<PAGE>
[Close up of dollar bill]
AMBAC TREASURERS TRUST
U.S. TREASURY MONEY MARKET FUND [AMBAC LOGO]
U.S. GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT
FOR THE PERIOD ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES
AND OFFICERS
W. Dayle Nattress
Chairman, President
and Chief Executive Officer
Donald W. Green
Trustee
Eugene J. McDonald
Trustee
C. Roderick O'Neil
Trustee
Roisin T. Kilgallen
Treasurer
Kevin Morrissey
Assistant Treasurer
Richard B. Gross
Secretary
Anne G. Gill
Assistant Secretary
Gail A. Hanson
Assistant Secretary
Therese M. Hogan
Assistant Secretary
INVESTMENT ADVISER
AMBAC Investment
Management, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
ADMINISTRATOR
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
TRANSFER AGENT
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
DISTRIBUTOR
440 Financial Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
CUSTODIAN
Bankers Trust Company
130 Liberty Street
New York, New York 10006
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP
99 High Street
Boston, Massachusetts 02110
LEGAL COUNSEL
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
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<PAGE>
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"Your community has entrusted you with the investment of its cash, and our
pledge is to help you uphold your responsibilities as a municipal money
manager."
- --------------------------------------------------------------------------------
[AMBAC LOGO]
CHAIRMAN'S LETTER
Dear Shareholder:
Thank you for your participation in the AMBAC Treasurers Trust Funds. We are
very pleased with the interest we have received from a growing number of
municipal and other governmental investors. As you know, our commitment is to
provide our shareholders with a convenient and competitive option for the
short-term investment of taxpayer dollars.
This Report is a prime example of one of the benefits that a registered
investment vehicle provides for its shareholders: disclosure of financial
information and performance of the Funds. Your community has entrusted you with
the investment of its cash, and our pledge is to help you uphold your
responsibilities as a municipal money manager. In your capacity, you understand
the importance of receiving timely, accurate and complete information. This
Annual Report is designed to give you a comprehensive summar y of how the monies
in the Funds are invested and how the Funds have performed.
We are confident in the potential for continued growth and success of the AMBAC
Treasurers Trust Funds and welcome you as a valued shareholder. Should you have
any questions or suggestions regarding our services or the Funds, please do not
hesitate to contact your AMBAC representative or me at 1-800-311-AMBAC(2622).
Sincerely,
/s/ W. Dayle Nattress
W. Dayle Nattress
Chairman, President and Chief Executive Officer
AMBAC Treasurers Trust
1
<PAGE>
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"The Federal Reserve did not change short-term interest rates during the
quarter, although the market is now expecting a small increase in short-term
interest rates during the first or second quarter of 1997."
- --------------------------------------------------------------------------------
[AMBAC LOGO]
ECONOMIC OVERVIEW
Interest rates fell during the three-month period ended October 31, 1996 due to
market expectations of slower economic growth than had previously been assumed.
The economy expanded moderately during the quarter, with the pace of growth
becoming slower than in recent quarters.
Some sectors of retail activity, such as autos and other durable goods,
department stores, especially luxury stores, and restaurants, showed strength,
but overall consumer spending expanded at a moderate pace. The employment
picture also showed signs of mild growth, with reports of tighter markets for
skilled labor as well as for entry-level labor. Indications of upward pressure
on wages vary by region across the country and continue to increase for skilled
labor. Construction activity is strong in many parts of the country, with
housing prices stable to slightly stronger. Multi-family home construction is
generally increasing at a faster pace than single-family home construction. Home
sales, for both new and existing homes, showed surprising strength during the
quarter.
The Federal Reserve did not change short-term interest rates during the quarter,
although the market is now expecting a small increase in short-term interest
rates during the first or second quarter of 1997. The overall inflation
situation continues to be benign, with few signs of increasing inflation at the
consumer level. The market is expecting inflation to continue to be mild. Most
economists are forecasting that Gross Domestic Product (GDP) will be positive
for the 4th quarter of 1996 and 1st quarter of 1997, but lower than in previous
quarters.
The discussion above is for general informational purposes. No assurance can
be given regarding future financial and economic developments, or the
investment performance of the funds.
2
<PAGE>
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"Concern over the direction of interest rates by funds with longer maturities
resulted in the selling of securities in order to shorten their average
maturities."
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[AMBAC LOGO]
PORTFOLIO MANAGER FUND UPDATE
<TABLE>
The AMBAC Treasurers Trust Money Market Funds (individually a "Fund" and
collectively, the "Funds") have offered competitive yields since they commenced
operations in April 1996. Subsequent to that time, short-term interest rates
remained low as a result of market uncertainty over whether or not the Federal
Reserve would increase interest rates. Concern over the direction of interest
rates by funds with longer maturities resulted in the selling of securities in
order to shorten their average maturities. As a result, an abundance of cash
came into the short-term market and led to buying of short-term government
securities, thereby lowering short-term yields. The following table shows the
yields of each of the Funds for the seven-day period ended October 31, 1996.
- --------------------------------------------------------------------------------
<CAPTION>
7-DAY 7-DAY
FUND CURRENT YIELD* EFFECTIVE YIELD*
<S> <C> <C>
AMBAC U.S. TREASURY MONEY MARKET FUND 5.00% 5.12%
AMBAC U.S. GOVERNMENT MONEY MARKET FUND 5.16% 5.29%
- --------------------------------------------------------------------------------
<FN>
* The investment adviser of the Funds has voluntarily agreed to waive its fees
and to reimburse expenses of the funds to the extent necessary to assure that
the ordinary operating expenses of the funds do not exceed 0.28% And 0.20% Of
the average daily net assets of AMBAC U.S. Treasury Money Market fund and AMBAC
U.S. Government Money Market fund, respectively. The yields of the funds quoted
above reflect the effect of this fee waiver and reimbursement of expenses.
</TABLE>
During the course of the year, one month U.S. Government Treasury Bills had an
average CD equivalent yield of 4.95% and one month U.S. Government Agency
Securities had an average CD equivalent yield of 5.25%. This compares to the
average overnight repurchase agreement (Repo) rate of 5.25%. Due to the
volatility of the markets in the three month to one year area, the investment
adviser did not believe that extending the maturities provided enough reward.
The potential risk of rising rates versus higher yielding overnight Repos
allowed the Funds to maintain a short weighted average maturity, while remaining
within conservative parameters consistent with the Funds' policies and the goals
of their investors.
3
<PAGE>
- --------------------------------------------------------------------------------
"The Fund maintained a weighted average maturity in the 1 to 22 day range,
enabling the Fund to stay competitive with other U.S. Treasury Money Market
Funds."
- --------------------------------------------------------------------------------
[AMBAC LOGO]
PORTFOLIO MANAGER FUND UPDATE (continued)
Throughout the year, the continued uncertainty of the direction of interest
rates has caused the Treasury market to become extremely expensive, offering
lower yields. U.S. Treasury Bills in the one to three month area yielded below
5.00%. As a result, the U.S. Treasury Money Market Fund stayed primarily in
overnight Repos where the Fund was able to secure yields in the 5.10% to 5.25%
range. The Fund maintained a weighted average maturity in the 1 to 22 day range,
enabling the Fund to stay competitive with other U.S. Treasury money market
funds.
<TABLE>
AMBAC U.S. TREASURY
MONEY MARKET FUND
<CAPTION>
FUND HOLDINGS AS OF 10/31/96*
[Pie Chart]
<S> <C>
Repos 44%
U.S. Treasury Bills 56%
<FN>
* Subject to applicable investment policies and restrictions, the particular
holdings of the Fund will vary from time to time.
</TABLE>
As the short-term market continued to rally over the course of the year, demand
for U.S. Government Agency Securities increased which led to less attractive
yields. As a means of maintaining the yield in the U.S. Government Money Market
Fund and reducing the volatility associated with overnight Repos, the investment
adviser invested part of the Fund in one month U.S. Government Agency Securities
at a rate of 5.25% or better. This strategy provided the Fund with yields
comparable to overnight Repos, while allowing the Fund's maturity to remain
relatively short. The Fund maintained a weighted average maturity in the 1 to 22
day range.
<TABLE>
AMBAC U.S. GOVERNMENT
MONEY MARKET FUND
<CAPTION>
FUND HOLDINGS AS OF 10/31/96*
[Pie Chart]
<S> <C>
Repos 38%
U.S. Government and Agency Obligations 62%
</TABLE>
Going forward, the investment adviser expects to maintain a neutral posture.
This strategy will allow the Funds to extend further out on the yield curve and
lock in yield, while remaining short enough to capitalize on any higher yields
should interest rates increase.
4
<PAGE>
[AMBAC LOGO]
FUND PERFORMANCE UPDATE
AMBAC U.S. TREASURY MONEY MARKET FUND
Performance Comparison*
7-Day Effective Yield
April 30 Through October 31, 1996
[Graph]
* The investment adviser of the Fund has voluntarily agreed to waive its fees
and to reimburse expenses of the Fund to the extent necessary to assure that the
ordinary operating expenses of the Fund do not exceed 0.28% Of the average daily
net assets of the Fund. The yield of the fund as shown above reflects the effect
of this fee waiver and reimbursement of expenses. An investment in the fund is
neither insured nor guaranteed by the u.S. Government or ambacindemnity
corporation, and there can be no assurance that the fund will be able to
maintain a stable net asset value of $1.00 Per share. The performance data
quoted represents past performance which is not a guarantee of future results.
Yield will fluctuate.
** The IBC U.S. Treasury & Repo Index is an unmanaged index that reflects the
yields of retail money market funds that invest solely in u.S. Treasury
securities and repos. Because there is no index of institutional money market
funds that invest exclusively in U.S. Treasury Securities and Repos, the yields
of the fund have been compared to the performance of the IBC U.S. Treasury &
Repo Index, which includes retail money market funds. The average expense ratio
of the funds included in the index is 0.60% As compared to an expense ratio of
0.28% After the fee waiver and reimbursement of expenses for the fund. In light
of this difference, the yields shown above for the ibcfinancial data u.S
treasury & repo index have been increased by 0.32% Over the actual reported
yields for the index.
*** The IBC Government-Only/Institutional-Only Index is an unmanaged index that
reflects the yields of institutional money market funds that invest in U.S.
Government and agency securities and repos.
5
<PAGE>
[AMBAC LOGO]
FUND PERFORMANCE UPDATE (CONTINUED)
AMBAC U.S. TREASURY MONEY MARKET FUND
Performance Comparison*
7-Day Effective Yield
April 30 Through October 31, 1996
[Graph]
* The investment adviser of the Fund has voluntarily agreed to waive its fees
and to reimburse expenses of the Fund to the extent necessary to assure that the
ordinary operating expenses of the fund do not exceed 0.20% Of the average daily
net assets of the Fund. The yield of the fund as shown above reflects the effect
of this fee waiver and reimbursement of expenses. An investment in the fund is
neither insured nor guaranteed by the U.S. Government or ambacindemnity
corporation, and there is no assurance that the fund will be able to maintain a
stable net asset value of $1.00 Per share. The performance data quoted
represents past performance which is not a guarantee of future results. Yield
will fluctuate.
** The IBC Government-only/institutional-only index is an unmanaged index that
reflects the yields of institutional money market funds that invest in u.S.
Government and agency securities and repos.
6
<PAGE>
<TABLE>
U.S. TREASURY MONEY MARKET FUND
[AMBAC LOGO] PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<CAPTION>
ANNUALIZED
YIELD ON
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT PURCHASE DATE (NOTE 2)
--------- ---------- -------- --------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATION - 56.27%
U.S. TREASURY BILL - 56.27%
$14,830,000 5.01%, 12/12/96 ................................ $14,745,383
-----------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $14,745,383) ............................. 14,745,383
-----------
REPURCHASE AGREEMENTS - 44.27%
1,300,000 BZW Securities, Inc.-Tri Party
5.52%, Due 11/01/96, Dated 10/31/96
Repurchase Price $1,300,199
(Collateralized by $1,316,000
U.S. Treasury Note, 6.125%
Due 09/30/00
Market Value $1,326,103) ....................... 1,300,000
1,300,000 Dresdner Securities, Inc. (New York)
5.53%, Due 11/01/96, Dated 10/31/96
Repurchase Price $1,300,200
(Collateralized by $1,218,000
U.S. Treasury Note, 9.00%
Due 05/15/98
Market Value $1,326,958) ....................... 1,300,000
1,300,000 Goldman Sachs Group LP-Tri Party
5.51%, Due 11/01/96, Dated 10/31/96
Repurchase Price $1,300,199
(Collateralized by $1,320,000
U.S. Treasury Note, 5.00%
Due 01/31/98
Market Value $1,326,389) ....................... 1,300,000
1,300,000 JP Morgan Securities, Inc.-Tri Party
5.47%, Due 11/01/96, Dated 10/31/96
Repurchase Price $1,300,198
(Collateralized by $1,284,000
U.S. Treasury Note, 8.75%
Due 10/15/97
Market Value $1,326,971) ....................... 1,300,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
$ 6,400,000 Morgan Stanley Group Inc. - Tri Party
5.53%, Due 11/01/96, Dated 10/31/96
Repurchase Price $6,400,983
(Collateralized by $6,600,000
U.S. Treasury Bill
Due 12/12/96
Market Value $6,561,271) ....................... $ 6,400,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $11,600,000) ............................. 11,600,000
-----------
TOTAL INVESTMENTS - 100.54%
(Cost $26,345,383)* ........................................... 26,345,383
-----------
NET OTHER ASSETS AND LIABILITIES - (0.54)% .................... (141,249)
-----------
NET ASSETS - 100.00% .......................................... $26,204,134
===========
<FN>
- ------------
* Also aggregate cost for Federal income tax purposes.
</TABLE>
See Notes To Financial Statements.
7
<PAGE>
<TABLE>
U.S. GOVERNMENT MONEY MARKET FUND
[AMBAC LOGO] PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<CAPTION>
ANNUALIZED
YIELD ON
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT PURCHASE DATE (NOTE 2)
--------- ---------- -------- --------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 62.05%
FEDERAL HOME LOAN MORTGAGE CORP.
DISCOUNT NOTES - 21.42%
$15,000,000 5.45%, 11/01/96............................. $15,000,000
185,000 5.47%, 12/02/96............................. 184,140
-----------
15,184,140
-----------
FEDERAL HOME LOAN BANK
DISCOUNT NOTE - 21.16%
15,000,000 5.45%, 11/01/96............................. 15,000,000
-----------
STUDENT LOAN MARKETING ASSOCIATION
DISCOUNT NOTE - 18.34%
13,000,000 5.50%, 11/01/96............................. 13,000,000
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
AGENCY NOTE - 1.13%
800,000 5.46%, 11/15/96............................. 799,941
-----------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS
(Cost $43,984,081) ........................ 43,984,081
-----------
REPURCHASE AGREEMENTS - 38.15%
3,400,000 BZW Securities, Inc.-Tri Party
5.55%, Due 11/01/96, Dated 10/31/96
Repurchase Price $3,400,524
(Collateralized by $3,415,000
Federal National Mortgage
Association Note, 6.56%
Due 08/25/99
Market Value $3,471,099).................... 3,400,000
3,400,000 Goldman Sachs Group LP-Tri Party
5.55%, Due 11/01/96, Dated 10/31/96
Repurchase Price $3,400,524
(Collateralized by $3,400,000
various Federal Home Loan Bank Notes
having various coupon rates
Due from 09/13/99 through 08/15/05
Market Value $3,468,364).................... 3,400,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
$ 3,399,000 Morgan Stanley Group Inc.-Tri Party
5.53%, Due 11/01/96, Dated 10/31/96
Repurchase Price $3,399,522
(Collateralized by $3,570,000
U.S. Treasury Bill
Due 04/03/97
Market Value $3,492,724).................... $ 3,399,000
16,841,000 NationsBanc Capital Markets, Inc.
5.60%, Due 11/01/96, Dated 10/31/96
Repurchase Price $16,843,620
(Collateralized by $17,946,000
various U.S. Government Securities
having various coupon rates
Due from 12/12/96 through 09/30/98
Market Value $18,024,203)................... 16,841,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost $27,040,000).......................... 27,040,000
-----------
TOTAL INVESTMENTS - 100.20%
(Cost $71,024,081)*....................................... 71,024,081
NET OTHER ASSETS AND LIABILITIES - (0.20)%................. (143,414)
-----------
NET ASSETS - 100.00%....................................... $70,880,667
===========
<FN>
* Also aggregate cost for Federal income tax purposes.
</TABLE>
See Notes To Financial Statements.
8
<PAGE>
<TABLE>
[AMBAC LOGO] STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<CAPTION>
U.S. TREASURY U.S. GOVERNMENT
MONEY MARKET FUND MONEY MARKET FUND
----------------- -----------------
<S> <C> <C>
ASSETS:
Investments (Note 2):
Investments at value ............................ $14,745,383 $43,984,081
Repurchase agreements ........................... 11,600,000 27,040,000
----------- -----------
Total investments at value .................... 26,345,383 71,024,081
Cash .............................................. 987 910
Interest receivable ............................... 1,779 24,360
Organizational costs, net (Note 2) ................ 24,154 24,154
Receivable from investment adviser ................ 7,631 9,834
Prepaid expenses .................................. 3,347 8,424
----------- -----------
Total Assets .................................... 26,383,281 71,091,763
----------- -----------
LIABILITIES:
Dividends payable ............................... 96,707 108,268
Payable to FDISG (Note 3) ....................... 21,003 26,909
Trustees' fees and expenses payable (Note 3) .... 3,875 3,875
Accrued expenses and other payables ............. 57,562 72,044
----------- -----------
Total Liabilities ............................. 179,147 211,096
----------- -----------
NET ASSETS ........................................ $26,204,134 $70,880,667
=========== ===========
NET ASSETS CONSIST OF:
Par value (Note 5) .............................. $ 26,204 $ 70,880
Paid-in capital in excess of par value .......... 26,177,368 70,809,080
Accumulated net realized gain on investments sold 562 707
----------- -----------
TOTAL NET ASSETS .................................. $26,204,134 $70,880,667
=========== ===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING ......... 26,203,572 70,879,960
NET ASSET VALUE,
offering and redemption price per share
(Net Assets / Shares Outstanding) ............... $1.00 $1.00
===== =====
</TABLE>
See Notes To Financial Statements.
9
<PAGE>
<TABLE>
[AMBAC LOGO] STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED
OCTOBER 31, 1996
<CAPTION>
U.S. TREASURY U.S. GOVERNMENT
MONEY MARKET FUND* MONEY MARKET FUND*
------------------ ------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) ................................... $ 704,702 $1,734,184
--------- ----------
EXPENSES:
Investment advisory fees (Note 3) ................... 20,088 48,338
Administration fees (Note 3) ........................ 22,314 47,686
Custodian fees ...................................... 7,500 7,500
Fund accounting fees (Note 3) ....................... 18,700 23,677
Legal fees .......................................... 8,000 11,365
Audit fees .......................................... 12,000 12,000
Transfer agent fees (Note 3) ........................ 16,622 16,622
Trustees' fees and expenses (Note 3) ................ 7,079 7,079
Amortization of organization costs (Note 2) ......... 2,823 2,823
Reports to shareholders ............................. 12,500 12,500
Registration fees ................................... 19,000 33,483
Insurance ........................................... 3,191 8,115
Rating agency fees .................................. 7,232 9,817
Miscellaneous ....................................... 1,000 1,000
--------- ----------
Total Expenses .................................... 158,049 242,005
Less: Expense reimbursement/waiver (Note 4) ....... (121,371) (177,554)
--------- ----------
Total Expenses net of reimbursement/waiver ........ 36,678 64,451
--------- ----------
NET INVESTMENT INCOME ................................. 668,024 1,669,733
--------- ----------
NET REALIZED GAIN ON INVESTMENTS SOLD (NOTE 2) ........ 562 707
--------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $ 668,586 $1,670,440
========= ==========
<FN>
- -----------------------------------------------------
* The Funds commenced investment operations on April 24, 1996.
</TABLE>
See Notes To Financial Statements.
10
<PAGE>
<TABLE>
[AMBAC LOGO] STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED
OCTOBER 31, 1996
<CAPTION>
U.S. TREASURY U.S. GOVERNMENT
MONEY MARKET FUND* MONEY MARKET FUND*
------------------ ------------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD ....................... $ -- $ --
----------- ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income ................................. 668,024 1,669,733
Net realized gain on investments sold ................. 562 707
----------- ------------
Net increase in net assets resulting from operations .. 668,586 1,670,440
----------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ................................. (668,024) (1,669,733)
----------- ------------
SHARE TRANSACTIONS:
Net proceeds from sales of shares ..................... 26,133,335 112,569,709
Issued to shareholders in reinvestment of dividends ... 91,825 1,022,381
Cost of shares repurchased ............................ (21,588) (42,712,130)
----------- ------------
Net increase from share transactions .................. 26,203,572 70,879,960
----------- ------------
Net increase in net assets .......................... 26,204,134 70,880,667
----------- ------------
NET ASSETS AT END OF PERIOD ............................. $26,204,134 $ 70,880,667
=========== ============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold .................................................. 26,133,335 112,569,709
Issued to shareholders in reinvestment of dividends ... 91,825 1,022,381
Shares repurchased .................................... (21,588) (42,712,130)
----------- ------------
Net increase in shares outstanding .................... 26,203,572 70,879,960
=========== ============
<FN>
- ---------------------------------------------------------
* The Funds commenced investment operations on April 24, 1996.
</TABLE>
See Notes To Financial Statements.
11
<PAGE>
<TABLE>
[AMBAC LOGO] FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<CAPTION>
U.S. TREASURY U.S. GOVERNMENT
MONEY MARKET FUND MONEY MARKET FUND
----------------- -----------------
PERIOD ENDED OCTOBER 31, 1996 (1)
-------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of period .................... $ 1.000 $ 1.000
------- -------
Income from Investment Operations:
Net investment income (2) ........................... 0.026 0.027
------- -------
Less Dividends:
Dividends from net investment income ................ (0.026) (0.027)
------- -------
Net increase in net asset value ......................... -- --
------- -------
Net Asset Value, End of period .......................... $ 1.000 $ 1.000
======= =======
Total Return ............................................ 2.63%* 2.72%*
Ratios/Supplemental Data:
Net Assets, End of period (000s) ........................ $26,204 $70,881
Ratios to average net assets:
Net investment income including reimbursement/waiver .. 4.99%** 5.18%**
Operating expenses including reimbursement/waiver ..... 0.27%** 0.20%**
Operating expenses excluding reimbursement/waiver ..... 1.18%** 0.75%**
- ---------------------------------------------------------
<FN>
* Not Annualized
** Annualized
(1) The Funds commenced investment operations on April 24, 1996.
(2) Net investment income per share before reimbursement/waiver of fees and expenses by the
Investment Adviser for the period ended October 31, 1996 for the U.S. Treasury Money
Market Fund and the U.S. Government Money Market Fund was $0.021 and $0.024, respectively.
</TABLE>
See Notes To Financial Statements.
12
<PAGE>
[AMBAC LOGO] NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
AMBAC Treasurers Trust (the "Trust") was organized on June 27, 1995, as a
Delaware business trust and is registered under the Investment Company Act of
1940, as amended, (the "1940 Act") as an open-end management investment company.
AMBAC Investment Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
AMBACCapital Corporation, which in turn is a wholly-owned subsidiary of AMBAC
Inc., serves as the Trust's investment adviser. As of the date of this report,
the Trust offered two managed diversified investment portfolios. The
accompanying financial statements and financial highlights are those of the
AMBAC U.S. Treasury Money Market Fund and AMBAC U.S. Government Money Market
Fund (individually, a "Fund," collectively, the "Funds"). The Funds commenced
investment operations on April 24, 1996. Prior to April 24, 1996, the only
business conducted by the Funds was the issuance of 33,335 shares of each Fund
in connection with the registration of the Trust. A third Fund of the Trust,
AMBAC Short-Term U.S. Government Income Fund, has not yet commenced operations.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies in conformity with
generally accepted accounting principles consiste ntly followed by the Funds in
the preparation of their financial statements.
PORTFOLIO VALUATION: Securities owned by the Funds are valued utilizing the
amortized cost valuation method permitted by Rule 2a-7 under the 1940 Act. This
method involves valuing a portfolio security initially at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
accounted for on a trade date basis. Net realized gains or losses on sales of
securities are determined by the identified cost method. Interest income is
recorded on the accrual basis.
DIVIDENDS TO SHAREHOLDERS: Dividends from net investment income are declared
and accrued daily and paid monthly. Net realized long-term capital gains, if
any, are distributed at least annually.
Income dividends and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
FEDERAL INCOME TAXES: The Trust treats each Fund as a separate entity for
Federal income tax purposes. Each Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, each Fund will not be subject to Federal
income taxes to the extent that it distributes substantially all of its taxable
income, if any, for its tax year ending October 31. In addition, by distributing
in each calendar year substantially all of its net investment income, capital
gains, and certain other amounts, if any, each Fund will not be subject to a
Federal excise tax. Therefore, no Federal income tax provision is required.
REPURCHASE AGREEMENTS: Each Fund may engage in repurchase agreement
transactions with institutions that the Trust's Adviser has determined are
creditworthy pursuant to guidelines established by the Trust's Board of
Trustees. Each repurchase agreement transaction is recorded at cost. Each Fund
requires that the securities purchased in a repurchase agreement transaction be
transferred to the Trust's Custodian (or sub-custodian) in a manner that is
intended to enable the Fund to realize the value of the securities in the event
of a counterparty default. The Adviser monitors the value of the securities,
including accrued interest, daily to ensure that the value of the collateral
equals or exceeds amounts due under the repurchase agreement. Repurchase
agreement transactions involve certain risks in the event of default or
insolvency of the counterparty, including possible delays or restrictions upon a
Fund's ability to dispose of the underlying securities, and a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights.
EXPENSES: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly attributable to a Fund are charged to
the Fund, while expenses which are attributable to more than one Fund of the
Trust are allocated among the respective Funds based on the average net assets
of each Fund.
13
<PAGE>
[AMBAC LOGO] NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ORGANIZATION COSTS: Each Fund bears certain costs in connection with its
organization, including the fees and expenses of registering and qualifying its
initial shares for distribution under Federal and state securities laws. All
such costs are amortized using the straight-line method over a period of five
years beginning with each Fund's commencement of operations. In the event that
any of the initial shares of a Fund purchased by the Adviser are redeemed by any
holder thereof during the period of amortization of organization costs, the
redemption proceeds will be reduced by the pro-rata amount of unamortized
organization costs based on the number of initial shares being redeemed to the
number of initial shares outstanding at the time of the redemption. These costs
were paid by the Adviser and will be reimbursed by the respective Funds.
3. INVESTMENT ADVISORY, ADMINISTRATION, AND OTHER FEES
The Trust and the Adviser are parties to an investment advisory agreement
under which the Adviser provides services for a fee, computed daily and paid
monthly, at the annual rates of 0.15% of the average daily net assets with
respect to AMBAC U.S. Treasury Money Market Fund and AMBAC U.S. Government Money
Market Fund. The Adviser has voluntarily agreed to waive its fee or reimburse
expenses of the Funds to the extent necessary to assure that the ordinary
operating expenses do not exceed 0.28% and 0.20% of the average daily net assets
of the AMBAC U.S. Treasury Money Market Fund and AMBAC U.S. Government Money
Market Fund, respectively. The Adviser reserves the right to modify or terminate
at any time its agreements to waive fees and reimburse expenses.
The Trust and First Data Investor Services Group, Inc. ("FDISG"), a
wholly-owned subsidiary of First Data Corporation, are parties to an
administration agreement under which FDISG (the "Administrator") provides
services for a monthly fee calculated at an annual rate of 0.05% of the Trust's
average daily net assets on the first $500 million of net assets of the Trust,
0.04% on the next $500 million of net assets of the Trust and 0.03% on net
assets of the Trust in excess of $1 billion, subject to a minimum monthly fee
paid by the Trust to the Administrator of $10,000. FDISG also provides certain
fund accounting services for which it is paid a monthly fee by each Fund of
$3,000 if the average monthly net assets of a Fund are $50 million or less,
$4,000 if a Fund's average monthly net assets are between $50 million and $200
million, or $5,000 if a Fund's average monthly net assets exceed $200 million.
In addition, FDISG also provides certain administration and transfer agency
services pursuant to certain fee arrangements.
440 Financial Distributors, Inc. (the "Distributor"), a wholly-owned
subsidiary of FDISG and an indirect wholly-owned subsidiary of First Data
Corporation, acts as the exclusive distributor of the Trust's shares.
Certain officers of the Trust may be officers of the Adviser, Administrator
and/or Distributor or their affiliates. Such officers receive no compensation
from the Trust for serving in their respective roles. Trustees who are not
employees of the Adviser, Administrator and/or Distributor or their affiliated
companies, are each paid an annual retainer of $5,000 and receive an attendance
fee of $750 for each meeting of the Board of Trustees they attend. Members of
the Audit Committee, of which each of the Independent Trustees is a member,
receive an attendance fee of $750 for each Audit Committee meeting they attend.
The Chairman of the Audit Committee receives an additional $1,000 annual fee.
Officers of the Trust receive no compensation from the Trust.
4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
<TABLE>
The Adviser voluntarily agreed to waive a portion of its fees and to reimburse
the Funds for certain expenses so that total expenses would not exceed certain
expense limitations established for each Fund. The Adviser, at its discretion,
may revise or discontinue the voluntary fee waivers and expense reimbursements.
For the period ended October 31, 1996, the Adviser waived fees and reimbursed
expenses with respect to the Funds in the following amounts:
<CAPTION>
EXPENSES
FUND FEES WAIVED REIMBURSED
- ---- ----------- ----------
<S> <C> <C>
AMBAC U.S. Treasury
Money Market Fund $20,088 $101,283
AMBAC U.S. Government
Money Market Fund 48,338 129,216
</TABLE>
5. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest in the Funds, each with a par value of
$0.001.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AMBAC Treasurers Trust
We have audited the accompanying statements of assets and liabilities of AMBAC
U.S. Treasury Money Market Fund and AMBAC U.S. Government Money Market Fund (the
Funds), including the portfolios of investments, as of October 31, 1996, and the
related statements of operations, statements of changes in net assets and
financial highlights for the period from April 24, 1996 to October 31, 1996.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
AMBACU.S. Treasury Money Market Fund and AMBACU.S. Government Money Market Fund
as of October 31, 1996, the results of their operations, changes in their net
assets and financial highlights for the period from April 24, 1996 to October
31, 1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 22, 1996
15
<PAGE>
This report is submitted for the general information of shareholders of AMBAC
Treasurers Trust. It is not authorized for distribution to prospective investors
unless accompanied or preceded by effective prospectuses for the Funds, which
contain more information concerning the Funds' investment policies, as well as
fees and expenses and other pertinent information. Read each prospectus
carefully before you invest.
An investment in the Funds is neither insured nor guaranteed by the U.S.
Government or AMBAC Indemnity Corporation, and there can be no assurance that
the Funds will be able to maintain stable net asset values of $1.00 per
share.
<PAGE>
[AMBAC LOGO] 4400 Computer Drive
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