THE GABELLI U.S. TREASURY MONEY MARKET FUND
ANNUAL REPORT
SEPTEMBER 30, 1998(A)
[PHOTO OMITTED]
JUDITH A. RANERI
TO OUR SHAREHOLDERS,
Early in 1998, Federal Reserve Board policy makers
were leaning toward an increase in interest rates. They then
shifted to a neutral bias in August. Since then, the world
has seen deteriorating equity markets, devaluing of currency
markets and lower growth expectations. With our domestic
economy facing such consuming factors, it was not likely
that the U.S. would remain an "oasis of prosperity" much
longer. Now, the threat to the U.S. is that the economy may
start to stumble. This is evidenced by increased reports of
planned layoffs, failing banks and hedge funds (such as Long
Term Capital Management).
Currently, the economy is in a transition towards a
prolonged period of slower growth. The goods producing
sector was the first phase of this transition. National
Association of Purchasing Managers (NAPM) surveys point to a
slower pace of growth but not a decelerating pace of
activity. Retail sales for September reported an increase of
0.2%, well below consensus expectations of an increase of
0.5%, and market expectations for third quarter Gross
Domestic Product (GDP) are now around 2.3%. All of these
significant factors confirm the market's expectations of a
slowing economy.
Prior to the latest Federal Open Market Committee
(FOMC) meeting, the market had already factored at least a
50 basis point cut into Treasuries. The symbolic rate cut
made by Federal Reserve Board Chairman Alan Greenspan which
left the Federal Funds rate still higher than the whole
Treasury curve, leaves us to wonder if more rate cuts are
waiting in the wings? The 25 basis point rate cut gives the
Fed the flexibility to either continue to cut rates at the
next FOMC meeting scheduled in November or to reassess the
economy and even raise rates if necessary.
Our strategy of investing in "spread product" while
trading the short term Treasury's ranges to add to total
rate of return has not changed. At these levels, we
naturally shift towards more spread and wait for value to
return, or at least until a new trading range emerges. We
believe the market is overbought and some correction from
these highs is on the horizon. We are continuing to build in
flexibility to the portfolio so we can act in any direction.
- --------------------------------------
(a) The Fund's fiscal year ends September 30.
<PAGE>
INVESTMENT RESULTS
For the twelve months ended September 30, 1998, the Gabelli
U.S. Treasury Money Market Fund's (the "Fund") total return
was 5.13%. The Fund's 7-day annualized yield and 30-day
annualized yield on September 30, 1998 were 4.80% and 4.96%,
respectively. For the five year period ended September 30,
1998, the Fund's average annual return was 4.81%. Since
inception on October 1, 1992 through September 30, 1998, the
Fund had an average annual return of 4.47%. As of September
30, 1998, shareholders total 5,787 and net assets are $314
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, as amended, 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 0.30% 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].
Shareholders will soon be able to receive quarterly
reports from Gabelli Funds via e-mail. We anticipate that
this service will be available in early 1999. If you are
interested in receiving your quarterly report via e-mail,
please send an e-mail to [email protected] with your
name and address and we will provide you with the
appropriate forms. Our investor representatives are
available at 1-800-GABELLI (1-800-422-3554) to assist you as
well.
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 adviser for the applicability to your
specific situation.
We thank you for your loyalty and as always, pledge
our best efforts on your behalf as we seek to provide you
with 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 30, 1998
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total
returns and average annual returns, which reflect changes in
investment income, are net of expenses. Investment returns
and yields will fluctuate. An investment in The Gabelli U.S.
Treasury Money Market Fund is neither insured nor guaranteed
by the U.S. Government or the Federal Deposit Insurance
Corporation. Although the Fund seeks to preserve the value
of an investment at $1.00 per share, there can be no
assurance that the Fund will maintain a stable $1.00 per
share net asset value, so it is possible to lose money by
investing in the Fund. The Fund's prospectus contains more
complete information, including fees and expenses. The
prospectus should be read carefully before investing or
sending money. If the Fund's expenses had not been capped,
the Fund's 7-day annualized yield and 30-day annualized
yield would have been 4.64% and 4.80%, respectively.
3
<PAGE>
THE GABELLI U.S. TREASURY MONEY MARKET FUND
STATEMENT OF NET ASSETS -- SEPTEMBER 30, 1998
================================================================================
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD AT DATE MATURITY
AMOUNT OF PURCHASE DATE VALUE
-------- ----------- ------- -----
<S> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 99.3%
U.S. TREASURY BILLS -- 39.1%
$123,943,000 U.S. Treasury Bills ............... 4.221% to 5.068% 10/22/98 - 12/24/98 $122,936,068
------------
INTEREST RATE
-------------
U.S. TREASURY NOTES -- 60.2%
10,000,000 U.S. Treasury Notes ............... 5.125% 11/30/98 9,996,791
70,000,000 U.S. Treasury Notes ............... 5.125% 12/31/98 70,011,627
109,000,000 U.S. Treasury Notes ............... 5.750% 12/31/98 109,181,057
------------
189,189,475
------------
TOTAL INVESTMENTS (Cost $312,125,543) (a) .......................................... 99.3% 312,125,543
PAYABLE TO MANAGER ................................................................. (0.0) (24,631)
OTHER ASSETS AND LIABILITIES (NET) ................................................. 0.7 2,292,755
----- ------------
NET ASSETS (applicable to 314,393,667 shares outstanding,
$0.001 par value, one billion shares authorized) ................................. 100.0% $314,393,667
===== ============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ........................... $1.00
=====
</TABLE>
- -------------------------------------------------------
(a) Aggregate cost for Federal tax purposes.
FINANCIAL HIGHLIGHTS
================================================================================
Selected data for a share of beneficial interest outstanding
throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------
1998 1997(D) 1996 1995 1994
------ ------ ---- ---- -----
<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) ................................... 0.0496 0.0485 0.0492 0.0528 0.0323
Net realized gain on investments ............................ 0.0005 0.0013 0.0006 0.0002 0.0002
------ ------ ------ ------ ------
Total from investment operations ............................ 0.0501 0.0498 0.0498 0.0530 0.0325
------ ------ ------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ....................................... (0.0496) (0.0485) (0.0492) (0.0528) (0.0323)
Net realized gains .......................................... (0.0005) (0.0013) (0.0006) (0.0002) (0.0002)
------ ------ ------ ------ ------
Total distributions ......................................... (0.0501) (0.0498) (0.0498) (0.0530) (0.0325)
------ ------ ------ ------ ------
Net asset value, end of period .............................. $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ======
Total return+ ............................................... 5.1% 5.1% 5.1% 5.4% 3.3%
====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ........................ $314,394 $203,542 $216,038 $218,036 $186,020
Ratio of net investment income to average net assets ........ 4.91% 4.85% 4.92% 5.30% 3.23%
Ratio of operating expenses to average net assets (c) ....... 0.30% 0.30% 0.30% 0.27% 0.30%
</TABLE>
- ----------------------------------------------
+ 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, 1998, 1997, 1996, 1995
and 1994 were $0.0475, $0.0469, $0.0477, $0.0516 and
$0.0312, respectively.
(c) Operating expense ratios before fees waived by the
Manager for the years ended September 30, 1998, 1997,
1996, 1995 and 1994 were 0.46%, 0.45%, 0.45%, 0.39% and
0.43%, respectively.
(d) Gabelli Funds, Inc. became the sole investment adviser of the Fund on April
15, 1997.
See accompanying notes to financial
statements.
4
<PAGE>
THE GABELLI U.S. TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS -- YEAR ENDED SEPTEMBER 30, 1998
================================================================================
INVESTMENT INCOME:
Interest .................................................... $ 15,010,349
------------
EXPENSES:
Management fee ............................................... 865,180
Transfer agent fees .......................................... 144,562
Registration fees ............................................ 84,703
Custodian fees ............................................... 44,989
Trustees' fees ............................................... 30,955
Legal and audit fees ......................................... 29,729
Shareholder reports .......................................... 16,988
Miscellaneous ................................................ 109,441
------------
Total Expenses before fees waived by Manager............... 1,326,547
Fees waived by Manager .................................... (461,367)
------------
TOTAL EXPENSES--NEt ....................................... 865,180
------------
NET INVESTMENT INCOME ........................................... 14,145,169
NET REALIZED GAIN ON INVESTMENTS ................................ 240,664
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $ 14,385,833
============
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
---------------- --------------
OPERATIONS:
Net investment income .................... $ 14,145,169 $ 10,272,019
Net realized gain on investments ......... 240,664 246,921
--------------- ---------------
Net increase in net assets resulting
from operations ...................... 14,385,833 10,518,940
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income .................... (14,145,169) (10,272,019)
Net realized gain on investments ......... (245,894) (241,691)
--------------- ---------------
Total distributions to shareholders .... (14,391,063) (10,513,710)
--------------- ---------------
SHARE TRANSACTIONS ($1.00 PER SHARE):
Shares sold .............................. 1,769,620,862 2,152,102,612
Shares issued upon reinvestment of
dividends and distributions ........... 13,843,721 9,949,097
Shares redeemed .......................... (1,672,607,748) (2,174,552,390)
--------------- ---------------
Net increase (decrease) in net assets .. 110,851,605 (12,495,451)
NET ASSETS:
Beginning of period ...................... 203,542,062 216,037,513
--------------- ---------------
End of period ............................ $ 314,393,667 $ 203,542,062
=============== ===============
See accompanying notes to financial
statements.
5
<PAGE>
THE GABELLI U.S. TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. DESCRIPTION. The Gabelli U.S. Treasury Money Market Fund
(the "Fund"), a series of The Gabelli Money Market Funds
(the "Trust"), was organized on May 21, 1992 as a Delaware
business trust. The Fund is a diversified, open-end
management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"),
whose primary objective is high current income consistent
with the preservation of principal and liquidity. The Fund
commenced operations on October 1, 1992.
2. SIGNIFICANT ACCOUNTING POLICIES. 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 by using the
identified 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.
3. 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,
oversees the administration of all aspects of the Fund's
business and affairs 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, 1998, the Manager
voluntarily waived management fees of $461,367.
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 (the
"Fund") (a series of The Gabelli Money Market Funds) as of
September 30, 1998, 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, 1998 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 as of September 30, 1998, the
results of its operations for the year then ended, the
changes in their 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
November 6, 1998 /s/ Ernst & Young LLP
---------------------
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1998 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, 1997 through
September 30, 1998 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 specific situation.
- --------------------------------------------------------------------------------
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] [PHOTO OMITTED]
(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 ATTORNEY-AT-LAW
INVESTMENT OFFICER MCCARTHY, FINGAR, DONOVAN, THE
GABELLI FUNDS, INC. DRAZEN & SMITH GABELLI
U.S. TREASURY
Anthony J. Colavita Karl Otto Pohl MONEY MARKET
ATTORNEY-AT-LAW FORMER PRESIDENT FUND
ANTHONY J. COLAVITA, P.C. DEUTSCHE BUNDESBANK
Vincent D. Enright Anthonie C. van Ekris
FORMER SENIOR VICE PRESIDENT MANAGING DIRECTOR
AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC.
KEYSPAN ENERGY CORP.
OFFICERS
Mario J. Gabelli, CFA Ronald S. Eaker
PRESIDENT VICE PRESIDENT
Bruce N. Alpert Judith A. Raneri
VICE PRESIDENT AND VICE PRESIDENT
TREASURER AND PORTFOLIO MANAGER
James E. McKee Henley L. Smith
SECRETARY 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.
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ANNUAL REPORT
SEPTEMBER 30, 1998
