THE PARNASSUS INCOME FUND
Supplement to the Prospectus dated May 1, 1997
as previously revised December 8, 1997
At a special meeting of shareholders scheduled for March 26, 1998 ("Special
Meeting"), shareholders of each Portfolio of the Fund will be asked to approve
proposals relating to the following, as applicable to one or more of the
Portfolios:
1. Balanced Portfolio's Investment Objective and Related Policies. Shareholders
of the Balanced Portfolio will be asked to change its investment objectives of
current income and capital preservation, with capital appreciation as a
secondary objective, to a single objective: "current income and capital
appreciation." In connection with this change, those shareholders will also be
asked to eliminate the current policies requiring at least 25% of the
Portfolio's assets to be invested in fixed-income securities and specifying the
minimum dividend paid by a stock in the Portfolio. If these proposed changes are
approved, the name of the Portfolio will be changed to the "Equity Income Fund."
2. Investment Restrictions. Shareholders of each Portfolio will be asked to
approve elimination of that Portfolio's fundamental investment restrictions
regarding restricted securities, securities owned by affiliated persons,
warrants, foreign securities or currencies, unseasoned issuers and investing for
control and to approve modification of its fundamental investment restrictions
regarding diversification, loans and investment in other funds. Also,
shareholders will be asked to consider a shareholder request that the Portfolio
be permitted to invest in companies that produce wine.
This Supplement is dated December 30, 1997.
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THE PARNASSUS INCOME FUND
Supplement to the Statement of Additional Information
Dated May 1, 1997
The following information supplements and supersedes any contrary information
contained in the Statement of Additional Information:
Investment Restrictions. At a special meeting of shareholders scheduled for
March 26, 1998 ("Special Meeting"), shareholders of each Portfolio of the Fund
will be asked to approve elimination and modification of certain of the
Portfolio's fundamental investment restrictions. If approved, the following
investment restrictions will supersede and replace the restrictions listed in
the "Investment Restrictions" section: (These restrictions also reflect the
anticipated change in the name of the Fund to The Parnassus Income Trust and the
corresponding designation of each "Portfolio" as a "Fund.")
The Trust may not:
(1) With respect to 75% of a Fund's total net assets, purchase the
securities of any one issuer other than obligations of the U.S.
Government, its agencies or instrumentalities, if as a result: (i) more
than 5% of 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 any 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 Trust 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 each 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 net assets (not including the amount borrowed)
and pledge its assets to secure such borrowings. A 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
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 each Fund may invest up to 10% of its assets in money
market funds, but no more than 5% of its assets in any one fund and no
Fund may own more than 3% of the outstanding voting shares of any one
fund. This restriction, however, does not apply to a transaction that
is 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.
(11) Make loans except through repurchase agreements; however, the
Trust may engage in securities lending and may also acquire debt
securities and other obligations consistent with the applicable Fund's
investment objective(s) and its other investment policies and
restrictions. Investing in a debt instrument that is convertible into
equity or investing in a community loan fund is not considered the
making of a loan.
If the Portfolios' current fundamental investment restrictions regarding
investment in warrants and foreign securities or currencies are eliminated as
proposed, the Fund intends to implement the following new, operating policies on
these matters: (These policies also reflect the anticipated change in the name
of the Balanced Portfolio and the designation of each "Portfolio" as a "Fund.")
(1) The Equity Income Fund may purchase warrants up to a maximum 5% of
the value of its total net assets, but the Fixed-Income and California
Tax-Free Funds may not purchase warrants.
(2) No Fund may hold or purchase foreign currency except the Equity
Income Fund to the extent necessary to settle foreign securities
transactions.
This Supplement is dated December 30, 1997.
