<PAGE>
THE
IRISH
INVESTMENT FUND
First Quarter Report
For the Period Ended January 31, 1996
<PAGE>
Chairman's Letter
-----------------
Dear Stockholder,
The Irish equity market performed strongly during the quarter ended January
31, 1996, closing the period up 10.6% in Irish Pound terms. After adjusting for
the strength of the U.S. Dollar against the Irish Pound, the return converted
into an increase of 6.8% in U.S. Dollar terms. Over the same period, The Irish
Investment Fund, Inc.'s (the "Fund") net asset value ("NAV") increased to
$13.88 from $13.61, an increase of 4.0% when allowance is made for the dividend
of $0.27 per share which was paid to stockholders at the end of December.
ECONOMIC ENVIRONMENT
The Irish economy continues to experience strong growth driven by low
interest rates, high business and consumer confidence, increasing foreign and
domestic capital investment, and a widening trade surplus. The Irish Central
Bank is forecasting that the economy will grow by 4.75% in 1996 after an
estimated 6.0% expansion in 1995 and 7.0% in 1994.
A significant factor in the growth of the economy has been the buoyancy of
the manufacturing sector, the output of which was 20% above the previous year's
level over the first 10 months of 1995. A major reason for the growth in the
manufacturing sector is the continuing success of the Industrial Development
Authority's program in attracting direct foreign investment. An example of this
was the recent announcement by Intel, the U.S. semi-conductor manufacturer, of
its intention to invest an additional $1,300 million in an expansion of its
Irish operations which is expected to generate 2,000 jobs. The 18% increase in
export volumes over the first 8 months of 1995 is also a reflection of this
success in attracting high-quality export-oriented companies.
After a sluggish start to 1995, consumer demand picked up in the second
half of the year with retail sales volumes increasing by 3.8% in the third
quarter of 1995 and by 4.9% and 4.0% in the months of October and November
respectively, over previous years' levels.
Government finances are also benefiting from the economic buoyancy, with
the Exchequer Borrowing Requirement for 1995 coming in some 23% below
expectations at a credible 1.9% of Gross National Product ("GNP"). For 1996,
the Government has set a borrowing target of 2.0% of GNP. The Irish Central
Bank announced a 0.5% reduction in interest rates in December, bringing them
down to 6.5%, following a similar move by the German Bundesbank. It is unlikely
that Irish interest rates can move substantially lower from current levels
given the strength of the Irish economy.
Inflation remains subdued and stood at 2.4% at mid-November 1995. The
strength of the Irish Pound during most of 1995 was a positive factor in
relation to inflation, given the degree of openness of the Irish economy.
Although the U.S. Dollar strengthened against the Irish Pound in the quarter
under review, over the whole of 1995 the Pound appreciated against both the
Dollar (3.4%) and Sterling (4.3%). With the expectation of a strengthening of
the Dollar, the Fund entered into a currency hedge to provide an element of
protection for its NAV.
POLITICAL ENVIRONMENT
The Northern Ireland peace process was negatively impacted by the collapse
of the IRA cease-fire on February 9, 1996. With the support of the Clinton
Administration, both the Irish and British Governments have re-affirmed their
commitment to the process and a firm date has now been set for all party talks.
STOCK MARKET REVIEW
As mentioned above, the Irish equity market performed strongly over the
quarter ended January 31, 1996 registering a gain of 10.6%. A comparison with
major international markets is shown below:
Local Currency U.S. $
-------------- ------
U.S. Equities 9.4% 9.4%
U.K. Equities 6.2% 1.7%
Japanese Equities 17.9% 12.7%
Irish Equities 10.6% 6.8%
In common with international markets, the Irish market was positively
impacted over this period by falling interest rates. The yield on the Irish
government long-term bond decreased by 0.5% to 7.5% over the quarter. As a
result Irish financial stocks were among the strongest performers, with Allied
Irish Bank ("AIB") ahead by 15% over the period.
Smurfit (Jefferson) Group continues to underperform the market as the stock
price is being driven more by the volatile global paper cycle rather than the
economy. Aside from the company-specific attraction of Smurfit (Jefferson)
Group, it is believed that investors have become overly pessimistic on the
outlook for paper product prices and corporate earnings. We believe that, at
current stock prices, Smurfit (Jefferson) Group offers good value.
Irish companies were active on the acquisition front over the quarter.
During December 1995, AIB purchased a 75% equity holding in the U.K. Fund
Manager John Govett Group at a cost of IR98 million. In January, AIB's U.S.
subsidiary First Maryland Bankcorp acquired First Washington Bankcorp for $83.5
million. Both transactions were received positively by the market. Fyffes
announced a joint venture to acquire the banana business of Geest for a total
consideration of Stgl47.5 million. The acquisition consolidates Fyffes position
as a leading player in the European banana business.
OUTLOOK
The Irish economy enters 1996 with considerable momentum and should
continue to deliver superior growth rates. Following substantial profit growth
over the past three years, it is likely that earning gains will moderate in
1996. Yet, the stock market remains attractively priced at 10.5 times earnings
and a dividend yield of 3.2%. It is the Fund's present strategy to maintain a
fully invested position.
Sincerely,
/s/ Peter Hooper
Peter Hooper
Chairman of the Board of Directors
March 11, 1996
<PAGE>
Investments (unaudited)
-----------------------
January 31, 1996
Shares Value
- -------------------------------------------------------------------------------
IRISH COMMON STOCKS (93.7%)
- -------------------------------------------------------------------------------
Abbey 745,000 U.S. $ 1,572,993
Allied Irish Bank 1,917,688 10,767,361
Anglo Irish Bank Corporation 1,405,720 1,385,084
Barlo Group 1,000,356 500,658
Boxmore International 234,000 1,493,183
Clondalkin Group 298,850 1,706,016
Crean (James) 347,625 1,277,661
CRH 1,048,036 7,933,383
FBD Holdings 260,000 740,085
Fyffes 1,635,000 2,838,426
Green Property 825,000 2,283,832
Greencore 218,168 1,849,385
Hibernian Group 300,000 1,266,840
Independent Newspapers 255,000 1,635,163
Inishtech 105,000 919,632
Irish Life 700,000 2,824,585
I.W.P., International 194,943 1,326,276
Jury's Hotel Group 981,695 3,408,525
Kerry Group, Series A 465,000 3,672,664
Smurfit (Jefferson) Group 3,355,840 7,820,318
Unidare 150,000 680,340
United Drug 350,000 1,499,876
Waterford Foods, Class A 1,394,156 2,202,265
Waterford Wedgewood 3,565,739 3,290,322
*+Yeoman International Holdings 982 268,774
TOTAL IRISH COMMON STOCKS
(Cost U.S. $52,834,425) 65,163,647
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UNITED KINGDOM COMMON STOCK (3.7%)
- -------------------------------------------------------------------------------
Northern Ireland Electricity 400,000 2,519,847
TOTAL UNITED KINGDOM COMMON STOCK
(Cost U.S. $2,795,320) 2,519,847
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS BEFORE FOREIGN CURRENCY ON DEPOSIT
- -------------------------------------------------------------------------------
(Cost U.S. $55,629,745#) 67,683,494
Investments (unaudited) (continued)
-----------------------------------
January 31, 1996
Face Value Value
- -------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT (0.1%)
- -------------------------------------------------------------------------------
(Interest Bearing)
British Pound Sterling Pds 19,150 U.S. $ 28,929
Irish Pound IRPds 32,821 51,331
TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost U.S. $80,956) 80,260
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (97.5%)
- -------------------------------------------------------------------------------
(Cost U.S. $55,710,701) 67,763,754
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.5%)
- -------------------------------------------------------------------------------
Net Unrealized Appreciation of Forward
Foreign Exchange Contracts 273,948
Other Assets 2,939,469
Other Liabilities (1,447,371)
----------
1,766,046
- -------------------------------------------------------------------------------
NET ASSETS (100.0%)
- -------------------------------------------------------------------------------
Applicable to 5,009,000 outstanding U.S. $.01 par
value shares (authorized 20,000,000 shares) U.S. $69,529,800
- -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -------------------------------------------------------------------------------
(U.S. $69,529,800 / 5,009,000) U.S. $ 13.88
=====
- -------------------------------------------------------------------------------
#Aggregate cost for Federal tax purposes.
*Non-income producing security.
+Private placement security.
SCHEDULE OF FORWARD FOREIGN EXCHANGE CONTRACTS
FORWARD FOREIGN EXCHANGE CONTRACTS TO SELL
<TABLE>
<CAPTION>
Contracts to Deliver
- -------------------------------------------- Unrealized
Expiration Local In Exchange Value in Appreciation/
Date Currency For U.S.$ U.S.$ (Depreciation)
------ -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
06/28/1996 Irish Pound 12,500,000 19,865,000 19,558,357 $306,643
06/28/1996 Irish Pound 5,133,800 8,000,000 8,032,695 (32,695)
--------
Net Unrealized Appreciation of Forward Foreign
Exchange Contracts $273,948
--------
</TABLE>
<PAGE>
THE IRISH INVESTMENT FUND, INC.
------------------------- DIRECTORS AND OFFICERS -------------------------
Peter J. Hooper - Chairman of the Board
William P. Clark - Director
Gerald F. Colleary - Director
Denis P. Kelleher - Director
James M. Walton - Director
Richard H. Rose - President and Treasurer
Brigid O. Bieber - Secretary
Patricia L. Bickimer - Assistant Secretary
Scott C. Blair - Assistant Treasurer
---------------------- PRINCIPAL INVESTMENT ADVISOR ----------------------
Bank of Ireland Asset Management (U.S.) Limited
Two Greenwich Plaza
Greenwich, Connecticut 06830
----------------------------- U.S. CO-ADVISOR ----------------------------
Salomon Brothers Asset Management Inc
Seven World Trade Center
New York, New York 10048
------------------------------ ADMINISTRATOR -----------------------------
First Data Investor Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
------------------------------- CUSTODIANS -------------------------------
Bank of Ireland
Lower Baggot Street, Dublin 2, Ireland
The First National Bank of Boston
150 Royall Street
Canton, Massachusetts 02021
----------------------- SHAREHOLDER SERVICING AGENT ----------------------
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
------------------------------ LEGAL COUNSEL -----------------------------
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
------------------------- INDEPENDENT ACCOUNTANTS ------------------------
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
----------------------------- CORRESPONDENCE -----------------------------
ALL CORRESPONDENCE SHOULD BE ADDRESSED TO:
The Irish Investment Fund, Inc.
c/o First Data Investor Services Group, Inc.
Exchange Place -- BOS665
Boston, Massachusetts 02109
TELEPHONE INQUIRIES SHOULD BE DIRECTED TO:
1-800-GO-TO-IRL (1-800-468-6475)
