MUNIYIELD
NEW YORK
INSURED
FUND III, INC.
FUND LOGO
Annual Report
October 31, 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
<PAGE>
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
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
<PAGE>
MuniYield New York Insured Fund III, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1994, the Common Stock of MuniYield
New York Insured Fund III, Inc. earned $0.927 per share income
dividends, which includes earned and unpaid dividends of $0.067.
This represents a net annualized yield of 7.23%, based on a month-
end net asset value of $12.82 per share. Over the same period, the
total investment return on the Fund's Common Stock was -11.44%,
based on a change in per share net asset value from $15.51 to
$12.82, and assuming reinvestment of $0.935 per share income
dividends.
For the six-month period ended October 31, 1994, the total
investment return on the Fund's Common Stock was -3.03%, based on a
change in per share net asset value from $13.67 to $12.82, and
assuming reinvestment of $0.415 per share income dividends.
For the six-month period ended October 31, 1994, the Fund's Auction
Market Preferred Stock had an average yield of 2.99%.
The Environment
As discussed in our last report to shareholders, the Federal Reserve
Board moved to counteract inflationary pressures by tightening
monetary policy. This trend continued during the May--October
period. Despite the series of preemptive strikes against inflation
by the central bank, concerns of increasing inflationary pressures
continued to prompt volatility in the US capital markets during the
period. In addition, the weakness of the US dollar in foreign
exchange markets prolonged stock and bond market declines.
Ongoing strength in the manufacturing sector and better-than-
expected economic results continue to fuel speculation that the
Federal Reserve Board will continue to raise short-term interest
rates in the months ahead. However, although consumer spending is
increasing, it is doing so at a lower rate than has been the case in
recent economic recoveries. In the weeks ahead, investors will
continue to assess economic data and inflationary trends in order to
gauge whether further increases in short-term interest rates are
imminent. Continued indications of moderate and sustainable levels
of economic growth would be positive for the US capital markets. At
the same time, greater US dollar stability in foreign exchange
markets would help to dampen expectations of significantly higher
short-term interest rates.
<PAGE>
The Municipal Market
The long-term tax-exempt market continued to erode throughout the
three months ended October 31, 1994. As measured by the Bond Buyer
Revenue Bond Index, yields on A-rated municipal revenue bonds
maturing in 30 years rose by almost 50 basis points (0.50%) to 6.95%
during the October 1994 quarter. This represents the highest level
in tax-exempt bond yields in over two years. US Treasury bonds
suffered even greater declines during the quarter as Treasury bond
yields rose approximately 60 basis points to end the quarter at
8.00%.
The tax-exempt bond market reacted negatively throughout the October
quarter to indications that, despite a series of interest rate
increases by the Federal Reserve Board, the strength of the domestic
economy seen in recent quarters has not yet been significantly
reduced. While inflationary pressures have remained well contained,
additional Federal Reserve Board actions have been expected both to
ensure that domestic economic growth is eventually confined to
current levels and to assure nervous financial markets of its anti-
inflationary intentions.
Fortunately, while the demand for tax-exempt bonds has declined
somewhat in recent months, new bond issuance has remained greatly
reduced. During the quarter ended October 31, 1994, only $32 billion
in long-term tax-exempt securities were issued, a decline of over
50% versus the October 31, 1993 quarter. Similarly, for the six
months ended October 31, 1994, only $75 billion in municipal
securities were underwritten, a decline of over 50% versus the
comparable period a year earlier. This reduction in issuance in
recent quarters has allowed the municipal bond market to react to
both the decline in investor demand and the rise in fixed-income
yields in a more orderly fashion than in similar situations in the
past, particularly during 1987.
Long-term tax-exempt revenue bonds currently yield approximately 7%,
or almost 11.5% on an after-tax equivalent basis, to an investor in
the 39.6% Federal income tax bracket. As inflation has only
marginally increased in the past year, real tax-exempt interest
rates have risen dramatically. The Federal Reserve Board appears
committed to maintaining inflation at or below its current levels.
Indeed, most forecasts expect inflation to remain in its present
range of 3%--4% throughout 1995 and, potentially, for the remainder
of the 1990s. Real after-tax equivalent interest rates exceeding 7%
represent historically attractive municipal investments for long-
term investors.
<PAGE>
Federal Reserve Board actions taken thus far have yet to fully
impact US domestic growth and expected additional actions should
promote only a modest economic expansion within a benign
inflationary context beginning sometime early in 1995. Within such
an environment, it is unlikely that tax-exempt interest rates will
remain at their current attractive levels. Tax-exempt bond issuance
is unlikely to return to the historic high levels seen in 1992 and
1993, while investor demand should return as markets stabilize. As
we have discussed in earlier reports, the total number of tax-exempt
bonds outstanding is scheduled to decline dramatically in 1994 and
1995 as a result of both regular bond maturities and early
redemptions. Investors seeking tax-advantaged issues are likely to
find it very difficult to obtain currently available tax-exempt
yields as the current supply/demand balance is unlikely to be
maintained in the coming quarters.
Portfolio Strategy
During the beginning of the fourth quarter of 1993, as long-term
interest rates declined to cyclical lows, we increased the Fund's
cash position to take advantage of the potential for a reversal in
the event of a stronger-than-anticipated economic recovery. As the
first quarter of 1994 unfolded, it appeared that the latter scenario
would take place. In fact, tax-exempt interest rates increased from
5.6% at year end to 6.4% by the end of the quarter. During this
period, we continued to raise cash reserves by selling discounted
holdings and purchasing higher coupon, shorter maturity bonds.
During the second quarter of 1994, the municipal market was
relatively stable, although a brief decline in interest rates in May
gave us an opportunity to continue our strategy of switching to
higher coupon, shorter maturity bonds. We increased the Fund's cash
position at the end of the quarter in anticipation of a surge in
issuance pending the state legislature's delayed passage of the annual
budget. Issuance did surge at the start of the third quarter but the
increase was short lived.
Recently we have maintained a relatively low cash position of about
7% of net assets for two reasons. First, the decline in new issuance
has been dramatic both for the overall municipal market and
especially for the New York market, which declined by 43%. As
anticipated, there was a surge of volume when the state legislature
passed the annual budget on June 8 of this year. We also anticipated
a more severe decline in issuance in the third quarter of 1994. For
the three-month period ended September 30, 1994, volume declined
over 50% from the prior year.
<PAGE>
The other reason for a relatively low cash position is the steepness
of the yield curve. With short-term interest rates at 3.00% for one-
month commercial paper and long-term interest rates in excess of
6.50%, we believe it is beneficial to maintain longer-term
investments for income purposes. To offset market volatility, we
have only added holdings in the 15-year maturity range. We expect
these bonds to be less volatile than the typical 30-year maturities
purchased in the past.
Our focus for the past year was to maintain an attractive yield
income for Common Stock shareholders. By keeping our cash position
at lower levels and by purchasing higher coupon, shorter maturity
issues, we were able to do so.
We appreciate your ongoing interest in MuniYield New York Insured
Fund III, Inc., and we look forward to assisting you with your
financial needs in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
December 1, 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 Preferred 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 leveraging will begin to outweigh the benefits.
<PAGE>
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.
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 (unaudited)
<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>
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 -- --
May 1, 1994 to July 31, 1994 .25 .02 .25 .21 .04 -- --
August 1, 1994 to October 31, 1994 .26 (.33) (.79) .21 .04 -- --
<PAGE>
<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
May 1, 1994 to July 31, 1994 14.32 13.33 13.75 12.625 244
August 1, 1994 to October 31, 1994 13.96 12.82 13.25 10.625 366
<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>
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
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
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--99.5%
<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) $ 2,098
<PAGE>
AAA Aaa 2,070 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue
Bonds, Series A, 6.375% due 7/01/2018 (d) 1,988
AAA Aaa 5,650 Metropolitan Transportation Authority, New York, Transportation Facilities
Revenue Bonds, Series J, 6.375% due 7/01/2010 (c) 5,630
AAA Aaa 2,000 Monroe County, New York, Public Improvement, GO, UT, 6.15% due 6/01/2018 (b) 1,904
AAA Aaa 1,005 Mount Sinai, New York, Union Free School District, Refunding, GO, UT, 6.20%
due 2/15/2019 (b) 964
AAA Aaa 4,520 New York City, New York, GO, UT, Refunding, Series C, Subseries C-1, 6.625% due
8/01/2002 (d)(e) 4,822
A1+ NR* 3,900 New York City, New York, IDA, IDR (Japan Airlines Company Ltd. Project), VRDN,
AMT, 3.75% due 11/01/2015 (a) 3,900
New York City, New York, Municipal Water Finance Authority, Water and Sewer
System Revenue Bonds (b):
AAA Aaa 2,000 Refunding, Series A, 5.875% due 6/15/2013 1,824
AAA Aaa 2,000 Series C, 6.20% due 6/15/2021 1,853
A1+ VMIG1 600 New York City, New York, Trust for Cultural Resources Revenue Bonds (Soloman R.
Guggenheim), VRDN, Series B, 3.30% due 12/01/2015 (a) 600
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 2,485 (City University System), Series C, 6% due 7/01/2016 (c) 2,279
AAA Aaa 1,075 (Colgate University), 5.625% due 7/01/2013 (c) 962
AAA Aaa 1,625 (Colgate University), 5.625% due 7/01/2023 (c) 1,400
A1+ VMIG1 900 (Cornell University), VRDN, Series B, 3.30% due 7/01/2025 (a) 900
AAA Aaa 1,750 Refunding (Mount Sinai School of Medicine), 6.75% due 7/01/2009 (d) 1,807
AAA Aaa 1,485 Refunding (New York University), Series B, 5% due 7/01/2008 (d) 1,279
NR* VMIG1 1,600 (Saint Francis Center at The Knolls), VRDN, 3.55% due 7/01/2023 (a) 1,600
BB+ Ba1 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 2,821
</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>
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) $ 3,283
<PAGE>
AAA Aaa 2,500 New York State Energy, Research and Development Authority, Gas Facilities Revenue
Bonds (Brooklyn Union Gas Company), AMT, Series A, 6.75% due 2/01/2024 (d) 2,465
AAA Aaa 2,000 New York State Energy, Research and Development Authority, PCR (Central Hudson Gas
& Electric), AMT, Series C, 8.375% due 12/01/2028 (d) 2,221
A Aa 3,000 New York State Environmental Facilities Corporation, PCR (Water-Revolving Fund),
Series E, 6.50% due 6/15/2014 2,935
BBB Baa3 750 New York State Environmental Facilities Corporation, Solid Waste Disposal Revenue
Bonds (Occidental Petroleum Corp.), AMT, Subseries A, 5.70% due 9/01/2028 606
NR* VMIG1 1,100 New York State Job Development Authority, Special Purpose Revenue Bonds (Series A-1
thru A-25), VRDN, AMT, 3.70% due 3/01/2007 (a) 1,100
AAA Aaa 3,000 New York State Medical Care Facilities, Finance Agency Revenue Bonds (Mental Health
Service Facilities Improvement), Series D, 5.90% due 8/15/2022 (b) 2,654
NR* Aa 2,500 New York State Mortgage Agency, Mortgage Revenue Bonds, AMT, Series 30-B, 6.65% due
10/01/2025 2,366
AAA Aaa 1,000 New York State Thruway Authority, General Revenue Bonds, Series A, 5.75% due
1/01/2012 (c) 912
AAA Aaa 3,000 New York State Thruway Authority Revenue Bonds (Highway and Bridge Trust Fund), UT,
Series B, 6.25% due 4/01/2012 (c) 2,925
Port Authority of New York and New Jersey, Consolidated Revenue Bonds:
AA- A1 1,950 67th Series, 6.875% due 1/01/2025 1,961
AA- A1 1,000 70th Series, AMT, 7.25% due 8/01/2025 1,032
AAA Aaa 2,000 72nd Series, 7.40% due 10/01/2012 (b) 2,147
Suffolk County, New York, Refunding, GO, UT, Series B (c):
AAA Aaa 580 6.20% due 5/01/2012 563
AAA Aaa 250 6.20% due 5/01/2015 239
AAA Aaa 1,000 Suffolk County, New York, Revenue Refunding Bonds, GO, UT, Series G, 5.40% due
4/01/2013 (d) 868
AAA Aaa 2,980 Suffolk County, New York, Water Authority, Waterworks Revenue Refunding Bonds,
Series C, 5.75% due 6/01/2010 (b) 2,779
AAA Aaa 2,500 Triborough Bridge and Tunnel Authority, New York, Special Obligation Revenue
Refunding Bonds, Series A, 6% due 1/01/2019 (d) 2,281
Total Investments (Cost--$75,511)--99.5% 71,968
Other Assets Less Liabilities--0.5% 333
-------
Net Assets--100.0% $72,301
=======
<PAGE>
<FN>
*Not Rated.
(a)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the ratein
effect at October 31, 1994.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)Prerefunded.
Ratings of issues shown have not been audited by Ernst & Young LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$75,510,560)(Note 1a) $71,967,787
Cash 342,075
Interest receivable 1,246,711
Deferred organization expense (Note 1e) 22,617
Prepaid expenses and other assets 3,585
-----------
Total assets 73,582,775
-----------
Liabilities: Payables:
Securities purchased $ 1,048,339
Dividends to shareholders (Note 1g) 122,170
Investment adviser (Note 2) 31,110 1,201,619
-----------
Accrued expenses and other liabilities 79,777
-----------
Total liabilities 1,281,396
-----------
Net Assets: Net assets $72,301,379
===========
<PAGE>
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 liquidation
preference) $25,000,000
Common Stock, par value $.10 per share (3,688,900 shares issued
and outstanding) $ 368,890
Paid-in capital in excess of par 51,141,408
Undistributed investment income--net 304,529
Accumulated realized capital losses on investments--net (Note 5) (970,675)
Unrealized depreciation on investments--net (3,542,773)
-----------
Total--Equivalent to $12.82 net asset value per share of Common
Stock (market price--$10.625) 47,301,379
-----------
Total capital $72,301,379
===========
<FN>
*Auction Market Preferred Stock.
</TABLE>
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended October 31, 1994
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 4,487,613
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 388,753
Professional fees 69,320
Commission fees (Note 4) 63,874
Accounting services (Note 2) 36,102
Printing and shareholder reports 32,076
Transfer agent fees 31,720
Directors' fees and expenses 21,972
Listing fees 16,919
Amortization of organization expenses (Note 1e) 7,338
Pricing fees 4,645
Custodian fees 3,729
Other 8,528
-----------
Total expenses 684,976
-----------
Investment income--net 3,802,637
-----------
<PAGE>
Realized & Realized loss on investments and financial futures contracts--net (970,676)
Unrealized Change in unrealized appreciation on investments--net (8,602,309)
Loss on -----------
Investments-- Net Decrease in Net Assets Resulting from Operations $(5,770,348)
Net (Notes ===========
1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the
For the Period
Year Ended Nov. 27,
Oct. 31, 1992++ to
Increase (Decrease) in Net Assets: 1994 Oct. 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 3,802,637 $ 3,113,543
Realized gain (loss) on investments and financial futures
contracts--net (970,676) 318,961
Change in unrealized appreciation on investments--net (8,602,309) 5,059,537
----------- -----------
Net increase (decrease) in net assets resulting from operations (5,770,348) 8,492,041
----------- -----------
Dividends & Investment income--net:
Distributions to Common Stock (3,157,490) (2,504,986)
Shareholders Preferred Stock (624,540) (324,635)
(Note 1g): Realized gain on investments--net:
Common Stock (285,706) --
Preferred Stock (33,255) --
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (4,100,991) (2,829,621)
----------- -----------
<PAGE>
Capital Stock Net proceeds from issuance of Common Stock -- 50,785,291
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 and distributions 197,662 999,981
Offering and underwriting costs resulting from the issuance of
Preferred Stock (29,641) (543,000)
----------- -----------
Net increase in net assets derived from capital stock transactions 168,021 76,242,272
----------- -----------
Net Assets: Total increase (decrease) in net assets (9,703,318) 81,904,692
Beginning of period 82,004,697 100,005
----------- -----------
End of period* $72,301,379 $82,004,697
=========== ===========
<FN>
*Undistributed investment income--net $ 304,529 $ 283,922
=========== ===========
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the
For the Period
The following per share data and ratios have been derived Year Nov. 27,
from information provided in the financial statements. Ended 1992++ to
October 31, October 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 1.03 .85
Realized and unrealized gain (loss) on investments--net (2.59) 1.45
----------- -----------
Total from investment operations (1.56) 2.30
----------- -----------
Less dividends and distributions to Common Stock shareholders:
Investment income--net (.86) (.68)
Realized gain on investments--net (.08) --
----------- -----------
Total dividends and distributions (.94) (.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 (.17) (.09)
Realized gain on investments--net (.01) --
Capital charge resulting from issuance of Preferred Stock (.01) (.15)
----------- -----------
Total effect of Preferred Stock activity (.19) (.24)
----------- -----------
Net asset value, end of period $ 12.82 $ 15.51
=========== ===========
Market price per share, end of period $ 10.625 $ 15.000
=========== ===========
Total Based on market price per share (24.11%) 4.69%+++
Investment =========== ===========
Return:** Based on net asset value per share (11.44%) 14.51%+++
=========== ===========
Ratios to Expenses, net of reimbursement .88% .55%*
Average Net =========== ===========
Assets:*** Expenses .88% .87%*
=========== ===========
Investment income--net 4.88% 4.86%*
=========== ===========
<PAGE>
Supplemental Net assets, net of Preferred Stock, end of period (in thousands) $ 47,301 $ 57,005
Data: =========== ===========
Preferred Stock outstanding, at end of period (in thousands) $ 25,000 $ 25,000
=========== ===========
Portfolio turnover 65.22% 11.06%
=========== ===========
Dividends Per Investment income--net $ 1,249 $ 649
Share 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, may
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 primarily
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 valued at their last sale price
as of the close of such exchanges or, lacking any sales, at the last
available bid price. Securities with remaining maturities of sixty
days or less are valued at amortized cost, which approximates market
value. 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. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co. and Fund
Asset Management, Inc. ("FAMI"), 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.
NOTES TO FINANCIAL STATEMENTS (concluded)
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, FAMI, PSI, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1994 were $48,227,051 and
$54,772,245, respectively.
<PAGE>
Net realized and unrealized gains (losses) as of October 31, 1994
were as follows:
Realized
Gains Unrealized
(Losses) Losses
Long-term investments $(1,063,184) $(3,542,773)
Financial futures contracts 92,508 --
----------- -----------
Total $ (970,676) $(3,542,773)
=========== ===========
As of October 31, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $3,542,773, of which $162,648 related
to appreciated securities and $3,705,421 related to depreciated
securities. The aggregate cost of investments at October 31, 1994
for Federal income tax purposes was $75,510,560.
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 year ended October 31, 1994, shares issued and outstanding
increased by 14,464 to 3,688,900 as a result of dividend
reinvestment. At October 31, 1994, total paid-in capital amounted to
$51,510,298.
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 ranging from 0.25% to 0.375%, calculated
on the proceeds of each auction. The yield in effect at October 31,
1994 was 3.15%.
In connection with the offering of AMPS, the Board of Directors
reclassified 500 shares of unissued capital stock as AMPS. For the
year ended October 31, 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 $58,353. Effective
December 1, 1994, as a result of a two-for-one stock split, there
will be 1,000 AMPS shares with a liquidation preference of $25,000
per share.
<PAGE>
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the year ended
October 31, 1994, MLPF&S, an affiliate of FAMI, earned $56,298
as commissions.
5. Capital Loss Carryforward:
At October 31, 1994, the Fund had a capital loss carryforward of
approximately $971,000, all of which expires in 2002. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 8, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $0.066734 per share, payable on November 29, 1994 to shareholders
of record as of November 18, 1994.
<AUDIT-REPORT>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
MuniYield New York Insured Fund III, Inc.
We have audited the accompanying statement of assets, liabilities
and capital of MuniYield New York Insured Fund III, Inc., including
the schedule of investments, as of October 31, 1994 and the related
statement of operations for the year then ended and the statements of
changes in net assets and financial highlights for the year then
ended, and for the period from November 27, 1992 (commencement of
operations) to October 31, 1993. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of
October 31, 1994 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
<PAGE>
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of MuniYield New York Insured Fund III, Inc. at
October 31, 1994, and the results of its operations for the year
then ended and the changes in its net assets and financial
highlights for the year then ended and for the period November 27,
1992 to October 31, 1993, in conformity with generally accepted
accounting principles.
(Ernst and Young LLP)
New York, New York
December 8, 1994
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
MuniYield New York Insured Fund III, Inc. during its taxable year
ended October 31, 1994 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the following table summarizes the per share capital
gains distributions paid by the Fund during the year:
<TABLE>
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
<S> <C> <C> <C>
Common Stock Shareholders 12/30/93 $ 0.077755 --
Preferred Stock Shareholders 12/09/93 $ 66.51 --
Please retain this information for your records.
</TABLE>
