Parnassus Core Equity Fund (PRBLX) N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

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

Parnassus Funds

Parnassus Income Funds

(Exact name of registrant as specified in charter)

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

(Address of principal executive offices) (Zip code)

Marc C. Mahon

Parnassus Funds

Parnassus Income Funds

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

(Name and address of agent for service)

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

Date of fiscal year end: December 31

Date of reporting period: December 31, 2017

Item 1: Report to Shareholders

PARNASSUS FUNDS^®

ANNUAL REPORT  ◾  DECEMBER 31, 2017

PARNASSUS FUNDS

Parnassus FundSM
Investor Shares	PARNX
Institutional Shares	PFPRX
Parnassus Core Equity FundSM
Investor Shares	PRBLX
Institutional Shares	PRILX
Parnassus Endeavor FundSM
Investor Shares	PARWX
Institutional Shares	PFPWX
Parnassus Mid Cap FundSM
Investor Shares	PARMX
Institutional Shares	PFPMX
Parnassus Asia FundSM
Investor Shares	PAFSX
Institutional Shares	PFPSX
Parnassus Fixed Income FundSM
Investor Shares	PRFIX
Institutional Shares	PFPLX

Table of Contents

Letter from Parnassus Investments	4
Fund Performance and Commentary
Parnassus Fund	5
Parnassus Core Equity Fund	9
Parnassus Endeavor Fund	12
Parnassus Mid Cap Fund	16
Parnassus Asia Fund	19
Parnassus Fixed Income Fund	23
Responsible Investing Notes	26
Fund Expenses	28
Report of Independent Public Accounting Firm	30
Portfolios of Investments
Parnassus Fund	31
Parnassus Core Equity Fund	33
Parnassus Endeavor Fund	35
Parnassus Mid Cap Fund	37
Parnassus Asia Fund	39
Parnassus Fixed Income Fund	41
Financial Statements	46
Notes to Financial Statements	53
Financial Highlights	66
Additional Information	70

PARNASSUS FUNDS Annual Report  •  2017

February 9, 2018

President’s Letter

2017 was a terrific year to be invested in stocks. With a 21.83% gain, the S&P 500 Index joined other major indexes across the globe in posting an exceptionally high return. An acceleration of economic growth was a key factor in boosting investor sentiment. The consensus expectation for growth in 2017 was 2.3% for the U.S., which is well ahead of last year’s 1.5%. Even more important, economists expect growth to accelerate to 2.5% for 2018. The unemployment rate has been on a similar trajectory, dropping from 4.7% at the end of 2016 to an expected 4.1% for the end of 2017.

In 2017, investors betting on change and disruption were the big winners. The stocks of companies with missions to disrupt long-stable industries led the market higher last year. Amazon, Netflix and Facebook posted great returns, as they were all up over 50% in 2017. A less well-known technology company that did even better was semiconductor company Nvidia, which posted an 82% gain. One use of Nvidia’s chips is for mining cryptocurrencies, like Bitcoin. Amazingly, this new currency soared from $1,000 at the beginning of 2017 to more than $12,000 in just 12 months, and in doing so emphatically underscored the “change and disruption wins” theme.

The corollary of this dominant theme is that companies in the crosshairs of the innovators remained out of favor in 2017. That many of these traditional companies entered the year with attractive valuations did nothing to improve their stocks’ performance. In fact, the subset of the S&P 500 labeled “Value” by the index provider returned a relatively pedestrian 15.4% in 2017. This is more than six percentage points less than the broad index, and a full 12 percentage points worse than the S&P 500 Growth Index.

Our fund managers incorporate rigorous valuation work into their investment decisions. This means that we buy stocks only when they have modest or better valuations, and we avoid stocks with sky-high valuations. We do this because we believe that investing in securities with attractive valuations is one of the most reliable ways to generate attractive risk-adjusted returns over the long-term. Unfortunately, when growth stocks are clearly in favor, a value-oriented approach represents a stiff headwind to performance. This was one reason why our funds didn’t keep up with the soaring indexes in 2017. A consolation is that the Parnassus Core Equity Fund and the Parnassus Endeavor Fund beat their respective Lipper averages, and the Parnassus Mid Cap Fund finished in a virtual tie with its peer average.

In the reports that follow, our portfolio managers discuss their funds’ performance for 2017. They also discuss their outlooks and strategies to get back to outperforming their indexes in the coming year. I hope you enjoy the reports.

Thank you all for investing with the Parnassus Funds.

Yours truly,

Benjamin E. Allen

President

4

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS FUND

Ticker: Investor Shares - PARNX

Ticker: Institutional Shares - PFPRX

As of December 31, 2017, the net asset value per share (“NAV”) of the Parnassus Fund – Investor Shares was $48.27, so after taking dividends into account, the total return for the year was 16.08%. This compares to a gain of 21.83% for the S&P 500 Index (“S&P 500”) and a gain of 19.50% for the Lipper Multi-Cap Core Average, which represents the average return of the multi-cap core funds followed by Lipper (“Lipper average”). Normally, we’d be pleased with an annual return of more than 16%, but this year, it doesn’t look too good in comparison with our benchmarks. The market’s advance was led by technology stocks that we didn’t own due to their expensive valuations. Investors paid exorbitant prices for growth and left behind many of our socially responsible, competitively advantaged businesses with long track records of success. Eventually, we believe the market will come to its senses and realize that these technology stocks are overvalued, or that our industry leaders are undervalued, or both.

Below is a table comparing the Parnassus Fund with the S&P 500 and the Lipper average over the past one-, three-, five- and ten-year periods. Our underperformance in 2017 pulled the Fund’s return below the S&P 500 for the one-, three- and

Parnassus Fund
Average Annual Total Returns (%)	One Year		Three Years		Five Years		Ten Years		Gross Expense Ratio		Net Expense Ratio
for period ended December 31, 2017
Parnassus Fund Investor Shares		16.08		9.71		15.24		10.72		0.86		0.86
Parnassus Fund Institutional Shares		16.25		9.84		15.31		10.76		0.71		0.71
S&P 500 Index		21.83		11.41		15.79		8.50		NA		NA
Lipper Multi-Cap Core Average		19.50		8.90		13.74		7.14		NA		NA

The average annual total return for the Parnassus Fund-Institutional Shares from commencement (April 30, 2015) was 9.99%. Performance shown prior to the inception of the Institutional Shares reflects the performance of the Parnassus 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 S&P 500 is an unmanaged index of common stocks, and it is not possible to invest directly in an index. Index figures do not take any expenses, fees or taxes into account, but mutual fund returns do.

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

five-year periods, but we remain well ahead on the ten-year period. The Fund is trailing the Lipper average for the one-year period, but is ahead on the three-, five- and ten-year periods. We’re proud of the ten-year period, where the Parnassus Fund – Investor Shares has returned 10.72% per year, compared to 8.50% for the S&P 500 and 7.14% for the Lipper average. This is 2.22% per year more than the S&P 500 and 3.58% per year more than the Lipper average.

Company Analysis

Eight companies each contributed 80 basis points (a basis point is 1/100^th of one percent) or more to the Parnassus Fund’s return this year, while only three subtracted more than 30 basis points from the return. The stock that hurt us the most was toy-manufacturer Mattel, best known for its iconic brands Barbie, Hot Wheels and Fisher-Price. Mattel’s stock cut 65 basis points from the Fund’s return as it dropped 10.3% from our average purchase price of $17.15 to $15.38. The shares slumped as Mattel reported declining sales and earnings, which forced the company to suspend its dividend. The weak performance was caused by a combination of tired brands, poor production planning and the bankruptcy of Toys R Us, the largest toy-store chain in the country. Mattel now has a new management team in place, and we believe their plan to reinvigorate the company will create significant upside for shareholders, so we added to our position as the stock sunk to its low of $13.04 in November. The stock quickly jumped off its low after press speculation that toy-rival Hasbro may acquire Mattel. We believe the current stock price does not reflect the company’s valuable brands, and we expect our upside will be significant, as management either improves operations, or sells the company at a premium.

5

PARNASSUS FUNDS Annual Report  •  2017

Allergan, a pharmaceutical company best known for developing Botox, fell 22.1% from $210.01 to $163.58, reducing the Fund’s return by 35 basis points. The stock fell after a federal judge invalidated patents covering the company’s $1.5 billion dry eye drug, Restasis, thereby enabling a generic version to come to the market. Shares declined again after Revance Therapeutics, a clinical-stage biotech company, presented data showing that its competing Botox product lasts longer than Allergan’s Botox. We added to our position as the stock moved lower, because we think Allergan’s aesthetics franchise remains solid despite increasing competition. The stock is also cheap, trading at just ten times expected 2018 earnings.

Patterson Companies, a leading animal health and dental distributor, sank 11.9% from $41.03 to $36.13, lowering the Fund’s return by 34 basis points. The company reported weak earnings due to sluggish dental sales caused by personnel issues and the loss of exclusivity with its largest dental manufacturing partner. The stock is now on the bargain table, and we’re hopeful the newly appointed CEO, Mark Walchirk, will improve Patterson’s sales execution and operating margins.

Auto insurer Progressive was the Parnassus Fund’s best performer, adding 192 basis points to the Fund’s return as its shares soared 58.6% from $35.50 to $56.32. Progressive’s earnings growth shifted into high gear due to the impressive combination of accelerating revenue growth and lower policy loss rates. The company is the industry leader in predictive analytics, which allows it to identify safe drivers and reward them with lower prices, while avoiding unsafe drivers who are unprofitable. A new home insurance product drove Progressive’s revenue growth, as customers bundled their home and auto policies together to save money and time.

Industrial gas supplier Praxair contributed 122 basis points to the Fund’s return, as the stock rose 32.0% from $117.19 to $154.68. Praxair announced a merger with Linde, a German competitor. The merger will create the world’s largest industrial gas supplier, combining Praxair’s leading position in the Americas with Linde’s strong presence in Europe and Asia. The combination of Praxair’s operational excellence and Linde’s engineering and technology leadership should accelerate earnings growth.

Semiconductor manufacturer Micron Technology added 94 basis points to the Parnassus Fund’s return, as the stock jumped 21.3% from $21.92 to our average selling price of $26.59. Micron makes two kinds of memory chips, DRAMs (dynamic random access memory) and NAND flash memory chips. Memory chips are commodities, which are sensitive to supply-demand relationships. Memory chip prices continued their upward momentum from 2016 due to surging demand from data-center servers, smartphones and Internet-connected devices, while producers were careful not to oversupply the market.

KLA-Tencor, a leading semiconductor equipment manufacturer, boosted the Fund’s return by 90 basis points, as its stock rose 33.5% from $78.68 to $105.07. The stock climbed higher as healthy demand for the company’s wafer inspection tools drove better than expected earnings results.

Parnassus Fund

as of December 31, 2017

(percentage of net assets)

* 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.

Top 10 Holdings

(percentage of net assets)

Alliance Data Systems Corp.	4.4%
Progressive Corp.	4.4%
Gilead Sciences Inc.	4.3%
Motorola Solutions Inc.	4.2%
Praxair Inc.	4.1%
International Business Machines Corp.	3.3%
Mattel Inc.	3.3%
Mondelez International Inc., Class A	3.2%
Intel Corp.	3.2%
Pentair plc	3.0%

Portfolio characteristics and holdings are subject to change periodically.

6

Annual Report  •  2017 PARNASSUS FUNDS

Alphabet, the parent of Google, added 86 basis points to the Fund’s return, as its stock increased 32.9% from $792.45 to $1,053.40. The stock marched higher throughout the year, as revenue growth exceeded 20%. Mobile search, YouTube and digital advertising were the main growth drivers.

Pentair manufactures pumps, filters, valves and thermal solutions for the water and electrical markets. The company contributed 84 basis points to the Fund’s return, as its stock jumped 26.0% from $56.07 to $70.62. Early in the year, investors cheered the company’s plan to separate its water and electrical segments into two standalone companies. Pentair also noted signs of improvement in its markets throughout the year, supporting sales momentum into 2018.

Transportation provider FedEx added 83 basis points to the Fund’s return, as the stock climbed

Value on December 31, 2017 of $10,000 invested on December 31, 2007

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

34.0% from $186.20 to $249.54. The company delivered solid earnings and benefited from growing demand for international air freight and e-commerce shipments, as consumers globally are purchasing more imported goods online.

Semiconductor giant Intel added 80 basis point to the Fund’s return, as its stock rose 27.3% from $36.27 to $46.16. The company raised its financial forecast for the year due to surging demand for semiconductors in its data center business, especially from its cloud computing customers. Intel also closed the acquisition of Mobileye, a leader in computer vision for autonomous driving, which will boost sales and earnings in the future.

Outlook and Strategy

The S&P 500 was up 21.83% in 2017, the ninth consecutive year of positive returns. It was a remarkably smooth ride, as 2017 was the first year in history that the market rose in every month. Stocks moved higher due to strong corporate earnings growth, synchronized global economic expansion and tax reform, which should boost corporate earnings in 2018 and provide consumers with more cash in their pockets.

The S&P 500 Growth Index returned 27.4% in 2017, far exceeding the 15.4% return of the S&P 500 Value Index. This 12.0% difference is the largest outperformance of Growth over Value since 1999, the peak of the dot-com bubble. This large gap hurt us in 2017, as the Fund skews more toward Value than Growth. While it’s fun to own the stocks that everyone is talking about, we’re confident that our time-tested discipline to avoid the high-flyers and search for under-the-radar bargains will pay off over the long-term.

As we turn the page to 2018, the economy looks strong. The U.S. has added jobs for 86 consecutive months, the longest period on record, and the unemployment rate now stands at just 4.1%, the lowest level since 2000. A strong job market and the excitement around tax reform have propelled consumer confidence close to its highest level in 17 years. Mortgage rates remain low by historical standards, helping to support a robust housing market.

However, we’re also monitoring several cautious data points. Wage growth and inflation have remained stubbornly low, which have held longer-term Treasury yields down while shorter-term yields have risen. This phenomenon, known as a flattening yield curve, has been a leading indicator of economic downturns. Additionally, we think the biggest risk to the stock market in 2018 is its high valuation. At year-end, the S&P 500 traded at 18.2 times forward earnings estimates, its highest level since 2002. This level of optimism among investors makes us nervous, but we gain some comfort knowing that the stocks in our portfolio trade at just 16.8 times forward earnings estimates. While we won’t be immune to a market correction, we expect the Fund to fall less than the market if we experience a sell-off.

7

PARNASSUS FUNDS Annual Report  •  2017

Overall, we think the market is fully-valued, if not over-valued. So, we were pleased to identify an attractive investment opportunity toward the end of the year. We purchased shares of Nielsen, the leading information and data company that measures what consumers buy and watch. The company’s “Buy” business, which provides consumer packaged-goods data to manufacturers and retailers, has suffered as manufacturers have reduced their marketing spend. We believe this is more than reflected in the stock’s cheap valuation, and that management has the expertise needed to improve this segment’s performance. Meanwhile, Nielsen’s “Watch” business, which measures media viewership, continues to do well.

Over the course of 2017, we reduced our exposure to the technology sector given its significant outperformance and high valuation. We increased our exposure to the health care and consumer discretionary sectors, where we have found a number of undervalued businesses with competitive advantages. The Fund remains overweight the financial sector, which we expect will benefit from a strong economy and rising rates.

We’re not market forecasters, so although the market is expensive, we don’t know if its next move will be up or down. Our focus is on investing in increasingly relevant, high-quality businesses that trade at bargain prices. That’s what’s worked for us in the past, and we believe it will continue to pay dividends in the future.

Yours truly,

Jerome L. Dodson Lead Portfolio Manager	Robert J. Klaber Portfolio Manager	Ian E. Sexsmith Portfolio Manager

8

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS CORE EQUITY FUND

Ticker: Investor Shares - PRBLX

Ticker: Institutional Shares - PRILX

As of December 31, 2017, the net asset value (NAV) of the Parnassus Core Equity Fund – Investor Shares was $42.67. After taking dividends into account, the total return for the fourth quarter was 5.52%. This compares to increases of 6.64% for the S&P 500 Index (“S&P 500”) and 5.46% for the Lipper Equity Income Fund Average, which represents the average equity income funds followed by Lipper (“Lipper average”). For the year, the Parnassus Core Equity Fund – Investor Shares gained 16.58%, which was better than the 15.48% return for the Lipper average, but falls short of the 21.83% gain for the S&P 500.

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

Parnassus Core Equity Fund
Average Annual Total Returns (%)	One Year		Three Years		Five Years		Ten Years		Gross Expense Ratio		Net Expense Ratio
for period ended December 31, 2017
Parnassus Core Equity Fund Investor Shares		16.58		8.58		14.45		9.70		0.87		0.87
Parnassus Core Equity Fund Institutional Shares		16.81		8.79		14.65		9.92		0.66		0.66
S&P 500 Index		21.83		11.41		15.79		8.50		NA		NA
Lipper Equity Income Fund Average		15.48		8.24		12.32		7.00		NA		NA

The average annual total return for the Parnassus Core Equity Fund-Institutional Shares from commencement (April 28, 2006) was 10.37%. Performance shown prior to the inception of the Institutional Shares reflects the performance of the Parnassus Core Equity Fund-Investor Shares and includes expenses that are not applicable to and are higher than those of the Institutional Shares. The performance of the Institutional Shares differs from that shown for the Investor Shares to the extent that the classes do not have the same expenses. Performance data quoted represent past performance and are no guarantee of future returns. Current performance may be lower or higher than the performance data quoted, and current performance information to the most recent month-end is available on the Parnassus website (www.parnassus.com). Investment return and principal value will fluctuate, so an investor’s shares, when redeemed, may be worth more or less than their original principal cost. Returns shown in the table do not reflect the deduction of taxes a shareholder may pay on fund distributions or redemption of shares. The S&P 500 is an unmanaged index of common stocks, and it is not possible to invest directly in an index. Index figures do not take any expenses, fees or taxes into account, but mutual fund returns do.

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

Year in Review

The Fund returned 16.58% for the year and trailed the S&P 500 by 5.25%. Sector allocations had a slightly negative effect on our relative performance. Our overweight position in consumer staples stocks cost us the most, as this group gained 13.3% on average during the year, far less than the index. The most significant positive allocation effect came from our underweight in the energy sector, which posted a slight loss for the year.

Moving on to individual stocks, our biggest loser for the year was CVS Health. The stock reduced the Fund’s return by 21 basis points (a basis point is 1/100^th of one percent) as it dropped 8.1% from $78.91 to $72.50. Customer losses, weakness in its retail business and concern that Amazon may enter the pharmaceutical supply chain weighed on CVS Health throughout the year. Partly to offset these headwinds, the company announced in December that it will invest $77 billion to acquire Aetna, one of the country’s largest health care insurers. This deal will transform CVS Health into a vertically integrated health care company, which should enable more coordinated care and greater savings for patients and the health care system.

Compass Minerals, a leading provider of salt for road safety and minerals for plant nutrition, dropped 17.2% from $78.35 to our average selling price of $64.89, subtracting 19 basis points from the Fund’s return. The stock fell at the beginning of the year after management issued a disappointing earnings outlook for 2017, as a warm winter reduced demand for the company’s de-icing salt. Shares declined again in September when the company cut its earnings guidance due to weaker than expected plant nutrition volumes

9

PARNASSUS FUNDS Annual Report  •  2017

and a production outage at one of its salt mines. We decided to sell our shares, because we were disappointed with the company’s capital allocation decisions, high leverage and significant management turnover.

Sempra Energy, a San Diego, California-based utility, reduced the Fund’s return by 13 basis points in 2017, as the stock fell 7.1% from our average buy price of $115.11 to $106.92. The stock declined during December, as Northern California-based

utility PG&E announced the suspension of its dividend due to a large potential liability associated with the wildfires in Napa and Sonoma Counties. While none of Sempra’s operations were impacted by the Northern California wildfires, the stock fell in sympathy with PG&E. During 2017, we met extensively with Sempra’s management team, and have been very impressed with its fire management strategy, which includes state-of-the-art weather monitoring, electric shut-off protocols, advanced camera systems, vegetation management, a high percentage of steel pole infrastructure and contracted fire crews. In addition, a large percentage of Sempra’s electric infrastructure is underground, which greatly reduces fire risk. Another positive about Sempra is that it generates 43% of its electricity from renewable sources, well ahead of California’s regulations. We are excited about Sempra’s prospects in 2018 as they plan to close their acquisition of Texas utility Oncor during first quarter of 2018.

Tech giant Apple had a fantastic year, as the stock surged 46.1% from $115.82 to $169.23, increasing the Fund’s return by 165 basis points. The stock rose early in the year after the company reported better than expected earnings, driven by robust demand for its iPhone 7, Mac computers and service offerings across nearly all its major sales regions. The stock moved higher over the summer as investors turned their attention to the launch of the widely-anticipated tenth anniversary iPhone X. After positive reviews of the newly released iPhone X and its captivating features, such as Face ID, investors gained even greater conviction that Apple could sustain its sales momentum. We remain excited about Apple’s long-term growth prospects, as it benefits from a strong product upgrade cycle, growing services business and tremendous free cash flow.

PayPal, the leading digital payments company, rose an amazing 86.5% from $39.47 to $73.62, adding 146 basis points to the Fund’s return. The stock climbed steadily throughout 2017, as the company consistently delivered better than expected sales and earnings. The company saw meaningful improvement during the year in customer engagement, transaction volumes and pricing. Investors also gained confidence in the long-term relevancy of PayPal’s platform after it announced strategic partnerships with numerous players in the payments ecosystem, including Visa, Mastercard and Facebook.

Praxair added 142 basis points to the Fund’s return, as the stock rose 32.0% from $117.19 to $154.68. The company announced during the year a merger of equals with Linde, a leading German industrial gas company. The merger will create the world’s largest industrial gas company with a combined market value of over $70 billion and revenue of approximately $30 billion. The new company will have more diverse and balanced end-markets and will combine Praxair’s leading position in the Americas with Linde’s strong presence in Europe and Asia. Additionally, each company brings complementary strengths, with Praxair’s operational excellence and Linde’s engineering and technology leadership. The deal is expected to close in the second half of 2018.

Parnassus Core Equity Fund
as of December 31, 2017
(percentage of net assets)

Top 10 Holdings

(percentage of net assets)

Intel Corp.	5.4%
Danaher Corp.	5.3%
Praxair Inc.	4.9%
Gilead Sciences Inc.	4.7%
The Walt Disney Co.	4.3%
VF Corp.	4.0%
Wells Fargo & Co.	4.0%
Novartis AG (ADR)	3.4%
The Clorox Company	3.2%
United Parcel Service Inc., Class B	3.1%

Portfolio characteristics and holdings are subject to change periodically.

10

Annual Report  •  2017 PARNASSUS FUNDS

Outlook and Strategy

Entering 2018, we feel that, while the economic cycle appears to be in the late innings, a recession doesn’t seem imminent. In fact, economic growth accelerated during the second half of 2017, and signs point to continued acceleration in 2018. Geopolitics are a concern, as always, but we think these risks are best mitigated by owning companies with durable franchises. A risk more difficult to manage is the overall valuation of the stock market, a result of an unusually long bull market that began in early 2009. According to FactSet, the S&P 500 currently trades at a P/E ratio of 27 times expected 2017 earnings, while the tech-heavy NASDAQ is even more expensive at 27 times earnings. These multiples are significantly above historic averages.

While many technology companies have great long-term prospects due to potential growth in cloud computing, data analytics and connectivity,

Value on December 31, 2017 of $10,000 invested on December 31, 2007

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

valuations for most technology companies seem excessive. As a result, the Fund is underweight the technology sector. This sector allocation decision could reduce downside risk, if richly valued technology companies come back to earth in 2018.

We remain underweight the energy sector. We expect oil prices to remain low for the long-term, due to increased shale oil supply and weaker hydrocarbon demand as renewable energy gains share. Our other major underweight is in the financial sector.

A major theme of our portfolio is to own companies that use technology to transform their operations, but which trade at reasonable valuations. Portfolio companies Disney, Starbucks and UPS use technology to drive efficiency, improve customer experiences and develop new growth opportunities. Another good example of this theme is Clorox, the Oakland, California-based household products company, an innovative version of its much larger competitor, Procter & Gamble.

Health care remains a significant overweight position in the Fund. The Fund’s highest conviction health care investments include leaders in innovation, including Danaher, Gilead Sciences, Novartis and Hologic. The Fund is also overweight consumer staples companies that offer durable earnings growth potential. While we are closely monitoring Amazon’s ability to change the competitive landscape, we think our consumer staples investments, led by Clorox and global snack company Mondelez, can grow due to strong brands and innovation. Finally, the Fund is overweight the industrials and materials sectors. Our holdings in these areas offer long-term upside due to increasing demand for infrastructure, manufacturing and logistics.

We wake up every morning expecting good things to happen to our portfolio companies, while also keeping a close eye on risks. While some of the worst risks are nearly impossible to predict and mitigate, we think a consistent stock selection process can help minimize losses in the event of an overall stock market correction. Our stock selection process has served us well over the course of multiple market cycles, and we expect the Fund to offer an attractive balance of upside participation and downside risk mitigation in the future.

As always, we thank you for your confidence and investment in the Parnassus Core Equity Fund.

Todd C. Ahlsten Lead Portfolio Manager	Benjamin E. Allen Portfolio Manager

11

PARNASSUS FUNDS Annual Report  •  2017

PARNASSUS ENDEAVOR FUND

Ticker: Investor Shares - PARWX

Ticker: Institutional Shares - PFPWX

As of December 31, 2017, the NAV of the Parnassus Endeavor Fund – Investor Shares was $37.18, so after taking dividends into account, the total return for the year was 19.81%. This compares to a return of 21.83% for the S&P 500 Index (“S&P 500”) and 19.50% for the Lipper Multi-Cap Core Average, which represents the average return of the multi-cap core funds followed by Lipper (“Lipper average”). It was another great year for the Parnassus Endeavor Fund, as we’ve gained about 20% for two years in a row. I’m happy that we were able to give our shareholders such an attractive return.

Even though we earned almost 20% this year, our return was two percentage points below the S&P 500. The main reason for this was that technology now accounts for about 24% of the S&P 500 (up from 19.7% three years ago), and technology stocks

Parnassus Endeavor Fund
Average Annual Total Returns (%)	One Year		Three Years		Five Years		Ten Years		Gross Expense Ratio		Net Expense Ratio
for period ended December 31, 2017
Parnassus Endeavor Fund Investor Shares		19.81		14.52		18.48		13.65		0.97		0.95
Parnassus Endeavor Fund Institutional Shares		20.03		14.72		18.59		13.71		0.74		0.74
S&P 500 Index		21.83		11.41		15.79		8.50		NA		NA
Lipper Multi-Cap Core Average		19.50		8.90		13.74		7.14		NA		NA

The average annual total return for the Parnassus Endeavor Fund-Institutional Shares from commencement (April 30, 2015) was 15.17%. 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 shown in the table do not reflect the deduction of taxes a shareholder may pay on fund distributions or redemption of shares. The S&P 500 is an unmanaged index of common stocks, and it is not possible to invest directly in an index. Index figures do not take any expenses, fees or taxes into account, but mutual fund returns do.

Before investing, an investor should carefully consider the investment objectives, risks, charges and expenses of the Fund and should carefully read the prospectus or summary prospectus, which contain this and other information. The prospectus or summary prospectus can be obtained on the Parnassus website or by calling (800) 999-3505. As described in the Fund’s current prospectus dated May 1, 2017, Parnassus Investments has contractually agreed to limit total operating expenses to 0.95% of net assets for the Parnassus Endeavor Fund-Investor Shares and to 0.83% of net assets for the Parnassus Endeavor Fund-Institutional Shares. This agreement will not be terminated prior to May 1, 2018, and may be continued indefinitely by the Adviser on a year-to-year basis.

had a great year, driving the S&P 500 much higher. Although the Parnassus Endeavor Fund has traditionally had a large representation of technology stocks – usually about 35% of the portfolio – we reduced our holdings during the year in some of those stocks that appeared to be fully-valued and even overvalued. For example, we owned 400,000 shares of Apple at the beginning of the year, when it traded around $116 a share, but by the end of the year, we only owned 25,000 shares when it traded at $169 a share. Similarly, we owned 2,200,000 shares of Applied Materials at the start of the year trading at $32 a share, but we only owned 100,000 shares at the end of the year, when it traded at $51.

During the year, we made some very nice gains in technology stocks, so we decided to take some profits by selling when I thought they were fully-valued. As it turned out, those stocks kept going higher, so that we didn’t quite keep up with the S&P 500 for the year.

To the left is a table comparing the Parnassus Endeavor Fund – Investor Shares with the S&P 500 and the Lipper average over the past one-, three-, five- and ten-year periods. You’ll notice that we’re ahead of the S&P 500 for all time periods except for the one-year period, and we’re ahead of the Lipper average for all time periods. This performance has made the Parnassus Endeavor Fund – Investor Shares the best-performing of all 391 multi-cap core funds followed by Lipper over the past ten years.*

To put the Fund’s performance in dollar terms, look at the graph on page 14. It shows the growth of a hypothetical $10,000 investment in the Fund made ten years ago, compared to the growth of a $10,000 investment in the S&P 500 and a $10,000 investment in the Lipper average. Had

* For the one-, three- and five-year periods, the Fund was #426 of 779 funds, #1 of 650 funds and #4 of 564 funds, respectively.

12

Annual Report  •  2017 PARNASSUS FUNDS

you been able to invest $10,000 in the S&P 500 on December 31, 2007, you would have had $22,590 on December 31 of 2017, and if you would have invested $10,000 in the multi-cap core funds covered by the Lipper average, you would have

had $20,029. By comparison, you would have had $35,965, if you had invested in the Parnassus Endeavor Fund. In other words, you would have made $12,590 with the S&P 500 and $10,029 with the Lipper average, but $25,965 with the Parnassus Endeavor Fund or more than double over the ten-year period.

Company Analysis

There were seven companies that each contributed 110 basis points (a basis point is 1/100^th of one percent) or more to the Fund’s return, and there were no stocks that subtracted that much from the NAV. The only one that did substantial damage to our return was toy-manufacturer Mattel, which cut 81 basis points from the Fund’s return, as its stock sank 11.8% from our cost of $17.43, where we bought it during the year to $15.38 by the end of the year. The shares slumped after Mattel reported disappointing sales and lower gross margins in the middle of the year, then fell further in September after Toys R Us, the largest U.S. toy-store chain, filed for bankruptcy, casting a pall over the outlook for future sales of Mattel’s toys. Besides the bankruptcy, tired brands and poor production planning hurt the stock. While we recognize the near-term challenges facing Mattel, we think new CEO Margaret Georgiadis’ plan to reinvigorate Mattel’s brands by creating online media content, shortening the product development cycle and fostering innovation, should improve performance in the future. Right now, it looks like the stock has hit bottom, and I expect the next big move to be higher. The company has some great brands in Barbie, Hot Wheels and Fisher-Price, and if it’s able to introduce some hot-selling new brands, Mattel’s stock could have some substantial gains.

The big winner for the year was Micron Technology, which soared 87.6% from $21.92 to $41.12 for an astonishing gain of 330 basis points to the Fund’s return. Surging demand from data-centers, smartphone manufacturers and Internet-connected devices moved prices much higher for the memory chips produced by Micron, causing company earnings to hit an all-time high.

VF Corporation, the global apparel company with important brands such as The North Face, Vans and Timberland, increased the Fund’s return by 196 basis points, as its stock surged 38.7% from $53.35 to $74.00. The company had strong sales and earnings paced by Vans and The North Face, as well as higher e-commerce sales and good growth in international sales.

American Express boosted the Fund’s return by 148 basis points, as its stock rose 34.1% from $74.08 to $99.31. After losing the Costco credit card account to Citigroup in 2016, management responded with new marketing initiatives and membership rewards that improved cardholder engagement and accelerated earnings growth. American Express is capitalizing on its premium brand and great customer service.

Whole Foods, a leading retailer of organic and natural foods, added 123 basis points to the Fund’s return, as its stock jumped 36.5% from $30.76 to $42.00 on a takeover by Amazon. The takeover occurred after the stock slumped in 2016, and activist investors pressed management to sell the company.

Parnassus Endeavor Fund

as of December 31, 2017

(percentage of net assets)

* 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.

Top 10 Holdings

(percentage of net assets)

QUALCOMM Inc.	10.2%
Gilead Sciences Inc.	9.7%
VF Corp.	5.1%
Mattel Inc.	4.8%
United Parcel Service Inc., Class B	4.3%
International Business Machines Corp.	4.3%
American Express Co.	4.2%
Wells Fargo & Co.	4.0%
Intel Corp.	3.9%
Signature Bank	3.7%

Portfolio characteristics and holdings are subject to change periodically.

13

PARNASSUS FUNDS Annual Report  •  2017

Autodesk, the leading software provider for architects, engineers and designers rose 41.6% from $74.01 to $104.83, adding 120 basis points to the Fund’s return. The stock moved higher in early 2017 with better earnings and new subscriber growth, then moved higher later in the year, when investors gained confidence in Autodesk’s ability to execute its transition to a software-as-a-service model.

The last two stocks we’ll talk about are very interesting, because each of them added 110 basis points to the Fund’s return for the year. While one stock was almost flat during the period, and the other one actually finished the year at a price that was lower than where it started the year, I swear I did not do this with black magic. This feat, though, does deserve an explanation.

Gilead Sciences is a biotechnology firm that makes therapies for HIV and hepatitis C. The stock

Value on December 31, 2017 of $10,000 invested on December 31, 2007

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

started the year at $71.61 and ended the year at $71.64, so the gain was only 0.04% or almost flat. However, the stock contributed 110 basis points to our return with almost no gain for the year. We owned 1.8 million shares at the beginning of the year when the price was $71.61, but the price dropped into the 60’s in February, and we continued to buy during the year, adding millions of shares at prices as low as $65.50 in February, then adding more in May at prices as low as $64, then buying more throughout the year, thus bringing our cost down to $69.32. The stock moved into the 80’s in September and October based on the news that Gilead would acquire Kite Pharma, a leader in cellular therapy for cancer. We began selling much of our stake in Gilead at this time for prices as high as $85 a share, thus locking in a profit. When the stock fell back into the low 70’s, we started adding to our position again. That’s how we were able to gain 110 basis points to the Fund’s return on our position in Gilead.

We started the year with two million shares of Qualcomm, the leading manufacturer of mobile phone chips, when the price was $65.20 per share. The price of the shares dropped into the 50’s and at one point even went down to $48.92 based on a dispute with Apple over the price that Apple should pay for the chip that powers the Apple iPhone. Apple stopped paying for the chips it was buying from Qualcomm, and I figured that at some point, they would settle the dispute and Apple would have to pay for the chips that it received. We added to our position in the stock, bringing our cost down to $56.27 per share. In early November, Broadcom made an offer of $70 a share to buy Qualcomm, which would amount to a price tag of about $105 billion.

Qualcomm’s shares moved into the 60’s and ended the year at $64.02. This added 110 basis points to the Fund’s return, so we made a nice profit on the stock, even though it dropped from $65.20 to $64.02 over the year.

Outlook and Strategy

The S&P 500 is now trading at 23 times its last 12 months’ earnings. Over the last ten years, the multiple has averaged 17 times, and the average has been in the 15 to 16 range if you go back a few years. By any historical measure, the market is way overvalued and due for a correction. Does this mean that there will be a big move down for the stock market in 2018?

One would think so, but there are some unusual circumstances that may prevent a big sell-off. First, interest rates are extremely low, so investors have few alternatives to the stock market, so this might keep the market moving higher, or at least prevent a big move lower.

Second, the economy is very strong right now, and unemployment is only around 4.1%. That should keep corporate earnings moving higher, and if this happens, the price/earnings (P/E) ratio should move lower, since the “E” would be higher. A lower P/E ratio would move it into the normal range.

14

Annual Report  •  2017 PARNASSUS FUNDS

Third, the tax cut will help corporate earnings, since more revenue will drop to the bottom line. This will definitely make the “E” go higher and reduce the P/E ratio.

Given this situation, it’s quite possible that the market will continue to move higher. At some point though, there should be a correction, but there needs to be a catalyst for this correction to take place. One never knows what this catalyst might be, but in the past, the thing that triggers a move down comes as a surprise. Possibilities include an increase in interest rates or lower corporate earnings.

If the economy keeps getting stronger, interest rates will probably rise. If they increase enough, some people will take money out of the stock market and put it in the bank or invest in bonds. This would put pressure on the stock market and might start a move lower.

If technology products saturate the market, and consumers stop increasing their spending on iPhones and other high-tech products, then earnings will stagnate and stocks will go down. This would ripple through the whole economy and bring equities down to more reasonable levels.

A trade war is another factor that would move the market lower. President Trump has taken an adversarial position against many of our trading partners, and if this results in a trade war, that might drive the economy into a recession and force the stock market into a free fall.

Even with all these factors pointing to a possible big move down for the market, stocks could still keep moving higher. After the election of Donald Trump as President, I thought there might be a major correction in 2017, given the high valuations and the unpredictability of Trump’s policies. Fortunately, we stayed fully-invested, and both the S&P 500 and the Parnassus Endeavor Fund moved up about 20% last year.

Those are my thoughts for the outlook, now what’s my strategy? Even with my concerns about the valuation of the stock market right now, I plan to keep the portfolio close to fully-invested, which for me means at least 90% of the assets in equities. However, there are two defensive measures I’ve taken with the portfolio. First, I’m investing in companies where the P/E ratio is lower than the historical ratios for those companies. This should give us a cushion if there is a downdraft. Our stocks will go down if there is a big drop, but hopefully, they won’t go down as much as the market as a whole. As I indicated earlier, the P/E ratio of the S&P 500 is around 23, while the ratio for the Parnassus Endeavor Fund is 17.2, so that should help cushion any big move lower.

Second, I’ve reduced our exposure to technology stocks compared to our traditional practice of having around 35% or more in the portfolio. There is a risk in doing this. If technology stocks keep moving higher, the Parnassus Endeavor Fund will underperform compared to the S&P 500.

This is a risk, though, that I’m willing to take. Here’s why. Right now, about 24% of the S&P 500 is invested in technology stocks like Apple, Facebook, Google, Netflix, Amazon and Microsoft. A year ago, it was 20.8%. Three years ago, tech stocks had a 19.7% weighting. This means that index funds have a higher portion of tech stocks in their portfolios than in the past. If technology stocks move lower, that will have a much bigger impact on the S&P 500. Given my views, it’s best to have a lower percentage of technology stocks in the portfolio right now.

Thank you for investing with us in the Parnassus Endeavor Fund.

Yours truly,

Jerome L. Dodson

Portfolio Manager

15

PARNASSUS FUNDS Annual Report  •  2017

PARNASSUS MID CAP FUND

Ticker: Investor Shares - PARMX

Ticker: Institutional Shares - PFPMX

As of December 31, 2017, the NAV of the Parnassus Mid Cap Fund – Investor Shares was $32.07, so after taking dividends into account, the total return for 2017 was a gain of 15.79%. This compares to a gain of 18.52% for the Russell Midcap Index (“Russell”) and a gain of 15.83% for the Lipper Mid-Cap Core Fund Average, which represents the average mid-cap core funds followed by Lipper (“Lipper average”). For the quarter, the Parnassus Mid Cap Fund – Investor Shares was up 4.07%, behind the Russell’s 6.07% return and the Lipper average’s 5.54% gain.

Below is a table comparing the Parnassus Mid Cap Fund with the Russell and the Lipper average for the one-, three-, five- and ten-year periods. The Fund’s long-term track record remains very good, as it outperformed its benchmarks in most of the listed periods.

Parnassus Mid Cap Fund
Average Annual Total Returns (%)	One Year		Three Years		Five Years		Ten Years		Gross Expense Ratio		Net Expense Ratio
for period ended December 31, 2017
Parnassus Mid Cap Fund Investor Shares		15.79		10.04		13.71		10.28		1.01		0.99
Parnassus Mid Cap Fund Institutional Shares		16.04		10.26		13.84		10.35		0.80		0.80
Russell Midcap Index		18.52		9.58		14.96		9.11		NA		NA
Lipper Mid-Cap Core Fund Average		15.83		8.37		13.24		7.79		NA		NA

The average annual total return for the Parnassus Mid Cap Fund-Institutional Shares from commencement (April 30, 2015) was 11.34%. 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.

Before investing, an investor should carefully consider the investment objectives, risks, charges and expenses of the Fund and should carefully read the prospectus or summary prospectus, which contain this and other information. The prospectus or summary prospectus can be obtained on the Parnassus website or by calling (800) 999-3505. As described in the Fund’s current prospectus dated May 1, 2017, Parnassus Investments has contractually agreed to limit total operating expenses to 0.99% of net assets for the Parnassus Mid Cap Fund-Investor Shares and to 0.85% of net assets for the Parnassus Mid Cap Fund-Institutional Shares. This agreement will not be terminated prior to May 1, 2018, and may be continued indefinitely by the Adviser on a year-to-year basis.

Year in Review

The Parnassus Mid Cap Fund – Investor Shares returned 15.79% in 2017. Normally, we would be thrilled with this return. However, the Fund’s gain wasn’t enough to keep up with the surging Russell. The Fund trailed the Russell by 273 basis points (a basis point is 1/100^th of one percent) and the Lipper average by 4 basis points.

The Fund had positive attribution from its sector allocations. The Fund benefitted from having an underweight position in energy and real estate stocks, two of the worst performing sectors in the benchmark. These allocations increased the Fund’s return relative to the benchmark by 90 and 45 basis points, respectively. Our overweight position in the consumer staples sector hurt us the most, detracting 45 basis points from the Fund’s return.

The Fund’s health care and information technology stocks hurt performance relative to the Russell by 216 and 98 basis points, respectively. Our health care stocks, which were up 8.7% in aggregate, significantly trailed the benchmark’s health care return of 26.0%. Similarly, our information technology stocks, which rose 26.6% in aggregate during the year, also performed poorly relative to the overall sector, which increased 34.8%. Conversely, our strong stock selection in the consumer staples sector, which rose 21.0% in aggregate versus the Russell’s consumer staples group’s 7.8% return, helped the Fund’s performance by 133 basis points.

The Fund’s weakest performer was drug distributor Cardinal Health, as its stock plummeted 16.5% from $71.97 to $60.06, where we sold it, slicing 56 basis points from the Fund’s return. The stock fell in early 2017, after the company reported disappointing sales due to pricing pressure in its pharmaceutical business and the loss of a contract with Safeway. The stock

16

Annual Report  •  2017 PARNASSUS FUNDS

took another leg down in the fall after management provided a disappointing outlook for 2018, and investors became concerned about the potential entry of Amazon into the drug distribution segment. To compound these issues, the stock was also hurt by its exposure to the nation’s opioid crises. While Cardinal Health does not manufacture or prescribe opioids, the company has become the subject of a growing number of lawsuits due to its distribution practices within affected communities. Based on our re-evaluation of the ESG investment case and concerns the company no longer met our ESG standards, we exited our position. Please see the Responsible Investing Notes on page 26 for further details related to the ESG investment case for divestment from the drug distributors due to the opioid crisis.

Mattel, the toy manufacturer famous for its Barbie and Fisher-Price brands, cut 32 basis points from the Fund’s return as it dropped 24.7% from our initial purchase price of $20.43 to $15.38. The shares slumped, as Mattel reported declining sales and falling gross margins, which slashed earnings and forced the company to suspend its dividend. The weak performance was caused by a combination of tired brands, poor production planning and the bankruptcy of Toys R Us, the largest toy-store chain in the country. Mattel has a new management team in place, and we feel their plan to reinvigorate the company will create significant upside for shareholders over time. We also believe the current stock price does not reflect the company’s valuable brands, and we see significant upside ahead as management either improves operations or sells the company at a premium.

Patterson Companies, the dental and animal health products distributor, slumped 11.9% from $41.03 to $36.13, taking 29 basis points from the Fund’s return. The stock had a good start in 2017, as strong demand for its core dental equipment boosted earnings. However, the stock started falling over the summer after the company reported weak earnings due to sluggish dental sales and the loss of exclusivity with its largest dental manufacturing partner. Investor sentiment soured after management lowered earnings guidance in the Fall. The stock is now on the bargain table, and we’re hopeful that the newly appointed CEO, Mark Walchirk, will take steps to improve sales execution and operating margins.

Our best performer during the year was health care product distributor Teleflex. The shares surged 54.4% from $161.15 to $248.82, increasing the Fund’s return by 159 basis points. The stock steadily climbed throughout the year as the company consistently delivered better than expected sales and earnings. The company saw sales momentum accelerate, after it released new anesthesia and catheter products. Investors became more bullish on the stock after the company acquired Vascular Solutions, a minimally invasive provider of coronary and vascular products, and NeoTract, a leading urology provider of minimally invasive treatment for benign prostatic hyperplasia. We’re excited about the company’s long-term growth prospects, as it benefits from synergies from its recent acquisitions, new products and margin expansion.

Xylem, an industrial manufacturer focused on water infrastructure, rose 37.7% from $49.52 to $68.20, increasing the Fund’s return by 114 basis points. The stock moved higher in the spring after the company reported better than expected sales, driven by healthy demand in its public utility segment in North America and increased order growth in the emerging markets. Investors gained even greater conviction in the Fall after management raised the 2017 earnings guidance due to strong order trends, driven by its multiple applications for smarter watershed management, water quality and advanced analytics.

Parnassus Mid Cap Fund

as of December 31, 2017

(percentage of net assets)

Top 10 Holdings

(percentage of net assets)

First Horizon National Corp.	4.1%
Motorola Solutions Inc.	4.1%
Fiserv Inc.	4.0%
Verisk Analytics Inc.	3.9%
Sysco Corp.	3.8%
The Clorox Company	3.7%
Shaw Communications Inc., Class B	3.7%
Dentsply Sirona Inc.	3.6%
Iron Mountain Inc.	3.6%
Praxair Inc.	3.5%

Portfolio characteristics and holdings are subject to change periodically.

17

PARNASSUS FUNDS Annual Report  •  2017

VF Corporation, the apparel manufacturer famous for brands such as The North Face, Vans and Wrangler, contributed 109 basis points to the Fund’s return, as its stock soared 38.7% during the year from $53.35 to $74.00. As the year progressed, the company raised its annual sales and earnings forecast. Strength in Vans and The North Face businesses, rising e-commerce sales and higher growth from international markets all contributed to a better outlook. During the year, VF Corporation also made two acquisitions that complement its existing brand portfolio and offer new growth opportunities. The company acquired Williamson-Dickie, a workwear company known for its namesake Dickies brand and Icebreaker Holdings, an outdoor apparel brand specializing in merino wool and natural fibers.

Outlook and Strategy

We are in the ninth year of a bull market. This is the second longest cycle on record without a

Value on December 31, 2017 of $10,000 invested on December 31, 2007

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

major correction. After this year’s 19% surge in the Russell and after taking dividends into account, the Russell is up over 362% since the trough of 2009. This represents an annualized return of nearly 21%. At year-end, the Russell traded at over 18 times forward earnings estimates, close to the ten-year high and well above the ten-year average of 16 times. In short, stocks are expensive.

In our view, stock valuations are already pricing in good news from the solid economy, low unemployment, robust corporate earnings growth and expectations for lower taxes. Additionally, investors are quick to shrug off risks from the tumultuous geo-political environment, rising interest rates and record-high corporate debt levels. As a result, we remain focused on identifying stocks with attractive risk-reward opportunities.

In 2017, certain sectors went up much more or substantially less than the Russell, creating opportunities for us to adjust our individual portfolio holdings. For example, the information technology sector rose 35%. We reduced our exposure in this area, because the range of outcomes for some stocks became less favorable. Over the past year, we decreased our information technology holdings by almost 500 basis points. Our most significant reductions were in the semiconductor space. We exited our positions in Applied Materials and Micron after their tremendous outperformance and reduced our position in KLA-Tencor. These stocks are also highly volatile, so when momentum changes, they can suffer steep declines very quickly. We also exited our position in software-maker Autodesk after the stock reached our price target.

Conversely, the consumer staples sector underperformed the Russell in 2017, rising 8%. We increased the Fund’s consumer staples weighting by almost 350 basis points. We initiated a position in Clorox and added to our holding in Sysco. We like the stability of these businesses and believe they are uniquely positioned with their leading products and services to deliver strong earnings and cash flow growth.

The Fund seeks to own high-quality businesses at reasonable prices that can grow intrinsic value faster than our benchmarks over the long-term. We are confident that this strategy will help the Fund outperform the market over the long-term, by participating in up-markets, providing down-market performance and avoiding permanent capital losses.

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

Yours truly,

Matthew D. Gershuny	Lori A. Keith
Lead Portfolio Manager	Portfolio Manager

18

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS ASIA FUND

Ticker: Investor Shares - PAFSX

Ticker: Institutional Shares - PFPSX

As of December 31, 2017, the net asset value (“NAV”) of the Parnassus Asia Fund – Investor Shares was $19.02, so the total return for the year was 20.39%. This compares to a gain of 32.04% for the MSCI AC Asia Pacific Index (“MSCI Index”) and a gain of 33.60% for the Lipper Asia Pacific Region Average, which represents the average return of the Asia Pacific Region funds followed by Lipper (“Lipper average”). The Parnassus Asia Fund generated its best annual return on record last year, yet fell significantly behind its benchmarks. We underperformed by being too cautious, as our conservative investment approach kept us away from hot emerging market stocks that rose spectacularly as the Chinese government revved its economy. Given the Fund’s runaway performance in 2016, we are disappointed to have backtracked in 2017. Still, we remain optimistic about the prospects for the companies in the Fund, which are carefully selected for their future upside potential.

Parnassus Asia Fund
Average Annual Total Returns (%)	One Year		Three Years		Since Inception on 4/30/13		Gross Expense Ratio		Net Expense Ratio
for period ended December 31, 2017
Parnassus Asia Fund Investor Shares		20.39		6.55		6.86		3.13		1.25
Parnassus Asia Fund Institutional Shares		20.60		6.78		NA		1.10		0.96
MSCI AC Asia Pacific Index		32.04		10.94		7.27		NA		NA
Lipper Asia Pacific Region Average		33.60		10.60		6.79		NA		NA

The average annual total return for the Parnassus Asia Fund-Institutional Shares from commencement (April 30, 2015) was 4.92%. Performance shown prior to the inception of the Institutional Shares reflects the performance of the Parnassus Asia 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 MSCI AC Asia Pacific Index is an unmanaged index of Asian stock markets, 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 Fund invests primarily in non-U.S. securities. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market or economic developments and can perform differently from the U.S. market.

Before investing, an investor should carefully consider the investment objectives, risks, charges and expenses of the Fund and should carefully read the prospectus or summary prospectus, which contain this and other information. The prospectus or summary prospectus can be obtained on the Parnassus website or by calling (800) 999-3505. As described in the Fund’s current prospectus dated May 1, 2017, Parnassus Investments has contractually agreed to limit the total operating expenses to 1.25% of net assets for the Parnassus Asia Fund-Investor Shares and to 1.22% of net assets for the Parnassus Asia Fund-Institutional Shares. This agreement will not be terminated prior to May 1, 2018, and may be continued indefinitely by the Adviser on a year-to-year basis.

To the left is a table comparing the Parnassus Asia Fund with the MSCI Index and the Lipper average over the past one- and three-year periods, and since inception. Last year’s relative underperformance has put us behind both benchmarks on a one- and three-year basis. Since inception, the Parnassus Asia Fund - Investor Shares has returned 6.86% per year, which slightly trails the 7.27% returned by the MSCI Index and slightly leads the 6.79% returned by the Lipper average.

Year in Review

The Parnassus Asia Fund – Investor Shares generated a gain of 20.39% for the year, but couldn’t match the MSCI Index, which gained 32.04%. Sector allocation had an overall negative impact on our relative performance. In a year when every sector in the benchmark was up over double digits, our underweight allocations in financials and consumer staples hurt the Fund’s performance.

Individually, four companies reduced the Fund’s return by more than 13 basis points (a basis point is 1/100^th of one percent). ASICS’s stock price sank 20.3% from $19.93 to $15.89 and reduced the Fund’s return by 64 basis points. Based in Japan, ASICS is a global sportswear company that sells athletic and casual apparel, and is best known for its ASICS running shoes, a trusted and preferred brand among serious runners. Amid a generally weak sporting goods market, the company suffered from inventory markdowns and heightened competition, especially from a resurgent Adidas. Softer sales in the U.S. and Europe dominated the outlook in 2017, but should be offset by brisk growth in key markets such as China and Southeast Asia in 2018. We held our shares, as the stock looks excessively undervalued and could surge once promotions and inventories normalize.

19

PARNASSUS FUNDS Annual Report  •  2017

The stock of toy-manufacturer Mattel, best known for its iconic brands Barbie, Hot Wheels and Fisher-Price, cut 59 basis points from the Fund’s return as it dropped 10.6% from our average purchase price of $17.78 to $15.89. The shares slumped as Mattel reported declining sales and falling gross margins, which slashed earnings and forced the company to suspend its

dividend. The weak performance was caused by a combination of tired brands, poor production planning, and the bankruptcy of Toys R Us, the largest toy-store chain in the country. Mattel now has a new management team in place, and we believe their plan to improve operations or sell the company at a premium will create significant upside for shareholders.

The stock price of Rakuten declined 6.7% from $9.80 to $9.14, subtracting 15 basis points from the Fund’s return. Based in Japan, Rakuten is an international online shopping mall with tens of thousands of merchants; it is also a major player in online financial services, including securities brokerage and credit cards. Domestic gross merchandise sales again grew at a fast clip, and ecommerce profits rose for the first time in over a year. However, the company incurred higher costs in its card business, launched a new data-driven advertising operation, and announced it would enter the mobile telecommunications business. While these investments could increase Rakuten’s ecosystem value and offer earnings upside in the future, the upfront outlay worried investors, who took profits.

Brambles decreased the Fund’s return by 13 basis points, as its stock price shrank 12.1% from $8.92 to $7.84. The Australia-based company is the largest global operator of pallet and reusable plastic crate pooling services, with operations in over 50 countries around the world. Brambles significantly reduced its profit growth forecast early in the year, citing margin pressures from competition and de-stocking issues. It also withdrew its long-term return targets, leading analysts to downgrade the stock. We still like Brambles’s global scale and economic moat driven by its extensive distribution network. Despite the challenging environment, Brambles is still scoring new accounts, a good foundation for a turnaround in 2018.

Our best performing stock was Alibaba Group, which added 251 basis points to the Fund’s return, as its stock price surged 96.4% from $87.81 to $172.43. Based in China, Alibaba is the world’s largest online and mobile commerce company by sales volume. Its major marketplaces – Taobao, Tmall and Juhuasuan – together generated gross merchandise volume of over half a trillion dollars last year, more than Amazon and

Parnassus Asia Fund
as of December 31, 2017
(percentage of net assets)

* 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.

eBay combined. The company demonstrated continued sales momentum, driven by personalization efforts within core commerce and a healthy macro environment. Fast growth in Alibaba’s dominant cloud business indicated brisk progress towards profitability, setting a positive precedent for the company’s other investments in offline retail, digital media, mobile and advertising platforms.

SITC International Holdings increased the Fund’s return by 241 basis points, as its stock soared 62.3% from $0.61 to $0.99. The Hong Kong-based integrated shipping-and-logistics company has operations that span Mainland China, Japan, Southeast Asia and the rest of the world, making it the tenth-largest container shipping operator in Asia. Both SITC’s container shipping and freight forwarding volumes accelerated, driven by a synchronized recovery in external demand across the region. The company also continued expanding its profit margins, despite higher bunker costs, by improving load factors and controlling costs.

Samsung Electronics contributed 202 basis points to the Fund’s return, as its stock climbed 60.1%, from $1,489.45 to $2,384.11. The South Korean consumer electronics giant ranks number-one in sales of mobile phones and displays worldwide, and this year took number-one in semiconductors, a spot occupied by Intel for 25 years. Samsung’s share price

20

Annual Report  •  2017 PARNASSUS FUNDS

rallied on positive reviews and strong pre-orders for the company’s Galaxy S8 smartphone, which includes new services powered by artificial intelligence. Semiconductor profits also blew through analyst expectations due to rising prices for memory chips. The windfall overshadowed negative court rulings against company leadership and sent the stock another leg higher.

The stock price of OMRON leapt 55.6% from $38.21 to $59.47, enhancing the Fund’s return by 167 basis points. OMRON is a Japanese specialty manufacturer of sensing and control equipment. Their main products include factory automation devices, electronic and automotive components, and blood pressure monitors. OMRON’s operating profits overshot consensus forecasts by a wide margin, driven by strong growth in its industrial and automotive business to core clients. In August, the company also acquired Microscan Systems, a leading supplier of industrial code readers and smart cameras, to bolster its product line-up in machine vision. Investors applauded OMRON’s positive momentum and the acquisition, since profit targets look to rise.

Outlook and Strategy

Asian stock markets surged higher in 2017. The uptrend that began in the first quarter of the year continued virtually unbroken through to the fourth quarter, with stocks in China, Korea and India leading the regional rally. Developed markets in Asia also posted healthy returns but failed to meet the torrid pace of emerging markets, so Australia and Japan were last year’s relative losers. The Parnassus Asia Fund’s underweight in Japan, our largest, paid off for a second year in a row. However, our above-benchmark allocations to other developed markets such as Hong Kong and the United States hurt our relative performance. As the U.S. dollar weakened, so too did the value of our U.S. dollar-linked securities. Consequently, the Fund ended the year under our benchmark, but with an otherwise respectable gain over 20%.

It was a banner year for Chinese stocks, which jumped 54.3%. To guarantee social stability ahead of a crucial leadership transition in October, the Chinese government unleashed stimulus designed to touch every corner of the economy. Though entirely stage managed, it worked. Factory and services activity, wholesale inflation, imports, and housing prices hit multi-year highs, and President Xi Jinping became China’s most powerful premier since Mao Zedong. Parnassus holdings Alibaba and SITC International soared, but not nearly as much as China’s largest online gaming company, real-estate developers, for-profit schools, or state-owned banks and insurance companies, which we avoided.

Helped by the ripple effects of China’s stimulus, Korea and Japan also witnessed resurgent economies. Korea gained 47.8% in 2017, despite the impeachment of President Park on corruption charges, threats on Korean businesses by the Chinese government over plans for a U.S. missile defense system, and the lingering specter of a nuclear North Korea. In Japan, years of ultra-loose monetary policy have finally revived the economy. Business conditions have reached their best levels since 1991; wage growth is starting to inch higher; and GDP is on its longest growth streak in more than a decade.

What should investors expect going forward? A key lesson from the current environment is that policy matters. Quantitative easing and low interest rates by the Federal Reserve, less regulation and lower taxes as

Parnassus Asia Fund

as of December 31, 2017

(percentage of net assets)

Parnassus considers companies that do a substantial amount of business in Asia to be Asian companies.

Top 10 Holdings

(percentage of net assets)

Kakaku.com Inc.	4.6%
Gilead Sciences Inc.	4.6%
Brambles Ltd.	4.3%
QUALCOMM Inc.	4.3%
SITC International Holdings Co., Ltd.	3.9%
Rakuten Inc.	3.9%
Mattel Inc.	3.8%
Perrigo Co. plc	3.7%
Asics Corp.	3.2%
Samsung Electronics Co., Ltd.	2.9%

Portfolio characteristics and holdings are subject to change periodically.

21

PARNASSUS FUNDS Annual Report  •  2017

championed by President Trump, and endless stimulus from China and Japan have collectively pushed up stock valuations and debt levels to new heights. Policy manipulations such as these generally do not, however, translate into higher long-term growth or sustainable returns. True economic development comes from companies delivering goods and services in a market that people desire and can pay for – in other words, basic business fundamentals. That is why, despite a year dominated by politics, we remain committed to an investment philosophy centered on bottom-up, fundamental analysis. At some point, global policy support will wane, and carefully selected, high-quality businesses such as the ones in the Fund’s portfolio should continue to thrive.

Thank you for your investment in the Parnassus Asia Fund.

Yours truly,

Billy Hwan

Portfolio Manager

Value on December 31, 2017 of $10,000 invested on April 30, 2013

The chart shows the growth in value of a hypothetical $10,000 investment since inception (April 30, 2013) and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares.

22

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS FIXED INCOME FUND

Ticker: Investor Shares - PRFIX

Ticker: Institutional Shares - PFPLX

As of December 31, 2017, the NAV of the Parnassus Fixed Income Fund – Investor Shares was $16.54, producing a gain for the year of 3.10% (including dividends). This compares to gains of 3.54% for the Bloomberg Barclays U.S. Aggregate Bond Index (“Barclays Aggregate Index”) and 3.56% for the Lipper Core Bond Fund Average, which represents the average return of the funds followed by Lipper that invest at least 85% of assets in domestic investment-grade bonds (“Lipper average”).

Below is a table comparing the performance of the Fund with that of the Barclays Aggregate Index and the Lipper average. Average annual total returns are for the one-, three-, five- and ten-year periods. For December 31, the 30-day subsidized SEC yield was 2.20%, and the unsubsidized SEC yield was 1.95%.

Parnassus Fixed Income Fund
Average Annual Total Returns (%)	One Year		Three Years		Five Years		Ten Years		Gross Expense Ratio		Net Expense Ratio
for period ended December 31, 2017
Parnassus Fixed Income Fund Investor Shares		3.10		2.07		1.57		3.39		0.80		0.68
Parnassus Fixed Income Fund Institutional Shares		3.37		2.25		1.68		3.45		0.50		0.49
Bloomberg Barclays U.S. Aggregate Bond Index		3.54		2.24		2.10		4.00		NA		NA
Lipper Core Bond Fund Average		3.56		2.15		1.95		3.83		NA		NA

The average annual total return for the Parnassus Fixed Income Fund-Institutional Shares from commencement (April 30, 2015) was 2.08%. 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 shown in the table do not reflect the deduction of taxes a shareholder would pay in fund distributions or redemption of shares. The Bloomberg Barclays 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.

Before investing, an investor should carefully consider the investment objectives, risks, charges and expenses of the Fund and should carefully read the prospectus or summary prospectus, which contain this and other information. The prospectus or summary prospectus can be obtained on the Parnassus website or by calling (800) 999-3505. As described in the Fund’s current prospectus dated May 1, 2017, Parnassus Investments has contractually agreed to limit total operating expenses to 0.68% of net assets for the Parnassus Fixed Income Fund-Investor Shares and to 0.58% of net assets for the Parnassus Fixed Income Fund-Institutional Shares. This agreement will not be terminated prior to May 1, 2018, and may be continued indefinitely by the Adviser on a year-to-year basis.

Year in Review

Once again, the bond market finished the year largely as it began. The final yield on the 10-year Treasury was 2.41%, shedding just 4 basis points (a basis point is 1/100^th of one percent) from the close of 2017. Strong economic growth, three increases in the Federal Reserve’s Target Rate and a 22% increase in the S&P 500 couldn’t push yields higher during the year. Slow inflation kept a lid on longer-term interest rates, making 2017 the least volatile in 40 years for the 10-year Treasury.

The Parnassus Fixed Income Fund – Investor Shares trailed the Barclays Aggregate Index and the Lipper average for the year, gaining 3.10% versus 3.54% and 3.56%, respectively. The underperformance was a result of the Fund’s conservative position both on the yield curve as well as within the corporate bond portfolio. Long-dated bonds, or those maturing more than ten years in the future, did especially well this year. The Fund has fewer of these more volatile bonds than the Index, so did not benefit as much from their excellent performance. Also, bonds issued by companies in the cyclical materials and energy sectors had the biggest returns in the year, and the Parnassus Fixed Income Fund was underweight both sectors.

Corporate bonds issued by Whole Foods Market and Verisk Analytics outperformed the Index, each contributing 16 basis points to the total return. Verisk Analytics’ bonds gained 14.83% in the year, handily beating the 6.42% return of corporate bonds in the Index. Verisk provides essential data to insurance firms and natural resource companies, allowing each to underwrite policies or maximize projects. In this case, the Fund holds Verisk’s 30-year bonds. Yields on 30-year Treasuries fell during the year, causing prices to rise. These price-sensitive bonds popped higher on the move, despite some missteps at the company early in the year.

23

PARNASSUS FUNDS Annual Report  •  2017

Bonds issued by Whole Foods Market gained 11.97% on the year after Amazon.com acquired the company. Whole Foods issued bonds with a BBB- rating several years ago, and we added the bonds believing the credit was mispriced relative to the company’s solid cash flow. The acquisition made the bonds much less risky, as Amazon has an A+ rating from S&P, so the yield fell and the price rose. We exited the position at the end of the year once the bonds converted to Amazon’s name and were fully valued.

Praxair, which supplies industrial gases, was also a top performer in the Fund this year. The company’s bonds gained 5.93% and contributed 11 basis points to the total return. During the year, the company announced a merger of equals with Linde, a leading German industrial gas company. The merger will create the world’s largest industrial gas company. Each company brings complementary strengths, with Praxair’s operational excellence and Linde’s technology leadership, creating a more diverse and robust company. The deal is expected to close in the second half of 2018, but the bonds rallied on anticipation of the deal closing.

While a number of bonds in the Fund trailed the market this year, only one pulled down the total return. A bond issued by Cardinal Health, a top pharmaceutical distributor, removed 1 basis point from the total return. The company was dogged by a CEO change, concerns about generic drug pricing and execution issues in its medical segment. During the quarter, Parnassus decided to divest from the drug distributors on concerns about their role in the national opioid epidemic (see Responsible Investing Notes on page 26). Because of this decision, we sold the bonds in the fourth quarter.

Outlook and Strategy

The economic outlook for the upcoming year is one of the brightest since the end of the most recent recession, a remarkable feat for a recovery that’s nearly 9 years old. It’s also remarkable that the yield on the 10-year Treasury remains close to its all-time low, despite strong economic growth and low unemployment. We do not speculate on the forward path of interest rates, but appreciate the risk of yields rising and bond prices falling. In this scenario, a healthy economy means corporations can continue to grow profits and cash flow, so their bonds should trade well. The Parnassus Fixed Income Fund has a heavy overweight allocation to corporate securities, and we expect this would help mitigate the impact of rising interest rates.

Parnassus Fixed Income Fund

as of December 31, 2017
(percentage of net assets)

Portfolio characteristics and holdings are subject to change periodically.

The signing of last year’s massive tax cut into law means that most companies held in the Fund will benefit from lower tax rates. All else equal, this will improve corporate cash flow, which is a positive for bond holders. While economists and investors have many theories about the impact of the tax cuts, one possible impact to the bond investors has been less publicized.

The bond market grew substantially over the last eight years as companies issued bonds to pay for share repurchases. Many companies had cash available to pay for these repurchases, but it was trapped overseas as management teams avoided onerous taxes on repatriating international profits. Now that the law allows companies to bring this cash back to the U.S. more easily, some expect companies to pay down that debt. This would also be a net positive for the Fund’s credit quality, though some of our bonds could be redeemed.

24

Annual Report  •  2017 PARNASSUS FUNDS

Finally, 2017 was a year of transition for the Fund, as it moved towards a heavy overweight position in corporate bonds and added preferred stock. The change improved the Fund’s yield – corporate securities earn more than Treasury bonds in exchange for more risk. However, we are comfortable with that risk because we know the companies in the Fund very well. About 65% of these companies are also held in the equity funds, and we believe they make great bond investments as well. Also, because we have deep relationships with management teams for these holdings, the Fund also benefits from our team’s ESG engagements. As we continue to look for new investments, these changes will strengthen the Fund’s ESG focus and increase the yield.

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

Yours truly,

Samantha D. Palm

Portfolio Manager

Value on December 31, 2017 of $10,000 invested on December 31, 2007

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

25

PARNASSUS FUNDS Annual Report  •  2017

Responsible Investing Notes

As I reflect on 2017, I’d like to highlight two significant engagements with companies held in the Parnassus Funds. One of these engagements resulted in Parnassus divesting from two companies and the other netted a significant win for responsible investors.

As part of the ESG team’s ongoing reviews, we surveyed the Parnassus Funds holdings to identify high-risk companies. As the year unfolded, we became increasingly concerned about our exposure to the nation’s burgeoning opioid crisis through two companies, McKesson Corporation and Cardinal Health. These are two of the largest drug distributors in the country.

The opioid crisis is a complex national public health emergency that has resulted from a systemic failure across the entire drug supply chain. Opioids like oxycodone and hydrocodone are inexpensive, loosely prescribed and highly addictive; they are also often gateways to illicit street drugs like heroin. The human impact of the opioid crisis is immense, killing 91 Americans a day¹. The Center for Disease Control and Prevention estimates that the economic burden of prescription opioid misuse is $78.5 billion per year. This estimate includes the costs of healthcare, lost productivity, addiction treatment and criminal justice involvement.

Our due diligence included engaging with McKesson and Cardinal Health executives, third-party research providers and litigation experts, as well as monitoring the growing number of lawsuits and investigations. It became clear to us that these two companies did not adequately monitor and stop suspicious opioid orders even though they are legally required to under the Title 21 United States Code Controlled Substances Act to implement controls to prevent diversion. While the distributors do not manufacture or prescribe opioids, they are in a unique position that affords them the visibility – and therefore the responsibility – to help prevent diversion. In our view, both companies’ responses to the opioid crisis have been insufficient compared to the harmful impact their distribution practices have had on affected communities. For these reasons, we concluded that McKesson and Cardinal Health no longer met our ESG standards, and we divested our positions across the Parnassus Funds.

On a brighter note, I’m delighted to share with you a positive development with Wells Fargo, which has worked hard over the past year to repair its damaged reputation. From eliminating sales goals in its Community Banking division to replacing three board members, Wells Fargo has taken significant steps to improve its relationships with its customers, stakeholders and shareholders. (If you would like to review the details of our ongoing engagement with Wells Fargo, please visit the News & Updates page on www.parnassus.com or read our past quarterly reports.)

One issue we believed Wells Fargo needed to address was its involvement in the Dakota Access Pipeline (DAPL) project. This controversial pipeline project caused an uproar across the nation, leading to closely watched protests and negative sentiment towards companies involved in its construction. A consortium of seventeen banks, including Wells Fargo, lent money to finance the DAPL.

We concluded from our discussions with Wells Fargo that they could not have predicted the consequences of financing the DAPL. More importantly, we became convinced Wells Fargo would not have financed the project had it known how much it would upset its customers, shareholders and stakeholders. We understood that Wells Fargo was contractually obligated to finance the project, but we believed the bank could take action to repair its relationship with the Standing Rock Sioux Tribe. In February, as part of our engagement with Wells Fargo about the DAPL, we asked the bank to donate its profits from financing the DAPL to the Standing Rock Sioux Tribe. Wells Fargo indicated they would consider this donation.

Over the course of the year, we engaged in multiple calls and meetings with Wells Fargo, urging the bank to act. We had three calls with Wells Fargo’s Head of Corporate Responsibility and Community Relations, Jon Campbell. We met with Wells Fargo’s CEO Tim Sloan, and later in the year with incoming Board Chair Elizabeth Duke. During each conversation, we discussed our proposed DAPL donation. In October, Wells Fargo acknowledged to us that financing the DAPL had affected the bank’s relationship with the American Indian and Alaskan tribes that are customers of the bank. In December, Wells Fargo announced a five-year $50 million commitment to the American Indian and Alaskan tribes, which was significantly greater than our request. These monetary grants, to be issued starting in early 2018, will target environmental sustainability, economic empowerment, and diversity and social inclusion programs focusing on the impacted tribes.

1 Centers for Disease Control and Prevention. “Understanding the Epidemic.” www.cdc.gov https://www.cdc.gov/drugoverdose/epidemic/index.html

26

Annual Report  •  2017 PARNASSUS FUNDS

We recognize this commitment will not solve the problems created by DAPL; however, we believe these grants are an important first step as Wells Fargo begins mending its relationships with the American Indian and Alaskan tribes. We are pleased to see Wells Fargo take a leadership role in its support of Native Americans, and our hope is that the other banks involved in financing the DAPL will follow in Wells Fargo’s footsteps. Parnassus Investments thanks you for your continued investments throughout this period. Furthermore, we will continue to put your shares to work to help achieve positive impacts.

Thank you for your investment in the Parnassus Funds. It is a privilege to have you as an investor.

Yours truly,

Iyassu Essayas

Senior Research Analyst

27

PARNASSUS FUNDS Annual Report  •  2017

Fund Expenses (unaudited)

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

The following example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the period of July 1, 2017 through December 31, 2017.

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 July 1, 2017		Ending Account Value December 31, 2017		Expenses Paid During Period
Parnassus Fund – Investor Shares: Actual*		0.86%		$1,000.00		$1,060.30		$4.47
Hypothetical (5% before expenses)		0.86%		$1,000.00		$1,020.87		$4.38
Parnassus Fund – Institutional Shares: Actual*		0.71%		$1,000.00		$1,061.00		$3.69
Hypothetical (5% before expenses)		0.71%		$1,000.00		$1,021.63		$3.62
Parnassus Core Equity Fund – Investor Shares: Actual*		0.87%		$1,000.00		$1,090.40		$4.58
Hypothetical (5% before expenses)		0.87%		$1,000.00		$1,020.82		$4.43
Parnassus Core Equity Fund – Institutional Shares: Actual*		0.66%		$1,000.00		$1,091.30		$3.48
Hypothetical (5% before expenses)		0.66%		$1,000.00		$1,021.88		$3.36
Parnassus Endeavor Fund – Investor Shares: Actual*		0.95%		$1,000.00		$1,088.90		$5.00
Hypothetical (5% before expenses)		0.95%		$1,000.00		$1,020.42		$4.84
Parnassus Endeavor Fund – Institutional Shares: Actual*		0.74%		$1,000.00		$1,090.00		$3.90
Hypothetical (5% before expenses)		0.74%		$1,000.00		$1,021.48		$3.77
Parnassus Mid Cap Fund – Investor Shares: Actual*		0.99%		$1,000.00		$1,065.30		$5.15
Hypothetical (5% before expenses)		0.99%		$1,000.00		$1,020.21		$5.04
Parnassus Mid Cap Fund – Institutional Shares: Actual*		0.80%		$1,000.00		$1,066.30		$4.17
Hypothetical (5% before expenses)		0.80%		$1,000.00		$1,021.17		$4.08
Parnassus Asia Fund – Investor Shares: Actual*		1.25%		$1,000.00		$1,060.00		$6.49
Hypothetical (5% before expenses)		1.25%		$1,000.00		$1,018.90		$6.36

28

Annual Report  •  2017 PARNASSUS FUNDS

Fund Expenses (unaudited) (continued)

	Fund Expense Ratio		Beginning Account Value July 1, 2017		Ending Account Value December 31, 2017		Expenses Paid During Period
Parnassus Asia Fund – Institutional Shares: Actual*		0.96%		$1,000.00		$1,060.90		$4.99
Hypothetical (5% before expenses)		0.96%		$1,000.00		$1,020.37		$4.89
Parnassus Fixed Income Fund – Investor Shares: Actual*		0.68%		$1,000.00		$1,007.00		$3.44
Hypothetical (5% before expenses)		0.68%		$1,000.00		$1,021.78		$3.47
Parnassus Fixed Income Fund – Institutional Shares: Actual*		0.49%		$1,000.00		$1,008.70		$2.48
Hypothetical (5% before expenses)		0.49%		$1,000.00		$1,022.74		$2.50

* Expenses are calculated using the Funds’ annualized expense ratios, which represent ongoing expense as a percentage of net assets for the six months ended December 31, 2017. Expenses are calculated by multiplying the annualized expense ratio by the average account value of the period; then multiplying the result by the number of days in the most recent one-half year period (184); and then dividing that result by the number of days in the current fiscal year (365). Expense ratios for the most recent half year may differ from expense ratios based on one-year data in the financial highlights.

29

PARNASSUS FUNDS Annual Report  •  2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Trustees of the Parnassus Funds and the Parnassus Income Funds

San Francisco, California

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statements of assets and liabilities of the Parnassus Funds (comprised of Parnassus Fund, Parnassus Mid Cap Fund, Parnassus Endeavor Fund, and Parnassus Asia Fund) and the Parnassus Income Funds (comprised of Parnassus Core Equity Fund and Parnassus Fixed Income Fund) (collectively, the “Trusts”), including the portfolios of investments, as of December 31, 2017, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended for Parnassus Fund, Parnassus Mid Cap Fund, Parnassus Endeavor Fund, Parnassus Core Equity Fund, and Parnassus Fixed Income Fund and for each of the four years in the period then ended and for the period April 30, 2013 (inception date) through December 31, 2017 for Parnassus Asia Fund, and the related notes.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Trusts constituting the Parnassus Funds and the Parnassus Income Funds as of December 31, 2017, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended for, and the financial highlights for each of the five years in the period then ended for Parnassus Fund, Parnassus Mid Cap Fund, Parnassus Endeavor Fund, Parnassus Core Equity Fund, and Parnassus Fixed Income Fund and for each of the four years in the period then ended and for the period April 30, 2013 (inception date) through December 31, 2017 for Parnassus Asia Fund, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Trusts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Trusts in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Trusts are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trusts’ internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included, examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of investments owned as of December 31, 2017, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

Costa Mesa, California

February 2, 2018

We have served as the Trusts’ auditor since 1987.

30

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS FUND

Portfolio of Investments as of December 31, 2017

Equities	Shares		Market Value ($)
Banks (5.5%)
Signature Bank q		210,000		28,824,600
Wells Fargo & Co.		500,000		30,335,000
				59,159,600
Chemicals (10.1%)
Axalta Coating Systems Ltd. q		550,000		17,798,000
Potash Corporation of Saskatchewan Inc.		1,250,000		25,812,500
PPG Industries Inc.		180,000		21,027,600
Praxair Inc.		285,000		44,083,800
				108,721,900
Computers (3.3%)
International Business Machines Corp.		235,000		36,053,700
Consulting Services (2.6%)
Cognizant Technology Solutions Corp.		400,000		28,408,000
Equipment Leasing (2.0%)
Air Lease Corp.		440,000		21,159,600
Financial Services (3.8%)
Charles Schwab Corp.		500,000		25,685,000
First Horizon National Corp.		800,000		15,992,000
				41,677,000
Food Products (3.2%)
Mondelez International Inc., Class A		805,500		34,475,400
Health Care Products (2.8%)
Dentsply Sirona Inc.		455,000		29,952,650
Health Care Services (2.1%)
Hologic Inc. q		540,734		23,116,379
Industrial Manufacturing (3.0%)
Pentair plc		460,000		32,485,200
Insurance (4.4%)
Progressive Corp.		850,000		47,872,000
Internet (4.7%)
Alphabet Inc., Class A q		30,000		31,602,000
eBay Inc. q		505,000		19,058,700
				50,660,700
Lodging (1.1%)
Belmond Ltd. q		1,000,000		12,250,000
Medical Equipment (2.8%)
Patterson Companies Inc.		856,000		30,927,280

Equities	Shares		Market Value ($)
Pharmaceuticals (9.6%)
Allergan plc		188,775		30,879,814
Gilead Sciences Inc.		646,000		46,279,440
Novartis AG (ADR)		321,301		26,976,432
				104,135,686
Professional Services (2.0%)
Nielsen Holdings plc		587,500		21,385,000
Real Estate Investment Trusts (5.2%)
Hannon Armstrong Sustainable Infrastructure Capital Inc.		455,000		10,947,300
Public Storage		140,000		29,260,000
Redwood Trust Inc.		1,100,000		16,302,000
				56,509,300
Semiconductors (6.0%)
Intel Corp.		745,000		34,389,200
KLA-Tencor Corp.		290,000		30,470,300
				64,859,500
Services (7.0%)
Alliance Data Systems Corp.		190,000		48,161,200
Thomson Reuters Corp.		660,000		28,769,400
				76,930,600
Snack & Juice Bars (1.5%)
Starbucks Corp.		283,000		16,252,690
Telecommunications Equipment (4.2%)
Motorola Solutions Inc.		500,000		45,170,000
Toys & Games (3.3%)
Mattel Inc. l		2,300,000		35,374,000
Transportation (6.9%)
C.H. Robinson Worldwide Inc.		280,000		24,945,200
Expeditors International of Washington Inc.		300,000		19,407,000
FedEx Corp.		125,000		31,192,500
				75,544,700
Total investment in equities (97.1%) (cost $897,821,690)				1,053,080,885

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

31

PARNASSUS FUNDS Annual Report  •  2017

PARNASSUS FUND

Portfolio of Investments as of December 31, 2017 (continued)

Short-Term Securities	Interest Rate			Maturity Date		Principal Amount ($)		Market Value ($)
Certificates of Deposit (0.0%) a
Albina Community Bank		0.20	%		01/15/2018		250,000		249,617
New Resource Bank		0.15	%		03/01/2018		250,000		248,384
									498,001
Certificates of Deposit Account Registry Service (0.0%) a
CDARS agreement with Beneficial State Bank, dated 03/16/2017 Participating depository institutions: Bank of America, N.A., par 243,500; Independent Bank, par 13,000; Parke Bank, par 243,500; (cost $495,990)		0.95	%		03/15/2018		500,000		495,990
Community Development Loans (0.1%) a
Boston Community Loan Fund		1.00	%		04/15/2018		100,000		98,291
Boston Community Loan Fund		1.00	%		04/15/2018		100,000		98,291
MicroVest Plus, LP Note		2.25	%		10/15/2018		1,000,000		952,657
Root Capital Loan Fund		1.25	%		02/01/2018		100,000		99,491
TMC Development Loan		1.00	%		05/25/2018		100,000		97,633
Vermont Community Loan Fund		0.85	%		10/15/2018		100,000		95,282
									1,441,645
Time Deposits (2.8%)
BBH Cash Management Service
Citibank, New York		0.92	%		01/02/2018		30,050,267		30,050,267
Securities Purchased with Cash Collateral from Securities Lending
Registered Investment Companies (3.6%)
Invesco Aim Government & Agency Portfolio
Short-Term Investments Trust, Institutional Class		1.18	%						39,477,179
Total short-term securities (6.5%) (cost $71,963,082)									71,963,082
Total securities (103.6%) (cost $969,784,772)									1,125,043,967
Payable upon return of securities loaned (-3.6%)									(39,477,179	)
Other assets and liabilities (0.0%)									109,392
Total net assets (100.0%)									1,085,676,180
q This security is non-income producing.
l This security, or partial position of this security, was on loan at December 31, 2017. The total value of the securities on loan at December 31, 2017 was $38,680,058.
a Market value adjustments have been applied to these securities to reflect potential early withdrawal.
plc Public Limited Company
ADR American Depository Receipt

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

32

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS CORE EQUITY FUND

Portfolio of Investments as of December 31, 2017

Equities	Shares		Market Value ($)
Apparel (4.0%)
VF Corp.		8,775,903		649,416,822
Banks (4.0%)
Wells Fargo & Co.		10,594,806		642,786,880
Chemicals (6.5%)
PPG Industries Inc.		2,118,141		247,441,232
Praxair Inc.		5,118,476		791,725,868
				1,039,167,100
Computers (1.9%)
Apple Inc.		1,848,717		312,858,378
Cosmetics & Personal Care (2.0%)
The Procter & Gamble Co.		3,423,000		314,505,240
Entertainment (4.3%)
The Walt Disney Co.		6,454,534		693,926,950
Financial Services (7.7%)
Charles Schwab Corp.		9,005,055		462,589,675
Mastercard Inc.		2,969,000		449,387,840
PayPal Holdings Inc. q		4,528,781		333,408,857
				1,245,386,372
Food Products (4.7%)
Mondelez International Inc., Class A		10,146,956		434,289,717
Sysco Corp.		5,379,409		326,691,509
				760,981,226
Health Care Products (5.3%)
Danaher Corp.		9,128,657		847,321,943
Health Care Services (2.3%)
Hologic Inc. q		8,775,591		375,156,515
Home Products (4.1%)
The Clorox Company		3,494,014		519,699,642
WD-40 Co. W		1,220,000		143,960,000
				663,659,642
Industrial Manufacturing (4.1%)
Pentair plc		5,071,456		358,146,223
Xylem Inc.		4,414,308		301,055,806
				659,202,029
Insurance (2.9%)
Verisk Analytics Inc. q		4,922,040		472,515,840

Equities	Shares		Market Value ($)
Internet (4.3%)
Alphabet Inc., Class Aq		314,000		330,767,600
Alphabet Inc., Class Cq		339,396		355,143,974
				685,911,574
Medical Equipment (1.1%)
Patterson Companies Inc.		4,841,958		174,939,943
Natural Gas (1.9%)
MDU Resources Group Inc.W		11,324,166		304,393,582
Oil & Gas (1.0%)
National Oilwell Varco Inc.		4,553,090		164,002,302
Pharmaceuticals (8.9%)
Allergan plc		768,006		125,630,421
Gilead Sciences Inc.		10,663,184		763,910,500
Novartis AG (ADR)		6,465,955		542,881,582
				1,432,422,503
Real Estate Investment Trusts (4.0%)
Iron Mountain Inc.		9,208,919		347,452,514
Public Storage		1,425,776		297,987,184
				645,439,698
Retail (3.0%)
CVS Health Corp.		6,709,530		486,440,925
Semiconductors (6.9%)
Intel Corp.		18,990,154		876,585,509
KLA-Tencor Corp.		2,293,287		240,955,665
				1,117,541,174
Snack & Juice Bars (3.0%)
Starbucks Corp.		8,387,837		481,713,479
Telecommunications Equipment (2.1%)
Motorola Solutions Inc.		3,649,423		329,688,874
Transportation (3.1%)
United Parcel Service Inc., Class B		4,233,270		504,394,121
Utility & Power Distribution (2.3%)
Sempra Energy		3,439,098		367,708,358
Waste Management (2.5%)
Waste Management Inc.		4,741,000		409,148,300
Total investment in equities (97.9%) (cost $11,864,823,446)				15,780,629,770

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

33

PARNASSUS FUNDS Annual Report  •  2017

PARNASSUS CORE EQUITY FUND

Portfolio of Investments as of December 31, 2017 (continued)

Short-Term Securities	Interest Rate			Maturity Date		Principal Amount ($)		Market Value ($)
Certificates of Deposit (0.0%)a
Community Trust Credit Union		0.80	%		10/15/2018		250,000		242,137
Urban Partnership Bank		0.30	%		09/24/2018		250,000		242,712
									484,849
Certificates of Deposit Account Registry Service (0.0%)a
CDARS agreement with Beneficial State Bank, dated 03/16/2017 Participating depository institutions: Amarillo National Bank, par 175,657; Bank of America, N.A., par 243,500; First United Bank & Trust Company, par 243,500; Independent Bank, par 243,500; Parke Bank, par 243,500; Portage Community Bank, par 243,500; South State Bank, par 243,500; TIAA, FSB, par 119,843; United Bank, par 243,500; (cost $1,983,956)		0.95	%		03/15/2018		2,000,000		1,983,956
Community Development Loans (0.1%) a
Boston Community Loan Fund		1.00	%		04/15/2018		100,000		98,291
MicroVest Plus, LP Note		2.25	%		04/15/2018		7,500,000		7,371,782
New Hampshire Community Loan Fund		1.00	%		07/31/2018		500,000		482,657
Root Capital Loan Fund		1.25	%		02/01/2018		200,000		198,981
TMC Development Working Solutions		1.00	%		05/25/2018		100,000		97,633
Vermont Community Loan Fund		0.85	%		04/15/2018		100,000		98,291
									8,347,635
Time Deposits (2.2%)
BBH Cash Management Service
ANZ, Melbourne		0.92	%		01/02/2018		16,465,181		16,465,181
BNP Paribas, Paris		0.92	%		01/02/2018		145,000,000		145,000,000
Standard Chartered Bank, London		0.92	%		01/02/2018		151,590,140		151,590,140
Sumitomo, Tokyo		0.92	%		01/02/2018		39,595,929		39,595,929
									352,651,250
Total short-term securities (2.3%) (cost $363,467,690)									363,467,690
Total securities (100.2%) (cost $12,228,291,136)									16,144,097,460
Other assets and liabilities (-0.2%)									(28,860,076	)
Total net assets (100.0%)									16,115,237,384
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.
plc Public Limited Company
ADR American Depository Receipt

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

34

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS ENDEAVOR FUND

Portfolio of Investments as of December 31, 2017

Equities	Shares		Market Value ($)
Apparel (5.1%)
VF Corp.		3,600,000		266,400,000
Banks (7.6%)
Signature Bank q		1,400,000		192,164,000
Wells Fargo & Co.		3,400,000		206,278,000
				398,442,000
Communications Equipment (10.2%)
QUALCOMM Inc.		8,300,000		531,366,000
Computers (4.3%)
Apple Inc.		25,000		4,230,750
International Business Machines Corp.		1,450,000		222,459,000
				226,689,750
Financial Services (9.3%)
American Express Co.		2,200,000		218,482,000
Capital One Financial Corp.		1,000,000		99,580,000
Charles Schwab Corp.		3,200,000		164,384,000
				482,446,000
Health Care Products (3.7%)
Perrigo Co. plc		2,200,000		191,752,000
Health Care Services (1.9%)
Hologic Inc. q		2,325,000		99,393,750
Internet (2.5%)
Alphabet Inc., Class A q		125,000		131,675,000
Machinery (0.8%)
Cummins Inc.		100,000		17,664,000
Deere & Co.		150,000		23,476,500
				41,140,500
Pharmaceuticals (20.1%)
Allergan plc		1,150,000		188,117,000
Bristol-Myers Squibb Co.		2,800,000		171,584,000
Gilead Sciences Inc.		7,050,000		505,062,000
Novartis AG (ADR)		2,200,000		184,712,000
				1,049,475,000

Equities	Shares		Market Value ($)
Professional Services (3.2%)
Nielsen Holdings plc		4,600,000		167,440,000
Retail (1.3%)
Costco Wholesale Corp.		350,000		65,142,000
Semiconductor Capital Equipment (0.2%)
Applied Materials Inc.		100,000		5,112,000
Lam Research Corp.		25,000		4,601,750
				9,713,750
Semiconductors (7.0%)
Intel Corp.		4,400,000		203,104,000
Micron Technology Inc. q		3,900,000		160,368,000
				363,472,000
Service (2.4%)
Alliance Data Systems Corp.		505,000		128,007,400
Software (3.6%)
Autodesk Inc.q		1,800,000		188,694,000
Toys & Games (4.9%)
Mattel Inc. l		16,450,000		253,001,000
Transportation (4.6%)
C.H. Robinson Worldwide Inc.		150,000		13,363,500
United Parcel Service Inc., Class B		1,900,000		226,385,000
				239,748,500
Total investment in equities (92.7%) (cost $4,160,081,839)				4,833,998,650

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

35

PARNASSUS FUNDS Annual Report  •  2017

PARNASSUS ENDEAVOR FUND

Portfolio of Investments as of December 31, 2017 (continued)

Short-Term Securities	Interest Rate			Maturity Date		Principal Amount ($)			Market Value ($)
Certificates of Deposit (0.0%)a
Urban Partnership Bank		0.30	%		02/03/2018	��	250,000			249,096
Certificates of Deposit Account Registry Service (0.0%) a
CDARS agreement with Community Bank of the Bay, dated 03/16/2017 Participating depository institutions: Bank of America, N.A., par 243,500; First United Bank & Trust Company, par 111,355; Independent Bank, par 145,145; (cost $495,990)		0.95	%		03/15/2018		500,000			495,990
Community Development Loans (0.0%) a
Root Capital Loan Fund		1.25	%		02/01/2018		100,000			99,491
TMC Development Loan		1.00	%		05/25/2018		100,000			97,633
										197,124
Time Deposits (7.2%)
BBH Cash Management Service
BNP Paribas, Paris		0.92	%		01/02/2018		61,296,787			61,296,787
Citibank, New York		0.92	%		01/02/2018		25,060,169			25,060,169
JPMorgan Chase, New York		0.92	%		01/02/2018		181,125,118			181,125,118
Standard Chartered Bank, London		0.92	%		01/02/2018		109,967,310			109,967,310
										377,449,384
Securities Purchased with Cash Collateral from Securities Lending
Registered Investment Companies (2.5%)
Invesco Aim Government & Agency Portfolio
Short-Term Investments Trust, Institutional Class		1.18	%							129,306,045
Total short-term securities (9.7%) (cost $507,697,639)										507,697,639
Total securities (102.4%) (cost $4,667,779,478)										5,341,696,289
Payable upon return of securities loaned (-2.5%)										(129,306,045	)
Other assets and liabilities (0.1%)										4,991,920
Total net assets (100.0%)										5,217,382,164
q This security is non-income producing.
l This security, or partial position of this security, was on loan at December 31, 2017. The total value of the securities on loan at December 31, 2017 was $126,590,282.
a Market value adjustments have been applied to these securities to reflect potential early withdrawal.
plc Public Limited Company
ADR American Depository Receipt

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

36

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS MID CAP FUND

Portfolio of Investments as of December 31, 2017

Equities	Shares		Market Value ($)
Apparel (5.7%)
Hanesbrands Inc. l		3,411,202		71,328,233
VF Corp.		1,209,803		89,525,422
				160,853,655
Chemicals (6.0%)
Axalta Coating Systems Ltd. q		1,753,160		56,732,258
Compass Minerals International Inc. l		185,653		13,413,429
Praxair Inc.		640,000		98,995,200
				169,140,887
Data Processing (4.0%)
Fiserv Inc. q		850,155		111,480,825
Financial Services (7.9%)
First American Financial Corp.		470,000		26,338,800
First Horizon National Corp.		5,806,499		116,071,915
SEI Investments Co.		1,097,545		78,869,583
				221,280,298
Food Products (6.7%)
McCormick & Co.		785,000		79,999,350
Sysco Corp.		1,774,617		107,772,490
				187,771,840
Health Care Products (3.7%)
Dentsply Sirona Inc.		1,545,174		101,718,804
Health Care Services (3.0%)
Hologic Inc. q		1,979,137		84,608,107
Home Products (3.7%)
The Clorox Company		689,698		103,924,341
Industrial Manufacturing (8.4%)
Fortive Corp.		952,090		68,883,712
Pentair plc		1,081,980		76,409,428
Xylem Inc.		1,324,880		90,356,816
				235,649,956
Insurance (3.9%)
Verisk Analytics Inc. q		1,139,585		109,400,160
Internet (2.9%)
eBay Inc. q		2,173,280		82,019,587
Medical Equipment (5.1%)
Patterson Companies Inc.		1,572,224		56,804,453
Teleflex Inc.		346,473		86,209,412
				143,013,865
Natural Gas (4.2%)
MDU Resources Group Inc.		3,500,000		94,080,000
Northwest Natural Gas Co.		397,500		23,710,875
				117,790,875

Equities	Shares		Market Value ($)
Oil & Gas (2.6%)
National Oilwell Varco Inc.		2,030,662		73,144,445
Real Estate Investment Trusts (5.5%)
Iron Mountain Inc.		2,663,034		100,476,273
Public Storage		260,000		54,340,000
				154,816,273
Semiconductors (2.4%)
KLA-Tencor Corp.		637,971		67,031,613
Services (2.7%)
Ecolab Inc.		410,000		55,013,800
Thomson Reuters Corp.		450,000		19,615,500
				74,629,300
Telecommunications Equipment (4.1%)
Motorola Solutions Inc.		1,267,870		114,539,376
Telecommunications Provider (3.7%)
Shaw Communications Inc., Class B l		4,528,796		103,392,413
Toys & Games (1.4%)
Mattel Inc. l		2,601,928		40,017,653
Transportation (2.2%)
Expeditors International of Washington Inc.q		952,590		61,623,047
Utility & Power Distribution (2.7%)
Sempra Energy		700,000		74,844,000
Waste Management (1.0%)
Waste Management Inc.		321,500		27,745,450
Total investment in equities (93.5%) (cost $2,230,029,377)				2,620,436,770

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

37

PARNASSUS FUNDS Annual Report  •  2017

PARNASSUS MID CAP FUND

Portfolio of Investments as of December 31, 2017 (continued)

Short-Term Securities	Interest Rate			Maturity Date		Principal Amount ($)			Market Value ($)
Certificates of Deposit (0.0%) a
Albina Community Bank		0.45	%		04/25/2018		250,000			246,877
Beneficial State		0.50	%		03/27/2018		250,000			247,671
New Resource Bank		0.15	%		03/21/2018		250,000			247,836
Urban Partnership Bank		0.30	%		03/22/2018		250,000			247,809
										990,193
Time Deposits (6.4%)
BBH Cash Management Service
Citibank, New York		0.92	%		01/02/2018		177,724,978			177,724,978
Securities Purchased with Cash Collateral from Securities Lending
Registered Investment Companies (3.1%)
Invesco Aim Government & Agency Portfolio
Short-Term Investments Trust, Institutional Class		1.18	%							86,572,648
Total short-term securities (9.5%) (cost $265,287,819)										265,287,819
Total securities (103.0%) (cost $2,495,317,196)										2,885,724,589
Payable upon return of securities loaned (-3.1%)										(86,572,648	)
Other assets and liabilities (0.1%)										2,496,039
Total net assets (100.0%)										2,801,647,980
q This security is non-income producing.
l This security, or partial position of this security, was on loan at December 31, 2017. The total value of the securities on loan at December 31, 2017 was $84,722,503.
a Market value adjustments have been applied to these securities to reflect potential early withdrawal.
plc Public Limited Company

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

38

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS ASIA FUND

Portfolio of Investments as of December 31, 2017

Equities	Shares		Market Value ($)
Australia (4.3%)
Brambles Ltd.		90,000		705,413
China (12.4%)
Air Lease Corp.		6,000		288,540
Alibaba Group Holding Ltd. (ADR) q		2,500		431,075
Mattel Inc.		40,000		615,200
QUALCOMM Inc.		11,000		704,220
				2,039,035
Hong Kong (14.6%)
China Minsheng Banking Corp., Ltd.		170,000		169,891
Greatview Aseptic Packaging Co., Ltd.		500,000		364,781
Hang Lung Properties Ltd.		150,000		365,394
HKBN Ltd.		300,000		379,373
Lenovo Group Ltd.		400,000		225,243
SITC International Holdings Co., Ltd.		650,000		641,655
Television Broadcasts Ltd.		70,000		251,763
				2,398,100
India (4.2%)
Cognizant Technology Solutions Corp.		4,000		284,080
Infosys Ltd. (ADR) q		25,000		405,500
				689,580
Indonesia (1.9%)
PT Asuransi Multi Artha Guna		3,741,500		104,765
PT Bank Rakyat Indonesia (Persero)		750,000		201,164
				305,929
Japan (30.4%)
Asics Corp.		33,000		524,482
Kakaku.com Inc.		45,000		759,563
KDDI Corp.		13,000		322,885
Lifull Co., Ltd.		25,000		222,907
M3 Inc.		12,000		420,613
OMRON Corp.		5,000		297,368

Equities	Shares		Market Value ($)
Rakuten Inc.		70,000		639,790
Shizuoka Bank Ltd.		40,000		411,719
SoftBank Group Corp.		5,000		395,818
Sompo Holdings Inc.		6,000		231,584
USS Co., Ltd.		16,000		338,318
W-Scope Corp.		20,000		413,240
				4,978,287
Philippines (1.2%)
Manila Water Co.		340,000		190,381
Singapore (2.4%)
M1 Ltd.		300,000		399,252
South Korea (2.9%)
Samsung Electronics Co., Ltd.		200		476,821
Taiwan (6.1%)
Giant Manufacturing Co., Ltd.		70,000		384,321
KLA-Tencor Corp.		3,500		367,745
Taiwan Semiconductor Manufacturing Co., Ltd. (ADR)		6,000		237,900
				989,966
Thailand (1.4%)
Advanced Info Service Public Co., Ltd.		40,000		231,501
United States (14.8%)
Gilead Sciences Inc.		10,500		752,220
International Business Machines Corp.		2,500		383,550
Keysight Technologies Inc. q		8,000		332,800
National Oilwell Varco Inc.		9,500		342,190
Perrigo Co. plc		7,000		610,120
				2,420,880
Total investment in equities (96.6%) (cost $14,236,112)				15,825,145

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

39

PARNASSUS FUNDS Annual Report  •  2017

PARNASSUS ASIA FUND

Portfolio of Investments as of December 31, 2017 (continued)

Short-Term Securities	Interest Rate			Maturity Date		Principal Amount ($)			Market Value ($)
Time Deposits (3.0%)
BBH Cash Management Service
Wells Fargo Bank, San Francisco		0.92	%		01/02/2018		498,168			498,168
Total short-term securities (3.0%) (cost $498,168)										498,168
Total securities (99.6%) (cost $14,734,280)										16,323,313
Other assets and liabilities (0.4%)										63,924
Total net assets (100.0%)										16,387,237
q This security is non-income producing.
ADR American Depository Receipt
PT Perseroan Terbatas
plc Public Limited Company

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

40

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS FIXED INCOME FUND

Portfolio of Investments as of December 31, 2017

Preferred Stock	Interest Rate				Maturity Date		Shares		Market Value ($)
Banks (1.4%)
Wells Fargo & Co.		5.63	%			06/15/2022		126,100		3,271,034
Real Estate Investment Trusts (1.3%)
Public Storage		5.15	%			06/02/2022		121,127		3,030,598
Total investment in preferred stocks (2.7%) (cost $6,279,785)										6,301,632
Commercial Mortgage-Backed Securities							Principal Amount ($)
JP Morgan Mortgage Trust Series 2011-C4, Class A3		4.11	%			06/15/2018		1,412,330		1,417,269
JP Morgan Mortgage Trust Series 2011-C4, Class A4		4.39	%			05/15/2021		1,000,000		1,050,212
JP Morgan Mortgage Trust Series 2013-C13, Class A2		2.67	%			06/15/2019		1,019,483		1,022,853
UBS-Barclays Mortgage Trust Series 2012-C2, Class A3		3.06	%			04/10/2022		800,220		810,585
Total investment in commercial mortgage-backed securities (1.9%) (cost $4,376,501)										4,300,919
Corporate Bonds
Air Transportation (0.6%)
Southwest Air 07-1 Trust		6.15	%			08/01/2022		1,200,924		1,306,245
Apparel (3.1%)
Hanesbrands Inc.		4.63	%			05/15/2024		3,000,000		3,060,000
VF Corp.		3.50	%			09/01/2021		4,000,000		4,128,736
										7,188,736
Chemicals (1.8%)
Praxair Inc.		3.20	%			01/30/2026		3,977,000		4,085,202
Computers (2.5%)
Apple Inc.		2.85	%			02/23/2023		4,000,000		4,054,188
Apple Inc.		4.38	%			05/13/2045		1,500,000		1,689,852
				��
										5,744,040
Entertainment (3.5%)
Comcast Corp.		3.38	%			02/15/2025		4,000,000		4,106,988
The Walt Disney Co.l		2.95	%			06/15/2027		4,000,000		3,980,384
										8,087,372
Financial Services (3.8%)
Charles Schwab Corp.		3.45	%			02/13/2026		4,000,000		4,106,072
Mastercard Inc.		3.38	%			04/01/2024		4,500,000		4,673,124
										8,779,196

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

41

PARNASSUS FUNDS Annual Report  •  2017

PARNASSUS FIXED INCOME FUND

Portfolio of Investments as of December 31, 2017 (continued)

Corporate Bonds	Interest Rate			Maturity Date		Principal Amount ($)		Market Value ($)
Health Care Products (1.7%)
Danaher Corp.		3.35	%		09/15/2025		3,750,000		3,876,439
Health Care Services (1.8%)
Hologic Inc.		5.25	%		07/15/2022		4,000,000		4,140,000
Home Products (1.6%)
The Clorox Company		3.50	%		12/15/2024		3,500,000		3,609,575
Industrial Manufacturing (4.2%)
3M Company		2.88	%		10/15/2027		2,000,000		1,989,276
Pentair Finance SA		3.15	%		09/15/2022		4,050,000		3,973,892
Sealed Air Corp.		5.25	%		04/01/2023		3,500,000		3,727,500
									9,690,668
Insurance (1.5%)
Verisk Analytics Inc.		5.50	%		06/15/2045		3,000,000		3,495,288
Internet (1.6%)
Alphabet Inc.		2.00	%		08/15/2026		4,000,000		3,771,220
Medical Equipment (1.3%)
Agilent Technologies Inc.		3.20	%		10/01/2022		2,000,000		2,016,996
Agilent Technologies Inc.		3.05	%		09/22/2026		1,000,000		961,203
									2,978,199
Oil & Gas (1.5%)
National Oilwell Varco Inc.		2.60	%		12/01/2022		3,500,000		3,417,932
Pharmaceuticals (4.5%)
Bristol-Myers Squibb Co.		3.25	%		02/27/2027		3,500,000		3,596,607
Gilead Sciences Inc.		3.70	%		04/01/2024		2,000,000		2,092,378
Novartis Capital Corp.		3.00	%		11/20/2025		4,500,000		4,549,428
									10,238,413
Real Estate Investment Trusts (2.7%)
Iron Mountain Inc.		6.00	%		08/15/2023		2,900,000		3,030,500
Regency Centers LP		3.75	%		06/15/2024		3,000,000		3,058,089
									6,088,589
Retail (4.6%)
Costco Wholesale Corp.		2.25	%		02/15/2022		3,000,000		2,983,206
Masco Corp.		3.50	%		04/01/2021		4,000,000		4,062,600
Nordstrom Inc.		4.00	%		10/15/2021		1,500,000		1,551,591
Nordstrom Inc.		4.00	%		03/15/2027		2,000,000		1,992,494
									10,589,891
Semiconductor Capital Equipment (1.6%)
Applied Materials Inc.		3.90	%		10/01/2025		3,500,000		3,714,956

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

42

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS FIXED INCOME FUND

Portfolio of Investments as of December 31, 2017 (continued)

Corporate Bonds	Interest Rate			Maturity Date		Principal Amount ($)		Market Value ($)
Semiconductors (3.1%)
Altera Corp.		4.10	%		11/15/2023		3,000,000		3,224,811
KLA-Tencor Corp.		4.65	%		11/01/2024		3,500,000		3,796,433
									7,021,244
Services (1.8%)
Hilton Worldwide Finance LLC		4.63	%		04/01/2025		4,000,000		4,110,000
Snack & Juice Bars (2.5%)
Starbucks Corp.		3.85	%		10/01/2023		3,500,000		3,719,615
Starbucks Corp.		2.45	%		06/15/2026		2,000,000		1,927,992
									5,647,607
Software (4.5%)
Adobe Systems Inc.		3.25	%		02/01/2025		3,000,000		3,080,943
Autodesk Inc.		4.38	%		06/15/2025		3,200,000		3,357,936
Microsoft Corp.		2.40	%		08/08/2026		4,000,000		3,857,460
									10,296,339
Transportation (4.4%)
Burlington Northern Santa Fe Corp.		3.85	%		09/01/2023		3,500,000		3,700,214
FedEx Corp.		2.70	%		04/15/2023		3,000,000		2,986,902
United Parcel Service Inc.		2.45	%		10/01/2022		3,500,000		3,491,576
									10,178,692
Waste Management (2.2%)
Waste Management Inc.		2.90	%		09/15/2022		2,500,000		2,514,145
Waste Management Inc.		3.50	%		05/15/2024		2,500,000		2,588,460
									5,102,605
Total investment in corporate bonds (62.4%) (cost $142,763,314)									143,158,448
Federal Agency Mortgage-Backed Securities
Fannie Mae Pool 890430		3.50	%		07/01/2027		775,228		802,137
Fannie Mae Pool AB5163		2.50	%		05/01/2027		2,378,335		2,390,231
Fannie Mae Pool AK2413		4.00	%		02/01/2042		2,756,480		2,909,599
Fannie Mae Pool AS2502		4.00	%		05/01/2044		1,019,547		1,079,744
Fannie Mae Pool AV0971		3.50	%		08/01/2026		740,243		764,274
Fannie Mae Pool BH1207		4.00	%		06/01/2047		4,440,354		4,667,789
Freddie Mac Pool C91754		4.50	%		02/01/2034		940,670		1,008,473
Freddie Mac Pool Q36308		4.00	%		09/01/2045		1,180,294		1,245,445
Freddie Mac Pool Q52093		3.50	%		11/01/2047		4,488,627		4,616,503
Freddie Mac Pool V82155		4.00	%		12/01/2045		964,752		1,016,096
Total investment in federal agency mortgage-backed securities (8.9%) (cost $20,714,883)									20,500,291

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

43

PARNASSUS FUNDS Annual Report  •  2017

PARNASSUS FIXED INCOME FUND

Portfolio of Investments as of December 31, 2017 (continued)

Supranational Bonds	Interest Rate			Maturity Date		Principal Amount ($)		Market Value ($)
European Bank for Reconstruction & Development		1.63	%		04/10/2018		4,000,000		4,000,240
Total investment in supranational bonds (1.8%) (cost $4,005,281)									4,000,240
U.S. Government Treasury Bonds
U.S. Treasury		1.88	%		12/31/2019		3,000,000		2,999,064
U.S. Treasury		1.50	%		07/15/2020		1,000,000		989,297
U.S. Treasury		1.88	%		12/15/2020		2,000,000		1,994,218
U.S. Treasury		1.75	%		06/30/2022		2,000,000		1,963,828
U.S. Treasury		1.88	%		07/31/2022		3,000,000		2,959,335
U.S. Treasury		1.75	%		01/31/2023		3,000,000		2,932,500
U.S. Treasury		2.75	%		11/15/2023		4,000,000		4,108,280
U.S. Treasury		2.75	%		02/15/2024		2,000,000		2,052,500
U.S. Treasury		2.50	%		05/15/2024		2,000,000		2,022,578
U.S. Treasury		2.00	%		06/30/2024		2,000,000		1,961,718
U.S. Treasury		2.25	%		11/15/2024		4,000,000		3,979,375
U.S. Treasury		2.13	%		05/15/2025		2,000,000		1,969,454
U.S. Treasury		2.38	%		05/15/2027		3,000,000		2,991,444
U.S. Treasury (TIPS)		0.63	%		07/15/2021		1,094,440		1,115,492
U.S. Treasury (TIPS)		0.13	%		01/15/2022		1,089,840		1,085,450
U.S. Treasury (TIPS)		0.38	%		07/15/2025		1,040,160		1,041,749
U.S. Treasury (TIPS)		1.75	%		01/15/2028		1,177,430		1,323,358
Total investment in U.S. government treasury bonds (16.3%) (cost $37,446,018)									37,489,640
Total investment in long-term securities (94.0%) (cost $215,585,783)									215,751,170
Short-Term Securities
Community Development Loans (0.6%) a
MicroVest Plus, LP Note		2.25	%		10/15/2018		1,500,000		1,428,987
Time Deposits (5.2%)
BBH Cash Management Service
ANZ, Melbourne		0.92	%		01/02/2018		11,935,837		11,935,837
U.S. Treasury Bill (0.9%)
U.S. Treasury Bill		0.00	%		07/19/2018		2,000,000		1,986,589

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

44

Annual Report  •  2017 PARNASSUS FUNDS

PARNASSUS FIXED INCOME FUND

Portfolio of Investments as of December 31, 2017 (continued)

Short-Term Securities	Interest Rate			Maturity Date	Principal Amount ($)		Market Value ($)
Securities Purchased with Cash Collateral from Securities Lending
Registered Investment Companies (1.7%)
Invesco Aim Government & Agency Portfolio
Short-Term Investments Trust, Institutional Class		1.18	%			3,963,575		3,963,575
Total short-term securities (8.4%) (cost $19,314,988)								19,314,988
Total securities (102.4%) (cost $234,900,771)								235,066,158
Payable upon return of securities loaned (-1.7%)								(3,963,575	)
Other assets and liabilities (-0.7%)								(1,576,713	)
Total net assets (100.0%)								229,525,870
l This security, or partial position of this security, was on loan at December 31, 2017. The total value of the securities on loan at December 31, 2017 was $3,883,030.
a Market value adjustments have been applied to these securities to reflect potential early withdrawal.
LP Limited Partnership
TIPS Treasury Inflation Protected Security

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

45

PARNASSUS FUNDS Annual Report  •  2017

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2017

	Parnassus Fund				Parnassus Core Equity Fund			Parnassus Endeavor Fund
Assets
Investments in stocks and bonds, at market value – Unaffiliated
(cost $897,821,690, $11,576,698,141, $4,160,081,839, $2,230,029,377, $14,236,112, $215,585,783)	$	1,053,080,885			$	15,332,276,188		$	4,833,998,650
Investments in stocks, at market value – Affiliated
(cost of $0, $288,125,305, $0, $0, $0, $0)		-				448,353,582			-
Investments in short-term securities
(at cost which approximates market value)		71,963,082				363,467,690			507,697,639
Receivables
Dividends and interest		1,122,597				22,943,342			1,015,039
Capital shares sold		388,460				12,756,329			13,223,533
Due from Parnassus Investments		-				-			-
Other assets		43,516				185,654			71,735
Total assets	$	1,126,598,540			$	16,179,982,785		$	5,356,006,596
Liabilities
Payable upon return of loaned securities		39,477,179				-			129,306,045
Payable for investment securities purchased		-				-			-
Capital shares redeemed		592,054				54,778,549			5,988,844
Fees payable to Parnassus Investments		616,446				8,542,905			3,104,154
Accounts payable and accrued expenses		236,681				1,423,947			225,389
Total liabilities	$	40,922,360			$	64,745,401		$	138,624,432
Net assets	$	1,085,676,180			$	16,115,237,384		$	5,217,382,164
Net assets consist of
Undistributed net investment income (loss)		1,476,189				(1,933,527	)		-
Unrealized appreciation on securities and foreign currency		155,259,195				3,915,806,324			673,916,811
Accumulated net realized gain on securities and foreign currency		(2,495,694	)	��		(2,490,194	)		55,532,975
Capital paid-in		931,436,490				12,203,854,781			4,487,932,378
Total net assets	$	1,085,676,180			$	16,115,237,384		$	5,217,382,164
Net asset value and offering per share
Net assets investor shares	$	923,261,793			$	9,870,058,517		$	4,185,857,038
Net assets institutional shares	$	162,414,387			$	6,245,178,867		$	1,031,525,126
Shares outstanding investor shares		19,126,843				231,319,321			112,584,475
Shares outstanding institutional shares		3,365,925				146,149,335			27,724,005
Net asset values and redemption price per share
(Net asset value divided by shares outstanding)
Investor shares	$	48.27			$	42.67		$	37.18
Institutional shares	$	48.25			$	42.73		$	37.21

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

46

Annual Report  •  2017 PARNASSUS FUNDS

Parnassus Mid Cap Fund			Parnassus Asia Fund		Parnassus Fixed Income Fund
$	2,620,436,770		$	15,825,145	$	215,751,170
	-			-		-
	265,287,819			498,168		19,314,988
	5,127,592			21,049		1,524,073
	4,412,590			31,850		145,836
	-			6,364		-
	52,487			28,946		34,995
$	2,895,317,258		$	16,411,522	$	236,771,062
	86,572,648			-		3,963,575
	-			-		2,998,436
	5,276,682			7,170		147,800
	1,570,515			-		69,839
	249,433			17,115		65,542
$	93,669,278		$	24,285	$	7,245,192
$	2,801,647,980		$	16,387,237	$	229,525,870
	2,045,484			13,688		-
	390,407,393			1,589,093		165,387
	(21,882,948	)		344,097		332,173
	2,431,078,051			14,440,359		229,028,310
$	2,801,647,980		$	16,387,237	$	229,525,870
$	2,021,276,169		$	9,685,806	$	182,160,523
$	780,371,811		$	6,701,431	$	47,365,347
	63,025,369			509,274		11,010,714
	24,304,167			350,838		2,863,638
$	32.07		$	19.02	$	16.54
$	32.11		$	19.10	$	16.54

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

47

PARNASSUS FUNDS Annual Report  •  2017

STATEMENT OF OPERATIONS

Year Ended December 31, 2017

	Parnassus Fund			Parnassus Core Equity Fund			Parnassus Endeavor Fund
Investment income
Dividends – Unaffiliated	$	18,137,163		$	293,256,257		$	78,556,704
Dividends – Affiliated		-			11,110,808			-
Interest		239,775			3,052,427			1,787,002
Securities lending		55,296			275,125			171,166
Other income		512			(59	)		-
Foreign witholding tax		(328,161	)		(2,942,231	)		(937,627	)
Total investment income	$	18,104,585		$	304,752,327		$	79,577,245
Expenses
Investment advisory fees		6,180,184			91,098,504			28,420,617
Transfer agent fees
Investor shares		274,798			513,005			384,505
Institutional shares		7,555			434,654			8,980
Fund administration		320,720			4,977,874			1,362,992
Service provider fees		1,165,262			23,331,879			6,875,639
Reports to shareholders		109,651			1,286,539			384,102
Registration fees and expenses		90,674			315,609			201,431
Custody fees		37,537			453,560			167,687
Overdraft charges		1,538			38,507			17,250
Professional fees		52,403			231,790			125,895
Trustee fees and expenses		17,890			293,461			72,729
Proxy voting fees		2,692			3,982			4,018
Pricing service fees		4,790			4,530			4,785
Other expenses		16,572			260,955			42,211
Total expenses	$	8,282,266		$	123,244,849		$	38,072,841
Fees waived by Parnassus Investments		-			-			-
Net expenses	$	8,282,266		$	123,244,849		$	38,072,841
Net investment gain	$	9,822,319		$	181,507,478		$	41,504,404
Realized and unrealized gain on investments and foreign currency related transactions
Net realized gain from securities transactions – Unaffiliated		73,482,823			1,078,616,554			357,499,761
Net realized gain from securities transactions – Affiliated		-			-			-
Net realized gain from foreign currency related transactions		-			-			-
Net change in unrealized appreciation of securities – Unaffiliated		64,635,974			1,166,929,707			374,012,412
Net change in unrealized depreciation of securities – Affiliated		-			(20,060,674	)		-
Net change in unrealized appreciation on foreign currency related transactions		-			-			-
Net realized and unrealized gain on securities and foreign currency related transactions	$	138,118,797		$	2,225,485,587		$	731,512,173
Net increase in net assets resulting from operations	$	147,941,116		$	2,406,993,065		$	773,016,577

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

48

Annual Report  •  2017 PARNASSUS FUNDS

Parnassus Mid Cap Fund			Parnassus Asia Fund			Parnassus Fixed Income Fund
$	43,695,272		$	316,738		$	286,264
	-			-			-
	829,975			3,158			6,485,423
	154,708			-			1,401
	-			16			-
	(610,332	)		(15,762	)		-
$	44,069,623		$	304,150		$	6,773,088
	17,312,887			163,569			1,138,787
	251,595			15,333			71,612
	2,768			290			2,395
	770,877			4,745			73,673
	4,029,010			11,502			348,323
	287,010			7,661			36,131
	138,501			50,340			35,376
	95,643			6,968			13,628
	-			217			79
	57,028			45,713			21,067
	44,948			814			5,744
	2,692			2,692			1
	4,800			16,321			8,624
	24,996			2,271			5,325
$	23,022,755		$	328,436		$	1,760,765
	(430,411	)		(158,178	)		(266,486	)
$	22,592,344		$	170,258		$	1,494,279
$	21,477,279		$	133,892		$	5,278,809
	92,538,256			1,278,586			677,256
	-			-			-
	-			61,548			-
	233,723,141			1,004,968			1,144,295
	-			-			-
	-			206,923			-
$	326,261,397		$	2,552,025		$	1,821,551
$	347,738,676		$	2,685,917		$	7,100,360

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

49

PARNASSUS FUNDS Annual Report  •  2017

STATEMENT OF CHANGES IN NET ASSETS

December 31, 2017

	Parnassus Fund						Parnassus Core Equity Fund
	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2017			Year Ended December 31, 2016
Investment income from operations
Net investment income	$	9,822,319		$	6,865,739		$	181,507,478		$	144,185,839
Net realized gain from securities transactions		73,482,823			9,527,328			1,078,616,554			422,253,124
Net realized gain (loss) on foreign currency related transactions		-			-			-			-
Net change in unrealized appreciation (depreciation) of securities		64,635,974			81,714,358			1,146,869,033			779,202,269
Net change in unrealized appreciation on foreign currency related transactions		-			-			-			-
Increase in net assets resulting from operations	$	147,941,116		$	98,107,425		$	2,406,993,065		$	1,345,641,232
Distributions
From net investment income
Investor shares		(8,540,650	)		(6,211,673	)		(131,603,378	)		(97,502,432	)
Institutional shares		(1,705,905	)		(711,028	)		(87,547,245	)		(51,800,559	)
From realized capital gains
Investor shares		(61,266,353	)		(9,253,785	)		(556,043,266	)		(276,161,758	)
Institutional shares		(9,983,715	)		(846,206	)		(351,949,409	)		(120,825,175	)
Distributions to shareholders	$	(81,496,623	)	$	(17,022,692	)	$	(1,127,143,298	)	$	(546,289,924	)
Capital share transactions
Investor shares
Proceeds from sale of shares		224,555,031			133,547,771			1,508,188,846			2,824,169,780
Reinvestment of dividends		67,850,609			15,082,411			681,913,192			370,823,490
Shares repurchased		(205,040,418	)		(155,939,489	)		(3,382,979,142	)		(1,907,325,036	)
Institutional shares
Proceeds from sale of shares		88,662,671			27,356,665			2,327,391,681			1,578,075,919
Reinvestment of dividends		11,219,954			1,482,346			356,456,177			127,194,744
Shares repurchased		(22,146,832	)		(3,368,830	)		(1,453,510,562	)		(916,763,596	)
Increase in net assets from capital share transactions		165,101,015			18,160,874			37,460,192			2,076,175,301
Increase in net assets	$	231,545,508		$	99,245,607		$	1,317,309,959		$	2,875,526,609
Net Assets
Beginning of year		854,130,672			754,885,065			14,797,927,425			11,922,400,816
End of year	$	1,085,676,180		$	854,130,672		$	16,115,237,384		$	14,797,927,425
Undistributed net investment income (loss)	$	1,476,189		$	2,569,663		$	(1,933,527	)	$	(12,681,649	)
Shares issued and redeemed
Investor shares
Shares sold		4,706,141			3,258,316			36,346,418			74,015,714
Shares issued through dividend reinvestment		1,425,829			339,229			16,203,184			9,568,183
Shares repurchased		(4,257,798	)		(3,864,923	)		(80,862,765	)		(50,307,927	)
Institutional shares
Shares sold		1,845,103			655,245			55,673,068			41,647,250
Shares issued through dividend reinvestment		235,501			33,278			8,450,001			3,274,865
Shares repurchased		(457,005	)		(82,079	)		(34,792,490	)		(24,076,020	)
Net increase (decrease) in shares outstanding
Investor shares		1,874,172			(267,378	)		(28,313,163	)		33,275,970
Institutional shares		1,623,599			606,444			29,330,579			20,846,095

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

50

Annual Report  •  2017 PARNASSUS FUNDS

Parnassus Endeavor Fund						Parnassus Mid Cap Fund
Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2017			Year Ended December 31, 2016
$	41,504,404		$	10,775,651		$	21,477,279		$	7,146,323
	357,499,761			70,374,664			92,538,256			27,352,382
	-			-			-			-
	374,012,412			267,871,746			233,723,141			97,182,171
	-			-			-			-
$	773,016,577		$	349,022,061		$	347,738,676		$	131,680,876
	(85,344,362	)		(23,947,281	)		(29,790,546	)		(5,600,780	)
	(22,407,670	)		(3,125,215	)		(13,115,409	)		(1,386,266	)
	(165,524,846	)		(46,028,697	)		(52,199,294	)		(31,066,331	)
	(39,475,626	)		(5,071,320	)		(20,048,314	)		(2,532,130	)
$	(312,752,504	)	$	(78,172,513	)	$	(115,153,563	)	$	(40,585,507	)
	2,387,291,707			1,362,577,892			925,624,325			1,045,852,674
	234,871,765			67,388,328			78,144,137			35,390,738
	(1,331,479,320	)		(496,407,694	)		(656,479,341	)		(220,152,125	)
	798,134,970			238,492,750			532,557,081			285,047,685
	59,314,656			7,722,344			30,597,593			3,500,569
	(193,847,799	)		(20,362,286	)		(117,149,172	)		(19,614,391	)
	1,954,285,979			1,159,411,334			793,294,623			1,130,025,150
$	2,414,550,052		$	1,430,260,882		$	1,025,879,736		$	1,221,120,519
	2,802,832,112			1,372,571,230			1,775,768,244			554,647,725
$	5,217,382,164		$	2,802,832,112		$	2,801,647,980		$	1,775,768,244
$	-		$	1,424,490		$	2,045,484		$	(232,825	)
	67,644,108			43,762,135			30,163,394			37,166,642
	6,215,559			2,053,728			2,438,127			1,223,175
	(37,274,595	)		(17,054,240	)		(21,208,638	)		(8,011,474	)
	22,551,107			7,701,176			17,214,813			9,989,778
	1,567,221			234,921			952,351			120,706
	(5,339,429	)		(658,964	)		(3,729,961	)		(689,213	)
	36,585,072			28,761,623			11,392,883			30,378,343
	18,778,899			7,277,133			14,437,203			9,421,271

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

51

PARNASSUS FUNDS Annual Report  •  2017

STATEMENT OF CHANGES IN NET ASSETS

December 31, 2017 (continued)

	Parnassus Asia Fund						Parnassus Fixed Income Fund
	Year Ended December 31, 2017			Year Ended December 31, 2016			Year Ended December 31, 2017			Year Ended December 31, 2016
Investment income from operations
Net investment income	$	133,892		$	135,899		$	5,278,809		$	4,306,111
Net realized gain from securities transactions		1,278,586			13,754			677,256			946,156
Net realized gain (loss) on foreign currency related transactions		61,548			(117,876	)		-			-
Net change in unrealized appreciation (depreciation) of securities		1,004,968			1,401,524			1,144,295			(831,242	)
Net change in unrealized appreciation on foreign currency related transactions		206,923			68,212			-			-
Increase in net assets resulting from operations	$	2,685,917		$	1,501,513		$	7,100,360		$	4,421,025
Distributions
From net investment income
Investor shares		(101,267	)		-			(4,505,190	)		(4,185,576	)
Institutional shares		(87,768	)		-			(942,865	)		(319,136	)
From realized capital gains
Investor shares		(491,546	)		-			-			(781,796	)
Institutional shares		(323,442	)		-			-			(67,763	)
Distributions to shareholders	$	(1,004,023	)		-		$	(5,448,055	)	$	(5,354,271	)
Capital share transactions
Investor shares
Proceeds from sale of shares		4,269,608			1,645,710			76,388,408			65,063,171
Reinvestment of dividends		586,326			-			4,326,813			4,515,951
Shares repurchased		(4,248,746	)		(1,250,370	)		(93,582,289	)		(57,568,779	)
Institutional shares
Proceeds from sale of shares		1,660,033			143,099			33,089,367			16,464,877
Reinvestment of dividends		411,210			-			808,023			341,666
Shares repurchased		(197,795	)		(105,832	)		(7,329,331	)		(3,572,291	)
Increase in net assets from capital share transactions		2,480,636			432,607			13,700,991			25,244,595
Increase in net assets	$	4,162,530		$	1,934,120		$	15,353,296		$	24,311,349
Net Assets
Beginning of year		12,224,707			10,290,587			214,172,574			189,861,225
End of year	$	16,387,237		$	12,224,707		$	229,525,870		$	214,172,574
Undistributed net investment income (loss)	$	13,688		$	7,253		$	-		$	29,862
Shares issued and redeemed
Investor shares
Shares sold		230,004			106,700			4,598,378			3,882,920
Shares issued through dividend reinvestment		30,661			-			260,645			269,913
Shares repurchased		(226,777	)		(80,121	)		(5,629,448	)		(3,449,146	)
Institutional shares
Shares sold		88,935			10,372			1,993,176			987,913
Shares issued through dividend reinvestment		21,384			-			48,673			20,444
Shares repurchased		(10,658	)		(7,883	)		(441,259	)		(215,698	)
Net increase (decrease) in shares outstanding
Investor shares		33,888			26,579			(770,425	)		703,687
Institutional shares		99,661			2,489			1,600,590			792,659

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

52

Annual Report  •  2017 PARNASSUS FUNDS

Notes to Financial Statements

1. Organization

The Parnassus Funds are comprised of two Trusts, the Parnassus Funds trust and the Parnassus Income Funds trust (collectively the “Trusts”), organized as Massachusetts Business Trusts registered under the Investment Company Act of 1940 as diversified, open-end investment management companies, and are comprised of six separate funds (collectively the “Funds”). The Parnassus Funds trust includes the Parnassus Fund, which commenced operations on December 27, 1984, the Parnassus Endeavor Fund and the Parnassus Mid Cap Fund, both of which commenced operations on April 29, 2005, and the Parnassus Asia Fund, which commenced operations on April 30, 2013. The Parnassus Income Funds trust includes the Parnassus Core Equity Fund and the Parnassus Fixed Income Fund, both of which commenced operations on August 31, 1992. Each Fund has distinct investment objectives. In general, each of the Funds seeks long-term capital appreciation. Prior to May 1, 2014, the Parnassus Core Equity Fund was known as the Parnassus Equity Income Fund, and the Parnassus Endeavor Fund was known as the Parnassus Workplace Fund.

2. Significant Accounting Policies

The Funds are investment companies that apply the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board. The presentation of the financial statements is made using specialized accounting principles applicable to investment companies.

Short-Term Securities

Short-term securities represent investments of excess cash and consist of time deposits, community development loans, certificates of deposit and money market funds.

Security Transactions and Related Investment Income and Expenses

Securities transactions are recorded on the date the securities are purchased or sold (trade date). Realized gains and losses on securities transactions are determined on the basis of first-in, first-out for both financial statement and federal income tax purposes. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Discounts and premiums on securities purchased are amortized over the lives of the respective securities using the constant yield method, which approximates the interest method. Expenses are recorded on an accrual basis.

Class Allocations

Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as broker service fees, administrative and shareholder services, are charged directly to the respective share class.

Dividends and Distributions to Shareholders

Dividends and distributions to shareholders are recorded on the ex-dividend date to shareholders of record on the record date. The Parnassus Core Equity Fund pays income dividends quarterly and capital-gain dividends annually. The Parnassus Fixed Income Fund pays income dividends monthly and capital-gain dividends annually. The other Funds pay income and capital-gain dividends annually.

Currency Translation

Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates supplied by the Funds’ pricing vendor on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. On the accompanying financial statements, the effects of changes in exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in currencies other than U.S. dollars are disclosed separately.

53

PARNASSUS FUNDS Annual Report  •  2017

Notes to Financial Statements (continued)

3. Securities Valuations

Methods and Inputs

Equity securities that are listed or traded on a national securities exchange are stated at market value, based on recorded closing sales on the exchange or on the NASDAQ’s National Market official closing price. In the absence of a recorded sale, and for over-the-counter securities, equity securities are stated at the mean between the last recorded bid and asked prices. Long-term, fixed-income securities are valued each business day using prices based on procedures established by independent pricing services and approved by the Board of Trustees (the “Trustees”). Fixed-income securities with an active market are valued at the “bid” price where such quotes are readily available from brokers and dealers and are representative of the actual market for such securities. Other fixed-income securities experiencing a less active market are valued as determined by the pricing services based on methods which include consideration of trading in securities of comparable yield, quality, coupon, maturity and type, as well as indications as to values from dealers and other market data without exclusive reliance upon quoted prices or over-the-counter prices, since such valuations are believed to reflect more accurately the value of such securities. Investments in registered investment companies are valued at their net asset value.

Investments where market quotations are not readily available are priced at their fair value, in accordance with procedures established by the Trustees. These investments include certificates of deposit and community development loans. These investments carry interest rates ranging from 0.15% to 2.25% with maturities of one year or less. In determining fair value, the Trustees may consider a variety of information including, but not limited to, the following: price based upon a multiple of earnings or sales, fundamental analytical data and an evaluation of market conditions. A valuation adjustment is applied to certificates of deposit, community development loans and other community development investments as an estimate of potential penalties for early withdrawal.

The Funds follow Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosure, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Various inputs are used in determining the value of the Funds’ portfolio investments. These inputs are summarized in three levels, Level 1—unadjusted quoted prices in active markets for identical investments, Level 2—other significant observable inputs (including quoted prices for similar investments) and Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

Securities Lending

The Parnassus Funds, with the exception of the Parnassus Asia Fund, have entered into an agreement with Brown Brothers Harriman & Co., dated July 29, 2009 (“Agreement”), to provide securities lending services to the Funds. Under this program, the proceeds (cash collateral) received from borrowers are used to invest in money market funds.

Under the Agreement, the borrowers pay the Funds negotiated lenders’ fees and the Funds receive cash collateral in an amount equal to 102% of the market value of loaned securities. The borrower of securities is at all times required to post cash collateral to the portfolio in an amount equal to 100% of the market value of the securities loaned based on the previous day’s market value of the securities loaned, marked-to-market daily. Any collateral shortfalls are adjusted the next business day. If the borrower defaults on its obligations to return the securities loaned because of insolvency or other reasons, the portfolio could experience delays and costs in recovering the securities loaned.

The agreement provides the right in the event of default for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Funds, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of a counterparty’s bankruptcy or insolvency. Under the agreement, the borrower can resell or re-pledge the loaned securities, and the Funds can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

54

Annual Report  •  2017 PARNASSUS FUNDS

Notes to Financial Statements (continued)

The Funds retained beneficial ownership and all economic benefits in the securities they have loaned and continues to receive interest paid by the securities and payments equivalent to dividends, and to participate in any changes in their market value, but does not have the proxy voting rights with respect to loaned securities. Each portfolio manager of the Funds has the responsibility to request that the securities lending agent call back securities which are out on loan to vote on material matters and it is the Funds’ policy that the portfolio managers vote on all material matters. However, the ability to timely recall shares for proxy voting purposes typically is not entirely within the control of the portfolio manager, the Funds or their securities lending agent. Under certain circumstances, the recall of shares in time for such shares to be voted may not be possible due to applicable proxy voting record dates and administrative considerations.

Income generated from securities lending is presented in the Statement of Operations. Cash collateral received by the Funds is reflected as an asset (securities purchased with cash collateral from securities lending) and the related liability (payable upon return of securities loaned) is presented in the Statement of Assets and Liabilities.

At December 31, 2017, the following tables are a summary of the Funds’ securities lending agreements by counterparty, which are subject to offset under the agreement:

Parnassus Fund
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Credit Suisse Securities (USA)		7,065,760		(7,065,760	)		-
MS Securities Services Inc.		16,918,578		(16,918,578	)		-
MS Securities Services Inc.		14,695,720		(14,695,720	)		-
Total		38,680,058		(38,680,058	)		-

Parnassus Endeavor Fund
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Citigroup Global Markets Inc.		30,680,000		(30,680,000	)		-
Citigroup Global Markets Inc.		15,340,000		(15,340,000	)		-
Citigroup Global Markets Inc.		15,340,000		(15,340,000	)		-
Deutsche Bank Securities Inc.		2,015,676		(2,015,676	)		-
JP Morgan Securities LLC		24,168,170		(24,168,170	)		-
MS Securities Services Inc.		21,476,000		(21,476,000	)		-
MS Securities Services Inc.		17,570,436		(17,570,436	)		-
Total		126,590,282		(126,590,282	)		-

55

PARNASSUS FUNDS Annual Report  •  2017

Notes to Financial Statements (continued)

Parnassus Mid Cap Fund
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital Inc.		3,284,886		(3,284,886	)		-
Barclays Capital Inc.		38,627		(38,627	)		-
Barclays Capital Inc.		334,723		(334,723	)		-
Barclays Capital Inc.		164,220		(164,220	)		-
Barclays Capital Inc.		8,252,172		(8,252,172	)		-
Barclays Capital Inc.		129,448		(129,448	)		-
Barclays Capital Inc.		89,464		(89,464	)		-
Credit Suisse Securities (USA)		1,503,743		(1,503,743	)		-
Credit Suisse Securities (USA)		2,103,000		(2,103,000	)		-
Deutsche Bank Securities Inc.		3,469,950		(3,469,950	)		-
Deutsche Bank Securities Inc.		1,108,281		(1,108,281	)		-
Deutsche Bank Securities Inc.		42,840		(42,840	)		-
Goldman, Sach & Co.		5,966,211		(5,966,211	)		-
Goldman, Sach & Co.		4,444,564		(4,444,564	)		-
Goldman, Sach & Co.		16,824		(16,824	)		-
Goldman, Sach & Co.		16,824		(16,824	)		-
Goldman, Sach & Co.		5,299		(5,299	)		-
Goldman, Sach & Co.		7,087,110		(7,087,110	)		-
Goldman, Sach & Co.		757,080		(757,080	)		-
JP Morgan Securities LLC		364,783		(364,783	)		-
JP Morgan Securities LLC		1,020,592		(1,020,592	)		-
JP Morgan Securities LLC		2,820,300		(2,820,300	)		-
Merrill Lynch, Pierce, Fenner		18,905,970		(18,905,970	)		-
Merrill Lynch, Pierce, Fenner		115,097		(115,097	)		-
Merrill Lynch, Pierce, Fenner		1,299,480		(1,299,480	)		-
MS Securities Services Inc.		16,504,429		(16,504,429	)		-
UBS Securities LLC		4,876,586		(4,876,586	)		-
Total		84,722,503		(84,722,503	)		-

Parnassus Fixed Income Fund
Counterparty	Securities Loaned at Value		Cash Collateral Received1			Net Amount
Barclays Capital Inc.		3,405,730		(3,405,730	)		-
JP Morgan Securities LLC		477,300		(477,300	)		-
Total		3,883,030		(3,883,030	)		-

¹  Collateral value of $39,477,179, $129,306,045, $86,572,648 and $3,963,575 has been received in connection with securities lending agreements for Parnassus Fund, Parnassus Endeavor Fund, Parnassus Mid Cap Fund and Parnassus Fixed Income Fund, respectively. Collateral received in excess of the value of the securities loaned from the individual counterparty is shown for financial reporting purposes in the Funds’ financial statements.

As of December 31, 2017, there is no contractual maturity date for the gross obligation of the equity securities on loan in the Parnassus Fund, Parnassus Endeavor Fund and Parnassus Mid Cap Fund, in the amounts of $39,477,179, $129,306,045 and $86,572,648, respectively, as well as the corporate securities on loan in the Parnassus Fixed Income Fund in the amount of $3,963,575.

56

Annual Report  •  2017 PARNASSUS FUNDS

Notes to Financial Statements (continued)

Community Development Investment Programs

The Parnassus Funds may each invest up to 2% of their assets in community investments and community-development loan funds. Each of the Funds may invest in obligations issued by community loan funds at below-market interest rates if the projects financed have a positive social impact. Generally, there is no secondary market on loan funds and thus these are considered illiquid.

As part of our community development investment program, the Parnassus Fund, Parnassus Core Equity Fund and Parnassus Endeavor Fund has entered into an agreement for fund investments through the Certificate of Deposit Account Registry Service (“CDARS”) network. The CDARS network allows members to place funds in time deposits with depository institutions whose accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”). Provisions stipulate that participating institutions are FDIC insured; however, in the event of default or bankruptcy by any party to the agreement, the proceeds of the investment may be delayed or subject to legal proceedings and are subject to FDIC limits. While certain investments of the Funds may be bank deposits and may be covered by FDIC insurance, the Funds are themselves not covered by FDIC insurance.

The Parnassus Fund, Parnassus Core Equity Fund and Parnassus Fixed Income Fund holds debt instruments issued by MicroVest Plus, LP, a microfinance limited partnership specializing in providing capital to international microfinance institutions (“MFI’s”) that extend credit to developing countries and the entrepreneurial poor. This instrument may be subject to political and foreign currency exchange risk not normally associated with domestic debt instruments. MicroVest Plus, LP’s investment in MFI’s can be affected by, among other factors, commodity prices, inflation, interest rates, taxation, social instability, and other political, economic or diplomatic developments in or affecting the various countries where MFI’s operate.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Subsequent Events

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment to or additional disclosure in the financial statements.

4. Risk Factors

Investing in the Parnassus Funds may involve certain risks including, but not limited to the following:

Market Conditions

The prices of, and the income generated by, the common stocks and other securities held by the Funds may decline in response to certain events taking place around the world, including those directly involving the companies whose securities are owned by the Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency, interest rate and commodity price fluctuations. Additionally, the values of, and the income generated by, most debt securities held by the Funds may be affected by changing interest rates and by changes in the effective maturities and credit ratings of these debt securities. The Funds’ investment adviser attempts to reduce these risks through diversification of the portfolio and ongoing credit analysis as well as by monitoring economic and legislative developments, but there can be no assurance that it will be successful at doing so. Investments in securities issued by entities based outside the U.S. may also be affected by currency controls; different accounting, auditing, financial reporting, and legal standards and practices; expropriation; changes in tax policy; greater market volatility; different securities market structures and higher transaction costs.

Investing Outside the U.S.

Securities of issuers domiciled outside the U.S., or with significant operations outside the U.S., may lose value because of political, social, economic or market developments or instability in the countries or regions in which the issuer operates.

57

PARNASSUS FUNDS Annual Report  •  2017

Notes to Financial Statements (continued)

These securities may also lose value due to changes in foreign currency exchange rates against the U.S. dollar and/or currencies of other countries. Securities markets in certain countries may be more volatile and/or less liquid than those in the U.S. Investment outside the U.S. may also be subject to different settlement and accounting practices and different regulatory, legal and reporting standards, and may be more difficult to value than those in the U.S. The risks of investing outside the U.S. may be heightened in connection with investments in emerging and developing countries.

Contractual Obligations

Under the Trusts’ organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Trusts. Additionally, the Trusts have a variety of indemnification obligations under contracts with its service providers. The Trusts’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trusts that have not yet occurred.

5. Taxation and Distributions

Federal Income Taxes

The Trusts intend to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all taxable income to shareholders. Therefore, no federal income tax provision is required. Income distributions and capital-gain distributions are determined in accordance with income tax regulations, which may differ from U.S. Generally Accepted Accounting Principles (“GAAP”).

The Funds follow ASC 740, Income Taxes, relating to uncertainty in income taxes and disclosures. ASC 740 establishes a minimum threshold for income tax benefits to be recognized in the financial statements. These tax benefits must meet a “more likely than not” threshold, which means that based on technical merits, they have a more than 50% likelihood of being sustained upon examination by the tax authority. Tax benefits meeting this threshold are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority. As of and during the year ended December 31, 2017, the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year, the Funds did not incur interest or penalties. The Funds are not subject to examination by U.S. federal taxing authorities before 2014 or state taxing authorities before 2013.

Tax Matters and Distributions

At December 31, 2017, the cost of investments in securities and net unrealized appreciation/depreciation for income tax purposes were as follows:

	Parnassus Fund				Parnassus Core Equity Fund				Parnassus Endeavor Fund
Distributions paid from:	2017		2016		2017		2016		2017		2016
Ordinary Income	$	10,246,555	$	6,922,701	$	206,763,094	$	149,167,371	$	107,752,032	$	27,072,496
Long-term capital gains		71,250,068		10,099,991		920,380,204		397,122,553		205,000,472		51,100,017
Total distributions	$	81,496,623	$	17,022,692	$	1,127,143,298	$	546,289,924	$	312,752,504	$	78,172,513

	Parnassus Mid Cap Fund				Parnassus Asia Fund				Parnassus Fixed Income Fund
Distributions paid from:	2017		2016		2017		2016		2017		2016
Ordinary Income	$	43,330,674	$	6,987,046	$	189,035	$	-	$	5,448,055	$	4,504,712
Long-term capital gains		71,822,889		33,598,461		814,988		-		-		849,559
Total distributions	$	115,153,563	$	40,585,507	$	1,004,023	$	-	$	5,448,055	$	5,354,271

58

Annual Report  •  2017 PARNASSUS FUNDS

Notes to Financial Statements (continued)

	Parnassus Fund		Parnassus Core Equity Fund		Parnassus Endeavor Fund		Parnassus Mid Cap Fund		Parnassus Asia Fund		Parnassus Fixed Income Fund
Cost of investment	$972,280,466		$12,230,224,663		$4,678,488,721		$2,496,182,662		$14,738,597		$234,900,771
Gross unrealized appreciation	$189,411,452		$4,162,017,679		$771,610,963		$416,031,590		$2,589,937		$2,111,527
Gross unrealized depreciation	$(36,647,951)		$(248,144,882)		$(108,403,395)		$(26,489,663)		$(1,005,161)		$(1,946,140)
Net unrealized appreciation	$	152,763,501	$	3,913,872,797	$	663,207,568	$	389,541,927	$	1,584,776	$	165,387
Distributable earnings – ordinary income	$10,029,205		$206,763,094		$127,490,672		$43,407,008		$178,887		$5,749,975
Distributable earnings – long-term capital gains	$74,908,340		$1,048,962,810		$276,285,857		$87,238,540		$1,163,402		$390
Undistributed earnings – ordinary income	$1,476,189		$-		$21,163,131		$76,334		$13,804		$331,782
Undistributed earnings – long-term capital gains	$-		$-		$45,079,087		$-		$348,414		$390

At December 31, 2017, there were no estimated net capital loss carry forward for the Parnassus Funds.

Late year capital losses as of December 31, 2017, which are deferred until 2018 for income tax purposes were as follows:

Fund	Capital
Parnassus Core Equity Fund	$	2,490,195
Parnassus Mid Cap Fund		19,048,330

Net realized gains differ for financial statement and income tax purposes primarily due to differing treatments of wash sales. Reclassifications as shown in the following table have been made in each Fund’s capital accounts to report these balances on a tax basis, excluding certain temporary differences, as of December 31, 2017. Additional permanent book to tax adjustments may be required in subsequent reporting periods. These reclassifications, which have no impact on the net asset value of the Funds, are primarily attributable to the reclassification of dividend income and certain differences in the computation of distributable income and capital gains under Federal tax rules versus GAAP.

Fund	Increase/Decrease in Accumulated  Net Investment Income/Loss			Decrease in Accumulated Net Realized  Loss			Increase/Decrease in Aggregate Capital Paid-In
Parnassus Fund	$	(669,238	)	$	(7,019,303	)	$	7,688,541
Parnassus Core Equity Fund		48,391,267			(222,442,537	)		174,051,270
Parnassus Endeavor Fund		64,823,138			(104,334,843	)		39,511,705
Parnassus Mid Cap Fund		23,706,985			(40,237,853	)		16,530,868
Parnassus Asia Fund		61,578			(61,544	)		(34	)
Parnassus Fixed Income Fund		139,384			(139,385	)		1

59

PARNASSUS FUNDS Annual Report  •  2017

Notes to Financial Statements (continued)

6. Fair Value Measurements

The following table summarizes the portfolios’ financial assets as of December 31, 2017, that is valued at fair value on a recurring basis:

Parnassus Fund
Investment Securities	Level 1		Level 2		Level 3		Total
Equities:
Consumer Discretionary	$	63,876,690	$	-	$	-	$	63,876,690
Consumer Staples		34,475,400		-		-		34,475,400
Financials		204,727,300		-		-		204,727,300
Health Care		188,131,995		-		-		188,131,995
Industrials		150,574,500		-		-		150,574,500
Information Technology		273,313,100		-		-		273,313,100
Materials		108,721,900		-		-		108,721,900
Real Estate		29,260,000		-		-		29,260,000
Short-Term Investments		69,527,446		-		2,435,636		71,963,082
Total	$	1,122,608,331	$	-	$	2,435,636	$	1,125,043,967
Parnassus Core Equity Fund
Investment Securities	Level 1		Level 2		Level 3		Total
Equities:
Consumer Discretionary	$	1,825,057,251	$	-	$	-	$	1,825,057,251
Consumer Staples		2,225,587,033		-		-		2,225,587,033
Energy		164,002,302		-		-		164,002,302
Financials		1,105,376,555		-		-		1,105,376,555
Health Care		2,829,840,906		-		-		2,829,840,906
Industrials		2,045,260,289		-		-		2,045,260,289
Information Technology		3,228,796,697		-		-		3,228,796,697
Materials		1,039,167,099		-		-		1,039,167,099
Real Estate		645,439,698		-		-		645,439,698
Utilities		672,101,940		-		-		672,101,940
Short-Term Investments		352,651,250		-		10,816,440		363,467,690
Total	$	16,133,281,020	$	-	$	10,816,440	$	16,144,097,460

60

Annual Report  •  2017 PARNASSUS FUNDS

Notes to Financial Statements (continued)

Parnassus Endeavor Fund
Investment Securities	Level 1		Level 2		Level 3		Total
Equities:
Consumer Discretionary	$	519,401,000	$	-	$	-	$	519,401,000
Consumer Staples		65,142,000		-		-		65,142,000
Financials		880,888,000		-		-		880,888,000
Health Care		1,340,620,750		-		-		1,340,620,750
Industrials		448,329,000		-		-		448,329,000
Information Technology		1,579,617,900		-		-		1,579,617,900
Short-Term Investments		506,755,429		-		942,210		507,697,639
Total	$	5,340,754,079	$	-	$	942,210	$	5,341,696,289
Parnassus Mid Cap Fund
Investment Securities	Level 1		Level 2		Level 3		Total
Equities:
Consumer Discretionary	$	304,263,721	$	-	$	-	$	304,263,721
Consumer Staples		291,696,181		-		-		291,696,181
Energy		73,144,445		-		-		73,144,445
Financials		240,895,799		-		-		240,895,799
Health Care		329,340,776		-		-		329,340,776
Industrials		434,418,612		-		-		434,418,612
Information Technology		375,071,401		-		-		375,071,401
Materials		224,154,687		-		-		224,154,687
Real Estate		154,816,273		-		-		154,816,273
Utilities		192,634,875		-		-		192,634,875
Short-Term Investments		264,297,626		-		990,193		265,287,819
Total	$	2,884,734,396	$	-	$	990,193	$	2,885,724,589
Parnassus Asia Fund
Investment Securities	Level 1		Level 2		Level 3		Total
Australia	$	-	$	705,413	$	-	$	705,413
China		2,039,035		-		-		2,039,035
Hong Kong		-		2,398,100		-		2,398,100
India		689,580		-		-		689,580
Indonesia		-		305,929		-		305,929
Japan		-		4,978,287		-		4,978,287
Philippines		-		190,381		-		190,381
Singapore		-		399,252		-		399,252
South Korea		-		476,821		-		476,821
Taiwan		605,645		384,321		-		989,966
Thailand		-		231,501		-		231,501
United States		2,420,880		-		-		2,420,880
Short-Term Investments		498,168		-		-		498,168
Total	$	6,253,308	$	10,070,005	$	-	$	16,323,313

61

PARNASSUS FUNDS Annual Report  •  2017

Notes to Financial Statements (continued)

Parnassus Fixed Income Fund
Investment Securities	Level 1		Level 2		Level 3		Total
Preferred Stock	$	6,301,632	$	-	$	-	$	6,301,632
Commercial Mortgage-Backed Securities		-		4,300,919		-		4,300,919
Corporate Bonds		-		143,158,448		-		143,158,448
Federal Agency Mortgage-Backed Securities		-		20,500,291		-		20,500,291
Supranational Bonds		-		4,000,240		-		4,000,240
U.S. Government Treasury Bonds		-		37,489,640		-		37,489,640
Short-Term Investments		17,886,001		-		1,428,987		19,314,988
Total	$	24,187,633	$	209,449,538	$	1,428,987	$	235,066,158

The following table reconciles the valuation of the Funds’ Level 3 investment securities and related transactions as of December 31, 2017:

	Parnassus Fund			Parnassus Core Equity Fund			Parnassus Endeavor Fund			Parnassus Mid Cap Fund			Parnassus Fixed Income Fund
	Certificates of Deposit			Certificates of Deposit			Certificates of Deposit
	Community Development Loans			Community Development Loans			Community Development Loans			Certificates of Deposit			Community Development Loans
Balance as of December 31, 2016	$	2,330,141		$	10,210,292		$	-		$	-		$	2,382,055
Discounts/premiums amortization		(44,505	)		6,148			(7,790	)		(9,807	)		46,932
Purchases		2,500,000			11,000,000			950,000			1,000,000			1,500,000
Sales		(2,350,000	)		(10,400,000	)		-			-			(2,500,000	)
Balance as of December 31, 2017	$	2,435,636		$	10,816,440		$	942,210		$	990,193		$	1,428,987

There were no significant transfers between Level 1, Level 2 and Level 3.

Quantitative information about Level 3 fair value measurement:

	Fair Value at December 31,  2017		Valuation Technique	Unobservable Input	Range (Weighted Average)
Parnassus Fund
Certificates of Deposit	$	993,991	Liquidity Discount	Discount for Lack of Marketability	4%
Community Development Loans	$	1,441,645	Liquidity Discount	Discount for Lack of Marketability and Probability of Default	6%

62

Annual Report  •  2017 PARNASSUS FUNDS

Notes to Financial Statements (continued)

	Fair Value at December 31,  2017		Valuation Technique	Unobservable Input	Range (Weighted Average)
Parnassus Core Equity Fund
Certificates of Deposit	$	2,468,805	Liquidity Discount	Discount for Lack of Marketability	4%
Community Development Loans	$	8,347,635	Liquidity Discount	Discount for Lack of Marketability and Probability of Default	6%
Parnassus Endeavor Fund
Certificates of Deposit	$	745,086	Liquidity Discount	Discount for Lack of Marketability	4%
Community Development Loans	$	197,124	Liquidity Discount	Discount for Lack of Marketability and Probability of Default	6%
Parnassus Mid Cap Fund
Certificates of Deposit	$	990,193	Liquidity Discount	Discount for Lack of Marketability	4%
Parnassus Fixed Income Fund
Community Development Loans	$	1,428,987	Liquidity Discount	Discount for Lack of Marketability and Probability of Default	6%

The significant unobservable inputs used in fair value measurement of the Fund’s Certificates of Deposits are a discount for lack of marketability. The significant unobservable inputs used in the fair value measurement of the Fund’s Community Development Loans are a discount for lack of marketability and a discount for the probability of default. Significant increases in any of these inputs in isolation would result in a lower fair value measurement. Generally, a change in the assumption used for probability of default should be accompanied by a directionally-similar change in the assumption used for the lack of marketability.

Certain foreign securities may be fair valued by independent pricing services if events occur between the time at which the market quotations are determined on the primary exchange and the close of trading on the NYSE. These events may affect the value of these securities and render market quotations unreliable. Such fair valuations are categorized as Level 2 investments. Foreign securities that are valued based on market quotations are categorized as Level 1 investments.

In accordance with procedures established by the Funds’ Trustees, all fair value securities as submitted by the Funds’ treasurer, are reviewed and approved by the Trustees. The Funds’ valuation committee is comprised of Independent Trustees who also comprise the Funds’ audit committee. The committee reviews the methodologies used by the Funds when securities have been identified as being fair valued and include the percentages used when determining liquidity discounts or discounts to be taken for lack of marketability. The Trustees review the changes in fair value measurement and methods used to substantiate the unobservable inputs on a quarterly basis.

7. Capital Stock

Capital stock consists of an unlimited number of authorized shares of capital stock with no par value.

63

PARNASSUS FUNDS Annual Report  •  2017

Notes to Financial Statements (continued)

8. Purchases and Sales of Securities

Purchases and proceeds from sales of securities, excluding short-term securities, for the year ended December 31, 2017 were as follows:

Fund	Affiliated Purchases		Unaffiliated Purchases		Affiliated Sales		Unaffiliated Sales
Parnassus Fund	$	-	$	461,846,307	$	-	$	356,619,582
Parnassus Core Equity Fund		-		3,680,017,219		-		4,485,665,318
Parnassus Endeavor Fund		-		3,438,791,744		-		1,675,562,543
Parnassus Mid Cap Fund		-		1,371,057,281		-		751,471,184
Parnassus Asia Fund		-		6,215,069		-		4,394,751
Parnassus Fixed Income Fund		-		110,654,749		-		84,429,785

The above includes purchases and sales of U.S. Government securities in the amount of $18,000,625 and $15,877,422, respectively, within the Parnassus Fixed Income Fund.

9. Investment Advisory Agreement and Transactions with Affiliates

Under terms of an agreement which provides for furnishing investment management and advice to the Funds, Parnassus Investments is entitled to receive fees payable monthly, based on each Fund’s average daily net assets for the month, at the following annual rates:

Parnassus Fund: 0.70% of the first $100,000,000, 0.65% of the next $100,000,000 and 0.60% of the amount above $200,000,000. Parnassus Endeavor Fund: 0.85% of the first $100,000,000, 0.80% of the next $100,000,000, 0.75% of the next $300,000,000 and 0.65% of the amount above $500,000,000. Parnassus Mid Cap Fund: 0.85% of the first $100,000,000, 0.80% of the next $100,000,000, 0.75% of the next $300,000,000 and 0.70% of the amount above $500,000,000. Parnassus Asia Fund: 1.10% of the first $100,000,000, 1.05% of the next $400,000,000 and 1.00% of the amount above $500,000,000. For the year ended December 31, 2017, Parnassus Investments has contractually agreed to limit total operating expenses to 0.99% of the net assets of the Parnassus Fund – Investor Shares and to 0.94% of the net assets of the Parnassus Fund – Institutional Shares, 0.95% of net assets for the Parnassus Endeavor Fund – Investor Shares and to 0.83% of net assets for the Parnassus Endeavor Fund Institutional Shares, 0.99% of net assets for the Parnassus Mid Cap Fund – Investor Shares and to 0.85% of net assets for the Parnassus Mid Cap Fund – Institutional Shares and 1.25% of net assets for the Parnassus Asia Fund Investor Shares and to 1.22% of net assets for the Parnassus Asia Fund-Institutional Shares.

Parnassus Core Equity Fund: 0.75% of the first $30,000,000, 0.70% of the next $70,000,000, 0.65% of the next $400,000,000, 0.60% of the next $9,500,000,000 and 0.55% of the amount above $10,000,000,000. Parnassus Fixed Income Fund: 0.50% of the first $200,000,000, 0.45% of the next $200,000,000 and 0.40% of the amount above $400,000,000. For the year ended December 31, 2017, Parnassus Investments has contractually agreed to limit total operating expenses to 0.87% of net assets of the Parnassus Core Equity Fund – Investor Shares and to 0.78% of net assets for the Parnassus Core Equity Fund – Institutional Shares and 0.68% of net assets for the Parnassus Fixed Income Fund – Investor Shares and to 0.58% of net assets for the Parnassus Fixed Income Fund – Institutional Shares.

Parnassus Investments receives fees under terms of a separate agreement which provides for furnishing transfer agent and fund administration services to the Funds. The transfer agent fee was $2.50 per month per account plus any out-of-pocket expenses for the Parnassus Fund, Parnassus Endeavor Fund, Parnassus Mid Cap Fund and Parnassus Asia Fund. The transfer agent fee was $2.70 per month per account plus any out-of-pocket expenses for the Parnassus Core Equity Fund and Parnassus Fixed Income Fund. The Funds pay the monthly fee based on the number of accounts on record at each month-end. The fund administration reflects annual rates based on net assets for all Funds managed by Parnassus Investments and was allocated based on respective Fund net assets. The fund administration services fee was 0.03% of average net assets under this new agreement for the year ended December 31, 2017.

64

Annual Report  •  2017 PARNASSUS FUNDS

Notes to Financial Statements (continued)

Parnassus Investments may also arrange for third parties to provide certain services, including account maintenance, recordkeeping and other personal services to their clients who invest in the Funds. For these services, the Parnassus Funds –Investor Shares may pay service providers an aggregate service fee on investment accounts at a rate not to exceed 0.25% per annum of average daily net assets. The Parnassus Funds – Institutional Shares do not incur service provider fees.

10. Investments in affiliates

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a Fund owns 5% or more of the outstanding voting shares. During the year ended December 31, 2017, the Parnassus Core Equity Fund below held 5% or more of the outstanding voting shares of the noted portfolio companies. During this period, other Funds in the Trust may also have held voting shares of the issuers at a level below 5%.

A summary of transactions in securities of issuers affiliated with a Fund for the year ended December 31, 2017 is set forth below.

	Beginning shares as of January 1, 2017		Shares purchased		Shares sold		Ending shares as of December 31, 2017		Market Value of affiliates at December 31, 2017		Net realized gain (loss) at December 31, 2017		Net unrealized appreciation (depreciation) at December 31, 2017			Dividend Income at December  31, 2017
Parnassus Core Equity Fund
Name of Company:
MDU Resources Group Inc.		11,324,166		-		-		11,324,166	$	304,393,582	$	-	$	(21,402,674	)	$	8,719,608
WD-40 Co.		1,220,000		-		-		1,220,000		143,960,000		-		1,342,000			2,391,200
Total Affiliates									$	448,353,582	$	-	$	(20,060,674	)	$	11,110,808

65

PARNASSUS FUNDS Annual Report  •  2017

Financial Highlights

Selected data for each share of capital stock outstanding, total return and ratios/supplement data for each of the five years ended December 31 are as follows:

For a Share Outstanding for the Year Ended	Net Asset Value Beginning of Year		Net  Investment Income (Loss)(a)		Net Realized and Unrealized Gain (Loss) on Securities(a)			Total from Investment Operations(a)			Dividends from Net Investment Income			Distributions from Net Realized Gains on Securities			Distributions from Return of Capital		Total Dividends and Distributions
Parnassus Fund – Investor Shares
2017		$44.97		$0.46		$6.68			$7.14			$(0.45	)		$(3.39	)		$-		$(3.84	)
2016		40.46		0.37		5.06			5.43			(0.36	)		(0.56	)		-		(0.92	)
2015		48.09		0.32		(0.01	)		0.31			(1.78	)		(6.16	)		-		(7.94	)
2014		45.86		0.22		6.47			6.69			(1.62	)		(2.84	)		-		(4.46	)
2013		40.62		0.25		13.34			13.59			(1.94	)		(6.41	)		-		(8.35	)
Parnassus Fund – Institutional Shares
2017		44.95		0.54		6.67			7.21			(0.52	)		(3.39	)		-		(3.91	)
2016		40.45		0.43		5.06			5.49			(0.43	)		(0.56	)		-		(0.99	)
For the period ended December 31, 2015(d)		49.44		0.28		(1.27	)		(0.99	)		(1.84	)		(6.16	)		-		(8.00	)
Parnassus Core Equity Fund – Investor Shares
2017		39.29		0.45		5.98			6.43			(0.55	)		(2.50	)		-		(3.05	)
2016		36.97		0.39		3.42			3.81			(0.40	)		(1.09	)		-		(1.49	)
2015		40.69		0.40		(0.56	)		(0.16	)		(0.80	)		(2.76	)		-		(3.56	)
2014		36.68		0.43		4.84			5.27			(0.59	)		(0.67	)		-		(1.26	)
2013		29.20		0.44		9.39			9.83			(0.48	)		(1.87	)		-		(2.35	)
Parnassus Core Equity Fund – Institutional Shares
2017		39.35		0.55		5.98			6.53			(0.65	)		(2.50	)		-		(3.15	)
2016		37.03		0.48		3.41			3.89			(0.48	)		(1.09	)		-		(1.57	)
2015		40.75		0.50		(0.58	)		(0.08	)		(0.89	)		(2.75	)		-		(3.64	)
2014		36.73		0.45		4.91			5.36			(0.67	)		(0.67	)		-		(1.34	)
2013		29.26		0.49		9.39			9.88			(0.54	)		(1.87	)		-		(2.41	)
Parnassus Endeavor Fund – Investor Shares
2017		32.99		0.34		6.20			6.54			(0.77	)		(1.58	)		-		(2.35	)
2016		28.07		0.19		5.80			5.99			(0.32	)		(0.75	)		-		(1.07	)
2015		29.95		0.17		0.83			1.00			(0.87	)		(2.01	)		-		(2.88	)
2014		26.99		0.18		4.79			4.97			(0.51	)		(1.50	)		-		(2.01	)
2013		22.17		0.14		6.71			6.85			(0.50	)		(1.53	)		-		(2.03	)
Parnassus Endeavor Fund – Institutional Shares
2017		33.01		0.41		6.21			6.62			(0.84	)		(1.58	)		-		(2.42	)
2016		28.06		0.24		5.83			6.07			(0.37	)		(0.75	)		-		(1.12	)
For the period ended December 31, 2015(d)		31.03		0.16		(0.20	)		(0.04	)		(0.92	)		(2.01	)		-		(2.93	)
Parnassus Mid Cap Fund – Investor Shares
2017		28.87		0.26		4.29			4.55			(0.48	)		(0.87	)		-		(1.35	)
2016		25.56		0.21		3.90			4.11			(0.11	)		(0.69	)		-		(0.80	)
2015		27.40		0.21		(0.41	)		(0.20	)		(0.18	)		(1.46	)		-		(1.64	)
2014		25.10		0.22		2.60			2.82			(0.20	)		(0.32	)		-		(0.52	)
2013		20.27		0.13		5.58			5.71			(0.26	)		(0.62	)		-		(0.88	)

66

Annual Report  •  2017 PARNASSUS FUNDS

Net Asset Value End of Year		Total Overall Return			Net Assets End of Year (000s)		Ratio of Gross Expenses to Average Net Assets			Ratio of Net Expenses to Average Net Assets (Net of Waiver and Expense Offset Arrangements)(b,c)			Ratio of Net Investment Income (Loss) to Average Net Assets			Portfolio Turnover Rate
	Parnassus Fund – Investor Shares
	$48.27		16.08	%		$923,262		0.84	%		0.84	%		0.96	%		37.45	%
	44.97		13.46			775,818		0.86			0.86			0.90			41.70
	40.46		0.26			708,944		0.84			0.84			0.64			68.52
	48.09		14.68			679,130		0.84			0.84			0.47			60.44
	45.86		34.22			572,301		0.86			0.86			0.54			64.87
	Parnassus Fund – Institutional Shares
	48.25		16.25			162,414		0.69			0.69			1.11			37.45
	44.95		13.59			78,313		0.71			0.71			1.04			41.70
	40.45		(2.37	)(e)		45,941		0.70	(f)		0.70	(f)		0.90	(f)		42.95	(e)
	Parnassus Core Equity Fund – Investor Shares
	42.67		16.58			9,870,059		0.87			0.87			1.09			24.52
	39.29		10.41			10,200,768		0.87			0.87			1.03			22.89
	36.97		(0.55	)		8,368,394		0.88			0.88			1.03			26.90
	40.69		14.48			8,558,905		0.87			0.87			1.11			14.32
	36.68		34.01			6,282,235		0.87			0.87			1.28			16.93
	Parnassus Core Equity Fund – Institutional Shares
	42.73		16.81			6,245,179		0.64			0.64			1.31			24.52
	39.35		10.61			4,597,160		0.66			0.66			1.25			22.89
	37.03		(0.34	)		3,554,007		0.67			0.67			1.25			26.90
	40.75		14.71			3,024,069		0.67			0.67			1.17			14.32
	36.73		34.13			1,809,054		0.69			0.69			1.44			16.93
	Parnassus Endeavor Fund – Investor Shares
	37.18		19.81			4,185,857		0.92			0.92			0.94			43.21
	32.99		21.42			2,507,515		0.97			0.95			0.64			34.08
	28.07		3.25			1,325,765		0.98			0.95			0.56			63.23
	29.95		18.51			770,332		1.02			0.95			0.62			39.51
	26.99		31.15			475,940		1.07			1.07			0.53			41.20
	Parnassus Endeavor Fund – Institutional Shares
	37.21		20.03			1,031,525		0.72			0.72			1.12			43.21
	33.01		21.68			295,317		0.74			0.74			0.80			34.08
	28.06		(0.22	)(e)		46,806		0.75	(f)		0.75	(f)		0.80	(f)		42.60	(e)
	Parnassus Mid Cap Fund – Investor Shares
	32.07		15.79			2,021,276		1.01			0.99			0.83			33.27
	28.87		16.07			1,490,587		1.01			0.99			0.75			18.81
	25.56		(0.87	)		543,251		1.07			0.99			0.77			58.01
	27.40		11.24			305,297		1.09			1.09			0.84			21.62
	25.10		28.27			241,162		1.14			1.14			0.55			20.70

67

PARNASSUS FUNDS Annual Report  •  2017

Financial Highlights (continued)

For a Share Outstanding for the Year Ended	Net Asset Value Beginning of Year		Net  Investment Income (Loss)(a)			Net Realized and Unrealized Gain (Loss) on Securities(a)			Total from Investment Operations(a)			Dividends from Net Investment Income			Distributions from Net Realized Gains on Securities			Distributions from Return of Capital			Total Dividends and Distributions
Parnassus Mid Cap Fund – Institutional Shares
2017		$28.90		$0.34			$4.29			$4.63			$(0.55	)		$(0.87	)		$-			$(1.42	)
2016		25.57		0.27			3.89			4.16			(0.14	)		(0.69	)		-			(0.83	)
For the period ended December 31, 2015(d)		27.58		0.20			(0.52	)		(0.32	)		(0.23	)		(1.46	)		-			(1.69	)
Parnassus Asia Fund – Investor Shares
2017		16.80		0.15			3.27			3.42			(0.20	)		(1.00	)		-			(1.20	)
2016		14.74		0.17			1.89			2.06			-			-			-			-
2015		16.72		0.24			(2.22	)		(1.98	)		-			-			-			-
2014		15.67		0.19			1.04			1.23			(0.18	)		-			-			(0.18	)
For the period ended December 31, 2013(g)		15.00		(0.07	)		0.74			0.67			-			-			-			-
Parnassus Asia Fund – Institutional Shares
2017		16.88		0.20			3.27			3.47			(0.25	)		(1.00	)		-			(1.25	)
2016		14.78		0.22			1.88			2.10			-			-			-			-
For the period ended December 31, 2015(d)		17.91		0.23			(3.36	)		(3.13	)		-			-			-			-
Parnassus Fixed Income Fund – Investor Shares
2017		16.42		0.37			0.14			0.51			(0.39	)		-			-			(0.39	)
2016		16.44		0.34			0.06			0.40			(0.36	)		(0.06	)		-			(0.42	)
2015		16.66		0.33			(0.21	)		0.12			(0.33	)		(0.01	)		-			(0.34	)
2014		16.43		0.31			0.43			0.74			(0.37	)		(0.14	)		-			(0.51	)
2013		17.56		0.29			(0.76	)		(0.47	)		(0.29	)		(0.31	)		(0.06	)		(0.66	)
Parnassus Fixed Income Fund – Institutional Shares
2017		16.41		0.41			0.14			0.55			(0.42	)		-			-			(0.42	)
2016		16.44		0.38			0.04			0.42			(0.39	)		(0.06	)		-			(0.45	)
For the period ended December 31, 2015(d)		16.75		0.24			(0.30	)		(0.06	)		(0.24	)		(0.01	)		-			(0.25	)

68

Annual Report  •  2017 PARNASSUS FUNDS

Net Asset Value End of Year		Total Overall Return			Net Assets End of Year (000s)		Ratio of Gross Expenses to Average Net Assets			Ratio of Net Expenses to Average Net Assets (Net of Waiver and Expense Offset Arrangements)(b,c)			Ratio of Net Investment Income (Loss) to Average Net Assets			Portfolio Turnover Rate
	Parnassus Mid Cap Fund – Institutional Shares
	$32.11		16.04	%		$780,372		0.75	%		0.75	%		1.09	%		33.27	%
	28.90		16.28			285,182		0.80			0.80			0.95			18.81
	25.57		(1.30	)(e)		11,397		0.77	(f)		0.77	(f)		1.12	(f)		34.04	(e)
	Parnassus Asia Fund – Investor Shares
	19.02		20.39			9,686		2.95			1.25			0.81			31.35
	16.80		13.98			7,985		3.13			1.25			1.14			46.04
	14.74		(11.84	)		6,616		2.50			1.25			1.50			59.89
	16.72		7.84			7,457		3.53			1.25			1.11			24.41
	15.67		4.47	(e)		3,376		5.08	(f)		1.45	(f)		(0.71	)(f)		3.00	(e)
	Parnassus Asia Fund – Institutional Shares
	19.10		20.60			6,701		0.97			0.97			1.06			31.35
	16.88		14.21			4,240		0.96			0.96			1.42			46.04
	14.78		(17.48	)(e)		3,675		0.94	(f)		0.94	(f)		2.24	(f)		49.07	(e)
	Parnassus Fixed Income Fund – Investor Shares
	16.54		3.10			182,161		0.82			0.68			2.25			38.48
	16.42		2.42			193,440		0.80			0.68			2.04			39.47
	16.44		0.70			182,130		0.79			0.68			1.98			35.80
	16.66		4.49			192,614		0.78			0.68			1.84			52.57
	16.43		(2.71	)		175,790		0.78			0.68			1.70			35.15
	Parnassus Fixed Income Fund – Institutional Shares
	16.54		3.37			47,365		0.47			0.47			2.46			38.48
	16.41		2.55			20,733		0.49			0.49			2.22			39.47
	16.44		(0.35	)(e)		7,731		0.49	(f)		0.49	(f)		2.14	(f)		24.24	(e)

(a) Income (loss) from operations per share is based on average daily shares outstanding.

(b) Parnassus Investments has contractually limited expenses to an annualized rate of 0.99% for the Parnassus Endeavor Fund – Investor Shares, 0.99% for the Parnassus Mid Cap Fund – Investor Shares, 1.25% for the Parnassus Asia Fund – Investor Shares and 0.68% for the Parnassus Fixed Income Fund – Investor Shares.

(c) Parnassus Investments has contractually limited expenses to an annualized rate of 0.83% for the Parnassus Endeavor Fund – Institutional Shares, 0.85% for the Parnassus Mid Cap Fund – Institutional Shares, 1.22% for the Parnassus Asia Fund – Institutional Shares and 0.58% for the Parnassus Fixed Income Fund – Institutional Shares.

(d) The Parnassus Fund – Institutional Shares, the Parnassus Endeavor Fund – Institutional Shares, the Parnassus Mid Cap Fund – Institutional Shares, the Parnassus Asia Fund –Institutional Shares and the Parnassus Fixed Income Fund – Institutional Shares commenced operations on April 30, 2015, and the period shown is from April 30, 2015 through December 31, 2015.

(e) Not annualized for periods less than one year.

(f) Annualized.

(g) The Parnassus Asia Fund – Investor Shares commenced operations on April 30, 2013, and the period shown is from April 30, 2013 through December 31, 2013.

(h) Amount less than $0.01.

69

PARNASSUS FUNDS Annual Report  •  2017

ADDITIONAL INFORMATION (unaudited)

Board of Trustees and Officers

	Independent Trustees§			Interested Trustee†
Name	Alecia A. DeCoudreaux	Donald J. Boteler	Kay Yun	Jerome L. Dodson
Age	63	69	54	74
Address	1 Market Street, Suite 1600 San Francisco, California 94105	1 Market Street, Suite 1600 San Francisco, California 94105	1 Market Street, Suite 1600 San Francisco, California 94105	1 Market Street, Suite 1600 San Francisco, California 94105
Position(s) Held with Funds	Lead Independent Trustee	Trustee, Audit Committee Chairman	Trustee	Chairman of the Board, CEO and Trustee
Term of Office and Length of Service	Indefinite.* Since 2013.	Indefinite.* Since 2012.	Indefinite.* Since July 2017.	Indefinite. As Trustee, since 1992 for Parnassus Income Funds and since 1984 for Parnassus Funds. As Chairman of the Board and Chief Executive Officer, since July 2017.
Principal Occupation(s) During Past 5 Years	Director of CVS Health Corporation since 2015. President of Mills College from 2011 to 2016. Trustee Emerita of Wellesley College, Honorary Director of the Indiana University Foundation and Emerita Board Member of the Indiana University School of Law Board of Visitors.	Independent Trustee, FAM Funds, since 2012. Previously employed by Investment Company Institute from 1986 to 2012, serving as Vice President, Operations & Continuing Education from 1993 to 2012.	Partner and Chief Financial Officer at Health Evolution Partners in San Francisco since 2007. Currently a trustee at both the American Conservatory Theater and the San Francisco University High School.	President of the Parnassus Funds and the Parnassus Income Funds from their inceptions to July 2017. Chief Executive Officer and Director of Parnassus Investments since 1984. President of Parnassus Investments from 1984 to January 2017.
Portfolios in the Fund Complex Overseen by Trustee	Six	Six	Six	Six
Other Directorships Held by Trustee	CVS Health Corporation	FAM Funds	None	None

§ “Independent” Trustees are Trustees who are not deemed to be “interested persons” of the Funds as defined in the Investment Company Act of 1940.

† An “interested” Trustee is a Trustee who is deemed to be an “interested person” of the Funds, as defined in the Investment Company Act of 1940. Jerome L. Dodson is an interested person of the Funds because of his ownership in the Funds’ investment adviser and because he is an officer of the Trusts.

* Subject to the mandatory retirement age for independent Trustees.

Additional information about the Funds’ Board of Trustees is available in the Statement of Additional Information. The Statement of Additional Information is available without charge on the Securities and Exchange Commission’s website(www.sec.gov) or by calling us at (800) 999-3505 or at the Parnassus website, www.parnassus.com.

70

Annual Report  •  2017 PARNASSUS FUNDS

ADDITIONAL INFORMATION (unaudited) (continued)

Board of Trustees and Officers (continued)

	Officers§
Name	Benjamin E. Allen	Marc C. Mahon	Todd C. Ahlsten	John V. Skidmore II	Downey H. Blount
Age	40	40	45	52	47
Address	1 Market Street, Suite 1600 San Francisco, California 94105	1 Market Street, Suite 1600 San Francisco, California 94105	1 Market Street, Suite 1600 San Francisco, California 94105	1 Market Street, Suite 1600 San Francisco, California 94105	1 Market Street, Suite 1600 San Francisco, California 94105
Position(s) Held with Funds	President	Executive Vice President and Treasurer	Vice President	Chief Compliance Officer, Fidelity Bond Officer and Secretary	Assistant Secretary
Term of Office and Length of Service	Indefinite. Since 2015. As President, since 2017.	Indefinite. Since 2007. As Executive Vice President since 2017.	Indefinite. Since 2001.	Indefinite. Since 2008.	Indefinite. Since 2015.
Principal Occupation(s) During Past 5 Years	President of Parnassus Investments since January 2017, Co-Portfolio Manager of Parnassus Core Equity Fund since 2012. Director of Research at Parnassus Investments from 2007 to 2013.	Chief Financial Officer of Parnassus Investments since 2007. Treasurer of the Parnassus Funds and the Parnassus Income Funds since 2007.	Vice President of the Parnassus Funds and Parnassus Income Funds since 2001. Chief Investment Officer of Parnassus Investments since 2007. Director of Research at Parnassus Investments from 1995 to 2007. Portfolio Manager of Parnassus Core Equity Fund since 2001.	Chief Compliance Officer of Parnassus Investments, the Parnassus Funds and the Parnassus Income Funds since 2008.	Chief Compliance Officer of the Parnassus Funds Distributor since 2015. Senior Compliance Officer of Parnassus Investments since 2014. Project Manager of Parnassus Investments during 2013. Homemaker from 2009 to 2013.

71

PARNASSUS FUNDS Annual Report  •  2017

ADDITIONAL INFORMATION (unaudited) (continued)

Proxy Disclosures

Parnassus proxy voting policies and procedures are available, without charge, on our website (www.parnassus.com), on the Securities and Exchange Commission’s website (www.sec.gov) and by calling us at (800) 999-3505. The Funds file a proxy voting record with the Securities and Exchange Commission for the 12 months ended June 30. The most recent report is available by calling Parnassus or it may be obtained from the Securities and Exchange Commission’s website or the Parnassus website.

Quarterly Portfolio Schedule

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The quarterly portfolio holdings are available on the Securities and Exchange Commission’s website (www.sec.gov). The Funds’ Form N-Q may also be reviewed and copied at the Securities and Exchange Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.

Federal Income Tax Information

For the year ended December 31, 2017, the following percentages of ordinary income distributed by the Funds that qualify for the individual qualified dividend income deduction (QDI) and the corporate dividends received deduction (DRD) are as follows:

Fund	QDI			DRD
Parnassus Fund		100.00	%		100.00	%
Parnassus Core Equity Fund		100.00	%		100.00	%
Parnassus Endeavor Fund		60.19	%		60.88	%
Parnassus Mid Cap Fund		90.51	%		90.62	%
Parnassus Asia Fund		100.00	%		100.00	%
Parnassus Fixed Income Fund		4.81	%		4.81	%

72

Go Paperless with E-Delivery

Sign up for electronic delivery of prospectuses, shareholder reports

and account statements at www.parnassus.com/gopaperless

If you do not hold your account directly with Parnassus, please contact

the firm that holds your account to inquire about electronic delivery.

PARNASSUS FUNDS

1 Market Street, Suite 1600

San Francisco, CA 94105

(800) 999-3505

www.parnassus.com

This report must be preceded or accompanied by a current prospectus.

Investment Adviser

Parnassus Investments

1 Market Street, Suite 1600

San Francisco, CA 94105

Legal Counsel

Foley and Lardner LLP

777 E. Wisconsin Ave.

Milwaukee, WI 53202

Independent Registered Public Accounting Firm

Deloitte and Touche LLP

555 Mission Street

San Francisco, CA 94105

Distributor

Parnassus Funds Distributor

1 Market Street, Suite 1600

San Francisco, CA 94105

Item 2: Code of Ethics

The registrant has adopted a code of ethics dated July 22, 2003 that applies to the registrant’s principal executive officer (President) and principal financial officer (Treasurer) for the fiscal year ending December 31, 2017. During the fiscal year ending December 31, 2017 there were no amendments to any provisions of this code of ethics.

Item 3: Audit Committee Financial Expert

The Board of Trustees of the Parnassus Funds and the Parnassus Income Funds determined that Don Boteler, Chairman of the Board’s Audit Committee, qualified as an “audit committee financial expert” as defined by Form N-CSR. The Trustee’s decision was based on Mr. Boteler’s understanding of generally accepted accounting principles (GAAP), experience applying GAAP, familiarity with internal controls and procedures for financial reporting and understanding of audit committee functions. Donald Boteler serves as Trustee of the Parnassus Funds Trust and the Parnassus Income Funds Trust. He retired in March of 2012 from the Investment Company Institute (ICI), the U.S. mutual fund industry’s national trade association in Washington, D.C., where he served as Vice President of Industry Operations from 1993 until his retirement. Mr. Boteler also served as Director of Fund Accounting and Compliance from 1986 to 1993. From 2009 to 2011, he served on the Advisory Council of the International Accounting Standards Board in London. Prior to his ICI career, he served in various roles as a member of the staff of the U.S. Securities and Exchange Commission and the U.S. Department of Labor. Mr. Boteler received his bachelor’s degree in economics and accounting from the University of Maryland and is a member of the American Institute of Certified Public Accountants.

Item 4: Principal Accountant Fees and Services

(a) Audit Fees

The aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the Parnassus Funds fiscal years ended December 31, 2016 and 2017 were $159,094 and $189,581 respectively and the Parnassus Income Funds fiscal year ended December 31, 2016 and 2017 were $114,476 and $136,419 respectively.

(b) Audit-Related Fees

There were no aggregate fees billed for assurance and related services rendered by the principal accountants that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item. Audit-related services relate to providing an internal control letter for affiliated transfer agent operations which are billed to the registrant’s investment advisor.

(c) Tax Fees

The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning for the Parnassus Funds fiscal years ended December 31, 2016 and 2017 were $19,860 and $24,440 respectively and the Parnassus Income Funds fiscal years ended December 31, 2016 and 2017 were $12,200 and $14,600 respectively.

(d) All Other Fees

There were no fees billed in each of the last two fiscal years for products and services by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item.

(e)(1) The Audit Committee’s pre-approval policies and procedures are as follows: The audit committee is required to pre-approve all audit services and permitted non-audit services provided by the independent accountants for the Parnassus Funds, affiliated funds, and other service affiliates. Explicit pre-approval by the Audit Committee Chair shall be required for any individual non-audit engagement to be performed by the independent accountants with estimated fees of $10,000 or less and the Audit Committee Chair shall report such approval to the full audit committee at the next regularly scheduled meeting. Explicit pre-approval by the full Audit Committee shall be required for any individual non-audit engagement to be performed by the independent accountants with estimated

fees in excess of $10,000. Officers of the Funds shall furnish the audit committee at least annually with a listing of all fees paid to the independent accountants including non-audit services performed. For certain non-audit services which are no more than five percent of the total fees paid by the Trust, such fees may be exempted from the required pre-approval process specified above subject to limitations and prompt disclosure of such services are identified, and in all cases approval is required prior to completion.

(e)(2) None.

(f) Not applicable.

(g) The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser forth in 4(b) and (c) of this Item of $— and $— for the Parnassus Funds fiscal years ended December 31, 2016 and 2017, respectively and $— and $— for the Parnassus Income Funds fiscal years

ended December 31, 2016 and 2017, respectively.

Item 5: Not applicable.

Item 6: Included as part of the report to shareholders filed under Item 1 of this form.

Item 7: Not applicable.

Item 8: Not applicable.

Item 9: Not applicable.

Item 10: For the purposes of this Item, there have not been any material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.

Item 11: Controls and Procedures.

(a) The registrant’s certifying officers have reasonably designed such disclosure controls and procedures to ensure material information relating to the registrant is made known to them by others, particularly during the period in which this report is being prepared. The registrant’s certifying officers have determined that the registrant’s disclosure controls and procedures are effective based on their evaluation of these controls and procedures as of a date within 90 days prior to the filing date of this report.

(b) There were no significant changes in the registrant’s internal controls over financial reporting, or in other factors that could significantly affect these controls, that occurred during the registrant’s fiscal half-year, including any corrective actions with regard to significant deficiencies and material weaknesses.

Item 12: Exhibits attached hereto.

(a)(1) Code of Ethics

(a)(2) Certification for each principal executive and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2(a)) - Filed as an attachment to this filing.

(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350). A certification furnished pursuant to this paragraph will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference – Filed as an attachment to this filing.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 9, 2018	By:	/s/ Benjamin E. Allen
		Benjamin E. Allen
		President

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: February 9, 2018
	By:	/s/ Benjamin E. Allen
		Benjamin E. Allen
		President
Date: February 9, 2018
	By:	/s/ Marc C. Mahon
		Marc C. Mahon
		Principal Financial Officer