<PAGE>
Dresdner RCM Global
Strategic Income Fund, Inc.
Annual Report
Directors and Officers
SIR ROBERT C. COTTON
DIRECTOR AND CHAIRMAN OF THE BOARD
SYDNEY, AUSTRALIA
LUKE D. KNECHT, C.F.A.
PRESIDENT AND DIRECTOR
SAN FRANCISCO, CA
JAMES J. FOLEY
DIRECTOR
BELMONT, MA
LEONARD T. HINDE
DIRECTOR
MOSMAN, NSW, AUSTRALIA
THE EARL OF LIMERICK
DIRECTOR
LONDON, ENGLAND
G. WILLIAM MILLER
DIRECTOR AND DEPUTY CHAIRMAN OF THE BOARD
WASHINGTON, DC
STEPHEN K. WEST
DIRECTOR
NEW YORK, NY
ROBERT J. GOLDSTEIN
SECRETARY
SAN FRANCISCO, CA
JENNIE W. KLEIN
TREASURER
SAN FRANCISCO, CA
Investment Advisor
DRESDNER RCM GLOBAL INVESTORS LLC
SAN FRANCISCO, CA
DRESDNER RCM GLOBAL STRATEGIC INCOME FUND, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CA 94111
(800) 237-4218
October 31, 1999
2520-Q4-10/99
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Report to Shareholders
REPORT HIGHLIGHTS
- - Shareholders approve investment mandate changes at Annual Meeting.
- - Australian dollar rose from US$0.62 to US$0.64 over the period.
- - Australian Inflation edged higher but remained below the Reserve Bank of
Australia's 2%-3% target band.
- - Australian Reserve Bank of Australia reduces the short-term Cash Target from
5.0% to 4.8%.
- - The yield on ten-year Australian government bonds ended the period at 6.6%.
Dear Shareholders,
This is our first report to you since approval by shareholders of the
Fund's restructuring. The changes as approved represent a major transition in
the character and structure of the Fund. Speaking on behalf of the Board, we
wish to express our resolute belief that these changes were both necessary and
desirable in light of today's market environment. Therefore, we will devote the
majority of this letter to a summary of the realized and expected benefits as a
result of the change that is already underway.
As you know, shareholders approved a number of changes with respect to
the Fund with the goal of improving income and overall value as reflected in the
share price. Principal among the changes approved was a broadening of the Fund's
investment mandate from a predominately Australian investment portfolio to a
global investment portfolio. In light of today's market dynamics, we believe the
ability to invest the Fund's assets across a broader range of world bond markets
is key to delivering a sustainable high level of income to shareholders. We are
pleased to report the transition is already well under way. While market
conditions will dictate when the completion of the programmed transition occurs,
we are hopeful that the majority of the restructuring will be accomplished by
the end of January.
We will not be able to determine precisely the new level of income until
the restructuring is complete. However, based on initial forecasts, the Board
recently voted to raise the regular monthly dividend from $0.04 to $0.05 per
share. We expect to maintain this level of payout until March 2000, at which
time the Board will reconsider the dividend policy for the remainder of the
year. We are hopeful that once the restructuring is complete, a further increase
in the dividend may be possible. Of course, market conditions will dictate
whether an increase is possible.
We are also pleased to report that it is highly likely that regular
dividends paid through the remainder of this fiscal year (October 31, 2000) will
be characterized as return of capital and therefore not be subject to U.S.
federal income tax. This is the result of the Fund's ability for tax purposes to
offset the taxable income we expect the portfolio to earn with the realization
of existing accumulated currency losses. These currency losses will be realized
for tax purposes during the course of restructuring the portfolio and will not
have a financial impact on the portfolio as it is refocused toward a global
mandate.
As you know, the impetus for undertaking these changes was to permit the
portfolio to deliver more value to its shareholders in today's market
environment. We will measure the success of this initiative two ways. The first
is a higher level of sustainable income allowing for a higher dividend rate. As
discussed above, this is already well underway and has resulted in an initial
dividend increase. The second is the performance of the Fund's share price.
While the share price is a result of many factors beyond our control, we believe
that by generating a higher level of income per share, more investors will be
attracted to the Fund with a resulting positive impact on the share price. We
are also committed to raising investor awareness of the Fund.
Page 1
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Report to Shareholders
We would like to take this opportunity to once again assure Shareholders
that Dresdner RCM has committed considerable effort and resources to avoid
difficulties related to Y2K through technological upgrades as well as ensuring
that critical vendor systems are also Y2K compliant. In addition, Dresdner RCM
reviews and takes into consideration in its investment decision making process,
the Y2K preparedness of the companies in which it invests. However, Dresdner RCM
recognizes that Y2K problems could adversely affect some companies, therefore
investment returns may be temporarily impacted.
We wish to take this opportunity to thank shareholders for their support
of the requested changes and pledge our continuing efforts to bring the highest
level of skill and diligence possible to the management of the assets entrusted
to our care. The Board of Directors, in conjunction with Dresdner RCM Global
Investors, the Fund's investment manager, strongly believes that implementing
these changes will produce positive results for our shareholders and look
forward to reporting the Fund's progress in future communications.
On behalf of the Board of Directors,
/s/ Sir Robert Cotton
Sir Robert Cotton
Chairman
/s/ Luke D. Knecht
Luke D. Knecht, C.F.A.
President
December 9, 1999
PORTFOLIO SUMMARY
At October 31, 1999, the average maturity of the Fund's portfolio was
5.9 years with an average duration of 4.5 years and a current yield to
maturity of 6.9%. Securities rated AAA comprised 80% of the portfolio
with the remaining 20% in AA-rated securities.
Page 2
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Portfolio Management Discussion
During the twelve months ended October 31, 1999, the total value of the
Fund declined slightly, with Australian and New Zealand bonds falling in value.
The acceleration of global economic growth led to higher global interest rates,
and most developed bond markets suffered the consequences. The Australian
currency did gain some ground against the US dollar, mitigating the decline in
bond values to some extent. An exposure to New Zealand dollar debt securities
was maintained as a diversification. The Fund's interest rate exposure was
maintained at close to index levels over the period under review. At
October 31, 1999, the Fund's closing market price was $6.188, a discount of
19.43% to its net asset value of $7.68, a level which we believe reflects the
diminished long-term prospects for the portfolio focused as it was exclusively
on Australian and New Zealand debt securities.
For the year ended October 31, 1999, the total return on net asset value
of the Fund (with income reinvested) was -0.72%. Over the 1999 fiscal year, the
Fund has achieved a superior level of income return to that available on US
Treasury securities. However, recent declines in Australian and New Zealand
interest rates continued to reduce the Fund's income stream. The Fund generated
a current income yield of 6.9% for the twelve months ended October 31, 1999
(based on the Fund's income distribution of $0.43 per share over the period
divided by the Fund's closing market price at October 29,1999, the last business
day of the 1999 fiscal year).
A further analysis of the Fund's performance since inception is provided
on page 5.
Throughout the period under review, prospects for global economic
recovery improved as many European and Asia economies firmed. At the same time,
the US economy remained strong. Bullish expectations of a synchronous cyclical
upturn across Europe and Asia, including Japan, led to a rise in commodity
markets and fears of higher inflation. However, inflationary pressures in the
most structurally sophisticated economies have remained moderate. In the US,
domestic consumer price inflation has remained low, but the Federal Reserve
nevertheless felt compelled to raise interest rates twice before the end of the
period. This was both as a precautionary measure against price inflation and an
attempt to curb the continued rally in stocks. Given this macro-economic
environment and the overbought levels of the US Treasury market in November
1998, US bond yields trended consistently higher for the twelve month period
ended October 31, 1999. This cast a shadow across most of the world's major bond
markets, resulting in weak market sentiment for much of the period under review.
The Australian bond market reflected this weak sentiment over the year
to October 31, 1999, with ten-year bond yields rising from just below 5.0% at
the beginning of November 1998 to over 6.8% by the end of October 1999. The
domestic fundamentals in Australia became increasingly bearish for bonds as the
prolonged period of consumer-led growth showed little sign of ending, causing
fears of both higher inflation and subsequent counter-inflationary measures from
the Reserve Bank. While yield increases such as this are unpleasant in the short
run, there is a long-term benefit in the Fund's ability to earn higher levels of
income for shareholders. The yield premium over US Treasuries however remained
reasonably tight with the range never widening beyond 69 basis points,
indicating that the sell-off in Australian bonds was led predominantly by
movements in the U.S. Treasury market itself rather than domestic inflationary
fears alone. The Reserve Bank of Australia reduced the short-term Cash Target
from 5.0% in November 1998 to 4.8%, where the official short-term interest rates
stood until October 1999. However, the Reserve Bank of Australia recently
signaled a decisive change in policy, from an accommodative to a tightening
monetary stance, and the Cash Target was duly raised to 5.0% after its November
2, 1999 meeting.
The New Zealand bond market sold off broadly in parallel with Australian
bonds, with ten-year yields rising from 5.4% to 7.1%. The main driver of
short-term interest rates shifted over the period from stimulating the weak
domestic economy to the maintenance of control over inflation as economic
conditions recovered. As a result,
Page 3
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Portfolio Management Discussion
cash rates fell to 2.8% in early 1999 only to rise to 4.5% towards the end of
the period. The bond market clearly suffered from the upward move in short term
rates. As in Australia, the bearish sentiment in the US Treasury market proved
of greater significance in causing yields in the New Zealand market to rise.
The Australian Dollar appreciated marginally over the course of the
year, from US$0.62 to US$0.64, closing around the mid-point of its trading range
for the period. The phenomenon of a broad range with no long-term directional
momentum was the result of conflicting economic and market forces. As the global
economic outlook began to recover, the currency benefited from better market
sentiment and improved trade with Asian economies. However, the currency
received little support from commodity price movements as the Reserve Bank of
Australia commodity index remained at depressed levels. Copper and oil prices
recovered in line with the improved economic outlook while gold prices fell. The
prolonged strength of the domestic economy throughout the period proved a mixed
factor for the Australian Dollar as theoretical economic support was offset by a
deteriorating trade balance, with the high level of imports being greater in
volume than increased exports to Asia.
The New Zealand Dollar depreciated marginally, falling from US$0.53 to
just below US$0.51. The New Zealand currency responded to the same global
economic and market factors outlined above with respect to the Australian
Dollar. However, domestic fundamental factors in New Zealand were generally
weaker than in Australia. The rate of economic growth continued to lag, despite
increased hopes of recovery. Finally, aside from domestic factors, the New
Zealand Dollar began to suffer from poor market sentiment and illiquidity as
investors reduced peripheral market exposure as a result of concerns over the
impact of Y2K.
Page 4
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Performance from Inception through October 31, 1999 (Unaudited)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
$10,000 INVESTMENT (11/30/86 - 10/31/99)
<S> <C> <C> <C> <C>
Market Value N.A.V. Sal. US Index Sal. AUST. Index
11/86 $10,000 $10,000 $10,000 $10,000
10/87 $9,165 $11,102 $10,041 $11,686
10/88 $14,679 $15,899 $11,007 $16,812
10/89 $15,010 $15,993 $12,359 $17,137
10/90 $14,664 $18,470 $13,075 $20,426
10/91 $20,969 $23,178 $14,965 $25,846
10/92 $21,388 $22,775 $16,527 $26,002
10/93 $23,363 $25,656 $18,687 $29,557
10/94 $23,776 $26,482 $17,864 $30,144
10/95 $27,518 $31,231 $20,601 $36,488
10/96 $30,144 $36,508 $21,669 $43,779
10/97 $30,029 $36,162 $23,530 $44,341
10/98 $26,276 $34,552 $26,247 $43,264
10/99 $26,943 $34,304 $25,869 $43,515
</TABLE>
Since its inception in 1986, the Fund has achieved an average annualized
return on market value of 7.97%, on the basis noted below. On a net asset value
basis, which measures the performance of the Fund's underlying portfolio, the
average annualized return has been 10.00% and has outpaced the Salomon Brothers
US Government Bond Index, which has averaged 7.63%. The Salomon Brothers
Australian Government Bond Index has averaged 12.05% since the Fund's inception,
with the difference between the Fund's net asset value performance and that of
the index primarily attributable to the Fund's operating and foreign tax
expenses, which neither index is subject to. After adjusting for these expenses,
which have averaged 2.13% since inception, the Fund has slightly outperformed
the Australian index.
ANNUALIZED PERFORMANCE
<TABLE>
<S> <C> <C> <C> <C> <C>
10 SINCE
1 YEAR 3 YEARS 5 YEARS YEARS INCEPTION
Fund Market Value (1) 2.56% -3.67% 2.53% 6.02% 7.97%
Fund Net Asset Value (2) -0.72% -1.49% 5.31% 7.93% 10.00%
Salomon Brothers U.S. Gov't Bond Index (3) -1.44% 6.09% 7.68% 7.66% 7.63%
Salomon Brothers Australian Gov't Bond
Index (3) 0.58% -0.20% 7.61% 9.76% 12.05%
</TABLE>
(1) Based on market value per share, adjusted for rights offerings, and assumes
reinvestment of all distributions at reinvestment plan prices.
(2) Based on net asset value per share, adjusted for rights offerings, and
assumes reinvestment of all distributions at the ex-dividend date net asset
value. This measures the performance of the underlying Fund portfolio and
may not be indicative of returns to investors.
(3) The Salomon Brothers US and Australian Government Bond Indices are US$ based
unmanaged indices.
Please remember that past performance may not be indicative of future results.
Page 5
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Portfolio of Investments
October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT CURRENCY DEBT INVESTMENTS COUPON MATURITY (US$)
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
LONG-TERM INVESTMENTS--97.3%
AUSTRALIAN GOVERNMENT AND SEMI-GOVERNMENT BONDS--63.5%
EUROBONDS--42.5%
2,000,000 A$ State Bank of South Australia 9.500% 10/15/02 $ 1,374,956
5,000,000 Australian Industrial Development Corp. 9.250% 2/17/03 3,440,073
3,300,000 Export Finance & Insurance Corp. 9.000% 3/26/03 2,258,498
2,750,000 State Bank of South Australia 10.500% 6/23/03 1,967,160
1,500,000 South Australian Government Bond 7.250% 9/22/03 974,908
2,500,000 Australian Industrial Development Corp. 8.750% 7/20/04 1,726,144
14,400,000 Queensland Treasury Corp. 6.500% 6/14/05 9,122,969
1,200,000 Treasury Corp. of Victoria 9.000% 6/27/05 843,029
1,000,000 Commonwealth Bank of Australia 9.000% 8/15/05 703,386
6,000,000 New South Wales Treasury Corp. 6.500% 5/1/06 3,768,663
21,500,000 Queensland Treasury Corp. 6.000% 7/14/09 12,848,937
-----------
39,028,723
-----------
DOMESTIC BONDS--21.0%
6,000,000 A$ Western Australia Treasury Corp. 8.000% 7/15/03 4,013,739
4,000,000 Victoria Public Finance Authority 12.500% 10/15/03 3,073,584
7,500,000 Commonwealth Government Bond 8.750% 8/15/08 5,446,254
10,000,000 Commonwealth Government Bond 7.500% 9/15/09 6,768,461
-----------
19,302,038
-----------
TOTAL AUSTRALIAN GOVERNMENT AND
SEMI-GOVERNMENT BONDS (Cost $60,949,179) 58,330,761
-----------
AUSTRALIAN CORPORATE EUROBONDS--18.7%
3,500,000 A$ DSL Finance NV 10.250% 4/7/00 2,275,691
6,000,000 Morgan Guaranty Trust Co. 8.000% 4/18/01 3,928,983
2,000,000 Bayerische Vereinsbank 8.750% 5/17/01 1,324,962
2,000,000 KFW International Finance 7.250% 2/20/07 1,282,143
5,000,000 Nederlandse Waterschapsbank NV 7.000% 3/15/02 3,224,669
4,000,000 National Australia Bank 7.000% 7/23/04 2,567,283
3,500,000 Bayerische Vereinsbank 10.250% 10/28/04 2,538,953
-----------
TOTAL AUSTRALIAN CORPORATE EUROBONDS (Cost $19,521,816) 17,142,684
-----------
</TABLE>
See Notes to Financial Statements.
Page 6
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Portfolio of Investments
October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT CURRENCY DEBT INVESTMENTS COUPON MATURITY (US$)
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONTINUED)
NEW ZEALAND EUROBONDS--12.9%
4,000,000 NZ$ European Investment Bank 8.500% 5/30/01 $ 2,078,361
2,000,000 KFW International Finance 7.500% 11/8/01 1,022,602
3,000,000 KFW International Finance 7.625% 4/29/02 1,530,127
7,000,000 Federal National Mortgage Association 7.250% 6/20/02 3,556,234
8,400,000 International Bank for Reconstruction and
Development 5.500% 11/3/08 3,645,346
-----------
TOTAL NEW ZEALAND EUROBONDS (Cost $12,481,358) 11,832,670
-----------
NEW ZEALAND GOVERNMENT BOND--2.2%
4,000,000 NZ$ New Zealand Government Bond
(Cost $2,215,889) 7.000% 7/15/09 2,012,699
-----------
TOTAL PORTFOLIO OF INVESTMENTS 97.3% (Cost $95,168,242) 89,318,814
-----------
OTHER ASSETS LESS LIABILITIES--2.7% 2,464,465
-----------
NET ASSETS--100.0% $91,783,279
===========
</TABLE>
See Notes to Financial Statements.
Page 7
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
OCTOBER 31, 1999 OCTOBER 31, 1998
----------------- -----------------
<S> <C> <C>
ASSETS:
Investments, at value (cost $95,168,242 and $98,864,788,
respectively) $89,318,814 $ 97,731,879
Cash on deposit:
Foreign currency (cost $4,668,923 and $3,265,545,
respectively) 4,588,424 3,270,877
US dollars 59,757 14,711
Receivable for securities sold -- 2,179,814
Interest receivable 2,361,153 2,788,798
Other assets -- 14,577
----------- ------------
Total Assets 96,328,148 106,000,656
----------- ------------
LIABILITIES:
Payable for securities purchased 3,658,588 5,105,157
Dividends payable 478,183 537,955
Investment advisory fee payable 54,762 57,806
Directors' fees and expenses payable 3,290 23,341
Other accrued expenses 350,046 229,512
----------- ------------
Total liablities 4,544,869 5,953,771
----------- ------------
NET ASSETS $91,783,279 $100,046,885
=========== ============
NET ASSETS:
Net assets were comprised of:
Common stock, at $0.001 par $ 11,955 $ 11,955
Paid-in capital 97,148,607 98,820,740
----------- ------------
97,160,562 98,832,695
Accumulated distributions in excess of net investment
income (826,136) --
Accumulated net realized gain on investment and foreign
currency transactions 1,340,220 2,281,942
Net unrealized depreciation on investments and other
assets and liabilities denominated in foreign currencies (5,891,367) (1,067,752)
----------- ------------
NET ASSETS $91,783,279 $100,046,885
=========== ============
Shares of common stock issued and outstanding 11,954,566 11,954,566
----------- ------------
Net asset value per share $ 7.68 $ 8.37
=========== ============
</TABLE>
See Notes to Financial Statements.
Page 8
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Statement of Operations
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
OCTOBER 31,
------------------------------
1999 1998
----------- ------------
<S> <C> <C>
NET INVESTMENT INCOME:
Investment Income:
Interest and discount earned (net of foreign withholding
taxes of $172,841 and $233,487, respectively) $ 6,588,565 $ 7,544,594
----------- ------------
Expenses:
Investment advisory fees 684,186 706,840
Custodian fees 189,083 185,392
Legal 142,325 22,010
Directors' fees and expenses 111,144 116,795
Audit and tax services 82,510 51,475
Postage 48,423 31,950
Printing 37,087 36,920
Stock exchange listing fee 26,220 21,932
Transfer agent fees 6,002 36,920
Insurance 3,853 2,048
Miscellaneous 2,020 11,995
----------- ------------
Total operating expenses 1,332,853 1,224,277
----------- ------------
Net investment income* 5,255,712 6,320,317
----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investment transactions* 446,532 2,644,183
Foreign currency transactions** (1,539,131) (8,266,748)
----------- ------------
Total net realized loss (1,092,599) (5,622,565)
----------- ------------
Change in unrealized depreciation on:
Investments* (8,665,368) (2,462,722)
Foreign currency denominated assets and liabilities** 3,841,753 (3,482,886)
----------- ------------
Total net change in unrealized depreciation (4,823,615) (5,945,608)
----------- ------------
Net realized and unrealized loss on investments and
foreign currencies (5,916,214) (11,568,173)
----------- ------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (660,502) $ (5,247,856)
=========== ============
</TABLE>
- --------------------------------
<TABLE>
<S> <C>
* Net increase/(decrease) in net assets before foreign
currency gain (loss) was ($2,963,124) and $6,501,778,
respectively.
** Net realized and unrealized foreign currency gain (loss) was
$2,302,622 and ($11,749,634), respectively.
</TABLE>
See Notes to Financial Statements.
Page 9
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
OCTOBER 31,
---------------------------------
1999 1998
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 5,255,712 $ 6,320,317
Net realized loss on investments and foreign
currency transactions (1,092,599) (5,622,565)
Change in unrealized depreciation on investments and
foreign currency denominated assets and liabilities (4,823,615) (5,945,608)
------------ ------------
Net decrease in net assets resulting from operations (660,502) (5,247,856)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (5,080,691) (6,455,466)*
From net realized gain on investments and foreign currency
transactions (2,522,413) (1,888,821)*
------------ ------------
Net decrease in net assets resulting from distributions to
shareholders (7,603,104) (8,344,287)
------------ ------------
Total decrease in net assets (8,263,606) (13,592,143)
NET ASSETS:
Beginning of year 100,046,885 113,639,028
------------ ------------
End of year (including accumulated undistributed net
investment income of $0 and $0, respectively) $ 91,783,279 $100,046,885
============ ============
</TABLE>
- --------------------------------
<TABLE>
<S> <C>
* The Fund redesignated $537,955 from distributions from net
investment income to distributions from net realized gain on
investments and foreign currency transactions.
</TABLE>
See Notes to Financial Statements.
Page 10
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Financial Highlights
<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value at beginning of year $ 8.37 $ 9.51 $ 10.41 $ 10.08 $ 9.99
------- -------- -------- -------- -------
Net investment income 0.44 0.53 0.72 0.85 0.84
Net realized and unrealized gain (loss) on
investments and foreign currencies (0.49) (0.97) (0.82) 0.79 0.82
------- -------- -------- -------- -------
Total increase (decrease) from operations: (0.05) (0.44) (0.10) 1.64 1.66
------- -------- -------- -------- -------
Distribution to shareholders:
From net investment income (0.43) (0.54) (0.78) (0.89) (0.89)
From net realized gains on investment and
foreign currency transactions (0.21) (0.16) (0.03) -- --
------- -------- -------- -------- -------
Total distributions to shareholders (0.64) (0.70) (0.81) (0.89) (0.89)
------- -------- -------- -------- -------
Decrease in net assets from capital stock
transactions -- -- -- (0.39) (0.65)
------- -------- -------- -------- -------
Offering expenses charged to capital -- -- 0.01 (0.03) (0.03)
------- -------- -------- -------- -------
Net increase (decrease) in net asset value (0.69) (1.14) (0.90) 0.33 0.09
------- -------- -------- -------- -------
NET ASSET VALUE AT END OF YEAR $ 7.68 $ 8.37 $ 9.51 $ 10.41 $ 10.08
======= ======== ======== ======== =======
Per share market value at end of year $ 6.188 $ 6.625 $ 8.3125 $ 9.125 $ 9.250
======= ======== ======== ======== =======
TOTAL INVESTMENT RETURN (1) 2.56% (12.50)% (0.38)% 9.54% 15.74%
======= ======== ======== ======== =======
Net asset value return (2) (0.72)% (4.45)% (0.95)% 16.90% 17.93%
======= ======== ======== ======== =======
Net assets at end of year (in 000's) $91,783 $100,047 $113,639 $124,501 $96,390
======= ======== ======== ======== =======
Number of shares outstanding at end of year
(in 000's) 11,955 11,955 11,955 11,955 9,564
======= ======== ======== ======== =======
RATIOS TO AVERAGE NET ASSETS:
Operating expenses 1.36% 1.21% 1.14% 1.22% 1.32%
======= ======== ======== ======== =======
Net investment income 5.38% 6.25% 7.21% 8.22% 8.51%
======= ======== ======== ======== =======
Portfolio turnover 46.08% 37.05% 26.67% 16.00% 56.55%
======= ======== ======== ======== =======
</TABLE>
- --------------------------------
<TABLE>
<S> <C>
(1) Based on market value per share, adjusted for reinvestment
of distributions at reinvestment plan prices and for rights
offerings, assuming full subscription by shareholder.
(2) Based on net asset value per share, adjusted for
reinvestment of distributions at ex-dividend date net asset
value and for rights offering, assuming full subscription by
shareholder.
</TABLE>
See Notes to Financial Statements.
Page 11
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Notes to Financial Statements
October 31, 1999
Dresdner RCM Global Strategic Income Fund, Inc. (formerly Kleinwort
Benson Australian Income Fund, Inc.) (the "Fund") was incorporated in Maryland
on August 12, 1986 and is registered as a closed-end, non-diversified investment
company under the Investment Company Act of 1940, as amended. The Fund now
trades under the new name and ticker symbol [DSF].
Prior to November 12, 1999, the Fund's investment objective was to seek
high income primarily through investments in Australian and New Zealand
government bonds. The Fund will now seek high income through investments in
global debt securities while maintaining an overall investment grade credit
quality. The managed use of derivatives and borrowing may also be utilized as
additional tools to enhance the Fund's current yield.
1. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements.
A. BASIS OF PRESENTATION:
The financial statements of the Fund are prepared in accordance with
accounting principles generally accepted in the United States using the
U.S. dollar as both the functional and reporting currency. (For tax purposes the
Fund uses the Australian dollar as its functional currency -- see TAXES.) The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates of certain reported
amounts in the financial statements. Actual amounts could differ from those
estimates.
B. INVESTMENT VALUATION:
Investment securities are stated at value. Investments for which market
quotations are readily available are valued at the last reported sales prices.
If there is no sales price on the date of valuation, then investments are valued
at the most recently available sales price or at fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost, if their term to maturity from date of purchase
was 60 days or less, or by amortizing their value on the 61st day prior to
maturity, if their original term to maturity exceeded 60 days.
C. FOREIGN CURRENCY TRANSLATION:
The books and records of the Fund are maintained in U.S. dollars.
Australian dollar ("A$") and New Zealand dollar ("NZ$") amounts are translated
into U.S. dollars ("US$") on the following basis:
(i) market value of investment securities and other assets and
liabilities -- at the current prevailing rate of exchange.
Page 12
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Notes to Financial Statements
October 31, 1999
1. ACCOUNTING POLICIES (CONTINUED)
(ii) purchases and sales of investment securities and income and
expenses -- at the rates of exchange prevailing on the respective
dates of such transactions.
The investment securities of the Fund are presented at the foreign
exchange rates and market values at the close of the period. The Fund isolates
that portion of the results of operations arising as a result of changes in
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held or sold during the period.
The foreign currency transactions element of net realized gains or
losses represents net foreign exchange gains or losses from the disposition of
portfolio securities, foreign currencies and forward currency contracts and net
currency gains or losses realized between the trade and settlement dates on
security transactions between the amounts of interest, discount and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar equivalent
amounts actually received or paid. The foreign currency denominated assets and
liabilities element of the change in unrealized appreciation or depreciation
represents the change in the value of portfolio securities, foreign currencies,
and other assets and liabilities arising as a result of changes in foreign
exchange rates.
The Australian and New Zealand dollar exchange rates at October 31,
1999, and October 31, 1998, were US$0.6378 to A$1.00 and US$0.5069 to NZ$1.00,
and US$0.6253 to A$1.00 and US$0.5296 to NZ$1.00, respectively.
D. MARKET AND CURRENCY RISK:
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin
as a result of, among other factors, the level of governmental supervision and
regulation of foreign securities markets and the possibility of political or
economic instability. The abilities of the issuers of debt securities held by
the Fund to meet their obligations may be affected by economic or political
developments in a particular country.
E. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME:
Investment security transactions are recorded on the trade date.
Realized and unrealized gains and losses on investments and foreign currencies
are calculated on the identified cost basis. Interest income is recorded on the
accrual basis and interest receivable is reflected in the Statement of Assets
and Liabilities net of accrued withholding taxes. Premiums and discounts on debt
securities are amortized over the life of the security.
F. FORWARD CURRENCY CONTRACTS:
The Fund may enter into forward currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings. A forward contract is a commitment to purchase or sell a
Page 13
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Notes to Financial Statements
October 31, 1999
1. ACCOUNTING POLICIES (CONTINUED)
foreign currency at a future date at a negotiated forward rate. Forward currency
contracts are valued based on the current forward rate of exchange. Fluctuations
in the value of such contracts are recorded as unrealized foreign exchange gain
or loss.
G. DIVIDENDS AND DISTRIBUTIONS:
The Fund declares and pays dividends of net investment income on a
monthly basis. Distributions of net realized capital gains, if any, are made
annually. Dividends and distributions are recorded on their ex-dividend date.
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ with generally accepted accounting principles.
These "book/tax" differences are either temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their tax-basis treatment; temporary
differences do not require a reclassification.
The Fund accounts for and reports distributions to shareholders in
accordance with the Statement of Position 93-2: "Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies." The effect of applying this statement
for the years ended October 31, 1999 and 1998 was to decrease undistributed net
investment income by $1,001,157 and $164,183 and increase undistributed capital
gain by $2,673,290 and $8,444,975 and decrease paid in capital by $1,672,133 and
$8,280,792. The adjustments are primarily attributable to re-designation of
foreign currency gains/losses for tax purposes. Net investment income, net
realized gains and net assets of the Fund were not affected by these changes.
H. TAXES:
For Federal income tax purposes, substantially all of the Fund's
transactions are accounted for using the Australian dollar as the functional
currency. Accordingly, only realized currency gains and losses resulting from
the repatriation of A$ into US$ or NZ$ into A$ or US$ are recognized for tax
purposes.
No provision has been made for U.S. income taxes because it is the
Fund's policy to meet the requirements of the U.S. Internal Revenue Code
applicable to regulated investment companies and to distribute, within allowable
time limits, all of its taxable income to shareholders. As the Fund uses the
Australian dollar as its functional currency for tax purposes, there are
character differences between taxable income and net investment income and net
realized gain (loss) on investments and foreign currencies as computed for
financial statement purposes. Australia imposes a withholding tax of 10% on most
interest and discount earned. Eurobonds and New Zealand government bonds are
generally not subject to withholding taxes.
Page 14
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Notes to Financial Statements
October 31, 1999
2. AGREEMENTS
The Fund's Advisory Agreement with Kleinwort Benson Investment
Management Americas Inc., the Investment Advisor, provides for a fee, computed
weekly and payable monthly, at an annual rate of 0.70% of the Fund's average
annual net assets up to $100,000,000 and at 0.65% thereafter. For the years
ended October 31, 1999 and 1998, the Investment Advisor earned $684,186 and
$706,840, respectively.
On October 15, 1999 stockholders approved the appointment of Dresdner
RCM Global Investors LLC as the Fund's Investment Advisor and Kleinwort Benson
Investment Management Americas Inc., as the Fund's sub-advisor, on substantially
the same terms and fee structure.
3. PORTFOLIO TRANSACTIONS
Purchases of investment securities, other than short-term investments,
for the year ended October 31, 1999 and 1998, aggregated $43,962,146 and
$36,608,281, respectively. Sales of investment securities, other than short-term
investments, totaled $46,272,432 and $37,573,285, respectively. The portfolio of
investments at October 31, 1998, was substantially the same in terms of types of
investments to that included herein for October 31, 1999.
The U.S. Federal income tax basis of the Fund's investments and foreign
currency cash deposits at October 31, 1999 and 1998, was as listed below.
<TABLE>
<CAPTION>
OCTOBER 31, 1999 OCTOBER 31, 1998
----------------- -----------------
<S> <C> <C>
Tax cost basis $89,491,994 $89,116,171
=========== ===========
Unrealized appreciation $ 2,377,566 $ 9,314,574
Unrealized depreciation (2,550,746) (149,876)
----------- -----------
Net unrealized appreciation/(depreciation) $ (173,180) $ 9,164,698
=========== ===========
</TABLE>
4. CAPITAL STOCK
There are 100 million shares of $0.001 par value common stock authorized
and 11,954,566 such shares outstanding. There were no transactions in the Fund's
capital stock for the years ended October 31, 1999 and 1998.
5. SUBSEQUENT EVENT
Subsequent to year-end, in accordance with the changes in the investment
mandate, the Fund liquidated approximately 90% of the portfolio securities as of
December 10, 1999. As a result, the Fund realized net losses of $5,518,354. The
Fund's net asset value per share was $7.69 at December 10, 1999 compared to
$7.68 at October 31, 1999.
Page 15
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Report of Independent Accountants
To the Board of Directors and Shareholders of the
Dresdner RCM Global Strategic Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the October 31, 1999 portfolio of investments, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Dresdner RCM Global Strategic Income Fund, Inc. (formerly Kleinwort Benson
Australian Income Fund, Inc.) (the "Fund") at October 31, 1999 and 1998, the
results of its operations and the changes in its net assets for each of the two
years then ended, and the financial highlights for each of the five years in the
period ended October 31, 1999 in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1999 and 1998 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
December 10, 1999
Page 16
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Dividend Reinvestment and Cash Purchase Plan
Foreign Tax Credits (Unaudited)
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund offers to shareholders a Dividend Reinvestment Plan which
provides participants with a prompt and simple way to reinvest their income
dividends and capital gain distributions in additional Fund shares. If you
choose to participate in the Plan, your income dividends and capital gain
distributions will automatically be reinvested in Fund shares at the lower of
market price or net asset value, at up to a 5% discount for market price, on
valuation date. The Plan also includes a Cash Purchase option which provides
Reinvestment Plan participants with the opportunity to make additional cash
investments in Fund shares directly through the Plan Agent.
The Plan is entirely voluntary and, subject to the terms and conditions
of the Plan, you may join or withdraw at any time. A brochure with more
information, including the full terms and conditions, and an application is
available from the Plan Agent, Boston EquiServe, telephone (800) 730-6001.
If you wish to participate and your shares are registered in your name,
simply complete and return the application form. If your shares are held in the
name of a brokerage firm, bank or other nominee, your shares may need to be
re-registered in your own name in order for you to participate. Please consult
your broker to determine what needs to be done to arrange for you to join the
Plan.
FOREIGN TAX CREDITS
The Fund will generally elect to treat all foreign taxes paid by it as
having been paid proportionately by its shareholders. As a result, the Form
1099-DIV's issued to shareholders by the Fund will likely include an amount of
foreign taxes paid by the Fund on the behalf of its shareholders. Shareholders
can generally use the foreign tax amount to either claim a deduction or a tax
credit on their U.S. Federal tax return.
The Fund issues its 1099-DIV tax forms in January of each year. In
February, the Fund will inform shareholders of the breakdown between foreign
taxes, dividends and distributions paid for the preceding calendar year.
Shareholders whose shares are held in "street name" should contact their broker
for foreign tax credit reporting information.
TAX INFORMATION
In accordance with United States federal income tax regulations, a
summary for the fiscal year ended October 31, 1999, of the dividends and
distributions paid for Federal income tax purposes on a per share basis is
listed on the next page.
Page 17
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
Dividend Reinvestment and Cash Purchase Plan
Foreign Tax Credits (Unaudited)
PLEASE NOTE THAT IF YOU REPORT FOR FEDERAL INCOME TAX PURPOSES ON A
CALENDAR YEAR BASIS, AMOUNTS WHICH SHOULD BE INCLUDED IN YOUR 1999 RETURN SHOULD
BE BASED ON FORM 1099 WHICH WILL BE PROVIDED TO YOU IN JANUARY 2000. THOSE FORM
1099'S WILL BE BASED ON CALENDAR YEAR TAX INFORMATION WHICH WILL VARY FROM THAT
REPORTED BELOW:
<TABLE>
<S> <C>
DISTRIBUTIONS TO SHAREHOLDERS:
- ------------------------------------------------------------
Dividends $0.425
Long-term Capital Gains 0.211
Foreign Taxes (Australia) 0.013
------
Total Distributions $0.649
======
DISTRIBUTIONS BY SOURCE:
- ------------------------------------------------------------
Ordinary Income, Foreign Source:
Australia $0.387
New Zealand 0.051
------
Total Foreign Source 0.438
======
Total Ordinary income 0.438
Long-term Capital Gains 0.211
------
Total Distributions $0.649
======
</TABLE>
Page 18
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
1999 Annual Stockholders' Meeting Results
(Unaudited)
The following matters were submitted to a vote of stockholders at the
Fund's 1999 Annual Meeting of Stockholders held on October 15, 1999 as adjourned
and reconvened on October 28, 1999 and November 12, 1999, respectively:
To amend the Fund's investment mandate and corresponding investment policies and
restrictions.
The votes were cast: For (5,950,415) Against
(1,961,206) Abstain (170,876)
To amend the Fund's investment restrictions on senior securities and related
restrictions on commodity contracts, margin and short sales.
The votes were cast: For (5,840,323) Against
(2,500,038) Abstain (229,447)
To amend the Fund's investment restriction to permit securities lending.
The votes were cast: For (6,314,346) Against
(1,501,004) Abstain (267,146)
To approve a new Investment Advisory Agreement between the Fund and Dresdner RCM
Global Investors LLC.
The votes were cast: For (7,867,398) Against (759,866) Abstain
(219,334) Broker non-votes (153,858)
To approve a Subadvisory Agreement among Dresdner RCM Global Investors LLC,
Kleinwort Benson Investment Management Americas Inc. and the Fund.
The votes were cast: For (7,820,649) Against (798,394) Abstain
(227,555) Broker non-votes (153,858)
To elect two Class II Directors, each to hold office for a term of three years
and until his successor is duly elected and qualified.
Luke D. Knecht
The votes were cast: For (7,199,024) Withheld
(1,362,549) Broker non-votes (153,858)
Stephen K. West
The votes were cast: For (7,189,105) Withheld
(1,372,462) Broker non-votes (153,858)
The terms of office for the following Directors continued after the meeting: Sir
Robert C. Cotton, James J. Foley, The Earl of Limerick, Leonard T. Hinde and G.
William Miller.
To ratify the selection of PricewaterhouseCoopers LLP as Independent Accountants
for the Fund for the fiscal year ending October 31, 1999.
The votes were cast: For (7,946,934) Against (489,462) Abstain
(116,177) Broker non-votes (153,858)
Page 19
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
