THE SWISS
A Swiss ---------
Investments HELVETIA
Fund --------
FUND, INC
---------
THE SWISS HELVETIA FUND, INC.
EXECUTIVE OFFICES
THE SWISS HELVETIA FUND, INC.
630 FIFTH AVENUE
SUITE 915 ANNUAL REPORT
NEW YORK, NEW YORK 10111-0001 FOR THE YEAR ENDED
1-888-SWISS-00 DECEMBER 31, 1998
(212) 332-2760
http://www.swz.com
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THE SWISS HELVETIA FUND, INC.
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DIRECTORS AND OFFICERS
Paul Hottinguer
Chairman and
Chief Executive Officer
Eric R. Gabus
Vice Chairman
(Non officer)
Alexandre de Takacsy
Director
Claude Frey
Director
Jean-Louis Gillieron
Director
Baron Hottinger
Director
Claude Mosseri-Marlio
Director
Stephen K. West, Esq.
Director
Samuel B. Witt III, Esq.
Director
Rodolphe Hottinger
President and
Chief Operating Officer
Rudolf Millisits
Vice President
Edward J. Veilleux
Vice President and Treasurer
Scott J. Liotta
Vice President
Paul R. Brenner, Esq.
Secretary
Joseph A. Finelli
Assistant Treasurer
INVESTMENT ADVISOR
Hottinger Capital Corp.
630 Fifth Avenue
Suite 915
New York, New York 10111-0001
(212) 332-7930
ADMINISTRATOR
Investment Company Capital Corp.
CUSTODIAN
PFPC Trust Company
TRANSFER AGENT
PFPC,Inc.
(800) 852-4750
LEGAL COUNSEL
Paul R. Brenner, Esq.
and
Christy & Viener
INDEPENDENT AUDITORS
Deloitte & Touche LLP
For Dividend Reinvestment Information, see page 21.
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.
630 Fifth Avenue
Suite 915
New York, New York 10111-0001
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
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 Standard 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.
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders
Year in Review
PERFORMANCE RESULTS
The financial year 1998 saw tremendous volatility in equity markets around
the world as a result of imbalances in a global financial system that is
becoming more and more integrated. The adjustment of commodity, currency, debt
and equity prices to reflect the new reality of the global economy was abrupt.
However the high level of liquidity in western markets cushioned the shock.
The 1998 performance of the European stock markets was very good overall
with appreciation ranging from 15% to 50% for the year in U.S. dollar terms. The
core of new Euroland (Germany, France and the Netherlands) returned about half
that of the periphery markets (Spain and Italy). Those countries benefited from
lower real interest rates which stimulated economic growth and the equity
markets. The non-Euro countries of Switzerland and the United Kingdom,
registered lower performance. Two factors weighed on the performance of the
Swiss market: the absence of the immediate positive impact of the Euro
convergence and the relatively high international exposure of Swiss companies.
The Swiss Performance Index still managed to return 21.98% in U.S. dollar terms
and 15.31% in Swiss franc terms. Currencies in Europe were quite stable against
each other but appreciated against the U.S. dollar.
The Fund's results were in line with the Swiss market with an increase of
21.37% in its Net Asset Value in U.S. dollar terms and 15.57% in Swiss franc
terms. The total annual return for stockholders based on the market price of the
Fund shares was 22.29%.
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Total Return Performance Based on Net Asset Value Per Share*
For the periods ended 12/31/98
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In U.S. dollars
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1 YEAR 3 YEARS** 5 YEARS**
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The Swiss Helvetia Fund 21.37% 21.18% 20.48%
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S&P 500 Index 28.72% 28.28% 24.09%
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EAFE Index 20.00% 9.00% 9.19%
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Lipper European Fund
Average 22.57% 20.48% 16.05%
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* These figures assume the reinvestment of dividends and capital gains
distributions. The Standard & Poor's 500 Index is an unmanaged index that is
widely recognized as an indicator of general U.S. equity market performance.
The Morgan Stanley Europe, Australia and Far East (EAFE) Index is an
unmanaged index that is widely recognized as an indicator of general
international equity performance. The Lipper European Fund Average is an
index of approximately 80 managed funds that invest in equity securities in
European markets. Past performance is not an indicator of future results.
** Average annual returns.
GLOBAL ECONOMY
1998 was characterized by a major financial crisis largely caused by
overinvestments in complex financial instruments and in emerging economies with
inefficient financial systems and by the indecisiveness of the Japanese
Government to repair its banking system. The spread of the crisis into more
mature markets was amplified when leveraged hedge funds had to unwind huge
financial positions at substantial losses. The consequence of this crisis was a
lower than expected global economic growth rate. However, thanks to the
coordinated moves of the western central banks in lowering interest rates, the
effect of the spread of the crisis into the western banking system was reduced.
Ample
2
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THE SWISS HELVETIA FUND, INC.
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liquidity combined with signs of reacceleration of economic growth in the
U.S. provided sufficient support for western stock markets which reestablished
investor confidence.
The deflation of prices due to production overcapacities and weakened
global demand has been a threat to all stock markets. However, deflationary
pressures have generally been contained to mainly the manufacturing sector of
the western economies, spurring mergers and acquisitions activity which, in
turn, gave some support to the stock prices of the companies involved.
SWISS ECONOMY
The domestic outlook of the western economies has improved despite the
shadows of the Asian crisis. In Switzerland, the unemployment rate fell from
5.0% to 3.4% during 1998. Subsequently, consumer confidence increased. Private
consumption rose by approximately 1.8% (after smaller increases of 0.4% in 1996
and 1.2% in 1997). Consumer spending was financed by stronger primary income
(which rose 2% year-over-year) and a lower savings rate of 8.1% of disposable
income compared to 8.3% in 1997 and 8.8% in 1996 (8.1% is still high by
international standards). Inflation was non-existent with a 0.1% increase for
the year. The Gross National Product, however, was adversely affected by a
slowdown of exports in the latter part of the year, although exports are
expected to be close to 30% higher year-over-year
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Performance of The Swiss Helvetia Fund* vs. SPI Index
From inception (August 27, 1987) through December 31, 1998
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In Swiss francs
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[GRAPH CHART]
Chart Plot Points
8/87 0 0 The Fund plus 306.3%
12/87 -23.68 -31.73 SPI Index plus 299.0%
12/88 -18.07 -16.37
12/89 1.56 0.97
12/90 -13.23 -19.41
12/91 -0.99 -6.58
12/92 16.7 9.9
12/93 75.05 65.73
12/94 59.59 53.11
12/95 91.52 88.41
12/96 127.24 122.88
12/97 252.17 245.89
12/98 306.33 299.03
* Gross of Fund expenses. The Fund's performance is calculated using the
Modified Dietz method.
CORPORATE ACTIVITY
Corporate activity in 1998 did not calm down and Swiss financial companies
continued to be among the consolidators of the industry. Zurich Group has agreed
to merge with BAT Financial Services. Swiss Re bought Life Re of the U.S. for
$1.8 billion, expanding its exposure to health and life reinsurance in a market
that grows rapidly in the United States, and also acquired Fox Pitt Kelton, a
well-known brokerage company in the United Kingdom.
Holderbank took advantage of the low priced assets in emerging markets and
continued its strategy of expansion--mainly in SouthEast Asia and South America
where demographics suggest strong growth in the long term. Union Bank of
Switzerland and Swiss Bank Corporation obtained regulatory approval for their
merger and Roche's acquisition of Corange received governmental acceptance as
well.
Swiss assets also attracted foreign attention. Cross border mergers and
acquisitions
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THE SWISS HELVETIA FUND, INC.
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activity was not affected by the fact that Switzerland is not part of the
European Monetary Union. Danzas, a large freight forwarding group is in the
process of being taken over by the German Bundespost. In addition, Algroup, the
Swiss packaging and aluminum processing company and Viag of Germany are merging
in a stock swap valued at $8.7 billion.
Swiss Market
The strongest sectors of the Swiss stock market have been the ones with
primary exposure to the domestic economy (retailers, building industries and
services companies) and the large insurance companies. The high quality of the
balance sheets of the latter kept them relatively immune from the Asian and
Russian crisis. These two sectors clearly outperformed the Swiss Performance
Index by a large margin. The greatest out performance however was the food
sector (+37%), due to the performance of Nestle, which comprises 94% of the
sector. The new focus of Nestle's management is on asset profitability and
reorganization of some brands have been rewarded by a higher market valuation.
However it remains questionable if this can continue into 1999.
The healthcare sector experienced a year of transition but has shown its
quality as a defensive investment, especially during the market turbulence of
the fall of 1998. On the other hand, the manufacturing sector has been suffering
from the collapse of demand from Asia and increased price competition. Its
return was a meager 1.8%. The large banks also underperformed due to losses from
their investments in hedge funds and emerging markets.
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Financial Highlights
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1998 1997 1996 1995 1994
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NET ASSETS
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(in Million SFr) 645.5 593.1 396.1 347.2 238.1
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(in Million $) 469.9 406.0 296.0 301.2 181.8
OUTSTANDING SHARES
(000) 24,642 24,642 24,52424,52418,374
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NET ASSET VALUE1
PER SHARE ($) 19.07 16.48 12.07 12.28 9.90
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DIVIDEND PER SHARE ($)11.01 0.43 0.38 0.33 0.63
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1 Per share amounts for the years ended December 31, 1994 through December 31,
1997 have been restated to reflect 2:1 a stock split effective October 16,
1998.
OUTLOOK
GLOBAL ECONOMY
The global situation will very much depend on how the Japanese economy
finds its way out of the current recession. A sign of a better environment might
be an appreciation of the Japanese Yen combined with an increase in interest
rates, reflecting the fact that public debt is growing due to higher government
spending--which should stimulate economic activity--and due to the restructuring
of the banking system. Another uncertainty is the potential effect of the sharp
economic slowdown in South America due to the very high interest rates in
Brazil.
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THE SWISS HELVETIA FUND, INC.
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EUROLAND ECONOMY
The new European currency is expected to show a mixed picture.
The Weaknesses are:
o Slow economic growth due to high unemployment and weakening international
demand
o A deflationary "model" with restrictive budget policy (Maastricht) and
ECB monetarist bias at the expense of growth
o Differing economic cycles of the members that can no longer be cushioned
by currency depreciation
o Current account deterioration due to slower export growth and an increase
of imported goods
The Strengths are:
o New political leadership (Germany and France) that is more oriented
toward economic growth
o Political stability due to forced coordination
o Emergence of the Euro as a major reserve currency
o The possibility of continued healthy economic growth due to Euroland's
reduced dependence on exports resulting from its progressive integration
thus creating a huge domestic market.
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THE SWISS HELVETIA FUND--PORTFOLIO HOLDINGS PER INDUSTRY
AS OF DECEMBER 31, 1998
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[PIE CHART]
Life Sciences 21.8%
Insurance 16.2
Pharmaceuticals 15.4
Banks 14.6
Food & Luxury Goods 13.3
Misc. Services 3.5
Cash and Equiv. 3.4
Chemicals 2.4
Misc. Industries 1.9
Building Contractors
& Materials 1.8
Machinery 1.8
Electrical Engineering
and Electronics 1.5
Retailers 1.2
Telecommunications 0.8
Bonds 0.3
Transport 0.1
SWISS ECONOMY
The purchasing power of private households in 1999 will be somewhat reduced
by a 1% increase in the value added tax and higher tobacco duties. However wage
growth, which was very slow during most of the 90's, should continue on its
recent uptrend.
Exports might rebound if economic growth in Europe reaccelerates (led by
U.S. economic strength) and Asian demand resumes. On the one hand, government
spending should remain restrained and construction activity should remain
subdued. On the other hand, consumption is expected to continue its improvement
as consumer confidence remains healthy.
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THE SWISS HELVETIA FUND, INC.
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GDP is estimated to grow by 1.3% in 1999 assuming there are no major
changes in our currency assumptions which call for a stable Swiss franc versus
the Euro and the U.S. dollar.
IMPACT OF THE EURO ON STOCK MARKETS
Bigger and more efficient capital markets will encourage increases in corporate
bond issuance and more initial public offerings. Pressure to increase
shareholder value continues to occur in that context. Management also expects
higher trading activity in European blue chips, including Swiss blue chips,
which are part of the major European stock indices due to the change from
country based asset allocation to more global sector based allocation.
Companies in peripheral countries might continue to benefit from historically
low interest rates which could support higher domestic growth compared to the
rest of Europe.
An equity culture similar to the one in the United States is likely to emerge in
the long run as higher returns on equities will be favored. Another effect would
be an acceleration of the pension system reform.
[CHART]
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The Swiss Helvetia Fund--Ten Largest Holdings (in U.S. dollars)
As of December 31, 1998
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% OF TOTAL
COST MARKET VALUE NET ASSETS
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1. Novartis Ltd. $ 30,098,514 $102,205,722 21.8%
2. Roche Holding AG 15,895,280 68,933,537 14.7
3. Nestle AG 17,790,018 59,856,592 12.7
4. Swiss Reinsurance
Company 7,875,841 36,495,596 7.8
5. Zurich Allied Ltd. 9,018,315 35,165,975 7.5
6. UBS AG 11,893,567 32,282,063 6.9
7. Credit Suisse Group 12,261,783 24,259,300 5.2
8. Holderbank Financiere 6,053,338 8,285,652 1.8
Glarus AG
9. Adecco SA 5,527,562 7,302,905 1.6
10. Clariant AG 2,813,989 5,140,860 1.1
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Total $119,228,207 $379,928,202 81.1%
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SWISS STOCK MARKET
The health care industry is poised for an acceleration of sales and
earnings growth after the recent transition period.
The large insurance companies (Zurich, Swiss Re) are benefitting from the
fact that the already high level of reserves in their balance sheets are
improved further by the current context of low inflation. This should absorb
premium income volatility. Consolidation within the European industry is also a
positive development for these companies.
Banks will be able to improve progressively their balance sheets (through
securitization of debt) and their revenue mix. However they remain exposed to
international financial crises and margin pressure due to tougher competition in
underwriting European securities.
The services and retailing sectors are expected to continue to do well due
to a favorable consumer environment.
Overall interest rates might have reached their cyclical lows but they can
occasionally benefit from turmoil in the international financial system.
6
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THE SWISS HELVETIA FUND, INC.
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Management expects positive developments in the corporate environment such
as smaller boards of directors that will, in general, become more company
focussed and a continuation of consolidations followed by a round of
divestitures of non-strategic assets.
Thank you for your continued interest in the Fund.
Sincerely,
/s/ Paul Hottinguer
Paul Hottinguer
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
/s/Rodolphe Hottinger
Rodolphe Hottinger
PRESIDENT AND CHIEF OPERATING OFFICER
February 2, 1999
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THE SWISS HELVETIA FUND--
TEN ISSUES HAVING GREATEST APPRECIATION IN 19981
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Market Price Market Price
per share per share
in U.S.$ in U.S.$ %
as of as of Appreciation
12/31/97 12/31/98 1997-98
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1. Bank Sarasin & Cie (R) $753 $1,776 135.86%
2. Baer Holdings Ltd. (B) 1,855 3,323 79.14
3. Adecco SA (B) 290 456 57.24
4. Schindler Holding AG (P) 1,074 1,602 49.16
5. Nestle AG (R) 1,499 2,177 45.23
6. Holderbank Financiere
Glarus AG (B) 816 1,184 45.10
7. Rieter Holding AG (R) 427 611 43.09
8. Komax Holding AG (R) 356 502 41.01
9. PubliGroupe Ltd. (P) 218 306 40.37
10. Swiss Reinsurance
Company (R) 1,870 2,607 39.41
1 Among issues held for the full year.
(B)=Bearer Shares
(R)=Registered Shares
(P)=Participation Certificates
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THE SWISS HELVETIA FUND, INC.
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REVIEW OF OPERATIONS
Trading activity in 1998 involved changes in the following positions:
NEW INVESTMENTS BY THE FUND
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Bon Appetit Holding
Saia-Burgess
Straumann Holding AG
Swisscom AG
Swisslog Holding AG
Usego-Hofer Curti AG
Valiant Holding
ADDITIONS TO EXISTING INVESTMENTS
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Adecco
Ares Serona SA
Baer Holdings Ltd.
Clariant AG
Georg Fischer AG
Gretag-Macbeth Holding AG
Huber & Suhner AG
Komax Holding AG
Phoenix Mecano AG
Publigroupe Ltd.
Schindler Holding AG
Valora Holding SA
SECURITIES DISPOSED OF
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AFG Arbonia-Forster Holding
Agie Charmilles Holding AG
Bossard Holding AG
Christ AG
Disetronic Holding AG
Forbo Holdings Ltd.
Helvetia Patria-Holding
IndustrieHolding Cham AG
Interroll Holding AG
Kardex AG
Keramik Holding AG Laufen
Kuehne & Nagel International
Oerlikon-Buehrle Holding
Prodega AG
Sarna Polymer Holding Inc.
Siegfried AG
Societe Generale de Surveillance
Sulzer
Sulzer Medica
Swiss Corporation for Micro-Electronics and
Watchmaking Industries (SMH)
Zellweger Luwa AG
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THE SWISS HELVETIA FUND, INC.
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Statement of Net Assets December 31, 1998
Percent
No. of Value of Net
Shares Security (Note A) Assets
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COMMON STOCKS - 96.3%
BANKS - 14.6%
1,500 BAER HOLDINGS LTD.
Bearer Shares $ 4,984,713 1.1%
Banking group specializing in asset
management, investment consulting
and securities trading.
(cost $2,000,497)
2,200 BANK SARASIN &CIE
Registered Shares 3,907,694 0.8
A bank specializing in investment advisor
services and portfolio management
for private and institutional
customers in Europe.
(cost $1,841,385)
155,000 CREDIT SUISSE GROUP*
Registered Shares 24,259,300 5.2
A global financial services institution
whose main holding is Credit Suisse.
(cost $12,261,783)
UBS AG
60,000 Warrants Expiring 6/30/00** 965,276 0.2
(cost $605,422)
105,085 Registered Shares* 32,282,063 6.9
Product of the merger of Basel-
based Swiss Bank Corp. and Zurich-
based Union Bank of Switzerland.
Operates globally with five core
business units: Private Banking,
Institutional Asset Management,
Investment Banking, Private and
Corporate Customers, and Private Equity.
(cost $11,893,567)
4,000 VALIANT HOLDING
Registered Shares 1,988,789 0.4
The largest regional bank of
Switzerland with activities focused
on mortgage loans and commercial
business with small and mid-sized
companies.
(cost $1,916,008)
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68,387,835 14.6
Percent
No. of Value of Net
Shares Security (Note A) Assets
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BUILDING CONTRACTORS & MATERIALS - 1.8%
7,000 HOLDERBANK FINANCIERE GLARUS AG*
Bearer Shares $ 8,285,652 1.8%
Large cement producer with worldwide
operations.
(cost $6,053,338)
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8,285,652 1.8
CHEMICALS - 2.4%
20,000 CIBA SPECIALTY CHEMICALS AG
Registered Shares 1,674,310 0.4
A spin-off from Novartis in February
1997. Develops, manufactures and markets specialty
chemical products worldwide. These products include
additives, performance polymers, textile dyes,
consumer care chemicals and pigments.
(cost $135,805)
11,000 CLARIANT AG*
Registered Shares 5,140,860 1.1
Specializes in color chemistry and
manufactures a range of dyestuffs,
pigments, chemicals, additives and
masterbatches for the textile, paper,
leather, plastics, synthetic fibers and
paint industries.
(cost $2,813,989)
200 EMS CHEMIE HOLDING AG
BEARER SHARES** 1,186,576 0.2
Produces polymers and manufactures
high-grade chemical intermediates
and fine chemicals.
(cost $766,308)
600 GURIT-HEBERLEIN AG
Bearer Shares 1,485,040 0.3
European market leader for wind
screen bonding systems, ski based
and optically pure thermoplastic
sheeting for the auto industry.
(cost $1,328,554)
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THE SWISS HELVETIA FUND, INC.
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Statement of Net Assets (continued) December 31, 1998
Percent
No. of Value of Net
Shares Security (Note A) Assets
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COMMON STOCKS - (CONTINUED)
CHEMICALS - (CONTINUED)
6,500 SIKA FINANZ AG
Bearer Shares $ 1,949,479 0.4%
Leading producer of construction
chemicals.
(cost $1,746,643)
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11,436,265 2.4
ELECTRICAL ENGINEERING & ELECTRONICS - 1.5%
4,000 ABB ASEA BROWN BOVERI LTD.
Bearer Shares 4,688,069 1.0
One of the largest electrical engineering
firms in the world.
(cost $4,021,524)
2,000 BELIMO AUTOMATION AG
Registered Shares 669,724 0.1
World market leader in damper and
volume control actuators for ventilation
and air conditioning equipment.
(cost $433,378)
3,150 SAIA-BURGESS
Registered Shares** 779,646 0.2
Develops and produces switches, motors,
and programmable control devices.
Products are mainly used in the auto-
mobile, heating & air conditioning
and telecommunications industries.
(cost $781,632)
10,000 SWISSLOG HOLDING AG
Registered Shares 946,349 0.2
Provides turnkey delivery of automated
material handling systems, storage, order
picking and transport systems.
Delivers its systems to production,
distribution and service companies
throughout Europe.
(cost $824,146)
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7,083,788 1.5
Percent
No. of Value of Net
Shares Security (Note A) Assets
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FOOD & LUXURY GOODS - 13.3%
2,000 HERO AG
Bearer Shares $ 1,368,567 0.3%
Leading Swiss manufacturer of branded
Jams and Preservatives.
(cost $1,058,807)
50 LINDT & SPRUENGLI AG
Registered Shares 1,310,330 0.3
Major manufacturer of premium
Swiss chocolates.
(cost $922,328)
27,500 NESTLE AG*
Registered Shares 59,856,592 12.7
Largest food and beverage processing
company in the world.
(cost $17,790,018)
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62,535,489 13.3
INSURANCE - 16.2%
4,200 BALOISE-HOLDING
Registered Shares 4,356,846 0.9
Medium-sized insurer active in all
sectors of insurance.
(cost $1,310,220)
14,000 SCHWEIZERISCHE RUCKVERSICHERUNGS-
GESELLSCHAFT*
(SWISS REINSURANCE COMPANY)
Registered Shares 36,495,596 7.8
Second largest reinsurance company
in the world.
(cost $7,875,841)
47,500 ZURICH ALLIED LTD.*
Registered Shares 35,165,975 7.5
A large worldwide insurance operator.
(cost $9,018,315)
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76,018,417 16.2
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THE SWISS HELVETIA FUND, INC.
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Statement of Net Assets (continued) December 31, 1998
Percent
No. of Value of Net
Shares Security (Note A) Assets
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COMMON STOCKS AND WARRANTS - (CONTINUED)
LIFE SCIENCES - 21.8%
52,000 NOVARTIS LTD.*
Registered Shares $102,205,722 21.8%
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 $30,098,514)
----------- ----
102,205,722 21.8
MACHINERY - 1.8%
1,200 BUCHER HOLDING LTD.
Bearer Shares 960,908 0.2
Manufacturer of agricultural machines,
special vehicles, fruit juice equipment
and plastics machines.
(cost $798,266)
4,800 GEORG FISCHER AG
Registered Shares 1,623,062 0.3
A mechanical engineering group that is a
market leader in vehicle engineering and
pipeline systems.
(cost $1,504,822)
6,000 MIKRON HOLDING AG
Registered Shares 1,198,952 0.3
Machine tools and milling machine
producer.
(cost $773,404)
2,000 RIETER HOLDING AG
Registered Shares 1,222,974 0.3
Leading supplier of spinning machinery
for the textile industry.
(cost $682,620)
Percent
No. of Value of Net
Shares Security (Note A) Assets
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1,200 SAURER GRUPPE HOLDING
Registered Shares $ 716,314 0.1%
Machinery maker with dominant
market share.
(cost $476,185)
1,200 SCHINDLER HOLDING AG
Participation Certificates 1,921,817 0.4
One of the world's largest elevator
companies and a leading Swiss
machinery enterprise.
(cost $1,321,735)
1,500 SIG SCHWEIZERISCHE INDUSTRIE-
GESELLSCHAFT HOLDING AG
Registered Shares 884,473 0.2
Medium-sized machinery manufacturer
with interests in the packaging, defense
and railway industries.
(cost $948,787)
----------- ----
8,528,500 1.8
MISCELLANEOUS INDUSTRIES - 1.9%
3,800 ALUSUISSE-LONZA GROUP LTD
Registered Shares 4,426,003 0.9
A major aluminum producing and
processing company.
(cost $2,765,161)
1,000 GRETAG-MACBETH HOLDING AG
Registered Shares 360,341 0.1
Offers a spectrum of benchtop and portable
color measurement instrumentation, color
formulation and color quality control
systems, densitometers and visual color
standards.
(cost $357,203)
6,000 HUBER & SUHNER AG
Registered Shares 2,031,011 0.4
Manufactures a wide range of products,
extending from cables for energy and
electrical transmission to special
products such as rubber.
(cost $1,904,277)
11
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets (continued) December 31, 1998
Percent
No. of Value of Net
Shares Security (Note A) Assets
- --------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS - (CONTINUED)
MISCELLANEOUS INDUSTRIES - (CONTINUED)
1,500 KOMAX HOLDING AG
Registered Shares $ 753,440 0.1%
World leading manufacturer of wire
processing machines.
(cost $604,653)
2,200 PHOENIX MECANO AG
Bearer Shares 1,321,249 0.3
Leading Swiss packaging manufacturer
for the mechanical engineering and
electronics industry.
(cost $1,032,220)
1,200 STRAUMANN HOLDING AG
Registered Shares** 262,066 0.1
Develops, produces and sells surgical
implants and instruments for dental,
medicine, jaw and face surgery.
(cost $342,055)
----------- ----
9,154,110 1.9
MISCELLANEOUS SERVICES - 3.5%
16,000 ADECCO SA*
Bearer Shares 7,302,905 1.6
Leading personnel and temporary
employment company.
(cost $5,527,562)
2,500 COMPAGNIE FINANCIERE RICHEMONT AG
Bearer Shares 3,534,251 0.7
Investment company with principal
interests in luxury goods and tobacco.
(cost $1,622,497)
700 KUONI TRAVEL HOLDING LTD.
Registered Shares 2,777,171 0.6
Leader in the Swiss travel and tourism
sector with subsidiaries in the United
Kingdom, Germany, France and Austria.
(cost $1,525,845)
No. of Value of Net
Shares Security (Note A) Assets
- --------------------------------------------------------------------------------
2,400 MOEVENPICK HOLDING LTD.
Bearer Shares $ 1,341,778 0.3%
Through its subsidiaries, invests in the
hotel and restaurant business worldwide.
Also produces food items under the
Moevenpick name, including ice cream,
coffee, salmon and jams.
(cost $829,529)
5,000 PUBLIGROUPE LTD.
Participation Certificates 1,528,718 0.3
Largest Swiss advertising intermediary.
(cost $1,049,456)
----------- ----
16,484,823 3.5
PHARMACEUTICALS - 15.4%
2,200 ARES SERONO SA
Bearer Shares 3,484,895 0.7
Develops and markets pharmaceutical
and diagnostic products, and is the
worldwide market leader in pharmaceutical
products for the treatment of infertility.
(cost $2,486,633)
5,650 ROCHE HOLDINGS AG*
Dividend Rights Certificates 68,933,537 14.7
Worldwide pharmaceutical company.
(cost $15,895,280)
----------- ----
72,418,432 15.4
RETAILERS - 1.2%
2,500 BON APPETIT HOLDING
Registered Shares 1,363,107 0.3
Swiss market leader that operates
"Cash and Carry."
(cost $1,008,766)
12
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded) December 31, 1998
Percent
No. of Value of Net
Shares Security (Note A) Assets
- --------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS - (CONTINUED)
RETAILERS - (CONTINUED)
1,500 JELMOLI HOLDING LTD.
Bearer Shares $ 1,681,590 0.4%
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 $888,220)
5,000 USEGO-HOFER CURTI AG
Registered Shares 1,037,344 0.2
Wholesales and distributes food
products to its own stores,
independent retailers and franchise
shops throughout Switzerland
and Austria.
(cost $1,105,446)
6,000 VALORA HOLDINGS AG
Registered Shares 1,622,625 0.3
Operates restaurants, food vending
machines and specialty retail stores.
(cost $1,369,815)
----------- ----
5,704,666 1.2
TELECOMMUNICATIONS - 0.8%
9,000 SWISSCOM AG
Registered Shares** 3,767,198 0.8
Operates public telecommunication
networks and offers network application
services.
(cost $2,818,090)
----------- ----
3,767,198 0.8
No. of Value of Net
Shares Security (Note A) Assets
- --------------------------------------------------------------------------------
TRANSPORT - 0.1%
2,500 SAIRGROUP
Registered Shares $ 620,587 0.1%
Switzerland's largest airline company.
(cost $463,168)
----------- ----
620,587 0.1
TOTAL COMMON STOCKS
(Cost $167,599,717) 452,631,484 96.3
----------- ----
BONDS - 0.3%
1,600 SWISSAIR CONVERTIBLE BOND, 0.25%
07/08/02
(Cost $1,255,166) 1,297,867 0.3
----------- ----
TOTAL BONDS
(Cost $1,255,166) 1,297,867 0.3
----------- ----
TOTAL INVESTMENTS
(Cost $168,854,883)*** 453,929,351 96.6
OTHER ASSETS IN EXCESS OF LIABILITIES 15,986,477 3.4
----------- ----
NET ASSETS APPLICABLE TO
24,642,032 SHARES OF
COMMON STOCK OUTSTANDING $469,915,828 100.0%
=========== =====
NET ASSET VALUE PER SHARE
($469,915,828 4 24,642,032) $19.07
=====
- --------------------------------------------------------------------------------
* One of the ten largest portfolio holdings.
** Non-Income producing security.
*** Aggregate cost for federal tax purposes was $168,883,300
Descriptions of the companies have not been audited by Deloitte & Touche
LLP.
See Notes to the Financial Statements.
13
<PAGE>
<TABLE>
<CAPTION>
THE SWISS HELVETIA FUND, INC.
- -----------------------------------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1998
<S> <C>
INVESTMENT INCOME:
Dividends (Less foreign taxes withheld of $864,025) ................................... $ 5,041,290
Interest .............................................................................. 52,555
------------
Total income ........................................................................ 5,093,845
------------
EXPENSES:
Investment advisory fee ............................................................... 3,563,487
Administration fee .................................................................... 437,159
Directors' fees and related expenses .................................................. 221,842
Custodian fees ........................................................................ 213,178
Professional fees ..................................................................... 165,861
Accounting fee ........................................................................ 131,254
Miscellaneous ......................................................................... 110,860
Printing and postage .................................................................. 88,295
Franchise fee ......................................................................... 70,691
Transfer agent fee .................................................................... 60,847
------------
Total expenses ...................................................................... 5,063,474
------------
Net investment income ...................................................................... 30,371
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain from security transactions .......................................... 23,170,402
Net realized foreign exchange gain .................................................... 2,462,144
Change in unrealized appreciation/depreciation of investments ......................... 63,014,424
Change in unrealized appreciation/depreciation on translation of assets and liabilities
denominated in foreign currency ..................................................... (14,447)
------------
Net gain on investments ............................................................... 88,632,523
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................................... $ 88,662,894
============
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements.
14
<PAGE>
<TABLE>
<CAPTION>
THE SWISS HELVETIA FUND, INC.
- -----------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31,
-------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase/(Decrease) in Net Assets:
Operations:
Net investment income/(expenses in excess of income) ......... $ 30,371 $ (491,809)
Net realized gain from security transactions ................. 23,170,402 9,867,108
Net realized foreign exchange gain/(loss) .................... 2,462,144 (430,653)
Change in unrealized appreciation/depreciation of investments. 63,014,424 110,377,806
Change in unrealized depreciation on translation of
assets and liabilities denominated in foreign currency ..... (14,447) (10,258)
------------- -------------
Net increase in net assets resulting from operations ......... 88,662,894 119,312,194
------------- -------------
Dividends to Shareholders from:
Net investment income: ....................................... (1,651,016) (25,030)
Capital Gains Distribution: .................................. (23,126,547) (10,580,024)
------------- -------------
Total distributions to shareholders ........................ (24,777,563) (10,605,054)
------------- -------------
Capital Share Transactions:
Value of shares issued in reinvestment ....................... -- 1,315,515
------------- -------------
Total increase from capital share transactions ............... -- 1,315,515
------------- -------------
Total increase in net assets ................................. 63,885,331 110,022,655
Net Assets:
Beginning of year ............................................ 406,030,497 296,007,842
------------- -------------
End of year .................................................. $ 469,915,828 $ 406,030,497
============= =============
- ---------------------------------------------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements.
15
<PAGE>
<TABLE>
<CAPTION>
THE SWISS HELVETIA FUND, INC.
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data. This information has been derived from information
provided in the financial statements and market price data for the Fund's
shares.
For the Year Ended December 31,
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE1:
NET ASSET VALUE AT BEGINNING OF YEAR ............. $ 16.48 $ 12.07 $ 12.28 $ 9.90 $ 10.48
------------ ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.004 (0.02) 0.05 0.03 0.02
Net realized and unrealized gain on investments 2 3.60 4.86 0.12 3.41 0.06
------------ ----------- ----------- ----------- -----------
Total from Investment Operations ................. 3.60 4.84 0.17 3.44 0.08
------------ ----------- ----------- ----------- -----------
Capital charge resulting from the issuance
of fund shares ................................. -- -- -- (0.73) (0.03)
------------ ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends from net investment income ............. (0.07) -- (0.05) (0.03) (0.13)
Distributions from net realized
capital gains .................................. (0.94) (0.43) (0.33) (0.30) (0.50)
------------ ----------- ----------- ----------- -----------
Total distributions .............................. (1.01) (0.43) (0.38) (0.33) (0.63)
------------ ----------- ----------- ----------- -----------
Net asset value at end of year ................... $ 19.07 $ 16.48 $ 12.07 $ 12.28 $ 9.90
============ =========== =========== =========== ===========
Market value per share, end of year .............. $ 16.00 $ 13.72 $ 9.94 $ 10.63 $ 9.44
============ =========== =========== =========== ===========
TOTAL INVESTMENT RETURN3:
Based on market value per share .................. 22.29% 42.67% (2.93)% 16.30% (10.67)%
Based on net asset value per share ............... 21.37% 41.10% 1.98% 26.28% 1.47%
RATIOS TO AVERAGE NET ASSETS:
Expenses ......................................... 1.09% 1.17% 1.22% 1.38% 1.57%
Net investment income/(expenses
in excess of income) ........................... 0.01% (0.14)% 0.25% 0.27% 0.02%
SUPPLEMENTAL DATA:
Net assets at end of year(000) ................... $ 469,916 $ 406,030 $ 296,008 $ 301,204 $ 181,795
Average net assets during year (000) ............. $ 464,967 $ 354,923 $ 306,069 $ 231,234 $ 184,112
Portfolio turnover rate .......................... 13% 13% 19% 10% 28%
</TABLE>
- -------------------
1 Per share amounts for the years ended December 31, 1994 through December 31,
1997 have been restated to reflect 2:1 stock split effective October 16, 1998.
2 Includes net realized currency gain.
3 Total investment return based on market value differs from total investment
return based on net asset value due to changes in the relationship between
the Fund's market price and its net asset value per share.
4 Less than $0.01 per share.
16
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements
A. SIGNIFICANT ACCOUNTING POLICIES - The Swiss Helvetia Fund, Inc. (the "Fund")
which was incorporated in Delaware on October 24, 1986 and began operations
August 27, 1987, is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, closed-end Investment Management Company. Its
objective is to seek long-term growth of capital through investment in equity
and equity-linked securities of Swiss companies.
When preparing the Fund's financial statements, management makes estimates
and assumptions in accordance with generally accepted accounting principles.
These estimates affect 1) the assets and liabilities that we report at the
date of the financial statements; 2) the contingent assets and liabilities
that we disclose at the date of the financial statements; and 3) the revenues
and expenses that we report for the period. Our estimates could be different
from the actual results. Under certain circumstances, it is necessary to
reclassify prior year information in order to conform to the current year's
presentation. The Fund's significant accounting policies are:
SECURITY VALUATION - The Fund states its investments at value. The Fund
values a security that is traded on the Swiss stock exchange at the last
sales price on the day of valuation. If there is no sales price available,
the Fund values the security at the mean between the closing bid and asked
prices for that day. A security that is not traded on the Swiss stock
exchange is valued at the mean between the current bid and asked prices. If
bid and asked prices are not available, the Fund uses a fair value that is
determined in good faith by or under the direction of the Fund's Board of
Directors.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME - The Fund uses the trade date
to account for security transactions and the specific identification method
for financial reporting and income tax purposes to determine the cost of
investments sold or redeemed. Interest income is recorded on an accrual
basis. Dividend income is recorded on the ex-dividend date. The Fund records
Swiss withholding tax as an expense, net of an amount receivable from Swiss
tax authorities in accordance with a tax treaty.
FOREIGN CURRENCY TRANSLATION - The Fund's books and records are maintained in
U.S. dollars. The Fund translates Swiss franc amounts into U.S. dollars based on
the following criteria.
o The Fund adjusts asset and liability accounts to reflect the current
exchange rate at the end of the period.
o The Fund includes in the period's net realized foreign exchange gain, the
exchange gain or loss that occurs due to exchange rate changes from the
time an income or expense amount is accrued and the time it is realized.
o The Fund records securities at cost based upon exchange rates at the time
that Swiss francs are purchased or received. Exchange rates are identified
on a first-in, first-out basis.
It is not practical for the Fund to distinguish the portion of its operation
results that occur due to exchange rate changes from the fluctuations that
occur due to market price changes.
FEDERAL INCOME TAXES - The Fund determines its distributions according to
income tax regulations, which may be different from generally accepted
accounting principles. As a result, the Fund occasionally makes
reclassifications within its capital accounts to reflect income and gains
that are available for distribution under income tax regulations.
The Fund declares and pays dividends from net investment income annually, and
records distributions of capital gains on the ex-dividend date. The Fund is
organized as a regulated investment company. As long as it maintains this
status and distributes to its shareholders all of its taxable net investment
income and net realized capital gains, it will be exempt from most, if not
all, federal income and excise taxes. As a result, the Fund has made no
provisions for federal income taxes.
B. INVESTMENT ADVISORY FEES, TRANSACTIONS WITH AFFILIATES AND OTHER FEES-
Hottinger Capital Corp. ("HCC"), which is owned jointly by Hottinger U.S.,
Inc. and Hottinger & Cie (Zurich), is the Fund's investment advisor. As
compensation for its advisory services, the Fund pays HCC an annual fee based
on the Fund's month-end net assets. This fee is calculated and paid monthly
at the following annual rates. 1.00% of the first $60 million, 0.90% of the
next $40 million,
17
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded)
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 over $600 million. For the year ended
December 31, 1998, advisory fees were $3,563,487 of which $299,765 was
payable at the end of the period. The Fund paid Hottinger & Cie $60,450 in
brokerage commissions for the year ended December 31, 1998.
Investment Company Capital Corp. ("ICC"), a subsidiary of Bankers Trust
Corporation, is the Fund's administrator. As compensation for its
administrative services, the Fund pays ICC an annual fee based on the Fund's
average monthly net assets. This fee is calculated weekly and paid monthly at
the following annual rates: 0.20% of the first $75 million, 0.15% of the next
$75 million, 0.10% of the next $75 million, 0.05% of the next $275 million,
and 0.03% of the amount over $500 million.
Certain officers and/or directors of the Fund are officers and/or directors
of HCC, Hottinger U.S., Inc., Hottinger & Cie and/or ICC.
PFPC Trust Company is the Fund's custodian and PFPC, Inc. is the Fund's
transfer agent. Both organizations are wholly owned indirect subsidiaries of
PNC Bank Corp. PFPC Trust Company and the Fund have entered into an agreement
with Credit Suisse First Boston that provides for the custody of Swiss
securities that the Fund holds.
C. CAPITAL SHARE TRANSACTIONS - The Fund is authorized to issue up to 50 million
shares of $.001 par value capital stock. HCC owned 28,810 of the 24,642,032
shares outstanding on December 31, 1998.
D. DIRECTORS' FEES - The Fund pays each director who is not affiliated with the
Fund, its investment advisor or administrator approximately $8,200 per annum
in compensation, except for the Chairman of the Audit Committee, who receives
an annual fee of approximately $9,025. In addition, each unaffiliated
director receives $750 for each attended directors' meeting, $750 for each
committee meeting attended, if it is held separately, and reimbursement for
out-of-pocket expenses in conjunction with attendance at meetings. Accrued
directors' fees were $93,818 at December 31, 1998.
E. INVESTMENT TRANSACTIONS - Excluding short-term obligations, purchases of
investment securities aggregated $60,055,200 and sales of investment
securities aggregated $97,649,044 for the year ended December 31, 1998. At
December 31, 1998 the payable for securities purchased amounted to $237,144.
On December 31, 1998, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was
$285,288,859, aggregate gross unrealized depreciation of all securities in
which there is an excess of tax cost over value was $214,391 and net
unrealized appreciation was $285,074,468.
F. FEDERAL INCOME TAX INFORMATION - Generally accepted accounting principles
require that certain components of net assets be reclassified to reflect
permanent differences between financial reporting and tax purposes.
Accordingly, a permanent book/tax difference of $2,359,427 has been
reclassified between net investment income and undistributed net realized
gain from security transactions, respectively. These reclassifications have
no effect on net assets or net asset values per share.
G. NET ASSETS - At December 31, 1998, net assets consisted of:
Paid-in capital ....................................... $ 183,587,582
Undistributed net investment income ................... (738,782)
Undistributed net realized gain
from security transactions .......................... 544,781
Unrealized appreciation of investments ................ 285,074,468
Unrealized currency translation loss .................. (29,785)
-------------
$ 469,915,828
=============
H. SUBSEQUENT EVENT - On February 5, 1999, the Fund's Board of Directors
authorized the Fund to repurchase up to 1,000,000 shares of its Common Stock
in open market purchases. The Board of Directors also declared a long-term
capital gains distribution in the amount of $0.025 per share and an income
distribution in the amount of $0.03 per share for the remainder of the
calendar year 1998. The distributions will be paid on February 23, 1999 to
shareholders of record on February 16, 1999. The ex-date is February 11,
1999.
18
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders,
The Swiss Helvetia Fund, Inc.:
We have audited the accompanying statement of net assets of the The Swiss
Helvetia Fund, Inc. as of December 31, 1998, and the related statements of
operations for the year then ended and changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 at December
31, 1998 by correspondence with the custodian and broker. 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 audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The Swiss Helvetia
Fund, Inc. as of December 31, 1998, the results of its operations, the changes
in its net assets and the financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
February 2, 1999
(February 5, 1999 as to Note H)
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.
STOCK REPURCHASE PROGRAM
On February 5, 1999, the Fund announced that its Board of Directors had
authorized the Fund to repurchase up to 1,000,000 shares of its common stock in
open market purchases to be effected on the New York Stock Exchange. The Board
of Directors and Management expect to make these purchases from time to time
during 1999. The principal purpose of the repurchases is to enhance stockholder
value by increasing the Fund's net asset value per share without creating a
meaningful adverse effect upon the Fund's expense ratio. This may also have the
effect of temporarily reducing the current discount of approximately 18 percent.
- --------------------------------------------------------------------------------
Notice is hereby given in accordance with section 23(c) of the Investment
Company Act of 1940 that the Fund may, from time to time, purchase shares of its
Common Stock in the open market in addition to the above program.
- --------------------------------------------------------------------------------
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.
19
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED) (CONCLUDED)
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, 1998.
Domestic Ordinary Income .037
Foreign Source Income .068
------
Total Ordinary Income .105
======
Long-Term Capital Gains .900
------
Total Distributions 1.005
======
Foreign Tax Paid or Withheld .035
The foreign taxes paid or withheld per share represent taxes incurred by the
Fund on interest and dividends received by the Fund from foreign sources.
Foreign taxes paid or withheld should be included in taxable income with an
offsetting deduction from gross income or as a credit for taxes paid to foreign
governments. You should consult your tax advisor regarding the appropriate
treatment of foreign taxes paid.
20
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
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 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 form to your
broker or PFPC 10 days prior to the record date for that dividend.
HOW DOES THE PLAN WORK?
When a dividend 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 on the
valuation date.
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 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 8950
Wilmington, Delaware, 19899
1-800-852-4750
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