NEWPORT BEACH, Calif., Jan. 23, 2004 (PRIMEZONE) -- PIMCO Strategic Global Government Fund, Inc. (NYSE:RCS) today released its investment-performance results and statistical portfolio information for the period October 1, 2003 through December 31, 2003 (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 $373 billion of assets under management as of December 31, 2003, 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:
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Performance for the periods ended 12/31/03
3 6 1 3 5
Mos Mos Year Years(1) Years(1)
RCS Based on
Net Asset Value (%) 2.51 2.50 9.17 10.97 9.35
RCS Based on NYSE
Share Price (%) 7.31 9.71 13.91 17.06 15.15
Lehman Intermediate
Aggregate Index (%) 0.42 0.61 3.82 7.30 6.66
1 Annualized
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The Fund's total return investment performance is net of all
fees and expenses and assumes the reinvestment of dividends.
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Price Information
Pricing Date NYSE Share Price Net Asset Value
------------ ---------------- ---------------
12/31/2003 $12.42 $11.40
9/30/2003 $11.82 $11.36
12/31/2002 $11.93 $11.31
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Date Premium/(Discount) to Net Asset Value
---- -------------------------------------
12/31/2003 8.95%
9/30/2003 4.05%
12/31/2002 5.48%
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Dividend Information
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Regular monthly dividend per share: $ 0.074
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Special dividend per share (declared December 12, 2003) $ 0.020
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Total dividends declared in the quarter: $ 0.242
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Total dividends declared for calendar 2003: $ 0.908
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Annualized dividend yield at 12/31/2003 based
on NYSE share price: 7.15% (see Note)
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Annualized dividend yield at 12/31/2003 based
on net asset value: 7.79% (see Note)
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Note: Excluding special dividend declared on 12/12/03.
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Portfolio Statistics
The Fund's investment portfolio had the following
characteristics as of December 31, 2003:
Net Assets: $404.5 million
Average Duration: 3.3 years
Average Maturity: 2.5 years
Quality Ratings: 80% AAA, -1% AA, 1% A, 8% BBB, 5% BB,
5% B, 2% less than B
Average Quality: AAA
Sector Weightings: 87.9% Mortgage-Backed (57.0% FNMA, 8.2%
GNMA, 12.1% FHLMC, 10.6% Other), 12.0%
Emerging Markets (3.1% Brazil, 0.3% Chile,
1.9% Russia, 1.2% Ecuador, 2.3% Mexico,
0.9% Panama, 1.6% Peru, 0.4% Malaysia,
0.3% Tunisia), -9.8% U.S. Treasury/
Agency, 1.6% Non-U.S., 8.3% Cash and
Equivalents
% Leverage (12/31/03): 9% (The Fund's use of leverage is
subject to change at any time.)
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Market Commentary
During the fourth quarter, the Fund's investment portfolio of mortgage-backed securities and emerging market bonds posted a 2.51% return based on net asset value and a 7.31% return based on its NYSE share price. In comparison, the Lehman Brothers Intermediate Aggregate Bond Index (which includes Treasury, investment-grade corporate, and residential mortgage-backed securities) returned 0.42% for the same period. For the annual period, the Fund posted a 9.17% return based on net asset value and a 13.91% return based on its NYSE share price. The Fund maintained an uninterrupted and constant dividend throughout 2003, holding the monthly per share rate steady at $0.074. In addition, a special dividend of $0.02 per share was declared towards the end of the quarter from ordinary income accumulated over the year in excess of the Fund's regular monthly distributions. Not including the special dividend, the regular dividend payouts equate to an annualized dividend yield of 7.15% based on the Fund's NYSE trading price as of December 31, 2003.
Mortgage securities recovered in the fourth quarter 2003, as yields stabilized, prepayment levels declined, and demand rebounded sharply, especially demand from banks, hedge funds, and other financial institutions. As a result, the sector outperformed Treasuries on a duration-adjusted basis, as mortgage yield premiums relative to Treasuries fell substantially, which boosted returns. Within the sector, higher coupon mortgages generally outperformed lower coupon mortgages.
Mortgage yields stabilized in the last three months of the year, after rising sharply in the third quarter. The yield on the Lehman Mortgage Index ended the fourth quarter at 4.92%, rising only 0.07% since the end of September, but up over 0.70% since the end of June. With mortgage rates well above the summer's lows, refinancings at year-end were some 80% slower than the record pace of mid-2003. The MBA refi index, which measures U.S. refinancing volume, declined by 34% during the quarter to 1644. Mortgage durations, which extended dramatically in July, stabilized in the quarter, making the securities more attractive to banks. As a result, these institutions emerged as large buyers of mortgages during the period.
Demand for mortgages was strong as banks and other financial institutions purchased approximately $80 billion of mortgage-backed securities ("MBS") in 2003. Banks, which purchased mortgages in lieu of making commercial loans, are attracted to the sector because of the securities' high yields and strong credit quality. Relative performance within the mortgage sector was also driven by financial institutions' preference for higher coupon mortgages. Banks favored higher coupon mortgage pass-throughs, as these issues have relatively short durations and are less vulnerable to rising rates. As a result, higher coupon MBS tended to outperform lower coupon securities during the fourth quarter.
Continued momentum in the global economy and reflationary economic policies drove commodity prices higher in the quarter, helping emerging markets post solid gains and capping an excellent year for the asset class. For the quarter and year, the asset class returned 4.7% and 25.7%, respectively, as measured by the JP Morgan Emerging Markets Global Bond Index. The continued strong performance of the Emerging Markets asset class for both the year and the quarter reflects both investor demand for higher yielding products and further strengthening of fundamentals, such as international reserves, fiscal & current account balances, and credit ratings.
October was a volatile month for Russia. Early in the month, Russia's long-term debt was unexpectedly upgraded to investment grade (Baa3) by Moody's. Following the upgrade, spreads tightened by approximately 0.74%. Spreads subsequently widened following investor concerns that the announcement of the arrest of a prominent oil executive signaled a reversal in recent economic policy. Russian bonds ended the quarter up 1.7%, and returned 22.4% for the year.
Ecuador was a strong performer for both the quarter and the year, as the country delivered returns of 24.1% and 101.5%, respectively. Performance was largely driven by investor enthusiasm following an increasingly favorable outlook for Ecuador's road to fiscal reform. The credit also benefited from increasing oil prices and investors' searches for higher yielding issues.
In Brazil, the uncertainties surrounding the economic policies of newly elected President Lula in 2002 were soundly answered in 2003. Prudent policy management has dramatically improved the economic outlook and has driven yields lower. The largest component of the asset class, as measured by the JP Morgan EMBI Global Index, Brazil was the key driver of returns for emerging markets for both the quarter and the year, posting returns of 13.5% and 68.8%, respectively.
For further information, please contact Jeff Sargent, PIMCO Strategic Global Government Fund, Inc., at (949) 720-4712.
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.