THE SWISS
A SWISS -----------
INVESTMENTS HELVETIA
FUND -----------
FUND, INC.
-----------
www.swz.com
THE SWISS HELVETIA FUND, INC.
EXECUTIVE OFFICES
The Swiss Helvetia Fund, Inc.
1270 Avenue of the Americas
Suite 400
New York, NY 10020 ANNUAL REPORT
1-888-SWISS-00 FOR THE YEAR ENDED
(212) 332-2760 DECEMBER 31, 2001
http://www.swz.com
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Directors and Officers
Paul Hottinguer
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
Eric R. Gabus
VICE CHAIRMAN (NON OFFICER)
Alexandre de Takacsy
DIRECTOR
Claude Frey
DIRECTOR
Baron Hottinger
DIRECTOR
Claude Mosseri-Marlio
DIRECTOR
Didier Pineau-Valencienne*
DIRECTOR
Stephen K. West, Esq.*
DIRECTOR
Samuel B. Witt III, Esq.**
DIRECTOR
Rodolphe E. Hottinger
PRESIDENT AND
CHIEF OPERATING OFFICER
Rudolf Millisits
SENIOR VICE PRESIDENT
Philippe Comby
VICE PRESIDENT
Sharon Kanovsky
VICE PRESIDENT
Edward J. Veilleux
VICE PRESIDENT AND TREASURER
Paul R. Brenner, Esq.
SECRETARY
--------------------------------------------------------------------------------
* AUDIT COMMITTEE MEMBER
** AUDIT COMMITTEE CHAIRMAN
INVESTMENT ADVISOR
Hottinger Capital Corp.
1270 Avenue of the Americas
Suite 400
New York, New York 10020
(212) 332-7930
ADMINISTRATOR
Investment Company Capital Corp.
CUSTODIAN
Swiss American Securities Inc.
TRANSFER AGENT
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
(800) 331-1710
LEGAL COUNSEL
Paul R. Brenner, Esq. and
Salans Hertzfeld Heilbronn
Christy & Viener
INDEPENDENT AUDITORS
Deloitte & Touche LLP
The Investment Advisor
The Fund is managed by Hottinger Capital Corp., which is 100% owned by 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, Geneva, 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.
Net Asset Value is calculated daily by 6:00 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
THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders
REVIEW OF MACRO-ECONOMY AND FINANCIAL MARKET CONDITIONS
The strong reaction by the U.S. Federal Reserve and other Central Banks to
both the September 11 events and to the further softening in the economy
prevented a deflationary spiral in prices and sparked a swift rebound in stock
markets during the last quarter of 2001. Historically, the very low interest
rates around the world cause investors to reevaluate equities upward, factoring
in "normalized earnings" such as those experienced during the last expanding
economic cycle. This resulted in an increase in the price multiples investors
were willing to pay for stocks and lower discount rates increasing the "present
value" of future earnings.
Investors also started to shift their focus to corporate assets rather than
earnings stream. They believed that companies with quality assets (which had
become less expensive to carry due to lower interest rates) would generate
strong acceleration in cash flow when the economy eventually rebounded. This
shift also assumed that the upturn would occur relatively soon and that cost
cutting would position firms to achieve a level of profitability in the next up
cycle that would rival or exceed the profit levels achieved in the last up
cycle. If these assumptions turn out to be too optimistic, markets will be
vulnerable to earnings disappointments or could be hit by a rebound in
short-term interest rates.
The Swiss market participated in the strong rebound experienced by most
stock exchanges around the world during the last quarter, ending the year up
nearly 25% from its September lows. The very sudden upswing was due to a strong
recovery in the financial services sector (banks and insurance) of the Swiss
Performance Index. This sector had suffered massively from the impact of the
September 11th attack. However, the market quickly started to react to the
positive impact of the liquidity put into the market by the different central
banks and, in particular, its benefits for financial and economically sensitive
stocks. In addition, there was a huge loss of capital linked to September 11th,
which has provoked a massive reduction in capacity putting the insurance
industry in a position to demand much higher premiums for new contracts. This
new positive cycle for premiums is widely seen to be long lasting.
Currency changes had a slightly negative impact for U.S. dollar based
investors. Despite a brief surge after the September 11th attack, the Swiss
franc could not benefit from its status as a safe haven. The U.S. Federal
Reserve Board's leadership in reinflating the economy convinced investors that
growth in the U.S. economy would exceed growth in the European economies.
2
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Letter to Stockholders (continued)
=========================================================
GLOBAL EQUITY INDEX PERFORMANCES (12/31/00 TO 12/31/01)
=========================================================
LOCAL U.S.$
INDEX CURRENCY TERMS
=========================================================
DOW JONES INDUSTRIALS--U.S. (5.44)% (5.44)%
---------------------------------------------------------
S&P 500--U.S. (13.04)% (13.04)%
---------------------------------------------------------
NASDAQ COMPOSITE--U.S. (21.05)% (21.05)%
---------------------------------------------------------
FTSE 100--LONDON (16.15)% (18.37)%
---------------------------------------------------------
CAC 40--FRANCE (21.97)% (26.60)%
---------------------------------------------------------
DAX INDEX--GERMANY (19.79)% (24.56)%
---------------------------------------------------------
IBEX--SPAIN (7.82)% (13.29)%
---------------------------------------------------------
MIB30--ITALY (26.20)% (30.59)%
---------------------------------------------------------
AEX INDEX--AMSTERDAM (20.52)% (25.24)%
---------------------------------------------------------
NIKKEI 225 INDEX--JAPAN (23.52)% (33.23)%
---------------------------------------------------------
SPI--SWITZERLAND (22.03)% (24.84)%
---------------------------------------------------------
SOURCES: BLOOMBERG, SWX, DOW JONES
CURRENCY EXCHANGE RATES--
NORMALIZED 2001
[GRAPHIC OMITTED]
EDGAR Representation of Data Points Used in Printed Graphic as Follows:
EU/$ CHF/$
12/29/2000 1 1
1/01/2001 1.0004 0.9996
1/02/2001 0.9905 0.9921
1/03/2001 1.0158 1.0127
1/04/2001 0.9928 0.9953
1/05/2001 0.9851 0.9919
1/08/2001 0.9958 0.9992
1/09/2001 0.9993 1.002
1/10/2001 1.0061 1.0114
1/11/2001 0.9903 1.0012
1/12/2001 0.991 1.0048
1/15/2001 1.0007 1.015
1/16/2001 1 1.0139
1/17/2001 1.0074 1.0197
1/18/2001 0.9997 1.0056
1/19/2001 1.0091 1.0168
1/22/2001 1.0043 1.0127
1/23/2001 1.0074 1.0161
1/24/2001 1.0207 1.0284
1/25/2001 1.0198 1.0253
1/26/2001 1.0198 1.0248
1/29/2001 1.0278 1.0287
1/30/2001 1.0172 1.022
1/31/2001 1.0065 1.0151
2/01/2001 1.0042 1.0138
2/02/2001 1.0067 1.0208
2/05/2001 1.0056 1.0178
2/06/2001 1.0126 1.0266
2/07/2001 1.0153 1.0273
2/08/2001 1.0275 1.0372
2/09/2001 1.02 1.031
2/12/2001 1.0113 1.0264
2/13/2001 1.0238 1.036
2/14/2001 1.0269 1.0371
2/15/2001 1.0413 1.0501
2/16/2001 1.0303 1.0409
2/19/2001 1.0231 1.0355
2/20/2001 1.0343 1.045
2/21/2001 1.0358 1.0469
2/22/2001 1.043 1.0511
2/23/2001 1.0273 1.0392
2/26/2001 1.0348 1.0475
2/27/2001 1.0273 1.0418
2/28/2001 1.0207 1.0354
3/01/2001 1.0132 1.0247
3/02/2001 1.0074 1.0213
3/05/2001 1.0152 1.0258
3/06/2001 1.0096 1.0237
3/07/2001 1.0142 1.0285
3/08/2001 1.0104 1.0246
3/09/2001 1.0106 1.0257
3/12/2001 1.0146 1.0284
3/13/2001 1.0301 1.0442
3/14/2001 1.0343 1.048
3/15/2001 1.0505 1.0639
3/16/2001 1.05 1.061
3/19/2001 1.0476 1.0587
3/20/2001 1.0366 1.0479
3/21/2001 1.0515 1.0615
3/22/2001 1.0602 1.0693
3/23/2001 1.0593 1.0681
3/26/2001 1.0515 1.0639
3/27/2001 1.0547 1.066
3/28/2001 1.0633 1.0718
3/29/2001 1.0687 1.0723
3/30/2001 1.0753 1.0818
4/02/2001 1.0722 1.0772
4/03/2001 1.0503 1.0564
4/04/2001 1.0462 1.0525
4/05/2001 1.0512 1.0577
4/06/2001 1.0426 1.05
4/09/2001 1.0513 1.0573
4/10/2001 1.0606 1.0656
4/11/2001 1.0617 1.061
4/12/2001 1.0561 1.0596
4/13/2001 1.0614 1.0634
4/16/2001 1.0603 1.0638
4/17/2001 1.067 1.0726
4/18/2001 1.067 1.0757
4/19/2001 1.0504 1.0569
4/20/2001 1.0449 1.0521
4/23/2001 1.0519 1.0592
4/24/2001 1.0542 1.0636
4/25/2001 1.0504 1.0595
4/26/2001 1.0435 1.057
4/27/2001 1.0571 1.0703
4/30/2001 1.0603 1.0756
5/01/2001 1.056 1.0715
5/02/2001 1.0546 1.0715
5/03/2001 1.0593 1.0757
5/04/2001 1.0562 1.0731
5/07/2001 1.0589 1.0751
5/08/2001 1.0652 1.0813
5/09/2001 1.0636 1.0802
5/10/2001 1.0696 1.0815
5/11/2001 1.077 1.087
5/14/2001 1.0785 1.0872
5/15/2001 1.0731 1.0826
5/16/2001 1.0676 1.0768
5/17/2001 1.0678 1.0795
5/18/2001 1.0696 1.0813
5/21/2001 1.0752 1.085
5/22/2001 1.0893 1.0971
5/23/2001 1.1003 1.1049
5/24/2001 1.1005 1.1035
5/25/2001 1.0948 1.1012
5/28/2001 1.0958 1.1031
5/29/2001 1.1019 1.1053
5/30/2001 1.1003 1.1039
5/31/2001 1.1152 1.1159
6/01/2001 1.1123 1.1142
6/04/2001 1.1147 1.1142
6/05/2001 1.1039 1.1027
6/06/2001 1.1119 1.1135
6/07/2001 1.1079 1.1117
6/08/2001 1.1084 1.1129
6/11/2001 1.1191 1.1205
6/12/2001 1.1045 1.11
6/13/2001 1.1022 1.1092
6/14/2001 1.0931 1.0987
6/15/2001 1.0949 1.1019
6/18/2001 1.0951 1.1037
6/19/2001 1.1039 1.1108
6/20/2001 1.103 1.1073
6/21/2001 1.1031 1.1034
6/22/2001 1.0992 1.1004
6/25/2001 1.0973 1.0979
6/26/2001 1.0917 1.0949
6/27/2001 1.0965 1.0962
6/28/2001 1.1167 1.1174
6/29/2001 1.1104 1.1123
7/02/2001 1.1119 1.1142
7/03/2001 1.1112 1.1142
7/04/2001 1.1139 1.1158
7/05/2001 1.1271 1.1285
7/06/2001 1.1122 1.1128
7/09/2001 1.1091 1.114
7/10/2001 1.1026 1.1042
7/11/2001 1.0977 1.097
7/12/2001 1.1044 1.0992
7/13/2001 1.103 1.0982
7/16/2001 1.1062 1.0999
7/17/2001 1.0968 1.0881
7/18/2001 1.0792 1.0687
7/19/2001 1.0826 1.0722
7/20/2001 1.0822 1.0716
7/23/2001 1.0848 1.0759
7/24/2001 1.0787 1.0696
7/25/2001 1.0697 1.0635
7/26/2001 1.0741 1.0675
7/27/2001 1.0744 1.0677
7/30/2001 1.0784 1.072
7/31/2001 1.0756 1.0716
8/01/2001 1.07 1.0631
8/02/2001 1.0669 1.0608
8/03/2001 1.0659 1.0595
8/06/2001 1.0697 1.0615
8/07/2001 1.0741 1.066
8/08/2001 1.0708 1.0607
8/09/2001 1.0565 1.0484
8/10/2001 1.0552 1.0516
8/13/2001 1.0515 1.0508
8/14/2001 1.0437 1.0418
8/15/2001 1.0314 1.0314
8/16/2001 1.0342 1.0348
8/17/2001 1.0267 1.0282
8/20/2001 1.0309 1.0306
8/21/2001 1.0267 1.0266
8/22/2001 1.0309 1.0325
8/23/2001 1.0302 1.0312
8/24/2001 1.0312 1.0333
8/27/2001 1.0342 1.0348
8/28/2001 1.0326 1.032
8/29/2001 1.0372 1.0362
8/30/2001 1.029 1.0268
8/31/2001 1.0333 1.0315
9/03/2001 1.0388 1.037
9/04/2001 1.0605 1.0567
9/05/2001 1.0634 1.0589
9/06/2001 1.0525 1.0477
9/07/2001 1.0388 1.0385
9/10/2001 1.0498 1.0481
9/11/2001 1.0324 1.0195
9/12/2001 1.0398 1.0303
9/13/2001 1.0348 1.0228
9/14/2001 1.0239 1.0068
9/17/2001 1.0195 0.9958
9/18/2001 1.0168 0.9914
9/19/2001 1.0173 0.9897
9/20/2001 1.0162 0.9841
9/21/2001 1.0304 0.9801
9/24/2001 1.0279 0.9914
9/25/2001 1.0216 0.9855
9/26/2001 1.0212 0.9927
9/27/2001 1.0266 1.0009
9/28/2001 1.0343 1.0058
10/01/2001 1.0275 1.0032
10/02/2001 1.0259 1.0051
10/03/2001 1.0308 1.0071
10/04/2001 1.0271 1.0062
10/05/2001 1.0266 1.0032
10/08/2001 1.0241 0.9981
10/09/2001 1.0323 1.0087
10/10/2001 1.0348 1.0099
10/11/2001 1.0448 1.0209
10/12/2001 1.0342 1.0091
10/15/2001 1.0368 1.0093
10/16/2001 1.0378 1.0145
10/17/2001 1.0433 1.0171
10/18/2001 1.0438 1.0164
10/19/2001 1.0484 1.0195
10/22/2001 1.0568 1.0295
10/23/2001 1.0586 1.0303
10/24/2001 1.0542 1.0279
10/25/2001 1.0562 1.0261
10/26/2001 1.0557 1.0248
10/29/2001 1.0412 1.0104
10/30/2001 1.0421 1.0083
10/31/2001 1.0469 1.014
11/01/2001 1.0445 1.0123
11/02/2001 1.0443 1.0115
11/05/2001 1.0501 1.0179
11/06/2001 1.0537 1.0215
11/07/2001 1.0503 1.0155
11/08/2001 1.0564 1.0184
11/09/2001 1.0546 1.0172
11/12/2001 1.0549 1.0169
11/13/2001 1.07 1.0367
11/14/2001 1.0685 1.0333
11/15/2001 1.0692 1.0312
11/16/2001 1.066 1.0291
11/19/2001 1.0724 1.0301
11/20/2001 1.0673 1.0235
11/21/2001 1.073 1.0273
11/22/2001 1.0738 1.031
11/23/2001 1.0737 1.0342
11/26/2001 1.0709 1.0327
11/27/2001 1.0671 1.0286
11/28/2001 1.062 1.0219
11/29/2001 1.0622 1.0275
11/30/2001 1.0517 1.0189
12/03/2001 1.0579 1.0274
12/04/2001 1.0585 1.0261
12/05/2001 1.0612 1.0299
12/06/2001 1.0529 1.0225
12/07/2001 1.059 1.029
12/10/2001 1.0584 1.0324
12/11/2001 1.0562 1.0264
12/12/2001 1.0492 1.0195
12/13/2001 1.0549 1.0249
12/14/2001 1.0429 1.0112
12/17/2001 1.045 1.0135
12/18/2001 1.0429 1.013
12/19/2001 1.0471 1.0174
12/20/2001 1.0474 1.0125
12/21/2001 1.0602 1.0253
12/24/2001 1.0749 1.0512
12/25/2001 1.0728 1.0486
12/26/2001 1.0704 1.0471
12/27/2001 1.0677 1.0415
12/28/2001 1.0646 1.0382
12/31/2001 1.0598 1.0305
THE SWISS HELVETIA FUND PERFORMANCE:
Management had adopted a very cautious approach before September 11th and
had concentrated on the lowest risk available (companies with volatility in line
with or lower than the market rather than companies with high risk/return
profile). Even though the interest rate environment is very supportive for
equity prices, the economic situation suggests that there is still overcapacity
in the economy. Many companies have yet to downsize their operations to put them
more in line with the type of economic recovery we may have. Therefore, while
capital markets are easier to tap due to the reduction in risk premium for
corporate bonds over treasuries, it may be very difficult for players with weak
balance sheets to generate the cash flow needed to maintain their current level
of operations. More bankruptcies are expected in the maturing economies of the
world. Rating agencies are expected to be quicker and more proactive in
adjusting their "investment grades" in order to protect investors. This can be
expected to eliminate opportunities for weak companies to get financing.
Management's cautious stance in redeploying cash has somewhat limited
upside in the Fund's performance during the last quarter of 2001. However this
was partially offset by good stock selection. All in all, the Fund performed in
line with the Swiss Performance Index during the quarter and underperformed the
index by less than 1% for the year. As far as the entire year is concerned, the
Fund was penalized by its exposure to the mid and small capitalization sectors
of the Swiss market and, particularly, the lack of trading volume in the stocks
in these sectors. All through the year, Management reduced the breadth of its
exposure to the sector, concentrating on compa-
3
THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
nies with high earnings visibility and excellent balance sheets and companies
that were most able to expand growth opportunities, consolidate their
competitive position and quickly adapt their cost structure to current economic
conditions. Management is confident that, at this stage in the market,
performance will be driven by stock picking, as the diminishing dynamic of lower
interest rates will cause investors to be much more selective. Concentration on
stock selection and valuation should also reduce the risk of being penalized by
wrong market timing.
========================================================
SWISS EQUITY INDEX PERFORMANCES (12/31/00 TO 12/31/01)
========================================================
LOCAL U.S.$
INDEX CURRENCY TERMS
========================================================
SPI INDEX (22.03)% (23.85)%
--------------------------------------------------------
SWISS HELVETIA NAV (22.91)% (24.94)%
--------------------------------------------------------
SWISS HELVETIA MARKET PRICE (20.25)% (22.10)%
--------------------------------------------------------
SWISS ECONOMY
The Swiss economy has been producing mixed signals. While still unclear,
these signals could mark the end of the recent decline, or perhaps the beginning
of the end of this process.
On the negative side, the index of leading economic indicators published by
the Swiss FederalInstitute of Technology (ETH) fell to minus 1.28 in November,
the lowest level since August 1996. The Institute said that the index signaled a
growth slowdown until mid-2002. Moreover, unemployment rose to 2.4% in December,
from 1.7% in September. Unemployment is expected to increase over the next few
months, potentially reaching 3% by UBS estimates. This expectation is reinforced
by indications that finished goods inventories rose again in November according
to an ETH monthly business survey.
In contrast, the business confidence indicator rebounded slightly in
October and November, as did exports. Moreover, the Purchasing Managers' Index
(PMI) showed new strength in December. At 43.8, the PMI index is higher than it
has been in six months, though still below the critical 50-point threshold. More
recent PMI sub-index data suggests businesses whittled down some of their
inventory buildup in December. In addition, retail sales increased for six
months straight through November.
Inflation remains contained, with expectations for 2002 hovering near 1.2%,
allowing the Central Bank some flexibility in monetary policy. Fourth quarter
inflation was even lower, largely due to a decrease in oil prices.
Export volume stabilized in the fourth quarter after a precipitous drop in
the third quarter. Imports were down 13.3% year-over-year in November, shifting
the trade balance substantially. It is unclear at this point how the fourth
quarter import and export figures were impacted by the events of September 11th,
and what the long term results will be.
4
THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
The relative strength of the Swiss franc certainly was a major factor in
fourth quarter trade patterns. The Swiss economy is dependent on exports and
quite sensitive to potential currency movements and to potential regulatory
impediments as foreign governments address security concerns regarding their
trade practices.
While these mixed signals alone do not suggest an imminent recovery, they
do represent a departure from the previously steady stream of negative news
about the Swiss economy. Consensus expectations of real GDP growth remain at
1.1% for 2002.
=====================================================
SPI SUBSECTOR RETURNS (12/31/00 TO 12/31/01)
=====================================================
Utilities 4.7%
-----------------------------------------------------
Food (5.1)
-----------------------------------------------------
Banks (7.5)
-----------------------------------------------------
Building (13.6)
-----------------------------------------------------
Miscellaneous Services (20.1)
-----------------------------------------------------
Chemicals (20.2)
-----------------------------------------------------
Services (21.1)
-----------------------------------------------------
Industrials (22.6)
-----------------------------------------------------
Machinery (36.7)
-----------------------------------------------------
Insurance (38.6)
-----------------------------------------------------
Retailers (44.6)
-----------------------------------------------------
Miscellaneous Industrials (46.1)
-----------------------------------------------------
Electronics (49.2)
-----------------------------------------------------
Transports (71.4)
-----------------------------------------------------
SPI RETURNS BY MARKET CAP
[GRAPHIC OMITTED]
EDGAR Representation of Data Points Used in Printed Graphic as Follows:
SPI SPI SPI SWISS
SMALL MIDDLE LARGE PERFORMANCE
COMPANIES - COMPANIES - COMPANIES - INDEX SPI -
26.1% 32.6% 19.9% 22%
December 1 1 1 1
January 1.014 1.003 0.987 0.99
February 0.982 0.949 0.945 0.947
March 0.919 0.886 0.879 0.881
April 0.918 0.89 0.902 0.901
May 0.928 0.891 0.927 0.922
June 0.913 0.844 0.898 0.891
July 0.865 0.775 0.853 0.842
August 0.83 0.73 0.821 0.808
September 0.715 0.577 0.753 0.727
October 0.708 0.61 0.76 0.736
November 0.727 0.656 0.778 0.758
December 0.739 0.674 0.801 0.78
STRATEGY
Overall, Management will continue to focus on quality stocks that have a
certain degree of sensitivity to the economic cycle and a reasonable valuation.
Particular attention will be paid to the market assumptions that are built into
stock prices, as investors have, to a certain extent, already anticipated
economic recovery. A large pool of liquidity is providing market support.
However, because operating margins could remain at current depressed levels for
quite a while, stock selection will concentrate mainly on companies that have
good track records at managing down cycles and generating strong cash flows. In
times of economic uncertainty cash flow tends to be critical mainly for
dividends and interest payments. In addition, the presence of strong cash flow
allows a guaranteed
5
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Letter to Stockholders (continued)
source of funding growth by internal resources. Strong cash positions on balance
sheets also open opportunities for companies with histories of promoting
shareholder value. On the one hand it gives management the possibility to gain
market share or improve product offerings by buying competitors. On the other
hand it can offer some support to the share price if management decides to buy
back shares, reduce the nominal value of shares or increase dividend payments.
In the current environment of low asset returns a high dividend, the fixed
element of total return, is especially important and tends to be a driver for
out performance.
===========================================================
THE SWISS HELVETIA FUND -- PORTFOLIO HOLDINGS PER INDUSTRY
AS OF DECEMBER 31, 2001
===========================================================
Pharmaceuticals 28.84%
-----------------------------------------------------------
Food & Luxury Goods 14.58
-----------------------------------------------------------
Banks 14.55
-----------------------------------------------------------
Electrical Engineering & Electronics 12.18
-----------------------------------------------------------
Insurance 5.06
-----------------------------------------------------------
Chemicals 4.42
-----------------------------------------------------------
Building Contractors and Materials 4.12
-----------------------------------------------------------
Telecommunications 3.35
-----------------------------------------------------------
Biotechnology 3.01
-----------------------------------------------------------
Miscellaneous Services 2.45
-----------------------------------------------------------
Machinery 1.21
-----------------------------------------------------------
Transportation 1.06
-----------------------------------------------------------
Miscellaneous Industries 0.80
-----------------------------------------------------------
Retailers 0.60
-----------------------------------------------------------
Miscellaneous Medical Services 0.51
-----------------------------------------------------------
Other Assets in Excess of Liabilities 3.26
-----------------------------------------------------------
Total 100.00%
===========================================================
CORPORATE ACTIVITY HIGHLIGHTS DURING THE 4TH QUARTER
NESTLE: The Federal Trade Commission approved Nestle's acquisition of
Ralston Purina for $10.3 billion financed primarily out of equity. Nestle will
retain its AAA rating. Combined with Nestle's $3.7 billion (sales) pet care
business, Ralston's $2.7 billion will make the combined company a leader in the
industry. Combined annual savings of $260 million are expected to be fully
achieved by the end of 2003.
ROCHE: Roche has announced a tender offer for the Japanese firm Chugai.
Once completed, the combined operations will lift Roche from the 32nd place in
the Japanese market to the top five, with a total Japanese sales force of 1,400.
The cash deal will be financed with 80% debt. Roche will acquire 50.1% of Chugai
before merging the two firms, which should be completed by the end of 2002
assuming approval by Japanese authorities. Roche will be among the first
European companies to break into this sector in Japan, which has a rapidly
growing elderly population. Recently, however, the annual growth rate of the
Japanese pharmaceutical industry has lagged most other nations, at a 3% pace.
SWISS RE: Before the events of September 11th, the reinsurance firm planned
to raise $2.6 billion in capital through an equity offering. However, the
transaction was not consummated before September 11th. After the event, Swiss Re
increased the scope of the
6
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Letter to Stockholders (continued)
offering, raising $3.3 billion from the sale of equities and convertible bonds
in a market more receptive to securities in the insurance industry. The capital
was raised primarily to finance the acquisition of Lincoln National Corp. for $2
billion in cash to bolster Swiss Re's life reinsurance business. In fiscal 2000,
Lincoln Re reported premiums of $1.4 billion and invested assets totaling $4.3
billion.
==================================================================
THE SWISS HELVETIA FUND--TEN LARGEST HOLDINGS (IN U.S. DOLLARS)
AS OF DECEMBER 31, 2001
==================================================================
MARKET % OF TOTAL
COST VALUE NET ASSETS
==================================================================
1. Novartis AG $ 21,636,239 $ 57,122,198 18.17%
------------------------------------------------------------------
2. Nestle Ltd. 12,427,540 44,154,013 14.04
------------------------------------------------------------------
3. Roche Holdings Ltd. 10,193,328 33,559,291 10.67
------------------------------------------------------------------
4. UBS Ltd. 8,162,640 21,964,931 6.98
------------------------------------------------------------------
5. Credit Suisse Group 8,942,685 19,751,989 6.28
------------------------------------------------------------------
6. Logitech International
SA 9,888,046 13,543,926 4.31
------------------------------------------------------------------
7. Holcim Ltd. 11,910,457 12,942,878 4.12
------------------------------------------------------------------
8. Swiss Reinsurance
Company 3,688,682 12,175,826 3.87
------------------------------------------------------------------
9. Lonza AG 10,477,549 11,571,764 3.68
------------------------------------------------------------------
10. Swisscom AG 10,137,064 10,532,658 3.35
------------------------------------------------------------------
Total $107,464,230 $237,319,474 75.47%
==================================================================
SWISS ECONOMIC OUTLOOK
Management considers a further Swiss interest rate cut likely in the first
quarter of 2002. Recent evidence indicates that the Swiss economy has followed
the cyclical patterns of the now weakening euro-zone. Switzerland's nearly flat
real GDP growth of 0.1% from the second to the third quarters was sustained only
by private consumption, as foreign trade and investment contracted for two
consecutive quarters. That, combined with expectations of low inflation,
suggests the Swiss Central Bank will likely lower rates again to avoid, or at
least moderate, a potential recession.
CURRENCY
Despite the aggressive U.S. Federal Reserve Board's ("Fed") decisions to
reduce interest rates, the U.S. economy may rebound very gradually or endure
some false starts. There is no pent-up demand and the savings rate of the U.S.
consumer, while being slowly restored, is still very low. As a result, private
spending will not help the economy a great deal. On the positive side, while the
Fed may have finished lowering rates, at least for the present, fiscal policy in
the U.S. will likely maintain the process of bringing the economy back to life.
This, in turn, could put a cap on the U.S. dollar, a situation that will be
greatly influenced at least in the short run by the pace of the recovery in
Europe and the speed with which the Japanese economy stabilizes.
Japan's Ministry of Finance has adopted a weak yen policy as a remedy for
economic growth, but this policy is facing harsh criticism from China and the
other Asian countries. In Europe, a weak currency is a comfortable way of
delaying structural reform that would improve competitiveness and drive growth
through increased exports
7
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Letter to Stockholders (continued)
to the U.S. On the other hand the United States will have to attract more and
more foreign capital to finance its current account deficit. It should be able
to do this as long as Japanese and European assets produce relatively low
returns and fail to adapt quickly to fluctuations in the economic cycles.
However, unless U.S. domestic demand is reduced, at some point the need to
recycle the U.S. dollars generated by the ballooning U.S. current account
deficit will open the door for a much weaker U.S. currency.
ECONOMY
European economies will most likely lag the U.S. economy. This would be
mainly due to constraints that limit the ability for fiscal policy to spur
activity but also because the European Central Bank has a less accommodative
policy stance than the U.S. Federal Reserve. The case for both European and
Swiss equities rests largely on relative valuation with prices at an average
multiple of around 17 times trailing earnings.
INTEREST RATES
Information technology and integrated global supply chain management have
made international borders more porous for financial and economic forces that
were previously geographically isolated. Capital is rapidly shifted to the most
efficient or lowest cost nations. Manufacturers increasingly produce on a
sufficient scale to serve the entire world market, and price competition
simultaneously occurs globally. With increasingly intense price competition in
both input and output markets, the net effect of globalization could reduce
corporate pricing power and dampen corporate earnings. Decreased pricing power
could help contain inflation, which could stabilize long-term interest rates and
lower the risk premium for debt.
EQUITY MARKETS
Companies with growing earnings and product innovation in this environment
could be rewarded with high valuations. While competition may grow fiercer and
more responsive, the blurring of international boundaries creates growth
opportunities that were previously unavailable. Industry leaders and upstart
innovators can more readily capture a share of the entire global market and are
not limited to domestic growth prospects. Moreover, with more tightly integrated
global markets for both production and consumption, national economic cycles
will be increasingly affected by international conditions. The result will
likely be more synchronized economic cycles among the world's major economies.
On the one hand, this makes geographical diversification a more difficult task
for portfolio managers. On the other hand, this potentially creates more
diversification opportunities inside a single geographic market, since
investment managers increasingly tend to do their asset allo-
8
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Letter to Stockholders (concluded)
cations by sectors as opposed to geographically. This last element is expected
to be particularly visible once the euro currency is introduced. Management
believes a fair number of Swiss companies have the requisite traits to succeed
in such an environment, being truly global and innovative. Swiss companies are
forced to expand internationally early in their history because they are limited
by a small domestic market. In addition, the high cost of labor and the
decentralization of production have stimulated a focus on research and
development in order to create higher value added goods and services.
After an extremely difficult and volatile year in 2001, the prospects for
2002 are better now that the systemic risk of global deflation seems to have
been avoided. Equity returns should revert to historical averages and
restructuring, cost cutting and acquisitions should be drivers for performance.
The downside risk is limited by continued low short term interest rates.
STOCK REPURCHASE PROGRAM
During the full year 2001, the Fund repurchased and retired 463,600 shares
of it's common stock at an average repurchase price of $13.39 at a weighted
average discount of 17.81%. These repurchases have enhanced stockholders value
by $1,327,945. During the same period, the discount rate was between 12.95% and
19.76% finishing the year at 16.29%.
FUND EXPENSES
We were disappointed to see the Fund's expense ratio rise to 1.39% during
2001. While this remains below the average of 1.56% for other U.S. closed-end
funds investing in European securities, it is considerably higher than the prior
four years when the Fund's ratio did not exceed 1.17%. The increase was
primarily attributable to two factors. First, the ratio is calculated by
dividing the Fund's expenses by its average net assets. While the Fund's assets
declined due to the adverse markets in 2001, its fixed expenses did not.
Secondly, the Fund experienced significant additional expenses this year as a
result of a stockholder's unsuccessful proxy contest for the election of
directors last May and the defense of an ongoing lawsuit against the Fund and
its directors and termination of the managment contract. We are hopeful that the
Fund will not have additional expenses in the upcoming year and that its
expenses will return to more normal levels in 2002.
Sincerely,
/S/ SIGNATURE
Paul Hottinguer
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
/S/ SIGNATURE
Rodolphe Hottinger
PRESIDENT AND CHIEF OPERATING OFFICER
December 31, 2001
9
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
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, 2001. 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 1940 Act.
------------------------------------------------------------------------------------------------------------------------------------
CLASS II NON-INTERESTED DIRECTORS
(NOMINEES FOR TERM EXPIRING IN 2005)
------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS HELD SHARES OF
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) BY DIRECTOR OR NOMINEE FOR COMMON STOCK
& AGE TIME SERVED DURING PAST FIVE YEARS DIRECTOR BENEFICIALLY
OWNED AT
DEC. 31, 2001 1
------------------------------------------------------------------------------------------------------------------------------------
Mr. Didier Director since Director since Honorary Chairman: Schneider Honorary Chairman: Schneider 2,000
Pineau- 1999; Member 1999. Term of Electric since 1999; Chairman of Electric since 1999;
Valencienne of the Audit office will the Board and CEO: Schneider SA Director: AXA Financial
c/o Schneider Committee and expire in 2002 (industrial conglomerate) from (insurance) since February
Electric, S.A. Discount Committee 1981 until February 1999; 1992, Equitable Companies
64 Rue de since 1999 and Chairman: AFEP from 1999 to 2001; Inc. (insurance) since
Miromesnil the Litigation Vice Chairman, Credit Suisse February 1992, Aventis, SA
75008 Paris Committee First Boston (Europe) Limited (Formerly Rhone-Poulenc SA)
France since 2001. since February 1, 1999; Chairman (chemicals) since January
of the Board and CEO: Ceca SA 1997, Compagnie Generale
Age 70 (specialty chemicals) (1968 to d'Industrie et de
1974); Managing Director, Participations (CGIP) since
Petrochemicals Division: 1997, Foundation de France
Rhone-Poulenc SA (chemicals) since 1998, LaGardere
(1974 to 1980); General Manager: (France) (holding company)
Banque Parisienne pour L'Industry since 1998.
(French Bank) (1958 to 1968);
Director: AON (France) since
2000; Fleury Michon (France)
since 2001; AFEP (France) since
1999; AXA Financial (insurance)
since February 1992, Equitable
Companies Inc. (insurance) since
February 1992, Bankers Trust New
York Corp. 1992 to March 1995,
Aventis, SA (Formerly
Rhone-Poulenc SA) (chemicals)
since January 1997, Sema Group
PLC (Great Britain) (computers)
from March 1990 to June 2001,
Compagnie Generale d'Industrie et
de Participations (CGIP) since
1997, Foundation de France since
1998 to 2001, Banque Paribas from
May 1990 to 1998, AXA-SA
(insurance) from April 1990 to
January 1997; Member: Supervisory
Board of AXA-UAP (France)
(insurance) from 1998 to March
2001, LaGardere (France) (holding
company) since 1998; ADNRE
(France) since 2000; Member:
Advisory Board, Booz Allen &
Hamilton (USA) since 1997;
Whirlpool Corp. from 1992 to
1996; Member of Trustees: IASC
since 2000.
------------------------------------------------------------------------------------------------------------------------------------
10
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
------------------------------------------------------------------------------------------------------------------------------------
CLASS II NON-INTERESTED DIRECTORS
(NOMINEES FOR TERM EXPIRING IN 2005)
------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS HELD SHARES OF
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) BY DIRECTOR OR NOMINEE FOR COMMON STOCK
& AGE TIME SERVED DURING PAST FIVE YEARS DIRECTOR BENEFICIALLY
OWNED AT
DEC. 31, 2001 1
------------------------------------------------------------------------------------------------------------------------------------
Samuel B. Witt, Director since Director since Senior Vice President and General Member, Board of Visitors: 2,806
III, Esq. 1987; Chairman of 1987. Term of Counsel: Stateside Associates, Virginia Military Institute
Stateside the Audit office will Inc. since August 1993; Samuel B. since July 1994; Director:
Associates, Committee, Chairman expire Witt, III, Attorney-at-Law, since Stateside Associates, Inc.
Inc. of the Discount in 2002 August 1993; Partner: Womble since 1989 and Global Energy
2300 Clarendon Committee and Carlyle Sandridge & Rice from Management Company, Inc.
Blvd. Chairman of the June 1989 to August 1993; since 1991.
Suite 407 Litigation Assistant Secretary: Fortune
Arlington, Committee since Technologies, Inc. from 1990 to
Virginia 1993, 1999 and December 1993; Trustee: The
22201-3367 2001, respectively. Williamsburg Investment Trust
since 1989; Member, Board of
Age 66 Visitors: Virginia Military
Institute since July 1994;
President: Virginia Military
Institute Board of Visitors since
August 2001; Director and
Secretary: Stateside Associates,
Inc. since 1989 and Global Energy
Management Company, Inc. since
1991; Director: Decision Point
Marketing, Inc. from 1990 to
1996, U.S. Games from October
1994 to September 1996 and
Grossman's Inc. from December
1996 to April 1997; Vice
President and Special Counsel:
R.J.R. Nabisco, Inc. from June
1988 to June 1989; Vice President
and Associate General Counsel:
R.J.R. Nabisco, Inc. from
February 1988 to June 1988;
Associate General Counsel: R.J.R.
Nabisco, Inc. from November 1986
to June 1988; Vice-President,
General Counsel and Secretary:
R.J. Reynolds Tobacco Company
from August 1981 to November
1986.
------------------------------------------------------------------------------------------------------------------------------------
11
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
------------------------------------------------------------------------------------------------------------------------------------
CLASS III NON-INTERESTED DIRECTORS
(TERM WILL EXPIRE IN 2003)
------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS HELD SHARES OF
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) BY DIRECTOR OR NOMINEE FOR COMMON STOCK
& AGE TIME SERVED DURING PAST FIVE YEARS DIRECTOR BENEFICIALLY
OWNED AT
DEC. 31, 2001 1
------------------------------------------------------------------------------------------------------------------------------------
Mr. Claude Director since Director since E.B.R.D.--European Bank for Director: Generali 6,952
Mosseri-Marlio 1993; Member of 1993. Term of Reconstruction and Development; Investments (France) since
6 bis rue du the Nominating office will Senior Advisor: TAM Program (Turn 1999.
Cloitre Committee expire in 2003. Around Management) since 1999;
Notre-Dame since 1993. Director: Generali Investments
75004 Paris (France) since 1999; Guest
France Lecturer: Harvard Business School
since 1995; Guest Professor:
Age 71 Yanok MBA Summer Program,
Lampang, Thailand in 2000;
Financial Consultant, portfolio
management since 1982; Managing
Director: Winthrop Laboratories
from 1979 to 1982; Managing
Director--Europe, Middle East,
Africa--Mallinckrodt, Inc. from
1975 to 1978.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
CLASS III NON-INTERESTED DIRECTORS
(TERM WILL EXPIRE IN 2003)
------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS HELD SHARES OF
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) BY DIRECTOR OR NOMINEE FOR COMMON STOCK
& AGE TIME SERVED DURING PAST FIVE YEARS DIRECTOR BENEFICIALLY
OWNED AT
DEC. 31, 2001 1
------------------------------------------------------------------------------------------------------------------------------------
Stephen K. Director since Director since Partner: Sullivan & Cromwell from Director: Pioneer Funds (52 19,078
West, Esq. 1995; Member of the 1995. Term of 1964 through 1996; Of Counsel: portfolios) since 1993;
Sullivan & Audit Committee, office will Sullivan & Cromwell since 1997. AMVESCAP PLC (Investment
Cromwell Discount Committee expire in 2003 Director, First ING Insurance Manager) since 1996;
125 Broad and the Litigation Company of New York from 1983 to Dresdner RCM Global
Street Committee since 2001; Winthrop Focus Funds from Strategic Income Fund, Inc
New York, 1996, 1999 and 1988 to 1997; ING America since 1997.
New York 10004 2001, respectively. Holdings, Inc. (insurance &
broker dealer holding company)
Age 73 from 1988 to 1998.
------------------------------------------------------------------------------------------------------------------------------------
12
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
------------------------------------------------------------------------------------------------------------------------------------
CLASS I NON-INTERESTED DIRECTORS
(TERM WILL EXPIRE IN 2004)
------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS HELD SHARES OF
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) BY DIRECTOR OR NOMINEE FOR COMMON STOCK
& AGE TIME SERVED DURING PAST FIVE YEARS DIRECTOR BENEFICIALLY
OWNED AT
DEC. 31, 2001 1
------------------------------------------------------------------------------------------------------------------------------------
Mr. Claude W. Director since Director since President of the Swiss Parliament Member of the Board: Infra 1,756
Frey 1995; Member of 1995. Term of (1994-1995); Swiss Police Academy 2000 (Marin) since 1996;
Clos 108 Nominating office will (Neuchatel) since 1996; and Berun Frais SA (Maria) since
2012 Auvernier Committee since expire in 2004. Steering Committee of 2002; SCCM SA
Switzerland 1996. InterNutrition (Zurich) since (Crans-Montana) since 2001;
2000; Member of the Swiss President of the Steering
Age 58 Parliament since 1979; Committee of InterNutrition
Parliamentary Assembly of the (Zurich) since 2000.
Council of Europe (Strasbourg)
since 1996 and Executive Board of
the "North-South Centre" (Lisbon)
since 1999; President of the
National Committee for Foreign
Affairs since 2001; Vice
President of the National
Committee for Foreign Affairs
(1999-2001); Chairman of the
Board: Federation of Swiss Food
Industries (Berne) (1991-2001);
Association of Swiss Chocolate
Manufacturers (Berne)
(1991-2000); Swiss Association of
Biscuits and Sugar Confectioners
Industries (Berne) (1991-2000);
Director: Federation of Swiss
Employers' Association (Zurich)
(1995-1996); Vice Chairman of the
Board: Federation of Swiss
Employers' Association (Zurich)
(1997-2001); Member of the Board:
Infra 2000 (Marin) since 1996;
Chairman of the Board: Berun
Frais SA (Maria) since 2002;
Member of the Board.
------------------------------------------------------------------------------------------------------------------------------------
13
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
------------------------------------------------------------------------------------------------------------------------------------
CLASS I NON-INTERESTED DIRECTORS
(TERM WILL EXPIRE IN 2004)
------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS HELD SHARES OF
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) BY DIRECTOR OR NOMINEE FOR COMMON STOCK
& AGE TIME SERVED DURING PAST FIVE YEARS DIRECTOR BENEFICIALLY
OWNED AT
DEC. 31, 2001 1
------------------------------------------------------------------------------------------------------------------------------------
Mr. Eric R. Director since Director since Chairman of the Board: Societe Chairman of the Board: 1,000
Gabus 1987; Vice 1987. Term of Neuchateloise de Presse since Societe Neuchateloise de
St. Dominique Chairman office will 1999, L'Express Communication Presse since 1999, L'Express
1815 Clarens (Non-Officer) since expire in 2004. (Neuchatel) since 1983, Vice Communication (Neuchatel)
Switzerland 1994; Chairman Chairman of the Board: Fondation since 1983, Vice Chairman of
of the Nominating Denis de Rougemont pour l'Europe, the Board: Fondation Denis
Age 74 Committee since Geneva since 1980; Board Member: de Rougemont pour l'Europe,
1987 and Member of Pro C.I.C.R (International Red Geneva since 1980; Board
the Discount Cross) Neuchatel since 1986; Member: Pro C.I.C.R
Committee and Deputy Chairman of the Board: (International Red Cross)
Litigation Credit Suisse First Boston from Neuchatel since 1986.
Committee since 1982 to 1986; General Manager:
2000 and 2001, Nestle S.A., Vevey from 1969 to
respectively. 1982; Manager: Banque Paribas
from 1955 to 1969.
------------------------------------------------------------------------------------------------------------------------------------
14
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
------------------------------------------------------------------------------------------------------------------------------------
CLASS II INTERESTED DIRECTORS
(NOMINEES FOR TERM EXPIRING IN 2005)
------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS HELD SHARES OF
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) BY DIRECTOR OR NOMINEE FOR COMMON STOCK
& AGE TIME SERVED DURING PAST FIVE YEARS DIRECTOR BENEFICIALLY
OWNED AT
DEC. 31, 2001 1
------------------------------------------------------------------------------------------------------------------------------------
The Baron Director 2 since Director since General Partner: Hottinger et Cie Director: Financiere 263,299 3
Hottinger 1987, Chairman of 1987. Term of (Zurich); President: Conseil de Hottinguer (holding
Hottinger et Cie the Board of office will Surveillance Credit company); Member: Conseil
Dreikonigstrasse Directors and Chief expire in 2005. Suisse/Hottinguer (Paris), de Surveillance AXA;
55 Executive Officer Sofibus (Paris) (real estate); Administrator:
8027 Zurich from 1987 to 1989. Vice President and Director: Investissement Provence
Switzerland Financiere Hottinguer (holding S.A. (holding company),
company); Member: Conseil de AXA, AXA Assurances IARD,
Age 67 Surveillance AXA; Administrator: AXA Courtage IARD, AXA
Investissement Provence S.A. Courtage VIE, AXA
(holding company), AXA, AXA Assurances Vie, AXA France
Assurances IARD, AXA Courtage Assurances, Alpha
IARD, AXA Courtage VIE, AXA Assurances Vie, Finaxa,
Assurances Vie, AXA France Hottinger International
Assurances, Alpha Assurances Vie, Fund--"U.S. Growth Fund"
Finaxa, Hottinger International (publicly-held Luxembourg
Fund--"U.S. Growth Fund" mutual fund), ECU Invest
(publicly-held Luxembourg mutual (publicly-held Luxembourg
fund), ECU Invest (publicly-held mutual fund), Hottinguer
Luxembourg mutual fund), International Asset
Hottinguer International Asset Management (Luxembourg),
Management (Luxembourg), Hottinger US (USA),
Hottinger US (USA), Hottinguer Managing Director: Intercom
Gestion (Luxembourg) (investment (holding company), Sofides
advisor) until December 1998; (real estate); Member of
Director: Donaldson, Lufkin & the Board: Conseil de
Jenrette, Inc. (NY) until 2000; Surveillance of EMBA N.V.
Auditor: Didot Bottin, Financiere (holding company); Chairman
Provence de Participations (FPP) of the Board and Director:
(venture capital); Managing Hottinger Capital Corp.
Director: Intercom (holding
company), Sofides (real estate);
Permanent Representative: AXA to
AXA Millesime; Vice President:
Gaspee (real estate); Member of
the Board: Conseil de
Surveillance of EMBA N.V.
(holding company); Chairman of
the Board and Director: Hottinger
Capital Corp.
------------------------------------------------------------------------------------------------------------------------------------
15
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (continued)
------------------------------------------------------------------------------------------------------------------------------------
CLASS III INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2003)
------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS HELD SHARES OF
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) BY DIRECTOR OR NOMINEE FOR COMMON STOCK
& AGE TIME SERVED DURING PAST FIVE YEARS DIRECTOR BENEFICIALLY
OWNED AT
DEC. 31, 2001 1
------------------------------------------------------------------------------------------------------------------------------------
Mr. Paul Director 2 since Director since General Partner: Hottinger et Cie Director: Drouot Securite 263,299 3
Hottinguer 1987; Chairman of 1987. Term of (Zurich); President: Gaspee (real since 1986, Member: Conseil
Hottinger et Cie the Board of office will estate) since 1992, Financiere de Surveillance Credit
Dreikonigstrasse Directors and Chief expire in 2003 Hottinguer (holding company) Suisse Hottinguer since
55 Executive Officer since 1990, Financiere Provence 1997; Societe pour le
8027 Zurich since 1989. Participations (venture capital Financement de Bureaux et
Switzerland firm) since 1990, Drouot Securite d'Usines Sofibus (real
since 1986, Hottinguer Gestion estate) since 1982;
Age 59 (Luxembourg) (investment advisor) Managing Director: Intercom
from 1991 to 1998, Hottinger (holding company) since
International Fund--"U.S. Growth 1984; Administrator:
Fund" (publicly held Luxembourg Investissement Hottinguer
mutual fund) until 1997; Member: S.A. since 1989, Finaxa
Conseil de Surveillance Credit (Compagnie Financiere
Suisse Hottinguer since 1997; Drouot) since 1982, Member
Societe pour le Financement de of the Board of Directors:
Bureaux et d'Usines Sofibus (real Norwich Union (insurance),
estate) since 1982; Managing Conseil de Surveillance of
Director: Intercom (holding Emba NV (investment
company) since 1984; company); Vice Chairman of
Administrator: Investissement the Board and Director:
Hottinguer S.A. since 1989, Hottinger Capital Corp.
Finaxa (Compagnie Financiere
Drouot) since 1982, Alpha
Assurances-Vie (insurance) from
1992 to 1998; 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; Member of the
Board of Directors: Norwich Union
(insurance), Conseil de
Surveillance of Emba NV
(investment company); Vice
Chairman of the Board, Director
and Member of Investment
Committee: Hottinger Capital
Corp.
------------------------------------------------------------------------------------------------------------------------------------
16
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Certain Information Concerning Directors (concluded)
------------------------------------------------------------------------------------------------------------------------------------
CLASS I INTERESTED DIRECTOR
(TERM WILL EXPIRE IN 2004)
------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OTHER DIRECTORSHIPS HELD SHARES OF
ADDRESS WITH FUND AND LENGTH OF OCCUPATION(S) BY DIRECTOR OR NOMINEE FOR COMMON STOCK
& AGE TIME SERVED DURING PAST FIVE YEARS DIRECTOR BENEFICIALLY
OWNED AT
DEC. 31, 2001 1
------------------------------------------------------------------------------------------------------------------------------------
Mr. Alexandre Director 2 from Director since Senior Advisor to the Hottinger Vice Chairman of the Board, 200
de Takacsy 1987 to February 8, 1987. Term of Group and President of Hottinger Hottinger Capital Corp.
Financiere 1994 and since office expires U.S., Inc. since April, 1986;
Hottinguer September 17, 1998. in 2004. Vice Chairman of the Board,
43, rue Taitbout President and Secretary,
75009 Paris Hottinger Capital Corp.; Retired
France Senior Executive; Royal Bank of
Canada.
Age 72
------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1 ALL DIRECTORS AS A GROUP (9 PERSONS) OWNED 297,091 SHARES WHICH CONSTITUTES
APPROXIMATELY 1.1% 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. PAUL HOTTINGUER AND THE BARON HOTTINGER ARE "INTERESTED PERSONS"
BECAUSE OF THEIR AFFILIATION WITH HOTTINGER ET CIE (ZURICH) AND HOTTINGER
U.S., INC., CONTROLLING PERSONS OF HOTTINGER CAPITAL CORP. ("HCC"), THE FUND'S
INVESTMENT ADVISOR; AND ALEXANDRE DE TAKACSY IS AN "INTERESTED PERSON" BECAUSE
OF HIS AFFILIATION WITH HCC.
3 HOTTINGER ET CIE (ZURICH), A PARTNERSHIP, OWNS 151,134 SHARES OF THE FUND,
HOTTINGER CAPITAL CORP., THE FUND'S INVESTMENT ADVISOR, OWNS 102,234 SHARES OF
THE FUND, HOTTINGER FINANZ AG OWNS 5,247 SHARES OF THE FUND AND HOTTINGER
TREUHAND AG OWNS 4,684 SHARES OF THE FUND. PAUL HOTTINGUER AND THE BARON
HOTTINGER ARE BROTHERS. PAUL HOTTINGUER AND THE BARON HOTTINGER ARE
CONTROLLING PARTNERS OF HOTTINGER ET CIE (ZURICH) AND CONTROLLING SHAREHOLDERS
AND DIRECTORS OF HOTTINGER CAPITAL CORP., HOTTINGER FINANZ AG AND HOTTINGER
TREUHAND AG AND THEREFORE SHARE VOTING AND INVESTMENT POWER OVER THE 263,299
SHARES OF THE FUND OWNED BY HOTTINGER ET CIE (ZURICH), HOTTINGER CAPITAL
CORP., HOTTINGER FINANZ AG AND HOTTINGER TREUHAND AG.
17
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Review of Operations
Trading activity for 2001 involved changes in the following positions:
NEW INVESTMENTS BY THE FUND
--------------------------------------------------------------------------------
Berna Biotech AG
Converium Holding AG
Daetwyler Holding Inc.
Holcim Ltd.
Kaba Holding AG
Kuehne & Nagel International Ltd.
Lonza AG
Straumann Holding AG
Swisscom AG
--------------------------------------------------------------------------------
ADDITIONS TO EXISTING INVESTMENTS
--------------------------------------------------------------------------------
Compagnie Financiere Richemont AG
Credit Suisse Group
Disetronic Holding Ltd.
Gurit-Heberlein AG
Huber & Suhner AG
Kudelski SA
Logitech International SA
Saia-Burgess Electronics Holding AG
Schindler Holding AG
Swiss Reinsurance Company
Tecan Group, Ltd.
Vontobel Holding AG
--------------------------------------------------------------------------------
SECURITIES DISPOSED OF
--------------------------------------------------------------------------------
ABB Ltd.
Actelion Ltd.
Ascom Holding AG
Bachem AG
Banque Cantonale Vaudoise
Charles Voegele Holding AG
Clariant Ltd.
Helvetia Patria Holding
Leica Geosystems AG
Micronas Semiconductor Holding AG
Mikron Holding AG
Oz Holding
Phoenix Mecano AG
SGS Societe Generale de Surveillance Holding SA
Sulzer AG
Swiss Life
Swisslog Holding AG
Unilabs SA
Zurich Allied
--------------------------------------------------------------------------------
REDUCTIONS IN EXISTING INVESTMENTS
--------------------------------------------------------------------------------
Adecco SA
Bank Sarasin & Co.
Compagnie Financiere Richemont AG
Credit Suisse Group
Gurit-Heberlein AG
Huber & Suhner AG
Julius Baer Holdings AG
Komax Holding AG
Kudelski SA
Logitech International SA
Nestle Ltd.
Novartis AG
Phonak Holding Ltd.
Roche Holdings Ltd.
Schaffner Holding Ltd.
Serono SA
Swiss Reinsurance Company
Tecan Group, Ltd.
The Swatch Group, Ltd.
Vontobel Holding AG
18
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments December 31, 2001
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- 96.74%
BANKS -- 14.55%
869 BANK SARASIN & CO.
REGISTERED SHARES $ 1,688,675 0.54%
Specializes in investment advisor
services and portfolio management
for private and institutional
customers in Europe. (Cost
$572,126)
463,000 CREDIT SUISSE GROUP 1,2
REGISTERED SHARES 19,751,989 6.28
A global operating financial group.
(Cost $8,942,685)
5,500 JULIUS BAER HOLDINGS AG
BEARER SHARES 1,855,869 0.59
Banking group specializing in asset
management, investment consulting
and securities trading. (Cost
$586,911)
435,000 UBS LTD. 1,2
REGISTERED SHARES 21,964,931 6.98
Global bank with three core
business units: UBS Switzerland,
UBS Asset Management and UBS
Warburg. (Cost $8,162,640)
19,000 VONTOBEL HOLDING AG
BEARER SHARES 492,287 0.16
Provides investment, banking and
consulting services to private and
institutional customers. (Cost
$682,252)
------------ ------
45,753,751 14.55
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
BIOTECHNOLOGY -- 3.01%
5,500 BERNA BIOTECH AG 1
REGISTERED SHARES $ 2,843,456 0.90%
Produces vaccines for influenza,
hepatitis, travel and general
immunization. (Cost $2,164,485)
7,600 SERONO SA
BEARER SHARES 6,635,575 2.11
Develops and markets biotechnology
products. (Cost $5,432,408)
------------ ------
9,479,031 3.01
BUILDING CONTRACTORS AND MATERIALS -- 4.12%
60,000 HOLCIM LTD. 2
REGISTERED SHARES 12,942,878 4.12
Produces and markets various
building materials, in addition to
providing consulting and
engineering services in all areas
of the cement manufacturing
process. (Cost $11,910,457)
------------ ------
12,942,878 4.12
CHEMICALS -- 4.42%
2,250 GURIT-HEBERLEIN AG
BEARER SHARES 1,776,031 0.56
European market leader for wind
screen bonding systems, ski based
and optically pure thermoplastic
sheeting for the auto industry.
(Cost $2,223,639)
19
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2001
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
CHEMICALS -- (CONTINUED)
17,700 LONZA AG 2
REGISTERED SHARES $ 11,571,764 3.68%
Produces chemicals, plastics, and
energy. (Cost $10,477,549)
2,523 SIKA FINANZ LTD.
BEARER SHARES 562,491 0.18
Leading producer of construction
chemicals. (Cost $614,614)
------------ ------
13,910,286 4.42
ELECTRICAL ENGINEERING & ELECTRONICS -- 12.18%
4,055 BELIMO AUTOMATION AG
REGISTERED SHARES 1,294,981 0.41
World market leader in damper and
volume control actuators for
ventilation and air conditioning
equipment. (Cost $1,259,329)
7,810 DISETRONIC HOLDING LTD.
REGISTERED SHARES 6,489,510 2.06
Develops, manufactures and markets
infusion (insulin pumps) and
injection systems. (Cost
$6,350,462)
16,749 KABA HOLDING AG
REGISTERED SHARES 4,137,798 1.32
Provides mechanical and electronic
security systems. (Cost $4,129,823)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
ELECTRICAL ENGINEERING & ELECTRONICS -- (CONTINUED)
44,000 KUDELSKI SA 1
BEARER SHARES $ 2,571,704 0.82%
Designs, produces and distributes
equipment under the `Nagra' brand
name for professional data display
in audio and video applications.
(Cost $2,772,596)
370,000 LOGITECH INTERNATIONAL SA 1,2
REGISTERED SHARES 13,543,926 4.31
Manufactures personal computer
input devices, as well as producing
trackballs, desktop publishing
programs and related software.
(Cost $9,888,046)
25,800 PHONAK HOLDING LTD. 1
REGISTERED SHARES 590,745 0.19
Designs and produces wireless
analog and digital hearing aids and
miniaturized voice communications
systems. (Cost $778,742)
5,400 SAIA-BURGESS ELECTRONICS HOLDING AG
REGISTERED SHARES 1,561,822 0.50
Develops and produces switches,
motors and programmable control
devices. The company's products are
mainly used in the automobile,
heating & air conditioning and
telecommunications industries.
(Cost $1,485,298)
5,263 SCHAFFNER HOLDING LTD.
REGISTERED SHARES 1,205,074 0.38
Develops, manufactures and markets
electrical components and test
equipment in the area of EMC
(Electro Magnetic Compatibility).
(Cost $1,469,991)
20
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2001
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
ELECTRICAL ENGINEERING & ELECTRONICS -- (CONTINUED)
89,076 TECAN GROUP, LTD.
REGISTERED SHARES $ 5,904,049 1.88%
Manufactures and distributes
components and complete solutions
for the automation of laboratory
processes. (Cost $4,876,777)
11,000 THE SWATCH GROUP, LTD. 1
BEARER SHARES 989,244 0.31
Manufactures watches, watch
components and microelectronics.
Produces machine tools for
scientific, medical and industrial
use. (Cost $673,362)
------------ ------
38,288,853 12.18
FOOD & LUXURY GOODS -- 14.58%
300 LINDT & SPRUNGLI AG
REGISTERED SHARES 1,699,205 0.54
Major manufacturer of premium Swiss
chocolates. (Cost $1,196,399)
207,000 NESTLE LTD. 2
REGISTERED SHARES 44,154,013 14.04
Largest food and beverage
processing company in the world.
(Cost $12,427,540)
------------ ------
45,853,218 14.58
INSURANCE -- 5.06%
30,000 BALOISE HOLDING AG
REGISTERED SHARES 2,765,727 0.88
Medium-sized insurer active in all
sectors of insurance. (Cost
$151,739)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
INSURANCE -- (CONTINUED)
20,000 CONVERIUM HOLDING AG 1
Provides life and non-life $ 972,523 0.31%
reinsurance worldwide. (Cost
$975,282)
121,000 SCHWEIZERISCHE RUCKVERSICHERUNGS-
GESELLSCHAFT (SWISS REINSURANCE COMPANY) 2
REGISTERED SHARES 12,175,826 3.87
Second largest reinsurance company
in the world. (Cost $3,688,682)
------------ ------
15,914,076 5.06
MACHINERY -- 1.21%
2,650 SCHINDLER HOLDING AG
REGISTERED SHARES 3,816,281 1.21
One of the world's largest elevator
companies and a leading Swiss
machinery enterprise. (Cost
$3,510,746)
------------ ------
3,816,281 1.21
MISCELLANEOUS INDUSTRIES -- 0.80%
750 DAETWYLER HOLDING INC.
BEARER SHARES 1,056,128 0.34
Manufactures cable, rubber and
plastic products, steel tubing,
pharmaceutical packaging and
industrial components. (Cost
$1,249,175)
12,465 HUBER & SUHNER AG
REGISTERED SHARES 833,704 0.27
Manufactures a wide range of
products, extending from cables for
energy and electrical transmission
to special products such as rubber.
(Cost $843,797)
21
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2001
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
MISCELLANEOUS INDUSTRIES -- (CONTINUED)
11,025 KOMAX HOLDING AG
REGISTERED SHARES $ 584,598 0.19%
Seller of wire processing machines.
Most important markets are the car,
household appliance,
telecommunications and electronics
industries. (Cost $415,378)
------------ ------
2,474,430 0.80
MISCELLANEOUS MEDICAL SERVICES -- 0.51%
546 GALENICA HOLDING LTD.
Manufactures and distributes 493,492 0.16
prescription and over-the-counter
drugs, toiletries and hygiene
products. (Cost $490,462)
14,500STRAUMANN HOLDING AG
REGISTERED SHARES 1,100,868 0.35
Develops, produces and sells
surgical implants and instruments
for dental medicine, jaw and face
surgery worldwide. (Cost
$1,077,230)
------------ ------
1,594,360 0.51
MISCELLANEOUS SERVICES -- 2.45%
49,500 ADECCO SA
BEARER SHARES 2,691,838 0.85
Leading personnel and temporary
employment company. (Cost
$1,471,056)
270,000 COMPAGNIE FINANCIERE RICHEMONT AG 1
BEARER SHARES 5,018,981 1.60
Investment company with principal
interests in luxury goods and
tobacco. (Cost $3,309,623)
------------ ------
7,710,819 2.45
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
PHARMACEUTICALS -- 28.84%
1,580,000 NOVARTIS AG 2
REGISTERED SHARES $ 57,122,198 18.17%
Life science group created by the
consolidation of Sandoz and
Ciba-Geigy. Manufactures health
care products for use in a broad
range of medical fields, as well as
agricultural products. The second
largest pharmaceutical entity in
the world. (Cost $21,636,239)
470,000 ROCHE HOLDINGS LTD. 2
DIVIDEND RIGHTS CERTIFICATES 33,559,291 10.67
Worldwide pharmaceutical company.
(Cost $10,193,328)
------------ ------
90,681,489 28.84
RETAILERS -- 0.60%
1,900 JELMOLI HOLDING AG
BEARER SHARES 1,889,009 0.60
Operates a network of
retail/service outlets throughout
Switzerland, including local dry
cleaners, auto body shops,
opticians, interior decorators,
travel agencies, restaurants,
pharmacies and retailers. (Cost
$1,405,703)
------------ ------
1,889,009 0.60
TELECOMMUNICATIONS -- 3.35%
38,000 SWISSCOM AG 2
REGISTERED SHARES 10,532,658 3.35
Operates public telecommunication
networks and offers network
application services. (Cost
$10,137,064)
------------ ------
10,532,658 3.35
22
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 2001
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- (CONCLUDED)
TRANSPORTATION -- 1.06%
66,200 KUEHNE & NAGEL INTERNATIONAL LTD.
Operates sea freight, land and rail $ 3,350,687 1.06%
transportation businesses and
warehousing and distribution
facilities. (Cost $3,446,629)
------------ ------
3,350,687 1.06
TOTAL COMMON STOCKS
(Cost $163,080,264) 3 $304,191,826 96.74%
OTHER ASSETS IN EXCESS
OF LIABILITIES 10,244,000 3.26
------------ ------
NET ASSETS $314,435,826 100.00%
============ ======
--------------------------------------------------------------------------------
1 NON-INCOME PRODUCING SECURITY.
2 ONE OF THE TEN LARGEST PORTFOLIO HOLDINGS.
3 AGGREGATE COST FOR FEDERAL TAX PURPOSES IS $163,564,287.
DESCRIPTIONS OF THE COMPANIES HAVE NOT BEEN AUDITED BY DELOITTE & TOUCHE LLP.
SEE NOTES TO THE FINANCIAL STATEMENTS.
23
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 2001
------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $163,080,264) .................................................... $304,191,826
Cash ......................................................................................... 783,370
Foreign currency (cost $7,002,027) ........................................................... 7,052,732
Dividend and interest receivable ............................................................. 171,110
Tax reclaims receivable ...................................................................... 3,935,039
Prepaid expenses and other ................................................................... 889
------------
Total assets ............................................................................... 316,134,966
------------
LIABILITIES:
Payable for securities purchased ............................................................. 1,267,983
Advisory fees payable ........................................................................ 217,273
Accrued audit and legal fees ................................................................. 66,265
Custody fees payable ......................................................................... 53,490
Administration fees payable .................................................................. 23,781
Transfer agent fees payable .................................................................. 10,216
Accounting fees payable ...................................................................... 9,041
Accrued expenses and other ................................................................... 51,091
------------
Total liabilities .......................................................................... 1,699,140
------------
Net assets ................................................................................. $314,435,826
------------
COMPOSITION OF NET ASSETS:
Paid-in capital .............................................................................. 171,926,815
Undistributed net investment income .......................................................... 1,532,859
Accumulated net realized gain from investment transactions ................................... 23,411
Net unrealized appreciation on investments and foreign currencies
140,952,741
------------
Net assets ................................................................................... $314,435,826
NET ASSET VALUE PER SHARE:
($314,435,826 / 23,892,709 shares outstanding) ............................................... $ 13.16
============
------------------------------------------------------------------------------------------------------------------
SEE NOTES TO THE FINANCIAL STATEMENTS.
24
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 2001
------------------------------------------------------------------------------------------------------------------
ASSETS:
INVESTMENT INCOME:
Dividends (less foreign taxes withheld of $506,888) ......................................... $ 3,474,667
Interest .................................................................................... 437,896
Securities lending income ................................................................... 33,256
-------------
Total income .............................................................................. 3,945,819
-------------
EXPENSES:
Investment advisory fees .................................................................... 2,720,545
Professional fees ........................................................................... 774,601
Directors' fees ............................................................................. 361,067
Administration fees ......................................................................... 295,910
Custody fees ................................................................................ 145,556
Printing and shareholder reports ............................................................ 115,767
Accounting fees ............................................................................. 111,859
Franchise taxes ............................................................................. 83,568
Transfer agent fees ......................................................................... 46,619
Miscellaneous ............................................................................... 84,105
-------------
Total expenses ............................................................................ 4,739,597
-------------
Expenses in excess of investment income .......................................................... (793,778)
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment transactions ................................................................... 3,897,932
Foreign currency transactions ............................................................. 2,326,637
Net change in unrealized appreciation/depreciation on investments and foreign currencies .. (109,534,341)
-------------
Net Realized and Unrealized Loss on Investments and Foreign Currencies .................... (103,309,772)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS ....................................................... $(104,103,550)
=============
------------------------------------------------------------------------------------------------------------------
SEE NOTES TO THE FINANCIAL STATEMENTS.
25
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Years Ended December 31,
----------------------------------------
2001 2000
-----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment (expenses in excess of) income ...................... $ (793,778) $ 47,623
Net realized gain from investment and
foreign currency transactions .................................... 6,224,569 33,661,372
Net change in unrealized appreciation/depreciation on
investments and foreign currencies ............................... (109,534,341) 5,565,094
------------- ------------
Net increase (decrease) in net assets from operations .............. (104,103,550) 39,274,089
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized capital gains ......................................... (7,360,963) (31,851,302)
------------- ------------
Total distributions to shareholders .............................. (7,360,963) (31,851,302)
------------- ------------
CAPITAL SHARE TRANSACTIONS:
Value of shares issued in reinvestment of dividends ................ 16,795,124 12,126,372
Value of shares repurchased through stock buyback .................. (6,209,492) (20,832,970)
------------- ------------
Total increase (decrease) from capital share transactions .......... 10,585,632 (8,706,598)
------------- ------------
Total decrease in net assets ....................................... (100,878,881) (1,283,811)
NET ASSETS:
Beginning of year .................................................. 415,314,707 416,598,518
------------- ------------
End of year (including undistributed net investment
income of $1,532,859 and $0, respectively) ....................... $ 314,435,826 $415,314,707
============= ============
-----------------------------------------------------------------------------------------------------------------
SEE NOTES TO THE FINANCIAL STATEMENTS.
26
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Financial Highlights
For the Years Ended December 31,
-----------------------------------------------------------
2001 2000 1999 1998 1997 1
------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of year .................. $ 17.92 $ 17.52 $ 19.07 $ 16.48 $ 12.07
------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (expenses in excess of income) .. (0.03) 0.00 2 0.01 0.00 2 (0.02)
Net realized and unrealized gain (loss) on investments 3 (4.34) 1.68 (0.60) 3.60 4.86
------- ------- -------- -------- --------
Total from investment operations ...................... (4.37) 1.68 (0.59) 3.60 4.84
------- ------- -------- -------- --------
Gain from capital share repurchases ................... 0.06 0.21 0.12 -- --
Capital charge resulting from the issuance
of fund shares ...................................... (0.14) (0.12) -- -- --
------- ------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. -- -- (0.03) (0.07) --
Distributions from net realized capital gains ......... (0.31) (1.37) (1.05) (0.94) (0.43)
------- ------- -------- -------- --------
Total distributions ................................... (0.31) (1.37) (1.08) (1.01) (0.43)
------- ------- -------- -------- --------
Net asset value at end of year ........................ $ 13.16 $ 17.92 $ 17.52 $ 19.07 $ 16.48
======= ======= ======== ======== ========
Market value per share, end of year ................... $ 11.00 $ 14.50 $ 13.81 $ 16.00 $ 13.72
======= ======= ======== ======== ========
TOTAL INVESTMENT RETURN: 4
Based on market value per share ....................... (22.10)% 15.06% (7.06)% 23.82% 42.66%
Based on net asset value per share .................... (24.94)% 12.11% (1.09)% 22.89% 41.08%
RATIOS TO AVERAGE NET ASSETS:
Expenses .............................................. 1.39% 5 1.16% 1.11% 1.09% 1.17%
Net investment income (expenses in excess of income) .. (0.23)% 0.01% 0.05% 0.01% (0.14)%
SUPPLEMENTAL DATA:
Net assets at end of year (000) ....................... $314,436 $415,315 $416,599 $469,916 $406,030
Average net assets during period (000) ................ $341,806 $422,426 $428,072 $464,967 $354,923
Shareholders of record 6 .............................. 1,067 1,125 1,230 1,287 1,408
Portfolio turnover rate ............................... 32% 25% 14% 13% 13%
------------------------------------------------------------------------------------------------------------------------
1 PER SHARE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 1997 HAVE BEEN RESTATED TO
REFLECT 2:1 STOCK SPLIT EFFECTIVE OCTOBER 16, 1998.
2 LESS THAN $0.01 PER SHARE.
3 INCLUDES NET REALIZED CURRENCY GAIN (LOSS).
4 TOTAL INVESTMENT RETURN BASED ON MARKET VALUE DIFFERS FROM TOTAL INVESTMENT
RETURN BASED ON NET ASSET VALUE DUE TO CHANGES IN THE RELATIONSHIP BETWEEN THE
FUND'S MARKET PRICE AND ITS NET ASSET VALUE PER SHARE. RETURNS FROM 1998 AND
1997 HAVE BEEN RESTATED TO REFLECT SUBSEQUENT CHANGES TO DIVIDEND REINVESTMENT
CALCULATIONS.
5 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 MANAGMEENT CONTRACT AND DEFENSE AGAINST A
LAWSUIT AGAINST THE FUND AND ITS DIRECTORS PLUS THE IMPACT OF A DECLINE IN
THE FUND'S NET ASSETS.
6 NOT AUDITED BY DELOITTE & TOUCHE LLP.
SEE NOTES TO THE FINANCIAL STATEMENTS.
27
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements
NOTE 1--ORGANIZATION AND SIGNIFICANT
ACCOUNTING POLICIES
A. ORGANIZATION
The Swiss Helvetia Fund, Inc. (the `Fund') is registered under the Investment
Company Act of 1940 (the `Act'), as amended, 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.
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 under procedures established by
and under the general supervision of the Fund's Board of Directors. 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, 2001, 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 annual dividends from its net investment income and makes annual
distributions of any net realized capital gains to the extent they exceed
capital loss carryforwards, if any. 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 shareholders. 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. The Fund requires the borrowers of the
securities to maintain collateral with the Fund in the form of cash and/or
government securities equal to 102% 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.
28
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
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 translation
shown on the Fund's financial statements result from the sale of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and 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 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 the amount in excess of $600 million. The
Fund paid Hottinger & Cie $44,468 in brokerage commissions for the year ended
December 31, 2001.
The Fund and the Advisor have agreed to share certain common expenses subject to
review and allocation by the Audit Committee of the Fund's board of directors.
The Committee's allocations are based on its determination of the relative
benefits the Fund and the Advisor derive from the expenditures. During 2001, the
Committee allocated expenses incurred in connection with publicizing the Fund
and various expenses incurred in connection with a stockholder's unsuccessful
proxy contest last May for the election of directors and termination of the
management contract as follows:
Expense Fund Advisor Total
------- ---- ------- -----
Marketing $6,698 $5,877 $12,575
Stockholder Meeting $366,575 $104,747 $471,322
Investment Company Capital Corp. (`ICCC') is the Fund's Administrator. The Fund
pays the Administrator an annual fee based on its average daily net assets which
is calculated daily and paid monthly at the following annual rates: 0.10% of the
first $250 million, 0.05% of the next $250 million and 0.03% of the amount over
$500 million.
ICCC is the Fund's accounting agent. The Fund pays the accounting agent an
annual fee based on its average daily net assets which is calculated daily and
paid monthly. PFPC Inc. is the Fund's transfer agent. The Fund pays the transfer
agent a per account fee which is accrued daily and paid monthly.
Certain officers and directors of the Fund are also officers or directors of
HCC, Hottinger U.S. Inc., Hottinger & Cie (Zurich) and/or ICCC. These persons
are not paid by the Fund for serving in these capacities.
NOTE 3--OTHER FEES
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.
The Fund pays each director who is not affiliated with the Fund, its investment
advisor or administrator approximately $15,000 per annum in compensation, except
for the Chairman of the Audit Committee, who the Fund pays an annual fee of
approximately $16,500. In addition, the Fund pays each unaffiliated
29
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
director $750 for each attended directors' meeting and $750 for each committee
meeting attended, if it is held separately, and reimbursement for out-of-pocket
expenses in conjunction with attendance at meetings.
The Fund compensates each Director who is a non-interested Director and who is a
member of the Discount or Litigation Committees of the Board for his work on the
committees on an hourly basis at the rate of $300, less the $750 meeting fee
otherwise payable to committee members for each meeting attended.
NOTE 4--CAPITAL SHARE TRANSACTIONS
The Fund is authorised to issue up to 50 million shares of capital stock. HCC
owned 102,234 of the 23,892,709 shares outstanding on December 31, 2001.
Transactions in capital shares were as follows:
For the Year Ended For the Year Ended
December 31, 2001 December 31, 2000
---------------------- ----------------------
Shares Amount Shares Amount
------- -------- ------- --------
Dividend
Reinvestments 1,177,572 $16,795,124 858,504 $ 12,126,372
Repurchased (463,600) (6,209,492) (1,462,500) (20,832,970)
--------- ----------- ---------- ------------
Net increase
(decrease) 713,972 $10,585,632 (603,996) $ (8,706,598)
========= =========== ========== ============
NOTE 5--FEDERAL INCOME TAX AND
INVESTMENT TRANSACTIONS
At December 31, 2001, capital contributions, accumulated undistributed 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.
Undistributed
Undistributed Net Realized Paid-in
NII Gain/ Loss Capital
------------- ------------- -------
$2,326,637 $(2,326,637) $--
At December 31, 2001, the net unrealized appreciation from investments for those
securities having an excess of value over cost and net unrealized depreciation
from investments for those securities having an excess of cost over value (based
on cost for federal income tax purposes) was $142,272,884 and $1,645,345,
respectively. 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 GAAP.
Distributions during the year ended December 31, 2001 were characterized as
follows for tax purposes:
Long-term capital gains $7,360,963
At December 31, 2001, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income $1,695,514
Long-term capital gains $344,779
Unrealized appreciation/(depreciation) $140,627,539
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended December 31, 2001, were
$104,612,444 and $111,511,469, respectively.
NOTE 6--STOCK REPURCHASE PROGRAM
Pursuant to authorization by the Board of Directors, the Fund began open market
purchases of its common stock on the New York Stock Exchange in 1999 and
continued purchases in 2000 and 2001. The Board has authorized the purchase of
up to one million shares in 2002. During the year ended December 31, 2001 the
Fund repurchased and retired 463,600 shares at an average price of $13.39 per
share (including broker commissions) and a weighted average discount of 17.81%.
The total cost of these repurchases was $6,209,492.
30
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
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 by individuals claiming to be Fund stockholders against the
Fund, each of its Directors and Hottinger Capital Corp., the Fund's Investment
Advisor (collectively, the "defendants"). The complaints in these cases,
entitled Kimberly Kahn vs. Paul Hottinguer et al. and Charles Miller vs. Paul
Hottinguer et al., allege that the defendants have: (A) breached fiduciary
duties to stockholders and violated Section 109(a) of the Delaware General
Corporation Law by adopting amendments to the Fund's Bylaws requiring a vote of
75% of the Fund's outstanding shares to alter, amend or repeal the Bylaws or to
adopt other bylaws; (B) breached fiduciary duties to stockholders by adopting
amendments to the Fund's Bylaws requiring nominees for election as directors to
satisfy certain qualifications; and (C) breached fiduciary and contractual
duties through the manner in which the Fund effected a capital gains
distribution in December 2000. The complaints seek as relief among other things:
(i) a declaration that the defendants have breached their fiduciary duties to
stockholders and that the amendments to the Bylaws are null and void; (ii) an
injunction in connection with any meeting of stockholders preventing the
defendants from enforcing the Bylaw amendments; and (iii) certain unspecified
damages. The defendants believe that the allegations relating to the Bylaws have
been mooted by the board's decision to put those Bylaws to a vote of
stockholders at the Fund's 2002 annual meeting and have moved to dismiss the
capital gains distribution claims because they believe that they fail to state
a claim upon which relief can be granted.
31
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
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 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, 2001, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our 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, 2001, by correspondence with the custodian
and brokers. 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 provides 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, 2001, 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
New York, New York
February 8, 2002
32
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Additional Information (Unaudited)
This report is sent to the stockholders of The Swiss Helvetia Fund, Inc. for
their information. It is not a prospectus, circular or representation intended
for use in the purchase or sale of shares of the Fund or of any securities
mentioned in this report.
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 of
Ethics 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 of Ethics 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, 2001.
Domestic Ordinary Income --
Foreign Source Income --
------
Total Ordinary Income --
======
------
Long-Term Capital Gains $0.307
------
Total Distributions $0.307
======
The Fund's long-term capital gain distributions of $0.307 per share are all
taxable at the 20% capital gains rate.
--------------------------------------------------------------------------------
Tax Information (Unaudited) For the Tax Year Ended December 31, 2001
The amounts may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Fund's distributions to shareholders included $7,360,963 from long-term
capital gains, all of which is taxable at the 20% capital gains rate.
33
THE SWISS HELVETIA FUND, INC.
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Dividend Reinvestment Plan (Unaudited)
THE PLAN
The Swiss Helvetia Fund's (the "Fund") Dividend Reinvestment Plan offers
you a convenient way to invest your income dividends and capital gains
distributions in additional shares of the Fund's common stock thereby increasing
your holdings of the Fund's shares. Participation in the Plan does not alter the
normal federal, state and local income tax consequences associated with income
dividends and capital gains distributions.
The Plan is designed to allow all stockholders an opportunity to
participate. Some of the Plan features are:
1. Dividend reinvestment automatically increases the number of shares you own.
2. Dividends and distributions are reinvested in additional shares at the lower
of net asset value or market price.
3. Shares purchased through the Plan are recorded in your account providing
protection against theft or destruction of share certificates.
4. You may terminate your Plan account at any time.
Not all brokerage firms holding shares in brokerage accounts permit
participation in dividend reinvestment plans such as the Plan, and even if your
brokerage firm does permit such participation, you may not be able to transfer
such shares to another broker who does not permit such participation. You are
encouraged to contact your brokerage firm to determine any restrictions upon
participation.
HOW DO I ENROLL IN THE PLAN?
To participate in the Fund's Dividend Reinvestment Plan, please contact
your broker or PFPC, Inc.
To start the Plan with a specific dividend, please forward the required
form to your broker or PFPC 10 days prior to the record date for that dividend
or distribution.
HOW DOES THE PLAN WORK?
When a dividend or distribution is declared, non-participants in the Plan
will receive cash. Plan participants will receive the equivalent in shares of
the Fund valued at the lower of the market price or net asset value as described
below.
1. Whenever net asset value is equal to or less than market price by no more
than 5% at the time of valuation, you will be issued shares at net asset value.
2. If the net asset value is less than 95% of the market price on the valuation
date, you will be issued shares at 95% of the market price of shares. 3. If net
asset value exceeds the market price of shares on the valuation date, PFPC, as
agent for the participants, will buy shares on the open market on the New York
Stock Exchange or elsewhere, for your account.
If, before PFPC has completed its purchase, the market price exceeds the
net asset value of shares, the average per share purchase price paid by PFPC may
exceed the net asset value of shares, resulting in the acquisition of fewer
shares than if the dividend or distribution had been paid in shares issued by
the Fund.
WILL THE ENTIRE AMOUNT OF MY DISTRIBUTION BE REINVESTED?
As a Plan participant, the entire amount of your distribution will be
reinvested. For any balance that is insufficient to purchase a whole share, the
amount will be credited to your account in fractional shares.
WILL STOCK CERTIFICATES BE ISSUED FOR TRANSACTIONS IN THE PLAN?
You will be issued a stock certificate upon request.
IS THERE ANY CHARGE TO PARTICIPATE IN THE PLAN?
There is no charge to participants for reinvesting dividends or
distributions. PFPC's fee for handling the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage charge to
stockholders for shares issued directly by the Fund as a result of dividends or
distributions payable either in stock or cash. Each participant, however, will
pay a pro rata share of brokerage commissions incurred with respect to PFPC's
open market purchases in connection with the reinvestment of dividends or
distributions.
HOW CAN I DISCONTINUE MY PARTICIPATION IN THE PLAN?
You may terminate your account under the Plan by notifying your broker or
PFPC in writing. Upon termination, you will receive a certificate for the number
of shares held in the Plan.
WHERE CAN I DIRECT MY QUESTIONS AND CORRESPONDENCE?
Questions and correspondence concerning the Plan should be directed to:
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
1-800-331-1710
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