1933 Act File No.: 2-93131
1940 Act File No.: 811-4044
Securities and Exchange Commission
Washington, DC 20549
Form N-1A
REGISTRATION UNDER THE SECURITIES ACT OF 1933
Post Effective Amendment No. 18
and/or
REGISTRATION UNDER THE INVESTMENT ACT OF 1940
Amendment No. 20
_____________________
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THE PARNASSUS FUND
(Exact Name of Registrant as Specified in Charter)
One Market - Steuart Tower #1600
San Francisco, CA 94105
(Address of Principal Executive Office)
Registrant's Telephone Number including Area Code: (415) 778-0200
Jerome L. Dodson
One Market - Steuart Tower #1600
San Francisco, CA 94105
(Name and Address of Agent for Service)
----------------------
It is proposed that this filing will become effective
X On May 1, 2000 pursuant to paragraph (b) of Rule 485
----
Title of Securities Being Registered..........Shares of Beneficial Interest,
no par value.
<PAGE>
The Parnassus FUND
Prospectus
MAY 1, 2000
PROSPECTUS-MAY 1, 2000
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The Parnassus Fund (the "Fund") is a mutual fund, managed by Parnassus
Investments (the "Adviser") that invests in a diversified group of securities.
The Fund's investment objective is to achieve long-term growth of capital. The
Adviser chooses the Fund's investments using social as well as financial
criteria. In general, the Adviser will choose investments that it believes will
have a positive social impact.
TABLE OF CONTENTS
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Investment Summary 2 The Adviser 10
Performance Information 3 How to Purchase Shares 10
Fund Expenses 4 How to Redeem Shares 14
The Legend of Mt. Parnassus 5 Distributions and Taxes 15
Investment Objective and Policies 5 Financial Highlights 16
Investment Risks 7 General Information 16
Management 8
Like securities of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission (SEC), and the SEC has not
determined if this prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
1
<PAGE>
INVESTMENT SUMMARY
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Investment Objective and Principal Strategies
The Parnassus Fund is a stock fund whose investment objective is to achieve
long-term growth of capital. The Fund invests mainly in domestic stocks and
subscribes to the "contrarian" strategy of investing. This means that the Fund's
Adviser seeks stocks that are currently out of favor with the investment
community, but that it believes are financially sound and have good prospects
for the future. To determine a company's prospects, the Adviser reviews the
company's profit and loss statement, sales and earnings histories, net cash flow
and outlook for future earnings.
The Fund takes social as well as financial factors into account in making
investment decisions. In general, The Parnassus Fund looks for companies that
respect the environment, treat their employees well, have effective equal
employment opportunity policies and good community relations as well as ethical
business dealings. The Fund will not invest in companies that are involved with
gambling or manufacture alcohol or tobacco products. The Fund also screens out
weapons contractors and those that generate electricity from nuclear power.
Principal Risks of Investing in the Fund
Investing in the Fund may result in a loss of money. When you sell your
shares, they may be worth more or less than what you paid for them. The Fund's
share price changes daily based on the value of its holdings. Stock markets are
volatile and stock values fluctuate in response to the fortunes of individual
companies and in response to general market and economic conditions both here
and abroad. The Fund's holdings can vary significantly from broad stock market
indexes. As a result, the Fund's performance can deviate from the performance of
those indexes. For best results, investors should have a long-term perspective
and plan to hold their shares for at least three years. (Legally, shareholders
may redeem at any time, but the Adviser recommends a minimum three-year holding
period.)
2
<PAGE>
Performance Information
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The bar chart below provides an indication of the risks of investing in The
Parnassus Fund by showing changes in the Fund's performance from year to year
over a 10-year period. The returns in the chart do not include the effect of the
sales charge which would have made the returns lower. How the Fund performed in
the past is not necessarily an indication of how the Fund will perform in the
future.
Insert Chart
During the ten-year period shown in the bar chart, the highest return for a
quarter was 44.6% (quarter ending December 31, 1998) and the lowest return for a
quarter was a loss of 26.9% (quarter ending September 30, 1990).
Below is a table comparing the performance of The Parnassus Fund with the S&P
500 Index and the average mid-cap value fund followed by Lipper Inc. The total
return column of the table assumes that the maximum sales charge of 3.5% was
deducted from the initial investment. The performance figures for the average
growth fund do not deduct any sales charges that may apply. Figures are average
annual returns for the one, five and ten-year periods ending December 31, 1999.
<TABLE>
<CAPTION>
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Periods Ending Average Annual Lipper Mid-Cap Wilshire 5000 S&P 500
December 31, 1999 Total Return Value Average Index Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year 42.57% 9.68% 23.82% 21.04%
Five Years 16.07% 16.55% 27.11% 28.46%
Ten Years 16.37% 12.71% 17.61% 18.14%
<FN>
Past performance is no guarantee of future returns. Investment return and
principal will fluctuate and an investor's shares, when redeemed, may be worth
more or less than their original cost.
The S&P 500 is the Standard & Poor's Composite Index of 500 large stocks, a
widely recognized index of common stock prices. The Wilshire 5000 is a composite
index of more than 5,000 companies that includes virtually all publicly-traded
companies that are suitable for investment by institutional investors. For
comparative purposes, The Parnassus Fund will henceforth use the Wilshire 5000
instead of the S&P 500 because the former is more representative of the market
as a whole while the S&P 500 emphasizes larger companies. An individual cannot
invest in the S&P 500 Index or the Wilshire 5000 Index and these indices do not
take any investing expenses into account as do the figures for The Parnassus
Fund and Lipper's Mid-Cap Value Average.
</FN>
</TABLE>
3
<PAGE>
FUND EXPENSES
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This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
Shareholder Fees (paid by the investor directly)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) .............. 3.5%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends .............. None
Redemption Fees ...........................................................None
Annual Fund Operating Expenses (paid from fund assets)
Management Fees ......................................................... 0.65%
12b-1 Fees .............................................................. None
Other Operating Expenses ................................................ 0.42%
Total Fund Operating Expenses ........................................... 1.07%
The Example in this table is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5%* return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
One Year Three Years Five Years Ten Years
$455 $678 $919 $1,610
The expenses shown above are the total fees paid throughout the time
period--not ones you pay every year. For example, the $1,610 figure for ten
years is not the annual expense figure, but the total cumulative expenses a
shareholder would have paid for the entire ten-year period.
From time to time, the Fund may direct brokerage commissions to firms that
may pay certain expenses of the Fund subject to "best execution." This is done
only when brokerage costs are reasonable and the Fund determines that the
reduction of expenses is in the best interest of the shareholders. The Fund did
not engage in such directed brokerage in 1999. If it does so in the future, such
directed brokerage is expected to occur on an irregular basis, so the effect on
the expense ratios cannot be calculated with any degree of certainty.
* The 5% figure is an example that regulations require all mutual funds to use
as an illustration. It should not be considered a representation of past or
future performance. Actual performance and expenses may be more or less than
those shown.
4
<PAGE>
THE LEGEND OF MT. PARNASSUS
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Parnassus is a mountain in central Greece whose twin peaks rise more than
8,000 feet above sea level. A dense forest covers the slopes of Mt. Parnassus,
but the summit is rocky and, most of the time, covered with snow. The mountain
plays a prominent role in Greek mythology because on its southern slope,
overlooking the Gulf of Corinth, lies Delphi, site of the famous oracle.
Originally, the oracle belonged to Gaia, the earth goddess. Later, Mother Earth
was worshipped under the name Delphyne and she controlled the oracle along with
her serpent-son, Python, and her priestess-daughters who controlled the rites.
Eventually, the Greek god, Apollo, took over the site, doing away with Python,
but keeping the priestesses.
The most "Greek" of the gods, Apollo represented enlightenment and
civilization and presided over the establishment of cities. Identified with the
development of Greek codes of law, Apollo was also the god of light, a master
musician and skilled archer. Legend has it that Python, an enormous serpent
raised in the caves of Mt. Parnassus, controlled the site of Delphi. When
Apollo, representing civilization, challenged Python, representing anarchy,
there was a heroic struggle, but the god finally killed the dragon by shooting a
hundred arrows into its body.
There were many oracles in ancient Greece, but only the one at Delphi
achieved a record of reliability. Apollo's temple at Delphi soon became an
enormous storehouse of treasures that were gifts of those who had consulted the
oracle.
The oracle communicated through the voice of a priestess who spoke while in a
trance. The priests of Delphi, who interpreted the sayings of the priestess,
obtained a great deal of knowledge and information from talking to the people
who came from all over the Greek world to consult at the shrine of Apollo. Quite
often, the oracle went against the prevailing wisdom of the time and,
frequently, the proud were humbled and the lowly were justified.
INVESTMENT OBJECTIVE AND POLICIES
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Objective
The Fund's investment objective is to achieve long-term growth of capital.
The Fund will attempt to achieve this objective by investing primarily in
"equity securities" of companies of various sizes based on the criteria
described below. "Equity securities" consist of common stocks or securities
having the characteristics of common stocks which include convertible securities
or warrants. There can be no assurance that the Fund will achieve its objective.
5
<PAGE>
Selection Process
In general, the Fund's Adviser uses three basic criteria in identifying
equity securities eligible for the Fund's portfolio:
1) the security is selling at a price below its intrinsic value as
calculated by the Adviser (contrarian principle);
2) the issuer is financially sound with good prospects for the future
(financial principle); and
3) the company, in the Adviser's judgment, meets the social criteria below
(social principle).
Once a security is purchased, however, the Adviser may continue to hold it
even if it is no longer undervalued.
Social Policy
The Adviser looks for certain social policies in the companies in which the
Fund invests. These social policies are: (1) treating employees fairly; (2)
sound environmental protection policies; (3) a good equal employment opportunity
program; (4) quality products and services; (5) a record of civic commitment;
and (6) ethical business practices. Obviously, no company will be perfect in all
categories, but the Adviser makes value judgments in deciding which companies
best meet the criteria.
Although the Fund emphasizes positive reasons for investing in a company, our
operating policies call for excluding companies that manufacture alcohol or
tobacco products or are involved with gambling. The Fund also screens out
weapons contractors and those that generate electricity from nuclear power.
The social criteria of The Parnassus Fund limit the availability of
investment opportunities. However, the Trustees and the Adviser believe that
there are sufficient investments available that can meet the Fund's social
criteria and still enable the Fund to provide a competitive rate of return.
Other Policies
The Fund may invest up to 15% of its total assets in foreign securities. The
Fund also may invest up to 5% of its assets in community development loan funds
such as those that provide financing for small business and for low and moderate
income housing. The Fund will not make loans to a project itself, but rather
will invest money in an intermediary community loan fund. With projects having a
strong, positive social impact, the Fund may invest in obligations issued by
community loan funds at below-market interest rates. Generally, there is no
secondary market, and thus no liquidity, for these investments. Also, community
loan funds do not have the same kind of resources as do large commercial
enterprises. In general, the Fund seeks to invest in community organizations
that have had a successful record in making these kinds of loans and that are
deemed creditworthy by the Adviser.
Under normal circumstances, the Fund will have virtually all of its assets
invested in equity securities. However, for temporary defensive purposes or
pending the investment of the proceeds from sales of shares of the Fund or sales
of portfolio securities, or for other reasons at the discretion of the Adviser,
all or part of the assets may be invested in money market instruments or in
investment grade, long-term debt securities. The Fund may invest up to 5% of its
total assets in warrants. Investing heavily in these securities limits the
Fund's ability to achieve capital appreciation, but can help preserve the Fund's
assets when the equity markets are unstable.
6
<PAGE>
INVESTMENT RISKS
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All investments involve risk and investing in the Fund is no exception.
Because the Fund invests primarily in equity securities, there is the risk that
individual stocks owned by the Fund could lose value. Also, the equity markets
as a whole could go down, resulting in a decline in value of the Fund's
investments. Changes in economic or political conditions, both domestic and
international, may result in a decline in value of the Fund's investments.
Foreign securities are affected by foreign markets, economics and political
systems, which may not be as stable as in the U.S. Also, changing values of
foreign currencies can cause losses and foreign securities may be less liquid
than U.S. stocks and bonds. Differences in foreign laws, accounting standards,
public information, custody and settlement practices provide less reliable
information on foreign investments and involve more risks.
For risks of investing in community loan funds and money market instruments
see the caption "Other Policies" above.
7
<PAGE>
MANAGEMENT
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The Trustees and officers are listed below, together with their principal
occupations during at least the past five years.
Jerome L. Dodson*, 56, President and Trustee, is also President of Parnassus
Investments. From 1975 to 1982, Mr. Dodson served as President and Chief
Executive Officer of Continental Savings and Loan Association in San Francisco.
From 1982 to 1984, he was President of Working Assets Money Fund and he also
served as a Trustee from 1988 to 1991. 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. Mr. Dodson has been the Fund's
portfolio manager since its inception. He is also President and Trustee of The
Parnassus Income Trust.
David L. Gibson, 60, Trustee, 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 J.D. from Washington and Lee
University and an LLM from William and Mary. Mr. Gibson is also a Trustee of The
Parnassus Income Trust.
Gail L. Horvath, 50, Trustee, is co-owner of 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. For four
years, she served as a director of Continental Savings of America. She is a
graduate of Ohio State University. Ms. Horvath is also a Trustee of The
Parnassus Income Trust.
Herbert A. Houston, 56, Trustee, is a health care consultant. Previously,
he spent 12 years as the Chief Executive Officer of the Haight-Ashbury Free
Clinics, Inc. Mr. Houston is on the Board of the Alameda County Medical Center
and is a Health Commissioner for Alameda County. 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. Mr. Houston is
also a Trustee of The Parnassus Income Trust.
Cecilia C.M. Lee, 56, Trustee, is President of hybridArts.com, a Silicon
Valley-based electronics firm. She is a San Francisco Asian Art commissioner and
serves on the board of public television station KQED. 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 Taiwan. Ms. Lee is also a Trustee of The Parnassus Income Trust.
Leo T. McCarthy, 69, Trustee, 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
licensed to practice law in California. Mr. McCarthy is also a Trustee of The
Parnassus Income Trust and a Director of the Forward Global Fund, another mutual
fund.
8
<PAGE>
Donald E. O'Connor, 63, Trustee, 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 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 holds a Masters in Business Administration from the
same institution. Mr. O'Connor is also a Trustee of The Parnassus Income Trust.
Howard M. Shapiro, 68, Trustee, 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 is also a Trustee of The Parnassus Income Trust. He is no
relation to Joan Shapiro.
Joan Shapiro, 57, Trustee, is a consultant in
development banking, community reinvestment, ethical investing and corporate
social responsibility. 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 industry. Active in Chicago's civic and cultural life for 25 years,
she is a Governor of International House of the University of Chicago and a
member of the President's Council of Cornell Women. She is a graduate of Cornell
University. Ms. Shapiro is also a Trustee of The Parnassus Income Trust. She is
no relation to Howard Shapiro.
Bryant Cherry, 35, Vice President and Treasurer, is also Vice President and
Treasurer of Parnassus Investments. Previously, he worked for Stanford
University's Graduate School of Business, Frank, Rimerman & Co. Accountancy and
Merrill Lynch & Co. He is a graduate of Stanford University and holds a Master's
degree in accounting from San Jose State University. Mr. Cherry joined Parnassus
Investments in 2000. He is also Vice President and Treasurer of The Parnassus
Income Trust. Susan Loughridge, 51, Vice President and Shareholder Services
Manager.
Ms. Loughridge is a graduate of University of Arizona. She began her career
as an examiner for the Federal Home Loan Bank Board and later joined Continental
Savings where she managed Branch Operations until 1991. She has served as
Shareholder Services Manager at Parnassus Investments since 1993. Ms. Loughridge
is also Vice President of The Parnassus Income Trust.
Richard D. Silberman, 62, Secretary, is an attorney specializing in business
law. He holds a bachelor's degree in business administration from the University
of Wisconsin, a Bachelor of Law, also from the University of Wisconsin and a
Master of Law from Stanford University. He is a member of both the Wisconsin and
California Bars. Mr. Silberman is also Secretary of The Parnassus Income Trust.
* Denotes "interested" trustee as defined in the Investment Company Act of 1940.
9
<PAGE>
THE ADVISER
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Parnassus Investments (the "Adviser"), One Market-Steuart Tower #1600, San
Francisco, California 94105, acts as investment adviser to the Fund, subject to
the control of the Fund's Board of Trustees. It supervises and arranges the
purchase and sale of securities held in the portfolio of the Fund. The Adviser
has had 14 years of experience managing the Fund. Mr. Jerome L. Dodson has
served as the Fund's portfolio manager since its inception. For more information
on Mr. Dodson, see "Management" above.
For its services, the Fund, under an Investment Advisory Agreement (the
"Agreement") between the Fund and the Adviser, pays the Adviser a fee. The fee
is computed and payable at the end of each month. The following annual
percentages of the Fund's average daily net assets are used: 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; and 0.60% of the amount above $200
million. For 1999, the Fund paid the Adviser 0.65% of its average daily net
assets which totaled $2,010,365 in 1999.
HOW TO PURCHASE SHARES
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Because the sales charge on its shares is lower than that charged by many
other investment companies which impose a sales charge, The Parnassus Fund is
what is commonly called a "low load" fund.
Shares of the Fund may be purchased by sending a check directly to the
Adviser, which is also the Fund's principal underwriter ("Distributor") (see
"Direct Purchase of Shares" below), or by ordering shares through a
broker-dealer which is a member of the National Associations of Securities
Dealers, Inc. and has signed a sales agreement with the Distributor (see
"Purchases through a Broker-Dealer" below). The purchase price per share is the
offering price, which is the net asset value per share as of the next
calculation after the order is placed, plus a sales charge calculated as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Dealer Discount
Sales Charge as a Percentage of Offering Net Asset as a Percentage
Amount of Transaction at Offering Price Price Value Offering Price
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $15,000 3.5% 3.63 3.5%
$15,000 but less than $25,000 3.0 3.09 3.0%
$25,000 but less than $50,000 2.5 2.56 2.5%
$50,000 but less than $100,000 2.0 2.04 2.0%
$100,000 but less than $250,000 1.5 1.52 1.5%
$250,000 but less than $500,000 1.0 1.01 1.0%
$500,000 but less than $1,000,000 0.5 0.50 0.5%
$1,000,000 or more No Sales Charge
</TABLE>
10
<PAGE>
These types of investors in the following categories may combine their
purchases into a single transaction to qualify for a reduced sales charge: 1) an
individual, his or her spouse and their children purchasing for his, her or
their own account(s) and 2) a trustee or other fiduciary purchasing for a single
trust estate or single fiduciary account.
Certain categories of people may invest in The Parnassus Fund without paying
a sales charge. These categories include Trustees, officers and employees of The
Parnassus Fund and the Fund's Adviser, representatives registered with the
National Association of Securities Dealers, Inc., custodial accounts qualifying
under Section 403(b) or Section 401(k) of the Internal Revenue Code of 1986 (the
Code), pension, profit-sharing or other employee benefit plans qualified under
Section 401 of the Code and discretionary accounts of bank trust departments or
registered investment advisers. Investors may be charged a transaction or other
fee in connection with purchases or redemptions of Fund shares at net asset
value (i.e., without a sales charge) on their behalf by an investment adviser, a
brokerage firm or other financial institution.
Statement of Intention (Letter of Intent)
A single investor may also obtain the reduced sales charges shown above by
completing a Statement of Intention. By expressing in writing an intent to
invest $15,000 or more within a thirteen-month period, a single investor may
obtain the reduced sales charges shown above. To receive the reduced sales
charge, you can complete the "letter of intent" section on the application or
write your own letter of intent.
While a shareholder is not obligated to fulfill a letter of intent, if the
goal is not met, the purchaser is required to pay the difference between the
sales charge actually paid and the one that would otherwise have been due had no
Statement of Intention been signed.
Rights of Accumulation
A single investor may also obtain a cumulative quantity discount (known as a
right of accumulation or ROA) by adding his or her current purchase to the net
asset value (at the close of business on the previous day) of all shares
previously purchased and still owned in the Fund. The applicable sales charge is
then based on this total. A shareholder may also add the total of any investment
in The Parnassus Income Trust to The Parnassus Fund total for purposes of
calculating the sales charge. To benefit from any ROA, a shareholder must
identify any ROA links to other accounts and communicate these links to the
Fund's shareholder service staff.
Other Information
The Fund also offers additional services to investors, including plans for
the systematic investment and withdrawal of money, as well as IRA, ROTH IRA and
SEP plans. Information about these plans is available from the Distributor.
The minimum initial investment in the Fund is $2,000 except for retirement
plans, accounts opened pursuant to a Uniform Transfers to Minors Act or a
Uniform Gifts to Minors Act (UGMA), and Parnassus Automatic Investment Plan
(PAIP) accounts which have a $500 minimum initial investment. The minimum
additional investment is $50. The Distributor reserves the right to reject any
order.
11
<PAGE>
Direct Purchase of Shares
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An investor should complete and mail an application form and send it along
with a check payable to The Parnassus Fund. It should be sent to the Fund at the
following address:
The Parnassus Fund
One Market-Steuart Tower #1600
San Francisco, California 94105
An initial investment must be at least $2,000 except for PAIP accounts, UGMA
accounts and certain employee benefit plans or tax qualified retirement plans
(e.g. IRA(s), SEP(s)) which have a $500 minimum. Additional investments for all
accounts must be at least $50. With additional investments, shareholders should
write the name and number of the account on the check. Checks do not need to be
certified, but are accepted subject to collection and must be drawn in United
States dollars on United States banks. The investment will be processed at the
public offering price calculated on the same business day it is received if it
arrives before 1:00 p.m. San Francisco time; otherwise, it will be processed the
next business day. A fee of $15.00 will be assessed if a check is returned to us
unpaid due to insufficient funds, stop payment or for any other reason.
Purchases Via Parnassus Automatic Investment Plan (PAIP)
After making an initial investment to open an account, a Fund shareholder may
purchase additional shares ($50 minimum) via the Parnassus Automatic Investment
Plan (PAIP). On a monthly or quarterly basis, your money will automatically be
transferred from your bank account to your Fund account on the day of your
choice (3rd or 18th day of the month). You can elect this option by filling out
the PAIP section on the new account form. For further information, call the Fund
and ask for the free brochure called "Automatic Investing and Dollar-Cost
Averaging." A fee of $15.00 will be assessed if the automatic purchase cannot be
made due to insufficient funds, stop payment or for any other reason.
Purchases Through A Broker-Dealer
All orders places with broker-dealers must be received by the Fund prior to
1:00 p.m. San Francisco time in order to be processed that day. Any order
received after 1:00 p.m. will be processed the following business day. The
broker-dealer is responsible for placing purchase orders promptly with the
Distributor and for forwarding payment within three business days.
12
<PAGE>
Net Asset Value
The Fund's net asset value (NAV) per share is usually calculated at the close
of trading on the NYSE, usually 4:00 p.m. Eastern time, on each day that the New
York Stock Exchange (NYSE) is open for trading ("business day") and on any other
day that there is a sufficient degree of trading in investments held by the Fund
to affect the net asset value. The NYSE is closed on national holidays and Good
Friday. The net asset value may not be determined on any day that there are no
transactions in shares of the Fund. The net asset value per share is the value
of the Fund's assets, less its liabilities, divided by the number of shares of
the Fund outstanding. In general, the value of the Fund's portfolio securities
is the market value of such securities. However, securities and other assets for
which market quotations are not readily available are valued at their fair value
as determined in good faith by the Adviser under procedures established by and
under the general supervision and responsibility of the Fund's Board of
Trustees. See the Statement of Additional Information for details.
Telephone Transfers
If a shareholder wishes to use telephone transfer privileges, he or she must
indicate this on the account application form. The telephone transfer privilege
allows a shareholder to effect exchanges from the Fund into an identically
registered account in another one of the other Parnassus Funds. Neither the Fund
nor Parnassus Investments will be liable for following instructions communicated
by telephone reasonably believed to be genuine; a loss to the shareholder may
result due to an unauthorized transaction. The Fund and Parnassus Investments
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Procedures may include one or more of the following:
recording all telephone calls requesting telephone exchanges, verifying
authorization and requiring some form of personal identification prior to acting
upon instructions and sending a statement each time a telephone exchange is
made. The Fund and Parnassus Investments may be liable for any losses due to
unauthorized or fraudulent instructions only if such reasonable procedures are
not followed. Of course, shareholders are not obligated in any way to authorize
telephone transfers and may choose to make all exchanges in writing. The
telephone exchange privilege may be modified or discontinued by the Fund at any
time upon 60 days' written notice to shareholders.
13
<PAGE>
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may sell or redeem your Fund shares by offering them for "repurchase" or
"redemption" directly to the Fund or through your dealer. If you offer shares
through your dealer before the close of the New York Stock Exchange and your
dealer transmits your offer to the Distributor before 1:00 p.m. (San Francisco
time) that day, you will receive that day's price. Your dealer may charge for
this service, but you can avoid this charge by selling your shares directly to
the Fund as described below.
To sell your shares directly to the Fund (that is, to redeem your shares),
you must send your written instructions to the Fund at One Market-Steuart Tower
#1600, San Francisco, California 94105. You may also send your redemption
instructions by FAX to (415) 778-0228 if the redemption is less than $25,000.
Your shares will be redeemed at the net asset value next determined after
receipt by the Fund of your written instructions in proper form. Give your
account number and indicate the number of shares you wish to redeem. All owners
of the account must sign unless the account application states that only one
signature is necessary for redemptions. All redemption checks must be sent to
the address-of-record on the account. The Fund must have a change-of-address on
file for 30 days before we send redemption or distribution checks to the new
address. Otherwise, we require a signature guarantee or the check must be sent
to the old address. If you wish to have redemption proceeds sent by wire
transfer or by overnight mail, there will be a charge of $10 per transaction.
Wiring funds will require a signature guarantee. The Fund usually requires
additional documents when shares are registered in the name of a corporation,
agent or fiduciary or if you are a surviving joint owner. In the case of a
corporation, we usually require a corporate resolution signed by the secretary.
In the case of an agent or fiduciary, we usually require an authorizing
document. In the case of a surviving joint owner, we usually require a copy of
the death certificate. Contact the Fund by phone at (800) 999-3505 if you have
any questions about requirements for redeeming your shares.
If the Fund has received payment for the shares you wish to redeem and you
have provided the instructions and any other documents needed in correct form,
the Fund will promptly send you a check for the proceeds from the sale.
Ordinarily, the Fund must send you a check within seven days unless the New York
Stock Exchange is closed for other than weekends or holidays. However, payment
may be delayed for any shares purchased by check for a reasonable time (not to
exceed 15 days from the date of such purchase) necessary to determine that the
purchase check will be honored. Rules of the Securities and Exchange Commission
(SEC) also authorize delayed redemptions during periods when trading on the
Exchange is restricted or during an emergency which makes it impractical for the
Fund to dispose of its securities or to determine fairly the value of its net
assets or during any other period authorized by the SEC for the protection of
investors.
Reinvestment Privilege. If you redeem some or all of your shares and then
change your mind, you may reinvest them without sales charge at the net asset
value if you do so within 60 days. This privilege may be exercised only once by
a shareholder with respect to this Fund. However, a shareholder has not used up
this one-time privilege if the sole purpose of a prior redemption was to invest
the proceeds at net asset value in an Individual Retirement Account or SEP. If
the shareholder has realized a gain on the redemption, the transaction is
taxable and reinvestment will not alter any capital gains tax payable. If there
has been a loss on the redemption, some or all of the loss may not be allowed as
a tax deduction depending on the amount reinvested. If a shareholder redeems
shares from the Fund and invests the proceeds in shares of The Parnassus Income
Trust, the shareholder may reinvest the proceeds of the redemption of those
shares back into the Fund at any time without a sales charge. The Fund resumes
the right to modify or eliminate this exchange privilege in the future.
Redemption of Small Accounts. The Trustees may, in order to reduce the
expenses of the Fund, redeem all of the shares of any shareholder whose account
is worth less than $500 as a result of a redemption. The Fund will give
shareholders whose shares are being redeemed 60 days' prior written notice in
which to purchase sufficient shares to avoid such redemption.
14
<PAGE>
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
All dividends from net investment income together with distributions of
short-term capital gains (collectively, "income dividends"), will be taxable as
ordinary income to shareholders even though paid in additional shares. Any net
long-term capital gains ("capital gain distributions") distributed to
shareholders are taxable as such. Tax-exempt and tax-deferred shareholders, of
course, will not be required to pay taxes on any amount paid to them. Holders of
IRAs and other tax-deferred retirement accounts are not required to pay taxes
until distribution. (Tax-exempt retirement accounts, of course, never have to
pay taxes.)
Income dividends and capital gain distributions will ordinarily be paid once
a year, and they are taxable in the year received. For the convenience of
investors, all payments are made in shares of the Fund, and there is no sales
charge for this reinvestment. Shareholders who prefer to receive payment of
income dividends and/or capital gain distributions in cash should notify the
Fund at least five days prior to the payment date. An exchange of the Fund's
shares for shares of another fund will be treated as a sale of the Fund's shares
for tax purposes and any gain on the transaction may be subject to state and
federal income tax. Annually, you will receive on Form 1099 the dollar amount
and tax status of all distributions you received.
The Fund may be required to impose backup withholding at a rate of 31% from
any income dividends and capital gain distributions and upon payment of
redemption proceeds. Shareholders can eliminate any backup withholding
requirements by furnishing certification of U.S. taxpayer identification numbers
and reporting dividends.
To the extent that income dividends are derived from qualifying dividends
paid by domestic corporations whose shares are owned by the Fund, such
dividends, in the hands of the Fund's corporate shareholders, will be eligible
for the 70% dividends received deduction. Individuals do not qualify for this
deduction -- only corporations.
The dividend and capital gain distribution is usually made in December of
each year. If an investor purchases shares just before the distribution date, he
or she will be taxed on the distribution even though it's a return of capital.
15
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding, total return and
ratios/supplemental data for each of the five years in the period ended December
31 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year $ 36.24 $ 35.74 $ 34.39 $ 31.77 $ 32.82
Income from investment operations:
Net investment income (loss) (0.21) (0.06) (0.14) (0.06) 0.15
Net realized and unrealized gain on securities 17.29 0.56 10.04 3.77 0.07
Total from investment operations 17.08 0.50 9.90 3.71 0.22
Distributions:
Dividends from net investment income .-- .-- .-- .-- (0.16)
Distributions from net realized gain on securities (2.65) .-- (8.55) (1.09) (1.11)
Total distributions (2.65) 0.00 (8.55) (1.09) (1.27)
Net asset value at end of year $50.67 $36.24 $35.74 $34.39 $31.77
Total return* 47.74% 1.40% 29.70% 11.68% 0.62%
Ratios/supplemental data:
Ratio of expenses to average net assets 1.07% 1.10% 1.11% 1.10% 1.02%
Ratio of net investment income (loss) to
average net assets (0.50%) (0.09%) (0.44%) (0.17%) 0.54%
Portfolio turnover rate 65.70% 99.20% 68.90% 59.60% 29.10%
Net assets, end of year (000's) $363,817 $302,762 $337,425 $268,235 $259,133
<FN>
Total return figures do not adjust for the sales charge.
Note: This information is taken from financial statements audited by Deloitte
& Touche LLP that were published in the Fund's 1999 annual report.
</FN>
</TABLE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Deloitte & Touche LLP, 50 Fremont Street, San Francisco, California 94105,
has been selected as the Fund's independent auditors.
Union Bank of California, 475 Sansome Street, San Francisco, California
94111, has been selected as the custodian of the Fund's assets.
Parnassus Investments, One Market-Steuart Tower #1600, San Francisco,
California 94105, is the Fund's transfer agent and accounting agent. Jerome L.
Dodson, the Fund's President, is the majority stockholder of Parnassus
Investments.
16
<PAGE>
Investment Adviser
Parnassus Investments
One Market-Steuart Tower #1600
San Francisco, California 94105
www.parnassus.com
Independent Auditors
Deloitte & Touche LLP
50 Fremont Street
San Francisco, California 94105
Custodian
Union Bank of California
475 Sansome Street
San Francisco, California 94111
LEGAL COUNSEL
Gardner, Carton & Douglas
321 North Clark Street
Chicago, IL 60610
You can obtain additional
information about The Parnassus Fund. A Statement
of Additional Information (SAl) dated May 1, 2000 has been
filed with the SEC and is incorporated in this
prospectus by reference (i.e., legally forms
a part of the prospectus). The Fund also publishes
an annual, a semiannual and two quarterly
reports each year that discuss the Fund's holdings
and how recent market conditions as well as the
Fund's investment strategies affected performance.
For a free copy of any of these documents or
to ask questions about the Fund,
call Parnassus Investments at (800) 999-3505.
The SAl, the Fund's annual, semiannual and quarterly reports and
other related materials are also available on the SEC's Internet Web site
(http://www.sec.gov). You can also obtain copies of this information
upon paying a duplicating fee, by writing the Public Reference Section
of the SEC, Washington, D.C. 20549-0102.
You can also review and copy information about the Fund,
including the SAl, at the SEC's Public Reference Room in Washington,
D.C. or make an electronic request at [email protected].
Call 202-942-8090 for information on
the operation of the SEC's Public Reference Room.
The Investment Company Act of 1940
File Number for The Parnassus Fund is 811-4044.
17
<PAGE>
The Parnassus Fund
One Market
Steuart Tower #1600
San Francisco, CA 94105
(800) 999-3505
STATEMENT OF ADDITIONAL INFORMATION May 1, 2000
The Parnassus Fund (the "Fund") is a diversified, open-end management investment
company. Parnassus Investments is the Fund's adviser.
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Fund's Prospectus dated May 1, 2000. The Fund's Annual
Report to Shareholders dated December 31, 1999 is expressly incorporated by
reference and made a part of this Statement of Additional Information. You may
obtain a free copy of the Prospectus or the Annual Report by calling the Fund at
(800) 999-3505.
TABLE OF CONTENTS
Page
Investment Objective and Policies B-2
Management B-4
The Adviser B-6
Performance Advertising B-8
Net Asset Value B-10
Shareholder Services B-10
Distributions and Taxes B-11
General B-11
Financial Statements B-12
<PAGE>
Investment Objectives and Policies
The investment objective of the Fund is to realize long-term growth of
capital. The Fund's principal strategies with respect to the composition of its
portfolio are described in the prospectus.
Investment Restrictions
The Fund has adopted the following restrictions (in addition to those
indicated in the prospectus) as fundamental policies which may not be changed
without the approval of the holders of a "majority" (as defined in the
Investment Company Act of 1940 (the "1940 Act")) of the Fund's outstanding
shares. A vote of the holders of a "majority" (as so defined) of the Fund's
outstanding shares means a vote of the holders of the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding shares
are represented or (ii) more than 50% of the outstanding shares.
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 would then be invested in
securities of a single issuer or (ii) the Fund would hold more than 10%
of the outstanding voting securities of any one issuer.
(2) Purchase any security if, as a result, the Fund would have 25% or more of
its net assets (at current value) invested in a single industry.
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions).
(4) Make short sales of securities, purchase on margin or purchase puts,
calls, straddles or spreads.
(5) Issue senior securities, borrow money or pledge its assets except that
the Fund may borrow from a bank for temporary or emergency purposes in
amounts not exceeding 10% (taken at the lower of cost or current value)
of its total assets (not including the amount borrowed) and pledge its
assets to secure such borrowings. The Fund will not make additional
purchases while borrowings are outstanding.
(6) Buy or sell commodities or commodity contracts including futures
contracts or real estate, real estate limited partnerships or other
interests in real estate although it may purchase and sell securities
which are secured by real estate and securities of companies which invest
or deal in real estate.
(7) Act as underwriter except to the extent that in connection with the
disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws.
(8) Participate on a joint (or joint and several) basis in any trading
account in securities.
(9) Invest in securities of other registered investment companies except that
the Fund may invest up to 10% of its assets (taken at current value) in
other funds, but no more than 5% of its assets in any one fund. The Fund
may not own more than 3% of the outstanding voting shares of any one fund
except as part of a merger, consolidation or other acquisition.
(10)Invest in interests in oil, gas or other mineral exploration or
development programs or in oil, gas or other mineral leases although it
may invest in the common stocks of companies which invest in or sponsor
such programs.
B-2
<PAGE>
(11)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.
Operating Policies
The Fund has adopted the following operating policies which may be changed
by a vote of the majority of the Fund's Trustees:
(1) The Fund may purchase warrants up to a maximum of 5% of the value of its
total net assets.
(2) The Fund may not hold or purchase foreign currency, except as may be
necessary in the settlement of foreign securities transactions.
(3) It is the position of the Securities and Exchange Commission ("SEC") (and
an operating although not a fundamental policy of the Fund) that the Fund
may not make certain illiquid investments if thereafter more than 15% of
the value of its net assets would be so invested. Investments included in
this 15% limit are: (i) those which are restricted, i.e., those which
cannot freely be sold for legal reasons; (ii) fixed time deposits subject
to withdrawal penalties (other than overnight deposits); (iii) repurchase
agreements having a maturity of more than seven days; and (iv) investments
for which market quotations are not readily available. However, the 15%
limit does not include obligations which are payable at principal amount
plus accrued interest within seven days after purchase or commercial paper
issued under section 4 (2) of the Securities Act of 1933, as amended ("1933
Act"), or securities eligible for resale under Rule 144A of the 1933 Act
that have been determined to be liquid pursuant to procedures adopted by
the Board of Trustees.
Foreign Securities
The Fund may purchase foreign securities up to a maximum of 15% of the
value of its total net assets. Such investments increase a portfolio's
diversification and may enhance return, but they also involve some special risks
such as: exposure to potentially adverse local political and economic
developments; nationalization and exchange controls; potentially lower liquidity
and higher volatility; possible problems arising from accounting, disclosure,
settlement and regulatory practices that differ from U.S. standards; and the
chance that fluctuations in foreign exchange rates will decrease the
investment's value (favorable change can increase its value). The Fund may also
invest up to 5% of its total net assets in venture capital limited partnerships.
These investments will not be liquid and will likely involve a higher degree of
risk than most portfolio securities.
Repurchase Agreements
The Fund may purchase the following securities subject to repurchase
agreements: certificates of deposit, certain bankers' acceptances and securities
which are direct obligations of, or that are fully guaranteed as to principal,
by the United States or any agency or instrumentality of the United States. A
repurchase transaction occurs when at the time the Fund purchases a security,
the Fund also resells it to the vendor (normally a commercial bank or a
broker-dealer) and must deliver the security (and/or securities substituted for
them under the repurchase agreement) to the vendor on an agreed-upon date in the
future. Such securities, including any securities so substituted, are referred
to as the "Resold Securities." The Adviser will consider the creditworthiness of
any vendor of repurchase agreements and
B-3
<PAGE>
continuously monitor the collateral so that it never falls below the resale
price. The resale price is in excess of the purchase price in that it reflects
an agreed-upon market interest rate effective for the period of time during
which the Fund's money is invested in the Resold Securities. The majority of
these transactions run from day to day and the delivery pursuant to the resale
typically will occur within one to five days of the purchase. The Fund is
subject to the risk that the vendor may not pay the agreed-upon sum upon the
delivery date.
If there is a default, the Resold Securities constitute security for the
repurchase obligation and will be promptly sold by the Fund. However, there may
be delays and costs in establishing the Fund's rights to the collateral and the
value of the collateral may decline. The Fund will bear the risk of loss in the
event that the other party to the transaction defaults on its obligation and the
Fund is delayed or prevented from exercising its right to dispose of the
underlying securities, including the risk of a possible decline in the value of
the underlying securities during the period in which the Fund seeks to assert
its rights.
Repurchase agreements can be considered as loans "collateralized" by the
Resold Securities (such agreements being defined as "loans" in the 1940 Act).
The return on such "collateral" may be more or less than that from the
repurchase agreement. The Resold Securities will be marked to market every
business day so that the value of the "collateral" is at least equal to the
value of the loan including the accrued interest earned thereon. All Resold
Securities will be held by the Fund's custodian either directly or through a
securities depository.
Lending Portfolio Securities
To generate additional income, the Fund may lend its portfolio securities
to broker-dealers, banks or other institutional borrowers of securities. The
Fund must receive 102% collateral in the form of cash or U.S. Government
securities. This collateral will be valued daily. Should the market value of the
loaned securities increase, the borrower must furnish additional collateral to
the Fund. During the time portfolio securities are on loan, the borrower pays
the Fund any dividends or interest received on such securities. While the Fund
does not have the right to vote securities that are on loan, the Fund intends to
terminate the loan and regain the right to vote if that is considered important
with respect to the investment. The borrower can repay the loan at any time and
the Fund can demand repayment at any time.
MANAGEMENT
The Fund's Board of Trustees decides on matters of general policy and
supervises the activities of the Fund's Adviser. The Fund's officers conduct and
supervise the daily business operations of the Fund. The Trustees and Officers
of the Fund are as follows:
<TABLE>
<CAPTION>
Name and Address Position with Fund Principal Occupation
- ---------------- ------------------ During Past Five Years
-----------------------
<S> <C> <C>
Jerome L. Dodson, 56* President President of The Parnassus Fund, The
Parnassus Investments and Trustee Parnassus Income Trust and President
One Market and Director of Parnassus Investments
Steuart Tower #1600 since June of 1984.
San Francisco, CA 94105
David L. Gibson, 60 Trustee Tax Counsel and later, Director of
5840 Geary Boulevard Public Affairs for the Crown
San Francisco, CA 94118 Zellerbach Corporation 1973-1984.
Since 1984,attorney in private
practice.
B-4
<PAGE>
Gail L. Horvath, 50 Trustee Owner and Director of New Product
Just Desserts Development at Just Desserts.
1970 Carroll Avenue
San Francisco, CA 94124
Herbert A. Houston, 56 Trustee Chief Executive Officer of the
4550 Sequoyah Road Haight Ashbury Free Clinics, Inc.
Oakland, CA 94605 1987-1998. Currently, a health
care consultant.
Cecilia C.M. Lee, 56 Trustee President of hybridArts.com, a
2048 Corporate Court Silicon Valley-based electronics
San Jose, CA 95131 firm.
Leo T. McCarthy, 69 Trustee President of the Daniel Group, a
One Market partnership involved in foreign
Steuart Tower #1600 trade. A former member of the
San Francisco, CA 94105 California State Assembly from
1969 to 1982 and former Lieutenant
Governor of the State of
California from 1983-1995.
Donald E. O'Connor, 63 Trustee Retired executive for the Investment
One Market Company Institute 1969-1997.
Steuart Tower #1600
San Francisco, CA 94105
Howard M. Shapiro, 68 Trustee Consultant to non-profit
American Bank Building organizations specializing in
621 SW Morrison St., Ste. #600 marketing, advertising,
Portland, OR 97205 fund-raising and organizational
structure.
Joan Shapiro, 57 Trustee Consultant in development banking,
One Market community reinvestment, ethical
Steuart Tower #1600 investing, and corporate social
San Francisco, CA 94105 responsibility. Executive with
South Shore Bank of Chicago
1977-1997.
Bryant Cherry, 35 Vice President Vice President and Treasurer of
One Market and Treasurer Parnassus Investments since 2000.
Steuart Tower #1600 Financial Consultant with Merrill
San Francisco, CA 94105 Lynch & Co. 1996-1997. Independent
research analyst 1998-1999.
Susan Loughridge, 51 Vice President and Vice President and Shareholder
One Market Shareholder Services Services Manager of Parnassus
Steuart Tower #1600 Manager Investments since 1993.
San Francisco, CA 94105
Richard D. Silberman, 62 Secretary Attorney specializing in business
1061 Eastshore, #200 law. Private practice.
Albany, CA 94710
B-5
<PAGE>
<FN>
The Fund pays each of its Trustees who is not affiliated with the Adviser or the
Distributor annual fees of $10,500 in addition to reimbursement for certain
out-of-pocket expenses. The Trustees and Officers of the Fund as a group own
less than 1% of the Fund's outstanding shares.
*"Interested" Trustee as defined in the 1940 Act.
</FN>
</TABLE>
Control Persons
As of March 31, 2000, no shareholder owned more than 5% of the outstanding
securities of the Fund. Trustees and Officers of The Parnassus Fund owned 1.15%
of the outstanding shares.
The Adviser
Parnassus Investments acts as the Fund's investment adviser. Under its
Investment Advisory Agreement ("Agreement") with the Fund, Parnassus Investments
acts as investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of the Fund in accordance with its investment
objective, policies and limitations. Parnassus Investments also provides the
Fund with all necessary office facilities and personnel for servicing the Fund's
investments and pays the salaries and fees of all officers and all Trustees of
the Fund who are "interested persons" under the 1940 Act. Parnassus Investments
also provides the management and administrative services necessary for the
operation of the Fund including supervising relations with the custodian,
transfer agent, independent accountants and attorneys. The Adviser also prepares
all shareholder communication, maintains the Fund's records, registers the
Fund's shares under state and federal laws and does the staff work for the Board
of Trustees.
The Agreement provides that the Adviser shall not be liable to the Fund for
any loss to the Fund except by reason of the Adviser's willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under the Agreement.
Jerome L. Dodson, President of The Parnassus Fund, owns a majority of the
stock in the Adviser, Parnassus Investments, and as such can be considered the
control person of the Adviser.
The Fund pays the Adviser a fee for services performed at the annual rate
of 1% of the Fund's average daily net assets up to $10 million, then declining
to 0.75% of assets above $10 million up to $30 million, 0.70% above $30 million
up to $100 million, 0.65% above $100 million to $200 million, 0.60% of the
amount above $200 million. During 1997, 1998 and 1999, the Fund paid to
Parnassus Investments under the Agreement the sums of $2,120,608, $2,022,491 and
$2,010,365 respectively.
As the Fund's underwriter (or Distributor), Parnassus Investments makes a
continuous offering of the Fund's shares and receives fees and commissions for
distributing the Fund's shares. For 1997, 1998 and 1999, Parnassus Investments
received $447,056, $420,326 and $121,437, respectively, of which amounts the
following was paid to other broker/dealers: $156,972 in 1997, $147,111 in 1998
and $34,824 in 1999.
Pursuant to a Shareholder Servicing Plan and Agreement with the Fund,
Parnassus Investments may arrange for third parties to provide certain services
including account maintenance, record keeping and other personal services to
their clients who invest in the Fund. For these services, the Fund may pay
Parnassus Investments an aggregate service fee at a rate not to exceed 0.25% per
annum of the Fund's average daily net assets. Parnassus Investments
B-6
<PAGE>
will not keep any of this fee for itself, but will instead use the fee to pay
the third-party service providers. (Service providers who do not maintain an
omnibus account for their clients will be limited to a fee of 0.10% per annum
paid by the Fund. Parnassus Investments, however, may elect to pay such service
providers an additional 0.15% from its own funds for a total not to exceed 0.25%
per annum.) For 1997, 1998 and 1999, respectively, the Fund paid service
providers the following amounts: $165,778, $178,997 and $185,000. For 1997, 1998
and 1999, respectively, the Adviser paid service providers the following
amounts: $131,396, $127,772 and $118,198.
In addition to the Adviser's fee, the Fund is responsible for its operating
expenses, including: (i) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses of its Trustees other than
those affiliated with the Adviser; (v) legal and audit expenses; (vi) fees and
expenses of the Fund's custodian, transfer agent and accounting services agent;
(vii) expenses incident to the issuance of its shares, including issuance on the
payment of, or reinvestment of, dividends; (viii) fees and expenses incident to
the registration under Federal or state securities laws of the Fund or its
shares; (ix) expenses of preparing, printing and mailing reports and notices and
proxy material to shareholders of the Fund; (x) all other expenses incidental to
holding meetings of the Fund's shareholders; (xi) dues or assessments of or
contributions to the Investment Company Institute and the Social Investment
Forum; (xii) such non-recurring expenses as may arise, including litigation
affecting the Fund and the legal obligations for which the Fund may have to
indemnify its officers and Trustees with respect thereto. In allocating
brokerage transactions, the investment advisory agreement states that the
Adviser may, subject to its obligation to obtain best execution, consider
research provided by brokerage firms or whether those firms sold shares of the
Fund.
Parnassus Investments is the fund accounting agent and in this capacity handles
all fund accounting and pricing services, including calculating the daily net
asset values. Parnassus Investments received the following amounts from the Fund
for 1997, 1998 and 1999 respectively: $70,000, $70,000 and $70,000.
Portfolio Transactions and Brokerage
The Investment Advisory Agreement states that in connection with its duties
to arrange for the purchase and the sale of securities held in the portfolio of
the Fund by placing purchase and sale orders for the Fund, the Adviser shall
select such broker-dealers ("brokers") as shall, in the Adviser's judgement,
implement the policy of the Fund to achieve "best execution," i.e., prompt and
efficient execution at the most favorable securities price. In making such
selection, the Adviser is authorized in the Agreement to consider the
reliability, integrity and financial condition of the broker. The Adviser is
also authorized to consider whether the broker provides brokerage and/or
research services to the Fund and/or other accounts of the Adviser. The
Agreement states that the commissions paid to such brokers may be higher than
another broker would have charged if a good faith determination is made by the
Adviser that the commission is reasonable in relation to the services provided,
viewed in terms of either that particular transaction or the Adviser's overall
responsibilities as to the accounts for which it exercises investment
discretion. The Agreement also states that the Adviser shall use its judgement
in determining that the amount of commissions paid are reasonable in relation to
the value of brokerage and research services provided and need not place or
attempt to place a specific dollar value on such services or on the portion of
commission rates reflecting such services.
The Fund recognizes in the Agreement that, on any particular transaction, a
higher than usual commission may be paid due to the difficulty of the
transaction in question. The Adviser is also authorized in the Agreement to
consider sales of Fund shares as a factor in the selection of brokers to execute
brokerage and principal transactions, subject to the requirements of "best
execution."
The research services discussed above may be in written form or through
direct contact with individuals and may include information as to particular
companies and securities as well as market, economic or institutional areas and
information assisting the Fund in the valuation of its investments. The research
which the Adviser receives for the
B-7
<PAGE>
Fund's brokerage commissions, whether or not useful to the Fund, may be useful
to the Adviser in managing the accounts of the Adviser's other advisory clients.
Similarly, the research received for the commissions of such accounts may be
useful to the Fund. To the extent that electronic or other products provided by
brokers are used by the Adviser for research purposes, the Adviser will use its
best judgement to make a reasonable allocation of the cost of the product
attributable to non-research use.
Research services provided through brokerage will be those providing
information and analyses that directly assist the portfolio manager making
investment decisions. Examples of such research services include Bloomberg
information and research, HOLT cash flow analyses, KLD social research,
publications containing investment information and recommendations and
individual reports written on specific companies.
During 1999, The Parnassus Fund paid PaineWebber, Inc. a total of $211,502
in brokerage commissions under a "soft dollar" agreement whereby PaineWebber
would provide research services to the Fund. During 1999, The Parnassus Fund and
the Parnassus Equity Income Fund maintained a joint account at Salomon Smith
Barney and the two funds together directed $29,000 in brokerage to pay for a
Bloomberg terminal. Allocation of commissions and research services were
approximately 80% to The Parnassus Fund and 20% to the Equity Income Fund.
The Adviser may also use brokerage commissions to reduce certain expenses
of the Fund subject to "best execution." For example, the Adviser may enter into
an agreement to have a brokerage firm pay part or all of the Fund's custodian
fee since this benefits the Fund's shareholders.
In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission although the price of the security usually includes a profit to the
dealer. Money market instruments usually trade on a "net" basis as well. On
occasion, certain money market instruments may be purchased directly from an
issuer in which case, no commissions or discounts are paid. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.
During 1997, 1998 and 1999, the Fund paid $574,269, $615,635 and $594,370,
respectively, in brokerage commissions. Of those amounts, the following was paid
in conjunction with research services: $525,000 in 1997, $510,000 in 1998 and
$550,000 in 1999.
Parnassus Investments may have clients other than the Fund that have
objectives similar to the Fund. Normally, orders for securities trades are
placed separately for each client. However, some recommendations may result in
simultaneous buying or selling of securities along with the Fund. As a result,
the demand for securities being purchased or the supply of securities being sold
may increase, and this could have an adverse effect on the price of those
securities. Parnassus Investments does not favor one client over another in
making recommendations or placing orders, and in some situations, orders for
different clients may be grouped together. In certain cases where the aggregate
order is executed in a series of transactions at various prices on a given day,
each participating client's proportionate share of such order reflects the
average price paid or received with respect to the total order. Also, should
only a partial order be filled, each client would ordinarily receive a pro rata
share of the total order.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise its total return for prior
periods. Any such advertisement would include at least average annual total
return quotations for one, five and ten year periods. The total return of the
Fund for a particular period represents the increase (or decrease) in the value
of a hypothetical investment in the Fund, from the beginning to the end of the
period. Total return is calculated by subtracting the value of the initial
investment
B-8
<PAGE>
from the ending value and showing the difference as a percentage of the initial
investment; the calculation assumes the initial investment is made at the
maximum public offering price (maximum sales charge) and that all income
dividends or capital gains distributions during the period are reinvested in
Fund shares at net asset value. No adjustments are made to reflect any income
taxes payable by shareholders on dividends and distributions paid by the Fund.
Average annual total return quotations for periods of two or more years are
computed by finding the average annual compounded rate of return over the period
that would equate the initial amount invested to the ending redeemable value.
Quotations of "overall return" are the same as "total return" except that
"overall return" calculations do not deduct the sales charge.
The Fund calculates total return by taking the total number of Fund shares
purchased with a hypothetical $1,000 investment, adding all additional Fund
shares purchased within the period with reinvested dividends, calculating the
value of those shares at the end of the period and dividing the result by the
initial $1,000 investment. For periods of more than one year, the cumulative
total return is then adjusted for the number of years, taking compounding into
account to calculate average annual total return during that period. The Fund
will quote total return for the most recent one-year period and the average
annual total return will be quoted for the most recent five-and ten-year
periods, or for the life of the Fund, if shorter.
Total return is computed according to the following formula:
P(1 + T)n = ERV
where P = a hypothetical initial payment of $1,000, T = total return, n = number
of years and ERV = ending redeemable value. Total return is historical
information and is not intended to indicate future performance.
PERFORMANCE FIGURES
<TABLE>
<CAPTION>
Periods Ending Average Annual Average Annual
December 31, 1999 Total Return Overall Return
<S> <C> <C>
One Year 42.57% 47.74%
Five Years 16.07% 16.90%
Ten Years 16.37% 16.78%
<FN>
Past performance is no guarantee of future returns. Principal value will
fluctuate and an investor's shares, when redeemed, may be worth more or
less than their original cost.
Total return is the return to an individual shareholder after paying the
maximum sales charge.
Overall return gives the investment performance of the Fund. Overall
return does not take into account payment of the sales charge. This return
figure should be used for comparative purposes such as comparing The
Parnassus Fund's performance to published returns in newspapers and
magazines.
</FN>
</TABLE>
The Fund may also advertise its cumulative total return for prior periods
and compare its performance to the performance of other selected mutual funds,
selected market indicators such as the Standard & Poor's 500 Composite Stock
Price Index or non-market indices or averages of mutual fund industry groups.
The Fund may quote its performance rankings and/or other information as
published by recognized independent mutual fund statistical services or by
publications of general interest. In connection with a ranking, the Fund may
provide additional information, such as the particular category to which the
ranking relates, the number of funds in that category, the criteria upon which
the ranking is based, and the effect of sales charges, fee waivers and/or
expense reimbursements.
B-9
<PAGE>
All Fund performance information is historical and is not intended to
represent or guarantee future results. The value of Fund shares when redeemed
may be more or less than their original cost.
The Fund's annual report contains additional performance information including a
discussion by management. You may obtain a copy of the annual report without
charge by calling or writing the Fund.
NET ASSET VALUE
In determining the net asset value of the Fund's shares, common stocks
that are listed on national securities exchanges are valued at the last sale
price on the exchange on which each stock is principally traded as of the close
of the New York Stock Exchange (which is currently 4:00 pm New York time) or, in
the absence of recorded sales, at the average of readily available closing bid
and asked prices on such exchanges. Securities traded on The NASDAQ Stock Market
are also valued at the last recorded sale price as of 4:00 pm New York time.
Other unlisted securities are valued at the quoted bid price in the
over-the-counter market. Bonds and other fixed-income securities are valued by a
third-party pricing service. Securities and other assets for which market
quotations are not readily available are valued at their fair value as
determined in good faith by the Adviser under procedures established by and
under the general supervision and responsibility of the Fund's Board of
Trustees. Short-term investments which mature in less than 60 days are valued at
amortized cost (unless the Board of Trustees determines that this method does
not represent fair value) if their original maturity was 60 days or less or by
amortizing the value as of the 61st day prior to maturity if their original term
to maturity exceeded 60 days. The NYSE is closed on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
SHAREHOLDER SERVICES
Statement of Intention
Reduced sales charges are available to investors who enter into a
written Statement of Intention providing for the purchase within a
thirteen-month period of a specified number of shares of the Fund. All shares of
the Fund previously purchased and still owned are also included at the then net
asset value in determining the applicable reduction.
A Statement of Intention permits a purchaser to establish a total
investment goal to be achieved by any number of investments over a
thirteen-month period. Each investment made during the period will receive the
reduced sales commission applicable to the amount represented by the goal as if
it were a single investment. Shares totaling 3.5% of the dollar amount of the
Statement of Intention will be held in escrow by the Fund's transfer agent in
the name of the shareholder. The effective date of a Statement of Intention may
be back-dated up to 90 days in order that investments made during this 90-day
period, valued at purchaser's cost, can be applied to the fulfillment of the
Statement of Intention goal.
The Statement of Intention does not obligate the investor to purchase
nor the Fund to sell the indicated amount. In the event the Statement of
Intention goal is not achieved within the thirteen-month period, the purchaser
is required to pay the difference between the sales commission otherwise
applicable to the purchases made during this period and sales charges actually
paid. Such payments may be made directly to the Distributor or, if not paid, the
Distributor will liquidate sufficient escrowed shares to obtain such difference.
If the goal is exceeded in an amount which qualifies for a lower sales
commission, a price adjustment is made by refunding to the purchaser the amount
of excess sales commissions, if any, paid during the thirteen-month period.
Investors electing to purchase shares of the Fund pursuant to a Statement of
Intention should carefully read such Statement of Intention.
B-10
<PAGE>
Systematic Withdrawal Plan
A Systematic Withdrawal Plan (the "Plan") is available for shareholders
having shares of the Fund with a minimum value of $10,000 based upon the
offering price. The Plan provides for monthly checks in an amount not less than
$100 or quarterly checks in an amount not less than $200.
Dividends and capital gain distributions on shares held under the Plan
are invested in additional full and fractional shares at net asset value.
Withdrawal payments should not be considered as dividends, yield or income. If
periodic withdrawals continuously exceed reinvested dividends and capital gain
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares and any
gain or loss realized must be recognized for federal income tax purposes.
Although the shareholder may invest $10,000 or more in a Systematic Withdrawal
Plan, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the sales charges applicable to the purchase of
additional shares.
Tax-Sheltered Retirement Plans
Through the Distributor, retirement plans are available: Individual
Retirement Accounts (IRAs) and Simplified Employee Pension Plans (SEPs).
Adoption of such plans should be on advice of legal counsel or tax adviser.
Retirement accounts have a minimum initial investment of $500 and each
subsequent investment must be at least $50. For further information regarding
plan administration, custodial fees and other details, investors should contact
the Distributor.
DISTRIBUTIONS AND TAXES
By paying out substantially all its net investment income (among other
things), the Fund has qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code. The Fund intends to continue to
qualify and, if so, it will not pay federal income tax on either its net
investment income or on its net capital gains. Instead, each shareholder will be
responsible for his or her own taxes.
GENERAL
The Fund was organized as a Massachusetts business trust on April 4,
1984. Its Declaration of Trust permits the Fund to issue an unlimited number of
full and fractional shares of beneficial interest and to divide or combine the
shares to a greater or lesser number of shares without thereby changing the
proportionate beneficial interest in the Fund. Each share represents an interest
in the Fund proportionately equal to the interest of each other share.
Certificates representing shares will not be issued. Upon the Fund's
liquidation, all shareholders would share pro rata in its net assets available
for distribution to shareholders. If they deem it advisable and in the best
interests of shareholders, the Board of Trustees may create additional series of
shares or classes thereof which may have separate assets and liabilities and
which may differ from each other as to dividends and other features. Shares of
each series or class thereof would be entitled to vote as a series or class only
to the extent required by the 1940 Act or as permitted by the Trustees.
The Declaration of Trust contains an express disclaimer of shareholder
liability for its acts or obligations and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Fund or its Trustees. The Declaration of Trust provides for
indemnification and reimbursement of expenses out of the Fund's property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder
B-11
<PAGE>
for any act or obligation of the Fund and satisfy any judgement thereon. Thus,
while Massachusetts law permits a shareholder of a trust such as this to be held
personally liable as a partner under certain circumstances, the risk of a
shareholder incurring financial loss on account of shareholder liability is
highly unlikely and is limited to the relatively remote circumstances in which
the Fund would be unable to meets its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgement or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
Shareholders are entitled to one vote for each full share held (and
fractional votes for fractional shares) and may vote in the election of Trustees
and on other matters submitted to meetings of shareholders. It is not
contemplated that regular annual meetings of shareholders will be held. The
Declaration of Trust provides that the Fund's shareholders have the right, upon
the declaration in writing or vote of more than two-thirds of its outstanding
shares, to remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record holders
of ten per cent of its shares. In addition, ten shareholders holding the lesser
of $25,000 worth or one percent of Fund shares may advise the Trustees in
writing that they wish to communicate with other shareholders for the purpose of
requesting a meeting to remove a Trustee. The Trustees will then, if requested
by the applicants, mail at the applicants' expense the applicants' communication
to all other shareholders. The holders of shares have no pre-emptive or
conversion rights. Shares when issued are fully paid and non-assessable. The
Fund may be terminated upon the sale of its assets to another issuer, if such
sale is approved by the vote of the holders of more than 50% of its outstanding
shares, or upon liquidation and distribution of its assets, if approved by the
vote of the holders of more than 50% of its outstanding shares. If not so
terminated, the Fund will continue indefinitely. No amendment that would have a
material adverse impact upon the rights of the shareholders may be made to the
Declaration of Trust without the affirmative vote of the holders of more than
50% of the Trust's outstanding shares.
Deloitte & Touche LLP, 50 Fremont Street, San Francisco, California 94105, has
been selected as the Fund's independent auditors.
Union Bank of California, 475 Sansome Street, San Francisco, California 94111,
has been selected as the custodian of the Fund's assets. Shareholder inquiries
should be directed to the Fund.
Parnassus Investments, One Market-Steuart Tower #1600, San Francisco, California
94105, is the Fund's transfer agent and accounting agent. As transfer agent,
Parnassus Investments receives a fee of $2.30 per account per month. As
accounting agent, Parnassus Investments receives a fee of $70,000 per year.
Jerome L. Dodson, the Fund's President, is the sole stockholder of Parnassus
Investments.
Code of Ethics
The Adviser and the Board of Trustees of the Fund have adopted a Code
of Ethics (the Code). The Code permits personnel subject to the Code to invest
in securities, including securities that may be purchased or held by the Fund.
However, the protective provisions of the Code prohibit certain investments and
limit such personnel from making investments during periods when the Fund is
making such investments. The Code is on public file with, and is available from,
the SEC.
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders dated December 31, 1999, is
expressly incorporated by reference and made a part of this Statement of
Additional Information. A copy of the Annual Report which contains the Fund's
audited financial statements for the year ending December 31, 1999, may be
obtained free of charge by writing or calling the Fund.
B-12
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Declaration of Trust *
(b) By-laws *
(d) Investment advisory contract *
(e) Distribution agreement and dealer agreement *
(g) Custodian agreement *
(h) Shareholder Servicing Plan and Agreement *
(i) Opinion and Consent of Counsel: on file
(j) Consent of Deloitte & Touche LLP *
(p) Code of Ethics *
* Filed herewith
Item 24. Persons Controlled by or under Common Control with Registrant:
Registrant is not controlled by or under common control with any
other person, except to the extent Registrant may be deemed to be
under common control with The Parnassus Income Trust by virtue of
having the same individuals as Trustees.
Item 25. Indemnification: Under the provisions of the Fund's Declaration
of Trust, the Fund will indemnify its present or former Trustees,
officers, employees and certain other agents against liability
incurred in such capacity except that no such person may 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 involved in the
conduct of his or her office.
Item 26. The Fund's investment adviser, Parnassus Investments, is the
investment adviser to The Parnassus Income Trust and also serves as
investment adviser for separate portfolios.
Item 27. (a) Parnassus Investments serves as underwriter for both The
Parnassus Fund and The Parnassus Income Trust.
(b) The officers and directors of Parnassus Investments are as follows:
<TABLE>
<CAPTION>
Name and Principal
Business Address Position with Distributor Position with Registrant
---------------- ------------------------- ------------------------
<S> <C> <C>
Jerome L. Dodson President and Director President and Trustee
One Market
Steuart Tower #1600
San Francisco, CA 94105
Bryant Cherry Treasurer Vice President and
One Market Treasurer
Steuart Tower #1600
San Francisco, CA 94105
Susan Loughridge Secretary None
One Market
Steuart Tower #1600
San Francisco, CA 94105
Thao N. Dodson Director None
One Market
Steuart Tower #1600
San Francisco, CA 94105
</TABLE>
(c) None
Item 28. Location of Accounts and Records: All accounts, books and records are
in the physical possession of Jerome L. Dodson at Registrant's
headquarters at One Market, Steuart Tower #1600, San Francisco, CA
94105.
Item 29. Management Services: Discussed in Part A and Part B.
Item 30. Undertakings: Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485 (b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City and County of San Francisco
and the State of California on the fourteenth day of April 2000.
The Parnassus Fund
(Registrant)
By:___________________________
Jerome L. Dodson
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed by the following persons
in the capacities and on the date indicated.
<PAGE>
Signature Title Date
Principal Executive Officer
and Trustee
Jerome L. Dodson
____4/14/00____
Principal Financial and
Bryant Cherry Accounting Officer ____4/14/00____
Trustee
David L. Gibson
_____4/14/00____
Trustee
Gail L. Horvath ____4/14/00____
Trustee
Herbert A. Houston
_____4/14/00____
Trustee
Cecilia C.M. Lee _____4/14/00____
Trustee
Leo T. McCarthy ____4/14/00____
Trustee
Donald E. O'Connor _____4/14/00____
Trustee
Howard M. Shapiro _____4/14/00____
Joan Shapiro Trustee ____4/14/00____
<PAGE>
LIST OF EXHIBITS
(A) Declaration of Trust
(b) By-laws
(d) Investment advisory contract
(e) Distribution agreement and dealer agreement
(g) Custodian agreement
(h) Shareholder Servicing Plan and Agreement
(j) Consent of Deloitte & Touche LLP
(p) Code of Ethics
<PAGE>
THE PARNASSUS FUND
AMENDED AND RESTATED
DECLARATION OF TRUST
DECLARATION OF TRUST, made April 2, 1984, as amended, and as restated
effective March 24, 2000:
WHEREAS, the Trustees desire to establish a trust fund under the laws
of the Commonwealth of Massachusetts, for the investment and reinvestment of
funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Declaration of Trust IN TRUST as herein set forth below.
FIRST: This Trust shall be known as THE PARNASSUS FUND.
SECOND: Whenever used herein, unless otherwise required by
the context or specifically provided:
1. All terms used in this Declaration of Trust which are defined in the 1940 Act
shall have the meanings given to them in the 1940 Act.
2. The "Trust" refers to THE PARNASSUS FUND.
3. "Shareholder" means a record owner of Shares of the Trust.
4. The "Trustees" refer to the individual trustees in their capacity as trustees
hereunder of the Trust and their successor or successors for the time being in
office as such trustees.
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.
8. The "1940 Act" refers to the Investment Company Act of 1940, as amended
from time to time.
9. "Commission" means the Securities and Exchange Commission.
10. "Board" or "Board of Trustees" means the Board of Trustees of the Trust.
11. In this Declaration of Trust, the masculine embraces the feminine.
THIRD: The purpose or purposes for which the Trust is formed
and the business or objects to be transacted, carried on and promoted by it are
as follows:
1. To hold, invest and reinvest its funds, and in connection therewith to hold
part or all of its funds in cash, and to purchase or otherwise acquire, hold for
investment or otherwise, sell, sell short, assign, negotiate, transfer, exchange
or otherwise dispose of or turn to account or realize upon, securities (which
term "securities" shall for the purposes of this Declaration of Trust, without
limitation of the generality thereof, be deemed to include any stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets) created or issued by any issuer
(which term "issuer" shall for the purposes of this Declaration of Trust,
without limitation of the generality thereof be deemed to include any persons,
firms, associations, corporations, syndicates, combinations, organizations,
governments, or subdivisions thereof) or in any other financial instruments
whether or not considered as securities or commodities; and to exercise, as
owner or holder of any securities or other financial instruments, all rights,
powers and privileges in respect thereof; and to do any and all acts and things
for the preservation, protection, improvement and enhancement in value of any or
all such securities or other financial instruments.
2. To borrow money and pledge assets in connection with any of the objects or
purposes of the Trust, and to issue notes or other obligations evidencing such
borrowings, to the extent permitted by the 1940 Act and by the Trust's
fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such amounts and on such terms and
conditions, for such purposes and for such amount or kind of consideration
(including without limitation thereto, securities or other financial
instruments) now or hereafter permitted by the laws of the Commonwealth of
Massachusetts and by this Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell, transfer, reissue
or cancel (all without the vote or consent of the Shareholders of the Trust) its
Shares, in any manner and to the extent now or hereafter permitted by the laws
of Massachusetts and by this Declaration of Trust.
5. To conduct its business in all its branches at one or more offices in
Massachusetts and elsewhere in anypart of the world, without restriction or
limit as to extent.
6. To carry out all or any of the foregoing objects and purposes as principal or
agent, and alone or with associates or, to the extent now or hereafter permitted
by the laws of Massachusetts, as a member of, or as the owner or holder of any
stock of, or share of interest in, any issuer, and in connection therewith to
make or enter into such deeds or contracts with any issuers and to do such acts
and things and to exercise such powers, as a natural person could lawfully make,
enter into, do or exercise.
7. To do any and all such further acts and things and to exercise any and all
such further powers as may be necessary, incidental, relative, conducive,
appropriate or desirable for the accomplishment, carrying out or attainment of
all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from,
the terms of any other clause of this or any other Articles of this Declaration
of Trust, and shall each be regarded as independent and construed as powers as
well as objects and purposes, and the enumeration of specific purposes, objects
and powers shall not be construed to limit or restrict in any manner the meaning
of general terms or the general powers of the Trust now or hereafter conferred
by the laws of the Commonwealth of Massachusetts nor shall the expression of one
thing be deemed to exclude another, though it be of like nature, not expressed;
provided, however, that the Trust shall not carry on any business, or exercise
any powers, in any state, territory, district or country except to the extent
that the same may lawfully be carried on or exercised under the laws thereof.
FOURTH: (a) 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.
(d) The ownership of Shares shall be recorded in the books of the Trust
or a transfer agent. The Trustees may make such rules as they consider
appropriate for the transfer of Shares and similar matters. The record books of
the Trust or any transfer agent, as the case may be, shall be conclusive as to
who are the holders of Shares and as to the number of Shares held from time to
time by each.
(e) The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize.
(f) Shareholders shall have no preemptive or other right to subscribe
to any additional Shares or other securities issued by the Trust or the
Trustees.
FIFTH: The following provisions are hereby adopted with
respect to voting Shares of the Trust and certain other rights:
1. The Shareholders shall have power to vote (i) for the election of Trustees to
the extent provided in the By-Laws, (ii) with respect to the amendment of this
Declaration of Trust as provided in Article EIGHTH, paragraph 12, (iii) to the
same extent as the shareholders of a Massachusetts business corporation, as to
whether or not a court action, proceeding or claim should be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (iv) with respect to such additional matters relating to the
Trust as may be required by the 1940 Act or authorized by law, by this
Declaration of Trust, or the By-Laws of the Trust or any registration statement
of the Trust with the Commission or any State, or as the Trustees may consider
desirable. 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.
2. At all meetings of Shareholders each Shareholder shall be entitled to one
vote for each Share standing in his name on the books of the Trust on the date,
fixed in accordance with the By-Laws, for determination of Shareholders entitled
to vote at such meeting except (if so determined by the Board of Trustees) for
Shares redeemed prior to the meeting. Any fractional Share shall carry
proportionately all the rights of a whole Share, including the right to vote and
the right to receive dividends. The presence in person or by proxy of the
holders of one-third of the Shares outstanding and entitled to vote thereat
shall constitute a quorum at any meeting of the Shareholders. If at any meeting
of the Shareholders there shall be less than a quorum present, the Shareholders
present at such meeting may, without further notice, adjourn the same from time
to time until a quorum shall attend, but no business shall be transacted at any
such adjourned meeting except such as might have been lawfully transacted had
the meeting not been adjourned.
3. Each Shareholder, upon request to the Trust in proper form determined by the
Trust, shall be entitled to require the Trust to redeem all or any part of the
Shares standing in the name of the Shareholder. The method of computing such net
asset value, the time at which such net asset value shall be computed and the
time within which the Trust shall make payment therefor, shall be determined as
hereinafter provided in Article SEVENTH of this Declaration of Trust.
Notwithstanding the foregoing, the Trustees, when permitted or required to do so
by the 1940 Act, may suspend the right of the Shareholders to require the Trust
to redeem Shares.
4. No Shareholder shall, as such holder, have any right to purchase or subscribe
for any security of the Trust which it may issue or sell, other than such right,
if any, as the Trustees, in their discretion, may determine.
5. Notwithstanding anything elsewhere contained in this Declaration of Trust or
in the By-Laws of the Trust, so long as the By-Laws of the Trust do not provide
for regular annual meetings of Shareholders of the Trust, the Shareholders of
the Trust shall have such rights, and the Trust, the Board of Trustees, and the
Trustees shall have such obligations as would exist if the Trust were a common
law trust covered by Section 16(c) of the 1940 Act. 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). However, the
Trust may at any time or from time to time apply to the Commission for one or
more exemptions from all or part of said Section 16(c) and, if an exemptive
order or orders are issued by the Commission, such order or orders shall be
deemed part of said Section 16(c) for the purposes of this paragraph 5.
SIXTH: The person who shall act as initial Trustees are the
persons initially executing this Declaration of Trust or any counterpart
thereof.
However, the By-Laws of the Trust may fix the number of Trustees at a
number greater than that of the number of initial Trustees and may authorize the
Trustees to increase or decrease the number of Trustees, to fill the vacancies
created by any such increase in the number of Trustees, to set and alter the
terms of office of the Trustees and to lengthen or lessen their own terms or
make their terms of indefinite duration, all subject to the 1940 Act. Unless
otherwise provided by the By-Laws of the Trust, the Trustees need not be
Shareholders.
SEVENTH: The following provisions are hereby adopted for the
purpose of defining, limiting and regulating the powers of the Trust and of the
Trustees and Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or the Trustees
and shall have accepted this trust, the Trust estate shall vest in the new
Trustee or Trustees, together with the continuing Trustees without any further
act or conveyance, and he shall be deemed a Trustee hereunder.
2. The death, declination, resignation, retirement, removal, or incapacity of
the Trustees, or any one of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration of
Trust.
3. The assets of the Trust shall be held separate and apart from any assets now
or hereafter held in any capacity other than as Trustee hereunder by the
Trustees or any successor Trustees. All of the assets of the Trust shall at all
times be considered as vested in the Trustees. Except as provided in this
Declaration of Trust, no Shareholder shall have, as such holder of beneficial
interest in the Trust, any authority, power or right whatsoever to transact
business for or on behalf of the Trust, or on behalf of the Trustees, in
connection with the property or assets of the Trust, or in any part thereon,
except the rights to receive the income and distributable amounts arising
therefrom as set forth herein.
4. The Trustees in all instances shall act as principals, and are and shall be
free from the control of the Shareholders. The Trustees shall have full power
and authority to do any and all acts and to make and execute any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The Trustees shall not in any way
be bound or limited by present or future laws or customs in regard to Trust
investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purposes of this Trust. Subject to any applicable limitation in
this Declaration of Trust or in the By-Laws of the Trust, the Trustees shall
have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration of Trust providing
for the conduct of the business of the Trust and to amend and repeal them to the
extent that they do not reserve that right to the Shareholders;
(b) to elect and remove such officers and appoint and terminate such
officers as they consider appropriate with or without cause;
(c) to employ a bank or trust company as custodian of any assets of the
Trust subject to any conditions set forth in this Declaration of Trust or in the
By-Laws;
(d) to retain a transfer agent and Shareholder servicing agent, or both;
(e) to provide for the distribution of Shares either through a principal
underwriter or the Trust itself or both;
(f) to set record dates in the manner provided for in the By-Laws of the
Trust;
(g) to delegate such authority as they consider desirable to any officers
of the Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of ownership, with respect to
stock or other securities or property held in Trust hereunder; and to execute
and deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(i) to exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities held in trust hereunder;
(j) to hold any security or property in a form not indicating any trust, whether
in bearer, unregistered or other negotiable form; or either in its own name or
in the name of a custodian or a nominee or nominees, subject in either case to
proper safeguards according to the usual practice of Massachusetts business
trusts or investment companies; (k) to consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or concern, and to
pay calls or subscriptions with respect to any security held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(m) to make, in the manner provided in the By-Laws, distributions of income
and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner permitted by the 1940
Act and the Trust's fundamental policy thereunder as to borrowing; and
(o) to enter into investment advisory or management contracts, subject to the
1940 Act, with any one or more corporations, partnerships, trusts, associations
or other persons; if the other party or parties to any such contract are
authorized to enter into securities transactions on behalf of the Trust, such
transactions shall be deemed to have been authorized by all of the Trustees.
5. No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred by the Trustees or upon their
order.
6. (a) The Trustees shall have no power to bind any Shareholder personally or to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription to any Shares or otherwise. Every note, bond,
contract or other undertaking issued by or on behalf of the Trust or the
Trustees relating to the Trust shall include a recitation limiting the
obligation represented thereby to the Trust and its assets (but the omission of
such a recitation shall not operate to bind any Shareholder).
(b) Except as otherwise provided in this Declaration of Trust
or the By-Laws, whenever this Declaration of Trust calls for or permits any
action to be taken by the Trustees hereunder, such action shall mean that taken
by the Board of Trustees by vote of the majority of a quorum of Trustees as set
forth from time to time in the By-Laws of the Trust or as required pursuant to
the provisions of the 1940 Act and the rules and regulations promulgated
thereunder.
(c) The Trustees shall possess and exercise any and all such
additional powers as are reasonably implied from the powers herein contained
such as may be necessary or convenient in the conduct of any business or
enterprise of the Trust, to do and perform anything necessary, suitable, or
proper for the accomplishment of any of the purposes, or the attainment of any
one or more of the objects, herein enumerated, or which shall at any time appear
conducive to or expedient for the protection or benefit of the Trust, and to do
and perform all other acts or things necessary or incidental to the purposes
herein before set forth, or that may be deemed necessary by the Trustees.
(d) The Trustees shall have the power to determine
conclusively whether any moneys, securities, or other properties of the Trust
property are, for the purposes of this Trust, to be considered as capital or
income and in what manner any expenses or disbursements are to be borne as
between capital and income whether or not in the absence of this provision such
moneys, securities, or other properties would be regarded as capital or income
and whether or not in the absence of this provision such expenses or
disbursements would ordinarily be charged to capital or to income.
7. The By-Laws of the Trust may divide the Trustees into classes and prescribe
the tenure of office of the several classes, but no class shall be elected for a
period shorter than that from the time of the election following the division
into classes until the next meeting of Shareholders.
8. The Shareholders shall have the right to inspect the records, documents,
accounts and books of the Trust, subject to reasonable regulations of the
Trustees, not contrary to Massachusetts law, as to whether and to what extent,
and at what times and places, and under what conditions and regulations, such
right shall be exercised.
9. Any Trustee, or any officer elected or appointed by the Trustees or by any
committee of the Trustees or by the Shareholders or otherwise, may be removed at
any time, with or without cause, in such lawful manner as may be provided in the
By-Laws of the Trust.
10. If the By-Laws so provide, the Trustees shall have power to hold their
meetings, to have an office or offices and, subject to the provisions of the
laws of Massachusetts, to keep the books of the Trust outside of said
Commonwealth at such places as may from time to time be designated by them.
11. Securities held by the Trust shall be voted in person or by proxy by the
President or a Vice-President, or such officer or officers of the Trust as the
Trustees shall designate for the purpose, or by a proxy or proxies thereunto
duly authorized by the Trustees, except as otherwise ordered by vote of the
holders of a majority of the Shares outstanding and entitled to vote in respect
thereto.
12. (a) Subject to the provisions of the 1940 Act, any Trustee, officer or
employee, individually, or any partnership of which any Trustee, officer or
employee may be a member, or any corporation or association of which any
Trustee, officer or employee may be an officer, director, trustee, employee or
stockholder, may be a party to, or may be pecuniarily or otherwise interested
in, any contract or transaction of the Trust, and in the absence of fraud no
contract or other transaction shall be thereby affected or invalidated; provided
that in case a Trustee, or a partnership, corporation or association of which a
Trustee is a member, officer, director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall have been known to the
Trustees or a majority thereof; and any Trustee who is so interested, or who is
also a director, officer, trustee, employee or stockholder of such other
corporation or association or a member of such other corporation or association
or a member of such partnership which is so interested, may be counted in
determining the existence of a quorum at any meeting of the Trustees which shall
authorize any such contract or transaction, and may vote thereat to authorize
any such contract or transaction, with like force and effect as if he were not
such director, officer, trustee, employee or stockholder of such other trust or
corporation or association or a member of a partnership so interested.
(b) Specifically, but without limitation of the foregoing, the
Trust may enter into a management or investment advisory contract or
underwriting contract and other contracts with, and may otherwise do business
with any manager or investment adviser and/or any sub-adviser for the Trust
and/or principal underwriter of the Shares of the Trust or any subsidiary or
affiliate of any such manager or investment adviser and/or sub-adviser and/or
principal underwriter and may permit any such firm or corporation to enter into
any contracts or other arrangements with any other firm or corporation relating
to the Trust notwithstanding that the Board of the Trust may be composed in part
of partners, directors, officers or employees of any such firm or corporations,
and officers of the Trust may have been or may be or become partners, directors,
officers or employees of any such firm or corporation, and in the absence of
fraud the Trust and any such firm or corporation may deal freely with each
other, and no such contract or transaction between the Trust and any such firm
or corporation shall be invalidated or in any way affected thereby, nor shall
any Trustee or officer of the Trust be liable to the Trust or to any Shareholder
or creditor thereof or to any other person for any loss incurred by it or him
solely because of the existence of any such contract or transaction; provided
that nothing herein shall protect any Trustee or officer of the Trust against
any liability to the Trust or to its security holders to which he would
otherwise be subject by reason or willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
(c) (1) The Trust shall indemnify all current and former
trustees, officers, employees and agents of the Trust (each, a "Covered Person")
against judgments, fines, settlements and expenses to the fullest extent
authorized, and in the manner permitted, by applicable federal and state law.
(2) The Trust shall advance the expenses of Covered
Persons who are parties to any Proceeding to the fullest extent authorized,
and in the manner permitted, by applicable federal and state law. For
purposes of this paragraph, "Proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative.
(3) Pursuant and subject to paragraphs (1) and (2), the Trust shall indemnify
each Covered Person against, or advance the expenses of any Covered Person for,
the amount of any deductible provided in any liability insurance policy
maintained by the Trust.
13. (a) 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.
(a) Payment of the net asset value of Shares of the Trust properly surrendered
to it for redemption shall be made by the Trust within seven days after tender
of such Shares to the Trust for such purpose plus any period of time during
which the right of the holders of the shares of the Trust to require the Trust
to redeem such shares has been suspended. Any such payment may be made in
portfolio securities of the Trust and/or in cash, as the Trustees shall deem
advisable, and no Shareholder shall have a right, other than as determined by
the Trustees, to have his Shares redeemed in kind.
EIGHTH:
1. In case any Shareholder or former Shareholder shall be held to be personally
liable solely by reason of his being or having been a Shareholder and not
because of his acts or omissions or for some other reason, the Shareholder or
former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the Trust estate to be held
harmless from and indemnified against all loss and expense arising from such
liability. This Trust shall, upon request by the Shareholder, assume the defense
of any claim made against any Shareholder for any act or obligation of the Trust
and satisfy any judgment thereon.
2. It is hereby expressly declared that a trust and not a partnership is created
hereby. No Trustee hereunder shall have any power to bind personally either the
Trust's officers or any Shareholder. All persons extending credit to,
contracting with or having any claim against the Trust or the Trustees shall
look only to the assets of the Trust for payment under such credit, contract or
claim; and neither the Shareholders nor the Trustees, nor any of their agents,
whether past, present or future, shall be personally liable therefor. Nothing in
this Declaration of Trust shall protect a Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
3. The exercise by the Trustees of their powers and discretion hereunder in good
faith and with reasonable care under the circumstances then prevailing, shall be
binding upon everyone interested. Subject to the provisions of paragraph 2 of
this Article EIGHTH, the Trustees shall not be liable for errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and the subject to the provisions of paragraph 2 of this Article EIGHTH, shall
be under no liability for any act or omission in accordance with such advice or
for failing to follow such advice. The Trustees shall not be required to give
any bond as such, nor any surety if a bond is required.
4. This Trust shall continue without limitation of time but subject to the
provisions of sub-sections (a),(b) and (c) of this paragraph 4.
(a) The Trustees, with the favorable vote of the holders of more than 50% of the
outstanding Shares entitled to vote may sell and convey the assets of the Trust
(which sale may be subject to the retention of assets for the payment of
liabilities and expenses) to another issuer for a consideration which may be or
include securities of such issuer. Upon making provision for the payment of
liabilities, by assumption by such issuer or otherwise, the Trustees shall
distribute the remaining proceeds ratably among the holders of the Shares of the
Trust then outstanding.
(b) The Trustees, with the favorable vote of the holders of more than 50% of the
outstanding Shares entitled to vote, may at any time sell and convert into money
all the assets of the Trust. Upon making provision for the payment of all
outstanding obligations, taxes and other liabilities, accrued or contingent, of
the Trust, the Trustees shall distribute the remaining assets of the Trust
ratably among the holders of the outstanding Shares.
(c) Upon completion or the distribution of the remaining proceeds or the
remaining assets as provided in sub-sections (a) and (b), the Trust shall
terminate and the Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties shall be canceled and discharged.
5. The original or a copy of this instrument and of each declaration of trust
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of each Supplemental
Declaration of Trust shall be filed with the Massachusetts Secretary of State,
as well as any other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such Supplemental Declarations of
Trust have been made and as to any matters in connection with the Trust
hereunder, and with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such Supplemental Declaration of Trust. In this instrument or in any such
Supplemental Declaration of Trust, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder" shall be deemed to refer to
this instrument as amended or affected by any such Supplemental Declaration of
Trust. This instrument may be executed in any number of counterparts, each of
which shall be deemed an original.
6. The trust set forth in this instrument is created under and is to be governed
by and construed and administered according to the laws of the Commonwealth of
Massachusetts. The Trust shall be of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption of the Shares held
in any account in the aggregate net asset value of such Shares (taken at cost or
value, as determined by the Board) has been reduced by a Shareholder to $500 or
less upon such notice to the Shareholders in question, with such permission to
increase the investment in question and upon such other terms and conditions as
may be fixed by the Board of Trustees in accordance with the 1940 Act.
8. In the event that any person advances the organizational expenses of the
Trust, such advances shall become an obligation of the Trust subject to such
terms and conditions as may be fixed by, and on a date fixed by, or determined
in accordance with criteria fixed by the Board of Trustees, to be amortized over
a period or periods to be fixed by the Board.
9. Whenever any action is taken under this Declaration of Trust under any
authorization to take action which is permitted by the 1940 Act, such action
shall be deemed to have been properly taken if such action is in accordance with
the construction of the 1940 Act then in effect as expressed in "no action"
letters of the staff of the Commission or any release, rule, regulation or order
under the 1940 Act or any decision of a court of competent jurisdiction,
notwithstanding that any of the foregoing shall later be found to be invalid or
otherwise reversed or modified by any of the foregoing.
10. Any action which may be taken by the Board of Trustees under this
Declaration of Trust or its By-Laws may be taken by the description thereof in
the then effective prospectus or Statement of Additional Information relating to
the Shares under the Securities Act of 1933 or in any proxy statement of the
Trust rather than by formal resolution of the Board.
11. Whenever under this Declaration of Trust, the Board of Trustees is permitted
or required to place a value on assets of the Trust, such action may be
delegated by the Board, and/or determined in accordance with a formula
determined by the Board, to the extent permitted by the 1940 Act.
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 an 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.
NINTH: The resident agent for the Trust in the Commonwealth of
Massachusetts shall be: Prentice Hall Corporation System, Inc., 84 State Street,
Boston, MA 02109.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this Amended and Restated Declaration of Trust as of the
24th day of March 2000.
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-------------------------------------------
Jerome L. Dodson David L. Gibson
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Gail L. Horvath Herbert A. Houston
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-------------------------------------------
Cecilia C.M. Lee Leo T. McCarthy
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- -------------------------- -------------------------------------------
Donald E. O'Connor Howard M. Shapiro
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Joan Shapiro
<PAGE>
THE PARNASSUS FUND and THE PARNASSUS INCOME TRUST
RESTATED BY-LAWS
As of March 24, 2000
ARTICLE I
SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the Shareholders (which
term as used herein shall, together with all other terms defined in the
Declaration of Trust, have the same meaning as in the Declaration of
Trust) shall be held at the principal office of the Trust or at such other
place as may from time to time be designated by the Board of Trustees and
stated in the notice of meeting.
Section 2. Calling of Meetings. Meetings of the Shareholders for any
purpose or purposes (including the election of Trustees) may be called by
the Chairman of the Board of Trustees, if any, or by the President or by
the Board of Trustees and shall be called by the Secretary upon receipt of
the request in writing signed by Shareholders holding not less than
one-third in amount of the entire number of Shares issued and outstanding
and entitled to vote thereat. Such request shall state the purpose or
purposes of the proposed meeting.
Section 3. Notice of Meetings. Not less than ten days' and not more
than ninety days' written or printed notice of every meeting of
Shareholders, stating the time and place thereof (and the general nature
of the business proposed to be transacted at any special or extraordinary
meeting), shall be given to each Shareholder entitled to vote thereat by
leaving the same with him or at his residence or usual place of business
or by mailing it, postage prepaid and addressed to him at his address as
it appears upon the books of the Trust.
No notice of the time, place or purpose of any meeting of Shareholders
need be given to any Shareholder who attends in person or by proxy or to
any Shareholder who, in writing executed and filed with the records of the
meeting, either before or after the holding thereof, waives such notice.
Section 4. Record Dates. The Board of Trustees may fix, in advance, a
date, not exceeding ninety days and not less than ten days preceding the
date of any meeting of Shareholders, and not exceeding ninety days
preceding any dividend payment date or any date for the allotment of
rights, as a record date for the determination of the Shareholders
entitled to receive such dividends or rights, as the case may be; and only
Shareholders of record on such date shall be entitled to notice of and to
vote at such meeting or to receive such dividends or rights, as the case
may be.
Section 5. Quorum, Adjournment of Meetings. The presence in person or
by proxy of the holders of record of one-third of the Shares of the stock
of the Trust issued and outstanding and entitled to vote thereat, shall
constitute a quorum at all meetings of the Shareholders. If at any meeting
of the Shareholders there shall be less than a quorum present, the
Shareholders present at such meeting may, without further notice, adjourn
the same from time to time until a quorum shall attend, but no business
shall be transacted at any such adjourned meeting except such as might
have been lawfully transacted had the meeting not been adjourned.
Section 6. Voting and Inspectors. At all meetings of Shareholders every
Shareholder of record entitled to vote thereat shall be entitled to vote
at such meeting either in person or by proxy appointed by instrument in
writing subscribed by such Shareholder or his duly authorized
attorney-in-fact.
All elections of Trustees shall be had by a plurality of the votes cast
and all questions shall be decided by a majority of the votes cast, in
each case at a duly constituted meeting, except as otherwise provided in
the Declaration of Trust or in these By-Laws or by specific statutory
provision superseding the restrictions and limitations contained in the
Declaration of Trust or in these By-Laws.
At any election of Trustees, the Board of Trustees prior thereto may,
or, if they have not so acted, the Chairman of the meeting may, and upon
the request of the holders of ten per cent (1 0%) of the Shares entitled
to vote at such election shall, appoint two inspectors of election who
shall first subscribe an oath of affirmation to execute faithfully the
duties of inspectors at such election with strict impartiality and
according to the best of their ability, and shall after the election make
a certificate of the result of the vote taken. No candidate for the office
of Trustee shall be appointed such inspector.
The Chairman of the meeting may cause a vote by ballot to be taken upon
any election or matter, and such vote shall be taken upon the request of
the holders of ten per cent (10%) of the Shares entitled to vote on such
election or matter.
Section 7. Conduct of Shareholders' Meetings. The meetings of the
Shareholders shall be presided over by the Chairman of the Board of
Trustees, if any, or if he shall not be present, by the President, or if
he shall not be present, by a Vice-President, or if neither the Chairman
of the Board of Trustees, the President nor any Vice-President is present,
by a chairman to be elected at the meeting. The Secretary of the Trust, if
present, shall act as Secretary of such meetings, or if he is not present,
an Assistant Secretary shall so act; if neither the Secretary nor an
Assistant Secretary is present, then the meeting shall elect its
secretary.
Section 8. Concerning Validity of Proxies, Ballots, Etc. At every
meeting of the Shareholders, all proxies shall be received and taken in
charge of and all ballots shall be received and canvassed by the secretary
of the meeting, who shall decide all questions touching the qualification
of voters, the validity of the proxies, and the acceptance or rejection of
votes, unless inspectors of election shall have been appointed as provided
in Section 6, in which event such inspectors of election shall decide all
such questions.
ARTICLE II
BOARD OF TRUSTEES
Section 1. Number of Tenure of Office. The business and property of the
Trust shall be conducted and managed by a Board of Trustees consisting of
nine (9) persons, which number may be increased or decreased as provided
in Section 2 of this Article. The Board of Trustees may sit and alter the
terms of office of the Trustees, may lengthen or lessen their own terms or
make their terms of indefinite duration, all subject to the 1940 Act.
Trustees need not be Shareholders. No one shall continue to serve as an
independent Trustee after the end of the calendar year in which that
person achieves the age of seventy-five (75).
Section 2. Increase or Decrease in Number of Trustees; Removal. The
Board of Trustees may increase the number of Trustees to a number not
exceeding fifteen, and may elect Trustees to fill the vacancies created by
any such increase in the number of Trustees; the Board of Trustees may
likewise decrease the number of Trustees to a number not less than three.
Vacancies occurring other than by reason of any such increase shall be
filled as provided for a Massachusetts business corporation. In the event
that after proxy material has been printed for a meeting of Shareholders
at which Trustees are to be elected any one or more management nominees
dies or becomes incapacitated, the authorized number of Trustees shall be
automatically reduced by the number of such nominees, unless the Board of
Trustees prior to the meeting shall otherwise determine. Any Trustee at
any time may be removed either with or without cause by resolution duly
adopted by the affirmative votes of the holders of the majority of the
Shares of the Trust present in person or by proxy at any meeting of
Shareholders at which such vote may be taken, provided that a quorum is
present, or by such larger vote as may be required by Massachusetts law.
Any Trustee at any time may be removed for cause by resolution duly
adopted at any meeting of the Board of Trustees provided that notice
thereof is contained in the notice of such meeting and that such
resolution is adopted by the vote of at least two thirds of the Trustees
whose removal is not proposed. As used herein, "for cause" shall mean any
cause which under Massachusetts law would permit the removal of a Trustee
of a business trust.
Section 3. Place of Meeting. The Trustees may hold their meetings, have
one or more offices, and keep the books of the Trust outside
Massachusetts, at any office or offices of the Trust or at any other place
as they may from time to time by resolution determine, or, in the case of
meetings, as they may from time to time by resolution determine or as
shall be specified or fixed in the respective notices or waivers of notice
thereof.
Section 4. Regular Meetings. Regular meetings of the Board of
Trustees shall be held at such time and
-----------------
on such notice, if any, as the Trustees may from time to time determine.
Section 5. Special Meetings. Special meetings of the Board of Trustees
may be held from time to time upon call of the Chairman of the Board of
Trustees, if any, the President or two or more of the Trustees, by oral or
telegraphic or written notice duly served on or sent or mailed to each
Trustee not less than one day before such meeting. No notice need be given
to any Trustee who attends in person or to any Trustee who, in writing
executed and filed with the records of the meeting either before or after
the holding thereof, waives such notice. Such notice or waiver of notice
need not state the purpose or purposes of such meeting.
Section 6. Quorum. One-third of the Trustees then in office shall
constitute a quorum for the transaction of business, provided that a
quorum shall in no case be less than two Trustees. If at any meeting of
the Board there shall be less than a quorum present (in person or by open
telephone line, to the extent permitted by the 1940 Act), a majority of
those present may adjourn the meeting from time to time until a quorum
shall have been obtained. The act of the majority of the Trustees present
at any meeting at which there is a quorum shall be the act of the Board,
except as may be otherwise specifically provided by statute, by the
Declaration of Trust or by these By-Laws.
Section 7. Executive Committee. The Board of Trustees may, by the
affirmative vote of a majority of the entire Board, elect from the
Trustees an Executive Committee to consist of such number of Trustees as
the Board may from time to time determine. The Board of Trustees by such
affirmative vote shall have power at any time to change the members of
such Committee and may fill vacancies in the Committee by election from
the Trustees. When the Board of Trustees is not in session, the Executive
Committee shall have and may exercise any or all of the powers of the
Board of Trustees in the management of the business and affairs of the
Trust (including the power to authorize the seal of the Trust to be
affixed to all papers which may require it) except as provided by law and
except the power to increase or decrease the size of, or fill vacancies on
the Board. The Executive Committee may fix its own rules of procedure, and
may meet, when and as provided by such rules or by resolution of the Board
of Trustees, but in every case the presence of a majority shall be
necessary to constitute a quorum. In the absence of any member of the
Executive Committee the members thereof present at any meeting, whether or
not they constitute a quorum, may appoint a member of the Board of
Trustees to act in the place of such absent member.
Section 8. Other Committees. The Board of Trustees, by the affirmative
vote of a majority of the entire Board, may appoint other committees which
shall in each case consist of such number of members and shall have and
may exercise such powers as the Board may determine in the resolution
appointing them. A majority of all members of any such committee may
determine its action, and fix the time and place of its meetings, unless
the Board of Trustees shall otherwise provide. The Board of Trustees shall
have power at any time to change the members and powers of any such
committee, to fill vacancies, and to discharge any such committee.
Section 9. Informal Action by and Telephone Meetings of Trustees and
Committees. Any action required or permitted to be taken at any meeting of
the Board of Trustees or any committee thereof may be taken without a
meeting, if a written consent to such action is signed by all members of
the Board, or of such committee, as the case may be. Trustees or members
of a committee of the Board of Trustees may participate in a meeting by
means of a conference telephone or similar communications equipment; such
participation shall, except as otherwise required by the 1940 Act, have
the same effect as presence in person.
Section 10. Compensation of Trustees. Trustees shall be entitled to
receive such compensation from the Trust for their services as may from
time to time be voted by the Board of Trustees.
Section 11. Dividends. Dividends or distributions payable on the Shares
may, but need not be, declared by specific resolution of the Board as to
each dividend or distribution; in lieu of such specific resolutions, the
Board may, by general resolution, determine the method of computation
thereof, the method of determining the Shareholders to which they are
payable and the methods of determining whether and to which Shareholders
they are to be paid in cash or in additional Shares.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the Trust
shall be chosen by the Board of Trustees. These may include a Chairman of
the Board of Trustees, and shall include a President, a Secretary and a
Treasurer. The Chairman of the Board of Trustees, if any, shall be
selected from among the Trustees. The Board of Trustees may also in its
discretion appoint one or more Vice-Presidents, Assistant Secretaries,
Assistant Treasurers, (the number thereof to be determined by the Board of
Trustees) and other officers, agents and employees, who shall have such
authority and perform such duties as the Board or the Executive Committee
may determine. The Board of Trustees may fill any vacancy which may occur
in any office. Any two offices, except those of President and
Vice-President, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity,
if such instrument is required by law or by these By-Laws to be executed,
acknowledged or verified by two or more officers.
Section 2. Term of Office. The term of office of all officers shall be
as fixed by the Board of Trustees; however, any officer may be removed
from office at any time with or without cause by the vote of a majority of
the entire Board of Trustees.
Section 3. Powers and Duties. The officers of the Trust shall have such
powers and duties as generally pertain to their respective offices, as
well as such posers and duties as may from time to time be conferred by
the Board of Trustees or the Executive Committee.
<PAGE>
THE PARNASSUS FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 24th day of March, 2000, by and between THE
PARNASSUS FUND (the "Fund"), a Massachusetts business trust, and PARNASSUS
INVESTMENTS (the "Adviser").
W I T N E S S E T H :
In consideration of the mutual promises and agreements herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
1. In General
The Adviser agrees, all as more fully set forth herein, to act as
managerial investment adviser to the Fund with respect to the
investment of its assets and to supervise and arrange the purchase and
sale of securities held in the portfolio of the Fund and generally
administer the affairs of the Fund.
2. Duties and Obligation of the Adviser with respect to Management of the Fund
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees
of the Fund, the Adviser shall:
(i) Decide what securities shall be purchased or sold by the
Fund and when; and
(ii)Arrange for the purchase and the sale of securities held
in the portfolio of the Fund by placing purchase and sale
orders for the Fund.
(b) Any investment purchases or sales made by the Adviser shall at
all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Investment
Company Act of 1940 (the "Act") and of any rules or
regulations in force thereunder; (2) any other applicable
provisions of law; (3) the provisions of the Declaration of
Trust and By-Laws of the Fund as amended from time to time;
(5) any policies and fundamental policies of the Fund, as
reflected in its registration statement under the Act, or as
amended by the shareholders of the Fund.
(c) The Adviser shall also administer the affairs of the Fund and,
in connection therewith, shall be responsible for (i)
maintaining the Fund's books and records (other than financial
or accounting books and records or those being maintained by
the Fund's custodian, transfer agent or accounting services
agent); (ii) overseeing the Fund's insurance relationships;
The Adviser shall give the Fund the benefit of its best
judgement and effort in rendering services thereunder, but the
Adviser shall not be liable for any loss sustained by reason
of the purchase, sale or retention of any security, whether or
not such purchase, sale or retention shall have been based
upon its own investigation and research or upon investigation
and research made by any other individual, firm or
corporation, if such purchase, sale or retention shall have
been made and such other individual, firm or corporation shall
have been selected in good faith. Nothing contained therein
shall, however, be construed to protect the Adviser against
any liability to the Fund or its security holders by reason of
willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
The Fund agrees that the word "Parnassus" in its name is
derived from the name of the Adviser and is the property of
the Adviser for copyright and all other purposes and that,
therefore, such word may be freely used by the Adviser as to
other investment companies or other investment products. The
Fund further agrees that, in the event that the Adviser ceases
to be the Fund's investment adviser for any reason, the Fund
will (unless the Adviser otherwise consents in writing)
promptly take all necessary steps to change its name to a name
not including the word "Parnassus".
It is agreed that the Adviser shall have no responsibility or
liability for the accuracy or completeness of the Fund's
Registration Statement under the 1940 Act or the Securities
Act of 1933 except for information supplied by the Adviser for
inclusion therein. The Fund agrees to indemnify the Adviser to
the full extent permitted by the Fund's Declaration of Trust.
3. Broker-Dealer Relationships
In connection with its duties set forth in Section 2(a)(ii) of this
Agreement to arrange for the purchase and the sale of securities held
in the portfolio of the Fund by placing purchase and sale orders for
the Fund, the Adviser shall select such broker-dealers ("brokers") as
shall, in the Adviser's judgment, implement the policy of the Fund to
achieve "best execution", i.e. prompt and efficient execution at the
most favorable securities price. In making such selection, the Adviser
is authorized to consider the reliability, integrity and financial
condition of the broker.
The Adviser is also authorized to consider whether the broker provides
brokerage and/or research services to the Fund and/or other accounts of
the Adviser. The commissions paid to such brokers may be higher than
another broker would have charged if a good faith determination is made
by the Adviser that the commission is reasonable in relation to the
services provided, viewed in terms of either that particular
transaction or the Adviser's overall discretion. The Adviser shall use
its judgment in determining that the amount of commissions paid are
reasonable in relation to the value of brokerage and research services
provided and need not place or attempt to place a specific dollar value
on such services or on the portion of commission rates reflecting such
services. To demonstrate that such determinations were in good faith
and to show the overall reasonableness of commissions paid, the Adviser
shall be prepared to show that commissions paid (i) were for purposes
contemplated by this Agreement; (ii) were not allocated or paid for
products or services which were readily and customarily available and
offered to the public on a commercial basis; and (iii) were within a
reasonable range as compared to the rates charged by qualified brokers
to other institutional investors as such rates may become known from
available information. The Fund recognizes that, on any particular
transaction, a higher than usual commission may be paid due to the
difficulty of the transaction in question. The Adviser is also
authorized to consider sales of shares as a factor in the selection of
brokers to execute brokerage and principal transactions, subject to the
requirements of "best execution" as defined above.
4. Allocation of Expenses
The Adviser agrees that it will furnish the Fund, at the Adviser's
expense, with all office space and facilities, and equipment and
clerical personnel necessary for carrying out its duties under this
Agreement. The Adviser will also pay all compensation of all Trustees,
officers and employees of the Fund who are affiliated persons of the
Adviser. All costs and expenses not expressly assumed by the Adviser
under this Agreement shall be paid by the Fund, including, but not
limited to (i) interest and taxes; (ii) brokerage commissions; (iii)
insurance premiums; (iv) compensation and expenses of its Trustees
other than those affiliated with the Adviser; (v) legal and audit
expenses; (vi) fees and expenses of the Fund's custodian, shareholder
servicing or transfer agent and accounting services agent; (vii)
expenses incident to the issuance of its shares, including stock
certificates and issuance of shares on the payment of, or reinvestment
of, dividends; (viii) fees and expenses incident to the registration
under Federal or state securities laws of the Fund or its shares; (ix)
expenses of preparing, printing and mailing reports and notices and
proxy material to shareholders of the Fund; (x) all other expenses
incidental to holding meetings of the Fund's shareholders; (xi) dues or
assessments of or contributions to the Investment Company Institute and
the Social Investment Forum or any successor; and (xii) such
non-recurring expenses as may arise, including litigation affecting the
Fund and the legal obligations which the Fund may have to indemnify its
officers and Trustees with respect thereto.
5. Compensation of the Adviser
(a) The Fund agrees to pay the Adviser and the Adviser agrees to
accept as full compensation for all services rendered by the
Adviser hereunder, an annual management fee payable monthly
and computed at the following annual percentages of the Fund's
average daily net assets: 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.
(b) In the event the expenses of the Fund (including the fees of
the Adviser and amortization of organization expenses but
excluding interest, taxes, brokerage commissions,
extraordinary expenses and sales charges and distribution
fees) for any fiscal year exceed the limits set by
applicable regulations of state securities commissions, the
Adviser will reduce its fee by the amount of such excess. Any
such reductions are subject to readjustment during the
year. The payment of the management fee at the end of any
month will be reduced or postponed or, if necessary, a refund
will be made to the Fund so that at no time will there be any
accrued but unpaid liability under this expense
limitation.
6. Duration and Termination
(a) This Agreement shall go into effect on the date set forth
above and shall, unless terminated as hereinafter provided, continue
in effect until April 30, 2001, and thereafter from year to year, but
only so long as such continuance is specifically approved at least
annually by the Fund's Board of Trustees, including the vote of a
majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval,
or by the vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote of the
Trustees.
(b) This Agreement may be terminated by the Adviser at any time
without penalty upon giving the Fund sixty (60) days' written notice
(which notice may be waived by the Fund) and may be terminated by the
Fund at any time without penalty upon giving the Adviser sixty (60)
days' written notice (which notice may be waived by the Adviser),
provided that such termination by the Fund shall be directed or
approved by the vote of a majority of all its Trustees in office at
the time or by the vote of the holders of a majority (as defined in
the Act) of the voting securities of the Fund at the time outstanding
and entitled to vote. This Agreement shall automatically terminate in
the event of its assignment (as so defined).
7. No Shareholder Liability.
-------------------------
The Adviser understands that the obligations of this Agreement are not
binding upon any shareholder of the Fund personally, but bind only the
Fund's property. The Adviser represents that it has notice of the
provisions of the Fund's Declaration of Trust disclaiming shareholder
liability for acts or obligations of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by duly authorized persons and their seals to be
hereunto affixed, all as of the day and year first above written.
THE PARNASSUS FUND
Date: March 24, 2000 By___________________________
Richard Silberman, Secretary
PARNASSUS INVESTMENTS
Date: March 24, 2000 By___________________________
Jerome L. Dodson, President
<PAGE>
THE PARNASSUS FUND
DISTRIBUTION AGREEMENT
This Agreement, made as of the 24th day of March, 2000, between THE
PARNASSUS FUND, a Massachusetts business trust (the "Fund"), and PARNASSUS
INVESTMENTS, a California corporation (the "Distributor").
WITNESSETH:
Whereas, the Fund proposes to engage in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "1940 Act") and it is in the interest of
the Fund to offer its shares for sale continuously; and
Whereas, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
Whereas, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Fund's Shares of
Beneficial Interest (the "Shares"), no par value, to commence after the
effectiveness of its initial registration statement filed pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act.
Now, THEREFORE, the parties agree as follows:
1. Appointment of Distributor. The Fund hereby appoints the Distributor
as its exclusive agent to sell and to arrange for the sale of the Fund's Shares,
on the terms and for the period set forth in this Agreement, and the Distributor
hereby accepts such appointment and agrees to act hereunder directly and/or
through the Fund's transfer agent in the manner set forth in the Prospectus (as
defined below). It is understood and agreed that the services of the Distributor
hereunder are not exclusive, and the Distributor may act as principal
underwriter for the shares of any other registered investment company.
2. Services and Duties of the Distributor.
--------------------------------------
(a) The Distributor agrees to sell the Shares, as agent for the
Fund, from time to time during the term of this Agreement upon the terms
described in the Fund's Prospectus. As used in this Agreement, the term
"Prospectus" shall mean the prospectus and statement of additional information
included as part of the Fund's Registration Statement, as such prospectus and
statement of additional information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the Registration
Statement most recently filed from time to time by the Fund with the Securities
and Exchange Commission and effective under the 1933 Act and the 1940 Act, as
such Registration Statement is amended by any amendments thereto at the time in
effect. The Distributor shall not be obligated to sell any certain number of
Shares.
(b) Upon commencement of the Fund's operations, the
Distributor will hold itself available to receive orders, satisfactory to the
Distributor, for the purchase of the Shares and will accept such orders and will
transmit such orders and funds received by it in payment for such Shares as are
so accepted to the Fund's transfer agent or custodian, as appropriate, as
promptly as practicable. Purchase orders shall be deemed effective at the time
and in the manner set forth in the Prospectus. The Distributor shall not make
any short sales of Shares.
(c) The offering price of the shares shall be the net asset
value (as defined in the Declaration of Fund of the Fund and determined as set
forth in the Prospectus) per share of the Shares. The Fund shall furnish the
Distributor, with all possible promptness, an advice of each computation of net
asset value.
3. Duties of the Fund.
-------------------
(a) Maintenance of Federal Registration. The Fund shall, at
its expense, take, from time to time, all necessary action and such steps,
including payment of the related filing fees, as may be necessary to register
and maintain registration of a sufficient number of Shares under the 1933 Act.
The Fund agrees to file from time to time such amendments, reports and other
documents as may be necessary in order that there may be no untrue statement of
a material fact in a registration statement or prospectus, or necessary in order
that there may be no untrue statement of a material fact in a registration
statement or prospectus, or necessary in order that there may be no omission to
state a material fact in the registration statement or prospectus which omission
would make the statements therein misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Fund shall,
at its expense, use its best efforts to qualify and maintain the qualification
of an appropriate number of Shares for sale under the securities laws of such
states as the Distributor and the Fund may approve, and, if necessary or
appropriate in connection therewith, to qualify and maintain the qualification
of the Fund as a broker or dealer in such states; provided that the Fund shall
not be required to amend its Declaration of Trust or By-Laws to comply with the
laws of any state, to maintain an office in any state, to change the terms of
the offering of the Shares in any state from the terms set forth in its
Prospectus, to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims arising out of
the offering and sale of the Shares. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such qualifications.
(c) Copies of Reports and Prospectus. The Fund shall, at its
expense, keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, including such
reasonable number of copies of its Prospectus and annual and interim reports as
the Distributor may request and shall cooperate fully in the efforts of the
Distributor to sell and arrange for the sale of the Shares and in the
performance of the Distributor under this Agreement.
4. Conformity with Applicable Law and Rules. The Distributor agrees
that in selling Shares hereunder it shall conform in all respects with the laws
of the United State and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
5. Independent Contractor. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Fund in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.
6. Indemnification.
----------------
(a) Indemnification of Fund. The Distributor agrees to
indemnify and hold harmless the Fund and each of its present or former trustees,
officers, employees, representatives and each person, if any, who controls or
previously controlled the Fund within the meaning of Section 15 of the 1933 Act
against any and all losses, liabilities, damages,claims or expenses (including
the reasonable costs or investigating or defending any alleged loss, liability,
damage, claims or expense and reasonable legal counsel fees incurred in
connection therewith) to which the Fund or any such person may become subject
under the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
covering Shares filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to the Fund by the Distributor. In no case (i) is the
Distributor's indemnity in favor of the Fund, or any person indemnified to be
deemed to protect the Fund or such indemnified person against any liability to
which the Fund or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of his obligations and duties under this
Agreement or (ii) is the Distributor to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against the Fund or
any person indemnified unless the Fund or such person, as the case may be, shall
have notified the Distributor in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Fund or upon such person (or
after the Fund or such person shall have received notice to such service on any
designated agent). However, failure to notify the Distributor of any such claim
shall not relieve the Distributor from any liability which the Distributor may
have to the Fund or any person against whom such action is brought otherwise
than on account of the Distributor's indemnity agreement contained in the
Paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense, or, if the Distributor so elects, to assume the defense of any
suit brought to enforce any such claim, but, if the Distributor ejects to assume
the defense, such defense shall be conducted by legal counsel chosen by the
Distributor and satisfactory to the Fund, to the persons indemnified defendant
or defendants, in the suit. In the event that the Distributor elects to assume
the defense of any such suit and retain such legal counsel, the Fund, the
persons indemnified defendant or defendants in the suit, shall bear the fees and
expenses of any additional legal counsel retained by them. If the Distributor
does not elect to assume the defense of any such suit, the Distributor will
reimburse the Fund and the persons indemnified defendant or defendants in such
suit for the reasonable fees and expenses of any legal counsel retained by them.
The Distributor agrees to promptly notify the Fund of the commencement of any
litigation of proceedings against it or any of its officers, employees or
representatives in connection with the issue or sale of any Shares.
(b) Indemnification of the Distributor. The Fund agrees to indemnify
and hold harmless the Distributor and each of its present or former officers,
employees, representatives and each person, if any, who controls or previously
controlled the Distributor within the meaning of Section 15 of the 1933 Act
against any and all losses, liabilities, damages, claims or expenses (including
the reasonable costs of investigating or defending any alleged loss, liability,
damage, claim or expense and reasonable legal counsel fees incurred in
connection therewith) to which the Distributor or and such person may become
subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person which (i)
may be based upon any wrongful act by the Fund or any of the Fund's trustees,
officers, employees or representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
covering Shares filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading unless such statement or omission was made in reliance
upon information furnished to the Fund by the Distributor. In no case (i) is the
Fund's indemnity in favor of the Distributor, or any person indemnified to be
deemed to protect the Distributor or such indemnified person against any
liability to which the Distributor or such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of his obligations and
duties under this Agreement, or (ii) is the Fund to be liable under its
indemnity agreement contained in this Paragraph with respect to any claim made
against Distributor, or person indemnified unless the Distributor, or such
person, as the case may be, shall have notified the Fund in writing of the claim
within a reasonable time after the summons or other first written notification
giving information of the nature of the claim shall have been served upon the
Distributor or upon such person (or after the Distributor or such person shall
have received notice of such service on any designated agent). However, failure
to notify the Fund of any such claim shall not relieve the Fund from any
liability which the Fund may have to the Distributor or any person against whom
such action is brought otherwise than on account of the Fund's indemnity
agreement contained in this Paragraph.
The Fund shall be entitled to participate, at its own expense, in the
defense, or, if the Fund so elects, to assume the defense of any suit brought to
enforce any such claim, but if the Fund elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Fund and satisfactory
to the Distributor, to the persons indemnified defendant or defendants, in the
suit. In the event that the Fund elects to assume the defense of any such suit
and retain such legal counsel, the Distributor, the persons indemnified
defendant or defendants in the suit, shall bear the fees and expenses of any
additional legal counsel retained by them. If the Fund does not elect to assume
the defense of any such suit, the Fund will reimburse the Distributor and the
persons indemnified defendant or defendants in such suit for the reasonable fees
and expenses of any legal counsel retained by them. The Fund agrees to promptly
notify the Distributor of the commencement of any litigation or proceedings
against it or any of its trustees, officers, employees or representatives in
connection with the issue or sale of any Shares.
7. Authorized Representations. The Distributor is not authorized by the
Fund to give on behalf of the Fund any information of to make any
representations in connection with the sale of Shares other than the information
and representations contained in a registration statement of prospectus filed
with the Securities and Exchange Commission ("SEC") under the 1933 Act and/or
the 1940 Act, covering Shares, as such registration statement and prospectus may
be amended or supplemented from time to time, or contained in shareholder
reports or other material that may be prepared by or on behalf of the Fund for
the Distributor's use. This shall not be construed to prevent the Distributor
from preparing and distributing tombstone advertisements and sales literature or
other material as it may deem appropriate. No person other than Distributor is
authorized to act as principal underwriter (as such term is defined in the 1940
Act) for the Fund.
8. Term of Agreement. The term of this Agreement shall begin on the
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect from year to year so long as: (a) such
continuation shall be specifically approved at least annually by the Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Fund and, concurrently with such approval by the Board of Trustees or prior to
such approval by the holders of the outstanding voting securities of the Fund,
as the case may be, by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the trustees of the Fund
who are not parties to this Agreement or interested persons of any such party;
and (b) the Distributor shall not have notified the Fund, in writing, at least
60 days prior to April 30, 2001 or prior to April 30 of any year thereafter,
that it does not desire such continuation. The Distributor shall furnish to the
Fund, promptly upon its request, such information as may reasonably be necessary
to evaluate the terms of this Agreement or any extension, renewal or amendment
hereof.
9. Amendment and Assignment of Agreement. This Agreement may
not be amended or assigned without the affirmative vote of a majority of the
outstanding voting securities of the Fund, and this Agreement shall
automatically and immediately terminate in the event of its assignment.
10. Termination of Agreement. This Agreement may be terminated by
either party hereto, without the payment of any penalty, on not more than upon
60 days' nor less than 30 days' prior notice in writing to the other party;
provided, that in the case of termination by the Fund such action shall have
been authorized by resolution of a majority of the Trustees of the Fund who are
not parties to this Agreement or interested persons of any such party, or by
vote of a majority of the outstanding voting securities of the Fund.
11. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Fund to take
any action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of its responsibility for
and control of the conduct of the affairs of the Fund.
12. Definition of Terms. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities", "interested persons",
"assignment", and "affiliated person", as used in Paragraphs 8, 9 and 10 hereof,
shall have the meanings assigned to them by Section 2(a) of the 1940. In
addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is relaxed by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. Compliance with Securities Laws. The Fund represents that it is
registered as an open-end management investment company under the 1940 Act, and
agrees that it will comply with all the provisions of the 1940 Act and of the
rules and regulations thereunder. The Fund and the Distributor each agree to
comply with all of the applicable terms and provisions on the 1940 Act, the 1933
Act and, subject to the provisions of the 1940 Act, the 1933 Act and, subject to
the provisions of Section 4(d), and all applicable "Blue Sky" laws. The
Distributor agrees to comply with all of the applicable terms and provisions of
the Securities Exchange Act of 1934.
14. Notices. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, (1) to the Distributor at One Market-Steuart Tower #1600, San
Francisco, CA 94105 or (2) to the Fund at One Market-Steuart Tower #1600, San
Francisco, CA 94105.
15. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California.
16. No Shareholder Liability. The Distributor understands that the
obligations of this Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property. The Distributor represents that
it has notice of the provisions of the Fund's Declaration of Trust disclaiming
shareholder liability for acts or obligations of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives and their respective
corporate seals to be hereunto affixed, as of the day and year first
above written.
THE PARNASSUS FUND
Date: March 24, 2000 By:----------------------------
Richard D. Silberman, Secretary
PARNASSUS INVESTMENTS
Date: March 24, 2000 By:----------------------------
Jerome L. Dodson, President
<PAGE>
CUSTODY AGREEMENT
This AGREEMENT is entered into as of Dec. 10,1999 between The Parnassus Fund
(the "Fund"), a Massachusetts business trust, having its principal office and
place of business at One Market - Steuart Tower, Suite #1600, San Francisco, CA
94105 and Union Bank of California, National Association (the "Bank"), a
National Banking Association organized under the laws of the United States with
its principal place of business at 350 California Street, San Francisco, CA
94104.
In consideration of the mutual promises set forth below, the Fund and the Bank
agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement, the
words and phrases set forth below shall have the following meanings, unless the
context otherwise requires:
1.1 "Authorized Person" shall mean the person or persons who
have been duly authorized by the Board of Trustees of the Fund to give Written
Instructions on behalf of the Fund for the requested action by the Bank, as
listed in the certificate annexed hereto as Appendix A, or such later
certification as may be received by the Bank from time to time.
1.2 "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and federal agency
securities, its successor or successors and its nominee or nominees.
1.3 "Declaration of Trust" shall mean the Declaration of Trust
of the Fund as now in effect and as the same may be amended from time to time.
1.4 "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17(a) of the Securities Exchange Act of 1934, as
amended, its successor or successors and its nominee or nominees, in which the
Bank is hereby specifically authorized to make deposits. The term "Depository"
shall further mean and include any other person to be named in Written
Instructions authorized to act as a depository under the 1940 Act, its
successor or successors and its nominee or nominees.
1.5 "Money Market Security" shall mean any security generally
referred to as a "money market" instrument, and shall be deemed to include,
without limitation, debt obligations issued or guaranteed as to interest and
principal by the Government of the United States or agencies or
instrumentalities thereof, and repurchase and reverse repurchase agreements
with respect to any of the foregoing types of securities, commercial paper,
bank certificates of deposit, bankers' acceptances and short-term corporate
obligations, where the purchase or sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale.
1. 6 "Prospectus" shall mean the Fund's current prospectus and
statement of additional information relating to the registration of the Fund's
Shares under the Securities Act of 1933, as amended.
1.7 "Security" or "Securities" shall mean any security and
other investment from time to time owned by any Portfolio, and shall be deemed
to include, without limitation, bonds, debentures, notes, stocks, shares,
evidences of indebtedness, and other securities and investments from time to
time owned by each Portfolio of the Fund.
1.8 "Shares" shall mean the shares of beneficial interest of a
Portfolio of the Fund.
1.9 "Portfolio" shall mean Portfolios shown on Schedule A,
attached hereto and made a part hereof by this reference, and any such other
Portfolio as may from time to time be created and designated in accordance with
the provisions of the Declaration of Trust.
1.10 "Transfer Agent" shall mean the person which performs the
transfer agent, dividend disbursing agent and shareholder servicing agent
functions for the Fund.
1.11 "Written Instructions" shall mean a written or electronic
communication actually received by the Bank from an Authorized Person or from a
person reasonably believed by the Bank to be an Authorized Person by telex or
any other such system whereby the receiver of such communication is able to
verify through codes or otherwise with a reasonable degree of certainty the
authenticity of the sender of such communication.
1.12 "Oral Instructions" shall mean an oral or telephonic or
similar communication actually received by the Bank from an Authorized Person
or from a person reasonably believed by the Bank to be an Authorized Person by
telephone or any other such system whereby the receiver of such communication
is able to verify with a reasonable degree of certainty the authenticity of the
sender of the communication. All Oral Instruction shall be confirmed by Written
Instructions.
1.13 The "1940 Act" shall mean the Investment Company Act of
1940, and the rules and regulations thereunder, all as amended from time to
time.
2. Appointment of Custodian.
2.1 The Fund hereby constitutes and appoints the Bank as
custodian of all the securities and moneys owned by or in the possession of the
Fund during the period of this Agreement.
2.2 The Bank hereby accepts appointment as custodian for the
Fund and agrees to perform the duties thereof as hereinafter set forth. In
addition to the specific duties set forth in this Agreement, the Bank W11 in
general attend to all routine and mechanical matters in connection with the
sale, exchange, substitution, purchase, transfer, deposit or other dealings
with Securities or other property of the Fund except as may be otherwise
provided in this Agreement or directed from time to time by the Board of
Trustees of the Fund.
2.3 The Bank agrees to notify the Fund promptly should its
aggregate capital, surplus, and undivided profits fall below prescribed
minimums under the 1940 Act or, for any reason, should it becomes unqualified
to act as Custodian under the 1940 Act or other law.
3. Compensation.
3.1 The Fund will compensate the Bank for its services
rendered under this Agreement in accordance with the fees set forth in the Fee
Schedule attached as Schedule B and made a part of this Agreement by this
reference.
3.2 The parties to this Agreement will agree upon the
compensation for acting as Custodian for any Portfolio hereafter established
and designated, and at the time that the Bank commences serving as such for
said Portfolio, such agreement shall be reflected in a revised Fee Schedule for
the Fund, which shall be attached to Schedule B of this Agreement.
3.3 Any compensation agreed to hereunder may be adjusted from
time to time by not less than 90 days advance written notice of such fee
increase from the Bank to Fund.
3.4 The Bank will bill the Fund as soon as practicable after
the end of the month, and said billings will be detailed in accordance with the
Fee Schedule. The Fund will promptly pay to the Bank the amount of such
billing. In the event such bill is not promptly paid with respect to a
Portfolio, the Bank may charge against any money specifically allocated to the
Portfolio such compensation and any expenses incurred by the Bank in the
performance of its duties pursuant to this Agreement. The Bank shall also be
entitled to charge against any money held by it and specifically allocated to a
Portfolio the amount of any loss, damage, liability or expense incurred with
respect to such Portfolio, including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement. There shall
be no additional fees or expenses to the Fund incurred by the Bank's use of
Sub-Custodians or foreign branches of the Bank in settling Portfolio Security
transactions outside of San Francisco or New York City.
4. Custody of Cash and Securities.
4.1 Receipt and Holding of Assets. The Fund will deliver or
cause to be delivered to the Bank all Securities and moneys owned by it,
including cash received from the issuances of its Shares, at any time during
the period of this Agreement and shall specify the Portfolio to which the
Securities and moneys are to be specifically allocated. The Bank shall
physically segregate and keep apart on its books the assets of each Portfolio,
including separate identification of Securities held in the Book-Entry System.
The Bank will not be responsible for such Securities and moneys until actually
received by it. The Fund shall instruct the Bank from time to time in its sole
discretion, by means of Written Instructions or Oral Instruction confirmed by
Written Instructions, as to the manner in which and in what amounts securities
and moneys of a Portfolio are to be deposited on behalf of such Portfolio in
the Book-Entry System or the Depository and specifically allocated on the books
of the Bank to such Portfolio. Securities and moneys of the Fund deposited in
the Book-Entry System or the Depository will be represented in accounts which
include only assets held by the Bank for customers, including but not limited
to accounts in which the Bank acts in a fiduciary or representative capacity.
4.2 Accounts and Disbursements. The Bank shall establish and
maintain a separate account for each Portfolio and shall credit to the separate
account of each Portfolio all moneys received by it for the account of such
Portfolio and shall disburse the same only:
4.2.1 In payment for Securities purchased for such
Portfolio, as provided in Section 5 hereof;
4.2.2 In payment of dividends or distributions with
respect to the Shares of such Portfolio;
4.2.3 In payment of original issue or other taxes
with respect to the Shares of such Portfolio;
4.2.4 In payment for Shares which have been redeemed
by such Portfolio;
4.2.5 Pursuant to Written Instructions, or Oral
Instructions confirmed by Written Instructions setting forth the name of such
Portfolio the name and address of the person to whom the payment is to be
made, the amount to be paid and the purpose for which payment is to be made; or
4.2.6 In payment of fees and in reimbursement of the
expenses and liabilities of the Bank attributable to such Portfolio.
4.2.7 The Bank shall upon receipt of Written
Instructions, or Oral Instructions confirmed by Written Instructions, establish
and maintain a segregated account or accounts for and on behalf of each
Portfolio of the Fund, into which account or accounts may be transferred cash
and Securities, (i) in accordance with the provisions of any agreement among the
Fund, the Bank and a broker-dealer registered under the Securities and Exchange
Act of 1934 (the "1934 Act") and a member of the NASD (or any futures commission
merchant registered under the commodities Exchange Act), relating to compliance
with the rules of the Options Clearing Corporation and of any registered
national securities exchange (or the Commodities Futures Trading Commission or
any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Fund, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for other proper
corporate purposes.
4.3 Confirmations and Statements. Promptly after the close of
business each day, the Bank shall make available to the Fund information with
respect to all transfers to and from the account of each Portfolio during that
day. The Bank need not send written confirmation or a summary of all such
transfers to or from the account of each Portfolio. Provided, however that upon
the written request the Fund, the Bank shall provide within 5 business days of
such written request a copy of any confirmations which include transactions of
the Fund. Where securities purchased by a Portfolio are in a fungible bulk of
Securities registered in the name of the Bank (or its nominee) or shown on the
Bank's account on the books of the Depository or the Book-Entry System, the
Bank shall by book entry or otherwise identify the quantity of those securities
belonging to such Portfolio. At least monthly, the Bank shall furnish the Fund
with a detailed statement of the Securities and moneys held for each Portfolio
under this Agreement.
4.4 Registration of Securities and Physical Separation All
Securities held for a Portfolio which are issued or issuable only in bearer
form, except such Securities as are held in the Book-Entry System, shall be
held by the Bank in that form; all other Securities held for a Portfolio may be
registered in the name of any duly appointed registered nominee of the Bank as
the Bank may from time to time determine, or in the name of the Book-Entry
System or the Depository or their successor or successors, or their nominee or
nominees. When a reference is made in this Agreement to an action to be taken
by the Bank it is understood by the parties that the action may be taken
directly or in the case of book-entry securities, through the appropriate
depository. The Fund agrees to furnish to the Bank appropriate instruments to
enable the Bank to hold or deliver in proper form for transfer, or to register
in the name of its registered nominee or in the name of the Book-Entry System
or the Depository, any Securities which it may hold for the account of a
Portfolio. The Bank (or its sub-custodians) shall hold all such Securities
specifically allocated to a Portfolio which are not held in the Book-Entry
System or the Depository in a separate account for such Portfolio in the name
of such Portfolio and physically segregated at all times from those of any
other person or persons.
4.5 Collection of Income and Other Matters Affecting
Securities. Unless otherwise instructed to the contrary by Written
Instructions, the Bank shall with respect to all Securities held for a
Portfolio in accordance with this Agreement:
4.5.1 Collect all income due or payable and credit
such income promptly on the contractual settlement date, whether or not
actually received, to the account of the appropriate Portfolio, except for
income from foreign issues (which shall be collected as soon as reasonably
practicable and shall be credited when actually received). Income which has
not been collected after reasonable effort, within a time agreed upon
between the parties, shall be repaid to the Bank pending final collection at
such date as may be mutually agreed upon by the Fund and the Bank.
4.5.2 Present for payment and collect the amount payable upon all Securities
which may mature or be called, redeemed or retired, or otherwise become payable.
The Bank shall make a good faith effort to inform the Fund of any call,
redemption or retirement date with respect to securities which are owned by a
Portfolio and held by the Bank or its nominee. Notwithstanding the foregoing,
the Bank shall have no responsibility to the Fund or a Portfolio for monitoring
or ascertaining of any call, redemption or retirement date with respect to
securities which are owned by a Portfolio and held by the Bank or its nominee.
Nor shall the Bank have any responsibility or liability to the Fund or to a
Portfolio for any loss by a Portfolio for any missed payment or other default
resulting therefrom with respect to any put security owned by a Portfolio and
held by the Bank or its nominee unless the Bank received timely general
notification, which shall not be less than 5 business days, from the Fund or the
Portfolio specifying the time, place and manner for the presentment of any such
put security. The Bank shall not be responsible and assumes no liability to the
Fund or a Portfolio for the accuracy or completeness of any notification the
Bank shall provide to the Fund or a Portfolio with respect to put securities;
4.5.3 Execute any necessary declarations or
certificates of ownership under the Federal income tax laws or the laws or r
egulations of any other taxing authority now or hereafter in effect; and
4.5.4 Hold for the account of each Portfolio all
rights and other Securities issued with respect to any Securities held by the
Bank hereunder for such Portfolio.
4.6 Delivery of Securities and Evidence of Authority.
Upon receipt of Written Instructions, or Oral Instructions confirmed by Written
Instructions, the Bank shall:
4.6.1 Execute and deliver or cause to be executed
and delivered, to such persons as may be designated in such Written
Instructions, proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities may be exercised;
4.6.2 Deliver or cause to be delivered any
Securities held for a Portfolio in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
4.6.3 Deliver or cause to be delivered any
Securities held for a Portfolio to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation or recapitalization or sale of assets of any corporation,
and receive and hold under the terms of this Agreement such certificates of
deposit, interim receipts or other instruments or documents as may be issued to
it to evidence such delivery;
4.6.4 Make or cause to be made such transfers or
exchanges of assets and take such steps as shall be stated in said Written
Instructions, or Oral Instructions confirmed by Written Instructions, to be for
the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund or a
Portfolio;
4.6.5 Deliver Securities owned by any Portfolio
upon sale of such Securities for the account of such Portfolio pursuant to
Section 5;
4.6.6 Deliver Securities owned by any Portfolio
upon the receipt of payment in connection with any repurchase agreement related
to such Securities entered into by such Portfolio;
4.6.7 Deliver Securities owned by any Portfolio to
the issuer thereof or its agent when such Securities are called, redeemed,
retired or otherwise become payable; provided, however, that in any such case
the cash or other consideration is be delivered to the Bank;
4.6.8 Deliver Securities owned by any Portfolio in
connection with any loans of Securities made by such Portfolio but only against
receipt of adequate collateral as agreed upon from time to time by the Bank and
the Fund which may be in any form permitted under the 1940 Act or any
interpretations thereof issued by the Securities and Exchange Commission or its
staff;
4.6.9 Deliver Securities owned by any Portfolio
for delivery as security in connection with any borrowings by such Portfolio
requiring a pledge of Portfolio assets, but only against receipt of amounts
borrowed;
4.6.10 Deliver Securities owned by any Portfolio
upon receipt of instructions from such Portfolio for delivery to the Transfer
Agent or to the holders of Shares of such Portfolio in connection with
distributions in kind, as may be described from time to time in the Fund's
Prospectus, in satisfaction of requests by holders of Shares for repurchase or
redemption; and
4.6.11 Deliver Securities owned by any Portfolio
for any other proper business purpose, but only upon receipt of, in addition to
Written Instructions, a certified copy of a resolution of the Board of Trustees
signed by an Authorized Person and certified by the Secretary or Assistant
Secretary of the Fund, specifying the Securities to be delivered, setting forth
the purpose for which such delivery is to be made, declaring such purpose to be
a proper business purpose, and naming the person or persons to whom delivery of
such Securities shall be made.
4.7 Endorsement and Collection of Checks. Etc. The Bank
is hereby authorized to endorse and collect all checks, drafts or other orders
for the payment of money received by the Bank for the account of a Portfolio.
5. Purchase and Sale of Investments of the Portfolio
-------------------------------------------------
5.1 Promptly after each purchase of Securities for a
Portfolio, the Fund shall deliver to the Bank Written Instructions or Oral
Instructions confirmed by Written Instructions, specifying with respect to each
purchase: (1) the name of the Portfolio to which such Securities are to be
specifically allocated; (2) the name of the issuer and the title of the
Securities; (3) the number of shares or the principal amount purchased and
accrued interest, if any; (4) the date of purchase and settlement; (5) the
purchase price per unit; (6) the total amount payable upon such purchase; (7)
the name of the person from whom or the broker through whom the purchase was
made, if any; (8) whether or not such purchase is to be settled through the
Book-Entry System of the Depository; and (9) whether the Securities purchased
are to be deposited in the Book-Entry System or the Depository. The Bank shall
receive all Securities purchased by or for a Portfolio and upon receipt of such
Securities shall pay out of the moneys held for the account of such Portfolio
the total amount payable upon such purchase, provided that the same conforms to
the total amount payable as set forth in such Written Instructions, or Oral
Instructions confirmed by Written Instructions.
5.2 Promptly after each sale of Securities of a Portfolio, the
Fund shall deliver to the Bank Written Instructions, or Oral Instructions
confirmed by Written Instructions, specifying with respect to such sale: (1)
the name of the Portfolio to which the Securities sold were specifically
allocated; (2) the name of the issuer and the title of the Securities; (3) the
number of shares or principal amount sold, and accrued interest, if any; (4)
the date of sale; (5) the sale price per unit; (6) the total amount payable to
the Portfolio upon such sale; (7) the name of the broker through whom or the
person to whom the sale was made; and (8) whether or not such sale is to be
settled through the Book-Entry System or the Depository. The Bank shall deliver
or cause to be delivered the Securities to the broker or other person
designated by the Fund upon receipt of the total amount payable to such
Portfolio upon such sale, provided that the same conforms to the total amount
payable to such Portfolio as set forth in such Written Instructions, or Oral
Instructions confirmed by Written Instructions. Subject to the foregoing, the
Bank may accept payment in such form as shall be satisfactory to it, and may
deliver Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
6. Payment of Dividends or Distributions
6.1 The Fund shall furnish to the Bank the resolution of the
Board of Trustees of the Fund certified by the Secretary or Assistant Secretary
(i) authorizing the declaration of dividends or distribution with respect to a
Portfolio on a specified periodic basis and authorizing the Bank to rely on
Written Instructions specifying the date of the declaration of each dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of the record date and the total amount
payable per share to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any dividend or distribution by a Portfolio,
the date of payment thereof, the record date as of which shareholders entitled
to payment shall be determined, the amount payable per share to the
shareholders of record as of the record date and the total amount payable to
the Transfer Agent on the payment date.
6.2 Upon the payment date specified in such resolution or
Written Instructions the Bank shall pay out the moneys specifically allocated
to and held for the account of the appropriate Portfolio the total amount
payable to the Transfer Agent of the Fund.
7. Sale and Redemption of Shares of a Portfolio
--------------------------------------------
7.1 Whenever the Fund shall sell or redeem any Shares of a Portfolio,
the Fund shall deliver or cause to be delivered to the Bank Written
Instructions, or Oral Instructions confirmed by Written Instructions, duly
specifying:
7.1.1 The name of the Portfolio whose Shares were sold or
redeemed
7.1.2 The number of Shares sold or redeemed, trade date, and
price; and
7.1.3 The amount of money to be received or paid by
the Bank for the sale or redemption of such Shares.
7.2 Upon receipt of such money from the Transfer Agent, the
Bank shall credit such money to the separate account of the Portfolio.
7.3 Upon issuance of any Shares of a Portfolio in accordance
with the foregoing provisions of this Section 7, the Bank shall pay, out of the
moneys specifically allocated and held for the account of such Portfolio, all
original issue or other taxes required to be paid in connection with such
issuance upon the receipt of Written Instructions, or oral instructions
confirmed by Written Instructions, specifying the amount to be paid.
7.4 Upon receipt from the Transfer Agent of advice setting
forth the number of Shares of a Portfolio received by the Transfer Agent for
redemption and that such Shares are valid and in good form for redemption, the
Bank shall make payment to the Transfer Agent out of the moneys specifically
allocated to and held for the account of the Portfolio.
8. Indebtedness.
-------------
8.1 The Fund will cause to be delivered to the Bank, by any
bank (excluding the Bank) from which the Fund borrows money for temporary
administrative or emergency purposes using Securities as collateral for such
borrowings, a notice or undertaking in the form currently employed by such bank
setting forth the amount which such bank will loan to the Fund against delivery
of a stated amount of collateral. The Fund shall promptly deliver to the Bank
Written Instructions, or Oral instructions confirmed by Written Instructions,
stating with respect to each such borrowing: (1) the name of the Portfolio for
which the borrowing is to be made; (2) the name of the bank; (3) the amount and
terms of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other-loan agreement;
(4) the time and date, if known, on which the loan is to be entered into (the
"borrowing date"); (5) the date on which the loan becomes due and payable; (6)
the total amount payable to the Fund for the separate account of the Portfolio
on the borrowing date; (7) the market value of Securities to be delivered as
collateral for such loan, including the name of the issuer, the title and the
number of shares or the principal amount of any particular Securities; (8)
whether the Bank is to deliver such collateral through the Book-Entry System or
the Depository; and (9) a statement that such loan is in conformance with the
1940 Act and the Fund's Prospectus.
8.2 Upon receipt of the Written Instructions, or Oral
Instructions confirmed by Written Instructions, referred to above, the Bank
shall deliver on the borrowing date the specified collateral and the executed
promissory note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the total amount
payable as set forth in the Written Instructions, or Oral Instructions
confirmed by Written Instructions. The Bank may at the option of the lending
bank keep such collateral in its possession, but such collateral shall be
subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Bank shall deliver as additional
collateral in the manner directed by the Fund from time to time such securities
specifically allocated to such Portfolio as may be specified in Written
Instructions, or Oral Instructions confirmed by Written Instructions, to
collateralize further any transaction described in this Section 8. The Fund
shall cause all Securities released from collateral status to be returned
directly to the Bank, and the Bank shall receive from time to time such return
of collateral as may be tendered to it. In the event that the Fund fails to
specify in Written Instructions, or Oral Instructions confirmed by Written
Instructions, all of the information required by this Section 8, the Bank shall
not be under any obligation to deliver any Securities. Collateral returned to
the Bank shall be held hereunder as it was prior to being used as collateral.
9. Persons Having Access to Assets of the Fund.
--------------------------------------------
9.1 No Trustee, officer, employee or agent of the Fund, and no
officer, director, employee or agent of the Fund's investment advisor, shall
have physical access to the assets of any Portfolio held by the Bank or be
authorized or permitted to withdraw any investments of any Portfolio, nor shall
the Bank deliver any assets of any Portfolio to any such person. No officer,
director, employee or agent of the Bank who holds any similar position with the
Fund or the Fund's investment advisor shall have access to the assets of the
Fund.
9.2 The individual employees of the Bank initially duly
authorized by the Board of Directors of the Bank to have access to the assets
of the Fund are listed on Schedule C which is attached and made a part of this
Agreement by this reference. The Bank shall advise the Fund of any change in
the individuals authorized to have access to the assets of the Fund by written
notice to the Fund.
9.3 Nothing in this section 9 shall prohibit any officer,
employee or agent of the Fund, or any officer, director, employee or agent of
the Fund's investment advisor, from giving Written Instructions, or Oral
Instructions confirmed by Written Instructions, to the Bank so long as it does
not result in delivery of or access to assets of any Portfolio prohibited by
this Section 9.
10. Concerning the Bank.
--------------------
10.1 Standard of Conduct. The Bank shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received by it or delivered by it pursuant to this Agreement and
reasonably believed by it to be valid or genuine and shall be held harmless in
acting upon proper instructions, resolutions, any notice, request, consent,
certificate or other instrument reasonably believed by it to be genuine and to
be signed by the proper party or parties and shall be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by it
hereunder a certificate signed by the President, a Vice President, the
Treasurer, the Secretary or an Assistant Secretary of the Fund. The Bank may
receive and accept a resolution as conclusive evidence (a) of the authority of
any person to act in accordance with such resolution or (b) of any
determination or of any action by the Board of Trustees pursuant to the
Declaration of Trust as described in such resolution, and such resolution may
be considered as in full force and effect until receipt by the Bank of written
notice from the Secretary or an Assistant Secretary of the Fund to the
contrary.
The Bank shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
Provided, however, that if such reliance involves a potential material loss to
the Fund, the Bank shall advise the Fund in advance and in writing of any such
actions to be taken in accordance with such advice of counsel to the Bank.
The Bank shall be held to the exercise of reasonable care in carrying out
the provisions of this Agreement but shall be liable only for its own negligent
or bad faith acts or willful misconduct or willful failures to act by the Bank
and its agents or employees. The Bank shall have no responsibility for
reviewing or questioning the acts or records of any prior custodian. The Fund
shall indemnify the Bank and hold it harmless from and against all losses,
liabilities, demands, claims, actions, expenses, attorneys' fees, and taxes
with respect to each Portfolio which the Bank may suffer or incur on account of
being Custodian hereunder except to the extent that such losses, liabilities,
demands, claims, actions, expenses, attorneys fees or taxes arise from the
Bank's own negligence or bad faith or willful misconduct or willful failure to
act.
If the Fund requires the Bank to take any action with respect to
Securities of a Portfolio, which action involves the payment of money or which
action may, in the opinion of the Bank, result in the Bank or its nominee
assigned to such Portfolio being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the Bank
to take such action, shall, prior to the Bank taking such action, provide
indemnity in writing to the Bank in an amount and form satisfactory to it.
The Bank shall not be liable for any loss of data or any delay in its
performance under this Agreement to the extent such loss or delay is due to
causes beyond its control, including but not limited to acts of God,
interruption in, loss of or malfunction in power, significant computer hardware
or systems software or telephone communication service; act of civil or
military authority, sabotage; war or civil commotion; fire; explosion; or
strike (except that the Bank shall at all time be required to maintain minimum
critical activities). The Bank shall use its best efforts to minimize any such
loss or delay by all practical steps and to replace any lost data promptly. The
Bank agrees not to discriminate against the Fund in favor of any other customer
of the Bank in making computer time and its personnel available to input and
process transactions hereunder when such a loss of data or delay occurs.
10.2 Limit of Duties. Without limiting the generality of the
foregoing, the Bank shall be under no duty or obligation to inquire into, and
shall not be liable for:
10.2.1 The validity of the issue of any
Securities purchased by any Portfolio, the legality of the purchase thereof, the
permissibility of the purchase thereof under the Fund's governing documents, or
the propriety of the amount paid therefor;
10.2.2 The legality of the sale of any Securities
by any Portfolio, the permissibility of such sale under the Fund's governing
documents, or the propriety of the amount for which the same are sold;
10.2.3 The legality of the issue or the sale of
any Shares of any Portfolio, or the sufficiency of the amount to be received
therefor;
10.2.4 The legality of the redemption of any
Shares of any Portfolio, or the propriety of the amount to be paid therefor;
10.2.5 The legality of the declaration or payment
of any dividend or other distribution of any Portfolio; purposes.
10.2.6 The legality of any borrowing for t
emporary or emergency administrative
10.3 No Liability Until Receipt. The Bank shall not be liable
for, or considered to be the custodian of, any money, whether or not
represented by any check, draft, or other instrument for the payment of money,
received by it on behalf of any Portfolio until the Bank actually receives and
collects such money directly or by the final crediting of the account
representing the Fund's interest in the Book-Entry System or the Depository.
10.4 Collection Where Payment Refused. The Bank shall not be
under any duty or obligation to take action to effect collection of any amount,
if the Securities upon which such amount is payable are in default, or if
payment is refused after due demand or presentation, unless and until (a) it
shall be directed to take such action by Written Instructions, or Oral
Instructions confirmed by Written Instructions, and (b) it shall be assured to
its satisfaction of reimbursement of its costs and expenses in connection with
any such action.
10.5 Appointment of Agents and Sub-Custodians. The Bank may
appoint one or more banking institutions, including but not limited to banking
institutions located in foreign countries, to act as depository or depositories
or as sub-custodian or as sub-custodians of Securities and moneys at any time
owned by any Portfolio, upon terms and conditions specified in Written
Instructions, or Oral Instructions confirmed by Written Instructions. As such
depository or sub-custodian shall be approved in advance by the Board of
Trustees of the Trust. The Custodians shall remain primarily responsible for
the Securities of the Fund held by any one depository or sub-custodian in the
same manner as if held directly by the Custodian.
10.6 No Duty to Ascertain: Authority. The Bank shall not
be under any duty or obligation toascertain whether any Securities at any time
delivered to or held by it for the Fund and specifically allocated to a
Portfolio are such as may properly be held by the Portfolio and specifically
allocated to such Portfolio under the provisions of the Declaration of Trust
arid the Fund's Prospectus.
10.7 Reliance on Certificates and Instructions. The Bank shall
be entitled to rely upon any Written Instructions or Oral Instructions actually
received by the Bank pursuant to the applicable Sections of this Agreement and
reasonably believed by the Bank to be genuine and to be given by an Authorized
Person. The Fund agrees to forward to the Bank Written Instructions from an
Authorized Person confirming such Oral Instructions in such manner so that such
Written Instructions are received by the Bank, whether by hand delivery, telex,
or otherwise, by the close of business on the same day that such Oral
Instructions are given to the Bank. The Fund agrees that the fact that such
confirming instructions are not received by the Bank shall in no way affect the
validity for the transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Bank shall incur no liability
to the Fund in acting upon Oral Instructions given to the Bank hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from a duly Authorized Person.
10.8 Maintenance and Inspection of Books and Records. The Bank
will create, maintain, preserve for the specified periods and make available
upon request, all records relating to its activities and obligations tinder
this Agreement in such a manner as will meet the obligations of the Fund tinder
the Investment Company Act of 1940, including records required by Rule 3la-l of
the General Rules and Regulations under the 1940 Act and under other applicable
federal and state tax laws and any other law or administrative rules or
procedures which may be applicable to the Fund. All such records shall be the
property of the Fund. The books and records of the Bank regarding the Fund
shall be open to inspection and audit at reasonable times by officers and
auditors employed by the Fund and by employees of the Securities and Exchange
Commission. The Bank shall provide the Fund, upon request, with any report
obtained by the Bank on the system of internal accounting control of the
Book-Entry System or the Depository and with such reports on its own systems of
internal accounting control (including reports by the Bank's independent
accountants for distribution generally to customers of the Bank) as the Fund
may reasonably request from time to time.
10.9 Neither the Bank nor any nominee of the Bank shall vote
any of the securities held hereunder by or for the account of the Fund, except
in accordance with Written Instructions, or Oral Instructions confirmed by
Written Instructions, from the Fund. The Bank shall promptly deliver, or cause
to be executed and delivered, to the Fund all notices, proxies and proxy
soliciting materials with relation to such Securities (if registered otherwise
than in the name of the Fund), but without indicating the manner in which such
proxies are to be voted. The Bank shall also promptly deliver to the Fund all
other communications it may receive with respect to the Securities held by it
hereunder.
The Bank shall also transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund) received by the Bank from
issuers of the securities being held for the Fund. With respect to capital
changes or reorganizations the Bank shall transmit promptly to the Fund or its
advisors all information received from issuers or their agents which requires
an action by the Fund or its advisor. If the Fund desires to take action with
respect to any tender offer, exchange offer or any other similar transactions,
the Fund shall notify the Bank at least three business days prior to the date
on which the Bank is to take such action.
11. Term and Termination.
---------------------
11.1 This Agreement shall become effective on the date first
set forth above (the "Effective Date") and shall continue in effect thereafter
as the parties may mutually agree.
11.2 Either of the parties hereto may terminate this Agreement
with respect to any Portfolio by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than 90 days
after the date of receipt of such notice. In the event such notice is given by
the Fund, it shall designate a successor custodian or custodians, which shall
be a person qualified to so act under the 1940 Act. In the event such notice is
given by the Bank, the Fund shall, on or before the termination date, deliver
to the Bank, Written Instructions, or Oral Instructions confirmed by Written
Instructions, designating a successor Custodian or Custodians. In the absence
of such designation by the Fund, the Bank may designate a successor Custodian,
which shall be a person qualified to so act under the 1940 Act. If the Fund
fails to designate a successor Custodian for any Portfolio, the Fund shall upon
the date specified in the notice of termination of this Agreement and upon the
delivery by the Bank of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and moneys then owned
by such Portfolio, be deemed to be its own Custodian and the Bank shall thereby
be relieved of all duties and responsibilities pursuant to this Agreement,
other than the duty with respect to Securities held in the Book-Entry System
which cannot be delivered to the Fund.
11.3 Upon the date set forth in such notice under Section 11.2,
this Agreement shall terminate to the extent specified in such notice, and the
Bank shall upon receipt of a notice of acceptance by the successor Custodian on
that date deliver directly to the successor Custodian all Securities and moneys
then held by the Bank and specifically allocated to the Portfolio specified,
after deducting all fees, expenses and other amounts for the payment or
reimbursement of which it shall then be entitled with respect to such
Portfolio.
12. Additional Services by Bank.
----------------------------
12.1 If allowed by the Prospectus, the Fund's investment
adviser may direct that the assets of any Portfolio be invested in deposits in
the Bank or its affiliates bearing a reasonable rate of interest.
12.2 Any Authorized Person may direct the Bank to utilize
other services or facilities provided by UnionBanCal Corporation, its
subsidiaries or affiliates including the Bank. Such services shall include, but
not be limited to (1) the placing of orders for the purchase, sale exchange,
investment or reinvestment of securities through any brokerage service
conducted by, or (2) the purchase of units of any investment company managed or
advised by the Bank, UnionBanCal, or their subsidiaries or affiliates and/or
for which the Bank, UnionBanCal, or their subsidiaries or affiliates act as
custodian or provide investment advice or other services for a fee, including,
without limitation, the HighMark Group of Funds. The Fund hereby acknowledges
that the Bank, UnionBanCal or their subsidiaries or affiliates will receive
fees for such services in addition to the fees payable under this Agreement.
Fee Schedules for such additional directed services shall be delivered to the
Authorized Person before provision of such services.
13. Miscellaneous.
--------------
13.1 Annexed hereto as Schedule C is a certification signed by
two of the present officers of the Fund setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Bank a new certification in similar form in the event that any such present
Authorized Person ceases to be such an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such new
certification shall be received, the Bank shall be fully protected in acting
under the provisions of this Agreement upon signatures of the present
Authorized Persons as set forth in the last delivered certification.
13.2 Annexed hereto as Appendix B is a certification signed by
two of the present officers of the Fund setting forth the names and the
signatures of the present officers of the Fund. The Fund agrees to furnish to
the Bank a new certification in similar form in the event any such present
officer ceases to be an officer of the Fund or in the event that other or
additional officers are elected or appointed. Until such new certification
shall be received, the Bank shall be fully protected in acting under the
provisions of this Agreement upon the signature of the officers as set forth in
the last delivered certification.
13.3 Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Bank, shall be sufficiently given
if addressed to the Bank and mailed or delivered to it at its offices at:
Union Bank of California, N.A.
Mutual Fund Services Dept
475 Sansome Street, 15th Floor
San Francisco, California 94111
or such other place as the Bank may from time to time designate in writing.
13.4 Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund, shall be sufficiently given
if addressed to the Fund and mailed or delivered to it at its offices at:
The Parnassus Fund
One Market - Steuart Tower, Suite #1600
San Francisco, CA 94105
Attn: J. L. Dodson, President
or at such other place as the Fund may from time to time designate in writing.
13.5 This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with the same
formality as this Agreement, and as may be permitted or required by the 1940
Act.
13.6 This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without the
written consent of the Bank, or by the Bank without the written consent of the
Fund authorized or approved by a resolution of the Board of Trustees of the
Fund, and any attempted assignment without such written consent shall be null
and void.
13.7 This Agreement shall be construed in accordance with the
laws of the State of California (with regard to principles of conflicts of
law).
13.8 It is expressly agreed to that the obligations of the
Fund hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents, or employees of the Fund, personally, but bind only
the property of the Fund, as provided in the Declaration of Trust of the Fund.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Fund and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the Fund property of the Fund as provided in its Declaration of
Trust.
13.9 The captions of the Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
13.10 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
13.11 The Bank represents and warrants to the Fund that it is
a national banking association duly organized and existing and in good standing
under the laws of the United States; it is duly qualified to carry on its
business in the State of California; it is empowered under applicable laws and
by its charter and by-laws to enter into and perform this Agreement; all
requisite corporate proceedings have been taken to authorize it to enter into
and perform this Agreement; all requisite corporate proceedings have been taken
to authorize it to enter into and perform this Agreement; and it is duly
authorized to act as a custodian under the 1940 Act.
The Fund represents and warrants to the Bank that it is a business
trust duly organized and existing and in good standing under the laws of the
State of Massachusetts; it is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this Agreement; all
proceedings required by said Declaration of Trust and By-Laws have been taken
to authorize it to enter into and perform this Agreement; and it is an
open-end, diversified investment company registered under the Investment
Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
The Parnassus Fund
By: Jerome L. Dodson, President
Date: December 10, 1999
Union Bank of California
By: Moon Shil Lee, Vice President
Date: December 22, 1999
<PAGE>
The Parnassus Fund
Schedule A - Portfolios
Parnassus Fund
The Parnassus Fund
By: Jerome L. Dodson, President
Date: December 10, 1999
Union Bank of California
By: Moon Shil Lee, Vice President
Date: December 22, 1999
<PAGE>
The Parnassus Fund
Schedule B
Of the Custody Contract between Union Bank of California, N.A. and the
Parnassus Fund
Schedule of Fees
Effective July 1, 1999
The Parnassus Fund will pay an annual fee based on the average daily net asset
value of that Portfolio as calculated and provided to Union Bank of California
by the Parnassus Fund.
First $100 Million 2 Basis Points
Over $100 Million 1 Basis Point
Plus Transaction charges as follows:
Security Transactions $15.00 Depository Eligible
$40.00 Depository ineligible
$40.00 options
Monthly Holding Fee $2.00 Depository Eligible
$4.00 Depository Ineligible
Disbursements/Fed Wires $10.00
Scheduled Disbursements $3.00
CMO Paydowns $20.00
Additional Asset/Cash Statements $10.00
Out-of-pocket Expenses As incurred
To avoid duplicative fees, the net assets will be reduced by the value of any
Short Term Government shares held in the Portfolio.
The Parnassus Fund
By: Jerome L. Dodson, President
Date: December 10, 1999
Union Bank of California
By: Moon Shil Lee, Vice President
Date: December 22, 1999
<PAGE>
Schedule C
Authorized Persons
Part I - Access Persons of Bank
Moon Shil Lee
Libby Thomas
Mark Peterson
Phil Clarke
Annabelle Anonuevo
Part II - Officers of the Fund
President Jerome L. Dodson
Vice President Bryant Cherry
Vice President Susan Loughridge
The Parnassus Fund
By: Jerome L. Dodson, President
Date: December 10, 1999
Union Bank of California
By: Moon Shil Lee, Vice President
Date: December 22, 1999
<PAGE>
Appendix A
CERTIFICATE OF THE SECRETARY
THE PARNASSUS FUND
THE PARNASSUS INCOME TRUST
1, RICHARD D. SILBERMAN, hereby certify that:
1. 1 am the duly elected and acting Secretary of The Parnassus
Fund and The Parnassus Income Trust, both of which are Massachusetts business
trusts (collectively, the "Funds"), with authority to execute and deliver this
certificate;
2. The following resolutions were duly adopted at a combined
meeting of the Boards of Trustees of the Funds duly held on March 24, 2000:
RESOLVED, that, effective April 14, 2000, the custodian of the
Fund's depository accounts is hereby authorized to disburse funds from
the accounts of the Fund according to the following procedures:
(1) For short-term investments that will be on deposit in
a bank or other financial institution other than the
custodian, two of the following signatories may
authorize a transfer:
Jerome L. Dodson
Bryant Cherry
Susan Loughridge
Todd Ahlsten
(2) For investment securities delivered versus payment
(DVP), any one of the signatories identified in this
resolution may authorize the disbursement of funds
with no telephone confirmation required.
FURTHER RESOLVED, that any one of the following persons is
hereby authorized, for and in the name of the Fund, to authorize the
purchases or sales of securities by brokers acting on behalf of the
Fund:
Jerome L. Dodson
Ben Liao
Todd Ahlsten
FURTHER RESOLVED, that the custodian of the Fund's depository
accounts is hereby authorized to effect wire transfers of funds from
shareholder accounts according to the following procedures:
(1) For transfers of $50,000 or less, only one of the
signatures authorized by this resolution is required:
(2) For transfers of more than $50,000, only one of the
signatures authorized by this resolution is required,
but the custodian must call back one of the other
authorized signatories to confirm the transaction.
The confirming signatory must give his or her
personal identification number ("PIN") orally to the
confirming representative of the custodian. The
confirming signatory should also sign the Fund's copy
of the fax or other wire transfer instruction
document after receiving the confirming telephone
call from the custodian:
(3) For named accounts at named institutions, only one of
the authorized signatures is required for transfers
of $500,000 or less. For transfers to any of those
named accounts at named institutions that are larger
than $500,000, only one signature is required, but
the custodian must call back one of the other
authorized signatories to confirm the transaction.
The confirming signatory must give his or her PIN
orally to the confirming representative of the
custodian. The confirming signatory must also sign
the Fund's copy of the fax or other wire transfer
instruction document after receiving the confirming
telephone call from the custodian. The list of named
accounts and named institutions shall be kept by the
custodian and may only be amended by the signature of
Jerome L. Dodson or Bryant Cherry.
(4) The authorized signatories for the transfer of funds
pursuant to this resolution are:
Jerome L. Dodson
Bryant Cherry
Susan Loughridge
In addition, Todd Ahlsten is an additional authorized
signatory for confirmation calls only.
3. The following are the signatures of the persons identified in
the foregoing resolution
Jerome L. Dodson
Bryant Cherry
Susan Loughridge
Todd Ahlsten
Ben Liao
IN WITNESS WHEREOF, I have set my hand this 31st day
of March, 2000.
Richard D. Silberman Secretary
<PAGE>
SHAREHOLDER SERVICING PLAN AND AGREEMENT
THIS SHAREHOLDER SERVICING PLAN AND AGREEMENT ("Agreement") is made as
of the 24th day of March, 2000 by and between THE PARNASSUS FUND, a
Massachusetts business trust (the "Fund"), and PARNASSUS INVESTMENTS, a
California corporation ("Parnassus").
WITNESSETH
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Fund wishes to retain Parnassus to appoint, oversee the
activities of and make payment to banks, 401 (k) administrators and any other
person or entity that have entered into agreements with Parnassus to provide
servicing to persons holding shares of the Fund, including personal services
and/or account maintenance for shareholders of the Fund and/or transfer agency
or sub-transfer agency services ("Service Providers"), and Parnassus is willing
to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby authorizes Parnassus to obtain for the
Fund the shareholder services specified in Section 2 of this Agreement for
clients of the Service Providers that hold shares of the Fund ("Clients").
Parnassus agrees to furnish through the Service Providers such shareholder
services for the compensation payable to Service Providers pursuant to Section 6
of this Agreement. Parnassus and not the Fund will be responsible for the
remittal of such compensation to the respective Service Providers.
2. Services and Responsibilities on a Continuing Basis. The
shareholder services provided pursuant to this Agreement shall be provided on a
regular basis, which shall be daily, weekly or as otherwise appropriate, unless
otherwise specified by the Fund. These services are the following:
(a) For Service Providers whose Clients' shares of the Fund are
held on the books of the Fund in a single, aggregated account
maintained by the Service Provider ("Recordkeepers"), such
services relating to record maintenance, processing of
dividends and other distributions, shareholder communications
and/or tax information reporting as are comparable to
shareholder servicing and/or transfer agency services that are
or may be provided to persons whose Fund shares are not held
in an omnibus account; and
(b) For any Service Provider,
(i) responding to client inquiries;
(ii) assisting Clients in changing dividend and/or
distribution options, account designations and
addresses;
(iii) providing assistance and information in connection
with proxy statements, annual reports, prospectuses
and other correspondence from the Fund to
shareholders (including, upon request, copies, but
not originals, of regular correspondence,
confirmations or regular statements of account) where
such clients hold shares of the Fund registered in
the name of Parnassus, a Service Provider, or their
nominees; and
(iv) providing such other information and assistance to
shareholders as may be reasonably requested by such
clients.
Parnassus and the Fund acknowledge that, to the extent any of the foregoing
services are provided by Parnassus, Parnassus is compensated for such services
under the Agreement for Transfer Agent Services and Accounting and Pricing
Services. No Payment shall be made pursuant to this Agreement for any services
that are primarily intended to result in the sale or distribution of shares of
the Fund.
3. Standard of Care. In the performance of the duties hereunder,
Parnassus and the Service Providers shall be obligated to exercise due care and
diligence and to act in good faith and to use their best efforts. Without
limiting the generality of the foregoing or of any other provision of this
Agreement, neither Parnassus nor any Service Provider shall be liable for delays
or errors or loss of data occurring by reason of circumstances beyond Parnassus'
or the Service Provider's control.
4. Confidentiality. Parnassus agrees, on behalf of itself and its
employees, to treat confidentially all records and other information relative to
the Fund, and all prior, present or potential shareholders of the Fund, except
after prior notification to, and approval of release of information in writing
by, the Fund, which approval shall not be unreasonably withheld, and may not be
withheld where Parnassus or a Service Provider may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Fund.
5. Independent Contractor. Parnassus shall, for all purposes herein, be
deemed to be an independent contractor, and the Service Providers shall at all
times be deemed to be independent contractors retained by Parnassus and not the
Fund, and Parnassus and the Service Providers shall, unless otherwise expressly
provided and authorized to do so, have no authority to act for or represent the
Fund in any way, or in any way be deemed an agent for the Fund. It is expressly
understood and agreed that the services to be rendered by Parnassus under the
provisions of this Agreement are not to be deemed exclusive, and Parnassus shall
be free to render similar or different services to others so long as its ability
to render the services provided for in this Agreement shall not materially be
impaired thereby.
6. Compensation. As compensation for the services rendered by, and
responsibilities assumed by, Parnassus during the term of this Agreement, the
Fund will pay to Parnassus for payment to Service Providers an aggregate service
fee at the rate of up to 0.25% (25 basis points) per annum of the average daily
net asset value of the Fund's shares; except, however, with respect to services
which are not provided by Recordkeepers, the Fund shall pay to Parnassus an
aggregate service fee which does not exceed the annual rate of 0.10% (10 basis
points) of the average daily net asset value of the Fund's shares.
7. Fund Information. No person is authorized to make any
representations concerning the Fund, shares of the Fund or shareholder services
except in accordance with the terms of this Agreement. Neither Parnassus or any
Service Provider, nor any of their respective agents will use or distribute, or
authorize the use or distribution of, any statements relating to the Fund other
than those contained in the Fund's current Prospectus or Statement of Additional
Information or in such supplemental literature as may be authorized by the Fund.
8. Reports to Fund. Parnassus shall provide to the Board of
Trustees of the Fund, and the Board shall review, at each meeting, a written
report of the amounts expended pursuant to this Agreement and the purposes for
which such expenditures were made.
9. Duration. This Agreement shall continue in full force and effect for
so long as such continuance is approved at least annually by vote or written
consent of a majority of the Trustees of the Fund, including a majority of the
Trustees of the Fund who are not "interested persons" of either party to this
Agreement and have no direct or indirect financial interest in the operation of
this Agreement.
10. Termination. This Agreement may be terminated without penalty by
either party upon at least 60 days' prior written notice to the other; provided,
that in the case of termination by the Fund, the Trustees, including a majority
of the Independent Trustees, shall have authorized such action.
11. Amendments. This Agreement or any part hereof may be changed
or waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought. All amendments to this Agreement
must be approved by vote of the Board of Trustees of the Fund, including a
majority of the Independent Trustees.
12. Records. All records required to be maintained and preserved by the Fund
pursuant to the provisions of rules or regulations of the Securities and
Exchange Commission under Section 31(a) of the 1940 Act and maintained and
preserved by Parnassus on behalf of the Fund, including any such records
maintained by Parnassus in connection with the performance of its obligations
under this Agreement, are the property of the Fund and shall be provided by
Parnassus promptly on request by the Fund.
13. Miscellaneous.
-------------
(a) This agreement embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior
agreements and understandings, relating to the subject matter
hereof.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or
effect.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of California as
applicable to contracts between California residents entered
into and to be performed entirely within California.
(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) Parnassus acknowledges that it has received notice of and
accepts the limitations of the Fund's liability set forth in
the Fund's Agreement and the Declaration of Trust. Parnassus
agrees that the Fund's obligations under this Agreement shall
be limited to the Fund and to its assets, and that neither
Parnassus nor any Service Provider shall seek satisfaction of
any such obligation from the shareholders of the Fund or from
any Trustee, officer, employee or agent of the Fund.
(f) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
(g) This Agreement may not be assigned without the written consent
of the parties.
14. No Shareholder Liability. The Parnassus understands that the
obligations of this Agreement are not binding upon any shareholder of the Fund
personally, but bind only the Fund's property. The Parnassus represents that it
has notice of the provisions of the Fund's Declaration of Trust disclaiming
shareholder liability for acts or obligations of the Fund.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written
THE PARNASSUS FUND
Date: March 24, 2000 By:
Richard Silberman, Secretary
PARNASSUS INVESTMENTS
Date: March 24, 2000 By:
Jerome L. Dodson, President
<PAGE>
Deloitte & Touche LLP
50 Fremont Street
San Francisco, CA 94105-2230
Telephone: (415) 247-4000
Facsimile: (415) 247-4329
INDEPENDENT AUDITORS' CONSENT
The Parnassus Fund:
We consent to (a) the incorporation by reference in this Post-Effective
Amendment No. 18 to Registration Statement No. 2-93131 of the Parnassus Fund on
Form N-1A of our report dated January 14, 2000 appearing in the Fund's 1999
Annual Report to Shareholders incorporated by reference in the Statement of
Additional Information ("SAI"), which is part of such Registration Statement,
(b) the reference to us under the heading "General" in the SAI, (c) the
reference to us under the heading "Financial Highlights" in the Prospectus,
which is a part of such Registration Statement, and (d) the reference to us
under the heading "General Information" in such Prospectus.
Deloitte & Touche LLP
San Francisco, California
April 14, 2000
<PAGE>
CODE OF ETHICS
of
THE PARNASSUS FUND
THE PARNASSUS INCOME TRUST
and
PARNASSUS INVESTMENTS
Adoption of this Code. This Code of Ethics (this "Code") has been
adopted by The Parnassus Fund and The Parnassus Income Trust (each of which is
referred to as the "Fund") and Parnassus Investments (the "Adviser") in
compliance with Rule 17j-1 (the "Rule") under the Investment Company Act of 1940
(the "1940 Act").
General Principles. In their personal investment activities, all
Trustees and officers of the Fund and all officers, directors and staff of
Parnassus Investments should at all times place the interests of Fund
shareholders before their own personal interests. All personal securities
transactions should be conducted consistent with this Code and in such a manner
as to avoid any actual or potential conflict of interest or any abuse of an
individual's position of trust or responsibility. No one affiliated with the
Fund should take inappropriate advantage of his or her position.
Activities covered by this Code. This Code applies to all activities by
which a Covered Account (see below) acquires or disposes of any direct or
indirect beneficial interest in a Covered Security. (See Appendix A to this Code
for a discussion of what constitutes such a beneficial interest). Covered
Securities do not, however, include transactions which are not voluntary, such
as the receipt or disposition of Covered Securities in a reorganization in which
all holders are bound by a vote of holders.
Accounts covered by this Code. This Code covers all securities accounts
("Covered Accounts") in which any "access person," as defined by the Rule, has
any direct or indirect beneficial interest. See Appendix B to this Code for the
definition of "access person." The President of the Fund is the Compliance
Officer (the "Compliance Officer") and shall be responsible, as required by the
Rule, for the identification and notification of access persons and the
maintenance of records relating thereto.
Note: Due to the beneficial ownership provisions of the Rule (see
Appendix A), Covered Accounts may include accounts not only in the names of
access persons, but other accounts not registered in their names, including
accounts held for their benefit, certain family accounts and certain accounts of
trusts, estates, partnerships and corporations. Access persons may exclude
accounts which would otherwise be Covered Accounts in certain cases as discussed
in Appendix A. A Covered Account related to a particular access person is
referred to as a "Covered Account of that access person" or in similar terms.
Covered Security. A "Covered Security" as used in this Code means any
Security, as defined in Section 2(a)(36) of the 1940 Act except:
(a) securities issued by the Government of the United States,
bankers' acceptances, bank certificates of deposit, commercial paper,
and shares of registered open-end investment companies; and
(b) securities issued by an entity that is not registered
under Section 12 of the Securities Exchange Act of 1934 of which an
access person holds, directly or indirectly, the right to thirty
percent (30%) or more of the voting power, provided that such access
person has previously given written notice of that fact to the
Compliance Officer.
Covered Transactions. A "Covered Transaction" as used in this Code
means any Covered Activity in a Covered Account involving Covered Securities.
Because of the complexity of these definitions, an example is provided below to
illustrate the application of these definitions. This example is not meant to
cover all cases, but only to show how the definition works in a particular fact
situation.
Example: The wife of an access person has a custodial account
for a minor child. Because of the beneficial ownership provision of the
Rule, this is a Covered Account. The Account holds Covered Securities.
The Covered Securities are sold. This is a Covered Activity, because it
is voluntary. Thus,the transaction is a Covered Transaction.
Prohibited Activities. For purposes of this Code, "access persons" are
all Trustees and officers of the Fund and all officers, directors and stall of
Parnassus Investments who are registered with the National Association of
Securities Dealers, Inc., or who have access to information about the Fund's
investment activities before they become part of the public record. However,
independent Trustees and other access persons who have no knowledge of the
Fund's investment activities before those activities become part of the public
record may obtain exemption from the prohibitions of paragraphs (3) and (4) upon
certifying those facts to the Compliance Officer. Similarly, an access person,
even one who has non-public knowledge of the Fund's investment activities, may
obtain exemption for an account over which such person has no direct or indirect
influence or control.
The following are substantive restrictions on personal investing
activities of all access persons:
(1) Initial Public Offerings. No access person may invest in an
initial public offering unless the Compliance Officer gives
prior written approval and certifies that the investment need
not be reserved for the Fund and that the opportunity is not
being offered to such access person by virtue of his or her
position with the Fund. Any decisions by the Fund to purchase
securities of that issuer within the following two (2) years
shall be subject to an independent review by the Compliance
Officer and shall be reported to the Trustees of the Fund at
their next meeting.
(2) Private Placements. No access person may invest in a private
placement unless the Compliance Officer gives prior approval
and certifies that the investment need not be reserved for the
Fund and its shareholders and that the opportunity is not
being offered to the access person by virtue of his or her
position with the Fund. Any decisions by the Fund to purchase
securities of that issuer within the following two (2) years
shall be subject to an independent review by the Compliance
Officer and shall be reported to the Trustees of the Fund at
their next meeting.
(3) Blackout Periods. No access person may buy or sell a security
within five (5) business days before or after the Fund or any
other account managed by Parnassus Investments trades in that
same security or is considering a trade in that security. Any
profits realized on trades within the proscribed period must
be disgorged.
(4) Ban on Short-Term Trading Profits. No access person may profit
from the purchase and sale or sale and purchase of the same
(or equivalent) security within 60 calendar days. Any profits
realized on such short-term trades must be disgorged.
Independent Trustees and other access persons who have no
knowledge of the Fund's investment activities before those
activities become part of the public record are not subject to
this prohibition.
(5) Gifts. No access person may receive a gift or other thing of
value worth more than $300 from any person or entity that does
business with or on behalf of the Fund. Any gift from any
person or entity that does business with or on behalf of the
Fund in excess of $10 shall be entered in the Gift Log which
is maintained by the Compliance Officer.
(6) Service as a Director. No person with decision-making
authority over the investment process at the Fund shall serve
on the board of directors of a publicly-traded company unless
the Trustees determine that such service would be consistent
with the interest of the Fund and its shareholders.
Compliance Procedures. The Compliance Officer shall be the President of
the Fund and as used in this Code, the term "Compliance Officer" shall include
that Officer or any person under his supervision to whom any functions hereunder
have been delegated. For personal trading by the President or a member of his
family residing with him, the Board of Trustees shall designate one of its
members to assume the role of Compliance Officer. The designated Trustee shall
consult with the Director of Research to determine the status of the Funds'
trading. Both the Director of Research and the designated Trustee shall keep a
record of approvals for the President's personal trading and that of family
members residing with him. The following are the compliance procedures:
(1) Notification of Outside Account. All employees shall provide
written notification to the Compliance Officer of their intent
to open a trading account prior to opening such an account. If
the account was opened prior to the employee's hire date, the
employee shall notify the Compliance Officer promptly after
the hire date.
(2) Preclearance. All access persons must "preclear" all personal
securities trades with the Compliance Officer. The Compliance
Officer must preclear his trades with the Board of Trustees.
Independent Trustees and other access persons who have no
nonpublic knowledge of the Fund's investment activities are
exempt from this requirement.
(3) Records of Securities Transactions. All access persons must
send duplicate copies of brokerage statements to the
Compliance Officer for any Covered Account. This requirement
shall not apply to independent Trustees and other access
persons who have no knowledge of the Fund's investment
activities before those activities become part of the public
record and so certify to the Compliance Officer.
(4) Disclosure of Personal Holdings.
-------------------------------
(a) All access persons (other than independent Trustees of a Fund) must
disclose all personal securities holdings within 10 days of becoming
access persons and thereafter must file an annual report containing
personal holdings information that is current as of a date not more
than 30 days before the report is submitted. Both the initial holdings
report and the annual report must contain the following information:
o the title, number of shares and principal amount of each Covered
Security in which the access person had, for the period covered,
any direct or indirect beneficial ownership,
o the name of any broker, dealer or bank with whom the access person
maintains an account in which any securities are held for the
direct or indirect benefit of the access person,
o the date on which the access person submits the report.
(b) Within 10 days of each fiscal quarter end, each access person of a
Fund must file with the Fund and each access person of the Adviser must
file with the Adviser a quarterly transaction report. Each independent
Trustee of a Fund is exempt from providing the quarterly report, unless
such Trustee knew or, in the ordinary course of fulfilling his or her
duties as Trustee, should have known that during the 15-day period
immediately before or after the Trustee's transaction in a Covered
Security, the Fund purchased or sold the Covered Security, or the Fund
or the Adviser considered purchasing or selling the Covered Security.
The quarterly report should disclose the following information with
respect to any transaction during the quarter in which the access
person had any direct or indirect beneficial ownership:
o the date of the transaction, title, interest rate and maturity (if
applicable), number of shares and principal amount of each Covered
Security involved,
o the nature of the transaction (purchase, sale or any other type of
acquisition or disposition),
o the price of the Covered Security at which the transaction was
affected,
o the name of the broker, dealer or bank with or through which the
transaction was affected, and
o the date on which the access person submits the quarterly report.
The quarterly report should disclose the following with respect to any
account established by the access person in which any securities were
held during the quarter for the direct or indirect benefit of the
access person:
o the name of the broker, dealer or bank with whom the access person
established the account,
o the date the access person established the account, and
o the date on which the access person submits the report.
(c) A person need not submit any of the reports listed in paragraphs
(a) and (b) above with respect to transactions effected for, and
Covered Securities held in, any account over which the person has no
direct or indirect influence or control.
(5) Certification of Compliance. All access persons must certify
annually that they have read and understood this Code and
recognize that they are subject thereto. They must certify
annually that they have complied with this Code and they have
complied with its requirements including reporting all
personal securities transactions required to be disclosed or
reported. All access persons that are not currently submitting
copies of any brokerage activity to the Compliance Officer
must provide written certification annually that there has
been no reportable securities activity during the previous
year.
(6) Review by the Board of Trustees. Each year the Fund's
management shall prepare a report to the Trustees that
summarizes existing procedures concerning personal investment
and any changes made to procedures during the preceding year.
The report will also identify any violations requiring
significant remedial action during the past year and will make
suggestions for any changes deemed necessary.
Entity Adopted Amended
The Parnassus Fund 12/7/94 3/17/97, 7/17/97, 12/11/98, 3/12/99, 7/12/99,
3/24/00
Parnassus Income Trust 12/2/94 3/17/97, 7/17/97, 12/11/98, 3/12/99, 7/12/99,
3/24/00
Parnassus Investments 1/12/95 3/17/97, 7/17/97, 12/11/98, 3/12/99, 7/12/99,
3/24/00
<PAGE>
APPENDIX A
The purpose of this Appendix is to discuss the circumstances in which
an access person may have a "direct or indirect beneficial interest" in a
securities account. Under the Rule, this question is to be "interpreted in the
same manner as it would be in determining whether a person is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934."
There is no comprehensive rule under that Section as to what
constitutes beneficial ownership. Therefore, the only guidance is provided by
SEC Releases and decided court cases so there can be changes from time to time.
This Appendix is not designed to be a complete or comprehensive discussion, but
only a summary of important areas.
Under the Rule, an access person need not report "with respect to
transactions effected for any account over which such person does not have any
direct or indirect influence or control." Thus, even if an access person has a
beneficial interest in an account, as discussed herein, such account may not be
a Covered Account as defined in the Code. For the purposes of the Code, an
access person may remove an account which would otherwise be a Covered Account
from that category by filing with the Compliance Officer a statement indicating
lack of influence and control as stated above together with such other documents
as the Compliance Officer may require to demonstrate such lack of influence or
control
The general categories of types of beneficial ownership may be
summarized as follows: (i) direct ownership; (ii) securities held by others for
the benefit of an access person; (iii) securities held by certain family
members; and (iv) securities held by certain estates, trusts, corporations or
partnerships.
Direct Ownership. This includes securities registered in the name of
an access person and bearer securities of which the access person is the bearer.
Securities held by others for the benefit of an access person. This
involves, in general, any agreement, arrangement or understanding under which an
access person derives benefits substantially equivalent to those of ownership.
This category would include, but not be limited to, securities held by pledgees,
custodians and brokers.
Securities held by certain family members. The SEC has indicated that
the "beneficial ownership" of an access person extends to securities owned (see
below) by a wife or husband of that access person, by a minor child or by other
relatives (i) sharing the same household, or (ii) not sharing the same household
but whose investments the access person directs or controls. That ownership by
relatives may be direct (i.e., in their own name) or in one or more of the
indirect ways described in this Appendix. This beneficial ownership position of
the SEC is not affected by whether or not the assets being invested are the
separate property of the relative. However, an access person may, as described
in the Code, disclaim beneficial ownership of any particular securities and also
may, as described in this Appendix, remove from the category of Covered Accounts
any accounts over which the access person has no direct or indirect influence or
control.
Securities held by estates etc. An access person may also have a
beneficial interest in securities held by estates, trusts, partnerships or
corporations. Access persons who are (i) settlers (i.e., creators), trustees or
beneficiaries of a trust, (ii) executors or administrators of, or beneficiaries
or legatees of, an estate; (iii) partners of a partnership, or (iv) directors,
officers or substantial shareholders of a corporation, which, in each case,
invests in Covered Securities, are required to obtain a determination from the
Compliance Officer as to whether the accounts in question are Covered Accounts.
In making any such determination, the Compliance Officer may rely on an opinion
of counsel.
<PAGE>
APPENDIX B
1. "Access person" means:
(i) With respect to the Fund, any Trustee, officer or advisory
person, as defined below, of the Fund;
(ii) With respect to the Adviser, any director, officer or advisory
person of the Adviser who, with respect to the Fund, makes any recommendation,
participates in the determination of which recommendation shall be made, or
whose principal function or duties relate to the determination of which
recommendation shall be made to the Fund; or who, in connection with his or her
other duties, obtains any information concerning recommendations being made by
the Adviser to the Fund.
2. "Advisory person" of the Fund and the Adviser means:
(i) Any employee of any of them (or any company in a control
relationship to any) who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information regarding the purchase or
sale of a security by the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
(ii) Any natural person in a control relationship to any of them who
obtains information concerning recommendations made to the Fund with regard to
the purchase or sale of a covered security by the Fund.
