MuniYield New York Insured Fund III, Inc.
Semi-Annual
Report
April 30, 1994
Officers and Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Robert E. Putney, III, Assistant Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MYY
<PAGE>
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield New York Insured
Fund III, Inc. for their information. It is not a prospectus,
circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report.
Past performance results shown in this report should not be
considered a representation of future performance. The Fund has
leveraged its Common Stock by issuing Preferred Stock to provide
the Common Stock shareholders with a potentially higher rate of
return. Leverage creates risks for Common Stock shareholders,
including the likelihood of greater volatility of net asset value
and market price of shares of the Common Stock, and the risk that
fluctuations in the short-term dividend rates of the Preferred
Stock may affect the yield to Common Stock shareholders.
MuniYield New York Insured Fund III, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield New York Insured Fund III, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1994, the Common Stock
of MuniYield New York Insured Fund III, Inc. earned $0.515 per
share income dividends, which includes earned and unpaid
dividends of $0.071. This represents a net annualized yield of
7.60%, based on a month-end per share net asset value of $13.67.
Over the same period, the total investment return on the Fund's
Common Stock was -8.67%, based on a change in per share net
asset value from $15.51 to $13.67, and assuming reinvestment of
$0.520 per share income dividends.
For the six-month period ended April 30, 1994, the Fund's Auction
Market Preferred Stock had an average yield of 2.33%.
The Environment
Inflationary expectations and investor sentiment changed for the
worse during the three-month period ended April 30, 1994.
Following stronger-than-expected economic results through year-
end 1993, the Federal Reserve Board broke with tradition on
February 4, 1994 and publicly announced a modest 25 basis point
(0.25%) increase in short-term interest rates. At the March 22,
1994 meeting of the Federal Open Market Committee, the Federal
Reserve Board again raised the Federal Funds rate by 25 basis
points, followed by another 25 basis point increase on April 18,
1994.
<PAGE>
Rather than view the Federal Reserve Board's first tightening
move as a preemptive strike against inflation, fixed-income
investors focused on Chairman Greenspan's implicit promise of
further tightening should the rate of inflation accelerate, and
bond prices declined sharply. The setback in the bond market was
also reflected in greater stock market volatility. While the
second and third increases in the Federal Funds rate were less of
a surprise, investors remained concerned that interest rates
would trend upward sharply as the central bank aggressively
attempted to contain the inflationary pressures of an improving
economy. At the same time, highly leveraged investors were forced
to liquidate positions in the face of declining stock and bond
prices. Investor confidence was not restored with the announce-
ment of the surprisingly slow 2.6% gross domestic product growth
rate for the first calendar quarter of 1994. Instead, investors
focused on the higher-than-expected (but still moderate) broad
inflation measures and became concerned that business activity
was beginning to stagnate as inflationary pressures were in-
creasing.
The volatility in the US capital markets was mirrored in inter-
national markets during the period. Political and economic
developments, along with concerns of heightened global infla-
tionary pressures, led to a selloff in most capital markets,
especially the emerging markets that had appreciated strongly in
1993.
The Municipal Market
During the six months ended April 30, 1994, tax-exempt bond
yields exhibited considerable volatility as they rose to their
highest level in the past two years. As measured by the Bond
Buyer Revenue Bond Index, the yield on newly issued municipal
bonds maturing in 30 years rose over 90 basis points to 6.42% by
the end of April. Yields on seasoned municipal revenue bonds rose
by over 100 basis points in sympathy with the equally dramatic
increase in long-term US Treasury bond yields. By the end of
April, yields on US Treasury securities rose by over 95 basis
points to approximately 7.30%.
<PAGE>
Long-term tax-exempt bond yields were essentially unchanged from
the end of October 1993 to the end of January 1994. However, on a
weekly basis, tax-exempt bond yields fluctuated by as much as 15
basis points as investors were unable to reconcile the rapid
economic growth seen late last year with continued low inflation.
Following the initial interest rate increase by the Federal
Reserve Board in early February, municipal bond prices began to
erode in concert with taxable bond prices as investors began to
sell securities in anticipation of further interest rate
increases. This fear led investors to withdraw from the tax-
exempt market. From early February to the end of March, total
assets of all tax-exempt bond funds declined by $14 billion to
$247 billion. This decline in investor demand, coupled with fears
that the robust economic recovery seen during the fourth quarter
of 1993 would continue well into 1994, helped push municipal bond
yields higher in February and March. Attracted by tax-exempt
yields in excess of 6.25%, investor demand returned in April,
allowing yields to decline approximately 15 basis points to end
the April period at approximately 6.40%.
A rise in tax-exempt bond yields the magnitude of that exper-
ienced over the past six months has not been seen since 1987
when municipal bond rates rose 250 basis points between March
and October of that year. It is very important to note that the
recent municipal bond price declines were largely the result of
consistent and insistent selling pressures over the last two
months. In 1987, the tax-exempt bond market was much more vola-
tile and, at times, chaotic as investors sought to liquidate
positions without concern for fundamental value. For the most
part, the recent price deterioration has been orderly, and the
municipal bond market's liquidity and integrity have not been
challenged or jeopardized.
To a large extent, the municipal bond market has continued to be
supported by its strong technical position. New-issue volume for
the last six months has been less than $105 billion. This
represents a decline of approximately 20% versus the comparable
period a year ago. This decline was expected and has been
discussed in previous shareholder reports. This reduced issuance
has minimized potential selling pressure in recent months since
institutional investors have been wary of selling appreciable
amounts of securities that they may be unable to replace later
this year at any price level. We expect this decline in issuance
to continue since we anticipate recent yield increases to
significantly impact future municipal bond issuance. Just as
higher mortgage rates slow home mortgage refinancings, the recent
rise in bond yields will prevent bond refinancings from becoming
the driving force in bond issuance in 1994 as they were in 1993.
<PAGE>
Despite recent price declines, tax-exempt securities remain among
the most attractive investment alternatives available. After the
recent yield increases, longer-term municipal securities yielded
approximately 90% of comparable US Treasury yields. Purchasers of
these municipal bonds also accrue substantial after-tax yield
advantages. To investors in the 39% marginal Federal income tax
bracket, the purchase of a municipal bond yielding 6.50% rep-
resents an after-tax equivalent of 10.65%. With prevailing
estimates of 1994 inflation at no more than 3%--4%, real after-
tax rates in excess of 6.50% easily compensate longer-term in-
vestors for much of the price volatility recently experienced.
Portfolio Strategy
During the six months ended April 30, 1994, the New York sector
of the tax-exempt arena closely mirrored, and in some instances
exceeded, the volatility witnessed in the municipal market in
general. Faced with the same factors that weighed on the market
as a whole, the relative performance of New York tax-exempt
issues was further hindered by a significant increase in the
volume of securities offered for sale by New York State, New York
City and each of their respective political subdivisions. While
national issuance during the period contracted by more than 19%
as compared to the same period of last year, volume of New York
tax-exempt securities increased by more than 45%, soaring to over
$16 billion and representing the largest single-state issuer of
debt in the nation. As such, while general market municipal bonds
found a certain measure of support in the positive technical
foundation underlying their trading, New York tax-exempt issues
were forced to adjust at various points to levels which enabled
both local and national investors to absorb the supply. Mit-
igating these adjustments in yields was the adoption on the
part of investors of a more positive outlook for the fundamental
credit prospects within the State as both the national and
regional economies continue to show signs of improvement.
Portfolio decisions throughout the six months were guided by a
decidedly conservative posture. While the Fund maintained an
almost fully invested stance throughout the period, its structure
at the start of the period was less aggressive than general
market fundamentals may have warranted. As the issuance witnessed
during the period began and the forward outlook for interest
rates in general became more uncertain, our trading activity
sought to capitalize on the opportunities inherent in such an
environment by drawing down the Fund's average portfolio maturity
and shifting its focus toward the generation of tax-exempt
income. Issues used to facilitate this objective were those
deemed to possess strong qualities of protection from redemption
prior to maturity and superior qualities of creditworthiness
relative to the universe of New York tax-exempt bonds.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
June 2, 1994
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield New York Insured Fund III, Inc. utilizes leveraging to
seek to enhance the yield and net asset value of its Common
Stock. However, these objectives cannot be achieved in all
interest rate environments. To leverage, the Fund issues Pre-
ferred Stock, which pays dividends at prevailing short-term
interest rates, and invests the proceeds in long-term municipal
bonds. The interest earned on these investments is paid to Common
Stock shareholders in the form of dividends, and the value of
these portfolio holdings is reflected in the per share net asset
value of the Fund's Common Stock. However, in order to benefit
Common Stock shareholders, the yield curve must be positively
sloped; that is, short-term interest rates must be lower than
long-term interest rates. At the same time, a period of generally
declining interest rates will benefit Common Stock shareholders.
If either of these conditions change, then the risks of lever-
aging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred
Stock for an additional $50 million, creating a total value of
$150 million available for investment in long-term municipal
bonds. If prevailing short-term interest rates are approximately
3% and long-term interest rates are approximately 6%, the yield
curve has a strongly positive slope. The fund pays dividends on
the $50 million of Preferred Stock based on the lower short-term
interest rates. At the same time, the fund's total portfolio of
$150 million earns the income based on long-term interest rates.
<PAGE>
In this case, the dividends paid to Preferred Stock shareholders
are significantly lower than the income earned on the fund's
long-term investments, and therefore the Common Stock shareholders
are the beneficiaries of the incremental yield. However, if short-
term interest rates rise, narrowing the differential between short-
term and long-term interest rates, the incremental yield pick-up
on the Common Stock will be reduced. At the same time, the market
value of the fund's Common Stock (that is, its price as listed on
the New York Stock Exchange) may, as a result, decline. Furthermore,
if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's
investments, since the value of the fund's Preferred Stock does not
fluctuate. In addition to the decline in net asset value, the market
value of the fund's Common Stock may also decline.
PER SHARE INFORMATION
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Realized Unrealized Dividends/Distributions
Investment Gains Gains Net Investment Income Capital Gains
For the Period Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
November 27, 1992++ to January 31, 1993 $.09 -- $ .17 -- -- -- --
February 1, 1993 to April 30, 1993 .23 $(.01) .45 $.23 $.01 -- --
May 1, 1993 to July 31, 1993 .27 -- .27 .23 .04 -- --
August 1, 1993 to October 31, 1993 .26 .09 .48 .22 .04 -- --
November 1, 1993 to January 31, 1994 .27 .04 .10 .22 .05 $.08 $.01
February 1, 1994 to April 30, 1994 .25 .01 (1.89) .22 .04 -- --
<CAPTION>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
November 27, 1992++ to January 31, 1993 $14.38 $14.18 $15.125 $15.00 116
February 1, 1993 to April 30, 1993 15.06 14.34 16.00 14.125 192
May 1, 1993 to July 31, 1993 15.13 14.64 15.50 14.50 156
August 1, 1993 to October 31, 1993 15.81 14.95 15.875 14.875 284
November 1, 1993 to January 31, 1994 15.58 15.00 15.25 14.00 354
February 1, 1994 to April 30, 1994 15.53 13.01 15.375 12.125 275
<FN>
++ Commencement of Operations.
* Calculations are based upon shares of Common Stock outstanding
at the end of each period.
** As reported in the consolidated transaction reporting system.
*** In thousands.
</TABLE>
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield New York Insured Fund III, Inc.'s
portfolio holdings in the Schedule of Investments, we have abbreviated
the names of some of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HFA Housing Finance Authority
IDA Industrial Development Authority
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New York--98.6%
<S> <S> <C> <S> <C>
AAA Aaa $2,500 Albany, New York, Municipal Water Finance Authority, Water and Sewer System
Revenue Refunding Bonds, Series A, 5.50% due 12/01/2022 (c) $ 2,255
AAA Aaa 2,500 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue
Refunding Bonds, Series B, 6.125% due 7/01/2012 (d) 2,521
BBB Baa1 2,500 Metropolitan Transportation Authority, New York, Service Contract Revenue
Refunding Bonds (Transit Facilities), Series 5, 6.50% due 7/01/2016 2,503
AAA Aaa 5,650 Metropolitan Transportation Authority, New York, Transportation Facilities
Revenue Bonds, Series J, 6.375% due 7/01/2010 (c) 5,805
AAA Aaa 1,005 Mount Sinai, New York, Union Free School District, Refunding, GO, UT, 6.20% due
2/15/2019 (b) 1,020
A1+ NR 800 Nassau County, New York, IDA, Civic Facilities Revenue Bonds (Cold Spring Harbor
Laboratory Project), VRDN, 2.90% due 7/01/2019 (a) 800
New York City, New York, GO:
AAA Aaa 3,000 Refunding, Series A, UT, 5.75% due 8/01/2010 (c) 2,898
AAA Aaa 2,500 Series C, Subseries C-1, 6.625% due 8/01/2012 (d) 2,710
AAA Aaa 3,310 Series C, Subseries C-1, 6.625% due 8/01/2013 (d) 3,588
AAA Aaa 1,265 New York City, New York, Health and Hospital Authority, Local Government Revenue
Refunding Bonds, Series A, 5.75% due 2/15/2022 (b) l,176
<PAGE>
New York City, New York, Municipal Water Finance Authority, Water and Sewer System
Revenue Bonds, Series C:
AAA Aaa 3,800 6.20% due 6/15/2021 (b) 3,780
A1+ VMIG1 100 VRDN, 2.75% due 6/15/2022 (a)(c) 100
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 2,485 (City University System), Series C, 6% due 7/01/2016 (c) 2,422
AAA Aaa 1,075 (Colgate University), 5.625% due 7/01/2013 (c) 1,012
A1+ VMIG1 300 (Cornell University), Series B, VRDN, 2.90% due 7/01/2025 (a) 300
AAA Aaa 1,625 (Insured-Colgate University), 5.625% due 7/01/2023 (c) 1,489
AAA Aaa 1,750 (Mount Sinai School of Medicine), 6.75% due 7/01/2009 (d) l,863
AAA Aaa 1,485 Refunding (New York University), Series B, 5% due 7/01/2008 (d) 1,363
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New York (concluded)
<S> <S> <C> <S> <C>
BB+ Baa3 $3,000 New York State Energy, Research and Development Authority, Electric Facilities
Revenue Bonds (Long Island Lighting), AMT, Series B, 7.15% due 9/01/2019 $ 3,023
AAA Aaa 3,500 New York State Energy, Research and Development Authority, Facilities Revenue Bonds
(Con Edison Company, New York, Inc.), AMT, Series B, 6.375% due 12/01/2027 (d) 3,516
New York State HFA, Service Contract Obligation Revenue Bonds, Series C:
BBB Baa1 1,000 6.30% due 9/15/2012 980
BBB Baa1 1,000 6.30% due 3/15/2022 968
NR VMIG1 800 New York State Job Development Authority, Special Purpose Revenue Bonds
(Series A-1 thru A-25), AMT, VRDN, 2.95% due 3/01/2007 (a) 800
New York State Medical Care Facilities, Finance Agency Revenue Bonds (Mental Health
Service Facilities Improvement) (b):
AAA Aaa 2,205 Series A, 5.70% due 8/15/2014 2,081
AAA Aaa 6,000 Series D, 5.90% due 8/15/2022 5,715
AAA Aaa 1,945 New York State Medical Care Facilities, Finance Agency Revenue Bonds (North Shore
University-Glen Cove), Series A, 5.125% due 11/01/2012 (d) 1,728
NR Aa 2,500 New York State Mortgage Agency, Mortgage Revenue Bonds, AMT, Series 30-B,
6.65% due 10/01/2025 2,515
AAA Aaa 1,000 New York State Thruway Authority, General Revenue Bonds, Series A, 5.75% due
1/01/2012 (c) 962
<PAGE>
AAA Aaa 1,200 New York State Urban Development Corporation, Revenue Refunding Bonds
(Correctional Facilities), 5.375% due 1/01/2012 (d) 1,108
AAA Aaa 5,000 Suffolk County, New York, IDA, Southwest Sewer System Revenue Bonds,
6% due 2/01/2007 (c) 5,071
Suffolk County, New York, Refunding, GO, UT, Series B (c):
AAA Aaa 580 6.20% due 5/01/2012 588
AAA Aaa 560 6.20% due 5/01/2014 566
AAA Aaa 250 6.20% due 5/01/2015 252
AAA Aaa 1,000 Suffolk County, New York, Revenue Refunding Bonds, Series G, 5.40% due 4/01/2013 (d) 918
AAA Aaa 3,500 Suffolk County, New York, Water Authority, Waterworks Revenue Refunding Bonds,
Series C, 5.75% due 6/01/2010 (b) 3,470
AAA Aaa 2,500 Triborough Bridge and Tunnel Authority, New York, Special Obligation Revenue
Refunding Bonds, Series A, 6% due 1/01/2019 (d) 2,412
Total Investments (Cost--$75,815)--98.6% 74,278
Other Assets Less Liabilities--1.4% 1,088
-------
Net Assets--100.0% $75,366
=======
<FN>
(a) The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate
in effect at April 30, 1994.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) MBIA Insured.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$75,814,578) (Note 1a) $74,277,532
Cash 34,379
Interest receivable 1,284,499
Deferred organization expenses (Note 1e) 29,954
Prepaid expenses 4,565
-----------
Total assets 75,630,929
-----------
Liabilities: Payables:
Dividends to shareholders (Note 2) $ 150,982
Investment adviser (Note 2) 29,851 180,833
------------
Accrued expenses 84,451
-----------
Total liabilities 265,284
-----------
Net Assets: Net assets $75,365,645
===========
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (500 shares of
AMPS* issued and outstanding at $50,000 per share liquid-
ation preference) $25,000,000
Common Stock, par value $.10 per share (3,683,535 shares
issued and outstanding) $ 368,354
Paid-in capital in excess of par 51,069,302
Undistributed investment income--net 272,682
Undistributed realized capital gains--net 192,353
Unrealized depreciation on investments--net (1,537,046)
------------
Total--Equivalent to $13.67 net asset value per share of
Common Stock (market price--$13.25) 50,365,645
-----------
Total capital $75,365,645
===========
<FN>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months
Ended April 30, 1994
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 2,246,963
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 198,166
Professional fees 33,448
Commission fees (Note 4) 31,201
Printing and shareholder reports 14,923
Accounting services (Note 2) 12,802
Transfer agent fees 12,243
Directors' fees and expenses 10,442
Listing fees 7,580
Amortization of organization expenses (Note 1e) 3,490
Custodian fees 2,387
Pricing fees 2,150
Other 8,935
------------
Total expenses 337,767
-----------
Investment income--net 1,909,196
-----------
Realized & Realized gain on investments--net 192,352
Unrealized Loss on Change in unrealized appreciation/depreciation on investments--net (6,596,583)
Investments--Net -----------
(Notes 1d & 3): Net Decrease in Net Assets Resulting from Operations $(4,495,035)
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
For the
For the Period
Six Months Nov. 27,
Ended 1992++ to
April 30, Oct. 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 1,909,196 $ 3,113,543
Realized gain on investments--net 192,352 318,961
Change in unrealized appreciation/depreciation on investments--net (6,596,583) 5,059,537
------------ -----------
Net increase (decrease) in net assets resulting from operations (4,495,035) 8,492,041
------------ -----------
Dividends & Investment income--net:
Distributions to Common Stock (1,624,896) (2,504,986)
Shareholders Preferred Stock (295,540) (324,635)
(Note 1g): Realized gain on investments--net:
Common Stock (285,705) --
Preferred Stock (33,255) --
------------ -----------
Net decrease in net assets resulting from dividends and distributions
to shareholders (2,239,396) (2,829,621)
------------ -----------
Common & Preferred Net proceeds from issuance of Common Stock -- 50,785,291
Stock Transactions Proceeds from issuance of Preferred Stock -- 25,000,000
(Notes 1e & 4): Value of shares issued to Common Stock shareholders in reinvestment
of dividends 125,020 999,981
Offering and underwriting costs resulting from the issuance of
Preferred Stock (29,641) (543,000)
------------ -----------
Net increase in net assets derived from stock transactions 95,379 76,242,272
------------ -----------
Net Assets: Total increase (decrease) in net assets (6,639,052) 81,904,692
Beginning of period 82,004,697 100,005
------------ -----------
End of period* $ 75,365,645 $82,004,697
============ ===========
<FN>
* Undistributed investment income--net $ 272,682 $ 283,922
============ ===========
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
For the Period
The following per share data and ratios have been derived Six Months Nov. 27,
from information provided in the financial statements. Ended 1992++ to
April 30, Oct. 31,
Increase (Decrease) in Net Asset Value: 1994 1993
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 15.51 $ 14.18
Operating ------------ -----------
Performance: Investment income--net .52 .85
Realized and unrealized gain (loss) on investments--net (1.74) 1.45
------------ -----------
Total from investment operations (1.22) 2.30
------------ -----------
Less dividends and distributions to Common Stock shareholders:
Investment income--net (.44) (.68)
Realized gain on investments--net (.08) --
------------ -----------
Total dividends and distributions to Common Stock shareholders (.52) (.68)
------------ -----------
Capital charge resulting from issuance of Common Stock -- (.05)
------------ -----------
Effect of Preferred Stock activity++++:
Dividends and distributions to Preferred Stock shareholders:
Investment income--net (.09) (.09)
Realized gain on investment--net (.01) --
------------ -----------
Capital charge resulting from issuance of Common Stock -- (.15)
------------ -----------
Total effect of Preferred Stock activity (.10) (.24)
------------ -----------
Net asset value, end of period $ 13.67 $ 15.51
============ ===========
Market price per share, end of period $ 13.25 $ 15.00
============ ===========
Total Investment Based on market price per share (8.47%)+++ 4.69%+++
Return:** ============ ===========
Based on net asset value per share (8.67%)+++ 14.51%+++
============ ===========
<PAGE>
Ratios to Average Expenses, net of reimbursement .85%* .55%*
Net Assets:*** ============ ===========
Expenses .85%* .87%*
============ ===========
Investment income--net 4.80%* 4.86%*
============ ===========
Supplemental Net assets, net of Preferred Stock, end of period (in thousands) $ 50,366 $ 57,005
Data: ============ ===========
Preferred Stock outstanding, end of period (in thousands) $ 25,000 $ 25,000
============ ===========
Portfolio turnover 24.74% 11.06%
============ ===========
Dividends Per Share Investment income--net $ 591 $ 649
On Preferred Stock
Outstanding:
<FN>
* Annualized.
** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, result
in substantially different returns. Total investment returns
exclude the effects of sales loads.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
++ Commencement of Operations.
++++ The Fund's Preferred Stock was issued on March 25, 1993.
+++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield New York Insured Fund III, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a non-
diversified, closed-end management investment company. The Fund
determines and makes available for publication the net asset
value of its Common Stock on a weekly basis. The Fund's Common
Stock is listed on the New York Stock Exchange under the symbol
MYY. The following is a summary of significant accounting
policies followed by the Fund.
<PAGE>
(a) Valuation of investments--Municipal bonds are traded pri-
marily in the over-the-counter markets and are valued at the
most recent bid price or yield equivalent as obtained by the
Fund's pricing service from dealers that make markets in such
securities. Financial futures contracts, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are val-
ued at their last sale price as of the close of such exchanges
or, lacking any sales, at the last available bid price. Sec-
urities with remaining maturities of sixty days or less are
valued at amortized cost. Securities for which market quotations
are not readily available are valued at their fair value as
determined in good faith by or under the direction of the Board
of Directors of the Fund.
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures
contracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation margin and are
recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income
tax provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are
entered into (the trade dates). Interest income is recognized on
the accrual basis. Discounts and market premiums are amortized
into interest income. Realized gains and losses on security
transactions are determined on the identified cost basis.
<PAGE>
(e) Deferred organization expenses and offering expenses--
Deferred organization expenses are amortized on a straight-line
basis over a five-year period. Direct expenses relating to the
public offering of the Common and Preferred Stock were charged to
capital at the time of issuance.
(f) Non-income producing investments--Written and purchased
options are non-income producing investments.
(g) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994,
the investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc., an indirect wholly-owned subsidiary of
ML & Co. The limited partners are ML & Co. and Merrill Lynch In-
vestment Management, Inc. ("MLIM"), which is also an indirect
wholly-owned subsidiary of ML & Co.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee at an annual rate
of 0.50% of the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, MLIM, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the six months ended April 30, 1994 were
$19,007,431 and $20,439,768, respectively.
Net realized and unrealized gains (losses) as of April 30, 1994
were as follows:
Realized Unrealized
Gains Losses
Long-term investments $ 192,352 $(1,537,046)
---------- -----------
Total $ 192,352 $(1,537,046)
========== ===========
As of April 30, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $1,537,046, of which $538,122
related to appreciated securities and $2,075,168 related to
depreciated securities. The aggregate cost of investments at
April 30, 1994 for Federal income tax purposes was $75,814,578.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital
stock, including Preferred Stock, par value $.10 per share, all
of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to reclassify any unissued
shares of capital stock without approval of the holders of Common
Stock.
Common Stock
For the six months ended April 30, 1994, shares issued and
outstanding increased by 9,099 to 3,683,535 as a result of
dividend reinvestment and the issuance of Common Stock.
At April 30, 1994, total paid-in capital amounted to $51,437,656.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of
Preferred Stock of the Fund that entitle their holders to
receive cash dividends at an annual rate that may vary for the
successive dividend periods. The yield in effect at April 30,
1994 was 2.75%.
In connection with the offering of AMPS, the Board of Directors
reclassified 500 shares of unissued capital stock as AMPS. For
the six months ended April 30, 1994, there were 500 AMPS shares
authorized, issued and outstanding with a liquidation preference
of $50,000 per share, plus accumulated and unpaid dividends of
$21,127.
<PAGE>
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1% calculated
on the proceeds of each auction. For the six months ended April
30, 1994, MLPF&S, an affiliate of MLIM, earned $28,868 as
commissions.
5. Subsequent Event:
On May 6, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the
amount of $.070610 per share, payable on May 27, 1994 to
shareholders of record as of May 17, 1994.
