SCHWAB CHARLES FAMILY OF FUNDS, 485BPOS, 1998-04-29

SCHWAB CHARLES FAMILY OF FUNDS
485BPOS, 1998-04-29

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<PAGE> 1
As filed with the Securities and Exchange Commission on April 29, 1998
File Nos. 33-31894 and 811-5954

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 35 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 37 [X]

--------------

THE CHARLES SCHWAB FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)

101 Montgomery Street, San Francisco, California 94104
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code:
(415) 627-7000

Tom D. Seip, President
The Charles Schwab Family of Funds
101 Montgomery Street, San Francisco, California 94104
(Name and Address of Agent for Service)

Copies of communications to:
Martin E. Lybecker, Esq. Frances Cole, Esq.
Ropes & Gray Charles Schwab Investment Management, Inc.
1301 K Street, NW, Suite 800 East 101 Montgomery Street
Washington, D.C. 20005 San Francisco, CA 94104

It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On April 30, 1998 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On April 30, 1998 pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (a)(2) of Rule 485
if appropriate, check the following box:

/ / This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE> 2
PART A
CROSS REFERENCE SHEET
PROSPECTUS

Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund

<TABLE>
<CAPTION>
PART A ITEM PROSPECTUS CAPTION
<S> <C>
1. Cover Page Cover Page

2. Synopsis Key Features; Expenses

3. Condensed Financial Information Not applicable

4. General Description of Registrant Organization & Management; Investment Objective, Policies &
Risks

5. Management of the Fund Organization & Management

5A. Management's Discussion of Fund Performance Not applicable

6. Capital Stock and Other Securities Organization & Management; Investing in Shares

7. Purchase of Securities Being Offered Investing in Shares

8. Redemption or Repurchase Investing in Shares

9. Pending Legal Proceedings Not applicable
</TABLE>
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
KEY FEATURES......................... 2
EXPENSES............................. 3
FINANCIAL HIGHLIGHTS................. 4
PERFORMANCE.......................... 6
ORGANIZATION & MANAGEMENT............ 7
INVESTMENT OBJECTIVES, POLICIES &
RISKS.............................. 9
INVESTING IN SHARES.................. 13
</TABLE>

The Prospectus provides concise information that you should know before
investing. Retain it for future reference.

The Statement of Additional Information (SAI), dated April 30, 1998, contains
additional information and is incorporated by reference into the Prospectus. The
SAI has been filed with the Securities and Exchange Commission (SEC). The SEC
maintains a web site (http://www.sec.gov) that contains the SAI, material
incorporated by reference and other information. The SAI is available without
charge by calling 1-800-435-4000 (1-800-345-2550 for TDD users) or writing to
101 Montgomery Street, San Francisco, CA 94104.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SEC OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SCHWAB MONEY
MARKET FUND

SCHWAB GOVERNMENT MONEY FUND

SCHWAB U.S. TREASURY MONEY FUND

SWEEP SHARES

PROSPECTUS
APRIL 30, 1998

EACH FUND seeks current income, while maintaining a stable share price of $1.00.

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 PER SHARE OF $1.00.
<PAGE> 4

KEY FEATURES

MATCHING A FUND TO YOUR INVESTMENT NEEDS. Each Fund seeks current income while
preserving the value of your investment and, therefore, may be appropriate for a
variety of investment programs.

The Funds are designed to provide convenience through automatic investment of
uninvested cash balances in your Schwab account (the Sweep Feature), although
shares also may be position traded (purchased directly). The Sweep Feature makes
the Funds especially suitable for investors with short-term investment needs,
such as for periods between other investments. The Funds also may be appropriate
for investors seeking long-term, low-risk investments for cash balances.

GOALS. Each Fund seeks current income, while maintaining a stable share price of
$1.00. There is no guarantee that the Funds will achieve their goals.

MANAGEMENT. Charles Schwab Investment Management, Inc. (the Investment Manager),
101 Montgomery Street, San Francisco, CA 94104, currently provides investment
management services to the SchwabFunds(R), a family of 34 mutual funds with over
$62 billion in assets as of March 31, 1998.

STRATEGIES. The Funds invest in high-quality, short-term debt securities (money
market securities).

Each Fund is a diversified mutual fund.

RISKS. Investment in a Fund will be subject to risks associated with investing
in money market securities, i.e. high-quality, short-term debt securities.

SHAREHOLDER SERVICE. Charles Schwab & Co., Inc. (Schwab), 101 Montgomery Street,
San Francisco, CA 94104, provides professional representatives 24 hours a day at
1-800-435-4000 to service your accounts. Read the "Investing in Shares" section
of the prospectus for information on how to buy, sell and exchange shares of a
Fund.

LOW-COST INVESTING. The Investment Manager and Schwab have voluntarily
guaranteed that, through at least April 30, 1999, total operating expenses of
Schwab Money Market Fund (Money Fund), Schwab Government Money Fund (Government
Fund) and Schwab U.S. Treasury Money Fund (Treasury Fund) will not exceed 0.75%,
0.75% and 0.65% of each Fund's daily net assets, respectively.

2
<PAGE> 5

EXPENSES

ANNUAL OPERATING EXPENSES are paid by the Funds. These expenses include
management fees paid to the Investment Manager, and other fees for services such
as maintaining shareholder records and furnishing shareholder statements and
financial reports. These expenses are factored into the dividends paid to
shareholders. As a shareholder, you are not charged any of these fees directly.

The annual operating expenses stated below are stated as a percentage of average
daily net assets of each Fund.

<TABLE>
<CAPTION>
GOVERN-
MONEY MENT TREASURY
FUND FUND FUND
----- ------- --------
<S> <C> <C> <C>
Management Fee
(after reduction) 0.28% 0.27% 0.17%
12b-1 Fees NONE NONE NONE
Other Expenses
(after reduction) 0.47% 0.48% 0.48%
TOTAL OPERATING
EXPENSES (AFTER
REDUCTION) 0.75% 0.75% 0.65%
</TABLE>

EXAMPLE. If each Fund were to provide an annual return of 5%, you would pay the
following expenses on a $1,000 investment, whether you redeemed your shares at
the end of each period or left your shares invested.

MONEY FUND

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$8 $24 $42 $93
</TABLE>

GOVERNMENT FUND

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$8 $24 $42 $93
</TABLE>

TREASURY FUND

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$7 $21 $36 $81
</TABLE>

THE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

The Investment Manager and Schwab have voluntarily agreed to guarantee, at least
through April 30, 1999, that total operating expenses (excluding interest, taxes
and extraordinary expenses) of Money Fund, Government Fund and Treasury Fund
will not exceed 0.75%, 0.75% and 0.65% of each Fund's average daily net assets,
respectively. If these guarantees were not in effect the management fee, other
expenses and total operating expenses of Money Fund, Government Fund and
Treasury Fund would be 0.40%, 0.47% and 0.87%; and 0.44%, 0.48% and 0.92%; and
0.44%, 0.49% and 0.93% of each Fund's average daily net assets, respectively.
Read the "Organization & Management" section of the prospectus for more
information on expenses.

3
<PAGE> 6

FINANCIAL HIGHLIGHTS

The following information has been audited by Price Waterhouse LLP, independent
accountants for the Funds. Their report is included in the Annual Report for the
Funds, which is a separate report that contains additional financial
information.

The auditor's report, financial highlights and financial statements are
incorporated by reference into the SAI. For free copies of the Annual Report
and/or the SAI, call 1-800-435-4000.

For a share outstanding throughout each period:

<TABLE>
<CAPTION>
Income from Less
Investment Operations Distributions Ratios/Supplemental Data
--------------------------------- ----------------------- -------------------------
Realized &
Unrealized Net
Fiscal Net Asset Net Gain Dividends Asset
Period Value Invest- (Loss) on Total from from Net Total Value Total Net Assets
Ended Beginning ment Invest- Investment Investment Distri- End of Return(4) End of Period
Dec. 31 of Period Income ment(6) Operation Income butions Period (%) (000's)
------- --------- ------- ---------- ---------- ------------- ------- ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Schwab Money Market Fund
1997 $1.00 $0.05 -- $0.05 $(0.05) $(0.05) $1.00 5.04 $21,421,437
1996 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 4.91 18,083,671
1995 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 5.41 14,010,387
1994 1.00 0.04 -- 0.04 (0.04) (0.04) 1.00 3.68 11,227,305
1993 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.67 8,164,599
1992 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 3.48 6,134,167
1991 1.00 0.06 -- 0.06 (0.06) (0.06) 1.00 5.70 4,866,584
1990(2) 1.00 0.07 -- 0.07 (0.07) (0.07) 1.00 7.23 4,058,408
Schwab Government Money Fund
1997 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 4.95 1,981,926
1996 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 4.83 1,986,862
1995 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 5.34 1,884,569
1994 1.00 0.04 -- 0.04 (0.04) (0.04) 1.00 3.62 1,897,328
1993 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.66 1,744,603
1992 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 3.42 1,592,793
1991 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 5.53 1,458,705
1990(2) 1.00 0.07 -- 0.07 (0.07) (0.07) 1.00 7.23 1,424,377
Schwab U.S. Treasury Money Fund
1997 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 4.85 1,765,445
1996 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 4.77 1,421,672
1995 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 5.25 1,193,689
1994 1.00 0.04 -- 0.04 (0.04) (0.04) 1.00 3.52 803,871
1993 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.54 378,143
1992 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 3.26 178,895
1991(3) 1.00 0.01 -- 0.01 (0.01) (0.01) 1.00 0.68 16,906

Ratios/Supplemental Data
-----------------------------
Ratio of Net
Ratio of Investment
Fiscal Expenses to Income to
Period Average Average
Ended Net Assets(1) Net Assets(1)
Dec. 31 (%) (%)
------- ------------- -------------
<S> <C> <C>
Schwab Money Market Fund
1997 0.75 4.93
1996 0.75 4.80
1995 0.75 5.27
1994 0.74 3.68
1993 0.73 2.64
1992 0.70 3.40
1991 0.78 5.52
1990(2 0.82(5) 7.51(5)
Schwab Government Money Fund
1997 0.75 4.84
1996 0.75 4.73
1995 0.75 5.21
1994 0.74 3.56
1993 0.73 2.63
1992 0.72 3.36
1991 0.70 5.38
1990(2 0.70(5) 7.51(5)
Schwab U.S. Treasury Money Fund
1997 0.65 4.75
1996 0.65 4.67
1995 0.65 5.11
1994 0.65 3.60
1993 0.65 2.50
1992 0.59 2.91
1991(3 0.24(5) 4.11(5)
</TABLE>

4
<PAGE> 7

(1) The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of expenses reduced and
absorbed by the investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Fund's expense and net investment income ratios
would have been:

<TABLE>
<CAPTION>
Schwab Government
Schwab Money Market Fund Money Fund Schwab U.S. Treasury Fund
------------------------- ----------------------- -------------------------
Ratio of Ratio of Ratio of
Net Net Net
Ratio of Investment Ratio of Investment Ratio of Investment
Expenses Income Expenses Income Expenses Income
Fiscal Period to Average to Average to Average to Average to Average to Average
Ended Dec. 31 Net Assets Net Assets Net Assets Net Assets Net Assets Net Assets
- ------------- ----------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1997 0.87% 4.81% 0.92% 4.67% 0.93% 4.47%
1996 0.89% 4.66% 0.92% 4.56% 0.94% 4.38%
1995 0.90% 5.12% 0.92% 5.04% 0.96% 4.80%
1994 0.90% 3.52% 0.92% 3.38% 1.00% 3.25%
1993 0.91% 2.46% 0.93% 2.43% 1.05% 2.10%
1992 0.92% 3.18% 0.94% 3.14% 1.15% 2.35%
1991 0.94% 5.36% 0.95% 5.13% 4.11%(3,5) 0.24%(3,5)
1990 0.95%(2,5) 7.38%(2,5) 0.96%(2,5) 7.25%(2,5) N/A N/A
</TABLE>

(2) For the period January 26, 1990 (commencement of operations) to December 31,
1990.

(3) For the period November 6, 1991 (commencement of operations) to December 31,
1991.

(4) Not annualized.

(5) Annualized.

(6) Amount per share does not round to a full penny.

5
<PAGE> 8

PERFORMANCE

Typically, mutual funds report performance in terms of total return or yield.

TOTAL RETURN is the actual annual return of an investment, assuming both the
reinvestment of any income earned and any change in share price. A cumulative
total return is the actual total return of an investment over a stated period of
time, while an average annual total return is a hypothetical rate of return,
which, if achieved annually would have produced the same cumulative total
return. An average annual total return will smooth out the actual year-to-year
fluctuations of an investment's return.

YIELD is the actual income earned on an investment over a stated period of time
and annualized (assumed to be generated over a year). For example, a seven-day
yield measures the income earned by a Fund over a seven-day period and expresses
that income as an annualized percentage rate.

An effective yield is calculated similarly as yield, but income earned is
assumed to be reinvested. Because of this compounding effect, effective yields
are generally higher.

Because money market funds seek to maintain a stable share price, yields are
generally considered a better method of measuring performance than total return.

Fund strategies, performance and holdings are detailed in financial reports,
which are sent to shareholders twice a year. For a free copy of the most recent
financial report, call 1-800-435-4000.

6
<PAGE> 9

ORGANIZATION & MANAGEMENT

THE FUNDS ARE DIVERSIFIED MUTUAL FUNDS. Each Fund is a series of The Charles
Schwab Family of Funds (the Trust).

THE FUNDS ARE OVERSEEN BY A BOARD OF TRUSTEES. The Board of Trustees meets
regularly to review the Funds' activities, contractual arrangements and
performance. The Board of Trustees is responsible for protecting the interests
of the Funds' shareholders.

THE FUNDS MAY HOLD SPECIAL MEETINGS. These meetings may be called for purposes
such as electing Trustees, changing fundamental policies and amending management
contracts. Shareholders are entitled to one vote for each share owned and may
vote by proxy or in person. Proxy materials will be mailed to shareholders prior
to any meetings, and will include a voting card and information explaining the
matters to be voted upon.

THE FUNDS ARE MANAGED BY THE INVESTMENT MANAGER. The Investment Manager is
responsible for managing the Funds' day-to-day business affairs, including
picking the Funds' investments. The Investment Manager, however, is subject to
the overall authority of the Board of Trustees.

For the services performed under its contract with each Fund, the Investment
Manager is entitled to receive a graduated annual fee, payable monthly from each
Fund.

For the fiscal year ended December 31, 1997, Money Fund, Government Fund and
Treasury Fund paid management fees of 0.28%, 0.27% and 0.17% of each Fund's
average daily net assets, respectively.

SCHWAB IS THE FUNDS' SHAREHOLDER SERVICES AND TRANSFER AGENT. Schwab provides
Fund information to shareholders, including share price, reporting shareholder
ownership and account activities and distributing the Funds' prospectuses,
financial reports and other informational literature. Schwab also maintains the
office space, equipment and personnel necessary to provide these services.
Schwab also distributes and markets SchwabFunds(R) and provides other services.

For the services performed as transfer agent under its contract with each Fund,
Schwab is entitled to receive an annual fee from each Fund, payable monthly in
the amount of 0.25% of each Fund's average daily net assets. For the services
performed as shareholder services agent under its contract with each Fund,
Schwab is entitled to receive an annual fee from each Fund, payable monthly in
the amount of 0.20% of the average daily net assets of each Fund.

THE FUNDS PAY OTHER EXPENSES. These expenses are typically connected with the
Trust's operations, and include legal, audit and custodian fees, as well as the
costs of accounting and registration of the Funds. Expenses not directly
attributable to a particular fund will generally be allocated among the funds in
the Trust on the basis of each fund's relative net assets at the time the
expense is incurred.

7
<PAGE> 10

For the fiscal year ended December 31, 1997, Money Fund, Government Fund and
Treasury Fund paid total operating expenses of 0.75%, 0.75% and 0.65% of each
Fund's average daily net assets, respectively.

The Charles Schwab Corporation is the parent company of the Investment Manager
and Schwab. Charles R. Schwab is the founder, Chairman, Co-Chief Executive
Officer and Director of The Charles Schwab Corporation. As a result of his
ownership of and interests in The Charles Schwab Corporation, Mr. Schwab may be
deemed a controlling person of the Investment Manager and Schwab.

8
<PAGE> 11

INVESTMENT OBJECTIVES, POLICIES & RISKS

INVESTMENT OBJECTIVES
MONEY FUND seeks maximum current income consistent with stability of capital.

GOVERNMENT FUND seeks maximum current income consistent with stability of
capital.

TREASURY FUND seeks high current income consistent with liquidity and stability
of capital.

Each Fund's investment objective may be changed only by vote of a majority of
its shareholders. Unless otherwise noted, policies and limitations may be
changed without shareholder approval.

INVESTMENT STRATEGIES

MONEY FUND seeks to achieve its investment objective by investing in
high-quality, U.S. dollar-denominated money market securities, including U.S.
Government securities and repurchase agreements for these securities.

GOVERNMENT FUND seeks to achieve its investment objective by investing in U.S.
Government securities and repurchase agreements for these securities.

TREASURY FUND seeks to achieve its objective by investing in U.S. Treasury
securities and other obligations that are backed by the full faith and credit of
the U.S. Government.

Each Fund's investment strategy is a policy that may be changed only by
shareholders.

Please remember that Government Fund and Treasury Fund are not insured or
guaranteed by the U.S. Government.

The Funds seek to maintain a stable share price of $1.00, although there is no
guarantee that they will be able to do so. The Funds follow regulations set
forth by the SEC that dictate the quality, maturity and diversification of a
Fund's investments. These requirements are designed to help the Funds maintain a
stable share price of $1.00.

The Funds earn income at current money market rates and their yields will
fluctuate from day to day. The Funds emphasize capital preservation, so they
will not provide the higher yield or capital appreciation that a more aggressive
mutual fund or other investment may provide.

INVESTMENT RISKS
Investment in a Fund will be subject to risks associated with investing in money
market securities, i.e., high-quality, short-term debt securities. Generally
speaking there are four types of risk attendant to investing in debt securities.

PREPAYMENT OR CALL RISK is the likelihood that, during periods of falling
interest rates, debt securities will be prepaid (or "called") prior to maturity
requiring the proceeds to be invested at a generally lower interest rate.

INTEREST RATE RISK is the potential for fluctuations in the prices of debt
securities due to changing interest rates. For example, when interest rates
rise, bond prices generally decline or "fall" and when interest rates fall, bond
prices generally rise.

9
<PAGE> 12

INCOME RISK is the potential for a decline in income due to falling interest
rates, and is a component of both prepayment or call risk and interest rate
risk.

CREDIT RISK is the possibility that an issuer will fail to make timely payments
of either interest or principal.

The amount of each type of risk each Fund will be subject to depends on its
portfolio of investments. The Funds may purchase only high-quality, short-term
debt securities that the Investment Manager believes present minimal credit
risk. Additionally, Government Fund's and Treasury Fund's investments make them
less sensitive to credit risks. In addition, the short maturity of each Fund's
portfolio is designed to minimize interest rate and prepayment or call risks.

PRINCIPAL SECURITIES AND INVESTMENT TECHNIQUES
Different types of securities a Fund may invest in are described below. Not
every security described is an eligible investment for each Fund.

MONEY MARKET SECURITIES are high-quality, short-term debt securities that may be
issued by entities such as the U.S. Government, corporations and financial
institutions (like banks). Money market securities include commercial paper,
certificates of deposit, banker's acceptances, notes and time deposits.

Money market securities pay fixed, variable or floating rates of interest and
are generally subject to credit and interest rate risks. The maturity date or
price of and financial assets collateralizing a security may be structured in
order to make it qualify as or act like a money market security. These
securities may be subject to greater credit and interest rate risks than other
money market securities because of their structure.

CREDIT AND LIQUIDITY SUPPORTS may be employed by issuers to reduce the credit
risk of their securities. Credit supports include letters of credit, insurance
and guarantees provided by foreign and domestic entities. Liquidity supports
include puts, demand features, standby bond purchase agreements and lines of
credit. Most of these arrangements move the credit risk of an investment from
the issuer of the security to the support provider. Changes in the credit
quality of a support provider could cause losses to a Fund, and affect its share
price.

FOREIGN SECURITIES involve additional risks because they are issued by foreign
entities, including foreign governments, banks and corporations, or because they
are principally traded overseas. Credit and liquidity supports also may be
provided by foreign entities. Foreign entities may not be subject to the same
regulatory and reporting requirements as domestic entities and may be subject to
higher transaction costs and foreign taxes. Foreign securities are sometimes
less liquid and may be more volatile than securities issued by domestic issuers
or securities traded on domestic markets. In addition, foreign economic,
political and legal developments could have

10
<PAGE> 13

more dramatic affects on the value of a foreign security or its payment of
interest and repayment of principal.

U.S. TREASURY SECURITIES are obligations of the U.S. Treasury and include bills,
notes and bonds. U.S. Treasury securities are backed by the full faith and
credit of the United States Government.

U.S. GOVERNMENT SECURITIES are securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities. Not all U.S. Government
securities are backed by the full faith and credit of the United States. Some
U.S. Government securities are supported by a line of credit the issuing entity
has with the U.S. Treasury. Others are supported solely by the credit of the
issuing agency or instrumentality. Of course U.S. Government securities,
including U.S. Treasury securities, are among the safest securities, but they
are still subject to interest rate changes which may affect yield.

REPURCHASE AGREEMENTS involve a Fund buying securities (usually U.S. Government
securities) from a seller and simultaneously agreeing to sell them back at an
agreed-upon price and time. There are risks that losses will result if the
seller does not perform as agreed.

VARIABLE AND FLOATING RATE SECURITIES pay an interest rate, which is adjusted
either periodically or at specific intervals or floats continuously according to
a formula or benchmark. Although these structures generally are intended to
minimize the fluctuations in value that occur when interest rates rise and fall,
some structures may be linked to a benchmark in such a way as to cause greater
volatility to the security's value. Some variable rate securities may be
combined with a put or demand feature (variable rate demand securities) that
entitles the holder the right to demand repayment in full. While the demand
feature is intended to reduce credit risks, it is not always unconditional and
may make the securities more difficult to sell quickly or without losses.

PUTS, sometimes called demand features or guarantees, are agreements that allow
the buyer to sell a security at a specified price and time to the seller or "put
provider." When a Fund buys a put, losses could occur as a result of the costs
of the put or if it exercises its rights under the put and the put provider does
not perform as agreed. Standby commitments are types of puts.

ASSET-BACKED SECURITIES are securities that are backed by the loans or account
receivables of an entity, such as a bank or credit card company. These
securities are typically commercial paper (short-term loans), which the issuer
intends to repay using the assets backing them (once collected). Therefore,
repayment depends largely on the cash-flows generated by the assets backing the
securities. Sometimes the credit support for these securities is limited to the
underlying assets, but, in other cases, may be provided by a third party via a
letter of credit or insurance guarantee.

11
<PAGE> 14

ILLIQUID SECURITIES are securities that are not actively traded, and, therefore,
may be difficult to sell quickly or without losses.

Restriction: Each Fund will not invest more than 10% of its net assets in
illiquid securities. For Money Fund and Government Fund this policy may be
changed only by shareholders.

RESTRICTED SECURITIES are securities that are subject to legal restrictions on
their sale. To the extent a Fund invests in liquid restricted securities, its
general level of illiquidity may increase if these securities become difficult
to sell.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES are securities that are purchased at
a specified price and yield, but delivered to the buyer at a later than
customary date. Generally, the purchaser does not pay for these securities or
earn interest on them until they are delivered, but their value could change
prior to delivery.

STRIPPED SECURITIES are securities whose income and principal components are
detached and sold separately. While the risks associated with stripped
securities are similar to other money market securities, stripped securities are
typically subject to greater changes in value. U.S. Treasury securities that
have been stripped by a Federal Reserve Bank are obligations of the U.S.
Treasury.

The Funds also may employ the policies described below.

DIVERSIFICATION involves investing in a wide range of securities, and thereby
spreading and reducing the risks of investment.

CONCENTRATION means that substantial amounts of assets are invested in a
particular industry or group of industries. Concentration increases a Fund's
investment exposure. For example, the automotive industry may have a greater
exposure to a single factor, such as an increase in the price of oil, which may
affect the sale of automobiles, and impact the value of the industry's
securities.

Restriction: Each Fund will not concentrate in any one industry or group of
industries. This policy does not apply to certificates of deposit and banker's
acceptances or to U.S. Government securities. For Money Fund and Government Fund
this policy may be changed only by shareholders.

BORROWING subjects the Funds to interest costs that may exceed the interest
received on the securities purchased with the borrowed funds.

Restriction: Each Fund may borrow up to 33 1/3% of its total assets for
temporary or emergency purposes; provided that each Fund will not purchase
securities while borrowings are outstanding. This policy may be changed only by
shareholders.

12
<PAGE> 15

INVESTING IN SHARES

BUSINESS DAYS
The Funds are open each day that both the Federal Reserve Bank of New York (New
York Fed) and New York Stock Exchange (NYSE) are open (business days). The
following holiday closings are currently scheduled for 1998: New Year's Day,
Martin Luther King's Birthday (observed), President's Day, Good Friday, Memorial
Day (observed), Independence Day (observed), Labor Day, Columbus Day (observed),
Veterans Day, Thanksgiving Day and Christmas Day. On any day that the New York
Fed, NYSE or principal government securities markets close early, such as days
in advance of holidays, the Funds reserve the right to advance the time by which
purchase, redemption and exchanges orders must be received on that day.

NET ASSET VALUE
The price of each share of a Fund is its net asset value per share (NAV). NAV is
determined each business day, first at 10 a.m. Eastern time, then again at the
close of the NYSE, generally 4 p.m. Eastern time. NAV is calculated by adding
the value of a Fund's assets, subtracting its liabilities and dividing the
result by the number of outstanding shares.

Investment holdings are valued on the basis of amortized cost, which means that
a Fund's securities are valued at cost, plus or minus any premium or discount
that has accrued since purchase. The amortized cost method is designed for money
market funds, which seek to maintain a stable share price, and most money market
funds use this method to calculate NAV.

HOW TO BUY, SELL OR EXCHANGE SHARES
Shares may be purchased, sold or exchanged through an account at Schwab or any
other entity designated by Schwab. The following information on how to buy, sell
and exchange shares is for transactions through an account at Schwab.

Shares are purchased or sold at the NAV next determined after your purchase,
redemption or exchange order is received in good order. Shares purchased at the
10 a.m. NAV generally receive a dividend that day, although shares purchased at
the 4 p.m. NAV generally receive a dividend the next day. Shares sold or
exchanged at the 10 a.m. NAV generally do not receive a dividend that day,
although shares sold or exchanged at the 4 p.m. NAV generally do receive a
dividend that day.

SWEEP FEATURE. Investors may choose a Fund as their "primary fund" and
uninvested cash balances in their account will be automatically invested in
Sweep Shares of their primary fund, according to the terms and conditions of
their account agreement. Sweep Shares of a primary fund also will be sold to
cover any negative cash balance in their account, according to the terms and
conditions of their account agreement.

DIRECT PURCHASE. Shares of a Fund also may be position traded (purchased
directly). The minimum initial investment is $1,000.

13
<PAGE> 16

Subsequent direct purchases must be in amounts of at least $100.

BY TELEPHONE. Call 1-800-435-4000, 24 hours a day (1-800-345-2550 for TDD
users). Telephone orders received in good order after the close of the NYSE, but
prior to 8 p.m. Eastern time will be executed at the 10 a.m. NAV. Telephone
orders received in good order after 8 p.m. Eastern time will be executed at the
4 p.m. NAV.

BY MAIL. Write to the Funds at 101 Montgomery Street, San Francisco, CA 94104.

BY WIRE. Call 1-800-435-4000 for wire instructions.

Please provide the following information:
- - your name and Schwab account number;
- - the name of the Fund;
- - the dollar amount you would like to purchase, sell or exchange; and
- - for initial purchases only, one of the two distribution choices below:

AUTOMATIC REINVESTMENT. All distributions will be reinvested in full shares of
the Fund you are purchasing. If you do not choose an option, this option will be
assigned to you; or

CASH OPTION. All distributions will be paid to your Schwab account and, if
requested, mailed to you the next business day.

- - for exchanges, the name of the Fund and class, if applicable, into which you
want to exchange shares and the distribution option you select; and

- - if selling or exchanging by mail, a signature of at least one of the persons
named on your Schwab account.

PLEASE NOTE THE FOLLOWING WHEN SELLING OR EXCHANGING SHARES OF THE FUNDS:

- - each Fund requires a minimum balance of $100;
- - your shares may be automatically redeemed if, as a result of selling or
exchanging shares, you no longer meet a Fund's minimum balance requirements,
although you will be given 30 days' notice prior to redemption to increase
your holdings to the required minimum balance;
- - redemption and exchange requests by mail are irrevocable and, once mailed,
may not be modified or canceled;
- - payment for redeemed shares will be made to your Schwab account within 7
days, and a check may be mailed to you upon request;
- - if you bought your shares by check, a check for your redemption proceeds will
be issued as soon as your check clears, which may take up to 15 days from the
date of purchase;
- - depending on the type of Schwab account you have, your money may earn
interest during any holding period;

- - you may exchange your shares for shares of other SchwabFunds(R), provided you
meet the Fund's minimum investment or other requirements;

- - an exchange of a Fund's shares for shares of other SchwabFunds will be
treated as a taxable event for federal income tax purposes;

14
<PAGE> 17

- - the Funds and Schwab reserve the right to modify, limit or terminate the
exchange privilege upon 60 days' written notification; and
- - the Funds may suspend the right to sell shares or postpone payment for a sale
of shares when trading on the NYSE is restricted, the NYSE is closed for any
reason other than its customary weekend and holiday closings, emergency
circumstances exist as determined by the SEC or as otherwise permitted by the
SEC.

DIVIDENDS & TAXES
Each business day, a Fund's net investment income is determined as of the close
of the NYSE as a dividend to shareholders of record. Net investment income is
calculated by subtracting its expenses from the income earned on its investments
that day. Dividends are declared each business day based on the net investment
income determined and are paid on the 15th of each month, if it is a business
day, except in December when dividends are paid on the last business day of the
month. If the 15th is not a business day, dividends are paid on the next
business day.

The following is only a brief summary of some of the federal and state income
tax consequences that may affect each Fund and its shareholders. Unless your
investment in a Fund is through a retirement account, you should consider the
tax implications of investing in a Fund, and consult with your own tax advisor.

Each Fund will distribute its net investment income and capital gains, if any,
to shareholders each year. All distributions received by shareholders are
subject to federal income tax, and may be subject to state and/or local income
taxes. Treasury Fund intends to invest in securities whose interest is free from
state and local taxes in most states.

Distributions are taxable when paid, whether they are received in cash or
reinvested, although distributions declared in December, but paid in January,
are taxable as if they were paid on December 31.

Shareholders receive a record of all distributions by the Funds, as well as
purchases and sales they have made, via their monthly Schwab account statement.
Each year, each Fund notifies shareholders of the federal tax treatment of all
distributions made that year.

OPENING A SCHWAB ACCOUNT
Schwab was established in 1971 and is one of America's largest discount brokers.
Schwab serves over 4.9 million active customer accounts and helps investors make
investment decisions by offering low-cost brokerage services and providing
financial products and information. Visit one of Schwab's 274 branch offices or
Schwab's web site (http://www.schwab.com) for information on investment products
and services.

Investors may open a Schwab account by simply completing an application,
although

15
<PAGE> 18

institutional investors should contact Schwab to find out if any additional
forms need to be completed.

Using a Schwab account, investors have access to investments other than just
mutual funds, such as stocks and bonds. The Securities Investor Protection
Corporation (SIPC) provides account protection of up to $500,000 for the
securities held in a Schwab account, including shares of the Funds. It is
important to remember that SIPC account protection does not protect against
losses due to market or economic conditions.

Schwab offers different types of accounts with varying minimum initial
investment and balance requirements designed to fit the needs of a variety of
investors. Contact Schwab for more information and read your account agreement
and application for specific account details, including minimum initial
investment and balance requirements and fees. Contact Schwab for instructions
and any applicable fees if you would like to wire money from your Schwab
account.

Deposits to your Schwab account may be made by check, wire and other forms of
electronic funds transfer. Securities also may be deposited. All checks should
be made out to Charles Schwab & Co., Inc. Schwab will charge a $15 service fee
for any checks returned as a result of insufficient or uncollected funds or a
stop order.

Monies received by Schwab before 4 p.m. Eastern time will be available for
investment that day. Monies received by Schwab after 4 p.m. Eastern time will be
available for investment the next business day.

TAX-ADVANTAGED RETIREMENT PLANS offer excellent tax advantages and the Funds may
be especially suitable investments for them. Schwab's retirement plans allow
participants to defer taxes while helping them build their retirement savings.

SCHWAB IRAS offer wide choice of investments for people with earned income who
want the opportunity to compound earnings on a tax-deferred basis. Schwab IRA
accounts with balances of $10,000 or more by September 15, 1998 will not be
charged Schwab's $29 annual IRA account fee for the life of the account.

SCHWAB KEOGHS provide tax-advantaged plans for self-employed individuals and
their employees that permit annual tax-deductible contributions of up to
$30,000. Schwab Keogh Plans are currently charged an annual fee of $45.

SCHWAB CORPORATE RETIREMENT ACCOUNTS offer well-designed retirement programs
that can help a company attract and retain valuable employees. Call
1-800-435-4000 for more information.

16
<PAGE> 19

These procedures may include:
- - requiring a form of personal identification before acting upon any telephone
order;
- - providing written confirmation of telephone orders; and
- - tape-recording all telephone orders.

It may be difficult to place orders by telephone during periods of drastic
economic or market changes because Schwab's phone lines may become very busy
with calls from other investors. Consider other methods for placing an order,
such as writing to the Funds.

Share certificates will not be issued in order to avoid additional
administrative costs, however, share ownership records are maintained by Schwab.
Twice a year, financial reports will be mailed to shareholders describing a
Fund's performance and investment holdings. In order to reduce these mailing
costs, each household will receive one consolidated mailing. If you do not want
to receive consolidated mailings, you may write to the Funds and request that
your mailings not be consolidated.

Each Fund, in its sole discretion and without prior notice, reserves the right
to reject orders to purchase shares, change or waive minimum investment
requirements or withdraw or suspend any part of the offering made by this
prospectus.
- ---------------------------------------------------

NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY STATEMENTS
ABOUT THIS OFFERING OTHER THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS AND
IN OFFICIAL SALES MATERIALS. IF ANYONE GIVES ANY OTHER INFORMATION OR MAKES ANY
OTHER REPRESENTATIONS, DO NOT RELY ON SUCH INFORMATION OR REPRESENTATIONS.
- ---------------------------------------------------

THIS PROSPECTUS IS NOT AN OFFER IN ANY STATE IN WHICH SUCH AN OFFER MAY NOT
LAWFULLY BE MADE, NOR IS IT AN OFFER TO ANY PERSON TO WHOM SUCH AN OFFER MAY NOT
BE MADE.
- ---------------------------------------------------

17
<PAGE> 20

------------------------------

Schwab Taxable
Money Funds--
Sweep Investments
------------------------------
PROSPECTUS APRIL 30, 1998

SCHWABFUNDS(R) SCHWABFUNDS(R)

<PAGE> 21
PART A
CROSS REFERENCE SHEET
PROSPECTUS

Schwab Retirement Money Fund(R)

<TABLE>
<CAPTION>
PART A ITEM PROSPECTUS CAPTION
<S> <C>
1. Cover Page Cover Page

2. Synopsis Key Features; Expenses

3. Condensed Financial Information Not applicable

4. General Description of Registrant Organization & Management; Investment Objective,
Policies & Risks

5. Management of the Fund Organization & Management

5A. Management's Discussion of Fund Performance Not applicable

6. Capital Stock and Other Securities Organization & Management; Investing in Shares

7. Purchase of Securities Being Offered Investing in Shares

8. Redemption or Repurchase Investing in Shares

9. Pending Legal Proceedings Not applicable
</TABLE>
<PAGE> 22

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
KEY FEATURES......................... 2
EXPENSES............................. 3
FINANCIAL HIGHLIGHTS................. 4
PERFORMANCE.......................... 5
ORGANIZATION & MANAGEMENT............ 6
INVESTMENT OBJECTIVES, POLICIES &
RISKS.............................. 8
INVESTING IN SHARES.................. 12
</TABLE>

The Prospectus provides concise information that you should know before
investing. Retain it for future reference.

MONEY FUND(R)

PROSPECTUS
APRIL 30, 1998

SCHWAB RETIREMENT MONEY FUND (THE FUND) seeks current income, while maintaining
a stable share price of $1.00.

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE PER SHARE OF $1.00.
<PAGE> 23

KEY FEATURES

MATCHING THE FUND TO YOUR INVESTMENT NEEDS: The Fund seeks current income, while
preserving the principal value of your investment for retirement plans, plan
participants and other institutional investors that are investing on behalf of
themselves or as a fiduciary, agent or custodian.

GOAL: The Fund seeks current income, while maintaining a stable share price of
$1.00. There is no guarantee that the Fund will achieve its goal.

STRATEGY: The Fund invests in high-quality, short-term debt securities (money
market securities).

The Fund is a diversified mutual fund.

MANAGEMENT: Charles Schwab Investment Management, Inc. (the Investment Manager),
101 Montgomery Street, San Francisco, CA 94104, currently provides investment
management services to the SchwabFunds(R), a family of 34 mutual funds with over
$62 billion in assets as of March 31, 1998.

SHAREHOLDER SERVICE: Charles Schwab & Co., Inc. (Schwab), 101 Montgomery Street,
San Francisco, CA 94104, and the Charles Schwab Trust Company (Trust Company)
provide professional representatives 24 hours a day at 1-800-435-4000 or
1-800-772-4900 to service your accounts. Read the "Investing in Shares" section
of the prospectus for information on how to buy, sell and exchange shares of the
Fund.

LOW-COST INVESTING: The Investment Manager and Schwab have voluntarily
guaranteed that, through at least April 30, 1999, total operating expenses of
the Fund will not exceed 0.73% of average daily net assets.

2
<PAGE> 24

EXPENSES

ANNUAL OPERATING EXPENSES are paid by the Fund. These expenses include
management fees paid to the Investment Manager, and other fees for services such
as maintaining shareholder records and furnishing shareholder statements and
financial reports. These expenses are factored into the dividends paid to
shareholders. As a shareholder, you are not charged any of these fees directly.

The annual operating expenses stated below are stated as a percentage of average
daily net assets of the Fund.

<TABLE>
<S> <C>
Management fee (after reduction) 0.38%
12b-1 fees NONE
Other expenses (after reduction) 0.35%
----
TOTAL OPERATING EXPENSES (AFTER REDUCTION) 0.73%
</TABLE>

EXAMPLE. If the Fund were to provide an annual return of 5%, you would pay the
following expenses on a $1,000 investment, whether you redeemed your shares at
the end of each period or left your shares invested.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$7 $23 $41 $91
</TABLE>

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

The Investment Manager and Schwab have voluntarily agreed to guarantee, through
at least April 30, 1999 that total operating expenses (excluding interest, taxes
and extraordinary expenses) of the Fund will not exceed 0.73% of average daily
net assets. If these guarantees were not in effect, the management fee, other
expenses and total operating expenses of the Fund would be 0.46%, 0.38% and
0.84% respectively, of average daily net assets. Read the "Organization &
Management" section of the prospectus for more information on expenses.

3
<PAGE> 25

FINANCIAL HIGHLIGHTS

The following information has been audited by Price Waterhouse LLP, independent
accountants for the Fund. Their report is included in the Annual Report for the
Fund, which is a separate report that contains additional financial information.

The auditor's report, financial highlights and financial statements are
incorporated by reference into the SAI. For free copies of the Annual Report
and/or the SAI, call 1-800-435-4000.

For a share outstanding throughout each period:

<TABLE>
<CAPTION>
Income from Less
Investment Operations Distributions
------------------------------------- -----------------------

Net Realized
& Net Total
Fiscal Net Asset Net Unrealized Dividends Asset Return
Period Value Invest- Gains Total from from Net Total Value (not
Ended Beginning ment (Losses) on Investment Investment Distri- End of annualized)
Dec. 31 of Period Income Investments(3) Operations Income butions Period (%)
------- --------- ------- -------------- ---------- ------------- ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

) Schwab Retirement Money Fund(R
1997 $1.00 $0.05 -- $0.05 $(0.05) $(0.05) $1.00 5.07
1996 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 4.93
1995 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 5.43
1994(2) 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 3.29

Ratios/Supplemental Data
------------------------------------------
Ratio of
Net
Ratio of Investment
Fiscal Expenses to Income to
Period Net Assets Average Average
Ended End of Period Net Assets(1) Net Assets
Dec. 31 (000's) (%) (%)
------- ------------- ------------- ----------
<S> <C> <C> <C>
)
1997 $154,903 0.73 4.96
1996 136,319 0.73 4.83
1995 98,992 0.73 5.28
1994(2 31,415 0.73* 4.04*
</TABLE>

(1) The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of expenses reduced by the
Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:

<TABLE>
<CAPTION>
Ratio of Ratio of Net
Expenses Investment
Fiscal Period Ended to Average Income to
December 31 Net Asset Average Net Asset
- ------------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
1997 0.84% 4.85%
1996 0.88% 4.68%
1995 0.92% 5.09%
1994(2) 1.05%* 3.72%*
</TABLE>

(2) For the period from March 2, 1994 (commencement of operations) to December
31, 1994.

(3) Amount does not round to a full penny.

*Annualized

4
<PAGE> 26

PERFORMANCE

Typically, money market funds report performance in terms of total return or
yield.

An effective yield is calculated similarly as yield, but income earned is
assumed to be reinvested. Because of this compounding effect, effective yields
are generally higher.

Because money market funds seek to maintain a stable share price, yields are
generally considered a better method of measuring performance than total return.

Fund strategies, performance and holdings are detailed in financial reports,
which are sent to shareholders twice a year. For a free copy of the most recent
financial report, call 1-800-435-4000.

5
<PAGE> 27

ORGANIZATION & MANAGEMENT

THE FUND IS A DIVERSIFIED MUTUAL FUND. The Fund is a series of The Charles
Schwab Family of Funds (the Trust).

THE FUND IS OVERSEEN BY A BOARD OF TRUSTEES. The Board of Trustees meets
regularly to review the Fund's activities, contractual arrangements and
performance. The Board of Trustees is responsible for protecting the interests
of the Fund's shareholders.

THE FUND MAY HOLD SPECIAL MEETINGS. These meetings may be called for purposes
such as electing Trustees, changing fundamental policies and amending management
contracts. Shareholders are entitled to one vote for each share owned and may
vote by proxy or in person. Proxy materials will be mailed to shareholders prior
to any meetings, and will include a voting card and information explaining the
matters to be voted upon.

THE FUND IS MANAGED BY THE INVESTMENT MANAGER. The Investment Manager is
responsible for managing the Fund's day-to-day business affairs, including
picking the Fund's investments. The Investment Manager, however, is subject to
the overall authority of the Board of Trustees.

For the services performed under its contract with the Fund, the Investment
Manager is entitled to receive a graduated annual fee, payable monthly by the
Fund. For the fiscal year ended December 31, 1997, the Fund paid management
fees of 0.38% of average daily net assets.

SCHWAB IS THE FUND'S SHAREHOLDER SERVICES AND TRANSFER AGENT. Schwab provides
Fund information to shareholders, including share price, reporting shareholder
ownership and account activities and distributing the Fund's prospectus,
financial reports and other informational literature. Schwab also maintains the
office space, equipment and personnel necessary to provide these services.
Schwab also distributes and markets SchwabFunds(R) and provides other services.

For the services performed as transfer agent under its contract with the Fund,
Schwab is entitled to receive an annual fee from the Fund, payable monthly in
the amount of 0.05% of its average daily net assets. For the services performed
as shareholder services agent under its contract with the Fund, Schwab is
entitled to receive an annual fee from the Fund, payable monthly in the amount
of 0.20% of its average daily net assets.

THE FUND PAYS OTHER EXPENSES. These expenses are typically connected with the
Trust's operations, and include legal, audit and custodian fees, as well as the
costs of accounting and registration of the Fund. Expenses not directly
attributable to a particular fund will generally be allocated among the funds in
the Trust on the basis of each fund's relative net assets at the time the
expense is incurred.

6
<PAGE> 28

For the fiscal year ended December 31, 1997, the Fund paid total operating
expenses of 0.73% of average daily net assets.

7
<PAGE> 29

INVESTMENT OBJECTIVES, POLICIES & RISKS

INVESTMENT OBJECTIVE

THE FUND seeks maximum current income consistent with liquidity and stability of
capital.

The Fund's investment objective may be changed only by vote of a majority of its
shareholders. Unless otherwise noted, policies and limitations may be changed
without shareholder approval.

INVESTMENT STRATEGY
THE FUND seeks to achieve its investment objective by investing in high-quality,
U.S. dollar-denominated money market securities, including U.S. Government
securities and repurchase agreements.

The Fund seeks to maintain a stable share price of $1.00, although there is no
guarantee that it will be able to do so. The Fund follows regulations set forth
by the SEC that dictate the quality, maturity and diversification of its
investments. These requirements are designed to help the Fund maintain a stable
share price of $1.00.

The Fund earns income at current money market rates and its yields will
fluctuate from day to day. The Fund emphasizes capital preservation, so it will
not provide the higher yield or capital appreciation that a more aggressive
mutual fund or other investment may provide.

INVESTMENT RISKS

Investment in the Fund will be subject to risks associated with investing in
money market securities, i.e., high-quality, short-term debt securities.
Generally speaking there are four types of risk attendant to investing in debt
securities.

PREPAYMENT RISK OR CALL RISK is the likelihood that, during periods of falling
interest rates, debt securities will be prepaid (or "called") prior to maturity,
requiring the proceeds to be invested at a generally lower interest rate.

INTEREST RATE RISK is the potential for fluctuations in the prices of debt
securities due to changing interest rates. For example, when interest rates
rise, bond prices generally decline or "fall," and when interest rates fall,
bond prices generally rise.

INCOME RISK is the potential for a decline in income due to falling interest
rates, and is a component of both prepayment or call risk and interest rate
risk.

CREDIT RISK is the possibility that an issuer will fail to make timely payments
of either interest or principal.

The amount of each type of risk the Fund will be subject to depends on its
portfolio of investments. The Fund may purchase only high-quality, short-term
debt securities that the Investment Manager believes present minimal credit
risk. In addition, the short maturity of the Fund's portfolio is designed to
minimize interest rate and prepayment or call risks.

8
<PAGE> 30

PRINCIPAL SECURITIES AND INVESTMENT TECHNIQUES

Different types of securities the Fund may invest in are described below.

MONEY MARKET SECURITIES are high-quality, short-term securities that may be
issued by entities such as the U.S. Government, corporations and financial
institutions (like banks). Money market securities include commercial paper,
certificates of deposit, banker's acceptances, notes and time deposits.

FOREIGN SECURITIES involve additional risks because they are issued by foreign
entities, including foreign governments, banks and corporations, or because they
are principally traded overseas. Credit and liquidity supports also may be
provided by foreign entities. Foreign entities may not be subject to the same
regulatory and reporting requirements as domestic entities, and may be subject
to higher transaction costs and foreign taxes. Foreign securities are sometimes
less liquid and may be more volatile than securities issued by domestic issuers
or securities traded on domestic markets. In addition, foreign economic,
political and legal developments could have more dramatic affects on the value
of a foreign security or its payment of interest and repayment of principal.

U.S. GOVERNMENT SECURITIES are securities issued by the U.S. Treasury or issued
or guaranteed by the U.S. Government or any of its agencies or
instrumentalities. U.S. Treasury securities are backed by the full faith and
credit of the United States. Not all U.S. Government securities are backed by
the full faith and credit of the United States. Some U.S. Government securities
are supported by a line of credit the issuing entity has with the U.S. Treasury.
Others are supported solely by the credit of the issuing agency or
instrumentality. Of course U.S. Government securities are among the safest
securities, but they are still subject to interest rate changes which may affect
yield.

REPURCHASE AGREEMENTS involve the Fund buying securities (usually U.S.
Government

9
<PAGE> 31

securities) from a seller and simultaneously agreeing to sell them back at an
agreed-upon price and time. There is a risk of loss if the seller does not
perform as agreed.

ASSET-BACKED SECURITIES are securities that are backed by the loans or account
receivables of an entity, such as a bank or credit card company. These
securities are typically commercial paper (short-term loans) which the issuer
intends to repay using the assets backing them (once collected). Therefore,
repayment depends largely on the cash-flows generated by the assets backing the
securities. Sometimes the credit support for these securities is limited to the
underlying assets, but, in other cases, may be provided by a third party via a
letter of credit or insurance guarantee.

ILLIQUID SECURITIES are securities that are not actively traded, and, therefore,
may be difficult to sell quickly or without losses.

Restriction: The Fund will not invest more than 10% of its net assets in
illiquid securities. This policy may be changed only by shareholders.

RESTRICTED SECURITIES are securities that are subject to legal restrictions on
their sale. To the extent the Fund invests in liquid restricted securities, its
general level of illiquidity may increase if these securities become difficult
to sell.

10
<PAGE> 32

greater changes in value. U.S. Treasury securities that have been stripped by a
Federal Reserve Bank are obligations of the U.S. Treasury.

The Fund also may employ the policies described below.

DIVERSIFICATION involves investing in a wide range of securities, and, thereby
spreading and reducing the risks of investment.

Restriction: The Fund will not concentrate in any one industry or group of
industries. This policy does not apply to certificates of deposit and banker's
acceptances, or to U.S. Government securities. This policy may be changed only
by shareholders.

BORROWING subjects the Fund to interest costs that may exceed the interest
received on the securities purchased with the borrowed funds.

Restriction: The Fund may borrow up to 33 1/3% of its total assets for temporary
or emergency purposes; provided that the Fund will not purchase securities while
borrowings are outstanding. This policy may be changed only by shareholders.

LENDING securities may earn income for a Fund, but also could result in losses,
and possibly affect its share price.

Restriction: The Fund will limit lending to no more than 33 1/3% of its total
assets.

11
<PAGE> 33

INVESTING IN SHARES

BUSINESS DAYS
The Fund is open each day that both the Federal Reserve Bank of New York (New
York Fed) and New York Stock Exchange (NYSE) are open (business days). The
following holiday closings are currently scheduled for 1998: New Year's Day,
Martin Luther King's Birthday (observed), President's Day, Good Friday, Memorial
Day (observed), Independence Day (observed), Labor Day, Columbus Day (observed),
Veterans Day, Thanksgiving Day and Christmas Day. On any day that the New York
Fed, NYSE or principal government securities markets close early, such as days
in advance of holidays, the Fund reserves the right to advance the time by which
purchase, redemption and exchange orders must be received on that day.

NET ASSET VALUE

The price of each share of the Fund is its net asset value per share (NAV). NAV
is determined each business day at the close of the NYSE, generally 4 p.m.
Eastern time. NAV is calculated by adding the value of the Fund's assets,
subtracting its liabilities and dividing the result by the number of outstanding
shares.

Investment holdings are valued on the basis of amortized cost, which means that
the Fund's securities are valued at cost, plus or minus any premium or discount
that has accrued since purchase. The amortized cost method is designed for money
market funds, which seek to maintain a stable share price, and most money market
funds use this method to calculate NAV.

HOW TO BUY, SELL OR EXCHANGE SHARES
Shares may be purchased, sold or exchanged through an account at Schwab
(including the Trust Company), or any other entity designated by Schwab. The
following information on how to buy, sell and exchange shares is for
transactions through an account at Schwab.

Shares are purchased or sold at the NAV next determined after your purchase,
redemption or exchange order is received in good order. Shares purchased at the
4 p.m. NAV generally receive a dividend the next day although, upon special
request, investments of $100,000 or more that are received in good order by
Schwab or the Trust Company before 1:30 p.m. Eastern time, may receive a
dividend that day. Shares sold or exchanged at the 4 p.m. NAV generally receive
a dividend that day.

MINIMUM INVESTMENTS

<TABLE>
<S> <C>
Initial Investment................... $ 1
Additional Shares.................... $ 1
Minimum Balance*..................... $ 1
</TABLE>

*Your shares may be automatically redeemed if, as a result of selling or
exchanging shares, you no longer meet the Fund's minimum balance requirements,
although you will be given 30 days' notice prior to redemption to increase your
holdings to the required minimum balance.

12
<PAGE> 34

Shares of the Fund may be bought in several ways.

- - BY TELEPHONE. Call 1-800-435-4000, 24 hours a day (1-800-345-2550 for TDD
users). For Retirement Advisors, call 1-800-772-4900.

- - BY MAIL. Write to the Fund at 101 Montgomery Street, San Francisco, CA 94104.

- - BY WIRE. Call 1-800-435-4000 for wire instructions.

Please provide the following information:

- - your name and Schwab account number;

- - the name of the Fund;

- - the dollar amount you would like to purchase, sell or exchange;

- - for initial purchases only, one of the two distribution choices below:

AUTOMATIC REINVESTMENT. All distributions will be reinvested in shares of the
Fund you are purchasing. If you do not choose an option, this option will be
assigned to you; or

CASH OPTION. All distributions will be paid to your Schwab account and, if
requested, mailed to you the next business day;

- - for exchanges, the name of the Fund and class, if applicable, into which you
want to exchange shares and the distribution option you select;

- - if selling or exchanging by mail, a signature of at least one of the persons
named on your Schwab account

PLEASE NOTE THE FOLLOWING WHEN SELLING OR EXCHANGING SHARES OF THE FUND:

- - redemption and exchange requests by mail are irrevocable and, once mailed,
may not be modified or canceled;

- - payment for redeemed shares will be made to your Schwab account within 7 days
and a check may be mailed to you upon request;

- - if you bought your shares by check, a check for your redemption proceeds will
be issued as soon as your check clears, which may take up to 15 days from the
date of purchase;

- - depending on the type of Schwab account you have, your money may earn
interest during any holding period;

- - you may exchange your shares for shares of other SchwabFunds, provided you
meet the Fund's minimum investment or other requirements;

- - an exchange of a Fund's shares for shares of other SchwabFunds(R) will be
treated as a taxable event for federal income tax purposes; and

- - the Fund and Schwab reserve the right to modify, limit or terminate the
exchange privilege upon 60 days' written notification; and

- - the Fund may suspend the right to sell shares or postpone payment for a sale
of shares when trading on the NYSE is restricted, the NYSE is closed for any
reason other than its customary weekend and holiday closings, emergency
circumstances exist as determined by the SEC or as otherwise permitted by the
SEC.

13
<PAGE> 35

DIVIDENDS & TAXES
Each business day, the Fund's net investment income is determined as of the
close of the NYSE as a dividend to shareholders of record. Net investment income
is calculated by subtracting its expenses from the income earned on its
investments that day. Dividends are declared each business day based on the net
investment income determined and are paid on the 15th of each month, if it is a
business day, except in December when dividends are paid on the last business
day of the month. If the 15th is not a business day, dividends are paid on the
next business day.

The following is only a brief summary of some of the federal and state income
tax consequences that may affect the Fund and its shareholders.

The Fund will distribute its net investment income and capital gains, if any, to
shareholders each year. Unless your investments in a Fund is held through a
retirement account, all distributions received by shareholders would be subject
to federal income tax, and may be subject to state and/or local income taxes.

Shareholders receive a record of all distributions by the Fund, as well as
purchases and sales they have made, via their monthly Schwab account statement.
Each year, the Fund notifies shareholders of the federal tax treatment of all
distributions made that year.

OPENING A SCHWAB ACCOUNT

Schwab was established in 1971 and is one of America's largest discount brokers.
Schwab serves over 4.9 million active customer accounts and helps investors make
investment decisions by offering low-cost brokerage services and providing
financial products and information. Visit one of Schwab's 274 branch offices or
Schwab's web site (http://www.schwab.com) for information on investment products
and services.

Investors may open a Schwab account by simply completing an application,
although institutional investors should contact Schwab to find out if any
additional forms need to be completed.

A $1,000 minimum initial investment and account balance is required for an
account at Schwab or the Trust Company.

Contact Schwab for instructions and any applicable fees if you would like to
wire money from your Schwab account.

14
<PAGE> 36

- - requiring a form of personal identification before acting upon any telephone
order;

- - providing written confirmation of telephone orders; and

- - tape-recording all telephone orders.

Share certificates will not be issued in order to avoid additional
administrative costs, however, share ownership records are maintained by Schwab.
Twice a year, financial reports will be mailed to shareholders describing a
Fund's performance and investment holdings. In order to reduce these mailing
costs, each household will receive one consolidated mailing. If you do not want
to receive consolidated mailings, you may write to the Fund and request that
your mailings not be consolidated.

The Fund, in its sole discretion and without prior notice, reserves the right to
reject orders to purchase shares, change or waive minimum investment
requirements or withdraw or suspend any part of the offering made by this
prospectus.
- ---------------------------------------------------

15
<PAGE> 37

---------------------------

Schwab Retirement
Money Funds(R)
---------------------------
PROSPECTUS APRIL 30, 1998

SCHWABFUNDS(R)

(LOGO)

SCHWABFUNDS(R)
101 Montgomery Street
San Francisco, California 94104

2026-7 (4/98) Printed on recycled paper.

<PAGE> 38
PART A
CROSS REFERENCE SHEET
PROSPECTUS

Schwab Institutional Advantage Money Fund(R)

<TABLE>
<CAPTION>
PART A ITEM PROSPECTUS CAPTION
<S> <C>
1. Cover Page Cover Page

2. Synopsis Key Features; Expenses

3. Condensed Financial Information Not applicable

4. General Description of Registrant Organization & Management; Investment Objective,
Policies & Risks

5. Management of the Fund Organization & Management

5A. Management's Discussion of Fund Performance Not applicable

6. Capital Stock and Other Securities Organization & Management; Investing in Shares

7. Purchase of Securities Being Offered Investing in Shares

8. Redemption or Repurchase Investing in Shares

9. Pending Legal Proceedings Not applicable
</TABLE>
<PAGE> 39

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
KEY FEATURES......................... 2
EXPENSES............................. 3
FINANCIAL HIGHLIGHTS................. 4
PERFORMANCE.......................... 5
ORGANIZATION & MANAGEMENT............ 6
INVESTMENT OBJECTIVES, POLICIES &
RISKS.............................. 8
INVESTING IN SHARES.................. 12
</TABLE>

The Prospectus provides concise information that you should know before
investing. Retain it for future reference.

PROSPECTUS
APRIL 30, 1998

SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND (THE FUND) seeks current income, while
maintaining a stable share price of $1.00.

KEY FEATURES

MATCHING THE FUND TO YOUR INVESTMENT NEEDS. The Fund seeks current income, while
preserving the principal value of your investment for retirement plans, plan
participants and other institutional investors that are investing on behalf of
themselves or as a fiduciary, agent or custodian.

GOAL. The Fund seeks current income, while maintaining a stable share price of
$1.00. There is no guarantee that the Fund will achieve its goal.

STRATEGY. The Fund invests in high-quality, short-term debt securities (money
market securities).

The Fund is a diversified mutual fund.

SHAREHOLDER SERVICE. Charles Schwab & Co., Inc. (Schwab), 101 Montgomery Street,
San Francisco, CA 94104, and the Charles Schwab Trust Company (Trust Company)
provide professional representatives 24 hours a day at 1-800-435-4000 or
1-800-772-4900 to service your accounts. Read the "Investing in Shares" section
of the prospectus for information on how to buy, sell and exchange shares of the
Fund.

LOW-COST INVESTING. The Investment Manager and Schwab have voluntarily
guaranteed that, through at least April 30, 1999, total operating expenses of
the Fund will not exceed 0.50% of average daily net assets.

2
<PAGE> 41

EXPENSES

The annual operating expenses stated below are stated as a percentage of average
daily net assets of the Fund.

<TABLE>
<S> <C>
Management fee
(after reduction) 0.16%
12b-1 fees NONE
Other expenses
(after reduction) 0.34%
TOTAL OPERATING
EXPENSES (AFTER REDUCTION) 0.50%
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$5 $16 $28 $63
</TABLE>

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

The Investment Manager and Schwab have voluntarily agreed to guarantee, through
at least April 30, 1999 that total operating expenses (excluding interest, taxes
and extraordinary expenses) of the Fund will not exceed 0.50% of average daily
net assets. If these guarantees were not in effect, the management fee, other
expenses and total operating expenses of the Fund would be 0.46%, 0.38% and
0.84% of average daily net assets, respectively. Read the "Organization &
Management" section of the prospectus for more information on expenses.

3
<PAGE> 42

FINANCIAL HIGHLIGHTS

The auditor's report, financial highlights and financial statements are
incorporated by reference into the SAI. For free copies of the Annual Report
and/or the SAI, call 1-800-435-4000.

For a share outstanding throughout each period:

<TABLE>
<CAPTION>
Income from
Investment Operations Less Distributions
--------------------------------- -----------------------
Net
Realized &
Unrealized Net
Fiscal Net Asset Net Gains Dividends Asset
Period Value Invest- (Losses) Total from from Net Total Value Total Return
Ended Beginning ment on Invest- Investment Investment Distri- End of (not annualized)
Dec. 31 of Period Income ments(3) Operations Income butions Period (%)
------- --------- ------- ---------- ---------- ------------- ------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

) Schwab Institutional Advantage Money Fund(R
1997 $1.00 $0.05 -- $0.05 $(0.05) $(0.05) $1.00 5.31
1996 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 5.15
1995 1.00 0.06 -- 0.06 (0.06) (0.06) 1.00 5.65
1994(2) 1.00 0.04 -- 0.04 (0.04) (0.04) 1.00 3.86

Ratios/Supplemental Data
---------------------------------------
Ratio of
Ratio of Net
Expenses Investment
Fiscal to Average Income to
Period Net Assets Net Average
Ended End of Period Assets(1) Net Assets
Dec. 31 (000's) (%) (%)
------- ------------- ---------- ----------
<S> <C> <C> <C>
)
1997 $275,337 0.50 5.20
1996 139,021 0.50 5.03
1995 80,746 0.53 5.50
1994( 60,088 0.55* 4.04*
</TABLE>

<TABLE>
<CAPTION>
Ratio of Net
Ratio of Investment
Fiscal Period Expenses Income to
Ended to Average Average
December 31 Net Asset Net Asset
- ------------- ---------- ------------
<S> <C> <C>
1997 0.84% 4.86%
1996 0.88% 4.65%
1995 0.90% 5.13%
1994(2) 0.92%* 3.67%*
</TABLE>

(2) For the period from January 4, 1994 (commencement of operations) to December
31, 1994.

(3) Amount does not round to a full penny.

*Annualized.

4
<PAGE> 43

PERFORMANCE

Typically, money market funds report performance in terms of total return or
yield.

YIELD is the actual income earned on an investment over a stated period of time
and annualized (assumed to be generated over a year). For example, a seven-day
yield measures the income earned by a Fund over a seven-day period, and
expresses that income as an annualized percentage.

An effective yield is calculated similarly as yield, but income earned is
assumed to be reinvested. Because of this compounding effect, effective yields
are generally higher.

Because money market funds seek to maintain a stable share price, yields are
generally considered a better method of measuring performance than total return.

Fund strategies, performance and holdings are detailed in financial reports,
which are sent to shareholders twice a year. For a free copy of the most recent
financial report, call 1-800-435-4000.

5
<PAGE> 44

ORGANIZATION & MANAGEMENT

THE FUND IS A DIVERSIFIED MUTUAL FUND. The Fund is a series of The Charles
Schwab Family of Funds (the Trust).

For the fiscal year ended December 31, 1997, the Fund paid total operating
expenses of 0.50% of average daily net assets.

6
<PAGE> 45

7
<PAGE> 46

INVESTMENT OBJECTIVES, POLICIES & RISKS

INVESTMENT OBJECTIVE
THE FUND seeks maximum current income consistent with liquidity and stability of
capital.

The Fund's investment objective may be changed only by vote of a majority of its
shareholders. Unless otherwise noted, policies and limitations may be changed
without shareholder approval.

INVESTMENT STRATEGY

THE FUND seeks to achieve its investment objective by investing in high-quality,
U.S. dollar-denominated money market securities, including U.S. Government
securities and repurchase agreements.

INVESTMENT RISKS

INTEREST RATE RISK is the potential for fluctuations in the prices of debt
securities due to changing interest rates. For example, when interest rates
rise, prices of debt securities generally decline or "fall," and when interest
rates fall, prices of debt securities generally rise.

INCOME RISK is the potential for a decline in income due to falling interest
rates, and is a component of both prepayment or call risk and interest rate
risk.

CREDIT RISK is the possibility that an issuer will fail to make timely payments
of either interest or principal.

8
<PAGE> 47

PRINCIPAL SECURITIES AND INVESTMENT TECHNIQUES
Different types of securities the Fund may invest in are described below.

FOREIGN SECURITIES involve additional risks because they are issued by foreign
entities, including foreign governments, banks and corporations, or because they
are principally traded overseas. Credit and liquidity supports also may be
provided by foreign entities. Foreign entities may not be subject to the same
regulatory and reporting requirements as domestic entities, and may be subject
to higher transaction costs and foreign taxes. Foreign securities are sometimes
less liquid and may be more volatile than securities issued by domestic issuers
or securities traded on domestic markets. In addition, foreign economic,
political and legal developments could have more dramatic affects on the value
of a foreign security or its payment of interest and repayment of principal.

9
<PAGE> 48

REPURCHASE AGREEMENTS involve the Fund buying securities (usually U.S.
Government securities) from a seller and simultaneously agreeing to sell them
back at an agreed-upon price and time. There is a risk of loss if the seller
does not perform as agreed.

ASSET-BACKED SECURITIES are securities that are backed by the loans or account
receivables of an entity, such as a bank or credit card company. These
securities are typically commercial paper (short-term loans) which the issuer
intends to repay using the assets backing them (once collected). Therefore,
repayment depends largely on the cash-flows generated by the assets backing the
securities. Sometimes the credit support for these securities is limited to the
underlying assets, but, in other cases, may be provided by a third party via a
letter of credit or insurance guarantee.

ILLIQUID SECURITIES are securities that are not actively traded, and, therefore,
may be difficult to sell quickly or without losses.

Restriction: The Fund will not invest more than 10% of its net assets in
illiquid securities. This policy may be changed only by shareholders.

STRIPPED SECURITIES are securities whose income and principal components are
detached and sold separately. While the risks associated with stripped
securities are

10
<PAGE> 49

similar to other money market securities, stripped securities are typically
subject to greater changes in value. U.S. Treasury securities that have been
stripped by a Federal Reserve Bank are obligations of the U.S. Treasury.

The Fund also may employ the policies described below.

DIVERSIFICATION involves investing in a wide range of securities, and, thereby
spreading and reducing the risks of investment.

BORROWING subjects the Fund to interest costs that may exceed the interest
received on the securities purchased with the borrowed funds.

LENDING securities may earn income for a Fund, but also could result in losses,
and possibly affect its share price.

Restriction: The Fund will limit lending to no more than 33 1/3% of its total
assets.

11
<PAGE> 50

INVESTING IN SHARES

NET ASSET VALUE
The price of each share of the Fund is its net asset value per share (NAV). NAV
is determined each business day at the close of the NYSE, generally 4 p.m.
Eastern time. NAV is calculated by adding the value of the Fund's assets,
subtracting its liabilities and dividing the result by the number of outstanding
shares.

HOW TO BUY, SELL OR EXCHANGE SHARES
Shares may be purchased, sold or exchanged through an account at Schwab
(including the Trust Company) or any other entity designated by Schwab. The
following information on how to buy, sell and exchange shares is for
transactions through an account at Schwab.

MINIMUM INVESTMENTS

<TABLE>
<S> <C>
INITIAL INVESTMENT.............. $25,000
ADDITIONAL SHARES............... $ 1
MINIMUM BALANCE*................ $25,000
</TABLE>

* Your shares may be automatically redeemed if, as a result of selling or
exchanging shares, you no longer meet the Fund's minimum balance requirements,
although you will be given 30 days' notice prior to redemption to increase your
holdings to the required minimum balance. Shares of the Fund may be bought in
several ways.

12
<PAGE> 51

BY TELEPHONE. Call 1-800-435-4000, 24 hours a day (1-800-345-2550 for TDD
users). For Retirement Advisors, call 1-800-772-4900.

BY MAIL. Write to the Fund at 101 Montgomery Street, San Francisco, CA 94104.

BY WIRE. Call 1-800-435-4000 for wire instructions.

AUTOMATIC REINVESTMENT. All distributions will be reinvested in shares of the
Fund you are purchasing. If you do not choose an option, this option will be
assigned to you; or

CASH OPTION. All distributions will be paid to your Schwab account and, if
requested, mailed to you the next business day.
- - for exchanges, the name of the Fund and class, if applicable, into which you
want to exchange shares and the distribution option you select; and
- - if selling or exchanging by mail, a signature of at least one of the persons
named on your Schwab account

PLEASE NOTE THE FOLLOWING WHEN SELLING OR EXCHANGING SHARES OF THE FUND:

- - redemption and exchange requests by mail are irrevocable and, once mailed,
may not be modified or canceled;
- - payment for redeemed shares will be made to your Schwab account within 7 days
and a check may be mailed to you upon request;

- - if you bought your shares by check, a check for your proceeds will be issued
as soon as your check clears, which may take up to 15 days from the date of
purchase;

- - depending on the type of Schwab account you have, your money may earn
interest during any holding period;
- - you may exchange your shares for shares of other SchwabFunds(R), provided you
meet the Fund's minimum investment or other requirements;
- - an exchange of a Fund's shares for shares of other SchwabFunds will be
treated as a taxable event for federal income tax purposes;
- - the Fund and Schwab reserve the right to modify, limit or terminate the
exchange privilege upon 60 days' written notification; and
- - the Fund may suspend the right to sell shares or postpone payment for a sale
of shares when trading on the NYSE is restricted, the NYSE is closed for any
reason other than its customary weekend and holiday closings, emergency
circumstances exist as determined by the SEC or as otherwise permitted by the
SEC.

13
<PAGE> 52

The following is only a brief summary of some of the federal and state income
tax consequences that may affect the Fund and its shareholders.

The Fund will distribute its net investment income and capital gains, if any, to
shareholders each year. Unless your investment is held through a retirement
account, all distributions received by shareholders would be subject to federal
income tax, and may be subject to state and/or local income taxes.

OPENING A SCHWAB ACCOUNT

Investors may open a Schwab account by simply completing an application,
although institutional investors should contact Schwab to find out if any
additional forms need to be completed.

A $1,000 minimum initial investment and account balance is required for an
account at Schwab or the Trust Company.

Contact Schwab for instructions and any applicable fees if you would like to
wire money from your Schwab account.

14
<PAGE> 53

GENERAL INFORMATION
The right to initiate transactions by telephone is automatically available
through your Schwab account. As long as the Fund or Schwab follow reasonable
procedures to confirm that your telephone order is genuine, they will not be
liable for any losses an investor may experience due to unauthorized or
fraudulent instructions. These procedures may include:
- - requiring a form of personal identification before acting upon any telephone
order;
- - providing written confirmation of telephone orders; and
- - tape-recording all telephone orders.

Share certificates will not be issued in order to avoid additional
administrative costs, however, share ownership records are maintained by Schwab.
Twice a year, financial reports will be mailed to shareholders describing a
Fund's performance and investment holdings. In order to reduce these mailing
costs, each household will receive one consolidated mailing. If you do not want
to receive consolidated mailings, you may write to the Fund and request that
your mailings not be consolidated.

15
<PAGE> 54

---------------------------

SCHWAB INSTITUTIONAL
ADVANTAGE MONEY FUND(R)
---------------------------
PROSPECTUS APRIL 30, 1998

SCHWABFUNDS(R)
(LOGO)

SCHWABFUNDS(R)
101 Montgomery Street
San Francisco, California 94104

<PAGE> 55
PART A
CROSS REFERENCE SHEET
PROSPECTUS

Schwab Municipal Money Fund-Sweep Shares
Schwab California Municipal Money Fund-Sweep Shares
Schwab New York Municipal Money Fund-Sweep Shares

<TABLE>
<CAPTION>
PART A ITEM PROSPECTUS CAPTION
<S> <C>
1. Cover Page Cover Page

2. Synopsis Key Features; Expenses

3. Condensed Financial Information Not applicable

4. General Description of Registrant Organization & Management; Investment Objective,
Policies & Risks

5. Management of the Fund Organization & Management

5A. Management's Discussion of Fund Performance Not applicable

6. Capital Stock and Other Securities Organization & Management; Investing in Shares

7. Purchase of Securities Being Offered Investing in Shares

8. Redemption or Repurchase Investing in Shares

9. Pending Legal Proceedings Not applicable
</TABLE>
<PAGE> 56

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
KEY FEATURES......................... 2
EXPENSES............................. 4
FINANCIAL HIGHLIGHTS................. 5
PERFORMANCE.......................... 7
ORGANIZATION & MANAGEMENT............ 8
INVESTMENT OBJECTIVES, POLICIES &
RISKS.............................. 10
INVESTING IN SHARES.................. 14
</TABLE>

The Prospectus provides concise information that you should know before
investing. Retain it for future reference.

SCHWAB CALIFORNIA
MUNICIPAL MONEY FUND
(CA FUND)

SCHWAB NEW YORK
MUNICIPAL MONEY FUND
(NY FUND)

SWEEP SHARES
PROSPECTUS
APRIL 30, 1998
Each Fund seeks tax-exempt income, while maintaining a stable share price of
$1.00.

Each of CA Fund and NY Fund intends to invest in municipal money market
securities of a single state, and may invest a significant percentage of its
assets in the securities of a single issuer. Therefore, these Funds may be
riskier than other types of money market funds.

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 PER SHARE OF $1.00.
<PAGE> 57

KEY FEATURES

MATCHING A FUND TO YOUR INVESTMENT NEEDS. Each Fund seeks income exempt from
federal income tax (and, for CA Fund and NY Fund, exempt from California state
and New York state and local personal income taxes), while preserving the value
of your investment and, therefore, may be appropriate for a variety of
investment programs. Some of a Fund's income, however, may be subject to
alternative minimum tax. The Funds are not suitable for investors who would not
benefit from the tax-exempt character of each Fund's investments, such as
holders of IRAs, qualified retirement plans or other tax-exempt entities.

Each Fund is composed of two classes of shares, which share a common investment
portfolio and objective. The Sweep Shares are designed to provide convenience
through automatic investment of uninvested cash balances in your Schwab account
(the Sweep Feature), although shares also may be position traded (purchased
directly). The Sweep Feature makes the Sweep Shares especially suitable for
investors with short-term investment needs, such as for periods between other
investments. The Value Advantage Shares, which are not offered through this
prospectus, do not have a Sweep Feature, but rather must be position traded. The
Value Advantage Shares, therefore, are suited for larger, longer-term
investments, and have slightly lower operating expenses. The Value Advantage
Shares require higher minimum investments than Sweep Shares and charge certain
transaction fees. Please call 1-800-435-4000 for a free copy of the Value
Advantage Investments' prospectus, which contains information you should know
before making an investment.

GOALS. Each Fund seeks tax-exempt income, while maintaining a stable share price
of $1.00. There is no guarantee that the Funds will achieve their goals.

STRATEGIES. Each Fund invests in high-quality, short-term municipal debt
securities (municipal money market securities).

Muni Fund is a diversified mutual fund; CA Fund and NY Fund are non-diversified
mutual funds.

RISKS. Investment in a Fund will be subject to risks associated with investing
in money market securities, i.e., high-quality, short-term debt securities.
Because each Fund invests substantially in municipal money market securities,
the performance of each Fund may be especially affected by state and local
economic conditions and political developments, as well as the ability of
issuers to meet their obligations. CA Fund and NY Fund invest substantially in
municipal money market securities of a single state, and will be especially
affected by conditions and developments particular to that state.

2
<PAGE> 58

funds with over $62 billion in assets as of March 31, 1998.

LOW-COST INVESTING. The Investment Manager and Schwab have voluntarily
guaranteed that, through at least April 30, 1999, total operating expenses of
the Sweep Shares of Muni Fund, CA Fund and NY Fund will not exceed 0.66%, 0.65%
and 0.69%, respectively, of each Fund's average daily net assets, respectively.

3
<PAGE> 59

EXPENSES

ANNUAL OPERATING EXPENSES are paid by the Funds. These expenses include
management fees paid to the Investment Manager, and other fees for services such
as maintaining shareholder records and furnishing shareholder statements and
financial reports. These expenses are factored into the dividends paid to
shareholders. For funds with more than one class, these fees are factored into
each class. As a shareholder, you are not charged any of these fees directly.

The annual operating expenses stated below are stated as a percentage of average
daily net assets of the Sweep Shares of each Fund and adjusted to reflect
current fees.

<TABLE>
<CAPTION>
MUNI CA NY
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>
Management fee (after
reduction) 0.19% 0.18% 0.17%
12b-1 fees NONE NONE NONE
Other expenses (after
reduction) 0.47% 0.47% 0.52%
TOTAL OPERATING EXPENSES
(AFTER REDUCTION) 0.66% 0.65% 0.69%
</TABLE>

MUNI FUND

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$7 $21 $37 $82
</TABLE>

CA FUND

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$7 $21 $36 $81
</TABLE>

NY FUND

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$7 $22 $38 $86
</TABLE>

THE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

The Investment Manager and Schwab have voluntarily agreed to guarantee, at least
through April 30, 1999, that total operating expenses (excluding interest, taxes
and extraordinary expenses) of the Sweep Shares of Muni Fund, CA Fund and NY
Fund, will not exceed 0.66%, 0.65% and 0.69% of average daily net assets,
respectively. If these guarantees were not in effect the management fee, other
expenses and total operating expenses of the Sweep Shares of Muni Fund, CA Fund
and NY Fund would be 0.41%, 0.48% and 0.90%; 0.43%, 0.47% and 0.90%; 0.46%,
0.54% and 1.00% of average daily net assets, respectively. Read the
"Organization & Management" section of the prospectus for more information on
expenses.

4
<PAGE> 60

FINANCIAL HIGHLIGHTS

The auditor's report, financial highlights and financial statements are
incorporated by reference into the SAI. For free copies of the Annual Report
and/or the SAI, call 1-800-435-4000.

For a share outstanding throughout each period:

<TABLE>
<CAPTION>
Income from
Investment Operations Less Distributions Ratios/Supplemental Data
---------------------------------------- ----------------------------- -------------------------

Net Realized Net
Fiscal Net Asset & Unrealized Dividends Asset
Period Value Net Gains Total from from Net Value Total Net Assets
Ended Beginning Investment (Losses) on Investment Investment Total End of Return(6) End of Period
Dec. 31 of Period Income Investments(8) Operations Income Distributions Period (%) (000's)
- ------- --------- ---------- -------------- ---------- ------------- ------------- ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Schwab Municipal Money Fund-Sweep Shares
1997 $1.00 $0.03 -- $0.03 $(0.03) $(0.03) $1.00 3.11 $4,423,841
1996 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.92 3,868,919
1995 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 3.30 3,403,837
1994 1.00 0.02 -- 0.02 (0.02) (0.02) 1.00 2.32 3,015,951
1993 1.00 0.02 -- 0.02 (0.02) (0.02) 1.00 1.93 2,423,317
1992 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.49 1,744,903
1991 1.00 0.04 -- 0.04 (0.04) (0.04) 1.00 4.01 1,359,121
1990(3) 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00 5.08 1,185,974
Schwab California Municipal Money Fund-Sweep Shares
1997 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.95 2,154,522
1996 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.80 1,816,112
1995 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 3.20 1,577,695
1994 1.00 0.02 -- 0.02 (0.02) (0.02) 1.00 2.26 1,293,883
1993 1.00 0.02 -- 0.02 (0.02) (0.02) 1.00 1.91 1,062,042
1992 1.00 0.02 -- 0.02 (0.02) (0.02) 1.00 2.35 691,176
1991 1.00 0.04 -- 0.04 (0.04) (0.04) 1.00 3.77 494,214
1990(4) 1.00 0.01 -- 0.01 (0.01) (0.01) 1.00 0.77 339,292
Schwab New York Municipal Money Fund-Sweep Shares
1997 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.96 357,221
1996 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.74 270,612
1995(5) 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00 2.75 204,863

Ratios/Supplemental Data
-----------------------------
Ratio of Net
Ratio of Investment
Fiscal Expenses to Income to
Period Average Average
Ended Net Assets(1) Net Assets(1)
Dec. 31 (%) (%)
- ------- ------------- -------------
<S> <C> <C>
Schwab
1997 0.66(2) 3.06
1996 0.66 2.89
1995 0.66 3.25
1994 0.65 2.31
1993 0.63 1.92
1992 0.63 2.45
1991 0.63 3.91
1990(3 0.63(7) 5.33(7)
Schwab
1997 0.65(2) 2.91
1996 0.65 2.77
1995 0.65 3.15
1994 0.64 2.25
1993 0.63 1.89
1992 0.63 2.31
1991 0.61 3.70
1990(4 0.28(7) 5.06(7)
Schwab
1997 0.69(2) 2.93
1996 0.69 2.71
1995(5 0.63(7) 3.20(7)
</TABLE>

5
<PAGE> 61

(1) The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Funds' expense and net investment income ratios
would have been:

<TABLE>
<CAPTION>
Schwab Municipal Schwab California Schwab New York Municipal
Money Fund-Sweep Shares Money Fund-Sweep Shares Money Fund-Sweep Shares
-------------------------------- -------------------------------- --------------------------------
Ratio of Ratio of Net Ratio of Ratio of Net Ratio of Ratio of Net
Expenses Investment Income Expenses Investment Income Expenses Investment Income
Fiscal Period to Average to Average to Average to Average to Average to Average
Ended Dec. 31 Net Assets Net Assets Net Assets Net Assets Net Assets Net Assets
- ------------- ----------- ------------------ ----------- ------------------ ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
1997 0.90% 2.83% 0.91% 2.66% 1.02% 2.62%
1996 0.90% 2.65% 0.92% 2.50% 1.04% 2.36%
1995 0.91% 3.00% 0.94% 2.86% 1.04%(5,7) 2.79%(5,7)
1994 0.91% 2.05% 0.94% 1.95% -- --
1993 0.93% 1.62% 0.96% 1.56% -- --
1992 0.94% 2.14% 0.97% 1.97% -- --
1991 0.95% 3.59% 0.98% 3.33% -- --
1990 0.95%(3,7) 5.01%(3,7) 1.17%(4,7) 4.17%(4,7) -- --
</TABLE>

(2) These expense ratios exclude interest expenses, extraordinary expenses and
taxes. Had these expenses been included, the expense ratios would have been:

<TABLE>
<S> <C>
Schwab Municipal Money Fund 0.67%
Schwab California Municipal Money Fund 0.66%
Schwab New York Municipal Money Fund 0.70%
</TABLE>

(3) For the period from January 26, 1990 (commencement of operations) to
December 31, 1990.

(4) For the period from November 6, 1990 (commencement of operations) to
December 31, 1990.

(5) For the period from February 27, 1995 (commencement of operations) to
December 31, 1995.

(6) Not Annualized

(7) Annualized

(8) Amount per share does not round to a full penny.

6
<PAGE> 62

PERFORMANCE

Typically, mutual funds report performance in terms of total return or yield.

An effective yield is calculated similarly as yield, but income earned is
assumed to be reinvested. Because of this compounding effect, effective yields
are generally higher.

A taxable-equivalent yield shows the yield that a taxable investment would have
to generate in order to equal a tax-free yield. A taxable-equivalent effective
yield is calculated similarly as taxable-equivalent yield, except that the
effective yield is used in the calculation.

Because money market funds seek to maintain a stable share price, yields are
generally considered a better method of measuring performance than total return.

Fund strategies, performance and holdings are detailed in financial reports,
which are sent to shareholders twice a year. For a free copy of the most recent
financial report, call 1-800-435-4000.

7
<PAGE> 63

ORGANIZATION & MANAGEMENT

MUNI FUND IS A DIVERSIFIED MUTUAL FUND; CA FUND AND NY FUND ARE NON-DIVERSIFIED
MUTUAL FUNDS. Each Fund is a series of The Charles Schwab Family of Funds (the
Trust).

For the services performed under its contract with each Fund, the Investment
Manager is entitled to receive a graduated annual fee, payable monthly from each
Fund.

For the fiscal year ended December 31, 1997, Muni Fund, CA Fund and NY Fund paid
management fees of 0.19%, 0.18% and 0.17% of each Fund's average daily net
assets, respectively.

For the services performed as transfer agent under its contract with each Fund,
Schwab is entitled to receive an annual fee from each Fund, payable monthly in
the amount of 0.25% of each Fund's average daily net assets. For the services
performed as shareholder services agent under its contract with each Fund,
Schwab is entitled to receive an annual fee from the Sweep Shares of each Fund,
payable monthly in the amount of 0.20% of the average daily net assets of each
Fund.

8
<PAGE> 64

For the fiscal year ended December 31, 1997, the Sweep Shares of Muni Fund, CA
Fund and NY Fund paid total operating expenses, after reductions, of 0.67%,
0.66% and 0.70% of each Fund's average daily net assets, respectively.

9
<PAGE> 65

INVESTMENT OBJECTIVES, POLICIES & RISKS

INVESTMENT OBJECTIVES
MUNI FUND seeks maximum current income exempt from federal income tax consistent
with stability of capital.

CA FUND seeks maximum current income exempt from federal and California state
personal income taxes, consistent with stability of capital.

NY FUND seeks maximum current income exempt from federal and New York state and
local personal income taxes consistent with stability of capital.

Each Fund's investment objective may be changed only by vote of a majority of
its shareholders. Unless otherwise noted, policies and limitations may be
changed without shareholder approval.

INVESTMENT STRATEGIES
MUNI FUND seeks to achieve its investment objective by investing in municipal
money market securities.

CA FUND seeks to achieve its investment objective by investing in California
municipal money market securities.

NY FUND seeks to achieve its investment objective by investing in New York
municipal money market securities.

The Funds seek to maintain a stable share price of $1.00, although there is no
guarantee that they will be able to continue to do so. The Funds follow
regulations set forth by the SEC that dictate the quality, maturity and
diversification of a Fund's investments. These requirements are designed to help
the Funds maintain a stable share price of $1.00.

The Funds earn tax-exempt income at current money market rates and their yields
will fluctuate from day-to-day. The Funds emphasize capital preservation, so
they will not provide the higher yield or capital appreciation that a more
aggressive mutual fund or other investment may provide.

INVESTMENT RISKS
Investment in a Fund will be subject to risks associated with investing in
municipal money market securities, i.e. high-quality, short-term municipal debt
securities. Generally speaking there are four types of risk attendant to
investing in debt securities.

PREPAYMENT or CALL RISK is the likelihood that, during periods of falling
interest rates, debt securities will be prepaid (or "called") prior to maturity,
requiring the proceeds to be invested at a generally lower interest rate.

INCOME RISK is the potential for a decline in income due to falling interest
rates, and is a component of both prepayment or call risk and interest rate
risk.

CREDIT RISK is the possibility that an issuer will fail to make timely payments
of either interest or principal.

10
<PAGE> 66

The amount of each type of risk each Fund will be subject to depends on its
portfolio of investments. The Funds may purchase only high-quality, short-term
municipal debt securities that the Investment Manager believes present minimal
credit risk. In addition, the short maturity of each Fund's portfolio is
designed to minimize interest rate and prepayment or call risks, and thereby
reduce income risk.

Because each Fund intends to invest substantially in municipal money market
securities, its performance and, possibly, its share price also may be affected
by the economic and political conditions within a state. An investment in either
CA Fund or NY Fund poses additional risk considerations because of each Fund's
substantial investments in a single state.

PRINCIPAL SECURITIES AND INVESTMENT TECHNIQUES
Different types of securities a Fund may invest in are described below.

MUNICIPAL MONEY MARKET SECURITIES are high-quality, short-term debt securities
(money market securities) issued by or on behalf of a state, including its
counties, municipalities, authorities and other subdivisions, or the territories
and possessions of the United States and the District of Columbia, including
their subdivisions, agencies and instrumentalities. These securities are issued
to raise money for various public purposes or private activities, such as
general financing for state and local governments or financing for specific
projects or facilities. Municipal securities pay fixed, variable or floating
rates of interest, which is meant to be exempt from federal income tax, and,
typically, personal income tax of a state or locality. The issuers of municipal
debt securities receive legal opinions as to the validity and tax exempt nature
of their securities, which each Fund relies on when purchasing such securities.

Municipal securities may be owned directly or through participation interests,
and include general obligation or revenue securities, tax-exempt commercial
paper, notes and leases. The maturity date or price of and financial assets
collateralizing a municipal security may be structured in order to make it
qualify as or act like a municipal money market security. These securities may
be subject to greater credit and interest rate risks than other municipal money
market securities because of their structure.

The value of municipal securities may be affected by legislation or litigation
involving the taxation of municipal securities or the rights of holders of
municipal securities. In addition, some municipal securities involve private
entities, and the value of these securities could be affected by the credit
quality of the private entity and possibly by the circumstances affecting the
project.

Restriction: Each Fund will normally invest 100% of its total assets in
municipal money market securities. In addition, each Fund may invest more than
25% in municipal securities financing similar projects.

11
<PAGE> 67

CALIFORNIA/NEW YORK MUNICIPAL MONEY MARKET SECURITIES are municipal money market
securities issued by or on behalf of either the state of California or the state
of New York, or either state's counties, municipalities, authorities or other
subdivisions. These securities are subject to the same general risks associated
with other municipal money market securities, although their values will be
particularly affected by economic, political, geographic and demographic
conditions and developments within either California or New York. Additionally,
like all securities, the value of municipal money market securities, including
those of California or New York issuers, may be affected by any change in the
perceived ability of issuers to meet their obligations.

Restriction: CA Fund will normally invest at least 65% of its total assets in
municipal money market securities of California issuers. NY Fund will normally
invest at least 65% of its total assets in municipal money market securities of
New York issuers.

CREDIT AND LIQUIDITY SUPPORTS may be employed by issuers to reduce the credit
risk of their securities. Credit supports include letters of credit, insurance
and guarantees provided by foreign and domestic entities, as well as moral
obligations, which are sometimes issued with municipal money market securities.
Liquidity supports include puts, demand features, standby bond purchase
agreements and lines of credit. Most of these arrangements move the credit risk
of an investment from the issuer of the security to the support provider.
Changes in the credit quality of a support provider could cause losses to a
Fund, and affect its share price.

12
<PAGE> 68

put provider does not perform as agreed. Standby commitments are types of puts.

ILLIQUID SECURITIES are securities that are not actively traded, and, therefore
may be difficult to sell quickly or without losses.

Restriction: Each Fund will not invest more than 10% of its net assets in
illiquid securities.

OTHER MUNICIPAL SECURITIES include leases and purchases and sales contracts.
These securities may be issued to finance the acquisition of equipment or
facilities. These securities are subject to the risks that the municipality may
reduce or not make its lease payments, thereby reducing the value of the
securities.

The Funds also may employ the policies described below.

DIVERSIFICATION involves investing in a wide range of securities, and thereby
spreading and reducing the risks of investment. While CA and NY Funds are
non-diversified mutual funds, they will attempt to diversify their investments
within their respective states.

BORROWING subjects the Funds to interest costs that may exceed the interest
received on the securities purchased with the borrowed funds.

Restriction: Each Fund may borrow up to 33 1/3% of its total assets for
temporary or emergency purposes; provided that each Fund will not purchase
securities while borrowings are outstanding.

TEMPORARY INVESTMENTS in U.S. Government securities, money market securities or
other taxable securities, and repurchase agreements for all of these securities
may be made by each Fund as a defensive measure or under abnormal market
conditions.

13
<PAGE> 69

INVESTING IN SHARES

NET ASSET VALUE
The price of each Sweep Share of a Fund is its net asset value per share (NAV).
NAV is determined each business day, first at 10 a.m. Eastern time, then again
at the close of the NYSE, generally 4 p.m. Eastern time. NAV is calculated by
adding the value of a Fund's assets, subtracting its liabilities and dividing
the result by the number of outstanding shares.

DIRECT PURCHASE. Sweep Shares of a Fund also may be position traded (purchased
directly). The minimum initial investment is $1,000. Subsequent direct purchases
must be in amounts of at least $100.

14
<PAGE> 70

- - BY TELEPHONE. Call 1-800-435-4000, 24 hours a day (1-800-345-2550 for TDD
users). Telephone orders received in good order after the close of the NYSE,
but prior to 8 p.m. Eastern time will be executed at the 10 a.m. NAV.
Telephone orders received in good order after 8 p.m. Eastern time will be
executed at the 4 p.m. NAV.
- - BY MAIL. Write to the Funds at 101 Montgomery Street, San Francisco, CA
94104.
- - BY WIRE. Call 1-800-435-4000 for wire instructions.

AUTOMATIC REINVESTMENT. All distributions will be reinvested in full Sweep
Shares of the Fund you are purchasing. If you do not choose an option, this
option will be assigned to you; or

CASH OPTION. All distributions will be paid to your Schwab account and, if
requested, mailed to you the next business day.

- - for exchanges, the name of the Fund and class, if applicable, into which you
want to exchange shares and the distribution option you select; and
- - if selling or exchanging by mail, a signature of at least one of the persons
named on your Schwab account.

PLEASE NOTE THE FOLLOWING WHEN SELLING OR EXCHANGING SHARES OF THE FUNDS:
- - Sweep Shares of each Fund require a minimum balance of $100;
- - your shares may be automatically redeemed if, as a result of selling or
exchanging shares you no longer meet a Fund's minimum balance requirements,
although you will be given 30 days' notice prior to redemption to increase
your holdings to the required minimum balance;
- - redemption and exchange requests by mail are irrevocable and, once mailed,
may not be modified or canceled;
- - payment for redeemed shares will be made to your Schwab account within 7 days
and a check may be mailed to you upon request;
- - if you bought your shares by check, a check for your redemption proceeds will
be issued as soon as your check clears, which may take up to 15 days from the
date of purchase;
- - depending on the type of Schwab account you have, your money may earn
interest during any holding period;
- - you may exchange your shares for shares of other SchwabFunds(R), provided you
meet the Fund's minimum investment or other requirements;
- - an exchange of a Fund's shares for shares of other SchwabFunds will be
treated as a taxable event for federal income tax purposes;

15
<PAGE> 71

Each Fund will distribute its net investment income and capital gains, if any,
to shareholders each year. Dividends derived from exempt-interest income will be
exempt from federal income tax when distributed to shareholders. In addition,
dividends paid by CA Fund and NY Fund are expected to be exempt from California
state and New York state and local personal income taxes, respectively. Some
distributions received by shareholders may be subject to federal or state and/or
local income taxes.

The interest from some municipal money market securities is subject to
alternative minimum tax. Each Fund may invest all of its assets in these
securities. Shareholders subject to the alternative minimum tax must take this
interest into account when computing their alternative minimum tax liability.

OPENING A SCHWAB ACCOUNT

16
<PAGE> 72

Investors may open a Schwab account by simply completing an application,
although institutional investors should contact Schwab to find out if any
additional forms need to be completed.

GENERAL INFORMATION
The right to initiate transactions by telephone is automatically available
through your Schwab account. As long as the Funds or Schwab follow reasonable
procedures to confirm that your telephone order is genuine, they will not be
liable for any losses an investor may experience due to unauthorized or
fraudulent instructions. These procedures may include:
- - requiring a form of personal identification before acting upon any telephone
order;
- - providing written confirmation of telephone orders; and
- - tape-recording all telephone orders.

17
<PAGE> 73

Funds and request that your mailings not be consolidated.

- ---------------------------------------------------

NO ONE HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY STATEMENTS
ABOUT THIS OFFERING OTHER THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS AND
IN OFFICIAL SALES MATERIALS. IF ANYONE GIVES ANY OTHER INFORMATION OR MAKES ANY
OTHER REPRESENTATIONS, DO NOT RELY ON SUCH INFORMATION OR REPRESENTATIONS.
===================================================

18
<PAGE> 74

---------------------------

Schwab Municipal
Money Funds-
Sweep Investments(TM)
---------------------------
PROSPECTUS APRIL 30, 1998

SCHWABFUNDS(R) SCHWABFUNDS(R)

<PAGE> 75
PART A
CROSS REFERENCE SHEET
PROSPECTUS

Schwab Value Advantage Money Fund-Investor Shares
Schwab Municipal Money Fund-Value Advantage Shares
Schwab California Municipal Money Fund- Value Advantage Shares
Schwab New York Municipal Money Fund- Value Advantage Shares

<TABLE>
<CAPTION>
PART A ITEM PROSPECTUS CAPTION
<S> <C>
1. Cover Page Cover Page

2. Synopsis Key Features; Expenses

3. Condensed Financial Information Not applicable

4. General Description of Registrant Organization & Management; Investment Objective,
Policies & Risks

5. Management of the Fund Organization & Management

5A. Management's Discussion of Fund Performance Not applicable

6. Capital Stock and Other Securities Organization & Management; Investing in Shares

7. Purchase of Securities Being Offered Investing in Shares

8. Redemption or Repurchase Investing in Shares

9. Pending Legal Proceedings Not applicable
</TABLE>
<PAGE> 76

TABLE OF CONTENTS

The Prospectus provides concise information that you should know before
investing. Retain it for future reference.

SCHWAB MUNICIPAL
MONEY FUND --
VALUE ADVANTAGE SHARES
(MUNI FUND)

SCHWAB CALIFORNIA
MUNICIPAL MONEY FUND --
VALUE ADVANTAGE SHARES
(CA FUND)

SCHWAB NEW YORK
MUNICIPAL MONEY FUND --
VALUE ADVANTAGE SHARES
(NY FUND)

PROSPECTUS
APRIL 30, 1998

Each Fund seeks income (tax-exempt in the case of Muni Fund, CA Fund and NY
Fund), while maintaining a stable share price of $1.00.

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 PER SHARE OF $1.00.
<PAGE> 77

KEY FEATURES

MATCHING A FUND TO YOUR INVESTMENT NEEDS. Each Fund seeks income, while
preserving the value of your investment and, therefore, may be appropriate for a
variety of investment programs. Muni Fund, CA Fund and NY Fund (the Municipal
Funds) seek income exempt from federal income tax (and also exempt from
California state and New York state and local personal income taxes for CA Fund
and NY Fund, respectively). Some of the Municipal Funds' income, however, may be
subject to alternative minimum tax. The Municipal Funds are not suitable for
investors who would not benefit from the tax-exempt character of the Funds'
investments, such as holders of IRAs, qualified retirement plans or other tax-
exempt entities.

Each Fund is composed of two classes of shares, which share a common investment
portfolio and objective. The Value Advantage Shares (Investor Shares for Money
Fund) are designed for larger, longer-term investments that do not require
frequent access. The Sweep Shares, which are not offered through this
prospectus, are designed to provide convenience through automatic investment of
uninvested cash balances in your Schwab account (the Sweep Feature), although
Sweep Shares also may be position traded (purchased directly). The Sweep Feature
makes the Sweep Shares especially suitable for investors with short-term
investment needs, such as for periods between other investments. The Sweep
Shares also require lower minimum investments, but have slightly higher
operating expenses. Please call 1-800-435-4000 for a free copy of the Sweep
Shares' prospectus, which contains information you should know before making an
investment.

GOALS. Each Fund seeks current income, tax-exempt in the case of Muni Fund, CA
Fund and NY Fund, while maintaining a stable share price of $1.00. There is no
guarantee that the Funds will achieve their goals.

STRATEGIES. Money Fund invests in high-quality, short-term debt securities
(money market securities).

Muni Fund, CA Fund and NY Fund invest in high-quality, short-term municipal debt
securities (municipal money market securities).

Money Fund and Muni Fund are diversified mutual funds; CA Fund and NY Fund are
non-diversified mutual funds.

RISKS. Investment in a Fund will be subject to risks associated with investing
in money market securities, i.e., high-quality, short-term debt securities.
Because the Municipal Funds invest substantially in municipal money market
securities, the performance of each Fund may be especially affected by state and
local economic conditions and political developments, as well as the ability of
issuers to meet their obligations. CA Fund and NY Fund invest substantially in
municipal money market securities of a single state, and will be especially
affected

2
<PAGE> 78

by conditions and developments particular to that state.

LOW-COST INVESTING. The Investment Manager and Schwab have voluntarily agreed to
guarantee, at least through April 30, 1999 (October 31, 1998 for Investor Shares
of Money Fund), that total operating expenses (excluding interest, taxes and
extraordinary expenses) will not exceed 0.40% and 0.45% of average daily net
assets of Investor Shares of Money Fund and Value Advantage Shares of the
Municipal Funds, respectively.

3
<PAGE> 79

EXPENSES

ANNUAL OPERATING EXPENSES are paid by the Funds. These expenses include
management fees paid to the Investment Manager, and other fees for services such
as maintaining shareholder records and furnishing shareholder statements and
financial reports. These expenses are factored into the dividends paid to
shareholders. For funds with more than one class, these fees are factored into
each class. As a shareholder, you are not charged any of these fees directly.

The annual operating expenses stated below are stated as a percentage of average
daily net assets of each Fund and adjusted to reflect current fees.

<TABLE>
<CAPTION>
MONEY MUNI CA NY
FUND FUND FUND FUND
----- ---- ---- ----
<S> <C> <C> <C> <C>
Management fee
(after reduction) 0.19% 0.19% 0.18% 0.17%
12b-1 fees NONE NONE NONE NONE
Other expenses
(after reduction) 0.21% 0.26% 0.27% 0.28%
TOTAL OPERATING
EXPENSES
(AFTER REDUCTION) 0.40% 0.45% 0.45% 0.45%
</TABLE>

MONEY FUND

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$4 $13 $22 $51
</TABLE>

MUNICIPAL FUNDS

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$5 $14 $25 $57
</TABLE>

THE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

The Investment Manager and Schwab have voluntarily agreed to guarantee, at least
through April 30, 1999 (October 31, 1998 for Investor Shares of Money Fund),
that total operating expenses (excluding interest, taxes and extraordinary
expenses) will not exceed 0.40% and 0.45% of average daily net assets of
Investor Shares of Money Fund and Value Advantage Shares of the Municipal Funds,
respectively. If these guarantees were not in effect, the management fee, other
expenses and total operating expenses of the Investor or Value Advantage Shares
of Money Fund, Muni Fund, CA Fund and NY Fund would be 0.41%, 0.28% and 0.69%;
0.41%, 0.30%, and 0.71%; 0.43%, 0.28% and 0.71%; and 0.46%; 0.37% and 0.83% of
average daily net assets, respectively. Read the "Organization & Management"
section of the prospectus for more information on expenses.

4
<PAGE> 80

FINANCIAL HIGHLIGHTS

The following information has been audited by Price Waterhouse LLP, independent
accountants for the Funds. Their report is included in the Annual Reports for
the Funds, which are separate reports that contain additional financial
information.

The auditor's reports, financial highlights and financial statements are
incorporated by reference into the SAI. For free copies of an Annual Report
and/or the SAI, call 1-800-435-4000.

For a share outstanding throughout each period:

<TABLE>
<CAPTION>
Income from
Investment Operations Less Distributions
---------------------------------------- --------------------------
Net
Realized & Net
Fiscal Net Asset Unrealized Dividends Asset
Period Value Net Gains Total from from Net Value
Ended Beginning Investment (Losses) on Investment Investment Total End of
Dec. 31 of Period Income Investments(9) Operations Income Distributions Period
- ------- --------- ---------- -------------- ---------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Schwab Value Advantage Money Fund
1997 $1.00 $0.05 -- $0.05 $(0.05) $(0.05) $1.00
1996 1.00 0.05 -- 0.05 (0.05) (0.05) 1.00
1995 1.00 0.06 -- 0.06 (0.06) (0.06) 1.00
1994 1.00 0.04 -- 0.04 (0.04) (0.04) 1.00
1993 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00
1992(3) 1.00 0.02 -- 0.02 (0.02) (0.02) 1.00
Schwab Municipal Money Fund-Value Advantage Shares
1997 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00
1996 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00
1995(4) 1.00 0.02 -- 0.02 (0.02) (0.02) 1.00
Schwab California Municipal Money Fund-Value Advantage Shares
1997 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00
1996 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00
1995(5) 1.00 0.01 -- 0.01 (0.01) (0.01) 1.00
Schwab New York Municipal Money Fund-Value Advantage Shares
1997 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00
1996 1.00 0.03 -- 0.03 (0.03) (0.03) 1.00
1995(6) 1.00 0.02 -- 0.02 (0.02) (0.02) 1.00

Ratios/Supplemental Data
-----------------------------------------
Ratio of Net
Ratio of Investment
Fiscal Expenses to Income to
Period Total Net Assets Average Average
Ended Return(7) End of Period Net Assets(1) Net Assets(1)
Dec. 31 (%) (000's) (%) (%)
- ------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Schwab
1997 5.40 $13,662,185 0.40 5.28
1996 5.26 10,476,537 0.40 5.14
1995 5.80 6,923,890 0.40 5.63
1994 4.09 3,731,629 0.40 4.40
1993 3.02 729,356 0.39 2.97
1992(3 2.33 319,024 0.29(8) 3.27(8)
Schwab
1997 3.32 1,085,229 0.45(2) 3.29
1996 3.14 680,080 0.45 3.10
1995(4 1.68 160,682 0.45(8) 3.50(8)
Schwab
1997 3.15 936,815 0.45(2) 3.12
1996 3.01 507,486 0.45 2.98
1995(5 0.84 108,008 0.45(8) 3.48(8)
Schwab
1997 3.21 125,537 0.45(2) 3.18
1996 2.99 66,683 0.45 2.98
1995(6 1.62 15,143 0.45(8) 3.42(8)
</TABLE>

5
<PAGE> 81

<TABLE>
<CAPTION>
Schwab Schwab Municipal Schwab California
Value Advantage Money Fund - Municipal Money Fund -
Money Fund - Investor Shares Value Advantage Shares Value Advantage Shares
-------------------------------- -------------------------------- --------------------------------
Ratio of Ratio of Net Ratio of Ratio of Net Ratio of Ratio of Net
Expenses Investment Income Expenses Investment Income Expenses Investment Income
Fiscal Period to Average to Average to Average to Average to Average to Average
Ended Dec. 31 Net Assets Net Assets Net Assets Net Assets Net Assets Net Assets
- ------------- ----------- ------------------ ----------- ------------------ ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
1997 0.69% 5.00% 0.72% 3.03% 0.72% 2.86%
1996 0.70% 4.84% 0.75% 2.80% 0.77% 2.66%
1995 0.72% 5.31% 0.95%(4,8) 3.00%(4,8) 1.04%(5,8) 2.89%(5,8)
1994 0.79% 4.01% -- -- -- --
1993 0.82% 2.54% -- -- -- --
1992 0.94%(3,8) 2.62%(3,8)

<CAPTION>
Schwab New York
Municipal Money Fund
Value Advantage Shares
--------------------------------
Ratio of Ratio of Net
Expenses Investment Income
Fiscal Period to Average to Average
Ended Dec. 31 Net Assets Net Assets
- ------------- ----------- ------------------
<S> <C> <C>
1997 0.85% 2.80%
1996 1.01% 2.42%
1995 1.81%(6,8) 2.06%(6,8)
1994 -- --
1993 -- --
1992
</TABLE>

(2) These expense ratios exclude interest expenses, extraordinary expenses and
taxes. Had these expenses been included, the expense ratios would have been:

<TABLE>
<S> <C>
Schwab Municipal Money Fund 0.46%
Schwab California Municipal Money Fund 0.46%
Schwab New York Municipal Money Fund 0.46%
</TABLE>

(3) For the period from April 30, 1992 (commencement of operations) to December
31, 1992.

(4) For the period from July 7, 1995 (commencement of operations) to December
31, 1995.

(5) For the period from October 3, 1995 (commencement of operations) to December
31, 1995.

(6) For the period from July 7, 1995 (commencement of operations) to December
31, 1995.

(7) Not Annualized

(8) Annualized

(9) Amount per share does not round to a full penny.

6
<PAGE> 82

PERFORMANCE

Typically, mutual funds report performance in terms of total return or yield.

YIELD is the actual income earned on an investment over a stated period of time
and annualized (assumed to be generated over a year). For example, a seven-day
yield measures the income earned by a Fund over a seven-day period, and
expresses that income as an annualized percentage rate.

An effective yield is calculated similarly as yield, but income earned is
assumed to be reinvested. Because of this compounding effect, effective yields
are generally higher.

Because money market funds seek to maintain a stable share price, yields are
generally considered a better method of measuring performance than total return.

Fund strategies, performance and holdings are detailed in financial reports,
which are sent to shareholders twice a year. For a free copy of the most recent
financial report, call 1-800-435-4000.

7
<PAGE> 83

ORGANIZATION & MANAGEMENT

MONEY FUND AND MUNI FUND ARE DIVERSIFIED MUTUAL FUNDS; CA FUND AND NY FUND ARE
NON-DIVERSIFIED MUTUAL FUNDS. Each Fund is a series of The Charles Schwab Family
of Funds (the Trust).

For the services performed under its contract with each Fund, the Investment
Manager is entitled to receive a graduated annual fee, payable monthly from each
Fund.

For the fiscal year ended December 31, 1997, Money Fund, Muni Fund, CA Fund and
NY Fund paid management fees of 0.19%, 0.19%, 0.18% and 0.17% of average daily
net assets, respectively.

For the services performed as transfer agent under its contract with each Fund,
Schwab is entitled to receive an annual fee from each Fund, payable monthly in
the amount of 0.05% of average daily net assets. For the services performed as
shareholder services agent under its contract with each class, Schwab is
entitled to receive an annual fee from the Investor Shares or Value Advantage
Shares of each Fund, payable monthly in the amount of 0.20% of average daily net
assets.

For the fiscal year ended December 31, 1997, the Investor Shares of the Money

8
<PAGE> 84

Fund and the Value Advantage Shares of the Municipal Funds paid total operating
expenses, after reductions, of 0.40% and 0.46% of average daily net assets,
respectively.

9
<PAGE> 85

INVESTMENT OBJECTIVES, POLICIES & RISKS

INVESTMENT OBJECTIVES

MONEY FUND seeks maximum current income consistent with liquidity and stability
of capital.

MUNI FUND seeks maximum current income exempt from federal income tax consistent
with liquidity and stability of capital.

CA FUND seeks maximum current income exempt from federal and California state
personal income taxes consistent with liquidity and stability of capital.

NY FUND seeks to provide maximum current income exempt from federal and New York
state and local personal income taxes consistent with liquidity and stability of
capital.

Each Fund's investment objective may be changed only by vote of a majority of
its shareholders. Unless otherwise noted, policies and limitations may be
changed without shareholder approval.

INVESTMENT STRATEGIES
MONEY FUND seeks to achieve its investment objective by investing in
high-quality, U.S. dollar-denominated money market securities, including U.S.
Government securities and repurchase agreements for these securities.

MUNI FUND seeks to achieve its investment objective by investing in municipal
money market securities.

CA FUND seeks to achieve its investment objective by investing in California
municipal money market securities.

NY FUND seeks to achieve its investment objective by investing in New York
municipal money market securities.

The Funds earn income at current money market rates (tax-exempt income in the
case of the Municipal Funds) and their yields will fluctuate from day-to-day.
The Funds emphasize capital preservation, so they will not provide the higher
yield or capital appreciation that a more aggressive mutual fund or other
investment may provide.

INVESTMENT RISKS

Investment in a Fund will be subject to risks associated with investing in money
market securities, i.e., high-quality, short-term debt securities. Generally
speaking there are four types of risk attendant to investing in debt securities.

PREPAYMENT RISK or CALL RISK is the likelihood that, during periods of falling
interest rates, debt securities will be prepaid (or "called") prior to maturity,
requiring the proceeds to be invested at a generally lower interest rate.

INTEREST RATE RISK is the potential for fluctuations in the prices of debt
securities due to changing interest rates. For example, when interest rates
rise, bond prices generally decline or "fall," and when interest rates fall,
bond prices generally rise.

10
<PAGE> 86

INCOME RISK is the potential for a decline in income due to falling interest
rates, and is a component of both prepayment or call risk and interest rate
risk.

CREDIT RISK is the possibility that an issuer will fail to make timely payments
of either interest or principal.

The amount of each type of risk each Fund will be subject to depends on its
portfolio of investments. The Funds may purchase only high-quality, short-term
debt securities that the Investment Manager believes present minimal credit
risk. In addition, the short maturity of each Fund's portfolio is designed to
minimize interest rate and prepayment or call risks.

Because the Municipal Funds intend to invest substantially in municipal money
market securities, their performance and, possibly, share price also may be
affected by the economic and political conditions within a state. An investment
in either CA Fund or NY Fund poses additional risk considerations because of
each Fund's substantial investments in a single state.

PRINCIPAL SECURITIES AND INVESTMENT TECHNIQUES
Different types of securities a Fund may invest in are described below. Not
every security described is an eligible investment for each Fund.

MUNICIPAL MONEY MARKET SECURITIES are high-quality, short-term debt securities
(money market securities) issued by or on behalf of a state, including its
counties, municipalities, authorities and other subdivisions, or the territories
and possessions of the United States and the District of Columbia, including
their subdivisions, agencies and instrumentalities. These securities are issued
to raise money for various public purposes or private activities, such as
general financing for state and local governments or financing for specific
projects or facilities. Municipal securities pay fixed, variable or floating
rates of interest, which also is meant to be exempt from federal income tax,
and, typically, personal income tax of a state or locality.

The issuers of municipal securities receive legal opinions as to the validity
and tax exempt nature of their securities, which each Fund relies on when
purchasing such securities.

Municipal securities may be owned directly or through participation interests,
and

11
<PAGE> 87

include general obligation or revenue securities, notes and leases. The maturity
date or price of and financial assets collateralizing a municipal security may
be structured in order to make it qualify as or act like a municipal money
market security. These securities may be subject to greater credit and interest
rate risks than other municipal money market securities because of their
structure.

Restriction: Each Municipal Fund will normally invest 100% of its total assets
in municipal money market securities. In addition, each Municipal Fund may
invest more than 25% in municipal securities financing similar projects.

These securities are subject to the same general risks associated with other
municipal money market securities, although their values will be particularly
affected by economic, political, geographic and demographic conditions and
developments within either California or New York. Additionally, like all
securities, the value of municipal money market securities, including those of
California or New York issuers, may be affected by any change in the perceived
ability of issuers to meet their obligations.

CREDIT AND LIQUIDITY SUPPORTS may be employed by issuers to reduce the credit
risk of their securities. Credit supports include letters of credit, insurance
and guarantees provided by foreign and domestic entities, as well as moral
obligations, which are sometimes issued with municipal money market securities.
Liquidity supports include puts, demand features, stand by bond purchase
agreements and lines of credit. Most of these arrangements move the credit risk
of an investment from the issuer of the security to the support provider.
Changes in the credit quality of a support provider could cause losses to a
Fund, and affect its share price.

12
<PAGE> 88

requirements as domestic entities, and may be subject to higher transaction
costs and foreign taxes. Foreign securities are sometimes less liquid and may be
more volatile than securities issued by domestic issuers or securities traded on
domestic markets. In addition, foreign economic, political and legal
developments could have more dramatic affects on the value of a foreign security
or its payment of interest and repayment of principal.

REPURCHASE AGREEMENTS involve the Fund buying securities (usually U.S.
Government securities) from a seller and simultaneously agreeing to sell them
back at an agreed-upon price and time. There are risks that losses will result
if the seller does not perform as agreed.

13
<PAGE> 89

using the assets backing them (once collected). Therefore, repayment depends
largely on the cash-flows generated by the assets backing the securities.
Sometimes the credit support for these securities is limited to the underlying
assets, but, in other cases, may be provided by a third party via a letter of
credit or insurance guarantee.

ILLIQUID SECURITIES are securities that are not actively traded, and, therefore,
may be difficult to sell quickly or without losses.

Restriction: Each Fund will not invest more than 10% of its net assets in
illiquid securities.

WHEN-ISSUED and DELAYED DELIVERY SECURITIES are securities that are purchased at
a specified price and yield, but are delivered to the buyer at a later than
customary date. Generally, the purchaser does not pay for these securities or
earn interest on them until they are delivered, but their value could change
prior to delivery.

The Funds also may employ the policies described below.

DIVERSIFICATION involves investing in a wide range of securities, and, thereby
spreading and reducing the risks of investment. While CA Fund and NY Fund are
non-diversified mutual funds, they will attempt to diversify their investments
within their respective states.

CONCENTRATION means that substantial amounts of assets are invested in a
particular industry or group of industries. Concentration increases exposure to
risks inherent to that industry or group of industries. For example, the
automotive industry may have a greater exposure to a single factor, such as an
increase in the price of oil, which may affect the sale of automobiles, and
impact the value of the industry's securities.

Restriction: Each Fund will not concentrate in any one industry or group of
industries. However, this policy does not apply to certificates of deposit and
banker's acceptances, or U.S. Government securities. This policy may be changed
only by shareholders.

14
<PAGE> 90

BORROWING subjects the Fund to interest costs that may exceed the interest
received on the securities purchased with the borrowed funds.

Restriction: Each Fund may borrow up to 33 1/3% of its total assets for
temporary or emergency purposes; provided that each Fund will not purchase
securities while borrowings are outstanding.

TEMPORARY INVESTMENTS in U.S. Government securities, money market securities or
other taxable securities, and repurchase agreements for all of these securities
may be made by each Municipal Fund as a defensive measure or under abnormal
market conditions.

15
<PAGE> 91

INVESTING IN SHARES

NET ASSET VALUE

The price of each Investor Share or Value Advantage Share of a Fund is its net
asset value per share (NAV). NAV is determined each business day at the close of
the NYSE, generally 4 p.m. Eastern time. NAV is calculated by adding the value
of the Fund's assets, subtracting its liabilities and dividing the result by the
number of outstanding shares.

MINIMUM INVESTMENTS*

<TABLE>
<S> <C>
INITIAL INVESTMENT $25,000
ADDITIONAL SHARES $ 5,000
MINIMUM BALANCE $20,000
</TABLE>

* Schwab may impose a $5 fee if you buy, sell or exchanges shares in amounts
less than $5,000 ($2,000 for IRAs and other retirement plan accounts), or if
your balance falls below $20,000 ($15,000 for IRAs and other retirement plan
accounts). The minimum initial investment requirement for IRAs and other
retirement plan accounts is $15,000.

These minimums may be different if you hold shares of a Fund through an entity
other than Schwab. Also, these minimums and fees may not be applicable to
certain customers of Schwab, including Schwab Institutional's Services for
Investment Managers and Schwab's Retirement Plan Services.

HOW TO BUY, SELL OR EXCHANGE SHARES
Shares may be purchased, sold or exchanged through an account at Schwab or with
any other entity designated by Schwab. The following information on how to buy,
sell and exchange shares is for transactions through an account at Schwab.

- - BY TELEPHONE. Call 1-800-435-4000, 24 hours a day (1-800-345-2550 for TDD
users).

16
<PAGE> 92

- - BY MAIL. Write to the Funds at 101 Montgomery Street, San Francisco, CA
94104.
- - BY WIRE. By wire. Call 1-800-435-4000 for wire instructions.

AUTOMATIC REINVESTMENT. All distributions will be reinvested in shares of the
Fund you are purchasing. If you do not choose an option, this option will be
assigned to you; or

CASH OPTION. All distributions will be paid to your Schwab account and, if
requested, mailed to you the next business day.

- - for exchanges, the name of the Fund and class, if applicable, into which you
want to exchange shares and the distribution option you select; and

- - if selling or exchanging by mail, a signature of at least one of the persons
named on your Schwab account.

PLEASE NOTE THE FOLLOWING WHEN SELLING OR EXCHANGING SHARES OF THE FUNDS:

- - redemption and exchange requests by mail are irrevocable and, once mailed,
may not be modified or canceled;

- - payment for redeemed shares will be made to your Schwab account within 7
days, and a check may be mailed to you upon request;

- - if you bought your shares by check, a check for your redemption proceeds will
be issued as soon as your check clears, which may take up to 15 days from the
date of purchase;

- - depending on the type of Schwab account you have, your money may earn
interest during any holding period;

- - you may exchange your shares for shares of other SchwabFunds, provided you
meet the Fund's minimum investment or other requirements;

- - an exchange of a Fund's shares for shares of other SchwabFunds will be
treated as a taxable event for federal income tax purposes;

- - the Funds and Schwab reserve the right to modify, limit or terminate the
exchange privilege upon 60 days' written notification; and

- - the Funds may suspend the right to sell shares or postpone payment for a sale
of shares when trading on the NYSE is restricted, the NYSE is closed for any
reason other than its customary weekend and holiday closings, emergency
circumstances exist as determined by the SEC or as otherwise permitted by the
SEC.

based on the net investment income determined and are paid on the 15th of each
month, if it is a business day, except in December when dividends are paid on
the last business day of the month. If the 15th is not a business day, dividends
are paid on the next business day.

The following is only a brief summary of some of the federal and state income
tax consequences that may affect each Fund and its shareholders. You should
consider the tax implications of investing in a Fund, and consult with your own
tax advisor. Each Fund will distribute its net investment income and capital
gains, if any, to shareholders each year. For the Money Fund, all distributions
received by shareholders are subject to federal income tax, and may be subject
to state and/or local income taxes. For the Municipal Funds, some distributions
received by shareholders may be subject to federal or state and/or local income
taxes.

For the Municipal Funds, dividends derived from exempt-interest income will be
exempt from federal income tax when distributed to shareholders. In addition,
dividends paid by CA Fund and NY Fund are expected to be exempt from California
state and New York state and local personal income taxes, respectively.

The interest from some municipal money market securities is subject to
alternative minimum tax. Each Municipal Fund may invest all of its assets in
these securities. Shareholders subject to alternative minimum tax must take this
interest into account when computing their alternative minimum tax liability.

OPENING A SCHWAB ACCOUNT

Investors may open a Schwab account by simply completing an application,
although institutional investors should contact Schwab to find out if any
additional forms need to be completed.

18
<PAGE> 94

specific account details, including minimum initial investment and balance
requirements and fees.

Contact Schwab for instructions and any applicable fees if you would like to
wire money from your Schwab account.

SPECIAL CONSIDERATIONS FOR SCHWAB ACCOUNTS. If your Schwab account contains no
cash or Sweep Shares of a Fund, Schwab may redeem Value Advantage Shares or
Investor Shares of a Fund without prior notification to you to cover the
following items:
- - negative balances in your Schwab account as a result of any securities
transactions;
- - payment of any Schwab One checks you have written;
- - payment of any charges you have made using your Visa debit card;
- - purchases you have made under an Automatic Investment Plan;
- - negative balances in your Schwab account as a result of any electronic funds
transactions.

Schwab may charge you a fee each time it must redeem shares of a Fund under any
of these circumstances. However, you will not be charged transaction fees for
redemptions in amounts less than $5,000, if such redemptions are made under any
of these circumstances.

Schwab will redeem shares from the Fund with the highest balance first, unless
the sum of your investments in the Funds will not satisfy the total amount due;
in which case, none of your shares in the Funds will be redeemed.

19
<PAGE> 95

unauthorized or fraudulent instructions. These procedures may include:
- - requiring a form of personal identification before acting upon any telephone
order;
- - providing written confirmation of telephone orders; and
- - tape-recording all telephone orders.

20
<PAGE> 96

------------------------------

Schwab Value
Advantage
Investments
------------------------------
PROSPECTUS APRIL 30, 1998

SCHWABFUNDS(R) SCHWABFUNDS(R)

<PAGE> 97
PART B
CROSS REFERENCE SHEET
STATEMENT OF ADDITIONAL INFORMATION

Schwab Money Market Fund
Schwab Government Money Fund
Schwab U.S. Treasury Money Fund
Schwab Retirement Money Fund(R)
Schwab Institutional Advantage Money Fund(R)

<TABLE>
<CAPTION>
PART B ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION
<S> <C>
10. Cover Page Cover Page

11. Table of Contents Cover Page

12. General Information and History General Information

13. Investment Objectives and Policies Investment Policies and Restrictions

14. Management of the Fund Management of the Trust

15. Control Persons and Principal Holders of Securities General Information

16. Investment Advisory and Other Services Management of the Trust

17. Brokerage Allocation and Other Practices Portfolio Transactions and Turnover

18. Capital Stock and Other Securities General Information

19. Purchase, Redemption and Pricing of Securities Share Price Calculation; Purchase and Redemption of Shares
Being Offered

20. Tax Status Distributions and Taxes

21. Underwriters Management of the Trust

22. Calculation of Performance Data How the Funds Report Performance

23. Financial Statements Not applicable
</TABLE>
<PAGE> 98
STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
101 Montgomery Street, San Francisco, CA 94104

SCHWAB MONEY MARKET FUND
SCHWAB GOVERNMENT MONEY FUND
SCHWAB U.S. TREASURY MONEY FUND
SCHWAB RETIREMENT MONEY FUND(R)
SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND(R)

APRIL 30, 1998

This Statement of Additional Information (SAI) is not a prospectus. It should be
read in conjunction with the Prospectus, dated April 30, 1998 (as may be amended
from time to time), for Schwab Money Market Fund (Money Fund), Schwab Government
Money Fund (Government Fund) and Schwab U.S. Treasury Money Fund (Treasury
Fund); the Prospectus, dated April 30, 1998 (as may be amended from time to
time), for Schwab Retirement Money Fund (Retirement Fund); or the Prospectus,
dated April 30, 1998 (as may be amended from time to time), for Schwab
Institutional Advantage Money Fund (Institutional Fund).

To obtain a copy of the Prospectus for Money Fund, Government Fund and Treasury
Fund, please contact Charles Schwab & Co., Inc. (Schwab) at 800-435-4000, 24
hours a day, or 101 Montgomery Street, San Francisco, California 94104. For the
Prospectus for Retirement Fund or Institutional Fund, please call 800-772-4900
or 800-435-4000 or write to the above address. TDD users may contact Schwab at
800-345-2550, 24 hours a day. The Prospectuses also may be available
electronically by using our Web address: http://www.schwab.com/schwabfunds.

SCHWABFunds(R)
800-435-4000

TABLE OF CONTENTS

INVESTMENT SECURITIES ........................................ 2
INVESTMENT RESTRICTIONS ...................................... 4
MANAGEMENT OF THE TRUST ...................................... 8
PORTFOLIO TRANSACTIONS AND TURNOVER .......................... 15
DISTRIBUTIONS AND TAXES ...................................... 16
SHARE PRICE CALCULATION ...................................... 18
HOW THE FUNDS REPORT PERFORMANCE ............................. 18
GENERAL INFORMATION .......................................... 19
PURCHASE AND REDEMPTION OF SHARES ............................ 21
OTHER INFORMATION ............................................ 21
APPENDIX - RATINGS OF INVESTMENT SECURITIES .................. 23

1
<PAGE> 99
INVESTMENT SECURITIES

FOREIGN SECURITIES. Investments in securities of foreign issuers or securities
principally traded overseas may involve certain special risks due to foreign
economic, political and legal developments, including expropriation of assets or
nationalization, imposition of withholding taxes on dividend or interest
payments and possible difficulty in obtaining and enforcing judgments against
foreign entities. Before investing in Eurodollar certificates of deposit, a Fund
will consider their marketability, possible restrictions on international
currency transactions, and any regulations imposed by the domicile country of
the foreign issuer. Eurodollar certificates of deposit may not be subject to the
same regulatory requirements as certificates of deposit issued by U.S. banks and
associated income may be subject to the imposition of foreign taxes.

RESTRICTED SECURITIES. Commercial Paper and other securities are issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended, and resold
to qualified institutional buyers under Securities Act Rule 144A ("Section 4(2)
paper"). Federal securities laws restrict the disposition of Section 4(2) paper.
Section 4(2) paper generally is sold to institutional investors, such as the
Funds, who agree that they are purchasing the paper for investment and not for
public distribution. Any resale by the purchaser must be in an exempt
transaction and may be accomplished in accordance with Rule 144A. Section 4(2)
paper normally is resold to other institutional investors, such as the Funds,
through or with the assistance of the issuer or investment dealers who make a
market in the Section 4(2) paper, thus providing liquidity. Because it is not
possible to predict with assurance exactly how this market for Section 4(2)
paper sold and offered under Rule 144A will continue to develop, Charles Schwab
Investment Management, Inc. (the "Investment Manager"), pursuant to guidelines
approved by the Board of Trustees, will carefully monitor a Fund's investments
in these securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information.

ASSET-BACKED SECURITIES. Repayment of these securities is intended to be
obtained from an identified pool of diversified assets, typically receivables
related to a particular industry, such as asset-backed securities related to
credit card receivables, automobile receivables, trade receivables or
diversified financial assets. Based on the primary characteristics of the
various types of asset-backed securities, for purposes of a Fund's concentration
policy, the following asset-backed securities industries have been selected:
credit card receivables, automobile receivables, trade receivables and
diversified financial assets. A Fund will limit its investments in each such
industry to not more than 25% of its total assets. The credit quality of most
asset-backed commercial paper depends primarily on the credit quality of the
assets underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator (or any other affiliated
entities) and the amount and quality of any credit support provided to the
securities.

Asset-backed commercial paper is often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors on these underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two classes: liquidity protection and protection against ultimate default
on the underlying assets. Liquidity protection refers to the provision of
advances, generally by the entity administering the pool of assets, to ensure
that scheduled payments on the underlying pool are made in a timely fashion.
Protection against ultimate default ensures payment on at least a portion of the
assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained from third parties, through
various means of structuring the transaction or through a combination of such
approaches. The degree of credit support provided on each issue

2
<PAGE> 100
is based generally on historical information respecting the level of credit risk
associated with such payments. Delinquency or loss in excess of that anticipated
could adversely affect the return on an investment in an asset-backed security.

Bank notes are notes used to represent debt obligations issued by banks in large
denominations.

ILLIQUID SECURITIES. Investments that cannot be sold or disposed of in the
normal course of business within seven days at their approximate value will be
considered illiquid. The Investment Manager determines the liquidity of a Fund's
investments under the supervision and direction of the Board of Trustees.
Investments currently considered illiquid include repurchase agreements not
maturing within seven days, some restricted securities and municipal lease
obligations.

LENDING. Loans of portfolio securities made by a Fund will be fully
collateralized with U.S. government securities, letters of credit, cash and
cash-equivalents, and will be marked to market daily.

CERTIFICATES OF DEPOSIT AND BANKER'S ACCEPTANCES. Certificates of deposit are
certificates issued against funds deposited in a banking institution for a
specified period of time at a specified interest rate. Bankers' acceptances are
credit instruments evidencing a bank's obligation to pay a draft drawn on it by
a customer. These instruments reflect the obligation both of the bank and of the
drawer to pay the full amount of the instrument upon maturity. A Fund will
invest only in certificates of deposit and bankers' acceptances of banks that
have capital, surplus and undivided profits in excess of $100 million.

COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured promissory
notes issued by banks, corporations and other institutions to finance short-term
credit needs. These securities generally are discounted but sometimes may be
interest bearing. Commercial paper is subject to credit risk.

REPURCHASE AGREEMENTS. Repurchase agreements are instruments under which a buyer
acquires ownership of a security from a seller that agrees to repurchase the
security at a mutually agreed upon time and price (which price is higher than
the purchase price), thereby determining the yield during the buyer's holding
period. Under the Investment Company Act of 1940, as amended (the "1940 Act"), a
repurchase agreement is deemed to be a Fund's loan of money to the seller,
collateralized by the underlying security. The interest rate is effective for
the period of time in which the Funds are invested in the agreement and is not
related to the coupon rate on the underlying security. Any repurchase agreements
a Fund enters into will involve the Fund as the buyer and banks or
broker-dealers as sellers (repurchase agreements with broker-dealers will be
limited to obligations of the U.S. Government or its agencies or
instrumentalities). The period of these repurchase agreements will be usually
short--from overnight to one week--and at no time will the Funds invest in
repurchase agreements for more than one year. However, securities subject to
repurchase agreements may have maturity dates in excess of one year from the
effective date of the repurchase agreements. The transaction requires the
initial collateralization of the seller's obligation with securities having a
market value, including accrued interest, equal to at least 102%

3
<PAGE> 101

of the dollar amount the Funds invest with the value marked-to-market daily to
maintain 100% coverage. A default by the seller might cause the Funds to
experience a loss or delay in the liquidation of the collateral securing the
repurchase agreement. The Funds might also incur disposition costs in
liquidating the collateral. The Funds will make payment for such securities only
upon physical delivery or evidence of book entry transfer to the account of its
custodian bank. The Funds may not enter into a repurchase agreement of more than
seven days duration if, as a result, the market value of the Funds' net assets,
together with investments in other securities deemed to be not readily
marketable, would be invested in excess of the Funds' policy on investments in
illiquid securities.

In the event of a bankruptcy or other default of a repurchase agreement's
seller, a Fund might incur expenses in enforcing its rights, and could
experience losses, including a decline in the value of the underlying securities
and loss of income.

INVESTMENT RESTRICTIONS

EXCEPT AS OTHERWISE NOTED, THE RESTRICTIONS BELOW ARE FUNDAMENTAL AND CANNOT BE
CHANGED WITHOUT APPROVAL OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES (AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED,
HEREINAFTER THE "1940 ACT") OF THE FUND TO WHICH THEY APPLY.

MONEY FUND, GOVERNMENT FUND, RETIREMENT FUND AND INSTITUTIONAL FUND MAY NOT:

(1) Purchase securities or make investments other than in accordance with its
investment objectives and policies.

(2) Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities) if, as a result
thereof, more than 5% of the value of its assets would be invested in the
securities of such issuer.

(3) Purchase, in the aggregate with all other Schwab Money Funds, more than 10%
of any class of securities of any issuer. All debt securities and all preferred
stocks are each considered as one class.

(4) Concentrate 25% or more of the value of its assets in any one industry;
provided, however, that it reserves the freedom of action to invest up to 100%
of its assets in certificates of deposit or bankers' acceptances issued by
domestic branches of U.S. banks and U.S. branches of foreign banks (which the
Fund has determined to be subject to the same regulation as U.S. banks), or
obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities in accordance its investment objective and policies.

(5) Invest more than 5% of its total assets in securities of issuers (other
than obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities) that, with their predecessors, have a record of less than
three years of continuous operation.

(6) Enter into repurchase agreements if, as a result thereof, more than 10% its
net assets valued at the time of the transaction would be subject to repurchase
agreements maturing in more than 7-days and invested in securities restricted as
to disposition under the federal securities laws (except

4
<PAGE> 102
commercial paper issued under Section 4(2) of the Securities Act of 1933, as
amended). Each Fund will invest no more than 10% of its net assets in illiquid
securities.

(7) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws (except commercial paper issued
under Section 4(2) of the Securities Act of 1933, as amended).

(8) Purchase or retain securities of an issuer if any of the officers, trustees
or directors of the Trust or its Investment Manager or the Sub-Adviser
individually own beneficially more than 1/2 of 1% of the securities of such
issuer and together beneficially own more than 5% of the securities of such
issuer.

(9) Invest in commodities or commodity contracts, futures contracts, real estate
or real estate limited partnerships, although it may invest in securities which
are secured by real estate and securities of issuers which invest or deal in
real estate.

(10) Invest for the purpose of exercising control or management of another
issuer.

(11) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.1

(12) Make loans to others (except through the purchase of debt obligations or
repurchase agreements in accordance with its investment objectives and policies)
except that Retirement Fund and Institutional Fund may (1) purchase a portion of
an issue of short-term debt securities or similar obligations (including
repurchase agreements) that are publicly distributed or customarily purchased by
institutional investors; and (2) lend its portfolio securities.

(13) Borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of its total
assets in order to meet redemption requests without immediately selling any
portfolio securities. The Fund will not borrow for leverage purposes or purchase
securities or make investments while reverse repurchase agreements or borrowings
are outstanding. Any borrowings by Money Fund or Government Fund will not be
collateralized. If for any reason the current value of the total net assets of
any Fund falls below an amount equal to three times the amount of indebtedness
from money borrowed, such Fund will, within three business days, reduce its
indebtedness to the extent necessary.

(14) Write, purchase or sell puts, calls or combinations thereof.

(15) Make short sales of securities, or purchase any securities on margin,
except to obtain such short-term credits as may be necessary for the clearance
of transactions.

(16) Invest in interests in oil, gas, mineral leases or other mineral
exploration or development programs, although it may invest in the securities of
issuers which invest in or sponsor such programs.

(17) Underwrite securities issued by others except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of securities from its investment portfolio.

- -------------------------------------

1 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" for an exception to this investment
restriction.

5
<PAGE> 103

(18) Issue senior securities as defined in the 1940 Act.

Except for restrictions (6) and (13), if a percentage restriction is adhered to
at the time of investment, a later increase in percentage resulting from a
change in values or net assets will not be considered a violation.

For purposes of restriction (3), the following funds constitute the Schwab Money
Funds: Money Fund, Government Fund, Retirement Fund, and Institutional Fund.
Additionally, for purposes of calculating restriction (3), an issuer shall be
the entity deemed to be ultimately responsible for payments of interest and
principal on that class of security.

TREASURY FUND MAY NOT:

(1) Purchase securities other than obligations issued by the U.S. Treasury and
securities backed by the "full faith and credit" guarantee of the U.S.
Government that mature in 397 days or less.(1)

(2) Make loans to others (except through the purchase of debt obligations).

(3) Issue senior securities as defined in the 1940 Act.

(4) Underwrite securities issued by others, except to the extent it may be
deemed to be an underwriter, under the federal securities laws, in connection
with the disposition of securities from its investment portfolio.

(5) Invest in commodities or in real estate.

(6) Invest for the purpose of exercising control over management of another
company.

(7) Borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only in an amount up to one-third of the value of the Fund's
total assets in order to meet redemption requests without immediately selling
any portfolio securities; or pledge its securities or receivables or transfer or
assign or otherwise encumber them in an amount to exceed 33% of the Fund's net
assets to secure borrowings. The Fund will not borrow for leverage purposes or
purchase securities or make investments while reverse repurchase agreements or
borrowings are outstanding. If for any reason the current value of the total net
assets of the Fund falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three business days,
reduce its indebtedness to the extent necessary.

THE FOLLOWING RESTRICTIONS ARE NON-FUNDAMENTAL, AND MAY BE CHANGED BY THE BOARD
OF TRUSTEES. TREASURY FUND MAY NOT:

(1) Invest more than 10% of its net assets in securities which are not readily
marketable, including securities which are restricted as to disposition; or

(2) Engage in short sales, except for short sales against the box.

- -----------------------------------

1 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" for an exception to this investment restriction.

6
<PAGE> 104
QUALITY AND MATURITY

Each Fund will only purchase securities that present minimal credit risks and
(except in the case of Treasury Fund) which are First Tier or Second Tier
Securities (otherwise referred to as Eligible Securities (1). An Eligible
Security is:

(1) a security with a remaining maturity of 397 days or less (12 months or less
in the case of Money Fund and Government Fund): (a) that is rated by the
requisite nationally recognized statistical rating organizations ("NRSROs")
designated by the Securities and Exchange Commission (the "SEC"), in one of the
two highest rating categories for short-term debt obligations (two NRSROs are
required but one rating suffices if only one NRSRO rates the security), or (b)
that itself was unrated by any NRSRO, but was issued by an issuer that has
outstanding a class of short-term debt obligations (or any security within that
class) meeting the requirements of subparagraph 1(a) above that is of comparable
priority and security;

(2) a security that at the time of issuance was a long-term security but has a
remaining maturity of 397 days or less (12 months or less in the case of Money
Fund and Government Fund), and (a) whose issuer received a rating within one of
the two highest rating categories from the requisite NRSROs for short-term debt
obligations with respect to a class of short-term debt obligations (or any
security within that class) that is now comparable in priority and security with
the subject security; or (b) that has long-term ratings from the requisite
NRSROs that are in one of the two highest categories; or

(3) a security not rated by an NRSRO but deemed by the Investment Manager,
pursuant to guidelines adopted by the Board of Trustees, to be of comparable
quality to securities described in (1) and (2) above and to represent minimal
credit risks.

A First Tier Security is an Eligible Security that carries (or other relevant
securities issued by its issuer carry) top NRSRO ratings from at least two
NRSROs (a single top rating suffices if only one NRSRO rates the security) or
has been determined by the Investment Manager, pursuant to guidelines adopted by
the Board of Trustees, to be of comparable quality to such a security. A Second
Tier Security is any other Eligible Security.

Money Fund, Government Fund Retirement Fund and Institutional Fund will limit
their investments in the First Tier Securities of any one issuer to no more than
5% of their assets. (Repurchase agreements collateralized by non-U.S. Government
securities will be taken into account when making this calculation.) Moreover,
each Fund's holdings of Second Tier Securities will not exceed 5% of its assets,
with investments in the Second Tier Securities of any one issuer being limited
to the greater of 1% of the Fund's assets or $1 million. In addition, the
underlying securities involved in repurchase agreements collateralized by
non-U.S. Government securities will be First Tier Securities at the time the
repurchase agreements are executed.

Money Fund and Government Fund are limited to purchasing securities with a
remaining maturity of 12 months or less. For this purpose only, Money Fund and
Government Fund will calculate maturity from the security's settlement date. At
all times, Money Fund and Government Fund will not purchase a security with a
remaining maturity in excess of the limits of Rule 2a-7 under the 1940 Act.

- -----------------------------------

1 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" for an exception to this investment restriction.

7
<PAGE> 105
MANAGEMENT OF THE TRUST

OFFICERS AND TRUSTEES. The Officers and Trustees of the Trust, their principal
occupations over the past five years and their affiliations, if any, with The
Charles Schwab Corporation, Schwab and the Investment Manager, are as follows:

POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION

CHARLES R. SCHWAB* Chairman and Chairman, Co-Chief Executive Officer
July 29, 1937 Trustee and Director, The Charles Schwab
Corporation; Chairman,
Chief Executive Officer
and Director, Charles
Schwab Holdings, Inc.;
Chairman and Director,
Charles Schwab & Co., Inc,
Charles Schwab Investment
Management, Inc., The
Charles Schwab Trust
Company, and Schwab
Retirement Plan Services,
Inc.; Chairman and
Director (current board
positions), and Chairman
(officer position) until
December 1995, Mayer &
Schweitzer, Inc. (a
securities brokerage
subsidiary of The Charles
Schwab Corporation);
Director, The Gap, Inc. (a
clothing retailer),
Transamerica Corporation
(a financial services
organization), AirTouch
Communications (a
telecommunications
company) and Siebel
Systems (a software
company).

TOM D. SEIP* President and Executive Vice President, The Charles
February 15, 1950 Trustee Schwab Corporation; Enterprise
President - International
and Mutual Funds, Charles
Schwab & Co., Inc.; Chief
Executive Officer, Charles
Schwab Investment
Management, Inc.

- -----------------------------------

* This Trustee is an "interested person" of the Trust.

8
<PAGE> 106
DONALD F. DORWARD Trustee Executive Vice President and
September 23, 1931 Managing Director, Grey Advertising.
From 1990 to 1996, Mr. Dorward was
President and Chief Executive
Officer, Dorward & Associates.
Dorward & Associates is an
advertising and marketing/consulting
firm.

ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer
May 15, 1931 and Director, Semloh Financial, Inc.
Semloh Financial is an international
financial services and investment
advisory firm.

DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens &
June 28, 1938 Co. (investment banking). Prior to
1995, Mr. Stephens was Chairman and
Chief Executive Officer of North
American Trust (a real estate
investment trust).

MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer
August 18, 1943 and Director, Wilsey Bennett, Inc.
(truck and air transportation, real
estate investment and management,
and investments).

TAI-CHIN TUNG Treasurer and Vice President - Finance, Charles
March 7, 1951 Principal Schwab & Co., Inc.; Controller,
Financial Officer Charles Schwab Investment
Management, Inc. From 1994 to 1996,
Ms. Tung was Controller for
Robertson Stephens Investment
Management, Inc. From 1993 to 1994,
she was Vice President of Fund
Accounting, Capital Research and
Management Co.

9
<PAGE> 107

WILLIAM J. KLIPP* Executive Vice Executive Vice President,
December 9, 1955 President, Chief SchwabFunds(R), Charles Schwab &
Operating Officer Co., Inc.; President and Chief
and Trustee Operating Officer, Charles Schwab
Investment Management, Inc.

STEPHEN B. WARD Senior Vice Senior Vice President and Chief
April 5, 1955 President and Investment Officer, Charles Schwab
Chief Investment Investment Management, Inc.
Officer

FRANCES COLE Secretary Senior Vice President, Chief
September 9, 1955 Counsel, Chief Compliance Officer
and Assistant Corporate Secretary,
Charles Schwab Investment
Management, Inc.

DAVID H. LUI Assistant Secretary Vice President and Senior Counsel,
October 14, 1960 Charles Schwab Investment
Management, Inc.

KAREN L. SEAMAN Assistant Secretary Corporate Counsel, Charles Schwab
February 27, 1968 Investment Management, Inc. From
October 1994 to July 1996, she was
an Attorney for Franklin Resources,
Inc. Prior to 1994, Ms. Seaman was
an Attorney for The Benham Group.

MATTHEW O'TOOLE Assistant Secretary Corporate Counsel, Charles Schwab
September 26, 1964 Investment Management, Inc. From
November 1995 to April 1997, Mr.
O'Toole was Assistant General
Counsel for Chancellor LGT Asset
Management, Inc. Prior there to, Mr.
O'Toole was Senior Counsel at the
U.S. Securities and Exchange
Commission in Washington, D.C.

- -----------------------------------

* This Trustee is an "interested person" of the Trust.

10
<PAGE> 108

AMY L. MAUK Assistant Secretary Corporate Counsel, Charles Schwab
January 5, 1969 Investment Management, Inc. From April
1995 to March 1997, she was a Legal
Product Manager for Fidelity
Investments. Prior to April 1995, Ms.
Mauk was an associate at Laurano &
Laurano in Boston, MA.

Each of the above-referenced Officers and/or Trustees also serves in the same
capacity as described for the Trust, for Schwab Capital Trust, Schwab
Investments and Schwab Annuity Portfolios. The address of each individual listed
above is 101 Montgomery Street, San Francisco, California 94104.

COMPENSATION TABLE(1)

Pension or
Retirement
Benefits
Accrued as Part Estimated
of Fund Annual Benefits Total
Aggregate Expenses from Upon Retirement Compensation
Name of Person, Compensation the Fund from the Fund from the Fund
Position from the Trust Complex(2) Complex(2) Complex(2)
- ----------------------- -------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and
Trustee

Timothy F. 0 N/A N/A 0
McCarthy,
President and
Trustee 3

Tom D. Seip, 0 N/A N/A 0
President and
Trustee 4

William J. Klipp, 0 N/A N/A 0
Executive Vice
President, Chief
Operating Officer
and Trustee

Donald F. Dorward, $51,500 N/A N/A $93,450
Trustee

Robert G. Holmes, $51,500 N/A N/A $93,450
Trustee

Donald R. $51,500 N/A N/A $93,450
</TABLE>

11
<PAGE> 109

<TABLE>
Stephens,
Trustee

<S> <C> <C> <C> <C>
Michael W. Wilsey, $51,500 N/A N/A $93,450
Trustee
</TABLE>

1. Information is as of the Trust's fiscal year ended December 31, 1997.

2. "Fund Complex" comprises all 31 funds of the Trust, Schwab Investments,
Schwab Capital Trust and Schwab Annuity Portfolios.

3. Mr. McCarthy served as President and Trustee of the Trust until November
24, 1997.

4. Mr. Seip began serving as President and Trustee of the Trust on November
24, 1997.

TRUSTEE DEFERRED COMPENSATION PLAN

Pursuant to exemptive relief received by the Trust from the SEC, the Trust may
enter into deferred fee arrangements (the "Fee Deferral Plan" or the "Plan")
with the Trust's Trustees who are not "interested persons" of any of the Funds
of the Trust (the "Independent Trustees" or the "Trustees").

As of the date of this SAI, none of the Independent Trustees has elected to
participate in the Fee Deferral Plan. If an Independent Trustee does elect to
participate in the Plan, the Plan would operate as described below.

Under the Plan, deferred Trustee's fees will be credited to a book reserve
account established by the Trust (the "Deferred Fee Account"), as of the date
such fees would have been paid to such Trustee. The value of the Deferred Fee
Account, as of any date, will be equal to the value the Account would have had
as of that date, if the amounts credited to the Account had been invested and
reinvested in the securities of the SchwabFund or SchwabFunds(R) selected by the
participating Trustee (the "Selected SchwabFund Securities"). SchwabFunds
include the series or classes of beneficial interest of the Trust, Schwab
Investments and Schwab Capital Trust.

Pursuant to the exemptive relief granted to the Trust, each Fund will purchase
and maintain the Selected SchwabFund Securities in an amount equal to the deemed
investments in that Fund of the Deferred Fee Accounts of the Independent
Trustees. The exemptive relief granted to the Trust permits the Funds and the
Trustees to purchase the Selected SchwabFund Securities, which transactions
would otherwise be limited or prohibited by the investment policies and/or
restrictions of the Funds. See "Investment Restrictions."

INVESTMENT MANAGER

The Investment Manager, a wholly owned subsidiary of The Charles Schwab
Corporation, serves as the Funds' investment adviser and administrator pursuant
to two separate yet otherwise substantially similar Investment Advisory and
Administration Agreements (the "Advisory Agreements") between it and the Trust.
The Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and currently provides investment
management services to the SchwabFunds(R), a family of 34 mutual funds with over
$62 billion in assets as of March 31, 1998. The Investment Manager is an
affiliate of Schwab; the Trust's distributor; and shareholder services and
transfer agent.

Each Advisory Agreement will continue in effect for one-year terms for each Fund
to which it relates, subject to annual approval by: (1) the Trust's Board of
Trustees or (2) a vote of a majority

12
<PAGE> 110
(as defined in the 1940 Act) of the outstanding voting securities of a Fund. In
either event, the continuance must also be approved by a majority of the Trust's
Board of Trustees who are not parties to the Agreement or interested persons (as
defined in the 1940 Act) of any such party by vote cast in person at a meeting
called for the purpose of voting on such approval. Each Advisory Agreement may
be terminated at any time upon 60 days' notice by either party, or by a majority
vote of the outstanding shares of a Fund, and will terminate automatically upon
assignment.

Pursuant to an Advisory Agreement dated May 1, 1997, as may be amended from time
to time, the Investment Manager is entitled to receive from Money Fund a
graduated annual fee, payable monthly, of 0.46% of the Fund's average daily net
assets not in excess of $1 billion, 0.45% of net assets over $1 billion but not
in excess of $3 billion, 0.40% of net assets over $3 billion but not in excess
of $10 billion, 0.37% of net assets over $10 billion but not in excess of $20
billion and 0.34% of net assets over $20 billion.

For fiscal years ended December 31, 1995, 1996, and 1997 Money Fund paid
investment and advisory fees of $36,652,000 (fees were reduced by $15,603,000);
$46,270,000 (fees were reduced by $19,250,000); and $55,434,000 (fees were
reduced by $23,541,000).

Pursuant to an Advisory Agreement dated May 1, 1997, as may be amended from time
to time, the Investment Manager is entitled to receive from Government Fund a
graduated annual fee, payable monthly, of 0.46% of the average daily net assets
of the Fund's not in excess of $1 billion, 0.41% of such net assets over $1
billion but not in excess of $2 billion, and 0.40% of such net assets over $2
billion.

For fiscal years ended December 31, 1995, 1996 and 1997 Government Fund paid
investment and advisory fees of $1,901,000 (fees were reduced by $2,777,000);
$5,671,000 (fees were reduced by $2,847,000); and $5,471,000 (fees were reduced
by $3,208,000).

Pursuant to an Advisory Agreement dated June 15, 1994, as may be amended from
time to time, the Investment Manager is entitled to receive an annual fee,
payable monthly, of 0.46% of Treasury Fund's average daily net assets not in
excess of $1 billion, 0.41% of such net assets over $1 billion but not in excess
of $2 billion, and 0.40% of such net assets over $2 billion.

For fiscal years ended December 31, 1995, 1996 and 1997, Treasury Fund paid,
respectively investment and advisory fees of $2,748,000 (fees were reduced by
$2,674,000; $2,420,000 (fees were reduced by $3,302,000) and $2,674,000 (fees
were reduced by $4,184,000).

Pursuant to an Advisory Agreement dated June 15, 1994, the Investment Manager is
entitled to receive from Retirement Fund and Institutional Fund a graduated
annual fee, payable monthly, of 0.46% of the Fund's average daily net assets not
in excess of $1 billion, 0.45% of net assets over $1 billion but not in excess
of $3 billion, 0.40% of net assets over $3 billion but not in excess of $10
billion, 0.37% of net assets over $10 billion but not in excess of $20 billion
and 0.34% of net assets over $20 billion.

For fiscal years ended December 31, 1995, 1996, and 1997 Retirement Fund paid
investment and advisory fees of $338,000 (fees were reduced by $16,000);
$494,000 (fees were reduced by $22,000); and $557,000 (fees were reduced by
$114,000).

For fiscal years ended December 31, 1995, 1996 and 1997 Institutional Fund paid
investment and advisory fees of $202,000 (fees were reduced by $162,000);
$292,000 (fees were reduced by $225,000); and $388,000 (fees were reduced by
$768,000).

13
<PAGE> 111

The Investment Manager and Schwab have guaranteed that, through at least April
30, 1999, Money Fund, Government Fund, Treasury Fund, Retirement Fund and
Institutional Fund will not exceed 0.75%, 0.75%, 0.65%, 0.73% and 0.50% of each
Fund's average daily net assets, respectively.

EXPENSES

The Trust pays the expenses of its operations, including: the fees and expenses
of independent accountants, counsel and the custodian; the cost of reports and
notices to shareholders; the cost of calculating net asset value; registration
fees; the fees and expenses of qualifying the Trust and its shares for
distribution under federal and state securities laws; and membership dues in the
Investment Company Institute or any similar organization. The Trust's expenses
generally are allocated among the Funds on the basis of relative net assets at
the time the expense is incurred, except that expenses directly attributable to
a particular Fund or class of a Fund are charged to that Fund or class,
respectively.

DISTRIBUTOR

Pursuant to a Distribution Agreement, Schwab is the principal underwriter for
shares of the Trust and is the Trust's agent for the purpose of the continuous
offering of the Funds' shares. Each Fund pays the cost of the prospectuses and
shareholder reports to be prepared and delivered to existing shareholders.
Schwab pays such costs when the described materials are used in connection with
the offering of shares to prospective investors and for supplementary sales
literature and advertising. Schwab receives no fee under the Distribution
Agreement. Terms of continuation, termination and assignment under the
Distribution Agreement are identical to those described above with respect to
the Advisory Agreements.

CUSTODIAN AND FUND ACCOUNTANT

PNC Bank, National Association, at the Airport Business Center, 200 Stevens
Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for the Trust.

PFPC, Inc., at 400 Bellevue Parkway Wilmington, Delaware 19809, serves as Fund
Accountant for the Trust.

ACCOUNTANTS AND REPORTS TO SHAREHOLDERS

The Trust's independent accountants, Price Waterhouse LLP, audit and report on
the annual financial statements of each series of the Trust and review certain
regulatory reports and each Fund's federal income tax return. Price Waterhouse
also performs other professional accounting, auditing, tax and advisory services
when the Trust engages it to do so. Each Fund's financial statements and
financial highlights for the fiscal year ended December 31, 1997, are included
in each Fund's Annual Report, which are separate reports supplied with the SAI.
Each Fund's financial statements and financial highlights are incorporated
herein by reference. Shareholders will be sent audited annual and unaudited
semi-annual financial statements. The address of Price Waterhouse LLP is 555
California Street, San Francisco CA 94104.

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<PAGE> 112
PORTFOLIO TRANSACTIONS AND TURNOVER

PORTFOLIO TRANSACTIONS

Portfolio transactions are undertaken principally to pursue the objective of
each Fund in relation to movements in the general level of interest rates;
invest money obtained from the sale of Fund shares; reinvest proceeds from
maturing portfolio securities; and meet redemptions of Fund shares. Portfolio
transactions may increase or decrease the yield of a Fund depending upon
management's ability to correctly time and execute them.

The Investment Manager, in effecting purchases and sales of portfolio securities
for the account of each Fund, seeks to obtain best price and execution. Subject
to the supervision of the Board of Trustees, the Investment Manager will
generally select brokers and dealers for the Funds primarily on the basis of the
quality and reliability of brokerage services, including execution capability
and financial responsibility.

When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources may also be used by the Investment Manager when
providing advisory services to other investment advisory clients, including
mutual funds.

The Trust expects that purchases and sales of portfolio securities will usually
be principal transactions. Securities will normally be purchased directly from
the issuer or from an underwriter or market maker for the securities.

Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.

The investment decisions for each Fund are reached independently from those of
other accounts managed by the Investment Manager. Such other accounts may also
make investments in instruments or securities at the same time as a Fund. When
two or more accounts managed by the Investment Manager have funds available for
investment in similar instruments, available instruments are allocated as to
amount in a manner considered equitable to each account. In some cases, this
procedure may affect the size or price of the position obtainable for Fund.
However, it is the opinion of the Board of Trustees that the benefits conferred
by the Investment Manager outweigh any disadvantages that may arise from
exposure to simultaneous transactions.

PORTFOLIO TURNOVER

Because securities with maturities of less than one year are excluded from
required portfolio turnover rate calculations, each Fund's portfolio turnover
rate for reporting purposes is expected to be zero.

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<PAGE> 113
DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

On each day that the net asset value per share of a Fund is determined
("Business Day"), such Fund's net investment income will be declared as of the
close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time) as a daily dividend to shareholders of record as of the last calculation
of net asset value prior to the declaration. In the case of Institutional Fund,
for shareholders satisfying certain conditions, investment income will be
declared as a daily dividend to shareholders of record as of that day's
calculation of net asset value. Conditions which must be met in order to receive
a dividend for the day on which the order is received be the Transfer Agent or
its authorized agent are: (1) a minimum investment of $100,000; (2) receipt by
Schwab or the Charles Schwab Trust company before 1:30 p.m. Eastern Time; and
(3) payment in immediately available funds. Shareholders will receive dividends
in additional shares unless they elect to receive cash. For each Fund, dividends
will normally be reinvested monthly in full shares of the Fund at the net asset
value on the 15th day of each month, if a Business Day, otherwise on the next
Business Day except in December when dividends are re-invested on the last
business of December. If cash payment is requested, checks will normally be
mailed on the Business Day following the reinvestment date. Each Fund will pay
shareholders, who redeem all of their shares, all dividends accrued to the time
of the redemption within 7 days.

Each Fund calculates its dividends based on its daily net investment income. For
this purpose, the net investment income of a Fund consists of: (1) accrued
interest income, plus or minus amortized discount or premium, minus (2) accrued
expenses allocated to that Fund. If a Fund realizes any capital gains, they will
be distributed at least once during the year as determined by the Board of
Trustees. Any realized capital losses, to the extent not offset by realized
capital gains, will be carried forward. It is not anticipated that a Fund will
realize any long-term capital gains. Expenses of the Trust are accrued each day.
Should the net asset value of a Fund deviate significantly from market value,
the Board of Trustees could decide to value per share the investments at market
value and any unrealized gains and losses could affect the amount of the Fund's
distributions.

FEDERAL INCOME TAXES

It is each Fund's policy to qualify for taxation as a "regulated investment
company" by meeting the requirements of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). By following this policy, each Fund
expects to eliminate or reduce to a nominal amount the federal income tax to
which it is subject.

In order to qualify as a regulated investment company, each of the Funds must,
among other things, (1) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stocks, securities, foreign currencies or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in stocks, securities or currencies; (2)
diversify its holdings so that at the end of each quarter of its taxable year
(i) at least 50% of the market value of the Fund's total assets is represented
by cash or cash items, U.S. Government securities, securities of other regulated
investment companies and other securities limited, in respect of any one issuer,
to a value not greater than 5% of the value of the Fund's total assets and 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its assets is invested in the securities of any one issuer
(other than U.S. Government securities or securities of any other regulated
investment company) or of two or more issuers that the Fund controls, within the
meaning of the Code, and that are engaged in the same, similar or related trades
or businesses. These requirements

16
<PAGE> 114
may restrict the degree to which a Fund may engage in certain hedging
transactions and may limit the range of a Fund's investments. If a Fund
qualifies as a regulated investment company, it will not be subject to federal
income tax on the part of its net investment income and net realized capital
gains, if any, which it distributes to shareholders, provided that the Fund
meets certain minimum distribution requirements. To comply with these
requirements, a Fund must distribute at least (a) 90% of its "investment company
taxable income" (as that term is defined in the Code) and (b) 90% of the excess
of its (i) tax-exempt interest income over (ii) certain deductions attributable
to that income (with certain exceptions), for its taxable year. Each Fund
intends to make sufficient distributions to shareholders to meet these
requirements.

If a Fund fails to distribute in a calendar year (regardless of whether it has a
non-calendar taxable year) substantially all of its (i) ordinary income for such
year; and (ii) capital gain net income for the year ending October 31 (or later
if the Fund is permitted so to elect and so elects), plus any retained amount
from the prior year, the Fund will be subject to a nondeductible 4% excise tax
on the undistributed amounts. Each Fund intends generally to make distributions
sufficient to avoid imposition of this excise tax.

Any distributions declared by the Funds in October, November or December to
shareholders of record during those months and paid during the following January
are treated, for tax purposes, as if they were received by each shareholder on
December 31 of the year in which they were declared. A Fund may adjust its
schedule for the reinvestment of distributions for the month of December to
assist in complying with the reporting and minimum distribution requirements of
the Code.

The Funds do not expect to realize any long-term capital gain. However, any
distributions of long-term capital gain will be taxable to the shareholders as
long-term capital gain, regardless of how long a shareholder has held the Fund's
shares. If a shareholder disposes of shares at a loss before holding such shares
for longer than six months, the loss will be treated as a long-term capital loss
to the extent the shareholder received a capital gain dividend on the shares.

The Funds may engage in investment techniques that may alter the timing and
character of the Funds' income. The Funds may be restricted in their use of
these techniques by rules relating to their qualification as regulated
investment companies.

A Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends paid to any shareholder who (1) fails to
provide a correct taxpayer identification number certified under penalty of
perjury; (2) is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (3) fails
to provide a certified statement that he or she is not subject to "backup
withholding." This "backup withholding" is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.

The foregoing discussion relates only to federal income tax law as applicable to
U.S. citizens or residents. Foreign shareholders (i.e., nonresident alien
individuals and foreign corporations, partnerships, trusts and estates) are
generally subject to U.S. withholding tax at the rate of 30% (or a lower tax
treaty rate) on distributions derived from net investment income and short-term
capital gains. Distributions to foreign shareholders of long-term capital gains
and any gains from the sale or other disposition of shares of the Funds are
generally not subject to U.S. taxation, unless the recipient is an individual
who meets the Code's definition of "resident alien." Different tax consequences
may result if the foreign shareholder is engaged in a trade or business within
the United States. In addition, the tax consequences to a foreign shareholder
entitled to claim the benefits of a tax treaty may be different than those
described above. Distributions by a Fund also

17
<PAGE> 115
may be subject to state, local and foreign taxes, and its treatment under
applicable tax laws may differ from the federal income tax treatment.

SHARE PRICE CALCULATION

Each Fund values its portfolio instruments at amortized cost, which means they
are valued at their acquisition cost, as adjusted for amortization of premium or
discount, rather than at current market value. Calculations are made to compare
the value of a Fund's investments at amortized cost with market values. Market
valuations are obtained by using actual quotations provided by market makers,
estimates of market value or values obtained from yield data relating to classes
of money market instruments published by reputable sources at the mean between
the bid and asked prices for the instruments. The amortized cost method of
valuation seeks to maintain a stable $1.00 per share net asset value, even where
there are fluctuations in interest rates that affect the value of portfolio
instruments. Accordingly, this method of valuation can in certain circumstances
lead to a dilution of a shareholder's interest. If a deviation of 1/2 of 1% or
more were to occur between the net asset value per share calculated by reference
to market values and a Fund's $1.00 per share net asset value, or if there were
any other deviation that the Board of Trustees of the Trust believed would
result in a material dilution to shareholders or purchasers, the Board of
Trustees would promptly consider what action, if any, should be initiated. If a
Fund's net asset value per share (computed using market values) declined, or
were expected to decline, below $1.00 (computed using amortized cost), the Board
of Trustees might temporarily reduce or suspend dividend payments in an effort
to maintain the net asset value at $1.00 per share. As a result of such
reduction or suspension of dividends or other action by the Board of Trustees,
an investor would receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could result in
investors receiving no dividend for the period during which they hold their
shares and receiving, upon redemption, a price per share lower than that which
they paid. On the other hand, if a Fund's net asset value per share (computed
using market values) were to increase, or were anticipated to increase above
$1.00 (computed using amortized cost), the Board of Trustees might supplement
dividends in an effort to maintain the net asset value at $1.00 per share.

HOW THE FUNDS REPORT PERFORMANCE

The historical performance of a Fund may be shown in the form of total return,
and yield, effective yield. These measures of performance are described below.

TOTAL RETURN

Standardized Total Return. Average annual total return for a period is
determined by calculating the actual dollar amount of investment return on a
$1,000 investment in a Fund made at the beginning of the period, then
calculating the average annual compounded rate of return that would produce the
same investment return on the $1,000 over the same period. In computing average
annual total return, a Fund assumes the reinvestment of all distributions at net
asset value on applicable reinvestment dates.

Nonstandardized Total Return. Nonstandardized total return for a Fund differs
from standardized total return in that it relates to periods other than the
period for standardized total return and/or that it represents aggregate (rather
than average) total return.

In addition, an after-tax total return for each Fund may be calculated by taking
that Fund's standardized or non-standardized total return and subtracting
applicable federal taxes from the portions of each Fund's total return
attributable to capital gains distributions and ordinary income.

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<PAGE> 116
This after-tax total return may be compared to that of other mutual funds with
similar investment objectives as reported by independent sources.

Each Fund may also report the percentage of that Fund's standardized or
non-standardized total return that would be paid to taxes annually (at the
applicable federal personal income and capital gains tax rates before redemption
of Fund shares). This proportion may be compared to that of other mutual funds
with similar investment objectives as reported by independent sources.

A Fund may also advertise its cumulative total return since inception. This
number is calculated using the same formula that is used for average annual
total return except that, rather than calculating the total return based on a
one-year period, cumulative total return is calculated from inception to the
date specified.

From Commencement of Operations to December 31, 1997

<TABLE>
<CAPTION>
1 Year 5 Year
Commencement Total Total Since Cumulative
Of Operations Return Return Commencement Total Return
<S> <C> <C> <C> <C> <C>
Money Fund 1/26/90 5.04% 4.34% 4.79% 45.01%

Government Fund 1/26/90 4.95% 4.28% 4.73% 44.30%

Treasury Fund 11/6/91 4.85% 4.18% 4.03% 27.54%

Retirement Fund 3/2/94 5.07% N/A 4.88% 20.06%

Institutional Fund 1/4/94 5.31% N/A 5.00% 21.51%
</TABLE>

YIELD

A Fund's yield refers to the net investment income generated by a hypothetical
investment in the Fund over a specific 7-day period. This net investment income
is then annualized, which means that the net investment income generated during
the 7-day period is assumed to be generated in each 7-day period over an annual
period, and is shown as a percentage of the investment.

EFFECTIVE YIELD

A Fund's effective yield is calculated similarly, but the net investment income
earned by the investment is assumed to be compounded weekly when annualized. The
effective yield will be slightly higher than the yield due to this compounding
effect.

GENERAL INFORMATION

The Trust is an open-end investment management company organized as a
Massachusetts business trust on October 20, 1989. Currently, there are 13 Funds
of the Trust: Schwab Money Market Fund, Schwab Government Money Fund, Schwab
Municipal Money Fund, Schwab U.S. Treasury Money Fund, Schwab Value Advantage
Money Fund(R), Schwab Institutional Advantage Money Fund(R), Schwab Retirement
Money Fund(R), Schwab New York Municipal Money Fund,

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<PAGE> 117

Schwab California Municipal Money Fund, Schwab Government Cash Reserves, Schwab
Pennsylvania Municipal Money Fund, Schwab New Jersey Municipal Money Fund and
Schwab Florida Municipal Money Fund. The Declaration of Trust permits to
Trustees to create additional Funds. There is a remote possibility that one Fund
might become liable for a misstatement in the prospectus or SAI about another
Fund. The Trust generally is not required to hold shareholder meetings. However,
as provided in its Agreement and Declaration of Trust and Bylaws, shareholder
meetings will be held in connection with the following matters: (1) election or
removal of Trustees, if a meeting is requested in writing by a shareholder or
shareholders who beneficially own(s) 10% or more of the Trust's shares; (2)
adoption of any contract for which shareholder approval is required by the 1940
Act; (3) any termination of the Trust to the extent and as provided in the
Declaration of Trust; (4) any amendment of the Declaration of Trust (other than
amendments changing the name of the Trust or any of its investment portfolios,
supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); (5)
determination of whether a court action, proceeding or claim should or should
not be brought or maintained derivatively or as a class action on behalf of the
Trust or the shareholders, to the same extent as the stockholders of a
Massachusetts business corporation; and (6) such additional matters as may be
required by law, the Declaration of Trust, the Bylaws or any registration of the
Trust with the SEC or any state or as the Board of Trustees may consider
desirable. The shareholders also would vote upon changes to a Fund's fundamental
investment objective, policies or restrictions.

Each Trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing Trustees and until the election and qualification of his
or her successor or until death, resignation, retirement or removal by a
majority vote of the shares entitled to vote (as described below) or of a
majority of the Trustees. In accordance with the 1940 Act, (i) the Trust will
hold a shareholder meeting for the election of Trustees when less than a
majority of the Trustees have been elected by shareholders and (ii) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
Trustees have been elected by the shareholders, that vacancy will be filled by a
vote of the shareholders.

Upon the written request of ten or more shareholders who have been such for at
least six months and who hold shares constituting at least 1% of the Trust's
outstanding shares, stating that they wish to communicate with the other
shareholders for the purpose of obtaining signatures necessary to demand a
meeting to consider removal of one or more Trustees, the Trust has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.

The Bylaws provide that a majority of shares entitled to vote shall be a quorum
for the transaction of business at a shareholders' meeting, except that where
any provision of law, of the Declaration of Trust or of the Bylaws permits or
requires that (i) holders of any series shall vote as a series, then a majority
of the aggregate number of shares of that series entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that series,
or (ii) holders of any class shall vote as a class, then a majority of the
aggregate number of shares of that class entitled to vote shall be necessary to
constitute a quorum for the transaction of business by that class. Any lesser
number shall be sufficient for adjournments. Any adjourned session or sessions
may be held, within a reasonable time after the date set for the original
meeting, without the necessity of further notice. The Declaration of Trust
specifically authorizes the Board of Trustees to terminate the Trust (or any of
its investment portfolios) by notice to the shareholders without shareholder
approval.

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<PAGE> 118
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or the Trustees. In addition, the Declaration of
Trust provides for indemnification out of the property of an investment
portfolio in which a shareholder owns or owned shares for all losses and
expenses of such shareholder or former shareholder if he or she is held
personally liable for the obligations of the Trust solely by reason of being or
having been a shareholder. Moreover, the Trust will be covered by insurance
which the Trustees consider adequate to cover foreseeable tort claims. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote, because it is limited to circumstances in which
a disclaimer is inoperative and the Trust itself is unable to meet its
obligations.

For further information, please refer to the registration statement and exhibits
for the Trust on file with the SEC in Washington, D.C. and available upon
payment of a copying fee. The statements in the Prospectus and this Statement of
Additional Information concerning the contents of contracts or other documents,
copies of which are filed as exhibits to the registration statement, are
qualified by reference to such contracts or documents.

PRINCIPAL HOLDERS OF SECURITIES

As of April 15, 1998, Schwab One Access Marketing directly or beneficially owned
approximately 8.7% of Government Fund. The Charles Schwab Trust Company directly
or beneficially owned 67.2% of Retirement Fund and 85.92% of Institutional Fund.

In addition, as of April 1, 1998 the officers and Trustees of the Trust, as a
group, owned less than 1% of each Fund's outstanding voting securities.

PURCHASE AND REDEMPTION OF SHARES

Each Fund's minimum investment requirements are disclosed in is prospectus.
These minimum requirements may be changed at any time and are not applicable to
certain types of investors. For all retirement plans, Schwab One(R) and certain
other types of accounts, any account credit balance in excess of $1.00 and
subsequent amounts of $1.00 on any Business Day will be automatically invested
on a daily basis in the Fund selected. The Trust may waive the minimums for
purchases by Trustees, Directors, officers or employees of the Trust, Schwab or
the Investment Manager. The Trust has made an election with the SEC to pay in
cash all redemptions requested by any shareholder of record limited in amount
during any 90-day period to the lesser of $250,000 or 1% of its net assets at
the beginning of such period. This election is irrevocable without the SEC's
prior approval. Redemption requests in excess of the stated limits may be paid,
in whole or in part, in investment securities or in cash, as the Trust's Board
of Trustees may deem advisable; however, payment will be made wholly in cash
unless the Board of Trustees believes that economic or market conditions exist
that would make such a practice detrimental to the best interests of the Fund.
If redemption proceeds are paid in investment securities, such securities will
be valued as set forth in the Prospectus of the Fund affected under "Share Price
Calculation" and a redeeming shareholder would normally incur brokerage expenses
if he or she converted the securities to cash.

OTHER INFORMATION

The Fund Prospectus and this SAI do not contain all the information included in
the Registration Statement filed with the SEC under the Securities Act of 1933,
as amended, with respect to the securities offered by the Prospectus.

21
<PAGE> 119
Certain portions of the Registration Statement have been omitted from the
Prospectus and this SAI pursuant to the rules and regulations of the SEC. The
Registration Statement including the exhibits filed therewith may be examined at
the office of the SEC in Washington, D.C.

Statements contained in the Prospectuses or in this SAI as to the contents of
any contract or other document referred to are not necessarily complete, and in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement of which the Prospectus and
this SAI form a part, each such statement being qualified in all respects by
such reference.

THIS SAI DOES NOT CONSTITUTE AN OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY
THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY
MADE.

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<PAGE> 120
APPENDIX - RATINGS OF INVESTMENT SECURITIES

COMMERCIAL PAPER

MOODY'S INVESTORS SERVICE

Prime-1 is the highest commercial paper rating assigned by Moody's. Issuers (or
related supporting institutions) of commercial paper with this rating are
considered to have a superior ability to repay short-term promissory
obligations. Issuers (or related supporting institutions) of securities rated
Prime-2 are viewed as having a strong capacity to repay short-term promissory
obligations. This capacity will normally be evidenced by many of the
characteristics of issuers whose commercial paper is rated Prime-1 but to a
lesser degree.

STANDARD & POOR'S CORPORATION

An S&P A-1 commercial paper rating indicated a strong degree of safety regarding
timely payment of principal and interest. Issues determined to possess
overwhelming safety characteristics are denoted A-1+. Capacity for timely
payment on commercial paper rated A-2 is satisfactory, but the relative degree
of safety is not as high as for issues designated A-1.

DUFF & PHELPS CREDIT RATING CO.

Duff-1 is the highest commercial paper rating assigned by Duff & Phelps Credit
Rating Co. ("Duff"). Three gradations exist within this rating category: a
Duff-1+ rating indicates the highest certainty of timely payment (issuer
short-term liquidity is found to be outstanding and safety is deemed to be just
below that of risk-free short-term U.S. Treasury obligations), a Duff-1 rating
signifies a very high certainty of timely payment (issuer liquidity is
determined to be excellent and risk factors are considered minor) and a Duff-1-
rating denotes high certainty of timely payment (issuer liquidity factors are
strong and risk is very small). A Duff-two rating indicates a good certainty of
timely payment; liquidity factors and company fundamentals are sound and risk
factors are small.

IBCA

F1+ is the highest category, and indicates the strongest degree of assurance for
timely payment. Issues rated F1 reflect an assurance of timely payment only
slightly less than issues rated F1+. Issues assigned an F2 rating have a
satisfactory degree of assurance for timely payment, but the margin of safety is
not as great as for issues in the first two rating categories.

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<PAGE> 121
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS

MOODY'S INVESTORS SERVICE

Short-term notes/variable rate demand obligations bearing the designations
MIG-1/VMIG-1 are considered to be of the best quality, enjoying strong
protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing. Obligations rated
MIG-2/VMIG-2 are of high quality and enjoy ample margins of protection although
not as large as those of the top rated securities.

STANDARD & POOR'S CORPORATION

An S&P SP-1 rating indicates that the subject securities' issuer has a very
strong capacity to pay principal and interest. Issues determined to possess very
strong safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a strong capacity to pay principal and interest
is denoted by an SP-2 rating.

COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS AND DEPOSIT
OBLIGATIONS ISSUED BY BANKS

THOMSON BANKWATCH (TBW)

TBW-1 is the highest category and indicates the degree of safety regarding
timely repayment of principal and interest is very high. TBW-2 is the second
highest category and while the degree of safety regarding timely repayment of
principal and interest is strong, the relative degree of safety is not as high
as for issues rated TBW-1.

<PAGE> 122
PART B
CROSS REFERENCE SHEET
STATEMENT OF ADDITIONAL INFORMATION

Schwab Municipal Money Fund-Sweep Shares
Schwab California Municipal Money Fund-Sweep Shares
Schwab New York Municipal Money Fund-Sweep Shares
Schwab Municipal Money Fund-Value Advantage Shares
Schwab California Municipal Money Fund- Value Advantage Shares
Schwab New York Municipal Money Fund- Value Advantage Shares
Schwab Value Advantage Money Fund(R)-Investor Shares

<TABLE>
<CAPTION>
PART B ITEM STATEMENT OF ADDITIONAL INFORMATION CAPTION
<S> <C>
10. Cover Page Cover Page

11. Table of Contents Cover Page

12. General Information and History General Information

13. Investment Objectives and Policies Investment Policies and Restrictions

14. Management of the Fund Management of the Trust

15. Control Persons and Principal Holders of Securities General Information

16. Investment Advisory and Other Services Management of the Trust

17. Brokerage Allocation and Other Practices Portfolio Transactions and Turnover

18. Capital Stock and Other Securities General Information

19. Purchase, Redemption and Pricing of Securities Share Price Calculation; Purchase and Redemption of Shares
Being Offered

20. Tax Status Distributions and Taxes

21. Underwriters Management of the Trust

22. Calculation of Performance Data How the Funds Report Performance

23. Financial Statements Not applicable
</TABLE>

<PAGE> 123
STATEMENT OF ADDITIONAL INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS
101 Montgomery Street, San Francisco, CA 94104

SWEEP INVESTMENTS(TM)
SCHWAB MUNICIPAL MONEY FUND-SWEEP SHARES(TM)
SCHWAB CALIFORNIA MUNICIPAL MONEY FUND-SWEEP SHARES(TM)
SCHWAB NEW YORK MUNICIPAL MONEY FUND-SWEEP SHARES(TM)

VALUE ADVANTAGE INVESTMENTS(R)
SCHWAB MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES(TM)
SCHWAB CALIFORNIA MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES(TM)
SCHWAB NEW YORK MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES(TM)
SCHWAB VALUE ADVANTAGE MONEY FUND(R)-INVESTOR SHARES

APRIL 30, 1998

The Statement of Additional Information (SAI) is not a prospectus. It should be
read in conjunction with the Prospectus dated April 30, 1998 (as may be amended
from time to time), for Schwab Municipal Money Fund-Sweep Shares, Schwab
California Municipal Money Fund-Sweep Shares and Schwab New York Municipal Money
Fund-Sweep Shares or the Prospectus, dated April 30, 1998 (as may be amended
from time to time), for Schwab Municipal Money Fund-Value Advantage Shares,
Schwab California Municipal Money Fund-Value Advantage Shares, Schwab New York
Municipal Money Fund-Value Advantage Shares and Schwab Value Advantage Money
Fund-Investor Shares.

To obtain a copy of the Prospectuses, call 1-800-435-4000 (1-800-345-2550 for
TDD Users), or write to the Funds at 101 Montgomery Street, San Francisco,
California 94104.

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INVESTMENT SECURITIES..................................................... 2
INVESTMENT POLICIES AND RESTRICTIONS...................................... 11
MANAGEMENT OF THE TRUST................................................... 16
PORTFOLIO TRANSACTIONS AND TURNOVER....................................... 23
DISTRIBUTIONS AND TAXES................................................... 24
SHARE PRICE CALCULATION................................................... 27
HOW THE FUNDS REPORT PERFORMANCE.......................................... 27
GENERAL INFORMATION....................................................... 29
PURCHASE AND REDEMPTION OF SHARES......................................... 31
OTHER INFORMATION......................................................... 31
APPENDIX - RATINGS OF INVESTMENT SECURITIES............................... 32
</TABLE>

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INVESTMENT SECURITIES

MUNICIPAL SECURITIES. Municipal securities are securities issued by a state, its
political subdivisions, agencies, authorities and corporations. These securities
may be issued to obtain money for various public purposes, including the
construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, public utilities, schools,
streets, and water and sewer works. Other public purposes include refunding
outstanding obligations, obtaining funds for general operating expenses and
obtaining funds to loan to other public institutions and facilities.

Municipal securities also may be issued to finance various private activities,
including certain types of private activity bonds ("industrial development
bonds" under prior law). These securities may be issued by or on behalf of
public authorities to obtain funds to provide certain privately owned or
operated facilities. The Funds may not be desirable investments for "substantial
users" of facilities financed by private activity bonds or industrial
development bonds or for "related persons" of substantial users because
distributions from the Funds attributable to interest on such bonds may not be
tax exempt. Shareholders should consult their own tax advisors regarding the
potential effect on them (if any) of any investment in these Funds.

Municipal securities generally are classified as "general obligation" or
"revenue" and may be purchased directly or through participation interests.
General obligation securities typically are secured by the issuer's pledge of
its full faith and credit and taxing power for the payment of principal and
interest. Revenue securities typically are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special tax or other specific revenue source. Private
activity bonds and industrial development bonds are, in most cases, revenue
bonds and generally do not constitute the pledge of the credit of the issuer of
such bonds. The credit quality of private activity bonds is frequently related
to the credit standing of private corporations or other entities.

Examples of municipal securities that are issued with original maturities of one
year or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds and tax-free commercial paper. Tax anticipation notes typically are sold
to finance working capital needs of municipalities in anticipation of the
receipt of property taxes on a future date. Bond anticipation notes are sold on
an interim basis in anticipation of a municipality's issuance of a longer-term
bond in the future. Revenue anticipation notes are issued in expectation of the
receipt of other types of revenue, such as that available under the Federal
Revenue Sharing Program. Construction loan notes are instruments insured by the
Federal Housing Administration with permanent financing by "Fannie Mae" (the
Federal National Mortgage Association) or "Ginnie Mae" (the Government National
Mortgage Association) at the end of the project construction period.
Pre-refunded municipal bonds are bonds that are not yet refundable, but for
which securities have been placed in escrow to refund an original municipal bond
issue when it becomes refundable. Tax-free commercial paper is an unsecured
promissory obligation issued or guaranteed by a municipal issuer. The Funds may
purchase other municipal securities similar to the foregoing that are or may
become available, including securities issued to pre-refund other outstanding
obligations of municipal issuers.

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The Funds also may invest in moral obligation securities, which are normally
issued by special purpose public authorities. If the issuer of a moral
obligation security is unable to meet its obligation from current revenues, it
may draw on a reserve fund. The state or municipality that created the entity
has only a moral commitment, not a legal obligation, to restore the reserve
fund.

The value of municipal securities may be affected by uncertainties with respect
to the rights of holders of municipal securities in the event of bankruptcy or
the taxation of municipal securities as a result of legislation or litigation.
For example, under federal law, certain issuers of municipal securities may be
authorized in certain circumstances to initiate bankruptcy proceedings without
prior notice to or the consent of creditors. Such action could result in
material adverse changes in the rights of holders of the securities. In
addition, litigation challenging the validity under the state constitutions of
present systems of financing public education has been initiated or adjudicated
in a number of states, and legislation has been introduced to effect changes in
public school finances in some states. In other instances, there has been
litigation challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law, which ultimately could
affect the validity of those municipal securities or the tax-free nature of the
interest thereon.

The Investment Manager relies on the opinion of the issuer's counsel, which is
rendered at the time the security is issued, to determine whether the security
is fit, with respect to its tax status, to be purchased by a Fund.

MUNICIPAL LEASES. Municipal leases are obligations issued to finance the
construction or acquisition of equipment or facilities. These obligations may
take the form of a lease, an installment purchase contract, a conditional sales
contract or a participation interest in any of these obligations. Municipal
leases may be considered illiquid investments. Additionally, municipal leases
are subject to "nonappropriation risk," which is the risk that the municipality
may terminate the lease because funds have not been allocated to make the
necessary lease payments. The lessor would then be entitled to repossess the
property, but the value of the property may be less to private sector entities
than it would be to the municipality.

DELAYED-DELIVERY TRANSACTIONS. Each Fund may buy or sell securities on a
delayed-delivery or when-issued bases. These transactions involve a commitment
to buy or sell specific securities at a predetermined price or yield, with
payment and delivery taking place after the customary settlement period for that
type of security. When purchasing securities on a delayed-delivery basis, a Fund
assumes the rights and risks of ownership, including the risk of price and yield
fluctuations. Typically, no interest will accrue to the Fund until the security
is delivered. If the Fund remains substantially fully invested at a time when
delayed-delivery securities are outstanding, the Fund will set aside appropriate
liquid assets in a notationally segregated custodial account to cover its
purchase obligations.

When a Fund has sold a security on a delayed-delivery basis, the Fund does not
participate in further gains or loses with respect to that security. If the
other party to a delayed-delivery transaction fails to deliver or pay for the
securities, the Fund could suffer losses.

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Trustees. Investments currently considered illiquid include repurchase
agreements not maturing within seven days, some restricted securities and
municipal lease obligations.

VARIABLE AND FLOATING RATE SECURITIES. Some variable rate securities have a
demand feature that entitles the holder to resell the securities at a specified
price and/or times. There are risks involved with these securities because there
may be no active secondary market for a particular variable rate demand security
purchased by a Fund. In addition, the Fund may exercise only its demand rights
at certain times. The Fund could suffer losses in the event that the issuer
defaults on its obligation. Synthetic variable or floating rate securities
include tender option bond receipts.

Tender option bond trust receipts are derived from fixed-rate municipal bonds
that are placed in a trust from which two classes of trust receipts are issued.
These receipts represent proportionate interest in the underlying bonds.
Interest payments are made on the bonds based upon a predetermined rate. Under
certain circumstances, the holder of a trust receipt may also participate in any
gain or loss on the sale of such bonds. Tender option bond trust receipts
generally are structured to as private placements and, accordingly, may be
deemed to be restricted securities for purposes of the Fund's investment
limitations.

TAXABLE SECURITIES. Under normal conditions, the Funds do not intend to invest
in securities in which interest is subject to federal income and/or state and
local personal income taxes. However, from time to time, as a defensive measure
or under abnormal market conditions, the Funds may make temporary investments in
securities, the interest on which is subject to federal income and/or state and
local personal income taxes.

U.S. GOVERNMENT SECURITIES. U.S. government securities are securities issued by
the U.S. Treasury or issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities. U.S. Treasury securities are backed by the full
faith and credit of the United States. Not all U.S. government securities are
backed by the full faith and credit of the United States. Some U.S. government
securities are supported by a line of credit the issuing entity has with the
U.S. Treasury. Others are supported solely by the credit of the issuing agency
or instrumentality. Of course, U.S. government securities are among the safest
securities, but they are still sensitive to interest rate changes that will
cause their yields to fluctuate.

ASSET-BACKED SECURITIES. Asset-backed securities are securities that are backed
by the loans or account receivables of an entity, such as a bank or credit card
company. These securities are obligations that the issuer intends to repay using
the assets backing them (once collected). Therefore, repayment may depend
largely on the cash flows generated by the assets backing the securities.
Sometimes the credit support for these securities is limited to the underlying
assets, but, in other cases, may be provided by a third party via a letter of
credit or insurance guarantee. Asset-backed securities are subject to credit and
prepayment risks. Currently, there are no tax-exempt Asset-backed securities in
the Funds.

Repayment of these securities is intended to be obtained from an identified pool
of assets, typically receivables related to a particular industry, such as
asset-backed securities related to credit card receivables, automobile
receivables, trade receivables or diversified financial assets. Based on the
primary characteristics of the various types of asset-backed securities, for
purposes of each Fund's concentration policy, each of the Funds has selected the
following asset-backed

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securities industries: credit card receivables, automobile receivables, trade
receivables and diversified financial assets, and each Fund will limit its
investments in each such industry to not more than 25% of its total assets.

REPURCHASE AGREEMENTS. Repurchase agreements involve a Fund buying securities
(usually U.S. government securities) from a seller and simultaneously agreeing
to sell them back at an agreed-upon price (usually higher) and time. There are
risks that losses will result if the seller does not perform as agreed.

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Fund sells
portfolio securities to another party and simultaneously agrees to buy them back
at an agreed-upon price and time. These agreements may increase the possibility
of the Fund's NAV to fluctuate and may be viewed as a form of leveraging.

LENDING. Loans of portfolio securities made by a Fund will be fully
collateralized with U.S. government securities, letters of credit, cash and
cash-equivalents, and will be marked to market daily.

RESTRICTED SECURITIES. Commercial paper and other securities are issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended, and resold
to qualified institutional buyers under Securities Act Rule 144A ("Section 4(2)
paper"). Federal securities laws restrict the disposition of Section 4(2) paper.
Section 4(2) paper generally is sold to institutional investors, such as the
Funds, who agree that they are purchasing the paper for investment and not for
public distribution. Any resale by the purchaser must be in an exempt
transaction and may be accomplished in accordance with Rule 144A. Section 4(2)
paper normally is resold to other institutional investors, such as the Funds,
through or with the assistance of the issuer or investment dealers who make a
market in the Section 4(2) paper, thus providing liquidity. Because it is not
possible to predict with assurance exactly how this market for Section 4(2)
paper sold and offered under Rule 144A will continue to develop, Charles Schwab
Investment Management, Inc. (the "Investment Manager"), pursuant to guidelines
approved by the Board of Trustees, will carefully monitor a Fund's investments
in these securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information.

QUALITY OF INVESTMENTS. The Funds will invest in high-quality securities.
Generally, high-quality securities are securities that are rated in one of the
two highest rating categories by two nationally recognized statistical rating
organizations (NRSROs), or by one if only one NRSRO has rated the securities,
or, if unrated, determined to be of comparable quality by the Investment

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Manager pursuant to guidelines adopted by the Board of Trustees. High-quality
securities may be "first tier" or "second tier" securities. First tier
securities are rated within the highest category and second tier securities are
rated within the second-highest category.

Should a security's high-quality rating change after purchase by a Fund, the
Investment Manager would take such action, including no action, as determined to
be in the best interest of the Fund by the Board of Trustees. For more
information about the ratings assigned by some NRSROs, refer to the Appendix
section of the SAI.

MATURITY OF INVESTMENTS. The Funds will purchase only short-term debt
securities. Basically, a short-term security is a security that is deemed to
mature within 397 days or less.

RISK FACTORS FOR CALIFORNIA MUNICIPAL SECURITIES. In addition to general
economic pressures that affect the State of California's (the "State") ability
to raise revenues to meet its financial obligations, certain State
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives also could result in the
adverse effects described below. The following information is only a brief
summary is not a complete description and is based on information drawn from
official statements and prospectuses relating to securities offerings of the
State that have come to the attention of the Trust and were available before the
date of this SAI. The Trust has not independently verified the accuracy and
completeness of the information contained in those statements and prospectuses.

As used in this section, "California Municipal Securities" includes issues that
are secured by a direct payment obligation of the State and obligations of
issuers that rely in whole or in part on State revenues for payment of their
obligations. Property tax revenues and part of the State's General Fund surplus
are distributed to counties, cities and their various taxing entities; whether
and to what extent a portion of the State's General Fund will be distributed in
the future to them is unclear.

Overview. After suffering through a severe recession, California's economy has
been on a steady recovery since the beginning of 1994. The rate of economic
growth in California in 1996 in terms of job gains, exceeded that of the rest of
the United States in terms of job growth. The State added nearly 350,000 jobs
during 1996, surpassing its pre-recession employment peak of 12.7 million jobs.
Another 380,000 jobs are expected to be created in 1997. The unemployment rate,
while still higher than the national average, fell to the low 6% range in
mid-1997, compared to more than 10% during the recession. Many of the new jobs
were created in such industries as computer services, software design, motion
pictures and high technology manufacturing. Business services, export trade and
other manufacturing also experienced growth. All major economic regions of the
State grew, with particularly large gains in the Silicon Valley region of
Northern California. The unsettled financial situation occurring in certain
Asian economies may adversely affect the State's export related industries.

The recession seriously affected State tax revenues and caused an increase in
expenditures for health and welfare programs. As a result, from the late 1980s
through 1993, the State experienced recurring budget deficits. During this
period, expenditures exceeded revenues in four out of six years, and the State
accumulated a budget deficit of about $2.8 billion at its peak on June 30, 1993.
One consequence of the large budget imbalances significantly reduced the State's
available cash

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resources and force the State to use a series of external borrowings to meet its
cash needs. With the end of the recession, the State's financial condition has
improved in the 1995-96, 1996-97 and 1997-98 fiscal years, with a combination of
better-than-expected revenues, a slowdown in growth of social welfare programs
and continued spending restraint. No deficit borrowing has occurred at the end
of the last two fiscal years and the State's cash flow borrowing was limited to
$3 billion in 1996-1997.

As a result of the deterioration in the State's budget and cash situation, the
State's credit ratings were reduced. All three major nationally recognized
statistical rating organizations lowered the State's general obligation bond
rating from the highest ranking of "AAA." The State's general obligation bonds
are now rated "A+" by Standard and Poor's Corporation ("S&P"), "A1" by Moody's
Investors Service, Inc. ("Moody's") and "AA-" by Fitch Investors Service, Inc.
("Fitch").

State Appropriations Limit. Subject to certain exceptions, the State is subject
to an annual appropriations limit imposed by its Constitution on "proceeds of
taxes." Various expenditures, including, but not limited to, debt service on
certain bonds and appropriations for qualified capital outlay projects, are not
included in the appropriations limit.

1995-1996 FISCAL YEAR

Revenues. The 1995-1996 Budget Act projected General Fund revenues and transfers
of $44.1 billion, a 3.5% increase from 1994-1995. The 1995-1996 Budget Act
projected that the General Fund would end the 1995-1996 fiscal year with a
slight surplus of $28 million at June 30, 1996, and that all of the accumulated
budget deficits will have been repaid. In May 1996, the State Department of
Finance updated the 1995-1996 projections, and estimated that there would be
revenues and transfers of about $46.1 billion but, due to increased
expenditures, there would instead be a deficit of about $70 million in the
budget reserve at June 30, 1996. Principal features of the 1995-1996 Budget Act
included an increase in Proposition 98 funding for K-14 schools of about $1.2
billion, reductions in health and welfare costs of about $900 million (about
$500 million of which depends upon federal legislative approval), and receipt of
an additional $494 million in federal aid for costs of illegal immigrants (above
commitments already made by the federal government; only $31 million of this was
received in 1995-1996). Special Fund revenues were estimated at $12.7 billion.

Expenditures. The 1995-1996 Budget Act projected General Fund expenditures of
$43.4 billion, a 4% increase from 1994-1995. Special Fund expenditures of $13
billion have been appropriated. The May 1996 State Department of Finance
revisions projected that expenditures for 1995-1996 would increase to about
$45.4 billion.

1996-97 FISCAL YEAR

The Governor's proposed budget for 1996-1997 projected General Fund revenues and
transfers of about $45.6 billion and proposed total General Fund appropriations
of about $45.2 billion. The Governor's proposed budget renewed a proposal, which
had been rejected by the Legislature in 1995, for a 15% cut in personal and
corporate tax rates, phased in over a three-year period. In May 1996, the State
Department of Finance updated revenue estimates to $47.1 billion for 1996-1997,
assuming enactment of the Governor's proposed tax cut, and expenditure estimates
to $46.5 billion.

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Revenues. The 1996-1997 Budget Act, enacted on July 15, 1996, rejected the
Governor's proposed 15% tax cut (but did include a 5% cut in bank and
corporation taxes). Consequently, revenues for 1996-1997 were increased to an
estimated $47.6 billion. Special fund revenues are estimated to be $13.3
billion. The 1996-1997 Budget Act appropriated a budget reserve of $305 million
at June 30, 1997. This budget reserve assumed savings of about $660 million in
the State's health and welfare costs based on changes to federal law, including
welfare reform. The federal welfare reform legislation passed in August 1996 is
projected to provide only about $360 million of the assumed $660 million in
savings, however, subject to further adjustment based on how the State
implements changes to its welfare system. Other principal features of the
1996-1997 Budget Act include an increase in Proposition 98 funding for K-14
schools of about $1.6 billion, and about $700 million in new federal aid for
costs of illegal immigrants (with about $540 million to be received during
1996-1997).

Expenditures. The 1996-1997 Budget Act included General Fund appropriations of
about $47.2 billion, a 4% increase over the final estimated 1995-1996
expenditures. Special Fund expenditures were budgeted at $12.6 billion.

1997-98 FISCAL YEAR

Revenues. The 1997-1998 Budget Act anticipates General Fund revenues and
transfers of $52.5 billion (a 6.8% increase over the final 1996-1997 levels) and
Special Fund revenues of $14.0 billion. Following enactment of the Budget Act,
the State implemented its annual cash flow borrowing program, issuing $3 billion
of notes, which mature on June 30, 1998.

Expenditures. The 1997-1998 Budget includes General Fund expenditures of $52.8
billion (an 8.0% increase from the 1996-1997 levels). Special Fund expenditures
of $14.4 billion, and $2.1 billion of expenditures from various Bond Funds. On a
budgetary basis, the budget reserve is projected to decrease from $408 million
at June 30, 1997 to $112 million at June 30, 1998. The 1997-98 Budget Act
increases funding for K-14 education, reflects a $1.235 billion pension case
judgment payment, increases funding for the University of California and
California State University and continues most other State programs at 1996-1997
levels. Unlike prior years, this Budget Act does not depend on uncertain federal
budget actions. After enactment of the Budget Act, and prior to the end of the
Legislative Session, the Legislature and the Governor reached certain agreements
related to State expenditures and taxes. Legislation signed by the Governor
includes a variety of phased-in tax cuts, conformity with certain provisions of
the federal tax reform law passed earlier in the year, and reform of funding for
county trails courts, with the state to assume greater responsibility.

The Governor's proposed budget for fiscal year 1998-1999 proposes total state
spending of $70.6 billion (excluding the expenditure of federal funds and
selected bond funds), which is up 4.7% from the current year's budget. This
total includes $55.4 billion in General Fund spending (a 4.5% increase from the
current year) and $15.2 billion in special funds spending (a 5.3% increase). The
Governor's proposed budget anticipates a $296 million reserve for economic
uncertainties. The new budget reflects agreements reached in the prior year in
the areas of welfare reform, education, state tax relief, and the financial
restructuring of the State's trial court system. The budget contains no tax
changes and relatively few major programmatic changes.

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The foregoing discussion of the 1995-1996, 1996-1997 and 1997-1998 Budgets is
based upon the Budget Acts for these years, and should not be construed as a
statement of fact. The assumptions used to construct a budget, which include
estimates and projections of revenues and expenditures, may be affected by
numerous factors, including future economic conditions in the State and the
Nation. There can be no assurances that any estimates will be achieved.

ISSUES AFFECTING LOCAL GOVERNMENTS AND SPECIAL DISTRICTS IN CALIFORNIA.

Proposition 13. Certain California Municipal Securities may be obligations of
issuers that rely in whole or in part on ad valorem real property taxes as a
source of revenue. In 1978, California voters approved Proposition 13, which
limits ad valorem taxes on real property and restricts the ability of taxing
entities to increase property tax and other tax revenues.

With certain exceptions, the maximum ad valorem tax on real property is limited
to 1% of the full cash value to be collected by the counties and apportioned
according to law. One exception is for debt service on bonded indebtedness if
such is approved by two-thirds of the votes cast by voters voting on the
proposition. The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by substantial damage, destruction or other factors, or adjusted when
there is a "change in ownership" or "new construction."

Proposition 62. This initiative, approved by voters in 1986, placed further
restrictions on the ability of local governments to raise taxes and allocate
approved tax revenues. Although some of the California Courts of Appeal held
that parts of Proposition 62 were unconstitutional, the California Supreme Court
upheld Proposition 62's requirement that special taxes be approved by a
two-thirds vote of the voters voting in an election on the issue. This recent
decision may invalidate other taxes that have been imposed by local governments
in California and make it more difficult for local governments to raise taxes.

Propositions 98 and 111. These initiatives changed the State appropriations
limit and State funding of public education below the university level by
guaranteeing K-14 schools a minimum share of General Fund revenues. The
initiatives require that the State establish a prudent state reserve fund for
public education.

Proposition 218. Passed in November 1996, this initiative places additional
limitations on the ability of California local governments to increase or impose
general taxes, special assessments, and many fees by requiring voter approval of
such items. General taxes and many assessments and fees that were passed without
public approval after 1994 and before November 6, 1996, must now be approved by
voters by either July 1, 1997, or November 6, 1998, to continue in effect.

Appropriations Limit. Local governmental entities also are subject to annual
appropriations limits. If a local government's revenues in any year exceed the
amount permitted to be spent, the excess must be returned to the public through
a revision of tax rates or fee schedules over the following two years.

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Conclusion. The effect of these constitutional and statutory changes and of
budget developments on the ability of California issuers to pay interest and
principal on their obligations remains unclear, and may depend on whether a
particular bond is a general obligation or limited obligation bond (limited
obligation bonds are generally less affected). There is no assurance that any
California issuer will make full or timely payments of principal or interest or
remain solvent. For example, in December 1994, Orange County filed for
bankruptcy. Concentration in California Municipal Securities provides a greater
level of risk than a fund that is diversified across numerous states and
municipal entities.

ADDITIONAL RISK FACTORS FOR CALIFORNIA MUNICIPAL SECURITIES.

Mortgages and Deeds of Trust. Some issues may be secured in whole or in part by
mortgages or deeds of trust on real property. California law limits the remedies
of a creditor secured by a mortgage or deed of trust, which may result in delays
in the flow of revenues to an issuer.

Lease Financings. Some local governments and districts finance certain
activities through lease arrangements. It is uncertain whether such lease
financings are debt that require voter approval.

Seismic Risk. It is impossible to predict the time, magnitude or location of a
major earthquake or its effect on the California economy. In January 1994, a
major earthquake struck Los Angeles, causing significant damage to structures
and facilities in a four county area. The possibility exists that another such
earthquake could create a major dislocation of the California economy.

NEW YORK MUNICIPAL SECURITIES

The State of New York ("NY State") has experienced fiscal problems for several
years as a result of negligible growth, increased human service needs and the
lingering recession that hit the State harder than others. Although the State
enjoyed good growth throughout the early to mid-1980's, unemployment continues
to be a problem. The State's economy is highly developed and diverse, with a
large emphasis in service, trade, financial services and real estate; however,
extensive job losses in each of these areas has placed a burden on the State to
maintain employment, company development and a stable tax base.

The State has a large accumulated deficit, as reflected in its financial
results. The overall wealth of the State's population, as reflected by its per
capita income, offers a positive credit enhancement, and is among the highest in
the nation. The debt per capita, however, also is among the highest and, as a
result, poses a large burden on State residents.

The importance of New York City to the State's economy is also an important
consideration, since it represents a significant portion of the overall economy
of the State. The City has struggled to maintain fiscal stability, and any major
changes to the financial condition of the City would ultimately have an effect
on the State. The overall financial condition of the State can be illustrated by
the changes of its debt rating during the last several years of financial
difficulties: Moody's downgraded the State's general obligation long-term debt
from A1 to A in 1990 and further refined the rating to A2 on February 2, 1997,
and S&P downgraded it from A to A- in early 1992. The State also carries a
rating of A+ from Fitch. The short-term rating assigned by S&P of A1 is within

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that NRSRO's two highest rating categories. Moody's rating on New York City
general obligation bonds is Baa1, while S&P rates them BBB+.

Schwab New York Municipal Money Fund's concentration in securities issued by the
State of New York and its political subdivisions provides a greater level of
risk than a fund that is diversified across numerous states and municipal
entities. The ability of the State of New York or its municipalities to meet
their obligations will depend on the availability of tax and other revenues;
economic, political and demographic conditions within the State; and the
underlying fiscal condition of the State and its municipalities.

INVESTMENT POLICIES AND RESTRICTIONS

THE FOLLOWING INVESTMENT POLICIES AND RESTRICTIONS MAY BE CHANGED ONLY BY
APPROVAL OF A MAJORITY OF A FUND'S SHAREHOLDERS. ALL OTHER INVESTMENT POLICIES
AND RESTRICTIONS CONTAINED IN THE SAI MAY BE CHANGED WITHOUT SHAREHOLDER
APPROVAL OR PRIOR NOTICE.

THE FOLLOWING DESCRIPTIONS OF THE 1940 ACT MAY ASSIST INVESTORS IN UNDERSTANDING
THE ABOVE POLICIES AND RESTRICTIONS.

Borrowing. The 1940 Act presently restricts a Fund from borrowing (including
pledging, mortgaging or hypothecating assets) in excess of 33 1/3% of its total
assets (not including temporary borrowings not in excess of 5% of its total
assets).

Lending. Under the 1940 Act, a Fund may only make loans if expressly permitted
by its investment policies.

Concentration. Concentration is currently determined as investing 25% or
more of a Fund's total assets in an industry or group of industries, with
certain exceptions. This means that each Fund currently may not purchase
securities of any issuer (other than U.S. government securities) if, as a
result, 25% or more of its total assets would be invested in the securities of
an issuer from a single industry or group of industries. Municipal securities
are not deemed to be issued by an issuer from a single industry or group of
industries.

EACH MUNICIPAL FUND MAY:

(1) not purchase securities or make investments other than in accordance
with investment objectives and policies.

(2) not purchase securities (other than securities of the U.S. Government,
its agencies or instrumentalities) if, as a result of such purchase,
25% or more of its total assets would be invested in any industry
(although securities issued by governments or political subdivisions of
governments are not considered to be securities subject to this
industry concentration restriction) or in any one state (although the
limitation as to investments in a state or its political subdivision
shall not apply to Schwab California Municipal Money Fund or Schwab New
York Municipal Money Fund), nor may it enter into a repurchase
agreement if more than 10% of its net assets would be subject to
repurchase agreements maturing in more than 7-days.).

11
<PAGE> 134
(3) not purchase or retain securities of an issuer if any of the officers,
trustees or directors of the Trust or its Investment Manager
individually own beneficially more than 1/2 of 1% of the securities of
such issuer and together own more than 5% of the securities of such
issuer.

(4) not invest in commodities or commodity futures contracts or in real
estate, except that each Fund may invest in Municipal Securities
secured by real estate or interests therein.

(5) not invest for the purpose of exercising control or management of
another issuer.

(6) not invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in Municipal Securities of
issuers which invest in or sponsor such programs.

(7) not underwrite securities issued by others, except to the extent as
permitted by the Investment Company Act of 1940 or the rules or
regulations thereunder, as such statute, rules or regulations may be
amended from time to time.

(8) lend or borrow money, to the extent permitted by the Investment Company
Act of 1940 or the rules or regulations thereunder, as such statute,
rules or regulations may be amended from time to time.

(9) pledge, mortgage or hypothecate any of its assets, to the extent as
permitted by the Investment Company Act of 1940 or the rules or
regulations thereunder, as such statute, rules or regulations may be
amended from time to time.

(10) issue senior securities, to the extent as permitted by the Investment
Company Act of 1940 or the rules or regulations thereunder, as such
statute, rules or regulations may be amended from time to time.

(11) purchase securities of any issuer only when consistent with the
maintenance of its respective status as a diversified company (in the
case of Schwab Municipal Money Fund) or non-diversified company (in the
case of Schwab California Municipal Money Fund and Schwab New York
Municipal Money Fund) under the Investment Company Act of 1940 or the
rules or regulations thereunder, as such statute, rules or regulations
may be amended from time to time.

THE FOLLOWING ARE NON-FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS.

EACH MUNICIPAL FUND MAY NOT:

(1) purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if, as a result, more than 5% of the value of its assets would be
invested in the securities of that issuer, except that, with respect to
Schwab California Municipal Money Fund and Schwab New York Municipal
Money Fund, provided no more than 25% of the Fund's total assets would
be invested in the securities of a single issuer, up to 50% of the
value of the Fund's assets may be invested without regard

12
<PAGE> 135

to this 5% limitation. For purposes of this limitation, the Fund will
regard the entity which has the primary responsibility for the payment
of interest and principal as the issuer.

(2) Invest more than 5% of its total assets in securities restricted as to
disposition under the federal securities laws, although this limitation
shall be 10% with respect to Schwab California Municipal Money Fund and
Schwab New York Municipal Money Fund.

(3) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets. 1

(4) Make loans to others (except through the purchase of debt obligations
or repurchase agreements in accordance with its investment objective
and policies).

(5) Borrow money, except from banks for temporary purposes (but not for the
purpose of purchasing investments), and then only in an amount not to
exceed one-third of the value of its total assets (including the amount
borrowed) in order to meet redemption requests which otherwise might
result in the untimely disposition of securities; or pledge its
securities or receivables or transfer or assign or otherwise encumber
them in an amount to exceed 10% of the Fund's net assets to secure
borrowings. Reverse repurchase agreements entered into by the Fund are
permitted within the limitations of this paragraph. No such Fund will
purchase securities or make investments while reverse repurchase
agreements or borrowings are outstanding.

(6) Write, purchase or sell puts, calls or combinations thereof, although
it may purchase Municipal Securities subject to standby commitments,
variable rate demand notes or repurchase agreements in accordance with
its investment objective and policies.

(7) Make short sales of securities or purchase securities on margin, except
to obtain such short-term credits as may be necessary for the clearance
of transactions.

(8) Issue senior securities as defined in the 1940 Act.

Except for fundamental restriction (3) and non-fundamental restriction (5), if a
percentage restriction is adhered to at the time of investment, a later increase
in percentage resulting from a change in values or net assets will not be
considered a violation. None of the Funds has a present intention of borrowing
during the coming year, and in any event, each Fund would limit borrowings as
required by the restrictions previously stated.

SCHWAB VALUE ADVANTAGE MONEY FUND(R) MAY, EXCEPT WHERE NOTED,:

(1) Not underwrite securities issued by others, except to the extent it may
be deemed to be an underwriter under the federal securities laws in
connection with the disposition of securities from its investment
portfolio.

- --------

1 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" for an exception to this investment restriction.

13
<PAGE> 136

(2) Not invest in commodities or commodity contracts, including futures
contracts, or in real estate, although it may invest in securities that
are secured by real estate and securities of issuers that invest or
deal in real estate.

(3) Not concentrate 25% or more of the value of its assets in any one
industry; provided, however, that the Fund reserves freedom of action
to invest up to 100% of its assets in certificates of deposit or
banker's acceptances issued by U.S. banks and U.S. branches of those
foreign banks that the Investment Manager has determined to be subject
to the same regulation as U. S. banks, or obligations of or guaranteed
by the U.S. government, its agencies or instrumentalities.

(4) Not make loans to others (except through the purchase of debt
obligations or repurchase agreements in accordance with its investment
objective and policies).

(5) Not issue senior securities as defined in the 1940 Act.

(6) Purchase securities of any issuer only when consistent with the
maintenance of its respective status as a diversified company under the
Investment Company Act of 1940 or the rules or regulations thereunder,
as such statute, rules or regulations may be amended from time to time.

(7) Borrow money to the extent permitted by the Investment Company Act of
1940 or the rules or regulations thereunder, as such statute, rules or
regulations may be amended from time to time.

THE FOLLOWING ARE NON-FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS.

SCHWAB VALUE ADVANTAGE MONEY FUND MAY NOT:

(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. government, its agencies or instrumentalities)
if, as a result, more than 5% of the value of its assets would be
invested in securities of that issuer.

(2) Invest more than 10% of its net assets in illiquid securities,
including repurchase agreements maturing in more than seven days.

(3) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Schwab Fund Family or the Investment
Manager beneficially own more than 1/2 of 1% of the securities of such
issuer, and together beneficially own more than 5% of the securities of
such issuer.

(4) Invest for the purpose of exercising control or management of another
issuer.

(5) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of
assets. 1

- --------

1 See the description of the Trustees' deferred compensation plan under
"Management of the Trust" for an exception to this investment restriction.

14
<PAGE> 137
(6) Write, purchase or sell puts, calls or combinations thereof.

(7) Make short sales of securities or purchase any securities on margin,
except to obtain such short-term credits as may be necessary for the
clearance of transactions.

(8) Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the securities of
issuers which invest in or sponsor such programs. Except as otherwise
noted, if a percentage restriction is adhered to at the time of
investment, a later increase in percentage beyond the specified limit
resulting from a change in values or net assets will not be considered
a violation.

Except for fundamental investment restriction (7) and non-fundamental investment
restriction (2), if a percentage restriction is adhered to at the time of
investment, a later increase in percentage resulting from a change in values or
net assets will not be considered a violation.

QUALITY AND MATURITY

Each Fund will only purchase securities that present minimal credit risks and
are First Tier or Second Tier Securities (otherwise referred to as "Eligible
Securities"). 1 An Eligible Security is:

(1) a security with a remaining maturity of 397 days or less (a) that is rated
by the requisite nationally recognized statistical rating organizations
("NRSROs") designated by the Securities and Exchange Commission (the "SEC"),
(currently Moody's, S&P, Duff and Phelps Credit Rating Co., Fitch, Thomson
Bankwatch, and, with respect to debt issued by banks, bank holding companies,
United Kingdom building societies, broker-dealers and broker-dealers' parent
companies, and bank-supported debt, IBCA Limited and its affiliate, IBCA, Inc.)
in one of the two highest rating categories for short-term debt obligations (two
NRSROs are required but one rating suffices if only one NRSRO rates the
security), or (b) that itself was unrated by any NRSRO, but was issued by an
issuer that has outstanding a class of short-term debt obligations (or any
security within that class) meeting the requirements of subparagraph 1(a) above
that is of comparable priority and security;

(2) a security that at the time of issuance was a long-term security but has a
remaining maturity of 397 days or less (12 months or less in the case of Schwab
Money Market and Schwab Government Money Funds), and (a) whose issuer received a
rating within one of the two highest rating categories from the requisite NRSROs
for short-term debt obligations with respect to a class of short-term debt
obligations (or any security within that class) that is now comparable in
priority and security with the subject security; or (b) that has long-term
ratings from the requisite NRSROs that are in one of the two highest categories;
or

A First Tier Security is any Eligible Security that carries (or other relevant
securities issued by its issuer carry) top NRSRO ratings from at least two
NRSROs (a single top rating suffices if only one NRSRO rates the security) or
has been determined by the Investment Manager, pursuant to guidelines adopted by
the Board of Trustees, to be of comparable quality to such a security. A Second
Tier Security is any other Eligible Security.

- --------

1 See the description of the Trustees' deferred compensation plan under
"Management of the Trust for an exception to this investment restriction.

15
<PAGE> 138
Each Fund's total holdings of Second Tier Securities will not exceed 5% of its
assets, with investment in the Second Tier Securities of any one issuer being
limited to the greater of 1% of the Fund's assets or $1 million. In addition,
the underlying securities involved in repurchase agreements collateralized by
non-Government securities will be First Tier Securities at the time the
repurchase agreements are executed.

MANAGEMENT OF THE TRUST

<TABLE>
<CAPTION>
POSITION WITH
NAME/DATE OF BIRTH THE TRUST PRINCIPAL OCCUPATION
- ------------------ --------- --------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Trustee Chairman, Co-Chief Executive Officer and
July 29, 1937 Director, The Charles Schwab Corporation;
Chairman, Chief Executive Officer and
Director, Charles Schwab Holdings, Inc.;
Chairman and Director, Charles Schwab
& Co., Inc, Charles Schwab Investment
Management, Inc., The Charles Schwab
Trust Company, and Schwab Retirement
Plan Services, Inc.; Chairman and Director
(current board positions), and Chairman
(officer position) until December 1995,
Mayer & Schweitzer, Inc. (a securities
brokerage subsidiary of The Charles Schwab
Corporation); Director, The Gap, Inc. (a
clothing retailer), Transamerica Corporation
(a financial services organization),
AirTouch Communications (a telecommunications
company) and Siebel Systems (a software
company).

TOM D. SEIP* President and Trustee Executive Vice President, The Charles Schwab
February 15, 1950 Corporation; Enterprise President - International
and Mutual Funds, Charles Schwab & Co.,
Inc.; Chief Executive Officer, Charles Schwab
Investment Management, Inc.
</TABLE>

* This Trustee is an "interested person" of the Trust.

16
<PAGE> 139
<TABLE>
<S> <C> <C>
DONALD F. DORWARD Trustee Executive Vice President and Managing Director,
September 23, 1931 Grey Advertising. From 1990 to 1996, Mr.
Dorward was President and Chief Executive
Officer, Dorward & Associates. Dorward &
Associates is an advertising and
marketing/consulting firm.

ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director,
May 15, 1931 Semloh Financial, Inc. Semloh Financial is an
international financial services and investment
advisory firm.

DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Co.
June 28, 1938 (investment banking). Prior to 1995, Mr.
Stephens was Chairman and Chief Executive
Officer of North American Trust (a real
estate investment trust).

MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer and Director,
August 18, 1943 Wilsey Bennett, Inc. (truck and air
transportation, real estate investment and
management, and investments).

TAI-CHIN TUNG Treasurer and Principal Vice President - Finance, Charles Schwab & Co.,
March 7, 1951 Financial Officer Inc.; Controller, Charles Schwab Investment
Management, Inc. From 1994 to 1996, Ms. Tung
was Controller for Robertson Stephens Investment
Management, Inc. From 1993 to 1994, she was
Vice President of Fund Accounting, Capital
Research and Management Co.
</TABLE>

17
<PAGE> 140

<TABLE>
<S> <C> <C>
WILLIAM J. KLIPP* Executive Vice Executive Vice President, SchwabFunds(R),
December 9, 1955 President, Chief Charles Schwab & Co., Inc.; President and Chief
Operating Officer and Operating Officer, Charles Schwab Investment
Trustee Management, Inc.

STEPHEN B. WARD Senior Vice President Senior Vice President and Chief Investment
April 5, 1955 and Chief Investment Officer, Charles Schwab Investment Management,
Officer Inc.

FRANCES COLE Secretary Senior Vice President, Chief Counsel, Chief
September 9, 1955 Compliance Officer and Assistant Corporate
Secretary, Charles Schwab Investment Management,
Inc.

DAVID H. LUI Assistant Secretary Vice President and Senior Counsel, Charles
October 14, 1960 Schwab Investment Management, Inc.

KAREN L. SEAMAN Assistant Secretary Corporate Counsel, Charles Schwab Investment
February 27, 1968 Management, Inc. From October 1994 to July
1996, she was an Attorney for Franklin
Resources, Inc. Prior to 1994, Ms. Seaman was
an Attorney for The Benham Group.

MATTHEW O'TOOLE Assistant Secretary Corporate Counsel, Charles Schwab Investment
September 26, 1964 Management, Inc. From November 1995 to April
1997, Mr. O'Toole was Assistant General Counsel
for Chancellor LGT Asset Management, Inc. Prior
there to, Mr. O'Toole was Senior Counsel at the
U.S. Securities and Exchange Commission in
Washington, D.C.
</TABLE>

* This Trustee is an "interested person" of the Trust.

18
<PAGE> 141
<TABLE>
<S> <C> <C>
AMY L. MAUK Assistant Secretary Corporate Counsel, Charles Schwab Investment
January 5, 1969 Management, Inc. From April 1995 to March 1997,
she was a Legal Product Manager for Fidelity
Investments. Prior to April 1995, Ms. Mauk was
and associate an Laurano & Laurano, Boston, MA
</TABLE>

COMPENSATION TABLE 1

<TABLE>
<CAPTION>
Pension or
Retirement Benefits Estimated Annual
Aggregate Accrued as Part of Benefits Upon Total Compensation
Name of Person, Compensation from Fund Expenses from Retirement from the from the Fund
Position the Trust the Fund Complex 2 Fund Complex 2 Complex 2
- --------------------------- -------------------- -------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Charles R. Schwab, 0 N/A N/A 0
Chairman and
Trustee

Timothy F. McCarthy, 0 N/A N/A 0
President and
Trustee 3

Tom D. Seip, 0 N/A N/A 0
President and
Trustee 4
</TABLE>

19
<PAGE> 142

<TABLE>
<S> <C> <C> <C> <C>
William J. Klipp, 0 N/A N/A 0
Executive Vice
President, Chief
Operating Officer
and Trustee

Donald F. Dorward, $51,500 N/A N/A $93,450
Trustee

Robert G. Holmes, $51,500 N/A N/A $93,450
Trustee

Donald R. Stephens, $51,500 N/A N/A $93,450
Trustee

Michael W. Wilsey, $51,500 N/A N/A $93,450
Trustee
</TABLE>

1 Information is as of the Trust's fiscal year ended December
31, 1997.

2 "Fund Complex" comprises all 31 funds of the Trust, Schwab
Investments, Schwab Capital Trust and Schwab Annuity
Portfolios, as of December 31, 1997.

3 Mr. McCarthy served as President and Trustee until November
24, 1997.

4 Mr. Seip began serving as President and Trustee on November
24, 1997.

TRUSTEE DEFERRED COMPENSATION PLAN

Under the Plan, deferred Trustee's fees will be credited to a book reserve
account established by the Trust (the "Deferred Fee Account"), as of the date
such fees would have been paid to such Trustee. The value of the Deferred Fee
Account, as of any date, will be equal to the value the Account would have had
as of that date, if the amounts credited to the Account had been invested and
reinvested in the securities of the Schwab Fund or Funds selected by the
participating Trustee (the "Selected SchwabFund Securities"). SchwabFunds(R)
include the series or classes of beneficial interest of the Trust, Schwab
Investments and Schwab Capital Trust.

20
<PAGE> 143
transactions would otherwise be limited or prohibited by the investment policies
and/or restrictions of the Funds.

INVESTMENT MANAGER

The Investment Manager, a wholly owned subsidiary of The Charles Schwab
Corporation, serves as each Fund's investment adviser and administrator pursuant
to an Investment Advisory and Administration Agreement (the "Advisory
Agreement") between it and the Trust. The Investment Manager is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, and
currently provides investment management services to the SchwabFunds, a family
of 34 mutual funds with over $62 billion in net assets as of March 31, 1998. The
Investment Manager is an affiliate of Schwab; the Trust's distributor and the
shareholder services and transfer agent.

The Advisory Agreement will continue in effect for one-year terms subject to
annual approval by: (1) the Trust's Board of Trustees or (2) a vote of a
majority of the Fund's shareholders. In either event, the continuance also must
be approved by a majority of the Trust's Board of Trustees who are not parties
to the Agreement or interested persons of any such party by vote cast in person
at a meeting called for the purpose of voting on such approval. The Advisory
Agreement may be terminated at any time upon 60 days' notice by either party, or
by a majority vote of the Fund's shareholders and will terminate automatically
upon assignment.

Pursuant to the Advisory Agreement dated May 1, 1997, as may be amended form
time to time, the Investment Manager is entitled to receive from Municipal Money
Fund a graduated annual fee payable monthly, of 0.46% or the Fund's average
daily net assets over $1 billion, 0.41% of such assets over $1 billion but not
in excess of $2 billion, 0.40% of such assets over $2 billion.

For the fiscal years ended December 31, 1995, 1996 and 1997 Schwab Municipal
Money Fund paid investment and advisory fees of $6,465,000 (fees were reduced by
7,229,000); $8,034,000 (fees were reduced by $8,734,000) and $9,331,000 (fees
were reduced by $10,977,000).

Pursuant to the Advisory Agreement dated June 15, 1994, as may be amended from
time to time, the Investment Manager is entitled to receive from Schwab
California Municipal Money Fund and Schwab New York Municipal Money Fund, a
graduated annual fee, payable monthly, of 0.46% of each Fund's average daily net
assets not in excess of $1 billion, 0.41% of such net assets over $1 billion but
not in excess of $2 billion and 0.40% of such net assets over $2 billion.

For the fiscal years ended December 31, 1995, 1996 and 1997 Schwab California
Municipal Money Fund paid investment and advisory fees of $2,748,000 (fees were
reduced by $3,697,000); $3,737,000 (fees were reduced by $4,819,000); and
$4,824,000 (fees were reduced by $6,548,000).

For the period of February 27, 1995 (commencement of operations) to December 31,
1995 and for the fiscal years ended December 31, 1996 and 1997 Schwab New York
Municipal Money Fund paid investment and advisory fees of $464,000 (fees reduced
by $277,000); $535,000 (fees were reduced by $696,000) and $675,000 (fees were
reduced by $1,192,000).

21
<PAGE> 144

Pursuant to the Advisory Agreement June 15, 1994, as may be amended from time to
time, the Investment Manager is entitled to receive from Schwab Value Advantage
Money Fund a graduated annual fee, payable monthly, of 0.46% of the Fund's
average daily net assets not in excess of $1 billion, 0.45% of such net assets
over $1 billion but not in excess of $3 billion, 0.40% of such net assets over
$3 billion but not in excess of $10 billion, 0.37% of such net assets over $10
billion but not in excess of $20 billion and 0.34% of such net assets over $20
billion.

For the fiscal years ended December 31, 1995, 1996 and 1997 Schwab Value
Advantage Money Fund paid investment and advisory fees of $15,877,000 (fees were
reduced by $7,922,000); $30,667,000 (fees were reduced by $6,081,000) and
$23,972,000 (fees were reduced by $27,753,000).

The Investment Manager and Schwab have voluntarily agreed to limit, or
reimburse, if necessary, a Fund's total operating expenses to 0.66%, 65% and 69%
of its average daily net assets for the Sweep Investments for Municipal Money
Fund, California Municipal Money Fund and New York Municipal Money Fund and
0.45%, 0.45% and 0.40% for the Value Advantage Investment Municipal Money Fund,
California Municipal Money Fund and Value Advantage Money Fund.

EXPENSES

The Trust pays the expenses of its operations, including the fees and expenses
of independent accountants, counsel and the custodian; the cost of reports and
notices to shareholders; the cost of calculating net asset value per share
(NAV); registration fees; the fees and expenses of qualifying the Trust and its
shares for distribution under federal and state securities laws; and membership
dues in the Investment Company Institute or any similar organization. The
Trust's expenses generally are allocated among the Funds on the basis of
relative net assets at the time the expense is incurred, except that expenses
directly attributable to a particular Fund or class of a Fund are charged to
that Fund or class, respectively.

DISTRIBUTOR

Pursuant to a Distribution Agreement, Schwab is the principal underwriter for
shares of the Trust and is the Trust's agent for the purpose of the continuous
offering of each Fund's shares. Each Fund pays the cost of its prospectuses and
shareholder reports to be prepared and delivered to existing shareholders.
Schwab pays such costs when the described materials are used in connection with
the offering of shares to prospective investors and for supplementary sales
literature and advertising. Schwab receives no fee under the Distribution
Agreement. Terms of continuation, termination and assignment under the
Distribution Agreement are identical to those described above with respect to
the Advisory Agreement.

CUSTODIAN AND FUND ACCOUNTANT

PNC Bank, National Association, at the Airport Business Center, 200 Stevens
Drive, Suite 440, Lester, Pennsylvania 19113, serves as Custodian for the Trust.

22
<PAGE> 145
PFPC, Inc., at 400 Bellevue Parkway, Wilmington, Delaware 19809, serves as Fund
Accountant for the Trust.

ACCOUNTANTS AND REPORTS TO SHAREHOLDERS

The Trust's independent accountants, Price Waterhouse LLP, 555 California
Street, San Francisco CA 94104 audit and report on the annual financial
statements of each series of the Trust and review certain regulatory reports and
the Funds' federal income tax return. It also performs other professional
accounting, auditing, tax and advisory services when the Trust engages it to do
so. Each Fund's financial statements and financial highlights for the fiscal
year ended December 31, 1997, are included in each Fund's Annual Report, which
are separate reports supplied with this SAI. Each Fund's financial statements
and financial highlights are incorporated herein by reference. Shareholders will
be sent audited annual and unaudited semi-annual financial statements.

PORTFOLIO TRANSACTIONS AND TURNOVER

PORTFOLIO TRANSACTIONS

Portfolio transactions are undertaken principally to pursue the objective of the
Funds in relation to movements in the general level of interest rates; invest
money obtained from the sale of Fund shares; reinvest proceeds from maturing
portfolio securities; and meet redemptions of Fund shares. Portfolio
transactions may increase or decrease the yield of a Fund depending upon
management's ability to correctly time and execute them.

The Investment Manager, in effecting purchases and sales of portfolio securities
for the account of a Fund, seeks to obtain best price and execution. Subject to
the supervision of the Board of Trustees, the Investment Manager generally will
select brokers and dealers for a Fund primarily on the basis of the quality and
reliability of brokerage services, including execution capability and financial
responsibility.

When the execution and price offered by two or more broker-dealers are
comparable, the Investment Manager may, in its discretion, utilize the services
of broker-dealers that provide it with investment information and other research
resources. Such resources also may be used by the Investment Manager when
providing advisory services to other investment advisory clients, including
mutual funds.

The Trust expects that purchases and sales of portfolio securities usually will
be principal transactions. Securities normally will be purchased directly from
the issuer or from an underwriter or market maker for the securities.

23
<PAGE> 146
The investment decisions for each Fund are reached independently from those for
other accounts managed by the Investment Manager. Such other accounts may also
make investments in instruments or securities at the same time as a Fund. When
two or more accounts managed by the Investment Manager have funds available for
investment in similar instruments, available instruments are allocated as to
amount in a manner considered equitable to each account. In some cases, this
procedure may affect the size or price of the position obtainable for a Fund.
However, it is the opinion of the Board of Trustees that the benefits conferred
by the Investment Manager outweigh any disadvantages that may arise from
exposure to simultaneous transactions.

PORTFOLIO TURNOVER

DISTRIBUTIONS AND TAXES

DISTRIBUTIONS

On each day that the NAV of a Fund is determined ("Business Day"), that Fund's
net investment income will be declared as of the close of trading on the New
York Stock Exchange ("NYSE") (normally 4 p.m. Eastern time) as a daily dividend
to shareholders of record as of the last calculation of NAV prior to the
declaration. Shareholders will receive dividends in additional shares unless
they elect to receive cash. Dividends normally will be reinvested monthly in
full shares of the Fund at the NAV on the 15th day of each month, if a Business
Day, otherwise on the next Business Day except for December when the dividend is
reinvested on the last business day of the month. If cash payment is requested,
checks normally will be mailed on the Business Day following the reinvestment
date. Each Fund will pay shareholders, who redeem all of their shares, all
dividends accrued to the time of the redemption within seven days.

Each Fund calculates its dividends based on its daily net investment income. For
this purpose, the net investment income of a Fund consists of: (1) accrued
interest income, plus or minus amortized discount or premium, minus (2) accrued
expenses allocated to that Fund. If a Fund realizes any capital gains, they will
be distributed at least once during the year as determined by the Board of
Trustees. Any realized capital losses, to the extent not offset by realized
capital gains, will be carried forward. It is not anticipated that the Fund will
realize any long-term capital gains. Expenses of the Trust are accrued each day.
Should the NAV of a Fund deviate significantly from market value, the Board of
Trustees could decide to value the investments at market value and any
unrealized gains and losses could affect the amount of the Fund's distributions.

FEDERAL INCOME TAXES

24
<PAGE> 147
In order to qualify as a regulated investment company, a Fund must, among other
things, (1) derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of stocks, securities, foreign currencies or other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in stocks, securities or currencies; (2) diversify its
holdings so that at the end of each quarter of its taxable year (i) at least 50%
of the market value of the Fund's total assets is represented by cash or cash
items, U.S. government securities, securities of other regulated investment
companies and other securities limited, in respect of any one issuer, to a value
not greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. government securities or securities of any other regulated investment
company) or of two or more issuers that the Fund controls, within the meaning of
the Code, and that are engaged in the same, similar or related trades or
businesses. These requirements may restrict the degree to which a Fund may
engage in certain hedging transactions and may limit the range of its
investments. If a Fund qualifies as a regulated investment company, it will not
be subject to federal income tax on the part of its net investment income and
net realized capital gains, if any, that it distributes to shareholders,
provided that the Fund meets certain minimum distribution requirements. To
comply with these requirements, each Fund must distribute at least (a) 90% of
its "investment company taxable income" (as that term is defined in the Code)
and (b) 90% of the excess of its (i) tax-exempt interest income over (ii)
certain deductions attributable to that income (with certain exception), for its
taxable year. Each Fund intends to make sufficient distributions to shareholders
to meet these requirements.

Any distributions declared by a Fund in October, November or December to
shareholders of record during those months and paid during the following January
are treated, for tax purposes, as if they were received by each shareholder on
December 31 of the year in which they were declared. A Fund may adjust its
schedule for the reinvestment of distributions for the month of December to
assist in complying with the reporting and minimum distribution requirements of
the Code.

The Funds do not expect to realize any long-term capital gain. However, any
distributions of long-term capital gain will be taxable to the shareholders as
long-term capital gain, regardless of how long a shareholder has held the Funds'
shares. If a shareholder disposes of shares at a loss before holding such shares
for longer than six months, the loss will be treated as a long-term capital loss
to the extent the shareholder received a capital gain dividend on the shares.

Each Fund may engage in investment techniques that may alter the timing and
character of its income. Each Fund may be restricted in its use of these
techniques by rules relating to its qualification as regulated investment
companies.

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Each Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends paid to any shareholder who (1) fails to
provide a correct taxpayer identification number certified under penalty of
perjury; (2) is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (3) fails
to provide a certified statement that he or she is not subject to "backup
withholding." This "backup withholding" is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.

The foregoing discussion relates only to federal income tax law as applicable to
U.S. citizens or residents. Foreign shareholders (i.e., nonresident alien
individuals and foreign corporations, partnerships, trusts and estates)
generally are subject to U.S. withholding tax at the rate of 30% (or a lower tax
treaty rate) on distributions derived from net investment income and short-term
capital gains. Distributions to foreign shareholders of long-term capital gains
and any gains from the sale or other disposition of shares of the Funds
generally are not subject to U.S. taxation, unless the recipient is an
individual who meets the Code's definition of "resident alien." Different tax
consequences may result if the foreign shareholder is engaged in a trade or
business within the United States. In addition, the tax consequences to a
foreign shareholder entitled to claim the benefits of a tax treaty may be
different than those described above. Distributions by the Funds also may be
subject to state, local and foreign taxes, and its treatment under applicable
tax laws may differ from the federal income tax treatment.

ADDITIONAL CONSIDERATIONS FOR MUNICIPAL FUNDS

The Municipal Funds will each distribute all of their net investment income
(including net short-term capital gain) to their respective shareholders. If, at
the close of each quarter of its taxable year, at least 50% of the value of a
Fund's assets consist of obligations the interest on which is excludable from
gross income, the Fund may pay "exempt-interest dividends" to its Shareholders.
Those dividends constitute the portion of the aggregate dividends as designated
by the Fund, equal to the excess of the excludable interest over certain amounts
disallowed as deductions. Exempt-interest dividends are excludable from a
shareholder's gross income for federal income tax purposes.

Exempt-interest dividends may nevertheless be subject to the federal alternative
minimum tax (AMT) imposed by Section 55 of the Code. The AMT is imposed at rates
of 26% and 28%, in the case of non-corporate taxpayers, and at the rate of 20%,
in the case of corporate taxpayers, to the extent it exceeds the taxpayer's
federal income tax liability. The AMT and the environmental tax may be imposed
in the following two circumstances. First, exempt-interest dividends derived
from certain private activity bonds issued after August 7, 1986, will generally
be an item of tax preference (and, therefore, potentially subject to AMT) for
both corporate and non-corporate taxpayers. Second, in the case of
exempt-interest dividends received by corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined in
Section 56(g) of the Code, in calculating the corporations' alternative minimum
taxable income for purposes of determining the AMT.

Current federal law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest that may have an effect on the ability
of a Fund to purchase sufficient

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amounts of tax-exempt securities to satisfy the Code's requirements for the
payment of "exempt-interest dividends."

Interest on indebtedness incurred or continued by a shareholder in order to
purchase or carry shares of the Funds is not deductible for federal income tax
purposes. Furthermore, these funds may not be an appropriate investment for
persons (including corporations and other business entities) who are
"substantial users" (or persons related to "substantial users") or facilities
financed by industrial development private activity bonds. Such persons should
consult their tax advisors before purchasing shares. A "substantial user" is
defined generally to include "certain persons" who regularly use in their trade
or business a part of a facilities financed from the proceeds of such bonds.

SHARE PRICE CALCULATION

If a Fund's NAV (computed using market values) declined, or were expected to
decline, below $1.00 (computed using amortized cost), the Board of Trustees
might temporarily reduce or suspend dividend payments in an effort to maintain
the NAV. As a result of such reduction or suspension of dividends or other
action by the Board of Trustees, an investor would receive less income during a
given period than if such a reduction or suspension had not taken place. Such
action could result in investors receiving no dividend for the period during
which they hold their shares and receiving, upon redemption, a price per share
lower than that which they paid. On the other hand, if a Fund's NAV (computed
using market values) were to increase, or were anticipated to increase above
$1.00 (computed using amortized cost), the Board of Trustees might supplement
dividends in an effort to maintain the NAV at $1.00.

HOW THE FUNDS REPORT PERFORMANCE

The historical performance of the Funds may be shown in the form of total
return, yield and effective yield. These measures of performance are described
below.

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TOTAL RETURN

Standardized Total Return. Average annual total return for a period is
determined by calculating the actual dollar amount of investment return on a
$1,000 investment in a Fund made at the beginning of the period, then
calculating the average annual compounded rate of return that would produce the
same investment return on the $1,000 over the same period. In computing average
annual total return, each Fund assumes the reinvestment of all distributions at
NAV on applicable reinvestment dates.

In addition, an after-tax total return for a Fund may be calculated by taking
the Fund's standardized or non-standardized total return and subtracting
applicable federal taxes from the portions of the Fund's total return
attributable to capital gains distributions and ordinary income. This after-tax
total return may be compared to that of other mutual funds with similar
investment objectives as reported by independent sources.

Each Fund also may report the percentage of the Fund's standardized or
non-standardized total return that would be paid to taxes annually (at the
applicable federal personal income and capital gains tax rates before redemption
of Fund shares). This proportion may be compared to that of other mutual funds
with similar investment objectives as reported by independent sources.

Each Fund also may advertise its cumulative total return since inception. This
number is calculated using the same formula that is used for average annual
total return except that, rather than calculating the total return based on a
one-year period, cumulative total return is calculated from inception to the
date specified.

YIELD

A Fund's yield refers to the net investment income generated by a hypothetical
investment in the Fund over a specific seven-day period. This net investment
income is then annualized, which means that the net investment income generated
during the seven-day period is assumed to be generated in each seven-day period
over an annual period, and is shown as a percentage of the investment.

EFFECTIVE YIELD

TAX-EQUIVALENT YIELD

The tax-equivalent yield for the Funds is computed by dividing that portion of a
Fund's yield which is tax-exempt by one minus a stated federal and/or state
income tax rate and adding the product to that portion, if any, of the Fund's
yield that is not tax-exempt. (Tax equivalent yields

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assume the payment of federal income taxes at a rate of 39.6% and California
income taxes at a rate of 45.22% and New York income taxes at a rate of 46.43%.)

Yields are one basis upon which investors may compare the Funds with other
funds; however, yields of other funds and other investment vehicles may not be
comparable because of the factors set forth above and differences in the methods
used in valuing portfolio instruments.

The yield of these Funds fluctuates, and the annualization of a week's dividend
is not a representation by the Trust as to what an investment in the Fund
actually will yield in the future. Actual yields will depend on such variables
as asset quality, average asset maturity, the type of instruments the Fund
invests in, changes in interest rates on money market instruments, changes in
the expenses of the Fund and other factors.

GENERAL INFORMATION

The Trust is an open-end investment management company organized as a
Massachusetts business trust on October 20, 1989. Currently, there are thirteen
Funds of the Trust: Schwab Money Market Fund, Schwab Government Money Fund,
Schwab Municipal Money Fund, Schwab U.S. Treasury Money Fund, Schwab Value
Advantage Money Fund(R), Schwab Institutional Advantage Money Fund(R), Schwab
Retirement Money Fund(R), Schwab New York Municipal Money Fund, Schwab
California Municipal Money Fund, Schwab Government Cash Reserves, Schwab
Pennsylvania Municipal Money Fund, Schwab New Jersey Municipal Money Fund and
Schwab Florida Municipal Money Fund. The Declaration of Trust permits the
Trustees to create additional Funds. There is a remote possibility that one Fund
might become liable for a misstatement in the prospectus or SAI about another
Fund. The Trust generally is not required to hold shareholder meetings. However,
as provided in its Agreement and Declaration of Trust and Bylaws, shareholder
meetings will be held in connection with the following matters: (1) election or
removal of Trustees, if a meeting is requested in writing by a shareholder or
shareholders who beneficially own(s) 10% or more of the Trust's shares; (2)
adoption of any contract for which shareholder approval is required by the 1940
Act; (3) any termination of the Trust to the extent and as provided in the
Declaration of Trust; (4) any amendment of the Declaration of Trust (other than
amendments changing the name of the Trust or any of its investment portfolios,
supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision thereof); (5)
determination of whether a court action, proceeding or claim should or should
not be brought or maintained derivatively or as a class action on behalf of the
Trust or the shareholders, to the same extent as the stockholders of a
Massachusetts business corporation; and (6) such additional matters as may be
required by law, the Declaration of Trust, the Bylaws or any registration of the
Trust with the SEC or any state or as the Board of Trustees may consider
desirable. The shareholders also would vote upon changes to a Fund's fundamental
investment objective, policies or restrictions.

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than two-thirds of the Trustees have been elected by the shareholders, that
vacancy will be filled by a vote of the shareholders.

Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for the Trust's
obligations. The Declaration of Trust, however, disclaims shareholder liability
for the Trust's acts or obligations and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. In addition, the Declaration of Trust provides for
indemnification out of the property of an investment portfolio in which a
shareholder owns or owned shares for all losses and expenses of such shareholder
or former shareholder if he or she is held personally liable for the obligations
of the Trust solely by reason of being or having been a shareholder. Moreover,
the Trust will be covered by insurance which the Trustees consider adequate to
cover foreseeable tort claims. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote, because
it is limited to circumstances in which a disclaimer is inoperative and the
Trust itself is unable to meet its obligations.

For further information, please refer to the registration statement and exhibits
for the Trust on file with the SEC in Washington, D.C. and available upon
payment of a copying fee. The statements in the Prospectus and this SAI
concerning the contents of contracts or other documents, copies of which are
filed as exhibits to the registration statement, are qualified by reference to
such contracts or documents.

PRINCIPAL HOLDERS OF SECURITIES

As of April 15, 1998, Igal Lichtman and Michal Lichtman, Livingston, NJ as joint
tenants directly or beneficially owned 5.77% of Schwab Value Advantage Money
Fund(R) - Investor shares. James M. McCormick and Marsha E. McCormack, New
Rochelle, NY as joint tenants

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directly or beneficially owned 5.24% of Schwab New York Municipal Money Fund -
Value Advantage Shares(TM).

In addition, as of April 17, 1998, the officers and Trustees of the Trust, as a
group, owned less than 1% of each Fund's outstanding voting securities.

PURCHASE AND REDEMPTION OF SHARES

The Trust has made an election with the SEC to pay in cash all redemptions
requested by any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of its net assets at the beginning of
such period. This election is irrevocable without the SEC's prior approval.
Redemption requests in excess of the stated limits may be paid, in whole or in
part, in investment securities or in cash, as the Trust's Board of Trustees may
deem advisable; however, payment will be made wholly in cash unless the Board of
Trustees believes that economic or market conditions exist that would make such
a practice detrimental to the best interests of a Fund. If redemption proceeds
are paid in investment securities, such securities will be valued as set forth
in "Share Price Calculation" and a redeeming shareholder would normally incur
brokerage expenses if he or she converted the securities to cash.

OTHER INFORMATION

The Prospectus and SAI do not contain all the information included in the
Registration Statement filed with the SEC under the Securities Act of 1933, as
amended, with respect to the securities offered by the Prospectus. Certain
portions of the Registration Statement have been omitted from the Prospectus and
the SAI pursuant to the rules and regulations of the SEC. The Registration
Statement including the exhibits filed therewith may be examined at the office
of the SEC in Washington, D.C.

Statements contained in the Prospectus or SAI as to the contents of any contract
or other document referred to are not necessarily complete, and in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement of which the Prospectus and SAI form
a part, each such statement being qualified in all respects by such reference.

THIS SAI DOES NOT CONSTITUTE AN OFFERING BY THE TRUST, ANY SERIES THEREOF, OR BY
THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY
MADE.

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APPENDIX - RATINGS OF INVESTMENT SECURITIES

Lower-quality debt securities are sometimes referred to as "junk
bonds," and are considered more speculative and subject to greater risk. Some
junk bonds already may be in default, i.e., failed to meet their interest and/or
principal payment obligations. From time to time, each Fund may report the
percentage of its assets that fall into the rating categories set forth below.

BONDS

MOODY'S INVESTORS SERVICE

Moody's rates the bonds it judges to be of the best quality Aaa. These
bonds carry the smallest degree of investment risk and generally are referred to
as "gilt edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of these issues. Bonds carrying an Aa
designation are deemed to be of high quality by all standards. Together with
Aaa-rated bonds, they comprise what are generally known as high-grade bonds. Aa
bonds are rated lower than the best bonds because they may enjoy relatively
lower margins of protection, fluctuations of protective elements may be of
greater amplitude or there may be other factors present that make them appear to
be subject to somewhat greater long-term risks. A-rated bonds are considered as
upper-medium grade obligations as they possess many favorable investment
attributes. Bonds designated Baa are considered medium grade in that they are
not highly protected nor poorly secured. Interest payments and principal
security appear to be adequate at the present, but they may lack certain
protective elements or be characteristically unreliable over any great length of
time. Baa bonds do not have any outstanding investment characteristics and do
have speculative characteristics.

STANDARD & POOR'S CORPORATION

AAA is the highest rating assigned by S&P to a bond and indicates the
issuer's extremely strong capacity to pay interest and repay principal. An AA
rating denotes a bond whose issuer has a very strong capacity to pay interest
and repay principal and differs from an AAA rating only in small degree. A
ratings are given to debt that has a strong capacity to pay interest and repay
principal but is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than higher-rated debt. BBB debt indicates
the issuer is regarded by S&P as having an adequate capacity to pay interest and
repay principal. These securities appear to have adequate protection, however
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal in this category than in
higher categories.
DUFF & PHELPS CREDIT RATING CO.

Duff confers an AAA designation to bonds of issuers with the highest
credit quality. The risk factors associated with these bonds are negligible,
being only slightly more than for risk-free U.S. Treasury debt. AA rated bonds
are of high credit quality and have strong protection factors. The risks
associated with them are modest but may vary slightly from time to time because
of economic conditions. An A rating indicates that the protection factors are
average but adequate. The risk factors, however, are more variable and greater
in periods of economic stress. BBB-rated debt has protection factors that are
below average but still sufficient for prudent investment. There is considerable
variability in the risk of BBB-rated debt during economic cycles.

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FITCH IBCA

AAA is the highest rating Fitch assigns to bonds, and indicates the
obligor's exceptionally strong ability to pay interest and repay principal.
Bonds that Fitch considers of very high credit quality, and the obligor's
ability to pay interest and repay principal is very strong, although not as
strong as AAA, is rated AA. An A rating is given to show high credit quality and
the issuer's ability to pay interest and repay principal is strong, but there is
more vulnerability to economic conditions and circumstances than higher rated
debt. BBB bonds are considered investment grade, where the issuer has adequate
ability to pay interest and repay principal. Bonds rated BBB are more
susceptible to adverse changes in economic conditions and circumstances, thus
these bonds are more likely to fall below investment grade or have the
timeliness of their payments impaired.

SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS

MOODY'S INVESTORS SERVICE

Short-term notes/variable rate demand obligations bearing the
designations MIG-1/VMIG-1 are considered to be of the best quality, enjoying
strong protection from established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing. Obligations rated
MIG-2/VMIG-3 are of high quality and enjoy ample margins of protection although
not as large as those of the top rated securities.

STANDARD & POOR'S CORPORATION

An S&P SP-1 rating indicates that the subject securities' issuer has a
strong capacity to pay principal and interest. Issues determined to possess very
strong safety characteristics are given a plus (+) designation. S&P's
determination that an issuer has a satisfactory capacity to pay principal and
interest is denoted by an SP-2 rating.

COMMERCIAL PAPER

MOODY'S INVESTORS SERVICE

Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers (or related supporting institutions) of commercial paper with this
rating are considered to have a superior ability to repay short-term promissory
obligations. Issuers (or related supporting institutions) of securities rated
Prime-2 are viewed as having a strong capacity to repay short-term promissory
obligations. This capacity normally will be evidenced by many of the
characteristics of issuers whose commercial paper is rated Prime-1 but to a
lesser degree.

STANDARD & POOR'S CORPORATION

A Standard & Poor's Corporation ("S&P") A-1 commercial paper rating
indicates a strong degree of safety regarding timely payment of principal and
interest. Issues determined to possess overwhelming safety characteristics are
denoted A-1+. Capacity for timely payment on

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commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.

DUFF & PHELPS CREDIT RATING CO.

Duff-1 is the highest commercial paper rating assigned by Duff. Three
gradations exist within this rating category: A Duff-1+ rating indicates the
highest certainty of timely payment (issuer short-term liquidity is found to be
outstanding and safety is deemed to be just below that of risk-free short-term
U.S. Treasury obligations), a Duff-1 rating signifies a very high certainty of
timely payment (issuer liquidity is determined to be excellent and risk factors
are considered minor) and a Duff-1- rating denotes high certainty of timely
payment (issuer liquidity factors are strong and risk is very small). A Duff-2
rating indicates a good certainty of timely payment. Liquidity factors and
company fundamentals are sound and risk factors are small.

FITCH IBCA

F1+ is the highest category, and indicates the strongest degree of
assurance for timely payment. Issues rated F1 reflect an assurance of timely
payment only slightly less than issues rated F1+. Issues assigned an F2 rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues in the first two rating categories.

COMMERCIAL PAPER, SHORT-TERM OBLIGATIONS
AND DEPOSIT OBLIGATIONS ISSUED BY BANKS

THOMSON BANKWATCH (TBW)

TBW-1 is the highest category and indicates the degree of safety
regarding timely repayment of principal and interest is very high. TBW-2 is the
second-highest category and while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1."

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PART C
OTHER INFORMATION
THE CHARLES SCHWAB FAMILY OF FUNDS

Item 24. Financial Statements and Exhibits.

(a) Financial Statements:

(1) Financial statements and financial highlights included in the
Annual Report for Schwab Money Market Fund, Schwab Government
Money Fund and Schwab U.S. Treasury Fund for the fiscal year
ended December 31, 1997, are incorporated by reference into the
SAI, were filed on March 6, 1998, pursuant to Rule 30d-1 under
the Investment Company Act of 1940 ("1940 Act"), and are
incorporated herein by reference.

(2) Financial statements and financial highlights included in the
Annual Report for Schwab Municipal Money Fund - Value Advantage
Shares, Schwab California Municipal Money Fund - Value
Advantage Shares and Schwab New York Municipal Money Fund -
Value Advantage Shares for the fiscal year ended December 31,
1997, are incorporated by reference into the SAI, were filed on
March 6, 1998, pursuant to Rule 30d-1 under the 1940 Act, and
are incorporated herein by reference.

(3) Financial statements and financial highlights included in the
Annual Report for Schwab Municipal Money Fund - Sweep Shares,
Schwab California Municipal Money Fund - Sweep Shares and
Schwab New York Municipal Money Fund - Sweep Shares for the
fiscal year ended December 31, 1997, are incorporated by
reference into the SAI, were filed on March 6, 1998, pursuant
to Rule 30d-1 under the 1940 Act, and are incorporated herein
by reference.

(4) Financial statements and financial highlights included in the
Annual Report for Schwab Value Advantage Money Fund - Investor
Shares for the fiscal year ended December 31, 1997, are
incorporated by reference into the SAI, were filed on March 6,
1998, pursuant to Rule 30d-1 under the 1940 Act, and are
incorporated herein by reference.

(5) Financial statements and financial highlights included in the
Annual Report for Schwab Retirement Money Fund(R) for the
fiscal year ended December 31, 1997, are incorporated by
reference into the SAI, were filed on March 6, 1998, pursuant
to Rule 30d-1 under the 1940 Act, and are incorporated herein
by reference.

(6) Financial statements and financial highlights included in the
Annual Report for Schwab Institutional Advantage Money Fund(R)
for the fiscal year ended December 31, 1997, are incorporated
by reference into the SAI, were filed on March 6, 1998,
pursuant to Rule 30d-1 under the 1940 Act, and are incorporated
herein by reference.

(b) Exhibits:

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(1) Amended and Restated Agreement and Declaration of Trust to
Registrant's Registration Statement on Form N-1A,dated May 9, 1995,
was electronically filed and is incorporated by reference to Exhibit
(1) to Post-Effective Amendment No. 33.

(2) Amended and Restated By-Laws are incorporated by reference to
Exhibit (2) to Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A, electronically filed on March
29, 1996.

(3) Inapplicable.

(4) (a) Article III, Sections 4 and 5; Article IV, Section 1; Article
V; Article VI, Section 2; Article VIII, Section 4; and Article
IX, Sections 1, 4 and 7 of the Agreement and Declaration of
Trust are incorporated by reference to Exhibit (1) above.

(b) Article 9 and Article 11 of the By-Laws are incorporated by
reference to Exhibit (2) above.

(5) (a) Investment Advisory and Administration Agreement between
Registrant and Charles Schwab Investment Management, Inc. (the
"Investment Manager") with respect to Schwab Money Market
Fund, Schwab Government Money Fund and Schwab Municipal Money
Fund, dated May 1, 1997, was electronically filed and is
incorporated herein by reference to Exhibit 5(a) to
Post-Effective Amendment No. 29.

(b) Schedule A to the Investment Advisory and Administration
Agreement between Registrant and Charles Schwab Investment
Management, Inc. (the "Investment Manager") with respect to
Schwab Money Market Fund, Schwab Government Money Fund and
Schwab Municipal Money Fund was electronically filed and is
incorporated herein by reference to Exhibit 5(b) to
Post-Effective Amendment No. 27.

(c) Schedule B to the Investment Advisory and Administration
Agreement between Registrant and Charles Schwab Investment
Management, Inc. (the "Investment Manager") with respect to
Schwab Money Market Fund, Schwab Government Money Fund and
Schwab Municipal Money Fund was electronically filed and is
incorporated herein by reference to Exhibit 5(c) to
Post-Effective Amendment No. 27.

(d) Investment Advisory and Administration Agreement between
Registrant and the Investment Manager, dated June 15, 1994,
was electronically filed and is incorporated herein by
reference to Exhibit (5)(d) to Post-Effective Amendment No.
27.

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(e) Schedule A to the Investment Advisory and Administration
Agreement between Registrant and the Investment Manager with
respect to Schwab California Municipal Money Fund, Schwab U.S.
Treasury Money Fund, Schwab Value Advantage Money Fund, Schwab
Institutional Advantage Money Fund(R), Schwab Retirement Money
Fund(R), Schwab New York Municipal Money Fund, Schwab
Government Cash Reserves Fund, Schwab New Jersey Municipal
Money Fund, Schwab Pennsylvania Municipal Money Fund and
Schwab Florida Municipal Money Fund, is electronically filed
herewith as Exhibit (5)(e).

(f) Schedule B to the Investment Advisory and Administration
Agreement between Registrant and the Investment Manager, dated
June 15, 1994, was electronically filed and is incorporated
herein by reference to Exhibit (5)(f) to Post-Effective
Amendment No. 27.

(g) Schedule C to the Investment Advisory and Administration
Agreement between Registrant and the Investment Manager with
respect to Schwab California Municipal Money Fund, Schwab U.S.
Treasury Money Fund, Schwab Value Advantage Money Fund, Schwab
Institutional Advantage Money Fund(R), Schwab Retirement Money
Fund(R), Schwab New York Municipal Money Fund, Schwab New
Jersey Municipal Money Fund and Schwab Pennsylvania Municipal
Money Fund, dated June 15, 1994, was electronically filed and
is incorporated herein by reference to Exhibit (5)(g) to
Post-Effective Amendment No. 27.

(h) Schedule D to the Investment Advisory and Administration
Agreement between Registrant and the Investment Manager with
respect to Schwab California Municipal Money Fund, Schwab U.S.
Treasury Money Fund, Schwab Value Advantage Money Fund, Schwab
Institutional Advantage Money Fund(R), Schwab Retirement Money
Fund(R), Schwab New York Municipal Money Fund, Schwab New
Jersey Municipal Money Fund, and Schwab Pennsylvania Municipal
Money Fund, dated June 15, 1994, was electronically filed and
is incorporated by reference to Exhibit (5)(h) to
Post-Effective Amendment No. 33.

(i) Form of Schedule D to the Investment Advisory and
Administration Agreement between Registrant and the Investment
Manager with respect to Schwab California Municipal Money
Fund, Schwab U.S. Treasury Money Fund, Schwab Value Advantage
Money Fund, Schwab Institutional Advantage Money Fund(R),
Schwab Retirement Money Fund(R), Schwab New York Municipal
Money Fund, Schwab New Jersey Municipal Money Fund, Schwab
Pennsylvania Municipal Money Fund and Schwab Florida Municipal
Money Fund, dated June 15, 1994, was electronically filed and
is incorporated by reference to Exhibit (5)(h) to
Post-Effective Amendment No. 33.

(6) (a) Distribution Agreement between Registrant and Charles Schwab &
Co., Inc. ("Schwab"), dated June 15, 1994, to Registrant's
Registration Statement on Form N-1A, was electronically filed
and is incorporated by reference to Exhibit (6)(a) to
Post-Effective Amendment No. 33.

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(b) Schedule A to the Distribution Agreement between Registrant
and Schwab is electronically filed herewith as Exhibit (6)(b).

(7) Inapplicable.

(8) (a) Accounting Services Agreement between Registrant and PFPC Inc.
(formerly, Provident Financial Processing Corporation) dated
April 8, 1991 to Registrant's Registration Statement on Form
N-1A, was electronically filed and is incorporated by
reference to Exhibit (8)(a) to Post-Effective Amendment No.
33.

(b) Schedule B to the Accounting Services Agreement referred to at
Exhibit (8)(a) is electronically filed herewith as Exhibit
(8)(b).

(c) Amendment Nos. 1 and 2 to the Accounting Services Agreement
referred to at Exhibit (8)(a) above was electronically filed
and is incorporated by reference to Exhibit (8)(d) to
Post-Effective Amendment No. 33.

(d) Amended and Restated Transfer Agency Agreement and Schedule B
between Registrant and Schwab dated June 5, 1995 to
Registrant's Registration Statement on Form N-1A, was
electronically filed and is incorporated by reference to
Exhibit (8)(e) to Post-Effective Amendment No. 33.

(e) Schedule A and Schedule C to the Amended and Restated Transfer
Agency Agreement is electronically filed herewith as Exhibit
(8)(e).

(h) Shareholder Service Agreement between Registrant and Schwab
dated May 1, 1993 to Registrant's Registration Statement on
Form N-1A, was electronically filed and is incorporated by
reference to Exhibit (8)(h) to Post-Effective Amendment No.
33.

(i) Schedules A, B, and C to the Shareholder Service Agreement
between Registrant and Schwab referred to at Exhibit (8)(h)
above to Registrant's Registration Statement on Form N-1A, was
electronically filed and is incorporated by reference to
Exhibit (8)(I) to Post-Effective Amendment No. 33.

(j) Form of Schedules A and C to the Shareholder Service Agreement
is electronically filed herewith as Exhibit (8)(j).

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(k) Custodian Services Agreement between Registrant and PNC Bank,
N.A. (formerly, Provident National Bank) dated April 8, 1991
to Registrant's Registration Statement on Form N-1A, was
electronically filed and is incorporated by reference to
Exhibit (8)(k) to Post-Effective Amendment No. 33.

(l) Schedule A to the Custodian Services Agreement is
electronically filed herewith as Exhibit (8)(l).

(n) Amendment Nos. 1 and 2 to the Custodian Services Agreement
referred to at Exhibit (8)(k) above was electronically filed
and is incorporated by reference to Exhibit (8)(n) to
Post-Effective Amendment No. 33.

(9) Inapplicable.

(10) (a) Inapplicable.

(b) Opinion of Counsel as to legality of the securities being
registered is electronically filed herewith as Exhibit
(10)(b).

(11) (a) Consent of Price Waterhouse LLP is electronically filed
herewith as Exhibit (11)(a).

(b) Inapplicable.

(12) Inapplicable.

(13) (a) Purchase Agreement between Registrant and Schwab relating to
the Schwab U.S. Treasury Money Fund to Registrant's
Registration Statement on Form N-1A, was electronically filed
and is incorporated by reference to Exhibit (13)(a) to
Post-Effective Amendment No. 33.

(b) Purchase Agreement between Registrant and Schwab relating to
the Schwab Value Advantage Money Fund to Registrant's
Registration Statement on Form N-1A, was electronically filed
and is incorporated by reference to Exhibit (13)(b) to
Post-Effective Amendment No. 33.

(c) Purchase Agreement between Registrant and Schwab relating to
the Schwab Retirement Money Fund(R) and the Schwab
Institutional Advantage Money Fund(R) to Registrant's
Registration Statement on Form N-1A, was electronically filed
and is incorporated by reference to Exhibit (13)(c) to
Post-Effective Amendment No. 33.

(d) Purchase Agreement between Registrant and Schwab relating to
the Schwab New York Municipal Money Fund to Registrant's
Registration Statement on Form N-1A, was electronically filed
and is incorporated by reference to Exhibit (13)(d) to
Post-Effective Amendment No. 33.

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(e) Purchase Agreement between Registrant and Schwab relating to
the Schwab Municipal Money Fund-Value Advantage Shares to
Registrant's Registration Statement on Form N-1A, was
electronically filed and is incorporated by reference to
Exhibit (13)(e) to Post-Effective Amendment No. 33.

(f) Purchase Agreement between Registrant and Schwab relating to
the Schwab California Municipal Money Fund-Value Advantage
Shares to Registrant's Registration Statement on Form N-1A,
was electronically filed and is incorporated by reference to
Exhibit (13)(f) to Post-Effective Amendment No. 33.

(g) Purchase Agreement between Registrant and Schwab relating to
the Schwab New York Municipal Money Fund-Value Advantage
Shares to Registrant's Registration Statement on Form N-1A,
was electronically filed and is incorporated by reference to
Exhibit (13)(g) to Post-Effective Amendment No. 33.

(h) Purchase Agreement between Registrant and Schwab relating to
the Schwab Government Cash Reserves Fund is electronically
filed herewith as Exhibit (13)(h).

(i) Purchase Agreement between Registrant and Schwab relating to
the Schwab New Jersey Municipal Money Fund was electronically
filed and is incorporated by reference to Exhibit (13)(i) to
Post-Effective Amendment No. 33.

(j) Purchase Agreement between Registrant and Schwab relating to
the Schwab Pennsylvania Municipal Money Fund was
electronically filed and is incorporated by reference to
Exhibit (13)(j) to Post-Effective Amendment No. 33.

(k) Purchase Agreement between Registrant and Schwab relating to
the Schwab Florida Municipal Money Fund is electronically
filed herewith as Exhibit (13)(k).

(14) (a) Model Charles Schwab & Co., Inc. Individual Retirement Plan is
incorporated by reference to Exhibit (14)(a) to Post-Effective
Amendment No. 14 to Registrant's Registration Statement on
Form N-1A, filed on August 25, 1995.

(b) Model Charles Schwab & Co., Inc. KEOGH Plan is incorporated by
reference to Exhibit (14)(b) to Post-Effective Amendment No.
14 to Registrant's Registration Statement on Form N-1A, filed
on August 25, 1995.

(15) Inapplicable.

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(16) (a) Performance Calculations for Schwab Money Market Fund, Schwab
Government Money Fund, Schwab Municipal Money Fund, Schwab
California Municipal Money Fund and Schwab U.S. Treasury Money
Fund are incorporated by reference to Exhibit (16) to
Post-Effective Amendment No. 6 to Registrant's Registration
Statement on Form N-1A, filed on March 3, 1992.

(b) Performance Calculations for Schwab Value Advantage Money Fund
are incorporated by reference to Exhibit (16) to
Post-Effective Amendment No. 7 to Registrant's Registration
Statement on Form N-1A, filed on August 7, 1992.

(c) Performance Calculations for Schwab Institutional Advantage
Money Fund(R) and Schwab Retirement Money Fund(R) are
incorporated by reference to Exhibit (16) to Post-Effective
Amendment No. 17 to Registrant's Registration Statement on
Form N-1A, filed on April 6, 1995.

(d) Performance Calculations for Schwab New York Municipal Money
Fund-Sweep Shares are incorporated by reference to Exhibit
(16)(d) to Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A, filed on August 25, 1995.

(17) (a) Financial Data Schedule for Schwab Money Market Fund is
electronically filed herein as Exhibit (17)(a).

(b) Financial Data Schedule for Schwab Government Money Fund is
electronically filed herein as Exhibit (17)(b).

(c) Financial Data Schedule for Schwab Municipal Money Fund-Sweep
Shares is electronically filed herein as Exhibit (17)(c).

(d) Financial Data Schedule for Schwab Municipal Money Fund-Value
Advantage Shares is electronically filed herein as Exhibit
(17)(d).

(e) Financial Data Schedule for Schwab California Municipal Money
Fund-Sweep Shares is electronically filed herein as Exhibit
(17)(e).

(f) Financial Data Schedule for Schwab California Municipal Money
Fund-Value Advantage Shares is electronically filed herein as
Exhibit (17)(f).

(g) Financial Data Schedule for Schwab U.S. Treasury Money Fund is
electronically filed herein as Exhibit (17)(g).

(h) Financial Data Schedule for Schwab Value Advantage Money
Fund-Investor Shares is electronically filed herein as Exhibit
(17)(h).

(i) Financial Data Schedule for Schwab Institutional Advantage
Money Fund(R) is electronically filed herein as Exhibit
(17)(i).

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(j) Financial Data Schedule for Schwab Retirement Money Fund(R) is
electronically filed herein as Exhibit (17)(j).

(k) Financial Data Schedule for Schwab New York Municipal Money
Fund-Sweep Shares is electronically filed herein as Exhibit
(17)(k).

(l) Financial Data Schedule for Schwab New York Municipal Money
Fund-Value Advantage Shares is electronically filed herein as
Exhibit (17)(l).

(18) (a) Form of Amended and Restated Multiple Class Plan of Registrant
and Schedule A are incorporated by reference to Exhibit (18)
to Post-Effective Amendment No. 25 to Registrant's
Registration Statement on Form N-1A, filed on February 21,
1997.

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Item 25. Persons Controlled by or under Common Control with Registrant.

Schwab Investments, Schwab Capital Trust, and Schwab Annuity Portfolios each are
Massachusetts business trusts registered under the Investment Company Act of
1940, as amended (the "1940 Act"); are advised by the Investment Manager; and
employ Schwab as their principal underwriter, transfer agent and shareholder
services agent. As a result, Schwab Investments, Schwab Capital Trust, and
Schwab Annuity Portfolios may be deemed to be under common control with
Registrant.

Item 26. Number of Holders of Securities.

As of April 15, 1998, the number of record holders of shares of beneficial
interest for the series of Registrant was:

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
- -------------- ------------------------
<S> <C>
Schwab Money Market Fund 1 (for the benefit of 2,332,902)
Schwab Government Money Fund 1 (for the benefit of 125,350)
Schwab U.S. Treasury Money Fund 1 (for the benefit of 68,327)
Schwab Municipal Money Fund-Sweep Shares 1 (for the benefit of 147,233)
Schwab Municipal Money Fund-Value Advantage Shares 1 (for the benefit of 4,885)
Schwab California Municipal Money Fund-Sweep Shares 1 (for the benefit of 60,246)
Schwab California Municipal Money Fund-Value Advantage Shares 1 (for the benefit of 3,876)
Schwab Value Advantage Money Fund-Investor Shares 1 (for the benefit of 68,327)
Schwab Retirement Money Fund(R) 1 (for the benefit of 1,007)
Schwab Value Advantage Money Fund-Sweep Shares 0 (for the benefit of 0)
Schwab Institutional Advantage Money Fund(R) 1 (for the benefit of 535)
Schwab New York Municipal Money Fund-Sweep Shares 1 (for the benefit of 13,412)
Schwab New York Municipal Money Fund-Value Advantage Shares 1 (for the benefit of 852)
Schwab Government Cash Reserves Fund 1 (for the benefit of 6)
Schwab New Jersey Municipal Money Fund 1 (for the benefit of 933)
Schwab Pennsylvania Municipal Money Fund 1 (for the benefit of 473)
Schwab Florida Municipal Money Fund 1 (for the benefit of 5,486)
</TABLE>

Item 27. Indemnification.

Article VIII of Registrant's Amended and Restated Agreement and Declaration of
Trust (Exhibit (1) hereto, which is incorporated herein by reference) provides
in effect that Registrant will indemnify its officers and trustees against all
liabilities and expenses, including but not limited to amounts paid in
satisfaction of judgments, in compromise, or as fines and penalties, and counsel
fees reasonably incurred by any such officer or trustee in connection with the
defense or disposition of any action, suit, or other proceeding. However, in
accordance with Section 17(h) and 17(i) of the 1940 Act and its own terms, said
Agreement and Declaration of Trust does not protect any person against any
liability to Registrant or its shareholders to which he or she would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
In any event, Registrant will comply with 1940 Act Releases Nos. 7221 and 11330
respecting the permissible boundaries of indemnification by an investment
company of its officers and trustees.

Insofar as indemnification for liability arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant will,

C-9
<PAGE> 166
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.

Item 28. Business and Other Connections of Investment Manager.

(a) Information pertaining to business and other connections of Registrant's
Investment Manager is hereby incorporated by reference to the section of the
Prospectuses for Schwab Money Market Fund, Schwab Government Money Fund, Schwab
U.S. Treasury Money Fund, Schwab Municipal Money Fund-Sweep Shares, Schwab
California Municipal Money Fund-Sweep Shares, Schwab New York Municipal Money
Fund-Sweep Shares, Schwab Institutional Advantage Money Fund(R) and Schwab
Retirement Money Fund(R) captioned "Management of the Fund(s);" the section of
the Prospectuses for Schwab Value Advantage Money Fund, Schwab Municipal Money
Fund-Value Advantage Shares, Schwab California Municipal Money Fund-Value
Advantage Shares and Schwab New York Municipal Money Fund-Value Advantage Shares
captioned "Organization and Management of the Fund(s);" and the section of the
Statements of Additional Information captioned "Management of the Trust."

Registrant's Investment Manager, Charles Schwab Investment Management, Inc., a
Delaware corporation, organized in October 1989 to serve as Investment Manager
to Registrant, also serves as the Investment Manager to Schwab Investments,
Schwab Capital Trust, and Schwab Annuity Portfolios, each an open-end,
management investment company. The principal place of business of the Investment
Manager is 101 Montgomery Street, San Francisco, California 94104. The only
business in which the Investment Manager engages is that of investment manager
and administrator to Registrant, Schwab Investments, Schwab Capital Trust,
Schwab Annuity Portfolios and any other investment companies that Schwab may
sponsor in the future.

(b) The business, profession, vocation or employment of a substantial nature in
which each director and/or executive officer of Schwab and/or the Investment
Manager is or has been engaged during the past two fiscal years for his or her
own account in the capacity of director, officer, employee, partner or trustee
is as follows:

<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- ----------------- --------------- --------
<S> <C> <C>
Charles R. Schwab, Charles Schwab & Co., Inc. Chairman and Director
Chairman and Trustee
The Charles Schwab Corporation Chairman, Co-Chief Executive
Officer and Director

Schwab Holdings, Inc. Chairman, Chief Executive
Officer and Director

Charles Schwab Investment Management, Inc. Chairman and Director

The Charles Schwab Trust Company Chairman and Director

Mayer & Schweitzer, Inc. Chairman and Director

Schwab Retirement Plan Services, Inc. Chairman and Director

Charles Schwab Limited Chairman, Chief Executive
Officer and Director

Performance Technologies, Inc. Chairman and Director

TrustMark, Inc. Chairman and Director
</TABLE>

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<PAGE> 167
<TABLE>
<S> <C> <C>
Schwab (SIS) Holdings, Inc. I Chairman, Chief Executive
Officer and Director

Schwab International Holdings, Inc. Chairman, Chief Executive
Officer and Director

The Gap, Inc. Director

Transamerica Corporation Director

AirTouch Communications Director

Siebel Systems Director

David S. Pottruck Charles Schwab & Co., Inc. Chief Executive Officer,
President, Chief Operating
Officer and Director

The Charles Schwab Corporation President, Co-Chief Executive
Officer, Chief Operating
Officer and Director

Schwab Holdings, Inc. Director

Schwab Retirement Plan Services, Inc. Director

Charles Schwab Limited Director

Charles Schwab Investment Management, Inc. Director

Mayer & Schweitzer, Inc. Director

Performance Technologies, Inc. Director

Schwab (SIS) Holdings, Inc. I President, Chief Operating
Officer and Director

Schwab International Holdings, Inc. President, Chief Operating
Officer and Director

TrustMark, Inc. Director
Steven L. Scheid Charles Schwab & Co., Inc. Executive Vice President, Chief
Financial Officer and Director

The Charles Schwab Corporation Executive Vice President and
Chief Financial Officer

Schwab Holdings, Inc. Executive Vice President, Chief
Financial Officer and Director

Charles Schwab Investment Management, Inc. Chief Financial Officer and
Director
</TABLE>

C-11
<PAGE> 168
<TABLE>
<S> <C> <C>
The Charles Schwab Trust Company Chief Financial Officer and
Director

Charles Schwab Limited Finance Officer and Director

Schwab Retirement Plan Services, Inc. Director

Performance Technologies, Inc. Director

Mayer & Schweitzer, Inc. Director

Schwab (SIS) Holdings, Inc. I Chief Financial Officer and
Director

Schwab International Holdings, Inc. Chief Financial Officer and
Director

Tom D. Seip Charles Schwab & Co., Inc. Enterprise President

The Charles Schwab Corporation Executive Vice President

Charles Schwab Investment Management, Inc. Chief Executive Officer

Karen W. Chang Charles Schwab & Co., Inc. Enterprise President

John P. Coghlan Charles Schwab & Co., Inc. Enterprise President

The Charles Schwab Corporation Executive Vice President

The Charles Schwab Trust Company President, Chief Executive
Officer and Director

Schwab Retirement Plan Services, Inc. Director

Frances Cole, Charles Schwab Investment Management, Inc. Senior Vice President, Chief
Secretary Counsel, Chief Compliance Officer
and Assistant Corporate Secretary

Linnet F. Deily Charles Schwab & Co., Inc. Enterprise President

Christopher V. Dodds Charles Schwab & Co., Inc. Controller and Senior Vice
President

The Charles Schwab Corporation Controller and Senior Vice
President

Carrie Dwyer Charles Schwab & Co., Inc. Executive Vice President, General
Corporate Secretary Counsel

Wayne W. Fieldsa Charles Schwab & Co., Inc. Executive Vice President

Lon Gorman Charles Schwab & Co., Inc. Enterprise President
</TABLE>

C-12
<PAGE> 169
<TABLE>
<S> <C> <C>
James M. Hackley Charles Schwab & Co., Inc. Executive Vice President

Cynthia K. Holbrook The Charles Schwab Corporation Assistant Corporate Secretary

Charles Schwab & Co., Inc. Assistant Corporate Secretary

Charles Schwab Investment Management, Inc. Corporate Secretary

The Charles Schwab Trust Company Assistant Corporate Secretary

Mayer & Schweitzer Secretary

Colleen M. Hummer Charles Schwab & Co., Inc. Senior Vice President

William J. Klipp, Charles Schwab & Co., Inc. Executive Vice President
Trustee, Executive Vice
President and Chief
Operating Officer

Charles Schwab Investment Management, Inc. President and Chief Operating
Officer

Daniel O. Leemon The Charles Schwab Corporation Executive Vice President and
Chief Strategy Officer

Charles Schwab & Co., Inc. Executive Vice President and
Chief Strategy Officer

Dawn G. Lepore Charles Schwab & Co., Inc. Executive Vice President and
Chief Information Officer

The Charles Schwab Corporation Executive Vice President and
Chief Information Officer

David H. Lui, Charles Schwab Investment Management, Inc. Vice President and Senior Counsel
Assistant Secretary

Susanne D. Lyons Charles Schwab & Co., Inc. Enterprise President

Amy L. Mauk Charles Schwab Investment Management, Inc. Corporate Counsel
Assistant Secretary

Peter J. McIntosh Charles Schwab & Co., Inc. Executive Vice President

Matthew M. O'Toole, Charles Schwab Investment Management, Inc. Corporate Counsel
Assistant Secretary

Gideon Sasson Charles Schwab & Co., Inc. Enterprise President

Karen L. Seaman, Charles Schwab Investment Management, Inc. Corporate Counsel
Assistant Secretary

Leonard Short Charles Schwab & Co., Inc. Executive Vice President
</TABLE>

C-13
<PAGE> 170
<TABLE>
<S> <C> <C>
Lawrence J. Stupski Charles Schwab & Co., Inc. Director until February 1995;
Vice Chairman until August 1994

The Charles Schwab Corporation Vice Chairman and Director; Chief
Operating Officer until March 1994

Mayer & Schweitzer, Inc. Director until February 1995

The Charles Schwab Trust Company Director until December 1996

Tai-Chin Tung, Charles Schwab & Co., Inc. Vice President
Treasurer and Principal
Financial Officer

Charles Schwab Investment Management, Inc. Controller

Robertson Stephens Investment Management, Inc. Controller until 1996

Luis E. Valencia Charles Schwab & Co., Inc. Executive Vice President and
Chief Administrative Officer

The Charles Schwab Corporation Executive Vice President and
Chief Administrative Officer

Commercial Credit Corporation Managing Director until February
1994

Stephen B. Ward, Charles Schwab Investment Management, Inc. Senior Vice President and Chief
Senior Vice President and Investment Officer
Chief Investment Officer
</TABLE>

Item 29. Principal Underwriters.

(a) Schwab acts as principal underwriter and distributor of Registrant's shares.
Schwab currently also acts as principal underwriter for Schwab Investments,
Schwab Capital Trust, Schwab Annuity Portfolios and intends to act as such for
any other investment company which Schwab may sponsor in the future.

(b) See Item 28(b) for information on the officers and directors of Schwab. The
principal business address of Schwab is 101 Montgomery Street, San Francisco,
California 94104.

Item 30. Location of Accounts and Records.

All accounts, books and other documents required to be maintained pursuant to
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
offices of: Registrant (transfer agency and shareholder records); Registrant's
investment manager and administrator, Charles Schwab Investment Management,
Inc., 101 Montgomery Street, San Francisco, California 94104; Registrant's
sub-investment adviser, Dimensional Fund Advisors Inc., 1299 Ocean Avenue, Suite
1100, Santa Monica, California 90401; Registrant's principal underwriter,
Charles Schwab & Co., Inc., 101 Montgomery Street, San Francisco, California
94104; Registrant's Custodian, PNC Bank, National Association, Broad and Market
Streets, Philadelphia, Pennsylvania 19104 (ledgers, receipts and brokerage
orders); Registrant's fund accountants, PFPC, Inc., 400 Bellevue Parkway,
Wilmington, Delaware 19809; or Ropes & Gray, counsel to

C-14
<PAGE> 171
Registrant, 1301 K Street, N.W., Suite 800 East, Washington, D.C. 20005 (minute
books, bylaws and declaration of trust).

Item 31. Management Services.

Not applicable.

Item 32. Undertakings.

(a) Registrant undertakes to call a meeting of Shareholders, at the request of
at least 10% of registrant's outstanding shares, for the purpose of voting upon
the question of removal of a trustee or trustees and to assist in communications
with other Shareholders as required by Section (16) of the 1940 Act.

(b) Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of Registrant's latest Annual Report to Shareholders upon
request and without charge.

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<PAGE> 172
SIGNATURE

Pursuant to the requirements of the Securities Act of 1933, as amended
(the "1933 Act"), and the Investment Company Act of 1940, as amended, Registrant
certifies that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 35 to Registrant's Registration Statement on Form
N-1A pursuant to Rule 485(b) under the 1933 Act and has duly caused this Post
Effective Amendment No. 35 to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Washington, District of Columbia, on
this 28th day of April, 1998.

CHARLES SCHWAB FAMILY OF FUNDS
Registrant

Charles R. Schwab*
Charles R. Schwab, Chairman

Pursuant to the requirements of the 1933 Act, this Post-Effective
Amendment No. 35 to Registrant's Registration Statement on Form N-1A has been
signed below by the following persons in the capacities indicated this 28th day
of April, 1998.

Signature Title

Charles R. Schwab* Chairman and Trustee
- ------------------------------
Charles R. Schwab

Tom D. Seip* President and Trustee
- ------------------------------
Tom D. Seip

William J. Klipp* Executive Vice President,
- ------------------------------
William J. Klipp Chief Operating Officer and Trustee

Donald F. Dorward* Trustee
- ------------------------------
Donald F. Dorward

Robert G. Holmes* Trustee
- ------------------------------
Robert G. Holmes

Donald R. Stephens* Trustee
- ------------------------------
Donald R. Stephens

Michael W. Wilsey* Trustee
- ------------------------------
Michael W. Wilsey

Tai-Chin Tung* Treasurer and Principal Financial Officer
- ------------------------------
Tai-Chin Tung

*By
--------------------------------------
Alan G. Priest, Attorney-In-Fact pursuant to Powers of Attorney filed
previously.

<PAGE> 173
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>

(5)(I) Schedule D-Investment Advisory Agreement Fees

(6)(b) Schedule A-Distribution Agreement.

(8)(b) Schedule B-Accounting Services Agreement.

(8)(e) Schedules A and C-Amended and Restated Transfer Agency Agreements

(8)(j) Form of Schedules A and C-Shareholder Service Agreement

(8)(l) Schedule A- Custodian Services Agreement

(10)(b) Opinion of Counsel

(11)(a) Consent of Price Waterhouse LLP

(17)(a) Financial Data Schedule for Schwab Money Market Fund

(17)(b) Financial Data Schedule for Schwab Government Money Fund

(17)(c) Financial Data Schedule for Schwab Municipal Money Fund-Sweep Shares

(17)(d) Financial Data Schedule for Schwab Municipal Money Fund-Value Advantage Shares

(17)(e) Financial Data Schedule for Schwab California Municipal Money Fund-Sweep Shares

(17)(f) Financial Data Schedule for Schwab California Municipal Money Fund-Value Advantage Shares

(17)(g) Financial Data Schedule for Schwab U.S. Treasury Money Fund

(17)(h) Financial Data Schedule for Schwab Value Advantage Money Fund-Investor Shares

(17)(i) Financial Data Schedule for Schwab Institutional Advantage Money Fund

(17)(j) Financial Data Schedule for Schwab Retirement Money Fund

(17)(k) Financial Data Schedule for Schwab New York Municipal Money Fund-Sweep Shares

(17)(l) Financial Data Schedule for Schwab New York Municipal Money Fund-Value Advantage Shares
</TABLE>

<PAGE> 1
EXHIBIT (5)(I)

SCHEDULE D
INVESTMENT ADVISORY AGREEMENT FEES

THE FEES LISTED BELOW ARE FOR SERVICES PROVIDED UNDER THIS AGREEMENT AND ARE TO
BE ACCRUED DAILY AND PAID MONTHLY IN ARREARS:

<TABLE>
<CAPTION>
FUND DATE
- ---- ----
<S> <C>
SCHWAB CALIFORNIA MUNICIPAL MONEY FUND November 5, 1990

Forty-six one-hundredths of one percent (.46%) of the Schwab California
Municipal Money Fund's average daily net assets not in excess of $1 billion;
forty-one one-hundredths of one percent (.41%) of such net assets over $1
billion but not in excess of $2 billion; and forty one-hundredths of one percent
(.40%) of such net assets over $2 billion.

SCHWAB U.S. TREASURY MONEY FUND November 5, 1991

Forty-six one-hundredths of one percent (.46%) of the Schwab U.S. Treasury Money
Fund's average daily net assets not in excess of $1 billion; forty-one
one-hundredths of one percent (.41%) of such net assets over $1 billion but not
in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such
net assets over $2 billion.

SCHWAB VALUE ADVANTAGE MONEY FUND February 7, 1992

Forty-six one-hundredths of one percent (.46%) of the Schwab Value Advantage
Money Fund's average daily net assets not in excess of $1 billion; forty-five
one-hundredths of one percent (.45%) of such net assets over $1 billion but not
in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net
assets over $3 billion but not in excess of $10 billion; thirty-seven
one-hundredths of one percent (.37%) of such net assets over $10 billion but not
in excess of $20 billion; and thirty-four on hundredths of one percent (.34%) of
such net assets over $20 billion.

SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND November 26, 1993

Forty-six one-hundredths of one percent (.46%) of the Schwab Institutional
Advantage Money Fund's average daily net assets not in excess of $1 billion;
forty-five one-hundredths of one percent (.45%) of such net assets over $1
billion but not in excess of $3 billion; forty one-hundredths of one percent
(.40%) of such net assets over $3 billion but not in excess of $10 billion;
thirty-seven one-hundredths of one percent (.37%) of such net assets over $10
billion but not in excess of $20 billion; and thirty four one-hundredths of one
percent (.34%) of such net assets over $20 billion.

SCHWAB RETIREMENT MONEY FUND November 26, 1993

Forty-six one-hundredths of one percent (.46%) of the Schwab Retirement
</TABLE>
<PAGE> 2

<TABLE>
<S> <C>
Money Fund's average daily net assets not in excess of $1 billion; forty-five
one-hundredths of one percent (.45%) of such net assets over $1 billion but not
in excess of $3 billion; forty one-hundredths of one percent (.40%) of such net
assets over $3 billion but not in excess of $10 billion; thirty-seven
one-hundredths of one percent (.37%) of such net assets over $10 billion but not
in excess of $20 billion; and thirty-four one-hundredths of one percent (.34%)
of such net assets over $20 billion.

SCHWAB NEW YORK MUNICIPAL MONEY FUND November 10, 1994

Forty-six one-hundredths of one percent (.46%) of the Schwab New York Municipal
Money Fund's average daily net assets not in excess of $1 billion; forty-one
one-hundredths of one percent (.41%) of such net assets over $1 billion but not
in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such
net assets over $2 billion.

SCHWAB GOVERNMENT CASH RESERVES FUND October 20, 1997

Forty-six one-hundredths of one percent (.46%) of the Schwab Government Cash
Reserves Fund's average daily net assets not in excess of $1 billion; forty-one
one-hundredths of one percent (.41%) of such net assets over $1 billion but not
in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such
net assets over $2 billion.

SCHWAB NEW JERSEY MUNICIPAL MONEY FUND January 20, 1998

Forty-six one-hundredths of one percent (.46%) of the Schwab New Jersey
Municipal Money Fund's average daily net assets not in excess of $1 billion;
forty-one one-hundredths of one percent (.41%) of such net assets over $1
billion but not in excess of $2 billion; and forty one-hundredths of one percent
(.40%) of such net assets over $2 billion.

SCHWAB PENNSYLVANIA MUNICIPAL MONEY FUND January 20, 1998

Forty-six one-hundredths of one percent (.46%) of the Schwab Pennsylvania
Municipal Money Fund's average daily net assets not in excess of $1 billion;
forty-one one-hundredths of one percent (.41%) of such net assets over $1
billion but not in excess of $2 billion; and forty one-hundredths of one percent
(.40%) of such net assets over $2 billion.

SCHWAB FLORIDA MUNICIPAL MONEY FUND January 20, 1998

Forty-six one-hundredths of one percent (.46%) of the Schwab Florida Municipal
Money Fund's average daily net assets not in excess of $1 billion; forty-one
one-hundredths of one percent (.41%) of such net assets over $1 billion but not
in excess of $2 billion; and forty one-hundredths of one percent (.40%) of such
net assets over $2 billion.
</TABLE>
<PAGE> 3
THE CHARLES SCHWAB FAMILY OF FUNDS

By: /s/ William J. Klipp
------------------------------------
Name: William J. Klipp
Title: Executive Vice President and Chief
Operating Officer

CHARLES SCHWAB & CO., INC.

By: /s/ Colleen M. Hummer
------------------------------------
Name: Colleen M. Hummer
Title: Senior Vice President

<PAGE> 1
EXHIBIT (6)(b)

SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN THE CHARLES SCHWAB FAMILY OF FUNDS AND
CHARLES SCHWAB & CO., INC.
<TABLE>
<CAPTION>
FUND EFFECTIVE DATE
- ---- --------------
<S> <C>
Schwab Money Market Fund December 15, 1989

Schwab Government Money Fund December 15, 1989

Schwab Municipal Money Fund December 15, 1989

Schwab California Municipal Money Fund November 5, 1990
(formerly Schwab California Tax-Exempt Money Fund)

Schwab U.S. Treasury Money Fund November 5, 1991

Schwab Value Advantage Money Fund February 7, 1992

Schwab Institutional Advantage Money Fund November 26, 1993

Schwab Retirement Money Fund November 26, 1993

Schwab New York Municipal Money Fund November 10, 1994
(formerly Schwab New York Tax-Exempt Money Fund)

Schwab Government Cash Reserves Fund October 20, 1997

Schwab New Jersey Municipal Money Fund January 20, 1998

Schwab Pennsylvania Municipal Money Fund January 20, 1998

Schwab Florida Municipal Money Fund February 16, 1998
</TABLE>

THE CHARLES SCHWAB FAMILY OF FUNDS

By: /s/ William J. Klipp
----------------------------------
Name: William J. Klipp
Title: Executive Vice President and
Chief Executive Officer

CHARLES SCHWAB & CO., INC.

By: /s/ Colleen M. Hummer
----------------------------------
Name: Colleen M. Hummer
Title: Senior Vice President

<PAGE> 1
EXHIBIT (8)(b)

SCHEDULE B
ACCOUNTING SERVICES AGREEMENT
<TABLE>
<S> <C>
1. Schwab California Municipal Money Fund November 6, 1990
(formerly Schwab California Tax-Exempt Money Fund)

2. Schwab Money Market Fund April 8, 1991

3. Schwab Government Money Fund April 8, 1991

4. Schwab Municipal Money Fund May 3, 1991
(formerly Tax-Exempt Money Fund)
5. Schwab US Treasury Money Fund November 5, 1991

6. Schwab Value Advantage Money Fund February 7, 1992

7. Schwab Institutional Advantage Money Fund November 26, 1993

8. Schwab Retirement Money Fund November 26, 1993

9. Schwab New York Municipal Money Fund November 8, 1994
(formerly Schwab New York Tax-Exempt Money Fund)

10. Schwab Government Cash Reserves Fund October 20, 1997

11. Schwab New Jersey Municipal Money Fund January 20, 1998

12. Schwab Pennsylvania Municipal Money Fund January 20, 1998

13 Schwab Florida Municipal Money Fund February 16, 1998
</TABLE>

PFPC INC.

By: /s/Joseph T. Gramlich
----------------------------------
Joseph T. Gramlich
Title: Senior Vice President

THE CHARLES SCHWAB FAMILY OF FUNDS

By: /s/William J. Klipp
----------------------------------
William J. Klipp
Title: Executive Vice President and Chief
Operating Officer

<PAGE> 1
EXHIBIT (8)(e)

SCHEDULE A
TRANSFER AGENCY AGREEMENT
<TABLE>
<CAPTION>
NAME OF FUND EFFECTIVE DATE
- ------------ --------------
<S> <C>
A. Sweep Funds
Schwab Money Market Fund May 1, 1993

Schwab Government Money Fund May 1, 1993

Schwab Municipal Money Fund -- Sweep Shares May 1, 1993

Schwab California Municipal Money Fund -- Sweep Shares May 1, 1993
(formerly Schwab California Tax-Exempt Money Fund)

Schwab US Treasury Money Fund May 1, 1993

Schwab New York Municipal Money Fund -- Sweep Shares November 10, 1994
(formerly Schwab New York Tax-Exempt Money Fund)

Schwab Government Cash Reserves Fund October 20, 1997

Schwab New Jersey Municipal Money Fund January 20, 1998

Schwab Pennsylvania Municipal Money Fund January 20, 1998

Schwab Florida Municipal Money Fund February 16, 1998

B. Other Funds
Schwab Value Advantage Money Fund-Investor Shares May 1, 1993

Schwab Institutional Advantage Money Fund May 1, 1993

Schwab Retirement Money Fund November 26, 1993

Schwab Municipal Money Fund -- Value Advantage Shares June 6, 1995

Schwab California Municipal Money Fund -- Value Advantage Shares June 6, 1995
(formerly Schwab California Tax-Exempt Money Fund)

Schwab New York Municipal Money Fund -- Value Advantage Shares June 6, 1995
(formerly Schwab New York Tax-Exempt Money Fund)
</TABLE>

THE CHARLES SCHWAB FAMILY OF FUNDS

By: /s/ William J. Klipp
----------------------------------
Name: William J. Klipp
Title: Executive Vice President and Chief
Operating Officer

CHARLES SCHWAB & CO., INC.

By: /s/ Colleen M. Hummer
----------------------------------
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 2

SCHEDULE C
TRANSFER AGENCY AGREEMENT

The fees listed below are for services provided under this Agreement and are to
be accrued daily and paid monthly in arrears:
<TABLE>
<CAPTION>
FUND FEE
---- ---
<S> <C>
A. Sweep Funds
Schwab Money Market Fund An annual fee, payable monthly, of twenty
five one-hundredths of one percent (.25%) of
the Fund's average daily net assets

Schwab Government Money Fund An annual fee, payable monthly, of twenty
five one-hundredths of one percent (.25%) of
the Fund's average daily net assets

Schwab Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of twenty
five one-hundredths of one percent (.25%) of
the Fund's average daily net assets

Schwab California Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of twenty
(formerly Schwab California Tax-Exempt Money Fund) five one-hundredths of one percent (.25%) of
the Fund's average daily net assets

Schwab US Treasury Money Fund An annual fee, payable monthly, of twenty
five one-hundredths of one percent (.25%) of
the Fund's average daily net assets

Schwab New York Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of twenty
(formerly Schwab New York Tax-Exempt Money Fund) five one-hundredths of one percent (.25%) of
the Fund's average daily net assets

Schwab Government Cash Reserves Fund An annual fee, payable monthly, of twenty
five one-hundredths of one percent (.25%) of
the Fund's average daily net assets

Schwab New Jersey Municipal Money Fund An annual fee, payable monthly, of twenty
five one-hundredths of one percent (.25%) of
the Fund's average daily net assets

Schwab Pennsylvania Municipal Money Fund An annual fee, payable monthly, of twenty
five one-hundredths of one percent (.25%) of
the Fund's average daily net assets
</TABLE>
<PAGE> 3

<TABLE>
<S> <C>
Schwab Florida Municipal Money Fund An annual fee, payable monthly, of twenty
five one-hundredths of one percent (.25%) of
the Fund's average daily net assets

B. Other Funds
Schwab Value Advantage Money Fund An annual fee, payable monthly, of five
one-hundredths of one percent (.05%) of the
Fund's average daily net assets

Schwab Institutional Advantage Money Fund An annual fee, payable monthly, of five
one-hundredths of one percent (.05%) of the
Fund's average daily net assets

Schwab Retirement Money Fund An annual fee, payable monthly, of five
one-hundredths of one percent (.05%) of the
Fund's average daily net assets

Schwab Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of five
one-hundredths of one percent (.05%) of the
Fund's average daily net assets

Schwab California Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of five
(formerly Schwab California Tax-Exempt Money Fund) one-hundredths of one percent (.05%) of the
Fund's average daily net assets

Schwab New York Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of five
(formerly Schwab New York Tax-Exempt Money Fund) one-hundredths of one percent (.05%) of the
Fund's average daily net assets
</TABLE>

THE CHARLES SCHWAB FAMILY OF FUNDS

By: /s/ William J. Klipp
-----------------------------
Name: William J. Klipp
Title: Executive Vice President
and Chief Operating Officer

CHARLES SCHWAB & CO., INC.

By: /s/ Colleen M. Hummer
-----------------------------
Name: Colleen M. Hummer
Title: Senior Vice President

<PAGE> 1
EXHIBIT 8(j)

SCHEDULE A
SHAREHOLDER SERVICES AGREEMENT
<TABLE>
<CAPTION>
FUND EFFECTIVE DATE
- ---- --------------
<S> <C>
A. Sweep Funds
Schwab Money Market Fund May 1, 1993

Schwab Government Money Fund May 1, 1993

Schwab Municipal Money Fund-Sweep Shares May 1, 1993

Schwab California Municipal Money Fund-Sweep Shares May 1, 1993

Schwab US Treasury Money Fund May 1, 1993

Schwab New York Municipal Money Fund-Sweep Shares November 10, 1994

Schwab Government Cash Reserves Fund October 20, 1997

Schwab New Jersey Municipal Money Fund January 20, 1998

Schwab Pennsylvania Municipal Money Fund January 20, 1998

Schwab Florida Municipal Money Fund February 16, 1998

B. Other Funds
Schwab Value Advantage Money Fund-Investor Shares May 1, 1993

Schwab Institutional Advantage Money Fund May 1, 1993

Schwab Retirement Money Fund November 26, 1993

Schwab Municipal Money Fund-Value Advantage Shares June 6, 1995

Schwab California Municipal Money Fund-Value Advantage Shares June 6, 1995

Schwab New York Municipal Money Fund-Sweep Shares-Value Advantage Shares June 6, 1995
</TABLE>

THE CHARLES SCHWAB FAMILY OF FUNDS

By: /s/ William J. Klipp
---------------------------------
Name: William J. Klipp
Title: Executive Vice President and
Chief Operating Officer

CHARLES SCHWAB & CO., INC.
<PAGE> 2
By: /s/ Colleen M. Hummer
---------------------------------
Name: Colleen M. Hummer
Title: Senior Vice President
<PAGE> 3

SCHEDULE C
SHAREHOLDER SERVICES AGREEMENT

The fees listed below are for services provided under this Agreement and are to
be accrued daily and paid monthly in arrears:

<TABLE>
<CAPTION>
FUND FEE
---- ---
<S> <C>
A. Sweep Funds
Schwab Money Market Fund An annual fee, payable monthly, of twenty
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab Government Money Fund An annual fee, payable monthly, of twenty
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of twenty
(formerly Schwab Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab California Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of twenty
(formerly Schwab California Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab US Treasury Money Fund An annual fee, payable monthly, of twenty
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab New York Municipal Money Fund-Sweep Shares An annual fee, payable monthly, of twenty
(formerly Schwab New York Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab Government Cash Reserves Fund An annual fee, payable monthly, of twenty
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab New Jersey Municipal Money Fund An annual fee, payable monthly, of twenty
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab Pennsylvania Municipal Money Fund An annual fee, payable monthly, of twenty
</TABLE>
<PAGE> 4

<TABLE>
<S> <C>
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab Florida Municipal Money Fund An annual fee, payable monthly, of twenty
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

B. Other Funds
Schwab Value Advantage Money Fund-Investor Shares An annual fee, payable monthly, of twenty
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab Institutional Advantage Money Fund An annual fee, payable monthly, of twenty
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab Retirement Money Fund An annual fee, payable monthly, of twenty
one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of twenty
(formerly Schwab Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab California Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of twenty
(formerly Schwab California Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the
Fund's average daily net assets

Schwab New York Municipal Money Fund-Value Advantage Shares An annual fee, payable monthly, of twenty
(formerly Schwab New York Tax-Exempt Money Fund) one-hundredths of one percent (.20%) of the
Fund's average daily net assets
</TABLE>

THE CHARLES SCHWAB FAMILY OF FUNDS

By: /s/ William J. Klipp
----------------------------
Name: William J. Klipp
Title: Executive Vice President and
Chief Operating Officer
<PAGE> 5

CHARLES SCHWAB & CO., INC.

By: /s/ Colleen M. Hummer
----------------------------
Name: Colleen M. Hummer
Title: Senior Vice President

<PAGE> 1
EXHIBIT (8)(l)

SCHEDULE A
CUSTODIAN SERVICES AGREEMENT

<TABLE>
<S> <C>
1. Schwab California Municipal Money Fund November 6, 1990
(formerly Schwab California Tax-Exempt Money Fund)

2. Schwab Money Market Fund April 8, 1991

3. Schwab Government Money Fund April 8, 1991

4. Schwab Municipal Money Fund May 3, 1991

5. Schwab US Treasury Money Fund November 5, 1991

6. Schwab Value Advantage Money Fund February 7, 1992

7. Schwab Institutional Money Fund November 26, 1993

8. Schwab Retirement Money Fund November 26, 1993

9. Schwab New York Municipal Money Fund November 8, 1994
(formerly Schwab New York Tax-Exempt Money Fund)

10. Schwab Government Cash Reserves Fund October 20, 1997

11. Schwab New Jersey Municipal Money Fund January 20, 1998

12. Schwab Pennsylvania Municipal Money Fund January 20, 1998

13. Schwab Florida Municipal Money Fund February 16, 1998
</TABLE>

PFPC INC.

By: /s/ Joseph T. Gramlich
--------------------------------------
Joseph T. Gramlich
Title: Senior Vice President

THE CHARLES SCHWAB FAMILY OF FUNDS

By: /s/ William J. Klipp
--------------------------------------
William J. Klipp
Title: Executive Vice President and Chief
Operating Officer

<PAGE> 1
EXHIBIT 10(b)

April 28, 1998

The Charles Schwab Family of Funds
c/o Charles Schwab Investment
Management, Inc.
101 Montgomery Street
San Francisco, California 94104

Gentlemen:

You have registered under the Securities Act of 1933, as amended (the
"1933 Act") an indefinite number of shares of beneficial interest ("Shares) of
The Charles Schwab Family of Funds ("Trust"), as permitted by Rule 24f-2 under
the Investment Company Act of 1940, as amended (the "1940 Act"). You propose to
file a post-effective amendment on Form N-1A (the "Post Effective Amendment") to
your Registration Statement as required by Section 10(a)(3) of the 1933 Act and
the Rules thereunder and Section 8(b) of the 1940 Act and the rules thereunder.

We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston. We have also examined a copy of your Bylaws and such other
documents, receipts and records as we have deemed necessary for the purpose of
this opinion.

Based upon the foregoing, we are of the opinion that the issue and sale
of the authorized but unissued Shares of the Trust have been duly authorized
under Massachusetts law. Upon the originals issue and sale of your authorized
but unissued Shares of the Trust and upon receipt of the authorized
consideration therefor in an amount not less than the net asset value of the
Shares of the Trust established and in force at the time of their sale (plus
any applicable sales charge), the Shares of the Trust issued will be validly
issued, fully paid and non-assessable.

The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust provides for indemnification
out of the property of a particular series of shares for all loss and expenses
of any shareholder of that series held personally liable solely by reason of
his being or having been a shareholder. Thus, the risk of shareholder liability
is limited to circumstances in which that series of shares itself would be
unable to meet its obligations.

We understand that this opinion is to be used in connection with the
filing of the Post-Effective Amendment. We consent to the filing of this
opinion with and as part of your Post-Effective Amendment.

Sincerely,

/s/ Ropes & Gray

Ropes & Gray

<PAGE> 1
EXHIBIT (11)(a)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting part of this Post-Effective
Amendment No. 35 to the registration statement on Form N-1A (the "Registration
Statement") of The Charles Schwab Family of Funds of our reports dated January
30, 1998, relating to the financial statements and financial highlights
appearing in the December 31, 1997 Annual Reports to Shareholders of Schwab
Money Market Fund, Schwab Government Money Fund, Schwab U.S. Treasury Money
Fund, Schwab Value Advantage Money Fund, Schwab Municipal Money Fund, Schwab
California Municipal Money Fund, Schwab New York Municipal Money Fund, Schwab
Institutional Advantage Money Fund and Schwab Retirement Money Fund, which are
also incorporated by reference into the Registration Statement. We also consent
to the reference to us under the heading "Financial Highlights" in such
Prospectuses and to the reference to us under the heading "Accountants and
Reports to Shareholders" in such Statement of Additional Information.

/s/ Price Waterhouse LLP

Price Waterhouse LLP
San Francisco, California
April 29, 1998

<PAGE> 1
Exhibit (17)(a)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 1
[NAME] SCHWAB MONEY MARKET FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 18099442
[INVESTMENTS-AT-VALUE] 18099442
[RECEIVABLES] 95770
[ASSETS-OTHER] 246
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 18195458
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 111787
[TOTAL-LIABILITIES] 111787
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 18084007
[SHARES-COMMON-STOCK] 18084007
[SHARES-COMMON-PRIOR] 14010737
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (336)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 18083671
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 885054
[OTHER-INCOME] 0
[EXPENSES-NET] 119663
[NET-INVESTMENT-INCOME] 765391
[REALIZED-GAINS-CURRENT] 14
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 765405
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 765391
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 50575596
[NUMBER-OF-SHARES-REDEEMED] 47235885
[SHARES-REINVESTED] 733559
[NET-CHANGE-IN-ASSETS] 4073270
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (350)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 65520
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 142188
[AVERAGE-NET-ASSETS] 15955087
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(b)

[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 2
[NAME] SCHWAB GOVERNMENT MONEY FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 1985431
[INVESTMENTS-AT-VALUE] 1985431
[RECEIVABLES] 13777
[ASSETS-OTHER] 52
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1999260
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 12398
[TOTAL-LIABILITIES] 12398
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1987318
[SHARES-COMMON-STOCK] 1987318
[SHARES-COMMON-PRIOR] 1884838
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (456)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1986862
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 107152
[OTHER-INCOME] 0
[EXPENSES-NET] 14666
[NET-INVESTMENT-INCOME] 92486
[REALIZED-GAINS-CURRENT] (187)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 92299
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 92486
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4805031
[NUMBER-OF-SHARES-REDEEMED] 4793775
[SHARES-REINVESTED] 91224
[NET-CHANGE-IN-ASSETS] 102293
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (269)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 8518
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 17931
[AVERAGE-NET-ASSETS] 1955610
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.04
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.04
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.74
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(c)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 3
[NAME] SCHWAB MUNICIPAL MONEY FUND-SWEEP SHARES
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-31-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 4653310
[INVESTMENTS-AT-VALUE] 4653310
[RECEIVABLES] 39554
[ASSETS-OTHER] 329
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 4693193
[PAYABLE-FOR-SECURITIES] 194494
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 21700
[TOTAL-LIABILITIES] 216194
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 3871203
[SHARES-COMMON-STOCK] 3871203
[SHARES-COMMON-PRIOR] 3405684
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2325)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 3868878
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 128912
[OTHER-INCOME] 0
[EXPENSES-NET] 24000
[NET-INVESTMENT-INCOME] 104911
[REALIZED-GAINS-CURRENT] (477)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 104434
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 104911
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 12710212
[NUMBER-OF-SHARES-REDEEMED] 12347201
[SHARES-REINVESTED] 102508
[NET-CHANGE-IN-ASSETS] 465042
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1847)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 15180
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 32633
[AVERAGE-NET-ASSETS] 3636389
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(d)

[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 4
[NAME] SCHWAB MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 4653310
[INVESTMENTS-AT-VALUE] 4653310
[RECEIVABLES] 39554
[ASSETS-OTHER] 329
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 4693193
[PAYABLE-FOR-SECURITIES] 194494
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 21700
[TOTAL-LIABILITIES] 216194
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 608121
[SHARES-COMMON-STOCK] 608121
[SHARES-COMMON-PRIOR] 160683
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 608121
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 13542
[OTHER-INCOME] 0
[EXPENSES-NET] 1713
[NET-INVESTMENT-INCOME] 11830
[REALIZED-GAINS-CURRENT] (40)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 11790
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 11830
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 994884
[NUMBER-OF-SHARES-REDEEMED] 557136
[SHARES-REINVESTED] 9691
[NET-CHANGE-IN-ASSETS] 447438
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1588
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2871
[AVERAGE-NET-ASSETS] 380638
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(e)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 5
[NAME] SCHWAB CALIFORNIA MUNICIPAL MONEY FUND-SWEEP SHARES
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 2318941
[INVESTMENTS-AT-VALUE] 2318941
[RECEIVABLES] 19905
[ASSETS-OTHER] 158
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 2339004
[PAYABLE-FOR-SECURITIES] 1300
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 14106
[TOTAL-LIABILITIES] 15406
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1816835
[SHARES-COMMON-STOCK] 1816835
[SHARES-COMMON-PRIOR] 1578359
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (732)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1816103
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 56750
[OTHER-INCOME] 0
[EXPENSES-NET] 10800
[NET-INVESTMENT-INCOME] 45951
[REALIZED-GAINS-CURRENT] (68)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 45893
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 45951
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5448674
[NUMBER-OF-SHARES-REDEEMED] 5255105
[SHARES-REINVESTED] 44907
[NET-CHANGE-IN-ASSETS] 238407
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (664)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7231
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 15264
[AVERAGE-NET-ASSETS] 1661488
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.65
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(f)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 6
[NAME] SCHWAB CALIFORNIA MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 2318941
[INVESTMENTS-AT-VALUE] 2318941
[RECEIVABLES] 19905
[ASSETS-OTHER] 158
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 2339004
[PAYABLE-FOR-SECURITIES] 1300
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 14106
[TOTAL-LIABILITIES] 15406
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 507495
[SHARES-COMMON-STOCK] 507495
[SHARES-COMMON-PRIOR] 108008
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 507495
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10469
[OTHER-INCOME] 0
[EXPENSES-NET] 1372
[NET-INVESTMENT-INCOME] 9096
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 9086
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 9096
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 782260
[NUMBER-OF-SHARES-REDEEMED] 389977
[SHARES-REINVESTED] 7206
[NET-CHANGE-IN-ASSETS] 399488
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1325
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2349
[AVERAGE-NET-ASSETS] 304915
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(g)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 7
[NAME] SCHWAB U.S. TREASURY MONEY FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 1403749
[INVESTMENTS-AT-VALUE] 1403749
[RECEIVABLES] 26251
[ASSETS-OTHER] 38
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1430038
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8366
[TOTAL-LIABILITIES] 8366
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1421929
[SHARES-COMMON-STOCK] 1421929
[SHARES-COMMON-PRIOR] 1193821
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (257)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1421672
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 67729
[OTHER-INCOME] 0
[EXPENSES-NET] 8279
[NET-INVESTMENT-INCOME] 59450
[REALIZED-GAINS-CURRENT] (125)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 59325
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 59325
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3744370
[NUMBER-OF-SHARES-REDEEMED] 3572884
[SHARES-REINVESTED] 56622
[NET-CHANGE-IN-ASSETS] 227983
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (132)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 5722
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 11937
[AVERAGE-NET-ASSETS] 1273735
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.73
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(h)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 8
[NAME] SCHWAB VALUE ADVANTAGE MONEY FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 10511689
[INVESTMENTS-AT-VALUE] 10511689
[RECEIVABLES] 135460
[ASSETS-OTHER] 162
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 10647311
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 170774
[TOTAL-LIABILITIES] 170774
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 10476662
[SHARES-COMMON-STOCK] 10476662
[SHARES-COMMON-PRIOR] 6924021
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (125)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 10476537
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 485244
[OTHER-INCOME] 0
[EXPENSES-NET] 35048
[NET-INVESTMENT-INCOME] 450196
[REALIZED-GAINS-CURRENT] 6
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 450202
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 450196
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 14542131
[NUMBER-OF-SHARES-REDEEMED] 11395029
[SHARES-REINVESTED] 405539
[NET-CHANGE-IN-ASSETS] 3552647
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (131)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 36748
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 61188
[AVERAGE-NET-ASSETS] 8761913
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.40
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(i)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 9
[NAME] SCHWAB INSTITUTIONAL MONEY FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 153678
[INVESTMENTS-AT-VALUE] 153678
[RECEIVABLES] 2227
[ASSETS-OTHER] 34
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 155939
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 16918
[TOTAL-LIABILITIES] 16918
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 139024
[SHARES-COMMON-STOCK] 139024
[SHARES-COMMON-PRIOR] 80747
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 139021
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 6218
[OTHER-INCOME] 0
[EXPENSES-NET] 562
[NET-INVESTMENT-INCOME] 5656
[REALIZED-GAINS-CURRENT] (2)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 5654
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5656
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 369135
[NUMBER-OF-SHARES-REDEEMED] 315013
[SHARES-REINVESTED] 4155
[NET-CHANGE-IN-ASSETS] 58275
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 517
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 991
[AVERAGE-NET-ASSETS] 112391
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.50
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(j)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 10
[NAME] SCHWAB RETIREMENT MONEY FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 130261
[INVESTMENTS-AT-VALUE] 130261
[RECEIVABLES] 7702
[ASSETS-OTHER] 37
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 138000
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1681
[TOTAL-LIABILITIES] 1681
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 136320
[SHARES-COMMON-STOCK] 136320
[SHARES-COMMON-PRIOR] 98992
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 136319
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 6238
[OTHER-INCOME] 0
[EXPENSES-NET] 819
[NET-INVESTMENT-INCOME] 5419
[REALIZED-GAINS-CURRENT] (1)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 5418
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 5418
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 166968
[NUMBER-OF-SHARES-REDEEMED] 134926
[SHARES-REINVESTED] 5286
[NET-CHANGE-IN-ASSETS] 37327
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 516
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 978
[AVERAGE-NET-ASSETS] 112262
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.73
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(k)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 11
[NAME] SCHWAB NEW YORK MUNICIPAL MONEY FUND-SWEEP SHARES
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 336332
[INVESTMENTS-AT-VALUE] 336332
[RECEIVABLES] 3738
[ASSETS-OTHER] 83
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 340153
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2858
[TOTAL-LIABILITIES] 2858
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 270625
[SHARES-COMMON-STOCK] 270625
[SHARES-COMMON-PRIOR] 204869
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (15)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 270610
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7953
[OTHER-INCOME] 0
[EXPENSES-NET] 1615
[NET-INVESTMENT-INCOME] 6338
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 6330
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 6338
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 868824
[NUMBER-OF-SHARES-REDEEMED] 809149
[SHARES-REINVESTED] 6081
[NET-CHANGE-IN-ASSETS] 65748
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (6)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1076
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1613
[AVERAGE-NET-ASSETS] 234009
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.69
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE> 1
Exhibit (17)(l)
[ARTICLE] 6
[CIK] 0000857156
[NAME] SCHWAB FAMILY OF FUNDS
[SERIES]
[NUMBER] 12
[NAME] SCHWAB NEW YORK MUNICIPAL MONEY FUND-VALUE ADVANTAGE SHARES
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 336332
[INVESTMENTS-AT-VALUE] 336332
[RECEIVABLES] 3738
[ASSETS-OTHER] 83
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 340153
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2858
[TOTAL-LIABILITIES] 2858
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 66685
[SHARES-COMMON-STOCK] 66685
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 66685
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1152
[OTHER-INCOME] 0
[EXPENSES-NET] 151
[NET-INVESTMENT-INCOME] 1001
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 1000
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1001
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 110557
[NUMBER-OF-SHARES-REDEEMED] 59789
[SHARES-REINVESTED] 773
[NET-CHANGE-IN-ASSETS] 54542
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 155
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 340
[AVERAGE-NET-ASSETS] 33619
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.03
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.69
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>