Swiss Helvetia Fund, Inc.
THE SWISS HELVETIA FUND, INC.
Directors and Officers
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Samuel B. Witt III, Esq. Chairman
(Non-executive) David R. Bock
Director Jean-Marc Boillat3 Director Richard A. Brealey Director Alexandre de Takacsy President Director Claude W. Frey Director Claus
Helbig1
Director R. Clark Hooper2 Director Paul Hottinguer Director Michael Kraynak, Jr.1
Director |
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Stephen K. West, Esq.1,4
Director Eric R. Gabus
Director Emeritus Baron
Hottinger Director Emeritus
Rudolf Millisits Chief Executive
Officer Chief Financial Officer Philippe R. Comby, CFA, FRM Vice President James Downey Secretary Glen Fougere Assistant Secretary Patrick J. Keniston
Chief Compliance Officer |
1 Audit Committee Member
2 Audit Committee
Chair |
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3 Governance/Nominating Committee Chair 4 Pricing Committee Chair |
Investment Advisor
Hottinger Capital Corp.
1270 Avenue of the Americas, Suite 400
New York, NY 10020
(212) 332-7930
Administrator
Citi Fund Services Ohio, Inc.
Custodian
Citibank, N.A.
Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Legal Counsel
Stroock & Stroock & Lavan LLP
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
The Investment Advisor
The Swiss Helvetia Fund, Inc. (the Fund) is managed by Hottinger Capital Corp., which belongs to the Hottinger
Group.
The Hottinger Group dates back to Banque Hottinguer,
which was formed in Paris in 1786 and is one of Europes oldest private banking firms. The Hottinger Group has remained under the control of the Hottinger family through seven generations. Its headquarters are in Zurich with offices in Basel,
Brig, Geneva, Luxembourg, Sion, Vienna, London, Paris, New York, Toronto 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
www.swz.com
The Fund
The Fund 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 also may acquire and hold equity and equity-linked securities of non-Swiss companies in limited instances.
The Fund is listed on the New York Stock Exchange under the symbol
SWZ.
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. Net Asset Value is also published weekly in Barrons, the Monday edition of The Wall Street Journal and the
Sunday edition of The New York Times.
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders
Global Market Review
The global macro-economic situation worsened over the summer. According to International Monetary Fund (IMF) forecasts, the global
economic recovery is slowing, with global gross domestic product (GDP) growth projected at 4.0% for both 2011 and 2012, down from prior forecasts of 4.5%. The IMF noted that global GDP growth has entered a challenging new phase with global activity
weakening and a recent sharp fall in consumer confidence. Moreover, the new head of the IMF, Christine Lagarde, along with the Organization for Economic Co-operation and Development (OECD), has focused on the immediate need to recapitalize European
banks. The combination of the European sovereign debt crisis and the undercapitalization of European banks has led to heightened financial market stress with a substantial impact on the global economy.
The third quarter of 2011 saw a slowdown in the global
economy and increasing fears of a double-dip recession in the U.S. and Europe as a result, in part, of the lack of stimulus efforts on the part of European policymakers. Leading indicators, including Purchasing Managers Indexes (PMI), also showed
that the second quarter soft patch extended well into the third quarter of 2011. For instance, the JP Morgan Global Manufacturing PMI remained slightly above the breakeven 50 mark in August, but output, new orders and new export orders continued to
contract. Half of the countries reported PMI still above the critical threshold of 50, although only 25% of those countries, including the U.S. and China, showed a
monthly increase. Although these indicators continued to deteriorate and U.S. GDP growth forecasts were reduced, sustained U.S. consumer spending, strong monetary growth expansion and lower oil
prices may suggest only slower GDP growth rates instead of a double-dip recession.
From a Eurozone perspective, the sovereign debt crisis continues to be a significant short-term risk to global financial stability. Concerns about European sovereign debt and, by extension, that of the
European banks holding sovereign bonds, have led to a renewed credit freeze as banks maintain high cash reserves, but have tightened their lending practices. As a result, there is a real risk of a feedback loop with low growth rates, increases in
non-performing loans, further weakened banks, and additional cuts in lending. The European Central Bank (ECB) and EU authorities continue to demonstrate their commitment to the Eurozone. The ECB has intervened in the bond markets by purchasing more
than 150 billion euros of government bonds. This action, however, has sterilized most of the ECBs operations and reduced its lending to financial institutions. Although there are no opt-out clauses under the EU constitution for EU members to
leave the Eurozone, the Lisbon Treaty explicitly states that any withdrawal should come from a Member States initiative and willingness. The Treaty also states that the adoption of the euro by Member States is irrevocable. ECB and EU
authorities are concerned that, if one country left the EU, speculation about other weak economies also leaving could generate
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
very high costs for Eurozone as well as for the global economy.
With respect to Greece, the countrys total debt burden stands at more than 320 billion euros. Greek default is well anticipated with
5-year credit default swaps (CDS) spreads signalling a 98% probability. The IMF, EU and ECB are reopening talks in Athens on Greeces progress in meeting its budget targets for the next 8 billion euro tranche from the countrys 110 billion
euro rescue program. Meanwhile, due to the escalating funding needs of Greece, speculation is mounting about a further haircut on Greek debt of up to 60% (originally it was around 20% in July). In early October, Greek Prime Minister George
Papandreou announced that Greece will fail to meet its fiscal deficit target of 7.6% of GDP for this year, and instead will only manage to reach 8.5% of GDP. Other peripheral countries, including Italy and Spain, also have come under pressure in
recent months. For example, the spotlight on Italy re-emerged after Moodys downgraded Italys sovereign debt rating three notches to A2 from Aa2 in early October.
The European sovereign debt crisis has had a significant
effect on the larger European financial sector with CDS spreads for financials reaching their highest historical levels. To improve liquidity, the ECB and other central banks decided to ease U.S. dollar funding of European banks. European
policymakers also agreed to expand the guarantee scheme of the European Financial
Stability Facility (EFSF) fund and to give the fund more flexibility, which will allow it not only to lend to countries under IMF, EU and ECB programs, but also to intervene in primary and
secondary bond markets and to recapitalize banks via sovereign investment. Because the sovereign debt crisis continues to grow, and has moved beyond Greece, Portugal and Ireland to Italy and Spain and even to certain French banks, such as Dexia, and
others, it has become evident that the EFSF initiative will be insufficient to cope with the needs of the larger European Monetary Union countries in the long term. Some recapitalization of European banks may occur while Greek debt is being
restructured, provided that the ECB continues to provide unlimited support to the bond market. The risk of a recession has increased in the Eurozone and will continue to increase as long as the Greek debt problem is unresolved. On the monetary
front, future implied rates are discounting cuts before year end with important issues in the interbank market, such as the reluctance of the European banks to lend to each other. In the long run, fiscal discipline through closer fiscal integratio
represents probably the most credible solution.
The increased risk of recession also is spreading across emerging market countries. Although those economies continue to demonstrate
stronger growth than the G7 nations. However, tightening monetary cycles are expected to end in key countries, including Brazil, Korea, Malaysia and, potentially, China in the near future. In particular, Chinas late stage monetary
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
tightening policy could end soon, as monetary growth dropped below the Chinese Central Banks target and credit growth fell below GDP growth. Inflation levels appear to have peaked; however,
they remain elevated given strong demand pressures. Assuming slower growth in the months ahead, Asian central banks are more likely to leave policy rates unchanged.
Overall, risk aversion in financial markets continued
throughout September, an event that has not spared any asset class. Global equities dropped by more than 15% in the third quarter of 2011, and were negatively affected by heightened global macro-economic concerns despite strong corporate
fundamentals. Companies also continued to be negatively affected by substantial earnings downgrades. Many sectors and stocks have reached their lowest valuations since the global financial crisis in 2008 and 2009, and appear to be oversold.
Management still anticipates most of the headwinds to persist in the short-term, while equity markets could move upward on compelling valuations both from a historical perspective, as compared to other asset classes, and on clearer prospects of a
resolution to the European sovereign debt crisis.
A shift towards less stable but faster growing investments by the Fund would need to be preceded by a recapitalization of the European
banking system (i.e., systemic risk mitigation) along with a move towards more fiscal integration in Europe (e.g., Eurobonds issuance, EFSF expansion and the ECB officially being the lender of last resort for the region).
Swiss Economy Review
Swiss economic growth slowed in the second quarter, with GDP growth up by only 0.4% quarter-over-quarter and 2.3% year-over-year, which
were the lowest growth rates since 2009. Subdued private consumption (+0.2% quarter-over-quarter) as well as declining equipment investments (-1.5% quarter-over-quarter), were the two main detractors, while construction expenditures also fell
2.5% quarter-over-quarter. However, the slowdown in construction spending should prove to be temporary when looking at the robust orders in new construction, with unfilled orders reaching a new all-time high in the third quarter, and building
permits increasing strongly. The external sector (exports minus imports) contributed positively for another quarter despite the strengthening of the Swiss franc (up by more than 7% against the U.S. dollar), while government spending rose by 2.8%
quarter-over-quarter, helping to offset subdued domestic demand. Despite this economic deceleration, Swiss GDP growth still outpaced the Eurozone during the second quarter.
Looking at consumer spending developments, households also
expect a general economic slowdown tied to the deterioration of their own financial situations. Consumption behavior, however, remained generally unaffected, as demonstrated by solid growth in retail sales at +2.9% in July (decelerating in
August by 1.9%) and new car registrations (+9.1% in August and +18.6% in September). The elevated migration into Switzerland, along with low and stable unemployment
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
(unchanged at 2.8% in September), continued to support domestic demand.
From a business survey standpoint, the Swiss KOF (Konjunkturforschungsstelle) leading indicator fell almost 25% in September, which is the
sharpest decline in more than two years and reflects the significant slowdown in the pace of economic activity. During that period, the strength of the Swiss franc started to have a significant negative effect on Swiss competitiveness with markedly
worse performance by export industries and losses in local tourism. The watch industry, however, continues to be extremely resilient, growing by 16% in August. The other key indicator, the Swiss PMI, also faded and dropped below the critical
boom-bust line of 50 to 48.2. Within the Swiss PMI, the production sub-index posted the biggest decline, while the more forward-looking order backlog was stabilized, albeit at a subdued level. Overall, although Swiss industrial activities have lost
some of their momentum over the last several months, they have not faltered to a similar degree observed in late 2008 and throughout 2009. Despite the detrimental effects of the strong Swiss franc, purchasing managers in Switzerland continue to have
confidence in their economic future.
After many
failed attempts to weaken the Swiss franc since the start of the financial crisis, the Swiss National Bank (SNB) signaled a shift to a more aggressive stance. As a first step, the SNB reduced its 3-month CHF-LIBOR target to 0% and massively expanded
its sight deposits (above CHF 200
billion), while buying back SNB bills above par, pushing their yields deep into negative territory. In a second step, in early September, the SNB set a target of CHF 1.20 against the euro and
started selling Swiss francs in potentially unlimited quantities. The SNB intends to continue reducing the attractiveness of investments in Swiss francs and is prepared to allow its foreign exchange reserves and its balance sheet to expand to
whatever level is necessary to achieve its goal. Moreover, the SNB lowered 2011 estimated Swiss GDP growth from 2.0% to 1.5%, as the economic outlook remained particularly uncertain, while at the same time cutting its inflation forecast to 0.4% in
2011 and -0.3% in 2012. The SNB believes that inflationary risks remain contained. Moreover, foreign exchange reserves grew by an additional 30 billion Swiss francs during September 2011 to 282 billion Swiss francs. The exchange rate floors
established by the SNB constituted a great relief for all exporters with a cost base in Swiss francs. SNBs intervention could potentially be successful as the Swiss franc is overvalued and the markets have not engaged in a large scale test of
the SNBs lower boundary. However, it will be difficult for Switzerland, through unilateral action, to reverse the strengthening of its currency given the larger ongoing deterioration in the fundamental outlook for the Eurozone. One positive
development, however, has been the widening inflation gap between the Eurozone and Switzerland, which has lead to a declining fair value in EUR/CHF on purchasing power parity (PPP) considerations. In this context, the Swiss franc has experienced
huge moves this year, ending
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
up 2.7% against the euro and up 4.9% against the U.S. dollar at the end of the third quarter. Continuing European sovereign debt issues and high financial market tensions will limit strengthening
of the euro against the Swiss franc, while the U.S. dollar should slightly appreciate against the euro and, therefore, the Swiss franc, in the very short-term based on inflation and economic growth differentials.
As a result of heightened risk, equity market volatility
increased dramatically in the third quarter of 2011, leading to a decline of nearly 12% for the Swiss market, with the small- and mid-cap segment dropping by 18%.
Sector Review
Consumers
Although the brand names in the consumer sector are generally regarded as defensive, the economic climate remained challenging for those
companies. Rising raw material costs negatively affected profitability levels and the continued strength of the Swiss franc will continue to negatively affect Swiss companies reporting in the domestic currency. Nestlé, for example, had cost
increases of almost 3 billion Swiss francs this year, which it was able to partially offset by savings programmes, growth, sales mix and pricing. The company is expected to deliver constant currency margin improvement and 5% to 6% organic growth on
potentially higher pricing during the second half of the year, in spite of flatter volumes. Double digit growth in Asia, Africa and Middle East outweighed subdued expansion in the developed world. Although
Nestlés management did not reject the idea of a new buyback program, priority is being given to the companys financial flexibility. In the current volatile economic
environment, Nestlé should continue to offer resilient underlying earnings growth. The companys stock price fell by 4.1% in the third quarter, outperforming slightly the European food and beverage sector.
Lindt, the worldwide leader in the premium chocolate segment,
should outperform the sector with projected organic growth in Swiss francs of 6% to 8%. Considering its relative overexposure to developed countries and its high dependence on competitive cocoa, sugar and milk prices to generate growth, however,
Lindt is more exposed to economic downturns than its peers in the consumer sector. The companys ongoing share buyback program, implemented in May of this year, will last to the end of 2012, with a maximum buyback of 5% of the companys
capital stock.
The personal goods and services
segment was a weak performer across all European indices during the third quarter. Fears of a hard landing in China, which would harm Swiss luxury goods and watch companies, were the main reason for this selloff. Swatch and Richemont have higher
exposure to China than their European peers, with 34% and 24% exposure, respectively. Although Fund management does not currently expect a global recession, the Funds exposure to both stocks was reduced slightly during the third quarter.
Excluding a hard landing scenario in China, Swiss domestic demand
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
should remain high for luxury goods. If the Chinese government implements certain tax relief on luxury goods, it would be beneficial for Swiss watch exports.
Industrials Goods and Services
The industrial sectors performance was strongly affected by the wild swings in the Swiss franc during the quarter. Once the U.S.
dollar plunged below 0.90 per Swiss franc and the euro closed down to 1.18 per Swiss franc, the negative correlation between the Swiss franc and the industrial sector increased significantly. Despite the SNBs currency intervention
and the subsequent devaluation of the Swiss franc by a whopping 25% against the euro and the U.S. dollar since mid-August, the sector has recovered modestly. During the year, the Fund progressively increased its exposure to large companies by
reducing its weighting in small and mid-capitalization companies, including those in the industrial sector, in part because of the better ability of the large companies to withstand the negative impact of the strong Swiss franc. Their
suppliers base is generally more geographically diversified which allows them to increase sourcing outside of Switzerland better matching revenues currencies and cost currencies. Swiss industrial companies, on the other hand, saw their
sales levels, operating profits and resulting growth rates, as measured in Swiss francs, strongly reduced as a result of this negative translation effect. At the same time, company margins have been negatively affected by delays in passing raw
material price increases on to customers. This delay was partly a result of slower economic growth that spurred more competitive behavior among corporations. The market share of Swiss industrial
companies, however, does not appear to have been negatively affected at this time.
Other sources of concerns for the sector are the slowdown in global GDP due to austerity measures implemented in different Western countries and due to the lagging effect of tightening monetary conditions
in the emerging market countries. These measures should continue to lower expectations for the industrial sector in the near future.
SGS performance suffered from excessive sales and earnings growth expectations. The companys organic growth was strong, but
the companys overall performance suffered due to the strength of the Swiss franc, as SGS does business in more than 90 countries whose currencies fell against the Swiss franc.
Kuhne & Nagel, a logistical company, continues to grow above the market rates in sea and air freight.
However, the global economic slowdown has started to negatively affect the volume of goods shipped. The companys management cut its volume guidance for the year from 7% to 6% for sea freight and from 18% to 10% for air freight. The summer
months saw sequential rebounds in activity, but September, usually a seasonally strong month, saw a renewed slowdown.
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
Healthcare
Global markets plunged in early August as a result of the deterioration of global macro-economic indicators and due to
fears that the Greek debt situation would contaminate other European countries. Healthcare was not immune to the downturn, and large pharmaceutical stocks dropped alongside other sectors. The MSCI World Pharmaceutical Index was down 16% in the first
few days in August as were the more cyclical medical technology companies in the sector. Swiss pharmaceutical stocks also were penalized, but the sector ultimately rallied during the quarter as a result of investors moving into the defensive
sectors, and outperformed the Swiss indices. In such an economic environment, investors should continue to be attracted to the predictable cash flow from companies in this sector, the dividend payout of the pharmaceutical companies and the
attractive yields. Roche and Novartis offered dividend yields of 4.6% and 4.3%, respectively, both of which are above the average yield for the Swiss market in the last decade (2.3%).
Roche remains confident that its on-going operational excellence program (initiated in November 2010) to reduce
marketing and research and development expenses will improve the companys overall profitability, and has revised its annual earnings per share estimates upwards from single digits to 10% (in Swiss francs). Product sales should expand at a
slower pace; however, as they are expected to be negatively affected by U.S. healthcare reform, European austerity measures and price cuts in Japan. Roches
long-
term prospects are attractive considering the quality of the product pipeline for its pharmaceutical division and the significant progress Roche is making in diagnostic tests. Roches
combined strengths in pharmaceuticals and diagnostics will position the company as one of the largest healthcare leaders in personalized medicines. After the many clinical setbacks in 2010, which delayed the development of new compounds in the
oncology area, Roche has slowly regained the confidence of the market. Fund management has maintained a cautious stance on the stock, but remains supportive of the long-term strategy of Roche. The robust outperformance of Roche during the quarter
(+16.5% versus the SPI) was mainly explained by the perceived relatively low valuation of the stock and its attractiveness for value investors.
Novartis is continuing its efforts to improve productivity across the company. The companys efficiency improvement program is aimed
at streamlining core processes that led to margin progression across all divisions, with savings in marketing and in selling, general and administrative expenses. Novartis management has painted a picture of accelerating growth for the second
half of the year. The integration of its eye care business, Alcon, which is one of the companys strategic priorities, is contributing to the companys diversified healthcare portfolio. Managements expectation for the pharmaceutical
pipeline is high. Future cash flow contributions from potential blockbuster drugs, such as Afinitor and Tasigna (oncology) and Gilenya (multiple sclerosis) are expected to
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
outweigh the decline due to patent expirations of legendary multi-billion products, such as Diovan.
The Swiss biotech and medical technology sectors have been disregarded by investors in recent years. Fund management remained optimistic
on the prospects of these two industries, in particular on certain private equity holdings with niche products, but has reduced the Funds exposure for tactical reasons. As reported previously to stockholders, Fund management believes that the
small- and mid-cap companies in this sector are well positioned to secure sizeable licensing deals with pharmaceutical firms and could be targets for merger and acquisition activities.
Chemicals
Increases in raw material prices should continue to apply pressure to margins of companies in the chemical industry in 2011. Consumer confidence, which has reached its lowest level in the past two and
one-half years, reflects the deteriorating conditions that face the more cyclical activities of the industry. Givaudan, a fine chemical manufacturer, has a diversified revenue base with limited cyclical exposure (fine fragrances account for less
than 10% of company sales). On the agribusiness side, the fundamentals of companies such as Syngenta are improving with a more favorable outlook for crop and seed prices. Syngentas management is confident in the Latin American season, which
starts in September, and expects strong volume growth during the second part of the year.
Financials: banks and insurance
The European financial sector has been hit by a massive de-rating since the end of the second quarter this year. The IMFs Global
Financial Stability Report highlighted that European banks could face losses of more than 200 billion euros on European sovereign debt based on CDS spreads on government bonds issued by Ireland, Greece, Portugal, Italy, Spain and Belgium. European
banks hold roughly 650 billion euros in sovereign debt issued by peripheral European countries, including 78 billion euros in Greek debt, 14 billion euros in Irish debt, 30 billion euros in Portuguese debt, 244 billion euros in Spanish debt, 220
billion euros in Italian debt and 57 billion euros in Belgian debt. Due to the tight liquidity situation, European banks cash deposits increased dramatically at the ECB, as those banks used the ECBs overnight deposit facility and
restrained their lending activity to other banks. Funding issues prevailed throughout the third quarter of 2011, forcing coordinated action from the ECB, BoJ (Bank of Japan), BoE (Bank of England) and the SNB, who offered unlimited dollar funding to
their banks through swap lines.
Due to the
extremely weak environment for the banking sector, the insurance sector has slightly outperformed banks on a year-to-date basis, although the sector also was negatively affected by a large sell-off due to pressure on reinsurers earnings coming
from low interest rates, rising catastrophe rates in April and June and from events of late 2010 and early 2011. A majority of
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
companies under SST (Swiss Solvency Test)/Solvency II shifted their investments out of equities and real estate into bonds.
The massive underperformance of the financial sector since
the beginning of the year also is a result of stricter regulation and rising financing costs. Overall profitability of the sector has been structurally impaired and will not be sustainable in the foreseeable future as a result of ongoing subdued
investment activity, structural weaknesses in investment banking and flattening yield curves. With a risk premium of almost 20% compared to government bonds, European banks are trading on a low valuation at 7 times 2011 earnings per share estimates
and below book value almost indicating a double-dip recession.
UBS announced that it expects to post a small profit for the third quarter of 2011, and has seen positive net new money flows in its wealth management businesses similar to those in the second quarter
despite the announcement of the $2.3 billion rogue trading loss. An important event for UBS will be its investor day on November 17th, where it will focus on its efforts to downsize the investment bank. UBS Chief Financial Officer has
already highlighted that UBS will take action to reduce the companys risk-weighted assets in the investment bank from about 75% to about 50%, on a Basel III basis. On the positive side, both UBS and Credit Suisse have minimal exposure to the
peripheral European countries debt, and remain well capitalized compared to their European peers.
The Fund remains substantially underweight in the financial sector, although it has
slightly reduced this gap during the quarter due to very attractive valuations in the sector.
Private Equity and Other Illiquid Investments
The Fund did
not add to its illiquid direct investments or its investments in private equity funds in the third quarter. The Funds total investment (consisting of assets invested to date and remaining capital commitments) in its two private equity fund
investments, Zurmont Madison and Aravis II, represented 4.3% of the Funds net assets as of September 30, 2011. As of that date, the Fund also had 4.7% of its net assets invested in illiquid direct investments.
Outlook
Volatility in the global economy will most likely continue until a new framework for the international monetary system is implemented.
Large swings of capital flows have occurred as consequence of the expansion in global liquidity (including foreign exchange reserves) and created substantial movement in currencies, making every day management of international corporations
challenging. The ongoing European sovereign debt crisis, including the estimated costs to resolve it, will hamper economic growth in the Eurozone for some time.
On the positive side, equity valuations have compressed to a level where some
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
what lowered earnings expectations are already factored in and, barring a freeze in the financial system, the investment downside appears limited. As a result, slight improvements, for
example, in U.S. economic activity could provide significant upside as short positions in the markets are at elevated levels and the cost of hedging is quite prohibitive. Companies with strong market positions and pricing power should be able to
benefit from lower commodities prices going forward.
Navigating the markets during this phase of price containment and low growth will be difficult, but a focus on companies with high quality balance sheets, the capacity to quickly adjust their cost
structure and a high market share in specific industries should provide above average returns.
Swiss Helvetia Performance Review
During the last quarter,
the Fund moved towards a more conservative portfolio. The Fund has remained more heavily weighted in healthcare and food companies, while reducing its positions among smaller cap companies, such as industrial companies and energy companies. The Fund
had sold certain of those positions to increase its cash position, partially for defensive purposes, and partially to pay shareholders in connection with its spill-back distribution payment in August.
The performance of the Fund relative to the SPI improved from
the second to the third quarter this year, going from -3.8% in May to
-2.3% at the end of the third quarter. In terms of sector allocation results, healthcare has been a drag on the Funds performance due to the strong showing of Roche, which is underweight in
the Funds portfolio, and the underperformance of the hearing-aids company, Sonova, in which the Fund was overweight, during the first quarter of 2011. In addition, the Fund had a large exposure to industrial companies active in energy
conservation and oil and gas upstream and downstream capital spending. Most of these companies are in the mid- and small-capitalization section of the market and have been more negatively affected than their peers by the slowdown and potential
double dip recession in Europe as well as by the strength of the Swiss franc. These factors have hampered the Funds performance, both in absolute terms and against the SPI during the first half of the year, despite an ongoing strategic
reduction in the Funds exposure to that sector since the start of the year.
Sincerely,
Alexandre de Takacsy
President
Rudolf Millisits
Chief Executive Officer and Chief Financial Officer
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (continued)
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Indices Performance Comparison |
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Year to
Date January 1, 2011 through September 30, 2011
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Performance in Swiss Francs |
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Swiss Performance Index (SPI) |
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-13.54% |
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Swiss Helvetia Fund |
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Based on Net Asset Value |
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-15.83% |
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Change in U.S. Dollar vs. Swiss Franc |
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-2.55% |
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Performance in U.S. Dollars |
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Swiss Helvetia Fund Performance |
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Based on Net Asset Value |
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-13.66% |
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Based on Market Price |
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-12.46% |
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S & P 500 Index |
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-8.68% |
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MSCI EAFE Index |
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-14.62% |
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Lipper European Fund Index (10 Largest) |
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-16.75% |
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Lipper European Fund Universe Average |
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-17.38% |
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Source: Citi Fund Services Ohio, Inc.
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THE SWISS HELVETIA FUND, INC.
Letter to Stockholders (concluded)
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Peer Group/Indices Performance Comparison in Swiss Francs1 |
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Total return YTD as
of 9/30/11
|
|
|
Total return as of year ended
December 31
|
|
|
Cumulative Performance
12/31/96- 9/30/11
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
|
1998
|
|
|
1997
|
|
|
Swiss Helvetia Fund |
|
|
-15.83% |
|
|
|
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% |
|
|
|
82.14% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swiss Performance Index (SPI) |
|
|
-13.54% |
|
|
|
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% |
|
|
|
99.30% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swiss Market Index (SMI) |
|
|
-14.05% |
|
|
|
-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% |
|
|
|
40.31% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iShares Switzerland2 |
|
|
-14.13% |
|
|
|
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% |
|
|
|
62.39% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CS EF (CH) Swiss Blue Chips3,7 |
|
|
-15.48% |
|
|
|
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% |
|
|
|
50.10% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UBS (CH) Equity Fund4,7 |
|
|
-16.17% |
|
|
|
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% |
|
|
|
54.65% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pictet (CH) - Swiss Equities5,7 |
|
|
-15.90% |
|
|
|
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% |
|
|
|
68.58% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Saraswiss (Bank Sarasin)6,7 |
|
|
-15.63% |
|
|
|
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% |
|
|
|
42.40% |
|
Sources : Bloomberg, management companies websites and Citi Fund Services, Ohio, Inc.
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, 9/30/11 = 0.91 |
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 quailty. |
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. |
13
THE SWISS HELVETIA FUND, INC.
|
|
|
|
|
Schedule of Investments
(Unaudited) |
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
Common Stocks 82.57% |
|
|
|
|
|
|
|
Banks 5.85% |
|
|
|
|
|
|
|
|
|
240,000 |
|
Credit Suisse Group Registered Shares |
|
$ |
6,341,517 |
|
|
|
1.69 |
% |
|
|
A global diversified financial service company with significant activity in private banking, investment banking, asset management and insurance service. (Cost $11,971,809) |
|
|
|
|
|
|
|
|
|
|
|
|
1,345,000 |
|
UBS AG1,2 Registered Shares |
|
|
15,607,509 |
|
|
|
4.16 |
% |
|
|
A global diversified financial service company with significant activity in private banking, investment banking, and asset management. (Cost $18,480,419) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,949,026 |
|
|
|
5.85 |
% |
|
|
|
Biotechnology 2.37% |
|
|
|
|
|
|
|
|
|
|
|
|
48,650 |
|
Actelion, Ltd. Registered Shares |
|
|
1,622,917 |
|
|
|
0.43 |
% |
|
|
Biotechnology company that develops and markets synthetic small-molecule drugs against diseases related to the endothelium. (Cost $2,494,563) |
|
|
|
|
|
|
|
|
|
|
|
|
352,155 |
|
Addex Pharmaceuticals, Ltd.2,3 Registered Shares |
|
|
2,911,686 |
|
|
|
0.78 |
% |
|
|
Bio-pharmaceutical company that discovers and develops allosteric modulators for human health. Allosteric modulators are a different kind of orally available small molecule therapeutic
agent. (Cost $17,167,028) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
|
|
|
|
|
|
|
|
|
Biotechnology (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
3,829,299 |
|
Biotie Therapies Oyj2,4 Bearer Shares |
|
$ |
2,091,081 |
|
|
|
0.56 |
% |
|
|
Develops drugs that treat dependence disorders, inflammatory diseases, and thrombosis. (Cost $2,118,548) |
|
|
|
|
|
|
|
|
|
|
|
|
3,029 |
|
NovImmune SA2,4 Common Shares |
|
|
2,260,995 |
|
|
|
0.60 |
% |
|
|
Discovers and develops therapeutic monoclonal antibodies (mAbs) to treat patients suffering from immune-related disorders. (Cost $1,551,109) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,886,679 |
|
|
|
2.37 |
% |
|
|
Chemicals 3.18% |
|
|
|
|
|
|
|
|
|
1,500 |
|
Givaudan SA Registered Shares |
|
|
1,174,172 |
|
|
|
0.31 |
% |
|
|
Manufactures and markets fragrances and flavors from natural and synthetic ingredients. (Cost $1,324,258) |
|
|
|
|
|
|
|
|
|
|
|
|
41,000 |
|
Syngenta AG1
Registered Shares |
|
|
10,765,716 |
|
|
|
2.87 |
% |
|
|
Produces herbicides, insecticides and fungicides, and seeds for field crops, vegetables, and flowers. (Cost $13,122,961) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,939,888 |
|
|
|
3.18 |
% |
See Notes to Schedule of Investments.
14
THE SWISS HELVETIA FUND, INC.
|
|
|
|
|
Schedule of Investments (Unaudited) (continued) |
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
Common Stocks (continued) |
|
|
|
|
|
|
|
|
Construction & Materials 1.06% |
|
|
|
|
|
|
|
|
|
|
|
|
2,235 |
|
Belimo Holding AG Registered Shares |
|
$ |
3,986,238 |
|
|
|
1.06 |
% |
|
|
World market leader in damper and volume control actuators for ventilation and air-conditioning equipment. (Cost $2,668,019) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,986,238 |
|
|
|
1.06 |
% |
|
|
|
Financial Services 2.96% |
|
|
|
|
|
|
|
|
|
|
|
|
14,700 |
|
Allreal Holding AG Registered Shares |
|
|
2,272,245 |
|
|
|
0.61 |
% |
|
|
Develops and manages real estate. Operates as a general contractor offering planning, architect, and construction management services. (Cost $2,094,153) |
|
|
|
|
|
|
|
|
|
|
|
|
150,442 |
|
Swiss Re AG1 Non-voting equity securities |
|
|
7,042,600 |
|
|
|
1.88 |
% |
|
|
Offers reinsurance, insurance and insurance-linked financial market products. (Cost $7,742,543) |
|
|
|
|
|
|
|
|
|
|
|
|
42,974 |
|
Swissquote Group Holding SA Registered Shares |
|
|
1,771,855 |
|
|
|
0.47 |
% |
|
|
Operates an online trading system which offers customer real-time securities quotes on the Swiss Stock Exchange. (Cost $2,368,690) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,086,700 |
|
|
|
2.96 |
% |
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
|
|
|
|
|
|
|
|
|
Food & Beverages 22.45% |
|
|
|
|
|
|
|
|
|
|
|
|
135 |
|
Lindt & Sprungli AG Registered Shares |
|
$ |
4,685,539 |
|
|
|
1.25 |
% |
|
|
Major manufacturer of premium Swiss chocolates. (Cost $471,625) |
|
|
|
|
|
|
|
|
|
|
|
|
1,442,300 |
|
Nestle SA1
Registered Shares |
|
|
79,554,365 |
|
|
|
21.20 |
% |
|
|
Largest food and beverage processing company in the world. (Cost $38,125,322) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,239,904 |
|
|
|
22.45 |
% |
|
|
|
Industrial Goods & Services 9.25% |
|
|
|
|
|
|
|
|
|
|
|
|
905,000 |
|
ABB, Ltd.1
Registered Shares |
|
|
15,712,705 |
|
|
|
4.19 |
% |
|
|
The holding company for ABB Group, which is one of the largest electrical engineering firms in the world. (Cost $21,646,736) |
|
|
|
|
|
|
|
|
|
|
|
|
14,730 |
|
Burckhardt Compression Holding AG
Bearer Shares |
|
|
2,928,810 |
|
|
|
0.78 |
% |
|
|
Produces compressors for oil refining, the chemical and petrochemical industries, industrial gases, and gas transport and storage. (Cost $3,721,138) |
|
|
|
|
|
|
|
|
|
|
|
|
6,440 |
|
Inficon Holding AG Registered
Shares |
|
|
943,702 |
|
|
|
0.25 |
% |
|
|
Manufactures and markets vacuum instruments used to monitor and control production processes. Manufactures on-site chemical detection and monitoring systems. (Cost $581,616) |
|
|
|
|
|
|
|
|
See Notes to Schedule of Investments.
15
THE SWISS HELVETIA FUND, INC.
|
|
|
|
|
Schedule of Investments (Unaudited) (continued) |
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
Common Stocks (continued) |
|
|
|
|
|
|
|
Industrial Goods & Services (continued) |
|
|
|
|
|
|
|
|
|
8,100 |
|
Kaba Holding AG, Series B Registered Shares |
|
$ |
2,764,505 |
|
|
|
0.74 |
% |
|
|
Provides mechanical and electronic security systems. Offers individually tailored Total Access Control including high-security locking devices for heavy safes, modular access
and time management applications, as well as no-contact identification technology. (Cost $3,048,081) |
|
|
|
|
|
|
|
|
|
|
|
|
54,744 |
|
Kuehne + Nagel International AG Registered Shares |
|
|
6,195,842 |
|
|
|
1.65 |
% |
|
|
Transports freight worldwide. (Cost $4,438,559) |
|
|
|
|
|
|
|
|
|
|
|
|
2,400 |
|
SGS SA Registered Shares
|
|
|
3,672,795 |
|
|
|
0.98 |
% |
|
|
Provides industrial inspection, analysis, testing, and verification services worldwide. (Cost $3,903,307) |
|
|
|
|
|
|
|
|
|
|
|
|
44,544 |
|
Zehnder Group AG Bearer Shares
|
|
|
2,493,738 |
|
|
|
0.66 |
% |
|
|
Manufactures a variety of radiators. Produces bathroom radiators, electric and aluminum radiators, as well as steel radiators. (Cost $3,355,515) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,712,097 |
|
|
|
9.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
|
|
|
|
|
|
|
|
Insurance 2.82% |
|
|
|
|
|
|
|
|
|
12,600 |
|
Swiss Life Holding AG
Registered Shares |
|
$ |
1,399,692 |
|
|
|
0.37 |
% |
|
|
Financial services company provides life and property insurance, institutional investment management, and private banking services. (Cost $2,159,923) |
|
|
|
|
|
|
|
|
|
|
|
|
43,740 |
|
Zurich Financial Services AG1 Registered Shares |
|
|
9,197,776 |
|
|
|
2.45 |
% |
|
|
Offers property, accident, health, automobile, liability, financial risk and life insurance and retirement products. (Cost $10,452,957) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,597,468 |
|
|
|
2.82 |
% |
|
|
Medical Technology 1.53% |
|
|
|
|
|
|
|
|
|
168,000 |
|
Kuros Biosurgery AG2,4
Common Shares |
|
|
2,996,367 |
|
|
|
0.80 |
% |
|
|
Develops biomaterials and bioactive biomaterial combination products for trauma, wound and spine indications. (Cost $2,516,639) |
|
|
|
|
|
|
|
|
|
|
|
|
3,731 |
|
Spineart SA2,4
Common Shares |
|
|
2,752,141 |
|
|
|
0.73 |
% |
|
|
Designs and markets an innovative full range of spine products, including fusion and motion preservation devices, focusing on easy to implant high-end products to simplify the surgical
act. (Cost $2,623,329) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,748,508 |
|
|
|
1.53 |
% |
See Notes to Schedule of Investments.
16
THE SWISS HELVETIA FUND, INC.
|
|
|
|
|
Schedule of Investments (Unaudited) (continued) |
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
Common Stocks (continued) |
|
|
|
|
|
|
|
|
Personal & Household Goods 3.95% |
|
|
|
|
|
|
|
|
|
|
|
|
207,700 |
|
Compagnie Financiere Richemont SA, Series A1 Bearer Shares |
|
$ |
9,363,993 |
|
|
|
2.50 |
% |
|
|
Manufactures and retails luxury goods. Produces jewelry, watches, leather goods, writing instruments, and mens and womens wear. (Cost $8,830,356) |
|
|
|
|
|
|
|
|
|
|
|
|
16,400 |
|
Swatch Group AG Bearer Shares |
|
|
5,458,241 |
|
|
|
1.45 |
% |
|
|
Manufactures finished watches, movements and components. Produces components necessary to its eighteen watch brand companies. Also operates retail boutiques. (Cost
$5,005,290) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,822,234 |
|
|
|
3.95 |
% |
|
|
|
Pharmaceuticals 25.93%5 |
|
|
|
|
|
|
|
|
|
|
|
|
1,098,000 |
|
Novartis AG1 Registered Shares |
|
|
61,409,666 |
|
|
|
16.37 |
% |
|
|
One of the leading manufacturers of branded and generic pharmaceutical products. Manufactures nutrition products. (Cost $35,800,368) |
|
|
|
|
|
|
|
|
|
|
|
|
221,600 |
|
Roche Holding AG1 Non-voting equity securities |
|
|
35,888,319 |
|
|
|
9.56 |
% |
|
|
Develops and manufactures pharmaceutical and diagnostic products. Produces prescription drugs in the area of cardiovascular, infectious, autoimmune and respiratory diseases, dermatology,
oncology and other areas. (Cost $20,504,703) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,297,985 |
|
|
|
25.93 |
% |
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
|
|
|
|
|
|
|
|
|
Retailers 1.22% |
|
|
|
|
|
|
|
|
|
|
|
|
8,912 |
|
Galenica AG Registered Shares |
|
$ |
4,589,440 |
|
|
|
1.22 |
% |
|
|
Manufactures and distributes prescription and over-the-counter drugs, toiletries and hygiene products. (Cost $5,077,326) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,589,440 |
|
|
|
1.22 |
% |
|
|
|
|
|
|
Total Common Stocks (Cost $255,366,890) |
|
$ |
309,856,167 |
|
|
|
82.57 |
% |
|
|
Preferred Stocks 1.97% |
|
|
|
|
|
|
|
|
Biotechnology 1.07% |
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
Ixodes AG, Series B4 Preferred Shares |
|
|
1,651,437 |
|
|
|
0.44 |
% |
|
|
Restricted to the development and production of a topical product for the treatment of borreliosis-infection and the prevention of lyme-disease after a tick bite. (Cost
$1,634,699) |
|
|
|
|
|
|
|
|
|
|
|
|
3,162 |
|
NovImmune SA, Series B4 Preferred Shares |
|
|
2,360,273 |
|
|
|
0.63 |
% |
|
|
Discovers and develops therapeutic monoclonal antibodies (mAbs) to treat patients suffering from immune-related disorders. (Cost $2,062,307) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,011,710 |
|
|
|
1.07 |
% |
See Notes to Schedule of Investments.
17
THE SWISS HELVETIA FUND, INC.
|
|
|
|
|
Schedule of Investments (Unaudited) (continued) |
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares/
Units |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
Preferred Stocks (continued) |
|
|
|
|
|
|
|
|
Medical Technology 0.90% |
|
|
|
|
|
|
|
|
|
|
|
|
83,611 |
|
EyeSense AG, Series C4 Preferred Shares |
|
$ |
3,391,202 |
|
|
|
0.90 |
% |
|
|
A spin-out from Ciba Vision AG. Develops novel ophthalmic self-diagnostic systems for glucose monitoring of diabetes patients. (Cost $2,390,510) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,391,202 |
|
|
|
0.90 |
% |
|
|
|
|
|
|
Total Preferred Stocks (Cost $6,087,516) |
|
$ |
7,402,912 |
|
|
|
1.97 |
% |
|
|
|
Convertible Corporate Bond 1.46% |
|
|
|
|
|
|
|
|
|
|
|
Industrial Goods & Services 1.46% |
|
|
|
|
|
|
|
|
|
|
|
|
6,500,000 |
|
Adecco Investment Bond, 6.50%, 11/26/12 (Cost $6,387,196) |
|
|
5,478,091 |
|
|
|
1.46 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Convertible Corporate Bond (Cost $6,387,196) |
|
$ |
5,478,091 |
|
|
|
1.46 |
% |
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares/
Units |
|
Security |
|
Fair
Value |
|
|
Percent
of Net
Assets |
|
|
|
|
|
|
|
|
|
Private Equity Limited Partnerships 3.14% |
|
|
|
|
|
|
|
|
|
|
|
Aravis Biotech Il - Limited Partnership2,4 (Cost $2,070,060) |
|
$ |
2,128,066 |
|
|
|
0.57 |
% |
|
|
|
|
|
|
Zurmont Madison Private Equity, Limited Partnership1,2,4 (Cost $10,606,992) |
|
|
9,633,356 |
|
|
|
2.57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Private Equity Limited Partnerships (Cost $12,677,052) |
|
$ |
11,761,422 |
|
|
|
3.14 |
% |
|
|
|
|
|
|
Total Investments* (Cost $280,518,654) |
|
$ |
334,498,592 |
|
|
|
89.14 |
% |
|
|
|
|
|
|
Other Assets Less Other Liabilities, net |
|
|
40,766,410 |
|
|
|
10.86 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets |
|
$ |
375,265,002 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
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 Held as of 12/31/2010
|
|
|
Value as of 12/31/2010
|
|
|
Gross Additions
|
|
|
Gross Reductions
|
|
|
Income
|
|
|
Shares Held as of 9/30/2011
|
|
|
Value as of 9/30/2011
|
|
Addex Pharmaceuticals, Ltd. |
|
|
352,155 |
|
|
$ |
3,706,298 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
352,155 |
|
|
$ |
2,911,686 |
|
See Notes to Schedule of Investments.
18
THE SWISS HELVETIA FUND, INC.
|
|
|
|
|
Schedule of Investments (Unaudited) (concluded) |
|
September 30, 2011 |
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 $29,264,918 or 7.80% 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 June 3, 2011 |
|
$ |
2,070,060 |
|
Biotie Therapies OYJ |
|
October 17, 2008 December 13, 2010 |
|
|
2,118,548 |
|
EyeSense AG Preferred Shares C |
|
July 22, 2010 |
|
|
2,390,510 |
|
Ixodes AG, Preferred Shares B |
|
April 7, 2011 |
|
|
1,634,699 |
|
Kuros Biosurgery AG |
|
August 10, 2009 August 28, 2009 |
|
|
2,516,639 |
|
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 |
|
Zurmont Madison Private Equity, LP |
|
September 13, 2007 June 14, 2011 |
|
|
10,606,992 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
27,574,193 |
|
|
|
|
|
|
|
|
|
|
Effective February 2, 2011, the Fund acquired shares of Biotie Therapies OYJ in exchange for shares of Synosia Therapeutics Holding AG which were acquired during the period
noted. |
5 |
|
The Fund has a fundamental investment policy that prohibits it from investing 25% or more of its total assets in a particular industry. As of September 30,
2011, the Fund had more than 25% of its total assets invested in the pharmaceutical sector as a result of the appreciation of the value of its existing investments against the value of its overall portfolio. The Fund will not invest in any
additional companies in this sector until such time as the percentage of the Funds total assets invested in this sector is below 25%. |
* Cost for Federal income tax purposes is $283,887,738 and net unrealized appreciation (depreciation) consists of:
|
|
|
|
|
Gross Unrealized Appreciation |
|
$ |
93,929,967 |
|
Gross Unrealized Depreciation |
|
|
(43,319,113 |
) |
|
|
|
|
|
Net Unrealized Appreciation (Depreciation) |
|
$ |
50,610,854 |
|
|
|
|
|
|
|
|
|
|
|
PORTFOLIO HOLDINGS |
|
|
|
|
% of Net Assets |
|
|
|
|
Common Stocks |
|
|
|
|
Pharmaceuticals |
|
|
25.93 |
% |
Food & Beverages |
|
|
22.45 |
% |
Industrial Goods & Services |
|
|
9.25 |
% |
Banks |
|
|
5.85 |
% |
Personal & Household Goods |
|
|
3.95 |
% |
Chemicals |
|
|
3.18 |
% |
Financial Services |
|
|
2.96 |
% |
Insurance |
|
|
2.82 |
% |
Biotechnology |
|
|
2.37 |
% |
Medical Technology |
|
|
1.53 |
% |
Retailers |
|
|
1.22 |
% |
Construction & Materials |
|
|
1.06 |
% |
Private Equity Limited Partnerships |
|
|
3.14 |
% |
Convertible Corporate Bond |
|
|
1.46 |
% |
Preferred Stocks |
|
|
1.97 |
% |
Other Assets and Liabilities |
|
|
10.86 |
% |
|
|
|
|
|
|
|
|
100.00 |
% |
|
|
|
|
|
See Notes to Schedule of Investments.
19
THE SWISS HELVETIA FUND, INC.
Notes to Schedule of Investments (Unaudited)
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 in accordance with
accounting principles generally accepted in the United States (GAAP).
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 (a Fair Value). 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 which do not have readily available market quotations. For such investments, the Act requires the Board
to determine their Fair Value. The Funds investments of this type have been Fair Valued at $29,264,918, or 7.80% of the Funds net assets at September 30, 2011, and are listed in Note 4 to the Schedule of Investments. These
investments also are considered Level 3 investments under GAAP as described below.
20
THE SWISS HELVETIA FUND, INC.
Notes to Schedule of Investments
(Unaudited) (continued)
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)
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 September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 Quoted Prices
|
|
|
Level
2 Other Significant Observable Inputs
|
|
|
Level
3 Significant Unobservable Inputs
|
|
|
Total
|
|
Investments in Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock* |
|
$ |
299,755,582 |
|
|
$ |
|
|
|
$ |
10,100,584 |
|
|
$ |
309,856,167 |
|
Preferred Stock |
|
|
|
|
|
|
|
|
|
|
7,402,912 |
|
|
|
7,402,912 |
|
Convertible Corporate Bond |
|
|
|
|
|
|
5,478,091 |
|
|
|
|
|
|
|
5,478,091 |
|
Private Equity Limited Partnerships |
|
|
|
|
|
|
|
|
|
|
11,761,422 |
|
|
|
11,761,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in Securities |
|
$ |
299,755,582 |
|
|
$ |
5,478,091 |
|
|
$ |
29,264,918 |
|
|
$ |
334,498,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
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 (private equity partnerships) that invest in privately-held companies, which are listed in Note 4 to
the Schedule of Investments.
Inputs and valuation techniques used by the
Fund to value its Level 3 investments in privately-held companies 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 investments in private equity partnerships in
accordance with Accounting Standards Codification 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 NAV of the investment is not as of the Funds 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 expe-
21
THE SWISS HELVETIA FUND, INC.
Notes to Schedule of Investments (Unaudited) (continued)
dient, 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 privately held companies 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.
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 nine-month period ended September 30, 2011, there were no significant transfers between Level 1, Level 2, and Level 3.
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, 2011 |
|
$ |
7,804,991 |
|
|
$ |
5,650,685 |
|
|
$ |
8,845,515 |
|
|
$ |
22,301,191 |
|
Change in Unrealized Appreciation/Depreciation |
|
|
177,045 |
|
|
|
382,892 |
|
|
|
12,084 |
|
|
|
572,021 |
|
Net Realized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Purchases |
|
|
2,118,548 |
|
|
|
3,487,883 |
|
|
|
2,903,823 |
|
|
|
8,510,254 |
|
Gross Sales |
|
|
|
|
|
|
(2,118,548 |
) |
|
|
|
|
|
|
(2,118,548 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2011 |
|
$ |
10,100,584 |
|
|
$ |
7,402,912 |
|
|
$ |
11,761,422 |
|
|
$ |
29,264,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. New Accounting Pronouncement
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-04 Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (ASU 2011-04), which includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04
will require reporting entities to disclose quantitative information about the unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy. In addition, ASU 2011-04 will require reporting entities
to make disclosures about amounts and reasons for all transfers in and out of Levels 1 and 2 of the fair value hierarchy. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011.
Management is currently evaluating the implications of ASU 2011-04 and its impact on the financial statements and related disclosures has not yet been determined.
D. 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, in the case of
fixed-income securities, 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.
E. 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.
22
THE SWISS HELVETIA FUND, INC.
Notes to Schedule of Investments (Unaudited) (continued)
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 the contract. 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 option will be exercised 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.
The Fund did not have any written call
option transactions during the nine-month period ended September 30, 2011, and the Fund held no contracts at September 30, 2011.
F. 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.
G. 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 Schedule of Investments. Actual results could differ from those estimates.
H. 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.
23
THE SWISS HELVETIA FUND, INC.
Notes to Schedule of Investments (Unaudited) (concluded)
Note 2Capital Commitments
As of September 30, 2011, the Fund invested in private equity partnerships and preferred stock. The Funds investments are summarized in the Schedule of
Investments. The Funds capital commitments and the amounts disbursed to the private equity partnerships and the issuer of preferred stock are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
Original Capital Commitment*
|
|
|
Unfunded Commitments
|
|
|
Fair Value as of September 30, 2011
|
|
Private Equity Limited PartnershipsInternational (a) |
|
|
|
|
|
|
|
|
|
|
|
|
Aravis Biotech II LP |
|
$ |
3,578,113 |
|
|
$ |
1,164,318 |
|
|
$ |
2,128,066 |
|
Zurmont Madison Private Equity LP |
|
|
15,413,410 |
|
|
|
3,117,569 |
|
|
|
9,633,356 |
|
Preferred StockInternational |
|
|
|
|
|
|
|
|
|
|
|
|
EyeSense AG, Series C (b) |
|
|
3,082,689 |
|
|
|
616,537 |
|
|
|
3,391,202 |
|
* |
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 September 30, 2011 was used for conversion and equals 0.9083. |
(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. |
THE SCHEDULE OF INVESTMENTS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES TO FINANCIAL STATEMENTS WHICH ARE INCLUDED IN THE FUNDS SEMI-ANNUAL REPORT OR AUDITED ANNUAL REPORT. THESE REPORTS INCLUDE ADDITIONAL INFORMATION ABOUT CERTAIN SECURITY TYPES INVESTED IN BY THE FUND.
24
THE SWISS HELVETIA FUND, INC.
Dividend Reinvestment Plan (Unaudited)
The Plan
The Funds Dividend Reinvestment Plan (the Plan) offers a convenient way for you to reinvest capital gains distributions and ordinary income dividends, payable in whole or in part in
cash, in additional shares of the Fund.
Some of the Plan features
are:
|
|
|
Once you enroll in the Plan, all of your future distributions and dividends payable in whole or in part in cash will be automatically reinvested in
Fund shares in accordance with the terms of the Plan. |
|
|
|
You will receive shares valued at the lower of the Funds net asset value or the Funds market price as described below. The entire amount of
your distribution or dividend will be reinvested automatically in additional Fund shares. For any balance that is insufficient to purchase full shares of the Fund, your account will be credited with fractional shares. |
|
|
|
Your shares will be held in an account with the Plan agent. You will be sent regular statements for your records. |
|
|
|
You may terminate participation in the Plan at any time. |
The following are answers to frequently asked questions about the Plan.
How do I enroll in the Plan?
If you are holding certificates for your shares, contact American Stock Transfer & Trust Company (AST) at the address shown below. If your shares
are held in a brokerage account, contact your broker. Not all brokerage firms permit their clients to participate in dividend reinvestment plans such as the Plan and, even if your brokerage firm does permit participation, you may not be able to
transfer your Plan shares to another
broker who does not permit participation. Your brokerage firm will be able to advise you about its policies.
How does the Plan work?
The cash portion of any dividends or distributions you receive, payable in whole or in part in cash, will be reinvested in shares of the Fund. The number
of shares credited to your Plan account as a result of the reinvestment will depend upon the relationship between the Funds market price and its net asset value per share on the record date of the distribution or dividend, as described below:
|
|
|
If the net asset value is greater than the market price (the Fund is trading at a discount), AST, as Plan Agent, will buy Fund shares for your account
on the open market on the New York Stock Exchange or elsewhere. Your dividends or distributions will be reinvested at the average price AST pays for those purchases. |
|
|
|
If the net asset value is equal to the market price (the Fund is trading at parity), the Fund will issue for your account new shares at net asset
value. |
|
|
|
If the net asset value is less than but within 95% of the market price (the Fund is trading at a premium of less than 5%), the Fund will issue for your
account new shares at net asset value. |
|
|
|
If the net asset value is less than 95% of the market price (the Fund is trading at a premium of 5% or more), the Fund will issue for your account new
shares at 95% of the market price. |
If AST
begins to buy Fund shares for your account at a discount to net asset value but, during the course of the purchases, the Funds market price increases to a level above the net asset value, AST will complete its purchases, even though
25
THE SWISS HELVETIA FUND, INC.
Dividend Reinvestment Plan (Unaudited) (concluded)
the result may be that the average price paid for the purchases exceeds net asset value.
Will the entire amount of my distribution or dividend be reinvested?
The entire amount of your distribution or dividend, payable in cash, will be reinvested in additional Fund shares. If a balance remains after the purchase of whole shares, your account will be credited
with any fractional shares (rounded to three decimal places) necessary to complete the reinvestment.
How can I sell my shares?
You can sell any or all of the shares in your Plan
account by contacting AST. AST charges $15 for the transaction plus $.10 per share for this service. You can also withdraw your shares from your Plan account and sell them through your broker.
Does participation in the Plan change the tax status of my distributions or dividends?
No. The distributions and dividends are paid in cash and their taxability is the same as if you received the cash. It is only after the payment of
distributions and dividends that AST reinvests the cash for your account.
Can I get certificates for the shares in the Plan?
AST will issue certificates
for whole shares upon your request. Certificates for fractional shares will not be issued.
Is there any charge to participate in the Plan?
There is no charge to participate in the Plan. You will, however, pay a pro rata share of brokerage commissions incurred with respect to ASTs open
market purchases of shares for your Plan account.
How can I discontinue my participation in the Plan?
Contact your broker or AST in writing. If your shares are in a Plan account, AST will send you a certificate for your whole shares and a check for any fractional shares.
Where can I direct my questions and correspondence?
Contact your broker, or contact AST as follows:
By mail:
American Stock Transfer & Trust
Company
PO Box 922
Wall Street Station
New York, NY 10269-0560
Through the Internet:
www.amstock.com
Through ASTs automated voice response System:
1-888-556-0425
AST will furnish you with a copy of the Terms and Conditions of the Plan without charge.
26
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
Quarterly Report
For the
Period Ended
September 30, 2011