SCHWAB CHARLES FAMILY OF FUNDS, 485APOS, 1998-02-27

SCHWAB CHARLES FAMILY OF FUNDS
485APOS, 1998-02-27

Previous: SCHWAB CHARLES FAMILY OF FUNDS, NSAR-B, 1998-02-27

Next: DYNAGEN INC, S-3, 1998-02-27

<PAGE> 1
As filed with the Securities and Exchange Commission on February 27, 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. 34 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 36 [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)
/ / On (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/X/ 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

PAGE
----
KEY FEATURES......................
EXPENSES..........................
FINANCIAL HIGHLIGHTS..............
PERFORMANCE.......................
ORGANIZATION & MANAGEMENT.........
INVESTMENT OBJECTIVES,
POLICIES & RISKS..................
INVESTING IN SHARES...............

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.

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

Each Fund is a diversified mutual fund.

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

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 xx mutual funds with over
$xx billion in assets as of [date].

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 [date], total operating expenses of the Schwab
Money Market Fund (Money Fund), the Schwab Government Money Fund (Government
Fund) and the Schwab U.S. Treasury Money Fund (Treasury Fund) will not exceed
__%, __% and __%, respectively, of each Fund's daily net assets.

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>
MONEY GOVERNMENT TREASURY
FUND FUND FUND
Management fee
<S> <C> <C> <C>
(after reduction) 0.XX% 0.XX% 0.XX%
12b-1 fees NONE NONE NONE
Other expenses
(after reduction) 0.XX% 0.XX% 0.XX%
TOTAL OPERATING
EXPENSES
(AFTER REDUCTION) 0.XX% 0.XX% 0.XX%
</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.

<TABLE>
<CAPTION>
MONEY FUND
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ -------- ------- --------
<S> <C> <C> <C>
$ 0.XX $ 0.XX $ 0.XX $ 0.XX

<CAPTION>
GOVERNMENT FUND
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$0.XX $ 0.XX $ 0.XX $ 0.XX

<CAPTION>
TREASURY FUND
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$0.XX $ 0.XX $ 0.XX $ 0.XX
</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 [date], that total operating expenses (excluding interest, taxes and
extraordinary expenses) of the Money Fund, Government Fund and the Treasury
Fund, respectively, will not exceed 0.xx%, 0.xx% and 0.xx% of each Fund's
average daily net assets. If these guarantees were not in effect the management
fee, other expenses and total operating expenses of the Money Fund, the
Government Fund and the Treasury Fund would be 0.xx%, 0.xx% and 0.xx%; and
0.xx%, 0.xx% and 0.xx%; and 0.xx%, 0.xx% and 0.xx%, respectively, of each Fund's
average daily net assets. 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 _____________, 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.

4
<PAGE> 7
PERFORMANCE

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

TOTAL RETURN is the actual 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 on an investment over a seven-day period,
annualizes it and expresses that income as a percentage of the original
investment.

An effective yield is calculated similarly, 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> 8
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 the 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, the Money Fund, the Government Fund
and the Treasury Fund paid management fees of __%, __% and __%, respectively, of
each Fund's average daily net assets.

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 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.

6
<PAGE> 9
For the fiscal year ended December 31, 1997, the Money Fund, the Government Fund
and the Treasury Fund paid total operating expenses of __%, __% and __%,
respectively, of each Fund's average daily net assets.

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.

7
<PAGE> 10
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 United States 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 each Fund's yield will
fluctuate from day to day. The Funds emphasize capital preservation and 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. The
holders of these securities will then be forced to invest their proceeds in
securities paying lower rates of interest.

8
<PAGE> 11
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.

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, the Government Fund's and the Treasury Fund's investments
make them less sensitive to credit risks. The Money Fund attempts to minimize
its credit risks by investing in securities that have been either rated or
determined by the Investment Manager to be "first tier" quality securities
(highest-quality). 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 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, 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.

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

9
<PAGE> 12
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.

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 (usually higher) 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 maybe 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.

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. 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.

10
<PAGE> 13
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. This policy may be changed only by
shareholders.

BORROWING money is a form of leveraging if a Fund continues to make investments
while borrowings remain outstanding. 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. For the Money Fund and the
Government Fund, this policy may be changed only by shareholders.

11
<PAGE> 14
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 with combined household accounts at Schwab of at least
$25,000 may choose a Fund as their "primary fund" and uninvested cash balances
in their Schwab account will be automatically invested in shares of their
primary fund, according to the terms and conditions of their account agreement.
Shares of a primary fund will be sold to cover any negative cash balance in the
Schwab account, according to the terms and conditions of the account agreement.
Investors with Schwab accounts already linked to a primary fund prior to January
15, 1998 are not subject to the household minimum requirement.

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

12
<PAGE> 15
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, 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.

DIVIDENDS & TAXES

13
<PAGE> 16
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. The 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 helps over 4.1 million customers make investment decisions by offering
low-cost brokerage services and providing financial products and information.
Visit one of Schwab's ___ 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.

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 One(R) accounts are available with a minimum initial investment of
$2,500. Schwab accounts (no longer available for opening) require a $1,000
minimum account balance ($500 for custodial accounts).

The account fees for Schwab and Schwab One accounts are $15 a quarter. However,
this fee will not be charged if the combined balances of your household's
accounts at Schwab exceed $25,000 at the end of any month in that quarter, you
have one commissionable trade in that preceding quarter or have two or more
commissionable trades during the last four quarters. If you have more than one
account at Schwab, you will be charged only one quarterly fee.

14
<PAGE> 17
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.

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

TAX-ADVANTAGED RETIREMENT PLANS.

Retirement plans offer excellent tax advantage 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 IRA. A retirement plan with a wide choice of investments offering people
with earned income 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 KEOGH. A tax-advantaged plan for self-employed individuals and their
employees that permit the employer to make annual tax-deductible contributions
of up to $30,000. Schwab Keogh Plans are currently charged an annual fee of $45.

SCHWAB CORPORATE RETIREMENT ACCOUNT. A well-designed retirement program can help
a company attract and retain valuable employees. Call 1-800-435-4000 for more
information.

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.

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.

15
<PAGE> 18
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.

16
<PAGE> 19
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> 20
TABLE OF CONTENTS

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

SCHWAB RETIREMENT MONEY FUND

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> 21
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 XX mutual funds with over
$XX billion in assets as of [ ].

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 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 [ ], total operating expenses of the Fund
will not exceed 0.xx% of average daily net assets.

2
<PAGE> 22
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) 0.0X%
12b-1 fees NONE
Other expenses (after reduction) 0.XX%
TOTAL OPERATING EXPENSES
(AFTER REDUCTION) 0.XX%
</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>
$ XX $ XX $ XX $ XX
</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 [XXXXX] that total operating expenses (excluding interest, taxes and
extraordinary expenses) of the Fund will not exceed 0.xx% 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.xx%, 0.xx% and
x.xx% respectively, of average daily net assets. Read the "Organization &
Management" section of the prospectus for more information on expenses.
<PAGE> 23
FINANCIAL HIGHLIGHTS

The following information has been audited by , 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.

FINANCIAL TABLE/INFO INSERTED HERE
<PAGE> 24
PERFORMANCE

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

An effective yield is calculated similarly, 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.
<PAGE> 25
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 [ ]% 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.

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

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
<PAGE> 26
controlling person of the Investment Manager and Schwab.

7
<PAGE> 27
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, such as bonds, 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. Additionally, the Fund attempts to minimize its credit risks by investing
in securities that have been either rated or determined by the Investment
Manager to be "first tier" quality securities (highest-quality). In addition,
the short maturity of the Fund's portfolio is designed to minimize interest
rate and prepayment or call risks.
<PAGE> 28
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.

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 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.

9
<PAGE> 29
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.

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.

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.

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

10
<PAGE> 30
securities. This policy may be changed only by shareholders.

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> 31
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.

<TABLE>
<CAPTION>
MINIMUM INVESTMENTS
<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.

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.

12
<PAGE> 32
- - 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 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; 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.

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

13
<PAGE> 33
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

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.

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.

14
<PAGE> 34
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.

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.

15
<PAGE> 35
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> 36
TABLE OF CONTENTS

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

SCHWAB INSTITUTIONAL ADVANTAGE MONEY FUND

PROSPECTUS
APRIL 30, 1998

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

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.

LOW-COST INVESTING: The Investment Manager and Schwab have voluntarily
guaranteed that, through at least [ ], total operating expenses of the Fund will
not exceed 0.xx% of average daily net assets.

2
<PAGE> 38
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) 0.0X%
12b-1 fees NONE
Other expenses (after reduction) 0.XX%
TOTAL OPERATING EXPENSES
(AFTER REDUCTION) 0.XX%
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$ XX $ XX $ XX $ XX
</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 [ ] that total operating expenses (excluding interest, taxes and
extraordinary expenses) of the Fund will not exceed 0.xx% 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.xx%, 0.xx% and
x.xx% respectively, of average daily net assets. Read the "Organization &
Management" section of the prospectus for more information on expenses.
<PAGE> 39
FINANCIAL HIGHLIGHTS

The following information has been audited by, 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.

FINANCIAL TABLE/INFO INSERTED HERE
<PAGE> 40
PERFORMANCE

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

An effective yield is calculated similarly, 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.

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 [ ]% of average daily net assets.

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
<PAGE> 42
controlling person of the Investment Manager and Schwab.

7
<PAGE> 43
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

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. Additionally, the Fund attempts to minimize its credit risks by investing
in securities that have been either rated or determined by the Investment
Manager to be "first tier" quality securities (highest-quality). In addition,
the short maturity of each Fund's portfolio is designed to minimize interest
rate and prepayment or call risks.
<PAGE> 44
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> 45
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.

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.

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

10
<PAGE> 46
securities. This policy may be changed only by shareholders.

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
borrowing 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> 47
INVESTING IN SHARES

BUSINESS DAYS

NET ASSET VALUE

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.

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

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.

12
<PAGE> 48
- - BY WIRE. Call 1-800-435-4000 for wire instructions.