THE SWISS
HELVETIA
FUND, INC.
www.swz.com
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, NY 10020
1-888-SWISS-00
(212) 332-2760
http://www.swz.com
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
JUNE 30, 2001
THE SWISS HELVETIA FUND, INC.
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Directors and Officers
Paul Hottinguer
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
Eric R. Gabus
VICE CHAIRMAN (NON OFFICER)
Alexandre de Takacsy
DIRECTOR
Claude Frey
DIRECTOR
Baron Hottinger
DIRECTOR
Claude Mosseri-Marlio
DIRECTOR
Didier Pineau-Valencienne*
DIRECTOR
Stephen K. West, Esq.*
DIRECTOR
Samuel B. Witt III, Esq.**
DIRECTOR
Rodolphe E. Hottinger
PRESIDENT AND
CHIEF OPERATING OFFICER
Rudolf Millisits
SENIOR VICE PRESIDENT
Philippe Comby
VICE PRESIDENT
Sharon Kanovsky
VICE PRESIDENT
Edward J. Veilleux
VICE PRESIDENT AND TREASURER
Paul R. Brenner, Esq.
SECRETARY
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* AUDIT COMMITTEE MEMBER
** AUDIT COMMITTEE CHAIRMAN
The Investment Advisor
The Fund is managed by Hottinger Capital Corp., which is 100% owned by the
Hottinger Group.
The Hottinger Group dates back to Banque Hottinguer, which was formed in Paris
in 1786 and is one of Europe's oldest private banking firms. The Hottinger Group
has remained under the control of the Hottinger family through seven
generations. It has offices in New York, Zurich, Luxembourg, Geneva, and the
Bahamas.
EXECUTIVE OFFICES
The Swiss Helvetia Fund, Inc.
1270 Avenue of the Americas
Suite 400
New York, New York 10020
1-888-SWISS-00 (1-888-794-7700)
(212) 332-2760
FOR INQUIRIES AND REPORTS:
1-888-SWISS-00 (1-888-794-7700)
Fax (212)332-7931
email: swz@swz.com
WEBSITE ADDRESS
http://www.swz.com
The Fund
The Swiss Helvetia Fund, Inc. is a non-diversified, closed-end investment
company whose objective is to seek long-term capital appreciation through
investment in equity and equity-linked securities of Swiss companies. The Fund,
listed on the New York Stock Exchange under the symbol "SWZ," is managed by
Hottinger Capital Corp.
Net Asset Value is calculated daily by 6:00 P.M. (Eastern Standard Time). The
most recent calculation is available by calling 1-888-SWISS-00 or by accessing
our Website. Weekly Net Asset Value is also published in BARRON'S, the Monday
edition of THE WALL STREET JOURNAL and the Sunday edition of THE NEW YORK TIMES.
INVESTMENT ADVISOR
Hottinger Capital Corp.
1270 Avenue of the Americas
Suite 400
New York, New York 10020
(212) 332-7930
ADMINISTRATOR
Investment Company Capital Corp.
CUSTODIAN
Swiss American Securities Inc.
TRANSFER AGENT
PFPC, Inc.
P.O. Box 43027
Providence, RI 02940-3027
(800) 331-1710
LEGAL COUNSEL
Paul R. Brenner, Esq. and
Salans Hertzfeld Heilbronn
Christy & Viener
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1
THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders
ECONOMIC DEVELOPMENTS
During the second quarter of 2001, the U.S. Federal Reserve cut interest
rates by 125 basis points in three separate actions, bringing the total
reduction in the fed funds rate to 3.25% over a six-month period. The rate cuts
were a reaction to a pronounced downshift in economic activity, which was
accentuated when manufacturers promptly scaled back production to reduce excess
inventories. The U.S. Federal Reserve believes that manufacturing may recover
somewhat when the rate of inventory reduction decreases. Further, U.S. consumer
demand will find some support from the recent tax cut and lower energy costs.
However, there are still considerable uncertainties regarding the current
economic situation.
For several years, productivity, GDP growth, and corporate earnings grew at
rates far above historic averages. This was largely driven by globalization and
investments in information technology. Equity markets reflected this rapid
growth, raising equity prices and market multiples to new highs. There is
widespread agreement that there was an equity price "bubble" as unsustainable
long term projections were mistakenly extrapolated from short term growth rates.
The partial reversal of these driving forces has led to the current period of
slower economic growth. Since we probably can not expect these forces to resume
at earlier peak levels, the rapid growth of the 1990s may not return.
The U.S. Federal Reserve believes that many growth-enabling technologies
are not yet mature, nor are they widely adopted. In the coming years adoption of
such technologies may provide a catalyst for sustainable long-term growth in GDP
and corporate earnings beyond historical averages, though significantly below
the rapid pace of the late 1990s. Resurgence in globalization and the
acceleration of large emerging economies may provide additional growth
opportunities.
Significant pressures on revenues, profit margins, and cash flows have
exacerbated weakness in capital spending. Rising energy prices further hindered
corporate performance. Cost pressure from growth in unit labor costs may
moderate if civilian unemployment rises as projected over the second half of the
year. Additionally, energy prices have moderated from levels seen earlier in the
year and U.S. inflation remains subdued, with current Fed projections of only
1.75% to 2.5% for 2001 and 2002.
U.S. capital spending remains weak with little agreement among market
participants as to when it will strengthen significantly. As successive
generations of technology enable increasingly large worker productivity gains,
businesses will likely resume capital spending to reap these benefits.
2
THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
In the near term, softness continues in all of the world's major economies.
The 3% growth rate projected for the U.S. exceeds expectations for other
countries. The Japanese economy is saddled with public debt and is undergoing a
long overdue restructuring. The European Union continues to digest the
integration of member nations and the harmonization of previously independent
economies. EU monetary policy can not effectively react to divergent economic
conditions within member nations, while individual fiscal policies are limited
by EU laws and strained by "subsidies" for the less developed nations. The weak
euro makes matters more difficult, as EU members are at an increasing
disadvantage on global commodity markets. A strict EU regulatory environment
continues to discourage foreign investment. Most notable among the disincentives
to investment in the EU are high tax regimes, increasingly burdensome labor
regulations, and the growing divergence of U.S. and EU policies. These are
evidenced by the EU Commission's aggressive stance on the GE/Honeywell merger,
for which there is no appeal process.
THE SWISS ECONOMY
The Swiss economy is growing at a fairly stable rate and has held up
reasonably well in spite of the slowdowns in the U.S. and Europe. Economic
growth is expected to be about 2% for the year, down from 3.4% in 2000, the
strongest year since 1990. Such growth is near the long-term potential of the
Swiss economy. Unemployment is low, at 1.6%, down from 2.0% at the beginning of
the year, and remains below the level of any country in the European Union.
INTEREST RATES: The Swiss National Bank did not change the LIBOR target
band of 2.75%-3.75% during the quarter after a mild reduction earlier in the
year. The target is roughly in line with recently reduced U.S. interest rates.
Switzerland still has very low unemployment despite the slowdown, and economic
development is near its long-term potential according to the president of the
Swiss National Bank. Though inflation is well contained, further cuts are
unlikely without changes in the economic environment.
Swiss producer prices have fallen, and the Swiss National Bank predicts
inflation of only 1.4% this year, down 0.2% from last year and well within the
targeted 2% ceiling.
The two key risks identified by the president of the Swiss National Bank
are linked to the U.S. The first risk consists of potentially volatile oil
prices, which are denominated in U.S. dollars. The more significant risk is the
development of the U.S. economy itself, and the possibility of U.S. dollar
depreciation. A strong dollar makes the U.S. an attractive and important export
market for Swiss goods and services.
3
THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
There are rough spots in the Swiss Economy. The Swiss Index of leading
economic indicators (Konjunkturbarometer) has been declining since March of
2000, suggesting an economic slowdown in the near future. It now stands at 0.25,
down from 0.46 in March.
CURRENCY
During the quarter, the Swiss franc lost nearly 3% against the dollar.
Global investors continued to seek security in U.S. currency as troubles mounted
in Turkey and East Asia. The U.S. dollar has been less affected than other
currencies in the context of the global economic slowdown because its main
trading partners have yet to show weakness. However, the U.S. dollar became an
increasingly expensive currency. The dollar ended the quarter near 12-month
highs relative to the euro, yen, and Swiss franc, even as interest rates
continued to decline. The risk of lower real returns on U.S. dollar denominated
assets, especially financial instruments, can reverse the flow of money that had
come into the U.S. dollar since the beginning of the year.
The Swiss franc has historically been a stable currency during times of
regional distress due to its relative economic neutrality. Switzerland has a
healthy domestic economy and a free-floating currency supported by an
independent monetary and fiscal policy.
However, during the quarter, movements in the franc closely tracked
movements in the euro, suggesting that broad movement into the dollar was the
primary factor driving currency exchange rates. Further, current EU inflation is
3.4% and has remained above the targeted ceiling of 2% for over 13 months,
limiting the European Central bank's ability to use monetary policy to provide
economic stimuli. The current EU benchmark interest rate remains unchanged at
4.5%.
The EU Central Bank's ("ECB") declared objective is to ensure price
stability. Unlike the U.S. Federal Reserve, the ECB is not charged with
stimulating economic activity. So long as inflation remains above the 2% target,
rate reductions are unlikely.
In addition to the problem of an inflexible monetary policy, the EU can not
rely on fiscal stimuli to promote growth. Under the Stability and Growth Pact,
EU members face stringent budgetary restrictions aimed at reducing debt. Members
are limited in their ability to reduce taxes or incur debt. While this may be
good long-term policy, the EU is left with few fiscal or monetary options to
help its faltering economy. Unaided by fiscal or monetary policy, EU economic
growth may remain sluggish relative to the U.S., keeping a cap on the euro.
Management believes there is a possibility that the Swiss franc will
appreciate in the near future as investors seek a less expensive safe haven than
the U.S. dollar. Switzerland's lower inflation and more flexible monetary policy
should provide a degree of downside protection against the euro.
4
THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
While the Swiss franc's depreciation of more than 11% over the past two
quarters is quite significant, the June 29th closing price of 1.79 francs per
dollar is still below the rates seen as recently as November 2000.
The weakness of the franc against the U.S. dollar provides significant
export opportunities for Swiss companies. At the same time, Swiss companies must
bear the increased cost of dollar denominated commodities and imports, such as
oil.
SWISS STOCK MARKET REVIEW:
After the year's bad start, the Swiss market has performed better than its
European peers over the last three months. The strong showing by stocks like
UBS, Credit Suisse, Nestle, and Swiss Re helped to balance negative performance
from Zurich, Roche and, to a lesser extent, Novartis.
In response to the recent law change permitting reduced par value for Swiss
equities, companies continue to announce stock splits. The following table
summarizes the major splits that impacted the Fund's portfolio during the
quarter.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
CURRENCY EXCHANGE MOVEMENTS--NORMALIZED FROM 3/30/01
EU(+3.2) CHF(+2.8)
3/30/01 1 1
4/2/01 0.9972 0.9958
4/3/01 0.9767 0.9765
4/4/01 0.9729 0.973
4/5/01 0.9776 0.9778
4/6/01 0.9696 0.9706
4/9/01 0.9777 0.9774
4/10/01 0.9864 0.9851
4/11/01 0.9874 0.9808
4/12/01 0.9822 0.9795
4/13/01 0.9871 0.9831
4/16/01 0.9861 0.9834
4/17/01 0.9922 0.9915
4/18/01 0.9923 0.9944
4/19/01 0.9768 0.977
4/20/01 0.9717 0.9726
4/23/01 0.9782 0.9792
4/24/01 0.9804 0.9832
4/25/01 0.9768 0.9794
4/26/01 0.9704 0.9772
4/27/01 0.9831 0.9894
4/30/01 0.9861 0.9943
5/1/01 0.9821 0.9905
5/2/01 0.9808 0.9905
5/3/01 0.9852 0.9944
5/4/01 0.9823 0.992
5/7/01 0.9847 0.9939
5/8/01 0.9906 0.9996
5/9/01 0.9892 0.9986
5/10/01 0.9947 0.9998
5/11/01 1.0016 1.0049
5/14/01 1.003 1.005
5/15/01 0.9978 1.0007
5/16/01 0.9929 0.9955
5/17/01 0.9931 0.9979
5/18/01 0.9947 0.9996
5/21/01 0.9999 1.003
5/22/01 1.0131 1.0142
5/23/01 1.0232 1.0214
5/24/01 1.0235 1.0201
5/25/01 1.0181 1.018
5/28/01 1.0191 1.0197
5/29/01 1.0248 1.0217
5/30/01 1.0232 1.0205
5/31/01 1.0372 1.0316
6/1/01 1.0345 1.03
6/4/01 1.0367 1.03
6/5/01 1.0266 1.0193
6/6/01 1.0341 1.0293
6/7/01 1.0303 1.0277
6/8/01 1.0308 1.0288
6/11/01 1.0407 1.0358
6/12/01 1.0272 1.0261
6/13/01 1.025 1.0254
6/14/01 1.0166 1.0157
6/15/01 1.0182 1.0187
6/18/01 1.0185 1.0202
6/19/01 1.0266 1.0268
6/20/01 1.0256 1.0236
6/21/01 1.0259 1.02
6/22/01 1.0223 1.0172
6/25/01 1.0205 1.015
6/26/01 1.0153 1.0122
6/27/01 1.0198 1.0134
6/28/01 1.0385 1.0329
6/29/01 1.0326 1.0283
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
CURRENCY EXCHANGE MOVEMENTS--NORMALIZED FROM 12/29/00
EU(+11.0)CHF(+11.2)
12/29/00 1 1
1/1/01 1.0004 0.9996
1/2/01 0.9905 0.9921
1/3/01 1.0158 1.0127
1/4/01 0.9928 0.9953
1/5/01 0.9851 0.9919
1/8/01 0.9958 0.9992
1/9/01 0.9993 1.002
1/10/01 1.0061 1.0114
1/11/01 0.9903 1.0012
1/12/01 0.991 1.0048
1/15/01 1.0007 1.015
1/16/01 1 1.0139
1/17/01 1.0074 1.0197
1/18/01 0.9997 1.0056
1/19/01 1.0091 1.0168
1/22/01 1.0043 1.0127
1/23/01 1.0074 1.0161
1/24/01 1.0207 1.0284
1/25/01 1.0198 1.0253
1/26/01 1.0198 1.0248
1/29/01 1.0278 1.0287
1/30/01 1.0172 1.022
1/31/01 1.0065 1.0151
2/1/01 1.0042 1.0138
2/2/01 1.0067 1.0208
2/5/01 1.0056 1.0178
2/6/01 1.0126 1.0266
2/7/01 1.0153 1.0273
2/8/01 1.0275 1.0372
2/9/01 1.02 1.031
2/12/01 1.0113 1.0264
2/13/01 1.0238 1.036
2/14/01 1.0269 1.0371
2/15/01 1.0413 1.0501
2/16/01 1.0303 1.0409
2/19/01 1.0231 1.0355
2/20/01 1.0343 1.045
2/21/01 1.0358 1.0469
2/22/01 1.043 1.0511
2/23/01 1.0273 1.0392
2/26/01 1.0348 1.0475
2/27/01 1.0273 1.0418
2/28/01 1.0207 1.0354
3/1/01 1.0132 1.0247
3/2/01 1.0074 1.0213
3/5/01 1.0152 1.0258
3/6/01 1.0096 1.0237
3/7/01 1.0142 1.0285
3/8/01 1.0104 1.0246
3/9/01 1.0106 1.0257
3/12/01 1.0146 1.0284
3/13/01 1.0301 1.0442
3/14/01 1.0343 1.048
3/15/01 1.0505 1.0639
3/16/01 1.05 1.061
3/19/01 1.0476 1.0587
3/20/01 1.0366 1.0479
3/21/01 1.0515 1.0615
3/22/01 1.0602 1.0693
3/23/01 1.0593 1.0681
3/26/01 1.0515 1.0639
3/27/01 1.0547 1.066
3/28/01 1.0633 1.0718
3/29/01 1.0687 1.0723
3/30/01 1.0753 1.0818
4/2/01 1.0722 1.0772
4/3/01 1.0503 1.0564
4/4/01 1.0462 1.0525
4/5/01 1.0512 1.0577
4/6/01 1.0426 1.05
4/9/01 1.0513 1.0573
4/10/01 1.0606 1.0656
4/11/01 1.0617 1.061
4/12/01 1.0561 1.0596
4/13/01 1.0614 1.0634
4/16/01 1.0603 1.0638
4/17/01 1.0669 1.0726
4/18/01 1.067 1.0757
4/19/01 1.0504 1.0569
4/20/01 1.0449 1.0521
4/23/01 1.0519 1.0592
4/24/01 1.0542 1.0636
4/25/01 1.0504 1.0595
4/26/01 1.0435 1.057
4/27/01 1.0571 1.0703
4/30/01 1.0603 1.0756
5/1/01 1.056 1.0715
5/2/01 1.0546 1.0715
5/3/01 1.0593 1.0757
5/4/01 1.0562 1.0731
5/7/01 1.0589 1.0751
5/8/01 1.0652 1.0813
5/9/01 1.0636 1.0802
5/10/01 1.0696 1.0815
5/11/01 1.077 1.087
5/14/01 1.0785 1.0872
5/15/01 1.073 1.0826
5/16/01 1.0676 1.0768
5/17/01 1.0678 1.0795
5/18/01 1.0696 1.0813
5/21/01 1.0752 1.085
5/22/01 1.0893 1.0971
5/23/01 1.1003 1.1049
5/24/01 1.1005 1.1035
5/25/01 1.0948 1.1012
5/28/01 1.0958 1.1031
5/29/01 1.1019 1.1053
5/30/01 1.1003 1.1039
5/31/01 1.1152 1.1159
6/1/01 1.1123 1.1142
6/4/01 1.1147 1.1142
6/5/01 1.1039 1.1027
6/6/01 1.1119 1.1135
6/7/01 1.1079 1.1117
6/8/01 1.1084 1.1129
6/11/01 1.1191 1.1205
6/12/01 1.1045 1.11
6/13/01 1.1022 1.1092
6/14/01 1.0931 1.0987
6/15/01 1.0949 1.1019
6/18/01 1.0951 1.1037
6/19/01 1.1039 1.1108
6/20/01 1.1028 1.1073
6/21/01 1.1031 1.1034
6/22/01 1.0992 1.1004
6/25/01 1.0973 1.0979
6/26/01 1.0917 1.0949
6/27/01 1.0965 1.0962
6/28/01 1.1167 1.1174
6/29/01 1.1104 1.1123
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SWISS PERFORMANCE INDEX FOR THE QUARTER YEAR TO DATE
SWISS PERFORMANCE IN SWISS FRANCS (4/1/01-6/30/01) (AS OF 6/30/01)
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SWISS PERFORMANCE INDEX 1.10% (10.93)%
FOODS 7.08% 2.48%
UTILITIES 6.24% 5.71%
INSURANCE 5.72% (20.49)%
MISCELLANEOUS SERVICES 3.38% (4.52)%
BUILDING MATERIALS & CONSTRUCTION 1.50% (5.86)%
CHEMICALS & PHARMACEUTICALS 0.67% (11.78)%
RETAILERS 0.44% (10.75)%
BANKS (0.07)% (4.40)%
ELECTRONICS & ELECTRICAL
ENGINEERING (5.96)% (26.23)%
MISCELLANEOUS INDUSTRY (10.83)% (27.86)%
TRANSPORTATION (13.93)% (31.45)%
MACHINERY (13.94)% (20.23)%
5
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
EARNINGS RELEASE
Earnings of Swiss companies were affected by the ongoing deterioration of
global economic conditions. Overall, results were weaker than expected with
specific standout exceptions within two sectors: the medical technology sector,
including Phonak, Disetronic and Tecan, and the technology sector, with strength
from Logitech and Leica Geosystem. The engineering sector and the majority of
the technology sector saw sharp declines in earnings momentum. Among the blue
chips, the bright spots were Nestle (first quarter volume growth above
expectations), SwissRe (strong 2000 results) and Swisscom (first quarter margin
above consensus). On the other side of the blue chip performance spectrum, ABB
and Roche struggled to show some growth, while Richemont and Adecco were hit by
the slowing global economy. UBS and Credit Suisse were mostly in line with
expectations despite lower trading volume and activity levels in the investment
banking business.
SWZ PERFORMANCE
Although the fund slightly outperformed its benchmark during the last
quarter, it is still lagging year-to-date. The mid and small cap segments of the
market suffered lower trading volume and sharper valuation compression than the
first tier companies. This negatively affected Fund performance due to its
heavier weighting of second tier companies relative to the index. Novartis was a
negative factor as well, not so much because of sub par operating performance,
but because of negative news specific to the company and to the sector (e.g.
slowdown at FDA, U.S. Medicare reform talks, push for over-the-counter drugs and
potential U.S. imports of cheaper drugs).
The market price return of the Fund was better than the return of the Swiss
Performance Index by a wide margin for the current year.
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COMPANY SPLIT RATIO SPLIT DATE
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ROCHE DIVIDEND RIGHT CERTIFICATE 100 FOR 1 5/4/2001
TECAN REG. 10 FOR 1 5/4/2001
ABB REG. 4 FOR 1 5/7/2001
NOVARTIS REG. 40 FOR 1 5/7/2001
ADDECO REG. 10 FOR 1 5/14/2001
CLARIANT REG. 10 FOR 1 5/21/2001
HOLDERBANK BEARER 5 FOR 1 5/23/2001
NESTLE REG. 10 FOR 1 6/11/2001
BALOISE REG. 10 FOR 1 5/11/2001
CREDIT SUISSE REG. 4 FOR 1 6/1/2001
HELVETIA PATRIA REG. 4 FOR 1 5/11/2001
HUBER & SUHNER REG. 5 FOR 1 5/16/2001
JULIUS BAR BEARER 10 FOR 1 5/9/2001
KUHNE & NAGEL REG. 10 FOR 1 5/15/2001
KUDELSKI BEARER 10 FOR 1 5/18/2001
SGS SURVEILLANCE BEARER 5 FOR 1 5/10/2001
SWISS RE REG. 20 FOR 1 5/31/2001
SWISSLOG REG. 5 FOR 1 5/16/2001
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THROUGH 6/30/01 YEAR TO ONE THREE
DATE YEAR YEARS
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MEASURED IN SWISS FRANCS
--------------------------------------------------------------------------------
SWZ TOTAL RETURN BASED ON NAV(12.00)% (6.21)% 1.43%
SWZ TOTAL RETURN BASED ON
MARKET PRICE (8.87)% (2.76)% 3.41%
SPI TOTAL RETURN (10.93)% (5.42)% 0.50%
--------------------------------------------------------------------------------
MEASURED IN U.S. DOLLARS
--------------------------------------------------------------------------------
SWZ TOTAL RETURN BASED ON NAV(20.60)%(14.82)% (4.18)%
SWZ TOTAL RETURN BASED ON
MARKET PRICE (17.78)%(11.69)% (2.32)%
SPI TOTAL RETURN (USD) (19.64)%(14.11)% (5.06)%
6
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders (continued)
This was due to a narrowing of the Fund's discount. One possible explanation may
be that the market has rediscovered the benefits of value investing.
MAJOR CORPORATE NEWS FOR THE QUARTER
NOVARTIS: After announcing a fast track approval of its cancer drug Gilvec
(for chronic myelogenous leukemia with potential for more applications), the
company suffered a set-back on Zelnorm, a new promising compound to treat
irritable bowel syndrome. The U.S. Food and Drug Administration regulators
issued a "not approvable" letter requesting additional data on the drug mainly
due to concerns over potential side effects. Despite this negative development,
Novartis' management reiterated its growth targets.
Earlier during the quarter Novartis announced that it had bought a stake
worth $2.8 billion in rival Roche (20% of the company's bearer shares) at 151
Sfr.--(5% above the closing price of the day preceding the transaction).
Novartis declared that it was a financial investment as opposed to a "strategic"
one.
ACTELION: This biotech company's experimental drug, Veletri, for treatment
of the symptoms of heart failure, which was co-developed with Genentech of the
U.S., failed to show significant improvement in patients' shortness of breath
even though it showed to be effective in hemodynamics tests (blood flow) in a
previous trial. Even if a new study is successful, this disappointing result
will delay the introduction of the drug for at least two years.
LEICA-GEOSYSTEM: This manufacturer of surveying and mapping equipment
agreed to buy Erdas and LH Systems of the U.S. for a total of $45 million in
cash, hoping to become the most comprehensive supplier in the field of
geographic information systems and the remote sensing market.
SOCIETE GENERALE DE SURVEILLANCE: The company continued its restructuring
and simplified its shareholder structure leading to a higher free float of
shares. At its shareholder meeting in May a large majority voted to unify the
company's registered and bearer shares.
LOGITECH: One of the top performers this year on the Swiss Performance
Index, the company signed a deal with Yahoo of the U.S. to include the Yahoo
instant-messaging software in its QuickCam line of webcams. Yahoo is the first
instant-messaging provider to offer such a Webcam service. It also shows that
the ongoing effort by management to transform Logitech into a branded retail
product company continues to bear fruit.
KUEHNE & NAGEL: The largest sea-freight company agreed to buy USCO
Logistics in an attempt to establish itself as a leading player in supply-chain
management, linking the three businesses of international forwarding, contract
logistics and warehousing.
In June the European stock exchange Virt-X PLC, a joint-venture between
the Swiss Exchange and investment banks that include Deutsche Bank and Merrill
Lynch, began trading operations. Companies listed on this European platform
include Switzerland's largest companies, the members of the Swiss Market
Index (SMI).
7
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Letter to Stockholders (continued)
OUTLOOK
Business conditions are expected to remain difficult across the board, with
no industry immune to the macro-economic conditions. For that reason Management
continues to focus on stock selection with particular attention paid to the
quality of balance sheets and low historical valuation. Management strategy is
to find the winners in the next up cycle, companies that can sustain the
downturn (based on their management track record) and gain market share during
the very difficult current economic conditions. The economic situation should
soon stabilize in the U.S. and begin to improve toward the end of the year.
Since Europe is lagging in the economic cycle, the recovery of its stock markets
could come later. We expect the Swiss market to be resilient because of its high
defensive (healthcare and food) and service, insurance and financial services
components which should fare well in a global economy with below average growth
and a greater tendency towards deflation in the medium term. Based on
fundamental analysis, the current Swiss market exhibits some downside
protection. The equity risk premium stands currently at 2.3%, which is above its
historical level. Current valuations reflect heightened risk aversion to
uncertainties regarding future earnings growth.
Even after recent downward revisions of earnings amid growth projections,
expectations for the Swiss market remain positive for 2002. While estimated 2001
earnings growth
--------------------------------------------------------------------------------
THE SWISS HELVETIA FUND -- PORTFOLIO HOLDINGS PER INDUSTRY
AS OF JUNE 30, 2001
--------------------------------------------------------------------------------
Pharmaceuticals 27.53%
-------------------------------------------------------------------------------
Banks 14.65
-------------------------------------------------------------------------------
Electrical Engineering & Electronics 14.04
-------------------------------------------------------------------------------
Food & Luxury Goods 13.72
-------------------------------------------------------------------------------
Insurance 11.23
-------------------------------------------------------------------------------
Miscellaneous Industries 3.26
-------------------------------------------------------------------------------
Miscellaneous Services 2.97
-------------------------------------------------------------------------------
Chemicals 2.17
-------------------------------------------------------------------------------
Biotechnology 1.85
-------------------------------------------------------------------------------
Machinery 1.73
-------------------------------------------------------------------------------
Telecommunications 1.52
-------------------------------------------------------------------------------
Retailers 1.15
-------------------------------------------------------------------------------
Transportation 0.91
-------------------------------------------------------------------------------
Miscellaneous Medical Services 0.58
-------------------------------------------------------------------------------
Cash and Equivalents 2.69
-------------------------------------------------------------------------------
Total 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THE SWISS HELVETIA FUND -- TEN LARGEST HOLDINGS
AS OF JUNE 30, 2001 (PERCENTAGES ARE BASED ON NET ASSET VALUE)
--------------------------------------------------------------------------------
MARKET % OF TOTAL
COST VALUE NET ASSETS
--------------------------------------------------------------------------------
1. Novartis AG $21,636,239 $ 57,213,872 17.18%
-------------------------------------------------------------------------------
2. Nestle Ltd. 12,427,540 44,018,036 13.22
-------------------------------------------------------------------------------
3. Roche Holdings Ltd. 10,471,939 34,451,152 10.35
-------------------------------------------------------------------------------
4. UBS Ltd. 8,314,606 20,784,625 6.24
-------------------------------------------------------------------------------
5. Swiss Reinsurance
Company 9,998,827 20,095,524 6.03
-------------------------------------------------------------------------------
6. Credit Suisse Group 6,828,597 17,601,035 5.29
-------------------------------------------------------------------------------
7. Logitech International
SA 6,208,715 8,657,315 2.60
-------------------------------------------------------------------------------
8. Zurich Allied 3,991,252 8,394,456 2.52
-------------------------------------------------------------------------------
9. ABB Ltd. 8,498,713 7,558,584 2.27
-------------------------------------------------------------------------------
10. Tecan Group Ltd. 5,122,456 6,718,437 2.02
-------------------------------------------------------------------------------
Total $93,498,884 $225,493,036 67.72%
--------------------------------------------------------------------------------
8
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Letter to Stockholders (concluded)
for the SPI stands near -2%, forecasts for 2002 are roughly 11.2%. These
projections imply a market P/E of 17.8 based on projected 2002 earnings. Swiss
mid and small caps are discounted even further, with a 2002 forward P/E of 15
based on projected earnings growth of 20%. Swiss blue chips are expected to
increase earnings by 9.3% in 2002, for a forward P/E of 18.4, after an expected
contraction of 1.5% in 2001. However, these figures, like all projections, are
subject to uncertainties.
Many Swiss companies, among the world's largest and most internationally
diverse, are well positioned to capitalize on the ongoing processes of
globalization, consolidation and trade liberalization.
During the first half of 2001, the Fund repurchased 358,500 of its shares,
at an average price of $14.28 and an average discount of 17.88%. This program
has enhanced stockholders value by $1,099,740. During the same period, the
discount was between 12.95% and 19.76% finishing the first six months at 16.21%.
VOTING RESULTS
At the Annual Meeting held on May 15, 2001, stockholders supported
management's proposals by a wide margin. These final results, certified by the
Fund's independent inspector of elections, show that stockholders took the
following actions:
O REELECTED ERIC R. GABUS, CLAUDE W. FREY AND ALEXANDRE DE TAKACSY AS CLASS I
DIRECTORS OF THE FUND FOR THREE YEAR TERMS EXPIRING IN 2004 (RECEIVING OVER
63% OF THE VOTES CAST FOR DIRECTORS);
O CONFIRMED THE CONTINUANCE OF THE FUND'S INVESTMENT ADVISORY AGREEMENT WITH
HOTTINGER CAPITAL CORP. (WITH SUPPORT FROM OVER 72% OF THE VOTES CAST ON
THIS PROPOSAL); AND
O DEFEATED BANKGESELLSCHAFT BERLIN AG'S PROPOSAL TO TERMINATE THE FUND'S
INVESTMENT ADVISORY AGREEMENT WITH HOTTINGER CAPITAL CORPORATION (WITH
FAVORABLE VOTES FROM 25% OF THE SHARES PRESENT AT THE MEETING VS. THE 67%
LEVEL REQUIRED TO TERMINATE).
THE FINAL RESULTS SHOW THAT 59.9% OF THE FUND'S 24,047,809 OUTSTANDING
SHARES VOTED OR WERE OTHERWISE PRESENT AT THE MEETING IN PERSON OR BY PROXY. THE
OFFICIAL OUTCOME OF THE VOTE WAS CERTIFIED BY I.V.S. ASSOCIATES, INC.
Sincerely,
/S/ PAUL HOTTINGUER
Paul Hottinguer
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
/S/ RODOLPHE HOTTINGER
Rodolphe Hottinger
PRESIDENT AND CHIEF OPERATING OFFICER
June 30, 2001
9
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Review of Operations
Trading activity in the first half of 2001 involved changes in the following
positions:
NEW INVESTMENTS BY THE FUND
--------------------------------------------------------------------------------
Daetwyler Holding Inc.
Esec Holding AG
Kaba Holding AG
Kuehne & Nagel International Ltd.
Lonza AG
SIG Holding AG
Swisscom AG
Unaxis Holdings Ltd.
--------------------------------------------------------------------------------
ADDITIONS TO EXISTING INVESTMENTS
--------------------------------------------------------------------------------
Gurit-Heberlein AG
Helvetia Patria Holding
Kudelski SA
Leica Geosystems AG
Logitech International SA
Saia-Burgess Electronics Holding AG
Schaffner Holding Ltd.
Schindler Holding AG
SGS Societe Generale de Surveillance Holding SA
Swiss Life
Tecan Group Ltd.
SECURITIES DISPOSED OF
--------------------------------------------------------------------------------
Actelion Ltd.
Bachem AG
Micronas Semiconductor Holding
Mikron Holding AG
Sulzer AG
10
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments June 30, 2001
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- 97.31%
BANKS -- 14.65%
2,081 BANK SARASIN & CO.
REGISTERED SHARES $ 4,923,319 1.48%
Specializes in investment
advisor services and
portfolio management for
private and institutional
customers in Europe.
(cost $1,774,473)
3,600 BANQUE CANTONALE VAUDOISE
BEARER SHARES 991,984 0.30
Attracts deposits and
offers real estate
mortgages and commercial
loans as well as
investment counseling and
portfolio management.
(cost $1,227,323)
107,000 CREDIT SUISSE GROUP
REGISTERED SHARES 17,601,035 5.29
A global operating
financial group.1,3 (cost
$6,828,597)
550 JULIUS BAER HOLDINGS AG
BEARER SHARES 2,117,151 0.63
Banking group
specializing in asset
management, investment
consulting and securities
trading. (cost $607,255)
1,500 OZ HOLDING
BEARER SHARES 1,594,856 0.48
Provides brokerage and
banking services,
specializing in Swiss
futures and options.
(cost $1,365,178)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
BANKS -- (CONTINUED)
145,000 UBS LTD.
REGISTERED SHARES $ 20,784,625 6.24%
Product of the merger of
Basel-based Swiss Bank
Corp. and Zurich-based
Union Bank of
Switzerland. Operates
globally and has three
core business units: UBS
Switzerland, UBS Asset
Management and UBS
Warburg.1,3 (cost
$8,314,606)
25,000 VONTOBEL HOLDING AG
BEARER SHARES 777,945 0.23
Provides investment,
banking and consulting
services to private and
institutional customers.
(cost $904,344)
------------ -----
48,790,915 14.65
BIOTECHNOLOGY -- 1.85%
6,200 SERONO SA
BEARER SHARES 6,153,752 1.85
Develops and markets
biotechnology products.
(cost $4,495,858)
------------ -----
6,153,752 1.85
CHEMICALS -- 2.17%
57,000 CLARIANT LTD.
REGISTERED SHARES 1,372,328 0.41
Specializes in color
chemistry and
manufactures a range of
dyestuffs, pigments,
chemicals, additives and
master batches for the
textile, paper, leather,
plastics, synthetic
fibers and paint
industries. (cost
$1,699,963)
11
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) June 30, 2001
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
CHEMICALS -- (CONTINUED)
2,250 GURIT-HEBERLEIN AG
BEARER SHARES $ 1,578,156 0.47%
European market leader
for wind screen bonding
systems, ski based and
optically pure
thermoplastic sheeting
for the auto industry.
(cost $2,223,639)
6,200 LONZA AG
REGISTERED SHARES 3,620,463 1.09
Produces chemicals,
plastics, and energy.
(cost $3,677,401)
2,523 SIKA FINANZ LTD.
BEARER SHARES 650,974 0.20
Leading producer of
construction chemicals.
(cost $614,614)
------------ -----
7,221,921 2.17
ELECTRICAL ENGINEERING & ELECTRONICS -- 14.04%
499,200 ABB LTD.
The holding company for 7,558,584 2.27
ABB Group which is one of
the largest electrical
engineering firms in the
world.3
(cost $8,498,713)
58,000 ASCOM HOLDING AG
BEARER SHARES 2,676,575 0.80
Manufactures
telecommunications
service automation
equipment and systems, as
well as power systems.
(cost $3,957,329)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
ELECTRICAL ENGINEERING & ELECTRONICS -- (CONTINUED)
4,055 BELIMO AUTOMATION AG
REGISTERED SHARES $ 1,670,396 0.50%
World market leader in
damper and volume control
actuators for ventilation
and air conditioning
equipment. (cost
$1,259,329)
4,800 DISETRONIC HOLDING LTD.
REGISTERED SHARES 3,540,414 1.06
Develops, manufactures
and markets infusion
(insulin pumps) and
injection systems.1 (cost
$4,132,588)
19,400 KABA HOLDING AG
REGISTERED SHARES 3,833,779 1.15
Provides mechanical and
electronic security
systems.1 (cost
$5,359,714)
25,500 KUDELSKI SA
BEARER SHARES 2,143,454 0.64
Designs, produces and
distributes equipment
under the 'Nagra' brand
name for professional
data display in audio and
video applications.1
(cost $2,584,942)
6,000 LEICA GEOSYSTEMS AG
REGISTERED SHARES 1,720,107 0.52
Manufactures surveying
and mapping equipment,
Produces devices that
capture and process
spatial data.1 (cost
$1,657,638)
12
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) June 30, 2001
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
ELECTRICAL ENGINEERING & ELECTRONICS -- (CONTINUED)
27,000 LOGITECH INTERNATIONAL SA
REGISTERED SHARES $ 8,657,315 2.60%
Manufactures personal
computer input devices,
as well as producing
trackballs, desktop
publishing programs, and
related software.1,3
(cost $6,208,715)
608 PHONAK HOLDING LTD.
REGISTERED SHARES 1,820,886 0.55
Designs and produces
wireless analog and
digital hearing aids and
miniaturized voice
communications systems.1
(cost $1,842,863)
5,400 SAIA-BURGESS ELECTRONICS
HOLDING AG
REGISTERED SHARES 1,533,066 0.46
Develops and produces
switches, motors and
programmable control
devices. Products are
mainly used in the
automobile, heating & air
conditioning and
telecommunications
industries.1 (cost
$1,485,298)
6,285 SCHAFFNER HOLDING LTD.
REGISTERED SHARES 1,784,319 0.54
Develops, manufactures
and markets electrical
components and test
equipment in the area of
EMC (Electro Magnetic
Compatability). (cost
$1,814,360)
29,000 SWISSLOG HOLDING, AG
REGISTERED SHARES 1,299,544 0.39
Provides turnkey delivery
of automated material
handling systems,
storage, order picking
and transport systems.
Delivers its systems to
production, distribution
and service companies
throughout Europe. (cost
$464,077)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
ELECTRICAL ENGINEERING & ELECTRONICS -- (CONTINUED)
81,000 TECAN GROUP, LTD.
REGISTERED SHARES $ 6,718,437 2.02%
Manufactures and
distributes components
and complete solutions
for the automation of
laboratory processes.3
(cost $5,122,456)
1,800 THE SWATCH GROUP, LTD.
BEARER SHARES 1,803,607 0.54
Manufactures watches,
watch components and
microelectronics.
Produces machine tools
for scientific, medical
and industrial use.1
(cost $1,212,326)
------------ -----
46,760,483 14.04
FOOD & LUXURY GOODS -- 13.72%
300 LINDT & SPRUNGLI AG
REGISTERED SHARES 1,661,657 0.50
Major manufacturer of
premium Swiss chocolates.
(cost $1,196,399)
207,000 NESTLE LTD.
REGISTERED SHARES 44,018,036 13.22
Largest food and beverage
processing company in the
world.3 (cost
$12,427,540)
------------ -----
45,679,693 13.72
INSURANCE -- 11.23%
3,000 BALOISE HOLDING AG
REGISTERED SHARES 2,939,212 0.88
Medium-sized insurer
active in all sectors of
insurance. (cost
$169,640)
13
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) June 30, 2001
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
INSURANCE -- (CONTINUED)
3,000 HELVETIA PATRIA HOLDING
REGISTERED SHARES $ 2,620,240 0.79%
Provides a broad range of
life, casualty, liability
accident, and
transportation insurance
programs. (cost
$2,753,300)
10,050 SCHWEIZERISCHE
RUCKVERSICHERUNGS-GESELLSCHAFT
(SWISS REINSURANCE COMPANY)
REGISTERED SHARES 20,095,524 6.03
Second largest
reinsurance company in
the world.1,3 (cost
$9,998,827)
5,200 SWISS LIFE
REGISTERED SHARES 3,357,827 1.01
A financial services
company that provides
life insurance,
institutional investment
management and private
banking through Banca del
Gottardo and STG. (cost
$4,142,382)
24,600 ZURICH ALLIED
REGISTERED SHARES 8,394,456 2.52
A multi-line insurance
company whose core
business units are
non-life and life
insurance, reinsurance,
and asset management.3
(cost $3,991,252)
------------ -----
37,407,259 11.23
MACHINERY -- 1.73%
4,950 ESEC HOLDING AG
REGISTERED SHARES 826,653 0.25
Manufactures automatic
assembly equipment for
the semiconductor
industry. (cost
$1,152,129)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
MACHINERY -- (CONTINUED)
2,650 SCHINDLER HOLDING AG
REGISTERED SHARES $ 3,537,464 1.06%
One of the world's
largest elevator
companies and a leading
Swiss machinery
enterprise. (cost
$3,510,746)
13,500 SIG HOLDING AG
REGISTERED SHARES 1,382,766 0.42
Produces and sells drives
and automation systems,
construction & mining
equipment, tools, wood,
and timber products,
packaging machines and
packaging systems for
food. (cost $1,772,584)
------------ -----
5,746,883 1.73
MISCELLANEOUS INDUSTRIES -- 3.26%
750 DAETWYLER HOLDING INC.
BEARER SHARES 1,047,929 0.32
Manufactures cable,
rubber and plastic
products, steel tubing,
pharmaceutical packaging
and industrial
components. (cost
$1,249,175)
3,515 HUBER & SUHNER AG
REGISTERED SHARES 1,764,935 0.53
Manufactures a wide range
of products, extending
from cables for energy
and electrical
transmission to special
products such as rubber.2
(cost $1,526,678)
14
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (continued) June 30, 2001
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
MISCELLANEOUS INDUSTRIES -- (CONTINUED)
15,000 KOMAX HOLDING AG
REGISTERED SHARES $ 1,177,355 0.35%
Seller of wire processing
machines. Most important
markets are the car,
household appliance,
telecommunication and
electronics industries.
(cost $589,052)
5,600 PHOENIX MECANO AG
BEARER SHARES 2,553,106 0.77
Leading Swiss packaging
manufacturer for the
mechanical engineering
and electronics
industries. (cost
$3,218,074)
30,500 UNAXIS HOLDINGS LTD.
REGISTERED SHARES 4,295,536 1.29
Provider of systems and
IT services, including
semiconductors, data
storage and displays, as
well as surface
technology and space
applications. (cost
$5,528,147)
------------ -----
10,838,861 3.26
MISCELLANEOUS MEDICAL SERVICES -- 0.58%
546 GALENICA HOLDING LTD.
Manufactures and
distributes prescription
and over-the-counter
drugs, toiletries and
hygiene products.
(cost $490,462) 440,715 0.13
1,800 UNILABS SA
REGISTERED SHARES 1,492,986 0.45
Provides clinical
laboratory testing
services in Europe.1
(cost $1,420,719)
------------ -----
1,933,701 0.58
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
MISCELLANEOUS SERVICES -- 2.97%
62,000 ADECCO SA
BEARER SHARES $ 2,919,840 0.88%
Leading personnel and
temporary employment
company. (cost
$1,902,171)
1,800 COMPAGNIE FINANCIERE
RICHEMONT AG
BEARER SHARES 4,609,218 1.38
Investment company with
principal interests in
luxury goods and
tobacco.1 (cost
$1,500,228)
13,000 SGS SOCIETE GENERALE DE
SURVEILLANCE
HOLDING SA
REGISTERED SHARES 2,351,926 0.71
SGS provides a variety of
industrial inspection,
analysis, testing and
verification services
worldwide. (cost
$3,393,051)
------------ -----
9,880,984 2.97
PHARMACEUTICALS -- 27.53%
1,580,000 NOVARTIS AG
REGISTERED SHARES 57,213,872 17.18
Life science group
created by the
consolidation of Sandoz
and Ciba-Geigy.
Manufactures health care
products for use in a
broad range of medical
fields, as well as
agricultural products.
The second largest
pharmaceutical entity in
the world.3 (cost
$21,636,239)
477,900 ROCHE HOLDINGS LTD.
DIVIDEND RIGHTS CERTIFICATES 34,451,152 10.35
Worldwide pharmaceutical
company.3 (cost
$10,471,939)
------------ -----
91,665,024 27.53
15
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Schedule of Investments (concluded) June 30, 2001
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
RETAILERS -- 1.15%
13,000 CHARLES VOEGELE HOLDING AG
Manufactures and markets a $ 1,447,339 0.43%
variety of clothing items
for men, women and
children. Operates
approximately 385 retail
stores in Switzerland,
Germany, Austria and
Benelux region. (cost
$2,008,189)
1,900 JELMOLI HOLDING AG
BEARER SHARES 2,379,760 0.72
Operates a network of
retail/service outlets
throughout Switzerland,
including local dry
cleaners, auto body
shops, opticians,
interior decorators,
travel agencies,
restaurants, pharmacies
and retailers. (cost
$1,405,702)
------------ -----
3,827,099 1.15
TELECOMMUNICATIONS -- 1.52%
21,300 SWISSCOM AG
REGISTERED SHARES 5,074,816 1.52
Operates public
telecommunication
networks and offers
network application
services. (cost
$5,664,693)
------------ -----
5,074,816 1.52
Percent
No. of of Net
Shares Security Value Assets
--------------------------------------------------------------------------------
TRANSPORTATION -- 0.91%
5,600 KUEHNE & NAGEL INTERNATIONAL LTD.
Operates sea freight,
land and rail
transportation businesses
and warehousing and
distribution facilities. $ 3,023,825 0.91%
(cost $2,920,445)
------------ -----
3,023,825 0.91
TOTAL COMMON STOCKS
(Cost $185,373,362) $324,005,216 97.31%
OTHER ASSETS IN EXCESS
OF LIABILITIES 8,967,341 2.69
------------ -----
TOTAL NET ASSETS $332,972,557 100.0%
============ =====
--------------------------------------------------------------------------------
1 NON-INCOME PRODUCING SECURITY FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2001.
2 ALL OR A PORTION OF THIS SECURITY WAS ON LOAN. (SEE NOTE A--SECURITIES
LENDING). THE VALUE OF ALL SECURITIES LOANED AT JUNE 30, 2001 AMOUNTED TO
$107,901.
3 ONE OF THE TEN LARGEST PORTFOLIO HOLDINGS.
SEE NOTES TO THE FINANCIAL STATEMENTS.
16
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statement of Assets and Liabilities June 30, 2001
(Unaudited)
--------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $185,373,362) ..................................... $324,005,216
Cash .......................................................................... 5,788,573
Tax reclaims receivable ....................................................... 3,438,166
Receivable for collateral under securities lending agreements ................. 141,349
Prepaid expenses and other .................................................... 7,900
------------
Total assets ................................................................ 333,381,204
------------
LIABILITIES:
Advisory fees payable ......................................................... 233,181
Payable for collateral under securities lending agreements .................... 141,349
Administration fees payable ................................................... 24,481
Accounting fees payable ....................................................... 9,283
Accrued expenses and other .................................................... 353
------------
Total liabilities ........................................................... 408,647
------------
Net assets .................................................................. $332,972,557
------------
COMPOSITION OF NET ASSETS:
Paid-in capital ............................................................... 173,016,276
Undistributed net investment income ........................................... 972,406
Accumulated net realized gain from investment and foreign currency transactions 21,009,775
Net unrealized appreciation on investments and foreign currencies ............. 137,974,100
------------
Net assets .................................................................... $332,972,557
------------
NET ASSET VALUE PER SHARE:
($332,972,557 (DIVIDE) 23,997,809 shares outstanding) ......................... $ 13.88
============
--------------------------------------------------------------------------------
SEE NOTES TO THE FINANCIAL STATEMENTS.
17
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended June 30, 2001
(Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (less foreign taxes withheld of $584,225) ...................................... $ 3,310,611
Interest ................................................................................. 5,387
Securities lending income ................................................................ 33,385
-------------
Total income ........................................................................... 3,349,383
-------------
EXPENSES:
Investment advisory fee .................................................................. 1,445,255
Professional fees ........................................................................ 283,887
Directors' fees .......................................................................... 158,813
Administration fee ....................................................................... 153,993
Custody fees ............................................................................. 70,870
Printing and shareholder reports ......................................................... 67,309
Accounting fee ........................................................................... 57,971
Franchise tax ............................................................................ 37,476
Transfer agent fee ....................................................................... 35,223
Miscellaneous ............................................................................ 66,180
-------------
Total expenses ......................................................................... 2,376,977
-------------
Net investment income ......................................................................... 972,406
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment transactions ................................................................ 20,927,310
Foreign currency transactions .......................................................... 612,006
Net change in unrealized appreciation/depreciation on investments and foreign currencies (112,512,982)
-------------
Net Realized and Unrealized Loss on Investments and Foreign Currencies ................. (90,973,666)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS .................................................... $ (90,001,260)
=============
--------------------------------------------------------------------------------
SEE NOTES TO THE FINANCIAL STATEMENTS.
18
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
June 30, December 31,
2001 1 2000
-----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................... $ 972,406 $ 47,623
Net realized gain from investment and
foreign currency transactions ......................... 21,539,316 33,661,372
Net change in unrealized appreciation/depreciation on
investments and foreign currencies .................... (112,512,982) 5,565,094
------------- -------------
Net increase (decrease) in net assets from operations ... (90,001,260) 39,274,089
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized capital gains .............................. (4,015,983) (31,851,302)
------------- -------------
Total distributions to shareholders ................... (4,015,983) (31,851,302)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Value of shares issued in reinvestment of dividends ..... 16,795,123 12,126,372
Value of shares repurchased through stock buy back ...... (5,120,030) (20,832,970)
------------- -------------
Total increase (decrease) from capital share transactions 11,675,093 (8,706,598)
------------- -------------
Total decrease in net assets ............................ (82,342,150) (1,283,811)
NET ASSETS:
Beginning of period ..................................... 415,314,707 416,598,518
------------- -------------
End of period (including undistributed net investment
income of $972,406 and $0, respectively) .............. $ 332,972,557 $ 415,314,707
============= =============
--------------------------------------------------------------------------------
1 UNAUDITED.
SEE NOTES TO THE FINANCIAL STATEMENTS.
19
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Financial Highlights
For the Six For the Years Ended December 31,
Months Ended --------------------------------------------------------
June 30, 2001 1 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:2
Net asset value, beginning of period........$ 17.92 $ 17.52 $ 19.07 $ 16.48 $ 12.07 $ 12.28
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (expenses in
excess of income)......................... 0.04 0.00 4 0.01 0.00 4 (0.02) 0.05
Net realized and unrealized gain (loss)
on investments 3.......................... (3.82) 1.68 (0.60) 3.60 4.86 0.12
-------- -------- -------- -------- -------- --------
Total from Investment Operations............ (3.78) 1.68 (0.59) 3.60 4.84 0.17
-------- -------- -------- -------- -------- --------
Gain from capital share repurchases......... 0.05 0.21 0.12 -- -- --
Capital charge resulting from the issuance
of fund shares............................ (0.14) (0.12) -- -- -- --
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income........ -- -- (0.03) (0.07) -- (0.05)
Distributions from net realized
capital gains............................... (0.17) (1.37) (1.05) (0.94) (0.43) (0.33)
-------- -------- -------- -------- -------- --------
Total distributions......................... (0.17) (1.37) (1.08) (1.01) (0.43) (0.38)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.............. $ 13.88 $ 17.92 $ 17.52 $ 19.07 $ 16.48 $ 12.07
======== ======== ======== ======== ======== ========
Market value per share, end of period....... $ 11.63 $ 14.50 $ 13.81 $ 16.00 $ 13.72 $ 9.94
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:5
Based on market value per share............. (17.78)% 15.06% (7.06)% 23.82% 42.66% (2.93)%
Based on net asset value per share.......... (20.60)% 12.11% (1.09)% 22.89% 41.08% 1.98%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................... 1.29% 6 1.16% 1.11% 1.09% 1.17% 1.22%
Net investment income (expenses in
excess of income)......................... 0.53% 6 0.01% 0.05% 0.01% (0.14)% 0.25%
SUPPLEMENTAL DATA:
Net assets, end of period (000)............. $332,973 $415,315 $416,599 $469,916 $406,030 $296,008
Average net assets during period (000)...... $370,487 $422,426 $428,072 $464,967 $354,923 $306,069
Shareholders of record 7.................... 1,102 1,125 1,230 1,287 1,408 1,557
Portfolio turnover rate..................... 15% 25% 14% 13% 13% 19%
--------------------------------------------------------------------------------
1 UNAUDITED.
2 PER SHARE AMOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996 THROUGH
DECEMBER 31, 1997 HAVE BEEN RESTATED TO REFLECT 2:1 STOCK SPLIT EFFECTIVE
OCTOBER 16, 1998.
3 INCLUDES NET REALIZED CURRENCY GAIN (LOSS).
4 LESS THAN $0.01 PER SHARE.
5 TOTAL INVESTMENT RETURN BASED ON MARKET VALUE DIFFERS FROM TOTAL INVESTMENT
RETURN BASED ON NET ASSET VALUE DUE TO CHANGES IN THE RELATIONSHIP BETWEEN
THE FUND'S MARKET PRICE AND ITS NET ASSET VALUE PER SHARE. RETURNS FROM
1998 AND 1997 HAVE BEEN RESTATED TO REFLECT SUBSEQUENT CHANGES TO DIVIDEND
REINVESTMENT CALCULATIONS.
6 ANNUALIZED.
7 NOT AUDITED BY DELOITTE & TOUCHE LLP.
SEE NOTES TO THE FINANCIAL STATEMENTS.
20
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements
(Unaudited)
A. SIGNIFICANT ACCOUNTING POLICIES -- The Swiss Helvetia Fund, Inc. (the
"Fund") which was incorporated in Delaware on October 24, 1986 and began
operations August 27, 1987, is registered under the Investment Company Act
of 1940, as amended, as a non-diversified, closed-end Investment Management
Company. Its objective is to seek long-term growth of capital through
investment in equity and equity-linked securities of Swiss companies.
When preparing the Fund's financial statements, management makes estimates
and assumptions in accordance with accounting principles generally accepted
in the United States. These estimates affect 1) the assets and liabilities
that we report at the date of the financial statements; 2) the contingent
assets and liabilities that we disclose at the date of the financial
statements; and 3) the income and expenses that we report for the period.
Our estimates could be different from the actual results.
Under certain circumstances, it is necessary to reclassify prior year
information in order to conform to the current year's presentation. The
Fund's significant accounting policies are:
VALUATION OF SECURITIES -- The Fund states its investments at value. The
Fund values a security that is traded on the Swiss stock exchange at the
last sales price on the day of valuation. If there is no sales price
available, the Fund values the security at the mean between the closing bid
and asked prices for that day. A security that is not traded on the Swiss
stock exchange is valued at the mean between the current bid and asked
prices. If bid and asked prices are not available, the Fund uses a fair
value that is determined in good faith by or under the direction of the
Fund's Board of Directors.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- The Fund uses the trade
date to account for securities transactions and the specific identification
method for financial reporting and income tax purposes to determine the
cost of investments sold or redeemed. Interest income is recorded on an
accrual basis. Dividend income is recorded on the ex-dividend date. The
Fund records Swiss withholding tax as an expense, net of an amount
receivable from Swiss tax authorities in accordance with a tax treaty.
FOREIGN CURRENCY TRANSLATION -- The Fund's books and records are maintained
in U.S. dollars. The Fund translates Swiss franc amounts into U.S. dollars
based on the following criteria.
o The Fund adjusts asset and liability accounts to reflect the exchange
rate at the end of the period.
o The Fund includes in the period's net realized foreign exchange gain
or loss, the exchange gain or loss that occurs due to exchange rate
changes from the time an income or expense amount is accrued and the
time it is realized.
o The Fund records securities at cost based upon exchange rates at the
time that Swiss francs are purchased or received. Exchange rates are
identified on a first-in, first-out basis.
It is not practical for the Fund to distinguish the portion of its
operating results attributable to exchange rate changes from the portion
attributable to market price changes.
FEDERAL INCOME TAXES AND DISTRIBUTIONS -- The Fund determines its
distributions according to income tax regulations, which may be different
from accounting principles generally accepted in the United States. As a
result, the Fund occasionally makes reclassifications within its capital
accounts to reflect income and gains that are available for distribution
under income tax regulations.
The Fund declares and pays dividends from net investment income annually,
and records distributions of capital gains on the ex-dividend date. The
Fund is organized as a regulated investment company under Subchapter M of
the Internal Revenue Code. As long as it maintains this status and
distributes to its stockholders all of its taxable net investment income
and net realized capital gains, it will be exempt from most, if not all,
federal income and excise taxes. As a result, the Fund has made no
provisions for federal income taxes.
SECURITIES LENDING -- The Fund may lend securities to broker-dealers. The
loans are secured by collateral at least equal at all times to the market
value of the securities loaned. Loans are subject to termination at the
option of the borrower or the Fund. Upon termination of the loan, the
borrower will return to the Fund securities identical to the loaned
securities. The Fund may bear the risk of delay in recovery of, or even
loss of rights in, the securities loaned should the borrower of
21
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
(Unaudited)
the securities fail financially. The Fund receives compensation, net of any
rebate, for lending its securities in the form of fees. The Fund continues
to receive dividends on the securities loaned and any gain or loss in the
market price of the securities loaned that may occur during the term of the
loan.
B. INVESTMENT ADVISORY FEES, TRANSACTIONS WITH AFFILIATES AND OTHER FEES --
Hottinger Capital Corp. ("HCC"), which is owned jointly by Hottinger U.S.,
Inc. and Hottinger & Cie (Zurich), is the Fund's investment advisor. As
compensation for its advisory services, the Fund pays HCC an annual fee
based on the Fund's month-end net assets. This fee is calculated and paid
monthly at the following annual rates. 1.00% of the first $60 million,
0.90% of the next $40 million, 0.80% of the next $100 million, 0.70% of the
next $100 million, 0.65% of the next $100 million, 0.60% of the next $100
million, 0.55% of the next $100 million, and 0.50% of the amount over $600
million. The Fund paid Hottinger & Cie $8,775 in brokerage commissions for
the period ended June 30, 2001.
Investment Company Capital Corp. ("ICCC"), is the Fund's administrator. As
compensation for its administrative services, the Fund pays ICCC an annual
fee based on the Fund's average net assets. This fee is calculated daily
and paid monthly at the following annual rates: 0.10% of the first $250
million, 0.05% of the next $250 million and 0.03% of the amount over $500
million.
Certain officers and/or directors of the Fund are officers and/or directors
of HCC, Hottinger U.S., Inc., Hottinger & Cie (Zurich) and/or ICCC.
Swiss American Securities Inc. is the Fund's custodian. Swiss American
Securities, Inc. and the Fund have entered into an agreement with Credit
Suisse First Boston that provides for the custody of Swiss securities that
the Fund holds. PFPC, Inc. is the Fund's transfer agent.
C. CAPITAL SHARE TRANSACTIONS -- The Fund is authorized to issue up to 50
million shares of $.001 par value capital stock. HCC owned 92,528 of the
23,997,809 shares outstanding on June 30, 2001. During the period the Fund
issued 1,177,572 shares and repurchased 358,500 shares through a stock
repurchase program.
D. STOCK REPURCHASE PROGRAM -- On February 5, 1999, the Fund announced that
its Board of Directors had authorized the Fund to repurchase up to
1,000,000 shares of its common stock in open market purchases to be
effected on the New York Stock Exchange. On December 7, 1999, the Fund
announced that its Board of Directors had increased this authorization for
2000 to 2,000,000 shares. The Board of Directors and Management made these
purchases from time to time during 1999 and 2000. The principal purpose of
the repurchases is to enhance stockholder value by increasing the Fund's
net asset value per share without creating a meaningful adverse effect upon
the Fund's expense ratio and without generating capital gains to fund the
program. This may also have the effect of temporarily reducing the current
discount of approximately 16 percent. During the period ended June 30, 2001
the Fund repurchased and retired 358,500 shares at a cost of $5,120,030 at
an average price of $14.28 (includes broker commissions) and a weighted
average discount of 17.88%.
Notice is hereby given in accordance with section 23(c) of the Investment
Company Act of 1940 that the Fund may, from time to time, purchase shares
of its Common Stock in the open market in addition to the above program.
E. DIRECTORS' FEES -- The Fund pays each director who is not affiliated with
the Fund, its investment advisor or administrator approximately $15,000 per
annum in compensation, except for the Chairman of the Audit Committee, who
receives an annual fee of approximately $16,500. In addition, each
unaffiliated director receives $750 for each attended directors' meeting
and $750 for each committee meeting attended, if it is held separately, and
reimbursement for out-of-pocket expenses in conjunction with attendance at
meetings.
22
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
(Unaudited)
Each Director who is a non-interested Director and who is a member of the
Discount or Litigation Committees of the Board is compensated for his work
on the committees on an hourly basis at the rate of $300, less the $750
meeting fee otherwise payable to committee members for each meeting
attended.
F. INVESTMENT TRANSACTIONS -- Excluding short-term obligations, purchases of
investment securities aggregated $54,124,488 and sales of investment
securities aggregated $55,759,793 for the period ended June 30, 2001.
On June 30, 2001, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost was
$150,829,480 and aggregate gross unrealized depreciation of all securities
in which there is an excess of tax cost over value was $12,197,626.
G. LENDING OF SECURITIES -- The Fund has the ability to lend its securities to
brokers, dealers and other financial organizations. Loans of the Fund's
securities are collateralized by cash and/or government securities that are
maintained at all times in an amount equal to 102% of the current market
value of the loaned securities for domestic securities.
At June 30, 2001
Market Value of Market Value % of Portfolio
Loaned Securities of Collateral on Loan
----------------- ------------- --------------
$107,901 $141,349 0.04%
H. TAX RECLAIMS RECEIVABLE -- Swiss taxes are withheld from dividends received
by the Fund subject to partial reclaim upon application to the Swiss
Federal Tax Administration (SFTA). The Fund records receivables for tax
reclaims in the normal course of business. Recently the SFTA suspended
payment of reclaims to U.S. regulated investment companies, such as the
Fund, pending a review of their eligibility to receive such reclaims. Based
upon information available to it, including the advice of Swiss tax
counsel, and recent statements by the SFTA, management believes these tax
reclaims are collectible.
I. LITIGATION -- On April 2, 2001 and May 8, 2001 two complaints were filed in
purported class actions on behalf of stockholders of the Fund in the Court
of Chancery of the state of Delaware by individuals claiming to be Fund
stockholders against the Fund, each of its Directors and Hottinger Capital
Corp., the Fund's Investment Advisor (collectively, the "defendants"). The
complaints in these cases, entitled KIMBERLY KAHN VS. PAUL HOTTINGUER ET
AL. and CHARLES MILLER VS. PAUL HOTTINGUER ET AL., allege that the
defendants have: (A) breached fiduciary duties to stockholders and violated
Section 109(a) of the Delaware General Corporation Law by adopting
amendments to the Fund's Bylaws requiring a vote of 75% of the Fund's
outstanding shares to alter, amend or repeal the Bylaws or to adopt other
bylaws; (B) breached fiduciary duties to stockholders by adopting
amendments to the Fund's Bylaws requiring nominees for election as
directors to satisfy certain qualifications; and (C) breached fiduciary and
contractual duties through the manner in which the Fund effected a capital
gains distribution in December 2000. The complaints seek as relief among
other things: (i) a declaration that the defendants have breached their
fiduciary duties to stockholders and that the amendments to the Bylaws are
null and void; (ii) an injunction in connection with any meeting of
stockholders preventing the defendants from enforcing the Bylaw amendments;
and (iii) certain unspecified damages. The defendants, including the Fund,
believe that each complaint is without merit and are defending against them
vigorously.
23
THE SWISS HELVETIA FUND, INC.
--------------------------------------------------------------------------------
Proxy Results (Unaudited)
At the Annual Meeting of Stockholders, held on May 15, 2001, the shares voted on
the following three proposals presented to the Stockholders, as reported by IVS
Associates, Inc., independent Inspectors of Election, were as follows:
1. TO ELECT THREE CLASS I DIRECTORS TO SERVE FOR A THREE-YEAR TERM AND UNTIL
THEIR SUCCESSORS ARE ELECTED AND QUALIFIED.
WITHHELD/
FOR ABSTENTIONS
--------- -----------
Alexandre de Takacsy 9,109,524 605,986
Claude W. Frey 9,136,031 580,389
Eric R. Gabus 9,110,674 604,746
Dirk Kipp 4,630,693 53,420
Gregory L. Melville 1 4,630,441 53,672
Moritz A. Sell 1 4,630,441 53,672
The following persons continue as Directors of the Fund: The Baron Hottinger,
Didier Pineau-Valencienne and Samuel B. Witt, III, Esq. (Terms Expire in 2002);
and Paul Hottinguer, Claude Mosseri-Marlio and Stephen K. West, Esq. (Terms
Expire in 2003).
2. TO CONSIDER A PROPOSAL TO CONFIRM THE BOARD OF DIRECTORS' DECISION TO
CONTINUE THE INVESTMENT ADVISORY AGREEMENT WITH HOTTINGER CAPITAL CORP.
WITHHELD/
FOR AGAINST ABSTENTIONS
---------- --------- -----------
10,391,014 3,782,139 223,897
3. TO CONSIDER A STOCKHOLDER PROPOSAL TO TERMINATE THE FUND'S INVESTMENT
ADVISORY AGREEMENT WITH HOTTINGER CAPITAL CORP.
WITHHELD/
FOR AGAINST ABSTENTIONS
---------- --------- -----------
3,577,602 1,044,577 59,458
Under the Investment Company Act of 1940, with 59.9% of the Fund's outstanding
shares present at the Meeting in person or by proxy, the approval of the
stockholder proposal to terminate the Fund's Investment Advisory Agreement with
Hottinger Capital Corp. required the approval of at least 67% of the shares
present at the Meeting. With only 3,577,602 votes cast "FOR" this proposal, it
received only 25% of the shares present at the Meeting and was soundly defeated.
In connection with the election of directors, there were no abstentions. In
addition, because the matters before the Meeting were contested, brokers were
not permitted to cast "broker non-votes" and no such votes are included in the
above totals.
Following the Meeting, the Fund's investment advisor, Hottinger Capital Corp.,
agreed to reimburse the Fund in full for expenses incurred in connection with
the engagement of Georgeson Shareholder Communications Inc. as the Fund's proxy
solicitor. The amount of the reimbursement is $96,508.72.
--------------------------------------------------------------------------------
1 PRIOR TO THE MEETING, THE FUND'S BOARD OF DIRECTORS DETERMINED THAT MESSRS.
MELVILLE AND SELL FAILED TO MEET THE QUALIFICATION REQUIREMENTS OF THE
FUND'S BY-LAWS TO BE NOMINATED AS DIRECTORS OF THE FUND. ALTHOUGH THOSE
NOMINEES WERE NOT BEFORE THE STOCKHOLDERS, THE FUND'S INDEPENDENT INSPECTOR
OF ELECTION REPORTED VOTING TOTALS FOR THEM, BECAUSE A STOCKHOLDER
SOLICITED PROXIES FOR ALL ITS NOMINEES. TOTALS FOR MESSRS. MELVILLE AND
SELL ARE INCLUDED HERE FOR INFORMATION ONLY.
24
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