UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-05128
The Swiss Helvetia Fund, Inc.
(Exact name of registrant as specified in charter)
7 Bryant Park,
New York, NY 10018
(Address of principal executive offices) (Zip code)
Carin F. Muhlbaum
Schroder Investment Management North America Inc.
7 Bryant Park,
New York, NY 10018
(Name and Address of Agent for Service)
Registrants telephone number, including area code: 1-800-730-2932
Date of fiscal year end: December 31
Date of reporting period: June 30, 2018
Item 1. Reports to Stockholders.
THE SWISS HELVETIA FUND, INC.
Managed Distribution Policy Disclosure |
June 30, 2018 (Unaudited) |
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THE SWISS HELVETIA FUND, INC.
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THE SWISS HELVETIA FUND, INC.
Source: Schroders, Bloomberg, as of June 30, 2018. Performance measured as total return in USD. Sectors mentioned should not be viewed as a recommendation to buy/sell. Portfolio composition is subject to change over time. Investors cannot invest directly in the Index.
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THE SWISS HELVETIA FUND, INC.
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THE SWISS HELVETIA FUND, INC.
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THE SWISS HELVETIA FUND, INC.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) | June 30, 2018 |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) (continued) | June 30, 2018 |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) (continued) | June 30, 2018 |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) (continued) | June 30, 2018 |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) (continued) | June 30, 2018 |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) (continued) | June 30, 2018 |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) (continued) | June 30, 2018 |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) (continued) | June 30, 2018 |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) (continued) | June 30, 2018 |
1 | Non-income producing security. |
2 | Value determined using significant unobservable inputs. |
3 | Illiquid. There is not a public market for these securities in the United States or in any foreign jurisdiction, including Switzerland. Securities are priced at Fair Value in accordance with the Funds valuation policy and procedures. At the end of the period, the aggregate Fair Value of these securities amounted to $6,202,712 or 1.87% of the Funds net assets. Additional information on these securities is as follows: |
Security |
Acquisition Date |
Cost |
||||
Aravis Biotech II, Limited Partnership | July 31, 2007 May 29, 2018 | $ | 1,810,184 | |||
EyeSense AG Preferred Shares A | July 22, 2010 October 3, 2011 | 3,007,048 | ||||
Ixodes AG Preferred Shares B | April 7, 2011 June 1, 2012 | 2,252,142 | ||||
NovImmune SA Common Shares | October 7, 2009 December 11, 2009 | 3,613,416 | ||||
SelFrag AG Class A Preferred Shares | December 15, 2011 January 28, 2014 | 1,932,198 | ||||
Spineart SA Common Shares | December 22, 2010 | 2,623,328 | ||||
$ | 15,238,316 | |||||
4 | Affiliated Company. An affiliated company is a company in which the Fund has ownership of at least 5% of the companys outstanding voting securities or an equivalent interest in the company. Details related to affiliated company holdings are as follows: |
Name of Issuer |
Fair Value |
Gross |
Gross |
Realized |
Change
in |
Interest |
Fair Value |
|||||||||||||||||||||
Aravis Biotech II, Limited Partnership |
$ | 1,591,513 | $ | 81,344 | $ | (1,081,211 | ) | $ | 61,007 | $ | 324,349 | $ | | $ | 977,002 | |||||||||||||
Ixodes AG Preferred Shares B |
68,268 | | | | (19,963 | ) | | 48,305 | ||||||||||||||||||||
$ | 1,659,781 | $ | 81,344 | $ | (1,081,211 | ) | $ | 61,007 | $ | 304,386 | $ | | $ | 1,025,307 | ||||||||||||||
* | Cost for Federal income tax purposes is $202,173,912 and net unrealized appreciation (depreciation) consists of: |
Gross Unrealized Appreciation |
$ | 136,668,159 | ||
Gross Unrealized Depreciation |
(15,635,848 | ) | ||
Net Unrealized Appreciation (Depreciation) |
$ | 121,032,311 | ||
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Schedule of Investments by Industry (Unaudited) (concluded) | June 30, 2018 |
PORTFOLIO HOLDINGS |
||||
% of Net Assets as of June 30, 2018 |
||||
Pharmaceuticals |
23.83 | % | ||
Food & Beverage |
17.05 | % | ||
Banks |
10.24 | % | ||
Industrial Goods & Services |
8.16 | % | ||
Personal & Household Goods |
6.22 | % | ||
Insurance |
6.21 | % | ||
Construction & Materials |
6.06 | % | ||
Medical Equipment |
6.05 | % | ||
Technology |
3.42 | % | ||
Financial Services |
2.65 | % | ||
Biotechnology |
2.12 | % | ||
Industrial Transportation |
1.38 | % | ||
Telecommunications |
1.16 | % | ||
Chemicals |
0.92 | % | ||
Industrial Engineering |
0.51 | % | ||
Machinery |
0.46 | % | ||
Electric Utilities |
0.45 | % | ||
Automobiles & Components |
0.38 | % | ||
Other Assets Less Liabilities |
2.73 | % | ||
100.00 | % | |||
TOP 10 PORTFOLIO HOLDINGS |
||||
% of Net Assets as of June 30, 2018 |
||||
Novartis AG |
13.23 | % | ||
Nestlé SA |
13.16 | % | ||
Roche Holding AG |
10.60 | % | ||
UBS Group AG |
4.05 | % | ||
Sonova Holding AG |
3.21 | % | ||
Cie Financiere Richemont SA |
3.16 | % | ||
Swatch Group AG Registered Shares |
3.06 | % | ||
Chocoladefabriken Lindt & Spruengli AG |
2.97 | % | ||
Logitech International SA |
2.95 | % | ||
Swiss Life Holding AG |
2.90 | % |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Statement of Assets and Liabilities (Unaudited) | June 30, 2018 |
Assets: |
||||
Investments in unaffiliated issuers, at value (cost $198,006,342) |
$ | 322,180,916 | ||
Investments in affiliated issuers, at value (cost $4,062,326) |
1,025,307 | |||
Total Investments, at value (cost $202,068,668) |
323,206,223 | |||
Cash |
91,224 | |||
Foreign currency (cost $5,728,173) |
5,770,705 | |||
Receivable for securities sold |
500,000 | |||
Tax reclaims receivable |
3,766,592 | |||
Prepaid expenses |
76,659 | |||
Total assets |
333,411,403 | |||
Liabilities: |
||||
Payable for securities purchased |
500,650 | |||
Professional fees payable |
209,554 | |||
Advisory fees payable |
186,420 | |||
Directors fees payable |
124,331 | |||
Other fees and expenses payable |
117,715 | |||
Total liabilities |
1,138,670 | |||
Net assets |
$ | 332,272,733 | ||
Composition of Net Assets: |
||||
Paid-in capital |
202,635,483 | |||
Distributions in excess of net investment income |
(857,617 | ) | ||
Accumulated net realized gain from investments and foreign currency transactions |
9,366,695 | |||
Net unrealized appreciation on investments, foreign currency, and foreign currency translations |
121,128,172 | |||
Net assets |
$ | 332,272,733 | ||
Net Asset Value Per Share: |
||||
($332,272,733 ÷ 25,313,872 shares outstanding, $0.001 par value: 50 million shares authorized) . |
$ | 13.13 | ||
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Statement of Operations (Unaudited) | For the Six Months Ended June 30, 2018 |
Investment Income: |
||||
Dividends (less of foreign tax withheld of $2,322,646) |
$ | 6,344,186 | ||
Total income |
6,344,186 | |||
Expenses: |
||||
Investment advisory fees (Note 2) |
1,159,163 | |||
Administration fees (Note 3) |
57,295 | |||
Directors fees and expenses |
195,662 | |||
Legal fees (Note 3) |
457,991 | |||
Audit fees (Note 3) |
28,674 | |||
Printing and shareholder reports |
67,226 | |||
Insurance fees |
56,714 | |||
Delaware franchise tax fees |
45,000 | |||
Custody fees (Note 3) |
23,026 | |||
Transfer agency fees (Note 3) |
15,394 | |||
Miscellaneous expenses |
51,081 | |||
Total expenses |
2,157,226 | |||
Net investment Income |
4,186,960 | |||
Realized and Unrealized Gains (Loss) on Investments and Foreign Currency: |
||||
Net realized gain (loss) from: |
||||
Investments in unaffiliated issuers |
9,572,916 | |||
Investments in affiliated issuers |
61,007 | |||
Foreign currency transactions |
(167,991 | ) | ||
Total net realized gain (loss) from unaffiliated and affiliated issuers and foreign currency transactions |
9,465,932 | |||
Net change in unrealized appreciation (depreciation) from: |
||||
Investments in unaffiliated issuers |
(33,323,443 | ) | ||
Investments in affiliated issuers |
304,386 | |||
Foreign currency and foreign currency translations |
(67,187 | ) | ||
Total net change in unrealized appreciation (depreciation) from unaffiliated and affiliated issuers, foreign currency and foreign currency translations |
(33,086,244 | ) | ||
Net Realized and Unrealized Loss on Investments and Foreign Currency |
(23,620,312 | ) | ||
Net Decrease in Net Assets from Operations |
$ | (19,433,352 | ) | |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Statement of Changes in Net Assets |
For the |
For the Year Ended December 31, 2017 |
Increase (Decrease) in Net Assets: |
||||||||
Operations: |
||||||||
Net investment income |
$ | 4,186,960 | $ | 3,420,450 | ||||
Total net realized gain (loss) from unaffiliated and affiliated issuers and foreign currency transactions |
9,465,932 | 13,005,528 | ||||||
Total net change in unrealized appreciation (depreciation) from unaffiliated and affiliated issuers, foreign currency and foreign currency translations |
(33,086,244 | ) | 51,978,234 | |||||
Net increase (decrease) in net assets from operations |
(19,433,352 | ) | 68,404,212 | |||||
Distributions to Stockholders from: |
||||||||
Net investment income and net realized gain from foreign currency transactions |
(5,126,059 | ) | (3,290,803 | ) | ||||
Net realized capital gain |
| | ||||||
Total distributions to stockholders |
(5,126,059 | ) | (3,290,803 | ) | ||||
Capital Share Transactions: |
||||||||
Value of shares issued in reinvestment of dividends and distributions |
| | ||||||
Value of shares repurchased through stock repurchase program (Note 6) |
| | ||||||
Value of shares repurchased through tender offer (Note 7) |
| (36,142,591 | ) | |||||
Total decrease from capital share transactions |
| (36,142,591 | ) | |||||
Total increase (decrease) in net assets |
(24,559,411 | ) | 28,970,818 | |||||
Net Assets: |
||||||||
Beginning of period |
356,832,144 | 327,861,326 | ||||||
End of period (including distributions in excess of net investment income of $(857,617) and accumulated net investment income of $81,482, respectively) |
$ | 332,272,733 | $ | 356,832,144 | ||||
1 | Unaudited. |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Financial Highlights
For the Six Months Ended June 30, 20181 |
For the Years Ended December 31, |
|||||||||||||||||||||||
2017 |
2016 |
2015 |
2014 |
2013 |
||||||||||||||||||||
Per Share Operating Performance: |
||||||||||||||||||||||||
Net asset value at the beginning of the period |
$ | 14.10 | $ | 11.66 | $ | 12.30 | $ | 12.78 | $ | 15.46 | $ | 12.99 | ||||||||||||
Income from Investment Operations: |
||||||||||||||||||||||||
Net investment income2 |
0.17 | 0.13 | 0.15 | 0.11 | 0.08 | 0.08 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments3 |
(0.94 | ) | 2.41 | (0.45 | ) | 0.12 | (0.40 | ) | 3.45 | |||||||||||||||
Total from investment activities |
(0.77 | ) | 2.54 | (0.30 | ) | 0.23 | (0.32 | ) | 3.53 | |||||||||||||||
Gain from capital share repurchases |
| | 0.02 | | | 0.03 | ||||||||||||||||||
Gain from tender offer |
| 0.03 | | | 0.05 | | ||||||||||||||||||
Capital change resulting from the issuance of fund shares |
| | (0.03 | ) | | (0.03 | ) | | ||||||||||||||||
Less Distributions: |
||||||||||||||||||||||||
Dividends from investment income and net realized gains from foreign currency transactions |
(0.20 | ) | (0.13 | ) | (0.12 | ) | (0.03 | ) | (0.04 | ) | (0.07 | ) | ||||||||||||
Distributions from net realized capital gains |
| | (0.21 | ) | (0.68 | ) | (2.34 | ) | (1.02 | ) | ||||||||||||||
Total distributions |
(0.20 | ) | (0.13 | ) | (0.33 | ) | (0.71 | ) | (2.38 | ) | (1.09 | ) | ||||||||||||
Net asset value at end of period |
$ | 13.13 | $ | 14.10 | $ | 11.66 | $ | 12.30 | 4 | $ | 12.78 | 5 | $ | 15.46 | 6 | |||||||||
Market value per share at the end of period |
$ | 12.35 | $ | 12.76 | $ | 10.21 | $ | 10.56 | $ | 11.14 | $ | 13.95 | ||||||||||||
Total Investment Return:7,8 |
||||||||||||||||||||||||
Based on market value per share |
(1.65 | )% | 26.26 | % | (0.24 | )% | 1.41 | % | (3.66 | )% | 33.10 | % | ||||||||||||
Based on net asset value per share |
(5.37 | )% | 22.17 | % | (2.19 | )% | 2.96 | %4 | (0.27 | )%5 | 28.18 | %6 | ||||||||||||
Ratios to Average Net Assets:9 |
||||||||||||||||||||||||
Net expenses |
1.25 | % | 1.40 | % | 1.19 | % | 1.15 | % | 1.41 | % | 1.30 | % | ||||||||||||
Gross expenses |
1.25 | % | 1.40 | % | 1.19 | % | 1.15 | % | 1.41 | % | 1.30 | % | ||||||||||||
Net investment income |
2.42 | % | 0.98 | % | 1.26 | % | 0.81 | % | 0.52 | % | 0.57 | % | ||||||||||||
Supplemental Data: |
||||||||||||||||||||||||
Net assets at end of period (000s) |
$ | 332,273 | $ | 356,832 | $ | 327,861 | $ | 344,132 | $ | 340,457 | $ | 471,888 | ||||||||||||
Average net assets during the period (000s) |
$ | 349,306 | $ | 350,487 | $ | 331,874 | $ | 368,969 | $ | 426,661 | $ | 456,196 | ||||||||||||
Portfolio turnover rate |
10 | % | 9 | % | 19 | % | 23 | % | 48 | % | 45 | % |
1 | Unaudited. |
2 | Calculated using the average shares method. |
3 | Includes net realized and unrealized currency gain and losses. |
4 | The net assets value per share (NAV) for financial reporting purposes, $12.30, differs from the NAV reported on December 31, 2015, $12.33 due to adjustments made in accordance with accounting principles generally accepted in the United States of America. |
5 | The NAV for financial reporting purposes, $12.78, differs from the NAV reported on December 31, 2014, $12.82 due to adjustments made in accordance with accounting principles generally accepted in the United States of America. |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Financial Highlights (concluded)
6 | The NAV for financial reporting purposes, $15.46, differs from the NAV reported on December 31, 2013, $15.39 due to adjustments made in accordance with accounting principles generally accepted in the United States of America. |
7 | Total investment return based on market value differs from total investment return based on net assets value due to changes in relationship between Funds market price and its NAV per share. |
8 | Not annualized for periods less than one year. |
9 | Annualized for periods less than one year. |
See Notes to Financial Statements.
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THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited)
Note 1Organization and Significant Accounting Policies
A. Organization
The Swiss Helvetia Fund, Inc. (the Fund) is registered under the Investment Company Act of 1940, as amended (the Act), as a non-diversified, closed-end management investment company. The Fund is organized as a corporation under the laws of the State of Delaware.
The investment objective of the Fund is to seek long-term growth of capital through investment in equity and equity-linked securities of Swiss companies. The Fund may also acquire and hold equity and equity-linked securities of non-Swiss companies in limited instances.
B. Securities Valuation
The Fund values its investments at fair value in accordance with accounting principles generally accepted in the United States (GAAP).
When valuing listed equity securities, the Fund uses the last sale price on the securities exchange or national securities market on which such securities primarily are traded (the Primary Market) prior to the calculation of the Funds net asset value (NAV). When valuing equity securities that are not listed (except privately-held companies and private equity limited partnerships) or that are listed but have not traded on a day on which the Fund calculates its NAV, the Fund uses the mean between the bid and asked prices for that day. If there are no asked quotations for such a security, the value of such security will be the most recent bid quotation on the Primary Market on that day. On any day when a securitys Primary Market is closed because of a local holiday or other scheduled closure, but the New York Stock Exchange is open, the Fund may use the prior days closing prices to value such security regardless of the length of the scheduled closing.
When valuing fixed-income securities, if any, the Fund uses the last bid price prior to the calculation of the Funds NAV. If there is no current bid price for a fixed-income security, the value of such security will be the mean between the last quoted bid and asked prices on that day. Overnight and certain other short-term fixed-income securities with maturities of less than 60 days will be valued by the amortized cost method, unless it is determined that the amortized cost method would not represent the fair value of such security.
It is the responsibility of the Funds Board of Directors (the Board) to establish procedures to provide for the valuation of the Funds portfolio holdings. When valuing securities for which market quotations are not readily available, or for which the market quotations that are available are considered unreliable, the Fund determines a fair value in good faith in accordance with these procedures (a Fair Value). The Fund may use these procedures to establish the Fair Value of securities when, for example, a significant event occurs between the time the market closes and the time the Fund values its investments. After consideration of various factors, the Fund may value the securities at their last reported price or at some other value.
Swiss exchange-listed options, if any, including Eurex-listed options, are valued at their most recent sale price (latest bid for long options and the latest ask for short options) on the Primary Market, or if there are no such sales, at the average of the most recent bid and asked quotations on such Primary Market, or if such quotations are not available, at the last bid quotation (in the case of purchased options) or the last asked quotation (in the case of written options). If, however, there
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THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
are no such quotations, such options will be valued using the implied volatilities observed for similar options or from aggregated data as an input to a model. Options traded in the over-the-counter market, if any, are valued at the price communicated by the counterparty to the option, which typically is the price at which the counterparty would close out the transaction. Option contracts, if any, that are neither exchange-listed nor traded in the over-the-counter market, and where no broker can provide a quote or approved pricing vendor a price, may be valued using the implied volatilities observed for similar instruments or from aggregated market data received from services (e.g., Bloomberg) as an input to a widely accepted model.
The Fund is permitted to invest in investments that do not have readily available market quotations. For such investments, the Act requires the Board to determine their Fair Value. The aggregate value of these investments amounted to $6,202,712, or 1.87% of the Funds net assets at June 30, 2018, and are listed in Note 3 to the Schedule of Investments.
Various inputs are used to determine the value of the Funds investments. These inputs are summarized in the three broad levels listed below:
Level 1unadjusted | quoted prices in active markets for identical assets and liabilities |
Level 2other | significant observable inputs (including quoted prices of similar securities, interest rates, prepayment speeds, credit risk, etc.) |
Level 3significant | unobservable inputs (including the Funds own assumptions in determining the fair value of investments) |
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Funds investments as of June 30, 2018:
Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level
3 Significant Unobservable Inputs |
Investments Valued at NAV** |
Total |
||||||||||||||||
Investments in Securities* |
|
|||||||||||||||||||
Common Stock |
$ | 317,003,511 | $ | | $ | 4,947,826 | $ | | $ | 321,951,337 | ||||||||||
Preferred Stock |
| | 277,884 | | 277,884 | |||||||||||||||
Limited Partnership |
| | | 977,002 | 977,002 | |||||||||||||||
Total Investments in Securities |
$ | 317,003,511 | $ | | $ | 5,225,710 | $ | 977,002 | $ | 323,206,223 | ||||||||||
* | Please see the Schedule of Investments for industry classifications. |
** | As of June 30, 2018 certain of the Funds investments were valued using net asset value (NAV) per share (or its equivalent) as a practical expedient for fair value and have been excluded from the fair value hierarchy in accordance with ASU 2015-07. The fair value amount presented in this table is intended to permit reconciliation of the amounts presented in the fair value hierarchy to the amounts presented in the statement of assets and liabilities. |
The Fund values its investment in a private equity limited partnership in accordance with Accounting Standards Codification 820-10-35, Investments in Certain Entities that Calculate Net Asset Value Per Share (Or its Equivalent) (ASC 820-10-35). ASC 820-10-35 permits a reporting entity to measure the fair value of an investment that does not have a readily determinable fair value, based on the NAV of the investment as a practical expedient, without further adjustment,
23
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
unless it is probable that the investment will be sold at a value significantly different than the NAV. If the NAV of the investment is not as of the Funds measurement date, then the NAV should be adjusted to reflect any significant events that may change the valuation. Inputs and valuation techniques for these adjustments may include fair valuations of the partnership and its portfolio holdings provided by the partnerships general partner or manager, other available information about the partnerships portfolio holdings, values obtained on redemption from other limited partners, discussions with the partnerships general partner or manager and/or other limited partners and comparisons of previously-obtained estimates to the partnerships audited financial statements. In using the unadjusted NAV as a practical expedient, certain attributes of the investment that may impact its fair value are not considered. Attributes of those investments include the investment strategies of the privately held companies and may also include, but are not limited to, restrictions on the investors ability to redeem its investments at the measurement date and any unfunded commitments.
Level 3 securities, which are listed in Note 3 to the Schedule of Investments, consist of the Funds investments in privately-held companies.
Inputs and valuation techniques used by the Fund to value its Level 3 investments in privately-held companies may include the following: acquisition cost; fundamental analytical data; discounted cash flow analysis; nature and duration of restrictions on disposition of the investment; public trading of similar securities of similar issuers; economic outlook and condition of the industry in which the issuer participates; financial condition of the issuer; and the issuers prospects, including any recent or potential management or capital structure changes. Although these valuation inputs may be observable in the marketplace as is characteristic of Level 2 investments, the privately-held companies, categorized as Level 3 investments, generally are highly illiquid in terms of resale.
When valuing Level 3 investments, management also may consider potential events that could have a material impact on the operations of a privately-held company. Not all of these factors may be considered or available, and other relevant factors may be considered on an investment-by-investment basis. The table below summarizes the techniques and unobservable inputs for the valuation of Level 3 investments.
24
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
Quantitative Information about certain Level 3 Fair Value Measurements | ||||||||||
Fair Value at June 30, 2018 |
Valuation Technique | Unobservable inputs | Range1 | |||||||
Biotechnology |
||||||||||
NovImmune SACommon Shares |
$3,591,335 | Discounted cash flow | Discount rate | 15% | ||||||
Probability of success rate | 95% | |||||||||
Ixodes AGPreferred Shares |
48,305 | Discounted cash flow | Discount rate | 19% | ||||||
Probability of success rate on | ||||||||||
research and development | 10% | |||||||||
Industrial Goods & Services |
||||||||||
SelFrag AGPreferred Shares |
$ 186,635 | Market approach | Recent round of financing | N/A | ||||||
Medical Equipment |
||||||||||
EyeSense AGPreferred Shares |
42,944 | Market approach | Recent round of financing | N/A | ||||||
Spineart SACommon Shares |
1,356,491 | Market approach | Recent round of financing | N/A | ||||||
Total |
$5,225,710 |
1 | Significant changes in any of these ranges would result in a significantly higher or lower fair value measurement. Generally, a change in the probability of success rate on research and development is accompanied by a directionally similar change in fair value. Conversely, a change in the discount rate is accompanied by a directionally opposite change in fair value. |
The Funds policy is to disclose transfers between Levels based on their market prices as of the beginning of the period.
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
Common Stock |
Preferred Stock |
Total |
||||||||||
Balance as of December 31, 2017 |
$ | 4,941,039 | $ | 328,792 | $ | 5,269,831 | ||||||
Change in Unrealized Appreciation/Depreciation (a) |
6,787 | (50,908 | ) | (44,121 | ) | |||||||
Net Realized Gain (Loss) |
| | | |||||||||
Gross Purchases |
| | | |||||||||
Gross Sales |
| | | |||||||||
Transfer out of Level 3 |
| | | |||||||||
Balance as of June 30, 2018 |
$ | 4,947,826 | $ | 277,884 | $ | 5,225,710 | ||||||
(a) | The noted amounts of change in unrealized appreciation/depreciation relate to the fair value of Level 3 assets held on June 30, 2018. |
C. Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Realized gains and losses are determined by comparing the proceeds of a sale or the cost of a purchase to a specific offsetting transaction.
Dividend income, net of any foreign taxes withheld, is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount, is accrued daily. Estimated expenses are also accrued daily.
25
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
The Fund records Swiss withholding tax as a reduction of dividend income, net of any amount reclaimable from Swiss tax authorities in accordance with the tax treaty between the United States and Switzerland.
Distributions received from securities that represent a return of capital or capital gains are recorded as a reduction of cost of investment and/or as a realized gain.
As of June 30, 2018, the Funds assets include a tax reclaims receivable totaling $3,766,592, which is attributable to tax amounts reclaimable from the Swiss Federal Tax Administration for calendar years 2015, 2016 and 2017 in accordance with the tax treaty between the United States and Switzerland. Although the Fund expects to receive these amounts in accordance with the tax treaty between the United States and Switzerland, it does not intend to accrue for tax amounts reclaimable for calendar year 2018 until it has received a portion of the amounts attributable to prior years.
D. Distributions
The Fund pays dividends at least annually to the extent it has any federally taxable net investment income and makes distributions of any net realized capital gains to the extent that they exceed any capital loss carryforwards. The Fund determines the size and nature of these distributions in accordance with provisions of the Internal Revenue Code of 1986, as amended (the Code). The Fund records dividends and distributions on the ex-dividend date.
E. Federal Income Taxes
The Funds policy is to continue to comply with the requirements of the Code that are applicable to regulated investment companies and to distribute all its taxable income to its stockholders. Therefore, no federal income tax provision is required.
Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. See Note 5 for federal income tax treatment of foreign currency gains/losses.
Management has analyzed the Funds tax positions taken on federal income tax returns for all open tax years and has concluded that no provision for federal income tax is required in the Funds financial statements. The Fund files federal tax returns which remain open for examination generally for the current year and the three prior years. In addition, the Fund holds investments in Switzerland and other foreign tax jurisdictions. Withholding taxes on foreign interest and dividends have been provided for in accordance with each applicable countrys tax rules and rates.
F. Foreign Currency Translation
The Fund maintains its accounting records in U.S. dollars. The Funds assets are invested primarily in Swiss equities. In addition, the Fund can make its temporary investments in Swiss franc-denominated bank deposits, short-term debt securities and money market instruments. Substantially all income received by the Fund is in Swiss francs. The Funds NAV, however, is reported, and distributions from the Fund are made, in U.S. dollars, resulting in gain or loss from currency conversions in the ordinary course of business. Historically, the Fund has not entered into transactions designed to reduce currency risk and does not intend to do so in the future. The cost basis of foreign denominated assets and liabilities is determined on the date that they are first
26
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
recorded within the Fund and translated to U.S. dollars. These assets and liabilities are subsequently valued each day at prevailing exchange rates. The difference between the original cost and current value denominated in U.S. dollars is recorded as unrealized foreign currency gain/loss. In valuing securities transactions, the receipt of income and the payment of expenses, the Fund uses the prevailing exchange rate on the transaction date.
Net realized and unrealized gains and losses on foreign currency shown in the Funds financial statements result from the sale of foreign currencies, from currency gains or losses realized between the trade and settlement dates of securities transactions, and from the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid.
When calculating realized and unrealized gains or losses on investments, the Fund does not separate the gain or loss attributable to changes in the foreign currency price of the security from the gain or loss attributable to the change in the U.S. dollar value of the foreign currency. Other foreign currency translations resulting in realized and unrealized gain or loss are disclosed separately.
G. Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
H. Concentration of Market Risk
The Fund primarily invests in securities of Swiss issuers. Such investments may carry certain risks not ordinarily associated with investments in securities of U.S. issuers. These risks include future political and economic developments, unfavorable movements in the Swiss franc relative to the U.S. dollar, and the possible imposition of exchange controls and changes in governmental law and restrictions. In addition, concentrations of investments in securities of issuers located in a specific region expose the Fund to the economic and government policies of that region and may increase risk compared to a fund whose investments are more diversified.
Note 2Fees and Transactions with Affiliates
Schroder Investment Management North America Inc. (SIMNA) and its affiliate, Schroder Investment Management North America Limited (SIMNA Ltd and together with SIMNA, Schroders), serve as the Funds investment adviser and investment sub-adviser, respectively. The Fund pays SIMNA an annual advisory fee of 0.70% of the Funds average month-end net assets up to $250 million, 0.60% of such assets in excess of $250 million and up to $350 million, 0.55% of such assets in excess of $350 million and up to $450 million, 0.50% of such assets in excess of $450 million and up to $550 million, and 0.45% of such assets in excess of $550 million. As compensation for its investment sub-advisory services, SIMNA Ltd receives 58.5% of the advisory fee paid by the Fund to SIMNA.
27
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
The Fund pays each Director who is not an interested person (as such term is defined in the Act) of the Fund or Schroders (Non-Interested Directors), $42,000 annually in compensation, except for the Chairman of the Board to whom the Fund pays an annual fee of $56,000 and for the Chairs of the Audit, the Pricing and the Governance/Nominating Committees to each of whom the Fund pays an annual fee of $48,000. In addition, the Fund pays each Non-Interested Director $2,000 for each Board meeting attended in person, and $750 for each Board meeting attended by telephone. Each Director who is a member of a Committee will be paid a fee of $750 for each Committee meeting attended, whether in person or by telephone. The Board or a Committee may establish ad hoc committees or subcommittees. Any Committee or sub-committee member may be compensated by the Fund for incremental work outside of the regular meeting process based on the value determined to be added to the Fund. In July 2018, the Board approved a change to its By-Laws and Board committee charters to provide that each Director who is not an interested person of Schroders or its affiliates will be entitled to receive the above fees.
Note 3Other Service Providers
American Stock Transfer & Trust Company is the Funds transfer agent. Effective October 1, 2015, JPMorgan Chase Bank, N.A. serves as the Funds custodian and also provides certain administration and portfolio accounting services to the Fund. The Fund pays these service providers fees, which are accrued daily and paid monthly. Prior to October 1, 2015, Citi Fund Services Ohio, Inc. provided custodian, administration and portfolio accounting services to the Fund.
In addition to its other service provider fees, the Fund incurs certain professional fees, including fees of its outside legal counsel and legal counsel to the Funds Non-Interested Directors as well as fees of its independent registered public accounting firm. Those fees vary depending on the nature of the Funds activities each year. Due to work associated with the litigation described in Note 9, and the proxy contest during the period, the Fund incurred additional fees which are not expected to be recurring expenses.
Note 4Capital Share Transactions
The Fund is authorized to issue up to 50 million shares of capital stock. Transactions in capital shares were as follows:
For the Six Months Ended June 30, 2018 |
For the Year Ended December 31, 2017 |
|||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||
Dividends Reinvested |
| $ | | | $ | | ||||||||||
Repurchased through Stock Repurchase Program (Note 6) |
| | | | ||||||||||||
Repurchased from Tender Offer (Note 7) |
| | (2,812,653 | ) | (36,142,591 | ) | ||||||||||
Net Increase/(Decrease) |
| $ | | (2,812,653 | ) | $ | (36,142,591 | ) | ||||||||
Note 5Federal Income Tax and Investment Transactions
Reclassifications are made to the Funds capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character
28
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
of distributions paid during the year and the tax components of net assets will be updated at the Funds fiscal year-end.
The tax character of distributions paid during 2017 was as follows:
Ordinary Income |
$ | 3,290,803 | ||
Long-Term Capital Gains |
| |||
Total |
$ | 3,290,803 | ||
Under current tax law, capital losses and specified ordinary losses realized after October 31 may be deferred and treated as occurring on the first business day of the following fiscal year. The Fund had deferred post-October capital and currency losses and other late-year deferrals totaling $154,368, which will be treated as arising on the first business day following the fiscal year ended December 31, 2017.
Capital loss carryovers retain their character as either long-term capital losses or short-term capital losses and are applied as a new loss on the first day of the immediately succeeding tax year. At December 31, 2017, the Fund had non-expiring short term capital loss carryovers totaling $615,819.
At December 31, 2017, the components of distributable earnings on a tax basis were as follows:
Undistributed Ordinary Income |
$ | 211,621 | ||
Capital Loss Carry Forward |
(615,819 | ) | ||
Current Late-Year Loss Deferral and Post-October Losses |
(154,368 | ) | ||
Unrealized Appreciation |
154,755,227 | |||
Total |
$ | 154,196,661 | ||
The differences between book basis and tax basis distributable earnings are primarily attributable to tax deferral of wash sales and investments in partnerships.
Gains and losses from foreign currency transactions are treated as ordinary income and loss, respectively, for federal income tax purposes.
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, six months ended June 30, 2018 were $33,527,775 and $37,747,181, respectively.
Note 6Stock Repurchase Program
Pursuant to authorization by the Board, the Fund began open market purchases of its common stock on the New York Stock Exchange in 1999. The Board has authorized a stock repurchase program permitting such purchases by the Fund in each subsequent year, except for 2014. The principal purpose of the stock repurchase program has been to enhance stockholder value by increasing the Funds NAV per share without adversely affecting the Funds expense ratio.
On December 4, 2017, the Fund announced the Boards approval of the Funds stock repurchase program for 2018. Under the program, the Fund is authorized to make open-market repurchases of its common stock of up to 500,000 shares. The Fund did not repurchase any common stock pursuant to the program during the six months ended June 30, 2018.
As a result of the Funds recently announced tender offer, the Funds share repurchase program has been suspended pending completion of the tender offer. See Note 10 for additional information.
29
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited) (continued)
The Fund intends to repurchase shares of its common stock, at such times and in such amounts as is deemed advisable and in accordance with applicable law, subject to various factors, including the limitations imposed by the federal securities laws governing the repurchase of an issuers stock by the issuer and the ability of the Fund to raise cash to repurchase shares of the Funds common stock in a tax-efficient manner.
Note 7Tender Offer
On March 22, 2017, the Fund announced a one-time cash self-tender offer (the Offer), which was approved by the Board. The Fund commenced the Offer on March 28, 2017 for up to 2,812,653 of its issued and outstanding shares of common stock, which represented approximately 10% of the Funds issued and outstanding shares as of the commencement of the Offer, at a price per share equal to 98% of the Funds NAV determined as of the close of the regular trading session of the New York Stock Exchange (NYSE) on the business day immediately following the day the Offer expired. The Offer expired at 5:00 p.m., New York time, on April 24, 2017.
Approximately 17,795,965 shares of common stock, or approximately 63% of the Funds outstanding shares as of the commencement of the Offer, were properly tendered. The Fund accepted 2,812,653 shares, or approximately 15.8% of the shares tendered, on a prorated basis, for cash payment of $12.85 per share, which represented 98% of the Funds NAV per share as of the close of regular trading session of the NYSE on April 25, 2017.
Note 8Capital Commitments
As of June 30, 2018, the Fund maintains an illiquid investment in one private equity limited partnership. This investment appears in the Funds Schedule of Investments. The Funds capital commitment for this partnership is shown in the table below:
Investments |
Original Capital |
Unfunded |
||||||
Private Equity Limited PartnershipInternational (a) |
||||||||
Aravis Biotech II, Limited Partnership |
$ | 3,272,910 | $ | |
* | The original capital commitment represents 3,250,000 Swiss francs, which has been fully funded as at June 30, 2018. The Swiss franc/U.S. dollar exchange rate as of June 30, 2018 was used for conversion and equaled 0.9930 as of such date. |
(a) | This category consists of one private equity limited partnership that invests primarily in venture capital companies in the biotechnology and medical technology sectors. There is no redemption right for the interest in this limited partnership. Instead, the nature of investments in this category is that distributions are received through the realization of the underlying assets of the limited partnership. |
Note 9Litigation
On April 19, 2017, Full Value Partners, L.P., an affiliate of Bulldog Investors, LLC, filed a putative class action lawsuit in the Court of Chancery for the State of Delaware against the Fund and its then-current Directors (Full Value Partners, L.P. v. The Swiss Helvetia Fund, Inc., et al., C.A. No. 2017-0303-AGB). On April 20, 2017, plaintiff filed an amended complaint and an amended motion for expedited proceedings, which, following oral argument, the Court denied in full on May 2, 2017. Defendants filed a motion to dismiss plaintiffs amended complaint on July 20, 2017, and, on September 15, 2017, the Court granted plaintiffs unopposed motion to dismiss the action as moot. On November 1, 2017, plaintiff filed a motion for an award of attorneys fees and expenses. On June 11, 2018, the Court
30
THE SWISS HELVETIA FUND, INC.
Notes to Financial Statements (Unaudited) (concluded)
granted that motion and awarded plaintiff $300,000 for attorneys fees and expenses. The amount was paid by the Funds insurance.
Note 10Subsequent Events
On August 22, 2018, the Board approved a tender offer to repurchase up to 65% of the Funds outstanding shares for cash at a price equal to 98% of the net asset value per share on the expiration date. The tender offer is expected to commence promptly following the completion of the distribution described below and to be completed during the fourth quarter of 2018. In accordance with the rules of the U.S. Securities and Exchange Commission, the Fund may purchase in the tender offer additional shares of the Fund not to exceed 2% of the Funds outstanding shares without amending or extending the tender offer.
Prior to commencing the tender offer, the Fund intends to (1) dispose of a significant portion of its portfolio securities in an orderly fashion, and (2) distribute substantially all of its realized capital gains to stockholders. Based on managements current estimate of the Funds unrealized and realized capital gains, the distribution is currently estimated to be $4.91 per share, or 36% of the Funds total net assets, and will be paid in newly issued shares of the Fund. Stockholders will have an opportunity to elect to receive cash in lieu of stock subject to a limitation on the total amount of cash to be distributed by the Fund equal to 20% of the aggregate distribution. The number of shares of stock to be issued will be based upon a price equal to the volume weighted average price of the Funds shares on the New York Stock Exchange over the three-day period commencing on day after the final date for making such election.
In view of these extraordinary actions, the Board has determined to suspend until further notice any distributions that would otherwise be payable pursuant to the Funds managed distribution plan. In addition, pending the completion of the tender offer, the Fund has suspended its previously announced stock repurchase program.
The actual amount of the distribution will be announced after the record and payment dates for the distribution are determined and may change, possibly materially, from managements current estimate. The final determination of the sources of all distributions in 2018 will be made after year end.
31
THE SWISS HELVETIA FUND, INC.
Voting Results
32
THE SWISS HELVETIA FUND, INC.
Information Regarding Approval of Investment Advisory Agreements (Unaudited)
33
THE SWISS HELVETIA FUND, INC.
Information Regarding Approval of Investment Advisory Agreements (Unaudited) (continued)
34
THE SWISS HELVETIA FUND, INC.
Information Regarding Approval of Investment Advisory Agreements (Unaudited) (concluded)
35
THE SWISS HELVETIA FUND, INC.
Automatic Dividend Reinvestment Plan (Unaudited)
36
THE SWISS HELVETIA FUND, INC.
Automatic Dividend Reinvestment Plan (Unaudited) (continued)
37
THE SWISS HELVETIA FUND, INC.
Automatic Dividend Reinvestment Plan (Unaudited) (concluded)
38
THE SWISS HELVETIA FUND, INC.
39
Semiannual Report
For the Six Months Ended
June 30, 2018
SWZ SAR 6-30-18
Item 2. Code of Ethics.
Not applicable for semi-annual report.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual report.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual report.
Item 6. Investments
(a) Schedule is included as part of the report to shareholders filed under Item 1 of this Form.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable for semi-annual report.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable for semi-annual report.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company & Affiliated Purchasers.
On December 4, 2017, the Fund announced a stock repurchase program effective for 2018. Under the program, the Fund is authorized to make open-market repurchases of its common stock of up to 500,000 shares. The Fund did not repurchase any common stock pursuant to the program during the period ended June 30, 2018. The principal purpose of the Funds stock repurchase program is to enhance stockholder value by increasing the Funds net asset value per share without creating a meaningful adverse effect on the Funds expense ratio. The Fund intends to repurchase shares of its common stock in the future, at such times and in such amounts as is deemed advisable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to procedures by which shareholders may recommend nominees to the Board of Directors.
Item 11. Controls and Procedures.
(a) | The Registrants principal executive officer and principal financial officer have concluded, based on their evaluation of the Registrants disclosure controls and procedures as conducted within 90 days of the filing date of this report, that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the Registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. |
(b) | There have not been any changes in Registrants control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a) | If the registrant is a closed-end management investment company, provide the following dollar amounts of income and fees/compensation related to the securities lending activities of the registrant during its most recent fiscal year: |
(1) Gross income from securities lending activities;
(2) All fees and/or compensation for each of the following securities lending activities and related services: any share of revenue generated by the securities lending program paid to the securities lending agent(s) (revenue split); fees paid for cash collateral management services (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in the revenue split; administrative fees that are not included in the revenue split; fees for indemnification that are not included in the revenue split; rebates paid to borrowers; and any other fees relating to the securities lending program that are not included in the revenue split, including a description of those other fees;
(3) The aggregate fees/compensation disclosed pursuant to paragraph (2); and
(4) Net income from securities lending activities (i.e., the dollar amount in paragraph (1) minus the dollar amount in paragraph (3)).
Not applicable.
(b) | If the registrant is a closed-end management investment company, describe the services provided to the registrant by the securities lending agent in the registrants most recent fiscal year. |
Not applicable.
Item 13. Exhibits.
(a)(l) | Not applicable. | |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. | |
(a)(3) | Not Applicable. | |
(a)(4) | Not applicable. | |
(b) | Certification required by Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 (Exhibit filed herewith). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The Swiss Helvetia Fund, Inc. | ||
By: |
| |
Mark A. Hemenetz, Principal Executive Officer August 28, 2018 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: |
| |
Mark A. Hemenetz, Principal Executive Officer August 28, 2018 |
By: |
| |
David Marshall, Treasurer and Principal Financial Officer August 28, 2018 |