THE PARNASSUS INCOME TRUST
SemiAnnual Report
June 30, 1998
August 3, 1998
Dear Shareholder:
Here is your semiannual report covering the first half of 1998. Below
you'll find an analysis of each Fund in the Parnassus Income Trust. As you may
recall, the investment objective of the old Balanced Portfolio was changed at
the March shareholders meeting so it's now the Equity Income Fund.
EQUITY INCOME FUND
As of June 30, 1998, the net asset value per share (NAV) of the Equity
Income Fund was $20.73. Taking into account dividends paid, the total return for
the first six months of the year was 1.81%. Since we changed the investment
objective of the Fund during the first half of the year, it's hard to compare
our return to similar funds. However, for the second quarter when the investment
objective was the same as it is now, total return was a loss of 1.86%. The
average equity income fund during the quarter lost 0.97% so we underperformed by
a little less than 1%. Much of this 1% underperformance was due to costs
incurred in changing the portfolio. Below is a table summarizing average annual
total returns for the one, three and five-year periods as well as for the life
of the Fund. All periods ended as of June 30, 1998.
--------------------------------------------------
Average Annual
Equity Income Fund Total Return
--------------------------------------------------
One Year 15.77%
Three Years 14.00%
Five Years 10.68%
Since inception on 9/1/92 13.06%
--------------------------------------------------
Past performance is no guarantee of future
returns. Investment return and principal value
will fluctuate and an investor's shares, when
redeemed, may be worth more or less than their
original cost.
While we normally discuss the reasons for the Fund's performance in the
semiannual reports, I'm going to take a different approach this time and instead
talk about the changes and our future direction. The first change is that we
will no longer have to have 25% bonds in the portfolio. As of June 30, we had
sold off all the fixed-income securities. A second change is that we have
greatly reduced the percentage of high-yielding utility stocks in the portfolio.
Together, these two changes mean that the yield on the Fund will be
substantially lower. For example, the Fund's SEC 30-day yield for April was
3.36% while the SEC 30-day yield for June was 1.55%. While substantially
reduced, this yield is still above the 1.35% yield on the S&P 500.
<PAGE>
Chances are that our timing may be right in eliminating bonds from the
portfolio. Interest rates on bonds are near their lowest point in a generation.
As I write this report in mid-July, the yield on the 30-year bond is 5.61%.
Although inflation remains low, the probability is that the next major move in
rates will be up. When interest rates go up, the value of bonds goes down and
should this happen, it would have hurt the NAV. Right now, I feel more
comfortable without any bonds in the portfolio.
While the yield for the Equity Income Fund will be less than that for the
old Balanced Portfolio, our aim is to increase the total return by having a
larger percentage of stocks with potential for substantial appreciation. I have
also noticed that most shareholders do not take the quarterly dividend in cash,
but rather reinvest it. This leads me to conclude that total return is more
important than yield. In any case, for any shareholders that want a higher
yield, they can invest in either of the other two funds of the Parnassus Income
Trust: the Fixed-Income Fund (SEC 30-day yield of 4.90% for June) or the
California Tax-Exempt Fund (SEC 30-day yield of 4.10%).
As you read through the financial statements, you will notice that the
Equity Income Fund has many more companies than the Balanced Portfolio did.
There are now around 130 companies in the portfolio and the number should stay
around that level. We chose the 130 companies according to financial and social
responsibility criteria. We also tried to construct the portfolio so that it
would represent most sectors of the economy.
There are not equal or even nearly equal positions in all the companies. We
started out by giving each company a weight in the portfolio according to its
market capitalization (stock price times number of shares outstanding). This
meant that the bigger companies would have a bigger position in the portfolio
and vice-versa. Once we arrived at these market capitalization targets, though,
we adjusted up or down. For example, we might have reduced the percentage
allocation of a very large company, but increased the percentage allocated to a
smaller company. We also tried to overweight the stocks we considered
undervalued and underweight the stocks we considered overvalued.
Once we're fully invested, the turnover ratio of the portfolio should be
low. This will help to keep expenses down and reduce taxes.
At least 75% of the assets in the Equity Income Fund have to be invested in
dividend-paying stocks. We also aim for a yield at least equal to that of the
S&P 500. The investment objective is both current income and capital
appreciation.
Because of the structure of the portfolio, the Fund should tend to move
with the market averages. It should be much less volatile than The Parnassus
Fund.
<PAGE>
FIXED-INCOME FUND
As of June 30, 1998, the net asset value per share (NAV) of the
Fixed-Income Fund was $16.14. Taking into account dividends paid, total return
for the six months ending June 30 was 3.15% compared to a return of 4.17% for
the Lehman Government/Corporate Bond index and 3.78% for the average A-rated
bond fund according to Lipper Analytical Services. The SEC 30-day yield for June
was 4.90%. Below is a table summarizing average annual total returns for the
one, three and five-year periods as well as for the life of the Fund. All
periods ended as of June 30, 1998.
------------------------------------------------------
Average Annual
Fixed-Income Fund Total Return
------------------------------------------------------
One Year 10.64%
Three Years 7.91%
Five Years 6.75%
Since inception on 9/1/92 7.58%
------------------------------------------------------
Past performance is no guarantee of future returns. Investment
return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their
original cost.
We underperformed the average A-rated bond fund by 0.64% during the first
half of the year. The main reason for this underperformance was because of our
defensive stance. At the present time, half of our portfolio is in short-term
money market instruments and the other half is in bonds with an average maturity
of less than ten years. Since interest rates dropped during the period, this
meant that bond funds with longer maturities had a capital gain because their
value increases as interest rates decrease. (At the beginning of the year, the
30-year bond rate was 5.92% compared to 5.63% on June 30.)
In addition to the capital gain, the average A-rated bond fund had a
slightly higher current yield as well. This was because we decided to invest
half our assets in short-term paper rather than longer-term bonds which pay a
somewhat higher rate. For example, as of mid-July, the yield on the 30-year
Treasury bond was 5.61%, the yield on the 10-year rate was 5.4% and the yield on
the 6-month Treasury bill was 5.01%.
As you can see, there's not a lot of difference in yields so there is not a
lot of reward for going out further in maturity. The yield curve is said to be
"flat" when there's not a lot of difference in yields of various maturities.
When there is a lot of difference in yields of different maturities (say 1% or
more), the yield curve is said to be "steep."
Given the flat yield curve, we've chosen to keep our maturities short. Part
of the reason is we don't feel the small yield increase is worth the risk of
holding longer-term bonds.
The other reason is that longer maturities are quite risky if interest
rates jump up. Since bonds decline in market value when interest rates go up,
there's risk involved in longer maturities. Since I expect the next move in
interest rates to be upward, I have chosen to keep the portfolio liquid. If
interest rates do increase, we'll buy more long-term bonds. In the meantime, I'm
happy to keep the portfolio in a liquid position. As interest rates go higher,
our maturities will get longer and the portfolio will become less liquid. In a
sense, we're buying insurance by accepting somewhat lower yields for protection
against a spike in interest rates. We're also in a position to take advantage of
higher yields if and when they materialize.
CALIFORNIA TAX-EXEMPT FUND
As of June 30, 1998, the net asset value per share (NAV) of the California
Tax-Exempt Fund was $16.73. Taking into account dividends reinvested, the total
return for the Fund was 2.37%. For the same period, the Lehman Municipal Bond
index posted a return of 2.69% while the average California municipal bond fund
gained 2.28% according to Lipper Analytical Services. Keep in mind that the
Lehman index measures bond performance only and does not take into account fund
expenses as do our Fund and the other California municipal bond funds. (Last
year, our expenses amounted to 0.67%.) Below is a table summarizing average
annual total returns for the one, three and five-year periods as well as for the
life of the Fund. All periods ended as of June 30, 1998.
------------------------------------------------------
Average Annual
California Tax-Exempt Fund Total Return
------------------------------------------------------
One Year 8.44%
Three Years 8.11%
Five Years 6.49%
Since inception on 9/1/92 7.17%
------------------------------------------------------
Past performance is no guarantee of future returns. Investment
return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their
original cost.
The Fund beat the average California municipal bond fund by 0.09%. We
achieved this by keeping our expenses low and selecting the best maturities for
our bonds. Right now, we're investing in bonds that are 15 years in maturity.
This gives us adequate yield and a measure of safety in case interest rates
should rise. A spike up in interest rates would hurt the value of a 30-year bond
more than the value of a 15-year bond.
Right now, inflation is low and there's no sign of any sharp increase in
prices. However, interest rates are very low so rates could rise sometime this
year. Because of this concern, I plan to keep the portfolio somewhat more liquid
in the second half.
David Pogran has resigned as portfolio manager of the California Tax-Exempt
Fund to take a job as a senior analyst with Pacific Alliance Capital Management,
the money management subsidiary of Union Bank of California. David was the
portfolio manager of the California Tax-Exempt Fund since its inception in 1992
and he has given us many years of dedicated service. He is a person of high
integrity and we will miss him. I will be taking over his job as portfolio
manager.
Yours truly,
Jerome L. Dodson
President
<PAGE>
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 1998 (UNAUDITED)
Percent of
Shares Common Stocks Net Assets Market Value
- --------------------------------------------------------------------------------
AIR TRANSPORT
1,500 Federal Express Corporation 0.2% $ 93,937
-----------
APPAREL
800 Russell Athletic 24,200
800 Liz Claiborne, Inc. 41,800
2,000 Reebok International Ltd. 55,250
1,000 St. John Knits 38,625
-----------
Total 0.4% 159,875
-----------
APPAREL RETAILING
1,800 Gap, Inc. (The) 111,263
4,000 Penny (J.C.) Company, Inc. 289,000
2,500 Lands' End, Inc. 79,531
1,100 Lillian Vernon Corporation 18,425
-----------
Total 1.2% 498,219
-----------
AUTO PARTS
1,000 Bandag Corporation 39,687
1,800 Cooper Tire & Rubber Co. 37,125
15,000 Dana Corporation 802,500
700 Modine Manufacturing Co. 24,238
-----------
Total 2.2% 903,550
-----------
BANKING
5,800 Chase Manhattan 437,900
3,000 Dime Bancorp 89,813
1,500 Golden West Financial 159,656
8,000 Morgan (J.P.) & Co. Inc. 936,500
6,000 Washington Mutual Inc. 260,250
1,700 Wells Fargo & Company 625,600
-----------
Total 6.1% 2,509,719
-----------
BROADCASTING
5,000 U S West Media Group 0.5% 217,500
-----------
BUILDING MATERIALS
900 Armstrong World Corp. 60,637
3,000 Building Materials Holding Corp. 41,438
3,000 Apogee Enterprises, Inc. 45,938
1,500 TJ International, Inc. 45,000
-----------
Total 0.5% 193,013
-----------
CHEMICALS
3,800 Calgon Carbon $ 37,763
600 Fuller (H.B.) Company 33,225
2,000 Nalco Chemical Company 70,500
600 Wellman, Inc. 13,650
-----------
Total 0.4% 155,138
-----------
COMPUTER SYSTEMS
40,000 Compaq Computer Corp. 1,132,500
24,000 Hewlett-Packard Company 1,423,500
6,000 Quantum Corporation 124,125
2,000 Stratus Computer, Inc. 50,375
20,000 Western Digital Corporation 237,500
-----------
Total 7.2% 2,968,000
-----------
ELECTRONICS &
SEMICONDUCTORS
15,000 Applied Materials, Inc. 442,500
10,000 Advanced Micro Devices, Inc. 170,625
6,000 Electro Scientific Industries 189,000
100,000 Helix Technology Corp. 1,500,000
30,000 Intel Corporation 2,220,000
9,000 LSI Logic Corporation 206,438
10,000 Micron Technology, Inc. 246,875
-----------
Total 12.0% 4,975,438
-----------
ELECTRIC UTILITIES
30,000 Black Hills Corporation 690,000
1,000 CILCORP Inc. 48,063
1,000 Idaho Power Company 34,500
5,000 LG&E Energy Corporation 135,312
10,000 Washington Water Power 225,000
-----------
Total 2.7% 1,132,875
-----------
ELECTRONIC INSTRUMENTS
10,000 Baldor Electric Company 244,375
1,800 Perkin-Elmer Corporation 112,050
2,200 Tektronix, Inc. 77,963
-----------
Total 1.1% 434,388
-----------
ENTERTAINMENT
25,000 Cedar Fair 1.7% $ 690,624
-----------
FOOD RETAILERS
5,800 Albertson's Inc. 0.7% 300,150
-----------
HEALTH CARE SERVICES
8,000 Humana Health Plans, Inc. 249,500
24,000 Oxford Health Plans, Inc. 367,500
-----------
Total 1.5% 617,000
-----------
HOME APPLIANCES
1,800 Maytag Corporation 88,650
1,700 Whirlpool Corporation 116,875
-----------
Total 0.5% 205,525
-----------
HOME PRODUCTS
1,400 Church & Dwight Co., Inc. 45,150
3,000 Clorox Company 286,125
2,400 Colgate-Palmolive Co. 211,200
-----------
Total 1.3% 542,475
-----------
HOUSEWARES
1,900 Black & Decker Corporation 115,900
3,500 Newell Company 173,250
3,000 Rubbermaid Incorporated 99,000
-----------
Total 0.9% 388,150
-----------
INSURANCE
3,000 Aetna, Inc. 229,125
3,500 American Int'l Group, Inc. 511,000
3,000 Chubb Corporation 240,375
7,500 CIGNA Corporation 517,500
3,500 SAFECO Corporation 159,250
3,800 St. Paul Companies, Inc. 159,363
1,400 Transamerica Corporation 161,000
3,500 UNUM Corporation 193,375
-----------
Total 5.3% 2,170,988
-----------
INSURANCE BROKERS
3,450 Marsh & McLennan Co., Inc. 0.5% $ 208,077
-----------
MACHINERY
3,800 Cummins Engine Co., Inc. 194,750
6,100 Deere & Company 322,538
-----------
Total 1.3% 517,288
-----------
<PAGE>
MEDICAL EQUIPMENT
3,000 Acuson Corporation 54,563
1,200 Dentsply 30,000
3,000 Invacare Corporation 79,500
2,600 Sunrise Medical Inc. 38,837
-----------
Total 0.5% 202,900
-----------
MISCELLANEOUS
20,000 Chemed Corporation 681,250
10,000 Jostens, Inc. 241,250
4,000 Minnesota Mining & Mfg. 329,500
2,500 Toro Company 85,625
10,000 WD 40 Company 272,500
-----------
Total 3.9% 1,610,125
-----------
NATURAL GAS
2,500 AGL Resources Inc. 52,500
2,500 Apache Corporation 78,750
1,000 Connecticut Energy Corp. 27,812
26,200 Energen Corporation 527,275
10,000 Enron Corporation 540,625
2,000 Equitable Resources, Inc. 61,000
20,000 Keyspan Energy Corporation 600,000
2,000 MCN Corporation 50,125
5,000 New Jersey Resources 179,375
5,000 Northwest Natural Gas Co. 139,687
10,000 ONEOK Inc. 398,125
5,000 Peoples Energy Corporation 193,438
5,000 UGI Corporation 125,313
1,000 WICOR Inc. 23,250
-----------
Total 7.3% 2,997,275
-----------
OFFICE EQUIPMENT
1,000 Avery Dennison Corp. $ 53,750
2,500 Herman Miller, Inc. 60,469
4,000 Pitney Bowes Inc. 196,500
2,700 Xerox Corporation 275,062
-----------
Total 1.4% 585,781
-----------
OIL
9,500 Amoco Corporation 399,000
5,000 Sun Company, Inc. 194,063
-----------
Total 1.4% 593,063
-----------
<PAGE>
PACKAGED FOODS
10,000 Campbell Soup Company 531,250
1,500 General Mills Incorporated 102,375
7,500 Heinz (H.J.) Company 420,938
5,000 Kellogg Company 187,188
2,900 Quaker Oats Company 158,774
-----------
Total 3.4% 1,400,525
-----------
PHARMACEUTICALS
2,000 Johnson & Johnson 0.4% 147,750
-----------
PHOTOGRAPHY
5,700 Eastman Kodak 416,456
2,500 Polaroid Corporation 89,063
-----------
Total 1.2% 505,519
-----------
PRINTING
2,800 Donnelley (R.R.) & Sons Co. 0.3% 128,100
-----------
PUBLISHING
1,000 Houghton Mifflin Company 0.1% 31,874
-----------
RESTAURANTS
70,000 Luby's Cafeterias, Inc. 3.0% 1,229,374
-----------
RETAILING - GENERAL
3,000 Dayton Hudson Corporation $ 145,500
3,800 Dollar General 150,338
2,800 Nordstrom, Inc. 216,300
3,000 Sears, Roebuck and Co. 183,562
-----------
Total 1.7% 695,700
-----------
SOFTWARE - SERVICES
11,000 3Com Corporation 337,563
3,000 Adobe Systems 127,313
2,500 Autodesk, Inc. 96,562
12,000 First Data 397,500
-----------
Total 2.3% 958,938
-----------
<PAGE>
SPECIALTY RETAILING
2,000 Circuit City Stores, Inc. 93,750
2,000 Claire's Stores, Inc. 41,000
13,000 Gymboree Corporation 196,625
1,000 Longs Drug Stores Corp. 28,938
7,000 Toys "R" Us, Inc. 165,375
-----------
Total 1.3% 525,688
-----------
STEEL
2,000 Nucor Corporation 0.2% 92,000
-----------
TELECOMMUNICATIONS
7,500 U S West Communications Group 0.9% 352,500
-----------
TRANSPORTATION
2,500 Consolidated Freightways Corp. 0.1% 34,843
-----------
TOTAL COMMON STOCKS 77.6% $ 31,973,884
------------
Principal Community Percent of
Amount Development Loans Net Assets Market Value
- --------------------------------------------------------------------------------
$ 100,000 Boston Community Loan Fund $ 100,000
100,000 Cascadia Revolving Fund 100,000
100,000 Institute for Community
Economics Loan Fund 100,000
100,000 Low Income Housing Fund 100,000
-----------
TOTAL COMMUNITY DEVELOPMENT LOANS 1.0% $ 400,000
-----------
TOTAL INVESTMENT IN SECURITIES
(Cost $32,533,175) 78.6% $ 32,373,884
-----------
<PAGE>
Percent of
Short-Term Investments Net Assets Market Value
- --------------------------------------------------------------------------------
Union Bank of California
Money Market Fund,
variable rate - 4.830% $ 1,053,608
Federal Home Loan Bank
Discount Note - 5.420% 6,473,577
Goldman Sachs
Government Portfolio - 5.200% 49,808
Goldman Sachs
Treasury Portfolio - 5.200% 46,117
-----------
TOTAL SHORT-TERM INVESTMENTS 18.5% $ 7,623,110
TOTAL INVESTMENTS 97.1% 39,996,994
OTHER ASSETS AND LIABILITIES - NET 2.9% 1,207,700
------ -----------
Total Net Assets 100.0% $ 41,204,694
====== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
Assets:
Investments in securities, at market value
(identified cost $32,533,175) (Note 1) $ 32,373,884
Temporary investments in short-term securities
(at cost, which approximates market) 7,623,110
Receivables:
Securities sold 1,908,795
Dividends and interest 83,231
Capital shares sold 9,043
Other assets 16,487
-----------
Total assets 42,014,550
-----------
Liabilities:
Dividends payable 37,037
Payable for securities purchased 768,970
Accounts payable and accrued expenses 3,849
-----------
Total liabilities 809,856
-----------
NET ASSETS (equivalent to $20.73
per share based on 1,987,216.202
shares of capital stock outstanding) $ 41,204,694
------------
Net assets consist of:
Undistributed net investment income $ 65,741
Unrealized depreciation on investments (159,291)
Undistributed net realized gain 5,494,926
Capital paid-in 35,803,318
-----------
Total Net Assets $ 41,204,694
===========
Computation of net asset value and offering price per share:
Net asset value and offering price per share
($41,204,694 divided by 1,987,216.202 shares) $ 20.73
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
EQUITY INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
Investment Income:
Dividends $ 495,860
Interest 422,709
-----------
Total investment income 918,569
-----------
Expenses:
Investment advisory fees (Note 5) 149,432
Transfer agent fees (Note 5) 44,866
Fund administration expense (Note 5) 17,650
Reports to shareholders 13,989
Registration fees and expenses 9,273
Professional fees 10,433
Custody fees 4,405
Trustee fees and expenses 4,905
Other expenses 4,985
Subtotal of expenses before fee waiver 259,938
-----------
Fees waived by Parnassus Investments (Note 5) (48,077)
-----------
Total expenses 211,861
-----------
Net Investment Income 706,708
-----------
Realized and Unrealized Gain (Loss) on Investments:
Realized gain from security transactions:
Proceeds from sales 33,270,113
Cost of securities sold (27,783,986)
-----------
Net realized gain 5,486,127
-----------
Unrealized appreciation (depreciation) of investments:
Beginning of year 5,306,076
End of period (159,291)
-----------
Unrealized depreciation during the year (5,465,367)
-----------
Net Realized and Unrealized Gain on Investments 20,760
-----------
Net Increase in Net Assets Resulting from Operations $ 727,468
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
EQUITY INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1997
JUNE 30, 1998 1997
- --------------------------------------------------------------------------------
From Operations:
Net investment income $ 706,708 $ 1,409,396
Net realized gain from security transactions 5,486,127 1,335,951
Net unrealized appreciation
(depreciation) during the year (5,465,367) 3,820,624
----------- -----------
Increase in net assets resulting from operations 727,468 6,565,971
Dividends to shareholders:
From net investment income (639,505) (1,407,411)
From realized capital gains 0 (1,335,937)
Increase in Net Assets from
Capital Share Transactions 2,269,234 1,663,068
----------- -----------
INCREASE IN NET ASSETS 2,357,197 5,485,691
Net Assets:
Beginning of year 38,847,497 33,361,806
----------- -----------
End of period
[including undistributed (distributions in
excess of) net investment income of
$65,741 in 1998 and $(1,462) in 1997] $ 41,204,694 $ 38,847,497
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 1998 (UNAUDITED)
Principal Percent of
Amount Corporate Bonds Net Assets Market Value
- --------------------------------------------------------------------------------
FINANCIAL SERVICES
$ 500,000 BankBoston Corporation
Notes, 6.375%, due 03/25/08 4.8% $ 501,120
-----------
PHOTO EQUIPMENT
AND SUPPLIES
400,000 Polaroid Corporation
Notes, 7.250%, due 01/15/07 4.0% 416,952
-----------
RETAIL
500,000 The Gap, Inc.
Notes, 6.900%, due 09/15/07 522,695
350,000 Reebok International Ltd.
Notes, 6.750%, due 09/15/05 349,860
500,000 Sears, Roebuck and Co.
Global Bond, 7.000%, due 06/15/07 523,570
-----------
Total 13.5% 1,396,125
-----------
TOTAL CORPORATE BONDS 22.3% $ 2,314,197
-----------
Principal U.S. Government Percent of
Amount Agency Securities Net Assets Market Value
- --------------------------------------------------------------------------------
$ 500,000 Federal Home
Loan Mortgage Corp.
6.510%, due 01/08/07 $ 522,835
300,000 Federal National
Mortgage Association
6.720%, due 08/01/05 316,050
850,000 Federal National
Mortgage Association
6.770%, due 09/01/05 898,442
500,000 Federal National
Mortgage Association
6.140%, due 11/25/05 510,680
450,000 Federal National
Mortgage Association
7.350%, due 03/28/05 488,682
-----------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 26.4% $ 2,736,689
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $4,855,191) 48.7% $ 5,050,886
-----------
Percent of
Short-Term Investments Net Assets Market Value
- --------------------------------------------------------------------------------
Union Bank of California
Money Market Fund,
variable rate - 4.830% $ 458,468
Goldman Sachs
Government Portfolio - 5.200% 493,095
Goldman Sachs
Treasury Portfolio - 5.200% 490,714
Federal Farm Credit
Discount Note - 5.370% 3,683,278
-----------
TOTAL SHORT-TERM INVESTMENTS 49.4% $ 5,125,555
-----------
TOTAL INVESTMENTS 98.1% 10,176,441
-----------
OTHER ASSETS AND LIABILITIES - NET 1.9% 203,716
------ -----------
TOTAL NET ASSETS 100.0% $ 10,380,157
====== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FIXED-INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
Assets:
Investments in securities, at market value
(identified cost $4,855,191) (Note 1) $ 5,050,886
Temporary investments in short-term securities
(at cost, which approximates market) 5,125,555
Receivables:
Interest 109,564
Other assets 114,728
-----------
Total assets 10,400,733
-----------
Liabilities:
Accounts payable and accrued expenses 20,576
-----------
Total liabilities 20,576
-----------
NET ASSETS (equivalent to $16.14
per share based on 643,008.877
shares of capital stock outstanding) $ 10,380,157
============
Net assets consist of:
Undistributed net investment income $ 5,095
Unrealized appreciation on investments 195,695
Accumulated net realized gain 249,012
Capital paid-in 9,930,355
-----------
TOTAL NET ASSETS $ 10,380,157
============
Computation of net asset value and offering price per share:
Net asset value and offering price per share
($10,380,157 divided by 643,008.877 shares) $ 16.14
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
FIXED-INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
Investment Income:
Interest $ 281,634
-----------
Total investment income 281,634
-----------
Expenses:
Investment advisory fees (Note 5) 24,494
Transfer agent fees (Note 5) 11,875
Fund administration expense (Note 5) 4,400
Reports to shareholders 3,644
Registration fees and expenses 6,942
Professional fees 3,515
Custody fees 446
Trustee fees and expenses 1,224
Other expenses 3,150
-----------
Subtotal of expenses before fee waiver 59,690
Fees waived by Parnassus Investments (Note 5) (19,596)
-----------
Total expenses 40,094
-----------
Net Investment Income 241,540
-----------
Realized and Unrealized Gain (Loss) on Investments:
Realized gain from security transactions:
Proceeds from sales 3,684,798
Cost of securities sold (3,434,128)
-----------
Net realized gain 250,670
-----------
Unrealized appreciation (depreciation) of investments:
Beginning of year 378,045
End of period 195,695
-----------
Unrealized depreciation during the year (182,350)
-----------
Net Realized and Unrealized Loss on Investments 68,320
-----------
Net Increase in Net Assets Resulting from Operations $ 309,860
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FIXED-INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1997
JUNE 30, 1998 1997
------------- -----------
From Operations:
Net investment income $ 241,540 $ 505,980
Net realized gain from security transactions 250,670 108,669
Net unrealized appreciation
(depreciation) during the year (182,350) 277,365
------------- -----------
Increase in net assets resulting from operations 309,860 892,014
Dividends to shareholders:
From net investment income (244,667) (500,716)
From realized capital gains 0 (43,607)
Increase in Net Assets from
Capital Share Transactions 631,475 952,103
------------- -----------
INCREASE IN NET ASSETS 696,668 1,299,794
Net Assets:
Beginning of year 9,683,489 8,383,695
------------- -----------
End of period
(including undistributed
net investment income of
$5,095 in 1998 and
$8,222 in 1997) $ 10,380,157 $ 9,683,489
============ ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
CALIFORNIA TAX-EXEMPT FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 1998 (UNAUDITED)
Principal Percent of
Amount Municipal Bonds Net Assets Market Value
- --------------------------------------------------------------------------------
EDUCATION
$ 50,000 State of California
6.000%, due 01/01/21 $ 54,429
170,000 State of California
6.125%, due 10/01/11 194,495
250,000 California Education
Facilities - California
Institute of Technology
6.000%, due 01/01/21 259,233
95,000 California Public Works -
University of California
at San Diego Facilities
7.375%, due 04/01/06 105,444
100,000 California Public Works -
Community College Projects
5.500%, due 12/01/06 107,054
130,000 California Public Works -
University of California
5.400%, due 06/01/08 139,113
175,000 California Public Works -
California State University
6.200%, due 10/01/08 193,461
300,000 Folsom School District
5.650%, due 08/11/11 325,296
100,000 Franklin-McKinsey
School District
5.600%, due 07/01/07 106,210
100,000 Kern High School District
5.600%, due 08/01/13 109,305
100,000 Los Angeles Municipal
Improvement -
Central Library Projects
5.200%, due 06/01/07 103,968
250,000 Murrieta Valley Unified
School District
5.500%, due 09/01/10 265,075
100,000 Natomas Unified School District
5.750%, due 09/01/13 107,146
<PAGE>
300,000 Oakland General Obligation
5.500%, due 12/15/11 $ 321,309
175,000 Palos Verdes California
Library District
5.000%, due 08/01/13 178,577
110,000 Pasadena Recreational/
Library Improvements
5.750%, due 01/01/13 114,489
130,000 Pomona Unified School District
5.500%, due 08/01/11 141,736
110,00 Santa Monica Unified School District
5.400%, due 08/01/11 114,315
-----------
Total 41.4 2,940,655
-----------
HEALTH CARE
200,000 California Health
Facilities-Cedar Sinai Medical Center
5.125%, due 08/01/17 199,990
60,000 California Health
Facilities-Feedback Foundation
6.500%, due 12/01/22 65,353
-----------
Total 3.7% 265,343
-----------
PUBLIC
TRANSPORTATION
250,000 Los Angeles Metro Transit Authority
5.000%, due 07/01/13 252,000
110,000 San Diego Mass Transit Authority
5.000%, due 06/01/07 113,948
125,000 San Francisco Bay Area Rapid Transit
5.650%, due 07/01/10 133,334
-----------
Total 7.0% 499,282
-----------
HOUSING
205,000 Belmont Redevelopment Agency
6.400%, due 08/01/09 $ 225,894
55,000 California Housing
Finance - Multi-Family
6.750%, due 02/01/09 55,092
100,000 Glendale Redevelopment Agency
5.500%, due 12/01/12 104,863
275,000 Los Angeles Community Redevelopment
5.000%, due 07/01/13 276,356
<PAGE>
275,000 Pasadena Community Development
6.000%, due 08/01/14 296,337
175,000 San Jose Redevelopment Agency
6.000%, due 08/01/15 197,969
200,000 University Of California Housing
5.500%, due 11/01/10 211,024
-----------
Total 19.2% 1,367,535
-----------
INFRASTRUCTURE
IMPROVEMENTS
90,000 East Bay Municipal
Utility District
6.000%, due 06/01/20 95,723
150,000 Los Angeles City
General Obligation
5.250%, due 09/01/11 154,365
200,000 Los Angeles Wastewater System
5.500%, due 06/01/12 209,170
200,000 Pomona Public Financing Authority
6.000%, due 10/01/06 225,692
-----------
Total 9.6% 684,950
-----------
ENVIRONMENT
80,000 Burbank Waste Disposal
5.300%, due 05/01/09 $ 82,745
75,000 California Pollution Control
North County Recycling Center
6.750%, due 07/01/17 83,519
125,000 California Public Works -
Energy Efficiency
5.250%, due 05/01/08 131,019
150,000 East Bay Regional Park
5.000%, due 09/01/14 150,049
315,000 Los Angeles City Public Works - Parks
5.500%, due 10/01/12 334,417
35,000 Midpeninsula Regional
Open Space District
6.250%, due 07/01/08 37,954
-----------
Total 11.5% 819,703
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $6,167,743) 92.4% $ 6,577,468
-----------
<PAGE>
Short-Term Investments
- --------------------------------------------------------------------------------
Highmark California
Tax-Exempt Fund,
variable rate - 3.331% 6.2% $ 438,815
-----------
TOTAL INVESTMENTS 98.6% 7,016,283
OTHER ASSETS AND LIABILITIES - NET 1.4% 97,192
------ -----------
TOTAL NET ASSETS 100.0% $ 7,113,475
====== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
CALIFORNIA TAX-EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
Assets:
Investments in securities, at market value
(identified cost $6,167,743) (Note 1) $ 6,577,468
Temporary investments in short-term securities
(at cost, which approximates market) 438,815
Receivables:
Interest 102,623
Other assets 618
-----------
Total assets 7,119,524
-----------
Liabilities:
Accounts payable and accrued expenses 6,049
-----------
Total liabilities 6,049
-----------
NET ASSETS (equivalent to $16.73
per share based on 425,243.702
shares of capital stock outstanding) $ 7,113,475
===========
Net assets consist of:
Undistributed net investment income $ 1,384
Unrealized appreciation on investments 409,725
Accumulated net realized gain 43,342
Capital paid-in 6,659,024
-----------
Total Net Assets $ 7,113,475
-----------
Computation of net asset value and offering price per share:
Net asset value and offering price per share
($7,113,475 divided by 425,243.702 shares) $ 16.73
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
CALIFORNIA TAX-EXEMPT FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
Investment Income:
Interest $ 177,347
-----------
Total investment income 177,347
-----------
Expenses:
Investment advisory fees (Note 5) 17,075
Transfer agent fees (Note 5) 4,296
Fund administration expense (Note 5) 2,950
Reports to shareholders 1,969
Registration fees and expenses 830
Professional fees 2,766
Custody fees 298
Trustee fees and expenses 817
Other expenses 2,734
-----------
Subtotal of expenses before fee waiver 33,735
Fees waived by Parnassus Investments (Note 5) (10,246)
-----------
Total expenses 23,489
Net Investment Income 153,858
-----------
Realized and Unrealized Gain (Loss) on Investments:
Realized gain from security transactions:
Proceeds from sales 634,779
Cost of securities sold 587,530
-----------
Net realized gain 47,249
-----------
Unrealized appreciation (depreciation) of investments:
Beginning of year 454,720
End of period 409,725
-----------
Unrealized depreciation during the year (44,995)
-----------
Net Realized and Unrealized Gain on Investments 2,254
-----------
Net Increase in Net Assets Resulting from Operations $ 156,112
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
CALIFORNIA TAX-EXEMPT FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1997
JUNE 30, 1998 1997
------------- -----------
From Operations:
Net investment income $ 153,858 $ 290,227
Net realized gain from security transactions 47,249 29,479
Net unrealized appreciation
(depreciation) during the period (44,995) 246,191
------------- -----------
Increase in net assets resulting from operations 156,112 565,897
Dividends to shareholders:
From net investment income (156,108) (286,574)
Increase in Net Assets from
Capital Share Transactions 593,716 405,391
------------- -----------
INCREASE IN NET ASSETS 593,720 684,714
Net Assets:
Beginning of year 6,519,755 5,835,041
------------- -----------
End of period
(including undistributed net investment
income of $1,384 in 1998 and $3,633 in 1997) $ 7,113,475 $ 6,519,755
============= ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
The Parnassus Income Trust (the Fund), organized on August 8, 1990 as a
Massachusetts Business Trust, is registered under the Investment Company
Act of 1940 as a diversified, open-end investment management company
comprised of three separate portfolios, each offering separate shares. The
Fund began operations on June 1, 1992. The following is a summary of
significant accounting policies of the fund.
Securities valuation: The Fund's investments are valued each business day
using independent pricing services ("Services") approved by the Board of
Trustees. Investments are valued at the mean between the "bid" and "ask"
prices where such quotes are readily available and are representative of
the actual market for such securities. Other investments are carried at
fair value as determined using the Services based on methods which include
consideration of (1) yields or prices of securities of comparable quality,
coupon, maturity and type (2) indications as to values from dealers and (3)
general market conditions.
Federal income taxes: The Fund intends to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income to shareholders; therefore, no
federal income tax provision is required. As of December 31, 1997 the
California Tax-Exempt Fund has available for federal income tax purposes an
unused capital loss carryover of $5,760 which will expire in 2002.
Security transactions: In accordance with industry practice, securities
transactions are accounted for on the date the securities are purchased or
sold (trade date). Realized gains and losses on securities transactions are
determined on the basis of first-in, first-out for both financial statement
and federal income tax purposes.
Dividends to shareholders: Distributions to shareholders are recorded on
the record date. The Equity Income Fund pays income dividends quarterly and
capital gain dividends once a year, generally in December. The Fixed-Income
and California Tax-Exempt Funds pay income dividends monthly and capital
gain dividends annually.
Investment income and expenses: Dividend income is recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily.
Interest income, adjusted for amortization of premium and, when
appropriate, discount on investments, is earned from settlement date and
recognized on the accrual basis.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. Dividends To Shareholders
Equity Income Fund: The Fund paid income dividends totaling $639,505
(aggregate of $0.328 per share) during the six months ended June 30, 1998.
Fixed-Income Fund: The Fund paid income dividends totaling $244,667
(aggregate of $0.399 per share) during the six months ended June 30, 1998.
California Tax-Exempt Fund: The Fund paid income dividends totaling
$156,108 (aggregate of $0.382 per share) during the six months ended June
30, 1998.
3. Capital Stock
<TABLE>
<CAPTION>
Equity Income Fund: As of June 30, 1998, there were an unlimited number of
shares of no par value capital stock authorized and capital paid-in
aggregated $35,803,318. Transactions in capital stock (shares) were as
follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 1997
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
----------- -------------- ----------- --------------
Shares sold 186,656 $ 3,902,116 243,713 $ 4,709,089
Shares issued through dividend reinvestment 26,574 558,791 124,257 2,482,385
Shares repurchased (104,711) (2,191,673) (287,159) (5,528,406)
----------- -------------- ----------- --------------
NET INCREASE 108,519 $ 2,269,234 80,811 $ 1,663,068
=========== ============== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
Fixed-Income Fund: As of June 30, 1998, there were an unlimited number of
shares of no par value capital stock authorized and capital paid-in
aggregated $9,930,355. Transactions in capital stock (shares) were as
follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 1997
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
----------- -------------- ----------- --------------
Shares sold 104,755 $ 1,689,887 154,187 $ 2,410,292
Shares issued through dividend reinvestment 10,843 174,480 24,386 379,889
Shares repurchased (76,441) (1,232,892) (117,962) (1,838,078)
----------- -------------- ----------- --------------
NET INCREASE 39,157 $ 631,475 60,611 $ 952,103
=========== ============== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
California Tax-Exempt Fund: As of June 30, 1998, there were an unlimited
number of shares of no par value capital stock authorized and capital
paid-in aggregated $6,659,024. Transactions in capital stock (shares) were
as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 1997
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
----------- -------------- ----------- --------------
Shares sold 42,895 $ 719,069 72,701 $ 1,163,383
Shares issued through dividend reinvestment 6,627 110,745 12,758 206,661
Shares repurchased (14,133) (236,098) (59,924) (964,653)
----------- -------------- ----------- --------------
NET INCREASE 35,389 $ 593,716 25,535 $ 405,391
=========== ============== =========== ==============
</TABLE>
<PAGE>
4. Purchases of Securities
Equity Income Fund: Purchases of securities for the six months ended June
30, 1998 were $30,821,692. For federal income tax purposes, the aggregate
cost of securities and unrealized depreciation at June 30, 1998 were the
same as for financial statement purposes. Of the $159,291 of net unrealized
depreciation at June 30, 1998, $391,991 related to appreciation of
securities and $551,282 related to depreciation of securities.
Fixed-Income Fund: Purchases of securities for the six months ended June
30, 1998 were $2,038,830. For federal income tax purposes, the aggregate
cost of securities and unrealized appreciation June 30, 1998 were the same
as for financial statement purposes. Of the $195,695 of net unrealized
appreciation June 30, 1998, $195,695 related to appreciation of securities
and $0 related to depreciation of securities.
California Tax-Exempt Fund: Purchases of securities for the six months
ended June 30, 1998 were $845,301. For federal income tax purposes, the
aggregate cost of securities and unrealized appreciation June 30, 1998 were
the same as for financial statement purposes. Of the $409,725 of net
unrealized appreciation June 30, 1998, $409,725 related to appreciation of
securities and $0 related to depreciation of securities.
5. Investment Advisory Agreement and Transactions with Affiliates
Under terms of an agreement which provides for furnishing investment
management and advice to the Fund, Parnassus Investments is entitled to
receive fees computed monthly, based on the Fund's average daily net assets
for the month, at the following annual rates:
Equity Income Fund: 0.75% of the first $30,000,000, 0.70% of the next
$70,000,000 and 0.65% of the amount above $100,000,000.
Fixed-Income Fund and California Tax-Exempt Fund: 0.50% of the first
$200,000,000, 0.45% of the next $200,000,000 and 0.40% of the amount above
$400,000,000.
However, the following were actually charged in 1998. For the Equity Income
Fund, the investment advisory fee was 0.50%. Parnassus Investments received
net advisory fees totaling $101,355 from the Equity Income Fund for the six
months ended June 30, 1998. For the Fixed-Income Fund, the investment
advisory fee was 0.10%. Parnassus Investments received net advisory fees
totaling $4,898 from the Fixed Income Portfolio for the six months ended
June 30, 1998. For the California Tax-Exempt Fund, the investment advisory
fee was 0.20%. Parnassus Investments received net advisory fees totaling
$6,829 from the California Tax-Exempt Fund for the six months ended June
30, 1998.
Parnassus Investments has agreed to reduce its investment advisory fee to
the extent necessary to limit total operating expenses to 1.25% of net
assets for the Equity Income Fund and 1.00% of net assets for the
Fixed-Income and California Tax-Exempt Funds.
Under terms of a separate agreement which provides for furnishing transfer
agent and fund administration services to the Fund, Parnassus Investments
received fees paid by the Fund totaling $86,037 for the six months ended
June 30, 1998. The transfer agent fee is $2.30 per month per account and
the fund administration fee is $4,167 per month.
Jerome L. Dodson is the President of the Fund and is the sole stockholder
of Parnassus Investments.
<PAGE>
6. Financial Highlights
Selected data for each share of capital stock outstanding, total returns and
ratios/supplemental data for the six months ended June 30, 1998 and years
ended December 31, 1997, 1996, 1995, 1994, 1993 and seven month period ended
December 31, 1992 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
JUNE 30, 1998
Equity Income Fund (UNAUDITED) 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $20.68 $18.56 $19.58 $15.70 $17.46 $16.17 $ .--
------ ------ ------ ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.36 0.79 0.98 0.88 0.80 1.20 0.17
Net realized and unrealized
gain (loss) on securities 0.02 2.86 0.37 3.93 (1.75) 1.36 16.15
------ ------ ------ ------ ------ ------ -------
Total from investment operations 0.38 3.65 1.35 4.81 (0.95) 2.56 16.32
------ ------ ------ ------ ------ ------ -------
DISTRIBUTIONS:
Dividends from net investment income (0.33) (0.79) (0.97) (0.90) (0.81) (1.21) (0.15)
Distributions from net realized gain
on securities 0.00 (0.74) (1.40) (0.03) .-- (0.06) .--
------ ------ ------ ------ ------ ------ -------
Total distributions (0.33) (1.53) (2.37) (0.93) (0.81) (1.27) (0.15)
------ ------ ------ ------ ------ ------ -------
Net asset value at end of period $20.73 $20.68 $18.56 $19.58 $15.70 $17.46 $16.17
------ ------ ------ ------ ------ ------ -------
TOTAL RETURN* 1.81% 20.15% 7.09% 31.13% (5.39%) 15.91% 8.58
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets (actual)** 1.04% 1.05% 0.80% 0.72% 0.83% 0.81% .--%
Decrease reflected in the above expense
ratios due to undertakings by
Parnassus Investments 0.24% 0.30% 0.60% 0.82% 0.88% 1.24% 1.14%
Ratio of net investment income to
average net assets 3.50% 4.04% 4.56% 4.76% 5.15% 4.94% 2.44%
Portfolio turnover rate 111.31% 34.12% 47.80% 15.36% 6.50% 33.40%
Net assets, end of period (000's) $ 41,205 $38,847 $33,362 $26,779 $17,087 $11,542 $ 3,241
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
JUNE 30, 1998
Fixed-Income Fund (UNAUDITED) 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $16.04 $15.43 $15.73 $13.79 $15.89 $15.33 $ .--
------ ------ ------ ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.39 0.90 0.92 0.95 1.02 1.03 0.36
Net realized and unrealized
gain (loss) on securities 0.11 0.67 (0.31) 1.95 (2.08) 0.57 15.32
------ ------ ------ ------ ------ ------ -------
Total from investment operations 0.50 1.57 0.61 2.90 (1.06) 1.60 15.68
------ ------ ------ ------ ------ ------ -------
DISTRIBUTIONS:
Dividends from net investment income (0.40) (0.89) (0.91) (0.96) (1.04) (1.03) (0.35)
Distributions from net realized gain
on securities 0.00 (0.07) .-- .-- .-- (0.01) .--
------ ------ ------ ------ ------ ------ -------
Total distributions (0.40) (0.96) (0.91) (0.96) (1.04) (1.04) (0.35)
------ ------ ------ ------ ------ ------ -------
Net asset value at end of period $16.14 $16.04 $15.43 $15.73 $13.79 $15.89 $15.33
------ ------ ------ ------ ------ ------ -------
TOTAL RETURN* 3.15% 10.60% 4.08% 21.58% (6.76%) 10.59% 2.87%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets (actual)** 0.82% 0.82% 0.83% 0.90% 0.81% 0.68% .--%
Decrease reflected in the above expense
ratios due to undertakings by
Parnassus Investments 0.40% 0.43% 0.50% 0.73% 0.98% 1.00% 1.18%
Ratio of net investment income to
average net assets 4.90% 5.79% 5.98% 6.20% 7.00% 6.43% 3.20%
Portfolio turnover rate 52.30% 17.15% 2.80% 12.10% 5.20% 10.90% 15.29%
Net assets, end of period (000's) $10,380 $ 9,683 $ 8,384 $ 6,585 $ 4,545 $ 4,160 $ 2,093
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
JUNE 30, 1998
California Tax-Exempt Fund (UNAUDITED) 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $16.72 $16.02 $16.06 $14.28 $16.10 $15.06 $ .--
------ ------ ------ ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.38 0.74 0.80 0.82 0.80 0.77 0.19
Net realized and unrealized
gain (loss) on securities 0.01 0.71 (0.06) 1.78 (1.81) 1.16 15.05
------ ------ ------ ------ ------ ------ -------
Total from investment operations 0.39 1.45 0.74 2.60 (1.01) 1.93 15.24
------ ------ ------ ------ ------ ------ -------
DISTRIBUTIONS:
Dividends from net investment income (0.38) (0.75) (0.78) (0.82) (0.81) (0.78) (0.18)
------ ------ ------ ------ ------ ------ -------
Distributions from net realized gain
on securities .-- .-- .-- .-- .-- (0.11) .--
------ ------ ------ ------ ------ ------ -------
Total distributions (0.38) (0.75) (0.78) (0.82) (0.81) (0.89) (0.18)
Net asset value at end of period $16.73 $16.72 $16.02 $16.06 $14.28 $16.10 $15.06
------ ------ ------ ------ ------ ------ -------
TOTAL RETURN* 2.37% 9.33% 4.78% 18.60% (6.36%) 13.03% 1.70%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets (actual)** 0.69% 0.67% 0.54% 0.50% 0.39% 0.48% .--%
Decrease reflected in the above expense
ratios due to undertakings by
Parnassus Investments 0.30% 0.32% 0.46% 0.69% 0.87% 0.99% 2.10%
Ratio of net investment income to
average net assets 4.51% 4.69% 4.96% 5.30% 5.37% 4.89% 2.10%
Portfolio turnover rate 9.50% 10.00% .--% 13.10% 12.00% 20.46% .--%
Net assets, end of period (000's) $ 7,113 $ 6,520 $ 5,835 $ 4,483 $ 3,902 $ 3,256 $ 1,061
<FN>
* 1992 ratios reflect returns for seven months of operation and are not annualized.
** Parnassus Investments has agreed to a 1.25% limit on expenses for the
Equity Income Fund and 1% limit for the Fixed-Income and California
Tax-Exempt Funds (See Note 5 for details). Certain fees were waived for the
six month period ended June 30, 1998 and years ended December 31, 1997,
1996, 1995, 1994 and 1993. All expenses were waived for the seven-month
period ended December 31, 1992; therefore, the actual ratio of expenses to
average net assets for each portfolio was 0%.
</FN>
</TABLE>
<PAGE>
THE PARNASSUS INCOME TRUST
INVESTMENT ADVISER
Parnassus Investments
One Market-Steuart Tower #1600
San Francisco, California 94105
LEGAL COUNSEL
Richard D. Silberman, Esq.
465 California Street #1020
San Francisco, California 94104
AUDITORS
Deloitte & Touche llp
50 Fremont Street
San Francisco, California 94105
CUSTODIAN
Union Bank of California
475 Sansome Street
San Francisco, California 94111
DISTRIBUTOR
Parnassus Investments
One Market-Steuart Tower #1600
San Francisco, California 94105
www.parnassus.com
This report must be preceded or accompanied by a current prospectus.
