Directors and Officers

Investment Advisor

Hottinger Capital Corp.

1270 Avenue of the Americas, Suite 400

New York, NY 10020

(212) 332-7930

Administrator

Citi Fund Services Ohio, Inc.

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. Its headquarters are in Zurich with offices in Basel, Brig, Geneva, Luxembourg, Sion, Vienna, London, Paris, New York, Toronto and the Bahamas.

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.

Global Economic Review

Calendar year 2011 ended on a mixed note. On one hand, the JPMorgan Global Manufacturing & Services Purchasing Managers Index (PMI) ended the year on a nine-month high at 53.0, which was up from October’s 27-month low of 51.4. The main catalyst contributing to this expansionary rate was the United States, where growth of all-industry activity hit a nine-month high. Additionally, industrial activity also improved in the U.K., India and Brazil, while the PMIs in China and Japan also edged back above the breakeven rate of 50 and into expansionary zones. On the other hand, the Eurozone remained a drag on global output growth, falling for the fourth consecutive month. Signs of recovery in Germany were offset by stagnation in France and ongoing downturns in Italy and Spain.

From the U.S. perspective, the domestic economy started slowly in 2011, picked up pace during second quarter, hit a soft patch during the summer and then performed better during the final four months of the year. Third quarter gross domestic product (“GDP”) growth was 1.8% (annualized), compared to 0.4% and 1.3% in the first and second quarters of the year, respectively, while durable goods orders, a key indicator for business investment, also continued to strengthen. Furthermore, solid jobs growth, which faltered mid-year but picked up towards year-end, was a key factor ensuring continued growth in domestic consumption. Capital spending by corporations was especially strong in 2011, with non-residential

investment spending growing 9.1% in the first three quarters of the year. Looking ahead, weak European demand for U.S. exports may dampen U.S. growth in the first half of 2012, but overall, these are all signs that the U.S. economic recovery, although not vigorous, is at least on a consistently positive trajectory. There remain, however, major headwinds to stronger sustainable U.S. economic growth, including the need for corporate balance sheet strengthening, further deleveraging by households, an ongoing depressed housing market and continued public sector budget cuts. These items held back the U.S. economy in 2010 and 2011, and are likely to continue to be major detractors of the household and financial sectors over the next several years. Based on this backdrop, the U.S. economy is unlikely to experience the swifter rebound of 3-5% growth rates evidenced during previous post-war recoveries.

The outcome of the Eurozone debt crisis continues to be uncertain, even after the Brussels Summit of December 8-9th, implying that the crisis is likely to persist and possibly even intensify during 2012, although government leaders have pledged to strengthen the European Monetary Union. On the one hand, these leaders committed their countries to a greater measure of fiscal discipline than in the past, agreeing to pass constitutional amendments to cap maximum structural budget deficits at 0.5% of GDP instead of the previous 3% general budget deficit limit contained in the Stability and Growth Pact. On the other hand, these leaders agreed

to bolster existing stabilization tools and rescue funds with the rapid deployment and leveraging of the European Financial Stability Facility (“EFSF”). The creation of the permanent rescue fund (i.e., the European Stability Mechanism (“ESM”)), will be accelerated to July 2012, but the combined lending capacity of the EFSF and the ESM is expected to be limited to 500 billion euros and the members would allocate 200 billion euros to the IMF for use in bilateral loans. The European Central Bank (“ECB”) has also taken a more proactive stance with its latest liquidity measures, including a reserve ratio cut, a three-year refinancing program and the expansion of eligible collateral enhancing liquidity, which are intended to assist bank funding stability in 2012 and 2013. Recent evidence, however, suggests that most of the added liquidity has remained on deposit with the ECB rather than finding its way into sovereign debt markets, as many had hoped. Moreover, as announced by the European Banking Authority on December 7th, European banks are in need of 115 billion euros in new capital. The European economies are almost certain to have shifted to negative growth or recessionary rates in the fourth quarter of this year (or will shift to such rates in the first quarter of 2012) on the back of the cumulative effect of severe budget cuts in several Eurozone countries, including the larger economies of Italy and Spain, and on the back of credit constraints on European banks.

Increased Eurozone fiscal supervision is surely needed, but only steps towards a

European fiscal union and the creation of fiscal transfers between countries would convince markets that the Eurozone is viable in the long-term. In the short-term, for tensions to ease significantly, the ECB has to signal it might be willing to act as a lender of last resort for governments. Unfortunately, Germany remains firmly opposed to a greater degree of fiscal mutualisation, while the President of the ECB has defended a narrow interpretation of the EU Treaty, preventing the ECB from any form of public debt monetization. Eurozone policymakers still expect that fiscal tightening would allow private confidence to rebound, therefore limiting the recessionary effects of recent austerity measures. Additionally, the ECB is hopeful that banks might be more willing to increase their exposure to sovereign debt as a result of greater access to liquidity through the ECB’s refinancing operations.

Outside of Europe, several central banks have decided to make their national monetary policies more accommodative. Notably, China’s concerns over inflationary pressures have eased, allowing the Central Bank of China to lower the reserve requirement rate to manage a gradual slowdown of the economy and prevent the cooling of the property market from turning into a crash. The Chinese economy was losing momentum in 2011, and is expected to weaken further in the first half of 2012. The two main contributors to this slowdown have been weaker domestic demand in response to the progressively tighter monetary policy of the past eighteen months and a distinct slowing of

export growth as key overseas markets, such as Europe and the U.K., have edged closer to recession. On the domestic side, the Chinese authorities embarked on a program of monetary tightening mainly in order to cool the overheated residential property market while, at the same time, actively promoting public sector housing under the new Five Year Plan, which seeks to build 36 million subsidized housing units by 2015. On the inflation front, consumer prices peaked in July at 6.2%, and have since moderated to slightly more than 4%, as food prices and the energy markets have softened. Thus, China’s overall economy should not experience a hard landing in 2012 as the country should introduce further expansionary measures if there is any substantial risk of a major economic deterioration.

Heightened uncertainty and increased volatility weighed negatively on financial markets in 2011, driven by the lack of decisive action from Europe, fears of financial sector deleveraging and softening economic data from emerging markets. For instance, the banks and basic resources sectors suffered the most within the European equity markets, with a sell-off of more than 30% in 2011. However, developed markets subsequently rose at the end of the year as positive economic indicators supported the equity markets and policy action from central banks, including the ECB, helped to stabilize investor sentiment. Among the major currencies, the euro has begun to lose its appeal and will probably decline further against the U.S. dollar, the yen and the pound in 2012.

Slow and decelerating global growth, combined with already-high profit margins, point to continued downward revisions to corporate earnings expectations, though this process is still well advanced. Valuations are reasonable, but price-to-earnings ratios are unlikely to expand meaningfully as the European sovereign debt crisis will continue to weigh on financial markets, and investors’ risk aversion will remain high. Management continues to advocate a preference for quality stocks, with a specific emphasis on those with strong dividend growth policies.

Swiss Economic Review

Swiss economic growth slowed considerably during the third quarter of 2011, and the substantial appreciation of the Swiss franc over the summer continued to weigh heavily on the Swiss economy. Real GDP growth of 1.5-2.0% for 2011 can be expected, but only as a result of stronger domestic economic growth during the first half of the year. For 2012, the Swiss National Bank (“SNB”) is expecting domestic economic growth of approximately 0.5%, as a result of the highly challenging international outlook. Moreover, given the country’s close relations with the Eurozone, Switzerland’s economic prospects are highly dependent on how the crisis—and the monetary and policy reactions to it—develops.

On the inflation front, the SNB’s forecast has once again been adjusted downward with price levels expected to dip into negative territory as a result of the strong appreciation in the Swiss franc. In the longer term,

the worsening of the growth outlook for the Eurozone is dampening the inflation outlook. The 2011 inflation forecast was 0.2%. For 2012, the SNB is expecting disinflation of 0.3% and 0.4% for 2013. Consequently, there is no perceived risk of inflation in Switzerland in the foreseeable future.

As long as uncertainty persists about the outcome of the Eurozone debt crisis and unemployment climbs, retail sales performance could be held back by poor consumer sentiment. However, immigration, which should drop slightly but is still expected to remain at a high level in 2012, should continue to have a positive effect on consumption rates in the retail sector. Elevated new car registrations and increased activity in the housing sector, driven by a resilient Swiss labor market, confirm that private consumption, while weak, is not expected to collapse in the coming months. On the positive side, headline manufacturing PMI of 50.7 for December was a surprising increase from November (44.8). This jump represented the biggest increase in the headline figure since March 2010, highlighting the favorable state of the Swiss goods producing sector at the end of 2011. The increased gap between the backlog of orders and the sub-index on inventories also bodes well for further expansion and suggests the lower boundary of the exchange rate between the euro and the Swiss franc has stabilized the negative effect of the strong Swiss franc on Swiss business sentiment. While disappointing, the other indicator of the Swiss business climate, the KOF (Konjunkturforschungsstelle),

deteriorated lately, but indicated that the construction sector and the watch industry remained robust, while the chemical industry and, to a lesser degree, the machinery sector show tentative signs of stabilization.

On the monetary front, the SNB continued to expand its foreign currency reserves through year-end, to CHF 254 billion at the end of December. The uncertainties immediately following the announcement of SNB President Hildebrand’s resignation (announced in January 2012) weighed on the exchange rate between the euro and the Swiss franc. Currently, the SNB is not expected to take a step back from its monetary policy, remaining committed to maintaining the lower boundary of the exchange rate between the euro and the Swiss franc at 1.20 for some time to come. As a result of those developments, the Swiss franc experienced huge moves over the year, ending up 2.7% against the euro and almost flat against the U.S. dollar. Continuing sovereign debt issues in Europe and high financial market tensions will limit the strengthening of the euro against the Swiss franc. The U.S. dollar should slightly appreciate against the euro, and therefore the Swiss franc, in the very short-term due to inflation and economic growth differentials.

Sector Review

Consumers: food & beverages, personal & household goods and retailers

The increase in global consumer confidence in December was a positive signal that might improve the perception of the

market in consumer goods companies. The trend in U.S. retail sales, however, remained weak in December. The ongoing economic uncertainty in the developed countries should continue to hamper sales growth, particularly in Europe, where Nestlé should grow at a low single digit rate, compared to about 4% to 5% worldwide, which is similar to what major U.S.-based food manufacturers are expecting for 2012. Food companies raised prices in 2011 amid sharply higher costs of agricultural commodities such as corn, wheat and sugar. Commodity prices, however, have slightly and gradually declined since mid-2011, which may allow food companies’ profit margins to widen. Nestlé is well positioned in the premium segment (i.e., pet food, kids and Nespresso) and, with its new products development (i.e., Dolce Gusto) and a high pace of product innovation, is in a position to improve its profitability.

The blue chip stocks in the food sector, such as Unilever and Kraft, outperformed the global indices in 2011 to a large extent. With a return of 2.1% for the year, however, Nestlé underperformed its blue chip peers. Smaller companies in the high-end premium food manufacturing business, like the chocolate producer Lindt, also suffered as a result of reduced demand from the Southern European countries. Additionally, the export market was adversely affected by the strong Swiss franc. On the positive side, Lindt benefited from a fall in cocoa prices, which declined by about 20% on a year-over-year basis.

Asian demand for Swiss luxury goods continues to be very strong, while there has been some weakening demand in Europe. The growth rate of sales of Swiss companies active in this sector has been between 22% and 25% in local currencies, outpacing the growth rate of export of Swiss watches in general. Sequentially, the second part of 2011 was slower than the first half of the year, which was fully expected by the markets. For 2011 as a whole, the negative sales effect for these companies as a result of the stronger Swiss franc was close to 10%. Of note, Swatch and Richemont lagged the Swiss market during 2011, and concerns remain in this sector, as demand could be depressed as a result of a negative wealth effect from a drop in real estate prices in China. Capital expenditures will be on the rise for Richemont due to new store openings in 2012. As a result of these concerns, market valuations of companies in the sector have been compressed.

Market penetration for Swiss luxury watches in China, however, is still very low, while the overall market share for Swiss companies remains unmatched, which is reassuring for the sector’s prospects on a long-term basis. The Fund’s exposure to this sector tracked the exposure of the Swiss Performance Index (SPI) at year-end.

Financials: banks, financial services and insurance

European banks are set to remain in a difficult investment environment in 2012. The European sovereign debt crisis, ongoing

deleveraging by European banks, compliance with the looming Basel III rules and a likely recession in the Eurozone will not help to make investor sentiment any more positive in the short-term. Moreover, private investment is also set to suffer from tightening credit conditions in the Eurozone. The negative vicious circle that links the public and the banking sectors has not yet been broken, and as European banks have faced increasing pressure to refinance themselves, with some being required to improve their capital ratios, the temptation to shrink balance sheets is growing. While the latest announcements from the ECB regarding the provision of liquidity could help to promote financial stability, this is unlikely to alleviate all concerns over the European banking system, which are mainly the result of the lingering possibility, although low, of a disorderly sovereign default. Moreover, in a low interest rate environment, banks will continue to face high pressure on their net interest margins, albeit less so than in late 2011.

The latest fund managers’ surveys by Bank of America/Merrill Lynch indicated that the financial sector (excluding insurance) is massively under owned, with banks extremely out of favor to investors. The Fund reduced its exposure to larger banks in early October, by selling its position in Credit Suisse ahead of the reporting of quarterly figures. For instance, Credit Suisse’s investment banking activities were disappointing and expectations for the bank’s Basel III core tier 1 ratio (“CT1”) were reduced from 11% to 9.4%, while analysts’ forecasts were even

more cautious. The Fund, however, increased its exposure to Julius Baer and Sarasin. As a top-ten holding in the Fund, UBS remains in line with forecasts, demonstrating the “best in class” capital position with a 2013 CT1 of 12% and a projected return on equity of 12-17% starting in 2013 along with a downsizing of its investment bank activities. Benefiting from a price-to-book ratio at around 0.8%, UBS is trading at an attractive valuation and UBS’ management expects to focus on risk weighted asset reductions going forward; mitigating CHF 130 billion of risk weighted assets by 2016 and significant expenses associated with balance sheet deleveraging.

From an insurance sector perspective, corporate earnings are increasingly driven by strong underwriting cash flows and less by investment results, as yields remain very low. Selective price improvements are likely to occur in 2012, which should help sustain sector activity. Insurance companies are, therefore, being pushed to focus even more on reducing expenses and increasing efficiencies, with a particular emphasis on risk management. Life insurers faced a challenging environment in 2011. Many headwinds weighed on the segment such as the reduced demand for traditional products as a result of low guarantees, depressed margins on reduced interest rates, strict capital requirements that prevented companies from taking more investment risks as well as real estate not qualifying under the Swiss Solvency Test (SST). Therefore, the business model of life insurance companies continues

to shift from interest rate-sensitive traditional products with guarantees towards more pure risk solutions and fee-based businesses.

In the reinsurance segment, quarterly catastrophe losses spiked in 2011, representing the costliest year ever in terms of economic natural catastrophe losses, which is expected to drive up property catastrophe reinsurance prices by 9.5% in 2012 with loss-affected areas much higher after a 7.5% decline in 2011. On the investment income side, heavily influenced by bond yields, yields fell to a quarterly 10-year low of 3.1% in Q3 2011 and could fall potentially further in Q4 2011 and Q1 2012 pressuring earnings and return on equity (ROE). For instance, the 2011 floods in Thailand were a major insurance event with economic losses estimated at around USD 20 billion, with one third covered by insurance companies and the major part by reinsurers. According to analysts, Munich Re should bear 10% of the losses, Swiss Re 8% and Hannover Re the remainder, with a negative 8-13% impact on combined ratios. However, no change is expected on dividend payments from those companies. As a top-ten holding in the Fund, with a slight overweight against the SPI Index, Swiss Re still has substantial excess capital of around USD 6 billion.

From an overall standpoint, the insurance sector is currently trading at slightly more than seven times 2012 expected earnings per share and 80% book value below its historic average, while trading at a 6% premium to its European peers, reflecting

Swiss issuers’ strong balance sheets and low exposures to peripheral European countries. Strongly capitalized companies should offer attractive returns for investors through high dividends. In this low interest rate environment, non-life and reinsurance companies are favored over life insurance companies. The whole insurance sector still appears undervalued relative to historical multiples, contributing to Management’s cautious although positive view on the sector. The effect of declining interest rates and volatility in the equity and bond markets appear to be already priced into the sector’s valuation. In terms of companies, Zurich Financial Services continues to demonstrate steady cash flow generation and a solid balance sheet. As a result, the Fund continues to maintain an overweight position in the company compared to the SPI.

Industrials Goods and Services; Construction and Materials

The rebound of the industrial sector continued in the last quarter of 2011, on the back of better U.S. economic prospects and healthy developments in companies exporting outside of Europe, especially to the emerging markets (although companies exposed mostly to Northern Europe also have not yet seen a reduction in demand). Most companies, however, also have been witnessing input cost inflation in emerging market countries. Strong competition in those markets does not seem to allow for companies to increase prices enough to fully offset their higher raw material bills and wages for

employees. As a result, the balance of unmatched cost has to be met by a reduction in operating expenses. Some companies also saw margin losses as a result of efforts to hedge against the increased strength of the Swiss franc.

End markets, like automotive and aerospace, continue to show strong demand, which is a boost for companies active in industrial coatings, such as Sulzer, Oerlikon, or auto parts, such as Georg Fischer. Additionally, the automotive industry trend towards lighter vehicles that match energy efficiency standards is a driver for coatings demand as well. Another end market for Swiss industrial companies is energy. The oil and gas upstream capital expenditure activity has been resilient, despite some uncertainty about large projects. On the downstream side, in refining for example, the activity has remained steady, albeit at a low level.

Textile machinery demand has rebounded (despite volatility in cotton prices), driven by a need to automate in China where labor cost issues and a need to upgrade an aging installed base is inevitable.

In general, Swiss industrial companies have been able to move towards a business model with more recurring revenues which allows them to better weather business cycles and defend pricing. ABB, for example, with its latest acquisitions, is aiming at increasing its revenues from software and services. Burckhardt Compression and Sulzer also continue to expand in the services and

replacement parts markets, which have lower margins, but are less cyclical and have lower requirements in terms of invested capital.

On the materials and construction side, Swiss cement companies suffered from the European slowdown and some emerging market activity reduction, higher energy costs and weak pricing power. Holcim outperformed the sector due to its lack of exposure to more difficult markets, such as Egypt, and due to its stronger balance sheet. Sika suffered from currency headwinds and from higher raw material prices; however, it was able to deliver 11% sales growth for the year organically, in line with market consensus as activity expanded in all countries. The negative currency impact on the company’s reported sales in Swiss francs for the year was close to 13%. Sika is still aiming at becoming the market leader in all its target markets, both globally and locally, and continues its acquisitive strategy. The industrial, construction and chemical material parts proved to be quite resilient in 2011, confirming the quality of the company’s innovation, management and decentralized international presence.

For Swiss exporters, a massive international competitive disadvantage was avoided, in part by the SNB’s successful intervention to weaken the Swiss franc in September. In addition, local businesses also were protected from cheaper European imports. Management reduced the Fund’s exposure to the industrial sector during the first part of 2011, as a result of the global

economic slowdown and compressed valuations of the small- and mid-cap companies in the sector compared to the larger companies in the sector. The Fund, however, maintained some core positions in the mid-capitalization segment where Management believes excess market value can be created over the economic cycle, because of the view that these companies should be able to outperform in economic downturns with successful cost management, and then maintain strong market share positions through the upturns. Overall, the Fund maintained an overweight position in the industrial sector against the SPI, despite its lack of exposure towards the end of the year in Holcim, Sulzer and ABB.

Energy

Despite vibrant drilling and exploration activity in the energy sector fostered by high oil prices, execution has been an issue for Swiss companies, which continue to report mixed results. On the equipment and service side, Weatherford’s sales and operating margins were in line with expectations, but free cash flow was negative and earnings guidance was downgraded. On the drilling service side, Transocean’s ultra-deep water fleet continues to struggle with technical problems. The company saw a huge increase in operating costs due to a delay in certification of blow-out preventers. The negative impact of a much tighter regulatory environment on an aging fleet was the main cause for low capacity utilization, penalizing returns on capital and justifying the company’s current

large trading discount to its net asset value. The Fund’s average exposure to the energy sector was minimal during the fourth quarter of 2011.

Healthcare: biotechnology, medical technology and pharmaceuticals

As a result of increased market volatility in the fourth quarter, investors continued to favor pharmaceutical stocks that focused on free cash flow, dividends and low valuation, rather than companies in the development stage of the product pipelines. The MSCI World Healthcare Index ended December with a positive total return for the month of 8.1% compared to 7.7% for the MSCI World Index. For 2011, the divergence between the two indices was remarkable (10.2% versus -5.0%, respectively). Within the sector, the performances of the stocks varied considerably, with Pfizer and GlaxoSmithKline up 29% and 24%, respectively, while AstraZeneca was up only 10% (in Swiss francs). The two largest Swiss blue chips stocks, Roche and Novartis, also had very different total returns in 2011 (22% versus 2%, respectively). The gap in those companies’ performance in the fourth quarter was less pronounced (8% versus 6%, respectively).

Investors seemed to regain confidence in a sector that continues to face many challenges, including uncertainty surrounding U.S. and European healthcare reform, a lack of innovation to replace blockbuster drugs and increased competition from generic drug manufacturers. The brutal de-rating of the

sector in the past decade that reduced the price-to-earnings ratio for the sector from twenty to about ten times earnings today reflects the deteriorating conditions in the sector. The pharmaceutical industry, however, has slowly responded to these challenges and companies have taken measures to revamp their research and development operations and discovery processes, improve productivity and implement broad based cost-cutting programs.

In the fourth quarter, Novartis suffered a delay in its effort to develop an inhaler treatment for smokers (NAV 237), which is expected to be pushed back by one or two years. The commercialization of the respiratory drug is still expected to become a blockbuster. The termination of the clinical development of the next generation of the anti-hypertensive drug Aliskiren for type-2 diabetes patients also came as a surprise. It is too soon, however, to anticipate the withdrawal of the drug for the approved indications (total peak sales for Aliskiren were anticipated to be between USD 1.2 and 1.6 billion). This negative news had broad repercussions on the company’s hypertensive franchise in general, which will suffer from the loss of patent exclusivity for Diovan, which generates revenue of CHF 6 billion on an annual basis. This news, however, failed to negatively affect Novartis’ stock price, suggesting that the market does not solely value the company based on its drug pipeline. This gives potential for the stock’s price to appreciate on good news when the market turns more positive. Novartis is progressing

well with its oncology franchise, as demonstrated by the run-up in sales of the newly commercialized Tasigna and the development of the drug Afinitor. Revenues from the first oral drug (Gilenya) for the treatment of multiple sclerosis are very encouraging, although some anecdotal evidence of cardiovascular side effects was observed. Gilenya should position Novartis as a serious competitor in the field, compared to similar emerging drugs from Biogen and Sanofi.

As noted, the performance of Roche contrasted with Novartis throughout 2011. The European marketing approval of Avastin for ovarian cancer in December 2011 was largely anticipated by the market and the contribution of this new target population on the CHF 7 billion peak sales generated in other cancer indications should be limited. With positive clinical data of a combination therapy (Herceptin and Pertuzumab) presented at the San Antonio Breast Cancer Symposium early December, Roche helped to secure its position in the breast cancer franchise.

The biotech indices largely outperformed worldwide indices in the fourth quarter (Nasdaq Biotech Index +12%). In Switzerland, however, Actelion did not participate in this momentum and ended the quarter in line with the SPI.

Chemicals

The consumer chemical sector remained stable with long term structural growth drivers in emerging markets and select demographics in developed markets. In this

sub-sector, Givaudan should continue to maintain its industry leading margins despite the deteriorating consumer confidence in Europe observed in the fourth quarter. The global market of flavor and fragrances should expand at a growth rate of 5-6% in the next three years. Growth in emerging markets is expected to be 3-4 times higher than in developed markets in the coming years triggered by increased consumption (i.e., cosmetics) and disposable income. To capture this growth potential, Givaudan, which already has a strong presence in the Asia Pacific region, is expected to shift its resources in marketing and sales as well as research and development, to emerging market countries.

On the agribusiness side, the fundamentals of Syngenta continue to point towards a favorable overall outlook, and anecdotal evidence suggests that volume momentum will increase in seeds, mainly in Latin America. A more cautious stance is needed for the fertilizer companies in Europe, which are facing a deteriorating environment in demand and the uninspiring figures provided by the USDA (United States Department of Agriculture) in December. The performance of Syngenta was strong, with a 15% return in the fourth quarter, which compared favorably to its peer group. The integrated business model announced in early 2011 will help Syngenta to double the size of the crop division by 2015 (USD 8 billion sales in 2011).

Private Equity and Other Illiquid Investments

In the fourth quarter, a new illiquid direct private investment was made in Selfrag, a privately held Swiss company that specializes in the development, engineering and production of high voltage pulse power products for the selective fragmentation of various materials. The technology is particularly suited for processing high purity materials as well as for mining and recycling applications. Selfrag was spun-off from the Ammann Group in 2007.

The Fund’s total investment (consisting of assets invested to date and remaining capital commitments) in its two private equity fund investments, Zurmont Madison and Aravis II, represented 4.6% of the Fund’s net assets as of December 31, 2011.

Outlook

Equity valuations are attractive in most of the markets on all metrics. Yields on earnings and free cash flow yields are very high historically compared to government bond yields. This elevated equity risk premium should allow for a decent performance for stocks in 2012, barring major deflationary events. The European debt crisis and larger economic issues in the Eurozone pose significant issues, but they are already well known to investors. Actions taken in Europe although not necessarily solving longer-term issues should stabilize the market for now. The U.S. economy is recovering while emerging market economies are slowing, but so are their inflation rates, which should allow central banks more room to cut interest rates and

add more liquidity to their economies in 2012. The macro-economic situation is still uncertain and volatility is to be expected, namely due to China’s transition to a more consumer-driven economy depending less on fixed-capital formation. While the European banking system remains a risk and its deleveraging will negatively affect global trade, Chinese social unrest, real estate depreciation and questionable loans by the banking system, are probably the main sources of risk for global demand. The favorable equity valuations and extremely low interest rates should act as shock absorbers against those risks in 2012.

Fund Performance Review

The Fund started the year with relatively high exposure to small- and mid-capitalization companies, despite some reduced exposure at the end of 2010, and continued to reduce select positions during the first quarter of 2011. Throughout 2011, these companies were more negatively affected by the stronger Swiss franc, investors’ avoidance of risk and relatively full valuation compared to their large capitalization peers.

Management of liquidity in the Fund in 2011 was challenging due to the high level of realized capital gains triggered by the need to raise cash to pay stockholders who participated in the Fund’s tender offer in June 2011 (and potential tender offer in October 2011), and by the rebalancing of the Fund’s portfolio in response to market conditions. As a result of the high level of

realized capital gains, the Fund also had to raise significant cash to pay distributions to stockholders in August. At times throughout the year, the Fund had higher cash positions than it otherwise would have, which penalized its performance, particularly in October when the markets recovered strongly.

At the sector level, the Fund benefitted from being underweight in the financial sector. The main detractors for performance were due to specific issues, including a structural underweight in the pharmaceutical sector, where the Fund is limited in its ability to invest more than a certain percentage of its assets in a particular issuer and the sector generally. On a stock selection basis, the technical rebound of Roche penalized the relative performance of the Fund in the fourth quarter. Earlier in the year, specific unexpected events, such as the allegations and resignations of Sonova’s management and the lengthening sales’ cycle affecting Temenos, also had a negative impact on specific securities.

In summary, 2011 was a challenging year for market participants generally and the Fund specifically. The Fund faced numerous external pressures on its performance, including global and Eurozone macro-economic issues, significant volatility in the equity and currency markets, the ongoing strength of the Swiss franc, and the underperformance of Swiss small- and mid-capitalization companies against their larger peers (the SMI Mid Index, for example,

underperformed the SPI by 13% in 2011). Adding to the Fund’s difficulty in trying to navigate these external pressures and still outperform the SPI, were various internal portfolio management challenges. These were the result, in part, of the Fund’s need to raise and set aside cash for the Fund’s tender offer program, and for two significant distributions to stockholders, as well as regulatory constraints on the Fund’s ability to add to its positions in important and attractive larger-capitalization issues. As a result of a combination of these various factors, the Fund underperformed the SPI by 3.4% for the year. Management continues to seek promising investment opportunities for the Fund in spite of these external and internal challenges and is confident, in light of the Fund’s long-term performance record, of its ability to continue to provide positive long-term results to the Fund’s stockholders.

Sincerely,

Alexandre de Takacsy

President

Rudolf Millisits

Chief Executive Officer and Chief Financial Officer

Source: Citi Fund Services Ohio, Inc.

New Investments by the Fund

Actelion, Ltd.

Adecco SA

Bank Sarasin & Co., Ltd.

Biotie Therapies Oyj*

Geberit AG

Ixodes AG, Series B

Julius Baer Group, Ltd.

SelFrag AG, Class A, Series C

Swiss Life Holding AG

Swiss Re AG

Additions to Existing Investments

Aravis Biotech Il — Limited Partnership

Clariant AG

Georg Fischer AG

Givaudan SA

Kaba Holding AG, Series B

Nestle SA

Roche Holding AG

Syngenta AG

UBS AG

Zehnder Group AG

Zurich Financial Services AG

Zurmont Madison Private Equity, Limited Partnership

Securities Disposed of / Expired

ABB, Ltd.

Credit Suisse Group

Dufry Group

Flughafen Zuerich AG

Forbo Holding AG

Gategroup Holding AG

Huber & Suhner AG

Meyer Burger Technology AG

Mobimo Holding AG

Panalpina Welttransport Holding AG

Phoenix Mecano AG

PSP Swiss Property AG

Schweiter Technologies AG

Sonova Holding AG

Sulzer AG

Swiss Prime Site AG

Swissquote Group Holding SA

Synosia Therapeutics Holding AG, Series A Preferred Shares*

Synosia Therapeutics Holding AG, Series B Preferred Shares*

Synosia Therapeutics Holding AG, Series C Preferred Shares*

Temenos Group AG

Weatherford International Ltd.

Reductions in Existing Investments

Addex Pharmaceuticals, Ltd.

Belimo Holding AG

Burckhardt Compression Holding AG

Compagnie Financiere Richemont SA, Series A

Galenica AG

Kuehne + Nagel International AG

Novartis AG

SGS SA

Sika AG

Swatch Group AG

Transocean, Ltd.