N-CSR 1 d386969dncsr.htm N-CSR N-CSR
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: Parnassus Funds (811-04044) and Parnassus Income Funds (811-06673)

Parnassus Funds

Parnassus Income Funds

(Exact name of registrant as specified in charter)

1 Market Street, Suite 1600, San Francisco, California 94105

(Address of principal executive offices) (Zip code)

Marc C. Mahon

Parnassus Funds

Parnassus Income Funds

1 Market Street, Suite 1600, San Francisco, California 94105

(Name and address of agent for service)

Registrant’s telephone number, including area code: (415) 778-0200

Date of fiscal year end: December 31

Date of reporting period: December 31, 2022

 

 

 


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Item 1: Report to Shareholders


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Parnassus Funds Annual Report

December 31, 2022

Parnassus Core Equity FundSM

Investor Shares: PRBLX | Institutional Shares: PRILX

Parnassus Growth Equity FundSM

Investor Shares: PFGEX | Institutional Shares: PFPGX

Parnassus Value Equity FundSM

Investor Shares: PARWX | Institutional Shares: PFPWX

Parnassus Mid Cap FundSM

Investor Shares: PARMX | Institutional Shares: PFPMX

Parnassus Mid Cap Growth FundSM

Investor Shares: PARNX | Institutional Shares: PFPRX

Parnassus Fixed Income FundSM

Investor Shares: PRFIX | Institutional Shares: PFPLX

 

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Table of Contents


Table of Contents

Table of Contents

 

Letter from Parnassus Investments   4
Fund Performance and Commentary  
Parnassus Core Equity Fund   6
Parnassus Growth Equity Fund   11
Parnassus Value Equity Fund   15
Parnassus Mid Cap Fund   19
Parnassus Mid Cap Growth Fund   23
Parnassus Fixed Income Fund   27
Responsible Investing Notes   30
Fund Expenses   32
Portfolios of Investments  
Parnassus Core Equity Fund   33
Parnassus Growth Equity Fund   35
Parnassus Value Equity Fund   37
Parnassus Mid Cap Fund   39
Parnassus Mid Cap Growth Fund   41
Parnassus Fixed Income Fund   43
Financial Statements   50
Notes to Financial Statements   56
Financial Highlights   68
Report of Independent Registered Public Accounting Firm   72
Additional Information   74

 

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February 3, 2023

 

Dear Shareholder,

This past year saw the worst returns for stocks since 2008, when we were mired in recession and still not out of the Great Financial Crisis (GFC). Then, as now, the future looked bleak, and the recent steep decline in prices induced many to sell. In the years following the 2008 debacle, stocks had a fabulous run. From 2009 through 2021, the S&P 500 benchmark posted double-digit annual returns ten times. This includes five years when stocks gained more than 20% and only one (2018, -4%) when they were down.

I don’t expect stocks to go up as much over the next dozen years as they did after 2008. Such sustained periods of outsized returns are historically rare, and the drawdown caused by the GFC was far greater than what we experienced in 2022. That said, it makes me optimistic remembering that historically stocks go up over time, and often the best returns come when conventional wisdom calls for gloom.

Parnassus is here to build your wealth responsibly over the long-term. We do this by focusing on what we can control, and bearing what we cannot with an attitude of learning and growth. The stock market was weak in 2022, and our funds did not perform as well as we wanted. We can’t do anything about that now. What we are doing is continuing to invest in our team and improving our investment offerings for your benefit.

Strengthening Our Team

During the fourth quarter, we welcomed six new employees to Parnassus. Lauren Virgen joined us as the firm’s first dedicated corporate controller. In this role, she is responsible for managing corporate financial reporting, internal and external audits, corporate treasury and expense management. Prior to joining Parnassus, Lauren worked at CrossCountry Consulting and PricewaterhouseCoopers. She received her bachelor’s degree in business economics and accounting from the University of California, Santa Barbara, and is a Certified Public Accountant (CPA). Lauren is currently learning French and loves to travel.

Jake Yoon joined Parnassus as a research analyst. Previously he worked at Guggenheim Securities in New York as an investment banking analyst focused on mergers and acquisitions (M&A). Jake received his bachelor’s degree in finance from New York University. In his spare time, he enjoys golf, pulling espresso shots and Stephen King novels.

Jeff Bernstein is senior manager of investment operations. He is responsible for managing the administration and operations of investment products as well as audits, data reporting and vendor relationships. Prior to joining Parnassus, Jeff managed a team at Opus Fund Services, overseeing the portfolio accounting, administration and trade operations for over 200 clients. He received a bachelor’s degree in finance from Benedictine University. In his free time, Jeff enjoys hiking, traveling, watching sports and trying new restaurants for his food blog.

Kevin Kelleher is our new senior investment writer. He joins us with a wealth of experience, including many years of work as a journalist focusing on business and finance. Kevin served as a contributing writer at Wired, TIME and Fortune. He was also a stock columnist at TheStreet.com and an Op Ed contributor at Reuters. Kevin was director of editorial content at Business for Social Responsibility and created branded content for Charles Schwab, Barclays Global,

 

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Brown & Co, E*TRADE and Softbank Vision Fund. Kevin earned a bachelor’s degree in English from Reed College and a master’s in journalism from Columbia University. Kevin enjoys watching classic and independent films, cheering on underdog baseball teams and taking long hikes with his dog in nature during his free time.

Ani Gravenites is our new compliance officer. She is responsible for the administration of the compliance testing programs and our vendor management program. Prior to joining Parnassus, Ani was a vice president of compliance at EQIS Capital Management. In her free time, Ani enjoys hiking, painting and cooking with ingredients from her garden.

Melissa Hearon joined Parnassus as our new director of human resources. She has a strong background in asset management and most recently held the HR leadership role at Hellman & Friedman (H&F), a private equity firm here in San Francisco. Melissa holds a bachelor’s degree in political science from Georgia State University. In her free time, she enjoys spending time with her husband and three kids, hiking, skiing and traveling.

Improved Fund Offerings

I’m happy to share that we’ve launched a new fund, the Parnassus Growth Equity Fund. The objective of this fund is to build your wealth over the long-term, with a focus on large-cap growth stocks. We have two wonderful portfolio managers at the helm of this new fund. Andrew Choi serves as lead manager of our new fund, and Shivani Vohra is co-portfolio manager. I encourage you to read their inaugural report in the pages that follow so you can learn about their outlook and strategy, and see what stocks they selected for the fund launch. I’d also like to acknowledge the hard work of dozens of Parnassus employees to get this new fund up and running.

We made two improvements to another of our large-cap focused offerings, the fund formerly known as the Parnassus Endeavor Fund. Since the beginning of 2021, this fund has focused on large-cap value stocks, and its benchmark has been the Russell 1000® Value Index. We decided to rename this offering the Parnassus Value Equity Fund, to better describe how it fits with our other fund offerings. There is no change to the fund’s objective. Billy Hwan, who joined the fund as portfolio manager in May 2018, is still at the helm. As of December 30, 2022, we added Krishna Chintalapalli as a co-portfolio manager.

Looking Forward

With the recent investments in our team and the improvements to our fund lineup, Parnassus is better equipped to serve you than ever before. 2022 was a challenging year, but we did not let that distract us from our mission to build wealth responsibly over the long term. We will continue to work hard for you in 2023 and hopefully get back to posting positive investment returns.

Thank you for investing in the Parnassus Funds.

Sincerely,

 

 

LOGO

Benjamin E. Allen

CEO and Portfolio Manager

 

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Parnassus Core Equity Fund

Ticker: Investor Shares - PRBLX

Ticker: Institutional Shares - PRILX

 

As of December 31, 2022, the net asset value (“NAV”) of the Parnassus Core Equity Fund – Investor Shares (“the Fund”) was $46.92. After taking dividends into account, the total return for the year was a loss of 18.61%. This compares to a loss of 18.11% for the S&P 500 Index (“S&P 500”).

Below is a table that summarizes the performances of the Parnassus Core Equity Fund and the S&P 500. The returns are for the one-, three-, five- and ten-year periods.

 

Parnassus Core Equity Fund

 

    Average Annual Total Returns (%)  
    for period ended December 31, 2022  
     One
Year
    Three
Years
    Five
Years
    Ten
Years
    Gross
Expense
Ratio
 
Parnassus Core Equity Fund – Investor Shares     -18.61       7.95       10.41       12.41       0.82  
Parnassus Core Equity Fund – Institutional Shares     -18.45       8.19       10.66       12.64       0.61  
S&P 500 Index     -18.11       7.66       9.42       12.56       NA  

Performance data quoted represent past performance and are no guarantee of future returns. Current performance may be lower or higher than the performance data quoted, and current performance information to the most recent month end is available on the Parnassus website (www.parnassus.com). Investment return and principal value will fluctuate, so an investor’s shares, when redeemed, may be worth more or less than their original principal cost.

Returns shown in the table do not reflect the deduction of taxes a shareholder may pay on fund distributions or redemption of shares. The S&P 500 is an unmanaged index of common stocks, and it is not possible to invest directly in an index. Index figures do not take any expenses, fees or taxes into account, but mutual fund returns do.

The estimated impact of individual stocks on the Fund’s performance is provided by FactSet.

Year in Review

In 2022, the S&P 500 fell 18.11%, in stark contrast to the incredible rally the year prior. The streak of seemingly unprecedented events, which started with the COVID-19 pandemic over two years ago, continued this year with Russia’s invasion of Ukraine. This was followed by a historically quick interest rate hiking cycle by the U.S. Federal Reserve. All of this occurred against a backdrop of stubbornly high inflation, robust consumer spending and an uneven recovery in supply chains. As a result, volatility persisted throughout the year, as financial markets grappled with unexpected events and a widening range of possible economic outcomes for the near future. Just as 2021 was characterized by investors’ willingness to take risk, 2022 was characterized by investors’ avoidance of it.

It is quite remarkable the difference a year can make. At the end of 2021, the U.S. 10 Year Treasury Note was yielding 1.5%, the federal funds policy rate was just 0.25% and the S&P 500’s forward price-to-earnings (PE) multiple was 21 times. CPI1 inflation for 2022 was expected to be just 4.0%. At the end of 2022, the U.S. 10 Year Treasury Note yielded over 3.8%, the federal funds policy rate was 4.5% and the S&P 500’s forward PE multiple was down 22% to 16 times earnings. CPI inflation for the year is on track to be almost double what was expected. In a rather dramatic reversal, the top five market constituents by index weight during 20212 – which had contributed 26% of the market’s gain in that year – accounted for 47% of the market’s 2022 loss.

Turning to our Fund, despite the growing list of anomalous events and high economic uncertainty, we remained disciplined and true to our investment

 

 

1 Consumer Price Index, U.S. Bureau of Labor Statistics.

2 Apple, Microsoft, Alphabet, Amazon and Meta Platforms (formerly Facebook)

 

 

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process throughout the year. We leaned into volatility to take advantage of emerging opportunities, while positioning the portfolio to reflect the level of uncertainty in the investment environment. Overall, while 2022 was a tough year for markets and the Fund, we remain optimistic and confident about how we navigated the challenges and positioned the portfolio for 2023.

The Parnassus Core Equity Fund – Investor Shares experienced a loss of 18.61% for 2022, which trailed the negative 18.11% return for the S&P 500. Our stock selection was positive last year, but it was overwhelmed by poor sector allocation. The Fund’s strongest stock selection was in the Communication Services sector, led by T-Mobile. Stock selection in the Information Technology sector was also notably positive, driven by our positions in Fiserv and Mastercard. From a sector allocation perspective, our underweight positioning in the Energy sector was by far the biggest detractor. This was followed by Communication Services, where our overweight position was also a detractor.

Within stock selection, our top three relative contributors were John Deere, Gilead and T-Mobile. John Deere, the farm equipment manufacturer, added 0.8%* to the Fund’s return, as the stock gained 26.6% in 2022. The company benefitted from strong pricing, an equipment upgrade cycle and strong management of significant cost and supply-chain headwinds.

Drug maker Gilead added 0.7% to the Fund’s return, with the stock returning 23.6%. Gilead benefitted from relatively stable near-term fundamentals, a low starting valuation and strong results that beat expectations to close the year.

Lastly, T-Mobile contributed 0.5% to the Fund’s total return, as its stock returned 37.8%. Due to the nature of its business, the company is less exposed to fluctuations in the broader economy. Execution also continued to be strong, as evidenced by the company’s increased market share and improved capital allocation.

Our biggest three relative detractors were Ball, Comcast and Alphabet. Ball cut the Fund’s return by 1.2%, with the stock returning negative 46.2%. It was a challenging year for the aluminum can provider, as the

company had notable business in Russia that they quickly divested. Further, their large customers took significant price increases at the expense of volumes, which impacted Ball sales. We believe these near-term headwinds will subside and that the stock should benefit as a result.

Our next biggest detractor was Comcast, the broadband internet provider. Comcast stock returned negative 34.8% in the year, detracting 1.3% from the Fund’s return. Due to rising competitive intensity, along with slowing housing starts, the company reported worse-than-expected net subscriber additions. We exited the position in the fourth quarter.

Lastly, Alphabet’s detraction from the Fund’s return was 2.6%, as the total return of the shares was negative 39.1%. Investors were disappointed with the lack of margin expansion and expense discipline by the company. They also worried about the growth of advertising in what is anticipated to be a tougher demand environment next year.

 

 

* For this report, we quote total return to the portfolio, which includes price change and dividends.

 

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Parnassus Core Equity Fund

As of December 31, 2022

(percentage of net assets)

 

 

LOGO

* For purposes of categorizing securities for diversification requirements under the Investment Company Act, the Fund uses industry classifications that are more specific than those used for the chart.

Portfolio characteristics and holdings are subject to change periodically.

Top 10 Equity Holdings   
(percentage of net assets)   
Microsoft Corp.      6.7%  
Alphabet Inc., Class A      5.0%  
Deere & Co.      4.3%  
Fiserv Inc.      4.2%  
Mastercard Inc., Class A      3.7%  
The Procter & Gamble Co.      3.2%  
Linde plc      3.2%  
Gilead Sciences Inc.      3.0%  
The Charles Schwab Corp.      2.9%  
Oracle Corp.      2.9%  

Portfolio characteristics and holdings are subject to change periodically.

Value on December 31, 2022

of $10,000 invested on December 31, 2012

 

 

LOGO

The chart shows the growth in value of a hypothetical $10,000 investment over the last 10 years and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares.

Outlook and Strategy

The current investment setup is a result of an unprecedented series of events without perfect historical analogues. COVID-19 emerged at a time when the infrastructure for online commerce was mature. This allowed many, though not all, to adapt to a new way of living while socially distancing. To avoid an economic and public health crisis, the U.S. government stepped in to provide significant stimulus and accommodative financial conditions. This bolstered demand at a time when supply chains were in disarray, which led to elevated inflation. Subsequently, the Federal Reserve stepped back in with a commensurately strong interest rate hiking cycle to curb demand and thereby reduce inflation.

Right now, the key question being debated is the following: What will be the full cost in terms of

 

 

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economic growth to bring inflation back down? Investors often look to the past to glean clues for where we might be going. However, it’s difficult to draw helpful parallels this time. For example, it is rare to see inflation begin to decelerate prior to an economic recession, as we saw happen in December. At the time of this writing, earnings for the S&P 500 are still expected to grow almost 5% in 2023 despite the Federal Reserve’s actions to curb demand.

As we now know, investors dramatically underestimated inflationary pressures entering 2022; similarly, it is unlikely that the market will be able to precisely predict the ramifications of the interest rate increases as we head into 2023. As we noted in our third quarter letter, we do know that many forward-looking signals show signs of cooling inflation and a weakening labor market. This trend will likely continue, which would allow the Federal Reserve to shift their focus back toward supporting employment and demand. This cooling of inflation and easing of financial conditions may occur without a deep recession, which would support investor risk appetite.

The elevated uncertainty in 2022 caused investors to favor sectors such as Consumer Staples and Health Care while sectors like Consumer Discretionary dramatically trailed the rest of the market. Despite an investor flight to safety, our portfolio remains balanced and has not shifted defensively.

Our strategy continues to focus on long-term outperformance through the ownership of high-quality businesses that are available at attractive prices due to near-term uncertainty. During the fourth quarter, we took advantage of quite a few of these kinds of opportunities. We added four new stocks, replacing the four that we sold. First on this list is D.R. Horton, the U.S. homebuilder. The historically fast pace of interest rate increases weighed on sentiment as homebuilding activity slowed. This created an attractive opportunity to own a market share-gaining homebuilder that addresses the need for more homes in the U.S.

We also bought shares of Bank of America, a dominant consumer-centric bank. Bank of America’s shares traded near book value in the fourth quarter due to recession concerns driving sentiment lower. The shares were pricing in quite a large margin of safety due to the broader economy, so we initiated a position.

We bought shares of SYSCO, the dominant food distribution company. The stock outperformed in 2022, and we believe that there is further upside on the horizon in 2023 due to the following factors: the continued recovery in demand, operating expense discipline and technology investments made over the past few years that strengthen the company’s already enviable competitive position.

Lastly, we bought shares in Salesforce, the iconic customer relationship management (CRM) software provider. Negative sentiment from economic uncertainty, decelerating sales growth and management turnover weighed significantly on the company’s shares. We believe this created an ideal opportunity to own the dominant CRM franchise with ample room for growth and margin expansion.

Turning to the positions we exited, we sold CoStar Group in favor of other opportunities after a period of outperformance that was driven by the continued strength of their CoStar Suite business and recovery in their Multifamily segment. Within Communication Services, we sold Verizon and Comcast because we believe the wireless and broadband industries are in the early stages of rising competitive intensity. Lastly, we exited railroad Union Pacific. We still maintain our railroad exposure through Canadian Pacific.

With these changes, the Fund exited the year most overweight in the Information Technology, Materials, and Financials sectors. Our holdings in these sectors offer an attractive combination of resilient business models with attractively priced earnings. We continue to lean into our bias for quality compounders at fair prices, and we have substantial exposure to secular winners such as Microsoft, Salesforce and Applied Materials. We also see opportunity in stocks that rely more on earnings growth than valuation expansion to deliver returns. Companies like Fiserv and Oracle are attractively priced with achievable earnings growth targets. Ball, despite the recent underperformance, also falls in this category, as we feel optimistic about the company’s prospects from here. We are also overweight Industrials and Consumer Staples.

We remain underweight the Consumer Discretionary sector, due to elevated expectations coupled with a tougher consumer setup for 2023. We’re also still underweight Health Care and Utilities, mostly due to valuation concerns. We don’t own any Energy stocks.

 

 

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While 2022 was a tough year, we maintain an optimistic outlook on the resilience and upside potential of the portfolio. The team remains disciplined and focused on executing our process. We strive to own companies that emerged from the pandemic stronger, benefitted from economic reopening, endured this period of higher inflation and are entering 2023 better positioned than before. As always, we’re honored to have your trust as we continue to deliver Principles and Performance®.

We thank you for your investment in the Parnassus Core Equity Fund.

Sincerely,

 

LOGO

Todd C. Ahlsten

Lead Portfolio Manager

 

LOGO

Benjamin E. Allen

Portfolio Manager

 

LOGO

Andrew S. Choi

Portfolio Manager

 

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Parnassus Growth Equity Fund

Ticker: Investor Shares - PFGEX

Ticker: Institutional Shares - PFPGX

 

As of December 31, 2022, the net asset value (“NAV”) of the Parnassus Growth Equity Fund – Investor Shares (“the Fund”) was $14.95. The total return for the period since inception on December 28, 2022, was a loss of 0.33%. This compares to a gain of 1.94% for the Russell 1000 Growth Index (“Russell 1000 Growth”).

Below is a table that summarizes the performances of the Parnassus Growth Equity Fund and the Russell 1000 Growth.

 

Parnassus Growth Equity Fund

 

    Average Annual Total Returns (%)  
    for period ended December 31, 2022  
    

Since
Inception,

December 28,
2022

    Gross
Expense
Ratio
    Net
Expense
Ratio
 
Parnassus Growth Equity Fund –
Investor Shares
    -0.33       1.20       0.84  
Parnassus Growth Equity Fund –
Institutional Shares
    -0.33       0.99       0.63  
Russell 1000 Growth Index     1.94       NA       NA  

Performance data quoted represent past performance and are no guarantee of future returns. Current performance may be lower or higher than the performance data quoted. Current performance information to the most recent month end is available on the Parnassus website (www.parnassus.com). Investment return and principal value will fluctuate, so an investor’s shares, when redeemed, may be worth more or less than their original principal cost. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived.

Returns shown in the table do not reflect the deduction of taxes a shareholder may pay on fund distributions or redemption of shares. The Russell 1000 Growth is an unmanaged index of common stocks, and it is not possible to invest directly in an index. Index figures do not take any expenses, fees or taxes into account, but mutual fund returns do.

The estimated impact of individual stocks on the Fund’s performance is provided by FactSet.

As described in the Fund’s current prospectus dated May 1, 2022, and as amended and restated as of January 1, 2023, Parnassus Investments, LCC has contractually agreed to reduce its investment advisory fee to the extent necessary to limit total annual fund operating expenses to 0.84% of net assets for the Parnassus Growth Equity Fund – Investor Shares and to 0.63% of net assets for the Parnassus Growth Equity Fund – Institutional Shares. This agreement will not be terminated prior to May 1, 2024 and may be continued indefinitely by the investment adviser on a year-to-year basis.

Introducing the Parnassus Growth Equity Fund

We are pleased to launch and introduce the Parnassus Growth Equity Fund, a U.S. large cap growth fund that is the first new fund in almost a decade from Parnassus Investments. We are excited to offer a strategy that focuses on owning innovative, high-quality growth companies. We are leveraging the best of Parnassus, including our disciplined investment process and experienced team, to create a portfolio that expresses what we believe to be some of the most attractive growth opportunities in the market.

By way of introduction, I, Andrew Choi, serve as the lead portfolio manager of the Fund alongside my co-portfolio manager, Shivani Vohra. I have been with Parnassus since 2017 and have 10 years of prior experience. During my time at Parnassus, I have led our coverage in the Information Technology sector and have experience managing a diversified portfolio as a portfolio manager on the Parnassus Core Equity Fund.

And I, Shivani Vohra, joined Parnassus in 2018. I have been working collaboratively with Andrew for the past several years, and we already have a very well-established partnership. I have 10 years of prior experience and have developed expertise in the Health Care and Consumer sectors. Technology, Consumer Discretionary, and Health Care represent the three largest sectors of the market and more than 70% of the Russell 1000 Growth Index.

We are supported by the broader Parnassus research team and our ESG stewardship team, which will engage with companies in our portfolio to drive positive environmental, social and governance (ESG) outcomes. Further, Parnassus’s chief investment officer, Todd Ahlsten, acts as senior advisor to the Fund, lending his expertise in helping to identify high-quality

 

 

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growth stocks and his decades of experience navigating market cycles.

This is an attractive time for active management in growth investing. The Russell 1000 Growth Index (“the market”) was down 29.1% in 2022. The valuation of the market fell more than 31% during the year, and currently trades at just over 21 times price to next twelve months earnings. Investors who simply bought the broader market during 2022 made a concentrated bet on a handful of companies as the five biggest constituents3 represented, on average, more than 38% of the market. These stocks contributed almost 53% of the market’s 2022 decline. At the time of this writing, the top five constituents still comprise more than 33% of the market. The environment is ripe for active management in large-growth stocks with more reasonable valuations and attractive opportunities, many of which can be found beyond the largest companies.

In this environment, we are diligently executing the same disciplined approach to valuation and fundamental research that has helped Parnassus navigate and take advantage of market cycles in the past. We are focused on companies with long-term growth that is tied to secular trends, strong competitive advantages and high-quality management teams. Relevancy, profitable unit economics and above-market growth and earnings are especially important for our portfolio holdings. Great companies rarely go on sale without some investor controversy or debate. We lean into the volatility these kinds of debates can create to take advantage of attractive long-term opportunities.

As all Parnassus funds do, Growth Equity integrates our ESG research and benefits from the efforts of our stewardship team. Tactically, we aim to hold approximately 40 stocks in our high-conviction, low-turnover strategy. We are primarily focused on larger market capitalization U.S. equities, but may hold some smaller capitalization or international companies if we believe there is an opportunity for outsized returns.

The Fund was launched on December 28, 2022, so we will not have a discussion of our performance for the period ended December 31, 2022. However, we are pleased to provide commentary on our investment

outlook and current positioning, which can be found below.

Parnassus Growth Equity Fund

As of December 31, 2022

(percentage of net assets)

 

 

LOGO

* For purposes of categorizing securities for diversification requirements under the Investment Company Act, the Fund uses industry classifications that are more specific than those used for the chart.

Portfolio characteristics and holdings are subject to change periodically.

 

 

3 Apple, Microsoft, Amazon, Tesla and Alphabet.

 

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Top 10 Equity Holdings   
(percentage of net assets)   
Microsoft Corp.      9.9%  
Amazon.com Inc.      5.9%  
Apple Inc.      5.5%  
Visa Inc.      4.7%  
Alphabet Inc., Class A      4.5%  
Planet Fitness, Inc., Class A      3.0%  
Thermo Fisher Scientific Inc.      2.9%  
PTC Inc.      2.9%  
Eli Lilly & Co.      2.9%  
Procore Technologies Inc.      2.7%  

Portfolio characteristics and holdings are subject to change periodically.

Outlook and Strategy

The current investment setup is a result of an unprecedented series of events without perfect historical analogues. COVID-19 emerged at a time when the infrastructure for online commerce was well established. This allowed many, though not all, to adapt to a new way of living while socially distancing. To avoid an economic and public health crisis, the U.S. government stepped in to provide significant stimulus and ease financial conditions. This bolstered demand at a time when supply chains were in disarray, which led to elevated inflation. Now, the Federal Reserve has stepped back in with a commensurately strong interest rate hiking cycle to curb demand and thereby reduce inflation.

The key debate now is what will be the cost to economic growth to bring inflation back down. Investors, rightfully, look to the past to glean clues for where we might be going. However, it is rare to see inflation begin to decelerate as we saw in December prior to an economic recession. At the time of this writing, earnings for the Russell 1000 Growth are still expected to grow almost 13% in 2023 despite the Federal Reserve’s actions to curb demand. Just as investors dramatically underestimated inflationary pressures entering 2022, it is unlikely that the ramifications of this year’s interest rate increases are easily predicted as we enter 2023.

Elevated uncertainty last year caused investors to favor sectors such as Consumer Staples and Health Care, while sectors like Consumer Discretionary and growth technology dramatically trailed the rest of the market.

Despite this flight to safety, our portfolio is balanced and is not positioned overly defensively. We own large positions in dominant, wide-moat businesses that generate significant cash, such as Microsoft, Alphabet and Visa. Our top 10 equity holdings also include innovative companies that are less economically sensitive, such as Eli Lilly, Thermo Fisher Scientific and AstraZeneca. Notably, Eli Lilly is a pharmaceutical company that finds itself in the enviable position of launching two potential blockbuster drugs. The company has a strong track record of successful internal R&D. Its shares are attractively priced, especially considering its significant growth runway.

We also own Amazon and believe this is a case of an exceptional business whose shares have underperformed due to investors’ overly near-term focus on margin. The company’s retail segment saw material margin compression, as Amazon ramped up pandemic-related expenses and overbuilt capacity. We believe Amazon’s retail business will grow into its investments and become profitable again, with overall profitability still supported by their higher-margin cloud and advertising businesses. Our biggest hesitation in initiating a position was due to Amazon’s labor issues. After multiple calls with Amazon’s head of ESG and internal meetings, we are confident that Amazon has made material improvements across key workplace factors. Equally important, we believe our stewardship can constructively engage Amazon, with the goal of a better workplace for 1.5 million Amazon employees. We are hopeful that both the company’s fundamentals and labor management will continue to improve during our ownership of Amazon shares.

As active managers, we are excited to venture outside the larger market constituents and own shares in growth companies such as Planet Fitness, PTC and Procore Technologies. Planet Fitness is a dominant low-cost gym franchise with attractive unit economics and an underappreciated runway for expansion. PTC is a software company that serves high-end manufacturing industries with mission-critical design and product management tools. Procore is another software provider that is entirely focused on digitizing the construction industry. The company has emerged as a leader with significant optionality in a significantly underpenetrated market.

We are optimistic about the exciting and innovative companies in our portfolio. All told, we are most

 

 

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overweight the Health Care sector through a combination of high-growth drug makers and resilient equipment and insurance providers. We are overweight the Consumer Discretionary sector through a variety of markets, such as health and fitness, travel, ecommerce and automotive. We are slightly overweight Real Estate and Consumer Staples.

We are the most underweight the Communication Services sector, with Alphabet as our only holding. We are concerned with the cyclicality of advertising and worsening industry structure and competitive dynamics in both media and telecommunications. We are also underweight the Information Technology sector due, in large part, to our less than market weight position in Apple. Lastly, we are underweight the Industrials and Materials sectors due to valuation concerns as we enter a more challenging consumer demand backdrop. We don’t own any Energy or Utilities stocks.

While 2022 was a tough year, especially for growth investors, we remain optimistic about the resilience and upside potential of our portfolio as we enter 2023. We believe by staying disciplined in our investment process and being selective, we can take advantage of this uncertain environment. We’re honored and grateful for this opportunity to deliver Principles and Performance® through the new Parnassus Growth Equity Fund.

Sincerely,

 

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Andrew S. Choi

Lead Portfolio Manager

 

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Shivani R. Vohra

Portfolio Manager

 

 

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Parnassus Value Equity Fund

Ticker: Investor Shares - PARWX

Ticker: Institutional Shares - PFPWX

 

As of December 31, 2022, the net asset value (“NAV”) of the Parnassus Value Equity Fund - Investor Shares was $45.27, so after taking dividends into account, the total return for the year was a loss of 13.81%. This compares to loss of 7.54% for the Russell 1000 Value Index (“Russell 1000 Value”). It was a challenging year for the Fund, because we avoided energy stocks, which soared, and held technology stocks, which slumped. The double whammy caused the Parnassus Value Equity Fund - Investor Shares to lag our primary benchmark by 627 basis points. (One basis point is 1/100th of one percent.) The Fund’s well-timed pivot into Health Care stocks significantly enhanced returns, but it was not enough to offset losses.

Below is a table that summarizes the performance of the Parnassus Value Equity Fund and the Russell 1000 Value over multiple time periods. While we trailed our benchmark last year, the Fund’s returns remain highly competitive over the three-year and longer periods.

 

Parnassus Value Equity Fund

 

    Average Annual Total Returns (%)  
    for period ended December 31, 2022  
     One
Year
    Three
Years
    Five
Years
    Ten
Years
    Gross
Expense
Ratio
    Net
Expense
Ratio
 
Parnassus Value Equity Fund – Investor Shares     -13.81       12.92       10.67       14.51       0.90       0.88  
Parnassus Value Equity Fund – Institutional Shares     -13.61       13.17       10.93       14.70       0.71       0.65  
Russell 1000 Value Index     -7.54       5.96       6.67       10.29       NA       NA  

The average annual total return for the Parnassus Value Equity Fund – Institutional Shares from commencement (April 30, 2015) was 12.38%. Performance shown prior to the inception of the Institutional Shares reflects the performance of the Parnassus Value Equity Fund – Investor Shares and includes expenses that are not applicable to and are higher than those of the Institutional Shares. The performance of the Institutional Shares differs from that shown for the Investor Shares to the extent that the classes do not have the same expenses.

Performance data quoted represent past performance and are no guarantee of future returns. Current performance may be lower or higher than the performance data quoted. Current performance information to the most recent month end is available on the Parnassus website (www.parnassus.com). Investment return and principal value will fluctuate, so an investor’s shares, when redeemed, may be worth more or less than their original principal cost. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived.

Returns shown in the table do not reflect the deduction of taxes a shareholder may pay on fund distributions or redemption of shares. The Russell 1000 Value is an unmanaged index of common stocks, and it is not possible to invest directly in an index. Index figures do not take any expenses, fees or taxes into account, but mutual fund returns do.

The estimated impact of individual stocks on the Fund’s performance is provided by FactSet.

As described in the Fund’s current prospectus dated May 1, 2022, and as amended and restated as of January 1, 2023, Parnassus Investments, LCC has contractually agreed to reduce its investment advisory fee to the extent necessary to limit total annual fund operating expenses to 0.88% of net assets for the Parnassus Vaule Equity Fund – Investor Shares and to 0.65% of net assets for the Parnassus Value Equity Fund – Institutional Shares. This agreement will not be terminated prior to May 1, 2023 and may be continued indefinitely by the investment adviser on a year-to-year basis.

Year in Review

Each of our three largest detractors reduced the Fund’s return by 1.0% or more. These stocks suffered a bust in consumer demand coming off stimulus-driven highs. Our three biggest contributors each added 0.6% or more to the Fund’s return. Pharmaceutical and biotechnology companies, just added in 2021, dominated the winners list.

Our biggest loser was Western Digital, a memory semiconductor company. Its stock sank 51.6% subtracting 1.5%* from the Fund’s total return. Rapid decline in demand for consumer electronics post-COVID-19 and inventory buildup at customers significantly depressed pricing for memory chips. We increased our position, as we believe that the industry glut will turn to shortage and lift pricing once inventories have been depleted and demand growth returns. The company is undervalued and stands to benefit if the trend of industry consolidation continues.

Hanesbrands slipped 58.5% cutting 1.4% from the Fund’s total return. The company is a leading provider of basic apparel, including underwear, socks, T-shirts and activewear under various brands including Hanes, Champion, Playtex, Bali and Bonds. This year’s extraordinarily difficult retail environment buffeted Hanesbrands, which was also felled by a ransomware attack that crippled operations. Investors fled the stock following slowing customer demand, higher costs to reduce excess inventory and the negative impact of the strong U.S. dollar on global sales. We sold our shares over concerns that the company’s high debt load would force management to cut the dividend or raise additional capital.

 

 

* For this report, we quote total return to the portfolio, which includes price change and dividends.

 

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VF Corp. sank 60.4%, detracting 1.3% from the Fund’s total return. The apparel and footwear company owns a portfolio of lifestyle brands, including North Face, Timberland, Vans and many others. Shares suffered their worst annual performance in over 20 years due to company missteps amid heightened macro uncertainty. Management lowered their outlook three times in three months, as U.S. sales slowed with the end of stimulus payments, inflation waylaid European consumers and Chinese sales collapsed under COVID-19-lockdowns. Moreover, an inventory glut, unfavorable foreign exchange, and an impairment charge on the company’s earlier purchase of streetwear brand Supreme all weighed on profitability, culminating in the retirement of the company’s long-time CEO. We held our shares, encouraged by the company’s efforts to revitalize Vans and by evidence that problems related to inventory, freight and inflation are beginning to abate.

Our top position and biggest winner was global biopharmaceutical company Merck. Its stock surged 44.8%, contributing 1.8% to the Fund’s total return. Merck’s steady cash flow and consistent execution made it a defensive haven this year among large capitalization pharmaceutical stocks. We remain confident in the company’s current pipeline and its ability to extend cancer drug Keytruda’s patent protection, HPV vaccine Gardasil’s growth and M&A capabilities. Moreover, Merck trades at a reasonable valuation while offering a healthy 2.5% dividend yield.

Vertex’s share price climbed 31.5%, adding 0.7% to the Fund’s total return. Vertex’s cystic fibrosis business continues to grow nicely, with the company gaining approval in new geographies and for treatment of younger age groups. Vertex is in late-stage trials for its next-generation triple-combination therapy for cystic fibrosis, as well as for a potential mRNA delivery mechanism with Moderna. Vertex also had positive pipeline news on its sickle cell and beta thalassemia partnership with CRISPR and phase II acute pain data. We continue to think Vertex is an innovative biotechnology company with a strong management team and attractive cash position. The stock’s valuation should move higher given the company’s dominant cystic fibrosis franchise and diversified pipeline.

Gilead Sciences jumped 23.6% last year, boosting the Fund’s total return by 0.8%. The biopharmaceutical company has dominant franchises in HIV and hepatitis C medicines. Gilead’s PrEP market for preventative care is driving growth for the company’s monopolistic HIV franchise. Additionally, Gilead had a positive

readout in its growing oncology franchise. Although oncology remains a highly competitive therapeutic area, we believe it represents an attractive option for the company at its current low valuation. Given today’s uncertain macro environment, we like Gilead’s steady execution, dividend yield and cash flow.

Parnassus Value Equity Fund

As of December 31, 2022

(percentage of net assets)

 

 

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Portfolio characteristics and holdings are subject to change periodically.

 

 

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Top 10 Equity Holdings   
(percentage of net assets)   
Merck & Co., Inc.      4.7%  
The Charles Schwab Corp.      4.3%  
Sysco Corp.      3.3%  
Gilead Sciences Inc.      3.2%  
Verizon Communications Inc.      3.0%  
D.R. Horton Inc.      2.9%  
Deere & Co.      2.7%  
Cisco Systems Inc.      2.6%  
Comcast Corp., Class A      2.6%  
Agilent Technologies Inc.      2.6%  

Portfolio characteristics and holdings are subject to change periodically.

Value on December 31, 2022

of $10,000 invested on December 31, 2012

 

 

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The chart shows the growth in value of a hypothetical $10,000 investment over the last 10 years and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares.

Outlook and Strategy

Inflation hammered stocks and bonds in 2022. Massive pandemic stimulus by the U.S. government, mixed with disrupted global supply chains, lit the flame of inflation, but Russia’s war on Ukraine set it ablaze through higher energy prices. The Federal Reserve responded to inflation belatedly, but forcefully, and raised interest rates higher and faster than at any point since the 1980s. Higher rates make borrowing more expensive for businesses and consumers. They depress the real economy with a lag, yet they take down the value of financial assets immediately. Fortunately, recent economic data indicate that the pace of inflation is moderating. One of the biggest investor debates today is whether the Fed will be able to tame inflation without causing a deep recession, the so-called “soft landing.”

In this highly uncertain investing backdrop, we adhere to our disciplined process of bottom-up, fundamental

stock selection. We begin with what the market is already telling us. We focus our attention on areas with the biggest mis-pricings or misunderstandings. We look deeply at companies to understand what the key debates are, and home in on where quality may be overlooked. Finally, we invest for the long term. The current sell-off in stocks is unpleasant, but we are cautiously optimistic, because the seeds of the next market rally are likely being planted today.

To that end, the Fund initiated four new positions in the fourth quarter. Citigroup is a leading U.S.-based commercial and investment bank. CEO Jane Fraser has been restructuring the bank for years, including scaling back international operations to improve profitability. International Flavors & Fragrances makes the key ingredients that define hundreds of the world’s most beloved foods and scents. Under new management, the company is also divesting underperforming assets in pursuit of higher future returns. We bought shares in Target Corp., a major U.S. retailer, and Align Technologies, maker of Invisalign braces. Both companies’ stocks fell due to worries about a recession that could dent consumer spending. We believe these issues are short-term in nature, and that these businesses are poised to take share in their respective end markets longer term.

To fund these purchases, we sold Discover Financial at a substantial gain, as well as Becton Dickinson, which outperformed the broader market. We harvested tax losses with the sale of Hanesbrands, as previously discussed. Our continual aim is to recycle capital from our outperformers to undervalued stocks. When the market is down, as it is now, there are fewer outperformers and more undervalued stocks, and the number of positions tends to increase slightly.

This year is likely to carry forward several cross currents from the past year and present new macroeconomic uncertainties. We remain confident that our time-tested process and deeply committed investment team position us well to navigate these challenging times. Your portfolio managers have over 25 years of combined value-investing experience, which we bring to bear every day with the goal of generating attractive risk-adjusted returns for our long-term shareholders.

 

 

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Thank you for your investment in the Parnassus Value Equity Fund.

 

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Billy J. Hwan

Lead Portfolio Manager

 

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Krishna S. Chintalapalli

Portfolio Manager

 

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Parnassus Mid Cap Fund

Ticker: Investor Shares - PARMX

Ticker: Institutional Shares - PFPMX

 

As of December 31, 2022, the net asset value (“NAV”) of the Parnassus Mid Cap Fund – Investor Shares was $33.88, so after taking dividends into account, the total return for 2022 was a loss of 21.56%. This compares to a loss of 17.32% for the Russell Midcap Index (“Russell”). For the fourth quarter, the Fund was up 8.65%, behind the Russell’s 9.18% gain.

Below is a table comparing the Parnassus Mid Cap Fund with the Russell for the one-, three-, five- and ten-year periods.

 

Parnassus Mid Cap Fund

 

    Average Annual Total Returns (%)  
    for period ended December 31, 2022  
     One
Year
    Three
Years
    Five
Years
    Ten
Years
    Gross
Expense
Ratio
 
Parnassus Mid Cap Fund – Investor Shares     -21.56       1.60       4.74       9.13       0.96  
Parnassus Mid Cap Fund – Institutional Shares     -21.41       1.82       4.98       9.32       0.75  
Russell Midcap Index     -17.32       5.88       7.10       10.96       NA  

The average annual total return for the Parnassus Mid Cap Fund – Institutional Shares from commencement (April 30, 2015) was 7.14%. Performance shown prior to the inception of the Institutional Shares reflects the performance of the Parnassus Mid Cap Fund – Investor Shares and includes expenses that are not applicable to and are higher than those of the Institutional Shares. The performance of the Institutional Shares differs from that shown for the Investor Shares to the extent that the classes do not have the same expenses.

Performance data quoted represent past performance and are no guarantee of future returns. Current performance may be lower or higher than the performance data quoted. Current performance information to the most recent month end is available on the Parnassus website (www.parnassus.com). Investment return and principal value will fluctuate, so an investor’s shares, when redeemed, may be worth more or less than their original principal cost.

Returns shown in the table do not reflect the deduction of taxes a shareholder may pay on fund distributions or redemption of shares. The Russell Midcap Index is an unmanaged index of common stocks, and it is not possible to invest directly in an index. Index figures do not take any expenses, fees or taxes into account, but mutual fund returns do. Mid-cap companies can be more sensitive to changing economic conditions and have fewer financial resources than large-cap companies.

The estimated impact of individual stocks on the Fund’s performance is provided by FactSet.

Year in Review

The Russell plunged 17.3% in 2022, its worst annual return in over a decade. This marked a significant performance shift from the preceding three years, when the benchmark yielded investors a cumulative return of greater than 70%. With a backdrop of soaring inflation, Federal Reserve rate increases, incrementally more attractive returns on less risky investments, the prospect of a recession and geopolitical tensions, investors lost much of their appetite for equities, particularly non-earning tech stocks.

The Fund’s 2022 loss of 21.6% was greater than the benchmark’s loss. From a sector allocation perspective, our overweight position relative to the Russell in the Information Technology sector, the second-worst-performing sector in the benchmark, subtracted 73 basis points from the Fund’s return. The Fund’s underweight position in Utilities stocks, one of the Russell’s best-performing sectors, took 46 basis points from the Fund’s return (One basis point is 1/100th of one percent). The Fund’s underweight position in the heavily battered Communication Services sector helped the Fund by 65 basis points, and our overweight positions in the Industrials and Consumer Staples sectors helped the Fund by 39 and 33 basis points, respectively.

The Energy and Utilities sectors were the only two market sectors that generated positive returns in 2022. We do not invest in the Energy sector due to our focus on responsible investments, and this decision cost the Fund 2.42% of return. Energy stocks benefitted from a surge in crude and natural gas prices, as a result of the Russia/Ukraine war and reduced capital spending by drillers. Additionally, we have limited exposure in the Utilities sector due to our avoidance of nuclear generation, so this underweight was a material

 

 

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headwind. Together these allocations reduced our ability to provide the accustomed downside protection for our investors.

The other factor in our performance relative to the benchmark was negative stock selection. The Fund had positive stock selection in the Information Technology, Consumer Staples, Consumer Discretionary and Health Care sectors, but poor stock selection in the Materials and Financials sectors more than offset good stock selection elsewhere.

Avantor, a leading provider of products and services to the life sciences and applied materials industries, dropped 49.9%, slicing the Fund’s total return by 2.13%. Although the company’s core business performed well, disappointing sales of recently acquired companies Masterflex and Ritter prompted management to lower its overall annual revenue growth expectation. Avantor also faced challenges with inventory destocking in certain lab consumables, currency headwinds due to a depreciating euro and slowing demand in its European markets. However, we believe Avantor has strong long-term prospects due to an attractive valuation, favorable biopharma industry trends, a mix shift toward high margin proprietary products and strong free cash-flow generation.

Another big loser was Signature Bank, a New York-based commercial bank and wealth manager, which saw its stock fall 64.0%, leading to a 2.2%* reduction in the Fund’s total return. This was due to rising interest rates, which prompted the bank to increase its deposit rates to retain its customers, as well as declining profitability resulting from narrowing net interest margins. The bank’s decision to reduce its exposure to digital asset customers by exiting about $10 billion of deposits, or 10% of the bank’s overall deposit base, led to further stock declines. We believe the decision will improve profitability as high-cost, volatile deposits run off. When the Federal Reserve pauses its rate hikes, Signature’s profitability should improve meaningfully as its deposit costs stabilize and its loans gradually reprice at higher rates. Over our investment period, Signature’s unique performance-driven and autonomous culture should allow the bank to grow faster than its peers. We believe the stock has far greater upside than downside at this level, so we are holding onto our position.

VF Corporation, a clothing and footwear company with global brands such as North Face, Timberland and Vans,

saw its shares plummet 62.3% in 2022, leading to a negative impact of 1.6% on the Fund’s total return. The company experienced its worst annual performance in more than two decades due to a series of missteps, including lowering their outlook three times due to declining domestic sales, weak demand in Europe and decreased sales in China due to COVID-19 lockdowns. In addition, an inventory glut, unfavorable currency rates and an impairment charge on the company’s purchase of streetwear brand Supreme all contributed to declining profits, culminating in the retirement of the company’s long-time CEO. Despite these headwinds, the company is working to revitalize Vans and address issues related to inventory, freight and inflationary costs, leading us to hold onto our shares.

Shifting to our winners, Jack Henry & Associates, a leading provider of core account processing and related services to regional banks and credit unions, rose 6.2%, adding 0.2% to the Fund’s total return. Jack Henry exceeded investor expectations with strong earnings throughout the year, thanks to new customer additions, particularly within credit unions, and an expansion of operating margins. We believe the company’s durable and subscription-based business model will continue to thrive with the increasing customer adoption of its cloud-based processing platform solutions, market share gains and the company’s disciplined capital allocation strategy.

O’Reilly Automotive, the largest auto parts retailer, motored 19.5% higher and added 0.7% to the Fund’s total return. After tremendous growth in 2020 and 2021, O’Reilly was able to maintain its high level of execution and grow at a solid mid-single-digit clip in 2022. The company is benefiting from strong pricing power, a favorable industry backdrop and elevated new car prices. O’Reilly continues to gain market share, which speaks to its exceptional service levels and advantaged distribution network.

Cboe Global Markets, a leading market exchange and trading platform, added 0.2% to the Fund’s total return, as we trimmed our position on the stock’s outperformance.

For the full year, the stock fell 2.2%. Cboe experienced healthy index option volume growth and robust demand for its Data and Access solutions, leading to higher-than-expected earnings in the beginning of the year. In the third quarter, management increased its

 

 

* For this report, we quote total return to the portfolio, which includes price change and dividends.

 

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outlook for annual organic revenue growth from 5%-7% to 9%-11% due to the strength in its Data and Access Solutions business. We believe Cboe is poised to benefit from uncertain market conditions and volatility, thanks to its high-margin proprietary index option products and new product launches.

Parnassus Mid Cap Fund

As of December 31, 2022

(percentage of net assets)

 

 

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* For purposes of categorizing securities for diversification requirements under the Investment Company Act, the Fund uses industry classifications that are more specific than those used for the chart.

Portfolio characteristics and holdings are subject to change periodically.

Top 10 Equity Holdings   
(percentage of net assets)   
Hologic Inc.      4.7%  
Otis Worldwide Corp.      4.3%  
Cboe Global Markets Inc.      4.0%  
Sysco Corp.      3.9%  
CNH Industrial NV      3.9%  
Verisk Analytics Inc.      3.7%  
C.H. Robinson Worldwide Inc.      3.7%  
O’Reilly Automotive Inc.      3.5%  
D.R. Horton Inc.      3.3%  
Workday Inc., Class A      3.2%  

Portfolio characteristics and holdings are subject to change periodically.

Value on December 31, 2022

of $10,000 invested on December 31, 2012

 

 

LOGO

The chart shows the growth in value of a hypothetical $10,000 investment over the last 10 years and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares.

Outlook and Strategy

As we enter 2023, we believe the Federal Reserve’s actions will be the main factor influencing investor sentiment and market direction. We say this because the Fed’s decisions reflect nearly all the factors that investors are considering, such as inflation trends, unemployment rates, the target terminal interest rate and associated hurdle rates. In 2022, we saw how stocks were negatively affected when the Fed started to wind down its decades-long accommodative policy, so in 2023, we expect investors to adjust their sentiment based on Fed policy direction.

Given the current economic outlook, which includes an expected growth rate of only 0.4% in the U.S. for 2023 and a 70% chance of recession within the next year according to Bloomberg economists, our perspective on equities is cautious. Inflation, which reached a peak

 

 

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of 9.1% in mid-2022, has declined to 7.1% as of November, but it remains above the Fed’s target. While goods and services inflation may decrease over the next year, there is no guarantee the Fed will pause or cut rates. If inflation remains above the Fed’s 2% target or the Fed raises rates too aggressively, we could see the economy fall into a recession and put pressure on corporate earnings.

At the same time, mid cap stocks are attractively valued relative to historical measures, with the Russell entering 2023 at a forward price-to-earnings multiple of 15.4 times. This is lower than the 20-year average of 16.4x and the 20-year high of 24.0x, but higher than the 20-year low of 9.0x. Not all stocks are cheap, but there are certainly attractive opportunities in our investable universe.

With this backdrop, our portfolio is carefully balanced with both defensive and opportunistic, high-quality offensive holdings. This approach should help us protect against potential market downturns, while also allowing us to capitalize on growth opportunities. Our investments are centered around resilient companies with competitive advantages, multi-year growth drivers, comfortable capital positions and attractive valuations. These include steady Industrials firms like Otis, Verisk and Republic Services, as well as depressed Staples companies like Ball Corporation and Sysco. These two sector exposures provide defensiveness, while our mature growth service-related Technology holdings, including Autodesk and Workday, offer offensiveness, given their growth prospects, profitability and reasonable valuations. Finally, we hold positions in innovative health care companies like Agilent, IQVIA and Avantor, which offer offensive and defensive attributes due to their exposure to stable and healthily growing areas of the Health Care sector.

Moving to our sector weightings, we have underweights relative to the Russell in Financials, Real Estate, Materials, Communication Services and Consumer Discretionary sectors. These sectors tend to be vulnerable to negative economic surprises. On the other hand, we are overweight relative to the Russell in the Information Technology, Industrials, Health Care

and Consumer Staples sectors. Our holdings here should do well in any market environment and offer attractive valuations with material upside over the long term. In general, though, as bottom-up stock pickers, we are always on the lookout for high-quality companies with asymmetric risk-reward profiles regardless of sector.

We initiated a position in Lam Research in the fourth quarter. Lam produces innovative semiconductor equipment, which will be essential for the next wave of semiconductor chip development and the construction of new semiconductor fabrication plants. The stock recently fell due to concerns about export controls on equipment sales to China and weak memory chip sales. We believe these issues are reflected in the current stock price and expect Lam to benefit as memory spending recovers and as it gains share in advanced logic and foundry applications. We exited First Horizon, due to its acquisition by TD Bank and Avalara due to its acquisition by Vista Equity, as well as Cable One and Americold due to concerns with slowing sales in exchange for higher-quality names with more upside.

The portfolio owns a collection of well-managed, increasingly relevant businesses with sustainable competitive advantages that should grow earnings and cash flows over the long term. We are confident that this strategy should enable the Fund to potentially outperform the market over the full market cycle.

Thank you for your investment in the Parnassus Mid Cap Fund.

Yours truly,

 

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Matthew D. Gershuny

Lead Portfolio Manager

 

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Lori A. Keith

Portfolio Manager

 

 

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Parnassus Mid Cap Growth Fund

Ticker: Investor Shares - PARNX

Ticker: Institutional Shares - PFPRX

 

As of December 31, 2022, the net asset value (“NAV”) of the Parnassus Mid Cap Growth Fund – Investor Shares was $42.28, resulting in a loss of 33.52% for 2022. This compares to a loss of 26.72% for the Russell Midcap Growth Index (“Russell Midcap Growth”).

Below is a table that summarizes the performance of the Parnassus Mid Cap Growth Fund and the Russell Midcap Growth. The returns are for the one-, three-, five- and ten-year periods ended December 31, 2022.

 

Parnassus Mid Cap Growth Fund

 

    Average Annual Total Returns (%)  
    for period ended December 31, 2022  
     One
Year
    Three
Years
    Five
Years
    Ten
Years
    Gross
Expense
Ratio
 
Parnassus Mid Cap Growth Fund –
Investor Shares
    -33.52       -2.21       1.85       8.34       0.80  
Parnassus Mid Cap Growth Fund –
Institutional Shares
    -33.45       -2.09       1.99       8.45       0.68  
Russell Midcap Growth Index     -26.72       3.85       7.64       11.41       NA  

The average annual total return for the Parnassus Mid Cap Growth Fund – Institutional Shares from commencement (April 30, 2015) was 4.70%. Performance shown prior to the inception of the Institutional Shares reflects the performance of the Parnassus Mid Cap Growth Fund – Investor Shares and includes expenses that are not applicable to and are higher than those of the Institutional Shares. The performance of Institutional Shares differs from that shown for the Investor Shares to the extent that the classes do not have the same expenses.

Performance data quoted represent past performance and are no guarantee of future returns. Current performance may be lower or higher than the performance data quoted. Current performance information to the most recent month-end is available on the Parnassus website (www.parnassus.com). Investment return and principal value will fluctuate, so an investor’s shares, when redeemed, may be worth more or less than their original principal cost.

Returns shown in the table do not reflect the deduction of taxes a shareholder may pay on fund distributions or redemption of shares. The Russell Mid Cap Growth is an index of common stocks, and it is not possible to invest directly in an index. Index figures do not take any expenses, fees or taxes into account, but mutual fund returns do.

The estimated impact of individual stocks on the Fund’s performance is provided by FactSet.

Year in Review

The Fund lost 33.5% for the year, trailing the Russell Midcap Growth by 681 basis points. (One basis point is 1/100th of one percent.) We’re disappointed by the Fund’s performance in 2022. Soaring inflation ate away at household incomes and led the Federal Reserve to dramatically increase its benchmark Fed Funds interest rate, from near zero to nearly 4.5%. The Fed is attempting to reduce inflation by curtailing demand and economic growth through increased borrowing costs. The rapid escalation of the Fed Funds rate had a disproportionate impact on the valuations of high-growth stocks. Specifically, the Russell Midcap Growth ended the year at 21x forward earnings, down from 34x a year ago. High-growth stocks carry more expensive valuations on their near-term earnings than low-growth stocks because their longer-term earnings power is much greater, but their higher valuations also mean there’s more room to fall in a market correction. We responded to the steep drop in high-growth stocks by adding to our positions in innovative, secularly growing and competitively advantaged businesses that are also trading at historically low valuations. We’ve been too early, and this hurt our performance in 2022. While these stocks haven’t rebounded yet, we have conviction they will, so we’re incredibly excited about the potential for our Fund in 2023.

Sector allocation subtracted from our performance in 2022 due to our zero-weighting of the Energy sector, which was the index’s best-performing sector. As a fossil-fuel-free fund, we don’t own oil and gas stocks. The longer-term earnings power of oil and gas stocks is uncertain as the economy gradually transitions away from fossil fuels, and we feel confident that our collection of unique businesses can outperform these commodity producers over a business cycle.

 

 

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Stock selection hurt our performance as well. Pool supplies distributor Pool Corporation subtracted 2.4%* from the Fund’s performance, as its shares returned -46.0%. Even though the company reported impressive revenue and earnings growth during the year, the stock’s multiple plummeted as investors worried that a slowing housing market and high interest rates would impact future demand for pools.

While new pool construction will slow, most of Pool’s revenue is from recurring maintenance that should be resilient. With the stock trading near its lowest valuation in over a decade, we’re holding onto our shares and we’re optimistic this industry leader will emerge from the housing downturn even stronger.

Silvergate Capital, a bank that focuses on the digital asset sector, plummeted 87.4% to our average selling price and reduced the Fund’s return by -2.2%. Silvergate’s deposits fell along with digital asset prices during the year, and then fell further after digital asset exchange FTX declared bankruptcy. We exited our position due to the uncertainty this caused for Silvergate’s financial position.

Block operates the Cash App consumer finance network and the Square merchant payment processing business. Block subtracted 1.7% from the Fund’s return, as its stock sunk 61.1%. The stock fell as investors worried that Block’s exposure to less affluent consumers and micro-merchants leave it exposed to an economic downturn. Investors were also displeased by the company’s decision to prioritize growth over profitability. We believe that Block can grow through an economic downturn due to its product innovation engine, which fuels its increasing share of customers’ wallets and new-business wins. We were pleased to see Block’s management team pivot at year-end toward profitability, and we believe investors are vastly under estimating the company’s earnings power. We took advantage of the all-time low valuation to add to our position.

Our biggest winner in 2022 was auto parts retailer O’Reilly Automotive, which motored 19.5% higher and added 0.6% to the Fund’s performance. After tremendous growth in 2020 and 2021, O’Reilly was able to maintain its high level of execution and grow at a solid mid-single-digit clip in 2022. The company is

benefiting from strong pricing power, a favorable industry backdrop and elevated car prices. O’Reilly remains a market share gainer, which speaks to the company’s best-in-class service levels and advantaged distribution network.

CoStar is a leading commercial real estate information provider and operates some of the most active online marketplaces for buying, selling and leasing various types of real estate.

It added 0.4% to the Fund’s return, as we trimmed our position on the stock’s outperformance. For the full year, the stock returned -2.2%. CoStar raised its profit guidance several times, supported by strong demand across its Apartments.com, LoopNet and CoStar marketplaces. The outperformance of CoStar’s core businesses is allowing it to invest behind its nascent Homes.com offering, which has a huge addressable market.

Auto insurer Progressive returned 21.3% from our average purchase price, boosting the Fund’s return by 0.3%. The stock raced ahead due to improving profitability, as elevated used car prices have begun to reverse and insurance industry-wide price increases are starting to take effect. Progressive’s sophisticated risk-rating algorithm is its competitive advantage, allowing it to attract and retain safe drivers with low pricing while minimizing its losses from unsafe drivers. As less sophisticated insurers raise prices generically on all their customers, we expect Progressive to swoop in and lure away the lowest-risk customers, which should lead to accelerated growth in 2023.

 

 

* For this report, we quote total return to the portfolio, which includes price change and dividends.

 

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Parnassus Mid Cap Growth Fund

As of December 31, 2022

(percentage of net assets)

 

 

LOGO

* For purposes of categorizing securities for diversification requirements under the Investment Company Act, the Fund uses industry classifications that are more specific than those used for the chart.

Portfolio characteristics and holdings are subject to change periodically.

Top 10 Equity Holdings   
(percentage of net assets)   
Veeva Systems Inc., Class A      4.6%  
Splunk Inc.      4.5%  
Pool Corp.      4.1%  
Fortinet Inc.      4.1%  
Agilent Technologies Inc.      4.0%  
IDEXX Laboratories Inc.      3.9%  
Illumina Inc.      3.6%  
Guidewire Software Inc.      3.4%  
Workday Inc., Class A      3.4%  
O’Reilly Automotive Inc.      3.4%  

Portfolio characteristics and holdings are subject to change periodically.

Value on December 31, 2022

of $10,000 invested on December 31, 2012

 

 

LOGO

The chart shows the growth in value of a hypothetical $10,000 investment over the last 10 years and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares.

Outlook and Strategy

2022 was the worst year for mid-cap growth investors since 2008. In 2022, investors worried that unprecedented interest rate increases from central banks globally could cause a recession in 2023, as the higher cost of debt curtails demand. Back in 2008, investors dealt with the financial crisis, which was caused by the bursting of the housing bubble, as soaring home mortgage delinquency rates destroyed consumer wealth, while the loan losses impaired the banking system. The investment climate looked grim entering 2009, just as it seems grim as we enter 2023.

Yet, 2009 turned out to be the best year for investment returns for the Fund and for the Russell Midcap Growth in the past two decades! There was indeed a deep global recession, and the housing market took many years to regain its footing, but the stock market is

 

 

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forward looking, and it rallied on the expectations for an improved economy in 2010 and beyond.

Past results are not indicative of future returns, and we don’t know what 2023 will bring. But we do know that the inflation rate at the end of 2022 cooled markedly and ended the year with a monthly Core CPI rate of only 0.2%, or less than 3% annualized. As inflation cools, the need for additional interest rate increases diminishes. We also know that the valuations for many of our stocks, including our secularly-growing-yet-cyclical stocks, such as Block and clear aligner manufacturer Align, and our mission-critical software providers, have fallen to historically low levels and sentiment is poor. For example, Align ended the year trading at 27x forward earnings, well below its ten-year average of 39x. Block ended the year at 36x forward earnings, a fraction of its 101x long-term average. We believe these stocks are already pricing in a deep recession. So, if the stock market continues its descent, we believe their depressed valuations could protect against further downside. Meanwhile, if they’re able to meet or exceed earnings expectations, or if the Federal Reserve stops hiking interest rates, there is the potential for a strong rally.

During the fourth quarter, we meaningfully added to our Information Technology holdings, and it is the largest sector by weight in our Fund. We made the most of the meaningful reset in software valuations by increasing our existing positions, as we believe these innovative businesses solve complex problems for their customers and generate resilient revenue streams that should outperform if the economy slows. The inherent operating leverage in software business models, combined with newfound management discipline, should allow them to meaningfully expand their profit margins. Our largest positions here include data observability platform Splunk, cyber-security vendor Fortinet and insurance software provider Guidewire.

We also added to our Semiconductor weighting within Information Technology after these stocks fell dramatically. Semiconductors are cyclical, and pent-up demand in 2021 and supply shortages caused by the pandemic led to double ordering from customers. As supply chains normalized and demand slowed globally, the supply-demand imbalance for semiconductors has been significant. But semiconductors are powering every major technological advancement of our time, and we have no doubt the world will soon need more of them. Historically, semiconductors have led the economy as customers place orders in advance of the

demand for their end product. So, we think we’re close to the trough of the current cycle. We were pleased to add back semiconductor capital equipment manufacturer Lam Research and memory chip manufacturer Western Digital at deeply discounted valuations.

We sold several stocks in other sectors to consolidate our investments behind these high-conviction ideas in software and semiconductors, including Silvergate, dating services conglomerate Match Group and fixed income trading platform MarketAxxess.

Health Care is our second largest sector, and we own a number of innovative, industry-leading businesses. During the fourth quarter, we more than doubled our position in Align. Align’s stock fell dramatically during 2022, as consumers postponed orthodontic procedures to save money as they coped with the impact of inflation. Align continues to innovate and introduce new products, so whenever consumers return to the orthodontist chair, we expect Align to be a major beneficiary. We sold biotechnology companies Alnylam and Seagen to make room, as both stocks had outperformed and we believe they offered less upside than Align.

As your portfolio managers, we both have a meaningful amount of our personal savings invested in the Fund, and we’ve felt the pain of this year’s drawdown as fundholders. We’re not sure exactly when investor sentiment will change, but it will. And when it does, we expect our portfolio of competitively advantaged and high growth stocks to lead the rebound. With inflation beginning to cool and valuations for high growth stocks at historically low levels, we believe the odds are stacked in our favor and we can’t wait to see how 2023 unfolds.

Thank you for your investment in the Parnassus Mid Cap Growth Fund.

Yours truly,

 

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Ian E. Sexsmith

Lead Portfolio Manager

 

LOGO

Robert J. Klaber

Portfolio Manager

 

 

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Parnassus Fixed Income Fund

Ticker: Investor Shares - PRFIX

Ticker: Institutional Shares - PFPLX

 

As of December 31, 2022, the net asset value (“NAV”) of the Parnassus Fixed Income Fund – Investor Shares was $14.40, producing a loss for the year of 14.29% (including dividends). This compares to a loss of 13.01% for the Bloomberg U.S. Aggregate Bond Index (“Bloomberg Aggregate Index”).

Below is a table comparing the performance of the Parnassus Fixed Income Fund with that of the Bloomberg Aggregate Index. Average annual total returns are for the one-, three-, five- and ten-year periods. For December 31, the 30-day subsidized SEC yield was 4.41%, and the unsubsidized SEC yield was 4.30%.

 

Parnassus Fixed Income Fund

 

    Average Annual Total Returns (%)  
    for period ended December 31, 2022  
     One
Year
    Three
Years
    Five
Years
    Ten
Years
    Gross
Expense
Ratio
    Net
Expense
Ratio*
 
Parnassus Fixed Income Fund – Investor Shares     -14.29       -3.24       -0.36       0.60       0.76       0.58  
Parnassus Fixed Income Fund – Institutional Shares     -14.10       -3.02       -0.15       0.76       0.56       0.39  
Bloomberg U.S. Aggregate Bond Index     -13.01       -2.71       0.02       1.06       NA       NA  

The average annual total return for the Parnassus Fixed Income Fund – Institutional Shares from commencement (April 30, 2015) was 0.62%. Performance shown prior to the inception of the Institutional Shares reflects the performance of the Parnassus Fixed Income Fund – Investor Shares and includes expenses that are not applicable to and are higher than those of the Institutional Shares. The performance of the Institutional Shares differs from that shown for the Investor Shares to the extent that the classes do not have the same expenses.

Performance data quoted represent past performance and are no guarantee of future returns. Current performance may be lower or higher than the performance data quoted. Current performance information to the most recent month end is available on the Parnassus website (www.parnassus.com). Investment return and principal value will fluctuate, so an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived.

Returns shown in the table do not reflect the deduction of taxes a shareholder would pay in fund distributions or redemption of shares. The Bloomberg U.S. Aggregate Bond Index (formerly known as the Barclays U.S. Aggregate Bond Index) is an unmanaged index of bonds, and it is not possible to invest directly in an index. Index figures do not take any expenses, fees or taxes into account, but mutual fund returns do.

The estimated impact of individual stocks on the Fund’s performance is provided by FactSet.

As Described in the Fund’s current prospectus dated May 1, 2022, and as amended and restated as of January 1, 2023, Parnassus Investments, LLC has contractually agreed to waive 0.10% of its management fee for each class, and to reimburse the Fund for expenses to the extent necessary to limit total operating expenses to 0.58% of net assets for the Parnassus Fixed Income Fund—Investor Shares and to 0.39% of net assets for the Parnassus Fixed Income Fund—Institutional Shares. This agreement will not be terminated prior to May 1, 2024, and may be continued indefinitely by the Adviser on a year-to-year basis.

Year in Review

This year was one of the worst for bonds in modern history, particularly corporate bonds. The Federal Reserve’s surprisingly hawkish turn at the beginning of the year forced bond yields higher and prices lower. As inflation remained stubbornly high through the summer and fall, the Federal Reserve raised interest rates by 425 basis points to quell the highest inflation in decades. (One basis point is 1/100th of one percent.)

Even though underlying economic growth was strong in 2022 and company earnings grew from 2021, the Federal Reserve’s aggressive policy raised the specter of recession. As a result, corporate bonds fell by 15.79% in the Index over the year, well exceeding losses in Treasuries or Securitized bonds. As credit spreads moved wider on future recession concerns and rates rocketed up, corporate bonds bore the brunt of the changes. Corporate bonds also have a longer duration than other fixed income asset classes, making them more susceptible to losses when interest rates rise.

Overall, our allocation relative to the index removed 126 basis points from the total return, led by the Fund’s allocation to corporate bonds which subtracted 115 basis points from the total return. Over the course of 2022, about 65% of assets were invested in corporate bonds versus the Index at about 25%. However, our selection of corporate bonds was good: our portfolio lost 14.74% as compared to the Index’s loss of 15.79% and so corporate selection added 58 basis points to the total return.

 

 

* Reflects the lowered expense limitation, effective as of January 1, 2023.

 

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Across the Fund, positive selection added 83 basis points to the total return. In addition to the 58 basis points of positive selection from corporate bonds, the Fund also had 16 basis points of positive attribution from selection in Government-Related bonds and 9 basis points of attribution from selection in Treasury bonds. Despite a difficult year due to our strategic allocation to corporate bonds, we’re very pleased to have selected the right issuers and securities. We think this reflects well on our investment process and should serve investors well when the market turns.

Green bonds issued by the International Finance Corporation (IFC), a part of the World Bank, contributed 20 basis points to the total return. These green supranational bonds have been an important part of the Fund for years, as they are less volatile than Treasuries, have excellent credit ratings and directly fund important climate-change mitigation projects. Our IFC holdings won on allocation (adding 14 basis points to the total return) and selection (adding 6 basis points to the total return).

Oracle was a substantial winner in the year, adding 14 basis points to the total return. We purchased two Oracle bonds in the fourth quarter, as we believed the bonds were undervalued relative to the company’s cash flows. These bonds had initial yields of between 6.8% and 7.0%, an excellent starting point for an investment-grade company. Both rallied into year end as long-term rates fell.

Bonds issued by T-Mobile added 9 basis points to the total return. These high-yield bonds benefitted from good underlying company performance, higher starting yields and a shorter duration. Many of our high-yield bonds contributed positively during the year, including Ball Corp (adding 9 basis points to the total return), Avantor (adding 6 basis points to the total return), SBA Communications (adding 6 basis points to the total return) and Macy’s (adding 6 basis points to the total return).

The worst-performing securities in the Fund were preferred stock series issued by Public Storage, subtracting 21 basis points from the total return. These securities have very long durations and so are especially sensitive to interest rates. All ended the year with yields above similar-duration bond, so we believe the preferred stock will recover into 2023.

Similarly, preferred stock issued by First Republic Bank subtracted 16 basis points from the total return. First

Republic has been pressured by rising interest rates and its equity has underperformed. The preferred stock suffered from both long duration and the deterioration of the company’s fundamentals. With a yield of 6.76% at year end, we believe the prospects for the preferred stock shares are brighter into 2023.

Finally, bonds issued by Masco Corp. removed 16 basis points from the total return. Our Masco holdings have a longer duration than the comparable position in the Index, contributing to relative losses. Also, the company’s underlying fundamentals deteriorated in the year, as inflation cut into margins and cash flows. Most of Masco’s products, including Behr Paint and Delta faucets, are fairly recession resistant. These are relatively inexpensive improvements homeowners can often do themselves, so we expect revenues to remain relatively resistant in a recession. We also believe the headwinds from raw material inflation should subside.

Parnassus Fixed Income Fund

As of December 31, 2022

(percentage of net assets)

 

 

LOGO

Portfolio characteristics and holdings are subject to change periodically.

 

 

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Value on December 31, 2022

of $10,000 invested on December 31, 2012

 

 

LOGO

The chart shows the growth in value of a hypothetical $10,000 investment over the last 10 years and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares.

Outlook and Strategy

Entering 2022, the Federal Reserve was expected to raise rates by just 75 basis points, and the markets believed this may have been too aggressive. Instead, the Federal Reserve ended the year by raising the Federal Funds Rate by 4.25%, a remarkable departure from both early expectations and previous policy. For the first part of 2023, the Federal Reserve is expected to continue hiking rates and so the market is now pricing a terminal rate above 5%. This is a key difference from last year. If the Federal Reserve’s higher interest rate policy brings down inflation as expected, the risk for further interest rate surprises is significantly reduced.

We believe that the overall level of rates available to investors is attractive, especially as compared to any other point in the 15 years since the Financial Crisis. As of year end, the yield to worst on the Fund was 5.40%, several hundred basis points higher than last year. This is also well above the yield to worst of the Index, at 4.67%, a reflection of our higher allocation to corporate bonds.

The Fund finished the year at a duration of 6.39 years, slightly longer than the 6.29 years for the Index. While we believe there’s a good chance that the Federal Reserve will keep rates higher for longer, we also believe that the slowing economy will make

longer-term bonds more attractive. The Fund also had a slightly long duration position at the end of the third quarter, but the composition of the duration has changed. We’ve reduced the Treasury duration and instead have purchased long-dated corporate bonds. The 30-year corporate bonds have yields that are at least 150 basis points better than the similar Treasury bond, making their overall yields more attractive.

We made a special effort over the course of 2022 to increase the Fund’s green bond holdings and are pleased to report that 18% of holdings are classified as green bonds. Recent green bond additions include those issued by Sysco Corp, American Express and Citigroup.

Some pundits have recently questioned the true impact of green bonds, but we believe these instruments can be effective tools for sustainability-focused investors. Just like not all bonds are good candidates for the Fixed Income Fund, not all green bonds are good candidates, either. We only buy green bonds issued by companies that are in our focus universe, or that we consider to be good-quality companies. We also want to be sure the funds meet the Green Bond Principles, whereby the use of proceeds is audited and reported upon. Companies can have a significant impact on mitigating climate change and we’re proud to support those efforts.

Thank you for your investment in the Parnassus Fixed Income Fund.

 

 

LOGO

Samantha Palm

Lead Portfolio Manager

 

 

LOGO

Minh Bui

Portfolio Manager

 

 

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Responsible Investing Notes

I am approaching 2023 with a mix of caution and optimism in the wake of the historic peaks and valleys of 2022 and the preceding two years. On one side – 2022 was marked by macroeconomic uncertainty, high energy prices, stubbornly elevated inflation, and broad market declines. These factors were brought on and exacerbated by the tragic war in Ukraine, global supply-chain disruptions, and a labor market unevenly and unpredictably recovering from the COVID-19 pandemic. In addition, a small but vocal number of politicians and outspoken influencers escalated their actions and rhetoric against ESG to further their own interests—in a way that we believe is contrary to shareholders’ best interests and not reflective of common sense.

On the other hand, 2022 saw historic wins and progress for ESG. For example, in August, President Biden signed into law the Inflation Reduction Act (IRA), providing around $390 billion in climate and energy investments and funding for advancing environmental justice, one of Parnassus’s impact engagement pillars. The SEC also put forward proposed rules on public company climate change disclosures and on the enhancement of ESG fund disclosures to improve transparency and combat greenwashing. Parnassus provided public comments to the SEC on both rules to further the interests of our clients and improve market transparency. In November, the U.S. Department of Labor announced a final rule explicitly allowing plan fiduciaries to consider climate change and other ESG factors when making investment decisions. And, finally, the 2022 proxy season saw an upward trend in the number of shareholder proposals filed and in the number of withdrawals-for-agreement on human, civil and worker rights, signaling that conversation and collaboration among companies and shareholders on these issues are robust and strengthening.

Against this somewhat checkered backdrop, Parnassus continues to build and strengthen our ESG resolve – and to focus the conversation on Principles and Performance® and the materiality of ESG topics in our investment process.

Importantly, pursuant to our mission – to build wealth responsibly for long-term investors – I am proud to share that Parnassus now has a public goal aiming for net-zero emissions across all our funds by 2050. In

practice, this means that by 2040, we aim for all companies across our assets under management to have science-based emissions reduction targets. We set our targets to improve the strength and resilience of our funds in a low-carbon world; to spur performance improvements in our portfolio companies; and to do our part to help avoid the most devastating economic, environmental and societal impacts of climate change. Climate is a team sport, and we recognize that to be successful, our resolve must be accompanied by global advances in policy, technology, infrastructure, and demand. In all cases, our actions in pursuit of lower carbon portfolios will be taken in accordance with our principles, our fiduciary duties and in the best interest of our clients.

In addition to our efforts to tackle climate change, Parnassus made significant strides in 2022, including:

 

 

Publishing Parnassus’ Principles and Responsible Investment Policy to share with clients and companies the principles that guide our investment strategy and to offer more transparency on the ways in which we incorporate ESG into our investment and stewardship decision-making.

 

 

Releasing ESG metrics for all our equity funds so our investors can review quantitative data across ESG factors that matter to us as investors, including carbon emissions, quality of workplace, diversity stats and several governance metrics.

 

 

Filing our first shareholder proposals with the goal of improving environmental justice (Republic Services), eliminating algorithmic bias (Cerner) and achieving a better understanding of company adherence to their own human and labor rights policies (Apple). We also used our voice to join others in thoughtfully voting our proxies and working in other ways to improve ESG performance at portfolio companies.

 

 

Driving improvements in company performance and disclosure through more than 45 impact engagements on environmental justice, climate risk, sustainable workplaces, algorithmic bias and more issues that we believe are key to the performance of our portfolio companies.

Looking forward to 2023, I believe we can expect the ESG backlash to continue in some states and in the U.S. House of Representatives. ESG investing will stay in legislative and media crosshairs, and the global ESG

 

 

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regulatory landscape may become more complex and challenging to navigate. Despite, and in part due to this attention, I also expect ESG as an investment discipline to thrive. The more investors, companies and regulators understand ESG, the more they will come to recognize it as a critical tool to analyze and drive long-term value creation. In this exciting and volatile ESG environment, what will remain constant is Parnassus’s commitment to enhance our processes and capabilities and to be a leader in the industry.

I look forward to seeing what 2023 will bring and to sharing more success stories and time with you as the year goes on.

Sincerely,

 

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Marian Macindoe

Head of ESG Stewardship

 

 

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Fund Expenses (unaudited)

As a shareholder of the Funds, you incur ongoing costs, which include portfolio management fees, administrative fees, shareholder reports, and other fund expenses. The Funds do not charge transaction fees, so you do not incur transaction costs such as sales charges (loads) on purchase payments, reinvested dividends, or other distributions, redemption fees, and exchange fees. The information on this page is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

The following example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the period of July 1, 2022, through December 31, 2022.

Actual Expenses

In the example below, the first line for each Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first

line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund’s expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. You may compare the ongoing costs of investing in the Fund with other mutual funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

Please note that the expenses shown in the table are meant to highlight only your ongoing costs in these Funds. Therefore, the second line of each Fund is useful in comparing only ongoing costs and will not help you determine the relative total costs of owning other mutual funds, which may include transactional costs such as loads.

 

 

            Beginning
Account
Value
     Ending
Account
Value
     Expense
Paid During
Period
     Fund
Expense
Ratio
       
  Parnassus Core Equity Fund – Investor Actual*      $1,000.00        $1,019.90        $4.17        0.82%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,021.07        $4.18        0.82%    
  Parnassus Core Equity Fund – Institutional Actual*      $1,000.00        $1,020.90        $3.11        0.61%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,022.13        $3.11        0.61%    
  Parnassus Growth Equity Fund – Investor Actual*      $1,000.00        $996.00        $4.23        0.84%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,020.97        $4.28        0.84%    
  Parnassus Growth Equity Fund – Institutional Actual*      $1,000.00        $996.00        $3.17        0.63%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,022.03        $3.21        0.63%    
  Parnassus Value Equity Fund – Investor Actual*      $1,000.00        $1,051.20        $4.55        0.88%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,020.77        $4.48        0.88%    
  Parnassus Value Equity Fund – Institutional Actual*      $1,000.00        $1,052.50        $3.36        0.65%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,021.93        $3.31        0.65%    
  Parnassus Mid Cap Fund – Investor Actual*      $1,000.00        $997.30        $4.83        0.96%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,020.37        $4.89        0.96%    
  Parnassus Mid Cap Fund – Institutional Actual*      $1,000.00        $998.30        $3.78        0.75%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,021.42        $3.82        0.75%    
  Parnassus Mid Cap Growth Fund - Investor Actual*      $1,000.00        $1,009.60        $4.05        0.80%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,021.17        $4.08        0.80%    
  Parnassus Mid Cap Growth Fund – Institutional Actual*      $1,000.00        $1,010.00        $3.45        0.68%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,021.78        $3.47        0.68%    
  Parnassus Fixed Income Fund – Investor Actual*      $1,000.00        $979.20        $3.39        0.68%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,021.78        $3.47        0.68%    
  Parnassus Fixed Income Fund – Institutional Actual*      $1,000.00        $979.70        $2.25        0.45%    
  Hypothetical (5% return before expenses)      $1,000.00        $1,022.94        $2.29        0.45%    

* Expenses are calculated using the Funds’ annualized expense ratios, which represent ongoing expense as a percentage of net assets for the six months ended December 31, 2022. Expenses are calculated by multiplying the annualized expense ratio by the average account value of the period; then multiplying the result by the number of days in the most recent one-half year period (184); and then dividing that result by the number of days in the current fiscal year (365). Expense ratios for the most recent half year may differ from expense ratios based on one-year data in the financial highlights.

 

32


Table of Contents
Annual Report  •  2022      LOGO

 

Parnassus Core Equity Fund

Portfolio of Investments as of December 31, 2022

 

Equities   Shares     Market
Value ($)
 
Banks (2.8%)    
Bank of America Corp.     20,502,178       679,032,135  
   

 

 

 
Biotechnology (3.0%)    
Gilead Sciences Inc.     8,448,783       725,328,021  
   

 

 

 
Capital Markets (10.3%)    
CME Group Inc., Class A     3,487,927       586,529,804  
Intercontinental Exchange Inc.     5,630,489       577,631,867  
S&P Global Inc. l     1,756,000       588,154,640  
The Charles Schwab Corp. l     8,453,485       703,837,161  
   

 

 

 
      2,456,153,472  
   

 

 

 
Chemicals (4.8%)    
Linde plc     2,332,094       760,682,421  
The Sherwin Williams Co.     1,684,167       399,703,354  
   

 

 

 
      1,160,385,775  
   

 

 

 
Commercial Services & Supplies (2.6%)    
Waste Management Inc. l     3,971,331       623,022,407  
   

 

 

 
Containers & Packaging (2.2%)    
Ball Corp. l W     10,297,422       526,610,161  
   

 

 

 
Equity Real Estate Investment Trusts (1.4%)    
American Tower Corp.     1,584,989       335,795,770  
   

 

 

 
Food & Staples Retailing (4.1%)    
Costco Wholesale Corp. l     1,062,873       485,201,525  
Sysco Corp.     6,547,694       500,571,206  
   

 

 

 
      985,772,731  
   

 

 

 
Food Products (2.6%)    
Mondelez International Inc., Class A l     9,368,546       624,413,591  
   

 

 

 
Health Care Equipment & Supplies (3.7%)    
Abbott Laboratories     2,438,579       267,731,588  
Becton, Dickinson and Co.     2,405,930       611,827,999  
   

 

 

 
      879,559,587  
   

 

 

 
Household Durables (1.9%)    
D.R. Horton Inc.     4,998,278       445,546,501  
   

 

 

 
Household Products (3.2%)    
The Procter & Gamble Co.     5,039,444       763,778,133  
   

 

 

 
Insurance (2.4%)    
Marsh & McLennan Co., Inc. l     3,521,857       582,796,896  
   

 

 

 
Interactive Media & Services (5.0%)    
Alphabet Inc., Class A q     13,438,880       1,185,712,382  
   

 

 

 
Equities   Shares     Market
Value ($)
 
IT Services (7.9%)    
Fiserv Inc. q     10,047,212       1,015,471,717  
Mastercard Inc., Class A     2,511,947       873,479,330  
   

 

 

 
      1,888,951,047  
   

 

 

 
Life Sciences Tools & Services (4.8%)    
Danaher Corp.     2,382,889       632,466,398  
Thermo Fisher Scientific Inc.     917,511       505,264,133  
   

 

 

 
      1,137,730,531  
   

 

 

 
Machinery (4.3%)    
Deere & Co.     2,374,200       1,017,961,992  
   

 

 

 
Professional Services (2.5%)    
Verisk Analytics Inc.     3,433,021       605,653,565  
   

 

 

 
Road & Rail (2.6%)    
Canadian Pacific Railway Ltd.     8,274,779       617,215,766  
   

 

 

 
Semiconductors & Semiconductor Equipment (6.1%)    
Applied Materials Inc.     5,736,114       558,582,781  
Micron Technology Inc.     5,166,815       258,237,414  
NVIDIA Corp.     1,527,207       223,186,031  
Texas Instruments Inc.     2,501,486       413,295,517  
   

 

 

 
      1,453,301,743  
   

 

 

 
Software (14.2%)    
Adobe Inc. q     1,323,078       445,255,439  
Microsoft Corp.     6,672,446       1,600,186,000  
Oracle Corp.     8,600,611       703,013,943  
Salesforce Inc. q     4,911,099       651,162,616  
   

 

 

 
      3,399,617,998  
   

 

 

 
Specialty Retail (1.2%)    
The Home Depot Inc. l     881,245       278,350,046  
   

 

 

 
Technology Hardware, Storage & Peripherals (2.9%)    
Apple Inc.     5,327,965       692,262,492  
   

 

 

 
Wireless Telecommunication Services (2.8%)    
T-Mobile US Inc. q     4,817,377       674,432,780  
   

 

 

 
Total investment in equities (99.3%)
(cost $20,506,585,895)

 

    23,739,385,522  
   

 

 

 
 

 

The accompanying notes are an integral part of these financial statements.

 

33


Table of Contents
LOGO      Annual Report  •  2022

 

Parnassus Core Equity Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

Short-Term Securities    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Certificates of Deposit (0.0%) a            
Citizens Trust Bank      0.05      01/14/2023        250,000        249,630  
Community Vision Capital & Consulting      0.50      01/31/2023        250,000        248,767  
Self-Help Federal Credit Union      0.40      02/17/2023        1,000,000        994,849  
Self-Help Federal Credit Union      1.50      10/16/2023        250,000        242,110  
           

 

 

 
              1,735,356  
           

 

 

 
Certificates of Deposit Account Registry Service (0.0%) a

 

        
CDARS agreement with Beneficial State Bank,
dated 03/17/2022
Participating depository institutions:
Chambers Bank, par 238,500;
Decatur County Bank, par 238,500;
First Commerce Bank, par 46,000;
First State Bank of Forsyth, par 24,529;
Legacy Bank & Trust Company, par 238,500;
Prime Alliance Bank, par 238,500;
Texas National Bank of Jacksonville, par 238,500;
The Tri-County Bank, par 38,740;
United Bank, par 238,500;
Waumandee State Bank, par 238,500;
West Alabama Bank & Trust, par 221,231;
(cost $1,983,736)
     0.73      03/16/2023        2,000,000        1,983,736  
           

 

 

 
Community Development Loans (0.0%) a            
BlueHub Loan Fund Inc.      1.00      04/15/2023        100,000        98,290  
BlueHub Loan Fund Inc.      1.00      04/15/2023        900,000        884,614  
New Hampshire Community Loan Fund Inc.      1.00      07/31/2023        500,000        482,658  
Root Capital Inc.      1.00      02/01/2023        200,000        198,981  
Vermont Community Loan Fund Inc.      0.50      04/15/2023        100,000        98,290  
           

 

 

 
              1,762,833  
           

 

 

 
Time Deposits (0.7%)            
Royal Bank of Canada, Toronto      3.69      01/03/2023        177,815,887        177,815,887  
           

 

 

 
Securities Purchased with Cash Collateral from Securities Lending

 

     
Registered Investment Companies (0.0%)            
Invesco Aim Government & Agency Portfolio            
Short-Term Investments Trust, Institutional Class      4.01            12,279,240  
           

 

 

 
Total short-term securities (0.7%)
(cost $195,577,052)
              195,577,052  
           

 

 

 
Total securities (100.0%)
(cost $20,702,162,947)
              23,934,962,574  
           

 

 

 
Payable upon return of securities loaned (0.0%)               (12,279,240
           

 

 

 
Other assets and liabilities (0.0%)               (12,498,678
           

 

 

 
Total net assets (100.0%)               23,910,184,656  
           

 

 

 

l This security, or partial position of this security, was on loan at December 31, 2022. The total value of the securities on loan at December 31, 2022 was $12,036,517.

  

W Fund ownership consists of 5% or more of the shares outstanding of the Affiliated Issuer, as defined under the Investment Securities Act of 1940.

  

q This security is non-income producing.

  

a Market value adjustments have been applied to these securities to reflect potential early withdrawal. Such securities has been classified as level 3.

  

plc Public Limited Company

           

 

The accompanying notes are an integral part of these financial statements.

 

34


Table of Contents
Annual Report  •  2022      LOGO

 

Parnassus Growth Equity Fund

Portfolio of Investments as of December 31, 2022

 

Equities   Shares     Market
Value ($)
 
Automobiles (1.5%)    
Stellantis N.V.     11,202       159,068  
   

 

 

 
Biotechnology (1.0%)    
Vertex Pharmaceuticals Inc. q     369       106,560  
   

 

 

 
Capital Markets (4.4%)    
Ares Management Corp., Class A     3,514       240,498  
S&P Global Inc.     713       238,812  
   

 

 

 
      479,310  
   

 

 

 
Chemicals (1.0%)    
Linde plc     323       105,356  
   

 

 

 
Equity Real Estate Investment Trusts (1.9%)    
SBA Communications Corp., Class A     753       211,073  
   

 

 

 
Food & Staples Retailing (2.5%)    
Costco Wholesale Corp.     582       265,683  
   

 

 

 
Food Products (2.0%)    
Hershey Co.     915       211,887  
   

 

 

 
   
Health Care Equipment & Supplies (4.2%)    
Boston Scientific Corp. q     5,157       238,614  
Dexcom Inc. q     1,889       213,910  
   

 

 

 
      452,524  
   

 

 

 
Health Care Services (2.4%)    

UnitedHealth Group Inc.

    500       265,090  
   

 

 

 
   
Hotels, Restaurants & Leisure (5.5%)    
Airbnb Inc., Class A q     1,256       107,388  
Hyatt Hotels Corp., Class A q     1,787       161,634  
Planet Fitness, Inc., Class A q     4,083       321,740  
   

 

 

 
      590,762  
   

 

 

 
Household Durables (1.2%)    
D.R. Horton Inc.     1,496       133,354  
   

 

 

 
Household Products (2.0%)    
Colgate-Palmolive Co.     2,697       212,497  
   

 

 

 
Interactive Media & Services (4.5%)    
Alphabet Inc., Class A q     5,456       481,383  
   

 

 

 
Internet (5.9%)    
Amazon.com Inc. q     7,636       641,424  
   

 

 

 
Equities   Shares     Market
Value ($)
 
IT Services (7.2%)    
Cloudflare Inc., Class A q     2,433       109,996  
EPAM Systems Inc. q     484       158,626  
Visa Inc.     2,438       506,519  
   

 

 

 
      775,141  
   

 

 

 
Life Sciences Tools & Services (2.9%)    
Thermo Fisher Scientific Inc.     576       317,198  
   

 

 

 
Machinery (1.9%)    
Deere & Co.     494       211,808  
   

 

 

 
Pharmaceuticals (5.4%)    
AstraZeneca plc, ADR     3,905       264,759  
Eli Lilly & Co.     862       315,354  
   

 

 

 
      580,113  
   

 

 

 
Professional Services (2.0%)    
Verisk Analytics Inc.     1,201       211,881  
   

 

 

 
Road & Rail (2.9%)    
Canadian Pacific Railway Ltd.     2,826       210,791  
Old Dominion Freight Line Inc.     370       104,999  
   

 

 

 
      315,790  
   

 

 

 
Semiconductors & Semiconductor Equipment (8.8%)    
Advanced Micro Devices Inc. q     3,294       213,352  
Applied Materials Inc.     1,646       160,287  
ASML Holding NV, ADR     289       157,910  
NVIDIA Corp.     1,467       214,387  
Taiwan Semiconductor Manufacturing Co., ADR     2,825       210,434  
   

 

 

 
      956,370  
   

 

 

 
Software (20.0%)    
Microsoft Corp.     4,466       1,071,036  
Procore Technologies Inc. q     6,177       291,431  
PTC Inc. q     2,637       316,545  
Salesforce Inc. q     1,223       162,158  
ServiceNow Inc. q     414       160,744  
Workday Inc., Class A q     962       160,972  
   

 

 

 
      2,162,886  
   

 

 

 
Technology Hardware, Storage & Peripherals (5.5%)    
Apple Inc.     4,543       590,272  
   

 

 

 
Textiles, Apparel & Luxury Goods (1.0%)    
Nike Inc., Class B     911       106,596  
   

 

 

 

Total investment in equities (97.6%)

(cost $10,584,320)

 

    10,544,026  
   

 

 

 
 

 

The accompanying notes are an integral part of these financial statements.

 

35


Table of Contents
LOGO      Annual Report  •  2022

 

Parnassus Growth Equity Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

Short-Term Securities    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Time Deposits (100.2%)            
Sumitomo, Tokyo      3.69      01/03/2023        10,823,100        10,823,100  
           

 

 

 
Total short-term securities (100.2%)
(cost $10,823,100)
              10,823,100  
           

 

 

 
Total securities (197.8%)
(cost $21,407,420)
              21,367,126  
           

 

 

 
Other assets and liabilities (-97.8%)               (10,566,566
           

 

 

 
Total net assets (100.0%)               10,800,560  
           

 

 

 
           

N.V. Naamloze Vennootschap

  

q  This security is non-income producing.

           

plc Public Limited Company

           

ADR American Depositary Receipt

           

 

The accompanying notes are an integral part of these financial statements.

 

36


Table of Contents
Annual Report  •  2022      LOGO

 

Parnassus Value Equity Fund

Portfolio of Investments as of December 31, 2022

 

Equities   Shares     Market
Value ($)
 
Air Freight & Logistics (2.1%)    
FedEx Corp.     551,180       95,464,376  
   

 

 

 
Banks (5.1%)    
Bank of America Corp.     3,000,000       99,360,000  
Citigroup Inc.     1,502,553       67,960,472  
Signature Bank     584,113       67,301,500  
   

 

 

 
      234,621,972  
   

 

 

 
Biotechnology (11.0%)    
Biogen Inc. q     305,808       84,684,351  
BioMarin Pharmaceutical Inc. q     832,295       86,134,210  
Gilead Sciences Inc.     1,738,122       149,217,774  
Moderna Inc. q     644,208       115,712,641  
Vertex Pharmaceuticals Inc. q     239,912       69,281,787  
   

 

 

 
      505,030,763  
   

 

 

 
Capital Markets (9.1%)    
S&P Global Inc.     331,514       111,037,299  
The Bank of New York Mellon Corp.     2,444,145       111,257,480  
The Charles Schwab Corp.     2,360,908       196,569,200  
   

 

 

 
      418,863,979  
   

 

 

 
Chemicals (1.1%)    
International Flavors & Fragrances Inc.     482,811       50,617,905  
   

 

 

 
Communications Equipment (2.6%)    
Cisco Systems Inc.     2,517,772       119,946,658  
   

 

 

 
Consumer Finance (3.5%)    
American Express Co.     642,639       94,949,912  
Capital One Financial Corp.     700,000       65,072,000  
   

 

 

 
      160,021,912  
   

 

 

 
Containers & Packaging (2.0%)    
Ball Corp. W     1,794,980       91,795,277  
   

 

 

 
Diversified Telecommunication Services (3.0%)    
Verizon Communications Inc.     3,521,415       138,743,751  
   

 

 

 
Equity Real Estate Investment Trusts (2.3%)    
Simon Property Group Inc.     913,815       107,354,986  
   

 

 

 
Food & Staples Retailing (3.3%)    
Sysco Corp.     1,975,976       151,063,365  
   

 

 

 
Health Care Equipment & Supplies (1.7%)    
Align Technology Inc. q     367,474       77,500,267  
   

 

 

 
Household Durables (2.9%)    
D.R. Horton Inc.     1,522,562       135,721,177  
   

 

 

 
Insurance (2.6%)    
The Progressive Corp.     911,671       118,252,846  
   

 

 

 
Interactive Media & Services (1.5%)

 

Alphabet Inc., Class A q     800,000       70,584,000  
   

 

 

 
Equities   Shares     Market
Value ($)
 
IT Services (10.2%)    
Accenture plc, Class A     346,720       92,518,765  
Amdocs Ltd.     1,048,646       95,321,921  
Global Payments Inc.     1,128,745       112,106,953  
Mastercard Inc., Class A     300,000       104,319,000  
Paychex Inc.     555,898       64,239,573  
   

 

 

 
      468,506,212  
   

 

 

 
Life Sciences Tools & Services (2.6%)    
Agilent Technologies Inc.     796,434       119,186,348  
   

 

 

 
Machinery (5.1%)    
Cummins Inc. l     455,464       110,354,373  
Deere & Co.     287,730       123,367,115  
   

 

 

 
      233,721,488  
   

 

 

 
Media (2.6%)    
Comcast Corp., Class A     3,428,863       119,907,339  
   

 

 

 
Multiline Retail (2.0%)    
Target Corp.     630,045       93,901,907  
   

 

 

 
Pharmaceuticals (4.7%)    
Merck & Co., Inc.     1,931,707       214,322,892  
   

 

 

 
Road & Rail (2.0%)    
Union Pacific Corp.     436,475       90,380,878  
   

 

 

 
Semiconductors & Semiconductor Equipment (2.1%)    
Applied Materials Inc.     222,448       21,661,986  
Micron Technology Inc.     1,549,823       77,460,154  
   

 

 

 
      99,122,140  
   

 

 

 
Software (4.3%)    
Microsoft Corp.     369,967       88,725,486  
Oracle Corp.     1,358,062       111,007,988  
   

 

 

 
      199,733,474  
   

 

 

 
Specialty Retail (3.6%)    
Ross Stores Inc.     979,200       113,655,744  
The Gap Inc.     4,729,419       53,347,846  
   

 

 

 
      167,003,590  
   

 

 

 
Technology Hardware, Storage & Peripherals (3.0%)    
Apple Inc.     468,300       60,846,219  
Western Digital Corp.     2,400,464       75,734,639  
   

 

 

 
      136,580,858  
   

 

 

 
Textiles, Apparel & Luxury Goods (1.3%)    
VF Corp.     2,124,793       58,665,535  
   

 

 

 
Trading Companies & Distributors (1.4%)    
W.W. Grainger Inc.     115,186       64,072,213  
   

 

 

 
Total investment in equities (98.6%)
(cost $4,052,164,784)

 

    4,540,688,108  
   

 

 

 
 

 

The accompanying notes are an integral part of these financial statements.

 

37


Table of Contents
LOGO      Annual Report  •  2022

 

Parnassus Value Equity Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

Short-Term Securities    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Certificates of Deposit (0.0%)  a            
Citizens Trust Bank      0.05      10/06/2023        250,000        242,384  
Community Vision Capital & Consulting      0.50      03/31/2023        250,000        246,343  
Self-Help Federal Credit Union      0.40      02/25/2023        250,000        248,493  
           

 

 

 
              737,220  
           

 

 

 
Certificates of Deposit Account Registry Service (0.0%) a

 

        
CDARS agreement with Beneficial State Bank,
dated 03/17/2022
Participating depository institutions:
Chambers Bank, par 23,000;
Legacy Bank & Trust Company, par 238,500;
Prime Alliance Bank, par 238,500;
(cost $495,794)
     0.73      03/16/2023        500,000        495,794  
           

 

 

 
Community Development Loans (0.0%)  a            
Root Capital Inc.      1.00      02/01/2023        100,000        99,490  
           

 

 

 
Time Deposits (1.3%)            
ANZ, London      3.69      01/03/2023        60,331,933        60,331,933  
           

 

 

 
Securities Purchased with Cash Collateral from Securities Lending

 

        
Registered Investment Companies (0.0%)            
Invesco Aim Government & Agency Portfolio            
Short-Term Investments Trust, Institutional Class      4.01            147,960  
           

 

 

 
Total short-term securities (1.3%)
(cost $61,812,397)
              61,812,397  
           

 

 

 
Total securities (99.9%)
(cost $4,113,977,181)
              4,602,500,505  
           

 

 

 
Payable upon return of securities loaned (0.0%)               (147,960
           

 

 

 
Other assets and liabilities (0.1%)               3,921,552  
           

 

 

 
Total net assets (100.0%)               4,606,274,097  
           

 

 

 

 

q This security is non-income producing.

           

W Fund ownership consists of 5% or more of the shares outstanding of the Affiliated Issuer, as defined under the Investment Securities Act of 1940.

  

l This security, or partial position of this security, was on loan at December 31, 2022. The total value of the securities on loan at December 31, 2022 was $145,038.

  

a Market value adjustments have been applied to these securities to reflect potential early withdrawal. Such securities have been classified as level 3.

 

plc Public Limited Company

           

 

The accompanying notes are an integral part of these financial statements.

 

38


Table of Contents
Annual Report  •  2022      LOGO

 

Parnassus Mid Cap Fund

Portfolio of Investments as of December 31, 2022

 

Equities   Shares     Market
Value ($)
 
Air Freight & Logistics (3.7%)    
C.H. Robinson Worldwide Inc.     2,426,867       222,203,943  
   

 

 

 
Banks (3.5%)    
First Republic Bank, Class A     1,120,673       136,598,832  
Signature Bank     651,384       75,052,464  
   

 

 

 
      211,651,296  
   

 

 

 
Biotechnology (2.3%)

 

 
BioMarin Pharmaceutical Inc. q     1,363,955       141,155,703  
   

 

 

 
Capital Markets (4.0%)    
Cboe Global Markets Inc.     1,947,431       244,344,168  
   

 

 

 
Chemicals (2.7%)    
PPG Industries Inc.     1,296,499       163,021,784  
   

 

 

 
Commercial Services & Supplies (2.5%)    
Republic Services Inc.     1,177,627       151,902,107  
   

 

 

 
Containers & Packaging (2.5%)    
Ball Corp. W     2,929,547       149,817,034  
   

 

 

 
Electric Utilities (2.4%)    
IDACORP Inc.     1,337,354       144,233,629  
   

 

 

 
Electronic Equipment, Instruments & Components (2.1%)    
Trimble Inc. q     2,468,198       124,792,091  
   

 

 

 
Equity Real Estate Investment Trusts (3.8%)    
Alexandria Real Estate Equities Inc.     431,695       62,885,011  
SBA Communications Corp., Class A     592,707       166,141,699  
   

 

 

 
      229,026,710  
   

 

 

 
Food & Staples Retailing (6.4%)

 

 
Grocery Outlet Holding Corp. q W     5,133,018       149,832,795  
Sysco Corp.     3,085,263       235,868,356  
   

 

 

 
      385,701,151  
   

 

 

 
Health Care Equipment & Supplies (4.7%)    
Hologic Inc. q     3,786,427       283,262,602  
   

 

 

 
Household Durables (3.3%)    
D.R. Horton Inc.     2,269,201       202,276,577  
   

 

 

 
IT Services (5.2%)    
Broadridge Financial Solutions Inc.     1,087,400       145,852,962  
Jack Henry & Associates Inc.     967,181       169,798,296  
   

 

 

 
      315,651,258  
   

 

 

 
Equities   Shares     Market
Value ($)
 
Life Sciences Tools & Services (5.6%)    
Agilent Technologies Inc.     1,197,216       179,163,374  
IQVIA Holdings Inc. q     786,864       161,220,565  
   

 

 

 
      340,383,939  
   

 

 

 
Machinery (13.0%)    
CNH Industrial N.V.     14,577,180       234,109,511  
Otis Worldwide Corp.     3,319,482       259,948,635  
Pentair plc     2,296,917       103,315,327  
Xylem Inc.     1,699,315       187,893,260  
   

 

 

 
      785,266,733  
   

 

 

 
Professional Services (6.1%)

 

 
CoStar Group Inc. q     1,930,334       149,176,212  
Verisk Analytics Inc.     1,267,461       223,605,470  
   

 

 

 
      372,781,682  
   

 

 

 
Semiconductors & Semiconductor Equipment (3.5%)

 

 
KLA Corp.     396,621       149,538,016  
Lam Research Corp.     155,029       65,158,689  
   

 

 

 
      214,696,705  
   

 

 

 
Software (11.0%)

 

 
Ansys Inc. q     415,088       100,281,110  
Autodesk Inc. q     770,926       144,062,942  
Roper Technologies Inc.     380,167       164,266,359  
Synopsys Inc. q     214,487       68,483,554  
Workday Inc., Class A q     1,157,030       193,605,830  
   

 

 

 
      670,699,795  
   

 

 

 
Specialty Retail (5.3%)

 

 
Burlington Stores Inc. q     535,924       108,663,950  
O’Reilly Automotive Inc. q     254,034       214,412,317  
   

 

 

 
      323,076,267  
   

 

 

 
Technology Hardware, Storage & Peripherals (0.9%)    
Western Digital Corp. q     1,809,424       57,087,327  
   

 

 

 
Textiles, Apparel & Luxury Goods (1.9%)    
Levi Strauss & Co., Class A l     3,467,865       53,821,265  
VF Corp.     2,162,672       59,711,374  
   

 

 

 
      113,532,639  
   

 

 

 
Transportation Infrastructure (3.0%)    
Avantor Inc. q     8,752,391       184,587,926  
   

 

 

 
Total investment in equities (99.2%)
(cost $5,845,537,894)

 

    6,031,153,066  
   

 

 

 
 

 

The accompanying notes are an integral part of these financial statements.

 

39


Table of Contents
LOGO      Annual Report  •  2022

 

Parnassus Mid Cap Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

Short-Term Securities    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Certificates of Deposit (0.0%) a            
Beneficial State Bank      0.30      03/27/2023        250,000        246,877  
Beneficial State Bank      0.30      04/25/2023        250,000        247,671  
Citizens Trust Bank      0.05      01/14/2023        250,000        249,630  
Self-Help Federal Credit Union      0.40      02/17/2023        250,000        248,712  
           

 

 

 
              992,890  
           

 

 

 
Community Development Loans (0.0%) a

 

        
BlueHub Loan Fund Inc.      1.00      04/15/2023        300,000        294,871  
           

 

 

 
Time Deposits (0.8%)            
ANZ, London      3.69      01/03/2023        6,058,779        6,058,779  
BBVA, Madrid      3.69      01/03/2023        22,423,384        22,423,384  
Royal Bank of Canada, Toronto      3.69      01/03/2023        22,184,113        22,184,113  
           

 

 

 
              50,666,276  
           

 

 

 
Securities Purchased with Cash Collateral from Securities Lending

 

     
Registered Investment Companies (0.1%)            
Invesco Aim Government & Agency Portfolio            
Short-Term Investments Trust, Institutional Class      4.01            8,648,213  
           

 

 

 
Total short-term securities (1.0%)
(cost $60,602,250)
              60,602,250  
           

 

 

 
Total securities (100.2%)
(cost $5,906,140,144)
              6,091,755,316  
           

 

 

 
Payable upon return of securities loaned (-0.1%)               (8,648,213
           

 

 

 
Other assets and liabilities (-0.1%)               (5,901,970
           

 

 

 
Total net assets (100.0%)               6,077,205,133  
           

 

 

 
           

q  This security is non-income producing.

W Fund ownership consists of 5% or more of the shares outstanding of the Affiliated Issuer, as defined under the Investment Securities Act of 1940.

l This security, or partial position of this security, was on loan at December 31, 2022. The total value of the securities on loan at December 31, 2022 was $8,459,737.

a  Market value adjustments have been applied to these securities to reflect potential early withdrawal.
Such securities have been classified as level 3.

  

  

  

  

N.V. Naamloze Vennootschap

  

plc Public Limited Company

           

 

The accompanying notes are an integral part of these financial statements.

 

40


Table of Contents
Annual Report  •  2022      LOGO

 

Parnassus Mid Cap Growth Fund

Portfolio of Investments as of December 31, 2022

 

Equities   Shares     Market
Value ($)
 
Air Freight & Logistics (2.0%)    
C.H. Robinson Worldwide Inc.     142,146       13,014,888  
   

 

 

 
Banks (1.3%)    
Signature Bank     74,090       8,536,650  
   

 

 

 
Biotechnology (2.2%)    
BioMarin Pharmaceutical Inc. q     142,279       14,724,454  
   

 

 

 
Capital Markets (2.0%)    
Morningstar Inc.     60,210       13,040,884  
   

 

 

 
Chemicals (2.1%)    
Nutrien Ltd.     188,197       13,744,027  
   

 

 

 
Commercial Services & Supplies (2.1%)    
Cintas Corp.     30,581       13,810,991  
   

 

 

 
Distributors (4.1%)    
Pool Corp.     89,405       27,029,814  
   

 

 

 
Health Care Equipment & Supplies (7.0%)    
Align Technology Inc. q     98,807       20,838,396  
IDEXX Laboratories Inc. q     62,395       25,454,664  
   

 

 

 
      46,293,060  
   

 

 

 
Health Care Technology (4.6%)    
Veeva Systems Inc., Class A q     188,042       30,346,218  
   

 

 

 
Hotels, Restaurants & Leisure (2.1%)    
Hilton Worldwide Holdings Inc.     108,531       13,713,977  
   

 

 

 
Insurance (2.2%)    
The Progressive Corp.     113,566       14,730,646  
   

 

 

 
Internet & Direct Marketing Retail (3.3%)    
MercadoLibre Inc. q     25,730       21,773,755  
   

 

 

 
   
IT Services (5.4%)    
Block Inc., Class A q     319,369       20,069,148  
Broadridge Financial Solutions Inc.     115,119       15,440,911  
   

 

 

 
      35,510,059  
   

 

 

 
Life Sciences Tools & Services (7.6%)    
Agilent Technologies Inc.     175,788       26,306,674  
Illumina Inc. q     117,499       23,758,298  
   

 

 

 
      50,064,972  
   

 

 

 
Media (1.9%)    
The Trade Desk Inc., Class A q     285,430       12,795,827  
   

 

 

 
   
Equities   Shares     Market
Value ($)
 
Professional Services (9.1%)    
CoStar Group Inc. q     214,800       16,599,744  
Equifax Inc.     72,957       14,179,922  
Thomson Reuters Corp. l     133,264       15,201,424  
Verisk Analytics Inc.     78,937       13,926,066  
   

 

 

 
      59,907,156  
   

 

 

 
Road & Rail (2.3%)    
Old Dominion Freight Line Inc.     53,308       15,127,744  
   

 

 

 
Semiconductors & Semiconductor Equipment (9.0%)    
KLA Corp.     42,973       16,202,110  
Lam Research Corp.     34,141       14,349,462  
Monolithic Power Systems Inc.     39,450       13,949,915  
Teradyne Inc.     165,728       14,476,341  
   

 

 

 
      58,977,828  
   

 

 

 
Software (24.0%)    
Ansys Inc. q     84,527       20,420,878  
Cadence Design Systems Inc. q     64,017       10,283,691  
Five9 Inc. q     225,571       15,307,248  
Fortinet Inc. q     548,169       26,799,982  
Guidewire Software Inc. q     362,966       22,707,153  
Splunk Inc. q     345,930       29,781,114  
Synopsys Inc. q     31,644       10,103,613  
Workday Inc., Class A q     133,563       22,349,097  
   

 

 

 
      157,752,776  
   

 

 

 
Specialty Retail (3.4%)    
O’Reilly Automotive Inc. q     26,154       22,074,761  
   

 

 

 
Technology Hardware, Storage & Peripherals (1.8%)    
Western Digital Corp. q     380,640       12,009,192  
   

 

 

 
Total investment in equities (99.5%)
(cost $603,227,354)
      654,979,679  
   

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

41


Table of Contents
LOGO      Annual Report  •  2022

 

Parnassus Mid Cap Growth Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

Short-Term Securities    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Certificates of Deposit (0.1%) a            
Beneficial State Bank      0.30      01/15/2023        250,000        249,602  
Citizens Trust Bank      0.05      01/14/2023        200,000        199,704  
           

 

 

 
              449,306  
           

 

 

 
Certificates of Deposit Account Registry Service (0.1%) a

 

        
CDARS agreement with Beneficial State Bank,
dated 03/17/2022
Participating depository institutions:
Chambers Bank, par 23,000;
Legacy Bank & Trust Company, par 238,500;
Prime Alliance Bank, par 238,500;
(cost $495,934)
     0.73      03/16/2023        500,000        495,934  
           

 

 

 
Community Development Loans (0.1%) a            
BlueHub Loan Fund Inc.      1.00      04/15/2023        100,000        98,290  
BlueHub Loan Fund Inc.      1.00      04/15/2023        100,000        98,290  
Root Capital Inc.      1.00      02/01/2023        100,000        99,491  
Vermont Community Loan Fund Inc.      0.50      10/15/2023        100,000        95,282  
           

 

 

 
              391,353  
           

 

 

 
Securities Purchased with Cash Collateral from Securities Lending

 

        
Registered Investment Companies (1.1%)            
Invesco Aim Government & Agency Portfolio            
Short-Term Investments Trust, Institutional Class      4.01            6,927,690  
           

 

 

 
Total short-term securities (1.4%)
(cost $8,264,283)
              8,264,283  
           

 

 

 
Total securities (100.9%)
(cost $611,491,637)
              663,243,962  
           

 

 

 
Payable upon return of securities loaned (-1.1%)               (6,927,690
           

 

 

 
Other assets and liabilities (0.2%)               2,169,570  
           

 

 

 
Total net assets (100.0%)               658,485,842  
           

 

 

 
           

q This security is non-income producing.

           

l This security, or partial position of this security, was on loan at December 31, 2022. The total value of the securities on loan at December 31, 2022 was $6,789,420.

  

a Market value adjustments have been applied to these securities to reflect potential early withdrawal. Such securities have been classified as level 3.

  

 

The accompanying notes are an integral part of these financial statements.

 

42


Table of Contents
Annual Report  •  2022      LOGO

 

Parnassus Fixed Income Fund

Portfolio of Investments as of December 31, 2022

 

Preferred Stocks    Interest
Rate
     Maturity
Date
     Shares      Market
Value ($)
 
Banks (1.5%)            
First Republic Bank      4.50      12/31/2026        250,000        4,315,000  
           

 

 

 
Capital Markets (2.2%)            
Morgan Stanley l      4.25      01/15/2027        240,000        4,123,200  
The Charles Schwab Corp. l      4.45      06/01/2026        107,835        1,994,948  
           

 

 

 
              6,118,148  
           

 

 

 
Consumer Finance (0.5%)            
Capital One Financial Corp. l      5.00      12/01/2024        50,000        900,000  
Capital One Financial Corp. l      4.63      12/01/2025        22,285        389,965  
           

 

 

 
              1,289,965  
           

 

 

 
Equity Real Estate Investment Trusts (2.3%)            
Digital Realty Trust Inc. l      5.20      10/10/2024        114,608        2,316,228  
Public Storage      3.88      10/06/2025        40,000        650,800  
Public Storage l      4.00      06/16/2026        140,549        2,337,330  
Public Storage      4.10      01/13/2027        70,000        1,195,600  
           

 

 

 
              6,499,958  
           

 

 

 
Total investment in preferred stocks (6.5%)
(cost $24,635,704)
              18,223,071  
           

 

 

 
Convertible Bonds                    Principal
Amount ($)
         
Electrical Equipment (0.7%)            
Sunrun Inc.      0.00      02/01/2026        2,800,000        1,934,800  
           

 

 

 
Total investment in convertible bonds (0.7%)
(cost $2,323,269)
              1,934,800  
           

 

 

 
           
Corporate Bonds                                
Air Freight & Logistics (2.5%)            
C.H. Robinson Worldwide Inc.      4.20      04/15/2028        4,000,000        3,784,199  
FedEx Corp.      4.25      05/15/2030        1,750,000        1,650,498  
FedEx Corp.      4.75      11/15/2045        1,750,000        1,485,420  
           

 

 

 
              6,920,117  
           

 

 

 
Airlines (2.6%)            
Alaska Airlines 2020-1, Class B      8.00      08/15/2025        4,130,952        4,126,507  
Alaska Airlines 2020-1, Class A      4.80      08/15/2027        132,198        125,963  
Southwest Airlines Co.      5.13      06/15/2027        3,000,000        2,966,132  
           

 

 

 
              7,218,602  
           

 

 

 
Auto Components (1.3%)            
APTIV plc      2.40      02/18/2025        1,000,000        943,648  
APTIV plc      5.40      03/15/2049        2,000,000        1,708,695  
APTIV plc      4.15      05/01/2052        1,500,000        1,087,028  
           

 

 

 
              3,739,371  
           

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

43


Table of Contents
LOGO      Annual Report  •  2022

 

Parnassus Fixed Income Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

Corporate Bonds    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Banks (2.0%)            
Bank of America Corp.      1.53      12/06/2025        2,000,000        1,845,769  
Citigroup Inc.      2.01      01/25/2026        4,000,000        3,709,572  
           

 

 

 
              5,555,341  
           

 

 

 
Biotechnology (0.6%)            
Gilead Sciences Inc.      4.80      04/01/2044        1,750,000        1,613,344  
           

 

 

 
Building Products (1.4%)            
Masco Corp.      3.50      11/15/2027        3,000,000        2,783,291  
Masco Corp.      4.50      05/15/2047        1,500,000        1,180,610  
           

 

 

 
              3,963,901  
           

 

 

 
Capital Markets (0.5%)            
The Charles Schwab Corp.      3.75      04/01/2024        1,500,000        1,477,106  
           

 

 

 
Chemicals (0.6%)            
The Sherwin-Williams Co.      4.50      06/01/2047        2,000,000        1,691,084  
           

 

 

 
Consumer Finance (3.8%)            
American Express Co.      4.05      05/03/2029        4,000,000        3,816,966  
Capital One Financial Corp.      2.62      11/02/2032        3,000,000        2,307,435  
Discover Financial Services      4.50      01/30/2026        3,500,000        3,378,687  
Discover Financial Services      4.10      02/09/2027        1,000,000        941,114  
           

 

 

 
              10,444,202  
           

 

 

 
Containers & Packaging (1.6%)            
Ball Corp.      4.88      03/15/2026        4,500,000        4,360,952  
           

 

 

 
Electronic Equipment, Instruments & Components (1.4%)            
Trimble Inc.      4.90      06/15/2028        4,000,000        3,842,001  
           

 

 

 
Equity Real Estate Investment Trusts (5.9%)            
Alexandria Real Estate Equities Inc.      2.00      05/18/2032        3,750,000        2,882,498  
Alexandria Real Estate Equities Inc.      4.85      04/15/2049        1,750,000        1,492,081  
American Tower Corp.      2.40      03/15/2025        2,000,000        1,881,958  
American Tower Corp.      2.70      04/15/2031        2,250,000        1,837,118  
Digital Realty Trust Inc.      3.60      07/01/2029        1,000,000        895,400  
Regency Centers LP      3.75      06/15/2024        2,000,000        1,940,386  
Regency Centers LP      4.40      02/01/2047        2,400,000        1,855,646  
SBA Communications Corp.      3.88      02/15/2027        4,000,000        3,613,554  
           

 

 

 
              16,398,641  
           

 

 

 
Food & Staples Retailing (1.8%)            
Sysco Corp.      2.40      02/15/2030        6,000,000        5,001,546  
           

 

 

 
Food Products (1.5%)            
McCormick & Co., Inc.      2.50      04/15/2030        5,000,000        4,181,424  
           

 

 

 
Health Care Equipment & Supplies (1.2%)            
Becton, Dickinson and Co.      3.36      06/06/2024        2,000,000        1,954,470  
Becton, Dickinson and Co.      4.69      12/15/2044        1,500,000        1,345,994  
           

 

 

 
              3,300,464  
           

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

44


Table of Contents
Annual Report  •  2022      LOGO

 

Parnassus Fixed Income Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

Corporate Bonds    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Hotels, Restaurants & Leisure (1.1%)            
Hilton Domestic Operating Company Inc.      3.75      05/01/2029        3,684,000        3,186,660  
           

 

 

 
Household Products (0.9%)            
The Clorox Co.      1.80      05/15/2030        3,050,000        2,435,700  
           

 

 

 
Industrial Conglomerates (1.1%)            
Roper Technologies Inc.      2.95      09/15/2029        3,500,000        3,039,666  
           

 

 

 
Insurance (1.4%)            
Marsh & McLennan Co., Inc.      3.50      03/10/2025        2,750,000        2,670,343  
Marsh & McLennan Co., Inc.      4.35      01/30/2047        1,500,000        1,267,457  
           

 

 

 
              3,937,800  
           

 

 

 
Interactive Media & Services (0.7%)            
Alphabet Inc.      1.10      08/15/2030        1,500,000        1,178,869  
Alphabet Inc.      2.05      08/15/2050        1,500,000        883,324  
           

 

 

 
              2,062,193  
           

 

 

 
Internet & Direct Marketing Retail (1.0%)            
Booking Holdings Inc.      4.63      04/13/2030        3,000,000        2,904,759  
           

 

 

 
IT Services (1.3%)            
Fiserv Inc.      3.85      06/01/2025        2,500,000        2,426,653  
Fiserv Inc.      4.40      07/01/2049        1,500,000        1,226,208  
           

 

 

 
              3,652,861  
           

 

 

 
Life Sciences Tools & Services (1.5%)            
Agilent Technologies Inc.      2.75      09/15/2029        4,750,000        4,106,701  
           

 

 

 
Machinery (4.1%)            
CNH Industrial Capital LLC      1.45      07/15/2026        4,500,000        3,975,756  
Pentair Finance SA      4.50      07/01/2029        4,500,000        4,176,622  
Xylem Inc.      2.25      01/30/2031        4,000,000        3,254,672  
           

 

 

 
              11,407,050  
           

 

 

 
Media (1.5%)            
Comcast Corp.      4.25      10/15/2030        3,000,000        2,877,696  
NBC Universal Media LLC      4.45      08/13/2043        1,500,000        1,329,262  
           

 

 

 
              4,206,958  
           

 

 

 
Multiline Retail (1.0%)            
Macy’s Retail Holdings LLC l      5.88      04/01/2029        3,000,000        2,656,209  
           

 

 

 
Road & Rail (1.6%)            
Kansas City Southern      2.88      11/15/2029        3,000,000        2,598,920  
Kansas City Southern      4.70      05/01/2048        2,000,000        1,733,621  
           

 

 

 
              4,332,541  
           

 

 

 
Semiconductors & Semiconductor Equipment (2.2%)            
Micron Technology Inc.      2.70      04/15/2032        5,000,000        3,769,118  
Qorvo Inc.      3.38      04/01/2031        3,000,000        2,410,317  
           

 

 

 
              6,179,435  
           

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

45


Table of Contents
LOGO      Annual Report  •  2022

 

Parnassus Fixed Income Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

Corporate Bonds    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Software (4.2%)            
Autodesk Inc.      2.85      01/15/2030        1,250,000        1,078,372  
Autodesk Inc.      2.40      12/15/2031        3,500,000        2,813,886  
Cadence Design Systems Inc.      4.38      10/15/2024        3,940,000        3,909,786  
Oracle Corp.      6.13      07/08/2039        4,000,000        3,993,209  
           

 

 

 
              11,795,253  
           

 

 

 
Specialty Retail (3.4%)            
Lowe’s Companies Inc.      4.50      04/15/2030        3,000,000        2,882,754  
O’Reilly Automotive Inc.      4.20      04/01/2030        4,000,000        3,784,558  
Ross Stores Inc.      4.80      04/15/2030        3,000,000        2,843,360  
           

 

 

 
              9,510,672  
           

 

 

 
Textiles, Apparel & Luxury Goods (2.5%)            
Hanesbrands Inc.      4.88      05/15/2026        4,500,000        4,021,069  
VF Corp.      6.00      10/15/2033        2,000,000        1,972,754  
VF Corp.      6.45      11/01/2037        1,000,000        1,010,603  
           

 

 

 
              7,004,426  
           

 

 

 
Transportation Infrastructure (1.3%)            
Avantor Funding Inc.      4.63      07/15/2028        4,000,000        3,634,560  
           

 

 

 
Wireless Telecommunication Services (1.3%)            
T-Mobile USA Inc.      2.25      02/15/2026        1,500,000        1,364,024  
T-Mobile USA Inc.      4.38      04/15/2040        2,500,000        2,145,244  
           

 

 

 
              3,509,268  
           

 

 

 
Total investment in corporate bonds (60.8%)
(cost $191,796,144)
              169,270,808  
           

 

 

 
Supranational Bonds                                
European Bank for Reconstruction & Development      1.50      02/13/2025        2,000,000        1,881,315  
European Investment Bank l      1.63      10/09/2029        2,000,000        1,715,560  
European Investment Bank      0.75      09/23/2030        2,000,000        1,574,149  
International Bank for Reconstruction & Development      3.13      11/20/2025        4,000,000        3,867,920  
International Bank for Reconstruction & Development      1.63      11/03/2031        5,000,000        4,107,498  
International Finance Corp.      2.13      04/07/2026        6,000,000        5,609,400  
           

 

 

 
Total investment in supranational bonds (6.7%)
(cost $21,126,291)
              18,755,842  
           

 

 

 
U.S. Government Agency Bonds                                
Fannie Mae      0.88      12/18/2026        5,000,000        4,378,922  
Federal Home Loan Bank      3.33      06/27/2025        4,000,000        3,862,522  
Federal Home Loan Bank      0.50      07/28/2025        5,000,000        4,507,067  
Federal Home Loan Bank      2.75      06/29/2027        4,000,000        3,861,580  
Federal Home Loan Bank      3.00      06/30/2027        4,000,000        3,847,125  
Freddie Mac      0.80      10/28/2026        4,000,000        3,492,294  
           

 

 

 
Total investment in U.S. government agency bonds (8.6%)
(cost $24,931,345)
              23,949,510  
           

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

46


Table of Contents
Annual Report  •  2022      LOGO

 

Parnassus Fixed Income Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

U.S. Government Treasury Bonds    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
U.S. Treasury      2.50      01/31/2024        2,000,000        1,953,125  
U.S. Treasury      2.13      03/31/2024        2,000,000        1,938,125  
U.S. Treasury      2.00      05/31/2024        1,000,000        963,828  
U.S. Treasury      2.50      05/31/2024        4,000,000        3,882,187  
U.S. Treasury      1.75      06/30/2024        2,000,000        1,917,266  
U.S. Treasury      2.25      11/15/2024        3,000,000        2,882,812  
U.S. Treasury      1.50      11/30/2024        2,000,000        1,893,594  
U.S. Treasury      2.00      02/15/2025        3,000,000        2,856,211  
U.S. Treasury      0.25      06/30/2025        2,000,000        1,813,203  
U.S. Treasury      2.25      11/15/2025        3,000,000        2,842,148  
U.S. Treasury      0.38      12/31/2025        2,000,000        1,789,219  
U.S. Treasury      1.88      07/31/2026        4,000,000        3,703,750  
U.S. Treasury      3.25      05/15/2042        5,000,000        4,413,281  
U.S. Treasury      2.00      02/15/2050        4,000,000        2,667,188  
U.S. Treasury      1.25      05/15/2050        2,500,000        1,359,668  
U.S. Treasury      1.88      11/15/2051        4,000,000        2,559,062  
U.S. Treasury (TIPS)      0.38      07/15/2025        1,256,670        1,207,802  
U.S. Treasury (TIPS)      1.75      01/15/2028        1,422,520        1,423,057  
U.S. Treasury (TIPS)      0.63      02/15/2043        2,592,420        2,091,624  
           

 

 

 
Total investment in U.S. government treasury bonds (15.9%)
(cost $49,696,391)

 

           44,157,150  
           

 

 

 
Total investment in long-term securities (99.2%)
(cost $314,509,144)
              276,291,181  
           

 

 

 
Short-Term Securities                                
Certificates of Deposit (0.2%) a            
Beneficial State Bank      1.10      10/23/2023        250,000        241,529  
Citizens Trust Bank      0.05      10/06/2023        250,000        242,384  
           

 

 

 
              483,913  
           

 

 

 
Time Deposits (0.1%)            
BBVA, Madrid      3.69      01/03/2023        294,415        294,415  
           

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

47


Table of Contents
LOGO      Annual Report  •  2022

 

Parnassus Fixed Income Fund

Portfolio of Investments as of December 31, 2022 (continued)

 

Short-Term Securities    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Securities Purchased with Cash Collateral from Securities Lending

 

        
Registered Investment Companies (2.1%)            
Invesco Aim Government & Agency Portfolio            
Short-Term Investments Trust, Institutional Class      4.01            5,779,448  
           

 

 

 
Total short-term securities (2.4%)
(cost $6,557,776)
              6,557,776  
           

 

 

 
Total securities (101.6%)
(cost $321,066,920)
              282,848,957  
           

 

 

 
Payable upon return of securities loaned (-2.1%)               (5,779,448
           

 

 

 
Other assets and liabilities (0.5%)               1,355,814  
           

 

 

 
Total net assets (100.0%)               278,425,323  
           

 

 

 

 

l This security, or partial position of this security, was on loan at December 31, 2022. The total value of the securities on loan at December 31, 2022 was $5,536,179.

  

a Market value adjustments have been applied to these securities to reflect potential early withdrawal. Such securities have been classified as level 3.

  

plc Public Limited Company

           

LLC Limited Liability Company

           

LP Limited Partnership

           

TIPS Treasury Inflation Protected Security

           

 

The accompanying notes are an integral part of these financial statements.

 

48


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THIS PAGE LEFT INTENTIONALLY BLANK

 

49


Table of Contents
LOGO      Annual Report  •  2022

 

Statement of Assets and Liabilities

December 31, 2022

 

     Parnassus
Core Equity
Fund
    Parnassus
Growth Equity
Fund
    Parnassus
Value Equity
Fund
 
Assets      

Investments in stocks and bonds, at market value – Unaffiliated (cost $19,648,139,828, $10,584,320, $3,943,386,109, $5,453,073,989, $603,227,354, $314,509,144)

  $ 23,212,775,361     $ 10,544,026     $ 4,448,892,831  

Investments in stocks, at market value – Affiliated

     

(cost of $858,446,067, $0, $108,778,675, $392,463,905, $0, $0)

    526,610,161             91,795,277  

Investments in short-term securities

     

(at cost which approximates market value)

    195,577,052       10,823,100       61,812,397  

Cash

    219,784       3,316       263,513  

Receivables

     

Investment securities sold

    500,000              

Dividends and interest

    27,100,884             4,381,003  

Capital shares sold

    24,850,343       15,000       6,614,623  

Due from Parnassus Investments

          27,588        

Offering Costs

          60,803        

Other assets

    473,594             212,039  

Total assets

  $ 23,988,107,179     $ 21,473,833     $ 4,613,971,683  
Liabilities      

Payable upon return of loaned securities

    12,279,240             147,960  

Payable for investment securities purchased

    22,750,281       10,584,319        

Capital shares redeemed

    26,573,917             4,393,280