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: 811-06052
Morgan Stanley Municipal Income Opportunities Trust III
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: March 31, 2007
Date of reporting period: June 30, 2006
ITEM 1. SCHEDULE OF INVESTMENTS.
The Fund's schedule of investments as of the close of the reporting period
prepared pursuant to Rule 12-12 of Regulation S-X is as follows:
MORGAN STANLEY MUNICIPAL INCOME OPPORTUNITIES TRUST III
PORTFOLIO OF INVESTMENTS June 30, 2006 (unaudited)
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------- ------ -------- -----------
TAX-EXEMPT MUNICIPAL BONDS (96.6%)
General Obligation (2.3%)
1,500 Poway Unified School District No 14 - Del Sur, California, Ser 2006 5.25% 09/01/36 $ 1,480,860
500 Henderson Local Improvement Districts No. T-18, Nevada, Ser 2006 5.30 09/01/35 489,425
------- -----------
2,000 1,970,285
------- -----------
Educational Facilities Revenue (6.6%)
Pima County Industrial Development Authority, Arizona, Noah
1,000 Webster Basic School Ser 2004 A 6.125 12/15/34 1,035,300
ABAG Finance Authority for Nonprofit Corporations, California,
500 National Center for International Schools COPs 7.50 05/01/11 510,430
Bellalago Educational Facilities Benefits District, Florida, Bellalago
495 Charter School Ser 2004 B 5.80 05/01/34 507,187
Illinois Finance Authority, Fullerton Village Student Housing
500 Ser 2004 A 5.125 06/01/35 494,770
1,500 Upland, Indiana, Taylor University Ser 2002 6.25 09/01/28 1,625,655
Maryland Industrial Development Financing Authority, Our Lady of
420 Good Counsel High School Ser 2005 A 5.50 05/01/20 433,154
Chattanooga Health Educational & Housing Facilities Board,
1,000 Tennessee, Student Housing Refg Ser 2005 A ** 5.00 10/01/25 969,270
------- -----------
5,415 5,575,766
------- -----------
Hospital Revenue (16.9%)
Colbert County - Northwest Health Care Authority, Alabama, Helen
1,000 Keller Hospital Ser 2003 5.75 06/01/27 1,012,300
750 University of Colorado Hospital Authority, Ser 2006 A 5.00 11/15/37 734,370
Hawaii Department of Budget & Finance, Wilcox Memorial Hospital
1,500 Ser 1998 5.50 07/01/28 1,517,955
Madison County Industrial Development Authority, Idaho, Madison
1,000 Memorial Hospital Ser 2006 COPs 5.25 09/01/37 1,002,110
Indiana Health Facility Financing Authority, Riverview Hospital
500 Ser 2002 6.125 08/01/31 527,400
Maryland Health & Higher Education Facilities Authority, Edenwald
500 Ser 2006 A (WI) 5.40 01/01/37 499,330
1,000 Nevada, Missouri, Nevada Regional Medical Center Ser 2001 6.75 10/01/31 1,052,320
1,000 Henderson, Nevada, Catholic Health West Ser 1998 A 5.125 07/01/28 1,003,940
New Hampshire Higher Educational & Health Facilities Authority,
1,000 Littleton Hospital Association Ser 1998 A 6.00 05/01/28 1,018,030
New Jersey Health Care Facilities Financing Authority, Raritan Bay
1,000 Medical Center Ser 1994 7.25 07/01/27 1,022,900
North Carolina Medical Care Commission Health Care Facilities,
1,000 Presbyterian Homes Ser 2006 (WI) 5.50 10/01/31 999,910
Oklahoma Development Finance Authority, Comanche County
1,000 Hospital 2000 Ser B 6.60 07/01/31 1,089,180
South Carolina Jobs Economic Development Authority, Palmetto
120 Health Ser 2003 C 6.875 08/01/27 136,304
Knox County Health, Educational & Housing Facility Board,
500 Tennessee, Baptist Health of East Tennessee Ser 2002 6.50 04/15/31 526,665
Decatur Hospital Authority, Texas, Wise Regional Health
500 Ser 2004 A 7.125 09/01/34 538,025
Teton County Hospital District, Wyoming, St John's Medical Center
1,500 Ser 2002 6.75 12/01/27 1,580,175
------- -----------
13,870 14,260,914
------- -----------
Industrial Development/Pollution Control Revenue (11.4%)
California County Tobacco Securitization Agency, Gold County
1,000 Settlement Funding Corp Ser 2006 0.00 06/01/33 211,510
Metropolitan Washington Airports Authority, District of Columbia &
1,005 Virginia, CaterAir International Corp Ser 1991 (AMT) + 10.125 09/01/11 1,006,296
Hawaii Department of Budget & Finance, Hawaiian Electric Co
200 Ser 1996 A (AMT) (MBIA) 6.20 05/01/26 202,340
Iowa Finance Authority, IPSCO Inc Ser 1997 (AMT)
1,000 (Mandatory Tender 06/01/07) 6.00 06/01/27 1,009,020
Maryland Industrial Development Financing Authority, Medical
1,235 Waste Associates LP 1989 Ser (AMT) 8.75 11/15/10 903,378
Nassau County Tobacco Settlement Corporation, New York,
1,000 Ser 2006 5.125 06/01/46 978,340
New York City Industrial Development Agency, New York,
1,000 American Airlines Inc Ser 2005 (AMT) 7.75 08/01/31 1,168,790
1,000 IAC/Interactive Corp Ser 2005 5.00 09/01/35 1,001,390
1,000 7 World Trade Center LLC Ser 2005 A 6.50 03/01/35 1,063,780
Carbon County Industrial Development Authority, Pennsylvania,
425 Panther Creek Partners Refg 2000 Ser (AMT) 6.65 05/01/10 447,865
Pennsylvania Economic Development Financing Authority, Reliant
500 Energy Inc Ser 2001 A (AMT) 6.75 12/01/36 535,570
375 Lexington County, South Carolina, Ellett Brothers Inc Refg Ser 1988 7.50 09/01/08 370,988
Pittsylvania County Industrial Development Authority, Virginia,
700 Multi-Trade LP Ser 1994 A (AMT) 7.45 01/01/09 704,865
------- -----------
10,440 9,604,132
------- -----------
Mortgage Revenue - Multi-Family (0.3%)
Washington Housing Finance Commission, FNMA Collateralized
290 Refg Ser 1990 A 7.50 07/01/23 290,499
------- -----------
Mortgage Revenue - Single Family (0.7%)
Maricopa County Industrial Development Authority, Arizona,
25 Ser 2000-1C (AMT) 6.25 12/01/30 25,469
205 Colorado Housing Finance Authority, 1998 Ser B-2 (AMT) 7.25 10/01/31 210,338
320 Chicago, Illinois, GNMA-Collateralized Ser 1998 A-1 (AMT) 6.45 09/01/29 328,557
------- -----------
550 564,364
------- -----------
Nursing & Health Related Facilities Revenue (9.2%)
Orange County Health Facilities Authority, Florida, Westminister
2,000 Community Care Services Inc Ser 1999 6.75 04/01/34 2,059,060
Pinellas County Health Facilities Authority, Florida, Oaks of
1,000 Clearwater Ser 2004 6.25 06/01/34 1,040,260
Iowa Health Facilities Development Financing Authority, Care
960 Initiatives Ser 1996 9.25 07/01/25 1,138,483
Massachusetts Development Finance Agency,
500 Evergreen Center Ser 2005 5.50 01/01/35 491,870
1,205 Kennedy-Donovan Center Inc 1990 Issue 7.50 06/01/10 1,244,331
New Jersey Health Care Facilities Financing Authority, Spectrum for 6.50 02/01/22 731,241
730 Living - FHA Insured Mortgage Refg Ser B
Mount Vernon Industrial Development Agency, New York, Meadowview at
1,000 the Wartburg Ser 1999 6.20 06/01/29 1,017,830
------- -----------
7,395 7,723,075
------- -----------
Public Facilities Revenue (1.2%)
Kansas City Industrial Development Authority, Missouri, Plaza Library
1,000 Ser 2004 5.90 03/01/24 982,270
------- -----------
Recreational Facilities Revenue (11.3%)
Sacramento Financing Authority, California, Convention Center Hotel
1,000 1999 Ser A 6.25 01/01/30 1,046,180
1,300 San Diego County, California, San Diego Natural History Museum COPs 5.60 02/01/18 1,234,168
500 Mashantucket (Western) Pequot Tribe, Connecticut, 1996 Ser A (a) 6.40 09/01/11 511,445
1,500 Mohegan Tribe of Indians, Connecticut, Gaming Authority Ser 2001 6.25 01/01/31 1,593,630
Overland Park Development Corporation, Kansas, Convention Center Hotel
1,000 Ser 2000 A 7.375 01/01/32 1,090,690
St Louis Industrial Development Authority, Missouri, Kiel Center
3,000 Refg Ser 1992 (AMT) 7.75 12/01/13 3,022,500
Austin Convention Enterprises Inc, Texas, Convention Center Hotel
1,000 Ser 2000 A 6.70 01/01/32 1,052,980
------- -----------
9,300 9,551,593
------- -----------
Retirement & Life Care Facilities Revenue (24.9%)
Orange County Health Facilities Authority, Florida, Orlando Lutheran
1,100 Towers Inc Ser 2005 5.375 07/01/20 1,067,891
St Johns County Industrial Development Authority, Florida, Glenmoor
2,000 Ser 1999 A 8.00 01/01/30 2,134,980
Illinois Finance Authority, Friendship Village of Schaumburg
1,000 Ser 2005 A 5.625 02/15/37 1,003,650
750 Illinois Health Facilities Authority, Villa St Benedict Ser 2003 A-1 6.90 11/15/33 815,070
Saint Joseph County, Indiana, Holy Cross Village at Notre Dame
275 Ser 2006 A 6.00 05/15/26 285,986
1,000 Olathe, Kansas, Catholic Care Ser 2006 A 6.00 11/15/38 1,032,990
Massachusetts Development Finance Agency, Loomis Communities
1,425 Ser 1999 A 5.625 07/01/15 1,433,308
Kansas City Industrial Development Authority, Missouri, Bishop
1,000 Spencer 2004 Ser I 6.25 01/01/24 1,036,650
New Jersey Economic Development Authority,
1,000 Cedar Crest Village Inc Ser 2001 A 7.25 11/15/31 1,080,510
1,000 Franciscan Oaks Ser 1997 5.70 10/01/17 1,022,650
1,000 Franciscan Oaks Ser 1997 5.75 10/01/23 1,022,030
500 Lions Gate Ser 2005 A 5.875 01/01/37 508,455
750 Suffolk County Industrial Development Agency, New York, Jefferson's
Ferry Ser 2006 5.00 11/01/28 744,465
750 Bucks County Industrial Development Authority, Pennsylvania, Ann's
Choice Ser 2005 A 6.25 01/01/35 776,745
500 Montgomery County Industry Development Authority, Pennsylvania,
Whitemarsh Community Ser 2005 6.25 02/01/35 525,010
Shelby County Health, Educational & Housing Facilities Board,
500 Tennessee, Trezevant Manor Ser 2006 A 5.75 09/01/37 491,135
750 Village at Germantown Ser 2003 A 7.25 12/01/34 791,115
Bexar County Health Facilities Development Corporation, Texas, Army
1,000 Retirement Residence Ser 2002 6.30 07/01/32 1,054,220
Lubbock Health Facilities Development Corporation, Texas, Carillon
1,000 Ser 2005 A 6.50 07/01/26 1,015,700
Chesterfield County Industrial Development Authority, Virginia,
2,580 Brandermill Woods Ser 1998 6.50 01/01/28 2,638,364
Peninsula Ports Authority of Virginia, Virginia Baptist Homes
500 Ser 2003 A 5.40 12/01/33 499,265
------- -----------
20,380 20,980,189
------- -----------
Tax Allocation Revenue (9.9%)
Carlsbad Community Facility District 3 Impt Area 1, California,
475 Ser 2006 5.30 09/01/36 465,505
San Marcos Community Facilities District No 2002-01, California,
1,000 University Commons Ser 2004 5.90 09/01/28 1,037,790
Santa Ana Unified School District, California, Community Facilities
700 District, No 2004-1 Ser 2005 5.05 09/01/30 691,768
Elk Valley Public Improvement Corporation, Colorado
500 Ser 2001 A 7.30 09/01/22 531,120
500 Ser 2001 A 7.35 09/01/31 527,440
Midtown Miami Community Development District, Florida, Parking Garage
1,000 Ser 2004 A 6.25 05/01/37 1,079,130
500 Bolingbrook, Illinois, Sales Tax Ser 2005 0.00++ 01/01/24 457,720
500 Chicago, Illinois, Lake Shore East Ser 2002 6.75 12/01/32 534,795
Pingree Grove Special Service Area No. 7, Illinois, Cambridge Lakes 6.00 03/01/36 500,160
500 Ser 2006
500 Prince George's County, Maryland, National Harbor Ser 2004 5.20 07/01/34 490,245
1,000 Des Peres, Missouri, West County Center Ser 2002 5.75 04/15/20 1,011,920
Clark County Special Improvement District 142, Nevada, Mountains 6.375 08/01/23 515,725
500 Edge Ser 2003
Allegheny County Redevelopment Authority, Pennsylvania, Pittsburgh
500 Mills Ser 2004 5.60 07/01/23 515,640
------- -----------
8,175 8,358,958
------- -----------
Transportation Facilities Revenue (1.2%)
Nevada Department of Business & Industry, Las Vegas Monorail 2nd Tier
1,000 Ser 2000 7.375 01/01/40 1,037,930
------- -----------
Refunded (0.7%)
Peninsula Ports Authority of Virginia, Virginia Baptist Homes
500 Ser 2003 A 7.375 12/01/13# 600,700
------- -----------
80,315 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Cost $78,470,788) 81,500,675
------- -----------
TAXABLE CONVERTIBLE BOND (0.2%)
Airlines
190 UAL Corp. (Cost $189,924) (b) 5.00 02/01/21 185,176
------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (3.3%)
Reno, Nevada, Saint Mary's Regional Medical Center Ser 1998 B (MBIA) 3.98* 05/15/23 1,400,000
1,400 (Demand 07/03/06)
New York City Municipal Water Finance Authority, New York, 2003
1,200 Ser F (Demand 07/03/06) 4.01* 06/15/35 1,200,000
200 North Central Texas Health Facility Development Corporation,
Presbyterian Medical Center Ser 1985 D (MBIA) (Demand 07/03/06) 3.98* 12/01/15 200,000
------- -----------
2,800 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Cost $2,800,000) 2,800,000
------- -----------
$83,305 TOTAL INVESTMENTS (Cost $81,460,712) (c)(d) 100.1% 84,485,851
=======
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1) (114,742)
------ -----------
NET ASSETS 100.0% $84,371,109
====== ===========
----------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
WI Security purchased on a when-issued basis.
* Current coupon of variable rate demand obligation.
** A portion of this security has been physically segregated in connection
with open futures contracts in the amount of $14,500.
+ Joint exemption in locations shown.
# Prerefunded to call date shown.
++ Security is a "step-up" bond where the coupon increases on a predetermined
future date.
(a) Resale is restricted to qualified institutional investors.
(b) Taxable convertible bond issued in reorganization.
(c) Securities have been designated as collateral in an amount equal to
$4,603,928 in connection with open futures contracts and securities
purchased on a when-issued basis.
(d) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $3,638,886 and the aggregate gross unrealized depreciation
is $570,248, resulting in net unrealized appreciation of $3,068,638.
Bond Insurance:
---------------
MBIA Municipal Bond Investors Assurance Corporation.
FUTURES CONTRACTS OPEN AT JUNE 30, 2006:
UNDERLYING
NUMBER OF LONG/ FACE AMOUNT UNREALIZED
CONTRACTS SHORT DESCRIPTION, DELIVERY MONTH AND YEAR AT VALUE APPRECIATION
--------- ----- ------------------------------------------ ----------- ------------
10 Short U.S. Treasury Notes 10 Year September 2006 ($1,048,594) $3,722
20 Short U.S. Treasury Notes 5 Year September 2006 (2,068,125) 9,789
-------
Total Unrealized Appreciation $13,511
=======
GEOGRAPHIC SUMMARY OF INVESTMENTS
BASED ON MARKET VALUE AS A PERCENT OF NET ASSETS
JUNE 30, 2006 (unaudited)
Alabama 1.2%
Arizona 1.3
California 7.9
Colorado 2.4
Connecticut 2.5
District of Columbia 1.2
Florida 9.3
Hawaii 2.0
Idaho 1.2
Illinois 5.1
Indiana 2.9
Iowa 2.5
Kansas 2.5
Maryland 2.8
Massachusetts 3.7
Missouri 8.4
Nevada 5.3
New Hampshire 1.2
New Jersey 6.4
New York 8.5
North Carolina 1.2
Oklahoma 1.3
Pennsylvania 3.3
South Carolina 0.6
Tennessee 3.3
Texas 4.6
Virginia 6.5
Washington 0.3
Wyoming 1.9
Joint Exemptions (1.2)
-----
Total 100.1%
=====
----------
* Joint exemptions have been included in each geographic location.
+ Does not include open short futures contracts with an underlying face
amount of $3,116,719 with unrealized appreciation of $13,511.
ITEM 2. CONTROLS AND PROCEDURES.
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-Q
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the Fund's internal control over financial
reporting that occurred during the registrant's fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Fund's
internal control over financial reporting.
ITEM 3. EXHIBITS.
(a) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto.
2
SIGNATURES
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.
Morgan Stanley Municipal Income Opportunities Trust III
/s/ Ronald E. Robison
------------------------------------
Ronald E. Robison
Principal Executive Officer
August 10, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ronald E. Robison
------------------------------------
Ronald E. Robison
Principal Executive Officer
August 10, 2006
/s/ Francis Smith
------------------------------------
Francis Smith
Principal Financial Officer
August 10, 2006
3