UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-10521
Name of Fund: Corporate High Yield Fund V, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Corporate High
Yield Fund V, Inc., 800 Scudders Mill Road, Plainsboro, NJ, 08536.
Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 08/31/03
Date of reporting period: 09/01/02 - 2/28/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
February 28, 2003
Corporate
High Yield
Fund V, Inc.
www.mlim.ml.com
CORPORATE HIGH YIELD FUND V, INC.
The Benefits and
Risks of
Leveraging
Corporate High Yield Fund V, Inc. utilizes leveraging through borrowings or
issuance of short-term debt securities or shares of Preferred Stock. The concept
of leveraging is based on the premise that the cost of assets to be obtained
from leverage will be based on short-term interest rates, which normally will be
lower than the return earned by the Fund on its longer-term portfolio
investments. Since the total assets of the Fund (including the assets obtained
from leverage) are invested in higher-yielding portfolio investments, the Fund's
Common Stock shareholders are the beneficiaries of the incremental yield.
Leverage creates risks for holders of Common Stock including the likelihood of
greater net asset value and market price volatility. In addition, there is the
risk that fluctuations in interest rates on borrowings (or in the dividend rates
on any Preferred Stock, if the Fund were to issue Preferred Stock) may reduce
the Common Stock's yield and negatively impact its market price. If the income
derived from securities purchased with assets received from leverage exceeds the
cost of leverage, the Fund's net income will be greater than if leverage had not
been used. Conversely, if the income from the securities purchased is not
sufficient to cover the cost of leverage, the Fund's net income will be less
than if leverage had not been used, and therefore the amount available for
distribution to Common Stock shareholders will be reduced. In this case, the
Fund may nevertheless decide to maintain its leveraged position in order to
avoid capital losses on securities purchased with leverage. However, the Fund
will not generally utilize leverage if it anticipates that its leveraged capital
structure would result in a lower rate of return for its Common Stock than would
be obtained if the Common Stock were unleveraged for any significant amount of
time.
Corporate High Yield Fund V, Inc., February 28, 2003
DEAR SHAREHOLDER
The High Yield Market Overview
The high yield market rebounded sharply during the six-month period ended
February 28, 2003, gaining 9.05% as measured by the unmanaged Credit Suisse
First Boston (CSFB) High Yield Index. By contrast, the same period was a
difficult one for equity markets, with the unmanaged Standard & Poor's (S&P) 500
Index falling 7.29%. The high yield market in general reflected strengthening
fundamentals, including a stabilizing economy and improving corporate earnings.
In addition, the high yield market benefited from the fact that investors began
searching for yield as well as an alternative to equity markets. High yield
securities appeared reasonably valued with an 884 basis point (8.84%) yield
spread over 10-year U.S. Treasury notes at February 28, 2003, down from the
historically wide levels reached in October 2002. While we view the market with
caution given current geopolitical and economic uncertainty, we note that
optimistic signs have emerged in the high yield marketplace, with earnings
stabilizing and default rates trending lower. These positive factors may yet be
overwhelmed by adverse events, but illustrate the potential for value available
in the high yield market that we believe will be realized in the longer term.
Fund Performance
For the six months ended February 28, 2003, the Common Stock of Corporate High
Yield Fund V, Inc. had a net annualized yield of 12.80%, based on a period-end
per share net asset value of $13.18 and $.838 per share income dividends. Over
the same period, the total investment return on the Fund's Common Stock was
+12.29%, based on a change in per share net asset value from $12.54 to $13.18,
and assuming reinvestment of $.837 per share ordinary income dividends. The Fund
outperformed the +11.00% Lipper average for closed-end leveraged high yield
funds for the six months ended February 28, 2003. The Fund benefited during this
period from both leverage and security selection.
For a description of the Fund's total investment return based on a change in the
per share market value (as measured by the trading price of the Fund's shares on
the New York Stock Exchange), and assuming reinvestment of dividends, please
refer to the Financial Highlights section of the Financial Statements included
in this report. As a closed end fund, the Fund's shares may trade in the
secondary market at a premium or discount to the Fund's net asset value. As a
result, total investment returns based on changes in the Fund's market value can
vary significantly from total investment return based on changes in the Fund's
net asset value.
A significant factor contributing to the Fund's performance for the past six
months was our overweight position in the wireless telecommunications industry.
The Fund benefited from our selection in the group, with names such as Nextel
Communications, Nextel Partners Inc., Nextel International Inc., Millicom
International Cellular and American Tower performing well. The contribution of
the utilities sector was mixed, based on individual company circumstances. For
example, Williams Companies Inc. and The AES Corporation had strong results as
financing eased liquidity concerns, while Mission Energy Holdings and Mirant
Americas Generation Inc. suffered from ongoing concerns about their future
operations and financial flexibility. We continue to hold the latter two names
because we believe that both have adequate asset protection at current market
levels and the ability to weather weak markets for at least another year.
Individual names that bolstered performance included Yell Finance BV, an
independent yellow pages publisher in the diversified media category that
benefited from market recognition of the industry's solid growth prospects and
non-cyclical operations, and Primedia, Inc., which surprised the market with
steadily improving operations and de-leveraging through asset sales.
Leverage Strategy
The Fund was on average 22% leveraged during the six-month period ended February
28, 2003. Thus, the Fund borrowed the equivalent of 22% of total assets
invested, earning incremental yield on the investments we made with the borrowed
funds. At February 28, 2003, the Fund was 21.8% leveraged, having borrowed $68.9
million at a borrowing cost of 1.28%. While leverage hurts total return in a
weak market, the converse is also true. We believe that attempting to time the
market is generally not successful. Therefore, we intend to have a leverage
position in the 25% range, though that level may vary somewhat as we adjust
portfolio holdings.
Investment Strategy
We have a bottom-up, value-oriented approach to the market that is tempered by a
desire to mitigate risk within the portfolio. We continually monitor the
portfolio, disposing of those companies that we do not believe have a good
risk/reward profile. Generally, we like to invest in a core of solid credits
that we believe will weather the vicissitudes of the high yield market, then add
in areas where the marketplace offers unusually attractive value. Core positions
would ideally include better-rated names or companies in stable industries.
We are approaching the current geopolitical uncertainty in the market with
caution, but believe that wholesale changes in the composition of the portfolio
are neither prudent nor practical in the high yield market. Therefore, we are
making modest changes at the margin. We have pared down outsized, higher risk
positions, solidifying positions in more stable names, while at the same time
adding to positions in downtrodden sectors and names that we believe have upside
potential. In the current market, we believe notable value opportunities include
utilities and independent power producers, refining and portions of the
telecommunications sector where there is real business and cash flow. We view
packaging, paper, health care and consumer products as safe havens. These
represent sectors of stability and/or solid financials and asset values. We are
significantly overweight in the energy -- other area, primarily through
positions in the refining sub-sector of the CSFB High Yield Index, where we find
the near-term fundamentals attractive, and U.S. cable, where we have positions
in a number of traditional cable systems, as well as in companies with satellite
television service. Our overweight position in this sector is based on solid
operations and moderate financial risk. We also have overweight positions in the
gaming, utilities, wireless and diversified media industries.
In Conclusion
We thank you for your investment in Corporate High Yield Fund V, Inc., and we
look forward to assisting you with your financial needs in the months and years
ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Elizabeth M. Phillips
Elizabeth M. Phillips
Vice President and Portfolio Manager
/s/ B. Daniel Evans
B. Daniel Evans
Vice President and Portfolio Manager
March 24, 2003
2 & 3
Corporate High Yield Fund V, Inc., February 28, 2003
PROXY RESULTS
During the six-month period ended February 28, 2003, Corporate High Yield Fund
V, Inc.'s shareholders voted on the following proposals. Proposal 1 was approved
at a shareholders' meeting on February 14, 2003. Proposal 2 was adjourned until
March 14, 2003 and was subsequently further adjourned until April 10, 2003, at
which time it passed. A description of each proposal and number of shares voted
are as follows:
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ----------------------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Directors: Terry K. Glenn, James H. Bodurtha,
Joe Grills, Herbert I. London, Andre F. Perold, Roberta Cooper Ramo,
Robert S. Salomon, Jr. and Stephen B. Swensrud 18,077,150 369,270
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted Broker
For Against Abstain Non-Vote
- ----------------------------------------------------------------------------------------------------------------------------------
2. To approve a plan of reorganization between the Fund and Corporate
High Yield Fund IV, Inc. 9,694,345 228,473 258,570 8,186,979
- ----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in U.S. dollars)
S&P Moody's Face
INDUSTRIES Ratings Ratings Amount Corporate Bonds Value
====================================================================================================================================
Aerospace & CCC+ Caa2 $ 800,000 Hexcel Corporation, 9.75% due 1/15/2009 $ 680,000
Defense--1.3% B B3 350,000 K & F Industries, 9.625% due 12/15/2010 361,375
B- B3 2,000,000 Transdigm Inc., 10.375% due 12/01/2008 2,090,000
----------
3,131,375
====================================================================================================================================
Airlines--1.4% BB+ B1 3,000,000 American Airlines, 7.80% due 10/01/2006 1,857,416
BB+ Ba2 950,922 Continental Airlines Inc., 7.033% due 6/15/2011 571,751
D Ca 5,000,000 USAir Inc., 10.375% due 3/01/2013 (a) 1,100,000
----------
3,529,167
====================================================================================================================================
Automotive--1.4% BB+ Ba2 1,525,000 AutoNation Inc., 9% due 8/01/2008 1,586,000
B B3 575,000 Metaldyne Corporation, 11% due 6/15/2012 454,250
B B3 1,425,000 United Auto Group, Inc., 9.625% due 3/15/2012 1,371,563
----------
3,411,813
====================================================================================================================================
Broadcasting--3.6% CCC+ B3 2,475,000 Acme Television/Finance, 10.875% due 9/30/2004 2,530,688
B- B2 550,000 Emmis Communications Corporation, 8.125% due 3/15/2009 569,250
B B3 3,900,000 LIN Holdings Corporation, 17.576%** due 3/01/2008 4,095,000
B- B3 1,300,000 Nextmedia Operating Inc., 10.75% due 7/01/2011 1,397,500
B- B3 450,000 Salem Communications Holding Corporation, 9% due 7/01/2011 477,000
----------
9,069,438
====================================================================================================================================
Cable-- C Caa2 4,425,000 Comcast UK Cable Partners Ltd., 11.20% due 11/15/2007 3,252,375
International--1.3%
====================================================================================================================================
Cable--U.S.--8.7% CSC Holdings Inc.:
BB- B1 2,000,000 7.625% due 4/01/2011 1,970,000
BB- B1 3,000,000 7.875% due 2/15/2018 2,820,000
Charter Communications Holdings:
CCC- Ca 3,150,000 8.625% due 4/01/2009 1,512,000
CCC- Ca 1,850,000 10.75% due 10/01/2009 874,125
B B3 550,000 Coaxial Communications Inc., 10% due 8/15/2006 517,000
B B1 1,900,000 DirecTV Holdings, 8.375% due 3/15/2013 (b) 2,004,500
EchoStar DBS Corporation:
B+ B1 2,300,000 9.125% due 1/15/2009 2,461,000
B+ B1 1,200,000 9.375% due 2/01/2009 1,278,000
B- Caa1 3,475,000 Insight Communications, 12.401%** due 2/15/2011 2,258,750
B+ B2 1,025,000 Insight Midwest, LP, 9.75% due 10/01/2009 (b) 999,375
B+ B2 1,550,000 Mediacom Broadband LLC, 11% due 7/15/2013 1,643,000
NR* NR* 2,100,000 Olympus Communications LP/Capital Corp., 10.625% due 11/15/2006 (a) 1,743,000
B- Ba3 1,650,000 Panamsat Corporation, 8.50% due 2/01/2012 1,621,125
----------
21,701,875
====================================================================================================================================
4 & 5
Corporate High Yield Fund V, Inc., February 28, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
S&P Moody's Face
INDUSTRIES Ratings Ratings Amount Corporate Bonds Value
====================================================================================================================================
Chemicals--6.3% B- Caa1 $2,750,000 Huntsman ICI Chemicals, 10.125% due 7/01/2009 $ 2,330,625
B- Caa2 4,000,000 Huntsman ICI Holdings, 19.455%** due 12/31/2009 920,000
B+ Ba3 1,450,000 IMC Global Inc., 7.625% due 11/01/2005 1,392,000
B+ B2 4,500,000 ISP Holdings, Inc., 10.625% due 12/15/2009 4,297,500
BB- Ba3 2,000,000 MacDermid, Inc., 9.125% due 7/15/2011 2,160,000
BBB- Ba1 1,500,000 Millennium America Inc., 9.25% due 6/15/2008 1,582,500
NR* NR* 72,861 Pioneer Companies, Inc., 4.90% due 12/31/2006 (d) 53,917
B Caa3 3,350,000 Terra Industries, 10.50% due 6/15/2005 2,897,750
-----------
15,634,292
====================================================================================================================================
Consumer Products-- BB+ Ba3 3,100,000 American Greetings, 11.75% due 7/15/2008 3,448,750
4.2% B- B2 1,000,000 Chattem, Inc., 8.875% due 4/01/2008 1,030,000
B- B2 350,000 Remington Arms Company, 10.50% due 2/01/2011 (b) 368,375
CCC Caa2 4,000,000 Samsonite Corporation, 10.75% due 6/15/2008 3,410,000
B B2 2,000,000 Simmons Company, 10.25% due 3/15/2009 2,145,000
-----------
10,402,125
====================================================================================================================================
Diversified Media-- B B2 485,000 Dex Media East LLC, 9.875% due 11/15/2009 (b) 523,800
6.5% Houghton Mifflin Company (b):
B B2 1,125,000 8.25% due 2/01/2011 1,170,000
B B3 425,000 9.875% due 2/01/2013 446,250
B B3 4,750,000 Primedia, Inc., 8.875% due 5/15/2011 4,536,250
R.H. Donnelley Financial Corporation I (b):
B+ B1 225,000 8.875% due 12/15/2010 242,438
B+ B2 650,000 10.875% due 12/15/2012 719,875
World Color Press Inc.:
BBB Baa2 2,500,000 8.375% due 11/15/2008 2,648,623
BBB Baa2 2,500,000 7.75% due 2/15/2009 2,579,085
B B2 4,250,000 Yell Finance BV, 11.707%** due 8/01/2011 3,187,500
-----------
16,053,821
====================================================================================================================================
Energy--Exploration B- B2 1,400,000 Baytex Energy Limited, 10.50% due 2/15/2011 1,491,000
& Production--4.4% B B2 775,000 Plains E&P Company, 8.75% due 7/01/2012 807,938
B+ B2 4,000,000 Stone Energy Corporation, 8.25% due 12/15/2011 4,150,000
BB- Ba3 1,175,000 Vintage Petroleum, 8.25% due 5/01/2012 1,239,625
B+ Ba3 3,000,000 Westport Resources Corporation, 8.25% due 11/01/2011 3,157,500
-----------
10,846,063
====================================================================================================================================
Energy--Other--7.5% BB- Ba3 1,500,000 BRL Universal Equipment, 8.875% due 2/15/2008 1,582,500
B+ Ba3 1,875,000 Citgo Petroleum Corporation, 11.375% due 2/01/2011 (b) 1,884,375
B B2 725,000 Dresser Inc., 9.375% due 4/15/2011 708,687
El Paso Energy Partners:
BB- B1 1,300,000 8.50% due 6/01/2011 1,254,500
BB- B1 300,000 8.50% due 6/01/2011 (b) 289,500
B B2 2,025,000 Ferrellgas Partners LP, 8.75% due 6/15/2012 2,116,125
B- B3 1,325,000 Giant Industries, Inc., 9% due 9/01/2007 1,099,750
B+ B2 1,850,000 Hanover Equipment, Trust B, 8.75% due 9/01/2011 (b) 1,752,875
CCC B3 1,750,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 1,522,500
BB Ba3 724,500 Port Arthur Finance Corporation, 12.50% due 1/15/2009 811,440
B+ B1 425,000 Southern Natural Gas, 8.875% due 3/15/2010 (b) 419,552
B B3 2,250,000 Star Gas Partners, LP, 10.25% due 2/15/2013 (b) 2,210,625
B B3 2,250,000 Tesoro Petroleum Corp., 9% due 7/01/2008 1,867,500
B B2 1,325,000 Trico Marine Services, 8.875% due 5/15/2012 1,205,750
-----------
18,725,679
====================================================================================================================================
Food/Tobacco--4.8% B B3 700,000 American Seafood Group LLC, 10.125% due 4/15/2010 738,500
B+ Ba3 2,750,000 Constellation Brands Inc., 8.125% due 1/15/2012 2,811,875
B+ B2 3,000,000 Cott Beverages Inc., 8% due 12/15/2011 3,157,500
B B2 1,200,000 Del Monte Corporation, 8.625% due 12/15/2012 (b) 1,230,000
CCC- Caa3 1,650,000 New World Pasta Company, 9.25% due 2/15/2009 495,000
BB+ Ba2 2,075,000 Smithfield Foods Inc., 8% due 10/15/2009 2,090,563
BB Ba1 1,250,000 Yum! Brands Inc., 7.70% due 7/01/2012 1,312,500
-----------
11,835,938
====================================================================================================================================
Foods--0.5% B- B2 1,200,000 Doane Pet Care Company, 10.75% due 3/01/2010 (b) 1,212,000
====================================================================================================================================
Gaming--6.7% B+ B1 3,000,000 Boyd Gaming Corporation, 8.75% due 4/15/2012 3,112,500
B B2 2,000,000 Isle of Capri Casinos, 9% due 3/15/2012 2,035,000
BB+ Ba2 1,500,000 MGM Grand Inc., 9.75% due 6/01/2007 1,610,625
Park Place Entertainment:
BB+ Ba2 500,000 8.875% due 9/15/2008 518,750
BB+ Ba2 2,500,000 7.875% due 3/15/2010 2,487,500
B B2 1,500,000 Resorts International Hotel/Casino, 11.50% due 3/15/2009 1,297,500
B+ B2 1,525,000 Sun International Hotels, 8.875% due 8/15/2011 1,532,625
B- B3 2,600,000 Venetian Casino, 11% due 6/15/2010 2,652,000
CCC+ B3 1,450,000 Wynn Las Vegas LLC, 12% due 11/01/2010 1,457,250
-----------
16,703,750
====================================================================================================================================
Government-- B+ B2 2,750,000 Federal Republic of Brazil, 14.50% due 10/15/2009 2,571,250
Foreign--1.0%
====================================================================================================================================
Health Care--6.1% B- Caa1 3,000,000 ALARIS Medical Systems, Inc., 9.75% due 12/01/2006 3,060,000
B+ B2 3,000,000 Fisher Scientific International, 8.125% due 5/01/2012 3,172,500
BB- Ba2 3,500,000 Fresenius Medical Capital Trust II, 7.875% due 2/01/2008 3,517,500
B+ NR* 900,000 ICN Pharmaceuticals Inc., 6.50% due 7/15/2008 (Convertible) 758,250
B- B3 1,550,000 Insight Health Services, 9.875% due 11/01/2011 1,557,750
B- B3 575,000 Kinetic Concepts, Inc., 9.625% due 11/01/2007 598,000
BBB Ba1 1,400,000 Manor Care Inc., 8% due 3/01/2008 1,470,000
BBB- Baa3 1,150,000 Tenet Healthcare Corporation, 6.375% due 12/01/2011 1,109,750
-----------
15,243,750
====================================================================================================================================
6 & 7
Corporate High Yield Fund V, Inc., February 28, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
S&P Moody's Face
INDUSTRIES Ratings Ratings Amount Corporate Bonds Value
====================================================================================================================================
Housing--3.8% B B2 $3,750,000 Building Materials Corporation, 8.625% due 12/15/2006 $ 3,093,750
BB Ba1 1,675,000 D.R. Horton, Inc., 7.50% due 12/01/2007 1,708,500
BB- Ba3 3,050,000 Forest City Enterprises Inc., 8.50% due 3/15/2008 3,053,812
BB- Ba1 1,500,000 Louisiana Pacific Corporation, 8.875% due 8/15/2010 1,637,601
-----------
9,493,663
====================================================================================================================================
Information B B1 3,050,000 Amkor Technology Inc., 9.25% due 5/01/2006 2,897,500
Technology--2.7% BB- Ba2 2,325,000 Celestica Inc., 4.639%** due 8/01/2020 (Convertible) 1,130,531
CCC+ Caa1 2,750,000 On Semiconductor Corporation, 12% due 5/15/2008 (b) 2,268,750
CCC+ Caa2 750,000 SCG Holdings Corporation, 12% due 8/01/2009 427,500
-----------
6,724,281
====================================================================================================================================
Leisure--4.6% B+ Ba3 1,000,000 Felcor Lodging LP, 8.50% due 6/01/2011 890,000
B+ Ba3 2,000,000 HMH Properties, Inc., 8.45% due 12/01/2008 1,880,000
BBB- Ba1 1,000,000 Hilton Hotels Corporation, 8.25% due 2/15/2011 1,015,000
BBB- Ba1 1,000,000 ITT Corporation, 7.375% due 11/15/2015 900,000
Intrawest Corporation:
B+ B1 1,625,000 9.75% due 8/15/2008 1,641,250
B+ B1 550,000 10.50% due 2/01/2010 574,750
B B2 2,250,000 Premier Parks Inc., 9.75% due 6/15/2007 2,137,500
B B2 2,250,000 Vail Resorts Inc., 8.75% due 5/15/2009 2,295,000
-----------
11,333,500
====================================================================================================================================
Manufacturing--6.5% CCC+ Caa1 1,175,000 Columbus McKinnon Corp., 8.50% due 4/01/2008 822,500
B- Caa1 2,000,000 Eagle-Picher Industries, 9.375% due 3/01/2008 1,500,000
Foamex LP:
CCC+ Caa2 850,000 13.50% due 8/15/2005 255,000
CCC+ Caa2 1,150,000 9.875% due 6/15/2007 345,000
CCC+ Caa1 1,025,000 International Wire Group, Inc., 11.75% due 6/01/2005 707,250
B B2 3,000,000 Johnson Diversey Inc., 9.625% due 5/15/2012 3,195,000
B+ B2 2,750,000 Joy Global Inc., 8.75% due 3/15/2012 2,880,625
B- B3 400,000 Rexnord Corporation, 10.125% due 12/15/2012 (b) 417,000
BB- Ba3 1,900,000 SPX Corporation, 7.50% due 1/01/2013 1,966,500
Tyco International Group SA:
BBB- Ba2 1,250,000 6.375% due 2/15/2006 1,218,750
BBB- Ba2 2,525,000 6.375% due 10/15/2011 2,348,250
BBB- Ba2 475,000 2.75% due 1/15/2018 (Convertible) (b) 458,969
-----------
16,114,844
====================================================================================================================================
Metal--Other--1.5% B- B3 1,058,000 Great Lakes Carbon Corp., 10.25% due 5/15/2008 (c) 793,500
NR* NR* 750,000 Kaiser Aluminum & Chemical Corp., 10.875% due 10/15/2006 (a) 472,500
B B3 3,000,000 UCAR Finance Inc., 10.25% due 2/15/2012 2,400,000
-----------
3,666,000
====================================================================================================================================
Multi-Sector Morgan Stanley (TRACERS) (b)(f):
Holdings--1.4% NR* NR* 2,100,000 8.198% due 5/01/2012 (d) 2,151,993
B+ B2 1,350,000 9.374% due 12/15/2012 1,367,145
-----------
3,519,138
====================================================================================================================================
Packaging--6.0% B+ B2 1,800,000 Anchor Glass Container, 11% due 2/15/2013 (b) 1,795,500
B- B3 725,000 Bway Corporation, 10% due 10/15/2010 (b) 757,625
Crown Euro Holdings SA (b):
B+ B1 950,000 9.50% due 3/01/2011 950,000
B B2 500,000 10.875% due 3/01/2013 503,750
CCC+ NR* 1,900,000 Graham Packaging Company, 10.75% due 1/15/2009 1,833,500
B+ B2 2,750,000 Graphic Packaging Corporation, 8.625% due 2/15/2012 2,901,250
BB B2 2,375,000 Owens-Brockway Glass Container, 8.875% due 2/15/2009 2,416,562
B+ B3 1,625,000 Owens-Illinois Inc., 7.15% due 5/15/2005 1,568,125
B- Caa1 1,250,000 Pliant Corporation, 13% due 6/01/2010 987,500
B- B3 1,350,000 Tekni-Plex Inc., 12.75% due 6/15/2010 1,208,250
-----------
14,922,062
====================================================================================================================================
Paper--5.7% BB+ Ba1 1,300,000 Abitibi Consolidated Inc., 8.55% due 8/01/2010 1,430,754
B- B3 2,250,000 Ainsworth Lumber Company, 13.875% due 7/15/2007 2,452,500
B+ Ba2 1,500,000 Caraustar Industries Inc., 9.875% due 4/01/2011 1,552,500
Doman Industries Limited (a):
D Ca 650,000 8.75% due 3/15/2004 94,250
D Ca 525,000 9.25% due 11/15/2007 76,125
BB+ Ba2 1,875,000 Georgia Pacific Corporation, 9.375% due 2/01/2013 (b) 1,893,750
B B2 1,200,000 Jefferson Smurfit Corporation, 8.25% due 10/01/2012 1,257,000
MDP Acquisitions PLC (b):
B NR* 1,625,000 9.625% due 10/01/2012 1,681,875
B B3 22,991 15.50% due 10/01/2013 24,888
B B3 600,000 15.50% due 10/01/2013 (c) 649,500
BB Ba2 3,000,000 Norske Skog of Canada, 8.625% due 6/15/2011 3,075,000
-----------
14,188,142
====================================================================================================================================
Services--3.1% Allied Waste North America:
BB- Ba3 675,000 8.875% due 4/01/2008 703,687
B+ B2 825,000 10% due 8/01/2009 837,375
B B2 2,750,000 Coinmach Corporation, 9% due 2/01/2010 2,853,125
B B3 3,500,000 Williams Scotsman, Inc., 9.875% due 6/01/2007 3,290,000
-----------
7,684,187
====================================================================================================================================
Steel--0.3% BB- B1 875,000 Oregon Steel Mills Inc., 10% due 7/15/2009 846,562
====================================================================================================================================
Telecommunications-- B- Caa1 2,500,000 Fairpoint Communications, 12.50% due 5/01/2010 2,112,500
2.6% CCC+ Caa2 2,025,000 Qwest Capital Funding, 7.25% due 2/15/2011 1,417,500
B- Ba3 1,125,000 Qwest Corporation, 8.875% due 3/15/2012 (b) 1,167,187
CCC+ B3 1,750,000 Time Warner Telecom Inc., 10.125% due 2/01/2011 1,233,750
CCC+ B3 900,000 Time Warner Telecom LLC, 9.75% due 7/15/2008 634,500
-----------
6,565,437
====================================================================================================================================
8 & 9
Corporate High Yield Fund V, Inc., February 28, 2003
SCHEDULE OF INVESTMENTS (concluded) (in U.S. dollars)
S&P Moody's Face
INDUSTRIES Ratings Ratings Amount Corporate Bonds Value
===================================================================================================================================
Transportation--1.8% BB- Ba3 $ 300,000 Stena AB, 9.625% due 12/01/2012 $ 310,500
BB- Ba2 3,500,000 Teekay Shipping Corporation, 8.875% due 7/15/2011 3,692,500
CC Caa1 1,025,000 Transportacion Maritima Mexicana, SA de CV, 10.25% due 11/15/2006 553,500
----------
4,556,500
===================================================================================================================================
Utility--11.3% The AES Corporation:
B- B3 4,250,000 9.375% due 9/15/2010 3,081,250
B- B3 3,250,000 8.875% due 2/15/2011 2,307,500
BB+ Ba1 725,000 Avista Corporation, 9.75% due 6/01/2008 757,625
BB Ba2 950,000 CMS Panhandle Holding Company, 6.50% due 7/15/2009 930,571
B+ B1 4,775,000 Calpine Canada Energy Finance, 8.50% due 5/01/2008 2,315,875
Calpine Corporation:
B+ B1 1,250,000 8.25% due 8/15/2005 706,250
B+ B1 85,000 4% due 12/26/2006 (Convertible) (b) 46,750
BBB- Baa3 1,250,000 Consumers Energy Company, 7.375% due 9/15/2023 1,249,317
BB Ba1 1,274,000 ESI Tractebel Acquisition Corp., 7.99% due 12/30/2011 1,245,131
B B3 2,250,000 Illinois Power Corporation, 11.50% due 12/15/2010 (b) 2,250,000
BB- Ba3 1,000,000 Midland Funding II, 11.75% due 7/23/2005 1,032,500
BB Ba3 4,550,000 Mirant Americas Generation Inc., 8.30% due 5/01/2011 2,297,750
B- B3 6,500,000 Mission Energy Holdings, 13.50% due 7/15/2008 1,820,000
BB Ba2 1,725,000 Nevada Power Co., 10.875% due 10/15/2009 (b) 1,785,375
Northwest Pipeline Corporation:
B+ B3 525,000 0.625% due 12/01/2007 504,000
B+ B3 250,000 8.125% due 3/01/2010 (b) 250,000
BB Ba2 1,625,000 Sierra Pacific Power Company, 8% due 6/01/2008 1,556,633
BBB- Ba1 1,250,000 Western Resources Inc., 7.875% due 5/01/2007 1,304,688
B Caa1 3,050,000 Williams Companies Inc., 8.125% due 3/15/2012 (b) 2,607,750
----------
28,048,965
===================================================================================================================================
Wireless CCC B3 775,000 American Tower Escrow, 12.25%** due 8/01/2008 476,625
Telecommunications-- CCC Caa1 2,250,000 American Tower Systems Corporation, 9.375% due 2/01/2009 1,788,750
6.4% CCC B3 2,750,000 Crown Castle International Corporation, 9.375% due 8/01/2011 2,227,500
CCC+ Caa1 3,775,000 Loral Cyberstar Inc., 10% due 7/15/2006 1,510,000
C Caa3 3,500,000 Millicom International Cellular SA, 13.50% due 6/01/2006 2,222,500
NR* NR* 2,001,945 NII Holdings Inc., 19.13%** due 11/01/2009 (b) 1,541,498
B B3 600,000 Nextel Communications, Inc., 9.50% due 2/01/2011 603,000
CCC+ Caa1 3,450,000 Nextel Partners Inc., 11% due 3/15/2010 3,156,750
BBB Baa2 2,150,000 Tritel PCS Inc., 10.375% due 1/15/2011 2,445,625
----------
15,972,248
===================================================================================================================================
Total Investments in Corporate Bonds (Cost--$315,919,495)--123.4% 306,960,240
===================================================================================================================================
Shares
Held Common Stocks
===================================================================================================================================
Wireless 75,190 NII Holdings Inc. (Class B) (a) 1,541,395
Telecommunications--
0.6%
===================================================================================================================================
Total Investments in Common Stocks (Cost--$189,598)--0.6% 1,541,395
===================================================================================================================================
Beneficial
Interest Short-Term Securities
===================================================================================================================================
$127,382 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (e) 127,382
===================================================================================================================================
Total Investments in Short-Term Securities (Cost--$127,382)--0.0% 127,382
===================================================================================================================================
Total Investments (Cost--$316,236,475)--124.0% 308,629,017
Liabilities in Excess of Other Assets--(24.0%) (59,827,682)
------------
Net Assets--100.0% $248,801,335
============
===================================================================================================================================
* Not Rated.
** Represents a zero coupon or step bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
(a) Non-income producing security.
(b) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(c) Represents a pay-in-kind security which may pay interest/ dividends in
additional face/shares.
(d) Floating rate note.
(e) Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $127,382 $556
--------------------------------------------------------------------------
(f) Tradeable Custodial Receipts (TRACERS).
See Notes to Financial Statements.
10 & 11
Corporate High Yield Fund V, Inc., February 28, 2003
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
As of February 28, 2003
=======================================================================================================================
Assets: Investments, at value (identified cost--$316,236,475) ..... $ 308,629,017
Receivables:
Interest ................................................ $ 7,536,111
Securities sold ......................................... 2,362,512 9,898,623
-------------
Prepaid expenses and other assets ......................... 27,442
-------------
Total assets .............................................. 318,555,082
-------------
=======================================================================================================================
Liabilities: Loans ..................................................... 68,900,000
Payables:
Securities purchased .................................... 669,551
Investment adviser ...................................... 142,666
Interest on loans ....................................... 24,561 836,778
-------------
Accrued expenses and other liabilities .................... 16,969
-------------
Total liabilities ......................................... 69,753,747
-------------
=======================================================================================================================
Net Assets: Net assets ................................................ $ 248,801,335
=============
=======================================================================================================================
Capital: Common Stock, $.10 par value, 200,000,000 shares authorized $ 1,887,344
Paid-in capital in excess of par .......................... 267,349,224
Undistributed investment income--net ...................... $ 2,788,911
Accumulated realized capital losses on investments--net ... (15,616,686)
Unrealized depreciation on investments--net ............... (7,607,458)
-------------
Total accumulated losses--net ............................. (20,435,233)
-------------
Total--Equivalent to $13.18 per share based on 18,873,442
shares of capital stock outstanding (market price--$14.01) $ 248,801,335
=============
=======================================================================================================================
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended February 28, 2003
=======================================================================================================================
Investment Income: Interest .................................................. $ 17,449,992
Securities lending--net ................................... 9
Other ..................................................... 57,343
-------------
Total income .............................................. 17,507,344
-------------
=======================================================================================================================
Expenses: Investment advisory fees .................................. $ 894,804
Loan interest expense ..................................... 621,314
Borrowing costs ........................................... 94,572
Professional fees ......................................... 52,918
Accounting services ....................................... 45,296
Transfer agent fees ....................................... 21,686
Printing and shareholder reports .......................... 21,020
Directors' fees and expenses .............................. 16,579
Listing fees .............................................. 15,785
Custodian fees ............................................ 11,375
Pricing services .......................................... 6,981
Other ..................................................... 12,706
-------------
Total expenses ............................................ 1,815,036
-------------
Investment income--net .................................... 15,692,308
-------------
=======================================================================================================================
Realized & Unrealized Realized loss on investments--net ......................... (11,303,926)
Gain (Loss) on Change in unrealized depreciation on investments--net ..... 23,356,153
Investments--Net: -------------
Total realized and unrealized gain on investments--net .... 12,052,227
-------------
Net Increase in Net Assets Resulting from Operations ...... $ 27,744,535
=============
=======================================================================================================================
See Notes to Financial Statements.
12 & 13
Corporate High Yield Fund V, Inc., February 28, 2003
STATEMENTS OF CHANGES IN NET ASSETS
For the Period
For the Six November 30,
Months Ended 2001+ to
February 28, August 31,
Increase (Decrease) in Net Assets: 2003 2002
=======================================================================================================================
Operations: Investment income--net ................................... $ 15,692,308 $ 19,726,177
Realized loss on investments--net ........................ (11,303,926) (4,312,760)
Change in unrealized depreciation on investments--net .... 23,356,153 (30,963,611)
------------- -------------
Net increase (decrease) in net assets resulting from
operations ............................................... 27,744,535 (15,550,194)
------------- -------------
=======================================================================================================================
Dividends to Dividends to shareholders from investment income--net .... (15,653,632) (16,975,942)
Shareholders: ------------- -------------
=======================================================================================================================
Capital Stock Proceeds from issuance of Common Stock ................... -- 261,073,125
Transactions: Value of shares issued to Common Stock shareholders in
reinvestment of dividends ................................ 4,174,825 4,201,898
Write-off (offering) costs resulting from the issuance
of Common Stock .......................................... 114,993 (428,276)
------------- -------------
Net increase in net assets derived from capital stock
transactions ............................................. 4,289,818 264,846,747
------------- -------------
=======================================================================================================================
Net Assets: Total increase in net assets ............................. 16,380,721 232,320,611
Beginning of period ...................................... 232,420,614 100,003
------------- -------------
End of period* ........................................... $ 248,801,335 $ 232,420,614
============= =============
*Undistributed investment income--net ..................... $ 2,788,911 $ 2,750,235
============= =============
=======================================================================================================================
+ Commencement of operations.
See Notes to Financial Statements.
STATEMENT OF CASH FLOWS
For the Six Months Ended February 28, 2003
=================================================================================================================
Cash Provided by Net increase in net assets resulting from operations .................. $ 27,744,535
Operating Activities: Adjustments to reconcile net increase in net assets resulting
from operations to net cash provided by operating activities:
Decrease in receivables ............................................. 128,005
Increase in other assets ............................................ (18,246)
Decrease in other liabilities ....................................... (245,389)
Realized and unrealized gain on investments--net .................... (12,052,227)
Amortization of discount ............................................ (2,715,627)
-------------
Net cash provided by operating activities ............................. 12,841,051
-------------
=================================================================================================================
Cash Used for Proceeds from sales of long-term investments .......................... 100,012,249
Investing Activities: Purchases of long-term investments .................................... (112,041,159)
Purchases of short-term investments--net .............................. (124,351)
-------------
Net cash used for investing activities ................................ (12,153,261)
-------------
=================================================================================================================
Cash Used for Write-off of offering costs resulting from the issuance of Common Stock 114,993
Financing Activities: Cash receipts from borrowings ......................................... 67,000,000
Cash payments on borrowings ........................................... (56,500,000)
Dividends paid to shareholders ........................................ (11,478,807)
-------------
Net cash used for financing activities ................................ (863,814)
-------------
=================================================================================================================
Cash: Net decrease in cash .................................................. (176,024)
Cash at beginning of period ........................................... 176,024
-------------
Cash at end of period ................................................. $ --
=============
=================================================================================================================
Cash Flow Information: Cash paid for interest ................................................ $ 629,043
=============
=================================================================================================================
Non-Cash Financing Reinvestment of dividends to shareholders ............................. $ 4,174,825
Activities: =============
=================================================================================================================
See Notes to Financial Statements.
14 & 15
Corporate High Yield Fund V, Inc., February 28, 2003
FINANCIAL HIGHLIGHTS
For the Period
The following per share data and ratios have been derived For the Six November 30,
from information provided in the financial statements. Months Ended 2001+ to
February 28, August 31,
Increase (Decrease) in Net Asset Value: 2003 2002
==================================================================================================================================
Per Share Net asset value, beginning of period .................................... $ 12.54 $ 14.33
Operating ----------- -----------
Performance: Investment income--net ................................................ .84 1.08
Realized and unrealized gain (loss) on investments--net ............... .63 (1.92)
----------- -----------
Total from investment operations ........................................ 1.47 (.84)
----------- -----------
Less dividends from investment income--net .............................. (.84) (.93)
----------- -----------
Capital write-off (charge) resulting from the issuance of Common Stock .. .01 (.02)
----------- -----------
Net asset value, end of period .......................................... $ 13.18 $ 12.54
=========== ===========
Market price per share, end of period ................................... $ 14.01 $ 12.50
=========== ===========
==================================================================================================================================
Total Investment Based on net asset value per share ...................................... 12.29%++ (6.31%)++
Return:** =========== ===========
Based on market price per share ......................................... 19.74%++ (6.61%)++
=========== ===========
==================================================================================================================================
Ratios to Average Expenses, net of reimbursement and excluding interest expense ........... 1.03%* .63%*
Net Assets: =========== ===========
Expenses, net of reimbursement .......................................... 1.57%* .89%*
=========== ===========
Expenses ................................................................ 1.57%* 1.12%*
=========== ===========
Investment income--net .................................................. 13.55%* 10.31%*
=========== ===========
==================================================================================================================================
Leverage: Amount of borrowings outstanding, end of period (in thousands) .......... $ 68,900 $ 58,400
=========== ===========
Average amount of borrowings outstanding during the period (in thousands) $ 66,486 $ 30,993
=========== ===========
Average amount of borrowings outstanding per share during the period .... $ 3.56 $ 1.71
=========== ===========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) ................................ $ 248,801 $ 232,421
Data: =========== ===========
Portfolio turnover ...................................................... 34.63% 49.51%
=========== ===========
==================================================================================================================================
* 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
charges. The Fund's Investment Adviser waived a portion of its management
fee. Without such waiver, the Fund's performance would have been lower.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Corporate High Yield Fund V, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, closed-end management
investment company. The Fund's financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal, recurring nature. 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 HYV. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments -- Portfolio securities are valued on the basis of
prices furnished by one or more pricing services that determine prices for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities that are generally recognized by institutional traders. In
certain circumstances, portfolio securities are valued at the last sale price on
the exchange that is the primary market for such securities, or the last quoted
bid price for those securities for which the over-the-counter market is the
primary market or for listed securities in which there were no sales during the
day. The value of interest rate swaps, caps and floors is determined in
accordance with a formula and then confirmed periodically by obtaining a bank
quotation. 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 written or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). Obligations with remaining maturities of sixty days
or less are valued at amortized cost, which approximates market value, unless
this method no longer produces fair valuations. Rights or warrants to acquire
stock, or stock acquired pursuant to the exercise of a right or warrant, may be
valued taking into account various factors such as original cost to the Fund,
earnings and net worth of the issuer, market prices for securities of similar
issuers, assessment of the issuer's future prosperity, liquidation value or
third party transactions involving the issuer's securities. Securities for which
there exist no price quotations or valuations and all other assets are valued at
fair value as determined in good faith by or on behalf of the Board of Directors
of the Fund. Occasionally, events affecting the values of securities and other
assets may occur between the times at which valuations of such securities are
determined (that is, close of the market on which such security trades) and the
close of business on the NYSE. If events (for example, company announcement,
natural disasters, market volatility) occur during such periods that are
expected to materially affect the value for such securities, those securities
may be valued at their fair market value as determined in good faith by the
Fund's Board of Directors or by the investment adviser using a pricing service
and/or procedures approved by the Board of Directors of the Fund.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Options -- The Fund is authorized to write and purchase call and 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.
16 & 17
Corporate High Yield Fund V, Inc., February 28, 2003
NOTES TO FINANCIAL STATEMENTS (continued)
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.
o Financial futures contracts -- The Fund may purchase or sell financial 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.
o Interest rate swaps -- The Fund is authorized to enter into swap agreements
for the purpose of hedging the market risk on existing securities. In a swap
agreement, the Fund exchanges with the counterparty their respective commitments
to pay or receive interest on a specified notional principal amount. If the
counterparty defaults on its obligation, the Fund's ability to receive interest
will be delayed or limited. Furthermore, if the Fund does not have sufficient
income to pay its obligation under the swap agreement, the Fund would be in
default and the counterparty would be able to terminate the swap agreement. When
the swap agreement is closed, the Fund records a realized gain or loss equal to
the difference between the value of the swap agreement at the time it was
entered into 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).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(e) Offering expenses -- Direct expenses relating to the public offering of the
Fund's Common Stock were charged to and written off to capital at the time of
issuance of the shares.
(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.
(g) Securities lending -- The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The market value of
the loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and retain the
amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The Fund
may pay reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access to the
collateral. The Fund also could suffer a loss where the value of the collateral
falls below the market value of the borrowed securities, in the event of
borrower default or in the event of losses on investments made with cash
collateral.
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 operation of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .60% of the Fund's average weekly net assets plus the proceeds
of any outstanding principal borrowed. FAM has entered into a Sub-Advisory
Agreement with Merrill Lynch Asset Management U.K. Limited ("MLAM U.K."), an
affiliate of FAM, pursuant to which MLAM U.K. provides investment advisory
services to FAM with respect to the Fund. There is no increase in the aggregate
fees paid by the Fund for these services.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated, a subsidiary of ML & Co., or its affiliates.
Pursuant to that order, the Fund also has retained Merrill Lynch Investment
Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the securities lending
agent for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Fund, invest cash collateral
received by the Fund for such loans, among other things, in a private investment
company managed by MLIM, LLC or in registered money market funds advised by FAM
or its affiliates. For the six months ended February 28, 2003, MLIM, LLC
received $4 in securities lending agent fees.
For the six months ended February 28, 2003, the Fund reimbursed FAM $2,534 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, MLAM U.K., PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended February 28, 2003 were $112,710,710 and $102,374,761, respectively.
Net realized losses for the six months ended February 28, 2003 and net
unrealized losses as of February 28, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
- --------------------------------------------------------------------------------
Long-term investments .............. $(11,303,926) $ (7,607,458)
------------ ------------
Total .............................. $(11,303,926) $ (7,607,458)
============ ============
- --------------------------------------------------------------------------------
As of February 28, 2003, net unrealized depreciation for Federal income tax
purposes aggregated $7,846,825, of which $14,961,302 related to appreciated
securities and $22,808,127 related to depreciated securities. The aggregate cost
of investments at February 28, 2003 for Federal income tax purposes was
$316,475,842.
4. Capital Share Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, par value
$.10, all of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to classify and reclassify any unissued shares
of capital stock without approval of the holders of Common Stock.
Shares issued and outstanding during the six months ended February 28, 2003
increased by 331,797 as a result of dividend reinvestment and during the period
November 30, 2001 to August 31, 2002 increased by 18,225,000 from shares sold
and by 309,664 as a result of dividend reinvestment.
5. Short-Term Borrowings:
On May 30, 2002, the Fund renewed its $110,000,000 revolving credit and security
agreement with Citibank, N.A. and other lenders (the "Lenders"). Under the
revolving credit and security agreement, the Fund may borrow money through (i) a
line of credit from certain Lenders at the Eurodollar rate plus .75%
18 & 19
Corporate High Yield Fund V, Inc., February 28, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
or the highest of the Federal Funds rate plus .50%, a base rate as determined by
Citibank, N.A. and/or the latest three-week moving average of secondary market
morning offering rates in the United States for three-month certificates of
deposit of major U.S. money market banks plus .50%, or (ii) the issuance of
commercial paper notes by certain Lenders at rates of interest based upon the
weighted average of the per annum rates paid or payable by such Lenders in
respect of those commercial paper notes. As security for its obligations to the
Lenders under the revolving credit and security agreement, the Fund has granted
a security interest in substantially all of its assets to and in favor of the
Lenders.
For the six months ended February 28, 2003, the average amount borrowed was
approximately $66,486,000 and the daily weighted average interest rate was
1.88%. For the six months ended February 28, 2003, facility and commitment fees
aggregated approximately $95,000.
6. Capital Loss Carryforward:
On August 31, 2002, the Fund had a net capital loss carryforward of $4,084,149,
all of which expires in 2010. This amount will be available to offset like
amounts of any future taxable gains.
7. Subsequent Event:
The Fund paid an ordinary income dividend in the amount of $.138483 per share on
March 31, 2003 to shareholders of record on March 17, 2003.
8. Reorganization Plan:
On October 30, 2002, the Fund's Board of Directors approved a plan of
reorganization whereby the Fund will acquire all of the assets and will assume
all of the liabilities of Corporate High Yield Fund IV, Inc. in exchange for
newly issued shares of the Fund.
PORTFOLIO INFORMATION
Percent of
As of February 28, 2003 Long-Term Investments
====================================================================================================================================
Ten Largest The AES Corporation AES is a worldwide power producer with operations in the United
Holdings States, Europe, Latin America and Asia. Electricity generation and
sales are primarily to wholesale customers, although the company has
a direct distribution business to end users. 1.7%
-----------------------------------------------------------------------------------------------------------
World Color Press Inc. Through its subsidiary, World Color Press, Quebecor World Inc.
provides commercial print media services throughout the United States
and internationally. Services include printing of magazines, inserts
and circulars, books, catalogs, specialty printing and direct mail,
directories, digital pre-media and others. 1.6
-----------------------------------------------------------------------------------------------------------
CSC Holdings, Inc. CSC provides telecommunications and entertainment services. The
company has operations in multimedia delivery, subscription cable
television services, championship professional sports teams and
national television program networks. CSC serves cable customers
primarily in the New York metropolitan area. 1.5
-----------------------------------------------------------------------------------------------------------
Primedia, Inc. Primedia, a media company, provides specialized information in the
consumer, business-to-business and education markets. The company's
products include specialty magazines, technical and trade magazines,
information products, supplemental education materials and
vocational networks. Primedia's consumer magazines include
"Seventeen" and "New York." 1.5
-----------------------------------------------------------------------------------------------------------
ISP Holdings, Inc. ISP manufactures specialty chemicals, mineral products and filter
products. The company's chemical products are used in the
pharmaceutical, hair and skin care, plastics, agricultural, coatings
and adhesives markets. ISP's mineral products are sold to the roofing
industry. Filter products include filter vessels, bags and systems. 1.4
-----------------------------------------------------------------------------------------------------------
Stone Energy Corporation Stone Energy Corporation is an independent oil and gas company. The
company acquires, explores, develops, and operates oil and gas
properties onshore and offshore in the Gulf Coast Basin. 1.3
-----------------------------------------------------------------------------------------------------------
LIN Holdings Corporation LIN owns and operates eight network-affiliated television stations.
The company also provides programming and marketing services for four
other stations and operates low-power television stations and satellite
broadcasting facilities. In addition, LIN offers a weather forecasting
service for cable systems. 1.3
-----------------------------------------------------------------------------------------------------------
Tyco International Group SA Tyco is a diversified manufacturing and service company with a global
footprint. The company's businesses include electrical and electronics
components, undersea telecommunications systems, fire protection and
security systems, flow control products, health care products and
specialty products. 1.3
-----------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc. Owens-Illinois is a manufacturer of a broad range of glass and plastic
packaging products, including glass bottles, plastic containers and
closures, labels and plastic beverage bottle carriers. 1.3
-----------------------------------------------------------------------------------------------------------
EchoStar DBS EchoStar operates a direct broadcast satellite subscription television
Corporation service in the United States that delivers video, audio and
data services. 1.2
-----------------------------------------------------------------------------------------------------------
Portfolio Profile
Quality Ratings by Percent of
Standard & Poor's Long-Term Investments
- --------------------------------------------------------------------------------
BBB ................................................................ 7%
BB ................................................................. 22
B .................................................................. 57
CCC or lower ....................................................... 12
NR (Not Rated) ..................................................... 2
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Total Assets
- --------------------------------------------------------------------------------
Utility ............................................................ 8.8%
Cable--U.S. ........................................................ 6.8
Energy--Other ...................................................... 5.9
Wireless Telecommunications ........................................ 5.5
Gaming ............................................................. 5.2
- --------------------------------------------------------------------------------
Percent of
Five Largest Foreign Countries* Long-Term Investments
- --------------------------------------------------------------------------------
Canada ............................................................. 4.6%
Luxembourg ......................................................... 2.0
Bahamas ............................................................ 1.7
Bermuda ............................................................ 1.1
Netherlands ........................................................ 1.0
- --------------------------------------------------------------------------------
* All holdings are denominated in U.S. dollars.
Percent of
Foreign Holdings* Long-Term Investments
- --------------------------------------------------------------------------------
Total Foreign Holdings ............................................. 13.8%
Emerging Markets Holdings .......................................... 1.0
- --------------------------------------------------------------------------------
* All holdings are denominated in U.S. dollars.
- --------------------------------------------------------------------------------
Average Portfolio Maturity ......................................... 6.9 years
- --------------------------------------------------------------------------------
20 & 21
Corporate High Yield Fund V, Inc., February 28, 2003
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Andre F. Perold, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Stephen B. Swensrud, Director
B. Daniel Evans, Vice President
Elizabeth M. Phillips, Vice President
Donald C. Burke, Vice President and Treasurer
David W. Clayton, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
EquiServe Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
NYSE Symbol
HYV
- --------------------------------------------------------------------------------
Melvin R. Seiden, Director of Corporate High Yield Fund V, Inc., has recently
retired. The Fund's Board of Directors wishes Mr. Seiden well in his retirement.
- --------------------------------------------------------------------------------
[LOGO] Merrill Lynch Investment Managers
[GRAPHICS OMITTED]
Corporate High Yield Fund V, Inc. seeks to provide shareholders with current
income by investing primarily in a diversified portfolio of fixed income
securities that are rated in the lower rating categories of the established
rating services (Ba or lower by Moody's Investors Service, Inc. or BB or lower
by Standard & Poor's Corporation) or are unrated securities of comparable
quality.
This report, including the financial information herein, is transmitted to
shareholders of Corporate High Yield Fund V, Inc. for their information. It is
not a prospectus. The Fund has leveraged its Common Stock to provide Common
Stock shareholders with a potentially higher rate of return. Leverage creates
risk for Common Stock shareholders, including the likelihood of greater
volatility of net asset value and market price of Common Stock shares, and the
risk that fluctuations in short-term interest rates may reduce the Common
Stock's yield. Past performance results shown in this report should not be
considered a representation of future performance. Statements and other
information herein are as dated and are subject to change.
Corporate High Yield Fund V, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #COYV--2/03
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (not answered until July
15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered
by the principal accountant for the audit of the
registrant's annual financial statements or services
that are normally provided by the accountant in
connection with statutory and regulatory filings or
engagements for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and
related services by the principal accountant
that are reasonably related to the performance
of the audit of the registrant's financial
statements and are not reported under
paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising
the fees disclosed under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of
the services comprising the fees disclosed under this
category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services
provided by the principal accountant, other than
the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the
nature of the services comprising the fees
disclosed under this category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by
the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the
registrant's financial statements for the most recent fiscal
year that were attributed to work performed by persons other
than the principal accountant's full-time, permanent
employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the
registrant's accountant for services rendered to the
registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling,
controlled by, or under common control with the adviser that
provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has
considered whether the provision of non-audit services that
were rendered to the registrant's investment adviser (not
including any subadviser whose role is primarily portfolio
management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that
provides ongoing services to the registrant that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Items 5-6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A (not answered
until July 1, 2003)
Item 8 -- Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or
persons performing similar functions, about the effectiveness of the
registrant's disclosure controls and procedures (as defined in Rule
30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their
evaluation of these controls and procedures as of a date within 90
days of the filing date of the report that includes the disclosure
required by this paragraph. N/A (not answered until July 15, 2003
and only annually for funds)
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
CEO/CFO). Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Corporate High Yield Fund V, Inc.
By: /s/ Terry K. Glenn
------------------------------
Terry K. Glenn,
President of
Corporate High Yield Fund V, Inc.
Date: April 21, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ Terry K. Glenn
------------------------------
Terry K. Glenn,
President of
Corporate High Yield Fund V, Inc.
Date: April 21, 2003
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke,
Chief Financial Officer of
Corporate High Yield Fund V, Inc.
Date: April 21, 2003