<PAGE>
MUNICIPAL INCOME TRUST III
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
Interest rates moved higher throughout most of 1994 as the fixed-income
markets focused on the strong pace of economic growth and the risk of higher
inflation. Convinced that growth would be sustained, the Federal Reserve
Board progressively tightened its monetary policy. This led to one of the
most severe bear markets for bonds in recent history. Subsequently, the bond
market began to rally in November based on signs of slower economic growth
and investor anticipation that the Fed's tighter monetary policy was taking
effect.
MUNICIPAL MARKET CONDITIONS
Municipal bond yields, as tracked by The Bond Buyer Revenue Bond Index,*
moved 187 basis points higher over a ten month period, from a low of 5.50
percent prior to the central bank's first rate increase in February 1994 to a
high of 7.37 percent in November. The municipal market rallied over the next
three months and the Revenue Bond Index yield declined 106 basis points to 6.31
percent at the end of February 1995. These yield changes were equivalent to a
22 point drop in price through November 1994 and a subsequent 9 point recovery
by February 1995.
The period ended February 28, 1995 was marked by shifts in the balance of
supply and demand in the municipal market. Between February and May 1994,
dealer inventories reached near-record levels as long-term bonds were sold to
pay taxes and increase cash. A semblance of stability returned to the market
between June and August. However, after Labor Day the market was subjected to
another round of bond sales caused by tax-loss selling. Conditions improved
in December as the market anticipated the reinvestment of coupons, bond calls
and maturities in January at a time of scarce supply. This seasonal pattern
more than offset the uncertainty caused by the Orange County, California
bankruptcy filing. On December 6, 1994 Orange County, one of the nation's
most affluent areas in the country, was forced to seek court protection when
its pooled-investment fund faced unprecedented losses.
Long-term municipal bonds have outperformed U.S. Treasury bonds since
November. The ratio of Revenue Bond Index yields to 30-year Treasury yields
over the past twelve months began at 87 percent, ranged as high as 92 percent
in November and ended the period at 84 percent. A declining ratio means that
municipal prices have been relatively stronger than U.S. Treasury prices.
The rise in interest rates in 1994 also took its toll on the level of
state and local government debt issuance. For the year, new-issue volume
declined 44 percent to $163 billion. The driving force behind this sharp
decline was the virtual halt in refunding issues, which plummeted 74 percent.
Last year, municipal maturities and bond calls reached $191 billion and
exceeded the supply of new issues coming to market. This marked the first
decline in the outstanding supply of municipal securities. A continuation of
this pattern is expected in 1995 and should strengthen municipal market
conditions. In the first two months of 1995 municipal volume was down
approximately 60 percent compared to the same period last year.
- ----------
* The Bond Buyer Revenue Bond Index is an arithmetic average of the yields
of 25 selected municipal revenue bonds with 30-year maturities. Credit
ratings of these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by
Standard & Poor's.
<PAGE>
<PAGE>
FUND PERFORMANCE
Municipal Income Trust III's net asset value (NAV) declined from $9.81 to
$9.74 per share during the six-month period ended February 28, 1995. The
Fund's total NAV return for the period was 3.03 percent. This was based on
the NAV price change of $0.07 and the reinvestment of tax-free dividends and
capital gains distributions which totaled $0.27 and $0.074 per share,
respectively. Concurrently, the Fund's market price on the New York Stock
Exchange was maintained at $9.00 per share. Based on market value and
reinvestment of dividends and capital gains, the Fund's total return for the
period was 3.99 percent. The Fund began the period trading at a 8.3 percent
discount to NAV and closed at a 7.6 percent discount to NAV. On February 28,
1995 undistributed net investment income totaled $0.101 per share unchanged
since the beginning of the period and an indication that the Fund had
distributed dividends equal to its income during the period.
INVESTMENT STRATEGY
Under volatile interest rate conditions, the Fund benefited from its
established mix of older high-coupon bonds. The portfolio held approximately
21 percent of its net assets in refunded issues, which were secured by U.S.
government securities held in escrow to redeem the municipal issues on their
first call dates.
The portfolio's long-term investments were diversified among 13 specific
municipal sectors and 35 credits. The Fund held one issuer, insured by MBIA
which participated in the Orange County investment pool. The three largest
sectors represented in the portfolio were refunded, mortgage revenue-single
family and nursing and health related facilities. These sectors accounted for
50 percent of net assets. The average maturity and call protection of the
Fund's long-term holdings were 18 and 8 years, respectively. Bonds subject to
the alternative minimum tax (AMT) comprised approximately 29 percent of net
assets. The credit-quality ratings of long-term portfolio are summarized
below:
<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S RATING PERCENT
<S> <C>
Aaa or AAA ............................. 18
Aa or AA ............................... 13
A or A ................................. 36
Baa or BBB ............................. 24
Not rated .............................. 9
</TABLE>
LOOKING AHEAD
While economic growth is expected to continue in 1995, the effect of last
year's rise in interest rates is likely to take its toll. By mid-year, we
anticipate that the economy will slow vis-a-vis the rapid pace experienced in
1994 and that inflation will stabilize. Investor demand for municipal
securities should be sustained by significant bond maturities, calls for
redemption and diminished new-issue supply. The Fund plans to reduce
defensive positions, including refunded bonds, to improve call protection.
New investments will continue to stress credit quality and essential service
sectors. Even with the move to higher yields that occurred last year, the
Fund still cannot replace the yield attributable to many older investments
that may be called or sold in the next few years.
<PAGE>
<PAGE>
The Fund's procedure for reinvestment of all dividends and distributions
on common shares is through purchase in the open market. This method helps to
support the market value of the Fund's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Fund, 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. During the six-month period ended
February 28, 1995, the Fund purchased 86,700 shares of common stock at a
weighted average discount of 11.2 percent.
We appreciate your ongoing support of Municipal Income 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>
<PAGE>
MUNICIPAL INCOME TRUST III
PORTFOLIO OF INVESTMENTS February 28, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN MATURITY
THOUSANDS) COUPON RATE DATE VALUE
- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (92.0%)
GENERAL OBLIGATION (3.9%)
$1,050 Moulton Niguel Water District, California, Refg 1993
(MBIA Insured) ................................................... 5.00 % 09/01/19 $ 895,786
New York City, New York,
1,000 Ser 1995 D ...................................................... 6.20 02/01/07 1,041,900
500 Ser 1989 C ...................................................... 6.50 08/15/08 496,880
- ----------- -------------
2,550 2,434,566
- ----------- -------------
EDUCATIONAL FACILITIES REVENUE (2.6%)
1,000 Massachusetts Health & Educational Facilities Authority,
Boston College Ser K ............................................. 5.25 06/01/18 892,140
750 West Virginia School Building Authority, Cap Impr Ser 1991 A .... 6.75 07/01/15 765,698
- ----------- -------------
1,750 1,657,838
- ----------- -------------
ELECTRIC REVENUE (7.3%)
1,000 Sacramento Municipal Utility District, California, Refg Ser I
(MBIA Insured) ................................................... 5.75 01/01/15 967,740
4,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C ............... 4.70 02/01/06 3,617,880
- ----------- -------------
5,000 4,585,620
- ----------- -------------
HOSPITAL REVENUE (3.4%)
905 Illinois Health Facilities Authority, Glen Oaks Medical Center
Inc Refg 1990 Ser D .............................................. 9.50 11/15/15 1,043,854
1,100 Montgomery County Higher Education & Health Authority,
Pennsylvania, Frankford Hospital Ser 1986 ........................ 7.875 01/01/19 1,119,943
- ----------- -------------
2,005 2,163,797
- ----------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (8.1%)
3,000 Cleveland, Ohio, Continental Airlines Inc Ser 1990 (AMT) ........ 9.00 12/01/19 3,043,020
2,005 Alliance Airport Authority, Texas, American Airlines Inc Ser 1990
(AMT) ............................................................ 7.50 12/01/29 2,022,203
- ----------- -------------
5,005 5,065,223
- ----------- -------------
MORTGAGE REVENUE - MULTI-FAMILY (1.6%)
1,000 Massachusetts Housing Finance Agency, Rental 1994 Ser A
- ----------- (AMT) (AMBAC Insured) ........................................... 6.60 07/01/14 1,026,390
-------------
MORTGAGE REVENUE - SINGLE FAMILY (18.7%)
2,000 Alaska Housing Finance Corporation, 1993 1st Ser ................. 5.90 12/01/33 1,812,420
460 Colorado Housing Finance Authority, Ser A-2 (AMT) ................ 8.25 08/01/20 481,565
265 Hawaii Housing Finance & Development Corporation, Purchase Ser
1989 A (AMT) ..................................................... 7.80 07/01/29 277,733
1,785 Idaho Housing Agency, Ser 1988 D-2 (AMT) ......................... 8.25 01/01/20 2,139,555
3,685 Saint Tammany Public Trust Financing Authority, Louisiana, Refg
Ser 1990 B ....................................................... 7.25 07/25/11 3,858,636
1,000 Maine Housing Authority, Purchase Ser 1990 A-4 (AMT) ............ 6.40 11/15/23 956,940
Massachusetts Housing Finance Agency, Residential
495 Ser 1989 A (AMT) ................................................ 8.10 08/01/09 521,963
165 Ser 1989 A (AMT) ................................................ 8.20 08/01/27 174,585
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST III
PORTFOLIO OF INVESTMENTS February 28, 1995 (unaudited) (continued)
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN MATURITY
THOUSANDS) COUPON RATE DATE VALUE
- ----------- ------------ ---------- -------------
Utah Housing Finance Agency,
$ 555 Ser 1991 Issue A-2 (AMT) ........................................ 7.75 % 01/01/23 $ 593,317
830 Ser 1991 Issue B-2 (AMT) ........................................ 7.75 01/01/23 879,783
- ----------- -------------
11,240 11,696,497
- ----------- -------------
NURSING & HEALTH RELATED FACILITIES REVENUE (10.3%)
Vista, California, Long-Term Care Foundation of America
2,060 Ser 1994 A COPs (a) ............................................. 8.50 01/01/20 1,647,621
271 Ser 1994 B COPs (a) ............................................. 0.00 01/01/20 2,709
1,000 Marion, Iowa, AHF/Kentucky-Iowa Inc Ser 1990 ..................... 10.25 01/01/20 1,040,000
2,000 Lexington-Fayette Urban County Government, Kentucky,
AHF/Kentucky-Iowa Inc Ser 1990 ................................... 10.25 01/01/20 2,080,000
1,750 Metropolitan Government of Nashville & Davidson County Health &
Educational Facilities Board, Tennessee, Metropolitan Nashville
Teachers' Nursing Facility Inc Ser 1989 (b) ...................... 10.25 10/01/19 1,653,750
- ----------- -------------
7,081 6,424,080
- ----------- -------------
RESOURCE RECOVERY REVENUE (4.2%)
2,500 Cambria County Industrial Development Authority,
- -----------
Pennsylvania, Cambria Cogen Co Ser 1989 F-2 (AMT) ............... 7.75 09/01/19 2,622,850
-------------
TRANSPORTATION FACILITIES REVENUE (4.2%)
2,435 Southwestern Illinois Development Authority, Tri-City Regional
- ----------- Port District Ser 1989 (AMT) (a) ................................ 7.90 07/01/14 2,621,691
-------------
WATER & SEWER REVENUE (4.1%)
1,000 Chicago, Illinois, Wastewater Ser 1994 (MBIA Insured) ........... 6.375 01/01/24 1,016,100
1,500 Massachusetts Water Resources Authority, 1993 Ser C ............. 5.25 12/01/20 1,322,925
1,090 Erie County Water Authority, New York, 4th Resolution
Refg Ser 1992 (AMBAC Insured) .................................... 0.00 12/01/17 212,281
- ----------- -------------
3,590 2,551,306
- ----------- -------------
OTHER REVENUE (2.4%)
1,000 Pasadena, California, Refg & Cap 1992 COPs ....................... 5.75 01/01/13 947,610
500 Illinois Development Finance Authority, Church Road Partnership
#2 Ser 1989 (AMT) ................................................ 7.875 09/01/14 531,610
- ----------- -------------
1,500 1,479,220
- ----------- -------------
REFUNDED (21.2%)
2,400 District of Columbia, Ser 1990 B (FSA Insured) (Prerefunded) .... 7.50 06/01/10 2,699,280
1,625 Minneapolis & St Paul Housing & Redevelopment Authority, Health
One Oblig Grp 1990 Ser B (Prerefunded) ........................... 8.00 08/15/14 1,868,522
2,000 Comanche County Hospital Authority, Oklahoma, Ser 1989
(Prerefunded) .................................................... 8.05 07/01/16 2,264,980
2,750 Florence County Public Facilities Corporation, South Carolina,
Law Enforcement & Civic Center 1990 COPs
(AMBAC Insured) (Prerefunded) .................................... 7.60 03/01/14 3,074,445
3,000 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser
1990 C (Prerefunded) ............................................. 7.625 07/01/10 3,403,350
- ----------- -------------
11,775 13,310,577
- ----------- -------------
57,431 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $54,898,933) ............. 57,639,655
- ----------- -------------
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST III
PORTFOLIO OF INVESTMENTS February 28, 1995 (unaudited) (continued)
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN MATURITY
THOUSANDS) COUPON RATE DATE VALUE
- ----------- ------------ ---------- -------------
SHORT-TERM MUNICIPAL OBLIGATIONS (6.7%)
$ 800 Massachusetts, Dedicated Income Tax Ser 1990 E
(Tender 03/01/95) ................................................ 3.65%* 12/01/97 $ 800,000
3,400 Harris County Health Facilities Development Corporation, Texas,
Methodist Hospital Ser 1994 (Tender 03/01/95) .................... 3.75* 12/01/25 3,400,000
- ----------- -------------
4,200 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS
- ----------- (Identified Cost $4,200,000) .................................... 4,200,000
-------------
$61,631 TOTAL INVESTMENTS (IDENTIFIED COST $59,098,933) (C) ................... 98.7 % 61,839,655
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ......................... 1.3 826,873
----- -------------
NET ASSETS ............................................................. 100.0 % $62,666,528
===== =============
</TABLE>
[FN]
- ----------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Variable or floating rate securities. Coupon rate shown reflects current
rate.
(a) Resale is restricted to qualified institutional investors.
(b) Bond in default.
(c) The aggregate cost for federal income tax purposes is $59,098,933; the
aggregate gross unrealized appreciation is $3,558,059, and the aggregate
gross unrealized depreciation is $817,337, resulting in net unrealized
appreciation of $2,740,722.
- -----------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
February 28, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Alaska ............ 2.9%
California ........ 7.1
Colorado .......... 0.8
District of
Columbia .......... 4.3
Hawaii ............ 0.4
Idaho ............. 3.4
Illinois .......... 8.3%
Iowa .............. 1.7
Kentucky .......... 3.3
Louisiana ......... 6.2
Maine ............. 1.5
Massachusetts ..... 7.6
Minnesota ......... 3.0%
New York .......... 2.8
Ohio .............. 4.9
Oklahoma .......... 3.6
Pennsylvania ...... 6.0
South Carolina .... 4.9
Tennessee ......... 2.6%
Texas ............. 14.4
Utah .............. 2.4
Washington ........ 5.4
West Virginia ..... 1.2
------
TOTAL ............. 98.7%
======
</TABLE>
- -----------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST III
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $59,098,933) ............ $61,839,655
Cash ...................................... 13,296
Interest receivable ....................... 884,624
Prepaid expenses and other assets ........ 28,507
-------------
TOTAL ASSETS ............................ 62,766,082
-------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased 27,090
Investment advisory fee .................. 21,777
Administration fee ....................... 13,610
Accrued expenses and other payables ...... 37,077
-------------
TOTAL LIABILITIES ....................... 99,554
-------------
NET ASSETS:
Paid-in-capital ........................... 59,723,413
Net unrealized appreciation ............... 2,740,722
Accumulated undistributed net investment
income ................................... 650,770
Accumulated net realized loss ............. (448,377 )
-------------
NET ASSETS .............................. $62,666,528
=============
NET ASSET VALUE PER SHARE,
6,435,986 shares outstanding (unlimited
shares authorized of $.01 par value) ... $ 9.74
=============
</TABLE>
STATEMENT OF OPERATIONS For the six months
ended February 28, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ....................... $2,153,940
------------
EXPENSES
Investment advisory fee .............. 122,403
Administration fee ................... 76,502
Professional fees .................... 32,295
Shareholder reports and notices ..... 15,913
Transfer agent fees and expenses .... 13,590
Trustees' fees and expenses .......... 9,847
Registration fees .................... 8,047
Other ................................ 4,752
------------
TOTAL EXPENSES ...................... 283,349
------------
NET INVESTMENT INCOME ............... 1,870,591
------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized loss .................... (448,377)
Net change in unrealized appreciation 182,908
------------
NET LOSS ............................ (265,469)
------------
NET INCREASE ........................ $1,605,122
============
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
FEBRUARY 28, 1995 ENDED AUGUST
(UNAUDITED) 31, 1994
----------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................................................. $ 1,870,591 $ 3,937,126
Net realized gain (loss) .............................................. (448,377) 476,511
Net change in unrealized appreciation ................................. 182,908 (2,159,202)
----------------- ---------------
Net increase ......................................................... 1,605,122 2,254,435
----------------- ---------------
Dividends and distributions to shareholders from:
Net investment income ................................................. (1,750,433) (3,732,458)
Net realized gain ..................................................... (476,511) (172,434)
----------------- ---------------
Total ................................................................ (2,226,944) (3,904,892)
Net decrease from transactions in shares of beneficial interest ....... (722,948) (989,071)
----------------- ---------------
Net decrease ......................................................... (1,344,770) (2,639,528)
NET ASSETS:
Beginning of period .................................................... 64,011,298 66,650,826
----------------- ---------------
END OF PERIOD (including undistributed net investment income of
$650,770 and $530,612, respectively) .................................. $62,666,528 $64,011,298
================= ===============
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST III
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Municipal Income Trust III (the
"Fund") is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company. The Fund was
organized as a Massachusetts business trust on June 26, 1989 and commenced
operations on October 5, 1989.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- Portfolio securities are valued for the Fund
by an outside independent pricing service approved by the Trustees. The
pricing service has informed the Fund that in valuing the Fund's portfolio
securities, it uses both a computerized matrix of tax-exempt securities and
evaluations by its staff, in each case based on information concerning market
transactions and quotations from dealers which reflect the bid side of the
market each day. The Fund's portfolio securities are thus valued by reference
to a combination of transactions and quotations for the same or other
securities believed to be comparable in quality, coupon, maturity, type of
issue, call provisions, trading characteristics and other features deemed to
be relevant. 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 by the identified cost
method. Discounts and premiums on securities purchased are amortized 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 Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Fund records
dividends and distributions to its shareholders on the ex-dividend 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 considered 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.
E. Organizational Expenses -- Dean Witter InterCapital Inc. (the
"Investment Adviser") paid the organizational expenses which were fully
amortized as of October 5, 1994.
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST III
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- -----------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement, the Fund pays its Investment Adviser an advisory fee, calculated
weekly and payable monthly, by applying the following annual rates to the
Fund's average weekly net assets: 0.40% to the portion of the Fund's average
weekly net assets not exceeding $250 million and 0.30% to the portion of the
Fund's average weekly net assets exceeding $250 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Adviser pays the salaries of all personnel,
including officers of the Fund, who are employees of the Investment Adviser.
3. ADMINISTRATION AGREEMENT -- Pursuant to an Administration Agreement with
Dean Witter Services Company Inc. (the "Administrator"), the Fund pays an
administration fee, calculated weekly and payable monthly, by applying the
following annual rates to the Fund's average weekly net assets: 0.25% to the
portion of the Fund's average weekly net assets not exceeding $250 million
and 0.20% to the portion of the Fund's average weekly net assets exceeding
$250 million but not exceeding $500 million; 0.167% to the portion of the
Fund's average weekly net assets exceeding $500 million but not exceeding
$750 million; and 0.133% to the portion of the Fund's average weekly net
assets exceeding $750 million.
Under the terms of the Administration Agreement, the Administrator
maintains certain of the Fund'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 Fund who are employees of the Administrator. The
Administrator also bears the cost of telephone services, heat, light, power
and other utilities provided to the Fund.
4. 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 February 28, 1995 aggregated
$995,820 and $5,771,421, respectively.
Dean Witter Trust Company, an affiliate of the Investment Adviser, is the
Fund's transfer agent. At February 28, 1995, the Fund had transfer agent fees
and expenses payable of approximately $4,000.
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
CAPITAL PAID
PAR VALUE OF IN EXCESS OF
SHARES SHARES PAR VALUE
----------- -------------- --------------
<S> <C> <C> <C>
Balance, August 31, 1993 ....................... 6,632,086 $66,321 $61,369,111
Treasury shares purchased and retired (weighted
average discount 7.82%)* ...................... (109,400) (1,094) (987,977)
----------- -------------- --------------
Balance, August 31, 1994 ....................... 6,522,686 65,227 60,381,134
Treasury shares purchased and retired (weighted
average discount 11.18%)* ..................... (86,700) (867) (722,081)
----------- -------------- --------------
Balance, February 28, 1995 ..................... 6,435,986 $64,360 $59,659,053
=========== ============== ==============
<FN>
- ----------
* The Trustees have voted to retire the shares purchased.
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST III
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- -----------------------------------------------------------------------------
6. DIVIDENDS -- The Fund has declared the following dividends from net
investment income:
</TABLE>
<TABLE>
<CAPTION>
AMOUNT PER
DECLARATION DATE SHARE RECORD DATE PAYABLE DATE
- -------------------- ----------- -------------- --------------
<S> <C> <C> <C>
February 28, 1995 $0.045 March 10, 1995 March 24, 1995
March 28, 1995 $0.045 April 7, 1995 April 21, 1995
</TABLE>
7. SELECTED QUARTERLY FINANCIAL DATA -- (unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED*
2/28/95 11/30/94
------------------------- -------------------
PER PER
TOTAL SHARE TOTAL SHARE
--------------- -------- --------- --------
<S> <C> <C> <C> <C>
Total investment income ................. $ 1,201 $ 0.18 $ 953 $ 0.15
Net investment income ................... 3,937 0.61 (2,066) (0.32)
Net realized and unrealized gain (loss) (3,349) (0.51) 3,084 0.49
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED*
8/31/94 5/31/94 2/28/94 11/30/93
------------------------ ------------------- ------------------ -----------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
--------------- ------- --------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ........ $996 $0.15 $ 1,216 $ 0.18 $1,137 $ 0.17 $1,200 $0.18
Net investment income .......... 843 0.13 1,065 0.16 994 0.15 1,035 0.16
Net realized and unrealized
gain (loss) .................... 237 0.04 (2,170) (0.32) (300) (0.05) 551 0.08
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED*
8/31/93 5/31/93 2/28/93 11/30/92
------------------------- ----------------- ----------------- -----------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
--------------- -------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ........ $1,232 $ 0.19 $1,170 $0.17 $1,196 $0.18 $1,201 $0.18
Net investment income .......... 1,074 0.16 1,019 0.16 1,031 0.15 1,035 0.16
Net realized and unrealized
gain (loss) .................... (160) (0.03) 268 0.04 1,119 0.17 495 0.08
<FN>
- ----------
* Totals expressed in thousands.
<PAGE>
<PAGE>
MUNICIPAL INCOME TRUST III
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FEBRUARY 28, FOR THE PERIOD
1995** FOR THE YEAR ENDED AUGUST 31, OCTOBER 5, 1989*
------------------ ------------------------------------------ THROUGH AUGUST
(UNAUDITED) 1994** 1993** 1992** 1991** 31, 1990**
------------------- --------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 9.81 $ 10.05 $ 9.80 $ 9.60 $ 9.32 $ 9.30
------------------- --------- --------- --------- --------- -----------------
Net investment income ................... 0.29 0.60 0.63 0.62 0.68 0.57
Net realized and unrealized gain (loss) (0.02) (0.25) 0.26 0.28 0.30 0.05
------------------- --------- --------- --------- --------- -----------------
Total from investment operations ....... 0.27 0.35 0.89 0.90 0.98 0.62
------------------- --------- --------- --------- --------- -----------------
Less dividends and distributions:
Net investment income .................. (0.27 ) (0.56) (0.60) (0.64) (0.66) (0.55)
Net realized gain ...................... (0.07 ) (0.03) (0.04) (0.06) (0.04) --
------------------- --------- --------- --------- --------- -----------------
Total dividends and distributions ...... (0.34 ) (0.59) (0.64) (0.70) (0.70) (0.55)
------------------- --------- --------- --------- --------- -----------------
Offering costs charged against capital . -- -- -- -- -- (0.05)
------------------- --------- --------- --------- --------- -----------------
Net asset value, end of period .......... $ 9.74 $ 9.81 $ 10.05 $ 9.80 $ 9.60 $ 9.32
=================== ========= ========= ========= ========= =================
Market value, end of period ............. $ 9.00 $ 9.00 $ 10.25 $ 9.75 $ 9.625 $ 8.625
=================== ========= ========= ========= ========= =================
TOTAL INVESTMENT RETURN+ ................ 3.99%(1) (6.60)% 12.27% 8.73% 20.38% (8.37)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands). $62,667 $64,011 $66,651 $65,024 $63,565 $62,147
Ratios to average net assets:
Expenses ............................... 0.93%(2) 0.93% 0.98% 1.00% 1.02% 1.10%(2)
Net investment income .................. 6.11%(2) 5.99% 6.37% 6.38% 7.20% 6.76%(2)
Portfolio turnover rate ................. 2%(1) 23% 2% 8% 40% 150%(1)
</TABLE>
[FN]
- ----------
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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 prices obtained under the Fund's dividend
reinvestment plan. Total investment return does not reflect sales charges
or brokerage commissions.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
- -----------------------------------------------------------------------------
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
<PAGE>
<PAGE>
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
James F. Willison
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 ADVISER
- ------------------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
Municipal
Income
Trust III
Semiannual Report
February 28, 1995
[/TABLE]
