THE SWISS HELVETIA FUND, INC.
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Directors and Officers
Samuel B. Witt III, Esq. Eric R. Gabus
CHAIRMAN (NON-EXECUTIVE) DIRECTOR EMERITUS
Jean-Marc Boillat Baron Hottinger
DIRECTOR DIRECTOR EMERITUS
Paul R. Brenner, Esq./1/ Rodolphe E. Hottinger
DIRECTOR PRESIDENT
Alexandre de Takacsy CHIEF EXECUTIVE OFFICER
DIRECTOR Rudolf Millisits
Claude Frey SENIOR VICE PRESIDENT CHIEF FINANCIAL OFFICER
DIRECTOR Philippe R. Comby,
R. Clark Hooper/2/ CFA, FRM
DIRECTOR VICE PRESIDENT
Paul Hottinguer Edward J. Veilleux
DIRECTOR VICE PRESIDENT
Michael Kraynak, Jr./2/ SECRETARY
DIRECTOR Scot E. Draeger
Didier Pineau-Valencienne/2,3/ ASSISTANT SECRETARY
DIRECTOR Glen Fougere
Stephen K. West, Esq./2/ ASSISTANT TREASURER
DIRECTOR Peter R. Guarino, Esq.
CHIEF COMPLIANCE OFFICER
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/1/AUDIT COMMITTEE CHAIRMAN /3/GOVERNANCE/NOMINATING COMMITTEE CHAIRMAN
/2/AUDIT COMMITTEE MEMBER
INVESTMENT ADVISOR
Hottinger Capital Corp.
1270 Avenue of the Americas, Suite 400
New York, New York 10020
(212) 332-7930
ADMINISTRATOR
Citigroup Fund Services, LLC
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 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 the Bahamas, Basel, Geneva, London, Lugano,
Luxembourg, New York, Sion, Toronto, Vienna and Zurich.
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's common stock 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 BARRON'S, the Monday
edition of THE WALL STREET JOURNAL and the Sunday edition of THE NEW YORK TIMES.
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders
GLOBAL MARKET OVERVIEW
Market volatility increased significantly over the summer, generally
harming stock indexes in the developed markets, but benefiting the emerging
markets. Performance in the more mature markets, however, varied by sector.
Industry groups contributing to consumer price inflation were the best
performers. These groups were led by the agri-business sector, which includes
machinery, crop protection, seeds, grain processing and fertilizer. The power
infrastructure and transmission and the engineering sectors also were strong
performers. Industrial metal prices had a strong rebound as global demand has
been sustained. Steel prices also benefited from reduction in Chinese exports
as outdated production capacities have been taken off line. Infrastructure
spending in the United States and in Europe also notably increased. Large cap
companies in the technology and telecom services sectors benefited as their
earnings were perceived to be immune to the troubles in the financial
intermediary sector, and their stocks were less volatile than the industrial
sector due to lower investor expectations.
The consequence of the meltdown in the credit markets brought on by the
sub-prime mortgage crisis, which has spread to mortgage-backed securities and
asset-backed commercial paper, was an aggressive cut in interest rates by the
Federal Reserve Board (FRB) which, in turn, reduced the hurdle rate for equity
returns and contributed to the strong performance of the above-mentioned
sectors.
On the other side, industries with low visibility and earnings
deceleration, such as the financial and the housing sectors, have struggled
with repercussions in both the United States and in Europe. International
investment banks have been hurt by the breakdown in their business model which
promoted originating debt to finance activity in the capital markets. Buyers of
debt instruments suddenly went on strike, as the offered yields and stated
ratings were no longer sufficient to offset the risks and the lack of
transparency of those instruments.
SWISS MARKET OVERVIEW
The Swiss market has seen a wide dispersion in the returns of its
components. The largest companies have been among the worst performers (except
Nestle, which was up strongly), not due to their size but to their sectors
(such as banking and healthcare).
The valuation of Swiss pharmaceutical companies has continued to decline to
a level that is now below some of their U.S. peers. Some restructuring in
response to pressure from investors is expected at Novartis and should support
the price of its stock. Roche has been a victim of a sharp compression in its
price multiple in response to expectations of a reduced growth rate and the
impact of public policy debates on the pricing of some of its cancer drugs.
Overall the pharmaceutical sector suffers from political risk and the
declining pro-
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Letter to Stockholders (continued)
ductivity of R&D departments as costs generated by the discovery and
development of drug candidates have increased. Meanwhile the size of the
addressable market has been constrained by price controls, generic competition
for expiring intellectual property protection and in some case little respect
of patents.
In reaction to this trend, the pharmaceutical industry is beginning to
rethink its business model and, for example, has moved to more outsourcing.
Despite its known problems, the sector offers risk diversification and
attractive valuations.
Biotechnology stocks also have recently underperformed, which may be
primarily a result of cautious investor sentiment towards the drug sector.
Mergers & acquisitions activity should pick up as large pharmaceutical
companies seek to replenish their pipelines, in addition to their efforts at
cost cutting, before the next wave of patent expirations in 2011.
The industrial, luxury goods and agri-business sectors have had returns of
between 15% to 40% in Swiss francs compared to 6.8% for the broad Swiss
Performance Index ("SPI"). Syngenta, Swatch and ABB stocks were all very strong.
The Swiss banks have had a very difficult year to date, as did all
international banks with exposure to U.S. mortgage- backed securities and
leveraged finance. These banks were somewhat victims of the intense competition
in the sector in which the practice has been to take on ever increasing risk by
engaging more capital, increasing off-balance sheet transactions and relaxing
debt covenants or, in some cases, guaranteeing deals, a role traditionally not
assumed by investment banks who were supposed to be only intermediaries. The
challenge for investors was to be able to gauge the risks being taken by the
banks, a difficult task given that the variables were not easily accessible or
were non-existent. This has explained why investment banks have been trading
for some time at large discounts to market multiples.
On the other side, the wealth management business of the Swiss banks
continued to be very strong, with healthy franchises allowing them to attract
net new money at a pace exceeding expectations.
The Swiss utility sector experienced consolidation as wholesale prices were
either unchanged or down, due mostly to dry weather.
As noted above, Nestle was one of the market's star performers, based on
its high real internal growth and its capacity to pass price increases along to
consumers, showing thereby the strength of its brands and its market position.
Although investor-pleasing Chief Financial Officer, Paul Pohlman, was not
selected as the company's new Chief Executive Officer, after a negative initial
reaction, the stock regrouped.
The mid cap index performance was very strong (up 27%), with logistics
(Panalpina and Kuehne and Nagel), industrials and food (Lindt) doing
particularly very well on the back of continued globalization trends.
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
The real estate sector has seen a valuation compression since the beginning
of the summer with premiums to net asset value falling to more reasonable
levels. The increase in rates initiated by the Swiss National Bank ("SNB")
represents headwinds for the sector for the time being.
SWISS ECONOMIC NOTES
The Swiss economy continued to grow at a healthy rate over the last
quarter. Gross Domestic Product expanded at a rate of 0.7% during the quarter
(3% annualized). Both exports, helped by favorable exchange rates against the
Japanese Yen and especially against the Euro, and strong private consumption
remained important contributors to economic activity, each growing at 0.5%
during the quarter. Private consumption has been helped by overall income
growth, with incomes of wage and salary earners likely to rise by 3.1% in real
terms in 2007. Moreover, the unemployment rate is remaining at low levels
(2.6%) for the first time since the economic boom in 2000. On the other hand,
the lack of qualified labor has been identified as an obstacle to production
expansion. Numerous companies have reported maximum capacity utilization
(especially in the industrial sector), and difficulties in recruiting. As a
result, they are looking to bridge the gap between supply and demand through
acquisitions, noting that such activity will not come cheaply.
Even though some companies could significantly increase prices, they have
been reluctant to do so because of the risk of damaging business relationships
and the fear of retaliation once the economic cycle softens.
Business activity has remained high, as indicated by the Purchasing Manager
Index's level of 65.1 versus its peak of 67.7 and industrial production
increased by 6.7% quarter-on-quarter versus consensus predictions of 5.2%.
Consumer confidence decreased in comparison to last quarter but remains at high
levels, while the KOF Swiss economic institute leading economic indicator of
business (which aims to project GDP growth approximately 8 months into the
future) finished the quarter at 2.14 (up from 1.98 last quarter).
When the problems in the U.S. mortgage market started to spread at the end
of July, the financial markets were confronted with the threat of liquidity
bottlenecks. The central banks responded by injecting additional liquidity into
their money markets. In Switzerland, however, high demand for liquidity and
increases in credit risk premiums pushed the Swiss three-month inter-bank rate
up to 2.9%. The SNB, given the healthy Swiss economic situation, decided to
increase its three-month Libor target range by 0.25% to 2.25%--3.25%, targeting
a rate of around 2.75%. This was unexpected, especially given the ECB decision
to leave interest rates unchanged and the FRB's decision to decrease both the
discount rate and the federal funds rate by 50 basis points. The SNB's
decision, however, provided some support to the Swiss franc versus the euro.
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Letter to Stockholders (continued)
Real interest rates were at 1.85% in the second quarter of 2007, above the
historical average of 1.6% since 2001.
Long-term nominal market rates on government debt, however, declined. The
yields on 10-year Confederation bonds fell significantly. After reaching a peak
of 3.4% on July 9, 2007 they dropped to 2.8% by September 17, 2007.
On the economic activity front, the SNB still expects real GDP growth of
2.5% for the year, and forecasts inflation rates of 0.6% in 2007, 1.5% in 2008
and 1.8% in 2009.
The value of the Swiss franc increased significantly against the U.S.
dollar and is still seen as a safe currency during market turmoil. After the
U.S. dollar reached a high of 1.246 Swiss francs in mid-June, just before the
problems with the U.S. sub-prime mortgage market surfaced, it dropped 6.7%
reaching 1.16 Swiss francs, the lowest level since 1995.
SWITZERLAND IN THE NEWS
In a study done by IBM for Business Value and The Economist Intelligence
Unit in August 2007, Switzerland was ranked as the most sophisticated financial
market, ahead of Great Britain and New York. The study included 35 markets and
took into account, among other things, GDP growth and the level of development
of the financial markets.
SWISS EXCHANGE NEWS
On July 1, 2007 the Swiss Leading Index (SLI) started trading. This index
is composed of the largest and most liquid 30 SPI components. As such, it
includes the 20 stocks in the Swiss Market Index (SMI) and the 10 largest
stocks in the Swiss Mid-Cap Index (SMIM). Due to this change, Actelion Ltd,
Geberit AG, Kuehne & Nagel AG, Logitech International and Petroplus Holdings AG
moved from the Swiss stock exchange (SWX) to trading on the Virtex electronic
platform (VIRTEX), which should improve their liquidity.
Nestle, having overtaken Novartis, is now ranked as the largest company in
the Swiss market with a market capitalization of 205 billion Swiss francs.
FUND PERFORMANCE
Since the conclusion of the Fund's rights offering in June, Management has
invested substantially all of the proceeds from the offering in accordance with
the Fund's investment objective and policies. The rights offering resulted, as
anticipated and as is typical with rights offerings, in dilution to the net
asset value of the Fund's shares. This dilution was 6.81% (Swiss francs) at the
conclusion of the offering. As of September 30, 2007, the Fund's year-to-date
total return based on net asset value was 0.34% (1.64% as of October 31, 2007).
Calculated without giving effect to this dilution, the Fund's year-to-date
total return was 6.84% as of September 30, 2007 (8.08% as of October 31, 2007).
The SPI's year-to-date total return was 4.81% as of September 30, 2007 (6.39%
as of October 31, 2007).
While the Fund had a lower exposure than its benchmark (the SPI) to the
financial sector, it also had a lower exposure to Nestle (as Management is in
the process of reducing
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
the Fund's largest positions to diversify the Fund's portfolio and to take
advantage of opportunities in the mid-cap segment of the market). The Fund also
had much higher exposure than its benchmark to the smaller bio-pharmaceutical
and biotech companies and lower exposure to the large pharmaceutical companies.
This was somewhat neutral to its performance since the biotech companies from
the middle of the year started to underperform the market despite a promising
pipeline of new products.
The Fund's exposure to the utility sector started to contribute to
performance late in the quarter, a contribution that is expected to continue.
Sale prices for electricity are on the rise in Europe after a period of
stagnation. Prices in Switzerland for retail consumers (where the market is
still subject to price controls) are 40% lower than the rest of Europe, a
situation that is not sustainable.
The Fund's investments in the mid cap industrial sector linked to energy
(such as ABB and, to a certain extent, Komax and Oerlikon) have delivered very
good results and continue to offer good opportunities as there are increasing
signs of the development of a "super-cycle" for agri-business and energy
infrastructure as well as solutions to reduce emissions of carbon dioxide. The
trend for stock prices in the sector is up, but as investors' expectations are
high any disappointment could lead to short-term volatility. Price weakness
brought by this volatility most likely will represent an opportunity to
increase exposure.
The Fund has started to make private equity investments. Management will
continue to build on relationships with private equity managers to reinforce
positions, especially in specialized buy-outs of family-owned businesses where
price competition to get access to such deals is not exceptionally strong.
Overall, the debt financing of transactions is much less available which has a
positive impact on acquisition prices. On the other hand, since Management
favors transactions with low leverage, the higher cost of debt will not have
such a negative impact on the expected returns of its private equity
investments.
In Management's view, the increasingly widespread effect of the turmoil in
the investment banking sector of the developed economies, along with the
weakness of the housing sector in the United States, which has pushed the FRB
to create liquidity in the U.S. dollar, thereby choking currency markets and
feeding volatility in stock markets, warranted a strategy that included hedging
transactions. That was accomplished during the quarter through the purchase of
put options on the main Swiss indexes, providing temporary downside protection
without the necessity of raising cash and increasing portfolio turnover.
At the same time, inflation, at least outside of the United States, is an
obvious risk as labor, energy and raw material costs continue to increase. So
far, productivity improvements have compensated for such increases but, as
capacity utilization is stretched to the limit, it is difficult to see how
inflation that already is in the pipeline will not spill over in the consumer
price index.
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
--------------------------------------------------------------------------------------------------------------------
PEER GROUP/INDICES PERFORMANCE COMPARISON IN SWISS FRANCS/1/
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURN TOTAL RETURN AS OF YEAR ENDED DECEMBER 31 PERFORMANCE
YTD AS OF ------------------------------------------------- ------ ------ ------ 12/31/96-
9/30/07 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 9/30/07
-------------------- ------------ ------ ------ ----- ------ ------- ------- ------ ------ ------ ------ -----------
SWISS HELVETIA
FUND 0.34%* 20.56% 33.20% 7.75% 22.54% -20.40% -22.91% 14.06% 14.70% 15.57% 53.99% 203.96%
Swiss Performance
Index (SPI) 4.81% 20.67% 35.61% 6.89% 22.06% -25.95% -22.03% 11.91% 11.69% 15.36% 55.19% 189.11%
Swiss Market Index
(SMI) 1.68% 15.85% 33.21% 3.74% 18.51% -27.84% -21.11% 7.47% 5.71% 14.28% 58.93% 126.60%
iShares MSCI
Switzlerland/2/
(Formerly called
Webs
Switzerland) 3.63% 20.02% 32.45% 6.34% 19.14% -26.23% -23.12% 7.75% 12.22% 11.74% 47.79% 136.36%
CS EF Swiss Blue
Chips/3,7/ 3.40% 18.78% 32.27% 2.75% 18.13% -28.75% -22.12% 10.97% 7.57% 14.21% 59.90% 138.52%
UBS (CH) Equity
Fund/4,7/ 2.84% 18.98% 33.50% 5.00% 18.14% -26.02% -22.04% 7.42% 6.43% 12.75% 55.94% 134.92%
Pictet (CH) --
Swiss Equities/5,7/ 5.24% 19.37% 37.06% 7.05% 20.10% -27.93% -22.35% 7.34% 9.38% 11.05% 55.65% 151.41%
Saraswiss (Bank
Sarasin)/6,7/ 3.03% 18.69% 33.05% 2.93% 19.64% -28.51% -24.45% 9.72% 7.10% 14.41% 53.57% 123.43%
SOURCES : BLOOMBERG, MANAGEMENT COMPANIES' WEBSITES AND CITIGROUP FUND SERVICES.
/1/ PERFORMANCE OF FUNDS IS BASED ON CHANGES IN THE FUND'S 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 NEW YORK STOCK
EXCHANGE 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 SWITZERLAND'S LARGEST AND MOST ESTABLISHED PUBLIC
COMPANIES, ACCOUNTING FOR APPROXIMATELY 85% OF THE MARKET CAPITALIZATION OF ALL
SWITZERLAND'S 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: 12/31/96 = 1.35,
12/31/97 = 1.46, 12/31/98 = 1.38, 12/31/99 = 1.60 12/31/00 = 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, AND 9/30/07=1.1682.
/3/ THIS FUND GIVES INVESTORS ACCESS TO THE SWISS EQUITY MARKET. IT HAS A
BROADLY-DIVERSIFIED PORTFOLIO GEARED TO THE LONG-TERM VALUE GROWTH, WITH A
PREFERENCE TO LARGE CAP STOCKS. STOCK SELECTION IS BASED ON CRITERIA SUCH AS
COMPANY VALUATION, BUSINESS CLIMATE, MARKET POSITIONING AND MANAGEMENT QUALITY.
/4/ THIS FUND INVESTS PRIMARILY IN MAJOR SWISS COMPANIES. QUALITY CRITERIA USED
FOR DETERMINING RELATIVE WEIGHTINGS OF COMPANIES INCLUDE: STRATEGIC
ORIENTATION, STRENGTH OF MARKET POSITION, QUALITY OF MANAGEMENT, SOUNDNESS OF
EARNINGS, GROWTH POTENTIAL AND POTENTIAL FOR IMPROVING SHAREHOLDER VALUE. THE
INVESTMENT OBJECTIVE SEEKS TO PROVIDE RESULTS THAT ARE ALIGNED WITH THE SPI
PERFORMANCE.
/5/ THIS FUND INVESTS IN SHARES OF COMPANIES LISTED IN SWITZERLAND AND INCLUDED
IN THE SPI, MAINLY IN BLUE CHIP STOCKS.
/6/ THIS FUND INVESTS IN SHARES OF SWISS COMPANIES. IT WEIGHTS INDIVIDUAL
SECTORS RELATIVE TO THE SPI ON THE BASIS OF THEIR EXPECTED RELATIVE
PERFORMANCE. IT FOCUSES ON LIQUID BLUE-CHIP STOCKS.
/7/ THESE FUNDS ARE NOT AVAILABLE FOR U.S. RESIDENTS OR CITIZENS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
* NOT INCLUDING THE RIGHTS OFFERING DILUTION THE NAV PERFORMANCE AS OF 9/30/07
WAS 6.84% IN SWISS FRANC TERMS (RESULTING IN A CUMULATIVE PERFORMANCE OF
223.65%).
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
----------------------------------------------------------
PEER GROUP/INDICES PERFORMANCE COMPARISON IN SWISS FRANCS
----------------------------------------------------------
YEAR TO DATE
DECEMBER 31, 2006
THROUGH
SEPTEMBER 30, 2007
--------------------------------------- ------------------
PERFORMANCE IN SWISS FRANCS
Swiss Performance Index (SPI) 4.81%
Swiss Helvetia Fund
Based on Net Asset Value 0.34%/1/
CHANGE IN U. S. DOLLAR VS. SWISS FRANC -4.30%
PERFORMANCE IN U.S. DOLLARS
SWISS HELVETIA FUND PERFORMANCE
Based on Net Asset Value 4.85%/2/
Based on Market Price -2.78%
S & P 500 Index 9.13%
MSCI EAFE Index 13.15%
Lipper European Fund Index (10 Largest) 16.46%
Lipper European Fund Universe Average 13.38%
SOURCES: CITI FUND SERVICES AND BLOOMBERG
/1/ NOT INCLUDING THE RIGHTS OFFERING DILUTION THE NAV PERFORMANCE AS OF
9/30/07 WAS 6.84% IN SWISS FRANC TERMS.
/2/ NOT INCLUDING THE RIGHTS OFFERING DILUTION THE NAV PERFORMANCE AS OF
9/30/07 WAS 11.64% IN US DOLLAR TERMS.
OUTLOOK
The world economy is still strong and there is still substantial liquidity
in the global system as a result of the recent FRB actions and the desire of
the emerging market central banks to keep a lid on their currencies, thereby
forcing savers to accept higher risk (invest in the stock market) to improve on
the low real rates available on deposits.
Sector performance will continue to vary, because investors, fearing
economic slowdown but enticed by low interest rates, will most likely bid up
prices for industry groups with solid fundamentals. Supply constraints and
strong demand should help support the industrials and commodities producers as
long as they can pass on cost inflation. Valuations should continue to expand
as long as U.S. interest rates continue their downward trend and as long as
China continues to promote strong economic growth and to keep its currency
appreciation under control. Earnings are still plentiful outside of residential
real estate, investment banking and large pharmaceutical companies. As
mentioned above, however, developments on the inflation front should continue
to be monitored closely.
STOCK REPURCHASE PROGRAM
Pursuant to authorization by the Board, the Fund began open market
purchases of its common stock on the New York Stock Exchange ("NYSE") in 1999
and has continued purchases in each subsequent year. The principal purpose of
the stock repurchase program is to enhance stockholder value by increasing the
Fund's net asset value per share without creating a meaningful adverse effect
upon the Fund's expense ratio. The Board has authorized the Fund to repurchase
up to 500,000 shares during 2007. During the period ended September 30, 2007,
the Fund repurchased and retired 339,500 shares at an
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (concluded)
average price of $17.32 per share (including brokerage commissions) and a
weighted average discount of 12.95%. These repurchases, which had a total cost
of $5,880,074, resulted in an increase of $896,163 to the Fund's net asset
value.
Sincerely,
/s/ Rodolphe E. Hottinger
Rodolphe E. Hottinger
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ Rudolf Millisits
Rudolf Millisits
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
September 30, 2007
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THE SWISS HELVETIA FUND, INC.
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Schedule of Investments (Unaudited) September 30, 2007
Percent
No. of of Net
Shares Security Value Assets
-------------------------------------------------------------
COMMON STOCKS -- 94.48%
BANKS -- 12.23%
430 BANK SARASIN & CIE AG
REGISTERED SHARES $ 1,884,609 0.28%
Offers private banking, asset
management, investment
advisory, and institutional
banking services.
(Cost $1,611,112)
450,000 CREDIT SUISSE GROUP/1,2/
REGISTERED SHARES 29,776,579 4.39%
A global diversified financial
service company with significant
activity in private banking,
investment banking, asset
management and insurance
service.
(Cost $16,683,206)
100,000 EFG INTERNATIONAL
REGISTERED SHARES 4,690,978 0.69%
Holding company of EFG Bank.
Offers private banking and asset
management services.
(Cost $3,249,443)
870,000 UBS AG/2/
REGISTERED SHARES 46,620,442 6.87%
A global diversified financial
service company with significant
activity in private banking,
investment banking, and asset
management.
(Cost $7,403,841)
------------ -----
82,972,608 12.23%
Percent
No. of of Net
Shares Security Value Assets
----------------------------------------------------------------
BASIC RESOURCES -- 3.95%
100,236 PRECIOUS WOODS HOLDING AG/1/
REGISTERED SHARES $ 10,982,886 1.62%
Through subsidiaries, manages
tropical forests using ecologically
sustainable forest management
methods. Harvests tropical trees
and processes them into lumber.
(Cost $8,999,044)
152,760 SCHMOLZ AND BICKENBACH AG
REGISTERED SHARES 14,214,186 2.09%
Manufactures industrial and
construction steel.
(Cost $8,500,850)
75,000 UMS SCHWEIZERISCHE
METALLWERKE HOLDING AG/1/
BEARER SHARES 1,605,033 0.24%
Produces profiles and large
dimension rods for electrical
engineering, mechanical
engineering, and construction
companies, lead-free brass wire
for batteries, billets, and small
diameter wire and rods for the
consumer goods and electronics
industries.
(Cost $1,655,850)
------------ ----
26,802,105 3.95%
BIOTECHNOLOGY -- 14.26%
664,655 ACTELION LTD./1, 2, 3/
REGISTERED SHARES 36,697,695 5.41%
Biotechnology company that
develops and markets synthetic
small-molecule drugs against
diseases related to the
endothelium.
(Cost $17,871,161)
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Schedule of Investments (Unaudited) September 30, 2007
(continued)
Percent
No. of of Net
Shares Security Value Assets
-------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
BIOTECHNOLOGY -- (CONTINUED)
240,360 ADDEX PHARMACEUTICALS SA/1/
REGISTERED SHARES $ 10,699,127 1.58%
Bio-pharmaceutical company that
discovers, develops, and markets
therapeutic compounds for the
treatment of addiction and other
neuropsychiatric conditions.
(Cost $13,484,966)
10,000 BACHEM HOLDING AG
REGISTERED SHARES 841,037 0.12%
Manufactures ingredients for
pharmaceuticals, generic drugs,
and research supplies.
(Cost $833,329)
156,200 BASILEA PHARMACEUTICA/1,2/
REGISTERED SHARES 35,500,000 5.24%
Conducts research into the
development of drugs for the
treatment of infectious diseases
and dermatological problems.
(Cost $21,602,083)
10,000 SANTHERA PHARMACEUTICALS AG/1/
REGISTERED SHARES 924,499 0.14%
Drug discovery and development
company.
(Cost $948,284)
91,903 SPEEDEL HOLDING AG/1/
REGISTERED SHARES 12,020,868 1.77%
Researches and develops
therapies for cardiovascular and
metabolic diseases.
(Cost $12,460,344)
------------ -----
96,683,226 14.26%
Percent
No. of of Net
Shares Security Value Assets
-------------------------------------------------------------
CHEMICALS -- 3.96%
45,000 EMS -- CHEMIE HOLDING AG
REGISTERED SHARES $ 6,271,186 0.92%
Manufactures and markets
performance polymers, high-
grade chemical intermediates,
fine chemicals, and protective
bonding, coating and sealing
products.
(Cost $5,881,838)
95,931 SYNGENTA AG/1,2/
REGISTERED SHARES 20,611,780 3.04%
Produces herbicides, insecticides
and fungicides, and seeds for
field crops, vegetables, and
flowers.
(Cost $7,529,965)
------------ ----
26,882,966 3.96%
CONSTRUCTION & MATERIALS -- 1.12%
1,141 BELIMO HOLDING AG
REGISTERED SHARES 1,363,496 0.20%
World market leader in damper
and volume control actuators for
ventilation and air-conditioning
equipment.
(Cost $222,726)
3,220 SIKA AG
BEARER SHARES 6,251,464 0.92%
Leading producer of construction
chemicals.
(Cost $891,990)
------------ ----
7,614,960 1.12%
11
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (Unaudited) September 30, 2007
(continued)
Percent
No. of of Net
Shares Security Value Assets
---------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
FINANCIAL SERVICES -- 1.48%
81,600 PARTNERS GROUP
REGISTERED SHARES $ 10,058,552 1.48%
Global alternative asset
management firm in private
equity, private debt, private real
estate, infrastructure and hedge
funds.
(Cost $10,215,050)
------------ -----
10,058,552 1.48%
FOOD & BEVERAGES -- 12.91%
2,690 BARRY CALLEBAUT AG
REGISTERED SHARES 1,972,252 0.29%
Manufactures cocoa, chocolate,
and confectionary products.
(Cost $1,399,816)
340 LINDT & SPRUNGLI AG
REGISTERED SHARES 12,840,952 1.89%
Major manufacturer of premium
Swiss chocolates.
(Cost $1,977,813)
162,500 NESTLE SA/2/
REGISTERED SHARES 72,750,813 10.73%
Largest food and beverage
processing company in the
world.
(Cost $9,260,283)
------------ -----
87,564,017 12.91%
Percent
No. of of Net
Shares Security Value Assets
----------------------------------------------------------------
INDUSTRIAL GOODS & SERVICES -- 4.81%
646,457 ABB LTD.
REGISTERED SHARES $ 16,966,591 2.50%
The holding company for ABB
Group which is one of the largest
electrical engineering firms in the
world.
(Cost $9,612,320)
6,440 INFICON HOLDING AG
REGISTERED SHARES 1,103,102 0.16%
Manufactures and markets
vacuum instruments used to
monitor and control production
processes. Manufactures on-site
chemical detection and
monitoring system.
(Cost $581,616)
87,215 KOMAX HOLDING AG
REGISTERED SHARES 14,558,231 2.15%
Manufactures wire processing
machines. Produces machines
for cutting and stripping round
and flat wire, crimping and
insertion machines for
processing single wires and
equipment for processing wire
harnesses.
(Cost $14,003,435)
------------ ----
32,627,924 4.81%
12
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (Unaudited) September 30, 2007
(continued)
Percent
No. of of Net
Shares Security Value Assets
------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
INSURANCE -- 0.92%
20,800 ZURICH FINANCIAL SERVICES AG
REGISTERED SHARES $ 6,218,456 0.92%
Offers property, accident, health,
automobile, liability, financial risk
and life insurance and retirement
products.
(Cost $3,338,952)
------------ ----
6,218,456 0.92%
MEDICAL TECHNOLOGY -- 0.63%
32,205 SONOVA HOLDING AG
REGISTERED SHARES 3,219,949 0.47%
Designs and produces wireless
analog and digital in-the-ear and
behind-the-ear hearing aids and
miniaturized voice
communications systems.
(Cost $1,100,139)
16,500 TECAN GROUP AG/1/
REGISTERED SHARES 1,059,322 0.16%
Develops, manufactures and
distributes laboratory automation
components and systems.
(Cost $1,238,914)
------------ ----
4,279,271 0.63%
OIL AND GAS -- 1.37%
106,000 PETROPLUS HOLDINGS AG/1/
REGISTERED SHARES 9,318,781 1.37%
Refines, supplies, markets and
distributes petroleum products.
(Cost $10,236,308)
------------ ----
9,318,781 1.37%
Percent
No. of of Net
Shares Security Value Assets
-------------------------------------------------------------
PERSONAL & HOUSEHOLD GOODS -- 2.58%
20,950 ADVANCED DIGITAL BROADCAST
HOLDING SA/1/
REGISTERED SHARES $ 878,745 0.13%
Develops equipment and systems
to view and interact with digital
TV broadcast through cable,
satellite, and telecommunication
networks.
(Cost $1,352,807)
20,000 SCHULTHESS GROUP
REGISTERED SHARES 2,499,572 0.37%
Develops, manufactures and sells
household appliances and
heating equipment.
(Cost $2,327,602)
43,216 SWATCH GROUP AG
BEARER SHARES 14,131,580 2.08%
Manufactures finished watches,
movements and components.
Produces components necessary
to its eighteen watch brand
companies. Also operates retail
boutiques.
(Cost $11,644,287)
------------ ----
17,509,897 2.58%
13
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (Unaudited) September 30, 2007
(continued)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
PHARMACEUTICALS -- 16.02%
781,300 NOVARTIS AG/2/
REGISTERED SHARES $ 42,970,831 6.33%
One of the leading manufacturers
of branded and generic
pharmaceutical products.
Manufactures nutrition products.
(Cost $8,326,469)
363,600 ROCHE HOLDING AG/2/
NON-VOTING EQUITY SECURITIES 65,704,469 9.69%
Worldwide pharmaceutical
company.
(Cost $6,578,720)
------------ -----
108,675,300 16.02%
REAL ESTATE AND INFRASTRUCTURE -- 0.18%
3,100 FLUGHAFEN ZUERICH AG
REGISTERED SHARES 1,193,482 0.18%
Constructs, leases, and maintains
airport structures and equipment.
(Cost $1,123,617)
------------ -----
1,193,482 0.18%
RETAILERS -- 6.76%
18,500 DUFRY GROUP
REGISTERED SHARES 2,231,339 0.33%
Operates duty-free shops in
countries such as Tunisia, Italy,
Mexico, France, Russia, the
United Arab Emirates, Singapore,
the Caribbean and the United
States.
(Cost $2,002,450)
Percent
No. of of Net
Shares Security Value Assets
---------------------------------------------------------------
RETAILERS -- (CONTINUED)
88,950 GALENICA AG/2/
REGISTERED SHARES $ 37,881,035 5.58%
Manufactures and distributes
prescription and over-the-
counter drugs, toiletries and
hygiene products.
(Cost $19,622,804)
2,100 JELMOLI HOLDING AG
BEARER SHARES 5,745,249 0.85%
Owns and operates department
and retail stores and provides
mail-order catalog and real estate
leasing services.
(Cost $3,707,265)
------------ ----
45,857,623 6.76%
TECHNOLOGY -- 6.08%
123,000 KUDELSKI SA
REGISTERED SHARES 3,466,153 0.51%
Designs and manufactures digital
security products under the
brand name 'Nagra'.
(Cost $3,897,054)
78,400 OC OERLIKON CORP. AG/2/
REGISTERED SHARES 29,165,646 4.30%
Manufactures coating machinery,
semiconductor assembly
equipment, and satellite
components.
(Cost $28,798,949)
369,200 TEMENOS GROUP AG/1/
REGISTERED SHARES 8,596,336 1.27%
Provides integrated software for
the banking sector.
(Cost $6,572,320)
------------ ----
41,228,135 6.08%
14
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (Unaudited) September 30, 2007
(continued)
Percent
No. of of Net
Shares Security Value Assets
----------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
UTILITY SUPPLIERS -- 5.22%
500 AARE-TESSIN AG FUR ELEKTRIZITAT
(ATEL)
REGISTERED SHARES $ 1,626,434 0.24%
Generates, transmits, and
distributes electricity in
Switzerland and neighboring
countries.
(Cost $1,275,915)
147,250 BKW FMB ENERGIE AG
REGISTERED SHARES 16,134,224 2.38%
Produces electricity using
nuclear, hydroelectric, solar,
biomass and wind energy.
(Cost $7,675,799)
28,409 CENTRALSCHWEIZERISCHE
KRAFTWERKE AG
REGISTERED SHARES 11,308,154 1.67%
Supplies electric power, operates
and maintains distribution
network facilities, constructs and
installs equipment, and offers
consulting services to its clients.
(Cost $8,525,835)
470 MOTOR-COLUMBUS LTD.
BEARER SHARES 4,385,379 0.64%
Generates, transmits and
distributes electricity throughout
Europe.
(Cost $4,019,837)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------
UTILITY SUPPLIERS -- (CONTINUED)
5,000 RAETIA ENERGIE AG
PARTICIPATION CERTIFICATE $ 1,968,841 0.29%
Generates and distributes electric
power from its own hydroelectric
stations, as well as from outside
nuclear power suppliers of
electric power.
(Cost $2,035,541)
------------ -----
35,423,032 5.22%
TOTAL COMMON STOCKS
(Cost $312,281,949)* $640,910,335 94.48%
15
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (Unaudited) September 30, 2007
(continued)
Percent
No. of of Net
Shares Security Value Assets
-------------------------------------------------------------------------------------------
PRIVATE EQUITY INVESTMENTS -- 0.16%
150,000 ARAVIS VENTURE II -- LIMITED PARTNERSHIP/4/ $ 213,323 0.03%
1,019,383 ZURMONT MADISON PRIVATE EQUITY, LP/4/ 872,610 0.13%
------------ -----
TOTAL PRIVATE EQUITY INVESTMENTS
(Cost $1,062,692) 1,085,933 0.16%
CALL WARRANTS -- 0.57%
1,100,000 ABB LTD., EXPIRES 12/21/07 1,525,424 0.22%
17,200,000 SMIM TOTAL RETURN INDEX, EXPIRES 01/18/08 2,355,761 0.35%
------------ -----
TOTAL CALL WARRANTS
(Cost $3,829,009) 3,881,185 0.57%
OTC CALL OPTION -- 0.16%
Strike Exp.
Price Date
-------------------------------------------------------------------------------------------
2,140,000 GALENICA AG $0.38 03/26/08 1,099,127 0.16%
------------ -----
TOTAL OTC CALL OPTION
(Cost $668,945) 1,099,127 0.16%
PUT WARRANTS -- 0.26%
2,000,000 SMIM TOTAL RETURN INDEX, EXPIRES 01/18/08 753,296 0.11%
5,900,000 SMIHA VONTOBEL, EXPIRES 03/08 1,003,000 0.15%
------------ -----
TOTAL PUT WARRANTS
(Cost $1,879,766) 1,756,296 0.26%
TOTAL INVESTMENTS
(Cost $319,722,361)* $648,732,876 95.63%
16
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (Unaudited) September 30, 2007
(concluded)
Percent
Strike Exp. of Net
Contracts Security Price Date Value Assets
----------------------------------------------------------------------------------------
CALL OPTIONS WRITTEN -- (0.01)%
(125,668) ACTELION LTD. $68.68 10/24/07 $ (101,120) -0.01%
------------ ------
TOTAL CALL OPTION WRITTEN
(Premiums received $209,750) (101,120) -0.01%
OTHER ASSETS LESS OTHER LIABILITIES, NET 29,740,637 4.38%
------------ ------
NET ASSETS $678,372,393 100.00%
============ ======
--------------------------------------------------------------------------------
/1/NON-INCOME PRODUCING SECURITY.
/2/ONE OF THE TEN LARGEST PORTFOLIO HOLDINGS.
/3/SECURITY SUBJECT TO CALL OPTION WRITTEN BY THE FUND.
/4/RESTRICTED SECURITY NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 OTHER
THAN RULE 144A SECURITIES. AT THE END OF THE PERIOD, THE VALUE OF THESE
SECURITIES AMOUNTED TO $1,085,933 OR 0.16% OF NET ASSETS.
Acquisition Value
Security Acquisition Date Acquisition Cost per unit
-------- ---------------- ---------------- -----------------
Aravis Venture II July 31, 2007 $205,328 $1.00
Zurmont Madison Private Equity, LP August 9, 2007 79,022 1.00
*COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME AS FOR
FINANCIAL STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION (DEPRECIATION)
CONSISTS OF:
GROSS UNREALIZED APPRECIATION $335,952,239
GROSS UNREALIZED DEPRECIATION (6,941,724)
------------
NET UNREALIZED APPRECIATION $329,010,515
============
17
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Dividend Reinvestment Plan (Unaudited)
The Plan
The Fund's 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 Fund's net asset value
or the Fund's 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 Fund's 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 Fund's market
18
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Dividend Reinvestment Plan (Unaudited) (concluded)
price increases to a level above the net asset value, AST will complete its
purchases, even though 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 AST's 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 AST's 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.
19
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, 2007