THE PARNASSUS FUND
THE PARNASSUS INCOME FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
January 20, 1998
Dear Shareholder:
There will be a Special Meeting of the shareholders of The Parnassus Fund
and The Parnassus Income Fund, to be held jointly at the Sheraton-Palace Hotel
at the corner of Market and New Montgomery Streets in San Francisco on Thursday
evening, March 26, 1998, at 7:00 p.m. PST. There will also be a reception just
before the Meeting to be held at 6:00 p.m. and refreshments will be served.
(When you send in your proxy card, please let us know if you will be attending
the reception so we can plan accordingly.)
The purpose of the Meeting is to consider and act upon the following proposals
and transact any other business as may properly come before the Meeting or any
adjournment(s) thereof:
1. For each Fund: To elect the Board of Trustees;
2. For each Fund: To ratify the selection of Deloitte & Touche LLP as
independent accountants for the current fiscal year;
3. For the Balanced Portfolio of The Parnassus Income Fund: To approve a
change in its investment objective and related investment policies;
4. For each Fund: To approve changes to certain of its fundamental investment
policies and restrictions;
5. For The Parnassus Fund: To approve a change in its investment advisory
agreement with Parnassus Investments;
6. For The Parnassus Fund: To approve a change in its investment objective by
deletion of "current income" as a secondary investment objective;
7. For each Fund: To approve certain changes in its Declaration of Trust; and
8. For each Fund: To approve or disapprove a policy allowing investments in
issuers involved in the production of wine.
Effective April 1, 1998, the Trustees have voted to change the name of The
Parnassus Income Fund to "The Parnassus Income Trust" and each series of the
Trust would be called a "Fund" instead of a "Portfolio." This would make each
name shorter and clearer since each "Portfolio" is actually a separate "mutual
fund." The Fixed-Income Portfolio will become the "Fixed-Income Fund" and the
California Tax-Exempt Portfolio will become the "California Tax-Exempt Fund." If
Proposal #3 is approved by shareholders, the "Balanced Portfolio" will become
the "Equity Income Fund."
The Board of Trustees of each Fund has fixed the close of business on January 5,
1998, as the record date for the determination of shareholders entitled to
notice of and to vote at the Special Meeting. You are entitled to vote at the
Meeting and at any adjournment(s) thereof if you owned shares of either of the
Funds at the close of business on January 5, 1998. We ask that you complete,
date, sign and return the enclosed proxy card in the enclosed postage paid
envelope even if you plan to attend the meeting in person. That way you can be
sure that your vote will be counted. You can always revoke the proxy and vote
again should you change your mind about a certain issue. By taking a few minutes
to vote right now, you can help us to save money since the Funds may incur the
additional expense of extra mailings if we don't have a sufficient number of
cards signed and returned.
Please retain this Notice and Proxy Statement. This is a joint Notice and
Proxy Statement for The Parnassus Fund and The Parnassus Income Fund. The shares
you own in a particular Fund may be voted only with respect to that Fund. (There
is also one Proposal pertaining only to the Balanced Portfolio and only
shareholders of that Portfolio can vote on that issue.) If you own shares in
more than one Fund, please vote with respect to each Fund only on the card
designated for that Fund. Please sign, date and return all proxy cards that were
mailed to you. Be sure to sign your name the same way it appears on the proxy
card.
The formal part of the Meeting will probably only last about half an hour,
say from 7:00 p.m. to 7:30 p.m. We will have a question-and-answer session as
well as discussion about The Parnassus Fund and The Parnassus Income Fund and
their investment policies from 7:30 to 9:00 p.m.. You will also have an
opportunity to meet the Parnassus Trustees and the staff.
The enclosed Proxy Statement discusses all the issues we are asking you
to vote on. Should you have any questions, be sure to give us a call at
(800)999-3505. Finally, I would like to ask you again to promptly vote your
proxy card and send it back as soon as possible. If you plan to attend the 6:00
p.m. reception, please be sure to let us know by checking the appropriate box on
the proxy card.
Yours truly,
Jerome L. Dodson
President
<PAGE>
PROXY STATEMENT
Introduction
This document is a joint proxy statement of The Parnassus Fund and The
Parnassus Income Fund (each, a "Fund") in connection with the solicitation of
proxies by the Board of Trustees of each Fund to be used at the joint Special
Meeting of shareholders ("Meeting") or any adjournment(s) thereof. The Meeting
will be held on March 26, 1998 at 7:00 p.m. (reception at 6:00 p.m.) Pacific
Standard Time at the Sheraton-Palace Hotel at the corner of Market and New
Montgomery Streets in San Francisco, California, for the purposes set forth in
the attached Notice of Meeting. This Proxy Statement is being first mailed to
shareholders on or about January 20, 1998.
For each Fund, a quorum is one-third of the outstanding shares on the
record date of January 5, 1998 ("Record Date"), represented in person or by
proxy at the Meeting. In the event that a quorum is not present or if a quorum
is present at the meeting, but sufficient votes to approve any one of the
Proposals are not received, the persons named as proxies (or their substitutes)
may propose one or more adjournments of the Meeting to permit the further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares represented at the meeting in person or by proxy.
The persons named as proxies will vote those proxies that they are entitled to
vote "For" in favor of an adjournment and will vote those proxies required to be
voted "Against" such Proposal against such adjournment. A shareholder vote may
be taken on one or more of the Proposals described in this Proxy Statement prior
to any such adjournment if sufficient votes have been received and it is
otherwise appropriate.
The individuals named as proxies (or their substitutes) on the enclosed
proxy card (or cards if you own shares of more than one Fund or have multiple
accounts) will vote in accordance with your directions as indicated on the card
if your proxy is received properly executed. You may direct the proxy holders to
vote your Fund shares on a Proposal applicable to that Fund (or Portfolio) by
checking the appropriate box "For" or "Against" or instruct them not to vote
those shares on the Proposal by checking the "Abstain" box. If you just sign and
date your card with no specific voting instructions, the Proxies will vote your
shares according to the recommendations of the Trustees.
Each full share of a Fund that is issued and outstanding on the record
date is entitled to one vote and fractional shares issued and outstanding on the
record date are entitled to proportionate shares of one vote.
For The Parnassus Income Fund, shareholders of each Portfolio vote
together with respect to the election of Trustees (Proposal #1), ratification of
independent accountants (Proposal #2), and changes in the Fund's Declaration of
Trust (Proposal #7) and vote separately with respect to each other Proposal that
affects their Portfolio. With respect to Proposal #3, only the shareholders of
the Balanced Portfolio are entitled to vote.
The Proposals to be voted upon by a Fund or Portfolio are as follows:
<TABLE>
<CAPTION>
Proposals Applicable to Fund
Fund/Portfolio Name or Portfolio
------------------- ------------
<S> <C>
The Parnassus Fund 1,2,4,5,6,7,8
The Parnassus Income Fund
Balanced Portfolio 1,2,3,4,7,8
Fixed-Income Portfolio 1,2,4,7,8
California Tax-Exempt Portfolio 1,2,4,7,8
</TABLE>
Abstentions and "broker non-votes" (as defined below) are counted for
purposes of determining a quorum, but do not represent votes cast with respect
to any Proposal. "Broker non-votes" are shares held by a broker or nominee for
which an executed proxy is received by the Fund, but are not voted as to one of
more Proposals because instructions have not been received from the beneficial
owners or persons entitled to vote and the broker or nominee does not have
discretionary voting power.
You may revoke your proxy with respect to a Fund: (a) at any time prior to
its exercise by written notice of its revocation to the Secretary of the Fund at
the Fund's address prior to the Meeting; (b) by the subsequent execution and
return of another proxy prior to the Meeting; or (c) by being present and voting
in person at the Meeting and giving oral notice of revocation to the Chairman of
the Meeting. Attendance at the Meeting will not in itself constitute revocation
of your proxy.
Each Fund may also arrange to have votes recorded by telephone. [Name of
soliciting firm] may be paid on a per-call basis for vote-by-phone solicitations
on behalf of the Fund. If a Fund records votes by telephone, it will use
procedures designed to authenticate shareholders' identities, to allow
shareholders to authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been properly recorded.
A proxy voted by telephone may be revoked at any time before it is voted in the
same manner that a proxy voted by mail may be revoked.
Information as to the number of outstanding shares of each Fund, and
Portfolios thereof, as of the Record Date, is set forth in Exhibit A along with
a listing of the owners of more than 5% of the shares of any Fund as of December
31, 1997. To the knowledge of each Fund's management, the executive officers and
Trustees of each Fund, as a group, owned less than 1% of the outstanding shares
of each Fund as of December 31, 1997.
Copies of each Fund's most recent annual and semiannual reports including
financial statements, have previously been delivered to shareholders.
Shareholders of any Fund may request copies of that Fund's annual and semiannual
reports by writing to Parnassus Investments at One Market-Steuart Tower #1600,
San Francisco, California, 94105, or by calling (800) 999-3505.
PROPOSAL #1 - ELECTION OF BOARD MEMBERS
Applies to: Both Funds
Discussion: The Board of Trustees of each Fund has acted to expand its
membership and anticipates that the Fund will benefit from the diversity and
experience of the current Trustees and nominees that would comprise the expanded
Board. When The Parnassus Fund was founded almost 14 years ago and when The
Parnassus Income Fund was founded almost seven years ago, the Parnassus
organization was much smaller and a small board was adequate for each Fund. With
the growth of both Funds, the Trustees believe that larger boards are
appropriate.
At the present time, each Fund has a separate Board with different
Trustees, but Proposal #1 contemplates a single group of Trustees to serve as
Board members for each Fund. This proposal is intended to coordinate and enhance
the efficiency of the governance of the Funds. The Parnassus Fund now has two
Trustees and The Parnassus Income Fund has three Trustees who are outside or
independent Trustees, i.e., not an "interested person," as defined in the
Investment Company Act of 1940, as amended ("1940 Act"). If all Trustees and
nominees are elected as proposed, each Fund will have eight independent Trustees
and one interested Trustee (Jerome L. Dodson, the Fund's President) for a total
of nine Trustees.
In addition to the independent Trustees who currently serve the
respective Funds, there are three new nominees with distinguished backgrounds
who would bring considerable expertise to the Boards. Cecilia Lee has had
business experience as President of Ultra Media, a Silicon Valley electronics
concern. Leo T. McCarthy has had experience in government as Speaker of the
California State Assembly and as Lt. Governor of the State of California. Donald
O'Connor has gained extensive knowledge of the mutual fund industry from his
service as Vice President for Operations of the Investment Company Institute
(trade association of the mutual fund industry) and as Chief Operating Officer
of the ICI Mutual Insurance Company (the provider of fidelity and liability
coverage for each Fund and its officers and Trustees).
Each nominee has indicated a willingness to serve if elected, and if
elected, each nominee will hold office for an indefinite term until his or her
successor is duly elected and qualified or until he or she resigns or is
otherwise removed. At its meeting on December 5, 1997, each Board acted to
establish the size of the Board at nine. Trustees unanimously approved the
nomination of each nominee and directed that the election of these nominees be
submitted to the Fund's shareholders. Although each Fund is asking its
shareholders to elect the nine nominees to its Board, the election of the
nominees to one Board is not conditioned on their election to the other Board.
The Parnassus Fund pays each Independent Trustee $3500 per regular
meeting attended and $500 for a phone meeting or other special meeting plus
reimbursement of certain out-of-pocket expenses. The Parnassus Income Fund will
pay each Independent Trustee $500 per regular meeting attended and $100 per
phone meeting or other special meeting plus reimbursement of certain
out-of-pocket expenses. The compensation and expenses paid to Trustees of The
Parnassus Income Fund are divided among the Portfolios of that Fund. Both Boards
anticipate meeting regularly three times per year with a possible fourth meeting
by phone. This would mean that for service on both Boards, each Independent
Trustee would receive about $12,600 per year. An interested Trustee will
continue to receive no compensation from any Fund. Each Fund requires retirement
at age 75 for all Independent Trustees. Neither Fund has an Audit or Nominating
Committee.
<TABLE>
The following table sets forth information relating to the compensation
paid to Trustees during 1997:
<CAPTION>
The Parnassus Fund* The Parnassus Income Fund
------------------- -------------------------
<S> <C> <C>
David L. Gibson $6,500 0
Gail L. Horvath $6,500 0
Herbert A. Houston 0 $1,500
Howard M. Shapiro 0 $1,500
Joan Shapiro 0 $1,500
<FN>
* For 1997, the Parnassus Fund paid each Independent Trustee a fee of
$1500 per regular meeting attended and $500 for each phone or special
meeting attended through December 4. Effective December 5, the fee was
raised to $3500 per regular meeting.
</FN>
</TABLE>
The nominees for election as Trustees, their ages and a description of
their principal occupations are listed below.
Jerome L. Dodson*, 54, is President of Parnassus Investments, the investment
adviser and distributor for each Fund. He has served as President and Trustee of
The Parnassus Fund since 1984 and as President and Trustee of The Parnassus
Income Fund since 1992. From 1975 to 1982, Mr. Dodson served as President and
Chief Executive Officer of Continental Savings of America in San Francisco. From
1982 to 1984, he was President and a Trustee of Working Assets Money Fund and he
also served as a Trustee from 1988 to 1991. He is Vice Chairman of the Board of
Directors of the Haight-Ashbury Free Clinics in San Francisco and serves as a
Director of Project Open Hand, an organization that provides meals to people
with AIDS. He is a graduate of the University of California at Berkeley and of
Harvard University's Graduate School of Business Administration where he
concentrated in finance.
Gail L. Horvath, 48, is co-owner and director of new product development at Just
Desserts, a San Francisco-based bakery and cafe. A co-founder of Just Desserts,
her experience includes market research, product planning and product
development. From 1976 to 1981, she served as a director of Continental Savings
of America. She is a graduate of Ohio State University. She has served as a
Trustee of The Parnassus Fund since 1996.
David L. Gibson, 58, is an attorney in private practice specializing in taxation
and personal financial planning. From 1973 to 1984, he was with the Crown
Zellerbach Corporation where he served as tax counsel and, later, as Director of
Public Affairs. Mr. Gibson is active in civic affairs and his special interests
include senior citizens and environmental protection. He holds a bachelor's
degree in business administration from Virginia Polytechnic Institute, an MBA
from Golden Gate University, a JD from Washington and Lee University and an LLM
from William and Mary. He has served as a Trustee of the Parnassus Fund since
1986.
* "interested person," as defined in the 1940 Act.
Herbert A. Houston, 54, is the Chief Executive Officer of the Haight-Ashbury
Free Clinics, Inc. Previously, he worked as Development Director for the
National Association for Sickle Cell Disease, Vice President of the Bay Area
Black United Fund and as an executive for the Combined Federal Campaign and the
United Way of the Bay Area. He is a graduate of California State University at
Hayward and holds a Master's degree in Public Administration & Health Services
from the University of Southern California. He has served as a Trustee of The
Parnassus Income Fund since 1992.
Howard M. Shapiro, 66, is a consultant to non-profit organizations specializing
in marketing, fund-raising and organizational structure. Previously, he worked
for 28 years in marketing, advertising and public relations. He is Chairman of
the Board of the Portland Housing Authority and is Vice Chairman of the Board of
the Albina Community Bank in Portland. He also serves on the Board of Oregon's
State Accident Insurance Fund and the Multnomah County Investment Council. Mr.
Shapiro is a graduate of the University of Washington. He has served as a
Trustee of The Parnassus Income Fund since 1992. He is no relation to Joan
Shapiro.
Joan Shapiro, 55, is a consultant specializing in development banking and
socially responsible investing. For 20 years, she worked with the South Shore
Bank of Chicago, most recently as Executive Vice President. She is a former
President of the Social Investment Forum, the national trade association of the
social investment movement. She is also a Director of the New Israel Fund and a
Governor of International House at the University of Chicago. She is a graduate
of Cornell University. She has served as a Trustee of The Parnassus Income Fund
since 1992. She is no relation to Howard Shapiro.
Cecilia C.M. Lee, 54, is President of Ultra Media, a Silicon Valley-based
electronics firm. She is active in community affairs with the Stanford
Children's Hospital and the Cupertino Children's Choir. Ms. Lee is a Director of
the Tech Museum of Innovation and the Asian-American Manufacturers Association.
She is also on the advancement Board of the West Valley-Mission Community
College. She received a bachelor's degree from the National Music and Art
Institute of China.
Leo T. McCarthy, 67, is President of the Daniel Group, a partnership involved in
foreign trade. His current directorships include Linear Technology, Open Data
Systems and the U.S. National Gambling Impact Study Commission. He has also
served as a Regent of the University of California. From 1969 to 1982, he served
as a member of the California State Assembly, six years as Speaker. From 1983 to
1995, he served as Lieutenant Governor of the State of California where his
major responsibility was economic development. He holds a B.S. from the
University of San Francisco and a J.D. from San Francisco Law School and is
qualified to practice law in California.
Donald E. O'Connor, 61, is a retired executive who spent 28 years as Vice
President of Operations for the Investment Company Institute, (the ICI is the
trade association of the mutual fund industry.) During that period, he also
spent 10 years as Chief Operating Officer of the ICI Mutual Insurance Company.
Prior to joining the ICI, he spent six years with the Securities and Exchange
Commission ("SEC"), including four years as Branch Chief of Market Surveillance.
He currently serves as a Trustee of the Advisors Series Trust, another mutual
fund. He is a graduate of The George Washington University and also holds a
Masters in Business Administration from the same institution.
The executive officers of each Fund are Jerome L. Dodson, President, and
Howard Fong, Vice President. Howard Fong has served as chief financial officer
of Parnassus Investments since 1989.
During 1997 each Board met three times, and all Board members attended all
meetings.
Required Vote: For each Fund, the candidates receiving the affirmative vote
of a plurality of the votes cast with respect to Proposal #1 will be
elected provided a quorum is present. Shares of all Portfolios of The
Parnassus Income Fund vote together as a single class for the Trustees of
that Fund.
EACH BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" EACH OF THE NOMINEES UNDER PROPOSAL #1.
-------------------
PROPOSAL #2 -RATIFICATION OF INDEPENDENT ACCOUNTANTS OF THE FUND
Applies to: Both Funds
Discussion: Shareholders of each Fund are asked to ratify their Board's
selection of independent public accountants ("Auditors"). The Auditors for each
Fund audit the Fund's financial statements for each year and prepare the Fund's
federal and state annual income tax returns.
Deloitte & Touche LLP has audited The Parnassus Fund for 11 years and The
Parnassus Income Fund for six years. Because it has done an excellent job, the
Trustees of each Fund have selected Deloitte & Touche LLP to serve as Auditors
for the current year. The Board's selection for Auditors for the current year is
subject to ratification by shareholders of that Fund at the Meeting.
Deloitte & Touche LLP has informed the Funds that neither it nor any of its
partners has any material direct or indirect financial interest in the Funds. A
representative of Deloitte & Touche LLP will be at the meeting and will be
available for any questions that may arise.
Required Vote: For each Fund, approval of Proposal #2 requires a
majority of the votes cast with respect to Proposal #2 at the Meeting
provided a quorum is present.
EACH BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSAL #2.
------------------
PROPOSAL #3 - APPROVAL OF CHANGE OF THE INVESTMENT OBJECTIVE AND RELATED
INVESTMENT POLICIES OF THE BALANCED PORTFOLIO
Applies to: The Balanced Portfolio of The Parnassus Income Fund
Discussion: At the present time, the primary investment objective of the
Balanced Portfolio (the "Portfolio") is current income and capital preservation.
Capital appreciation is a secondary objective. The Portfolio seeks to achieve
its objectives by investing in a mix of fixed-income and equity securities
determined by Parnassus Investments (the "Adviser") depending upon its economic
outlook and view of market conditions. In pursuing these objectives, as a matter
of fundamental policy that, as such, may be changed only with the approval of
shareholders of the Portfolio, the Portfolio must have at least 25% of its
assets in fixed-income securities. In the opinion of the Adviser, this has
depressed the performance of the Portfolio. Over the long term, stocks have had
a better total return than bonds. The Adviser believes that although bonds
usually have less risk than stocks, for most investors, it makes sense to take
somewhat more risk in the hopes of achieving a higher return.
Currently, the Portfolio may also invest in both common and preferred
stocks as well as securities that are convertible into these instruments. As a
matter of fundamental policy, a common stock selected for the Portfolio must pay
a dividend at least equal to that paid by the average stock in the S&P 500
Composite Stock Price Index ("S&P 500").
Based on the suggestion of the Adviser, the Trustees recommend that the
Portfolio's investment objective be changed to "current income and capital
appreciation" and that the current policies requiring a minimum 25% investment
in fixed-income securities and specifying the minimum dividend paid by a stock
in the Portfolio be deleted.
If approved by shareholders, the Fund will try to achieve this new
objective by investing primarily in a diversified portfolio of equity
securities. Equity securities may include common and preferred stock as well as
securities that are convertible into these instruments such as convertible
bonds. As operating policies, at least 75% of the Portfolio's total assets will
normally be invested in equity securities that pay a dividend (or interest in
the case of convertible debt instruments), and up to 25% of the Portfolio's
total assets may be invested in non-dividend paying equity securities, in
investment grade debt securities or in money market instruments. However, for
temporary, defensive purposes, the Fund may invest all its assets in money
market instruments or investment grade debt.
The Fund seeks to invest in equity securities that pay above-average
dividends and which the Adviser believes have the capacity to raise dividends in
the future and also have the potential for capital appreciation. The Fund seeks
to achieve a yield for its shareholders that matches the yield on the securities
comprising the S&P 500. Issuers of securities in which the Portfolio invests
must meet the social criteria of The Parnassus Income Fund.
The proposed change to the Portfolio's investment objective does not
reflect any current or contemplated change to any other investment policies of
the Portfolio other than those described above, and it is not intended to
reflect any change in the level of risk associated with an investment in the
Portfolio.
The Board of Trustees of The Parnassus Income Fund has authorized changing
the name of the Fund to "The Parnassus Income Trust." If this Proposal #3 is
approved by shareholders, the name of the Portfolio will be changed to the
"Equity Income Fund," and the changes to the Portfolio's investment objective
and related investment policies will be implemented, concurrently with the
effectiveness of an amendment to the Fund's registration statement describing
the same. If this Proposal #3 is not approved, the Portfolio's current
investment objectives and related policies will remain unchanged and the name of
the Portfolio will be changed only to the "Balanced Fund."
Required Vote: Approval of Proposal #3 requires the affirmative vote of
a "majority of the outstanding voting securities" of the Balanced
Portfolio of The Parnassus Income Fund which, for this purpose, means
the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Portfolio or (2) 67% or more of the shares of
the Portfolio present at the Meeting if more than 50% of the
outstanding shares of the Portfolio are represented at the Meeting in
person or by proxy.
THE BOARD OF THE PARNASSUS INCOME FUND, INCLUDING ITS INDEPENDENT TRUSTEES,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL #3.
------------------
PROPOSAL #4 - APPROVAL OF CHANGES TO CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS
AND POLICIES
Applies to: Both Funds
Discussion: Pursuant to the 1940 Act, each of the Funds has adopted certain
fundamental investment restrictions and policies which are set forth in each
Fund's Prospectus and Statement of Additional Information. Non-fundamental or
operating policies can be changed by a Fund's Board of Trustees without
shareholder approval, but a fundamental policy or restriction can only be
changed by a vote of shareholders. Certain of the fundamental restrictions that
the Funds have adopted in the past reflect industry conditions or practices that
no longer exist or federal or state regulations that are no longer in effect.
Other fundamental restrictions reflect regulatory requirements that remain in
effect, but which are not required to be fundamental. Accordingly, the Board of
each Fund has approved revisions to certain fundamental restrictions to clarify,
modernize and standardize certain investment restrictions and to eliminate
others that are not legally required. Although the proposed changes in
fundamental restrictions will allow a Fund greater investment flexibility, the
Trustees do not anticipate that the changes will result in a materially greater
risk level with the investments in either Fund.
The text and a summary description of each proposed change to the affected
Fund's fundamental restrictions are set forth below. If approved by shareholders
of the affected Fund, or, in the case of The Parnassus Income Fund, each
affected Portfolio, the amendment or elimination of fundamental investment
restrictions shall take effect concurrently with the effectiveness of an
amendment to the Fund's registration statement describing the changes. If a
Proposal is not approved as to a particular Fund or Portfolio, the corresponding
current investment restriction of that Fund or Portfolio will remain unchanged.
4 (a) Modification of Fundamental Restrictions Regarding Diversification of
Assets
Applies to: The Parnassus Fund and each Portfolio of the Parnassus Income
Fund
Discussion: The diversification requirement contained in the current
investment restriction of each Fund is more restrictive than required under the
1940 Act because, for the Parnassus Fund, the current restriction applies to
100% rather than 75% of the Fund's total assets and for each Fund, the
restriction prohibits holding more than 10% of any class of an issuer's
securities rather than only the outstanding voting securities of an issuer. Each
Fund's Board has voted to approve changes so that the Fund's diversification
restrictions are limited to those required by the 1940 Act.
The greater a Fund's or Portfolio's holdings of a particular issuer, the
greater the impact that changes in the value of those securities may have on the
Fund's or Portfolio's investment portfolio. The Adviser believes that the
proposed amended fundamental restrictions will provide each Fund with additional
flexibility in the purchase of portfolio securities while maintaining full
compliance with the diversification requirements of the 1940 Act.
If Proposal #4(a) is approved by the shareholders of The Parnassus Fund,
the text in that Fund's prospectus under "Principal Investment Restrictions"
would be revised as follows: (Proposed additions to the text appear in { }
while proposed deletions appear in \ \.)
The Fund is subject to certain investment restrictions which are
fundamental policies and, as such, cannot be changed without the
approval of holders of a majority of the Fund's outstanding voting
securities. The Fund's investment objective is such a policy, as are
restrictions that provide that the Fund may not: (i) {with respect to
75% of its total net assets}, invest more than 5% of the value of its
total net assets in securities of any one issuer (other than
obligations issued or guaranteed by the United States Government, its
agencies or its instrumentalities) \;(ii)\ {or} purchase more than 10%
of the outstanding voting securities \or of any class of securities\ of
any one issuer; (ii)
Further, if Proposal #4(a) is approved by the shareholders of The Parnassus
Fund, the text in the Fund's Statement of Additional Information ("SAI") under
"Investment Restrictions" would be revised as follows: (Proposed additions to
the text are in { } while proposed deletions are in \ \.)
The Fund may not:
(1) {With respect to 75% of its total net assets}, purchase
any security other than obligations of the U.S. Government,
its agencies or instrumentalities ("U.S Government
securities") if as a result: (i) more than 5% of the Fund's
total net assets \taken at current value\ would then be
invested in securities of a single issuer or (ii) the Fund
would hold \more than 10% of any class of securities of an
issuer (taking all common stock issues as a single class) or\
more than 10% of the outstanding voting securities of \an
issuer\ {any one issuer}.
If the shareholders of each Portfolio of The Parnassus Income Fund approve
Proposal #4(a), as to that Portfolio, the text in that Fund's SAI under
"Investment Restrictions" would be revised as follows: (Proposed additions to
the text appear in { } while proposed deletions appear in \ \, which also
reflect the anticipated name changes.)
The {Trust} \Fund\ may not:
(1) With respect to 75% of \its\ a {Fund's} total net assets,
purchase the securities of any one issuer other than
obligations of the U.S. Government, its agencies or
instrumentalities, if as a result: (i) more than 5% of a
Fund's total net assets \(taken at current value)\ would then
be invested in securities of a single issuer or (ii) a
\portfolio\ {Fund} would hold more than 10% \of any class of
securities of an issuer (taking all common stock issues as a
single class) or more than 10%\ of the outstanding voting
securities of any one issuer.
If the shareholders of each Portfolio of The Parnassus Income Fund approve
Proposal #4(a) as to that Portfolio, the text in that Fund's prospectus under
"Other Investment Policies" would also be revised to make the 10% limitation
applicable only to the voting securities of any one issuer.
If Proposal #4(a) is approved as to one or two, but not all, Portfolios of
The Parnassus Income Fund, that Fund's prospectus and SAI would be revised as
indicated above only as to each Portfolio for which the Proposal is approved.
For any Portfolio for which Proposal #4(a) is not approved, the current
diversification restriction will remain in effect.
4 (b) Elimination of Fundamental Restriction Regarding Investments in Issuers
Whose Securities are Owned by Certain Persons (Affiliates)
Applies to: Both Funds
Discussion: Both Funds currently have a fundamental restriction that
prohibits them from purchasing or holding the securities of an issuer if certain
persons affiliated with the Fund or the Adviser own certain amounts of the
outstanding securities of that issuer.
As stated in the SAI, each Fund may not:
Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or Trustee of the Fund or officer or
director of the Adviser owns more than one-half of 1% of the
outstanding securities of such issuer and such officers, and
Trustees who own more than one-half of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.
This restriction was originally adopted to address state securities law
requirements in connection with the registration of Fund shares. This provision
is now obsolete since those state restrictions are no longer applicable. The
ability of a Fund to invest in companies in which its Trustees and officers, or
its affiliates and their directors and officers, hold interests would continue
to be restricted by the 1940 Act, whether or not the current fundamental
investment restriction is eliminated.
If shareholders of The Parnassus Fund or, in the case of The Parnassus
Income Fund, a Portfolio, approve Proposal #4(b) as to that Fund or Portfolio,
as applicable, the above-quoted restriction in each Fund's SAI would be
eliminated as to that Fund or Portfolio, as appropriate.
4(c) Elimination of Fundamental Restrictions Regarding Restricted Securities
Applies to: Both Funds
Discussion: Usually, restricted securities cannot be sold to the public
without registration under the Securities Act of 1933, as amended ("1933 Act"),
unless they are sold in privately negotiated transactions or pursuant to an
exemption. Both Funds currently have a general fundamental restriction
prohibiting investment in restricted securities. As stated in the SAI, each Fund
may not: "Purchase any security restricted as to disposition under the federal
securities laws."
Even though unregistered securities may not be freely offered to the
public, in many cases, an active secondary market exists for unregistered
securities and other institutional buyers stand ready to purchase such
securities in transactions exempt from registration. In view of changes that
have occurred and that may occur in the future in the 1933 Act requirements with
respect to the types of offers and sales that may be made without registration
and in increased size and liquidity of institutional markets for certain
securities, the Trustees believe that the current restriction is unnecessarily
limiting.
Further, elimination of this restriction for The Parnassus Income Fund is
anticipated to facilitate implementation of the specific, fundamental investment
policy of the Balanced Portfolio and the Fixed-Income Portfolio authorizing each
to invest up to 10% of its assets in securities issued by community development
loan funds. The Trustees of The Parnassus Fund believe that it may be
appropriate and desirable for that Fund to invest in community development loan
funds and plan to implement an operating policy permitting the Fund to invest up
to 5% of its assets in community development loan funds if this Proposal #4(c)
is approved.
In addition, each Fund's current investment restriction precludes it from
investing in the securities of issuers that may have substantial positive social
impact and which may provide above average financial returns. Eliminating the
restriction would also allow The Parnassus Fund and the Balanced Portfolio of
The Parnassus Income Fund to devote a small portion of their assets (i.e., 5% of
total assets as an operating policy) to venture capital investments.
If shareholders of The Parnassus Fund or, in the case of The Parnassus
Income Fund, a Portfolio, approve Proposal #4 (c) as to that Fund or Portfolio,
as applicable, the above-quoted restriction in each Fund's SAI would be
eliminated as to that Fund or Portfolio, as appropriate.
4(d) Modification of Fundamental Restriction on Making Loans
Applies to: Both Funds
Discussion: Both Funds currently have a prohibition on making loans except
through repurchase agreements. The proposed change would clarify the meaning of
making a loan and avoid unintended limitations. The new language would expressly
permit securities lending and clarify that acquiring debt securities and other
obligations consistent with the Fund's or Portfolio's objective(s) and other
policies, such as instruments convertible into equities not constitute the
making of a loan. The Board of Trustees of The Parnassus Fund recommends that
the restriction on the Fund's making loans be changed to read as follows
(Proposed additions to the text appear in { } while proposed deletions appear in
\ \.):
The Fund may not:
Make loans except through repurchase agreements; {however, the
Fund may engage in securities lending and may also acquire
debt securities and other obligations consistent with the
Fund's investment objective and its other investment policies
and restrictions. Investing in a debt instrument that is
convertible into equity or investing in a community loan fund
is not considered the making of a loan.}
For The Parnassus Income Fund, that Fund's current restriction would also
be modified by elimination of the 5% limit on the amount of a Portfolio's assets
that may be invested in repurchase agreements and, as proposed to be changed,
would read as follows: (Proposed additions to the text appear in { } while
proposed deletions appear in \ \, which also reflect the anticipated name
changes.)
The {Trust} \Fund\ may not:
Make loans except through repurchase agreements. Each
portfolio, though, may invest no more than 5% of its assets in
repurchase agreements. The Balanced Portfolio and the
Fixed-Income Portfolio, however, may lend up to 10% of each
Portfolio's assets to community loan funds as described in the
Prospectus. The Fund will not make loans directly to a project
itself, but rather will invest in an intermediary community
loan fund; {however, the Trust may engage in securities
lending and may also acquire debt securities and other
obligations consistent with the applicable Fund's investment
objective(s) and its other investment policies and
restrictions. Investing in a debt instrument that is
convertible into equity or investing in a community loan fund
is not considered the making of a loan.}
If Proposal #4(d) is approved as to one or two, but not all, Portfolios of
The Parnassus Income Fund, that Fund's SAI would be revised as indicated above
only as to each Portfolio for which the Proposal is approved. For any Portfolio
for which Proposal #4(d) is not approved, the current fundamental restriction
will remain in effect.
4(e) Elimination of Fundamental Restriction Regarding Investment in Warrants
Applies to: Both Funds
Discussion: At the present time, both Funds have a restriction limiting the
Fund's (or Portfolio's) purchase of warrants to 5% of total net assets with no
more than 2% invested in warrants which are not traded on the New York Stock
Exchange or the American Stock Exchange. To give the Funds greater flexibility,
the Trustees of the Funds recommend eliminating this restriction as a
fundamental policy. If the shareholders of The Parnassus Fund approve Proposal
#4(e), that Fund intends to implement the following operating policy: "The Fund
may purchase warrants up to a maximum of 5% of the value of its total net
assets."
If the shareholders of the Balanced Portfolio of The Parnassus Income Fund
approve Proposal #4(e), that Fund intends to implement the following operating
policy (which reflects the anticipated name change of the Portfolio): "The
Equity Income Fund may purchase warrants up to a maximum of 5% of the value of
its total net assets." However, if the shareholders of the Fixed-Income
Portfolio or of the California Tax-Exempt Portfolio approve Proposal #4(e), the
Fund intends to implement an operating policy prohibiting that Portfolio's
investment in warrants.
4(f) Elimination of Fundamental Restriction on Investing for the Purpose of
Control
Applies to: Both Funds
Discussion: Each Fund currently has an investment restriction under which
it may not: "Make investments for the purpose of exercising a controlling
influence over the management or policies of a company, except that the Fund may
seek to influence the social policies of the companies it invests in." Since the
Funds are not required to have a fundamental restriction on this subject, each
Board has approved elimination of this restriction.
4(g) Elimination of Fundamental Restriction on Purchasing Foreign Securities or
Currencies
Applies to: Both Funds
Discussion: At the present time, The Parnassus Fund has a fundamental
investment restriction prohibiting the "purchase [of] foreign securities or
currencies." Similarly, the fundamental investment restrictions of The Parnassus
Income Fund state that the Fund may not: "Invest more than 5% of the Balanced
Portfolio or more than 5% of the Fixed-Income Portfolio in foreign securities.
The California Tax-Exempt Portfolio may not invest in foreign securities or
currencies."
To the extent that a Fund has a policy regarding investment in foreign
securities or currencies, the policy need not be fundamental. Accordingly,
elimination of each Fund's current fundamental policy is proposed to give the
Fund greater flexibility. If the shareholders of The Parnassus Fund approve
Proposal #4(g), that Fund intends to implement the following operating policies:
"The Fund may purchase foreign securities up to a maximum of 15% of the value of
its total net assets;" and "The Fund may not hold foreign currency except as may
be necessary in the settlement of foreign securities transactions."
If the shareholders of the Balanced Portfolio of The Parnassus Income Fund
approve Proposal #4(g), that Fund intends to implement operating policies that,
in substance, would permit the Balanced Portfolio to purchase foreign securities
up to a maximum of 15% of the value of the Portfolio's total net assets and
prohibit the Portfolio from holding or purchasing foreign currency except as may
be necessary to settle foreign securities transactions. However, if the
shareholders of the Fixed-Income Portfolio or of the California Tax-Exempt
Portfolio approve Proposal #4(g), the Fund intends to implement an operating
policy prohibiting that Portfolio's investment in foreign securities or
currency.
4(h) Elimination of Fundamental Restriction Regarding Unseasoned Issuers
Applies to: The Parnassus Income Fund
Discussion: This Fund currently has a fundamental investment restriction
pursuant to which the Fund may not: "Invest more than 5% of the assets of any
one portfolio in the securities of unseasoned issuers (i.e., those with less
than three years of continuous operation)." The purposes of this fundamental
restriction was to comply with state securities laws and regulations and limit
the risks associated with investing in companies that have no proven long-term
track record in business. However, these state requirements are no longer
applicable. Accordingly, elimination of this restriction is proposed to give the
Fund greater flexibility for the future should the Adviser deem it appropriate
for a Portfolio to invest in unseasoned issuers.
4(i) Modification of Fundamental Restriction Regarding Investing in Other Funds
Applies to: The Parnassus Income Fund
Discussion: This Fund has a fundamental investment restriction prohibiting
a Portfolio's investment in shares of another registered investment company,
except that a Portfolio may invest to a limited extent in money market funds.
The restriction includes a requirement that the Adviser will waive its fee to
the extent of any Portfolio assets that are so invested.
This requirement was intended to comply with certain state securities
regulations that are no longer applicable. Accordingly, this requirement is
proposed to be deleted. If a Portfolio invests in shares of another registered
investment company, as a shareholder of that fund, the Portfolio would bear its
proportionate share of that fund's expenses, which could result in duplication
of certain fees, including management and administrative fees.
If shareholders of each Portfolio approve Proposal #4(i) as to that
Portfolio, the current fundamental investment restriction, as proposed to be
changed, would read as follows: (Proposed additions to the text appear in { }
while proposed deletions appear in \ \, which also reflect the anticipated name
changes.)
The {Trust} \Fund\ may not:
Invest in securities of other registered investment companies
except that each Fund may invest up to 10% of its assets \(taken
at current value)\ in money market funds, but no more than 5% of
its assets in any one fund and no Portfolio may own more than 3%
of the outstanding voting shares of any one fund. \The Adviser
will waive its management fee on any portion of the Fund's assets
that are invested in another registered investment company.\ This
restriction, however, does not apply to a transaction that is
part of a merger, consolidation or other acquisition.
If Proposal #4(i) is approved as to one or two, but not all, Portfolios of
The Parnassus Income Fund, the current investment restriction would be revised
as indicated above only as to each Portfolio for which the Proposal is approved.
For any Portfolio for which Proposal #4(i) is not approved, the restriction
regarding investment in other investment companies will remain as currently in
effect.
Required Vote: For Proposals 4(a) through 4(i), approval for The
Parnassus Fund requires that each one receive the affirmative vote of a
"majority of the outstanding voting securities" of the Fund which for
this purpose means the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of the Fund or (2) 67% or more of the
shares of the Fund present at the Meeting if more than 50% of the
outstanding shares of the Fund are represented at the Meeting in person
or by proxy. Approval for a Portfolio of The Parnassus Income Fund
requires that each Proposal receive the affirmative vote of a "majority
of the outstanding voting securities" of that Portfolio which for this
purpose means the affirmative vote of the lesser of (1) more than 50%
of the outstanding shares of the Portfolio or (2) 67% or more of the
shares of the Portfolio present at the Meeting if more than 50% of the
outstanding shares of the Portfolio are represented at the Meeting in
person or by proxy.
EACH BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSALS #4(a) through #4(i).
------------------
PROPOSAL #5 - APPROVAL OF A CHANGE IN THE SCHEDULED RATE OF THE INVESTMENT
MANAGEMENT FEE
Applies to: The Parnassus Fund
Discussion: Under the terms of the Investment Advisory Agreement dated
December 18, 1991, between The Parnassus Fund and the Adviser ("Advisory
Agreement"), the scheduled investment management fee that the Fund pays to the
Adviser starts at the annual rate of 1.0% of the Fund's average daily net assets
and declines to 0.5% as the assets of the Fund increase: 1.00% of the first $10
million in assets; 0.75% of the amount above $10 million in assets up to $30
million; 0.70% of the amount above $30 million up to $100 million; 0.65% of the
amount above $100 million up to $200 million; 0.60% of the amount above $200
million up to $400 million; 0.55% of the amount above $400 million up to $600
million; and 0.50% of the amount above $600 million.
At the request of the Adviser, at its meeting on December 5, 1997, the
Board of Trustees (including all of the Independent Trustees) considered and
approved the continuance of the Advisory Agreement. The Board (including all the
Independent Trustees) also approved, subject to approval by Fund shareholders,
the elimination of the breakpoints in the fee payable to the Adviser on Fund
assets in excess of $400 million. If approved, this Proposal would result in a
fee payable by the Fund to the Adviser at the annual rate of 0.60% of the Fund's
average daily net assets in excess of $400 million. As of the close of the
Fund's most recent fiscal year ended December 31, 1997, the net assets of the
Fund were $340 million. For that year, the investment advisory fees payable to
the Adviser were $2,121,517, the same that would have been payable had the
proposed revised fee schedule been in effect.
In evaluating the proposed revision to the fee schedule, the Trustees
considered the information provided by the Adviser with respect to its
profitability. In this regard, the Adviser noted that within its primary areas
of responsibility under the Advisory Agreement - investment management and
general administration of the affairs of the Fund - the Adviser was devoting
increasing resources to administrative and compliance services. The Adviser
stated that it intended to use the additional fees which it anticipated
receiving under the proposed revised schedule to support its administrative and
compliance services. The Trustees recognized that it is common in the mutual
fund industry for a fund to have an arrangement and fee for the provision of
administrative and compliance services to it that is separate from the provision
of investment advisory services. The Trustees found that the anticipated impact
of the proposed revised fee schedule on the Fund and its shareholders appeared
to compare favorably with the costs of such separate arrangements for
administrative and compliance services. Accordingly, the Trustees, including the
independent Trustees, determined that the proposed revision to the Advisory
Agreement fee schedule was in the best interests of the Fund and its
shareholders.
No other change is proposed with respect to the Advisory Agreement. Under
the Advisory Agreement, the Adviser, subject to the direction and control of the
Board of Trustees, determines the securities to be purchased and sold and
arranges and places orders for the purchase and sale of portfolio securities, in
accordance with the Fund's investment objective, policies and limitations. In
selecting broker-dealers to effect brokerage transactions for the Fund, the
Adviser is authorized to consider whether the broker-dealer provides brokerage
and/or research services to the Fund and/or other accounts of the Adviser. The
Adviser is also responsible for administering the affairs of the Fund. The
Adviser provides the Fund with all necessary office facilities and personnel for
servicing the Fund's investments and pays the salaries of all officers and
Trustees of the Fund who are "interested persons" as defined in the 1940 Act.
The Advisory Agreement was last approved by shareholders on November 22, 1988 in
connection with a special shareholders meeting.
The Adviser also serves as the Fund's transfer agent and accounting agent,
in which capacity the Adviser received fees of $586,486 and $70,000,
respectively, during the Fund's fiscal year ended December 31, 1997. Jerome L.
Dodson is the President and sole shareholder of the Adviser. Mr. Dodson and Thao
N. Dodson, his wife, are the Directors of the Adviser.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES OF THE PARNASSUS FUND
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL #5.
Required Vote: Approval of Proposal #5 requires the affirmative vote
of "a majority of the outstanding voting securities" of The Parnassus
Fund which for this purpose means the affirmative vote of the lesser
of (1) more than 50% of the outstanding shares of the Fund or (2) 67%
or more of the shares of the Fund present at the Meeting if more than
50% of the outstanding shares of the Fund are represented at the
Meeting in person or by proxy.
------------------------
PROPOSAL # 6 - APPROVAL OF THE DELETION OF "CURRENT INCOME" AS A SECONDARY
OBJECTIVE
Applies to: The Parnassus Fund
Discussion: At the present time, The Parnassus Fund's principal investment
objective is long-term growth of capital. Current income is a secondary
objective. When the Parnassus Fund was established 14 years ago, it seemed as if
the Fund could readily pursue both objectives. The Adviser believes that
conditions have changed quite a bit since then; fewer companies pay dividends
and those that do have a lower yield. Accordingly, the Adviser has found that it
is difficult to pursue both objectives and believes that the investment
objectives of the Fund should be revised by elimination of "current income" as a
secondary objective.
The proposed change to the Fund's investment objective does not reflect any
current or contemplated change to the investment policies of the Fund and it is
not intended to reflect any change in the level of risk associated with an
investment in the Fund.
Required Vote: Approval of Proposal #6 requires the affirmative vote of
"a majority of the outstanding voting securities" of The Parnassus Fund
which for this purpose means the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of the Fund or (2) 67% or more
of the shares of the Fund present at the Meeting if more than 50% of the
outstanding shares of the Fund are represented at the Meeting in person
or by proxy.
THE BOARD OF TRUSTEES OF THE PARNASSUS FUND, INCLUDING ITS INDEPENDENT TRUSTEES,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL #6.
-----------------------
PROPOSAL #7 - APPROVAL OF CERTAIN CHANGES IN THE
DECLARATION OF TRUST
Applies to: Both Funds
Discussion: Each Fund's Board of Trustees has determined that it would be
desirable to amend certain provisions of the Fund's Declaration of Trust, in
some cases to eliminate potential uncertainty as to the proper application of
the provision and generally to modernize the treatment of the particular matter.
The text of each provision as proposed to be changed is set forth below; the
corresponding provisions as currently in effect are set forth in Exhibit B. For
each of the changes proposed below, the Board has concluded that the proposal
will benefit the Fund and its shareholders.
7(a) Amendment of Declaration of Trust Regarding Series and Classes of Shares
Applies to: Both Funds
Discussion: Each Fund's Declaration of Trust provides for creation and
operation of multiple series and classes of shares of the Fund. Currently,
shares of The Parnassus Fund are not divided into more than one series or class
and The Parnassus Income Fund has three series of its shares outstanding: the
Balanced Portfolio, the Fixed-Income Portfolio and the California Tax-Exempt
Portfolio. To modernize and provide updated, standard provisions regarding the
creation and operation of multiple series and/or classes, Article FOURTH through
subparagraph (g) is proposed to be revised to read as follows:
FOURTH: The beneficial interest in the Trust shall be divided into
such transferable Shares, without par value, of one or more separate
and distinct Series or Classes thereof as the Trustees shall from time
to time create and establish. The number of Shares is unlimited and
upon issuance in accordance with the terms hereof shall be fully paid
and nonassessable. The Trustees shall have full power and authority,
in their sole discretion and without obtaining any prior authorization
or vote of the Shareholders of the Trust, to create and establish (and
to change in any manner) Shares with such preferences, terms of
conversion, voting powers, rights and privileges as the Trustees may
from time to time determine, to divide or combine the Shares into a
greater or lesser number, to classify or reclassify any unissued
Shares into one or more Series or Classes of Shares, to abolish any
one or more Series or Classes of Shares, and to take such other action
with respect to the Shares as the Trustees may deem desirable.
Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole Shares or 1/1,000ths of a Share or multiple
thereof. The Trustees, in their discretion without a vote of the
Shareholders, may divide the Shares of any Series into Classes. In
such event, each Class of a Series shall represent interests in the
assets of that Series and have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that
expenses allocated to a Class of a Series may be borne solely by such
Class as shall be determined by the Trustees and a Class of a Series
may have exclusive voting rights with respect to matters affecting
only that Class. Without limiting the authority of the Trustees set
forth in this Article FOURTH to establish and designate Series or
Classes, the Trustees have established and designated the Series of
Shares and Classes, if any, listed in Schedule A attached hereto and
made a part hereof.
(b) The establishment of any Series or Class in addition to
those set forth in (a) above shall be effective upon the adoption of a
resolution by a majority of the then Trustees setting forth such
establishment and designation and the relative rights and preferences
of the Shares of such Series or Class thereof. At any time that there
are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by a majority vote abolish
that Series and the establishment and designation thereof. At any time
that there are no shares outstanding of any particular Class of a
Series, the Trustees may by a majority vote abolish that Class and the
establishment and designation thereof. The Trustees by a majority vote
may change the name of any Series or Class.
(c) All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all assets in
which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall be referred to as "assets belonging to"
that Series. In addition, any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable
as belonging to any particular Series shall be allocated by the
Trustees between and among one or more of the Series in such manner as
they, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes, and shall be referred to as assets belonging
to that Series. The assets belonging to a particular Series shall be so
recorded upon the books of the Trust, and shall be held by the Trustees
in Trust for the benefit of the holders of Shares of that Series. The
assets belonging to each particular Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and
reserves attributable to that Series except that liabilities and
expenses allocated solely to a particular Class shall be borne by that
Class. Any general liabilities, expenses, costs, charges or reserves of
the Trust or Series which are not readily identifiable as belonging to
any particular Series or Class shall be allocated and charged by the
Trustees between or among any one or more of the Series or Classes in
such manner as the Trustees in their sole discretion deem fair and
equitable. Each such allocation shall be conclusive and binding upon
the Shareholders of all Series or Classes for all purposes. Any
creditor of any Series may look only to the assets of that Series to
satisfy such creditor's debt. See Article EIGHTH, paragraph 1.
As a conforming change, current subparagraph (h) of Article FOURTH is
proposed to be redesignated subparagraph (d).
To coordinate with the proposed change in Article FOURTH, Article FIFTH
is proposed to be revised by addition of the following at the end of current
paragraph 1:
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted by individual Series, except:(i) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual
Series; and (ii) when the Trustees have determined that the matter
affects only the interests of one or more Classes, then only the
Shareholders of such Class or Classes shall be entitled to vote
thereon.
As a further conforming change, Article FIFTH is proposed to be revised
by changing the second sentence of paragraph 5 to read as follows:
In the event that the Trust has outstanding two or more Series, each
such Series shall be considered as if it were a separate common law
trust covered by said Section 16(c).
To give effect to the foregoing proposed changes, Article SECOND is
proposed to be changed by revising the definition of "Shares" in paragraph 5 and
by addition of new definitions of "Series" and "Class," as follows:
5. "Shares" means the equal proportionate units of interest into which
the beneficial interest of each Series or Class thereof shall be
divided from time to time and includes fractions of shares as well as
whole shares (all of the units of a Series or of a single Class may be
referred to as "Shares" as the context may require).
6. "Series" refers to series of Shares of the Trust established in
accordance with the provisions of Article FOURTH.
7. "Class" refers to the class of Shares of a Series of the Trust
established in accordance with the provisions of Article FOURTH.
The remaining paragraphs of Article SECOND would be renumbered accordingly.
7(b) Amendment of Declaration of Trust Regarding Valuation
Applies to: Both Funds
Discussion: Each Fund's Declaration of Trust currently prescribes in detail
the times and methods for valuation of the Fund's assets and then provides for
flexibility in establishing other times and bases for valuation. To simplify and
eliminate the potential for uncertainty as to the proper application of this
provision, Article SEVENTH, paragraph 13 (through subparagraph (e)), is proposed
to be revised to read as follows: (The proposed revision reflects the proposed
changes adding definitions of "Series" and "Class" as described in Proposal
#7(a) above.)
13. The term "Net Asset Value" of any Series shall mean that amount by
which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Net Asset Value
per Share shall be determined separately for each Series of Shares and
shall be determined on such days and at such times as the Trustees may
determine. Such determination may be made on a Series-by-Series or
Class-by-Class basis, as appropriate, and shall include any expenses
allocated to a specific Series or Class. The determination shall be
made with respect to securities for which market quotations are readily
available at the market value of such securities; and with respect to
other securities and assets, at the fair value as determined in good
faith by the Trustees, provided, however, that the Trustees, without
Shareholder approval, may alter the method of appraising portfolio
securities insofar as permitted under the 1940 Act and the rules,
regulations and interpretations thereof promulgated or issued by the
Commission or insofar as permitted by any order of the Commission
applicable to the Series. The Trustees may delegate any of their powers
and duties under this paragraph 13 with respect to appraisal of assets
and liabilities. At any time the Trustees may cause the Net Asset Value
per Share last determined to be determined again in a similar manner
and may fix the time when such redetermined values shall become
effective.
As a conforming change, current subparagraph (f) of paragraph 13 is proposed to
be redesignated subparagraph (b).
7(c) Amendment of Declaration of Trust Regarding Investment Powers
Applies to: Both Funds
Discussion: Each Fund's Declaration of Trust broadly identifies in Article
THIRD, paragraph 1, the purposes of the Fund with respect to investment and
reinvestment in "securities or other financial instruments." That paragraph
includes a general authorization "to do any and all acts and things for the
preservation, protection, improvement and enhancement in value of any or all
such securities." (emphasis added) To expressly extend the scope of this
authority to the instruments referred to in the preceding portions of that
paragraph, paragraph 1 is proposed to be revised by addition of the phrase "or
other financial instruments" at the end of the paragraph.
7(d) Amendment of Declaration of Trust Regarding Indemnification
Applies to: Both Funds
Discussion: Each Fund's Declaration of Trust provides in Article SEVENTH,
paragraph 12, for mandatory indemnification of certain persons, including
present or former Trustees, officers and employees of the Fund (i.e.,
"indemnitees"), for certain "covered expenses" incurred in connection with a
"covered proceeding," as those terms are defined in that paragraph. The right to
indemnification requires that, where there has been no final decision by a court
or other applicable authority, a determination of eligibility be made by either
a quorum of a majority of Independent Trustees who are not parties to the
proceeding or in independent legal counsel in a written opinion.
In addition, the Declaration provides for mandatory advancement of covered
expenses if, generally, either: the indemnitee provides security; the Fund has
insurance against loss relating to the advancements; or a determination that the
indemnitee will be ultimately found to be entitled to indemnification has been
made by either a quorum of a majority of Independent Trustees who are not
parties to the proceeding or in independent legal counsel in a written opinion.
The By-laws of The Parnassus Fund also authorize discretionary indemnification
and advancement of expenses under certain circumstances, ad pursuant to this
provision, that Fund is currently advancing covered expenses to one current and
one former Trustee. However, as required by the 1940 Act, under no circumstances
may a person be indemnified if there has been an adjudication of liability
against that person based on a finding of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties of his or her office.
It is common in the mutual fund industry for a fund to provide for
mandatory indemnification (including advancement of expenses) to the fullest
extent permitted by law. Under Massachusetts corporate law, which the Board has
been advised would likely be the applicable state law, a corporation may, in
general, provide for mandatory indemnification for any person, and advancement
of expense may be made solely upon the person's undertaking to pay, except with
respect to a matter as to which he or she has been adjudicated not to have acted
in good faith. Accordingly, to take advantage of this greater latitude, subject
to the limitations of the 1940 Act, Article SEVENTH, paragraph 12, is proposed
to be revised to eliminate the conditions on indemnification and advancement of
"covered expenses" of an "indemnitee" by revising current paragraphs (e) and (f)
to read as follows:
(e) Except as set forth in (d) above, the Trust shall indemnify any
indemnitee for covered expenses in any covered proceeding, whether or
not there is an adjudication of liability, upon request of the
indemnitee for such indemnification.
(f) Covered expenses incurred by an indemnitee in connection with a
covered proceeding shall be advanced by the Trust to an indemnitee
prior to the final disposition of a covered proceeding upon the request
of the indemnitee and the undertaking by or on behalf of the indemnitee
to repay the advance if the indemnitee shall be adjudicated not to be
entitled to indemnification under this Article or otherwise under the
1940 Act.
7(e) Amendment of Declaration of Trust Regarding Authority to Amend
Applies to: Both Funds
Discussion: Each Fund's Declaration of Trust, in general, permits the
Declaration of Trust to be amended only with the approval of shareholders. To
provide flexibility to the Trustees, Article EIGHTH, paragraph 12, is proposed
to be revised to permit amendment of the Declaration by the Trustees except with
respect to any amendment that would have a material, adverse impact on the
rights of shareholders, and read as follows:
12. If authorized by the vote of the Trustees, the Trustees shall amend
or otherwise supplement this instrument, by making a Declaration of
Trust supplemental hereto, which thereafter shall form a part hereof;
any such Supplemental Declaration of Trust may be executed by and on
behalf of the Trust and the Trustees by any officer or officers of the
Trust. A restated Declaration of Trust, integrating into a single
instrument all of the provisions of the Declaration of Trust which are
then in effect and operative, may be executed from time to time by a
majority of the Trustees. Notwithstanding the forgoing, no amendment
that would have a material adverse impact upon the rights of the
shareholders may be made without the favorable vote of the holders of
more than 50% of the outstanding Shares entitled to vote, or by any
larger vote which may be required by applicable law in a particular
case.
As a conforming change, Article FIFTH, paragraph 1(ii), regarding
shareholder's right to vote, is proposed to be revised by addition of { }
to state: "1. The Shareholders shall have power to vote ...(ii) with respect
to the amendment of this Declaration of Trust {as provided in Article EIGHTH,
paragraph 12, ... ."}
EACH BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" PROPOSALS #7(a) through #7(f)
-------------------------
PROPOSAL #8 - APPROVAL OF POLICY ALLOWING INVESTMENTS IN ISSUERS INVOLVED IN THE
PRODUCTION OF WINE
Applies to: Both Funds
Discussion: This Proposal is in response to a shareholder request for a
change in the Funds' current policy to exclude from their respective portfolios
companies that manufacture alcohol products. This policy is an operating policy
and, as such, may be changed by a Fund's Board of Trustees without shareholder
approval.
Nevertheless, the Board of each Fund is seeking direction from the Fund's
shareholders as to whether it should revise the current policy based on the
request of John G. Rauck, a shareholder of The Parnassus Fund from San Rafael,
California, a general partner in a number of vineyard limited partnerships and
the president of the Sonoma County Grape Growers Association. In 1996, Mr. Rauck
wrote to the Fund to say that he agreed with almost all the Fund's social
criteria, but he wanted the Fund to consider excluding wine from the ban on
investment in alcohol. In his letter, Mr. Rauck acknowledged that wine could be
abused just as other alcoholic beverages could be, but he stated that statistics
show that wine (i.e. table wine as opposed to fortified wine) is abused far less
often than other alcoholic beverages. Mr. Rauck also stated that wine is
consumed primarily to enhance the flavor of food and that it is healthful when
consumed in moderation.
The Fund's President, Jerome L. Dodson, wrote back to Mr. Rauck explaining
that the Fund avoided investment in alcohol manufacturers because of the abuse
of alcohol in our society which leads to negative social consequences. Mr.
Dodson further stated that while, in his view, there is not a substantial
negative impact from moderate consumption of wine, he did not think that the
Fund should make a general exception for wine because of alcohol's effect on
society. However, Mr. Dodson agreed to present the issue to shareholders as to
whether the Fund's Board should consider implementing such a change.
If you vote "For" this Proposal, you want the Board of Trustees of your
Fund to consider changing the Fund's current policy and permit investment in
issuers that produce wine. If you vote "Against" this Proposal, the Fund will
keep its current policy of excluding all alcohol producers from its investment
portfolio. Proposal #8 is not binding on the Trustees, but is intended to be
advisory to both Boards.
Required Vote: Approval of Proposal #8 as to The Parnassus Fund or a
Portfolio of The Parnassus Income Fund requires the affirmative vote of
more than 50% of the outstanding shares of the Fund or Portfolio, as
applicable, cast with respect to Proposal #8 at the Meeting provided a
quorum is present.
EACH BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS THAT
SHAREHOLDERS VOTE "AGAINST" PROPOSAL #8.
<PAGE>
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by the Funds,
will be made primarily by mail, telephone, facsimile or oral communications by
representatives of each Fund, regular employees of Parnassus Investments,
certain broker-dealers (who may be specifically compensated for such services),
or by representatives of Shareholder Communications Corporation, professional
proxy solicitors, retained by the Funds, who will be paid the following
approximate fees for soliciting services set forth below. Each Fund will pay
this firm for its share of the fees and out-of-pocket expenses for proxy
solicitation. Each Fund will pay a portion of the costs of the Meeting,
including the costs of solicitation, allocated on the basis of the number of
shareholder accounts of each Fund.
Soliciting Fees
Fund and Expenses (Approximate)
---- --------------------------
The Parnassus Fund
Balanced Portfolio
Fixed-Income Portfolio
California Tax-Exempt Portfolio
RECEIPT OF SHAREHOLDER PROPOSALS
As a general matter, the Funds do not hold regular annual or other meetings
of shareholders. Any Fund shareholder who wishes to submit proposals to be
considered at a special meeting of that Fund's shareholders should send such
proposals to the Fund at One Market-Steuart Tower #1600, San Francisco,
California 94105.
OTHER BUSINESS
No Fund knows of any other business to be presented at the Meeting other
than the matters set forth in this Proxy Statement. If any other matter or
matters are properly presented for action at the Meeting, the proxy holders will
vote the shares which the proxy cards entitle them to vote in accordance with
their judgment on such matter or matters. By signing and returning your proxy
card, you give the proxy holders discretionary authority as to any such matter
or matters.
By order of the Boards of Trustees
January 20, 1998 Richard D. Silberman, Secretary
<PAGE>
Exhibit A
<TABLE>
<CAPTION>
Shares Outstanding as of January 5, 1998 (record date)
<S> <C>
The Parnassus Fund 7,624,198.491
Balanced Portfolio 1,813,851.848
Fixed-Income Portfolio 586,383.069
California Tax-Exempt Portfolio 390,087.176
</TABLE>
No Shareholder owns more than 5% of any of the four Funds.
<TABLE>
<CAPTION>
Fund Ownership of Current Trustees and Board Nominees*
The Fixed-Income
Parnassus Balanced Portfolio California Tax-
Fund Portfolio Exempt Portfolio
---- --------- ----------------
<S> <C> <C> <C> <C>
Jerome L. Dodson 28,741.309 2,004.503 377.833 1,860.518
Gail L. Horvath 654.606
David Gibson 1,100.298
Herb Houston 106.869 186.980
Howard M. Shapiro 389.677 1,371.395 500.024
Joan Shapiro 10,781.722 3,440.375 1,131.806
Cecilia C.M. Lee 3,574.454
Leo T. McCarthy 461.494
Donald O'Connor
45,810.429 7,003.253 2,009.663 1,860.518
Trustees & Officers own less than 1% of Outstanding shares of each Fund.
<FN>
* Share Ownership includes members of each person's immediate family.
</FN>
</TABLE>
<PAGE>
Exhibit
B
CURRENT DECLARATION OF TRUST PROVISIONS
PROPOSED TO BE REVISED
[TRUST PROVISIONS TO BE INSERTED:
Article SECOND, paragraphs 5 through 9
Article THIRD, paragraph 1
Article FOURTH
Article FIFTH, paragraphs 1 and 5
Article SEVENTH, paragraphs 12 and 13
Article EIGHTH, paragraphs 7 and 12]
<PAGE>
[Form of Proxy Card]
THE PARNASSUS FUND
PLEASE SIGN AND RETURN ALL PROXIES THAT YOU RECEIVE.
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED.
IF NO DIRECTION IS GIVEN FOR A PROPOSAL, THE SHARES WILL BE VOTED ACCORDING TO
THE RECOMMENDATIONS OF THE TRUSTEES. (Note: Proposal #3 in the Proxy Statement
does not apply to the Fund.)
Proposal #1 To elect as Trustees of the Fund: Jerome L. Dodson; David L.
Gibson; Gail L. Horvath; Herbert A. Houston; Cecilia C.M.Lee; Leo
T. McCarthy; Donald E. O'Connor; Howard M. Shapiro; Joan Shapiro
/ / FOR ALL NOMINEES LISTED ABOVE EXCEPT THOSE IDENTIFIED BELOW*
/ / AGAINST OR ABSTAIN AS TO ALL NOMINEES LISTED ABOVE
*Instruction: To withhold authority to vote for any nominee,
write his or her name below:
-----------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposal #2 To ratify the selection of Deloitte & Touche LLP as FOR AGAINST ABSTAIN
independent accountants for the current fiscal year / / / / / /
Proposal #4 To approve changes to certain fundamental invest- FOR AGAINST ABSTAIN
ment policies and restrictions ALL* ALL ALL
/ / / / / /
</TABLE>
*Except as indicated below: to vote against a
particular change, place an "X" in the box below
to the left of the number(s) (as set forth in the
Proxy Statement) of the sub-proposal(s) you do
not want to change.
/ / 4(a) Diversification of Assets
/ / 4(b) Securities Owned by Certain Persons
/ / 4(c) Restricted Securities
/ / 4(d) Loans
/ / 4(e) Warrants
/ / 4(f) Control
/ / 4(g) Foreign Securities or Currencies
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposal #5 To approve a change in the fee schedule FOR AGAINST ABSTAIN
in the Investment Advisory Agreement / / / / / /
Proposal #6 To approve a change in the investment objective FOR AGAINST ABSTAIN
/ / / / / /
Proposal #7 To approve certain changes to the Declaration FOR AGAINST ABSTAIN
of Trust ALL* ALL ALL
/ / / / / /
</TABLE>
*Except as indicated below: to vote against a
particular change, place an "X" in the box below
to the left of the number(s) (as set forth in the
Proxy Statement) of the sub-proposal(s) you do not
want to change.
/ / 7(a) Series and Classes of Shares
/ / 7(b) Valuation
/ / 7(c) Investment Powers
/ / 7(d) Indemnification
/ / 7(e) Authority to Amend
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposal #8 To approve a change in policy regarding investment in FOR AGAINST ABSTAIN
wine producers / / / / / /
</TABLE>
The Trustees recommend a vote "FOR" Proposals #1-7 and "AGAINST" Proposal #8.
To avoid the expense of adjourning the Meeting to a subsequent date,
please sign, date and return this proxy inthe enclosed post-paid envelope.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Jerome L. Dodson and Richard D. Silberman,
or either of them (or their substitutes), as attorneys and proxies of the
undersigned, with full power of substitution to represent and vote all of the
shares of the Fund owned by the undersigned and which are entitled to be voted
at the Special Meeting of Shareholders of the Fund to be held March 26, 1998, at
7:00 p.m. PST, at the Sheraton-Palace Hotel at the corner of Market and New
Montgomery Streets, San Francisco, California, and any adjournment(s) thereof,
and revoking all proxies heretofore given, as designated on this proxy card. As
to any other matter, the attorneys and proxies shall be authorized to vote in
accordance with their best judgment. This proxy shall remain in effect for a
period not to exceed one year from its date. The undersigned acknowledges
receipt of the Fund's Proxy Statement.
SIGN BELOW - Please sign
exactly as your name appears
hereon. If shares are
registered in more than one
name, all should sign but if
one signs, it binds the
others. When signing as an
attorney, executor,
administrator, agent, trustee
or guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by an
authorized person. If a
partnership, please sign in
partnership name by an
authorized person.
Dated: ________________, 1998
____ I/We plan to attend the reception. Signature: __________________
(Number attending: ___)
____ I/We do not plan to attend the reception. Signature: __________________
<PAGE>
[Form of Proxy Card]
THE PARNASSUS INCOME FUND
Balanced Portfolio
Fixed-Income Portfolio
California Tax-Exempt Portfolio
PLEASE SIGN AND RETURN ALL PROXIES THAT YOU RECEIVE.
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED.
IF NO DIRECTION IS GIVEN FOR A PROPOSAL, THE SHARES WILL BE VOTED ACCORDING TO
THE RECOMMENDATIONS OF THE TRUSTEES. (Note: Proposals #5 and #6 in the Proxy
Statement do not apply to the Fund.)
Proposal #1 To elect as Trustees of the Fund: Jerome L. Dodson; David L.
Gibson; Gail L. Horvath; Herbert A. Houston; Cecilia C.M.Lee; Leo
T. McCarthy; Donald E. O'Connor; Howard M. Shapiro; Joan Shapiro
/ / FOR ALL NOMINEES LISTED ABOVE EXCEPT THOSE IDENTIFIED BELOW*
/ / AGAINST OR ABSTAIN AS TO ALL NOMINEES LISTED ABOVE
<TABLE>
<CAPTION>
*Instruction: To withhold authority to vote for any nominee, write his or her name below:
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Proposal #2 To ratify the selection of Deloitte & Touche LLP as FOR AGAINST ABSTAIN
independent accountants for the current fiscal year / / / / / /
Proposal #3 For the Balanced Portfolio only: To approve a change FOR AGAINST ABSTAIN
in its investment objective and related policies / / / / / /
Proposal #4 To approve changes to certain fundamental invest- FOR AGAINST ABSTAIN
ment policies and restrictions ALL* ALL ALL
/ / / / / /
</TABLE>
*Except as indicated below: to vote against a
particular change, place an "X" in the box below
to the left of the number(s) (as set forth in the
Proxy Statement) of the sub-proposal(s) you do
not want to change.
/ / 4(a) Diversification of Assets
/ / 4(b) Securities Owned by Certain Persons
/ / 4(c) Restricted Securities
/ / 4(d) Loans
/ / 4(e) Warrants
/ / 4(f) Control
/ / 4(g) Foreign Securities or Currencies
/ / 4(h) Unseasoned Issuers
/ / 4(i) Other Funds
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposal #7 To approve certain changes to the Declaration FOR AGAINST ABSTAIN
of Trust ALL* ALL ALL
/ / / / / /
</TABLE>
*Except as indicated below: to vote against a
particular change, place an "X" in the box below
to the left of the number(s) (as set forth in the
Proxy Statement) of the sub-proposal(s) you do not
want to change.
/ / 7(a) Series and Classes of Shares
/ / 7(b) Valuation
/ / 7(c) Investment Powers
/ / 7(d) Indemnification
/ / 7(e) Authority to Amend
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposal #8 To approve a change in policy regarding investment in FOR AGAINST ABSTAIN
wine producers / / / / / /
</TABLE>
The Trustees recommend a vote "FOR" Proposals #1-7 and "AGAINST"
Proposal #8.
To avoid the expense of adjourning the Meeting to a subsequent
date, please sign, date and return this proxy in the enclosed
post-paid envelope.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Jerome L. Dodson and Richard D. Silberman,
or either of them (or their substitutes), as attorneys and proxies of the
undersigned, with full power of substitution to represent and vote all of the
shares of the Portfolio in which the undersigned owns shares and which are
entitled to be voted at the Special Meeting of Shareholders of the Fund to be
held March 26, 1998, at 7:00 p.m. PST, at the Sheraton-Palace Hotel at the
corner of Market and New Montgomery Streets, San Francisco, California, and any
adjournment(s) thereof, and revoking all proxies heretofore given, as designated
on this proxy card. As to any other matter, the attorneys and proxies shall be
authorized to vote in accordance with their best judgment. This proxy shall
remain in effect for a period not to exceed one year from its date. The
undersigned acknowledges receipt of the Fund's Proxy Statement.
SIGN BELOW - Please sign
exactly as your name appears
hereon. If shares are
registered in more than one
name, all should sign but if
one signs, it binds the
others. When signing as an
attorney, executor,
administrator, agent, trustee
or guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by an
authorized person. If a
partnership, please sign in
partnership name by an
authorized person.
Dated: ________________, 1998
____ I/We plan to attend the reception. Signature: __________________
(Number attending: ___)
____ I/We do not plan to attend the reception. Signature: __________________
