AMBAC
LOGO
U.S. TREASURY MONEY MARKET FUND
A SERIES OF AMBAC TREASURERS TRUST
300 Nyala Farms Road
Westport, Connecticut 06880
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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 100% of its
assets in short-term debt securities that are direct obligations of
the U.S. Treasury ("Treasury Securities") and repurchase agreements
collateralized by Treasury 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").
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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.
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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."
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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, 1995 as supplemented May
10, 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).
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Investors are advised to read this Prospectus and retain it for
future reference.
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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.
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The date of this Prospectus is November 1, 1995 as supplemented May
10, 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).............................. .10%
12b-1 Fees.................................................. None
Other Expenses (estimated).................................. .18%
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 and estimated total operating expenses of the Fund
would be .15% and .33%, 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."
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.
2
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 100% of its assets in short-term debt
securities that are direct obligations of the U.S. Treasury ("Treasury
Securities") and repurchase agreements collateralized by Treasury 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."
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 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 and is required to
consist of Treasury 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.
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
3
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. 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. 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.
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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 9312
Boston, Massachusetts 02209-9312
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
determined as of 4:00 p.m., and will be entitled to that day's dividend if a
purchase order is received and accepted by the Distributor prior to 4:00 p.m.
(Eastern time) and 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. 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 as of 4:00 p.m. that 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 9312
Boston, MA 02209-9312
5
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.
One Exchange Place
Boston, MA 02109
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--Share Purchase Procedures."
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
6
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 9312
Boston, Massachusetts 02209-9312
Written redemption requests sent by overnight delivery should be sent to:
AMBAC Funds
c/o First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
7
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 shareholder's 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 9312, Boston, Massachusetts 02209-9312.
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 these procedures
are used, neither the Trust or the Fund, nor the Investment Adviser,
Administrator, Distributor or Transfer Agent, will be liable for any loss
8
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
9
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 fees 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.
In its investment advisory agreement with the Trust, the Investment Adviser
has agreed that if, in any fiscal year, the Fund's operating expenses (including
any fees or expenses payable to the Investment Adviser, but excluding interest,
taxes, brokerage commissions and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of business)
exceed the lowest applicable percentage expense limitation imposed by the
securities laws or regulations of any state in which the Fund's shares are
qualified for sale, the advisory fee payable to the Investment Adviser will be
reduced by the amount of the excess. As of the date of this Prospectus, the most
restrictive expense limitation to which the Fund is subject is 2 1/2% of the
first $30 million of average daily net assets, 2% of the next $70 million of
average daily net assets and 1 1/2% of the average daily net assets over $100
million.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and accrued daily based upon the Fund's net
investment income (including net realized short-term gains, if any), and are
paid on the first Business Day of each month. 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 monthly
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 computed and declared on each Business Day and 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.
10
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.
11
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 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
12
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 Donoghue's 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 the date of this Prospectus, as supplemented, AMBAC
Indemnity Corporation, an affiliate of the Investment Adviser owned more than
25% of the outstanding shares of the Fund. So long as
13
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 parents,
AMBAC Capital Corporation and 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., One Exchange Place, Boston, Massachusetts 02109, 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.
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 at toll free at 1-800-311-AMBAC (2622) or at P.O. Box 9312, Boston,
Massachusetts 02209-9312.
14
INVESTMENT ADVISER
AMBAC Investment Management, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
ADMINISTRATOR AND TRANSFER AGENT
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
DISTRIBUTOR
440 Financial Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
CUSTODIAN
Bankers Trust Company
130 Liberty Street
New York, New York 10006
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP
99 High Street
Boston, Massachusetts 02110
LEGAL COUNSEL
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
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.
...............................................................................
TABLE OF CONTENTS
U.S. TREASURY MONEY MARKET FUND
A SERIES OF AMBAC TREASURERS TRUST AMBAC
LOGO
...............................................................................
SUMMARY OF EXPENSES 2
..................................................................
SUITABLE INVESTORS 2
..................................................................
INVESTMENT OBJECTIVE AND POLICIES 3
..................................................................
PURCHASING SHARES 4
..................................................................
SHAREHOLDER ACCOUNTS 6
..................................................................
REDEEMING SHARES 6
..................................................................
EXCHANGE PRIVILEGE 8
..................................................................
NET ASSET VALUE 9
..................................................................
FUND EXPENSES 9
..................................................................
DIVIDENDS AND DISTRIBUTIONS 10
..................................................................
TAXES 10
..................................................................
MANAGEMENT OF THE FUND 11
..................................................................
PERFORMANCE INFORMATION 12
..................................................................
GENERAL INFORMATION 13
..................................................................
-------------------------------------
-----------------------------------------
-----------------------------------------
PROSPECTUS
NOVEMBER 1, 1995 AS SUPPLEMENTED
MAY 10, 1996
-----------------------------------------
AMBAC
LOGO
SHORT-TERM U.S. GOVERNMENT INCOME FUND
A SERIES OF AMBAC TREASURERS TRUST
300 Nyala Farms Road
Westport, Connecticut 06880
.....................................................................
AMBAC Short-Term U.S. Government Income Fund (the "Fund") is a
series of AMBAC Treasurers Trust (the "Trust"), a diversified,
open-end management investment company. The investment objective of
the Fund is to seek high current income consistent with
preservation of capital. It pursues this objective by investing its
assets primarily in debt securities issued or guaranteed by the
U.S. government or an agency or instrumentality of the U.S.
government ("Government Securities"). The Fund maintains a
dollar-weighted average portfolio maturity of three years or less.
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 $1,000,000.
See "Purchasing Shares." Shares of the Fund are not insured by
AMBAC Indemnity Corporation.
....................................................................
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, 1995 as supplemented May
10, 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, 1995 as supplemented May
10, 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).............................. .12%
12b-1 Fees.................................................. None
Other Expenses (estimated).................................. .33%
Total Fund Operating Expenses............................... .45%
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 .45% of the Fund's average daily net assets. Absent this
agreement, management fees and estimated total operating expenses of the Fund
would be .35% and .68%, 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: $5 $14
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.The example should not be considered a representation of past or
future expenses. Actual expenses and annual return may be greater or less than
the amounts shown above.
For a more complete description of fees and expenses, see "Management of
the Fund."
SUITABLE INVESTORS
The Fund is specifically designed as a prudently managed, low-cost,
professionally managed investment 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 economics of scale to investors whose
investment policies and guidelines are consistent with those of the Fund.
2
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek high current income
consistent with preservation of capital. The Fund pursues this objective by
investing its assets in 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.
In pursuing its objective, the Fund may also purchase and sell interest rate
futures contracts. The Fund maintains a dollar-weighted average portfolio
maturity of three years or less. In determining a security's maturity for
purposes of calculating the Fund's average portfolio maturity, an estimate of
the expected time for the principal amount to be repaid may be used. This
estimate can be substantially shorter than stated maturity of the security.
There is no limitation on the maximum maturity of any particular security that
may be purchased by the Fund.
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 or guaranteed by federal agencies and
instrumentalities ("Agency Securities"). Certain Agency Securities, such as
those issued by 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 those issued by the Federal
Home Loan Banks, Federal Farm Credit Banks, and Federal National Mortgage
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
greater risk than obligations which are backed by the full faith and credit of
the U.S. government. At least 65% of the value of the Fund's total assets is
invested in Government Securities and repurchase agreements collateralized by
Government Securities.
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").
NO ASSURANCE CAN BE GIVEN THAT THE FUND WILL BE ABLE TO ACHIEVE ITS
INVESTMENT OBJECTIVE.
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 15% of the Fund's net assets would, as a result, be
invested in repurchase agreements under which the Fund 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 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.
3
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. 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. In
determining the maturities of the Fund's portfolio securities and calculating
the Fund's 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.
Stripped Securities. The Fund may purchase component parts of Government
Securities (either principal or interest). These instruments, known as "stripped
securities" separate the interest and principal payments on a security into two
separate securities and may take the form of: Government Securities from which
interest coupons have been stripped; interest coupons; or book-entry ownership
of interest or principal of a Government Security. The prices of stripped
securities may be more volatile than those of other debt securities.
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.
Mortgage-Backed Securities. The Fund may invest in fixed rate and adjustable
rate mortgage-backed securities that are issued or guaranteed by U.S. government
or one of its agencies and instrumentalities. All mortgage-backed securities
purchased by the Fund represent interests in and are payable from pools of
mortgage loans (i.e., pass-through certificates). These securities include GNMA,
FNMA, and FHLMC certificates, which entitle the holder to receive a share of all
interest and principal payments from the mortgages underlying the certificates,
net of fees. The U.S. government or the issuing agency guarantee of the payment
of interest and principal on mortgage-backed securities does not protect against
changes in the yields or values of the securities.
Tax or regulatory changes may adversely affect the mortgage securities
market and the prices of mortgage-backed securities. In addition, because
underlying mortgages are subject to prepayment at any time, the values of
mortgage-backed securities may be adversely affected if prepayments differ from
those anticipated at the time of issuance. When prepayments are received, they
may have to be reinvested by the Fund in other securities at a current market
rate which can be expected to be lower than the interest rate payable on the
original mortgage-backed security. Prepayments are influenced by a variety of
factors. However, prepayments will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Thus, the amounts
required to be reinvested by the Fund are likely to be greater during a period
of declining interest rates than during a period of rising interest rates.
Prepayments of mortgages can also result in a capital loss to the Fund when a
mortgage-backed security was purchased by the Fund at a premium. In addition,
because of the nature of mortgage-backed securities, the holders of these
securities normally do not benefit from appreciation in market value to the same
extent as holders of other types of debt securities. The Investment Adviser
determines the effective life of mortgage-backed securities based on industry
practice and current market conditions. If the Investment Adviser's
determination is not borne out in practice, it could positively or negatively
affect the value of the Fund's holdings of mortgage-backed securities when
market
4
interest rates change. Increasing market interest rates generally extend the
effective maturities of mortgage-backed securities.
The Fund does not invest in stripped mortgage-backed securities or
collateralized mortgage obligations.
Interest Rate Futures. The Fund may seek to reduce the risk of changes in
the value of its portfolio securities (i.e., hedge) or to manage its portfolio
maturity by purchasing and selling interest-rate futures contracts traded on
U.S. futures exchanges, subject to the limitations imposed by regulations of the
Commodity Futures Trading Commission. The use of futures contracts involves
certain risks, including increased price volatility and a high degree of
leverage. If the Investment Adviser judges market conditions incorrectly or
employs a strategy that does not correlate well with the Fund's investments, the
use of futures could result in a loss to the Fund. In addition, it is possible
that the use of futures may increase the volatility of the Fund because futures
involve a small investment of cash relative to the magnitude of the investment
position taken and risk assumed. Because the Fund will only enter into
transactions in exchange traded futures, the futures in which the Fund invests
can be expected to have greater liquidity and decreased risk of counterparty
default. Transactions in futures contracts are used to adjust the risk and
return characteristics of the Fund's portfolio.
Borrowings. The Fund does not borrow money for purposes of making
investments. 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 restrictions on its
investments in addition to those described in this Prospectus. See "Investment
Restrictions" in the Statement of Additional Information. 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.
Investment Characteristics. The Fund invests its assets primarily in
Government Securities and repurchase agreements collateralized by these
securities. Although Government Securities, including those which are not backed
by the full faith and credit of the U.S. government, are of very high credit
quality, the market values of these securities fluctuate. The Fund's yield and
share price are not insured or guaranteed by the U.S. government or any
government agency. The values of the Fund's investments and investment return
will change daily based upon changes in the level of prevailing interest rates,
market conditions, economic and political news and other factors. As a result,
shares of the Fund may at the time of their redemption be worth more or less
than their purchase price. In general, the prices of debt securities will rise
when interest rates fall, and will decrease when interest rates rise. The impact
of interest rate changes on the market values of debt securities is generally
greater for securities having longer maturities. By maintaining a
dollar-weighted average portfolio maturity of three years or less, the Fund
seeks to limit the probable impact of changing interest rates on the Fund's net
asset value per share.
The Investment Adviser manages the Fund's investment portfolio by altering
the composition of the Fund's investments and adjusting the Fund's average
portfolio maturity based upon its professional judgment regarding anticipated
changes in interest rates and market conditions. There can be no assurance,
however, that the Investment Adviser's judgment will be correct.
There are no fixed limitations on portfolio turnover. Although the Fund will
not purchase securities with the intention of profiting from short-term trading,
the Fund may sell portfolio securities prior to
5
maturity when the Investment Adviser believes that such action is advisable. It
is anticipated that the Fund's portfolio turnover rate will not exceed 100%
annually. Turnover rates in excess of 100% may result in higher costs and a
possible increase in realized short-term capital gains (or losses). The Fund
does not generally expect to incur commissions on its securities transactions
because virtually all portfolio transactions will be effected on a principal
basis with issuers, underwriters and dealers serving as primary market makers.
However, the Fund will incur transaction costs and the price paid by the Fund on
the purchase or sale of a security from or to a dealer will include a profit to
the dealer in the form of a "spread."
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"). 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." Payment for shares purchased must be made by federal funds wire no
later than 4:00 p.m. on the Business Day following the day shares are purchased.
A minimum initial investment of $1,000,000 is required. Subsequent investments
may be made in any amount, subject to a $100,000 minimum. Shares may be
purchased only by federal funds wire.
Shares become entitled to receive dividends beginning on the Business Day
following the date of purchase. Shares will be issued at the net asset value
determined as of 4:00 p.m., and will be entitled to the dividend declared on the
following Business Day, if a purchase order is received and accepted by the
Distributor prior to 4:00 p.m. (Eastern time). If a purchase order is not
received and accepted prior to 4:00 p.m., the purchase order will not be
effected until the following Business Day. A purchase order cannot be canceled
after it has been placed. If federal funds in the amount of the purchase price
are not received by the Trust's custodian by 4:00 p.m. on the Business Day
following the day shares are purchased, the Distributor will redeem the shares
and, if the shares have declined in value, the investor will be held responsible
by the Fund to pay the full amount of any loss resulting from the redemption.
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 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.
Share Purchase Procedures. Shares may be purchased only 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.
Prior to making an initial investment by wire, 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 9312
Boston, Massachusetts 02209-9312
6
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 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.
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 Short-Term U.S. Government Income Fund
C/o BSD&T Co.
ABA # 011001234
CR DDA # 05-338-4
CR FDISG A/C #
------------
[insert your account number]
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 not later than the Business Day following the day of
the redemption. If a redemption request is not received prior to 4:00 p.m.
(Eastern time), it will be processed on the following Business Day. Shares are
entitled to receive dividends declared on the day the shares are redeemed. See
"Dividends and
7
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 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.
A completed account application must be on file with the Transfer Agent in
order to redeem shares. See "Purchasing Shares--Share Purchase Procedures."
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 no later than the Business Day following the
day of the redemption. Redemption requests that are not received prior to 4:00
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
8
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 9312
Boston, Massachusetts 02209-9312
Written redemption requests sent by overnight delivery should be sent to:
AMBAC Funds
c/o First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
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 U.S. Government Money Market 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 9312, Boston, Massachusetts 02209-9312.
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 4:00 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
9
case of telephone redemption requests, the Transfer Agent employs reasonable
procedures to confirm that telephone exchange instructions are genuine. To the
extent these 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 its investments and other assets and
dividing the result by the total number of outstanding shares of the Fund.
In computing net asset value, the Fund's portfolio securities 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 Fund's portfolio
securities. Valuations provided by any pricing service will be monitored on a
periodic basis by the Board of Trustees. 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.
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 fees or to absorb expenses of the Fund as
may be necessary to limit total ordinary operating expenses of the
10
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.
In its investment advisory agreement with the Trust, the Investment Adviser
has agreed that if, in any fiscal year, the Fund's operating expenses (including
any fees or expenses payable to the Investment Adviser, but excluding interest,
taxes, brokerage commissions and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of business)
exceed the lowest applicable percentage expense limitation imposed by the
securities laws or regulations of any state in which the Fund's shares are
qualified for sale, the advisory fee payable to the Investment Adviser will be
reduced by the amount of the excess. As of the date of this Prospectus, the most
restrictive expense limitation to which the Fund is subject is 2 1/2% of the
first $30 million of average daily net assets, 2% of the next $70 million of
average daily net assets and 1 1/2% of the average daily net assets over $100
million.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and accrued daily based upon the Fund's net
investment income (including net realized short-term gains, if any), and are
paid on the first Business Day of each month. 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 monthly
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 computed and declared on each Business Day and are payable to
all shareholders of record as of the time of declaration. Shareholders will
begin receiving dividends on the Business Day following the day shares are
purchased and will be entitled to receive dividends declared on the day shares
are redeemed. Any long-term capital gains realized by the Fund will be
distributed annually.
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.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses) that are designated by the Fund as
capital gain dividends, regardless of whether such capital gain dividends are
received in cash or reinvested in additional shares, are
11
taxable to the Fund's shareholders as long-term capital gains, regardless of how
long they have held shares in the Fund. 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. The
redemption or exchange of Fund shares by an investor is a taxable event and may
result in a capital gain or loss.
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.
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 (such as intangible property 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
12
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 .35% of the
Fund's average daily net assets during the month.
Dolores O. Miller, CFA, a Managing Director of the Investment Adviser, is
the person primarily responsible for managing the Fund's investments. Ms. Miller
has 12 years of experience managing fixed income portfolios. She is also the
Managing Director and head of asset management for AMBAC Capital Management,
Inc. ("ACMI"), an affiliate of the Investment Adviser, where she is responsible
for managing ACMI's investments which total approximately $2 billion. Prior to
joining ACMI in April 1993, Ms. Miller was Senior Portfolio Manager and head of
taxable fixed income at American Express Company. 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 "yield" and "total return" in advertisements, sales
materials and shareholder reports. Yield refers to the income generated by an
investment in the Fund over a 30 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 period over a one year period and is
shown as a percentage of the investment. The income earned on the investment is
assumed to be earned and reinvested at a constant rate and compounded
semi-annually. Total return refers to the change in the value of an investment
in the Fund over a specified period of time, assuming reinvestment of all
dividends and other distributions paid by the Fund. The Fund's quotations of
total return are quotations of "average annual total return," which is the rate
13
of return that would have been earned assuming that the investment performance
of the Fund over the entire period was earned ratably throughout the period.
Average annual total returns will be shown for one, five and ten year periods,
at such time as the Fund has operated for such periods, and for the period since
inception of the Fund. The Fund may also publish quotations of its "aggregate
total return," which reflects the actual performance of the Fund over the entire
period for which the quotation is given. 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, Donoghue's 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 such securities or investments may also be used.
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 U.S. Government
Money Market 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.
14
Control Persons. As of the date of this Prospectus, as supplemented, the
Investment Adviser was the sole shareholder of the Fund. As a result of such
ownership, the Fund may be deemed to be controlled by the Investment Adviser and
its parents, AMBAC Capital Corporation and AMBAC Inc. So long as ownership of
shares of the Fund (or of the Trust) by such companies continues to exceed 25%
of the outstanding shares of the Fund (or of the outstanding shares of the
Trust) such companies will be deemed to control the Fund (and the Trust) by
virtue of such ownership. In addition, as a result of AMBAC Indemnity
Corporation's ownership of shares of AMBAC U.S. Treasury Money Market Fund and
AMBAC U.S. Government Money Market Fund, AMBAC Indemnity Corporation and AMBAC
Inc. may be deemed to control the Trust.
Transfer Agent. The Transfer Agent, First Data Investor Services Group,
Inc., One Exchange Place, Boston, Massachusetts 02109, 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.
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 investment 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 9312, Boston,
Massachusetts 02209-9312.
15
INVESTMENT ADVISER
AMBAC Investment Management, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
ADMINISTRATOR AND TRANSFER AGENT
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
DISTRIBUTOR
440 Financial Distributors, Inc.
290 Donald Lynch Boulevard
Marlboro, Massachusetts 01752
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
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
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.
...............................................................................
TABLE OF CONTENTS
SHORT-TERM U.S. GOVERNMENT INCOME FUND
A SERIES OF AMBAC TREASURERS TRUST AMBAC
LOGO
...............................................................................
SUMMARY OF EXPENSES 2
.....................................................................
SUITABLE INVESTORS 2
.....................................................................
INVESTMENT OBJECTIVE AND POLICIES 3
.....................................................................
PURCHASING SHARES 6
.....................................................................
SHAREHOLDER ACCOUNTS 7
.....................................................................
REDEEMING SHARES 7
.....................................................................
EXCHANGE PRIVILEGE 9
.....................................................................
NET ASSET VALUE 10
.....................................................................
FUND EXPENSES 10
.....................................................................
DIVIDENDS AND DISTRIBUTIONS 11
.....................................................................
TAXES 11
.....................................................................
MANAGEMENT OF THE FUND 12
.....................................................................
PERFORMANCE INFORMATION 13
.....................................................................
GENERAL INFORMATION 14
.....................................................................
-----------------------------------------
-----------------------------------------
-----------------------------------------
PROSPECTUS
NOVEMBER 1, 1995 AS SUPPLEMENTED
MAY 10, 1996
-----------------------------------------
AMBAC
LOGO
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 100% of its
assets 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, 1995 as supplemented May
10, 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, 1995 as supplemented May
10, 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)........................... .02%
12b-1 Fees............................................... None
Other Expenses (estimated)............................... .18%
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 and estimated total operating expenses of the Fund
would be .15% and .33%, 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."
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.
2
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 100% of its assets 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 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.
3
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
4
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. Subsequent investments may be made in any amount,
subject to a $100,000 minimum. Shares may be purchased only by federal funds
wire.
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 placed. Shares will be issued at the net asset value
determined as of 4:00 p.m., and will be entitled to that day's dividend, if a
purchase order is received and accepted by the Distributor prior to 4:00 p.m.
(Eastern time) and 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. 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. 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.
Share Purchase Procedures. Shares may be purchased only 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.
Prior to making an initial investment by wire, 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 9312
Boston, Massachusetts 02209-9312
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 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.
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.
5
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]
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 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.
A completed account application must be on file with the Transfer Agent in
order to redeem shares. See "Purchasing Shares--Share Purchase Procedures."
Shareholders will be asked to designate a primary recipient
6
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 9312
Boston, Massachusetts 02209-9312
7
Written redemption requests sent by overnight delivery should be sent to:
AMBAC Funds
c/o First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
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 9312, Boston, Massachusetts 02209-9312.
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 these 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.
8
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 fees or to absorb expenses of the Fund as
may be necessary to limit total ordinary operating expenses of the
9
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.
In its investment advisory agreement with the Trust, the Investment Adviser
has agreed that if, in any fiscal year, the Fund's operating expenses (including
any fees or expenses payable to the Investment Adviser, but excluding interest,
taxes, brokerage commissions and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of business)
exceed the lowest applicable percentage expense limitation imposed by the
securities laws or regulations of any state in which the Fund's shares are
qualified for sale, the advisory fee payable to the Investment Adviser will be
reduced by the amount of the excess. As of the date of this Prospectus, the most
restrictive expense limitation to which the Fund is subject is 2 1/2% of the
first $30 million of average daily net assets, 2% of the next $70 million of
average daily net assets and 1 1/2% of the average daily net assets over $100
million.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and accrued daily based upon the Fund's net
investment income (including net realized short-term gains, if any), and are
paid on the first Business Day of each month. 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 monthly
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 computed and declared on each Business Day and 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
10
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
11
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 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,
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
12
Analytical Services, Inc., IBC Donoghue's 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 the date of this Prospectus, as supplemented, 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 parents, AMBAC Capital Corporation
and AMBAC Inc., will be deemed to control the Fund (and the Trust) by virtue of
such ownership.
13
Transfer Agent. The Transfer Agent, First Data Investor Services Group,
Inc., One Exchange Place, Boston, Massachusetts 02109, 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.
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 9312, Boston,
Massachusetts 02209-9312.
14
INVESTMENT ADVISER
AMBAC Investment Management, Inc.
300 Nyala Farms Road
Westport, Connecticut 06880
ADMINISTRATOR AND TRANSFER AGENT
First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
DISTRIBUTOR
440 Financial Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
CUSTODIAN
Bankers Trust Company
130 Liberty Street
New York, New York 10006
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP
99 High Street
Boston, Massachusetts 02110
LEGAL COUNSEL
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
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.
...............................................................................
TABLE OF CONTENTS
U.S. GOVERNMENT MONEY MARKET FUND
A SERIES OF AMBAC TREASURERS TRUST AMBAC
LOGO
...............................................................................
SUMMARY OF EXPENSES 2
....................................................................
SUITABLE INVESTORS 2
....................................................................
INVESTMENT OBJECTIVE AND POLICIES 3
....................................................................
PURCHASING SHARES 4
....................................................................
SHAREHOLDER ACCOUNTS 6
....................................................................
REDEEMING SHARES 6
....................................................................
EXCHANGE PRIVILEGE 8
....................................................................
NET ASSET VALUE 9
....................................................................
FUND EXPENSES 9
....................................................................
DIVIDENDS AND DISTRIBUTIONS 10
....................................................................
TAXES 10
....................................................................
MANAGEMENT OF THE FUND 11
....................................................................
PERFORMANCE INFORMATION 12
....................................................................
GENERAL INFORMATION 13
....................................................................
-----------------------------------------
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PROSPECTUS
NOVEMBER 1, 1995 AS SUPPLEMENTED
MAY 10, 1996
-----------------------------------------
