CORPORATE
HIGH YIELD
FUND III, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
November 30, 1998
<PAGE>
CORPORATE HIGH YIELD FUND III, INC.
The Benefits and Risks of Leveraging
Corporate High Yield Fund III, Inc. has the ability to utilize leverage through
borrowings or issuance of short-term debt securities or shares of Preferred
Stock. The concept of leveraging is based on the premise that the cost of assets
to be obtained from leverage will be based on short-term interest rates, which
normally will be lower than the return earned by the Fund on its longer-term
portfolio investments. Since the total assets of the Fund (including the assets
obtained from leverage) are invested in higher-yielding portfolio investments,
the Fund's Common Stock shareholders are the beneficiaries of the incremental
yield.
Leverage creates risks for holders of Common Stock including the likelihood of
greater net asset value and market price volatility. In addition, there is the
risk that fluctuations in interest rates on borrowings (or in the dividend rates
on any Preferred Stock, if the Fund were to issue Preferred Stock) may reduce
the Common Stock's yield and negatively impact its market price. If the income
derived from securities purchased with assets received from leverage exceeds the
cost of leverage, the Fund's net income will be greater than if leverage had not
been used. Conversely, if the income from the securities purchased is not
sufficient to cover the cost of leverage, the Fund's net income will be less
than if leverage had not been used, and therefore the amount available for
distribution to Common Stock shareholders will be reduced. In this case, the
Fund may nevertheless decide to maintain its leveraged position in order to
avoid capital losses on securities purchased with leverage. However, the Fund
will not generally utilize leverage if it anticipates that its leveraged capital
structure would result in a lower rate of return for its Common Stock than would
be obtained if the Common Stock were unleveraged for any significant amount of
time.
Portfolio Profile As of November 30, 1998
The quality ratings* of securities in the Fund as of November 30, 1998 were as
follows:
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Percent of
S&P Ratings/Moody's Ratings Long-Term Investments
- --------------------------------------------------------------------------------
BBB/Baa ............................................................. 3.8%
BB/Ba ............................................................... 26.7
B/B ................................................................. 61.4
CCC/Caa ............................................................. 4.7
NR (Not Rated) ...................................................... 3.4
- --------------------------------------------------------------------------------
* In cases where bonds are rated differently by Standard & Poor's Corp. and
Moody's Investors Service, Inc., bonds are categorized according to the
higher of the two ratings.
Percent of Total
Foreign Holdings Long-Term Investments
- --------------------------------------------------------------------------------
Total Foreign Holdings .............................................. 31.0%
Emerging Markets Holdings ........................................... 10.1
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Percent of Total
Five Largest Foreign Countries* Long-Term Investments
- --------------------------------------------------------------------------------
Canada .............................................................. 9.2%
United Kingdom ...................................................... 5.0
Argentina ........................................................... 4.0
Brazil .............................................................. 2.7
Bermuda ............................................................. 2.4
- --------------------------------------------------------------------------------
* All holdings are denominated in US dollars.
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1998
DEAR SHAREHOLDER
High-Yield Market Overview
The high-yield market experienced market extremes during the six months ended
November 30, 1998. The market ranged from overvalued as the period began, to
oversold during the dramatic revaluation of financial markets in the early fall,
and ended the period with a sharp recovery in the month of November. Investor
concerns about companies' ability to sustain earnings growth in the face of weak
overseas markets contributed to a sell-off that began in August and led to
unprecedented illiquidity in the high-yield market and to yield spreads relative
to Treasury securities that have not been seen in the high-yield market since
1990. The unmanaged CS First Boston Index returned -6.79% for the month of
August. Despite a strong rebound total return of +5.07% in November, the Index
returned -3.15% for the six months ended November 30, 1998. The Index includes
about 7% emerging markets bonds, which were especially hard hit. The yield
spread between ten-year Treasury securities and the high-yield market, as
measured by the CS First Boston High Yield Index, widened to 760 basis points
(7.60%) in mid-October from 371 basis points on February 28, 1998 and ended
November at 624 basis points.
Viewing the high-yield market from a yield spread perspective highlights the
good value we continue to see in the market over the long term, though
volatility resulting from ongoing earnings concerns and supply/demand imbalances
may hurt performance in the months ahead. The yield spread is the incremental
yield demanded by investors for the additional credit risk they take on by
investing in the high-yield market rather than in US Government obligations. The
average monthly yield spread between high-yield issues as measured by the CS
First Boston High Yield Index from 1986 to 1997 is 517 basis points compared to
624 basis points at November 30, 1998. This historical period includes 1990 and
1991, two years that experienced the unwinding of considerable speculative
excess in the market, the fall of the dominant high-yield dealer Drexel Burnham
Lambert, and the savings and loan crisis.
In our opinion, the high-yield market continues to offer a measure of
diversification to investors, as well as a reasonable risk/reward profile. The
high-yield market acts as a hybrid market, since it has characteristics of both
the fixed-income and equity markets, although it does not track either exactly.
The performance of the high-yield market has been more closely tied to the
Treasury market in a benign economic environment. On the other hand, when
corporate earnings concerns dominate, as was the case in early fall, the
performance of the high-yield market has more closely followed that of the
equity markets. On a historic basis, high-yield issues have tended to deliver
their returns with about half the volatility of stocks and about the same
volatility as Treasury securities.
Fund Performance
For the six months ended November 30, 1998, the total investment return on the
Fund's Common Stock was -5.92%, based on a change in the per share net asset
value from $14.99 to $13.36, and assuming reinvestment of $0.708 per share
income dividends. During the same period, the net annualized yield of the Fund's
Common Stock was 10.50%. The Fund's performance for the period reflects downward
pressure in emerging market issues, weakness in the high-yield market as a whole
and earnings weakness in specific credits generally related to international
economic upheaval. Weak performance was magnified during the period by leverage.
Leverage Strategy
The Fund was on average 17% leveraged during the six-month period ended November
30, 1998. This means that we borrowed the equivalent of 17% of total assets
invested, earning incremental yield on the investments we made with the borrowed
funds. We expect to maintain leverage in the coming months as market conditions
permit. On November 30, 1998, the Fund was 23.7% leveraged, having borrowed $147
million at a borrowing cost of 5.8%. (For a complete explanation of the benefits
and risks of leveraging, see page 1 of this report to shareholders.)
Investment Strategy
Communications and media remained our largest broad sector category, at
approximately 26% of total long-term investments. Of the narrowly classified
industry groups, the largest allocations were: computer services/electronics,
7.5% of total long-term investments; transportation, 6.8%;
telephony--competitive local exchange carriers, 6.6%; energy, 5.5%; and health
services, 4.4%. Dollar-denominated non-US bonds totaled about 31% of the
portfolio, with emerging market holdings accounting for 10% of total long-term
investments. (See the foreign holdings table on page 1 of this report for the
distribution of non-US, dollar-denominated investments in the portfolio.) At
November 30, 1998, the average maturity for the portfolio was 7 years, 2 months.
We continue to search for value in the markets, discarding issues that we
believe have limited upside potential and adding to positions in companies that
we believe have solid fundamental characteristics.
In Conclusion
We thank you for your investment in Corporate High Yield Fund III, Inc., and we
look forward to assisting you with your financial needs in the months and years
ahead.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Vincent T. Lathbury III
Vincent T. Lathbury III
Senior Vice President and Portfolio Manager
/s/ Elizabeth M. Phillips
Elizabeth M. Phillips
Vice President and Portfolio Manager
January 7, 1999
PORTFOLIO INFORMATION
Ten Largest Holdings
Percent of Total
As of November 30, 1998 Long-Term Investments
- --------------------------------------------------------------------------------
Midland Cogeneration Midland Cogeneration operates a natural
Venture Limited Partnership gas-fired, cogeneration facility located in
Midland County, Michigan. The plant also
produces steam for industrial applications.
Consumers Energy Company, who is Midland's
main customer, indirectly owns a 49% stake
in the company. 2.1%
- --------------------------------------------------------------------------------
Cumulus Media, Inc. Cumulus is one of the largest radio
broadcasting companies in the United States,
owning and operating radio stations
throughout the country. The company also
provides sales and marketing services to
radio stations. 1.8
- --------------------------------------------------------------------------------
Reliance Group Reliance owns property/casualty insurance
Holdings, Inc. and title insurance companies. The companies
underwrite a broad range of standard
commercial and specialty commercial lines of
property and casualty insurance, as well as
title insurance. 1.7
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Nextlink Communications Nextlink provides local, long distance and
Inc. enhanced telephone communications services
to commercial customers. The company
operates in 24 markets in seven states. 1.7
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Parker Drilling Co. Parker is a leading worldwide energy
company, providing contract drilling and
drilling-related services. The company has
land-based, transitional and offshore
drilling operations in domestic and
international markets, including the Gulf of
Mexico and Nigeria. 1.6
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RSL Communications PLC A telecommunications company providing
international services, RSL provides long
distance, calling card, private line,
value-added, and Internet-based services for
businesses, consumers and other
telecommunications carriers. The company
operates on four continents in 20 countries. 1.6
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NTL, Inc./Comcast UK NTL provides communications services to
Cable Partners Ltd. residential, business and wholesale
customers. The company offers residential
telephony, cable television and Internet
access services. NTL also provides national
and international telecommunications, and
satellite and radio communications. NTL
holdings include a position in recently
acquired Comcast UK Cable Partners Ltd. 1.5
- --------------------------------------------------------------------------------
Call-Net Enterprises Inc. The company is the largest alternative
provider of long distance telephone services
in Canada, marketing under the brand name
Sprint Canada. Sprint Communications Company
L.P., the third-largest long distance
services carrier in the United States, owns
approximately 25% of the company's shares. 1.5
- --------------------------------------------------------------------------------
MetroNet Communications MetroNet is the largest competitive local
Corp. telephone provider in Canada, competing with
the telephone companies. The company has
high capacity fiber optic networks in five
major Canadian markets: Toronto, Montreal,
Vancouver, Edmonton and Calgary. The company
is continuing to build in target markets and
will ultimately reach 11 major markets in
Canada. 1.4
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Metrogas S.A. Metrogas is the largest natural gas
distribution company in Argentina. Metrogas
accounts for about 29% of total deliveries
to the country's natural gas market and has
over 1.8 million customers in its service
area in and around Argentina's capital,
Buenos Aires. 1.4
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2 & 3
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Corporate Bonds Cost (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Automotive--1.6% B+ B3 $5,000,000 Breed Technologies Inc., 9.25% due 4/15/2008 (c) $ 5,000,000 $ 4,150,000
B B2 3,000,000 Collins & Aikman Corp., 11.50% due 4/15/2006 2,932,500 3,120,000
------------ ------------
7,932,500 7,270,000
===================================================================================================================================
Broadcasting--Radio CCC NR* 5,000,000 Acme Intermediate Holdings, Series B, 12.28%** due
& Television--3.1% 9/30/2005 3,164,360 2,900,000
B NR* 3,250,000 Chancellor Media Corp., 9% due 10/01/2008 (c) 3,250,000 3,445,000
CCC+ B3 3,000,000 Cumulus Media, Inc., 10.375% due 7/01/2008 3,000,000 3,210,000
B- B2 5,000,000 Lin Television Corp., 8.375% due 3/01/2008 4,988,300 5,000,000
------------ ------------
14,402,660 14,555,000
===================================================================================================================================
Building Materials-- BB Ba3 7,000,000 Building Materials Corp., Series B, 9.475%** due
3.0% 7/01/2004 6,886,742 7,105,000
B+ B1 7,000,000 Nortek Inc., 8.875% due 8/01/2008 (c) 6,974,870 7,175,000
------------ ------------
13,861,612 14,280,000
===================================================================================================================================
Cable--0.8% BB+ Ba2 3,750,000 CSC Holdings Inc., 7.625% due 7/15/2018 3,746,287 3,756,900
===================================================================================================================================
Cable--International-- B- B2 5,000,000 Comcast UK Cable Partners Ltd., 9.775%** due
5.1% 11/15/2007 4,356,771 4,325,000
B- Caa1 1,500,000 Diamond Cable Communications PLC, 10.839%** due
9/30/2004 1,433,840 1,440,000
B- B3 4,000,000 Diamond Holdings PLC, 9.125% due 2/01/2008 4,000,000 3,990,000
BB+ Ba3 5,000,000 Muticanal S.A., 10.50% due 4/15/2018 4,916,500 4,112,500
B- B3 7,500,000 NTL, Inc., 9.085%** due 4/01/2008 (c) 5,214,197 4,875,000
B B3 8,750,000 United International Holdings, Series B, 10.75%**
due 2/15/2008 5,630,607 5,162,500
------------ ------------
25,551,915 23,905,000
===================================================================================================================================
Capital Goods--1.0% B B2 5,000,000 Columbus McKinnon Corp., 8.50% due 4/01/2008 4,986,700 4,850,000
===================================================================================================================================
Chemicals--3.2% NR* NR* 3,000,000 Huntsman Corp., 9.50% due 7/01/2007 (c) 2,962,500 3,000,000
BB- Ba3 7,000,000 ISP Holdings Inc., 9.75% due 2/15/2002 7,498,750 7,446,250
B+ B2 4,250,000 Octel Developments PLC, 10% due 5/01/2006 4,250,000 4,420,000
------------ ------------
14,711,250 14,866,250
===================================================================================================================================
Computer Services/ B Ba3 6,000,000 Advanced Micro Devices, Inc., 11% due 8/01/2003 6,373,125 6,405,000
Electronics--9.7% B+ B1 1,300,000 Celestica International, 10.50% due 12/31/2006 1,420,250 1,420,250
B B2 5,000,000 Hadco Corp., 9.50% due 6/15/2008 4,983,000 4,900,000
B- B3 4,000,000 MCMS Inc., 9.75% due 3/01/2008 4,000,000 3,220,000
B- B3 5,000,000 PSINet Inc., 11.50% due 11/01/2008 (c) 5,000,000 5,300,000
CCC NR* 5,250,000 Splitrock Services Inc., 11.75% due 7/15/2008 5,250,000 4,725,000
BB- Ba3 6,000,000 Unisys Corp., 11.75% due 10/15/2004 7,011,200 6,870,000
Verio Inc.:
B- B3 4,000,000 10.375% due 4/01/2005 4,000,000 3,960,000
B- B3 3,000,000 11.25% due 12/01/2008 (c) 3,000,000 3,112,500
B- B2 7,250,000 Zilog Inc., 9.50% due 3/01/2005 6,846,250 5,510,000
------------ ------------
47,883,825 45,422,750
===================================================================================================================================
Conglomerates--4.4% BBB Baa1 5,000,000 Cendant Corp., 7.75% due 12/01/2003 4,991,400 4,991,400
B- B3 5,000,000 Eagle-Picher Industries, 9.375% due 3/01/2008 4,991,800 4,700,000
BB Ba2 6,000,000 Sequa Corp., 8.75% due 12/15/2001 6,157,500 6,150,000
BB- NR* 5,000,000 Voto-Votorantim O/S Trading, 8.50% due
6/27/2005 (c) 4,765,625 4,462,500
------------ ------------
20,906,325 20,303,900
===================================================================================================================================
Consumer Products-- B- B3 5,000,000 Albecca Inc., 10.75% due 8/15/2008 (c) 5,000,000 5,100,000
5.2% Chattem Inc., Series B:
B- B2 1,000,000 12.75% due 6/15/2004 1,118,750 1,120,000
B- B2 4,000,000 8.875% due 4/01/2008 4,000,000 4,060,000
B B3 8,500,000 Corning Consumer Products, Series B, 9.625% due
5/01/2008 8,410,000 5,822,500
B B2 3,000,000 Revlon Consumer Products, 9.50% due 6/01/1999 3,090,000 3,037,500
B- B3 6,500,000 Syratech Corp., 11% due 4/15/2007 5,397,500 5,200,000
------------ ------------
27,016,250 24,340,000
===================================================================================================================================
Energy--7.1% B B1 5,000,000 Chesapeake Energy Corp., Series B, 9.625% due
5/01/2005 4,938,125 4,550,000
B B1 7,000,000 KCS Energy Inc., Series B, 11% due 1/15/2003 7,726,250 6,580,000
B+ B1 10,000,000 Parker Drilling Co., 9.75% due 11/15/2006 10,310,400 9,662,500
B+ B2 3,000,000 Pool Energy Services Co., 8.625% due 4/01/2008 3,000,000 2,865,000
BB- B1 7,000,000 Tesoro Petroleum Corp., Series B, 9% due 7/01/2008 6,960,030 6,930,000
NR* B3 7,000,000 TransAmerican Energy Corp., Series B, 13.145%**
due 6/15/2002 6,513,466 2,450,000
------------ ------------
39,448,271 33,037,500
===================================================================================================================================
Entertainment--2.6% CCC+ B3 2,000,000 AMF Bowling Worldwide, 10.875% due 3/15/2006 1,960,000 1,700,000
CCC+ B3 5,000,000 AMF Group Inc., Series B, 13.014%** due 3/15/2006 3,645,122 2,850,000
B+ B1 2,500,000 Intrawest Corp., 9.75% due 8/15/2008 2,461,025 2,575,000
B- B3 5,000,000 Premier Parks, Inc., 9.25% due 4/01/2006 5,000,000 5,256,250
------------ ------------
13,066,147 12,381,250
===================================================================================================================================
Financial Services-- CCC+ B2 8,000,000 AMRESCO, Inc., Series 98-A, 9.875% due 3/15/2005 8,042,188 5,680,000
4.9% Reliance Group Holdings, Inc.:
BBB- Ba1 1,500,000 9% due 11/15/2000 1,582,500 1,537,170
BB+ Ba2 8,500,000 9.75% due 11/15/2003 8,956,875 8,795,545
BB- NR* 5,000,000 Veritas Capital Trust, 10% due 1/01/2028 5,312,500 4,650,000
BB NR* 2,300,000 Veritas Holdings GMBH, 9.625% due 12/15/2003 2,501,250 2,363,250
------------ ------------
26,395,313 23,025,965
===================================================================================================================================
Food & Beverage-- B B3 5,000,000 Agrilink Foods Inc., 11.875% due 11/01/2008 (c) 5,000,000 5,150,000
3.8% B+ B1 5,000,000 Aurora Foods Inc., 8.75% due 7/01/2008 5,000,000 5,200,000
B+ Ba3 4,000,000 COTT Corp., 9.375% due 7/01/2005 4,120,000 3,840,000
B- B3 4,500,000 Favorite Brands International Inc., 10.75% due
5/15/2006 (c) 4,060,000 3,622,500
------------ ------------
18,180,000 17,812,500
===================================================================================================================================
</TABLE>
4 & 5
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Corporate Bonds Cost (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Furniture--1.6% B B1 $7,000,000 Lifestyle Furnishings, Inc., 10.875% due 8/01/2006 $ 7,883,750 $ 7,507,500
===================================================================================================================================
Gaming--3.7% BB+ Ba2 5,000,000 Circus Circus Enterprise, 9.25% due 12/01/2005 5,000,000 5,162,500
B+ B2 3,750,000 Station Casinos Inc., 9.75% due 4/15/2007 3,507,140 3,965,625
CCC+ Caa1 9,000,000 Venetian Casino Resorts, 10%** due 11/15/2005 8,533,108 8,010,000
------------ ------------
17,040,248 17,138,125
===================================================================================================================================
Health Services-- B- B3 2,000,000 ALARIS Medical Systems, Inc., 9.75% due 12/01/2006 1,878,125 2,010,000
5.7% BBB Ba2 2,500,000 Columbia Healthcare, 6.41% due 6/15/2000 2,442,950 2,466,952
BBB Ba2 2,000,000 Columbia/HCA Healthcare Corp., 8.85% due 1/01/2007 2,083,120 2,095,860
B- B2 5,000,000 Extendicare Health Services, 9.35% due 12/15/2007 5,026,250 4,750,000
B+ Ba3 2,000,000 Fresenius Medical Care AG, 9% due 12/01/2006 1,987,500 2,090,000
B- B3 6,500,000 Kinetic Concepts, Inc., 9.625% due 11/01/2007 6,641,250 6,223,750
B- B3 7,500,000 Magellan Health Services, 9% due 2/15/2008 7,478,125 7,050,000
------------ ------------
27,537,320 26,686,562
===================================================================================================================================
Hotels--2.7% HMN Properties:
BB Ba2 5,000,000 7.875% due 8/01/2005 4,998,600 4,962,500
BB Ba2 2,000,000 7.875% due 8/01/2008 1,965,000 1,965,000
B B3 7,000,000 Signature Resorts, Inc., 9.75% due 10/01/2007 6,630,000 5,880,000
------------ ------------
13,593,600 12,807,500
===================================================================================================================================
Independent Power Midland Cogeneration Venture Limited
Producers--3.5% Partnership (b):
BB Ba3 2,674,508 10.33% due 7/23/2002 2,895,155 2,805,050
B B2 7,500,000 13.25% due 7/23/2006 9,478,125 9,577,050
BB Ba2 5,000,000 Monterrey Power S.A. de C.V., 9.625% due
11/15/2009 (c) 4,990,800 4,075,000
------------ ------------
17,364,080 16,457,100
===================================================================================================================================
Industrials--1.1% B B3 5,000,000 Neff Corp., 10.25% due 6/01/2008 5,000,000 5,000,000
===================================================================================================================================
Media & BB- Ba3 5,000,000 Antenna TV S.A., 9% due 8/01/2007 5,112,500 4,250,000
Communications-- Call-Net Enterprises Inc.:
3.9% BB- B1 2,000,000 8% due 8/15/2008 1,990,840 1,950,000
BB- B1 12,000,000 8.94%** due 8/15/2008 7,950,487 7,140,000
BB- B2 7,000,000 Globo Comunicacoes e Participacoes S.A., 10.625%
due 12/05/2008 (c) 7,046,000 5,180,000
------------ ------------
22,099,827 18,520,000
===================================================================================================================================
Metals & Mining-- BB Ba2 5,000,000 Great Central Mines Ltd., 8.875% due 4/01/2008 5,000,000 5,050,000
4.3% CCC+ B2 7,000,000 Kaiser Aluminum & Chemical Corp., 12.75% due
2/01/2003 7,460,600 6,930,000
B B3 5,000,000 Ormet Corp., 11% due 8/15/2008 (c) 5,000,000 4,725,000
B- B2 5,000,000 Simcala Inc., Series B, 9.625% due 4/15/2006 5,012,500 3,350,000
------------ ------------
22,473,100 20,055,000
===================================================================================================================================
Paper & Forest CCC+ Caa1 1,000,000 APP International Finance, 11.75% due 10/01/2005 877,500 850,000
Products--3.7% B B3 7,000,000 Ainsworth Lumber Company, 12.50% due 7/15/2007 (a) 6,865,264 6,982,500
B B2 1,500,000 Bear Island LLC, Series B, 10% due 12/01/2007 1,413,750 1,492,500
BB Ba3 7,500,000 Malette Inc., 12.25% due 7/15/2004 8,462,950 8,100,000
------------ ------------
17,619,464 17,425,000
===================================================================================================================================
Product Distribution-- B B2 4,000,000 CEX Holdings Inc., 9.625% due 6/01/2008 (c) 4,000,000 3,660,000
1.5% B- B3 3,500,000 Nebraska Book Company, 8.75% due 2/15/2008 3,500,000 3,316,250
------------ ------------
7,500,000 6,976,250
===================================================================================================================================
Publishing & MDC Communications Corp.:
Printing--1.5% B B3 2,000,000 10.50% due 12/01/2006 1,985,000 2,030,000
B B3 5,000,000 10.50% due 12/01/2006 (c) 4,900,750 5,000,000
------------ ------------
6,885,750 7,030,000
===================================================================================================================================
Real Estate--1.1% BB- Ba3 5,000,000 Forest City Enterprises Inc., 8.50% due 3/15/2008 5,000,000 5,025,000
===================================================================================================================================
Restaurants--0.5% CCC B3 5,000,000 Planet Hollywood International, 12% due 4/01/2005 5,000,000 2,150,000
===================================================================================================================================
Specialty Retailing-- B- B3 5,000,000 Eye Care Centers of America, Inc., 9.125% due
1.0% 5/01/2008 (c) 4,975,550 4,837,500
===================================================================================================================================
Steel--3.0% NR* B2 5,000,000 CSN Iron S.A., 9.125% due 6/01/2007 (c) 4,370,000 3,750,000
B B2 6,250,000 Ucar Global Enterprises, 12% due 1/15/2005 6,592,188 6,562,500
B B3 4,000,000 WHX Corp., 10.50% due 4/15/2005 4,000,000 3,840,000
------------ ------------
14,962,188 14,152,500
===================================================================================================================================
Telephony-- B- Caa1 4,250,000 Esprit Telecom Group PLC, 10.875% due 6/15/2008 4,339,063 4,122,500
Competitive Local B B2 4,000,000 Intermedia Communication Inc., 8.60% due 6/01/2008 4,000,000 3,890,000
Exchange Carriers-- B B3 2,750,000 Level 3 Communications, 9.125% due 5/01/2008 2,738,423 2,753,437
8.5% MetroNet Communications Corp.:
B B3 10,000,000 10%** due 6/15/2008 6,409,861 6,200,000
B B3 2,000,000 10.625% due 11/01/2008 (c) 2,000,000 2,140,000
Nextlink Communications Inc.:
B B3 2,000,000 12.50% due 4/15/2006 2,155,000 2,200,000
B B3 5,000,000 9% due 3/15/2008 4,989,900 4,800,000
NR* B3 5,000,000 9.45%** due 4/15/2008 3,338,653 2,950,000
RSL Communications PLC:
B- B3 2,325,000 10.502%** due 3/01/2008 1,485,120 1,319,438
B- B3 7,800,000 12% due 11/01/2008 (c) 7,371,396 8,190,000
B- B2 1,250,000 Time Warner Telecom LLC, 9.75% due 7/15/2008 1,250,000 1,318,750
------------ ------------
40,077,416 39,884,125
===================================================================================================================================
Textiles--2.6% B B3 7,500,000 Dan River, Inc., 10.125% due 12/15/2003 8,035,950 7,650,000
B B2 4,750,000 Polymer Group Inc., 8.75% due 3/01/2008 4,750,000 4,666,875
------------ ------------
12,785,950 12,316,875
===================================================================================================================================
</TABLE>
6 & 7
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Corporate Bonds Cost (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Transportation--8.8% B B2 $5,000,000 Alpha Shipping PLC, 9.50% due 2/15/2008 $ 4,971,400 $ 2,700,000
B+ B1 4,250,000 American Reefer Co. Ltd., 10.25% due 3/01/2008 4,250,000 3,187,500
BB- NR* 6,000,000 Autopistas del Sol S.A., 10.25% due 8/01/2009 (c) 5,598,750 4,395,000
BB- Ba2 8,000,000 Eletson Holdings, Inc., 9.25% due 11/15/2003 8,090,000 7,600,000
BB- B1 6,100,000 Sea Containers Ltd., 12.50% due 12/01/2004 6,927,375 6,588,000
B+ B2 6,000,000 TFM, S.A. de C.V., 11.896%** due 6/15/2009 3,963,065 3,120,000
BB- Ba3 5,000,000 Transportacion Maritima Mexicana, S.A. de C.V.,
10% due 11/15/2006 5,036,875 4,287,500
B- B3 7,000,000 Transtar Holdings L.P., Series B, 10.547%** due
12/15/2003 6,620,793 6,685,000
B- Caa1 5,000,000 Trism Inc., 10.75% due 12/15/2000 4,425,000 2,550,000
------------ ------------
49,883,258 41,113,000
===================================================================================================================================
Utilities--3.9% BB+ Baa3 5,000,000 Empresa Elec del Norte, 10.50% due 6/15/2005 (c) 5,000,000 3,650,000
NR* B2 5,000,000 Espirito Santo--Escelsa, 10% due 7/15/2007 4,817,500 3,800,000
BB+ NR* 3,000,000 Inversora de Electrica, 9% due 9/16/2004 (c) 2,947,500 2,460,000
BBB- Ba3 8,000,000 Metrogas S.A., 12% due 8/15/2000 8,591,250 8,220,000
------------ ------------
21,356,250 18,130,000
===================================================================================================================================
Wireless CCC+ B2 5,000,000 Cencall Communications Corporation, 8.805%** due
Communications-- 1/15/2004 4,979,625 4,962,500
Domestic Paging & NR* NR* 8,375,000 Pinnacle Holdings Inc., 10%** due 3/15/2008 5,510,433 4,983,125
Cellular--2.1% ------------ ------------
10,490,058 9,945,625
===================================================================================================================================
Wireless B B3 14,000,000 CTI Holdings S.A., 11.586%** due 4/15/2008 8,526,904 5,460,000
Communications-- B+ B3 8,475,000 Comunicacion Celular S.A., 11.302%** due 11/15/2003 7,029,196 5,529,938
International Paging CCC+ Caa1 7,500,000 McCaw International Ltd., 11.522%** due 4/15/2007 5,346,278 4,125,000
& Cellular--5.5% B+ Ba3 5,250,000 Orange PLC, 8% due 8/01/2008 5,209,995 5,328,750
Telesystem International Wireless Inc.:
CCC+ Caa1 4,000,000 Series B, 17.337%** due 6/30/2007 1,734,344 1,800,000
CCC+ Caa1 8,000,000 Series C, 10.683%** due 11/01/2007 5,286,804 3,760,000
------------ ------------
33,133,521 26,003,688
===================================================================================================================================
Total Investments in Corporate Bonds--125.7% 640,750,385 588,968,365
===================================================================================================================================
<CAPTION>
Shares
Held Preferred Stocks
===================================================================================================================================
<S> <C> <C> <C> <C>
Broadcasting--Radio 7,240 Cumulus Media, Inc., Series A, 13.75% 7,322,800 7,746,800
& Television--1.6%
===================================================================================================================================
Product Distribution-- 54,254 Nebco Evans Holding Co., 11.25% (a) 5,317,866 2,875,462
0.6%
===================================================================================================================================
Wireless 4,230 Rural Cellular Corp., Series B, 11.375% (a) 4,278,875 4,018,500
Communications--
Domestic Paging &
Cellular--0.9%
===================================================================================================================================
Total Investments in Preferred Stocks--3.1% 16,919,541 14,640,762
===================================================================================================================================
<CAPTION>
Face
Amount Short-Term Securities
===================================================================================================================================
<S> <C> <C> <C> <C>
Commercial $ 714,000 General Motors Acceptance Corp., 5.50% due
Paper***--0.2% 12/01/1998 714,000 714,000
===================================================================================================================================
Total Investments in Short-Term Securities--0.2% 714,000 714,000
===================================================================================================================================
Total Investments--129.0% $658,383,926 604,323,127
============
Liabilities in Excess of Other Assets--(29.0%) (135,831,444)
------------
Net Assets--100.0% $468,491,683
============
===================================================================================================================================
</TABLE>
* Not Rated.
** Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Fund.
*** Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Fund.
(a) Represents a pay-in-kind security which may pay interest/dividends
in additional face amount/shares.
(b) Subject to principal paydowns.
(c) The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
See Notes to Financial Statements.
8 & 9
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1998
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of November 30, 1998
============================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$658,383,926) (Note 1a) ........ $604,323,127
Cash ................................................................... 2,963,317
Receivables:
Interest ............................................................. $ 13,701,289
Dividends ............................................................ 173,380 13,874,669
------------
Deferred organization expenses (Note 1e) ............................... 15,864
Prepaid expenses and other assets ...................................... 43,690
------------
Total assets ........................................................... 621,220,667
------------
============================================================================================================================
Liabilities: Loans (Note 5) ......................................................... 147,000,000
Payables:
Securities purchased ................................................. 3,135,880
Dividends to shareholders (Note 1f) .................................. 1,384,979
Interest on loans (Note 5) ........................................... 564,722
Investment adviser (Note 2) .......................................... 274,586
Commitment fees ...................................................... 16,569 5,376,736
------------
Accrued expenses and other liabilities ................................. 352,248
------------
Total liabilities ...................................................... 152,728,984
------------
============================================================================================================================
Net Assets: Net assets ............................................................. $468,491,683
============
============================================================================================================================
Capital: Common Stock, $.10 par value, 200,000,000 shares authorized ............ $ 3,506,970
Paid-in capital in excess of par ....................................... 521,675,130
Undistributed investment income--net ................................... 4,244,031
Accumulated realized capital losses on investments--net ................ (6,873,649)
Unrealized depreciation on investments--net ............................ (54,060,799)
------------
Total--Equivalent to $13.36 per share based on 35,069,700 shares of
capital stock outstanding (market price $12.625) ....................... $468,491,683
============
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended November 30, 1998
============================================================================================================================
<S> <C> <C> <C>
Investment Interest and discount earned ........................................... $ 28,620,208
Income (Note 1d): Dividends .............................................................. 826,885
Other .................................................................. 91,318
------------
Total income ........................................................... 29,538,411
------------
============================================================================================================================
Expenses: Loan interest expense (Note 5) ......................................... $ 2,685,474
Investment advisory fees (Note 2) ...................................... 1,716,385
Borrowing cost (Note 5) ................................................ 114,656
Accounting services (Note 2) ........................................... 36,999
Professional fees ...................................................... 27,712
Custodian fees ......................................................... 22,825
Directors' fees and expenses ........................................... 19,717
Transfer agent fees .................................................... 15,106
Printing and shareholder reports ....................................... 12,694
Pricing services ....................................................... 4,042
Amortization of organization expenses (Note 1e) ........................ 1,872
Other .................................................................. 8,524
------------
Total expenses ......................................................... 4,666,006
------------
Investment income--net ................................................. 24,872,405
------------
============================================================================================================================
Realized & Realized loss on investments--net ...................................... (7,909,057)
Unrealized Loss Change in unrealized depreciation on investments--net .................. (48,970,920)
on Investments-- ------------
Net (Notes 1b, Net Decrease in Net Assets Resulting from Operations ................... $(32,007,572)
1d & 3): ============
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended Jan. 30, 1998+
Increase (Decrease) in Net Assets: Nov. 30, 1998 to May 31, 1998
============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ................................................. $ 24,872,405 $ 14,458,735
Realized gain (loss) on investments--net ............................... (7,909,057) 1,035,408
Change in unrealized depreciation on investments--net .................. (48,970,920) (5,089,879)
------------ ------------
Net increase (decrease) in net assets resulting from operations ........ (32,007,572) 10,404,264
------------ ------------
============================================================================================================================
Dividends to Investment income--net ................................................. (24,755,281) (10,331,828)
Shareholders ------------ ------------
(Note 1f): Net decrease in net assets resulting from dividends to shareholders .... (24,755,281) (10,331,828)
------------ ------------
============================================================================================================================
Capital Stock Value of shares issued to Common Stock shareholders in reinvestment
Transactions of dividends ........................................................... 1,397,095 --
(Notes 1e & 4): Proceeds from issuance of Common Stock ................................. -- 524,250,000
Offering costs resulting from issuance of Common Stock ................. -- (565,000)
------------ ------------
Net increase in net assets derived from capital stock transactions ..... 1,397,095 523,685,000
------------ ------------
============================================================================================================================
Net Assets: Total increase (decrease) in net assets ................................ (55,365,758) 523,757,436
Beginning of period .................................................... 523,857,441 100,005
------------ ------------
End of period* ......................................................... $468,491,683 $523,857,441
============ ============
============================================================================================================================
*Undistributed investment income--net ................................... $ 4,244,031 $ 4,126,907
============ ============
============================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
10 & 11
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1998
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended November 30, 1998
================================================================================================================================
<S> <C> <C>
Cash Provided by Net decrease in net assets resulting from operations .................................. $(32,007,572)
Operating Activities: Adjustments to reconcile net decrease in net assets resulting from
operations to net cash provided by operating activities:
Increase in receivables ............................................................. (3,629,429)
Increase in other assets ............................................................ (25,000)
Increase in other liabilities ....................................................... 324,228
Realized and unrealized loss on investments--net .................................... 56,879,977
Amortization of discount ............................................................ (4,892,217)
------------
Net cash provided by operating activities ............................................. 16,649,987
------------
================================================================================================================================
Cash Used for Proceeds from sales of long-term investments .......................................... 98,896,401
Investing Activities: Purchases of long-term investments .................................................... (235,368,231)
Purchases of short-term investments ................................................... (105,126,633)
Proceeds from sales and maturities of short-term investments .......................... 104,435,000
------------
Net cash used for investing activities ................................................ (137,163,463)
------------
================================================================================================================================
Cash Provided by Cash receipts from borrowings ......................................................... 214,700,000
Financing Activities: Cash payments on borrowings ........................................................... (67,700,000)
Dividends paid to shareholders ........................................................ (23,523,207)
------------
Net cash provided by financing activities ............................................. 123,476,793
------------
================================================================================================================================
Cash: Net increase in cash .................................................................. 2,963,317
Cash at beginning of period ........................................................... --
------------
Cash at end of period ................................................................. $ 2,963,317
============
================================================================================================================================
Cash Flow Cash paid for interest ................................................................ $ 2,120,752
Information: ============
================================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Six For the Period
Months Ended Jan. 30, 1998+
Increase (Decrease) in Net Assets: Nov. 30, 1998 to May 31, 1998
================================================================================================================================
<S> <C> <C> <C>
Per Share Net asset value, beginning of period .................................. $ 14.99 $ 15.00
Operating ------------ ------------
Performance: Investment income--net .............................................. .71 .42
Realized and unrealized loss on investments--net .................... (1.63) (.11)
------------ ------------
Total from investment operations ...................................... (.92) .31
------------ ------------
Less dividends from investment income--net ............................ (.71) (.30)
------------ ------------
Capital charge resulting from issuance of Common Stock ................ -- (.02)
------------ ------------
Net asset value, end of period ........................................ $ 13.36 $ 14.99
============ ============
Market price per share, end of period ................................. $ 12.625 $ 14.1875
============ ============
================================================================================================================================
Total Investment Based on net asset value per share .................................... (5.92%)++ 2.00%++
Return:** ============ ============
Based on market price per share ....................................... (6.07%)++ (3.46%)++
============ ============
================================================================================================================================
Ratios to Average Expenses, net of reimbursement and excluding interest expense ......... .82%* --
Net Assets: ============ ============
Expenses, net of reimbursement ........................................ 1.93%* .10%*
============ ============
Expenses .............................................................. 1.93%* .69%*
============ ============
Investment income--net ................................................ 10.27%* 8.46%*
============ ============
================================================================================================================================
Leverage: Amount of borrowings (in thousands) ................................... $ 147,000 --
============ ============
Average amount of borrowings outstanding during the period
(in thousands) ........................................................ $ 107,507 --
============ ============
Average amount of borrowings outstanding per share during the period .. $ 3.07 --
============ ============
================================================================================================================================
Supplemental Net assets, end of period (in thousands) .............................. $ 468,492 $ 523,857
Data: ============ ============
Portfolio turnover .................................................... 15.90% 16.79%
============ ============
================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Corporate High Yield Fund III, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, closed-end management
investment company. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles which may require the use of
management accruals and estimates. These unaudited financial statements reflect
all adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund will determine and make available for
publication the net asset value of its Common Stock on a weekly basis. The
Fund's Common Stock is listed on the New York Stock Exchange under the symbol
CYE. The following is a summary of significant accounting policies followed by
the Fund.
(a) Valuation of investments--Portfolio securities are valued on the basis of
prices furnished by one or more pricing services which determine prices for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders. In
certain circumstances, portfolio securities are valued at the last sale price on
the exchange that is the primary market for such securities, or the last quoted
bid price for those securities for which the over-the-counter market is the
primary market or for listed securities in which there were no sales during the
day. The value of interest rate swaps, caps and floors is determined in
accordance with a formula and then confirmed periodically by obtaining a bank
quotation. Options written or purchased are valued at the last sale price in the
case of
12 & 13
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). Obligations with remaining maturities of sixty days
or less are valued at amortized cost, which approximates market value, unless
this method no longer produces fair valuations. Rights or warrants to acquire
stock, or stock acquired pursuant to the exercise of a right or warrant, may be
valued taking into account various factors such as original cost to the Fund,
earnings and net worth of the issuer, market prices for securities of similar
issuers, assessment of the issuer's future prosperity, liquidation value or
third party transactions involving the issuer's securities. Securities for which
there exist no price quotations or valuations and all other assets including
futures contracts and related options are valued at fair value as determined in
good faith by or on behalf of the Board of Directors of the Fund.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Options--The Fund is authorized to write and purchase call and put options.
When the Fund writes an option, an amount equal to the premium received by the
Fund is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
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.
o Interest rate transactions--The Fund is authorized to enter into interest rate
swaps and purchase or sell interest rate caps and floors. In an interest rate
swap, the Fund exchanges with another party their respective commitments to pay
or receive interest on a specified notional principal amount. The purchase of an
interest rate cap (or floor) entitles the purchaser, to the extent that a
specified index exceeds (or falls below) a predetermined interest rate, to
receive payments of interest equal to the difference between the index and the
predetermined rate on a notional principal amount from the party selling such
interest rate cap (or floor).
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates. Interest income (including
amortization of discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost basis.
(e) Deferred organization and offering expenses--Deferred organization expenses
are amortized on a straight-line basis over a period not exceeding five years.
Direct expenses relating to the public offering of the Fund's Common Stock were
charged to capital at the time of issuance of the shares.
(f) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operation of the Fund. For such services the Fund pays a monthly fee at
an annual rate of 0.60% of the Fund's average weekly net assets plus the
proceeds of any outstanding principal borrowed.
During the six months ended November 30, 1998, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), $419 for security price quotations to compute the net
asset value of the Fund.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended November 30, 1998 were $238,504,111 and $89,806,946, respectively.
Net realized losses for the six months ended November 30, 1998 and net
unrealized losses as of November 30, 1998 were as follows:
- -------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
- -------------------------------------------------------------------------------
Long-term investments .......................... $(7,909,057) $(54,060,799)
----------- ------------
Total .......................................... $(7,909,057) $(54,060,799)
=========== ============
- -------------------------------------------------------------------------------
As of November 30, 1998, net unrealized depreciation for Federal income tax
purposes aggregated $54,060,799, of which $5,738,959 related to appreciated
securities and $59,799,758 related to depreciated securities. The aggregate cost
of investments at November 30, 1998 for Federal income tax purposes was
$658,383,926.
4. Capital Share Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, par value
$.10, all of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to classify and reclassify any unissued shares
of capital stock without approval of the holders of Common Stock.
Shares issued and outstanding during the six months ended November 30, 1998
increased by 113,033 as a result of dividend reinvestment and during the period
January 30, 1998 to May 31, 1998 increased by 34,950,000 as a result of the
initial offering.
5. Short-Term Borrowings:
On June 10, 1998, the Fund entered into a one-year credit agreement with a
syndicate of banks led by BankBoston, N.A. and State Street Bank and Trust
Company. The agreement is for a $250,000,000 credit facility bearing interest at
the Federal Funds rate plus 0.43% and/or LIBOR plus 0.43%. For the six months
ended November 30, 1998, the average amount borrowed was approximately
$107,507,000 and the daily weighted average interest rate was 4.98%. For the six
months ended November 30, 1998, facility and commitment fees aggregated
approximately $115,000.
6. Subsequent Events:
On December 1, 1998, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.121017 per share,
payable on December 18, 1998 to shareholders of record as of December 11, 1998.
In addition, on December 22, 1998, the Fund's Board of Directors declared an
ordinary income dividend and a long-term capital gains distribution to Common
Stock shareholders in the amount of $.132298 and $.029525 per share,
respectively, payable on January 11, 1999 to shareholders of record as of
December 31, 1998.
14 & 15
<PAGE>
Officers and Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Terry K. Glenn, Executive Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Elizabeth M. Phillips, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
Custodian and Transfer Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
NYSE Symbol
CYE
This report, including the financial information herein, is transmitted to the
shareholders of Corporate High Yield Fund III, Inc. for their information. It is
not a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a representation of future
performance. The Fund has leveraged its Common Stock to provide Common Stock
shareholders with a potentially higher rate of return. Leverage creates risk for
Common Stock shareholders, including the likelihood of greater volatility of net
asset value and market price of Common Stock shares, and the risk that
fluctuations in short-term interest rates may reduce the Common Stock's yield.
Statements and other information herein are as dated and are subject to change.
Corporate High
Yield Fund III, Inc.
Box 9011
Princeton, NJ
08543-9011 #COYIII--11/98
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