N-Q 1 a_equityincome.htm PUTNAM EQUITY INCOME FUND a_equityincome.htm

Washington, D.C. 20549



Investment Company Act file number: (811-02742)
Exact name of registrant as specified in charter: Putnam Equity Income Fund
Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109
Name and address of agent for service: Robert T. Burns, Vice President
One Post Office Square
Boston, Massachusetts 02109
Copy to:         Bryan Chegwidden, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, New York 10036
Registrant’s telephone number, including area code: (617) 292-1000
Date of fiscal year end: November 30, 2014
Date of reporting period: August 31, 2014

Item 1. Schedule of Investments:

Putnam Equity Income Fund

The fund's portfolio
8/31/14 (Unaudited)
COMMON STOCKS (95.7%)(a)
Shares Value

Aerospace and defense (5.8%)
General Dynamics Corp. 579,400 $71,411,050
Honeywell International, Inc. 626,100 59,623,503
L-3 Communications Holdings, Inc. 532,740 58,574,763
Northrop Grumman Corp. 908,590 115,590,820
United Technologies Corp. 366,200 39,542,276

Airlines (0.9%)
American Airlines Group, Inc. 1,344,300 52,306,713

Auto components (2.4%)
Dana Holding Corp. 1,303,700 30,284,951
Delphi Automotive PLC (United Kingdom) 781,200 54,355,896
TRW Automotive Holdings Corp.(NON) 613,244 59,049,265

Automobiles (1.3%)
Ford Motor Co. 1,625,740 28,304,133
General Motors Co. 1,371,100 47,714,280

Banks (7.1%)
Bank of America Corp. 5,596,500 90,047,685
Citigroup, Inc. 1,099,523 56,790,363
JPMorgan Chase & Co. 1,421,000 84,478,450
Regions Financial Corp. 2,308,200 23,428,230
U.S. Bancorp 1,249,700 52,837,316
Wells Fargo & Co. 2,193,640 112,840,842

Beverages (1.4%)
Dr. Pepper Snapple Group, Inc. 692,300 43,559,516
PepsiCo, Inc. 399,300 36,931,257

Capital markets (3.1%)
Charles Schwab Corp. (The) 1,851,300 52,780,563
Invesco, Ltd. 737,500 30,119,500
State Street Corp. 1,417,380 102,093,881

Chemicals (1.7%)
Air Products & Chemicals, Inc. 385,400 51,339,134
Dow Chemical Co. (The) 882,600 47,263,230

Commercial services and supplies (0.9%)
Tyco International, Ltd. 1,129,130 50,381,781

Communications equipment (1.5%)
Cisco Systems, Inc. 1,716,850 42,904,082
Qualcomm, Inc. 581,500 44,252,150

Consumer finance (0.8%)
Capital One Financial Corp. 290,700 23,854,842
Discover Financial Services 335,200 20,906,424

Containers and packaging (1.4%)
MeadWestvaco Corp. 787,200 33,849,600
Packaging Corp. of America 406,200 27,617,538
Sealed Air Corp. 549,800 19,847,780

Diversified financial services (1.1%)
CME Group, Inc. 809,200 61,944,260

Diversified telecommunication services (2.9%)
AT&T, Inc. 1,557,800 54,460,688
CenturyLink, Inc. 721,100 29,557,889
Verizon Communications, Inc. 1,742,770 86,824,801

Electric utilities (3.5%)
American Electric Power Co., Inc. 552,700 29,679,990
Edison International 645,500 38,174,870
Exelon Corp. 1,284,300 42,921,306
NextEra Energy, Inc. 338,900 33,364,705
PPL Corp. 1,766,336 61,168,216

Energy equipment and services (0.7%)
National Oilwell Varco, Inc. 466,700 40,336,881

Food and staples retail (1.2%)
CVS Caremark Corp. 881,600 70,043,120

Food products (1.6%)
Kellogg Co. 882,900 57,362,013
Kraft Foods Group, Inc. 651,800 38,391,020

Health-care equipment and supplies (3.5%)
Baxter International, Inc. 1,270,400 95,254,592
Covidien PLC 285,725 24,809,502
St. Jude Medical, Inc. 799,300 52,426,087
Zimmer Holdings, Inc. 339,100 33,676,021

Health-care providers and services (2.6%)
CIGNA Corp. 1,275,600 120,671,760
UnitedHealth Group, Inc. 394,400 34,186,592

Hotels, restaurants, and leisure (0.5%)
Hilton Worldwide Holdings, Inc.(NON) 1,218,600 30,854,952

Household durables (0.4%)
PulteGroup, Inc. 1,167,100 22,431,662

Household products (0.4%)
Energizer Holdings, Inc. 174,400 21,193,088

Independent power and renewable electricity producers (0.8%)
Abengoa Yield PLC (United Kingdom)(NON) 149,151 5,982,447
Calpine Corp.(NON) 793,665 18,865,417
NextEra Energy Partners LP(NON) 105,000 3,686,550
NRG Energy, Inc. 523,700 16,119,486

Industrial conglomerates (0.9%)
General Electric Co. 2,041,800 53,045,964

Insurance (7.1%)
American International Group, Inc. 1,265,353 70,935,689
Aon PLC 493,800 43,039,608
Assured Guaranty, Ltd. 1,680,500 40,584,075
Genworth Financial, Inc. Class A(NON) 2,993,000 42,470,670
Hartford Financial Services Group, Inc. (The) 1,026,200 38,020,710
MetLife, Inc. 2,041,270 111,739,120
PartnerRe, Ltd. 509,550 56,911,640
Willis Group Holdings PLC 395,000 16,578,150

IT Services (0.7%)
Computer Sciences Corp. 673,900 40,292,481

Leisure products (0.6%)
Hasbro, Inc. 619,200 32,603,976

Life sciences tools and services (0.5%)
Agilent Technologies, Inc. 522,800 29,883,248

Media (4.4%)
CBS Corp. Class B (non-voting shares) 677,800 40,186,762
Comcast Corp. Special Class A 2,123,150 115,923,990
Liberty Global PLC Ser. C (United Kingdom) 829,800 34,793,514
Time Warner, Inc. 863,890 66,545,447

Metals and mining (0.5%)
Freeport-McMoRan, Inc. (Indonesia) 848,800 30,870,856

Multi-utilities (0.4%)
Ameren Corp. 637,700 25,501,623

Multiline retail (0.6%)
Macy's, Inc. 564,500 35,162,705

Oil, gas, and consumable fuels (10.3%)
EOG Resources, Inc. 345,100 37,919,588
Exxon Mobil Corp. 1,560,000 155,157,600
Marathon Oil Corp. 4,162,200 173,522,118
Marathon Petroleum Corp. 241,300 21,960,713
Occidental Petroleum Corp. 91,600 9,501,668
QEP Resources, Inc. 1,056,200 37,569,034
Royal Dutch Shell PLC ADR (United Kingdom) 1,477,210 119,609,694
Total SA (France) 164,744 10,864,397
Valero Energy Corp. 779,300 42,191,302

Personal products (0.9%)
Coty, Inc. Class A 2,921,700 50,224,023

Pharmaceuticals (7.5%)
AstraZeneca PLC ADR (United Kingdom) 882,500 67,078,825
Eli Lilly & Co. 1,947,300 123,770,388
Johnson & Johnson 1,164,870 120,831,965
Merck & Co., Inc. 1,081,800 65,026,998
Pfizer, Inc. 2,281,286 67,046,996

Real estate investment trusts (REITs) (2.2%)
American Tower Corp.(R) 276,200 27,233,320
Equity Lifestyle Properties, Inc.(R) 615,700 28,131,333
Gaming and Leisure Properties, Inc.(R)(S) 750,600 24,994,980
Hatteras Financial Corp.(R) 464,400 9,241,560
MFA Financial, Inc.(R) 4,883,805 41,219,314

Real estate management and development (0.3%)
Altisource Portfolio Solutions SA(NON)(S) 187,900 18,776,847

Road and rail (0.8%)
Union Pacific Corp. 474,000 49,897,980

Semiconductors and semiconductor equipment (2.9%)
Fairchild Semiconductor International, Inc.(NON)(S) 1,482,956 26,025,878
Intel Corp. 1,092,200 38,139,624
Maxim Integrated Products, Inc. 851,000 26,287,390
NXP Semiconductor NV(NON) 592,200 40,577,544
Texas Instruments, Inc. 784,400 37,792,392

Software (0.3%)
Symantec Corp. 814,700 19,780,916

Specialty retail (0.6%)
Gap, Inc. (The) 317,100 14,634,165
Office Depot, Inc.(NON) 4,098,500 20,984,320

Technology hardware, storage, and peripherals (3.7%)
Apple, Inc. 706,300 72,395,750
EMC Corp. 1,991,200 58,800,136
SanDisk Corp. 500,610 49,039,756
Seagate Technology PLC 640,400 40,076,232

Thrifts and mortgage finance (0.4%)
Radian Group, Inc. 1,811,385 26,373,766

Tobacco (1.9%)
Altria Group, Inc. 1,087,300 46,840,884
Philip Morris International, Inc. 738,850 63,230,783

Wireless telecommunication services (0.7%)
Vodafone Group PLC ADR (United Kingdom) 1,284,710 44,116,941


Total common stocks (cost $4,213,851,683) $5,641,227,077

Principal amount Value

MGIC Investment Corp. cv. sr. notes 5s, 2017 $18,271,000 $20,269,391
WESCO International, Inc. cv. company guaranty sr. unsec. notes 6s, 2029 6,471,000 19,299,758

Total convertible bonds and notes (cost $27,440,612) $39,569,149

Shares Value

American Tower Corp. Ser. A, $5.25 cv. pfd.(R) 59,937 $6,791,611
ArcelorMittal SA Ser. MTUS, $1.50 cv. pfd. (France) 183,261 4,111,919
McDermott International, Inc. $1.563 cv. pfd. 606,059 15,242,384
Stanley Black & Decker, Inc. $6.25 cv. pfd. 23,762 2,761,140

Total convertible preferred stocks (cost $28,102,900) $28,907,054

Shares Value

Putnam Short Term Investment Fund 0.04%(AFF) 191,659,970 $191,659,970
Putnam Cash Collateral Pool, LLC 0.18%(d) 26,306,350 26,306,350

Total short-term investments (cost $217,966,320) $217,966,320


Total investments (cost $4,487,361,515)(b) $5,927,669,600

Key to holding's abbreviations
ADR American Depository Receipts: represents ownership of foreign securities on deposit with a custodian bank
Notes to the fund's portfolio
Unless noted otherwise, the notes to the fund's portfolio are for the close of the fund's reporting period, which ran from December 1, 2013 through August 31, 2014 (the reporting period). Within the following notes to the portfolio, references to “ASC 820” represent Accounting Standards Codification 820 Fair Value Measurements and Disclosures, references to “Putnam Management” represent Putnam Investment Management, LLC, the fund's manager, an indirect wholly-owned subsidiary of Putnam Investments, LLC and references to “OTC”, if any, represent over-the-counter.
(a) Percentages indicated are based on net assets of $5,897,525,528.
(b) The aggregate identified cost on a tax basis is $4,488,750,449, resulting in gross unrealized appreciation and depreciation of $1,474,691,195 and $35,772,044, respectively, or net unrealized appreciation of $1,438,919,151.
(NON) Non-income-producing security.
(AFF) Affiliated company. The rate quoted in the security description is the annualized 7-day yield of the fund at the close of the reporting period. Transactions during the period with Putnam Money Market Liquidity Fund and Putnam Short Term Investment Fund, which are under common ownership and control, were as follows:
Name of affiliate Fair value at the beginning of the reporting period Purchase cost Sale proceeds Investment income Fair value at the end of the reporting period

Putnam Money Market Liquidity Fund * $— $44,532,874 $44,532,874 $4,954 $—
Putnam Short Term Investment Fund * 87,139,355 856,079,650 751,559,035 68,351 191,659,970
Totals $87,139,355 $900,612,524 $796,091,909 $73,305 $191,659,970

* Management fees charged to Putnam Money Market Liquidity Fund and Putnam Short Term Investment Fund have been waived by Putnam Management.
(d) Affiliated company. The fund may lend securities, through its agent, to qualified borrowers in order to earn additional income. The loans are collateralized by cash in an amount at least equal to the fair value of the securities loaned. The fair value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The risk of borrower default will be borne by the fund’s agent; the fund will bear the risk of loss with respect to the investment of the cash collateral.
The fund received cash collateral of $26,354,025, which is invested in Putnam Cash Collateral Pool, LLC, a limited liability company managed by an affiliate of Putnam Management. Investments in Putnam Cash Collateral Pool, LLC are valued at its closing net asset value each business day. There are no management fees charged to Putnam Cash Collateral Pool, LLC. The rate quoted in the security description is the annualized 7-day yield at the close of the reporting period. At the close of the reporting period, the value of securities loaned amounted to $26,306,350.
(R) Real Estate Investment Trust.
(S) Security on loan, in part or in entirety, at the close of the reporting period.
Security valuation: Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets, and are classified as Level 1 securities under ASC 820. If no sales are reported, as in the case of some securities that are traded OTC, a security is valued at its last reported bid price and is generally categorized as a Level 2 security.
Investments in open-end investment companies (excluding exchange traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value foreign equity securities taking into account multiple factors including movements in the U.S. securities markets, currency valuations and comparisons to the valuation of American Depository Receipts, exchange-traded funds and futures contracts. These securities, which would generally be classified as Level 1 securities, will be transferred to Level 2 of the fair value hierarchy when they are valued at fair value. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value and are classified as Level 2 securities.
To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security's fair value, the security will be valued at fair value by Putnam Management in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures and recovery rates. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.

ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:

Valuation inputs

Investments in securities: Level 1 Level 2 Level 3
Common stocks*:
    Consumer discretionary $633,830,018 $— $—
    Consumer staples 427,775,704
    Energy 648,632,995
    Financials 1,308,373,138
    Health care 834,662,974
    Industrials 550,374,850
    Information technology 536,364,331
    Materials 210,788,138
    Telecommunication services 214,960,319
    Utilities 275,464,610
Total common stocks 5,641,227,077
Convertible bonds and notes 39,569,149
Convertible preferred stocks 28,907,054
Short-term investments 191,659,970 26,306,350

Totals by level $5,832,887,047 $94,782,553 $—

* Common stock classifications are presented at the sector level, which may differ from the fund's portfolio presentation.

For additional information regarding the fund please see the fund's most recent annual or semiannual shareholder report filed on the Securities and Exchange Commission's Web site, www.sec.gov, or visit Putnam's Individual Investor Web site at www.putnaminvestments.com

Item 2. Controls and Procedures:
(a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

(b) Changes in internal control over financial reporting: Not applicable
Item 3. Exhibits:
Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.

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.

Putnam Equity Income Fund
By (Signature and Title):
/s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer
Date: October 28, 2014

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.

By (Signature and Title):
/s/ Jonathan S. Horwitz
Jonathan S. Horwitz
Principal Executive Officer
Date: October 28, 2014

By (Signature and Title):
/s/ Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer
Date: October 28, 2014