THE PARNASSUS INCOME TRUST
Semiannual Report June 30, 2000
--------------------------------------------------------------------------------
August 4, 2000
Dear Shareholder:
Here is your semiannual report for the first half of 2000 for The Parnassus
Income Trust which consists of three funds: the Equity Income Fund, the
Fixed-Income Fund and the California Tax-Exempt Fund. I'm happy to report that
the Equity Income Fund and the California Tax-Exempt Fund performed at the top
of their peer groups. Unfortunately, the Fixed-Income Fund did not do as well.
Read on for all the details.
At the end of the year, each of the three funds will have a new portfolio
co-manager. I will stay on as co-manager of all three funds through 2001, but by
2002, I expect to retire from daily management of the three funds. You won't be
getting rid of me completely, though, since I will remain as chief investment
officer overseeing all three funds although not as a portfolio manager. I will
also continue being the sole portfolio manager of The Parnassus Fund.
I am proud to announce that Todd Ahlsten, Director of Research, will become
co-manager of the Equity Income Fund. Bryant Cherry, Vice President and Chief
Financial Officer of Parnassus Investments, will become co-manager of the
Fixed-Income Fund. Ben Liao, financial analyst and head trader for Parnassus
Investments, will become co-manager of the California Tax-Exempt Fund. All
appointments will be effective on December 31, 2000.
These changes will show what great talent we have at Parnassus Investments.
It will also bring new perspective to the portfolio management process.
<PAGE>
EQUITY INCOME FUND
As of June 30, 2000, the net asset value per share (NAV) of the Equity
Income Fund was $25.59, so after taking dividends into account, the total return
for the first six months of the year was 11.28%. This compares to a loss of
0.42% for the S&P 500, a loss of 0.69% for the Wilshire 5000 and a loss of 1.86%
for the average equity income fund followed by Lipper. This performance meant
that for the past six months, we placed third out of the 216 equity income funds
followed by Lipper.
We have now had over two years experience with our new investment objective
(we changed from a balanced fund to an equity income fund on March 31, 1998) and
so far, the Fund's new investment strategy has been an unqualified success. For
the 12 months ending June 30, the Parnassus Equity Income Fund placed first out
of the 214 equity income funds followed by Lipper. We also placed first out of
169 funds for the three years ending June 30, 2000.
We have also paid an average dividend of 1.49% for the past six months
compared to a yield of 1.17% for the S&P 500. For the month of June, our 30-day
SEC yield was 1.77% compared to 1.17% for the S&P 500.
Below is a table that compares the performance of the Fund with the S&P
500, the Wilshire 5000 and the average equity income fund followed by Lipper.
Average annual total returns are for the one, three and five-year periods and
since inception.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Average Annual Total Returns Parnassus Equity Average Equity S&P 500 Wilshire 5000
for periods ended 6/30/00 Income Fund Income Fund Index Index
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year 22.75% (6.59%) 7.25% 9.68%
Three Years 19.94% 7.30% 19.60% 19.12%
Five Years 17.16% 13.80% 23.72% 22.50%
Since Inception 8/31/92 15.29% 13.23% 19.88% 19.24%
-------------------------------------------------------------------------------------------------------------------
<FN>
Past performance is no guarantee of future returns. Principal value will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost. The Wilshire 5000 and the S&P 500 are unmanaged
indices of common stocks and it is not possible to invest directly in an index.
Note: For the one and three-year periods, the Parnassus Equity Income Fund
beat the indices and the average equity income fund. In earlier years, however,
the Fund lagged the indices. The reason is that in the earlier years, the Fund
was a balanced fund which typically has lower returns than an equity income fund
so the returns are not completely comparable in earlier years.
</FN>
</TABLE>
<PAGE>
STRATEGY AND ANALYSIS
Just like last year, the Parnassus Equity Income Fund beat the average
equity income fund followed by Lipper by a wide margin for the first half of
2000. The reason for our strong performance in 1999 was primarily because of an
overweighting of technology stocks. The reason for our strong performance in the
first half of 2000 is somewhat more complicated.
Veteran shareholders know what our basic strategy is, but it might be
useful to review it here for investors who have recently joined the Fund. First,
we do a screen of the S&P 500 and pick the companies with the strongest social
characteristics. Since we are an equity income fund, we choose from that list
all the companies that pay a dividend. This usually leaves us with more than 100
companies. We put these companies into the portfolio roughly in proportion to
their market capitalization so the resulting portfolio resembles an index fund.
At this point, we add companies that we think will outperform the market in
general. We add these companies without regard to whether or not they pay a
dividend except that no more than 25% of the portfolio can be in companies that
don't pay either interest or a dividend. Next, we underweight or overweight
companies in the portfolio depending on our analysis of an individual company's
prospects over the next 12 months. The result is that we have a portfolio that
is relatively stable, but one that also has the potential to beat the market if
we've made the right choices for overweighting and underweighting.
For the first half of 2000, we made the right choices. For the first
quarter, we were overweighted in technology which did quite well. For the second
quarter, we were underweighted in technology when those stocks crashed. At the
first of the year, 40% of the portfolio was in technology compared to about 32%
for the S&P 500. By June 30, only 22% of the portfolio was in technology. The
reason for the change was that early this year, we concluded that many
technology issues were overvalued so we decided to sell a substantial portion of
stocks in that sector. We were, indeed, fortunate since the "tech wreck" that
occurred in March, April and May, came just as we reduced the percentage of
technology stocks in our portfolio.
With the proceeds from the sale of our technology shares, we bought
companies in undervalued industries such as retail, medical and finance. When
technology stocks dropped, the undervalued shares, for the most part, increased
in value.
<PAGE>
LOSERS
Despite a great six months, there were a number of companies that did not
do well. The companies with the biggest negative impact on the portfolio were in
telecommunications, household products, mortgage finance and retail. AT&T
dropped 37.8% to $31.63 during the first half which cost the Fund 22 cents on
the NAV. Pricing competition for long-distance services caused the company to
have disappointing earnings.
Procter & Gamble lost 35.3% as its stock sank to $57.25 for a loss of 24
cents on the NAV. The company abandoned its policy of using conservative figures
to budget for expenses and instead hoped to use increased spending to drive
sales higher. The policy didn't work and disappointing earnings caused the stock
to slump.
Fannie Mae's stock declined 16.4% to $52.19 for a loss of 13 cents on the
NAV while Freddie Mac's shares traded down 13.9% to $40.50 for a drop of 9 cents
on the NAV. Although earnings were strong at both of these companies that invest
in home mortgages, higher interest rates and political pressures in Washington
caused these issues to slump. Opponents of the two companies are trying to
persuade Congress to put more restrictions on these government-chartered
entities.
Lucent, the large manufacturer of telecommunications equipment, saw its
stock move down 20.8% to $59.25 for a loss of 10 cents on the NAV. Our
convertible bond in Central Garden & Pet Company lost 14.3% during the period
which cost us 10 cents on the NAV. Talk of a possible division of the company
into two parts aroused credit concern which drove down the price of the bond.
The Gap dropped 32.6% to $31 for a loss of 8 cents on the NAV. Target
Stores went down 21% to $58 for a decline of 8 cents on the NAV.
WINNERS
Intel had the biggest positive impact on the NAV as it pushed up the Fund's
per share price by 59 cents. Strong sales of cellular phones and personal
computers created enormous demand for semiconductors (both microprocessors and
flash memory chips) which moved Intel's stock up 62.4% to $133.69 a share. The
stock of another semiconductor company, Micron Technology, climbed 128.9% to $89
for an increase of 20 cents on the NAV. Strong demand for DRAMs (dynamic random
access memory chips) moved the stock higher.
<PAGE>
Apex, a maker of switches that allows one keyboard and monitor to control
many servers, boosted the NAV by 17 cents as its stock climbed 22% to $47.13.
Higher demand for computer servers by businesses meant higher sales and earnings
for Apex.
Retailer AnnTaylor contributed a gain of 16 cents to the NAV as its new
line of women's clothing found favor with customers. The stock price soared
99.5% to $33.13.
We sold our AMD convertible bond during the period for a gain of 32.2% and
11 cents on the NAV. Strong demand for semiconductors increased earnings.
Cardinal Health contributed 10 cents to the Fund's share price as the stock
climbed 54.6% to $74. Cardinal distributes drugs and other medical supplies.
Good cost control helped improve margins and the stock also benefited from
sector rotation: investors' selling dot-com issues and putting the proceeds into
real companies that actually make money. Another medical company, Merck, saw its
stock price rise 13.1% to $75.88 because of the same phenomenon; it added 9
cents to the NAV.
Venator, parent of Foot Locker, had a 77.6% increase in its stock price as
it went to $10.25 for a gain of 9 cents on the NAV. Higher sales of athletic
shoes meant better comparable store sales versus a year ago and this translated
into strong earnings.
LSI Logic saw its stock rise 60.6% to $54.19 for a contribution of 8 cents
to the NAV. Strong demand for products with semiconductors caused the stock
price to increase.
Schering-Plough gained 19.5% as the stock went to $50.63 for a contribution
of 7 cents to the NAV. Sector rotation and strong sales of the allergy drug,
Claritin, were responsible for the move.
Natural gas company Enron put 7 cents on the NAV by virtue of its 48.6%
increase in stock price to $65.94. Stronger earnings, though, did not come
principally through natural gas sales, but rather through its broadband
business. The company installed fiber optic cables on top of its natural gas
pipelines for use in data transmission over the internet.
<PAGE>
FIXED-INCOME FUND
As of June 30, 2000, the net asset value per share (NAV) of the
Fixed-Income Fund was $14.29. Taking into account dividends paid during the
first half of the year, the total return for the first half of 2000 was 1.68%.
This compares to a gain of 3.00% for the average A-rated corporate bond fund
followed by Lipper, Inc. and 4.18% for the Lehman Government/Corporate Bond
Index. The Fixed-Income Fund was the only one of the three funds in The
Parnassus Income Trust to underperform the average fund in its category. Below
is a table comparing the performance of the Fixed-Income Fund with that of the
Lehman Government/Corporate Bond Index and with the Lipper A-rated Bond Fund
Average.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Average Annual Total Returns Parnassus Lipper A-Rated Bond Lehman Government/
for periods ended 6/30/00 Fixed-Income Fund Fund Average Corporate Bond Index
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Year 0.74% 2.78% 4.32%
Three Years 3.74% 4.71% 6.03%
Five Years 4.86% 5.22% 6.10%
Since Inception 8/31/92 5.71% 5.86% 6.28%
-------------------------------------------------------------------------------------------------------------------
<FN>
Past performance is no guarantee of future returns. Principal value will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost. The Lehman Government/Corporate Bond Index is an
unmanaged index of fixed-income securities and it is not possible to invest
directly in an index.
</FN>
</TABLE>
As you can see from the table above, our weak performance over the past two
years has caused our long-term return to slip below the Lipper A-rated average.
Since inception, we've averaged 5.71% per year while the average fund has
averaged 5.86% -- slightly higher.
There are two principal reasons for our weak performance over the past two
years. One is selection of bond issuers and two is being in the wrong part of
the yield curve.
Bonds from two companies hurt us the most. For the first half of the year,
the J.C. Penney bond declined 8.7% because the company's debt rating was lowered
by Moody's Investor Services from A3 to Baa2. The company has shown weakness
both in its department stores and at its Eckerd chain of drugstores. When we
bought the bond, it had a higher yield than other A3-rated bonds so we thought
it was attractive. Unfortunately, I did not do a careful enough analysis on its
business prospects, instead relying mostly on its bond rating.
<PAGE>
Interestingly enough, bond rating agencies like Moody's and Standard &
Poor's are usually behind investors in making credit decisions. In other words,
investors downgrade bonds by pricing them lower before the official downgrade is
made. The reason that the J.C. Penney bond was yielding more than other A3 bonds
at the time of purchase was because its finances were not as solid.
The same thing happened with the Xerox bond. It dropped 2.05% during the
first half because it was put under a negative credit watch by Standard & Poor's
in May. The company has had earnings problems because of stiff competition and a
disastrous sales force reorganization. Again, had we used the same analysis on
bonds that we use on stocks, we could have avoided investing in the Xerox bond.
The second factor at work is the bond's average maturity (i.e. what I
called "the wrong part of the yield curve"). An unusual thing happened this year
that is called "an inverted yield curve." Normally, an investor can get a higher
interest rate the longer the maturity. For example, at the start of this year, a
one year Treasury note yielded 5.96%, a five-year Treasury yielded 6.34%, a
ten-year yielded 6.44% and a 30-year yielded 6.48%. In other words, this was a
normal yield curve since yields went higher as maturities increased.
By June 30, though, the yield curve had inverted so that a five-year
Treasury (6.18%) yielded more than a ten-year Treasury (6.02%) which, in turn,
yielded more than a 30-year Treasury (5.90%). One of the effects of this
inverted curve was that bonds with maturities of more than 15 years increased in
value much more than those with less than ten years until maturity. The average
maturity of the Fixed-Income Fund is 8.9 years so we underperformed.
I'm not going to change the maturity of the Fund since I think a maturity
of around ten years is the right place to be. Normally, a yield inversion
disappears after a while and when it does, our return should improve.
Right now, the Fixed-Income Fund has an excellent yield of 7.47% (30-day
SEC yield for June) which is higher than most other A-rated bond funds. This
should mean that our performance should improve going forward.
Another thing we can do is have greater diversification in our bond
portfolio so that two poorly performing bonds won't hurt our performance as
much. Finally, I pledge to do a better job of analyzing the finances of the
companies whose bonds we buy.
<PAGE>
CALIFORNIA TAX-EXEMPT FUND
As of June 30, 2000, the net asset value per share (NAV) of the California
Tax-Exempt Fund was $16.24. Taking dividends into account, the total return for
the first half of 2000 for the Fund was 4.95% which is exactly the total return
for the average California tax-exempt fund followed by Lipper, Inc.
Although we only equaled the return of the average California tax-exempt
fund for the first half, our longer-term record continues to be outstanding. For
the year ended June 30, the Fund placed third among the 111 California municipal
bond funds followed by Lipper, second of 95 funds for the three-year period,
fifth of 85 funds for the five-year period and sixth of 49 funds since inception
on 8/31/92.
Below you will find a table comparing the Parnassus California Tax-Exempt
Fund with the Lipper average and the Lehman Municipal Bond Index.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Average Annual Total Returns Parnassus California Lipper Municipal Lehman Municipal
for periods ended 6/30/00 Tax-Exempt Fund Fund Average Bond Index
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Year 4.65% 1.35% 3.25%
Three Years 4.95% 3.74% 4.86%
Five Years 6.14% 5.12% 5.88%
Since Inception 8/31/92 6.15% 5.46% 6.12%
-------------------------------------------------------------------------------------------------------------------
<FN>
Past performance is no guarantee of future returns. Principal value will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost. The Lehman Municipal Bond Index is an unmanaged index
of fixed-income securities and it is not possible to invest directly in an
index. The 30-day SEC yield for June 2000 was 4.20% for the Fund.
</FN>
</TABLE>
There are a number of reasons why we continue to outperform most other
California tax-exempt funds. First, we keep our expenses relatively low. Second,
we try to minimize trading, preferring to hang onto our bonds for long periods
of time. Third, we concentrate on buying bonds with 10-year maturities which is
long enough to get a good yield, but short enough to avoid the most extreme
interest rate risks. Fourth, we negotiate with market-makers on each bond we buy
to get a better price and, therefore, a higher yield. Fifth, we buy bonds that
have good credit.
One important reason why the California Tax-Exempt Fund has done well
compared to the Fixed-Income Fund was the strong economy in California. Since
the state has enjoyed strong growth, California municipalities have found
themselves with good cash flow to pay for public services or to pay off debt.
Therefore, there is a low supply of new issues because local government agencies
do not need to raise money by selling bonds. Low supply and strong demand for
non-taxable securities mean high prices for California municipal securities.
Yours truly,
Jerome L. Dodson
President
<PAGE>
<TABLE>
THE PARNASSUS INCOME TRUST
<CAPTION>
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 2000 (UNAUDITED)
Percent of
Shares Common Stocks Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AIR TRANSPORT
4,000 Delta Air Lines, Inc. $ 202,250
2,500 Federal Express Corp.1 95,000
------------
Total 0.6% 297,250
------------
APPAREL
20,000 AnnTaylor Stores Corp.1, 2 662,500
2,000 Liz Claiborne, Inc. 70,500
2,000 The Limited, Inc. 43,250
2,000 Reebok International Ltd.1 31,875
3,000 Russell Corporation 60,000
4,000 The Stride Rite Corporation 24,500
------------
Total 1.7% 892,625
------------
APPAREL RETAILING
16,000 Gap, Inc. The 496,000
4,000 Lands' End, Inc.1 133,500
2,000 Lillian Vernon Corporation 21,000
------------
Total 1.2% 650,500
------------
AUTO PARTS
1,200 Bandag, Inc. 29,100
10,000 Dana Corporation 211,875
------------
Total 0.5% 240,975
------------
BANKING
26,000 Chase Manhattan 1,197,625
3,000 Dime Bancorp 47,250
6,000 Golden West Financial 244,875
5,000 J.P. Morgan & Co. 550,625
7,000 Bank One Corporation 185,937
20,000 Wells Fargo Company 775,000
20,000 Washington Mutual Inc. 576,250
------------
Total 6.7% 3,577,562
------------
BUILDING MATERIALS
6,000 Armstrong World Corp. 91,875
15,000 INTERFACE, Inc. 57,187
------------
Total 0.3% 149,062
------------
<PAGE>
Percent of
Shares Common Stocks Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
CHEMICALS
3,000 Air Products & Chemicals $ 93,000
60,000 Calgon Carbon 465,000
4,000 H.B. Fuller Company 182,250
1,000 Millipore Corporation 75,375
10,000 Wellman, Inc. 161,875
------------
Total 1.8% 977,500
------------
COMPUTER PERIPHERALS
20,000 Adaptec, Inc.1 455,000
40,000 Apex Inc.1 1,885,000
1,000 Cisco Systems, Inc.1 63,562
17,000 Lucent Technologies, Inc. 1,007,250
------------
Total 6.4% 3,410,812
------------
COMPUTER SYSTEMS
45,000 Compaq Computer Corp. 1,147,500
1,000 Hewlett-Packard Company 124,375
5,000 International Business
Machines 547,813
------------
Total 3.4% 1,819,688
------------
ELECTRIC UTILITIES
2,000 Idaho Power Company 64,500
4,500 LG&E Energy Corporation 107,438
------------
Total 0.3% 171,938
------------
ELECTRONIC
INSTRUMENTS
5,000 Baldor Electric Company 93,125
1,000 Tektronix, Inc.1 73,125
------------
Total 0.3% 166,250
------------
FINANCIAL SERVICES
29,000 Fannie Mae 1,513,437
38,000 Freddie Mac 1,539,000
1,500 Charles Schwab Corp. 50,438
2,000 SLM Holding Corporation 74,875
------------
Total 6.0% 3,177,750
------------
<PAGE>
THE PARNASSUS INCOME TRUST
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 2000 (CONTINUED)
Percent of
Shares Common Stocks Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
FOOD RETAILERS
22,000 The Kroger Co.1 $ 485,375
35,000 Wild Oats Markets, Inc.1, 2 439,687
------------
Total 1.7% 925,062
------------
HEALTH CARE SERVICES
8,000 Cardinal Health 592,000
1,290 MedQuist Inc.1 43,860
------------
Total 1.2% 635,860
------------
HOME APPLIANCES
3,000 Maytag Corporation 110,625
3,000 Whirlpool Corporation 139,875
------------
Total 0.5% 250,500
------------
HOME PRODUCTS
700 Church & Dwight Co., Inc. 12,600
11,000 Clorox Company 492,938
3,000 Colgate-Palmolive Co. 179,625
4,000 Proctor & Gamble Co. 229,000
------------
Total 1.7% 914,163
------------
HOUSEWARES
1,000 Black & Decker Corp. 39,312
4,000 Newell Company 103,000
------------
Total 0.3% 142,312
------------
INDUSTRIAL
AUTOMATION
1,000 Cognex Corporation1 0.1% 51,750
------------
INSURANCE
500 Aetna, Inc. 32,094
13,000 American Int'l Group, Inc. 1,527,500
1,000 Chubb Corporation1 61,500
1,500 CIGNA Corporation 140,250
11,000 SAFECO Corporation1 218,625
5,000 St. Paul Companies, Inc.1 170,625
40,000 UnumProvident Corp. 802,500
------------
Total 5.5% 2,953,094
------------
<PAGE>
Percent of
Shares Common Stocks Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
INSURANCE BROKERS
4,000 Marsh & McLennan
Co., Inc. 0.8% $ 417,750
------------
MACHINERY
7,000 Cummins Engine Co., Inc. 190,750
2,000 Deere & Company 74,000
1,500 Illinois Tool Works, Inc. 85,500
3,000 Snap-on Inc. 79,875
2,000 The Stanley Works 47,500
------------
Total 0.9% 477,625
------------
MEDICAL EQUIPMENT
2,000 Becton Dickinson 57,375
20,000 Boston Scientific Corp.1 438,750
3,000 Invacare Corporation 78,750
5,000 DENTSPLY International,
Inc. 154,063
------------
Total 1.3% 728,938
------------
MICROELECTRONIC
PROCESSING EQUIPMENT
2,000 Applied Materials, Inc.1 181,250
10,000 Credence Systems
Corporation1 551,875
500 Helix Technology Corp. 19,500
2,000 Novellus Systems1 113,125
------------
Total 1.6% 865,750
------------
MISCELLANEOUS
5,000 Minnesota Mining & Mfg. 417,500
4,000 WD 40 Company 83,000
------------
Total 0.9% 500,500
------------
<PAGE>
THE PARNASSUS INCOME TRUST
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 2000 (CONTINUED)
Percent of
Shares Common Stocks Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
NATURAL GAS
3,000 AGL Resources Inc. $ 47,813
35,000 Eastern Enterprises 2,205,000
3,100 Energen Corporation 67,619
6,000 Enron Corporation 395,625
1,500 Equitable Resources, Inc. 72,375
6,000 Keyspan Energy
Corporation 184,500
3,000 MCN Corporation 64,125
1,500 New Jersey Resources 57,094
3,000 Northwest Natural Gas Co. 67,125
2,000 ONEOK Inc. 51,875
2,000 Peoples Energy Corporation 64,750
5,000 UGI Corporation 102,500
3,000 Washington Gas Light Co. 72,188
------------
Total 6.5% 3,452,589
------------
OFFICE EQUIPMENT
500 Avery Dennison Corp. 33,562
3,000 Herman Miller, Inc. 77,625
5,000 Office Depot, Inc.1 31,250
4,000 Pitney Bowes Inc. 160,000
10,000 Xerox Corporation 207,500
------------
Total 0.9% 509,937
------------
OIL
4,000 Sunoco, Inc. 0.2% 117,750
------------
PACKAGED FOODS
1,500 Campbell Soup Company 43,688
1,000 Dreyer's Grand Ice Cream 21,000
5,000 General Mills Incorporated 191,250
10,000 Heinz H.J. Company 437,500
10,000 Kellogg Company1 297,500
2,000 Quaker Oats Company 150,250
3,000 Ralston Purina Group 59,813
------------
Total 2.3% 1,201,001
------------
<PAGE>
Percent of
Shares Common Stocks Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS
2,000 Amgen Inc.1 $ 140,500
2,000 Bristol-Myers Squibb Co. 116,500
20,000 Johnson & Johnson 2,037,500
4,000 McKesson HBOC, Inc. 83,750
24,000 Merck & Company 1,821,000
6,000 Mylan Laboratories 109,500
30,000 Schering-Plough Corp. 1,518,750
------------
Total 11.0% 5,827,500
------------
PRINTING
1,500 Banta Corp. 28,406
4,000 Deluxe Corporation 94,250
4,000 Donnelley R.R. & Sons Co. 90,250
------------
Total 0.4% 212,906
------------
PUBLISHING
3,000 Gannett 179,437
2,000 Houghton Mifflin Company 93,375
2,000 Knight-Ridder, Inc.1 106,375
2,500 McGraw-Hill
Companies, Inc. 136,250
------------
Total 1.0% 515,437
------------
RESTAURANTS
4,000 Luby's Cafeterias, Inc. 0.1% 31,750
------------
RETAILING - GENERAL
2,000 Borders Group, Inc.1 31,125
2,000 Dollar General 39,000
40,000 Nordstrom, Inc. 965,000
55,000 J.C. Penney Company, Inc. 1,014,063
12,000 Target Corporation 696,000
------------
Total 5.2% 2,745,188
------------
SEMICONDUCTORS
24,000 Intel Corporation 3,208,500
10,000 LSI Logic Corporation1, 2 541,875
8,000 Micron Technology, Inc.1 712,000
------------
Total 8.4% 4,462,375
------------
<PAGE>
THE PARNASSUS INCOME TRUST
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 2000 (CONTINUED)
Percent of
Shares Common Stocks Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
SOFTWARE - SERVICES
12,000 Autodesk, Inc.2 $ 416,250
6,000 BMC Software, Inc.1, 2 218,906
20,000 Electronics for Imaging, Inc.1 506,250
8,000 Mentor Graphics Corp.1 159,000
3,000 Symantec Corporation1 161,813
------------
Total 2.8% 1,462,219
------------
SPECIALTY RETAILING
6,000 Costco Companies, Inc.1 198,000
2,500 Ethan Allen Interiors Inc. 60,000
1,000 Longs Drug Stores Corp. 21,750
12,000 Mattel Inc. 158,250
2,000 Toys R Us, Inc.1 29,500
6,000 Walgreen Co. 192,750
40,000 Venator Group, Inc.1 410,000
------------
Total 2.0% 1,070,250
------------
TELECOMMUNICATIONS
35,000 AT&T Corporation 1,106,875
8,000 U S West
Communications Group 686,000
------------
Total 3.4% 1,792,875
------------
Total common stocks 89.9% $ 47,796,991
------------
Principal Percent of
Amount Convertible Bonds Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
$1,900,000 Central Garden &
Pet Company
Convertible Bond,
6.000%, due 11/15/03 $ 1,180,223
1,000,000 Quantum Corp.
DLT & Storage Systems
Convertible Bond, 7.000%,
due 8/01/04 777,500
------------
Total convertible bonds 3.7% 1,957,723
------------
<PAGE>
THE PARNASSUS INCOME TRUST
EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 2000 (CONTINUED)
Principal Percent of
Amount Community 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 0.8% 400,000
------------
Total investment in securities
(Cost $43,096,934) 93.7% $ 50,154,714
------------
Short-Term Investments
-------------------------------------------------------------------------------------------------------------------
Union Bank of California
Bank Deposit Account,
variable rate 5.390% $ 493,671
Janus Institutional
Government Portfolio,
variable rate 6.430% 2,000,000
Goldman Sachs
Government Portfolio
6.300% 457,106
Repurchase Agreements:
Greenwich Capital
Triparty Repurchase
Agreement
(Repurchase agreement
with Greenwich Capital
dated 6/30/00, effective
yield is 7.205% due 7/3/00,
Face value is $1,361,600
with price at 100)3 1,361,600
------------
Total short-term investments 8.1% 4,312,377
------------
Total investments 102.5% 54,467,091
Payable upon return of securities loaned - 2.6% (1,361,600)
Other assets and liabilities - net 0.1% 48,172
------- ------------
Total net assets 100.0% $ 53,153,663
======= ============
<FN>
1 Non-income producing.
2 This security or partial position of this security is on loan at June 30,
2000 (Note 1). The total value of securities on loan at June 30, 2000 was
$1,322,375.
3 This security purchased with cash collateral held from securities lending.
</FN>
</TABLE>
<PAGE>
THE PARNASSUS INCOME TRUST
EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
Assets:
Investments in securities, at market value
(identified cost $43,096,934) (Note 1) $ 50,154,714
Temporary investments in short-term securities
(at cost, which approximates market) 4,312,378
Receivables:
Securities sold 87,210
Dividends and interest 137,503
Capital shares sold 28,848
Other assets 12,658
--------------
Total assets 54,733,311
--------------
Liabilities:
Payable unpon return of securities loaned 1,361,600
Dividends payable 21,115
Payable for securities purchased 186,028
Accounts payable and accrued expenses 10,905
--------------
Total liabilities 1,579,648
--------------
Net assets (equivalent to $25.59
per share based on 2,077,230.158
shares of capital stock outstanding) $ 53,153,663
==============
Net assets consist of:
Undistributed net investment income $ 8,231
Unrealized appreciation on investments 7,057,780
Undistributed net realized gain 7,963,897
Capital paid-in 38,123,755
--------------
Total net assets $ 53,153,663
==============
Computation of net asset value and offering price per share:
Net asset value and offering price per share
($53,153,663 divided by 2,077,230.158 shares) $ 25.59
==============
<PAGE>
THE PARNASSUS INCOME TRUST
EQUITY INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
Investment income:
Dividends $ 349,430
Interest 214,050
--------------
Total investment income 563,480
--------------
Expenses:
Investment advisory fees (Note 5) 386,681
Transfer agent fees (Note 5) 39,259
Fund administrative expense (Note 5) 17,750
Reports to shareholders 11,556
Registration fees and expenses 5,259
Professional fees 11,600
Custody fees 17,289
Trustee fees and expenses 4,519
Other expenses 5,749
--------------
Subtotal of expenses before fee waiver 499,662
Fees waived by Parnassus Investments (Note 5) (249,911)
--------------
Total expenses 249,751
--------------
Net investment income 313,729
--------------
Realized and unrealized gain
on investments:
Realized gain from security transactions:
Proceeds from sales 21,534,544
Cost of securities sold (13,548,042)
--------------
Net realized gain 7,986,502
--------------
Unrealized appreciation of investments:
Beginning of year 10,097,250
End of period 7,057,780
--------------
Unrealized depreciation during period (3,039,470)
--------------
Net realized and unrealized gain on investments 4,947,032
--------------
Net increase in net assets resulting from operations $ 5,260,761
==============
<PAGE>
THE PARNASSUS INCOME TRUST
EQUITY INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1999
June 30, 2000 1999
-------------- --------------
From operations:
Net investment income $ 313,729 $ 458,873
Net realized gain from
security transactions 7,986,502 2,305,069
Net unrealized appreciation
(depreciation) during the year (3,039,470) 5,977,319
-------------- --------------
Increase in net assets
resulting from operations 5,260,761 8,741,261
Dividends to shareholders:
From net investment income (303,162) (495,676)
From realized capital gains 0 (2,336,820)
Increase (decrease) in
net assets from capital
share transactions 2,196,766 (812,845)
-------------- --------------
Increase in net assets 7,154,365 5,095,920
Net assets:
Beginning of year 45,999,298 40,903,378
-------------- --------------
End of period
(including undistributed
net investment income
of $8,231 in 2000 and
($2,336) in 1999) $ 53,153,663 $ 45,999,298
============= ==============
<PAGE>
<TABLE>
THE PARNASSUS INCOME TRUST
<CAPTION>
FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 2000 (UNAUDITED)
Principal Percent of
Amount Corporate Bonds Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES
$ 500,000 Bank One Corporation
Notes, 6.000%,
due 02/17/09 $ 436,660
500,000 BankBoston Corporation
Notes, 6.375%,
due 03/25/08 453,875
500,000 Chase Manhattan
Corporation
Notes, 6.000%,
due 02/15/09 442,360
500,000 First Union National Bank
Notes, 5.800%,
due 12/01/08 430,915
500,000 Goldman Sachs Group
Notes, 6.650%,
due 05/15/09 458,365
500,000 Household Finance
Corporation
Notes, 6.500%,
due 11/15/08 452,960
500,000 J.P. Morgan & Co, Inc.
Notes, 6.000%,
due 01/15/09 441,940
500,000 Norwest Financial Inc.
Notes, 6.850%,
due 07/15/09 468,175
------------
Total 33.6% 3,585,250
------------
INDUSTRIAL
500,000 Dana Corporation
Notes, 6.500%,
due 03/01/09 447,220
480,000 John Deere Capital
Corporation
Notes, 6.000%,
due 02/15/09 427,157
500,000 Illinois Tool Works
Notes, 5.750%,
due 03/01/09 448,000
500,000 Xerox Corporation
Notes, 7.200%,
due 04/01/16 452,540
------------
Total 16.6% 1,774,917
------------
<PAGE>
Principal Percent of
Amount Corporate Bonds Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
RETAIL
$ 500,000 The Gap, Inc.
Notes, 6.900%,
due 09/15/07 $ 475,060
500,000 J.C. Penney Company, Inc.
Debentures, 7.650%,
due 08/15/16 391,960
500,000 Nordstrom, Inc.
Notes, 6.625%,
due 01/15/09 425,480
350,000 Reebok International Ltd.
Notes, 6.750%,
due 09/15/05 321,377
------------
Total 15.1% 1,613,877
------------
TELECOMMUNICATON
500,000 U.S. West Capital
Funding Inc.
Notes, 6.500%,
due 11/15/18 4.0% 422,545
------------
UTILITIES
600,000 KeySpan Gas East
Notes, 7.875%,
due 02/01/10 5.6% 599,868
------------
Total corporate bonds 74.9% $ 7,996,457
------------
</TABLE>
<PAGE>
<TABLE>
THE PARNASSUS INCOME TRUST
<CAPTION>
FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 2000 (UNAUDITED)
Principal U.S. Government Percent of
Amount Agency Securities Net Assets Market Value
--------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 500,000 Federal Home Loan
Mortgage Corp.
6.510%, due 01/08/07 $ 481,010
500,000 Federal National
Mortgage Association
6.770%, due 09/01/05 492,31
500,000 Federal National
Mortgage Association
6.140%, due 11/25/05 478,140
450,000 Federal National
Mortgage Association
7.350%, due 03/28/05 453,874
------------
Total U.S. Government
Agency securities 17.9% 1,905,334
------------
Total investments in securities
(Cost $10,737,213) 92.8% 9,901,791
------------
Short-Term Investments
-------------------------------------------------------------------------------
Goldman Sachs
Government Portfolio
6.300% $ 478
Total short-term investments 0.1% 478
-------------
Total investments 92.9% 9,902,269
Other assets and liabilities - net 7.1% 760,157
------- -------------
Total net assets 100.0% $ 10,662,426
======= =============
</TABLE>
<PAGE>
THE PARNASSUS INCOME TRUST
FIXED-INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
Assets:
Investments in securities, at market value
(identified cost $10,737,213) (Note 1) $ 9,901,791
Temporary investments in short-term securities
(at cost, which approximates market) 478
Receivables:
Interest receivable 239,321
Other assets 1,024,785
------------
Total assets 11,166,375
------------
Liabilities:
Accounts payable and accrued expenses 503,949
------------
Total liabilities 503,949
------------
Net assets (equivalent to $14.29
per share based on 746,381.269
shares of capital stock outstanding) $ 10,662,426
=============
Net assets consist of:
Undistributed net investment income $ 9,252
Unrealized depreciation on investments (835,422)
Accumulated net realized loss (93,156)
Capital paid-in 11,581,752
------------
Total net assets $ 10,662,426
============
Computation of net asset value and
offering price per share:
Net asset value and offering price per share
($10,662,426 divided by 746,381.269 shares) $ 14.29
============
<PAGE>
THE PARNASSUS INCOME TRUST
FIXED-INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
Investment income:
Interest $ 385,581
------------
Total investment income 385,581
------------
Expenses:
Investment advisory fees (Note 5) 27,966
Transfer agent fees (Note 5) 11,926
Fund administrative expense (Note 5) 4,250
Reports to shareholders 3,069
Registration fees and expenses 6,720
Professional fees 2,905
Custody fees 632
Trustee fees and expenses 1,269
Other expenses 2,684
------------
Subtotal of expenses before fee waiver 61,421
Fees waived by Parnassus Investments (Note 5) (19,576)
------------
Total expenses 41,845
------------
Net investment income 343,736
------------
Realized and unrealized gain (loss)
on investments:
Realized gain from security transactions:
Proceeds from sales 1,362,631
Cost of securities sold (1,395,152)
------------
Net realized gain (32,521)
------------
Unrealized appreciation (depreciation)
of investments:
Beginning of year (701,630)
End of period (835,422)
------------
Unrealized depreciation during period (133,792)
------------
Net realized and unrealized loss on investments (166,313)
------------
Net increase in net assets resulting from operations $ 177,423
============
<PAGE>
THE PARNASSUS INCOME TRUST
FIXED-INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1999
June 30, 2000 1999
-------------- -----------
From operations:
Net investment income $ 343,736 $ 602,934
Net realized gain
from security transactions (32,521) (59,335)
Net unrealized depreciation
during the year (133,792) (1,026,102)
-------------- -----------
Increase (decrease) in
net assets resulting
from operations 177,423 (482,503)
Dividends to shareholders:
From net investment income (339,206) (602,863)
From realized capital gains 0 0
Increase (decrease) in
net assets from capital
share transactions (182,217) 609,320
-------------- -----------
Increase (decrease) in net assets (344,000) (476,046)
Net assets:
Beginning of year 11,006,426 11,482,472
-------------- -----------
End of period
(including undistributed net investment income
of $4,315 in 2000 and $4,723 in 1999) $ 10,662,426 $ 11,006,426
============== ============
<PAGE>
<TABLE>
THE PARNASSUS INCOME TRUST
<CAPTION>
CALIFORNIA TAX-EXEMPT FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 2000 (UNAUDITED)
Principal Percent of
Amount Municipal Bonds Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EDUCATION
$ 170,000 State of California
6.125%, due 10/01/11 $ 189,003
400,000 California Public Works -
Community College
Projects
5.375%, due 03/01/13 405,488
130,000 California Public Works -
University of California
5.400%, due 06/01/08 136,525
175,000 California Public Works -
California State University
6.200%, due 10/01/08 187,625
300,000 Folsom School District
5.650%, due 08/11/11 317,379
100,000 Franklin-McKinsey
School District
5.600%, due 07/01/07 103,775
100,000 Kern High School District
5.600%, due 08/01/13 104,096
100,000 Los Angeles Municipal
Improvement -
Central Library Projects
5.200%, due 06/01/07 101,884
250,000 Murrieta Valley Unified
School District
5.500%, due 09/01/10 259,975
100,000 Natomas Unified School
District
5.750%, due 09/01/13 102,389
300,000 Oakland General
Obligation
5.500%, due 12/15/11 314,346
175,000 Palos Verdes California
Library District
5.000%, due 08/01/13 174,909
110,000 Pasadena Recreational/
Library Improvements
5.750%, due 01/01/13 111,898
130,000 Pomona Unified School
District
5.500%, due 08/01/11 137,575
<PAGE>
Principal Percent of
Amount Municipal Bonds Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
$ 410,000 Sacramento Unified
School District
5.750%, due 07/01/17 $ 422,988
110,000 Santa Monica Unified
School District
5.400%, due 08/01/11 115,383
-------------
Total 31.7% 3,185,238
-------------
ENVIRONMENT
125,000 California Public Works -
Energy Efficiency
5.250%, due 05/01/08 128,288
150,000 East Bay Regional Park
5.000%, due 09/01/14 147,821
315,000 Los Angeles City
Public Works - Parks
5.500%, due 10/01/12 327,928
-------------
Total 6.0% 604,037
-------------
HEALTH CARE
350,000 California Health Facilities
Kaiser Permanente
5.000%, due 10/01/08 357,448
200,000 California Health
Facilities-Cedar Sinai
Medical Center
5.125%, due 08/01/17 190,368
415,000 Loma Linda Hospital
4.850%, due 12/01/10 416,501
-------------
Total 9.6% 964,317
-------------
HOUSING
205,000 Belmont Redevelopment
Agency
6.400%, due 08/01/09 224,370
405,000 Coronado Community
Development Agency
5.500%, due 09/01/18 405,486
<PAGE>
THE PARNASSUS INCOME TRUST
CALIFORNIA TAX-EXEMPT FUND
PORTFOLIO OF INVESTMENTS BY INDUSTRY CLASSIFICATION, JUNE 30, 2000 (CONTINUED)
Principal Percent of
Amount Municipal Bonds Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
$ 100,000 Glendale Redevelopment
Agency
5.500%, due 12/01/12 $ 102,749
275,000 Los Angeles Community
Redevelopment
5.000%, due 07/01/13 273,312
275,000 Pasadena Community
Development
6.000%, due 08/01/14 285,406
450,000 Petaluma Community
Development
5.600%, due 05/01/18 454,176
175,000 San Jose Redevelopment
Agency
6.000%, due 08/01/15 191,137
200,000 University Of California
Housing
5.500%, due 11/01/10 206,840
-------------
Total 21.3% 2,143,476
-------------
INFRASTRUCTURE IMPROVEMENTS
150,000 Los Angeles City
General Obligation
5.250%, due 09/01/11 152,054
350,000 Los Angeles Municipal
Improvement
Police Emergency
4.600%, due 09/01/13 328,510
200,000 Los Angeles
Wastewater System
5.500%, due 06/01/12 204,874
200,000 Los Angeles
Wastewater System
5.000%, due 06/01/11 202,410
350,000 Metro Water District -
Southern California
5.250%, due 07/01/15 350,595
200,000 Pomona Public Financing
Authority
6.000%, due 10/01/06 208,158
-------------
Total 14.4% 1,446,601
-------------
<PAGE>
Principal Percent of
Amount Municipal Bonds Net Assets Market Value
-------------------------------------------------------------------------------------------------------------------
PUBLIC
TRANSPORTATION
$ 250,000 Los Angeles Metro
Transit Authority
5.000%, due 07/01/13 $ 248,465
150,000 Los Angeles Metro
Transit Authority
4.500%, due 07/01/13 137,702
110,000 San Diego Mass
Transit Authority
5.000%, due 06/01/07 112,180
350,000 San Francisco
International Airport
5.000%, due 05/01/07 359,660
400,000 San Francisco
Bay Area Rapid Transit
5.250%, due 07/01/13 406,064
-------------
Total 12.6% 1,264,071
-------------
Total investments in securities
(Cost $9,375,409) 95.6% 9,607,740
-------------
Short-Term Investments
-------------------------------------------------------------------------------------------------------------------
Highmark California
Tax-Exempt Fund,
variable rate 3.860% 3.2% 317,040
-------------
Total investments 98.8% 9,924,780
Other assets and liabilities - net 1.2% 124,400
------- -------------
Total net assets 100.0% $ 10,049,180
======= =============
</TABLE>
<PAGE>
THE PARNASSUS INCOME TRUST
CALIFORNIA TAX-EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
Assets:
Investments in securities, at market value
(identified cost $9,375,409) (Note 1) $ 9,607,740
Temporary investments in short-term securities
(at cost, which approximates market) 317,040
Receivables:
Interest receivable 149,360
Capital shares sold 112
Other assets 862
-------------
Total assets 10,075,114
-------------
Liabilities:
Capital shares redeemed 20,204
Accounts payable and accrued expenses 5,730
-------------
Total liabilities 25,934
-------------
Net assets (equivalent to $16.24
per share based on 618,696.221
shares of capital stock outstanding) $ 10,049,180
=============
Net assets consist of:
Undistributed net investment income $ 3,090
Unrealized appreciation on investments 232,330
Undistributed net realized gain 27,827
Capital paid-in 9,785,933
-------------
Total net assets $ 10,049,180
=============
Computation of net asset value and offering price per share:
Net asset value and offering price per share
($10,049,180 divided by 618,696.221 shares) $ 16.24
=============
<PAGE>
THE PARNASSUS INCOME TRUST
CALIFORNIA TAX-EXEMPT FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
Investment income:
Interest $ 226,420
-------------
Total investment income 226,420
-------------
Expenses:
Investment advisory fees (Note 5) 22,434
Transfer agent fees (Note 5) 4,554
Fund administrative expense (Note 5) 3,000
Reports to shareholders 1,622
Registration fees and expenses 0
Professional fees 2,083
Custody fees 465
Trustee fees and expenses 813
Other expenses 2,788
-------------
Subtotal of expenses before fee waiver 37,759
Fees waived by Parnassus Investments (Note 5) (11,217)
-------------
Total expenses 26,542
-------------
Net investment income 199,878
-------------
Realized and unrealized gain (loss)
on investments:
Realized gain from security transactions:
Proceeds from sales 912,658
Cost of securities sold 887,095
-------------
Net realized gain 25,563
-------------
Unrealized appreciation of investments:
Beginning of year 9,461
End of period 232,330
-------------
Unrealized appreciation during period 222,869
-------------
Net realized and unrealized gain on investments 248,432
-------------
Net increase in net assets resulting from operations $ 448,310
=============
<PAGE>
THE PARNASSUS INCOME TRUST
CALIFORNIA TAX-EXEMPT FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1999
June 30, 2000 1999
-------------- ----------
From operations:
Net investment income $ 199,878 $ 340,397
Net realized gain from
security transactions 25,563 4,201
Net unrealized appreciation
(depreciation) during the year 222,869 (504,906)
-------------- ----------
Increase (decrease) in
net assets resulting
from operations 448,310 (160,308)
Dividends to shareholders:
From net investment income (202,796) (338,368)
From realized capital gains 0 (3,825)
Increase in net assets from
capital share transactions 2,026,666 937,627
-------------- ----------
Increase in net assets 2,272,180 435,126
Net assets:
Beginning of year 7,777,000 7,341,874
-------------- ----------
End of period
(including undistributed net investment income
of $3,091 in 2000 and $6,009 in 1999) $ 10,049,180 $ 7,777,000
============= ==========
<PAGE>
THE PARNASSUS INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
The Parnassus Income Trust (the "Trust"), formerly The Parnassus Income
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 funds,
each offering separate shares. The Trust began operations on June 1, 1992.
The following is a summary of significant accounting policies of the Trust.
Securities Valuation: The Trust'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 Trust 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.
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 ex-penses 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.
Security Lending: The Equity Income Fund lends its securities to approved
brokers to earn additional income and receives cash and/or securities as
collateral to secure the loans. Collateral is maintained at not less than
102% of the value of loaned securities. Although the risk of lending is
mitigated by the collateral, this fund could experience a delay in
recovering its securities and a possible loss of income or value if the
borrower fails to return them.
Repurchase Agreements: Securities purchased with cash collateral held from
securities lending may include investments in repurchase agreements secured
by U.S. government obligations or other securities. Securities pledged as
collateral for repurchase agreements are held by the Funds' custodian bank
until maturity of the repurchase agreements. Provisions of the agreements
ensure that the market value of the collateral is sufficient in the event
of default; however, in the event of default or bankruptcy by the other
party to the agreements, realization and/or retention of the collateral may
be subject to legal proceedings.
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 $303,162
(aggregate of $0.148 per share) during the six months ended June 30, 2000.
Fixed-Income Fund: The Fund paid income dividends totaling $339,207
(aggregate of $0.437 per share) during the six months ended June 30, 2000.
California Tax-Exempt Fund: The Fund paid income dividends totaling
$202,796 (aggregate of $0.354 per share) during the six months ended June
30, 2000.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. Capital Stock
Equity Income Fund: As of June 30, 2000, there were an unlimited number of
shares of no par value capital stock authorized and capital paid-in
aggregated $38,123,755. Transactions in capital stock (shares) were as
follows:
<TABLE>
<CAPTION>
-------------------------- --------------------------
Six Months Ended Year Ended
June 30, 2000 1999
Shares Amount Shares Amount
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 631,625 $ 15,457,810 313,500 $ 6,954,055
Shares issued through dividend reinvestment 10,519 267,416 118,936 2,623,924
Shares repurchased (553,598) (13,527,582) (475,945) (10,390,824)
---------- ------------- ---------- ------------
Net increase (decrease) (88,546) $ (2,197,644) (43,509) $ (812,845)
========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
Fixed-Income Fund: As of June 30, 2000, there were an unlimited number of
shares of no par value capital stock authorized and capital paid-in
aggregated $11,581,751. Transactions in capital stock (shares) were as
follows:
-------------------------- --------------------------
Six Months Ended Year Ended
June 30, 2000 1999
Shares Amount Shares Amount
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 152,623 $ 2,188,138 215,444 $ 3,290,183
Shares issued through dividend reinvestment 19,090 272,229 31,742 479,317
Shares repurchased (184,860) (2,641,583) (206,257) (3,160,180)
---------- ------------- ---------- ------------
Net increase (13,147) $ (181,216) 40,929 $ 609,320
========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
California Tax-Exempt Fund: As of June 30, 2000, there were an unlimited
number of shares of no par value capital stock authorized and capital
paid-in aggregated $9,785,933. Transactions in capital stock (shares) were
as follows:
-------------------------- --------------------------
Six Months Ended Year Ended
June 30, 2000 1999
Shares Amount Shares Amount
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 144,285 $ 2,304,278 81,320 $ 1,275,501
Shares issued through dividend reinvestment 9,876 157,830 15,540 253,900
Shares repurchased (27,114) (435,442) (40,164) (591,774)
---------- ------------- ---------- ------------
Net increase 127,047 $ 2,026,666 56,696 $ 937,627
========== ============= ========== ============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. Purchases of Securities
Equity Income Fund: Purchases of securities for the six months ended June
30, 2000 were $21,932,439. For federal income tax purposes, the aggregate
cost of securities and unrealized depreciation at June 30, 2000 were the
same as for financial statement purposes. Of the $7,057,780 of net
unrealized appreciation at June 30, 2000, $10,224,349 related to
appreciation of securities and $3,166,569 related to depreciation of
securities.
Fixed-Income Fund: Purchases of securities for the six months ended June
30, 2000 were $1,136,106. For federal income tax purposes, the aggregate
cost of securities and unrealized appreciation at June 30, 2000 were the
same as for financial statement purposes. Of the ($835,521) of net
unrealized depreciation at June 30, 2000, $8,296 related to appreciation of
securities and $843,817 related to depreciation of securities.
California Tax-Exempt Fund: Purchases of securities for the six months
ended June 30, 2000 were $2,983,611. For federal income tax purposes, the
aggregate cost of securities and unrealized appreciation at June 30, 2000
were the same as for financial statement purposes. Of the $232,362 of net
unrealized appreciation at June 30, 2000, $292,300 related to appreciation
of securities and $59,938 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 Invest-ments 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 2000. For the Equity Income
Fund, the investment advisory fee was 0.55%. (On February 1, 1999 the fee
was increased to 0.55% from 0.50%.) Parnassus Investments received net
advisory fees totaling $136,770 from the Equity Income Fund for the six
months ended June 30, 2000. For the Fixed-Income Fund, the investment
advisory fee was 0.15%. (On February 1, 1999 the fee was increased to 0.15%
from 0.10%.) Parnassus Investments received net advisory fees totaling
$8,390 from the Fixed-Income Fund for the six months ended June 30, 2000.
For the California Tax-Exempt Fund, the investment advisory fee was 0.25%.
(On February 1, 1999 the fee was increased to 0.25% from 0.20%.) Parnassus
Investments received net advisory fees totaling $11,217 from the California
Tax-Exempt Fund for the six months ended June 30, 2000.
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 three funds, Parnassus
Investments received fees paid by the Trust totaling $80,738 for the six
months ended June 30, 2000. 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>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
6. Financial Highlights
<CAPTION>
Selected data for each share of capital stock outstanding, total return and
ratios/supplementa data for the six months ended June 30, 2000, and each of
the five years ended December 31 are as follows:
-------------------------------------------------------------------------------------------------------------------
June 30, 2000
Equity Income Fund (unaudited) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $23.13 $20.13 $20.68 $18.56 $19.58 $15.70
------- ------- ------ ------ ------ ------
Income from investment operations:
Net investment income 0.15 0.24 0.75 0.79 0.98 0.88
Net realized and unrealized gain (loss) on securities 2.46 4.26 1.49 2.86 0.37 3.93
------- ------- ------ ------ ------ ------
Total from investment operations 2.61 4.50 2.24 3.65 1.35 4.81
------- ------- ------ ------ ------ ------
Distributions:
Dividends from net investment income (0.15) (0.26) (0.73) (0.79) (0.97) (0.90)
Distributions from net realized gains 0.00 (1.24) (2.06) (0.74) (1.40) (0.03)
------- ------- ------ ------ ------ ------
Total distributions (0.15) (1.50) (2.79) (1.53) (2.37) (0.93)
------- ------- ------ ------ ------ ------
Net asset value at end of period $25.59 $23.13 $20.13 $20.68 $18.56 $19.58
------- ------- ------ ------ ------ ------
Total return 11.28% 22.78 11.05% 20.15% 7.09% 31.13%
Ratios/Supplemental Data:
Ratio of expenses to average net assets (actual)* 0.96% 1.08% 1.05% 1.05% 0.80% 0.72%
Decrease reflected in the above expense ratios due to
undertakings by Parnassus Investments 0.05% 0.19% 0.24% 0.30% 0.60% 0.82%
Ratio of net investment income to average net assets 1.20% 1.09% 2.30% 4.04% 4.56% 4.76%
Portfolio turnover rate 29.60% 39.53% 166.32% 34.12% 47.80% 15.36%
Net assets, end of period (000's) $53,154 $45,999 $40,903 $38,847 $33,362 $26,779
</TABLE>
<TABLE>
-------------------------------------------------------------------------------------------------------------------
June 30, 2000
Fixed-Income Fund (unaudited) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $14.49 $15.98 $16.04 $15.43 $15.73 $13.79
------- ------- ------ ------ ------ ------
Income from investment operations:
Net investment income 0.44 0.81 0.84 0.90 0.92 0.95
Net realized and unrealized gain (loss) on securities(0.21) (1.49) 0.25 0.67 (0.31) 1.95
------- ------- ------ ------ ------ ------
Total from investment operations 0.24 (0.68) 1.09 1.57 0.61 2.90
------- ------- ------ ------ ------ ------
Distributions:
Dividends from net investment income (0.44) (0.81) (0.85) (0.89) (0.91) (0.96)
Distributions from net realized gains 0.00 0.00 (0.30) (0.07) .-- .--
------- ------- ------ ------ ------ ------
Total distributions (0.44) (0.81) (1.15) (0.96) (0.91) (0.96)
------- ------- ------ ------ ------ ------
Net asset value at end of period $14.29 $14.49 $15.98 $16.04 $15.43 $15.73
------- ------- ------ ------ ------ ------
Total return 1.68% (4.32%) 6.97% 10.60% 4.08% 21.58%
Ratios/Supplemental Data:
Ratio of expenses to average net assets (actual)* 0.72% 0.87% 0.79% 0.82% 0.83% 0.90%
Decrease reflected in the above expense ratios due to
undertakings by Parnassus Investments 0.06% 0.36% 0.40% 0.43% 0.50% 0.73%
Ratio of net investment income to average net assets 5.89% 5.36% 4.92% 5.79% 5.98% 6.20%
Portfolio turnover rate 10.77% 13.47% 44.98% 17.15% 2.80% 12.10%
Net assets, end of period (000's) $10,662 $ 11,006 $ 11,482 $ 9,683 $ 8,384 $ 6,585
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
June 30, 2000
California Tax-Exempt Fund (unaudited) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of year $15.82 $16.88 $16.72 $16.02 $16.06 $14.28
------- ------- ------ ------ ------ ------
Income from investment operations:
Net investment income 0.36 0.72 0.75 0.74 0.80 0.82
Net realized and unrealized gain (loss) on securities 0.41 (1.05) 0.26 0.71 (0.06) 1.78
------- ------- ------ ------ ------ ------
Total from investment operations 0.77 (0.33) 1.01 1.45 0.74 2.60
------- ------- ------ ------ ------ ------
Distributions:
Dividends from net investment income (0.35) (0.72) (0.75) (0.75) (0.78) (0.82)
Distributions from net realized gains 0.00 (0.01) (0.10) .-- .-- .--
------- ------- ------ ------ ------ ------
Total distributions (0.35) (0.73) (0.85) (0.75) (0.78) (0.82)
------- ------- ------ ------ ------ ------
Net asset value at end of period $16.24 $15.82 $16.88 $16.72 $16.02 $16.06
------- ------- ------ ------ ------ ------
Total return 4.95% (2.01%) 6.12% 9.33% 4.78% 18.60%
Ratios/Supplemental Data:
Ratio of expenses to average net assets (actual)* 0.55% 0.70% 0.67% 0.67% 0.54% 0.50%
Decrease reflected in the above expense ratios due to
undertakings by Parnassus Investments 0.12% 0.25% 0.30% 0.32% 0.46% 0.69%
Ratio of net investment income to average net assets 4.13% 4.42% 4.43% 4.69% 4.96% 5.30%
Portfolio turnover rate 10.28% 1.75% 9.40% 10.00% .00% 13.10%
Net assets, end of period (000's) $10,049 $ 7,777 $ 7,342 $ 6,520 $ 5,835 $ 4,483
<FN>
* 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, 1999 and years ended December 31,
1998, 1997, 1996, and 1995.
</FN>
</TABLE>
<PAGE>
INVESTMENT ADVISER
Parnassus Investments
One Market-Steuart Tower #1600
San Francisco, California 94105
LEGAL COUNSEL
Gardner, Carton & Douglas
321 N. Clark Street #3300
Chicago, IL 60610
INDEPENDENT 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.
Printed on recycled paper.
