MUNIYIELD
NEW YORK
INSURED
FUND III, INC.
FUND LOGO
Annual Report
October 31, 1995
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.
<PAGE>
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 year ended October 31, 1995, the Common Stock of MuniYield
New York Insured Fund III, Inc. earned $0.751 per share income
dividends, which included earned and unpaid dividends of $0.067.
This represents a net annualized yield of 5.26%, based on a month-
end net asset value of $14.27 per share. Over the same period, the
total investment return on the Fund's Common Stock was +18.44%,
based on a change in per share net asset value from $12.82 to
$14.27, and assuming reinvestment of $0.751 per share income
dividends.
<PAGE>
For the six-month period ended October 31, 1995, the total
investment return on the Fund's Common Stock was +8.56%, based on a
change in per share net asset value from $13.55 to $14.27, and
assuming reinvestment of $0.375 per share income dividends.
For the six-month period ended October 31, 1995, the Fund's Auction
Market Preferred Stock had an average yield of 3.48%.
The Environment
After losing momentum through the second calendar quarter of 1995,
it now appears that the US economic expansion has resumed. Gross
domestic product growth for the three months ended September 30 was
reported to be 4.2%, higher than generally expected. September
durable goods orders increased a surprisingly strong 3%, and
existing home sales rose to a near-record level. At the same time,
there is evidence that inflationary pressures remain subdued.
Reflecting the trend of renewed economic growth--and continued good
news on the inflation front--the Federal Reserve Board signaled no
near-term shift in monetary policy following its September meeting.
Thus, official interest rates may not be reduced further in the
immediate future.
Another significant development has been the strengthening of the US
dollar relative to the yen and the Deutschemark. Improving interest
rate differentials favoring the US currency, combined with
coordinated central bank intervention and more positive investor
sentiment, have helped to bolster the dollar in foreign exchange
markets. Other factors that appear to be improving the US dollar's
outlook in the near term are a pick-up in capital flows to the
United States and the prospect of increased capital outflows from
Japan. However, it remains to be seen if the US dollar's
strengthening trend can continue without significant improvements in
the US budget and trade deficits.
In the weeks ahead, investor interest will continue to focus on US
economic activity. Clear signs of a moderate, noninflationary
expansion could further benefit the US stock and bond markets. In
addition, should the current Federal budget deficit reduction
efforts now underway in Washington prove successful, the
implications would likely be positive for the US financial markets.
<PAGE>
The Municipal Market
Tax-exempt bond yields continued to decline during the six-month
period ended October 31, 1995. As measured by the Bond Buyer
Revenue Bond Index, the yield on uninsured, long-term municipal
revenue bonds fell 30 basis points (0.30%) to end the October period
at approximately 6%. While tax-exempt bond yields have declined
dramatically from their highs one year ago, municipal bond yields
have exhibited considerable yield volatility on a weekly basis. In
recent months, tax-exempt bond yields have fluctuated by as much as
20 basis points on a week-to-week basis. US Treasury bond yields
have displayed similar volatility, but the extent of their decline
has been greater. By the end of October, long-term US Treasury bond
yields had declined almost 100 basis points to 6.33%. Proposed
Federal tax restructuring continued to weigh heavily on the tax-
exempt bond market. Thus far in 1995, US Treasury bond yields have
declined approximately 150 basis points. Municipal bond yields have
fallen approximately 95 basis points as the uncertainty surrounding
any changes to the existing Federal income tax structure has
prevented the municipal bond market from rallying as strongly as its
taxable counterpart.
A general view of a moderately expanding domestic economy, supported
by a very favorable inflationary environment, allowed interest rates
to significantly decline from their recent highs in November 1994.
However, this decline was not a smooth downward curve. Conflicting
economic indicators were released during recent months that have
prevented a clear consensus regarding the near-term direction of
interest rates from being reached. The resultant uncertainty has
promoted more of a saw-toothed pattern as interest rate declines
were repeatedly interrupted by indications of stronger-than-expected
economic growth. As these concerns were overcome by subsequent
weaker economic releases, interest rate declines have resumed. These
periods of volatility are likely to continue for the remainder of
1995, or until proposed Federal budget deficit reduction packages
are resolved and any resultant responses by the Federal Reserve
Board have occurred.
However, the municipal bond market's technical position remained
supportive throughout recent quarters. Approximately $82 billion in
long-term municipal securities were issued during the six months
ended October 31, 1995. While this issuance is virtually identical
to underwritings during the October 31, 1994 quarter, tax-exempt
bond issuance over the last 12 months remained approximately 25%
below comparable 1994 levels. The municipal bond market should
maintain this positive technical position well into 1996. Annual
issuance for 1995 is now projected to be approximately $140 billion,
significantly less than last year's already low level of $162
billion. Projected maturities and early redemptions for the
remainder of 1995 and throughout 1996 will lead to a continued
decline in the total outstanding municipal bond supply throughout
1996 and, perhaps, into 1998 should new bond issuance remain at
historically low levels.
<PAGE>
Despite the municipal bond market's relative underperformance
compared to the US Treasury market thus far in 1995, the extent of
the tax-exempt bond market's rally was nonetheless quite impressive.
Municipal bond yields have fallen 135 basis points from their highs
reached in November 1994 and municipal bond prices rose accordingly.
Most tax-exempt products recouped almost all of the losses incurred
in 1994 and are well on their way to posting double-digit total
returns for all of 1995. This relative underperformance so far in
1995 provided long-term investors with the rare opportunity to
purchase tax-exempt securities at yield levels near those of taxable
securities.
Additionally, many of the factors that led to the relative
underperformance of the tax-exempt bond market thus far in 1995,
namely investor concern regarding Federal budget deficit reductions
and proposed changes in the Federal income tax structure, are
nearing resolution. The Federal budget reconciliation process has
already begun, and may be essentially completed by year-end. Recent
public opinion polls suggest that the majority of American taxpayers
prefer the existing Federal income tax system compared to proposed
changes, such as the flat tax or national sales tax. In an upcoming
election year, neither party is likely to advocate a clearly
unpopular position, particularly one that can be expected to
negatively impact the Federal budget deficit reduction program
through reduced tax revenues. As these factors are resolved, we
believe that much of the resistance that the municipal bond market
met this year should dissipate. This should allow municipal bond
yields to significantly decline from current levels in order to
return to more normal historic yield relationships.
Portfolio Strategy
As interest rates continued to move lower at the beginning of May,
our strategy of adding lower-coupon, longer-maturity issues to the
portfolio continued to enhance the Fund's net asset value. Economic
releases during the second quarter of 1995 confirmed our belief that
the economy was indeed slowing and the potential of an ease in
interest rates by the Federal Reserve Board was a real possibility.
In July, the Federal Reserve Board cut the Federal Fund's target
rate by 25 basis points. While the cut was not significant in size,
it did indicate the probable end to any further interest rate
increases which had taken a severe toll on the performance of the
credit markets during the preceding 12 months.
The economic soft landing that investors hoped for came into
question during the third quarter of this year as the economy
produced stronger-than-expected results. This caused a temporary
rise in yields as investors feared renewed inflationary pressure
along with renewed growth.
<PAGE>
The bounce back in economic growth seems to be waning as we move
into the fourth quarter of 1995. Consumers have curtailed their
spending and continue to be extremely price conscious in the
purchase of goods, which has produced the lowest level of inflation
in many years. As a result, we are anticipating a continued decline
in interest rates during the remainder of 1995.
While New York experienced a record delay in approving a budget
agreeable to the legislature and the Governor, the surge of issuance
expected by the delay was well received by investors. The main
reason for the more orderly disbursement of the financings was a
result of the close attention the new administration spent in
reviewing the financing needs of the various authorities. This
renewed fiscal responsibility helped the perception of New York
issues in the marketplace and aided their relative value.
Prior to the budget resolution, issuance in New York was well below
1994 levels. The third quarter of this year saw volume increase by
30% over 1994 but on a year-over-year basis, issuance was 25% behind
declines on a national level.
In Conclusion
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 ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
<PAGE>
(James C. Cahill)
James C. Cahill
Portfolio Manager
November 30, 1995
We are pleased to announce that James C. Cahill is responsible for
the day-to day management of MuniYield New York Insured Fund III,
Inc. Mr. Cahill has been employed by Merrill Lynch Asset Management,
L.P. (an affiliate of the Fund's investment adviser) since 1994 as
Vice President and Portfolio Manager. Prior thereto, he was employed
by the Prudential Insurance Company.
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended October 31, 1995, MuniYield New
York Insured Fund III, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on May 12, 1995. The description of each
proposal and number of shares voted are as follows:
Shares Shares Voted
Voted For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Edward H. Meyer 3,431,108 151,245
Jack B. Sunderland 3,433,471 148,882
J. Thomas Touchton 3,432,669 149,684
Arthur Zeikel 3,433,471 148,882
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
2. To select Ernst & Young LLP as the Fund's
independent auditors for the current fiscal year. 3,427,864 13,623 140,866
<CAPTION>
During the six-month period ended October 31, 1995, MuniYield New
York Insured Fund III, Inc. Preferred Stock shareholders voted on
the following proposals. The proposals were approved at a special
shareholders' meeting on May 12, 1995. The description of each
proposal and number of shares voted are as follows:
<PAGE>
Shares Shares Voted
Voted For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Donald Cecil 998 2
M. Colyer Crum 996 2
Edward H. Meyer 996 2
Jack B. Sunderland 996 2
J. Thomas Touchton 996 2
Arthur Zeikel 996 2
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
2. To select Ernst & Young LLP as the Fund's
independent auditors for the current fiscal year. 996 2 0
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. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
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 or eliminated completely. 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.
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 many of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New York--99.2%
<S> <S> <C> <S> <C>
AAA Aaa $1,250 Buffalo and Fort Erie, New York, Public Bridge Authority, Toll Bridge System
Revenue Bonds, 5.75% due 1/01/2025 (d) $ 1,253
AAA Aaa 2,070 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue
Bonds, Series A, 6.375% due 7/01/2018 (d) 2,194
AAA Aaa 5,650 Metropolitan Transportation Authority, New York, Transportation Facilities
Revenue Bonds, Series J, 6.375% due 7/01/2010 (c) 6,073
AAA Aaa 2,000 Monroe County, New York, Public Improvement, GO, UT, 6.15% due 6/01/2018 (b) 2,097
AAA Aaa 1,005 Mount Sinai, New York, Union Free School District, Refunding, GO, UT,
6.20% due 2/15/2019 (b) 1,094
AAA Aaa 2,500 New York City, New York, IDA, Civic Facilities Revenue Bonds (USTA National
Tennis Center Project), 6.375% due 11/15/2014 (g) 2,647
A1+ NR* 400 New York City, New York, IDA, IDR (Japan Airlines Company Ltd. Project), VRDN,
AMT, 4.10% due 11/01/2015 (a) 400
AAA Aaa 2,500 New York City, New York, Municipal Water Finance Authority, Water and Sewer
System Revenue Bonds, Series B, 5.50% due 6/15/2019 (d) 2,448
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 1,000 (City University), Second Generation, Series A, 5.75% due 7/01/2018 (e) 1,011
AAA Aaa 4,250 (City University), Third Generation Reserves, Series 2, 6.875% due 7/01/2014 (d) 4,698
BBB+ Baa1 1,000 Refunding (State University Educational Facilities), Series A, 6% due 5/15/2025 988
AAA Aaa 3,000 (Saint Vincent's Hospital and Medical Center), 5.80% due 8/01/2025 (b)(f) 2,987
BBB- Baa1 2,000 (Upstate Community Colleges), Series A, 6.25% due 7/01/2025 2,014
AAA Aaa 2,500 New York State Energy, Research and Development Authority, Facilities Revenue
Bonds (Con Edison Company Inc.), AMT, Series A, 6.75% due 1/15/2027 (d) 2,622
AAA Aaa 2,000 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) 2,134
</TABLE>
<PAGE>
<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>
New York State Energy, Research and Development Authority, PCR, VRDN (a):
A1+ NR* $ 900 (Niagara Mohawk Power Corporation Project), Series A, 3.85% due 7/01/2015 $ 900
A1+ VMIG1++ 1,100 Refunding (New York State Electric and Gas Company), Series C, 3.60% due 6/01/2029 1,100
AAA Aaa 2,500 New York State HFA, M/F Housing Secured Mortgage Revenue Bonds, AMT, Series A,
6.30% due 8/15/2026 (b) 2,550
BBB Baa1 2,500 New York State HFA, Service Contract Obligation Revenue Bonds, Series A, 5.50%
due 9/15/2022 2,300
New York State Medical Care Facilities, Finance Agency Revenue Bonds:
AAA Aaa 1,000 (Long-Term Health Care), Series A, 6.80% due 11/01/2014 (e) 1,087
AAA Aaa 1,865 (Long-Term Health Care), Series B, 6.45% due 11/01/2014 (e) 1,961
AAA Aaa 3,000 (Mental Health), Series E, 6.50% due 8/15/2015 (e) 3,199
AAA Aaa 2,000 (Mental Health), Series F, 6.50% due 8/15/2012 (e) 2,122
AAA Aaa 1,500 (Mental Health Services Facilities), Series E, 6.25% due 8/15/2019 (e) 1,538
AAA Aaa 6,000 (Montefiore Medical Center), Series A, 5.75% due 2/15/2025 (b)(f) 5,924
AAA Aaa 2,000 (New York Hospital Mortgage), Series A, 6.80% due 8/15/2024 (b)(f) 2,183
AAA Aaa 1,250 (New York Hospital Mortgage), Series A, 6.50% due 8/15/2029 (b)(f) 1,330
AAA Aaa 3,000 New York State Thruway Authority, General Revenue Bonds (Highway and Bridge Trust
Fund), UT, Series B, 6.25% due 4/01/2012 (c) 3,172
New York State Urban Development Corporation Revenue Bonds:
AAA Aaa 3,000 (Correctional Facilities), Series 5, 5.50% due 1/01/2025 (d) 2,927
BBB Baa1 3,000 Refunding (Correctional Facilities), 5.50% due 1/01/2015 2,804
BBB Baa1 2,000 Refunding (Onondaga County Convention Project), 6.25% due 1/01/2020 2,013
AA- A1 3,000 Port Authority of New York and New Jersey, Consolidated Revenue Bonds, 72nd Series,
7.35% due 10/01/2027 3,435
Triborough Bridge and Tunnel Authority, New York, Special Obligation Revenue Bonds:
AAA Aaa 1,500 Refunding, Series A, 6.625% due 1/01/2017 (d) 1,617
A1+ VMIG1++ 200 VRDN, 3.70% due 1/01/2024 (a)(c) 200
Total Investments (Cost--$73,225)--99.2% 77,022
Other Assets Less Liabilities--0.8% 632
-------
Net Assets--100.0% $77,654
=======
<PAGE>
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1995.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)CGIC Insured.
(f)FHA Insured.
(g)FSA Insured.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
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, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$73,225,476) (Note 1a) $ 77,022,092
Cash 81,224
Interest receivable 1,196,612
Deferred organization expenses (Note 1e) 15,279
Prepaid expenses and other assets 4,205
------------
Total assets 78,319,412
------------
Liabilities: Payables:
Securities purchased $ 479,583
Dividends to shareholders (Note 1f) 97,010
Investment adviser (Note 2) 33,886 610,479
------------
Accrued expenses and other liabilities 55,261
------------
Total liabilities 665,740
------------
Net Assets: Net assets $ 77,653,672
============
<PAGE>
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (1,000 shares of
AMPS* issued and outstanding at $25,000 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 314,421
Accumulated realized capital losses on investments--net (Note 5) (2,967,663)
Unrealized appreciation on investments--net 3,796,616
------------
Total--Equivalent to $14.27 net asset value per share of
Common Stock (market price--$12.375) 52,653,672
------------
Total capital $ 77,653,672
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,416,520
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 374,464
Professional fees 78,090
Commission fees (Note 4) 64,916
Transfer agent fees 40,338
Printing and shareholder reports 35,404
Accounting services (Note 2) 32,737
Directors' fees and expenses 21,468
Listing fees 16,902
Amortization of organization expenses (Note 1e) 7,338
Custodian fees 5,343
Pricing fees 4,736
Other 9,329
------------
Total expenses 691,065
------------
Investment income--net 3,725,455
------------
<PAGE>
Realized & Realized loss on investments--net (1,996,988)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 7,339,389
(Loss) on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 9,067,856
- --Net (Notes 1b, ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 3,725,455 $ 3,802,637
Realized loss on investments--net (1,996,988) (970,676)
Change in unrealized appreciation/depreciation on
investments--net 7,339,389 (8,602,309)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 9,067,856 (5,770,348)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (2,771,523) (3,157,490)
Shareholders Preferred Stock (944,040) (624,540)
(Note 1f): 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 (3,715,563) (4,100,991)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders in
Transactions reinvestment of dividends and distributions -- 197,662
(Notes 1e & 4): Offering costs resulting from the issuance of Preferred Stock -- (29,641)
------------ ------------
Net increase in net assets derived from capital stock
transactions -- 168,021
------------ ------------
<PAGE>
Net Assets: Total increase (decrease) in net assets 5,352,293 (9,703,318)
Beginning of year 72,301,379 82,004,697
------------ ------------
End of year* $ 77,653,672 $ 72,301,379
============ ============
<FN>
*Undistributed investment income--net $ 314,421 $ 304,529
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived Nov. 27,
from information provided in the financial statements. For the Year Ended 1992++ to
October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.82 $ 15.51 $ 14.18
Operating -------- -------- --------
Performance: Investment income--net 1.02 1.03 .85
Realized and unrealized gain (loss) on
investments--net 1.44 (2.59) 1.45
-------- -------- --------
Total from investment operations 2.46 (1.56) 2.30
-------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.75) (.86) (.68)
Realized gain on investments--net -- (.08) --
-------- -------- --------
Total dividends and distributions to Common Stock
shareholders (.75) (.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 (.26) (.17) (.09)
Realized gain on investments--net -- (.01) --
Capital charge resulting from issuance of
Preferred Stock -- (.01) (.15)
-------- -------- --------
Total effect of Preferred Stock activity (.26) (.19) (.24)
-------- -------- --------
Net asset value, end of period $ 14.27 $ 12.82 $ 15.51
======== ======== ========
Market price per share, end of period $ 12.375 $ 10.625 $ 15.00
======== ======== ========
<PAGE>
Total Investment Based on market price per share 23.93% (24.11%) 4.69%+++
Return:** ======== ======== ========
Based on net asset value per share 18.44% (11.44%) 14.51%+++
======== ======== ========
Ratios to Average Expenses, net of reimbursement .92% .88% .55%*
Net Assets:*** ======== ======== ========
Expenses .92% .88% .87%*
======== ======== ========
Investment income--net 4.98% 4.88% 4.86%*
======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $ 52,654 $ 47,301 $ 57,005
======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $ 25,000 $ 25,000 $ 25,000
======== ======== ========
Portfolio turnover 176.98% 65.22% 11.06%
======== ======== ========
Dividends Per Investment income--net $ 944 $ 625 $ 325
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.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
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.
(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 and options thereon, 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, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the
general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
<PAGE>
* 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.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(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.
(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.
<PAGE>
(f) 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"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
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, 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, 1995 were $125,994,076 and
$121,287,588, respectively.
Net realized and unrealized gains (losses) as of October 31,1995
were as follows:
Realized Unrealized
Losses Gains
Long-term investments $(1,440,405) $ 3,796,616
Short-term investments (645) --
Financial futures contracts (555,938) --
----------- -----------
Total $(1,996,988) $ 3,796,616
=========== ===========
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $3,796,616, of which $3,798,974
related to appreciated securities and $2,358 related to depreciated
securities. The aggregate cost of investments at October 31, 1995
for Federal income tax purposes was $73,225,476.
<PAGE>
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, 1995, shares issued and outstanding
remained constant at 3,688,900. As of October 31, 1995, 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 that may vary for the successive
dividend periods. The yield in effect at October 31, 1995 was
3.745%.
A two-for-one stock split occurred on December 1, 1994. As a result,
as of October 31, 1995, there were 1,000 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends of $51,300.
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, 1995, MLPF&S, an affiliate of FAM, earned $50,359 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1995, the Fund had a capital loss carryforward of
approximately $2,576,000, of which $971,000 expires in 2002 and
$1,605,000 expires in 2003. This amount will be available to offset
like amounts of any future taxable gains.
6. Subsequent Event:
On November 13, 1995, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $0.066621 per share, payable on November 29, 1995 to shareholders
of record as of November 24, 1995.
<AUDIT-REPORT>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
MuniYield New York Insured Fund III, Inc.
<PAGE>
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, 1995, and the related
statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then
ended and financial highlights for each of the periods indicated
therein. 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, 1995 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.
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, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in
the period then ended and financial highlights for each of the
indicated periods, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Princeton, New Jersey
December 4, 1995
</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, 1995 qualify as tax-exempt interest dividends for
Federal income tax purposes. Additionally, there were no capital
gains distributed by the Fund during the year.
<PAGE>
Please retain this information for your records.
PER SHARE INFORMATION (UNAUDITED)
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Dividends/Distributions
Net Realized Unrealized
Investment Gains Gains Net Investment Income Capital Gains
For the Quarter Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
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 -- --
November 1, 1994 to January 31, 1995 .25 (.74) 1.09 .19 .08 -- --
February 1, 1995 to April 30, 1995 .25 (.02) .42 .19 .06 -- --
May 1, 1995 to July 31, 1995 .26 .23 (.01) .18 .06 -- --
August 1, 1995 to October 31, 1995 .26 (.02) .49 .19 .06 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
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 12.50 244
August 1, 1994 to October 31, 1994 13.96 12.82 13.125 10.625 366
November 1, 1994 to January 31, 1995 13.15 11.87 11.75 9.875 900
February 1, 1995 to April 30, 1995 13.98 13.15 12.125 11.75 246
May 1, 1995 to July 31, 1995 14.52 13.55 12.50 11.625 227
August 1, 1995 to October 31, 1995 14.35 13.56 13.00 11.75 248
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
<PAGE>
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
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
