<PAGE>
RCM
STRATEGIC
GLOBAL
GOVERNMENT
FUND
1998
ANNUAL
REPORT
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
FUND HIGHLIGHTS
- ----------------
ANNUAL FINANCIAL INFORMATION
RCM Strategic Global Government Fund, Inc. ("RCS" or the "Fund") is a
closed-end, global bond fund. The primary objective of RCS 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 seeks to
maintain volatility in the net asset value of the shares of the Fund comparable
to that of high-quality, intermediate-term U.S. debt securities. In addition,
the Fund seeks capital appreciation to the extent consistent with its other
investment objectives.
The Fund invests at least 65% of its assets in government securities of the
United States and other countries, under normal market conditions. The
securities in the investment portfolio currently have an average credit-quality
rating of AA and have effective maturities generally between 3 and 10 years.
<TABLE>
<CAPTION>
FISCAL YEAR* 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total investment income $ 32,730 $ 34,578 $ 33,013
Total investment income per share 1.07 1.13 1.08
Net investment income 28,094 30,054 28,665
Net investment income per share 0.92 0.98 0.94
Net realized and unrealized gain(loss) (13,362) 1,421 6,163
Net realized and unrealized gain(loss) per share (0.43) 0.05 0.21
Net asset value at end of year 11.46 11.91 11.87
Market price at end of year 9.88 11.16 10.63
Total return on net asset value 5.32% 9.66% 11.72%
Total return on market value (3.11)% 14.76% 13.57%
Dividend from net investment income $ 0.94 $ 0.99 $ 0.92
Effective dividend yield** 9.51% 8.87% 8.65%
</TABLE>
* IN THOUSANDS (000'S) EXCEPT PER SHARE DATA.
** DIVIDEND DIVIDED BY YEAR-END MARKET PRICE.
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
CHAIRMAN'S LETTER TO SHAREHOLDERS
- -----------------------------------
PHOTO
March 22, 1999
Dear Shareholders:
For fiscal 1998, the RCM Strategic Global Government Fund (NYSE Symbol: RCS)
achieved its primary investment objective to provide shareholders with higher
income than that generated by high-quality, intermediate-term U.S. debt
securities. Net investment income for 1998 was $28.1 million ($0.92 per share)
including a special dividend of $0.048 per share paid in addition to the regular
monthly dividends of $0.074 per share. Net investment income in the prior year
was $30.1 million ($0.98 per share), higher as a result of more favorable
interest rates in Europe. Total dividends distributed during 1998 represented
7.9% of the portfolio's net asset value and provided shareholders with an
effective dividend yield of 8.4%, based upon RCS' stock price at the end of the
prior year. RCS' net asset value decreased $0.45 per share largely impacted by a
significant increase in the yields of emerging market debt securities. The
market price of the Fund's shares declined $1.28 per share as volatility in
emerging market securities prompted a decline in market liquidity for closed-end
funds investing in these markets. The Fund had total returns for the fiscal year
on net asset value and market price of 5.3% and -3.1%, respectively, based on
the sum of dividends paid and change in principal.
INVESTMENT PORTFOLIO CHARACTERISTICS
The average credit quality of the investment portfolio is rated AA.
Approximately 80% of the debt securities held are rated AAA by either, or both,
of the major credit rating agencies. Only 7% of the debt securities are rated
BB, which is considered below investment grade. The largest single investment is
a position of over $200 million in Federal National Mortgage Association
("FNMA") 7% mortgage pass-through securities.
As measured by the duration of the Fund's investments, the percentage
contribution of each country or region to total portfolio variability, after
including the impact of swap contracts, is approximately as follows: United
States 28%, Canada 4%, Europe 30%, New Zealand 10% and Emerging Markets 28%.
Total portfolio duration and the average effective maturity were both 5.3 years
at fiscal year-end. RCS' securities at year-end were all denominated in U.S.
dollars.
1
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
CHAIRMAN'S LETTER TO SHAREHOLDERS
- -------------------------------------------------
The Fund continues to derive the majority of its income from investments in the
United States. Approximately two thirds of total investment income is earned
from mortgage-backed securities, collateralized mortgage obligations and money
market investments while emerging and developed foreign securities contributed
10% and 23% of total investment income, respectively.
COMPARATIVE INVESTMENT PERFORMANCE
RCS' -3.1% return on market price and 5.3% return on net asset value for the
fiscal year compared to returns of 14.8% on market price and 9.7% on net asset
value last year. Global investors reappraisal of the value of emerging market
debt subsequent to Russia's default was the principal cause of RCS' lower
capital performance and higher relative volatility in net asset value. The
comparative fiscal 1998 benchmark returns, representing the average market
performance for the major sectors in which the Fund invests, are 6.7% for the
Salomon Brothers Mortgage Security Index, 10.7% for the Salomon Brothers World
Government Bond Index (Hedged) and -15.8% for the J.P. Morgan Emerging Market
Bond Index. Inside, you will find more discussions that describe the investment
strategies employed in response to last year's economic and market conditions.
<TABLE>
<CAPTION>
FISCAL
REFERENCE RETURNS* 1998
- ---------------------------------------------------------------------------------------------
<S> <C>
RCS return on market price** -3.1%
RCS return on net asset value** 5.3%
Salomon Brothers Mortgage Security Index 6.7%
Salomon Brothers World Government Bond Index (Hedged) 10.7%
J.P. Morgan Emerging Market Bond Index -15.8%
</TABLE>
* 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 (HEDGED) IS A MARKET CAPITALIZATION BOND
INDEX THAT INCLUDES LOCAL GOVERNMENT BOND MARKET RETURNS HEDGED INTO U.S.
DOLLAR RETURNS OF TWELVE COUNTRIES THAT ARE FREELY OPEN TO FOREIGN INVESTORS.
THE J.P. MORGAN EMERGING MARKET BOND INDEX INCLUDES APPROXIMATELY $110
BILLION IN FACE VALUE OUTSTANDING, DOLLAR-DENOMINATED, RESTRUCTURED SOVEREIGN
BONDS.
** RCS RETURNS ARE CALCULATED ASSUMING REINVESTMENT OF DIVIDENDS AT THE ACTUAL
AVERAGE MARKET PRICE OBTAINED BY THE FUND'S TRANSFER AGENT.
2
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
CHAIRMAN'S LETTER TO SHAREHOLDERS
- -------------------------------------------------
STOCK PRICE DISCOUNT TO NET ASSET VALUE
The average percentage stock price discount to net asset value increased from
8.3% in fiscal 1997 to 11.4% in fiscal 1998. The differences between the value
per share of the Fund's investments and RCS' stock price at fiscal year-end 1998
and 1997 were $1.57 from $0.75, respectively. Although it is not possible to
determine the causes of investor behavior, it appears that anxieties regarding
emerging markets adversely impacted RCS' stock price in relation to the better
performance in the value of the Fund's investments. Dresdner RCM Global
Investors Inc. ("Dresdner RCM"), the investment manager of RCS, expects less
disruption in global bond markets this year which, hopefully, will benefit RCS'
stock price.
YEAR 2000
We would also like to take this opportunity to assure shareholders that Dresdner
RCM has informed your Board of Directors that they have committed considerable
effort and resources to avoid difficulties related to the so-called "Y2K" effect
associated with the year 2000. Please refer to page 6 of the Manager Discussion
and Analysis for more information on this important topic.
I encourage you to visit RCS' Website, www.RCSfund.com, for updated information
regarding RCS. The Board of Directors, Officers and investment manager
appreciate your support and investment in the stock of RCS.
Sincerely,
/s/ GARY SCHREYER
Gary Schreyer
CHAIRMAN OF THE BOARD AND PRESIDENT
3
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
MANAGER DISCUSSION AND ANALYSIS
- ---------------------------------
REGIONAL PORTFOLIO COMPOSITION. RCS held broad diversification across regions
and bond market industries in 1998. Average allocations to key regions around
the world were North America (United States and Canada, 31.2% of total), Europe
(33.9%), Oceania (New Zealand 2.4%) and Emerging Markets (32.5%) when measured
on the basis of interest rate risk or "duration". At fiscal year-end, the
allocations were North America (32.1%), Europe (30.2%), Oceania (9.4%) and
Emerging Markets (28.3%).
U.S. investments were predominantly mortgage "pass-through" securities.
Pass-throughs provide substantial yield above other U.S. securities and have
principal and interest guaranteed by the U.S. government or government-sponsored
agencies. The total return on pass-throughs is sensitive to prepayment of the
underlying mortgage loans, and, as a result, the effective maturities of these
investments will be shorter than stated maturities. Lower U.S. interest rates
prompted faster prepayments in the portfolio's holdings of pass-throughs with
coupons of 7.5% and 8.0%. Reinvestment of cash flow and new TBA positions were
made in coupons of 6.5% and 7.0% that have proportionately lower prepayment
risk. To diversify U.S. holdings and take advantage of relative cheapness
opportunities, RCS held new positions in investment-grade corporates and
commercial mortgage-backed securities. The average credit rating for these new
assets was A+. Both of these asset classes should make significant contributions
to the realization of 1999 dividend goals. Within the North American exposure,
the investment mix was 61.7% mortgage pass-throughs, 19.1% investment-grade
corporates, 12.8% commercial mortgage-backed securities and 6.4% collateralized
mortgage obligations measured on the basis of interest rate risk sensitivity.
Exposure to Europe and Oceania was composed of U.S dollar positions held through
interest rate swaps, a strategy employed by RCS since 1995. Swaps are often a
more efficient way to effectively hold foreign bonds without taking currency
risk, and hence help RCS achieve its goals. They allow RCS to benefit from
stable or declining foreign interest rates while avoiding foreign currency
exchange risk since all interest payments and any future gains or losses are in
U.S. dollars. In the period, these positions contributed 7.7% of investment
income. Positions at year-end included Switzerland and New Zealand, as detailed
on page 11, to take advantage of yield spread opportunities in these two
countries. Prior European swap positions matured during 1998. With less
favorable yield opportunities in Europe, its past contribution to income was
shifted to the United States in the new corporate and commercial mortgage
positions.
RCS' emerging market investments historically have been predominantly in Latin
American markets: Argentina, Mexico and Panama. In early 1999, Brazil's currency
devalued. Prior to that devaluation,
4
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
MANAGER DISCUSSION AND ANALYSIS
- ----------------------------------------------
the overall exposure to Latin America was diversified by reducing Latin America
exposure in favor of Poland, Korea and the Philippines. These three new
countries have best weathered the volatility of 1998 brought on by Russia's
default. As part of the overall allocation in emerging markets, RCS has $20
million in notional swap positions indexed to the J.P. Morgan Emerging Market
Bond Index Plus ("EMBI+") included in the swap schedule on page 11. The EMBI+ is
an index of actively traded U.S. dollar-denominated debt instruments from the
following thirteen emerging countries (in order of market capitalization):
Brazil, Argentina, Mexico, Russia, Venezuela, Ecuador, Poland, Nigeria,
Bulgaria, The Philippines, Peru, Morocco and Panama. The EMBI+ swaps allow RCS
to hold a geographically diversified basket of exposures to emerging market
positions. The overall exposure makes important contributions to income.
FINANCIAL LEVERAGE is an integral part of Dresdner RCM's income and duration
management strategies for RCS. 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 interest rates. As leverage, these transactions are limited by
regulations. To manage overall duration, RCS sells U.S. Treasury bonds on a
forward commitment basis. RCS averaged $59 million in bonds sold forward during
the year. At year-end, there was $73.7 million in similar positions, as detailed
on page 11, compared to $90.8 million at prior fiscal year-end.
Financed mortgage-backed securities, "mortgage dollar rolls," contributed $2.8
million in income in 1998 on average volume of $221 million. The income
contribution appears on the Statement of Operations as Fee Income. At
period-end, there was $303 million in mortgage dollar rolls compared to $191
million at prior fiscal year-end. New positions totaling $109 million in U.S.
investment-grade corporates and commercial mortgage-backed securities were
financed by short-term borrowing through repurchase agreements on mortgage
pass-throughs. To limit the effect of leverage, the Fund has segregated $346.6
million in high credit quality, liquid investments.
Since 1994, RCS has used interest rate swaps for managing income and duration.
For income, RCS averaged $321 million in notional interest rate swaps on
Canadian, European and New Zealand interest rates and $20 million in notional
amount on emerging markets. The income contribution from swaps was $3.8 million
and is included in the Fund's interest income. At period-end, there were
5
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
MANAGER DISCUSSION AND ANALYSIS
- ----------------------------------------------
$145 million notional interest rate swaps based on European and emerging market
interest rates. In 1998, RCS sold $164 million in notional U.S. interest rate
swaps that served to lock the cost of financing on mortgage dollar roll
positions.
DISCOUNT. During 1998, RCS' stock traded at a price 11.4% below its net asset
value on average, compared to 8.3% in fiscal 1997. Dresdner RCM is responsible
for the net asset value performance of the Fund. The stock price of RCS is
affected by factors outside of the direct control of Dresdner RCM, including the
phases of the interest rate cycle, the stock market in general, and specific
supply and demand characteristics of RCS. The wider discount in 1998 appears to
be a reaction to emerging market volatility in the third quarter. In achieving
the goals of RCS, Dresdner RCM uses the income and duration management tools
available to it under the closed-end format.
MARKET OUTLOOK. The Asian crisis and its effect on the global economy began in
the summer of 1997, reaching a peak in 1998. Looking to 1999, Dresdner RCM
anticipates the global economy will slow but will be positioned for future
recovery. Emerging markets are likely to experience better liquidity and renewed
investor interest. Inflation should remain muted by historical standards.
Interest rates in the United States should be relatively stable which is a
favorable environment for the high-quality, higher yielding securities in RCS.
Dresdner RCM will continue to position the Fund globally towards achievement of
its goals.
YEAR 2000. Beginning with a study initiated in 1996 that detailed the need to
replace the core portfolio accounting system with new Y2K-compliant technology,
Dresdner RCM has made Year 2000 readiness a priority.
A three-step process has been established to address Y2K dating issues. The
first objective is to make critical in-house applications compliant by the end
of the first quarter of 1999, either through upgrading or the acquisition of new
technology. These applications include portfolio accounting and trade support.
The second objective is to ensure critical vendor systems (including Custody and
Transfer Agent) are Y2K-compliant by mid-1999. The third objective is to perform
all other upgrades necessary to make the company's internal environment fully
compliant. As a result, no disruption to client services is anticipated before,
during or after the turn of the century.
However, while Dresdner RCM is taking all precautions as an organization, Y2K
problems could adversely affect countries and companies in which the Fund
invests and might impact the Fund's investment return.
6
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
RCS INVESTMENT INCOME SUMMARY
- ---------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1998 1997 1997
PERCENTAGE (000'S) PERCENTAGE (000'S)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES
Mortgage Pass-Throughs 49.6% $16,244 41.0% $ 14,197
Mortgage Dollar Rolls 8.4% 2,758 4.4% 1,529
Mortgage Projects/CMO's 6.2% 2,036 18.8% 6,485
Cash & Other 1.8% 571 1.7% 576
Corporate Bonds 0.8% 274 -- --
- ---------------------------------------------------------------------------------------------------
Total United States 66.8% 21,883 65.9% 22,787
- ---------------------------------------------------------------------------------------------------
DEVELOPED FOREIGN
Canada 2.2% 728 4.4% 1,519
Germany 2.1% 690 4.1% 1,401
The Netherlands 1.8% 579 2.8% 960
Switzerland 1.4% 453 0.6% 205
Belgium 1.1% 362 1.8% 626
Finland 0.9% 284 1.4% 494
New Zealand 0.4% 125 -- --
- ---------------------------------------------------------------------------------------------------
Total Developed Foreign 9.9% 3,221 15.1% 5,205
- ---------------------------------------------------------------------------------------------------
EMERGING MARKETS
Argentina 6.4% 2,109 6.3% 2,196
Mexico 5.7% 1,881 6.1% 2,095
Panama 4.6% 1,500 3.2% 1,112
Poland 2.1% 674 -- --
Korea 1.9% 630 -- --
Brazil 0.5% 161 2.9% 1,015
Other 2.1% 671 0.5% 168
- ---------------------------------------------------------------------------------------------------
Total Emerging Markets 23.3% 7,626 19.0% 6,586
- ---------------------------------------------------------------------------------------------------
Total RCS Investment Income 100.0% $32,730 100.0% $ 34,578
- ---------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
- -------------------------
JANUARY 31, 1999
<TABLE>
<CAPTION>
MARKET
COUNTRY/ PRINCIPAL VALUE(US$)
CURRENCY (000's) DESCRIPTION (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEBT SECURITIES - 207.0%*
ARGENTINA -- 4.3%
USD Republic of Argentina
5,000 5.75%, Step-Up Coupon, 03/31/23 $ 3,431,500
4,000 8.38%, 12/20/03 3,504,000
5,000 9.75%, 09/19/27 4,112,500
4,000 10.95%, 11/01/99 4,000,000
-------------
Total Argentina 15,048,000
-------------
CANADA -- 1.6%
USD Quebec Province
5,000 7.13%, 02/09/24 5,502,500
-------------
KOREA -- 3.0%
USD Korea Electric and Power
11,500 7.00%, 02/01/27 10,422,450
-------------
MEXICO -- 5.1%
USD United Mexican States
6,000 9.75%, 02/06/01 6,096,000
7,000 11.38%, 09/15/16 7,210,000
4,326 11.50%, 05/15/26 4,563,930
-------------
Total Mexico 17,869,930
-------------
PANAMA -- 3.4%
USD Republic of Panama
4,000 7.88%, 02/13/02, 144A** 3,800,000
9,300 8.88%, 09/30/27 8,189,580
-------------
Total Panama 11,989,580
-------------
PHILIPPINES -- 1.5%
USD Republic of Philippines
5,000 9.88%, 01/15/19 5,137,500
-------------
POLAND -- 3.7%
USD Republic of Poland
14,000 5.00%, Step-Up Coupon, 10/27/14 13,055,000
-------------
UNITED STATES -- 184.4%
USD MORTGAGE-BACKED SECURITIES -- 154.1%
31,935 FNMA 6.50%, 2024 - 2029 32,238,457
33,785 GNMA 7.00%, 2024 - 2028 34,640,072
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
- -----------------------------------
JANUARY 31, 1999
<TABLE>
<CAPTION>
MARKET
COUNTRY/ PRINCIPAL VALUE(US$)
CURRENCY (000's) DESCRIPTION (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
USD MORTGAGED-BACKED SECURITIES - (CONTINUED)
5,627 FNMA 7.00%, 2027 - 2028 $ 5,752,105
44,676 GNMA 7.50%, 2006 - 2028 46,174,535
18,074 FNMA 7.50%, 2026 - 2028 18,614,841
72,639 FHLMC 7.50%, 2025 - 2026 74,814,349
3,175 GNMA 8.00%, 2016 - 2022 3,330,114
3,702 FHLMC 8.00%, 2024 3,842,461
384 GNMA 8.50%, 2016 - 2023 408,210
97,000 FNMA 6.50%, 2029 TBA 97,921,500
201,000 FNMA 7.00%, 2029 TBA 205,486,320
9,482 FHA Project Pool 56, 7.43%, 11/01/22 9,511,363
5,811 FHA Project Pool 144 S, 7.43%, 06/01/24 5,857,831
-------------
Total Mortgage-Backed Securities 538,592,158
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 17.8%
DLJ Mortgage Acceptance Corp.
1,000 Series 1994-MF11, Class A2 8.10%, 06/18/04 1,063,690
4,850 Series 1994-MF11, Class A3 8.10%, 06/18/04 5,122,037
FHLMC
17,932 Series 1667, Class PE 6.00%, 03/15/08 18,088,905
G E Capital Mortgage Services, Inc.
3,951 Series 1994-12, Class B1 6.00%, 04/25/09 3,776,698
Merrill Lynch Mortgage Investors, Inc.
3,295 Series 1998-C3, Class A2 5.87%, 12/15/30 3,294,871
Mortgage Capital Funding, Inc.
15,000 Series 1998-MC3, Class A2 6.34%, 11/18/31 15,427,734
5,000 Series 1998-MC3, Class B 6.54%, 11/18/31 5,120,313
10,000 Series 1998-MC2, Class C 6.73%, 06/18/08 10,230,859
-------------
Total Collateralized Mortgage Obligations 62,125,107
-------------
CORPORATE BONDS -- 12.5%
7,000 Associates Corp. NA 5.75%, 11/01/03 7,112,350
3,000 BankAmerica Corp. 7.13%, 03/01/09 3,299,970
7,500 CSX Corp. 6.25%, 10/15/08 7,690,950
7,500 Coca-Cola Enterprises Inc. 5.75%, 11/01/08 7,543,725
2,500 Ford Motor Company 6.63%, 10/01/28 2,608,200
5,000 General Motors Accept. Corp. 5.75%, 11/10/03 5,063,850
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
- -----------------------------------
JANUARY 31, 1999
<TABLE>
<CAPTION>
MARKET
COUNTRY/ PRINCIPAL VALUE(US$)
CURRENCY (000's) DESCRIPTION (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
USD CORPORATE BONDS - (CONTINUED)
5,000 MCI Worldcom Inc. 6.25%, 08/15/03 $ 5,174,850
5,000 Sprint Capital Corp. 6.88%, 11/15/28 5,334,500
-------------
Total Corporate Bonds 43,828,395
-------------
TOTAL DEBT SECURITIES -- (COST $717,167,561) 723,570,620
-------------
SHORT-TERM INVESTMENT -- 3.0%
UNITED STATES -- 3.0%
USD MONEY MARKET FUND -- 3.0% (NOTE 1)
10,548,513 SSgA U.S. Government Money Market Fund 10,548,513
-------------
TOTAL SHORT-TERM INVESTMENT -- (COST $10,548,513) 10,548,513
-------------
TOTAL INVESTMENTS -- 210.0% (COST $727,716,074) 734,119,133
-------------
Payable for Investments Purchased -- (86.5)% (302,284,063 )
Payable for Reverse Repurchase Agreements -- (23.2)% (81,127,000 )
Payable for Investment Sold on a Forward Commitment Basis, net -- (23.2)%+ (81,014,228 )
Other Assets Less Liabilities -- 22.9%++ 79,903,622
-------------
NET ASSETS -- 100.0% $349,597,464
-------------
-------------
</TABLE>
TERMS
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
TBA -- To Be Announced, Standard Settlement
USD -- United States Dollar
* PERCENTAGE OF NET ASSETS
** SECURITY PURCHASED PURSUANT TO RULE 144A OF THE SECURITIES ACT OF 1933 AND
MAY BE RESOLD ONLY TO QUALIFIED INSTITUTIONAL BUYERS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
- -----------------------------------
JANUARY 31, 1999
+ On a forward commitment basis, the Fund has agreed to sell the following U.S.
Treasury securities:
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE(US$)
CURRENCY (000's) DESCRIPTION (NOTE 1)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
USD $ 73,720 U.S. Treasury Bonds 6.00%, 02/15/26 $80,861,994
--------- ------------
$ 73,720 (Proceeds $79,198,194) $80,861,994
--------- ------------
--------- ------------
</TABLE>
- --------------------------------------------------------------------------------
++ As of January 31, 1999, the Fund had the following outstanding interest rate
swap agreements denominated in U.S. dollars - (Note 1):
<TABLE>
<CAPTION>
COUNTER-
NOTIONAL PARTY SWAP UNREALIZED
AMOUNT CREDIT TERMINATION MATURITY RATE RATE APPRECIATION
(000'S) RATING(E) COUNTRY DATE DATE RECEIVED PAID (DEPRECIATION)
- --------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
$ 50,000 A New Zealand 11/24/00 11/24/03 6.30% 4.98%(a) $ (30,400)
35,000 A Switzerland 11/25/00 11/25/08 3.26% 1.68%(b) 249,620
40,000 AA Switzerland 6/19/00 6/19/08 3.67% 2.18%(b) 1,431,480
10,000 AA EMBI+ Index(d) 12/8/99 12/8/99 9.65% 6.05%(c) (2,898,630)
10,000 AA EMBI+ Index(d) 4/24/00 4/24/00 9.56% 5.91%(c) (2,840,310)
- --------------------------------------------------------------------------------------------------
$145,000 $(4,088,240)
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) FLOATING RATE BASED ON THE COUNTRY'S INTERBANK OFFERED RATE, BUT FIXED
THROUGH TERMINATION DATE.
(b) FLOATING RATE BASED ON THE COUNTRY'S INTERBANK OFFERED RATE.
(c) FLOATING RATE BASED ON THE J.P. MORGAN EMERGING MARKET BOND INDEX PLUS
(EMBI+), BUT FIXED THROUGH TERMINATION DATE.
(d) THE J.P. MORGAN EMERGING MARKETS BOND INDEX PLUS (EMBI+) IS A TOTAL RETURN
INDEX TRACKING THE TRADED U.S. DOLLAR DENOMINATED DEBT INSTRUMENTS OF
SEVERAL EMERGING MARKET COUNTRIES. FINAL PAYMENT WILL BE ADJUSTED BASED ON
THE PERFORMANCE OF THE UNDERLYING INDEX OVER THE TERM OF THE AGREEMENT.
(e) UNAUDITED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------
JANUARY 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value -- (Note 1)
(cost $717,167,561) $ 723,570,620
Cash equivalents -- (Note 1) 10,548,513
Receivable for investments sold -- (Note 1) 79,151,943
Interest receivable 5,581,253
------------------
Total Assets 818,852,329
------------------
LIABILITIES:
Payable for investments purchased -- (Note 1) 302,284,063
Payable for reverse repurchase agreements -- (Note 1) 81,127,000
Investments sold on a forward commitment basis, net -- (Note 1) 81,014,228
Payable on interest rate swap contracts, net -- (Note 1) 4,088,240
Payable for reverse repurchase interest -- (Note 1) 147,939
Deferred fee income -- (Note 1) 101,310
Payable for:
Investment management fees -- (Note 2) 279,385
Professional fees 94,822
Administration fees -- (Note 2) 44,725
Custodial fees 36,364
Directors' fees 15,963
Other expenses 20,826
------------------
Total Liabilities 469,254,865
------------------
NET ASSETS $ 349,597,464
------------------
------------------
NET ASSETS CONSIST OF:
Paid-in capital -- (Note 3) $ 380,711,199
Accumulated undistributed net investment income 3,031,956
Accumulated net realized loss on investments, interest rate swaps, and
forward commitments (34,796,710)
Net unrealized appreciation on investments, interest rate swaps and
forward commitments 651,019
------------------
NET ASSETS $ 349,597,464
------------------
------------------
NET ASSET VALUE PER SHARE
(30,515,800 shares outstanding) $ 11.46
------------------
------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
STATEMENT OF OPERATIONS
- -------------------------
FOR THE YEAR ENDED JANUARY 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest $ 29,972,338
Fee income -- (Note 1) 2,757,571
----------------
Total investment income 32,729,909
----------------
Expenses:
Investment management fees -- (Note 2) 3,365,871
Interest expense -- (Note 1) 365,212
Administration fees -- (Note 2) 303,620
Custodial fees 192,987
Professional fees 187,279
Directors' fees and expenses 78,067
Insurance expense 41,143
Printing and postage expenses 40,739
Registration and filing fees 29,942
Transfer agent fees 23,594
Other expenses 7,665
----------------
Total expenses 4,636,119
----------------
Net investment income 28,093,790
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments, interest rate swaps and forward commitments 12,672,296
Net change in unrealized depreciation on investments, interest rate swaps, and forward commitments (26,033,904)
----------------
Net realized and unrealized loss on investments (13,361,608)
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 14,732,182
----------------
----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JANUARY 31, 1999 JANUARY 31, 1998
------------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 28,093,790 $ 30,054,331
Net realized gain (loss) on investments, interest rate swaps, and forward
commitments 12,672,296 (7,145,875)
Net change in unrealized appreciation (depreciation) on investments, interest rate
swaps, and forward commitments (26,033,904) 8,567,348
------------------- -------------------
Net increase in net assets resulting from operations 14,732,182 31,475,804
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income -- (Note 1) (28,562,789) (30,149,611)
------------------- -------------------
Net increase (decrease) in net assets (13,830,607) 1,326,193
NET ASSETS:
Beginning of period 363,428,071 362,101,878
------------------- -------------------
End of period* $ 349,597,464 $ 363,428,071
------------------- -------------------
------------------- -------------------
* Includes accumulated undistributed (distributions in excess of) net investment
income $ 3,031,956 $ (1,044,555)
------------------- -------------------
------------------- -------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
STATEMENT OF CASH FLOWS
- -------------------------
FOR THE YEAR ENDED JANUARY 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income received $ 23,962,614
Operating expenses paid (4,339,360)
Purchase of long-term portfolio investments* (1,311,181,870)
Proceeds from disposition of long-term portfolio investments* 1,240,545,418
-----------------
Net cash used in operating activities (51,013,198)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from reverse repurchase agreement 81,127,000
Net proceeds from dollar roll transactions 2,766,796
Dividends paid from net investment income (28,562,789)
-----------------
Net cash provided by financing activities 55,331,007
-----------------
Net increase in cash 4,317,809
Cash and equivalents at beginning of year 6,230,704
-----------------
Cash and equivalents at end of year $ 10,548,513
-----------------
-----------------
RECONCILIATION OF RESULTS FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 14,732,182
Increase in investments (189,125,072)
Net realized gain on investments and forward commitments (12,672,296)
Net unrealized depreciation on investments 13,857,045
Change in:
Receivable for investments sold 18,099,904
Net unrealized depreciation on interest rate swaps 11,186,544
Interest receivable (1,484,899)
Payable for investments purchased 111,260,047
Payable for investments sold on a forward commitment basis (16,911,081)
Payable for reverse repurchase interest 147,939
Payable for expenses (103,511)
-----------------
Net cash used in operating activities $ (51,013,198)
-----------------
-----------------
* PURCHASES AND PROCEEDS INCLUDE SECURITIES TRADED ON A FORWARD COMMITMENT BASIS THAT ARE NOT INCLUDED IN
THE FUND'S PORTFOLIO TURNOVER RATE.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
FINANCIAL STATEMENTS
- ------------------------------
For a share outstanding throughout each fiscal year or period:
<TABLE>
<CAPTION>
2/24/94*
THROUGH
1998 1997 1996 1995 1/31/95**
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE (a):
Net asset value, beginning of period $ 11.91 $ 11.87 $ 11.64 $ 10.85 $ 12.50
---------- ---------- ---------- ---------- --------
Net investment income 0.92 0.98 0.94 0.96 0.83
Net realized and unrealized gain (loss) (0.43) 0.05 0.21 0.72 (1.71)
---------- ---------- ---------- ---------- --------
Net increase (decrease) in net assets resulting from
operations 0.49 1.03 1.15 1.68 (0.88)
Less distributions:
Dividends from net investment income (0.94) (0.99) (0.92) (0.89) (0.75)
Offering costs -- -- -- -- (0.02)
---------- ---------- ---------- ---------- --------
Net asset value, end of period $ 11.46 $ 11.91 $ 11.87 $ 11.64 $ 10.85
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
Per share market value, end of period $ 9.88 $ 11.16 $ 10.63 $ 10.25 $ 9.63
---------- ---------- ---------- ---------- --------
---------- ---------- ---------- ---------- --------
Total return based on net asset value 5.32% 9.66% 11.72% 17.07% (6.68)%+
Total return based on market value (3.11)% 14.76% 13.57% 16.21% (17.21)%+
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 349,597 $ 363,428 $ 362,102 $ 355,287 $331,166
Ratio of total expenses to average net assets (excluding
interest expense) 1.21% 1.25% 1.25% 1.20% 1.15%++(b)
Ratio of interest expense to average net assets 0.10% -- -- -- 0.02%++
Ratio of net investment income to average net assets 7.93% 8.29% 8.21% 8.50% 7.79%++(b)
Portfolio turnover(c) 133% 29% 59% 96% 158%+
</TABLE>
* COMMENCEMENT OF INVESTMENT OPERATIONS.
** AUDITED BY PRIOR AUDITORS.
+ NOT ANNUALIZED.
++ ANNUALIZED.
(a) CALCULATED USING THE AVERAGE SHARE METHOD
(b) 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%.
(c) DOES NOT INCLUDE THE EFFECTIVE MORTGAGE DOLLAR ROLL TRANSACTIONS OR FORWARD
COMMITMENT TRANSACTIONS.
16
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
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.
PORTFOLIO 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 AND FOREIGN INVESTMENTS: 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.
17
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
There were no open Forwards in fiscal year 1998.
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, 1999, there were $80,861,994 of forward sale commitments
outstanding.
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 $2,757,571. At January 31, 1999, there were $302,284,063 in
dollar roll commitments on liquid mortgage pass-throughs outstanding.
INTEREST RATE SWAPS: The Fund enters into interest rate swaps for investment,
hedging and risk management purposes. Interest rate swaps involve the exchange
of commitments to pay or receive interest--e.g., an exchange of floating rate
payments for fixed rate payments. If forecasts of interest rates and other
market factors are incorrect, investment performance will diminish compared to
what performance would have been if these investment techniques were not used.
Even if the forecasts are
18
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
The Fund had $145 million in notional amount of swaps to provide regional
exposure to interest rates in Europe, Canada and emerging markets. The swaps are
U.S. dollar-denominated to provide interest rate exposure without foreign
currency exchange risk. The difference between rates received and paid by the
Fund constitutes investment income. Unrealized depreciation on swap positions
was $4,088,240 at January 31, 1999.
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, 1999, the Fund
had $81,127,000 in open reverse repurchase agreements outstanding. The average
daily balance of reverse repurchase agreements outstanding during the fiscal
year ended January 31, 1999, was approximately $7,185,948 at a weighted average
interest rate of approximately 5.04%. The maximum amount of reverse repurchase
agreements outstanding during the fiscal year ended January 31, 1999, was
$81,127,000.
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 or delivered $346,640,339 in high credit
quality, liquid investments against outstanding obligations, resulting in
$123,549,995 net leverage at January 31, 1999.
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
19
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income and net realized capital gains to its shareholders. Therefore, no federal
income tax provision is required. As of January 31, 1999 the Fund had capital
loss carryovers of $14,117,806, $18,629,658, and $1,742,109 which will expire on
January 31, 2003, January 31, 2004, and January 31, 2006, 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
Dresdner RCM Global Investors LLC, the Fund's 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. 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 an annual fee of $6,000 plus
$1,000 for each meeting attended.
3. CAPITAL SHARES
At January 31, 1999, 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 fiscal year ended January 31, 1999, aggregated
$123,896,155 and $67,853,935, respectively. Purchases and proceeds from sales of
obligations of the U.S. government and its agencies, other than short-term
securities and
20
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------
4. PURCHASES AND SALES OF SECURITIES (CONTINUED)
dollar rolls, for the fiscal year ended January 31, 1999, aggregated
$986,247,728 and $693,405,557, respectively. At January 31, 1999, the aggregate
cost of investments for federal income tax purposes was $717,474,697. Gross
unrealized appreciation and depreciation of investments aggregated $8,944,998
and $2,849,075, respectively, resulting in net unrealized appreciation of
$6,095,923 at January 31, 1999.
21
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
INDEPENDENT AUDITOR'S REPORT
- ------------------------------
To the Shareholders and Board of Directors of the RCM Strategic Global
Government Fund, Inc.:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statement of operations, changes
in net assets, cash flows and the financial highlights present fairly, in all
material respects, the financial position of the RCM Strategic Global Government
Fund, Inc. (the "Fund") at January 31, 1999, the results of its operations, the
changes in its net assets, cash flows and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned at
January 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 19, 1999
22
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
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, 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.
23
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
SHAREHOLDER MEETING RESULTS (UNAUDITED)
- ------------------------------------------
The Annual Meeting of Shareholders of RCM Strategic Global Government Fund, Inc.
was held on Thursday, November 12, 1998. The number of shares issued,
outstanding and eligible to vote as of record date (September 1, 1998) was
30,515,800. Present were 29,344,959 shares represented by 180 proxies or 96.16%
of the eligible voting shares tabulated. The matters voted upon by Shareholders
and the resulting votes for each matter are presented below:
1. The existing investment management agreement between the Fund and Dresdner
RCM Global Investors LLC was approved. The votes were cast: For
(28,540,032), Against (293,027), Abstain (511,900).
2. Francis E. Lundy was re-elected as to the Board of Directors for a term to
expire in 2001 or until their successors shall be duly elected and
qualified. The votes for Francis E. Lundy were cast: For (28,969,484),
Withheld (375,475).
3. The selection by the Board of Directors of PriceWaterhouseCoopers L.L.P. as
independent public accountants for the fiscal year ending January 31, 1999
was approved. The votes were cast: For (28,851,589), Against (142,013),
Abstain (351,357).
AMENDMENT TO BY-LAWS
- ------------------------------
On December 8, 1998, the Fund's Board of Directors amended the Fund's By-laws to
require advance notice of certain shareholder proposals and nominations. Copies
of the amended By-laws have been filed with the Securities and Exchange
Commission and are available from its public reference facilities.
24
<PAGE>
RCM STRATEGIC GLOBAL GOVERNMENT FUND
CORPORATE INFORMATION
- -------------------------------
DIRECTORS
Gary W. Schreyer, CHAIRMAN AND PRESIDENT
Francis E. Lundy
James M. Whitaker
OFFICERS
George A. Rio
CHIEF FINANCIAL OFFICER
Judith W. O'Connell
SECRETARY AND TREASURER
Steven L. Wong
ASSISTANT TREASURER
PORTFOLIO MANAGERS
Eamonn F. Dolan
Stephen Kim
Jack L. Bernard
Mark E. Raaberg
INVESTMENT MANAGER
Dresdner RCM Global Investors LLC
Four Embarcadero Center
San Francisco, California 94111
ADMINISTRATOR, CUSTODIAN AND
TRANSFER AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 426-5523
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Dresdner RCM Global Investors LLC is an institutional money manager
headquartered in San Francisco with approximately $63 billion in managed assets,
including approximately $16 billion in fixed income securities. Dresdner RCM has
over 20 years of experience in active fixed income investment management for
corporate retirement plans, endowments, foundations, insurance companies,
nuclear decommissioning trusts and select individuals.
<PAGE>
RCM STRATEGIC GLOBAL
GOVERNMENT FUND, INC.
MARKET PRICES FOR RCS SHARES ARE PUBLISHED DAILY IN THE WALL STREET JOURNAL AS
"RCM STRATG," IN THE NEW YORK TIMES AS "RCMSTGLFD," AND IN LOCAL NEWSPAPERS IN
THE NEW YORK STOCK EXCHANGE LISTINGS. NET ASSET VALUE IS PUBLISHED WEEKLY AND
APPEARS EACH MONDAY IN THE WALL STREET JOURNAL AND IN THE NEW YORK TIMES UNDER
THE CAPTION "CLOSED-END BOND FUNDS." THE WEEKLY NET ASSET VALUE IS ALSO
AVAILABLE EACH SATURDAY IN BARRON'S.
THIS REPORT IS SENT TO THE SHAREHOLDERS OF RCS FOR THEIR INFORMATION. THE
FINANCIAL INFORMATION INCLUDED HEREIN IS TAKEN FROM THE RECORDS OF THE FUND.
THIS IS NOT A PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED FOR USE IN THE
PURCHASE OR SALE OF SHARES OF THE FUND OR OF ANY SECURITIES MENTIONED IN THE
REPORT. IF YOU WOULD LIKE A COPY OF PRIOR SHAREHOLDER REPORTS, PLEASE CONTACT
YOUR BROKER OR CALL DRESDNER RCM DIRECTLY AT (415) 954-5400 OR VISIT THE FUND'S
WEBSITE AT WWW.RCSFUND.COM.
INVESTMENT MANAGER:
DRESDNER RCM GLOBAL INVESTORS LLC
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
