Total Return Securities Fund — Management Reports 2003

Mar 7, 2003

THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- DIRECTORS AND OFFICERS

• ------------------------------------------------------- AUDIT COMMITTEE MEMBER *AUDIT COMMITTEE CHAIRMAN INVESTMENT ADVISOR Hottinger Capital Corp. 1270 Avenue of the Americas, Suite 400 New York, New York 10020 (212) 332-7930 ADMINISTRATOR Forum Administrative Services, LLC CUSTODIAN Swiss American Securities Inc. TRANSFER AGENT PFPC Inc. P.O. Box 43027 Providence, RI 02940-3027 (800) 331-1710 LEGAL COUNSEL Stroock & Stroock & Lavan LLP INDEPENDENT AUDITORS Deloitte & Touche LLP THE INVESTMENT ADVISOR The Swiss Helvetia Fund, Inc. (the "Fund") is managed by Hottinger Capital Corp., which 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, Toronto, Geneva, Vienna, London, and the Bahamas. EXECUTIVE OFFICES The Swiss Helvetia Fund, Inc. 1270 Avenue of the Americas, Suite 400 New York, New York 10020 1-888-SWISS-00 (1-888-794-7700) (212) 332-2760 FOR INQUIRIES AND REPORTS: 1-888-SWISS-00 (1-888-794-7700) Fax (212) 332-7931 email: swz@swz.com WEBSITE ADDRESS http://www.swz.com THE FUND The Swiss Helvetia Fund, Inc. is a non-diversified, closed-end investment company whose objective is to seek long-term capital appreciation through investment in equity and equity-linked securities of Swiss companies. The Fund, listed on the New York Stock Exchange under the symbol "SWZ," is managed by Hottinger Capital Corp. The Fund has earned the Lipper, Inc. award for ranking number one among Western European closed-end funds in ten year performance for the periods ended December 31, 2001, 2000, 1999, and 1998. The Fund had previously been recognized for its top one year performance in the same category for the year 2000. The Fund also was given Morningstar's top overall rating of five stars as of December 31, 2002. Of course, past performance is no guarantee of future results. See page 4 for more information. Net Asset Value is calculated daily by 6:15 P.M. (Eastern Time). The most recent calculation is available by calling 1-888-SWISS-00 or by accessing our Website. Weekly Net Asset Value is also published in BARRON'S, the Monday edition of THE WALL STREET JOURNAL and the Sunday Edition of THE NEW YORK TIMES. 1 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- LETTER TO STOCKHOLDERS GENERAL MARKET REVIEW AND ECONOMIC CONSIDERATIONS 2002 was not a good year for the global equity markets. After a relatively good start early in the year, equity investors around the world saw their hope for the reacceleration of earnings confronted with the harsh reality of a weak economic rebound. The valuation bubble of the late 90's was still unwinding. This process, now in its third year, contributed to a large increase in equity index volatility. With many companies running out of costs to cut and their capital eroded by accumulated investment and operating losses, there is a fear that excess leverage will trigger a new wave of corporate bankruptcies. Expectations of a possible breakdown of the financial system, fears that a large financial institution would run into trouble and continuing corporate scandals had a strong negative impact on the markets with troughs during the summer and in mid October. In that respect, the traditional seasonality of the market once again played its role. Those fears turned out to be exaggerated. Reality, however, was not all bad. Because the financial system was in relatively good shape (banks had unloaded much of their risk in the capital market), the Federal Reserve was extremely stimulative in its monetary policy. In addition, the U.S. consumer was supported by rising home prices, making some damage control possible. Massive price/earnings multiple contraction did not occur for most of the largest companies due to their ability to maintain margins by cutting costs and to their ability to preserve cash flow by increasing pressure on suppliers and reducing capital expenditures. Working capital discipline also helped. Together these factors spurred strong productivity growth and positive, though moderate, GDP growth for the year in spite of relatively high unemployment. By the end of the year, Washington lawmakers called for a stimulus package to spur job creation and economic growth. The U.S. economic recovery was progressing too slowly, business investment had been stalled for too long, and unemployment was becoming a chronic problem instead of a cyclical one. With consumer spending still strong, inflation under control, the Federal Reserve actively watching for signs of deflation, GDP and productivity growing and interest rates at lifetime lows, most of the fundamentals were in place for a solid recovery in the U.S. economy and the global equity markets. Those positive fundamentals, however, were somewhat offset by other concerns on investors' minds including corporate scandals, rising tensions in Iraq and North Korea, terrorist incidents in Israel, Moscow, and even Washington D.C., the power of tort lawyers and class action suits, rising anti-American sentiment, even in close allies such as Germany, and the economic quagmire of the world's other economic powers, most notably the European Union and Japan. There has been a lot of uncertainty in the markets, and not much confidence. The number and scope of the unresolved issues puts the prospects 2 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- LETTER TO STOCKHOLDERS (CONTINUED) for this year's market performance into perspective. STOCK MARKET PERFORMANCE The Swiss market was one of the best performers of 2002 in U.S. dollar terms primarily due to the Swiss franc's 16.68% appreciation against the U.S. dollar. Without the currency impact, the Swiss Performance Index (SPI) was in line with the Italian and British markets, though still better than the other continental European markets.

SOURCES: FORUM FINANCIAL GROUP, BLOOMBERG LARGEST SWISS STOCKS 2002 PERFORMANCE

SECURITY HELD AS OF DECEMBER 31, 2002 IN SWZ PORTFOLIO. SOURCE: BLOOMBERG Financial stocks, especially in the insurance sector, were hit hard by insufficient reserves, collapsing equity markets and dwindling risk-free yields (a special concern for life insurance companies). The pricing environment for insurance has been much stronger post 9/11, especially for property and casualty businesses. But this strength was not enough to compensate for the 3 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- LETTER TO STOCKHOLDERS (CONTINUED) adverse factors mentioned earlier. In addition, Swiss companies were hit by losses in assets they acquired at high prices during the bubble years. Even though Swiss pharmaceutical companies outperformed their U.S. peers, they were still hurt by a decrease in their market multiples triggered by concerns over fewer product introductions and increasing government pressure on health care costs. Therefore, Swiss pharmaceutical stocks were unable to shield investors from economic turmoil as they had in past down cycles. FUND PERFORMANCE REVIEW The Fund's U.S. dollar performance benefited significantly from currency movements in 2002. The Swiss franc appreciated 16.68% against the U.S. dollar, shielding dollar denominated investors from a precipitous drop in equity values even as the Swiss Market Index fell 27.84% for the year. The past year's currency movement demonstrates why the Fund does not hedge its currency exposure as a matter of policy. Investors can achieve a degree of currency diversification by investing in Fund shares, and can potentially outperform the U.S. equity markets by a significant margin when the dollar weakens. As mentioned in the September report, Management considers cash held in Swiss francs a real investment from the point of view of its U.S. shareholders. In addition it helps to offset decreases in the market price of Swiss multinational companies caused by the impact the weakening dollar has on their earnings. The Swiss currency provides capital preservation when geopolitical uncertainties are as high as they are now. The Fund's market price was down 6.92% in 2002 while its net asset value slipped only 4.46%. While any loss is disappointing, the Fund's performance for the year was far superior to the returns achieved by both U.S. and Swiss equity indexes. The S&P 500 fell by 22.10%, and the SPI lost 11.12% in U.S. dollar terms. Management also delivered on stock picking and market timing. In Swiss currency, the Fund beat the benchmark SPI by 5.55%. The Fund maintained, for the year ended December 31, 2002, an overall rating of five stars from Morningstar. For the last year, the Fund's total returns earned a spot among the top 13% of funds in its category, (stock funds that invest at least 75% of their assets in Europe). The Fund achieved these results with less volatility than most of its international equity fund peers. The three year average standard deviation of the returns was 14.62%, among the lowest of all closed-end equity funds included in Morningstar's list of the 100 best closed-end funds for 2002. The Morningstar risk factor that "evaluates the fund's downside volatility MORNINGSTAR IS AN INDEPENDENT FUND PERFORMANCE MONITOR. ITS RATINGS REFLECT HISTORIC RISK-ADJUSTED PERFORMANCE AND MAY CHANGE MONTHLY. ITS RATINGS OF ONE (LOW) AND FIVE (HIGH) STARS ARE BASED ON A FUND'S THREE-AND FIVE-YEAR AVERAGE ANNUAL TOTAL RETURNS WITH FEE ADJUSTMENTS, AND A RISK FACTOR THAT REFLECTS FUND PERFORMANCE RELATIVE TO THREE-MONTH TREASURY BILL MONTHLY RETURNS. ONLY 33% OF THE FUNDS IN AN INVESTMENT CATEGORY MAY RECEIVE FOUR OR FIVE STARS. AS OF 12/31/02, THERE WERE 14 FUNDS IN THE FUND'S ASSET CATEGORY RATED BY MORNINGSTAR. IN FEBRUARY 2003, MORNINGSTAR RATED THE FUND FOUR STARS. 4 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- LETTER TO STOCKHOLDERS (CONTINUED) relative to other funds in its asset class" shows that the Fund as of 12/31/02 was 51% less risky over ten years than the average for the same asset class and 42% less risky for the three year period (go to www.morningstar.com, under closed-end funds, quicktake report for details). The Fund also received Lipper, Inc.'s top ranking for Western European closed-end funds in ten-year performance for the period ended December 31, 2001, the last year for which data on such ranking by Lipper, Inc. is available. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. *LIPPER, INC. IS AN INDEPENDENT FUND PERFORMANCE MONITOR. AS OF 12/31/01, THERE WERE TEN FUNDS IN THE LIPPER WESTERN EUROPEAN CLOSED-END FUNDS CATEGORY, WHICH IS COMPRISED OF FUNDS THAT CONCENTRATE THEIR INVESTMENTS IN EQUITY SECURITIES WHOSE PRIMARY TRADING MARKETS OR OPERATIONS ARE IN THE WESTERN EUROPEAN REGION OR A SINGLE COUNTRY WITHIN THIS REGION. PERFORMANCE COMMENTARY AND SWISS MARKET REVIEW

SOURCES: FORUM FINANCIAL GROUP, BLOOMBERG SWISS ECONOMY The Swiss and European economies are following the same cycle. Capital spending has been adjusted downward to reflect weaker consumer spending. Despite weak economic indicators, the Swiss National Bank has left its target range for the 3 months Swiss franc LIBOR unchanged at 0.25-1.25% with an easing bias. While the Swiss central bank wants to prevent further appreciation of the currency, it is running out of resources to accomplish that goal. Switzerland, because it is at the opposite end of the spectrum from the U.S. (non-engagement in conflicts, principle of neutrality), is bound to see its currency under upward pressure during tense geopolitical situations. Capital spending in Switzerland, despite a mediocre outlook for consumer spending and pressure on exports, is due for a rebound in 2003. Management expects a Real Gross Domestic Product increase of only 1% next year, continued weakness in job creation, and increasing pressure against exports due to a strengthening currency. OUTLOOK FOR THE SWISS MARKET The theme of the year 2003 may very well be reflation, engineered by the Federal Reserve and the European Central Banks. That, combined with the apparent overvaluation of Treasuries and other risk-free assets, should continue to trigger a broad shift in asset allocation in favor of equities. As a result, the overall backdrop for stocks and for commodities is positive. 5 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- LETTER TO STOCKHOLDERS (CONTINUED) The fate of the Swiss market will depend mainly on the performance of the financial and pharmaceutical sectors. Management believes that Swiss financial institutions have improved operations and management significantly as a result of recent restructuring. Company-specific risks have receded substantially. The capital base has been replenished and cost cutting programs are finally coming to fruition. Most of these companies are more sensitive to changes in the stock market than to changes in the economy. Since Management expects the stock market to outperform the economy in 2003, the context is favorable for these financial companies. Pharmaceutical companies are trading at a slight premium to the market. However, this slight premium is still a historically low valuation. Management believes there is more upside potential than downside potential in this sector. Overall, stock markets are cheap when compared to bond yields, especially risk-free bond yields. A key Management assumption is that the disparity between earnings yields and bond yields will close. This would give stocks a boost if the Federal Reserve wins its war against deflation as Management predicts. COMMENT ON THE CURRENCY The weakening of the U.S. dollar accelerated toward the end of the year as money was repatriated out of the dollar zone. Despite relatively weaker economic growth in Europe and in Switzerland in particular, the dollar suffered from the U.S. trade deficit and increasing government deficit projections. In addition, the risk of war put pressure on the U.S. currency as investors favored other safe haven currencies such as the Swiss franc. The Fed made it clear that it will fight deflation by any means, which likely includes a substantial increase in the supply of U.S. dollars. This creates, in turn, a supply and demand imbalance, contributing to further weakness versus the major currencies and especially against commodities. Management believes that the dollar is on a down trend because the factors behind its recent decline are still in place. Because Swiss multinational companies have a disproportionate emphasis on exports and a large amount of U.S. dollar denominated assets, Management expects this down-trend will have a disproportionate impact on their revenues and earnings. The impact of currency movements on Swiss equity prices is a complex issue. More than simply making exports too expensive for non-Swiss customers, currency movements expose Swiss firms to three distinct risks: translation risk, operational risk and transaction risk. Swiss companies have different hedging opportunities, including the use of market instruments, and natural hedges, such as shifting production out of Switzerland and local sourcing. Some Swiss companies report in euros or U.S. dollars. However, since they are more 6 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- LETTER TO STOCKHOLDERS (CONCLUDED) truly international than distinctly U.S. or European, they will still be affected by currency movements. Management expects the strong Swiss currency to dampen the expansion of the valuation of Swiss multinationals, which comprise over 80% of the Swiss market. On the other hand, this currency exposure may already be built into current equity prices. In the opinion of Management, the valuation of Swiss stocks is rather cheap, and therefore upside potential exists. STOCK REPURCHASE PROGRAM During the full year 2002, the Fund repurchased and retired 219,700 shares of its common stock at an average price of $10.75 per share and a weighted average discount of 16.90%. The total expenditure of $2,361,886 enhanced stockholder value by $513,051. During the period, the discount rate was between 14.40% and 23.39% finishing the year at 18.44%. Sincerely, (-s- Paul Hottinguer) Paul Hottinguer CHAIRMAN (-s- Rodolphe E. Hottinger) Rodolphe E. Hottinger PRESIDENT AND CHIEF EXECUTIVE OFFICER December 31, 2002 7 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- CERTAIN INFORMATION CONCERNING DIRECTORS The following tables set forth certain information about each person currently serving as a Director of the Fund, including his beneficial ownership of Common Stock of the Fund. All information presented in the tables is as of December 31, 2002. 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.

9 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- CERTAIN INFORMATION CONCERNING DIRECTORS (CONTINUED)

10 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- CERTAIN INFORMATION CONCERNING DIRECTORS (CONTINUED)

11 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- CERTAIN INFORMATION CONCERNING DIRECTORS (CONCLUDED)

12 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- CERTAIN INFORMATION CONCERNING EXECUTIVE OFFICERS The following table sets forth certain information about each person currently serving as an Executive Officer of the Fund, including his beneficial ownership of Common Stock of the Fund. All information presented in the table is as of December 31, 2002.

• -------------------------------------------------------------------------------- (1) ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (14 PERSONS) OWNED 338,293 SHARES WHICH CONSTITUTES APPROXIMATELY 1.4% OF THE OUTSTANDING COMMON STOCK OF THE FUND. SHARE NUMBERS IN THIS ANNUAL REPORT HAVE BEEN ROUNDED TO THE NEAREST WHOLE SHARE. (2) INDICATES "INTERESTED PERSON," AS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940 ACT"). PAUL HOTTINGUER AND THE BARON HOTTINGER ARE BROTHERS AND RODOLPHE E. HOTTINGER IS THE SON OF THE BARON. PAUL HOTTINGUER, THE BARON HOTTINGER, AND RODOLPHE E. HOTTINGER ARE 13 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- CERTAIN INFORMATION CONCERNING EXECUTIVE OFFICERS (CONCLUDED) "INTERESTED PERSONS" BECAUSE OF THEIR AFFILIATION WITH HOTTINGER ET CIE (ZURICH) AND HOTTINGER U.S., INC., CONTROLLING PERSONS OF HCC, THE FUND'S INVESTMENT ADVISOR. ALEXANDRE DE TAKACSY IS AN "INTERESTED PERSON" BECAUSE OF HIS AFFILIATION WITH HCC. PAUL R. BRENNER IS AN "INTERESTED PERSON" BECAUSE HE SERVED AS COUNSEL TO THE FUND, COUNSEL TO HCC AND OF COUNSEL TO SALANS HERTZFELD HEILBRONN CHRISTY & VEINER, WHICH SERVED AS GENERAL COUNSEL FOR THE FUND DURING THE LAST TWO YEARS. IN ADDITION, RODOLPHE E. HOTTINGER, RUDOLF MILLISITS, PHILIPPE R. COMBY, AND EDWARD J. VEILLEUX ARE CONSIDERED "INTERESTED PERSONS" BECAUSE EACH IS AN OFFICER OF THE FUND. (3) HOTTINGER ET CIE (ZURICH), A PARTNERSHIP, OWNS 152,260 SHARES OF THE FUND, HCC OWNS 107,964 SHARES OF THE FUND, AND HOTTINGER TREUHAND AG OWNS 8,219 SHARES OF THE FUND. PAUL HOTTINGUER, THE BARON HOTTINGER, AND RODOLPHE E. HOTTINGER ARE CONTROLLING PARTNERS OF HOTTINGER ET CIE (ZURICH) AND CONTROLLING SHAREHOLDERS AND DIRECTORS OF HCC AND HOTTINGER TREUHAND AG AND THEREFORE SHARE VOTING AND INVESTMENT POWER OVER THE 268,443 SHARES OF THE FUND OWNED BY HOTTINGER ET CIE (ZURICH), HCC, AND HOTTINGER TREUHAND AG. IN ADDITION, RODOLPHE E. HOTTINGER AND HIS CHILDREN DIRECTLY OWN 16,316 SHARES OF THE FUND. 14 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- REVIEW OF OPERATIONS Trading Activity for 2002 involved changes in the following positions: NEW INVESTMENTS BY THE FUND - ------------------------------------------------------- Geberit AG Givaudan SA Micronas Semiconductor Holding AG SGS Societe Generale de Surveillance Holding SA Swiss Life Holding Syngenta AG Unaxis Holding AG Zurich Financial Services AG - ------------------------------------------------------- ADDITIONS TO EXISTING INVESTMENTS - ------------------------------------------------------- Baloise Holding AG Converium Holding AG Phonak Holding AG Schindler Holding AG Sika AG The Swatch Group Ltd. - ------------------------------------------------------- SECURITIES DISPOSED OF - ------------------------------------------------------- Adecco SA Bank Sarasin & Co. Compagnie Financiere Richemont AG Daetwyler Holding Inc. Disetronic Holding Ltd. Galenica Holding Ltd. Gurit-Heberlein AG Huber & Suhner AG Jelmoli Holding AG Julius Baer Holdings AG Kaba Holding AG Kudelski SA Logitech International SA Schaffner Holding Ltd. Serono SA Straumann Holding AG Swisscom AG Tecan Group, Ltd. Vontobel Holding AG - ------------------------------------------------------- REDUCTIONS IN EXISTING INVESTMENTS - ------------------------------------------------------- Berna Biotech AG Credit Suisse Group Holcim Ltd. Komax Holding AG Lonza Group AG Novartis AG Swiss Reinsurance Company 15 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS DECEMBER 31, 2002

16 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2002

17 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONTINUED) DECEMBER 31, 2002

18 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS (CONCLUDED) DECEMBER 31, 2002

• -------------------------------------------------------------------------------- (1) NON-INCOME PRODUCING SECURITY. (2) ONE OF THE TEN LARGEST PORTFOLIO HOLDINGS. (3) AGGREGATE COST FOR FEDERAL TAX PURPOSES IS $132,490,616. SEE NOTES TO THE FINANCIAL STATEMENTS. 19 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2002

• -------------------------------------------------------------------------------- SEE NOTES TO THE FINANCIAL STATEMENTS. 20 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002

• -------------------------------------------------------------------------------- SEE NOTES TO THE FINANCIAL STATEMENTS. 21 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS

• -------------------------------------------------------------------------------- SEE NOTES TO THE FINANCIAL STATEMENTS. 22 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS

• -------------------------------------------------------------------------------- (1) LESS THAN $.01 PER SHARE (2) INCLUDES NET REALIZED CURRENCY GAIN (LOSS). (3) TOTAL INVESTMENT RETURN BASED ON MARKET VALUE DIFFERS FROM TOTAL INVESTMENT RETURN BASED ON NET ASSET VALUE DUE TO CHANGES IN THE RELATIONSHIP BETWEEN THE FUND'S MARKET PRICE AND ITS NET ASSET VALUE PER SHARE. RETURNS FROM 1998 HAVE BEEN RESTATED TO REFLECT SUBSEQUENT CHANGES TO DIVIDEND REINVESTMENT CALCULATIONS. (4) THE INCREASE IN THE FUND'S EXPENSE RATIO WAS ATTRIBUTABLE TO EXTRAORDINARY EXPENSES IN CONNECTION WITH A STOCKHOLDER'S PROXY CONTEST FOR THE ELECTION OF DIRECTORS AND TERMINATION OF THE MANAGEMENT CONTRACT AND DEFENSE AGAINST A LAWSUIT AGAINST THE FUND AND ITS DIRECTORS PLUS THE IMPACT OF A DECLINE IN THE FUND'S NET ASSETS. (5) NOT AUDITED BY DELOITTE & TOUCHE LLP. SEE NOTES TO THE FINANCIAL STATEMENTS. 23 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1-- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES A. ORGANIZATION The Swiss Helvetia Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified, closed-end investment management company. The Fund is organized as a corporation under the laws of the State of Delaware. The investment objective of the Fund is to seek long-term growth of capital through investment in equity and equity-linked securities of Swiss companies. B. VALUATION OF SECURITIES The Fund values its investments at market value. When valuing listed equity securities, the Fund uses the last sale price prior to the calculation of the Fund's net asset value. When valuing equity securities that are not listed or that are listed but have not traded, the Fund uses the mean between the bid and asked prices for that day. When valuing fixed income securities, the Fund uses the last bid price prior to the calculation of the Fund's net asset value. If a current bid price is not available, the Fund uses the mean between the latest quoted bid and asked prices. When valuing fixed income securities that mature within sixty days, the Fund uses amortized cost. When valuing securities for which market quotations are not readily available or for which the market quotations that are available are considered unreliable, the Fund determines a fair value in good faith under procedures established by and under the general supervision of the Fund's Board of Directors. The Fund may use these procedures to establish the fair value of securities when, for example, a significant event occurs between the time the market closes and the time the Fund values its investments. After consideration of various factors, the Fund may value the securities at their last reported price or at some other value. On December 31, 2002, there were no fair valued securities. C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded on the trade date. Realized gains and losses are determined by comparing the proceeds of a sale or the cost of a purchase with a specific offsetting transaction. Dividend income, net of any foreign taxes withheld, is recorded on the ex-dividend date. Interest income, including amortization of premiums and accretion of discounts, is accrued daily. Estimated expenses are also accrued daily. The Fund records Swiss withholding tax as an expense, net of any amount receivable from Swiss tax authorities in accordance with the tax treaty between the United States and Switzerland. D. DISTRIBUTIONS At least once a year, the Fund pays dividends to the extent it has any net investment income and makes distributions of any net realized capital gains to the extent they exceed any capital loss carryforwards. The Fund determines the size and nature of these distributions in accordance with provisions of the Internal Revenue Code. Distributions may be paid either in cash or in stock with an option to take cash. The Fund records dividends and distributions on its books on the ex-dividend date. E. FEDERAL INCOME TAXES The Fund's policy is to continue to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income to its shareholders. Therefore, no federal income tax provision is required. F. SECURITIES LENDING The Fund may lend securities to financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive amounts equivalent to the dividends paid on these securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund in the form of cash and/or government securities equal to 102% of the value of the securities loaned. The Fund receives fees as compensation for lending its securities. Either the Fund or the borrower may terminate the securities loan at any time. The Fund did not engage in any securities lending activity for the year ended December 31, 2002. 24 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) G. FOREIGN CURRENCY TRANSLATION The Fund maintains its accounting records in U.S. dollars. The Fund determines the U.S. dollar value of foreign currency denominated assets, liabilities and transactions by using prevailing exchange rates. In valuing assets and liabilities, the Fund uses the prevailing exchange rate on the valuation date. In valuing securities transactions, the receipt of income and the payment of expenses, the Fund uses the prevailing exchange rate on the transaction date. Net realized and unrealized gains and losses on foreign currency translations shown on the Fund's financial statements result from the sale of foreign currencies, from currency gains or losses realized between the trade and settlement dates on securities transactions, and from the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. When calculating realized and unrealized gains or losses on investments in equity securities, the Fund does not separate the gain or loss attributable to changes in the foreign currency price of the security from the gain or loss attributable to the change in the U.S. dollar value of the foreign currency. H. ESTIMATES In preparing its financial statements in conformity with accounting principles generally accepted in the United States, management makes estimates and assumptions. Actual results may be different. NOTE 2-- FEES AND TRANSACTIONS WITH AFFILIATES Hottinger Capital Corp. ("HCC"), which is owned jointly by Hottinger U.S., Inc. and Hottinger & Cie (Zurich), is the Fund's advisor (the "Advisor"). The Fund pays the Advisor an annual fee based on its month-end net assets which is calculated and paid monthly at the following annual rates: 1.00% of the first $60 million, 0.90% of the next $40 million, 0.80% of the next $100 million, 0.70% of the next $100 million, 0.65% of the next $100 million, 0.60% of the next $100 million, 0.55% of the next $100 million, and 0.50% of such assets in excess of $600 million. For the year ended December 31, 2002, the Fund paid the Advisor $2,511,744 in investment advisory fees. The Fund paid Hottinger & Cie $114,255 in brokerage commissions for the year ended December 31, 2002. The Fund and the Advisor have agreed to share certain common expenses subject to review and allocation by the Audit Committee of the Fund's Board of Directors. The Committee's allocations are based on its determination of the relative benefits the Fund and the Advisor derive from the expenditures. During 2002, the Committee allocated $11,166 of expenses incurred in connection with publicizing the Fund as follows: $5,583 to the Fund and $5,583 to the Advisor. Certain officers and directors of the Fund are also officers or directors of HCC, Hottinger U.S. Inc., Hottinger & Cie (Zurich) and/or FAcS. These persons are not paid by the Fund for serving in these capacities. NOTE 3-- OTHER FEES Forum Administrative Services, LLC ("FAdS") is the Fund's Administrator. FAdS receives, for its services, an annual fee based on the Fund's average daily net assets which is calculated daily and paid monthly at the following annual rates: 0.08% on the first $250 million, 0.05% on the next $250 million, and 0.03% on assets in excess of $500 million. Prior to May 28, 2002, Investment Company Capital Corp. ("ICCC"), an indirect, wholly owned subsidiary of Deutsche Bank AG, served as the Fund's Administrator. For the year ended December 31, 2002, the Fund paid $139,330 to FAdS and $114,815 to ICCC. Forum Accounting Services, LLC ("FAcS") is the Fund's accountant. FAcS receives, for its services, a monthly fee of $5,000 plus an annual fee based on the Fund's average daily net assets which is calculated daily and paid monthly at the following annual rates: 0.01% of the first $500 million and 0.005% on assets in excess of $500 million. FAcS also receives reimbursement for certain, reasonable out-of-pocket expenses. Prior to May 28, 2002, ICCC served as the Fund's accountant. For the year ended December 31, 2002, the Fund paid $53,552 to FAcS and $43,568 to ICCC. PFPC Inc. is the Fund's transfer agent. The Fund pays the transfer agent a per account fee which is accrued daily and paid monthly. Swiss American Securities Inc. is the Fund's U.S. custodian. Credit Suisse First Boston is the Fund's Swiss sub-custodian. The Fund pays the custodian and sub-custodian an annual fee. 25 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Fund pays each director who is not an interested person (as such term is defined in the Act) of the Fund, its Advisor or Administrator approximately $15,000 per annum in compensation, except for the Chairman of the Audit Committee, who the Fund pays an annual fee of approximately $16,500. In addition, the Fund pays each disinterested director $750 for each directors' meeting attended and $750 for each committee meeting attended, if it is held separately. In addition, the Fund reimburses directors that are not employees of or affiliated with the Fund's advisor for out-of-pocket expenses incurred in conjunction with attendance at meetings. NOTE 4-- CAPITAL SHARE TRANSACTIONS The Fund is authorized to issue up to 50 million shares of capital stock. HCC owned 107,964 of the 23,673,009 shares outstanding on December 31, 2002. Transactions in capital shares were as follows:

(a) REPRESENTS SHARES ISSUED TO STOCKHOLDERS WHO DID NOT ELECT CASH IN CONNECTION WITH A CAPITAL GAINS DISTRIBUTION OF $1.32 PER SHARE PAID JANUARY 11, 2001 TO STOCKHOLDERS OF RECORD ON DECEMBER 18, 2000. NOTE 5-- FEDERAL INCOME TAX AND INVESTMENT TRANSACTIONS At December 31, 2002, capital contributions, accumulated undistributed net investment income, and accumulated net realized gain/(loss) from investments and foreign currency transactions have been adjusted for current period permanent book/tax differences which arose principally from differing book/tax treatments of foreign currency transactions.

At December 31, 2002, the net unrealized appreciation from investments for those securities having an excess of value over cost and net unrealized depreciation from investments for those securities having an excess of cost over value (based on cost of $132,490,616 for federal income tax purposes) was $108,886,295 and $3,576,732, respectively. The difference between book basis and tax-basis unrealized appreciation is primarily attributable to the tax deferral of losses on wash sales. Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. The tax character of distributions paid during 2002 and 2001 was as follows (see page 29 for details):

At December 31, 2002, the components of distributable earnings on a tax basis were as follows: Long-term capital gains $ 3,189,071 Unrealized appreciation $105,309,563 The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended December 31, 2002, were $234,336,516 and $278,461,772, respectively. For tax purposes, the Fund had a current year deferred post-October loss of $1,463,498. This loss will be recognized for tax purposes on the first day of the following tax year. NOTE 6-- STOCK REPURCHASE PROGRAM Pursuant to authorization by the Board of Directors, the Fund began open market purchases of its common stock on the New York Stock Exchange in 1999 and has continued purchases in each subsequent year. The Board has authorized the purchase of up to 500,000 shares in 2003. During the year ended December 31, 2002, the Fund repurchased and retired 219,700 shares at an average price of $10.75 per share (including broker commissions) and a weighted average discount of 16.90%. These repurchases, which had a total cost of 26 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONCLUDED) $2,361,886, resulted in an increase of $513,051 to the Fund's net asset value. NOTE 7-- LITIGATION On April 2, 2001 and May 8, 2001, two complaints were filed in purported class actions on behalf of stockholders of the Fund, in the Court of Chancery of the State of Delaware, against the Fund, each of its directors and HCC, the Fund's Investment Advisor (collectively, the "defendants"). The complaints in these cases, entitled Kimberly Kahn v. Paul Hottinguer et al. and Charles Miller v. Paul Hottinguer et al., allege that the defendants have: (A) breached fiduciary duties to stockholders and violated Section 109(a) of the Delaware General Corporation Law by adopting amendments to the Fund's Bylaws requiring a vote of 75% of the Fund's outstanding shares to alter, amend or repeal the Bylaws or to adopt other bylaws; (B) breached fiduciary duties to stockholders by adopting amendments to the Fund's Bylaws requiring nominees for election as directors to satisfy certain qualifications; and (C) breached fiduciary and contractual duties through the manner in which the Fund effected a capital gains distribution in December 2000. The complaints seek as relief among other things: (i) a declaration that the defendants have breached their fiduciary duties to stockholders and that the amendments to the Bylaws are null and void; (ii) an injunction in connection with any meeting of stockholders preventing the defendants from enforcing the Bylaw amendments; and (iii) certain unspecified damages. The claims relating to the Bylaws were voluntarily dismissed by the plaintiffs as moot. The defendants have moved to dismiss the capital gains distribution claims on the grounds that they fail to state a claim upon which relief can be granted. The parties have reached an agreement in principle to settle the remaining claims and are in the process of preparing the necessary papers to submit the settlement to the Court for approval. Although the ultimate outcome of the lawsuit cannot be ascertained, it is the opinion of management after consultation with outside legal counsel that the resolution of such suits will not have a material adverse effect on the financial statements of the Fund. 27 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of The Swiss Helvetia Fund, Inc.: We have audited the accompanying statement of assets and liabilities of The Swiss Helvetia Fund, Inc., including the schedule of investments, as of December 31, 2002, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2002, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Swiss Helvetia Fund, Inc. as of December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP New York, New York February 14, 2003 28 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (UNAUDITED) This report is sent to the stockholders of The Swiss Helvetia Fund, Inc. for their information. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report. CODE OF ETHICS The Board of Directors of the Fund and the Advisor have Adopted Codes of Ethics pursuant to provisions of the Investment Company Act of 1940 (the "Codes"). The Codes apply to the personal investing activities of various individuals including directors and officers of the Fund and designated officers, directors and employees of the Advisor. The provisions of the Codes place restrictions on individuals who are involved in managing the Fund's portfolio, who help execute the portfolio manager's decisions or who come into possession of contemporaneous information concerning the investment activities of the Fund. The fundamental principle of the Codes is that the individuals covered by the Codes have a fiduciary responsibility to the Fund and its stockholders. They are therefore required at all times to place the interests of the Fund and the stockholders first and to conduct all personal securities transactions in a manner so as to avoid any actual or potential conflict of interest or abuse of their position of trust. Portfolio managers and other individuals with knowledge of Fund investment activities are prohibited from purchasing or selling a security during a blackout period of 30 calendar days before and after the date on which the Fund effects a trade in the same or a similar security. They are also prohibited from engaging in short term trading of Swiss equity or equity linked securities. Additionally, the Fund's portfolio managers are prohibited from participating in any initial public offering or private placement of Swiss equity and equity linked securities and other covered individuals must obtain prior clearance before doing so. Any individual who violates the provisions of the Codes is required to reverse the transaction and to turn over any resulting profits to the Fund. The Fund and the Advisor have adopted compliance procedures and have appointed compliance officers to ensure that all covered individuals comply with the Codes. DISTRIBUTIONS The following information summarizes all distributions declared by the Fund during the year ended December 31, 2002.

The Fund has elected to pass through $.021855 per share to its shareholders as a credit for taxes paid to Switzerland during its fiscal year ended December 31, 2002. - -------------------------------------------------------------------------------- TAX INFORMATION FOR THE TAX YEAR ENDED DECEMBER 31, 2002 (UNAUDITED) The amounts may differ from those elsewhere in this report because of differences between tax and financial reporting requirements. The Fund's distributions to shareholders of long-term capital gains included $372,739 in connection with the distribution paid June 14, 2002 to shareholders of record on June 7, 2002, and $12,807,098 in connection with the distribution paid January 14, 2003 to shareholders of record on December 19, 2002. 29 THE SWISS HELVETIA FUND, INC. - -------------------------------------------------------------------------------- DIVIDEND REINVESTMENT PLAN (UNAUDITED) THE PLAN The Swiss Helvetia Fund's (the "Fund") Dividend Reinvestment Plan (the "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. The federal, state and local tax consequences are the same whether you receive dividends and capital gains distributions in cash or in Fund shares. The Plan is designed to allow all stockholders an opportunity to participate. Some of the Plan features are: 1. Dividend reinvestment automatically increases the number of shares you own. 2. Dividends and distributions are reinvested in additional shares at the lower of net asset value or market price. 3. Shares purchased through the Plan are recorded in your account. 4. You may terminate your Plan account at any time. You may not be able to participate in the Plan if your Fund shares are held at a brokerage firm. If the 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. ("PFPC"). To start the Plan at the time a specific dividend is distributed, please forward the required form to your broker or PFPC 10 days prior to the record date for that dividend or distribution. HOW DOES THE PLAN WORK? When a dividend or distribution is declared, non-participants in the Plan will receive cash. Plan participants will receive the equivalent in shares of the Fund valued at the lower of the market price or net asset value as described below. 1. Whenever net asset value is equal to or less than market price by no more than 5% at the time of valuation, you will be issued shares at net asset value. 2. If the net asset value is less than 95% of the market price on the valuation date, you will be issued shares at 95% of the price of the shares. 3. If the net asset value exceeds the market price 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, the average per share purchase price paid by PFPC may exceed the net asset value, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund at net asset value. 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. You will be issued a stock certificate upon request. IS THERE ANY CHARGE TO PARTICIPATE IN THE PLAN? There is no charge to participants for reinvesting dividends or distributions. PFPC's fee for handling the reinvestment of dividends and distributions will be paid by the Fund. There will be no brokerage charge to stockholders for shares issued directly by the Fund as a result of dividends or distributions payable either in stock or cash. Each participant, however, will pay a pro rata share of brokerage commissions incurred with respect to PFPC's open market purchases in connection with the reinvestment of dividends or distributions. HOW CAN I DISCONTINUE MY PARTICIPATION IN THE PLAN? You may terminate your account under the Plan by notifying your broker or PFPC in writing. Upon termination, you will receive a certificate for the number of shares held in the Plan. WHERE CAN I DIRECT MY QUESTIONS AND CORRESPONDENCE? Questions and correspondence concerning the Plan should be directed to: PFPC, Inc. P.O. Box 43027 Providence, RI 02940-3027 1-800-331-1710 30