[GRAPHIC IN BACKGROUND]
RCM
STRATEGIC
GLOBAL
GOVERNMENT
FUND
INC.
ANNUAL
REPORT
JANUARY 31, 2002
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.
JANUARY 31,
---------------------------------
FISCAL YEAR* 2002 2001 2000
------------------------------------------------------------------------------------
Total investment income $33,833 $32,962 $34,713
Total investment income per share 1.10 1.08 1.14
Net investment income 29,780 29,102 28,838
Net investment income per share 0.97 0.95 0.95
Net realized and unrealized gain (loss) 2,648 19,501 (25,159)
Net realized and unrealized gain (loss) per
share 0.09 0.64 (0.83)
Net asset value at end of year 11.20 11.14 10.56
Market price at end of year 10.90 10.35 9.13
Total return on net asset value 10.23% 17.37% 2.70%
Total return on market price 15.46% 26.13% 2.99%
Dividend from net investment income per share $ 1.00 $ 1.01 $ 1.02
Effective dividend yield** 9.17% 9.76% 11.17%
* In thousands (000's) except per share data.
** Annual dividend divided by year-end market price.
RCM STRATEGIC GLOBAL GOVERNMENT FUND
CHAIRMAN'S LETTER TO STOCKHOLDERS
--------------------------------------------------
[LUKE KNECHT PHOTO]
February 7, 2002
Dear Stockholders;
2001 was an eventful year for the RCM Strategic Global
Government Fund, Inc. (the "Fund" or "RCS"). Once again, the
Fund was able to deliver strong investment results to
stockholders as reflected in a rise in the Fund's stock price from $10.35 to
$10.90 and payment of total dividends of $0.998 per share. A second major
accomplishment during the year was the completion of the merger between the Fund
and the Dresdner RCM Global Strategic Income Fund, Inc. ("DSF"), resulting in an
increase of $40,985,851 in the net assets of the Fund. As discussed more fully
below, I believe the completion of this merger will provide stockholders a
number of benefits in the years ahead. Finally, the acquisition of Dresdner Bank
by Allianz AG in August of 2001 led to a change in the organization of Dresdner
RCM's fixed income investment group. As a result, effective February 8, 2002,
responsibility for the management of the Fund changed from Dresdner RCM Global
Investors LLC ("Dresdner RCM" or the "investment adviser") to its affiliate
Pacific Investment Management Company LLC ("PIMCO"). As more fully explained
below, PIMCO is a premier bond management firm that I strongly believe is fully
capable of maintaining the successful record of the Fund.
Interest rates fell across the maturity spectrum in 2001 as the Federal Reserve
aggressively lowered short-term interest rates in an attempt to reinvigorate the
slowing United States economy. In total, the Federal Reserve lowered short rates
11 times between January 1, 2001 and December 31, 2001. The impact of these
actions on the bond market was greatest in the short and intermediate part of
the yield curve. For example, the two-year treasury note's yield fell from 5.09%
to 3.02% in the course of the calendar year while the ten-year treasury note's
yield declined from 5.11% to 5.05%. This overall decline in yields caused the
prices of most fixed income securities to rise, resulting in a favorable return
for the bond market as a whole.
NEW FUND NAME:
PIMCO STRATEGIC GLOBAL GOVERNMENT FUND
NYSE TRADING SYMBOL: RCS (UNCHANGED)
1
RCM STRATEGIC GLOBAL GOVERNMENT FUND
CHAIRMAN'S LETTER TO STOCKHOLDERS
--------------------------------------------------
This favorable environment for bonds was reflected in another strong year for
the Fund, which produced a 10.23% return on net asset value. This return
resulted from an increase in net asset value ("NAV") from $11.14 to $11.20 per
share at fiscal year-end in combination with payment of $0.998 in dividends. The
overall Fund return of 10.23% was again in excess of the 7.55% return of the
broad bond market as measured by the Lehman Brothers Aggregate Bond Index. The
favorable results reflect the investment adviser's success in managing interest
rate, yield curve and sector exposures within the Fund. In a year marked by
numerous high-profile bankruptcies and credit problems, I am pleased to report
that the Fund's emphasis on government and government-related issuers mitigated
the impact of such events. The favorable environment for bonds, the high credit
quality profile of the Fund and its stable dividend policy are all factors that
I believe resulted in the share price of the Fund increasing from $10.35 to
$10.90 during the course of this fiscal year. When combined with dividends
received, the total return on market value for those holding Fund shares during
the entire fiscal year was 15.46%.
For the twelve months ended January 31, 2002, the Fund earned total gross
investment income of $33,833M or $1.10 per share. This is up from gross earnings
in the prior fiscal year when the Fund earned $32,962M or $1.08 per share. The
primary reason income was higher in this fiscal year was the sharp decline in
short-term interest rates. While lower rates reduced the earning rate on some
Fund assets such as mortgage related securities, it also positively impacted the
Fund's effective cost of borrowing. The net effect was an increase in the income
derived from financed mortgage holdings (mortgage TBA's). In the past fiscal
year, these holdings contributed $6,535M in income versus $2,654M in the prior
fiscal year. Net investment income for the period was $29,780M or $0.97 per
share versus $29,102M or $0.95 per share in the prior fiscal year. Please refer
to the MD&A for a full discussion of each of the Fund's principal areas of
focus.
For the sixth consecutive year, the Fund was able to produce income in excess of
the $.074 monthly dividend for the fiscal year and consequently was able to pay
a special dividend of $0.11 at year-end. This brought total dividend
distributions for the fiscal year to $0.998 versus $1.014 in the prior fiscal
year. In reviewing the data on the inside front cover of this report, you will
note that total dividends again exceeded the reported net investment income per
share. This is because the Fund is required to pay out at least 98% of taxable
income as defined by the IRS and that amount was again higher than the net
investment income per-share figure reported of $0.97. Based on the beginning NAV
of $11.14 per share, the $0.998 in dividends paid
2
RCM STRATEGIC GLOBAL GOVERNMENT FUND
CHAIRMAN'S LETTER TO STOCKHOLDERS
--------------------------------------------------
represented a distribution rate of about 9.0% which was again well in excess of
the yield on high-quality intermediate maturity debt obligations.
As noted above, two other significant events occurred during the Fund's fiscal
year, one of which was the completion of the merger of DSF into the Fund. The
merger was effective January 18, 2002 and resulted in the issuance of 3,669,726
additional RCS common shares with a value of $40,985,851. Immediately following
the merger, the total assets of the Fund were $381,805,869. The Fund's Board of
Directors supported this merger as being in the best interests of stockholders
for a variety of reasons. Most immediately, the larger asset base of the Fund
following the merger was projected to result in a lower overall expense
structure going forward. Other projected benefits included larger average
trading volume in the Fund's shares. The true impact of the merger will only be
apparent over time.
The other significant event to report is the acquisition of Dresdner Bank, the
parent of Dresdner RCM, by Allianz AG. The combination of these two
organizations resulted in duplicative fixed income portfolio management
capabilities in the combined firm. A number of options to resolve the
redundancies were explored by Dresdner RCM and the Board of Directors of the
Fund. In December of 2001, Dresdner RCM reached a final decision to discontinue
the fixed income portfolio management operations in its San Francisco office and
to seek client approval to have PIMCO assume management of all fixed income
client portfolios. After carefully considering the options, the Board
unanimously approved PIMCO as the successor manager to the Fund. I believe that
in appointing PIMCO as the successor manager, the Board has selected an adviser
with a strong track record in management of other closed-end funds and
demonstrated expertise in each of the Fund's principal areas of focus: U.S.
mortgage-backed securities, emerging market debt and developed foreign market
debt. The Fund has entered into a 150-day interim agreement with PIMCO to act as
the Fund's investment manager, with the intention of seeking stockholder
approval of a longer-term agreement at this year's annual meeting. The Board
also approved an administrative service agreement pursuant to while PIMCO
replaced State Street Bank and Trust Company as the Fund's administrator. Full
details of the terms under which PIMCO will provide services to the Fund will be
forthcoming in proxy material. However, it is worth noting that the asset-based
fee PIMCO will charge to manage the Fund's assets going forward is approximately
8 basis points lower than the fee charged under the Fund's prior contract with
Dresdner RCM.
3
RCM STRATEGIC GLOBAL GOVERNMENT FUND
CHAIRMAN'S LETTER TO STOCKHOLDERS
--------------------------------------------------
This will be my last letter to you as Chairman of the Fund. Consistent with
PIMCO's assumption of duties as the Fund's investment adviser, Mr. Brent R.
Harris, a Managing Director of PIMCO with extensive experience in bond fund
management, will be assuming my role as Chairman. On behalf of the Board, I
thank stockholders for your continued interest in the Fund. It was indeed an
eventful year in which the groundwork was laid for the future continued success
of the Fund. I also wish to thank all those involved whose diligence and
expertise again provided stockholders with a high-quality, steady income stream.
As always, your thoughts and comments are welcome and should be directed to
PIMCO's shareholder services group at 1-800-927-4648.
[/s/ Luke Knecht]
Luke Knecht
Chairman of the Board and President
4
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
MANAGER'S DISCUSSION AND ANALYSIS
----------------------------------------------
MARKET REVIEW There is little doubt that 2001 will be remembered as one of the
more volatile investing environments in recent memory. We are pleased that,
despite the many challenges presented during the year, the RCM Strategic Global
Government Fund, Inc. ("RCS" or the "Fund") again posted positive absolute
returns for the fiscal year ended January 31, 2002. Bonds were the asset class
of choice during much of the period in large part due to the ongoing
deterioration of the U.S. and global economies beginning in 2000. During the
fiscal period, the Fund's net asset value ("NAV") per share increased by 0.54%,
and the Fund paid dividends equal to 8.91% of NAV for a total return on NAV of
10.23%. For comparison purposes, stocks (as measured by the S&P 500) returned a
dismal -16.15% for the same period, while the Lehman Aggregate Bond Index Index
posted a 7.55% total return.
The United States economy continued its slide which started in 2000. The
National Bureau of Economic Research declared that the United States economy has
been in a recession since March 2001, although the current recession doesn't fit
the widely understood description of two consecutive quarters of negative
growth. Initial fourth quarter Gross Domestic Product ("GDP") was reported at
0.2% versus -1.3% for the third quarter. Other evidence supported the claim of
recession. Manufacturing indicators dipped to levels not seen since the 1990
recession. The National Association of Purchasing Managers Index (NAPM, now
called ISM) fell to 41.2 (levels below 50 indicate contraction), and is just now
beginning to recover. The labor market exhibited weakness, with the unemployment
rate hitting 5.8%, a seven-year high, and weekly jobless claims, though
generally volatile, topping 500,000 during October (the highest level since
1992), then falling below 400,000, during the Fund's fourth quarter, for the
first time since August 2001. The terrorist attacks of September 11 exacerbated
the deteriorating economic situation with an abrupt change in investor and
business sentiment. Consumer confidence fell sharply, followed by increased job
layoffs and sharply reduced profit expectations. Investors fled corporate bonds
on concerns that the threat of terrorism would squash consumer spending and make
it harder for companies to service their debt. Likewise, investors sold equities
in favor of high quality government-backed securities, particularly treasuries.
It was only midway during the fourth quarter that investors began to find signs
of hope and rebirth in the economy. The manufacturing sector showed signs of
bottoming during the quarter, as NAPM climbed back to levels last seen in
October 2000, while non-manufacturing NAPM finally reached above the key level
of 50 (which indicates expansion). Confidence indicators staged a small rebound,
as both the Conference Board and the University of Michigan surveys improved
during the quarter. Consumer spending remained resilient, as retail sales growth
improved during the
5
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
MANAGER'S DISCUSSION AND ANALYSIS
--------------------------------------------
fourth quarter from depressed post September 11 levels. Consumers bought autos
(due to successful incentive programs) and real estate (which bounced back
especially in December after depressed levels earlier in 2001). Additionally,
the need for inventory replenishment increased at an opportune time.
Against this backdrop of slowing growth and rising unemployment, the Federal
Reserve aggressively reduced short-term interest rates during the entire fiscal
year in an effort to cushion the severity of the downturn. In total, the Federal
Reserve lowered the targeted Federal Funds rate 11 times during this cycle, by a
total of 475 basis points to the current level of 1.75%, where it stood as of
January 31, 2002. For reference, this is the lowest Federal Funds rate in the
last 40 years. In the aftermath of the September 11 terrorist attacks, the
Federal Reserve and other central banks around the world intervened to ensure
proper liquidity in financial markets and to try to stem the effects of the
attacks on confidence and to preempt future weakness in global markets.
RCS FUND REVIEW As we have indicated in past reports, RCS continues to rely on
three primary bond market segments to meet stockholder income objectives: United
States domestic markets, developed foreign markets, and emerging markets.
Once again, United States dollar investments constituted the majority of the
Fund's holdings and were primarily concentrated in mortgage pass-through
securities. As discussed previously, the United States bond market performed
well during the review period. As the Federal Reserve continued to ease interest
rates throughout the period, bond yields generally decreased, particularly
shorter maturities. In a declining rate environment, mortgages often lag behind
treasuries because of the homeowners' option to prepay or refinance their
mortgages to obtain a more attractive rate. The yield curve continued to
steepen, significantly improving the attractiveness of mortgages to a wide range
of buyers. Demand for mortgages overwhelmed record levels of supply leading to
slight outperformance for this sector versus the broader market during the
review period. The only major change in the mortgage component of the Fund's
portfolio during the year was the purchase of slight premium-coupon mortgage
bonds. The superb risk adjusted yield of slight premium coupon mortgages
relative to discount and premium coupon mortgages was the catalyst for the
restructuring. This strategy was the primary contributor to income growth in the
Fund. TBA's continued to comprise a significant piece of the Fund's mortgage
passthrough component. Mortgage TBA's are financed mortgage passthrough
transactions with extended settlements. These types of transactions allow RCS to
6
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
MANAGER'S DISCUSSION AND ANALYSIS
--------------------------------------------
earn the spread between the yield on the underlying mortgage securities and
short-term interest rates. During the review period, the Fund continued its use
of total return swaps on indices as an efficient means to gain exposure to
investment-grade corporate and commercial mortgage-backed securities. This
strategy allowed the Fund to diversify its holdings in these two sectors, as
well as lock in the yield spreads on those securities versus treasuries. Because
of the event risk inherent in corporate bonds, especially amid the economic
environment over the last year, the Fund was well-positioned to remain insulated
from credit-specific event risk by holding corporate and CMBS exposure via
swaps.
The second primary strategy for RCS, developed foreign markets, took the form of
interest-rate swaps during the period. Interest rate swaps are an efficient
means to create and manage exposure to foreign markets without assuming currency
risk. We continued to hold interest rate swaps in Switzerland and Japan because
of the income advantage given the relative steepness of the two countries' yield
curves.
The third strategy, emerging market debt, had a terrific, though volatile, year.
The JP Morgan Emerging Market Bond Index Plus achieved a 12.2% return for the
period. We pre-emptively and systematically reduced the Fund's exposure to
Argentina upon seeing glimpses of future difficulties in the region. The Fund's
position was reduced, from almost 20% of the emerging markets component at the
beginning of the year to about 2% by the end of July, to 0% when the situation
flared up in the fourth quarter of 2001. Thus, the emerging market debt in RCS
had lower volatility and outperformed the broad emerging market indices. In
addition, the emerging market segment of the portfolio remains very well
diversified across 14 countries. During the period, we took advantage of market
weakness to purchase higher rated credits in Mexico, China, Korea, Malaysia and
India. Although less than 11.1% of the market value of the Fund is invested in
emerging market debt, over 24.6% of the Fund's income was generated through this
sector because of its attractive yields.
FINANCIAL LEVERAGE Financial leverage has been an integral part of Dresdner
RCM's income and duration management strategies for RCS. Financial leverage
results when the Fund purchases securities with borrowed funds or otherwise
achieves a similar result using derivatives, such as interest rate swaps and
mortgage TBA's. Such leveraged transactions are intended to allow RCS to earn
the spread between the yield of the purchased security and the cost of the
borrowing, usually a function of short-term interest rates. A financed
transaction may thus increase fund income to the extent of the interest rate
spread. However, if short-term interest
7
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
MANAGER'S DISCUSSION AND ANALYSIS
--------------------------------------------
rates increase, that spread is likely to narrow and could even result in a
negative spread. Further, when a fund's manager employs financial leverage in
managing the fund's portfolio, the value of an investment in that fund will be
more volatile and all other risks of investing tend to be compounded. In
particular, the use of financed securities transactions increases the fund's
overall duration risk (i.e., the risk of declining values due to increased
interest rates), and, if the cost of the borrowing is variable, creates an
increased sensitivity of the Fund to rising short-term interest rates.
Stockholders of the Fund are thus exposed to greater risks than they would be if
leverage were not employed, including the possibility that amounts available for
distribution as dividends will decrease if the income derived from leveraged
securities is not sufficient to cover the costs of the financing, as well as the
likelihood of greater volatility in the net asset value and potentially greater
volatility in the market value of Fund shares. A closed-end fund's use of
leveraged transactions is limited by law.
To manage overall duration risk, RCS sells U.S. Treasury bonds on a forward
commitment basis. RCS averaged 32.3 million in bonds sold forward during the
period. At January 31, 2002, there were $77.6 million in similar positions.
Financed mortgage-backed securities, "mortgage dollar rolls," contributed $6.5
million in income, or 19.3% of the Fund's total income, in the annual period on
average volume of $311.1 million. The income contribution appears on the
Statement of Operations as Fee Income. At January 31, 2002, there were $350.4
million in mortgage dollar rolls. As required by SEC pronouncements, the Fund
has segregated $278.5 million in high-quality, liquid assets to meet any
contractual obligations under the mortgage dollar rolls.
Since 1994 RCS has used interest-rate swaps/total return swaps for managing
income, duration and exposure to changing short-term interest rates. RCS
averaged $137.1 million in notional interest rate swaps. The income from swaps
was $2.4 million and is included in the Fund's interest income. At January 31,
2002, there were $115.0 million in notional interest rate swaps based on
developed foreign and domestic mortgage interest rates. During the period, RCS
entered into $65.0 million notional U.S. interest rate swaps that served to lock
the cost of financing on mortgage dollar roll positions. Under these interest
rate swaps, RCS was entitled to receive a short-term interest rate and was
obligated to pay a longer-term interest rate on a notional amount fixed by the
contract.
8
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
MANAGER'S DISCUSSION AND ANALYSIS
--------------------------------------------
DISCOUNT TO NET ASSET VALUE We are pleased to report that the discount to Net
Asset Value has narrowed significantly. At January 31, 2001, the discount was
7.1%, and it subsequently narrowed to 2.7% by January 31, 2002, a narrowing of
4.4% of the Fund's discount. In fact, the Fund traded at a premium to NAV
several times throughout the review period. We recognize that the market price
at which shares of the Fund trade is influenced by a variety of factors, many of
which are beyond the control of Fund management. We believe, however, that a
number of favorable factors contributed to the decline in the discount during
this review period, including a continued favorable environment for bonds in
light of the U.S. economic slowdown and stability in the income prospects for
the Fund.
MARKET OUTLOOK As noted in the Chairman's Letter to Stockholders in this report,
Pacific Investment Management Company LLC (PIMCO) has assumed the role of the
investment adviser to the Fund as of February 8, 2002. Accordingly, the market
outlook section of this report reflects PIMCO's view of the investment
environment ahead.
The global economy will continue to rely on the United States as the main engine
of growth in 2002. Management expects the United States economy to rebound from
its current recession and then settle lower, producing average growth of a
modest 2% to 2.5%. In Europe, where the economic downturn has been milder,
recovery will be more tepid, averaging about 1%. Japan will see more contraction
in growth and continued deflation.
In the United States, business and consumer risk-taking, depressed by
uncertainty after the terrorist attacks and the bursting of New Economy
investment and consumption bubbles, will begin to revive and lead the upturn.
Risk appetites will recover because of more abundant liquidity resulting from
Federal Reserve easing; more stimulative fiscal policy; increased consumer
income due to lower mortgage rates and sharply lower gasoline prices; and
because there is room for corporate profits to improve in light of the
deceleration of inventory de-stocking and favorable trends in the (prices
received)/(prices paid) ratio.
However, investors banking on a return to the exuberant growth of the late 1990s
will be disappointed. Business investment growth (other than inventory
restocking), a major driver of New Economy growth, will not contribute to
recovery this time. Stuck with excess capacity, corporations will continue to
limit capital expenditures.
Corporate belt-tightening will not be confined to capital budgets. Under
pressure from shareholders to boost stock prices, management may use layoffs
and/or wage cuts to bolster
9
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
MANAGER'S DISCUSSION AND ANALYSIS
--------------------------------------------
profits, especially in industries where pricing power remains weak. The
resulting anxiety about unemployment and incomes will limit the resurgence in
consumption.
Concerns that monetary stimulus and a pickup in growth will lead to more
inflation are misplaced. Management expects modest disinflation in the United
States and Europe, and continued deflation in Japan, due to lower energy prices
and lingering capacity overhang. Tame inflation and modest growth will result in
a more range-bound interest rate environment.
PIMCO believes the Fund is well positioned to continue to achieve its primary
objective of income generation. Please refer to the February 22, 2002 press
release for more information on PIMCO and its capabilities in achieving the
Fund's objectives. The press release can be found in the "Publications" section
of the website at www.rcsfund.com.
10
RCM STRATEGIC GLOBAL GOVERNMENT FUND
INVESTMENT INCOME SUMMARY
-------------------------------------
(Unaudited)
2002 2002 2001 2001
PERCENTAGE (000'S) PERCENTAGE (000'S)
----------------------------------------------------------------------------------------------------
UNITED STATES
Mortgage Pass-Throughs 46.9% $15,865 49.7% $16,397
Mortgage Projects/CMOs 0.5% 174 4.2% 1,381
Commercial Mortgage Securities 4.1% 1,392 -- --
Corp Bonds 0.8% 259 1.6% 526
Mortgage Dollar Rolls 19.3% 6,535 8.0% 2,654
Cash & Other 1.6% 530 6.9% 2,281
----------------------------------------------------------------------------------------------------
Total United States 73.2% 24,755 70.4% 23,239
----------------------------------------------------------------------------------------------------
DEVELOPED FOREIGN
Japan 1.4% 482 1.4% 450
Switzerland 0.7% 225 1.0% 326
Luxembourg 0.1% 18 -- --
----------------------------------------------------------------------------------------------------
Total Developed Foreign 2.2% 725 2.4% 776
----------------------------------------------------------------------------------------------------
EMERGING MARKETS
Brazil 5.9% 1,995 6.0% 1,977
Russia 5.2% 1,751 6.0% 1,973
Mexico 3.6% 1,219 3.6% 1,201
Argentina 2.4% 824 4.8% 1,586
Venezuela 1.3% 457 2.0% 671
Ecuador 1.0% 354 -- --
Korea 1.0% 336 0.8% 266
Bulgaria 0.9% 301 1.1% 360
Philippines 0.8% 285 1.0% 325
China 0.7% 230 -- --
India 0.5% 177 -- --
Jamacia 0.5% 166 -- --
Columbia 0.4% 122 -- --
Israel 0.3% 94 -- --
Malaysia 0.3% 93 -- --
Peru 0.0% 11 -- --
Indonesia (0.2%) (62) 0.6% 187
Turkey -- -- 0.8% 263
Panama -- -- 0.1% 19
Other -- -- 0.4% 119
----------------------------------------------------------------------------------------------------
Total Emerging Markets 24.6% 8,353 27.2% 8,947
----------------------------------------------------------------------------------------------------
Total RCS Investment Income 100.0% $33,833 100.0% $32,962
====================================================================================================
11
RCM STRATEGIC GLOBAL GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
-------------------------------
January 31, 2002
COUNTRY/ PRINCIPAL VALUE (US$)
CURRENCY (000'S) DESCRIPTION (NOTE 1)
---------------------------------------------------------------------------------------------------
LONG-TERM DEBT SECURITIES -- 185.1%*
BRAZIL -- 4.9%
USD CESP -- Compannhia Energetica de Sao Paulo
2,000 10.50%, 03/05/2004, Series 144A** $ 1,935,000
Federal Republic of Brazil
3,363 C Bond, 8.00%, 04/15/14 2,593,699
4,738 10.13%, 05/15/27 3,494,275
9,580 12.25%, 03/06/30 8,291,490
Petrobras International Finance
2,230 9.88%, 05/09/2008, Series 144A** 2,263,450
-------------
Total Brazil 18,577,914
-------------
BULGARIA -- 1.4%
USD National Republic of Bulgaria
5,039 4.56%, Step-Up Coupon, 07/28/12*** 4,453,216
983 4.56%, Floating Rate, 07/28/11*** 845,440
-------------
Total Bulgaria 5,298,656
-------------
CHINA -- 0.5%
USD GH Water Supply Holdings Ltd.
1,988 7.00%, 06/22/08, Series 144A** 1,888,600
-------------
COLOMBIA -- 0.8%
USD National Republic of Colombia
3,278 11.75%, 02/25/20 3,205,884
-------------
ECUADOR -- 1.0%
USD Republic of Ecuador
7,712 5.00%, 08/15/30, Series 144A** 3,933,120
-------------
HONG KONG -- 0.3%
USD Bangkok Bank Pub. Co. (HK)
1,500 9.03%, 03/15/29, Series 144A** 1,320,000
-------------
INDIA -- 0.5%
USD Reliance Industries Ltd.
2,180 10.50%, 08/06/46, Series 144A** 2,050,318
-------------
JAMAICA -- 0.7%
USD Government of Jamaica
2,655 11.75%, 05/15/11, Series 144A** 2,781,113
-------------
The accompanying notes are an integral part of the financial statements.
12
RCM STRATEGIC GLOBAL GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
-------------------------------
January 31, 2002
COUNTRY/ PRINCIPAL VALUE (US$)
CURRENCY (000'S) DESCRIPTION (NOTE 1)
---------------------------------------------------------------------------------------------------
KOREA -- 0.8%
USD Hanvit Bank
2,569 12.75%, 03/01/10, Series 144A** $ 2,942,019
-------------
MALAYSIA -- 0.6%
USD Petroliam Nasional
2,300 7.63%, 10/15/26 2,202,480
-------------
MEXICO -- 2.9%
USD Grupo Elektra S.A.
1,115 12.00, 04/01/08 1,126,150
United Mexican States
Euro 6,440 7.38%, 07/06/06 5,773,361
USD 395 8.63%, 03/12/08 427,002
USD 3,480 9.88%, 02/01/10 3,915,000
-------------
Total Mexico 11,241,513
-------------
PHILIPPINES -- 0.8%
USD Republic of Philippines
1,600 9.38%, 01/18/17 1,580,000
1,525 10.63%, 03/16/25 1,505,938
-------------
Total Philippines 3,085,938
-------------
RUSSIA -- 4.9%
USD Russian Federation
2,680 11.00%, 07/24/18 2,726,900
11,727 12.75%, 06/24/28, Series 144A** 13,295,486
4,437 5.00%, Floating Rate, 03/31/30, Series 144A** *** 2,717,663
-------------
Total Russia 18,740,049
-------------
VENEZUELA -- 0.7%
USD Republic of Venezuela
857 2.88%, Floating Rate, 12/18/07*** 614,991
3,000 3.00%, Floating Rate, 03/31/20*** 2,055,000
-------------
Total Venezuela 2,669,991
-------------
The accompanying notes are an integral part of the financial statements.
13
RCM STRATEGIC GLOBAL GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
-------------------------------
January 31, 2002
COUNTRY/ PRINCIPAL VALUE (US$)
CURRENCY (000'S) DESCRIPTION (NOTE 1)
---------------------------------------------------------------------------------------------------
UNITED STATES -- 164.3%
USD MORTGAGE-BACKED SECURITIES -- 162.7%
5,507 FHA Project Pool, 7.43%, 06/01/24**** $ 5,566,097
22,022 FHLMC 6.50%, 2031 - 2032**** 22,160,074
31,099 FHLMC 7.50%, 2025 - 2030**** 32,294,100
1,347 FHLMC 8.00%, 2024**** 1,418,675
4,505 FNMA 6.00%, 2031**** 4,431,449
103,896 FNMA 6.50%, 2024 - 2031**** 104,513,158
26,559 FNMA 7.00%, 2004 - 2031**** 27,190,135
17,001 FNMA 7.50%, 2026 - 2031**** 17,645,374
33,977 GNMA 7.00%, 2024 - 2029**** 34,922,145
19,924 GNMA 7.50%, 2006 - 2028**** 20,783,426
1,385 GNMA 8.00%, 2016 - 2022**** 1,459,583
134 GNMA 8.50%, 2016 - 2023**** 142,067
302,400 FNMA 6.50%, 2032 TBA***** 304,193,232
45,100 FNMA 7.00%, 2032 TBA***** 46,171,125
-------------
Total Mortgage-Backed Securities 622,890,640
-------------
USD COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.6%
DLJ Mortgage Acceptance Corp.
3,478 Series 1994-MF11, Class A3, 8.10%, 07/18/04**** 3,460,445
G E Capital Mortgage Services, Inc.
2,534 Series 1994-12, Class B1, 6.00%, 04/25/09**** 2,539,032
-------------
Total Collateralized Mortgage Obligations 5,999,477
-------------
Total United States 628,890,117
-------------
TOTAL LONG-TERM DEBT SECURITIES -- (COST $694,145,997) 708,827,712
-------------
The accompanying notes are an integral part of the financial statements.
14
RCM STRATEGIC GLOBAL GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
-------------------------------
January 31, 2002
PRINCIPAL/
COUNTRY/ SHARES VALUE (US$)
CURRENCY (000'S) DESCRIPTION (NOTE 1)
----------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.8%
UNITED STATES -- 3.8%
USD U.S. GOVERNMENT SECURITIES -- 1.2%
4,500 United States Treasury Bills, 1.88%, 2/14/2002 $ 4,497,335
-------------
USD MONEY MARKET FUNDS -- 2.6%
9,876 SSgA U.S. Government Money Market Fund 9,876,043
-------------
TOTAL SHORT-TERM INVESTMENTS -- (COST $14,373,378) 14,373,378
-------------
TOTAL INVESTMENTS -- 188.9% (COST $708,519,375) 723,201,090
-------------
Payable for delayed delivery investments purchased -- (91.5)% (350,364,357)
Payable for Investments Sold on a Forward Commitment Basis -- (20.5)%+ (78,334,758)
Other Assets Less Liabilities -- 23.1%++ 88,329,079
-------------
NET ASSETS -- 100.0% $ 382,831,054
=============
TERMS
Euro -- Euro Dollar
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 exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers, or to the public,
if registered. The Fund may from time to time invest in securities that are
subject to legal or contractual restrictions on resale. As a result, the
sale price of the 144A securities compared to the market price may have a
larger spread than registered securities.
***Floating Rate or Step-Up Coupon security. Interest rate shown is rate in
effect at January 31, 2002.
****All or a portion of these securities have been segregated to cover the
Fund's leverage transactions.
*****Settlement of mortgage-backed securities is on a delayed delivery basis
with the final maturity to be announced (TBA) in the future. At January 31,
2002, the value of the Fund's forward commitment purchases was
$350,364,357.
The accompanying notes are an integral part of the financial statements.
15
RCM STRATEGIC GLOBAL GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
-------------------------------
January 31, 2002
+ On a forward commitment basis, the Fund has agreed to deliver the following
U.S. Treasury securities:
PRINCIPAL
CURRENCY (000'S) DESCRIPTION VALUE (US$)
---------------------------------------------------------------------------------------------------
USD $16,125 U.S. Treasury Bonds 5.25%, 11/15/28 $ 15,248,123
25,000 U.S. Treasury Bonds 5.25%, 02/15/29 23,652,250
18,500 U.S. Treasury Bonds 6.13%, 08/15/29 19,786,305
18,000 U.S. Treasury Bonds 6.25%, 05/15/30 19,648,080
------- -------------
$77,625 (Proceeds $78,851,492) $ 78,334,758
======= =============
++ As of January 31, 2002, the Fund had the following outstanding swap
agreements denominated in U.S. dollars:
COUNTER-
NOTIONAL PARTY SWAP UNREALIZED
AMOUNT CREDIT TERMINATION MATURITY RATE RATE APPRECIATION
(000'S) RATING COUNTRY/ISSUER DATE DATE RECEIVED PAID (DEPRECIATION)
---------------------------------------------------------------------------------------------------------------
$ 65,000 AA CMBS Total
Return Index(a) 02/28/02 02/28/02 1.60% 1.53% $ 791,700
25,000 AA Japan(b) 03/15/02 03/15/02 2.12% 0.08%(c) 1,640,100
25,000 AA Switzerland(d) 03/15/02 03/15/02 4.02% 2.83%(e) 527,950
---------------------------------------------------------------------------------------------------------------
$115,000 $ 2,959,750
---------------------------------------------------------------------------------------------------------------
(a)Total return swap with J.P. Morgan. The fund receives fixed interest rates
quarterly. In addition, the Fund pays a fixed rate of 1.53% on the swap
maturity date. At termination, the Fund will receive or pay the total return
of the Lehman Brother Commercial Mortgage-Backed Securities ("CMBS")
Investment Grade Index less the total return of the J.P. Morgan U.S. Treasury
7-10 Index adjusted for interest received or paid. The CMBS and U.S. Treasury
7-10 indices are broad market indices for U.S. investment-grade commercial
mortgage-backed securities and U.S. treasuries. In addition, at termination
the Fund is obligated to repay the fair value of quarterly income streams
received.
(b)On termination date of the interest rate swap, the Fund will receive or pay
an additional amount, dependent upon whether the 8-year Japanese Swap Rate is
higher or lower than the Annual Fixed Payment Rate of 2.12% paid to the Fund
on a quarterly basis.
(c)Floating rate based on the country's interbank offered rate, but fixed
through March 15, 2001.
(d)On termination date of the interest rate swap, the Fund will receive or pay
an additional amount, dependent upon whether the 8-year Swiss Swap Rate is
higher or lower than the Annual Fixed Payment Rate of 4.02% paid to the Fund
on a quarterly basis.
(e)Floating rate based on the country's interbank offered rate, but fixed
through March 15, 2001.
The accompanying notes are an integral part of the financial statements.
16
(This page has been left blank intentionally.)
17
RCM STRATEGIC GLOBAL GOVERNMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------
January 31, 2002
ASSETS:
Investments, at value (cost $708,519,375) $723,201,090
Cash 43,619
Proceeds from investment sold on a forward commitment
basis 78,851,492
Receivable for investments sold 4,647,777
Receivable for interest rate swap contracts, net 2,959,750
Interest receivable 4,960,489
------------
Total Assets 814,664,217
------------
LIABILITIES:
Payable for delayed delivery investments purchased 350,364,357
Payable for investments purchased 1,989,770
Investments sold on a forward commitment basis 78,334,758
Deferred fee income on dollar rolls 559,464
Payable for:
Investment management fees 287,771
Administration fees 28,958
Professional fees 109,460
Custodial fees 10,150
Directors' fees 1,393
Printing and postage expenses 41,445
Merger expenses 70,899
Other expenses 34,738
------------
Total Liabilities 431,833,163
------------
NET ASSETS $382,831,054
============
NET ASSETS CONSIST OF:
Paid-in capital $425,687,283
Accumulated undistributed net investment income 1,841,553
Accumulated net realized gain (loss) on investments,
foreign currency transactions, interest rate swaps and
forward commitments (62,748,153)
Net unrealized appreciation (depreciation) on investments,
foreign currency translations, interest rate swaps and
forward commitments 18,050,371
------------
NET ASSETS $382,831,054
============
NET ASSET VALUE PER SHARE
(34,185,526 shares outstanding) $ 11.20
============
The accompanying notes are an integral part of the financial statements.
18
RCM STRATEGIC GLOBAL GOVERNMENT FUND
STATEMENT OF OPERATIONS
------------------------------
For the Year Ended January 31, 2002
INVESTMENT INCOME:
Income:
Interest $27,297,789
Fee income 6,535,201
-----------
Total investment income 33,832,990
-----------
Expenses:
Investment management fees 3,237,628
Administration fees 262,742
Professional fees 206,562
Printing and postage expenses 68,886
Custodial fees 68,625
Registration and filing fees 32,916
Directors' fees and expenses 68,705
Transfer agent fees 20,951
Merger fees 125,887
Other expenses 50,212
-----------
Total expenses before waivers and reimbursements 4,143,114
Less: Expenses waived and reimbursed by Investment Manager
and Administrator (90,305)
-----------
Total net expenses 4,052,809
-----------
Net investment income 29,780,181
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments, foreign currency
transactions, interest rate swaps and forward
commitments 4,541,512
Net change in unrealized appreciation (depreciation) on
investments, foreign currency translations, interest
rate swaps and forward commitments (1,893,530)
-----------
Net realized and unrealized gain (loss) on investments 2,647,982
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $32,428,163
===========
The accompanying notes are an integral part of the financial statements.
19
RCM STRATEGIC GLOBAL GOVERNMENT FUND
STATEMENT OF CHANGES IN NET ASSETS
---------------------------------------------
YEAR ENDED YEAR ENDED
JANUARY 31, 2002 JANUARY 31, 2001
---------------- ----------------
OPERATIONS:
Net investment income $ 29,780,181 $ 29,102,169
Net realized gain (loss) on investments, foreign
currency transactions, interest rate swaps and
forward commitments 4,541,512 (29,747,152)
Net change in unrealized appreciation
(depreciation) on investments, foreign currency
translations, interest rate swaps and forward
commitments (1,893,530) 49,248,565
---------------- ----------------
Net increase in net assets resulting from
operations 32,428,163 48,603,582
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (30,454,768) (30,943,021)
---------------- ----------------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued in connection with
fund merger 40,985,851 --
---------------- ----------------
Net increase in net assets 42,959,246 17,660,561
---------------- ----------------
NET ASSETS:
Beginning of year 339,871,808 322,211,247
---------------- ----------------
End of year* $ 382,831,054 $ 339,871,808
================ ================
* Includes accumulated undistributed net investment
income of $ 1,841,553 $ 2,278,334
================ ================
The accompanying notes are an integral part of the financial statements.
20
RCM STRATEGIC GLOBAL GOVERNMENT FUND
STATEMENT OF CASH FLOWS
-------------------------------
For the Year Ended January 31, 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income received $ 27,434,527
Operating expenses paid (3,870,365)
Purchase of long-term portfolio investments* (2,083,076,877)
Proceeds from disposition of long-term portfolio
investments* 2,081,969,050
Net proceeds from short-term investments 278,744
---------------
Net cash provided by operating activities 22,735,079
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received from merger 923,086
Net proceeds from dollar roll transactions 6,840,222
Dividends paid from net investment income (30,454,768)
---------------
Net cash and equivalents used in financing activities (22,691,460)
---------------
Net increase in cash and equivalents 43,619
Cash at beginning of year --
---------------
Cash at end of year $ 43,619
===============
RECONCILIATION OF RESULTS FROM OPERATIONS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 32,428,163
Increase in long-term investments (36,687,342)
Decrease in short-term investments 278,744
Net realized loss on investments and forward commitments (4,541,512)
Net unrealized appreciation on investments 3,453,793
Change in:
Receivable for investments sold (55,354,719)
Net unrealized appreciation on interest rate swaps (804,735)
Interest receivable (324,392)
Payable for investments purchased 34,394,131
Payable for investments sold on a forward commitment
basis 49,837,158
Accrued expenses 55,790
---------------
Net cash provided by operating activities $ 22,735,079
===============
* Purchases and proceeds include securities traded on a
forward commitment basis that are not included in the
Fund's portfolio turnover rate.
The accompanying notes are an integral part of the financial statements.
21
RCM STRATEGIC GLOBAL GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
-------------------------
For a share outstanding throughout each fiscal year:
JANUARY 31,
----------------------------------------------------------------
2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $ 11.14 $ 10.56 $ 11.46 $ 11.91 $ 11.87
-------- -------- -------- -------- --------
Net investment income (a) 0.97 0.95 0.95 0.92 0.98
Net realized and unrealized gain (loss) 0.09 0.64 (0.83) (0.43) 0.05
-------- -------- -------- -------- --------
Net increase in net assets resulting from
operations 1.06 1.59 0.12 0.49 1.03
Less distributions:
Dividends from net investment income (1.00) (1.01) (1.02) (0.94) (0.99)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.20 $ 11.14 $ 10.56 $ 11.46 $ 11.91
======== ======== ======== ======== ========
Per share market value, end of year $ 10.90 $ 10.35 $ 9.13 $ 9.88 $ 11.16
======== ======== ======== ======== ========
Total return based on net asset value 10.23% 17.37% 2.70% 5.32% 9.66%
Total return based on market price 15.46% 26.13% 2.99% (3.11)% 14.76%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of year (in 000's) $382,831 $339,872 $322,211 $349,597 $363,428
Ratio of total expenses to average net
assets:
With waiver and reimbursement 1.15%(b) 1.19% 1.73% 1.31% 1.25%
Without waiver and reimbursement 1.18%(b) -- -- -- --
Ratio of interest expense to average net
assets -- -- 0.57% 0.10% --
Ratio of net investment income to average
net assets 8.74%(c) 8.95% 8.50% 7.93% 8.29%
Portfolio turnover (d) 211% 81% 74% 133% 29%
(a)Calculated using the average share method.
(b)Ratio includes merger related expenses of 0.04%.
(c)Ratio of net investment income to average net assets excluding merger related
expenses is 8.78%.
(d)Does not include the effect of mortgage dollar roll transactions or forward
commitment transactions.
The accompanying notes are an integral part of the financial statements.
22
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 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 in the United States of America.
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America 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. Swap agreements
are valued at fair value as determined by or under the direction of the Fund's
Board of Directors. 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.
In November 2000, a revised AICPA Audit and Accounting Guide, Audits of
Investment Companies, was issued, and is effective for fiscal years beginning
after December 15, 2000. The revised Guide requires the Fund to amortize premium
and accrete discount on all fixed-income securities, and classify gains and
losses realized on prepayments received on mortgage-backed securities previously
included in realized gain/loss, as part of interest income. Adopting these
accounting principles did not affect the Fund's net asset value as it has always
been the policy of
23
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
-------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the Fund to amortize market premiums on bonds and to classify prepayments
received on mortgage-backed securities as part of investment income for
financial reporting purposes.
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.
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in U.S.
companies and securities of the U.S. Government. These risks include revaluation
of currencies and the risk of expropriation. Moreover, the markets for
securities of many foreign companies and foreign governments may be less liquid
and the prices of such securities may be more volatile than those of comparable
U.S. companies and the U.S. Government.
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, 2002, the value of open forward sale commitments was $78,334,758
and proceeds from forward commitments were $78,851,492.
MORTGAGE DOLLAR ROLLS: 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
24
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
-------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$6,535,201. At January 31, 2002, there were $350,364,357 in dollar roll
commitments on liquid mortgage pass-throughs outstanding.
SWAP AGREEMENTS: The Fund enters into swap agreements for investment, hedging
and risk management purposes in an effort to preserve a return on a particular
investment or a portion of its portfolio and as a technique for reducing or
extending duration (i.e., price sensitivity to changes in interest rates).
Interest rate swaps involve the exchange of commitments to pay or
receive -- e.g., an exchange of floating rate payments for fixed rate payments.
Currency swaps involve the exchange of commitments to pay or receive interest
based on that country's inter-bank offered rate versus the U.S. rate. Total
return swaps involve the exchange of commitments to pay or receive interest and
to pay or receive an amount, at termination, based upon the return of a
particular index.
If forecasts of interest rates, the shape of the relevant yield curve, and other
market factors, including those that may impact the indexes of the total return
swaps, 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 the counterparty to a transaction may default.
At January 31, 2002, the Fund had entered into swaps with $115 million in
notional amount. The swaps are U.S. dollar-denominated to avoid foreign currency
exchange risk. The difference between interest rates received and paid by the
Fund constitutes investment income and is shown as a component of interest
income on the Statement of Operations of $2,197,948 for the period ended January
31, 2002. Net unrealized appreciation on swap positions was $2,959,750 at
January 31, 2002.
LEVERAGE: Forward sale commitments, dollar rolls, swaps, reverse repurchase
agreements and other transactions that are financed by the Fund result in
leverage that the Fund employs for purposes of seeking to manage income and
duration exposures of the Fund. However, the use of leverage increases the
overall duration risk of the Fund, and creates an increased sensitivity of the
Fund to rising short-term interest rates. The use of leverage, which is
generally the economic equivalent of borrowing to purchase securities, thus
creates risks of greater volatility of the net asset value and market value of
Fund shares. As required by the Securities and Exchange
25
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
-------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Commission, the Fund segregated $278,525,761 in high credit quality, liquid
investments against outstanding obligations, resulting in $147,651,129 net
regulatory leverage at January 31, 2002.
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 stockholders. Therefore, no Federal income tax
provision is required. As of January 31, 2002, the Fund had capital loss
carryovers of $5,812,727, $18,629,658, $1,736,003, $3,439,757 and $28,487,803,
which will expire on January 31, 2003, 2004, 2006, 2008 and 2009, respectively
unless offset by future capital gains. During 2001, the Fund had a post-October
loss amounting to $4,734,255. Under current tax law, capital losses realized
after October 31 may be deferred and treated as occurring on the first day of
the following year.
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 in the United States of America. Any
such differences are due primarily to differing treatments for gains and losses,
original issue discount accretion and excise tax regulations.
The tax character of distributions paid to shareholders during fiscal years
ending 2002 and 2001 were as follows:
FISCAL 2002 FISCAL 2001
------------------------------------------ ------------------------------------------
ORDINARY LONG TERM ORDINARY LONG TERM
INCOME CAPITAL GAIN TOTAL INCOME CAPITAL GAIN TOTAL
----------- ------------ ----------- ----------- ------------ -----------
$30,454,768 -- $30,454,768 $30,943,021 -- $30,943,021
As of January 31, 2002, the components of distributable earnings on a tax basis
were as follows:
UNREALIZED
ORDINARY LONG TERM APPRECIATION
INCOME CAPITAL GAIN (DEPRECIATION) TOTAL
---------- ------------ -------------- -----------
$2,144,751 -- $14,637,940 $16,782,691
26
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
-------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS: The Fund considers investments in money market funds and
short-term investments to be cash equivalents.
2. TRANSACTIONS WITH AFFILIATES, ADMINISTRATOR AND RELATED PARTIES
Dresdner RCM Global Investors LLC, the Fund's investment manager, furnished
investment advice to the Fund and received a fee at the annualized rate of 0.95%
of the Fund's average daily net assets during the fiscal year ended January 31,
2002. In connection with the merger of Dresdner RCM Global Strategic Income
Fund, Inc. ("DSF Fund") into the Fund, Dresdner RCM, agreed to waive its
management fee in excess of a rate of 0.75% per annum for those assets of the
Fund following the merger that exceeded the Fund's pre-merger net asset level.
(see note 5.) Dresdner RCM, in addition, agreed to waive a portion of its
management fee payable by the Fund during the first year following the merger as
might be necessary to ensure that the Fund's total operating expenses for that
year, plus nonrecurring merger-related expenses, would be at least $75,000 less
than what the Fund's operating expenses were projected to be using an estimated
expense ratio for the Fund computed on the assumption that the merger had not
occurred. For the period from January 18, 2002 through January 31, 2002,
Dresdner RCM waived $4,941 of its management fees payable by the Fund.
State Street Bank and Trust Company (the "Administrator") served as the Fund's
administrator and accounting agent and received an administrator fee of 0.06% on
the first $250 million of the Fund's average daily net assets, 0.03% on the next
$250 million and 0.01% on the amounts thereafter and an accounting fee of
$90,000 annually. 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 "non interested"
directors an annual fee of $6,000 plus $1,000 for each meeting attended.
3. CAPITAL SHARES
At January 31, 2002, there were 500,000,000 shares of common stock authorized at
$0.00001 par value and 34,185,526 shares outstanding, of which 3,669,726 shares
were issued in exchange of DSF assets. (see note 5.)
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 period ended January 31, 2002, aggregated
$90,498,449 and $95,005,115, respectively. Purchases and
27
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
-------------------------------------
4. PURCHASES AND SALES OF SECURITIES (CONTINUED)
proceeds from sales of obligations of the U.S. Government and its agencies,
other than short-term securities, dollar rolls and forward commitments for the
period ended January 31, 2002, aggregated $1,393,376,711 and $1,253,897,912,
respectively. At January 31, 2002, the aggregate cost of investments for federal
income tax purposes was $708,563,150. Gross unrealized appreciation and
depreciation of investments aggregated $16,283,940 and $1,646,000, respectively,
resulting in net unrealized appreciation of $14,637,940 at January 31, 2002.
5. MERGER
Effective January 18, 2002, in a statutory merger under Maryland law, the Fund
acquired all of the assets and assumed all of the stated liabilities of Dresdner
RCM Global Strategic Income Fund, Inc. ("DSF Fund"). The acquisition was
accomplished by a tax-free exchange of 3,669,726 shares of the Fund (valued at
$40,985,851) for 5,977,283 shares of DSF Fund outstanding on January 18, 2002.
DSF Fund's net assets at that date ($40,985,851), included $99,270 of unrealized
appreciation and $923,086 of cash. The aggregate net assets of the Fund and DSF
Fund immediately before the merger were $340,820,019 and $40,985,851,
respectively, resulting in aggregate net assets of the Fund of $381,805,870
immediately after the merger.
6. SUBSEQUENT EVENT
Effective February 8, 2002, Pacific Investment Management Company LLC ("PIMCO"),
an advisory affiliate of Dresdner RCM Global Investors LLC, assumed management
responsibilities for the Fund pursuant to an interim investment management
agreement. The interim investment management agreement will remain in effect for
up to 150 days from its effective date, pending approval of a new investment
management agreement between the Fund and PIMCO by stockholders of the Fund. The
Board, including a majority of independent directors, approved the new
investment management agreement with PIMCO on March 19, 2002 and expects to seek
stockholder approval of the new investment management agreement at the 2002
Annual Meeting of Stockholders, which is expected to be held on or about June
21, 2002. In connection with approving the transition of Fund management to
PIMCO, the Board also approved a change in the Fund's corporate name to "PIMCO
Strategic Global Government Fund, Inc.", which became effective on March 19,
2002.
Under the terms of the interim investment management agreement approved by the
Board, PIMCO will provide investment advisory services to the Fund for a fee
calculated at an annual
28
RCM STRATEGIC GLOBAL GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
-------------------------------------
6. SUBSEQUENT EVENT (CONTINUED)
rate of 0.85% of the Fund's net assets. The Board also approved an
administrative services agreement pursuant to which PIMCO replaced State Street
Bank and Trust Company as the Fund's administrator and provides certain
administrative services to the Fund for a fee calculated at the annual rate of
0.05% of the Fund's net assets. The Fund's prior investment adviser and
administrator charged fees at the approximate effective rates of 0.94% and 0.05%
of average net assets for advisory and administrative services, respectively.
Pasi Hamalainen at PIMCO has been primarily responsible for the day-to-day
management of the Fund's portfolio since February 8, 2002.
Mr. Hamalainen is a Managing Director, generalist portfolio manager, and a
member of PIMCO'S investment committee. Mr. Hamalainen joined PIMCO in 1994.
29
PIMCO STRATEGIC GLOBAL GOVERNMENT FUND
(FORMERLY RCM STRATEGIC GLOBAL GOVERNMENT FUND)
INDEPENDENT AUDITOR'S REPORT
------------------------------------
To the Board of Directors and Stockholders of the
PIMCO Strategic Global Government Fund, Inc.
(Formerly RCM Strategic Global Government Fund, Inc.):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, changes
in net assets and cash flows, and the financial highlights present fairly, in
all material respects, the financial position of the PIMCO Strategic Global
Strategic Income Fund, Inc. (Formerly RCM Strategic Global Government Fund,
Inc.) (the "Fund") at January 31, 2002, the results of its operations for the
year then ended, the changes in its net assets, cash flows and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statements presentation. We believe that our audits, which included
confirmation of securities at January 31, 2002 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
[/s/ PricewaterhouseCoopers LLP]
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 19, 2002
30
RCM STRATEGIC GLOBAL GOVERNMENT FUND
DIRECTORS AND OFFICERS INFORMATION
--------------------------------------------
January 31, 2002 (Unaudited)
NUMBER OF
PORTFOLIOS IN
TERM OF FUND COMPLEX OTHER
NAME, POSITION OFFICE AND OVERSEEN BY DIRECTORSHIPS
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION DIRECTOR/ HELD BY
AND AGE THE FUND TIME SERVED DURING PAST 5 YEARS OFFICER DIRECTOR/OFFICER
-------------------- ------------- ------------- --------------------------------- ------------- ----------------
INTERESTED
DIRECTOR
Luke D. Knecht Chairman and Term: 3 Chairman and President, RCS Fund. 1 None
Age: 47 President years Member of the Board of Managers
Four Embarcadero Elected: and Managing Director of Dresdner
San Francisco 1999 RCM (since 1998); Director of DSF
CA 94111 Fund (1999-2002)(a closed-end
mutual fund managed by Dresdner
RCM); Chairman, Caywood Scholl
Capital Management (since 1998)
(institutional fixed income
investment advisor); Executive
Director, Russel Reynolds
Associates (1995-1997)(global
executive recruiting firm).
INDEPENDENT
DIRECTORS
James M. Whitaker Director and Term: 3 Director and Vice Chairman of the 1 None
Age: 58 Vice Chairman years Board, RCS Fund. Attorney at Law,
Four Embarcadero of the Board Elected: sole practitioner (since 1972).
San Francisco 1994
CA 94111
Francis E. Lundy Director Term: 3 Director, RCS Fund. Chairman and 1 Industrialex
Age: 63 years President, Technical Manufacturing
Four Embarcadero Elected: Instrument -- San Francisco Corp.
San Francisco 1994 (since 1976); Director,
CA 94111 Industrialex Manufacturing Corp.
(since June 2000) (coating and
application techniques for
electronics industry); Vice
President, Zygo Corp. (1996-1999)
(technology manufacturing and
sales).
Gregory S. Young Director Term: 3 Director, RCS Fund. Principal, 1 None
Age: 44 years Teton Capital Management (since
Four Embarcadero Elected: 1990) (private equity venture
San Francisco 2001 capital)
CA 94111
31
RCM STRATEGIC GLOBAL GOVERNMENT FUND
DIRECTORS AND OFFICERS INFORMATION
--------------------------------------------
January 31, 2002 (Unaudited)
NUMBER OF
PORTFOLIOS IN
TERM OF FUND COMPLEX OTHER
NAME, POSITION OFFICE AND OVERSEEN BY DIRECTORSHIPS
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION DIRECTOR/ HELD BY
AND AGE THE FUND TIME SERVED DURING PAST 5 YEARS OFFICER DIRECTOR/OFFICER
-------------------- ------------- ------------- --------------------------------- ------------- ----------------
OFFICERS
George A. Rio Chief Since 1998 Senior Vice President, Business 1 N/A
Age: 46 Financial Development at BISYS Fund
60 State St, Suite Officer Services, an affiliate of Fund
1300 Distributors, Inc. ("FDI")(since
Boston April 2001); Executive Vice
MA 02109 President and Client Service
Director of FDI (April 1998 to
April 2001); Senior Vice
President and Senior Key Account
Manager for Putnam Mutual Funds
(June 1995 to March 1998).
Robert J. Goldstein Secretary Since 2000 Director and General Counsel, 1 N/A
Age: 38 Dresdner RCM (since July 2001);
Four Embarcadero Director and Associate General
San Francisco Counsel, Dresdner RCM (January
CA 94111 1997 to June 2001); Associate
with law firm of Weil, Gotshal &
Manges (September 1990-December
1996).
Steven L. Wong Treasurer Since 2000 Assistant Director and Manager of 1 N/A
Age: 34 Fund Administration, Dresdner RCM
Four Embarcadero (since December 1994).
San Francisco
CA 94111
Karen Jacoppo-Wood Vice Since 1998 Counsel and an officer of certain 1 N/A
Age: 34 President investment companies distributed
60 State St, Suite and Assistant or administered by BISYS Fund
1300 Secretary Services, an affiliate of FDI
Boston (since April 2001); Vice
MA 02109 President and Senior Counsel of
FDI and an officer of certain
investment companies distributed
by FDI (February 1996 to April
2001); Manager of SEC
Registration, Scudder, Stevens &
Clark, Inc. (June 1994 1994 to
January 1996)
32
RCM STRATEGIC GLOBAL GOVERNMENT FUND
DIRECTORS AND OFFICERS INFORMATION
--------------------------------------------
January 31, 2002 (Unaudited)
NUMBER OF
PORTFOLIOS IN
TERM OF FUND COMPLEX OTHER
NAME, POSITION OFFICE AND OVERSEEN BY DIRECTORSHIPS
ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION DIRECTOR/ HELD BY
AND AGE THE FUND TIME SERVED DURING PAST 5 YEARS OFFICER DIRECTOR/OFFICER
-------------------- ------------- ------------- --------------------------------- ------------- ----------------
Mary A. Nelson Vice Since 1998 Senior Vice President and an 1 N/A
Age: 37 President officer of certain investment
60 State St, Suite and Assistant companies distributed or
1300 Treasurer administered by BISYS Fund
Boston Services, an affiliate of FDI
MA 02109 (since April 2001); Senior Vice
President and Manager of
Financial Services of FDI (May
2000 to April 2001); Vice
President and Manager of
Operations and Treasury Services
of FDI and an officer of certain
investment companies distributed
by FDI (August 1994 to April
2000).
Glen M. Wong Assistant Since 2000 Manager of Fund Administration, 1 N/A
Age: 39 Treasurer Dresdner RCM (since July 1999);
Four Embarcadero Financial Reporting Supervisor at
San Francisco Supervisor at Fremont Mutual
CA 94111 Funds Inc. (July 1996 to June
1999); Accountant, The Permanente
Medical Group, Inc. (July 1995 to
July 1996).
33
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. Dividends and capital gains that are
reinvested through the Plan will be realized as taxable income by participating
stockholders, even though they will receive no cash distribution from the Fund.
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.
34
RCM STRATEGIC GLOBAL GOVERNMENT FUND
STOCKHOLDER MEETING RESULTS
------------------------------------
(Unaudited)
The Annual Meeting of Stockholders of RCM Strategic Global Government Fund, Inc.
(the "Fund") was held on Tuesday, November 20, 2001, and reconvened on November
26, 2001, November 28, 2001 and December 3, 2001. The number of shares issued,
outstanding and eligible to vote as of the record date (October 1, 2001) was
30,515,800. Present were 29,906,576.759 shares represented by 138 proxies or
98.00% of the eligible shares tabulated. The matters voted upon by Stockholders
and the resulting votes for each matter are presented below:
1. The Merger of the Fund with Dresdner RCM Global Strategic Income Fund, Inc.
pursuant to an Agreement and Plan of Merger and Contingent Liquidation dated
August 2, 2001 was approved. The votes were cast: For (15,383,306.991), Against
(454,498.116), Abstain (852,988.652), Del N-Vote (13,215,783).
2. An Investment Management Agreement between the Fund and Dresdner RCM Global
Investors LLC, with an initial term expiring on December 31, 2001, was approved.
The votes were cast: For (28,622,618.395), Against (448,641.712), Abstain
(835,316.652).
3. Francis E. Lundy and Gregory S. Young were re-elected to the Board of
Directors, each for a term to expire in 2004 or until his successor is duly
elected and qualified. The votes were cast:
Francis E. Lundy For (29,252,220.759) Withheld (654,356).
Gregory S. Young For (29,250,920.759) Withheld (655,656).
Luke D. Knecht and James M. Whitaker continued in office as Directors.
The 2002 Annual Meeting of Stockholders of the Fund is currently expected to be
held on or about June 21, 2002. In order for a Stockholder proposal to be
considered for inclusion in the Fund's proxy materials relating to the 2002
Annual Meeting, it must be received by the Secretary of the Fund, Garlin G.
Flynn, at the Fund's executive offices no later than April 15, 2002. The address
of the Fund's executive offices is 840 Newport Center Drive, Suite 300, Newport
Beach, CA 92660.
35
(This page has been left blank intentionally.)
RCM STRATEGIC GLOBAL GOVERNMENT FUND
CORPORATE INFORMATION
----------------------------
DIRECTORS
Luke D. Knecht, Chairman and President
Francis E. Lundy
James M. Whitaker
Gregory S. Young
OFFICERS
George A. Rio
Chief Financial Officer
Robert J. Goldstein
Secretary
Steven L. Wong
Treasurer
Karen Jacoppo-Wood
Vice President and Assistant Secretary
Mary A. Nelson
Vice President and Assistant Treasurer
Glen M. Wong
Assistant Treasurer
INVESTMENT MANAGER (THROUGH 2/8/02)
Dresdner RCM Global Investors LLC
Four Embarcadero Center
San Francisco, California 94111
INVESTMENT MANAGER (SINCE 2/8/02)
PIMCO
840 Newport Center Drive
Newport Beach, CA 92660
ADMINISTRATOR AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(800) 426-5523
TRANSFER AGENT
Equiserve
150 Royall St.
Canton, Massachusetts 02021
(800) 730-6001
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
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 "RCM STGLFD," 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 STOCKHOLDERS 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 STOCKHOLDER REPORTS, PLEASE CONTACT
YOUR BROKER OR CALL DRESDNER RCM DIRECTLY AT (415) 954-5400or visit the Website
at www.rcsfund.com.
INVESTMENT MANAGER: (THROUGH 2/8/02) INVESTMENT MANAGER: (SINCE 2/8/02)
DRESDNER RCM GLOBAL INVESTORS LLC PIMCO
FOUR EMBARCADERO CENTER 840 NEWPORT CENTER DRIVE
SAN FRANCISCO, CALIFORNIA 94111 NEWPORT BEACH, CALIFORNIA 92660