NEWPORT BEACH, Calif., Jan. 31, 2003 (PRIMEZONE) -- PIMCO Strategic Global Government Fund, Inc. (NYSE:RCS) today released its investment performance results and statistical portfolio information for the period October 1, 2002, through December 31, 2002 (fourth quarter).
PIMCO Strategic Global Government Fund, Inc. ("RCS" or the "Fund") is a closed-end, intermediate-term bond fund whose primary objective is to generate a level of income higher than that generated by high-quality, intermediate-term U.S. debt securities. Pacific Investment Management Company LLC ("PIMCO"), an investment adviser with more than $304 billion of assets under management as of December 31, 2002, is responsible for managing the Fund's investment portfolio.
Investment Performance, Price and Dividend Information
The Fund's valuation and investment performance information are as
follows:
Performance for the periods ended 12/31/02
3 6 1 3 5
Mos Mos Year Years(1) Years(1)
RCS Based on
Net Asset Value (%) 5.05 6.20 12.26 11.11 8.63
Based on NYSE Share Price (%) 1.39 7.80 21.84 20.25 11.41
Lehman Intermediate
Aggregate Index (%) 1.53 5.37 9.50 9.60 7.47
(1) Annualized.
The Fund's total return investment performance is net of all fees
and expenses and assumes the reinvestment of dividends.
Price Information
Pricing Date NYSE Share Price Net Asset Value
12/31/2002 $11.93 $11.31
09/30/2002 $12.00 $11.10
12/31/2001 $10.60 $11.02
Premium/(Discount) to Net Asset Value
12/31/2002 5.48%
09/30/2002 8.11%
12/31/2001 -3.81%
Dividend Information
Regular monthly dividend per share: $ 0.074
Special dividend per share (declared December 13, 2002) $ 0.124
Total dividends declared in the quarter: $ 0.346
Total dividends declared for calendar 2002: $ 1.012
Annualized dividend yield at 12/31/02 based on
NYSE share price: 7.44%*
Annualized dividend yield at 12/31/02 based on
net asset value: 8.45%*
* Excluding special dividend declared on 12/13/02.
Portfolio Statistics
The Fund's investment portfolio had the following characteristics
as of December 31, 2002:
Net Assets: $403.2 mm
Average Duration: 2.46 years
Average Maturity: 3.43 years
Quality Ratings: 84% AAA, 0% AA, 0% A, 5% BBB, 7% BB, 3% B,
1% (less than) B
Average Quality: AAA
Sector Weightings: 68% Mortgage-Backed (42% FNMA, 3% GNMA,
22% FHLMC, 1% Other), 11% Emerging Markets
(2% Brazil, 2% Russia, 1% Ecuador, 2% Mexico,
1% Panama, 1% Peru, 1% Tunisia) 30% Cash and
Equivalents, -9% U.S. Treasury/Agency
Market Commentary
Mortgage-Backed Securities (MBS) continued to gain in the fourth quarter, even in the face of rising Treasury yields, prepayments near all time historical highs and heavy new issuance. Strong financial institution and overseas demand sustained premium prices and pushed yields on MBS toward historic lows.
Heightened confidence that U.S. and, to a lesser extent, European policymakers would act to prevent deflation caused Treasury yields to rise during the quarter, especially in the intermediate and long maturity issues.
With the 2-year Treasury yield down 0.08% quarter to date, mortgage yields fell even further, causing the difference between Treasury and MBS rates to narrow. The 10-year Treasury yield ended 2002 at 3.81%, up 0.22% during the quarter, though still down 1.24% for the full year. In comparison, the current coupon FNMA Mortgage ended the year at 4.91%, down 0.22% basis points for the quarter and 1.96% for the year. While most fixed income sectors lagged Treasuries on a duration-adjusted basis in 2002, mortgages were an exception, outperforming Treasuries by 1.73%.
With mortgage rates at historically low levels, refinancing activity remained high, with the Mortgage Bankers Association Refinance Index averaging close to 5000 for the quarter. Capacity constraints in mortgage origination created pent-up refinancing demand during October and November, which helped to sustain high levels of prepayments. Prior to this recent refinancing wave, the MBA Refinance Index had reported a reading over 4000 only nine times in its entire history.
Despite high prepayments, implied volatility declined during the quarter, supporting performance of MBS. The decline in implied volatility means the bond market's estimate of the value of the prepayment option, or "embedded" call option to mortgage holders, has declined. This decline contributed to the decrease in nominal MBS spreads relative to Treasury securities from near historic wide levels.
Credit risk aversion by financial institutions drove demand in MBS, particularly CMO's. These securities are attractive to banks and other financial institutions that prefer to invest in bonds with stable cash flows and prepayment protection. As demand remained strong, CMO issuance increased in the fourth quarter and absorbed much of the new mortgage supply, helping to hold mortgage rates near historic lows.
Within the mortgage sector, Ginnie Maes (GNMA) outperformed their conventional counterparts. GNMAs, which are explicitly backed by the U.S. government, attracted strong overseas demand. Lower coupons are less vulnerable to prepayments than higher coupons and met strong demand early in the quarter. Investor demand shifted to higher coupon securities later in the quarter, as extension risk became more of a threat as Treasury yields started to rise. As mortgage rates fell in the fourth quarter, MBS continued to trade above par. The average price for the Lehman MBS Index finished at $104.20.
Emerging Markets' momentum carried into December, as the month's returns helped cap a strong fourth quarter for the asset class. Emerging Market debt, as measured by the J.P. Morgan Emerging Market Bond Index Plus, gained 3.1% during December, and 14.6% for the quarter.
Brazilian debt again posted strong gains for December, up 8.8%, and was the dominant contributor to the Index's quarterly performance, rallying 41% during the period. The combination of strong economic performance and abating investor uncertainty about the new administration's policy regime has helped returns, as President-elect Luiz Inacio Lula da Silva's cabinet has demonstrated an adherence to orthodox policy.
Other significant contributors toward the end of the quarter included Colombia, Uruguay and Peru. Colombian asset prices were supported by official sector assistance, while Uruguay and Peru were largely assisted by bank stabilization and normalization in political regimes.
Venezuela on the other hand, returned -3.3% in December, reflecting the deteriorating financial and economic situation which has been further challenged by the ongoing national oil strike. Oil production levels have dropped to a mere 150,000 barrels a day, from a normal level of 3 million. The loss of oil receipts, the disruption to various production and consumption chains, and pressure on the financial system have led to a high degree of uncertainty and a fall in asset prices. As a result, Standard & Poor's downgraded the country's long-term sovereign debt rating to CCC+ on December 13th.
Past performance is no guarantee of future results. Investment return, dividend rate and share price will fluctuate so that shares, when sold, may be worth more or less than their original cost.