<PAGE> 1
HIGH INCOME ADVANTAGE TRUST III Two World Trade Center, New York, New York 10048
LETTER TO SHAREHOLDERS
DEAR SHAREHOLDER:
The fixed-income markets rebounded sharply during the first half of 1995, as
economic growth slowed and inflation fears began to subside. The high-yield
market recorded a strong first half, benefiting from the rally in the U.S.
Treasury market, which drove long-term interest rates significantly lower, as
well as from the continued strength in corporate earnings. As is typical in a
decelerating economic environment, high-yield bonds have lagged the 1995 rally
in U.S. Treasuries, as concerns over the severity of the economic slowdown have
offset some of the benefit of lower interest rates.
For the six-month period ended July 31, 1995, the Trust's total return was 11.50
percent, based on its closing market price on the New York Stock Exchange (NYSE)
of $6.875 per share. Based on its net asset value (NAV) of $6.49 per share on
July 31, 1995, the Trust's total return for the six-month period was 12.72
percent. As of July 31, 1995, the Trust had net assets in excess of $83 million.
Over the past six months, the Trust continued to distribute regular income
dividends at a rate of $0.06 per share per month, which totaled $0.36 per share
for the full six-month period.
INVESTMENT STRATEGY
The Trust's overall investment strategy entering 1995 was to capitalize on the
opportunity created by the 1994 market correction by positioning the Trust for
an eventual rebound in the market. Despite the fact that corporate credit
quality remained strong, the 1994 market correction pushed yields on many
B-rated issues 300-400 basis points higher (to the 13-14 percent range) and
caused bond prices in some cases to decline by as much as 15-20 percent. In
light of this correction, the Trust sought to increase its holdings in
discounted issues during the second half of 1994, which should provide more
capital appreciation potential in the future. While the Trust's portfolio is
still positioned for further upside in the high-yield market, it maintains a
sizable position in various defensive securities in order to provide the
flexibility needed to take advantage of any interim opportunities that may
arise.
<PAGE> 2
HIGH INCOME ADVANTAGE TRUST III
LETTER TO SHAREHOLDERS, continued
MARKET OUTLOOK
Given our outlook for continued, albeit slower economic growth, we find that
many of today's B-rated issues, yielding more than 600 basis points (6 percent)
above U.S. Treasury securities and trading at significant discounts, offer
excellent long-term return potential. Over the near term, we expect continued
volatility in the financial markets as investors assess the economy's strength,
the level of interest rates and possible Federal Reserve Board actions. However,
despite any potential short-term weakness, we consider today's high-yield market
to be an attractive long-term opportunity for investors. Many current high-yield
issues provide an exceptionally attractive yield advantage over U.S. Treasury
securities, with the potential for substantial capital appreciation if the
high-yield market continues its recovery.
We would like to remind you that the Trustees have approved a procedure whereby
the Trust, when appropriate, may repurchase shares in the open market or in
privately negotiated transactions at a price not above market value or net asset
value, whichever is lower at the time of purchase.
We thank you for your continued support of High Income Advantage Trust III and
look forward to continuing to serve your investment needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
- --------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 3
HIGH INCOME ADVANTAGE TRUST III
PORTFOLIO OF INVESTMENTS July 31, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (88.5%)
Aerospace (2.7%)
$ 2,500 Sabreliner Corp. (Series B)............ 12.50 % 04/15/03 $ 2,225,000
---------
Airlines (4.4%)
4,000 GPA Delaware, Inc. .................... 8.75 12/15/98 3,660,000
---------
Automotive (2.7%)
3,000 Envirotest Systems, Inc. .............. 9.63 04/01/03 2,265,000
---------
Cable & Telecommunications (4.0%)
1,601 Adelphia Communications Corp. (Series
B)..................................... 9.50+ 02/15/04 1,344,487
3,500 In-Flight Phone Corp.
(Units)+++ - 144A**.................... 14.00++ 05/15/02 2,030,000
---------
3,374,487
---------
Computer Equipment (7.8%)
3,000 IBM Credit Corp. ...................... 15.00 06/13/96 3,219,060
3,000 Unisys Corp. .......................... 13.50 07/01/97 3,300,000
---------
6,519,060
---------
Consumer Products (1.8%)
1,000 J.B. Williams Holdings, Inc. .......... 12.00 03/01/04 1,000,000
500 Thermoscan, Inc. - 144A**.............. 13.50* 08/15/01 510,000
---------
1,510,000
---------
Containers (2.6%)
4,000 Ivex Holdings Corp. (Series B)......... 13.25++ 03/15/05 2,180,000
---------
Electrical & Alarm Systems (1.9%)
2,000 Mosler, Inc. .......................... 11.00 04/15/03 1,600,000
---------
Entertainment/Gaming & Lodging (6.0%)
1,000 Fitzgeralds Gaming Corp. - 144A**...... 14.00* 03/15/96 730,000
1,500 Motels of America, Inc. (Series B)..... 12.00 04/15/04 1,515,000
1,000 Six Flags Theme Parks Corp. - 144A**... 12.25++ 06/15/05 747,500
6,722 Spectravision, Inc. (c)................ 11.65 12/01/02 427,923
2,000 Trump Castle Funding, Inc. ............ 11.75 11/15/03 1,630,000
---------
5,050,423
---------
Foods & Beverages (12.9%)
500 Envirodyne Industries, Inc. - 144A**... 12.00 06/15/00 496,250
4,000 Envirodyne Industries, Inc. ........... 10.25 12/01/01 3,240,000
3,000 Pepsico Inc. .......................... 15.00 06/14/96 3,222,900
1,000 Seven Up/RC Bottling Co. Southern
California, Inc. ...................... 11.50 08/01/99 650,000
6,000 Specialty Foods Acquisition Corp.
(Series B)............................. 13.00++ 08/15/05 3,180,000
---------
10,789,150
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
HIGH INCOME ADVANTAGE TRUST III
PORTFOLIO OF INVESTMENTS July 31, 1995 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Manufacturing (5.2%)
$1,500 Berry Plastics Corp. .................. 12.25 % 04/15/04 $ 1,575,000
1,000 Cabot Safety Corp. - 144A**............ 12.50 07/15/05 1,042,500
1,000 Terex Corp. (Units)+++ - 144A**........ 13.75 05/15/02 780,000
1,000 Uniroyal Technologies Corp. ........... 11.75 06/01/03 920,000
---------
4,317,500
---------
Manufacturing - Diversified (6.3%)
1,000 Foamex L.P. ........................... 11.875 10/01/04 985,000
1,500 Interlake Corp. ....................... 12.125 03/01/02 1,507,500
1,000 J.B. Poindexter & Co., Inc. ........... 12.50 05/15/04 977,500
3,000 Jordan Industries, Inc. ............... 11.75++ 08/01/05 1,815,000
---------
5,285,000
---------
Oil & Gas (3.0%)
1,000 Deeptech International, Inc. .......... 12.00 12/15/00 800,000
2,000 Empire Gas Corp. ...................... 7.00 07/15/04 1,665,000
---------
2,465,000
---------
Publishing (7.7%)
4,000 Affiliated Newspapers Investments,
Inc. .................................. 13.25++ 07/01/06 2,320,000
2,400 BFP Holdings, Inc. (Series B).......... 13.50++ 04/15/04 1,611,000
1,000 Garden State Newspapers, Inc. ......... 12.00 07/01/04 1,000,000
1,875 United States Banknote Corp. .......... 10.375 06/01/02 1,518,750
---------
6,449,750
---------
Restaurants (9.6%)
4,750 American Restaurant Group Holdings,
Inc. .................................. 14.00++ 12/15/05 2,256,250
2,000 Carrols Corp. ......................... 11.50 08/15/03 1,955,000
4,500 Flagstar Corp. ........................ 11.25 11/01/04 3,780,000
---------
7,991,250
---------
Retail (4.8%)
2,000 Cort Furniture Rental Corp. ........... 12.00 09/01/00 2,000,000
1,000 County Seat Stores Co. ................ 12.00 10/01/02 990,000
1,000 Thrifty Payless, Inc. ................. 12.25 04/15/04 1,045,000
---------
4,035,000
---------
Textiles - Apparel Manufacturers (4.0%)
3,048 JPS Textile Group, Inc. ............... 10.85 06/01/99 2,956,560
500 U.S. Leather, Inc. .................... 10.25 07/31/03 430,000
---------
3,386,560
---------
Transportation (1.1%)
1,500 Transtar Holdings L.P. (Series B)...... 13.375++ 12/15/03 915,000
---------
TOTAL CORPORATE BONDS
(Identified Cost $78,863,377).................................. 74,018,180
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
HIGH INCOME ADVANTAGE TRUST III
PORTFOLIO OF INVESTMENTS July 31, 1995 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE BOND (0.0%)
Textiles
$ 57 Farley, Inc. - 144A**
(Identified Cost $5,507)............... 0.00 % 01/01/12 $ 5,167
---------
U.S. GOVERNMENT OBLIGATION (1.8%)
1,500 U.S. Treasury Note
(Identified Cost $1,543,906)........... 11.50 11/15/95 1,525,547
---------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCK (0.0%)
Utilities - Electric
327,500 TGX Corp. (Identified Cost $2,718,250)..................... 40,937
---------
COMMON STOCKS (a) (6.9%)
Building & Construction (1.9%)
63,101 USG Corp. (b).............................................. 1,593,300
---------
Computer Equipment (0.2%)
95,553 Memorex Telex NV (ADR) (Netherlands) (b)................... 146,320
---------
Consumer Products (0.1%)
6,500 Thermoscan, Inc. - 144A**.................................. 45,500
---------
Entertainment/Gaming & Lodging (0.2%)
2,000 Motels of America, Inc. - 144A**........................... 180,000
---------
Foods & Beverages (0.3%)
90,000 Specialty Foods Acquisition Corp. - 144A**................. 247,500
---------
Manufacturing - Diversified (3.2%)
173,377 Thermadyne Holdings Corp. (b).............................. 2,730,688
---------
Publishing (0.7%)
4,000 Affiliated Newspapers Investments, Inc. (Class B).......... 120,000
15,200 BFP Holdings, Inc. - 144A** (Class D)...................... 456,000
---------
576,000
---------
Restaurants (0.1%)
4,750 American Restaurant Group Holdings, Inc. - 144A**.......... 71,250
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
HIGH INCOME ADVANTAGE TRUST III
PORTFOLIO OF INVESTMENTS July 31, 1995 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
Retail (0.2%)
38,000 Thrifty Payless Holdings, Inc. (Class C)................... $ 175,750
---------
TOTAL COMMON STOCKS
(Identified Cost $8,023,214)............................... 5,766,308
---------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
SHARES DATE VALUE
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
WARRANTS (a) (0.5%)
Aerospace (0.0%)
2,500 Sabreliner Corp. .............................. 04/15/03 25,000
---------
Containers (0.2%)
2,000 Crown Packaging Holdings, Ltd. - 144A**
(Canada)....................................... 11/01/03 110,000
---------
Entertainment/Gaming & Lodging (0.0%)
3,263 Casino America, Inc. .......................... 11/15/96 2,040
1,000 Fitzgeralds Gaming Corp. - 144A**.............. 03/15/99 10,000
---------
12,040
---------
Manufacturing (0.1%)
2,000 BPC Holdings Corp. ............................ 04/15/04 25,000
10,000 Uniroyal Technology Corp. ..................... 06/01/03 25,000
---------
50,000
---------
Oil & Gas (0.0%)
2,760 Empire Gas Corp. .............................. 07/15/04 27,600
---------
Retail (0.2%)
2,000 County Seat Holdings Co. ...................... 10/15/98 45,000
66,000 New Cort Holdings Corp. ....................... 09/01/98 115,500
---------
160,500
---------
Retail - Food Chains (0.0%)
8,607 Grand Union Co. (Series 1) (b)................. 06/16/00 7,531
17,215 Grand Union Co. (Series 2) (b)................. 06/16/00 6,025
---------
13,556
---------
TOTAL WARRANTS
(Identified Cost $294,658).................................. 398,696
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
HIGH INCOME ADVANTAGE TRUST III
PORTFOLIO OF INVESTMENTS July 31, 1995 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (0.5%)
REPURCHASE AGREEMENT
$ 396 The Bank of New York (dated 07/31/95;
proceeds $395,859, collateralized by
$287,607 Federal National Mortgage
Association Corp. 9.50% due 04/01/01
valued at $301,477 and $106,470 Federal
National Mortgage Association Corp.
8.50% due 02/01/08 valued at $109,952)
(Identified Cost $395,795)............. 5.8125% 08/01/95 $ 395,795
---------
TOTAL INVESTMENTS
(Identified Cost $91,844,707) (d)...................... 98.2% 82,150,630
OTHER ASSETS IN EXCESS OF LIABILITIES.................... 1.8 1,476,292
---- ---------
NET ASSETS............................................. 100.0% $83,626,922
==== =========
- ---------------------
<FN>
ADR American Depository Receipt.
* Adjustable rate. Rate shown is the rate in effect at July 31, 1995.
** Resale is restricted to qualified institutional investors.
+++ Consist of one or more class of securities traded together as a unit;
generally bonds with attached stocks/warrants.
+ Payment-in-kind security.
++ Currently a zero coupon bond and will pay interest at the rate shown at a
future specified.
(a) Non-income producing security.
(b) Acquired through exchange offer.
(c) Non-income producing security, issuer in bankruptcy.
(d) The aggregate cost for federal income tax purposes is $91,870,867; the
aggregate gross unrealized appreciation is $2,643,833 and the aggregate gross
unrealized depreciation is $12,364,070, resulting in net unrealized
depreciation of $9,720,237.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
HIGH INCOME ADVANTAGE TRUST III
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1995 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $91,844,707)........... $ 82,150,630
Interest receivable...................... 1,550,249
Prepaid expenses and other assets........ 16,886
----------
TOTAL ASSETS......................... 83,717,765
----------
LIABILITIES:
Investment management fee payable........ 52,901
Accrued expenses and other payables...... 37,942
----------
TOTAL LIABILITIES.................... 90,843
----------
NET ASSETS:
Paid-in-capital.......................... 121,076,287
Net unrealized depreciation.............. (9,694,077)
Accumulated undistributed net investment
income.................................. 829,229
Accumulated net realized loss............ (28,584,517)
----------
NET ASSETS........................... $ 83,626,922
==========
NET ASSET VALUE PER SHARE,
12,876,779 shares outstanding
(unlimited shares authorized of $.01 par
value).................................. $6.49
===
STATEMENT OF OPERATIONS
For the six months ended July 31, 1995
(unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $ 5,205,239
----------
EXPENSES
Investment management fee................ 302,374
Professional fees........................ 38,988
Transfer agent fees and expenses......... 28,539
Registration fees........................ 12,327
Shareholder reports and notices.......... 11,199
Trustees' fees and expenses.............. 10,306
Custodian fees........................... 8,869
Other.................................... 3,140
----------
TOTAL EXPENSES....................... 415,742
----------
NET INVESTMENT INCOME................ 4,789,497
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................ (3,004,585)
Net change in unrealized depreciation.... 7,713,015
----------
NET GAIN............................. 4,708,430
----------
NET INCREASE............................. $ 9,497,927
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
HIGH INCOME ADVANTAGE TRUST III
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS FOR THE
ENDED YEAR ENDED
JULY 31, JANUARY 31,
1995 1995
- ---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................... $ 4,789,497 $ 9,615,361
Net realized loss................................... (3,004,585) (12,646,621)
Net change in unrealized depreciation............... 7,713,015 (5,793,370)
--------- ---------
NET INCREASE (DECREASE)......................... 9,497,927 (8,824,630)
--------- ---------
Dividends to shareholders from net investment
income............................................. (4,635,640) (9,876,489)
--------- ---------
TOTAL INCREASE (DECREASE)....................... 4,862,287 (18,701,119)
NET ASSETS:
Beginning of period................................. 78,764,635 97,465,754
--------- ---------
END OF PERIOD
(Including undistributed net investment income of
$829,229 and $675,372, respectively)............. $83,626,922 $78,764,635
========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
HIGH INCOME ADVANTAGE TRUST III
NOTES TO FINANCIAL STATEMENTS July 31, 1995 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
High Income Advantage Trust III (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management
investment company. The Trust was organized as a Massachusetts business trust on
November 23, 1988 and commenced operations on February 28, 1989.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American Stock Exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued; if there were no sales that
day, the security is valued at the latest bid price; (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation; (3)
when market quotations are not readily available, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees; (4) certain of
the Trust's portfolio securities may be valued by an outside pricing service
approved by the Trustees. The pricing service utilizes a matrix system
incorporating security quality, maturity and coupon as the evaluation model
parameters, and/or research and evaluations by its staff, including review of
broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the portfolio securities valued by such
pricing service; and (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined on the identified cost method.
Discounts on securities purchased are accreted over the life of the respective
securities. Interest income is accrued daily except where collection is not
expected.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either consid-
<PAGE> 11
HIGH INCOME ADVANTAGE TRUST III
NOTES TO FINANCIAL STATEMENTS July 31, 1995 (unaudited) continued
ered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they exceed
net investment income and net realized capital gains for tax purposes, they are
reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Trust pays its Investment Manager a
management fee, calculated weekly and payable monthly, by applying the following
annual rates to the Trust's average weekly net assets: 0.75% to the portion of
average weekly net assets not exceeding $250 million; 0.60% to the portion of
average weekly net assets exceeding $250 million but not exceeding $500 million;
0.50% to the portion of average net assets exceeding $500 million but not
exceeding $750 million; 0.40% to the portion of average net assets exceeding
$750 million but not exceeding $1 billion; and 0.30% to the portion of daily net
assets exceeding $1 billion.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Trust who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended July 31, 1995 aggregated
$37,310,711 and $34,184,822, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At July 31, 1995, the Trust had transfer agent fees and
expenses payable of approximately $8,000.
<PAGE> 12
HIGH INCOME ADVANTAGE TRUST III
NOTES TO FINANCIAL STATEMENTS July 31, 1995 (unaudited) continued
4. SHARES OF BENEFICIAL INTEREST
<TABLE>
<CAPTION>
PAR
VALUE CAPITAL PAID
OF IN EXCESS OF
SHARES SHARES PAR VALUE
---------- -------- ------------
<S> <C> <C> <C>
Balance, January 31, 1994, January 31, 1995 and
July 31, 1995..................................................... 12,876,779 $128,768 $120,947,519
========== ======== ============
</TABLE>
5. DIVIDENDS
The Trust has declared the following dividends from net investment income:
<TABLE>
<CAPTION>
AMOUNT
DECLARATION PER RECORD PAYABLE
DATE SHARE DATE DATE
- --------------- ----- ------------------ -------------------
<S> <C> <C> <C>
August 1, 1995 $0.06 August 11, 1995 August 25, 1995
August 29, 1995 $0.06 September 8, 1995 September 22, 1995
</TABLE>
6. FEDERAL INCOME TAX STATUS
At January 31, 1995, the Trust had an approximate net capital loss carryover
which may be used to offset future capital gains to the extent provided by
regulations as follows:
<TABLE>
<CAPTION>
AVAILABLE THROUGH JANUARY 31
- ---------------------------------------------------------------
2000 2002 2003 TOTAL
- ---------- ---------- ----------- -----------
<S> <C> <C> <C>
$9,648,000 $3,256,000 $10,665,000 $23,569,000
========== ========== =========== ===========
</TABLE>
<PAGE> 13
HIGH INCOME ADVANTAGE TRUST III
NOTES TO FINANCIAL STATEMENTS July 31, 1995 (unaudited) continued
7. SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------
7/31/95 4/30/95
---------------- ----------------
PER PER
TOTAL* SHARE TOTAL* SHARE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Total investment income................................................ $2,735 $0.21 $2,470 $0.19
Net investment income.................................................. 2,515 0.19 2,274 0.18
Net realized and unrealized gain....................................... 2,205 0.17 2,503 0.19
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------------
1/31/95 10/31/94 7/31/94 4/30/94
----------------- ----------------- ----------------- -----------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income.............. $ 2,522 $ 0.20 $ 2,698 $ 0.21 $ 2,675 $ 0.21 $ 2,609 $ 0.20
Net investment income................ 2,299 0.18 2,492 0.19 2,451 0.19 2,373 0.19
Net realized and unrealized loss..... (2,635) (0.20) (4,587) (0.36) (6,559) (0.51) (4,659) (0.36)
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------------
1/31/94 10/31/93 7/31/93 4/30/93
----------------- ----------------- ----------------- -----------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income.............. $2,836 $0.22 $2,694 $0.21 $3,358 $0.26 $2,471 $0.19
Net investment income................ 2,595 0.20 2,493 0.19 3,119 0.24 2,241 0.18
Net realized and unrealized gain..... 4,582 0.36 1,839 0.15 2,545 0.20 2,658 0.20
- ---------------------
<FN>
* Amounts in thousands.
</TABLE>
<PAGE> 14
HIGH INCOME ADVANTAGE TRUST III
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
SIX
MONTHS
ENDED FOR THE YEAR ENDED JANUARY 31
JULY 31, -----------------------------------------------
1995 1995 1994 1993 1992 1991
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(unaudited)
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period.............................. $ 6.12 $ 7.57 $ 6.70 $ 6.83 $ 5.18 $ 7.59
----- ----- ----- ----- ----- -----
Net investment income............................. 0.37 0.75 0.81 0.91 0.84 1.11
Net realized and unrealized gain (loss)........... 0.36 (1.43) 0.91 (0.13) 1.58 (2.37)
----- ----- ----- ----- ----- -----
Total from investment operations.................. 0.73 (0.68) 1.72 0.78 2.42 (1.26)
----- ----- ----- ----- ----- -----
Dividends from net investment income.............. (0.36) (0.77) (0.85) (0.91) (0.77) (1.15)
----- ----- ----- ----- ----- -----
Net asset value, end of period.................... $ 6.49 $ 6.12 $ 7.57 $ 6.70 $ 6.83 $ 5.18
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Market value, end of period....................... $6.875 $ 6.50 $ 7.75 $6.875 $ 6.50 $4.625
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
TOTAL INVESTMENT RETURN+.......................... 11.50%(1) (6.30)% 26.21% 20.77% 60.31% (24.31)%
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.03%(2) 1.02% 0.99% 1.06% 1.17% 1.05%
Net investment income............................. 11.88%(2) 11.04% 11.40% 13.22% 13.53% 17.39%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $83,627 $78,765 $97,466 $86,305 $89,084 $68,476
Portfolio turnover rate........................... 46%(1) 82% 231% 118% 137% 44%
- ---------------------
<FN>
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends and distributions are assumed to be
reinvested at the prices obtained under the Trust's dividend reinvestment
plan. Total investment return does not reflect sales charges or brokerage
commissions.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements included herein have been taken from the records of the
Trust without examination by the independent auditors and accordingly, they do
not express the opinion thereon.
<PAGE> 15
HIGH INCOME ADVANTAGE TRUST III
RESULTS OF ANNUAL SHAREHOLDERS MEETING (unaudited)
On June 22, 1995, an annual meeting of the Fund's shareholders was held for the
purpose of voting on three separate matters, the results of which were as
follows:
Election of Trustees:
<TABLE>
<CAPTION>
Manuel H. Johnson
VOTE: NO. OF SHARES
- ---- -----------
<S> <C>
For..................... 8,716,701
Withheld................ 114,525
Paul Kolton
VOTE: NO. OF SHARES
- ---- -----------
For..................... 8,714,393
Withheld................ 116,833
John L. Schroeder
VOTE: NO. OF SHARES
- ---- -----------
For..................... 8,718,837
Withheld................ 112,389
</TABLE>
The following Trustees, who were not up for election, have terms of office which
continued following the June 22, 1995 meeting: Jack F. Bennett; Michael Bozic;
Charles A. Fiumefreddo; Edwin J. Garn; John R. Haire; Michael E. Nugent; Philip
J. Purcell.
Continuance of Currently Effective Investment Management Agreement:
<TABLE>
<CAPTION>
VOTE: NO. OF SHARES
------- -----------
<S> <C>
For....................................................................................... 8,321,717
Against................................................................................... 102,385
Abstain................................................................................... 407,124
</TABLE>
Ratification of Price Waterhouse LLP as Independent Accountants:
<TABLE>
<CAPTION>
VOTE: NO. OF SHARES
------- -----------
<S> <C>
For....................................................................................... 8,569,621
Against................................................................................... 73,488
Abstain................................................................................... 188,117
</TABLE>
<PAGE> 16
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Peter M. Avelar
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
HIGH
INCOME
ADVANTAGE
TRUST III
SEMIANNUAL REPORT
JULY 31, 1995
