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THIS SUPPLEMENT DATED SEPTEMBER 25, 1997
supplants the supplement dated July 28, 1997
to the Prospectus dated December 31, 1997 for:
SCHWAB SHORT/INTERMEDIATE GOVERNMENT BOND FUND
SCHWAB LONG-TERM GOVERNMENT BOND FUND
LOW-COST INVESTING. As part of a commitment to low-cost investing, Charles
Schwab Investment Management, Inc. and Charles Schwab & Co., Inc. guarantee,
effective November 1, 1997, that the operating expense ratio for the Schwab
Short/Intermediate Government Bond Fund and the Schwab Long-Term Government Bond
Fund (each a "Fund") will not exceed 0.38% and 0.30%, respectively, of the
Fund's daily net assets through at least September 30, 1998.
CHANGES IN CERTAIN FUNDAMENTAL POLICIES AND ELECTION OF TRUSTEES. On September
22, 1997, the shareholders of each Fund approved the following matters, which
will become effective November 1, 1997:
1. Amendment of each Fund's fundamental investment objective resulting in
changing each Fund from a Government bond fund to a bond index fund that would
include Government and other fixed income securities;
2. Elimination, reclassification or amendment of each Fund's fundamental
investment restrictions; and
3. Election of seven Trustees.
As a result of the amendment referenced in Item No. 1 above, as of November 1,
1997, the name of the Schwab Short/Intermediate Government Bond Fund will be
changed to the Schwab Short-Term Bond Market Index Fund, and the name of the
Schwab Long-Term Government Bond Fund will be changed to the Schwab Total Bond
Market Index Fund. As a result of the shareholder vote, each Fund's fundamental
investment objective is amended to allow each Fund to pursue an indexing
strategy. The Schwab Short-Term Bond Market Index Fund will seek to track the
Lehman Brothers Short (1-5) Government/Corporate Index and the Schwab Total Bond
Market Index Fund will seek to track the Lehman Brothers Aggregate Bond Index.
Each index is market-weighted and designed to track the performance of broad
segments of the bond market.
MANAGEMENT OF THE FUNDS. Stephen B. Ward, the Funds' Senior Vice President and
Chief Investment Officer, has overall day-to-day responsibility for management
of each Fund's portfolio. The second paragraph in the prospectus under
"Management of the Funds" is deleted.
