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: Robert C. Doll, Jr., Chief Executive
Officer, 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: 05/31/2006
Date of reporting period: 12/01/05 - 02/28/06
Item 1 - Schedule of Investments
Corporate High Yield Fund III, Inc.
Schedule of Investments as of February 28, 2006 (in U.S. dollars)
Face
Industry Amount Corporate Bonds Value
--------------------------------------------------------------------------------------------------------------------------------
Aerospace & $ 2,275,000 Alliant Techsystems, Inc., 3% due 8/15/2024 (b)(i) $ 2,627,625
Defense - 4.8% 1,575,000 DRS Technologies, Inc., 6.875% due 11/01/2013 1,571,062
250,000 DRS Technologies, Inc., 6.625% due 2/01/2016 251,250
975,000 Esterline Technologies Corp., 7.75% due 6/15/2013 1,009,125
775,000 K&F Acquisition, Inc., 7.75% due 11/15/2014 790,500
1,375,000 L-3 Communications Corp., 6.375% due 10/15/2015 1,371,562
1,380,000 L-3 Communications Corp., 3% due 8/01/2035 (b)(i) 1,416,225
1,750,000 Standard Aero Holdings, Inc., 8.25% due 9/01/2014 1,540,000
1,800,000 Transdigm, Inc., 8.375% due 7/15/2011 1,881,000
2,950,000 Vought Aircraft Industries, Inc., 8% due 7/15/2011 2,765,625
----------------
15,223,974
--------------------------------------------------------------------------------------------------------------------------------
Airlines - 1.3% 2,250,000 American Airlines, Inc. Class C, 7.80% due 4/01/2008 2,235,505
1,150,194 Continental Airlines, Inc. Series 1997-4-B, 6.90% due 1/02/2017 1,068,297
163,732 Continental Airlines, Inc. Series 1998-1-C, 6.541% due 9/15/2008 153,948
829,500 Continental Airlines, Inc. Series 2001-1 Class C, 7.033%
due 6/15/2011 765,245
----------------
4,222,995
--------------------------------------------------------------------------------------------------------------------------------
Automotive - 0.5% 800,000 General Motors Acceptance Corp., 7.25% due 3/02/2011 730,934
965,000 Metaldyne Corp., 10% due 11/01/2013 882,975
----------------
1,613,909
--------------------------------------------------------------------------------------------------------------------------------
Broadcasting - 4.0% 737,143 Emmis Communications Corp., 10.366% due 6/15/2012 (d) 737,143
1,150,000 Granite Broadcasting Corp., 9.75% due 12/01/2010 1,040,750
1,200,000 Nexstar Finance, Inc., 7% due 1/15/2014 1,125,000
1,950,000 Paxson Communications Corp., 7.777% due 1/15/2012 (d)(i) 1,950,000
975,000 Paxson Communications Corp., 10.777% due 1/15/2013 (d)(i) 943,312
1,175,000 Salem Communications Corp., 7.75% due 12/15/2010 1,205,844
1,364,000 Salem Communications Holding Corp. Series B, 9% due 7/01/2011 1,432,200
400,000 Sinclair Broadcast Group, Inc., 8% due 3/15/2012 408,500
1,950,000 Sirius Satellite Radio, Inc., 9.625% due 8/01/2013 1,911,000
2,300,000 Young Broadcasting, Inc., 8.75% due 1/15/2014 1,932,000
----------------
12,685,749
--------------------------------------------------------------------------------------------------------------------------------
Cable - 750,000 New Skies Satellites NV, 9.573% due 11/01/2011 (d) 774,375
International - 0.6% 1,000,000 New Skies Satellites NV, 9.125% due 11/01/2012 1,075,000
----------------
1,849,375
--------------------------------------------------------------------------------------------------------------------------------
Cable - U.S. - 8.5% 750,000 Adelphia Communications Corp., 6% due 2/15/2006 (b)(c)(k) 18,750
2,275,000 CSC Holdings, Inc. Series B, 7.625% due 4/01/2011 2,292,062
75,000 Cablevision Systems Corp. Series B, 8.716% due 4/01/2009 (d) 77,531
2,500,000 Cablevision Systems Corp. Series B, 8% due 4/15/2012 2,456,250
1,900,000 Century Communications Series B, 9.05%* due 1/15/2008 (e) 1,026,000
1,550,000 Charter Communications Holdings II LLC, 10.25% due 9/15/2010 1,546,125
1,950,000 Charter Communications Holdings LLC, 9.625% due 11/15/2009 1,491,750
595,000 Charter Communications, Inc., 5.875% due 11/16/2009 (b)(i) 426,169
2,675,000 Intelsat Bermuda Ltd., 9.609% due 1/15/2012 (d)(i) 2,728,500
2,775,000 Intelsat Bermuda Ltd., 8.625% due 1/15/2015 (i) 2,879,062
596,000 Loral Spacecom Corp., 14% due 11/15/2015 (g) 712,220
2,425,000 Mediacom Broadband LLC, 11% due 7/15/2013 2,594,750
Corporate High Yield Fund III, Inc.
Schedule of Investments as of February 28, 2006 (in U.S. dollars)
Face
Industry Amount Corporate Bonds Value
--------------------------------------------------------------------------------------------------------------------------------
$ 2,425,000 Mediacom LLC, 9.50% due 1/15/2013 $ 2,425,000
2,193,000 PanAmSat Corp., 9% due 8/15/2014 2,313,615
1,975,000 Quebecor Media, Inc., 7.75% due 3/15/2016 (i) 2,024,375
1,900,000 Rainbow National Services LLC, 10.375% due 9/01/2014 (i) 2,149,375
----------------
27,161,534
--------------------------------------------------------------------------------------------------------------------------------
Chemicals - 4.0% 1,519,000 BCP Caylux Holdings Luxembourg SCA, 9.625% due 6/15/2014 1,699,381
1,500,000 Huntsman International, LLC, 10.125% due 7/01/2009 1,537,500
1,950,000 Innophos, Inc., 8.875% due 8/15/2014 (i) 2,008,500
975,000 Millennium America, Inc., 9.25% due 6/15/2008 1,001,812
450,000 Nalco Co., 7.75% due 11/15/2011 457,875
1,125,000 Nalco Co., 8.875% due 11/15/2013 1,178,437
924,000 Nalco Finance Holdings, Inc., 9.141%* due 2/01/2014 683,760
1,125,000 Nova Chemicals Corp., 7.561% due 11/15/2013 (d) 1,147,500
2,300,000 Omnova Solutions, Inc., 11.25% due 6/01/2010 2,420,750
775,000 Tronox Worldwide LLC, 9.50% due 12/01/2012 (i) 809,875
----------------
12,945,390
--------------------------------------------------------------------------------------------------------------------------------
Consumer - Durables - 0.9% 1,350,000 Sealy Mattress Co., 8.25% due 6/15/2014 1,410,750
600,000 Simmons Bedding Co., 7.875% due 1/15/2014 576,000
785,000 Tempur-Pedic, Inc., 10.25% due 8/15/2010 839,950
----------------
2,826,700
--------------------------------------------------------------------------------------------------------------------------------
Consumer - 2,200,000 Chattem, Inc., 7% due 3/01/2014 2,211,000
Non-Durables - 4.0% 2,975,000 Church & Dwight Co., Inc., 6% due 12/15/2012 2,960,125
3,525,000 Hines Nurseries, Inc., 10.25% due 10/01/2011 3,520,594
2,000,000 Quiksilver, Inc., 6.875% due 4/15/2015 1,930,000
2,200,000 Samsonite Corp., 8.875% due 6/01/2011 2,326,500
----------------
12,948,219
--------------------------------------------------------------------------------------------------------------------------------
Diversified Media - 7.4% 2,975,000 CBD Media, Inc., 8.625% due 6/01/2011 3,023,344
2,275,000 CanWest Media, Inc., 8% due 9/15/2012 2,331,875
1,367,000 Dex Media West LLC, 9.875% due 8/15/2013 1,513,952
2,650,000 Houghton Mifflin Co., 8.25% due 2/01/2011 2,769,250
3,739,000 Liberty Media Corp., 0.75% due 3/30/2023 (b) 4,000,730
750,000 RH Donnelley Corp., 6.875% due 1/15/2013 (i) 705,000
1,475,000 RH Donnelley Corp., 8.875% due 1/15/2016 (i) 1,539,531
1,400,000 RH Donnelley Corp. Series A-2, 6.875% due 1/15/2013 (i) 1,316,000
1,375,000 Six Flags, Inc., 9.625% due 6/01/2014 1,395,625
1,700,000 Universal City Florida Holding Co. I, 9.43% due 5/01/2010 (d) 1,725,500
3,302,000 Yell Finance BV, 12.52%* due 8/01/2011 3,413,443
----------------
23,734,250
--------------------------------------------------------------------------------------------------------------------------------
Energy - Exploration & 1,575,000 Belden & Blake Corp., 8.75% due 7/15/2012 1,638,000
Production - 2.8% 1,550,000 Chaparral Energy, Inc., 8.50% due 12/01/2015 (i) 1,639,125
1,950,000 Compton Petroleum Finance Corp., 7.625% due 12/01/2013 1,993,875
800,000 Encore Acquisition Co., 6.25% due 4/15/2014 784,000
325,000 Plains Exploration & Production Co., 7.125% due 6/15/2014 338,813
2,525,000 Plains Exploration & Production Co. Series B, 8.75% due 7/01/2012 2,714,375
----------------
9,108,188
--------------------------------------------------------------------------------------------------------------------------------
Energy - Other - 3.5% 475,000 Copano Energy LLC, 8.125% due 3/01/2016 (i) 494,000
1,875,000 Dresser, Inc., 9.375% due 4/15/2011 1,968,750
375,000 Ferrellgas Escrow LLC, 6.75% due 5/01/2014 365,625
2,350,000 Ferrellgas Partners LP, 8.75% due 6/15/2012 2,379,375
2,350,000 SemGroup LP, 8.75% due 11/15/2015 (i) 2,432,250
Corporate High Yield Fund III, Inc.
Schedule of Investments as of February 28, 2006 (in U.S. dollars)
Face
Industry Amount Corporate Bonds Value
--------------------------------------------------------------------------------------------------------------------------------
$ 1,475,000 Star Gas Partners LP, 10.25% due 2/15/2013 $ 1,493,438
1,975,000 Suburban Propane Partners, LP, 6.875% due 12/15/2013 1,905,875
----------------
11,039,313
--------------------------------------------------------------------------------------------------------------------------------
Food & Drug - 0.1% 450,000 Stripes Acquisition LLC, 10.625% due 12/15/2013 (i) 470,250
--------------------------------------------------------------------------------------------------------------------------------
Food & Tobacco - 2.8% 800,000 AmeriQual Group LLC, 9% due 4/01/2012 (i) 840,000
2,925,000 Cott Beverages USA, Inc., 8% due 12/15/2011 3,005,437
1,250,000 Del Monte Corp., 8.625% due 12/15/2012 1,331,250
975,000 Del Monte Corp., 6.75% due 2/15/2015 975,000
400,000 Michael Foods, Inc., 8% due 11/15/2013 408,000
1,950,000 New World Pasta Co., 9.25% due 2/15/2009 (e) 117,000
2,100,000 Smithfield Foods, Inc. Series B, 8% due 10/15/2009 2,194,500
----------------
8,871,187
--------------------------------------------------------------------------------------------------------------------------------
Gaming - 9.9% 3,225,000 Boyd Gaming Corp., 8.75% due 4/15/2012 3,450,750
900,000 CCM Merger, Inc., 8% due 8/01/2013 (i) 895,500
1,350,000 Caesars Entertainment, Inc., 7.875% due 3/15/2010 1,439,437
1,050,000 Galaxy Entertainment Finance Co. Ltd., 9.655%
due 12/15/2010 (d)(i) 1,084,125
550,000 Galaxy Entertainment Finance Co. Ltd., 9.875%
due 12/15/2012 (i) 569,250
1,725,000 Inn of the Mountain Gods Resort & Casino, 12%
due 11/15/2010 1,822,031
1,200,000 Isle of Capri Casinos, Inc., 9% due 3/15/2012 1,275,000
1,650,000 Little Traverse Bay Bands of Odawa Indians, 10.25%
due 2/15/2014 (i) 1,629,375
1,550,000 MGM Mirage, 8.50% due 9/15/2010 1,679,812
3,325,000 Majestic Star Casino LLC, 9.50% due 10/15/2010 3,557,750
975,000 Mirage Resorts, Inc., 6.75% due 2/01/2008 988,406
1,975,000 Penn National Gaming, Inc., 6.875% due 12/01/2011 2,014,500
2,575,000 Poster Financial Group, Inc., 8.75% due 12/01/2011 2,703,750
2,675,000 Resorts International Hotel and Casino, Inc., 11.50%
due 3/15/2009 2,949,188
975,000 San Pasqual Casino, 8% due 9/15/2013 (i) 994,500
1,350,000 Station Casinos, Inc., 6.625% due 3/15/2018 (i) 1,350,000
1,800,000 Tunica-Biloxi Gaming Authority, 9% due 11/15/2015 (i) 1,845,000
1,575,000 Wynn Las Vegas LLC, 6.625% due 12/01/2014 1,551,375
----------------
31,799,749
--------------------------------------------------------------------------------------------------------------------------------
Health Care - 7.9% 800,000 Athena Neurosciences Finance LLC, 7.25% due 2/21/2008 778,000
3,550,000 DaVita, Inc., 7.25% due 3/15/2015 3,621,000
1,575,000 Elan Finance Plc, 8.749% due 11/15/2011 (d) 1,523,812
1,975,000 HCA, Inc., 5.50% due 12/01/2009 1,943,349
2,350,000 HealthSouth Corp., 8.375% due 10/01/2011 2,643,750
1,175,000 Mylan Laboratories, Inc., 5.75% due 8/15/2010 1,172,062
575,000 Mylan Laboratories, Inc., 6.375% due 8/15/2015 581,469
1,425,000 Select Medical Corp., 7.625% due 2/01/2015 1,218,375
1,950,000 Select Medical Corp., 10.82% due 9/15/2015 (d)(i) 1,569,750
1,000,000 Tenet Healthcare Corp., 9.875% due 7/01/2014 1,017,500
2,000,000 Triad Hospitals, Inc., 7% due 5/15/2012 2,040,000
2,675,000 U.S. Oncology, Inc., 9% due 8/15/2012 2,862,250
1,000,000 Vanguard Health Holding Co. II, LLC, 9% due 10/01/2014 1,042,500
3,225,000 Ventas Realty LP, 6.75% due 6/01/2010 3,293,531
----------------
25,307,348
--------------------------------------------------------------------------------------------------------------------------------
Corporate High Yield Fund III, Inc.
Schedule of Investments as of February 28, 2006 (in U.S. dollars)
Face
Industry Amount Corporate Bonds Value
--------------------------------------------------------------------------------------------------------------------------------
Housing - 3.3% $ 1,050,000 Building Materials Corp. of America, 8% due 10/15/2007 $ 1,067,062
5,850,000 Building Materials Corp. of America, 8% due 12/01/2008 5,930,437
775,000 Forest City Enterprises, Inc., 7.625% due 6/01/2015 810,844
450,000 Goodman Global Holding Co., Inc., 7.491% due 6/15/2012 (d) 457,875
950,000 Goodman Global Holding Co., Inc., 7.875% due 12/15/2012 928,625
800,000 Standard-Pacific Corp., 6.50% due 8/15/2010 767,000
725,000 Texas Industries, Inc., 7.25% due 7/15/2013 750,375
----------------
10,712,218
--------------------------------------------------------------------------------------------------------------------------------
Information 1,000,000 Activant Solutions, Inc., 10.53% due 4/01/2010 (d)(i) 1,025,000
Technology - 7.4% 2,340,000 Advanced Micro Devices, Inc., 7.75% due 11/01/2012 2,480,400
2,135,000 Cypress Semiconductor Corp., 1.25% due 6/15/2008 (b) 2,759,488
2,175,000 Freescale Semiconductor, Inc., 7.35% due 7/15/2009 (d) 2,229,375
1,650,000 MagnaChip Semiconductor SA, 8.16% due 12/15/2011 (d) 1,674,750
1,275,000 MagnaChip Semiconductor SA, 8% due 12/15/2014 1,230,375
1,835,000 Quantum Corp., 4.375% due 8/01/2010 (b) 1,867,113
2,450,000 Sungard Data Systems, Inc., 9.125% due 8/15/2013 (i) 2,606,188
1,625,000 Sungard Data Systems, Inc., 9.431% due 8/15/2013 (d)(i) 1,714,375
975,000 Sungard Data Systems, Inc., 10.25% due 8/15/2015 (i) 1,022,531
775,000 Telcordia Technologies Inc., 10% due 3/15/2013 (i) 713,000
1,150,000 UGS Corp., 10% due 6/01/2012 1,260,688
3,100,000 Viasystems, Inc., 10.50% due 1/15/2011 2,976,000
----------------
23,559,283
--------------------------------------------------------------------------------------------------------------------------------
Leisure - 1.5% 2,850,000 FelCor Lodging LP, 8.83% due 6/01/2011 (d) 2,964,000
1,550,000 FelCor Lodging LP, 9% due 6/01/2011 1,712,750
----------------
4,676,750
--------------------------------------------------------------------------------------------------------------------------------
Manufacturing - 4.4% 2,175,000 CPI Holdco, Inc., 10.561% due 2/01/2015 (d) 2,251,125
875,000 Chart Industries, Inc., 9.125% due 10/15/2015 (i) 905,625
3,725,000 EaglePicher Inc., 9.75% due 9/01/2013 (e) 2,588,875
1,900,000 Invensys Plc, 9.875% due 3/15/2011 (i) 1,966,500
1,335,000 Medis Technologies Ltd., 6% due 7/15/2010 (b)(i) 1,468,500
975,000 Mueller Group, Inc., 10% due 5/01/2012 1,067,625
775,000 Rexnord Corp., 10.125% due 12/15/2012 852,500
1,000,000 Superior Essex Communications LLC, 9% due 4/15/2012 1,010,000
2,325,000 Trimas Corp., 9.875% due 6/15/2012 2,046,000
----------------
14,156,750
--------------------------------------------------------------------------------------------------------------------------------
Metal - Other - 1.7% 1,150,000 Foundation PA Coal Co., 7.25% due 8/01/2014 1,178,750
2,350,000 Indalex Holding Corp., 11.50% due 2/01/2014 (i) 2,303,000
2,150,000 Novelis, Inc., 7.25% due 2/15/2015 2,085,500
----------------
5,567,250
--------------------------------------------------------------------------------------------------------------------------------
Packaging - 1.8% 1,925,000 Graham Packing Co., Inc., 9.875% due 10/15/2014 1,953,875
3,000,000 Owens-Brockway, 8.875% due 2/15/2009 3,123,750
400,000 Owens-Brockway, 8.25% due 5/15/2013 417,000
875,000 Pliant Corp., 13% due 6/01/2010 (e) 214,375
550,000 Pliant Corp., 13% due 6/01/2010 (e) 134,750
----------------
5,843,750
--------------------------------------------------------------------------------------------------------------------------------
Paper - 5.0% 1,925,000 Abitibi-Consolidated, Inc., 8.41% due 6/15/2011 (d) 1,872,062
975,000 Boise Cascade LLC, 7.475% due 10/15/2012 (d) 970,125
2,725,000 Bowater, Inc., 7.91% due 3/15/2010 (d) 2,725,000
2,025,000 Domtar, Inc., 7.125% due 8/15/2015 1,695,937
825,000 Graphic Packaging International Corp., 8.50% due 8/15/2011 829,125
1,550,000 Graphic Packaging International Corp., 9.50% due 8/15/2013 1,472,500
925,000 JSG Funding Plc, 9.625% due 10/01/2012 968,937
Corporate High Yield Fund III, Inc.
Schedule of Investments as of February 28, 2006 (in U.S. dollars)
Face
Industry Amount Corporate Bonds Value
--------------------------------------------------------------------------------------------------------------------------------
$ 1,450,000 NewPage Corp., 10.93% due 5/01/2012 (d) $ 1,522,500
1,450,000 NewPage Corp., 12% due 5/01/2013 1,486,250
2,325,000 Norske Skog Canada Ltd. Series D, 8.625% due 6/15/2011 2,301,750
----------------
15,844,186
--------------------------------------------------------------------------------------------------------------------------------
Retail - 1.9% 600,000 General Nutrition Centers, Inc., 8.625% due 1/15/2011 600,000
2,550,000 Jean Coutu Group, Inc., 8.50% due 8/01/2014 2,435,250
1,375,000 Neiman-Marcus Group, Inc., 9% due 10/15/2015 (i) 1,452,344
1,575,000 Neiman-Marcus Group, Inc., 10.375% due 10/15/2015 (i) 1,657,687
----------------
6,145,281
--------------------------------------------------------------------------------------------------------------------------------
Service - 6.3% 2,625,000 Allied Waste North America, Inc. Series B, 8.875% due 4/01/2008 2,762,812
2,725,000 Corrections Corp. of America, 7.50% due 5/01/2011 2,816,969
1,750,000 Dycom Industries, Inc., 8.125% due 10/15/2015 (i) 1,820,000
1,150,000 MSW Energy Holdings LLC, 8.50% due 9/01/2010 1,224,750
375,000 MSW Energy Holdings II LLC, 7.375% due 9/01/2010 388,125
2,000,000 Mac-Gray Corp., 7.625% due 8/15/2015 2,050,000
2,775,000 Service Corp. International, 7.50% due 6/15/2017 (i) 2,833,969
3,325,000 United Rentals North America, Inc., 7.75% due 11/15/2013 3,337,469
3,000,000 Waste Services, Inc., 9.50% due 4/15/2014 3,075,000
----------------
20,309,094
--------------------------------------------------------------------------------------------------------------------------------
Steel - 1.1% 1,950,000 Chaparral Steel Co., 10% due 7/15/2013 2,154,750
1,200,000 Ucar Finance, Inc., 10.25% due 2/15/2012 1,278,000
----------------
3,432,750
--------------------------------------------------------------------------------------------------------------------------------
Telecommunications - 5.6% 1,647,000 ADC Telecommunications, Inc., 1% due 6/15/2008 (b) 1,756,114
750,000 ADC Telecommunications, Inc., 5.045% due 6/15/2013 (b)(d) 814,688
2,350,000 Eircom Funding Plc, 8.25% due 8/15/2013 2,511,562
1,975,000 Inmarsat Finance Plc, 7.625% due 6/30/2012 2,036,719
2,900,000 LCI International, Inc., 7.25% due 6/15/2007 2,932,625
350,000 Qwest Communications International, Inc., 7.50% due 2/15/2014 359,625
1,550,000 Qwest Corp., 8.16% due 6/15/2013 (d) 1,693,375
525,000 Qwest Corp., 7.625% due 6/15/2015 563,063
370,000 Terremark Worldwide, Inc., 9% due 6/15/2009 (b)(i) 329,300
850,000 Time Warner Telecom Holdings, Inc., 8.749% due 2/15/2011 (d) 868,063
3,875,000 Time Warner Telecom, Inc., 10.125% due 2/01/2011 4,068,750
----------------
17,933,884
--------------------------------------------------------------------------------------------------------------------------------
Transportation - 1.0% 600,000 OMI Corp., 7.625% due 12/01/2013 615,000
2,325,000 Teekay Shipping Corp., 8.875% due 7/15/2011 2,580,750
----------------
3,195,750
--------------------------------------------------------------------------------------------------------------------------------
Utility - 10.1% 4,458,000 The AES Corp., 9.375% due 9/15/2010 4,892,655
2,100,000 The AES Corp., 8.75% due 5/15/2013 (i) 2,278,500
1,975,000 Aquila, Inc., 7.625% due 11/15/2009 2,024,375
1,891,000 Centerpoint Energy, Inc. Series B, 3.75% due 5/15/2023 (b) 2,217,198
2,158,000 ESI Tractebel Acquisition Corp. Series B, 7.99% due 12/30/2011 2,256,916
1,900,000 Edison Mission Energy, 9.875% due 4/15/2011 2,189,750
2,025,000 Mirant North America LLC, 7.375% due 12/31/2013 (i) 2,078,156
1,575,000 NRG Energy, Inc., 7.25% due 2/01/2014 1,614,375
1,475,000 NRG Energy, Inc., 7.375% due 2/01/2016 1,519,250
390,000 Nevada Power Co., 9% due 8/15/2013 431,245
2,145,000 Nevada Power Co. Series E, 10.875% due 10/15/2009 2,322,591
2,250,000 Reliant Energy, Inc., 9.50% due 7/15/2013 2,295,000
Corporate High Yield Fund III, Inc.
Schedule of Investments as of February 28, 2006 (in U.S. dollars)
Face
Industry Amount Corporate Bonds Value
--------------------------------------------------------------------------------------------------------------------------------
$ 1,650,000 Sierra Pacific Power Co. Series A, 8% due 6/01/2008 $ 1,728,375
1,200,000 Sierra Pacific Resources, 8.625% due 3/15/2014 1,309,601
925,000 Southern Natural Gas Co., 8.875% due 3/15/2010 989,399
2,135,563 Tenaska Alabama Partners LP, 7% due 6/30/2021 (i) 2,204,361
----------------
32,351,747
--------------------------------------------------------------------------------------------------------------------------------
Wireless 1,600,000 Centennial Cellular Operating Co. LLC, 10.125%
Communications - 4.6% due 6/15/2013 1,752,000
1,000,000 Dobson Cellular Systems, 9.43% due 11/01/2011 (d) 1,040,000
875,000 Dobson Communications Corp., 8.85% due 10/15/2012 (d)(l) 866,250
1,750,000 IWO Holdings, Inc., 8.35% due 1/15/2012 (d) 1,822,187
650,000 Rogers Wireless Communications, Inc., 8.035% due 12/15/2010 (d) 672,750
250,000 Rogers Wireless Communications, Inc., 8% due 12/15/2012 266,875
3,400,000 Rogers Wireless Communications, Inc., 6.375% due 3/01/2014 3,434,000
625,000 Rural Cellular Corp., 9.41% due 3/15/2010 (d) 637,500
2,000,000 Rural Cellular Corp., 8.25% due 3/15/2012 2,100,000
894,000 SBA Communications Corp., 8.50% due 12/01/2012 983,400
1,255,000 SBA Telecommunications, Inc., 7.415%* due 12/15/2011 1,189,113
----------------
14,764,075
--------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost - $372,932,463) - 118.7% 380,300,898
--------------------------------------------------------------------------------------------------------------------------------
Floating Rate Loan Interests (a)
--------------------------------------------------------------------------------------------------------------------------------
Cable - U.S. - 1.5% 4,850,000 Century Cable Holdings LLC, Discretionary Term Loan,
9.50% due 12/31/2009 4,753,000
--------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.9% 2,830,000 Wellman, Inc. Second Lien Term Loan, 11.43% due 2/10/2010 2,904,288
--------------------------------------------------------------------------------------------------------------------------------
Consumer - Durables - 0.4% 1,375,000 Simmons Co. Term Loan, 8.50% due 6/19/2012 1,393,692
--------------------------------------------------------------------------------------------------------------------------------
Total Floating Rate Loan Interests (Cost - $8,746,683) - 2.8% 9,050,980
--------------------------------------------------------------------------------------------------------------------------------
Foreign Government Obligations
--------------------------------------------------------------------------------------------------------------------------------
1,900,000 Brazilian Government International Bond, 8.75% due 2/04/2025 2,294,250
1,900,000 Brazilian Government International Bond, 8.25% due 1/20/2034 2,261,000
1,200,000 Philippine Government International Bond, 8.375% due 2/15/2011 1,300,500
1,150,000 Turkey Government International Bond, 6.875% due 3/17/2036 1,167,250
400,000 Venezuela Government International Bond, 7.65% due 4/21/2025 436,000
--------------------------------------------------------------------------------------------------------------------------------
Total Foreign Government Obligations (Cost - $6,568,315) - 2.3% 7,459,000
--------------------------------------------------------------------------------------------------------------------------------
Shares Held Common Stocks
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Airlines - 0.2% 81,243 ABX Air, Inc. (c) 651,569
--------------------------------------------------------------------------------------------------------------------------------
Cable - U.S. - 0.8% 89,446 Loral Space & Communications Ltd. (c) 2,412,359
--------------------------------------------------------------------------------------------------------------------------------
Energy - Other - 0.0% 2,524 Trico Marine Services, Inc. (c) 73,524
--------------------------------------------------------------------------------------------------------------------------------
Paper - 0.1% 158,023 Western Forest Products, Inc. (c) 236,073
45,762 Western Forest Products, Inc. (c) 68,365
----------------
304,438
--------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost - $5,328,908) - 1.1% 3,441,890
--------------------------------------------------------------------------------------------------------------------------------
Preferred Securities
--------------------------------------------------------------------------------------------------------------------------------
Preferred Stocks
--------------------------------------------------------------------------------------------------------------------------------
Automotive - 0.6% 106,400 General Motors Corp. Series C, 6.25% (b) 1,766,240
--------------------------------------------------------------------------------------------------------------------------------
Cable - U.S. - 0.3% 5,644 Loral Spacecom Corp. Series A, 12% (g)(i) 1,117,512
--------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (Cost - $3,776,984) - 0.9% 2,883,752
--------------------------------------------------------------------------------------------------------------------------------
Corporate High Yield Fund III, Inc.
Schedule of Investments as of February 28, 2006 (in U.S. dollars)
Face
Industry Amount Preferred Securities Value
--------------------------------------------------------------------------------------------------------------------------------
Capital Trusts
--------------------------------------------------------------------------------------------------------------------------------
Health Care - 1.2% $ 3,750,000 Fresenius Medical Care Capital Trust II, 7.875% due 2/01/2008 3,881,250
--------------------------------------------------------------------------------------------------------------------------------
Total Capital Trusts (Cost - $3,690,323) - 1.2% 3,881,250
--------------------------------------------------------------------------------------------------------------------------------
Total Preferred Securities (Cost - $7,467,307) - 2.1% 6,765,002
--------------------------------------------------------------------------------------------------------------------------------
Shares Held Warrants (h)
--------------------------------------------------------------------------------------------------------------------------------
Health Care - 0.1% 32,042 HealthSouth Corp. (expires 1/16/2014) 80,105
--------------------------------------------------------------------------------------------------------------------------------
Packaging - 0.0% 4,000 Pliant Corp. (expires 6/01/2010) 40
--------------------------------------------------------------------------------------------------------------------------------
Paper - 0.0% 700 MDP Acquisitions Plc (expires 10/01/2013) 7,000
--------------------------------------------------------------------------------------------------------------------------------
Wireless 825 American Tower Corp. (expires 8/01/2008) 369,790
Communications - 0.1%
--------------------------------------------------------------------------------------------------------------------------------
Total Warrants (Cost - $53,675) - 0.2% 456,935
--------------------------------------------------------------------------------------------------------------------------------
Rights (j)
--------------------------------------------------------------------------------------------------------------------------------
Paper - 0.0% 203,785 Western Forest Products, Inc. 3,582
--------------------------------------------------------------------------------------------------------------------------------
Total Rights (Cost - $0) - 0.0% 3,582
--------------------------------------------------------------------------------------------------------------------------------
Beneficial
Interest Other Interests (f)
--------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.5% $ 3,780,240 U.S. Airways Group, Inc. (Certificate of Beneficial Interest) 1,663,306
--------------------------------------------------------------------------------------------------------------------------------
Cable - U.S. - 0.0% 4,019,000 Loral Cyberstar Escrow 40
--------------------------------------------------------------------------------------------------------------------------------
Total Other Interests (Cost - $1,020,665) - 0.5% 1,663,346
--------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost - $402,118,016**) - 127.7% 409,141,633
Liabilities in Excess of Other Assets - (27.7%) (88,831,256)
----------------
Net Assets - 100.0% $ 320,310,377
================
* Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
** The cost and unrealized appreciation (depreciation) of investments as of
February 28, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 403,086,303
=============
Gross unrealized appreciation $ 17,279,622
Gross unrealized depreciation (11,224,292)
-------------
Net unrealized appreciation $ 6,055,330
=============
(a) Floating rate loan interests in which the Fund invests generally pay
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.
(b) Convertible security.
(c) Non-income producing security.
(d) Floating rate note.
(e) Non-income producing security; issuer filed for bankruptcy or is in
default of interest payments.
(f) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(g) Represents a pay-in-kind security which may pay interest/dividends in
additional face/shares.
(h) 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.
(i) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(j) The rights may be exercised until 3/09/2006.
(k) As a result of bankruptcy proceedings, the company did not repay the
principal amount of the security upon maturity.
(l) This security, or portion thereof, has been purchased on a "when-issued"
basis period.
Corporate High Yield Fund III, Inc.
Schedule of Investments as of February 28, 2006 (in U.S. dollars)
o For Fund compliance purposes, the Fund's industry classifications refer to
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 industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets.
o Investments in companies considered to be an affiliate of the Fund, for
purposes of 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 ($79,564) $12,905
--------------------------------------------------------------------------
o Swaps outstanding as of February 28, 2006 were as follows:
-----------------------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
-----------------------------------------------------------------------------------------
Sold credit default protection on General Motors
Corp. and receive 5%
Broker, Morgan Stanley Capital Services, Inc.
Expires June 2006 $ 800,000 $ 4,788
Sold credit default protection on General Motors
Acceptance Corp. and receive 4%
Broker, Morgan Stanley Capital Services, Inc.
Expires June 2006 $ 800,000 382
Sold credit default protection on General Motors
Acceptance Corp. and receive 3.50%
Broker, JPMorgan Chase Bank
Expires March 2007 $ 800,000 (10,810)
Sold credit default protection on General Motors
Acceptance Corp. and receive 4.50%
Broker, Morgan Stanley Capital Services, Inc.
Expires March 2007 $ 800,000 (3,000)
Sold credit default protection on General Motors Corp.
and receive 4.40%
Broker, Morgan Stanley Capital Services, Inc.
Expires June 2007 $ 400,000 (41,884)
Sold credit default protection on General Motors
Corp. and receive 8%
Broker, Morgan Stanley Capital Services, Inc.
Expires June 2007 $ 400,000 (25,953)
Sold credit default protection on Russian
Federation and receive 0.73%
Broker, UBS Warburg
Expires October 2010 $ 1,600,000 17,262
Corporate High Yield Fund III, Inc.
Schedule of Investments as of February 28, 2006 (in U.S. dollars)
-----------------------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
-----------------------------------------------------------------------------------------
Sold credit default protection on Federative Republic
of Brazil and receive 3.44%
Broker, Morgan Stanley Capital Services, Inc.
Expires October 2010 $ 1,000,000 $ 99,498
Bought credit default protection on Chemtura Corp.
and pay 1.35%
Broker, Deutsche Bank AG London
Expires December 2010 $ 600,000 (9,917)
Bought credit default protection on Chemtura Corp.
and pay 1.4286%
Broker, Morgan Stanley Capital Services, Inc.
Expires December 2010 $ 1,375,000 (27,281)
Sold credit default protection on Dow Jones CDX Emerging
Markets Index Series 4 and receive 1.80%
Broker, Morgan Stanley Capital Services, Inc.
Expires December 2010 $ 1,000,000 43,151
Sold credit default protection on Dow Jones CDX Emerging
Markets Index Series 4 and receive 1.80%
Broker, Morgan Stanley Capital Services, Inc.
Expires December 2010 $ 2,950,000 165,646
-----------------------------------------------------------------------------------------
Total $ 211,882
===========
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/ Robert C. Doll, Jr.
-----------------------------------
Robert C. Doll, Jr.
Chief Executive Officer
Corporate High Yield Fund III, Inc.
Date: April 20, 2006
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/ Robert C. Doll, Jr.
-----------------------------------
Robert C. Doll, Jr.
Chief Executive Officer
Corporate High Yield Fund III, Inc.
Date: April 20, 2006
By: /s/ Donald C. Burke
-----------------------------------
Donald C. Burke
Chief Financial Officer
Corporate High Yield Fund III, Inc.
Date: April 20, 2006