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Parnassus Growth Equity Fund

Fund Facts	Investor Shares	Institutional Shares
Ticker	PFGEX	PFPGX
Net Expense Ratio1	0.84%	0.63%
Gross Expense Ratio	2.71%	2.30%
Inception Date	12/28/2022	12/28/2022
Benchmark	Russell 1000 Growth Index
Asset Class	U.S. large cap growth
Objective	Capital appreciation

The strategy pursues strong long-term returns by owning a concentrated portfolio of innovative, high-quality U.S. large cap companies that are well positioned to benefit from long-term secular trends.

Market Review

U.S. equities surged in the first quarter of 2024 as the economy continued to perform above expectations. Large cap growth stocks outperformed the broader market, as the Russell 1000 Growth Index gained more than 11%. In light of the economy’s resilience, analysts tempered their projections for when interest rate cuts by the Federal Reserve might begin and how many cuts we will likely see.

Consensus estimates for U.S. unemployment in 2024 dipped, while estimates for both GDP growth and inflation trended higher. Against this backdrop, the 10-year U.S. Treasury yield (US10Y) climbed from 3.88% to 4.21%. Within the Russell 1000 Growth, the Utilities, Communication Services and Information Technology sectors performed the best, while only Real Estate posted a negative return. The artificial intelligence (‘AI’)-related momentum and optimism that characterized much of 2023’s market activity continued in the quarter, especially within the Semiconductors industry.

Performance			Annualized Returns (%)
As of 03/31/2024	3 Mos.	1 Yr.	3 Yr.	5 Yr.	10 Yr.	Since 12/28/2022
PFGEX – Investor Shares	12.91	41.64	N/A	N/A	N/A	47.50
PFPGX – Institutional Shares	13.00	41.93	N/A	N/A	N/A	47.81
Russell 1000 Growth Index	11.41	39.00	12.50	18.52	15.98	46.80
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 (Parnassus Investments \| Responsible Investing Since 1984). 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 1000 Growth 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. The estimated impact of individual stocks on the Fund’s performance is provided by FactSet.

Performance Review

Outperformance driven by stock selection

The Fund returned 12.91%, better than the Russell 1000 Growth’s 11.41%, driven primarily by our stock selection in the Consumer Discretionary and Information Technology sectors. Selection in Health Care and an underweight in Consumer Discretionary also aided results. Conversely, our selection in Communication Services detracted, primarily due to not owning Meta along with Charter’s underperformance. Holdings in Industrials also weighed on relative results.

The Fund’s top relative contributors for the quarter were our underweight position in Apple (AAPL), followed by Adyen (OTCPK:ADYEY) and a new holding, Natera (NTRA), in Health Care. The largest detractors were our underweight of chipmaker NVIDIA (NVDA), followed by Charter Communications (CHTR) and Akamai Technologies (AKAM).

Top Contributors

Security	Avg. Weight (%)	Total Return (%)	Allocation Effect (%)
Apple	3.58	-10.82	1.78
Adyen	2.84	31.29	0.52
Natera	1.08	41.03	0.34
Taiwan Semiconductor	1.47	31.24	0.27
Applied Materials	1.83	27.46	0.20
Return calculations are gross of fees, time weighted and geometrically linked. Returns would be lower as a result of the deduction of fees.

Apple struggled in the first quarter, meaning that our underweight position proved beneficial. Reports of declining iPhone sales in China and concerns over the company’s product pipeline dampened investor sentiment. Antitrust actions by the U.S. and European Union governments regarding Apple’s competitive practices also weighed on the stock.

Adyen performed strongly during the quarter, regaining investor confidence relative to the previous year. Shares of the Dutch payments company rallied as it reported better- than-expected 2023 earnings, crediting expanded relationships with existing customers and lower costs due to a slowdown in hiring.

Natera, a new position in the portfolio, notched impressive revenue growth for the fourth quarter and full year 2023, leading the genetic testing company to raise its guidance for 2024 and pull forward its timeline for reaching the cash flow break-even point. The genetic testing company continues to consolidate and expand coverage for both its Women’s Health and Oncology franchises.

Taiwan Semiconductor Manufacturing Company (TSM) advanced as investors continue to seek greater clarity on which companies will benefit the most from soaring demand for AI capabilities. Against this backdrop, TSMC’s shares have been buoyed by recognition of its leading position in AI chip production.

Applied Materials (AMAT) gained as a resurgent environment for semiconductor chip production improved sentiment around the stock. Major manufacturers have been increasing their investment in semiconductor capital equipment and Applied Materials continues to take share.

Bottom Contributors

Security	Avg. Weight (%)	Total Return (%)	Allocation Effect (%)
NVIDIA	4.69	82.46	-0.90
Charter Comm.	1.55	-25.23	-0.62
Akamai Technologies	1.14	-11.62	-0.39
S&P Global	2.00	-3.22	-0.32
Intuit	3.26	4.15	-0.20
Return calculations are gross of fees, time weighted and geometrically linked. Returns would be lower as a result of the deduction of fees.

NVIDIA continued its strong 2023 momentum into the first quarter, so our underweight position held back relative returns. The maker of generative AI chips outshone consensus estimates for its fourth-quarter revenue and upgraded its own expectations for first-quarter performance.

Charter Communications missed earnings expectations, as an increase in mobile phone users did not offset a decrease in residential and commercial Internet customers. We added to the position based on confidence that Charter’s competitive positioning should improve and that its valuation remains too low.

Akamai Technologies beat earnings estimates but missed revenue expectations for the fourth quarter, pressuring its stock. We initiated the position in Akamai during the quarter and believe its security and cloud businesses will continue to grow over the long term.

S&P Global (SPGI) ended the quarter down after reporting mixed results, with revenue growth topping expectations but earnings falling short. A modest outlook for 2024, attributed in part to uncertainty over potential interest rate cuts, also curbed sentiment.

Intuit (INTU) had a negative impact on relative returns, but its stock posted a positive absolute return. It experienced significant volatility as robust earnings numbers for the company’s fiscal second quarter competed for attention with an outlook that disappointed some investors and a cautious macro environment for small- and medium-sized businesses.

Portfolio Positioning

Health Care overweight grew with two new holdings

The Fund’s most significant overweights relative to the benchmark as of March 31, 2024, were in Financials, Health Care and Materials, while its three largest underweights were in Information Technology, Consumer Discretionary and Consumer Staples.

Financials remained our largest sector overweight, with no change in our positions. We continue to own names with unique exposure to consumer activity, payment processing, and private and public debt, focusing on companies with limited balance sheet risk and attractive valuations.

We increased our exposure in our second largest overweight sector, Health Care, with the addition of Natera and Intuitive Surgical (ISRG), netted against the sale of Vertex (VRTX).

Within Health Care, we continue to own high-quality compounders and product-driven names across subsectors, including medical devices, biopharma, life science tools and payors. We continue to prefer the defensive growth in Health Care to the businesses and valuations in Consumer Staples, where we remain underweight.

Our underweights in Information Technology, Consumer Discretionary and Communication Services were primarily driven by having underweight or no exposure to large benchmark constituents Apple, Tesla (TSLA) and META. Our Apple and Tesla underweights were both positive contributors for the quarter. Within Information Technology, we added to our Semiconductors and Software exposure with Broadcom (AVGO) and PTC, respectively. With the addition of Broadcom, we reduced our underweight to the Semiconductors industry.

We made no changes in names or positioning in Consumer Staples, Industrials and Materials. We do not own any Energy, Real Estate or Utilities stocks.

Outlook

A balanced approach underscoring risk neutrality

We continue to take a balanced approach to portfolio positioning as the market seems increasingly confident in a soft landing, where the economy moderates but doesn’t enter a recession and inflation continues to trend lower over time. As such, we remain overweight in the competitively advantaged, increasingly relevant businesses positioned to outperform over the long term, while remaining disciplined on valuation.

We have decided not to shift to an overly offensive stance, due to the lack of compellingly priced risk we see in the market. However, we are not pivoting in an overly defensive direction either, given the multitude of supportive factors evident in the economic data and the fact that we continue to see strong demand, impending fiscal and monetary support in an election year and strong secular earnings growth drivers that we believe to be durable (for example, continued digitization and adoption of AI across sectors).

We expect macro volatility to continue in the near term as we see more data, but we remain focused on positioning the portfolio for success in the long term.

Portfolio Activity

Activity	Security Name	Ticker	Sector	Rationale
Bought	Natera Inc.	NTRA	Health Care	Natera is an emerging genetic testing company with franchises across women’s health, oncology and organ transplant markets. We believe the stock will have multiple upside drivers as tests become more widely adopted, coverage expands and new products are launched. We also believe the strong management team can reach the cash flow break- even point this year and will continue to balance reinvestment and profitability.
Bought	PTC Inc.	PTC	Information Technology	PTC is a best-in-class product lifecycle management (PLM) and computer-aided design (CAD) software provider for manufacturing, industrials, aerospace, automotive, healthcare, and high- tech verticals. PTC is in the early innings of benefiting from a positive shift in the strategic importance of PLM. We trimmed Adobe to fund the purchase of PTC, where we expect higher sales and margin upside potential.
Bought	Akamai Technologies Inc.	AKAM	Information Technology	We believe Akamai represents an opportunity to own a leading content delivery network (CDN) and web application security vendor that should increasingly benefit from emerging growth vectors in cybersecurity and edge computing. Akamai’s valuation is attractive, particularly considering its edge network’s potential to play a meaningful role in the AI inference market.
Bought	Intuitive Surgical Inc.	ISRG	Health Care	Intuitive Surgical is the dominant provider of robotic-assisted surgery, a large and underpenetrated market. We believe the company is entering a multi-year product cycle with the launch of the Da Vinci 5 and should see meaningful margin expansion within the next three to five years.
Bought	Broadcom Inc.	AVGO	Information Technology	Broadcom’s pullback provided an opportunity to buy an attractive collection of semiconductor and software businesses that can generate durable growth and cash flow. The company’s strong position in AI accelerators, its acquisition of software provider VMware and the cyclical recovery of its non-AI chip business are long-term growth drivers that we believe will likely drive stock appreciation.
Sold	Canadian Pacific Kansas City Ltd.	CP	Industrials	Canadian Pacific, while growing, appears to be expensive relative to some of our other holdings that have lower valuations and higher long- term upside potential. We sold Canadian Pacific and reallocated capital to those opportunities. We still have similar end-market exposure through our holding of Old Dominion Freight Line.
Sold	Yum! Brands, Inc.	YUM	Consumer Discretionary	While Yum! owns strong brand, we sold due to concerns around weak consumer spending and slowing growth across franchises, particularly Pizza Hut and KFC, and increased geopolitical volatility. Its slowing KFC business and international exposure puts pressure on its shares, making Intuitive Surgical a relatively compelling opportunity.
Sold	Vertex Pharmaceuticals Inc.	VRTX	Health Care	After a series of positive readouts for late-stage assets, including pain, Cystic Fibrosis and Sickle Cell Disease, we now believe Vertex is fairly valued, with more near-term execution around these new assets.

Sector Weights		As of 03/31/24
Sector	% of TNA	Russell 1000 Growth
Information Technology	39.1	44.1
Communication Services	10.2	12.0
Industrials	7.3	5.8
Health Care	14.7	10.6
Financials	11.2	6.4
Consumer Staples	1.8	4.0
Materials	3.4	0.8
Real Estate	0.0	0.8
Consumer Discretionary	10.8	14.9
Energy	0.0	0.5
Utilities	0.0	0.1
Cash and Other	1.5	0.0

Ten Largest Holdings	As of 03/31/24
Security	% of TNA
Microsoft Corp. (MSFT)	8.5
Alphabet Inc., Class A (GOOG,GOOGL)	7.5
Amazon.com Inc. (AMZN)	6.2
NVIDIA Corp.	4.6
Visa Inc., Class A (V)	4.5
Salesforce Inc. (CRM)	3.6
Adyen N.V. ADR	3.0
Apple Inc.	3.0
Intuit Inc.	3.0
Eli Lilly & Co. (LLY)	2.9
Holdings are subject to change.

Andrew Choi, Portfolio Manager, Senior Analyst

Shivani Vohra, Portfolio Manager, Senior Analyst

Glossary

Cash Flow refers to the net amount of cash and cash equivalents being transferred in and out of a company. 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.

Earnings Growth is the change in an company’s reported net income over a period of time and is not a measure of future performance.

Allocation Effect measures the impact of asset allocation decisions on the active return. It reflects the difference between the portfolio weights and benchmark weights, multiplied by the benchmark returns.

Important Information

PIL-525050-2024-04-09

The Russell 1000® Growth Index measures the performance of the large cap growth segment of the U.S. equity universe. An individual cannot invest directly in an index. An index reflects no deductions for fees, expenses or taxes, but mutual fund returns do. The Standard & Poor’s 500 Composite Stock Price Index (the S&P 500 Index) is a widely recognized index of common stock prices. It is an unmanaged index of 500 common stocks primarily traded on the New York Stock Exchange, weighted by market capitalization. Index performance includes the reinvestment of dividends and capital gains. An individual cannot invest directly in an index. An index reflects no deductions for fees, expenses or taxes. The S&P 500 Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Parnassus Investments. Copyright © 2022 by S&P Dow Jones Indices LLC, a subsidiary of McGraw-Hill Financial, Inc., and/or its affiliates. All rights reserved. Redistribution, reproduction and/or photocopying in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions or interruptions of any index or the data included therein.

1. As described in the Fund’s current prospectus dated May 1, 2023, Parnassus Investments has contractually agreed to reduce its investment advisory fee to the extent necessary to limit total operating expenses to 0.84% of net assets for the Parnassus Growth Equity Fund (Investor Shares) and to 0.63% of net assets for the Parnassus Growth Equity Fund (Institutional Shares). This agreement will not be terminated prior to May 1, 2024, and may be continued indefinitely by the investment adviser on a year-to-year basis. The net expense ratio is what investors pay.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (‘ESG’) GUIDELINES: The Fund evaluates financially material ESG factors as part of the investment decision-making process, considering a range of impacts they may have on future revenues, expenses, assets, liabilities and overall risk. The Fund also utilizes active ownership to encourage more sustainable business policies and practices and greater ESG transparency. Active ownership strategies include proxy voting, dialogue with company management and sponsorship of shareholder resolutions, and public policy advocacy. There is no guarantee that the ESG strategy will be successful.

Mutual fund investing involves risk, and loss of principal is possible. The Fund’s share price may change daily based on the value of its security holdings. Stock markets can be volatile, and stock values fluctuate in response to the asset levels of individual companies and in response to general U.S. and international market and economic conditions. In addition to large cap companies, the Fund may invest in small and/or mid cap companies, which can be more volatile than large cap firms. Security holdings in the fund can vary significantly from broad market indexes.

©2024 Parnassus Investments, LLC. All rights reserved. PARNASSUS, PARNASSUS INVESTMENTS and PARNASSUS FUNDS are federally registered trademarks of Parnassus Investments, LLC. The Parnassus Funds are distributed by Parnassus Funds Distributor, LLC.

Before investing, an investor should carefully consider the investment objectives, risks, charges and expenses of a fund and should carefully read the prospectus or summary prospectus, which contain this and other information. The prospectus or summary prospectus can be found on the website, www.parnassus.com, or by calling (800) 999-3505.

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