As filed with the Securities and Exchange Commission on March 10, 2008
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-05128
THE SWISS HELVETIA FUND, INC.
1270 Avenue of the Americas, Suite 400
New York, New York 10020
1-888-SWISS-00
Rodolphe E. Hottinger, President
Hottinger et Cie
3 Place des Bergues
C.P. 395
CH-1201 Geneva
Switzerland
Date of fiscal year end: December 31
Date of reporting period: January 1, 2007 - December 31, 2007
ITEM 1. REPORT TO STOCKHOLDERS
THE SWISS HELVETIA FUND, INC.
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Directors and Officers
Samuel B. Witt III, Esq. Baron Hottinger
CHAIRMAN (NON-EXECUTIVE) DIRECTOR EMERITUS
Jean-Marc Boillat Rodolphe E. Hottinger
DIRECTOR PRESIDENT
Paul R. Brenner, Esq./1/ CHIEF EXECUTIVE OFFICER
DIRECTOR Rudolf Millisits
Alexandre de Takacsy SENIOR VICE PRESIDENT
DIRECTOR CHIEF FINANCIAL OFFICER
Claude Frey Philippe R. Comby,
DIRECTOR CFA, FRM
R. Clark Hooper/ 2/ VICE PRESIDENT
DIRECTOR Edward J. Veilleux
Paul Hottinguer VICE PRESIDENT
DIRECTOR SECRETARY
Michael Kraynak, Jr./2/ Scot E. Draeger
DIRECTOR ASSISTANT SECRETARY
Didier Pineau-Valencienne/ 2,3/ Glen Fougere
DIRECTOR ASSISTANT TREASURER
Stephen K. West, Esq./2/ Peter R. Guarino, Esq.
DIRECTOR CHIEF COMPLIANCE OFFICER
Eric R. Gabus
DIRECTOR EMERITUS
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/1/AUDITCOMMITTEE CHAIRMAN / / /3/GOVERNANCE/NOMINATING COMMITTEE CHAIRMAN
/2/AUDITCOMMITTEE MEMBER
INVESTMENT ADVISOR
Hottinger Capital Corp.
1270 Avenue of the Americas, Suite 400
New York, New York 10020
(212) 332-7930
ADMINISTRATOR
Citi Fund Services, LLC
CUSTODIAN
Citibank, N.A.
TRANSFER AGENT
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
LEGAL COUNSEL
Stroock & Stroock & Lavan LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
The Investment Advisor
The Swiss Helvetia Fund, Inc. (the "Fund") is managed by Hottinger Capital
Corp., which belongs to the Hottinger Group.
The Hottinger Group dates back to Banque Hottinguer, which was formed in Paris
in 1786 and is one of Europe's oldest private banking firms. The Hottinger
Group has remained under the control of the Hottinger family through seven
generations. It has offices in the Bahamas, Basel, Geneva, London, Lugano,
Luxembourg, New York, Sion, Toronto, Vienna and Zurich.
EXECUTIVE OFFICES
The Swiss Helvetia Fund, Inc.
1270 Avenue of the Americas, Suite 400
New York, New York 10020
1-888-SWISS-00 (1-888-794-7700)
(212) 332-2760
FOR INQUIRIES AND REPORTS:
1-888-SWISS-00 (1-888-794-7700)
Fax: (212) 332-7931
email: swz@swz.com
WEBSITE ADDRESS
www.swz.com
The Fund
The Fund is a non-diversified, closed-end investment company whose objective is
to seek long-term capital appreciation through investment in equity and
equity-linked securities of Swiss companies. The Fund also may acquire and hold
equity and equity-linked securities of non-Swiss companies in limited instances.
The Fund is listed on the New York Stock Exchange under the symbol "SWZ".
Net Asset Value is calculated daily by 6:15 P.M. (Eastern Time). The most
recent calculation is available by calling 1-888-SWISS-00 or by accessing our
Website. Net Asset Value is also published weekly in BARRON'S, the Monday
edition of THE WALL STREET JOURNAL and the Sunday Edition of THE NEW YORK TIMES.
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Letter to Stockholders
GLOBAL MARKETS REVIEW
After a volatile summer, and a rebound in August and September as the
Federal Reserve cut U.S. interest rates, stock markets around the world
registered a difficult fourth quarter. Most of the developed markets had
negative fourth quarters, while the strongest emerging markets finished flat
during the same period. The detrimental effect of structured finance linked to
mortgage debt continued to spread throughout most credit products, creating
conditions for the end of the multi-year credit cycle boom.
Default risk has been reintroduced into the equation, and the need for more
capital for financial intermediaries has become an urgent reality because of
the impairment of assets and the necessity to disclose contingent liabilities
on companies' balance sheets.
SWISS MARKET REVIEW
As described in previous reports in 2007, the Swiss market has been
affected by issues plaguing the pharmaceuticals industry and investment banks.
In 2007, on the positive side the industrial sector had a very strong
performance (+27.63%), but as it is a relatively small portion of the market,
it had less of an impact on the broad index. In spite of its strong
performance, the industrial sector itself went through a correction towards the
end of the year as economic activity started to show signs of slowdown
worldwide.
However, the Swiss Performance Index (SPI) was up 7.76% in U.S. dollar
terms compared to 5.49% for the Standard & Poor's 500 Index. In Swiss francs,
the SPI was flat for the year despite the strong headwinds described above.
In corporate news, UBS, after announcing the departure of its CEO earlier
in the year, revealed the extent of the damage resulting from its trading in
sub-prime mortgage-backed securities. The bank wrote down 10 billion Swiss
francs and indicated that it had remaining exposure of 29 billion Swiss francs.
At the end of November, the average markdown on various collateralized debt
obligations and residential mortgage-backed securities was 60 cents on the
dollar. Noticeably, UBS had very little exposure to other problematic areas
such as leveraged loans and no exposure to so-called "conduits". However, UBS
has also seen losses generated from its portfolio of structured products.
UBS also has announced a proposed dilutive capital management program
consisting of the resale of treasury shares, the payment of dividends in stock
rather than cash and a 13 billion Swiss franc issue of mandatory convertible
bonds carrying a 9% coupon that would be closed to current shareholders. The
program, if approved, would bring back the bank's tier one ratio from 8.8% (as
of 12/31/07) to 12.2% (at the high end of the industry standard) which was the
ratio before the sub-prime crisis. Shareholders will have the opportunity to
approve this program at an extraordinary meeting on February 27th. Until then,
any recovery in the
2
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Letter to Stockholders (continued)
value of UBS' stock could be delayed by other potential issues including
counterparty risk, the potential for increases in non-performing loans, and
questions about the profitability of the bank's investment banking business
model. These challenges notwithstanding, UBS' equity advisory franchise in the
investment bank and the global private banking franchise should allow
eventually the earnings of the entire company to be on a more normal level.
While Credit Suisse has much less exposure than UBS to U.S. consumer debt,
it has greater exposure to corporate debt, mainly leveraged loans (commitments
on large private equity transactions) and commercial mortgage-backed
securities. Its third quarter results registered a fair value adjustment of 6.9
billion Swiss francs on these commitments and on other structured products.
As of September 2007, Credit Suisse's exposure to funded and unfunded
non-investment grade loan commitments stood at 60 billion Swiss francs, much of
it due to large private equity deals. Credit Suisse's relatively small fair
value adjustment in comparison with its total exposure is probably the reason
why it has not outperformed UBS since the crisis started, as investors feared
that additional write downs may be required.
In the pharmaceutical area, Novartis announced a restructuring program
following the path of some of its European and U.S. peers. The program's goal
is to cut costs, mainly through staff reductions, to an estimated annual
pre-tax level of 1.6 billion U.S. dollars by 2010. A pre-tax restructuring
charge of approximately 450 million U.S. dollars will be taken during the
fourth quarter of 2007. Novartis is looking to decentralize its decision-making
processes and stated that it will focus resources on research and development.
The outlook for the company will depend on developments in the regulatory
environment and execution of projects in the pipeline. While the company's
valuation mostly reflects those risks, its cardio-vascular franchise and the
growing oncology area will remain the key elements to monitor for a positive
re-rating of the stock.
SWISS ECONOMIC NOTES
Switzerland recorded stronger than expected growth of 0.8% in the third
quarter (3.2% annualized) mainly as a result of private consumption, which grew
by 0.9% over the previous quarter. This factor continues to be an important
growth driver and is helped by the continuously improving Swiss labor situation
(the unemployment rate finished the year at 2.6%) and rising income. However,
all of the other components of domestic demand had negative quarterly growth
rates. Most importantly, equipment expenditures were down 4.1% from the prior
quarter.
The export sector continued to be a strong contributor to economic activity
dur-
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Letter to Stockholders (continued)
ing the third quarter, increasing by 2.3% over the prior quarter. The growth in
Gross Domestic Product (GDP) was 0.8% quarter-on-quarter and 2.3% on a
year-over-year basis. Going forward, the performance of the export sector and
financial intermediaries, (the latter accounting for up to 44% of overall GDP
growth in Switzerland) will continue to be the most important factors to
influence economic activity, as private consumption will continue to be
affected by tightening credit standards.
Short-term consumption estimates remain positive, however, as the
Purchasing Manager Index (PMI), a forward looking indicator, reported solid
numbers in November at 63.4 (its highest level was 67.7 on 11/30/06) and order
backlog increased to 69.6 (its highest level was 74.5 on 11/30/06).
The Consumer Price Index (CPI) increased from 0.4% (year-on-year) to 1.8%
(year-on-year) between August and November. This was principally due to an
increase in the price of oil. Excluding oil, the CPI was contained, increasing
from 0.7% to 0.9%. The Swiss National Bank (SNB) has forecasted average
inflation of 0.7% in 2007, 1.7% in 2008 (assuming an increase in the price of
oil in the first half of 2008) and 1.5% in 2009.
Following last quarter's monetary policy decision to cut interest rates,
the three-month LIBOR rate rapidly dropped from a high of 2.9% to the target
rate of 2.75% and remained at that level. At its last quarterly assessment in
December, the SNB decided to leave its target range for the three-month LIBOR
unchanged at 2.25%-3.25% and hold the rate in the middle of the target range,
(i.e. at 2.75%). The SNB still forecasts a growth rate of a little over 2.5% in
2007 and 2% in 2008.
On the bond interest rate front, the yield on 10-year Confederation bonds
dropped slightly during the fourth quarter, and finished the year at 3%. Very
short-term government rates (1 year or less) that are influenced more by SNB
policy than by market forces, stayed substantially higher than the rates
ranging from 2 years to 8 years. However, this second portion of the curve
witnessed some steepening that could be related to expectations of higher
inflation.
Beginning in August, the Swiss franc benefited clearly from an increase in
risk aversion in the market, increasing by 7% against the U.S. dollar and 1%
against the euro, which is a new development. The Swiss franc was, after the
Japanese yen, the strongest performer against the U.S. dollar among all main
currencies. The outlook for the Swiss currency looks quite good based on the
reversal of the carry trade, which benefits the funding currencies like the
Swiss franc and the Japanese yen as interest rate differentials across
different countries are expected to narrow.
OTHER NEWS INVOLVING THE SWISS NATIONAL BANK
On December 12, 2007, the SNB joined the Bank of Canada, the Bank of
England, the
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Letter to Stockholders (continued)
European Central Bank (ECB) and the Federal Reserve Bank (FRB) in a coordinated
effort to promote lending and restore liquidity in money markets as inter-bank
spreads reached record levels against government rates. The FRB established a
Temporary Term Auction Facility under which it offered two auctions of 20
billion U.S. dollars each in December. The FRB also established foreign
exchange swap lines with the ECB and the SNB in which they entered with the FRB
to auction 24 billion U.S. dollars to banks in Europe.
RIGHTS OFFERING AND FUND PERFORMANCE
Since the conclusion of the Fund's rights offering in June, Management has
invested substantially all of the proceeds from the offering in accordance with
the Fund's investment objective and policies. The Fund has made new and
additional investments in certain asset classes, including industrials, small-
and mid-cap issuers and private equity vehicles, where Management has found
attractive investment opportunities. In other sectors, such as real estate,
Management continues to monitor market conditions and investment opportunities.
As previously discussed and anticipated, the rights offering resulted in
dilution to the net asset value of the Fund's shares. This dilution was
estimated at 6.81% (measured in Swiss francs) at the conclusion of the
offering. As of December 31, 2007, the Fund's annual total return based on net
asset value was -2.67% (Swiss francs). Calculated without giving effect to this
dilution, the Fund's annual total return was 4.00% (Swiss francs) as of
December 31, 2007. The SPI's annual total return was -0.05% (Swiss francs) as
of December 31, 2007. As such, Management has been able to reduce the impact of
the rights offering dilution on the Fund's performance relative to the
benchmark. Net of the dilution impact, the relative performance versus the SPI
Index was -2.62% and with the effect of the dilution it was 4.05%.
The mid cap sector, in which the Fund has made large investments, has been
during the quarter affected by the current economic outlook and redemptions
from investors in European and Swiss mutual funds. However, the main issue for
the Fund was investors' increased risk aversion for the early stage companies
in the biotech sector as the U.S. Food and Drug Administration (FDA)
implemented new measures to improve its review process of new drug candidates.
Under these measures, the FDA will rely more on external experts. Investors
viewed these standards as making the approval process longer and more complex.
The uncertainty created by the discussions around this development has
penalized companies with a high number of products waiting for approval
compared to their existing products on the market.
The Fund's private equity investments have developed favorably, even though
they have not yet had a material impact on the Fund's performance, as the Fund
has less than 0.5% of its total assets invested in this sector. Management,
however, is gradually increasing its exposure to this sector. There are ample
opportunities in the venture capital and, especially, the buy-out sectors in
Switzerland to
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Letter to Stockholders (continued)
allow the Fund to make additional investments. The deployment of investments in
these sectors is much longer than required for investments in public equities,
but stays well within the time frame projected.
As mentioned above, market conditions did not provide the Fund with many
attractive investment opportunities in real estate and infrastructure. The
price correction of listed real estate companies has brought these companies
much closer to their net asset values. Since these companies are mostly active
in commercial real estate, Management will continue to monitor developments in
consumer spending and the local financial sector to assess the sign of a
bottoming process.
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Letter to Stockholders (continued)
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PEER GROUP/INDICES PERFORMANCE COMPARISON IN SWISS FRANCS/1/
------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN AS OF YEAR ENDED DECEMBER 31 CUMULATIVE
------- ---------------------------------------------------------------------- PERFORMANCE
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 12/31/96-12/31/07
----------------------------- ------- ------ ------ ----- ------ ------- ------- ------ ------ ------ ------ -----------------
SWISS HELVETIA FUND -2.67%* 20.56% 33.20% 7.75% 22.54% -20.40% -22.91% 14.06% 14.70% 15.57% 53.99% 194.85%
Swiss Performance Index
(SPI) -0.05% 20.67% 35.61% 6.89% 22.06% -25.95% -22.03% 11.91% 11.69% 15.36% 55.19% 175.70%
Swiss Market Index (SMI) -3.43% 15.85% 33.21% 3.74% 18.51% -27.84% -21.11% 7.47% 5.71% 14.28% 58.93% 115.22%
iShares MSCI Switzlerland/2/
(Formerly called Webs
Switzerland) -0.97% 20.02% 32.45% 6.34% 19.14% -26.23% -23.12% 7.75% 12.22% 11.74% 47.79% 125.87%
CS EF Swiss Blue Chips/3,7/ -1.66% 18.78% 32.27% 2.75% 18.13% -28.75% -22.12% 10.97% 7.57% 14.21% 59.90% 126.85%
UBS (CH) Equity Fund/4,7/ -2.55% 18.98% 33.50% 5.00% 18.14% -26.02% -22.04% 7.42% 6.43% 12.75% 55.94% 122.60%
Pictet (CH) -- Swiss
Equities/5,7/ 1.94% 19.37% 37.06% 7.05% 20.10% -27.93% -22.35% 7.34% 9.38% 11.05% 55.65% 143.52%
Saraswiss (Bank Sarasin)/6,7/ -2.86% 18.69% 33.05% 2.93% 19.64% -28.51% -24.45% 9.72% 7.10% 14.41% 53.57% 110.65%
SOURCES : BLOOMBERG, MANAGEMENT COMPANIES' WEBSITES AND CITIGROUP FUND SERVICES.
/1/ PERFORMANCE OF FUNDS IS BASED ON CHANGES IN THE FUND'S NAV OVER A SPECIFIED
PERIOD. IN EACH CASE TOTAL RETURN IS CALCULATED ASSUMING REINVESTMENT OF ALL
DISTRIBUTIONS. FUNDS LISTED, OTHER THAN ISHARES MSCI SWITZERLAND, ARE NOT
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION. PERFORMANCE AND
DESCRIPTIVE INFORMATION ABOUT THE FUNDS ARE DERIVED FROM THEIR PUBLISHED
INVESTOR REPORTS AND WEBSITES, WHICH ARE SUBJECT TO CHANGE.
/2/ SHARES OF ISHARES MSCI SWITZERLAND ARE TRADED ON THE NEW YORK STOCK
EXCHANGE AND SEEKS TO PROVIDE INVESTMENT RESULTS THAT CORRESPOND TO THE
PERFORMANCE OF THE SWISS MARKET, AS MEASURED BY THE MSCI SWITZERLAND INDEX.
THESE STOCKS REPRESENT SWITZERLAND'S LARGEST AND MOST ESTABLISHED PUBLIC
COMPANIES, ACCOUNTING FOR APPROXIMATELY 85% OF THE MARKET CAPITALIZATION OF ALL
SWITZERLAND'S PUBLICLY TRADED STOCKS. PERFORMANCE OF SHARES OF ISHARES MSCI
SWITZERLAND IS CALCULATED BASED UPON THE CLOSING PRICES OF THE PERIOD INDICATED
USING THE SWISS FRANC/U.S. DOLLAR EXCHANGE RATE AS OF NOON EACH SUCH DATE, AS
REPORTED BY BLOOMBERG. SUCH EXCHANGE RATES WERE AS FOLLOWS: 12/31/97 = 1.46,
12/31/98 = 1.38, 12/31/99 = 1.60, 12/31/00 = 1.61, 12/31/01 = 1.67, 12/31/02 =
1.39, 12/31/03 = 1.24, 12/31/04 = 1.14, 12/31/05 = 1.32, 12/31/06 = 1.22 AND
12/31/07 = 1.13.
/3/ THIS FUND GIVES INVESTORS ACCESS TO THE SWISS EQUITY MARKET. IT HAS A
BROADLY-DIVERSIFIED PORTFOLIO GEARED TO THE LONG-TERM VALUE GROWTH, WITH A
PREFERENCE TO LARGE CAP STOCKS. STOCK SELECTION IS BASED ON CRITERIA SUCH AS
COMPANY VALUATION, BUSINESS CLIMATE, MARKET POSITIONING AND MANAGEMENT QUALITY.
/4/ THIS FUND INVESTS PRIMARILY IN MAJOR SWISS COMPANIES. QUALITY CRITERIA USED
FOR DETERMINING RELATIVE WEIGHTINGS OF COMPANIES INCLUDE: STRATEGIC
ORIENTATION, STRENGTH OF MARKET POSITION, QUALITY OF MANAGEMENT, SOUNDNESS OF
EARNINGS, GROWTH POTENTIAL AND POTENTIAL FOR IMPROVING SHAREHOLDER VALUE. THE
INVESTMENT OBJECTIVE SEEKS TO PROVIDE RESULTS THAT ARE ALIGNED WITH THE SPI
PERFORMANCE.
/5/ THIS FUND INVESTS IN SHARES OF COMPANIES LISTED IN SWITZERLAND AND INCLUDED
IN THE SPI, MAINLY IN BLUE CHIP STOCKS.
/6/ THIS FUND INVESTS IN SHARES OF SWISS COMPANIES. IT WEIGHTS INDIVIDUAL
SECTORS RELATIVE TO THE SPI ON THE BASIS OF THEIR EXPECTED RELATIVE
PERFORMANCE. IT FOCUSES ON LIQUID BLUE-CHIP STOCKS.
/7/ THESE FUNDS ARE NOT AVAILABLE FOR U.S. RESIDENTS OR CITIZENS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
*NOT INCLUDING THE RIGHTS OFFERING DILUTION, THE NAV PERFORMANCE AS OF 12/31/07
WAS 4.00% MEASURED IN SWISS FRANC TERMS (RESULTING IN CUMULATIVE PERFORMANCE OF
215.20%).
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (concluded)
---------------------------------------------------------
INDICES PERFORMANCE COMPARISON
---------------------------------------------------------
YEAR ENDED
DECEMBER 31, 2007
--------------------------------------- -----------------
PERFORMANCE IN SWISS FRANCS
Swiss Performance Index (SPI) -0.05%
Swiss Helvetia Fund
Based on Net Asset Value -2.67%/1/
CHANGE IN U. S. DOLLAR VS. SWISS FRANC -7.25%
PERFORMANCE IN U.S. DOLLARS
SWISS HELVETIA FUND PERFORMANCE
Based on Net Asset Value 4.95%/2/
Based on Market Price -3.39%
S & P 500 Index 5.49%
MSCI EAFE Index 11.17%
Lipper European Fund Index (10 Largest) 17.15%
Lipper European Fund Universe Average 11.61%
SOURCES: CITIGROUP FUND SERVICES, LLC AND BLOOMBERG
/1/ NOT INCLUDING THE RIGHTS OFFERING DILUTION THE NAV PERFORMANCE AS OF
12/31/07 WAS 4.00% IN SWISS FRANC TERMS.
/2 /NOT INCLUDING THE RIGHTS OFFERING DILUTION THE NAV PERFORMANCE AS OF
12/31/07 WAS 12.14% IN U.S. DOLLAR TERMS.
OUTLOOK
Beginning in June, the global market started to discount a projected rapid
slowdown in corporate earnings in 2008-2009. Not only will the progression of
sales numbers be affected by moderation of global economic growth, but also
margins will be under pressure due to the effect of negative operating leverage
and increased input prices. Return on equity also will suffer from lower
earnings and higher capital needs to support business activity, mainly in the
financial sector. As mentioned, however, the valuation of stocks in the Swiss
markets is now at a level that reflects a major slowdown in the U.S. economy
and a more moderate pace of growth outside the United States. While uncertainty
about the impact of the credit crisis on global growth remains, Management will
use the tools at its disposal including private equity and hedging instruments,
to navigate the Fund through the rough environment caused by the unwinding of
the U.S. credit bubble.
Sincerely,
/s/ Rodolphe E. Hottinger
Rodolphe E. Hottinger
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ Rudolf Millisits
Rudolf Millisits
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
December 31, 2007
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Certain Information Concerning Directors (Unaudited)
The following tables set forth certain information about each person
currently serving as a Director of the Fund, including his beneficial ownership
of Common Stock of the Fund. All information presented in the tables is as of
December 31, 2007. Information is presented separately with respect to
Directors who have been determined to be non-interested Directors and Directors
who are interested Directors under the Investment Company Act of 1940, as
amended.
CLASS I INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2010)
-------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS SHARES AND DOLLAR
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) HELD BY DIRECTOR RANGE OF
& AGE TIME SERVED DURING AT LEAST THE PAST FIVE YEARS COMMON STOCK
BENEFICIALLY
OWNED/1/
-------------------------------------------------------------------------------------------------------------------------------
Mr. Alexandre Director Director from Senior Advisor to the Hottinger Group None 1,057
de Takacsy/2/ 1987 to 1994 and President of Hottinger U.S. Inc. until $10,001-$50,000
Financiere and since 1998. December 2004; Vice Chairman of the
Hottinguer Board, Director, President and Secretary:
43, rue Taitbout Hottinger Capital Corp.; Retired Senior
75009 Paris Executive: Royal Bank of Canada.
France
Age 78
-------------------------------------------------------------------------------------------------------------------------------
CLASS I NON-INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2010)
-------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS SHARES AND DOLLAR
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) HELD BY DIRECTOR RANGE OF
& AGE TIME SERVED DURING AT LEAST THE PAST FIVE YEARS COMMON STOCK
BENEFICIALLY
OWNED/1/
-------------------------------------------------------------------------------------------------------------------------------
Mr. Jean-Marc Director; Director since Former CEO, Tornos-Bechler S.A., None 4,600
Boillat Member of the 2005. Moutier; Former Ambassador of $50,001-$100,000
Les Gradas Governance/ Switzerland in various countries,
47120 Villeneuve Nominating including Lebanon, Cyprus, Angola,
de Duras Committee Mozambique and Argentina.
France since 2005.
Age 66
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Certain Information Concerning Directors (Unaudited) (continued)
CLASS I NON-INTERESTED
DIRECTOR(TERM WILL EXPIRE IN 2010)
-----------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS SHARES AND DOLLAR
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) HELD BY DIRECTOR RANGE OF
& AGE TIME SERVED DURING AT LEAST THE PAST FIVE COMMON STOCK
YEARS BENEFICIALLY
OWNED/1/
-----------------------------------------------------------------------------------------------------------------------------
Mr. Claude W. Director; Director since President of the Swiss Chairman of the Board: Infra 3,086
Frey Member of the 1995. Parliament from 1994 to 1995; Tunnel SA (Marin); Beton Frais $50,001-$100,000
Clos 108 Governance/ President of the Swiss Police SA (Marin); Member of the
2012 Auvernier Nominating Academy (Neuchatel) from 1996 Board: Dexia Banque Privee
Switzerland Committee to 2003; Member of the Swiss (Suisse), Zurich; Dexia Public
since 2002. Parliament from 1979 to 2003; Finance (Switzerland), Geneva;
Age 64 Parliamentary Assembly of the Racemark Industries
Council of Europe (Switzerland) SA, Couvet;
(Strasbourg) from 1996 to SCCM SA (Crans-Montana);
2004; Executive Board of the President of the Steering
"North-South Centre" (Lisbon) Committee of InterNutrition
since 1999; President of the (Zurich); Chairman of the
National Committee for Executive Board of the "North-
Foreign Affairs from 2001 to South Centre" (Lisbon);
2003 (Vice President from Chairman of the Federal
1991 to 2001); Chairman of Committee for Employee
the Board: Berun Frais SA Pension Plans (Berne).
(Marin) since 2002;
Federation of Swiss Food
Industries (Berne) from 1991
to 2001; Association of Swiss
Chocolate Manufacturers
(Berne) from 1991 to 2000;
Vice Chairman of the Board:
Federation of Swiss
Employers' Association
(Zurich) from 1997 to 2001.
-----------------------------------------------------------------------------------------------------------------------------
Ms. R. Clark Director; Director since President of Dumbarton Group Director of certain funds in the 1,000
Hooper Member of the 2007. LLC (regulatory consulting) American Fund fund complex $10,001-$50,000
1156 St. Audit from 2003 to 2007; Various (18 funds); Director of JP
Andrews Road Committee positions, including Morgan Value Opportunities
Bryn Mawr, PA and Member Executive Vice President of Fund; Chairman and Member
19010 of the Regulatory Policy and of the Executive Committee
Governance/ Oversight (2002-2003) and and Board of Trustees of
Age 61 Nominating Strategic Programs Hollins University (VA); and
Committee (1992-2002) of the National Trustee of Children's Hospital
since 2007. Association of Securities of Philadelphia (PA).
Dealers, Inc. (currently,
Financial Industry Regulatory
Authority, Inc.) from 1972 to
2003.
-----------------------------------------------------------------------------------------------------------------------------
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Certain Information Concerning Directors (Unaudited) (continued)
CLASS II NON-INTERESTED
DIRECTOR(TERM WILL EXPIRE IN
2008)
------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS SHARES AND DOLLAR
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) HELD BY DIRECTOR RANGE OF
& AGE TIME SERVED DURING AT LEAST THE PAST COMMON STOCK
FIVE YEARS BENEFICIALLY
OWNED/1/
------------------------------------------------------------------------------------------------------------------------------
Mr. Paul R. Director; Director since Of Counsel of Salans Chairman of the Board and 15,087
Brenner Esq. Chairman of December (law firm) since July Director: Harry Limited over $200,000
25 Moore Road the Audit 2002. 1996; Paul R. Brenner, (Private Investment Company
Bronxville, Committee Attorney-at-Law since ("P.I.C.")); MFGAT, Inc.
New York since 2006; June 1993; Counsel to (P.I.C.); Strelsau, Inc. (P.I.C.);
10708 Member of the the Fund from 1994 to MG Management Corp.
Governance/ 2002; Partner: Kelly (P.I.C.); Marango Capital
Age 65 Nominating Drye & Warren LLP (law Management Corp. (P.I.C.);
Committee firm) from 1976 to 1993. Quercus Foundation, Inc.
since 2005; and (Private Foundation);
Secretary from Highstead Fund, Inc. (Private
1987 to 2002. Foundation); Highstead
Foundation, Inc. (Arboretum)
and Director and Senior
Trustee: The Louis Calder
Foundation (Private
Foundation).
------------------------------------------------------------------------------------------------------------------------------
Mr. Didier Director; Director since Honorary Chairman: Director: Fleury Michon 3,070
Pineau- Member of the 1999. Schneider Electric SA (France); AFEP (France); $50,001-$100,000
Valencienne Audit (industrial Wendel Investissements
c/o SAGARD Committee conglomerate) since (formerly Compagnie Generale
Private Equity since 1999; and 1999; Chairman of the d'Industrie et de Participations
Partners Member (since Board and CEO of (CGIP)) from 1996 to 2005;
24/32 Rue Jean 2002) and Schneider Electric SA Member of the Board of Pernod
Goujon Chairman (industrial Ricard; Member of Supervisory
75008 Paris (since 2007) conglomerate) from 1981 Board of AXA-UAP (France)
France of the to 1999; Chairman of (insurance) from 1998 to 2001;
Governance/ AFEP from 1999 to 2001; Member of Advisory Board:
Age 76 Nominating Vice Chairman of Credit Booz Allen & Hamilton (USA)
Committee. Suisse First Boston from 1997 to 2002; Member of
(Europe) Limited LaGardere (France) (holding
(investment banking) company).
from 1999 to 2002;
Senior Advisor of Credit
Suisse First Boston
since 2002; Partner,
SAGARD Private Equity
Partners (France).
------------------------------------------------------------------------------------------------------------------------------
Mr. Samuel B. Director; Director since Senior Vice President Former Member and President 4,470
Witt, III, Esq. Chairman 1987. and General Counsel: of the Virginia Military $50,001-$100,000
1802 Bayberry (Non-executive) Stateside Associates, Institute Board of Visitors;
Court, Suite 401 since 2006; Inc. from August 1993 to Trustee, The Williamsburg
Richmond, Chairman of May 30, 2004; Senior Investment Trust (registered
Virginia 23226 the Audit Consultant to Stateside investment company); Trustee,
Committee Associates, Inc. from George C. Marshall
Age 72 from 1993 to June 1 to December 31, Foundation; Trustee,
2005; and 2004; Samuel B. Witt, University of Virginia Law
Member of the III, Attorney-at-Law, School Foundation; Director,
Governance/ since August 1993. Gateway Homes, Inc.; and
Nominating Director, College Orientation
Committee Workshop.
since 2002.
------------------------------------------------------------------------------------------------------------------------------
11
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (Unaudited) (continued)
CLASS III INTERESTED DIRECTOR(TERM
WILL EXPIRE IN 2009)
--------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS SHARES AND DOLLAR
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) HELD BY DIRECTOR RANGE OF
& AGE TIME SERVED DURING AT LEAST THE PAST FIVE COMMON STOCK
YEARS BENEFICIALLY
OWNED/1/
--------------------------------------------------------------------------------------------------------------------------
Mr. Paul Director; Director since Vice Chairman of the Board, None. None./3/
Hottinguer/2/ Chairman of 1987. Director and Member of
Hungerstrosse the Board of Investment Committee:
H2 Directors from Hottinger Capital Corp.; AXA
8832 Wilem- 1989 to 2006; International Obligation
Wollerau Chief (finance) since 1996;
Switzerland Executive Managing Director: Intercom
Officer from (holding company) since 1984;
Age 65 1989 to 2002. Administrator: Investissement
Provence SA since 1989;
Permanent Representative:
Credit Suisse Hottinguer to
Provence International
(publicly held French mutual
fund); Credit Suisse
Hottinguer to CS Oblig Euro
Souverain (mutual fund);
Censor -- Provence Europe
(mutual fund); Credit Suisse
Hottinguer to PPC; Credit
Suisse Hottinguer to
Croissance Britannia
(investment fund); Credit
Suisse Hottinguer to Harwanne
Allemagne; Director:
Hottinger U.S., Inc. until
December 2004; General
Partner: Hottinger et Cie
(Zurich) until December 2007;
President: Gaspee (real
estate) from 1992 to 2006;
Financiere Hottinguer
(holding company) from 1990
to 2002; Financiere Provence
Participations (venture
capital firm) from 1990 to
2002; Finaxa (finance) from
1982 to 2004; Financiere
Hottinguer to CS Institutions
Monetaire (mutual fund) from
1990 to 2002; Financiere
Hottinguer to CS Court Terme
(mutual fund) from 1990 to
2002.
--------------------------------------------------------------------------------------------------------------------------
Mr. Michael Director; Director since Partner of Brown Brothers Director of American 10,000
Kraynak, Jr. Member of the 2005. Harriman & Co.; Member, BBH Australian Association; $100,001-$200,000
401 Mountain Audit Trust Company Investment Chairman, Finance Committee;
Avenue Committee Committee. Member, Executive Committee;
Ridgewood, since 2005; President of the Robert
New Jersey Member of the Brunner Foundation (private
07450 Governance/ foundation); Trustee of the
Nominating Ridgecrest Senior Citizens
Age 77 Committee Housing Corp.; Former
since 2005. Member of the Ridgewood (NJ)
Financial Advisory Council;
Former Director: Yale Alumni
Association of Bergen County.
--------------------------------------------------------------------------------------------------------------------------
12
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (Unaudited) (concluded)
CLASS III NON-INTERESTED
DIRECTORS(TERM WILL EXPIRE IN 2009)
------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS SHARES AND DOLLAR
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) HELD BY DIRECTOR RANGE OF
& AGE TIME SERVED DURING AT LEAST THE PAST FIVE COMMON STOCK
YEARS BENEFICIALLY
OWNED/1/
------------------------------------------------------------------------------------------------------------------------------
Mr. Stephen K. Director; Director since Senior Counsel of Sullivan & Director: Pioneer Funds 19,771
West, Esq. Member of the 1995. Cromwell LLP since 1997, (registered investment over $200,000
Sullivan & Governance/ including counsel to the company) (52 portfolios);
Cromwell LLP Nominating Fund's independent Directors; AMVESCAP PLC (investment
125 Broad Street Committee Partner of Sullivan Cromwell manager) from 1999 to 2005;
New York, since 2002 and from 1964 to 1996. First ING Insurance Company
New York 10004 Member of the of New York from 1983 to 2001;
Audit Winthrop Focus Funds
Age 79 Committee (registered investment
from 1996 to company) from 1988 to 1997;
2004 and since ING America Holdings, Inc.
2006. (insurance and broker-dealer
holding company) from 1988 to
1998; Dresdner RCM Global
Strategic Income Fund, Inc.
(registered investment
company) from 1997 to 2002.
------------------------------------------------------------------------------------------------------------------------------
13
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Executive Officers (Unaudited)
The following table sets forth certain information about each person
currently serving as an Executive Officer of the Fund, including his beneficial
ownership of Common Stock of the Fund. All information presented in the table
is as of December 31, 2007.
EXECUTIVE OFFICERS
------------------------------------------------------------------------------------------------
NAME, POSITION(S) PRINCIPAL SHARES OF
ADDRESS & AGE WITH FUND OCCUPATION(S) COMMON STOCK
DURING AT LEAST THE PAST FIVE YEARS BENEFICIALLY
OWNED/1/
------------------------------------------------------------------------------------------------
Mr. Rodolphe E. President and Managing Partner: Hottinger et Cie 468,944/4/
Hottinger Chief Executive (Zurich) since 1987; President: Over $1,000,000
Hottinger et Cie Officer Financiere Hottinguer Paris; Hottinger
3 Place des Bergues Capital, S.A. (Geneva) (investment
C.P. 1620 company) since 2000; Hottinger Asset
1211 Geneva 1 Management Canada, Inc. since 2007;
Switzerland Hottinger & Partners SA Geneve;
Hottinger & Associates Sion since 2001;
Age 51 and Emba, NV (investment company) since
1990; Vice Chairman of the Board,
Director, Chief Executive Officer and
Member of Investment Committee:
Hottinger Capital Corp. ("HCC") since
1994; Director: Hottinger U.S. Inc.
until December 2004.
------------------------------------------------------------------------------------------------
Mr. Rudolf Millisits Senior Vice Director of HCC since December 2000; 11,640
HCC President, Chief Operating Officer of HCC since Over $200,000
1270 Avenue of Treasurer and December 1998; Executive Vice
the Americas Suite 400 Chief Financial President, Portfolio Manager, Member of
New York, New York Officer Investment Committee and Chief
10020 Compliance Officer of HCC since
September 1994; Assistant Secretary of
Age 50 HCC since August 1995; Chairman, CEO,
Director of Hottinger U.S., Inc since
December 2004; President, CFO:
Hottinger Brothers LLC since 2004;
Executive Vice President and Assistant
Secretary of Hottinger U.S., Inc. until
December 2004.
------------------------------------------------------------------------------------------------
Mr. Philippe R. Comby, Vice President Director of HCC since September 2005; 3,778
CFA, FRM Senior Vice President of HCC since $50,001-$100,000
HCC 2002; Chief Investment Officer and
1270 Avenue of Senior Vice President of Hottinger
the Americas Suite 400 Brothers LLC since 2004; President,
New York, New York Director and Secretary of Hottinger
10020 U.S., Inc. since December 2004; Chief
Investment Officer of Hottinger Asset
Age 41 Management AG (Zurich) since 2007;
First Vice President of HCC from 1998
to 2002; Vice President of Hottinger
U.S., Inc until December 2004;
Treasurer of HCC since 1997. Member of
Investment Committee of HCC since 1996.
------------------------------------------------------------------------------------------------
Mr. Edward J. Veilleux Vice President President EJV Financial Services LLC 3,461
EJV Financial Services and Secretary (investment company consulting) since $50,001-$100,000
LLC May 2002; Director of Deutsche Asset
5 Brook Farm Court Management from 1999 to 2002; Principal
Hunt Valley, Maryland of BT Alex. Brown Incorporated from
21030 1989 to 1999; Executive Vice President,
Investment Company Capital Corp. from
Age 64 1987 to 2002; Senior Vice President of
Old Mutual Advisor Funds (formerly
known as the PBHG Funds) since January
2005.
------------------------------------------------------------------------------------------------
14
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Executive Officers (Unaudited) (concluded)
EXECUTIVE OFFICERS
---------------------------------------------------------------------------------------
NAME, POSITION(S) PRINCIPAL SHARES OF
ADDRESS & AGE WITH FUND OCCUPATION(S) COMMON STOCK
DURING AT LEAST THE PAST FIVE YEARS BENEFICIALLY
OWNED/1/
---------------------------------------------------------------------------------------
Mr. Peter R. Guarino, Chief Executive Director, Compliance Services None
Esq. Compliance of Foreside Fund Services, LLC since
Forum Compliance Officer 2004; Independent Compliance Consultant
Services, LLC from 2002 to 2004; General Counsel and
Two Portland Square Global Compliance Director of MiFund,
Portland, Maine 04101 Inc. (mutual fund services) from
2000 to 2002.
Age 50
---------------------------------------------------------------------------------------
/1/ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (15 PERSONS) OWNED 806,491
SHARES WHICH CONSTITUTES APPROXIMATELY 2.5% OF THE OUTSTANDING COMMON STOCK
OF THE FUND. SHARE NUMBERS IN THIS ANNUAL REPORT HAVE BEEN ROUNDED TO THE
NEAREST WHOLE SHARE.
/2/INDICATES "INTERESTED PERSON," AS DEFINED IN THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED (THE "1940 ACT"). PAUL HOTTINGUER AND ALEXANDRE DE TAKACSY
ARE "INTERESTED PERSONS" BECAUSE OF THEIR CURRENT POSITIONS WITH HCC, THE
FUND'S INVESTMENT ADVISOR.
/3/AS OF DECEMBER 31, 2007, AS A RESULT OF CERTAIN TRANSFERS IN 2007 AMONG
FAMILY MEMBERS AND THE ENTITIES OWNED AND CONTROLLED BY THEM, PAUL
HOLLINGUER WAS NO LONGER DEEMED TO OWN SHARES PREVIOUSLY ATTRIBUTED TO HIS
OWNERSHIP.
/4/HOTTINGER ET CIE (ZURICH), A PARTNERSHIP, OWNS 191,074 SHARES OF THE FUND,
HCC OWNS 189,187 SHARES OF THE FUND, HOTTINGER TREUHAND AG OWNS 13,098
SHARES OF THE FUND AND HOTTINGER BANK & TRUST LIMITED, NASSAU OWNS 52,355
SHARES OF THE FUND. RODOLPHE E. HOTTINGER IS A CONTROLLING PARTNER OF
HOTTINGER ET CIE (ZURICH) AND A CONTROLLING STOCKHOLDER AND DIRECTOR OF HCC
AND HOTTINGER TREUHAND AG AND THEREFORE HAS VOTING AND INVESTMENT POWER OVER
THE 445,714 SHARES OF THE FUND OWNED BY HOTTINGER ET CIE (ZURICH), HCC,
HOTTINGER TREUHAND AG AND HOTTINGER BANK & TRUST LIMITED, NASSAU. IN
ADDITION, MR. HOTTINGER AND HIS CHILDREN DIRECTLY OWN 23,230 SHARES OF THE
FUND.
15
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Review of Operations (Unaudited)
Trading activity for the year ended December 31, 2007 involved changes in the
following positions:
--------------------------------------------------------------------------------
NEW INVESTMENTS BY THE FUND
--------------------------------------------------------------------------------
Aare-Tessin AG Fuer Elektrizitaet Olten
ABB Ltd., Expired 6/15/07 -- Call Warrant
ABB Ltd., Expired 12/21/07 -- Call Warrant
Actelion, Ltd., Expires 3/20/08 -- Call Warrant
Addex Pharmaceuticals SA
Aravis Venture II -- Limited Partnership
Atel Holding AG
Bachem Holding
Credit Suisse Group, Expires 5/16/08 -- Warrant
Dufry Group
Elektrizitaets-Gesellschaft Laufenburg AG
EMS -- Chemie Holding AG
Flughafen Zuerich AG
Komax Holding AG
Lonza Group, Expired 5/18/07 -- Call Warrant
Lonza Group, Expired 6/15/07 -- Call Warrant
Novartis AG, Expires 4/18/08 -- Warrant
OC Oerlikon Corp. AG
Partners Group
Petroplus Holdings AG
Raetia Energie AG
Santhera Pharmaceuticals AG
Schulthess Group AG
SLI Swiss Leader Index, Expires 3/20/08 -- Put Warrant
SMIM Total Return Index, Expires 3/20/08 -- Put Warrant
Swiss Market Index, Expired 9/21/07 -- Put Warrant
Swiss Market Index, Expires 1/18/08 -- Call Warrant
Swiss Market Index, Expires 2/15/08 -- Call Warrant
Swiss Market Index, Expires 3/20/08 -- Put Warrant
Swiss Market Index, Expires 4/18/08 -- Put Warrant
Tecan Group AG
Temenos Group AG
UMS Schweizerische Metallwerke Holding
Zurmont Madison Private Equity, LP
--------------------------------------------------------------------------------
ADDITIONS TO EXISTING INVESTMENTS
--------------------------------------------------------------------------------
ABB Ltd.
Credit Suisse Group
Centralschweizerische Kraftwerke AG
Precious Woods Holdings AG
Schmolz and Bickenbach AG
Swatch Group AG
Syngenta AG
--------------------------------------------------------------------------------
SECURITIES DISPOSED OF
--------------------------------------------------------------------------------
ABB Ltd., Expired 6/15/07 -- Call Warrant
ABB Ltd., Expired 12/21/07 -- Call Warrant
Adecco SA
Cie Financ Richmont, Class A
Lonza Group, Expired 5/18/07 -- Call Warrant
Lonza Group, Expired 6/15/07 -- Call Warrant
Julius Baer Holding AG
Kudelski SA
Novartis AG, Expires 4/18/08 -- Warrant
Sulzer AG
Swiss Life Holding
Swiss Market Index, Expired 9/21/07 -- Put Warrant
Swiss Market Index, Expires 1/18/08 -- Call Warrant
--------------------------------------------------------------------------------
REDUCTIONS IN EXISTING INVESTMENTS
--------------------------------------------------------------------------------
Bank Sarasin & Cie AG
BKW FMB Energie AG
Galencia Holding AG
Jelmoli Holding AG
Nestle SA
Novartis AG -- Registered Shares
Roche Holdings -- Genus
Sika AG
Zurich Financial Services AG
16
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments December 31, 2007
Percent
No. of Fair of Net
Shares Security Value Assets
----------------------------------------------------------------
COMMON STOCKS -- 101.74%
BANKS -- 11.80%
430 BANK SARASIN & CIE AG
REGISTERED SHARES $ 2,031,975 0.33%
Offers private banking, asset
management, investment
advisory, and institutional banking
services.
(Cost $1,611,112)
450,000 CREDIT SUISSE GROUP/2/
REGISTERED SHARES 27,067,968 4.35%
A global diversified financial
service company with significant
activity in private banking,
investment banking, asset
management and insurance
service.
(Cost $16,683,206)
100,000 EFG INTERNATIONAL
REGISTERED SHARES 4,018,902 0.65%
Holding company of EFG Bank.
Offers private banking and asset
management services.
(Cost $3,249,443)
870,000 UBS AG/2/
REGISTERED SHARES 40,266,749 6.47%
A global diversified financial
service company with significant
activity in private banking,
investment banking, and asset
management.
(Cost $7,403,841)
------------ -----
73,385,594 11.80%
Percent
No. of Fair of Net
Shares Security Value Assets
----------------------------------------------------------------
BASIC RESOURCES -- 3.55%
117,236 PRECIOUS WOODS HOLDING AG/1/
REGISTERED SHARES $ 12,664,367 2.04%
Through subsidiaries, manages
tropical forests using ecologically
sustainable forest management
methods. Harvests tropical trees
and processes them into lumber.
(Cost $10,847,127)
93,760 SCHMOLZ AND BICKENBACH AG
REGISTERED SHARES 7,577,653 1.22%
Manufactures industrial and
construction steel.
(Cost $2,962,747)
75,000 UMS SCHWEIZERISCHE
METALLWERKE HOLDING AG/1/
BEARER SHARES 1,815,131 0.29%
Produces profiles and large
dimension rods for electrical
engineering, mechanical
engineering, and construction
companies, lead-free brass wire
for batteries, billets, and small
diameter wire and rods for the
consumer goods and electronics
industries.
(Cost $1,655,849)
------------ ----
22,057,151 3.55%
BIOTECHNOLOGY -- 13.36%
664,655 ACTELION LTD./1, 2/
REGISTERED SHARES 30,557,164 4.91%
Biotechnology company that
develops and markets synthetic
small-molecule drugs against
diseases related to the
endothelium.
(Cost $17,871,161)
17
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2007
Percent
No. of Fair of Net
Shares Security Value Assets
-------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
BIOTECHNOLOGY -- (CONTINUED)
288,360 ADDEX PHARMACEUTICALS SA/1/
REGISTERED SHARES $ 10,047,964 1.62%
Bio-pharmaceutical company that
discovers, develops, and markets
therapeutic compounds for the
treatment of addiction and other
neuropsychiatric conditions.
(Cost $15,078,778)
10,000 BACHEM HOLDING AG
REGISTERED SHARES 845,294 0.14%
Manufactures ingredients for
pharmaceuticals, generic drugs,
and research supplies.
(Cost $833,329)
156,200 BASILEA PHARMACEUTICA/1,2/
REGISTERED SHARES 30,421,852 4.89%
Conducts research into the
development of drugs for the
treatment of infectious diseases
and dermatological problems.
(Cost $21,602,083)
10,000 SANTHERA PHARMACEUTICALS AG/1/
REGISTERED SHARES 750,784 0.12%
Drug discovery and development
company.
(Cost $948,284)
91,903 SPEEDEL HOLDING AG/1/
REGISTERED SHARES 10,455,422 1.68%
Researches and develops
therapies for cardiovascular and
metabolic diseases.
(Cost $12,460,344)
------------ -----
83,078,480 13.36%
Percent
No. of Fair of Net
Shares Security Value Assets
----------------------------------------------------------------
CHEMICALS -- 6.81%
45,000 EMS -- CHEMIE HOLDING AG
REGISTERED SHARES $ 6,621,914 1.06%
Manufactures and markets
performance polymers, high-
grade chemical intermediates, fine
chemicals, and protective
bonding, coating and sealing
products.
(Cost $5,881,838)
140,331 SYNGENTA AG/2/
REGISTERED SHARES 35,759,832 5.75%
Produces herbicides, insecticides
and fungicides, and seeds for field
crops, vegetables, and flowers.
(Cost $17,590,749)
------------ ----
42,381,746 6.81%
CONSTRUCTION & MATERIALS -- 1.19%
1,141 BELIMO HOLDING AG
REGISTERED SHARES 1,297,061 0.21%
World market leader in damper
and volume control actuators for
ventilation and air-conditioning
equipment.
(Cost $222,726)
3,220 SIKA AG
BEARER SHARES 6,075,096 0.98%
Leading producer of construction
chemicals.
(Cost $891,990)
------------ ----
7,372,157 1.19%
18
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2007
Percent
No. of Fair of Net
Shares Security Value Assets
----------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
FINANCIAL SERVICES -- 0.95%
44,100 PARTNERS GROUP
REGISTERED SHARES $ 5,920,770 0.95%
Global alternative asset
management firm in private
equity, private debt, private real
estate, infrastructure and hedge
funds.
(Cost $5,310,578)
------------ -----
5,920,770 0.95%
FOOD & BEVERAGES -- 14.25%
2,690 BARRY CALLEBAUT AG
REGISTERED SHARES 2,043,369 0.33%
Manufactures cocoa, chocolate,
and confectionary products.
(Cost $1,399,816)
340 LINDT & SPRUNGLI AG
REGISTERED SHARES 11,943,470 1.92%
Major manufacturer of premium
Swiss chocolates.
(Cost $1,977,813)
162,500 NESTLE SA/2/
REGISTERED SHARES 74,636,753 12.00%
Largest food and beverage
processing company in the world.
(Cost $9,260,282)
------------ -----
88,623,592 14.25%
INDUSTRIAL GOODS & SERVICES -- 5.40%
646,457 ABB LTD.
REGISTERED SHARES 18,626,001 2.99%
The holding company for ABB
Group which is one of the largest
electrical engineering firms in the
world.
(Cost $9,612,320)
Percent
No. of Fair of Net
Shares Security Value Assets
-----------------------------------------------------------------
INDUSTRIAL GOODS & SERVICES -- (CONTINUED)
6,440 INFICON HOLDING AG
REGISTERED SHARES $ 1,038,113 0.17%
Manufactures and markets
vacuum instruments used to
monitor and control production
processes. Manufactures on-site
chemical detection and
monitoring system.
(Cost $581,616)
87,215 KOMAX HOLDING AG/1/
REGISTERED SHARES 13,943,307 2.24%
Manufactures wire processing
machines. Produces machines for
cutting and stripping round and
flat wire, crimping and insertion
machines for processing single
wires and equipment for
processing wire harnesses.
(Cost $14,003,435)
------------ ----
33,607,421 5.40%
INSURANCE -- 0.98%
20,800 ZURICH FINANCIAL SERVICES AG
REGISTERED SHARES 6,108,731 0.98%
Offers property, accident, health,
automobile, liability, financial risk
and life insurance and retirement
products.
(Cost $3,338,952)
------------ ----
6,108,731 0.98%
19
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2007
Percent
No. of Fair of Net
Shares Security Value Assets
--------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
MEDICAL TECHNOLOGY -- 0.74%
32,205 SONOVA HOLDING AG
REGISTERED SHARES $3,638,228 0.58%
Designs and produces wireless
analog and digital in-the-ear and
behind-the-ear hearing aids and
miniaturized voice communications
systems.
(Cost $1,100,139)
16,500 TECAN GROUP AG
REGISTERED SHARES 991,035 0.16%
Develops, manufactures and
distributes laboratory automation
components and systems.
(Cost $1,238,914)
---------- ----
4,629,263 0.74%
OIL AND GAS -- 1.32%
106,000 PETROPLUS HOLDINGS AG/1/
REGISTERED SHARES 8,211,103 1.32%
Refines, supplies, markets and
distributes petroleum products.
(Cost $10,236,308)
---------- ----
8,211,103 1.32%
PERSONAL & HOUSEHOLD GOODS -- 2.89%
20,950 ADVANCED DIGITAL BROADCAST
HOLDING SA/1/
REGISTERED SHARES 592,148 0.10%
Develops equipment and systems to
view and interact with digital TV
broadcast through cable, satellite,
and telecommunication networks.
(Cost $1,352,807)
Percent
No. of Fair of Net
Shares Security Value Assets
-------------------------------------------------------------
PERSONAL & HOUSEHOLD GOODS -- (CONTINUED)
20,000 SCHULTHESS GROUP
REGISTERED SHARES $ 2,383,076 0.38%
Develops, manufactures and sells
household appliances and heating
equipment.
(Cost $2,327,602)
49,816 SWATCH GROUP AG
BEARER SHARES 15,015,422 2.41%
Manufactures finished watches,
movements and components.
Produces components necessary
to its eighteen watch brand
companies. Also operates retail
boutiques.
(Cost $13,753,331)
------------ -----
17,990,646 2.89%
PHARMACEUTICALS -- 16.99%
781,300 NOVARTIS AG/2/
REGISTERED SHARES 42,855,390 6.89%
One of the leading manufacturers
of branded and generic
pharmaceutical products.
Manufactures nutrition products.
(Cost $8,326,468)
363,600 ROCHE HOLDING AG/2/
NON-VOTING EQUITY SECURITIES 62,818,673 10.10%
Worldwide pharmaceutical
company.
(Cost $6,578,721)
------------ -----
105,674,063 16.99%
20
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2007
Percent
No. of Fair of Net
Shares Security Value Assets
--------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
REAL ESTATE AND INFRASTRUCTURE -- 0.73%
11,100 FLUGHAFEN ZUERICH AG
REGISTERED SHARES $ 4,510,003 0.73%
Constructs, leases, and maintains
airport structures and equipment.
(Cost $4,365,202)
------------ ----
4,510,003 0.73%
RETAILERS -- 5.56%
18,500 DUFRY GROUP
REGISTERED SHARES 2,058,915 0.33%
Operates duty-free shops in
countries such as Tunisia, Italy,
Mexico, France, Russia, the
United Arab Emirates, Singapore,
the Caribbean and the United
States.
(Cost $2,002,450)
62,950 GALENICA AG/2/
REGISTERED SHARES 27,523,076 4.42%
Manufactures and distributes
prescription and over-the-counter
drugs, toiletries and hygiene
products.
(Cost $11,494,134)
2,100 JELMOLI HOLDING AG
BEARER SHARES 5,035,993 0.81%
Owns and operates department
and retail stores and provides
mail-order catalog and real estate
leasing services.
(Cost $3,707,265)
------------ ----
34,617,984 5.56%
Percent
No. of Fair of Net
Shares Security Value Assets
---------------------------------------------------------------
TECHNOLOGY -- 7.68%
78,400 OC OERLIKON CORP. AG/2/
REGISTERED SHARES $ 32,771,983 5.27%
Manufactures coating machinery,
semiconductor assembly
equipment, and satellite
components.
(Cost $28,798,949)
606,200 TEMENOS GROUP AG/1/
REGISTERED SHARES 14,965,588 2.41%
Provides integrated software for
the banking sector.
(Cost $13,106,926)
------------ ----
47,737,571 7.68%
UTILITY SUPPLIERS -- 7.54%
500 AARE-TESSIN AG FUR ELEKTRIZITAT
REGISTERED SHARES 2,042,132 0.33%
Generates, transmits, and
distributes electricity in
Switzerland and neighboring
countries.
(Cost $1,275,916)
14,750 ATEL HOLDING AG
REGISTERED SHARES 7,882,127 1.27%
Generates, transmits and
distributes electricity throughout
Europe.
(Cost $5,398,957)
147,250 BKW FMB ENERGIE AG
REGISTERED SHARES 18,728,967 3.01%
Produces electricity using
nuclear, hydroelectric, solar,
biomass and wind energy.
(Cost $7,675,799)
21
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2007
Percent
No. of Fair of Net
Shares Security Value Assets
---------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
UTILITY SUPPLIERS -- (CONTINUED)
28,409 CENTRALSCHWEIZERISCHE
KRAFTWERKE AG
REGISTERED SHARES $ 14,052,060 2.26%
Supplies electric power, operates
and maintains distribution
network facilities, constructs and
installs equipment, and offers
consulting services to its clients.
(Cost $8,525,835)
1,500 ELECTRIZITAETS-GESELLSCHAFT
LAUFENBURG AG
BEARER SHARES 1,978,095 0.32%
Operates nuclear and
hydroelectric generating plants
and sells excess power
throughout Europe.
(Cost $1,970,882)
5,000 RAETIA ENERGIE AG
PARTICIPATION CERTIFICATE 2,208,188 0.35%
Generates and distributes electric
power from its own hydroelectric
stations, as well as from outside
nuclear power suppliers of
electric power.
(Cost $2,035,541)
------------ ------
46,891,569 7.54%
TOTAL COMMON STOCKS
(Cost $318,551,565)* 632,797,844 101.74%
PRIVATE EQUITY INVESTMENTS /3/ -- 0.20%
ARAVIS VENTURE II -- LIMITED
PARTNERSHIP (150,000 EURO)/4/ 219,308 0.04%
ZURMONT MADISON PRIVATE
EQUITY, LP (1,145,330 CHF)/4/ 1,011,641 0.16%
------------ ------
TOTAL PRIVATE EQUITY INVESTMENTS
(Cost $1,171,902) 1,230,949 0.20%
No. of Percent
Shares/ Fair of Net
Units Security Value Assets
-----------------------------------------------------------------
LONG CALL WARRANTS -- 0.59%
4,800,000 ACTELION LTD, EXPIRES
03/20/2008 AT 56.00 CHF $ 678,355 0.11%
7,370,000 CREDIT SUISSE GROUP, EXPIRES
05/16/08 AT 76.50 CHF 846,266 0.14%
14,100,000 SWISS MARKET INDEX, EXPIRES
02/15/08 AT 8,900.00 CHF 2,117,211 0.34%
------------ ------
TOTAL CALL WARRANTS
(Cost $4,521,658) 3,641,832 0.59%
LONG PUT WARRANTS -- 1.00%
2,600,000 SLI SWISS LEADER INDEX, EXPIRES
03/20/08 AT 1,300.00 CHF /3/ 1,584,596 0.25%
7,868,000 SMIM PRICE INDEX, EXPIRES
04/18/08 AT 15,500.00 CHF 2,015,387 0.32%
2,000,000 SMIM TOTAL RETURN INDEX, EXPIRES
01/18/08 AT 1,600.00 CHF /3/ 282,648 0.05%
1,800,000 SMIM TOTAL RETURN INDEX, EXPIRES
03/20/08 AT 1,580.00 CHF /3/ 715,453 0.12%
5,900,000 SWISS MARKET INDEX, EXPIRES
03/20/08 AT 8,200.00 CHF /3/ 1,615,510 0.26%
------------ ------
TOTAL PUT WARRANTS
(Cost $6,340,797) 6,213,594 1.00%
TOTAL INVESTMENTS
(Cost $330,585,922)* $643,884,219 103.53%
OTHER ASSETS LESS OTHER
LIABILITIES, NET (21,968,764) -3.53%
------------ ------
NET ASSETS $621,915,455 100.00%
============ ======
22
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (concluded) December 31, 2007
/1/NON-INCOME PRODUCING SECURITY.
/2/ONE OF THE TEN LARGEST PORTFOLIO HOLDINGS.
/3/PRIVATE EQUITY INVESTMENTS ARE PRICED AT FAIR VALUE AS DETERMINED BY THE
BOARD'S VALUATION COMMITTEE AND LISTED WARRANTS ARE PRICED BY MANAGEMENT IF
NO BID PRICES ARE AVAILABLE. PLEASE REFER TO NOTE 1B. VALUATION OF
SECURITIES ON PAGE 28. AT THE END OF THE PERIOD, THE VALUE OF THESE
SECURITIES AMOUNTED TO $5,429,156 OR 0.87% OF NET ASSETS.
/4/RESTRICTED SECURITY NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 OTHER
THAN RULE 144A SECURITIES. AT THE END OF THE PERIOD, THE VALUE OF THESE
SECURITIES AMOUNTED TO $1,230,949 OR 0.20% OF NET ASSETS. ADDITIONAL
INFORMATION ON THE RESTRICTED SECURITIES IS AS FOLLOWS:
Acquisition Value
Security Acquisition Date Acquisition Cost per unit
-------- ---------------- ---------------- -----------------
Aravis Venture II July 31, 2007 $205,328 $1.00
Zurmont Madison Private Equity, LP August 9, 2007 79,022 1.00
Zurmont Madison Private Equity, LP September 13, 2007 778,342 1.00
Zurmont Madison Private Equity, LP December 17, 2007 109,210 1.00
*COST FOR FEDERAL INCOME TAX PURPOSES IS $330,585,922 AND NET UNREALIZED
APPRECIATION (DEPRECIATION) CONSISTS OF:
GROSS UNREALIZED APPRECIATION $328,070,839
GROSS UNREALIZED DEPRECIATION (14,772,542)
------------
NET UNREALIZED APPRECIATION $313,298,297
============
SEE NOTES TO FINANCIAL STATEMENTS.
23
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 2007
ASSETS:
Investments, at fair value (cost $330,585,922).................................. $643,884,219
Cash............................................................................ 922,210
Foreign currency (cost $22,827,250)............................................. 23,796,775
Tax reclaims receivable......................................................... 3,326,998
Prepaid expenses................................................................ 49,675
------------
Total assets................................................................ 671,979,877
------------
LIABILITIES:
Capital gain distribution payable............................................... 45,758,852
Payable for securities purchased................................................ 3,424,182
Advisory fees payable (Note 2).................................................. 366,349
Directors' fees and expenses.................................................... 97,010
Accrued expenses and other...................................................... 418,029
------------
Total liabilities........................................................... 50,064,422
------------
Net assets.................................................................. $621,915,455
------------
COMPOSITION OF NET ASSETS:
Paid in capital................................................................. 299,691,828
Distributable earnings
Undistributed net investment income.................................. 1,407,218
Accumulated net realized gain from investment and foreign currency
transactions....................................................... 6,287,883
Net unrealized appreciation on investments and foreign currency...... 314,528,526
-----------
Total distributable earnings................................................ 322,223,627
------------
Net assets............................................................................ $621,915,455
------------
NET ASSET VALUE PER SHARE:
($621,915,455 / 32,156,607 shares outstanding, 50 million shares authorized).... $ 19.34
============
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
24
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 2007
INVESTMENT INCOME:
Dividends (less foreign taxes withheld of $1,216,956)........................... $ 6,896,085
Interest........................................................................ 397,025
-----------
Total income.................................................................. 7,293,110
-----------
EXPENSES:
Investment advisory fees (Note 2)............................................... 4,302,746
Directors' fees & expenses...................................................... 595,445
Professional fees............................................................... 306,374
Administration fees............................................................. 364,876
Custody fees.................................................................... 75,134
Printing and shareholder reports................................................ 300,222
Accounting fees................................................................. 114,984
Transfer agent fees............................................................. 23,760
Interest expense................................................................ 164,351
Tax expense..................................................................... 75,553
Miscellaneous................................................................... 272,592
-----------
Total expenses................................................................ 6,596,037
-----------
Net investment income......................................................... 697,073
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions....................................................... 52,453,003
Foreign currency transactions................................................. 865,367
Written call options.......................................................... (103,985)
Net change in unrealized appreciation/depreciation from:
Investment transactions....................................................... (842,085)
Foreign currency translations................................................. 1,171,537
-----------
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency... 53,543,837
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS......................................... $54,240,910
===========
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
25
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the For the
Year Ended Year Ended
December 31, 2007 December 31, 2006
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................................. $ 697,073 $ 430,342
Net realized gain (loss) from:
Investment transactions............................................. 52,453,003 54,274,788
Foreign currency transactions....................................... 865,367 77,287
Written options..................................................... (103,985) --
Net change in unrealized appreciation/depreciation from:
Investment transactions............................................. (842,085) 70,960,520
Foreign currency translations....................................... 1,171,537 303,348
------------ ------------
Net increase in net assets from operations............................ 54,240,910 126,046,285
------------ ------------
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income and net realized gains from foreign
currency transactions............................................... -- (685,681)
Net realized capital gains............................................ (58,616,416) (47,712,116)
------------ ------------
Total distributions to stockholders................................. (58,616,416) (48,397,797)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Value of sales of shares issued in connection with rights
offering............................................................ 135,360,705 --
Offering costs on rights issuance..................................... (5,081,422) --
Value of shares issued in reinvestment of dividends and
distributions....................................................... -- 12,903,159
Value of shares repurchased through stock buyback..................... (6,803,424) (7,550,175)
------------ ------------
Total increase from capital share transactions........................ 123,475,859 5,352,984
------------ ------------
Total increase in net assets.......................................... 119,100,353 83,001,472
NET ASSETS:
Beginning of year..................................................... 502,815,102 419,813,630
------------ ------------
End of year (including undistributed (distributions in excess of) net
investment income) of $1,407,218 and ($155,222),
respectively)....................................................... $621,915,455 $502,815,102
============ ============
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
26
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Financial Highlights
For the Years Ended December 31,
----------------------------------------------------------
2007 2006 2005 2004 2003
-------------------------------------------------------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of year......................... $ 20.61 $ 17.47 $ 16.79 $ 15.31 $ 11.82
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (expenses in excess of income)......... 0.02/1/ 0.02/1/ 0.05/1/ (0.01) (0.01)
Net realized and unrealized gain on investments/2/........... 1.98 5.14 2.24 2.41 4.24
-------- -------- -------- -------- --------
Total from investment operations............................. 2.00 5.16 2.29 2.40 4.23
-------- -------- -------- -------- --------
Gain from capital share repurchases.......................... 0.04 0.03 0.04 0.02 0.02
Capital charge resulting from the issuance of fund shares.... (1.36)/3/ (0.07) (0.04) -- (0.06)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income and net realized gains
from foreign currency transactions.......................... -- (0.03) (0.02) (0.10) (0.14)
Dividends in excess of net investment income................. -- -- -- (0.01) --
Distributions from net realized capital gains................ (1.95) (1.95) (1.59) (0.83) (0.56)
-------- -------- -------- -------- --------
Total distributions.......................................... (1.95) (1.98) (1.61) (0.94) (0.70)
-------- -------- -------- -------- --------
Net asset value at end of year............................... $ 19.34 $ 20.61 $ 17.47 $ 16.79 $ 15.31
======== ======== ======== ======== ========
Market value per share at end of year........................ $ 16.50 $ 19.10 $ 15.31 $ 14.95 $ 12.92
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN/4/:
Based on market value per share.............................. (3.39)% 37.64% 13.11% 23.65% 41.76%
Based on net asset value per share/5/........................ 4.95% 30.16% 14.92% 17.19% 37.00%
RATIOS TO AVERAGE NET ASSETS:
Expenses..................................................... 1.10% 1.17% 1.19% 1.14% 1.30%
Net investment income (expenses in excess of income)......... 0.12% 0.09% 0.27% (0.08)% (0.07)%
SUPPLEMENTAL DATA:
Net assets at end of year (000's)............................ $621,915 $502,815 $419,814 $401,514 $368,986
Average net assets during year (000's)....................... $599,573 $484,631 $415,074 $378,205 $306,563
Stockholders of record/6/.................................... 736 794 740 926 964
Portfolio turnover rate...................................... 26% 34% 37% 41% 89%
--------------------------------------------------------------------------------
/1/CALCULATED USING THE AVERAGE SHARES METHOD.
/2/INCLUDES NET REALIZED AND UNREALIZED CURRENCY GAIN (LOSS).
/3/ISSUED IN CONNECTION WITH RIGHTS OFFERING.
/4/TOTAL INVESTMENT RETURN BASED ON MARKET VALUE DIFFERS FROM TOTAL INVESTMENT
RETURN BASED ON NET ASSET VALUE DUE TO CHANGES IN THE RELATIONSHIP BETWEEN
THE FUND'S MARKET PRICE AND ITS NET ASSET VALUE PER SHARE.
/5/NOT INCLUDING THE RIGHTS OFFERING DILUTION THE NAV PERFORMANCE AS OF
12/31/07 WAS 12.14% IN US DOLLAR TERMS. THIS CALCULATION WAS DETERMINED BY
ADJUSTING THE BEGINNING NAV IN THE TOTAL RETURN CALCULATION BY THE PER SHARE
CAPITAL CHANGE RESULTING FROM THE ISSUANCE OF FUND SHARES.
/6/NOT AUDITED BY DELOITTE & TOUCHE LLP.
SEE NOTES TO FINANCIAL STATEMENTS.
27
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The Swiss Helvetia Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a non-diversified, closed-end
investment management company. The Fund is organized as a corporation under the
laws of the State of Delaware.
The investment objective of the Fund is to seek long-term growth of capital
through investment in equity and equity-linked securities of Swiss companies.
The Fund may also acquire and hold equity and equity-linked securities of
non-Swiss companies in limited instances, as fully described in its prospectus.
B. VALUATION OF SECURITIES
The Fund values its investments at fair value.
When valuing listed equity securities, the Fund uses the last sale price prior
to the calculation of the Fund's net asset value. When valuing equity
securities that are not listed or that are listed but have not traded, the Fund
uses the mean between the bid and asked prices for that day.
When valuing fixed income securities, the Fund uses the last bid price prior to
the calculation of the Fund's net asset value. If a current bid price is not
available, the Fund uses the mean between the latest quoted bid and asked
prices. When valuing fixed income securities that mature within sixty days, the
Fund uses amortized cost.
It is the responsibility of the Fund's Board of Directors (the "Board") to
establish fair valuation procedures. When valuing securities for which market
quotations are not readily available or for which the market quotations that
are available are considered unreliable, the Fund determines a fair value in
good faith in accordance with these procedures. The Fund may use these
procedures to establish the fair value of securities when, for example, a
significant event occurs between the time the market closes and the time the
Fund values its investments. After consideration of various factors, the Fund
may value the securities at their last reported price or at some other value.
As of December 31, 2007, Aravis Venture II and Zurmont Madison Private Equity,
LP are restricted securities priced at fair value as determined by the Board's
Valuation Committee pursuant to the Board's valuation procedures. Listed
warrants with no trading are valued using the bid option price. If no bid
prices are available, then Management uses a theoretical bid price based on the
Black-Scholes model, which is a method of valuing securities by reference to
the value of other securities with similar characteristics such as rating,
interest rate and maturity.
C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Realized gains and
losses are determined by comparing the proceeds of a sale or the cost of a
purchase with a specific offsetting transaction.
Dividend income, net of any foreign taxes withheld, is recorded on the
ex-dividend date. Interest income, including amortization of premiums and
accretion of discounts, is accrued daily. Estimated expenses are also accrued
daily.
The Fund records Swiss withholding tax as a reduction of dividend income, net
of any amount reclaimable from Swiss tax authorities in accordance with the tax
treaty between the United States and Switzerland.
D. DISTRIBUTIONS
The Fund pays dividends at least annually to the extent it has any net
investment income and net realized gains from foreign currency transactions and
makes distributions of any net realized capital gains to the extent they exceed
any capital loss carryforwards. The Fund determines the size and nature of
these distributions in accordance with provisions of the Internal Revenue Code.
Distributions may be paid either in cash or in stock with an option to take
cash. The Fund records dividends and distributions on its books on the
ex-dividend date.
E. FEDERAL INCOME TAXES
The Fund's policy is to continue to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment companies and
to distribute all its taxable income to its stockholders. Therefore, no federal
income tax provision is required.
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. See Note 5 for Federal income tax treatment of foreign currency
gain/losses.
28
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
F. SECURITIES LENDING INCOME
The Fund may lend securities to financial institutions. The Fund retains
beneficial ownership of the securities it has loaned and continues to receive
amounts equivalent to the dividends paid on these securities and to participate
in any changes in their market value. For the initial transaction, the Fund
requires the borrowers of the securities to establish collateral with the Fund
in the form of cash and/or government securities equal to 105% of the value of
the securities loaned. Subsequent to the initial transaction, the Fund requires
the borrowers to maintain collateral with the Fund equal to 100% of the value
of the securities loaned. The Fund receives fees as compensation for lending
its securities. Either the Fund or the borrower may terminate the securities
loan at any time. There were no securities on loan during the year ended
December 31, 2007.
G. FOREIGN CURRENCY TRANSLATION
The Fund maintains its accounting records in U.S. dollars. The Fund determines
the U.S. dollar value of foreign currency denominated assets, liabilities and
transactions by using prevailing exchange rates. The cost basis of foreign
denominated assets & liabilities is determined on the date that they are first
recorded within the Fund and translated to U.S. dollars. These assets and
liabilities are subsequently valued each day at prevailing exchange rates. The
difference between the original cost and current value denominated in U.S.
dollars is recorded as Unrealized Currency Gain/Loss. In valuing assets and
liabilities, the Fund uses the prevailing exchange rate on the valuation date.
In valuing securities transactions, the receipt of income and the payment of
expenses, the Fund uses the prevailing exchange rate on the transaction date.
Net realized and unrealized gains and losses on foreign currency translations
shown on the Fund's financial statements result from the sale of foreign
currencies, from currency gains or losses realized between the trade and
settlement dates on securities transactions, and from the difference between
the amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent of the amounts actually
received or paid.
When calculating realized and unrealized gains or losses on investments in
equity securities, the Fund does not separate the gain or loss attributable to
changes in the foreign currency price of the security from the gain or loss
attributable to the change in the U.S. dollar value of the foreign currency.
Other foreign currency transactions resulting in realized and unrealized gain
(loss) are disclosed separately.
H. ESTIMATES
In preparing its financial statements in conformity with accounting principles
generally accepted in the United States, management makes estimates and
assumptions. Actual results may be different.
NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES
Hottinger Capital Corp. ("HCC"), which is owned jointly by Hottinger U.S., Inc.
and Hottinger & Cie (Zurich), is the Fund's advisor (the "Advisor"). The Fund
pays the Advisor an annual fee based on its month-end net assets which is
calculated and paid monthly at the following annual rates: 1.00% of the first
$60 million, 0.90% of the next $40 million, 0.80% of the next $100 million,
0.70% of the next $100 million, 0.65% of the next $100 million, 0.60% of the
next $100 million, 0.55% of the next $100 million, and 0.50% of such assets in
excess of $600 million. The Fund paid the Advisor $4,302,746 in investment
advisory fees for the year ended December 31, 2007. The Fund paid Hottinger &
Cie (Zurich) $21,209 in brokerage commissions for the year ended December 31,
2007.
The Fund and the Advisor have agreed to share certain common expenses subject
to review and allocation by the Audit Committee (the "Committee") of the Board.
During the year ended December 31, 2007, the Committee allocated $73,795 of
expenses incurred in connection with publicizing the Fund as follows:
$36,897.50 to the Fund and $36,897.50 to the Advisor.
Certain officers and directors of the Fund are also officers or directors of
HCC, Hottinger U.S., Inc. and Hottinger & Cie (Zurich). These persons are not
paid by the Fund for serving in these capacities.
NOTE 3--OTHER FEES
Citi Fund Services, LLC ("Citi") provides certain administration and portfolio
accounting services to the Fund.
American Stock Transfer & Trust Company is the Fund's transfer agent. The Fund
pays the transfer agent an annual fee, which is accrued daily and paid monthly.
29
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
On December 28, 2006, Swiss American Securities, Inc. and Credit Suisse First
Boston commenced transition of custody responsibility to Citibank, N.A. (the
"Custodian"); the transfer was completed on January 16, 2007. The Fund pays the
custodian an annual fee.
The Fund pays each director who is not an interested person (as such term is
defined in the Act) of the Fund or its Advisor approximately $30,268 per annum
in compensation, except for the Chairman of the Board to whom the fund pays an
annual fee of approximately $42,568 and for the Chairmen of the Audit Committee
and the Governance/Nominating Committee, to whom the Fund pays an annual fee of
approximately $35,567. In addition, the Fund pays each disinterested director
$1,300 for each Board meeting attended, and pays each disinterested Director
who is a member of a Committee a fee of $750 for each Committee meeting
attended. In connection with the Fund's right offering in 2007, the Board
established an Ad Hoc Rights Offering Committee. The Fund paid each
disinterested director who was a member of that Committee a fee of $1,000 for
each Committee meeting attended. Committee meeting fees are paid for only those
meetings held separately from other meetings. In addition, the Fund reimburses
directors who are not employees of or affiliated with the Advisor for
out-of-pocket expenses incurred in conjunction with attendance at meetings.
Directors' fees and expenses payable of $97,010 shown on the Statements of
Assets and Liabilities represents total dollars owed to Directors that have
been accrued and not paid. Directors' fees and expenses of $595,445 shown on
the Statement of Operations represent the portion of Directors' fees and
expenses accrued during the period January 1, 2007 through December 31, 2007.
These fees are calculated by projecting Directors' fees contractually owed and
adding estimates of reimbursable expenses based on historical activity.
NOTE 4--CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to 50 million shares of capital stock. HCC
owned 189,187 of the 32,156,607 shares outstanding on December 31, 2007.
Transactions in capital shares were as follows:
For the Year Ended For the Year Ended
December 31, 2007 December 31, 2006
------------------ ------------------
Shares Amount Shares Amount
------ ------ ------ ------
Sale of Shares
through
rights
offering 8,149,552 $135,360,705 -- $ --
Dividends
Reinvested -- -- 798,957 12,903,159/(a)/
Repurchased (390,600) (6,803,424) (430,800) (7,550,175)
--------- ------------ -------- -----------
Net increase 7,758,952 $128,557,281 368,157 $ 5,352,984
========= ============ ======== ===========
(A)REPRESENTS SHARES ISSUED TO STOCKHOLDERS WHO DID NOT ELECT CASH IN
CONJUNCTION WITH A LONG TERM CAPITAL GAINS DISTRIBUTION OF $1.276 PER SHARE
PAID JANUARY 31, 2006 TO STOCKHOLDERS OF RECORD ON DECEMBER 19, 2005.
NOTE 5--FEDERAL INCOME TAX AND INVESTMENT TRANSACTIONS
At December 31, 2007, accumulated net investment income and accumulated net
realized gain from investments and foreign currency transactions have been
adjusted for current period permanent book/tax differences which arose
principally from differing book/tax treatments of foreign currency transactions.
The following reclassification was a result of net operating losses and
currency reclassifications and has no impact on the net assets of the Fund.
Undistributed Net Investment Income $ 865,367
Undistributed Net Realized Gain (872,274)
Paid-In-Capital 6,907
The tax character of distributions paid during 2007 and 2006 was as follows
(see page 35 for details):
2007 2006
- ----------- -----------
Ordinary income $ 8,392,875 $14,699,228
Long-term capital gains 50,223,541 33,698,569
Equalization 6,903 --
At December 31, 2007, the components of distributable earnings on a tax basis
were as follows:
Undistributed Ordinary Income $ 4,473,493
Undistributed Long-Term Gain 3,221,608
Unrealized Appreciation 314,528,526
------------
Total $322,223,627
============
Gains from foreign currency transactions are to be treated as ordinary income
for Federal income tax purposes.
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year
30
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
ended December 31, 2007, were $203,828,086 and $154,479,357, respectively.
The following information summarizes all distributions declared by the Fund
during the year ended December 31, 2007.
Record Payable
Distribution Date Date Amount
------------ -------- -------- --------
Long-Term Capital Gains 05/17/07 05/29/07 $0.52700
Short-Term Capital Gains 12/17/07 01/29/08 $0.26100
Long-Term Capital Gains 12/17/07 01/29/08 $1.16200
--------
Total Distributions $1.95000
========
NOTE 6--STOCK REPURCHASE PROGRAM
Pursuant to authorization by the Board, the Fund began open market purchases of
its common stock on the New York Stock Exchange ("NYSE") in 1999 and has
continued purchases in each subsequent year. The principal purpose of the stock
repurchase program is to enhance stockholder value by increasing the Fund's net
asset value per share without creating a meaningful adverse effect upon the
Fund's expense ratio. The Board had authorized the Fund to repurchase up to
500,000 shares during 2007. During the year ended December 31, 2007, the Fund
repurchased and retired 390,600 shares at an average price of $17.42 per share
(including brokerage commissions) and a weighted average discount of 13.05%.
These repurchases, which had a total cost of $6,803,424, resulted in an
increase of $1,053,757 to the Fund's net asset value. This gain is the result
of the difference between the Fund's net asset value and the activity price of
the buyback.
NOTE 7--LINE OF CREDIT
On December 13, 2006, the Fund entered into a line of credit arrangement with
the custodian to be used for temporary purposes. The initial agreement expired
on December 13, 2007 and, based on the Fund's request, was renewed until
December 13, 2008. The agreement provides that the Fund may borrow up to an
aggregate amount not to exceed $45,000,000 at any one time outstanding. The
Fund pays interest on the unpaid principal amount of each advance made to it
from the day of such advance until such principal amount is paid in full. The
interest is payable in arrears on demand, or if no demand has been made, on the
last day of the interest period for such advance, pursuant to the agreement.
As of December 31, 2007, the Fund had no loans outstanding under the line of
credit. During the year ended December 31, 2007 the average borrowing was 17.2
million (Swiss Francs) and the average interest rate was 3.25%.
NOTE 8--WRITTEN OPTION TRANSACTIONS
Transactions in options written during the year ended December 31, 2007 were as
follows:
Calls
-----
Number of
Contracts Premiums
- --------- --------
Outstanding, December 31, 2006 -- $ --
Options written 125,668 209,750
Options terminated in closing transactions 125,668 209,750
Options exercised -- --
Options expired -- --
------- --------
Outstanding, December 31, 2007 -- $ --
------- --------
NOTE 9--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Effective June 29, 2007, the Fund implemented Financial Accounting Standards
Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes -- an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including investment companies, before being
measured and recognized in the financial statements. Management has evaluated
the application of FIN 48 to the Fund, and has determined that the adoption of
FIN 48 does not have a material impact on the Fund's financial statements. The
Fund files U.S. federal, Delaware state and foreign tax returns. No income tax
returns are currently under examination. The Fund's U.S. federal tax returns
remain open for examination for the years ended December 31, 2004 through
December 31, 2007. The Fund's Delaware state tax returns remain open for
examination for the years ended December 31, 2003 through December 31, 2007. In
addition, the Fund holds investments in Switzerland and other foreign tax
jurisdictions that remain open subject to examination based on varying statutes
of limitations.
In September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS")
31
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
157, Fair Value Measurements, which clarifies the definition of fair value and
requires companies to expand their disclosure about the use of fair value to
measure assets and liabilities in interim and annual periods subsequent to
initial recognition. Adoption of SFAS 157 requires the use of the price that
would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. SFAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years.
Although still in the process of evaluating the impact, if any, upon adoption
of the standard, management believes there will be no material impact other
than enhanced disclosures.
NOTE 10--PRIVATE EQUITY COMMITMENTS
As of December 31, 2007, the Fund invested in private equity funds. The Fund's
investments are summarized in the Schedule of Investments. The Fund made
capital commitments to private equity funds of $5,211,324 (5,900,000 Swiss
Francs), with $4,199,696 (4,754,686 Swiss Francs) outstanding at December 31,
2007, and $2,193,079 (1,500,000 Euro), with $1,973,771 (1,350,000 Euro)
outstanding at December 31, 2007.
32
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of The Swiss Helvetia Fund, Inc.
We have audited the accompanying statement of assets and liabilities of The
Swiss Helvetia Fund, Inc. (the "Fund"), including the schedule of investments,
as of December 31, 2007, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of material
misstatement. The Fund is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also 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, as
well as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2007, by
correspondence with the custodian and portfolio fund managers of the private
equity investments. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the Fund as of December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 25, 2008
33
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Additional Information (Unaudited)
This report is sent to the stockholders of The Swiss Helvetia Fund, Inc. for
their information. It 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 this report.
Proxy Voting Information
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available, without
charge and upon request, by calling 1-888-SWISS-00 and on the SEC's website at
http://www.sec.gov. The Fund's proxy voting record for the twelve-month period
ended June 30 is available, without charge and upon request, by calling
1-888-SWISS-00 and on the SEC's website at http://www.sec.gov.
Availability of Quarterly Portfolio Schedules
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q
is available, without charge and upon request, on the SEC's website at
http://www.sec.gov or may be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
Certifications
The Fund's chief executive officer has certified to the NYSE, pursuant to the
requirements of Section 303A.12(a) of the NYSE Listed Company Manual, that, as
of June 8, 2007, he was not aware of any violation by the Fund of applicable
NYSE corporate governance listing standards. The Fund's reports to the
Securities and Exchange Commission on Form N-CSR and Form N-Q contain
certifications by the Fund's chief executive officer and chief financial
officer as required by Rule 30a-2(a) under the Act, including certifications
regarding the quality of the Fund's disclosures in such reports and
certifications regarding the Fund's disclosure controls and procedures and
internal control over financial reporting.
Code of Ethics
The Board of Directors of the Fund and the Advisor have adopted Codes of Ethics
pursuant to provisions of the Investment Company Act of 1940 (the "Codes"). The
Codes apply to the personal investing activities of various individuals
including directors and officers of the Fund and designated officers, directors
and employees of the Advisor. The provisions of the Codes place restrictions on
individuals who are involved in managing the Fund's portfolio, who help execute
the portfolio manager's decisions or who come into possession of
contemporaneous information concerning the investment activities of the Fund.
The fundamental principle of the Codes is that the individuals covered by
the Codes have a fiduciary responsibility to the Fund and its stockholders.
They are therefore required at all times to place the interests of the Fund and
the stockholders first and to conduct all personal securities transactions in a
manner so as to avoid any actual or potential conflict of interest or abuse of
their position of trust.
Portfolio managers and other individuals with knowledge of Fund investment
activities are prohibited from purchasing or selling a security during a
blackout period of 30 calendar days before and after the date on which the Fund
effects a trade in the same or a similar security. They are also prohibited
from engaging in short term trading of Swiss equity or equity linked securities.
34
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Additional Information (Unaudited) (continued)
Additionally, the Fund's portfolio managers are prohibited from participating
in any initial public offering or private placement of Swiss equity and equity
linked securities and other covered individuals must obtain prior clearance
before doing so.
Any individual who violates the provisions of the Codes is required to
reverse the transaction and to turn over any resulting profits to the Fund. The
Fund and the Advisor have adopted compliance procedures and have appointed
compliance officers to ensure that all covered individuals comply with the
Codes.
Distributions
The Fund elected to pass through $0.03800 per share to its stockholders as a
credit for taxes paid to Switzerland during its fiscal year ended December 31,
2007.
The Fund designates 57.61% of its ordinary income dividend distributions for
the qualified dividend rate (QDI) as defined in Section 1(h)(11) of the
Internal Revenue Code. The Fund also designates 73.24% as qualified short-term
capital gain dividends exempt from U.S. tax for foreign shareholders (QSD).
--------------------------------------------------------------------------------
Tax Information For the Year Ended December 31, 2007
The amounts may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements. For Federal
income tax purposes, distributions from short-term capital gains are classified
as ordinary income. The Fund's distributions to stockholders of long- term
capital gains included $12,857,564 in connection with the distribution paid May
29, 2007 to stockholders of record on May 17, 2007, and $37,365,977 in
connection with the distribution to be paid January 29, 2008 to stockholders of
record on December 17, 2007.
35
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Dividend Reinvestment Plan (Unaudited)
The Plan
The Fund's Dividend Reinvestment Plan (the "Plan") offers a convenient way for
you to reinvest capital gains distributions and ordinary income dividends,
payable in whole or in part in cash, in additional shares of the Fund.
Some of the Plan features are:
. Once you enroll in the Plan, all of your future distributions and
dividends payable in whole or in part in cash will be automatically
reinvested in Fund shares in accordance with the terms of the Plan.
. You will receive shares valued at the lower of the Fund's net asset value
or the Fund's market price as described below. The entire amount of your
distribution or dividend will be reinvested automatically in additional
Fund shares. For any balance that is insufficient to purchase full shares
of the Fund, your account will be credited with fractional shares.
. Your shares will be held in an account with the Plan agent. You will be
sent regular statements for your records.
. You may terminate participation in the Plan at any time.
The following are answers to frequently asked questions about the Plan.
How do I enroll in the Plan?
If you are holding certificates for your shares, contact American Stock
Transfer & Trust Company (AST) at the address shown below. If your shares are
held in a brokerage account, contact your broker. Not all brokerage firms
permit their clients to participate in dividend reinvestment plans such as the
Plan and, even if your brokerage firm does permit participation, you may not be
able to transfer your Plan shares to another broker who does not permit
participation. Your brokerage firm will be able to advise you about its
policies.
How does the Plan work?
The cash portion of any dividends or distributions you receive, payable in
whole or in part in cash, will be reinvested in shares of the Fund. The number
of shares credited to your Plan account as a result of the reinvestment will
depend upon the relationship between the Fund's market price and its net asset
value per share on the record date of the distribution or dividend, as
described below:
. If the net asset value is greater than the market price (the Fund is
trading at a discount), AST, as Plan Agent, will buy Fund shares for your
account on the open market on the New York Stock Exchange or elsewhere.
Your dividends or distributions will be reinvested at the average price
AST pays for those purchases.
. If the net asset value is equal to the market price (the Fund is trading
at parity), the Fund will issue for your account new shares at net asset
value.
. If the net asset value is less than but within 95% of the market price
(the Fund is trading at a premium of less than 5%), the Fund will issue
for your account new shares at net asset value.
. If the net asset value is less than 95% of the market price (the Fund is
trading at a premium of 5% or more), the Fund will issue for your account
new shares at 95% of the market price.
If AST begins to buy Fund shares for your account at a discount to net asset
value but, during the course of the purchases, the Fund's market price
increases to a level above the net asset
36
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Dividend Reinvestment Plan (Unaudited) (concluded)
value, AST will complete its purchases, even though the result may be that the
average price paid for the purchases exceeds net asset value.
Will the entire amount of my distribution or dividend be reinvested?
The entire amount of your distribution or dividend, payable in cash, will be
reinvested in additional Fund shares. If a balance remains after the purchase
of whole shares, your account will be credited with any fractional shares
(rounded to three decimal places) necessary to complete the reinvestment.
How can I sell my shares?
You can sell any or all of the shares in your Plan account by contacting AST.
AST charges $15 for the transaction plus $.10 per share for this service. You
can also withdraw your shares from your Plan account and sell them through your
broker.
Does participation in the Plan change the tax status of my distributions or
dividends?
No. The distributions and dividends are paid in cash and their taxability is
the same as if you received the cash. It is only after the payment of
distributions and dividends that AST reinvests the cash for your account.
Can I get certificates for the shares in the Plan?
AST will issue certificates for whole shares upon your request. Certificates
for fractional shares will not be issued.
Is there any charge to participate in the Plan?
There is no charge to participate in the Plan. You will, however, pay a pro
rata share of brokerage commissions incurred with respect to AST's open market
purchases of shares for your Plan account.
How can I discontinue my participation in the Plan?
Contact your broker or AST in writing. If your shares are in a Plan account,
AST will send you a certificate for your whole shares and a check for any
fractional shares.
Where can I direct my questions and correspondence?
Contact your broker, or contact AST as follows:
By mail:
American Stock Transfer & Trust Company
PO Box 922
Wall Street Station
New York, NY 10269-0560
Through the Internet:
www.amstock.com
Through AST's automated voice response System:
1-888-556-0425
AST will furnish you with a copy of the Terms and Conditions of the Plan
without charge.
37
A SWISS INVESTMENTS FUND
THE SWISS HELVETIA FUND, INC.
EXECUTIVE OFFICES
The Swiss Helvetia Fund, Inc.
1270 Avenue of the Americas
Suite 400
New York, New York 10020
1-888-SWISS-00
(212) 332-2760
www.swz.com
THE SWISS
--------------------------------------------------------------------------------
HELVETIA
--------------------------------------------------------------------------------
FUND, INC.
--------------------------------------------------------------------------------
www.swz.com
ANNUAL REPORT
FOR THE
YEAR ENDED
DECEMBER 31, 2007
ITEM 2. CODE OF ETHICS
As of the end of the period covered by this report, the Registrant has adopted a
code of ethics, as defined in Item 2 of Form N-CSR, that applies to its
principal executive officer and senior financial officer. A copy of the code of
ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board of Directors (the "Board") has determined that Messrs.
Paul R. Brenner, Esq., Didier Pineau-Valencienne and Stephen K. West, Esq., each
a member of the Audit Committee of the Board, are audit committee financial
experts as defined by the Securities and Exchange Commission (the "SEC").
Messrs. Brenner, Pineau-Valencienne and West each are "independent" as defined
by the SEC for purposes of audit committee financial expert determinations.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) The aggregate fees billed for each of the last two fiscal years (the
"Reporting Periods") for professional services rendered by the Registrant's
principal accountant for the audit of the Registrant's annual financial
statements, or services that are normally provided by the principal accountant
in connection with the statutory and regulatory filings or engagements for the
Reporting Periods, were $40,750 in 2006 and $52,656 in 2007.
(b) There were no audit-related fees billed to the Registrant in the Reporting
Periods for assurance and related services rendered by the principal accountant
that were reasonably related to the performance of the audit of the Registrant's
financial statements and are not reported under paragraph (a) of this Item 4.
There were no fees billed in the Reporting Periods for assurance and related
services rendered by the principal accountant to the Registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the Registrant
(collectively the "investment adviser") which were required to be pre-approved
by the audit committee as described in paragraph (e)(1) of this Item 4.
(c) The aggregate fees billed in the Reporting Periods for professional services
rendered by the principal accountant to the Registrant for tax compliance, tax
advice and tax planning ("Tax Services") were $4,400 in 2006 and $4,625 in 2007.
These services consisted of review or preparation of U.S. federal, state, local
and excise tax returns.
(d) There were no other fees billed in the Reporting Periods for products and
services provided by the principal accountant to the Registrant, other than the
services reported in paragraphs (a) through (c) of this Item.
(e) (1) The Registrant's Audit Committee pre-approves the principal accountant's
engagements for audit and non-audit services to the Registrant, and certain
non-audit services to the investment adviser that are required to be
pre-approved on a case-by-case basis. Pre-approval considerations include
whether the proposed services are compatible with maintaining the principal
accountant's independence.
(e) (2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) None.
(g) The aggregate non-audit services billed by the principal accountant for
services rendered to the Registrant in the reporting periods were $4,400 in 2006
and $4,625 in 2007. There were no fees billed in each of the Reporting Periods
for non-audit services rendered by the principal accountant to the investment
adviser.
(h) The Registrant's Audit Committee considers whether the provision of any
non-audit services rendered to the investment adviser not pre-approved (not
requiring pre-approval) by the Audit Committee is compatible with maintaining
the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Registrant has a separately-designated standing Audit Committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
It is composed of the following Directors, each of who is not an "interested
person" as defined in the Investment Company Act of 1940:
Paul R. Brenner, Esq.
R. Clark Hooper
Michael Kraynak, Jr.
Didier Pineau-Valencienne
Stephen K. West, Esq.
ITEM 6. SCHEDULE OF INVESTMENTS
Not Applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
The Registrant has delegated voting of proxies in respect of portfolio holdings
to its investment adviser, Hottinger Capital Corp. (the "Advisor"), to vote the
Registrant's proxies in accordance with Advisor's proxy voting guidelines and
procedures. The Advisor has adopted proxy voting guidelines (the "Voting
Guidelines") that provide as follows:
. The Advisor votes proxies in respect of a client's securities in the
client's best economic interests and without regard to the interests
of the Advisor or any other client of the Advisor.
. Unless the Advisor's Proxy Voting Committee (the "Committee")
otherwise determines (and documents the basis for its decision) or as
otherwise provided below, the Advisor votes proxies in a manner
consistent with the Voting Guidelines.
. To avoid material conflicts of interest, the Advisor applies the
Voting Guidelines in an objective and consistent manner across client
accounts. Where a material conflict of interest has been identified
and the matter is covered by the Voting Guidelines, the Committee
votes in accordance with the Voting Guidelines. Where a conflict of
interest has been identified and the matter is not covered by the
Voting Guidelines, the Advisor will disclose the conflict and the
Committee's determination of the manner in which to vote to the
Registrant's Audit Committee.
. The Advisor also may determine not to vote proxies in respect of
securities of any issuer if it determines that it would be in the
client's overall best interests not to vote.
The Advisor's Voting Guidelines address how it will vote proxies on particular
types of matters such as the election for directors, adoption of option plans
and anti-takeover proposals. For example, the Advisor generally will:
. support management in most elections for directors, unless the board
gives evidence of acting contrary to the best economic interests of
shareholders;
. support option plans, if it believes that they provide for their
administration by disinterested parties and provide incentive to
directors, managers and other employees by aligning their economic
interests with those of the shareholders while limiting the transfer
of wealth out of the company; and
. oppose anti-takeover proposals unless they are structured in such a
way that they give shareholders the ultimate decision on any proposal
or offer.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
PRINCIPAL PORTFOLIO MANAGERS
As of the date of the filing of this Report on Form N-CSR, Messrs.
Philippe Comby and Rudolf Millisits are primarily responsible for the management
of the Registrant's portfolio.
Mr. Comby has been a portfolio manager of the Registrant since 1999,
when he joined the Advisor. Mr. Comby is a Vice President of the Registrant and
a Director and Senior Vice President of the Advisor. He also is a Director and
the President of Hottinger U.S., Inc. and the Chief Investment Officer and
Senior Vice President of Hottinger Brothers LLC, each of which is a registered
investment adviser affiliated with the Advisor. Mr. Comby has been affiliated
with the Hottinger Group since 1994, providing portfolio management and client
advisory services. He is a member of the New York Society of Security Analysts,
a member of Global Association of Risk Professionals and a Chartered Financial
Analyst.
Mr. Millisits has been a portfolio manager of the Registrant since
1994, when he joined the Advisor. Mr. Millisits is the Senior Vice President and
Chief Financial Officer of the Registrant and the Chief Operating Officer,
Executive Vice President and Chief Compliance Officer of the Advisor. He also is
the Chairman and Chief Executive Officer of Hottinger U.S., Inc. and the
President and Chief Financial Officer of Hottinger Brothers, LLC. Mr. Millisits
has been affiliated with the Hottinger Group since 1993, providing portfolio
management and private banking services. Prior to joining the Hottinger Group,
Mr. Millisits was a portfolio manager for private clients for Credit Suisse in
New York and Geneva.
PORTFOLIO MANAGEMENT
The Registrant's portfolio managers manage multiple accounts for a
diverse client base, including private clients and institutions.
Material Conflicts Related to Management of Similar Accounts. The
------------------------------------------------------------
potential for conflicts of interest exist when the Advisor or its affiliates and
the portfolio managers manage other accounts that invest in securities in which
the Registrant may invest or that may pursue a strategy similar to the
Registrant's strategy (collectively, "Similar Accounts"). In addition, the
Registrant, as a registered investment company, is subject to different
regulations than certain of the Similar Accounts, and, consequently, may not be
permitted to engage in all the investment techniques or transactions, or to
engage in such techniques or transactions to the same degree, as the Similar
Accounts.
Potential conflicts of interest may arise because of a portfolio
manager's management of the Registrant and Similar Accounts. For example,
conflicts of interest may arise with both the aggregation and allocation of
securities transactions and allocation of limited investment opportunities, as
the portfolio manager may be perceived as causing accounts he manages to
participate in an offering to increase his overall allocation of securities in
that offering, or to increase his ability to participate in future offerings by
the same underwriter or issuer. Allocations of bunched trades, particularly
trade orders that were only partially filled due to limited availability, and
allocation of investment opportunities generally, could raise a potential
conflict of interest, as the portfolio manager may have an incentive to allocate
securities that are expected to increase in value to preferred accounts. Initial
public offerings, in particular, are frequently of very limited availability.
Additionally, the Registrant's portfolio managers may be perceived to have a
conflict of interest because of the number of Similar Accounts, in addition to
the Registrant, that they are managing. In addition, the Advisor could be viewed
as having a conflict of interest to the extent that the Advisor or its
affiliates and/or the portfolio managers have a materially larger investment in
a Similar Account than their investment in the Registrant.
A potential conflict of interest may be perceived to arise if
transactions in one account closely follow related transactions in a different
account, such as when a purchase increases the value of securities previously
purchased by the other account, or when a sale in one account lowers the sale
price received in a sale by a second account.
Other Accounts Managed by the Portfolio Managers. The chart below
------------------------------------------------
includes information regarding the Registrant's portfolio managers, as of
December 31, 2007. Specifically, it shows the number of other portfolios and
assets, including the Registrant, managed by the Registrant's portfolio
managers. Neither portfolio manager manages any accounts with respect to which
the advisory fee is based on this performance of the account.
REGISTERED INVESTMENT OTHER POOLED INVESTMENT
PORTFOLIO MANAGER COMPANIES ($) VEHICLES ($) OTHER ACCOUNTS ($)
----------------- --------------------- ----------------------- ------------------
Philippe Comby 1 (622 million) 0 23 (74.3 million)
Rudolf Millisits 1 (622 million) 0 23 (74.3 million)
COMPENSATION FOR THE PORTFOLIO MANAGERS
The portfolio managers are generally responsible for managing multiple
types of accounts that may, or may not, invest in securities in which the
Registrant may invest or pursue a strategy similar to one of the Registrant's
strategies.
During the fiscal period covered by this Report on Form N-CSR, the
Registrant's portfolio managers were compensated by a competitive salary and
bonus structure, which was determined both quantitatively and qualitatively.
Salary and bonus are paid in cash. The portfolio managers are compensated on the
performance of the aggregate group of portfolios they manage rather than for a
specific fund or account. Various factors are considered in the determination of
the portfolio managers' compensation. All of the portfolios managed by the
portfolio managers are comprehensively evaluated to determine each portfolio
manager's positive and consistent performance contribution over time. Further
factors include the amount of assets in the portfolios as well as qualitative
aspects that reinforce the Advisor's investment philosophy.
Total compensation is generally not fixed, but rather is based on the
following factors: (i) leadership and commitment, (ii) maintenance of current
knowledge and opinions on companies owned in the portfolio; (iii) generation and
development of new investment ideas, including the quality of security analysis
and identification of appreciation catalysts; (iv) ability and willingness to
develop and share ideas; and (v) the performance results of the portfolios
managed by the portfolio managers.
Variable bonus is based on the portfolio managers' quantitative
performance as measured by their ability to make investment decisions that
contribute to the pre-tax absolute and relative returns of the accounts managed
by the portfolio manager, by comparison to predetermined benchmarks (for the
Registrant, the Swiss Market Index and the Swiss Performance Index) over the
current fiscal year and the longer-term performance (3-, 5- or 10-year, if
applicable), as well as performance relative to peers. The portfolio managers'
bonuses also can be influenced by subjective measurement of the managers'
ability to help others make investment decisions.
OWNERSHIP OF SECURITIES OF THE REGISTRANT
As of December 31, 2007, Mr. Comby and Mr. Millisits owned between
$50,001-$100,000 and over $100,000 of shares of common stock of the Registrant,
respectively.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
(d) Maximum
Number (or
Approximate
(c) Total Number of Dollar Value) of
Shares (or Units) Shares that May
Purchased as Part of Yet Be Purchased
(a) Total Number of (b) Average Price Publicly Announced Under the Plans or
Period Shares Purchased Paid per Share Plans or Programs Programs
------------------- ------------------- ----------------- -------------------- ------------------
01/01/07 - 01/31/07 500,000
02/01/07 - 02/28/07 500,000
03/01/07 - 03/31/07 500,000
04/01/07 - 04/30/07 500,000
05/01/07 - 05/31/07 500,000
06/01/07 - 06/30/07 500,000
07/01/07 - 07/31/07 500,000
08/01/07 - 08/31/07 190,200 17.0036 190,200 309,800
09/01/07 - 09/30/07 149,300 17.7641 149,300 160,500
10/01/07 - 10/31/07 51,100 18.3234 51,100 109,400
11/01/07 - 11/30/07 109,400
12/01/07 - 12/31/07 109,400
------- ------- ------- -------
Total 390,600 17.6970 390,600 109,400
======= ======= ======= =======
At the December 6, 2007 meeting of the Board, the Board approved the purchase of
up to 500,000 shares of the Fund by the Advisor during 2008. The approved
purchase plan, announced to the public in a press release on December 6, 2007,
expires on December 31, 2008. The Fund does not intend to terminate the plan
prior to its expiration.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No material changes
to procedures.
ITEM 11. CONTROLS AND PROCEDURES
(a) The Registrant's principal executive and principal financial officers have
concluded, based on their evaluation of the Registrant's disclosure controls and
procedures as of a date within 90 days of the filing date of this report, that
the Registrant's disclosure controls and procedures are reasonably designed to
ensure that information required to be disclosed by the Registrant on Form N-CSR
is recorded, processed, summarized and reported within the required time periods
and that information required to be disclosed by the Registrant in the reports
that it files or submits on Form N-CSR is accumulated and communicated to the
Registrant's management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions regarding required
disclosure.
(b) There were no changes to the Registrant's internal control over financial
reporting that occurred during the Registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) A copy of the Code of Ethics (Exhibit filed herewith).
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (Exhibit filed herewith).
(a)(3) Not Applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (Exhibit filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant THE SWISS HELVETIA FUND, INC.
By /s/ Rodolphe E. Hottinger
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Rodolphe E. Hottinger, Chief Executive Officer
Date 3/6/08
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Rodolphe E. Hottinger
----------------------------------------------
Rodolphe E. Hottinger, Chief Executive Officer
Date 3/6/08
----------------------------------------------
By /s/ Rudolf Millisits
----------------------------------------------
Rudolf Millisits, Chief Financial Officer
Date 3/6/08
----------------------------------------------