THE
IRISH
INVESTMENT
FUND
[GRAPHIC OMITTED]
THIRD QUARTER REPORT
FOR THE PERIOD ENDED JULY 31, 2000
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COVER PHOTOGRAPH -- THE ROCK OF CASHEL.
Provided courtesy of Irish Tourist Board.
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CHAIRMAN'S LETTER
Dear Stockholder,
INTRODUCTION
The Irish equity market declined by 7.4% in Euro terms during the quarter
ended July 31, 2000. After adjusting for movements in exchange rates this
decrease converted into a decline of 5.9% in US dollar terms. The Fund's Net
Asset Value (NAV) declined by 3.75% to $19.23 over the period.
The Share Repurchase Program which was approved by the Board earlier in the
year, commenced during the quarter. This program has added liquidity to the
market for the benefit of shareholders who wish to sell their shares while also
increasing the Fund's NAV. Since the repurchase program began in late May, up to
the end of the quarter, the Fund has repurchased and retired 129,000 shares at a
cost of almost $1.9 million. This represents 2.6% of the shares originally
issued and has increased the portfolio's NAV by 15.5 cents per share. It is the
Board's and Management's intention to continue its active repurchase program.
ECONOMIC REVIEW
Irish economic growth continues to exceed expectations. The Irish Central
Bank recently increased its economic growth forecast for 2000 to 8.5%, which
compares to a 6.25% forecast at the beginning of the year. However, there has
been a marked divergence in 2000 between continued positive economic growth
statistics and international investor sentiment towards the economy. While the
majority of domestic economists remain broadly positive on the prospects of the
Irish economy, a number of international commentators and sections of the
financial press have become increasingly negative on the sustainability of Irish
prosperity. Their current concerns centre on accelerating domestic inflation.
In June 2000 the headline consumer price inflation rate reached 6.2%, its
highest monthly observation rate since 1985. This deterioration in Ireland's
inflation picture has seen the headline rate of CPI move from 1.5% to 6.2% over
the past ten months. However, it should be highlighted that a large part of the
acceleration can be attributed to a number of specific factors - rising oil
prices, tobacco tax increases and recent interest rate increases. In addition
Ireland is a particularly open economy and the persistent weakness of the Euro
currency, against both the dollar and sterling, is also negatively impacting on
inflation. It is clearly important that this current upturn in consumer price
inflation does not feed into a permanent increase in inflationary expectations
in the economy. Finally, we believe it is overly simplistic to conclude that the
current inflationary spike marks the end of the Irish growth story as this
ignores the fundamental and secular positives that have underpinned Ireland's
success over the past eight years - positive demographics, strong foreign direct
investment, a young competitive labour force and solid public finances.
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Recent exchequer tax returns for 2000 highlight the continued buoyancy of
the Irish economy. In the first seven months total tax revenues increased by
14.7% as compared to the same period in 1999. Value Added Tax receipts increased
by 20% highlighting buoyant consumer demand. It is clear that for the third year
in succession the Irish government is likely to enjoy a substantial budget
surplus.
EQUITY MARKET REVIEW
The Irish equity market decreased by 7.4% over the quarter ended July 31,
2000. A comparison with major international and European markets is shown below:
QUARTER ENDED JULY 31, 2000
LOCAL CURRENCY U.S. $
-------------- ------
Irish Equities -7.4% -5.9%
US Equities -1.5% -1.5%
UK Equities +0.1% -2.7%
Japanese Equities -12.5% -13.5%
Euroland Equities -2.7% -1.2%
German Equities -3.0% -1.5%
French Equities +1.9% +3.6%
Dutch Equities +0.6% +2.2%
International Equity markets in 2000 remain volatile and were broadly
unchanged over the quarter under review. The Irish market's underperformance was
driven by the aforementioned concerns over inflation which hurt those stocks
most exposed to the domestic economy. In particular AIB (-19.8% IN QUARTER)
suffered from investor concerns over domestic overheating. Despite these
concerns, the company delivered a solid set of interim results for the first
half of 2000 with underlying pre-tax profits increasing by 12% to Euro 609
million, and earnings per share 13% to 49.2c.
The continued poor performance of EIRCOM (-34.8% IN QUARTER) was a feature
of the period. Similar to other European telecom operators, Eircom is suffering
from severe competition in the fixed-line voice business which has seen the
European telecom sector decline by 20.5% during the quarter under review. The
overhang of the KPN/Telia 35% shareholding in Eircom continues to depress the
stock.
The Fund continues to benefit from its investments in Irish technology
companies. IONA TECHNOLOGIES (+23.6% IN QUARTER) delivered strong share price
performance despite volatility in the global technology sector. In the second
quarter of 2000 the company's revenues increased by 41% to $34.7 million driven
by buoyant software sales which now account for 69% of total revenues. Also in
the technology sector, BCO TECHNOLOGIES rose by 68.5% as Analog Devices
announced a take-over of the company. The Fund
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realised substantial gains on its investment in BCO Technologies. We believe
this sector will provide new investment opportunities for the Fund which is
consistent with the current thrust of entrepreneurship in the country. During
the quarter the Fund purchased new shareholdings in PARTHUS TECHNOLOGIES, a
recent initial public offering, and in an unquoted Irish software company TWELVE
HORSES.
JURYS DOYLE GROUP (+21.5% IN QUARTER) delivered an excellent set of
full-year results (April year-end) with pre-tax profits increasing by 70% to
Euro 50 million and EPS by 35.9% to 73.8c. The uplift in profits was driven by
the successful integration of Doyle hotels. Over the past five years the annual
EPS growth at the company has been 30%.
CURRENT OUTLOOK
International equity markets are struggling against a backdrop of rising
short-term interest rates, increasing oil prices and the strong absolute returns
generated from stock markets over the past number of years. For these reasons,
as well as the concerns related to overheating in the domestic economy, the
Irish market remains subdued.
On a stock-by-stock basis, valuations in Ireland are at a reasonable
discount to international sector comparables. The market stands at a P/E for
2000 of 15.2x and a yield of 1.8%. The Fund retains a fully invested position.
Sincerely,
/S/ SIGNATURE
Peter Hooper
Chairman of the Board
September 19, 2000
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (UNAUDITED)
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July 31, 2000 Shares Value
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IRISH COMMON STOCKS (90.38%)
COMPUTER SOFTWARE AND SERVICES (6.78%)
Datalex Corporation*+ 52,500 U.S. $ 892,500
IONA Technologies-ADR* 74,300 5,219,575
Trintech Group-ADR* 10,000 245,554
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6,357,629
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CONSTRUCTION AND BUILDING MATERIALS (18.12%)
Abbey 348,600 904,455
CRH 664,462 11,236,594
Green Property 607,143 3,414,926
Kingspan 550,000 1,447,380
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17,003,355
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CONSUMER GOODS (10.58%)
DCC 320,000 2,816,925
ICON-ADR* 85,000 1,540,625
I.W.P., International 639,886 919,043
United Drug 287,500 1,944,744
Waterford Wedgwood 2,653,364 2,704,526
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9,925,863
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FINANCIAL (19.26%)
Allied Irish Banks 1,817,688 14,821,893
FBD Holdings 260,000 1,060,053
Irish Life & Permanent 306,991 2,190,373
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18,072,319
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FOOD AND BEVERAGES (13.05%)
Fyffes 1,635,000 1,545,324
Glanbia 1,153,610 694,823
Greencore 452,568 1,216,140
Kerry Group, Series A 705,000 8,786,443
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12,242,730
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HOTELS AND RESORTS (3.76%)
Jury's Doyle Hotel Group 481,792 3,526,861
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PAPER AND PAPER PRODUCTS(2.75%)
Smurfit Group 1,435,840 2,581,127
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (UNAUDITED) (CONTINUED)
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July 31, 2000 Shares Value
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PUBLISHING AND PRINTING (5.35%)
Adare Printing 320,000 U.S. $ 3,202,399
Independent News & Media 578,142 1,821,441
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5,023,840
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TECHNOLOGY (2.09%)
Horizon Technology* 264,817 1,963,078
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TELECOMMUNICATIONS (6.42%)
Eircom* 2,200,000 5,137,181
Parthus Technologies* 125,000 383,786
Twelve Horses Ltd.+ 625,000 500,000
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6,020,967
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TRANSPORTATION (2.22%)
Ryanair Holdings* 250,000 2,084,895
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TOTAL IRISH COMMON STOCKS
(Cost U.S. $63,214,778) 84,802,664
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UNITED KINGDOM COMMON STOCKS (5.03%)
PHARMACEUTICALS (1.65%)
Galen Holdings 150,000 1,544,503
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TECHNOLOGY (3.38%)
BCO Technologies* 535,700 3,177,179
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TOTAL UNITED KINGDOM COMMON STOCKS
(Cost U.S. $1,623,230) 4,721,682
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TOTAL INVESTMENTS BEFORE FOREIGN CURRENCY
ON DEPOSIT (Cost U.S. $64,838,008) U.S. $ 89,524,346
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FOREIGN CURRENCY ON DEPOSIT (4.25%)
(Interest Bearing)
British Pounds Sterling [BRITISH POUND
STERLING] 181 U.S. $ 272
Euro [EURO] 4,300,822 3,985,228
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TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost U.S. $4,093,300) 3,985,500
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (UNAUDITED) (CONTINUED)
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July 31, 2000 Value
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TOTAL INVESTMENTS (99.66%)
(Cost U.S. $68,931,308)** U.S. $ 93,509,846
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OTHER ASSETS AND LIABILITIES (0.34%) 323,598
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NET ASSETS (100.00%)
Applicable to 4,880,000 outstanding U.S. $.01 par value
shares (authorized 20,000,000 shares) U.S. $ 93,833,444
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NET ASSET VALUE PER SHARE
(U.S. $93,833,444 / 4,880,000) U.S. $ 19.23
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* Non-income producing security.
** Foreign currency held on deposit at the Bank of Ireland.
+ Not readily marketable.
ADR - American Depository Receipt traded in U.S. dollars
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THE IRISH INVESTMENT FUND, INC.
DIRECTORS AND OFFICERS
Peter J. Hooper - CHAIRMAN OF THE BOARD
James J. Boyle - DIRECTOR
William P. Clark - DIRECTOR
Denis Curran - DIRECTOR
Denis P. Kelleher - DIRECTOR
James M. Walton - DIRECTOR
Richard H. Rose - PRESIDENT AND TREASURER
Linda J. Hoard - SECRETARY
Michael O'Donnell - ASSISTANT TREASURER
PRINCIPAL INVESTMENT ADVISOR
Bank of Ireland Asset Management (U.S.) Limited
75 Holly Hill Lane
Greenwich, Connecticut 06830
CONSULTANT
Salomon Brothers Asset Management Inc.
Seven World Trade Center
New York, New York 10048
ADMINISTRATOR
PFPC Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406
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
2400 Eleven Penn Center
Philadelphia, PA 19103
CORRESPONDENCE
ALL CORRESPONDENCE SHOULD BE ADDRESSED TO:
The Irish Investment Fund, Inc.
o PFPC Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406
TELEPHONE INQUIRIES SHOULD BE DIRECTED TO:
1-800-GO-TO-IRL (1-800-468-6475)
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