AMBAC TREASURERS TRUST
U.S. Treasury Money Market Fund
A SERIES OF AMBAC TREASURERS TRUST
300 Nyala Farms Road
Westport, Connecticut 06880
AMBAC U.S. Treasury Money Market Fund (the "Fund") is a
series of AMBAC Treasurers Trust (the "Trust"), a diversified,
open-end management investment company. The Fund is a money market
fund and seeks to maintain a stable net asset value of $1.00 per
share. The investment objective of the Fund is to seek high
current income, consistent with preservation of capital and
maintenance of liquidity. The Fund pursues this objective by
investing exclusively in short-term debt securities that are
direct obligations of the U.S. Treasury ("Treasury Securities")
and repurchase agreements collateralized by debt obligations
backed by the "full faith and credit" of the United States. See
"Investment Objective and Policies." AMBAC Investment Management,
Inc. (the "Investment Adviser") serves as the investment adviser
of the Fund. First Data Investor Services Group, Inc. serves as
the administrator of the Fund (the "Administrator").
Shares of the Fund are offered for sale on a no-load basis
to states and municipalities, and their subdivisions and agencies,
as well as to other institutional investors. No sales commissions
or other charges are imposed upon the purchase or redemption of
shares. The minimum initial investment in the Fund is $100,000.
See "Purchasing Shares." Shares of the Fund are not insured by
AMBAC Indemnity Corporation.
An investment in the Fund is neither insured nor guaranteed
by the U.S. Government and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per
share. See "Net Asset Value."
This Prospectus sets forth concisely the information about
the Fund and the Trust that a prospective investor should know
before investing. Additional information about the Trust has been
filed with the Securities and Exchange Commission in a Statement
of Additional Information dated November 1, 1996, which is
incorporated herein by reference and is available without charge
by writing to the Transfer Agent or by calling 1-800-311-AMBAC
(2622).
Investors are advised to read this Prospectus and retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is November 1, 1996
SUMMARY OF EXPENSES
The following table is designed to assist prospective
investors in understanding the various direct and indirect
costs and expenses that a shareholder in the Fund will
bear. The amounts set forth below under "Other Expenses,"
as well as the amounts in the Example below, are based
upon estimates of expenses for the current fiscal year.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends
None
Deferred Sales Load None
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses Net of Expense
(as a percentage of average net assets) Reimbursement
Management Fees (after waiver) . 0%
12b-1 Fees . None
Other Expenses (estimated) . .28%
Total Fund Operating Expenses . .28%
The Investment Adviser has voluntarily agreed to
waive its fees or absorb Fund expenses to the extent
necessary to assure that the ordinary operating expenses
do not exceed .28% of the Fund's average daily net assets.
Absent this agreement, management fees, estimated other
expenses and estimated total operating expenses of the
Fund would be .15%, 1.29% and 1.44%, respectively, of the
Fund's average daily net assets. The Investment Adviser
reserves the right to modify or terminate at any time its
agreement to waive fees and absorb expenses.
Example 1 Year 3 Years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: $3 $9
The Example is based upon estimated Total Fund
Operating Expenses, as set forth in the Table above, after
giving effect to the fee waiver and absorption of
expenses. Actual expenses and annual return may be greater
or less than the amounts shown above. The Example should
not be considered a representation of past or future
expenses.
For a more complete description of fees and expenses,
see "Management of the Fund."
U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The Financial Highlights for the Fund should be read in
conjunction with the Financial Statements and related notes
included in the Statement of Additional Information. The
following presents information relating to a share of beneficial
interest in the Fund outstanding for the entire period.
Period ended August 31, 1996
(unaudited)(1)
Net Asset Value, Beginning of period $
1.000
Income from Investment Operations:
Net investment income (2) 0.018
Less Dividends:
Dividends from net investment income
(0.018)
Net increase in net asset value ----
Net Asset Value, End of period $ 1.000
Total Return 1.78%**
Ratios/Supplemental Data:
Net Assets, End of period (000s) $ 26,178
Ratios to average net assets:
Net investment income including reimbursement/waiver
4.99%*
Operating expenses including reimbursement/waiver
0.27%*
Operating expenses excluding reimbursement/waiver
1.44%*
* Annualized
** Not Annualized
(1) The Fund commenced 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 August 31, 1996
for the Fund was $0.014.
SUITABLE INVESTORS
The Fund is specifically designed for investors concerned
about the safety of their investments and is a low-cost,
professionally managed cash management vehicle for states,
municipalities, and their subdivisions and agencies, including
school and special purpose districts, and for other institutional
investors. It offers investment diversification, administrative
convenience and operating economies of scale to investors whose
investment policies and guidelines are consistent with those of
the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek high current
income, consistent with preservation of capital and maintenance of
liquidity. The Fund pursues this objective by investing
exclusively in short-term debt securities that are direct
obligations of the U.S. Treasury ("Treasury Securities") and
repurchase agreements collateralized by debt obligations backed by
the "full faith and credit" of the United States. The Fund
maintains a dollar-weighted average maturity of 90 days or less,
and invests only in securities having remaining maturities of 397
days or less. As a money market fund, the Fund seeks to maintain a
stable net asset value of $1.00 per share at all times. No
assurance can be given that the Fund will be able to achieve its
investment objective or to maintain a stable net asset value. See
"Net Asset Value."
Treasury Securities include Treasury bills, notes and bonds.
These obligations are issued by the U.S. Treasury and backed by
the full faith and credit of the U.S. government. All securities
purchased by the Fund, including repurchase agreements, must be of
high quality and be determined by the Investment Adviser to
present minimal credit risks pursuant to procedures adopted by the
Board of Trustees of the Trust. The Fund may invest up to 35% of
its total assets in repurchase agreements that are collateralized
by debt obligations which are backed by the "full faith and
credit" of the United States, but which are not Treasury
Securities.
The Fund does not invest in any securities commonly known as
derivatives.
The Fund's investment objective is fundamental and may not
be changed without the approval of the holders of a majority of
the outstanding voting securities of the Fund, as defined in the
Investment Company Act of 1940, as amended (the "Investment
Company Act").
Repurchase Agreements. A repurchase agreement involves the
purchase of a security by the Fund with an agreement by the seller
of the security to repurchase it from the Fund at a mutually
agreed upon day and price, frequently the next business day. The
resale price is in excess of the purchase price and reflects the
rate of return earned by the Fund. The maturities of repurchase
agreements entered into by the Fund normally do not exceed seven
days. However, the Fund may enter into a repurchase agreement
maturing in more than seven days provided that not more than 10%
of the Fund's net assets would, as a result, be invested in
repurchase agreements having maturities in excess of seven days
and under which the Fund also does not have the right to repayment
within seven days. Repurchase agreements will at all times be
fully collateralized by their underlying securities ("collateral")
in an amount at least equal to the purchase price plus accrued
interest, marked to market daily. The collateral for repurchase
agreements is held by the Trust's custodian (or a subcustodian)
and is required to consist of obligations which are backed by the
"full faith and credit" of the United States (without regard to
the maturity of such obligations). If the seller defaults and the
value of the collateral securing a repurchase agreement declines,
the Fund may incur a loss. The Fund, however, enters into
repurchase agreements only with banks or primary dealers
designated as such by the Federal Reserve Bank of New York and
which have been determined by the Investment Adviser to present
minimal credit risk in accordance with guidelines established by
the Board of Trustees of the Trust.
When-Issued and Delayed Delivery Securities. The Fund may
purchase or sell securities on a when-issued or delayed delivery
basis. In these transactions, securities are purchased or sold by
the Fund with payment and delivery taking place as much as a month
or more in the future. The Fund engages in these transactions to
secure an advantageous price and yield at the time of entering
into the transactions. However, the value of securities purchased
on a when-issued basis is subject to market fluctuation and no
interest accrues to the purchaser during the period between
purchase and settlement.
Borrowings. The Fund does not borrow for purposes of making
investments (a practice known as "leverage"). However, it may
borrow money from banks in an amount not exceeding one-third of
the value of its total assets (calculated at the time of the
borrowing), for temporary extraordinary or emergency purposes. The
Fund may pledge its assets to secure these borrowings. Additional
investments will not be made by the Fund while any borrowings are
outstanding.
Investment Restrictions. The Fund is subject to various
additional restrictions on its investments. Certain of these
restrictions are deemed fundamental policies and cannot be changed
without the approval of the holders of a majority of the Fund's
outstanding voting securities, as defined in the Investment
Company Act. See "Investment Restrictions" in the Statement of
Additional Information.
Investment Characteristics. The Fund invests solely in
direct obligations of the United States Treasury and repurchase
agreements collateralized by such securities or by securities
which are backed by the "full faith and credit" of the United
States. Shares of the Fund are not insured or guaranteed by the
U.S. government or any government agency. The return on an
investment in the Fund will increase or decrease in response to
changes in short-term market interest rates. The market value of
the Fund's investments will fluctuate, with investments increasing
in value as interest rates fall and decreasing in value as
interest rates rise. However, due to the method used by the Fund
in valuing its assets, it is expected but cannot be assured that
the net asset value of shares of the Fund will be a stable $1.00
per share. See "Net Asset Value." Virtually all portfolio
transactions for the Fund will be effected on a principal basis
with issuers, underwriters or dealers serving as primary market-
makers.
PURCHASING SHARES
Shares of the Fund are offered for sale, without sales
charge, at the net asset value per share next determined after
receipt and acceptance of a purchase order by 440 Financial
Distributors, Inc., as distributor of the Fund's shares (the
"Distributor"), subject to timely receipt of federal funds as
described below. Net asset value is computed as of 4:00 p.m.
(Eastern time) on each day on which both the New York Stock
Exchange is open for trading and the Federal Reserve Bank of New
York is open (each, a "Business Day"). See "Net Asset Value." A
minimum initial investment of $100,000 is required (except in
special circumstances as described in the Statement of Additional
Information). Subsequent investments may be made in any amount.
Shares become entitled to receive dividends beginning on the
day of purchase. For this reason, the Fund must have federal funds
available to it (i.e., monies credited to its custodian bank by a
Federal Reserve bank) on the day the purchase order is accepted.
An order for the purchase of shares of the Fund is accepted (i)
immediately upon receipt of federal funds by wire as described
below or (ii) when a check is credited to the shareholder's
account in the form of federal funds (generally one Business Day
after receipt of a check). Shares will be issued at the net asset
value next determined after acceptance of the purchase order and
will be entitled to that day's dividend. The Fund reserves the
right to reject any purchase order and to modify or suspend the
continuous offering of its shares.
In order to permit the Investment Adviser to manage the Fund
most effectively, investors should place purchase orders as early
in the day as possible by calling the Fund's transfer agent, First
Data Investor Services Group, Inc. (the "Transfer Agent"), toll-
free at 1-800-311-AMBAC (2622), as described below. Investors who
anticipate making purchase transactions in excess of $5,000,000
are encouraged to make an advisory call to the Transfer Agent on
the day prior to investment. This advisory call does not replace
the need to call the Transfer Agent to place a purchase order.
Prior to making an initial investment by wire or check, an
account number must be obtained by calling the Transfer Agent
toll-free at 1-800-311-AMBAC (2622), or by mailing a completed
account application to:
AMBAC Funds
P.O. Box 5138
Westborough, Massachusetts 01581-5138
In order to receive an account number by telephone, an
investor must provide the name, address, and tax identification
number of the account owner, the amount being wired or mailed as
the initial investment, and the name of the wiring bank. Promptly
after opening accounts by telephone, investors should mail an
original completed account application for each account opened to
the Transfer Agent. Although share purchases can be made before an
account application is submitted, shares may not be redeemed until
a completed account application has been submitted.
Purchases by Federal Funds. Shares may be purchased by
wiring federal funds directly to the Fund in accordance with the
instructions below. The Fund does not impose any transaction
charges; however, wire charges may be imposed by the shareholder's
transmitting bank. Shares will be issued at the net asset value
next determined after receipt of an order to purchase shares and
will be entitled to the dividend declared on the date the order is
received if the Trust's custodian receives payment in federal
funds in the amount of the purchase order not later than the close
of the Federal Reserve wire on that day. If a purchase order is
not received and accepted prior to 4:00 p.m. (Eastern time) (2:00
p.m. for remote trade entry orders), or federal funds are not
received by the close of the Federal Reserve wire, shares will not
be issued or entitled to receive dividends until the next
computation of net asset value following the receipt of federal
funds by the Trust's custodian.
Additional purchases of shares can be made by calling the
Transfer Agent toll-free at 1-800-311-AMBAC (2622), to place a
purchase order and then wiring federal funds in the amount of the
purchase.
With respect to both initial and subsequent purchases of
shares, the wiring bank should be instructed to wire federal funds
to:
AMBAC U.S. Treasury Money Market Fund
C/o BSD&T Co. ABA # 011001234
CR DDA # 05-338-4
CR FDISG A/C # __________
[insert your account number]
Purchases by Check. Shares may be purchased by check in
accordance with the instructions below. Shares will be issued on
the next Business Day after receipt of a check at the net asset
value determined on such day. Shareholders will begin accruing
dividends when a check is credited to the shareholder's account in
the form of federal funds (generally one Business Day after
receipt of a check).
Checks for both initial and subsequent purchases of shares
should indicate the account name and number and be made payable to
AMBAC U.S. Treasury Money Market Fund and sent by regular mail to
the Transfer Agent at:
AMBAC Funds
P.O. Box 5138
Westborough, MA 01581-5138
Check purchases sent by registered or certified mail or
overnight delivery should be sent to the Transfer Agent at:
AMBAC Funds
c/o First Data Investor Services Group, Inc.
4400 Computer Drive - 2CW65
Westborough, MA 01581-5120
SHAREHOLDER ACCOUNTS
The Transfer Agent maintains one or more accounts for each
shareholder reflecting full and fractional shares of the Fund the
shareholder owns. Shareholders are sent confirmations of each
account transaction, and monthly statements showing account
balances. The Trust does not issue certificates for shares of the
Fund.
Sub-Account Services. Special sub-accounting procedures are
available for investors wishing to open multiple accounts to meet
requirements regarding the commingling of funds or for accounting
convenience. Sub-accounts can be established at any time by
calling the Transfer Agent. Please call toll-free at 1-800-311-
AMBAC (2622) for further information and appropriate forms.
Investors who have established sub-accounts will receive periodic
confirmations and statements of holdings and transactions for the
master account and each sub-account.
Minimum Account Balance. There is no minimum account balance
for the Fund. In order to avoid costs to the Fund that are
associated with maintaining inactive accounts, if there has been
no activity in an account with no balance for a period of six
months, the Fund has the right to close the account. However, a
shareholder will first be sent written notice of the Fund's
intention to close the account, and given 60 days to purchase
shares to increase the account balance.
REDEEMING SHARES
Shareholders may redeem all or any portion of the shares in
their accounts at any time at the net asset value next computed
after the receipt of a redemption request in proper form.
Redemption proceeds will be paid by federal funds wire to one or
more of the bank accounts that have been predesignated by the
shareholder, normally on the day the redemption request is
received. Redemption may also be made by check as described below.
If a redemption request is not received prior to 2:00 p.m.
(Eastern time), it will be processed on the following Business
Day. Shares are not entitled to receive dividends declared on the
day the shares are redeemed. See "Dividends and Distributions." In
the case of complete redemption of all shares in an account, the
redemption payment will include the amount of all dividends
declared for the month-to-date on shares held in the account.
Except in unusual circumstances described in the Statement of
Additional Information, the Fund will not suspend the right of
redemption or postpone the payment of redemption proceeds for more
than seven days, except that when shares are purchased by check or
acquired by means of an exchange of shares purchased by check
(including, in each case, certified checks and cashiers checks),
payment of redemption proceeds will be delayed until the purchase
check has cleared (the time varies from state to state) which may
take up to 15 days. Shareholders who anticipate the need for
immediate access to their investment should purchase shares with
federal funds.
A completed account application must be on file with the
Transfer Agent in order to redeem shares. See "Purchasing Shares."
Shareholders will be asked to designate a primary recipient bank
account on their account application. The primary recipient
account may be changed at any time, and any number of secondary
recipient bank accounts can be added, provided proper written
instructions are on file. Please call the Transfer Agent to
receive additional information and appropriate forms.
In order to permit the Investment Adviser to manage the Fund
most effectively, investors should place telephone redemption
requests as early in the day as possible by calling the Transfer
Agent toll-free at 1-800-311-AMBAC (2622) as described below.
Investors who anticipate making redemptions in excess of
$5,000,000 are encouraged to make an advisory call to the Transfer
Agent at least one day in advance. This advisory call does not
replace the need to place the redemption request in writing or by
telephone.
Telephone Redemption Procedures. A request to redeem shares
may be placed by calling the Transfer Agent at 1-800-311-AMBAC
(2622). The shareholder will be asked to provide the account name
and number, and the amount of the redemption. Proceeds of the
redemption will be sent to the primary recipient bank account
designated by the shareholder unless the shareholder requests that
payment be made to a predesignated secondary recipient bank
account. Proceeds will be sent by Federal Reserve wire, normally
on the day the redemption request is received. Redemption requests
that are not received prior to 2:00 p.m. (Eastern time) will be
processed the following Business Day.
The Transfer Agent employs reasonable procedures to confirm
that telephone redemption instructions are genuine such as
recording telephone calls, providing written confirmation of
transactions, or requiring a form of personal identification or
other information prior to effecting a telephone redemption. To
the extent such procedures are used, neither the Trust or the
Fund, nor the Investment Adviser, Administrator, Distributor or
Transfer Agent, will be liable for any loss due to fraudulent or
unauthorized telephone instructions. A redemption by telephone
may be made only if the telephone redemption privilege has been
selected on the account application, or written instructions have
been filed with the Transfer Agent.
During periods of severe market or economic conditions, it
may be difficult to contact the Transfer Agent by telephone. In
such an event a shareholder should send a
written redemption request by overnight delivery to the Transfer
Agent and follow the procedures for written redemption requests
described below.
Written Redemption Requests. Shares of the Fund may be
redeemed by written redemption request. A written redemption
request must be signed by each of the persons who the shareholder
has specified as required to sign such requests. The request must
include the complete account name and address, the amount of the
redemption, and the predesignated primary or secondary recipient
bank account to which the proceeds of the redemption are to be
sent. The signature of each person signing the request must be
guaranteed by an eligible guarantor institution. Organizations
that may qualify as eligible guarantor institutions include banks,
brokers, dealers, national securities exchanges, clearing
agencies, credit unions, and savings associations. The Transfer
Agent reserves the right to request additional information from,
and to make reasonable inquiries of, any eligible guarantor
institution.
Written redemption requests sent by regular mail should be sent
to:
AMBAC Funds
P.O. Box 5138
Westborough, Massachusetts 01581-5138
Written redemption requests sent by overnight delivery should be
sent to:
AMBAC Funds
c/o First Data Investor Services Group, Inc.
4400 Computer Drive - 2CW65
Westborough, Massachusetts 01581-5120
Redemption by Check. Shares of the Fund may be redeemed by
writing checks ("Redemption Checks") against the account balance.
Redemption Checks may be obtained by election of the checkwriting
option on the account application or by later written request to
the Transfer Agent. Redemption Checks may be made payable to the
order of any person. The account will continue to earn dividends
until the check is presented to the Fund for payment. Redemption
Checks will be returned by the Transfer Agent if there are
insufficient funds to meet the withdrawal amount. Redemption
Checks should not be used to close an account because the exact
balance at the time the check clears will not be known at the time
the check is written. Redemption Checks are free, but the Fund
may impose a fee for stopping payment of a Redemption Check at the
shareholders request or if a Redemption Check cannot be honored
due to insufficient funds or other valid reasons.
EXCHANGE PRIVILEGE
Shareholders may exchange shares of the Fund for shares of
any other fund advised by the Investment Adviser based upon the
relative net asset values per share of the funds at the time the
exchange is effected. Currently, shares of the Fund may be
exchanged for shares of AMBAC U.S. Government Money Market Fund
and AMBAC Short-Term U.S. Government Income Fund. No sales charge
or other fee is imposed in connection with exchanges. Before
requesting an exchange, shareholders should obtain and read the
prospectus of the fund whose shares will be acquired in the
exchange. Prospectuses can be obtained by calling the Transfer
Agent at 1-800-311-AMBAC (2622) or writing to the Transfer Agent
at P.O. Box 5138, Westborough, Massachusetts 01581-5138.
All exchanges are subject to applicable minimum initial and
subsequent investment requirements of the fund whose shares will
be acquired. In addition, an exchange is permitted only between
accounts that have identical registrations. The Fund does not
impose limitations on the frequency of exchanges. Shares of a fund
may be acquired in an exchange only if the shares are currently
being offered and are legally available for sale in the state of
the shareholder's residence.
An exchange involves the redemption of shares of the Fund
and the purchase of shares of another fund. Shares of the Fund
will be redeemed at the net asset value per share of the Fund next
computed after receipt of an exchange request in proper form. See
"Net Asset Value." Shares of the fund being acquired in the
exchange will be purchased when the proceeds of the redemption
become available (normally, on the day the exchange request is
received) at the net asset value of those shares then in effect.
See "Redeeming Shares." The acquired shares will be entitled to
receive dividends in accordance with the policies of the
applicable fund. Shareholders that are not exempt from taxation
may realize a taxable gain or loss on an exchange transaction. See
"Taxes."
The exchange privilege may be modified or terminated at any
time. However, 60 days' prior notification of any modification or
termination will be given to shareholders.
Telephone Exchange Procedures. A request to exchange shares
may be placed by calling the Transfer Agent at 1-800-311-AMBAC
(2622). The shareholder will be asked to provide the account name
and number, the amount of shares being exchanged and the name of
the fund whose shares are being acquired. Telephone exchange
requests that are not received prior to 2:00 p.m. (Eastern time)
will be processed the following Business Day. A written
confirmation of the exchange transaction will be sent to the
shareholder. As in the case of telephone redemption requests, the
Transfer Agent employs reasonable procedures to confirm that
telephone exchange instructions are genuine. To the extent such
procedures are used, neither the Trust or the Fund, nor the
Investment Adviser, Administrator, Distributor or Transfer Agent,
will be liable for a loss due to fraudulent or unauthorized
telephone exchange instructions. An exchange by telephone may be
made only if the telephone exchange privilege has been selected on
the account application, or written instructions have been filed
with the Transfer Agent.
During periods of severe market or economic conditions, it
may be difficult to contact the Transfer Agent by telephone. In
such event, a shareholder should send a written exchange request
by overnight delivery to the Transfer Agent and follow the
procedures for written exchange requests described below.
Written Exchange Procedures. Requests to exchange shares may
be submitted in writing. Each written exchange request should
specify the complete account name and
number of the shareholder's account with the Fund, the amount to
be exchanged, and the name of the fund whose shares are to be
acquired in the exchange. The request must be signed by each of
the persons who the shareholder has specified as required to sign
redemption requests. The signature of each person signing the
exchange request must be guaranteed by an eligible guarantor
institution. Written exchange requests should be sent to the
Transfer Agent at the address indicated above under "Redeeming
Shares--Written Redemption Requests."
NET ASSET VALUE
The Fund's share price, or net asset value per share, is
calculated as of 4:00 p.m. (Eastern time) each Business Day. Net
asset value per share is determined by subtracting the Fund's
liabilities (including accrued expenses and dividends payable)
from the total value of the Fund's investments and other assets
and dividing the result by the total number of outstanding shares
of the Fund.
For purposes of calculating net asset value per share, the
Fund's portfolio securities are valued using the "amortized cost"
method of valuation. This method involves valuing each investment
at cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the investment.
Amortized cost valuation provides certainty in valuation, but may
result in periods during which the value of an investment, as
determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold the investment. Use of this
valuation method permits the maintenance of the Fund's net asset
value at $1.00 per share, absent unusual circumstances. There can
be no assurance, however, that the Fund will be able to maintain a
stable net asset value of $1.00 per share.
In using this method, the Trust has adopted certain
procedures and adheres to various investment limitations as
required by Rule 2a-7 under the Investment Company Act. These
procedures, among other things, require the Investment Adviser to
monitor the deviation between the Fund's net asset value
determined by using available market quotations or market
equivalents and its net asset value determined by using amortized
cost.
FUND EXPENSES
The Fund's expenses are deducted from total income before
dividends are paid. The Fund bears all expenses of its operations
other than those expressly assumed by the Investment Adviser,
including the Fund's proportionate share of the Trust's expenses.
Expenses borne by the Fund include but are not limited to: the
fees of the Investment Adviser, the Administrator and Transfer
Agent; the fees and expenses of the Trust's independent public
accountants, legal counsel, accounting services agent and
custodian; taxes; brokerage fees and commissions; interest; costs
incident to meetings of trustees and shareholders, printing and
mailing prospectuses and reports to shareholders, and the filing
of reports with regulatory bodies and the maintenance of the
Trust's legal existence; federal and state registration fees; the
fees and expenses of non-interested trustees of the Trust; and any
extraordinary expenses of a non-recurring nature.
As discussed under "Summary of Expenses," the Investment
Adviser has voluntarily undertaken to waive its fee or to absorb
expenses of the Fund as may be necessary to limit total ordinary
operating expenses of the Fund to a specified percentage of the
Fund's average daily net assets. The Investment Adviser may modify
or terminate this undertaking at any time.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and accrued daily on each Business
Day based upon the Fund's net investment income (i.e., income
other than net realized capital gains), and are paid monthly.
Distributions of net realized capital gains, if any, are declared
and paid annually at the end of the Fund's fiscal year in which
they have been earned. All dividends and other distributions are
automatically reinvested in full and fractional shares of the Fund
at net asset value unless otherwise requested by the shareholder.
A shareholder can request that dividends and other distributions
be paid by wire transfer to a predesignated bank account by
sending a written request to the Transfer Agent. Any such request
must be received by the Transfer Agent at least five Business Days
prior to a payment date in order to be effective on such date.
Dividends are payable to all shareholders of record as of
the time of declaration. Shareholders will begin receiving
dividends on shares the day the shares are purchased, but will not
be entitled to receive dividends declared on shares the day the
shares are redeemed.
The Fund does not expect to realize any long-term capital
gains. Should any such gains be realized, they will be distributed
annually. In addition, in order to satisfy certain distribution
requirements of the Tax Reform Act of 1986, the Fund may declare
special or regular year-end dividend and capital gains
distributions during December. Such distributions, if received by
shareholders by January 31, are deemed to have been paid by the
Fund and received by shareholders on December 31 of the prior
year.
TAXES
Taxation of the Fund. The Fund intends to qualify each year
as a "regulated investment company" under Subchapter M of the
Internal Revenue Code (the "Code"). If so qualified, the Fund will
not be subject to federal income tax to the extent it distributes
its net income to shareholders. Certain federal income and excise
taxes would be imposed on the Fund if it failed to make certain
required distributions of its income to shareholders. The Fund
intends to make distributions in a manner which will avoid the
imposition of any such tax. If the Fund should fail to qualify as
a "regulated investment company," it would be subject to regular
federal income tax on its taxable income, and its distributions
generally would be taxable. The Fund intends to carry on its
operations so that it will continue to qualify as a regulated
investment company.
Federal Taxation of Shareholders. Dividend distributions,
whether received in cash or reinvested in additional shares, will
be taxable as ordinary income. Although the Fund does not expect
to distribute any long-term capital gains, investors will also be
subject to tax on any capital gains distributions they receive.
Since the Fund does not expect to earn dividend income, dividends
and other distributions from the Fund will generally not qualify
for the dividends-received deduction available to corporate
investors. In January of each year, the Fund sends each
shareholder a statement showing the tax status of distributions
for the past calendar year.
Section 115(1) of the Code provides, in part, that gross
income does not include income derived from the exercise of any
essential government function accruing to a state or any political
subdivision thereof. Shareholders are urged to consult their own
tax advisors to determine any limitations on the applicability of
Section 115(1) to earnings from their investment in the Fund. A
portion of the earnings derived from funds which are subject to
the arbitrage limitations or rebate requirements of the Code maybe
required to be paid to the U.S. Treasury as computed in accordance
with such requirements.
A sale of shares of the Fund, either by redemption or
exchange, is a taxable event, and may result in a capital gain or
loss. However, because the Fund seeks to maintain a stable net
asset value of $1.00 per share for both purchases and redemptions,
it is generally expected that shareholders will not realize any
capital gain or loss upon redemptions of shares.
The Fund is required to withhold 31% of all taxable
distributions and redemption proceeds paid to shareholders who
either have not complied with IRS taxpayer identification
regulations or are otherwise subject to backup withholding.
Shareholders are asked to certify on their account applications
that their taxpayer identification numbers are correct and that
they are not subject to backup withholding. Failure to so certify
will result in backup withholding.
State and Local Taxes. Investors may be subject to state and
local taxes on their investment. For example, dividends and other
distributions made by the Fund and received by an investor may be
subject to state and local taxes. Although shareholders of the
Fund do not directly receive interest on Treasury Securities held
by the Fund, certain states may allow the character of the Fund's
income to pass through to shareholders. If so, the portion of
dividends paid by the Fund that is derived from interest on
Treasury Securities may be exempt from state and local taxes.
State laws vary, however, and any exemption from state and local
income taxes does not preclude states from assessing other taxes
on the ownership of Treasury Securities. The United States Supreme
Court has ruled that income from certain types of repurchase
agreements involving Treasury Securities does not constitute
interest on Treasury Securities for this purpose. However, it is
not clear whether the Court's holding extends to all types of
repurchase agreements involving Treasury Securities in which the
Fund may invest.
The tax discussion set forth above regarding federal and
state income taxation is included for general information only.
Prospective investors should consult their own tax advisors
concerning the federal and state tax consequences of an investment
in the Fund.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust is responsible for
supervising the operations and affairs of the Trust and the Fund.
The Trust's officers, who are all officers or employees of the
Investment Adviser or the Administrator, are responsible for the
daily management and administration of the Fund's operations.
Investment Adviser. The Investment Adviser, AMBAC Investment
Management, Inc., 300 Nyala Farms Road, Westport, Connecticut
06880, is a wholly owned subsidiary of AMBAC Capital Corporation
which, in turn, is a wholly owned subsidiary of AMBAC Inc.
("AMBAC"). Through its subsidiaries, AMBAC is a leading insurer of
municipal and structured finance obligations and a provider of
investment contracts and interest rate swaps to states,
municipalities and municipal authorities. AMBAC is a publicly held
company whose shares are traded on the New York Stock Exchange.
Subject to overall supervision of the Board of Trustees, the
Investment Adviser is responsible for managing the investment
operations of the Fund in accordance with the Fund's investment
objective and policies. The Investment Adviser formulates a
continuing investment program for the Fund and makes all decisions
regarding securities to be purchased or sold for the Fund. The
Investment Adviser is required to provide certain administrative
services to the Trust to the extent those services are not
provided by other organizations retained by the Fund, and
furnishes, without expense to the Fund, the services of its
personnel to serve as officers and trustees of the Trust. The Fund
pays the Investment Adviser a monthly fee computed at the annual
rate of .15% of the Fund's average daily net assets during the
month.
Evelyn R. Robertson, a Vice President of the Investment
Adviser, is the person primarily responsible for managing the
Fund's investments. Ms. Robertson has over 12 years of experience
managing money market funds. Prior to joining the Investment
Adviser in June, 1995, Ms. Robertson was a Vice President of Smith
Barney, Inc., where she served as portfolio manager of various
money market funds. The Investment Adviser is a newly formed
company which has not previously served as the investment adviser
of mutual funds. However, AMBAC, through its subsidiaries, manages
its investment portfolios of approximately $4 billion.
Administrator. The Trust has entered into an Administration
Agreement with the Administrator, First Data Investor Services
Group, Inc., One Exchange Place, Boston, Massachusetts 02109, a
wholly owned subsidiary of First Data Corporation. The
Administrator provides various services required in connection
with the operations of the Trust and the Fund, including, but not
limited to: overseeing the preparation and maintenance of all
documents and records required to be maintained by the Trust;
preparing and updating required regulatory filings, prospectuses
and shareholder reports; providing, at its own expense, the
services of its personnel to serve as officers of the Trust; and
preparing and disseminating material for meetings of the Board of
Trustees. For these services, the Fund pays the Administrator a
monthly fee calculated at an annual rate of .05% of the Fund's
average daily net assets on the first $500 million of net assets
of the Trust, .04% on the next $500 million of net assets of the
Trust and .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. The Administrator also provides the
Trust with fund accounting services for which it is paid a monthly
fee by the Fund of $3,000 if monthly average net assets of the
Fund are $50 million or less, $4,000 if the Fund's monthly average
net assets are between $50-$200 million, or $5,000 if the Fund's
monthly average net assets exceed $200 million.
PERFORMANCE INFORMATION
The Fund may publish its "current yield" and "effective
yield" in advertisements, sales materials and shareholder reports.
Current yield refers to the income generated by an investment in
the Fund over a seven-day period; the income is then annualized.
In annualizing income, the amount of income generated by the
investment during the period is assumed to be generated each week
over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated in the same manner,
but when annualized, the income earned by an investment in the
Fund is assumed to be reinvested. The effective yield will be
slightly higher than the current yield because of the compounding
effect of the assumed reinvestment. All quotations of investment
performance are based upon historical investment results and are
not intended to predict future performance.
In addition, comparative performance information may be used
from time to time in advertisements, sales literature and
shareholder reports. This information may include data, ratings
and rankings from Lipper Analytical Services, Inc., IBC Financial
Data Money Fund Report, The Bank Rate Monitor, Morningstar and
other industry publications, business periodicals and services.
Comparisons to recognized market indices and to the returns on
specific money market securities or types of securities or
investments may also be used. The Fund may disseminate yields for
periods longer than seven days, and may report its total return.
The "total return" of the Fund refers to the average annual
compounded rate of return over a specified period (as stated in
the advertisement) that would equate an initial amount invested at
the beginning of the period to the end of period redeemable value
of the investment, assuming the reinvestment of all dividends and
distributions.
GENERAL INFORMATION
Description of Shares. The Trust is a Delaware business
trust organized pursuant to a Certificate of Trust dated June 27,
1995 and is authorized to issue an unlimited number of shares of
beneficial interest, $.001 par value. As of the date of this
Prospectus, the Trust has established three series of its shares,
each representing interests in a separate portfolio of
investments. One series of shares represents interests in the
Fund. The other series represent interests in AMBAC U.S.
Government Money Market Fund and AMBAC Short-Term U.S. Government
Income Fund. The Board of Trustees has the power to establish
additional series of shares and, subject to applicable laws and
regulations, to issue two or more classes of shares of each
series. Shares are fully paid and non-assessable, and have no
preemptive or conversion rights.
Shareholders of the Fund, together with shareholders of each
other series of the Trust, are entitled to vote on the election of
trustees and the ratification of the Trust's independent
accountants when those matters are voted upon at a meeting of
shareholders. On other matters affecting the Fund on which
shareholders of the Fund are entitled to vote, shares of the Fund
will generally be voted as a separate class. Each share (and
fractional share) is entitled to that number of votes which equals
the net asset value of such share (or fraction thereof). All
shares of the Trust have non-cumulative voting rights, meaning
that shareholders entitled to cast more than 50% of the votes for
the election of trustees can elect all of the trustees standing
for election if they choose to do so.
Under Delaware law, shareholders of the Fund could, under
certain circumstances, be held personally liable for the
obligations of the Trust but only to the extent of the
shareholder's investment. However, the Declaration of Trust
disclaims liability of the shareholders, trustees or officers of
the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust and requires that
notice of the disclaimer be given in each contract or obligation
entered into or executed by the Trust or the trustees. The risk of
a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and should be considered
remote.
Annual meetings of shareholders will not be held except as
required by the Investment Company Act or other applicable law. A
meeting will be held on the removal of a trustee or trustees of
the Trust if requested in writing by holders of not less than 10%
of the outstanding shares of the Trust.
Control Persons. As of September 30, 1996, AMBAC Indemnity
Corporation, an affiliate of the Investment Adviser owned more
than 25% of the outstanding shares of the Fund. So long as such
ownership of shares of the Fund (or of the Trust) continues to
exceed 25% of the outstanding shares of the Fund (or of the
outstanding shares of the Trust), AMBAC Indemnity Corporation, the
Investment Adviser and its parent, AMBAC Inc., will be deemed to
control the Fund (and the Trust) by virtue of such ownership.
Transfer Agent. The Transfer Agent, First Data Investor
Services Group, Inc., P.O. Box 5138, Westborough, Massachusetts
01581-5138, serves as the Trust's shareholder servicing agent and
dividend disbursing agent. Shareholders of the Fund should contact
the Transfer Agent with their questions regarding transactions in
shares of the Fund and share account balances.
Custodian. Bankers Trust Company, 130 Liberty Street, New
York, New York 10006, serves as custodian of the Trust, and in
that capacity maintains custody of all securities and cash assets
of the Fund. The custodian is authorized to hold the Fund's
investments in securities depositories and to use subcustodians
approved by the Trust.
Distributor. 440 Financial Distributors, Inc., 4400 Computer
Drive, Westborough, Massachusetts 01581-5120, serves as
Distributor of the Fund's shares. The Distributor may, from time
to time, enter into selling agreements with dealers or other
financial institutions, and in accordance therewith, pay to such
dealers or institutions, in connection with sales or the
distribution of shares of the Fund, material compensation or
promotional incentives, in the form of cash or other compensation.
Such compensation and incentives are not paid by the Fund and will
not be a Fund expense.
Additional Information. This Prospectus, including the
Statement of Additional Information which has been incorporated by
reference herein, does not contain all the information set forth
in the Registration Statement filed by the Trust with the SEC
under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or
may be examined, without charge, at the office of the SEC in
Washington, D.C.
Shareholder Reports. The Trust sends shareholders annual and
semi-annual reports without charge. These reports include further
information regarding the Fund's performance. The financial
statements of the Fund appearing in the Trust's annual reports are
audited by KPMG Peat Marwick LLP, the Trust's independent public
accountants.
Shareholder Inquiries. For questions concerning shareholder
accounts, dividends and share purchase and redemption procedures,
contact the Transfer Agent toll free at 1-800-311-AMBAC (2622) or
at P.O. Box 5138, Westborough, Massachusetts 01581-5138.
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 01581-5120
DISTRIBUTOR
440 Financial Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581-5120
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
Investors are advised to read this Prospectus and retain it for
future reference.
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS,
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IN CONNECTION WITH
THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER BY THE TRUST OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OR AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
U.S. Treasury Money Market
Fund
TABLE OF CONTENTS A SERIES OF AMBAC TREASURERS TRUST
SUMMARY OF EXPENSES 2
FINANCIAL HIGHLIGHTS 3
SUITABLE INVESTORS 4
INVESTMENT OBJECTIVE AND POLICIES 4
PURCHASING SHARES 6
SHAREHOLDER ACCOUNTS 8
REDEEMING SHARES 8
EXCHANGE PRIVILEGE 10
NET ASSET VALUE 12
FUND EXPENSES 12
DIVIDENDS AND DISTRIBUTIONS 13
TAXES 13
MANAGEMENT OF THE FUND 15
PERFORMANCE INFORMATION 16
GENERAL INFORMATION 16
AMBAC TREASURERS TRUST
U.S. Government Money Market Fund
A SERIES OF AMBAC TREASURERS TRUST
300 Nyala Farms Road
Westport, Connecticut 06880
AMBAC U.S. Government Money Market Fund (the "Fund") is a
series of AMBAC Treasurers Trust (the "Trust"), a diversified,
open-end management investment company. The Fund is a money market
fund and seeks to maintain a stable net asset value of $1.00 per
share. The investment objective of the Fund is high current
income, consistent with preservation of capital and maintenance of
liquidity. The Fund pursues this objective by investing
exclusively in short-term debt securities that are issued or
guaranteed by the U.S. government or an agency or instrumentality
of the U.S. government ("Government Securities") and repurchase
agreements collateralized by Government Securities. See
"Investment Objective and Policies." AMBAC Investment Management,
Inc. (the "Investment Adviser") serves as the investment adviser
of the Fund. First Data Investor Services Group, Inc. serves as
the administrator of the Fund (the "Administrator").
Shares of the Fund are offered for sale on a no-load basis
to states and municipalities, and their subdivisions and agencies,
as well as to other institutional investors. No sales commissions
or other charges are imposed upon the purchase or redemption of
shares. The minimum initial investment in the Fund is $2,000,000.
See "Purchasing Shares." Shares of the Fund are not insured by
AMBAC Indemnity Corporation.
An investment in the Fund is neither insured nor guaranteed
by the U.S. Government and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per
share. See "Net Asset Value."
This Prospectus sets forth concisely the information about
the Fund and the Trust that a prospective investor should know
before investing. Additional information about the Trust has been
filed with the Securities and Exchange Commission in a Statement
of Additional Information dated November 1, 1996, which is
incorporated herein by reference and is available without charge
by writing to the Transfer Agent or by calling 1-800-311-AMBAC
(2622).
Investors are advised to read this Prospectus and retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is November 1, 199
SUMMARY OF EXPENSES
The following table is designed to assist prospective
investors in understanding the various direct and indirect costs and
expenses that a shareholder in the Fund will bear. The amounts set
forth below under "Other Expenses," as well as the amounts in the
Example below, are based upon estimates of expenses for the current
fiscal year.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends
None
Deferred Sales Load None
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses Net of Expense
(as a percentage of average net assets)
Reimbursement
Management Fees (after waiver) 0%
12b-1 Fees None
Other Expenses (estimated) .20%
Total Fund Operating Expenses .20%
The Investment Adviser has voluntarily agreed to waive its
fees or absorb Fund expenses to the extent necessary to assure that
the ordinary operating expenses do not exceed .20% of the Fund's
average daily net assets. Absent this agreement, management fees,
other estimated expenses and estimated total operating expenses of
the Fund would be .15%, .77% and .92%, respectively, of the Fund's
average daily net assets. The Investment Adviser reserves the right
to modify or terminate at any time its agreement to waive fees and
absorb expenses.
Example 1 Year 3
Years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: $2 $6
The Example is based upon estimated Total Fund Operating
Expenses, as set forth in the Table above, after giving effect to
the fee waiver and absorption of expenses. Actual expenses and
annual return may be greater or less than the amounts shown above.
The Example should not be considered a representation of past or
future expenses.
For a more complete description of costs and expenses, see
"Management of the Fund."
U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
The Financial Highlights for the Fund should be read in
conjunction with the Financial Statements and related notes
included in the Statement of Additional Information. The
following presents information relating to a share of beneficial
interest in the Fund outstanding for the entire period
Period ended August 31, 1996
(unaudited)(1)
Net Asset Value, Beginning of period $
1.000
Income from Investment Operations:
Net investment income (2) 0.018
Less Dividends:
Dividends from net investment income
(0.018)
Net increase in net asset value ----
Net Asset Value, End of period $ 1.000
Total Return 1.84%**
Ratios/Supplemental Data:
Net Assets, End of period (000s) $ 67,950
Ratios to average net assets:
Net investment income including reimbursement/waiver
5.20%*
Operating expenses including reimbursement/waiver
0.20%*
Operating expenses excluding reimbursement/waiver
0.92%*
* Annualized
** Not Annualized
(1) The Fund commenced 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
August 31, 1996 for the Fund was $0.016.
SUITABLE INVESTORS
The Fund is specifically designed for investors concerned
about the safety of their investments and is a low-cost,
professionally managed cash management vehicle for states,
municipalities, and their subdivisions and agencies, including
school and special purpose districts, and for other institutional
investors. It offers investment diversification, administrative
convenience and operating economies of scale to investors whose
investment policies and guidelines are consistent with those of
the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek high current
income, consistent with preservation of capital and maintenance of
liquidity. The Fund pursues this objective by investing
exclusively in short-term debt securities issued or guaranteed by
the U.S. government or an agency or instrumentality of the U.S.
government ("Government Securities") and repurchase agreements
collateralized by Government Securities. The Fund maintains a
dollar-weighted average maturity of 90 days or less, and invests
only in securities having remaining maturities of 397 days or
less. As a money market fund, the Fund seeks to maintain a stable
net asset value of $1.00 per share at all times. No assurance can
be given that the Fund will be able to achieve its investment
objective or to maintain a stable net asset value. See "Net Asset
Value."
Government Securities include obligations that are issued by
the U.S. Treasury. These obligations, which include Treasury
bills, notes and bonds, are backed by the full faith and credit of
the U.S. government. Government Securities also include
obligations issued by federal agencies and instrumentalities
("Agency Securities"). Certain Agency Securities, such as the
Export-Import Bank of the United States, the General Services
Administration, the Government National Mortgage Association, and
the Small Business Administration, are backed by the full faith
and credit of the U.S. government. Other Agency Securities, such
as obligations of the Federal Farm Credit Banks, Federal Home Loan
Banks, Federal Home Loan Mortgage Corporation, Federal National
Mortgage Association and Student Loan Marketing Association, are
backed by the right of the issuer to borrow from the U.S. Treasury
under certain circumstances or are backed by the credit of the
agency or instrumentality issuing the obligation. These types of
Agency Securities are not deemed direct obligations of the United
States, and therefore involve more risk than obligations which are
backed by the full faith and credit of the U.S. government. All
securities purchased by the Fund, including repurchase agreements,
must be of high quality and be determined by the Investment
Adviser to present minimal credit risks pursuant to procedures
adopted by the Board of Trustees of the Trust.
The Fund may invest in certain variable and floating rate
securities, as described below, but does not invest in any other
securities commonly known as derivatives.
The Fund's investment objective is fundamental and may not
be changed without the approval of the holders of a majority of
the outstanding voting securities of the Fund, as defined in the
Investment Company Act of 1940, as amended (the "Investment
Company Act").
Repurchase Agreements. A repurchase agreement involves the
purchase of a security by the Fund with an agreement by the seller
of the security to repurchase it from the Fund at a mutually
agreed upon day and price, frequently the next business day. The
resale price is in excess of the purchase price and reflects the
rate of return earned by the Fund. The maturities of repurchase
agreements entered into by the Fund normally do not exceed seven
days. However, the Fund may enter into a repurchase agreement
maturing in more than seven days provided that not more than 10%
of the Fund's net assets would, as a result, be invested in
repurchase agreements having maturities in excess of seven days
and under which the Fund also does not have the right to repayment
within seven days. Repurchase agreements will at all times be
fully collateralized by their underlying securities ("collateral")
in an amount at least equal to the purchase price plus accrued
interest, marked to market daily. The collateral for repurchase
agreements is held by the Trust's custodian (or a subcustodian)
and is required to consist of Government Securities (without
regard to the maturity of such obligations). If the seller
defaults and the value of the collateral securing a repurchase
agreement declines, the Fund may incur a loss. The Fund, however,
enters into repurchase agreements only with banks or primary
dealers designated as such by the Federal Reserve Bank of New York
and which have been determined by the Investment Adviser to
present minimal credit risk in accordance with guidelines
established by the Board of Trustees of the Trust.
Variable and Floating Rate Securities. Government Securities
purchased by the Fund may include variable and floating rate
securities. The interest rates payable on these securities are
adjusted either at predesignated intervals or whenever there is a
change in an established benchmark rate of interest, and, upon
reset, the market value approximates par. These securities may
also have a demand feature under which the Fund can demand
repayment of principal on specified dates or after giving
specified notice. The Fund only purchases variable and floating
rate Government Securities that are eligible for purchase by money
market funds under applicable regulations, and therefore does not
purchase securities such as inverse floaters, range floaters, COFI
floaters, capped floaters or dual index floaters. In determining
the maturities of the Fund's portfolio securities and calculating
the Fund's dollar-weighted average portfolio maturity, variable
rate Government Securities are deemed to have a maturity equal to
the period remaining until the next readjustment of the interest
rate. Floating rate Government Securities with demand features are
deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
When-Issued and Delayed Delivery Securities. The Fund may
purchase or sell securities on a when-issued or delayed delivery
basis. In these transactions, securities are purchased or sold by
the Fund with payment and delivery taking place as much as a month
or more in the future. The Fund engages in these transactions to
secure an advantageous price and yield at the time of entering
into the transactions. However, the value of securities purchased
on a when-issued basis is subject to market fluctuation and no
interest accrues to the purchaser during the period between
purchase and settlement.
Borrowings. The Fund does not borrow for purposes of making
investments (a practice known as "leverage"). However, it may
borrow money from banks in an amount not exceeding one-third of
the value of its total assets (calculated at the time of the
borrowing), for temporary extraordinary or emergency purposes. The
Fund may pledge its assets to secure these borrowings. Additional
investments will not be made by the Fund while any borrowings are
outstanding.
Investment Restrictions. The Fund is subject to various
additional restrictions on its investments. Certain of these
restrictions are deemed fundamental policies and cannot be changed
without the approval of the holders of a majority of the Fund's
outstanding voting securities, as defined in the Investment
Company Act. See "Investment Restrictions" in the Statement of
Additional Information.
Investment Characteristics. The Fund invests solely in
obligations issued or guaranteed by the U.S. government or an
agency or instrumentality of the U.S. government, and repurchase
agreements collateralized by such securities. Government
Securities are of very high credit quality. Shares of the Fund are
not insured or guaranteed by the U.S. government or any government
agency. The return on an investment in the Fund will increase or
decrease in response to changes in short-term market interest
rates. The market value of the Fund's investments will fluctuate,
with investments increasing in value as interest rates fall and
decreasing in value as interest rates rise. However, due to the
method used by the Fund in valuing its assets, it is expected but
cannot be assured that the net asset value of shares of the Fund
will be a stable $1.00 per share. See "Net Asset Value." Virtually
all portfolio transactions for the Fund will be effected on a
principal basis with issuers, underwriters or dealers serving as
primary market-makers.
PURCHASING SHARES
Shares of the Fund are offered for sale, without sales
charge, at the net asset value per share next determined after
receipt and acceptance of a purchase order by 440 Financial
Distributors, Inc., as distributor of the Fund's shares (the
"Distributor"), subject to timely receipt of federal funds as
described below. Net asset value is computed as of 4:00 p.m.
(Eastern time) on each day on which both the New York Stock
Exchange is open for trading and the Federal Reserve Bank of New
York is open (each, a "Business Day"). See "Net Asset Value." A
minimum initial investment of $2,000,000 is required (except in
special circumstances as described in the Statement of Additional
Information). Subsequent investments may be made in any amount,
subject to a $100,000 minimum.
Shares become entitled to receive dividends beginning on the
day of purchase. For this reason, the Fund must have federal funds
available to it (i.e., monies credited to its custodian bank by a
Federal Reserve bank) on the day the purchase order is accepted.
An order for the purchase of shares of the Fund is accepted (i)
immediately upon receipt of federal funds by wire as described
below or (ii) when a check is credited to the shareholder's
account in the form of federal funds (generally one Business Day
after receipt of a check). Shares will be issued at the net asset
value next determined after acceptance of the purchase order and
will be entitled to that day's dividend. The Fund reserves the
right to reject any purchase order and to modify or suspend the
continuous offering of its shares.
In order to permit the Investment Adviser to manage the Fund
most effectively, investors should place purchase orders as early
in the day as possible by calling the Fund's transfer agent, First
Data Investor Services Group, Inc. (the "Transfer Agent"), toll-
free at 1-800-311-AMBAC (2622), as described below. Investors who
anticipate making purchase transactions in excess of $5,000,000
are encouraged to make an advisory call to the Transfer Agent on
the day prior to investment. This advisory call does not replace
the need to call the Transfer Agent to place a purchase order.
Prior to making an initial investment by wire or check, an
account number must be obtained by calling the Transfer Agent
toll-free at 1-800-311-AMBAC (2622), or by mailing a completed
account application to:
AMBAC Funds
P.O. Box 5138
Westborough, Massachusetts 01581-5138
In order to receive an account number by telephone, an
investor must provide the name, address, and tax identification
number of the account owner, the amount being wired or mailed as
the initial investment, and the name of the wiring bank. Promptly
after opening accounts by telephone, investors should mail an
original completed account application for each account opened to
the Transfer Agent. Although share purchases can be made before an
account application is submitted, shares may not be redeemed until
a completed account application has been submitted.
Purchases by Federal Funds. Shares may be purchased by
wiring federal funds directly to the Fund in accordance with the
instructions below. The Fund does not impose any transaction
charges; however, wire charges may be imposed by the shareholder's
transmitting bank. Shares will be issued at the net asset value
next determined after receipt of an order to purchase shares and
will be entitled to the dividend declared on the date the order is
received if the Trust's custodian receives payment in federal
funds in the amount of the purchase order not later than the close
of the Federal Reserve wire on that day. If a purchase order is
not received and accepted prior to 4:00 p.m. (Eastern time) (2:00
p.m. for remote trade entry orders), or federal funds are not
received by the close of the Federal Reserve wire, shares will not
be issued or entitled to receive dividends until the next
computation of net asset value following the receipt of federal
funds by the Trust's custodian.
Additional purchases of shares can be made by calling the
Transfer Agent toll-free at 1-800-311-AMBAC (2622), to place a
purchase order and then wiring federal funds in the amount of the
purchase.
With respect to both initial and subsequent purchases of
shares, the wiring bank should be instructed to wire federal funds
to:
AMBAC U.S. Government Money Market Fund
C/o BSD&T Co. ABA # 011001234
CR DDA # 05-338-4
CR FDISG A/C # __________
[insert your account number]
Purchases by Check. Shares may be purchased by check in
accordance with the instructions below. Shares will be issued on
the next Business Day after receipt of a check at the net asset
value determined on such day. Shareholders will begin accruing
dividends when a check is credited to the shareholder's account in
the form of federal funds (generally one Business Day after
receipt of a check).
Checks for both initial and subsequent purchases of shares
should indicate the account name and number and be made payable to
AMBAC U.S. Government Money Market Fund and sent by regular mail
to the Transfer Agent at:
AMBAC Funds
P.O. Box 5138
Westborough, MA 01581-5138
Check purchases sent by registered or certified mail or
overnight delivery should be sent to the Transfer Agent at:
AMBAC Funds
c/o First Data Investor Services Group, Inc.
4400 Computer Drive - 2CW65
Westborough, MA 01581-5120
SHAREHOLDER ACCOUNTS
The Transfer Agent maintains one or more accounts for each
shareholder reflecting full and fractional shares of the Fund the
shareholder owns. Shareholders are sent confirmations of each
account transaction, and monthly statements showing account
balances. The Trust does not issue certificates for shares of the
Fund.
Sub-Account Services. Special sub-accounting procedures are
available for investors wishing to open multiple accounts to meet
requirements regarding the commingling of funds or for accounting
convenience. Sub-accounts can be established at any time by
calling the Transfer Agent. Please call toll-free at 1-800-311-
AMBAC (2622) for further information and appropriate forms.
Investors who have established sub-accounts will receive periodic
confirmations and statements of holdings and transactions for the
master account and each sub-account.
Minimum Account Balance. In order to avoid costs to the Fund
that are associated with maintaining small accounts, shareholders
should maintain account balances of not less than $100,000. If an
account balance falls below $100,000 as a result of share
redemptions, the Fund has the right to redeem all shares held in
the account. In such event, the proceeds will be wired to the
primary bank account of record. However, a shareholder will first
be sent written notice of the Fund's intention to close the
account, and given 60 days to purchase additional shares to
increase the account balance to $100,000.
REDEEMING SHARES
Shareholders may redeem all or any portion of the shares in
their accounts at any time at the net asset value next computed
after the receipt of a redemption request in proper form.
Redemption proceeds will be paid by federal funds wire to one or
more of the bank accounts that have been predesignated by the
shareholder, normally on the day the redemption request is
received. If a redemption request is not received prior to 2:00
p.m. (Eastern time), it will be processed on the following
Business Day. Shares are not entitled to receive dividends
declared on the day the shares are redeemed. See "Dividends and
Distributions." In the case of complete redemption of all shares
in an account, the redemption payment will include the amount of
all dividends declared for the month-to-date on shares held in the
account. Except in unusual circumstances described in the
Statement of Additional Information, the Fund will not suspend the
right of redemption or postpone the payment of redemption proceeds
for more than seven days, except that when shares are purchased by
check or acquired by means of an exchange of shares purchased by
check (including, in each case, certified checks and cashiers
checks), payment of redemption proceeds will be delayed until the
purchase check has cleared (the time varies from state to state)
which may take up to 15 days. Shareholders who anticipate the
need for immediate access to their investment should purchase
shares with federal funds.
A completed account application must be on file with the
Transfer Agent in order to redeem shares. See "Purchasing Shares."
Shareholders will be asked to designate a primary recipient bank
account on their account application. The primary recipient
account may be changed at any time, and any number of secondary
recipient bank accounts can be added, provided proper written
instructions are on file. Please call the Transfer Agent to
receive additional information and appropriate forms.
In order to permit the Investment Adviser to manage the Fund
most effectively, investors should place telephone redemption
requests as early in the day as possible by calling the Transfer
Agent toll-free at 1-800-311-AMBAC (2622) as described below.
Investors who anticipate making redemptions in excess of
$5,000,000 are encouraged to make an advisory call to the Transfer
Agent at least one day in advance. This advisory call does not
replace the need to place the redemption request in writing or by
telephone.
Telephone Redemption Procedures. A request to redeem shares
may be placed by calling the Transfer Agent at 1-800-311-AMBAC
(2622). The shareholder will be asked to provide the account name
and number, and the amount of the redemption. Proceeds of the
redemption will be sent to the primary recipient bank account
designated by the shareholder unless the shareholder requests that
payment be made to a predesignated secondary recipient bank
account. Proceeds will be sent by Federal Reserve wire, normally
on the day the redemption request is received. Redemption requests
that are not received prior to 2:00 p.m. (Eastern time) will be
processed the following Business Day.
The Transfer Agent employs reasonable procedures to confirm
that telephone redemption instructions are genuine such as
recording telephone calls, providing written confirmation of
transactions, or requiring a form of personal identification or
other information prior to effecting a telephone redemption. To
the extent such procedures are used, neither the Trust or the
Fund, nor the Investment Adviser, Administrator, Distributor or
Transfer Agent, will be liable for a loss due to fraudulent or
unauthorized telephone instructions. A redemption by telephone
may be made only if the telephone redemption privilege has been
selected on the account application, or written instructions have
been filed with the Transfer Agent.
During periods of severe market or economic conditions, it
may be difficult to contact the Transfer Agent by telephone. In
such an event a shareholder should send a written redemption
request by overnight delivery to the Transfer Agent and follow the
procedures for written redemption requests described below.
Written Redemption Requests. Shares of the Fund may be
redeemed by written redemption request. A written redemption
request must be signed by each of the persons who the shareholder
has specified as required to sign such requests. The request must
include the complete account name and address, the amount of the
redemption, and the predesignated primary or secondary recipient
bank account to which the proceeds of the redemption are to be
sent. The signature of each person signing the request must be
guaranteed by an eligible guarantor institution. Organizations
that may qualify as eligible guarantor institutions include banks,
brokers, dealers, national securities exchanges, clearing
agencies, credit unions, and savings associations. The Transfer
Agent reserves the right to request additional information from,
and to make reasonable inquiries of, any eligible guarantor
institution.
Written redemption requests sent by regular mail should be sent
to:
AMBAC Funds
P.O. Box 5138
Westborough, Massachusetts 01581-5138
Written redemption requests sent by overnight delivery should be
sent to:
AMBAC Funds
c/o First Data Investor Services Group, Inc.
4400 Computer Drive - 2CW65
Westborough, Massachusetts 01581-5120
EXCHANGE PRIVILEGE
Shareholders may exchange shares of the Fund for shares of
any other fund advised by the Investment Adviser based upon the
relative net asset values per share of the funds at the time the
exchange is effected. Currently, shares of the Fund may be
exchanged for shares of: AMBAC U.S. Treasury Money Market Fund and
AMBAC Short-Term U.S. Government Income Fund. No sales charge or
other fee is imposed in connection with exchanges. Before
requesting an exchange, shareholders should obtain and read the
prospectus of the fund whose shares will be acquired in the
exchange. Prospectuses can be obtained by calling the Transfer
Agent at 1-800-311-AMBAC (2622) or writing to the Transfer Agent
at P.O. Box 5138, Westborough, Massachusetts 01581-5138.
All exchanges are subject to applicable minimum initial and
subsequent investment requirements of the fund whose shares will
be acquired. In addition, an exchange is permitted only between
accounts that have identical registrations. The Fund does not
impose limitations on the frequency of exchanges. Shares of a fund
may be acquired in an exchange only if the shares are currently
being offered and are legally available for sale in the state of
the shareholder's residence.
An exchange involves the redemption of shares of the Fund
and the purchase of shares of another fund. Shares of the Fund
will be redeemed at the net asset value per share of the Fund next
computed after receipt of an exchange request in proper form. See
"Net Asset Value." Shares of the fund being acquired in the
exchange will be purchased when the proceeds of the redemption
become available (normally, on the day the exchange request is
received) at the net asset value of those shares then in effect.
See "Redeeming Shares." The acquired shares will be entitled to
receive dividends in accordance with the policies of the
applicable fund. Shareholders that are not exempt from taxation
may realize a taxable gain or loss on an exchange transaction. See
"Taxes."
The exchange privilege may be modified or terminated at any
time. However, 60 days' prior notification of any modification or
termination will be given to shareholders.
Telephone Exchange Procedures. A request to exchange shares
may be placed by calling the Transfer Agent at 1-800-311-AMBAC
(2622). The shareholder will be asked to provide the account name
and number, the amount of shares being exchanged and the name of
the fund whose shares are being acquired. Telephone exchange
requests that are not received prior to 2:00 p.m. (Eastern time)
will be processed the following Business Day. A written
confirmation of the exchange transaction will be sent to the
shareholder. As in the case of telephone redemption requests, the
Transfer Agent employs reasonable procedures to confirm that
telephone exchange instructions are genuine. To the extent such
procedures are used, neither the Trust or the Fund, nor the
Investment Adviser, Administrator, Distributor or Transfer Agent,
will be liable for any loss due to fraudulent or unauthorized
telephone exchange instructions. An exchange by telephone may be
made only if the telephone exchange privilege has been selected on
the account application, or written instructions have been filed
with the Transfer Agent.
During periods of severe market or economic conditions, it
may be difficult to contact the Transfer Agent by telephone. In
such event, a shareholder should send a written exchange request
by overnight delivery to the Transfer Agent and follow the
procedures for written exchange requests described below.
Written Exchange Procedures. Requests to exchange shares may
be submitted in writing. Each written exchange request should
specify the complete account name and number of the shareholder's
account with the Fund, the amount to be exchanged, and the name of
the fund whose shares are to be acquired in the exchange. The
request must be signed by each of the persons who the shareholder
has specified as required to sign redemption requests. The
signature of each person signing the exchange request must be
guaranteed by an eligible guarantor institution. Written exchange
requests should be sent to the Transfer Agent at the address
indicated above under "Redeeming Shares-Written Redemption
Requests."
NET ASSET VALUE
The Fund's share price, or net asset value per share, is
calculated as of 4:00 p.m. (Eastern time) each Business Day. Net
asset value per share is determined by subtracting the Fund's
liabilities (including accrued expenses and dividends payable)
from the total value of the Fund's investments and other assets
and dividing the result by the total number of outstanding shares
of the Fund.
For purposes of calculating net asset value per share, the
Fund's portfolio securities are valued using the "amortized cost"
method of valuation. This method involves valuing each investment
at cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the investment.
Amortized cost valuation provides certainty in valuation, but may
result in periods during which the value of an investment, as
determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold the investment. Use of this
valuation method permits the maintenance of the Fund's net asset
value at $1.00 per share. There can be no assurance, however, that
the Fund will be able to maintain a stable net asset value of
$1.00 per share.
In using this method, the Trust has adopted certain
procedures and adheres to various investment limitations as
required by Rule 2a-7 under the Investment Company Act. These
procedures, among other things, require the Investment Adviser to
monitor the deviation between the Fund's net asset value
determined by using available market quotations or market
equivalents and its net asset value determined by using amortized
cost.
FUND EXPENSES
The Fund's expenses are deducted from total income before
dividends are paid. The Fund bears all expenses of its operations
other than those expressly assumed by the Investment Adviser,
including the Fund's proportionate share of the Trust's expenses.
Expenses borne by the Fund include but are not limited to: the
fees of the Investment Adviser, the Administrator and Transfer
Agent; the fees and expenses of the Trust's independent public
accountants, legal counsel, accounting services agent and
custodian; taxes; brokerage fees and commissions; interest; costs
incident to meetings of trustees and shareholders, printing and
mailing prospectuses and reports to shareholders, and the filing
of reports with regulatory bodies and the maintenance of the
Trust's legal existence; federal and state registration fees; the
fees and expenses of non-interested trustees of the Trust; and any
extraordinary expenses of a non-recurring nature.
As discussed under "Summary of Expenses," the Investment
Adviser has voluntarily undertaken to waive its fee or to absorb
expenses of the Fund as may be necessary to limit total ordinary
operating expenses of the Fund to a specified percentage of the
Fund's average daily net assets. The Investment Adviser may modify
or terminate this undertaking at any time.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and accrued daily on each Business
Day based upon the Fund's net investment income (i.e., income
other than net realized capital gains), and are paid monthly.
Distributions of net realized capital gains, if any, are declared
and paid annually at the end of the Fund's fiscal year in which
they have been earned. All dividends and other distributions are
automatically reinvested in full and fractional shares of the Fund
at net asset value unless otherwise requested by the shareholder.
A shareholder can request that dividends and other distributions
be paid by wire transfer to a predesignated bank account by
sending a written request to the Transfer Agent. Any such request
must be received by the Transfer Agent at least five Business Days
prior to a payment date in order to be effective on such date.
Dividends are payable to all shareholders of record as of
the time of declaration. Shareholders will begin receiving
dividends on shares the day the shares are purchased, but will not
be entitled to receive dividends declared on shares the day the
shares are redeemed.
The Fund does not expect to realize any long-term capital
gains. Should any such gains be realized, they will be distributed
annually. In addition, in order to satisfy certain distribution
requirements of the Tax Reform Act of 1986, the Fund may declare
special or regular year-end dividend and capital gains
distributions during December. Such distributions, if received by
shareholders by January 31, are deemed to have been paid by the
Fund and received by shareholders on December 31 of the prior
year.
TAXES
Taxation of the Fund. The Fund intends to qualify each year
as a "regulated investment company" under Subchapter M of the
Internal Revenue Code (the "Code"). If so qualified, the Fund will
not be subject to federal income tax to the extent it distributes
its net income to shareholders. Certain federal income and excise
taxes would be imposed on the Fund if it failed to make certain
required distributions of income to shareholders. The Fund intends
to make distributions in a manner which will avoid the imposition
of such tax. If the Fund should fail to qualify as a "regulated
investment company," it would be subject to regular federal income
tax on its taxable income, and its distributions generally would
be taxable. The Fund intends to carry on its operations so that it
will continue to qualify as a regulated investment company.
Federal Taxation of Shareholders. Dividend distributions,
whether received in cash or reinvested in additional shares, will
be taxable as ordinary income. Although the Fund does not expect
to distribute any long-term capital gains, investors will also be
subject to tax on any capital gains distributions they receive.
Since the Fund does not expect to earn dividend income, dividends
and other distributions from the Fund will generally not qualify
for the dividends-received deduction available to corporate
investors. In January of each year, the Fund sends each
shareholder a statement showing the tax status of distributions
for the past calendar year.
Section 115(1) of the Code provides, in part, that gross
income does not include income derived from the exercise of any
essential government function accruing to a state or any political
subdivision thereof. Shareholders are urged to consult their own
tax advisors to determine any limitations on the applicability of
Section 115(1) to earnings from their investment in the Fund. A
portion of the earnings derived from funds which are subject to
the arbitrage limitations or rebate requirements of the Code may
be required to be paid to the U.S. Treasury as computed in
accordance with such requirements.
A sale of shares of the Fund, either by redemption or
exchange, is a taxable event, and may result in a capital gain or
loss. However, because the Fund seeks to maintain a stable net
asset value of $1.00 per share for both purchases and redemptions,
it is generally expected that shareholders will not ordinarily
realize any capital gain or loss upon redemptions of shares.
The Fund is required to withhold 31% of all taxable
distributions and redemption proceeds paid to shareholders who
either have not complied with IRS taxpayer identification
regulations or are otherwise subject to backup withholding.
Shareholders are asked to certify on their account applications
that their taxpayer identification numbers are correct and that
they are not subject to backup withholding. Failure to so certify
will result in backup withholding.
State and Local Taxes. Investors may be subject to state and
local taxes on their investment. For example, dividends and other
distributions made by the Fund and received by an investor may be
subject to state and local taxes. Although shareholders of the
Fund do not directly receive interest on Government Securities
held by the Fund, certain states may allow the character of the
Fund's income to pass through to shareholders. If so, the portion
of dividends paid by the Fund that is derived from interest on
Treasury securities may be exempt from state and local taxes.
Applicable rules vary from state to state, and interest on certain
Agency Securities may not qualify for exemption from income tax in
some states. The United States Supreme Court has ruled that income
from certain types of repurchase agreements involving Government
Securities does not constitute interest on Government Securities
for this purpose. However, it is not clear whether the Court's
holding extends to all types of repurchase agreements involving
Government Securities in which the Fund may invest. Any exemption
from state and local income taxes does not preclude states from
assessing other taxes on the ownership of Government Securities.
The tax discussion set forth above regarding federal and
state income taxation is included for general information only.
Prospective investors should consult their own tax advisors
concerning the federal and state tax consequences of an investment
in the Fund.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust is responsible for
supervising the operations and affairs of the Trust and the Fund.
The Trust's officers, who are all officers or employees of the
Investment Adviser or the Administrator, are responsible for the
daily management and administration of the Fund's operations.
Investment Adviser. The Investment Adviser, AMBAC Investment
Management, Inc., 300 Nyala Farms Road, Westport, Connecticut
06880, is a wholly-owned subsidiary of AMBAC Capital Corporation
which, in turn, is a wholly-owned subsidiary of AMBAC Inc.
("AMBAC"). Through its subsidiaries, AMBAC is a leading insurer of
municipal and structured finance obligations and a provider of
investment contracts and interest rate swaps to states,
municipalities and municipal authorities. AMBAC is a publicly held
company whose shares are traded on the New York Stock Exchange.
Subject to overall supervision of the Board of Trustees, the
Investment Adviser is responsible for managing the investment
operations of the Fund in accordance with the Fund's investment
objective and policies. The Investment Adviser formulates a
continuing investment program for the Fund and makes all decisions
regarding securities to be purchased or sold for the Fund. The
Investment Adviser is required to provide certain administrative
services to the Trust to the extent those services are not
provided by other organizations retained by the Fund, and
furnishes, without expense to the Fund, the services of its
personnel to serve as officers and trustees of the Trust. The Fund
pays the Investment Adviser a monthly fee computed at the annual
rate of .15% of the Fund's average daily net assets during the
month.
Evelyn R. Robertson, a Vice President of the Investment
Adviser, is the person primarily responsible for managing the
Fund's investments. Ms. Robertson has over 12 years of experience
managing money market funds. Prior to joining the Investment
Adviser in June, 1995, Ms. Robertson was a Vice President of Smith
Barney, Inc., where she served as portfolio manager of various
money market funds. The Investment Adviser is a newly formed
company which has not previously served as the investment adviser
of mutual funds. However, AMBAC, through its subsidiaries, manages
its investment portfolios of approximately $4 billion.
Administrator. The Trust has entered into an Administration
Agreement with the Administrator, First Data Investor Services
Group, Inc., One Exchange Place, Boston, Massachusetts, 02109, a
wholly-owned subsidiary of First Data Corporation. The
Administrator provides various services required in connection
with the operations of the Trust and the Fund, including, but not
limited to: overseeing the preparation and maintenance of all
documents and records required to be maintained by the Trust;
preparing and updating required regulatory filings, prospectuses
and shareholder reports; providing, at its own expense, the
services of its personnel to serve as officers of the Trust; and
preparing and disseminating material for meetings of the Board of
Trustees. For these services, the Fund pays the Administrator a
monthly fee calculated at an annual rate of .05% of the Fund's
average daily net assets on the first $500 million of net assets
of the Trust, .04% on the next $500 million of net assets of the
Trust and .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. The Administrator also provides the
Trust with fund accounting services for which it is paid a monthly
fee by the Fund of $3,000 if the monthly average net assets of the
Fund are $50 million or less, $4,000 if the Fund's monthly average
net assets are between $50-$200 million, or $5,000 if the Fund's
monthly average net assets exceed $200 million.
PERFORMANCE INFORMATION
The Fund may publish its "current yield" and "effective
yield" in advertisements, sales materials and shareholder reports.
Current yield refers to the income generated by an investment in
the Fund over a seven-day period; the income is then annualized.
In annualizing income, the amount of income generated by the
investment during the period is assumed to be generated each week
over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated in the same manner,
but when annualized, the income earned by an investment in the
Fund is assumed to be reinvested. The effective yield will be
slightly higher than the current yield because of the compounding
effect of the assumed reinvestment. All quotations of investment
performance are based upon historical investment results and are
not intended to predict future performance.
In addition, comparative performance information may be used
from time to time in advertisements, sales literature and
shareholder reports. This information may include data, ratings
and rankings from Lipper Analytical Services, Inc., IBC Financial
Data Money Fund Report, The Bank Rate Monitor, Morningstar and
other industry publications, business periodicals and services.
Comparisons to recognized market indices and to the returns on
specific money market securities or types of securities or
investments may also be used. The Fund may disseminate yields for
periods longer than seven days, and may report its total return.
The "total return" of the Fund refers to the average annual
compounded rate of return over a specified period (as stated in
the advertisement) that would equate an initial amount invested at
the beginning of the period to the end of period redeemable value
of the investment, assuming the reinvestment of all dividends and
distributions.
GENERAL INFORMATION
Description of Shares. The Trust is a Delaware business
trust organized pursuant to a Certificate of Trust dated June 27,
1995 and is authorized to issue an unlimited number of shares of
beneficial interest, $.001 par value. As of the date of this
Prospectus, the Trust has established three series of its shares,
each representing interests in a separate portfolio of
investments. One series of shares represents interests in the
Fund. The other series represent interests in AMBAC U.S. Treasury
Money Market Fund and AMBAC Short-Term U.S. Government Income
Fund. The Board of Trustees has the power to establish additional
series of shares and, subject to applicable laws and regulations,
to issue two or more classes of shares of each series. Shares are
fully paid and non-assessable, and have no preemptive or
conversion rights.
Shareholders of the Fund, together with shareholders of each
other series of the Trust, are entitled to vote on the election of
trustees and the ratification of the Trust's independent
accountants when those matters are voted upon at a meeting of
shareholders. On other matters affecting the Fund on which
shareholders of the Fund are entitled to vote, shares of the Fund
will generally be voted as a separate class. Each share (and
fractional share) is entitled to that number of votes which equals
the net asset value of such share (or fraction thereof). All
shares of the Trust have non-cumulative voting rights, meaning
that shareholders entitled to cast more than 50% of the votes for
the election of trustees can elect all of the trustees standing
for election if they choose to do so.
Under Delaware law, shareholders of the Fund could, under
certain circumstances, be held personally liable for the
obligations of the Trust but only to the extent of the
shareholder's investment. However, the Declaration of Trust
disclaims liability of the shareholders, trustees or officers of
the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust and requires that
notice of the disclaimer be given in each contract or obligation
entered into or executed by the Trust or the trustees. The risk of
a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and should be considered
remote.
Annual meetings of shareholders will not be held except as
required by the Investment Company Act or other applicable law. A
meeting will be held on the removal of a trustee or trustees of
the Trust if requested in writing by holders of not less than 10%
of the outstanding shares of the Trust.
Control Persons. As of September 30, 1996, AMBAC Indemnity
Corporation, an affiliate of the Investment Adviser owned more
than 25% of the outstanding shares of the Fund. So long as such
ownership of shares of the Fund (or of the Trust) continues to
exceed 25% of the outstanding shares of the Fund (or of the
outstanding shares of the Trust), AMBAC Indemnity Corporation, the
Investment Adviser and its parent, AMBAC Inc., will be deemed to
control the Fund (and the Trust) by virtue of such ownership.
Transfer Agent. The Transfer Agent, First Data Investor
Services Group, Inc., P.O. Box 5138, Westborough, Massachusetts
01581-5138, serves as the Trust's shareholder servicing agent and
dividend disbursing agent. Shareholders of the Fund should contact
the Transfer Agent with their questions regarding transactions in
shares of the Fund and share account balances.
Custodian. Bankers Trust Company, 130 Liberty Street, New
York, New York 10006, serves as custodian of the Trust, and in
that capacity maintains custody of all securities and cash assets
of the Fund. The custodian is authorized to hold the Fund's
investments in securities depositories and to use subcustodians
approved by the Trust.
Distributor. 440 Financial Distributors, Inc., 4400 Computer
Drive, Westborough, Massachusetts 01581-5120, serves as
Distributor of the Fund's shares. The Distributor may, from time
to time, enter into selling agreements with dealers or other
financial institutions, and in accordance therewith, pay to such
dealers or institutions, in connection with sales or the
distribution of shares of the Fund, material compensation or
promotional incentives, in the form of cash or other compensation.
Such compensation and incentives are not paid by the Fund and will
not be a Fund expense.
Additional Information. This Prospectus, including the
Statement of Additional Information which has been incorporated by
reference herein, does not contain all the information set forth
in the Registration Statement filed by the Trust with the SEC
under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or
may be examined, without charge, at the office of the SEC in
Washington, D.C.
Shareholder Reports. The Trust sends shareholders annual and
semi-annual reports without charge. These reports include further
information regarding the Fund's performance. The financial
statements of the Fund appearing in the Trust's annual reports are
audited by KPMG Peat Marwick LLP, the Trust's independent public
accountants.
Shareholder Inquiries. For questions concerning shareholder
accounts, dividends and share purchase and redemption procedures,
contact the Transfer Agent toll free at 1-800-311-AMBAC (2662) or
at P.O. Box 5138, Westborough, Massachusetts 01581-5138.
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 01581-5120
DISTRIBUTOR
440 Financial Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581-5120
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
Investors are advised to read this Prospectus and retain it for
future reference.
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS,
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IN CONNECTION WITH
THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER BY THE TRUST OR BY THE DISTRIBUTOR TO
SELL OR A SOLICITATION OR AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
U.S. Government Money Market
Fund
TABLE OF CONTENTS A SERIES OF AMBAC TREASURERS TRUST
SUMMARY OF EXPENSES 2
FINANCIAL HIGHLIGHTS 3
SUITABLE INVESTORS 4
INVESTMENT OBJECTIVE AND POLICIES 4
PURCHASING SHARES 6
SHAREHOLDER ACCOUNTS 8
REDEEMING SHARES 9
EXCHANGE PRIVILEGE 10
NET ASSET VALUE 12
FUND EXPENSES 12
DIVIDENDS AND DISTRIBUTIONS 13
TAXES 13
MANAGEMENT OF THE FUND 14
PERFORMANCE INFORMATION 15
GENERAL INFORMATION 16
AMBAC U.S. Treasury Money Market Fund
AMBAC U.S. Government Money Market Fund
AMBAC Short-Term U.S. Government Income
Fund
(Series of AMBAC Treasurers Trust)
300 Nyala Farms Road
Westport, Connecticut 06880
Statement of Additional Information dated November 1, 1996
AMBAC Treasurers Trust (the "Trust") is a diversified, open-end,
management investment company. AMBAC U.S. Treasury Money Market
Fund (the "Treasury Money Fund"), AMBAC U.S. Government Money
Market Fund (the "Government Money Fund"), and AMBAC Short-Term
U.S. Government Income Fund (the "Government Income Fund") (each a
"Fund" and, collectively, the "Funds") are the three initial
series of the Trust. Treasury Money Fund and Government Money
Fund are money market funds which seek to maintain stable net
asset values of $1.00 per share. Each of these Funds seeks high
current income, consistent with preservation of capital and
maintenance of liquidity. The investment objective of Government
Income Fund is to seek high current income, consistent with
preservation of capital. Government Income Fund maintains a
dollar-weighted average portfolio maturity of three years or less.
See "Investment Policies and Practices." AMBAC Investment
Management, Inc. (the "Investment Adviser") serves as the
investment adviser of the Funds. See "Investment Advisory
Arrangements." First Data Investor Services Group, Inc. serves as
the administrator of the Funds (the "Administrator").
Shares of the Trust are offered for sale on a no-load basis to
states and municipalities, and their sub-divisions and agencies,
as well as to other institutional investors. No sales commissions
or other charges are imposed upon the purchase or redemption of
shares. The minimum initial investment is $2,000,000 in
Government Money Fund, $1,000,000 in Government Income Fund and
$100,000 in Treasury Money Fund. See "Purchasing Shares." Shares
of the Trust are not insured by AMBAC Indemnity Corporation.
Investments in the Funds are not insured or guaranteed by the U.S.
Government and there can be no assurance that either Treasury
Money Fund or Government Money Fund will be able to maintain a
stable net asset value of $1.00 per share. See "Determination of
Net Asset Value."
Information about the Funds is set forth in separate Prospectuses
dated November 1, 1996 for U. S. Treasury Money Market Fund and
U.S. Government Money Market Fund and dated November 1, 1995 as
supplemented May 10, 1996 for Short-Term U.S. Government Income
Fund, which provide the basic information you should know before
investing. The Prospectuses may be obtained without charge by
writing to the Transfer Agent or by calling 1-800-311-AMBAC
(2622). This Statement of Additional Information is not a
prospectus, but contains information in addition to and more
detailed than that set forth in each Prospectus. It is intended
to provide you with additional information regarding the
activities and operations of the Funds and the Trust, and should
be read in conjunction with each Funds Prospectus.
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND PRACTICES 3
INVESTMENT RESTRICTIONS 6
PORTFOLIO TRANSACTIONS AND BROKERAGE 8
PURCHASING SHARES 9
SHAREHOLDER ACCOUNTS 10
REDEEMING SHARES 11
EXCHANGE PRIVILEGE 12
DETERMINATION OF NET ASSET VALUE 12
TAXES 13
INVESTMENT ADVISORY ARRANGEMENTS 15
TRUSTEES AND OFFICERS 16
EXPENSES 19
PERFORMANCE INFORMATION 20
GENERAL INFORMATION 21
FINANCIAL STATEMENTS F-1
2
INVESTMENT POLICIES AND PRACTICES
The sections below provide additional information regarding the
types of investments that may be made by the Funds and the
investment practices in which the Funds may engage. The investment
objective and general investment policies of each Fund are
described in the Funds Prospectuses.
Treasury, Government and Agency Securities. Treasury Money Fund
invests exclusively in short-term debt securities that are direct
obligations of the U.S. Treasury ("Treasury Securities") and
repurchase agreements collateralized by debt obligations backed by
the "full faith and credit" of the United States. Government Money
Fund invests exclusively in short-term debt securities (including
Treasury Securities) issued or guaranteed by the U.S. government
or an agency or instrumentality of the U.S. government
("Government Securities"), and repurchase agreements
collateralized by Government Securities. Government Income Fund
invests primarily in Government Securities and repurchase
agreements collateralized by Government Securities.
Treasury Securities consist of obligations issued by the U.S.
Treasury, including Treasury bills, notes and bonds. These are
direct obligations of the U.S. government and differ primarily in
their rates of interest and the length of their original
maturities. Treasury Securities are backed by the full faith and
credit of the U.S. government. Government Securities include
Treasury Securities as well as securities issued or guaranteed by
the U.S. government or its agencies and instrumentalities ("Agency
Securities"). As described in the Prospectuses of Government
Money Fund and Government Income Fund, Agency Securities are in
some cases backed by the full faith and credit of the U.S.
government. In other cases, Agency Securities are backed solely
by the credit of the governmental issuer. Certain issuers of
Agency Securities have the right to borrow from the U.S. Treasury,
subject to certain conditions. Government Securities purchased by
the Funds may include variable and floating rate securities, which
are described in the Prospectuses. Government Income Fund may
also purchase stripped Government Securities and certain mortgage-
backed Government Securities.
Stripped Government Securities. (Government Income Fund only.)
Government Income Fund may invest in component parts of Government
Securities, which represent either the principal (corpus) of a
particular obligation or the right to interest payments on the
obligation (coupon). Investments of this type may include:
obligations from which the interest coupons have been stripped;
interest coupons that have been stripped; stripped obligations
maintained in Federal Reserve book-entry form; and receipts
evidencing the component parts of obligations (corpus or coupons)
that have not actually been stripped. Receipts of this type
evidence ownership of the component parts of particular Government
Securities that are held in physical or book-entry form by a major
commercial bank or trust company pursuant to the terms of a
custody agreement. Under these arrangements, the interests in
Government Securities held by a Fund continue to be backed by the
issuers of those securities.
Repurchase Agreements. As discussed in the Prospectuses, the
Funds may each enter into repurchase agreements. A repurchase
agreement, which may be viewed as a type of secured lending by a
Fund, involves the acquisition by a Fund of a security from a
selling financial institution such as a bank or broker-dealer.
The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the
underlying security ("collateral") at a specified price and at a
fixed time in the future. The Fund will receive interest from the
institution until the time when the repurchase is to occur.
Although such date is deemed to be the maturity date of a
repurchase agreement, the maturities of securities that are
purchased by the Funds through repurchase agreements are not
subject to any limitation as to maturity. The Funds may enter
into repurchase agreements maturing in more than seven days.
However, a Fund may not enter into such a repurchase agreement if,
as a result, more than 10% of the value of its net assets (15% of
net assets in the case of Government Income Fund) would be
invested in repurchase agreements under which the Fund does not
have the right to obtain repayment in seven days or less.
Because repurchase agreements involve certain risks not associated
with direct investment in securities, the Trust follows procedures
designed to minimize these risks. These procedures include
requirements that the Investment Adviser effect repurchase
transactions only with banks or primary dealers designated as such
by the Federal Reserve Bank of New York, and that the bank or
dealer has been determined by the Investment Adviser to present
minimal credit risk in accordance with guidelines established and
monitored by the Board of Trustees of the Trust. In addition, the
collateral underlying a repurchase agreement is required to be
held by the Trust's custodian (or a subcustodian) in a segregated
account on behalf of the Fund which entered into the transaction.
The collateral is marked to market daily and required to be
maintained in an amount at least equal to the repurchase price
plus accrued interest. In the event of a default or bankruptcy by
a selling financial institution, the Trust will seek to liquidate
the collateral. However, the exercise of the Trusts right to
liquidate collateral could involve certain costs or delays and, to
the extent that proceeds from any sale upon a default of the
obligation to repurchase are less than the repurchase price, the
Fund which entered into the transaction will suffer a loss.
When-Issued and Delayed Delivery Securities. As noted in each
Funds Prospectus, the Funds may purchase and sell securities on a
when-issued or delayed delivery basis. These transactions arise
when a Fund purchases or sells a security, with payment and
delivery taking place in the future beyond the normal settlement
period. A transaction of this type will be effected in order to
secure for a Fund an attractive price or yield at the time of
entering into the transaction. When purchasing securities on a
when-issued or delayed delivery basis, a Fund assumes the rights
and risks of ownership, including the risk of price and yield
fluctuations. Because a Fund is not required to pay for
securities until the delivery date, these risks are in addition to
the risks associated with the Funds other investments. If a Fund
remains fully invested at a time during which when-issued or
delayed delivery purchases are outstanding, such purchases will
result in a form of leverage. When a Fund enters into purchase
transactions of this type, the Trusts custodian maintains, in a
segregated account for the Fund, cash and debt obligations held by
the Fund and having a value equal to or greater than the Funds
purchase commitments. When a Fund has sold a security on a when-
issued or delayed delivery basis, the Fund does not participate in
further gains or losses with respect to the security. If the
counterparty fails to deliver or pay for the securities, the Fund
could miss a favorable price or yield opportunity, or could suffer
a loss. When a Fund enters into a sales transaction of this type,
the Trusts custodian segregates the securities sold on a delayed
delivery basis to cover the Funds settlement obligations.
Interest Rate Futures Contracts. (Government Income Fund only.)
Government Income Fund may purchase and sell U.S. exchange-traded
interest rate futures contracts. Currently, there are futures
contracts based on U.S. Treasury bonds, U.S. Treasury notes,
three-month U.S. Treasury bills and GNMA certificates. A clearing
corporation associated with the commodities exchange on which a
futures contract trades assumes responsibility for the completion
of transactions and guarantees that futures contracts will be
performed. Although futures contracts call for actual delivery or
acceptance of debt securities, in most cases the contracts are
closed out before the settlement date without the making or taking
of delivery.
Government Income Fund does not pay or receive money upon the
purchase or sale of a futures contract. Instead, when the Fund
enters into a futures contract, it is initially required to
deposit with its custodian for the benefit of the broker (the
futures commission merchant) an amount of initial margin in cash
or U.S. Treasury bills, currently equal to approximately 1 to
2% of the contract amount for futures on Treasury bonds and notes
and approximately 1/10 of 1% of the contract amount for futures on
Treasury bills. Initial margin in futures transactions is
different from margin in securities transactions in that futures
contract initial margin does not involve the borrowing of funds by
the customer to finance the transactions. Rather, initial margin
is in the nature of a good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the
futures commission merchant are made on a daily basis as the
market price of the futures contract fluctuates. This process is
known as "marking to market." At any time prior to expiration of
the futures contract, the Fund may elect to close the position by
taking an offsetting position which will operate to terminate the
Funds position in the futures contract. While interest rate
futures contracts provide for the delivery and acceptance of
securities, most futures contracts are terminated by entering into
offsetting transactions.
Certain of the considerations associated with the use of futures
contracts are discussed in the Prospectus of Government Income
Fund. Successful use of futures contracts by the Fund is also
subject to the ability of the Investment Adviser to predict
correctly movements in the direction of interest rates and other
factors affecting markets for securities. For example, if the
Fund has hedged against the possibility of an increase in interest
rates which would adversely affect the price of securities in its
portfolio and the price of such securities increases instead, the
Fund will lose part or all of the benefit of the increased value
of its securities because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund
has insufficient cash to meet daily variation margin requirements,
it may have to sell securities to meet such requirements. Such
sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market, and the Fund may
have to sell securities at a time when it is disadvantageous to do
so.
The hours of trading futures contracts on U.S. government
securities may not conform to the hours during which Government
Income Fund may trade such securities. To the extent that the
futures markets close before or after the Government Securities
markets, significant variations can occur in one market that
cannot be reflected in the other market.
The skills needed to trade futures contracts are different than
those needed to invest in securities. However, personnel of the
Investment Adviser have experience in managing securities
portfolios which use futures strategies similar to those used by
Government Income Fund.
The Government Income Fund will maintain in a segregated account
with the Trusts custodian cash and Government Securities to cover
the Government Income Funds obligations on futures contracts.
Investment Characteristics. In managing the Funds, the Investment
Adviser attempts to balance the Funds goals of seeking high
income with their goals of seeking to preserve capital. For this
reason, the Funds do not necessarily invest in securities offering
the highest available yields. The maturities of the securities
purchased by the Funds and the Funds average portfolio maturities
will vary from time to time as the Investment Adviser deems
consistent with the Funds investment objectives and the
Investment Advisers assessment of risks, subject to applicable
limitations on the maturities of investments and dollar-weighted
average portfolio maturity.
When market rates of interest increase, the market value of debt
obligations held by the Funds will decline. Conversely, when
market rates of interest decrease, the market value of obligations
held by the Funds will increase. Debt obligations having longer
maturities generally pay higher rates of interest, but the market
values of longer term obligations can be expected to be subject to
greater fluctuations from general changes in interest rates than
shorter term obligations. These changes will cause fluctuations
in the amount of daily dividends of the Funds and changes in the
net asset value per share of Government Income Fund. In extreme
cases, changes in interest rates could cause the net asset values
per share of Treasury Money Fund and Government Money Fund to
decline. See "Determination of Net Asset Value." In the event of
unusually large redemption demands, securities may have to be sold
at a loss prior to maturity or the Funds may have to borrow money
and incur interest expense. The Investment Adviser seeks to
manage investment risk by purchasing and selling investments for
the Funds consistent with its best judgment and expectations
regarding anticipated changes in interest rates. However, there
can be no assurance that the Funds will achieve their investment
objectives.
INVESTMENT RESTRICTIONS
Each of the Funds is subject to a variety of investment
restrictions. Certain of these restrictions are deemed
fundamental, and may not be changed without the approval of the
holders of a majority of a Fund's outstanding voting securities.
A "majority of the outstanding voting securities" of a Fund for
this purpose means the lesser of (i) 67% of the shares of the Fund
represented at a meeting at which holders of more than 50% of the
outstanding shares are present in person or represented by proxy
or (ii) more than 50% of the outstanding shares of the Fund. As
fundamental investment restrictions, a Fund may not:
(1) Purchase a security, other than a Government Security, if as
a result of such purchase more than 5% of the value of the Funds
assets would be invested in the securities of any one issuer, or
the Fund would own more than 10% of the voting securities, or of
any class of securities, of any one issuer. (For purposes of this
restriction, all outstanding indebtedness of an issuer is deemed
to be a single class.)
(2) Purchase a security, other than a Government Security, if as
a result of such purchase 25% or more of the value of the Funds
total assets would be invested in the securities of issuers
engaged in any one industry.
(3) Issue senior securities as defined by the Investment Company
Act of 1940 (the "1940 Act") or borrow money, except that each
Fund may borrow from banks for temporary extraordinary or
emergency purposes (but not for investment) in an amount up to
one-third of the value of its total assets (calculated at the time
of the borrowing). A Fund may not make additional investments
while it has any borrowings outstanding. This restriction shall
not be deemed to prohibit a Fund from purchasing or selling
securities on a when-issued or delayed delivery basis, or entering
into repurchase agreements.
(4) Purchase or sell commodities or commodity contracts, or real
estate or interests in real estate (including limited partnership
interests), except that each Fund, to the extent not prohibited by
other investment policies, may purchase and sell securities of
issuers engaged in real estate activities and may purchase and
sell securities secured by real estate or interests therein, and
in the case of Government Income Fund, may purchase and sell
interest rate futures contracts.
(5) Underwrite the securities of other issuers, except to the
extent that, in connection with the disposition of securities, the
Fund may be deemed to be an underwriter under the Securities Act
of 1933.
(6) Make loans of money or securities, except through the
purchase of permitted investments, including repurchase
agreements.
(7) Make short sales of securities or purchase securities on
margin, except for such short-term credits as may be necessary for
the clearance of transactions.
(8) Pledge, hypothecate, mortgage or otherwise encumber the
Funds assets, except as may be necessary to secure permitted
borrowings. (Collateral and other arrangements incident to
permissible investment practices are not deemed to be subject to
this restriction.)
The Funds have the following additional investment
restrictions which are not fundamental and may be changed by the
Board of Trustees, without a vote of shareholders. Under these
restrictions, a Fund may not:
(1) Make investments for the purpose of exercising control or
management of another company.
(2) Participate on a joint or joint and several basis in any
trading account in securities.
(3) Purchase any illiquid securities, except that each Fund may
invest in repurchase agreements maturing in more than seven days
provided that a Fund may not enter into such a repurchase
agreement if more than 10% of the value of the Funds net assets
(15% in the case of Government Income Fund) would, as a result, be
invested in repurchase agreements under which the Fund does not
have the right to obtain repayment in seven days or less. The
Funds are authorized to invest in restricted securities which can
be sold in transactions pursuant to Rule 144A under the Securities
Act of 1933 and which have been determined to be liquid under
procedures adopted by the Board of Trustees. However, the Funds
do not intend to invest in any such restricted securities during
the coming year.
(4) Invest in oil, gas or other mineral leases, rights, royalty
contracts, or exploration or development programs.
(5) Invest in warrants or rights.
(6) Purchase the securities of another investment company,
except in connection with a merger, consolidation, reorganization
or acquisition of assets.
All percentage and other restrictions, requirements and
limitations on investments set forth in this Statement of
Additional Information, and those set forth in each Funds
Prospectus, apply immediately after purchase of an investment, and
subsequent changes and events do not constitute a violation or
require the sale of any investment by a Fund unless otherwise
specified.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the general supervision of the Board of Trustees of the
Trust, the Investment Adviser is responsible for decisions to buy
and sell securities for the Funds and for the selection of dealers
to effect those transactions. Purchases of securities for each
Fund will be made from issuers, underwriters and dealers. Sales
of securities will be made to dealers and issuers. The Funds do
not normally incur brokerage commissions on transactions in the
types of securities in which they invest. These transactions are
generally traded on a "net" basis, with dealers acting as
principal in such transactions. However, the price at which
securities are purchased from and sold to dealers will usually
include a spread which represents a profit to the dealer.
Securities purchased in underwritten offerings include a fixed
amount of compensation to the underwriter (an underwriting
concession). Government Income Fund will incur commissions in
connection with its transactions in futures contracts.
In placing orders for the purchase and sale of investments for the
Funds, the Investment Adviser gives primary consideration to the
ability of dealers to provide the most favorable prices and
efficient executions on transactions. If such price and execution
are obtainable from more than one dealer, transactions may be
placed with dealers who also furnish research services to the
Trust or the Investment Adviser. Such services may include, but
are not limited to, any one or more of the following: information
as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to
investments; wire services; and appraisals or evaluations of
securities. These research services may be of benefit to the
Investment Adviser or its affiliates in the management of accounts
of other clients, or the accounts of the Investment Adviser and
its affiliated companies, and may not in all cases benefit a
particular Fund. While such services are useful and important in
supplementing the Investment Advisers own research and
facilities, the Investment Adviser believes the value of such
services is not determinable and does not significantly reduce its
expenses.
The Investment Adviser may serve as the investment adviser to
other clients, including other investment companies, and will
follow a policy of allocating investment opportunities and
purchase and sale transactions equitably among its clients. In
making such allocations, the primary factors considered are the
respective investment objectives, the relative size of portfolio
holdings of the same or comparable securities, and the
availability of cash for investment. This procedure may have an
adverse effect on a client, including one or more of the Funds, in
a particular transaction, but is expected to benefit all clients
on a general basis.
PURCHASING SHARES
As described under "Purchasing Shares" in each Funds Prospectus,
shares of each Fund are offered for sale, without a sales charge,
at their respective net asset values per share next computed after
receipt of a purchase order by 440 Financial Distributors, Inc.,
as distributor of the Funds shares (the "Distributor"). Net
asset value is computed once daily for each Fund, on each day on
which both the New York Stock Exchange is open for trading and the
Federal Reserve Bank of New York is open (each, a "Business Day").
See "Determination of Net Asset Value." The following shows the
calculation of the offering prices of shares of the Funds as of
August 31, 1996:
Net
Asset
s
Share
s
Outst
andin
g
Offer
ing
Price
Treasury
Money
Fund
$26,1
78,10
5
26,17
7,081
$1.00
Governmen
t Money
Fund
$67,9
50,38
2
67,95
0,315
$1.00
Governmen
t Income
Fund
$33,3
30
3,333
$10.0
0
Distribution Arrangements. The Distributor has the exclusive
right, pursuant to a distribution agreement with the Trust dated
as of November 1, 1995, as amended (the "Distribution Agreement"),
to purchase shares of the Funds for distribution and to enter into
selling agreements with dealers and other financial institutions
for the distribution of shares. Shares of the Funds are available
for purchase from the Distributor and from organizations which
have entered into selling agreements. The Distributor may, from
time to time, pay to such dealers and institutions, in connection
with sales or the distribution of shares of a Fund, material
compensation or promotional incentives, in the form of cash or
other compensation. Such compensation and incentives are not paid
by any of the Funds and will not be an expense of any of the
Funds.
The Board of Trustees, including a majority of the Trustees who
are not parties to the Distribution Agreement or "interested
persons" of the Investment Adviser or the Distributor, as defined
by the 1940 Act (the "Independent Trustees"), approved the
Distribution Agreement at a meeting held in person on October 9,
1995, and similarly approved an amendment to such agreement on
September 17, 1996. The Distribution Agreement will remain in
effect until October 31, 1997, and may be continued in effect from
year to year thereafter if approved annually by the Board of
Trustees, including a majority of the Independent Trustees, by
vote cast in person at a meeting called for such purpose. The
Distribution Agreement may be terminated at any time, without
penalty, by either party upon 60 days' written notice and
terminates automatically in the event of an "assignment" as
defined by the 1940 Act and the rules thereunder. Under the
Distribution Agreement, the Distributor is required to bear all of
the costs associated with distribution of shares of the Funds,
including the incremental cost of printing prospectuses, annual
reports and other periodic reports for distribution to prospective
investors and the costs of preparing, distributing and publishing
sales literature and advertising materials. Unlike many other
mutual funds, the Funds do not bear expenses relating to the
distribution of shares, and thus, do not make any payments
pursuant to a Rule 12b-1 plan or a services plan. In the
Distribution Agreement, the Trust has agreed to indemnify the
Distributor to the extent permitted by applicable law against
certain liabilities under the Securities Act of 1933, as amended.
The Distributor is a wholly-owned subsidiary of First Data
Investor Services Group, Inc., which serves as the Trusts
administrator. The Distributors address is 4400 Computer Drive,
Westborough, Massachusetts 01581.
SHAREHOLDER ACCOUNTS
First Data Investor Services Group, Inc., as transfer agent (the
"Transfer Agent"), maintains one or more accounts for each
shareholder reflecting the amount of full and fractional shares of
each Fund the shareholder owns. Shareholders are sent
confirmations of each account transaction, and monthly statements
showing account balances. The Trust does not issue certificates
for shares of the Funds.
Sub-Account Services. Special procedures have been designed for
investors wishing to open multiple accounts. A single master
account may be opened by filing an application form with the
Distributor, signed by personnel authorized to act for the
institution. Individual sub-accounts may be opened at the time the
master account is opened by listing them, or they may be added at
a later date by written advice or by filing forms supplied by the
Transfer Agent. Procedures are available to identify sub-accounts
by name and number within the master account name. The investment
minimums applicable to initial and subsequent purchases of shares
of the Funds, and the minimum account balance requirement
discussed below, apply to the aggregate amounts invested by a
shareholder for the master account (including all sub-accounts)
and not to the amount invested for individual sub-accounts.
When sub-accounts have been established, the Transfer Agent
provides written confirmations of transactions in sub-accounts.
The Transfer Agent also provides monthly statements setting forth
the share balance of and the dividends and other distributions
paid to the master account, and monthly statements for each sub-
account setting forth transactions in the sub-account for the
year-to-date, the total number of shares owned and the dividends
paid for the current month, as well as for the year-to-date.
Further information on this service is available from the Transfer
Agent.
Minimum Initial Investment Requirements. The Funds each have a
minimum initial investment requirement which is set forth on the
cover page of this Statement of Additional Information. In its
discretion, however, the Distributor may waive a Fund's minimum
initial investment in special circumstances, such as when a
prospective investor anticipates receipt of investable funds so as
to enable it to meet the minimum investment requirement within a
reasonable period of time.
Minimum Account Balance. In order to avoid costs that are
associated with maintaining small accounts, shareholders should
maintain account balances of not less than $100,000 in any Fund.
If an account balance in Government Money Fund or Government
Income Fund falls below $100,000 as a result of share redemptions,
the Trust has the right to redeem all shares held in the account.
There is no minimum account balance for Treasury Money Fund;
however, an in-active account with no balance for a period of six
months may be closed at the discretion of the Trust. The
applicable procedures are described in the Funds Prospectuses.
The Trust is under no obligation to compel the redemption of any
account.
REDEEMING SHARES
Redemption proceeds are normally paid as described in the
Prospectuses. However, the payment of redemption proceeds may be
postponed for more than seven days or the right of redemption
suspended at times (a) when the New York Stock Exchange is closed
for other than customary weekends and holidays, (b) when trading
on the New York Stock Exchange is restricted, (c) when an
emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not
reasonably practicable for a Fund to determine fairly the value of
its net assets, or (d) during any other period when the Securities
and Exchange Commission (the "SEC"), by order, so permits for the
protection of shareholders. Applicable rules and regulations of
the SEC will govern as to whether the conditions described in (b)
or (c) exist. In addition, in the event that the Board of
Trustees of the Trust determines that it would be detrimental to
the best interests of remaining shareholders of a Fund to pay any
redemption or redemptions in cash, a redemption payment may be
made in whole or in part by a distribution in kind of portfolio
securities held by the Fund, subject to applicable rules of the
SEC. Any securities distributed in kind will be readily
marketable and will be valued, for purposes of the redemption, in
the same manner as such securities are normally valued by the Fund
in computing net asset value per share. In the unlikely event
that shares are redeemed in kind, the redeeming shareholder would
incur transaction costs in converting the distributed securities
to cash. The Trust has elected to be governed by Rule 18f-1 under
the 1940 Act and is therefore obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net asset value of
a Fund during any 90 day period for any one shareholder.
EXCHANGE PRIVILEGE
As described under "Exchange Privilege" in each Funds Prospectus,
shareholders may exchange shares of one of the Funds for shares of
any of the other Funds based upon the relative net asset values
per share of the Funds at the time the exchange is effected. None
of the Funds currently impose any limitation on the frequency of
exchanges, but may impose such limitations upon notice to
shareholders.
DETERMINATION OF NET ASSET VALUE
Each Funds Prospectus describes the days on which the net asset
value per share of the Fund is computed for purposes of purchases
and redemptions of shares by investors, and also sets forth the
times as of which such computations are made. Net asset value is
computed once daily as of 4:00 p.m. (Eastern time) on each day on
which both the New York Stock Exchange is open for trading and the
Federal Reserve Bank of New York is open. The New York Stock
Exchange currently observes the following holidays: New Year's
Day; Presidents' Day (third Monday in February); Good Friday
(Friday before Easter); Memorial Day (last Monday in May);
Independence Day; Labor Day (first Monday in September);
Thanksgiving Day (fourth Thursday in November); and Christmas Day.
The Federal Reserve Bank of New York currently observes all the
holidays listed above except Good Friday, in addition to Martin
Luther Kings Birthday (third Monday in January), Columbus Day
(second Monday in October) and Veterans Day.
Treasury Money Fund and Government Money Fund. In accordance with
rules adopted by the SEC, the amortized cost method of valuation
is used to determine the value of the investments held by Treasury
Money Fund and Government Money Fund. This method of valuation is
used by the Funds in seeking to maintain stable net asset values
of $1.00 per share. However, no assurance can be given that the
Funds will be able to maintain stable share prices.
Amortized cost involves valuing a security at its cost and
amortizing any discount or premium over the period remaining until
the maturity of the security. This method of valuation does not
take into account unrealized capital gains and losses resulting
from changes in the market values of the securities. The market
values of debt securities purchased by the Funds will generally
fluctuate as a result of changes in prevailing interest rate level
and other factors.
In order to use the amortized cost method of valuation, Treasury
Money Fund and Government Money Fund are each required to maintain
a dollar-weighted average maturity of 90 days or less, to purchase
securities with remaining maturities of 397 days or less and to
invest only in securities which have been determined by the
Investment Adviser, under procedures adopted by the Board of
Trustees, to present minimal credit risks and to be of eligible
credit quality under applicable regulations. In addition,
procedures have been adopted by the Board of Trustees which are
designed to stabilize, to the extent reasonably possible, the
prices of shares of the Funds as computed for purposes of sales
and redemptions at $1.00. These procedures include review by the
Board of Trustees, at such intervals as it deems appropriate, to
determine whether the net asset value per share calculated by
using available market quotations deviates from the net asset
value per share of $1.00 computed by using the amortized cost
method. If such deviation exceeds of 1%, the Board will
promptly consider what action, if any, should be taken. The
Trustees will take such action as they deem appropriate to
eliminate or to reduce, to the extent reasonably practicable, any
material dilution or other unfair results which might arise from
differences between the two valuation methods. Such action may
include selling instruments prior to maturity to realize capital
gains or losses or to shorten average maturity, redeeming shares
in kind, withholding dividends, paying distributions from capital
gains, or utilizing a net asset value per share based upon
available market quotations.
Government Income Fund. Portfolio securities held by Government
Income Fund are generally valued on the basis of bid quotations
obtained from principal market makers. If market quotations are
not readily available, portfolio securities are valued at their
fair value as determined under procedures adopted by the Board of
Trustees of the Trust. A pricing service may be used to value the
Funds portfolio securities. Such a service may use prices based
on yields or prices of securities of comparable quality, coupon,
maturity and type, indications as to value from dealers and
general market conditions. Securities with remaining maturities
of less than 60 days are valued at amortized cost unless the use
of such valuation is determined not to reflect fair value.
TAXES
It is the policy of the Trust to distribute each fiscal year
substantially all of the net investment income and net realized
capital gains, if any, of each Fund to shareholders. The Trust
intends that each Fund will qualify as a regulated investment
company under the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"). If so qualified, a Fund will not be
subject to federal income tax on that part of its net investment
income and net realized capital gains which it distributes to its
shareholders. To qualify for such tax treatment, a Fund must
generally, among other things: (a) derive at least 90% of its
gross income from dividends, interest, payments received with
respect to loans of stock and securities, and gains from the sale
or other disposition of stock or securities and certain related
income; (b) derive less than 30% of its gross income from the sale
or other disposition of stock or securities or options, forwards
or futures thereon held less than three months; and (c) diversify
its holdings so that at the end of each fiscal quarter (i) 50% of
the market value of the Fund's assets is represented by cash,
Government Securities and other securities limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's
assets or 10% of the voting securities of any issuer, and (ii) not
more than 25% of the value of its assets is invested in the
securities of any one issuer (other than Government Securities).
The Code requires regulated investment companies to pay a
nondeductible 4% excise tax to the extent they do not distribute
98% of their ordinary income, determined on a calendar year basis,
and 98% of their capital gains, determined on an October 31 year
end. The Trust intends to distribute the income and capital gains
of each Fund, in the manner necessary, to avoid imposition of the
4% excise tax by the end of each calendar year.
Fund dividends declared in October, November or December and paid
the following January will be taxable to shareholders as if
received on December 31 of the year in which they are declared.
In general, any gain or loss realized on a taxable disposition of
shares of a Fund by a shareholder that holds such shares as a
capital asset will be treated as long-term capital gain or loss if
the shares have been held for more than twelve months and
otherwise as a short-term capital gain or loss. However, any loss
realized upon a redemption of shares in a Fund held for six months
or less will be treated as a long-term capital loss to the extent
of any distributions of net capital gain made with respect to
those shares. Any loss realized upon a redemption of shares may
also be disallowed under the rules of Section 1091 of the Code
relating to "wash sales" (i.e., purchase of substantially
identical securities within a 61-day period beginning 30 days
before such disposition).
Futures Contracts. (Government Income Fund only.) Accounting for
futures contracts will be in accordance with generally accepted
accounting principles. Initial margin deposits made by Government
Income Fund upon entering into futures contracts will be
recognized as assets. During the period the futures contract is
open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis
to reflect the market value of the contract at the end of each
days trading. Maintenance margin payments are made or received,
depending upon whether gains or losses are incurred. Futures
contracts held by Government Income Fund at the end of each fiscal
year may be required to be "marked to market" for federal income
tax purposes; that is, treated as having been sold at market
value. The straddle rules of Section 1092 of the Code may require
the Fund to defer losses incurred in certain transactions
involving securities and futures and may affect the Funds holding
period in the asset offsetting the futures contract. The Funds
ability to engage in futures transactions may be limited by these
rules.
The Funds transactions in futures contracts will be subject to
special tax rules that may affect the amount, timing and character
of Fund income and distributions to shareholders. For example,
certain exchange-traded futures contracts held by the Fund at the
end of the Funds taxable year will be treated as having been sold
for their fair market value on the last day of such taxable year,
and gain or loss will be taken into account for such year. Such
gain or loss generally will be treated as short-term capital gain
or loss to the extent of 40% of such gain or loss, and long-term
capital gain or loss to the extent of 60% of such gain or loss.
Certain positions held by the Fund that substantially diminish its
risk of loss with respect to other positions in its portfolio may
constitute "straddles," and may be subject to special tax rules
that would cause deferral of recognition of losses by the Fund and
adjustments to the holding periods of securities held by the Fund.
Certain tax elections exist for straddles that may alter the
effects of these rules. The Fund will monitor its activities in
futures contracts to ensure that they do not affect its
qualification as a regulated investment company.
INVESTMENT ADVISORY ARRANGEMENTS
The Investment Adviser, a Delaware corporation, with offices at
300 Nyala Farms Road, Westport, Connecticut 06880, is a wholly-
owned subsidiary of AMBAC Capital Corporation which, in turn, is a
wholly-owned subsidiary of AMBAC Inc. Through its subsidiaries,
AMBAC Inc. is a leading insurer of municipal and structured
finance obligations and a provider of investment contracts and
interest rate swaps to states, municipalities, and municipal
authorities. AMBAC Inc. is a publicly held company whose shares
are traded on the New York Stock Exchange.
Pursuant to an Investment Advisory Agreement with the Trust dated
November 1, 1995 (the "Agreement"), the Investment Adviser manages
the investment of each Funds assets and places orders for the
purchase and sale of investments for each Fund. The Investment
Adviser is also responsible under the Agreement for monitoring
services provided by the Administrator, the Transfer Agent and the
Trust's custodian. The Investment Adviser provides such
additional management and administrative services as the Trust or
the Fund may require beyond those furnished by the Administrator
and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, and other personnel and services as may
reasonably be necessary to render the services under the
Agreement. In addition, the Investment Adviser pays the salaries
of officers of the Trust and any fees and expenses of Trustees of
the Trust who are also officers, directors or employees of the
Investment Adviser, or, who are officers or employees of any
company affiliated with the Investment Adviser, and bears the cost
of telephone service, heat, light, power and other utilities
associated with the services it provides. As compensation for
services rendered and expenses assumed by the Investment Adviser,
the Agreement provides for the payment by each Fund of a monthly
fee to the Investment Adviser, which fee is calculated daily and
computed at the annual rate of .15% of the net assets of each of
Treasury Money Fund and Government Money Fund, and .35% of the net
assets of Government Income Fund.
The Agreement provides that in the absence of willful misfeasance,
bad faith, negligence or reckless disregard of its obligations
thereunder, the Investment Adviser is not liable to the Trust or
any of its shareholders for any act or omission by the Investment
Adviser or for any losses sustained by the Trust or its
shareholders. The Agreement in no way restricts the Investment
Adviser from acting as investment adviser to others.
The Agreement was approved by the Board of Trustees of the Trust,
including a majority of the Trustees who are not parties to the
Agreement or "interested persons" of the Investment Adviser or the
Distributor, as defined in the 1940 Act (the "Independent
Trustees"), at a meeting held in person on October 9, 1995. The
Agreement was also approved on that date by the Investment
Adviser, as the then sole shareholder of the Trust. The Agreement
will continue in effect until September 30, 1997, and may be
continued in effect from year to year thereafter upon the approval
of the Trust's shareholders or the Board of Trustees. Each annual
continuance also requires approval by a vote of a majority of the
Independent Trustees cast in person at a meeting called for the
purpose of voting on such continuance. The Agreement may be
terminated at any time, as to any Fund, without penalty, on sixty
days written notice by the Board of Trustees of the Trust, by
vote of the holders of a majority (as defined in the 1940 Act) of
the outstanding shares of such Fund, or by the Investment Adviser.
The Agreement will automatically terminate in the event of its
assignment (as defined in the 1940 Act and the rules thereunder).
The Trust has acknowledged that the name "AMBAC" is a property
right of AMBAC Inc., and has agreed that AMBAC Inc. and its
affiliated companies may use and permit others to use that name.
The Trust has also agreed that, in the event the Agreement is
terminated, the Trust will eliminate the name "AMBAC" from its
name, unless otherwise consented to by AMBAC Inc. or any successor
to its interest in such name.
TRUSTEES AND OFFICERS
The Board of Trustees of the Trust has the overall responsibility
for monitoring the operations of the Trust and each Fund and
supervising the services provided by the Investment Adviser and
other organizations. The officers of the Trust are responsible
for managing the day-to-day operations of the Trust and each Fund.
Set forth below is information with respect to each of the
Trustees and officers of the Trust, including their principal
occupations during the past five years.
Name, Position
with Trust, Age
and Address
Principal Occupations
During Last Five Years
*W. Dayle
Nattress
Trustee,
Chairman,
President and
Chief Executive
Officer, 47
Chief Investment Officer, AMBAC
Inc. and AMBAC Indemnity
Corporation and Division
Executive, AMBAC Financial
Services Division; formerly, from
1990 to 1991, Senior Vice
President, Corporate Finance,
Dean Witter Reynolds Inc.
Eugene J.
McDonald
Trustee, 64
2200 West Main
Street, Suite
1000 Durham,
North Carolina
27705
President and Chief Executive
Officer, Duke Management Co.
(investment management affiliate
of Duke University); Director,
Central Carolina Bank, Key Group
of Mutual Funds and Flag Group of
Mutual Funds
Donald W. Green
Trustee, 52
305 Hartford Road
South Orange, New
Jersey 07079
Chief Financial Officer, Managing
Director and Director, PlanEcon,
Inc. (economic consulting and
publications); formerly, from
1988 to 1991, Executive Vice
President and Director, The
Mercator Corporation (financial
advisory and merchant banking)
*C. Roderick
ONeil
Trustee, 65
375 Park Avenue
Suite 2602
New York, New
York 10152
Chairman, ONeil Associates
(investment and financial
consulting firm); Director,
AMBAC Inc., AMBAC Indemnity
Corporation, Fort Dearborn Income
Securities, Inc. and Beckman
Instruments, Inc.; Trustee,
Memorial Drive Trust (finance)
Roisin T.
Kilgallen
Treasurer, 30
Treasurer and Controller, AMBAC
Investment Management, Inc.;
formerly, from 1992 to 1994,
Assistant Vice President of
Sakura Global Capital, Inc.;
prior thereto, from 1988 to 1992,
Senior Associate, Arthur Andersen
& Co.
Richard B. Gross
Secretary, 49
One State Street
Plaza
New York, New
York 10004
Senior Vice President, General
Counsel and Secretary, AMBAC
Inc.; Senior Vice President,
AMBAC Indemnity Corporation;
Secretary, AMBAC Investment
Management, Inc.; formerly, from
1990 to 1991, Senior Vice
President and General Counsel of
Citicorp Insurance Group, Inc.
Anne G. Gill
Assistant
Secretary, 33
One State Street
Plaza
New York, New
York 10004
Vice President, Counsel and
Assistant Secretary, AMBAC Inc.;
Vice President, Assistant General
Counsel and Assistant Secretary,
AMBAC Indemnity Corporation;
Assistant Secretary, AMBAC
Investment Management, Inc.;
formerly, from 1988 to 1993,
Associate, Hughes Hubbard & Reed
Gail A. Hanson
Assistant
Secretary, 54
One Exchange
Place
Boston,
Massachusetts
02109
Counsel, First Data Investor
Services Group, Inc.; formerly,
from 1988 to 1994, Associate,
Bingham, Dana & Gould
Therese M. Hogan
Assistant
Secretary, 34
One Exchange
Place
Boston,
Massachusetts
02109
Manager, State Regulation, First
Data Investor Services Group,
Inc.; formerly, from 1992 to
1994, Senior Legal Assistant,
Palmer & Dodge; prior thereto,
from 1984 to 1992, Blue Sky
Paralegal, Robinson & Cole
Kevin Morrissey
Assistant
Treasurer, 53
4400 Computer
Drive
Westbourgh,
Massachusetts
01581
Vice President, Financial
Administrator, First Data
Investor Services Group, Inc.;
formerly, from 1980 to April,
1996, Vice President and
Treasurer, Keystone Investments,
Inc.
Scott Blair
Assistant
Treasurer, 32
4400 Computer
Drive
Westbourgh,
Massachusetts
01581
Director, Treasury Department,
First Data Investor Services
Group, Inc.; formerly, from 1992
to 1994, Senior Financial
Analyst, Bank of Boston; prior
thereto, from 1988 to 1992,
Senior Associate, Coopers &
Lybrand
Except as otherwise indicated above, the address of each Trustee
and officer of the Trust is 300 Nyala Farms Road, Westport,
Connecticut 06880. Mr. Nattress and Mr. ONeil are Trustees who
are "interested persons" of the Trust, as defined in the 1940 Act,
by virtue of their affiliations with the Investment Adviser and/or
companies affiliated with the Investment Adviser.
Trustees who are not employees of the Investment Adviser, or its
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. As of the date of this Statement of
Additional Information, the Trustees and officers of the Trust, as
a group, owned less than 1% of the outstanding shares of the Trust
and each Fund.
Trustee compensation from the Trust is as follows:
Compensation Table*
Name of
Person
A
g
g
r
e
g
a
t
e
C
o
m
p
e
n
s
a
t
i
o
n
f
r
o
m
T
r
u
s
t
Pension or
Retirement
Benefits
Accrued as
Part of Fund
Expenses
Total
Compens
ation
from
Trust
Paid to
Trustee
s
W.
Dayle
Nattres
s
$
0
$0
$0
David
E. A.
Carson*
*
$
3
,
2
5
0
$0
$3,25
0
Eugene
J.
McDonal
d**
$
7
5
0
$0
$750
Donald
W.
Green
$
5
,
7
5
0
$0
$5,75
0
C.
Roderic
k
ONeil
$
4
,
0
0
0
$0
$4,00
0
* Estimated compensation for the fiscal year ending October 31,
1996.
**David E. A. Carson resigned as a Trustee, effective September
17, 1996, and was replaced by Eugene J. McDonald, who was
appointed on such date by the Board of Trustees to fill the
vacancy created by Mr. Carson's resignation.
EXPENSES
All expenses of the Trust and the Fund not expressly assumed by
the Investment Adviser, the Administrator or the Distributor, are
paid by the Trust. Expenses borne by the Trust include, but are
not limited to: fees paid to the Investment Adviser and the
Administrator; the fees and expenses of any registrar, custodian,
accounting agent, transfer agent or dividend disbursing agent;
brokerage commissions; taxes; registration costs of the Trust and
its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing
prospectuses and supplements thereto to shareholders; all expenses
of shareholders' and Trustees' meetings and of preparing, printing
and mailing of proxy statements and reports to shareholders; fees
and travel expenses of Trustees or members of any advisory board
or committee who are not employees of the Investment Adviser or
any affiliate of the Investment Adviser; all expenses incident to
any dividend, withdrawal or redemption options; charges and
expenses of any outside service used for pricing shares of the
Trust; fees and expenses of legal counsel; fees and expenses of
the Trust's independent accountants; membership dues of industry
associations; interest on Trust borrowings; postage; insurance
premiums on property or personnel (including officers and
Trustees) of the Trust which inure to its benefit; and
extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any
indemnification relating thereto). Certain of the expenses of
organizing the Trust and the Funds and of the initial registration
and qualification of shares of the Funds under federal and state
securities laws are being charged to each Funds operations, as an
expense, over a period not exceeding five years from the date of
commencement of the Trusts operations.
PERFORMANCE INFORMATION
Calculation of Yield. Treasury Money Fund and Government Money
Fund may publish quotations of "current yield" and "effective
yield" in advertisements, sales materials and shareholder reports.
Current yield is the simple annualized yield for an identified
seven calendar day period. This yield calculation is based on a
hypothetical account having a balance of exactly one share at the
beginning of the seven-day period. The base period return is the
net change in the value of the hypothetical account during the
seven-day period, including dividends declared on any shares
purchased with dividends on the shares but excluding any capital
changes. Yield will vary as interest rates and other conditions
change. The yield for the seven-day period ended August 31, 1996
for Government Money Fund was 5.12%, which is equivalent to an
effective yield of 5.25%. The yield for the seven-day period
ended August 31, 1996 for Treasury Money Fund was 5.00%, which is
equivalent to an effective yield of 5.13%. Yields also depend on
the quality, length of maturity and type of instruments held and
operating expenses of the Funds. Effective yield is computed by
compounding the unannualized seven-day period return as follows:
by adding 1 to the unannualized seven-day base period return,
raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result.
Effective yield = [(base period return + 1)365/7]-1
Government Income Fund may from time to time publish quotations of
its yield as calculated over a 30-day period in advertisements,
sales literature and shareholder reports. This yield will be
computed by dividing the Funds net investment income per share
earned during a specified 30-day period by the maximum offering
price per share on the last day of the period. Yield is
calculated according to the following formula:
YIELD = 2[( a-b + 1)6 - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day
of the period.
Calculation of Total Return. Each Fund may also disseminate
quotations of its average annual total return and other total
return data from time to time. Average annual total return
quotations for the specified periods are computed by finding the
average annual compounded rates of return (based on net investment
income and any realized and unrealized capital gains or losses on
investments over such periods) that would equate the initial
amount invested to the redeemable value of such investment at the
end of each period. In making these computations, all dividends
and distributions are assumed to be reinvested and all applicable
recurring and non-recurring expenses are taken into account. The
Funds also may quote annual, average annual and annualized total
return and aggregate total return performance data, both as a
percentage and as a dollar amount based on a hypothetical
investment amount, for various periods.
Total return quotations will be computed in accordance with the
following formula, except that as required by the periods of the
quotations, actual annual, annualized or aggregate data, rather
than average annual data, may be quoted:
P (1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 payment
made at the beginning of the period.
Actual annual or annualized total return data generally will be
lower than average annual total return data because the average
rates of return reflect compounding of return. Aggregate total
return data, which is calculated according to the following
formula, generally will be higher than average annual total return
data because the aggregate rates of return reflect compounding
over longer periods of time:
ERV - P
P
Where: P = a hypothetical initial payment of $1,000.
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period.
Yield and total return quotations are based upon each Fund's
historical performance and are not intended to indicate future
performance. Each Fund's yield and total return fluctuate and
will depend upon not only changes in prevailing interest rates,
but also upon any realized gains and losses and changes in the
Fund's expenses.
GENERAL INFORMATION
Description Of Shares. Interests in the Funds (presently, the
only three series of the Trust) are represented by shares of
beneficial interest, $.001 par value. The Trust is authorized to
issue an unlimited number of shares.
Each share of each Fund represents an equal proportionate interest
in that Fund with each other share of such Fund, without any
priority or preference over other shares. All consideration
received for the sales of shares of a particular Fund, all assets
in which such consideration is invested, and all income, earnings
and profits derived therefrom are allocated to and belong to that
Fund. As such, the interest of shareholders in each Fund are
separate and distinct from the interest of shareholders of the
other Funds, and shares of a Fund are entitled to dividends and
distributions only out of the net income and gains, if any, of
that Fund as declared by the Board of Trustees. The assets of
each Fund are segregated on the Trust's books and are charged with
the expenses and liabilities of that Fund and with a share of the
general expenses and liabilities of the Trust not attributable to
any one Fund. The Board of Trustees determines those expenses and
liabilities deemed to be general, and these items are allocated
among the Funds as deemed fair and equitable by the Board of
Trustees in its sole discretion.
Control Persons and Holders of Securities. As of September 30,
1996, AMBAC Inc. and its subsidiary, AMBAC Indemnity Corporation,
may be deemed to control the Trust, Treasury Money Fund and
Government Money Fund, and AMBAC Inc., AMBAC Capital Corporation
and the Investment Adviser may be deemed to control Government
Income Fund, through beneficial ownership of the outstanding
shares of the Funds, as follows:
S
h
a
r
e
s
o
f
T
r
e
a
s
u
r
y
M
o
n
e
y
F
u
n
d
S
h
a
r
e
s
o
f
G
o
v
e
r
n
m
e
n
t
M
o
n
e
y
F
u
n
d
S
h
a
r
e
s
o
f
G
o
v
e
r
n
m
e
n
t
I
n
c
o
m
e
F
u
n
d
AMBAC Inc.
One State Street
Plaza
New York, New
York
9
9
%
4
6
%
1
0
0
%
AMBAC Indemnity
Corporation
One State Street
Plaza
New York, New
York
8
8
%
3
6
%
- -
- -
- -
AMBAC Capital
Corporation
300 Nyala Farms
Road
Westport,
Connecticut
06880
- -
- -
- -
- -
- -
- -
1
0
0
%
AMBAC Investment
Management, Inc.
300 Nyala Farms
Road
Westport,
Connecticut
06880
- -
- -
- -
- -
- -
- -
1
0
0
%
The various control relationships over the Trust and
the Funds noted above will continue to exist until such time as
the above-described share ownership of the Trust or applicable
Fund represents 25% or less of the outstanding shares of the Trust
or of the Fund, as the case may be. Through the exercise of
voting rights with respect to shares of the Funds, the controlling
persons set forth above may be able to determine the outcome of
shareholder voting on matters as to which approval of shareholders
of the Trust or the Funds is required.
In addition to the controlling persons named above,
the following entities owned of record or are known by the Trust
to own beneficially 5% or more of the outstanding shares of the
Funds as of September 30, 1996:
Treasury Money Fund
Shar
es
Owne
d
AMBAC Financial Services
Holdings, Inc.
300 Nyala Farms Road
Wesport, Connecticut
06880
6%
Government Money Fund
Shar
es
Owne
d
City of New Britain
7 West Main Street
New Britain, Connecticut
06051
15%
City of Bridgeport
45 Lyons Terrace
Bridgeport, Connecticut
06604
15%
Town of Suffield -
Treasurer's Office
83 Mountain Road
Suffield, Connecticut
06078
9%
USA Services, Inc. (AMBAC
affiliate)
9130 Jolleyville Road,
Suite 335
Austin, Texas 78759
6%
Town of Cromwell
41 West Street
Cromwell, Connecticut
06416
6%
Trustee and Officer Liability. Under the Trust's Declaration of
Trust and its By-Laws, and under Delaware law, the Trustees,
officers, employees and agents of the Trust are entitled to
indemnification under certain circumstances against liabilities,
claims and expenses arising from any threatened, pending or
completed action, suit or proceeding to which they are made
parties by reason of the fact that they are or were such Trustees,
officers, employees or agents of the Trust, subject to the
limitations of the 1940 Act which prohibit indemnification which
would protect such persons against liabilities to the Trust or its
shareholders to which they would otherwise be subject by reason of
their own bad faith, willful misfeasance, gross negligence or
reckless disregard of duties.
Independent Public Accountants. KPMG Peat Marwick LLP, 99 High
Street, Boston, Massachusetts 02110, are the independent public
accountants of the Trust. The independent public accountants are
responsible for auditing the financial statements and prepare the
tax returns of the Funds. The selection of the independent public
accountants is approved annually by the Board of Trustees.
Custodian. Bankers Trust Company, 130 Liberty Street, New York,
New York 10006, serves as custodian of the Trust's assets and
maintains custody of each Funds cash and investments. Cash held
by the custodian, which may at times be substantial, is insured by
the Federal Deposit Insurance Corporation up to the amount of
available insurance coverage limits (presently, $100,000).
Shareholder Reports. Shareholders of the Trust will be kept fully
informed through annual and semi-annual reports showing
diversification of investments, securities owned and other
information regarding each Fund's activities. The financial
statements of each Fund are audited each year by the Trust's
independent public accountants.
Legal Counsel. Schulte, Roth & Zabel LLP, New York, New York,
serves as counsel to the Trust.
Registration Statement. This Statement of Additional Information
and the Prospectus do not contain all of the information set forth
in the Registration Statement the Trust has filed with the SEC.
The complete Registration Statement may be obtained from the SEC
upon payment of the fee prescribed by the rules and regulations of
the SEC.
Use of Joint Statement of Additional Information. Each Fund
acknowledges that it is solely responsible for all information or
lack of information about the Fund in this Statement of Additional
Information, and no other Fund is responsible therefor. The
Trustees of the Trust have considered this factor in approving
each Funds use of this single combined Statement of Additional
Information.
Financial Statements. The audited financial statements of each
Fund as of September 20, 1995 included in this Statement of
Additional Information have been audited by KPMG Peat Marwick LLP,
independent public accountants, as indicated in their report with
respect thereto. The unaudited financial statements of Treasury
Money Fund and Government Money Fund as of August 31, 1996 are
also included in this Statement of Additional Information. As of
the date of this Statement of Additional Information, Government
Income Fund has not commenced operations.
Report of Independent Public Accountants
The Board of Trustees and Shareholder
AMBAC Treasurers Trust:
We have audited the accompanying statements of assets and
liabilities of AMBAC U.S. Treasury Money Market Fund, AMBAC U.S.
Government Money Market Fund and AMBAC Short-Term U.S. Government
Income Fund, portfolios of AMBAC Treasurers Trust (the Trust) as
of September 20, 1995. These financial statements are the
responsibility of the Trust's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. 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 statements of assets and liabilities referred
to above present fairly, in all material respects, the financial
position of AMBAC U.S. Treasury Money Market Fund, AMBAC U.S.
Government Money Market Fund and AMBAC Short-Term U.S. Government
Income Fund, as of September 20, 1995 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
September 20, 1995
AMBAC TREASURERS TRUST
Statements of Assets and Liabilities
September 20, 1995
AMBAC
AMBAC AMBAC Short-Term
U.S. Treasury U.S. Government U.S.
Money Money Government
Market Fund Market Fund Income Fund
Assets:
Cash $ 33,335 33,335 33,330
Deferred organization costs 55,000 55,000
55,000
Prepaid registration fees 12,093 12,093
12,094
Total 100,428 100,428 100,424
Liabilities:
Accrued organizational and other costs 67,093
67,093 67,094
Net assets $ 33,335 33,335 33,330
Shares outstanding 33,335 33,335 3,333
Net asset value per share $ 1.00 1.00 10.00
See notes to statements of assets and liabilities.
AMBAC TREASURERS TRUST
Notes to Statements of Assets and Liabilities
September 20, 1995
(1) General
(a) General
AMBAC Treasurers Trust (the Trust) was organized on June 27, 1995,
as a Delaware business trust and is registered as an open-ended
management investment company under the Investment Company Act of
1940, as amended. The Trust currently consists of three separate
investment funds, AMBAC U.S. Treasury Money Market Fund, AMBAC
U.S. Government Money Market Fund and AMBAC Short-Term U.S.
Government Income Fund (each a "Fund"). As of September 20, 1995,
the Trust and each Fund has had no operations other than
organizational matters and the issuance of shares (33,335 of AMBAC
U.S. Treasury Money Market Fund, 33,335 of AMBAC U.S. Government
Money Market Fund and 3,333 shares of AMBAC Short-Term U.S.
Government Income Fund) to AMBAC Investment Management, Inc.
(AIMI), a wholly owned subsidiary of AMBAC Inc. The Trust's
financial statements are prepared in accordance with generally
accepted accounting principles
(b) Organization Costs
Costs incurred by the Trust in connection with its organization,
and the organization of the Funds, have been deferred and will be
amortized on a straight-line basis over a five-year period from
the date on which each Fund commences operation of its investment
activities. The accrued organization costs are payable to AIMI.
If any of the initial shares of the Trust are redeemed by AIMI (or
any subsequent holder of such initial shares) 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.
(2) Investment Advisory, Administration and Other Services
The investment adviser to the Trust is AIMI (the "Adviser").
Pursuant to an Investment Advisory Agreement, the Adviser receives
an advisory fee computed daily and paid monthly at a rate of .15%
per annum of the net assets of the AMBAC U.S. Treasury Money
Market Fund and the AMBAC U.S. Government Money Market Fund and
.35% of the net assets of the AMBAC Short-Term U.S. Government
Income Fund. The Adviser has voluntarily agreed to waive its fee
or absorb Fund expenses to the extent necessary to assure that the
ordinary operating expenses do not exceed .20% of the average
daily net assets of the AMBAC U.S. Treasury Money Market Fund and
AMBAC U.S. Government Money Market Fund and .45% of the average
daily net assets of the AMBAC Short-Term U.S. Government Income
Fund. The Adviser reserves the right to modify or terminate at
any time its agreement to waive fees and absorb expenses.
AMBAC TREASURERS TRUST
Notes to Statements of Assets and Liabilities, (Continued)
The Shareholder Services Group, Inc. (TSSG) serves as the Trust's
administrator and is compensated for those services at an annual
rate of .05% of the aggregate average daily net assets of the
Trust (lower rates apply at higher asset levels), subject to a
minimum monthly fee of $10,000. 440 Financial Distributors, Inc.
("440") acts as the Trust's distributor pursuant to a separate
Distribution Agreement with the Trust. 440 receives no
compensation under that agreement. TSSG and 440 are affiliate
companies.
TSSG also serves as the Trust's transfer agent and dividend
disbursing agent and is compensated for those services by each
Fund in the amount of $30,000 per year, plus certain shareholder
account fees. TSSG also performs fund accounting for the Trust
and is compensated for those services, by each Fund, in the amount
of $36,000 per year (higher amounts apply at higher assets
levels).
U.S. Treasury Money Market Fund
PORTFOLIO OF INVESTMENTS
August 31, 1996 (unaudited)
Annualized
Yield on
Principal Date of Maturity
Value
Amount Purchase Date (Note 2)
U.S. TREASURY OBLIGATIONS - 72.49%
U.S. Treasury Bills - 72.49%
$ 9,000,000 5.10%, 09/05/96 $ 8,994,900
10,000,000 5.25%, 09/17/96 9,979,622
Total U.S. Treasury Obligations
(Cost $18,974,522) 18,974,522
REPURCHASE AGREEMENTS - 66.27%
2,501,000 Barclays Bank-Tri Party
5.22%, Due 09/03/96, Dated 08/30/96
Repurchase Price $2,502,451
(Collateralized by U.S. Treasury Note, 6.50%
Due 05/15/05
Market Value $2,551,883) 2,501,000
2,500,000 Goldman Sachs-Tri Party
5.20%, Due 09/03/96, Dated 08/30/96
Repurchase Price $2,501,444
(Collateralized by U.S. Treasury Note, 6.25%
Due 06/30/98
Market Value $2,550,737) 2,500,000
2,481,000 HSBC Securities
5.10%, Due 9/03/96, Dated 08/30/96
Repurchase Price $2,482,406
(Collateralized by U.S. Treasury Note, 5.75%
Due 09/30/97
Market Value $2,557,750) 2,481,000
See Notes to Financial Statements.
U.S. Treasury Money Market Fund
PORTFOLIO OF INVESTMENTS (continued)
August 31, 1996 (unaudited)
Value
Principal Amount (Note 2)
REPURCHASE AGREEMENTS (continued)
$ 2,500,000 Morgan Stanley-Tri Party
5.23%, Due 09/03/96, Dated 08/30/96
Repurchase Price $2,501,444
(Collateralized by U.S. Treasury Bill
Due 05/01/97
Market Value $2,564,839) $ 2,500,000
2,500,000 Morgan, J.P.
5.20%, Due 09/03/96, Dated 08/30/96
Repurchase Price $2,501,453
(Collateralized by U.S. Treasury Note, 6.50%
Due 05/15/97
Market Value $2,550,161) 2,500,000
2,367,000 Nomura
5.18%, Due 09/03/96, Dated 08/30/96
Repurchase Price $2,368,362
(Collateralized by U.S. Treasury Note, 6.63%
Due 02/28/01
Market Value $2,417,494) 2,367,000
2,500,000 Sanwa
5.20%, Due 09/03/96, Dated 08/30/96
Repurchase Price $2,501,444
(Collateralized by U.S. Treasury Note, 6.38%
Due 05/15/99
Market Value $2,550,689) 2,500,000
Total Repurchase Agreements
(Cost $17,349,000) 17,349,000
Total Investments - 138.76%
(Cost $36,323,522)* 36,323,522
Net Other Assets and Liabilities - (38.76)%** (10,145,417)
Net Assets - 100.00% $26,178,105
* Aggregate cost for Federal tax purposes.
** Includes amounts for securities purchased but not settled.
See Notes to Financial Statements.
U.S. Government Money Market Fund
PORTFOLIO OF INVESTMENTS
August 31, 1996 (unaudited)
Annualized
Yield on
Principal Date of Maturity
Value
Amount Purchase Date (Note 2)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 44.91%
Federal National Mortgage Association,
Discount Notes - 22.90%
$ 2,060,000 5.42%, 09/03/96 $ 2,059,811
2,920,000 5.22%, 09/03/96 2,918,730
600,000 5.23%, 09/05/96 599,652
10,000,000 5.22%, 09/12/96 9,984,111
15,562,304
Federal Home Loan Mortgage Corp.,
Discount Notes - 19.07%
1,000,000 5.22%, 09/03/96 999,565
2,950,000 5.41%, 09/03/96 2,949,270
5,000,000 5.23%, 09/05/96 4,997,100
3,696,000 5.23%, 09/06/96 3,693,320
315,000 5.27%, 09/09/96
314,633
12,953,888
Federal Farm Credit Bank,
Discount Note - 2.94%
2,000,000 5.23%, 09/06/96 1,998,550
Total U.S. Government and Agency Obligations
(Cost $30,514,742) 30,514,742
REPURCHASE AGREEMENTS - 55.33%
6,350,000 Barclays Bank-Tri Party
5.25%, Due 09/03/96, Dated 08/30/96
Repurchase Price $6,353,704
(Collateralized by U.S. Government Securities
with maturities in 1996
Market Value $6,481,831) 6,350,000
See Notes to Financial Statements.
U.S. Government Money Market Fund
PORTFOLIO OF INVESTMENTS (continued)
August 31, 1996 (unaudited)
Value
Principal Amount (Note 2)
REPURCHASE AGREEMENTS (continued)
$ 6,250,000 Goldman Sachs-Tri Party
5.26%, Due 09/03/96, Dated 08/30/96
Repurchase Price $6,253,653
(Collateralized by U.S. Treasury Note, 6.25%
Due 06/30/98
Market Value $6,375,327) $ 6,250,000
6,250,000 Morgan, J.P.
5.22%, Due 09/03/96, Dated 08/30/96
Repurchase Price $6,253,625
(Collateralized by Federal Home Loan Bank,
Agency Note, 5.22%, Due 07/08/98
Market Value $6,504,319) 6,250,000
6,250,000 Morgan Stanley-Tri Party
5.23%, Due 09/03/96, Dated 08/30/96
Repurchase Price $6,253,632
(Collateralized by U.S. Treasury Bill
Due 11/14/96
Market Value $6,410,729) 6,250,000
6,250,000 Nomura
5.25%, Due 09/03/96, Dated 08/30/96
Repurchase Price $6,253,646
(Collateralized by Federal National Mortgage
Association, Discount Note, Due 09/24/96
Market Value $6,376,000) 6,250,000
See Notes to Financial Statements.
U.S. Government Money Market Fund
PORTFOLIO OF INVESTMENTS (continued)
August 31, 1996 (unaudited)
Value
Principal Amount (Note 2)
6,250,000 Sanwa
5.20%, Due 09/03/96, Dated 08/30/96
Repurchase Price $6,253,611
(Collateralized by U.S. Treasury Note, 5.63%
Due 10/31/96
Market Value $6,375,590) 6,250,000
Total Repurchase Agreements
(Cost $37,600,000) 37,600,000
Total Investments - 100.24%
(Cost $68,114,742)* 68,114,742
Net Other Assets and Liabilities - (0.24)%
(164,360)
Net Assets - 100.00% $67,950,382
* Aggregate cost for Federal tax purposes.
See Notes to Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES
August 31, 1996 (unaudited)
U.S. Treasury
U.S. Government
Money Market Fund
Money Market Fund
ASSETS:
Investments (Note 2):
Investments at value $ 18,974,522 $ 30,514,742
Repurchase agreements 17,349,000 37,600,000
Total investments at value 36,323,522
68,114,742
Cash 289 615
Interest receivable 5,012 10,935
Receivable from investment adviser 11,378
51,499
Deferred organization costs (Note 2) 64,907
64,907
Prepaid expenses 12,583 19,868
Total Assets $ 36,417,691 $ 68,262,566
LIABILITIES:
Payable for investments purchased 9,979,622
- ----
Dividends payable 97,524 108,998
Accrued organization costs (Note 2) 69,885
69,885
Payable to FDISG (Note 3) 17,003
35,958
Trustees' fees and expenses payable (Note 3)
6,875 6,875
Accrued expenses and other payables 68,677
90,468
Total Liabilities 10,239,586 312,184
NET ASSETS $ 26,178,105 $ 67,950,382
NET ASSETS consist of:
Par value (Note 5) $ 26,177 $ 67,950
Paid-in capital in excess of par value 26,150,904
67,882,365
Accumulated net realized gain on investments
sold 1,024 67
TOTAL NET ASSETS $ 26,178,105 $ 67,950,382
Shares of beneficial interest outstanding 26,177,081
67,950,315
NET ASSET VALUE
offering and redemption price per share
(Net Assets Shares Outstanding) $ 1.00 $
1.00
See Notes to Financial Statements.
STATEMENTS OF OPERATIONS
For the period ended
August 31, 1996 (unaudited)
U.S. Treasury U.S. Government Money Market Fund*
Money Market Fund*
INVESTMENT INCOME
Interest (Note 2) $ 474,710 $ 1,113,079
EXPENSES:
Investment advisory fees (Note 3) 13,542
30,910
Administration fees (Note 3) 13,178
29,155
Custodian fees 6,000 6,000
Fund accounting fees (Note 3) 12,700
15,677
Legal fees 5,333 8,685
Audit fees 10,000 10,000
Transfer agent fees (Note 3) 11,289
11,289
Trustees' fees and expenses (Note 3) 6,875
6,875
Amortization of organization costs (Note 2)
4,978 4,978
Reports to shareholders 10,833
10,833
Registration fees 20,024 34,372
Insurance 3,473 8,773
Rating Agency fees 7,500 7,500
Miscellaneous 4,307 4,307
Total Expenses 130,032 189,354
Less: Expense reimbursement/waiver (Note 4)
(105,573) (148,141)
Total Expenses net of reimbursement/waiver
24,459 41,213
NET INVESTMENT INCOME 450,251 1,071,866
NET REALIZED GAIN ON INVESTMENTS
SOLD (Note 2) 1,024 67
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 451,275 $
1,071,933
* The Funds commenced operations on April 24, 1996.
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the period ended
August 31, 1996 (unaudited)
U.S. Treasury U.S. Government
Money Market Fund (1) Money Market Fund (1)
NET ASSETS at beginning of period $ ---- $
- ----
Increase in Net Assets resulting from operations:
Net investment income 450,251
1,071,866
Net realized gain on investments sold 1,024
67
Net increase in net assets resulting from
operations 451,275
1,071,933
Dividends to shareholders from:
Net investment income (450,251)
(1,071,866)
Share Transactions:
Net proceeds from sales of shares 26,133,335
105,215,723
Issued to shareholders in reinvestment of dividends 65,334
638,892
Cost of shares repurchased (21,588)
(37,904,300)
Net increase from share transactions 26,177,081
67,950,315
Total increase in net assets 26,178,105
67,950,382
NET ASSETS at the end of period $ 26,178,105 $
67,950,382
OTHER INFORMATION:
Share Transactions:
Sold 26,133,335 105,215,723
Issued to shareholders in reinvestment of dividends 65,334
638,892
Shares repurchased (21,588) (37,904,300)
Net increase in shares outstanding 26,177,081
67,950,315
(1) The Funds commenced operations on April 24, 1996.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
U.S. Treasury U.S. Government
Money Market Fund Money Market Fund
Period ended
August 31, 1996(unaudited) (1)
Net Asset Value, Beginning of period $ 1.000 $
1.000
Income from Investment Operations:
Net investment income (2) 0.018 0.018
Less Dividends:
Dividends from net investment income (0.018)
(0.018)
Net increase in net asset value ---- -
- ---
Net Asset Value, End of period $ 1.000 $
1.000
Total Return 1.78%** 1.84%**
Ratios/Supplemental Data:
Net Assets, End of period (000s) $ 26,178 $
67,950
Ratios to average net assets:
Net investment income including reimbursement/waiver 4.99%*
5.20%*
Operating expenses including reimbursement/waiver 0.27%*
0.20%*
Operating expenses excluding reimbursement/waiver 1.44%*
0.92%*
* Annualized
** Not Annualized
(1) The Funds commenced 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
August 31, 1996 for the U.S. Treasury Money Market Fund and the
U.S. Government Money Market Fund were $0.014, and $0.016,
respectively.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS (unaudited)
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, as an open-end
management investment company. 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 AMBAC U.S. Treasury Money Market Fund and AMBAC U.S.
Government Money Market Fund (individually, a "Fund,"
collectively, the "Funds"). A third series 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 and disclosure of contingent 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
consistently followed by the Funds in the preparation of the
financial statements.
Portfolio Valuation: Securities in the Funds are valued
utilizing the amortized cost valuation method permitted in
accordance with 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. Dividend income is recorded on the ex-dividend
date.
Dividends to Shareholders: Dividends from net investment
income are declared and accrued daily and paid monthly. Net
realized capital gains, if any, are distributed at least annually.
Income distributions 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 or tax-exempt 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
Investment 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
obtain those securities in the event of a counterparty default.
The Investment 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.
Organization Costs: Each Fund bears all 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 purchased by any
shareholder of a Fund are redeemed 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 AMBAC Investment Management,
Inc. (the "Adviser"), a wholly-owned subsidiary of AMBAC Capital
Corporation which, in turn, is a wholly-owned subsidiary of AMBAC
Inc. ("AMBAC"), 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 and AMBAC U.S. Government Money Market
Funds. The Adviser has voluntarily agreed to waive its fee or
absorb Fund expenses 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
and AMBAC U.S. Government Money Market Funds, respectively. The
Adviser reserves the right to modify or terminate at any time its
agreements to waive fees and absorb 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 Fund'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 the Fund of $3,000 if the monthly average
net assets of the Fund are $50 million or less, $4,000 if the
Fund's monthly average net assets are between $50 or $200 million,
or $5,000 if the Fund's monthly average net assets exceed $200
million. In addition, FDISG also provides certain custody
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
Administrator and/or Distributor. Such officers receive no
compensation from the Trust for serving in their respective roles.
Trustees who are not employees of the Adviser, or its 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
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 series. The Adviser, at its discretion, may revise or
discontinue the voluntary fee waivers and expense reimbursements.
For the period ended August 31, 1996, the Adviser waived fees and
reimbursed expenses with respect to the Funds in the following
amounts.
Expenses
Fund Fees Waived
Reimbursed
AMBAC U.S. Treasury Money Market Fund $13,542
$ 92,031
AMBAC U.S. Government Money Market Fund 30,910
117,231
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.
* Trustee who is an "interested person" of the Trust, as defined in the
1940 Act.
Ownership percentages include direct beneficial ownership of 4% of the
shares of Treasury Money Fund and 4%
of the shares of Government Money Funds, indirect beneficial ownership of
the shares of each Fund that are
owned by subsidiaries of AMBAC Inc.
Ownership of shares is indirect and based upon direct beneficial ownership
by AMBAC Investment Management,
Inc., a subsidiary of AMBAC Capital Corporation.
1
g:\shared\3rdparty\ambac\prospect\trespro4.doc
g:\shared\3rdparty\ambac\prospect\trespro1.doc
1
g:\shared\3rdparty\ambac\prospect\govtpro4.doc
1
g:\shared\3rdparty\ambac\sai\sai4.doc
F-5
F-16
