NEWPORT BEACH, Calif., July 21, 2004 (PRIMEZONE) -- PIMCO Strategic Global Government Fund, Inc. (NYSE:RCS) today released its investment performance results and statistical portfolio information for the period April 1, 2004 through June 30, 2004 (second 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 $391.9 billion of assets under management as of June 30, 2004, 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 6/30/04
3 6 1 3 5 10
Mos Mos Year Years Years Years
(1) (1) (1)
RCS Based on
Net Asset
Value(%) -2.67 -0.42 2.07 8.76 9.02 8.44
RCS Based on NYSE
Share Price(%) -16.54 -12.90 -4.44 8.07 11.32 9.60
Lehman
Intermediate
Aggregate Index(%) -1.97 0.25 0.85 6.01 6.73 7.06
(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
------------ ---------------- ---------------
6/30/2004 $10.40 $10.91
3/31/2004 $12.72 $11.44
6/30/2003 $11.79 $11.59
Date Premium/(Discount) to Net Asset Value
---- -------------------------------------
6/30/2004 -4.67%
3/31/2004 11.19%
6/30/2003 1.73%
Dividend Information
Regular monthly dividend per share: $ 0.074
Total dividends declared in the quarter: $ 0.222
Annualized dividend yield at 6/30/2004 based
on NYSE share price: 8.54%
Annualized dividend yield at 6/30/2004 based
on net asset value: 8.14%
Portfolio Statistics
The Fund's investment portfolio had the following characteristics
as of June 30, 2004:
Net Assets: $391.0 million
Average Duration: 3.8 years
Average Maturity: 3.1 years
Quality Ratings: 81% AAA, 0% AA, 1% A, 7% BAA, 4% BA, 5% B,
2% less than B
Average Quality: AAA
Sector Weightings: 105.0% Mortgage-Backed (58.0% FNMA, 14.0%
FHLMC, 10.0% GNMA, 23.0% Other Mortgages),
13.0% Emerging Markets (3.1% Brazil, 2.6%
Mexico, 2.0% Russia, 1.8% Peru, 1.3%
Ecuador, 1.0% Panama, 0.4% Malaysia, 0.4%
Chile, 0.4% Tunisia), 9.0% Cash and
Equivalents, 1.0% Non-U.S., -28.0% U.S.
Treasury/ Agency.
% Leverage (6/30/04): 22.7% (The Fund's use of leverage is subject
to change at any time.)
Market Commentary
During the second quarter, the Fund's investment portfolio of mortgage-backed securities and emerging market bonds returned -2.67% based on net asset value and -16.54% based on the Fund's NYSE share price. In comparison, the Lehman Brothers Intermediate Aggregate Bond Index (which includes Treasury, investment-grade corporate, and residential mortgage-backed securities) returned -1.97% for the same period. It's important to note that the second quarter was an unusual period for closed-end funds, as the prospect of rising interest rates became imminent. As a result, share prices of closed-end funds were negatively impacted during the period, and the Fund's share price changed from a high premium to a discount relative to its net asset value. However, since the end of the quarter the Fund's share price has improved. The Fund maintained an uninterrupted and constant dividend throughout the second quarter, holding the monthly per share rate steady at $0.074. These dividend payouts equate to an annualized dividend yield of 8.54% based on the Fund's June 30, 2004 NYSE share price.
Mortgages outperformed Treasuries on a like-duration basis during the first half of 2004 and by a slight amount in the second quarter. Mortgages suffered in April as rising interest rates caused mortgage durations to lengthen, leading banks to sell some of their mortgage holdings. Performance rebounded in May and June however, as interest rates stabilized, volatility declined, and yield-hungry investors re-entered the market.
April's underperformance was driven by the large move in interest rates. Mortgage durations lengthened significantly, as higher rates slowed prepayments and resulted in longer durations for most mortgage securities. The duration of the sector, as estimated by the Lehman Brothers Mortgage Index, started the quarter at 2.37 years and extended 74% to 4.13 years by the end of June.
The rise in rates, combined with longer durations, pushed banks to sell some of their mortgage holdings. These banks, who currently own approximately 20% of outstanding mortgages, are currently the largest marginal buyers of mortgage-backed securities, as other traditional investors, like FNMA and FHLMC, have generally reduced their mortgage holdings so far in 2004.
Interest rates stabilized in May and June, and the mortgage market again became attractive to investors and to the banking sector. Banks, who purchase mortgages with proceeds from short-term borrowings, remain attracted to the sector's relatively high yields. Their renewed purchase activity, combined with falling volatility and the expectation of diminished new supply, helped to push up valuations on mortgages relative to other fixed income sectors.
Within the mortgage sector, performance was strong across coupons, and was mixed across maturities and issuers. While most coupons outperformed treasuries, lower coupon securities tended to slightly lag higher coupon, premium issues. 30-year maturities, banks' preferred instruments, significantly outperformed 15-year issues overall for the second quarter, although the 15-year sector outperformed the longer maturities in April when bank demand was weak. Finally, investors tended to favor conventional mortgages over GNMA issues.
For Emerging Market securities, following strong performance in 2003 and solid returns in the first quarter of this year, the sector had a difficult second quarter by returning -5.47%, to close at -2.27% for the first half of 2004. The first six weeks of the quarter saw Emerging Market bond valuations fall in response to global interest rate concerns. Specifically, the anticipation of higher policy rates in the United States, combined with worries about a hard landing in China, prompted a re-evaluation of the growth and funding outlook for emerging economies. The two largest and most liquid countries in this subset of the Emerging Markets, Russia and Mexico, lagged the sector by returning -6.5% and -5.6 %, respectively, during the second quarter.
For further information, please contact Erik Velicer, PIMCO Strategic Global Government Fund, Inc., at (949) 720-4733.
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.