<PAGE>
THE IRISH INVESTMENT FUND
[LOGO]
Annual Report
October 31, 1996
<PAGE>
Chairman's Letter
-----------------
Dear Stockholder,
Prior to reviewing The Irish Investment Fund, Inc.'s (the "Fund") fiscal
year ended October 31, 1996, I would like to comment briefly on the final
quarter. The Irish equity market registered strong gains during the quarter,
with a return of 8.9% in Irish pound terms. The weakness of the U.S. dollar
translated this return into an increase of 9.5% in U.S. dollar terms. By
comparison, the net asset value ("NAV") of the Fund increased to $16.90 from
$15.31, a gain of 10.4%.
Over the fiscal year, the Irish equity market produced a return of 26.5% in
Irish pound terms. As a result of the weakness of the U.S. dollar, this
converted into a return of 27.3% in U.S. dollar terms. The Fund's NAV increased
by 24.2%, excluding the reinvestment of distributions, which is considered by
your Board as a satisfactory performance.
ECONOMIC REVIEW
At a time when Continental Europe is struggling to generate economic
growth, the Irish economy continues to expand at a rapid pace. The Irish Central
Bank expects gross national product ("GNP") to increase by 5.25% in 1996. The
economy expanded by 7.7% in 1995 and 7.2% in 1994.
The key development in economic data in 1996 has been the relative increase
in the contribution of domestic demand to the overall growth rate of the
economy. Irish export growth peaked at 21.1% in October 1995 and has declined
steadily since then to 12.4% in June 1996, bringing the pace of export growth
more in line with import growth. It is important to state that this does not
represent a deterioration in the Irish trade picture -- the overall trade
balance for the first six months of 1996 was a very satisfactory surplus of $6.5
billion.
Irish consumer confidence is being supported by rising disposable incomes,
employment growth, low interest rates, and a strong housing market. Retail sales
volumes were ahead by 6.4% in the first eight months of 1996 over previous year
levels. New car sales over the first ten months of 1996 were 110,800 units,
which represents a 31.0% increase over 1995 levels. With two months of the year
to go, this represents a record year for new car sales in Ireland. The previous
record year was 1978 with 107,600 units.
Following many quarters of positive Irish economic news, a negative emerged
in the agriculture sector when the BSE ("mad cow disease") crisis severely
damaged the European beef industry. European beef consumption now is estimated
to be between 80% and 85% of former levels. Agriculture is Ireland's most
important indigenous industry, accounting for approximately 6% of GNP and 10% of
national employment. The blow to farm incomes will be cushioned by BSE
compensation from the European Union.
Irish inflation remains subdued, with consumer price inflation standing at
1.5% for the year to mid-August 1996. Inflation in Ireland now appears to have
bottomed out and we probably will see mild increases over the coming quarters.
The Irish Central Bank is forecasting average inflation of 2.25% for 1997.
Negotiations have commenced recently between representatives of Government and
employer and employee groups with the aim of putting in place a new three year
National Wage Agreement. Agreement is likely on this front.
STOCK MARKET REVIEW
As mentioned above, the Irish equity market performed strongly over the
final quarter of the Fund's year with a gain of 8.9% which left the market ahead
by 26.5% over the fiscal year. The following is a comparison of the Irish equity
market with major international markets:
Quarter Ended Year Ended
October 31, 1996 October 31, 1996
-------------------- --------------------
Local Local
Currency U.S.$ Currency U.S.$
U.S. Equities +10.2% +10.2% +21.3% +21.3%
U.K. Equities + 6.6% +11.5% +12.8% +16.4%
Japanese Equities - 1.1% - 7.2% +15.9% + 4.2%
Irish Equities + 8.9% + 9.5% +26.5% +27.3%
The key positive for the Irish market over the quarter ended October 31,
1996 was a sharp reduction in Irish bond yields, as confidence increased that
the European Monetary Union will happen in 1999 and Ireland will be a member.
Irish ten-year bond yields fell from 7.52% at the end of July 1996 to 6.82% at
the end of October 1996. Supported by the strong bond market and following
relative underperformance over the previous three quarters, Irish financial
stocks moved ahead strongly.
Interim results were also in focus during the quarter under review, and on
balance, company results delivered on investor expectations. Allied Irish Banks'
share price increased by 16.0% over the quarter, following a strong set of
interim results. The bank's pre-tax profits increased by 13.5% in the six months
to end June 1996 and both earnings and dividends were ahead by 14.0%. Current
valuation ratings for Allied Irish Banks look undemanding with the stock trading
on a prospective price-to-earnings for 1997 of 9.6 times and a dividend yield of
4.9%.
CRH announced the largest acquisition in its history, with the takeover of
U.S.-based Tilcon Inc. for a consideration of $329 million. Independent
Newspapers announced a bid for full control of Wilson and Horton, New Zealand's
largest publishing and printing group. Independent Newspapers had held a 22.5%
interest in Wilson & Horton and the remaining equity is set to cost the company
approximately $730 million.
Powerscreen International, the Northern Ireland-based machinery
manufacturer, returned 22.7% over the quarter, prompted by strong growth in its
pre-tax profits and earnings. The company continues to experience an increase in
demand for screening and crushing machines, driven by recycling trends in the
construction industry worldwide.
OUTLOOK
The Irish economy continues to expand at a rapid pace and, apart from the
aforementioned negative development in the agriculture sector, economic
fundamentals remain excellent. GNP growth is easily the highest in Europe and
the momentum is likely to continue into 1997.
The overall price-to-earnings ratio for the market stands at 12.0 times
prospective 1997 earnings and the market offers a dividend yield of 3.1%. The
Fund retains its fully invested position.
DISTRIBUTION
I am pleased to advise you that the Board of Directors has declared a
distribution of $0.58 per share, consisting of $0.36 of long-term capital gains
and $0.22 of net investment income, to be paid on December 31, 1996 to
stockholders of record as of the close of business on December 23, 1996.
Sincerely,
/s/ Peter Hooper
Peter Hooper
Chairman of the Board of Directors
December 20, 1996
------------------
NET ASSET VALUE PERFORMANCE
(including the reinvestment of distributions)
The Irish Investment Fund, Inc.
(Source: First Data Investor Services Group, Inc.)
Aggregate Total Returns
<TABLE>
<CAPTION>
<S> <C> <C> <C>
04/06/90* - 10/31/96 10/31/93 - 10/31/96 10/31/94 - 10/31/96 10/31/95 - 10/31/96
80.48%** 84.34% 59.71% 26.84%+
</TABLE>
------------
* Commencement of Fund operations.
** The net asset value performance on an annualized basis since commencement of
the Fund's operations is 10.52%.
+ Total investment return based on share price and reinvestment of income
distributions was 27.12% for the year ended October 31, 1996.
<PAGE>
Statement of Net Assets
-----------------------
October 31, 1996
Shares Value (Note A)
IRISH COMMON STOCKS (97.1%)
Abbey 745,000 U.S. $ 2,267,980
Adare Printing Group 290,000 2,572,977
Allied Irish Bank 1,917,688 12,175,420
Anglo Irish Bank Corporation 1,405,720 1,647,680
Boxmore International 468,000 2,361,832
Clondalkin Group 298,850 2,310,938
Crean (James) 347,625 1,188,425
CRH 1,048,036 10,851,124
FBD Holdings 260,000 888,862
Fyffes 1,635,000 2,688,317
Green Property 1,100,000 4,476,866
Greencore 442,568 2,579,315
Hibernian Group 750,000 3,418,698
Independent Newspapers 309,999 1,652,772
Irish Life 700,000 3,031,245
I.W.P., International 389,886 1,618,524
Jury's Hotel Group 991,792 4,117,202
Kerry Group, Series A 465,000 5,071,882
Smurfit (Jefferson) Group 3,355,840 9,287,345
United Drug 350,000 1,937,262
Waterford Foods, Class A 1,644,156 2,382,179
Waterford Wedgewood 3,065,739 3,768,110
TOTAL IRISH COMMON STOCKS
(Cost U.S. $55,309,887) 82,294,955
UNITED KINGDOM COMMON STOCK (2.7%)
Powerscreen International 230,000 2,289,278
TOTAL UNITED KINGDOM COMMON STOCK
(Cost U.S. $1,403,303) 2,289,278
TOTAL INVESTMENTS BEFORE FOREIGN CURRENCY ON DEPOSIT
(Cost U.S. $56,713,190#) U.S. $84,584,233
<PAGE>
Statement of Net Assets
-----------------------
Value (Note A)
FOREIGN CURRENCY ON DEPOSIT (0.7%)
(Interest Bearing)
British Pound Sterling Brt Pd 31,876 U.S. $ 51,885
Irish Pound IRBrt Pd 347,014 564,922
TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost U.S. $565,251) 616,807
TOTAL INVESTMENTS (100.5%)
(Cost U.S. $57,278,441) 85,201,040
OTHER ASSETS AND LIABILITIES (-0.5%)
Cash 47,113
Dividends and Interest Receivable 210,146
Prepaid Expenses 56,199
Net Unrealized Depreciation of Forward
Foreign Currency Contract (Note A) (723,690)
Principal Investment Advisory Fee Payable (Note B) (53,080)
Co-Advisory Fee Payable (Note B) (17,693)
Administration Fee Payable (Note B) (14,155)
Accrued Directors' Fees and Expenses (Note C) (500)
Other Liabilities (71,960)
-----------
(567,620)
NET ASSETS (100.0%)
Applicable to 5,009,000 outstanding U.S. $.01 par
value shares (authorized 20,000,000 shares) U.S. $84,633,420
NET ASSET VALUE PER SHARE
(U.S. $84,633,420 / 5,009,000) U.S. $ 16.90
=====
- ------------------------------------------------------------------------------
# Aggregate cost for U.S. Federal income tax purposes.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACT
FORWARD FOREIGN CURRENCY CONTRACT TO SELL
Contract to Deliver
------------------------------------------------
Delivery Local In Exchange Value in Unrealized
Date Currency For U.S. $ U.S. $ Depreciation
---------- ---------------------- ----------- ---------- ------------
11/29/1996 Irish Pound 17,566,034 27,865,000 28,588,690 U.S. $ (723,690)
==========
<PAGE>
Statement of Net Assets
-----------------------
Value (Note A)
AT OCTOBER 31, 1996 NET ASSETS CONSISTED OF:
Common Stock, U.S. $.01 Par Value --
Authorized 20,000,000 Shares;
Issued and Outstanding 5,009,000 Shares U.S. $ 50,090
Capital Surplus 54,517,462
Undistributed Net Investment Income 1,079,986
Accumulated Net Realized Gain 1,785,056
Unrealized Appreciation of Securities, Forward
Foreign Currency Contracts, Foreign Currency
and Net Other Assets 27,200,826
TOTAL NET ASSETS U.S. $84,633,420
See Notes to Financial Statements.
<PAGE>
Statement of Operations
-----------------------
For the Year Ended
October 31, 1996
INVESTMENT INCOME
Dividends (Net of Withholding Taxes of U.S.$35,263) U.S. $ 1,878,464
Interest 70,382
TOTAL INVESTMENT INCOME 1,948,846
EXPENSES
Principal Investment Advisory Fee
(Note B) U.S.$ 566,194
Co-Advisory Fee (Note B) 188,738
Administration Fee (Note B) 150,990
Shareholder Reports Expense 76,166
Directors' Fees and Expenses (Note C) 71,394
Custodian Fees (Note B) 65,581
Legal and Audit Fees 32,541
Other 78,289
TOTAL EXPENSES 1,229,893
NET INVESTMENT INCOME 718,953
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS (NOTE D)
Realized Gain/(Loss) on:
Securities Transactions 2,604,625
Forward Foreign Currency Contracts (304,639)
Foreign Currency Transactions (10,178)
---------
Net Realized Gain on Investments
During the Year 2,289,808
Net Change in Unrealized Appreciation/
(Depreciation) of:
Securities 15,467,677
Forward Foreign Currency Contracts (723,690)
Foreign Currency and Net Other Assets 47,370
---------
Net Unrealized Appreciation of Investments
During the Year 14,791,357
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 17,081,165
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS U.S. $17,800,118
See Notes to Financial Statements.
<PAGE>
Statement of Changes in Net Assets
----------------------------------
Year Ended Year Ended
October 31, 1996 October 31, 1995
Net Investment Income U.S. $ 718,953 U.S. $ 568,636
Net Realized Gain on
Investments 2,289,808 5,610,350
Net Unrealized Appreciation
of Investments 14,791,357 7,748,142
----------- -----------
Net Increase in Net Assets
Resulting from Operations 17,800,118 13,927,128
Distributions to Shareholders from:
Net Investment Income (706,269) (525,945)
Net Realized Gains (646,161) --
----------- -----------
Net Increase in Net Assets 16,447,688 13,401,183
NET ASSETS
Beginning of Year 68,185,732 54,784,549
----------- -----------
End of Year (Including
Undistributed Net Investment
Income of $1,079,986 and
$566,041 at October 31, 1996
and 1995, respectively) U.S. $84,633,420 U.S. $68,185,732
=========== ===========
See Notes to Financial Statements.
<PAGE>
Financial Highlights
--------------------
For a Fund share outstanding throughout each year.
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990*
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Performance:
Net Asset Value,
Beginning of Year U.S.$13.61 U.S.$10.94 U.S.$ 9.54 U.S.$ 7.99 U.S.$ 9.75 U.S.$10.04 U.S.$11.16
------ ------ ------ ------ ------ ------ ------
Net Investment Income 0.14 0.11 0.10 0.12 0.15 0.15 0.26
Net Realized and
Unrealized Gain/
(Loss) on Investments 3.42 2.67 1.37 1.66 (1.49) (0.11) (1.13)
------ ------ ------ ------ ------ ------ ------
Net Increase/(Decrease)
in Net Assets Resulting
From Investment Operations 3.56 2.78 1.47 1.78 (1.34) 0.04 (0.87)
Offering Costs -- -- -- -- -- -- (0.25)
Distributions to
Shareholders from:
Net Investment Income (0.14) (0.11) (0.07) (0.12) (0.23) (0.33) --
Net Realized Gains (0.13) -- -- -- -- -- --
Capital Surplus -- -- -- (0.11) (0.19) -- --
------ ------ ------ ------ ------ ------ ------
Total from Distributions (0.27) (0.11) (0.07) (0.23) (0.42) (0.33) 0.00
------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Year U.S.$16.90 U.S.$13.61 U.S.$10.94 U.S.$ 9.54 U.S.$ 7.99 U.S.$ 9.75 U.S.$10.04
====== ====== ====== ====== ====== ====== ======
Share Price, End of Year U.S.$14.00 U.S.$11.25 U.S.$10.13 U.S.$ 8.75 U.S.$ 7.00 U.S.$ 7.88 U.S.$ 7.00
====== ====== ====== ====== ====== ====== ======
Total Investment Return** 27.12% 12.46% 16.59% 29.34% (6.35)% 18.07% (41.67)%
====== ====== ====== ====== ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets,
End of Period (000's) U.S.$84,633 U.S.$68,186 U.S.$54,785 U.S.$47,806 U.S.$40,018 U.S.$48,847 U.S.$50,299
Ratio of Net
Investment Income to
Average Net Assets 0.95% 0.94% 0.93% 1.39% 1.62% 1.55% 4.28%+
Ratio of Operating
Expenses to Average Net
Assets 1.63% 1.74% 1.87% 1.88% 1.80% 2.03% 1.70%+
Portfolio Turnover Rate 12% 21% 13% 15% 7% 28% 6%+
Average Commission Rate
(Per Share of
Security)# $0.0096 N/A N/A N/A N/A N/A N/A
* The Fund commenced operations on March 29, 1990.
** Based on share price and reinvestment of income distributions.
+ Annualized.
# Average commission rate as required by amended disclosure requirements effective September 1, 1995.
</TABLE>
See Notes to Financial Statements.
<PAGE>
Notes to Financial Statements
-----------------------------
The Irish Investment Fund, Inc. (the "Fund") was incorporated under the laws
of the State of Maryland on December 14, 1989 as a non-diversified, closed-end
management investment company under the Investment Company Act of 1940, as
amended.
A. SIGNIFICANT ACCOUNTING POLICIES:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements.
SECURITY VALUATION: Securities listed on a stock exchange for which market
quotations are readily available are valued at the closing prices on the date of
valuation, or if no such closing prices are available, at the last bid price
quoted on such day. If there are no such quotations available for the date of
valuation, the last available closing price will be used. The value of
securities and other assets for which no market quotations are readily available
is determined in good faith at fair value using estimation methods approved by
the Board of Directors. Short-term securities that mature in 60 days or less are
valued at amortized cost.
DIVIDENDS AND DISTRIBUTIONS TO STOCKHOLDERS: The Fund intends to distribute
to stockholders, at least annually, substantially all of its net income from
dividends and interest payments and substantially all of its net realized
capital gains, if any. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are due primarily to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund.
U.S. FEDERAL INCOME TAXES: It is the Fund's intention to continue to qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended, and distribute all of its taxable income. Accordingly,
no provision for U.S. Federal income taxes is required. For the year ended
October 31, 1996, permanent differences resulting from book and tax accounting
for currency gains and losses were reclassified from net realized gains to
undistributed net investment income.
REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements.
Securities pledged as collateral for repurchase agreements are held by the
Fund's custodian bank until maturity of the repurchase agreements. Provisions of
the agreements require that the market value of the collateral be sufficient in
the event of default; however, in the event of default or bankruptcy by the
other party to the agreement, realization and/or retention of the collateral may
be subject to legal proceedings.
CURRENCY TRANSLATION: The books and records of the Fund are maintained in
U.S. Dollars. Foreign currency amounts are translated into U.S. Dollars at the
bid price of such currencies against U.S. Dollars last quoted by a major bank as
follows: assets and liabilities at the closing rates of exchange on the
valuation date, security transactions and investment income and expenses at the
closing rates of exchange on the dates of such transactions. Net realized
foreign currency gains and losses resulting from changes in exchange rates
include foreign currency gains and losses between trade date and settlement date
on investment securities transactions, foreign currency transactions and the
difference between the amounts of interest and dividends recorded on the books
of the Fund and the amount actually received. The portion of foreign currency
gains and losses related to fluctuation in exchange rates between the initial
purchase trade date and subsequent sale trade date is included in realized gains
and losses on security transactions.
FORWARD FOREIGN CURRENCY CONTRACTS: The Fund may enter into forward foreign
currency contracts for non-trading purposes in order to protect investment
securities and related receivables and payables against future changes in
foreign currency exchange rates. Fluctuations in the value of such contracts are
recorded as unrealized gains or losses; realized gains or losses include net
gains or losses on contracts which have terminated by settlements or by entering
into offsetting commitments. Risks associated with such contracts include
movement in the value of the foreign currency relative to the U.S. Dollar and
the ability of the counterparty to perform.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Realized gains and losses from securities sold
are recorded on the identified cost basis. Dividend income is recorded on the
ex-dividend date except that certain dividends from foreign securities are
recorded as soon as the Fund is informed of the ex-dividend date. Interest
income is recorded on the accrual basis.
B. MANAGEMENT SERVICES:
The Fund has entered into an investment advisory agreement (the "Principal
Investment Advisory Agreement") with Bank of Ireland Asset Management (U.S.)
Limited ("Bank of Ireland Asset Management"), an indirect, wholly-owned
subsidiary of The Governor and Company of the Bank of Ireland ("Bank of
Ireland"). Under the Principal Investment Advisory Agreement, the Fund pays a
monthly fee at an annual rate of 0.75% of the value of its average weekly net
assets.
The Fund has also entered into an investment advisory agreement (the "U.S.
Co-Advisory Agreement") with Salomon Brothers Asset Management Inc. ("Salomon
Brothers Asset Management"). Under the U.S. Co-Advisory Agreement, the Fund
pays a monthly fee at an annual rate of 0.25% of the value of its average
weekly net assets.
The Fund has entered into an administration agreement (the "Administration
Agreement") with First Data Investor Services Group, Inc. a subsidiary of First
Data Corporation. Under the Administration Agreement, the Fund pays a monthly
fee at an annual rate of 0.20% of the value of its average monthly net assets.
BankBoston serves as custodian of the Fund's assets held outside of Ireland.
Bank of Ireland serves as custodian of the Fund's assets held in Ireland. During
the year ended October 31, 1996, the Fund paid U.S. $63,981 in custodial fees to
Bank of Ireland.
For the year ended October 31, 1996, the Fund incurred total brokerage
commissions of $48,555, of which $7,391 was paid to Davy Stockbrokers, an
affiliate of Bank of Ireland Asset Management.
C. DIRECTORS FEES:
The Fund currently pays each Director who is not a managing director,
officer or employee of Bank of Ireland Asset Management or Salomon Brothers
Asset Management or any affiliate thereof, an annual retainer of U.S. $7,000
plus U.S. $700 for each meeting of the Board of Directors or Committee of the
Board attended in person or via telephone and any stockholder meeting attended
in person not held on the same day as a meeting of the Board. The Fund pays the
Chairman of the Board of Directors of the Fund U.S. $3,500 annually in addition
to the amount he may receive as detailed above. Each Director will be reimbursed
for travel and out-of-pocket expenses.
D. PURCHASES AND SALES OF SECURITIES:
The cost of purchases and proceeds from sales of securities for the year
ended October 31, 1996, excluding U.S. Government and short-term investments,
aggregated U.S. $11,071,770 and U.S. $9,112,532, respectively.
At October 31, 1996, aggregate gross unrealized appreciation for all
securities (excluding foreign currency on deposit) in which there was an excess
value over tax cost was U.S. $30,257,135 and aggregate gross unrealized
depreciation for all securities (excluding foreign currency on deposit) in which
there was an excess of tax cost over value was U.S. $2,386,092.
E. COMMON STOCK:
On December 14, 1989, 9,000 shares of the Fund's common stock were issued to
Bank of Ireland Asset Management. On March 30, 1990, in conjunction with its
initial underwriting, 5,000,000 shares of common stock were issued. Costs
incurred in the initial offering of shares aggregated U.S. $1,231,000 and were
charged to capital upon commencement of operations. No subsequent shares have
been issued since the initial underwriting.
F. MARKET CONCENTRATION:
Because the Fund concentrates its investments in securities issued by
corporations in Ireland, its portfolio may be subject to special risks and
considerations typically not associated with investing in a broader range of
domestic securities. In addition, the Fund is more susceptible to factors
adversely affecting the Irish economy than a comparable fund not concentrated in
these issuers to the same extent.
* * * *
In accordance with Section 23(c) of the Investment Company Act of 1940, as
amended, the Fund hereby gives notice that it may from time to time repurchase
shares of the Fund in the open market at the option of the Board of Directors
and upon such terms as the Directors shall determine.
<PAGE>
Report of Independent Accountants
---------------------------------
To the Stockholders and Board of Directors
The Irish Investment Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Irish Investment Fund, Inc. (the "Fund") at October 31, 1996, and the
results of its operations for the year then ended, the changes in its net assets
and the financial highlights for each of the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
the financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating for the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1996 by
correspondence with the custodians, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 12, 1996
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Net Increase/
Net Realized and (Decrease)
Unrealized Gain/ in Net Assets
Net Investment (Loss) on Resulting From
Income/(Loss) Investments Operations
--------------------------- -------------------------- ---------------------------
Total Total Total
Quarter Ended (000) Per Share (000) Per Share (000) Per Share
- ------------- ----- --------- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
January 31, 1995 U.S.$(38) U.S.$(0.01) U.S.$386 U.S.$0.08 U.S.$348 U.S.$0.07
April 30, 1995 423 0.09 5,354 1.07 5,777 1.16
July 31, 1995 (51) (0.01) 7,784 1.55 7,733 1.54
October 31, 1995 235 0.04 (166) (0.03) 69 0.01
January 31, 1996 69 0.02 15,054 3.01 15,123 3.03
April 30, 1996 613 0.12 (5,895) (1.18) (5,282) (1.06)
July 31,1996 (60) (0.01) 51 0.01 (9) (0.00)
October 31, 1996 97 0.01 7,871 1.58 7,968 1.59
</TABLE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (UNAUDITED)
The Fund will distribute to stockholders, at least annually, substantially
all of its net income from dividends and interest payments and expects to
distribute substantially all its net realized capital gains annually. Pursuant
to the Dividend Reinvestment and Cash Purchase Plan approved by the Fund's Board
of Directors (the "Plan"), each stockholder will be deemed to have elected,
unless American Stock Transfer & Trust Company (the "Plan Agent") is instructed
otherwise by the stockholder in writing, to have all distributions automatically
reinvested by the Plan Agent in Fund shares pursuant to the Plan. Distributions
with respect to Fund shares registered in the name of a broker-dealer or other
nominee (i.e., in "street name") will be reinvested by the broker or nominee in
additional Fund shares under the Plan, unless the service is not provided by the
broker or nominee or the stockholder elects to receive distributions in cash.
Investors who own Fund shares registered in street name may not be able to
transfer those shares to another broker-dealer and continue to participate in
the Plan. These stockholders should consult their broker-dealer for details.
Stockholders who do not participate in the Plan will receive all distributions
in cash paid by check in U.S. Dollars mailed directly to the stockholder by
American Stock Transfer & Trust Company, as paying agent. Stockholders who do
not wish to have distributions automatically reinvested should notify the Fund,
c/o the Plan Agent for The Irish Investment Fund, Inc.
The Plan Agent will serve as agent for the stockholders in administering the
Plan. If the Directors of the Fund declare an income dividend or a capital gains
distribution payable either in the Fund's common stock or in cash, as
stockholders may have elected, non-participants in the Plan will receive cash
and participants in the Plan will receive common stock, to be issued by the
Fund. If the market price per share on the valuation date equals or exceeds net
asset value per share on that date, the Fund will issue new shares to
participants at net asset value or, if the net asset value is less than 95% of
the market price on the valuation date, then at 95% of the market price. The
valuation date will be the dividend or distribution payment date or, if that
date is not a trading day on the New York Stock Exchange, Inc. ("New York Stock
Exchange"), the next preceding trading day. If the net asset value exceeds the
market price of Fund shares at such time, participants in the Plan will be
deemed to have elected to receive shares of stock from the Fund, valued at
market price on the valuation date. If the Fund should declare a dividend or
capital gains distribution payable only in cash, the Plan Agent, as agent for
the participants, will buy Fund shares in the open market, on the New York Stock
Exchange or elsewhere, with the cash in respect of such dividend or
distribution, for the participants' account on, or shortly after, the payment
date.
Participants in the Plan have the option of making additional cash payments
to the Plan Agent, annually, in any amount from $100 to $3,000 for investment in
the Fund's common stock. The Plan Agent will use all funds received from
participants (as well as any dividends and capital gain distributions received
in cash) to purchase Fund shares in the open market on or about January 15 of
each year. Any voluntary cash payments received more than thirty days prior to
such date will be returned by the Plan Agent, and interest will not be paid on
any uninvested cash payments. To avoid unnecessary cash accumulations and to
allow ample time for receipt and processing by the Plan Agent, it is suggested
that the participants send in voluntary cash payments to be received by the Plan
Agent approximately ten days before January 15. A participant may withdraw a
voluntary cash payment by written notice, if the notice is received by the Plan
Agent not less than forty-eight hours before such payment is to be invested.
The Plan Agent maintains all stockholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by stockholders for personal and U.S. Federal tax records. Shares in the
account of each Plan participant will be held by the Plan Agent in
non-certificated form in the name of the participant, and each stockholder's
proxy will include those shares purchased pursuant to the Plan.
In the case of stockholders such as banks, brokers or nominees who hold
shares for beneficial owners, the Plan Agent will administer the Plan on the
basis of the number of shares certified from time to time by the stockholder as
representing the total amount registered in the stockholder's name and held for
the account of beneficial owners who are participating in the Plan.
There is no charge to participants for reinvesting dividends or capital
gains distributions. The Plan Agent's fee for the handling of the reinvestment
of dividends and distributions will be paid by the Fund. However, each
participant's account will be charged a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends or capital gains distributions. A participant
will also pay brokerage commissions incurred in purchases from voluntary cash
payments made by the participant. Brokerage charges for purchasing small amounts
of stock of individual accounts through the Plan are expected to be less than
the usual brokerage charges for such transactions, because the Plan Agent will
be purchasing stock for all participants in blocks and prorating the lower
commission thus attainable.
The automatic reinvestment of dividends and distributions will not relieve
participants of any U.S. Federal income tax which may be payable on such
dividends or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any voluntary cash payment made and any dividend or distribution paid
subsequent to notice of the change sent to all stockholders at least ninety days
before the record date for such dividend or distribution. The Plan also may be
amended or terminated by the Plan Agent with at least ninety days' written
notice to all stockholders. All correspondence concerning the Plan should be
directed to the Plan Agent for The Irish Investment Fund, Inc. in care of
American Stock Transfer & Trust Company, 40 Wall Street, New York, New York,
10005, telephone number (718) 921-8283.
MEETING OF STOCKHOLDERS (UNAUDITED)
On June 4, 1996, the Fund held its Annual Meeting of Stockholders. The
following Director was elected by the following votes: Gerald F. Colleary -
3,128,636 For; 49,662 Abstaining. Peter J. Hooper, William P. Clark, Denis P.
Kelleher, and James M. Walton continue to serve in their capacities as Directors
of the Fund. In the only other matter voted upon, the selection of Price
Waterhouse LLP as the Fund's independent public accountants for the fiscal year
ending October 31, 1996 was ratified by the following votes:
3,155,418 For; 9,033 Against; and 13,846 Abstaining.
TAX INFORMATION (UNAUDITED)
For the year ended October 31, 1996, the amount of long term capital gains
distributed to stockholders by the Fund was $646,161.
PORTFOLIO MANAGER
Ms. Jane Neill and Mr. John Forde are the co-managers of the Fund and are
responsible for the day-to-day investment operations of the Fund. Ms. Neill
has managed the Fund's assets since May 1994. Ms. Neill has over fifteen years
experience in the investment management business in Ireland. Prior to joining
Bank of Ireland Asset Management in 1994, Ms. Neill was the Chief Executive
Officer of UBIM, an Irish investment management operation of National
Westminster Bank. Mr. Forde has co-managed the Fund's assets since late 1995.
Mr. Forde has seven years experience in the investment management business in
Ireland. Prior to joining Bank of Ireland Asset Management in 1995, Mr. Forde
was with Irish Life Investment Managers.
<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
Susan Manter - 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.
One Exchange Place
Boston, Massachusetts 02109
------------------------------- CUSTODIANS -------------------------------
Bank of Ireland
Lower Baggot Street, Dublin 2, Ireland
BankBoston
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.
One Exchange Place -- BOS665
Boston, Massachusetts 02109
TELEPHONE INQUIRIES SHOULD BE DIRECTED TO:
1-800-GO-TO-IRL (1-800-468-6475)
