[graphic omitted]
Annual Report
October 31, 1997
<PAGE>
Chairman's Letter
-----------------
Dear Stockholder,
Prior to reviewing The Irish Investment Fund, Inc.'s (the "Fund") fiscal
year ended October 31, 1997, I would like to comment briefly on the final
quarter. The Irish equity market declined by 0.4% in Irish pound terms in the
final quarter of the Fund's fiscal year. The weakness of the U.S. dollar
translated this return into an increase of 2.9% in U.S. dollar terms. By
comparison, the net asset value ("NAV") of the Fund increased to $19.99 from
$19.28, a gain of 3.7%.
Over the fiscal year, the Irish equity market produced a return of 37.7% in
Irish pound terms. While the dollar weakened in the final quarter, it still
ended the year stronger than it began it, and, as a result, the market return,
in U.S. dollar terms, was 27.2%. In the same period, the total return on the
Fund, inclusive of the re-investment of distributions, was 17.03%.
ECONOMIC REVIEW
At a time when many of the Asian "Tiger" economies are faltering, the Irish
"Celtic Tiger" goes from strength to strength. The Irish Central Bank has been
increasing its growth forecasts over the course of 1997 and now expects gross
national product ("GNP") to increase by 6.75% over that period. This marks the
fourth successive year of rapid Irish economic growth - GNP expanded by 6.9% in
1996, 8.0% in 1995 and 7.6% in 1994.
Over 1997, the key economic features have been a clear acceleration in
consumer spending and a strong rebound in manufacturing production. The growth
rate of retail sales has accelerated during 1997 with year-over-year increases
of 5.8% in Q1 1997, 5.9% in Q2 1997 and 8.8% in Q3 1997. New car sales in the
first ten months increased by 10.4% to 122,328, which represents a record year
for car sales in Ireland.
Buoyant consumer spending has also resulted in vigorous growth in
Government tax revenues which increased by 14.0% in the first ten months of
1997 over previous year levels. As a result, based on current trends, the
Government is likely to incur little or no borrowing in 1997 and is well placed
to fund infrastructural spending and tax reduction in 1998.
Output in the manufacturing sector rebounded in 1997 following a brief
slowdown in the second half of 1996. In the three month period May through July
1997, output increased by 14.5% over 1996 levels, driven in particular by the
high-technology sector. The Irish unemployment rate continued to decline and
stood at 10.6% at the end of September 1997. This represents a significant
decrease from the 15.6% level registered at the end of 1993.
Most importantly, buoyant economic performance and employment growth are
being achieved without inflationary consequences. The consumer price inflation
rate stood at 1.3% for the year to mid October 1997. Indeed, house prices
remain the only real inflationary concern with the prices of pre-owned housing
increasing by 14.9% in the second quarter of 1997 over previous year levels.
STOCK MARKET REVIEW
As mentioned above, the Irish equity market was almost unchanged over the
final quarter delivering a return of -0.4%, which left the market ahead by
37.7% over the Fund's fiscal year. The following is a comparison of the Irish
equity market with major international markets:
Quarter Ended Year Ended
October 31, 1997 October 31, 1997
--------------------- --------------------
Local Local
Currency U.S.$ Currency U.S.$
U.S. Equities - 4.1% - 4.1% 29.7% 29.7%
U.K. Equities - 0.1% 2.3% 17.2% 20.7%
Japanese Equities -19.1% -20.3% -19.6% -24.0%
Irish Equities - 0.4% 2.9% 37.7% 27.2%
The key features of the Irish market over the quarter were Asian-related
falls in global stockmarkets and the release of interim results from many of
our leading companies. Irish stocks do not have significant direct exposure to
Asian economies and the Irish market has performed satisfactorily in the face
of volatile international stockmarkets.
Interim results were a focus of the quarter under review and once again
results matched or exceeded investor expectations. Allied Irish Banks, the
biggest holding in the Fund, delivered an excellent set of interim results with
pre-tax profits increasing by 20.0% and earnings per share by 21.8% in the six
months to the end of June 1997. The bank is continuing to benefit from buoyant
domestic lending conditions and experienced credit growth in Ireland of 20.6%
over this period. The company's stock price was a victim of profit-taking over
the most recent quarter, declining by 11.0% following strong outperformance
earlier in the summer. Over the fiscal year of the Fund, Allied Irish Banks'
stock price increased by 42.1%.
Avonmore Waterford Group completed its merger during the quarter under
review and, as a result of rationalization, investors may look forward to
significant savings gains. The company now ranks as the fourth largest dairy
processor in Europe. The company intends to reduce headcount by approximately
11% and expects to generate cost savings of approximately Brt Pd 40 million by
1999.
Among smaller capitalized financial stocks, Hibernian Group (insurance/
financial services) delivered an excellent set of interim results with
operating profits ahead by 26% and earnings per share by 27%. Over the past
decade, Hibernian has achieved an average return on equity of 16.4%. The stock
price increased by 11.9% over the quarter and by 58.0% over the fiscal year.
OUTLOOK
The Irish economy continues to deliver high levels of economic growth. The
momentum as we begin 1998 remains strong. Over the course of 1998, financial
markets will focus on European Monetary Union and Ireland remains on track to
become a founding member of the new currency system.
The overall price-to-earning ratio for the market stands at 16.1 times
prospective 1997 earnings and the market offers a dividend yield of 2.5%. These
valuation levels seem reasonable in the context of high equity market
valuations on a global basis. The Fund retains its fully invested position.
DISTRIBUTION
I am pleased to advise you that the Board of Directors of the Fund has
declared an annual distribution in the amount of $0.770 per share consisting of
$0.494 per share of long-term capital gains, $0.210 short-term capital gains
and $0.066 per share of net investment income. One hundred percent of the
long-term capital gains distribution of $0.494 per share should be considered
taxable to shareholders as a 28% rate gain for federal income tax purposes. The
distribution will be payable on December 31, 1997 to stockholders of record on
December 23, 1997.
Sincerely,
/s/ Peter Hooper
Peter Hooper
Chairman of the Board
December 17, 1997
<PAGE>
Statement of Net Assets
October 31, 1997
Shares Value (Note A)
- -------------------------------------------------------------------------
IRISH COMMON STOCKS (91.5%)
- -------------------------------------------------------------------------
Abbey 745,000 U.S. $ 2,801,013
Adare Printing Group 280,000 3,031,862
Allied Irish Banks 1,817,688 15,444,955
Avonmore Waterford Group 953,610 3,728,749
Boxmore International 393,000 1,773,098
Clondalkin Group+ 348,850 3,042,885
Crean (James) 147,625 288,617
CRH 1,048,036 12,609,127
FBD Holdings 260,000 1,173,042
Fyffes 1,635,000 2,508,053
Green Property Group 900,000 5,414,039
Greencore Group 542,568 2,545,820
Hibernian Group 600,000 4,060,529
Independent Newspapers 309,999 1,818,209
IONA Technologies+ 169,300 2,677,056
Irish Life 500,000 2,631,824
I.W.P., International 639,886 3,079,438
Jury's Hotel Group 691,792 4,213,562
Kerry Group, Series A 465,000 5,629,472
Smurfit (Jefferson) Group 2,785,840 8,253,559
United Drug 437,500 2,513,392
Waterford Wedgewood 2,065,739 2,392,131
TOTAL IRISH COMMON STOCKS
(Cost U.S. $52,269,404) 91,630,432
- -------------------------------------------------------------------------
UNITED KINGDOM COMMON STOCKS (6.0%)
- -------------------------------------------------------------------------
Galen Holdings+ 450,000 2,101,700
Powerscreen International 330,000 3,860,034
TOTAL UNITED KINGDOM COMMON STOCKS
(Cost U.S. $3,611,777) 5,961,734
- -------------------------------------------------------------------------
TOTAL INVESTMENTS BEFORE FOREIGN CURRENCY ON DEPOSIT
- -------------------------------------------------------------------------
(Cost U.S. $55,881,181#) U.S. $97,592,166
- -------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT (1.5%)
- -------------------------------------------------------------------------
(Interest Bearing) Face Value
British Pound Sterling BP 25,013 U.S. $ 41,947
IP 1,006,272 1,513,332
TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost U.S. $1,325,257) 1,555,279
- -------------------------------------------------------------------------
TOTAL INVESTMENTS (99.0%)
- -------------------------------------------------------------------------
(Cost U.S. $57,206,438) 99,147,445
- -------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.0%)
Cash 335,060
Receivable for Investment Securities Sold 789,824
Dividends and Interest Receivable 230,663
Prepaid Expenses 51,534
Net Unrealized Depreciation of Forward
Foreign Currency Contract (Note A) (224,030)
Principal Investment Advisory Fee Payable (Note B) (64,794)
Co-Advisory Fee Payable (Note B) (21,598)
Administration Fee Payable (Note B) (17,278)
Accrued Directors' Fees and Expenses (Note C) (7,858)
Other Liabilities (97,754)
-----------
973,769
- -------------------------------------------------------------------------
NET ASSETS (100.0%)
- -------------------------------------------------------------------------
Applicable to 5,009,000 outstanding U.S. $.01 par
value shares (authorized 20,000,000 shares) U.S.$100,121,214
- -------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -------------------------------------------------------------------------
(U.S. $100,121,214 / 5,009,000) U.S.$ 19.99
=====
- -------------------------------------------------------------------------
# Aggregate cost for U.S. Federal income tax purposes.
+ Non-income producing security.
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACT
FORWARD FOREIGN CURRENCY CONTRACT TO SELL
<TABLE>
<CAPTION>
Contract to Deliver
---------------------------------------------------------------
Delivery Local In Exchange Value in Unrealized
Date Currency For U.S. $ U.S. $ Depreciation
- --------------------- -------------------------- ---------------- -------------- ---------------------
<S> <C> <C> <C> <C>
12/10/1997 Irish Pound 16,767,270 25,000,000 25,224,030 U.S. $ (224,030)
============
</TABLE>
<PAGE>
Statement of Net Assets (continued)
Value (Note A)
- --------------------------------------------------------------------------
AT OCTOBER 31, 1997 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 310,565
Accumulated Net Realized Gain 3,523,423
Unrealized Appreciation of Securities, Forward
Foreign Currency Contracts, Foreign Currency
and Net Other Assets 41,719,674
- --------------------------------------------------------------------------
TOTAL NET ASSETS U.S. $100,121,214
- --------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
Statement of Operations
For the Year Ended
October 31, 1997
- ------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends (Net of Withholding Taxes of U.S.$12,839) U.S. $ 2,052,531
Interest 42,242
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,094,773
- ------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------
Principal Investment Advisory Fee (Note B) U.S.$ 675,846
Co-Advisory Fee (Note B) 225,282
Administration Fee (Note B) 180,225
Custodian Fees (Note B) 61,090
Directors' Fees and Expenses (Note C) 57,288
Legal and Audit Fees 40,295
Other 151,457
- ------------------------------------------------------------------------------
TOTAL EXPENSES 1,391,483
- ------------------------------------------------------------------------------
NET INVESTMENT INCOME 703,290
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS (NOTE D)
- ------------------------------------------------------------------------------
Realized Gain/(Loss) on:
Securities Transactions 3,392,357
Forward Foreign Currency Contracts 15,390
Foreign Currencies Transactions (261,916)
----------
Net Realized Gain on Investments
During the Year 3,145,831
Net Change in Unrealized Appreciation of:
Securities 13,839,942
Forward Foreign Currency Contracts 499,660
Foreign Currency and Net Other Assets 179,246
----------
Net Unrealized Appreciation of Investments
During the Year 14,518,848
----------
- ------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 17,664,679
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS U.S. $18,367,969
- ------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
Statement of Changes in Net Assets
Year Ended Year Ended
October 31, 1997 October 31, 1996
Net Investment Income U.S. $ 703,290 U.S. $ 718,953
Net Realized Gain on
Investments 3,145,831 2,289,808
Net Unrealized Appreciation
of Investments 14,518,848 14,791,357
------------ -----------
Net Increase in Net Assets
Resulting from Operations 18,367,969 17,800,118
Distributions to Shareholders from:
Net Investment Income (1,091,962) (706,269)
Net Realized Gains (1,788,213) (646,161)
------------ -----------
Net Increase in Net Assets 15,487,794 16,447,688
- ---------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------
Beginning of Year 84,633,420 68,185,732
------------ -----------
End of Year (Including
Undistributed Net Investment
Income of $310,565 and
$1,079,986 at October 31, 1997
and 1996, respectively) U.S. $100,121,214 U.S. $84,633,420
============ ===========
See Notes to Financial Statements.
<PAGE>
Financial Highlights
For a Fund share outstanding throughout each year.
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------------------------------------------------------------------------
1997+ 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Operating Performance:
Net Asset Value,
Beginning 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
------ ------ ------ ------ ------ ------
NetInvestmentIncome 0.14 0.14 0.11 0.10 0.12 0.15
Net Realized and Unrealized
Gain/(Loss) on Investments 3.53 3.42 2.67 1.37 1.66 (1.49)
------ ------ ------ ------ ------ ------
Net Increase/(Decrease)
in Net Assets Resulting From
Investment Operations 3.67 3.56 2.78 1.47 1.78 (1.34)
Distributions to
Shareholders from:
Net Investment Income (0.22) (0.14) (0.11) (0.07) (0.12) (0.23)
Net Realized Gains (0.36) (0.13) -- -- -- --
Capital Surplus -- -- -- -- (0.11) (0.19)
------ ------ ------ ------ ------ ------
Total from Distributions (0.58) (0.27) (0.11) (0.07) (0.23) (0.42)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Year U.S. $19.99 U.S. $16.90 U.S. $13.61 U.S. $10.94 U.S. $ 9.54 U.S. $ 7.99
====== ====== ====== ====== ====== ======
Share Price, End of Year U.S. $15.75 U.S. $14.00 U.S. $11.25 U.S. $10.13 U.S. $ 8.75 U.S. $ 7.00
====== ====== ====== ====== ====== ======
Total Investment Return* 17.03% 27.12% 12.46% 16.59% 29.34% (6.35)%
====== ====== ====== ====== ====== ======
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) U.S.$100,121 U.S.$84,633 U.S.$68,186 U.S.$54,785 U.S.$47,806 U.S.$40,018
Ratio of Net Investment
Income to Average Net Assets 0.78% 0.95% 0.94% 0.93% 1.39% 1.62%
Ratio of Operating Expenses
to Average Net Assets 1.54% 1.63% 1.74% 1.87% 1.88% 1.80%
Portfolio Turnover Rate 11% 12% 21% 13% 15% 7%
Average Commission Rate (Per
Share of Security)# $0.0094 $0.0096 N/A N/A N/A N/A
* Based on share price and reinvestment of income distributions.
# Average commission rate as required by amended disclosure requirements effective September 1, 1995.
+ Per-share numbers have been calculated using the average share method, which more appropriately represents the per-share data
for the period since the use of the undistributed income method did not accord with results of operations.
</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 and is registered 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 within the
prescribed time. It is also the intention of the Fund to make distributions in
sufficient amounts to avoid Fund excise tax. Accordingly, no provision for U.S.
Federal income taxes is required. For the year ended October 31, 1997, permanent
differences resulting from book and tax accounting for currency gains and losses
were reclassified from undistributed net investment income to net realized
gains.
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, 1997, the Fund paid U.S. $60,394 in custodial fees to
Bank of Ireland.
For the year ended October 31, 1997, the Fund incurred total brokerage
commissions of $46,853, of which $8,256 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, 1997, excluding U.S. government and short-term investments,
aggregated U.S. $10,076,758 and U.S. $14,301,130, respectively.
At October 31, 1997, 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. $42,649,127 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. $938,142.
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.
G. SUBSEQUENT EVENT:
The merger of Salomon Inc. (the parent company of Salomon Brothers Asset
Management) and Travelers Group Inc. results in a technical change in control of
Salomon Brothers Asset Management and, therefore, pursuant to the terms of the
U.S. Co-Advisory Agreement, automatic termination upon the consummation of the
merger. Effective November 28, 1997 (the date of the merger) the Irish
Investment Fund entered into a new U.S. Co-Advisory Agreement with Salomon
Brothers Asset Management. The fee under the new U.S. Co-Advisory Agreement is
0.20% of the value of the Fund's average monthly net assets.
* * * *
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, 1997, the results of
its operations, the changes in its net assets and the financial highlights for
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 the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1997 by correspondence with the
custodians and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 12, 1997
<PAGE>
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,
in care of 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 17, 1997, the Fund held its Annual Meeting of Stockholders. The
following Directors were elected by the following votes: Peter J. Hooper --
3,673,107 For; 45,533 Abstaining and William P. Clark -- 3,674,622 For; 44,018
Abstaining. Gerald F. Colleary, James M. Walton and Denis P. Kelleher 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, 1997 was ratified by
the following votes: 3,673,082 For; 10,513 Against; and 35,040 Abstaining.
TAX INFORMATION (UNAUDITED)
For the year ended October 31, 1997, the amount of long term capital gains,
distributed to stockholders by the Fund was $1,788,213.
<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
William H. Harkins - Assistant Treasurer
Brigid O. Bieber - Secretary
Elizabeth A. Russell - Assistant Secretary
----------------------- PRINCIPAL INVESTMENT ADVISOR ----------------------
Bank of Ireland Asset Management (U.S.) Limited
20 Horseneck Lane
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
53 State Street
Boston, Massachusetts 02109
-------------------------------- CUSTODIANS -------------------------------
Bank of Ireland
Lower Baggot Street
Dublin 2, Ireland
BankBoston
150 Royall Street
Canton, Massachusetts 02021
----------------------- STOCKHOLDER 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 -- BOS865
53 State Street
Boston, Massachusetts 02109
TELEPHONE INQUIRIES SHOULD BE DIRECTED TO
1-800-GO-TO-IRL (1-800-468-6475)
