MUNIHOLDINGS
CALIFORNIA
INSURED
FUND V, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
November 30, 1999
<PAGE>
MuniHoldings California Insured Fund V, Inc.
The Benefits and Risks of Leveraging
MuniHoldings California Insured Fund V, Inc. has the ability to leverage to seek
to enhance the yield and net asset value of its Common Stock. However, these
objectives cannot be achieved in all interest rate environments. To leverage,
the Fund issues Preferred Stock, which pays dividends at prevailing short-term
interest rates, and invests the proceeds in long-term municipal bonds. The
interest earned on these investments is paid to Common Stock shareholders in the
form of dividends, and the value of these portfolio holdings is reflected in the
per share net asset value of the Fund's Common Stock. However, in order to
benefit Common Stock shareholders, the yield curve must be positively sloped;
that is, short-term interest rates must be lower than long-term interest rates.
At the same time, a period of generally declining interest rates will benefit
Common Stock shareholders. If either of these conditions change, then the risks
of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Stock based on the lower short-term interest rates. At the same time, the fund's
total portfolio of $150 million earns the income based on long-term interest
rates. Of course, increases in short-term interest rates would reduce (and even
eliminate) the dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value of the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the port-folio's
investments, since the value of the fund's Preferred Stock does not fluctuate.
In addition to the decline in net asset value, the market value of the fund's
Common Stock may also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities.
<PAGE>
MuniHoldings California Insured Fund V, Inc., November 30, 1999
DEAR SHAREHOLDER
We are pleased to provide you with this first semi-annual report for
MuniHoldings California Insured Fund V, Inc. In this and future reports to
shareholders, we will highlight the Fund's performance, describe the recent
investment environment and outline investment activities. The Fund seeks to
provide shareholders with current income exempt from Federal income tax and
California personal income taxes by investing in a portfolio of long-term,
investment grade municipal obligations.
Since inception (July 23, 1999) through November 30, 1999, MuniHoldings
California Insured Fund V, Inc. earned $0.283 per share income dividends, which
included earned and unpaid dividends of $0.069. This represents a net annualized
yield of 5.71%, based on a month-end net asset value of $13.83 per share. Over
the same period, the Fund's total investment return was -6.25%, based on a
change in per share net asset value from $15.00 to $13.83, and assuming
reinvestment of $0.214 per share income dividends.
For the period July 23, 1999 through November 30, 1999, the Fund's Auction
Market Preferred Stock had an average yield of 3.38%.
The Municipal Market Environment
The combination of steady strong domestic economic growth, improvement in
foreign economies (most notably in Japan) and increasing investor concerns
regarding potential increases in US inflation put upward pressure on bond yields
throughout the six-month period ended November 30, 1999. Continued strong US
employment growth and consumer spending were among the reasons the Federal
Reserve Board cited for raising short-term interest rates in late June, August
and November. US Treasury bond yields reacted by climbing above 6.375% by late
October and into November. During the period, yields on 30-year US Treasury
bonds increased over 45 basis points (0.45%).
Long-term tax-exempt bond yields also rose during the six months ended November
30, 1999. For much of the first half of 1999, the municipal bond market was able
to withstand much of the upward pressure on bond yields. However, investor
concerns of additional moves by the Federal Reserve Board to moderate US
economic growth and, more importantly, the loss of the strong technical support
that the tax-exempt market enjoyed in early 1999 helped push municipal bond
yields significantly higher for the remainder of the period. The yields on
long-term tax-exempt revenue bonds rose over 70 basis points to 6.14% by
November 30, 1999, as measured by the Bond Buyer Revenue Bond Index.
In recent months, the significant decline in new tax-exempt bond issuance has
remained a positive factor within the municipal bond market, as it had been for
much of the past year. Over the last year, more than $230 billion in long-term
municipal bonds was issued, a decline of nearly 20% compared to the same period
a year ago. During the past six months, over $115 billion in long-term
tax-exempt bonds was underwritten, representing a decline of nearly 15% compared
to the corresponding period in 1998. Over the past three months, approximately
$55 billion in securities was issued by municipalities nationally. This
quarterly issuance represented a decline of over 5% when compared to the same
period in 1998. It is likely that many tax-exempt issuers have accelerated their
financings in recent months to avoid any potential Year 2000 (Y2K)-related
disruptions at year-end. It is likely that this increased new-issue volume in
October and November is at the expense of future bond issuance, particularly in
early 2000. Consequently, the municipal market's positive technical position is
likely to continue into early next year.
Although tax-exempt bond yields are at their highest level in over two years and
have attracted significant retail investor interest, institutional demand has
declined sharply. Long-term municipal mutual funds have seen consistent outflows
in recent months as the yields of individual securities have risen faster than
those of larger, more diverse mutual funds. In addition, the demand from
property/casualty insurance companies has weakened as a result of the losses,
and anticipated losses, incurred as a result of the series of damaging storms
across much of the eastern United States. Additionally, many institutional
investors who were attracted to the municipal bond market in recent years by
historically attractive tax-exempt bond yield ratios of over 90% have found
other asset classes even more attractive. Even with a reduced supply position,
tax-exempt issuers have been forced to repeatedly raise municipal bond yields in
the attempt to attract adequate demand.
The recent relative underperformance of the municipal bond market has resulted
in an opportunity for long-term investors to purchase tax-exempt issues whose
yields are nearly identical with taxable US Treasury securities. At November 30,
1999, long-term uninsured municipal revenue bond yields were almost 98% of
comparable US Treasury securities. In recent months, many taxable asset classes,
such as corporate bonds, mortgage-backed securities and US agency debt, have all
accelerated debt issuance. This acceleration was initiated largely to avoid
issuing securities at year-end and to minimize any associated Y2K problems that
may develop. However, this increased issuance has also resulted in higher yield
levels in the various asset classes as lower bond prices became necessary to
attract sufficient investor demand. Going forward, it is believed that the pace
of non-US Government debt issuance is likely to slow significantly. As the
supply of this debt declines, we would expect many institutional investors to
return to the municipal bond market and the attractive yield ratios available.
Looking ahead, it appears to us that long-term tax-exempt bond yields will
remain under pres sure, trading in a broad range centered near current levels.
Investors are likely to remain concerned about future action by the Federal
Reserve Board. We believe Y2K considerations have prohibited any further Federal
Reserve Board moves from the end of the year and the beginning of 2000. Any
improvement in bond prices will probably be contingent upon weakening in both US
employment growth and consumer spending. The 100 basis point rise in US Treasury
bond yields seen thus far this year may negatively impact US economic growth.
The US housing market will be among the first sectors likely to be affected, as
some declines have already been evidenced in response to higher mortgage rates.
We believe that it is also unrealistic to expect double-digit returns in US
equity markets to continue indefinitely. Much of the US consumer's wealth is
tied to recent stock market appreciation. Any slowing in these incredible growth
rates is likely to reduce consumer spending. We believe that these factors
suggest that the worst of the recent increase in bond yields has passed and
stable, if not slightly improving, bond prices may be expected.
Portfolio Strategy
Our goal is to deliver tax-exempt income through the use of leverage. (For an
explanation of the benefits and risks of leveraging, see page 1 of this report
to shareholders.) For the past four months, we succeeded in enhancing the yield
to shareholders but the Fund underperformed in terms of its total return. The
fixed-income marketplace has been subject to above-average price volatility,
resulting from steady economic releases and uncertainty surrounding the Year
2000. Consequently, our relatively fully invested position for the Fund and long
duration has subjected its net asset valuation to the volatility that
accompanies such a drastic rise in interest rates. The positive news is that
municipal bonds have reached both relative and absolute levels where retail
demand becomes very active, which we expect to provide support for the
fixed-income market going into 2000, when a lesser degree of supply could be
forecast.
At November 30, 1999, the Fund was overweighted in high-quality holdings, with
87.4% of Fund assets rated AAA by at least one of the major rating agencies. The
emphasis on credit quality has helped performance as credit spreads have widened
in this period's rising interest rate environment. With value
2 & 3
<PAGE>
MuniHoldings California Insured Fund V, Inc., November 30, 1999
having been restored to the taxable and especially to tax-exempt fixed-income
markets, we intend to stay the course and monitor market data for signs
indicating a more supportive market for fixed-income securities.
In Conclusion
We appreciate your investment in MuniHoldings California Insured Fund V, Inc.,
and we look forward to assisting you with your financial needs in the months and
years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Walter C. O'Connor
Walter C. O'Connor
Vice President and Portfolio Manager
December 29, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
California--98.4% AAA Aaa $1,000 ABAG Finance Authority for Nonprofit Corporations, California,
COP (Children's Hospital Medical Center), 6% due 12/01/2029 (a)(g) $ 1,002
---------------------------------------------------------------------------------------------------------------
AAA Aaa 1,945 ABAG Finance Authority for Nonprofit Corporations, California,
M/F Revenue Bonds (Housing, Civic Center Drive Apartments), AMT,
Series A, 5.875% due 3/01/2032 (c) 1,875
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,800 Arcade, California, Water District, Water Revenue Bonds, COP,
5% due 11/01/2027 (b) 2,433
---------------------------------------------------------------------------------------------------------------
AAA Aaa 3,885 Berkeley, California, GO, Series C, 5.375% due 9/01/2029 (b) 3,605
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,500 California HFA, M/F Housing III Revenue Bonds, AMT, Series A,
5.95% due 8/01/2028 (d) 4,391
---------------------------------------------------------------------------------------------------------------
AAA Aaa 3,205 California Health Facilities Finance Authority Revenue Bonds
(Kaiser Permanente), Series A, 5% due 6/01/2024 (c) 2,800
---------------------------------------------------------------------------------------------------------------
California Health Facilities Finance Authority, Revenue
Refunding Bonds:
A1+ VMIG1+ 1,600 (Adventist Hospital), VRDN, Series B, 3.65% due 9/01/2028 (d)(f) 1,600
A1+ VMIG1+ 2,500 (Adventist Hospital), VRDN, Series C, 3.55% due 9/01/2015 (d)(f) 2,500
AAA Aaa 2,540 (Little Co. of Mary Health Service), 4.50% due 10/01/2028 (a) 2,003
A1+ VMIG1+ 800 (Sutter/Catholic Healthcare System), VRDN, Series B, 3.55%
due 7/01/2012 (a)(f) 800
AAA Aaa 2,500 (Sutter Health), Series C, 5.125% due 8/15/2022 (c) 2,236
---------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, PCR, Refunding:
A1+ P1 1,700 (Exxon Project), VRDN, 3.55% due 12/01/2012 (f) 1,700
A1+ NR* 1,000 (Pacific Gas and Electric), VRDN, Series C, 3.65% due 11/01/2026 (f) 1,000
A1+ VMIG1+ 300 (Pacific Gas and Electric), VRDN, Series E, 3.90% due 11/01/2026 (f) 300
A1+ NR* 1,600 (Pacific Gas and Electric), VRDN, Series F, 3.55% due 11/01/2026 (f) 1,600
AAA Aaa 3,500 (Southern California Edison Company), AMT, Series C, 5.55%
due 9/01/2031 (d) 3,281
---------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 700 California Pollution Control Financing Authority, Solid Waste
Disposal Revenue Bonds (Shell Oil Company Martinez Project), VRDN,
Series A, 3.65% due 10/01/2024 (f) 700
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 California State, GO, Refunding, 5% due 8/01/2029 (d) 1,737
---------------------------------------------------------------------------------------------------------------
California State Public Works Board, Lease Revenue Refunding
Bonds (Department of Corrections), Series B (d):
AAA Aaa 1,250 5.625% due 11/01/2019 1,224
AAA Aaa 2,000 5% due 9/01/2021 1,776
---------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 California Statewide Communities Development Auxiliary Authority,
COP, Refunding (Foundation of California State University), 5.20%
due 6/01/2024 (d) 2,722
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Calleguas--Las Virgines, California, Public Financing Authority,
Installment Purchase Revenue Refunding Bonds (Las Virgenes Municipal
Water District), 5% due 11/01/2023 (c) 3,528
---------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Capistrano, California, Unified School District, Community Facility
District, Special Tax Refunding Bonds (Las Flores), Number 92-1, 5%
due 9/01/2023 (d) 882
---------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Central Coast Water Authority, California, Revenue Refunding
Bonds (State Water Project
Regional Facilities), Series A, 5% due 10/01/2022 (a) 2,657
---------------------------------------------------------------------------------------------------------------
A1 P1 1,200 Chula Vista, California, IDR, Refunding (San Diego Gas and Electric Co.),
VRDN, AMT, Series B, 4% due 12/01/2021 (f) 1,200
---------------------------------------------------------------------------------------------------------------
BBB NR* 2,000 Contra Costa County, California, Public Financing Authority, Tax
Allocation Revenue Refunding Bonds (Pleasant Hill Bart Etc. Redevelopment),
5.25% due 8/01/2028 1,713
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,370 Corona, California, Public Financing Authority, Revenue
Refunding Bonds, Superior Lien, Series A,
5% due 9/01/2020 (c) 2,109
---------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Escondido, California, COP, Refunding (Wastewater Project),
5.70% due 9/01/2026 (a) 4,859
---------------------------------------------------------------------------------------------------------------
AAA Aaa 5,100 Los Angeles, California, Wastewater System Revenue Bonds,
Series A, 5% due 6/01/2028 (b) 4,433
---------------------------------------------------------------------------------------------------------------
AAA Aaa 3,430 Los Angeles County, California, Public Works Financing
Authority, Lease Revenue Bonds (Multiple Capital
Facilities Project V), Series B, 5.125% due 12/01/2029 (a) 3,036
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Metropolitan Water District, Southern California, Waterworks
Revenue Bonds, Series C, 5% due 7/01/2027 (d) 1,746
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Modesto, California, Public Financing Authority, Lease Revenue
Refunding Bonds (Capital Improvements and Refinancing Project),
5% due 9/01/2029 (a) 1,736
---------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Northern California Power Agency, Public Power Revenue
Refunding Bonds (Hydroelectric Project Number 1), Series A,
5.125% due 7/01/2023 (d) 2,688
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Palm Desert, California, Financing Authority, Tax Allocation Revenue
Bonds (Special Term Project Area Number 4), 5.20% due 10/01/2028 (d) 1,799
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,700 Pleasanton, California, Unified School District, GO, Series D,
5.375% due 8/01/2023 (d) 2,530
---------------------------------------------------------------------------------------------------------------
</TABLE>
Portfolio Abbreviations
To simplify the listings of MuniHoldings California Insured Fund V, Inc.'s
portfolio holdings in the Schedule of Investments, we have abbreviated the names
of many of the securities according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniHoldings California Insured Fund V, Inc., November 30, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
California AAA Aaa $1,250 Riverside, California, Redevelopment Agency Tax Allocation
(concluded) Refunding Bonds (University Corridor), Series A, 5% due 8/01/2027 (a) $ 1,090
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Roseville, California, Electric System Revenue Bonds, COP,
5.50% due 2/01/2024 (c) 3,795
---------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 San Diego, California, Certificates of Undivided Interest,
Water Utility Fund, Net System Revenue Bonds, 5% due 8/01/2021 (b) 2,665
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 San Diego, California, Public Facilities Financing Authority,
Sewer Revenue Bonds, 5% due 5/15/2020 (b) 1,781
---------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 San Francisco, California, City and County Airport Commission,
International Airport Revenue Bonds, Second Series, Issue 15B,
5% due 5/01/2024 (d) 2,639
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,410 San Francisco, California, City and County Redevelopment
Agency, Hotel Tax Revenue Refunding Bonds, 5% due 7/01/2025 (c) 2,111
---------------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 San Joaquin Hills, California, Transportation Corridor Agency,
Toll Road Revenue Refunding Bonds, Series A, 5.25% due 1/15/2030 (d) 5,422
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,295 San Jose, California, Redevelopment Agency, Tax Allocation
Bonds (Merged Area Redevelopment Project), 4.75% due 8/01/2030 (a) 1,892
---------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 San Rafael, California, Redevelopment Agency, Tax Allocation
Bonds (Central San Rafael Redevelopment Project), 5% due 12/01/2022 (a) 1,768
---------------------------------------------------------------------------------------------------------------
NR* Aaa 5,000 Santa Clara, California, Redevelopment Agency, Tax Allocation
Bonds, RIB, Series 164, 7.05% due 6/01/2023 (a)(e) 4,531
---------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Stockton, California, COP, Revenue Refunding Bonds (Wastewater
System Project), Series A, 5.20% due 9/01/2029 (d) 2,687
---------------------------------------------------------------------------------------------------------------
NR* Aaa 7,755 University of California Revenue Bonds, RIB, Series 159, 7.05%
due 9/01/2028 (b)(e) 6,920
---------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 University of California, Revenue Refunding Bonds (Multiple
Purpose Projects), Series E, 5.125% due 9/01/2020 (d) 3,627
===================================================================================================================================
Total Investments (Cost--$122,324)--98.4% 117,129
Variation Margin on Financial Futures Contracts**--0.0% (38)
Other Assets Less Liabilities--1.6% 1,965
--------
Net Assets--100.0% $119,056
========
===================================================================================================================================
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FSA Insured.
(d) MBIA Insured.
(e) The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at November 30, 1999.
(f) The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at November 30, 1999.
(g) All or a portion of security held as collateral in connection with
open financial futures contracts.
* Not Rated.
** Financial futures contracts sold as of November 30, 1999 were as
follows:
See Notes to Financial Statements.
--------------------------------------------------------------------
(in Thousands)
--------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
--------------------------------------------------------------------
110 US Treasury Bonds March 2000 $10,237
--------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price--$10,368) $10,237
=======
--------------------------------------------------------------------
+ Highest short-term rating by Moody's Investors Service, Inc.
<PAGE>
STATEMENT OF ASSETS, LIABILITIES ANDCAPITAL
<TABLE>
<CAPTION>
As of November 30, 1999
===================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$122,324,126) ............................. $117,129,214
Cash .............................................................................. 264,772
Receivables:
Interest ........................................................................ $ 1,974,036
Investment adviser .............................................................. 7,821 1,981,857
-----------
Other assets ...................................................................... 15,037
------------
Total assets ...................................................................... 119,390,880
------------
===================================================================================================================================
Liabilities: Payables:
Dividends to shareholders ....................................................... 179,505
Offering costs .................................................................. 86,300
Variation margin ................................................................ 37,812 303,617
-----------
Accrued expenses and other liabilities ............................................ 31,546
------------
Total liabilities ................................................................. 335,163
------------
===================================================================================================================================
Net Assets: Net assets ........................................................................ $119,055,717
============
===================================================================================================================================
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.10 per share (1,960 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) ............. $ 49,000,000
Common Stock, par value $.10 per share (5,065,505 shares issued and outstanding) $ 506,551
Paid-in capital in excess of par .................................................. 74,753,351
Undistributed investment income--net .............................................. 453,574
Accumulated realized capital loss on investments--net ............................. (594,332)
Unrealized depreciation on investments--net ....................................... (5,063,427)
-----------
Total--Equivalent to $13.83 net asset value per share of Common Stock (market
price--$12.625) ................................................................. 70,055,717
------------
Total capital ..................................................................... $119,055,717
============
===================================================================================================================================
</TABLE>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
6 & 7
<PAGE>
MuniHoldings California Insured Fund V, Inc., November 30, 1999
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period July 23, 1999+ to November 30, 1999
===================================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned .......................... $ 2,152,221
Income:
===================================================================================================================================
Expenses: Investment advisory fees .......................................................... $ 217,530
Commission fees ................................................................... 38,939
Accounting services ............................................................... 16,965
Professional fees ................................................................. 13,899
Transfer agent fees ............................................................... 10,268
Directors' fees and expenses ...................................................... 7,239
Listing fees ...................................................................... 5,337
Custodian fees .................................................................... 3,504
Printing and shareholder reports .................................................. 2,539
Pricing fees ...................................................................... 2,350
Other ............................................................................. 1,886
---------
Total expenses before reimbursement ............................................... 320,456
Reimbursement of expenses ......................................................... (193,163)
---------
Total expenses .................................................................... 127,293
------------
Investment income--net ............................................................ 2,024,928
------------
===================================================================================================================================
Realized & Realized loss on investments--net ................................................. (594,332)
Unrealized Loss on Unrealized depreciation on investments--net ....................................... (5,063,427)
Investments--Net: ------------
Net Decrease in Net Assets Resulting from Operations .............................. $ (3,632,831)
============
===================================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
July 23, 1999+ to
Increase (Decrease) in Net Assets: November 30, 1999
===================================================================================================================================
<S> <C> <C>
Operations: Investment income--net ............................................................ $ 2,024,928
Realized loss on investments--net ................................................. (594,332)
Unrealized depreciation on investments--net ....................................... (5,063,427)
------------
Net decrease in net assets resulting from operations .............................. (3,632,831)
------------
===================================================================================================================================
Dividends to Investment income--net:
Shareholders: Common Stock ..................................................................... (1,085,943)
Preferred Stock .................................................................. (485,411)
------------
Net decrease in net assets resulting from dividends to shareholders ............... (1,571,354)
------------
===================================================================================================================================
Capital Stock Proceeds from issuance of Common Stock ............................................ 75,882,570
Transactions: Proceeds from issuance of Preferred Stock ......................................... 49,000,000
Offering costs resulting from the issuance of Common Stock ........................ (210,551)
Offering and underwriting costs resulting from the issuance of Preferred Stock .... (512,122)
------------
Net increase in net assets derived from capital stock transactions ................ 124,159,897
------------
===================================================================================================================================
Net Assets: Total increase in net assets ...................................................... 118,955,712
Beginning of period ............................................................... 100,005
------------
End of period* .................................................................... $119,055,717
============
* Undistributed investment income--net .............................................. $ 453,574
============
===================================================================================================================================
</TABLE>
+ Commencement of operations.
See Notes to Financial Statements.
8 & 9
<PAGE>
MuniHoldings California Insured Fund V, Inc., November 30, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period
July 23, 1999+ to
Increase (Decrease) in Net Asset Value: November 30, 1999
======================================================================================================================
<S> <C> <C>
Per Share Net asset value, beginning of period ........................................... $ 15.00
Operating --------
Performance: Investment income--net ......................................................... .40
Realized and unrealized loss on investments--net ............................... (1.12)
--------
Total from investment operations ............................................... (.72)
--------
Less dividends to Common Stock shareholders:
Investment income--net ........................................................ (.21)
--------
Total dividends to Common Stock shareholders ................................... (.21)
--------
Capital charge resulting from issuance of Common Stock ......................... (.04)
--------
Effect of Preferred Stock activity:++
Dividends to Preferred Stock shareholders:
Investment income--net ...................................................... (.10)
Capital charge resulting from issuance of Preferred Stock ..................... (.10)
--------
Total effect of Preferred Stock activity ....................................... (.20)
--------
Net asset value, end of period ................................................. $ 13.83
========
Market price per share, end of period .......................................... $ 12.625
========
======================================================================================================================
Total Investment Based on market price per share ................................................ (14.42%)++++
Return:** ========
Based on net asset value per share ............................................. (6.25%)++++
========
======================================================================================================================
Ratios Based on Total expenses, net of reimbursement*** ........................................ .51%*
Average Net Assets ========
Of Common Stock: Total expenses*** .............................................................. 1.27%*
========
Total investment income--net*** ................................................ 8.04%*
========
Amount of dividends to Preferred Stock shareholders ............................ 1.93%*
========
Investment income--net, to Common Stock shareholders ........................... 6.11%*
========
======================================================================================================================
Ratios Based on Total expenses, net of reimbursement ........................................... .32%*
Total Average ========
Net Assets:+++*** Total expenses ................................................................. .81%*
========
Total investment income--net ................................................... 5.12%*
========
======================================================================================================================
Ratios Based on Dividends to Preferred Stock shareholders ...................................... 3.38%*
Average Net Assets ========
Of Preferred
Stock:
======================================================================================================================
Supplemental Data: Net assets, net of Preferred Stock, end of period (in thousands) ............... $ 70,056
========
Preferred Stock outstanding, end of period (in thousands) ...................... $ 49,000
========
Portfolio turnover ............................................................. 35.76%
========
======================================================================================================================
Leverage: Asset coverage per $1,000 ...................................................... $ 2,430
========
======================================================================================================================
Dividends Per Investment income--net ......................................................... $ 248
Share on Preferred ========
Stock Outstanding:
======================================================================================================================
</TABLE>
* Annualized.
** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales charges.
*** Do not reflect the effect of dividends to Preferred Stock
shareholders.
+ Commencement of operations.
++ The Fund's Preferred Stock was issued on August 16, 1999.
+++ Includes Common and Preferred Stock average net assets.
++++ Aggregate total investment return.
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniHoldings California Insured Fund V, Inc., November 30, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniHoldings California Insured Fund V, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles, which may require the use of
management accruals and estimates. These unaudited financial statements reflect
all adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. Prior to commencement of operations on July
23, 1999, the Fund had no operations other than those relating to organizational
matters and the sale of 6,667 shares of Common Stock on June 15, 1999 to Fund
Asset Management, L.P. ("FAM") for $100,005. The Fund's Common Stock is listed
on the New York Stock Exchange under the symbol CAF. The following is a summary
of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and 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, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt markets. Losses may arise due to changes in the
value of the contract or if the counterparty does not perform under the
contract.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options--The Fund is authorized to write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the cur rent market
value of the option written.
When a security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the basis of
the security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Offering expenses--Direct expenses relating to the public offering of the
Fund's Common and Preferred Stock were charged to capital at the time of
issuance of the shares.
(f) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with FAM. The general
partner of FAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .55% of the Fund's average weekly net assets, including
issuance of Preferred Stock. For the period July 23, 1999 to November 30, 1999,
FAM earned fees of $217,530, of which $176,036 was voluntarily waived. FAM also
reimbursed the Fund additional expenses of $17,127.
During the period July 23, 1999 to November 30, 1999, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, received
underwriting fees of $367,500 in connection with the issuance of the Fund's
Preferred Stock.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
period July 23, 1999 to November 30, 1999 were $142,607,459 and $30,893,695,
respectively.
Net realized gains (losses) for the period July 23, 1999 to November 30, 1999
and net unrealized gains (losses) as of November 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments ................ $ (806,027) $(5,194,912)
Financial futures .................... 211,695 131,485
----------- -----------
Total ................................ $ (594,332) $(5,063,427)
=========== ===========
- --------------------------------------------------------------------------------
As of November 30, 1999, net unrealized depreciation for Federal income tax
purposes aggregated $5,194,912, of which $109,758 related to appreciated
securities and $5,304,670 related to depreciated securities. The aggregate cost
of investments at November 30, 1999 for Federal income tax purposes was
$122,324,126.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, including
Preferred Stock, par value $.10 per share, all of which were initially
classified as Common Stock. The Board of Directors is authorized, however, to
reclassify any unissued shares of capital stock without approval of holders of
Common Stock.
Common Stock
Shares issued and outstanding during the period July 23, 1999 to November 30,
1999 increased by 5,058,838 from shares sold.
12 & 13
<PAGE>
MuniHoldings California Insured Fund V, Inc., November 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund, with a par value of $.10 per share and a liquidation preference of $25,000
per share, that entitle their holders to receive cash dividends at an annual
rate that may vary for the successive dividend periods. The yield in effect at
November 30, 1999 was 3.55%.
In connection with the offering of AMPS, the Board of Directors has reclassified
1,960 shares of unissued capital stock as AMPS. Shares issued and outstanding
during the period July 23, 1999 to November 30, 1999 increased by 1,960 as a
result of the AMPS offering.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the period July 23, 1999 to November 30, 1999, MLPF&S, an affiliate
of FAM, earned $32,285 as commissions.
5. Subsequent Event:
On December 8, 1999, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.069000 per share,
payable on December 30, 1999 to shareholders of record as of December 23, 1999.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more consistent yield to the current trading price of shares
of Common Stock of the Fund, the Fund may at times pay out less than the entire
amount of net investment income earned in any particular month and may at times
in any particular month pay out such accumulated but undistributed income in
addition to net investment income earned in that month. As a result, the
dividends paid by the Fund for any particular month may be more or less than the
amount of net investment income earned by the Fund during such month. The Fund's
current accumulated but undistributed net investment income, if any, is
disclosed in the Statement of Assets, Liabilities and Capital, which comprises
part of the financial information included in this report.
QUALITY PROFILE
The quality ratings of securities in the Fund as of November 30, 1999 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa ................................................ 87.4%
BBB/Baa ................................................ 1.4
Other+ ................................................. 9.6
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Robert A. DiMella, Vice President
Kenneth A. Jacob, Vice President
Walter C. O'Connor, Vice President
Donald C. Burke, Vice President and Treasurer
William E. Zitelli, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
CAF
14 & 15
<PAGE>
This report, including the financial information herein, is transmitted to the
shareholders of MuniHoldings California Insured Fund V, Inc. for their
information. It is not a prospectus, circular or representation intended for use
in the purchase of shares of the Fund or any securities mentioned in the report.
The Fund has the ability to leverage its Common Stock by issuing Preferred Stock
to provide the Common Stock shareholders with a potentially higher rate of
return. Leverage creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price of shares
of the Common Stock, and the risk that fluctuations in the short-term dividend
rates of the Preferred Stock may affect the yield to Common Stock shareholders.
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.
MuniHoldings California
Insured Fund V, Inc.
Box 9011
Princeton, NJ
08543-9011 #MHCAI5--11/99
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