THE PARNASSUS INCOME TRUST
PROSPECTUS
MAY 1, 1999
PROSPECTUS-MAY 1, 1999
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The Parnassus Income Trust (the "Trust") is a mutual fund, managed by
Parnassus Investments (the "Adviser"). The Adviser chooses the Trust's
investments according to social standards described in this Prospectus. In
general, the Adviser will choose investments that it believes will have a
positive social impact.
The Trust has three funds. The Equity Income Fund invests primarily in stocks
that pay a dividend, and its investment objective is both current income and
capital appreciation. The Fixed-Income Fund invests primarily in bonds and other
fixed-income investments, and its investment objective is current income and
preservation of capital. The California Tax-Exempt Fund (for California
residents only) has as its investment objective a high level of current income
exempt from federal and California personal income tax consistent with prudent
investment management.
TABLE OF CONTENTS
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Investment Summary 2 How to Purchase Shares 16
Trust Expenses 7 How to Redeem Shares 18
The Legend of Mt. Parnassus 8 Dividends and Taxes 20
Investment Objective and Policies 9 Financial Highlights 21
Management 13 General Information 23
The Adviser 15
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.
<PAGE>
INVESTMENT SUMMARY
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EQUITY INCOME FUND
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Investment Objective and Principal Strategies
The Parnassus Equity Income Fund invests primarily in stocks that pay a
dividend and its investment objective is both current income and growth of
capital. The Fund invests primarily in a diversified portfolio of equity
securities. Equity securities may include common and preferred stock as well as
convertible bonds. At least 75% of the Fund's total assets will normally be
invested in equity securities that pay interest or dividends. The remaining 25%
may be invested in non-dividend paying equity securities, in investment grade
debt securities or money market instruments. The Fund seeks to invest in equity
securities that pay above-average dividends and which the Adviser believes have
the capacity to raise dividends in the future and also have the potential for
capital appreciation. To determine a company's prospects, the Adviser reviews
the company's profit and loss statement, sales, earnings and dividend 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 Equity Income 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 Equity Income 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. 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 fund manager recommends a minimum three-year holding
period.)
Performance Information for the Equity Income Fund
The bar chart below provides an indication of the risks of investing in the
Parnassus Equity Income Fund by showing changes in the Fund's performance from
year to year over a six-year period. Prior to March 31, 1998, the Equity Income
Fund had a different investment objective, maintaining a balanced portfolio of
both stocks and bonds. How the Fund performed in the past is not necessarily an
indication of how the Fund will perform in the future.
<PAGE>
[GRAPHIC HERE]
During the six-year period shown in the bar chart, the highest return for a
quarter was 23.4% (quarter ending December 31, 1998) and the lowest return for a
quarter was -11.6% (quarter ending September 30, 1998).
Below is a table comparing the performance of the Parnassus Equity Income
Fund with the S&P 500 Index and the average equity income fund followed by
Lipper, Inc. Figures are average annual returns for the one and five-year
periods and for the life of the Fund (since inception on August 31, 1992).
<TABLE>
<CAPTION>
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Average Annual Total Returns Parnassus Equity S&P 500 Lipper Equity Income
for periods ending 12/31/98 Income Fund Index Fund Average
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<S> <C> <C> <C>
One Year 11.05% 28.58% 10.89%
Five Years 12.13% 24.01% 16.71%
Since Inception 8/31/92 13.51% 21.48% 16.32%
<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 stocks, a widely
recognized index of common stock prices. An individual cannot invest directly in
the S&P 500 and the index does not take any investing expenses into account as
do the figures for the Parnassus Equity Income Fund and Lipper's average equity
income fund.
</FN>
</TABLE>
FIXED-INCOME FUND
-----------------
Investment Objective and Principal Strategies
The Parnassus Fixed-Income Fund invests in a diversified portfolio of bonds
and other fixed-income instruments and its investment objective is a high level
of current income consistent with safety and capital preservation. The Fund
invests in investment grade bonds which means they are rated within the four
highest categories as determined by a nationally-recognized rating service.
Ordinarily, at least 65% of the Fund's total net assets will be invested in
bonds rated "A" or better.
The Fund may invest in a combination of long-term, intermediate-term or
short-term fixed-income securities depending on market conditions and these
securities may also have floating or variable interest rates. The portfolio may
be comprised of U.S. Government obligations, corporate bonds, preferred stock,
convertible preferred stock and convertible bonds. The Fund's average weighted
maturity will be between 5 and 20 years.
The Fund takes social as well as financial factors into account in making
investment decisions. In general, the Parnassus Fixed-Income 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.
<PAGE>
Principal Risks of Investing in the Fixed-Income Fund
Investing in the Fund may result in a loss of money when you sell your
shares. The Fund's share price changes daily based on the value of its holdings.
The value of the Fund will vary inversely with changes in interest rates. As
interest rates go up, the net asset value (NAV) will likely go down, and as
interest rates drop, the NAV of the Fund will likely go up. This Fund is
intended for investors who can accept the fact that there will be principal
fluctuations. The NAV of the Fund will also be affected by other factors such as
credit risk and general market conditions. Credit risk involves an individual
company's being unable to make payments on its financial obligations either in
whole or in part. When you sell your shares of the Fund, they may be worth more
or less than what you paid for them.
Performance Information for the Fixed-Income Fund
The bar chart below provides an indication of the risks of investing in the
Parnassus Fixed-Income Fund by showing changes in the Fund's performance from
year to year over a six-year period. How the Fund performed in the past is not
necessarily an indication of how the Fund will perform in the future.
[GRAPHIC HERE]
During the six-year period shown in the bar chart, the highest return for a
quarter was 7.5% (quarter ending June 30, 1995) and the lowest return for a
quarter was -4.4% (quarter ending June 30, 1994).
Below is a table comparing the performance of the Parnassus Fixed-Income Fund
with the Lehman Government/Corporate Bond Index and the average A-rated bond
fund followed by Lipper, Inc. Figures are average annual returns for the one and
five-year periods and for the life of the Fund (since inception on August 31,
1992).
<TABLE>
<CAPTION>
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Average Annual Total Returns Parnassus Lehman Government/ Lipper A-Rated Bond
for periods ending 12/31/98 Fixed-Income Fund Corporate Bond Index Fund Average
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<S> <C> <C> <C>
One Year 6.97% 9.47% 7.47%
Five Years 6.90% 7.30% 6.29%
Since Inception 8/31/92 7.58% 7.49% 6.89%
<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 Lehman Government/Corporate Bond Index is a widely recognized index
measuring the performance of bonds and other fixed-income securities. An
individual cannot invest directly in the index and the index does not take
investing expenses into account as do the figures for the Parnassus Fixed-
Income Fund and Lipper's average A-rated bond fund.
</FN>
</TABLE>
<PAGE>
CALIFORNIA TAX-EXEMPT FUND
--------------------------
Investment Objective and Principal Strategies
The Parnassus California Tax-Exempt Fund is available to California residents
only. It invests in a diversified portfolio of tax-exempt, investment grade
securities issued by California state and local governments and by other public
authorities. Its investment objective is to provide high current income exempt
from both federal and California personal income tax.
The Fund invests in investment grade bonds which means they are rated within
the four highest categories as determined by a nationally-recognized rating
service. No more than 20% of the Fund's portfolio will be invested in the 4th
highest category. Under normal circumstances, the Fund will invest 100% of its
assets in California municipal obligations. However, it could invest up to 20%
of its assets in private activity bonds that may be subject to the federal
alternative minimum tax.
The Fund takes social as well as financial factors into account in making
investment decisions. The Parnassus California Tax-Exempt Fund seeks a portfolio
that will have a positive social and environmental impact. Examples would be
bonds that support schools, libraries, hospitals, mass transit, low and moderate
income housing and pollution control facilities.
Principal Risks of Investing in the California Tax-Exempt Fund
Investing in the Fund may result in a loss of money when you sell your
shares. The Fund's share price changes daily based on the value of its holdings.
The Fund's average weighted maturity will be 5 years or more. The value of the
Fund will vary inversely with changes in interest rates. As interest rates go
up, the net asset value (NAV) will likely go down, and as interest rates drop,
the NAV of the Fund will likely go up. This Fund is intended for investors who
can accept the fact that there will be principal fluctuations. As the Fund
invests primarily in California municipal securities, there are special risks
involved. The NAV of the Fund will be affected by factors such as changes to the
state constitution regarding taxes, changes in the federal tax status of
municipal securities and changes in bond ratings based on the California
economy. When you sell your shares of the Fund, they may be worth more or less
than what you paid for them.
Performance Information for the California Tax-Exempt Fund
The bar chart below provides an indication of the risks of investing in the
Parnassus California Tax-Exempt Fund by showing changes in the Fund's
performance from year to year over a six-year period. How the Fund performed in
the past is not necessarily an indication of how the Fund will perform in the
future.
<PAGE>
[GRAPHIC HERE]
During the six-year period shown in the bar chart, the highest return for a
quarter was 8.0% (quarter ending March 31, 1995) and the lowest return for a
quarter was -5.7% (quarter ending March 31, 1994).
Below is a table comparing the performance of the Parnassus California
Tax-Exempt Fund with the Lehman Municipal Bond Index and the average California
Municipal Bond Fund followed by Lipper, Inc. Figures are average annual returns
for the one and five-year periods and for the life of the Fund (since inception
on August 31, 1992).
<TABLE>
<CAPTION>
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Lipper California
Average Annual Total Returns Parnassus California Lehman Municipal Municipal Bond
for periods ending 12/31/98 Tax-Exempt Fund Bond Index Fund Average
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<S> <C> <C> <C>
One Year 6.12% 6.48% 5.77%
Five Years 6.19% 6.23% 5.48%
Since Inception 8/31/92 7.18% 7.23% 6.65%
<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 Lehman Municipal Bond Index is a recognized index measuring the performance
of municipal bonds in the United States. An individual cannot invest directly in
the index and the index does not take into account investing expenses as do the
figures for the Parnassus California Tax-Exempt Fund and Lipper's average
California Municipal bond fund.
</FN>
</TABLE>
<PAGE>
TRUST EXPENSES
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This table describes the fees and expenses that you may pay if you buy and
hold shares of the Trust.
<TABLE>
<CAPTION>
Equity Fixed- California
Income Income Tax- Exempt
Shareholder Fees (paid by the investor directly) Fund Fund Fund
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<S> <C> <C> <C>
Maximum Sales Charge (load) Imposed on Purchases None None None
Redemption Fees None None None
Annual Trust Operating Expenses (paid from Trust assets)
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Management Fees (before fee waiver) 0.74% 0.50% 0.50%
12b-1/Distribution Fees None None None
Other Expenses 0.55% 0.69% 0.47%
Total Annual Trust Operating Expenses 1.29% 1.19% 0.97%
Fee Waiver/Expense Reimbursement 0.19% 0.35% 0.25%
Net Expenses 1.10% 0.84% 0.72%
</TABLE>
The Examples in this table are intended to help you compare the cost of
investing in the Trust with the cost of investing in other mutual funds. The
Examples assume that you invest $10,000 in each of the funds for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Examples also assume that your investments have a 5%* return each
year and that the funds' operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your cost would
be as follows:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
Equity Income Fund $131 $409 $708 $1,556
Fixed-Income Fund $121 $378 $654 $1,443
California Tax-Exempt Fund $ 99 $309 $536 $1,190
The expenses shown above are the total fees you would pay throughout the time
period indicated -- not ones you would pay every year. For example, the figure
for ten years is not the expense figure for that single year, but the total
cumulative expenses a shareholder would have paid for the entire ten-year
period.
The figures in the table above also overstate the expenses you would actually
pay since they are based on the Total Annual Trust Operating Expenses before fee
waivers/reimbursements and not on the Net Expenses. However, the Adviser is
contractually obligated to provide the fee waivers indicated during the period
of this prospectus: May 1, 1999 through April 30, 2000. The SEC, though,
requires that the calculations be made on the basis of pre-waiver expenses to
show what expenses might potentially be in the future.
<PAGE>
From time to time, a fund may direct brokerage commissions to firms that may
pay certain expenses of a 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 fund's shareholders. No fund engaged
in such directed brokerage in 1998. If a fund does so in the future, such
directed brokerage is expected to occur on an irregular basis, so the effect on
the expense ratios cannot be calculated with any degree of certainty.
* The 5% return 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 greater or lesser
than those shown.
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 a 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.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
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Social Policy
The Adviser looks for certain social policies in the companies in which the
Trust 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. The Adviser also considers social factors other than
these six (as discussed under the investment objectives of each of the three
Funds).
Although the Trust 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 Trust also screens out
weapons contractors and those that generate electricity from nuclear power.
The social criteria of The Parnassus Income Trust limit the availability of
investment opportunities. However, the Trustees and the Adviser believe that
there are sufficient investments available that can meet the Trust's social
criteria and still enable each fund to provide a competitive rate of return.
EQUITY INCOME FUND
------------------
The investment objective of the Equity Income Fund is both current income and
capital appreciation. The Fund tries to achieve this objective by investing
primarily in a diversified portfolio of equity securities. Equity securities may
include common and preferred stock as well as securities that are convertible
into these instruments such as convertible bonds. As an operating policy, at
least 75% of the Fund's total assets will normally be invested in equity
securities that pay a dividend (or interest in the case of convertible debt
instruments), and up to 25% of the Fund's total assets may be invested in
non-dividend paying equity securities, in investment grade debt securities or in
money market instruments. However, for temporary defensive purposes, the Fund
may invest all its assets in money market instruments or investment grade debt.
The Fund seeks to invest in equity securities that pay above-average
dividends and which the Adviser believes have the capacity to raise dividends in
the future and also have the potential for capital appreciation. The Fund seeks
to achieve a yield for its shareholders that exceeds the yield on the securities
comprising the S&P 500 Composite Stock Price Index. Issuers of securities in
which the Fund invests must meet the social criteria stated in this Prospectus.
The Equity Income Fund may, as an operating policy, also invest up to 10% 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. 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.
<PAGE>
Risk Factors
As with all investments, there are a number of risk factors associated with
the Equity Income Fund. Equity securities in the Fund pose a risk in that an
individual enterprise may fall on hard times and operate with little or no
profits; this would depress the price of its stock. There are also risks
associated with the economic cycle (e.g., a recession) as well as market risks
that might sharply reduce the valuation of all stocks or stocks in a specific
industry. Since the Equity Income Fund invests primarily in stocks that pay a
dividend, the portfolio will be invested in larger, more mature companies. These
companies tend to be safer and less volatile than those companies that don't pay
a dividend.
With preferred stock and higher-yielding common stocks such as utilities, a
major risk is increased interest rates that will decrease the market value of
the securities in question. For a fuller description of interest rate risk, see
the Risk Factors section under Fixed-Income Fund.
There are also special risks involved with community development investments
which may comprise as much as 10% of the Fund. These investments do not have
liquidity, and community loan funds do not have the same kind of financial
resources as do large commercial enterprises. Moreover, there is no publicly
available track record for community loan funds so it is hard to assess the
history of these kinds of investments. In fact, one of the social objectives of
The Parnassus Income Trust is to establish a publicly available track record for
community development investments.
<PAGE>
FIXED-INCOME FUND
-----------------
The investment objective of the Fixed-Income Fund is a high level of current
income consistent with safety and capital preservation. The Adviser seeks to
achieve this objective by investing in a diversified portfolio of bonds and
other fixed-income instruments that are rated investment grade. "Investment
grade" means rated within the four highest categories as determined by a
nationally-recognized rating service such as Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. ("Standard & Poors") or Moody's Investors
Service, Inc. ("Moody's"). Securities in the lowest of these four categories are
considered investment grade, but they may have speculative elements about them.
The Fixed-Income Fund ordinarily will have at least 65% of its net assets in
securities rated "A" or better (i.e., the three highest categories). See the
Appendix in the SAI for a description of bond ratings. Obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities
need not have a rating.
The Fixed-Income Fund may invest in long-term, intermediate-term or
short-term fixed-income securities or any combination thereof, depending on
market conditions, and these securities may also have floating or variable
interest rates. Securities in this Fund may include preferred stock, convertible
preferred stock and convertible bonds.
The Fixed-Income Fund invests only in investment grade securities. The Fund
will not invest in "high-yield" or "junk" bonds. Because of this emphasis on
quality and safety, the Fund's yield may not be as high as it otherwise might
be.
This Fund may, as an operating policy, also invest up to 10% of its assets
in community development loan funds. See the section on the Equity Income Fund
for details.
Risk Factors
The Adviser anticipates that the Fixed-Income Fund's average weighted
maturity will be between 5 and 20 years. Because of this relatively long
maturity, the value of this Fund will vary inversely with changes in interest
rates. As interest rates go up, the net asset value (NAV) will likely go down,
and as interest rates drop, the NAV of this Fund will likely go up. The
Fixed-Income Fund is intended for investors who can accept the fact that there
will be principal fluctuations. The NAV of the Fund may also be affected by
factors other than interest rates such as credit risk and general market
factors.
<PAGE>
CALIFORNIA TAX-EXEMPT FUND
--------------------------
The investment objective of the California Tax-Exempt Fund is to provide high
current income exempt from both federal and California personal income tax while
choosing a portfolio that will have a positive social and environmental impact.
The Adviser pursues this objective by investing in a diversified portfolio of
tax-exempt, investment grade securities issued by California state and local
governments and by other public authorities. This Fund is for California
residents only.
For temporary purposes, the Fund may invest up to 10% of its assets in
no-load, open-end investment companies which invest in tax-exempt securities
with maturities of less than one year ("tax-exempt money market funds") but the
Fund will put no more than 5% of its assets into any one fund.
Normally, the Fund will have all its assets invested in tax-exempt
securities, but may temporarily invest in short-term taxable money market
instruments. Temporary investments will be limited to obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities,
prime commercial paper or deposits with federally-insured financial
institutions, and the Fund may engage in repurchase transactions involving U.S.
Government securities.
Risk Factors
Since the California Tax-Exempt Fund invests primarily in California
municipal securities, there are special risks involved. Changes in the State
constitution and other laws raise questions about the ability of State and
municipal issuers to obtain sufficient revenue to pay their bond obligations. In
particular, California voters have approved amendments to the State constitution
which limit property taxes as well as the ability of taxing entities to raise
other types of taxes. In addition, another constitutional amendment, popularly
known as the Gann Initiative, limits increases in revenue appropriations.
Federal legislative proposals have threatened the tax-exempt status or use of
mu-nicipal securities.
The Fund typically invests in securities with maturities of more than one
year, and the average maturity of all securities will usually be five years or
more. If the Adviser determines that market conditions warrant a shorter average
maturity, the Fund will be adjusted accordingly. Since the value of debt
obligations typically varies inversely with changes in interest rates, the net
asset value (NAV) per share of the Fund will also fluctuate in this manner. As
interest rates go up, the NAV will likely go down and as interest rates drop,
the NAV will likely go up. The California Tax-Exempt Fund is intended for
investors who can accept the fact that there will be principal fluctuations.
(See the SAI for a further discussion of risk factors involved with investing in
California tax-exempt securities.)
<PAGE>
MANAGEMENT
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The Trustees and officers are listed below together with their principal
occupations during at least the past five years.
Jerome L. Dodson*, 55, 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 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 is the Fund's portfolio manager. He is also
President and Trustee of The Parnassus Fund.
David L. Gibson, 59, Trustee, is an attorney in private practice specializing
in taxation and estate 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 and environmental issues. 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 Fund.
Gail L. Horvath, 49, 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. She is a graduate of
Ohio State University. Ms. Horvath is also a Trustee of The Parnassus Fund.
Herbert A. Houston, 55, 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 Fund.
Cecilia C.M. Lee, 55, 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 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 Fund.
Leo T. McCarthy, 68, Trustee, is President of the Daniel Group, a partnership
involved in foreign trade. His current directorships include Linear Technology
and Open Data Systems. He served eighteen years 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 admitted to practice law in California. Mr.
McCarthy is also a Trustee of The Parnassus Fund and a Director of Forward
Funds, another mutual fund.
<PAGE>
Donald E. O'Connor, 62, 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 Fund.
Howard M. Shapiro, 67, 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 Fund. He is no relation to
Joan Shapiro.
Joan Shapiro, 56, Trustee, is a consultant in corporate social responsibility
development banking and community reinvestment. 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 Fund. She is no relation to Howard Shapiro.
Howard Fong, 53, Vice President and Treasurer, is also Vice President of
Parnassus Investments. Mr. Fong began his career as an examiner with the
California Department of Savings and Loan. In 1979, he joined Continental
Savings where he worked until 1988, most recently as Senior Vice President and
Chief Financial Officer. He joined The Parnassus Fund in 1989. Mr. Fong
graduated from San Francisco State University with a degree in business
administration. Mr. Fong is also Vice President and Treasurer of The Parnassus
Fund.
Susan Loughridge, 50, 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 Fund.
Richard D. Silberman, 61, Secretary, is an attorney specializing in business
law. He has been general counsel to The Parnassus Fund since its inception. 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 and general counsel of The
Parnassus Fund.
* Denotes "interested" trustee as defined in the Investment Company Act of 1940.
<PAGE>
THE ADVISER
- --------------------------------------------------------------------------------
Parnassus Investments (the "Adviser"), One Market-Steuart Tower #1600, San
Francisco, California 94105 acts as investment adviser to each fund subject to
the control of the Trust's Board of Trustees, and as such, supervises and
arranges the purchase and sale of securities held in the funds' portfolios. The
Adviser has been the investment manager of The Parnassus Fund since 1985 and The
Parnassus Income Trust since 1992.
For its services, the Trust, under an Investment Advisory Agreement (the
"Agreement") between the Trust and the Adviser, pays the Adviser a fee, computed
and payable at the end of each month, at the following annual percentages of
each Fund's average daily net assets: for the Equity Income Fund, 0.75% of the
first $30 million, 0.70% of the next $70 million and 0.65% of the amount above
$100 million; and for the Fixed-Income Fund and the California Tax-Exempt Fund,
the fee is 0.50% of the first $200 million, 0.45% of the next $200 million and
0.40% of the amount above $400 million. 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 $196,661 from
the Equity Income Fund for the year ended December 31, 1998. For the
Fixed-Income Fund, the investment advisory fee was 0.10%. Parnassus Investments
received net advisory fees totaling $10,393 from the Fixed-Income Fund for the
year ended December 31, 1998. For the California Tax-Exempt Fund, the investment
advisory fee was 0.20%. Parnassus Investments received net advisory fees
totaling $14,135 from the California Tax-Exempt Fund for the year ended December
31, 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. For the period from May 1, 1999 through April 30,
2000, the Adviser has agreed to limit its fees to 0.55% of the net assets of the
Equity Income Fund, 0.15% of the net assets of the Fixed-Income Fund and 0.25%
of the net assets of the California Tax-Exempt Fund.
<PAGE>
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Direct Purchase Of Shares
To purchase shares, an investor should complete and mail the application form
along with a check payable to The Parnassus Income Trust. It should be sent to
the Trust at the following address.
The Parnassus Income Trust
One Market-Steuart Tower #1600
San Francisco, California 94105
An initial investment must be at least $2,000 per fund except for certain
employee benefit plans or tax qualified retirement plans (such as IRAs or SEPs),
Parnassus Automatic Investment Plan (PAIP) and accounts opened pursuant to the
Uniform Gifts to Minors Act ("UGMA") or Uniform Transfers to Minors Act
("UTMA"), which have a $500 minimum. Additional investments for all accounts
must be at least $50. Parnassus Investments reserves the right to reject any
order. 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. Investments in the Equity Income Fund and the California
Tax-Exempt Fund, if received before 1:00 p.m. San Francisco time, will be
processed at the net asset value calculated on the same business day they are
received. If an investment in either of these Funds is received after 1:00 p.m.
San Francisco time, it will be processed on the next business day.
An investment in the Fixed-Income Fund, if received before 12:00 noon San
Francisco time, will be processed at the net asset value calculated on the same
business day it is received. An investment in this Fund received after 12:00
noon San Francisco time will be processed on the next business day.
Other Information
The Trust also offers additional services to investors including plans for
the systematic investment and withdrawal of money as well as IRA and SEP plans.
Information about these plans is available from Parnassus Investments.
There is no sales charge for the purchase of Trust shares, but investors may
be charged a transaction or other fee in connection with purchases or
redemptions of Trust shares on their behalf by an investment adviser, a
brokerage firm or other financial institution.
Purchases Via Parnassus Automatic Investment Plan (PAIP)
After making an initial investment to open a Fund account ($500 minimum), a
shareholder may purchase additional Fund shares ($50 minimum) via the 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 Trust and ask for the
free brochure called "Automatic Investing and Dollar-Cost Averaging."
<PAGE>
Net Asset Value
The net asset value (NAV) for each fund will usually be calculated on every
day the New York Stock Exchange (NYSE) is open for trading ("business day") and
on any other day there is a sufficient degree of trading in investments held by
the Fund to affect the net asset value. The NAV of the Equity Income Fund and
the California Tax-Exempt Fund will usually be calculated as of the close of
trading on the NYSE, usually 4:00 p.m. Eastern time. The NAV of the Fixed-Income
Fund will usually be determined as of one hour prior to the close of trading on
the NYSE, usually 3:00 p.m. Eastern time. The NAV 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 a fund's assets, less its
liabilities, divided by the number of outstanding shares of that fund. In
general, the value of a 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 Trust's Board of Trustees.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
You may sell or redeem your shares by offering them for "repurchase" or
"redemption" directly to the Trust. To sell your shares to the Trust (that is,
to redeem your shares), you must send your written instructions to the Trust 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 NAV next determined after
receipt by the Trust of your written instructions in proper form. Give your
account number and indicate the number of shares you wish to redeem. All owners
of the account must sign unless the account application states that only one
signature is necessary for redemptions. All redemption checks must be sent to
the address of record on the account. The Trust 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 the redemption proceeds sent by wire
transfer or by overnight mail, there will be a charge of $10 per transaction.
Wiring funds will require an original signature guarantee. The Trust 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 Trust by phone at (800) 999-3505 if
you have any questions about requirements for redeeming your shares.
If the Trust 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 Trust will promptly send you a check for the proceeds from the sale.
Ordinarily, the Trust must send you a check within seven days unless the NYSE is
closed for days 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 for the Trust to determine that the
purchase check will be honored.
<PAGE>
Exchange Privileges. The proceeds of a redemption of shares of a fund can be
used to purchase shares of another fund. The proceeds of a redemption of shares
from a fund can also be used to purchase shares of The Parnassus Fund, but the
purchase of Parnassus Fund shares will be subject to a sales charge if no sales
charge was paid on the fund shares redeemed. If shares are redeemed from The
Parnassus Fund and the proceeds invested in shares of the Trust, there will be
no additional sales charge if those Trust shares are redeemed and the proceeds
invested back into The Parnassus Fund.
There is no limit on the number or dollar amount of exchanges. The Trust
reserves the right to modify or eliminate this exchange privilege in the future.
The exchange privilege is only available in states where the exchange may be
legally made. The exchange of shares is treated as a sale and an exchanging
shareholder may, therefore, realize a taxable gain or loss.
Telephone Transfers. Shareholders who elect to use telephone transfer
privileges must so indicate on the account application form. The telephone
transfer privilege allows a shareholder to effect exchanges from a fund into an
identically registered account in another fund or The Parnassus Fund. Neither
the Trust 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 Trust and the
transfer agent will employ reasonable pro-cedures to confirm that instructions
communicated by telephone are genuine.
Procedures may include one or more of the following: recording all telephone
calls requesting telephone exchanges, verifying authorization and requiring some
form of personal identification prior to acting upon instructions and sending a
statement each time a telephone exchange is made. The Trust 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 Trust at any time upon 60 days' written
notice to shareholders.
Redemption of Small Accounts. The Trustees may, in order to reduce the
expenses of the Trust, redeem all of the shares of any shareholder whose account
is worth less than $500 (as a result of a redemption order). This will be done
at the NAV determined as of the close of business on the business day preceding
the sending of such notice of redemption. The Trust will give shareholders whose
shares are being redeemed 60 days' prior written notice in which to purchase
sufficient shares to avoid such redemption.
<PAGE>
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
The Equity Income Fund normally declares and pays dividends from net
investment income ("income dividends") on a quarterly basis. The Fixed-Income
Fund and the California Tax-Exempt Fund normally declare and pay income
dividends on a monthly basis. Dividends from net long-term capital gains
("capital gains dividends") are paid once a year (usually in December) for each
Fund. Shareholders can have dividends paid in additional shares and reinvested
or paid out in cash. If an investor purchases shares just before the dividend
date, he or she will be taxed on the distribution even though it's a return of
capital.
Taxation of Shareholders in Equity Income and Fixed-Income Funds
For the Equity Income Fund and the Fixed-Income Fund, 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 to shareholders. An exchange of a fund's shares for shares of another fund
will be treated as a sale of a fund's shares for tax purposes and any gain on
the transaction may be subject to state and federal income tax. Tax-exempt and
tax-deferred shareholders, of course, will not be required to pay taxes on any
dividends 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.)
For shareholders of these funds, the Trust may be required to impose backup
withholding at a rate of 31% from any income dividend and capital gain
distribution. 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 a fund, such dividends,
in the hands of that fund's corporate shareholders, will be eligible for the 70%
dividends received deduction. Individuals do not qualify for this deduction--
only corporations.
Taxation of Shareholders of California Tax-Exempt Fund
This Fund is for California residents only. Dividends derived from interest
on state and local obligations constitute "exempt-interest" dividends on which
shareholders are not subject to federal income tax. To the extent that income
dividends are derived from earnings attributable to California state and local
obligations, they will be exempt from federal and California personal income
tax. Such dividends may be subject to California franchise taxes and corporate
income taxes if received by a corporation subject to such taxes.
Dividends attributable to interest on certain private activity bonds issued
after August 7, 1986, must be included in federal alternative minimum taxable
income for the purpose of determining liability (if any) for the alternative
minimum tax (AMT) for individuals and for corporations.
Dividends derived from taxable interest and any distributions of short-term
capital gains are taxable to shareholders as ordinary income. Distributions of
net long-term capital gains, if any, are taxable to shareholders as a long-term
capital gain regardless of how long their shares of the Fund have been held
except that losses on certain shares held less than six months will be treated
as long-term capital losses to the extent of the capital gain dividends received
on such shares.
The Fund will notify shareholders each January as to the federal and
California tax status of dividends paid during the previous calendar year.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each fund's
financial performance for the past five years. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in a fund
assuming reinvestment of all dividends and distributions. This information has
been audited by Deloitte & Touche LLP, independent accountants, whose report,
along with the Trust's financial statements, is included in the Trust's annual
report. A free copy of the annual report is available upon request.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Equity Income Fund 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year $20.68 $18.56 $19.58 $15.70 $17.46
Income from investment operations:
Net investment income 0.75 0.79 0.98 0.88 0.80
Net realized and unrealized gain (loss) on securities 1.49 2.86 0.37 3.93 (1.75)
Total from investment operations 2.24 3.65 1.35 4.81 (0.95)
Distributions:
Dividends from net investment income (0.73) (0.79) (0.97) (0.90) (0.81)
Distributions from net realized gains (2.06) (0.74) (1.40) (0.03) .--
Total distributions (2.79) (1.53) (2.37) (0.93) (0.81)
Net asset value at end of year $20.13 $20.68 $18.56 $19.58 $15.70
Total return 11.05% 20.15% 7.09% 31.13% (5.39%)
Ratios/supplemental data:
Ratio of expenses to average net assets (actual)* 1.05% 1.05% 0.80% 0.72% 0.83%
Decrease reflected in the above expense ratios due to
undertakings by Parnassus Investments 0.24% 0.30% 0.60% 0.82% 0.88%
Ratio of net investment income to average net assets 2.30% 4.04% 4.56% 4.76% 5.15%
Portfolio turnover rate 166.32% 34.12% 47.80% 15.36% 6.50%
Net assets, end of year (000's) $ 40,903 $38,847 $ 33,362 $ 26,779 $ 17,087
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fixed-Income Fund 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year $16.04 $15.43 $15.73 $13.79 $15.89
Income from investment operations:
Net investment income 0.84 0.90 0.92 0.95 1.02
Net realized and unrealized gain (loss) on securities 0.25 0.67 (0.31) 1.95 (2.08)
Total from investment operations 1.09 1.57 0.61 2.90 (1.06)
Distributions:
Dividends from net investment income (0.85) (0.89) (0.91) (0.96) (1.04)
Distributions from net realized gains (0.30) (0.07) .-- .-- .--
Total distributions (1.15) (0.96) (0.91) (0.96) (1.04)
Net asset value at end of year $15.98 $16.04 $15.43 $15.73 $13.79
Total return 6.97% 10.60% 4.08% 21.58% (6.76%)
Ratios/supplemental data:
Ratio of expenses to average net assets (actual)* 0.79% 0.82% 0.83% 0.90% 0.81%
Decrease reflected in the above expense ratios due to
undertakings by Parnassus Investments 0.40% 0.43% 0.50% 0.73% 0.98%
Ratio of net investment income to average net assets 4.92% 5.79% 5.98% 6.20% 7.00%
Portfolio turnover rate 44.98% 17.15% 2.80% 12.10% 5.20%
Net assets, end of year (000's) $ 11,482 $ 9,683 $ 8,384 $ 6,585 $ 4,545
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
California Tax-Exempt Fund 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year $16.72 $16.02 $16.06 $14.28 $16.10
Income from investment operations:
Net investment income 0.75 0.74 0.80 0.82 0.80
Net realized and unrealized gain (loss) on securities 0.26 0.71 (0.06) 1.78 (1.81)
Total from investment operations 1.01 1.45 0.74 2.60 (1.01)
Distributions:
Dividends from net investment income (0.75) (0.75) (0.78) (0.82) (0.81)
Distributions from net realized gains (0.10) .-- .-- .-- .--
Total distributions (0.85) (0.75) (0.78) (0.82) (0.81)
Net asset value at end of year $16.88 $16.72 $16.02 $16.06 $14.28
Total return 6.12% 9.33% 4.78% 18.60% (6.36%)
Ratios/supplemental data:
Ratio of expenses to average net assets (actual)* 0.67% 0.67% 0.54% 0.50% 0.39%
Decrease reflected in the above expense ratios due to
undertakings by Parnassus Investments 0.30% 0.32% 0.46% 0.69% 0.87%
Ratio of net investment income to average net assets 4.43% 4.69% 4.96% 5.30% 5.37%
Portfolio turnover rate 9.40% 10.00% .--% 13.10% 12.00%
Net assets, end of year (000's) $ 7,342 $ 6,520 $ 5,835 $ 4,483 $ 3,902
<FN>
* Parnassus Investments has agreed to a 1.25% limit on expenses for the Equity
Income Fund and 1% for the Fixed-Income and California Tax-Exempt Funds (See
Note 5 for details). Certain fees were waived for the years ended December 31,
1998, 1997, 1996, 1995 and 1994.
</FN>
</TABLE>
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Deloitte & Touche LLP, 50 Fremont Street, San Francisco, CA 94105, has been
selected as the Trust's independent auditors.
Union Bank of California, 475 Sansome Street, San Francisco, CA 94111, has
been selected as the custodian of the Trust's assets.
Parnassus Investments, One Market-Steuart Tower #1600, San Francisco,
California 94105, is the Trust's transfer agent and accounting agent. Jerome L.
Dodson, the Trust's President, is the sole stockholder of Parnassus Investments.
One issue with the potential to disrupt fund operations and affect
performance is the inability of some computers to recognize the year 2000.
Parnassus Investments has taken steps to enable its systems to handle this issue
and has scheduled final testing for its internal systems for the middle of 1999.
The investment adviser is also seeking confirmation from its service providers
and business partners that they are taking similar steps. These providers of
external systems have indicated they are working on this issue and they are
scheduled to complete testing in the first half of 1999. The Trust is also
collecting information on Year 2000 issues with regard to the issuers of
securities in the portfolios of the funds and deciding what investment action to
take in light of the findings. Nevertheless, there can be no assurance that
these steps will be sufficient to avoid any adverse impact upon the Trust.
<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
You can obtain additional information about
The Parnassus Income Trust.
A Statement of Additional Information (SAl)
dated May 1, 1999 has been filed with
the SEC and is incorporated in this prospectus
by reference (i.e., legally forms a part of the
prospectus). The Trust also publishes an annual and a
semiannual report each year that discuss the Trust's
holdings and how recent market conditions as well as
the Trust's investment strategies affected performance.
For a free copy of any of these documents or to ask
questions about the Trust, call Parnassus Investments
at (800) 999-3505.
The SAl, the Trust's annual and semiannual
reports and other related materials are also available
on the SEC's Internet 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 Trust, including the SAl, at
the SEC's Public Reference Room in
Washington, D.C. Call 800-SEC-0330 for information
on the operation of the
SEC's Public Reference Room. The Investment
Company Act of 1940 File Number for
The Parnassus Income Trust is 811-6673.
