<PAGE> 1
MUNICIPAL INCOME OPPORTUNITIES TRUST III
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - --------------------------------------------------------------------------------
During the 12 months ended March 31, 1994, the fixed-income markets rallied
to record-low yields and then retreated to levels not seen in more than a year.
Long-term revenue bond yields as measured by The Bond Buyer Revenue Bond Index,*
fell from 6.07 percent in March of 1993 to a record low of 5.41 percent in mid
October. The final quarter of 1993 was marked by strong economic activity. The
Federal Reserve Board demonstrated its resolve to resist potential inflation in
the first quarter of 1994 by raising the federal-funds rate -- the interest rate
that banks charge each other for overnight loans -- by 50 basis points from 3.00
percent to 3.50 percent in two separate moves. Although this action was
presented as a pre-emptive strike against inflation, the bond market interpreted
the move as the beginning of a trend toward higher interest rates. By March 31,
1994, the Revenue Bond Index stood at 6.39 percent, its highest level in over a
year.
New-issue municipal underwriting totaled $290 billion in 1993, a 23 percent
increase over the previous high of $235 billion set in 1992. Refunding issues,
which are used by state and local governments to refinance higher-coupon debt,
represented 66 percent of total volume last year. This year's underwriting is
estimated to decline by 30 percent to about $200 billion. It is anticipated that
approximately $260 billion in municipal bonds will either mature or be called in
1994, thus reducing the amount of municipal debt outstanding. In line with these
projections, new-issue volume for the first three months of 1994 declined by 27
percent and totaled $49 billion. Refunding activity, the catalyst of last year's
record underwriting, dropped even more sharply.
PERFORMANCE
Municipal Income Opportunities Trust III's total return for the 12-month
period ended March 31, 1994 was -5.04 percent. This return is based on a change
in the Trust's New York Stock Exchange (NYSE) market price from $9.625 per share
on March 31, 1993 to $8.50 per share on March 31, 1994 and included the
reinvestment of all dividends and distributions. Over the same period, the
Trust's net asset value declined by 0.96 percent, from $9.41 per share to $9.32
per share.
The Trust paid shareholders income dividends totaling $0.71 per share for
the fiscal year. Beginning with the distribution on January 21, 1994, the
Trust's monthly dividend level was reduced from $0.06 to $0.055 per share. This
decrease was prompted by the prospect of continued problem loan restructurings
and redemptions or sales of older, high-coupon bonds.
PORTFOLIO STRUCTURE
Non-performing loans represented 1.9 percent of the Trusts net assets at
the end of the period. These loans were concentrated in the public facilities,
retirement facilities, housing, and nursing and health-related sectors. Issues
representing another 2.2 percent of net assets are currently paying interest but
are expected to be restructured in the future. Revenues of these projects appear
insufficient
- - ---------------
*The Revenue Bond Index is an arithmetic average of the yields of 25 selected
municipal revenue bonds with 30-year maturities.
Ratings of these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by S&P.
The Index appears in the publication The Bond Buyer.
<PAGE> 2
to sustain present debt-service levels. Over the last six months $3.4 million in
bonds were called for redemption. The proceeds were reinvested in New York City
General Obligation, Swanton, Vermont -- Electric and Lorain County,
Ohio -- Laurel Lakes Retirement issues. The Trust's short-term (cash) position
increased substantially with the sales of two credits: Philadelphia-Methodist
Hospital and Denver Airport. Subsequent to the sale of the Denver Airport bonds
in early March, the city again delayed the opening of the airport.
At the conclusion of the fiscal year, the Trust's net assets exceeded $106
million. The portfolio was diversified among 11 specific municipal sectors and
52 separate issuers. Non-rated securities comprised 67 percent of the portfolio.
The three largest municipal sectors were nursing and health-related, housing and
tax allocation revenue bonds. These sectors represented 48 percent of the
portfolio. The average maturity and call protection of the Trust's long-term
holdings were 20 years and 8 years, respectively.
We would like to remind you that the Trustees have approved a procedure
whereby the Trust, when appropriate, may attempt to reduce or eliminate a market
value discount from net asset value by repurchasing shares in the open market or
in privately negotiated transactions at a price not above market value,
whichever is lower at the time of purchase.
We appreciate your support of Municipal Income Opportunities Trust III and
look forward to continuing to serve your investment needs.
Very truly yours,
/s/ C. FIUMEFREDDO
----------------------
Charles A. Fiumefreddo
Chairman of the Board
<PAGE> 3
MUNICIPAL INCOME OPPORTUNITIES TRUST III
PORTFOLIO OF INVESTMENTS March 31, 1994
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Coupon Maturity Value
Amount (in Rate Date
thousands) --- ---- ----
- - ----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (88.7%)
GENERAL OBLIGATION (0.9%)
$ 1,000 New York City, New York, Ser 1994 D.......................... 5.75 % 8/15/10 $ 918,410
- - ---------- ------------
EDUCATIONAL FACILITIES REVENUE (2.1%)
1,430 Trenholm State Technical College, Alabama, Ser 1991 COPs..... 9.50 9/ 1/11 1,387,329
1,000 New York State Dormitory Authority, State University Ser 1993
A.......................................................... 5.25 5/15/15 868,760
- - ---------- ------------
2,430 2,256,089
- - ---------- ------------
ELECTRIC REVENUE (1.5%)
1,750 Swanton, Vermont, Ser 1993................................... 6.70 12/ 1/23 1,663,602
- - ---------- ------------
HOSPITAL REVENUE (12.6%)
2,000 Corona, California, Vista Hospital System Inc Ser 1992 B
COPs....................................................... 9.50 7/ 1/20 2,131,700
2,000 Dixon, Illinois, Katherine Shaw Bethea Hospital Ser 1990..... 9.75 12/ 1/10 2,120,180
Illinois Health Facilities Authority,
1,250 Edward Hospital Refg Ser 1993.............................. 6.00 2/15/19 1,129,313
670 Hinsdale Hospital Ser 1990 C............................... 9.50 11/15/19 775,632
1,330 Hinsdale Hospital Ser 1990 C (Prerefunded)................. 9.50 11/15/19 1,671,730
2,000 Iowa Finance Authority, Mercy Health Initiatives Ser 1989.... 9.95 7/ 1/19 2,116,320
1,000 North Central Texas Health Facilities Development
Corporation, University Medical Center Inc Ser 1987........ 7.75 4/ 1/17 1,060,740
2,350 Tarrant County Health Facilities Development Corporation,
Texas, Community Health Care Foundation Inc Ser 1991....... 9.875 4/ 1/01 2,468,722
- - ---------- ------------
12,600 13,474,337
- - ---------- ------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (11.6%)
1,500 Pope County, Arkansas, Arkansas Power & Light Co
Ser 1990 (AMT)............................................. 8.00 11/ 1/20 1,615,905
1,980 Metropolitan Washington Airports Authority, District of
Columbia, CaterAir International Corp Ser 1991 (AMT)....... 10.125 9/ 1/11 2,055,577
1,500 Chicago, Illinois, Chicago O'Hare Int'l Airport/American
Airlines Inc Ser 1990 A (AMT).............................. 7.875 11/ 1/25 1,548,345
2,500 Port Authority of New York & New Jersey, Continental Airlines
Inc & Eastern Airlines Inc/LaGuardia Airport 1990 Ser 2
(AMT)..................................................... 9.125 12/ 1/15 2,801,800
2,000 Brazos River Authority, Texas, Texas Utilities Electric Co
1990 Ser A (AMT)........................................... 8.125 2/ 1/20 2,174,800
2,000 Sabine River Authority, Texas, Texas Utilities Electric Co
Ser 1990 B (AMT)........................................... 8.25 10/ 1/20 2,185,060
- - ---------- ------------
11,480 12,381,487
- - ---------- ------------
MORTGAGE REVENUE -- MULTI-FAMILY (9.4%)
1,400 Palm Beach County Housing Authority, Florida, Scattered Sites
Ser 1990................................................... 9.75 6/ 1/20 1,400,000
2,398 Saint Tammany Public Trust Financing Authority, Louisiana,
Refg Ser 1990.............................................. 10.00 10/ 1/20 2,590,174
1,960 Tewksbury Housing Authority, Massachusetts, Sullivan Place
Ser 1990 (AMT)(a).......................................... 9.875 8/ 1/25 294,000
Alexandria Redevelopment & Housing Authority, Virginia,
Courthouse Commons Apts
10,884 Ser 1990 B (AMT)........................................... 0.00 1/ 1/21 818,664
1,760 Ser 1990 A (AMT)........................................... 10.00 1/ 1/21 1,815,774
3,000 Washington Housing Finance Commission, FNMA Collateralized
Refg Ser 1990 A............................................ 7.50 7/ 1/23 3,090,420
- - ---------- ------------
21,402 10,009,032
- - ---------- ------------
MORTGAGE REVENUE -- SINGLE-FAMILY (6.2%)
785 Indiana Housing Finance Authority, GNMA Collateralized
1990 Ser E-2 (AMT)......................................... 8.00 1/ 1/22 815,505
1,695 Louisiana Housing Finance Agency, GNMA Collateralized
Ser 1988 (AMT)............................................. 8.30 11/ 1/20 1,793,751
1,975 Ohio Housing Finance Authority, GNMA-Backed 1990 Ser C
(AMT)...................................................... 7.85 9/ 1/21 1,995,323
1,940 Pennsylvania Housing Finance Authority, Ser X (AMT).......... 8.15 4/ 1/24 2,058,010
- - ---------- ------------
6,395 6,662,589
- - ---------- ------------
</TABLE>
<PAGE> 4
MUNICIPAL INCOME OPPORTUNITIES TRUST III
PORTFOLIO OF INVESTMENTS March 31, 1994 (continued)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Coupon Maturity Value
Amount (in Rate Date
thousands) --- ---- ----
- - ----------
<C> <S> <C> <C> <C>
NURSING & HEALTH RELATED FACILITIES REVENUE (17.9%)
$ 2,500 North Miami Health Facilities Authority, Florida, Hallmark
Homes for Better Living Foundation Inc Ser 1990 A(a)....... 10.50 % 8/ 1/20 $ 300,000
2,330 Champaign, Illinois, Hoosier Care Inc/Champaign Children's
Home Ser 1989 A............................................ 9.75 8/ 1/19 2,498,179
1,450 Winchester, Indiana, Hoosier Care II Inc Ser 1990............ 10.375 6/ 1/20 1,514,409
1,600 Westside Habilitation Center, Louisiana, Intermediate Care
Facility for the Mentally Retarded Refg Ser 1993........... 8.375 10/ 1/13 1,569,184
2,400 Massachusetts Health & Educational Facilities Authority,
Farren Care Center 1990 Ser A.............................. 10.375 6/ 1/10 2,729,712
3,245 Massachusetts Industrial Finance Agency, Kennedy-Donovan
Center Inc 1990 Issue...................................... 9.75 6/ 1/10 3,463,421
New York State Medical Care Facilities Finance Agency,
Mental Health
1,065 1990 Ser B................................................. 7.875 8/15/08 1,173,822
895 1990 Ser B (Prerefunded)................................... 7.875 8/15/08 1,038,379
2,465 Maury County Health & Educational Facilities Board,
Tennessee,
Southern Healthcare Systems/Heritage Manor of Monteagle,
Rogersville, & Columbus Ser 1990 E......................... 10.50 3/ 1/20 2,598,209
2,000 Hurricane, Utah, Mission Health Service Ser 1990............. 10.50 7/ 1/20 2,261,480
- - ---------- ------------
19,950 19,146,795
- - ---------- ------------
PUBLIC FACILITIES REVENUE (4.1%)
2,000 George L Smith II World Congress Center Authority, Georgia,
Domed Stadium Ser 1990 (AMT)............................... 7.875 7/ 1/20 2,175,580
1,500 Irwin County, Georgia, Detention COPs(a)..................... 9.50 12/ 1/10 900,000
780 Angelina County Jail Facilities Financing Corporation, Texas,
Criminal Detention Center(a)............................... 9.75 8/ 1/09 8
1,324 Newton County, Texas, Detention Phase II COPs................ 9.875 12/15/11 1,324,324
- - ---------- ------------
5,604 4,399,912
- - ---------- ------------
RETIREMENT FACILITIES REVENUE (6.5%)
1,000 Colorado Health Facilities Authority, Liberty Heights 1990
Ser A(a)................................................... 10.00 7/ 1/19 550,000
2,325 Connecticut Development Authority, Seabury Life Care Ser
1991....................................................... 10.00 9/ 1/16 2,437,158
655 Massachusetts Industrial Finance Agency, Pioneer Valley
Living Care Center at Amherst 1990 Issue................... 7.00 10/ 1/01 537,100
1,500 Charlotte Housing Authority, North Carolina, Merrywood Senior
Adult Community Ser 1989 A (AMT)........................... 9.75 5/ 1/19 1,500,000
1,000 Lorain County, Ohio, Laurel Lakes Ser 1993................... 7.30 12/15/14 984,120
1,500 Chesterfield County Industrial Development Authority,
Virginia, Brandermill Woods--Congruent Care Ser 1991 A..... 10.625 7/ 1/16 960,000
- - ---------- ------------
7,980 6,968,378
- - ---------- ------------
TAX ALLOCATION (14.9%)
3,000 Lely Community Development District, Florida, Ser 1991....... 9.00 10/ 1/11 3,192,870
2,385 Bedford Park, Illinois, First Lien Ser 1990 (Prerefunded).... 9.70 1/ 1/10 2,767,793
1,920 Bradley, Illinois, Bradley North Redev Ser 1990.............. 9.125 1/ 1/05 2,010,662
1,550 Bridgeview, Illinois, Ser 1991............................... 9.50 1/ 1/11 1,658,066
1,765 Carol Stream, Illinois, Carol Pointe Ser 1990 B.............. 9.50 1/15/10 1,888,444
2,000 Hodgkins, Illinois, Ser 1991................................. 9.50 12/ 1/09 2,168,960
2,000 Muskegon Downtown Development Authority, Michigan,
Ser A-1 1989(b)............................................ 9.75 6/ 1/18 2,255,580
- - ---------- ------------
14,620 15,942,375
- - ---------- ------------
OTHER REVENUE (1.0%)
1,000 Virgin Islands Public Finance Authority Matching Fund
Refg Ser 1992 A............................................ 7.25 10/ 1/18 1,072,960
- - ---------- ------------
106,211 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $95,121,809).......... 94,895,966
- - ---------- ------------
</TABLE>
<PAGE> 5
MUNICIPAL INCOME OPPORTUNITIES TRUST III
PORTFOLIO OF INVESTMENTS March 31, 1994 (continued)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Coupon Maturity Value
Amount (in Rate Date
thousands) --- ---- ----
- - ----------
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS (7.6%)
$ 2,600 Valdez, Alaska, Marine Terminal Exxon Pipeline Co Ser A
(Tender 4/4/94)............................................ 2.75*% 12/ 1/33 $ 2,600,000
1,507 California Pollution Control Financing Authority, OMS Equity
of Stanislaus Inc Ser 1987 (AMT) (Tender 4/4/94)........... 2.65* 12/ 1/17 1,507,000
4,000 Massachusetts Dedicated Income Tax Ser 1990 (Tender
4/4/94).................................................... 3.05* 12/ 1/97 4,000,000
- - ---------- ------------
8,107 TOTAL SHORT-TERM MUNICIPAL BONDS
(IDENTIFIED COST $8,107,000)........................................... 8,107,000
- - ---------- ------------
$ 114,318 TOTAL INVESTMENTS (IDENTIFIED COST $103,228,809) (C)................... 96.3% 103,002,966
- - ----------
- - ----------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES......................... 3.7 3,912,622
------ ------------
NET ASSETS............................................................. 100.0% $106,915,588
------ ------------
------ ------------
</TABLE>
- - ---------------
* Variable or floating rate security. Coupon rate shown reflects current rate.
(a) Non-income producing, bond in default.
(b) Resale is restricted to qualified accredited investors.
(c) The aggregate cost for federal income tax purposes is $103,482,984; the
aggregate gross unrealized appreciation is $6,016,431 and the aggregate
gross unrealized depreciation is $6,496,449, resulting in net unrealized
depreciation of $480,018.
See Notes to Financial Statements
SUMMARY OF INVESTMENTS BY STATE
<TABLE>
<CAPTION>
Percent of Percent of Percent of
Net Assets Net Assets Net Assets
--------- --------- ---------
<S> <C> <C>
AL 1.3% IL 18.9% PA 1.9%
AK 2.4 IN 2.1 TN 2.4
AR 1.5 IA 2.0 TX 8.6
CA 3.4 LA 5.6 UT 2.1
CO 0.5 MA 10.3 VT 1.6
CT 2.3 MI 2.1 VA 3.4
DC 1.9 NY 6.4 WA 2.9
FL 4.6 NC 1.4 Other Territory--
GA 2.9 OH 2.8 Virgin Island 1.0
----
Total 96.3%
----
----
</TABLE>
<PAGE> 6
MUNICIPAL INCOME OPPORTUNITIES TRUST III
FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1994
- - -------------------------------------------
ASSETS:
Investments in securities, at value
(identified cost $103,228,809) (Note
1)....................................... $ 103,002,966
Cash....................................... 200,985
Receivable for:
Interest................................. 2,402,892
Investments sold......................... 1,451,377
Deferred organizational expenses (Note
1)....................................... 9,285
Prepaid expenses and other assets.......... 21,715
------------
TOTAL ASSETS....................... 107,089,220
------------
LIABILITIES:
Investment advisory fee payable (Note 2)... 50,722
Administration fee payable (Note 3)........ 30,433
Accrued expenses (Note 4).................. 92,477
------------
TOTAL LIABILITIES.................. 173,632
------------
NET ASSETS:
Paid-in-capital............................ 106,386,529
Accumulated undistributed net realized
gain on investments...................... 566,491
Net unrealized depreciation on
investments.............................. (225,843)
Accumulated undistributed net
investment income........................ 188,411
------------
NET ASSETS......................... $ 106,915,588
------------
------------
NET ASSET VALUE PER SHARE, 11,466,006
shares outstanding (unlimited shares
authorized of $.01 par value)............ $9.32
-----
-----
STATEMENT OF OPERATIONS For the year
ended March 31, 1994
- - -------------------------------------------
INVESTMENT INCOME:
INTEREST INCOME........................... $8,758,153
----------
EXPENSES
Investment advisory fee (Note 2)......... 550,986
Administration fee (Note 3).............. 330,592
Professional fees........................ 87,297
Shareholder reports and notices (Note
4)..................................... 69,702
Transfer agent fees and expenses (Note
4)..................................... 61,242
Trustees' fees and expenses (Note 4)..... 32,457
Registration fees........................ 24,175
Organizational expenses (Note 1)......... 8,559
Other.................................... 16,730
----------
TOTAL EXPENSES......................... 1,181,740
----------
NET INVESTMENT INCOME................ 7,576,413
----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (Note 1):
Net realized gain on investments......... 562,044
Net change in unrealized appreciation
on investments......................... (1,051,107)
----------
NET LOSS ON INVESTMENTS................ (489,063)
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $7,087,350
----------
----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
March 31, 1994 March 31, 1993
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.......................................................... $ 7,576,413 $ 8,026,337
Net realized gain on investments............................................... 562,044 286,105
Net change in unrealized appreciation on investments........................... (1,051,107) (832,695)
-------------- --------------
Net increase in net assets resulting from operations......................... 7,087,350 7,479,747
-------------- --------------
Dividends and distributions to shareholders from:
Net investment income.......................................................... (8,083,535) (8,269,623)
Net realized gain on investments............................................... -0- (372,973)
-------------- --------------
Total dividends and distributions............................................ (8,083,535) (8,642,596)
-------------- --------------
Net decrease from transactions in shares of beneficial interest (Note 5)......... -0- (251,807)
-------------- --------------
Total decrease............................................................... (996,185) (1,414,656)
NET ASSETS:
Beginning of period.............................................................. 107,911,773 109,326,429
END OF PERIOD (including undistributed net investment income of $188,411 and -------------- --------------
$695,533, respectively)........................................................ $ 106,915,588 $ 107,911,773
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements
<PAGE> 7
MUNICIPAL INCOME OPPORTUNITIES TRUST III
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Municipal Income Opportunities Trust
III (the "Fund") is registered under the Investment Company Act of 1940, as
amended (the "Act"), as a diversified closed-end management investment company.
It was organized on February 20, 1990 as a Massachusetts business trust and
commenced operations on April 30, 1990.
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 Fund's Trustees.
The pricing service has informed the Fund that in valuing the Fund's
portfolio securities, it uses both a computerized grid 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.
B. Accounting for Investments -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). In computing
net investment income, the Fund amortizes premiums and original issue
discounts on fixed income securities. Additionally, with respect to market
discount on bonds purchased after April 30, 1993, a portion of any capital
gain realized upon disposition is recharacterized as taxable investment
income. Realized gains and losses on security transactions are determined
on the identified cost method. 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
reclassifications. 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 -- The Fund's Former Administrator paid the
organizational expenses of the Fund in the amount of $43,103. The Fund
reimbursed the Former Administrator for such expenses which are being
amortized by the straight-line method over a period not to exceed five
years from the commencement of operations.
2. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement (the "Advisory Agreement") with Dean Witter InterCapital Inc. (the
"Investment Adviser"), the Fund pays its Investment Adviser an advisory fee,
calculated weekly and payable monthly, by applying the annual rate of 0.50% to
the Fund's average weekly net assets.
<PAGE> 8
MUNICIPAL INCOME OPPORTUNITIES TRUST III
NOTES TO FINANCIAL STATEMENTS (continued)
- - --------------------------------------------------------------------------------
Under the terms of the Advisory Agreement, the Investment Adviser manages
the Fund's assets. Also, the Investment Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Adviser.
3. ADMINISTRATION AGREEMENT -- Through December 31, 1993, pursuant to an
Administration Agreement with Dean Witter InterCapital Inc. (the "Former
Administrator"), the Fund paid an administration fee, calculated weekly and
payable monthly, by applying the annual rate of 0.30% to the Fund's average
weekly net assets. On January 1, 1994, the Administration Agreement between the
Former Administrator and the Fund had been terminated and a new Administration
Agreement had been entered into between Dean Witter Services Company Inc. (the
"Administrator"), a wholly-owned subsidiary of the Former Administrator, and the
Fund. The nature and scope of the services being provided to the Fund or any
fees being paid by the Fund under the new Agreement are identical to those of
the previous Agreement.
Under the terms of the Administration Agreement, the Administrator
maintains certain of the Fund's books and records and furnishes, at its own
expense, such office space, facilities, equipment, clerical help, bookkeeping
and certain legal services as the Fund may reasonably require in the conduct of
its business. In addition, the Administrator pays the salaries of all personnel,
including officers of the Fund, who are employees of the Administrator.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and the proceeds from sales of portfolio securities for the year ended
March 31, 1994, excluding short-term investments, aggregated $12,124,166 and
$17,867,417, respectively.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as independent Trustees for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the year ended March 31, 1994, included in Trustees' fees and expenses in the
Statement of Operations, amounted to $11,215. At March 31, 1994 the Fund had an
accrued pension liability of $41,245 which is included in accrued expenses in
the Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Adviser and
Administrator, is the Fund's transfer agent. At March 31, 1994, the Fund had
transfer agent fees and expenses payable of $5,637.
Bowne & Co., Inc. is an affiliate of the Fund by virtue of a common Fund
Trustee and Director of Bowne & Co., Inc. During the year ended March 31, 1994,
the Fund paid Bowne & Co., Inc. $2,725 for printing of shareholders reports.
5. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Par Capital
Value Paid in
of Excess of
Shares Shares Par Value
----------- -------- ------------
<S> <C> <C> <C>
Balance, March 31, 1992............................. 11,495,006 $114,950 $106,523,386
Treasury shares purchased and retired (weighted
average discount 7.76%)*.......................... (29,000) (290) (251,517)
----------- -------- ------------
Balance, March 31, 1993 and March 31, 1994.......... 11,466,006 $114,660 $106,271,869
----------- -------- ------------
----------- -------- ------------
</TABLE>
- - ---------------
* The Trustees have voted to retire the shares repurchased.
<PAGE> 9
MUNICIPAL INCOME OPPORTUNITIES TRUST III
NOTES TO FINANCIAL STATEMENTS (continued)
- - --------------------------------------------------------------------------------
6. FEDERAL INCOME TAX STATUS -- As of March 31, 1994 the Fund had temporary
book/tax differences which were primarily attributable to wash sales.
7. DIVIDENDS -- The Fund declared the following dividends from net investment
income --
<TABLE>
<CAPTION>
Declaration Amount Record Payable
Date Per Share Date Date
------ --------- ------ ------
<S> <C> <C> <C>
March 29, 1994 $ 0.055 April 8, 1994 April 22, 1994
April 26, 1994 $ 0.055 May 6, 1994 May 20, 1994
</TABLE>
8. SELECTED QUARTERLY FINANCIAL DATA --(unaudited)
<TABLE>
<CAPTION>
Quarters Ended*
-----------------------------------------------------------------
3/31/94 12/31/93 9/30/93 6/30/93
-------------- -------------- -------------- --------------
Per Per Per Per
Total Share Total Share Total Share Total Share
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income.......... $2,041 $0.18 $2,219 $0.19 $2,255 $0.20 $2,243 $0.19
Net investment income............ 1,723 0.15 1,926 0.17 1,968 0.17 1,959 0.17
Net realized and unrealized gain
(loss) on investments.......... (4,195) (0.36) (200) (0.02) 1,843 0.16 2,063 0.18
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended*
-----------------------------------------------------------------
3/31/93 12/31/92 9/30/92 6/30/92
-------------- -------------- -------------- --------------
Per Per Per Per
Total Share Total Share Total Share Total Share
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income.......... $2,314 $0.20 $2,330 $0.20 $2,277 $0.20 $2,322 $0.20
Net investment income............ 2,040 0.18 2,018 0.17 1,963 0.17 2,005 0.18
Net realized and unrealized gain
(loss) on investments.......... 39 -0- (186) (0.01) (1,163) (0.10) 763 0.06
</TABLE>
- - ---------------
* Totals expressed in thousands of dollars.
<PAGE> 10
MUNICIPAL INCOME OPPORTUNITIES TRUST III
FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
For the period
April 30,
For the year ended March 31, 1990*
------------------------------ through
1994 1993 1992 March 31, 1991
---- ---- ---- --------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......... $ 9.41 $ 9.51 $ 9.44 $ 9.30
-------- -------- -------- --------------
Net investment income..................... 0.66 0.70 0.73 0.57
Net realized and unrealized gain (loss) on
investments............................. (0.04) (0.05) 0.12 0.10
-------- -------- -------- --------------
Total from investment operations............. 0.62 0.65 0.85 0.67
-------- -------- -------- --------------
Less dividends, distributions and other
charges:
Dividends from net investment income...... (0.71) (0.72) (0.72) (0.50)
Distributions from net realized gains on
investments............................. -0- (0.03) (0.06) -0-
Offering costs charged against capital.... -0- -0- -0- (0.03)
-------- -------- -------- --------------
Total dividends, distributions and other
charges................................... (0.71) (0.75) (0.78) (0.53)
-------- -------- -------- --------------
Net asset value, end of period............... $ 9.32 $ 9.41 $ 9.51 $ 9.44
-------- -------- -------- --------------
-------- -------- -------- --------------
Market value, end of period.................. $ 8.50 $ 9.625 $ 9.50 $ 9.125
-------- -------- -------- --------------
-------- -------- -------- --------------
TOTAL INVESTMENT RETURN+....................... (5.04)%(1) 9.84% 12.84% (3.49)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..... $106,916 $107,912 $109,326 107$,798
Ratio of expenses to average net assets...... 1.07% 1.12% 1.14% 1.12%(2)
Ratio of net investment income to average net
assets.................................... 6.88% 7.37% 7.61% 6.72%(2)
Portfolio turnover rate...................... 12% 3% 11% 10%
</TABLE>
- - ---------------
* Commencement of operations.
+ Total investment return is based upon the current market value on the first
and last day of each period reported. Dividends and distributions are
assumed to be reinvested at the 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
1994 FEDERAL TAX NOTICE (unaudited)
During the year ended March 31, 1994, the Fund paid to shareholders $0.705 per
share from net investment income. All of the Fund's dividends from net
investment income were exempt interest dividends, excludable from gross income
for Federal income tax purposes.
<PAGE> 11
MUNICIPAL INCOME OPPORTUNITIES TRUST III
REPORT OF INDEPENDENT ACCOUNTANTS
- - --------------------------------------------------------------------------------
To the Shareholders and Trustees of Municipal Income Opportunities Trust III
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Municipal Income Opportunities
Trust III (the "Fund") at March 31, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended and for the period April 30, 1990 (commencement of
operations) through March 31, 1991, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at March 31, 1994 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
New York, New York
May 10, 1994
<PAGE> 12
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
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
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse
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
OPPORTUNITIES
TRUST III
Annual Report
March 31, 1994
