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THE
IRISH
INVESTMENT FUND
[logo]
First Quarter Report
For the Period Ended January 31, 1999
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Chairman's Letter
-----------------
Dear Stockholder,
A recovery in global stock markets from the steep declines in September and
early October of 1998 helped the Irish equity market to rise by 17.6% in Irish
pound terms over the quarter to January 31, 1999. After adjusting for movements
in exchange rates, this return converted into an increase of 12.9% in U.S.
dollar terms. The net asset value of The Irish Investment Fund (the Fund)
increased by 6.9% to $22.72 per share over this period. During the quarter the
Fund paid a dividend of $1.142 per share to shareholders and when this is taken
into account, the Fund's total return was 12.3% for the quarter.
The introduction of the euro currency was the big economic event over the
quarter. It is clear that the new currency is an important agent of change both
for the Irish economy and Irish companies. While the notes and coins of the
euro currency will not be introduced for three years, it is worth highlighting
that all participating European stock markets, including Ireland, now report in
euros. As a result the holdings of the Fund have been converted to euros and
consequently this, and all future, reports will reflect this.
ECONOMIC REVIEW
While many economies are struggling in the global environment, the Irish
economy continues to deliver strong growth, with the Irish Central Bank
estimating that the economy expanded by over 10% in 1998. Buoyant consumer
demand and a positive contribution from net exports were the key drivers of the
strength. For the calendar year, retail sales volumes increased by 9.0% over
1997 levels, driven by strong employment growth and declining interest rates.
Following the introduction of the euro, Irish consumers are benefiting from low
interest rates with short-term rates currently at 3.0%.
Employment growth remains strong and the unemployment rate in February 1999
was 6.9%, representing a sharp reduction from an unemployment rate of 8.2% in
February 1998. Given the sharp reduction in unemployment in recent years,
employment growth is likely to moderate over the coming years. While these
favorable trends are resulting in rising wages, particularly in the technology
and construction industries, global deflationary trends kept Irish consumer
price inflation in check in 1998. Average inflation for the year was 2.4%.
EQUITY MARKET REVIEW
The following table shows the performance of global equity markets
alongside the Irish market over the quarter.
LOCAL CURRENCY U.S. DOLLARS
-------------- ------------
U.S. Equities 16.5% 16.5%
U.K. Equities 7.6% 5.5%
Japanese Equities 6.9% 7.1%
European Equities 14.3% 14.5%
Irish Equities 17.6% 12.9%
The recovery in global equity markets pushed the Irish market higher with
financial stocks leading the advance. Allied Irish Banks (AIB), +40.6% this
quarter, benefited from recovery in international banking stocks, as well as
index-related buying in Europe. AIB is the only Irish stock included on the Dow
Jones Euro Stock 50 Index and this has bolstered demand for its stock. In
February 1999, the company delivered a strong set of 1998 results with earnings
per share increasing by 33.1%, helped by buoyant loan growth in Ireland.
CRH (+16.3% this quarter) announced the acquisition of Ibstock, a UK
building materials company, for $528 million. This is seen as a good fit for
the company's current operations and was welcomed by the market. Fyffes (+56.8%
in quarter) was re-rated by investors following strong full-year results to end
October 1998 which revealed its earnings per share rose by 21.3%. The company
also announced a strategic alliance with Capespan, which is a leading South
African fruit company.
The Fund invested in Horizon Technology Group over the quarter. Horizon is
an unquoted Irish company involved in the distribution of computer products,
integration system and classroom-based technology training.
CURRENT OUTLOOK
The Irish economy has entered 1998 with considerable momentum, and while
economic growth may moderate from 1998 levels, the outlook remains positive.
In comparison to many international stock markets, the Irish market remains
attractively priced at a P/E ratio of 17.3 times prospective 1999 earnings and
a dividend yield of 1.8%. The Fund retains a fully invested position.
Sincerely,
/s/ Peter Hooper
Peter Hooper
Chairman of the Board March 24, 1999
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Investments (unaudited)
-----------------------
January 31, 1999
Shares Value
- --------------------------------------------------------------------------------
IRISH COMMON STOCKS (96.89%)
- --------------------------------------------------------------------------------
Abbey 698,600 U.S. $ 2,320,093
Adare Printing 320,000 2,547,663
Allied Irish Banks 1,567,688 30,311,163
Avonmore Waterford 1,153,610 2,715,960
Boxmore International 393,000 983,353
Clondalkin 268,850 1,651,193
CRH 808,036 13,233,882
DCC 400,000 3,594,025
FBD 260,000 1,522,911
Fyffes 1,635,000 4,369,982
Green Property 907,143 5,189,647
Greencore 542,568 2,067,250
Hibernian 300,000 3,122,025
Horizon Technology* 897,436 1,010,896
ICON - ADR* 85,000 2,465,000
Independent Newspapers 309,999 1,198,763
IONA Technologies - ADR* 139,300 6,233,675
Irish Life 504,506 4,819,918
I.W.P., International 639,886 1,237,216
Jury's Hotel 691,792 5,129,998
Kerry Group 465,000 6,081,978
Smurfit (Jefferson) Group 2,035,840 3,357,420
United Drug 287,500 2,223,519
Waterford Wedgwood 3,565,739 2,879,400
TOTAL IRISH COMMON STOCKS
(Cost U.S. $54,553,106) 110,266,930
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UNITED KINGDOM COMMON STOCKS (1.85%)
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BCO Technologies* 535,700 603,915
Galen 200,000 1,505,860
TOTAL UNITED KINGDOM COMMON STOCKS
(Cost U.S. $1,749,942) 2,109,775
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TOTAL INVESTMENTS BEFORE FOREIGN CURRENCY ON DEPOSIT
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(Cost U.S. $56,303,048#) U.S. $112,376,705
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Investments (unaudited) (continued)
-----------------------------------
January 31, 1999
Face Value Value
- --------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT (0.04%)
- --------------------------------------------------------------------------------
(Interest Bearing)
British Pound Sterling Pds 21 U.S. $ 35
Euro EUR 35,308 40,157
TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost U.S. $39,897) 40,192
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TOTAL INVESTMENTS (98.78%)
- --------------------------------------------------------------------------------
(Cost U.S. $56,342,945) 112,416,897
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OTHER ASSETS AND LIABILITIES (1.22%)
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Other Assets 1,570,886
Other Liabilities (179,226)
------------
1,391,660
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NET ASSETS (100.0%)
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Applicable to 5,009,000 outstanding U.S. $.01 par
value shares (authorized 20,000,000 shares) U.S. $113,808,557
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
(U.S. $113,808,557 / 5,009,000) U.S. $ 22.72
=====
- --------------------------------------------------------------------------------
#Aggregate cost for U.S. Federal income tax purposes.
*Non-income producing security.
ADR -- U.S. quotation denominated in U.S. dollars.
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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
Elizabeth A. Russell - Secretary
Linda J. Hoard - Assistant Secretary
----------------------- PRINCIPAL INVESTMENT ADVISOR ---------------------
Bank of Ireland Asset Management (U.S.) Limited
20 Horseneck Lane
Greenwich, Connecticut 06830
------------------------------- CONSULTANT -------------------------------
Salomon Brothers Asset Management Inc
Seven World Trade Center
New York, New York 10048
------------------------------ ADMINISTRATOR -----------------------------
First Data Investor Services Group, Inc.
101 Federal Street
Boston, Massachusetts 02110
------------------------------- CUSTODIANS -------------------------------
Bank of Ireland
Lower Baggot Street
Dublin 2, Ireland
Investors Bank & Trust Company
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 ------------------------
PricewaterhouseCoopers 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.
101 Federal Street, 6th Floor
Boston, Massachusetts 02110
TELEPHONE INQUIRIES SHOULD BE DIRECTED TO:
1-800-GO-TO-IRL (1-800-468-6475)
