For the three-month period ended March 31, 2018, the performance of The Swiss Helvetia Fund, Inc. (the “Fund”), as measured by the change in value in the Fund’s net asset value (“NAV”), decreased -3.90% in US dollars (“USD”). For the same period, the Fund’s share price performance decreased -4.00% in USD, as the discount at which the Fund traded its shares marginally widened. This compares with a decrease of -3.59% in the Swiss Performance Index (the “Index” or “SPI”) in USD.

Economic environment during the period under review

Global economic review

The global macroeconomic environment began 2018 on a positive footing. The International Monetary Fund (“IMF”) revised its world growth forecast for 2018 and 2019 upwards from 3.7% to 3.9% for both years. In addition, US tax reform provided a temporarily lift to US growth and generated favorable spill-over effects for US trading partners. Towards the end of the reporting period, however, concerns arose that US import tariffs would trigger retaliation, thereby impeding global trade and world economic growth. Inflation expectations gradually picked up, and wage pressure intensified as the US economy remained close to full employment. As a consequence, more interest rate hikes are now expected for the US. Meanwhile, in Europe, the IMF lifted its forecast for Euro-area economies, which

could lead to an earlier than expected end to quantitative easing and low interest rates. As we move into the second quarter of 2018, while the economic environment remains strong, expectations may have gotten a bit ahead of themselves; the economic surprise indices in the US and in Europe both peaked in late 2017.

Market environment during the period under review

Similar to the global macroeconomic environment, equity markets performed well at the beginning of the year. In the US, the S&P 500 Index returned 5.7% in USD. This return was driven by the strong performance of the Technology sector, as illustrated by the 8.7% gain in the Nasdaq Index. At the start of February, however, stocks quickly reversed their path and eventually ended the quarter in negative territory: in the first three months of the year, the S&P 500, MSCI Europe and the SPI lost -0.76%, -1.74% and -3.59%, respectively. While the correction arose suddenly, there were several indications of the impending shift. For example, inflation expectations and long-term interest rates had begun to rise at the end of 2017, and both the Fed and the ECB signalled plans to reverse monetary policy and quantitative easing. In addition, as noted above, economic surprise indices on both sides of the Atlantic peaked in December, and the threat of trade wars had re-emerged as a front-page topic in Q1 2018. Indeed, a few days before the correction, the volatility

index VIX, which had marked a new historical low in late 2017, started to increase.

In light of this background, it was a surprise that the SPI fared worse than the S&P 500 and the MSCI Europe indices, as the large weight of defensive stocks and sectors typically make the SPI more resilient when there is a stock market correction. However, Roche and Nestlé, two index heavyweights, suffered from the start of the year for stock-specific reasons. Shares of Roche fell after Merck released very positive data on Keytruda, its lead candidate drug for immune-oncology, as it now seems more likely that Merck will win the race to market. Furthermore, at

year-end, concerns re-emerged that Roche’s best-selling drugs might get stiffer competition from so-called bio-similars. Nestlé also disappointed with a very weak sales growth in the final quarter of 2017 and with a lacklustre outlook for 2018. Driven by those two heavyweights, the SPI fell more than the Swiss Small & Mid Cap Index, which declined by -1.14%. This represents another surprise, particularly because small and mid caps stocks, which are seen as more volatile and riskier than large cap stocks, not only outperformed during the January rise, but also fell less over the February and March periods.

Performance

In comparing the Fund’s NAV return of -3.90% to the Index’s return of -3.59% in USD, there was a positive relative performance impact from some of the Fund’s larger overweight positions, such as Swatch, Implenia, Logitech, Valiant,

Sonova, Tecan and Lindt & Sprüngli. Being underweight in ABB, Nestlé, Lonza and Roche also had a positive impact on relative performance. Conversely, negative contributions to relative performance came from overweight positions such as Aryzta, VZ Holding, Belimo and Forbo. With

Zurich, Swiss Re, Partners Group, Vifor and ams, the Fund also had negative contributions to relative performance from stocks either not held or held at an underweight by the Fund. Taken together, the portfolio holdings on aggregate delivered a marginally positive contribution to relative performance (including a modestly positive return from cash and the private equity holdings), but this positive contribution was slightly more than offset by costs and other factors.

Portfolio changes

In total, there were 10 purchases and 11 sales of listed equities on a net basis during the first quarter of 2018. As of March 31, 2018, there are 42 listed companies held by the Fund and six direct private equity investments, including one participation in a private equity limited partnership.

The Fund established new positions in ABB, Geberit, Givaudan, Swatch (Bearer) and Zurich. In addition, the Fund participated in the initial public offering of Sensirion.

We bought an initial position in ABB, as we believed the valuation of the

company, following its recent share price correction, no longer warranted a zero weight. However, we remain underweight in ABB.

Geberit and Givaudan are two ‘quality’ companies with leading market share and

best-in-class margins where we believe recent share price declines offered attractive entry points.

Sensirion is a leading developer and producer of environmental and gas flow sensors whose products offer superior accuracy and miniaturization features. We believe that the company is well positioned to take advantage of mega trends such as digitization and industry 4.0, and should be able to grow substantially in the coming years.

Swatch manufactures some of the world’s most reputed luxury watches. We were already overweight in the stock through its registered shares, but added to that overweight through bearer shares, as liquidity appeared more attractive. The company currently benefits from continuing positive news flow, as evidence of recovery in key end markets keeps mounting.

Zurich is a well-established Swiss insurance player. Under CEO Mario Greco, we believe the company is on track to deliver on its strategy and will generate above average earnings. Therefore, we switched our position in Helvetia, another Swiss insurer, into Zurich, as we see more cost discipline in the latter.

In the case of Zur Rose, we saw competitive pressure rising with potential new entrants and the regulatory environment worsening.

We bought a position in Aryzta in 2017 following an announcement that the company’s executive management would be stepping down. At that time, it was also announced that the company would review its holding in Piccard and start focusing on cash flows, which were initiatives we welcomed. Nevertheless, the company issued a profit warning in January 2018, and the share price fell some 43% (in USD) over the quarter. We continue to believe that the company is diligently working through its problems after ousting former management. As a result, we increased our position after the recent share price correction since we believe the investment case is still valid.

In line with our investment philosophy as active managers, we used the heightened volatility and market downturn in February to both increase positions in stocks that we felt corrected too strongly and reduce positions in stocks where the investment case had worsened.

Outlook and Investment View

After strong returns paired with historically low volatility in 2017, volatility picked up in the first quarter of 2018 and equity markets have corrected. We started the year with a positive outlook for economic growth but also highlighted that sentiment indicators were very bullish, which called for caution. While we believe economic prospects are still sound, as evidenced by our upgraded global growth estimates for 2018 and 2019, sentiment

has become more cautious. This has been driven by several developments, such as the imposition of tariffs, greater geopolitical tension and political blockage in important European countries. For example, in Germany, the continuation of the grand coalition will most likely result in political stand-still. In the UK, there are still too many open questions regarding Brexit. In Italy, we expect an unstable government, and necessary reforms are unlikely to happen. And in France, our view is that there is a good chance that Macron, now entering his second year, will be challenged by labor disputes in the public transport sector.

Factoring out external risks, our view is that the global economy has now reached the expansion phase and is no longer in the recovery phase. While for some countries, such as the US, this occurred earlier, in Europe this transition happened more recently in 2017. If estimates hold true, our upgrade of global growth from 3.2% to 3.5% would make 2018 the strongest year since 2011. During an expansion phase firms typically start to experience shortages in spare capacity, leading to inflation of input prices and wages, which in turn drives demand higher. As a result of rising inflation, central banks often tighten monetary policy. Bond yields commonly tend to rise as investors demand additional compensation not only for rising inflation, but also the higher potential returns on equities, driven by stronger economic

growth. Corporate earnings should also develop positively in an environment of economic growth. One could even argue that earnings have the potential to exceed current expectations as operating margins are supported by generally high cost discipline.

In Switzerland, the outlook for economic growth has further improved. The Swiss State Secretariat for Economic Affairs increased its growth outlook for 2018 from 2.3% to 2.4%. Swiss companies generally benefit from a sound economic environment and ongoing productivity gains. In 2018, a weaker Swiss franc compared with its trade weighted currency basket should provide additional support for earnings.

In summary, we believe that the fundamental background for equity markets remains positive with global growth driven by all regions, earnings growth and cost discipline. However, risks (inflation, higher bond yields, external events) have become more visible. As a consequence, we expect higher volatility to persist in the quarters to come. In our opinion, such an environment offers good investment opportunities for active managers, and we intend to stick to our investment philosophy by increasing the Fund’s holdings in quality stocks with attractive valuations while taking profits in stocks that are either too expensive or where quality has deteriorated.