[PHOTO]
THE
GABELLI
U.S. TREASURY
MONEY MARKET
FUND
ANNUAL REPORT
SEPTEMBER 30, 1997
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 Chief Investment Attorney-at-Law
Officer McCarthy, Fingar, Donovan,
Gabelli Funds, Inc Drazen &Smith
Anthony J. Colavita Karl Otto Pohl
Attorney-at-Law Former President
Anthony J. Colavita, P.C. Deutsche Bundesbank
Vincent D. Enright Anthonie C. van Ekris
Senior Vice President and Managing Director
Chief Financial Officer BALMAC International, Inc.
Brooklyn Union Gas 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 Judith A. Raneri
Vice President 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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<PAGE>
THE GABELLI U.S. TREASURY MONEY MARKET FUND
One Corporate Center
Rye, New York 10580-1434
ANNUAL REPORT
SEPTEMBER 30, 1997(a)
TO OUR SHAREHOLDERS:
Alan Greenspan's hawkish congressional testimony and a jump in producer
prices have put the possibility of a fourth quarter tightening back into play.
While street expectations suggest the next tightening will occur in the first
quarter, events over the past few weeks have raised the odds for a fourth
quarter move.
Greenspan's testimony put some risk taking back into the market, which was
becoming overly complacent. From a fundamental perspective, we could contend
that the bond market remains complacent with respect to inflation, particularly
against the backdrop of tight labor markets and rapid growth. One of the reasons
Greenspan felt compelled to inject some realism back into the market was based
on the disproportionate response to the recent employment report, which saw the
two year note trade within 11 basis points of the Federal Funds rate and the
long bond yield fall below 6.25% despite third quarter Gross Domestic Product
(GDP) growth near 3.5%.
With that in mind, third quarter GDP growth of 3.5% appears to be
relatively robust, with an increase in final sales of 5.3%. Furthermore, GDP
growth may not slow in the fourth quarter. On the other hand, the September
Consumer Price Index (CPI) report was surprisingly favorable, which indicates
that there is still no upward pressure on inflation. We expect the employment
cost index for the third quarter to remain benign. This means that the inflation
rate is still in check with no upward pressure on wages, which are considered a
leading indicator of inflation. However, this combination of very strong growth
and low inflation cannot last. If the unemployment rate continues to fall and
capacity utilization continues to rise, there can be little doubt that at some
point there will be upward pressure on prices. In order to alleviate this
situation, the Fed needs to slow GDP growth from its current rate by raising the
Federal Funds rate at the next FOMC meeting.
- -----------------------------
(a) The Fund's fiscal year ends September 30, 1997.
<PAGE>
INVESTMENT RESULTS
For the twelve months ended September 30, 1997, the Gabelli U.S. Treasury
Money Market Fund's total return was 5.05%. The Fund's 7-day annualized yield
and 30-day annualized yield on September 30, 1997 were 5.00% and 5.03%,
respectively. Since inception on October 1, 1992 through September 30, 1997, the
Fund has an average annual return of 4.31%. As of September 30, 1997,
shareholders total 5,272 and net assets are $204 million. The Fund maintained a
stable net asset value of $1.00 per share throughout the period.
PORTFOLIO MANAGEMENT
On April 14, 1997, Gabelli Funds, Inc., the Fund's Manager, increased its
ownership interest in the Fund's Sub-Advisor, Gabelli-O'Connor Fixed Income
Mutual Funds Management Co. Subsequently, the Sub-Advisor was succeeded by the
newly formed Gabelli Fixed Income LLC, a registered investment advisor
specializing in customized, institutional-based, cash and short-to-intermediate
term fixed income portfolios. Gabelli Fixed Income LLC is an indirect majority
owned subsidiary of Gabelli Funds, Inc. Consequently, pursuant to the Investment
Company Act of 1940, the sub-advisory contract automatically terminated and
Gabelli Funds, Inc. has assumed all of the sub-advisory responsibilities
including managing the portfolio.
MINIMUM INITIAL INVESTMENT - $10,000
The Fund's minimum initial investment is $10,000. However, shareholders of
any of the Gabelli Funds may invest in the Fund with an initial investment of
$3,000. IRAs, retirement accounts and custodial accounts for minors require an
initial investment of only $1,000. The Fund provides check writing and exchange
privileges and continues to offer these services at no charge to shareholders.
The Fund's expenses are voluntarily capped at .30% of average net assets, making
it one of the most attractive U.S. Treasury-only money market funds. With
dividends that are exempt from state and local income taxes in all states, the
Fund is an excellent vehicle in which to store idle cash.
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, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].
2
<PAGE>
DAILY DIVIDENDS
The Fund declares daily dividends which are reinvested monthly unless a
cash distribution is requested. The Fund invests exclusively in U.S. Treasury
Securities and therefore 100% of the Fund's income dividends are exempt from
state and local income taxes in all states. Please consult your tax advisor for
the applicability to your specific situation.
We thank you for your confidence in our investing abilities and will work
hard to preserve the assets you have entrusted to us and provide competitive
returns. Please call us at 1-800-GABELLI (1-800-422-3554) during the business
day for further information.
Sincerely,
/s/ Judith A. Raneri
-----------------------
Judith A. Raneri
Vice President
and Portfolio Manager
October 25, 1997
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 4.84% and 4.87%,
respectively.
3
<PAGE>
<TABLE>
<CAPTION>
THE GABELLI U.S. TREASURY MONEY MARKET FUND
STATEMENT OF NET ASSETS -- SEPTEMBER 30, 1997
===========================================================================================================================
ANNUALIZED
PRINCIPAL YIELD AT DATE MATURITY
AMOUNT OF PURCHASE DATE VALUE
-------- ----------- ------- -----
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 96.5%
U.S. TREASURY BILLS -- 66.2%
$136,066,000 U.S. Treasury Bills 4.754% to 5.126% 10/16/1997-03/05/1998 $134,742,723
------------
INTEREST RATE
-------------
U.S. TREASURY NOTES -- 30.3%
20,000,000 U.S. Treasury Notes 8.750% 10/15/1997 20,024,630
41,617,000 U.S. Treasury Notes 5.625% 10/31/1997 41,622,853
------------
61,647,483
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TOTAL INVESTMENTS (COST $196,390,206)(a) ............................................. 96.5% 196,390,206
PAYABLE FOR FUND SHARES REDEEMED ..................................................... (0.5) (949,790)
PAYABLE TO MANAGER ................................................................... (0.0) (23,388)
OTHER ASSETS AND LIABILITIES (NET) ................................................... 4.0 8,125,034
----- -------------
NET ASSETS (applicable to 203,536,832 shares of beneficial interest
issued and outstanding, $0.001 par value, one billion shares authorized) 100.0% $203,542,062
===== =============
NET ASSET VALUE, offering and redemption price per share $1.00
=====
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(a) Aggregate cost for Federal tax purposes.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
===========================================================================================================================
Per share amounts for a Fund share outstanding throughout each year ended September 30,
1997(d) 1996 1995 1994 1993*
------ ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Net investment income (b) 0.0485 0.0492 0.0528 0.0323 0.0271
Net gain on investments 0.0013 0.0006 0.0002 0.0002 0.0002
------ ------ ------ ------ ------
Total from investment operations 0.0498 0.0498 0.0530 0.0325 0.0273
------ ------ ------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.0485) (0.0492) (0.0528) (0.0323) (0.0271)
Net realized gains (0.0013) (0.0006) (0.0002) (0.0002) (0.0002)
------ ------ ------ ------ ------
Total distributions (0.0498) (0.0498) (0.0530) (0.0325) (0.0273)
------ ------ ------ ------ ------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return** 5.1% 5.1% 5.4% 3.3% 2.8%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $203,542 $216,038 $218,036 $186,020 $187,709
Ratio of net investment income to average net assets 4.85% 4.92% 5.30% 3.23% 2.73%
Ratio of operating expenses to average net assets (c) 0.30% 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, 1997, 1996, 1995, 1994 and 1993 was $0.0469, $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, 1997, 1996, 1995, 1994 and 1993 were 0.46%, 0.45%,
0.39%, 0.43% and 0.46%, respectively.
(d) Gabelli Funds, Inc. became the sole investment adviser of the Fund on April
15, 1997. (See Note 2)
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
THE GABELLI U.S. TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS -- YEAR ENDED SEPTEMBER 30, 1997
===========================================================================================================================
<S> <C>
INVESTMENT INCOME:
Interest income ............................................................................... $10,907,438
-----------
EXPENSES:
Management fee ................................................................................ 635,419
Transfer agent fees ........................................................................... 159,867
Custodian fees ................................................................................ 43,731
Registration and filing fees .................................................................. 40,135
Legal and audit fees .......................................................................... 30,811
Trustees' fees ................................................................................ 24,978
Amortization of organization expenses ......................................................... 20,273
Other ......................................................................................... 23,442
-----------
Total expenses before fees waived by Manager ............................................... 978,656
Fees waived by Manager ..................................................................... (343,237)
-----------
Total Expenses -- Net ...................................................................... 635,419
-----------
NET INVESTMENT INCOME ............................................................................ 10,272,019
NET REALIZED GAIN ON INVESTMENTS ................................................................. 246,921
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................................. $10,518,940
===========
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
===========================================================================================================================
Year Year
Ended Ended
9/30/97 9/30/96
---------------- --------------
<S> <C> <C>
Net investment income ........................................................ $ 10,272,019 $ 12,326,902
Net realized gain on investments ............................................. 246,921 144,619
-------------- --------------
Net increase in net assets resulting from operations ......................... 10,518,940 12,471,521
Distributions to shareholders from:
Net investment income ..................................................... (10,272,019) (12,326,902)
Net realized gain on investments .......................................... (241,691) (144,619)
Share transactions ($1.00 per share):
Shares sold ............................................................... 2,152,102,612 1,379,164,485
Shares issued upon reinvestment of dividends and distributions ............ 9,949,097 11,971,379
Shares redeemed ........................................................... (2,174,552,390) (1,393,134,459)
-------------- --------------
Net decrease in net assets ................................................... (12,495,451) (1,998,595)
NET ASSETS
Beginning of period .......................................................... 216,037,513 218,036,108
-------------- --------------
End of period ................................................................ $ 203,542,062 $ 216,037,513
============== ==============
</TABLE>
See Notes to Financial Statements.
5
<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
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 accretion of 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.
ORGANIZATION EXPENSES. The organization expenses of the Fund 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 will 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, 1997, the Manager voluntarily waived management fees of
$343,237.
Prior to April 15, 1997, Gabelli-O'Connor Fixed Income Mutual Funds Management
Company (the "Sub-Adviser") served pursuant to a sub-advisory agreement (the
"Sub-Advisory Agreement"), which provided 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 provided day-to-day management of
the Fund's investments. On April 15, 1997, as a result of an increase in the
ownership of the Sub-Adviser by the Manager, the Sub-Advisory Agreement was
automatically terminated. Beginning April 15, 1997, the Manager performs all
investment advisory services for the Fund.
6
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
================================================================================
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
THE GABELLI U.S.TREASURY MONEYMARKET FUND
(a series of The Gabelli MoneyMarket Funds)
We have audited the accompanying statement of net assets of The Gabelli
U.S.Treasury MoneyMarket Fund (the "Fund") (a series of The Gabelli Money Market
Funds) as of September 30, 1997, 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
five 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, 1997 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, 1997, 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 five years in the period then ended, in conformity with generally accepted
accounting principles.
New York, New York /s/ Ernst & Young LLP
October 24, 1997
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1997 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, 1996 through September 30, 1997 which was derived from
U.S. Treasury Securities was 98%. 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 specific situation.
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