<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
[ARTWORK OMITTED]
1996 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
TABLE OF CONTENTS
FUND HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LETTER TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FUND MANAGERS' DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . 5
INVESTMENTS IN SECURITIES AND NET ASSETS . . . . . . . . . . . . . . . . . 16
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
NOTES TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . 22
DIVIDEND REINVESTMENT PLAN . . . . . . . . . . . . . . . . . . . . . . . . 26
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . . . . . . . 27
SHAREHOLDER MEETING RESULTS. . . . . . . . . . . . . . . . . . . . . . . . 28
<PAGE>
RCS
CORPORATE PROFILE
The RCM Strategic Global Government Fund trades under the symbol "RCS" on the
New York Stock Exchange. RCS is managed by RCM Capital Management, L.L.C., one
of the largest independent institutional investment management firms in the
United States. The firm manages $26 billion in both equity and fixed income
assets for more than 250 blue-chip institutional clients around the world.
FUND HIGHLIGHTS
ANNUAL FINANCIAL INFORMATION
FISCAL YEAR* 1996 1995
- --------------------------------------------------------------------------------
Total investment income $ 33,013 $ 33,300
Total investment income per share 1.08 1.09
Net investment income 28,665 29,171
Net investment income per share 0.94 0.96
Net realized and unrealized gain 6,163 22,048
Net realized and unrealized gain per share 0.21 0.72
Net asset value at end of year 11.87 11.64
Market price at end of year 10.63 10.25
Total return on market price 13.57% 16.21%
Total return on net asset value 11.72% 17.07%
Dividend from net investment income $ 0.92 $ 0.89
Effective dividend yield ** 8.65% 8.68%
- --------------------------------------------------------------------------------
* IN THOUSANDS EXCEPT PER SHARE DATA.
** DIVIDEND DIVIDED BY MARKET PRICE.
1
<PAGE>
LETTER TO SHAREHOLDERS
1996 WAS ANOTHER SUCCESSFUL YEAR FOR THE RCM STRATEGIC GLOBAL GOVERNMENT FUND.
IN A YEAR CHARACTERIZED BY STRONG EQUITY MARKETS, A MODEST INCREASE IN INTEREST
RATES AND A TOUGH ENVIRONMENT FOR U.S. BONDS, WE'RE PLEASED TO REPORT THAT THE
FUND ACHIEVED A TOTAL RETURN OF 13.6% ON MARKET PRICE. MONTHLY DIVIDENDS WERE
$0.074 PER SHARE -- WITH A SPECIAL YEAR-END DIVIDEND OF $0.03 PER SHARE -- AND
BOTH THE NET ASSET VALUE AND MARKET PRICE OF THE FUND REMAINED STABLE. CREDIT
QUALITY OF OUR PORTFOLIO REMAINED STRONG, WITH 79.8% OF OUR TOTAL INVESTMENTS
RATED AAA, AND THE PORTFOLIO'S "DURATION" -- AN IMPORTANT BAROMETER OF INTEREST
RATE SENSITIVITY -- AVERAGED AN INTERMEDIATE-TERM 4.8 YEARS IN 1996.
DISCIPLINED INVESTMENT STRATEGY
The fund's solid performance in 1996, our third year of operations, reflects the
disciplined approach to global investing of the fund's investment manager, RCM
Capital Management, L.L.C. ("RCM"). The investment policy of RCM is to manage
high-quality debt instruments to achieve superior and consistent income, with
less price volatility than that of intermediate-term U.S. government notes. Our
portfolio is a mix of fixed income securities from developed countries in
Europe, emerging markets in Latin America, and the United States. RCM actively
manages risk, augmenting our positions with interest rate swaps and other
portfolio management tools that enable us to achieve higher income while
minimizing foreign currency risk.
STRONG CONTRIBUTION FROM INTERNATIONAL MARKETS
RCM made several portfolio changes this past year to take advantage of global
economic, political, trade and market trends. As planned, we increased our
position in the emerging markets of Latin America, investing in the more liquid
and higher-yielding government-guaranteed bonds of Mexico, Brazil and Argentina.
As a result of our increase in regional investments -- and the strong
performance of these instruments -- Latin America contributed 19.2% of the
fund's total income in 1996, up from 13.5% in 1995.
2
<PAGE>
LETTER TO SHAREHOLDERS
The developed foreign sector, specifically Europe, also provided significant
incremental yield and returns in 1996. One of the fund's key investments in this
sector last year was a $75 million, five-year German interest rate swap. This
transaction, which is discussed on page 11 of this report, enabled RCS to take a
position in this market without currency risk by converting cash flows from
deutsche marks into U.S. dollars. Income from the developed foreign market
portion of our portfolio comprised 8.7% of our total income in 1996, compared
with 2.4% in 1995. However, the shift to developed foreign markets was even more
significant to the fund's sensitivity to interest rates. Europe and Canada made
up 55.1% of the fund's total sensitivity to interest rates at fiscal year-end
compared to 46.6% at prior fiscal year-end.
In our third market sector, U.S. mortgage-related securities, RCM shifted to
lower coupon issues this past year to reduce our portfolio's sensitivity to
changing prepayment -- or refinancing -- risk. For example, we purchased $130
million in 7.5% coupon mortgage pass-through certificates issued by the Federal
Home Loan Mortgage Corporation, replacing similar bonds with an 8.5% coupon. In
total, the mortgage sector contributed the majority of our fund's income --
70.6% in 1996 -- as mortgage-related securities provided highly stable income
streams in the current market environment.
RCM: A MORE GLOBAL COMPANY
1996 was also a significant year for our investment manager, RCM. During the
year, Dresdner Bank AG, one of Europe's preeminent financial institutions with
assets of $179 billion and more than 1,500 offices in 40 countries worldwide,
completed its acquisition of RCM. In November, Dresdner Bank announced the
formation of a new global asset management company, which will consolidate RCM
and the asset management businesses of Dresdner Kleinwort Benson, Thornton &
Co., and other asset management subsidiaries of Dresdner Bank. Under the
leadership of RCM, the combined business will manage more than $50 billion in
assets and will be headquartered in San Francisco. RCM believes this combination
will enhance its international research and economic, currency and asset
allocation expertise.
3
<PAGE>
LETTER TO SHAREHOLDERS
OUTLOOK FOR 1997
As we begin 1997, RCM expects that interest rates on 10-year Treasury notes will
fluctuate between 6% and 7.25%. This scenario is based on the belief that growth
in U.S. consumer spending, production and exports will continue to expand
moderately and that monetary policy will restrain prospective inflationary
developments.
RCM also anticipates that global economic volatility will remain low and that
such an environment will be generally supportive for financial asset prices.
RCM expects that continued investment opportunities will be available in
European bond markets in 1997. Europe's economic growth and inflation remain
constrained by attempts to meet criteria established for European monetary
union. In addition, RCM is optimistic about the emerging markets of Latin
America, where economic growth and capital inflows should accelerate this year
while inflation subsides further.
We anticipate another solid year for the RCM Strategic Global Government Fund in
1997. All of us at RCS are committed to achieving the fund's investment
objectives and to maintaining clear and regular communications with you, our
shareholders, on our performance, investment techniques and strategies. We thank
you for your support and participation in our fund and look forward to reporting
to you on our results in the months and years ahead.
Sincerely,
Gary W. Schreyer
Chairman
February 21, 1997
4
<PAGE>
AS A BOND FUND, RCS INVESTS IN DEVELOPED COUNTRIES, EMERGING
MARKETS AND THE UNITED STATES TO ACHIEVE SUPERIOR, STABLE
INCOME WITH LESS PRICE VOLATILITY THAN INTERMEDIATE-TERM
U.S. GOVERNMENT BONDS. TO ACHIEVE THIS OBJECTIVE, RCM
ASSESSES A RANGE OF POTENTIAL RISKS -- DURATION, COUNTRY
SELECTION, CURRENCY, MORTGAGE PREPAYMENT AND CREDIT --
BEFORE SELECTING AN INVESTMENT. ASSET ALLOCATION IN OUR
PORTFOLIO ALSO REFLECTS THE ECONOMIC AND INTEREST RATE
CYCLES ABROAD AND IN THE UNITED STATES. ON THE PAGES THAT
FOLLOW, WE DESCRIBE THE ASSET ALLOCATION PROCESS TO OUR
THREE CORE MARKET SECTORS.
5
<PAGE>
[ARTWORK OMITTED]
GROSS DOMESTIC PRODUCT
94 95 96
------------------------
3.5 1.3 3.4
CONSUMER PRICE INFLATION
94 95 96
------------------------
2.7 2.5 3.3
INTEREST RATES (10 YR)
94 95 96
------------------------
7.8 5.6 6.4
6
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
CASE STUDY
NORTH AMERICA
UNITED STATES
RCM has been a specialist in U.S. mortgage-related securities for more than two
decades. Today, this sector is a major focus of the RCM Strategic Global
Government Fund and a fundamental source of its income. In 1996, mortgage-
related securities contributed 70.6% of the fund's income.
U.S. mortgage-related securities are an ideal fit for our investment strategy.
Yields in the mortgage sector have exceeded those of U.S. Treasury securities by
more than 1% in recent years, and these instruments provide the fund incremental
income without the credit risk associated with higher-yielding "junk" bonds in
the corporate sector.
In selecting a mortgage-related security, RCM's portfolio managers analyze a
bond's potential return under three scenarios - most likely, pessimistic and
optimistic. Only when RCM determines that the bond can perform well in all
three cases, such as the $130 million 7.5% Freddie-Mac pass-throughs that
RCM purchased during 1995 and 1996, will RCM invest. Then RCM continuously
monitors and reviews our mortgage security holdings, restructuring the
portfolio, as necessary, to manage the prepayment - or refinancing - risk that
is associated with these securities. For example, since homeowners react to
changing interest rates by refinancing their homes, the declining interest rates
in 1995 and the volatile environment in 1996 prompted RCM to sell Federal
National Mortgage Association 8.5% pass-throughs and replace them with the more
stable 7.5% coupon pass-throughs. RCM's overall strategy for mortgages is to
not bet on the direction of interest rates, but to manage the refinancing risk
and achieve stable income.
In 1997, RCM expects our asset allocation to continue to favor the U.S. mortgage
sector, reflecting the beneficial characteristics of mortgage bonds against the
solid growth RCM expects for the U.S. economy.
7
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
CASE STUDY
LATIN AMERICA
MEXICO
Emerging market debt from Latin America was a very profitable area in 1996 for
our fund and for bond investors, with indexes producing returns of 25% to 30%.
Mexico, Argentina and Brazil have accelerated their efforts to control
inflation, cut spending, and better manage their debt loads.
While political uncertainty continues, emerging market debt from Latin America
is generating high yields for the level of risk. In 1996, RCM increased the
fund's Latin American holdings significantly. During the year, investments in
government-guaranteed bonds from Latin America contributed 19.2% of our total
income, compared with 13.5% in 1995.
Approximately one-third of our holdings in this region are in Mexico, which is
the most liquid of these emerging markets. With the recession of 1995 and the
peso crisis of 1994 now well in the past, inflation of 52% and peso interest
rates of 48% in 1995 are expected by market analysts to be only 18% and 24%,
respectively, in 1997. RCM expects Mexico to benefit from higher oil prices,
the expansion of global trade and continued capital flows into the region. In
1996, RCM purchased $4.3 million of United Mexican States Global thirty-year
bonds with an 11.5% coupon denominated in U.S. dollars, to increase our longer-
maturity positions and take advantage of the strong performance RCM expects will
continue in Mexico. All the Latin American positions during 1996 were
denominated in U.S. dollars.
8
<PAGE>
[ARTWORK OMITTED]
GROSS DOMESTIC PRODUCT
94 95 96
------------------------
5.2 (5.8) 6.3
CONSUMER PRICE INFLATION
94 95 96
------------------------
7.1 52.0 27.7
INTEREST RATES (3 MO.)
94 95 96
------------------------
20.4 48.0 26.5
9
<PAGE>
[ARTWORK OMITTED]
GROSS DOMESTIC PRODUCT
94 95 96
------------------------
3.7 1.1 1.6
CONSUMER PRICE INFLATION
94 95 96
------------------------
2.6 1.7 1.4
INTEREST RATES (10 YR)
94 95 96
------------------------
7.6 6.0 5.8
10
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
CASE STUDY
EUROPE
GERMANY
The developed markets in Europe - including Germany, The Netherlands, Belgium,
Switzerland and Finland --are increasingly important sectors for our fund. To
become more competitive in the global economy, Europe is moving toward a single
currency. Government policies are focused on reducing debt, inflation and
deficits without increasing the already high unemployment that exists in many
countries.
These policies are likely to contribute to growth in Europe that is slower than
in the United States and to stable interest rates -- an environment that is more
favorable for bonds than in the United States.
Much of RCM's focus within the developed foreign sector is on Germany, whose
currency and economy are dominant in Europe. However, as the deutsche mark and
all European currencies weaken in anticipation of monetary union, RCM does not
want the currency risk of investing directly in German bonds. Instead, RCM is
using U.S. dollar-denominated interest rate swaps as substitutes for German bond
holdings, which minimizes currency risk. The value of our $75 million five-year
swap with a 5.42% coupon, for example, rises or falls with the movement of
German interest rates, paralleling the performance of a German bond with a
similar maturity, but without the risk of the softening deutsche mark.
In 1997, RCM anticipates maintaining significant positions in the developed
markets of Europe, particularly Germany. RCM also expects to use interest rate
swaps to hedge risks from European currencies while positioning our shareholders
to benefit from the potentially higher returns available in European bonds.
11
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
PERFORMANCE
RCS had an outstanding year with a total return of 13.6% on market price and
11.7% on net asset value. RCS paid monthly dividends of $0.074 per share plus a
special dividend of $0.03 per share from income in December. Net asset value per
share increased from $11.64 to $11.87 for the year after distributions of $0.92
in income dividends. For comparison purposes, reference returns are provided
below for the major market sectors in which RCS is permitted to invest. On a
comparative basis, RCS had significantly better returns than the Salomon
Brothers Mortgage Security Index and the Salomon Brothers World Government Bond
Index. Emerging markets continued to benefit from international investor
interest. On average in 1996, the portfolio's risk exposure, as measured by the
fund's duration, was roughly one-half world bond, one-third United States and
the remainder in emerging markets.
FISCAL YEAR
REFERENCE RETURNS* 1996
- --------------------------------------------------------------------------------
RCS return on market price 13.6%
RCS return on net asset value 11.7%
Salomon Brothers Mortgage Security Index 5.5%
Salomon Brothers World Government Bond Index 7.3%
J.P. Morgan Emerging Market Bond Index 27.8%
- --------------------------------------------------------------------------------
* 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 BOND INDEX INCLUDES APPROXIMATELY $50 BILLION IN FACE VALUE
OUTSTANDING, DOLLAR-DENOMINATED, RESTRUCTURED SOVEREIGN BONDS.
LEVERAGE
RCS uses financial leverage as part of its income and duration management
strategies. 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 rate spread, (2) it increases
overall duration risk and (3) it adds sensitivity to rising short-term rates. As
leverage, these transactions are limited by regulations and, within those
limits, the fund segregated $188 million in high credit quality, liquid
investments -- an amount equivalent to these obligations.
Financed mortgage-backed securities, "mortgage dollar rolls," contributed
approximately $1.9 million in income in 1996 on average volume of $86.2 million.
The income contribution appears on the Statement of Operations as Fee Income. At
fiscal year-end, there were $69 million in mortgage dollar rolls compared to
$112 million at prior fiscal year-end.
RCS uses interest rate swaps for income and duration management. For income, RCS
averaged $208.3 million in notional interest rate swaps on developed foreign
markets. The fund's swaps allow it to benefit from stable or declining foreign
interest rates without taking currency exchange rate risk. The income
contribution
12
<PAGE>
FUND MANAGERS' DISCUSSION AND ANALYSIS
from swaps was $2.9 million and is included in Interest Income. At fiscal year-
end, there were $250 million notional interest rate swaps based on European and
Canadian interest rates compared to $200 million at prior fiscal year-end. These
are listed in detail on page 23. The 7-year $50 million Canadian position was
added in 1996. For income and duration management, RCS also had $70 million in
U.S. interest rate swaps that served to lock the cost of financing on the
financed mortgage positions as well as decrease overall portfolio duration by
approximately 0.2 years. There were no comparable U.S. interest rate swaps at
prior fiscal year-end.
To manage overall duration, RCS sells U.S. Treasury bonds on a forward
commitment basis. RCS averaged $83.8 million in bonds sold forward during the
year. At fiscal year-end, there were $116.5 million in similar positions, as
detailed on page 17.
COMPOSITION
During the year, the fund's assets were predominantly U.S. mortgage pass-
throughs, as listed on the Schedule of Investments in Securities and Net Assets.
Mortgage-backed securities permitted the fund to provide stable dividends and
maintain overall duration. Holdings included liquid U.S. Government or agency
issues consisting of FNMA, GNMA and FHLMC. Other U.S. positions include FHA
project loans and collateralized mortgage obligations having stable cash flows
with limited risk of early prepayment of principal.
DURATION
RCS describes overall portfolio exposures on the basis of duration. Duration is
a measure of sensitivity to interest rate changes: a duration of 1 year would
expect to have a price decline of 1% for a 1% rise in interest rates. The fund
averaged 4.8 years duration during the year. Duration at fiscal year-end was 4.9
years, which is roughly comparable to a bond with a 6-year maturity. This is up
slightly from the 4.6 years at prior fiscal year-end. All non-cash transactions
(e.g., interest rate swaps and U.S. Treasuries sold on a forward commitment
basis) are reflected in the fund's duration.
DISCOUNT
During the 1996 fiscal year, the stock of RCS traded at a price 13.7% below its
net asset value on average, compared to 11.4% in fiscal 1995. There are a number
of explanations for the discounts on RCS and other closed-end bond funds which
were discussed in the Special Focus section of the October 1996 Quarterly Report
(copies are available at 415-954-5400). None of the techniques employed by other
funds to "solve" the discount have had lasting results and, therefore, did not
achieve shareholder acceptance. RCS's achievements have been strongly based on
using the income and duration management tools available to it under the closed-
end format. RCS has actively used the closed-end toolbox to solve some of the
industry's tougher challenges: (1) stable dividend; (2) intermediate-term
duration including the effects of leverage; (3) moderate net asset value
volatility; and (4) eliminating currency risk.
13
<PAGE>
RCS INVESTMENT INCOME SUMMARY
FISCAL YEAR 1996 1996 1995
INVESTMENT INCOME PERCENTAGE ($MIL) ($MIL)
- --------------------------------------------------------------------------------
UNITED STATES
Mortgage Pass-Throughs 44.5% 14.7 16.2
Mortgage Projects/CMO's 20.3% 6.7 7.3
Mortgage Dollar Rolls 5.8% 1.9 4.4
Cash & Other 1.5% 0.5 0.1
- --------------------------------------------------------------------------------
Total United States 72.1% 23.8 28.0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEVELOPED FOREIGN
Germany 2.7% 0.9 0.4
The Netherlands 2.1% 0.7 0.1
Switzerland 1.2% 0.4 -
Finland 1.2% 0.4 -
Belgium 1.2% 0.4 -
Canada 0.3% 0.1 -
Spain - - 0.2
Italy - - 0.1
- --------------------------------------------------------------------------------
Total Developed Foreign 8.7% 2.9 0.8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EMERGING MARKETS
Brazil 7.0% 2.3 1.4
Argentina 6.4% 2.1 1.4
Mexico 5.5% 1.8 1.7
Other 0.3% 0.1 -
- --------------------------------------------------------------------------------
Total Emerging Markets 19.2% 6.3 4.5
- --------------------------------------------------------------------------------
RCS Totals 100.0% 33.0 33.3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14
<PAGE>
RCS PORTFOLIO SUMMARY
AVERAGE* DURATION* PERCENTAGE OF
JANUARY 31, 1997 DURATION CONTRIBUTION TOTAL DURATION
- --------------------------------------------------------------------------------
UNITED STATES
United States 1.2 0.5 10.2%
DEVELOPED FOREIGN
Germany 3.4 0.7 14.3%
Canada 4.7 0.6 12.2%
The Netherlands 3.4 0.5 10.2%
Switzerland 5.2 0.4 8.2%
Belgium 4.8 0.3 6.1%
Finland 3.4 0.2 4.1%
- --------------------------------------------------------------------------------
Total Developed Foreign - 2.7 55.1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EMERGING MARKETS
Brazil 8.4 0.5 10.2%
Argentina 7.4 0.5 10.2%
Mexico 7.3 0.5 10.2%
Panama 9.5 0.2 4.1%
- --------------------------------------------------------------------------------
Total Emerging Markets - 1.7 34.7%
- --------------------------------------------------------------------------------
RCS Totals - 4.9 100.0%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In years
15
<PAGE>
INVESTMENTS IN SECURITIES AND NET ASSETS
COUNTRY PRINCIPAL JANUARY 31, 1997
CURRENCY (000'S) DESCRIPTION VALUE (US$)
- --------------------------------------------------------------------------------
Investments In Debt Securities - 115.0%*
ARGENTINA -- 6.0%
USD Republic of Argentina
15,000 5.25% Step-Up Coupon, 03/31/23 $ 9,806,250
4,000 8.38%, 12/20/03 3,814,000
4,000 9.25%, 02/23/01 4,080,000
4,000 10.95%, 11/01/99 4,258,000
------------
Total Argentina 21,958,250
------------
BRAZIL -- 6.2%
USD 15,970 Federal Republic of Brazil C Bond, 4.50% with
3.50% Interest Capitalization, 04/15/14 12,416,598
10,000 Federal Republic of Brazil, 8.88%, 11/05/01 10,105,000
------------
Total Brazil 22,521,598
------------
MEXICO -- 6.2%
USD United Mexican States
5,000 6.25%, 12/31/19 3,762,500
6,000 9.75%, 02/06/01 6,324,000
7,000 11.38%, 09/15/16 7,616,000
4,326 11.50%, 05/15/26 4,700,199
------------
Total Mexico 22,402,699
------------
PANAMA -- 2.0%
USD 8,112 Panama PDI, 4.00% with 2.5625%
Interest Capitalization, 07/17/16 7,108,155
------------
UNITED STATES -- 94.6%
USD Mortgage-Backed Securities -- 75.6%
131,612 FHLMC 7.50%, 2025 - 2026 131,934,734
20,497 FNMA 7.50%, 2026 - 2027 20,519,934
9,649 GNMA 7.50%, 2006 - 2026 9,696,392
19,497 FHLMC 8.00%, 2023 - 2025 19,923,676
5,094 GNMA 8.00%, 2016 - 2022 5,273,912
739 GNMA 8.50%, 2016 - 2023 770,512
58,000 FNMA 7.50%, 2027 TBA 58,069,600
11,000 GNMA 7.50%, 2027 TBA 11,035,640
10,398 FHA Project Pool 56,7.43%, 11/01/22 10,558,083
5,979 FHA Project Pool 144 S, 7.43%, 06/01/24 5,851,400
------------
Total Mortgage-Backed Securities 273,633,883
------------
* Percentage of Net Assets
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
INVESTMENTS IN SECURITIES AND NET ASSETS
COUNTRY PRINCIPAL JANUARY 31, 1997
CURRENCY (000'S) DESCRIPTION VALUE (US$)
- --------------------------------------------------------------------------------
USD COLLATERALIZED MORTGAGE OBLIGATIONS -- 19.0%
DLJ Mortgage Acceptance Corp.
1,000 Series 1994-MF11, Class A2 8.10%, 06/18/04 $ 1,030,508
4,850 Series 1994-MF11, Class A3 8.10%, 06/18/04 4,944,727
Federal Home Loan Mortgage Corp.
17,932 Series 1667, Class PE 6.00%, 03/15/08 17,338,703
22,786 Series 1665, Class N 6.50%, 01/15/24 21,156,568
G E Capital Mortgage Services, Inc.
4,516 Series 1994-12, Class B1 6.00%, 04/25/09 4,141,824
22,000 Series 1994-10, Class A15 6.50%, 03/25/24 20,058,672
------------
Total Collateralized Mortgage Obligations 68,671,002
------------
TOTAL INVESTMENTS -- (COST $405,130,957) 416,295,587
------------
Payable for Investments Purchased -- (19.0%) (68,707,500)
Payable for Investments Sold on a Forward
Commitment Basis, net -- (32.8%)+ (118,827,220)
Other Assets Less Liabilities -- 36.8% 133,341,011
------------
NET ASSETS -- 100.0% $362,101,878
------------
------------
TERMS
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
TBA -- To Be Announced, Standard Settlement
USD -- United States Dollar
+ On a forward commitment basis, the Fund has agreed to sell the following U.S.
Treasury securities -- (Note 1):
PRINCIPAL
CURRENCY (000'S) DESCRIPTION VALUE (US$)
- --------------------------------------------------------------------------------
USD $ 37,100 U.S. Treasury Bonds 6.88%, 08/15/25 $ 37,121,518
USD 79,350 U.S. Treasury Bonds 7.13%, 02/15/23 81,491,657
-------- ------------
$116,450 (Cost $121,115,582) $118,613,175
-------- ------------
-------- ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1997
----------------
ASSETS:
Investments in securities, at value - (Note 1)
(cost $ 405,130,957) $416,295,587
Cash equivalents - (Note 1) 4,543,369
Receivable for investments sold 121,115,601
Receivable on interest rate swap contracts, net - (Note 1) 4,489,175
Interest receivable 3,924,158
------------
Total Assets 550,367,890
------------
------------
LIABILITIES:
Payable for investments purchased 68,707,500
Investments sold on a forward commitment basis, net - (Note 1) 118,827,220
Deferred fee income 52,695
Payable for:
Investment management fees - (Note 2) 287,262
Professional fees 146,861
Printing and postage expenses 134,718
Other expenses 56,304
Custodial fees 31,667
Administration fees - (Note 2) 21,785
------------
Total Liabilities 188,266,012
------------
NET ASSETS $362,101,878
------------
NET ASSETS CONSIST OF:
Paid-in capital - (Note 3) $380,711,199
Distributions in excess of net investment income (1,142,083)
Accumulated net realized loss on investments, foreign currency
transactions, interest rate swaps and forward commitments (35,584,813)
Net unrealized appreciation on investments, interest rate
swaps and forward commitments 18,117,575
------------
NET ASSETS $362,101,878
------------
------------
NET ASSET VALUE PER SHARE
(30,515,800 shares outstanding) $ 11.87
------------
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED
JANUARY 31, 1997
----------------
INVESTMENT INCOME:
INCOME:
Interest $ 31,150,943
Fee income - (Note 1) 1,862,146
------------
Total investment income 33,013,089
------------
EXPENSES:
Investment management fees - (Note 2) 3,315,075
Administration fees - (Note 2) 300,939
Printing and postage expenses 236,875
Custodial fees 191,018
Professional fees 153,000
Insurance expense 41,500
Directors' fees and expenses 40,000
Registration and filing fees 33,370
Transfer agent fees 19,000
Other expenses 17,000
------------
Total expenses 4,347,777
------------
Net investment income 28,665,312
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments, interest rate swaps
and forward commitments 7,367,886
Net change in unrealized depreciation on investments,
interest rate swaps and forward commitments (1,204,734)
------------
Net realized and unrealized gain 6,163,152
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 34,828,464
------------
------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JANUARY 31, 1997 JANUARY 31, 1996
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income $28,665,312 $29,170,844
Net realized gain (loss) on:
Investments, interest rate swaps, and forward commitments 7,367,886 (16,950,280)
Foreign currency transactions - 2,330,131
Net change in unrealized appreciation (depreciation)
on investments, foreign currency transactions,
interest rate swaps and forward commitments (1,204,734) 36,667,874
------------ ------------
Net increase in net assets resulting from operations 34,828,464 51,218,569
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income - (Note 1) (28,013,272) (27,098,030)
------------ ------------
Net increase in net assets 6,815,192 24,120,539
NET ASSETS:
Beginning of year 355,286,686 331,166,147
------------ ------------
End of year * $362,101,878 $355,286,686
------------ ------------
------------ ------------
* Include distributions in excess of net investment income $ (1,142,083) $ (1,795,396)
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<PAGE>
STATEMENT OF CASH FLOWS
YEAR ENDED
JANUARY 31, 1997
----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income received $ 26,240,443
Operating expenses paid (4,230,614)
Sale of short-term portfolio investments, net 96,417
Purchase of long-term portfolio investments (825,426,845)
Proceeds from disposition of long-term portfolio investments 831,525,287
-------------
Net cash provided by operating activities 28,204,688
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payment for reverse repurchase agreement (24,727)
Net proceeds from dollar roll transactions 1,820,263
Dividends paid from net investment income (28,013,272)
-------------
Net cash used in financing activities (26,217,736)
-------------
Net increase in cash 1,986,952
Cash and equivalents at beginning of year 2,556,417
-------------
Cash and equivalents at end of year $ 4,543,369
-------------
RECONCILIATION OF RESULTS FROM OPERATIONS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 34,828,464
Decrease in investments and foreign currency 45,681,640
Net realized gain on investments and forward commitments (7,367,886)
Net unrealized depreciation on investments 8,072,045
Change in:
Receivable for investments sold (54,090,992)
Net unrealized appreciation on interest rate swaps (3,513,270)
Interest receivable (427,944)
Payable for investments purchased (64,586,091)
Payable for investments sold on a forward commitment basis 69,494,852
Accrued expenses 113,870
-------------
Net cash provided by operating activities $ 28,204,688
-------------
-------------
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 or 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, 1997, there were no open Forwards.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 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, 1997, there were $118,613,175 of forward sale
commitments outstanding and a payable for forward commitments closed but
unsettled of $214,045.
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 $1,862,146. At January 31, 1997, there were $68,707,500 in
dollar roll commitments on liquid mortgage pass-throughs outstanding.
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, 1997, the Fund had the following outstanding interest rate
swap agreements denominated in U.S. dollars:
<TABLE>
<CAPTION>
COUNTER-
PARTY
NOTIONAL CREDIT SWAP UNREALIZED
AMOUNT RATING TERMINATION MATURITY RATE RATE APPRECIATION
(000s) (UNAUDITED) COUNTRY DATE DATE RECEIVED PAID (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 75,000 AA Germany 1/4/99 1/3/02 5.42% 3.45%+ $ 1,628,175
25,000 AAA The Netherlands 1/4/99 1/3/02 5.38% 3.37%+ 596,800
25,000 A The Netherlands 1/4/99 1/3/02 5.38% 3.37%+ 551,900
25,000 A Belgium 1/4/99 1/3/04 6.05% 3.50%+ 820,000
25,000 AAA Switzerland 1/4/99 1/3/04 4.08% 1.95%+ 814,650
25,000 A Finland 1/4/99 1/3/02 5.82% 3.75%+ 595,500
50,000 AAA Canada 1/4/99 1/3/04 6.05% 3.60%+ (727,850)
70,000 AA United States 3/1/98 3/1/98 5.50%* 5.49% 210,000
- ----------------------------------------------------------------------------------------------------------------------------------
$ 320,000 $ 4,489,175
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Floating rate based on 1-month LIBOR (London Interbank Offered Rate).
+ Floating rate based on country's 6-month LIBOR.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, 1997, the Fund
had no open reverse repurchase agreements outstanding.
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 $188,048,525 in high credit quality, liquid
investments against outstanding obligations, resulting in no net leverage at
January 31, 1997.
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, 1997, the Fund had capital loss
carryovers of $16,648,019 and $18,629,658 which will expire on January 31, 2003
and January 31, 2004, respectively.
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
On June 14, 1996, all of the outstanding general and limited partnership
interests in the Fund's investment manager, RCM Capital Management, a California
Limited Partnership ("Old RCM"), were acquired by RCM Capital Management,
L.L.C., ("RCM") a wholly owned subsidiary of Dresdner Bank AG, an international
banking organization headquartered in Frankfurt, Germany. Because the
transaction may have constituted an "assignment" of the Fund's management
agreement with Old RCM under the Investment Company Act of 1940, and thus a
termination of such management agreement, the Fund sought and obtained approval
of a new management agreement from the Fund's Board of Directors (on March 15,
1996) and shareholders (on May 28, 1996). The terms of the new management
agreement are substantially the same as those of the previous management
agreement.
RCM 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. No principal, officer or employee of the investment manager or any
affiliate thereof will receive any compensation
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
3. CAPITAL SHARES
At January 31, 1997, there were 500,000,000 shares of common stock authorized at
$0.00001 par value and 30,515,800 shares outstanding.
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, dollar rolls, and
forward commitments for the year ended January 31, 1997 aggregated $47,517,608
and $52,433,662, 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, 1997, aggregated $205,785,181 and
$200,264,610, respectively. At January 31, 1997, the aggregate cost of
investments for federal income tax purposes was $409,122,373. Gross unrealized
appreciation and depreciation of investments aggregated $9,766,235 and
$2,593,021, respectively, resulting in net unrealized appreciation of $7,173,214
at January 31, 1997.
5. FINANCIAL HIGHLIGHTS
Supplementary data for a share outstanding are presented for the periods
indicated:
<TABLE>
<CAPTION>
FEBRUARY 24, 1994*
YEAR ENDED YEAR ENDED THROUGH
PER SHARE OPERATING PERFORMANCE: JANUARY 31, 1997 JANUARY 31, 1996 JANUARY 31, 1995**
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.64 $ 10.85 $ 12.50
-------- -------- --------
Net investment income 0.94 0.96 0.83
Net realized and unrealized gain (loss) 0.21 0.72 (1.71)
-------- -------- --------
Net increase (decrease) in net assets resulting
from operations 1.15 1.68 (0.88)
Distributions:
Net investment income (0.92) (0.89) (0.75)
Offering costs - - (0.02)
-------- -------- --------
Net asset value, end of period $ 11.87 $ 11.64 $ 10.85
-------- -------- --------
-------- -------- --------
Market price, end of period $ 10.625 $ 10.25 $ 9.625
-------- -------- --------
-------- -------- --------
Total return based on market price 13.57% 16.21% (17.21)%+
Total return based on net asset value 11.72% 17.07% (6.68)%+
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $362,102 $355,287 $331,166
Ratio of expenses to average net assets 1.25% 1.20% 1.15%++
Ratio of net investment income to average
net assets 8.21% 8.50% 7.79%++
Portfolio turnover 59% 96% 158%+
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of investment operations.
** Audited by prior auditors.
+ Not annualized.
++ Annualized. Ratios include certain ordinary operating expense waivers.
Without such waivers, the ratio of expenses to average net assets would
have been 1.24% and the ratio of net investment income to average net
- - assets would have been 7.71%.
25
<PAGE>
DIVIDEND REINVESTMENT PLAN (UNAUDITED)
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.
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, 1997, and the
related statement of operations and statement of cash flows for the year then
ended, the statements of changes in net assets and financial highlights for each
of the two years in the period 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 audits. The 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 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, 1997, by
correspondence with the 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 provides 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, 1997, the results of
its operations and cash flows for the year then ended, the changes in its net
assets and financial highlights for each of the two years in the period then
ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 20, 1997
27
<PAGE>
SHAREHOLDER MEETING RESULTS (UNAUDITED)
The Annual Meeting of Shareholders of RCM Strategic Global Government Fund, Inc.
was held on Tuesday, May 28, 1996. The number of shares issued, outstanding and
eligible to vote as of record date (May 14, 1996) was 30,515,678. Present were
28,193,570 shares represented by 201 proxies or 92.39% of the eligible voting
shares tabulated. The matters voted upon by Shareholders and the resulting votes
for each matter are presented below:
1. A new investment management agreement between RCM Capital Management,
L.L.C. and the Fund, effective upon the closing date of the transaction
involving Dresdner Bank AG and RCM Capital Management, a California Limited
Partnership, was approved. The votes were cast: For (27,181,629), Against
(369,084), Abstain (638,768), Broker Non-Vote (4,089). 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. Gary W. Schreyer and James M. Whitaker were re-elected to the Board of
Directors for a term to expire in 1999 or until their successors shall be
duly elected and qualified. The votes for Gary W. Schreyer were cast: For
(27,707,443), Withheld (482,038), Broker Non-Vote (4,089). The votes for
James M. Whitaker were cast: For (27,705,932), Withheld (483,549), Broker
Non-Vote (4,089).
3. The selection by the Board of Directors of Coopers & Lybrand L.L.P. as
independent public accountants for the fiscal year ending January 31, 1997
was approved. The votes were cast: For (27,689,789), Against (138,505),
Abstain (361,187), Broker Non-Vote (4,089).
28
<PAGE>
CORPORATE INFORMATION
DIRECTORS INVESTMENT MANAGER
Gary W. Schreyer, CHAIRMAN RCM Capital Management, L.L.C.
William A. Hasler Four Embarcadero Center
Francis E. Lundy San Francisco, California 94111
James M. Whitaker
AUDIT COMMITTEE PORTFOLIO MANAGERS
William A. Hasler Eamonn F. Dolan
Francis E. Lundy Stephen Kim
James M. Whitaker Jack L. Bernard
Mark E. Raaberg
NOMINATING COMMITTEE ADMINISTRATOR,CUSTODIAN
Gary W. Schreyer AND TRANSFER AGENT
William A. Hasler State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 426-5523
OFFICERS INDEPENDENT AUDITORS
Richard W. Ingram Coopers & Lybrand L.L.P.
PRESIDENT, CHIEF FINANCIAL OFFICER One Post Office Square
AND ASSISTANT TREASURER Boston, Massachusetts 02109
John E. Pelletier
VICE PRESIDENT AND ASSISTANT SECRETARY COUNSEL
Elizabeth A. Bachman Ropes & Gray
VICE PRESIDENT AND ASSISTANT SECRETARY One International Place
Caroline M. Hirst Boston, Massachusetts 02110-2624
SECRETARY AND TREASURER
At January 31, 1997, RCM Strategic Global Government Fund, Inc. had 20 employees
and approximately 20,000 beneficial holders of its securities.
DESIGNED BY MARK SELFE DESIGN. PRODUCED AND PRINTED BY MERRILL CORPORATION.
<PAGE>
RCM STRATEGIC GLOBAL
GOVERNMENT FUND, INC.
INVESTMENT MANAGER:
RCM CAPITAL MANAGEMENT, L.L.C.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
