UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: Robert C. Doll, Jr., Chief Executive
Officer, 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: 08/31/06
Date of reporting period: 09/01/05 - 02/28/06
Item 1 - Report to Stockholders
Semi-Annual Report
February 28, 2006
Corporate High Yield
Fund V, Inc.
Corporate High Yield Fund V, Inc.
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to contribute Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), to BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with nearly $1 trillion in assets under management (based on combined
assets under management as of December 31, 2005). The transaction is expected to
close in the third quarter of 2006, at which time the new company will operate
under the BlackRock name. If approved by the Fund's Board of Directors and Fund
shareholders, the combined company that results from the transaction is expected
to become the investment adviser of the Fund.
The Benefits and Risks of Leveraging
Corporate High Yield Fund V, Inc. utilizes leverage 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 yield 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 net asset value and 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.
2 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
A Letter From the President
Dear Shareholder
Financial markets began 2006 with a return to volatility following a fairly
uninspiring 2005. For the six- and 12-month periods ended February 28, 2006,
most major market indexes landed in positive territory:
Total Returns as of February 28, 2006 6-month 12-month
=======================================================================================
U.S. equities (Standard & Poor's 500 Index) + 5.93% + 8.40%
- ---------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) +10.24 +16.59
- ---------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +15.14 +17.41
- ---------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) - 0.11 + 2.74
- ---------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.99 + 3.87
- ---------------------------------------------------------------------------------------
High yield bonds (Credit Suisse High Yield Index) + 1.89 + 3.27
- ---------------------------------------------------------------------------------------
The Federal Reserve Board (the Fed) increased interest rates 200 basis points
(2.00%) over the past 12 months, bringing the target federal funds rate to 4.5%.
Notably, Ben Bernanke replaced Alan Greenspan as Fed chairman in January, a
month after the central bank removed the critical word "measured" from the
description of its rate-hiking program. Still, most observers expect at least
one more interest rate hike before the Fed pauses in its tightening campaign.
U.S. economic growth, which came in at 4.1% in the third quarter of 2005, fell
to 1.6% in the fourth quarter. Growth is expected to reaccelerate in the first
quarter of 2006, although the economy is likely to feel some pressure in the
quarters ahead as the consumer sector seems to be softening. Capital spending by
businesses, however, appears relatively strong. Overall corporate health,
including strong company balance sheets, helped prompt robust
dividend-distribution, share-buyback and merger-and-acquisition activity in
2005, a trend that has continued in 2006. This, as well as reasonably good
company earnings and low core inflation, has been supportive of U.S. stocks
despite the headwinds of rising interest rates and high energy prices. Many
international equity markets have fared even better, thanks in part to higher
economic growth rates and low inflation.
In the U.S. bond market, short-term interest rates continued to move higher as
longer-term interest rates advanced more moderately. After flattening
dramatically in 2005, the Treasury curve recently has been toying with bouts of
inversion, whereby short-term yields have surpassed long-term yields. At
period-end, the six-month Treasury bill offered the highest yield on the curve
at 4.74%.
Amid the uncertainty inherent in the financial markets, we encourage you to
review your goals periodically with your financial advisor and to make portfolio
changes, as needed. For timely "food for thought" for investors, we also invite
you to visit Shareholder magazine at www.mlim.ml.com/shareholdermagazine. As
always, we thank you for trusting Merrill Lynch Investment Managers with your
investment assets, and we look forward to continuing to serve your investment
needs.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 3
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed the total return of its market benchmark and
comparable Lipper category average for the semi-annual period, benefiting
primarily from positive security selection.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended February 28, 2006, the Common Stock of Corporate
High Yield Fund V, Inc. had net annualized yields of 9.17% and 9.54%, based on a
period-end per share net asset value of $14.36 and a per share market price of
$13.80, respectively, and $.653 per share income dividends. For the same period,
the total investment return on the Fund's Common Stock was +3.56%, based on a
change in per share net asset value from $15.19 to $14.36, and assuming
reinvestment of all distributions. By comparison, the high yield bond market, as
measured by the Credit Suisse High Yield Index, returned +1.89%, while the
Fund's comparable Lipper category of High Current Yield Funds (Leveraged) had an
average return of +2.49% for the six-month period. (Funds in this Lipper
category aim for relatively high current yield from investment in fixed income
securities, have no quality or maturity restrictions, and tend to invest in
lower-grade debt issues.)
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (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
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or a discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
The high yield market posted a modest gain over the past six months, reflecting
continued economic growth and the gradual absorption of the securities of
General Motors Corp. and Ford Motor Co. into the market. (The two auto
companies' debt had been downgraded to junk bond status in May 2005.) With the
strengthening market, the performance of many of our more speculative holdings
improved during the six-month period, as companies such as HealthSouth Corp. and
propane distributor Star Gas Partners, LP resolved financial issues, showed
solid earnings recovery and generated positive returns. The same was true of
Cypress Semiconductor Corp., ADC Telecommunications, Inc. and several other
companies in which we held convertible securities.
What changes were made to the portfolio during the period?
In anticipation of gradually slowing economic growth and a moderate increase in
the default rates on high yield bonds, we further reduced the portfolio's risk
profile during the period. We trimmed the Fund's position in riskier CCC-rated
bonds from 16% of net assets six months ago to 10% at period-end. We also
reduced the portfolio's exposure to cyclical sectors such as chemicals,
manufacturing and paper during the past six months from 15.3% of net assets to
13%.
The Fund's leverage position averaged 27.2% during the past six months. That is,
the Fund borrowed the equivalent of 27.2% of total assets invested, earning
incremental yield on the investments we made with the borrowed funds. As of
February 28, 2006, the Fund was 25.5% leveraged after borrowing $160.5 million
at a cost of 4.53%. Over the six-month period, the average amount borrowed was
approximately $178.7 million, and the weighted average annual interest rate was
4.37%. While leveraging will hinder the Fund's total return in a weak market,
the converse also is true. We intend to maintain our leverage position in the
mid-20% range, although that level may vary somewhat as we adjust the
portfolio's holdings. (For a more complete discussion of the benefits and risks
of leveraging, see page 2 of this report to shareholders.)
The Federal Reserve Board raised the target federal funds rate from 3.50% to
4.50% in four increments of 25 basis points (.25%) during the period. Rising
interest rates resulted in higher borrowing costs for the Fund. The increasing
cost of leverage had an adverse effect on the Fund's earnings during the period.
In addition, we upgraded the portfolio's average credit quality and modestly
decreased the level of borrowing during the period. We made these moves in
anticipation of a gradual increase in default rates over the remainder of 2006.
While this has decreased the Fund's earnings in the short term, we believe that
these changes should result in a higher net asset value in the medium term.
4 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
How would you characterize the Fund's position at the close of the period?
Both the Fund and the Credit Suisse High Yield Index had an average credit
rating of B at the end of the period. The Fund's largest industry exposures are
in less cyclical sectors such as U.S. cable, health care, gaming, diversified
media and utilities. We have positioned the portfolio with limited exposure to
the automotive, retail and financial sectors, given many of these companies'
uncertain asset values and insecure competitive positions.
Our position in convertible securities (corporate bonds that pay interest and
also can be converted to shares of company stock at a specific price) comprised
5.3% of the Fund's non-cash investments at period-end. We continue to see upside
potential in that asset class relative to high yield bonds. Our holdings in
floating rate securities, including bank loans, totaled 12.3% of non-cash
investments at February 28, 2006. We believe that rising short-term interest
rates should continue to benefit these securities.
Elizabeth M. Phillips
Vice President and Portfolio Manager
March 24, 2006
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 5
Portfolio Information
Percent of
As of February 28, 2006 Total Assets
====================================================================================================================================
Ten Largest Holdings
- ------------------------------------------------------------------------------------------------------------------------------------
Building Materials Corp. of America* Building Materials is a manufacturer of residential roofing products, with
Timberline as its major brand. 1.7%
- ------------------------------------------------------------------------------------------------------------------------------------
The AES Corp.* AES is a worldwide power producer with operations in the United 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
- ------------------------------------------------------------------------------------------------------------------------------------
Adelphia Communications Corp.* Adelphia is a cable television operator, with systems in suburban areas of
large- and medium-sized cities in the United States. Our holdings are primarily
in loans to Adelphia's Century Cable subsidiary that have continued to pay
interest through the bankruptcy proceedings. 1.5
- ------------------------------------------------------------------------------------------------------------------------------------
Sierra Pacific Resources* Sierra Pacific Resources is the holding company for two utilities, Nevada Power
Company and Sierra Pacific Power Company. Both utilities primarily serve the
State of Nevada. 1.4
- ------------------------------------------------------------------------------------------------------------------------------------
Qwest* Qwest provides a broad range of telecommunications services, including broadband
Internet-based data, voice and image communication, local exchange services, and
data and long-distance services to residential and business customers. The
company also provides Web hosting, high-speed Internet access and private
networks. 1.3
- ------------------------------------------------------------------------------------------------------------------------------------
Intelsat Bermuda Ltd.* Intelsat owns and operates a global communications satellite system that offers
satellite service for voice, data, video and Internet communications to over 200
countries and territories. 1.3
- ------------------------------------------------------------------------------------------------------------------------------------
SunGard Data Systems, Inc.* SunGard is a top financial software firm, brought private by a group of seven
financial investors. The company provides information technology and electronic
processing for financial services companies worldwide. It also offers a high
availability infrastructure for business continuity. 1.3
- ------------------------------------------------------------------------------------------------------------------------------------
Time Warner Telecom* Time Warner Telecom offers local telephone service and a wide range of telephony
products to medium- and large-sized businesses in selected metropolitan areas.
The company operates a fiber optic network. 1.2
- ------------------------------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp.* Cablevision Systems 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. Cablevision serves cable customers primarily in the New York
metropolitan area. 1.2
- ------------------------------------------------------------------------------------------------------------------------------------
Mediacom* Mediacom is a cable television company that provides a variety of broadband
services across the United States. Services include traditional video services,
digital television and high-speed Internet access. 1.2
- ------------------------------------------------------------------------------------------------------------------------------------
* Includes combined holdings and/or affiliates.
Portfolio Profile
Percent of
Five Largest Industries Total Investments
- --------------------------------------------------------------------------------
Cable--U.S. ............................................. 8.7%
Utility ................................................. 7.8
Gaming .................................................. 7.7
Health Care ............................................. 7.1
Diversified Media ....................................... 5.8
- --------------------------------------------------------------------------------
For Fund compliance purposes, the Fund's industry classifications refer to
any one or more ofthe industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease.
Quality Ratings by Percent of
S&P/Moody's Total Investments
- --------------------------------------------------------------------------------
A/A ..................................................... .5%
BBB/Baa ................................................. 1.1
BB/Ba ................................................... 22.7
B/B ..................................................... 60.2
CCC/Caa ................................................. 9.9
D ....................................................... .1
NR(Not Rated) ........................................... 2.5
Other* .................................................. 3.0
- --------------------------------------------------------------------------------
* Includes investments in common stocks, preferred stocks, capital trusts,
warrants, rights, other interests and short-term investments.
Percent of
Five Largest Foreign Countries* Total Investments
- --------------------------------------------------------------------------------
Canada .................................................. 5.4%
Brazil .................................................. 1.4
Bermuda ................................................. 1.3
Netherlands ............................................. 1.3
Ireland ................................................. 1.2
- --------------------------------------------------------------------------------
* All holdings are denominated in U.S. dollars.
- --------------------------------------------------------------------------------
Average Portfolio Maturity 6.8 years
- --------------------------------------------------------------------------------
6 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
Schedule of Investments (in U.S. dollars)
Face
Amount Corporate Bonds Value
==========================================================================================
Aerospace & Defense--5.0%
$ 3,550,000 Alliant Techsystems, Inc., 3% due 8/15/2024 (a)(g) $ 4,100,250
DRS Technologies, Inc.:
2,425,000 6.875% due 11/01/2013 2,418,938
375,000 6.625% due 2/01/2016 376,875
1,500,000 Esterline Technologies Corp., 7.75%
due 6/15/2013 1,552,500
1,225,000 K&F Acquisition, Inc., 7.75% due 11/15/2014 1,249,500
L-3 Communications Corp.:
2,125,000 6.375% due 10/15/2015 2,119,688
2,120,000 3% due 8/01/2035 (a)(g) 2,175,650
2,725,000 Standard Aero Holdings, Inc., 8.25%
due 9/01/2014 2,398,000
2,700,000 Transdigm, Inc., 8.375% due 7/15/2011 2,821,500
4,525,000 Vought Aircraft Industries, Inc., 8% due 7/15/2011 4,242,188
-------------
23,455,089
==========================================================================================
Airlines--1.6%
6,000,000 American Airlines, Inc. Class C, 7.80%
due 4/01/2008 5,961,347
Continental Airlines, Inc.:
205,392 Series 1997-4-B, 6.90% due 1/02/2017 190,767
268,767 Series 1998-1-C, 6.541% due 9/15/2009 252,707
1,123,015 Series 2001-1 Class C, 7.033%
due 6/15/2011 1,036,024
-------------
7,440,845
==========================================================================================
Automotive--0.5%
1,200,000 General Motors Acceptance Corp., 7.25%
due 3/02/2011 1,096,400
1,509,000 Metaldyne Corp.,10% due 11/01/2013 1,380,735
-------------
2,477,135
==========================================================================================
Broadcasting--4.2%
1,140,000 Emmis Communications Corp.,10.366%
due 6/15/2012 (c) 1,140,000
1,850,000 Granite Broadcasting Corp., 9.75%
due 12/01/2010 1,674,250
1,800,000 Nexstar Finance, Inc., 7% due 1/15/2014 1,687,500
Paxson Communications Corp. (c)(g):
3,025,000 7.777% due 1/15/2012 3,025,000
1,525,000 10.777% due 1/15/2013 1,475,438
4,100,000 Salem Communications Corp., 7.75%
due 12/15/2010 4,207,625
600,000 Sinclair Broadcast Group, Inc., 8% due 3/15/2012 612,750
3,050,000 Sirius Satellite Radio, Inc., 9.625% due 8/01/2013 2,989,000
3,550,000 Young Broadcasting, Inc., 8.75% due 1/15/2014 2,982,000
-------------
19,793,563
==========================================================================================
Cable--International--0.6%
New Skies Satellites NV:
1,225,000 9.573% due 11/01/2011 (c) 1,264,813
1,475,000 9.125% due 11/01/2012 1,585,625
-------------
2,850,438
==========================================================================================
Cable--U.S.--8.8%
1,250,000 Adelphia Communications Corp., 6%
due 2/15/2006 (a)(i)(l) 31,250
3,550,000 CSC Holdings, Inc. Series B, 7.625%
due 4/01/2011 3,576,625
Cablevision Systems Corp. Series B:
100,000 8.716% due 4/01/2009 (c) 103,375
3,900,000 8% due 4/15/2012 3,831,750
2,950,000 Century Communications Series B, 9.05%*
due 1/15/2008 (b) 1,593,000
3,000,000 Charter Communications Holdings LLC, 9.625%
due 11/15/2009 2,295,000
2,475,000 Charter Communications Holdings II LLC,10.25%
due 9/15/2010 2,468,812
905,000 Charter Communications, Inc., 5.875%
due 11/16/2009 (a)(g) 648,206
Intelsat Bermuda Ltd. (g):
3,925,000 9.609% due 1/15/2012 (c) 4,003,500
4,325,000 8.625% due 1/15/2015 4,487,187
981,000 Loral Spacecom Corp.,14% due 10/15/2015 (f) 1,172,295
3,725,000 Mediacom Broadband LLC,11% due 7/15/2013 3,985,750
3,650,000 Mediacom LLC, 9.50% due 1/15/2013 3,650,000
3,313,000 PanAmSat Corp., 9% due 8/15/2014 3,495,215
3,025,000 Quebecor Media, Inc., 7.75% due 3/15/2016 (g) 3,100,625
2,950,000 Rainbow National Services LLC,10.375%
due 9/01/2014 (g) 3,337,188
-------------
41,779,778
==========================================================================================
Chemicals--4.2%
2,311,000 BCP Caylux Holdings Luxembourg SCA, 9.625%
due 6/15/2014 2,585,431
2,317,000 Huntsman International, LLC,10.125%
due 7/01/2009 2,374,925
3,050,000 Innophos, Inc., 8.875% due 8/15/2014 (g) 3,141,500
1,500,000 Millennium America, Inc., 9.25% due 6/15/2008 1,541,250
Nalco Co.:
750,000 7.75% due 11/15/2011 763,125
1,725,000 8.875% due 11/15/2013 1,806,938
1,352,000 Nalco Finance Holdings, Inc., 9.161%*
due 2/01/2014 1,000,480
1,750,000 Nova Chemicals Corp., 7.561%
due 11/15/2013 (c) 1,785,000
3,575,000 Omnova Solutions, Inc.,11.25% due 6/01/2010 3,762,688
1,225,000 Tronox Worldwide LLC, 9.50% due 12/01/2012 (g) 1,280,125
-------------
20,041,462
==========================================================================================
Consumer--Durables--0.9%
2,150,000 Sealy Mattress Co., 8.25% due 6/15/2014 2,246,750
900,000 Simmons Bedding Co., 7.875% due 1/15/2014 864,000
1,167,000 Tempur-Pedic, Inc.,10.25% due 8/15/2010 1,248,690
-------------
4,359,440
==========================================================================================
Consumer--Non-Durables--4.2%
3,325,000 Chattem, Inc., 7% due 3/01/2014 3,341,625
4,500,000 Church & Dwight Co., Inc., 6% due 12/15/2012 4,477,500
5,450,000 Hines Nurseries, Inc.,10.25% due 10/01/2011 5,443,187
3,000,000 Quiksilver, Inc., 6.875% due 4/15/2015 2,895,000
3,425,000 Samsonite Corp., 8.875% due 6/01/2011 3,621,938
-------------
19,779,250
==========================================================================================
Diversified Media--7.8%
4,525,000 CBD Media, Inc., 8.625% due 6/01/2011 4,598,531
3,500,000 CanWest Media, Inc., 8% due 9/15/2012 3,587,500
2,171,000 Dex Media West LLC, 9.875% due 8/15/2013 2,404,382
4,075,000 Houghton Mifflin Co., 8.25% due 2/01/2011 4,258,375
5,798,000 Liberty Media Corp., 0.75% due 3/30/2023 (a) 6,203,860
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 7
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
==========================================================================================
Diversified Media (concluded)
RH Donnelley Corp. (g):
$ 1,150,000 6.875% due 1/15/2013 $ 1,081,000
2,275,000 8.875% due 1/15/2016 2,374,531
2,150,000 Series A-2, 6.875% due 1/15/2013 2,021,000
2,150,000 Six Flags, Inc., 9.625% due 6/01/2014 2,182,250
2,650,000 Universal City Florida Holding Co. I, 9.43%
due 5/01/2010 (c) 2,689,750
5,175,000 Yell Finance BV, 11.201%* due 8/01/2011 5,349,656
-------------
36,750,835
==========================================================================================
Energy--Exploration & Production--3.0%
2,425,000 Belden & Blake Corp., 8.75% due 7/15/2012 2,522,000
2,400,000 Chaparral Energy, Inc., 8.50% due 12/01/2015 (g) 2,538,000
3,050,000 Compton Petroleum Finance Corp., 7.625%
due 12/01/2013 3,118,625
1,200,000 Encore Acquisition Co., 6.25% due 4/15/2014 1,176,000
Plains Exploration & Production Co.:
400,000 7.125% due 6/15/2014 417,000
4,000,000 Series B, 8.75% due 7/01/2012 4,300,000
-------------
14,071,625
==========================================================================================
Energy--Other--3.6%
750,000 Copano Energy LLC, 8.125% due 3/01/2016 (g) 780,000
2,900,000 Dresser, Inc., 9.375% due 4/15/2011 3,045,000
600,000 Ferrellgas Escrow LLC, 6.75% due 5/01/2014 585,000
3,650,000 Ferrellgas Partners LP, 8.75% due 6/15/2012 3,695,625
3,650,000 SemGroup LP, 8.75% due 11/15/2015 (g) 3,777,750
2,300,000 Star Gas Partners LP, 10.25% due 2/15/2013 2,328,750
3,025,000 Suburban Propane Partners, LP, 6.875%
due 12/15/2013 2,919,125
-------------
17,131,250
==========================================================================================
Food & Drug--0.2%
700,000 Stripes Acquisition LLC,10.625%
due 12/15/2013 (g) 731,500
==========================================================================================
Food & Tobacco--2.9%
1,225,000 AmeriQual Group LLC, 9% due 4/01/2012 (g) 1,286,250
4,550,000 Cott Beverages USA, Inc., 8% due 12/15/2011 4,675,125
Del Monte Corp.:
1,850,000 8.625% due 12/15/2012 1,970,250
1,525,000 6.75% due 2/15/2015 1,525,000
600,000 Michael Foods, Inc., 8% due 11/15/2013 612,000
3,600,000 New World Pasta Co., 9.25% due 2/15/2009 (b) 216,000
3,350,000 Smithfield Foods, Inc. Series B, 8% due 10/15/2009 3,500,750
-------------
13,785,375
==========================================================================================
Gaming--10.3%
5,000,000 Boyd Gaming Corp., 8.75% due 4/15/2012 5,350,000
1,400,000 CCM Merger, Inc., 8% due 8/01/2013 (g) 1,393,000
2,075,000 Caesars Entertainment, Inc., 7.875%
due 3/15/2010 2,212,469
Galaxy Entertainment Finance Co. Ltd. (g):
1,600,000 9.655% due 12/15/2010 (c) 1,652,000
850,000 9.875% due 12/15/2012 879,750
2,650,000 Inn of the Mountain Gods Resort & Casino,12%
due 11/15/2010 2,799,062
1,825,000 Isle of Capri Casinos, Inc., 9% due 3/15/2012 1,939,063
2,375,000 Little Traverse Bay Bands of Odawa Indians,
10.25% due 2/15/2014 (g) 2,345,313
2,425,000 MGM Mirage, 9.75% due 6/01/2007 2,540,188
5,175,000 Majestic Star Casino LLC, 9.50% due 10/15/2010 5,537,250
1,525,000 Mirage Resorts, Inc., 6.75% due 2/01/2008 1,545,969
3,050,000 Penn National Gaming, Inc., 6.875%
due 12/01/2011 3,111,000
3,800,000 Poster Financial Group, Inc., 8.75%
due 12/01/2011 3,990,000
4,175,000 Resorts International Hotel and Casino, Inc.,
11.50% due 3/15/2009 4,602,938
1,525,000 San Pasqual Casino, 8% due 9/15/2013 (g) 1,555,500
2,000,000 Station Casinos, Inc., 6.625% due 3/15/2018 (g) 2,000,000
2,775,000 Tunica-Biloxi Gaming Authority, 9%
due 11/15/2015 (g) 2,844,375
2,425,000 Wynn Las Vegas LLC, 6.625% due 12/01/2014 2,388,625
-------------
48,686,502
==========================================================================================
Health Care--8.2%
1,200,000 Athena Neurosciences Finance LLC, 7.25%
due 2/21/2008 1,167,000
5,450,000 DaVita, Inc., 7.25% due 3/15/2015 5,559,000
2,375,000 Elan Finance Plc, 8.749% due 11/15/2011 (c) 2,297,812
3,025,000 HCA, Inc., 5.50% due 12/01/2009 2,976,521
3,650,000 HealthSouth Corp., 8.375% due 10/01/2011 4,106,250
Mylan Laboratories, Inc.:
1,800,000 5.75% due 8/15/2010 1,795,500
900,000 6.375% due 8/15/2015 910,125
Select Medical Corp.:
2,200,000 7.625% due 2/01/2015 1,881,000
3,050,000 10.82% due 9/15/2015 (c)(g) 2,455,250
1,500,000 Tenet Healthcare Corp., 9.875% due 7/01/2014 1,526,250
3,050,000 Triad Hospitals, Inc., 7% due 5/15/2012 3,111,000
4,075,000 U.S. Oncology, Inc., 9% due 8/15/2012 4,360,250
1,500,000 Vanguard Health Holding Co. II, LLC, 9%
due 10/01/2014 1,563,750
5,025,000 Ventas Realty LP, 6.75% due 6/01/2010 5,131,781
-------------
38,841,489
==========================================================================================
Housing--3.5%
Building Materials Corp. of America:
7,350,000 8% due 10/15/2007 7,469,437
3,325,000 8% due 12/01/2008 3,370,719
1,225,000 Forest City Enterprises, Inc., 7.625%
due 6/01/2015 1,281,656
Goodman Global Holding Co., Inc.:
750,000 7.491% due 6/15/2012 (c) 763,125
1,525,000 7.875% due 12/15/2012 1,490,687
1,225,000 Standard-Pacific Corp., 6.50% due 8/15/2010 1,174,469
1,100,000 Texas Industries, Inc., 7.25% due 7/15/2013 1,138,500
-------------
16,688,593
==========================================================================================
Information Technology--7.4%
1,575,000 Activant Solutions, Inc.,10.53%
due 4/01/2010 (c)(g) 1,614,375
2,210,000 Advanced Micro Devices, Inc., 7.75%
due 11/01/2012 2,342,600
3,325,000 Cypress Semiconductor Corp., 1.25%
due 6/15/2008 (a) 4,297,563
3,350,000 Freescale Semiconductor, Inc., 7.35%
due 7/15/2009 (c) 3,433,750
MagnaChip Semiconductor SA:
2,600,000 8.16% due 12/15/2011 (c) 2,639,000
1,950,000 8% due 12/15/2014 1,881,750
8 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
==========================================================================================
Information Technology (concluded)
$ 2,960,000 Quantum Corp., 4.375% due 8/01/2010 (a) $ 3,011,800
SunGard Data Systems, Inc. (g):
3,775,000 9.125% due 8/15/2013 4,015,656
2,525,000 9.431% due 8/15/2013 (c) 2,663,875
1,475,000 10.25% due 8/15/2015 1,546,906
1,200,000 Telcordia Technologies Inc.,10% due 3/15/2013 (g) 1,104,000
1,850,000 UGS Corp.,10% due 6/01/2012 2,028,063
4,875,000 Viasystems, Inc.,10.50% due 1/15/2011 4,680,000
-------------
35,259,338
==========================================================================================
Leisure--1.5%
FelCor Lodging LP:
4,650,000 8.83% due 6/01/2011 (c) 4,836,000
2,000,000 9% due 6/01/2011 2,210,000
-------------
7,046,000
==========================================================================================
Manufacturing--4.7%
3,325,000 CPI Holdco, Inc.,10.561% due 2/01/2015 (c) 3,441,375
1,375,000 Chart Industries, Inc., 9.125% due 10/15/2015 (g) 1,423,125
5,750,000 EaglePicher Inc., 9.75% due 9/01/2013 (b) 3,996,250
3,050,000 Invensys Plc, 9.875% due 3/15/2011 (g) 3,156,750
2,055,000 Medis Technologies Ltd., 6% due 7/15/2010 (a)(g) 2,260,500
1,525,000 Mueller Group, Inc.,10% due 5/01/2012 1,669,875
1,250,000 Rexnord Corp.,10.125% due 12/15/2012 1,375,000
1,500,000 Superior Essex Communications LLC, 9%
due 4/15/2012 1,515,000
3,650,000 Trimas Corp., 9.875% due 6/15/2012 3,212,000
-------------
22,049,875
==========================================================================================
Metal--Other--1.9%
2,400,000 Foundation PA Coal Co., 7.25% due 8/01/2014 2,460,000
3,650,000 Indalex Holding Corp.,11.50% due 2/01/2014 (g) 3,577,000
3,250,000 Novelis, Inc., 7.75% due 2/15/2015 3,152,500
-------------
9,189,500
==========================================================================================
Packaging--1.9%
3,050,000 Graham Packing Co., Inc., 9.875%
due 10/15/2014 3,095,750
Owens-Brockway:
4,600,000 8.875% due 2/15/2009 4,789,750
600,000 8.25% due 5/15/2013 625,500
2,000,000 Pliant Corp., 13% due 6/01/2010 (b) 490,000
-------------
9,001,000
==========================================================================================
Paper--5.2%
3,050,000 Abitibi-Consolidated, Inc., 8.41%
due 6/15/2011 (c) 2,966,125
1,525,000 Boise Cascade LLC, 7.475% due 10/15/2012 (c) 1,517,375
4,250,000 Bowater, Inc., 7.91% due 3/15/2010 (c) 4,250,000
3,125,000 Domtar, Inc., 7.125% due 8/15/2015 2,617,187
Graphic Packaging International Corp.:
1,275,000 8.50% due 8/15/2011 1,281,375
2,400,000 9.50% due 8/15/2013 2,280,000
1,475,000 JSG Funding Plc, 9.625% due 10/01/2012 1,545,063
NewPage Corp.:
2,275,000 10.93% due 5/01/2012 (c) 2,388,750
2,275,000 12% due 5/01/2013 2,331,875
3,275,000 Norske Skog Canada Ltd. Series D, 8.625%
due 6/15/2011 3,242,250
-------------
24,420,000
==========================================================================================
Retail--2.0%
900,000 General Nutrition Centers, Inc., 8.625%
due 1/15/2011 900,000
3,925,000 Jean Coutu Group, Inc., 8.50% due 8/01/2014 3,748,375
Neiman-Marcus Group, Inc. (g):
2,125,000 9% due 10/15/2015 2,244,531
2,425,000 10.375% due 10/15/2015 2,552,313
-------------
9,445,219
==========================================================================================
Service--6.7%
4,025,000 Allied Waste North America, Inc. Series B, 8.875%
due 4/01/2008 4,236,312
4,250,000 Corrections Corp. of America, 7.50%
due 5/01/2011 4,393,437
2,725,000 Dycom Industries, Inc., 8.125% due 10/15/2015 (g) 2,834,000
1,975,000 MSW Energy Holdings LLC, 8.50% due 9/01/2010 2,103,375
750,000 MSW Energy Holdings II LLC, 7.375%
due 9/01/2010 776,250
3,000,000 Mac-Gray Corp., 7.625% due 8/15/2015 3,075,000
4,225,000 Service Corp. International, 7.50%
due 6/15/2017 (g) 4,314,781
5,150,000 United Rentals North America, Inc., 7.75%
due 11/15/2013 5,169,313
4,650,000 Waste Services, Inc., 9.50% due 4/15/2014 4,766,250
-------------
31,668,718
==========================================================================================
Steel--1.2%
3,050,000 Chaparral Steel Co.,10% due 7/15/2013 3,370,250
2,000,000 Ucar Finance, Inc.,10.25% due 2/15/2012 2,130,000
-------------
5,500,250
==========================================================================================
Telecommunications--5.9%
ADC Telecommunications, Inc. (a):
2,874,000 1% due 6/15/2008 3,064,403
900,000 5.045% due 6/15/2013 (c) 977,625
3,600,000 Eircom Funding Plc, 8.25% due 8/15/2013 3,847,500
3,050,000 Inmarsat Finance Plc, 7.625% due 6/30/2012 3,145,312
4,350,000 LCI International, Inc., 7.25% due 6/15/2007 4,398,938
650,000 Qwest Communications International, Inc.,
7.50% due 2/15/2014 667,875
Qwest Corp.:
2,350,000 8.16% due 6/15/2013 (c) 2,567,375
850,000 7.625% due 6/15/2015 911,625
536,000 Terremark Worldwide, Inc., 9%
due 6/15/2009 (a)(g) 477,040
1,400,000 Time Warner Telecom Holdings, Inc., 8.749%
due 2/15/2011 (c) 1,429,750
6,150,000 Time Warner Telecom, Inc.,10.125%
due 2/01/2011 6,457,500
-------------
27,944,943
==========================================================================================
Transportation--1.1%
925,000 OMI Corp., 7.625% due 12/01/2013 948,125
3,750,000 Teekay Shipping Corp., 8.875% due 7/15/2011 4,162,500
-------------
5,110,625
==========================================================================================
Utility--10.5%
The AES Corp.:
7,199,000 9.375% due 9/15/2010 7,900,902
2,475,000 8.75% due 5/15/2013 (g) 2,685,375
3,025,000 Aquila, Inc., 7.625% due 11/15/2009 3,100,625
2,900,000 Centerpoint Energy, Inc. Series B, 3.75%
due 5/15/2023 (a) 3,400,250
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 9
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
==========================================================================================
Utility (concluded)
$ 3,342,000 ESI Tractebel Acquisition Corp. Series B, 7.99%
due 12/30/2011 $ 3,495,187
2,975,000 Edison Mission Energy, 9.875% due 4/15/2011 3,428,687
3,125,000 Mirant North America LLC, 7.375%
due 12/31/2013 (g) 3,207,031
NRG Energy, Inc.:
2,450,000 7.25% due 2/01/2014 2,511,250
2,300,000 7.375% due 2/01/2016 2,369,000
Nevada Power Co.:
910,000 9% due 8/15/2013 1,006,238
3,120,000 Series E,10.875% due 10/15/2009 3,378,314
3,400,000 Reliant Energy, Inc., 9.50% due 7/15/2013 3,468,000
2,600,000 Sierra Pacific Power Co. Series A, 8%
due 6/01/2008 2,723,500
1,825,000 Sierra Pacific Resources, 8.625% due 3/15/2014 1,991,685
1,550,000 Southern Natural Gas Co., 8.875% due 3/15/2010 1,657,913
3,277,842 Tenaska Alabama Partners LP, 7%
due 6/30/2021 (g) 3,383,437
-------------
49,707,394
==========================================================================================
Wireless Communications--4.8%
2,500,000 Centennial Cellular Operating Co. LLC,10.125%
due 6/15/2013 2,737,500
1,500,000 Dobson Cellular Systems, 9.43%
due 11/01/2011 (c) 1,560,000
1,350,000 Dobson Communications Corp., 8.85%
due 10/15/2012 (c)(m) 1,336,500
2,750,000 IWO Holdings, Inc., 8.35% due 1/15/2012 (c) 2,863,437
Rogers Wireless Communications, Inc.:
1,300,000 8.035% due 12/15/2010 (c) 1,345,500
250,000 8% due 12/15/2012 266,875
5,025,000 6.375% due 3/01/2014 5,075,250
Rural Cellular Corp.:
1,025,000 9.41% due 3/15/2010 (c) 1,045,500
3,025,000 8.25% due 3/15/2012 3,176,250
1,365,000 SBA Communications Corp., 8.50%
due 12/01/2012 1,501,500
1,944,000 SBA Telecommunications, Inc., 7.415%*
due 12/15/2011 1,841,940
-------------
22,750,252
- ------------------------------------------------------------------------------------------
Total Corporate Bonds
(Cost--$580,022,942)--124.3% 587,757,283
==========================================================================================
Floating Rate Loan Interests (d)
==========================================================================================
Cable--U.S.--1.6%
7,950,000 Century Cable Holdings LLC, Discretionary Term
Loan, 9.50% due 12/31/2009 7,791,000
==========================================================================================
Chemicals--1.0%
4,650,000 Wellman, Inc. Second Lien Term Loan,11.43%
due 2/10/2010 4,772,063
==========================================================================================
Consumer--Durables--0.5%
2,125,000 Simmons Co. Term Loan, 8.50% due 6/19/2012 2,153,887
- ------------------------------------------------------------------------------------------
Total Floating Rate Loan Interests
(Cost--$14,215,553)--3.1% 14,716,950
==========================================================================================
Foreign Government Obligations
==========================================================================================
Government--Foreign--2.5%
Brazilian Government International Bond:
3,100,000 8.75% due 2/04/2025 3,743,250
3,100,000 8.25% due 1/20/2034 3,689,000
1,800,000 Philippine Government International Bond,
8.375% due 2/15/2011 1,950,750
1,750,000 Turkey Government International Bond, 6.875%
due 3/17/2036 1,776,250
600,000 Venezuela Government International Bond,
7.65% due 4/21/2025 654,000
- ------------------------------------------------------------------------------------------
Total Foreign Government Obligations
(Cost--$10,378,496)--2.5% 11,813,250
==========================================================================================
Shares
Held Common Stocks
==========================================================================================
Airlines--0.2%
129,348 ABX Air, Inc. (i) 1,037,371
==========================================================================================
Cable--U.S.--0.8%
137,986 Loral Space & Communications Ltd. (i) 3,721,482
==========================================================================================
Energy--Other--0.0%
4,201 Trico Marine Services, Inc. (i) 122,375
==========================================================================================
Paper--0.1%
149,825 Western Forest Products, Inc. (i) 223,826
- ------------------------------------------------------------------------------------------
Total Common Stocks
(Cost--$5,220,470)--1.1% 5,105,054
==========================================================================================
==========================================================================================
Preferred Securities
- ------------------------------------------------------------------------------------------
Preferred Stocks
==========================================================================================
Automotive--0.5%
158,300 General Motors Corp. Series C, 6.25% (a) 2,627,780
==========================================================================================
Cable--U.S.--0.4%
8,707 Loral Spacecom Corp. Series A, 12% (f)(g) 1,723,986
- ------------------------------------------------------------------------------------------
Total Preferred Stocks
(Cost--$5,680,551)--0.9% 4,351,766
==========================================================================================
Face
Amount Capital Trusts
==========================================================================================
Health Care--1.3%
$ 5,850,000 Fresenius Medical Care Capital Trust II, 7.875%
due 2/01/2008 6,054,750
- ------------------------------------------------------------------------------------------
Total Capital Trusts
(Cost--$5,533,066)--1.3% 6,054,750
- ------------------------------------------------------------------------------------------
Total Preferred Securities
(Cost--$11,213,617)--2.2% 10,406,516
==========================================================================================
10 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
Schedule of Investments (continued) (in U.S. dollars)
Shares
Held Warrants (h) Value
==========================================================================================
Health Care--0.0%
52,465 HealthSouth Corp.
(expires 1/16/2014) $ 131,163
==========================================================================================
Paper--0.0%
1,100 MDP Acquisitions Plc
(expires 10/01/2013) 11,000
==========================================================================================
Wireless Communications--0.1%
1,350 American Tower Corp.
(expires 8/01/2008) 605,111
- ------------------------------------------------------------------------------------------
Total Warrants
(Cost--$87,831)--0.1% 747,274
==========================================================================================
Rights (k)
==========================================================================================
Paper--0.0%
149,825 Western Forest Products, Inc. 2,633
- ------------------------------------------------------------------------------------------
Total Rights
(Cost--$0)--0.0% 2,633
==========================================================================================
Beneficial
Interest Other Interests (e)
==========================================================================================
Airlines--0.6%
6,615,420 US Airways Group, Inc. (Certificate of
Beneficial Interest) 2,910,785
==========================================================================================
Cable--U.S.--0.0%
6,200,000 Loral Cyberstar Escrow 62
- ------------------------------------------------------------------------------------------
Total Other Interests
(Cost--$1,786,163)--0.6% 2,910,847
==========================================================================================
Short-Term Securities
==========================================================================================
1,842 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I, 4.42% (c)(j) 1,842
- ------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$1,842)--0.0% 1,842
==========================================================================================
Total Investments (Cost--$622,926,914**)--133.9% 633,461,649
Liabilities in Excess of Other Assets--(33.9%) (160,427,310)
-------------
Net Assets--100.0% $ 473,034,339
=============
* Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
** The cost and unrealized appreciation (depreciation) of investments as of
February 28, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ........................................ $624,915,785
============
Gross unrealized appreciation ......................... $ 23,593,165
Gross unrealized depreciation ......................... (15,047,301)
------------
Net unrealized appreciation ........................... $ 8,545,864
============
(a) Convertible security.
(b) Non-income producing security; issuer filed for bankruptcy or is in
default of interest payments.
(c) Floating rate note.
(d) Floating rate loan interests in which the Fund invests generally pay
interest at rates that are periodically redetermined by reference to a
base lending rate plus a premium. The base lending rates are generally (i)
the lending rate offered by one or more major European banks, such as
LIBOR (London InterBank Offered Rate), (ii) the prime rate offered by one
or more major U.S. banks or (iii) the certificate of deposit rate.
(e) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(f) Represents a pay-in-kind security which may pay interest/dividends in
additional face/shares.
(g) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(h) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(i) Non-income producing security.
(j) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
---------------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
---------------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC Cash Sweep Series I $(40,518) $ 10,491
---------------------------------------------------------------------------------
(k) The rights may be exercised until 3/09/2006.
(l) As a result of bankruptcy proceedings, the company did not repay the
principal amount of the security upon maturity.
(m) This security or a portion thereof, has been purchased on a "when-issued"
basis.
o For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets.
o Swaps outstanding as of February 28, 2006 were as follows:
----------------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
----------------------------------------------------------------------------------
Sold credit default protection on General Motors
Corp. and receive 5%
Broker, Morgan Stanley Capital Services, Inc.
Expires June 2006 $1,225,000 $ 7,331
Sold credit default protection on General Motors
Acceptance Corp. and receive 4%
Broker, Morgan Stanley Capital Services, Inc.
Expires June 2006 $1,225,000 586
Sold credit default protection on General Motors
Acceptance Corp. and receive 3.50%
Broker, JPMorgan Chase Bank
Expires March 2007 $1,225,000 (16,553)
Sold credit default protection on General Motors
Acceptance Corp. and receive 4.50%
Broker, Morgan Stanley Capital Services, Inc.
Expires March 2007 $1,225,000 (4,594)
Sold credit default protection on General
Motors Corp. and receive 4.40%
Broker, Morgan Stanley Capital Services, Inc.
Expires June 2007 $ 600,000 (62,826)
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 11
Schedule of Investments (concluded) (in U.S. dollars)
Swaps outstanding as of February 28, 2006 (concluded):
----------------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
----------------------------------------------------------------------------------
Sold credit default protection on General
Motors Corp. and receive 8%
Broker, Morgan Stanley Capital Services, Inc.
Expires June 2007 $ 600,000 $(38,929)
Sold credit default protection on Russian
Federation and receive 0.73%
Broker, UBS Warburg
Expires October 2010 $2,400,000 25,894
Sold credit default protection on Federative
Republic of Brazil and receive 3.44%
Broker, Morgan Stanley Capital Services, Inc.
Expires October 2010 $1,500,000 149,247
Bought credit default protection on Chemtura
Corp. and pay 1.35%
Broker, Deutsche Bank AG London
Expires December 2010 $ 900,000 (14,875)
Bought credit default protection on Chemtura
Corp. and pay 1.4286%
Broker, Morgan Stanley Capital Services, Inc.
Expires December 2010 $2,125,000 (42,162)
Sold credit default protection on Dow Jones
CDX Emerging Markets Index Series 4 and
receive 1.80%
Broker, Morgan Stanley Capital Services, Inc.
Expires December 2010 $1,500,000 64,726
Sold credit default protection on Dow Jones
CDX Emerging Markets Index Series 4 and
receive 1.80%
Broker, Morgan Stanley Capital Services, Inc.
Expires December 2010 $4,600,000 258,294
----------------------------------------------------------------------------------
Total $326,139
========
See Notes to Financial Statements.
12 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
Statement of Assets, Liabilities and Capital
As of February 28, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified cost--$622,925,072) ... $ 633,459,807
Investments in affiliated securities, at value (identified cost--$1,842) ........... 1,842
Cash ............................................................................... 97,660
Unrealized appreciation on swaps ................................................... 506,078
Receivables:
Interest ........................................................................ $ 11,071,560
Securities sold ................................................................. 2,487,468
Swaps ........................................................................... 85,525 13,644,553
-------------
Prepaid expenses and other assets .................................................. 78,821
-------------
Total assets ....................................................................... 647,788,761
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Loans .............................................................................. 160,500,000
Unrealized depreciation on swaps ................................................... 179,939
Swaps premiums received ............................................................ 122,389
Payables:
Securities purchased ............................................................ 13,305,474
Investment adviser .............................................................. 241,691
Dividends to shareholders ....................................................... 228,101
Interest on loans ............................................................... 84,692
Swaps ........................................................................... 8,384
Other affiliates ................................................................ 4,250 13,872,592
-------------
Accrued expenses and other liabilities ............................................. 79,502
-------------
Total liabilities .................................................................. 174,754,422
-------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ......................................................................... $ 473,034,339
=============
===================================================================================================================================
Capital
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.10 par value, 200,000,000 shares authorized ........................ $ 3,294,409
Paid-in capital in excess of par ................................................... 466,527,839
Distributions in excess of investment income--net .................................. $ (1,548,072)
Accumulated realized capital losses--net ........................................... (6,100,711)
Unrealized appreciation--net ....................................................... 10,860,874
-------------
Total accumulated earnings--net .................................................... 3,212,091
-------------
Total capital--Equivalent to $14.36 per share based on 32,944,087 shares of
capital stock outstanding (market price--$13.80) .................................. $ 473,034,339
=============
See Notes to Financial Statements.
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 13
Statement of Operations
For the Six Months Ended February 28, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Interest (including $10,491 from affiliates) ....................................... $ 25,755,555
Dividends .......................................................................... 160,156
Other .............................................................................. 373,332
-------------
Total income ....................................................................... 26,289,043
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Loan interest expense .............................................................. $ 3,874,870
Investment advisory fees ........................................................... 1,959,718
Borrowing costs .................................................................... 132,564
Accounting services ................................................................ 84,730
Professional fees .................................................................. 40,985
Transfer agent fees ................................................................ 33,927
Printing and shareholder reports ................................................... 25,813
Custodian fees ..................................................................... 19,692
Pricing services ................................................................... 14,980
Directors' fees and expenses ....................................................... 12,667
Listing fees ....................................................................... 11,570
Other .............................................................................. 19,101
-------------
Total expenses ..................................................................... 6,230,617
-------------
Investment income--net ............................................................. 20,058,426
-------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ................................................................ (5,909,080)
Swaps--net ...................................................................... 144,619 (5,764,461)
-------------
Change in unrealized appreciation/depreciation on:
Investments--net ................................................................ (1,154,823)
Swaps--net ...................................................................... 316,349 (838,474)
------------------------------
Total realized and unrealized loss--net ............................................ (6,602,935)
-------------
Net Increase in Net Assets Resulting from Operations ............................... $ 13,455,491
=============
See Notes to Financial Statements.
14 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 2006 2005
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................................. $ 20,058,426 $ 48,150,672
Realized gain (loss)--net .......................................................... (5,764,461) 22,868,474
Change in unrealized appreciation/depreciation--net ................................ (838,474) (16,546,937)
------------------------------
Net increase in net assets resulting from operations ............................... 13,455,491 54,472,209
------------------------------
===================================================================================================================================
Dividends & Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................................. (22,333,956) (53,736,409)
Realized gain--net ................................................................. (18,516,619) (32,164,606)
------------------------------
Net decrease in net assets resulting from dividends and distributions to
shareholders ...................................................................... (40,850,575) (85,901,015)
------------------------------
===================================================================================================================================
Capital Stock Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in reinvestment of dividends
and distributions ................................................................. 126,423 3,234,101
------------------------------
Net increase in net assets derived from capital stock transactions ................. 126,423 3,234,101
------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets ....................................................... (27,268,661) (28,194,705)
Beginning of period ................................................................ 500,303,000 528,497,705
------------------------------
End of period* ..................................................................... $ 473,034,339 $ 500,303,000
==============================
* Undistributed (distributions in excess of) investment income--net ............. $ (1,548,072) $ 727,458
==============================
See Notes to Financial Statements.
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 15
Statement of Cash Flows
For the Six Months Ended February 28, 2006
===================================================================================================================================
Cash Provided by Operating Activities
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations ........................................... $ 13,455,491
Adjustments to reconcile net increase in net assets resulting from operations
to net cash provided by operating activities:
Decrease in receivables ..................................................................... 1,249,932
Increase in prepaid expenses and other assets ............................................... (9,569)
Increase in accrued expenses and other liabilities .......................................... (49,828)
Realized and unrealized loss--net ........................................................... 6,602,935
Amortization of discount .................................................................... (879,749)
Proceeds from sales and paydowns of long-term investments ...................................... 211,252,437
Other investment related transactions .......................................................... 144,653
Purchases of long-term investments ............................................................. (163,170,798)
Proceeds from sales and maturities of short-term investments--net .............................. 40,518
-------------
Net cash provided by operating activities ...................................................... 68,636,022
-------------
===================================================================================================================================
Cash Used for Financing Activities
- -----------------------------------------------------------------------------------------------------------------------------------
Cash receipts from borrowings .................................................................. 132,500,000
Cash payments on borrowings .................................................................... (160,500,000)
Dividends and distributions paid to shareholders ............................................... (40,756,486)
-------------
Net cash used for financing activities ......................................................... (68,756,486)
-------------
===================================================================================================================================
Cash
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash ........................................................................... (120,464)
Cash at beginning of period .................................................................... 218,124
-------------
Cash at end of period .......................................................................... $ 97,660
=============
===================================================================================================================================
Cash Flow Information
- -----------------------------------------------------------------------------------------------------------------------------------
Cash paid for interest ......................................................................... $ 3,925,422
=============
===================================================================================================================================
Non-Cash Financing Activities
- -----------------------------------------------------------------------------------------------------------------------------------
Capital shares issued in reinvestment of dividends and distributions to
shareholders .................................................................................. $ 126,423
=============
See Notes to Financial Statements.
16 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
Financial Highlights
For the Period
For the Six For the Year Ended November 30,
Months Ended August 31, 2001+ to
The following per share data and ratios have been derived February 28, ---------------------------------- August 31,
from information provided in the financial statements. 2006 2005 2004 2003 2002
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ....................... $ 15.19 $ 16.15 $ 14.90 $ 12.54 $ 14.33
-----------------------------------------------------------
Investment income--net .................................. .61*** 1.47*** 1.67*** 1.68 1.08
Realized and unrealized gain (loss)--net ................ (.22) .19 1.27 2.37 (1.92)
-----------------------------------------------------------
Total from investment operations ........................... .39 1.66 2.94 4.05 (.84)
-----------------------------------------------------------
Less dividends and distributions:
Investment income--net .................................. (.66) (1.64) (1.63) (1.69) (.93)
Realized gain--net ...................................... (.56) (.98) (.06) -- --
-----------------------------------------------------------
Total dividends and distributions .......................... (1.22) (2.62) (1.69) (1.69) (.93)
-----------------------------------------------------------
Offering costs resulting from the issuance of Common Stock . -- -- -- --++ (.02)
-----------------------------------------------------------
Net asset value, end of period ............................. $ 14.36 $ 15.19 $ 16.15 $ 14.90 $ 12.54
===========================================================
Market price per share, end of period ...................... $ 13.80 $ 15.04 $ 15.44 $ 14.47 $ 12.50
===========================================================
=================================================================================================================================
Total Investment Return**
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ......................... 3.56%@ 11.03% 20.92%@@ 34.62% (6.31%)@
===========================================================
Based on market price per share ............................ .51%@ 14.99% 19.04% 31.16% (6.61%)@
===========================================================
=================================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and excluding interest expense ..... .99%* .97% .97% 1.05% .63%*
===========================================================
Expenses, net of waiver .................................... 2.62%* 1.99% 1.46% 1.52% .89%*
===========================================================
Expenses ................................................... 2.62%* 1.99% 1.46% 1.52% 1.12%*
===========================================================
Investment income--net ..................................... 8.43%* 9.38% 10.52% 12.22% 10.31%*
===========================================================
=================================================================================================================================
Leverage
- ---------------------------------------------------------------------------------------------------------------------------------
Amount of borrowings outstanding, end of period
(in thousands) ............................................ $160,500 $188,500 $199,700 $170,700 $ 58,400
===========================================================
Average amount of borrowings outstanding during the
period (in thousands) ..................................... $178,670 $184,650 $180,502 $ 93,361 $ 30,993
===========================================================
Average amount of borrowings outstanding per share during
the period*** ............................................. $ 5.42 $ 5.62 $ 5.51 $ 4.25 $ 1.71
===========================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ................... $473,034 $500,303 $528,498 $487,545 $232,421
===========================================================
Portfolio turnover ......................................... 26.82% 47.85% 82.36% 83.95% 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
dif ferent returns. Total investment returns exclude the effects of sales
charges.
*** Based on average shares outstanding.
+ Commencement of operations.
++ Amount is less than $.01 per share.
@ Aggregate total investment return.
@@ Fund Asset Management, L.P. (an affiliate), reimbursed the Fund for the
difference in value of unregistered securities sold by the Fund and the
same security of the issuer that had been registered for resale, which had
no impact on total investment return.
See Notes to Financial Statements.
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 17
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 amended, as a diversified, closed-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim period. 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 daily basis. The Fund's Common Stock
shares are listed on the New York Stock Exchange ("NYSE") under the symbol HYV.
The following is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments -- Debt securities are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values obtained by a pricing service.
Floating rate loan interests are valued at the mean between the last available
bid and asked prices from one or more brokers or dealers as obtained from a
pricing service. Pricing services use valuation matrixes that incorporate both
dealer-supplied valuations and valuation models. The procedures of the pricing
service and its valuations are reviewed by the officers of the Fund under the
general direction of the Board of Directors. Such valuations and procedures will
be reviewed periodically by the Board of Directors of the Fund. 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 OTC market, valuation is the last
asked price (options written) or the last bid price (options purchased). Swap
agreements are valued based upon quoted fair valuations received daily by the
Fund from a pricing service or counterparty. Short-term investments with a
remaining maturity of 60 days or less are valued at amortized cost, which
approximates market value, under which method the investment is valued at cost
and any premium or discount is amortized on a straight line basis to maturity.
Repurchase agreements are valued at cost plus accrued interest. Investments in
open-end investment companies are valued at their net asset value each business
day. Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund.
Equity securities that are held by the Fund, which are traded on stock exchanges
or the Nasdaq National Market, are valued at the last sale price or official
close price on the exchange, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price for long positions, and at the last available asked price for short
positions. In cases where equity securities are traded on more than one
exchange, the securities are valued on the exchange designated as the primary
market by or under the authority of the Board of Directors of the Fund. Long
positions traded in the OTC market, Nasdaq Small Cap or Bulletin Board are
valued at the last available bid price obtained from one or more dealers or
pricing services approved by the Board of Directors of the Fund. Short positions
traded in the OTC market are valued at the last available asked price. Portfolio
securities that are traded both in the OTC market and on a stock exchange are
valued according to the broadest and most representative market.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities, is substantially
completed each day at various times prior to the close of business on the NYSE.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange rates
also are generally determined prior to the close of business on the NYSE.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and the close of
business on the NYSE that may not be reflected in the computation of the Fund's
net asset value. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair 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 Fund's Board of Directors.
(b) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
The Fund invests in foreign securities, which may involve a number of risk
factors and special considerations not present with investments in securities of
U.S. corporations.
18 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
Notes to Financial Statements (continued)
(c) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. 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 may 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. 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. 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 Swaps -- The Fund may enter into swap agreements, which are
over-the-counter contracts in which the Fund and a counterparty agree to
make periodic net payments on a specified notional amount. The net
payments can be made for a set period of time or may be triggered by a
predetermined credit event. The net periodic payments may be based on a
fixed or variable interest rate; the change in market value of a specified
security, basket of securities, or index; or the return generated by a
security. These periodic payments received or made by the Fund are
recorded in the accompanying Statement of Operations as realized gains or
losses, respectively. Gains or losses are also realized upon termination
of the swap agreements. Swaps are marked-to-market daily and changes in
value are recorded as unrealized appreciation (depreciation). Risks
include changes in the returns of the underlying instruments, failure of
the counterparties to perform under the contracts' terms and possible lack
of liquidity with respect to the swap agreements.
(d) 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.
(e) 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.
(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
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 19
Notes to Financial Statements (concluded)
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 ("MLPF&S"), an affiliate of FAM, 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.
In addition, MLPF&S received $16,919 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended February
28, 2006.
For the six months ended February 28, 2006, the Fund reimbursed FAM $5,702 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, MLAM U.K., ML & Co., and/or MLIM, LLC.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
merge ML & Co.'s investment management business, including FAM, with the
investment management business of BlackRock, Inc. The transaction is expected to
close in the third quarter of 2006.
3. Investments:
Purchases and sales (including paydowns) of investments, excluding short-term
securities, for the six months ended February 28, 2006 were $174,903,972 and
$209,416,297, respectively.
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, 2006 and
the year ended August 31, 2005 increased by 8,475 and 205,828 respectively as a
result of dividend reinvestment.
5. Short-Term Borrowings:
On May 24, 2005, the Fund renewed its revolving credit and security agreement
funded by a commercial paper asset securitization program with Citigroup North
America, Inc. ("Citigroup") as Agent, certain secondary backstop lenders, and
certain asset securitization conduits as lenders (the "Lenders"). The agreement
was renewed for one year and has a maximum limit of $250,000,000. Under the
Citigroup program, the conduits will fund advances to the Fund through the
issuance of highly rated commercial paper. As security for its obligations to
the Lenders under the revolving securitization facility, the Fund has granted a
security interest in substantially all of its assets to and in favor of the
Lenders. The interest rate on the Fund's borrowings is based on the interest
rate carried by the commercial paper plus a program fee. The Fund pays
additional borrowing costs including a backstop commitment fee.
The weighted average annual interest rate was 4.37% and the average borrowing
was approximately $178,670,000 for the six months ended February 28, 2006.
6. Distributions to Shareholders:
The Fund paid an ordinary income dividend in the amount of $.095000 per share on
March 31, 2006 to shareholders of record on March 14, 2006.
20 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
Disclosure of Investment Advisory Agreement
Activities of and Composition of the Board of Directors
All but one member of the Board of Directors is an independent director whose
only affiliation with Fund Asset Management, L.P. (the "Investment Adviser") or
other Merrill Lynch affiliates is as a director of the Fund and certain other
funds advised by the Investment Adviser or its affiliates. The Co-chairmen of
the Board are also independent directors. New director nominees are chosen as
nominees by a Nominating Committee comprised of independent directors. All
independent directors also are members of the Board's Audit Committee and the
independent directors meet in executive session at each in-person Board meeting.
The Board and the Audit Committee meet in person for at least two days each
quarter and conduct other in-person and telephone meetings throughout the year,
some of which are formal board meetings, and some of which are informational
meetings. The independent counsel to the independent directors attends all
in-person Board and Audit Committee meetings and other meetings at the
independent directors' request.
Investment Advisory Agreement -- Matters Considered by the Board
Every year, the Board considers approval of the Fund's investment advisory
agreement (the "Investment Advisory Agreement"). The Board also annually
considers approval of the sub-advisory agreement on behalf of the Fund between
the Investment Adviser and an affiliate. The Board assesses the nature, scope
and quality of the services provided to the Fund by the personnel of the
Investment Adviser, the sub-adviser and their affiliates, including
administrative services, shareholder services, oversight of fund accounting,
marketing services and assistance in meeting legal and regulatory requirements.
The Board also receives and assesses information regarding the services provided
to the Fund by certain unaffiliated service providers.
At various times throughout the year, the Board also considers a range of
information in connection with its oversight of the services provided by the
Investment Adviser and its affiliates, including the sub-adviser. Among the
matters considered are: (a) fees (in addition to management fees) paid to the
Investment Adviser and its affiliates by the Fund; (b) Fund operating expenses
paid to third parties; (c) the resources devoted to and compliance reports
relating to the Fund's investment objective, policies and restrictions, and its
compliance with its Code of Ethics and the Investment Adviser's compliance
policies and procedures; and (d) the nature, cost and character of
non-investment management services provided by the Investment Adviser and its
affiliates.
The Board believes that the Investment Adviser is one of the most experienced
global asset management firms and considers the overall services provided by the
Investment Adviser to be of high quality. The Board also believes that the
Investment Adviser is financially sound and well managed and notes that the
Investment Adviser is affiliated with one of America's largest financial firms.
The Board works closely with the Investment Adviser in overseeing the Investment
Adviser's efforts to achieve good performance. As part of this effort, the Board
discusses portfolio manager effectiveness and, when performance is not
satisfactory, discusses with the Investment Adviser taking steps such as
changing investment personnel.
Annual Consideration of Approval by the Board of Directors
In the period prior to the Board meeting to consider renewal of the Investment
Advisory Agreement and the sub-advisory agreement, the Board requests and
receives materials specifically relating to the Fund's Investment Advisory
Agreement and/or the sub-advisory agreement. These materials include (a)
information compiled by Lipper Inc. ("Lipper") on the fees and expenses and the
investment performance of the Fund as compared to a comparable group of funds as
classified by Lipper; (b) information comparing the Fund's market price with its
net asset value per share; (c) a discussion by the Fund's portfolio management
team of investment strategies used by the Fund during its most recent fiscal
year; and (d) information on the profitability to the Investment Adviser and its
affiliates of the Investment Advisory Agreement, the sub-advisory agreement and
other relationships with the Fund. Since the sub-advisory services are provided
by Merrill Lynch Asset Management U.K. Limited, an affiliate of the Investment
Adviser, and no additional fee is paid for these services, the Board considered
the sub-advisory agreement and Investment Advisory Agreement together. The Board
also considers other matters it deems important to the approval process such as
services related to the valuation and pricing of Fund portfolio holdings,
allocation of Fund portfolio transactions, the Fund's portfolio turnover
statistics, and direct and indirect benefits to the Investment Adviser and the
sub-adviser and their affiliates from their relationship with the Fund.
Certain Specific Renewal Data
In connection with the most recent renewal of the Fund's Investment Advisory
Agreement and the sub-advisory agreement which occurred in February, 2006, the
independent directors' and Board's review included the following:
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 21
Disclosure of Investment Advisory Agreement (concluded)
Services Provided by the Investment Adviser -- The Board reviewed the nature,
extent and quality of services provided by the Investment Adviser and
sub-adviser, focusing on investment advisory services and the resulting
performance of the Fund. The Board uses data provided by Lipper and by the
Investment Adviser in its review of advisory services. The Board compared Fund
performance -- both including and excluding the effects of the Fund's fees and
expenses -- to the performance of a comparable group of funds, and the
performance of a relevant index or combination of indexes. While the Board
reviews performance data at least quarterly, consistent with the Investment
Adviser's investment goals, the Board attaches more importance to performance
over relatively long periods of time, typically three to five years, or a
shorter period in the case of a fund that has been in existence less than five
years. The Board concluded that the comparative data indicated that performance
was satisfactory. Considering all these factors, the Board concluded that the
nature and quality of these services supported the continuation of the
Investment Advisory Agreement.
The Investment Adviser's Personnel and Investment Process -- The Board reviews
at least annually the Fund's investment objectives and strategies. The Board
discusses with senior management of the Investment Adviser responsible for
investment operations and the senior management of the Investment Adviser's
taxable fixed-income investing group the strategies being used to achieve the
stated objectives. Among other things, the Board considers the size, education
and experience of the Investment Adviser's investment staff, its use of
technology, and the Investment Adviser's approach to training and retaining
portfolio managers and other research, advisory and management personnel. The
Board also reviews the Investment Adviser's compensation policies and practices
with respect to the Fund's portfolio manager. The Board also considered the
experience of the Fund's portfolio manager and noted that Ms. Phillips has more
than ten years of experience in portfolio management. The Investment Adviser and
its investment staff have extensive experience in analyzing and managing the
types of investments used by the Fund. The Board concluded that the Fund
benefits from that expertise.
Management Fees and Other Expenses -- The Board reviews the Fund's contractual
management fee rate and actual management fee rate as a percentage of total
assets at common asset levels -- the actual rate includes advisory and
administrative service fees and the effects of any fee waivers -- compared to
the other funds considered comparable by Lipper. The Board also compares the
Fund's total expenses to those of other comparable funds. The Board determined
that the Fund's contractual and actual management fee rates and total expenses
were competitive with those of comparable funds, as determined by Lipper. The
Board has concluded that the Fund's management fee and fee rate and overall
expense ratio are reasonable compared to those of other comparable funds.
Profitability -- The Board considers the cost of the services provided to the
Fund by the Investment Adviser, and the Investment Adviser's and its affiliates'
profits relating to the management and distribution of the Fund and the
MLIM/FAM-advised funds. As part of its analysis, the Board reviewed the
Investment Adviser's methodology in allocating its costs to the management of
the Fund and concluded that there was a reasonable basis for the allocation. The
Board concluded that the Investment Adviser's profits are acceptable in relation
to the nature and quality of services provided and given the level of fees and
expenses overall.
Economies of Scale -- The Board considered the extent to which economies of
scale might be realized as the assets of the Fund increase and whether there
should be changes in the management fee rate or structure in order to enable the
Fund to participate in these economies of scale. The Board considered economies
of scale to the extent applicable to the Fund's closed-end structure and
determined that the Fund appropriately benefits from any economies of scale and
no changes were currently necessary.
Conclusion
After the independent directors deliberated in executive session, the entire
Board, including all of the independent directors, approved the renewal of the
existing Investment Advisory Agreement and sub-advisory agreement, concluding
that the advisory fee was reasonable in relation to the services provided and
that a contract renewal was in the best interests of the shareholders.
22 CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006
Officers and Directors
Robert C. Doll, Jr., President and Director
James H. Bodurtha, Director
Kenneth A. Froot, Director
Joe Grills, Director
Herbert I. London, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Donald C. Burke, Vice President and Treasurer
Elizabeth M. Phillips, Vice President
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
NYSE Symbol
HYV
- --------------------------------------------------------------------------------
Effective January 1, 2006, Stephen B. Swensrud retired as Director of Corporate
High Yield Fund V, Inc. The Fund's Board of Directors wishes Mr. Swensrud well
in his retirement.
- --------------------------------------------------------------------------------
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
CORPORATE HIGH YIELD FUND V, INC. FEBRUARY 28, 2006 23
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
- --------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-637-3863; (2) at
www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Corporate High Yield Fund V, Inc.
Box 9011
Princeton, NJ
08543-9011
#COYV -- 2/06
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - 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/ Robert C. Doll, Jr.
------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Corporate High Yield Fund V, Inc.
Date: April 20, 2006
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/ Robert C. Doll, Jr.
------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Corporate High Yield Fund V, Inc.
Date: April 20, 2006
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke,
Chief Financial Officer of
Corporate High Yield Fund V, Inc.
Date: April 20, 2006