UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05128
THE SWISS HELVETIA FUND, INC.
1270 Avenue of the Americas, Suite 400
New York, New York 10020
1-888-SWISS-00
Alexandre de Takacsy, President
Hottinger et Cie
3 Place des Bergues
C.P. 395
CH-1201 Geneva
Switzerland
Date of fiscal year end: December 31
Date of reporting period: January 1, 2010 December 31, 2010
Item 1. Reports to Stockholders.
THE SWISS HELVETIA FUND, INC.
1
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders
2
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
3
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
4
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
5
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
6
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
7
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
8
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
9
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
10
THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (concluded)
Peer Group/Indices Performance Comparison in Swiss Francs1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total return as of year ended
December 31 |
Cumulative Performance 12/31/96- 12/31/10 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 |
2009 |
2008 |
2007 |
2006 |
2005 |
2004 |
2003 |
2002 |
2001 |
2000 |
1999 |
1998 |
1997 |
|||||||||||||||||||||||||||||||||||||||||||||||
Swiss Helvetia Fund |
7.64% | -5.05% | -28.19% | -2.67% | 20.56% | 33.20% | 7.75% | 22.54% | -20.40% | -22.91% | 14.06% | 14.70% | 15.57% | 53.99% | 116.23% | |||||||||||||||||||||||||||||||||||||||||||||
Swiss Performance Index (SPI) |
2.92% | 23.18% | -34.05% | -0.05% | 20.67% | 35.61% | 6.89% | 22.06% | -25.95% | -22.03% | 11.91% | 11.69% | 15.36% | 55.19% | 130.51% | |||||||||||||||||||||||||||||||||||||||||||||
Swiss Market Index (SMI) |
-1.68% | 18.27% | -34.77% | -3.43% | 15.85% | 33.21% | 3.74% | 18.51% | -27.84% | -21.11% | 7.47% | 5.71% | 14.28% | 58.93% | 63.24% | |||||||||||||||||||||||||||||||||||||||||||||
iShares Switzerland2 |
3.24% | 18.55% | -31.59% | -0.97% | 20.02% | 32.45% | 6.34% | 19.14% | -26.23% | -23.12% | 7.75% | 12.22% | 11.74% | 47.79% | 89.12% | |||||||||||||||||||||||||||||||||||||||||||||
CS EF (CH) Swiss Blue Chips3,7 |
1.51% | 19.98% | -35.72% | -1.66% | 18.78% | 32.27% | 2.75% | 18.13% | -28.75% | -22.12% | 10.97% | 7.57% | 14.21% | 59.90% | 77.59% | |||||||||||||||||||||||||||||||||||||||||||||
UBS (CH) Equity Fund4,7 |
2.18% | 22.44% | -33.76% | -2.55% | 18.98% | 33.50% | 5.00% | 18.14% | -26.02% | -22.04% | 7.42% | 6.43% | 12.75% | 55.94% | 84.48% | |||||||||||||||||||||||||||||||||||||||||||||
Pictet (CH) Swiss Equities5,7 |
2.07% | 27.00% | -36.50% | 1.94% | 19.37% | 37.06% | 7.05% | 20.10% | -27.93% | -22.35% | 7.34% | 9.38% | 11.05% | 55.65% | 100.46% | |||||||||||||||||||||||||||||||||||||||||||||
Saraswiss (Bank |
3.71% | 18.62% | -34.87% | -2.86% | 18.69% | 33.05% | 2.93% | 19.64% | -28.51% | -24.45% | 9.72% | 7.10% | 14.41% | 53.57% | 68.78% |
Sources: Bloomberg, management companies websites and Citi Fund Services, LLC.
1 | Performance of funds is based on changes in each funds NAV over a specified period. In each case total return is calculated assuming reinvestment of all distributions. Funds listed, other than iShares MSCI Switzerland, are not registered with the Securities and Exchange Commission. Performance and descriptive information about the funds are derived from their published investor reports and websites, which are subject to change. |
2 | Shares of iShares MSCI Switzerland are traded on the NYSE Arca and seeks to provide investment results that correspond to the performance of the Swiss market, as measured by the MSCI Switzerland Index. These stocks represent Switzerlands largest and most established public companies, accounting for approximately 85% of the market capitalization of all Switzerlands publicly traded stocks. Performance of shares of iShares MSCI Switzerland is calculated based upon the closing prices of the period indicated using the Swiss franc/U.S. dollar exchange rate as of noon each such date, as reported by Bloomberg. Such exchange rates were as follows: 12/31/97 = 1.46, 12/31/98 = 1.38, 12/31/99 = 1.60, 12/31/00 = 1.61, 12/31/01 = 1.67, 12/31/02 = 1.39, 12/31/03 = 1.24, 12/31/04 = 1.14, 12/31/05 = 1.32, 12/31/06 = 1.22, 12/31/07 = 1.13, 12/31/08 = 1.06, 12/31/09 = 1.03, 12/31/10 = 0.93. |
3 | This fund gives investors access to the Swiss equity market. It has a broadly-diversified portfolio geared to the long-term value growth, with a preference to large cap stocks. Stock selection is based on criteria such as company valuation, business climate, market positioning and management quality. |
4 | This fund invests primarily in major Swiss companies. Quality criteria used for determining relative weightings of companies include: strategic orientation, strength of market position, quality of management, soundness of earnings, growth potential and potential for improving shareholder value. The investment objective seeks to provide results that are aligned with the SPI performance. |
5 | This fund invests in shares of companies listed in Switzerland and included in the SPI, mainly in blue chip stocks. |
6 | This fund invests in shares of Swiss companies. It weights individual sectors relative to the SPI on the basis of their expected relative performance. It focuses on liquid blue-chip stocks. |
7 | These funds are not available for U.S. residents or citizens. |
Past performance is no guarantee of future results. |
11
THE SWISS HELVETIA FUND, INC.
Certain Information Concerning Directors (Unaudited)
The following tables set forth certain information about each person currently serving as a Director of the Fund, including his or her beneficial ownership of Common Stock of the Fund. All information presented in the tables is as of December 31, 2010. Information is presented separately with respect to Directors who have been determined to be non-interested Directors and Directors who are interested Directors under the Investment Company Act of 1940, as amended.
Class I Non-Interested Directors (Terms Will Expire in 2013) | ||||||||
Name, Address & Age |
Position(s) with Fund (Since) |
Principal Occupation(s) During At Least The Past Five Years |
Other Directorships Held By Director During At Least The Past |
Shares and Dollar Beneficially Owned1 | ||||
Claude W. Frey Clos 108 2012 Auvernier Switzerland Age: 67 |
Director (1995); Member of the Governance/ Nominating Committee (2002) and the Pricing Committee (2009) | President of the Swiss Parliament from 1994 to 1995; President of the Swiss Police Academy (Neuchâtel) from 1996 to 2003; Member of the Swiss Parliament from 1979 to 2003; Parliamentary Assembly of the Council of Europe (Strasbourg) from 1996 to 2004; Executive Board of the North-South Centre (Lisbon) since 1999; President of the National Committee for Foreign Affairs from 2001 to 2003; Vice President of the National Committee for Foreign Affairs from 1999 to 2001; Chairman of the Board: Bérun Frais SA (Marin) since 2002; Federation of Swiss Food Industries (Berne) from 1991 to 2001; Association of Swiss Chocolate Manufacturers (Berne) from 1991 to 2000; Vice Chairman of the Board: Federation of Swiss Employers Association (Zurich) from 1997 to 2001 | Chairman of the Board: Infra Tunnel SA (Marin); Beton Frais SA (Marin); Member of the Board: SCCM SA (Crans-Montana); Dexia Banque Privee (Suisse), Zurich since 2003, Vice Chairman of Board since 2009; Dexia Public Finance (Suisse) Geneva since 2006; Racemark Industries SA (Suisse) Couvet since 2006; Chairman of the Executive Board of the North-South Centre (Lisbon); Chairman of the Federal Committee for Employee Pension Plans (Berne); Chairman of the Advisory Board of International Swiss State Broadcast since 2009; President of the Steering Committee of InterNutrition (Zurich) from 2000 to 2008 |
5,086 $50,001-$100,000 | ||||
Jean-Marc Boillat Les Gadras 47120 Villeneuve de Duras France Age: 69 |
Director (2005); Member of the Governance/ Nominating Committee (2005) and the Pricing Committee (2009) | Former CEO, Tornos-Bechler S.A., Moutier; Former Ambassador of Switzerland in various countries, including Lebanon, Cyprus, Angola, Mozambique and Argentina | None |
4,600 $50,001-$100,000 | ||||
R. Clark Hooper 1156 St. Andrews Road Bryn Mawr, PA 19010 Age: 64 |
Director (2007); Member (2007) and Chairperson (2009) of the Audit Committee; Member of the Governance/ Nominating Committee (2007) and the Pricing Committee (2008) | President of Dumbarton Group LLC (regulatory consulting) from 2003 to 2007; Various positions, including Executive Vice President of Regulatory Policy and Oversight (2002-2003) and Strategic Programs (1992-2002) of the National Association of Securities Dealers, Inc. (currently, Financial Industry Regulatory Authority, Inc.) from 1972 to 2003 | Director of certain funds in the American Funds fund complex (46 funds) since 2003; Director of JP Morgan Value Opportunities Fund since 2005; Chairman and Member of the Executive Committee and Board of Trustees of Hollins University (VA); and Trustee of Childrens Hospital of Philadelphia (PA) | 1,130 $10,001-$50,000 |
12
THE SWISS HELVETIA FUND, INC.
Certain Information Concerning Directors (Unaudited) (continued)
Class II Non-Interested Directors (Terms Will Expire in 2011) | ||||||||
Name, Address & Age |
Position(s) with Fund |
Principal Occupation(s) During At Least The Past Five Years |
Other Directorships Held By Director |
Shares and Dollar Common Stock Beneficially Owned1 | ||||
Didier Pineau-Valencienne c/o SAGARD Private Equity Partners, 24/32 Rue Jean Goujon 75008 Paris, France Age: 79 |
Director (1999); Member (2002) and Chairman (2007) of the Governance/ Nominating Committee; Member of the Audit Committee (1999) and the Pricing Committee (2008) | Honorary Chairman of Schneider Electric SA (industrial conglomerate) since 1999; Chairman of the Board and Chief Executive Officer of Schneider Electric SA from 1981 to 1999; Chairman of AFEP from 1999 to 2001; Vice Chairman of Credit Suisse First Boston (Europe) Limited (investment banking) from 1999 to 2002; Senior Adviser of Credit Suisse First Boston (Europe) Limited from 2002 to 2008; Partner of SAGARD Private Equity Partners (France) | Director: Fleury Michon (France); AFEP (France); Wendel Investissements (formerly, Compagnie Générale dIndustrie et de Participations (CGIP)) from 1996 to 2005; Member of the Board of Pernod Ricard from 2003 to 2009; Member of the Supervisory Board of AXA-UAP (France) (insurance) from 1998 to 2001; Member of Advisory Board of Booz Allen & Hamilton (USA) from 1997 to 2002; Member of LAGARDÈRE (France) (holding company) |
3,070 $10,001-$50,000 | ||||
Samuel B. Witt, III, Esq. 1802 Bayberry Court Suite 401 Richmond, Virginia 23226 Age: 75 |
Director (1987) and Chairman of the Board of Directors (2006); Chairman of the Audit Committee (1993 to 2006); Member of the Governance/ Nominating Committee (2002) and the Pricing Committee (2008) | Samuel B. Witt, III, Attorney-at-Law, since August 1993 | Trustee of The Williamsburg Investment Trust (11 funds) |
4,867 $50,001-$100,000 | ||||
Claus Helbig Mauerkircherstrasse 10, D-81679 Munich, Germany Age: 69 |
Director (2008); Member of the Governance/ Nominating Committee (2008), the Audit Committee (2009) and the Pricing Committee (2009) | Member of the Supervisory Board of: Audi AG (Ingolstadt) from 1998 to 2008, Bankhaus August Lenz & Co. AG (Munich) (Chairman) since 2002, GLL Real Estate Partners GmbH (Munich) (Chairman) since 2001, and HCM Capital Management AG (Munich) (Vice-Chairman) since 2004; Member of the European Advisory Board of Booz Allen Hamilton since 2003; and Member of the Global Advisory Board of Millennium Associates, Zug/CH since 2007; Director of Leo Capital Growth SPC (Cayman Islands) since 2007 | None | 1,000 $10,001-$50,000 | ||||
Richard Brealey Haydens Cottage The Pound Cookham Berks SL69 QE England Age: 75 |
Director (1987 to 1996 and since 2009); Member of the Governance/ Nominating Committee (2009) and the Pricing Committee (2009) | Emeritus Professor London Business School (LBS); Full-time faculty member LBS from 1968 to 1998; Special Advisor to the Governor of the Bank of England 1998-2001 | Director of the HSBC Investor Funds from 2004 to 2008 | 13,018 over $200,000 |
13
THE SWISS HELVETIA FUND, INC.
Certain Information Concerning Directors (Unaudited) (continued)
Class III Non-Interested Directors (Terms Will Expire in 2012) | ||||||||
Name, Address & Age |
Position(s) with Fund |
Principal Occupation(s) During At Least The Past Five Years |
Other Directorships Held By Director |
Shares and Dollar Beneficially Owned1 | ||||
Michael Kraynak, Jr. 401 Mountain Avenue Ridgewood, New Jersey 07450 Age: 80 |
Director (2005); Member of the Audit Committee (2006), the Governance/ Nominating Committee (2005) and the Pricing Committee (2008) | Partner of Brown Brothers Harriman & Co.; Member, BBH Trust Company Investment Committee | President of the Robert Brunner Foundation (private foundation); Trustee of the Ridgecrest Senior Citizens Housing Corp.; Former Member of the Ridgewood (NJ) Financial Advisory Council; Former Director: Yale Alumni Association of Bergen County; Director of American Australian Association; Chairman, Finance Committee; Member, Executive Committee from 1995 to 2010 | 10,000 $100,001-$200,000 | ||||
Stephen K. West, Esq. Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004 Age: 82 |
Director (1995); Chairman of the Pricing Committee (2008); Member of the Audit Committee (1996 to 2004 and since 2006) and the Governance/ Nominating Committee (2002) | Senior Counsel of Sullivan & Cromwell LLP (law firm) since 1997, including counsel to the Funds Non-Interested Directors; Partner of Sullivan & Cromwell LLP from 1964 to 1996 | Director: Pioneer Funds (registered investment companies) (44 portfolios); INVESCO (formerly, AMVESCAP) (investment manager) from 1999 to 2005; First ING Insurance Company of New York from 1983 to 2001; Winthrop Focus Funds (registered investment companies) from 1988 to 1997; ING America Holdings, Inc. (insurance and broker-dealer holding company) from 1988 to 1998; Dresdner RCM Global Strategic Income Fund, Inc. (registered investment company) from 1997 to 2002 |
19,771 over $200,000 | ||||
David R. Bock 6003 Overlea Road Bethesda, Maryland 20816 Age: 66 |
Director (2010); Member of the Governance/ Nominating Committee (2010) and Pricing Committee (2010) |
Managing Partner, Federal City Capital Advisors since 1997; Interim CEO, Oxford Analytical, January to June 2010; Executive Vice President and Chief Financial Officer of I-trax, Inc. (health care services) from 2004 to 2008; Managing Director of Lehman Brothers from 1992 to 1995; Executive at The World Bank from 1974 to 1992 | Director of the Pioneer Funds (53 portfolios) since 2005; Director and Member of the International Advisory Board of Oxford Analytica (political and economic consulting) since 2008; Director of Enterprise Community Investment (private investment company) from 1985 to 2010; Director of New York Mortgage Trust from 2004 to 2008; Director of I-trax, Inc. from 2000 to 2004 | None |
14
THE SWISS HELVETIA FUND, INC.
Certain Information Concerning Directors (Unaudited) (concluded)
Class I Interested Director (Term Will Expire in 2013) | ||||||||
Name, Address & Age |
Position(s) with Fund |
Principal Occupation(s) During At Least The Past Five Years |
Other Directorships Held By Director |
Shares and Dollar Beneficially Owned1 | ||||
Alexandre de Takacsy2,3 Financière Hottinguer 43, rue Taitbout 75009 Paris France Age: 81 |
Director (1987 to 1994; 1998 to present); and President (2009) | Vice Chairman of the Board, Director, Chief Executive Officer, President, Secretary and Member of the Investment Committee of HCC; Senior Advisor to the Hottinger Group and President of Hottinger U.S., Inc. (HUS) until December 2004; Retired Senior Executive, Royal Bank of Canada | None |
1,057 $10,001-$50,000 |
Class III Interested Director (Term Will Expire in 2012) | ||||||||
Name, Address & Age |
Position(s) with Fund |
Principal Occupation(s) During At Least The Past Five Years |
Other Directorships Held By Director |
Shares and Dollar Beneficially Owned1 | ||||
Paul Hottinguer2,3 Hungerstrasse H2 8832 Wilen b. Wollerau Switzerland Age: 68 |
Director (1989); Chairman of the Board of Directors (1989 to 2006); and Chief Executive Officer (1989 to 2002) | Vice Chairman of the Board, Director and Member of Investment Committee of HCC; AXA International Obligations (finance) since 1996; Managing Director: Intercom (holding company) since 1984; Administrator: Investissement Provence SA (holding company) since 1996; Permanent Representative: Credit Suisse Hottinguer to Provence International (publicly held French mutual fund), Credit Suisse Hottinguer to CS Oblig Euro Souverain (mutual fund); Censor -- Provence Europe (mutual fund); Credit Suisse Hottinguer to PPC; Credit Suisse Hottinguer to Croissance Britannia (investment fund); Credit Suisse Hottinguer to Harwanne Allemagne; General Partner: Hottinger et Cie (Zurich) until December 2007; President: Gaspee (real estate) from 1992 to 2006; Financière Hottinguer (holding company) from 1990 to 2002; Financière Provence Participations (venture capital firm) from 1990 to 2002; Finaxa (finance) from 1982 to 2004; Financière Hottinguer to CS Institutions Monetaire (mutual fund) from 1990 to 2002; Financière Hottinguer to CS Court Terme (mutual fund) from 1990 to 2002 | Director of HUS until December 2004 |
11,433 $100,001-$200,000 |
15
THE SWISS HELVETIA FUND, INC.
Certain Information Concerning Executive Officers (Unaudited)
The following table sets forth certain information about each person currently serving as an Executive Officer of the Fund, including his beneficial ownership of Common Stock of the Fund. All information presented in the table is as of December 31, 2010.
Executive Officers4 | ||||||||
Name, Address & Age |
Position(s) with Fund |
Principal Occupation(s) During At Least The Past Five Years |
Other Directorships Held By Officer |
Shares and Dollar Beneficially Owned1 | ||||
Rudolf Millisits3 HCC 1270 Avenue of the Americas Suite 400 New York, New York 10020 Age: 53 |
Chief Executive Officer (2009); Senior Vice President (2000); Treasurer and Chief Financial Officer (2002); and Vice President (1995 to 2000) | Director of HCC since December 2000; Chief Operating Officer of HCC since December 1998; Executive Vice President, Portfolio Manager, Member of Investment Committee and Chief Compliance Officer of HCC since September 1994; Assistant Secretary of HCC since August 1995; Chairman, Chief Executive Officer and Director of HUS since December 2004; Executive Vice President of HUS from 1994 to 2004; Assistant Secretary of HUS from 1995 to 2004; President and Chief Financial Officer of Hottinger Brothers LLC since 2004; Director of Hottinger Investment Managers S.A. since April 2008; Director of Hottinger Asset Management AG (Zurich) since February 2008 | N/A |
12,740 $100,001-$200,000 | ||||
Philippe R. Comby, CFA, FRM3 HCC 1270 Avenue of the Americas Suite 400 New York, New York 10020 Age: 44 |
Vice President (2000) | Director of HCC since September 2005; Senior Vice President of HCC since 2002; First Vice President of HCC from 1998 to 2002; Treasurer of HCC since 1997; Member of Investment Committee of HCC since 1996; Chief Investment Officer and Senior Vice President of Hottinger Brothers LLC since 2004; Director, President and Secretary of HUS since December 2004; Vice President of HUS until December 2004; Director of Hottinger Investment Managers S.A. since April 2008 | N/A |
3,778 $50,001-$100,000 | ||||
Edward J.
Veilleux Age: 67 |
Vice President (1987); Secretary (2002); and Treasurer (1987 to 2002) | President of EJV Financial Services LLC (investment company consulting) since May 2002; Senior Vice President of OMF II Funds (formerly known as the PBHG Funds) since January 2005; Director of Deutsche Asset Management from 1999 to 2002; Principal of BT Alex Brown Incorporated from 1989 to 1999; Executive Vice President of Investment Company Capital Corp. from 1987 to 2002 | N/A | 3,461 $50,001-$100,000 |
16
THE SWISS HELVETIA FUND, INC.
Certain Information Concerning Executive Officers (Unaudited) (concluded)
Executive Officers4 | ||||||||
Name, Address & Age |
Position(s) with Fund |
Principal Occupation(s) During At Least The Past Five Years |
Other Directorships Held By Officer |
Shares and Dollar Beneficially Owned1 | ||||
Patrick J. Keniston Foreside Compliance Services, LLC Three Canal Plaza, Suite 100 Portland, Maine 04101 Age: 46 |
Chief Compliance Officer (2008) | Director, Foreside Compliance Services since October 2008; Vice President, Citi Fund Services Ohio, Inc. from 2005 to 2008; Attorney, Citigroup Global Transaction Services from 2001 to 2005 | N/A | None |
1 | All Directors and executive officers as a group (16 persons) owned 300,422 shares which constitutes approximately 1.0% 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 1940 Act. Alexandre de Takacsy and Paul Hottinguer are Interested Persons because of their current positions with HCC. |
3 | HCC owns 207,211 shares of the Fund. Messrs. Hottinguer, de Takacsy, Millisits and Comby, constituting a majority of the directors of HCC, may be deemed to have voting and investment power over such shares. |
4 | Each executive officer serves on a year-to-year basis for an indefinite term, until his successor is elected and qualified. |
17
THE SWISS HELVETIA FUND, INC.
Review of Operations (Unaudited)
Trading activity for the year ended December 31, 2010 involved changes in the following positions:
18
THE SWISS HELVETIA FUND, INC.
Schedule of Investments | December 31, 2010 |
See Notes to Financial Statements.
19
THE SWISS HELVETIA FUND, INC.
Schedule of Investments (continued) | December 31, 2010 |
See Notes to Financial Statements.
20
THE SWISS HELVETIA FUND, INC.
Schedule of Investments (continued) | December 31, 2010 |
See Notes to Financial Statements.
21
THE SWISS HELVETIA FUND, INC.
Schedule of Investments (continued) | December 31, 2010 |
See Notes to Financial Statements.
22
THE SWISS HELVETIA FUND, INC.
Schedule of Investments (continued) | December 31, 2010 |
See Notes to Financial Statements.
23
THE SWISS HELVETIA FUND, INC.
Schedule of Investments (continued) | December 31, 2010 |
See Notes to Financial Statements.
24
THE SWISS HELVETIA FUND, INC.
Schedule of Investments (continued) | December 31, 2010 |
1 | One of the ten largest portfolio holdings. |
2 | Non-income producing security. |
3 | Affiliated Company. An affiliated company is a company in which the Fund has ownership of at least 5% of the companys outstanding voting securities. Transactions during the year with companies which were affiliates are as follows: |
Name of Issuer |
Shares |
Value as of |
Gross |
Gross |
Income |
Shares |
Value as of |
|||||||||||||||||||||
Addex Pharmaceuticals Ltd. |
488,370 | $ | 6,519,474 | $ | | $ | (1,245,879 | ) | $ | | 352,155 | $ | 3,706,298 |
See Notes to Financial Statements.
25
THE SWISS HELVETIA FUND, INC.
Schedule of Investments (concluded) | December 31, 2010 |
4 | Illiquid. There is no public market for these securities. Securities priced at Fair Value as determined by the Boards Pricing Committee. Restricted securities are not registered under the Securities Act of 1933, as amended, other than Rule 144A securities. At the end of the period, the aggregate value of these securities amounted to $22,301,191 or 4.77% of the Funds net assets. Additional information on these securities is as follows: |
Security |
Acquisition Date |
Acquisition Cost |
||||
Aravis Biotech II, LP | July 31, 2007 December 8, 2010 | $ | 1,759,036 | |||
Kuros Biosurgery Holding AG | August 10, 2009 August 28, 2009 | 2,516,639 | ||||
EyeSense AG Preferred Shares C | July 22, 2010 | 537,326 | ||||
NovImmune SA Common Shares | October 7, 2009 December 11, 2009 | 1,551,109 | ||||
NovImmune SA Preferred Shares B | October 7, 2009 December 11, 2009 | 2,062,307 | ||||
Spineart SA | December 22, 2010 | 2,623,329 | ||||
Synosia Therapeutics Holdings AG, Series A, Preferred Shares | December 13, 2010 | 171,778 | ||||
Synosia Therapeutics Holdings AG, Series B, Preferred Shares | October 17, 2008 February 23, 2009 | 1,740,545 | ||||
Synosia Therapeutics Holdings AG, Series C, Preferred Shares | August 30, 2010 | 206,225 | ||||
Zurmont Madison Private Equity, LP | September 13, 2007 September 9, 2010 | 8,480,050 | ||||
$ | 21,648,344 | |||||
* | Cost for Federal income tax purposes is $310,441,034 and net unrealized appreciation (depreciation) consists of: |
Gross Unrealized Appreciation |
$ | 180,078,102 | ||
Gross Unrealized Depreciation |
(16,951,807 | ) | ||
Net Unrealized Appreciation (Depreciation) |
$ | 163,126,295 | ||
PORTFOLIO HOLDINGS |
||||
% of Net Assets |
||||
Common Stocks |
||||
Pharmaceuticals |
20.3 | % | ||
Food & Beverages |
18.5 | % | ||
Industrial Goods & Services |
8.7 | % | ||
Diversified Manufacturing Operation |
8.1 | % | ||
Retailers |
7.3 | % | ||
Banks |
5.7 | % | ||
Real Estate & Infrastructure |
4.6 | % | ||
Oil & Gas |
4.5 | % | ||
Construction & Materials |
3.1 | % | ||
Insurance |
2.8 | % | ||
Commercial Services |
2.8 | % | ||
Personal & Household Goods |
2.8 | % | ||
Chemicals |
2.7 | % | ||
Medical Technology |
2.0 | % | ||
Technology |
1.3 | % | ||
Biotechnology |
1.3 | % | ||
Private Equity Limited Partnerships |
1.9 | % | ||
Convertible Corporate Bond |
1.7 | % | ||
Preferred Stocks |
1.2 | % | ||
Other Assets and Liabilities |
-1.3 | % | ||
100.0 | % | |||
See Notes to Financial Statements.
26
THE SWISS HELVETIA FUND, INC.
Statement of Assets and Liabilities | December 31, 2010 |
Assets: |
||||||||
Unaffiliated investments, at value (cost $289,190,391) |
|
$ | 469,861,031 | |||||
Affiliated investments, at value (cost $17,167,028) |
|
3,706,298 | ||||||
Total investments, at value (cost $306,357,419) |
|
473,567,329 | ||||||
Cash |
|
686,079 | ||||||
Foreign currency (cost $6,786,928)* |
|
6,940,230 | ||||||
Interest and dividends receivable |
|
265,758 | ||||||
Tax reclaims receivable |
|
2,191,952 | ||||||
Receivable for securities sold |
|
439,053 | ||||||
Prepaid expenses |
|
28,825 | ||||||
Total assets |
|
484,119,226 | ||||||
Liabilities: |
||||||||
Payable for securities purchased |
|
1,398,714 | ||||||
Income distributions payable |
|
6,887,686 | ||||||
Capital gains distributions payable |
|
8,010,348 | ||||||
Advisory fees payable (Note 2) |
|
288,269 | ||||||
Other fees payable |
|
225,089 | ||||||
Total liabilities |
|
16,810,106 | ||||||
Net assets |
|
$ | 467,309,120 | |||||
Composition of Net Assets: |
||||||||
Paid-in capital |
|
$ | 282,290,056 | |||||
Distributable earnings |
||||||||
Accumulated net investment income (loss) |
(3,060,113 | ) | ||||||
Accumulated net realized gain from investment, foreign currency transactions and written options |
20,400,384 | |||||||
Net unrealized appreciation on investments and foreign currency |
167,678,793 | |||||||
Total distributable earnings |
|
185,019,064 | ||||||
Net assets |
|
$ | 467,309,120 | |||||
Net Asset Value Per Share: |
||||||||
($467,309,120 ÷ 30,308,627 shares outstanding, $0.001 par value; 50 million shares authorized) |
|
$ | 15.42 | |||||
* | Consists of 6,418,693 Swiss francs, 12,854 euros and 23,450 British pounds. |
See Notes to Financial Statements.
27
THE SWISS HELVETIA FUND, INC.
Statement of Operations | For the Year Ended December 31, 2010 |
Investment Income: |
||||
Dividends (less foreign tax withheld of $1,427,571) |
$ | 8,083,480 | ||
Interest |
404,860 | |||
Total income |
8,488,340 | |||
Expenses: |
||||
Investment advisory fees |
3,230,776 | |||
Directors fees & expenses |
551,331 | |||
Professional fees |
950,986 | |||
Administration fees |
297,700 | |||
Custody fees |
86,034 | |||
Printing and shareholder reports |
145,153 | |||
Accounting fees |
113,602 | |||
Transfer agent fees |
25,366 | |||
Compliance service fees |
41,711 | |||
Miscellaneous |
410,922 | |||
Total expenses before reimbursements/waivers |
5,853,581 | |||
Less expenses reimbursed by the Investment Advisor |
(150,000 | ) | ||
Less Administration fees waived |
(2,000 | ) | ||
Total Net expenses |
5,701,581 | |||
Net investment income |
2,786,759 | |||
Realized and Unrealized Gain (Loss) on Investments, Written Call Options and Foreign Currency: |
||||
Net realized gain (loss) from: |
||||
Investment transactions |
40,091,886 | |||
Foreign currency transactions |
1,577,254 | |||
Written call options |
(289,314 | ) | ||
Net change in unrealized appreciation/depreciation from: |
||||
Investments |
28,345,024 | |||
Foreign currency translations |
321,117 | |||
Written call options |
(65,997 | ) | ||
Net Realized and Unrealized Gain (Loss) on Investments, Written Call Options and Foreign Currency |
69,979,970 | |||
Net Increase in Net Assets from Operations |
$ | 72,766,729 | ||
See Notes to Financial Statements.
28
THE SWISS HELVETIA FUND, INC.
Statement of Changes in Net Assets |
For the Year Ended |
For the Year Ended |
Increase (Decrease) in Net Assets: |
||||||||
Operations: |
||||||||
Net investment income |
$ | 2,786,759 | $ | 1,883,605 | ||||
Net realized gain (loss) from: |
||||||||
Investment transactions |
40,091,886 | (10,991,829 | ) | |||||
Foreign currency transactions |
1,577,254 | 7,068,023 | ||||||
Written call options |
(289,314 | ) | 1,612,491 | |||||
Net change in unrealized appreciation/depreciation from: |
||||||||
Investments |
28,345,024 | (6,096,220 | ) | |||||
Foreign currency translations |
321,117 | (9,082,766 | ) | |||||
Written call options |
(65,997 | ) | 65,997 | |||||
Net increase (decrease) in net assets from operations |
72,766,729 | (15,540,699 | ) | |||||
Distributions to Stockholders from: |
||||||||
Net investment income and net realized gain from foreign currency transactions |
(6,887,686 | ) | (7,077,616 | ) | ||||
Net realized capital gain |
(8,010,348 | ) | (11,882,602 | ) | ||||
Total distributions to stockholders |
(14,898,034 | ) | (18,960,218 | ) | ||||
Capital Share Transactions: |
||||||||
Value of shares repurchased through stock buyback |
(24,485,169 | ) | (635,755 | ) | ||||
Total decrease from capital share transactions |
(24,485,169 | ) | (635,755 | ) | ||||
Total increase (decrease) in net assets |
33,383,526 | (35,136,672 | ) | |||||
Net Assets: |
||||||||
Beginning of year |
433,925,594 | 469,062,266 | ||||||
End of year (including accumulated net investment income (loss) of $(3,060,113) and $(861,860), respectively) |
$ | 467,309,120 | $ | 433,925,594 | ||||
See Notes to Financial Statements.
29
THE SWISS HELVETIA FUND, INC.
Financial Highlights
For the Years Ended December 31, |
||||||||||||||||||||
2010 |
2009 |
2008 |
2007 |
2006 |
||||||||||||||||
Per Share Operating Performance: |
||||||||||||||||||||
Net asset value at the beginning of year |
$ | 13.39 | $ | 14.45 | $ | 19.34 | $ | 20.61 | $ | 17.47 | ||||||||||
Income from Investment Operations: |
||||||||||||||||||||
Net investment income1 |
0.09 | 0.06 | 0.08 | 0.02 | 0.02 | |||||||||||||||
Net realized and unrealized gain (loss) on investments2 |
2.31 | (0.53 | ) | (4.65 | ) | 1.98 | 5.14 | |||||||||||||
Total from investment operations |
2.40 | (0.47 | ) | (4.57 | ) | 2.00 | 5.16 | |||||||||||||
Gain from capital share repurchases |
0.12 | | * | 0.08 | 0.04 | 0.03 | ||||||||||||||
Capital charge resulting from the issuance of fund shares |
| | (0.08 | ) | (1.36 | )3 | (0.07 | ) | ||||||||||||
Less Distributions: |
||||||||||||||||||||
Dividends from net investment income and net realized gains from foreign currency transactions |
(0.23 | ) | (0.22 | ) | (0.08 | ) | | (0.03 | ) | |||||||||||
Distributions from net realized capital gains |
(0.26 | ) | (0.37 | ) | (0.24 | ) | (1.95 | ) | (1.95 | ) | ||||||||||
Total distributions |
(0.49 | ) | (0.59 | ) | (0.32 | ) | (1.95 | ) | (1.98 | ) | ||||||||||
Net asset value at end of year |
$ | 15.42 | $ | 13.39 | $ | 14.45 | $ | 19.34 | $ | 20.61 | ||||||||||
Market value per share at the end of year |
$ | 13.54 | $ | 11.62 | $ | 12.43 | $ | 16.50 | $ | 19.10 | ||||||||||
Total Investment Return4: |
||||||||||||||||||||
Based on market value per share |
20.79 | % | (1.20 | )% | (22.98 | )% | (3.39 | )% | 37.64 | % | ||||||||||
Based on net asset value per share |
19.38 | % | (2.07 | )% | (23.62 | )% | 4.95 | %5 | 30.16 | % | ||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net expenses |
1.34 | % | 1.23 | % | 1.10 | % | 1.10 | % | 1.17 | % | ||||||||||
Gross expenses |
1.38 | %6 | 1.23 | % | 1.12 | %6 | 1.10 | % | 1.17 | % | ||||||||||
Net investment income |
0.66 | % | 0.47 | % | 0.49 | % | 0.12 | % | 0.09 | % | ||||||||||
Supplemental Data: |
||||||||||||||||||||
Net assets at end of year (000s) |
$ | 467,309 | $ | 433,926 | $ | 469,062 | $ | 621,915 | $ | 502,815 | ||||||||||
Average net assets during the year (000s) |
$ | 424,627 | $ | 404,535 | $ | 554,386 | $ | 599,573 | $ | 484,631 | ||||||||||
Stockholders of record7 |
621 | 662 | 695 | 736 | 794 | |||||||||||||||
Portfolio turnover rate |
61 | % | 123 | % | 66 | % | 26 | % | 34 | % |
* | Amount is less than $0.01 per share. |
1 | Calculated using the average shares method. |
2 | Includes net realized and unrealized currency gain and losses. |
3 | Issued in connection with rights offering. |
4 | Total investment return based on market value differs from total investment return based on net asset value due to changes in relationship between the Funds market price and its net asset value (NAV) per share. |
5 | Not including the rights offering dilution, the NAV performance as of 12/31/07 was 12.14%. This calculation was determined by adjusting the beginning NAV in the total return calculation by the per-share capital change resulting from the issuance of Fund shares. |
6 | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
7 | Unaudited. |
See | Notes to Financial Statements. |
30
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements
Note 1Organization and Significant Accounting Policies
A. Organization
The Swiss Helvetia Fund, Inc. (the Fund) is registered under the Investment Company Act of 1940, as amended (the Act), as a non-diversified, closed-end management investment company. The Fund is organized as a corporation under the laws of the State of Delaware.
The investment objective of the Fund is to seek long-term growth of capital through investment in equity and equity-linked securities of Swiss companies. The Fund may also acquire and hold equity and equity-linked securities of non-Swiss companies in limited instances.
B. Securities Valuation
The Fund values its investments at fair value.
When valuing listed equity securities, the Fund uses the last sale price prior to the calculation of the Funds net asset value (NAV). 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 Funds NAV. If a current bid price is not available, the Fund uses the mean between the last quoted bid and asked prices. When valuing fixed income securities that mature within sixty days, the Fund uses amortized cost, which approximates fair value.
It is the responsibility of the Funds Board of Directors (the Board) to establish fair valuation procedures. When valuing securities for which market quotations are not readily available, or for which the market quotations that are available are considered unreliable, the Fund determines a fair value in good faith in accordance with these procedures. The Fund may use these procedures to establish the fair value of securities when, for example, a significant event occurs between the time the market closes and the time the Fund values its investments. After consideration of various factors, the Fund may value the securities at their last reported price or at some other value. Additional consideration is given to securities that have experienced a decrease in the volume or level of activity or to circumstances that indicate that a transaction is not orderly.
Swiss exchange-listed options or options that are not listed at the request of a counterparty are valued using implied volatilities as input into widely accepted models (e.g., Black-Scholes). Eurex-listed options are valued at their most recent sale price (latest bid for long options and the latest ask for short options), or if there are no such sales, at the average of the most recent bid and asked quotations, or if such quotations are not available, at the last bid quotation (in the case of purchased options) or the last asked quotation (in the case of written options); however, if there are no such quotations, such contracts will be valued using the implied volatilities observed for similar options as an input to a model. Options traded in the over-the-counter market are valued at the price communicated by the counterparty to the option, which typically is the price at which the counterparty would close out the transaction.
The Fund is permitted to invest in alternative investments that do not have a readily determinable fair value, and, as such, has elected to use the NAV, as a practical expedient, as calculated on the reporting entitys measurement date as the fair value of the investment.
Various inputs are used to determine the value of the Funds investments. These inputs are summarized in the three broad levels listed below:
Level 1quoted prices in active markets for identical assets and liabilities
Level 2other significant observable inputs (including quoted prices of similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3significant unobservable inputs (including the Funds own assumptions in determining the fair value of investments)
31
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (continued)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Funds net assets as of December 31, 2010:
Level 1 Quoted Prices |
Level 2 Other Significant |
Level 3 Significant |
Total |
|||||||||||||
Investments in Securities |
||||||||||||||||
Common Stock* |
$ | 443,080,992 | $ | | $ | 7,804,991 | $ | 450,885,983 | ||||||||
Preferred Stock |
| | 5,650,685 | 5,650,685 | ||||||||||||
Convertible Corporate Bond |
| 8,185,146 | | 8,185,146 | ||||||||||||
Private Equity Limited Partnerships |
| | 8,845,515 | 8,845,515 | ||||||||||||
Total Investments in Securities |
$ | 443,080,992 | $ | 8,185,146 | $ | 22,301,191 | $ | 473,567,329 | ||||||||
* | Please see the Schedule of Investments for Industry classifications. |
The inputs and valuation techniques used to value Level 2 securities, which consist of an exchange-listed corporate convertible bond, are based on a pricing service model, which may include consideration of dealer quotes, trade execution data, conversion prices compared to the current market quotation of the underlying stock and, when available, the last sale price on the exchange on which it trades.
Level 3 securities consist of the Funds investments in privately-held companies and the Funds investments in limited partnerships that invest in privately-held companies (private equity partnerships). The Fund values all of its investments in accordance with accounting principles generally accepted in the United States (GAAP).
Inputs and valuation techniques used by the Fund to value its Level 3 privately-held company securities may include the following: acquisition cost; fundamental analytical data; nature and duration of restrictions on disposition of the investment; public trading of similar securities of similar issuers; economic outlook and condition of the industry in which the issuer participates; financial condition of the issuer; and the issuers prospects, including any recent or potential management or capital structure changes.
The Fund values its Level 3 private equity partnerships in accordance with Accounting Standards Codification (ASC) 820-10-35, Investments in Certain Entities that Calculate Net Asset Value Per Share (Or its Equivalent) (ASC 820-10-35). ASC 820-10-35 permits a reporting entity to measure the fair value of an investment that does not have a readily determinable fair value, based on the NAV of the investment as a practical expedient, without further adjustment, unless it is probable that the investment will be sold at a value significantly different than the NAV. If the practical expedient NAV is not as of the reporting entitys measurement date, then the NAV should be adjusted to reflect any significant events that may change the valuation. Inputs and valuation techniques for these adjustments may include fair valuations of the partnerships and their portfolio holdings provided by the partnerships general partners or managers, other available information about the partnerships portfolio holdings, values obtained on redemption from other limited partners, discussions with the partnerships general partners or managers and/or other limited partners and comparisons of previously-obtained estimates against the partnerships audited financial statements. In using the NAV as a practical expedient, certain attributes of the investment, that may impact the fair value of the investment, are not considered in measuring fair value. Attributes of those investments include the investment strategies of the investees and may also include, but are not limited to, restrictions on the investors ability to redeem its investments at the measurement date and any unfunded commitments.
When valuing Level 3 investments, management also may consider potential events that could have a material impact on the operations of a privately-held company or private equity partnership. Not all of these factors may be considered or available, and other relevant factors may be considered on an investment-by investment basis.
32
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (continued)
In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update No. 2010-06, Fair Value Measurements and Disclosures (ASU 2010-06). ASU 2010-06 requires disclosures regarding transfers in and out of Levels 1 and 2 effective for interim and annual reporting periods beginning after December 15, 2009. The Fund has adopted a policy of recognizing significant transfers between all Levels based on their market prices at the reporting period end. For the year ended December 31, 2010, there were no transfers between Level 1, Level 2, and Level 3. ASU 2010-06 also requires disclosure of Level 3 transaction activity on a gross basis and this requirement is effective for interim and annual periods beginning after December 15, 2010. Management has determined that this will not have any impact to the Funds financial statements, other than enhanced disclosures.
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
Common Stock |
Preferred Stock |
Private Equity Limited Partnerships |
Total |
|||||||||||||
Balance as of December 31, 2009 |
$ | 4,183,797 | $ | 3,997,870 | $ | 7,395,960 | $ | 15,577,627 | ||||||||
Change in Unrealized Appreciation/Depreciation* |
997,865 | 737,486 | 660,733 | 2,396,084 | ||||||||||||
Net Purchases/(Sales) |
2,623,329 | 915,329 | 788,822 | 4,327,480 | ||||||||||||
Balance as of December 31, 2010 |
$ | 7,804,991 | $ | 5,650,685 | $ | 8,845,515 | $ | 22,301,191 | ||||||||
* | All realized and unrealized gain and loss is attributable to Level 3 securities held as of December 31, 2010. These amounts are reflected as a component of Realized and Unrealized Gain (Loss) on Investments, Written Call Options and Foreign Currency on the Statement of Operations. |
C. Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Realized gains and losses are determined by comparing the proceeds of a sale or the cost of a purchase with a specific offsetting transaction.
Dividend income, net of any foreign taxes withheld, is recorded on the ex-dividend date. Interest income, including amortization of premiums and accretion of discounts, is accrued daily. Estimated expenses are also accrued daily.
The Fund records Swiss withholding tax as a reduction of dividend income, net of any amount reclaimable from Swiss tax authorities in accordance with the tax treaty between the United States and Switzerland.
D. Distributions
The Fund pays dividends at least annually to the extent it has any net investment income and net realized gains from foreign currency transactions and makes distributions of any net realized capital gains to the extent they exceed any capital loss carryforwards. The Fund determines the size and nature of these distributions in accordance with provisions of the Internal Revenue Code. Distributions may be paid either in cash or in stock with an option to take cash. The Fund records dividends and distributions on the ex-dividend date.
E. Federal Income Taxes
The Funds policy is to continue to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income to its stockholders. Therefore, no federal income tax provision is required.
Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. See Note 5 for federal income tax treatment of foreign currency gain/losses.
Management has analyzed the Funds tax positions taken on federal income tax returns for all open tax years and has concluded that no provision for federal income tax is required in the Funds financial statements. The Fund files U.S. federal and Delaware state tax returns. The Funds U.S. federal tax returns remain open for examination for the years ended December 31, 2007 through
33
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (continued)
December 31, 2010. The Funds Delaware state tax returns remain open for examination for the years ended December 31, 2006 through December 31, 2010. In addition, the Fund holds investments in Switzerland and other foreign tax jurisdictions. Withholding taxes on foreign interest and dividends have been provided for in accordance with each applicable countrys tax rules and rates.
F. When-Issued and Delayed-Delivery Transactions
The Fund may purchase or sell securities on a when-issued or delayed-delivery basis. The Fund records when-issued or delayed-delivery securities as of trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed-delivery basis are marked-to-market daily and begin earning interest on the settlement date. The Fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, which may result in a capital gain or loss. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
G. Options
The Fund may buy call options and put options, and may sell (write) covered call options. Options may be entered into on securities in which the Fund may invest and on Swiss stock indices. Option contracts are utilized to manage the Funds exposure to changing security prices and to generate income. Purchasing call options tends to increase the Funds exposure to the underlying instrument. Purchasing put options tends to decrease the Funds exposure to the underlying instrument. The Fund pays a premium as an investment that is subsequently marked-to-market to reflect the current value of the option purchased. Premiums paid for purchasing options which expire are treated as realized losses. The risk associated with purchasing put and call options is limited to the premium paid and the exposure to the risk that the counterparty would be unable to meet the terms of their contracts. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying instrument to determine the realized gain or loss.
Writing call options tends to decrease the Funds exposure to the underlying instrument. When the Fund writes a call option, such option is covered, meaning that the Fund holds the underlying instrument subject to being called by the option counterparty. When the Fund writes a call option, an amount equal to the premium received is recorded as a liability and subsequently marked-to-market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains.
Premiums received from writing options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying instrument to determine the realized gain or loss. The Fund as a writer of an option has no control over whether the underlying instrument may be sold (called) and, as a result, bears the market risk of an unfavorable change in the price of the instrument underlying the written option. There is the risk the Fund may not be able to enter into a closing transaction because of an illiquid market.
Transactions in written call options during the year ended December 31, 2010, were as follows:
Number of |
Premiums |
|||||||
Outstanding, December 31, 2009 |
30,000 | $ | 762,490 | |||||
Written |
| | ||||||
Exercised |
| | ||||||
Expired |
| | ||||||
Closed |
(30,000 | ) | (762,490 | ) | ||||
Outstanding, December 31, 2010 |
| $ | | |||||
Market Value of Liability, December 31, 2010 |
$ | | ||||||
34
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (continued)
The Fund engaged in limited derivative activity for the year ended December 31, 2010. As of December 31, 2010, the Fund had no investments in derivatives. There was no effect of derivative instruments on the Statements of Assets and Liabilities as of December 31, 2010.
The effect of derivative instruments on the Statement of Operations for the year ended December 31, 2010:
Primary Risk Exposure |
Location of Gain (Loss) on Derivatives Recognized in Income |
Realized Gain |
Change in Unrealized |
|||||||
Equity Exposure |
||||||||||
Written Option Contracts |
Net Realized gain (loss) from written call options/Net change in unrealized appreciation/depreciation from written call options |
$ | (289,314 | ) | $ | (65,997 | ) | |||
Purchased Option Contracts |
Net Realized gain (loss) from investment transactions/Net change in unrealized appreciation/depreciation from investments |
(14,318,999 | ) | 11,850,880 |
H. Foreign Currency Translation
The Fund maintains its accounting records in U.S. dollars. The Funds assets are invested primarily in Swiss equities and equity-linked securities. In addition, the Fund makes its temporary investments in Swiss franc-denominated bank deposits, short-term debt securities and money market instruments. Substantially all income received by the Fund is in Swiss francs. The Funds NAV, however, is reported, and distributions from the Fund are made, in U.S. dollars resulting in gain or loss from currency conversions in the ordinary course of business. Historically, the Fund has not entered into transactions designed to reduce currency risk and does not intend to do so in the future. The cost basis of foreign denominated assets and liabilities is determined on the date that they are first recorded within the Fund and translated to U.S. dollars. These assets and liabilities are subsequently valued each day at prevailing exchange rates. The difference between the original cost and current value denominated in U.S. dollars is recorded as unrealized foreign currency gain/loss. 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 shown on the Funds financial statements result from the sale of foreign currencies, from currency gains or losses realized between the trade and settlement dates on securities transactions, and from the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid.
When calculating realized and unrealized gains or losses on equity investments, the Fund does not separate the gain or loss attributable to changes in the foreign currency price of the security from the gain or loss attributable to the change in the U.S. dollar value of the foreign currency. Other foreign currency transactions resulting in realized and unrealized gain (or loss) are disclosed separately.
I. Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
35
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (continued)
J. Concentration of Market Risk
The Fund primarily invests in securities of Swiss issuers. Such investments may carry certain risks not ordinarily associated with investments in securities of U.S. issuers. These risks include future political and economic developments, unfavorable movements in the U.S. dollar relative to the Swiss franc, and the possible imposition of exchange controls and changes in governmental law and restrictions. In addition, concentrations of investments in securities of issuers located in a specific region exposes the Fund to the economic and government policies of that region and may increase risk compared to a fund whose investments are more diversified.
Note 2Fees and Transactions with Affiliates
Hottinger Capital Corp. (HCC), which is owned jointly by Hottinger U.S., Inc. and Hottinger & Cie (Zurich), is the Funds advisor (the Advisor). The Fund pays the Advisor an annual fee based on its month-end net assets which is accrued daily and 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, 0.50% of next $200 million and 0.45% of such assets in excess of $800 million. The Fund paid Hottinger & Cie (Zurich) $100,795 in brokerage commissions for the year ended December 31, 2010.
The Fund and the Advisor have agreed to share equally certain common expenses subject to review by the Audit Committee of the Board. During the year ended December 31, 2010, $14,225 of expenses incurred in connection with publicizing the Fund were shared equally by the Fund and the Advisor.
Certain officers and Directors of the Fund are also officers or directors of HCC, Hottinger U.S., Inc. and Hottinger & Cie (Zurich). These persons are not paid by the Fund for serving in these capacities.
Note 3Other Service Providers
Citi Fund Services Ohio, Inc. (Citi) provides certain administration and portfolio accounting services to the Fund. The Fund pays Citi an annual fee, which is accrued daily and paid monthly.
American Stock Transfer & Trust Company is the Funds transfer agent. The Fund pays the transfer agent an annual fee, which is accrued daily and paid monthly.
Citibank, N.A. serves as the Funds custodian and the Fund pays the custodian an annual fee, which is accrued daily and paid monthly.
The Fund pays each Director who is not an interested person (as such term is defined in the Act) of the Fund or the Advisor $32,809 annually in compensation, except for the Chairman of the Board to whom the Fund pays an annual fee of $44,809 and for the Chairs of the Audit, the Pricing and the Governance/Nominating Committees to each of whom the Fund pays an annual fee of $37,809. In addition, the Fund pays each disinterested Director $1,300 for each Board meeting attended and pays each disinterested Director who is a member of a Committee a fee of $750 for each Committee meeting attended. Committee meeting fees are paid for only those meetings held separately from other meetings. The Board or a Committee may establish ad hoc committees or sub-committees. Any Committee or sub-committee member may be compensated by the Fund for incremental work outside of the regular meeting process based on the value added to the Fund. In addition, the Fund reimburses Directors who are not employees of or affiliated with the Advisor for out-of-pocket expenses incurred in conjunction with attendance at meetings.
From time to time, fees or expenses incurred by the Fund may be voluntarily reduced or reimbursed by one or more of the Funds service providers. In 2010, the Advisor voluntarily reimbursed $150,000 of expenses to the Fund. In addition, the Administrator voluntarily waived $2,000 of its fee. Voluntary fee reductions and expense reimbursements are not subject to recoupment in subsequent fiscal periods and may be stopped at any time.
36
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (continued)
Note 4Capital Share Transactions
The Fund is authorized to issue up to 50 million shares of capital stock. HCC owned 207,211 of the 30,308,627 shares outstanding on December 31, 2010. Transactions in capital shares were as follows:
For the Year Ended December 31, 2010 |
For the Year Ended December 31, 2009 |
|||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||
Repurchased |
(2,102,800 | ) | $ | (24,485,169 | ) | (54,700 | ) | $ | (635,755 | ) | ||||||
Net Decrease |
(2,102,800 | ) | $ | (24,485,169 | ) | (54,700 | ) | $ | (635,755 | ) | ||||||
Note 5Federal Income Tax and Investment Transactions
At December 31, 2010, accumulated net investment income and accumulated net realized gain from investments and foreign currency transactions have been adjusted for current and prior period book/tax differences.
The following adjustment was primarily a correction to a prior year temporary difference which was recorded as a permanent difference. The adjustment has no impact on the net assets of the Fund.
Accumulated Net Investment Income |
$ | 1,902,674 | ||
Accumulated Net Realized Gain |
2,621,391 | |||
Paid-In Capital |
(4,524,065 | ) |
The tax character of distributions paid during 2010 and 2009 was as follows (see page 42 for details):
2010 |
2009 |
|||||||
Ordinary Income |
$ | 6,887,686 | $ | 7,078,281 | ||||
Long-Term Capital Gains |
8,010,348 | 11,881,937 | ||||||
Total |
$ | 14,898,034 | $ | 18,960,218 | ||||
Under current tax law, capital losses realized after October 31 of a Funds fiscal year may be deferred and treated as occurring on the first business day of the following fiscal year. The Fund had $21,404 of capital and currency losses realized after October 31, 2010, which will be deferred and treated as arising on the first business day of the fiscal year ending December 31, 2010.
At December 31, 2010, the Fund had no capital loss carryover.
At December 31, 2010, the components of distributable earnings on a tax basis were as follows:
Undistributed Ordinary Income |
$ | 311,230 | ||
Undistributed Long-Term Capital Gains |
21,134,060 | |||
Accumulated Capital and Other Losses |
(21,404 | ) | ||
Unrealized Appreciation |
163,595,178 | |||
Total |
$ | 185,019,064 | ||
Gains from foreign currency transactions are treated as ordinary income for federal income tax purposes.
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended December 31, 2010 were $251,059,355 and $263,974,698, respectively.
37
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (continued)
The following information summarizes all distributions declared by the Fund during the year ended December 31, 2010:
Distribution |
Record Date |
Payable Date |
Amount |
|||||||||
Ordinary Income |
12/21/2010 | 1/28/2011 | $ | 0.22700 | ||||||||
Long-Term Capital Gains |
12/21/2010 | 1/28/2011 | $ | 0.26400 | ||||||||
Total Distributions |
$ | 0.49100 | ||||||||||
The Regulated Investment Company Modernization Act of 2010, (the Modernization Act), was signed into law by President Obama on December 22, 2010. The Modernization Act makes a number of changes to the provisions in the Internal Revenue Code of 1986, as amended relating to regulated investment companies (RICs) that will generally become effective for taxable years beginning after December 22, 2010. The Modernization Act allows RICs to generally carryover net capital losses indefinitely, effective for losses arising in taxable years beginning after December 22, 2010. Such losses will retain their character as either long-term capital losses or short-term capital losses. Under pre-enactment law, capital losses could be carried forward for eight years and carried forward as short-term capital losses irrespective of the character of the original loss. Loss carryovers from years beginning prior to December 22, 2010 will still expire subject to the eight-year limitation. The Modernization Act further provides that losses arising in taxable years after December 22, 2010 (which are carried forward indefinitely) would be utilized prior to loss carryovers arising in taxable years beginning prior to December 22, 2010.
Note 6Stock Repurchase Program
Pursuant to authorization by the Board, the Fund began open market purchases of its common stock on the New York Stock Exchange (NYSE) in 1999. The Board has authorized a stock repurchase program permitting such purchases by the Fund in each subsequent year. The principal purpose of the stock repurchase program is to enhance stockholder value by increasing the Funds NAV per share without creating a meaningful adverse effect upon the Funds expense ratio.
On December 23, 2009, the Fund announced a stock repurchase program effective for the duration of 2009 and 2010. Under the program, the Fund was authorized to make open-market repurchases of its common stock of up to $30 million. The Fund has extended the repurchase program into 2011 until the $30 million repurchase is complete. The Fund expected to repurchase its common stock when the discount to NAV of the trading price of its common stock on NYSE was greater than 5% subject to various factors, including the limitations imposed by the federal securities laws governing the repurchase of an issuers stock by the issuer and the ability of the Advisor to raise cash to repurchase shares of the Funds common stock in a tax-efficient manner. During the period from January 1, 2010 through December 31, 2010, the Fund repurchased and retired 2,102,800 shares at an average price of $11.64 per share (including brokerage commissions) and at a weighted average discount of 13.49%. These repurchases had a total cost of $24,485,169 (including brokerage commissions). The difference between the Funds net asset value and the price of the repurchases resulted in a $0.12 increase to the Funds net asset value per share.
The Fund intends to repurchase shares of its common stock in the future at such times and in such amounts as is deemed advisable.
38
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (concluded)
Note 7Capital Commitments
As of December 31, 2010, the Fund invested in private equity limited partnerships and preferred stocks. The Funds investments are summarized in the Schedule of Investments. The Funds capital commitments and the amounts disbursed to the private equity limited partnerships and preferred stocks are shown in the table below:
Investments |
Original Capital |
Unfunded |
Fair Value as of |
|||||||||
Private Equity Limited Partnerships International (a) |
||||||||||||
Aravis Biotech II LP |
$ | 3,486,750 | $ | 1,413,529 | $ | 1,786,324 | ||||||
Zurmont Madison Private Equity LP |
15,019,848 | 5,469,016 | 7,059,191 | |||||||||
Preferred Stock International |
||||||||||||
EyeSense AG, Series C (b) |
3,003,976 | 2,403,181 | 600,796 |
* | The original capital commitment represents 3,250,000, 14,000,000 and 2,800,006 Swiss francs for Aravis Biotech II LP, Zurmont Madison Private Equity LP and EyeSense AG, respectively. The exchange rate as of December 31, 2010 was used for conversion and equals 0.9321. |
(a) | This category includes two private equity limited partnerships that invest primarily in ventures, biotechnology and in management buyout of industrial and consumer goods companies. There is no redemption right for the interests in these two funds. Instead, the nature of the investments in this category is that distributions are received through the realization of the underlying assets of a fund. If these investments were held, it is estimated that the underlying assets of each fund would be realized over 4 to 6 years. |
(b) | The unfunded commitment for this security represents future payments contingent upon contractual milestones achieved by EyeSense. |
Note 8Subsequent Events
Management has evaluated subsequent events through the date this report was available to be issued. Other than the events listed below, there were no subsequent events requiring adjustment or additional disclosure in the financial statements.
Pursuant to the Funds extended 2009-2010 stock repurchase program, the Fund has continued to repurchase shares of its common stock. During the period from January 1, 2011 through February 24, 2011, the Fund repurchased and retired 58,103 shares at an average price of $13.69 per share (including brokerage commissions) and at a weighted average discount of 10.35%. The repurchases had a total cost of $795,608 (including brokerage commissions). The difference between the Funds net asset value and the price of the repurchases resulted in less than a $0.005 increase to the Funds net asset value per share.
On January 25, 2011, the Fund announced making up to two tender offers in 2011, each for up to 5% of the Funds outstanding common stock, at a price per share equal to 98% of the Funds NAV per share as determined by the Fund on the next business day following the expiration date of the tender offer, or such later date to which the offer is extended. The Fund will conduct a tender offer if the average discount to NAV of the trading price of its common stock on the NYSE is greater than 10% during the applicable twelve-week measurement period. The first measurement period will commence on March 1, 2011, and the second measurement period will commence on September 1, 2011.
On January 28, 2011, the Fund had 559,643 shares reinvested at a price of $13.40 per share at a discount of 12.06%. The reinvested shares had a total value of $7,500,329. The difference between the Funds net asset value and the price of the reinvest resulted in a $0.03 decrease to the Funds net asset value per share.
39
THE SWISS HELVETIA FUND, INC.
Report of Independent Registered Public Accounting Firm
40
THE SWISS HELVETIA FUND, INC.
Additional Information (Unaudited)
41
THE SWISS HELVETIA FUND, INC.
Additional Information (Unaudited) (concluded)
Distributions
The Fund designates 99.65% of its ordinary income dividend distributions for the qualified dividend rate (QDI) as defined in Section 1(h)(11) of the Internal Revenue Code.
Tax Information for the Year Ended December 31, 2010
The amounts may differ from those elsewhere in this report because of difference between tax and financial reporting requirements. For Federal income tax purposes, distributions from short-term capital gains are classified as ordinary income. The Funds distributions to stockholders of long-term capital gains included $8,010,348 in connection with the distribution paid January 28, 2011 to stockholders of record on December 21, 2010.
42
THE SWISS HELVETIA FUND, INC.
Dividend Reinvestment Plan (Unaudited)
43
THE SWISS HELVETIA FUND, INC.
Dividend Reinvestment Plan (Unaudited) (concluded)
44
A Swiss Investments Fund
THE SWISS HELVETIA FUND, INC.
Executive Offices
The Swiss Helvetia Fund, Inc.
1270 Avenue of the Americas
Suite 400
New York, New York 10020
1-888-SWISS-00
(212) 332-2760
www.swz.com
THE SWISS
HELVETIA
FUND, INC.
www.swz.com
Annual Report
For the
Year Ended
December 31, 2010
Item 2. Code of Ethics.
As of the end of the period covered by this report, the Registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its principal executive officer and senior financial officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert.
The Registrants Board of Directors (the Board) has determined that Claus Helbig, Didier Pineau-Valencienne and Stephen K. West, Esq., each a member of the Audit Committee of the Board, are audit committee financial experts as defined by the Securities and Exchange Commission (the SEC). Messrs. Helbig, Pineau-Valencienne and West each are independent as defined by the SEC for purposes of audit committee financial expert determinations.
Item 4. Principal Accountant Fees and Services.
(a) The aggregate fees billed for each of the last two fiscal years (the Reporting Periods) for professional services rendered by the Registrants principal accountant for the audit of the Registrants annual financial statements, or services that are normally provided by the principal accountant in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $43,000 in 2009 and $50,000 in 2010.
(b) There were no audit-related fees billed to the Registrant in the Reporting Periods for assurance and related services rendered by the principal accountant that were reasonably related to the performance of the audit of the Registrants financial statements and are not reported under paragraph (a) of this Item 4.
There were no fees billed in the Reporting Periods for assurance and related services rendered by the principal accountant to the Registrants investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant (collectively the investment adviser) which were required to be pre-approved by the Audit Committee as described in paragraph (e)(1) of this Item 4.
(c) The aggregate fees billed in the Reporting Periods for professional services rendered by the principal accountant to the Registrant for tax compliance, tax advice and tax planning (Tax Services) were $5,500 in 2009 and $5,800 in 2010. These services consisted of review or preparation of U.S. federal, state, local and excise tax returns.
(d) There were no other fees billed in the Reporting Periods for products and services provided by the principal accountant to the Registrant, other than the services reported in paragraphs (a) through (c) of this Item.
(e) (1) The Registrants Audit Committee pre-approves the principal accountants engagements for audit and non-audit services to the Registrant, and certain non-audit services to the investment adviser that are required to be pre-approved on a case-by-case basis. Pre-approval considerations include whether the proposed services are compatible with maintaining the principal accountants independence.
(e) (2) No services included in (b) - (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) None.
(g) The aggregate non-audit services billed by the principal accountant for services rendered to the Registrant in the reporting periods were $5,500 in 2009 and $5,800 in 2010. There were no fees billed in each of the Reporting Periods for non-audit services rendered by the principal accountant to the investment adviser.
(h) The Registrants Audit Committee considers whether the provision of any non-audit services rendered to the investment adviser not pre-approved (not requiring pre-approval) by the Audit Committee is compatible with maintaining the principal accountants independence.
Item 5. Audit Committee of Listed Registrants.
The Registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. It is composed of the following Directors, each of who is not an interested person as defined in the Investment Company Act of 1940:
Claus Helbig
R. Clark Hooper
Michael Kraynak, Jr.
Didier Pineau-Valencienne
Stephen K. West, Esq.
Item 6. Investments.
(a) Not applicable.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
The Registrant has delegated voting of proxies in respect of portfolio holdings to its investment adviser, Hottinger Capital Corp. (the Advisor), to vote the Registrants proxies, upon the instruction of an executive officer of the Registrant, in accordance with Advisors proxy voting guidelines and procedures (the Voting Guidelines) that provide as follows:
| The Advisor recommends voting proxies in respect of the Registrants securities in the Registrants best economic interests and without regard to the interests of the Advisor or any other client of the Advisor. |
| Unless the Advisors Proxy Voting Committee (the Committee) otherwise determines (and documents the basis for its decision) or as otherwise provided below, the Advisor recommends voting proxies in a manner consistent with the Voting Guidelines. |
| To avoid material conflicts of interest, the Advisor applies the Voting Guidelines in an objective and consistent manner across client accounts. Where a material conflict of interest has been identified and the matter is covered by the Voting Guidelines, the |
Committee recommends voting in accordance with the Voting Guidelines. Where a conflict of interest has been identified and the matter is not covered by the Voting Guidelines, the Advisor will disclose the conflict and the Committees recommendation of the manner in which to vote to the Registrants Audit Committee. |
| The Advisor also may recommend not to vote proxies in respect of securities of any issuer if it determines that it would be in the Registrants overall best interests not to vote. |
In all instances, the Advisor examines and analyzes the Registrants proxies in accordance with the Voting Guidelines. The Advisor then presents its recommendations to an executive officer of the Registrant, who either approves the Advisors recommendation or determines if the Registrant will vote its proxy in a different way. The Advisor retains the power to vote the Registrants proxies, but will not do so without instruction and approval of an executive officer of the Fund. The Advisors Voting Guidelines address how it will recommend voting proxies on particular types of matters such as the election for directors, adoption of option plans and anti-takeover proposals. For example, the Advisor generally will:
| support management in most elections for directors, unless the board gives evidence of acting contrary to the best economic interests of shareholders; |
| support option plans, if it believes that they provide for their administration by disinterested parties and provide incentive to directors, managers and other employees by aligning their economic interests with those of the shareholders while limiting the transfer of wealth out of the company; and |
| oppose anti-takeover proposals unless they are structured in such a way that they give shareholders the ultimate decision on any proposal or offer. |
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
PRINCIPAL PORTFOLIO MANAGERS
As of the date of the filing of this Report on Form N-CSR, Messrs. Philippe Comby and Rudolf Millisits are primarily responsible for the management of the Registrants portfolio.
Mr. Comby has been a portfolio manager of the Registrant since 1999, when he joined the Advisor. Mr. Comby is a Vice President of the Registrant and a Director and Senior Vice President of the Advisor. He also is a Director and the President of Hottinger U.S., Inc., a private holding company affiliated with the Advisor, and the Chief Investment Officer and Senior Vice President of Hottinger Brothers LLC, a registered investment adviser affiliated with the Advisor. Mr. Comby has been affiliated with the Hottinger Group since 1994, providing portfolio management and client advisory services. He is a member of the New York Society of Security Analysts, a member of the Global Association of Risk Professionals and a Chartered Financial Analyst.
Mr. Millisits has been a portfolio manager of the Registrant since 1994, when he joined the Advisor. Mr. Millisits is the Senior Vice President and Chief Financial Officer of the Registrant and the Chief Operating Officer, Executive Vice President and Chief Compliance Officer of the Advisor. He also is the Chairman and Chief Executive Officer of Hottinger U.S., Inc. and the President and Chief Financial Officer of Hottinger Brothers, LLC. Mr. Millisits has been affiliated with the Hottinger Group since 1993, providing portfolio management and private banking services. Prior to joining the Hottinger Group, Mr. Millisits was a portfolio manager for private clients for Credit Suisse in New York and Geneva.
PORTFOLIO MANAGEMENT
The Registrants portfolio managers manage multiple accounts for a diverse client base, including private clients and institutions.
Material Conflicts Related to Management of Similar Accounts. The potential for conflicts of interest exist when the Advisor or its affiliates and the portfolio managers manage other accounts that invest in securities in which the Registrant may invest or that may pursue a strategy similar to the Registrants strategy (collectively, Similar Accounts). In addition, the Registrant, as a registered investment company, is subject to different regulations than certain of the Similar Accounts, and, consequently, may not be permitted to engage in all the investment techniques or transactions, or to engage in such techniques or transactions to the same degree, as the Similar Accounts.
Potential conflicts of interest may arise because of a portfolio managers management of the Registrant and Similar Accounts. For example, conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of limited investment opportunities, as the portfolio manager may be perceived as causing accounts he manages to participate in an offering to increase his overall allocation of securities in that offering, or to increase his ability to participate in future offerings by the same underwriter or issuer. Allocations of bunched trades, particularly trade orders that were only partially filled due to limited availability, and allocation of investment opportunities generally, could raise a potential conflict of interest, as the portfolio manager may have an
incentive to allocate securities that are expected to increase in value to preferred accounts. Initial public offerings, in particular, are frequently of very limited availability. Additionally, the Registrants portfolio managers may be perceived to have a conflict of interest because of the number of Similar Accounts, in addition to the Registrant, that they are managing. In addition, the Advisor could be viewed as having a conflict of interest to the extent that the Advisor or its affiliates and/or the portfolio managers have a materially larger investment in a Similar Account than their investment in the Registrant.
A potential conflict of interest may be perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by the other account, or when a sale in one account lowers the sale price received in a sale by a second account.
Other Accounts Managed by the Portfolio Managers. The chart below includes information regarding the Registrants portfolio managers, as of December 31, 2010. Specifically, it shows the number of other portfolios and assets, including the Registrant, managed by the Registrants portfolio managers. Neither portfolio manager manages any accounts with respect to which the advisory fee is based on this performance of the account.
PORTFOLIO MANAGER |
REGISTERED INVESTMENT COMPANIES ($) |
OTHER POOLED INVESTMENT VEHICLES ($) |
OTHER ACCOUNTS ($) | |||
Philippe Comby |
1 (467 million) | 0 | 34 (83 million) | |||
Rudolf Millisits |
1 (467 million) | 0 | 34 (83 million) |
COMPENSATION FOR THE PORTFOLIO MANAGERS
The portfolio managers are generally responsible for managing multiple types of accounts that may, or may not, invest in securities in which the Registrant may invest or pursue a strategy similar to one of the Registrants strategies.
During the fiscal period covered by this Report on Form N-CSR, the Registrants portfolio managers were compensated by a competitive salary and bonus structure, which was determined both quantitatively and qualitatively. Salary and bonus are paid in cash. The portfolio managers are compensated on the performance of the aggregate group of portfolios they manage rather than for a specific fund or account. Various factors are considered in the determination of the portfolio managers compensation. All of the portfolios managed by the portfolio managers are comprehensively evaluated to determine each portfolio managers positive and consistent performance contribution over time. Further factors include the amount of assets in the portfolios as well as qualitative aspects that reinforce the Advisors investment philosophy.
Total compensation is generally not fixed, but rather is based on the following factors: (i) leadership and commitment, (ii) maintenance of current knowledge and opinions on companies owned in the portfolio; (iii) generation and development of new investment ideas, including the quality of security analysis and identification of appreciation catalysts; (iv) ability and willingness to develop and share ideas; and (v) the performance results of the portfolios managed by the portfolio managers.
Variable bonus is based on the portfolio managers quantitative performance as measured by their ability to make investment decisions that contribute to the pre-tax absolute and relative returns of the accounts managed by the portfolio manager, by comparison to predetermined benchmarks (for the Registrant, the Swiss Market Index and the Swiss Performance Index) over the current fiscal year and the longer-term performance (3-, 5- or 10-year, if applicable), as well as performance relative to peers. The portfolio managers bonuses also can be influenced by subjective measurement of the managers ability to help others make investment decisions.
OWNERSHIP OF SECURITIES OF THE REGISTRANT
As of December 31, 2010, Mr. Comby and Mr. Millisits owned between $50,001 - $100,000 and between $100,001 - $200,000 of shares of common stock of the Registrant, respectively.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Period |
(a) Total Number of Shares Purchased |
(b) Average Price Paid per Share |
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
||||||||||||
$ | 29,364,245 | |||||||||||||||
01/01/10 - 01/31/10 |
297,200 | 11.5273 | 297,200 | 25,943,452 | ||||||||||||
02/01/10 - 02/28/10 |
316,700 | 11.0258 | 316,700 | 22,447,624 | ||||||||||||
03/01/10 - 03/31/10 |
172,300 | 11.5707 | 172,300 | 20,450,482 | ||||||||||||
04/01/10 - 04/30/10 |
100,000 | 11.9640 | 100,000 | 19,251,742 | ||||||||||||
05/01/10 - 05/31/10 |
143,800 | 10.3586 | 143,800 | 17,751,469 | ||||||||||||
06/01/10 - 06/30/10 |
256,600 | 10.4890 | 256,600 | 15,021,111 | ||||||||||||
07/01/10 - 07/31/10 |
186,300 | 11.0805 | 186,300 | 12,958,115 | ||||||||||||
08/01/10 - 08/31/10 |
103,600 | 11.4606 | 103,600 | 11,767,760 | ||||||||||||
09/01/10 - 09/30/10 |
64,000 | 12.3236 | 64,000 | 10,977,127 | ||||||||||||
10/01/10 - 10/31/10 |
141,900 | 12.8422 | 141,900 | 9,145,072 | ||||||||||||
11/01/10 - 11/30/10 |
159,000 | 13.3160 | 159,000 | 7,030,966 | ||||||||||||
12/01/10 - 12/31/10 |
161,400 | 13.3066 | 161,400 | 4,879,076 | ||||||||||||
Total |
2,102,800 | 11.6441 | 2,102,800 | $ | 4,879,076 | |||||||||||
On December 23, 2009, the Fund announced a new stock repurchase program effective for the duration of 2009 and 2010. Under the new program, the Fund is authorized to make open-market repurchases of its common stock of up to $30 million. The Fund expects to repurchase its common stock when the discount to net asset value of the trading price of its common stock on the NYSE is greater than 5%, subject to various factors, including the limitations imposed by the federal securities laws governing the repurchase of an issuers stock by the issuer and the ability of the Advisor to raise cash to repurchase shares of the Funds common stock in a tax-efficient manner.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The Registrants principal executive officer and principal financial officer have concluded, based on their evaluation of the Registrants disclosure controls and procedures as conducted within 90 days of the filing date of this report, that the Registrants disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrants management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the Registrants internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The Code of Ethics (Exhibit filed herewith).
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (Exhibit filed herewith).
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (Exhibit filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant The Swiss Helvetia Fund, Inc.
By (Signature and Title)* |
/s/ Rudolf Millisits | |
Rudolf Millisits Chief Executive Officer |
Date | 2/28/11 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Rudolf Millisits | |
Rudolf Millisits | ||
Chief Executive Officer |
Date | 2/28/11 |
By (Signature and Title)* | /s/ Rudolf Millisits | |||
Rudolf Millisits Chief Financial Officer | ||||
Date | 2/28/11 |