Directors and Officers

Investment Advisor

Hottinger Capital Corp.

1270 Avenue of the Americas, Suite 400

New York, NY 10020

(212) 332-7930

Administrator

Citi Fund Services Ohio, Inc.

Custodian

Citibank, N.A.

Transfer Agent

American Stock Transfer & Trust Company

59 Maiden Lane

Plaza Level

New York, NY 10038

Legal Counsel

Stroock & Stroock & Lavan LLP

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

The Investment Advisor

The Swiss Helvetia Fund, Inc. (the “Fund”) is managed by Hottinger Capital Corp., which belongs to Groupe Banque Hottinger & Cie SA.

Groupe Banque Hottinger & Cie SA dates back to Banque Hottinguer, which was formed in Paris in 1786 and is one of Europe’s oldest private banking firms. Groupe Banque Hottinger & Cie SA has remained under the control of the Hottinger family through seven generations. Its headquarters are in Zurich with offices in Geneva, Sion, Basel, Brig and New York.

Executive Offices

The Swiss Helvetia Fund, Inc.

1270 Avenue of the Americas, Suite 400

New York, NY 10020

1-888-SWISS-00 (1-888-794-7700)

(212) 332-2760

For inquiries and reports:

1-888-SWISS-00 (1-888-794-7700)

Fax: (212) 332-7931

email: swz@swz.com

Website Address

www.swz.com

The Fund

The Fund is a non-diversified, closed-end investment company whose objective is to seek long-term capital appreciation through investment in equity and equity-linked securities of Swiss companies. The Fund also may acquire and hold equity and equity-linked securities of non-Swiss companies in limited instances.

The Fund is listed on the New York Stock Exchange under the symbol “SWZ”.

Net Asset Value is calculated daily by 6:15 P.M. (Eastern Time). The most recent calculation is available by calling 1-888-SWISS-00 or by accessing our Website. Net Asset Value is also published weekly in Barron’s, the Monday edition of The Wall Street Journal and the Sunday edition of The New York Times.

Global Economic Review

Four years after the start of the last financial crisis, developed countries continue to struggle to achieve sustainable economic growth, although the United States has recovered better than others. Recently, however, U.S. growth has slowed along with a greater deceleration of growth in China.

The global manufacturing sector contracted in June, falling to a three-year low of 48.9%, primarily as a result of ongoing economic issues in the Eurozone where production continued to contract sharply. Declines occurred in Germany, France, Italy, Spain and Greece. Notably, global manufacturing new orders weakened in June for the first time since the beginning of the year. Input prices weakened for the first time in seven months as a result of a reduction in demand for raw materials.

A key concern with respect to a sustainable U.S. recovery has been the recent deterioration in the labor market data along with weak income growth, which suggests the U.S. economy is experiencing a loss of momentum. Moreover, weak income growth, coupled with the recent significant slump in consumer confidence, suggests that consumer spending in the United States will decline further in the months ahead. While the manufacturing sector has been under pressure, other segments of the U.S. economy, such as capital spending and even consumption, to a larger extent, have continued to follow a typical recovery pattern and should remain resilient on the back of

softening oil prices and the increasing availability of credit. On the housing market front, some signs of stabilization have appeared as a result of the ongoing and dramatic deleveraging of household debt. The United States, however, faces a significant fiscal cliff at year-end as a series of tax cuts and other programs, which could account for nearly 4% of the U.S. gross domestic product (“GDP”), are set to expire in January 2013.

In the Eurozone, private lending has barely recovered from the 2008 slump. Europe, as a whole, avoided a technical recession in the first quarter of the year, with GDP data showing stagnation rather than contraction with the core economies expanding significantly, offsetting the sharp contraction seen in the peripheral countries. More recently, however, the economic weakness seen in the peripheral Eurozone countries has spread to the core countries. German confidence indices have weakened sharply, suggesting that a move back into a recession is likely to have been only delayed and not averted.

In Spain, austerity measures have put tremendous strain on its economy, with unemployment reaching more than 24%. The 100 billion euros credit line provided in early June represents around 7% of Spain’s GDP. Spain’s banking problems are concentrated amongst domestically-focused, often second-tier banks, while larger banks with comparatively lesser exposure to Spanish real estate have been more resilient during this economic downturn. European policy

makers are committed to directly injecting 100 billion euros into the Spanish and Italian banking sectors, with the funding coming from two European Financial Stability Facility (“EFSF”) and European Stability Mechanism (“ESM”) bailout funds. Furthermore, policy makers have introduced a flexible use of the EFSF and ESM funds to purchase bonds of distressed Eurozone countries in both the primary and secondary markets, subject to very few conditions. Additionally, the European Central Bank (“ECB”) was given a more powerful role in the supervision of Eurozone banks, which could include laying the foundation for a banking union and, later on, a fiscal union. The ECB, however, opposes debt monetization given certain legal and institutional constraints.

In conclusion, European officials have outlined their efforts to move towards allowing the bailout funds to buy sovereign debt of troubled European nations, implementing deposit insurance and, more generally, moving to greater fiscal integration. One major obstacle towards these efforts is the lack of an enforcement mechanism, which is one reason why Germany is demanding that any fiscal union must precede the issuance of Eurobonds.

In the emerging markets, China faced a significant slowdown in exports due to the decline in Eurozone demand. There are, however, some positive signs, including the potential for the Chinese housing market to bottom out along with a decision to cut

interest rates in June for the second time in less than a month. Some Chinese cities also are gradually easing housing market restrictions. Chinese authorities have accelerated the pace of monetary and fiscal policy easing in recent weeks. All of this suggests the Chinese economy could start recovering during the second half of the year and that government attempts to revive bank lending are starting to work. China itself still appears to have firepower to help growth hold up during this year’s delicate political transition. In India and Brazil, GDP growth also decelerated, but the policy mix should become more aggressive in the coming months with activity gaining strength in the second half of the year.

Overall, global equities exhibited massive divergence in the second quarter of the year, with European equities dropping around 5%, emerging markets tumbling 10%, while U.S. stocks were generally flat. While valuations have slightly risen on the back of the EU Summit, they remained cheap relative to historical valuations and government bond yields. Dividend yields on equities are still in excess of government bond yields in the United States, Germany and Japan. Softness in the global economy will continue in the coming months, which will require more accommodative monetary policies.

Swiss Economic Review

In Switzerland, real GDP rose faster than expected in the first quarter as the euro/Swiss franc exchange rate floor of 1.20 played a stabilizing role with exports of

goods declining only slightly while exports of services rose. Consumer confidence recovered from depressed levels late last year on the back of solid real income growth and an improving labor market, historically elevated savings rates and sustained housing prices, all of which lead to a substantial increase in private consumer spending. For instance, retail sales surged 6.2% in May from the previous month. Since the beginning of May, the euro and the Swiss franc have weakened by around 5% against the U.S. dollar. At the beginning of June, 10-year Confederation bonds reached a new all-time low, at around 0.5%, while 30-year bonds were trading in the market at yields under 1%. For bonds with short to medium-term maturities, yields were in negative territory. The low interest rate environment continues to favor robust growth in lending and rising real estate prices.

On the monetary front, the Swiss National Bank’s (“SNB”) foreign currency reserves surged to 364.9 billion Swiss francs at the end of June, up from 305.9 billion Swiss francs in the previous month as a result of currency purchases to maintain the exchange rate floor. The SNB reiterated its utmost determination and preparedness to buy foreign currency in unlimited quantities to maintain the exchange rate floor at 1.20. The exchange rate between the euro and the Swiss franc has fluctuated between 1.20 to 1.24 since the SNB introduced the floor on September 6, 2011, breaching it just once on April 5th of this year. Until May, the euro remained well supported against the U.S.

dollar as a result of the repatriation of assets invested abroad by European financial institutions aiming to comply with European Bank Association (“EBA”) core Tier 1 requirements of 9% by the end of June, but has since dropped to a two-year low against the U.S. dollar. The SNB may continue to build reserves so long as inflation is not becoming an issue. Strong elevation in domestic prices does not appear to be in the cards: as of June the year-over-year Consumer Prices Index change has come down nine straight months. The strength of the Swiss franc against the euro in the last three years before the peg was instituted is working its way through supply chains and sellers of European imported goods in Switzerland are finally lowering prices in domestic currencies.

The SNB is forecasting an inflation rate of -0.5% for 2012 and 0.3% for 2013. Consequently, there is no risk of inflation in Switzerland in the foreseeable future. The SNB expects economic growth of around 1.5% for 2012. Similarly, Switzerland increased its 2012 GDP growth forecast to 1.4%, as a result of robust domestic economic activity and a relatively resistant export industry. The uncertainty about future developments in the Eurozone has again risen and led to higher capital inflows. These inflows have lowered mortgage costs tremendously and created upside pressures on prices in the Swiss residential real estate market. A government-led panel is currently weighing measures including capital controls, as well as negative interest rates that would be applied to non-domestic deposits. Finally, the KOF

leading indicator increased for the fifth straight month in June, reaching its highest level since September 2011, on the back of strong momentum in the watch industry, in contrast to the still weak purchasing managers index.

Sector Review

Consumers: food & beverages

Despite the perception of a fairly valued sector, the European food sector continued trading at a large premium to the consumer sector. Stocks such as Nestlé and Lindt gained momentum in June and outperformed the Swiss Performance Index (“SPI”) for the quarter by 4.5% and 6.5%, respectively. Nestlé’s stock performance was not affected by the profit warning issued in mid-June by its European peer, Danone, as a result of losses arising from its strong presence in southern Europe and by hedging losses on commodities contracts. During the quarter, the European Food and Beverage Index remained at a historically high premium of almost 60% to the overall market. At a current valuation of 17.3 times its 2012 earnings estimates, Nestlé’s stock seems fairly valued. Slowing consumer demand in developed markets, higher cost inflation and a more difficult year-over-year comparison could limit further upside in the short term.

On April 23, 2012, Nestlé acquired Pfizer’s infant nutrition business for $11.8 billion, which represents its largest acquisition since the $10 billion acquisition of Ralston Purina (pet food) in 2001. The transaction, which should be accretive for Nestlé in 2013, should

reinforce its presence in emerging markets. Latin America, China, South Asia and the Middle East offer a dynamic trading environment with organic growth rates in the range of 11% to 15%. That compares to a low single digit rate for the European markets.

Personal & household goods

Swiss watch export figures remained quite strong as shown in the latest publications in May and June. The price component of the figures went up while volumes were more subdued. It remains to be seen if numerous reports about high inventory levels in the distribution channel will prove accurate, as those levels are not reflected yet in the export figures, which would reduce demand in the near future. The exposure of the Fund to the luxury goods sector was reduced slightly during the last quarter, and Fund Management continues to closely monitor the sector for signs of weakening in Chinese demand.

Financials: banks, financial services and insurance

During the first quarter, the Fund had invested in Credit Suisse as Management believed the company was undervalued because the market was not accounting for the quality of Credit Suisse’s wealth management franchise, but was discounting the book value of the company at the same rate as European banks that had much more exposure to the risky sovereign debt of the southern European countries. In addition, Management expected that the introduction and deployment of the Long Term Refinancing

Operations (“LTROs”) by the ECB, which had improved liquidity in the refinancing activities of the banks, would continue to have a strong positive effect on bank stocks.

Late in the second quarter, however, the SNB announced that UBS and, in particular, Credit Suisse should bolster their loss-absorbing capital to protect against weakening economic conditions. Originally, the deadline for Swiss banks to fully comply with Basel III capital requirements was 2019, but it now seems as the SNB is asking for quicker compliance with these requirements. The SNB announcement had quite a negative impact on Credit Suisse, as the market anticipated that the company would have to move its capital plan forward by issuing dilutive securities as opposed to be able to let its equity capital expand by earnings accumulation over time. In addition, the positive effects from the LTROs stated to fade much earlier than anticipated as European solvency issues were reignited. Trading conditions in the capital markets also took a turn for the worse at the end of the first quarter making it difficult for investment banks to earn decent returns. Management concluded that the pressure from the Swiss authorities combined with the deterioration of the capital markets would keep return on equity for investment banks structurally low and, at least in the short-term, possibly lower than their cost of equity.

As a result, Management reduced the Fund’s exposure to both Credit Suisse and UBS during the second quarter as multiple expansion, despite quite being at low levels,

was unlikely given the structural headwinds weighing on the sector. Overall, the Fund continued to be significantly underweight against the SPI in the financial sector during the second quarter of 2012.

The insurance sector overall is trading well below book value and at around 8 times 2012 estimated earnings per share. The valuation of the sector appears to reflect some of the uncertainty about the development of the Eurozone debt crisis and the current low interest rate levels in core European countries and the United States. Moreover, most companies are implementing substantial restructuring measures. Although the Swiss authorities decided to lower the minimum guaranteed rate from 2% to 1.5%, which should lead to an improvement in group life margins, the Fund remained slightly underweight in the life insurance sector as companies’ margins continued to be under pressure against the backdrop of regulatory reform and a new economic solvency regime (Solvency II), which is set to be introduced in 2013.

Strong underlying results coupled with the absence of major natural catastrophes and realized gains on investments, boosted Swiss Re’s growth this year, which also has been supported by substantial price increases in its renewals. Moreover, Swiss Re has benefitted from $7 billion in excess capital and the implementation of a new divisional structure that has brought more clarity regarding the profitability of its different units. The upward trend in the price for Swiss Re is expected to continue in 2012 and the company

is prepared to deploy more capital to capture the most attractive opportunities. Swiss Re has recently reiterated its intention to become the world’s leading reinsurer as it works to become the leader in the wholesale reinsurance industry. Zurich Insurance Group also has remained well-positioned as a result of continued price increases in non-life units, a strong capital position and an attractive dividend yield. The Fund maintained a slight overweight in Swiss Re and Zurich Insurance Group, while maintaining a minor underweight in the sector compared to the SPI.

Industrials Goods and Services

Stock prices in the industrial sector weakened substantially during the last quarter, erasing most if not all of the gains seen during the first quarter, primarily as a result of the rapidly deteriorating economic situation in Europe. Improvements in financing conditions in the Eurozone after the implementation of the LTROs were only temporary and did not translate in higher credit availability and higher overall demand. China’s slowdown accentuated the negative trading conditions in Europe for the industrial sector.

Amongst the larger companies, ABB’s stock price was negatively affected by news of the entry of substantial competitors in its transmission and distribution markets. Based on current valuations, investors now expect a very weak development in order intakes and a drop in group-wide operating margins of at least 200 basis points. Industrial automation has been the outperforming segment of ABB,

the business drivers being expansion of an industrial base in the emerging markets and the need to improve energy efficiency in different manufacturing sectors. Pricing in power systems and power products has been under pressure for some time, but so far ABB has been successful at offsetting this weakness with cost reduction programs. The company masters important futures technologies, but it operates in a highly competitive market. Overall, ABB’s valuation is at a historic low, and it has a 4% dividend yield and enough firepower for acquisitions.

The industrial companies linked to energy infrastructure and capital expenditure markets generally continue to outperform the manufacturing sector as a whole. In this area, the Fund has invested in Burckhardt Compression, a compressor manufacturing company, where business is still booming and is driven by strong end-market demand for gas transportation and storage, which benefits from the U.S. shale gas activity. In addition, the company saw increased demand for its solutions for the refinery industry, which needs to handle more clean fuels and has to modernize its infrastructure. The service component of the business is also increasing, which helps improve the return on operating assets, and the company is extending its product range for gas processing applications. The market in which Burckhardt Compression operates is relatively consolidated, with the largest four players holding 65% of the market share. Pricing is strong and the company is still able to deliver a return on invested capital of close to 30%.

Aside from Syngenta, the Fund is invested in agricultural businesses through Bucher, a company that, through its Kuhn group, manufactures solutions for plowing, seeding and fertilization. As agricultural commodities continue to increase in price, incentives are high to expand acreage and use machinery. The company, however, has recently suffered from uneven order intake (high base comparison), and weakness linked to its municipal division (street sweepers) and Emhart Glass (glass machinery).

For industrial service companies, growth results have come in above expectations and margins are barely disappointing. Leadership, strengthened by acquisition and product innovation, allowed certification and testing company, Société Générale de Surveillance (“SGS”), and forwarding company, Kuhne & Nagel, to outgrow their peers, which has justified their premium valuations to the Swiss market. SGS grew organically and through acquisitions, purchasing seven companies in 2012. The company also added size to its international lab network and, despite well-publicized increases in investment programs, maintained high margin levels. After publishing disappointing margins in the first quarter of the year, Kuhne & Nagel reigned in operational costs and was able to improve its margins in a difficult trading environment, despite an increase in freight rates charged by shipping lines.

The Fund is overweight in the industrial sector, but is more overweight on the capital

goods manufacturing side than on the service side due to the larger historical valuation discounts.

The strength of the U.S. dollar against the Swiss franc and the euro should help reported sales in Swiss francs. On the margin side, companies with large manufacturing bases in Europe should disproportionally benefit from the recent increase in the weakness of the euro.

Construction and Materials

Emerging markets countries reduced activities in construction and in infrastructure spending, which put pressure on the construction and materials sector during the last quarter. Investors will be looking for decisive reactions to this lower level of activity. With current low market valuation, the capacity of companies to maintain their margin levels by implementing cost savings should put a floor under their stock prices. This will likely keep investors happy in the shorter-term, but will likely reduce investment activity and lower GDP growth in the longer-term.

The cement producer, Holcim, is one of the companies that has announced a set of specific measures aimed at preserving margins. Limited pricing power and unsatisfactory return on invested capital pushed the company to propose a drastic cost reduction program, including more efficient fuel consumption and lower logistic expenses. Selective divestments are also expected.

Sika, a company active in cement additives, sealants and adhesives, suffered from the sharp reduction in infrastructure spending in China, but benefitted from the resumption of growth in the United States, particularly in the refurbishing segment of the construction market. The company is international, quite innovative and has a portfolio of products with structural demand in water conservation and water proofing, energy conservation and refurbishing of infrastructure. The company’s value added is becoming apparent in the emerging markets, especially as demand has shifted from commodity products to more advanced technologies where Sika has a market advantage. Overall, stricter regulations are a driver for Sika’s business growth. Lately, the company’s stock has been under pressure as investors reduced their positions due to concerns about the sustainability of the company’s margin levels and its exposure to southern Europe. Short term developments in Europe are expected to penalize the company, as 25% of its operating profit has been in that region. However, the growth in other regions like North and South America, a potential rebound of Chinese infrastructure investments and a reduction in raw material cost inputs that should help margins, are supportive of the stock.

Energy

The oil service and equipment sector has continued to be very volatile. For example, Transocean’s stock was up 46% from January to March, fell back down 30% in May and

then rebounded again in June. After having been on a massive uptrend, the operating cost of Transocean was lower in the first quarter of the year, although investors expect this positive development to be temporary. Growth results were below expectations, but capacity utilization and day rates are on a positive trend. Short term volatility in oil prices might not have a drastic effect on the demand for drilling service. It remains to be seen how Transocean will catch up with its competition on the modernization of its fleet while at the same time reducing its debt load.

Healthcare: Pharmaceuticals; biotechnology

Healthcare stocks outperformed the worldwide indices in the second quarter of the year. The MSCI Healthcare Index ended June with a positive total return of 1.1% compared to a drop of 5.6% for the MSCI World Index. Swiss pharmaceutical stocks gained momentum during the second quarter, which coincided with the anticipation of a slowdown in the global economy and revisions of companies’ earnings estimates. The sector is seen as particularly interesting for value investors, which look at capital allocation and dividend distribution.

Despite the failure of Roche to demonstrate the efficacy of Dalcetrapib for the treatment of high cholesterol, the company’s stock ended June with a positive return of 4.1%, outperforming the SPI by 5.6%. Also, the hostile bid to acquire the U.S. diagnostic company Illumina for $5.7 billion was abandoned in April 2012. The development of the diagnostic activity at Roche is part of the

company’s long-term strategy and the personalized medicine field in particular is expected to become a key element in the treatment options. For the pharmaceutical business, half of the budget will continue to be allocated to oncology with the remainder going to unmet medical needs, such as schizophrenia and Alzheimer’s, and a newly identified therapy in the metabolism franchise. The critical economic situation in the southern European countries has forced Roche’s management to reduce its receivable exposure, particularly in Spain. For 2012, the company should be able to maintain its current level of top line growth in the mid-single digit range despite pricing pressures and competition. In general, pharmaceutical companies should continue to experience pricing pressure in the range of 5% to 6% in Europe compared to 2% to 3% before the financial crisis began. To mitigate this impact, companies like Novartis are shifting their primary care activity to specialized portfolios and tend to rely less on public reimbursement.

Novartis matched the performance of the sector with a positive return of 5.9% during the second quarter. As the blockbuster drug Diovan is losing its patent protection in the United States this September, investors’ attention is focused on the success of newly launched products to replace the $3 billion sales generated by Diovan in the antihypertensive franchise alone. Top line growth is mainly driven by the pharmaceuticals and Alcon, balanced by weaker figures for the generic business Sandoz. The activity of the

consumer health division should resume after the manufacturing problem that affected the production earlier in the year was resolved. The Fund continues to maintain significant exposure to Roche and Novartis, although its ability to make additional investments in both companies is limited due to regulatory restrictions against sector concentration.

Actelion’s franchise in the pulmonary hypertension market was reinforced with the successful conclusion of the study with Macitentan. If approved by the U.S. FDA and European authorities, Actelion will reinforce its leading position in this market and a return to growth in 2014 in addition with cost saving programs.

On June 28th, the U.S. Supreme Court upheld the Affordable Care Act, which was slightly negative for managed care (HMO) companies. In general, the topic of healthcare reform will be more pronounced as the U.S. elections approach in November, with likely additional government initiatives to bend the unsustainable cost curve.

Chemicals

In the second quarter, the defensive names in the sector outperformed the more cyclical chemical companies. The recent decrease in crude oil prices should trigger a destocking effect in the sector and should result in improved gross margins. As the Eurozone manufacturing purchasing managers index continued to decrease and order intakes in Europe are losing momentum, chemical manufacturers with the highest

industrial exposure should face some headwinds. Industrial chemical companies may still have to adjust their optimist guidance announced in the first quarter. In Switzerland, Clariant, which has the most cyclical activities, was more volatile. In contrast, Givaudan, the flavor and fragrance global leader, was steadier and outperformed the European chemical sector (DJ Stoxx Chemicals) in the second quarter. The defensive nature of Givaudan, however, is well reflected in its valuation, which represents a large premium to the SPI on a price-to-earnings basis.

The agribusiness segment deserves higher attention for its structural growth rate opportunity. The crop protection technologies offer major long term growth in the emerging markets, where fertilizer application rates still remain high. The recent rebound of crop prices has helped the performance of Syngenta and the robust sales growth start to 2012 bodes well for a low double digit rate for 2012. The extreme dry weather conditions in the middle of the growing season in the United States could reduce yields. Syngenta is expected to play a leading role in new growth markets, such as Africa. In May, Syngenta’s management announced a long term investment commitment to develop crop technology solutions and improve productivity.

Private Equity and Other Illiquid Investments

The Fund did not invest in any new illiquid direct investments or private equity funds in the second quarter. The Fund’s total

investment in its two limited partnership holdings, Aravis Biotech II, LP and Zurmont Madison Private Equity, LP, represented 3.75% of the Fund’s net assets as of June 30th while the Fund’s illiquid direct investments represented 4.00% of net assets as of June 30th.

Outlook

Swiss companies have sounded much more cautious lately with respect to their outlook for the rest of the year. The accelerated slowdown of the European economies as a result of increasing austerity measures and weaker exports, as well as the difficult financing conditions and rapidly slowing inflation, have created a difficult climate for business confidence. An abundance of share buy-backs and a lack of new offerings contributed to the shrinkage of the supply of stocks, which also acts as a price support.

On the other side, low stock valuation, modest corporate balance sheet leverage and good cash flow generation has produced a good margin of safety for equity investors in a very volatile macro-economic environment, which highlights a material advantage of the publicly-listed stocks asset class—liquidity.

Swiss companies should continue to benefit from very favorable liquidity conditions, aided by the SNB’s maintenance of the exchange rate floor between the euro and the Swiss franc, and the large inflow of money from countries with difficult fiscal situations. Monetary aggregates are still growing much faster in Switzerland than in the rest of Europe.

The traditional defensive sectors, like pharmaceuticals, food producers and industrial services, which have low earnings volatility, could see valuation support from continuous high dividend pay-outs. The more cyclical companies on the other side should see a rebound of their very depressed valuations, especially if they are able to adapt their cost structure to compensate for the lower capacity utilization of their fixed assets.

Fund Performance review

The trading environment in the Swiss markets was quite difficult and erratic like most other markets. The first three months of the year were up close to 7% in local currency, but April and May saw a complete reversal of that move, and in June the market recaptured about 80% of the initial uptick. The market appreciation since May saw less participation though, as the movement was more limited to large caps and defensive stocks. This penalized the Fund, when compared to the SPI, as the Fund is structurally underweight in pharmaceuticals and is overweight in mid and small capitalization stocks, and because the Fund’s private equity portfolio was practically unchanged. Aside from concentration restrictions, the Fund positioning was driven, in part, by the idea that the huge valuation gap between defensive (except pharmaceuticals which have a valuation closer to the broader market) and more cyclical stocks would start to close. The rapid recent deceleration of the European economy, however, prevented that from happening. Companies with low expectations for sales growth, but with resilient

margins, have outperformed and maintained a premium valuation of close to 50% compared to the SPI.

The Fund’s portfolio structure has been adjusted slightly with a reduction in some industrials and financials, taking advantage of a decent rebound from a yearly bottom. However, as Chinese demand for infrastructure projects should rebound from very depressed levels and U.S. activity remains positive in the construction, energy and manufacturing sectors, along with the strength of the U.S. dollar, trade conditions are expected to improve for the companies where the Fund has a sizable exposure.

The Fund had a net asset value total return in Swiss francs of 2.59% compared to 1.8% for the Euro Stoxx50 Index and 5.42% for the SPI. In U.S. dollars the Fund’s net asset value was up 1.39%.

Sincerely,

Alexandre de Takacsy

President

Rudolf Millisits

Chief Executive Officer

Sources: Bloomberg, Lipper, Morningstar and Citi Fund Services Ohio, Inc.

New Investments by the Fund

ABB, Ltd.

Bucher Industries AG

Credit Suisse Group AG

Dufry AG

Holcim, Ltd.

Rieter Holding AG

Weatherford International, Ltd.

Additions to Existing Investments

Actelion, Ltd.

Ixodes AG, Series B Preferred Shares

Transocean, Ltd.

Zurmont Madison Private Equity, Limited Partnership

Securities Disposed of / Expired

Adecco SA

Bank Sarasin & Co., Ltd.

Inficon Holding AG

Julius Baer Group, Ltd.

Swiss Life Holding AG

Reductions in Existing Investments

Addex Pharmaceuticals, Ltd.

Allreal Holding AG

Clariant AG

Compagnie Financiere Richemont SA

Galenica AG

Georg Fischer AG

Givaudan SA

Kuehne + Nagel International AG

Nestle SA

Novartis AG

Swatch Group AG

Swiss Re AG

Syngenta AG

UBS AG

Zehnder Group AG

Zurich Financial Services AG