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Form N-CSRS PARNASSUS FUNDS For: Jun 30

August 5, 2022 11:39 AM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSRS

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: June 30, 2022

 

 

 


Table of Contents

Item 1: Report to Shareholders


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Parnassus Funds Semiannual Report

June 30, 2022

Parnassus Core Equity FundSM

Investor Shares: PRBLX | Institutional Shares: PRILX

Parnassus Mid Cap FundSM

Investor Shares: PARMX | Institutional Shares: PFPMX

Parnassus Endeavor FundSM

Investor Shares: PARWX | Institutional Shares: PFPWX

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   8
Parnassus Mid Cap Fund   12
Parnassus Endeavor Fund   16
Parnassus Mid Cap Growth Fund   19
Parnassus Fixed Income Fund   23
Responsible Investing Notes   26
Fund Expenses   27
Portfolios of Investments  
Parnassus Core Equity Fund   28
Parnassus Mid Cap Fund   30
Parnassus Endeavor Fund   32
Parnassus Mid Cap Growth Fund   34
Parnassus Fixed Income Fund   36
Financial Statements   42
Notes to Financial Statements   48
Financial Highlights   58
Additional Information   62

 

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August 5, 2022

 

Dear Shareholder,

The first half of the year mercifully has come to an end, with stocks and bonds posting major losses. The S&P 500 closed the half with a loss of -20.0%, while the Russell MidCap returned -21.6%. Even bonds were down double digits, with the Bloomberg U.S. Aggregate Bond Index dropping -10.4%. The corrosive impact of high inflation and the rapid increase in interest rates, spurred on by the Federal Reserve in an effort to combat inflation, are the main culprits for this market correction.

There was a major divergence between value and growth in the first half of 2022, as seen by the difference in returns for the Russell 1000 Value Index down -12.9% and the Russell Midcap Growth Index down -31.0%. After many years of outperforming value stocks, growth had a dismal six months to start 2022.

The major contributor to value’s dominance this year has been the strength of oil and gas stocks. As we know, the prices of fossil fuels have spiked this year, primarily due to the Russian invasion of Ukraine. Parnassus believes that investing in oil and gas is not a good long-term, sustainable investment, so we avoid the sector entirely. This policy helped us in prior years, when oil and gas stocks didn’t do well, but it has hurt us in recent quarters. As long-term, responsible investors, we still believe that avoiding oil and gas investments is the right course of action for our funds.

It is natural for investment conviction to wane when a bear market rears its ugly head. Besides the brief, but severe, downturn at the start of the pandemic, we haven’t had a bear market since the Great Financial Crisis of 2008-2009. The years in between saw fantastic gains for stocks and bonds, and those who held on during the unsettling times benefited greatly for their perseverance. It’s impossible to know if we’ve reached the bottom of this market cycle. What I can say with full confidence is that eventually the market will start making gains again. If you are in a position to hold on to your investments during this troubling bear market, I encourage you to do so.

New Head of ESG Stewardship

As I’ve written in recent shareholder reports, Parnassus is increasing its commitment to investment stewardship. In particular, this means we are putting more resources into engaging with our portfolio companies in an effort to improve their performance on environmental and social matters. By guiding our companies to improve in these areas, we are acting in accord with our values. In addition, the areas of engagement that we select have a clear connection to long-term shareholder value creation. This intersection of shareholder value creation and adherence to our values is what Parnassus Investments is all about.

Coming into the year, our ESG stewardship team consisted of three talented professionals: Rachel Nishimoto, Marissa LaFave and Simar Kaur. In April, the team grew to four with the addition of its new leader, Marian Macindoe. As our head of ESG stewardship, Marian is responsible for oversight of Parnassus’ proxy voting, ESG engagements and stockholder proposal strategy. Prior to joining us, Ms. Macindoe was the head of ESG strategy and

 

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engagement at Uber Technologies. Prior to that, she acted as the director of investment stewardship at Charles Schwab. Marian received her master’s in regional and urban planning from the London School of Economics and her bachelor’s degree in international and comparative policy studies (economics) from Reed College. Marian sits on the board of an Oakland-based nonprofit that serves youth transitioning out of foster care, First Place for Youth.

New Hires

In addition to Marian, we added a whopping six new employees in the quarter. Some of these replaced employees who moved on from Parnassus, and a few are filling new positions. Cameron Hall joined the client relationship team as an advisor relations associate. In this role, he is responsible for managing relationships with financial advisors and other similar clients. Prior to joining Parnassus, Cameron was a senior analyst with Nasdaq’s Capital Markets Advisory practice. He received his bachelor’s degrees in finance and French, as well as a minor in leadership studies from Chapman University. In his free time, Cameron enjoys skiing, travel, and reading nonfiction.

Colin Rennich also joined our advisor relations group as a manager of advisor relations. Before joining Parnassus, Colin worked at Appleseed Capital, Principal Financial Group and Ameriprise Financial. Colin earned a bachelor’s degree in business management from Purdue University. In his free time, Colin enjoys coaching youth sports, playing golf and traveling. Colin is working fully remote from Chicago, where he can better serve our clients in the Midwest.

Randall Dobkin joined our communications team as an investment reporting specialist. He graduated from the University of California, Davis, with a double major in economics and political science and a minor in global international studies. Prior to joining Parnassus, Randall worked as a consultant with the business development team at the International Research and Exchanges Board (IREX) and as a policy analyst for the Environmental Policy Innovation Center (EPIC) and California State Senate. In his free time, he enjoys camping, traveling, and rooting for the Detroit Lions.

Dan Lee joined the marketing strategy team as a senior digital strategist. He previously led digital marketing efforts at AIG First Principles, Mellon Investments and State Street Global Advisors. Dan earned a bachelor’s degree in sociology from the University of California, Santa Cruz. In his free time, Dan enjoys sailing, snowboarding, traveling, cooking, and wine tasting.

Bashir Nakhuda joined Parnassus as a senior financial analyst, where he will be working on corporate financial planning and analysis functions. Prior to joining Parnassus, Bashir spent the last 11 years working at Duff and Phelps within their Valuation Services Group. Bashir has a BA in political economy from the University of California, Berkeley, and is a Chartered Financial Analyst (CFA). In his spare time, Bashir enjoys traveling and rooting for Bay Area sports teams.

Kayla Ware is an investment operations associate. In this role, she is responsible for supporting operations and administration of Parnassus mutual funds and separate accounts. She recently graduated from California State University, East Bay, with a BS in business administration. In her free time, Kayla enjoys cooking, traveling, and going to the beach.

 

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Interns

It wouldn’t be summertime at Parnassus if we didn’t have a full complement of interns. We have five interns on the research team helping our analysts and portfolio managers make investment decisions. Tracy Wang is an MBA candidate at Harvard Business School. Previously, Tracy worked as an industry specialist at Capital Group, where she covered Chinese consumer discretionary sectors. She graduated magna cum laude with a BA in geography from Dartmouth College. Tracy grew up in Shanghai, China, sings in an a cappella group, and enjoys Chinese calligraphy and traveling.

Alex Morse is an MBA candidate at the Haas School of Business at the University of California, Berkeley. He previously worked at Bernstein Research as a senior research associate and at climate-technology startup Minimum. He is a CFA charter holder and graduated with a BA in english literature from the University of Oxford. Alex grew up in London and enjoys skiing, reading, and supporting the Chelsea Football Club.

Joon Kang is pursuing an economics degree from Cornell University. He previously interned in the equity research team at NH-Amundi Asset Management in Seoul, South Korea, and is a member of Johnson Private Equity & Credit at his school. Born in South Korea and raised in Queretaro, Mexico, Joon enjoys playing golf and hanging out with friends and family.

Christine Zhang is a Master of environmental studies candidate at the University of Pennsylvania. Previously, Christine interned as a sustainability consultant at KPMG and ESG analyst at Workiva. She graduated with a BA in economics and environmental studies (Honors) from the University of Pennsylvania. Christine grew up in New Zealand, and enjoys practicing yoga, traveling and eating at new restaurants.

Katelyn Moulton is a rising fourth year at the University of Virginia (UVA) studying economics and statistics. She is the director of an ESG career-development seminar through the McIntire School of Commerce at UVA and works with the sustainability office to pilot composting throughout campus. She completed a fellowship last summer with a non-profit based in Appalachia as a data science analyst. In her free time, Katelyn enjoys hiking in the Shenandoah Mountains and trying out new restaurants.

We have two interns working with the ESG Stewardship team. Coco Xu is pursuing a double degree in environmental economics & policy and psychology at the University of California, Berkeley. She previously worked as a think tank research intern at Industrial Securities in Shanghai. In her free time, Coco enjoys hiking, scuba diving, and playing volleyball.

Coming from a rural province in the Philippines, Emman Uy attended the Hong Kong University of Science and Technology and graduated with a BBA in economics and finance. After this, he pursued further studies as a Master’s in development engineering student at the University of California, Berkeley, focusing on energy, water and environmental engineering research in the Philippines. Emman loves his home and enjoys spending time with the people there swimming, hiking, and going on trips.

 

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We have two local high school students serving as interns this summer. Lucas Hom is a rising junior at Acalanes High School in the East Bay town of Lafayette. Lucas has been coding since age eight and started an online coding school during the pandemic, teaching kids how to get a start in programming using Scratch. This summer, Lucas is working at Parnassus as a software engineer intern while also teaching coding summer camps for The Coder School. In his free time, Lucas collects vinyl records, hangs out with friends, and is learning how to play ukulele.

Brayden Lee is a rising senior at Lowell High School, the prestigious San Francisco public school. Born and raised in the Bay Area, he is a sports enthusiast and a fan of the Warriors, 49ers, and Giants. Brayden participates in Lowell’s Intelligent Investors and UNICEF clubs while being committed to the varsity basketball team. In his free time, he loves outdoor activities like hiking and skiing, eating out with friends, and traveling especially to Hawaii.

Thank you all for investing with the Parnassus Funds.

Sincerely,

 

LOGO

Benjamin E. Allen

President and CEO

 

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Parnassus Core Equity Fund

Ticker: Investor Shares - PRBLX

Ticker: Institutional Shares - PRILX

 

As of June 30, 2022, the net asset value (“NAV”) of the Parnassus Core Equity Fund – Investor Shares (“the Fund”) was $50.53. After taking dividends into account, the total return for the second quarter was a loss of -15.34%. This compares to a loss of -16.10% for the S&P 500 Index (“S&P 500”). Year to date, the Parnassus Core Equity Fund – Investor Shares posted a loss of -20.20%. This compares to a loss of -19.96% for the 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 June 30, 2022  
     One
Year
    Three
Years
    Five
Years
    Ten
Years
    Gross
Expense
Ratio
 
Parnassus Core Equity Fund – Investor Shares     -11.51       10.28       11.90       13.09       0.82  
Parnassus Core Equity Fund –Institutional Shares     -11.33       10.52       12.14       13.31       0.61  
S&P 500 Index     -10.62       10.60       11.31       12.96       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 and 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.

 

Second Quarter Review

The S&P 500 is off to its worst start since 1970, finishing down -19.96% in the first half. Volatility persisted and the stock market fell just over 16% in the second quarter alone. Even the utilities and energy sectors, the only positive returners in the first quarter, had negative returns as the market selloff intensified. The story of virus variants, supply-chain disruptions, a geopolitical conflict, elevated inflation, and tightening financial conditions continued. The market had to reorient to the higher-than-expected inflation as measured by CPI,1,2 which accelerated year-over-year in May. Stocks fell as the Federal Reserve responded to the higher CPI by raising interest rates to curb demand and thereby stymie inflation. Volatility continued as market concerns fluctuated between inflation and the risk of recession.

Against this economic backdrop, the Parnassus Core Equity Fund – Investor Shares returned -15.34% compared to the S&P 500’s -16.10%. While sector allocation was slightly positive, most of our outperformance was explained by stock selection, particularly in the communication services and consumer discretionary sectors. Within sector allocation, our underweight positioning in energy, driven by our avoidance of fossil fuels, continued to be our largest detractor. This was followed closely by our underweight in utilities. Despite this, we had a notably positive contribution from our underweight in consumer discretionary, which helped drive a positive contribution from sector allocation overall.

 

 

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

2 Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a fixed basket of consumer goods and services (such as food, transportation, shelter, utilities, and medical care), and is widely used as a cost-of-living benchmark.

 

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T-Mobile, the US wireless carrier, was the Fund’s best performer in the quarter, with the stock returning 4.8%, contributing positive 0.1%* to the Fund’s return. The company reported a strong quarter, beating expectations on key metrics and raising full-year earnings guidance. T-Mobile continues to gain market share while ramping up their home broadband business. We like the share-gain story and find the improving financials and attractive cash flow generation promising.

Our next-best performer was Becton Dickinson, a global medical technology company, if only in a relative sense, with the stock returning -4.6%, contributing -0.2% to the Fund’s return. The company beat earnings expectations in the quarter, while completing the spin-off of Embecta and announcing the acquisition of Parata Systems, a provider of pharmacy automation solutions. We believe that the company’s shares are attractively priced as revenue could grow and profit margins expand more than expected.

American Tower, owner of wireless telecommunications infrastructure, was also a relative top performer. The company’s stock returned 2.9% in the quarter, contributing positive 0.1% to the Fund’s return. The company reported solid results that were slightly ahead of expectations while modestly raising their guidance. Despite a challenging interest rate environment, we continue to find the secular growth potential at American Tower attractive.

The three largest detractors in the quarter were Deere, Alphabet and Charles Schwab. Deere’s stock returned -27.7% in the quarter, which detracted -1.2% from the Fund’s return. After a period of outperformance, Deere reported mixed results in the quarter, as sales and margins missed expectations. The company is dealing with temporary supply-chain issues and volatile commodity prices despite a robust equipment-demand backdrop. Deere’s products are becoming increasingly relevant to the future of farming, and we continue to believe the longer-term upside from precision agriculture is underappreciated.

Alphabet, owner of Google and YouTube, returned -21.7% for the Fund, detracting -1.3% from the Fund’s return. Despite strong performance from Google Search, results from YouTube missed investor

expectations due to the emerging short-form video format, which is not currently generating revenue. Further, Alphabet’s exposure to digital advertising and overall economic activity weighed on shares, as economic growth expectations came down during the quarter. Despite this, we find Alphabet shares to be attractively priced even in a volatile macroeconomic environment.

Lastly, Charles Schwab, a dominant investment brokerage, returned -24.8% during the quarter as the company reported weak results along with the building of cash on its balance sheet to fund a potential deposit run-off. This lowers the amount of money Schwab can earn on customer cash deposits as customers opt to hold less cash in favor of higher-yielding alternatives. The company also has some exposure to “payment for order flow,” where Schwab makes money by routing trades to certain market makers. This practice is under scrutiny by regulators and the company’s exposure weighed on shares. The stock detracted -0.6% from the Fund’s return.

 

 

* 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 June 30, 2022

(percentage of net assets)

 

LOGO

Portfolio characteristics and holdings are subject to change periodically.

Top 10 Equity Holdings   
(percentage of net assets)   
Microsoft Corp.      6.8%  
Alphabet Inc., Class A      5.8%  
Fiserv Inc.      4.5%  
CME Group Inc., Class A      4.1%  
Becton, Dickinson and Co.      4.1%  
Danaher Corp.      3.8%  
Mastercard Inc., Class A      3.4%  
S&P Global Inc.      3.4%  
Comcast Corp., Class A      3.3%  
Deere & Co.      3.3%  

Portfolio characteristics and holdings are subject to change periodically.

Outlook and Strategy

We are still seeing inflation of 8.6%,3 which is the highest in over four decades. What’s changed since the first quarter is that the stock market is now off to the worst start in over five decades. Entering 2022, investors underappreciated the persistence and magnitude of elevated inflation. The second quarter saw the market sell off with more interest rate increases, prompted again by stubbornly high inflation. While it’s difficult to know exactly how rate sensitive the real economy is today, conditions have clearly deteriorated. Real GDP growth expectations for this year, which had already been coming down at the time of our last quarterly commentary, have dropped from 3.5% to 2.4% in a matter of months. The Federal Reserve now expects unemployment, which had been trending down to 3.6%, to tick up to 3.9% in 2023. We seem to be rapidly approaching the apex of uncertainty surrounding the path of inflation and the impact on overall demand from both higher prices and tightening financial conditions.

This uncertainty is a headwind for investors. However, there are reasons to be optimistic regarding a more certain path toward taming inflation and stable interest rates. An increasingly aggressive Federal Reserve may shorten this economic cycle, creating opportunity. We are seeing early signs of slowing industrial production, weakening freight and shipping pricing, commodity price corrections, inventory builds and other signs of economic slowdown. The obvious concern, which we

share, is greater-than-expected demand destruction, which could lead to a painful recession. The silver lining is that stock valuations are also now more attractive. The valuation of the S&P 500 in terms of a forward price-to-earnings ratio is down -30% while forward earnings estimates are up 13%.

 

 

3 Consumer Price Index – May 2022, U.S. Bureau of Labor.

 

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Clearly, not all companies will meet short-term earnings expectations and not all stocks are bargains. It is precisely during these times of near-term uncertainty that our focus on longer-term performance and high-quality ESG fundamentals becomes key. Consistent with our investment process, we are looking out over the next few years, where fundamentals may be mispriced and where we may be in an entirely different macroeconomic regime. Many positive secular trends related to technology adoption and innovation across sectors like software, media, life sciences and agriculture continue unabated. We are working to ensure that the Fund has the appropriate balance of resilient companies that can weather a slowing economy and attractively priced secular growers with achievable earnings expectations. In deteriorating economic conditions, we are cognizant that some companies may reasonably need to reduce staff or cut costs. It is important to Parnassus that companies undertake these activities with compassion and empathy toward affected stakeholders. As part of our ongoing ESG risk reviews, we will look for disclosures around these activities to ensure alignment with our principles. With this framework in mind, we made some notable changes to existing Fund holdings during the quarter, while adding one new stock and selling out of two. Overall, we continued to take advantage of the market volatility to upgrade the return profile of the portfolio, while tilting the Fund toward more resilient long-term business fundamentals.

Our largest overweight is still industrials. We continue to see attractive opportunities in this sector, which offer unique exposure to different parts of the economy. We reduced our overweight slightly by exiting Pentair, a water treatment company. We sold Pentair to reduce the Fund’s cyclicality and due to concerns around demand destruction and elevated earnings expectations. Our next largest overweight sector is communications services. We added to our exposure to this sector by adding to our positions in T-Mobile, Verizon and Comcast. We continue to see the resilient cash-flow generation in this sector as attractively priced in this economic environment. We remain overweight materials through our positions in high-quality businesses like Sherwin-Williams, Ball and Linde.

Our biggest change in sector allocation for the quarter was a further reduction to our exposure to information technology stocks. We trimmed our semiconductor holdings Texas Instruments, NVIDIA, Micron and Applied Materials. While we acknowledge the long-term growth and innovation in semiconductor companies, we are concerned about short-term

demand. Despite these trims, we are also seeing opportunity in this sector, as we increased our stake in Adobe, the design software company that is at the center of digital content creation. Our next-biggest change in sector allocation was an increase to our overweight positioning in financials. We did this without taking additional credit risk by initiating a position in Marsh & McLennan, the world’s leading insurance broker and risk advisor. The company has demonstrated consistent, stable growth through multiple economic cycles given the mission-critical nature of its insurance and risk management products.

Our largest underweight sector continues to be consumer discretionary, as we view valuations to be unattractive given the elevated risk to certain consumer segments. We reduced our exposure to the sector by selling Booking Holdings, the online travel agent. We are concerned that demand will be negatively impacted in Booking’s core markets.

We continue to be slightly overweight real estate and consumer staples while being underweight health care. Our portfolio also continues to be underweight utilities due to high valuations and unattractive return profiles. We have no direct energy exposure due to our avoidance of fossil fuel companies.

While we share the market’s near-term concerns relative to historic inflation and a slowing economy, we believe the portfolio is positioned well to deliver strong long-term returns. As always, we’re honored to have your trust as we continue pursuing Principles and Performance® for you.

Sincerely,

 

LOGO

Todd C. Ahlsten

Lead Portfolio Manager

 

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Benjamin E. Allen

Portfolio Manager

 

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Andrew S. Choi

Portfolio Manager

 

 

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Parnassus Mid Cap Fund

Ticker: Investor Shares - PARMX

Ticker: Institutional Shares - PFPMX

 

As of June 30, 2022, the net asset value (“NAV”) of the Parnassus Mid Cap Fund – Investor Shares was $35.55, so the total return for the quarter was -11.76%. This compares to a return of -16.85% for the Russell Midcap Index (“Russell”). For the first half of 2022, the Parnassus Mid Cap Fund – Investor Shares is down -21.35% compared to a loss of -21.57% for the Russell.

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 June 30, 2022  
    

One

Year

    Three
Years
    Five
Years
    Ten
Years
    Gross
Expense
Ratio
 
Parnassus Mid Cap Fund – Investor Shares     -16.18       3.59       6.13       9.95       0.96  
Parnassus Mid Cap Fund – Institutional Shares     -16.02       3.83       6.37       10.13       0.75  
Russell Midcap Index     -17.30       6.59       7.96       11.29       NA  

The average annual total return for the Parnassus Mid Cap Fund – Institutional Shares from commencement (April 30, 2015) was 7.69%. 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.

Second Quarter Review

Runaway inflation, rising interest rates, fear of recession and geo-political uncertainty battered worldwide financial markets in the second quarter, and domestic mid-cap stocks were not immune to the downdraft. The Russell had one of its worst quarterly performances in memory and is now down almost -21.57% for the year-to-date. This negative return is a sharp contrast to the similar period just a year ago, when the Russell posted one of its strongest six-month returns in decades.

There weren’t many bright spots for the market in the first half of 2022. Among them was the astronomic rise in commodities prices, mostly oil, gas and certain materials. The main catalyst for this was the Russia-Ukraine war, which disrupted supplies of oil and wheat along with other staples. We are also experiencing a flood of demand following a prolonged period of COVID-19-induced restraint and generous fiscal stimulus. The result has been rising inflation across the board, an aggressive Federal Reserve response in the form of interest rate hikes and the sale of risk assets by investors.

Good stock picking and the portfolio’s quality bias were at the heart of the Fund’s quarterly outperformance. The Parnassus Mid Cap Fund – Investor Shares were down -11.76% during the second quarter, which captured just under 70% of the Russell’s -16.85% loss. We’re pleased with the Fund’s relative quarterly return, but are disappointed to have a negative absolute quarterly return. On an incrementally positive note, despite a challenging first quarter, the Parnassus Mid Cap Fund – Investor Shares is now slightly ahead of the Russell for the first half of 2022, posting a loss of -21.35% versus a loss of -21.57% for the benchmark.

 

 

 

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The Fund’s second-quarter relative performance rebound occurred despite a zero allocation to energy stocks, which cost the fund 54 basis points from an attribution perspective. (One basis point is 1/100th of

one percent.) Other than energy, our underweight position in utilities stocks relative to the Russell, a sector that we mostly avoid due to its many constituents’ poor ESG performance and exposure to nuclear power, cost the Fund 33 basis points from an attribution perspective.

While the Fund’s year-to-date performance is only slightly better than the Russell, it looks materially better when focusing on our investable universe. For the year to date, our underweight allocations in the energy and utilities sectors hurt the Fund by 189 basis points and 43 basis points, respectively.

The Fund’s performance during the quarter was heavily driven by stock selection rather than sector allocation. The worst performer was Signature Bank, a regional bank operating primarily in the greater New York City area and on the West Coast. The stock dropped -38.8%,* reducing the fund’s return by -1.21%, after the company announced that total deposit balances grew slower than expected. Furthermore, investors became concerned about the bank’s partial reliance on its digital currency platform to drive future asset balances. While investor concerns are somewhat valid, the company’s core non-crypto business is still performing well, and the cryptocurrency-related business accounts for less than 25% of total deposits and none of its loan growth. We believe Signature is especially attractive at the current valuation given its long runway for earnings growth, solid credit metrics and asset sensitive portfolio that will benefit as interest rates rise.

Alexandria Real Estate, the leader in life sciences real estate, fell by -27.4%, reducing the fund’s return by -0.26%. Concerns about life science tenant credit, as well as uncertain real estate demand given current capital markets conditions, hurt Alexandria’s stock. Rising interest rates were also a headwind, as Alexandria carries material debt due to its REIT structure. We believe the company’s decades of expertise, attractive tenant base, top tier properties and strong reputation are positive differentiators that will help Alexandria succeed in what remains an attractive industry over the long-term.

 

Avalara, a leading online tax software player, declined by -29.1%, reducing the fund’s return by -0.26%. Although the company delivered better-than-expected revenue growth and solid new customer additions, the stock experienced multiple compression consistent with the broader software sector. We are encouraged by management’s recent analyst day targets to deliver mid-20s organic revenue growth with improving free cash flow margins over the next three years, and believe Avalara is a direct beneficiary of the highly complex multi-jurisdictional tax system in the United States.

On the positive side, the largest contributor was Grocery Outlet, the “off-price grocer,” which rose by 30.0%, adding 1.07% to the Fund’s total return. The company reported better-than-expected same-store sales growth of 5.2%, driven by greater store traffic and improved customer basket size. We see further upside ahead, as the company benefits from new store unit growth and market share gains as customers seek greater value in this rising price environment.

Sysco, the leading, domestic food distributor, climbed 4.3%, adding 0.7% to the Fund’s total return. Despite higher fuel prices, the company reported robust earnings, driven by market share gains, strong expense management and accelerating domestic demand. The company continues to make progress with its “Recipe for Growth” strategic plan, as it deployed its new AI-powered pricing tool to drive better pricing, a new customer loyalty program and enhancements to its employee training programs, which should boost margins and earnings ahead.

Cboe Global Markets, one of the largest exchange holding companies, went down just -0.7%, contributing 0.6% to the Fund’s total return. The company’s quarterly earnings beat consensus expectations and management raised its annual revenue outlook. Investor sentiment rose after recent investments in new products, such as European Derivatives, showed strong customer traction. The company also resumed share buybacks after a two-quarter pause. With expanding opportunities in new geographies and products, a strong balance sheet and robust free cash-flow generation, we believe the stock’s risk-reward remains attractive.

 

 

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


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Parnassus Mid Cap Fund

As of June 30, 2022

(percentage of net assets)

 

LOGO

Portfolio characteristics and holdings are subject to change periodically.

Top 10 Equity Holdings   
(percentage of net assets)   
Cboe Global Markets Inc.      4.2%  
Sysco Corp.      4.0%  
Hologic Inc.      3.9%  
C.H. Robinson Worldwide Inc.      3.6%  
Avantor Inc.      3.5%  
Jack Henry & Associates Inc.      3.5%  
SBA Communications Corp., Class A      3.4%  
Verisk Analytics Inc.      3.2%  
Republic Services Inc.      3.1%  
Grocery Outlet Holding Corp.      3.1%  

Portfolio characteristics and holdings are subject to change periodically.

Strategy and Outlook

While large losses were experienced by most equity investors in the first half of 2022, it’s important to remember that domestic equity indices boomed from 2019 to 2021. During this period, the Russell Midcap Index cumulatively returned well over 70%, a return much greater than its typical performance. This doesn’t soften the blow from recent losses, but does remind us that keeping a long-term perspective and investing for a full-market cycle is often prudent. Going through this contraction also reminds us of the importance of investing in reasonably valued, quality businesses that should perform well over full market cycles. The silver lining is that the year-to-date market correction is creating attractive investment opportunities.

Many pundits believe a recession is around the corner, and investors are responding by selling stocks to reduce portfolio risk. Looking forward, it’s difficult to predict exactly what will happen with the economy and stock market over the near- and medium-terms, but we expect volatility to continue. We believe our strategy of owning a concentrated collection of high-quality businesses with increasing relevancy, competitive advantages, disciplined management, strong ESG practices, solid balance sheets and favorable upside-downside potential will do relatively well in this environment. We are optimistic that our portfolio construction will dampen any pending volatility and deliver solid returns relative to the benchmark over the full-market cycle.

 

 

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As a reflection of our bottom-up research process, the Fund is currently slightly underweight relative to the Russell in the more volatile and cyclical consumer discretionary, financial and materials sectors and has no exposure to the energy sector. In contrast, we are overweight in the predominantly stable sub-sections of the information technology sector, health care, consumer staples, real estate and industrials sectors, owning a combination of defensive and offensive high-quality companies. That said, we own quite a few companies that should do well if we see investor appetite for risk assets increase.

Following an active buying period in the first quarter, we bought only one new stock during the second quarter. We initiated a position in Otis Worldwide, the world’s largest provider of new equipment and services in the elevator and escalator industry. Over half of the company’s revenue is derived from its services segment, which provides a significant source of recurring revenue and free cash flow. The company has significant cost advantages due to its scale and large installed base of equipment. We’re excited about the company’s long-term growth prospects, as it benefits from recent investments in products, sales and digital field capabilities and margin expansion opportunities.

We exited three stocks during the second quarter. A theme for these sales, as well as sales we made in the first quarter, is excessive valuation. We sold Hilton Worldwide, a leading hospitality company that owns, leases, manages and franchises hotels and resorts. We

had initially purchased the stock in 2020 after the COVID-19 pandemic caused demand for business and leisure travel to temporarily collapse. The company has since benefited from a rebound in demand as leisure and corporate travel increased, but we believe the stock is no longer undervalued. We also sold ANGI Inc., a leading online home services provider. While we believe the company has a significant opportunity to penetrate the online home services category, we became concerned with the company’s increasing investments required to rebrand the business, slow turnaround progress and high valuation. Finally, we exited AES corporation, a power operator and utility operator, due to concerns about slowing earnings growth and its continued reliance on high carbon-emission generation sources.

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

Yours truly,

 

LOGO

Matthew D. Gershuny

Lead Portfolio Manager

 

LOGO

Lori A. Keith

Portfolio Manager

 

 

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Parnassus Endeavor Fund

Ticker: Investor Shares - PARWX

Ticker: Institutional Shares - PFPWX

 

As of June 30, 2022, the net asset value (“NAV”) of the Parnassus Endeavor Fund – Investor Shares was $44.30, so the total return for the second quarter was a loss of -13.07%. This compares to a decline of -12.21% for the Russell 1000 Value Index (“Russell 1000 Value”). For the year-to-date period, the Parnassus Endeavor Fund – Investor Shares has posted a loss of -18.01% compared to the Russell 1000 Value’s loss of -12.86%. It has been a challenging year for stocks, but especially for the Fund. Technology stocks, where the Fund is overweight, led the decliners. Energy, in which we do not invest, is the only sector with a positive real return so far this year.

Below is a table that summarizes the performances of the Parnassus Endeavor Fund, the Russell 1000 Value and the S&P 500 Index^. The returns are for the one-, three-, five- and ten-year periods.

 

Parnassus Endeavor Fund

 

    Average Annual Total Returns (%)  
    for period ended June 30, 2022  
     One
Year
    Three
Years
    Five
Years
    Ten
Years
    Gross
Expense
Ratio
    Net
Expense
Ratio
 
Parnassus Endeavor Fund – Investor Shares     -14.82       15.56       11.46       15.21       0.90       0.88  
Parnassus Endeavor Fund – Institutional Shares     -14.64       15.81       11.71       15.39       0.71       0.65  
Russell 1000 Value Index     -6.82       6.87       7.17       10.50       NA       NA  
S&P 500 Index^     -10.62       10.60       11.31       12.96       NA       NA  

The average annual total return for the Parnassus Endeavor Fund – Institutional Shares from commencement (April 30, 2015) was 12.50%. Performance shown prior to the inception of the Institutional Shares reflects the performance of the Parnassus Endeavor 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 and S&P 500 are unmanaged indexes 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.

Net expense ratio reflects contractual agreement through May 1, 2023.

Second Quarter Review

For the quarter, the Parnassus Endeavor Fund lagged our benchmark by 0.86%. While stock selection was neutral to positive, sector allocation was negative and explained all our underperformance. Our overweight positioning in technology was the biggest detractor, followed by our underweight positioning in the energy sector. Within stock selection, health care was our biggest contributor.

Shares of Charles Schwab fell by -24.8% in the quarter, which cut -0.4%* from the Fund’s return. The stock slid in April after the company forecast faster cash withdrawals than investors anticipated, lowering future earnings. The brokerage firm earns interest income on cash held within client portfolios, so it is one of the few beneficiaries of an aggressive Federal Reserve. However, higher interest rates also lead some customers to invest in lower-margin products within Schwab’s ecosystem rather than hold cash. We maintained our position since we believe the company can still grow earnings substantially as the Fed raises rates through the rest of the year.

Gap’s stock returned -40.8% in the quarter, which detracted -0.4% from the Fund’s return. Gap is the parent company of Old Navy, the largest individual apparel brand by retail sales in the United States. Poor merchandising decisions, elevated freight costs and supply-chain disruptions related to COVID-19 shutdowns in China negatively impacted same-store sales and profitability. Meanwhile, persistently high oil prices also crowded out consumer demand for apparel. Finally, the stock took another leg down when Old Navy CEO Nancy Green abruptly departed. We believe these problems are known, temporary, and fixable, so we continued to hold our shares.

 

 

 

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

^ Effective September 30, 2021, the Fund’s benchmark changed from the S&P 500 to the Russell 1000 Value Index.

 

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Hanesbrands, a global manufacturer of inner and activewear, slid -30.1% in the quarter, reducing the Fund’s return by -0.4%. The company is facing an incrementally more-challenging global macro environment, with higher input and freight costs expected for the rest of the year. As such, management no longer expects a second half margin expansion, and now forecasts earnings to be at the low end of its prior annual guidance. Investors are also concerned that excess inventory across some of the company’s wholesale partners, like Walmart and Target, may lead to slower ordering, potential canceled orders and additional markdowns to balance inventory.

Turning to our winners, global pharmaceutical giant Merck was the Fund’s best performer in the quarter. The stock returned 12.0%, contributing a positive 0.6% to the Fund’s return. Merck’s sales grew faster than investors expected, driven by extensions in cancer drug Keytruda, greater adoption of HPV vaccine Gardasil and the launch of COVID-19 pill Lagevrio. In late June, Merck also entered talks to acquire biotech Seagen for $40 billion to bolster its oncology franchise. Investors praised Merck’s progress in diversifying its sources of revenue by bidding up the company’s shares.

Sysco, the world’s leading foodservice distributor, was also a positive contributor in the quarter with the stock returning 4.4%, adding 0.5% to the Fund’s return. Sysco is the largest-scaled player in its industry, and the lowest-cost supplier, so it uniquely benefits from the current inflationary environment. The company is gaining independent-restaurant market share faster than expected, thanks to solid execution of the company’s new pricing tool, loyalty program, and staffing levels. Sysco is also skillfully taking out structural costs while passing through elevated inflation, raising the prospect for enhanced profitability coming out of the pandemic.

Finally, Vertex Pharmaceuticals had another strong quarter, as its stock returned 8.0%, adding 0.3% to the Fund’s return. With AbbVie’s disappointing readout in cystic fibrosis, Vertex solidified its effective monopoly in the space. Vertex continues to grow its cystic fibrosis franchise internationally and invest in addressing the remaining patient population through its partnership with Moderna. Vertex has also had several pipeline wins, notably in later stage trials for APOL1-mediated kidney disease and its CRISPR partnership for sickle cell

disease and beta thalassemia. We believe Vertex’s cystic fibrosis franchise is now fairly valued, but continue to be excited about the pipeline opportunities with five clinical programs with proof of concept.

Parnassus Endeavor Fund

As of June 30, 2022

(percentage of net assets)

 

LOGO

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%  
Verizon Communications Inc.      4.0%  
Sysco Corp.      3.7%  
PepsiCo Inc.      3.4%  
The Charles Schwab Corp.      3.3%  
The Progressive Corp.      2.8%  
Cisco Systems Inc.      2.8%  
Global Payments Inc.      2.8%  
Gilead Sciences Inc.      2.7%  
Agilent Technologies Inc.      2.6%  

Portfolio characteristics and holdings are subject to change periodically.

Outlook and Strategy

The U.S. stock market, as measured by the S&P 500 Index, deflated 20% in the first half of 2022. Investors today confront a drumbeat of negative news–new virus variants, the war in Ukraine, lockdowns in China, and global supply chain disruptions. For stocks, the focus is on the Federal Reserve’s plan to combat inflation through restrictive monetary policy. The effects have been dramatic. Asset values have collapsed, consumer demand has evaporated, and economic growth has slowed. If we are not already in a recession, we can surmise one is near. At the same time, this is not a typical downturn since consumer balance sheets are strong and jobs remain plentiful.

How are we investing in this unprecedented environment? First, our investment philosophy of buying good companies at discounted prices remains the same. Characteristics we look for in a good company include a long history of consistently high profitability, a conservatively financed balance sheet and a socially responsible enterprise. To buy at a discounted price means the stock is selling at an inexpensive valuation relative to our assessment of the company’s future potential. Certainly, compared to the end of 2021, stocks are selling at discounted prices. It is our job, then, to determine and assemble a portfolio of good, if not the best, companies out there.

To that end, we had an active second quarter, selling three positions and buying three others. We profitably

sold cloud software company VMware and electronic health records provider Cerner when larger technology firms acquired them. Conversely, we exited PayPal due to worsening fundamentals in ecommerce retail, opting instead to harvest tax losses.

We initiated positions in Amdocs, Deere and Ross Stores. Amdocs is a leading IT consultancy that services the telecommunications industry worldwide. It is poised to benefit from the increasing competitive intensity of wireless and cable players as they undergo digital transformation, cloud migration and 5G adoption. We purchased farming equipment company Deere when its stock price sank due to supply-chain concerns. Deere is a pioneer in precision agriculture, a promising field that aims to boost crop output while using less resources such as land, fertilizer and water. Finally, we bought shares of off-price retailer Ross Stores. The company is in a prime position to benefit from snarled supply-chains because it helps vendors and manufacturers sell excess inventory instead of throwing it away.

Finally, a note about our benchmark, the Russell 1000 Value. A recent reconstitution of this index by its owner resulted in surprising changes. This is due to the dramatic fluctuations in stock values this year, which got codified in June. Meta, formerly Facebook, now appears in our benchmark, as does Netflix, Zoom and Pinterest. Even crypto wallet Coinbase, meme stock GameStop and electric vehicle startup Lucid Group have moved in. It is not clear what to make of these new neighbors or how long they will stay. Rest assured that we are committed to search the entire universe of stocks available in an effort to generate attractive, long-term risk-adjusted returns for our shareholders.

Thank you for your investment in the Parnassus Endeavor Fund.

Sincerely,

 

LOGO

Billy Hwan

Portfolio Manager

 

 

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Parnassus Mid Cap Growth Fund

Ticker: Investor Shares - PARNX

Ticker: Institutional Shares - PFPRX

 

As of June 30, 2022, the net asset value (“NAV”) of the Parnassus Mid Cap Growth Fund – Investor Shares was $42.38, resulting in a loss of -21.94% for the second quarter. This compares to a loss of -21.07% for the Russell Midcap Growth Index (“Russell Midcap Growth”). For the first half of 2022, the Parnassus Mid Cap Growth Fund – Investor Shares is down -34.15% compared to a loss of -31.00% for the 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 June 30, 2022.

 

Parnassus Mid Cap Growth Fund

 

    Average Annual Total Returns (%)  
    for period ended June 30, 2022  
     One
Year
    Three
Years
    Five
Years
    Ten
Years
    Gross
Expense
Ratio
 
Parnassus Mid Cap Growth Fund — Investor Shares     -33.08       0.04       2.85       9.54       0.80  
Parnassus Mid Cap Growth Fund — Institutional Shares     -33.01       0.18       3.00       9.65       0.68  
Russell Midcap Growth Index     -29.57       4.25       8.88       11.51       NA  

The average annual total return for the Parnassus Mid Cap Growth Fund – Institutional Shares from commencement (April 30, 2015) was 4.89%. 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.

Second Quarter Review

Our Parnassus Mid Cap Growth Fund – Investor Shares dropped -21.94% in the second quarter, trailing the -21.07% loss for the Russell Midcap Growth. With interest rates increasing since the start of the year, growth stocks have fallen out of favor. We’ve seen this before–where investors shun a part of the market and overreact, only to return to it shortly thereafter. While we’re disappointed that we underperformed this quarter, we’re sticking to our knitting and believe our portfolio of high-quality growth compounders will win the day.

Sector allocation accounted for most of our underperformance, led by the energy sector, which cost us 0.5%. As a fossil fuel-free** fund, we don’t invest in oil and gas stocks. While energy prices will be volatile in the short term, we believe that our portfolio will benefit over the long term as the economy transitions toward renewable energy sources. Stock selection was a more modest performance headwind, with the largest drag coming from the financials sector.

Our worst performer was financial technology company Block, formerly known as Square, as its shares fell -54.7% and cut -1.6%* from the Fund’s performance. During the quarter, the company hosted an upbeat analyst day that highlighted its large addressable market. Nevertheless, investors were concerned that growth at Block’s popular Cash App will slow due to its exposure to low-end consumers. Additionally, Block acquired “buy now, pay later” company Afterpay earlier in the year, and investors worried that some loans may not get repaid in a worsening economic environment. We view Block as one of the most disruptive companies in our portfolio, and believe the company’s prospects remain bright.

Illumina, the largest provider of gene sequencing instruments and related consumables, subtracted -1.4% from the Fund’s performance, as its shares returned

 

 

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

** The Fund is fossil-fuel free, meaning it does not invest in companies that derive significant revenues from the extraction, exploration, production or refining of fossil fuels; the Fund may invest in companies that use fossil fuel-based energy to power their operations or for other purposes. The Funds define “significant revenues” as being 10% or greater.

 

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-47.2%. Illumina’s stock fell due to concerns that new competitors will offer cheaper sequencing tools. The stock took another leg down after the company’s CFO announced he was leaving to work at a different health care company. While we’re closely monitoring the competitive environment, we believe Illumina’s moat and new, innovative products, which will launch later this year, will enable the company to remain the leader in the growing sequencing market.

Silvergate Capital, a leading provider of financial infrastructure for the digital asset industry, dropped -64.4% and reduced the Fund’s performance by -1.3%. The stock fell as valuations across the digital asset industry declined meaningfully. As a result, investors were concerned about volumes on Silvergate’s real-time payments network and deposit growth. We are bullish on the digital asset industry over the long-term and believe Silvergate is a unique asset.

Moving to our outperformers, leading U.S. auto insurer Progressive increased the Fund’s return by 0.1%, as the stock climbed 2.1%. Investors appreciate the company’s rising profitability, as the company led the industry in raising prices to offset the jump in used-vehicle prices and repair costs over the past year. Additionally, Progressive is benefiting from higher yields, as they result in higher net investment income on the company’s fixed income portfolios. Overall, we’re pleased with Progressive’s execution and believe the company’s long-term track record of market share gains will continue for the foreseeable future.

Veeva Systems is a leading provider of cloud-based software for the life sciences industry. Our overweight positioning benefited our performance, as the stock dropped less than the Russell Midcap Growth. Veeva returned -6.8% during the quarter and had a neutral impact on the Fund’s return. The company reported stronger-than-expected quarterly results and provided upbeat guidance, as it’s not feeling the impact from a slowing macro economy. The highlight of the quarter was Veeva signing one of its largest deals ever. With a long runway for growth and best-in-class margins, we remain enthusiastic about Veeva’s prospects.

Our large position in Thomson Reuters, which provides information and data for legal, tax and accounting professionals, was also beneficial to our performance, as the stock declined much less than the benchmark. The stock returned -3.8% during the quarter and had a neutral impact on the Fund’s return. The company reported a strong first quarter and increased

its revenue growth outlook for the year. In addition to broad-based growth, Thomson Reuters is making solid progress with its cost savings program. We believe the company is well positioned in a volatile macro environment given its resilient end markets, recurring revenue model and strong balance sheet.

Parnassus Mid Cap Growth Fund

As of June 30, 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.

 

 

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Top 10 Equity Holdings   
(percentage of net assets)   
Veeva Systems Inc., Class A      5.1%  
Pool Corp.      4.5%  
Fortinet Inc.      4.4%  
Verisk Analytics Inc.      4.3%  
Agilent Technologies Inc.      4.2%  
Ansys Inc.      3.9%  
MarketAxess Holdings Inc.      3.7%  
Splunk Inc.      3.4%  
CoStar Group Inc.      3.3%  
Thomson Reuters Corp.      3.2%  

Portfolio characteristics and holdings are subject to change periodically.

Outlook and Strategy

During the quarter, the Russell Midcap Growth sank -21.1%, bringing the year-to-date loss to -31.0%. The Index is off -35.8% from the all-time high it set in November 2021.

Growth stocks have been on sale because inflation jumped to its highest level in decades. Inflation accelerated to a 40-year high in May, with clogged supply chains keeping prices high for many goods and Russia’s invasion of Ukraine causing elevated commodity prices. The Federal Reserve has pivoted from viewing inflation as transitory, and as a result, it has had to act aggressively. In June, the Federal Reserve increased interest rates by 75 basis points, the largest increase since 1994, and signaled an additional 50 or 75 basis point hike in July. (One basis point is 1/100th of one percent.) Since stocks with high long-term growth rates derive a higher portion of their intrinsic value from cash flows expected further out in the future, an increase in the discount rate reduces the value of higher-growth equities more than lower-growth equities.

The Federal Reserve is walking a tight rope-trying to raise interest rates enough to slow inflation, but not so much that it causes a recession. While time will tell whether the economy falls into recession, we’re starting to see the consequences of the Federal Reserve’s actions. During the quarter, the 10-year Treasury yield jumped, making everything from car loans to mortgages more expensive. Consumers are beginning to feel the pinch in their wallets, and consumer confidence has declined since the beginning of the

year. Real GDP expectations have also fallen, with this year’s growth now expected to be just 2.6%, down from 4% at the start of the year.

While there’s a lot of grim news out there, the silver lining is that the Russell Midcap Growth ended the quarter at just 20x forward earnings estimates, below its 5-year and 10-year averages of 27x and 23x, respectively. So while there are real headwinds facing the economy and growth stocks, a lot of that has already been priced in.

In the second quarter, we took advantage of the market’s downturn and invested in three new companies, which we believe further enhance the quality of our fund. We bought Splunk, a software company focused on data analytics and security. We’ve followed the company for a long time and are particularly excited about the company’s rapidly growing cybersecurity business. We believe that the company can grow sales at a 20% clip during our investment horizon and that margins will inflect meaningfully higher. Trading at just 5x forward sales estimates, Splunk, in our view, offers asymmetric upside.

We also invested in C.H. Robinson, the largest domestic truck broker. The company is firing on all cylinders, led by its truck brokerage business, which is growing nicely and showing operating leverage. C.H. Robinson’s business is resilient, and we believe it should generate more than $2 billion in free cash flow over the next two years. Management has a track record of successfully allocating capital, which gives us confidence it will again deploy excess cash in an accretive manner.

Finally, we bought Align Technology, the leader in the clear aligner market. The stock has fallen sharply this year, as growth has been slower than expected due to COVID-19-related lockdowns in China and waning consumer confidence in Europe and North America. Despite these near-term headwinds, we believe the clear aligner category will continue to take market share from metal braces and that Align will be leading that charge. The company’s moat, history of innovation, pristine balance sheet and strong profitability point to better days ahead for Align.

To make room for these new positions, we sold Coupa Software and 10x Genomics. We believe Coupa’s growth will be hurt as we enter a more challenging macro environment, as customers may delay their

 

 

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purchases or choose to consolidate back-office spend into platform companies like Oracle or Workday. We moved on from 10X Genomics given its uncertain path to profitability and because of our concern that ongoing COVID-19 lockdowns in China will adversely impact the company.

At the end of the quarter, the Russell Midcap Growth underwent its annual reconstitution. The reconstitution resulted in three big weighting changes to the index, which impacted our relative positioning. First, the weighting of the information technology sector declined by nearly 300 basis points. We had been modestly overweight prior to the reconstitution, but at quarter-end we’re overweight by approximately 300 basis points, and it remains our largest sector on an absolute basis. Most of our information technology holdings are within the software sub-sector, where we own market leaders like Fortinet and Trade Desk. Second, the weighting of the communication services sector increased by more than 200 basis points. Our position size had been equal to the benchmark’s, but we’re now underweight. Within this sector we own Match Group, the global leader in online dating, and Angi, the dominant online platform for home service projects. Finally, the weighting of the materials sector rose by approximately 175 basis points. Our position size was in line with the benchmark’s, but we’re now

underweight. The sole materials company we own is Nutrien, the world’s largest crop nutrient company, which is uniquely positioned to benefit from fertilizer supply curtailments in China, Europe, Russia and Belarus.

As we enter the second half of the year, we’re excited about our companies’ prospects. Our portfolio consists of innovative companies with durable growth, expanding moats and clean balance sheets. We have conviction that these characteristics position us well for whatever the rest of the year has in store.

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

Yours truly,

 

LOGO

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 June 30, 2022, the net asset value (“NAV”) of the Parnassus Fixed Income Fund – Investor Shares was $14.91, producing a loss for the quarter of -6.21% (including dividends). This compares to a loss of -4.69% for the Bloomberg U.S. Aggregate Bond Index (“Bloomberg Aggregate Index”). For the first half of 2022, the Parnassus Fixed Income Fund – Investor Shares posted a loss of -12.47%, as compared to a loss of -10.35% for the Bloomberg Aggregate Index.

Below is a table comparing the performance of the Parnassus Fixed Income Fund with that of the Bloomberg Aggregate. Average annual total returns are for the one-, three-, five- and ten-year periods. For June 30, the 30-day subsidized SEC yield was 3.20%, and the unsubsidized SEC yield was 3.08%.

 

Parnassus Fixed Income Fund

 

    Average Annual Total Returns (%)  
    for period ended June 30, 2022  
     One
Year
   

Three

Years

    Five
Years
   

Ten

Years

   

Gross

Expense
Ratio

    Net
Expense
Ratio
 
Parnassus Fixed Income Fund – Investor Shares     -12.62       -1.95       0.20       0.84       0.76       0.68  
Parnassus Fixed Income Fund – Institutional Shares     -12.40       -1.70       0.44       0.98       0.56       0.45  
Bloomberg U.S. Aggregate Bond Index     -10.29       -0.93       0.88       1.54       NA       NA  

The average annual total return for the Parnassus Fixed Income Fund – Institutional Shares from commencement (April 30, 2015) was 0.95%. 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.

Net expense ratio reflects contractual agreement through May 1, 2023.

Second Quarter Review

The second quarter continued to be difficult for bond investors, as a combination of rising interest rates and widening corporate bond spreads impacted returns. The Fund’s underperformance was driven by our overweight position in corporate bonds, which fell significantly more than other major fixed income asset classes. Corporate bonds within the Index lost -7.27% versus losses of -4.01% and -3.77% for securitized bonds and Treasuries, respectively.

Overall, allocation reduced the Fund’s value by -1.43%, principally due to our overweight allocation to corporate bonds. While our weight in corporate bonds was reduced from a peak of about 70% to 63.53% over the course of the quarter, it remained significantly higher than the Index at 24.60%. As a result, allocation to corporate bonds reduced the total return by -1.07%. Similarly, the absence of securitized bonds in the Fund reduced our total return by -0.21%.

Security selection continued to be a bright spot this quarter, with a positive 0.19% impact on total return. This was principally from our corporate bond portfolio, which recorded 0.21% of positive security selection. Our corporate bonds lost -6.86% in the quarter, as compared to a loss of -7.27% for the Index. Investing in companies that have more durable cash flows helped our corporate portfolio weather the volatility.

The worst-performing assets in the portfolio during the quarter were preferred stock issued by banks. We have 6.79% of assets allocated to banks, versus 5.55% for the Index, but a much longer duration due to our preferred stock positions. Preferred stock accounts for 6.5% of the portfolio, while the Index has none. This asset tends to be more volatile than investment-grade

 

 

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bonds, but offers significantly higher yields as well. All our preferred stock positions have yields above 5.50%, with many issues boasting yields above 6.00%. The shares we hold were issued by excellent companies, including Morgan Stanley, Charles Schwab and Public Storage. As a result, we’re confident in the long-term advantages of our preferred stock positions.

Government-related securities owned by the fund performed well, adding 0.14% to the total return with 0.13% of positive attribution from selection. This category of bonds is broad, but for the Parnassus Fixed Income Fund, there are two main groups: supranational bonds and government-sponsored entities. About 6% of the Fund’s assets are in green bonds issued by supranational organizations like the World Bank. We were pleased by the outperformance of the green bonds, which added 0.10% to the total return.

We also began investing in bonds issued by government-sponsored entities (GSEs) in the quarter, like Fannie Mae and Freddie Mac. These bonds were trading at bargain prices compared to Treasury bonds, providing us with an attractive buying opportunity. It’s important to note that these are not securitized bonds, which means there are no mortgages supporting repayment. They are the equivalent of corporate bonds issued by organizations like Fannie Mae and the Federal Home Loan Bank. We finished the quarter with 9.16% of assets in GSEs. These bonds provide a yield over 3% with a short duration, which we think is an excellent alternative to certain short-term Treasury bonds.

Parnassus Fixed Income Fund

As of June 30, 2022

(percentage of net assets)

 

LOGO

Portfolio characteristics and holdings are subject to change periodically.

Outlook and Strategy

The second half of the year is sure to be a very interesting period for investors. Economic conditions have been opaque and continue to be so, as nearly all the data we receive is backward-looking. Headline numbers are also noisy, deeply impacted by inflation.

We believe that headline growth will continue to slow relative to last year’s breakneck pace of 5.7%. The current forecast is for growth of 2.5% overall in 2022, down from an expectation of 4.0% at the beginning of the year. However, one of the biggest factors driving the revisions downward has been the impact of inflation. The growth numbers that are discussed in the media and tracked by investors are real growth rates, which means that the impact of inflation is removed. In a time like today, when consumer inflation exceeds 8%, that means the nominal growth rate is quite strong indeed, and is likely above 9%.

 

 

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The Federal Reserve has committed to fighting inflation and demonstrated its commitment during the June meeting, when it raised rates by 0.75%. This was the largest hike since 1994 and indicative of the scope of the problem. Inflation has been partially driven by some supply problems, specific to oil and the invasion of Ukraine, but it’s mostly been driven by excess demand. The Federal Reserve hopes that raising rates and cooling off the economy, destroys some of that demand so that inflation returns to its target range.

While a headline growth rate of 2.5% for 2022 may appear to be a cooler economy, it’s a very different 2.5% growth than we saw in 2015 and 2017. In those years, inflation averaged around 2%, so nominal growth was about 4.5%. Today, nominal growth is nearly 10%, which is driving inflation, and so it’s likely that the Federal Reserve will hike interest rates through the remainder of the year.

As of the end of the quarter, the duration of the Fund declined to 6.08 years, and is now 0.40 years short of the Index. A slightly shorter duration protects the Fund against rising interest rates. Our duration position is short across all asset classes, with the most significant deviation in Treasury bonds. We also trimmed positions in high-yield bonds, as the asset class’s outperformance in the first five months of the year became stretched. High-yield companies have demonstrated excellent balance sheet discipline over the last year and, relative to the past, are very healthy

financially. However, in an environment where the Federal Reserve is determined to destroy demand, high-yield bonds should see deeper losses than investment grade peers. These companies tend to have narrower product lines and customer bases, making it more difficult to navigate a challenging economy.

Despite shortening the Fund’s duration and reducing its exposure to high yield bonds, the Fund’s yield-to-worst* is 4.24%, well ahead of the Index’s 3.73%. We maintained a healthy advantage in yield over the Index by focusing on attractive asset classes, like preferred stock, and by purchasing bargains, like GSEs.

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

 

LOGO

Samantha Palm

Lead Portfolio Manager

 

LOGO

Minh Bui

Portfolio Manager

 

 

*The Yield to Worst (“YTW”) is the lowest potential bond yield received without the issuer defaulting, it assumes the worst-case scenario, or earliest redemption possible under terms of the bond.

 

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Responsible Investing Notes

We live in interesting times. Times marked by profound and historic environmental, societal and technological change, against a backdrop of stark political polarization, persistent inequality and an increase in devastating weather events around the world. Many people, seeking agency and influence over the direction, pace, and scale of this change, are using their investment dollars to build wealth responsibly in pursuit of a more sustainable future. In April 2022, I joined Parnassus as head of ESG stewardship to help our clients do exactly that-drive long-term value toward a better world. This past quarter, my first in the role, marked several important milestones in the furtherance of Parnassus’ decades-long responsible investment mission.

Importantly, we published Parnassus’s principles to share with clients and companies the principles that guide our investment strategy. The document outlines our expectations for companies on human, worker and community rights; diversity, equity and inclusion in the workforce; product safety and equity; climate change and a just transition; environmental stewardship; and ethical and transparent operations. Alongside our principles, we published Parnassus’s ESG Investment Policy, which shares how we incorporate ESG into our investment and stewardship decision-making.

Also, Parnassus’s first shareholder resolution went to a vote at Republic Services (RSG) in June. The proposal asked RSG to conduct an environmental justice audit and report on the outcomes and its plans to rectify any existing or past disparate impacts. This proposal received support from 58% of independent votes cast (excluding votes from affiliated or insider shareholders), or 36% of shareholder votes cast overall. These results indicate a shared concern among RSG investors around the potential impacts that unaddressed environmental injustice may have on stakeholders and shareholders alike. We plan to continue and expand this important and impactful work on environmental justice in the coming years.

We also concluded climate risk engagements with eight companies and, in particular, would like to

congratulate PPG Industries (PPG), Old Dominion Freight Line (ODFL), and Xylem, Inc. (XYL) for the important improvements they made in their climate disclosure. PPG committed to set science-based targets; ODFL published its inaugural ESG report, which includes scopes 1, 2, and 3 emissions for the first time; and XYL published its inaugural TCFD report, its 2021 Sustainability Report and a refreshed Climate Action Plan.

In addition, Parnassus submitted a public comment letter to the SEC calling for improved public company climate change disclosures in response to the Commission’s request for feedback on a proposed rule. We believe that issuer transparency around greenhouse gas emissions and climate change-related risks and opportunities would improve Parnassus’s investment, engagement, and proxy voting decision quality and promote more efficient use of investor and company resources.

Finally, our strengthened proxy voting policy pressed for improvements in executive compensation, board composition and ESG performance on more than 1,400 ballot items at more than 100 companies in our portfolios. We used our voting power to express our views that companies best create value when they consider stakeholder impacts alongside financial metrics in business planning and strategic decision making. For more information on ESG stewardship and outcomes from the 2022 proxy season, please look for our ESG Stewardship Report, set for publication in Q3 2022.

I look forward to meeting many of you in the coming months and continuing to drive change and build value together.

Sincerely,

 

LOGO

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 January 1, 2022 through June 30, 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.

 

 

            Fund
Expense
Ratio
     Beginning
Account Value
January 1, 2022
     Ending
Account Value
June 30, 2022
     Expenses Paid
During Period
       
  Parnassus Core Equity Fund – Investor Shares: Actual*      0.82%        $1,000.00        $ 798.00        $3.66    
  Hypothetical (5% before expenses)      0.82%        $1,000.00        $1,020.73        $4.11    
  Parnassus Core Equity Fund – Institutional Shares: Actual*      0.61%        $1,000.00        $ 798.90        $2.72    
  Hypothetical (5% before expenses)      0.61%        $1,000.00        $1,021.77        $3.06    
  Parnassus Mid Cap Fund – Investor Shares: Actual*      0.96%        $1,000.00        $ 786.50        $4.25    
  Hypothetical (5% before expenses)      0.96%        $1,000.00        $1,020.03        $4.81    
  Parnassus Mid Cap Fund – Institutional Shares: Actual*      0.75%        $1,000.00        $ 787.20        $3.32    
  Hypothetical (5% before expenses)      0.75%        $1,000.00        $1,021.08        $3.76    
  Parnassus Endeavor Fund – Investor Shares: Actual*      0.88%        $1,000.00        $ 819.90        $3.97    
  Hypothetical (5% before expenses)      0.88%        $1,000.00        $1,020.43        $4.41    
  Parnassus Endeavor Fund – Institutional Shares: Actual*      0.65%        $1,000.00        $ 820.90        $2.93    
  Hypothetical (5% before expenses)      0.65%        $1,000.00        $1,021.57        $3.26    
  Parnassus Mid Cap Growth Fund – Investor Shares: Actual*      0.80%        $1,000.00        $ 658.50        $3.29    
  Hypothetical (5% before expenses)      0.80%        $1,000.00        $1,020.83        $4.01    
  Parnassus Mid Cap Growth Fund – Institutional Shares: Actual*      0.68%        $1,000.00        $ 658.90        $2.80    
  Hypothetical (5% before expenses)      0.68%        $1,000.00        $1,021.42        $3.41    
  Parnassus Fixed Income Fund – Investor Shares: Actual*      0.68%        $1,000.00        $ 875.30        $3.16    
  Hypothetical (5% before expenses)      0.68%        $1,000.00        $1,021.42        $3.41    
  Parnassus Fixed Income Fund – Institutional Shares: Actual*      0.45%        $1,000.00        $ 876.90        $2.09    
  Hypothetical (5% before expenses)      0.45%        $1,000.00        $1,022.56        $2.26    

* Expenses are calculated using the Funds’ annualized expense ratios, which represent ongoing expense as a percentage of net assets for the six months ended June 30, 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 (181); 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.

 

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Parnassus Core Equity Fund

Portfolio of Investments as of June 30, 2022 (unaudited)

 

Equities   Shares     Market
Value ($)
 
Biotechnology (2.0%)    
Gilead Sciences Inc.     7,999,157       494,427,894  
   

 

 

 
Capital Markets (11.4%)    
CME Group Inc., Class A     5,062,381       1,036,269,391  
Intercontinental Exchange Inc.     3,898,412       366,606,664  
S&P Global Inc.     2,542,234       856,885,392  
The Charles Schwab Corp.     9,497,745       600,067,529  
   

 

 

 
      2,859,828,976  
   

 

 

 
Chemicals (4.5%)    
Linde plc     2,474,530       711,501,611  
The Sherwin Williams Co.     1,862,242       416,974,606  
   

 

 

 
      1,128,476,217  
   

 

 

 
Commercial Services & Supplies (2.4%)    
Waste Management Inc.     3,971,331       607,534,216  
   

 

 

 
Containers & Packaging (2.1%)    
Ball Corp.     7,665,093       527,128,446  
   

 

 

 
Diversified Telecommunication Services (2.2%)    
Verizon Communications Inc.     10,629,589       539,451,642  
   

 

 

 
Equity Real Estate Investment Trusts (3.7%)    
Alexandria Real Estate Equities Inc.     2,100,486       304,633,485  
American Tower Corp.     2,445,771       625,114,610  
   

 

 

 
      929,748,095  
   

 

 

 
Food & Staples Retailing (2.0%)    
Costco Wholesale Corp.     1,062,873       509,413,771  
   

 

 

 
Food Products (2.3%)    
Mondelez International Inc., Class A     9,368,546       581,693,021  
   

 

 

 
Health Care Equipment & Supplies (6.0%)    
Becton, Dickinson and Co.     4,131,668       1,018,580,112  
Boston Scientific Corp. q     12,896,232       480,642,567  
   

 

 

 
      1,499,222,679  
   

 

 

 
Household Products (2.9%)    
The Procter & Gamble Co.     5,039,444       724,621,653  
   

 

 

 
Insurance (2.1%)    
Marsh & McLennan Co., Inc.     3,361,199       521,826,145  
   

 

 

 
Interactive Media & Services (5.8%)    
Alphabet Inc., Class A q     671,944       1,464,340,681  
   

 

 

 
Equities   Shares     Market
Value ($)
 
IT Services (7.9%)    
Fiserv Inc. q     12,672,877       1,127,505,867  
Mastercard Inc., Class A     2,735,121       862,875,973  
   

 

 

 
      1,990,381,840  
   

 

 

 
Life Sciences Tools & Services (5.6%)    
Danaher Corp.     3,800,882       963,599,605  
Thermo Fisher Scientific Inc.     792,766       430,693,912  
   

 

 

 
      1,394,293,517  
   

 

 

 
Machinery (3.3%)    
Deere & Co.     2,792,238       836,191,514  
   

 

 

 
Media (3.3%)    
Comcast Corp., Class A     21,336,057       837,226,877  
   

 

 

 
Professional Services (3.8%)    
CoStar Group Inc. q     4,756,075       287,314,491  
Verisk Analytics Inc.     3,832,206       663,316,537  
   

 

 

 
      950,631,028  
   

 

 

 
Road & Rail (4.1%)    
Canadian Pacific Railway Ltd.     11,182,599       780,992,714  
Union Pacific Corp.     1,113,083       237,398,342  
   

 

 

 
      1,018,391,056  
   

 

 

 
Semiconductors & Semiconductor Equipment (3.9%)    
Applied Materials Inc.     2,352,151       213,998,698  
Micron Technology Inc.     5,166,815       285,621,533  
NVIDIA Corp.     1,527,207       231,509,309  
Texas Instruments Inc.     1,641,888       252,276,091  
   

 

 

 
      983,405,631  
   

 

 

 
Software (9.2%)    
Adobe Inc. q     1,643,676       601,684,037  
Microsoft Corp.     6,672,446       1,713,684,306  
   

 

 

 
      2,315,368,343  
   

 

 

 
Specialty Retail (1.8%)    
The Home Depot Inc.     1,612,420       442,238,433  
   

 

 

 
Technology Hardware, Storage & Peripherals (2.9%)    
Apple Inc.     5,327,965       728,439,375  
   

 

 

 
Textiles, Apparel & Luxury Goods (0.9%)    
Nike Inc., Class B     2,250,000       229,950,000  
   

 

 

 
Wireless Telecommunication Services (2.8%)    
T-Mobile US Inc. q     5,131,491       690,390,799  
   

 

 

 
Total investment in equities (98.9%)

 

 
(cost $22,388,995,152)       24,804,621,849  
   

 

 

 
 

 

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

 

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Parnassus Core Equity Fund

Portfolio of Investments as of June 30, 2022 (unaudited) (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        244,387  
Community Vision Capital & Consulting      0.50      01/31/2023        250,000        241,205  
Self-Help Federal Credit Union      0.40      10/16/2022        250,000        247,068  
Self-Help Federal Credit Union      0.40      02/17/2023        1,000,000        974,685  
           

 

 

 
              1,707,345  
           

 

 

 
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 $1,943,296)
     0.73      03/16/2023        2,000,000        1,943,296  
           

 

 

 
Community Development Loans (0.0%) a

 

        
BlueHub Loan Fund Inc.      1.00      04/15/2023        100,000        95,266  
BlueHub Loan Fund Inc.      1.00      04/15/2023        900,000        857,392  
New Hampshire Community Loan Fund Inc.      1.00      07/31/2022        500,000        497,535  
Root Capital Inc.      1.00      02/01/2023        200,000        192,932  
Vermont Community Loan Fund Inc.      0.75      04/15/2023        100,000        95,266  
           

 

 

 
              1,738,391  
           

 

 

 
Time Deposits (1.1%)

 

        
ANZ, London      0.91      07/01/2022        383,289        383,289  
JPMorgan Chase, New York      0.91      07/01/2022        77,088,053        77,088,053  
Sumitomo, Tokyo      0.91      07/01/2022        200,000,000        200,000,000  
           

 

 

 
              277,471,342  
           

 

 

 
Total short-term securities (1.1%)
(cost $282,860,374)
              282,860,374  
           

 

 

 
Total securities (100.0%)
(cost $22,671,855,526)
              25,087,482,223  
           

 

 

 
Other assets and liabilities (0.0%)               (905,487
           

 

 

 
Total net assets (100.0%)               25,086,576,736  
           

 

 

 
           

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.

 

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Parnassus Mid Cap Fund

Portfolio of Investments as of June 30, 2022 (unaudited)

 

Equities   Shares     Market
Value ($)
 
Air Freight & Logistics (3.6%)    
C.H. Robinson Worldwide Inc.     2,365,183       239,758,601  
   

 

 

 
Banks (5.8%)    
First Horizon Corp.     3,059,003       66,869,806  
First Republic Bank, Class A     1,018,191       146,823,142  
Signature Bank     933,895       167,363,323  
   

 

 

 
      381,056,271  
   

 

 

 
Biotechnology (2.0%)    
BioMarin Pharmaceutical Inc. q     1,579,295       130,876,177  
   

 

 

 
Capital Markets (4.2%)    
Cboe Global Markets Inc.     2,477,331       280,409,096  
   

 

 

 
Chemicals (2.2%)    
PPG Industries Inc.     1,296,499       148,241,696  
   

 

 

 
Commercial Services & Supplies (3.1%)    
Republic Services Inc.     1,574,321       206,031,389  
   

 

 

 
Containers & Packaging (2.9%)    
Ball Corp.     2,747,318       188,933,059  
   

 

 

 
Electric Utilities (2.9%)    
IDACORP Inc.     1,800,345       190,692,542  
   

 

 

 
Electronic Equipment, Instruments (1.9%)    
Trimble Inc. q     2,170,005       126,359,391  
   

 

 

 
Equity Real Estate Investment Trusts (8.6%)    
Alexandria Real Estate Equities Inc.     1,240,521       179,912,761  
Americold Realty Trust Inc.     5,467,059       164,230,452  
SBA Communications Corp., Class A     701,157       224,405,298  
   

 

 

 
      568,548,511  
   

 

 

 
Food & Staples Retailing (7.1%)    
Grocery Outlet Holding Corp. q W     4,808,694       204,994,625  
Sysco Corp.     3,153,400       267,124,514  
   

 

 

 
      472,119,139  
   

 

 

 
Health Care Equipment & Supplies (3.9%)    
Hologic Inc. q     3,752,933       260,078,257  
   

 

 

 
Household Durables (2.0%)    
D.R. Horton Inc.     1,957,979       129,598,630  
   

 

 

 
IT Services (6.3%)    
Broadridge Financial Solutions Inc.     1,319,138       188,043,122  
Jack Henry & Associates Inc.     1,281,322       230,663,586  
   

 

 

 
      418,706,708  
   

 

 

 
Equities   Shares     Market
Value ($)
 
Life Sciences Tools & Services (4.7%)    
Agilent Technologies Inc.     1,234,908       146,670,023  
IQVIA Holdings Inc. q     760,169       164,949,071  
   

 

 

 
      311,619,094  
   

 

 

 
Machinery (7.9%)    
CNH Industrial NV     12,684,751       147,016,264  
Otis Worldwide Corp.     2,861,004       202,187,153  
Pentair plc     2,061,463       94,353,161  
Stanley Black & Decker Inc.     765,165       80,235,202  
   

 

 

 
      523,791,780  
   

 

 

 
Media (2.4%)    
Cable One Inc.     122,122       157,454,337  
   

 

 

 
Professional Services (5.3%)    
CoStar Group Inc. q     2,312,772       139,714,557  
Verisk Analytics Inc.     1,224,733       211,989,035  
   

 

 

 
      351,703,592  
   

 

 

 
Semiconductors & Semiconductor Equipment (1.0%)    
KLA Corp.     207,289       66,141,774  
   

 

 

 
Software (8.5%)    
Ansys Inc. q     358,868       85,873,524  
Autodesk Inc. q     565,307       97,210,192  
Avalara Inc. q     1,696,739       119,789,773  
Guidewire Software Inc. q     1,347,408       95,652,494  
Roper Technologies Inc.     164,033       64,735,623  
Synopsys Inc. q     320,684       97,391,731  
   

 

 

 
      560,653,337  
   

 

 

 
Specialty Retail (4.5%)    
Burlington Stores Inc. q     1,003,142       136,658,035  
O’Reilly Automotive Inc. q     252,274       159,376,622  
   

 

 

 
      296,034,657  
   

 

 

 
Technology Hardware, Storage & Peripherals (1.6%)    
Western Digital Corp. q     2,339,622       104,885,254  
   

 

 

 
Textiles, Apparel & Luxury Goods (2.9%)    
Levi Strauss & Co., Class A     5,842,954       95,357,009  
VF Corp.     2,128,768       94,027,683  
   

 

 

 
      189,384,692  
   

 

 

 
Transportation Infrastructure (3.5%)    
Avantor Inc. q     7,485,841       232,809,655  
   

 

 

 
Total investment in equities (98.8%)
(cost $6,674,013,127)

 

    6,535,887,639  
   

 

 

 
 

 

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

 

30


Table of Contents
 
Semiannual Report  •  2022      LOGO

 

Parnassus Mid Cap Fund

Portfolio of Investments as of June 30, 2022 (unaudited) (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        242,630  
Beneficial State Bank      0.30      04/25/2023        250,000        241,836  
Citizens Trust Bank      0.05      01/14/2023        250,000        244,388  
Self-Help Federal Credit Union      0.40      02/17/2023        250,000        243,671  
           

 

 

 
              972,525  
           

 

 

 
Community Development Loans (0.0%) a            
BlueHub Loan Fund Inc.      1.00      04/15/2023        300,000        285,797  
           

 

 

 
Time Deposits (1.1%)            
JPMorgan Chase, New York      0.91      07/01/2022        74,377,026        74,377,026  
           

 

 

 
Total short-term securities (1.1%)
(cost $75,635,348)
              75,635,348  
           

 

 

 
Total securities (99.9%)
(cost $6,749,648,475)
              6,611,522,987  
           

 

 

 
Other assets and liabilities (0.1%)               9,328,278  
           

 

 

 
Total net assets (100.0%)               6,620,851,265  
           

 

 

 
           

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.

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.

 

31


Table of Contents
 
LOGO      Semiannual Report  •  2022

 

Parnassus Endeavor Fund

Portfolio of Investments as of June 30, 2022 (unaudited)

 

Equities   Shares     Market
Value ($)
 
Air Freight & Logistics (2.6%)    
FedEx Corp.     514,788       116,707,587  
   

 

 

 
Banks (2.1%)    
Bank of America Corp.     3,000,000       93,390,000  
   

 

 

 
Beverages (3.4%)    
PepsiCo Inc.     915,459       152,570,397  
   

 

 

 
Biotechnology (10.2%)    
Biogen Inc. q     452,053       92,191,689  
BioMarin Pharmaceutical Inc. q     1,059,846       87,829,438  
Gilead Sciences Inc.     1,949,610       120,505,394  
Moderna Inc. q     599,840       85,687,144  
Vertex Pharmaceuticals Inc. q      261,967       73,819,681  
   

 

 

 
      460,033,346  
   

 

 

 
Capital Markets (8.0%)    
S&P Global Inc.     331,514       111,740,109  
The Bank of New York Mellon Corp.     2,444,145       101,945,288  
The Charles Schwab Corp.     2,360,908       149,162,167  
   

 

 

 
      362,847,564  
   

 

 

 
Communications Equipment (2.8%)    
Cisco Systems Inc.     3,000,000       127,920,000  
   

 

 

 
Consumer Finance (5.3%)    
American Express Co. l     642,639       89,082,618  
Capital One Financial Corp.     700,000       72,933,000  
Discover Financial Services     800,869       75,746,190  
   

 

 

 
      237,761,808  
   

 

 

 
Diversified Telecommunication Services (4.0%)

 

 
Verizon Communications Inc.     3,521,415       178,711,811  
   

 

 

 
Equity Real Estate Investment Trusts (1.9%)    
Simon Property Group Inc.     913,815       86,739,320  
   

 

 

 
Food & Staples Retailing (3.7%)    
Sysco Corp.     1,975,976       167,384,927  
   

 

 

 
Health Care Equipment & Supplies (2.3%)    
Becton, Dickinson and Co.     419,352       103,382,849  
   

 

 

 
Household Durables (1.8%)

 

 
D.R. Horton Inc.     1,248,104       82,612,004  
   

 

 

 
Insurance (2.8%)    
The Progressive Corp.     1,105,217       128,503,580  
   

 

 

 
Interactive Media & Services (1.9%)    
Alphabet Inc., Class A q     40,000       87,170,400  
   

 

 

 
Equities   Shares     Market
Value ($)
 
IT Services (9.8%)    
Accenture plc, Class A     231,254       64,207,673  
Amdocs Ltd.     844,191       70,329,552  
Global Payments Inc.     1,128,745       124,884,347  
Mastercard Inc., Class A     300,000       94,644,000  
Paychex Inc.     777,861       88,575,032  
   

 

 

 
      442,640,604  
   

 

 

 
Life Sciences Tools & Services (2.6%)    
Agilent Technologies Inc.     1,000,000       118,770,000  
   

 

 

 
Machinery (5.1%)    
Cummins Inc.     455,464       88,145,948  
Deere & Co.     287,730       86,166,503  
Stanley Black & Decker Inc.     535,107       56,111,320  
   

 

 

 
      230,423,771  
   

 

 

 
Media (2.0%)    
Comcast Corp., Class A     2,256,901       88,560,795  
   

 

 

 
Pharmaceuticals (7.0%)    
Merck & Co. Inc.     2,306,548       210,287,981  
Novartis AG (ADR)     1,242,128       104,997,080  
   

 

 

 
      315,285,061  
   

 

 

 
Road & Rail (2.1%)    
Union Pacific Corp.     436,475       93,091,388  
   

 

 

 
Semiconductors & Semiconductor Equipment (4.6%)    
Applied Materials Inc.     244,608       22,254,436  
Intel Corp.     2,803,269       104,870,293  
Micron Technology Inc.     1,450,399       80,178,057  
   

 

 

 
      207,302,786  
   

 

 

 
Software (2.1%)    
Microsoft Corp.     369,967       95,018,625  
   

 

 

 
Specialty Retail (2.1%)    
The Gap Inc. l     5,067,768       41,758,408  
Ross Stores Inc.     774,665       54,404,723  
   

 

 

 
      96,163,131  
   

 

 

 
Technology Hardware, Storage & Peripherals (3.5%)    
Apple Inc.     468,300       64,025,976  
Western Digital Corp. q     2,100,000       94,143,000  
   

 

 

 
      158,168,976  
   

 

 

 
Textiles, Apparel & Luxury Goods (3.1%)    
Hanesbrands Inc.     7,512,685       77,305,529  
VF Corp.     1,382,333       61,057,649  
   

 

 

 
      138,363,178  
   

 

 

 
Trading Companies & Distributors (1.7%)    
W.W. Grainger Inc.     171,312       77,849,312  
   

 

 

 
Total investment in equities (98.5%) (cost $4,228,865,650)

 

    4,447,373,220  
   

 

 

 
 

 

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

 

32


Table of Contents
 
Semiannual Report  •  2022      LOGO

 

Parnassus Endeavor Fund

Portfolio of Investments as of June 30, 2022 (unaudited) (continued)

 

Short-Term Securities    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
     Market
Value ($)
 
Certificates of Deposit (0.0%) a            
Citizens Trust Bank      0.05      10/06/2022        250,000        247,335  
Community Vision Capital & Consulting      0.50      03/31/2023        250,000        238,781  
Self-Help Federal Credit Union      0.40      02/25/2023        250,000        243,452  
           

 

 

 
              729,568  
           

 

 

 
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 $485,681)
     0.73      03/16/2023        500,000        485,681  
           

 

 

 
Community Development Loans (0.0%) a            
Root Capital Inc.      1.00      02/01/2023        100,000        96,466  
           

 

 

 
Time Deposits (1.4%)            
Royal Bank of Canada, Toronto      0.91      07/01/2022        62,089,552        62,089,552  
           

 

 

 
Securities Purchased with Cash Collateral from Securities Lending

 

        
Registered Investment Companies (0.0%)            
Invesco Aim Government & Agency Portfolio            
Short-Term Investments Trust, Institutional Class      1.04            596,196  
           

 

 

 
Total short-term securities (1.4%)
(cost $63,997,463)
              63,997,463  
           

 

 

 
Total securities (99.9%)
(cost $4,292,863,113)
              4,511,370,683  
           

 

 

 
Payable upon return of securities loaned (0.0%)               (596,196
           

 

 

 
Other assets and liabilities (0.1%)               2,599,715  
           

 

 

 
Total net assets (100.0%)               4,513,374,202  
           

 

 

 
           

q  This security is non-income producing.

l This security, or partial position of this security, was on loan at June 30 2022. The total value of the securities on loan at June 30, 2022 was $584,257.

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

           

ADR American Depository Receipt

           

 

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

 

33


Table of Contents
 
LOGO      Semiannual Report  •  2022

 

Parnassus Mid Cap Growth Fund

Portfolio of Investments as of June 30, 2022 (unaudited)

 

Equities   Shares     Market
Value ($)
 
Air Freight & Logistics (2.0%)    
C.H. Robinson Worldwide Inc.     134,690       13,653,525  
   

 

 

 
Banks (2.8%)    
Signature Bank     74,090       13,277,669  
Silvergate Capital Corp., Class A q     111,554       5,971,486  
   

 

 

 
      19,249,155  
   

 

 

 
Biotechnology (4.2%)    
Alnylam Pharmaceuticals Inc. q     58,038       8,464,842  
BioMarin Pharmaceutical Inc. q     142,279       11,790,661  
Seagen Inc. q     51,291       9,075,430  
   

 

 

 
      29,330,933  
   

 

 

 
Capital Markets (6.1%)    
MarketAxess Holdings Inc.     102,405       26,216,704  
Morningstar Inc.     66,909       16,180,603  
   

 

 

 
      42,397,307  
   

 

 

 
Chemical (2.2%)    
Nutrien Ltd.     188,197       14,997,419  
   

 

 

 
Commercial Services & Supplies (2.4%)    
Cintas Corp.     45,880       17,137,556  
   

 

 

 
Distributors (4.5%)    
Pool Corp.     89,405       31,401,718  
   

 

 

 
Health Care Equipment & Supplies (3.8%)    
Align Technology Inc. q     21,279       5,036,101  
IDEXX Laboratories Inc. q     62,395       21,883,798  
   

 

 

 
      26,919,899  
   

 

 

 
Health Care Technology (5.1%)    
Veeva Systems Inc., Class A q     180,297       35,706,018  
   

 

 

 
Hotels Restaurants & Leisure (1.7%)    
Hilton Worldwide Holdings Inc. q     108,531       12,094,695  
   

 

 

 
Insurance (3.0%)    
The Progressive Corp.     181,525       21,105,912  
   

 

 

 
Interactive Media & Services (2.9%)    
Angi Inc., Class A q     2,293,740       10,505,329  
Match Group Inc. q     146,238       10,191,326  
   

 

 

 
      20,696,655  
   

 

 

 
Internet & Catalog Retail (1.1%)    
MercadoLibre Inc. q     12,557       7,997,177  
   

 

 

 
IT Services (5.2%)    
Block Inc., Class A q     266,947       16,406,563  
Broadridge Financial Solutions Inc.     141,281       20,139,607  
   

 

 

 
      36,546,170  
   

 

 

 
Equities   Shares     Market
Value ($)
 
Life Sciences Tools & Services (6.1%)    
Agilent Technologies Inc.     248,068       29,463,036  
Illumina Inc. q     73,104       13,477,453  
   

 

 

 
      42,940,489  
   

 

 

 
Professional Services (10.9%)    
CoStar Group Inc. q     387,000       23,378,670  
Thomson Reuters Corp.     217,191       22,633,474  
Verisk Analytics Inc.     175,308       30,344,062  
   

 

 

 
      76,356,206  
   

 

 

 
Road & Rail (2.4%)    
Old Dominion Freight Line Inc.     66,810       17,122,067  
   

 

 

 
Semiconductors & Semiconductor Equipment (6.1%)    
KLA Corp.     58,790       18,758,713  
Monolithic Power Systems Inc.     50,262       19,302,618  
Teradyne Inc.     49,728       4,453,142  
   

 

 

 
      42,514,473  
   

 

 

 
Software (21.6%)    
Ansys Inc. q     113,855       27,244,363  
Avalara Inc. q     240,851       17,004,081  
Cadence Design Systems Inc. q     106,149       15,925,535  
Five9 Inc. q     86,858       7,916,238  
Fortinet Inc. q     540,640       30,589,411  
Splunk Inc. q     272,346       24,091,727  
Synopsys Inc. q     54,882       16,667,663  
The Trade Desk Inc., Class A q     285,430       11,956,663  
   

 

 

 
      151,395,681  
   

 

 

 
Specialty Retail (2.6%)    
O’Reilly Automotive Inc. q     28,620       18,080,971  
   

 

 

 
Textiles, Apparel & Luxury Goods (2.1%)    
Lululemon Athletica Inc. q     54,564       14,874,692  
   

 

 

 
Total investment in equities (98.8%)

 

 
(cost $654,756,619)       692,518,718  
   

 

 

 
 

 

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

 

34


Table of Contents
 
Semiannual Report  •  2022      LOGO

 

Parnassus Mid Cap Growth Fund

Portfolio of Investments as of June 30, 2022 (unaudited) (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        244,375  
Citizens Trust Bank      0.05      01/14/2023        200,000        195,510  
           

 

 

 
              439,885  
           

 

 

 
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 $485,824)
     0.73      03/16/2023        500,000        485,824  
           

 

 

 
Community Development Loans (0.0%) a            
BlueHub Loan Fund Inc.      1.00      04/15/2023        100,000        95,265  
BlueHub Loan Fund Inc.      1.00      04/15/2023        100,000        95,266  
Root Capital Inc.      1.00      02/01/2023        100,000        96,466  
Vermont Community Loan Fund Inc.      0.50      10/15/2022        100,000        98,257  
           

 

 

 
              385,254  
           

 

 

 
Time Deposits (1.1%)            
BBVA, Madrid      0.91      07/01/2022        7,674,413        7,674,413  
           

 

 

 
Total short-term securities (1.3%)            
(cost $8,985,376)               8,985,376  
           

 

 

 
Total securities (100.1%)            
(cost $663,741,995)               701,504,094  
           

 

 

 
Other assets and liabilities (-0.1%)               (454,906
           

 

 

 
Total net assets (100.0%)               701,049,188  
           

 

 

 

 

q This security is non-income producing.

  

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.

 

35


Table of Contents
 
LOGO      Semiannual Report  •  2022

 

Parnassus Fixed Income Fund

Portfolio of Investments as of June 30, 2022 (unaudited)

 

Preferred Stocks    Interest
Rate
     Maturity
Date
     Shares     

Market

Value ($)

 
Banks (2.5%)            
Bank of America      5.00      09/17/2024        223,739        4,763,403  
First Republic Bank      4.50      12/31/2026        250,000        4,625,000  
           

 

 

 
              9,388,403  
           

 

 

 
Capital Markets (1.7%)            
Morgan Stanley l      4.25      01/15/2027        240,000        4,334,400  
The Charles Schwab Corp.      4.45      06/01/2026        107,835        2,204,148  
           

 

 

 
              6,538,548  
           

 

 

 
Consumer Finance (0.4%)            
Capital One Financial Corp.      5.00      12/01/2024        50,000        1,012,500  
Capital One Financial Corp.      4.63      12/01/2025        22,285        418,512  
           

 

 

 
              1,431,012  
           

 

 

 
Equity Real Estate Investment Trusts (1.9%)            
Digital Realty Trust Inc.      5.20      10/10/2024        114,608        2,726,525  
Public Storage      3.88      10/06/2025        40,000        725,200  
Public Storage      4.00      06/16/2026        140,549        2,567,830  
Public Storage      4.10      01/13/2027        70,000        1,342,600  
           

 

 

 
              7,362,155  
           

 

 

 
Total investment in preferred stocks (6.5%)
(cost $30,606,114)
              24,720,118  
           

 

 

 
Convertible Bonds                    Principal
Amount ($)
         
Electrical Equipment (0.5%)            
Sunrun Inc.      0.00      02/01/2026        2,800,000        2,016,000  
           

 

 

 
Total investment in convertible bonds (0.5%)
(cost $2,254,464)
              2,016,000  
           

 

 

 
Corporate Bonds                                
Air Freight & Logistics (0.9%)            
FedEx Corp.      4.25      05/15/2030        1,750,000        1,702,754  
FedEx Corp.      4.75      11/15/2045        1,750,000        1,612,518  
           

 

 

 
              3,315,272  
           

 

 

 
Airlines (2.4%)            
Alaska Airlines 2020-1, Class B      8.00      08/15/2025        4,691,986        4,833,304  
Southwest Airlines 07-1 Trust      6.15      08/01/2022        147,523        147,670  
Southwest Airlines Co.      5.13      06/15/2027        4,000,000        4,047,704  
           

 

 

 
              9,028,678  
           

 

 

 
Auto Components (1.3%)            
APTIV plc      2.40      02/18/2025        3,000,000        2,867,396  
APTIV plc      5.40      03/15/2049        2,500,000        2,280,622  
           

 

 

 
              5,148,018  
           

 

 

 

 

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

 

36


Table of Contents
 
Semiannual Report  •  2022      LOGO

 

Parnassus Fixed Income Fund

Portfolio of Investments as of June 30, 2022 (unaudited) (continued)

 

Corporate Bonds    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
    

Market

Value ($)

 
Biotechnology (0.6%)            
Gilead Sciences Inc.      4.80      04/01/2044        2,500,000        2,430,720  
           

 

 

 
Building Products (1.4%)            
Masco Corp.      3.50      11/15/2027        3,000,000        2,858,154  
Masco Corp.      4.50      05/15/2047        3,000,000        2,566,189  
           

 

 

 
              5,424,343  
           

 

 

 
Capital Markets (1.2%)            
Morgan Stanley      2.51      10/20/2032        2,000,000        1,656,902  
The Charles Schwab Corp.      3.75      04/01/2024        3,000,000        3,010,352  
           

 

 

 
              4,667,254  
           

 

 

 
Chemicals (0.5%)            
Linde Inc.      2.65      02/05/2025        2,000,000        1,964,484  
           

 

 

 
Commercial Services & Supplies (1.3%)            
Waste Management Inc.      3.15      11/15/2027        3,500,000        3,360,791  
Waste Management Inc.      1.50      03/15/2031        2,000,000        1,595,672  
           

 

 

 
              4,956,463  
           

 

 

 
Consumer Finance (2.0%)            
Capital One Financial Corp.      2.62      11/02/2032        4,000,000        3,223,734  
Discover Financial Services      4.50      01/30/2026        3,500,000        3,452,625  
Discover Financial Services      4.10      02/09/2027        1,000,000        960,360  
           

 

 

 
              7,636,719  
           

 

 

 
Containers & Packaging (1.5%)            
Ball Corp.      4.88      03/15/2026        6,000,000        5,902,500  
           

 

 

 
Diversified Telecommunication Services (0.5%)            
Verizon Communications Inc.      4.02      12/03/2029        2,000,000        1,941,349  
           

 

 

 
Electronic Equipment Instruments (1.3%)            
Trimble Inc.      4.90      06/15/2028        5,000,000        4,881,885  
           

 

 

 
Equity Real Estate Investment Trusts (5.3%)            
Alexandria Real Estate Equities Inc.      2.00      05/18/2032        3,750,000        2,959,660  
Alexandria Real Estate Equities Inc.      4.85      04/15/2049        1,750,000        1,631,440  
American Tower Corp.      2.40      03/15/2025        3,000,000        2,837,531  
American Tower Corp.      2.95      01/15/2051        2,250,000        1,534,116  
Digital Realty Trust Inc.      3.70      08/15/2027        2,000,000        1,908,024  
Digital Realty Trust Inc.      3.60      07/01/2029        1,000,000        905,670  
Regency Centers LP      3.75      06/15/2024        2,000,000        1,988,985  
Regency Centers LP      1.00      02/01/2047        1,647,000        1,452,775  
SBA Communications Corp.      3.88      02/15/2027        5,500,000        5,011,875  
           

 

 

 
              20,230,076  
           

 

 

 
Food Products (1.7%)            
McCormick & Co. Inc.      2.50      04/15/2030        6,000,000        5,138,757  
Mondelez International Inc.      1.50      02/04/2031        2,000,000        1,572,184  
           

 

 

 
              6,710,941  
           

 

 

 

 

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

 

37


Table of Contents
 
LOGO      Semiannual Report  •  2022

 

Parnassus Fixed Income Fund

Portfolio of Investments as of June 30, 2022 (unaudited) (continued)

 

Corporate Bonds    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
    

Market

Value ($)

 
Health Care Equipment & Supplies (1.0%)            
Becton, Dickinson and Co.      3.36      06/06/2024        2,000,000        1,980,967  
Becton, Dickinson and Co.      4.69      12/15/2044        1,500,000        1,392,657  
Boston Scientific Corp.      4.70      03/01/2049        495,000        475,701  
           

 

 

 
              3,849,325  
           

 

 

 
Hotels Restaurants & Leisure (2.1%)            
Hilton Domestic Operating Company Inc.      3.75      05/01/2029        3,684,000        3,121,609  
Starbucks Corp.      2.45      06/15/2026        3,500,000        3,304,782  
Starbucks Corp.      3.75      12/01/2047        2,000,000        1,630,838  
           

 

 

 
              8,057,229  
           

 

 

 
Household Products (0.4%)            
The Clorox Co.      1.80      05/15/2030        2,050,000        1,680,731  
           

 

 

 
Insurance (1.0%)            
Marsh & McLennan Co. Inc.      3.50      03/10/2025        3,730,000        3,684,749  
           

 

 

 
Interactive Media & Services (1.0%)            
Alphabet Inc.      1.90      08/15/2040        1,250,000        900,952  
Alphabet Inc.      3.38      02/25/2024        3,000,000        3,018,915  
           

 

 

 
              3,919,867  
           

 

 

 
Internet & Catalog Retail (0.8%)            
Booking Holdings Inc.      4.63      04/13/2030        3,000,000        2,985,044  
           

 

 

 
IT Services (1.2%)            
Fiserv Inc.      3.85      06/01/2025        2,500,000        2,473,147  
Fiserv Inc.      4.40      07/01/2049        2,500,000        2,161,719  
           

 

 

 
              4,634,866  
           

 

 

 
Life Sciences Tools & Services (2.2%)            
Agilent Technologies Inc.      2.75      09/15/2029        5,250,000        4,593,226  
Agilent Technologies Inc.      2.10      06/04/2030        1,000,000        816,693  
Danaher Corp.      3.35      09/15/2025        2,000,000        1,977,902  
Danaher Corp.      2.60      10/01/2050        1,250,000        886,686  
           

 

 

 
              8,274,507  
           

 

 

 
Machinery (4.2%)            
CNH Industrial Capital LLC      1.45      07/15/2026        4,500,000        3,979,209  
Cummins Inc.      4.88      10/01/2043        2,500,000        2,511,751  
Pentair Finance SA      4.50      07/01/2029        5,000,000        4,841,863  
Xylem Inc.      2.25      01/30/2031        5,500,000        4,594,712  
           

 

 

 
              15,927,535  
           

 

 

 
Media (1.3%)            
Comcast Corp.      4.25      10/15/2030        5,000,000        4,941,732  
           

 

 

 
Pharmaceuticals (1.0%)            
Merck & Co. Inc.      3.40      03/07/2029        4,000,000        3,871,794  
           

 

 

 
Road & Rail (1.4%)            
Kansas City Southern      2.88      11/15/2029        4,000,000        3,573,867  
Kansas City Southern      4.70      05/01/2048        2,000,000        1,893,977  
           

 

 

 
              5,467,844  
           

 

 

 

 

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

 

38


Table of Contents
 
Semiannual Report  •  2022      LOGO

 

Parnassus Fixed Income Fund

Portfolio of Investments as of June 30, 2022 (unaudited) (continued)

 

Corporate Bonds    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
    

Market

Value ($)

 
Semiconductors & Semiconductor Equipment (2.3%)            
Micron Technology Inc.      2.70      04/15/2032        5,000,000        3,998,333  
Qorvo Inc.      1.75      12/15/2024        2,500,000        2,335,300  
Qorvo Inc.      3.38      04/01/2031        3,000,000        2,359,020  
           

 

 

 
              8,692,653  
           

 

 

 
Software (3.8%)            
Autodesk Inc.      4.38      06/15/2025        3,630,000        3,687,121  
Autodesk Inc.      2.85      01/15/2030        2,250,000        1,969,824  
Cadence Design Systems Inc.      4.38      10/15/2024        3,940,000        3,978,027  
Roper Technologies Inc.      2.95      09/15/2029        3,500,000        3,098,308  
Roper Technologies Inc.      2.00      06/30/2030        2,500,000        2,018,246  
           

 

 

 
              14,751,526  
           

 

 

 
Specialty Retail (2.2%)            
Lowe’s Companies Inc.      4.50      04/15/2030        3,000,000        2,971,266  
O’Reilly Automotive Inc.      4.20      04/01/2030        5,500,000        5,322,240  
           

 

 

 
              8,293,506  
           

 

 

 
Textiles, Apparel & Luxury Goods (2.3%)            
Hanesbrands Inc.      4.88      05/15/2026        5,000,000        4,631,300  
VF Corp.      2.40      04/23/2025        2,000,000        1,920,870  
VF Corp.      6.00      10/15/2033        2,000,000        2,113,683  
           

 

 

 
              8,665,853  
           

 

 

 
Transportation Infrastructure (1.0%)            
Avantor Funding Inc.      4.63      07/15/2028        4,000,000        3,666,800  
           

 

 

 
Wireless Telecommunication Services (1.2%)            
T-Mobile USA Inc.      2.25      02/15/2026        5,000,000        4,535,500  
           

 

 

 
Total investment in corporate bonds (52.3%)
(cost $228,665,502)
              200,139,763  
           

 

 

 
Supranational Bonds                                
European Bank for Reconstruction & Development      1.50      02/13/2025        2,000,000        1,921,910  
European Investment Bank      1.63      10/09/2029        2,000,000        1,805,160  
European Investment Bank      0.75      09/23/2030        2,000,000        1,663,435  
International Bank for Reconstruction & Development      3.13      11/20/2025        4,000,000        4,004,686  
International Bank for Reconstruction & Development      1.63      11/03/2031        5,000,000        4,386,526  
International Finance Corp.      2.00      10/24/2022        3,000,000        2,996,400  
International Finance Corp.      2.13      04/07/2026        6,000,000        5,784,120  
           

 

 

 
Total investment in supranational bonds (5.9%)
(cost $24,138,489)
              22,562,237  
           

 

 

 

 

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

 

39


Table of Contents
 
LOGO      Semiannual Report  •  2022

 

Parnassus Fixed Income Fund

Portfolio of Investments as of June 30, 2022 (unaudited) (continued)

 

U.S. Government Agency Bonds    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
    

Market

Value ($)

 
Fannie Mae      0.88      12/18/2026        5,000,000        4,503,840  
Federal Home Loan Bank      3.05      12/30/2024        3,000,000        2,980,981  
Federal Home Loan Bank      3.33      06/27/2025        4,000,000        3,970,966  
Federal Home Loan Bank      0.50      07/28/2025        5,000,000        4,611,316  
Federal Home Loan Bank      0.68      02/24/2026        5,075,000        4,634,310  
Federal Home Loan Bank      0.96      03/05/2026        3,000,000        2,766,174  
Federal Home Loan Bank      2.75      06/29/2027        4,000,000        3,989,631  
Federal Home Loan Bank      3.00      06/30/2027        4,000,000        3,978,116  
Freddie Mac      0.80      10/28/2026        4,000,000        3,606,082  
           

 

 

 
Total investment in U.S. government agency bonds
(9.2%)
(cost $35,182,221)
              35,041,416  
           

 

 

 
U.S. Government Treasury Bonds                                
U.S. Treasury      1.75      07/15/2022        3,000,000        3,000,617  
U.S. Treasury      1.63      11/15/2022        3,000,000        2,992,500  
U.S. Treasury      1.38      02/15/2023        3,000,000        2,976,211  
U.S. Treasury      2.50      03/31/2023        2,000,000        1,995,547  
U.S. Treasury      2.88      10/31/2023        3,000,000        2,998,477  
U.S. Treasury      2.50      01/31/2024        2,000,000        1,986,328  
U.S. Treasury      0.88      01/31/2024        2,500,000        2,420,801  
U.S. Treasury      2.38      02/29/2024        5,000,000        4,956,250  
U.S. Treasury      2.13      03/31/2024        5,000,000        4,930,078  
U.S. Treasury      2.50      04/30/2024        6,000,000        5,952,656  
U.S. Treasury      2.50      05/31/2024        4,000,000        3,967,188  
U.S. Treasury      2.00      05/31/2024        1,000,000        982,734  
U.S. Treasury      1.75      06/30/2024        2,000,000        1,953,750  
U.S. Treasury      1.75      07/31/2024        3,000,000        2,927,226  
U.S. Treasury      1.25      08/31/2024        2,000,000        1,928,516  
U.S. Treasury      2.25      11/15/2024        3,000,000        2,950,898  
U.S. Treasury      1.50      11/30/2024        2,000,000        1,931,016  
U.S. Treasury      2.00      02/15/2025        3,000,000        2,925,469  
U.S. Treasury      0.25      06/30/2025        2,000,000        1,843,437  
U.S. Treasury      2.25      11/15/2025        3,000,000        2,925,234  
U.S. Treasury      0.38      12/31/2025        2,000,000        1,824,922  
U.S. Treasury      2.63      01/31/2026        2,000,000        1,973,359  
U.S. Treasury      1.88      07/31/2026        4,000,000        3,826,094  
U.S. Treasury      2.00      11/15/2026        3,000,000        2,872,266  
U.S. Treasury      3.25      05/15/2042        2,000,000        1,962,500  
U.S. Treasury      2.00      02/15/2050        4,000,000        3,126,406  
U.S. Treasury      1.25      05/15/2050        4,500,000        2,888,965  
U.S. Treasury      1.38      08/15/2050        2,000,000        1,328,672  
U.S. Treasury      1.63      11/15/2050        2,000,000        1,419,297  
U.S. Treasury      1.88      11/15/2051        6,000,000        4,541,250  
U.S. Treasury (TIPS)      0.38      07/15/2025        1,219,130        1,232,750  
U.S. Treasury (TIPS)      1.75      01/15/2028        1,380,020        1,467,727  
U.S. Treasury (TIPS)      0.63      02/15/2043        2,514,960        2,253,574  
           

 

 

 

Total investment in U.S. government treasury bonds (23.3%)

(cost $93,854,355)

 

 

           89,262,715  
           

 

 

 
Total investment in long-term securities (97.7%)
(cost $414,701,145)
              373,742,249  
           

 

 

 

 

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

 

40


Table of Contents
 
Semiannual Report  •  2022      LOGO

 

Parnassus Fixed Income Fund

Portfolio of Investments as of June 30, 2022 (unaudited) (continued)

 

Short-Term Securities    Interest
Rate
     Maturity
Date
     Principal
Amount ($)
    

Market

Value ($)

 
Certificates of Deposit (0.1%) a            
Beneficial State Bank      0.30      10/23/2022        250,000        246,791  
Citizens Trust Bank      0.05      10/06/2022        250,000        247,335  
           

 

 

 
              494,126  
           

 

 

 
Time Deposits (1.6%)            
BBVA, Madrid      0.91      07/01/2022        6,185,868        6,185,868  
           

 

 

 
Securities Purchased with Cash Collateral from Securities Lending

 

        
Registered Investment Companies (1.1%)            
Invesco Aim Government & Agency Portfolio            
Short-Term Investments Trust, Institutional Class      1.04            4,382,160  
           

 

 

 
Total short-term securities (2.8%)
(cost $11,062,154)
              11,062,154  
           

 

 

 
Total securities (100.5%)
(cost $425,763,299)
              384,804,403  
           

 

 

 
Payable upon return of securities loaned (-1.1%)               (4,382,160
           

 

 

 
Other assets and liabilities (0.6%)               2,144,105  
           

 

 

 
Total net assets (100.0%)               382,566,348  
           

 

 

 
           

l This security, or partial position of this security, was on loan at June 30, 2022. The total value of the securities on loan at June 30, 2022 was $4,294,988.

  

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

           

LP Limited Partnership

           

TIPS Treasury Inflation Protected Security

           

 

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

 

41


Table of Contents
LOGO      Semiannual Report  •  2022

 

Statement of Assets and Liabilities

June 30, 2022 (unaudited)

 

     Parnassus
Core Equity
Fund
    Parnassus
Mid Cap
Fund
 
Assets    

Investments in stocks and bonds, at market value – Unaffiliated
(cost $22,388,995,152, $6,532,295,431, $4,228,865,650, $654,756,619, $414,701,145)

  $ 24,804,621,849     $ 6,330,893,014  

Investments in stocks, at market value – Affiliated

   

(cost of $0, $141,717,696, $0, $0, $0)

    -       204,994,625  

Investments in short-term securities

   

(at cost which approximates market value)

    282,860,374       75,635,348  

Receivables

   

Investment securities sold

    -       40,797,937  

Dividends and interest

    16,089,692       7,350,853  

Capital shares sold

    23,557,708       5,314,616  

Other assets

    533,947       186,529  

Total assets

  $ 25,127,663,570     $ 6,665,172,922  
Liabilities    

Payable upon return of loaned securities

    -       -  

Payable for investment securities purchased

    -       33,281,840  

Capital shares redeemed

    25,224,714       6,230,491  

Fees payable to Parnassus Investments

    12,032,453       3,932,216  

Distributions payable

    1,510,757       -  

Accounts payable and accrued expenses

    2,318,910       877,110  

Total liabilities

  $ 41,086,834     $ 44,321,657  

Net assets

  $ 25,086,576,736     $ 6,620,851,265  
Net assets consist of    

Capital paid-in

    19,474,068,710       5,985,078,369  

Total Distributable Earnings

    5,612,508,026       635,772,896  

Total net assets

  $ 25,086,576,736     $ 6,620,851,265  
Net asset value and offering per share    

Net assets investor shares

  $ 11,779,947,483     $ 2,227,669,062  

Net assets institutional shares

  $ 13,306,629,253     $ 4,393,182,203  

Shares outstanding investor shares

    233,143,823       62,663,855  

Shares outstanding institutional shares

    262,789,386       122,940,548  

Net asset values and redemption price per share

   

(Net asset value divided by shares outstanding)

   

Investor shares

  $ 50.53     $ 35.55  

Institutional shares

  $ 50.64     $ 35.73  

 

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

 

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Parnassus
Endeavor
Fund
    Parnassus
Mid Cap
Growth Fund
    Parnassus
Fixed Income
Fund
 
   
    
$

4,447,373,220

 
  $ 692,518,718     $ 373,742,249  
   
  -       -       -  
   
  63,997,463       8,985,376       11,062,154  
   
  -       -       -  
  4,971,925       304,418       2,542,321  
  5,599,049       89,806       239,763  
  205,562       28,164       25,587  
$ 4,522,147,219     $ 701,926,482     $ 387,612,074  
   
  596,196       -       4,382,160  
  -       -       -  
  5,227,023       113,681       386,858  
  2,349,218       434,118       119,891  
  -       -       35,141  
  600,580       329,495       121,676  
$ 8,773,017     $ 877,294     $ 5,045,726  
$ 4,513,374,202     $ 701,049,188     $ 382,566,348  
   
  4,120,264,369       648,829,832       443,711,286  
  393,109,833       52,219,356       (61,144,938
$ 4,513,374,202     $ 701,049,188     $ 382,566,348  
   
$ 3,042,304,491     $ 546,417,066     $ 174,552,574  
$ 1,471,069,711     $ 154,632,122     $ 208,013,774  
  68,677,502       12,891,799       11,705,362  
  33,126,665       3,638,420       13,943,656  
   
   
$ 44.30     $ 42.38     $ 14.91  
$ 44.41     $ 42.50     $ 14.92  

 

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

 

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Statement of Operations

Six Months Ended June 30, 2022 (unaudited)

 

     Parnassus
Core Equity
Fund
    Parnassus
Mid Cap
Fund
 
Investment income    

Dividends – Unaffiliated

  $ 154,559,991     $ 39,645,903  

Interest

    196,290       130,496  

Securities lending

    2,061       6,803  

Other income

    19       -  

Foreign withholding tax

    (484,742     -  

Total investment income

  $ 154,273,619     $ 39,783,202  
Expenses    

Investment advisory fees

    80,926,852       26,022,554  

Transfer agent fees

   

Investor shares

    73,195       36,334  

Institutional shares

    31,626       19,333  

Fund administration

    4,350,918       1,127,360  

Service provider fees

    14,557,600       2,664,161  

Reports to shareholders

    499,531       315,900  

Registration fees and expenses

    497,150       158,331  

Custody fees

    259,506       69,598  

Professional fees

    237,369       98,902  

Trustee fees and expenses

    383,820       101,344  

Proxy voting fees

    2,091       2,091  

Pricing service fees

    3,823       3,511  

Interest expense

    -       -  

Other expenses

    135,171       49,858  

Total expenses

  $ 101,958,652     $ 30,669,277  

Fees waived by Parnassus Investments

    (1,521,930     (367,451

Net expenses

  $ 100,436,722     $ 30,301,826  

Net investment gain (loss)

  $ 53,836,897     $ 9,481,376  
Realized and unrealized gain (loss) on investments    

Net realized gain (loss) from securities transactions – Unaffiliated

    2,260,369,843       556,551,473  

Net realized gain from securities transactions – Affiliated

          2,915,193  

Net change in unrealized (depreciation) of securities – Unaffiliated

    (8,771,574,842     (2,481,340,373

Net change in unrealized appreciation of securities – Affiliated

    -       75,825,936  

Net realized and unrealized (loss) on securities

  $ (6,511,204,999   $ (1,846,047,771

Net (decrease) in net assets resulting from operations

  $ (6,457,368,102   $ (1,836,566,395

 

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

 

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Parnassus
Endeavor
Fund
    Parnassus
Mid Cap
Growth Fund
    Parnassus
Fixed Income
Fund
 
   
$ 51,233,019     $ 1,704,574     $ 600,339  
  82,672       12,412       5,342,812  
  4,854       4,854       12,720  
  12       -       1,939  
  (619,558     (56,095     -  
$ 50,700,999     $ 1,665,745     $ 5,957,810  
   
  16,926,808       2,649,915       985,577  
   
  45,914       60,268       30,729  
  20,422       18,677       17,313  
  780,611       131,301       64,029  
  3,477,550       340,667       214,379  
  146,673       37,129       18,520  
  189,293       20,688       27,387  
  51,123       12,460       5,303  
  78,138       34,218       46,971  
  63,764       13,338       5,526  
  2,091       2,091       -  
  3,511       3,823       4,985  
  -       25,870       -  
  33,609