CORPORATE
HIGH YIELD
FUND III, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
November 30, 1999
<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.
Officers and Directors
Terry K. Glenn, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Arthur Zeikel, Director
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Elizabeth M. Phillips, Vice President
Donald C. Burke, Vice President and Treasurer
William E. Zitelli, Secretary
Custodian and Transfer Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
NYSE Symbol
CYE
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1999
DEAR SHAREHOLDER
High-Yield Market Overview
The high-yield market, which has been in the doldrums for over a year, has
reached valuations that look attractive from a historical perspective. Interest
rate malaise, earnings disappointments and an unfavorable technical picture
pushed yields higher and led to weak performance for the high-yield market as a
whole. Over the past six months, the unmanaged benchmark CS First Boston High
Yield Index lost 0.71%, and the yield of the Index was over 12%. While this is
better than the 1.61% loss on ten-year US Treasury securities, the high-yield
market has clearly been uninspiring. We believe that, in hindsight, such periods
of weakness generally prove to provide good value for long-term investors.
High-yield fundamentals appear to be poised for a favorable longer-term outlook,
although near-term setbacks are still likely. For example, we believe that while
interest rates may rise further in this tightening cycle, it is likely that most
of the damage has been done. Yields on ten-year Treasury notes rose from 4.65%
at December 31, 1998 to over 6% at November 31, 1999. Furthermore, the
difference between yields in the high-yield market and yields of US Treasury
bonds has been at historically high levels, paying investors relatively more
than in the past for the additional credit risk of investing in the high-yield
universe. As measured by the CS First Boston High Yield Index, this difference,
or yield spread, stood at 6.01% on November 30, 1999, compared to 5.64% on May
31, 1999. By contrast, the average spread to US Treasury issues since 1986 has
been near 5.2%.
Corporate earnings trends, while not entirely out of the woods, have encountered
support from a growing world economy. A better earnings environment is notable
in commodities such as oil, gas and paper. Improved cash flows have allowed some
corporate bond issuers to repurchase their high-yield bonds at a discount in the
open market, thus reducing debt and interest expense while strengthening
earnings.
Fund Performance
For the six months ended November 30, 1999, the total investment return on the
Fund's Common Stock was -2.37%, based on a change in the per share net asset
value from $12.98 to $11.89, and assuming reinvestment of $0.752 per share
income dividends. During this period the net annualized yield of the Fund's
Common Stock was 14.63%. Fund performance was hurt during the period by the
overall weakness in the high-yield market and by credit concerns regarding
individual portfolio holdings. In general, we believe that asset values support
these positions or that improving fundamentals will gradually revive sagging
bond prices.
Leverage Strategy
The Fund was on average about 25% leveraged during the six-month period ended
November 30, 1999. Thus, the Fund borrowed the equivalent of 25% of total assets
invested, earning incremental yield on the investments we made with the borrowed
funds. On November 30, 1999, the Fund was 25.3% leveraged, having borrowed
$143.4 million at a borrowing cost of 6.1875%. Given our view that the
high-yield market offers long-term value, we expect to maintain leverage near
current levels. (For a complete explanation of the benefits and risks of
leveraging, see page 1 of this report to shareholders.)
Investment Strategy
Our strategy has been to continue to search out value in the market. Purchases
during the last six months have predominantly reflected this perspective, as we
have concentrated buys in downtrodden industry sectors, such as energy and
transportation, and in growth sectors such as communications. We sold a number
of positions where bond price appreciation was modest because of either small
risk premiums relative to US Treasury bonds or a limited potential for credit
improvement.
During the six-month period ended November 30, 1999, we maintained credit
quality in the portfolio near the benchmark CS First Boston High Yield Index. At
this time, spreads between ratings categories do not present unusual return
opportunities. Even within a rating category, bond selection has been the
critical factor in performance. We would like to point out that in the current
market, bond prices are pushed down dramatically if a company reports earnings
disappointments or fails to meet expectations. This applies to bonds of
better-rated companies, as well as those with weaker credit ratings.
We have weighted several industries more heavily than the benchmark index
because of our view that these industries represent good value relative to
other industries in the high yield universe. Our largest broad industry exposure
is in communications, which includes communications satellites, telephony and
wireless communications. This broad category totaled 21% of long-term
investments at November 30, 1999. We believe that this industry has excellent
long-term growth prospects, as demand for communications services, both wireline
and wireless has been expanding worldwide. Holdings in this category included
Nextel Communications Inc., a rapidly growing wireless telephone operator, and
Nextlink Communications Inc., a high growth alternative telecommunications
provider. Other overweighted industry sectors included energy, health care,
transportation and chemicals. These sectors have all been downtrodden over the
past year and should represent value in coming quarters. We believe that
earnings rebounds by many participants in these industries will provide support
to bond prices.
We continue to overweight emerging markets, which represented 15.2% of total
long-term investments as of November 30, 1999. Typically, these investments are
in bonds of companies with stronger credit profiles than is usual for high-yield
companies. Emerging market bonds have bounced back from their lows during the
Asian economic crisis of the fall of 1998 and appear poised for further
improvement as strength in the world economy supports earnings growth.
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/ Terry K. Glenn
Terry K. Glenn
President and Director
/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 6, 2000
PROXY RESULTS
During the six-month period ended November 30, 1999, Corporate High Yield Fund
III, Inc.'s shareholders voted on the following proposals. The proposals were
approved at the shareholders' meeting on August 25, 1999. The description of
each proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. To elect the Fund's Board of Directors: Terry K. Glenn 33,691,960 1,130,759
Joe Grills 33,685,125 1,137,594
Walter Mintz 33,674,305 1,148,414
Robert S. Salomon, Jr. 33,687,919 1,134,800
Melvin R. Seiden 33,677,498 1,145,221
Stephen B. Swensrud 33,680,298 1,142,421
Arthur Zeikel 33,681,400 1,141,319
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP
as the Fund's independent auditors for the current fiscal year. 33,620,006 825,679 377,034
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2 & 3
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1999
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
S&P Moody's Face
INDUSTRIES Rating Rating Amount Corporate Bonds Value
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Automotive--0.9% NR* Caa3 $5,000,000 Breed Technologies Inc., 9.25% due 4/15/2008 (c) $ 50,000
BB+ Ba2 4,250,000 Federal-Mogul Corporation, 7.375% due 1/15/2006 3,906,872
------------
3,956,872
================================================================================================================================
Broadcasting/Radio NR* NR* 5,000,000 Acme Intermediate Holdings/Finance, 12.28%** due 9/30/2005 3,525,000
Television--2.7% BB- Ba3 5,000,000 Antenna TV SA, 9% due 8/01/2007 4,500,000
B- B3 3,000,000 Cumulus Media, Inc., 10.375% due 7/01/2008 3,127,500
------------
11,152,500
================================================================================================================================
Cable--1.2% B+ B2 5,500,000 Charter Communications Holdings LLC, 8.625% due 4/01/2009 5,197,500
================================================================================================================================
Cable-- BB B1 6,500,000 Cablevision SA, 13.75% due 5/01/2009 (e) 6,370,000
International--7.2% B- B3 1,500,000 Diamond Cable Communications PLC, 10.839%** due 9/30/2004 1,610,625
B- B3 4,000,000 Diamond Holdings PLC, 9.125% due 2/01/2008 3,980,000
BB+ B1 5,000,000 Multicanal SA, 10.50% due 4/15/2018 3,875,000
D Caa3 4,050,000 Supercanal Holdings SA, 11.50% due 5/15/2005 (c)(e) 2,106,000
TeleWest Communications PLC**:
B+ B1 5,000,000 11.001% due 10/01/2007 4,625,000
B+ B1 6,875,000 9.25% due 4/15/2009 (e) 4,193,750
B B3 5,750,000 United International Holdings, 10.757%** due 2/15/2008 (b) 3,608,125
------------
30,368,500
================================================================================================================================
Chemicals--6.4% BBB- Baa3 5,250,000 Equistar Chemicals LP, 8.50% due 2/15/2004 5,246,671
NR* B2 3,000,000 Huntsman Corp., 9.50% due 7/01/2007 (e) 2,820,000
B+ B3 7,500,000 Huntsman ICI Chemicals, 0/13.375%** due 12/31/2009 (e) 2,231,250
BB Ba3 8,750,000 Lyondell Chemical Company, 9.625% due 5/01/2007 9,012,500
B+ B2 4,250,000 Octel Developments PLC, 10% due 5/01/2006 4,228,750
BB- B3 3,250,000 Sterling Chemicals Inc., 12.375% due 7/15/2006 3,347,500
------------
26,886,671
================================================================================================================================
Communications-- B+ B2 9,700,000 Orion Network Systems, Inc., 15.781%** due 1/15/2007 4,510,500
2.3% B- B3 7,000,000 Satelites Mexicanos SA, 10.125% due 11/01/2004 5,075,000
------------
9,585,500
================================================================================================================================
Computer Services/ BB- Ba3 5,250,000 Amkor Technologies Inc., 9.25% due 5/01/2006 (e) 5,092,500
Electronics--5.2% CCC+ B3 7,250,000 MCMS Inc., 9.75% due 3/01/2008 3,117,500
B B2 6,500,000 SCG Holding Corporation, 12% due 8/01/2009 (e) 6,857,500
B- B2 7,500,000 Zilog Inc., 9.50% due 3/01/2005 6,900,000
------------
21,967,500
================================================================================================================================
Conglomerates--1.0% B- B3 5,000,000 Eagle-Picher Industries, 9.375% due 3/01/2008 4,362,500
================================================================================================================================
Consumer Products-- B- B3 7,000,000 Albecca Inc., 10.75% due 8/15/2008 4,812,500
5.0% B- B2 5,250,000 Chattem, Inc., 8.875% due 4/01/2008 4,711,875
B B3 8,500,000 Corning Consumer Products, 9.625% due 5/01/2008 6,683,125
CCC+ Caa1 6,500,000 Syratech Corp., 11% due 4/15/2007 4,582,500
------------
20,790,000
================================================================================================================================
Consumer Services-- BB- B2 2,500,000 Avis Rent A Car, Inc., 11% due 5/01/2009 2,618,750
1.5% B+ B2 8,750,000 Protection One Alarm Monitoring, 8.625% due 1/15/2009 (e) 3,762,500
------------
6,381,250
================================================================================================================================
Energy--7.4% CCC- Caa1 3,750,000 Belden & Blake Corp., 9.875% due 6/15/2007 2,250,000
NR* Ca 5,000,000 Forcenergy, Inc., 8.50% due 2/15/2007 (c) 4,093,750
CCC B3 5,750,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 4,657,500
B+ B1 5,000,000 Parker Drilling Co., 9.75% due 11/15/2006 4,887,500
BBB Baa2 3,000,000 Pool Energy Services Co., 8.625% due 4/01/2008 2,970,000
BB- B1 7,000,000 Tesoro Petroleum Corp., 9% due 7/01/2008 6,746,250
NR* C 7,000,000 TransAmerican Energy Corp., 13% due 6/15/2002 (c) 735,000
B- B3 2,750,000 United Refining Co., 10.75% due 6/15/2007 1,808,125
CCC- Caa3 3,750,000 Wiser Oil Company, 9.50% due 5/15/2007 2,887,500
------------
31,035,625
================================================================================================================================
Entertainment--4.2% CCC+ Caa1 7,000,000 AMF Bowling Worldwide Inc., 14.444%** due 3/15/2006 3,220,000
B+ B1 5,800,000 Intrawest Corp., 9.75% due 8/15/2008 5,655,000
B- B3 5,000,000 Premier Parks, Inc., 9.25% due 4/01/2006 4,887,500
B- Caa1 4,750,000 Regal Cinemas Inc., 9.50% due 6/01/2008 3,871,250
------------
17,633,750
================================================================================================================================
Financial Services-- CCC- Caa3 5,000,000 Amresco Inc., 9.875% due 3/15/2005 2,675,000
6.0% BB Ba3 4,250,000 Port Arthur Finance Corporation, 12.50% due 1/15/2009 (e) 4,250,000
BB- Ba3 5,000,000 RBF Finance Company, 11% due 3/15/2006 5,250,000
BB+ Ba2 8,500,000 Reliance Group Holdings, Inc., 9.75% due 11/15/2003 5,174,375
BB+ Ba3 4,000,000 Sovereign Bancorp, 10.50% due 11/15/2006 4,040,000
B NR* 5,000,000 Veritas Capital Trust, 10% due 1/01/2028 3,750,000
------------
25,139,375
================================================================================================================================
Food & Beverage-- B- B3 5,000,000 Agrilink Foods, Inc., 11.875% due 11/01/2008 4,825,000
2.3% B+ B1 5,000,000 Aurora Foods Inc., 8.75% due 7/01/2008 4,787,500
------------
9,612,500
================================================================================================================================
Forest Products-- CCC+ Caa1 5,500,000 Repap New Brunswick, 10.625% due 4/15/2005 5,060,000
1.2%
================================================================================================================================
Gaming--3.0% BB+ Ba2 7,750,000 Harrah's Operating Co. Inc., 7.875% due 12/15/2005 7,488,437
CCC+ Caa3 9,000,000 Venetian Casino/LV Sands, 10%** due 11/15/2005 5,040,000
------------
12,528,437
================================================================================================================================
</TABLE>
4 & 5
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1999
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
S&P Moody's Face
INDUSTRIES Rating Rating Amount Corporate Bonds Value
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Health Services-- B- B3 $ 2,000,000 ALARIS Medical Systems, Inc., 9.75% due 12/01/2006 $ 1,680,000
7.4% BB+ Ba2 2,500,000 Columbia HCA/Healthcare Corp., 6.41% due 6/15/2000 2,475,045
CCC+ B2 5,000,000 Extendicare Health Services, 9.35% due 12/15/2007 2,950,000
B+ Ba3 2,000,000 Fresenius Medical Capital Trust I, 9% due 12/01/2006 1,895,000
BB Ba3 2,750,000 ICN Pharmaceutical Inc., 8.75% due 11/15/2008 (e) 2,585,000
CCC+ B3 8,750,000 Kinetic Concepts, Inc., 9.625% due 11/01/2007 6,300,000
B- Caa1 7,500,000 Magellan Health Services, 9% due 2/15/2008 6,037,500
D C 5,250,000 Mariner Post--Acute Network, 9.50% due 11/01/2007 210,000
B+ Ba3 7,000,000 Quorum Health Group Inc., 8.75% due 11/01/2005 6,667,500
------------
30,800,045
================================================================================================================================
Hotels & Motels-- HMH Properties, Inc.:
2.9% BB Ba2 5,000,000 7.875% due 8/01/2005 4,625,000
BB Ba2 2,000,000 7.875% due 8/01/2008 1,810,000
B B3 7,000,000 Signature Resorts, Inc., 9.75% due 10/01/2007 5,880,000
------------
12,315,000
================================================================================================================================
Independent Power BB Ba3 7,500,000 Midland Funding II, 13.25% due 7/23/2006 (g) 8,933,250
Producers--3.2% BB Ba1 5,000,000 Monterrey Power, SA de CV, 9.625% due 11/15/2009 (e) 4,400,000
------------
13,333,250
================================================================================================================================
Industrial Services-- Neff Corp.:
1.4% B B3 5,000,000 10.25% due 6/01/2008 4,850,000
B B3 1,000,000 10.25% due 6/01/2008 970,000
------------
5,820,000
================================================================================================================================
Internet Transport-- B- B3 5,000,000 PSINet Inc., 11.50% due 11/01/2008 5,200,000
3.8% NR* NR* 5,250,000 Splitrock Services Inc., 11.75% due 7/15/2008 4,935,000
B- B3 5,500,000 Verio Inc., 10.625% due 11/15/2009 (e) 5,596,250
------------
15,731,250
================================================================================================================================
Metals & Mining-- BB Ba2 5,000,000 Great Central Mines Ltd., 8.875% due 4/01/2008 4,500,000
5.5% CCC+ B3 7,000,000 Kaiser Aluminum & Chemical Corp., 12.75% due 2/01/2003 6,947,500
CCC+ Caa2 5,500,000 Metal Management Inc., 10% due 5/15/2008 4,015,000
B B3 5,000,000 Ormet Corporation, 11% due 8/15/2008 (e) 4,500,000
B- Caa1 5,000,000 Simcala Inc., 9.625% due 4/15/2006 2,975,000
------------
22,937,500
================================================================================================================================
Paper & Forest CCC+ Caa1 1,000,000 APP International Finance, 11.75% due 10/01/2005 821,250
Products--4.6% B B2 3,700,000 Ainsworth Lumber Company, 12.50% due 7/15/2007 (d) 4,070,000
B Caa1 9,000,000 Doman Industries Limited, 8.75% due 3/15/2004 7,582,500
CCC+ Caa1 6,000,000 Pindo Deli Financial Mauritius, 10.75% due 10/01/2007 4,230,000
CCC+ Caa1 3,300,000 Tjiwi Kimia Finance Mauritius, 10% due 8/01/2004 2,359,500
------------
19,063,250
================================================================================================================================
Publishing & B B2 7,000,000 MDC Communications Corp., 10.50% due 12/01/2006 6,895,000
Printing--1.6%
================================================================================================================================
Real Estate--1.8% BB- Ba3 8,250,000 Forest City Enterprises Inc., 8.50% due 3/15/2008 7,672,500
================================================================================================================================
Specialty Retailing B B2 6,000,000 Jo-Ann Stores Inc., 10.375% due 5/01/2007 5,940,000
- --1.4%
================================================================================================================================
Steel--1.9% NR* B2 5,000,000 CSN Iron SA, 9.125% due 6/01/2007 (e) 3,975,000
B Caa1 5,500,000 Republic Technology, 13.75% due 7/15/2009 (a)(e) 3,850,000
------------
7,825,000
================================================================================================================================
Telephony--9.7% Call-Net Enterprises Inc.:
B+ B2 2,000,000 8% due 8/15/2008 1,540,000
B+ B2 12,000,000 8.94%** due 8/15/2008 5,880,000
B- B3 4,250,000 Esprit Telecom Group PLC, 10.875% due 6/15/2008 4,186,250
BB Ba2 2,750,000 Global Crossing Holding Limited, 9.50% due 11/15/2009 (e) 2,715,625
B+ B2 7,000,000 Globo Comunicacoes e Participacoes, Ltd., 10.625% due
12/05/2008 (e) 5,626,250
B B2 4,000,000 Intermedia Communications Inc., 8.60% due 6/01/2008 3,650,000
B+ B2 2,750,000 Metromedia Fiber Network, 10% due 12/15/2009 2,794,688
Nextlink Communications Inc.:
B B2 2,000,000 12.50% due 4/15/2006 2,140,000
B B2 5,000,000 9% due 3/15/2008 4,725,000
B B2 2,000,000 10.75% due 6/01/2009 2,040,000
NR* NR* 5,500,000 Tele1 Europe BV, 13% due 5/15/2009 5,445,000
------------
40,742,813
================================================================================================================================
Textiles--1.7% B B3 2,500,000 Dan River, Inc., 10.125% due 12/15/2003 2,531,250
B B2 4,750,000 Polymer Group Inc., 8.75% due 3/01/2008 4,548,125
------------
7,079,375
================================================================================================================================
Transportation--9.4% B- B3 6,500,000 American Reefer Co. Ltd., 10.25% due 3/01/2008 3,640,000
BB- NR* 6,000,000 Autopistas del Sol SA, 10.25% due 8/01/2009 (e) 4,650,000
BB- Ba3 8,000,000 Eletson Holdings, Inc., 9.25% due 11/15/2003 7,200,000
NR* C 6,500,000 Hvide Marine, Inc., 8.375% due 2/15/2008 (c) 2,632,500
BB- B1 5,350,000 Sea Containers Ltd., 12.50% due 12/01/2004 5,564,000
B+ B2 6,000,000 TFM, SA de CV, 11.896%** due 6/15/2009 3,735,000
BB- Ba3 5,000,000 Transportacion Maritima Mexicana, SA de CV, 10% due
11/15/2006 3,881,250
B- B2 7,000,000 Transtar Holdings LP, 10.547%** due 12/15/2003 7,008,750
D Caa3 5,000,000 Trism Inc., 10.75% due 12/15/2000 (c) 1,050,000
------------
39,361,500
================================================================================================================================
</TABLE>
6 & 7
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1999
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
S&P Moody's Face
INDUSTRIES Rating Rating Amount Corporate Bonds Value
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Utilities--1.5% B+ B2 $ 5,000,000 Espirito Santo--Escelsa, 10% due 7/15/2007 $ 3,987,500
BB NR* 3,000,000 Inversora de Electrica, 9% due 9/16/2004 (e) 2,100,000
------------
6,087,500
================================================================================================================================
Wireless B B1 6,000,000 Nextel Communications Inc., 9.375% due 11/15/2009 (e) 5,955,000
Communications-- B B3 8,375,000 Pinnacle Holdings Inc., 10%** due 3/15/2008 5,255,313
Domestic Paging & NR* NR* 6,000,000 TeleCorp PCS Inc., 11.762%** due 4/15/2009 (e) 3,870,000
Cellular--5.5% CCC+ B3 3,750,000 Triton PCS Inc., 11.232%** due 5/01/2008 2,662,500
B- B2 5,250,000 VoiceStream Wireless Corporation/VoiceStream Wireless
Holding Company, 10.375% due 11/15/2009 (e) 5,473,125
------------
23,215,938
================================================================================================================================
Wireless B B1 13,000,000 CTI Holdings SA, 11.625%** due 4/15/2008 7,150,000
Communications-- B B3 8,475,000 Comunicacion Celular SA, 13.653%** due 3/01/2005 (e) 4,248,094
International Paging CCC+ Caa1 2,750,000 Dolphin Telecom PLC, 17.456%** due 6/01/2008 1,333,750
& Cellular--9.1% B- Caa1 4,750,000 McCaw International Ltd., 11.543%** due 4/15/2007 3,040,000
B- Caa1 12,000,000 Millicom International Cellular SA, 13.861%** due 6/01/2006 9,240,000
BBB Ba3 5,250,000 Orange PLC, 8% due 8/01/2008 5,341,875
Telesystem International Wireless Inc.**:
CCC+ Caa1 6,250,000 17.359% due 6/30/2007 3,687,500
CCC+ Caa1 8,000,000 10.683% due 11/01/2007 4,040,000
------------
38,081,219
================================================================================================================================
Total Investments in Corporate Bonds
(Cost--$624,731,657)--129.9% 544,559,620
================================================================================================================================
<CAPTION>
Shares
Held Preferred Stocks & Warrants
================================================================================================================================
<S> <C> <C> <C>
Broadcasting/ 2,416 Cumulus Media, Inc., Series A, 13.75% (d) 2,633,440
Radio & Television--
0.6%
================================================================================================================================
Computer Services/ 5,250 Splitrock Services Inc. (Warrants) (f) 420,000
Electronics--0.1%
================================================================================================================================
Product Distribution-- 60,617 Nebco Evans Holding Co. (d) 727,404
0.2%
================================================================================================================================
Telephony--0.1% 5,500 Tele1 Europe BV (Warrants) (f) 440,000
================================================================================================================================
Wireless 4,730 Rural Cellular Corp. (Series B) (d) 4,800,950
Communications--
Domestic Paging &
Cellular--1.2%
================================================================================================================================
Total Investments in Preferred Stocks & Warrants
(Cost--$12,928,407)--2.2%) 9,021,794
================================================================================================================================
<CAPTION>
Face
Amount Short-Term Securities
================================================================================================================================
<S> <C> <C> <C>
Commercial $ 248,000 General Motors Acceptance Corp., 5.75% due 12/01/1999 248,000
Paper***--0.0%
================================================================================================================================
Total Investments in Short-Term Securities
(Cost--$248,000)--0.0% 248,000
================================================================================================================================
Total Investments (Cost--$637,908,064)--132.1% 553,829,414
Liabilities in Excess of Other Assets--(32.1%) (134,709,518)
------------
Net Assets--100.0% $419,119,896
============
================================================================================================================================
</TABLE>
* Not Rated.
** Represents a zero coupon or step bond; the interest rate shown reflects
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) Each $1,000 face amount contains one warrant of Republic Technology.
(b) Each $1,000 face amount contains one warrant of United International
Holdings.
(c) Non-income producing security.
(d) Represents a pay-in-kind security which may pay interest/dividends in
additional face/shares.
(e) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(f) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(g) Subject to principal paydowns.
See Notes to Financial Statements.
8 & 9
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1999
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of November 30, 1999
===================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$637,908,064).......... $553,829,414
Cash........................................................... 309
Receivables:
Interest..................................................... $12,761,362
Dividends.................................................... 19,896 12,781,258
-----------
Prepaid expenses and other assets.............................. 74,867
------------
Total assets................................................... 566,685,848
------------
===================================================================================================================
Liabilities: Loans.......................................................... 143,400,000
Payables:
Securities purchased......................................... 2,254,271
Dividends to shareholders.................................... 1,001,237
Interest on loans............................................ 696,772
Investment adviser........................................... 18,458
Commitment fees.............................................. 18,274 3,989,012
-----------
Accrued expenses and other liabilities......................... 176,940
------------
Total liabilities.............................................. 147,565,952
------------
===================================================================================================================
Net Assets: Net assets..................................................... $419,119,896
============
===================================================================================================================
Capital: Common Stock, $.10 par value, 200,000,000 shares authorized.... $ 3,526,004
Paid-in capital in excess of par............................... 524,097,509
Undistributed investment income--net........................... 4,048,016
Accumulated realized capital losses on investments--net........ (27,437,550)
Accumulated distributions in excess of realized
capital gains on investments--net ........................... (1,035,433)
Unrealized depreciation on investments--net.................... (84,078,650)
------------
Total--Equivalent to $11.89 per share based on 35,260,043
shares of capital stock outstanding (market price $10.0625).. $419,119,896
============
===================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended November 30, 1999
===================================================================================================================
<S> <C> <C> <C>
Investment Interest and discount earned................................... $ 31,018,878
Income: Dividends...................................................... 567,232
Other.......................................................... 65,857
------------
Total income................................................... 31,651,967
------------
===================================================================================================================
Expenses: Loan interest expense.......................................... $ 4,280,087
Investment advisory fees....................................... 1,743,586
Borrowing cost................................................. 112,079
Accounting services............................................ 36,425
Professional fees.............................................. 34,646
Transfer agent fees............................................ 31,807
Custodian fees................................................. 23,406
Printing and shareholder reports............................... 22,494
Directors' fees and expenses................................... 19,833
Listing fees................................................... 15,821
Organization expenses.......................................... 13,265
Pricing services............................................... 5,229
Other.......................................................... 14,808
-----------
Total expenses................................................. 6,353,486
------------
Investment income--net......................................... 25,298,481
------------
===================================================================================================================
Realized & Realized loss on investments--net.............................. (2,302,031)
Unrealized Loss on Change in unrealized depreciation on investments--net.......... (34,984,579)
Investments--Net: ------------
Net Decrease in Net Assets Resulting from Operations........... $(11,988,129)
============
===================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1999
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: Nov. 30, 1999 May 31, 1999
========================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ........................................... $ 25,298,481 $ 51,459,837
Realized loss on investments--net ................................ (2,302,031) (25,413,003)
Change in unrealized depreciation on investments--net ............ (34,984,579) (44,004,192)
------------- -------------
Net decrease in net assets resulting from operations ............. (11,988,129) (17,957,358)
------------- -------------
========================================================================================================================
Dividends & Investment income--net ........................................... (26,470,629) (51,124,504)
Distributions to In excess of realized gain on investments--net ................... -- (1,035,433)
Shareholders: ------------- -------------
Net decrease in net assets resulting from dividends
and distributions to shareholders ................................ (26,470,629) (52,159,937)
------------- -------------
========================================================================================================================
Capital Stock Value of shares issued to Common Stock shareholders
Transactions: in reinvestment of dividends and distributions ................... 2,400,682 1,397,095
Offering costs resulting from issuance of Common Stock ........... -- 40,731
------------- -------------
Net increase in net assets derived from capital stock transactions 2,400,682 1,437,826
------------- -------------
========================================================================================================================
Net Assets: Total decrease in net assets ..................................... (36,058,076) (68,679,469)
Beginning of period .............................................. 455,177,972 523,857,441
------------- -------------
End of period* ................................................... $ 419,119,896 $ 455,177,972
============= =============
========================================================================================================================
*Undistributed investment income--net ............................ $ 4,048,016 $ 5,220,164
============= =============
========================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended November 30, 1999
========================================================================================================================
<S> <C> <C>
Cash Provided by Net decrease in net assets resulting from operations ........................... $ (11,988,129)
Operating Activities: Adjustments to reconcile net decrease in net assets resulting
from operations to net cash provided by operating activities:
Decrease in receivables ...................................................... 1,214,516
Increase in other assets ..................................................... (28,735)
Decrease in other liabilities ................................................ (3,875,908)
Realized and unrealized loss on investments--net ............................. 37,286,610
Amortization of discount ..................................................... (5,536,528)
-------------
Net cash provided by operating activities ...................................... 17,071,826
-------------
========================================================================================================================
Cash Provided by Proceeds from sales of long-term investments ................................... 153,499,748
Investing Activities: Purchases of long-term investments ............................................. (134,149,249)
Purchases of short-term investments ............................................ (35,756,700)
Proceeds from sales and maturities of short-term investments 35,865,000
-------------
Net cash provided by investing activities ...................................... 19,458,799
-------------
========================================================================================================================
Cash Used for Cash receipts from borrowings .................................................. 238,500,000
Financing Activities: Cash payments on borrowings .................................................... (250,800,000)
Dividends paid to shareholders ................................................. (24,230,316)
-------------
Net cash used for financing activities ......................................... (36,530,316)
-------------
========================================================================================================================
Cash: Net increase in cash ........................................................... 309
Cash at beginning of period .................................................... --
-------------
Cash at end of period .......................................................... $ 309
=============
========================================================================================================================
Cash Flow Cash paid for interest ......................................................... $ 4,319,222
Information: =============
========================================================================================================================
Non-Cash Reinvestment of dividends and distributions to shareholders..................... $ 2,400,682
Financing Activities: =============
========================================================================================================================
</TABLE>
See Notes to Financial Statements.
12 & 13
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived For the Six For the Year For the Period
from information provided in the financial statements. Months Ended Ended Jan. 30, 1998+
Increase (Decrease) in Net Asset Value: Nov. 30, 1999** May 31, 1999 to May 31, 1998
=================================================================================================================================
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........................ $ 12.98 $ 14.99 $ 15.00
Operating -------- -------- --------
Performance: Investment income--net ..................................... .72 1.47 .42
Realized and unrealized loss on investments--net ........... (1.06) (1.99) (.11)
-------- -------- --------
Total from investment operations ............................ (.34) (.52) .31
-------- -------- --------
Less dividends and distributions:
Investment income--net ..................................... (.75) (1.46) (.30)
In excess of realized gain on investments--net ............. -- (.03) --
-------- -------- --------
Total dividends and distributions ........................... (.75) (1.49) (.30)
-------- -------- --------
Capital charge resulting from issuance of Common Stock ...... -- --++ (.02)
-------- -------- --------
Net asset value, end of period .............................. $ 11.89 $ 12.98 $ 14.99
======== ======== ========
Market price per share, end of period ....................... $10.0625 $12.8125 $14.1875
======== ======== ========
===============================================================================================================================
Total Investment Based on net asset value per share .......................... (2.37%)++ (2.73%) 2.00%+++
Return:*** ======== ======== ========
Based on market price per share ............................. (16.30%)++ 1.45% (3.46%)+++
======== ======== ========
===============================================================================================================================
Ratios to Average Expenses, excluding interest expense ........................ .95%* .85% --*
Net Assets: ======== ======== ========
Expenses, net of reimbursement .............................. 2.92%* 2.28% .10%*
======== ======== ========
Expenses .................................................... 2.92%* 2.28% .69%*
======== ======== ========
Investment income--net ...................................... 11.63%* 10.58% 8.46%*
======== ======== ========
===============================================================================================================================
Leverage: Amount of borrowings (in thousands) ......................... $143,400 $155,700 --
======== ======== ========
Average amount of borrowings outstanding
during the period (in thousands) .......................... $148,075 $126,034 --
======== ======== ========
Average amount of borrowings outstanding per
share during the period ................................... $ 4.21 $ 3.60 --
======== ======== ========
===============================================================================================================================
Supplemental Net assets, end of period (in thousands) .................... $419,120 $455,178 $523,857
Data: ======== ======== ========
Portfolio turnover .......................................... 22.96% 46.86% 16.79%
======== ======== ========
===============================================================================================================================
</TABLE>
* Annualized.
** Based on average shares outstanding.
*** 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
charges.
+ Commencement of operations.
++ Amount is less than $.01 per share.
+++ 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 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).
14 & 15
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
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) Organization and offering expenses--In accordance with Statement of Position
98-5, unamortized organization expenses of $13,265 were expensed during the six
months ended November 30, 1999. This is considered to be a change in accounting
principle and had no material impact on the operations of the Fund. 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. Distributions in excess of realized capital gains are due
primarily to post-October losses.
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 port -folio 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 .60% of the Fund's average weekly net assets plus the proceeds
of any outstanding principal borrowed.
During the six months ended November 30, 1999, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), $1,156 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, 1999 were $131,125,113 and $153,499,748, respectively.
Net realized losses for the six months ended November 30, 1999 and net
unrealized losses as of November 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
- --------------------------------------------------------------------------------
Long-term investments .............. $ (2,302,031) $(84,078,650)
------------ ------------
Total .............................. $ (2,302,031) $(84,078,650)
============ ============
- -------------------------------------------------------------------------------
As of November 30, 1999, net unrealized depreciation for Federal income tax
purposes aggregated $84,078,650, of which $9,375,630 related to appreciated
securities and $93,454,280 related to depreciated securities. The aggregate cost
of investments at November 30, 1999 for Federal income tax purposes was
$637,908,064.
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, 1999 and
the year ended May 31, 1999 increased by 190,343 and 113,033, respectively, as a
result of dividend reinvestment.
5. Short-Term Borrowings:
On June 9, 1999, the Fund extended its one-year credit agreement with State
Street Bank and Trust, Fleet National Bank and certain other institutions party
thereto. The agreement is for a $250,000,000 credit facility bearing interest at
the Federal Funds rate plus .50% and/or LIBOR plus .50%. For the six months
ended November 30, 1999, the average amount borrowed was approximately
$148,075,000 and the daily weighted average interest rate was 5.77%. For the six
months ended November 30, 1999, facility and commitment fees aggregated
approximately $112,000.
6. Capital Loss Carryforward:
At May 31, 1999, the Fund had a net capital loss carryforward of approximately
$6,419,000, all of which expires in 2007. This amount will be available to
offset like amounts of any future taxable gains.
7. Subsequent Event:
On December 1, 1999, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.116994 per share,
payable on December 17, 1999 to shareholders of record as of December 10, 1999.
16 & 17
<PAGE>
Corporate High Yield Fund III, Inc., November 30, 1999
PORTFOLIO INFORMATION
Ten Largest Holdings
Percent of
As of November 30, 1999 Long-Term Investments
================================================================================
Millicom Millicom International develops and operates
International cellular telephone systems worldwide. The
Cellular SA company has interest in 33 cellular systems in
20 countries, primarily in emerging markets in
Asia, Latin America, Europe and Africa. 1.7%
- --------------------------------------------------------------------------------
Lyondell Chemical Lyondell is a global commodity chemical company.
Company The company is the world's largest producer of
propylene oxide and produces a variety of
derivative chemicals based on propylene oxide.
Styrene monomer and tertiary butyl alcohol are
also important products. Lyondell's chemicals have
such end uses as flexible foam for automotive
seating and furniture, antifreeze and coolants,
personal care products, coatings, adhesives,
sealants, resins and solvents. 1.6
- --------------------------------------------------------------------------------
Nextel Nextel offers digital and analog wireless
Communications communications services throughout the United
Inc. States. The company's digital service covers near
one half of the total US population and, once
completed, will enable Nextel to offer nationwide
digital wireless service. Our holdings include
bonds of 100%-owned McCaw International. 1.6
- --------------------------------------------------------------------------------
Midland Funding II Midland Cogeneration operates a natural 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. 1.6
- --------------------------------------------------------------------------------
Nextlink Nextlink provides local, long distance and
Communications enhanced telephone communications services to
Inc. commercial customers. The company operates 23
facilities-based networks with switched local and
long distance service in fourteen states. 1.6
- --------------------------------------------------------------------------------
TeleWest TeleWest offers both cable TV and telephone
Communications PLC service to residential customers and businesses in
the United Kingdom. The company also offers
internet connection services. 1.6
- --------------------------------------------------------------------------------
Telesystem The company is a global wireless
International telecommunications company, which develops,
Wireless Inc. acquires, owns and operates wireless
communications companies in developing markets
throughout the world. Operations are in Romania,
Brazil, India and China. The company also offers
specialized mobile radio and paging services. 1.4
- --------------------------------------------------------------------------------
Forest City Forest City is a diversified real estate
Enterprises Inc. developer. The company develops, acquires, owns
and manages commercial and residential real estate
projects in 21 states and the District of
Columbia. 1.4
- --------------------------------------------------------------------------------
Doman Industries Doman is an integrated Canadian producer of lumber
Limited and pulp. The company grows and harvests timber
and sells lumber, including remanufactured
value-added lumber. Doman produces both dissolving
sulphite pulp and NBSK pulp. Based in British
Columbia, Doman exports a significant amount of
its output. 1.4
- --------------------------------------------------------------------------------
Harrah's Harrah's is a casino and casino/hotel operator,
Operating Co. Inc. primarily in the United States. Its casinos are
known under the Harrah's, Showboat and Rio names.
The company also operates the Star City casino in
Sydney, Australia. 1.4
- --------------------------------------------------------------------------------
Portfolio Profile
The quality ratings* of securities in the Fund as of November 30, 1999 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Long-Term Investments
- --------------------------------------------------------------------------------
BBB/Baa ............................................................. 0.9%
BB/Ba ............................................................... 28.8
B/B ................................................................. 60.9
CCC/Caa or Lower .................................................... 7.2
NR (Not Rated) ...................................................... 2.2
- --------------------------------------------------------------------------------
*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
Foreign Holdings Long-Term Investments
- --------------------------------------------------------------------------------
Total Foreign Holdings .............................................. 36.4%
Emerging Market Holdings ............................................ 15.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Portfolio Maturity ..........................................6.11 years
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of
Five Largest Foreign Countries* Long-Term Investments
- --------------------------------------------------------------------------------
Canada .................................................................. 8.0%
United Kingdom .......................................................... 5.3
Argentina ............................................................... 4.7
Mexico .................................................................. 3.1
Brazil .................................................................. 2.5
- --------------------------------------------------------------------------------
*All holdings are denominated in US dollars.
- --------------------------------------------------------------------------------
Percent of
Top Five Industries Total Assets
- --------------------------------------------------------------------------------
Telephony ............................................................... 7.3%
Transportation .......................................................... 6.9
Wireless Communications--International Paging & Cellular ................ 6.7
Energy .................................................................. 5.5
Health Services ......................................................... 5.4
- --------------------------------------------------------------------------------
18 & 19
<PAGE>
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. 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. Past performance
results shown in this report should not be considered a representation of future
performance. 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--11/99
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