<PAGE> 1
SCHWABFUNDS(R)
[LOGO]
SCHWAB NEW YORK TAX-EXEMPT
MONEY FUND--SWEEP SHARES
SEMI-ANNUAL REPORT
JUNE 30, 1995
[Photo of the Schwab Building, San Francisco, California]
<PAGE> 2
Dear Fellow Shareholder,
This year, the SchwabFunds Family(TM) celebrates its fifth
[Photo anniversary as a mutual fund complex. This celebration follows an
of exciting 1994 when the organization experienced tremendous
Charles growth--the third largest asset growth of all mutual fund
R. Schwab] companies. By placing your trust in SchwabFunds(R), you've helped
total assets under management reach $27 billion, ranking
SchwabFunds in the top 6% of all mutual fund complexes in just a
few years.
We believe much of this success can be traced to the Schwab commitment to
serving the needs of Fund shareholders, a commitment demonstrated by the entire
SchwabFunds staff and, in particular, by our experienced team of portfolio
managers.
The 20 professionals who make up our growing portfolio management team are
devoted to monitoring the financial markets for you. Through careful and
disciplined selection of securities, they strive to construct optimal portfolios
that provide shareholders with competitive returns that meet their investment
goals. Shareholders continue to signal their trust in the 175 years of combined
experience behind our SchwabFunds portfolio management by keeping their money
invested in SchwabFunds. In fact, a large number of the 1.5 million shareholders
have been investing in the SchwabFunds Family since its first year of operation.
We believe an important part of serving your needs is keeping you informed about
your investments. For example, we've added the question and answer section of
this report, developed to address what our portfolio managers feel have been the
most pressing questions we've heard from shareholders over the period. It is one
way we hope to keep communication open between you and the people managing your
investments. In addition, now that Charles Schwab Investment Management, Inc.
will be managing the day-to-day portfolio management of the three Schwab equity
funds, we will be even better able to meet your service needs and respond to
your questions.
The SchwabFunds Family has grown to include a solid selection of funds that meet
the "core" needs of investors. The 16 funds available to retail investors offer
effective diversification of the U.S. and international equity markets, both
taxable and tax-free bonds, and a variety of money market investments. With this
level of diversification, you may use the SchwabFunds to create an efficient,
well-rounded portfolio. Or, they can serve as building blocks to an overall
investment program that includes more specialized investments.
To receive a brochure and prospectus for any of the SchwabFunds, you can call
Schwab's toll-free number, 1-800-2 NO-LOAD, or visit any one of the over 200
Schwab offices. The prospectus includes more complete information on the Funds,
including charges and expenses. Please read it carefully before investing.
I'd like to extend my personal gratitude for your trust in the SchwabFunds
Family. You should feel confident that the outstanding efforts of all those who
are part of the SchwabFunds organization will continue going forward. And, we
expect these efforts to help us meet even higher standards of excellence in the
years ahead.
/s/ Charles R. Schwab
Charles R. Schwab
Chairman
Cover: The Schwab Building, San Francisco, California
<PAGE> 3
YES! I'D LIKE TO TAKE
ADVANTAGE OF AN EASY WAY
TO EFFECTIVELY DIVERSIFY MY EQUITY PORTFOLIO.
PLEASE SEND ME MORE INFORMATION, INCLUDING PROSPECTUSES, FOR THE THREE
SCHWABFUNDS(R) EQUITY INDEX FUNDS LISTED BELOW.
SCHWAB 1000 FUND(R) is designed to match the total return of the Schwab 1000
Index(R), Schwab's own benchmark of America's 1,000 largest companies, based on
market capitalization.
SCHWAB SMALL-CAP INDEX FUND(TM) seeks to track the total return of the Schwab
Small-Cap Index(TM), comprised of the second 1,000 largest U.S. companies,
ranked by market capitalization.
SCHWAB INTERNATIONAL INDEX FUND(TM) seeks to track the total return of the
Schwab International Index(TM), comprised of 350 of the largest publicly traded
companies (based on market capitalization) in countries with developed
securities markets outside of the U.S.
The prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
--------------------------------------------------------------------------------
NAME
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ADDRESS
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See the back page for more information.
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<PAGE> 4
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<PAGE> 5
COMMENTS FROM THE INVESTMENT ADVISER
We're pleased to provide you with the first shareholder report for the Schwab
New York Tax-Exempt Money Fund--Sweep Shares, which reviews the performance of
your investment from the Fund's commencement of operations on February 27, 1995
through June 30, 1995. During this abbreviated reporting period, the Fund proved
successful at providing a competitive level of current income exempt from
federal, New York State and municipal taxes*, combined with capital stability
and ready access to your money.
The Schwab New York Tax-Exempt Money Fund--Sweep Shares was introduced as part
of the ongoing effort of SchwabFunds(R) to offer Schwab customers more options
for effective cash management. As a sweep investment, cash balances of $100 or
more in your Schwab account are automatically invested in the Fund on a regular
basis. This special "sweep" feature offers you a convenient way to keep all of
your excess cash working between investments.
The response to this new addition to the SchwabFunds Family(TM) has been
enthusiastic. As of June 30, 1995, there were more than 5,800 shareholders in
the Fund, and net assets totaled over $184 million.
PERFORMANCE REVIEW
Both short-term taxable interest rates, as well as tax-exempt rates declined
slightly during the first half of 1995. The table below presents the Fund's
7-day average yields at the end of the period. As with all money market funds,
past performance is no guarantee of future results.
--------------------------------------------------------------------------------
7-DAY AVERAGE YIELDS
(As of 6/30/95)
<TABLE>
<CAPTION>
Simple Compound Compound Taxable Equivalent**
--------------------------------------------------------------------------------
<S> <C> <C>
3.46% 3.52% 6.63%
--------------------------------------------------------------------------------
</TABLE>
HIGHER RETURNS, AFTER TAXES
As a resident of a state with some of the nation's highest taxes, you're
probably well aware of how much income taxes can erode your investment returns.
The Schwab New York Tax-Exempt Money Fund--Sweep Shares is designed to provide
higher after-tax returns than a taxable fund in the form of current income that
is exempt from federal, New York State and municipal taxes.*
* Income may be subject to local taxes and the Alternative Minimum Tax (AMT).
** Taxable equivalent yield assumes a combined federal, New York State and
municipal income tax rate of 46.88%.
<PAGE> 6
Depending on your tax bracket, this triple tax-exempt income may offer you a
significant yield advantage over taxable money funds on a taxable equivalent
basis. For example, although past performance is no guarantee of future results,
on June 27, 1995, the Fund's 7-day simple yield was 3.48% and the compound yield
was 3.54%; for shareholders in the highest tax bracket, this compound yield
translates to a compound taxable equivalent yield of 6.66%, which surpasses the
5.56% compound 7-day average yield for similar fully taxable money funds on June
27,1995.(1)
KEY GOAL: CAPITAL STABILITY
If you're like most money market fund investors, preserving the value of your
investment is an important concern. That's why the Schwab New York Tax-Exempt
Money Fund--Sweep Shares is managed with stability of capital as a fundamental
objective. To protect your principal, the Fund seeks to maintain a stable $1
share price. As with all money market funds, of course, there can be no
assurance that the Fund will be able to maintain a $1 net asset value, and your
investment is neither insured nor guaranteed by the U.S. Government.
HIGH-QUALITY PORTFOLIO
The Schwab New York Tax-Exempt Money Fund--Sweep Shares seeks to invest in a
diversified portfolio of short-term municipal securities issued by the State of
New York, its agencies and municipalities. To limit credit risk, the Fund
primarily invests in high-quality securities rated in the top two rating
categories by national rating agencies. We maintain strict credit quality
standards for the Fund's portfolio, while actively managing portfolio maturity
to help protect and enhance your returns. The chart below illustrates the Fund's
portfolio composition on June 30, 1995. In addition, you'll find a complete
listing of the securities in the Fund's portfolio as of June 30, 1995 later in
this report.
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
PORTFOLIO COMPOSITION
JUNE 30, 1995
[Pie chart indicating percentages as of June 30, 1995 for the Schwab New York
Tax-Exempt Money Fund]
<TABLE>
<S> <C>
Variable Rate Obligations 68%
Tax-Exempt Commercial Paper 7%
Notes 10%
Bonds Under 13 Months 8%
Variable Rate Tender Option Bonds/Partnerships 7%
</TABLE>
1. Source: IBC/Donoghue, average compound seven-day yield for the 254 funds in
the First Tier category of Taxable Money Funds as of June 27, 1995.
<PAGE> 7
To enhance your understanding of the performance of the Schwab New York
Tax-Exempt Money Fund--Sweep Shares, the portfolio management team offers
insights into economic trends and the Fund's investment strategy in the
following section. If you want more information on the Fund, or any of the
mutual funds in the SchwabFunds Family(TM), visit your local Schwab office or
call 1-800-2 NO-LOAD.
LOOKING FORWARD IN 1995
While the outlook for interest rates in the second half of the year is
uncertain, we remain confident that the Schwab New York Tax-Exempt Money
Fund--Sweep Shares will continue to strive to offer you an effective cash
management tool that can help you earn a competitive level of triple tax-exempt
income without sacrificing safety and liquidity.
At SchwabFunds(R), we recognize that we earn your trust day by day. We
appreciate your continued confidence in our efforts, and we look forward to
helping you achieve your financial goals in the future.
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
<PAGE> 8
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM OF
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
Stephen B. Ward - Senior Vice President and Chief Investment Officer
Walter Beveridge - Portfolio Manager
Q. WHAT HAS BEEN THE ECONOMIC CLIMATE IN THE FIRST SIX MONTHS OF 1995?
A. Following an impressive 4.1% growth rate of the Gross Domestic Product (GDP)
during 1994, the highest annual growth rate in ten years, economic activity is
showing increasing signs of slowing. Recent evidence of this trend includes
slowdowns in auto sales, consumer spending and retail sales, home building and
home sales, and a somewhat dramatic slowdown in the labor markets. The GDP
growth rate for the first quarter of 1995 was 2.7%, and 0.5% for the second
quarter.
The primary reason for the slowdown in the GDP growth rate has been a series of
increases in the federal funds rate implemented by the Federal Reserve ("the
Fed") throughout 1994 and into 1995. With the high rate of growth in 1994 and a
falling civilian unemployment rate, potential inflation emerged as a major
concern at the Fed. As a result, the Fed initiated a series of increases in the
federal funds rate, resulting in a rise from 3.0% in January 1994 to 6.0% in
February 1995. As evidenced by the Fed's recent 0.25% reduction in the federal
funds rate in July 1995, these increases appear to have accomplished their
desired effect of slowing the rate of economic growth to more moderate levels
and reducing the likelihood of increases in the rate of inflation.
Q. HOW HAVE THE ECONOMIC EVENTS OF THE LAST SIX MONTHS IMPACTED SHORT-TERM
INTEREST RATES?
A. Short-term interest rates have been declining slowly since the beginning of
the year. For example, the 90-day commercial paper rate dropped from
approximately 6.3% at the beginning of the year to approximately 5.9% on June
30, 1995. This decline has been a result of the anticipation that the Fed will
lower interest rates, a practice known as "easing," as well as the economic
slowdown that was brought on by prior increases in interest rates, a practice
known as "tightening."
Q. HOW HAVE SHORT-TERM TAX-EXEMPT RATES RESPONDED TO THE DECLINES IN TAXABLE
RATES?
A. Unlike short-term taxable rates, short-term tax-exempt rates did not
experience an overall decline during the first four months of 1995. As shown in
the graph on the following page, these rates were characterized by a degree of
volatility with no clear trend during the initial four months of the year.
During May and June, strong demand for shorter term fixed rate securities caused
a significant reduction in the 90-day municipal commercial paper rate.
Differences in rate movements of tax-exempt versus taxable securities are
attributable to the difference in supply and demand conditions in these markets.
The supply of tax-exempt securities is more irregular because tax-exempt issuers
enter the market based on budget, tax, and legal considerations -- different
motivations from those of taxable issuers.
<PAGE> 9
INTEREST RATES DECLINED IN
THE FIRST HALF OF 1995
YIELDS
90-Day Municipal Commercial Paper
January 6, 1995 - June 30, 1995
[Graph of 90-Day Municipal Commercial Paper]
<TABLE>
<CAPTION>
90-DAY MUNICIPAL
DATE COMMERCIAL PAPER
---- ----------------
<S> <C>
1/6 4.00
1/13 4.06
1/20 4.02
1/27 4.04
2/3 4.00
2/10 4.15
2/17 4.18
2/24 4.04
3/1 4.08
3/10 3.91
3/17 3.96
3/24 3.90
3/31 3.96
4/7 3.95
4/13 4.06
4/21 4.10
4/28 4.10
5/5 4.10
5/12 4.09
5/19 3.97
5/26 3.81
6/2 3.69
6/9 3.18
6/16 3.40
6/23 3.60
6/30 3.65
</TABLE>
Source: Lehman Brothers, Inc.
Q. WHAT STANDARDS DOES THE INVESTMENT ADVISER USE IN SELECTING SECURITIES FOR
THE PORTFOLIO?
A. Money market funds are required to hold high-quality securities in their
portfolios. For the Schwab New York Tax-Exempt Money Fund, we have taken the
additional step of only investing in what are referred to as First Tier
securities. In general, a First Tier security is one that is within certain
maturity limits and carries the top rating from the requisite number of
Nationally Recognized Statistical Rating Organizations (NRSROs), or is deemed to
be of comparable quality by the Trust's Board of Trustees if unrated.
One other method we utilize to increase the overall quality of the Schwab New
York Tax-Exempt Money Fund's portfolio is to selectively purchase securities
which are insured or backed by a letter of credit from a highly rated financial
institution. These arrangements are frequently referred to as "credit
enhancements" because they provide an incremental level of creditworthiness, in
addition to the strength of the underlying issuer. Schwab's thorough credit
review of the portfolio's securities includes ongoing review of the issuer as
well as the insurance company or financial institution providing any credit
enhancement to the security. Banks which provide enhancements on securities we
purchase represent some of the highest rated U.S., Japanese, and British banks.
<PAGE> 10
Recently there has been a fair amount of news coverage concerning the health of
the Japanese economy in general and Japanese banks in particular. As a result of
our continuous monitoring of the situation in Japan, we are confident that we
have selected the Japanese banks that are among the highest rated in the world.
Selected carefully, these banks appear to represent excellent opportunities to
provide credit enhancements which improve the overall quality of the portfolio.
Q. WE CONTINUE TO READ ABOUT PROBLEMS WITH DERIVATIVES. DOES THE SCHWAB NEW YORK
TAX-EXEMPT MONEY FUND INVEST IN THE DERIVATIVE SECURITIES WHICH HAVE CAUSED
PROBLEMS FOR OTHER MONEY FUNDS?
A. No. Unlike some well publicized examples, it has always been our position
that such securities are inappropriate for use in money market funds. Therefore,
the Fund has never purchased these types of securities. The Fund only invests in
securities appropriate for money market funds, such as fixed rate notes and
simple variable rate notes or variable rate demand notes. These types of
securities are used in virtually all money market funds.
The Fund also uses more complex variable rate securities relying on puts
(purchase agreements) from high-quality banks and dealers. These high-quality
securities feature good liquidity, and attractive yields. In fact, they are
designed and well-suited for money market funds and many funds use them in their
investment strategies. These securities are called tender option bonds and are
created by attaching a put to another security after its initial issuance. The
SEC is aware that tax-exempt money market funds have been using these securities
for many years and has not objected.
Q. HOW HAS THE ECONOMIC CLIMATE IN NEW YORK AFFECTED THE PERFORMANCE OF THE
FUND?
A. New York's creditworthiness is supported by a diverse economic base and by
the importance of New York City in the world's financial markets, as well as its
extensive tourism and service-related businesses. The State entered the last
recession earlier than other states, and its recovery has been significantly
slower and less robust than has been experienced elsewhere. At the current
growth rate, New York is expected to reach pre-recession employment levels by
the end of 1997. Continued growth will be constrained by ongoing structural
changes in the economy, downsizing by large corporations (especially Wall Street
firms), cutbacks in defense spending and high levels of spending for public
assistance programs.
In spite of reported budgetary surpluses in 1993 and 1994, the State still faces
the challenge of resolving a general fund deficit of more than $2.3 billion. The
Governor and legislature have prepared a 1996 budget that makes important
changes in state spending and tax policy. However, the key to the budget's
success is a realization of the economic growth forecast as well as the State's
ability to implement its new strategy in a smooth and timely fashion. Continued
economic sluggishness may impair the expected economic
<PAGE> 11
growth, and the late adoption of the budget and other administrative delays will
make it difficult for the State to implement many of the necessary changes.
Therefore, it is unlikely that the State will completely reverse its general
fund deficit in 1996.
New York's economic and budget difficulties have not had much effect on the
performance of the Fund during the six-month reporting period. Notwithstanding
these difficulties, New York-issued municipal securities offer yields which are
very close to the national average for tax-exempt municipal securities. We are
satisfied with the credit quality of the New York securities which the Fund owns
and we will, of course, continue to monitor the State's economic situation.
The State's current credit ratings are A from Moody's Investors Service, A- from
Standard & Poor's Corporation and A+ from Fitch Investors Services, Inc., three
well-known rating agencies.
<PAGE> 12
SchwabFunds(R)
------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
PORTFOLIO SUMMARY
(Unaudited)
------------------------------------------------------------------
ASSET GROWTH
<TABLE>
<CAPTION>
Total Net Assets
Total as of 2/27/95 Percentage
Net Assets (commencement Growth Over
as of 6/30/95 of operations) Reporting
(000s) (000s) Period
------------------------------------------------------------------
<S> <C> <C>
$ 184,559 $153,806* 20%
------------------------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED ON
JUNE 30, 1995
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Month Twelve Months
------------------------------------------------------------------
<S> <C> <C>
3.46% 3.44% --
------------------------------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 3/31/95 6/30/95
------------------------------------------------------------------
<S> <C> <C>
0 - 15 Days 79.6% 75.4%
16 - 30 Days 4.2% 0.0%
31 - 60 Days 0.0% 2.7%
61 - 90 Days 0.0% 7.1%
91 - 120 Days 0.8% 0.0%
Over 120 Days 15.4% 14.8%
Weighted Average 44 Days 39 Days
------------------------------------------------------------------
</TABLE>
* Includes amounts accumulated prior to commencement of operations.
<PAGE> 13
SchwabFunds(R) 1
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
VARIABLE RATE
OBLIGATIONS--67.9%(a)
Babylon, New York General
Obligation Bonds/(Bank
of Nova Scotia SBPA &
AMBAC Insurance)
3.95%, 07/07/95 $5,500 $ 5,500
Cortland County, New York
Industrial Development
Authority Industrial
Development Revenue
Bonds Series 1994B
(General Signal Corp.
Project) Series 1983/
(Wachovia Bank LOC)
3.90%, 07/07/95 1,750 1,750
Erie County, New York
Water Authority Water
Revenue Bonds
Series 1993B/(Industrial
Bank of Japan SBPA & AMBAC
Insurance)
4.00%, 07/07/95 1,400 1,400
Franklin County, New York
Industrial Development
Authority Revenue Bonds (Kes
Chateaugay LP Project) Series
A/(Bank of Tokyo LOC)
4.05%, 07/07/95 3,000 3,000
Geneva, New York
Industrial Development
Agency Civic Facility
Revenue Bonds
(Colleges of The Seneca)
Series 1993A/
(Sumitomo Bank LOC)
4.05%, 07/07/95 2,500 2,500
Monroe County, New York
Industrial Development
Authority Industrial
Development Revenue Bonds
(ENIB Corp. Lease Rent
Project) Series 1988/
(ABN-AMRO Bank LOC)
3.85%, 07/07/95 2,000 2,000
Nassau County, New York
Industrial Development Agency
Civic Facilities Revenue
Bonds (Cold Spring Harbor
Laboratory Project)/
(Morgan Guaranty Trust LOC)
4.40%, 07/07/95 400 400
New Rochelle, New York
Industrial Development
Authority Industrial
Development Revenue Bonds
(Chas Sadek Import Corp.)/
(Bank of New York LOC)
3.60%, 07/07/95 5,500 5,500
New York City, New York
General Obligation Bonds
Series 1993 Subseries B-2/
(Dai-Ichi Kangyo Bank LOC)
4.55%, 07/07/95 900 900
New York City, New York
General Obligation Bonds
Series 1993 Subseries B-2B/
(Dai-Ichi Kangyo Bank LOC)
4.55%, 07/01/95 700 700
New York City, New York
General Obligation Bonds
Series 1994 Subseries B-4/
(Union Bank of Switzerland LOC)
4.50%, 07/07/95 1,200 1,200
New York City, New York
Housing Development Corp.
Mortgage Revenue Multi Family
Housing Revenue Bonds
(Columbus Gardens Project)
Series 1993A/(Citibank LOC)
4.00%, 07/07/95 3,600 3,600
New York City, New York
Housing Development Corp.
Special Obligation
Revenue Bonds (East 96th
Street Project) Series 1990A/
(Mitsubishi Bank LOC)
3.75%, 07/07/95 7,700 7,700
New York City, New York
Industrial Development
Agency Industrial
Development Revenue
Bonds (Field Hotel Associates
JFK Project) Series 1985/
(Banque Indosuez LOC)
4.10%, 07/07/95 6,200 6,200
New York City, New York
Industrial Development
Agency Industrial Development
Revenue
Bonds (Japan Airlines)
Series 1991/(Morgan
Guaranty Trust LOC)
4.15%, 07/07/95 200 200
New York State Dormitory
Authority Revenue Bonds
(Masonic Hall Asylum)/ (AMBAC
Insurance & Credit Local de
France SBPA)
3.95%, 07/07/95 7,200 7,200
New York State Dormitory
Authority Revenue Bonds (St.
Francis Center at the
Knolls)/ (Banque Paribas LOC)
4.10%, 07/07/95 800 800
New York State Energy Research
& Development Authority
Electric Facility Revenue
Bonds (Lilco Project) Series
1993A/
(Toronto-Dominion Bank LOC)
4.10%, 07/07/95 2,000 2,000
</TABLE>
<PAGE> 14
SchwabFunds(R) 2
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
New York State Energy Research
& Development Authority
Electric Facility Revenue
Bonds (Lilco Project) Series
1993B/
(Toronto-Dominion Bank LOC)
3.90%, 07/07/95 $5,000 $ 5,000
New York State Energy Research
& Development Authority
Pollution Control Revenue
Refunding Bonds (New York
State Electric & Gas) Series
1994C/
(Morgan Guaranty Trust LOC)
4.20%, 07/01/95 3,000 3,000
New York State Energy Research
& Development Authority
Pollution Control Revenue
Refunding Bonds (Orange and
Rockland Utilities, Inc.
Project) Series 1994A/
(FGIC Insurance &
Societe Generale SBPA)
3.95%, 07/07/95 8,800 8,800
New York State Energy Research
& Development Authority
Pollution Control
Revenue Refunding Bonds/
(Union Bank of
Switzerland LOC)
4.50%, 07/07/95 2,000 2,000
4.20%, 07/01/95 1,100 1,100
New York State Housing Finance
Agency Revenue Bonds (Mount
Sinai School of Medicine)
Series 1984A/
(Sanwa Bank LOC)
4.00%, 07/07/95 6,000 6,000
New York State Housing Finance
Agency
Revenue Bonds
(Hospital Special Surgery
Staff) Series 1985A/
(Sakura Bank LOC)
4.00%, 07/07/95 1,600 1,600
New York State Housing Finance
Agency
Multi Family Housing Revenue
Bonds (Normandie Court II)
Series 1987A/
(Bankers Trust Co. LOC)
3.85%, 07/07/95 8,150 8,150
New York State Local
Government Assistance
Corp. Bonds Series 1994B/
(Credit Suisse LOC &
Swiss Bank LOC)
3.70%, 07/07/95 6,900 6,900
Niagara County, New York
Industrial Development
Revenue Bonds (Allegheny
Ludlum Steel Company) Series
1984/(PNC Bank LOC)
3.85%, 07/07/95 3,500 3,500
Niagara Falls, New York
Bridge Commission Revenue
Bonds Series 1993A/
(FGIC Insurance & Industrial
Bank of Japan SBPA)
4.00%, 07/07/95 1,400 1,400
Port Authority, New York and
New Jersey Special Obligation
Revenue Bonds Series 1993/
(Deutsche Bank LOC)
4.10%, 07/07/95 4,000 4,000
Puerto Rico--Puerto Rico
Government Development Bank
Revenue Refunding Bonds
Series 1995/
(Credit Suisse LOC)
3.80%, 07/07/95 5,000 5,000
Rotterdam, New York
Industrial Development
Agency Refunding Bonds
(Rotterdam Industrial Park
Project) Series 1993A/
(Chemical Bank LOC)
3.80%, 07/07/95 3,200 3,200
St. Lawrence County, New York
Industrial Development
Authority Environmental
Improvement Revenue Bonds
(Reynolds Metals Project)
Series 1995/(Royal Bank of
Canada LOC)
4.00%, 07/07/95 4,000 4,000
Triborough Bridge and Tunnel
Authority, New York Special
Obligation Bridge Revenue
Bonds Series 1994/
(FGIC Securities Purchase
Agreement & FGIC Insurance)
3.75%, 07/07/95 6,200 6,200
Yonkers, New York Industrial
Development Authority Civic
Facilities Revenue Bonds
(Consumers Union Facility
Project)/(Industrial Bank of
Japan LOC)
3.95%, 07/07/95 2,200 2,200
--------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $124,600) 124,600
--------
</TABLE>
<PAGE> 15
SchwabFunds(R) 3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
VARIABLE RATE TENDER
OPTION BONDS--3.8%(a)
New York City Tender Option
Custody Receipt Short Mode
(BT-79)/(Bankers Trust
Tender Option)
4.00%, 07/07/95 $7,000 $ 7,000
--------
TOTAL VARIABLE RATE TENDER
OPTION BONDS (Cost $7,000) 7,000
--------
VARIABLE RATE TENDER
OPTION BOND PARTNERSHIPS
--2.9%(a)
New York State
Dormitory Authority
New York University
Industrial Revenue Bonds
(BTP-26)/(Automatic Data
Processing, Inc. Tender
Option & MBIA Insurance)
4.19%, 07/07/95 5,375 5,375
--------
TOTAL VARIABLE RATE TENDER
OPTION BOND PARTNERSHIPS
(Cost $5,375) 5,375
--------
BOND ANTICIPATION
NOTES--5.4%(b)
Broome County, New York
Bond Anticipation Notes
Series 1995-96
4.33%, 04/19/96 3,812 3,832
Nassau County, New York
General Obligation Bond
Anticipation Notes Series
1985B
4.10%, 11/15/95 3,000 3,012
Schenectady, New York
General Obligation Bond
Anticipation Notes Series
1995
4.63%, 02/16/96 3,068 3,079
--------
TOTAL BOND ANTICIPATION NOTES
(Cost $9,923) 9,923
--------
REVENUE ANTICIPATION
NOTES--2.2%(b)
Erie County, New York
Revenue Anticipation Notes
Series 1994-95/(Union Bank
of Switzerland LOC)
4.30%, 08/15/95 4,000 4,002
--------
TOTAL REVENUE ANTICIPATION
NOTES (Cost $4,002) 4,002
--------
REVENUE BONDS--8.5%(b)
New York City, New York
Municipal Assistance Corp.
Revenue Bonds Series 1984-52/
(Escrowed to Maturity with
Government Securities)
4.15%, 07/01/95 1,235 1,260
New York State Dormitory
Authority Special Obligation
Revenue Bonds (State
University) Series 1989B/
(Escrowed to Maturity with
Government Securities)
4.00%, 11/01/95 1,350 1,361
New York State Medical Care
Facility Finance Agency
Revenue Bonds (St. Mary's
Hospital) Series 1985/ (AMBAC
Insurance & Escrowed to
Maturity with Government
Securities)
4.60%, 11/01/95 3,450 3,561
New York State Urban
Development Corp.
Revenue Refunding Bonds
(Correctional Facility)
Series 1986/
(Escrowed to Maturity with
Government Securities)
4.80%, 01/01/96 7,000 7,246
Triborough Bridge and Tunnel
Authority, New York General
Purpose Revenue Bonds Series
1986-1/
(Escrowed to Maturity with
Government Securities)
4.05%, 01/01/96 1,000 1,037
Triborough Bridge and Tunnel
Authority, New York
General Purpose Revenue
Bonds Series I/
(Escrowed to Maturity with
Government Securities)
4.45%, 01/01/96 1,000 1,035
--------
TOTAL REVENUE BONDS
(Cost $15,500) 15,500
--------
TAX ANTICIPATION
NOTES--2.2%(b)
Suffolk County, New York
Tax Anticipation Notes/
(Westdeutsche
Landesbank LOC)
4.55%, 08/15/95 1,000 1,001
Westchester County, New York
Tax Anticipation Notes Series
1995
4.45%, 12/14/95 3,000 3,006
--------
TOTAL TAX ANTICIPATION NOTES
(Cost $4,007) 4,007
--------
</TABLE>
<PAGE> 16
SchwabFunds(R) 4
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------ --------
<S> <C> <C>
TAX-EXEMPT COMMERCIAL
PAPER--7.1%(b)
New York City, New York
Municipal Water Finance
Authority Tax Exempt
Commercial Paper/
(Credit Suisse LOC)
3.60%, 09/07/95 $7,000 $ 7,000
New York State Dormitory
Authority Revenue Bonds
(Memorial Sloan Kettering
Project) Series 1989C/
(Fuji Bank LOC)
3.05%, 09/15/95 6,000 6,000
--------
TOTAL TAX-EXEMPT COMMERCIAL
PAPER
(Cost $13,000) 13,000
--------
TOTAL INVESTMENTS--100.0%
(Cost $183,407) $183,407
========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS.
For each security, cost (for financial reporting and federal income tax
purposes) and carrying value are the same.
(a) Variable rate securities. Interest rates vary periodically based on
current market rates. Rates shown are the effective rates on June 30, 1995.
Dates shown represent the latter of the demand date or next interest rate
change date, which is considered the maturity date for financial reporting
purposes. For variable rate securities without demand features the next
interest reset date is shown.
(b) Interest rates represent effective yield to put or call date at time of
purchase.
Abbreviations
-------------
<TABLE>
<S> <C>
ABN-AMRO Algemene Bank of the Netherlands/Amsterdam-Rotterdam
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
SBPA Standby Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 17
SchwabFunds(R) 5
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $183,407) $183,407
Cash 29
Interest receivable 1,507
Prepaid expenses 3
Deferred organization costs 10
--------
Total assets 184,956
--------
LIABILITIES
Payable for:
Dividends 261
Deferred organization costs 10
Investment advisory and administration fee 66
Other 60
--------
Total liabilities 397
--------
Net assets applicable to outstanding shares $184,559
========
NET ASSETS CONSIST OF:
Capital paid in $184,549
Accumulated net realized gain on investments sold 10
--------
$184,559
========
THE PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 184,549
Net asset value, offering and redemption
price per share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 18
SchwabFunds(R) 6
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENT OF OPERATIONS (in thousands)
For the period February 27, 1995 (commencement of operations) to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Interest income $2,293
------
Expenses:
Investment advisory and administration fee 266
Transfer agency and shareholder service fees 260
Custodian fees 9
Registration fees 29
Professional fees 11
Shareholder reports 12
Amortization of deferred organization costs 1
Insurance and other expenses 2
------
590
Less expenses reduced (249)
------
Total expenses incurred by Fund 341
------
Net investment income 1,952
Net realized gain on investments sold 10
------
Increase in net assets resulting from operations $1,962
======
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 19
SchwabFunds(R) 7
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
For the period February 27, 1995 (commencement of operations) to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Operations:
Net investment income $ 1,952
Net realized gain on investments sold 10
--------
Increase in net assets resulting from operations 1,962
--------
Dividends to shareholders from net investment income (1,952)
--------
Capital Share Transactions (dollar amounts and number of
shares are the same):
Proceeds from shares sold 351,731
Net asset value of shares issued in reinvestment of
dividends 1,661
Less payments for shares redeemed (168,843)
--------
Increase in net assets from capital share transactions 184,549
--------
Total increase in net assets 184,559
Net Assets:
Beginning of period --
--------
End of period $ 184,559
========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 20
SchwabFunds(R) 8
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the period February 27, 1995 (commencement of operations) to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab New York Tax-Exempt Money Fund (the "Fund") is a series of The
Charles Schwab Family of Funds (the "Trust"), an open-end, management investment
company organized as a Massachusetts business trust on October 20, 1989 and
registered under the Investment Company Act of 1940, as amended. The Fund
commenced operations on February 27, 1995.
On May 9, 1995, the Board of Trustees of the Trust adopted a multiple class plan
for the Fund. On July 7, 1995, the Fund began offering more than one class of
shares. Pursuant to the plan, the existing shares were redesignated as Sweep
Shares, and a new class of shares was added -- the Value Advantage Shares. Both
classes represent interests in the same portfolio of investments of the Fund and
are substantially the same in all respects except that the shares are subject to
different transfer agency and shareholder service fees, investment minimums and
certain other expenses.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
the Schwab Government Money Fund, the Schwab U.S. Treasury Money Fund, the
Schwab Tax-Exempt Money Fund, the Schwab California Tax-Exempt Money Fund, the
Schwab Value Advantage Money Fund(R), the Schwab Institutional Advantage Money
FundTM and the Schwab Retirement Money FundTM. The assets of each series are
segregated and accounted for separately.
The Schwab New York Tax-Exempt Money Fund, which is not "diversified" within the
meaning of the Investment Company Act of 1940, as amended, invests in a
portfolio of debt obligations issued by or on behalf of New York and other
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities that
generate interest exempt from federal income tax and State of New York and New
York municipal personal income tax.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions and interest income -- Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis (date
the order to buy or sell is executed). Interest income is recorded on the
accrual basis and includes amortization of premium on investments. Realized
gains and losses from security transactions are determined on an identified cost
basis.
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund, its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
<PAGE> 21
SchwabFunds(R) 9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income and realized net capital gains, if
any, to shareholders. Therefore, no federal income tax provision is required.
The Fund is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreements -- The Trust has investment
advisory and administration agreements with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .46% of
the first $1 billion of average daily net assets, .41% of such assets over $1
billion, and .40% of such assets in excess of $2 billion. Under these
agreements, the Fund incurred investment advisory and administration fees of
$266,000 during the period from February 27, 1995 to June 30, 1995, before the
Investment Manager reduced its fee (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .45% of average daily net assets. For the period
from February 27, 1995 to June 30, 1995, the Fund incurred transfer agency and
shareholder service fees of $260,000, before Schwab reduced its fees (see Note
4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager and/or Schwab. During the period
from February 27, 1995 to June 30, 1995, the Trust made no direct payments to
its officers or trustees who are "interested persons" within the meaning of the
Investment Company Act of 1940, as amended. The Fund did not incur fees related
to the Trust's unaffiliated trustees.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the
period from February 27, 1995 to June 30, 1995, the total of such fees reduced
by the Investment Manager and Schwab was $11,000 and $238,000, respectively.
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the period from
February 27, 1995 to June 30, 1995, aggregated (in thousands) $324,924 and
$141,340, respectively.
<PAGE> 22
SchwabFunds(R) 10
--------------------------------------------------------------------------------
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
NOTES TO FINANCIAL STATEMENTS
For the period February 27, 1995 (commencement of operations) to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
6. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
For the period
February 27, 1995
(commencement
of operations) to
June 30, 1995
(Unaudited)
-----------------
<S> <C>
Net asset value at beginning of period $1.00
Income from Investment Operations
Net investment income .01
Net realized and unrealized gain (loss) on
investments --
--------
Total from investment operations .01
Less Distributions
Dividends from net investment income (.01)
Distributions from realized gain on investments --
--------
Total distributions (.01)
--------
Net asset value at end of period $1.00
========
Total return (%) 1.15
Ratios/Supplemental Data
Net assets, end of period (000s) $ 184,559
Ratio of expenses to average net assets (%) .59*
Ratio of net investment income to average
net assets (%) 3.38*
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees in order
to limit the Fund's ratio of operating expenses to average net assets. Had these
fees not been reduced, the ratio of expenses to average net assets for the
period ended June 30, 1995 would have been 1.02%*, and the ratio of net
investment income to average net assets would have been 2.95%*.
* Annualized
<PAGE> 23
THIS SPACE IS RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 24
THIS SPACE IS RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 25
CAPTURING GROWTH OPPORTUNITIES
DOESN'T HAVE TO BE GUESSWORK.
Large-cap stocks, small-cap stocks, or international stocks? It's difficult to
predict which stock market segment will come out ahead during given time
periods, especially since these markets do not always move in tandem. While one
market segment may be experiencing only moderate growth, others, at the same
time, may be expanding rapidly.
SchwabFunds(R) three equity index funds help you take some of the guesswork out
of equity investing. These Funds provide a way for you to put the growth
potential of all three markets into your portfolio--rather than relying on just
one market. The Funds offer an easy and efficient way to achieve a broad level
of effective equity diversification. In fact, they provide market coverage that
could require investments in many more funds.
SCHWAB 1000 FUND(R) is designed to match the total return of the
[FIGURE 1] Schwab 1000 Index(R), which is comprised of the largest 1,000
publicly traded U.S. companies--the stocks of which represent
about 91% of the total market capitalization of the U.S. stock
market. 1
SCHWAB SMALL-CAP INDEX FUND(TM) is designed to track the total
[FIGURE 2] return of the Schwab Small-Cap Index(TM), which tracks the
performance of smaller-capitalization companies. The Schwab
Small-Cap Index is comprised of the second 1,000 largest publicly
traded companies in the U.S. 1
SCHWAB INTERNATIONAL INDEX FUND(TM) is designed to track the total
[FIGURE 3] return of the Schwab International Index(TM), which is comprised
of 350 of the largest companies, based on market capitalization,
in foreign countries with developed securities markets. 2
You can begin building your diversified equity investment portfolio with the
three SchwabFunds equity index funds by calling Schwab at the toll-free number
below, or by sending back the enclosed postcard. We'll be happy to provide you
with a free prospectus and brochure for the Funds.
EACH PROSPECTUS PROVIDES MORE COMPLETE INFORMATION, INCLUDING CHARGES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE INVESTING.
--------------------------------------------------------------------------------
SCHWAB'S FUNDMAP(TM) SOFTWARE MAKES FUND
SELECTION EASIER.
FundMap Mutual Fund Selection Software for Windows(R) allows you to calculate
your long-term investment needs and can help you to decide how much you may need
to invest in each of the three SchwabFunds equity index funds. 3 You can
explore ways to allocate your assets, even re-evaluate your current strategy and
set up several "what if" scenarios. SchwabFunds and FundMap make it easy for you
to build a diversified portfolio today.
--------------------------------------------------------------------------------
1-800-266-5623
1-800-2 NO-LOAD
1 Each Index consists of publicly traded companies ranked by market
capitalization. Each Index does not include privately held companies,
investment companies and companies incorporated outside of the United
States.
2 The Index is comprised of publicly traded companies ranked by market
capitalization in countries with developed securities markets around the
world. It does not include privately held companies, investment companies,
or companies from the United States.
3 FundMap is available for Schwab customers only. Please allow 2-4 weeks for
delivery.
Windows is a registered trademark of Microsoft Corporation.
<PAGE> 26
--------------
BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
--------------
[SCHWABFUNDS FAMILY(TM) LOGO]
101 Montgomery Street
San Francisco, California 94104
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
CRS 3851 TF3633R (8/95) Printed on recycled paper.
