NEW YORK, April 26, 2005 (PRIMEZONE) -- PIMCO Floating Rate Income Fund (NYSE:PFL) and PIMCO Floating Rate Strategy Fund (NYSE:PFN) (the "Funds") recently experienced declines in their market price.
This press release is being issued by Allianz Global Investors Fund Management LLC to help investors understand some of the possible reasons behind these market price declines. We also hope to provide long-term investors with information that might help them make more informed decisions regarding the Funds and their asset allocation based on their goals and views regarding interest rates and the economy in general.
The Funds seek high current income, consistent with the preservation of capital. The Funds seek to achieve their objective by investing predominantly in high-yield floating rate income securities and their economic equivalents.
Past performance and distribution yields:
The Funds have generated attractive dividend yields since their inceptions. As short-term interest rates have increased, the Funds' formulaic method of setting dividend rates, which is based on 3-month LIBOR (London Interbank Offered Rate) plus a factor, has resulted in an increase in the monthly dividend payout. Since its first dividend, PFL's monthly per share dividend has increased to $0.105323 from $0.07750. PFN's monthly per share dividend has increased to $0.101157 from $0.09125.
On April 1, 2005, PFL and PFN declared monthly dividends of $0.105323 and $0.101157 per common share, respectively. On April 13, 2005, the Funds went "ex-dividend" which impacted the Funds' net asset value ("NAV"). The ex-dividend NAV per share accounts for approximately 50% of the recent reduction in NAV since that date through April 22, 2005.
PFL PFN
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Inception date August 29, 2003 October 29, 2004
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Current market yield
(as of April 22, 2005) 6.41% 6.77%
Since inception total return
at NAV (as of 3.31.05) 6.18%(a) 0.90%(b)
Since inception total return
at Market Price (as of 3.31.05) 6.44%(a) -3.89%(b)
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(a) Average Annual
(b) Cumulative
Current market environment and Outlook:
The 10-Year Treasury Yield has fallen from 4.65% on March 22, 2005 to 4.25% as of April 22, 2005. As bond prices move inversely to yields, this represents a gain in the value of the 10-Year Treasury bond. It is possible that in reaction to this cyclical rally in fixed-rate debt, floating rate funds, which typically benefit from rising interest rates, experienced a sell-off. In the high yield market, yields have recently risen, providing possible additional selling pressure on floating-rate funds.
Ray Kennedy, the Funds' lead portfolio manager, has provided the following commentary on the recent performance of the high-yield market: "The high-yield market has undergone a period of significant underperformance. It started with the pre-announcement of earnings by General Motors and the related concerns that General Motors would be downgraded to below investment grade. All leveraged asset classes significantly underperformed after that announcement with high-yield declining almost 4% during that period, despite a rally in the treasury market. The net result is that high-yield spreads widened almost 100 basis points. We are now at an inflection point in the market where credit markets once again appear attractive and unless there are further disruptions, we expect some improvements in leveraged asset classes, especially bank loans and high-yield." (See Note)
Summary:
While the Funds' NAVs have declined recently, these decreases are less than that of the Funds' market prices, possibly reflecting investors' concern for floating rate funds as opposed to fundamental concerns with the specific portfolios.
However, we have a positive outlook for the Funds' asset class, based on the following factors:
1. If the Federal Reserve continues to increase short-term interest rates further, floating-rate bonds could provide a good hedge against interest rate increases.
2. High-yield floating-rate bonds and senior floating-rate bank loans can provide high current income.
3. PIMCO, the Funds' sub-adviser, has a time-tested ability to effectively manage high-yield bonds in a risk-controlled manner.
Note: The views expressed by Mr. Kennedy are his own, are not investment advice and do not necessarily reflect the views of the investment adviser or the sub-adviser. Each investor should weigh the risks and return potential of an investment in one or both of the Funds from their own perspective before making an investment. It is recommended that you seek professional financial advice before making an investment decision.
Past performance is no guarantee of future results. There can be no assurance that dividend yields of the Funds will remain constant or that you will earn a positive total return on your investment. It is possible to lose money on an investment in the Funds.
Because the Funds may invest without limit in below-investment-grade securities ("high yield" securities or "junk bonds"), they will be subject to greater levels of credit and other risks. Credit risk refers to an issuer's ability to make payments of principal and interest when due. Lower grade securities are regarded as having predominantly speculative characteristics and may experience higher default rates. If that happens, the Funds may lose some or all of its investment in such securities, adversely affecting the Funds' net asset value, market price and ability to pay dividends. Securities in the lowest investment grade category may also be considered to possess some speculative characteristics. Because most of the instruments held by the Funds will have variable interest rates or related characteristics, the amounts of the Funds' monthly distributions to common shareholders are expected to vary. Generally, when market interest rates fall, the amount of the distributions to common shareholders will likewise decrease.
Allianz Global Investors Fund Management LLC, an indirect, wholly-owned subsidiary of Allianz Global Investors of America L.P., serves as the Funds' investment manager and is a member of Munich-based Allianz Group (NYSE - AZ). Pacific Investment Management Company LLC, an Allianz Global Investors Fund Management affiliate, serves as the Funds' sub-adviser.
The Funds' daily New York Stock Exchange closing price, weekly net asset value per share and other information are available by calling the Funds' transfer agent at 1-800-331-1710. The preceding information plus updated portfolio statistics and performance as of March 31, 2005, are available at www.allianzinvestors.com.
Statements made in this release that look forward in time involve risks and uncertainties and are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such risks and uncertainties include, without limitation, the adverse effect from a decline in the securities markets or a decline in the Funds' performance, a general downturn in the economy, competition from other companies, changes in government policy or regulation, inability of to attract or retain key employees, inability to implement its operating strategy and/or acquisition strategy, and unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations.