EXHIBIT 99.09

AMBAC ASSURANCE CORPORATION AND SUBSIDIARIES

(a wholly owned subsidiary of Ambac Financial Group, Inc.)

Consolidated Unaudited Financial Statements

As of June 30, 2003 and December 31, 2002

and for the Three and Six Months Ended June 30, 2003 and 2002

Ambac Assurance Corporation and Subsidiaries

Consolidated Balance Sheets

June 30, 2003 and December 31, 2002

(Dollars in Thousands Except Share Data)

	June 30, 2003		December 31, 2002
	(unaudited)
ASSETS
Investments:
Fixed income securities, at fair value (amortized cost of $6,548,605 in 2003 and $5,865,467 in 2002)	$	7,024,802	$	6,223,062
Short-term investments, at cost (approximates fair value)		267,254		287,315
Other (cost of $3,496 in 2003 and $2,415 in 2002)		2,814		1,394
Total investments		7,294,870		6,511,771
Cash		15,219		15,876
Securities purchased under agreements to resell		45,168		57,753
Receivable for securities sold		4		230
Investment income due and accrued		88,223		80,825
Reinsurance recoverable on paid and unpaid losses		3,944		4,842
Prepaid reinsurance		314,866		296,126
Deferred acquisition costs		174,646		174,055
Derivative product assets		1,210,181		1,010,081
Other assets		38,304		43,821
Total assets	$	9,185,425	$	8,195,380
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities:
Unearned premiums	$	2,381,060	$	2,137,460
Losses and loss adjustment expense reserve		181,772		172,137
Ceded reinsurance balances payable		15,034		16,930
Obligations under payment agreements		249,810		250,534
Deferred income taxes		274,934		232,269
Current income taxes		23,344		41,375
Notes payable to affiliate		56,560		111,350
Payable for securities purchased		188,943		70,761
Derivative product liabilities		1,170,398		953,772
Other liabilities		128,402		126,729
Total liabilities		4,670,257		4,113,317
Stockholder’s equity:
Preferred stock, par value $1,000 per share; authorized shares – 285,000; issued and outstanding shares – none		—		—
Common stock, par value $2.50 per share; authorized shares –  40,000,000; issued and outstanding shares – 32,800,000 at June 30, 2003 and December 31, 2002		82,000		82,000
Additional paid-in capital		1,002,866		920,146
Accumulated other comprehensive income		309,260		231,436
Retained earnings		3,121,042		2,848,481
Total stockholder’s equity		4,515,168		4,082,063
Total liabilities and stockholder’s equity	$	9,185,425	$	8,195,380

See accompanying Notes to Consolidated Unaudited Financial Statements.

Ambac Assurance Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

For The Three and Six Months Ended June 30, 2003 and 2002

(Dollars in Thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Revenues:
Financial Guarantee:
Gross premiums written	$	386,227		$	196,789		$	587,636		$	348,258
Ceded premiums written		(42,313	)		(24,705	)		(73,481	)		(44,254	)
Net premiums written	$	343,914		$	172,084		$	514,155		$	304,004
Net premiums earned	$	153,367		$	114,956		$	289,959		$	220,168
Other credit enhancement fees		12,294			6,576			22,658			12,864
Net premiums earned and other credit enhancement fees		165,661			121,532			312,617			233,032
Net investment income		79,892			73,594			156,487			146,141
Net realized investment gains		12,777			3,472			26,720			2,972
Net mark-to-market gains (losses) on credit derivative contracts		10,002			(7,982	)		(2,174	)		(12,053	)
Other income		1,853			512			2,679			2,072
Financial Services:
Interest from payment agreements		3,026			—			6,027			—
Other revenue		(9,470	)		1,391			(3,907	)		8,633
Total revenues		263,741			192,519			498,449			380,797
Expenses:
Financial Guarantee:
Losses and loss adjustment expenses		10,900			5,900			20,700			11,600
Underwriting and operating expenses		19,935			18,492			42,532			37,552
Interest expense		127			678			305			1,500
Financial Services:
Interest from payment agreements		899			—			1,924			—
Other expenses		931			1,090			2,509			2,324
Total expenses		32,792			26,160			67,970			52,976
Income before income taxes		230,949			166,359			430,479			327,821
Provision for income taxes		61,847			42,495			113,118			82,928
Net income	$	169,102		$	123,864		$	317,361		$	244,893

See accompanying Notes to Consolidated Unaudited Financial Statements

Ambac Assurance Corporation and Subsidiaries

Consolidated Statements of Stockholder’s Equity

(Unaudited)

For The Six Months Ended June 30, 2003 and 2002

(Dollars in Thousands)

	2003					2002
Retained Earnings:
Balance at January 1	$	2,848,481				$	2,386,073
Net income		317,361		$	317,361		244,893		$	244,893
Dividends declared—common stock		(44,800	)				(39,000	)
Balance at June 30	$	3,121,042				$	2,591,966
Accumulated Other Comprehensive Income:
Balance at January 1	$	231,436				$	80,556
Unrealized gains (losses) on securities, $118,908 and $92,667, pre-tax, in 2003 and 2002, respectively (1)					77,290					60,233
Foreign currency translation loss					534					1,062
Other comprehensive income (loss)		77,824			77,824		61,295			61,295
Comprehensive income				$	395,185				$	306,188
Balance at June 30	$	309,260				$	141,851
Preferred Stock:
Balance at January 1 and June 30	$	—				$	—
Common Stock:
Balance at January 1 and June 30	$	82,000				$	82,000
Additional Paid-in Capital:
Balance at January 1	$	920,146				$	928,094
Capital contribution		75,000					—
Capital issuance costs		(2,471	)				(5,767	)
Employee benefit plans		10,191					349
Balance at June 30	$	1,002,866				$	922,676
Total Stockholder’s Equity at June 30	$	4,515,168				$	3,738,493
(1) Disclosure of reclassification amount:
Unrealized holding gains arising during period	$	103,961				$	60,943
Less: reclassification adjustment for net securities gains included in net income		26,671					710
Net unrealized gains on securities	$	77,290				$	60,233

See accompanying Notes to Consolidated Unaudited Financial Statements.

Ambac Assurance Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

For The Six Months Ended June 30, 2003 and 2002

(Dollars in Thousands)

	Six Months Ended June 30,
	2003			2002
Cash flows from operating activities:
Net income	$	317,361		$	244,893
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,395			1,424
Amortization of bond premium and discount		179			(3,262	)
Current income taxes		(18,031	)		(97,117	)
Deferred income taxes		1,048			5,553
Deferred acquisition costs		(591	)		(6,868	)
Unearned premiums, net		224,860			84,427
Losses and loss adjustment expenses		10,533			9,510
Ceded reinsurance balances payable		(1,896	)		(315	)
Net realized investment (gains) losses		(26,720	)		(2,972	)
Mark-to-market losses on credit derivative contracts		2,174			12,053
Other, net		47,932			(16,064	)
Net cash provided by operating activities		558,244			231,262
Cash flows from investing activities:
Proceeds from sales of bonds		586,760			294,283
Proceeds from maturities of bonds		284,471			144,684
Purchases of bonds		(1,408,112	)		(649,007	)
Change in short-term investments		20,061			52,456
Securities purchased under agreements to resell		(10,605	)		(14,005	)
Other, net		(3,691	)		(13,706	)
Net cash used in investing activities		(531,116	)		(185,295	)
Cash flows from financing activities:
Dividends paid		(44,800	)		(39,000	)
Capital contribution		75,000			—
Capital issuance costs		(2,471	)		(5,767	)
Payment agreements		(724	)		—
Short-term financing from affilates, net		(23,190	)		(2,300	)
Long-term financing from affiliates		(31,600	)		(2,600	)
Net cash used in financing activities		(27,785	)		(49,667	)
Net cash flow		(657	)		(3,700	)
Cash and cash pledged as collateral at January 1		15,876			33,678
Cash and cash pledged as collateral at June 30	$	15,219		$	29,978
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	112,000		$	144,744
Interest expense on notes	$	305		$	560
Interest expense on payment agreements	$	1,116		$	—

See accompanying Notes to Consolidated Unaudited Financial Statements.

Ambac Assurance Corporation and Subsidiaries

Notes to Consolidated Unaudited Financial Statements

(1)    Basis of Presentation

Ambac Assurance Corporation is a leading provider of financial guarantees to clients in both the public and private sectors around the world. Ambac Assurance provides financial guarantees on public finance and structured finance obligations. Ambac Assurance has earned triple-A ratings, the highest ratings available from Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services, Fitch, Inc., and Rating and Investment Information, Inc. Insurance policies insured by Ambac Assurance guarantee payment when due of the principal of and interest on the obligation guaranteed. As of June 30, 2003, Ambac Assurance’s net guarantees in force (principal and interest) were $594,824,180 thousand. Ambac Assurance is a wholly-owned subsidiary of Ambac Financial Group, Inc., a holding company whose subsidiaries provide financial guarantee products and financial services to clients in both the public and private sectors around the world.

Ambac Assurance serves clients in international markets through its wholly-owned subsidiary Ambac Assurance UK Limited. Ambac U.K. is licensed to transact credit, suretyship and financial guarantee insurance in the United Kingdom and to offer insurance services into twelve other European countries. Ambac UK is subject to regulation by the Financial Services Authority (“FSA”) in the conduct of its insurance business.

Ambac Credit Products LLC, a wholly owned subsidiary of Ambac Assurance, provides credit protection in the global markets in the form of structured credit derivatives. These structured credit derivatives, which are privately negotiated contracts, provide the counterparty with credit protection against the occurrence of a specific event such as a payment default or bankruptcy relating to an underlying obligation (generally a fixed income obligation). Upon a credit event, Ambac is required to either (i) purchase the underlying obligation at its par value and a loss is realized for the difference between the par and market value of the underlying obligation or (ii), make a payment equivalent to the difference between the par value and market value of the underlying obligation. Substantially all of Ambac’s structured credit derivative contracts are partially hedged with various financial institutions or structured with first loss protection. Structured credit derivatives issued by Ambac Credit Products are insured by Ambac Assurance.

Ambac Assurance, as the sole limited partner, owns a limited partnership interest representing 90% of the total partnership interests of Ambac Financial Services, L.P., a limited partnership which provides interest rate swaps primarily to states, municipalities and their authorities. The sole general partner of Ambac Financial Services, Ambac Financial Services Holdings, Inc., a wholly-owned subsidiary of Ambac Financial Group, owns a general partnership interest representing 10% of the total partnership interest in Ambac Financial Services. Ambac Financial Services provides interest rate swaps and other derivative products primarily to states, municipalities and their authorities, issuers of asset-backed securities and other entities in connection with their financings. The interest rate swaps provided by Ambac Financial Services are guaranteed by Ambac Assurance through policies that guarantee the obligations of Ambac Financial Services and its counterparties. Total return swaps, which are entered into by Ambac Capital Services, are only used for fixed income obligations, which meet Ambac Assurance’s credit underwriting criteria.

Ambac Assurance Corporation and Subsidiaries

Notes to Consolidated Unaudited Financial Statements (Continued)

The accompanying consolidated unaudited interim financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”) and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of Ambac Assurance’s financial condition, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the six months ended June 30, 2003 may not be indicative of the results that may be expected for the full year ending December 31, 2003. These consolidated financial statements and notes should be read in conjunction with the financial statements and notes included in the audited consolidated financial statements of Ambac Assurance and its subsidiaries as of December 31, 2002 and 2001, and for each of the years in the three-year period ended December 31, 2002 which was filed with the Securities and Exchange Commission on March 28, 2003 as Exhibit 99.01 to Ambac Financial Group Inc.’s Form 10-K and the consolidated unaudited financial statements of Ambac Assurance and its subsidiaries as of March 31, 2003, which was filed with the SEC on May 15, 2003 as Exhibit 99.05 to Ambac Financial Group’s 10-Q for the quarterly period ended March 31, 2003.

The consolidated financial statements include the accounts of Ambac Assurance and each of its subsidiaries. All significant intercompany balances have been eliminated.

Certain reclassifications have been made to prior period’s amounts to conform to the current period’s presentation.

(2)    Accounting Standards

Financial Accounting Standards Board (“FASB”) Interpretation No. 46 “Consolidation of Variable Interest Entities” (“FIN 46”) provides accounting and disclosure rules for variable interest entities (“VIE”). A VIE is an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. VIEs are often created for a single specific purpose, for example, to facilitate asset securitization. FIN 46 became effective in the first quarter of 2003 for VIEs created after January 31, 2003, and to VIEs in which an enterprise obtains an interest after that date. It became effective July 1, 2003 for VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. FIN 46 requires VIEs to be consolidated by their primary beneficiaries if the entities do not effectively disperse risk among the parties involved. FIN 46 requires disclosures for entities that have either a primary or significant variable interest in a VIE.

Ambac Financial Group has involvement with VIEs in two ways. First, Ambac Assurance is a provider of financial guarantee insurance for various securitized asset-backed debt obligations, including mortgage backed security obligations, collateralized debt obligations

Ambac Assurance Corporation and Subsidiaries

Notes to Consolidated Unaudited Financial Statements (Continued)

(“CDO”) and other asset-backed securitization obligations. Second, Ambac Financial Group has sponsored two VIEs that issue medium-term notes (“MTNs”) to fund the purchase of certain financial assets. As discussed in detail below, these special purpose entities are considered Qualifying Special Purpose Entities (“QSPEs”).

Ambac Assurance provides financial guarantee insurance to securitized asset-backed debt obligations of VIEs. The transaction structure provides certain financial protection to Ambac Assurance. This financial protection can take several forms, however, the most common are over-collateralization, first loss retention and excess spread. In the case of over-collateralization (i.e., the principal amount of the securitized assets exceeds the principal amount of the structured finance obligations guaranteed by Ambac Assurance), which allows the transaction to experience defaults among the securitized assets before a default is experienced on the structured finance obligations which have been guaranteed by Ambac Assurance. In the case of first loss retention, the financial guarantee insurance policy only covers a senior layer of losses on debt issued by the VIE. The expected losses on the assets are either retained by the seller or sold off in the form of equity and mezzanine debt to other investors. In the case of excess spread, the financial assets contributed to a VIE generate cash flow in the form of interest that is in excess of the interest payments on the related debt. All or a portion of this excess spread accumulates and is available to absorb losses in the transaction. Ambac Assurance requires these financial protections as a condition for issuing its financial guarantee insurance policy.

It is possible however, that from time to time, Ambac Assurance will consolidate an entity for which it has issued a financial guarantee insurance policy. If Ambac Assurance issues a financial guarantee insurance policy for the obligations of a VIE and does not receive structural financial protection adequate to absorb the majority of expected loss, Ambac Assurance may be required to consolidate the related VIE in accordance with FIN 46. Ambac Assurance underwrites its insurance to a remote loss standard and normally demands structural financial protection that absorbs the majority of expected loss in a transaction. However, transactions may occur where the structural financial protections are outside of the VIE and, as result, this type of transaction could be consolidated under FIN 46. Upon the occurrence of certain events, the insurance policy may give Ambac Assurance certain rights to remediate potential or actual losses. These events include an asset manager or asset servicer breach of certain financial, corporate or performance covenants. A breach of these covenants may give Ambac Assurance the right to take certain actions such as replacing the asset manager or asset servicer. Depending upon the actions taken, Ambac Assurance may be required to consolidate the structure under FIN 46. As we underwrite to a remote loss standard, we expect such situations to be infrequent. However, management is committed to take actions to reduce economic loss regardless of any requirement to consolidate. Consolidation is an important accounting concept, however, it does not change the economic risk profile of the insurance exposure. Ambac Assurance’s insured exposures as of December 31, 2002, are disclosed in Note 10 “Guarantees in Force” of Ambac Assurance’s 2002 Consolidated Financial Statements.

Regarding QSPEs, Ambac Financial Group has transferred financial assets to two VIEs. The business purpose of these entities is to provide certain financial guarantee clients with

Ambac Assurance Corporation and Subsidiaries

Notes to Consolidated Unaudited Financial Statements (Continued)

funding for their debt obligations. These entities meet the characteristics of QSPEs in accordance with Statement of Financial Accounting Standards 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“FAS 140”). QSPEs are not subject to the requirements of FIN 46 and accordingly are not consolidated in Ambac Financial Group’s financial statements. However, see the discussion below on the Exposure Draft recently issued by the FASB that could change the accounting rules for QSPEs in the future. The QSPEs are legal entities that are demonstrably distinct from Ambac Assurance. Ambac Assurance, its affiliates or its agents cannot unilaterally dissolve the QSPEs. The QSPEs permitted activities are limited to those outlined below.

As of June 30, 2003, there have been 12 individual transactions processed through the QSPEs, of which 8 remain. In each case, Ambac Financial Group sells fixed income debt obligations to the QSPEs. These transactions are true sales based upon the bankruptcy remote nature of the QSPE and the absence of any agreement or obligation for Ambac Financial Group to repurchase or redeem assets of the QSPE. The purchase by the QSPE is financed through the issuance of MTNs, which are collateralized by the purchased assets. These MTNs approximately match the cash flow of the assets purchased. Derivative contracts may be used (interest rate and currency swaps) for hedging purposes only. Derivative hedges are established at the time MTNs are issued to purchase financial assets. The activities of the QSPEs are contractually limited to purchasing assets from Ambac Financial Group, issuing MTNs to fund such purchase, executing derivative hedges and related administrative services. Ambac Assurance may issue a financial guarantee insurance policy on the assets sold, the MTNs issued or both. As of June 30, 2003, Ambac Assurance had financial guarantee insurance policies issued for all assets and MTNs owned and outstanding by the QSPEs.

Ambac Assurance’s exposure under these financial guarantee insurance policies as of December 31, 2002, is included in the disclosure in Note 10 “Guarantees in Force” of Ambac Assurance’s 2002 Consolidated Financial Statements. Pursuant to the terms of Ambac Assurance’s insurance policy, insurance premiums are paid to Ambac Assurance by the QSPE and are earned in a manner consistent with other insurance policies, over the risk period. Any losses incurred would be included in Ambac Assurance’s Consolidated Statements of Operations. Under the terms of an Administrative Agency Agreement, Ambac Financial Group provides certain administrative duties, primarily collecting amounts due on the obligations and making interest payments on the MTNs.

Assets sold to the QSPEs during the six months ended June 30, 2003 and the year ended December 31, 2002 were $0 million and $350.0 million, respectively. No gains or losses were recognized on these sales. As of June 30, 2003, the estimated fair value of financial assets, MTN liabilities and derivative hedges were $1.4 billion, $ 1.3 billion and $100 million, respectively. When market quotes are not available, estimated fair value is determined utilizing valuation models. These models include estimates, made by management, which utilize current market information. The valuation results from these models could differ materially from amounts that would actually be realized in the market. Ambac Assurance received gross premiums and other fees for issuing financial guarantee policies on the assets and MTNs of $2.7 million and $19.3 million for the six months ended June 30, 2003 and for the year ended December 31, 2002, respectively. Ambac Financial Group also received fees for providing

Ambac Assurance Corporation and Subsidiaries

Notes to Consolidated Unaudited Financial Statements (Continued)

administrative agency services amounting to $0.0 million and $0.1 million for the six months ended June 30, 2003 and the year ended December 31, 2002, respectively.

In June 2003, the FASB issued an Exposure Draft for proposed Statement of Financial Accounting Standards entitled “Qualifying Special-Purposes Entities and Isolation of Transferred Assets”, an amendment of FASB Statement No. 140 (“The Exposure Draft”). The Exposure Draft is a proposal that is subject to change and as such, is not yet authoritative. If the proposal is enacted in its current form, it will amend and clarify FAS 140. The Exposure Draft would prohibit an entity from being a QSPE if it enters into an agreement that obligates a transferor of financial assets, its affiliates, or its agents to deliver additional cash or other assets to fulfill the SPE’s obligations to beneficial interest holders. While Ambac Assurance is still evaluating the Exposure Draft, management believes that Ambac Assurance would consolidate its current QSPEs if this Statement becomes enacted as currently proposed and if the QSPEs issue new beneficial interests after the effective date and receive assets other than those they are committed to receive. It appears only static structures would be grandfathered under the proposal. This conclusion is based upon the fact that Ambac Assurance provides financial support to these entities such as financial guarantees and liquidity commitments. The impact of consolidation would be to gross up Ambac Assurance’s consolidated balance sheet for the assets and liabilities held by the QSPEs that approximate $1.4 billion at June 30, 2003. Additionally, fees received by Ambac Assurance from the QSPEs (primarily insurance premiums) would be eliminated in consolidation and essentially reclassified to net interest income. The risk characteristics of these transactions are not impacted by consolidation.

In April 2003, the FASB issued FAS Statement 149 “Amendment to Statement 133 on Derivative Instruments and Hedging Activities” (“FAS 149”). This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FAS 133 “Accounting for Derivative Instruments and Hedging Activities”. The changes in FAS 149 improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. In particular, FAS 149 (i) clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative under FAS 133, (ii) clarifies when a derivative contains a financing component, (iii) amends the definition of an underlying obligation to conform it to language used in FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, and (iv) amends certain other pronouncements. Those changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments. FAS 149 is effective for contracts entered into or modified after June 30, 2003, except in certain instances detailed in FAS 149, and hedging relationships designated after June 30, 2003. Except as otherwise stated in FAS 149, all provisions should be applied prospectively. FAS 149 will not have a material impact on Ambac Assurance.

In May 2003, the FASB issued FAS Statement 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“FAS 150”). FAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. FAS 150 is effective for financial instruments

10

Ambac Assurance Corporation and Subsidiaries

Notes to Consolidated Unaudited Financial Statements (Continued)

entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. FAS 150 will not have an impact on Ambac Assurance.

(3)    Segment Information

Ambac Assurance has two reportable segments, as follows: (1) financial guarantee, which provides financial guarantee products (including structured credit derivatives) for public finance and structured finance obligations; and (2) financial services, which provides payment agreements, interest rate and total return swaps.

Ambac’s reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different marketing strategies, personnel skill sets and technology.

Pursuant to insurance and indemnity agreements between Ambac Financial Services and Ambac Assurance, Ambac Financial Services’ payment obligations under its swap agreements are guaranteed by Ambac Assurance. Additionally, the payment obligations of Ambac Financial Services’ counterparties, under their swap agreements with Ambac Financial Services, are guaranteed by Ambac Assurance pursuant to insurance and indemnity agreements. Intersegment revenues include the premiums earned under those agreements, but which are eliminated in the consolidated financial statements. Such premiums are accounted for as if they were premiums to third parties, that is, at current market prices.

The following tables summarize the financial information by reportable segment as of and for the three and six months ended June 30, 2003 and 2002:

(Dollars in thousands) Three months ended June 30,	Financial Guarantee		Financial Services			Intersegment Eliminations			Consolidated
2003:
Revenues:
Unaffiliated customers	$	270,185	$	(6,444	)	$	—		$	263,741
Intersegment		534		—			(534	)		—
Total revenues	$	270,719	$	(6,444	)	$	(534	)	$	263,741
Income before income taxes:
Unaffiliated customers	$	239,223	$	(8,274	)	$	—		$	230,949
Intersegment		534		(534	)		—			—
Total income before income taxes	$	239,757	$	(8,808	)	$	—		$	230,949
Identifiable assets	$	7,764,124	$	1,421,301		$	—		$	9,185,425
2002:
Revenues:
Unaffiliated customers	$	191,128	$	1,391		$	—		$	192,519
Intersegment		297		—			(297	)		—
Total revenues	$	191,425	$	1,391		$	(297	)	$	192,519
Income before income taxes:
Unaffiliated customers	$	166,058	$	301		$	—		$	166,359
Intersegment		297		(297	)		—			—
Total income before income taxes	$	166,355	$	4			—		$	166,359
Identifiable assets	$	6,313,634	$	442,428		$	—		$	6,756,062

(Dollars in thousands) Six months ended June 30,	Financial Guarantee		Financial Services			Intersegment Eliminations			Consolidated
2003:
Revenues:
Unaffiliated customers	$	496,329	$	2,120		$	—		$	498,449
Intersegment		1,153		—			(1,153	)		—
Total revenues	$	497,482	$	2,120		($	1,153	)	$	498,449
Income before income taxes:
Unaffiliated customers	$	432,792	$	(2,313	)	$	—		$	430,479
Intersegment		1,153		(1,153	)		—			—
Total income before income taxes	$	433,945	$	(3,466	)	$	—		$	430,479
Identifiable assets	$	7,764,124	$	1,421,301		$	—		$	9,185,425
2002:
Revenues:
Unaffiliated customers	$	372,164	$	8,633		$	—		$	380,797
Intersegment		714		—			(714	)		—
Total revenues	$	372,878	$	8,633		($	714	)	$	380,797
Income before income taxes:
Unaffiliated customers	$	321,512	$	6,309		$	—		$	327,821
Intersegment		714		(714	)		—			—
Total income before income taxes	$	322,226	$	5,595			—		$	327,821
Identifiable assets	$	6,313,634	$	442,428		$	—		$	6,756,062

Ambac Assurance Corporation and Subsidiaries

Notes to Consolidated Unaudited Financial Statements (Continued)

The following table summarizes unaffiliated gross premiums written and net premiums earned and other credit enhancement fees included in the financial guarantee segment by location of risk for the three and six month periods ended June 30, 2003 and 2002:

(Dollars in thousands)	Three Months				Six Months
2003:	Gross Premiums Written		Net Premiums Earned and Other Credit Enhancement Fees		Gross Premiums Written		Net Premiums Earned and Other Credit Enhancement Fees
United States	$	286,752	$	123,841	$	444,382	$	232,149
United Kingdom		66,590		7,354		79,031		14,664
Japan		6,576		6,683		13,168		12,301
Mexico		3,614		1,754		7,969		3,761
Australia		194		1,378		4,347		2,712
Germany		390		1,493		822		2,879
France		203		190		292		384
Internationally diversified (1)		9,519		15,417		16,012		29,275
Other international		12,389		7,551		21,613		14,492
Total	$	386,227	$	165,661	$	587,636	$	312,617
2002:
United States	$	172,590	$	94,073	$	286,643	$	181,137
United Kingdom		5,035		4,490		23,452		8,507
Japan		5,759		4,792		9,943		7,652
Mexico		4,021		1,896		8,185		3,852
Australia		129		1,020		266		1,983
Germany		311		1,098		428		1,863
France		194		247		415		543
Internationally diversified (1)		3,371		10,302		6,904		18,915
Other international		5,379		3,614		12,022		8,580
Total	$	196,789	$	121,532	$	348,258	$	233,032

1) Internationally diversified includes guarantees with multiple locations of risk and includes components of United States exposure.

(4)    Stock Options

Ambac Financial Group sponsors the “1997 Equity Plan”, where awards are granted to eligible employees in the form of non-qualified stock options or other stock-based awards. Prior to 2003, Ambac Financial Group accounted for such awards under the recognition and measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees”. Effective January 1, 2003, Ambac Financial Group adopted the fair value recognition provisions of FAS Statement No. 123, “Accounting for Stock-Based Compensation”, prospectively to all employee awards granted after January 1, 2003. The impact of the adoption of the fair value method of accounting for stock-based compensation expense to Ambac Assurance was approximately $1.2 million and $2.2 million for the three and six months ended June 30, 2003, respectively.