Equity Income Fund Annual Report - Putnam Investments

The views expressed in this report are exclusivelythose of Putnam Management andare subject to change. They are not meant asinvestment advice.Please note that the holdings discussed in thisreport may not have been held by the fundfor the entire period. Portfolio compositionis subject to review in accordance with thefund’s investment strategy and may varyin the future. Current and future portfolioholdings are subject to risk.Portfolio Manager Darren A. Jaroch has aB.A. from Hartwick College. A CFA charterholder,he joined Putnam in 1999 and hasbeen in the investment industry since 1996.In addition to Darren, your fund is managed byAssistant Portfolio Manager Walter D. Scully,who has an M.B.A. from The University ofChicago Booth School of Business and a B.S.from The Ohio State University. A CertifiedPublic Accountant, he has been in the investmentindustry since he joined Putnam in 1996.IN THE NEWSThe U.S. unemployment rate has been on asteady decline as of late, recently dipping to7% for the first time in five years. In what wasthe first full assessment of the nation’s jobspicture since the 16-day partial governmentshutdown in early October, the lower unemploymentrate is a clear indicator that the U.S.economy has measurably improved sincethe 2008 financial crisis that rattled marketsand economies worldwide. The unemploymentrate peaked at 10% in October 2009,according to the Labor Department. Theimproving job situation also means that theFederal Reserve may be more inclined tobegin winding down its $85-billion-a-monthasset purchase program in the near future.The Fed’s stimulus efforts have helped keepinterest rates low with the goal of fosteringeconomic growth and lowering unemployment.The central bank has stated that itwould start tapering its quantitative-easingprogram when it sees “real and sustainable”progress in job gains.Equity Income Fund 9