[PHOTO]
The
Gabelli
U.S. Treasury
Money Market
Fund
ANNUAL REPORT
SEPTEMBER 30, 1995
<PAGE>
The Gabelli U.S. Treasury Money Market Fund
One Corporate Center
Rye, New York 10580-1434
Annual Report -- 1995 (a)
To Our Shareholders:
Yields along the Treasury curve dropped at the end of the summer as
expectations continued to build that the Federal Reserve Bank (the "Fed") would
ease short-term interest rates further. Continued good news on inflation and
weaker than expected retail sales figures for August helped to move long-term
bond yields down to a low of 6.45%. Yields on the short end of the curve moved
lower in sympathy, albeit less dramatically.
The most recent Federal Open Market Committee (FOMC) meeting, held on
September 26th, was adjourned with no significant announcements. The target for
fed funds (overnight bank loans) remains at 5.75% and the discount rate
(borrowing from the Fed) remains at 5.25%. The Fed hopes to let the economy
expand at a slow and steady pace, keeping inflation from accelerating. Are we
witnessing the mythical "soft landing"?
Economic data releases continue to be mixed, as alternating strong and weak
numbers contribute to quick shifts in market psychology. Soft retail sales and a
drop in the National Purchasing Managers' Index seem to be inconsistent with a
surge in industrial production and a significant jump in the Philadelphia
Federal Reserve Index of Business Conditions. New single family home sales were
up 8.1% in July, but fell 9.6% in August. The dollar has staged a dramatic
comeback versus the yen over the past few months, rallying from a low of below
Y85 to a recent high of over Y104, before dropping back to its current level of
Y85. Another important report on the health of the economy will come with
September's employment report due out on October 6th. The market will be waiting
and watching for indications that the Fed will make another monetary policy move
before the end of this year.
Overall, we are bullish on the fixed income market in the long run for
three primary reasons. First and foremost, inflation as measured on both the
producer and consumer levels, remains very much in control and should provide
the Fed plenty of room to ease rates down the road without too much concern for
price volatility. For the first eight months of 1995, the Producer Price Index
(PPI) and Consumer Price Index (CPI) have been running at annualized rates of
1.4% and 2.9%, respectively. Second, we believe that a budget resolution in the
near term is a real possibility. While the financial markets desperately want
fiscal discipline, House Speaker Newt Gingrich gives us pause by threatening a
default on U.S debt if the Republicans do not get their way on the budget. We do
not think it will come to that but we believe that the country's current sour
mood will pressure our representatives in Washington to finally get something
done on this front. This would provide the Fed with more room to lighten up on
the monetary brake. Third, we are quickly approaching a presidential election
year with its accompanying bi-partisan (at least) campaign. Keeping rates low
will take on increased importance for the current administration.
We expect that this mix of economic data will provide a measure of
volatility to the short-term Treasury market. We will continue to identify and
exploit trading ranges in the T-bill market in an effort to enhance the total
rate of return on our Fund's portfolio.
- ----------
(a) The Fiscal Year ends on September 30, 1995.
<PAGE>
Investment Results
From the Fund's inception on October 1, 1992 through September 30, 1995,
the Fund earned an average annualized return of 3.81%. The 7-day annualized
yield and the 30-day annualized yield on September 30, 1995 were 5.23% and
5.27%, respectively. As of September 30, 1995, the Fund had net assets of $218.0
million with 5,874 shareholder accounts. The Fund maintained a stable net asset
value of $1.00 per share throughout the period.
An investment in The Gabelli U.S. Treasury Money Market Fund is neither
insured nor guaranteed by the U.S. Government. There can be no assurance that
the Fund will maintain a stable $1 per share net asset value. The Fund's
prospectus contains more complete information, including fees and expenses. The
prospectus should be read carefully before you invest or send money. Yields will
fluctuate. If the Fund's expenses had not been capped, the Fund's 7-day
annualized yield and 30-day annualized yield would have been 5.08% and 5.07%,
respectively.
Minimum Initial Investment - $10,000
The minimum initial investment is $10,000. However, shareholders of any of
the Gabelli Funds may acquire the Fund with an initial investment of $3,000.
IRAs and retirement related accounts and custodial accounts for minors require
an initial investment of only $1,000. The Fund provides checkwriting and
exchange privileges. Expenses are capped at .30% of average net assets, making
it one of the most attractive U.S. Treasury-only money market funds. The Fund is
designed as a low-cost investment vehicle for the long-term investor and is an
excellent vehicle in which to store idle cash. The Fund continues to offer free
checkwriting for the first 10,000 investors.
Daily Dividends
The Fund declares daily dividends which are reinvested quarterly unless you
request a cash distribution. Beginning in October 1995, the Fund will pay its
dividends on a monthly basis. 100% of the Fund's income dividends are derived
from U.S. government securities and are, therefore, exempt from state and local
income taxes in all states. Please consult your tax advisor.
We thank you for your investment and we will work hard to preserve your
assets and provide competitive returns in the Treasury money market funds arena.
We are available to answer any questions you may have. Call us at 1-800-GABELLI
(1-800-422-3554).
Sincerely,
/s/ RONALD S. BAKER /s/ BRUCE N. ALPERT
Ronald S. Eaker Bruce N. Alpert
Vice President & Portfolio Manager Vice President & Treasurer
October 5, 1995
2
<PAGE>
<TABLE>
The Gabelli U.S. Treasury Money Market Fund
Statement of Net Assets -- September 30, 1995
===================================================================================================================
<CAPTION>
Annualized
Principal Yield at Date Maturity
Amount of Purchase Date Value
------ ----------- ---- -----
<C> <S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 99.8%
U.S. Treasury Bills -- 78.2%
$171,483,000 U.S. Treasury Bills ........ 5.240% to 5.430% 10/05/1995-12/21/1995 $170,529,396
------------
Interest Rate
-------------
U.S. Treasury Notes -- 21.6%
20,000,000 U.S. Treasury Notes ........ 4.250% 11/30/1995 19,958,252
26,880,000 U.S. Treasury Notes ........ 7.875 02/15/1996 27,105,521
------------
47,063,773
------------
TOTAL INVESTMENTS (Cost $217,593,169) (a) ........................................ 99.8% 217,593,169
Payable for Fund shares redeemed ................................................. (74,680)
Payable Manager .................................................................. (63,192)
Cash and Other Assets in Excess of Liabilities ................................... 0.2 580,811
----- ------------
NET ASSETS (applicable to 218,036,108 shares of beneficial interest issued
and outstanding, $0.001 par value, one billion shares authorized) .............. 100.0% $218,036,108
===== ============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $1.00
=====
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
===================================================================================================================
Per share amounts for a Fund share outstanding throughout each year ended September 30,
1995 1994 1993*
-------- -------- --------
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of year ............................... $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
Net investment income (a) ........................................ 0.0528 0.0323 0.0271
Net gain on investments .......................................... 0.0002 0.0002 0.0002
-------- -------- --------
Total from investment operations ................................. 0.0530 0.0325 0.0273
-------- -------- --------
Distributions to shareholders from:
Net investment income .......................................... (0.0528) (0.0323) (0.0271)
Net realized gains ............................................. (0.0002) (0.0002) (0.0002)
-------- -------- --------
Total distributions ............................................ (0.0530) (0.0325) (0.0273)
-------- -------- --------
Net asset value, end of year ..................................... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
Total return** ................................................... 5.4% 3.3% 2.8%
======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) ............................... $218,036 $186,020 $187,709
Ratio of net investment income to average net assets ........... 5.30% 3.23% 2.73%
Ratio of operating expenses to average net assets (b) .......... 0.27% 0.30% 0.30%
</TABLE>
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* The Fund commenced operations on October 1, 1992.
** Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends.
(a) Net investment income before expenses reimbursed by Manager for the years
ended September 30, 1995 and 1994 and the period ended September 30, 1993
was $0.0516, $0.0312 and $0.0255, respectively.
(b) Operating expense ratios before expenses reimbursed by Manager for the
years ended September 30, 1995 and 1994 and the period ended September 30,
1993 were 0.39%, 0.43% and 0.46%, respectively.
See Notes to Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
The Gabelli U.S. Treasury Money Market Fund
Statement of Operations
Year Ended September 30, 1995
==================================================================================================================
<S> <C> <C>
Investment Income:
Interest income $12,934,225
-----------
Expenses:
Management fee ............................................................. $ 627,450
Transfer agent fees ........................................................ 120,658
Legal and audit fees ....................................................... 39,819
Trustees' fees ............................................................. 27,053
Amortization of organization expenses ...................................... 20,962
Other ...................................................................... 72,375
---------
Total expenses before fees waived by Manager ........................... 908,317
Fees waived by Manager ................................................. (278,588)
-----------
Total Expenses-- Net ................................................... 629,729
Net investment income ......................................................... 12,304,496
-----------
Net realized gain on investments .............................................. 78,346
-----------
Net increase in net assets resulting from operations .......................... $12,382,842
===========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
===================================================================================================================
Year Year
Ended Ended
9/30/95 9/30/94
-------------- ------------
<S> <C> <C>
Net investment income .................................................... $ 12,304,496 $ 5,942,885
Net realized gain on investments ......................................... 78,346 44,354
-------------- ------------
Net increase in net assets resulting from operations ..................... 12,382,842 5,987,239
Distributions to shareholders from:
Net investment income .................................................. (12,304,496) (5,942,885)
Net realized gain on investments ....................................... (78,346) (44,354)
Share transactions ($1.00 per share):
Shares sold ............................................................ 1,143,159,517 827,577,627
Shares issued on reinvestment of dividends and distributions ........... 11,856,303 5,684,079
Shares redeemed ........................................................ (1,123,000,143) (834,950,737)
--------------- -------------
Net increase/(decrease) in net assets .................................... 32,015,677 (1,689,031)
NET ASSETS:
Beginning of year ........................................................ 186,020,431 187,709,462
-------------- ------------
End of year .............................................................. $218,036,108 $186,020,431
============== ============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
The Gabelli U.S. Treasury Money Market Fund
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies. The Gabelli U.S. Treasury Money Market Fund
(the "Fund") is a series of The Gabelli Money Market Funds, a Delaware business
trust (the "Trust"). The Fund is a no-load, diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund commenced operations on October 1, 1992. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
Security Valuation. Investments are valued at amortized cost (which approximates
market value) whereby, a portfolio instrument is valued at cost and any discount
or premium is amortized on a constant basis to the maturity of the instrument.
Security Transactions and Investment Income. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined using specific identification as the cost method. Interest income
(including amortization of premium and discount) is recorded as earned.
Dividends and Distributions. Dividends from investment income (including
realized capital gains and losses) are declared daily and paid quarterly.
Beginning in October 1995, dividends and distributions to shareholders will be
declared daily and paid monthly. At September 30, 1995 the dividends payable
were $63,051.
Provision for Income Taxes. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Deferred Organization Expenses. A total of $104,264 was incurred in connection
with the organization of the Fund. These costs have been deferred and are being
amortized on a straight-line basis over a period of 60 months from the date the
Fund commenced investment operations.
2. Agreements with Affiliated Parties. The Trust has entered into a management
agreement (the "Management Agreement") with Gabelli Funds, Inc. (the "Manager")
which provides that the Trust will pay the Manager a fee, computed daily and
paid monthly, at the annual rate of 0.30 percent of the value of the Fund's
average daily net assets. In accordance with the Management Agreement, the
Manager provides a continuous investment program for the Fund's portfolio,
provides all facilities and personnel, including officers required for its
administrative management, and pays the compensation of all officers and
Trustees of the Fund who are its affiliates. To the extent necessary, the
Manager has undertaken to assume certain expenses of the Trust so that the total
expenses do not exceed 0.30 percent of the Fund's average daily net assets.
During the period October 1, 1994 through November 15, 1994, the Trust was
operating without a Management Agreement. The Manager agreed to provide services
without compensation until the Trustees approved a new Management Agreement
identical to the terms of the original agreement on November 16, 1994. For the
year ended September 30, 1995, the Manager voluntarily waived management fees of
$278,588.
5
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
================================================================================
To the Shareholders and Board of Trustees
The Gabelli U.S. Treasury Money Market Fund
(a series of The Gabelli Money Market Funds)
We have audited the accompanying statement of net assets of The Gabelli U.S.
Treasury Money Market Fund (a series of The Gabelli Money Market Funds) as of
September 30, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Gabelli U.S. Treasury Money Market Fund at September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
New York, New York
October 25, 1995
- --------------------------------------------------------------------------------
1995 TAX NOTICE TO SHAREHOLDERS (Unaudited)
U.S. Government Income:
The percentage of the ordinary income dividend paid by the Fund
during the period from October 1, 1994 to September 30, 1995 which was
derived from U.S. Treasury Securities was 100%. Such income is exempt
from state and local income tax in all states. Due to the diversity in
state and local tax laws, it is recommended that you consult your
personal tax advisor for the applicability of the information provided
as to your own situation.
- --------------------------------------------------------------------------------
6
<PAGE>
We would like to share with you the following article on the recent
dedication of the Gabelli School of Business at Roger Williams University in
Rhode Island. At Gabelli Funds, we recognize and appreciate the support that our
Chairman, Chief Investment Officer and Founder, Mario J. Gabelli, provides for
enhancing educational opportunities for students.
- --------------------------------------------------------------------------------
Providence Journal-Bulletin
- --------------------------------------------------------------------------------
ROGER WILLIAMS
RENAMES SCHOOL
TO HONOR TRUSTEE
BRISTOL -- Roger Williams University's business school is getting a new
name: the Gabelli School of Business.
A dedication ceremony Tuesday, Oct. 17, will mark the renaming of the school for
Mario J. Gabelli, a Wall Street financial analyst and founder of Gabelli Funds,
Inc., in Rye, N.Y., who serves on the university's board of trustees.
Described by Roger Williams officials as a "strong supporter of the university,"
Gabelli, of Greenwich Conn., was the principal speaker and a recipient of an
honorary doctor of business degree at the school's 1992 commencement.
The three-story building that will soon carry Gabelli's name housed the
university library until 1992. It was then rededicated as the new home of the
School of Business after a $1 million renovation.
"The School of Business is honored to have Mario Gabelli's name attached to it
because this man serves as an icon--an exemplary role model--to any student
seeking a career in the field of business," said university President Anthony J.
Santoro.
Ralph Papitto, chairman of the board of trustees, said Gabelli's name and
prominence as "a topnotch money manager on Wall Street" would lend added stature
to the School of Business.
Gabelli, a graduate of Fordham University and the Columbia University Graduate
School of Business began his Wall Street career in 1967 as an analyst.
He is now Chairman and Chief Investment Officer of Gabelli Funds, Inc., the
holding company for GAMCO Investors, a money management firm, and the Gabelli
family of mutual funds. He is also Chairman and Chief Executive Officer of the
Lynch Corporation and a governor of the American Stock Exchange.
- --------------------------------------------------------------------------------
Reprinted with permission September 26, 1995
7
<PAGE>
The Gabelli U.S. Treasury
Money Market Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
Board of Trustees
Mario J. Gabelli John J. Parker
Chairman and Attorney-at-Law
President McCarthy, Fingar, Donovan,
Drazen & Smith
Anthony J. Colavita
Attorney-at-Law Karl Otto Pohl
Anthony J. Colavita, P.C. Former President
Deutsche Bundesbank
Vincent D. Enright
Senior Vice President and Anthonie C. van Ekris
Chief Financial Office Managing Director
Brooklyn Union Gas Company BALMAC International, Inc.
Thomas E. O'Connor
Managing General Partner
Gabelli-O'Connor Fixed Income
Mutual Funds Management
Company
Officers
Mario J. Gabelli, CFA Ronald S. Eaker
Chairman and Vice President and
President Portfolio Manager
James E. McKee Bruce N. Alpert
Secretary Vice President and Treasurer
Henley L. Smith
Vice President
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Willkie Farr & Gallagher
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli U.S. Treasury Money Market Fund. It is not authorized for distribution
to prospective investors unless preceded or accompanied by an effective
prospectus.
- --------------------------------------------------------------------------------
