THE PARNASSUS FUND
One Market-Steuart Tower #1600 San Francisco, Ca 94105 800-999-3505
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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.
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TABLE OF CONTENTS
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Investment Summary 2 The Adviser 9
Performance Information 3 How to Purchase Shares 10
Fund Expenses 4 How to Redeem Shares 13
The Legend of Mt. Parnassus 5 Distributions and Taxes 14
Investment Objective and Policies 5 Financial Highlights 15
Investment Risks 7 General Information 15
Management 7
<FN>
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.
</FN>
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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.)
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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.
[GRAPHIC OMITTED]
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 mid-cap value 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.
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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
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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%
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<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>
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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)
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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)
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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.
[FN]
* 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.
</FN>
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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.
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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
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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.
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.
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.
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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.
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.
<PAGE>
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.
[FN]
* Denotes "interested" trustee as defined in the Investment Company Act of 1940.
</FN>
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 15 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.
<PAGE>
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 Association 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:
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Sales Charge as a Percentage of Offering Net Asset Dealer Discount as a
Amount of Transaction at Offering Price Price Value Percentage Offering Price
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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
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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
<PAGE>
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.
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;
<PAGE>
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 placed 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.
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
<PAGE>
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.
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 or the dollar amount 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.
<PAGE>
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.
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.
FINANCIAL HIGHLIGHTS
<TABLE>
- --------------------------------------------------------------------------------------------------------------------
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:
<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 sole stockholder of Parnassus Investments.
<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 N. Clark Street #3300
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. 20549-6009.
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 public [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.
Printed on recycled paper.
