<PAGE>
TABLE OF CONTENTS
.................
LETTER TO SHAREHOLDERS 1
......................................................
FUND MANAGERS' DISCUSSION AND ANALYSIS 5
......................................................
INVESTMENTS IN SECURITIES AND NET ASSETS 16
......................................................
FINANCIAL STATEMENTS 18
......................................................
NOTES TO FINANCIAL STATEMENTS 22
......................................................
FINANCIAL HIGHLIGHTS 26
......................................................
INDEPENDENT AUDITOR'S REPORT 27
......................................................
DIVIDEND REINVESTMENT PLAN 28
......................................................
SHAREHOLDER MEETING RESULTS 28
......................................................
<PAGE>
LETTER TO SHAREHOLDERS
......................
We are pleased to report to our
shareholders regarding the achievements of the RCM
Strategic Global Government Fund (NYSE symbol: RCS)
during its second year of operations. Last year, the
market value of your fund's investments appreciated as
world interest rates declined. During fiscal 1995, RCS
achieved a 16.2% pre-tax total return, measured in terms
of the market value of RCS's stock price, and a 17.1%
pre-tax total return, calculated on the basis of net
asset value per share of the RCS portfolio of
investments. Your fund's monthly $0.074 per share
dividend provided a yield of 8.2%, based upon a
beginning-of-year net asset value of $10.85. At fiscal
year-end, the per share net value of the fund's portfolio
of investments appreciated approximately 7.3%, to reach a
net asset value per share of $11.64. We are pleased that
RCM Capital Management, a California Limited Partnership
RCM'S INVESTMENT ("RCM"), the fund's investment manager, adopted
POLICY IS TO MAN- strategies that enabled RCS to maintain its dividend
AGE A HIGH-QUALITY during a period when many closed-end bond funds were
DEBT SECURITIES forced to reduce income distributions to shareholders.
PORTFOLIO TO ACHIEVE
SUPERIOR AND CON-
SISTENT INCOME. RCM's investment policy is to manage a high-quality debt
securities portfolio to achieve superior and consistent
income, with lower price volatility than is typical of
intermediate-term maturity U.S. government notes. The
fund's investment strategy is to attain income
objectives, while moderating the variation in net asset
value per share. RCM will also opportunistically take
actions to enhance capital gains when consistent with its
other investment objectives and when the potential for
gains, relative to downside risk, is deemed favorable.
This strategy is expected to achieve our shareholders'
long-term objectives, produce higher income than is
generally available on comparable risk bonds, and attain
a superior long-term risk-adjusted total investment
return.
RCM Capital Management entered into an Agreement of
Purchase and Sale pursuant to which RCM will become an
entity wholly owned by Dresdner Bank AG, an international
banking organization with headquarters in Frankfurt,
Germany. Dresdner has over DM400.1 billion total
consolidated assets and is one of the few major banks of
the
1
-
<PAGE>
LETTER TO SHAREHOLDERS
......................
world to retain a AAA rating from Moody's Investor
Services. It is expected that the day-to-day operations
of RCM will not be affected and that the individuals who
are primarily responsible for the management of the
fund's portfolio will remain the same. The transaction is
currently expected to close in mid-1996. The terms of
RCS's management agreement will be substantially
unchanged and will be submitted to the fund's
shareholders for their consideration and approval.
We encourage you to read this annual report. The report
provides additional information about the management and
goals of RCS and the strategies RCM employs to achieve
your fund's objectives. Your management and Board of
Directors are committed to meeting RCS's investment
objectives and are equally committed to extensive
disclosure of the fund's portfolio and investment
WE BELIEVE RCS activities. We will continue to provide quarterly
REPRESENTS EXCEL- shareholder reports which will include discussions of
LENT LONG-TERM important investment techniques, explanations of
INVESTMENT VALUE. technical investment terms and relationships, and
summaries of critical investment strategies.
On behalf of the Board of Directors and the RCS portfolio
management team, I wish to thank you for your support and
participation in the RCM Strategic Global Government
Fund. We believe RCS represents excellent long-term
investment value, and we are committed to enhancing this
value for our shareholders' benefit.
Sincerely,
Gary W. Schreyer
CHAIRMAN AND PRESIDENT
FEBRUARY 21, 1996
2
-
<PAGE>
RCS's primary investment OBJECTIVE is to
generate a level of INCOME that is higher than that
generated by high-quality, intermediate-TERM U.S. debt
securities. As a secondary objective, RCS will seek to
maintain volatility in the net asset value of the shares
of the fund comparable to that of the high-QUALITY,
intermediate-term U.S. debt securities by investing in
the U.S., developed FOREIGN and emerging MARKETS. The
fund will seek capital appreciation to the extent
consistent with its other investment objectives.
<PAGE>
PHOTO
PHOTO
PHOTO
PHOTO
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
......................................
As markets become more complex, creating a bond fund
PORTFOLIO demands ever-increasing levels of
sophistication and precision. While some bond funds
gravitate towards Wall Street's latest "hot" products,
RCS follows a DISCIPLINED approach to constructing a
portfolio and accomplishing specific goals for its
shareholders. RCS's objectives are UNIQUE among
closed-end bond funds. RCS strives to deliver a level of
income higher than yields from high credit quality bonds
in the United States while keeping its duration risk
comparable to intermediate-term securities, with
maturities between three and ten years. As most investors
know, higher INCOME may be associated with higher risk if
not actively managed. RCS has developed a creative
palette of tools to control the components of risk and
achieve higher income.
Unique
FOCUSED
Objectives
All bond funds constantly face a multitude of risks,
which may include the risks of duration, country
selection, currency, mortgage prepayments and credit.
Some funds and INVESTORS chase yield without MEASURING or
calculating the whole risk picture. Many such funds have
been surprised by unexpected developments in certain PHOTO
categories of risk over the past two years. As a result,
in 1994, foreign currency losses caused returns of
capital for a number of mutual funds. In 1995, several RCS FOCUSES ON
mortgage funds lowered their DIVIDENDS as the risk RISK MANAGEMENT
characteristics of their portfolios compromised income. AND PERFORMANCE TO
RCS has innovatively applied its techniques and its ACHIEVE A COMPLETE
unique PERSPECTIVE to solve the problems of managing INVESTMENT PACKAGE.
overall risk while delivering a consistent dividend. RCS
is also unmatched in its disclosure and discussion about
risk-management issues.
Other funds may take more risk. As market conditions
change, some of these funds will do BETTER, and some will
do worse than RCS. However, more risk means more
volatility in returns. RCS focuses on RISK MANAGEMENT and
performance to achieve a complete investment package.
5
-
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
......................................
RCS applies its disciplined INVESTMENT process to
international opportunities. Foreign markets add depth
and diversity because the economic and INTEREST rate
cycles abroad can differ from those in the United States,
offering better bond market returns. However, geographic
diversification is only a starting point for global
investment. As capital FLOWS accelerate around the world,
financial markets become increasingly interdependent.
Thus, foreign interest rates often follow the U.S.'s
lead, making geographic diversification less effective.
RCS makes allocations to the international area to
achieve income, risk and credit quality goals besides
diversity. In addition, RCS continues to CONCENTRATE on
securities issued or guaranteed by the United States or
foreign governments in keeping with its "global
government" focus.
Quality
GLOBAL
Investments
Recognizing that international investments are inherently
more challenging, RCM looks to EVALUATE risk and return
PHOTO so that RCS can provide a more consistent performance. In
1995, RCM believed that the U.S. market would provide
better RETURNS and emphasized U.S. investments in the
fund to ensure RCS's monthly dividends against any
ACHIEVING GLOBAL unforeseen events. In 1996, RCS is back in a more
INVESTMENT PERFOR- BALANCED global position. Currency fluctuations can
MANCE REQUIRES periodically overwhelm the bond market. In keeping with
REAL-TIME ACCESS TO its current strategy, RCS's investments were all
RESEARCH, ANALYSIS denominated in U.S. dollars at year-end.
AND COMMENTARY.
Achieving global investment performance requires
real-time access to RESEARCH, analysis and commentary;
and the ability to tap global resources is more important
than ever. RCM Capital Management recently announced a
strategic alliance with Dresdner Bank AG to become the
major institutional investment management subsidiary of
the Dresdner Bank Group. DRESDNER, an international
banking organization headquartered in Frankfurt, Germany,
has a network of over 1,500 offices in 40 countries and
the ability to provide extensive research on the key
topics influencing RCS's investments.
6
-
<PAGE>
PHOTO
PHOTO
PHOTO
PHOTO
PHOTO
<PAGE>
PHOTO PHOTO
PHOTO
PHOTO
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
......................................
Building a disciplined portfolio requires experience.
Although RCS is entering only its third year, it is
managed by the fixed income team at RCM, which has SERVED
corporate and pension fund CLIENTS since 1975. RCM
currently has approximately $10 billion in bond
investments and $15 billion in equity investment assets
under management, making it one of only a small group of
managers with a long-term track record in both equity and
fixed income performance. RCM's experienced and DIVERSE
organization allows RCS to draw on extensive resources.
RCS is about consistent income and risk-managed
performance. It is also about VALUING the opportunity to
SHARE more about the business of fixed income investment.
Experienced
VALUE
Solutions
For most funds, finding TIMELY information about a fund's
portfolio and changes in strategy is extremely difficult.
Equally difficult is getting access to the investment PHOTO
people who make decisions. RCS is an industry leader in
the breadth, frequency and QUALITY of information it
provides to shareholders. Quarterly reports expand the
HORIZON of understanding by providing special focus
articles on different aspects of the bond market
environment. For example, RCS has provided detailed RCS IS AN INDUSTRY
information about duration as a risk-management tool and LEADER IN THE
a KEY measure of a bond portfolio's sensitivity to BREADTH, FREQUENCY
interest rates. In addition, RCS issues monthly press AND QUALITY OF INFOR-
releases which relay critical developments to the MATION IT PROVIDES TO
investment community. SHAREHOLDERS.
Nineteen ninety-six should be an exciting year,
as RCM expands its capabilities and draws on new
RESOURCES, particularly in the international domain.
Throughout this period, we will continue to keep you
informed of the fund's strategies, DIRECTIONS and
goals. We look forward to another successful year
together.
9
-
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
......................................
PERFORMANCE: On an absolute basis, RCS had a strong year with a
total return of 16.2% on market price, and 17.1% on net asset
value. On a relative basis, RCS's return on net asset value
outperformed the Salomon Brothers Mortgage Security Index, which
RCM believes reflects the 1995 portfolio. Total return on net
asset value includes the change in net asset value plus
reinvestment of monthly dividends in compliance with the
measurement standards of the Association for Investment
Management and Research (AIMR). The net asset value per share
rose from $10.85 to $11.64 for the year.
<TABLE>
<CAPTION>
JANUARY OCTOBER JULY APRIL FISCAL
QUARTERLY PERIOD ENDED 1996 1995 1995 1995 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RCS PER SHARE INFORMATION
Net investment income $ 0.24 $ 0.24 $ 0.23 $ 0.25 $ 0.96
Dividend from net investment
income 0.23 0.22 0.22 0.22 0.89
Net asset value at end of
period 11.64 11.33 11.25 11.08 11.64
Market price at end of period 10.25 10.13 10.13 9.75 10.25
Total return on market price 3.45% 2.20% 6.10% 3.60% 16.21%
Total return on net asset
value 4.99% 2.93% 3.74% 4.44% 17.07%
Effective dividend yield* 8.66% 8.77% 8.77% 9.11% --
REFERENCE RETURNS**
Salomon Brothers Mortgage Security Index 15.09%
Salomon Brothers World Government Bond
Index 16.38%
J.P. Morgan Emerging Market
Index 43.75%
</TABLE>
Interest rates in the United States declined 2.3%. Despite the
stellar performance of the bond market generally, the closed-end
mutual fund industry did not experience a significant change in
discounts of stock market prices to fund net asset values. RCS,
as with other closed-end funds, will trade at a premium or
discount to net asset value depending upon the phases of the
interest rate cycle, the stock market in general, specific
supply and demand characteristics of RCS, and changes in net
asset value. The discount, for RCS, averaged 11.4% during the
year. The bear market conditions of 1994 may have contributed to
hesitant investor return to the closed-end bond fund industry in
1995. RCS ended the year at a discount of 11.9%, compared to
11.3% at last fiscal year-end. The discount has the effect of
increasing the effective yield of the dividend payments.
* End-of-the-quarter dividend divided by market price and
annualized.
** These reference returns are used for comparison to total
return on net asset value and represent the major market
sectors in which the portfolio is permitted to invest. The
Salomon Brothers Mortgage Security Index includes various
types of mortgage securities, including 30-year FNMA/GNMA
issues, 20-year FHLMC issues, 15-year FHLMC/FNMA/GNMA issues
and FHA Project Notes. The Salomon Brothers World Government
Bond Index is a market capitalization-weighted local currency
bond index that includes local government bond market returns
of fourteen countries that are freely open to foreign
investors. The J.P. Morgan Emerging Market Index includes
approximately $50 billion in face value outstanding,
dollar-denominated, restructured sovereign bonds.
10
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
......................................
DURATION: The fund averaged 4.4 years duration during the year.
Duration at year-end was 4.6 years, which is roughly comparable
to a bond with a six-year maturity. Duration is a key tool in
managing both RCS's sensitivity to rising rates and its
opportunity to benefit from declining rates. Duration is the
percentage change in the price of a particular fixed income
security or portfolio of fixed income securities for a 1% change
in interest rates. For example, if RCS's duration were one year
and interest rates increase 1%, the prices of RCS's investments
would be expected to decline 1%. As a measurement of risk,
duration assumes that all interest rates, including foreign
interest rates, move in tandem.
Duration is also particularly important in the fund's use of
financial leverage. Transactions that are financed create
financial leverage and allow RCS to earn the spread between the
yield of the underlying security and short-term interest rates.
A financed transaction has three important effects: (1) it
increases income to the extent of the interest spread, (2) it
increases a fund's overall duration risk and (3) it adds
sensitivity to rising short-term rates. Some mutual funds using
financial leverage end up with total risk levels more comparable
to twenty- or thirty-year maturity bonds. RCS actively manages
the overall duration of the fund to maintain an
intermediate-term duration risk level. As one tool to manage
duration, RCS had $48.7 million of U.S. Treasuries sold on a
forward commitment basis to lower duration at year-end. RCS has
also selectively used interest rate swaps to manage its overall
sensitivity to changing short-term rates.
The income contribution of financed mortgage-backed securities
declined in 1995 as the spread between short-term rates and
mortgage yields diminished. The spread, appearing on the
STATEMENT OF OPERATIONS as FEE INCOME, was $4.4 million in 1995,
compared to $5.3 million in 1994 on average volumes of $238.5
million and $154.4 million, respectively. Mortgage yields are
affected by the changing pace of mortgage prepayments. Lower
interest rates encourage homeowners to refinance their
mortgages. Since mortgage pass-throughs are made up of mortgage
loans, an increase in refinance activity shortens their
effective maturities and durations. RCM manages these changes by
regularly adjusting durations to reflect its expectations for
prepayments and, where appropriate, increases or reduces
duration to compensate for these adjustments. Collateralized
mortgage obligations in the portfolio are mortgage-backed
securities but were relatively unaffected by the faster
prepayment environment. These securities are core bond holdings
with stable prepayment exposure and income contribution.
11
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
......................................
COMPOSITION: The fund's composition through fiscal 1995 was
predominantly U.S. mortgage pass-throughs, including FNMA
positions with coupons ranging from 7.0% to 8.5%. The
pass-through securities in RCS's portfolio were mainly 8% and
8.5% coupons at year-end 1994. As refinancing activity
accelerated, pass-through holdings were shifted to the lower
7.5% coupons to decrease the overall sensitivity of the fund to
faster prepayments of principal. The positions in collateralized
mortgage obligations and emerging markets were, in aggregate,
stable. The overall emphasis on mortgage-backed securities
permitted the fund to provide stable dividends, avoid any
currency exposure that would compromise income, and maintain
duration.
In 1995, RCS introduced a new role for interest rate swaps to
increase RCS's position in developed foreign markets. The
interest rate swaps are often a more efficient way to hold
foreign bonds without taking currency risk and help RCS to
achieve its goals. First, they allow RCS to benefit from stable
or declining foreign interest rates. Second, they produce
income. Third, they avoid foreign currency risk since all
interest payments and any future gains or losses are in U.S.
dollars. They provide further diversification of income allowing
RCS to reduce its financed positions of liquid mortgage
pass-throughs to $114.5 million. At year-end, RCS held swaps
with an aggregate notional amount of $200 million, including
investments in five- and seven-year interest rates in Germany,
Switzerland, Belgium, The Netherlands and Finland, as detailed
on page 23.
<TABLE>
<CAPTION>
PORTFOLIO DURATION BY COUNTRY
JANUARY 31, 1996
PERCENTAGE
DURATION OF TOTAL
COUNTRY (YEARS) DURATION
- -------------------------------------------------------------------
<S> <C> <C>
United States 1.5 32.2%
Germany 0.7 16.0%
Mexico 0.5 10.7%
The Netherlands 0.5 10.5%
Argentina 0.4 9.6%
Switzerland 0.4 7.9%
Belgium 0.3 7.2%
Finland 0.2 5.0%
Brazil 0.1 0.9%
- -------------------------------------------------------------------
TOTAL 4.6 100.0%
</TABLE>
In 1994 and 1995, RCS used U.S. interest rate swaps to lock the
funding cost on financed mortgage positions. At fiscal year-end
1994, there were $135 million in these swaps outstanding, and
$275 million by July 31, 1995. All of these positions were
terminated. Interest rate swaps, mortgage pass-through
financing, forward sale commitments and other transactions may
involve financial leverage. In order to limit leverage, the fund
has segregated $177.1 million at fiscal year-end in high credit
quality, liquid investments, an amount equivalent to these
obligations.
12
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
......................................
OUTLOOK: There are several key global themes that are quite
pronounced in Europe and Japan, the outcome of which will have a
significant impact on the overall tone of the world's bond
markets. First, there is a significant force of price deflation
which has its roots in the Japanese bubble economy of the early
1990s, the liberalization of trade with the GATT and NAFTA
agreements and the general weakening of the U.S. dollar. Price
deflation has increased competition and led to weaker economic
conditions. Second, as in the United States, there is a global
move to more prudent fiscal policies of deficit reduction and
pension reform. In Europe, the potential for the community to
achieve a European union has driven reductions in fiscal policy
to meet the Maastricht qualification requirements for
participation. Fiscal restraint has added to the weakening of
economic activity and is truly unprecedented in the scope of
these efforts. The fiscal restraint has also been pursued within
the context of historically high unemployment making the efforts
politically challenging for Europe's leadership. Third, monetary
authorities in Japan and Europe are lowering interest rates to
counter the other two trends and stimulate their economies. This
easing of rates is likely to cause inflation, sometimes referred
to as "reflation."
The outlook for the 1996 bond markets has everything to do with
the winner of this contest among deflation, fiscal restraint and
reflation. It is critical that Europe continue to pursue sound
fiscal policies for its future growth. RCM believes that the
lower interest rates will allow reflation to win out eventually,
increasing economic activity abroad. At the earliest indications
of economic resurgence, foreign central banks will most likely
cease their easier monetary policies. RCM believes this
constitutes a key risk to the bond markets. RCM anticipates that
it will likely be early 1997 before this policy reversal occurs.
Despite some expected choppiness in the market, RCM anticipates
that rates will decrease in Europe.
Emerging markets, specifically Latin America, are likely to
continue to see a resumption of global interest. RCM believes
the general market improvement in 1995, especially in Mexico,
reflects a return home of local "flight" capital. In 1996, RCM
anticipates that global asset allocations will favor emerging
markets as these countries see diminished default risk, a
general improvement in economic activity with a renewed
political emphasis on fiscal prudence and lower inflation.
RCM believes the U.S. economy has a fundamentally firm base and
the Federal Reserve is intent on keeping the United States out
of recession. U.S. economic activity is likely to be at
average-to-low levels, which would be generally favorable to
stable or lower interest rates in 1996.
13
<PAGE>
<TABLE>
<CAPTION>
CREDIT RATING %
<S> <C>
AAA 81.7%
AA 0.2%
A 5.8%
BB 9.1%
B 3.2%
TOTAL 100.0%
</TABLE>
[ARTWORK FOLIO 14]
REPRESENTATIVE DURATION RISK
(For Different Maturities)
<TABLE>
<CAPTION>
GOVERNMENT BOND DURATION (YRS.)
<S> <C>
3 yr. Bond +/- 2.8
5 yr. Bond +/- 4.4
7 yr. Bond +/- 5.8
10 yr. Bond +/- 7.6
20 yr. Bond +/-11.7
30 yr. Bond +/-13.8
RCS +/- 4.6
</TABLE>
Duration is the expected change
in price for a 1% change in interest rates
<PAGE>
MARKET SECTOR 1995 INCOME CONTRIBUTION
(FISCAL 1995)
<TABLE>
<CAPTION>
%
<S> <C>
U.S. Mortgage pass-throughs 64.1%
U.S. Collateralized mortgage obligations 19.4%
Developed foreign 2.3%
Emerging markets 13.4%
U.S. Short-term investments 0.8%
TOTAL 100.0%
</TABLE>
[ARTWORK FOLIO 15]
MONTHLY 1995 DIVIDEND (PER 1,000 SHARES)
<TABLE>
<CAPTION>
MONTH DIVIDEND $
<S> <C>
Feb-95 74
Mar-95 74
Apr-95 74
May-95 74
Jun-95 74
Jul-95 74
Aug-95 74
Sep-95 74
Oct-95 74
Nov-95 74
Dec-95 74
Jan-96 74
-----
Total $ 888
</TABLE>
<PAGE>
INVESTMENTS IN SECURITIES AND NET ASSETS
........................................
JANUARY 31, 1996
<TABLE>
<CAPTION>
COUNTRY/ PRINCIPAL VALUE
CURRENCY (000'S) DESCRIPTION (US$)
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
INVESTMENTS IN DEBT SECURITIES - 130.7%*
ARGENTINA - 5.7%
USD Republic of Argentina
15,000 5.00%, 03/31/23 $ 9,037,500
8,000 8.38%, 12/20/03 7,100,000
4,000 10.95%, 11/01/99 4,290,000
--------------
Total Argentina 20,427,500
--------------
BRAZIL - 4.2%
USD Petrobras Euronote
15,000 8.75%, 12/09/96 14,925,000
MEXICO - 6.1%
USD United Mexican States
23,000 6.25%, 12/31/19 15,783,750
6,000 9.75%, 02/06/01 6,030,000
--------------
Total Mexico 21,813,750
--------------
UNITED STATES - 114.7%
MORTGAGE-BACKED SECURITIES - 89.6%
USD
8,848 FNMA 7.00%, 2025 8,930,892
23,544 FHLMC 8.00%, 2023 - 2025 24,415,083
5,768 GNMA 8.00%, 2016 - 2022 6,050,863
116,350 FNMA 8.50%, 2017 - 2025 121,609,187
29,437 GNMA 8.50%, 2016 - 2025 30,882,517
78,800 FNMA 7.50%, 2025 TBA 80,804,672
33,500 FHLMC 7.50%, 2025 TBA 34,383,730
10,699 FHA Project Pool 56 7.43%, 11/01/22 11,153,182
--------------
Total Mortgage-Backed Securities 318,230,126
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 25.1%
USD
DLJ Mortgage Acceptance Corp.
1,000 Series 1994-MF11, Class A2 8.10%, 06/18/04 1,063,125
4,850 Series 1994-MF11, Class A3 8.10%, 06/18/04 5,111,256
</TABLE>
* PERCENTAGE OF NET ASSETS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
INVESTMENTS IN SECURITIES AND NET ASSETS
........................................
JANUARY 31, 1996
<TABLE>
<CAPTION>
COUNTRY/ PRINCIPAL VALUE
CURRENCY (000'S) DESCRIPTION (US$)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - (CONTINUED)
USD
Federal Home Loan Mortgage Corp.
17,932 Series 1667, Class PE 6.00%, 03/15/08 $ 17,898,378
22,786 Series 1665, Class N 6.50%, 01/15/24 21,867,750
G E Capital Mortgage Services, Inc.
4,765 Series 1994-12, Class B1 6.00%, 04/25/09 4,514,148
9,157 Series 1994-9, Class B1 6.50%, 02/25/24 8,558,239
22,000 Series 1994-10, Class A15 6.50%, 03/25/24 21,133,750
Residential Funding Mortgage Sec. I
3,914 Series 1993-S43, Class M-2 6.50%, 11/25/23 3,639,964
5,737 Series 1993-S47, Class M-2 6.50%, 12/25/23 5,335,818
--------------
Total Collateralized Mortgage Obligations 89,122,428
--------------
TOTAL INVESTMENTS - (COST $445,282,129) 464,518,804
--------------
Payable for investments purchased - (37.5%) (133,293,591)
Investments sold on a forward commitment basis, net - (13.9%)+ (49,332,368)
Other assets less liabilities - 20.7% 73,393,841
--------------
NET ASSETS - 100.0% $ 355,286,686
--------------
</TABLE>
TERMS
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
TBA - To Be Announced
USD - United States Dollar
+ On a forward commitment basis, the fund has agreed to sell U.S. Treasury
securities:
<TABLE>
<CAPTION>
PRINCIPAL VALUE
CURRENCY (000'S) DESCRIPTION (US$)
<C> <S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
USD 43,000 U.S. Treasury Bonds, 7.125%, 2/15/23 $ 48,737,920
(Cost $47,847,649)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
...................................
JANUARY 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value - (Note 1)
(cost $445,282,129) $ 464,518,804
Cash equivalents 2,556,417
Receivable for investments sold 67,024,609
Interest receivable 3,496,214
Unrealized appreciation on interest rate swap contracts, net - (Note 1) 975,905
------------------
Total Assets 538,571,949
------------------
LIABILITIES:
Payable for investments purchased 133,293,591
Investments sold on a forward commitment basis, net - (Note 1) 49,332,368
Deferred fee income 94,577
Payable for:
Investment management fees - (Note 2) 286,716
Printing and postage expenses 92,531
Professional fees 74,524
Administration fees - (Note 2) 57,591
Custodial fees 35,695
Other expenses 17,670
------------------
Total Liabilities 183,285,263
------------------
NET ASSETS $ 355,286,686
------------------
NET ASSETS CONSIST OF:
Paid in capital $ 380,687,827
Accumulated net investment loss (1,795,396)
Accumulated net realized loss on investments, foreign currency transactions, interest rate swaps and
forward commitments (42,928,054)
Net unrealized appreciation on investments, interest rate swaps and forward commitments 19,322,309
------------------
NET ASSETS $ 355,286,686
------------------
NET ASSET VALUE PER SHARE
(30,515,800 shares outstanding) $ 11.64
------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<PAGE>
STATEMENT OF OPERATIONS
.......................
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest $ 28,871,141
Fee income - (Note 1) 4,428,890
----------------
Total investment income 33,300,031
----------------
Expenses:
Investment management fees - (Note 2) 3,260,660
Administration fees - (Note 2) 295,066
Custodial fees 189,267
Printing and postage expenses 157,262
Professional fees 92,768
Insurance expense 46,520
Directors' fees and expenses 31,000
Registration and filing fees 23,290
Transfer agent fees 16,933
Other expenses 16,421
----------------
Total expenses 4,129,187
----------------
Net investment income 29,170,844
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments, interest rate swaps and forward commitments (16,950,280)
Foreign currency transactions 2,330,131
----------------
Net realized loss (14,620,149)
Net unrealized appreciation on investments, interest rate swaps and forward commitments 36,667,874
----------------
Net realized and unrealized gain 22,047,725
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 51,218,569
----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
...................................
<TABLE>
<CAPTION>
FEBRUARY 24, 1994*
YEAR ENDED THROUGH
JANUARY 31, 1996 JANUARY 31, 1995+
---------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 29,170,844 $ 25,279,057
Net realized gain (loss) on:
Investments, interest rate swaps and forward
commitments (16,950,280) (23,701,575)
Foreign currency transactions and forward foreign
currency contracts 2,330,131 (11,012,183)
Net unrealized appreciation (depreciation) on
investments, foreign currency transactions, interest
rate swaps and forward commitments 36,667,874 (17,345,565)
---------------- ------------------
Net increase (decrease) in net assets resulting from
operations 51,218,569 (26,780,266)
---------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income - (Note 1) (27,098,030) (22,764,787)
CAPITAL SHARES TRANSACTIONS:
Proceeds from sale of common shares -- 381,347,500
Offering costs - (Note 3) -- (736,300)
---------------- ------------------
Net increase from capital share transactions -- 380,611,200
---------------- ------------------
Net increase in net assets 24,120,539 331,066,147
NET ASSETS:
Beginning of period 331,166,147 100,000
---------------- ------------------
End of period $ 355,286,686 $ 331,166,147
---------------- ------------------
</TABLE>
* COMMENCEMENT OF INVESTMENT OPERATIONS.
+ AUDITED BY PRIOR AUDITOR.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<PAGE>
STATEMENT OF CASH FLOWS
.......................
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income received $ 26,951,397
Operating expenses paid (4,276,230)
Sale of short-term portfolio investments, net 25,635,867
Purchase of long-term portfolio investments (864,424,605)
Proceeds from disposition of long-term portfolio investments and foreign currency 874,233,259
-------------------
Net cash provided by operating activities 58,119,688
-------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of reverse repurchase agreement (33,367,000)
Net proceeds from dollar roll transactions 4,365,942
Dividend paid from net investment income (27,098,030)
-------------------
Net cash used in financing activities (56,099,088)
-------------------
Effect of exchange rate in cash (96,548)
-------------------
Net increase in cash 1,924,052
Cash and equivalents at beginning of year 632,365
-------------------
Cash and equivalents at end of year $ 2,556,417
-------------------
RECONCILIATION OF RESULTS FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 51,218,569
Decrease in investments and foreign currency 114,504,266
Net realized (gain) loss on:
Investments and forward commitments 16,950,280
Foreign currency transactions (2,330,131)
Net unrealized appreciation on investments (34,540,113)
Change in:
Receivable for investments sold 92,136,359
Unrealized appreciation on interest rate swaps 1,739,091
Interest receivable 769,061
Payable for investments purchased (99,466,850)
Payable for investments sold on a forward commitment basis (82,807,534)
Accrued expenses (53,310)
-------------------
Net cash provided by operating activities $ 58,119,688
-------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
.............................
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Strategic Global Government Fund, Inc. (the "Fund") commenced investment
operations on February 24, 1994, as a non-diversified, closed-end management
investment company and is registered under the Investment Company Act of 1940,
as amended. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
SECURITIES VALUATIONS: Investment securities are stated at market value or, in
the absence of market value, at fair value as determined by or under the
direction of the Fund's Board of Directors. Over-the-counter securities are
valued on the basis of the most recent bid price. Investments in U.S. government
securities (other than short-term securities) are valued at the average of the
most recent bid and ask prices in the over-the-counter market. Investments that
mature in sixty days or less are valued at amortized cost which approximates
market value.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions are
recorded as of the date of purchase, sale or maturity. Realized gains and losses
on security transactions are determined on an identified cost basis. Interest
income, foreign taxes and expenses are accrued daily. Fees from dollar roll
transactions are recognized daily on a straight-line basis over the term of the
contract. The Fund accretes discount and amortizes premium to par value on
securities.
FOREIGN CURRENCY TRANSLATIONS: The 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 at current exchange rates. Purchases and
sales of foreign securities and income and expenses are translated on the
respective dates of such transactions. Net realized currency gains and losses
arise from trade and settlement date gains and losses, sales of forward foreign
currency contracts, and foreign currency transactions. The Fund does not isolate
the portion of unrealized foreign currency exchange fluctuation on investments.
Such unrealized fluctuations are included in net unrealized appreciation or
depreciation on investments.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign currency contract
("Forward") is an agreement between two parties to buy and sell currency at a
set price on a future date. The Fund may enter into Forwards in order to hedge
foreign currency risk associated with its portfolio securities or for other risk
management or investment purposes. The net U.S. dollar value of foreign currency
underlying all contractual commitments held by the Fund on each day is
determined by using the appropriate current or forward exchange rate. Realized
gains or losses on Forwards include net gains or losses on contracts that have
matured or which the Fund has terminated by entering into an offsetting closing
transaction. Unrealized appreciation or depreciation of Forwards is included in
the Statement of Assets and Liabilities and is carried on a net basis. The
portfolio could be exposed to risk of loss if the counterparty is unable to meet
the terms of the contract or if the value of the currency changes unfavorably.
As of January 31, 1996, there were no open Forwards.
FORWARD COMMITMENTS: The Fund may enter into forward sale commitments in which
the Fund agrees on trade date to make delivery against payment for securities on
a delayed delivery basis. The price and interest rate of such securities are
fixed at trade date. The Fund enters into forward sale commitments to manage its
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
.............................
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
portfolio duration. Realized gains and losses of forward sale commitments are
recognized at the time such transactions are closed by an offsetting purchase.
At January 31, 1996, there were $48,737,920 of forward sale commitments
outstanding and a payable for forward commitments closed, but unsettled of
$594,448.
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 year on these
transactions was $4,428,890. At January 31, 1996, there were $114,472,125 in
dollar roll commitments outstanding on liquid mortgage pass-throughs.
INTEREST RATE SWAPS: The Fund enters into interest rate swaps for hedging, risk
management and other investment 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.
As of January 31, 1996, the Fund had the following outstanding interest rate
swap agreements:
<TABLE>
<CAPTION>
NOTIONAL INTEREST COUNTER- SWAP UNREALIZED
AMOUNT RATE PARTY CREDIT TERMINATION MATURITY APPRECIATION/
(000S) RECEIVED COUNTRY RATING DATE DATE (DEPRECIATION)
- --------- --------- ------------ ------------ ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 75,000 5.84% Germany AAA 10/20/97 10/20/00 $ 1,509,525
25,000 5.84% Netherlands AAA 10/23/97 10/23/00 516,280
25,000 5.00% Netherlands A+ 01/25/98 01/25/01 (262,700)
25,000 5.85% Belgium A+ 01/25/98 01/25/03 (214,700)
25,000 3.99% Switzerland AAA 01/26/98 01/26/03 (202,500)
25,000 6.36% Finland AA+ 01/26/98 01/26/01 (370,000)
- --------- --------------
$ 200,000 $ 975,905
- --------- --------------
</TABLE>
REVERSE REPURCHASE AGREEMENTS: The Fund enters into reverse repurchase
agreements with qualified counterparties as determined by or under the direction
of the Fund's Board of Directors. A reverse repurchase agreement involves a sale
by the Fund of securities that it holds with an agreement by the Fund to
repurchase the same securities at an agreed-upon price and date. Interest on the
value of reverse repurchase agreements issued and outstanding is based upon
competitive market rates at the time of issuance. At January 31, 1996, the Fund
had no reverse repurchase agreements outstanding.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
.............................
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LEVERAGE: Forward sale commitments, dollar rolls, interest rate swaps, reverse
repurchase agreements and other transactions may involve leverage. In order to
limit leverage, the Fund segregated $177,108,346 in high credit quality, liquid
investments against outstanding obligations, resulting in no net leverage at
January 31, 1996.
FEDERAL INCOME TAXES: It is the policy of the Fund to comply with the
requirements for qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended. It is also the intention of the Fund
to make distributions of substantially all of its taxable income and net
realized capital gains to its shareholders. Therefore, no federal income tax
provision is required. As of January 31, 1996, the Fund had a capital loss
carryover of $42,111,669, of which $23,482,011 expires in 2003 and $18,629,658
expires in 2004.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund distributes to its holders of common
stock monthly dividends of net investment income. Net realized capital gains, in
excess of capital loss carryovers, if any, will be distributed to the
stockholders at least annually. The Fund records all distributions to
stockholders on the ex-dividend date. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Any differences are primarily due to
differing treatments for losses deferred, accounting for foreign currency,
original issue discount accretion and excise tax regulations.
CASH EQUIVALENTS: The Fund considers investments in money market funds to be
cash equivalents.
2. TRANSACTIONS WITH AFFILIATES, ADMINISTRATOR AND RELATED PARTIES
RCM Capital Management, a California Limited Partnership (the "Investment
Manager"), furnishes investment advice to the Fund and receives a fee, at the
annualized rate of 0.95% of the Fund's average daily net assets. State Street
Bank and Trust Company (the "Administrator") serves as the Fund's administrator
and receives a fee of 0.10% on the first $250 million of the Fund's average
daily net assets, 0.05% on the next $250 million and 0.02% on amounts
thereafter. To the extent necessary to reduce the Fund's total annual expenses
for the first year of operations to 1.15%, the Investment Manager agreed to
reduce its fee to 0.90%, and the Administrator agreed to reduce its fee to 0.07%
on the first $250 million of the Fund's average daily net assets, 0.05% on the
next $250 million and 0.02% on amounts thereafter. In the absence of fee
reductions by the Investment Manager and the Administrator, the Fund's ratio of
expenses and net investment income to average net assets in the first fiscal
year would have been 1.24% and 7.71%, respectively. No principal, officer or
employee of the Investment Manager or any affiliate thereof will receive any
compensation from the Fund for serving as an officer or director of the Fund.
The Fund pays each of its directors who is not a principal, officer or employee
of the Investment Manager or any affiliate thereof an annual fee of $6,000 plus
$1,000 for each meeting attended.
In December 1995, the Investment Manager entered into an Agreement of Purchase
and Sale pursuant to which the Investment Manager will be acquired by a
subsidiary of Dresdner Bank AG, an international banking organization with
headquarters in Frankfurt, Germany. It is expected that the day-to-day
operations of the Investment Manager will not be affected and that the
individuals who are primarily responsible for the management of the Fund's
portfolio will remain the same. The closing of the transaction is subject to a
number of contingencies, including the receipt of certain regulatory approvals.
The transaction is currently expected to close in mid-1996. Because the
transaction will constitute an "assignment" of the Fund's management agreement
with
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
.............................
2. TRANSACTIONS WITH AFFILIATES, ADMINISTRATOR AND RELATED PARTIES (CONTINUED)
the Investment Manager under the Investment Company Act of 1940, and thus a
termination of such management agreement, the Fund will seek approval of a new
management agreement from the Fund's Board of Directors and stockholders prior
to the closing of the transaction. The terms of the new management agreement are
expected to be substantially the same as those of the current management
agreement.
3. CAPITAL SHARES
On April 15, 1994, the Fund completed the initial public offering of a total of
30,515,800 shares of its common stock. Offering costs of $736,300 were charged
to capital upon commencement of investment operations. All other initial costs
of distribution and all offering commissions were paid by the Investment
Manager. At January 31, 1996, 500,000,000 shares of common stock, $0.00001 par
value, were authorized.
4. PURCHASES AND SALES OF SECURITIES
Purchases and proceeds from sales of securities, other than obligations of the
U.S. government and its agencies, short-term securities and dollar rolls, for
the year ended January 31, 1996, aggregated $39,006,625 and $62,677,015,
respectively. Purchases and proceeds from sales of obligations of the U.S.
government and its agencies, other than short-term securities and dollar rolls,
for the year ended January 31, 1996, aggregated $512,922,058 and $570,694,641,
respectively. At January 31, 1996, the aggregate cost of investments for federal
income tax purposes was $447,656,664. Gross unrealized appreciation and
depreciation of investments aggregated $17,249,455 and $387,315, respectively,
resulting in net unrealized appreciation of $16,862,140 at January 31, 1996.
25
<PAGE>
FINANCIAL HIGHLIGHTS
....................
Supplementary data for a share outstanding are presented for the periods
indicated:
<TABLE>
<CAPTION>
FEBRUARY 24, 1994*
YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE: JANUARY 31, 1996 JANUARY 31, 1995**
----------------- --------------------
<S> <C> <C>
Net asset value, beginning of period $10.85 $12.50
----------------- --------------------
Net investment income 0.96 0.83
Net realized and unrealized gain (loss) 0.72 (1.71)
----------------- --------------------
Net increase (decrease) in net assets resulting from operations 1.68 (0.88)
Distributions:
Net investment income (0.89) (0.75)
Offering costs - (0.02)
----------------- --------------------
Net asset value, end of period $11.64 $10.85
----------------- --------------------
Market price, end of period $10.25 $9.625
----------------- --------------------
Total return based on market price 16.21% (17.21)%+
Total return based on net asset value 17.07% (6.68)%+
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000s) $355,287 $331,166
Ratio of expenses to average net assets -- (Note 2) 1.20% 1.15%++
Ratio of net investment income to average net assets -- (Note 2) 8.50% 7.79%++
Portfolio turnover 96% 158%+
+ Not annualized. ++ Annualized * Commencement of Investment Operations ** Audited by prior auditors.
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA FOR THE PERIOD ENDED (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL NET NET REALIZED NET ASSET VALUE MARKET PRICE
INVESTMENT INVESTMENT AND UNREALIZED -------------------- -------------------- VOLUME
INCOME INCOME GAIN (LOSS) HIGH LOW HIGH LOW (000'S)
----------- ----------- --------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
April 1994 $0.16 $0.13 $(0.74) $12.50 $11.87 $12.50 $10.75 1,084
July 1994 0.28 0.25 (0.31) 11.92 11.43 11.50 10.00 4,927
October 1994 0.25 0.22 (0.17) 11.54 11.30 10.69 9.69 6,122
January 1995 0.26 0.23 (0.49) 11.25 10.71 10.25 9.25 7,654
April 1995 0.28 0.25 0.20 11.08 10.79 9.94 9.50 5,583
July 1995 0.27 0.23 0.16 11.47 11.11 10.50 9.75 5,708
October 1995 0.27 0.24 0.06 11.39 11.12 10.25 9.88 5,261
January 1996 0.27 0.24 0.30 11.70 11.29 10.25 9.88 6,833
TOTALS (000'S)
April 1994 $4,775 $4,049 $(22,682)
July 1994 8,612 7,563 (9,306)
October 1994 7,779 6,756 (5,283)
January 1995 7,852 6,911 (14,788)
April 1995 8,427 7,496 6,230
July 1995 8,221 7,139 4,830
October 1995 8,338 7,286 1,909
January 1996 8,314 7,250 9,079
</TABLE>
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
............................
To the Shareholders and Board of Directors of
RCM Strategic Global Government Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of RCM
Strategic Global Government Fund, Inc. (the "Fund"), including the statement of
investments in securities and net assets as of January 31, 1996, and the related
statement of operations, the statement of changes in net assets, statement of
cash flows and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
of net assets and financial highlights for the period from February 24, 1994
(commencement of operations) to January 31, 1995 presented herein were audited
by other auditors whose report dated March 10,1995 expressed an unqualified
opinion on such statement and financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of January 31, 1996 by
correspondence with custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of RCM
Strategic Global Government Fund, Inc. as of January 31, 1996, the results of
its operations, the changes in its net assets, its cash flows and financial
highlights for the year then ended in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
March 8, 1996
27
<PAGE>
DIVIDEND REINVESTMENT PLAN
..........................
Under the Fund's Dividend Reinvestment Plan (the "Plan"), a stockholder whose
shares of common stock are registered in his or her own name will have all
distributions from the Fund reinvested automatically by State Street Bank and
Trust Company (the "Plan Agent") as agent under the Plan, unless the stockholder
elects to receive cash. Distributions with respect to shares registered in the
name of a broker-dealer or other nominee (that is, in "street name") will be
reinvested by the broker or nominee in additional shares under the Plan, unless
that service is not provided by the broker or nominee or the stockholder elects
to receive distributions in cash.
When the market price of the common stock is equal to or exceeds the net asset
value per share of the common stock on the dividend payment date, Plan
participants will be issued shares of common stock valued at the net asset value
most recently determined or, if net asset value is less than 95% of the then
current market price of the common stock, then at 95% of the market value.
If the market price of the common stock is less than the net asset value of the
common stock, or if the Fund declares a dividend or capital gains distribution
payable only in cash, a broker-dealer not affiliated with the Fund's principal
underwriter, as purchasing agent for Plan participants (the "Purchasing Agent"),
will buy common stock in the open market for the participants' accounts. If the
market price exceeds the net asset value of shares before the Purchasing Agent
has completed its purchases, the Purchasing Agent is permitted to cease
purchasing shares and the Fund may issue the remaining shares.
Plan participants are subject to no charge for reinvesting dividends and capital
gains distributions. The Plan Agent's fees for handling the reinvestment of
dividends and capital gains distributions will be paid by the Fund. No brokerage
charges apply with respect to shares of common stock issued directly by the
Fund. Each Plan participant will, however, bear a proportionate share of
brokerage commissions incurred with respect to open market purchases made in
connection with the reinvestment of dividends or capital gains distributions.
Plan participants may terminate their participation in the Plan by giving
written notice to the Plan Agent. The Fund reserves the right to amend or
terminate the Plan. To obtain a full description of the Plan or to obtain any
other information about the Plan, please contact State Street Bank and Trust
Company, P.O. Box 8209, Boston, Massachusetts 02266-8209, or call (800)
426-5523.
"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""
SHAREHOLDER MEETING RESULTS (UNAUDITED)
.......................................
The Annual Meeting of Shareholders of the RCM Strategic Global Government Fund,
Inc. was held on Friday, August 18, 1995, at the Hyatt Regency, Five Embarcadero
Center, San Francisco, California. The number of shares issued, outstanding and
eligible to vote as of record date (June 23, 1995) was 30,515,800. Present were
29,466,544 shares represented by 182 proxies or 96.56% of the eligible voting
shares tabulated. The two matters voted upon by Shareholders and the resulting
votes for each matter are presented below:
1. The re-election of William A. Hasler to the Board of Directors for a term to
expire in 1998 or until his successor shall be duly elected and qualified.
The votes were cast: For (29,062,148), Abstain (394,157) and Broker Non-Vote
(10,239). A broker non-vote is a proxy received by the Fund from a broker or
nominee when the broker or nominee neither has received instructions from
the beneficial owner or other persons entitled to vote, nor has the
discretionary power to vote on a particular matter.
2. The ratification or rejection of the selection by the Board of Directors of
the Company of Coopers & Lybrand L.L.P. as independent public accountants
for the fiscal year ending January 31, 1996. The votes were cast: For
(28,927,282), Against (216,992) and Abstain (322,270).
28
<PAGE>
CORPORATE INFORMATION
...........................
DIRECTORS
Gary W. Schreyer, CHAIRMAN
William A. Hasler
Francis E. Lundy
Jeffrey S. Rudsten
James M. Whitaker
AUDIT COMMITTEE
William A. Hasler
Francis E. Lundy
James M. Whitaker
NOMINATING COMMITTEE
Gary W. Schreyer
William A. Hasler
Jeffrey S. Rudsten
OFFICERS - PORTFOLIO MANAGEMENT
Gary W. Schreyer
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Jeffrey S. Rudsten
VICE PRESIDENT
Eamonn F. Dolan
VICE PRESIDENT AND PORTFOLIO MANAGER
Stephen Kim
VICE PRESIDENT AND PORTFOLIO MANAGER
Jack L. Bernard
VICE PRESIDENT AND PORTFOLIO MANAGER
Mark E. Raaberg
VICE PRESIDENT AND PORTFOLIO MANAGER
Frederick J. Clancy
VICE PRESIDENT
OFFICERS - ADMINISTRATION
Ellen M. Courtien
VICE PRESIDENT
Michael J. Apatoff
VICE PRESIDENT
Susan C. Gause
TREASURER AND CHIEF FINANCIAL OFFICER
Caroline M. Hirst
VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER
Judith A. Wilkinson
VICE PRESIDENT
Anthony Ain
VICE PRESIDENT AND GENERAL COUNSEL
Timothy B. Parker
SECRETARY AND ASSISTANT GENERAL COUNSEL
INVESTMENT MANAGER
RCM Capital Management
Four Embarcadero Center
San Francisco, California 94111
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 426-5523
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
At January 31, 1996, RCM Strategic Global Government Fund, Inc. had 20 employees
and approximately 21,500 beneficial holders of its securities.
<PAGE>
RCM STRATEGIC GLOBAL
GOVERNMENT FUND, INC.
INVESTMENT MANAGER:
[RCM LOGO] CAPITAL MANAGEMENT
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
