<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.
DIRECTOR AND PRESIDENT
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, 2000
2520-Q4-10/00
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Report to Shareholders
REPORT HIGHLIGHTS
- Income rises as a result of the restructuring
- Monthly Dividend raised to $0.06 per share
- Favorable tax treatment for substantially all dividends paid
- Total return on share price was 21.69% while discount to net asset value
declined to 5.54%
- Shareholders approve proposal urging conversion to open-end format
Dear Shareholders,
The Dresdner RCM Global Strategic Income Fund Inc. (the "Fund") recently
completed fiscal year 2000, the year in which the Fund's mandate was changed
from an Australian income fund to a global strategic income fund. We are pleased
to report that shareholders were rewarded during the fiscal year with many
positive benefits as a result of the mandate change. The per-share dividend rate
was increased in stages, from $0.04 per share per month before the mandate
change to its current level of $0.06 per share per month, or a 50% increase. The
other major benefit of the mandate change was the Fund's ability to classify
substantially all dividends paid during fiscal year 2000 a substantial portion
of the current fiscal year's dividend as return of capital and therefore free
from current federal and state income tax. We believe that these and other
factors discussed below helped boost the Fund's share price from $6.188 at the
beginning of the fiscal year to $6.688 per share as of this writing.
As you know, the Fund's primary investment objective has always been,
and continues to be, the delivery of high current income to its shareholders. It
was this objective that the Board of Directors had in mind when recommending to
shareholders that the Fund's mandate be changed to a global income fund. Since
the mandate change was fully implemented some ten months ago, the Fund's income
has increased significantly and the Board has been able to raise the monthly
dividend rate commensurately. This was possible because of two key aspects of
the new mandate. First and most importantly, the Fund was able to invest in a
broader range of securities than was previously allowed. Specifically, the
proceeds from the sales of Australian and New Zealand bonds were re-deployed to
U.S. dollar denominated bond investments in high yield, emerging market and
mortgage backed securities. Improved yields on the Fund's investments increased
income by about $0.14 per share during the period.
Second, during the period under the new mandate, the Fund was able to
utilize leverage as a way to increase income by earning the difference between
the cost of borrowed funds and the income generated by the acquired securities.
The income from this activity was approximately $350,000 during the fiscal year,
or about $0.03 per share. Taken together, the changes combined to produce an
overall increase in income of approximately $0.17 per share over the prior
fiscal year.
Finally, the Board also considers the Fund's share price in relation to
its net asset value as a further means to gauge the Fund's success. In the past
year, the share price discount to net asset value declined from 19.43% to 5.54%.
As you know, many factors beyond the control of the Board or the Fund's
investment manager influence the share price. However, we believe the narrowing
of the discount was in part due to the mandate change initiated by the Board.
The total return for the Fund during its fiscal year was 2.05%, which consisted
of a decline in the net asset value from $7.68 to $7.08 offset by income
distributions of $0.755. The principal reason for the decline in the net asset
value was the increase in corporate bond yields during the period and a further
decline in the value of the Fund's remaining Australian dollar
Page 1
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Report to Shareholders
investments. These securities were retained until the current fiscal year to
maximize the tax advantages to shareholders that are realized upon their
liquidation. A further discussion of the market environment follows in the
manager's discussion and analysis.
As you know, the Fund recently held its annual meeting at which two
important events occurred. First, the incumbent slate of Directors supported by
the Board was not re-elected for another term. Rather, the slate of Directors
proposed by Mr. Phillip Goldstein was elected. Second, the non-binding
shareholder proposal urging the Board to take the necessary steps to convert the
Fund to an open-end Fund passed. The Fund's Board and investment advisor were
opposed to this proposal primarily because if approved, the Fund would not be
able to continue using the strategies which have been instrumental in raising
the Fund's income generation. The proposal passed with 44.4% of the Fund's
outstanding shares in favor of this action and 55.6% not voting in favor of this
action either by voting against (21.9%) or not voting or abstaining (33.7%).
Needless to say, this was a disappointing outcome for those who felt the
restructuring had been successful in creating a stronger Fund with an improved
income stream and stock price. However, the Board will actively consider the
approved proposal, including exploring the best course of action for the Fund's
future. In the coming months, the Board will explore all the relevant options
and, when a final decision is reached by the Board, it will be communicated to
shareholders as promptly as possible.
Lastly, we wish to publicly extend our gratitude to the Fund's three
long-time directors who were not re-elected. Mr. G. William Miller, Mr. Leonard
T. Hinde and The Earl of Limerick each have served shareholders as Directors of
the Fund for over twelve years. We thank them for their many significant
contributions over those years and wish them well. We would also like to take
this opportunity to extend our welcome to the Fund's newly elected Directors,
Phillip Goldstein, Glenn Goodstein and Andrew Dakos.
Sincerely,
/s/ Luke D. Knecht
Luke D. Knecht, C.F.A.
President
November 22, 2000
Page 2
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Portfolio Management Discussion -- Annual Period Ended October 31, 2000
OVERVIEW
For the annual period ended October 31, 2000, investment activities
centered on restructuring the Fund in accordance with the broadened investment
mandate approved by shareholders in November 1999. The new investment mandate
sought to raise the yield of the Fund and correspondingly increase the monthly
dividend paid to shareholders. Through the restructuring, the Fund was able to
increase the monthly dividend rate in stages from $0.04 to $0.06, representing a
50% rate increase, and has been able to characterize substantially all of the
dividends as return of capital thereby allowing shareholders to enjoy dividends
free from current income tax. While the Fund has been able to increase its
monthly dividend to shareholders, it has still maintained an investment-grade
credit quality as well as an overall intermediate duration profile.
Through the restructuring, the Investment Manager liquidated almost 90%
of the Fund's assets during fiscal year 2000, including the bulk of the
Australian and New Zealand dollar bond holdings. With the proceeds from the
liquidation, the Fund invested in mortgage-backed securities, corporate bonds,
high-yield securities, and emerging market debt. Financial leverage was
introduced to the Fund to enhance yield (with associated funding costs
subsequently locked in via an interest rate swap).
Financial markets were generally mixed and volatile during the fiscal
period. The time between November 1999 and mid-January 2000 was marked by
sharply rising bond yields, surging equity markets, and rallies in
commodity-related currencies (such as the Australian dollar). This environment
was caused by continued strength in the pace of global economic activity, rising
inflation indicators across most markets, and central banks which were
increasingly wary regarding the sustainability of such growth without the
introduction of inflation.
From mid-January until April, the fundamentals of these markets did not
change, but technical conditions in the U.S. marketplace changed radically and
caused havoc in most financial markets. Rates on treasuries, especially
longer-dated ones, rallied strongly because the Treasury announced intentions to
use the government surplus to begin debt buybacks, especially in the long end.
Subsequently, investors scurried to buy the "soon-to-be-extinct" treasury
securities. Meanwhile, the Federal Reserve continued to raise the Fed Funds rate
in an attempt to cool the U.S. economy to sustainable levels. This continued
pressure on the short end caused the yield curve to "invert". The 10-year
treasury yield, for example, fell 100bps from January until April. As treasuries
performed well during this time, the non-treasury sectors lagged. The exception
to this was the emerging market sector, which exceeded investors' expectations
and proved to be the best performing sector during this period. Equity markets
declined and remained bumpy during this period, especially in the
technology-driven sectors that had performed so well in 1999.
From April through October, the U.S. economy appeared to finally react
to a year of Fed policy tightening, and began to show signs of moderated growth
with few signs of inflation. The treasury curve began to assume a more "normal"
shape and long-term yields slowly rose while short rates came down based on an
expectation that the Fed will be on hold through year-end. The U.S. equity
market continued to suffer. Punished most visibly were companies, spanning a
variety of industries, that reported disappointing earnings and subsequently had
their stock prices destroyed. Meanwhile the Euro continued its free-fall,
touching a new historic low almost every month. In mid-October the Euro hit
$0.82 before rebounding back to $0.86 by month-end. In an effort to bolster the
beleaguered currency, the European Central Bank, Federal Reserve and Bank of
Japan all collaborated to prop up the unsteady currency during the month of
September, but this had little sustainable impact. The European Central Bank is
in treacherous territory now, hoping to reach into its toolbox to improve the
Euro situation. One option is to raise interest rates to attract investors with
higher yields, but it's a tricky proposition during a time where growth in the
region is already stalling.
Restructuring the Fund's portfolio during the fiscal period proved to be
fortunate timing and better served
Page 3
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Portfolio Management Discussion -- Annual Period Ended October 31, 2000
the Fund's primary investment objective of income generation in two main ways.
First, the Fund's yield was increased significantly. Second, the Fund's exposure
to Australian dollar volatility was materially reduced. A summary comparison of
primary Fund characteristics is given below (we assigned calendar year-end as an
arbitrary 'before' and 'after' delineator for Fund restructuring).
<TABLE>
<S> <C> <C> <C> <C>
OCT-99 DEC-99 APR-00 OCT-00
Yield (to Maturity) 6.9% 10.1% 10.7% 11.6%
Credit Quality AA+ A- BBB BBB-
Duration 4.5 years 5.2 years 4.8 years 4.9 years
NAV $7.68 $7.51 $7.28 $7.08
Stock Price $6.188 $5.813 $5.875 $6.688
Discount -19.4% -22.6% -19.3% -5.5%
AUD/USD Exch. Rate 0.6395 0.6569 0.5841 0.5185
</TABLE>
OUTLOOK
Dresdner RCM believes that the Federal Reserve, while still in inflation-control
mode, will likely remain on hold to allow for the past year's worth of
tightening to run its course in slowing economic growth to a sustainable,
non-inflationary pace.
In the environment ahead, the Fund's portfolio strategy will continue to
rely on four primary bond market sectors: U.S. mortgage-backed securities, U.S.
high-yield securities, investment-grade corporate and agency bonds, and emerging
market bonds. The structural liquidity and supply/demand pressures that caused
most sector spreads to widen relative to comparable U.S. Treasury securities
earlier in the year are still in evidence. But valuations have adjusted sharply
and are attractive on an historical basis. Amongst investment-grade spread
sectors, mortgage-backed securities continue to offer a viable,
credit-'efficient' way of generating income for the Fund. With interest rates
having risen, prepayment risk is presently very low. Though a poor performer
over the last month, emerging market bonds have performed extremely well during
the year, diversifying Fund risk by generally being beneficiaries of a strong
economic growth environment (typically a negative influence for bonds as an
asset class). Though in the short run there are liquidity and country-specific
considerations, emerging markets continue to enjoy a positive long-term
fundamental outlook, reasonably attractive valuations and still offer the
highest yields of any U.S. spread sector. Portfolio investments in emerging
market debt remain well-diversified.
High-yield bonds have struggled since the beginning of the calendar
year. Unfavorable supply/demand dynamics (primarily regarding mutual fund
outflows) and a modest uptick in default rates have exerted pressure upon this
sector. Valuations have become commensurately more attractive in response.
Historically, high-yield bonds have been perhaps the pre-eminent fixed income
asset class in terms of risk/reward. We believe a structural holding in this
sector is warranted for both of these reasons. The Fund's high-yield holdings
are highly diversified and have not experienced any defaults to date.
While the outlook for Australian bonds is sanguine, current dynamics
pressuring the Australian currency are expected to persist in the near-term.
Again, since
Page 4
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Portfolio Management Discussion -- Annual Period Ended October 31, 2000
restructuring, the Fund's income and NAV are far less exposed to currency
fluctuations. The positions that remained in the Fund at fiscal year end did so
for two main reasons: first, the book yield on these specific securities was
very high, helping the Fund maintain its primary objective of generating high
income; second, there were potential tax benefits for the Fund if these
investments were not disposed of until the current fiscal year. Already-realized
currency losses associated with the restructuring could be offset against
taxable income for fiscal year 2000 and therefore substantially all dividends
through year-end will be classified as return of capital and therefore free from
current income tax. We disposed of the remainder of the Australian-related
assets in November 2000 and resulting currency losses are expected to continue
to shelter a substantial portion of the Fund's dividends from current income
taxes for the current fiscal year.
Finally, financial leverage represents an integral part of the income
and duration management of the Fund. Transactions that are financed allow the
Fund to garner additional income by earning the spread between the yield of the
underlying security and the level of short-term interest rates. It also
increases duration and adds sensitivity to rising short-term rates (which
represents the cost of financing leveraged positions). Dresdner RCM has engaged
in both mortgage dollar rolls to produce leverage and has entered into an
interest rate swap agreement to manage financing costs. In consideration of
regulatory requirements concerning the use of leverage, the Fund has segregated
a commensurate offsetting amount in high-quality, liquid assets.
Page 5
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Performance from Inception through October 31, 2000 (Unaudited)
From its inception until October 31, 1999, the Fund operated under a
mandate of investing primarily in high quality Australian debt securities. At
the Fund's 1999 Annual Stockholders' Meeting, stockholders approved a broadening
of the Fund's investment mandate to permit investment in countries and
investment sectors where meeting the Fund's primary investment objective of high
current income was considered to be the most attractive. For most of the year
ended October 31, 2000, the Fund has been operating under its new global
investment mandate. The implementation of the Fund's new mandate began in early
December 1999 and was substantially completed by year-end. The performance of
the Fund will be measured, from November 1, 1999 forward, against the Lehman
Brothers U.S. Universal Index, an index that represents the sectors in which the
Fund is now authorized to invest under its new mandate.
The chart below demonstrates, for the period from inception through
October 31, 1999, the total return performance of the Fund versus the relevant
performance indices under its old investment mandate. For the period from
November 1, 1999 through October 31, 2000, the chart reflects the Fund's total
return performance versus the Lehman Brothers U.S. Universal Index. For the year
ended October 31, 2000, the Fund achieved an annualized return on market value
of 21.69% as compared to the Lehman Brothers U.S. Universal index's return of
7.27%. On a net asset value basis, which measures the performance of the Fund's
underlying portfolio, the Fund achieved an annualized return of 2.05% for the
period.
ANNUALIZED PERFORMANCE
<TABLE>
<S> <C> <C> <C> <C> <C>
10 SINCE
1 YEAR 3 YEARS 5 YEARS YEARS INCEPTION*
Fund Market Value (1) 21.69% 2.98% 3.57% 8.38% 8.90%
Fund Net Asset Value (2) 2.05% -1.07% 2.31% 6.60% 9.41%
Salomon Brothers U.S. Gov't Bond Index (3) 8.42% 5.96% 6.26% 7.90% 7.67%
Salomon Brothers Australian Gov't Bond
Index (3) -11.98% -4.77% 0.97% 6.48% 10.11%
Lehman Brothers U.S. Universal Index (4) 7.27% N/A N/A N/A N/A
</TABLE>
* Fund commenced operations November 28, 1986.
(1) Based on market value per share and assumes reinvestment of all
distributions at reinvestment plan prices.
(2) Based on net asset value per share 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 U.S. and Australian Government Indices are US$ based
unmanaged indices.
(4) The Lehman Brothers U.S. Universal Index, like the Lehman Brothers Aggregate
index, is modular and combines the core Lehman Aggregate Index with the
following cap-weighted sub-sectors: High Yield, Emerging Market, Rule 144A,
and Eurobond Dollar. The Index is broadly diversified by sector, but is
concentrated in AAA-rated and government quality issues.
Please remember that past performance may not be indicative of future results.
Page 6
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Performance from Inception through October 31, 2000 (Unaudited)
The graph below reflects the change in value of an initial $10,000
investment in the Fund from its inception date through October 31, 2000 assuming
reinvestment of all distributions.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
$10,000 Investment (11/28/86 - 10/31/99)
<TABLE>
<CAPTION>
MARKET VALUE N.A.V.
<S> <C> <C>
11/86 $10,000 $10,000
10/87 $9,165 $11,102
10/88 $14,679 $15,899
10/89 $15,010 $15,993
10/90 $14,664 $18,470
10/91 $20,969 $23,178
10/92 $21,388 $22,775
10/93 $23,363 $25,656
10/94 $23,776 $26,482
10/95 $27,518 $31,231
10/96 $30,144 $36,508
10/97 $30,029 $36,162
10/98 $26,276 $34,552
10/99 $26,943 $34,304
10/00 $32,786 $35,005
</TABLE>
Page 7
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Invesment Income Summary (Unaudited)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
----------------------- -----------------------
% $ % $
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
AUSTRALIA/NEW ZEALAND 16.1% $1,377,189 100.0% $6,588,565
----- ---------- ----- ----------
Total Australia/New Zealand 16.1% 1,377,189 100.0% 6,588,565
----- ---------- ----- ----------
UNITED STATES
High Yield 19.9% 1,697,482 -- --
Government/Mortgage Backed 13.9% 1,192,262 -- --
Corporate Bonds 4.4% 378,648 -- --
Fee Income On Dollar Rolls 4.1% 345,793
Cash & Other 1.3% 112,182 -- --
----- ---------- ----- ----------
Total United States 43.6% 3,726,367 -- --
----- ---------- ----- ----------
EMERGING MARKETS
Brazil 9.2% 790,478 -- --
Russia 8.5% 726,023 -- --
Mexico 4.9% 416,894 -- --
Venezuela 4.5% 383,712 -- --
Argentina 4.3% 372,780 -- --
Bulgaria 1.9% 164,233 -- --
Philippines 1.8% 152,789 -- --
Korea 1.6% 139,219 -- --
Turkey 1.6% 138,286 -- --
Indonesia 0.7% 58,129 -- --
Trindad & Tobago 0.4% 32,656 -- --
Panama 0.3% 25,354 -- --
India 0.2% 16,909 -- --
Peru 0.2% 14,606 -- --
Israel 0.1% 9,279 -- --
Colombia 0.1% 8,087 -- --
----- ---------- ----- ----------
Total Emerging Markets 40.3% 3,449,434 -- --
----- ---------- ----- ----------
Total Fund's Investment Income 100% $8,552,990 100% $6,588,565
===== ========== ===== ==========
</TABLE>
Page 8
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Portfolio of Investments
October 31, 2000
<TABLE>
<CAPTION>
FACE % OF
AMOUNT COUNTRY(1) ISSUER RATE MATURITY NET ASSETS MARKET VALUE
----------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
DEBT INVESTMENTS
AUSTRALIA GOVERNMENT BONDS 8.4%
3,300,000 AU Export Finance & Insurance
Corp.*+ 9.00% 03/26/03 $ 1,791,419
5,580,000 AU Queensland Treasury Corp.*+ 6.50% 06/14/05 2,897,311
4,000,000 AU Victoria Public Finance
Authority *+ 12.50% 10/15/03 2,410,355
------------
7,099,085
------------
CORPORATE BONDS 3.0%
1,500,000 MY Malaysia 8.75% 06/01/09 1,566,510
1,000,000 US Waste Management Inc. 6.88% 05/15/09 910,911
------------
2,477,421
------------
EMERGING MARKETS BONDS
7,116,000 AR Republic of Argentina 11.75% 04/07/09 6,226,500
957,600 AR Republic of Argentina
Series FRB (2) 7.63% 03/31/05 838,481
452,000 BG Bulgaria FLIRB (2) 7.75% 07/28/11 338,407
2,427,000 BG Bulgaria FLIRB,
Series A (2) 3.00% 07/28/12 1,746,426
1,410,000 BR CIA Petrolifera Marlim,
144A 12.25% 09/26/08 1,358,535
4,425,000 BR Federal Republic of Brazil
DCB (2) 7.69% 04/15/12 3,319,887
4,051,339 BR Federal Republic of Brazil,
C Bond (2) 8.00% 04/15/14 3,047,340
450,000 BR Federal Republic of Brazil,
Floating Rate Bond, Par Z 6.00% 04/15/24 297,296
1,048,000 CI APP China Group Ltd. 14.00% 03/15/10 442,885
463,000 IL Partner Communications 13.00% 08/15/10 380,818
470,000 IN Indah Kiat Finance
Mauritius Ltd. 10.00% 07/01/07 193,875
1,210,000 KR Hanvit Bank, 144A 12.75% 03/01/10 1,182,775
256,000 KR Korea Exchange Bank,
144A (2) 13.75% 06/30/10 247,287
530,000 MX Grupo Elektra, 144A 12.00% 04/01/08 484,950
485,000 MX Grupo Iusacell SA de CV 14.25% 12/01/06 489,850
2,500,000 MX Mexican United States 11.50% 05/15/26 2,952,500
1,230,000 MX Mexican United States 10.38% 02/17/09 1,309,950
455,000 MX Mexican United States 9.88% 02/01/10 474,338
575,000 MX Nuevo Grupo Iusacell SA de
CV, 144A 14.25% 12/01/06 580,750
555,000 PH Globe Telecom, 144A 13.00% 08/01/09 557,775
697,778 PH Republic of Philippines
FLIRB, Series B (2) 7.94% 06/01/08 675,198
</TABLE>
See Notes to Financial Statements.
Page 9
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Portfolio of Investments
October 31, 2000
<TABLE>
<CAPTION>
FACE % OF
AMOUNT COUNTRY(1) ISSUER RATE MATURITY NET ASSETS MARKET VALUE
----------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
DEBT INVESTMENTS (CONTINUED)
4,430,000 RU Russia Federation, 144A 10.00% 06/26/07 $ 3,316,963
650,000 RU Russia Federation, 144A 12.75% 06/24/28 550,063
4,290,000 RU Russia Federation,
Series REGS 11.00% 07/24/18 3,146,981
2,678,553 VE Republic of Venezuela DCB,
Series DL (2) 7.88% 12/18/07 2,254,506
1,392,842 VE Republic of Venezuela
FLIRB, Series A (2) 7.63% 03/31/07 1,144,905
------------
37,559,241
------------
HIGH YIELD BONDS 26.8%
325,000 BM Flag Limited 8.25% 01/30/08 273,000
150,000 BM Flag Telecom Holding Ltd. 11.63% 03/30/10 126,750
100,000 BM Global Crossing Holding
Ltd. 9.13% 11/15/06 95,875
150,000 BM Global Crossing Holding
Ltd. 144A 9.13% 11/15/06 147,375
500,000 CA Gulf Canada Resources Ltd. 8.35% 08/01/06 511,250
475,000 CA IMAX Corp. 7.88% 12/01/05 268,375
600,000 US Adelphia Communications 9.38% 11/15/09 516,000
500,000 US AES Corp. 9.50% 06/01/09 511,250
300,000 US AK Steel Corp. 7.88% 02/15/09 273,000
425,000 US Allied Waste Series B 7.63% 01/01/06 380,375
650,000 US American Standard Inc. 7.38% 02/01/08 607,750
500,000 US Avis Group Holdings Inc. 11.00% 05/01/09 535,000
750,000 US Azurix Corp., 144A 10.38% 02/15/07 693,750
100,000 US Buckeye Technologies Inc. 8.00% 10/15/10 94,000
400,000 US Building Materials Corp.,
Series B 8.00% 10/15/07 122,000
750,000 US Calpine Corp. 7.75% 04/15/09 706,201
400,000 US Canandaigua Brands,
Series C 8.75% 12/15/03 398,000
450,000 US Charter Communications
Holdings LLC 8.25% 04/01/07 408,375
400,000 US Circus Circus/Mandalay
Resort Group 9.25% 12/01/05 397,000
500,000 US CMS Energy Corp. 7.50% 01/15/09 436,445
400,000 US Cogentrix Energy Inc. 8.75% 10/15/08 403,499
250,000 US Dade International Inc.,
Series B 11.13% 05/01/06 25,000
550,000 US Echostar DBS Corp. 9.38% 02/01/09 543,125
1,045,000 US Finova Capital Corp. 7.25% 05/01/02 669,218
500,000 US Fisher Scientific
International 7.13% 12/15/05 443,587
250,000 US Flextronics 144A 9.88% 07/01/10 253,750
350,000 US Foodmaker Inc. 8.38% 04/15/08 323,750
400,000 US Fox Family Worldwide Inc. 9.25% 11/01/07 381,000
500,000 US Fox/Liberty Networks LLC 0.01% 08/15/07 422,500
250,000 US HCA -- The Healthcare Co. 6.91% 06/15/05 235,808
350,000 US Healthsouth Corp., 144A 10.75% 10/01/08 352,878
</TABLE>
See Notes to Financial Statements.
Page 10
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Portfolio of Investments
October 31, 2000
<TABLE>
<CAPTION>
FACE % OF
AMOUNT COUNTRY(1) ISSUER RATE MATURITY NET ASSETS MARKET VALUE
----------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
DEBT INVESTMENTS (CONTINUED)
750,000 US HMH Properties, Series B 7.88% 08/01/08 $ 693,750
250,000 US Intermedia Communication,
Series B 8.50% 01/15/08 236,250
500,000 US International Game
Technology 7.88% 05/15/04 490,000
200,000 US Lear Corp., 144A 7.96% 05/15/05 186,384
500,000 US Level 3 Communications Inc. 9.13% 05/01/08 406,250
250,000 US Levi Strauss & Co. 7.00% 11/01/06 183,750
200,000 US Lyondell Chemical Co.,
Series A 9.63% 05/01/07 194,500
250,000 US Mediacom LLC / Capital,
Series B 8.50% 04/15/08 231,875
500,000 US Metromedia Fiber Network,
Series B 10.00% 11/15/08 445,000
500,000 US MGM Grand Inc. 9.75% 06/01/07 521,250
450,000 US Michaels Stores Inc. 10.88% 06/15/06 443,250
400,000 US Navistar International 8.00% 02/01/08 368,000
250,000 US Nextel Communications Corp. 9.38% 11/15/09 241,875
425,000 US Nextel Communications
Corp., 144A 9.38% 11/15/09 420,219
200,000 US Nortek Inc. Series B 9.13% 09/01/07 180,000
475,000 US Nuevo Energy Co., 144A 9.50% 06/01/08 472,625
25,000 US Nuevo Energy Co., Series B 9.50% 06/01/08 25,094
400,000 US Owens Illinois Inc. 7.35% 05/15/08 274,000
750,000 US Pioneer Natural Resource 9.63% 04/01/10 789,317
100,000 US Primedia Inc., Series B 8.50% 02/01/06 96,000
450,000 US Psinet Inc. 10.50% 12/01/06 217,125
250,000 US RBF Finance Co. 11.00% 03/15/06 285,625
400,000 US RCN Corp. 10.13% 01/15/10 274,000
250,000 US Sbarro Inc., 144A 11.00% 09/15/09 259,375
400,000 US Scotts Co., 144A 8.63% 01/15/09 382,000
250,000 US Sinclair Broadcast Group 8.75% 12/15/07 218,750
500,000 US Stater Brothers Holdings 10.75% 08/15/06 402,500
400,000 US Station Casinos 8.88% 12/01/08 386,000
500,000 US Tenet Healthcare Corp.,
Series B 8.13% 12/01/08 484,375
200,000 US Trico Marine Services,
Series G 8.50% 08/01/05 194,000
350,000 US United Rentals Inc.,
Series B 8.80% 08/15/08 281,750
250,000 US Voicestream Wireless Co.,
144A 10.38% 11/15/09 268,750
250,000 US Westpoint Stevens Inc. 7.88% 06/15/08 170,000
500,000 US Williams Communication
Group Inc. 10.70% 10/01/07 431,250
------------
22,710,775
------------
</TABLE>
See Notes to Financial Statements.
Page 11
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Portfolio of Investments
October 31, 2000
<TABLE>
<CAPTION>
FACE % OF
AMOUNT COUNTRY(1) ISSUER RATE MATURITY NET ASSETS MARKET VALUE
----------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
DEBT INVESTMENTS (CONTINUED)
MORTGAGE BACKED SECURITIES 67.8%
4,500,000 US FNMA * 7.25% 05/15/30 $ 4,771,166
9,800,000 US FNMA TBA 7.50% 08/01/28 9,790,813
35,500,000 US FNMA TBA 8.00% 04/06/28 35,954,844
1,221,180 US FNMA Pool # 512726 * 7.50% 09/01/29 1,220,492
393,383 US FNMA Pool # 517089 * 7.50% 10/01/29 393,161
570,085 US FNMA Pool # 517782 * 7.50% 11/01/29 569,764
4,689,940 US FNMA Pool # 520655 * 7.50% 11/01/29 4,687,301
------------
57,387,541
------------
SHARES WARRANT EXPIRE 0.0%
1,048 US APP China Group Ltd. (3) 03/15/05 --
------------
TOTAL PORTFOLIO OF INVESTMENTS (Cost $132,942,242) 150.4% 127,234,063
------------
OTHER ASSETS LESS LIABILITIES (50.4)% (42,643,039)
------------
NET ASSETS 100.0% $ 84,591,024
============
</TABLE>
Glossary of Terms:
144A -- Security is purchased pursuant to Rule 144A of the Securities
Act of 1933 and may be resold only to qualified institutional
buyers. At October 31, 2000 these securities amounted to
$11,716,204 or 13.85% of net assets.
FNMA -- Federal National Mortgage Association
TBA -- Settlement of mortgage backed securities is on a delayed delivery
basis with the final maturity to be announced (TBA) in the
future. At October 31, 2000, the value of the Fund's forward
commitment purchases was $45,745,657.
FRB -- Floating Rate Bond
DCB -- Debt Conversion Bond
FLIRB -- Front Loaded Interest Reduction Bond
<TABLE>
<CAPTION>
(1) Country Code Legend:
<S> <C> <C>
AR -- Argentina
AU -- Australia
BG -- Bulgaria
BM -- Bermuda
BR -- Brazil
CA -- Canada
CI -- China
IL -- Israel
IN -- Indonesia
</TABLE>
See Notes to Financial Statements.
Page 12
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Portfolio of Investments
October 31, 2000
<TABLE>
<S> <C> <C>
(1) Country Code Legend: (Continued)
KR -- Korea
MX -- Mexico
MY -- Malaysia
PH -- Philippines
RU -- Russia
US -- United States
VE -- Venezuela
</TABLE>
(2) Variable rate or step-up security. Interest rate shown is the current rate.
(3) Non-income producing.
* All or a portion of these securities have been segregated to cover the
Fund's leverage transactions.
+ Face amount is denominated in Australian dollars.
The Fund's investments in securities at October 31, 2000 categorized by country:
<TABLE>
<CAPTION>
% OF NET ASSETS
-----------------------------------
COUNTRY SHORT-TERM
COUNTRY CODE DEBT AND OTHER TOTAL
------- -------- -------- ----------- --------
<S> <C> <C> <C> <C>
Argentina AR 8.4% 8.4%
Australia AU 8.4% 8.4%
Bulgaria BG 2.5% 2.5%
Bermuda BM 0.8% 0.8%
Brazil BR 9.5% 9.5%
Canada CA 0.9% 0.9%
China CI 0.5% 0.5%
Israel IL 0.5% 0.5%
Indonesia IN 0.2% 0.2%
Korea KR 1.7% 1.7%
Mexico MX 7.4% 7.4%
Malaysia MY 1.9% 1.9%
Philippines PH 1.4% 1.4%
Russia RU 8.3% 8.3%
United States US 94.0% (50.4)% 43.6%
Venezuela VE 4.0% 4.0%
----- ----- -----
TOTAL 150.4% (50.4)% 100.0%
===== ===== =====
</TABLE>
See Notes to Financial Statements.
Page 13
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Portfolio of Investments
October 31, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
As of October 31, 2000, the Fund had the following outstanding swap agreement
denominated in U.S. dollars (Note 1):
<TABLE>
<CAPTION>
COUNTER-
PARTY SWAP
NOTIONAL CREDIT TERMINATION MATURITY RATE RATE UNREALIZED
AMOUNT RATING ISSUER DATE DATE RECEIVED PAID DEPRECIATION
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$15,000,000 A Treasury Index (a) 2/15/01 2/15/01 6.47% 6.64% $(1,080,240)
</TABLE>
(a) Total return swap with J.P. Morgan Securities Inc. The Fund pays fixed
interest rates quarterly and receives a floating rate quarterly, based upon
USD LIBOR less a 35 basis point spread. At termination, the Fund will
receive, in the case of a negative total return, or pay, in the case of a
positive total return, the total return of the J.P. Morgan Government Bond
Index, U.S. Treasury 10+ Index adjusted for interest received or paid.
See Notes to Financial Statements.
Page 14
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
OCTOBER 31, 2000
-----------------
<S> <C>
ASSETS
INVESTMENTS, AT VALUE (COST $132,942,242) $127,234,063
Cash and cash equivalents 1,955,564
Foreign currency (cost $369,139) 334,277
Receivable for securities sold 8,326,855
Receivable for delayed delivery investments sold 71,954,063
Interest receivable 2,072,274
Prepaid expenses 7,113
Other assets 10,344
------------
Total Assets 211,894,553
------------
LIABILITIES
Payables:
Investments purchased (Note 1) 8,468,118
Delayed delivery investments purchased 117,519,559
Dividends payable (Note 1) --
Interest rate swap contract (Note 1) 1,080,240
Interest rate swap expense 4,157
ACCRUED EXPENSES:
Investment advisory fees (Note 2) 49,952
Directors' fees and expenses 2,799
Other accrued expenses 163,763
Deferred fee income on dollar rolls (Note 1) 14,941
------------
Total Liabilities 127,303,529
------------
NET ASSETS $ 84,591,024
============
NET ASSETS:
Net Assets were comprised of:
Common stock, at $0.001 par $ 11,955
Paid-in capital (Note 4) 91,708,319
------------
91,720,274
Accumulated distribution in excess of net investment
income (288,426)
Accumulated net realized gain (loss) on investment and
foreign currency transactions (4,110)
Net unrealized appreciation (depreciation) on investments,
foreign currencies and interest rate swap (6,836,714)
------------
NET ASSETS $ 84,591,024
============
Shares of common stock issued and outstanding 11,954,566
------------
Net asset value per share $ 7.08
============
</TABLE>
See Notes to Financial Statements.
Page 15
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Statement of Operations
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
OCTOBER 31, 2000
-----------------
<S> <C>
NET INVESTMENT INCOME
Investment Income:
Interest and discount earned (net of foreign withholding
taxes of $60,536) $ 8,207,197
Fee income on dollar rolls (Note 1) 345,793
-----------
Total investment income 8,552,990
-----------
Expenses:
Investment advisory fees (Note 2) 620,689
Custodian fees 196,480
Directors' fees and expenses 149,369
Legal fees 74,142
Audit and tax services 60,900
Shareholder reports 35,177
Transfer agent fees 34,320
Stock exchange listing fee 24,248
Postage 48,952
Subscriptions 9,337
Insurance 7,631
Miscellaneous 22,195
-----------
Total operating expenses 1,283,440
-----------
Net Investment Income 7,269,550
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investment transactions 328,601
Foreign currency transactions (4,819,361)
-----------
Total net realized gain (loss) (4,490,760)
-----------
Change in unrealized appreciation (depreciation) on:
Investments 141,249
Foreign currency translations and interest rate swap (1,086,596)
-----------
Total net change in unrealized appreciation
(depreciation) (945,347)
-----------
Net realized and unrealized gain (loss) on
investments and foreign currencies (5,436,107)
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 1,833,443
===========
</TABLE>
See Notes to Financial Statements.
Page 16
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
OCTOBER 31,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 7,269,550 $ 5,255,712
Net realized gain (loss) on investments and foreign
currency transactions (4,490,760) (1,092,599)
Change in unrealized appreciation (depreciation) on
investments, foreign currency translations, and interest
rate swaps (945,347) (4,823,615)
------------ -----------
Net increase (decrease) in net assets resulting from
operations 1,833,443 (660,502)
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (5,080,691)
From net realized gain on investments and foreign currency
transactions (1,739,111) (2,522,413)
From return of capital (7,286,587) --
------------ -----------
Net decrease in net assets resulting from distributions to
shareholders (9,025,698) (7,603,104)
------------ -----------
Total decrease in net assets (7,192,255) (8,263,606)
NET ASSETS
Beginning of period 91,783,279 100,046,885
------------ -----------
End of period* $ 84,591,024 $91,783,279
============ ===========
--------------------------------
* Includes distributions in excess of net investment income. $ (288,426) $ (826,136)
============ ===========
</TABLE>
See Notes to Financial Statements.
Page 17
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
FISCAL
YEAR ENDED
OCTOBER 31, 2000
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income received $ 8,496,076
Operating expenses paid (1,475,024)
Purchase of investments* (598,441,751)
Proceeds from dispostion of investments* 598,205,506
------------
Net cash provided by operating activities 6,784,807
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from dollar roll transactions 360,734
Dividends paid from net investment income (239,092)
Dividends paid from net realized gain on investments and
foreign currency transactions (1,978,202)
Dividends paid from return of capital (7,286,587)
------------
Net cash used in financing activities (9,143,147)
------------
Net decrease in cash (2,358,340)
Cash and equivalents at beginning of year 4,648,181
------------
Cash and equivalents at end of year $ 2,289,841
============
RECONCILIATION OF RESULTS FROM OPERATIONS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 1,833,443
Increase in investments (42,622,212)
Net realized loss on investments 4,490,760
Net unrealized depreciation on investments (141,249)
Change in:
Receivable for investments sold (80,280,918)
Net unrealized depreciation on interest rate swap 1,080,240
Interest receivable 288,879
Payable for investments purchased 122,329,089
Accrued expenses (191,584)
Other assets and liabilities (1,641)
------------
Net cash provided by operating activities $ 6,784,807
============
</TABLE>
--------------------------------
<TABLE>
<S> <C>
* Purchases and proceeds include investments traded on a
forward commitment basis that are not included in the Fund's
portfolio turnover rate.
</TABLE>
Page 18
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Financial Highlights
<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:(1)
Net asset value at beginning of period $ 7.68 $ 8.37 $ 9.51 $ 10.41 $ 10.08
------- ------- -------- -------- --------
Net investment income 0.61 0.44 0.53 0.72 0.85
Net realized and unrealized gain (loss) on
investments and foreign currencies (0.45) (0.49) (0.97) (0.82) 0.79
------- ------- -------- -------- --------
Total increase (decrease) from operations: 0.16 (0.05) (0.44) (0.10) 1.64
------- ------- -------- -------- --------
Distribution to shareholders:
From net investment income -- (0.43) (0.54) (0.78) (0.89)
From net realized gains on investment and
foreign currency transactions (0.15) (0.21) (0.16) (0.03) --
From return of capital (0.61) -- -- -- --
------- ------- -------- -------- --------
Total distributions to shareholders (0.76) (0.64) (0.70) (0.81) (0.89)
------- ------- -------- -------- --------
Decrease in net assets from capital stock
transactions -- -- -- -- (0.39)
------- ------- -------- -------- --------
Offering expenses charged to capital -- -- -- 0.01 (0.03)
------- ------- -------- -------- --------
Net increase (decrease) in net asset value (0.60) (0.69) (1.14) (0.90) 0.33
------- ------- -------- -------- --------
NET ASSET VALUE AT END OF YEAR $ 7.08 $ 7.68 $ 8.37 $ 9.51 $ 10.41
======= ======= ======== ======== ========
Per share market value at end of year $ 6.688 $ 6.188 $ 6.625 $ 8.313 $ 9.125
======= ======= ======== ======== ========
TOTAL INVESTMENT RETURN (2) 21.69% 2.56% (12.50)% (0.38)% 9.54%
======= ======= ======== ======== ========
Net asset value return (3) 2.05% (0.72)% (4.45)% (0.95)% 16.90%
======= ======= ======== ======== ========
Net assets at end of period (in 000's) $84,591 $91,783 $100,047 $113,639 $124,501
======= ======= ======== ======== ========
Number of shares outstanding at end of
period (in 000's) 11,955 11,955 11,955 11,955 11,955
======= ======= ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Operating expenses 1.45% 1.36% 1.21% 1.14% 1.22%
======= ======= ======== ======== ========
Net investment income 8.20% 5.38% 6.25% 7.21% 8.22%
======= ======= ======== ======== ========
Portfolio turnover (5) 142.64%(4) 46.08% 37.05% 26.67% 16.00%
======= ======= ======== ======== ========
</TABLE>
--------------------------------
<TABLE>
<S> <C>
(1) Calculated on average shares outstanding.
(2) Based on market value per share, adjusted for reinvestment
of distributions at reinvestment plan prices, assuming full
subscription by shareholder.
(3) Based on net asset value per share, adjusted for
reinvestment of distributions at ex-dividend date net asset
value, assuming full subscription by shareholder.
(4) Turnover rate higher than prior periods due to the change in
investment mandate.
(5) Portfolio turnover does not include investments traded on a
forward commitment basis.
</TABLE>
See Notes to Financial Statements.
Page 19
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Notes to Financial Statements
October 31, 2000
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 management
investment company under the Investment Company Act of 1940, as amended. On
October 29, 1999, the stockholders of the Fund approved a change in the Fund's
investment mandate to eliminate the requirement that the Fund invest primarily
in Australian debt securities and to permit the Fund to invest in a broad range
of fixed-income investment sectors as well as derivatives on a global basis. In
connection with the Fund's new investment mandate, the Fund now trades under its
new name and ticker symbol DSF.
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 of America using
the U.S. dollar as both the functional and reporting currency. (For tax purposes
the Fund uses U.S. dollars as the functional currency and the Fund held
investments in a qualified business unit that used Australian dollars as the
functional currency -- see TAXES.) The preparation of financial statements in
accordance with accounting principles generally accepted in the United States of
America 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 market 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.
Foreign currencies, investments and other assets and liabilities, if any, 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 20
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Notes to Financial Statements
October 31, 2000
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 denominated in foreign currencies
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, swaps, 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,
swaps, and other assets and liabilities arising as a result of changes in
foreign exchange rates.
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 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. At October 31, 2000 there were no forward contracts outstanding.
Page 21
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Notes to Financial Statements
October 31, 2000
1. ACCOUNTING POLICIES (CONTINUED)
G. FORWARD COMMITMENTS:
The Fund enters into dollar rolls in which the Fund sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, same or similar interest rate and maturity)
securities on a specified future date. During the roll period, the Fund forgoes
principal and interest paid on the securities. The Fund accounts for dollar
rolls as financing transactions. Dollar rolls enhance the Fund's yield by
earning a spread between the yield on the underlying mortgage securities and
short-term interest rates. The fee income earned for the period on these
transactions was $345,793. At October 31, 2000, there were $45,745,657 in dollar
roll commitments on liquid mortgage pass-throughs outstanding.
H. INTEREST RATE SWAPS:
The Fund enters into interest rate swaps for investment, hedging and
risk management purposes. Interest rate swaps involve the exchange of
commitments to pay or receive interest-e.g., an exchange of floating rate
payments for fixed rate payments. If forecasts of interest rates and other
market factors are incorrect, investment performance will diminish compared to
what performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there are risks that the positions may
correlate imperfectly with the asset or liability being hedged, a liquid
secondary market may not always exist, or a counterparty to a transaction may
not perform. The Fund records, as an increase or decrease to interest income,
the net amount due or owed by the Fund on each periodic payment. The market
valuations represent the net present value of all future cash settlement amounts
based on implied forward interest rates.
At October 31, 2000, the Fund had entered into one swap with $15 million
in notional amount to provide exposure to interest rates. The swap is U.S.
dollar-denominated to provide interest rate exposure. The difference between
rates received and paid by the Fund constitutes investment income, and is a
component of interest income on the Statement of Operations of $679,611 for the
year ended October 31, 2000. Net unrealized depreciation on the swap position
was $1,080,240 at October 31, 2000.
I. LEVERAGE:
Forward sale commitments, dollar rolls, interest rate swaps, reverse
repurchase agreements and other transactions may involve leverage. Transactions
that are financed by the Fund result in financial leverage that the Fund uses to
manage income and duration exposures of the Fund. The use of leverage increases
the overall duration risk of the Fund, and an increased sensitivity to rising
short-term interest-rates. The Board of Directors has adopted an internal policy
limiting the Fund's use of net leverage to no more than 50% of total assets less
all liabilities and indebtedness other than bank or other borrowings. At
October 31, 2000 the Fund had total leverage of $46,825,861. In order to reduce
leverage, the Fund segregated $18,740,969 in high credit quality, liquid
investments against outstanding obligations, resulting in $28,084,892 net
leverage.
Page 22
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Notes to Financial Statements
October 31, 2000
1. ACCOUNTING POLICIES (CONTINUED)
J. 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 from accounting principles generally accepted in
the United States of America. 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 year ended October 31, 2000 was to decrease undistributed net investment
income by $6,731,840 and increase undistributed capital gain by $4,885,541 and
increase paid in capital by $1,846,299. The adjustments are primarily
attributable to re-designation of foreign currency gains/losses for tax
purposes. Net investment income, net realized gains and net assets of the Fund
were not affected by these changes.
K. TAXES:
For Federal income tax purposes, the Fund's transactions are accounted
for using U.S. dollars as the functional currency and the Fund held investments
in a qualified business unit that used Australian dollar ("A$") as the
functional currency. During fiscal year 2000 repatriation of A$130,961,053 to
US$82,944,642 resulted in currency losses used to offset investment income,
which in turn made substantially all of fiscal year 2000 distributions return of
capital 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. 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.
2. AGREEMENTS
Pursuant to an investment advisory agreement between the Fund and
Dresdner RCM Global Investors ("Dresdner RCM") and a subadvisory agreement with
Kleinwort Benson Investment Management Americas Inc. ("KBIMA"), the Fund pays
investment advisory fees based on weekly average net assets of 0.70% annually
for assets up to $100 million and 0.65% annually thereafter. The fees are
computed weekly and paid monthly to Dresdner RCM. For services rendered pursuant
to the subadvisory agreement with KBIMA, Dresdner RCM pays to KBIMA the
percentage of Dresdner RCM's investment advisory fee equal to the percentage of
the Fund's weekly net assets sub-advised by KBIMA. For the year ended October
31, 2000 the Fund paid total advisory fees of $620,689.
Page 23
<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
Notes to Financial Statements
October 31, 2000
3. PORTFOLIO TRANSACTIONS
Purchases and proceeds from sales of securities, other than obligations
of the U.S. government and its agencies, short-term securities, dollar rolls and
forward commitments for the year ended October 31, 2000, aggregated $125,218,786
and $140,522,220, respectively. Purchases and proceeds from sales of obligations
of the U.S. government and its agencies, other than short-term securities,
dollar rolls and forward commitments for the period ended October 31, 2000,
aggregated $85,558,906 and $74,022,142, respectively. At October 31, 2000, the
aggregate cost of investments for federal income tax purposes was $133,075,873.
Gross unrealized appreciation and depreciation of investments aggregated
$404,169 and ($6,245,979), respectively, resulting in net unrealized
depreciation of ($5,841,810) at October 31, 2000.
4. CAPITAL STOCK
There are 100 million shares of common stock ($0.001 par value)
authorized and 11,954,566 such shares outstanding. There were no transactions in
the Fund's capital stock for the year ended October 31, 2000.
5. SUBSEQUENT EVENT
Subsequent to year-end, in accordance with the changes in the investment
mandate, the Fund liquidated the remainder of its Australian portfolio
securities as of November 8, 2000. The subadvisory agreement with Kleinwort
Benson Investment Management Americas Inc. was discontinued effective
November 30, 2000.
Page 24
<PAGE>
Dresdner RCM Global Strategic 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 portfolio of investments, and the related statements of
operations, of cash flows, 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. (the "Fund") at October 31,
2000, the results of its operations and cash flows for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. 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 auditing standards generally accepted in
the United States of America, 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
December 11, 2000
Page 25
<PAGE>
Dresdner RCM Global Strategic 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 from 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.
Page 26
<PAGE>
Dresdner RCM Global Strategic 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 2000 RETURN SHOULD
BE BASED ON FORM 1099 WHICH WILL BE PROVIDED TO YOU IN JANUARY 2001. 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:
Return of Capital $0.186
Long-term Capital Gains 0.146
Foreign Tax (Australia) 0.004
Foreign Tax (Other) 0.001
------
Total Distributions $0.337
======
DISTRIBUTIONS BY SOURCE:
Return of Capital, Foreign Source:
Australia $0.111
Other (Brazil, Israel, and Korea) 0.080
------
Total Foreign Source 0.191
======
Total Return of Capital 0.191
Long-term Capital Gains 0.146
------
Total Distributions $0.337
======
</TABLE>
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<PAGE>
Dresdner RCM Global Strategic Income Fund, Inc.
(Formerly Kleinwort Benson Australian Income Fund, Inc.)
2000 Annual Stockholders' Meeting Results
(Unaudited)
The following matters were submitted to a vote of stockholders at the
Fund's 2000 Annual Meeting of Stockholders held on October 26, 2000 as adjourned
and reconvened on November 7, 2000.
To elect three Directors of the Fund, each to hold office for a term of three
years and until his successor is duly elected and qualified.
The following nominees were proposed by the Fund's Board of Directors:
The Earl of Limerick
The votes were cast: For (3,267,624) Withheld
(349,500) Non-votes (8,337,442)
Leonard T. Hinde
The votes were cast: For (3,302,113) Withheld
(315,011) Non-votes (8,337,442)
G. William Miller
The votes were cast: For (3,327,485) Withheld
(289,639) Non-votes (8,337,442)
The following nominees were proposed by a Fund stockholder and included
in an opposing proxy statement:
Phillip Goldstein
The votes were cast: For (4,339,529) Withheld
(144,493) Non-votes (7,470,544)
Glenn Goodstein
The votes were cast: For (4,336,824) Withheld
(147,198) Non-votes (7,470,544)
Andrew Dakos
The votes were cast: For (4,338,547) Withheld
(145,475) Non-votes (7,470,544)
To ratify the selection by the Board of Directors of PricewaterhouseCoopers LLP
as independent public accountants for the fiscal year ending October 31, 2000.
The votes were cast: For (6,155,059) Against (146,413) Abstain
(1,800,148) Non-votes (3,852,946)
To consider a stockholder proposal urging the Board of Directors to take the
steps necessary to convert the Fund to an open-end Fund.
The votes were cast: For (5,302,802) Against (2,615,991) Abstain
(182,352) Non-votes (3,853,421)
Page 28
