Equity Income Fund Annual Report - Putnam Investments

Financial statementsThese sections of the report, as well as theaccompanying Notes, preceded by theReport of Independent Registered PublicAccounting Firm, constitute the fund’sfinancial statements.The fund’s portfolio lists all the fund’s investmentsand their values as of the last day ofthe reporting period. Holdings are organizedby asset type and industry sector, country,or state to show areas of concentrationand diversification.Statement of assets and liabilities showshow the fund’s net assets and share price aredetermined. All investment and non-investmentassets are added together. Any unpaidexpenses and other liabilities are subtractedfrom this total. The result is divided by thenumber of shares to determine the net assetvalue per share, which is calculated separatelyfor each class of shares. (For funds withpreferred shares, the amount subtracted fromtotal assets includes the liquidation preferenceof preferred shares.)Statement of operations shows the fund’snet investment gain or loss. This is done byfirst adding up all the fund’s earnings — fromdividends and interest income — and subtractingits operating expenses to determine netinvestment income (or loss). Then, any net gainor loss the fund realized on the sales of its holdings— as well as any unrealized gains or lossesover the period — is added to or subtractedfrom the net investment result to determine thefund’s net gain or loss for the fiscal year.Statement of changes in net assets showshow the fund’s net assets were affected by thefund’s net investment gain or loss, by distributionsto shareholders, and by changes in thenumber of the fund’s shares. It lists distributionsand their sources (net investment incomeor realized capital gains) over the currentreporting period and the most recent fiscalyear-end. The distributions listed here maynot match the sources listed in the Statementof operations because the distributions aredetermined on a tax basis and may be paid ina different period from the one in which theywere earned.Financial highlights provide an overview of thefund’s investment results, per-share distributions,expense ratios, net investment incomeratios, and portfolio turnover in one summarytable, reflecting the five most recent reportingperiods. In a semiannual report, the highlightstable also includes the current reporting period.24 Equity Income Fund