THE GABELLI U.S. TREASURY MONEY MARKET FUND
ANNUAL REPORT
SEPTEMBER 30, 1999(A)
[OMITTED PHOTO OF JUDITH A RANERI]
JUDITH A. RANERI
TO OUR SHAREHOLDERS,
After the announcement of the second interest rate hike on August 24, the
Federal Reserve indicated that its actions "should markedly diminish the risk of
rising inflation going forward." At that point, the statement indicated that the
Federal Reserve was operating from a neutral stance, suggesting an inclination
not to tighten at the next Federal Open Market Committee ("FOMC") meeting in
October, unless data showed surprising economic strength.
The Fed decided to leave the Federal Funds rate unchanged at 5.25% at the
October FOMC meeting and adopted an asymmetrical tightening bias in its policy
directive, leaving the market to ponder a threat of subsequent tightening. The
debate regarding future Fed action weighs heavily on the market at this time. In
a statement following the meeting, the Fed affirmed the need to remain
"especially alert in the months ahead to the potential for costs to increase
significantly in excess of productivity which could contribute to inflation
pressures". The market reacted negatively to the announcement, which added
continued confusion and uncertainty to the near term direction of Treasuries.
The policy shift, combined with robust economic data, strongly evokes the
possibility that the Federal Reserve may change interest rates between meetings
if it should spot signs of rising inflationary pressures between now and
November 16.
A relentless string of strong economic data in August confirmed low
inflation, strong domestic demand, an improved global economic environment, and
continued productivity-led growth. Excellent news on inflation came via the
exceptionally benign core Consumer Price Index ("CPI") reading in August, which
rose 0.3%, boosted by higher prices for energy and food, while the core rate
rose just 0.1%, one-half the expected gain. On a year over year basis the core
CPI inflation rate slowed to 1.9% in August the lowest level of core inflation
since May 1966. The well-received news on consumer prices should go a long way
toward alleviating Fed and market concerns over higher inflation.
- -----------------------------
(a) The Fund's fiscal year ends September 30.
<PAGE>
Meanwhile, consumer spending measures remain robust. In August, retail
sales increased by 1.2% overall, or by 0.7% excluding autos. Overall retail
sales were 10.6% higher than a year ago, the strongest year over year growth
since 1994. The market also received more evidence from the Commerce Department
that consumers continued to part with their dollars, generating more inflation
fears among market participants. In fact, August personal income rose 0.5% with
a 0.9% rise in personal spending. The savings rate fell to negative 1.5% from a
negative 1.3%, leaving the nation's savings rate matching a record low. Most
forecasters had expected a 0.4% gain in income with a 0.7% rise in expenditures.
Additionally, recently released data showed no slow down in the housing sector
despite the continued steady rise in mortgage rates.
Despite a decline in the unemployment rate, hourly earnings rose just 0.2%
in August, following a downwardly revised 0.3% gain in July. This modest August
increase dropped the year over year rise in hourly earnings to 3.5%, the lowest
level since October 1996. Also noted was the outsized gain of 0.5% in the
Producer Price Index ("PPI"). Yes, the PPIU core rate fell .01% with price
declines recorded for apparel, autos and computers.
Subsequently, the September employment report has added increased confusion
to the market. Considered one more worrisome indicator, it signaled a weakness
in payrolls with an outsized gain in hourly earnings. An unexpectedly weak
employment report allowed markets to rally as the drop in job levels by 8,000
suggested the economy may be slowing while a rise in average hourly earnings by
0.5% created fears that tight labor markets will eventually spark inflation. In
addition to a decline in the number of workers, the number of hours worked
declined as well from 34.5 to 34.4 hours, while the unemployment rate remained
steady at 4.2%.
The likely outcome of the Fed's next meeting should become clearer as the
remainder of September's economic data is released. Retail sales represent the
demand side of the economy, the inflation side is represented by the Producer
Price Index, and the production side is represented by industrial production and
business inventories. With the Federal Reserve on heightened inflation watch,
the PPI will be the most watched market indicator. Federal Reserve Chairman Alan
Greenspan will provide insight on the assorted data in a series of scheduled
speeches before the November FOMC meeting. While the market is now pricing in
greater odds of a November interest rate hike, it is far from certain, as some
have speculated. The upcoming inflation data remain the most integral
determinant of near term monetary policy.
INVESTMENT RESULTS
For the twelve-month period ended September 30, 1999, The Gabelli U.S.
Treasury Money Market Fund's (the "Fund") total return was 4.35%. The Lipper
U.S. Treasury Money Market Average had a total return of 4.17% over the same
period. The Lipper Average reflects the average performance of mutual funds
classified in this particular category. The Fund's 7-day annualized yield and
30-day annualized yield on September 30, 1999 were 4.46% and 4.56%,
respectively.
2
<PAGE>
For the five-year period ended September 30, 1999, the Fund's total return
averaged 5.06% versus an average annual total return of 4.75% for the Lipper
U.S. Treasury Money Market Average. Since inception on October 1, 1992 through
September 30, 1999, the Fund had an average annual total return of 4.48%. As of
September 30, 1999, shareholders total 6,459 and net assets are $480 million.
The Fund maintained a stable net asset value of $1.00 per share throughout the
period.
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.
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,
JUDITH A. RANERI
Vice President
and Portfolio Manager
October 25, 1999
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 4.46% and 4.56%, respectively.
3
<PAGE>
THE GABELLI U.S. TREASURY MONEY MARKET FUND
STATEMENT OF NET ASSETS -- SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
====================================================================================================================================
ANNUALIZED
PRINCIPAL YIELD AT DATE MATURITY MARKET
AMOUNT OF PURCHASE DATE VALUE
-------- ----------- ------- ------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 99.8%
U.S. TREASURY BILLS -- 72.7%
$350,690,000 U.S. Treasury Bills .............. 4.439% to 4.887% 10/14/99-11/26/99 $348,858,078
------------
INTEREST RATE
-----------
U.S. Treasury Notes -- 27.1%
30,000,000 U.S. Treasury Notes .............. 5.625% 11/30/99 30,037,932
40,000,000 U.S. Treasury Notes .............. 5.375% 01/31/00 40,034,095
15,000,000 U.S. Treasury Notes .............. 5.500% 02/29/00 15,014,305
25,000,000 U.S. Treasury Notes .............. 5.500% 03/31/00 25,026,682
40,000,000 U.S. Treasury Notes .............. 5.875% 11/15/99 20,022,440
------------
130,135,454
------------
TOTAL INVESTMENTS (Cost $478,993,532)(a) ................................................................. 99.8% 478,993,532
OTHER ASSETS AND LIABILITIES (NET) ....................................................................... 0.2 1,105,980
----- ------------
NET ASSETS (applicable to 480,099,512 shares outstanding,
$0.001 par value, one billion shares authorized) ....................................................... 100.0% $480,099,512
===== ============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ................................................. $1.00
=====
- ----------------------------------------------
(a) Aggregate cost for Federal tax purposes.
FINANCIAL HIGHLIGHTS
====================================================================================================================================
Selected data for a share of beneficial interest outstanding throughout each
period.
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
1999 1998 1997(C) 1996 1995
-------- -------- -------- -------- --------
<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 (a) ............................... 0.0422 0.0496 0.0485 0.0492 0.0528
Net realized gain on investments ........................ 0.0005 0.0005 0.0013 0.0006 0.0002
-------- -------- -------- -------- --------
Total from investment operations ........................ 0.0427 0.0501 0.0498 0.0498 0.0530
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................... (0.0422) (0.0496) (0.0485) (0.0492) (0.0528)
Net realized gain on investments ........................ (0.0005) (0.0005) (0.0013) (0.0006) (0.0002)
-------- -------- -------- -------- --------
Total distributions ..................................... (0.0427) (0.0501) (0.0498) (0.0498) (0.0530)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return+ ........................................... 4.4% 5.1% 5.1% 5.1% 5.4%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $480,100 $314,394 $203,542 $216,038 $218,036
Ratio of net investment income to average net assets .... 4.19% 4.91% 4.85% 4.92% 5.30%
Ratio of operating expenses to average net assets (b) ... 0.30% 0.30% 0.30% 0.30% 0.27%
--------
</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.
(a) Net investment income before fees waived by the Manager for the fiscal
years ended September 30, 1999, 1998, 1997, 1996 and 1995 were $0.0412,
$0.0475, $0.0469, $0.0477 and $0.0516, respectively.
(b) Operating expense ratios before fees waived by the Manager for the fiscal
years ended September 30, 1999, 1998, 1997, 1996 and 1995 were 0.40%,
0.46%, 0.45%, 0.45% and 0.39%, respectively.
(c) Gabelli Funds, LLC (formerly known as Gabelli Funds, Inc.) became the sole
investment adviser of the Fund on April 15, 1997.
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
THE GABELLI U.S. TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS -- FOR THE YEAR ENDED SEPTEMBER 30, 1999
====================================================================================================================================
INVESTMENT INCOME:
<S> <C>
Interest ..................................................................................................... $ 19,227,778
------------
EXPENSES:
Management fee ............................................................................................... 1,257,445
Transfer agent fees .......................................................................................... 169,462
Custodian fees ............................................................................................... 70,007
Registration fees ............................................................................................ 49,500
Legal and audit fees ......................................................................................... 33,700
Trustees' fees ............................................................................................... 26,163
Shareholder communications expenses .......................................................................... 36,631
Miscellaneous expenses ....................................................................................... 22,038
------------
TOTAL EXPENSES BEFORE FEES WAIVED BY MANAGER ................................................................. 1,664,946
Fees waived by Manager ....................................................................................... (407,351)
------------
TOTAL EXPENSES-- NET ......................................................................................... 1,257,595
------------
NET INVESTMENT INCOME ............................................................................................ 17,970,183
NET REALIZED GAIN ON INVESTMENTS ................................................................................. 230,183
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................................................. $ 18,200,366
============
STATEMENT OF CHANGES IN NET ASSETS
====================================================================================================================================
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
--------------- ---------------
OPERATIONS:
<S> <C> <C>
Net investment income ....................................................... $ 17,970,183 $ 14,145,169
Net realized gain on investments ............................................ 230,183 240,664
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................ 18,200,366 14,385,833
--------------- ---------------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income ....................................................... (17,970,183) (14,145,169)
Net realized gain on investments ............................................ (230,183) (245,894)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ......................................... (18,200,366) (14,391,063)
--------------- ---------------
SHARE TRANSACTIONS ($1.00 PER SHARE):
Shares sold ................................................................. 2,175,277,133 1,769,620,862
Shares issued upon reinvestment of dividends and distributions .............. 17,576,389 13,843,721
Shares redeemed ............................................................. (2,027,147,677) (1,672,607,748)
--------------- ---------------
NET INCREASE IN NET ASSETS .................................................. 165,705,845 110,851,605
NET ASSETS:
Beginning of period ......................................................... 314,393,667 203,542,062
--------------- ---------------
End of period ............................................................... $ 480,099,512 $ 314,393,667
=============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
THE GABELLI U.S. TREASURY MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. ORGANIZATION. 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"). The Fund's primary objective is high current
income consistent with the preservation of principal and liquidity. The Fund
commenced investment 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, LLC (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,
1999, the Manager voluntarily waived management fees of $407,351.
6
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
================================================================================
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
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, 1999, 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, 1999 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, 1999, 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.
Ernst & Young LLP
New York, New York
November 1, 1999
- --------------------------------------------------------------------------------
1999 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, 1998 through September 30, 1999 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 law, it is
recommended that you consult your personal tax advisor as to the applicability
of the information provided 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]
(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,
GABELLI ASSET MANAGEMENT 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
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.
- --------------------------------------------------------------------------------
[PHOTO OF MARIO J. GABELLI]
THE
GABELLI
U.S. TREASURY
MONEY MARKET
FUND
ANNUAL Report
SEPTEMBER 30, 1999
GAB404Q399SR
