(logo)
Putnam
High Yield
Advantage
Fund
Annual
Report
November 30, 1993
(artwork)
For investors seeking high
current income through a
diversified portfolio of
high-yielding, lower-rated
corporate bonds, with
potential for capital growth
A member
of the Putnam
Family of Funds
Contents
2 How your fund performed
3 From the Chairman
4 Report from Putnam Management
Annual Report
7 Report of Independent Accountants
8 Portfolio of investments owned
14 Financial statements
23 Fund performance supplement
<PAGE>
How your
fund performed
For periods ended November 30, 1993
Total return* First Boston Lehman Brothers
Fund High YieldCorporate Bond
NAV POP Index Index
1 year 19.88% 14.13% 18.65% 13.58%
5 years 80.48 71.86 86.10 75.77
annualized 12.53 11.44 13.23 11.94
Life-of-fund
(since 3/25/86) 129.69 118.75 137.92 111.61
annualized 11.44 10.73 11.95 10.25
Share data NAV POP
November 30, 1992 $ 9.74 $10.23
November 30, 1993 $10.41 $10.93
Distributions Investment In excess of
12 months ended Number income net investment income Total
November 30, 1993 12 $1.152 $.01 $1.162
Current returns
at the end of the period NAV POP
Current dividend rate 9.80% 9.33%
Current 30-day yield 9.42 8.96
Total return at end of most recent calendar quarter
Periods ended December 31, 1993
Cumulative Annualized
NAV POP NAV POP
1 year 21.04% 15.34% -- --
5 years 83.90 75.11 12.96% 11.86%
Life-of-class
(since 3/25/86) 134.25 123.09 11.58 10.88
*Performance data represent past results. Investment return and
net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than
their original cost.
<PAGE>
Terms you need to know
Total return is the change in value of an investment from the
beginning to the end of a period, assuming the reinvestment of
all distributions. It may be shown at net asset value or at
public offering price.
Net asset value (NAV) is the value of all your fund's assets,
minus any liabilities, divided by the number of outstanding
shares, not reflecting any sales charge.
Public offering price (POP) is the price of a mutual fund share
plus the maximum 4.75% sales charge levied at the time of
purchase.
Current dividend rate is calculated by annualizing the net
investment income paid to shareholders in the fund's most recent
distribution, then dividing by the NAV or POP on the last day of
the period.
Current 30-day yield, based only on the fund's net investment
income earnings, is calculated in accordance with Securities and
Exchange Commission guidelines.
Please see the fund performance supplement on page 23 for
additional information about performance comparisons.
<PAGE>
From the
Chairman
(photograph of George Putnam)
(C) Karsh, Ottawa
George Putnam
Chairman
of the Trustees
Dear Shareholder:
November 30, 1993, marked the end of another successful fiscal
year for Putnam High Yield Advantage Fund. Building on the strong
performance results achieved in the first half of the fiscal
year, your fund posted double-digit total returns at both net
asset value and public offering price for the full year. The
fund's performance at net asset value finished ahead of the First
Boston High Yield Index, a popular measure of high-yield bond
performance. Total return performance at both net asset value and
public offering price topped the returns earned by the Lehman
Brothers Corporate Bond Index -- a measure of investment-grade
bond performance -- testifying once again to the fact that
although higher-yielding, lower-rated corporate bonds entail
greater risks than their investment-grade counterparts, they also
have the ability to provide greater rewards.
As Fund Manager Jin Ho explains in the Report from Putnam
Management that follows, the current economic environment of slow
growth and low inflation, combined with investors' demand for
higher yields, has been quite a favorable one for your fund's
holdings. Furthermore, the strength and depth of Putnam's
high-yield management team enabled the fund to take advantage of
many significant investment opportunities that were not
necessarily available to individual investors or most other
institutional managers.
We are optimistic that these positive market conditions will
extend into fiscal 1994 and that your fund will continue to
benefit.
Respectfully yours,
//George Putnam's signature//
George Putnam
January 19, 1994
<PAGE>
Report from
Putnam Management
Putnam High Yield Advantage Fund completed fiscal 1993 with
enviable total returns at both net asset value and public
offering price, garnering praise from many recognized industry
sources along the way. Although past performance is no guarantee
of future results, notable third-party recognition during the
year included many well-known mutual fund rating agencies:
*As of November 30, 1993, Lipper Analytical Services ranked the
fund among the top 25 performers, relative to funds with similar
objectives, for every time period tracked during the life of the
fund. Lipper's high current yield fund category ranges in size
from 74 funds tracked year-to-date to 61 funds tracked for the
five years ended November 30, 1993. Rankings are based on total
return performance, not including sales charges.
*CDA/Wiesenberger placed the fund in the top 20% of 70 and 66
high-yield funds tracked for 3- and 5-year total returns,
respectively, not including sales charges, as of November 30,
1993.
*Morningstar has awarded the fund four or five stars -- the
highest ratings available -- for every two-week period throughout
fiscal 1993. The fund retained a four-star rating through
December 17, 1993, based on risk-adjusted 3- and 5-year total
returns, adjusted for sales charges, as of November 30, 1993.
*Value Line Mutual Fund Survey rated the fund among the top 30%
of funds in the corporate-high yield category on December 28,
1993, for performance through November 30, 1993. Value Line rates
funds on the basis of risk-adjusted three-year performance and
whether or not a fund has outperformed the average return for its
category over the one- and five-year periods.
Strong supply; stronger demand The high-yield market in 1993 has
been characterized by a growing supply of bonds, including over
$45 billion in new public issues and an estimated $15 billion in
privately placed transactions. The good news for fund investors
is that this strong supply is being surpassed by an even stronger
demand for the higher income streams these bonds provide. Demand
for yield pushes high-yield bond prices -- and, consequently,
your fund's net asset value -- higher, although bond prices are
also affected by other factors such as interest rates and
economic growth.
<PAGE>
(line graph)
Cumulative total return on a $10,000 investment since 3/25/86
Putnam High Yield Advantage Fund
- ----- at NAV
_____ at POP
***** First Boston High Yield Index
..... Lehman Brothers Corp. Bond Index
date/ First Boston Lehman fund at fund at
year High Yield Corp Bond NAV POP
3/25/86 10000 10000 10000 9524
11/30/86 10597 10681 10326 9834
11/30/87 11048 10848 10908 10389
11/30/88 12784 12039 12726 12120
11/30/89 12973 13758 12394 11804
11/30/90 12033 14527 11122 10593
11/30/91 17256 16907 16178 15407
11/30/92 20050 18632 19161 18248
11/30/93 23789 21160 22969 21875
Past performance is no assurance of future results.
During the first half of fiscal 1993, yield-seeking investors
kept the fund's incoming cash flows high. At that time, issuers
of higher-yielding, lower-rated bonds were capitalizing on the
strong demand, offering issues that we believed were overpriced.
We elected to focus instead on the more attractively priced
investments then available in the secondary market. As the year
continued, new-issue pricing became more compelling and we were
able to redeploy some of these assets into bonds with higher
current coupons.
Later, when we did identify buying opportunities among new
issues, the expertise and capabilities of our research staff were
invaluable in pinpointing the industries and specific issues that
best enhanced the overall portfolio composition. Bonds from
companies in industry sectors such as gaming, cable television,
telecommunications and health care made significant contributions
to the fund's total return.
Positive outlook for 1994 Entering fiscal 1994, capacity usage
among many companies remains low, corporate price increases have
generally been slight, productivity gains have kept unit labor
costs down, and the global economic recovery is not yet fully
underway. These factors keep the threat of inflation at bay. Low
inflation, supported by moderate economic growth, bodes well for
the high-yield bond market. Continued high demand for yield adds
the potential for further price appreciation within the sector.
As always, we will continue to seek investment opportunities
through our commitment to intensive research and our strong
presence in the high-yield market. We look forward to helping you
seek your financial goals in the new fiscal year.
Top industry sectors among bond holdings (as a % of net assets as
of 11/30/93)
Recreation ...............................10.1%
Cable television .............................8.7%
Metals and mining .........................6.3%
Conglomerates ......................5.5%
Cellular communications ....................5.2%
Health care .................4.9%
Forest products ...............4.5%
Specialty consumer products ...............4.5%
<PAGE>
Portfolio
profiles
TransTexas Gas Corporation TransTexas, a company that explores
for and produces natural gas, has declared bankruptcy twice.
Nevertheless, Putnam Management believes that TransTexas bonds,
with covenants we requested to protect the fund's shareholders,
offer the potential for solid performance.
As the third largest producer of natural gas in Texas, the
company's strengths include low costs, large undeveloped reserves
and an exceptional management team which consistently delivers an
85% "hit ratio." According to Putnam analysts, TransTexas
operates its main business of exploration and production
skillfully and ran into trouble only when it ventured outside its
area of expertise into refining.
We believe expected market growth and the company's strengths,
combined with favorable covenants, make TransTexas bonds an
attractive investment.
Adelphia Cable Communications Corporation A cable pioneer,
Adelphia built its first system in 1952. Currently, Adelphia is
one of the United States' 10 largest cable operators with over 1
million subscribers. The company's commitment to advanced
technologies has improved the quality, reliability and capacity
of its present cable services and provides for many future
developments.
During fiscal 1993, operating cash flow, the industry's benchmark
of financial performance, grew to a healthy 12.3%. Putnam, as the
largest investor in the present issue (used to refinance more
expensive debt), won covenants designed for the protection of
fund shareholders.
We believe Adelphia's strengths make it a good prospect for a
strategic alliance with a large phone company, a development that
would follow industry trends and offer potential benefits to fund
shareholders.
Gaylord Container Corporation Gaylord is a major producer and
distributor of paper and packaging products. Along with mills in
Louisiana, California and Arkansas, the company's 24 converting
facilities make corrugated containers, multiwall bags and grocery
bags for many industries.
Gaylord's strategy is to further its position as one of the
lowest-cost, highest-quality producers in the industry. With the
installation of advanced paper-making technology, Gaylord has
increased production capacity and product quality while trimming
costs. A leading producer of recycled linerboard and recycled
brown paper packaging, Gaylord uses recycled materials for about
40% of its fiber needs versus the industry average of 20%.
We believe the Gaylord bonds, with protective covenants
restricting additional debt, currently offer one of the most
attractive yields in the market.
Although all of the companies met the fund's selection criteria
at the time of purchase, Putnam Management's views on these
companies should not be taken as investment advice. The bonds of
these companies were still viewed favorably as of November 30,
1993, but there is no guarantee the fund will hold these
securities in the future.
<PAGE>
Putnam
High Yield
Advantage
Fund
Annual
Report
For the Year Ended November 30, 1993
Report of Independent Accountants
To the Trustees and Shareholders of
Putnam High Yield Advantage Fund
We have audited the accompanying statement of assets and
liabilities of Putnam High Yield Advantage Fund including the
portfolio of investments owned, as of November 30, 1993, and the
related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in
the period then ended, and the "Financial highlights" for each of
the seven years in the period ended November 30, 1993, and for
the period March 25, 1986 (commencement of operations) to
November 30, 1986. These financial statements and "Financial
highlights" are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and "Financial highlights" based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. 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. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of November 30, 1993 by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and "Financial
highlights" referred to above present fairly, in all material
respects, the financial position of Putnam High Yield Advantage
Fund as of November 30, 1993, the results of its operations for
the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the "Financial
highlights" for each of the seven years in the period ended
November 30, 1993, and for the period March 25, 1986
(commencement of operations) to November 30, 1986, in conformity
with generally accepted accounting principles.
<PAGE>
Coopers & Lybrand
Boston, Massachusetts
January 14, 1994
<PAGE>
Portfolio of
investments owned
November 30, 1993
Corporate Bonds and Notes (94.2%)(a)
Principal Amount Value
Recreation (10.1%)
$ 5,500,000 AMC Entertainment, Inc. sr. sub.
deb. 12 5/8s, 2002 $ 6,215,000
500,000 AMC Entertainment, Inc. sr. sub.
deb. 11 7/8s, 2000 558,750
2,035,000 Arizona Charlies Corp. sub. deb.
12s, 2000(b) 2,024,825
2,350,000 Bally's Casino Inc. sr. disc. notes
zero %, 1998(b) 1,480,500
1,167,000 Belle Casinos Inc. sr. sub. notes
12s, 2000(b) 1,161,165
1,480,000 Capitol Queen Corp. sr. sub.
deb. 12s, 2000(b) 1,302,400
2,220,000 Casino Magic Finance Corp.
1st mtge. deb. 11 1/2s, 2001(b) 2,197,800
2,095,000 Cinemark Mexico sr. notes 12s,
2003(b) 1,974,535
2,750,000 Cinemark USA sr. notes 12s,
2002 3,080,000
2,000,000 Eletson Holdings, Inc. 1st pfd.
mtge. notes 9 1/4s, 2003(c) 2,025,000
9,000,000 Golden Nugget Finance Corp.
1st mtge. deb. 10 5/8s, 2003 8,685,000
5,000,000 Grand Casino Resorts Inc. notes
12 1/2s, 2000 5,387,500
1,124,000 Louisiana Casino Cruise Corp.
sr. sub. 11 1/2s, 1998(b) 1,132,430
7,000,000 Pioneer Finance Corp. gtd. 1st
mtge. 13 1/2s, 1998 7,367,500
3,500,000 Presidential Riverboat Casinos
sr. sub. notes 11 3/4s, 2001(b) 3,395,000
10,019,000 Trump Castle Funding sr. sub.
units 9 1/2s, 1998(d) 8,265,675
6,000,000 Trump Plaza Funding, Inc.
1st mtge. notes 10 7/8s, 2001 6,000,000
12,790,000 Trump Taj Mahal sub. deb. Ser. A,
11.35s, 1999(d) 12,821,975
75,075,055
Cable Television (8.7%)
$20,500,000 Adelphia Communications Corp.
sr. notes 12 1/2s, 2002 $ 23,472,500
4,000,000 Adelphia Communications Corp.
notes 9 7/8s, 2005 4,240,000<PAGE>
2,500,000 Cablevision System Corp. sr. sub.
reset deb. 14s, 2003(b) 2,650,000
5,000,000 Continental Cablevision, Inc. sr.
deb. 9 1/2s, 2013 5,500,000
1,900,000 Continental Cablevision, Inc. sr.
deb. 9s, 2008 2,071,000
11,032,000 Falcon Holdings Group L.P. sr.
sub. notes 11s, 2003(b)(d) 11,556,020
8,000,000 Jones Intercable, Inc. sub. deb.
11 1/2s, 2004 8,920,000
3,000,000 Marcus Cable Co. (L.P.) sr. deb.
11 7/8s, 2005 3,165,000
3,000,000 Royal Crown Corp. sr. secd.
notes 9 3/4s, 2000 3,067,500
64,642,020
Metals and Mining (6.3%)
11,750,000 Haynes International Inc. sr. sub.
notes 13 1/2s, 1999 11,985,000
4,000,000 Haynes International, Inc. Ser. B,
sr. notes 11 1/4s, 1998 4,060,000
10,800,000 Horsehead Industries, Inc. sub.
notes 14s, 1999 9,828,000
21,100,000 Kaiser Aluminum & Chemical Corp.
sr. sub. notes 12 3/4s, 2003 20,730,750
46,603,750
Conglomerates (5.5%)
12,900,000 Collins & Aikman Group, Inc. sub
notes 15s, 1995 13,190,250
3,000,000 Collins & Aikman Group, Inc. sr.
sub. deb. 11 7/8s, 2001 3,075,000
2,425,000 Collins & Aikman Group, Inc. deb.
stepped-coupon zero %
(7 1/2s, 1/31/94), 2005(e) 2,328,000
12,750,000 Jordan Industries, Inc. sr. notes
10 3/8s, 2003 12,877,500
2,475,000 MacAndrews & Forbes Holdings
Inc. sub. deb. 13s, 1999 2,487,375
6,623,000 PA Holdings Corp. sr. sub. notes
13 3/4s, 1999 7,119,725
41,077,850
Cellular Communications (5.2%)
6,550,000 Cellular, Inc. sr. sub. disc. notes
stepped-coupon zero %
(11 3/4s, 9/1/98), 2003(e) 4,257,500
4,000,000 Centennial Cellular sr. notes
8 7/8s, 2001 3,980,000
5,000,000 Comcast Cellular Corp. sr.
participating notes Ser. A,
zero %, 2000 3,075,000
14,000,000 Comcast Cellular Corp. sr.
participating notes Ser. B,
zero %, 2000 8,610,000<PAGE>
5,000,000 Horizon Cellular Telephone Co.
sr. sub. disc. notes stepped-
coupon zero % (11 3/8s,
10/1/97), 2000(b)(e) 3,500,000
9,215,000 McCaw Cellular Communications,
Inc. sr. sub. deb. 12.95s, 1999 9,767,900
8,000,000 NEXTEL Communications Inc.
sr. disc. notes stepped-coupon
zero % (11 1/2s, 9/1/98), 2003(e) 5,360,000
38,550,400
Health Care (4.9%)
1,125,000 Abbey Healthcare Group Inc. sr.
sub. notes 9 1/2s, 2002 1,147,500
4,003,500 EPIC Healthcare Group, Inc. jr.
sub. notes 11s, 2003(b) 2,357,061
3,900,000 EPIC Holdings Inc. sr. sub. notes
10 7/8s, 2003 4,153,500
16,500,000 EPIC Holdings Inc. sr. notes
stepped-coupon zero%
(12s, 3/15/97), 2002(e) 11,962,500
5,625,000 Multicare Cos., Inc. sr. sub. notes
12 1/2s, 2002 6,440,625
9,000,000 Ornda Healthcorp sr. sub. notes
12 1/4s, 2002 10,080,000
36,141,186
Forest Products (4.5%)
28,500,000 Gaylord Container Corp. sr.
sub. deb. stepped-coupon
zero % (12 3/4s, 5/15/96),
2005(e) 22,515,000
7,000,000 Riverwood International Corp. sr.
sub. notes 11 1/4s, 2002 7,595,000
5,000,000 Stone Savannah River Pulp &
Paper Corp. sr. sub. notes
14 1/8s, 2000 3,625,000
33,735,000
Specialty Consumer Products (4.5%)
9,375,000 Equitable Bag Co. sr. notes
12 3/8s, 2002 8,156,250
10,250,000 Playtex Family Products Corp.
sr. sub. disc. notes stepped-
coupon zero % (14 3/4s,
12/15/93), 1997(e) 10,839,375
15,500,000 Revlon Consumer Products Corp.
sr. notes Ser. B, 9 3/8s, 2001 14,725,000
33,720,625
Chemicals (3.2%)
1,325,000 Arcadian Partners L.P. sr. notes
10 3/4s, 2005 1,386,281
5,000,000 G-I Holdings Inc. sr. notes zero %,
1998(b) 3,087,500
6,000,000 Harris Chemical Corp. sr. sub.
notes 10 3/4s, 2003 6,210,000
4,000,000 OSI Specialties Inc. sr. sub. notes
9 1/4s, 2003 4,090,000
5,200,000 Quantum Chemical Corp. sr. sub.
deb. 13s, 2004 5,645,250
5,000,000 UCC Investors Holding, Inc. sub.
notes stepped-coupon zero%
(10 1/2s, 5/1/98), 2005(e) 3,250,000
23,669,031
Automotive Parts (2.8%)
9,150,000 Auburn Hills Trust gtd. exch.
certif. 12 3/8s, 2020 13,770,750
3,000,000 Exide Corp. sr. sub. deb. stepped-
coupon zero% (12 1/4s,
12/15/97), 2004(e) 2,070,000
4,000,000 Key Plastics Corp. sr. notes 14s,
1999 4,700,000
20,540,750
Retail (2.6%)
7,000,000 County Seat Stores units 12s, 2001 6,825,000
4,888,000 Duane Reade Corp. sr. notes
Ser. B 12s, 2002 5,279,040
4,000,000 Finlay Enterprises, Inc. sr. notes
10 5/8s, 2003 4,080,000
3,000,000 Specialty Retailers, Inc. sr. sub.
notes 11s, 2003(b) 3,030,000
19,214,040
Insurance (2.6%)
2,000,000 American Annuity Group, Inc. sr.
notes 9 1/2s, 2001 2,045,000
6,500,000 Bankers Life Holding Corp. sr. sub.
notes Ser. B 13s, 2002 7,540,000
2,000,000 National RE Holdings Corp. sr. sub.
Ser. B notes 14 1/2s, 1999 2,340,000
4,000,000 Reliance Group Holdings sr. sub.
notes 9 3/4s, 2003 4,080,000
3,000,000 Reliance Group Holdings sr. notes
9s, 2000 3,015,000
19,020,000
Food Chains (2.5%)
$16,500,000 Grand Union Co. sub. deb. 12 1/4s,
2002 $ 17,366,250
1,440,000 Megafoods Stores Inc. sr. notes
10 1/4s, 2000 1,411,200
18,777,450
Restaurants (2.5%)
18,536,000 Flagstar Companies,Inc. sr. sub.
deb. 11 1/4s, 2004 18,628,680
Building Products (2.3%)
1,439,000 American Standard, Inc. sub. disc.
deb. 14 1/4s, 2003 1,528,938
3,125,000 Overhead Door Corp. sr. notes
12 1/4s, 2000 3,453,125
7,500,000 Southdown, Inc. sr. sub. deb.
Ser. B, 14s, 2001 8,625,000
3,000,000 Triangle Pacific sr. notes 10 1/2s,
2003 3,123,750
16,730,813
Communications (2.2%)
730,000 Page Mart Inc. sr. disc. notes
stepped-coupon zero %
(12 1/4s, 11/1/98), 2003(b)(e) 4,325,250
18,500,000 Panamsat L.P. sr. sub. notes
stepped-coupon zero %
(11 3/8s, 8/1/98), 2003(e) 11,840,000
16,165,250
Food (2.0%)
1,750,000 Beatrice Foods, Inc. sr. sub. notes
12s, 2001 1,968,750
4,000,000 Fresh Del Monte Produce N.V.
Corp. deb. 10s, 2003(b) 3,720,000
5,000,000 Specialty Foods Corp. sr. sub.
notes 11 3/4s, 2003(b) 5,150,000
7,500,000 Specialty Foods Corp. units
stepped-coupon .5s (13s,
8/15/99), 2005(b)(e) 3,656,250
14,495,000
Containers (1.9%)
5,000,000 Anchor Glass Container Corp.
sr. sub. deb. 9 7/8s, 2008 5,050,000
8,705,000 Ivex Packaging Corp. sr. sub.
notes 12 1/2s, 2002 9,314,350
14,364,350
Publishing (1.8%)
21,000,000 Marvel Holdings, Inc. sr. secd.
notes zero %, 1998 13,020,000
Electrical Equipment (1.7%)
11,050,000 Amphenol Corp. sr. sub. notes
12 3/4s, 2002 12,265,500
Electronics (1.5%)
22,000,000 International Semi-Tech Corp. sr.
secd. disc. notes stepped-
coupon zero % (11 1/2s,
8/15/00), 2003(e) 11,440,000
Electric Utilities (1.5%)
2,000,000 Midland Funding Corp. II sub.
secd. lease oblig. bonds Ser. B,
13 1/4s, 2006 2,340,000
8,000,000 Texas New Mexico Power Corp.
secd. deb. 12 1/2s, 1999 8,840,000
11,180,000
Gas (1.4%)
10,000,000 TransTexas Gas Corp. sr. secd.
notes 10 1/2s, 2000 10,650,000
Broadcasting (1.3%)
7,500,000 Granite Broadcasting Corp. sr.
sub. deb. 12 3/4s, 2002 7,725,000<PAGE>
2,150,000 SFX Broadcasting deb. 11 3/8s,
2000 2,236,000
9,961,000
Advertising (1.3%)
1,000,000 Lamar Advertising Co. sr. secd.
notes 11s, 2003 1,052,500
3,500,000 Outdoor Systems Inc. deb. 10 3/4s,
2003 3,657,500
5,000,000 Universal Outdoor Inc. sub. deb.
11s, 2003(b) 5,075,000
9,785,000
Tobacco (1.2%)
3,475,000 Consolidated Cigar Corp. deb.
10 1/2s, 2003 3,544,500
5,000,000 Mafco, Inc. sr. sub. notes 11 7/8s,
2002 5,325,000
8,869,500
School Busses (1.1%)
7,500,000 Blue Bird Acquisition Corp. sub.
deb. ser. B 11 3/4s, 2002 8,062,500
Agriculture (1.1%)
1,350,000 PMI Acquisition Corp. sr. sub.
notes 10 1/4s, 2003 1,410,750
6,367,000 PMI Acquisition Corp. units
Ser. A. stepped-coupon zero %
(11 1/2s, 3/1/00), 2005(b)(e) 3,167,583
597,400 Premium Standard Farms exch.
pfd. units 12 1/2s, 2000(b) 625,777
2,658,842 Premium Standard Farms sr. secd.
notes 12s, 2000(b) 2,785,137
7,989,247
Consumer Services (1.0%)
5,000,000 Solon Automated Services, Inc. sr.
sub. deb. 13 3/4s, 2002 5,550,000
1,500,000 Solon Automated Services, Inc. sr.
notes 12 3/4s, 2001 1,657,500
7,207,500
Business Services (0.9%)
4,000,000 Bell & Howell Group, Inc. deb.
stepped-coupon zero %
(11 1/2s, 3/1/00), 2005(e) 2,160,000
4,500,000 Sullivan Graphics, Inc. sr. sub.
notes 15s, 2000 4,770,000
6,930,000
Computers (0.9%)
6,300,000 Computervision Corp. sr. sub.
notes 11 3/8s, 1999 4,851,000
14,484,000 DR Holdings Inc. sr. sub. deb.
15 1/2s, 2002(d)(f) 1,520,820
6,371,820
Oil and Gas (0.8%)
6,000,000 Maxus Energy Corp. notes
9 3/8s, 2003 6,000,000
Airlines (0.5%)
3,825,000 USAir, Inc. sr notes 10 3/8s, 2013 3,801,094
Textiles (0.5%)
3,500,000 Foamex (L.P.) Capital Corp. sr.
notes 11 1/4s, 2002 3,771,250
Finance (0.4%)
3,000,000 Comdata Network, Inc. sr. notes
12 1/2s, 1999 3,270,000
Medical Supplies (0.4%)
3,080,000 Wright Medical Technology Inc.
sr. secd. notes 10 3/4s, 2000(b) 3,080,000
Apparel (0.4%)
3,000,000 Guess Jeans, Inc. sr. sub. notes
10s, 2003(b) 3,060,000
Banks (0.2%)
$ 1,250,000 Chevy Chase Savings Bank Inc.
sub. notes 9 1/4s, 2005 $ 1,271,875
Total Corporate Bonds
and Notes ($669,219,017) $699,137,536
Common Stocks (0.6%)(a)
Number of Shares Value
368 CDK Holding Corp. Rights
(acquired 10/31/88, cost
$20,643)(f)(g) $ 8,230
28,002 Charter Medical Corp.(f) 672,048
41,197 Computervision Corp. (acquired
8/21/92, cost $370,773)(g) 96,554
60,000 Dr Pepper Bottling Co. (Texas)(f) 187,500
45,217 Grand Casinos, Inc.(f) 1,107,817
14,480 Kendall International, Inc.(f) 609,970
49 RJR Nabisco Holdings Corp.(f) 319
44,572 SPI Holdings Inc. Class B(f) 406,720
541,314 Solon Automated Services, Inc.
(acquired 6/18/92 cost
$323,250)(f)(g) 338,321
50 Southland Corp.(f) 334
112,500 Specialty Foods Corp.(f) 189,844
34,911 Taj Mahal Holding Corp. Class A(f) 785,498
Total Common Stocks
(cost $2,941,574) $ 4,403,155
Convertible Preferred Stocks (0.6%)(a) (cost $3,811,000)
Number of Shares Value
76,220 Conseco, Inc. Ser. D, $3.25
cv. pfd. $ 4,344,540
Yankee Bonds and Notes (0.5%)(a) (cost $3,981,680)
Principal Amount Value
$ 4,000,000 Banco De Galicia Inc. sr. notes
9s, 2003 $ 3,990,000
<PAGE>
Preferred Stocks (0.3%)(a) (cost $1,600,000)
Number of Shares Value
1,000,000 Playtex Family Products Corp.
Ser. B, $3.50, pfd. (acquired
6/3/92, cost $1,600,000)(g) $ 1,937,500
Warrants (0.3%)(a)(f)
Number of Warrants Expiration Date Value
92,500 Becker Gaming Corp. 11/15/00 $ 231,250
1,167 Belle Casinos Inc. 10/15/03 46,680
610 CDK Holding Corp. Class A
(acquired 10/31/88,
cost $34,165)(g) 7/7/99 13,649
653 CDK Holding Corp. Class B
(acquired 10/31/88,
cost $18,269)(g) 7/7/99 13,305
23,278 Cinemark Mexico 8/1/03 215,322
2,138 Lear Holdings Corp.
(acquired 12/15/88
cost $213,750)(g) 12/1/93 908,438
21,000 Presidential Riverboat
Casinos 9/15/96 89,250
55,000 Southdown, Inc.
(acquired 10/31/91,
cost $165,000)(g) 11/1/96 275,000
1,268 Wright Medical
Technology Inc. 6/30/03 107,800
Total Warrants
(cost $1,050,246) $ 1,900,694
Short-Term Investments (1.7%)(a) (cost $12,512,113)
Principal Amount Value
$12,511,000 Interest in $476,193,000 joint
repurchase agreement dated
November 30, 1993 with Kidder
Peabody & Co., Inc. due
December 1, 1993 with respect
to various U.S. Treasury obligations--
maturity value of $12,512,113 for
an effective yield of 3.2%. $ 12,512,113
Total Investments
(cost $695,115,630)(h) $728,225,538
<PAGE>
Notes
(a) Percentages indicated are based on total net assets of
$742,472,226, which corresponds to a net asset value per share of
$10.41.
(b) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At November 30, 1993, these securities were
valued at $75,494,233 or 10.2% of net assets.
(c) A portion of this security, having a value of $2,025,000 or
0.3% of net assets, has been purchased on a "forward commitment"
basis--that is, the Fund has agreed to take delivery of and make
payment for such securitiy beyond the settlement time of five
business days after the trade date and subsequent to the date of
this report. The purchase price and interest rate of this
security are fixed at the trade date, although the Fund does not
earn any interest on such security until the settlement date.
(d) Income may be received in cash or additional securities at
the discretion of the issuer.
(e) Cash interest will be paid on these obligations at the stated
rate beginning on the stated date.
(f) Non-income-producing security.
(g) Restricted, excluding 144A securities, as to public resale.
At the date of acquisition these securities were valued at cost.
There were no outstanding unrestricted securities of the same
class as those held. Total market value of restricted securities
owned at November 30, 1993 is $3,590,997 or 0.5% of net assets.
(h) The aggregate identified cost for federal income tax purposes
is $695,276,880 resulting in gross unrealized appreciation and
depreciation of $47,000,092 and $14,051,434, respectively, or net
unrealized appreciation of $32,948,658.
<PAGE>
<TABLE>
<CAPTION>
Statement of
assets and liabilities
November 30, 1993
<S> <C> <C>
Assets
Investments in securities, at value (identified cost
$695,115,630) (Note 1) $728,225,538
Cash 261
Dividends, interest and other receivables 14,821,324
Receivable for securities sold 8,926,891
Receivable for shares of the Fund sold 2,709,818
Total assets 754,683,832
Liabilities
Payable for securities purchased $9,749,269
Payable for shares of the Fund repurchased 907,456
Payable for compensation of Manager (Note 2) 917,861
Payable for administrative services (Note 2) 3,410
Payable for compensation of Trustees (Note 2) 563
Payable for investor servicing and custodian fees
(Note 2) 249,598
Payable for distribution fees (Note 2) 298,751
Payable for closed forward currency contracts 20,642
Other accrued expenses 64,056
Total liabilities 12,211,606
Net assets $742,472,226
Represented by
Paid-in capital (Note 4) $766,243,189
Distributions in excess of net investment income (534,703)
Accumulated net realized loss on investment transactions (56,346,168)
Net unrealized appreciation of investments 33,109,908
Total -- Representing net assets applicable to capital
shares outstanding $742,472,226<PAGE>
Computation of net asset value and offering price
Net asset value and redemption price per share
($742,472,226 divided by 71,341,812 shares) $10.41
Offering price per share (100/95.25 of $10.41)* $10.93
*On single retail sales of less than $50,000. On sales of $50,000 or more and on group
sales the offering price is reduced.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
operations
Year ended November 30, 1993
<S> <C> <C>
Investment income:
Interest $ 70,920,548
Dividends 2,056,286
Total investment income 72,976,834
Expenses:
Compensation of Manager (Note 2) $3,283,747
Investor servicing and custodian fees (Note 2) 718,975
Compensation of Trustees (Note 2) 22,499
Reports to shareholders 43,942
Auditing 71,877
Legal 28,991
Postage 99,556
Administrative services (Note 2) 20,515
Distribution fees (Note 2) 1,513,405
Registration fees 4,927
Other 24,016
Total expenses 5,832,450
Net investment income 67,144,384
Net realized gain on investments (Notes 1 and 3) 22,128,062
Net realized loss on forward currency contracts (Notes 1 and 3) (28,347)
Net unrealized appreciation of investments during the year 18,654,171
Net gain on investments 40,753,886
Net increase in net assets resulting from operations $107,898,270
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
changes in net assets
<S> <C> <C>
Year ended November 30
1993 1992
Increase in net assets
Operations:
Net investment income $ 67,144,384 $ 55,213,834
Net realized gain on investments 22,128,062 22,310,680
Net realized gain on foreign currency -- 10,888
Net realized loss on forward currency contracts (28,347) (7,355)
Net unrealized foreign currency translation loss -- (8,693)
Net unrealized appreciation (depreciation) of
investments and forward currency contracts 18,654,171 (7,324,921)
Net increase in net assets resulting
from operations 107,898,270 70,194,433
Undistributed net investment income included
in price of shares sold and repurchased, net 363,601 108,379
Distributions to shareholders from:
Net investment income (68,524,430) (54,305,768)
In excess of net investment income (534,703) --
Increase from capital share transactions (Note 4)218,749,645 99,372,813
Total increase in net assets 257,952,383 115,369,857
Net assets
Beginning of year 484,519,843 369,149,986
End of year (including undistributed (over
distributed) net investment income of
$(534,703) and $1,016,445, respectively) $742,472,226 $484,519,843
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Financial highlights*
(For a share outstanding throughout the period)
For the period
March 25, 1986
(commencement
of operations) to
Year ended November 30 November 30
1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.74 $9.30 $7.38 $9.69 $11.35 $10.94 $11.61 $12.00
Investment Operations
Net Investment Income 1.13 1.23 1.14 1.18 1.37 1.35 1.36 .69
Net Realized and Unrealized
Gain (Loss) on Investments .70 .42 1.98 (2.09) (1.60) .38 (.71) (.31)
Total from Investment
Operations 1.83 1.65 3.12 (.91) (.23) 1.73 .65 .38
Less Distributions from:
Net Investment Income (1.15) (1.21) (1.15) (1.33) (1.32) (1.32) (1.32) (.77)
In Excess of Net
Investment Income (a) (.01) -- -- -- -- -- -- --
Net Realized Gain on
Investments -- -- -- (.07) (.11) -- -- --
Paid in Capital (a) -- -- (.05) -- -- -- -- --
Total Distributions (1.16) (1.21) (1.20) (1.40) (1.43) (1.32) (1.32) (.77)
Net Asset Value,
End of Period $10.41 $9.74 $9.30 $7.38 $9.69 $11.35 $10.94 $11.61
Total Investment Return,
at Net Asset Value (%) (b) 19.88 18.44 45.46 (10.26) (2.61) 16.67 5.64 4.79(c)
Net Assets,
End of Period
(in thousands) $742,472 $484,520 $369,150 $248,111 $346,188 $398,221 $309,912 $196,934
Ratio of Expenses to
Average Net Assets (%) .96 1.14 1.33 1.37 1.23 1.07 1.12 1.24(c)
Ratio of Net Investment
Income to Average
Net Assets (%) 11.04 12.40 13.38 13.92 12.55 12.04 11.65 10.06(c)
Portfolio Turnover (%) 50.89 68.29 74.45 63.29 76.88 97.36 121.08 133.40(d)
*Financial highlights for periods ended through November 30, 1992 have been restated to conform with requirements issued
by the SEC in April 1993.
(a)See Note 1 to Financial Statements.
(b)Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c)Annualized.
(d)Not annualized.
/TABLE
<PAGE>
Notes to
financial statements
November 30, 1993
Note 1
Significant
accounting
policies
The Fund is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment
company. The Fund seeks high current income through a diversified
portfolio of high-yielding, lower-rated corporate bonds with
potential for capital growth.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with
generally accepted accounting principles.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price, or, if no sales are reported-
- -as in the case of some securities traded over the counter--the
last reported bid price, except that certain U.S. government
obligations are stated at the mean between the bid and asked
prices. Securities quoted in foreign currencies are translated
into U.S. dollars at the current exchange rate. Short-term
investments having remaining maturities of 60 days or less are
stated at amortized cost, which approximates market value, and
other investments, including restricted securities, are stated at
fair value following procedures approved by the Trustees. Market
quotations are not considered to be readily available for
long-term corporate bonds and notes; such investments are stated
at fair market value on the basis of valuations furnished by a
pricing service, approved by the Trustees, which determines
valuations for normal, institutional-size trading units of such
securities using methods based on market transactions for
comparable securities and various relationships between
securities which are generally recognized by institutional
traders.
B) Joint trading account Pursuant to an exemptive order issued by
the Securities and Exchange Commission, the Fund may transfer
uninvested cash balances into a joint trading account along with
the cash of other registered investment companies managed by
Putnam Investment Management, Inc. ("Putnam Management")
(formerly known as The Putnam Management Company, Inc.), the
Fund's Manager, a wholly-owned subsidiary of Putnam Investments,
Inc. (formerly known as The Putnam Companies, Inc.), and certain
other accounts. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
<PAGE>
C) Repurchase agreements The Fund, or any joint trading account,
through its custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. The Fund's manager is responsible for
determining that the value of these underlying securities is at
all times at least equal to the resale price, including accrued
interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the
accrual basis and dividend income is recorded on the ex-dividend
date. Discount on zero coupon bonds, original issue discount
bonds and stepped-coupon bonds is accreted according to the
effective yield method. Certain securities held by the Fund pay
interest in the form of cash or additional securities; interest
on such securities is recorded on the accrual basis at the lower
of coupon rate or market value of the securities to be received,
and is allocated to the cost of the securities received on the
payment date. Foreign-denominated receivables and payables are
"marked-to-market" using the current exchange rate. The
fluctuation between the original exchange rate and the current
exchange rate is recorded daily as unrealized gain or loss. Upon
receipt or payment, the Fund realizes a gain or loss amounting to
the difference between the original value and the ending value of
the receivable or payable. Foreign currency gains and losses
related to interest income are reported as part of interest
income.
E) Forward currency contracts A forward currency contract is an
agreement between two parties to buy and sell a currency at a set
price on a future date. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract
is "marked-to-market" daily and the change in market value is
recorded by the Fund as an unrealized gain or loss. When the
contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The
maximum potential loss from such contracts is the aggregate face
value in U.S. dollars at the time the contract was opened;
however, management believes the likelihood of such a loss to be
remote.
F) Federal taxes It is the policy of the Fund to distribute all
of its income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the
Fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of
1986. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation of securities
held and excise tax on income and capital gains.
At November 30, 1993, the Fund had a capital loss carryover of
approximately $65,192,437, available to offset future capital
gains, if any. To the extent that the capital loss carryover is
used to offset realized gains, it is unlikely that the gains so
offset will be distributed to shareholders, since any such
distribution might be taxable as ordinary income.
Loss Carryover Expiration
$49,783,676 November 30, 1998
$15,408,761 November 30, 1999
G) Distributions to shareholders Distributions to shareholders
are recorded by the Fund on the ex-dividend date. At certain
times, the Fund may pay distributions at a level rate even
though, as a result of market conditions or investment decisions,
the Fund may not achieve projected investment results for a given
period.
H) Equalization The Fund follows the accounting practice known as
equalization, by which a portion of the proceeds from sales and
costs of repurchases of shares of beneficial interest equivalent,
on a per share basis, to the amount of distributable investment
income is credited or charged to undistributed net investment
income. As a result, undistributed net investment income per
share is unaffected by sales or repurchases of Fund shares.
Note 2
Management fee,
administrative
services, and
other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net
assets of the Fund for the quarter. Such fee is based on the
following annual rates: 0.7% of the first $100 million of average
net assets, 0.6% of the next $100 million, 0.5% of the next $300
million, 0.45% of the next $500 million and 0.425% of any amount
over $1.0 billion, subject to reduction in any year, under
current law, to the extent that expenses (exclusive of
distribution fees, brokerage, interest and taxes) of the Fund
exceed 2.5% of the first $30 million of average net assets, 2% of
the next $70 million, and 1.5% of any amount over $100 million
and by the amount of certain brokerage commissions and fees (less
expenses) received by affiliates of the Manager on the Fund's
portfolio transactions.
The Fund also reimburses the Manager for the compensation and
related expenses of certain officers of the Fund and their staff
who provide administrative services to the Fund. The aggregate
amount of all such reimbursements is determined annually by the
Trustees. For the year ended November 30, 1993, the Fund paid
$20,515 for these services.
Trustees of the Fund receive an annual Trustee's fee of $1,560
and an additional fee for each Trustees' meeting attended.
Trustees who are not interested persons of the Manager and who
serve on committees of the Trustees receive additional fees for
attendance at certain committee meetings.
Custodial functions for the Fund are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam
Investor Services, a division of PFTC. Fees paid for these
investor servicing and custodial functions for the year ended
November 30, 1993 amounted to $718,975.
Investor servicing and custodian fees reported in the Statement
of operations for the year ended November 30, 1993 have been
reduced by credits allowed by PFTC.
Pursuant to the Fund's distribution plan adopted under Rule 12b-1
of the Investment Company Act of 1940, the Fund pays Putnam
Mutual Funds Corp. (formerly known as Putnam Financial Services,
Inc.), a wholly-owned subsidiary of Putnam Investments, Inc., a
quarterly distribution fee at the annual rate of 0.25% of the
average net assets for shares outstanding (including shares
acquired through reinvestment of distributions on all shares)
attributable to qualifying investment dealers of record for Fund
shareholders. For the year ended November 30, 1993, the Fund paid
$1,513,405 in distribution fees.
During the year ended November 30, 1993, Putnam Mutual Funds
Corp., acting as an underwriter, received net commissions of
$690,185 from the sale of shares of the Fund.
A deferred sales charge of up to 1.00% is assessed on certain
redemptions of shares purchased as part of an investment of $1
million or more. For the year ended November 30, 1993, Putnam
Mutual Funds Corp., acting as underwriter, received $1,464 on
share redemptions.
<PAGE>
Note 3
Purchases
and sales of
securities
During the year ended November 30, 1993, purchases and sales of
investment securities other than short-term investments
aggregated $484,443,997 and $295,632,692, respectively. There
were no purchases and sales of U.S. government obligations. In
determining the net gain or loss on securities sold, the cost of
securities has been determined on the identified cost basis.
Sales of forward currency contracts during the year are
summarized as follows:
Aggregate
Face Value
Contracts open at beginning of year $ 3,020,249
Contracts opened 369,651
Contract closed (3,389,900)
Contracts open at end of year $ --
<PAGE>
<TABLE>
<CAPTION>
Note 4
Capital shares
At November 30, 1993, there was an unlimited number of shares of beneficial interest
authorized. Transactions in capital shares were as follows:
Year ended November 30
1993 1992
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 40,856,725 $415,633,545 29,224,818 $286,926,467
Shares issued in connection with
reinvestment of distributions 3,401,816 34,357,401 2,765,708 27,091,053
44,258,541 449,990,946 31,990,526 314,017,520
Shares repurchased (22,675,269) (230,877,700) (21,924,361)(214,536,328)
Portion represented by undistributed
net investment income -- (363,601) -- (108,379)
Net increase 21,583,272 $218,749,645 10,066,165$ 99,372,813
/TABLE
<PAGE>
Fund
performance
supplement
Putnam High Yield Advantage Fund is a portfolio managed for high
current income primarily through investments in high-yielding,
lower-rated fixed income securities. The fund invests in
lower-rated, high-yielding securities, which pose a greater risk
to principal than higher-rated securities. High-yield securities
are rated lower than investment-grade securities because there is
a greater possibility that negative changes in the issuer's
business condition, or in general economic conditions, may hinder
the issuer's ability to pay principal and interest on the
securities.
Lehman Brothers Corporate Bond Index is an unmanaged list of
publicly traded corporate bonds rated Baa or better by Moody's
Investors Service. First Boston High Yield Index is an unmanaged
list of higher-yielding, lower-rated corporate bonds. The indexes
assume reinvestment of all distributions but do not take into
account brokerage commissions or other costs. The fund
customarily invests in bonds rated lower than those in the Lehman
Brothers Index. The portfolio contains securities that do not
match those in either index.
The fund performance supplement has been prepared by Putnam
Management to provide additional information about the fund and
the indexes used for performance comparisons. The information is
not part of the portfolio of investments owned or the financial
statements.
<PAGE>
Putnam
High Yield
Advantage
Fund
Fund information
Investment manager
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
Marketing services
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
Investor servicing agent
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
1-800-225-1581
Custodian
Putnam Fiduciary
Trust Company
Legal counsel
Ropes & Gray
Independent accountants
Coopers & Lybrand
(DALBAR logo)
Putnam Investor Services
has received the DALBAR
award each year since the
award's 1990 inception.
In more than 10,000 tests
of 38 shareholder
service components,
Putnam outperformed
the industry standard
in every category.
15-10023
<PAGE>
Officers
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
Jin W. Ho
Vice President
and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul O'Neil
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Hans H. Estin, John A. Hill,
Elizabeth T. Kennan, Lawrence J. Lasser,
Robert E. Patterson, Donald S. Perkins,
George Putnam, III, A.J.C. Smith,
W. Nicholas Thorndike
<PAGE>
This report is for the information of
shareholders of Putnam High Yield
Advantage Fund. It may also be used
as sales literature when preceded or
accompanied by the current prospectus,
which gives details of sales charges,
investment objectives and operating
policies of the fund.
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
Bulk Rate
U.S. Postage
Paid
Boston, MA
Permit No. 53749
- --------------------
<PAGE>
APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Rule lines for tables are omitted.
(2) Boldface and italic typefaces are displayed in normal type.
(3) Headers (e.g, the name of the fund) and footers (e.g., page
numbers and "The accompanying notes are an integral part of these
financial statements") are omitted.
(4) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(5) Bullet points and similar graphic signals are omitted.
(6) Page numbering is different.
