As filed with the Securities and Exchange Commission on March 8, 2003
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, 2003
Date of reporting period: JANUARY 31, 2003 THROUGH DECEMBER 31, 2003
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, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
T H E S W I S S H E L V E T I A F U N D, I N C.
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Directors and Officers
Paul Hottinguer Samuel B. Witt III, Esq.**
CHAIRMAN DIRECTOR
Eric R. Gabus + Rodolphe E. Hottinger
VICE CHAIRMAN (NON OFFICER) PRESIDENT
CHIEF EXECUTIVE OFFICER
Paul R. Brenner, Esq.
DIRECTOR Rudolf S. Millisits
SENIOR VICE PRESIDENT
Alexandre de Takacsy TREASURER
DIRECTOR
Philippe R. Comby
Claude Frey VICE PRESIDENT
DIRECTOR
Edward J. Veilleux
Baron Hottinger VICE PRESIDENT
DIRECTOR SECRETARY
Claude Mosseri-Marlio Leslie K. Klenk
DIRECTOR ASSISTANT SECRETARY
Didier Pineau-Valencienne* Frederick Skillin
DIRECTOR ASSISTANT TREASURER
Stephen K. West, Esq.*
DIRECTOR
----------------------------------------------------------
*Audit Committee Member +Governance Committee Chairman
**Audit Committee Chairman
INVESTMENT ADVISOR
Hottinger Capital Corp.
1270 Avenue of the Americas, Suite 400
New York, New York 10020
(212) 332-7930
ADMINISTRATOR
Forum Administrative Services, LLC
CUSTODIAN
Swiss American Securities Inc.
TRANSFER AGENT
American Stock Transfer & Trust
59 Maiden Lane
Plaza Level
New York, NY 10038
(800) 937-5449
LEGAL COUNSEL
Stroock & Stroock & Lavan LLP
INDEPENDENT AUDITORS
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 New York, Zurich, Luxembourg, Toronto, Geneva,
Vienna, London, and the Bahamas.
EXECUTIVE OFFICES
The Swiss Helvetia Fund, Inc.
1270 Avenue of the Americas, Suite 400
New York, New York 10020
1-888-SWISS-00 (1-888-794-7700)
(212) 332-2760
FOR INQUIRIES AND REPORTS:
1-888-SWISS-00 (1-888-794-7700)
Fax (212) 332-7931
email: swz@swz.com
WEBSITE ADDRESS
http://www.swz.com
The Fund
The Swiss Helvetia Fund, Inc. 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,
listed on the New York Stock Exchange under the symbol "SWZ," is managed by
Hottinger Capital Corp.
The Fund has earned the Lipper, Inc. award for ranking number one among Western
European closed-end funds in ten year performance for the periods ended December
31, 2002, 2001, 2000, 1999, and 1998. The Fund had previously been recognized
for its top one year performance in the same category for the year 2000. The
Fund also maintained Morningstar's overall rating of four stars as of December
31, 2003. Of course, past performance is no guarantee of future results. See
page 4 for more information.
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.
Weekly Net Asset Value is also published in BARRON'S, the Monday edition of THE
WALL STREET JOURNAL and the Sunday Edition of THE NEW YORK TIMES.
1
T H E S W I S S H E L V E T I A F U N D, I N C.
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Letter to Stockholders
GLOBAL STOCK MARKET PERFORMANCE
The year under review was indeed a good one for stock markets across the
world. 2003 was one of the best examples of markets "climbing a wall of
worries". It all looked bleak at the beginning of the year with the prospect of
major geopolitical risks materializing, recession in business spending
continuing and deflation becoming more of a reality. However, the concerted
actions of the central banks were able to stop price erosion and preserve the
strength in U.S. consumer spending and keep Chinese economic growth on its path.
While emerging markets were star performers due to an increase in
investors' risk appetite in the context of very favorable liquidity conditions,
the more mature markets, such as Germany and Spain, had very good performance as
well. Although Switzerland and the United Kingdom did not perform as strongly in
their own currencies, when their returns are measured in U.S. dollar terms their
performance was admirable. The Swiss market appreciation of 36.47% (in U.S.
dollar terms), as measured by the Swiss Performance Index (SPI), significantly
outperformed the Dow Jones Industrial Average return of 28.28% and the Standard
& Poor's 500 Index return of 28.67%.
SWISS ECONOMIC NOTES
On December 12, 2003, the Swiss National Bank (SNB) announced at a press
conference that it would leave the target range for the 3-month Libor unchanged
at 0.00% - 0.75% and that, for the time being, the rate would be kept at around
0.25%. The ten-year spot interest rate on Confederation bonds increased from
2.58% at the beginning of the year to 2.97% by the end of December. Most of the
increase happened between June and the beginning of September. The last quarter,
however, was flat. Even though the signs of an economic recovery in Switzerland
are present, a sustained upswing is not yet assured. At the same time, inflation
potential is low. For these reasons, the SNB maintained its expansionary
monetary policy.
The real Gross Domestic Product (GDP) at the end of the third quarter
decreased by 0.7% in comparison to last year. However, it exceeded the two
previous quarters. Third quarter GDP grew by 1.0% led by higher exports (+5.2%
over the prior quarter) thanks to more favorable exchange rate conditions. In
addition, equipment investment rose slightly following a long phase of decline
(+4.5% over the prior quarter) and consumer spending increased (+1.5%). Leading
economic indicators set a new two-year record in November, suggesting a
continuing positive trend for the GDP.
2
T H E S W I S S H E L V E T I A F U N D, I N C.
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Letter to Stockholders (continued)
There is, however, some concern regarding consumption in Switzerland. The
unemployment rate hit a six-year high in December at 4.1% (at the beginning of
the year the rate was at 3.5%). The SNB believes that unemployment should fall
and consumer spending should increase following improvement in the economic
situation. It is expecting exports to continue to develop favorably and
investment in equipment to experience a robust increase. On average, it expects
a moderate decline in economic activity in the current year with growth in the
economy of slightly over 1.5%.
On the inflation side, if monetary policy remains unchanged, average annual
inflation is likely to amount to 0.4% in the coming year, 1.0% in 2005 and 2.3%
in 2006. The SNB's opinion is that price stability can be maintained by
tightening monetary policy at a later point in time.
SWISS NEWS
On December 2, 2003, the Swiss parliament voted to add banking secrecy to
the constitution. Switzerland has had a banking secrecy law since 1935. However,
adding financial privacy to the constitution would strengthen the law against
efforts by some European Union members to abolish it. With banking secrecy in
the constitution, parliament would lose the power to repeal the secrecy law.
This is good news for the Swiss financial industry, as it will assure further
guarantee of the confidentiality of domestic and foreign private clients. Before
it is part of the constitution, it has to be approved by the upper house and
then by a majority vote in a popular referendum.
SWISS MARKET REVIEW AND FUND PERFORMANCE FOR THE YEAR
In the first quarter of the year Management kept a high level of cash due
to the strength of the Swiss currency and the geopolitical risks. The market
reached a bottom in March. After a loss of -22% from the beginning of the year
through March 12th, the SPI rallied sharply, gaining back 20% in seven days,
mainly on short covering in a limited number of financial stocks. This
volatility made the Fund lag the benchmark for the first half of the year. For
the rest of the year, the Fund's investment strategy was to concentrate on stock
picking, trying to find undervalued stocks in turnaround situations. The
strategy allowed the Fund to regain a positive relative performance, finishing
the year with a 22.54% return in local currency, 0.48% better than the SPI.
3
T H E S W I S S H E L V E T I A F U N D, I N C.
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Letter to Stockholders (continued)
The Fund maintained, for the year ended December 31, 2003, an overall
rating of four stars from Morningstar.* The Fund also received Lipper, Inc.'s
top ranking for Western European closed-end funds in ten-year performance for
the period ended December 31, 2002.** Past performance is no guarantee of future
results.
* Morningstar is an independent fund performance monitor. Its ratings reflect
historic risk-adjusted performance and may change monthly. Its ratings of one
(low) and five (high) stars are based on a fund's three- and five-year average
annual total returns with fee adjustments, and a risk factor that reflects fund
performance relative to three-month Treasury Bill monthly returns. Only 33% of
the funds in an investment category may receive four or five stars. As of
12/31/03, there were 12 funds in the Fund's asset category rated by Morningstar.
** Lipper, Inc. is an independent fund performance monitor. As of 12/31/02,
there were 9 funds in the Lipper Western European closed-end funds category,
which is comprised of funds that concentrate their investments in equity
securities whose primary trading markets or operations are in the Western
European region or a single country within this region.
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PEER GROUP/INDICES PERFORMANCE COMPARISON IN SWISS FRANCS 1
----------------------------------------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 1998 1997
----------------------------------------------------------------------------------------------------------------------------
SWISS HELVETIA FUND 22.54% -20.40% -22.91% 14.06% 14.70% 15.57% 53.99%
----------------------------------------------------------------------------------------------------------------------------
Swiss Performance Index (SPI) 22.06% -25.95% -22.03% 11.91% 11.69% 15.36% 55.19%
----------------------------------------------------------------------------------------------------------------------------
Swiss Market Index (SMI) 18.51% -27.84% -21.11% 7.47% 5.71% 14.28% 58.93%
----------------------------------------------------------------------------------------------------------------------------
Switzerland iShares2
(Formerly called Webs Switzerland) 19.14% -26.23% -23.12% 7.75% 12.22% 11.74% 47.79%
----------------------------------------------------------------------------------------------------------------------------
CS Equity Swiss Blue Chips3, 7 18.13% -28.75% -22.12% 10.97% 7.57% 14.21% 59.90%
----------------------------------------------------------------------------------------------------------------------------
UBS Equity Inv. Switzerland4, 7 18.14% -26.02% -22.04% 7.42% 6.43% 12.75% 55.94%
----------------------------------------------------------------------------------------------------------------------------
Pictet Valsuisse5, 7 20.10% -27.93% -22.35% 7.34% 9.38% 11.05% 55.65%
----------------------------------------------------------------------------------------------------------------------------
Saraswiss (Bank Sarasin)6, 7 19.64% -28.51% -24.45% 9.72% 7.10% 14.41% 53.57%
----------------------------------------------------------------------------------------------------------------------------
--------------------------------------------
CUMULATIVE
PERFORMANCE
12/31/96 -
12/31/03
--------------------------------------------
SWISS HELVETIA FUND 75.07%
--------------------------------------------
Swiss Performance Index (SPI) 57.70%
--------------------------------------------
Swiss Market Index (SMI) 39.20%
--------------------------------------------
Switzerland iShares2
(Formerly called Webs Switzerland) 34.92%
--------------------------------------------
CS Equity Swiss Blue Chips3, 7 42.90%
--------------------------------------------
UBS Equity Inv. Switzerland4, 7 36.96%
--------------------------------------------
Pictet Valsuisse5, 7 36.40%
--------------------------------------------
Saraswiss (Bank Sarasin)6, 7 33.41%
--------------------------------------------
SOURCES: BLOOMBERG, MANAGEMENT COMPANIES' WEBSITES, INVESTMENT COMPANY CAPITAL
CORP., AND CITIGROUP GTS.
1Performance 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 Switzerland iShares, 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.
2Switzerland iShares are traded on the New York Stock Exchange and invest in
most of the same stocks listed in the Morgan Stanley Capital International
(Switzerland) Index. These stocks represent Switzerland's largest and most
established public companies, accounting for approximately 85% of the market
capitalization of all of Switzerland's publicly traded stocks. Performance of
iShares is calculated based upon the December 31 closing prices each year 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, and 12/31/03 = 1.24.
3 This fund invests in equities issued by leading Swiss companies. Stock
selection is based on economic, sector and company analyses. Preference is given
to large-cap companies.
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 Swiss companies listed on the Swiss Stock
Exchange (SWX) and included in the SPI.
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.
7These funds are not available for U.S. residents or citizens.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
4
T H E S W I S S H E L V E T I A F U N D, I N C.
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Letter to Stockholders (continued)
--------------------------------------------------------------------------------
Year to Date
December 31, 2002
Through
December 31, 2003
--------------------------------------------------------------------------------
PERFORMANCE
Swiss Performance Index (SPI) 22.06%
Swiss Helvetia Fund
Based on Net Asset Value in Swiss Francs 22.54%
CHANGE IN U.S. DOLLAR VS. SWISS FRANC -10.56%
SWISS HELVETIA FUND PERFORMANCE IN U.S. DOLLARS
Based on Market Price 41.76%
Based on Net Asset Value 37.00%
S & P 500 Index 28.67%
MSCI EAFE Index 38.59%
Lipper European Fund Index (10 Largest) 36.81%
Lipper European Fund Universe Average 37.58%
Sources: Citigroup GTS and Bloomberg
SPECIFIC COMPANY NEWS GEBERIT: On December 12, 2003 the Geberit Group announced
the acquisition of Mapress Holding, Germany, the leading European provider of
press fitting systems and drainage solutions, mainly made of stainless steel.
With this acquisition, Geberit will expand its piping systems division, broaden
its geographic presence and open up further potential for improvement in its
sales and profits.
SGS: On December 22, 2003 SGS announced its acquisition of Medisearch
International (MSI), an international full service clinical research
organization, which provides clinical development and biomedical services to
life sciences companies. With this acquisition SGS is building-up its life
sciences services and is establishing a presence in the North American market,
both important steps for its growth strategy.
Several capital increases occurred this last quarter:
ABB: At an extraordinary meeting on November 20, 2003 shareholders approved
share capital increase expected to raise about $2.5 billion through a rights
offering. Shareholders demonstrated their confidence in the company by
exercising 99% of the rights.
MICRONAS: At an extraordinary meeting held on November 30, 2003 shareholders
accepted a proposal to increase the share capital by 8.1 million Swiss francs
within the next two years. The stated aim is to increase the group's strategic
financial flexibility.
SGS: At an extraordinary meeting on December 9, 2003 shareholders approved a
conditional share capital increase of up to 20 million Swiss francs and an
authorized share capital increase of up to 10 million Swiss francs. Management's
stated objective is to strengthen the company's long term financial flexibility,
especially with regard to acquisitions.
5
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Letter to Stockholders (continued)
COMMENTS ON THE CURRENCY
U.S. DOLLAR: The dollar depreciated markedly against the other main currencies
of the world. It fell by 20% against the euro, 10.5% against the Swiss franc,
10% against the British pound and 10% versus the yen. The trade and budget
deficits have been a source of concern for some time now, but the downside move
was triggered by the statements of U.S. officials showing little willingness to
continue a strong dollar policy.
SWISS FRANC: The Swiss franc vs. the U.S. dollar was flat during the first half
of the year and then appreciated by around 12% from the peak exchange rate of
1.4174 at the end of August to 1.2391 at the end of year. The Swiss franc
weakened considerably against the euro between March and July, depreciating by
8% for the full year, a decline which considerably helped Swiss exports to
Euroland.
EURO: The European Central Bank (ECB) changed its rate only one time during the
year, from 2.5% to 2.0% in June. The news did not have any impact on the euro
since it had been expected for a long time. With inflation steady at around 2%,
there is no indication that the ECB will change policy for some time. The euro
finished the year high with an exchange rate of 1.2595 against the U.S. dollar
and of 1.56 against the Swiss franc.
OUTLOOK
It is difficult to imagine a more favorable environment for stocks than the
one that prevailed during the second half of 2003. As inflexion points in
earnings expectations were reached, the first incremental upward revision took
place. With extremely low interest rates and the threat of deflation fading
away, no investment vehicle could compete against stocks. While price momentum
can be expected to carry over in 2004, investors can look more closely at
valuations and analysts will have a tougher time increasing earnings estimates.
In the Swiss and U.S. markets, however, some segments that have performed below
average, such as quality names in the large capitalization area, should
outperform as investors become more risk adverse. While a flatter yield curve
may slow down market performance, as long as long-term interest rates stay
stable, stocks should continue to be attractive.
6
T H E S W I S S H E L V E T I A F U N D, I N C.
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Letter to Stockholders (concluded)
STOCK REPURCHASE PROGRAM
Pursuant to authorization by its Board of Directors, the Fund began open
market purchases of its common stock on the New York Stock Exchange 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 and realizing capital gains in order to fund the
repurchases. During the period ended December 31, 2003, the Fund repurchased and
retired 172,100 shares at an average price of $10.62 per share (including
brokerage commissions) and a weighted average discount of 17.20%. These
repurchases, which had a total cost of $1,827,374, resulted in an increase of
$373,246 to the Fund's net asset value. The Board has authorized the purchase of
up to 500,000 shares in 2004.
Sincerely,
/s/ Paul Hottinguer
Paul Hottinguer
Chairman
/s/ Rodolphe Hottinger
Rodolphe Hottinger
President and Chief Executive Officer
December 31, 2003
7
T H E S W I S S H E L V E T I A F U N D, I N C.
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Certain Information Concerning Directors
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, 2003. 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 2004)
------------------------------------------------------------------------------------------------------------------------------------
NAME, TERM OF OFFICE PRINCIPAL
ADDRESS POSITION(S) AND LENGTH OF OCCUPATION(S) OTHER DIRECTORSHIPS
& AGE WITH FUND TIME SERVED DURING PAST FIVE YEARS HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
Mr. Alexandre Director 2 Director from Senior Advisor to the Hottinger Group and None
de Takacsy 1987 to President of Hottinger U.S., Inc. since April,
Financiere February 8, 1994 1986; Vice Chairman of the Board, Director,
Hottinguer and since President, and Secretary: Hottinger Capital
43, rue Taitbout September 17, Corp.; Retired Senior Executive: Royal
75009 Paris 1998. Bank of Canada.
France
Age 74
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Alexandre 700
de Takacsy $1-$10,000
Financiere
Hottinguer
43, rue Taitbout
75009 Paris
France
Age 74
------------------------------------------------------------------------------------------------------------------------------------
CLASS I NON-INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2004)
------------------------------------------------------------------------------------------------------------------------------------
NAME, TERM OF OFFICE PRINCIPAL
ADDRESS POSITION(S) AND LENGTH OF OCCUPATION(S) OTHER DIRECTORSHIPS
& AGE WITH FUND TIME SERVED DURING PAST FIVE YEARS HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
Mr. Claude Director; Director since President of the Swiss Police Academy Chairman of the Board: Infra Tunnel
W. Frey Member of 1995. (Neuchatel) from 1996 to 2003; Member of the Swiss SA (Marin); Beton Frais SA (Marin);
Clos 108 Nominating Parliament from 1979 to 2003; Parliamentary Member of the Board: Dexia Banque
2012 Auvernier Committee from Assembly of the Council of Europe Privee (Suisse), Zurich;
Switzerland 1996 to 2002, (Strasbourg) from 1996 to 2004 and Executive Board SCMM SA (Crans-Montana)
and the of the "North-South Centre" (Lisbon) since
Age 60 Governance/ 1999; President of the National Committee for
Nominating Foreign Affairs from 2001 to 2003 (Vice President
Committee since from 1999 to 2001); Chairman of the Board:
2002. Federation of Swiss Food Industries (Berne)
from 1991 to 2001; Association of Swiss
Chocolate 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.
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Claude 1,815
W. Frey $10,001-$50,000
Clos 108
2012 Auvernier
Switzerland
Age 60
-----------------------------------------------------------------------------------------------------------------------
8
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
-----------------------------------------------------------------------------------------------------------------------
CLASS I NON-INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2004)
-----------------------------------------------------------------------------------------------------------------------
NAME, TERM OF OFFICE PRINCIPAL
ADDRESS POSITION(S) AND LENGTH OF OCCUPATION(S) OTHER DIRECTORSHIPS
& AGE WITH FUND TIME SERVED DURING PAST FIVE YEARS HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
Mr. Eric R. Gabus Director; Vice Director since Chairman of the Board: Societe Neuchateloise de Board Member: Pro C.I.C.R.
St. Dominique Chairman (Non- since 1987. Presse since 1999; L'Express Communication (International Red Cross) Neutchatel
1815 Clarens Officer) since 1994; (Neuchatel) from 1983 to 2002; Vice Chairman of the since 1986.
Switzerland Chairman of the Board: Fondation Denis de Rougemont pour
Nominating l'Europe, Geneva since 1980.
Age 76 Committee from
1987 to 2002, the
Governance/
Nominating
Committee since
2002, and Member
of the Litigation
Committee from
2001 to 2003.
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Eric R. Gabus 1,000
St. Dominique $10,001-$50,000
1815 Clarens
Switzerland
Age 76
--------------------------------------------------------------------------------------------------------------------
CLASS II INTERESTED DIRECTORS
(TERM WILL EXPIRE IN 2005)
-----------------------------------------------------------------------------------------------------------------------
NAME, TERM OF OFFICE PRINCIPAL
ADDRESS POSITION(S) AND LENGTH OF OCCUPATION(S) OTHER DIRECTORSHIPS
& AGE WITH FUND TIME SERVED DURING PAST FIVE YEARS HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
The Baron Director2; Chairman Director since General Partner: Hottinger et Cie (Zurich); Member: Conseil de Surveillance
Hottinger of the Board 1987. President: Conseil de Surveillance Credit AXA; Administrator: Investissement
Hottinger et Cie Directors and Chief Suisse/Hottinguer (Paris), Sofibus (Paris) (real Provence SA (holding company),
Dreikonigstrasse Executive Officer estate); Vice President and Director: Financiere AXA, AXA Assurances IARD, AXA
55 from 1987 to 1989. Hottinguer (holding company); Administrator: Courtage IARD, AXA Courtage VIE,
8027 Zurich Hottinger U.S., Inc. (USA), Hottinguer Gestion AXA Assurances Vie, AXA France
Switzerland (Luxembourg) (investment advisor) until December Assurances, Alpha Assurances Vie,
1989; Auditor: Didot Bottin, Financiere Provence de Finaxa, Hottinger International
Age 69 Participations (FPP) (venture capital); Managing Fund "U.S. Growth Fund"
Director: Intercom (holding company), Sofides (real (publicly-held Luxembourg mutual
estate); Vice President: Gaspee (real estate); fund), ECU Invest (publicly-held
Chairman of the Board and Director: Hottinger Luxembourg mutual fund),
Capital Corp. Hottinguer International Asset
Management (Luxembourg),
Hottinger U.S., Inc. (USA); Member
of the Board Conseil de Surveillance
of EMVA N.V. (holding company)
Permanent Representative: AXA to
AXA Millesime.
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
The Baron 248,834 3
Hottinger over $100,000
Hottinger et Cie
Dreikonigstrasse
55
8027 Zurich
Switzerland
Age 69
------------------------------------------------------------------------------------------------------------------------------------
Mr. Paul R. Director 2; Secretary Director since Of Counsel: Salans since July 1996; Paul R. Brenner, None
Brenner Esq. from 1987 to 2002. December 2002. Attorney-at-Law since June 1993; Counsel to the
25 Moore Road Fund from 1994 to 2002.
Bronxville, New
York
10708
Age 61
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Paul R. 8,734
Brenner Esq. over $100,000
25 Moore Road
Bronxville, New
York
10708
Age 61
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--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
-----------------------------------------------------------------------------------------------------------------------
CLASS II NON-INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2005)
-----------------------------------------------------------------------------------------------------------------------
NAME, TERM OF OFFICE PRINCIPAL
ADDRESS POSITION(S) AND LENGTH OF OCCUPATION(S) OTHER DIRECTORSHIPS
& AGE WITH FUND TIME SERVED DURING PAST FIVE YEARS HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
Mr. Didier Director; Member of Director since Honorary Chairman: Schneider Electric SA Director:Fleury Michon (France);
Pineau- the Audit 1999. (industrial conglomerate) since 1999; Chairman of AFEP (France); Aventis, SA (Formerly
Valencienne Committee since the Board and CEO: Schneider Electric SA Rhone-Poulenc SA) (chemicals);
c/o Schneider 1999, the Litigation (industrial conglomerate) from 1981 until February Wendel Investissements (formerly
Electric SA Committee from 1999; Chairman: AFEP from 1999 to 2001; Vice CGIP); LaGardere (France) (holding
64 Rue de 2001 to 2003, and the Chairman: Credit Suisse First Boston (Europe) company); Member: LaGardere
Miromesnil Governance/ Limited (investment banking) from 1999 to 2002; (France) (holding company);
75008 Paris Nominating Senior Advisor: CSFB since 2002; Partner, SAGARD ADNRE (France); Member of Board:
France Committee since Private Equity Partners (France). Pernod Ricard.
2002.
Age 72
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Didier 2,303
Pineau- $10,001- $50,000
Valencienne
c/o Schneider
Electric SA
64 Rue de
Miromesnil
75008 Paris
France
Age 72
------------------------------------------------------------------------------------------------------------------------------------
Samuel B. Witt, Director; Chairman Director since Senior Vice President and General Counsel: Stateside Member and President
III, Esq. of the Audit 1987. Associates, Inc. since August 1993; Samuel B. Witt, Military Institute of the Virginia
Stateside Committee since III, Attorney-at-Law, since August 1993. Trustee: The Williamsburg Investment
Associates, Inc. 1993, the Litigation Trust (registered investment
2300 Clarendon Committee from company).
Blvd. 2001 to 2003, and
Suite 407 Member of the
Arlington, Governance/
Virginia 22201- Nominating
3367 Committee since
2002.
Age 68
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Samuel B. Witt, 2,958
III, Esq. $10,001-$50,000
Stateside
Associates, Inc.
2300 Clarendon
Blvd.
Suite 407
Arlington,
Virginia 22201-
3367
Age 68
10
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
------------------------------------------------------------------------------------------------------------------------------------
CLASS III INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2006)
------------------------------------------------------------------------------------------------------------------------------------
NAME, TERM OF OFFICE PRINCIPAL
ADDRESS POSITION(S) AND LENGTH OF OCCUPATION(S) OTHER DIRECTORSHIPS
& AGE WITH FUND TIME SERVED DURING PAST FIVE YEARS HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
Mr. Paul Director2; Chairman Director since General Partner: Hottinger et Cie (Zurich); Director: Drouot Securite; Member:
Hottinguer of the Board of 1987. President: Gaspee (real estate) since 1992; Financiere Conseil de Surveillance Credit Suisse
Hottinger et Cie Directors since 1989; Hottinguer (holding company) since 1990; Financiere Hottinguer; Societe pour le
Dreikonigstrasse Chief Executive Provence Participations (venture capital firm) since Financement de Bureaux et d'Usines
55 Officer from 1989 to 1990; AXA International Obligation (finance) since Sofibus (real estate).
8027 Zurich 2002. 1996; Hottinguer Gestion (Luxembourg) (investment
Switzerland advisor) from 1991 to 1998; Managing Director:
Intercom (holding company) since 1984; Vice
Age 61 Chairman of the Board, Director and Member of
Investment Committee: Hottinger Capital Corp;
Administrator: Investissement Hottinger SA
since 1989; Finaxa (finance) since 1982; Permanent
Representative: Credit Suisse Hottinguer to Provence
International (publicly held French mutual fund);
Credit Suisse Hottinguer to PPC; Credit Suisse
Hottinguer to Croissance Britannia (investment
fund); Credit Suisse Hottinguer to Harwanne
Allemagne.
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Paul 248,834 3
Hottinguer over $100,000
Hottinger et Cie
Dreikonigstrasse
55
8027 Zurich
Switzerland
Age 61
------------------------------------------------------------------------------------------------------------------------------------
11
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
------------------------------------------------------------------------------------------------------------------------------------
CLASS III NON-INTERESTED DIRECTORS
(TERM WILL EXPIRE IN 2006)
------------------------------------------------------------------------------------------------------------------------------------
NAME, TERM OF OFFICE PRINCIPAL
ADDRESS POSITION(S) AND LENGTH OF OCCUPATION(S) OTHER DIRECTORSHIPS
& AGE WITH FUND TIME SERVED DURING PAST FIVE YEARS HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
Mr. Claude Director; Member of Director since E.B.R.D. - European Bank for Reconstruction and None
Mosseri-Marlio the Nominating 1993. Development; Senior Advisor: TAM Program (Turn
6 bis rue du Committee since Around Management) since 1999; Financial
Cloitre 1993 and the Consultant, portfolio management since 1982;
Notre-Dame Governance/ Professor, Schiller University, Paris since 1989;
75004 Paris Nominating Professor, American Business School, Paris, since
France Committee since 1995; Guest Lecturer, Kelley School of Business,
2002. Indiana University, since 1998; Guest Lecturer, Fox
Age 73 School of Business, Temple University, since 2002;
Visiting Professor, Tyumen State Institute of
Management, Tyumen, Russia, since 2002.
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Claude 6,992
Mosseri-Marlio $50,001-$100,000
6 bis rue du
Cloitre
Notre-Dame
75004 Paris
France
Age 73
------------------------------------------------------------------------------------------------------------------------------------
NAME, TERM OF OFFICE PRINCIPAL
ADDRESS POSITION(S) AND LENGTH OF OCCUPATION(S) OTHER DIRECTORSHIPS
& AGE WITH FUND TIME SERVED DURING PAST FIVE YEARS HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
Stephen K. West, Director; Member of Director since Of Counsel: Sullivan & Cromwell since 1997. Director: Pioneer Funds (registered
Esq. the Audit 1995. investment company) (52 portfolios);
Sullivan & Committee since AMVESCAP PLC (Investment
Cromwell 1996, the Litigation Manager).
125 Broad Street Committee from
New York, New 2001 to 2003, and the
York 10004 Governance/
Nominating
Age 75 Committee since
2002.
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Stephen K. West, 19,217
Esq. over $100,000
Sullivan &
Cromwell
125 Broad Street
New York, New
York 10004
Age 75
------------------------------------------------------------------------------------------------------------------------------------
12
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Certain Information COncerning Executive Officers
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, 2003.
------------------------------------------------------------------------------------------------------------------------------------
EXECUTIVE OFFICERS
------------------------------------------------------------------------------------------------------------------------------------
NAME,
ADDRESS POSITION(S)
& AGE WITH FUND
------------------------------------------------------------------------------------------------------------------------------------
Mr. Rodolphe E. Hottinger2 President and
Hottinger et Cie Chief Executive
3 Place des Bergues Officer
C.P. 395
CH-1201 Geneva
Switzerland
Age 47
------------------------------------------------------------------------------------------------------------------------------------
NAME, PRINCIPAL
ADDRESS OCCUPATION(S)
& AGE DURING PAST FIVE YEARS
------------------------------------------------------------------------------------------------------------------------------------
Mr. Rodolphe E. Hottinger2 Managing Partner: Hottinger et Cie (Zurich) since 1987; President: Hottinger Capital, S.A. (Geneva)
Hottinger et Cie (investment company) since 2000; Hottinger & Co. Ltd, UK (investment advisor) since 2001; and Emba,
3 Place des Bergues NV (investment company) since 1990; Vice Chairman of the Board, Director, Chief Executive Officer and
C.P. 395 Member of Investment Committee: Hottinger Capital Corp. ("HCC") since 1994; President: Financiere
CH-1201 Geneva Hottinger Paris.
Switzerland
Age 47
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Rodolphe E. Hottinger2 265,181 3
Hottinger et Cie Over $100,000
3 Place des Bergues
C.P. 395
CH-1201 Geneva
Switzerland
Age 47
------------------------------------------------------------------------------------------------------------------------------------
NAME,
ADDRESS POSITION(S)
& AGE WITH FUND
------------------------------------------------------------------------------------------------------------------------------------
Mr. Rudolf S. Millisits2 Senior Vice
Hottinger Capital Corp. President,
1270 Avenue of the Treasurer and
Americas Suite 400 Chief Financial
New York, New York Officer
10020
Age 46
------------------------------------------------------------------------------------------------------------------------------------
NAME, PRINCIPAL
ADDRESS OCCUPATION(S)
& AGE DURING PAST FIVE YEARS
------------------------------------------------------------------------------------------------------------------------------------
Mr. Rudolf S. Millisits2 Director: HCC since December 2000; Chief Operating Officer: HCC since December 1998; Executive Vice
Hottinger Capital Corp. President, Portfolio Manager, Member of Investment Committee and Chief Compliance Officer: HCC
1270 Avenue of the since September 1994; Assistant Secretary: HCC since August 1995; Executive Vice President: Hottinger
Americas Suite 400 U.S., Inc. since September 1994 and Assistant Secretary since August 1995.
New York, New York
10020
Age 46
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Rudolf S. Millisits2 7,035
Hottinger Capital Corp. $50,001-$100,000
1270 Avenue of the
Americas Suite 400
New York, New York
10020
Age 46
------------------------------------------------------------------------------------------------------------------------------------
NAME,
ADDRESS POSITION(S)
& AGE WITH FUND
------------------------------------------------------------------------------------------------------------------------------------
Mr. Philippe R. Comby2 Vice President
Hottinger Capital Corp.
1270 Avenue of the
Americas Suite 400
New York, New York
10020
Age 37
------------------------------------------------------------------------------------------------------------------------------------
NAME, PRINCIPAL
ADDRESS OCCUPATION(S)
& AGE DURING PAST FIVE YEARS
------------------------------------------------------------------------------------------------------------------------------------
Mr. Philippe R. Comby2 Senior Vice President: HCC since 2002; First Vice President: HCC from 1998 to 2002; Vice President:
Hottinger Capital Corp. HCC from 1996 to 1998 and Hottinger U.S., Inc since 1996; Treasurer: HCC since 1997.
1270 Avenue of the Member of Investment Committee: HCC since 1996.
Americas Suite 400
New York, New York
10020
Age 37
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Philippe R. Comby2 2,500
Hottinger Capital Corp. $10,001-$50,000
1270 Avenue of the
Americas Suite 400
New York, New York
10020
Age 37
------------------------------------------------------------------------------------------------------------------------------------
NAME,
ADDRESS POSITION(S)
& AGE WITH FUND
------------------------------------------------------------------------------------------------------------------------------------
Mr. Edward J. Veilleux2 Vice President
EJV Financial Services LLC and Secretary
5 Brook Farm Court
Hunt Valley, MD 21030
Age 60
------------------------------------------------------------------------------------------------------------------------------------
NAME, PRINCIPAL
ADDRESS OCCUPATION(S)
& AGE DURING PAST FIVE YEARS
------------------------------------------------------------------------------------------------------------------------------------
Mr. Edward J. Veilleux2 President EJV Financial Services LLC (Investment Company Consulting) since May 2002; Director:
EJV Financial Services LLC Deutsche Asset Management from 1999 to 2002; Principal: BT Alex. Brown Incorporated from 1989 to
5 Brook Farm Court 1999; Executive Vice President, Investment Company Capital Corp. from 1987 to 2002; Trustee; Devcap
Hunt Valley, MD 21030 Shared Return Fund from 2000 to 2003.
Age 60
---------------------------------------
SHARES AND DOLLAR
NAME, RANGE OF
ADDRESS COMMON STOCK
& AGE BENEFICIALLY
OWNED AT
DEC. 31, 20031
---------------------------------------
Mr. Edward J. Veilleux2 1,054
EJV Financial Services LLC $10,001-$50,000
5 Brook Farm Court
Hunt Valley, MD 21030
Age 60
------------------------------------------------------------------------------------------------------------------------------------
1 All Directors and Executive Officers as a group (14 persons) owned 319,489
shares which constitutes approximately 1.3% of the outstanding Common Stock
of the Fund. Share numbers in this Annual Report have been rounded to the
nearest whole share.
2 Indicates "Interested Person," as defined in the Investment Company Act of
1940, as amended (the "1940 Act"). Paul Hottinguer and The Baron Hottinger
are brothers and Rodolphe E. Hottinger is the son of The Baron. Paul
Hottinguer, The Baron Hottinger, and Rodolphe E. Hottinger are "Interested
Persons" because of their affiliation with Hottinger et Cie (Zurich) and
Hottinger U.S., Inc., controlling persons of HCC, the Fund's Investment
Advisor. Alexandre de Takacsy is an "Interested Person" because of his
affiliation with HCC. Paul R. Brenner is an "Interested Person" because he
served as Counsel to the Fund, Counsel to HCC and of Counsel to Salans,
which served as General Counsel for the Fund during the prior two years. In
addition, Rodolphe E. Hottinger, Rudolf S. Millisits, Philippe R. Comby,
and Edward J. Veilleux are considered "Interested Persons" because each is
an officer of the Fund.
3 Hottinger et Cie (Zurich), a partnership, owns 126,382 shares of the Fund,
HCC owns 113,788 shares of the Fund, and Hottinger Treuhand AG owns 8,664
shares of the Fund. Paul Hottinguer, The Baron Hottinger, 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 248,834 shares of the
Fund owned by Hottinger et Cie (Zurich), HCC, and Hottinger Treuhand AG. In
addition, Rodolphe E. Hottinger and his children directly own 16,347 shares
of the Fund.
13
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Review of Operations
Trading Activity for 2003 involved changes in the following positions:
----------------------------------
NEW INVESTMENTS BY THE FUND
----------------------------------
ABB Ltd.
Actelion Ltd.
Adecco SA
Charles Voegele Holding AG
Galenica Holding AG
Holcim Ltd. - Registered
Kaba Holdings AG
Kudelski SA
Logitech International SA
Temenos Group AG
----------------------------------
ADDITIONS TO EXISTING INVESTMENTS
----------------------------------
Converium Holding AG
Geberit AG
Phonak Holding AG
Swiss Reinsurance Company
----------------------------------
SECURITIES DISPOSED OF
----------------------------------
Baloise Holding AG
Berna Biotech AG
Givaudan SA
Holcim Ltd. - Bearer
Komax Holding AG
Lonza Group AG
Saia-Burgess Electronics AG
Schindler Holding AG
Swiss Life Holding
The Swatch Group AG
Zurich Financial Services AG
----------------------------------
REDUCTIONS IN EXISTING INVESTMENTS
----------------------------------
Belimo Holding AG
Credit Suisse Group
Kuehne & Nagel International AG
Micronas Semiconductor Holding AG
Novartis AG
Roche Holding AG
SGS Societe Generale de Surveillance
Holding SA
Syngenta AG
Unaxis Holding AG
14
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Schedule of Investments December 31, 2003
Percent
No. of of Net
Shares Security Value Assets
---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.92%
BANKS - 12.14%
410,000 CREDIT SUISSE GROUP2
REGISTERED SHARES $ 15,001,011 4.07%
A global operating financial group.
(Cost $11,508,471)
435,000 UBS AG2
REGISTERED SHARES 29,791,389 8.07%
Largest Swiss bank. It offers
consumer, business and construction
loans, mortgages, mutual funds, export
and structured finance and securities
brokerage services, advises on mergers
and acquisitions, invests pension funds
and sponsors credit cards.
(Cost $7,578,949)
---------------- -----------------
44,792,400 12.14%
BIOTECHNOLOGY - 3.71%
126,873 ACTELION LTD.1,2
REGISTERED SHARES 13,695,206 3.71%
Pharmaceutical company that develops
and markets synthetic small-molecule
drugs against diseases related to the
endothelium. The Company's drugs,
Veletri and Tracleer, are used in
the treatment of heart and pulmonary
conditions.
(Cost $8,547,615)
---------------- -----------------
13,695,206 3.71%
CHEMICALS - 5.06%
16,783 SIKA AG
BEARER SHARES $ 7,246,511 1.96%
Leading producer of construction
chemicals.
(Cost $4,237,473)
170,000 SYNGENTA AG
REGISTERED SHARES 11,450,172 3.10%
Produces herbicides, insecticides
and fungicides, and seeds for field crops,
vegetables, and flowers.
(Cost $10,688,759)
---------------- -----------------
18,696,683 5.06%
CONSTRUCTION - 4.23%
26,011 GEBERIT AG2
REGISTERED SHARES 12,787,296 3.47%
Manufactures and supplies water supply
pipes and fittings, installation systems,
drainage and flushing systems such as
visible cisterns, and other sanitary
systems for the commercial and
residential construction markets.
(Cost $9,866,934)
60,000 HOLCIM LTD.
REGISTERED SHARES 2,794,421 0.76%
Produces and markets various building
materials, in addition to providing consulting
and engineering services in all areas of the
cement manufacturing process.
(Cost $2,587,410)
---------------- -----------------
15,581,717 4.23%
15
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Schedule of Investments December 31, 2003
No. of of Net
Shares Security Value Assets
---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (CONTINUED)
FOOD & BEVERAGES - 14.75%
300 LINDT & SPRUNGLI AG
REGISTERED SHARES $ 2,680,412 0.73%
Major manufacturer of premium
Swiss chocolates.
(Cost $1,196,399)
207,000 NESTLE AG2
REGISTERED SHARES 51,718,617 14.02%
Largest food and beverage processing
company in the world.
(Cost $12,427,540)
---------------- -----------------
54,399,029 14.75%
HEALTH CARE - 29.47%
1,315,000 NOVARTIS AG2
REGISTERED SHARES 59,702,648 16.18%
One of the leading manufacturers
of pharmaceutical and
nutrition products.
(Cost $16,301,451)
306,409 PHONAK HOLDING AG
REGISTERED SHARES 6,689,341 1.81%
Designs and produces wireless analog and
digital hearing aids, transmitters, remote
controls, microphones and receivers for
use in wireless communications within
broadcasting and sports.
(Cost $3,226,748)
420,000 ROCHE HOLDING AG2
DIVIDENDS RIGHTS CERTIFICATES 42,365,070 11.48%
Worldwide pharmaceutical company.
(Cost $8,467,363)
---------------- -----------------
108,757,059 29.47%
INDUSTRIAL GOODS & SERVICES- 14.06%
3,274,725 ABB LTD.1,2
REGISTERED SHARES $ 16,602,002 4.50%
The holding company for ABB Group
which is one of the largest electrical
engineering firms in the world.
(Cost $13,260,020)
254,000 ADECCO SA2
REGISTERED SHARES 16,327,471 4.43%
Leading personnel and temporary
employment company.
(Cost $9,106,761)
2,055 BELIMO HOLDING AG
REGISTERED SHARES 819,175 0.22%
World market leader in damper and
volume control actuators for ventilation
and air-conditioning equipment.
(Cost $450,523)
4,500 KABA HOLDINGS AG
BEARER SHARES 909,642 0.25%
Provides mechanical and electronic
security systems.
(Cost $809,667)
53,000 KUEHNE & NAGEL INTERNATIONAL AG
REGISTERED SHARES 6,728,118 1.82%
Operates sea freight, land and rail
transportation businesses and
warehousing and distribution facilities.
(Cost $2,734,725)
16
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Schedule of Investments December 31, 2003
No. of of Net
Shares Security Value Assets
---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (CONTINUED)
INDUSTRIAL GOODS & SERVICES - (CONTINUED)
16,698 SGS SOCIETE GENERALE DE
SURVEILLANCE HOLDING SA
REGISTERED SHARES $ 10,477,177 2.84%
Provides a variety of industrial
inspection, analysis, testing and
verification services worldwide.
(Cost $4,295,869)
---------------- -----------------
51,863,585 14.06%
INSURANCE - 4.48%
218,342 CONVERIUM HOLDING AG
REGISTERED SHARES 11,607,832 3.15%
Offers reinsurance services worldwide.
Provides accident and health,
automobile, aviation and space, credit and
surety, general third party liability,
engineering, e-commerce, intellectual
property, life, marine, professional liability
and property, and catastrophe insurance.
(Cost $10,196,857)
72,924 SWISS REINSURANCE COMPANY
REGISTERED SHARES 4,923,513 1.33%
Second largest reinsurance company
in the world.
(Cost $4,326,225)
---------------- -----------------
16,531,345 4.48%
RETAILERS - 3.97%
173,208 CHARLES VOEGELE HOLDING AG1
BEARER SHARES $ 11,050,019 2.99%
Family apparel retailer which focuses
on the value-for-money segment of the
market. Operates retail stores in
Switzerland, Germany, Austria, and the
Benelux region.
(Cost $6,704,300)
24,767 GALENICA HOLDING AG
REGISTERED SHARES 3,604,657 0.98%
Manufactures and distributes prescription
and over-the-counter drugs, toiletries and
hygiene products.
(Cost $3,158,881)
---------------- -----------------
14,654,676 3.97%
TECHNOLOGY - 6.05%
121,000 KUDELSKI SA1
BEARER SHARES 3,996,644 1.08%
Designs, produces, and distributes
equipment under the 'Nagra' brand name
for professional data display in audio
and visual applications.
(Cost $3,568,795)
302,000 LOGITECH INTERNATIONAL SA1,2
REGISTERED SHARES 13,064,079 3.54%
Manufactures personal computer input
devices, as well as producing trackballs,
desktop publishing programs and related
software.
(Cost $10,951,030)
17
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Schedule of Investments December 31, 2003
No. of of Net
Shares Security Value Assets
---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (CONCLUDED)
TECHNOLOGY - (CONTINUED)
49,180 MICRONAS SEMICONDUCTOR HOLDING AG1
REGISTERED SHARES $ 2,105,584 0.57%
Develops and manufactures a wide range
of semiconductors and modules used
by the automotive and consumer goods
industries.
(Cost $1,059,179)
163,540 TEMENOS GROUP AG1
REGISTERED SHARES 1,176,880 0.32%
Provides integrated software for the banking
sector. Develops, distributes,
implements, and supports its
process-oriented real-time enterprise
software designed for the management of
administrative tasks in Europe,
North America, Asia, and the Middle East.
(Cost $1,112,255)
14,002 UNAXIS HOLDING AG
REGISTERED SHARES $ 1,984,112 0.54%
Provider of systems and IT services,
including semiconductors, data storage
and displays, as well as surface
technology and space applications.
(Cost $1,527,346)
---------------- -----------------
22,327,299 6.05%
TOTAL COMMON STOCKS
(Cost $169,897,545) $ 361,298,999 97.92%
OTHER ASSETS IN EXCESS OF LIABILITIES 7,686,647 2.08%
---------------- -----------------
NET ASSETS $ 368,985,646 100.00%
================ =================
--------------------------------------------------------------------------------
1 Non-income producing security.
2 One of the ten largest portfolio holdings.
See Notes to the Financial Statements.
18
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 2003
ASSETS:
Investments, at value (cost $169,897,545) ....................................... $ 361,298,999
Collateral received on securities loaned ........................................ 4,436,250
Cash ............................................................................ 3,813,606
Foreign currency (cost $3,322,412) .............................................. 3,867,350
Tax reclaims receivable ......................................................... 522,235
Prepaid expenses and other ...................................................... 2,703
-------------------------
Total assets ................................................................. 373,941,143
-------------------------
LIABILITIES:
Payable for securities loaned ................................................... 4,436,250
Advisory fees payable (Note 2) .................................................. 241,994
Accrued expenses and other ...................................................... 277,253
-------------------------
Total liabilities ............................................................ 4,955,497
-------------------------
-------------------------
Net assets ................................................................... $ 368,985,646
-------------------------
COMPOSITION OF NET ASSETS:
Paid in capital ................................................................. 172,318,476
Distributable earnings
Undistributed net investment income ............................... 2,594,895
Accumulated net realized gain from investment transactions ........ 2,089,028
Net unrealized appreciation on investments and foreign currency ... 191,983,247
------------------
Total distributable earnings ..................................................... 196,667,170
-------------------------
Net assets .......................................................................... $ 338,985,646
-------------------------
NET ASSET VALUE PER SHARE:
($368,985,646 / 24,098,318 shares outstanding) ...................................... $ 15.31
=========================
--------------------------------------------------------------------------------
See Notes to the Financial Statements.
19
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Statement of Operations December 31, 2003
Investment Income:
Dividends (less foreign taxes withheld of $643,736) ............................ $ 3,647,840
Interest ....................................................................... 65,644
Securities lending income ...................................................... 36,118
-------------------------
Total income ............................................................... 3,749,602
-------------------------
EXPENSES:
Investment advisory fees (Note 2) .............................................. 2,509,363
Professional fees .............................................................. 446,434
Directors' fees & expenses ..................................................... 304,229
Administration fees ............................................................ 238,285
Custody fees ................................................................... 104,931
Printing and shareholder reports ............................................... 69,015
Accounting fees ................................................................ 90,658
Transfer agent fees ............................................................ 53,451
Miscellaneous .................................................................. 157,809
-------------------------
Total expenses ............................................................. 3,974,175
-------------------------
Expenses in excess of net investment income ............................. (224,573)
-------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain from:
Investment transactions .................................................... 15,418,356
Foreign currency transactions .............................................. 6,289,626
Net change in unrealized appreciation/depreciation from:
Investment transactions .................................................... 84,616,279
Foreign currency translations .............................................. (3,997,843)
-------------------------
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency .... 102,326,418
-------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .......................................... $ 102,101,845
=========================
--------------------------------------------------------------------------------
See Notes to the Financial Statements.
20
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
2003 2002
---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
OPERATIONS:
Expenses in excess of net investment income ......................... $ (224,573) $ (440,676)
Net realized gain (loss) from:
Investment transactions ......................................... 15,418,356 13,569,040
Foreign currency transactions ................................... 6,289,626 (940,306)
Net change in unrealized appreciation/depreciation from:
Investments ..................................................... 84,616,279 (34,167,565)
Foreign currency ................................................ (3,997,843) 4,579,635
-------------------- --------------------
Net increase (decrease) in net assets from operations ............... 102,101,845 (17,399,872)
-------------------- --------------------
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income and net realized gains from foreign currency
transactions ................................................... (3,470,158) (1,532,859)
In excess of net investment income .................................. - (178,799)
Net realized capital gains .......................................... (13,579,287) (13,163,694)
-------------------- --------------------
Total distributions to stockholders ............................. (17,049,445) (14,875,352)
-------------------- --------------------
CAPITAL SHARE TRANSACTIONS:
Value of shares issued in reinvestment of dividends and distributions 5,961,904 -
Value of shares repurchased through stock buyback ................... (1,827,374) (2,361,886)
-------------------- --------------------
Total increase (decrease) from capital share transactions ........... 4,134,530 (2,361,886)
-------------------- --------------------
Total increase (decrease) in net assets ............................. 89,186,930 (34,637,110)
NET ASSETS:
Beginning of period ................................................. 279,798,716 314,435,826
-------------------- --------------------
End of period (including undistributed net investment income
of $2,594,895 and $0, respectively) ............................. $ 368,985,646 $ 279,798,716
==================== ====================
--------------------------------------------------------------------------------
See Notes to the Financial Statements.
21
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of period .............. $ 11.82 $ 13.16 $ 17.92 $ 17.52 $ 19.07
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (expenses in excess
of income) ...................................... (0.01) (0.02) (0.03) 0.001 0.01
Net realized and unrealized gain (loss)
on investments2 .................................. 4.24 (0.71) (4.34) 1.68 (0.60)
--------- --------- --------- --------- ---------
Total from investment operations .................... 4.23 (0.73) (4.37) 1.68 (0.59)
--------- --------- --------- --------- ---------
Gain from capital share repurchases ................. 0.02 0.02 0.06 0.21 0.12
Capital charge resulting from the issuance
of fund shares ................................... (0.06) - (0.14) (0.12) -
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income and net realized
gains from foreign currency transactions ......... (0.14) (0.06) - - (0.03)
Dividends in excess of net investment income ........ - (0.01) - - -
Distributions from net realized capital gains ....... (0.56) (0.56) (0.31) (1.37) (1.05)
--------- --------- --------- --------- ---------
Total distributions ................................. (0.70) (0.63) (0.31) (1.37) (1.08)
--------- --------- --------- --------- ---------
Net asset value at end of period .................... $ 15.31 $ 11.82 $ 13.16 $ 17.92 $ 17.52
========= ========= ========= ========= =========
Market value per share at end of period ............. $ 12.92 $ 9.64 $ 11.00 $ 14.50 $ 13.81
========= ========= ========= ========= =========
TOTAL INVESTMENT RETURN3:
Based on market value per share ..................... 41.76% (4.46)% (22.10)% 15.06% (7.06)%
Based on net asset value per share .................. 37.00% (6.92)% (24.94)% 12.11% (1.09)%
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................ 1.30% 1.31% 1.39%4 1.16% 1.11%
Net investment income (expenses in excess
of income) ...................................... (0.07)% (0.14)% (0.23)% 0.01% 0.05%
SUPPLEMENTAL DATA:
Net assets at end of period (000s) .................. $ 368,986 $ 279,799 $ 314,436 $ 415,315 $ 416,599
Average net assets during period (000's) ............ $ 306,563 $ 308,018 $ 341,806 $ 422,426 $ 428,072
Stockholders of record5 ............................. 964 1,001 1,067 1,125 1,230
Portfolio turnover rate ............................. 89% 83% 32% 25% 14%
--------------------------------------------------------------------------------
1 Less than $.01 per share.
2 Includes net realized 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 The increase in the Fund's expense ratio was attributable to extraordinary
expenses in connection with a stockholder's proxy contest for the election of
directors and termination of the management contract and defense against a
lawsuit against the Fund and its directors plus the impact of a decline in
the Fund's net assets.
5 Not audited by Deloitte & Touche LLP.
See Notes to the Financial Statements.
22
T H E S W I S S H E L V E T I A F U N D, I N C.
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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.
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. On December 31,
2003, there were no fair valued securities.
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 an expense, net of any amount
receivable from Swiss tax authorities in accordance with the tax treaty between
the United States and Switzerland.
D. DISTRIBUTIONS
The Fund pays dividends 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.
F. SECURITIES LENDING
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.
23
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
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.
At December 31, 2003, securities valued at $4,325,850 were on loan to borrowers.
For collateral, the Fund received U.S. government securities valued at
$4,436,250. Income generated from the program amounted to $36,118 for the fiscal
year ended December 31, 2003.
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. 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.
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. For the year ended December 31, 2003, the Fund paid the
Advisor $2,509,363 in investment advisory fees. The Fund paid Hottinger & Cie
$154,406 in brokerage commissions for the year ended December 31, 2003.
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. The
Committee's allocations are based on its determination of the relative benefits
the Fund and the Advisor derive from the expenditures. During 2003, the
Committee allocated $20,624 of expenses incurred in connection with publicizing
the Fund as follows: $10,312 to the Fund and $10,312 to the Advisor.
Certain officers and directors of the Fund are also officers or directors of
HCC, Hottinger U.S. Inc., Hottinger & Cie (Zurich) and/or Citigroup Global
Transaction Services and its various affiliates (collectively "Citigroup").
These persons are not paid by the Fund for serving in these capacities.
NOTE 3-OTHER FEES
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.
Swiss American Securities Inc. is the Fund's U.S. custodian. Credit Suisse First
Boston is the Fund's Swiss sub-custodian. The Fund pays the custodian and
sub-custodian an annual fee.
24
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
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 Forum Administrative Services,
LLC approximately $16,000 per annum in compensation, except for the Chairmen of
the Audit Committee and the Governance Committee, who the Fund pays an annual
fee of approximately $17,600. In addition, the Fund pays each disinterested
director $750 for each directors' 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.
NOTE 4-CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to 50 million shares of capital stock. HCC
owned 113,788 of the 24,098,318 shares outstanding on December 31, 2003.
Transactions in capital shares were as follows:
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
----------------- -----------------
Shares Amount Shares Amount
------ ------ ------ ------
Dividends
Reinvested 597,409 $5,961,904(a) - -
Repurchased (172,100) (1,827,374) (219,700) ( 2,361,886)
--------- ----------- --------- ------------
Net increase
(decrease) 425,309 $4,134,530 (219,700) $(2,361,886)
======= ========== ========= ============
(a) REPRESENTS SHARES ISSUED TO STOCKHOLDERS WHO DID NOT ELECT CASH IN
CONJUNCTION WITH A CAPITAL GAINS DISTRIBUTION OF $0.541 PER SHARE PAID JANUARY
14, 2003 TO STOCKHOLDERS OF RECORD ON DECEMBER 19, 2002.
NOTE 5-FEDERAL INCOME TAX AND INVESTMENT TRANSACTIONS
At December 31, 2003, accumulated net investment income and accumulated net
realized gain (loss) 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.
Accumulated Accumulated
Undistributed Net Undistributed Net
Investment Income Realized Gain
----------------- -------------
$6,289,626 $(6,289,626)
At December 31, 2003, the net unrealized appreciation from investments for those
securities having an excess of value over cost (based on cost of $170,447,162
for federal income tax purposes) was $190,851,837. The difference between book
basis and tax-basis unrealized appreciation is attributable primarily to the tax
deferral of losses on wash sales.
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles.
The tax character of distributions paid during 2003 and 2002 was as follows (see
page 28 for details):
2003 2002
---- ----
Ordinary income $ 3,470,158 $ 1,532,859
Short-term capital $ 7,301,790 $ 162,657
gains
Long-term capital
gains (Pre May 6) $ 3,265,207 $ 1,289,517
Long-long-term
capital gains
(Qualified 5 YR) $ 2,349,718 $11,890,319
Long-term capital
Gains (Post May 5) $ 662,572 -
At December 31, 2003, the components of distributable earnings on a tax basis
were as follows:
Ordinary income (includes currency gains
and short-term capital gains) $4,477,031
Long-term capital gains $ 756,507
Unrealized appreciation $190,851,837
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended December 31, 2003, were
$268,863,108 and $243,427,567, respectively.
25
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
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 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 and realizing capital gains in order to fund the repurchases. The Board
has authorized the purchase of up to 500,000 shares in 2004. During the period
ended December 31, 2003, the Fund repurchased and retired 172,100 shares at an
average price of $10.62 per share (including brokerage commissions) and a
weighted average discount of 17.20%. These repurchases, which had a total cost
of $1,827,374, resulted in an increase of $373,246 to the Fund's net asset
value.
NOTE 7-LITIGATION
On April 2, 2001 and May 8, 2001, two complaints were filed in purported class
actions on behalf of stockholders of the Fund, in the Court of Chancery of the
State of Delaware, against the Fund, each of its directors and HCC, the Fund's
Investment Advisor (collectively, the "defendants"). The complaints in these
cases, entitled KIMBERLY KAHN V. PAUL HOTTINGUER ET AL. and CHARLES MILLER V.
PAUL HOTTINGUER ET AL., have been voluntarily dismissed by plaintiffs with
prejudice pursuant to a settlement agreement that was approved by the Delaware
Chancery Court on June 4, 2003. In the opinion of management, the terms of the
settlement did not have a material adverse effect on the financial statements of
the Fund.
NOTE 8-PROXY VOTING GUIDELINES (UNAUDITED)
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,
by calling 1-888-SWISS-00.
26
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Independent Auditors' Report
To the Board of Directors and Stockholders of
The Swiss Helvetia Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Swiss Helvetia Fund, Inc., including the schedule of investments, as of December
31, 2003, and the related statements of operations for the year then ended and
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provided a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Swiss Helvetia Fund, Inc. as of December 31, 2003, 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 13, 2004
27
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
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.
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.
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, 2003.
Record Payable
Distribution Date Date Amount
------------ ---- ---- ------
Long-term Capital Gains 6/4/03 6/13/03 $0.135
Income 12/15/03 12/29/03 $0.447
Long-Term Capital Gains 12/15/03 12/29/03 $0.125
------
Total Distributions $0.707
======
The Fund has elected to pass through $.02671 per share to its stockholders as a
credit for taxes paid to Switzerland during its fiscal year ended December 31,
2003.
The Fund designates 24.09% of its income distribution for the qualified dividend
rate (QDI) as defined in Section 1(h)(11) of the Internal Revenue Code.
Tax Information For the Year Ended December 31, 2003 (Unaudited)
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 $3,265,207 in
connection with the distribution paid June 13, 2003 to stockholders of record on
June 4, 2003, and $3,012,290 in connection with the distribution paid December
29, 2003 to stockholders of record on December 11, 2003.
28
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Dividend Reinvestment Plan (Unaudited)
THE PLAN
The Fund's Dividend Reinvestment Plan (the "Plan") offers a convenient way for
you to reinvest your capital gains distributions and ordinary income dividends
in additional shares of the Fund.
Some of the Plan features are:
o 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.
o 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.
o Your shares will be held in an account with the Plan agent. You will
be sent regular statements for your records.
o 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?
Any dividends or distributions you receive 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:
o 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.
o 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.
o 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.
o 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
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 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 it would be if you received the cash. It is only after the payment that
AST reinvests the cash for your account.
29
T H E S W I S S H E L V E T I A F U N D, I N C.
--------------------------------------------------------------------------------
Dividend Reinvestment Plan (Unaudited) (concluded)
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 and 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.
30
A SWISS THE SWISS
INVESTMENTS -------------------
FUND HELVETIA
-------------------
FUND, INC.
-------------------
www.swz.com
THE SWISS HELVETIA FUND, INC.
EXECUTIVE OFFICES
The Swiss Helvetia Fund, Inc.
1270 Avenue of the Americas ANNUAL REPORT
Suite 400 FOR THE YEAR ENDED
New York, NY 10020 DECEMBER 31, 2003
1-888-SWISS-00
(212) 332-2760
http://www.swz.com
ITEM 2. CODE OF ETHICS
As of the end of the period, December 31, 2003, the Swiss Helvetia Fund, Inc.
has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies
to its President and Treasurer. 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 has determined that Samuel B. Witt, III, Stephen K. West
and Didier Pineau-Valencienne are "audit committee financial experts" and that
each such member is "independent" for purposes of this Item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES - SWISS HELVETIA FUND
(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 $35,000 in 2002 and $34,500 in 2003.
(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") that are reasonably related to the
performance of the audit of the Registrant's financial statements, are not
reported under paragraph (a) of this Item 4 and 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 $1,000 in 2002 and $0 in 2003.
These services consisted of review or preparation of U.S. federal, state, local
and excise tax returns.
(d) The aggregate 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, were $0 in 2002
and $17,600 in 2003. These services related to work performed for internal
control consulting services.
(e) (1) The Registrant's Audit Committee pre-approves the principal accountant's
engagements for audit and non-audit services to the Registrant and non-audit
services to the investment adviser on a case-by-case basis as required.
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 fees billed by the principal accountant for services
rendered to the Registrant for the Reporting Periods were $1,000 in 2002 and
$17,600 in 2003. 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 has considered whether the provision of any
non-audit services rendered to the investment adviser which were not
pre-approved (not requiring pre-approval) is compatible with maintaining the
principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable.
ITEM 6. [RESERVED]
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:
o 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.
o 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.
o 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 Fund's Audit
Committee.
o 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:
o support management in most elections for directors, unless the board
gives evidence of acting contrary to the best economic interests of
shareholders;
o 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
o 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. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) The registrant's President and Treasurer have concluded that the
registrant's disclosure controls and procedures (as defined in rule 30a-3(c)
under the Act) are effective in design and operation and are sufficient to form
the basis of the certifications required by Rule 30a-(2) under the Act, based on
their evaluation of these disclosure controls and procedures within 90 days of
the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act), or the internal control
over financial reporting of its service providers during the last fiscal half
year (the registrant's second half year in the case of an annual report) that
have materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) (1) A copy of the Code of Ethics (Exhibit filed herewith).
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(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 SWISS HELVETIA FUND, INC.
BY /S/ RUDOLF S. MILLISITS
______________________________
RUDOLF S. MILLISITS, TREASURER
DATE February 27, 2004
_________________________
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, PRESIDENT
DATE February 23, 2004
_________________________
BY /S/ RUDOLF S. MIILISITS
_______________________________
RUDOLF S. MILLISITS, TREASURER
DATE February 27, 2004
_________________________