The Parnassus Fund
Quarterly Report
March 31, 1998
May 4, 1998
Dear Shareholder:
As of March 31, 1998, the net asset value per share (NAV) of The Parnassus
Fund was $38.16 so the overall return for the quarter was 6.77%. This compares
to a return of 13.95% for the S&P 500 and 12.83% for the average growth fund
according to Lipper Analytical Services. Normally, I would be very happy with a
return of 6.77% for a quarter since this is equivalent to a return of about 30%
on an annualized basis. However, the market continues to race ahead at
breathtaking speed and we couldn't keep up with it for the first three months of
the year.
Below you will find a table summarizing our average annual returns as of
March 31, 1998 for the one, five and ten-year periods. The overall return
figures give investment performance only while the total return figures are
reduced by the amount of the maximum sales charge (3.5%).
<TABLE>
<CAPTION>
Average Annual Average Annual
Total Return Overall Return
<S> <C> <C>
One Year 28.08% 32.73%
Five Years 13.44% 14.25%
Ten Years 14.27% 14.68%
<FN>
Returns for average growth fund supplied by Lipper Analytical Services.
Past performance is no guarantee of future returns. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost
</FN>
</TABLE>
In my view, the market as a whole is not only fully valued, but somewhat
overvalued. I expect there will be some kind of correction this year with the
market dropping as much as 10% at some point. Naturally, there's no way of
knowing for sure if and when this downdraft will occur so it doesn't make sense
to pull out of the market and hope to buy back in when the averages are lower.
For the last few years, the market has been climbing higher than all
expectations and an investor who pulled out of the market to wait for lower
prices would still be waiting today.
I believe the best strategy is to stay invested even when the market is
fully-priced or even overpriced. This is what we're doing, but we're putting our
money in some of the few companies that are still undervalued. In fact, one of
the principal reasons we underperformed the market this quarter is because most
of our companies were out of favor and did not move up as much as the hotter
sectors of the market. Before year-end, though, we hope that our undervalued
companies will catch up with and perhaps even surpass the market averages.
Performance Of Individual Companies
There were seven companies that hurt our performance the most during the
quarter. Genus dropped 34.0% to $2.13 a share because of the Asian financial
crisis. The company makes equipment for use in semiconductor manufacturing and
last year over half its sales were from Korea.
Broderbund, the software house with best-selling titles like Myst, Riven
and the Carmen San Diego series, dropped 28.8% as its stock settled at $18.25.
Although Riven, its new game release, is a runaway hit with sales of 1.6 million
copies since its introduction last fall, market share has fallen off in its
other product lines and Broderbund's overhead is still too high.
Cannondale, the maker of high quality bicycles, saw its stock drop 23.9% as
it hit $16.56 by quarter's end. Sales have been much slower than anticipated and
inventory has built up at the dealer level.
We sold Protocol Systems during the first quarter after the company
announced disappointing results and indicated that expenses would increase
substantially as new salespeople were hired in an effort to increase revenue.
Protocol has excellent medical monitoring technology and offers hospitals
substantial cost savings, but the company is just too small to fund the selling
effort to penetrate the market. The stock dropped 22.3% from the first of the
year until we sold it at $7.82. Our average cost for Protocol was $9.20 and we
held the position for about nine months so we lost 15.0% during the holding
period. Despite the loss, we did learn an important lesson. Companies with
exciting technologies may seem very promising, but unless they have the
financial resources and the know-how to market their products, they may not be
good investments.
Centigram, a telecommunications firm, declined 21.8% as its stock dropped
to $13.25. New product delays, postponed orders and turnover of salespeople all
contributed to a poor quarter.
Read-Rite dropped 12.3% during the quarter as its stock went to $13.81. The
company makes recording heads for the hard disk drive industry and, at the
present time, there is more supply than demand and there is excess inventory of
hard disks. Read-Rite's stock price reflects this situation and it has come down
from $36 in February of 1997 to $13.81. We bought the stock after most of the
decline at an average cost of $14.71. By the end of the year, we expect
conditions to have improved and the stock price should climb to much higher
levels.
Adaptec dropped 10.3% during the quarter to $19.63 a share. The company
manufactures devices that improve the flow of data between the central
processing unit of a personal computer and peripheral products such as disk
drives. Adaptec has been affected by the excess inventories in the personal
computer market and in the disk drive industry. In this regard, it faces a
similar situation to that of Read-Rite. Adaptec traded as high as $54 a share in
October of last year so today's price more than reflects current difficulties
(our cost is $21.59 a share). We expect conditions to improve substantially by
the end of the year and Adaptec's stock price should climb higher.
<PAGE>
Companies Showing Strong Performance
Advanced Micro Devices (AMD) gained 62.6% to hit $29.06 by the end of the
quarter. Last year, AMD traded in the low 40's on the strength of its then new
K-6 chip that had the same power as Intel's new chip. Although the K-6
prototypes had excellent performance, production problems caused yields to
suffer at AMD and the stock dropped to around $20 a share. The stock made a
comeback after recent reports showed better manufacturing yields and an
agreement with IBM to help AMD with its production.
The Money Store, a home and small business lender, climbed 50.3% as its
stock hit $31.94 on a takeover offer from First Union Bank. Building Materials
Holding Company gained 29.8% as its stock moved up to $13.63. Its lumber yards
did well in the first quarter as housing starts stayed strong because of the
strong economy and low interest rates.
St. John Knits, the quality women's clothing manufacturer, gained 18.1% as
its stock ended the period at $47.25. Strong sales and good management kept the
company performing well.
Amgen, the biotechnology company that makes Epogen and Neupogen for
stimulating the production of red and white blood cells, went up 12.5% during
the quarter. More liberal federal reimbursement policies for their drugs
contributed to the stock price increase.
Outlook And Strategy
Although we lagged the market by a substantial margin during the first
quarter, I'm quite optimistic for the year as a whole. As I indicated at the
beginning of this report, I think that the market as a whole is overvalued and
we're due for some kind of correction. Nevertheless, there are two important
industries where stocks are quite undervalued: disk drives and semiconductor
capital equipment. A substantial portion of our portfolio is invested in these
two industries and if their stock prices rebound, the Fund should do very well.
Stock prices in the semiconductor capital equipment industry are depressed
right now because of the Asian financial crisis. Although most of the more
sophisticated semiconductors (such as the microprocessors that run personal
computers) are designed and manufactured in the United States, most of the
commodity semiconductors (such as memory chips) are made in Asia. Because the
supply of memory chips is greater than demand in today's markets, manufacturers
are losing money. Given these losses and the Asian financial crisis,
semiconductor manufacturers have greatly reduced their purchases of capital
equipment.
<PAGE>
By the end of the year, I expect manufacturers to step up their purchases
of capital equipment. Although there's no guarantee that the Asian financial
crisis will be over by the end of the year, chances are that things will be much
better. Even if they're not, manufacturers will still have to increase purchases
of new equipment if they want to stay competitive with current technology.
Semiconductor equipment companies now in our portfolio that should benefit are
Applied Materials, ADE, Electro Scientific Industries, FEI Corporation, Genus,
Helix and Lam Research.
Our thinking is similar with the hard disk drive industry. The cause of
this industry's troubles, though, is not the Asian financial crisis, but rather
too much of a good thing. In 1997, disk drive manufacturers had to put their
products on allocation since there was more demand than supply. To meet this
demand, they increased capacity and new competitors moved into the industry.
Disk drive capacity had an enormous expansion due to a huge backlog of orders
from their customers, primarily personal computer makers.
Finding themselves in a situation where they couldn't get enough disk
drives to meet their needs, computer makers started to double and even triple
orders. These multiple orders gave the disk drive companies false signals that
exaggerated demand and they increased capacity accordingly. Soon, supply was
plentiful and disk drives were no longer on allocation. Since they no longer
were desperate, computer makers stopped double and triple ordering and the
backlog of orders disappeared. Soon, the disk drive makers found themselves with
too much production capacity. This was the situation that prevailed at the end
of 1997.
Since that time, disk drive makers have reduced capacity. At some point,
inventories will come down to very low levels and demand should once again
exceed supply. My view is that this will happen late this year or very early
next year.
When this happens, prices will firm, sales will increase and disk drive
makers will start making money again. Stock prices of these companies will also
rise. Companies in the portfolio that either manufacture disk drives or sell
components to the disk drive industry are Quantum Corporation, Western Digital,
Read-Rite and Adaptec.
Company Notes
LSI Logic held its eighth annual Classic Run on Sunday, April 26. Proceeds
estimated at more than $50,000 will go to the Milpitas Unified School District.
Winners in the male, female and wheelchair divisions will receive prizes.
Petco, a pet supply store chain, sponsors Adopt-a-Pet days in conjunction
with the Society for the Prevention of Cruelty to Animals (SPCA) and other
animal welfare groups. The company also sponsored a telethon that raised
$300,000 for the San Diego Humane Society. Petco is also in the process of
organizing a national Adopt-a-Pet Day. It also sponsored a Long Beach Pet Walk
to benefit AIDS organizations.
<PAGE>
Shareholder Meeting
About 200 people attended the shareholders meeting on March 26 at the
Sheraton-Palace Hotel in San Francisco. I really enjoyed the opportunity to meet
with shareholders and talk about the Fund. It felt like a family reunion.
Although 200 people represents only about 1% of our 22,000 shareholders,
that's a large turnout in the world of mutual fund shareholder meetings. Turnout
for most mutual funds is usually less than a dozen people and meetings are
usually held during the day so working people can't attend. We held ours in the
evening and we also had a great buffet dinner.
As of the record date of January 5, 1998, there were 9,458,948 shares
outstanding and 68.79% of the shares outstanding were represented at the meeting
in person or by proxy.
As you know, we consolidated the boards of The Parnassus Fund and The
Parnassus Income Fund (now known as The Parnassus Income Trust). While there are
still two separate Boards of Trustees, the same nine people will serve on both
boards. Below are the results of the balloting with the first column being the
percentage each candidate received as a percentage of those voting and the
second column being the percentage of all shares outstanding. The third column
represents the percentage withheld as a percentage of those voting and the
fourth column being the percentage withheld of total shares.
Election of Trustees % of Voted % of Total % Voted Withheld % Total Withheld
- --------------------------------------------------------------------------------
Jerome L. Dodson 99.63% 68.54% 0.37% 0.26%
David L. Gibson 99.63% 68.54% 0.37% 0.25%
Gail L. Horvath 99.63% 68.54% 0.37% 0.26%
Herbert A. Houston 99.64% 68.55% 0.36% 0.24%
Cecilia C.M. Lee 99.65% 68.55% 0.35% 0.24%
Leo T. McCarthy 99.65% 68.55% 0.35% 0.24%
Donald E. O'Connor 99.66% 68.56% 0.34% 0.23%
Howard M. Shapiro 99.66% 68.56% 0.34% 0.23%
Joan Shapiro 99.66% 68.56% 0.34% 0.23%
<PAGE>
Deloitte & Touche was approved as our auditor for 1998. The firm has been
with us since 1987 and they have done an excellent job. The firm was on Fortune
magazine's list of best places to work so the company meets our social as well
as our financial standards. The vote was as follows:
% of Voted % of Total
For 94.56% 65.05%
Against 0.50% 0.34%
Abstain 4.94% 3.40%
Total 100.00% 68.79%
The shareholders meeting was a joint meeting with The Parnassus Income
Trust and Proposal #3 applied only to The Parnassus Income Trust. (It changed
the objective of the Balanced Portfolio and the name of the Portfolio was
changed to the Equity Income Fund.) Proposal #4 related to approving certain
changes in the fundamental investment policies and restrictions. The vote was as
follows:
4a. Diversification of Assets
% of Voted % of Total
For 80.69% 55.50%
Against 2.25% 1.55%
Abstain 6.55% 4.51%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
4b. Securities Owned by Certain Persons
% of Voted % of Total
For 79.05% 54.38%
Against 3.40% 2.34%
Abstain 7.04% 4.84%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
4c. Restricted Securities
% of Voted % of Total
For 79.88% 54.95%
Against 2.57% 1.76%
Abstain 7.04% 4.85%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
4d. Loans
% of Voted % of Total
For 78.59% 54.06%
Against 3.08% 2.12%
Abstain 7.82% 5.38%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
4e. Warrants
% of Voted % of Total
For 77.91% 53.59%
Against 3.26% 2.24%
Abstain 8.32% 5.73%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
4f. Control
% of Voted % of Total
For 79.05% 54.38%
Against 3.48% 2.40%
Abstain 6.96% 4.78%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
4g. Foreign Securities or Currencies
% of Voted % of Total
For 78.36% 53.91%
Against 4.80% 3.30%
Abstain 6.33% 4.35%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
Proposal #5 was a change in the fee schedule of the Investment Advisory
Agreement so that the breakpoints leveled off at 0.6% instead of 0.5%. The vote
was as follows:
% of Voted % of Total
For 73.95% 50.87%
Against 7.53% 5.18%
Abstain 8.01% 5.51%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
Proposal #6 was a change in the investment objective deleting income as a
secondary objective of the Fund. Since growth of capital is clearly the focus of
the Fund, the change would clarify our investment strategy. The vote was as
follows:
% of Voted % of Total
For 80.91% 55.66%
Against 2.13% 1.47%
Abstain 6.45% 4.43%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
Proposal #7 was a series of technical changes to the Declaration of Trust
to update our 14-year old charter. The vote was as follows:
7a. Series and Classes of Shares
% of Voted % of Total
For 78.25% 53.83%
Against 2.12% 1.46%
Abstain 9.12% 6.27%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
7b. Valuation
% of Voted % of Total
For 79.31% 54.56%
Against 1.45% 1.00%
Abstain 8.73% 6.00%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
7c. Investment Powers
% of Voted % of Total
For 79.78% 54.88%
Against 1.12% 0.77%
Abstain 8.59% 5.91%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
7d. Indemnification
% of Voted % of Total
For 77.83% 53.54%
Against 2.85% 1.96%
Abstain 8.81% 6.06%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
7e. Authority to Amend
% of Voted % of Total
For 75.74% 52.10%
Against 5.27% 3.62%
Abstain 8.48% 5.84%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
Proposal #8 proved to be the most controversial issue at the meeting. It
was to change the Fund's investment policies to allow investments in wine
producers. It was submitted by John G. Rauck, a shareholder in The Parnassus
Fund from San Rafael, California and a general partner in a number of vineyard
limited partnerships and the President of the Sonoma County Grape Growers
Association. Mr. Rauck wrote us to say that he agreed with almost all of 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 showed that wine (i.e., table wine as opposed to fortified wine)
is abused far less often than other alcoholic beverages. He also stated that
wine is consumed primarily to enhance the flavor of food and that it is
healthful when consumed in moderation.
The Trustees agreed with some of Mr. Rauck's points, but opposed the
resolution because the abuse of alcohol leads to negative social consequences
and it was not good policy to invest in a company that produced alcohol.
One very thoughtful letter we received on the issue came from one of our
shareholders, Cristina A. Booker.
To whom it may concern;
As a public health student at UC Berkeley, a Parnassus shareholder and a
wine lover, I have mixed feelings about proposal #8 of the Proxy Statement.
My inclination is to vote against investing in wine producers such as Gallo
(and other large wine houses) that profit from addiction and suffering. The
devastating impact of alcoholism on individuals, families and communities is not
worth funding or supporting.
However, the wine industry has shown integrity that distinguishes it from
the beer and liquor producers. One wine association (the name escapes me right
now) immediately adopted industry advertising standards put forth by the
DANGEROUS PROMISES campaign. This was a far cry from beer producers who refused
to comply with DANGEROUS PROMISES' request for advertising without sexist and
racist portrayals of people! The wine association is to be commended.
To avoid the risk of investing in companies whose interests are not
socially responsible, we unfortunately lose the opportunity of supporting
responsible wine producers. An alternative that would be worth exploring might
include investing only in wine makers who are not contributing to easy access to
fortified wine and who are aligned with Parnassus' vision.
I greatly value being part of this dialogue and hope to hear more about
this investment issue soon.
Sincerely,
Cristina A. Booker
San Francisco, California
As with so many issues in life, there are good points on both sides. Both
Ms. Booker's ideas and Mr. Rauck's ideas have a lot of merit.
In any case, the vote on Proposal #8 was closer than the others, but it did
lose. The vote was as follows:
% of Voted % of Total
For 26.31% 18.10%
Against 55.84% 38.41%
Abstain 7.34% 5.05%
Broker Non-vote 10.51% 7.23%
Total 100.00% 68.79%
Size Of Dividend
On December 19 of last year, the Fund paid a dividend of $8.55 per share.
This was the largest dividend in the Fund's history. A number of shareholders
(including my mother) complained about the size of the dividend and the
resulting tax liability. Since we had a total return of about 30% last year and
we sold many of our positions, we had to declare that size of dividend to comply
with IRS regulations.
Some shareholders said that the size of the dividend had thrown off their
calculations of their estimated taxes and the result was that the IRS might fine
them for underpayment. Since I make estimated tax payments every quarter, the
same thing might happen to me. As Bill Clinton would say, "I feel your pain."
In any case, in the future I will try to warn shareholders if an
exceptionally large dividend is about to occur. Although I did indicate in the
third quarter report that a large dividend would be coming, I did not quantify
it. Although I did not know in October exactly how much the dividend would be, I
could have made a reasonable estimate. In the future, I will try to give both
advance warning and a reasonable estimate of any large distribution.
<PAGE>
Trustees
I'm very proud of our new Board of Trustees. In terms of quality, I think
our board is as good as any in the mutual fund industry. In addition to the
biographical information contained in the proxy statement for the shareholders
meeting, I would like to give you some background on the eight outside Trustees.
David Gibson has served as a Trustee of The Parnassus Fund for 12 years,
the longest of all the independent Trustees. David is an attorney in private
practice specializing in taxation and personal financial planning. His previous
experience includes 11 years with the Crown Zellerbach Corporation where he
served as tax counsel, and later, as Director of Public Affairs. He also served
as senior trial attorney in the San Francisco office of the Internal Revenue
Service. For those of you who don't like the IRS, I would like to point out that
David was recently named Volunteer of the Month by the San Francisco Bar
Association for his pro bono work over the past decade representing
community-based organizations and individuals in tax disputes with the
California Franchise Tax Board and the IRS. During his tenure with the IRS,
David was very involved with drafting regulations for non-profits and he draws
on this experience in doing community work. He is active in civic affairs
generally and his special interests include senior citizens and environmental
protection. We are, indeed, fortunate to have someone of David's stature serving
on the Board.
Gail Horvath has served for two years as a Trustee of The Parnassus Fund.
In her other life, she's the co-owner and director of new product development
for Just Desserts, the famous San Francisco bakery that has great tasting sweets
and is a classic example of a socially responsible business. Previously, Gail
served as a director of Continental Savings of America and she's been active in
community affairs in San Francisco.
Herb Houston has served for six years as a Trustee of The Parnassus Income
Trust. For over a decade, he's served as Chief Executive Officer of the Haight
Ashbury Free Clinics. Previously, he worked as Development Director for the
National Association for Sickle Cell Disease, Vice President of the Bay Area
Black United Fund and an executive for the Combined Federal Campaign and the
United Way of the Bay Area. I serve on the Board of the Haight Ashbury Free
Clinics and, in this regard, I've had an opportunity to see how effective Herb
is. In my view, he's the best non-profit executive there is.
Cecilia Lee is new to the Parnassus Family of Funds, but brings a world of
great experience. She's 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. She serves as 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.
Another new Trustee is Leo T. McCarthy who brings invaluable experience in
government to our board. Leo is the former Lt. Governor of California and
Speaker of the State Assembly. He's now 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. Previously, he also served as a Regent of the University of
California.
<PAGE>
Donald O'Connor is a retired executive who spent 28 years as Vice President
of Operations at the Investment Company Institute, 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. His previous experience
includes six years with the SEC including four years as Branch Chief of Market
Surveillance. Don's presence on the Board will change the dynamics of Trustee
meetings. Throughout the history of the Parnassus Funds, I've always been the
Trustee who knew the most about the mutual fund industry, but that will now
change and I'll have to content myself with being the second most knowledgeable
person in the room. Don has tremendous understanding of the mutual fund industry
and he'll bring years of rich experience to the Parnassus Funds.
Howard Shapiro is a consultant to non-profit organizations specializing in
marketing, fund-raising and organizational structure. He is Chairman of the
Board of the Portland Housing Authority and 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. Howard has
been on the Board of The Parnassus Income Trust for six years.
Another Trustee new to The Parnassus Fund, but not to the Parnassus group,
is Joan Shapiro who is not related to Howard Shapiro except by friendship and a
shared interest in social investing. She's a consultant in development banking,
community reinvestment and social investing. For 20 years, she worked with the
South Shore Bank of Chicago, the nation's leading development bank, with her
most recent position being Executive Vice President. She is a former President
of the Social Investment Forum and a Governor of International House at the
University of Chicago. She has served as a Trustee of The Parnassus Income Trust
since its inception six years ago.
Yours truly,
Jerome L. Dodson
President
P.S. Parnassus Investments has formed a joint venture with Copper Mountain
Advisors of Portland, Oregon. We will manage 401(k) and 403(b) retirement
accounts in conjunction with Copper Mountain. If your firm would like to start a
retirement program or would like to convert an existing program, please call
William Thomason, Director of Portfolio Management at Parnassus. He can be
reached at (800) 999-3505.
<PAGE>
<TABLE>
<CAPTION>
THE PARNASSUS FUND PORTFOLIO: MARCH 31, 1998*
# of Shares Issuer Market Value Per Share
- --------------------------------------------------------------------------------
<S> <C> <C>
100,000 Acme Metals, Inc. $ 918,750 $ 9.19
250,000 ADE Corporation 4,234,375 16.94
525,000 Adaptec, Inc. 10,303,125 19.63
600,000 Advanced Micro Devices, Inc. 17,437,500 29.06
120,000 Amgen, Inc. 7,305,000 60.88
50,000 Applied Materials, Inc. 1,765,625 35.31
200,000 Broderbund Software, Inc. 3,650,000 18.25
580,000 Building Materials Holding Corp. 7,902,500 13.63
300,000 Cannondale Corporation 4,968,750 16.56
500,000 Centigram Communications 6,625,000 13.25
100,000 Claire's Stores, Inc. 2,293,750 22.94
475,000 Cognex Corporation 10,153,125 21.38
450,000 Compaq Computer Corporation 11,671,875 25.94
300,000 Electronics for Imaging, Inc. 7,800,000 26.00
500,000 Electro Scientific Industries, Inc. 19,312,500 38.63
600,000 First Data Corporation 19,500,000 32.50
600,000 FEI Company 7,500,000 12.50
205,000 Just For Feet, Inc. 4,176,875 20.38
50,000 Galoob Toys, Inc. 496,875 9.94
700,000 Genus, Inc. 1,487,500 2.13
600,000 Green Tree Financial Corporation 17,062,500 28.44
400,000 The Gymboree Corporation 10,350,000 25.88
425,000 Helix Technology Corporation 8,500,000 20.00
80,000 Hewlett-Packard Company 5,070,000 63.38
50,000 Houghton Mifflin Company 1,593,750 31.88
375,000 In Focus Systems 3,375,000 9.00
75,000 Intel Corporation 5,854,688 78.06
200,000 Lam Research Corporation 5,625,000 28.13
375,000 LSI Logic Corporation 9,468,750 25.25
165,000 Mentor Graphics Corporation 1,619,063 9.81
275,000 The Money Store, Inc. 8,782,813 31.94
1,000,000 Morgan Products, Ltd. 5,500,000 5.50
50,000 Mylan Laboratories, Inc. 1,150,000 23.00
900,000 Oxford Health Plans, Inc. 13,443,750 14.94
325,000 Petco Animal Supplies, Inc. 6,337,500 19.50
525,000 Quantum Corporation 11,189,062 21.31
875,000 Read-Rite Corporation 12,085,937 13.81
825,000 Sequent Computer Systems, Inc. 15,056,250 18.25
50,000 Silicon Graphics, Inc. 696,875 13.94
400,000 St. John Knits, Inc. 18,900,000 47.25
300,000 Toys "R" Us, Inc. 9,037,500 30.13
50,000 West Marine, Inc. 1,456,250 29.13
950,000 Western Digital Corporation 16,684,375 17.56
--------------
Total Portfolio $ 338,342,188
Short Term Investments
and Other Assets $ 28,522,874
--------------
Total Net Assets $ 366,865,062
--------------
The Net Asset Value
as of March 31, 1998 $ 38.16
<FN>
* Portfolio is current at time of printing, but composition is
subject to change.
</FN>
</TABLE>
The Parnassus Fund
Distributed by Parnassus Investments
One Market-Steuart Tower #1600
San Francisco, California 94105
415-778-0200
800-999-3505
www.parnassus.com
This quarterly report must be preceded or accompanied by a
current prospectus.
