UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-8497
Name of Fund: Corporate High Yield Fund III, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Corporate High
Yield Fund III, Inc., 800 Scudders Mill Road, Plainsboro, NJ 08536.
Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 5/31/04
Date of reporting period: 06/01/04 - 08/31/04
Item 1 - Schedule of Investments
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
-----------------------------------------------------------------------------------------------------------------------------------
Aerospace & B B2 $ 2,275,000 Alliant Techsystems Inc., 2.75% due $ 2,306,281
Defense - 2/15/2024 (Convertible) (e)
2.5% B+ B1 975,000 Esterline Technologies Corporation, 7.75% due 1,035,937
6/15/2013
B B3 350,000 K & F Industries, Inc., 9.625% due 12/15/2010 387,625
B- Caa1 1,750,000 Standard Aero Holdings, Inc., 8.25% due 1,798,125
9/01/2014(e)
B- B3 750,000 TD Funding Corp., 8.375% due 7/15/2011 793,125
B B2 1,800,000 The Titan Corporation, 8% due 5/15/2011 1,858,500
-------------
8,179,593
-----------------------------------------------------------------------------------------------------------------------------------
Airlines - BB B1 1,300,000 American Airlines, Inc., 7.80% due 4/01/2008 1,113,159
1.6% Continental Airlines, Inc.:
BB- B3 750,000 7.25% due 11/01/2005 639,506
CCC+ Caa2 950,000 8% due 12/15/2005 869,250
B+ B2 552,557 6.541% due 9/15/2009 474,120
BB- B2 1,318,425 7.033% due 6/15/2011 1,022,293
BB+ Ba2 1,328,933 6.90% due 1/02/2017 1,044,708
-------------
5,163,036
-----------------------------------------------------------------------------------------------------------------------------------
Automotive - B B3 1,225,000 Asbury Automotive Group, Inc., 8% due 3/15/2014 1,194,375
2.6% B- B3 1,900,000 Autocam Corporation, 10.875% due 6/15/2014(e) 1,919,000
Metaldyne Corporation:
B Caa1 2,625,000 11% due 6/15/2012 2,283,750
B B3 1,190,000 10% due 11/01/2013(e) 1,175,125
B Caa1 1,725,000 Stanadyne Corporation (Kohlberg Ownership), 10% 1,785,375
due 8/15/2014(e) -------------
8,357,625
-----------------------------------------------------------------------------------------------------------------------------------
Broadcasting CCC B3 2,300,000 Granite Broadcasting Corporation, 9.75% due 2,167,750
- 4.7% 12/01/2010
B B1 1,750,000 LIN Television Corporation, 6.50% due 5/15/2013 1,723,750
B- B3 1,375,000 NextMedia Operating, Inc., 10.75% due 7/01/2011 1,540,000
CCC Caa1 2,125,000 Paxson Communications Corporation, 10.75% due 2,135,625
7/15/2008
Salem Communications Holding Corporation:
B- B3 1,175,000 7.75% due 12/15/2010 1,222,000
B- B3 1,364,000 9% due 7/01/2011 1,486,760
B B3 3,005,000 Sinclair Broadcast Group, Inc., 4.875% due 2,775,869
7/15/2018 (Convertible)
CCC+ Caa1 2,300,000 Young Broadcasting Inc., 8.75% due 1/15/2014 2,205,125
-------------
15,256,879
-----------------------------------------------------------------------------------------------------------------------------------
Cable B B3 2,125,000 Kabel Deutschland GmbH, 10.625% due 2,178,125
International 7/01/2014(e)
- 1.5% B- B3 2,450,000 NTL Cable PLC, 6.61% due 10/15/2012(d)(e) 2,499,000
-------------
4,677,125
-----------------------------------------------------------------------------------------------------------------------------------
1
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (continued) (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
-----------------------------------------------------------------------------------------------------------------------------------
Cable - Adelphia Communications Corporation (h):
U.S. - 7.7% NR* NR* $ 750,000 6% due 2/15/2006 (Convertible) $ 191,250
NR* NR* 1,900,000 12.531%** due 1/15/2008 1,197,000
CCC- Caa1 236,329 Avalon Cable LLC, 11.875% due 12/01/2008 249,327
BB- B1 2,600,000 CSC Holdings, Inc., 7.625% due 4/01/2011 2,697,500
D Caa1 4,850,000 Century Cable Holdings LLC, Term, due 12/31/2009(a) 4,729,759
Charter Communications Holdings, LLC:
CCC- Ca 3,500,000 8.625% due 4/01/2009 2,782,500
CCC- Ca 2,000,000 9.625% due 11/15/2009 1,615,000
B- Caa2 3,025,000 Insight Communications Company, Inc., 12.25%** 2,714,938
due 2/15/2011
NR* NR* 1,469,000 Loral Cyberstar, Inc., 10% due 7/15/2006(h) 1,197,235
NR* NR* 950,000 Loral Space & Communications Ltd., 9.50% due 294,500
1/15/2006(h)
B+ B2 4,175,000 Mediacom Broadband LLC, 11% due 7/15/2013 4,519,437
CCC+ Caa1 2,850,000 Rainbow National Services LLC, 10.375% due
9/01/2014(e) 2,949,750
-------------
25,138,196
-----------------------------------------------------------------------------------------------------------------------------------
Chemicals - B- B3 2,375,000 BCP Caylux Holdings Luxembourg SCA, 9.625% 2,550,156
13.0% due 6/15/2014(e)
Crompton Corporation (e):
B B1 1,875,000 7.67% due 8/01/2010(d) 1,917,187
B B1 2,175,000 9.875% due 8/01/2012 2,262,000
B+ B3 1,575,000 Geon Company, 6.875% due 12/15/2005 1,639,969
CCC+ NR* 2,200,000 HMP Equity Holdings Corporation, 14.909%** due 1,298,000
5/15/2008
CCC+ Caa2 2,025,000 Huntsman International Holdings LLC, 13.898%** 1,032,750
due 12/31/2009
Huntsman International LLC:
B- B3 525,000 9.875% due 3/01/2009 567,000
CCC+ Caa1 2,500,000 10.125% due 7/01/2009 2,575,000
BB- B1 2,025,000 ISP Chemco Inc., 10.25% due 7/01/2011 2,252,812
B+ B2 1,575,000 ISP Holdings, Inc., 10.625% due 12/15/2009 1,732,500
B- B3 1,175,000 Innophos, Inc., 8.875% due 8/15/2014(e) 1,222,000
BB- B1 3,025,000 Millennium America Inc., 7% due 11/15/2006 3,108,188
Nalco Company (e):
B- B2 450,000 7.75% due 11/15/2011 479,250
B- Caa1 1,125,000 8.875% due 11/15/2013 1,213,594
B- Caa2 3,500,000 Nalco Finance Holdings Inc., 9.037%** due 2,485,000
2/01/2014(e)
BB- B2 3,125,000 Omnova Solutions Inc., 11.25% due 6/01/2010 3,437,500
NR* NR* 725,000 PCI Chemicals, Canada, 10% due 12/31/2008 706,875
B+ B3 3,125,000 PolyOne Corporation, 10.625% due 5/15/2010 3,398,438
B- B3 1,825,000 Rockwood Specialties Group, Inc., 10.625% due 1,989,250
5/15/2011
B- Caa1 3,025,000 Terra Capital, Inc., 11.50% due 6/01/2010 3,372,875
B- B1 2,830,000 Wellman, Inc., Second Lien Term, due 2,796,982
2/10/2010(a) -------------
42,037,326
-----------------------------------------------------------------------------------------------------------------------------------
2
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (continued) (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
-----------------------------------------------------------------------------------------------------------------------------------
Consumer - B- Caa1 $ 1,350,000 Sealy Mattress Company, 8.25% due 6/15/2014(e) $ 1,393,875
Durables - B B2 785,000 Tempur-Pedic, Inc., 10.25% due 8/15/2010 883,125
0.7% -------------
2,277,000
-----------------------------------------------------------------------------------------------------------------------------------
Consumer- Non- Chattem, Inc.:
Durables - B+ Ba3 650,000 4.79% due 3/01/2010(d) 667,875
2.1% B- B2 600,000 7% due 3/01/2014 594,000
B B3 3,125,000 Hines Nurseries, Inc., 10.25% due 10/01/2011 3,281,250
B- B3 2,200,000 Samsonite Corporation, 8.875% due 6/01/2011(e) 2,266,000
-------------
6,809,125
-----------------------------------------------------------------------------------------------------------------------------------
Diversified B- B3 2,150,000 CBD Media LLC, 8.625% due 6/01/2011 2,273,625
Media - B B2 850,000 Cadmus Communications Corporation, 8.375% due 903,125
5.9% 6/15/2014(e)
B B2 1,367,000 Dex Media West LLC, 9.875% due 8/15/2013 1,572,050
B B2 2,650,000 Houghton Mifflin Company, 8.25% due 2/01/2011 2,732,812
BBB- Baa3 3,800,000 Liberty Media Corporation, 0.75% 4,175,250
due 3/30/2023 (Convertible)
B B3 875,000 Primedia Inc., 7.625% due 4/01/2008 857,500
R.H. Donnelley Financial Corporation I (e):
BB B1 200,000 8.875% due 12/15/2010 225,250
B+ B2 725,000 10.875% due 12/15/2012 857,313
CCC+ B3 2,450,000 Six Flags, Inc., 9.50% due 2/01/2009 2,376,500
BB- B1 3,302,000 Yell Finance BV, 12.52%** due 8/01/2011 3,153,410
-------------
19,126,835
-----------------------------------------------------------------------------------------------------------------------------------
Energy- CCC+ Caa1 825,000 Continental Resources, Inc., 10.25% due 8/01/2008 852,844
Exploration Plains Exploration & Production Company:
& Production - B+ Ba3 825,000 8.75% due 7/01/2012 919,875
1.1% B B2 1,700,000 8.75% due 7/01/2012 1,895,500
-------------
3,668,219
-----------------------------------------------------------------------------------------------------------------------------------
Energy B B2 1,875,000 Dresser, Inc., 9.375% due 4/15/2011 2,015,625
Other - 4.4% B B2 2,075,000 Ferrellgas Partners LP, 8.75% due 6/15/2012 2,261,750
BBB Baa2 2,300,000 Halliburton Company, 3.125% due 2,495,500
7/15/2023 (Convertible) (e)
CCC B3 3,750,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 3,726,563
Star Gas Partners, LP:
B B3 2,250,000 10.25% due 2/15/2013 2,430,000
B B3 500,000 10.25% due 2/15/2013(e) 540,000
D Ca 2,025,000 Trico Marine Services, Inc., 8.875% due 972,000
5/15/2012(h) -------------
14,441,438
-----------------------------------------------------------------------------------------------------------------------------------
Financial - B B3 2,900,000 Refco Finance Holdings LLC, 9% due 8/01/2012(e) 3,001,500
0.9%
-----------------------------------------------------------------------------------------------------------------------------------
3
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (continued) (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
-----------------------------------------------------------------------------------------------------------------------------------
Food/ B B3 $ 750,000 American Seafoods Group LLC, 10.125% due $ 819,375
Tobacco - 4/15/2010
5.4% Commonwealth Brands, Inc. (e):
B- B2 1,925,000 9.75% due 4/15/2008 2,035,687
B- B3 1,475,000 10.625% due 9/01/2008 1,559,813
B+ Ba3 3,250,000 Cott Beverages, Inc., 8% due 12/15/2011 3,522,187
B B2 1,250,000 Del Monte Corporation, 8.625% due 12/15/2012 1,390,625
CCC B2 2,200,000 Doane Pet Care Company, 10.75% due 3/01/2010 2,332,000
B- B3 1,275,000 Merisant Company, 9.50% due 7/15/2013(e) 1,275,000
NR* NR* 1,950,000 New World Pasta Company, 9.25% due 136,500
2/15/2009(h)
BB Ba2 2,100,000 Smithfield Foods, Inc., 8% due 10/15/2009 2,283,750
B- Caa1 1,250,000 Tabletop Holdings, Inc., 12.25%** due 5/15/2014(e) 731,250
B+ B2 1,375,000 The Wornick Company, 10.875% due 7/15/2011(e) 1,443,750
-------------
17,529,937
-----------------------------------------------------------------------------------------------------------------------------------
Gaming - B+ B1 3,250,000 Boyd Gaming Corporation, 8.75% due 4/15/2012 3,575,000
6.8% B B3 1,925,000 Inn of the Mountain Gods Resort and Casino, 12% 2,175,250
due 11/15/2010
BB+ Ba1 1,550,000 MGM Mirage Inc., 8.50% due 9/15/2010 1,743,750
B B2 3,625,000 The Majestic Star Casino, LLC, 9.50% due 3,706,562
10/15/2010
BB- Ba2 2,325,000 Park Place Entertainment Corporation, 7.875% due 2,580,750
3/15/2010
CCC+ Caa1 1,425,000 Pinnacle Entertainment, Inc., 8.25% due 3/15/2012 1,432,125
B B2 2,575,000 Poster Financial Group, Inc., 8.75% due 12/01/2011 2,639,375
B B2 2,700,000 Resorts International Hotel and Casino, Inc., 3,064,500
11.50% due 3/15/2009
CCC+ B3 987,000 Wynn Las Vegas, LLC, 12% due 11/01/2010 1,214,010
-------------
22,131,322
-----------------------------------------------------------------------------------------------------------------------------------
Government - Federal Republic of Brazil:
Foreign - BB- B1 1,114,132 8% due 4/15/2014 1,090,512
1.5% B+ B1 1,625,000 10.50% due 7/14/2014 1,742,812
B+ B1 1,900,000 10.125% due 5/15/2027 1,923,750
-------------
4,757,074
-----------------------------------------------------------------------------------------------------------------------------------
Health Care - Alpharma, Inc.:
6.6% CCC+ NR* 1,900,000 3% due 6/01/2006 (Convertible) 2,341,750
B- B3 2,100,000 8.625% due 5/01/2011(e) 2,105,250
A- NR* 1,900,000 Chiron Corporation, 2.75% due 1,985,500
6/30/2034 (Convertible) (e)
BB+ Ba3 2,902,000 Fisher Scientific International Inc., 8.125% due 3,221,220
5/01/2012
B+ Ba3 3,750,000 Fresenius Medical Care Capital Trust II, 7.875% 4,003,125
due 2/01/2008
NR* NR* 2,825,000 HealthSouth Corporation, 8.375% due 10/01/2011 2,768,500
Tenet Healthcare Corporation:
B- B3 1,000,000 5.375% due 11/15/2006 1,007,500
B- B3 1,125,000 9.875% due 7/01/2014(e) 1,172,813
B- B2 2,675,000 US Oncology, Inc., 9% due 8/15/2012(e) 2,802,063
-------------
21,407,721
-----------------------------------------------------------------------------------------------------------------------------------
4
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (continued) (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
-----------------------------------------------------------------------------------------------------------------------------------
Housing - Building Materials Corporation of America:
3.4% B+ B2 $ 400,000 7.75% due 7/15/2005 $ 405,000
B+ B2 1,050,000 8% due 10/15/2007 1,063,125
B+ B2 5,325,000 8% due 12/01/2008 5,364,937
BB- Ba3 650,000 Forest City Enterprises, Inc., 7.625% due 6/01/2015 666,250
B- B3 1,875,000 Nortek, Inc., 8.50% due 9/01/2014(e) 1,954,688
BB- B1 1,475,000 Texas Industries, Inc., 10.25% due 6/15/2011 1,681,500
-------------
11,135,500
-----------------------------------------------------------------------------------------------------------------------------------
Information BB+ Ba2 1,925,000 Freescale Semiconductor, Inc., 4.38% due 1,958,687
Technology - 7/15/2009(d)(e)
1.7% B- B3 1,150,000 UGS Corp., 10% due 6/01/2012(e) 1,253,500
CCC+ Caa2 2,350,000 Viasystems, Inc., 10.50% due 1/15/2011 2,267,750
-------------
5,479,937
-----------------------------------------------------------------------------------------------------------------------------------
Leisure - FelCor Lodging LP:
1.7% B- B1 2,850,000 5.84% due 6/01/2011(d)(e) 2,864,250
B- B1 1,550,000 9% due 6/01/2011 1,689,500
B+ B1 1,050,000 Intrawest Corporation, 7.50% due 10/15/2013 1,065,750
-------------
5,619,500
-----------------------------------------------------------------------------------------------------------------------------------
Manu- CCC+ Caa1 800,000 Columbus McKinnon Corporation, 8.50% due 780,000
facturing - 4/01/2008
6.5% B- B2 925,000 Da-Lite Screen Company, Inc., 9.50% due 971,250
5/15/2011(e)
B- B3 2,500,000 Eagle-Picher Incorporated, 9.75% due 9/01/2013 2,693,750
B- B3 3,450,000 Invensys PLC, 9.875% due 3/15/2011(e) 3,501,750
B B2 2,475,000 JohnsonDiversey, Inc., 9.625% due 5/15/2012 2,772,000
B- Caa1 1,175,000 Mueller Group, Inc., 10% due 5/01/2012(e) 1,266,063
B- B3 775,000 Rexnord Corporation, 10.125% due 12/15/2012 875,750
B- Caa1 975,000 Sensus Metering Systems Inc., 8.625% due 955,500
12/15/2013(e)
B B3 1,825,000 Superior Essex Communications LLC, 9% due 1,797,625
4/15/2012(e)
B B3 3,125,000 TriMas Corporation, 9.875% due 6/15/2012 3,312,500
BBB Baa3 1,605,000 Tyco International Group SA, 2.75%
due 1/15/2018 (Convertible) 2,307,188
-------------
21,233,376
-----------------------------------------------------------------------------------------------------------------------------------
5
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (continued) (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
-----------------------------------------------------------------------------------------------------------------------------------
Metal - BB- B1 $ 1,200,000 Century Aluminum Company, 7.50% due $ 1,233,000
Other - 2.2% 8/15/2014(e)
B B1 1,150,000 Foundation PA Coal Company, 7.25% due 1,210,375
8/01/2014(e)
BB Ba3 2,925,000 Luscar Coal Ltd., 9.75% due 10/15/2011 3,297,937
NR* Ba1 1,375,000 Vale Overseas Ltd., 8.25% due 1/17/2034 1,306,250
-------------
7,047,562
-----------------------------------------------------------------------------------------------------------------------------------
Packaging - CCC B3 1,400,000 Consolidated Container Company LLC, 10.75%** due 1,120,000
6.7% 6/15/2009(e)
Crown Euro Holdings SA:
B+ B1 950,000 9.50% due 3/01/2011 1,054,500
B B2 500,000 10.875% due 3/01/2013 581,250
CCC+ Caa1 950,000 Graham Packaging Company, 8.75% due 1/15/2008 976,125
CCC+ Caa2 2,625,000 Graham Packaging Holdings Company, 10.75% 2,726,719
due 1/15/2009
Owens-Brockway Glass Container, Inc.:
BB- B2 3,325,000 8.875% due 2/15/2009 3,615,938
B B3 775,000 8.25% due 5/15/2013 817,625
Pliant Corporation:
B B3 2,200,000 11.125%** due 6/15/2009 1,941,500
B- Caa2 3,550,000 13% due 6/01/2010 3,266,000
CCC Caa2 1,975,000 Tekni-Plex, Inc., 12.75% due 6/15/2010 1,905,875
U.S. Can Corporation:
CCC+ Caa1 375,000 10.875% due 7/15/2010 390,000
CCC+ Caa2 2,825,000 12.375% due 10/01/2010 2,613,125
B B2 650,000 Wise Metals Group LLC, 10.25% due 5/15/2012(e) 653,250
-------------
21,661,907
-----------------------------------------------------------------------------------------------------------------------------------
Paper - 7.0% D NR* 1,000,000 APP International Finance Company B.V., 11.75% 495,000
due 10/01/2005(h)
BB Ba2 2,675,000 Abitibi-Consolidated Inc., 5.02% due 2,728,500
6/15/2011(d)(e)
BB Ba2 3,025,000 Bowater Incorporated, 4.88% due 3/15/2010(d) 3,009,875
B Caa1 2,125,000 Caraustar Industries, Inc., 9.875% due 4/01/2011 2,247,187
Georgia-Pacific Corporation:
BB+ Ba2 1,425,000 7.375% due 7/15/2008 1,556,812
BB+ Ba2 1,200,000 9.375% due 2/01/2013 1,413,000
Graphic Packaging International Inc.:
B- B2 825,000 8.50% due 8/15/2011 915,750
B- B3 950,000 9.50% due 8/15/2013 1,064,000
B B3 1,900,000 JSG Funding PLC, 9.625% due 10/01/2012 2,137,500
B B2 2,975,000 Jefferson Smurfit Corporation, 8.25% due 3,242,750
10/01/2012
Norske Skog Canada Ltd.:
BB Ba3 2,450,000 8.625% due 6/15/2011 2,652,125
BB Ba3 150,000 7.375% due 3/01/2014 152,625
NR* NR* 1,003,000 Western Forest Products Inc., 15% due 7/28/2009(g) 1,123,360
-------------
22,738,484
-----------------------------------------------------------------------------------------------------------------------------------
6
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (continued) (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
-----------------------------------------------------------------------------------------------------------------------------------
Retail - 0.5% B+ B1 $ 275,000 Finlay Fine Jewelry Corporation, 8.375% due $ 292,875
6/01/2012(e)
B B3 1,250,000 The Jean Coutu Group, Inc., 8.50% due
8/01/2014(e) 1,259,375
-------------
1,552,250
-----------------------------------------------------------------------------------------------------------------------------------
Services - BB- Ba3 2,625,000 Allied Waste North America, Inc., 8.875% due 2,880,938
5.7% 4/01/2008
B B2 825,000 Buhrmann US Inc., 8.25% due 7/01/2014(e) 827,062
B- B2 2,900,000 The Coinmach Corporation, 9% due 2/01/2010(e) 2,936,250
B B1 2,725,000 Corrections Corporation of America, 7.50% due 2,868,062
5/01/2011
BB- Ba2 875,000 MSW Energy Holdings II LLC, 7.375% due 910,000
9/01/2010
BB Ba1 1,500,000 MSW Energy Holdings LLC, 8.50% due 9/01/2010 1,635,000
B+ B2 1,875,000 United Rentals (North America), Inc., 7.75% due 1,743,750
11/15/2013
CCC Ca 775,000 Waste Services, Inc., 9.50% due 4/15/2014(e) 685,875
Williams Scotsman, Inc.:
B- B3 3,750,000 9.875% due 6/01/2007 3,693,750
B B2 375,000 10% due 8/15/2008 410,625
-------------
18,591,312
-----------------------------------------------------------------------------------------------------------------------------------
Steel - 0.9% B+ B1 1,425,000 CSN Islands VIII Corp., 9.75% due 12/16/2013(e) 1,417,875
B B2 1,200,000 UCAR Finance Inc., 10.25% due 2/15/2012 1,362,000
-------------
2,779,875
-----------------------------------------------------------------------------------------------------------------------------------
Tele- ADC Telecommunications, Inc. (Convertible):
communi- NR* NR* 2,200,000 1% due 6/15/2008 1,996,500
cations- 6.9% NR* NR* 750,000 2.235% due 6/15/2013 (d) 704,063
B- B2 2,475,000 Alaska Communications System Holdings, Inc., 2,475,000
9.875% due 8/15/2011
B- B3 2,850,000 Cincinnati Bell Inc., 8.375% due 1/15/2014 2,522,250
B- Caa1 3,250,000 FairPoint Communications, Inc., 12.50% due 3,477,500
5/01/2010
NR* Caa1 2,750,000 LCI International, Inc., 7.25% due 6/15/2007 2,433,750
B Caa2 1,725,000 Qwest Capital Funding, Inc., 7.25% due 2/15/2011 1,474,875
B Caa1 1,350,000 Qwest Services Corp., 14% due 12/15/2010(e) 1,569,375
NR* NR* 1,000,000 Terremark Worldwide, Inc., 9% due 956,250
6/15/2009 (Convertible) (e)
B B1 850,000 Time Warner Telecom Holdings, Inc., 5.711% due 828,750
2/15/2011(d)
Time Warner Telecom, Inc.:
CCC+ B3 500,000 9.75% due 7/15/2008 485,000
CCC+ B3 3,875,000 10.125% due 2/01/2011 3,642,500
-------------
22,565,813
-----------------------------------------------------------------------------------------------------------------------------------
Trans- B+ B2 1,900,000 Laidlaw International, Inc., 10.75% due 6/15/2011 2,166,000
portation - BB- Ba2 2,325,000 Teekay Shipping Corporation, 8.875% due
1.5% 7/15/2011 2,606,906
-------------
4,772,906
-----------------------------------------------------------------------------------------------------------------------------------
7
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (continued) (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
S&P Moody's Face
Industry+ Ratings Ratings Amount Corporate Bonds Value
-----------------------------------------------------------------------------------------------------------------------------------
Utility - The AES Corporation:
12.3% B- B2 $ 4,458,000 9.375% due 9/15/2010 $ 4,959,525
B+ B1 2,100,000 8.75% due 5/15/2013(e) 2,336,250
NR* NR* 850,000 AES Drax Energy Limited, 11.50% due 4,250
8/30/2010(h)
CCC+ Caa1 7,325,000 Calpine Canada Energy Finance ULC, 8.50% due 4,669,687
5/01/2008
Calpine Corporation:
CCC+ Caa1 1,500,000 8.25% due 8/15/2005 1,462,500
CCC+ Caa1 950,000 8.75% due 7/15/2007 693,500
BBB- Ba2 4,600,000 CenterPoint Energy, Inc., 3.75% due 5,244,000
5/15/2023 (Convertible)
BB Ba1 2,071,000 ESI Tractebel Acquisition Corp., 7.99% due 2,143,485
12/30/2011
B B1 1,900,000 Edison Mission Energy, 9.875% due 4/15/2011 2,180,250
CCC+ Caa1 4,625,000 El Paso CGP Company, 7.75% due 6/15/2010 4,445,781
CCC B3 2,625,000 Mission Energy Holding Company, 13.50% due 3,300,938
7/15/2008
Nevada Power Company:
BB Ba2 3,300,000 10.875% due 10/15/2009 3,811,500
BB Ba2 600,000 9% due 8/15/2013 672,000
BB Ba2 1,650,000 Sierra Pacific Power Company, 8% due 6/01/2008 1,765,500
B- B2 1,200,000 Sierra Pacific Resources, 8.625% due 3/15/2014(e) 1,260,000
B- B1 925,000 Southern Natural Gas Company, 8.875% due
3/15/2010 1,040,625
-------------
39,989,791
-----------------------------------------------------------------------------------------------------------------------------------
Wireless - CCC B3 825,000 American Tower Escrow Corporation, 14.887%** due 615,656
3.1% 8/01/2008
CCC Caa1 2,000,000 Centennial Communications Corp., 10.125% due 2,055,000
6/15/2013
CCC B3 2,800,000 Crown Castle International Corp., 3,234,000
9.375% due 8/01/2011
B- B2 625,000 Rural Cellular Corporation, 6.38% due 634,375
3/15/2010(d)(e)
CCC- Caa2 2,950,000 SBA Communications Corporation, 10.25% due 3,104,875
2/01/2009
CC Caa1 400,000 UbiquiTel Operating Company, 11.347%** due 5/15/2010 410,000
-------------
10,053,906
-----------------------------------------------------------------------------------------------------------------------------------
Total Investments in Corporate Bonds 419,182,070
(Cost - $403,274,579) -- 129.1%
-----------------------------------------------------------------------------------------------------------------------------------
Shares
Held Common Stocks
-----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.1% 81,243 ABX Air, Inc.(c) 472,022
2,590 US Airways Group, Inc. (Class A) (j) 5,569
-------------
477,591
-----------------------------------------------------------------------------------------------------------------------------------
8
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (continued) (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
Shares
Industry+ Held Common Stocks Value
-----------------------------------------------------------------------------------------------------------------------------------
Cable - International - 0.8% 223,671 Telewest Global, Inc. (c) $ 2,583,400
-----------------------------------------------------------------------------------------------------------------------------------
Paper - 0.6% 183,923 Western Forest Products Inc. (c) 1,507,566
45,762 Western Forest Products Inc. (Restricted Shares)(c)(e) 375,098
-------------
1,882,664
-----------------------------------------------------------------------------------------------------------------------------------
Telecommunications - 0.1% 16,244 MCI, Inc.(c) 279,722
-----------------------------------------------------------------------------------------------------------------------------------
Total Investments in Common
Stocks (Cost - $5,386,161) - 1.6% 5,223,377
-----------------------------------------------------------------------------------------------------------------------------------
Preferred Stocks
-----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 1,589 US Airways Group, Inc. (j) 0
-----------------------------------------------------------------------------------------------------------------------------------
Automotive - 1.1% 128,000 General Motors Corporation (Convertible) 3,563,520
-----------------------------------------------------------------------------------------------------------------------------------
Total Investments in Preferred Stocks
(Cost - $3,199,472) - 1.1% 3,563,520
-----------------------------------------------------------------------------------------------------------------------------------
Warrants (b)
-----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 1,589 US Airways Group, Inc. 953
-----------------------------------------------------------------------------------------------------------------------------------
Cable - U.S. - 0.0% 32,981 Loral Space & Communications Ltd. 165
-----------------------------------------------------------------------------------------------------------------------------------
Health Care - 0.0% 32,042 HealthSouth Corporation 72,095
-----------------------------------------------------------------------------------------------------------------------------------
Packaging - 0.0% 4,000 Pliant Corporation 40
-----------------------------------------------------------------------------------------------------------------------------------
Paper - 0.0% 700 JSG Funding PLC 7,000
-----------------------------------------------------------------------------------------------------------------------------------
Wireless - 0.1% 825 American Tower Escrow Corporation 152,625
-----------------------------------------------------------------------------------------------------------------------------------
Total Investments in Warrants
(Cost - $112,171) -- 0.1% 232,878
-----------------------------------------------------------------------------------------------------------------------------------
9
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (continued) (in U.S. dollars)
-----------------------------------------------------------------------------------------------------------------------------------
Beneficial
Interest Other Interests (f) Value
-----------------------------------------------------------------------------------------------------------------------------------
$ 3,780,240 US Airways Group, Inc. - Certificate of Beneficial $ 1,134,072
Interest
-----------------------------------------------------------------------------------------------------------------------------------
Total Investments in Other Interests
(Cost - $1,020,665) - 0.3% 1,134,072
-----------------------------------------------------------------------------------------------------------------------------------
Short-Term Investments
-----------------------------------------------------------------------------------------------------------------------------------
1,272,408 Merrill Lynch Liquidity Series, LLC Cash Sweep 1,272,408
Series I (i)
-----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments 1,272,408
(Cost - $1,272,408) -- 0.4%
-----------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost - $414,265,456***) - 132.6% 430,608,325
Liabilities in Excess of Other Assets - (32.6%) (105,967,456)
-------------
Net Assets - 100.0% $ 324,640,869
=============
--------------------------------------------------------------------------------
(a) Floating rate corporate loans in which the Fund invests generally pays
interest at rates that are periodically redetermined by reference to a
base lending rate plus a premium. The base lending rates are generally (i)
the lending rate offered by one or more major European banks, such as
LIBOR (London InterBank Offered Rate), (ii) the prime rate offered by one
or more major U.S. banks or (iii) the certificate of deposit rate.
Corporate loans represent 2.3% of the Fund's net assets.
(b) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(c) Non-income producing security.
(d) Floating rate note.
(e) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(f) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities.
(g) Represents a pay-in-kind security which may pay interest/dividends in
additional face/shares.
(h) Non-income producing - issuer filed for bankruptcy or is in default of
interest payments.
(i) Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) were as follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $1,189,909 $1,132
--------------------------------------------------------------------------
(j) Non-income producing security. Company is in bankruptcy.
10
Corporate High Yield Fund III, Inc.
Schedule of Investments as of August 31, 2004 (concluded) (in U.S. dollars)
+ For Fund compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classification for reporting ease.
* Not Rated.
** Represents a zero coupon or step bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
*** The cost and unrealized appreciation/depreciation of investments as of
August 31, 2004, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 414,478,949
===============
Gross unrealized appreciation $ 26,890,927
Gross unrealized depreciation (10,761,551)
---------------
Net unrealized appreciation $ 16,129,376
===============
Swaps outstanding as of August 31, 2004 were as follows:
--------------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------------
Receive a variable rate equal to 1-month USD LIBOR
and pay a fixed rate of 1.56%
Broker, UBS Warburg
Expires June 2005 $30,000,000 $146,713
--------------------------------------------------------------------------------
11
Item 2 - Controls and Procedures
2(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to the
filing date of this report.
2(b) - There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal quarter of the period
covered by this report that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 3 - Exhibits
Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Corporate High Yield Fund III, Inc.
By: /s/ Terry K. Glenn
----------------------
Terry K. Glenn,
President of
Corporate High Yield Fund III, Inc.
Date: October 18, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Terry K. Glenn
----------------------
Terry K. Glenn,
President of
Corporate High Yield Fund III, Inc.
Date: October 18, 2004
By: /s/ Donald C. Burke
----------------------
Donald C. Burke,
Chief Financial Officer of
Corporate High Yield Fund III, Inc.
Date: October 18, 2004