[Photo of Mario J. Gabelli]
The
Gabelli
U.S. Treasury
Money Market
Fund
ANNUAL REPORT
SEPTEMBER 30, 1996
<PAGE>
The Gabelli U.S. Treasury Money Market Fund
One Corporate Center
Rye, New York 10580-1434
Annual Report -- 1996(a)
To Our Shareholders:
The U.S. economy clearly was unable to sustain the growth rate from the
first half of 1996 through the third quarter. While second quarter Gross
Domestic Product growth came in at a robust 4.8%, expectations for the third
quarter are more in the 1.5% to 2% range. Job growth for the third quarter
started out looking fairly impressive as non-farm payrolls for July and August
were announced at 228,000 and 240,000, respectively. But those numbers, which
were more or less anticipated by the market, were long forgotten when it was
announced by the Labor Department that we had actually lost 40,000 jobs in
September. The market, which had been clearly pointing to a post election Fed
tightening in November, quickly decided that the Fed will be on hold for the
time being. The market then proceeded to trade up dramatically to the top end of
a perceived trading range.
The market continues to focus on a perceived tight labor situation and the
possibility that increased wage pressures will translate to higher inflation
numbers in the future. So far, inflation fears have not materialized. Both
producer and consumer price indices have been stable. The data continues to be
mixed. Recent housing and retail sales reports show disappointment but consumer
confidence remains relatively high. Adding to the confusion is a Dow over 6000
and leading indicators showing moderate improvement ahead.
The fluctuations in day-to-day economic releases and other factors, such as
the relatively low rates overseas vis-a-vis the United States, have helped to
define the trading range that the fixed income market has been in for months
now. We believe that the market will remain in this trading range for the
near-term and we continue to focus on exploitation of the volatility within that
range by trading the market to enhance total return on the investments in your
portfolio.
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(a) The Fund's fiscal year ends September 30, 1996.
<PAGE>
Investment Results
We have completed the fiscal year as one of the leading money market funds
which invest exclusively in U.S. Treasury Securities. The 7-day annualized yield
and the 30-day annualized yield on September 30, 1996 were 4.90% and 4.86%,
respectively. From the Fund's inception on October 1, 1992 through September 30,
1996, the Fund earned an average annualized return of 4.13%. As of September 30,
1996, the Fund had net assets of $216.0 million with 5,651 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 4.75% and 4.71%,
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
check writing to shareholders.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, quarterly reports, closing prices, IRAs, 401(k)s and other
current news. You can also send us E-mail at [email protected].
2
<PAGE>
Daily Dividends
The Fund declares daily dividends which are reinvested quarterly unless you
request a cash distribution. 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 check with 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. Eaker /s/ Bruce N. Alpert
Ronald S. Eaker Bruce N. Alpert
Vice President & Portfolio Manager Vice President & Treasurer
November 1, 1996
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1996 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, 1995 to September 30, 1996 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.
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3
<PAGE>
The Gabelli U.S. Treasury Money Market Fund
Statement of Net Assets -- September 30, 1996
================================================================================
<TABLE>
<CAPTION>
Annualized
Principal Yield at Date Maturity
Amount of Purchase Date Value
------ ----------- ---- -----
<C> <S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 99.7%
U.S. Treasury Bills -- 93.4%
$203,261,000 U.S. Treasury Bills........ 5.030% to 5.130% 10/24/1996-01/23/1997 $ 201,814,242
-------------
Interest Rate
U.S. Treasury Notes -- 6.3%
13,515,000 U.S. Treasury Notes........ 6.875% 10/31/1996 13,532,638
-------------
TOTAL INVESTMENTS (Cost $215,346,880) (a).................................................. 99.7% 215,346,880
Payable for Fund shares redeemed........................................................... (0.1) (274,114)
Payable to Manager......................................................................... (0.0) (28,258)
Cash and Other Assets in Excess of Liabilities ........................................... 0.4 993,005
----- -------------
NET ASSETS (applicable to 216,037,513 shares of beneficial interest issued
and outstanding, $0.001 par value, one billion shares authorized)........................ 100.0% $ 216,037,513
===== =============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE................................... $1.00
=====
</TABLE>
(a) Aggregate cost for Federal tax purposes is identical.
Financial Highlights
================================================================================
Per share amounts for a Fund share outstanding throughout each year ended
September 30,
<TABLE>
<CAPTION>
1996 1995 1994 1993*
---- ---- ---- -----
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year ............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------------- ------------- -------------
Net investment income (b) ...................................... 0.0492 0.0528 0.0323 0.0271
Net gain on investments ........................................ 0.0006 0.0002 0.0002 0.0002
------------- ------------- ------------- -------------
Total from investment operations ............................. 0.0498 0.0530 0.0325 0.0273
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income ........................................ (0.0492) (0.0528) (0.0323) (0.0271)
Net realized gains ........................................... (0.0006) (0.0002) (0.0002) (0.0002)
------------- ------------- ------------- -------------
Total distributions .......................................... (0.0498) (0.0530) (0.0325) (0.0273)
------------- ------------- ------------- -------------
Net asset value, end of year ................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= =============
Total return** ................................................. 5.1% 5.4% 3.3% 2.8%
============= ============= ============= =============
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) ............................. $ 216,038 $ 218,036 $ 186,020 $ 187,709
Ratio of net investment income to average net assets ......... 4.92% 5.30% 3.23% 2.73%
Ratio of operating expenses to average net assets (c) ........ 0.30% 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.
(b) Net investment income before fees waived by the Manager for the years ended
September 30, 1996, 1995, 1994 and 1993 was $0.0477, $0.0516, $0.0312 and
$0.0255, respectively.
(c) Operating expense ratios before fees waived by the Manager for the years
ended September 30, 1996, 1995, 1994 and 1993 were 0.45%, 0.39%, 0.43% and
0.46%, respectively.
See Notes to Financial Statements.
4
<PAGE>
The Gabelli U.S. Treasury Money Market Fund
Statement of Operations
Year Ended September 30, 1996
================================================================================
Investment Income:
Interest income ........................................... $ 13,077,787
------------
Expenses:
Management fee ............................................ 750,885
Transfer agent fees ....................................... 157,245
Registration and filing fees .............................. 71,112
Custodian fees ............................................ 42,999
Legal and audit fees ...................................... 27,644
Trustees' fees ............................................ 26,376
Amortization of organization expenses ..................... 20,962
Other ..................................................... 29,105
------------
Total expenses before fees waived by Manager .......... 1,126,328
Fees waived by Manager ................................ (375,443)
------------
Total Expenses -- Net ................................. 750,885
Net investment income ........................................ 12,326,902
------------
Net realized gain on investments ............................. 144,619
------------
Net increase in net assets resulting from operations ......... $ 12,471,521
============
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Year
Ended Ended
9/30/96 9/30/95
--------------- ---------------
<S> <C> <C>
Net investment income ........................................ $ 12,326,902 $ 12,304,496
Net realized gain on investments ............................. 144,619 78,346
--------------- ---------------
Net increase in net assets resulting from operations ......... 12,471,521 12,382,842
Distributions to shareholders from:
Net investment income ...................................... (12,326,902) (12,304,496)
Net realized gain on investments ........................... (144,619) (78,346)
Share transactions ($1.00 per share):
Shares sold ................................................ 1,379,164,485 1,143,159,517
Shares issued on reinvestment of dividends and distributions 11,971,379 11,856,303
Shares redeemed ............................................ (1,393,134,459) (1,123,000,143)
--------------- ---------------
Net increase/(decrease) in net assets ........................ (1,998,595) 32,015,677
NET ASSETS:
Beginning of year ............................................ 218,036,108 186,020,431
--------------- ---------------
End of year .................................................. $ 216,037,513 $ 218,036,108
=============== ===============
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
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
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. 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.
Securities 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 monthly.
Distributions of long-term capital gains, if any, are paid annually.
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. For
the year ended September 30, 1996, the Manager voluntarily waived management
fees of $375,443.
The Manager has entered into a sub-advisory agreement (the "Sub-Advisory
Agreement") with Gabelli-O'Connor Fixed Income Mutual Funds Management Company
(the "Sub-Adviser"), which provides that the Manager will pay the Sub-Adviser a
fee, computed daily and paid monthly, at the annual rate of 0.08 percent of the
value of the Fund's average daily net assets. In accordance with the
Sub-Advisory Agreement, the Sub-Adviser provides day-to-day management of the
Fund's investments.
6
<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, 1996, 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 four years in
the period then ended. 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, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Gabelli U.S. Treasury Money Market Fund at September 30, 1996, 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 periods indicated above, in conformity with generally accepted accounting
principles.
New York, New York
October 25, 1996
/s/ Ernst & Young LLP
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]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Trustees
Mario J. Gabelli, CFA John J. Parker
Chairman and President Attorney-at-Law
McCarthy, Fingar, Donovan,
Anthony J. Colavita Drazen & Smith
Attorney-at-Law
Anthony J. Colavita, P.C. Karl Otto Pohl
Former President
Vincent D. Enright Deutsche Bundesbank
Senior Vice President and
Chief Financial Officer Anthonie C. van Ekris
Brooklyn Union Gas Company Managing Director
BALMAC International, Inc.
Thomas E. O'Connor
General Partner
Gabelli-O'Connor Fixed Income
Mutual Funds Management Company
Officers
Mario J. Gabelli, CFA Bruce N. Alpert
Chairman and President Vice President and Treasurer
James E. McKee Henley L. Smith
Secretary Vice President
Ronald S. Eaker
Vice President and
Portfolio Manager
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Willkie Farr & Gallagher
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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.
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