As filed with the Securities and Exchange Commission on March 8, 2007
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, 2006
Date of reporting period: January 1, 2006 - December 31, 2006
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
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
Eric R. Gabus/1/ Rodolphe E. Hottinger
VICE CHAIRMAN (NON-EXECUTIVE) PRESIDENT
Jean-Marc Boillat CHIEF EXECUTIVE OFFICER
DIRECTOR Rudolf Millisits
Paul R. Brenner, Esq./3/ SENIOR VICE PRESIDENT
DIRECTOR CHIEF FINANCIAL OFFICER
Alexandre de Takacsy Philippe R. Comby, CFA, FRM
DIRECTOR VICE PRESIDENT
Claude Frey Edward J. Veilleux
DIRECTOR VICE PRESIDENT
Paul Hottinguer SECRETARY
DIRECTOR Scot E. Draeger
Michael Kraynak, Jr./2/ ASSISTANT SECRETARY
DIRECTOR Frederick Skillin
Didier Pineau-Valencienne/2/ ASSISTANT TREASURER
DIRECTOR Jean L. Seidel
Stephen K. West, Esq./2/ ASSISTANT TREASURER
DIRECTOR Peter R. Guarino, Esq.
CHIEF COMPLIANCE OFFICER
-------------------------------------------------------------------------------
/1/GOVERNANCE/NOMINATING /2/AUDITCOMMITTEE MEMBER
COMMITTEECHAIRMAN /3/AUDITCOMMITTEE CHAIRMAN
INVESTMENT ADVISOR
Hottinger Capital Corp.
1270 Avenue of the Americas, Suite 400
New York, New York 10020
(212) 332-7930
ADMINISTRATOR
Citigroup 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
as more fully described in this report.
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
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GLOBAL OVERVIEW
After the May-June slump and a short consolidation phase, performance
during the fourth quarter of 2006 was very strong across all of the major
equity markets with the sole exception of Japan. Emerging markets outperformed,
with China and India in the lead, and Europe did well, clearly outperforming US
indexes. Liquidity, low interest rates, and the mergers and acquisitions
activity were again the main drivers. Earnings did not slow down, contrary to
some expectations, and the US economy was able to absorb the shock of a higher
Fed funds rate.
SWISS ECONOMIC NOTES
On December 14th 2006, the Swiss National Bank (SNB) again increased its
target range for the three-month Libor by 0.25%, to 1.50%-2.50%, and has said
it intends to hold rates in the middle of the range for now. The Swiss economy
has seen a successful year with rising consumer confidence, increasing exports
and improving private household expenditures with many industries reporting
production at maximum sustainable capacity. The SNB forecasts real GDP growth
of just under 3% in 2006. The unemployment rate, at 3.1% in December, is
expected to fall below 3% in the beginning of 2007, its lowest level since 2002.
Europe's economic situation improved significantly this year, especially in
Germany, where the IFO Index of business climate sentiment increased by nine
points for the year, including 1.9 points in December, to the highest ever
reading. Europe is Switzerland's most important trading partner, accounting for
62% of Swiss exports (31% to Germany alone). Its economic strength therefore
had a positive impact on the Swiss economy. This source of strength, however,
might be subdued in 2007 due to the impact of an increase in Germany's value
added taxes from 16% to 19% at the beginning of the year.
For 2007, the SNB expects a decline in economic momentum, forecasting 2%
growth in Switzerland's GDP for the year. The KOF (Swiss Institute for Business
Cycle Research) leading indicator indicates acceleration in GDP up to the end
of 2006 followed by a slow down during the first half of 2007.
In its last monetary policy assessment, the SNB stated that it expects
annual inflation to be 1.1% for 2006, 0.4% for 2007 and 0.9% in 2008. The
effect of a 2% interest rate is still expansionary. The yield on the 10-year
Swiss Confederation bond increased significantly during the first half of the
year, along with short term interest rates, but it remained more or less flat
during the second half, despite a continuing rise in short term rates. The
yield on the 10-year bond finished the year at 2.51%
On the currency front, the Swiss franc has increased nearly 8% against the
US dollar. Against the euro, on the other hand, the Swiss franc declined about
4%, possibly as an adjustment based on an expected differential in interest
rates. Interestingly enough, both the SNB and the Swiss Finance Minister have
recently expressed some concern with the weakness of the Swiss franc. The SNB
has let
2
THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
the market know that it was uncomfortable with the Swiss franc being a funding
currency for the carry trade and indicated it could be considering raising
interest rates in the current low volatility environment in order to encourage
more strength in the franc.
SWISS MARKET REVIEW AND FUND PERFORMANCE
The Swiss market was up 20% in local currency for the year, in line with
most European markets. The clear winners for the year were the high volatility
names, despite having been hit by a sharp correction in May. The large
defensive stocks (pharmaceuticals and food) did not fare as well.
The 35% return of the mid and small sized companies clearly outperformed
the 16% return of the blue chips, a change from 2005, during which the large
caps outperformed slightly. Mid and small cap companies now trade at a premium
to the rest of the market. This could be sustainable if the global economy
stays on a growth path and if, as Management believes, private equity money
continues to flow into the sector.
Looking at individual issues, the cyclical industrial and the financial
sectors have performed the best, with ABB Ltd, Swatch Group AG, Syngenta AG,
Adecco SA, Julius Baer Holding AG, Credit Suisse Group and Baloise Holding AG
clearly leading on the large cap side. Looking at the mid and small caps,
restructuring industrials such as OC Oerlikon Corp, Gurit Holding AG and
Schmolz & Bickenbach AG (formerly Swiss Steel AG) moved up strongly.
The Fund has been heavily positioned in the mid cap portion of the
healthcare sector, benefiting from a 146% increase in Actelion Ltd, a 53%
increase in Basilea Pharmaceutica and a 45% increase in Galenica Holding AG. It
also was well positioned in the utility sector benefiting from 64% increases in
Centralschweizerische Kraftwerke AG and BKW Energie AG. However, because of the
Fund's low exposure to the mid and small cap industrial sector, a large part of
this sector's strong performance was not captured.
Most of the market's recovery from its May-June lows was attributable to an
increase in valuations on the back of the decrease in long term interest rates,
even though earnings growth contributed as well. A very supportive liquidity
backdrop drove the market to new highs and rewarded exposure to systematic risk
(market risk). It was therefore quite difficult to differentiate oneself
through stock picking.
SWISS MARKET QUARTERLY CORPORATE NEWS
Kudelski SA, a world leader in conditional access systems for digital TV,
announced on October 19th 2006, that it was taking over a controlling stake in
Open TV, the number one provider of set-top box middleware based in San
Francisco. With this acquisition, Kudelski SA will improve its offering and
satisfy the increasing need for integrated solutions in digital TV.
On October 25th, 2006, Vontobel Holding announced the acquisition of
Lombard Odier Darier Hentsch's brokerage and corporate
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
finance business. Vontobel already holds a leading market position with regard
to listed products in Switzerland. With this acquisition Vontobel should be
able to strengthen its market position in its brokerage and corporate finance
areas as well.
On November 20, 2006, Actelion Ltd announced a definitive agreement to
acquire US-based Cotherix, Inc. Cotherix is a biopharmaceutical company also
active in the treatment of pulmonary arterial hypertension (PAH). It also
markets Ventavis, the only approved inhaled therapy treatment of PAH in the
United States. This acquisition should strengthen its leading position in this
therapeutic area.
Nestle SA announced on December 14, 2006 the acquisition of Novartis
Medical Nutrition, a company with sales of about $950 million in 2006. Nestle's
management believes the business is complementary to its healthcare nutrition
business and the combination offers a product portfolio covering all diseases
needing special nutrition therapies. This continues Nestle's strategic
transformation process to a nutrition, health and wellness company.
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
--------------------------------------------------------------------------------------------------------------------
PEER GROUP/INDICES PERFORMANCE COMPARISON IN SWISS FRANCS/1/
--------------------------------------------------------------------------------------------------------------------
TOTAL RETURN AS OF YEAR ENDED DECEMBER 31, CUMULATIVE
---------------------------------------------------------------------- PERFORMANCE
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 12/31/96-12/31/06
--------------------------- ------ ------ ----- ------ ------- ------- ------ ------ ------ ------ -----------------
SWISS HELVETIA FUND 20.56% 33.20% 7.75% 22.54% -20.40% -22.91% 14.06% 14.70% 15.57% 53.99% 202.90%
Swiss Performance
Index (SPI) 20.67% 35.61% 6.89% 22.06% -25.95% -22.03% 11.91% 11.69% 15.36% 55.19% 175.84%
Swiss Market Index (SMI) 15.85% 33.21% 3.74% 18.51% -27.84% -21.11% 7.47% 5.71% 14.28% 58.93% 122.86%
iShares MSCI
Switzlerland/2/ (Formerly
called Webs
Switzerland) 20.02% 32.45% 6.34% 19.14% -26.23% -23.12% 7.75% 12.22% 11.74% 47.79% 128.08%
CS EF Swiss Blue Chips/3,7/ 18.78% 32.27% 2.75% 18.13% -28.75% -22.12% 10.97% 7.57% 14.21% 59.90% 94.21%
UBS (CH) Equity Fund/4,7/ 18.98% 33.50% 5.00% 18.14% -26.02% -22.04% 7.42% 6.43% 12.75% 55.94% 128.43%
Pictet (CH) -- Swiss
Equities/5,7/ 19.37% 37.06% 7.05% 20.10% -27.93% -22.35% 7.34% 9.38% 11.05% 55.65% 138.89%
Saraswiss (Bank
Sarasin)/6,7/ 18.69% 33.05% 2.93% 19.64% -28.51% -24.45% 9.72% 7.10% 14.41% 53.57% 116.86%
SOURCES: BLOOMBERG, MANAGEMENT COMPANIES' WEBSITES AND CITIGROUP FUND SERVICES,
LLC.
/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 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: 12/31/96 = 1.35,
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 = 1.3179, AND
12/31/06 = 1.2207.
/3/ THIS FUND GIVES INVESTORS ACCESS TO THE SWISS EQUITY MARKET. IT HAS A
BROADLY-DIVERSIFIED PORTFOLIO GEARED TO 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.
Correction: In the last two quarterly reports, the annual total return figures
for iShares MSCI Switzerland were misstated. The figures presented above are
correct.
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
-------------------------------------------------
2006
------------------------------------------ ------
PERFORMANCE IN SWISS FRANCS
Swiss Performance Index (SPI) 20.67%
Swiss Helvetia Fund
Based on Net Asset Value 20.56%
CHANGE IN U. S. DOLLAR VS. SWISS FRANC -7.38%
PERFORMANCE IN U. S. DOLLARS
SWISS HELVETIA FUND PERFORMANCE
Based on Net Asset Value 30.16%
Based on Market Price 37.64%
S & P 500 Index 15.79%
MSCI EAFE Index 26.34%
Lipper European Fund Index (10 Largest)/1/ 32.23%
Lipper European Fund Universe Average/1/ 33.66%
SOURCES: CITIGROUP FUND SERVICES, LLC AND BLOOMBERG
/1/ BASED ON NET ASSET VALUE.
The Swiss industrial sector continues to attract a strong inflow of foreign
capital especially from the rest of Europe, be it private equity investors or
investors taking a substantial stake in small to mid sized listed companies.
Switzerland has strong know-how in financial services, pharmaceuticals and
machinery. The first two areas have been "global" for a long time (as witnessed
by the size of UBS, Credit Suisse, Novartis and Roche), but the industrial
sector has not developed as quickly. While many corporations in that sector
have substantial international sales, they have been active mostly in niche
markets.
The inflow of foreign money is pushing for merger and acquisition activity
to take this knowledge to a larger global scale. This trend will support the
valuation of the industrial sector and continue to make Switzerland, with the
quality of its infrastructure and the skill level of its business elite, an
interesting place to invest. The World Economic Forum recognized that fact when
its report on global competitiveness, issued at the end of September, put
Switzerland at the top of its list of the most competitive economies in the
world.
OUTLOOK
The globalization forces at play have been highly supportive for the world
equity markets, with global trade accounting for a record level of global GDP.
While it has kept inflation in goods and services at a relatively low level, it
has put upside pressure on the prices of real estate and financial assets and,
at the same time, kept real wage growth in developed countries at a very modest
level. Political pressure on global trade and calls for more protectionism are
potential risks for globalization, trends that could, in turn, negatively
impact equity markets. Another underlying risk is the rebalancing of the global
economy towards more savings in the US and more spending in the developing
world, threatening the US dollar and bond market. This process is expected to
unfold in the long run, however, and its effects should not be felt in 2007.
The more immediate worry is investor complacency driven by a high level of
liquidity and a hunt for yield, with the tendency to under price risk. While it
is true that the debt market, with its high valuation, looks more overvalued
than the equity market, an increase in the debt market's risk
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (concluded)
premium would substantially affect the equity market as well.
Macro risks are again evident, as they were in the last two years, but in
the absence of a short term catalyst, it is not possible to assess the timing
of an adjustment that would be strong enough to trigger a sharp market
correction. Of particular interest will be the action of central banks in the
US and Europe, especially with regard to the impact of a monetary policy that
is tighter than expected. On the other hand, if the central banks become less
hawkish, the market might experience a reduction in the risk premiums of
equities as compared to bonds.
In this context, Management will continue its effort to control systematic
risk and to have exposure to specific investment cases less dependent on global
economic conditions. In terms of industry groups Management believes that in
Switzerland, the sectors driven by the capital cycle (where there is supply
constraint) will continue to benefit, with energy being an obvious candidate.
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 has authorized the Fund to repurchase
up to 500,000 shares during 2007. During the year ended December 31, 2006, the
Fund repurchased and retired 430,800 shares at an average price of $17.53 per
share (including brokerage commissions) and a weighted average discount of
10.25%. These repurchases, which had a total cost of $7,550,175, resulted in an
increase of $843,650 to the Fund's net asset value.
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, 2006
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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, 2006. 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 2007)
---------------------------------------------------------------------------------------------------------------------------
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 AT
DEC. 31, 2006/1/
---------------------------------------------------------------------------------------------------------------------------
Mr. Alexandre Director Director from Senior Advisor to the Hottinger Group None 793
de Takacsy/2/ 1987 to and President of Hottinger U.S., Inc. $10,001-$50,000
Financiere February 8, until December 2004; Vice Chairman of
Hottinguer 1994 and since the Board, Director, President and
43, rue Taitbout September 17, Secretary: Hottinger Capital Corp.;
75009 Paris 1998. Retired Senior Executive: Royal Bank of
France Canada.
Age 77
---------------------------------------------------------------------------------------------------------------------------
CLASS I NON-INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2007)
---------------------------------------------------------------------------------------------------------------------------
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 AT
DEC. 31, 2006/1/
---------------------------------------------------------------------------------------------------------------------------
Mr. Jean-Marc Director; Director since Former CEO, Tornes-Bechler S.A., None 1,200
Boillat Member of the 2005. Moutier; Ambassador of Switzerland in $10,001-$50,000
Les Gradas Governance/ various countries, including Lebanon,
47120 Nominating Cyprus, Angola, Mozambique and
Villeneuve de Committee Argentina.
Duras France since 2005.
Age 65
---------------------------------------------------------------------------------------------------------------------------
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Certain Information Concerning Directors (Unaudited) (continued)
CLASS I NON-INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2007)
----------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) HELD BY DIRECTOR
& AGE TIME SERVED DURING AT LEAST THE PAST FIVE YEARS
-----------------------------------------------------------------------------------------------------------------------
Mr. Claude W. Director; Director since President of the Swiss Parliament from Chairman of the Board: Infra
Frey Member of the 1995. 1994 to 1995; the President of the Swiss Tunnel SA (Marin); Beton Frais
Clos 108 Governance/ Police Academy (Neuchatel) from 1996 SA (Marin); Member of the
2012 Auvernier Nominating to 2003; Member of the Swiss Parliament Board: Dexia Banque Privee
Switzerland Committee from 1979 to 2003; Parliamentary (Suisse), Zurich; SCCM SA
Age 63 since 2002. Assembly of the Council of Europe (Crans-Montana); Dexia Public
(Strasbourg) from 1996 to 2004; Finance (Geneva); Racemark
Executive Board of the "North-South Industries SA (Couvet);
Centre" (Lisbon) since 1999; President of President of the Steering
the National Committee for Foreign Committee of InterNutrition
Affairs from 2001 to 2003 (Vice President (Zurich); Chairman of the
from 1991 to 2001); Chairman of the Executive Board of the "North-
Board: Berun Frais SA (Marin) since South Centre" (Lisbon);
2002; Federation of Swiss Food Chairman of the Federal
Industries (Berne) from 1991 to 2001; Committee for Employee
Association of Swiss Chocolate Pension Plans (Berne).
Manufacturers (Berne) from 1991 to 2000;
Swiss Association of Biscuits and Sugar
Confectioners Industries (Berne) from
1991 to 2000; Vice Chairman of the
Board: Federation of Swiss Employers'
Association (Zurich) from 1997 to 2001.
-----------------------------------------------------------------------------------------------------------------------
Mr. Eric R. Director; Vice Director since Chairman of the Board: Societe Vice Chairman of the Board of
Gabus Chairman 1987. Neuchateloise de Presse and L'Express Fondation Denis de
St. Dominique (Non- Communication (Neuchatel) until 2002. Rougement pour l'Europe,
Villa Executive) Geneva since 1980; Deputy
Chemin de since 1994; Chairman: CSFB (London)
Carnaches 17 Chairman of until 1986; Executive Vice
1815 Clarens/ the President of Nestle until 1982.
VD Governance/
Switzerland Nominating
Age 79 Committee
since 2002 and
Member of the
Litigation
Committee
from 2001 to
2003.
-----------------------------------------------------------------------------------------------------------------------
------------------
SHARES AND DOLLAR
RANGE OF
COMMON STOCK
BENEFICIALLY
OWNED AT
DEC. 31, 2006/1/
-----------------
1,814
$10,001-$50,000
-----------------
1,000
$10,001-$50,000
-----------------
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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 AT
DEC. 31, 2006/1/
--------------------------------------------------------------------------------------------------------------------------------
Mr. Paul R. Director; Director since Of Counsel of Salans Chairman of the Board and 9,902
Brenner Esq. Chairman of December (law firm) since July Director: Harry Limited over $100,000
25 Moore Road the Audit 2002. 1996; Paul R. Brenner, (Private Investment Company
Bronxville, Committee Attorney-at-Law since ("P.I.C.")); MFGAT, Inc. (P.I.C.);
New York since 2006; June 1993; Counsel to Strelsau, Inc. (P.I.C.); MG
10708 Member of the the Fund from 1994 to Management Corp. (P.I.C.);
Age 64 Governance 2002; Partner: Kelly Marango Capital Management
Committee Drye & Warren LLP (law Corp. (P.I.C.); Quercus
since 2005; and firm) from 1976 to 1993. Foundation, Inc. (Private
Secretary from Foundation); Highstead Fund,
1987 to 2002. Inc. (Private Foundation); and
Director and Senior Trustee:
The Louis Calder Foundation
(Private Foundation).
--------------------------------------------------------------------------------------------------------------------------------
Mr. Didier Director; Director since Honorary Chairman: Director: Fleury Michon 2,303
Pineau- Member of the 1999. Schneider Electric SA (France); AFEP (France); $10,001-$50,000
Valencienne Audit (industrial Wendel Investissements
c/o SABARD Committee conglomerate) since (formerly Compagnie Generale
Private Equity since 1999; the 1999; Chairman of the d'Industrie et de Participations
Partners, 24/32, Governance/ Board and CEO of (CGIP)) from 1996 to 2005;
Rue Jean Goujon Nominating Schneider Electric SA Member of the Board of Pernod
75008 Paris Committee (industrial Ricard since 2003; Member of
France since 2002 and conglomerate) from 1981 Supervisory Board of
Age 75 the Litigation until February 1999; AXA-UAP (France) (insurance)
Committee Chairman of AFEP from from 1998 to March 2001;
from 2001 to 1999 to 2001; Vice Member of Advisory Board:
2003. Chairman of Credit Booz Allen & Hamilton (USA)
Suisse First Boston from 1997 to December 30,
(Europe) Limited 2002; Member of LAGARDERE
(investment banking) (France) (holding 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 3,108
Witt, III, Esq. Chairman 1987. and General Counsel: of the Virginia Military $50,001-$100,000
1802 Bayberry (Non- Stateside Associates, Institute Board of Visitors;
Court, Suite 401, executive) since Inc. from 1993 to 2004; Trustee: The Williamsburg
Richmond, 2006; Chairman Senior Consultant to Investment Trust (registered
Virginia of the Audit Stateside Associates, investment company); Trustee,
23226-3767 Committee Inc. from June 1 to George C. Marshall
Age 71 from 1993 to December 31, 2004; Foundation; Trustee,
2005 and of the Samuel B. Witt, III, University of Virginia Law
Litigation Attorney-at-Law, since School Foundation; Director,
Committee August 1993. Gateway Homes, Inc.; and
from 2001 to Director, College Orientation
2003; and Workshop.
Member of the
Governance/
Nominating
Committee
since 2002.
--------------------------------------------------------------------------------------------------------------------------------
10
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 AT
DEC. 31, 2006/1/
---------------------------------------------------------------------------------------------------------------------------------
Mr. Paul Director; Director since General Partner: Hottinger et Director: Drouot Securite; 327,451/3/
Hottinguer/2/ Chairman of 1987. Cie (Zurich); President: Gaspee Member: Conseil de over $100,000
Hottinger et Cie the Board of (real estate) since 1992; Surveillance Credit Suisse
Dreikonigstrasse Directors Financiere Hottinguer (holding Hottinguer; Societe pour le
55 1989-2006; company) since 1990; Financiere Financement de Bureaux et
8027 Zurich Chief Provence Participations (venture d'Usines Sofibus (real estate).
Switzerland Executive capital firm) since 1990; AXA
Age 64 Officer from International Obligation
1989 to 2002. (finance) since 1996; Managing
Director: Intercom (holding
company) since 1984; Vice
Chairman of the Board, Director
and Member of Investment
Committee: Hottinger Capital
Corp; Administrator:
Investissement Provence SA since
1989; Finaxa (finance) since
1982; Permanent Representative:
Credit Suisse Hottinguer to
Provence International (publicly
held French mutual fund); Credit
Suisse Hottinguer to CS Oblig
Euro Souverain (mutual fund);
Financiere Hottinguer to CS
Institutions Monetaire (mutual
fund) from 1990 to 2002;
Financiere Hottinguer to CS
Court Terme (mutual fund) from
1990 to 2002; 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.
---------------------------------------------------------------------------------------------------------------------------------
Mr. Michael Director; Director since Partner of Brown Brothers Director of American 2,000
Kraynak, Jr. Member of the 2005. Harriman & Co.; Member, BBH Australian Association; $10,001-$50,000
401 Mountain Audit Trust Company Investment Chairman, Finance Committee;
Avenue Committee Committee. Member, Executive Committee;
Ridgewood, since 2006; President of the Robert
New Jersey Member of the Brunner Foundation (private
07450 Governance/ foundation); Trustee of the
Age 76 Nominating Ridgecrest Senior Citizens
Committee Housing Corp.; Former
since 2005 Member of the Ridgewood (NJ)
Financial Advisory Council;
Former Director: Yale Alumni
Association of Bergen County.
---------------------------------------------------------------------------------------------------------------------------------
11
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 AT
DEC. 31, 2006/1/
---------------------------------------------------------------------------------------------------------------------------------
Mr. Stephen K. Director; Director since Senior Counsel of Sullivan & Director: Pioneer Funds 19,217
West, Esq. Member of the 1995. Cromwell LLP since 1997; Partner (registered investment over $100,000
Sullivan & Governance/ of Sullivan Cromwell from 1964 company) (52 portfolios);
Cromwell LLP Nominating to 1996. AMVESCAP PLC (investment
125 Broad Street Committee manager) from 1999 to 2005;
New York, New since 2002 and First ING Insurance Company
York 10004 Member of the of New York from 1983 to 2001;
Age 78 Audit Winthrop Focus Funds
Committee (registered investment
since 1996 and company) from 1988 to 1997;
of the ING America Holdings, Inc.
Litigation (insurance and broker-dealer
Committee holding company) from 1988 to
from 2001 to 1998; Dresdner RCM Global
2003. Strategic Income Fund, Inc.
(registered investment
company) from 1997 to 2002.
---------------------------------------------------------------------------------------------------------------------------------
12
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, 2006.
EXECUTIVE OFFICERS
------------------------------------------------------------------------------------------------
NAME, POSITION(S) PRINCIPAL SHARES OF
ADDRESS WITH FUND OCCUPATION(S) COMMON STOCK
& AGE DURING AT LEAST THE PAST FIVE YEARS BENEFICIALLY
OWNED AT
DEC. 31, 2006/1/
------------------------------------------------------------------------------------------------
Mr. Rodolphe E. President and Managing Partner of Hottinger et Cie 346,723/3/
Hottinger/2/ Chief Executive (Zurich) since 1987; President: Over $100,000
Hottinger et Cie Officer Financiere Hottinger Paris; Hottinger
3 Place des Bergues Capital, S.A. (Geneva) (investment
C.P. 395 company) since 2000; Hottinger & Co.
CH-1201 Geneva Ltd, UK (investment advisor) since
Switzerland 2001; and Emba, NV (investment company)
since 1990; Vice Chairman of the Board,
Age 50 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; 7,974
HCC President, Chief Operating Officer of HCC since Over $100,000
1270 Avenue of the Treasurer and December 1998; Executive Vice
Americas Chief Financial President, Portfolio Manager, Member of
Suite 400 Officer Investment Committee and Chief
New York, New York Compliance Officer of HCC since
10020 September 1994; Assistant Secretary of
HCC since August 1995; Chairman, CEO,
Age 48 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; 2,834
CFA, FRM Senior Vice President: HCC since 2002; $50,001-$100,000
HCC Chief Investment Officer and Senior
1270 Avenue of the Vice President of Hottinger Brothers
Americas LLC since 2004; President, Director and
Suite 400 Secretary: Hottinger U.S., Inc. since
New York, New York December 2004; First Vice President of
10020 HCC from 1998 to 2002; Vice President
of Hottinger U.S., Inc until December
Age 40 2004; Treasurer: HCC since 1997. Member
of Investment Committee of HCC since
1996.
------------------------------------------------------------------------------------------------
Mr. Edward J. Veilleux Vice President President EJV Financial Services LLC 2,273
EJV Financial Services and Secretary (investment company consulting) since $10,001-$50,000
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 63 1987 to 2002; Senior Vice President of
Old Mutual Advisor Funds (formerly
known as the PBHG Funds) since January
2005.
------------------------------------------------------------------------------------------------
13
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Executive Officers (Unaudited) (concluded)
EXECUTIVE OFFICERS
-------------------------------------------------------------------------------------------
NAME, POSITION(S) PRINCIPAL SHARES OF
ADDRESS WITH FUND OCCUPATION(S) COMMON STOCK
& AGE DURING AT LEAST THE PAST FIVE YEARS BENEFICIALLY
OWNED AT
DEC. 31, 2006/1/
-------------------------------------------------------------------------------------------
Mr. Peter R. Guarino, Chief Managing Director of Foreside None
Esq. Compliance Compliance Services, LLC since 2004;
Foreside Compliance Officer Independent Compliance Consultant from
Services, LLC 2002 to 2004; General Counsel and
Two Portland Square Global Compliance Director, MiFund,
Portland, Maine 04101 Inc. (mutual fund services) from 2000
to 2002.
Age 49
-------------------------------------------------------------------------------------------
1ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (15 PERSONS) OWNED 728,592
SHARES WHICH CONSTITUTES APPROXIMATELY 3.0% OF THE OUTSTANDING COMMON STOCK OF
THE FUND. SHARE NUMBERS IN THIS ANNUAL REPORT HAVE BEEN ROUNDED TO THE NEAREST
WHOLE SHARE.
2INDICATES "INTERESTED PERSON," AS DEFINED IN THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED (THE "1940 ACT"). PAUL HOTTINGUER AND RODOLPHE E. HOTTINGER
ARE "INTERESTED PERSONS" BECAUSE OF THEIR AFFILIATION WITH HOTTINGER ET CIE
(ZURICH) AND AS, CONTROLLING PERSONS OF HCC, THE FUND'S INVESTMENT ADVISOR.
ALEXANDRE DE TAKACSY IS AN "INTERESTED PERSON" BECAUSE OF HIS CURRENT
POSITIONS WITH HCC.
3HOTTINGER ET CIE (ZURICH), A PARTNERSHIP, OWNS 143,305 SHARES OF THE FUND, HCC
OWNS 140,307 SHARES OF THE FUND, HOTTINGER TREUHAND AG OWNS 9,823 SHARES OF
THE FUND AND HOTTINGER BANK & TRUST LIMITED, NASSAU OWNS 34,016 SHARES OF THE
FUND. PAUL HOTTINGUER AND RODOLPHE E. HOTTINGER ARE CONTROLLING PARTNERS OF
HOTTINGER ET CIE (ZURICH) AND CONTROLLING STOCKHOLDERS AND DIRECTORS OF HCC
AND HOTTINGER TREUHAND AG AND THEREFORE SHARE VOTING AND INVESTMENT POWER OVER
THE 327,451 SHARES OF THE FUND OWNED BY HOTTINGER ET CIE (ZURICH), HCC,
HOTTINGER TREUHAND AG AND HOTTINGER BANK & TRUST LIMITED, NASSAU. IN ADDITION,
RODOLPHE E. HOTTINGER AND HIS CHILDREN DIRECTLY OWN 18,533 SHARES OF THE FUND.
14
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Review of Operations (Unaudited)
Trading activity for the year ended December 31, 2006 involved changes in the
following positions:
--------------------------------------------------------------------------------
NEW INVESTMENTS BY THE FUND
--------------------------------------------------------------------------------
Barry Callebaut AG
Basilea Pharmaceutica
EFG International
Julius Baer Holding AG
Kudelski SA
Speedel Holding AG
Swiss Life Holding
--------------------------------------------------------------------------------
ADDITIONS TO EXISTING INVESTMENTS
--------------------------------------------------------------------------------
Actelion Ltd.
Adecco SA
BKW FMB Energie AG
Centralschweizerische Kraftwerke
Galenica Holding AG
Jelmoli Holding AG
Lindt & Sprungli AG
Phonak Holding AG
Schmolz and Bickenbach AG
Sika AG
--------------------------------------------------------------------------------
SECURITIES DISPOSED OF
--------------------------------------------------------------------------------
Berna Biotech AG
Elektrizitaets-Gesellschaft Laufenburg AG
IsoTis SA
Kuehne & Nagel International AG
Logitech International SA
OZ Holding AG
SGS Societe Generale de Surveillance Holding SA
Swiss Reinsurance Company
Swisslog Holding AG
--------------------------------------------------------------------------------
REDUCTIONS IN EXISTING INVESTMENTS
--------------------------------------------------------------------------------
ABB Ltd.
Advanced Digital Broadcast Holdings SA
Bank Sarasin & Cie AG
Belimo Holding AG
Compagnie Financiere Richemont AG, Class A
Credit Suisse Group
Inficon Holding AG
Nestle SA
Novartis AG
Precious Woods Holding AG
Roche Holding AG
Sulzer AG
Swatch Group AG
Syngenta AG
Zurich Financial Services AG
15
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments December 31, 2006
Percent
No. of of Net
Shares Security Value Assets
------------------------------------------------------------
COMMON STOCKS -- 107.98%
BANKS -- 16.86%
530 BANK SARASIN & CIE AG
REGISTERED SHARES $ 1,668,977 0.33%
Offers private banking, asset
management, investment
advisory, and institutional
banking services.
(Cost $1,184,730)
380,000 CREDIT SUISSE GROUP/2/
REGISTERED SHARES 26,538,052 5.28%
A global diversified financial
service company with large
activity in private banking,
investment banking, asset
management and insurance
service.
(Cost $12,095,927)
100,000 EFG INTERNATIONAL/1/
REGISTERED SHARES 3,764,234 0.75%
Holding company of EFG Bank.
The Bank offers private banking
and asset management services.
(Cost $3,249,443)
870,000 UBS AG/2/
REGISTERED SHARES 52,775,866 10.50%
A global diversified financial
service company with large
activity in private banking,
investment banking, and asset
management.
(Cost $7,403,841)
------------ -----
84,747,129 16.86%
Percent
No. of of Net
Shares Security Value Assets
----------------------------------------------------------------
BASIC RESOURCES -- 2.88%
93,236 PRECIOUS WOODS HOLDING AG/1/
REGISTERED SHARES $ 6,644,984 1.32%
Through subsidiaries, manages
tropical forests using ecologically
sustainable forest management
methods. Harvests tropical trees
and processes them into lumber.
(Cost $8,284,983)
103,960 SCHMOLZ AND BICKENBACH AG
REGISTERED SHARES 7,839,369 1.56%
Manufactures industrial and
construction steel.
(Cost $3,313,494)
------------ ----
14,484,353 2.88%
BIOTECHNOLOGY -- 13.66%
132,931 ACTELION LTD./1,2/
REGISTERED SHARES 29,184,491 5.80%
Biotechnology company that
develops and markets synthetic
small-molecule drugs against
diseases related to the
endothelium.
(Cost $17,871,161)
156,200 BASILEA PHARMACEUTICA/1,2/
REGISTERED SHARES 27,255,346 5.42%
Conducts research into the
development of drugs for the
treatment of infectious diseases
and dermatological problems.
(Cost $21,602,082)
16
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2006
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
BIOTECHNOLOGY -- (CONTINUED)
91,903 SPEEDEL HOLDING AG/1/
REGISTERED SHARES $ 12,271,802 2.44%
Researches and develops
therapies for cardiovascular and
metabolic diseases
(Cost $12,765,588)
------------ -----
68,711,639 13.66%
CHEMICALS -- 3.54%
95,931 SYNGENTA AG
REGISTERED SHARES 17,815,645 3.54%
Produces herbicides, insecticides
and fungicides, and seeds for
field crops, vegetables, and
flowers.
(Cost $7,696,272)
------------ -----
17,815,645 3.54%
CONSTRUCTION & MATERIALS -- 1.83%
1,141 BELIMO HOLDING AG
REGISTERED SHARES 1,121,652 0.22%
World market leader in damper
and volume control actuators for
ventilation and air-conditioning
equipment.
(Cost $231,391)
5,220 SIKA AG/1/
BEARER SHARES 8,082,084 1.61%
Leading producer of construction
chemicals.
(Cost $2,806,198)
------------ -----
9,203,736 1.83%
Percent
No. of of Net
Shares Security Value Assets
-------------------------------------------------------------
FINANCIAL SERVICES -- 3.71%
169,600 JULIUS BAER HOLDING AG/2/
REGISTERED SHARES $ 18,645,302 3.71%
Offers private banking,
institutional asset management,
mutual fund, securities
brokerage, and corporate finance
services.
(Cost $16,454,035)
------------ -----
18,645,302 3.71%
FOOD & BEVERAGES -- 14.84%
2,690 BARRY CALLEBAUT AG/1/
REGISTERED SHARES 1,355,247 0.27%
Manufactures cocoa, chocolate,
and confectionary products.
(Cost $1,423,307)
340 LINDT & SPRUNGLI AG
REGISTERED SHARES 8,550,832 1.70%
Major manufacturer of premium
Swiss chocolates.
(Cost $1,977,813)
182,500 NESTLE SA/2/
REGISTERED SHARES 64,735,398 12.87%
Largest food and beverage
processing company in the world.
(Cost $10,683,769)
------------ -----
74,641,477 14.84%
17
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2006
Percent
No. of of Net
Shares Security Value Assets
----------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
INDUSTRIAL GOODS & SERVICES -- 6.13%
467,457 ABB LTD.
REGISTERED SHARES $ 8,367,277 1.66%
The holding company for ABB
Group which is one of the largest
electrical engineering firms in the
world.
(Cost $3,109,639)
232,000 ADECCO SA
REGISTERED SHARES 15,822,069 3.15%
Leading personnel and temporary
employment company.
(Cost $12,120,878)
6,440 INFICON HOLDING AG
REGISTERED SHARES 1,012,927 0.20%
Manufactures and markets
vacuum instruments used to
monitor and control production
processes. Manufactures on-site
chemical detection and
monitoring system.
(Cost $581,616)
4,946 SULZER AG
REGISTERED SHARES 5,619,810 1.12%
Manufactures and sells surface
coatings, pumps, and process
engineering equipment.
(Cost $1,609,155)
------------ ----
30,822,083 6.13%
Percent
No. of of Net
Shares Security Value Assets
------------------------------------------------------------------
INSURANCE -- 3.86%
44,500 SWISS LIFE HOLDING/1/
REGISTERED SHARES $ 11,127,734 2.21%
Offers financial services including
life and property insurance,
institutional investment
management, and private
banking services.
(Cost $8,286,281)
30,800 ZURICH FINANCIAL SERVICES AG
REGISTERED SHARES 8,275,907 1.65%
Offers property, accident, health,
automobile, liability, financial risk
and life insurance and retirement
products.
(Cost $4,969,378)
------------ ----
19,403,641 3.86%
MEDICAL TECHNOLOGY -- 0.51%
32,205 PHONAK HOLDING AG
REGISTERED SHARES 2,559,093 0.51%
Designs and produces analog
and digital hearing aids.
(Cost $1,100,139)
------------ ----
2,559,093 0.51%
PERSONAL & HOUSEHOLD GOODS -- 1.71%
20,950 ADVANCED DIGITAL BROADCAST
HOLDING SA/1/
REGISTERED SHARES 1,372,983 0.27%
Develops equipment and systems
to view and interact with digital
TV broadcast through cable,
satellite, and telecommunication
networks.
(Cost $1,352,807)
18
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2006
Percent
No. of of Net
Shares Security Value Assets
-------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
PERSONAL & HOUSEHOLD GOODS -- (CONTINUED)
100,084 COMPAGNIE FINANCIERE
RICHEMONT AG, CLASS A
BEARER SHARES $ 5,821,221 1.16%
Manufactures and retails luxury
goods through subsidiaries.
Produces jewelry, watches,
leather goods, writing
instruments, and mens' and
womens' wear.
(Cost $3,328,765)
6,367 SWATCH GROUP AG
BEARER SHARES 1,404,370 0.28%
Manufactures finished watches,
movements and components.
Produces components necessary
to its eighteen watch brand
companies. Also operates retail
boutiques.
(Cost $859,824)
------------ -----
8,598,574 1.71%
PHARMACEUTICALS -- 25.04%
969,000 NOVARTIS AG/2/
REGISTERED SHARES 55,764,930 11.09%
One of the leading manufacturers
of branded and generic
pharmaceutical products. The
company also manufactures
nutrition products.
(Cost $10,880,355)
Percent
No. of of Net
Shares Security Value Assets
---------------------------------------------------------------
PHARMACEUTICALS -- (CONTINUED)
392,000 ROCHE HOLDING AG/2/
DIVIDEND RIGHTS CERTIFICATES $ 70,166,298 13.95%
Worldwide pharmaceutical
company.
(Cost $7,529,739)
------------ -----
125,931,228 25.04%
RETAILERS -- 5.82%
75,950 GALENICA HOLDING AG/2/
REGISTERED SHARES 21,232,029 4.22%
Manufactures and distributes
prescription and over-the-
counter drugs, toiletries and
hygiene products.
(Cost $14,745,077)
3,600 JELMOLI HOLDING AG
BEARER SHARES 8,065,864 1.60%
Owns and operates department
and retail stores and provides
mail-order catalog and real estate
leasing services.
(Cost $6,678,168)
------------ -----
29,297,893 5.82%
TECHNOLOGY -- 1.23%
165,000 KUDELSKI SA
REGISTERED SHARES 6,204,227 1.23%
Designs and manufactures digital
security products under the
brand name 'Nagra'.
(Cost $5,285,462)
------------ -----
6,204,227 1.23%
19
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (concluded) December 31, 2006
Percent
No. of of Net
Shares Security Value Assets
-----------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
UTILITY SUPPLIERS -- 6.36%
209,450 BKW FMB ENERGIE AG/2/
REGISTERED SHARES $ 24,587,683 4.89%
Produces electricity using
nuclear, hydroelectric, solar,
biomass and wind energy.
(Cost $11,317,266)
21,409 CENTRALSCHWEIZERISCHE
KRAFTWERKE AG
REGISTERED SHARES 7,374,854 1.47%
Supplies electric power, operates
and maintains distribution
network facilities, constructs and
installs equipment, and offers
consulting services to its clients
(Cost $6,089,592)
------------ ------
31,962,537 6.36%
TOTAL COMMON STOCKS
(Cost $228,888,175)* $543,028,557 107.98%
OTHER ASSETS LESS OTHER
LIABILITIES, NET (40,213,455) (7.98%)
------------ ------
NET ASSETS $502,815,102 100.00%
============ ======
--------------------------------------------------------------------------------
/1/NON-INCOME PRODUCING SECURITY.
/2/ONE OF THE TEN LARGEST PORTFOLIO HOLDINGS.
*COST FOR FEDERAL INCOME TAX PURPOSES IS $229,190,458 AND NET UNREALIZED
APPRECIATION (DEPRECIATION) CONSISTS OF:
GROSS UNREALIZED APPRECIATION $316,720,282
GROSS UNREALIZED DEPRECIATION (2,882,183)
------------
NET UNREALIZED APPRECIATION $313,838,099
============
20
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 2006
ASSETS:
Investments, at value (cost $228,888,175)........................................ $543,028,557
Cash............................................................................. 561,741
Foreign currency (cost $522,141)................................................. 522,740
Tax reclaims receivable.......................................................... 1,469,634
Prepaid expense.................................................................. 29,318
------------
Total assets................................................................. 545,611,990
------------
LIABILITIES:
Capital gain distribution payable................................................ 42,085,954
Advisory fees payable (Note 2)................................................... 313,416
Directors' fees and expenses..................................................... 92,791
Accrued expenses and other....................................................... 304,727
------------
Total liabilities............................................................ 42,796,888
------------
Net assets................................................................... $502,815,102
------------
COMPOSITION OF NET ASSETS:
Paid in capital.................................................................. 176,209,062
Distributable earnings
Distributions in excess of net investment income..................... (155,222)
Accumulated net realized gain from investment and foreign currency
transactions....................................................... 12,562,188
Net unrealized appreciation on investments and foreign currency...... 314,199,074
-----------
Total distributable earnings................................................. 326,606,040
------------
Net assets............................................................................. $502,815,102
------------
NET ASSET VALUE PER SHARE:
($502,815,102 / 24,397,655 shares outstanding, 50 million shares authorized)..... $ 20.61
============
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
21
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 2006
INVESTMENT INCOME:
Dividends (less foreign taxes withheld of $1,030,112).................... $ 5,970,613
Interest (less foreign taxes withheld of $263)........................... 146,880
------------
Total income........................................................... 6,117,493
------------
EXPENSES:
Investment advisory fees (Note 2)........................................ 3,638,546
Directors' fees & expenses............................................... 543,634
Professional fees........................................................ 303,065
Administration fees...................................................... 326,384
Custody fees............................................................. 220,757
Printing and shareholder reports......................................... 204,487
Accounting fees.......................................................... 108,235
Compliance services fees................................................. 40,384
Transfer agent fees...................................................... 24,429
Miscellaneous............................................................ 277,230
------------
Total expenses......................................................... 5,687,151
------------
Net investment income.................................................. 430,342
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain from:
Investment transactions................................................ 54,274,788
Foreign currency transactions.......................................... 77,287
Net change in unrealized appreciation/depreciation from:
Investment transactions................................................ 70,960,520
Foreign currency translations.......................................... 303,348
------------
Net Realized and Unrealized Gain on Investments and Foreign Currency... 125,615,943
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................................. $126,046,285
============
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
22
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statements of Changes in Net Assets December 31, 2006
For the For the
Year Ended Year Ended
December 31, 2006 December 31, 2005
---------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income...................................... $ 430,342 $ 1,140,823
Net realized gain (loss) from:
Investment transactions.................................. 54,274,788 37,161,885
Foreign currency transactions............................ 77,287 (670,310)
Net change in unrealized appreciation/depreciation from:
Investment transactions.................................. 70,960,520 19,996,117
Foreign currency translations............................ 303,348 (1,564,407)
------------ ------------
Net increase in net assets from operations................. 126,046,285 56,064,108
------------ ------------
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income and net realized gains from foreign
currency transactions.................................... (685,681) (514,998)
Net realized capital gains................................. (47,712,116) (38,324,832)/1/
------------ ------------
Total distributions to stockholders...................... (48,397,797) (38,839,830)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Value of shares issued in reinvestment of dividends and
distributions............................................ 12,903,159 7,643,488
Value of shares repurchased through stock buyback.......... (7,550,175) (6,568,476)
------------ ------------
Total increase from capital share transactions............. 5,352,984 1,075,012
------------ ------------
Total increase in net assets............................... 83,001,472 18,299,290
NET ASSETS:
Beginning of year.......................................... 419,813,630 401,514,340
------------ ------------
End of period (including distributions in excess of net
investment income of ($155,222) and undistributed net
investment income of $470,513, respectively)............. $502,815,102 $419,813,630
============ ============
--------------------------------------------------------------------------------
/1/INCLUDES A REPORTING ADJUSTMENT OF $2,357 FOR SHORT-TERM CAPITAL GAINS AND
$4,598 FOR LONG-TERM CAPITAL GAINS, WHICH WERE PROPERLY DISTRIBUTED IN THE
PREVIOUS YEAR.
SEE NOTES TO FINANCIAL STATEMENTS.
23
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Financial Highlights
For the Years Ended December 31,
----------------------------------------------------
2006 2005 2004 2003 2002
------------------------------------------------------------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of period............................ $ 17.47 $ 16.79 $ 15.31 $ 11.82 $ 13.16
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (expenses in excess of income).............. 0.02/1/ 0.05/1/ (0.01) (0.01) (0.02)
Net realized and unrealized gain (loss) on investments/2/......... 5.14 2.24 2.41 4.24 (0.71)
-------- -------- -------- -------- --------
Total from investment operations.................................. 5.16 2.29 2.40 4.23 (0.73)
-------- -------- -------- -------- --------
Gain from capital share repurchases............................... 0.03 0.04 0.02 0.02 0.02
Capital charge resulting from the issuance of fund shares......... (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) (0.06)
Dividends in excess of net investment income...................... -- -- (0.01) -- (0.01)
Distributions from net realized capital gains..................... (1.95) (1.59) (0.83) (0.56) (0.56)
-------- -------- -------- -------- --------
Total distributions............................................... (1.98) (1.61) (0.94) (0.70) (0.63)
-------- -------- -------- -------- --------
Net asset value at end of period.................................. $ 20.61 $ 17.47 $ 16.79 $ 15.31 $ 11.82
======== ======== ======== ======== ========
Market value per share at end of period........................... $ 19.10 $ 15.31 $ 14.95 $ 12.92 $ 9.64
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN/3/:
Based on market value per share................................... 37.64% 13.11% 23.65% 41.76% (4.46)%
Based on net asset value per share................................ 30.16% 14.92% 17.19% 37.00% (6.92)%
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................................... 1.17% 1.19% 1.14% 1.30% 1.31%
Net investment income (expenses in excess of income).............. 0.09% 0.27% (0.08)% (0.07)% (0.14)%
SUPPLEMENTAL DATA:
Net assets at end of period (000's)............................... $502,815 $419,814 $401,514 $368,986 $279,799
Average net assets during period (000's).......................... $484,631 $415,074 $378,205 $306,563 $308,018
Stockholders of record/4/......................................... 794 740 926 964 1,001
Portfolio turnover rate........................................... 34% 37% 41% 89% 83%
--------------------------------------------------------------------------------
/1/CALCULATED USING THE AVERAGE SHARES METHOD.
/2/INCLUDES NET REALIZED AND UNREALIZED CURRENCY GAIN (LOSS).
/3/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.
/4/NOT AUDITED BY DELOITTE & TOUCHE LLP.
SEE NOTES TO FINANCIAL STATEMENTS.
24
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 the limited instance where: (1) the Fund holds an
investment in a Swiss company, and (2) such Swiss company undergoes a merger,
takeover, reorganization or other form of business combination with a non-Swiss
issuer (a "reorganization"), or reorganizes (or "redomiciles") itself as a new
corporate entity outside of Switzerland, and (3) the Fund, as a shareholder in
the Swiss company, acquires equity or equity-linked securities in the non-Swiss
issuer as a result of the transaction. The Fund would be permitted, but not
required, to reacquire equity and equity-linked securities of Swiss companies
that have redomiciled, so long as the Fund held an investment in the Swiss
company at or before the time the company redomiciled.
B. VALUATION OF SECURITIES
The Fund values its investments at market 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.
There were no fair valued securities on December 31, 2006.
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.
25
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
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.
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 period ended
December 31, 2006.
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 $3,638,546 in investment
advisory fees for the year ended December 31, 2006. The Fund paid Hottinger &
Cie (Zurich) $38,108 in brokerage commissions for the year ended December 31,
2006.
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, 2006, the Committee allocated $72,500 of
expenses incurred in connection with publicizing the Fund as follows: $36,250
to the Fund and $36,250 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.
26
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
NOTE 3--OTHER FEES
Citigroup Fund Services, LLC ("Citigroup") 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.
On December 28, 2006, Swiss American Securities, Inc. and Credit Suisse First
Boston commenced transition of Custody responsibility to Citibank, N.A. 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, its Advisor, or Citigroup, approximately
$29,530 per annum in compensation, except for the Chairman of the Board to whom
the Fund pays an annual fee of approximately $41,530 and for the Chairmen of
the Audit Committee and the Governance/Nominating Committee, to whom the Fund
pays an annual fee of approximately $34,698. In addition, the Fund pays each
disinterested director $1,300 for each Board meeting attended and $750 for each
committee meeting attended, if it is held separately. 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 $92,791 shown on the Statements of
Assets & Liabilities represents total dollars owed to Directors that have been
accrued and not paid. Directors' fees and expenses of $543,634 shown on the
Statement of Operations represent the portion of Directors' fees and expenses
accrued during the period January 1, 2006 through December 31, 2006. 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 140,307 of the 24,397,655 shares outstanding on December 31, 2006.
Transactions in capital shares were as follows:
For the Year Ended For the Year Ended
December 31, 2006 December 31, 2005
------------------ ------------------
Shares Amount Shares Amount
------ ------ ------ ------
Dividends
Reinvested 798,957 $12,903,159(a) 542,380 $ 7,643,488
Repurchased (430,800) (7,550,175) (422,100) (6,568,476)
-------- ----------- -------- -----------
Net increase 368,157 $ 5,352,984 120,280 $ 1,075,012
======== =========== ======== ===========
(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, 2006, 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 currency gains/losses and has no
impact on the net assets of the Fund.
Undistributed Net Undistributed Net
Investment Income Realized Gain
----------------- -----------------
$(370,396) $370,396
The tax character of distributions paid during 2006 and 2005 was as follows
(see page 31 for details):
2006 2005
---- ----
Ordinary income $14,699,228 $ 1,762,873
Long-term capital gains $33,698,569 $37,076,957
At December 31, 2006, the components of distributable earnings on a tax basis
were as follows:
Ordinary income $ --
Long-term capital gains $ 12,864,471
Capital and other losses $ (155,222)
Unrealized Appreciation $313,896,791
27
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
Gains from foreign currency transactions will be treated as ordinary income for
Federal income tax purposes.
For tax purposes, the current year post-October loss was $155,222. This loss
will be recognized for tax purposes on the first business day of the Fund's
next year.
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended December 31, 2006, were
$160,230,472 and $177,627,176, respectively.
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 has authorized the Fund to repurchase up to
500,000 shares during 2007. During the year ended December 31, 2006, the Fund
repurchased and retired 430,800 shares at an average price of $17.53 per share
(including brokerage commissions) and a weighted average discount of 10.25%.
These repurchases, which had a total cost of $7,550,175, resulted in an
increase of $843,650 to the Fund's net asset value.
NOTE 7--LINE OF CREDIT
The Fund has entered into a line of credit agreement with the Custodian to be
used for temporary purposes. 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 will pay interest on the unpaid principal amount of each advance made
to it from the date 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, 2006, the Fund had no loans outstanding under the line of
credit.
NOTE 8--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board issued Interpretation
No. 48, "Accounting for Uncertainty in Income Taxes -- an Interpretation of
FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes
for all entities, a minimum threshold for financial statement recognition of
the benefit of positions taken in filing tax returns (including whether an
entity is taxable in a particular jurisdiction), and requires certain expanded
tax disclosures. The Interpretation is effective for fiscal years beginning
after December 15, 2006, and is required to be implemented by calendar year
closed-end funds by no later than June 29, 2007. The Investment Manager has
recently begun to evaluate the application of the Interpretation to the Fund,
and is not in a position at this time to estimate the significance of its
impact, if any, on the Fund's financial statements.
In September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") 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. At this time, the Fund is in the
process of reviewing the impact, if any, of the SFAS on the Fund's financial
statements.
28
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, 2006, 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 the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with auditing 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. An audit includes 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, 2006, by correspondence with the
custodians. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund as of
December 31, 2006, 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 21, 2007
29
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 7, 2005, 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 certifi
cations 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.
30
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Additional Information (Unaudited) (concluded)
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 following information summarizes all distributions declared by the Fund
during the year ended December 31, 2006.
Record Payable
Distribution Date Date Amount
------------ -------- ------- --------
Income 6/19/06 7/5/06 $0.02800
Long-Term Capital Gains 6/19/06 7/5/06 $0.22700
Long-Term Capital Gains 12/18/06 1/29/07 $1.72500
--------
Total Distributions $1.98000
========
The Fund elected to pass through $.04200 per share to its stockholders as a
credit for taxes paid to Switzerland during its fiscal year ended December 31,
2006.
The Fund has designated 51.66% 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 1.42% of its income dividends
as qualified interest income (QII) and 100.00% as qualified short-term capital
gain dividends exempt from U.S. tax for foreign shareholders (QSD).
--------------------------------------------------------------------------------
Tax Information For the Year Ended December 31, 2006
The amounts may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements. The Fund's
distributions to stockholders of long-term capital gains included $5,031,325 in
connection with the distribution paid July 5, 2006 to stockholders of record on
June 19, 2006, and $28,667,244 in connection with the distribution to be paid
January 29, 2007 to shareholders of record on December 18, 2006.
31
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Other Matters (Unaudited)
Revised Investment Strategies, Policies and Related Risks--Stockholder Approved
At the 2006 Annual Meeting of Stockholders, the Fund's stockholders approved
changes to the Fund's fundamental investment policies and restrictions to
permit the Fund to: (1) leverage up to 10% of its total assets (including the
amount borrowed); (2) invest in securities of Swiss Real Estate Companies (as
defined below), and to acquire, hold and sell real estate or mortgages on real
estate acquired through default, liquidation or other distributions or an
interest in real estate as a result of the Fund's ownership of such securities;
(3) acquire equity and equity-linked securities of non-Swiss companies in
limited instances; and (4) engage in certain options transactions. There are
certain risks associated with these investment strategies, which are discussed
below.
PERMITTED USE OF LEVERAGE AND LEVERAGE RISK
Previously, the Fund was subject to a fundamental investment restriction
prohibiting the Fund from borrowing money for the purpose of making investments
(known as "leverage"). The Fund is now permitted, but not required, to borrow
up to 10% of the Fund's total assets (including the amount borrowed) for
investment purposes. The Fund may seek to leverage a portion of the Fund's
assets to promote investment flexibility and to seek to ensure that the Fund
has funds available for investment in attractive opportunities, without
requiring the Fund to sell existing investments.
Using leverage is a speculative investment technique and involves certain
risks. These include higher volatility of net asset value, the possibility of
more volatility in the market value of the Fund's shares and the possibility
that the Fund's return will fall if the interest rate on any borrowings rises.
The Fund will pay any costs and expenses relating to any borrowings, including
interest and any commitment or other fee required to maintain a line of credit.
So long as the Fund is able to realize a higher net return on investments
purchased with borrowings than the then current cost of any leverage together
with other related expenses, the effect of the leverage will be to cause the
Fund to realize higher net return than if the Fund were not so leveraged.
However, to the extent that the cost of any leverage, together with other
related expenses, is more than the net return on investments purchased with
borrowings, use of leverage would result in a lower rate of return than if the
Fund were not so leveraged. There can be no assurance that any leverage
strategy the Fund employs will be successful.
INVESTMENTS IN SWISS REAL ESTATE COMPANIES AND RISKS OF INVESTING IN REAL ESTATE
Previously, the Fund was subject to a fundamental investment restriction
prohibiting the Fund from buying real estate or interests in real estate. The
Fund is now permitted, but not required, to invest in equity and equity-linked
securities issued by Swiss real estate companies, including real estate
investment trusts ("REITs") or REIT-like structures ("Swiss Real Estate
Companies"). The Fund defines a real estate company as a company that derives
at least 50% of its revenue from the ownership, construction, financing,
management or sale of commercial, industrial or residential real estate or has
at least 50% of its assets in real estate investments. The Fund also considers
a real estate company to be a Swiss Real Estate Company if it: (1) is organized
in or has its principal office in Switzerland or (2) has a significant amount
of real estate assets or investments in Switzerland, even if it is organized or
its principal office is outside of Switzerland. The Fund's investment in Swiss
Real Estate Companies is deemed to be an investment in
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Other Matters (Unaudited) (continued)
Swiss equity or equity-linked securities for purposes of the Fund's investment
objective.
In addition to the general risks associated with investing in Swiss equity
and equity-linked securities, the Fund's investments in Swiss Real Estate
Companies will be linked to the performance of the Swiss real estate markets.
The Fund will not invest in real estate directly (except as described below),
but only in securities issued by Swiss Real Estate Companies. However, these
investments are subject to the risks associated with the direct ownership of
real estate. These risks are described in further detail below:
Real Estate--General. Real property investments are subject to varying degrees
of risk. The price of real estate company shares may decline because of the
failure of borrowers to pay their loans and poor management. Many real estate
companies also utilize leverage, which increases investment risk and could
adversely affect a company's operations and market value in periods of rising
interest rates. If real estate properties do not generate sufficient income to
meet operating expenses, the income and ability of the real estate company to
make payments of any interest and principal on its debt securities will be
adversely affected. In addition, real property may be subject to the quality of
credit extended and defaults by borrowers and tenants. A real estate company
also may have joint venture investments in certain of its properties and,
consequently, its ability to control decisions relating to these properties may
be limited.
The performance of the Swiss economy and the economies of any other
countries and regions in which the real estate owned by a portfolio company is
located affects occupancy, market rental rates and expenses and, consequently,
has an impact on the income from such properties and their underlying values.
There also are risks associated with particular sectors of real estate
investments, such as in the retail, office, hotel, healthcare and multifamily
sectors, each of which will be affected by the economic health of the sector
specifically and the overall economy generally, demographic changes, spending
patterns, governmental regulations, competition and obsolescence.
Real Estate Investment Trusts. A common type of U.S. real estate company, a
real estate investment trust, is dedicated to owning, and usually operating,
income producing real estate, or to financing real estate. Such companies
normally derive income from rents or from interest payments, and may realize
capital gains by selling properties that have appreciated in value. REITs are
characterized as equity REITs, mortgage REITs and hybrid REITs. Equity REITs,
which may include operating or finance companies, own real estate directly and
the value of, and income earned by, the REITs depends upon the income of the
underlying properties and the rental income they earn. Mortgage REITs can make
construction, development or long-term mortgage loans and are sensitive to the
credit quality of the borrower. Mortgage REITs derive their income from
interest payments on such loans. Hybrid REITs combine the characteristics of
both equity and mortgage REITs. The values of securities issued by REITs are
affected by tax and regulatory requirements and by perceptions of management
skill.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. An equity
REIT may be affected by changes in the value of the underlying properties owned
by the REIT. A mortgage REIT may be affected by changes in interest rates and
the ability of the issuers of its portfolio mortgages to repay their
obligations. REITs are generally dependent upon maintaining cash flows to repay
borrowings and
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Other Matters (Unaudited) (continued)
to make distributions to shareholders and are subject to the risk of default by
lessees or borrowers. REITs whose underlying assets are concentrated in
properties used by a particular industry are also subject to risks associated
with such industry. REITs or REIT-like structures may experience delays in
enforcing their rights as a mortgagee or lessor and may incur substantial costs
associated with protecting their investments. REITs also may fail to qualify
under any tax provisions pursuant to which they were structured, and the
application of unanticipated taxation may significantly reduce the return to
the Fund.
The Fund also may acquire real estate or mortgages on real estate as a
result of default, liquidation or other distributions of an interest in real
estate solely as a result of the Fund's ownership of Swiss Real Estate
Companies. The Fund may have difficulty enforcing its rights as a mortgagee or
lessor and may incur substantial costs in connection with protecting its
investments.
INVESTMENTS IN NON-SWISS SECURITIES AND RELATED RISKS
The Fund's stockholders also approved a proposal to revise the Fund's
investment objective. The Fund is now permitted, but not required, to acquire
and hold equity and equity-linked securities of non-Swiss companies in the
limited instance where: (1) the Fund holds an investment in a Swiss company,
and (2) such Swiss company undergoes a merger, takeover, reorganization or
other form of business combination with a non-Swiss issuer (a
"reorganization"), or reorganizes (or "redomiciles") itself as a new corporate
entity outside of Switzerland, and (3) the Fund, as a shareholder in the Swiss
company, acquires equity or equity-linked securities in the non-Swiss issuer as
a result of the transaction. The Fund also is now permitted, but not required,
to reacquire equity and equity-linked securities of Swiss companies that have
redomiciled, so long as the Fund held an investment in the Swiss company at or
before the time the company redomiciled.
Although investments in Swiss securities are subject to the Fund's other
investment policies, the Fund's Board of Directors and HCC cannot predict the
percentage of non-Swiss securities that could constitute the Fund's portfolio,
as the number and frequency of these types of transactions would be affected by
activity in the capital markets and not through any actions taken by the Fund
or HCC.
ENGAGING IN CERTAIN OPTIONS TRANSACTIONS AND RELATED RISKS
Previously, the Fund was subject to a fundamental investment restriction
prohibiting the Fund from buying, selling or writing put or call options. The
Fund is now permitted, but not required, to engage in certain options
transactions which are considered derivative instruments. The Fund may engage
in the following options transactions: (i) buying calls on securities in which
the Fund can invest; (ii) buying calls on Swiss stock indices; (iii) writing
covered calls on securities in which the Fund can invest; (iv) buying puts on
these types of securities; and (v) buying puts on Swiss stock indices. The Fund
may engage in these options transactions on an established Swiss exchange,
European exchange (for example, Eurex) or in the over-the-counter market.
Exchange-traded options generally are guaranteed by the clearing agency
which is the issuer or counterparty to such options. This guarantee usually is
supported by a daily variation margin system operated by the clearing agency in
order to reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated with
options purchased on an exchange. By contrast, no
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Other Matters (Unaudited) (continued)
clearing agency guarantees over-the-counter options. Accordingly, to the extent
the Fund enters into such options, HCC will consider the creditworthiness of
counterparties to over-the-counter options in the same manner as it would
review the credit quality of a security to be purchased by the Fund.
HCC may utilize options contracts to manage the Fund's exposure to changing
security prices. Some options strategies, including buying puts, will tend to
hedge the Fund's investments against price fluctuations. Other strategies,
including buying calls, will tend to increase market exposure.
The Fund may write (I.E., sell) covered call options with respect to
specific securities in which the Fund may invest. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date. A covered call option is a call option
with respect to which the Fund owns the underlying security, has an absolute
and immediate right to acquire that security without additional cash
consideration or otherwise covers the transaction by segregating permissible
liquid assets. The Fund receives a premium from writing covered call options
which it retains whether or not the option is exercised, although by writing a
call option the Fund forgoes any appreciation in the subject securities above
the exercise price if the option is exercised by the purchaser of the option.
The Fund also is permitted to purchase put and call options in respect of
specific securities in which the Fund may invest (or groups or "baskets" of
specific securities) or Swiss stock indices. A put option gives the purchaser
of the option the right to sell, and obligates the writer to buy, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date. The Fund will pay premiums to purchase
put and call options, whether or not the options are exercised. An option on a
stock index is similar to an option in respect of specific securities, except
that settlement does not occur by delivery of the securities comprising the
index. Instead, the option holder receives an amount of cash if the closing
level of the stock index upon which the option is based is greater than in the
case of a call, or less than in the case of a put, the exercise price of the
option. Thus, the effectiveness of purchasing stock index options will depend
upon price movements in the level of the index rather than the price of a
particular stock.
Successful use by the Fund of options will be subject to HCC's ability to
predict correctly movements in the prices of securities and indices underlying
options and the stock market generally. To the extent HCC's predictions are
incorrect, the Fund may incur losses.
Revised Investment Strategies, Policies and Related Risks--Board Approved
At a meeting of the Board of Directors on December 7, 2006, the Board approved
a proposal to permit the Fund to invest its assets in certain pooled investment
vehicles ("funds"), including investment companies and funds that invest in
private equity by investing in private equity funds (so-called funds of funds)
and by making direct investments, including in infrastructure projects and real
estate investments. The Fund is only permitted to purchase interests in (i)
funds that were organized or domiciled in Switzerland or (ii) funds that meet
the standards approved by its stockholders in Proposal 3C (INVESTMENTS IN
NON-SWISS SECURITIES) at the 2006 Annual Stockholder Meeting (described above).
For purposes of complying with Proposal 3C, the fund must
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Other Matters (Unaudited) (continued)
either (a) be organized in or have its principal office in Switzerland or (b)
meet the three-part test set forth above under "Investments in Non-Swiss
Securities and Related Risks."
The proposal approved by the Board of Directors limited the Fund's permitted
investments in these types of funds to the following:
. COUNTRIES. A fund must have at least 80% of its total assets invested in
companies in developed markets and may have no more than 20% of its total
assets invested in emerging market countries or issuers;
. CURRENCIES. A fund must have at least 80% of its underlying investments
denominated in currencies of countries in developed markets. A fund that
satisfies the first prong of the test also will be deemed to satisfy this
prong; and
. PRICING. For funds that are not listed on an exchange, a fund must (i)
invest in exchange-listed issuers or securities that can be readily valued
or (ii) provide HCC fair valuations of its underlying investments either
through regular shareholder communications or through other written means
that, based on information reasonably available at the time the valuation
is made, HCC believes to be reliable.
General Risks. HCC expects that a majority of the funds investing in private
equity transactions will be listed on Swiss or other European exchanges, but
cannot predict that the Fund would only invest in these funds. Any of the
Fund's holdings in funds that are purchased in private transactions will be
illiquid and subject to the Fund's 10% limit on investments in illiquid
securities.
In addition to the general risks associated with investing in Swiss equity
and equity-linked securities, the Fund would be subject to a height-ened risk
in respect of investing a greater percentage of its total assets in illiquid
private equity securities. The risks associated generally with such investments
include: (i) very limited liquidity due to legal or contractual limitations on
resales or lack of a public market; (ii) dependence on an exit strategy, such
as an initial public offering or sale of a business, which may not occur to
realize the anticipated value of an investment or dispose of the investment
without a significant or total loss; and (iii) dependence on managerial
assistance provided by other investors and the willingness of those investors
or third parties to provide additional financial support to the issuer.
Depending on the specific facts and circumstances of a private equity
security investment, there may not be a reasonable basis to revalue it for a
substantial period of time after the Fund's investment. It is possible that the
fair value attributed to the investment may not accurately reflect its actual
value and, consequently, the net asset value and/or market value of the Fund's
shares may not reflect the actual values of the Fund's portfolio. If the Fund
invests in private equity securities, changes in the Fund's net asset value may
be more pronounced than with other funds that do not invest in private equity
securities.
The business of identifying attractive investments in private equity
securities of the types contemplated for the Fund is competitive, and involves
a high degree of uncertainty. Furthermore, the availability of investment
opportunities in private equity securities generally will be subject to market
conditions as well as, in some cases, the prevailing regulatory or political
climate. Accordingly, there can be no assurance that the Fund will be able to
identify attractive investments in private equity securities.
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Other Matters (Unaudited) (concluded)
Investing in these types of funds also will subject the Fund's stockholders
to additional fees and expenses, including advisory fees charged, and operating
expenses borne, by each underlying fund. As a result, stockholders will bear
not only the Fund's advisory fee and certain operating expenses, but also the
fees and expenses of the underlying fund attributable to the Fund's investment.
Additionally, the Fund may have limited access to information concerning the
underlying fund and its investments.
For funds that are not listed on an exchange, HCC will fair value the Fund's
investment pursuant to procedures approved by the Fund's Board of Directors.
The valuation ordinarily will be the value determined at the end of a fund's
fiscal period in accordance with the fund's valuation policies. The fair value
of the Fund's investment in a fund represents the amount that the Fund could
reasonably expect to receive from a fund if the Fund's investment were redeemed
at the time of valuation, based on information reasonably available at the time
the valuation is made and that HCC believes to be reliable. In the unlikely
event that a fund does not report a value to HCC on a timely basis, HCC would
determine the fair value of the fund based on the most recent value reported by
the fund, as well any other relevant information available at that time.
Although HCC will review the valuations provided by the funds, HCC may not be
able to confirm independently the accuracy of such valuations.
Tax Risks. HCC expects that most of these funds will be "passive foreign
investment companies" ("PFICs"), and the Fund may be subject to U.S. federal
income tax -- notwithstanding the Fund's Subchapter M election -- on a portion
of any "excess distribution" or gain from the disposition of shares of the
funds even if such income is distributed as a taxable dividend by the Fund to
its stockholders.
Dividends paid by a PFIC are not eligible for taxation at preferential rates
that apply to certain dividends from domestic corporations and certain other
foreign corporations. The determination of whether a fund is a PFIC is made
annually on the basis of facts that may be beyond the Fund's control, and there
can be no assurance that the Fund will not invest in a fund that is a PFIC.
Certain elections--not always in the Fund's control--may mitigate some of the
negative tax consequences of investing in PFICs.
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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 value, AST will complete its
purchases, even
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Dividend Reinvestment Plan (Unaudited) (concluded)
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.
39
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
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FUND, INC.
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www.swz.com
ANNUAL REPORT
FOR THE
YEAR ENDED
DECEMBER 31, 2006
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 $38,575 in 2005 and $40,750 in 2006.
(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 $4,200 in 2005
and $4,400 in 2006. 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 $4,200 in
2005 and $4,400 in 2006. 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,
as amended. It is composed of the following Directors, each of who is not an
"interested person" as defined in the Investment Company Act of 1940, as
amended (the "Act"):
Paul R. Brenner, Esq.
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,
2006. 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 (502.8 million) 0 24 (61.2 million)
Rudolf Millisits 1 (502.8 million) 0 24 (61.2 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, 2006, 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
------ ------------------- ----------------- -------------------- ------------------
01/01/06 - 01/31/06 24,000 15.6069 24,000 976,000
02/01/06 - 02/28/06 976,000
03/01/06 - 03/31/06 976,000
04/01/06 - 04/30/06 976,000
05/01/06 - 05/31/06 976,000
06/01/06 - 06/30/06 52,700 16.2299 52,700 923,300
07/01/06 - 07/31/06 32,100 16.7347 32,100 891,200
08/01/06 - 08/31/06 193,100 17.5350 193,100 698,100
09/01/06 - 09/30/06 128,900 18.4274 128,900 569,200
10/01/06 - 10/31/06 569,200
11/01/06 - 11/30/06 569,200
12/01/06 - 12/31/06 569,200
Total 430,800 16.9068 430,800 569,200
At the December 7, 2006 meeting of the Board, the Board approved the purchase
of up to 500,000 shares of the Fund by the Advisor during 2007. The approved
purchase plan, announced to the public in a press release on December 7, 2006,
expires on December 31, 2007. 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
-------------------------------
Rodolphe E. Hottinger,
Chief Executive Officer
Date March 6, 2007
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 March 6, 2007
By /s/ Rudolf Millisits
-------------------------------
Rudolf Millisits,
Chief Financial Officer
Date March 6, 2007