<PAGE> 1
SCHWABFUNDS(R)
[LOGO]
SCHWAB NEW YORK
TAX-EXEMPT
MONEY FUND-
SWEEP SHARES
SEMI-ANNUAL REPORT
JUNE 30, 1996
[Photo of the Schwab Building, San Francisco, California]
<PAGE> 2
Dear Shareholder,
[Photo of I'd like to take this opportunity to share some thoughts on
Charles mutual fund investing and tell you how we're working to expand
R. Schwab] our services to keep pace with your changing needs.
First, however, I want to extend a personal welcome to the many thousands of
new shareholders who've joined the SchwabFunds Family(R) in the past six
months. With your support, we've become one of the largest and fastest-growing
organizations in the mutual fund industry. Today, Charles Schwab Investment
Management, Inc. serves over 1.8 million shareholders with total assets under
management in excess of $38 billion. In six years, SchwabFunds(R) has grown
from just a few funds to a mutual fund complex offering retail investors 21
funds covering a broad range of financial markets and investing approaches.
NEW INVESTING STRATEGIES. Over the past year, we've introduced five new funds,
each built on specific, time-tested strategies. The Schwab Asset Director(R)
Funds help you diversify your portfolio through asset allocation, the Schwab S&P
500 Fund seeks to track U.S. stock market performance through indexing, and the
Schwab Analytics Fund(TM) uses advanced quantitative methods to identify
attractive investment opportunities. Along with our other offerings, these new
funds give you powerful tools you can use to help construct a custom investment
portfolio that matches your individual goals. And, of course, they also allow
you to tap into the combined investing expertise of our highly experienced team
of professional portfolio managers.
TIME-TESTED INVESTING STRATEGIES THAT OFFER YOU AN EXPANDING RANGE OF
OPPORTUNITIES
ENHANCING SHAREHOLDER COMMUNICATIONS. Our commitment to shareholders goes beyond
simply offering you new investment opportunities. We also want to help you
become a more-informed mutual fund investor by providing the in-depth
information you need to help manage your portfolio more effectively. Toward that
end, we've changed the format of this report to make it more accessible and
informative.
If you'd like more information on any of the funds in the SchwabFunds Family,
call 1-800-2 NO-LOAD (1-800-266-5623). Our representatives will be happy to
provide you with a free prospectus, which contains more complete information on
fund risks, charges and expenses. Please read it carefully before investing.
Thank you for placing your trust in us. We value your confidence in our efforts
to date, and we'll continue working hard to offer you an even broader range of
strategic investment opportunities in the future.
/s/ Charles R. Schwab
Charles R. Schwab
Cover: The Schwab Building, San Francisco, California
<PAGE> 3
[The following is the outside of the envelope.]
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MAILED IN THE
UNITED STATES
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<PAGE> 4
[The following is the inside flap of the envelope.]
SCHWAB MONEYFUNDER
TAKE ADVANTAGE OF THIS OPPORTUNITY TO
ADD TO YOUR SCHWAB MONEY FUND INVESTMENT.
Your Schwab Money Fund earns money market returns and gives you
direct access to many investment opportunities available through
Schwab. By funding your account now, you'll be able to quickly
respond to changing market conditions with just a phone call to your
Schwab representative. And you keep every dollar working for you.
SO DON'T DELAY. USE THIS CONVENIENT
SCHWAB MONEYFUNDER TO SEND YOUR CHECK TODAY!
PLEASE DETACH HERE
SCHWAB MONEYFUNDER
- ------------------
PLEASE ENCLOSE YOUR CHECK AND THIS COMPLETED MONEYFUNDER SLIP
IN THE ATTACHED POSTAGE-PAID ENVELOPE.
- --------------------------------------------- -------------------------
NAME [ ][ ][ ][ ]-[ ][ ][ ][ ]
SCHWAB ACCOUNT NUMBER
$
- ----------------------------------------------
AMOUNT OF INVESTMENT*
[ ] CHECK HERE IF YOU WOULD LIKE MORE SCHWAB MONEYFUNDERS FOR FUTURE USE.
*MINIMUM INITIAL INVESTMENT $1,000, SUBSEQUENT MINIMUM $100, CUSTODIAN & IRA
ACCOUNTS $1. AN INVESTMENT CONSTITUTES THE PURCHASE OF SHARES IN THE MONEY
FUND YOU HAVE PREVIOUSLY CHOSEN AS THE PRIMARY FUND FOR YOUR BROKERAGE ACCOUNT.
SMF MEMBER SIPC (C) 1996 CHARLES SCHWAB & CO., INC. 1280-3 (7/96) PRINTED ON
RECYCLED PAPER.
(LIFT HERE FOR MORE INFORMATION)
<PAGE> 5
[The following is the inside of the envelope.]
CHARLES SCHWAB
JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWAB MONEY FUND:
1. Fill out the Schwab MoneyFunder slip completely, including your name,
account number and the amount of your check. Please use one slip for
each account.
2. Make your check payable to CHARLES SCHWAB & CO., INC., and enclose
your check with the completed slip in this postage-paid envelope.
3. Then just drop your Schwab MoneyFunder in the mail today-and start
putting your money to work! If you have any questions, don't
hesitate to call your local Schwab office or 1-800-2 NO LOAD.
THIS ENVELOPE MUST BE PRECEDED OR
ACCOMPANIED BY A CURRENT SCHWAB
MONEY FUND PROSPECTUS. AN INVESTMENT
IN A FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. THERE CAN BE
NO ASSURANCE THAT A FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE.
<PAGE> 6
[The following is the outside flap of the envelope.]
SCHWAB MONEYFUNDER
KEEP YOUR
MONEY WORKING
HARDER!
Use this envelope to easily add to
your Schwab Money Fund.
CHARLES SCHWAB
<PAGE> 7
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
OVERVIEW ............................................................. 1
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND-
SWEEP SHARES SUMMARY ................................................. 2
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM ........................... 5
GLOSSARY OF TERMS .................................................... 10
PORTFOLIO SUMMARY .................................................... 11
FINANCIAL STATEMENTS AND NOTES ....................................... 12
</TABLE>
OVERVIEW
We're pleased to report on the performance of your investment in the Schwab New
York Tax-Exempt Money Fund-Sweep Shares for the six-month reporting period ended
June 30, 1996. During the reporting period, these shares provided you with
competitive current income exempt from federal income and New York state and
local personal income taxes, 1 combined with capital stability and ready access
to your money.
The Schwab New York Tax-Exempt Money Fund-Sweep Shares seeks to maintain a
stable $1 share price to protect your principal. As with all money funds,
however, there can be no assurance that the Fund will be able to maintain a $1
net asset value per share. It is also important to understand that your
investment is not insured or guaranteed by the U.S. government.
1 Income may be subject to the federal Alternative Minimum Tax (AMT).
1
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SCHWAB NEW YORK TAX-EXEMPT MONEY FUND-
SWEEP SHARES SUMMARY
PERFORMANCE REVIEW
The table below presents the Schwab New York Tax-Exempt Money Fund-Sweep Shares'
7-day average yields at the end of the reporting period. Of course, money market
yields fluctuate and past performance is no guarantee of future results.
7-DAY AVERAGE YIELDS 2
(as of 6/30/96)
<TABLE>
<CAPTION>
Simple Compound Compound Taxable Equivalent 3
- -------------------------------------------------------------------------------
<S> <C> <C>
2.62% 2.65% 4.93%
- -------------------------------------------------------------------------------
</TABLE>
PORTFOLIO COMPOSITION
The chart at the right illustrates the composition of the Fund's portfolio as of
the June 30, 1996 report date. In addition, you'll find a complete listing of
the securities in the Fund's portfolio on June 30, 1996 later in this report.
The Schwab New York Tax-Exempt Money Fund-Sweep Shares primarily invests in
high-quality municipal obligations issued by the state of New York, its
agencies, and municipalities. To minimize credit risk, the Fund primarily has
invested in securities rated in the highest rating category (known as First
Tier) assigned by the requisite number of Nationally Recognized Statistical
Rating Organizations (NRSROs), or securities of equivalent credit quality, if
unrated.
2 A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, the Schwab New York Tax-Exempt
Money Fund-Sweep Shares' 7-day simple yield would have been 2.29%, the 7-day
compound yield would have been 2.32%, and the 7-day compound taxable equivalent
yield would have been 4.32% at June 30, 1996.
3 Taxable equivalent yield assumes a 1996 maximum combined federal income tax,
and New York state and New York city personal income tax rate of 46.27%.
2
<PAGE> 9
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
PORTFOLIO COMPOSITION - JUNE 30, 1996
[The following is a pie-chart depicting the Schwab New York Tax-Exempt Money
Fund Portfolio Composition as of June 30, 1996.]
<TABLE>
<S> <C>
Variable Rate Obligations 68%
Tax-Exempt Commercial Paper 6%
Anticipation Notes 17%
Other 5%
Variable Rate Tender Option
Bonds/Partnerships 4%
</TABLE>
THE OPPORTUNITY FOR HIGHER YIELDS, AFTER TAXES
If you are in a high tax bracket, the triple tax-exempt income which may be paid
by the Schwab New York Tax-Exempt Money Fund-Sweep Shares can provide you with
higher yields than taxable money funds on a taxable equivalent basis. On June
25, 1996, these Sweep Shares' average 7-day simple yield was 2.68% and average
7-day compound yield was 2.71%. 4 Here's how the compound taxable equivalent
yield compared with First Tier taxable money funds on June 25, 1996 for
shareholders in the highest 1996 tax bracket:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Your Sweep Shares' 7-day
compound taxable equivalent yield: 5 5.04%
Average 7-day compound yield for
fully taxable money funds: 6 4.82%
------
Your yield advantage, after taxes: 0.22%
- --------------------------------------------------------------------------------
</TABLE>
4 A portion of the Fund's fees were waived or reimbursed during the reporting
period. Without the waivers or reimbursements, the Schwab New York Tax-Exempt
Money Fund-Sweep Shares' 7-day simple yield would have been 2.35%, the 7-day
compound yield would have been 2.38%, and the 7-day compound taxable equivalent
yield would have been 4.43% at June 25, 1996.
5 Taxable equivalent yield assumes a 1996 maximum combined federal income
tax, and New York state and New York city personal income tax rate of 46.27%.
6 Source: IBC Financial Data's average 7-day simple and compound yields for
the 272 funds in the First Tier category of Taxable Money Funds, as of June 25,
1996. Past performance is no guarantee of future results.
3
<PAGE> 10
GROWTH IN FUND ASSETS AND SHAREHOLDERS
The table below illustrates the growth in the Schwab New York Tax-Exempt Money
Fund-Sweep Shares' total net assets and number of shareholders during the
six-month reporting period.
<TABLE>
<CAPTION>
6/30/96 12/31/95 Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Net Assets (000s) $229,208 $204,863 +12%
- --------------------------------------------------------------------------------
Shareholder Accounts 8,583 6,946 +24%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
KEEP YOUR MONEY WORKING
The Schwab New York Tax-Exempt Money Fund-Sweep Shares can be linked to your
Schwab account to keep all of your money invested and working for you. With this
special "sweep" feature, a balance of $100 or more in your account can be
automatically invested, or "swept," on a regular basis into the Sweep Shares you
select, where it will be available to settle trades and cover other day-to-day
transactions.
- --------------------------------------------------------------------------------
4
<PAGE> 11
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 DURING THE FIRST SIX MONTHS OF 1996?
A. At the beginning of the reporting period, market participants were primarily
concerned about the likelihood of an economic recession. However, as the
six-month reporting period progressed, the economic climate changed, and by June
30, 1996, concern was focused on excessive growth and its potential impact on
future inflation. Following the first quarter of 1996, many economic observers
were surprised by both the size of the increase in the Real Gross Domestic
Product (GDP) growth rate and the strength of the labor market. The Real GDP
growth rate was 2.0% for the first quarter in 1996 and 4.2% for the second
quarter, based on the advance estimate. The average monthly increase in payroll
employment jumped from 185,000 in 1995 to 232,000 during the first six months of
1996. The June hourly wage increase was the largest recorded in history. These
developments have led most market observers to anticipate that the Federal
Reserve (the Fed) may increase the federal funds rate in the near term.
The economy continues to exhibit signs of strong economic growth as evidenced by
strong growth in jobs, retail sales, auto sales, and strong construction
spending despite higher mortgage rates. Although inflation has remained
relatively low, as evidenced by the 2.8% Consumer Price Index (CPI) increase on
a year-over-year basis as of June 1996, there remains a concern that the economy
is performing at or near its employment and manufacturing capacity. As a result,
the Fed is expected to remain diligent in its effort to prevent future increases
in inflation.
5
<PAGE> 12
Q. HOW HAVE THIS YEAR'S ECONOMIC EVENTS IMPACTED SHORT-TERM TAXABLE INTEREST
RATES?
A. Short-term interest rates continued their year long decline during the first
six weeks of 1996. The 90-day commercial paper rate fell from 5.50% on January 2
to 5.12% on February 16. This short-lived decline in interest rates reflected
continuing doubts about the strength of the economy, as well as the Fed's
announcement of a 0.25% reduction in the federal funds rate following its Open
Market Committee meeting in late January. Since mid-February, evidence of
increased productivity and strength in the labor market has led to an upward
trend in short-term interest rates. By June 28, the last business day of the
period, the 90-day commercial paper rate was 5.52%. Many economists believe that
sustained GDP growth and potential inflationary pressures will lead the Fed to
increase the federal funds rate, and current market rates incorporate this
expectation.
Q. HOW HAVE SHORT-TERM TAX-EXEMPT INTEREST RATES RESPONDED TO MOVEMENTS IN
TAXABLE INTEREST RATES DURING THE SIX-MONTH REPORTING PERIOD?
A. In general, differences between interest rate movements for tax-exempt and
taxable securities exist due to differences in supply and demand conditions in
these markets. The supply of tax-exempt securities is more irregular than the
supply of taxable securities since tax-exempt issuers offer securities for
substantially different reasons from those motivating taxable issuers.
Specifically, tax-exempt issuers are usually motivated by budgetary, tax, and
legal considerations. Demand can also be affected by buyers who are sensitive to
changes in interest rates and who enter and exit the tax-exempt market primarily
to earn trading profits by capitalizing on changes in the size of the spread
between taxable and tax-exempt interest rates.
During the first half of 1996, short-term tax-exempt interest rates loosely
tracked taxable interest rates, with variations in the spread between taxable
and tax-exempt interest rates reflecting supply and demand factors in the
municipal market. Specifically, through much of January, low
6
<PAGE> 13
inventories of municipal securities drove tax-exempt interest rates lower
relative to taxable interest rates. In February, as dealer inventories of
municipal securities increased to more typical levels, the spread between
municipal and taxable yields narrowed, returning to a more normal relationship.
This situation, combined with market conditions, resulted in increased Fund
yields later in the period. This upward trend in supply and dealer inventories
continued as the reporting period closed -- issuance activity in the municipal
market increased during the busy June "note season" -- and municipal rates again
began to rise, narrowing the spread between municipal and taxable yields. These
movements in tax-exempt interest rates during the six-month reporting period are
illustrated in the chart below.
SHORT-TERM MUNICIPAL INTEREST RATES
IN THE FIRST HALF OF 1996
YIELDS
90-Day Municipal Commercial Paper
January 2, 1996 - June 28, 1996
90-Day
Municipal
Commercial
Paper Yield
[The following is a line graph comparing the Short-Term Municipal Interest
Rates in the First Half of 1996 yields for 90-Day Municipal Commercial Paper.]
<TABLE>
<S> <C>
1/02/96 3.25%
1/03/96 3.30%
1/04/96 3.30%
1/05/96 3.15%
1/08/96 3.25%
1/09/96 3.25%
1/10/96 3.25%
1/11/96 3.30%
1/12/96 3.25%
1/15/96 3.25%
1/17/96 3.20%
1/18/96 3.20%
1/19/96 3.15%
1/22/96 3.15%
1/23/96 3.20%
1/24/96 3.20%
1/25/96 3.30%
1/26/96 3.40%
1/29/96 3.40%
1/30/96 3.35%
1/31/96 3.35%
2/01/96 3.30%
2/02/96 3.00%
2/05/96 3.00%
2/06/96 3.00%
2/07/96 3.15%
2/08/96 3.15%
2/09/96 3.20%
2/12/96 3.20%
2/13/96 3.20%
2/14/96 3.20%
2/15/96 3.20%
2/16/96 3.20%
2/20/96 3.20%
2/21/96 3.20%
2/22/96 3.20%
2/23/96 3.20%
2/26/96 3.20%
2/27/96 3.20%
2/28/96 3.20%
2/29/96 3.20%
3/01/96 3.25%
3/04/96 3.25%
3/05/96 3.20%
3/06/96 3.10%
3/07/96 3.15%
3/08/96 3.25%
3/11/96 3.30%
3/12/96 3.30%
3/11/96 5.31%
3/12/96 5.32%
3/13/96 5.34%
3/14/96 5.34%
3/15/96 5.34%
3/18/96 5.36%
3/19/96 5.36%
3/20/96 5.36%
3/21/96 5.35%
3/22/96 5.35%
3/25/96 5.37%
3/26/96 5.36%
3/27/96 5.37%
3/28/96 5.39%
3/29/96 5.38%
4/1/96 5.36%
4/2/96 5.36%
4/3/96 5.36%
4/4/96 5.36%
4/5/96 5.36%
4/8/96 5.40%
4/9/96 5.41%
4/10/96 5.41%
4/11/96 5.41%
4/12/96 5.41%
4/15/96 5.41%
4/16/96 5.40%
4/17/96 5.39%
4/18/96 5.39%
4/19/96 5.38%
4/22/96 5.38%
4/23/96 5.38%
4/24/96 5.38%
4/25/96 5.38%
4/26/96 5.38%
4/29/96 5.38%
4/30/96 5.39%
5/1/96 5.40%
5/2/96 5.41%
5/3/96 5.41%
5/6/96 5.41%
5/7/96 5.41%
5/8/96 5.41%
5/9/96 5.40%
5/10/96 5.39%
5/13/96 5.38%
5/14/96 5.38%
5/15/96 5.38%
5/16/96 5.38%
5/17/96 5.38%
5/20/96 5.38%
5/21/96 5.37%
5/22/96 5.37%
5/23/96 5.37%
5/24/96 5.37%
5/27/96 5.37%
5/28/96 5.37%
5/29/96 5.37%
5/30/96 5.39%
5/31/96 5.40%
6/3/96 5.43%
6/4/96 5.42%
6/5/96 5.42%
6/6/96 5.41%
6/7/96 5.50%
6/10/96 5.51%
6/11/96 5.50%
6/12/96 5.49%
6/13/96 5.49%
6/14/96 5.49%
6/17/96 5.50%
6/18/96 5.50%
6/19/96 5.50%
6/20/96 5.50%
6/21/96 5.50%
6/24/96 5.51%
6/25/96 5.50%
6/26/96 5.50%
6/27/96 5.51%
6/28/96 5.52%
</TABLE>
Source: Lehman Brothers, Inc.
7
<PAGE> 14
Q. HOW HAS THE PORTFOLIO MANAGEMENT TEAM ADJUSTED THE FUND'S PORTFOLIO TO
RESPOND TO CHANGES IN THE INTEREST RATE ENVIRONMENT?
A. As the reporting period began, the dollar-weighted average maturity of the
Schwab New York Tax-Exempt Money Fund was 47 days -- a figure reflecting the
relatively large supply and higher yields of New York municipal money market
instruments. Starting in mid-January, a reduction in the supply and yields of
New York municipal securities led to a corresponding reduction in the Fund's
average maturity -- to 38 days. Shortening the Fund's dollar-weighted average
maturity prevents the Fund from being locked into lower rates and allows the
flexibility to buy higher-yielding securities as interest rates rise. Improved
supply conditions in late February allowed for a gradual extension of average
maturity to approximately 64 days by the end of May. The Fund's average maturity
at the close of the reporting period was 54 days.
Q. WHAT STANDARDS DOES THE PORTFOLIO MANAGEMENT TEAM USE IN SELECTING SECURITIES
FOR THE PORTFOLIO?
A. Money market funds are required by law to hold high-quality securities in
their portfolios. For the Schwab New York Tax-Exempt Money Fund, we have
continued to take the additional step of only investing in what are referred to
as First Tier securities. In general, a First Tier security is a security that
provides certain maturity limits and carries the highest credit rating from the
required number of Nationally Recognized Statistical Rating Organizations
(NRSROs); if unrated, it must be deemed to be of comparable quality according to
guidelines approved by the Board of Trustees of The Charles Schwab Family of
Funds.
Certain securities owned by the Fund are insured or are backed by a letter of
credit issued by a First Tier financial institution. These arrangements are
frequently referred to as "credit enhancements" because they provide incremental
levels of creditworthiness in addition to the underlying strength of the primary
issuer. Insurance companies and financial institutions providing credit
enhancements are reviewed by Charles Schwab Investment Management as a regular
part of our thorough credit review procedures for all portfolio securities and
issuers.
8
<PAGE> 15
Q. WHAT CHANGES HAVE OCCURRED IN NEW YORK'S ECONOMIC CLIMATE DURING THE
SIX-MONTH REPORTING PERIOD?
A. New York's creditworthiness is supported by a diverse economic base and the
central role New York City continues to play as a focus for international
finance, tourism, and other service-related businesses. The state entered the
last recession earlier than others, and its recovery has been significantly
slower and less robust. At the current growth rate, New York may not reach
pre-recession employment levels until late 1997. Economic growth may continue to
be constrained by ongoing structural changes in the economy, corporate
downsizing and relocation, cutbacks in defense spending, and high levels of
public assistance.
In spite of reported budgetary surpluses in 1993, 1994, and 1996, the state
still faces the challenge of resolving a general fund deficit of more than $2.3
billion. In early July 1996, after the longest delay in the state's history,
Governor George Pataki and the legislature agreed on a 1997 budget that will
result in slightly higher New York state spending than in 1996. The success of
this budget will depend largely on the state's ability to achieve forecast
levels of economic growth and implement its budget strategies in a smooth and
timely fashion. Growth forecasts notwithstanding, New York's economy continues
to be somewhat sluggish, and major delays in adoption of the budget, and other
administrative roadblocks, make it difficult for the state to implement many of
the new policies. Therefore, the state is unlikely to reverse its general fund
deficit within the next twelve months.
We are satisfied with the credit quality of the New York securities which the
Fund currently owns, and we will continue to monitor the state's economic
situation. New York's current long-term credit ratings are A from Moody's
Investor Service, A- from Standard & Poor's Corporation, and A+ from Fitch
Investors Services, Inc., three well-known rating agencies.
9
<PAGE> 16
GLOSSARY OF TERMS
COMMERCIAL PAPER Short-term, interest-paying obligations with maturities ranging
up to 270 days, issued by banks, corporations, and other borrowers.
CREDIT ENHANCEMENTS A bank letter of credit, purchase agreement, insurance, or
line of credit that provides an additional level of creditworthiness for debt
securities to supplement the financial strength of the issuer.
DOLLAR-WEIGHTED AVERAGE MATURITY A measure of the average maturity of a mutual
fund's entire portfolio, weighted by the value of its individual holdings.
FEDERAL FUNDS RATE A key interest rate charged by banks when lending money to
other banks overnight.
FEDERAL RESERVE The central bank of the United States that establishes policies
on bank reserves and regulations, determines the discount rate, and tightens or
loosens the availability of credit.
FIRST TIER SECURITY A security that matures within certain recognized limits and
carries the top credit rating from the requisite number of NRSROs, or if
unrated, is of equivalent credit quality.
HIGH-QUALITY SECURITY A security ranked in the highest two rating categories by
an NRSRO, or if unrated, is of equivalent credit quality.
MATURITY The length of time before which the issuer of a debt security must
repay the principal amount.
NRSRO A Nationally Recognized Statistical Rating Organization, such as Standard
& Poor's or Moody's Investor Services, which evaluates and rates the credit
quality of securities.
TAXABLE EQUIVALENT YIELD The return you would have to realize on a fully taxable
investment in order to equal a specified tax-exempt yield; this hypothetical
yield varies according to your income tax bracket.
YIELD The rate of return, usually dividend or interest payments, on an
investment, expressed as a percentage of market price.
10
<PAGE> 17
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
PORTFOLIO SUMMARY (Unaudited)
ASSET GROWTH
<TABLE>
<CAPTION>
Total Total Percentage
Net Assets Net Assets Growth Over
as of 6/30/96 as of 12/31/95 Reporting
(000s) (000s) Period
- --------------------------------------------------
<S> <C> <C>
$ 258,693 $220,006 18%
- --------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED JUNE 30, 1996
SWEEP SHARES
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Months Twelve Months
- --------------------------------------------------
<S> <C> <C>
2.62% 2.77% 2.91%
- --------------------------------------------------
</TABLE>
VALUE ADVANTAGE SHARES
<TABLE>
<CAPTION>
Last Last Last
Seven Days Three Months Twelve Months
- --------------------------------------------------
<S> <C> <C>
2.86% 3.01% N/A
- --------------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
Maturity Range 9/30/95 12/31/95 3/31/96 6/30/96
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
0 - 15 Days 72.2% 68.4% 67.6% 72.0%
16 - 30 Days 0.0 0.0 2.7 2.3
31 - 60 Days 4.0 11.7 0.0 7.8
61 - 90 Days 1.5 0.0 16.0 0.0
91 - 120 Days 4.8 3.1 1.7 1.4
Over 120 Days 17.5 16.8 12.0 16.5
Weighted Average 50 Days 48 Days 44 Days 54 Days
- -----------------------------------------------------------------
</TABLE>
11
<PAGE> 18
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
------- --------
<S> <C> <C>
VARIABLE RATE OBLIGATIONS--68.28%(a)
Albany, New York Industrial Development Agency
Adjustable Rate Revenue Bonds (Newkirk Products, Inc.)
Series 1995A/(Fleet Bank of New York LOC)
3.35%, 07/07/96 $1,000 $1,000
Babylon, New York General Obligation Bonds Series B/
(Bank of Nova Scotia SBPA & AMBAC Insurance)
3.10%, 07/07/96 5,600 5,600
Babylon, New York Industrial Development Agency Revenue
Bonds (General Microwave)/(National Westminster Bank
LOC)
3.15%, 07/07/96 2,000 2,000
Cortland County, New York Industrial Development Agency
Revenue Bonds (General Signal Corp. Project) Series
1983/(Wachovia Bank LOC)
3.15%, 07/07/96 1,750 1,750
Erie County, New York Water Authority Revenue Bonds
Series 1993B/(Industrial Bank of Japan SBPA & AMBAC
Insurance)
3.10%, 07/07/96 1,400 1,400
Franklin County, New York Industrial Development Agency
Revenue Bonds (Kes Chateaugay LP Project) Series A/
(Bank of Tokyo-Mitsubishi LOC)
3.40%, 07/07/96 3,000 3,000
Geneva, New York Industrial Development Agency Civic
Facility Revenue Bonds (Colleges of The Seneca) Series
1993A/(Sumitomo Bank LOC)
3.50%, 07/07/96 2,410 2,410
Monroe County, New York Industrial Development Agency
Revenue Bonds (ENBI Corp. Lease Rent Project) Series
1988/(ABN-AMRO Bank LOC)
3.20%, 07/07/96 2,000 2,000
New Rochelle, New York Industrial Development Agency
Revenue Bonds (Chas Sadek Import Corp.)/
(Bank of New York LOC)
3.20%, 07/07/96 5,500 5,500
New York City, New York Cultural Trust Resource Revenue
Adjustable Bonds (American Museum of Natural History)
Series 1991B/(MBIA Insurance & Credit Suisse SBPA)
3.10%, 07/07/96 800 800
New York City, New York General Obligation Bonds Series
1993 Subseries A-8B/(Sanwa Bank LOC)
3.65%, 07/01/96 1,415 1,415
</TABLE>
12
<PAGE> 19
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- --------
<S> <C> <C>
New York City, New York General Obligation Bonds Series
1994B Subseries B-4/(MBIA Insurance &
National Westminster Bank SBPA)
3.60%, 07/07/96 $ 1,000 $ 1,000
New York City, New York General Obligation Bonds Series
1995B Subseries B-2/(Bank of Austria SBPA & MBIA
Insurance)
3.60%, 07/01/96 300 300
New York City, New York General Obligation Bonds Series
1995B Subseries B-8/(Bank of Tokyo-Mitsubishi LOC)
3.25%, 07/07/96 1,500 1,500
New York City, New York Housing Development Corp.
Multi Family Housing Mortgage Revenue Bonds
(Columbus Gardens Project) Series 1993A/(Citibank LOC)
3.10%, 07/07/96 3,465 3,465
New York City, New York Housing Development Corp.
Multi Family Housing Mortgage Revenue Bonds
(Parkgate Tower Project)/(Citibank LOC)
3.15%, 07/07/96 3,000 3,000
New York City, New York Housing Development Corp. Multi
Family Housing Mortgage Revenue Bonds
(Tribeca Towers Project) Series 1994A/
(FNMA Collateral Investment Agreement)
3.20%, 07/07/96 4,100 4,100
New York City, New York Housing Development Corp.
Variable Rate Demand Special Obligation Revenue Bonds
(East 96th Street Project) Series 1990A/(Bank of
Tokyo-Mitsubishi LOC)
3.30%, 07/07/96 10,300 10,300
New York City, New York Industrial Development Agency
Revenue Bonds (White Plains Auto)/
(Societe Generale LOC)
3.25%, 07/07/96 300 300
New York City, New York Municipal Water Finance
Authority Water & Sewer System Revenue Bonds Series
1994C/(FGIC Insurance & FGIC SPA)
3.60%, 07/01/96 1,600 1,600
New York City, New York Municipal Water Finance
Authority Water & Sewer System Revenue Bonds Series
1995A/(FGIC Insurance & FGIC SPA)
3.75%, 07/01/96 2,000 2,000
New York State Dormitory Authority Revenue Bonds
(Cornell University) Series 1990B/(Morgan Guaranty
Trust LOC)
3.45%, 07/07/96 2,900 2,900
</TABLE>
13
<PAGE> 20
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
------- --------
<S> <C> <C>
New York State Dormitory Authority Revenue Bonds
(Masonic Hall Asylum)/(AMBAC Insurance &
Credit Local de France SBPA)
3.10%, 07/07/96 $ 9,700 $ 9,700
New York State Dormitory Authority Revenue Bonds (New
York Public Library) Series 1992B/
(Canadian Imperial Bank of Commerce LOC)
3.00%, 07/07/96 1,500 1,500
New York State Energy Research & Development Authority
Electric Facilities Revenue Bonds (Long Island
Lighting Co. Project) Series 1993B/(Toronto-Dominion
Bank LOC)
3.05%, 07/07/96 6,000 6,000
New York State Energy Research & Development Authority
Electric Facilities Revenue Bonds (Long Island
Lighting Co. Project) Series 1994A/(Union Bank of
Switzerland LOC)
3.00%, 07/07/96 1,500 1,500
New York State Energy Research & Development Authority
Pollution Control Revenue Refunding Bonds (New York
Electric & Gas) Series 1994C/(Morgan Guaranty Trust
LOC)
3.55%, 07/01/96 3,200 3,200
New York State Energy Research & Development Authority
Pollution Control Revenue Refunding Bonds (Orange &
Rockland Utilities, Inc. Project) Series 1994A/
(FGIC Insurance & Societe Generale SBPA)
3.10%, 07/07/96 8,100 8,100
New York State Energy Research & Development Authority
Pollution Control Revenue Bonds (Central Hudson Gas &
Electric Corp. Project) Series 1985A/(J.P. Morgan
Delaware LOC)
3.05%, 07/07/96 10,000 10,000
New York State Energy Research & Development Authority
Pollution Control Revenue Bonds (Niagara Mohawk Power)
Series 1985A/(Toronto-Dominion Bank LOC)
3.70%, 07/01/96 2,900 2,900
New York State Energy Research & Development Authority
Pollution Control Revenue Refunding Bonds (New York
Energy & Gas) Series B/(Union Bank of Switzerland LOC)
3.45%, 07/01/96 400 400
New York State Energy Research & Development Authority
Pollution Control Revenue Refunding Bonds (Niagara
Mohawk Power) Series 1987/(Morgan Guaranty Trust LOC)
3.80%, 07/07/96 300 300
</TABLE>
14
<PAGE> 21
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- --------
<S> <C> <C>
New York State Housing Finance Agency Multi Family
Housing Revenue Bonds (Normandie Court II) Series
1987A/(Fleet Bank of New York LOC)
3.30%, 07/07/96 $ 4,900 $ 4,900
New York State Housing Finance Agency Revenue Bonds
(East 84th Street Project) Series 1995A/(Fleet Bank of
New York LOC)
3.30%, 07/07/96 5,000 5,000
New York State Housing Finance Agency Revenue Bonds
(Mount Sinai School of Medicine) Series 1984A/(Sanwa
Bank LOC)
3.00%, 07/07/96 5,900 5,900
New York State Local Government Assistance Corp. Revenue
Bonds Series 1993A/(Credit Suisse, Swiss Bank &
Union Bank of Switzerland LOC)
3.10%, 07/07/96 6,100 6,100
New York State Local Government Assistance Corp.
Revenue Bonds Series 1994B/(Credit Suisse &
Swiss Bank LOC)
3.00%, 07/07/96 14,200 14,200
New York State Local Government Assistance Corp.
Revenue Bonds Series 1995B/(Bank of Nova Scotia LOC)
3.10%, 07/07/96 1,200 1,200
New York State Local Government Assistance Corp.
Revenue Bonds Series 1995F/
(Toronto-Dominion Bank LOC)
3.05%, 07/07/96 1,800 1,800
New York State Local Government Assistance Corp. Revenue
Bonds Series 1995G/(National Westminster Bank LOC)
3.10%, 07/07/96 4,000 4,000
New York State Medical Care Facilities Financing Agency
Revenue Bonds (Pooled Equipment Loan Program) Series
1/(Chemical Bank LOC)
3.40%, 07/07/96 2,200 2,200
Niagara County, New York Industrial Development Agency
Revenue Bonds (Allegheny Ludlum Steel Co.) Series
1984/(PNC Bank LOC)
3.05%, 07/07/96 3,500 3,500
Niagara Falls, New York Bridge Commission Revenue Bonds
Series 1993A/(FGIC Insurance & Industrial Bank of
Japan SBPA)
3.10%, 07/07/96 6,400 6,400
Port Authority of New York & New Jersey Special
Obligation Revenue Bonds Series 1993/(Deutsche Bank
LOC)
3.10%, 07/07/96 4,000 4,000
</TABLE>
15
<PAGE> 22
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
------- --------
<S> <C> <C>
Port Authority of New York & New Jersey Special
Obligation Versatile Structure Obligation Revenue
Bonds Series 2/(Morgan Guaranty Trust LOC)
3.50%, 07/07/96 $1,300 $ 1,300
Puerto Rico--Puerto Rico Government Development Bank
Revenue Refunding Bonds Series 1985/(Credit Suisse
LOC)
3.00%, 07/07/96 5,000 5,000
Schenectady, New York Industrial Development Agency
Revenue Bonds (Fortitech Holding Corp. Project)
Series A/(Fleet Bank of New York LOC)
3.35%, 07/07/96 1,500 1,500
St. Lawrence County, New York Industrial Development
Agency Environmental Improvement Revenue Bonds
(Reynolds Metals Project) Series 1995/(Royal Bank of
Canada LOC)
3.35%, 07/07/96 4,000 4,000
Yonkers, New York Industrial Development Agency Civic
Facilities Revenue Bonds (Consumers Union Facility
Project) Series 1989/(Industrial Bank of Japan LOC)
3.55%, 07/07/96 1,500 1,500
Yonkers, New York Industrial Development Agency Civic
Facilities Revenue Bonds (Consumers Union Facility
Project) Series 1991/(Industrial Bank of Japan LOC)
3.55%, 07/07/96 700 700
Yonkers, New York Industrial Development Agency Civic
Facilities Revenue Bonds (Consumers Union Facility
Project) Series 1994/(AMBAC Insurance & Credit Local
de France SBPA)
3.20%, 07/07/96 1,700 1,700
--------
TOTAL VARIABLE RATE OBLIGATIONS
(Cost $175,840) 175,840
--------
VARIABLE RATE TENDER OPTION
BONDS--1.59%(a)
New York City, New York General Obligation Bonds
(Citi-1I)/(AMBAC Insurance, Escrowed to Maturity with
Government Securities & Citibank Tender Option)
3.45%, 07/07/96 4,100 4,100
-------
TOTAL VARIABLE RATE TENDER OPTION BONDS
(Cost $4,100) 4,100
-------
</TABLE>
16
<PAGE> 23
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par Value
------- --------
<S> <C> <C>
VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS--2.09%(a)(c)
New York State Dormitory Authority, New York University
Insured Revenue Bonds (BTP-26)/(Automated Data
Processing, Inc. Tender Option & MBIA Insurance)
3.45%, 07/07/96 $5,375 $ 5,375
------
TOTAL VARIABLE RATE TENDER OPTION
BOND PARTNERSHIPS (Cost $5,375) 5,375
------
BOND ANTICIPATION NOTES--9.82%(b)
Broome County, New York Bond Anticipation Notes Series
1996-97
3.75%, 04/17/97 7,500 7,521
Dutchess County, New York Bond Anticipation Notes Series
1995-96
3.75%, 08/02/96 2,825 2,826
Dutchess County, New York Bond Anticipation Notes Series
1996B
3.15%, 02/28/97 2,300 2,305
Monroe County, New York Bond Anticipation Notes Series
1996-97
3.65%, 06/06/97 7,560 7,618
Rochester, New York General Obligation Bond Anticipation
Notes Series 1995I
3.80%, 10/31/96 5,000 5,007
------
TOTAL BOND ANTICIPATION NOTES (Cost $25,277) 25,277
------
GENERAL OBLIGATIONS--1.88%(b)
Buffalo, New York Unlimited General Obligation Bonds/
(MBIA Insurance)
3.50%, 12/01/96 1,824 1,828
Erie County, New York General Obligation Revenue
Anticipation Notes Series 1996A/(Union Bank of
Switzerland LOC)
3.60%, 04/17/97 2,500 2,512
Williamsville, New York Consolidated School District
Unlimited General Obligation Bonds/(FSA Insurance)
3.70%, 05/01/97 500 507
------
TOTAL GENERAL OBLIGATIONS (Cost $4,847) 4,847
------
</TABLE>
17
<PAGE> 24
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Par Value
------- --------
<S> <C> <C>
MANDATORY PUT BONDS--3.37%(b)
New York State Environmental Research & Development
Agency Pollution Control Revenue Bonds (Long Island
Lighting Co. Project) Series 1985B/(Deutsche Bank LOC)
3.25%, 03/01/97 $ 5,000 $ 5,000
New York State Mortgage Agency Revenue Put Bonds Series
1996-16th
3.25%, 07/01/96 3,680 3,680
-------
TOTAL MANDATORY PUT BONDS (Cost $8,680) 8,680
-------
REVENUE ANTICIPATION NOTES--3.90%(b)
Rockland County, New York Revenue Anticipation Notes
Series 1996
3.73%, 05/16/97 10,000 10,044
-------
TOTAL REVENUE ANTICIPATION NOTES
(Cost $10,044) 10,044
-------
TAX ANTICIPATION NOTES--3.11%(b)
Suffolk County, New York General Obligation Tax Anticipation
Notes Series 1996I/(Multiple Credit Enhancements)
3.20%, 08/15/96 8,000 8,008
-------
TOTAL TAX ANTICIPATION NOTES (Cost $8,008) 8,008
-------
TAX-EXEMPT COMMERCIAL PAPER--5.96%(b)
New York City, New York General Obligation Bonds Fiscal
1994 Series B-4/(AMBAC Insurance & Kredietbank SBPA)
3.20%, 08/13/96 1,500 1,500
New York City, New York Municipal Water Finance
Authority Tax-Exempt Commercial Paper/(Credit Suisse
LOC)
3.35%, 07/24/96 6,000 6,000
New York City, New York Municipal Water Finance
Authority Tax-Exempt Commercial Paper Series
1995/(Canadian Imperial Bank of Commerce LOC)
3.70%, 08/08/96 1,850 1,850
New York State Dormitory Authority Revenue Bonds
(Memorial Sloan Kettering Project) Series
1989C/(Chemical Bank LOC)
3.35%, 08/19/96 6,000 6,000
-------
TOTAL TAX-EXEMPT COMMERCIAL PAPER
(Cost $15,350) 15,350
-------
TOTAL INVESTMENTS--100.0% (Cost $257,521) $257,521
========
</TABLE>
18
<PAGE> 25
- ------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
June 30, 1996 (Unaudited)
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,
1996. 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.
(c) Certain securities purchased by the Fund are private placement
securities exempt from registration by Section 4(2) of the Securities
Act of 1933. These securities generally are sold to institutional
investors, such as the Schwab New York Tax-Exempt Money Fund. Any
resale by the Fund must be in an exempt transaction, normally to a
qualified institutional buyer. At June 30, 1996, the aggregate value
of private placement securities held by the Fund was $5,375,000 which
represented 2.08% of net assets. All of these private placement
investments were determined by the Investment Manager to be liquid in
accordance with a resolution adopted by the Board of Trustees relating
to Rule 144A, promulgated under the Securities Act of 1933.
<TABLE>
<CAPTION>
Abbreviations
-------------
<S> <C>
AMBAC AMBAC Indemnity Corporation
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corporation
SBPA Standby Purchase Agreement
SPA Securities Purchase Agreement
</TABLE>
See accompanying Notes to Financial Statements.
19
<PAGE> 26
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
June 30, 1996 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost: $257,521) $257,521
Cash 13
Interest receivable 1,397
Receivable for Fund shares sold 769
Deferred organization costs 20
Prepaid expenses 66
--------
Total assets 259,786
--------
LIABILITIES
Payable for:
Dividends 247
Fund shares redeemed 762
Investment advisory and administration fee 9
Transfer agency and shareholder service fees 18
Other 57
--------
Total liabilities 1,093
--------
Net assets applicable to outstanding shares $258,693
========
NET ASSETS CONSIST OF:
Capital paid in $258,709
Accumulated net realized loss on investments sold (16)
--------
$258,693
========
PRICING OF SHARES
$0.00001 par value (unlimited shares authorized)
Outstanding Sweep Shares 229,222
Outstanding Value Advantage Shares 29,487
--------
258,709
Net asset value, offering and redemption price per
each Sweep Share and Value Advantage Share $1.00
</TABLE>
See accompanying Notes to Financial Statements.
20
<PAGE> 27
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (in thousands)
Six months ended June 30, 1996 (Unaudited)
<TABLE>
<S> <C>
Interest income $4,101
------
Expenses:
Investment advisory and administration fee 557
Transfer agency and shareholder service fees:
Sweep Shares 495
Value Advantage Shares 28
Custodian fees 79
Registration fees 49
Professional fees 11
Shareholder reports 16
Trustees' fees 1
Amortization of deferred organization costs 3
Insurance and other expenses 2
------
1,241
Less expenses reduced and absorbed (432)
------
Total expenses incurred by Fund 809
------
Net investment income 3,292
Net realized loss on investments sold (10)
------
Increase in net assets resulting from operations $3,282
======
</TABLE>
See accompanying Notes to Financial Statements.
21
<PAGE> 28
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Six months
ended Period
June 30, ended
1996 December 31,
(Unaudited) 1995*
----------- ------------
<S> <C> <C>
Operations:
Net investment income $ 3,292 $ 5,167
Net realized loss on investments
sold (10) (6)
--------- ---------
Increase in net assets resulting
from operations 3,282 5,161
--------- ---------
Dividends to shareholders from
net investment income:
Sweep Shares (2,966) (5,046)
Value Advantage Shares (326) (121)
--------- ---------
Total dividends to shareholders (3,292) (5,167)
--------- ---------
Capital share transactions
(at $1.00 per share):
Proceeds from shares sold 472,559 692,976
Net asset value of shares issued in
reinvestment of dividends 3,826 4,181
Less payments for shares redeemed (437,688) (477,145)
--------- ---------
Increase in net assets from
capital share transactions 38,697 220,012
--------- ---------
Total increase in net assets 38,687 220,006
Net assets:
Beginning of period 220,006 --
--------- ---------
End of period $ 258,693 $ 220,006
========= =========
</TABLE>
* For the period February 27, 1995 (commencement of operations) to December 31,
1995.
See accompanying Notes to Financial Statements.
22
<PAGE> 29
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1996 (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") a no-load, open-end investment
management company organized as a Massachusetts business trust on October 20,
1989 and registered under the Investment Company Act of 1940, as amended.
The Fund offers multiple classes of shares -- the Sweep Shares ("Sweep Shares")
and the Value Advantage Shares ("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 classes are subject to
different transfer agency and shareholder service fees (see Note 3), investment
minimums and certain other expenses.
In addition to the Fund, the Trust also offers -- the Schwab Money Market Fund,
Schwab Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab Tax-Exempt
Money Fund (Sweep and Value Advantage Shares), Schwab California Tax-Exempt
Money Fund (Sweep and Value Advantage Shares), Schwab Value Advantage Money
Fund(R), Schwab Institutional Advantage Money Fund(R) and the Schwab Retirement
Money Fund(R). The assets of each series are segregated and accounted for
separately.
The Schwab New York Tax-Exempt Money Fund, which is not a "diversified"
investment company 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
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. 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.
23
<PAGE> 30
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1996 (Unaudited)
Security valuation -- Investments are stated at amortized cost which
approximates market value.
Security transactions -- Security transactions are accounted for on a trade date
basis (date the order to buy or sell is executed).
Dividends to shareholders -- The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly. Dividends paid by the Fund
with respect to each class of shares are calculated in the same manner, at the
same time, and will be in the same amount except for the effect of expenses that
may be applied differently, as described below.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund and 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. Expenses attributable to both
classes of shares are allocated daily to each class based on the value of
settled shares outstanding of each respective class. Transfer agency,
shareholder service fees and certain other expenses which are class specific are
calculated daily at the class level.
Interest income and realized gains (losses) -- 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. Income and realized gains (losses) are allocated daily to each class of
shares based on the value of settled shares outstanding of each respective
class.
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.
24
<PAGE> 31
- ------------------------------------------------------------------------------
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
$557,000 for the six months ended June 30, 1996, 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% and .25% of average daily net assets of the
Sweep Shares and Value Advantage Shares, respectively. For the six months ended
June 30, 1996, the Fund incurred transfer agency and shareholder service fees of
$495,000 and $28,000 for the Sweep Shares and Value Advantage Shares
respectively, before Schwab reduced its fees (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager and/or Schwab. During the
six months ended June 30, 1996, 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 incurred fees of $1,000
related to the Trust's unaffiliated trustees.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees and absorbed
certain expenses in order to limit the Fund's ratio of operating expenses to
average net assets. For the six months ended June 30, 1996, the total of such
fees and expenses reduced and absorbed by the Investment Manager were $316,000
and the total of such fees reduced by Schwab was $116,000.
25
<PAGE> 32
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1996 (Unaudited)
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities during the six months
ended June 30, 1996, aggregated (in thousands) $262,542 and $223,926,
respectively.
6. CAPITAL SHARE TRANSACTIONS
The Fund offers two classes of shares: Sweep Shares and Value Advantage Shares.
Shares of each class represent interests in the same portfolio of investments of
the Fund. Transactions in capital shares were as follows (in thousands):
<TABLE>
<CAPTION>
Six months
ended
June 30, Period ended
1996 December 31,
(Unaudited) 1995*
----------- ------------
<S> <C> <C>
Proceeds from shares sold:
Sweep Shares $ 430,106 $ 671,692
Value Advantage Shares 42,453 21,284
----------- ------------
Total 472,559 692,976
Net asset value of shares issued in
reinvestment of dividends:
Sweep Shares 3,495 4,126
Value Advantage Shares 331 55
----------- ------------
Total 3,826 4,181
Less payments for shares redeemed:
Sweep Shares (409,248) (470,949)
Value Advantage Shares (28,440) (6,196)
----------- ------------
Total (437,688) (477,145)
Total increase in net assets from
capital share transactions $ 38,697 $ 220,012
========== ==========
</TABLE>
- ---------------
* The Sweep Shares commenced operations on February 27, 1995 and the Value
Advantage Shares commenced operations on July 7, 1995.
26
<PAGE> 33
- ------------------------------------------------------------------------------
7. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
Sweep Shares Value Advantage Shares
------------------------- -------------------------
Six months Six months
ended Period ended Period
June 30, ended June 30, ended
1996 December 31, 1996 December 31,
(Unaudited) 1995(1) (Unaudited) 1995(2)
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from
- -----------
investment operations
---------------------
Net investment income .01 .03 .01 .02
Net realized and
unrealized gain (loss)
on investments -- -- -- --
-------- -------- ------- --------
Total from
investment operations .01 .03 .01 .02
Less distributions
- ------------------
Dividends from
net investment income (.01) (.03) (.01) (.02)
Distributions from
realized gain on
investments -- -- -- --
-------- -------- ------- --------
Total distributions (.01) (.03) (.01) (.02)
-------- -------- ------- --------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ========
Total return (%) 1.35 2.75 1.47 1.62
- ----------------
Ratios/Supplemental data
- ------------------------
Net assets, end of
period (000s) $ 229,208 $204,863 $29,485 $ 15,143
Ratio of expenses to
average net assets (%) .69* .63* .45* .45*
Ratio of net investment
income to average
net assets (%) 2.70* 3.20* 2.94* 3.42*
</TABLE>
Continued on next page.
- ---------------
(1) For the period February 27, 1995 (commencement of operations) to December
31, 1995.
(2) For the period July 7, 1995 (commencement of operations) to December 31,
1995.
* Annualized
27
<PAGE> 34
SCHWAB NEW YORK TAX-EXEMPT MONEY FUND
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended June 30, 1996 (Unaudited)
7. FINANCIAL HIGHLIGHTS (CONTINUED)
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratios of operating
expenses to average net assets for each class of shares. Had these fees and
expenses not been reduced and absorbed, with respect to the Sweep Shares, the
ratio of expenses to average net assets for the periods ended June 30, 1996 and
December 31, 1995 would have been 1.03%* and 1.04%* and the ratio of net
investment income to average net assets would have been 2.36%* and 2.79%*,
respectively. With respect to the Value Advantage Shares, the ratio of expenses
to average net assets for the periods ended June 30, 1996 and December 31, 1995
would have been .96%* and 1.81%*, respectively, and the ratio of net investment
income to average net assets would have been 2.43%* and 2.06%*, respectively.
- ---------------
* Annualized
28
<PAGE> 35
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio with one investment in any of our three
asset allocation funds, or choose from several equity markets with our equity
funds. You can also select from different maturities with our bond fund choices,
and take advantage of an array of money market funds.
SCHWAB ASSET ALLOCATION FUNDS
Schwab Asset Director(R)--High Growth Fund
Schwab Asset Director--Balanced Growth Fund
Schwab Asset Director--Conservative Growth Fund
SCHWAB EQUITY FUNDS
Schwab 1000 Fund(R)
Schwab International Index Fund(TM)
Schwab Small-Cap Index Fund(R)
Schwab S&P 500 Fund
Schwab Analytics Fund(TM)
SCHWAB BOND FUNDS
Schwab Government Bond Funds--Long-Term
and Short/Intermediate
Schwab Tax-Free Bond Funds--Long-Term and Short/Intermediate
Schwab California Tax-Free Bond Funds--Long-Term
and Short/Intermediate
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds that seek high current income with
safety and liquidity. Choose from taxable or tax-exempt alternatives. Many can
be linked to your Schwab account to "sweep" cash balances automatically when
you're between investments. Or, for your larger cash reserves, choose one of our
Value Advantage Investments(TM). 1
Please call 1-800-2 NO-LOAD for a free prospectus and brochure for any of the
SchwabFunds(R).
Each prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
1. Investments in money market funds are neither insured nor guaranteed by the
U.S. government, and there is no assurance that the Funds will be able to
maintain a stable share price of $1.
<PAGE> 36
===============
[SCHWABFUNDS BULK RATE
FAMILY(R) LOGO] U.S. POSTAGE
PAID
101 Montgomery Street CHARLES SCHWAB
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.
(C)1996 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
TF4218R(8/96) CRS 6793 Printed on recycled paper.
