A Swiss
Investments
Fund
THE SWISS
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HELVETIA
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FUND, INC.
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Semi-Annual Report
For the Period Ended
June 30, 1998
THE SWISS HELVETIA FUND, INC.
Executive Offices
The Swiss Helvetia Fund, Inc.
630 Fifth Avenue
Suite 915
New York, New York 10111-0001
1-888-SWISS-00
(212) 332-2760
http://www.swz.com
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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)
Claude Frey
Director
Jean-Louis Gillieron
Director
Baron Hottinger
Director
Claude Mosseri-Marlio
Director
Stephen K. West, Esq.
Director
Samuel B. Witt III, Esq.
Director
Rodolphe Hottinger
President And
Chief Operating Officer
Rudolf Millisits
Vice President
Edward J. Veilleux
Vice President And Treasurer
Scott J. Liotta
Vice President
Paul R. Brenner, Esq.
Secretary
Joseph A. Finelli
Assistant Treasurer
Investment Advisor
Hottinger Capital Corp.
630 Fifth Avenue
Suite 915
New York, New York 10111-0001
(212) 332-7930
Administrator
Investment Company Capital Corp.
Custodian
PNC Bank, N.A.
Transfer Agent
PNC Bank, N.A.
(800) 852-4750
Legal Counsel
Paul R. Brenner, Esq.
and
Christy & Viener
Independent Auditors
Deloitte & Touche LLP
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.
630 Fifth Avenue
Suite 915
New York, New York 10111-0001
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
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 every day 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 Saturday edition of The New
York Times.
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THE SWISS HELVETIA FUND, INC.
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Letter to Stockholders
Semi-Annual Results
After a strong first quarter performance, the Swiss market entered a
consolidation phase during April and May, largely due to concerns about Asia and
Eastern Europe, and then resumed its upward trend in June. The end result was a
return of 26.53% for the first six months, as measured by the Swiss Performance
Index (SPI). This brought the SPI Index to an all time high, matching the
performances of the German and French markets. In Europe, however, the pace is
still being set by the fast rising Italian and Spanish markets.
The Swiss Helvetia Fund outperformed the SPI for the six-month period with
an appreciation in its Net Asset Value of 27.51%, measured in Swiss franc terms.
The appreciation of the U.S. dollar against the Swiss franc, however, lead to a
somewhat lower return in dollar terms with the Fund up 22.99% against a 22.05%
return for the SPI.
Despite this strong performance, the market price of the Fund's shares
increased by only 16.79% leading to an increase of the discount to 20.93% as of
the end of the quarter. It appears that U. S. investors have lost interest in
European equity funds due to the setback of the European markets during April
and May and fears concerning a possible hike in interest rates prior to the
launch of the European Monetary Union.
Market in Review
The Swiss market has been lagging some of its European counterparts due to
several circumstances. Most importantly, while Swiss interest rates are already
at a record low level, the possibility of further declines in other countries
led to an expansion of the price earnings ratios in their equity markets.
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Total Return Performance Based on Net Asset Value Per Share*
For the periods ended 6/30/98
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In U.S. dollars
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6 Months 1 Year 3 Years** 5 Years**
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The Swiss Helvetia Fund 22.99% 33.90% 23.18% 23.43%
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S&P 500 Index 17.71% 30.15% 30.24% 23.08%
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EAFE Index 15.93% 6.10% 10.69% 10.03%
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Lipper European Fund
Average 27.84% 33.00% 23.90% 21.02%
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*These figures assume the reinvestment of dividends and capital gains
distributions and exclude the impact of any sales charge. If the sales charge
were reflected, the quoted performance would be lower. The Standard & Poor's
500 Index is an unmanaged index that is widely recognized as an indicator of
general U.S. equity market performance. The Morgan Stanley Europe, Australia
and Far East (EAFE) Index is an unmanaged index that is widely recognized as
an indicator of general international equity performance. The Lipper European
Fund Average is an index of approximately 100 managed funds that invest in
equity securities in European markets. Past performance is not an indicator of
future results.
**Average annual returns.
Within the Swiss market, the revival of cyclical stocks has given rise to
strong performance in the construction and building material sectors (see
chart). The revaluation of Nestle by the market due to its increased
profitability, improved asset returns and change to a management with more focus
on shareholder value, led the food sub-index to be the second best performer.
The financial sector has also been a leader. The healthy returns of the
securities markets continued to attract a lot of funds to the banking and
insurance stocks and the fact that companies like Zurich Group and Credit Suisse
Group have continued to position themselves as global leaders in their industry
has supported the advance of this group.
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THE SWISS HELVETIA FUND, INC.
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SWISS PERFORMANCE INDEX INDUSTRY GROUP PERFORMANCE
(from 1/1/98 to 6/30/98)
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[BAR CHART HERE - PERCENTAGES BELOW]
Chemicals and Pharmaceuticals 7.02%
Utilities 11.73%
Electronic and Electric Engineering 28.60%
Miscellaneous Services 30.18%
Transportation 31.22%
Miscellaneous Industries 32.91%
Retailers 35.82%
Insurance 37.15%
Machinery 38.27%
Banks 43.10%
Foods 48.82%
Building Material and Construction 52.66%
Novartis and Roche, on the other hand, have been rather disappointing
investments so far in 1998. Weak revenue growth in the pharmaceutical business
due to difficult pricing conditions in Japan and Germany, increased competition
in the U.S. and delay in approval of certain drugs, have put pressure on their
respective stock prices, making the Swiss healthcare sector one of the most
oversold industries in Europe. The current year is regarded as a transition
phase in which both companies are bringing new products to the market.
There was a continued emphasis on shareholder value during the period under
review, with high activity in terms of corporate restructuring, unification of
share structure, repayment of capital and stock splits. Some examples are
especially to be found among the mid-cap companies such as Georg Fischer,
Sairgroup, Alusuisse Group, SIG, Bobst and Baloise Holding.
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NAV PERFORMANCE OF THE SWISS HELVETIA FUND* vs. SPI INDEX
From inception (August 27, 1987) through June 30, 1998
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In Swiss francs
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The Fund SPI Index
+349.38% +337.65%
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The Fund SPI Index
8/87 100 100
12/87 76.32 68.27
12/88 81.93 83.63
12/89 101.56 100.97
12/90 86.77 80.59
12/91 99.01 93.42
12/92 116.7 109.9
12/93 175.05 165.73
12/94 159.59 153.11
12/95 191.52 188.41
12/96 227.24 222.88
12/97 352.17 345.89
6/98 449.38 437.65
*Gross of Fund expenses. The Fund's performance is calculated using the
Modified Dietz method.
The main events among the large caps included regulatory clearance of the
Union Bank of Switzerland/Swiss Bank Corp merger, which boosted their stock
prices late in the quarter, and shareholder approval of Zurich Group's purchase
of BAT financial services for $18.7 billion, making them the world's No.7 money
manager. Credit Suisse Group continued to grow, hiring management teams from
Union Bank of Switzerland and Deutsche Bank in the United States and also
expanding externally. An example of the latter was the purchase of Garantia, a
leading Brazilian investment bank, at a price close to $675 million. Due to the
current uncertainties in emerging markets, Credit Suisse Group was able to
pursue this opportunity at an attractive price. This move
3
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will place the Group in a good position to take advantage of the liberalization
of the biggest South American economy.
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Swiss Nominal Exports by Destination/Weight in 1997
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[PIE CHART HERE - PERCENTAGES BELOW]
Western Europe 60.7%
Eastern Europe 3.7%
USA & Canada 10.6%
Latin America 3.3%
Japan 3.8%
Thailand, Indonesia, Philippines, Malaysia 2.0%
Hong Kong, Singapore, South Korea 5.2%
Rest of Asia 2.9%
Rest of the World 7.8%
Swiss Economy
The macro economic picture has started to brighten. The unemployment rate
declined to 3.6% in June, first quarter GDP growth increased to 2.4% and the
volume of exports is still growing -- although recently at a slightly slower
pace. Switzerland depends on Western Europe for the majority of its exports
(60.7% in 1997) (see chart). Compared to prior year periods, total exports grew
11.6% in 1997 and 8% for the January to May 1998 period. These increases were
achieved despite a decline in total exports to South-East Asia and South Korea
from the 1997 level of 7.3% to the 1998 level of 4.9%. The link between the
Swiss economy and the crises in Asia and Russia is rather indirect but an
economic slowdown will be felt in Switzerland if major trading partners like
Germany, France and Italy see their growth rates reduced because of the economic
turmoil in the Eastern hemisphere.
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Financial Highlights (Unaudited)
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June 30, June 30,
For The Year Ended: 1998 1997
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Total Net Assets
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(in Million Sfr.) 750.5 557.9
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(in Million $) 498.6 382.0
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Exchange Rate (per U.S. $) 1.51 1.46
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Net Asset Value per Share (U.S. $) 40.47 31.00
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Market Price per Share (U.S. $) 32.00 25.625
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Shares Outstanding 12,321,016 12,321,016
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Domestic demand has continued to rise as evidenced by an increase in retail
sales and higher consumer sentiment. Nevertheless, Switzerland continues to lag
the European cycle. Management expects the Gross Domestic Product to increase by
1.9% in 1998 and 1.5% in 1999. That this is lower than the European average can
be partially explained by new budget legislation that will reduce government
spending during the next years.
Because of the relatively slower growth of the Swiss economy, the Swiss
franc has weakened somewhat against the U.S. dollar and the German mark. The
lagging Swiss recovery has kept Swiss interest rates much lower than those in
the European Monetary Union countries both on the short and the long ends of the
yield curve. This should give support to the financial sector of the Swiss
market (37% of the SPI Index at the end of the current quarter).
4
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THE SWISS HELVETIA FUND, INC.
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Market Outlook and Strategy
Positive Aspects for the Swiss Market
Management expects a continuation of the positive environment for financial
assets. A scenario of moderate growth and low global interest rates, which
should especially benefit the financial sector, seems to be very much in the
cards. Additionally, investors might again be attracted by the defensive sectors
(e.g. healthcare, food) since low rates increase the present value of their
long-term predictable earnings. Those sectors account for 80% of the broad Swiss
market (SPI).
Because of increased competitiveness at the Swiss borders due to the
introduction of the EMU in 1999, Swiss companies for the last three years have
gone through an early restructuring and recruiting of highly qualified
international managers in an effort to maintain their market position.
Therefore, most Swiss companies are now in a good position to resist the threats
of European and Asian competition.
Management believes that earnings growth potential is less at risk in the
Swiss market, and that the defensive quality of this market could be rewarded by
a higher valuation compared with some of the more cyclical European peers.
Support for this view might be that several Swiss companies (e.g. Swiss Re,
Swatchgroup, Julius Baer) have initiated stock buy-back programs.
In light of the advent of the European Monetary Union, we believe that
international money managers will approach European asset allocation by sector
rather than by country. The proportion of their holdings in Swiss blue chips
should increase since these companies are global leaders in their sector and
should receive increased coverage from international brokerage houses. In
addition, Swiss blue chips are often cited as benchmarks for their industry
groups in European comparisons. As an example, Credit Suisse Group has often
been cited as the only European bank to have a big and successful presence in
the U.S. investment banking business.
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The Swiss Helvetia Fund--Ten Largest Holdings (in U.S. Dollars)
As of June 30, 1998
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% of Total
Cost Market Value Net Assets
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1. Novartis Ltd. $ 31,144,189 $ 93,339,497 18.7%
2. Nestle AG 18,418,475 62,163,376 12.4
3. Roche Holding AG 16,329,129 58,525,556 11.7
4. UBS AG 17,628,378 48,618,640 10.6
5. Credit Suisse Group 13,321,545 39,223,816 7.9
6. Swiss Reinsurance
Company 8,253,411 37,997,755 7.6
7. Zurich Insurance 9,350,656 31,961,963 6.4
8. ABB Asea Brown
Boveri Ltd. 7,910,828 11,094,235 2.2
9. Holderbank Financiere
Glarus AG 4,909,825 7,647,098 1.6
10. Clariant AG 2,304,318 6,597,108 1.3
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Total $129,570,754 $397,169,043 80.4%
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The Asian crisis is poised to continue for several more months and most
analysts believe the measures taken by Japan are insufficient to spark a
recovery in economic activity. The result will be a weak yen vs the U.S. dollar.
Also supporting a strong U.S. dollar are economic instabilities in the former
Eastern European block countries. These developments should benefit the European
markets in general and the Swiss market in particular since there is a strong
positive correlation between the value of the U.S. dollar and the appreciation
of stock markets prices in Europe.
5
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THE SWISS HELVETIA FUND, INC.
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Strategy in Regard to the Risks of the Market
Despite the poor performance of the healthcare sector during the first half
of 1998, Management maintained a substantial position in this strategically
important segment because of its relatively low valuation compared to its
international peers. In addition, worldwide economic developments should favor
this sector as outlined before. In the medium and long term the share price
appreciation potential for Roche and Novartis remains above average.
Management continues to monitor the ability of the Swiss banking and
insurance industries to deal with the Holocaust issue. The market seems to be
discounting most of the bad news and the damage made to the image of the
affected companies. Nonetheless, a settlement to compensate the victims as soon
as possible is desirable since the money involved may have a higher value now
than in an unpredictable future. Failure to resolve the conflict will most
certainly result in the involvement of both the concerned Federal Governments
and the World Trade Organization. The Fund's Management does not believe that
any of the participants are willing to risk such an expansion of the issue.
Accordingly, in light of the financial sector's otherwise excellent
fundamentals, it has not reduced the Fund's exposure to this area.
Discount to Net Asset Value
Both Fund Management and the Board of Directors are determined to see that
shareholders are able to enjoy the very good performance of the Fund by having a
market price return that is comparable to the Fund's net asset value return.
While the net asset value performance is, to a very large degree, the driver of
the market price performance, the Board of Directors is looking into further
possibilities to reduce the discount and enhance stockholder value.
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The Swiss Helvetia Fund--Portfolio Holdings per Industry
as of June 30, 1998
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[PIE CHART HERE - PERCENTAGES BELOW]
Life Sciences 18.7%
Pharmaceuticals 12.3
Banks 20.5
Insurance 14.9
Food and Luxury Goods 12.9
Electrical Engineering
& Electronics 3.1
Machinery 2.9
Chemicals 4.1
Misc Services 3.9
Misc Industries 2.8
Building Materials 1.7
Transport 0.8
Retailers 0.9
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Thank you for your continued interest in the Fund.
Sincerely,
/s/ Paul Hottinguer
_________________________
Paul Hottinguer
Chairman and Chief Executive Officer
/s/ Rodolphe Hottinger
__________________________
Rodolphe Hottinger
President and Chief Operating Officer
July 17, 1998
6
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THE SWISS HELVETIA FUND, INC.
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Statement of Net Assets June 30, 1998
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
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COMMON STOCKS AND WARRANTS - 99.5%
BANKS - 20.5%
1,200 BAER HOLDINGS LTD.
BEARER SHARES $ 3,760,153 0.8%
Banking group specializing in asset
management, investment consulting
and securities trading.
2,500 BANK SARASIN & CIE
REGISTERED SHARES 4,391,468 0.9
A bank specializing in investment
advisor services and portfolio
management for private and institutional
customers in Europe.
175,990 CREDIT SUISSE GROUP*
REGISTERED SHARES 39,223,816 7.9
A global financial services institution
whose main holding is Credit Suisse,
one of Switzerland's largest banks.
UBS AG*
138,585 REGISTERED SHARES** 51,615,516 10.3
60,000 WARRANTS EXPIRING 6/30/00** 1,406,591 0.3
(Ex-Swiss Bank Corporation)
Result of the merger of Basel-based
Swiss Bank Corp. and Zurich-based
Union Bank of Switzerland. The group
operates globally and has five core
business units: Private Banking,
Institutional Asset Management, Investment
Banking, Private and Corporate Customers,
and Private Equity.
3,300 VALIANT HOLDING
REGISTERED SHARES 1,706,333 0.3
The largest regional bank of Switzerland
with activities focused on mortgage loans
and commercial business with small
and mid-sized companies.
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102,103,877 20.5
Percent
No. of of Net
Shares Security Value Assets
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BUILDING CONTRACTORS & MATERIALS - 1.7%
1,200 FORBO HOLDINGS LTD.
REGISTERED SHARES $ 611,768 0.1%
Manufacturer of wall and floor coverings.
6,000 HOLDERBANK FINANCIERE GLARUS AG*
BEARER SHARES 7,647,098 1.6
Large cement producer with worldwide
operations.
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8,258,866 1.7
CHEMICALS - 4.1%
45,000 CIBA SPECIALTY CHEMICALS AG
REGISTERED SHARES 5,787,327 1.2
A spin-off from Novartis in February
1997, develops, manufactures and
markets specialty chemical products
worldwide. These products include
additives, performance polymers,
textile dyes, consumer care chemicals
and pigments.
10,000 CLARIANT AG*
REGISTERED SHARES 6,597,108 1.3
Specializes in color chemistry and
manufactures a range of dyestuffs,
pigments, chemicals, additives and
masterbatches for the textile, paper,
leather, plastics, synthetic fibers and
paint industries.
200 EMS CHEMIE HOLDING AG
BEARER SHARES** 1,162,253 0.2
Produces polymers and manufactures
high-grade chemical intermediates
and fine chemicals.
600 GURIT-HEBERLEIN AG
BEARER SHARES 2,171,300 0.4
European market leader for wind
screen bonding systems, ski bases
and optically pure thermoplastic
sheeting for the auto industry.
7
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THE SWISS HELVETIA FUND, INC.
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Statement of Net Assets (continued) June 30, 1998
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
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COMMON STOCKS AND WARRANTS - (CONTINUED)
CHEMICALS - (CONTINUED)
1,600 SIEGFRIED AG
REGISTERED SHARES $ 2,028,660 0.4%
International producer and supplier
of chemicals and pharmaceuticals
for major businesses.
7,000 SIKA FINANZ AG
BEARER SHARES 2,778,181 0.6
Leading producer of construction
chemicals.
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20,524,829 4.1
ELECTRICAL ENGINEERING & ELECTRONICS - 3.1%
7,500 ABB ASEA BROWN BOVERI LTD.*
BEARER SHARES 11,094,235 2.2
One of the largest electrical engineering
firms in the world.
2,000 BELIMO AUTOMATION AG
REGISTERED SHARES 832,068 0.2
World market leader in damper and
volume control actuators for ventilation
and air conditioning equipment.
1,500 SAIA - BURGESS
REGISTERED SHARES** 404,147 0.1
Develops and produces switches,
motors and programmable control
devices. Products are mainly used
in the automobile, heating & air
conditioning and telecommunications
industries.
5,000 SWISSLOG HOLDING AG
REGISTERED SHARES 577,825 0.1
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.
3,500 SWATCH GROUP AG
BEARER SHARES 2,708,842 0.5
Manufactures watches, watch
components and microelectronics.
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15,617,117 3.1
Percent
No. of of Net
Shares Security Value Assets
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FOOD & LUXURY GOODS - 12.9%
1,200 HERO AG
BEARER SHARES $ 816,219 0.2%
Leading Swiss manufacturer of
jams and preserves.
50 LINDT & SPRUENGLI AG
REGISTERED SHARES 1,304,233 0.3
Major manufacturer of premium
Swiss chocolates.
29,000 NESTLE AG*
REGISTERED SHARES 62,163,376 12.4
Largest food and beverage processing
company in the world.
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64,283,828 12.9
INSURANCE - 14.9%
BALOISE-HOLDING
1,400 REGISTERED SHARES 1,148,253 0.2
2,800 RIGHTS** 2,294,658 0.5
Medium-sized insurer active in all
sectors of insurance.
800 HELVETIA PATRIA
REGISTERED SHARES 948,293 0.2
Through its subsidiaries, Helvetia
Schweizerische Versicherungs-
Gesellschaft and Patria Schweizerische
Lebensversicherungs-Gesellschaft,
offers all types of life, property and
casualty insurance in Switzerland and
elsewhere.
15,000 SCHWEIZERISCHE RUCKVERSICHERUNGS -
GESELLSCHAFT*
(SWISS REINSURANCE COMPANY)
REGISTERED SHARES** 37,997,755 7.6
Second largest reinsurance company
in the world.
50,000 ZURICH SCHWEIZERISCHE
(ZURICH GROUP)
REGISTERED SHARES 31,961,963 6.4
A large worldwide insurance operator.
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74,350,922 14.9
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THE SWISS HELVETIA FUND, INC.
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Statement of Net Assets (continued) June 30, 1998
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
- --------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS - (CONTINUED)
LIFE SCIENCES - 18.7%
56,000 NOVARTIS LTD.*
REGISTERED SHARES $ 93,339,497 18.7%
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
and pharmaceutical products.
------------ -----
93,339,497 18.7
MACHINERY - 2.9%
1,600 BUCHER HOLDING LTD.
BEARER SHARES 2,102,622 0.4
Manufacturer of agricultural machines,
special vehicles, fruit juice equipment
and plastics machines.
4,000 GEORG FISCHER AG
REGISTERED SHARES 1,558,476 0.3
A mechanical engineering group
that is a market leader in vehicle
engineering and pipeline systems.
5,000 MIKRON HOLDING AG
REGISTERED SHARES** 1,271,214 0.3
Machine tools and milling machine
producer.
2,500 RIETER HOLDING AG
REGISTERED SHARES 1,733,474 0.3
Leading supplier of spinning machinery
for the textile industry.
1,200 SAURER GRUPPE HOLDING AG
REGISTERED SHARES** 1,228,290 0.3
Machinery maker with dominant
market share.
800 SCHINDLER HOLDING AG
REGISTERED SHARES 1,241,499 0.2
One of the world's largest elevator
companies and a leading Swiss
machinery enterprise.
Percent
No. of of Net
Shares Security Value Assets
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MACHINERY - (CONTINUED)
3,000 SIG SCHWEIZERISCHE INDUSTRIE-
GESELLSCHAFT HOLDING AG
REGISTERED SHARES $ 2,446,676 0.5%
Medium-sized machinery manufacturer
with interests in the packaging, defense
and railway industries.
3,500 SULZER AG
REGISTERED SHARES 2,766,625 0.6
A machine manufacturer and worldwide
leader in weaving machines and sewing
machines.
------------ -----
14,348,876 2.9
MISCELLANEOUS INDUSTRIES - 2.8%
400 AFG ARBONIA-FORSTER HOLDING AG
BEARER SHARES 264,413 0.1
Manufacturer of heating radiators,
refrigeration kitchen equipment and
steel tubing.
4,700 ALUSUISSE-LONZA HOLDING AG
REGISTERED SHARES 5,971,604 1.2
A major aluminum producing and
processing company.
800 GRETAG-MACBETH HOLDING AG
REGISTERED SHARES 339,695 0.1
Offers a spectrum of benchtop and
portable color measurement
instrumentation, color formulation
and color quality control systems,
densitometers and visual color standards.
5,600 HUBER & SUHNER AG
REGISTERED SHARES 2,662,617 0.5
Manufactures a wide range of products
ranging from specialized materials
via insulated cable to high frequency
link and radio technology equipment.
800 KOMAX HOLDING AG
REGISTERED SHARES 390,940 0.1
World leading manufacturer of wire
processing machines.
9
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THE SWISS HELVETIA FUND, INC.
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Statement of Net Assets (continued) June 30, 1998
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
- --------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS - (CONTINUED)
MISCELLANEOUS INDUSTRIES - (CONTINUED)
300 SARNA POLYMER HOLDING INC.
REGISTERED SHARES $ 524,995 0.1%
Specializes in the processing
of high quality plastic. The two
main activities of the group are
sealant films manufacturing with
application in construction and civil
engineering industries and injection
molding with a wide range of application
as for the automotive industry.
1,000 SOCIETE INTL PIRELLI SA
BEARER SHARES 235,092 --
Provides financial, administrative
and management services to
its subsidiaries which manufactures
and distributes tires and cables.
Produces fiber optic, long distance
and power cables used in tele-
communications operations.
The company operates worldwide.
10,000 OERLIKON-BUEHRLE HOLDING AG
REGISTERED SHARES 1,829,228 0.4
The diversified holding company includes
Bally (shoes and accessories), Balzers
and Leybold (surface technologies),
Oerlikon Contraves (military products
and space technology) and Pilatus (aircraft).
2,000 PHOENIX MECANO AG
BEARER SHARES 1,294,327 0.3
Leading Swiss packaging manufacturer
for the mechanical engineering and
electronics industry.
2,500 STRAUMANN HOLDING AG
REGISTERED SHARES** 676,880 0.1
Develops, produces and sells surgical
implants and instruments for dental
medicine, jaw and face surgery. The
group has subsidiaries throughout Europe
and North America.
------------ -----
14,189,791 2.8
Percent
No. of of Net
Shares Security Value Assets
- --------------------------------------------------------------------------------
MISCELLANEOUS SERVICES - 3.9%
ADECCO SA
13,000 BEARER SHARES $ 5,872,020 1.2%
65,000 RIGHTS(1)
Leading personnel and temporary
employment company.
1,200 BOSSARD HOLDING AG
BEARER SHARES 738,559 0.1
Manufactures fastening elements,
industrial adhesives, tools, pneumatics
and handling modules and automated
assembly systems.
3,200 COMPAGNIE FINANCIERE RICHEMONT AG
BEARER SHARES** 4,194,677 0.8
Investment company with principal
interests in luxury goods and tobacco.
900 KUONI TRAVEL HOLDING LTD.
REGISTERED SHARES 4,475,335 0.9
Leader in the Swiss travel and tourism
sector with subsidiaries in the United
Kingdom, Germany, France and Austria.
2,000 MOVENPICK HOLDING LTD.
BEARER SHARES 994,519 0.2
Through its subsidiaries, invests in the
hotel and restaurant business worldwide.
Also produces food items under
the Movenpick name, including
ice cream, coffee, salmon and jams.
4,000 PUBLIGROUP LTD.
PARTICIPATION CERTIFICATES 1,241,498 0.3
Largest Swiss advertising intermediary.
6,000 SOCIETE GENERALE DE SURVEILLANCE
HOLDING AG
REGISTERED SHARES 2,068,282 0.4
World's leading inspection company
and adjusting group.
------------ -----
19,584,890 3.9
10
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
Statement of Net Assets (concluded) June 30, 1998
(Unaudited)
Percent
No. of of Net
Shares Security Value Assets
- --------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS - (CONCLUDED)
PHARMACEUTICALS - 12.3%
2,000 ARES SERONO SA
BEARER SHARES $ 2,786,766 0.6%
Develops and markets pharmaceutical
and diagnostic products. The
worldwide market leader in
pharmaceutical products for the
treatment of infertility.
5,950 ROCHE HOLDING AG*
DIVIDEND RIGHTS CERTIFICATES 58,525,556 11.7
Worldwide pharmaceutical company.
------------ -----
61,312,322 12.3
RETAILERS - 0.9%
1,500 JELMOLI HOLDING LTD.
BEARER SHARES 1,906,822 0.4
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.
BON APPETIT HOLDING
2,000 REGISTERED SHARES** 1,311,497 0.3
2,000 WARRANTS** 40,943
Swiss market leader that operates
"Cash and Carry."
3,500 VALORA HOLDINGS AG
REGISTERED SHARES 924,520 0.2
Operates restaurants and specialty retail
stores, and manufactures mattresses.
------------ -----
4,183,782 0.9
Percent
No. of of Net
Shares Security Value Assets
- --------------------------------------------------------------------------------
TRANSPORT - 0.8%
12,500 SAIRGROUP
REGISTERED SHARES $ 4,119,062 0.8%
Switzerland's largest airline company.
------------ -----
4,119,062 0.8
738,375 TOTAL COMMON STOCKS AND WARRANTS
(Cost $185,980,301) 496,217,659 99.5
OTHER ASSETS IN EXCESS
OF LIABILITIES 2,399,143 0.5
------------ -----
NET ASSETS APPLICABLE TO
12,321,016 SHARES OF
COMMON STOCK OUTSTANDING $498,616,802 100.0%
============ =====
NET ASSET VALUE PER SHARE
($498,616,802 4 12,321,016) $40.47
======
- --------------------------------------------------------------------------------
* ONE OF THE TEN LARGEST PORTFOLIO HOLDINGS.
(1) RIGHTS NOT TRADING.
** NON-INCOME PRODUCING SECURITY.
11
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
Statement of Operations (Unaudited) For the Six Months Ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
INVESTMENT INCOME:
Dividends (Less foreign taxes withheld of $802,020) $ 4,544,779
-----------
Total income 4,544,779
-----------
EXPENSES:
Investment advisory fee 1,780,605
Administration fee 226,010
Directors' fees and related expenses 101,215
Accounting fee 65,559
Miscellaneous 55,879
Sub-custodian fee 49,775
Printing and postage 43,030
Transfer agent fee 33,729
Franchise fee 32,234
Custodian fee 10,860
Miscellaneous 92,055
-----------
Total expenses 2,490,951
-----------
Net investment income 2,053,828
-----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain from security transactions 2,980,953
Net realized foreign exchange loss (31,161)
Net unrealized appreciation/depreciation of investments 88,177,314
Net unrealized appreciation/depreciation on translation of assets and liabilities
denominated in foreign currency (40,184)
-----------
Net gain on investments 91,086,922
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $93,140,750
===========
</TABLE>
- --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the
Six Months Ended For the
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
- ------------------------------------------------------------------------------------------------------------------
<S><C>
INCREASE/(DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income / (expenses in excess of income) $ 2,053,828 $ (491,809)
Net realized foreign exchange gain (loss) (31,161) (430,653)
Net realized gain (loss) from security transactions 2,980,953 9,867,108
Net unrealized appreciation/depreciation of investments 88,177,314 110,377,806
Net unrealized appreciation/depreciation on translation of
assets and liabilities denominated in foreign currency (40,184) (10,258)
------------ ------------
Net increase in net assets resulting from operations 93,140,750 119,312,194
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income -- (25,030)
Capital gains distribution (554,445) (10,580,024)
------------ ------------
Total distributions to shareholders (554,445) (10,605,054)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Value of shares issued in reinvestment -- 1,315,515
------------ ------------
Total increase from capital share transactions -- 1,315,515
------------ ------------
Total increase in net assets 92,586,305 110,022,655
NET ASSETS:
Beginning of period 406,030,497 296,007,842
------------ ------------
End of period $498,616,802 $406,030,497
============ ============
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
Financial Highlights
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data. This information has been derived from information
provided in the financial statements and market price data for the Fund's
shares.
<TABLE>
<CAPTION>
For the
Six Months Ended For the Year Ended December 31,
June 30, 1998 --------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S><C>
PER SHARE OPERATING PERFORMANCE:
Net asset value at beginning of period $ 32.95 $ 24.14 $ 24.56 $ 19.79 $ 20.96 $ 14.62
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(expenses
in excess of income) 0.17 (+) 0.10 0.06 0.03 0.08
Net realized and unrealized gain/(expenses)
in excess of income) on investments 7.39 9.67 0.23 6.82 0.12 6.59
------- ------- ------- ------- ------- -------
Total from Investment Operations 7.56 9.67 0.33 6.88 0.15 6.67
------- ------- ------- ------- ------- -------
Capital charge resulting from the issuance
of fund shares -- -- -- (1.46) (0.06) --
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- (0.10) (0.06) (0.27) (0.08)
Distribution from net realized
capital gains (0.04) (0.86) (0.65) (0.59) (0.99) (0.25)
------- ------- ------- ------- ------- -------
Total distributions (0.04) (0.86) (0.75) (0.65) (1.26) (0.33)
------- ------- ------- ------- ------- -------
Net asset value at end of period $ 40.47 $ 32.95 $ 24.14 $ 24.56 $ 19.79 $ 20.96
======= ======= ======= ======= ======= =======
Market value per share, end of period $ 32.00 $ 27.44 $ 19.88 $ 21.25 $ 18.88 $ 22.75
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(2):
Based on market value per share 16.79% 42.67% (2.93)% 16.30% (10.67)% 65.39%
Based on net asset value per share 22.99% 41.10% 1.98% 26.28% 1.47% 44.90%
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.09%(3) 1.17% 1.22% 1.38% 1.57% 1.50%
Net investment income/(expenses
in excess of income) 0.90%(3) (0.14)% 0.25% 0.27% 0.02% 0.29%
SUPPLEMENTAL DATA:
Net assets at end of the (000) $495,620 $406,030 $296,008 $301,204 $181,795 $184,698
Average net assets during period (000) $460,667 $354,923 $306,069 $231,234 $184,112 $151,936
Portfolio turnover rate 2% 13% 19% 10% 28% 20%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE PERIOD ENDED JUNE 30, 1998 AND THE YEARS ENDED DECEMBER 31, 1997, 1996,
1995 AND 1994 INCLUDE NET REALIZED CURRENCY GAIN. PRIOR YEARS' NET REALIZED
CURRENCY GAIN/(LOSS) IS INCLUDED IN NET INVESTMENT INCOME.
(2) TOTAL INVESTMENT RETURN BASED ON MARKET VALUE DIFFERS FROM THAT AS MEASURED
BASED ON NET ASSET VALUE DUE TO AN INCREASE OR DECREASE IN THE DISCOUNT TO
NET ASSET VALUE AT WHICH THE FUND'S SHARES TRADED THROUGHOUT THE PERIOD.
TOTAL INVESTMENT RETURN EXCLUDES THE EFFECTS OF SALES LOADS AND COMMISSIONS.
(3) ANNUALIZED.
(+) LESS THAN 0.01 PER SHARE
14
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements
A. SIGNIFICANT ACCOUNTING POLICIES - The Swiss Helvetia Fund, Inc. (the
"Fund"), which was incorporated in Delaware on October 24, 1986 and
commenced 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 to comply with generally accepted accounting principles.
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
revenues and expenses that we report for the period. Our estimates could be
different from the actual results. The Fund's significant accounting
policies are:
Security Valuation - 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 security 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 current
exchange rate at the end of the period.
o The Fund includes in the period's net realized foreign exchange gain, 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 operation
results that occur due to exchange rate changes from the fluctuations that
occur due to market price changes.
Federal Income Taxes - The Fund determines its distributions according to
income tax regulations, which may be different from generally accepted
accounting principles. 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. As long as it maintains this
status and distributes to its shareholders substantially 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.
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 average 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 and 0.70% of
the amount over $200 million. Accrued advisory fees owed by the Fund were
$313,941 on June 30, 1998.
15
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
Investment Company Capital Corp. ("ICC"), a subsidiary of Alex. Brown
Financial Corp., is the Fund's administrator. As compensation for its
administrative services, the Fund pays ICC an annual fee based on the Fund's
average monthly net assets. This fee is calculated daily and paid monthly at
the following annual rates: 0.20% of the first $75 million, 0.15% of the
next $75 million, 0.10% of the next $75 million, 0.05% of the next $275
million and .03% of the amount over $500 million. The Fund has accrued
$57,537 in administrative fees owed at June 30, 1998.
Certain officers and/or directors of the Fund are officers and/or directors
of HCC, Hottinger U.S., Inc., Hottinger & Cie and/or ICC.
PNC Bank, N.A., a wholly-owned subsidiary of PNC Financial Corp., is the
Fund's custodian and transfer agent. PNC Bank and the Fund have entered into
an agreement with Credit Suisse that provides for the custody of Swiss
securities that the Fund holds.
As compensation for its accounting services, the Fund pays ICC an annual fee
that is calculated weekly and paid monthly based on the Fund's average daily
net assets. The Fund paid ICC $65,559 for accounting services for the six
months ended June 30, 1998. Additionally, the Fund owed $1,610 in custody
fees at June 30, 1998.
C. CAPITAL SHARE TRANSACTIONS - The Fund is authorized to issue up to 50
million shares of $.001 par value capital stock. HCC owned 14,425 of the
12,321,016 shares outstanding on June 30, 1998.
D. DIRECTORS' FEES - The Fund pays each director who is not affiliated with the
Fund, its investment advisor or administrator approximately $7,750 per annum
in compensation, except for the Chairman of the Audit Committee, who
receives an annual fee of approximately $8,500. In addition, each
unaffiliated director receives $750 for each attended directors' meeting,
$750 for each committee meeting attended if it is held separately and
reimbursement for out-of-pocket expenses. Accrued directors' fees owed at
June 30, 1998 amounted to $7,715.
E. INVESTMENT TRANSACTIONS - Excluding short-term obligations, purchases of
investment securities aggregated $8,863,177 and sales of investment
securities aggregated $9,120,893 for the six months ended June 30, 1998. At
June 30, 1998 the payable for investments purchased amounted to $270,263.
On June 30, 1998, aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost was $310,413,941,
aggregate gross unrealized depreciation of all securities in which there is
an excess of tax cost over value was $176,583 and net realized appreciation
was $310,237,558.
F. FEDERAL INCOME TAX INFORMATION - Generally accepted accounting principles
require that certain components of net assets be reclassified to reflect
permanent differences between financial reporting and tax purposes.
Accordingly, last year's permanent book/tax differences of 491,809 have been
reclassified between (i) net investment income and paid-in capital and (ii)
net investment income and undistributed net realized gain from security
transactions, respectively. These reclassifications have no effect on net
assets or net asset values per share.
G. NET ASSETS - On June 30, 1998, net assets consisted of:
Paid-in capital $183,587,582
Undistributed net investment income 2,053,828
Undistributed net realized gain
from security transactions 2,793,555
Unrealized appreciation of investments 310,237,358
Unrealized translation loss (55,521)
------------
$498,616,802
============
1998 Annual Meeting of Stockholders -- Voting Results
At the May 12, 1998 Annual Meeting of Stockholders, Eric R. Gabus and Claude
Frey were re-elected to the Board of Directors for three-year terms that
expire in 2001. In addition, the accounting firm Deloitte & Touche LLP was
selected as the Fund's independent auditors for the calendar year ending
December 31, 1998. Deloitte & Touche has served as the Fund's independent
auditors since the Fund's inception in 1987. Finally, the Stockholders
approved a proposal to make a change in the Fund's Fundamental Restrictions
that would allow the Fund to engage in securities lending with respect to its
portfolio assets to the extent permitted by the Investment Company Act of
1940. A proposal to change the Fund's state of incorporation from Delaware to
Maryland did not receive enough votes and therefore was not approved.
16
<PAGE>
THE SWISS HELVETIA FUND, INC.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
--------------------------
The Dividend Reinvestment Plan offers you a convenient and automatic way to
reinvest your income dividends and capital gains distributions in additional
shares of the Fund. For an enrollment form and detailed information about the
Plan, please contact the Fund's transfer agent at PNCBank, N.A., P.O. Box
8950, Wilmington, DE, 19899, (800) 852-4750. If your shares are held by your
brokerage firm, please contact your investment representative.
This report is sent to the stockholders of The Swiss Helvetia Fund, Inc. for
their information. It is not a prospectus, circular or representation intended
for use in the purchase or sale of shares of the Fund or of any securities
mentioned in this report.
--------------------------
Notice is hereby given in accordance with section 23(c) of The Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
17
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<PAGE>
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