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[The IRISH Investment Fund logo omitted]
FIRST QUARTER REPORT
FOR THE PERIOD ENDED JANUARY 31, 2000
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CHAIRMAN'S LETTER
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Dear Stockholder,
The Irish equity market increased by 8.4% in Irish pound terms during the
quarter ended January 31, 2000. After adjusting for the weakness of the euro
against the dollar this increase converted into a rise of 0.6% in U.S. dollar
terms. The Fund's Net Asset Value (NAV) declined by 0.4% to $19.67 over the
period. The Fund paid a dividend of $1.731 per share to shareholders in December
1999, and when this is taken into account, the Fund's total return was 8.4% for
the quarter.
The strong performance of technology, telecom and media stocks at the
expense of almost all other sectors was the notable feature of both the period
under review and the calendar year 1999. While these three high-growth sectors
finished 1999 representing almost 40% of U.S. and European stock markets, the
Irish market remains heavily exposed to more traditional stocks that have not
participated in recent bull markets. Telecom and technology represent less than
20% of the Irish market index with 13.5% of this index weight derived from the
telecom provider Eircom. Although the Fund had approximately 13% of its
portfolio invested in the technology sector at the start of the quarter, it has
benefited by substantial gains from some of these investments during the
reporting period, as detailed below.
ECONOMIC REVIEW
The most recent economic data indicates that the long-anticipated slowdown
in the Irish economy shows little sign of materializing. In particular, the pace
of domestic consumer demand remains strong. The Irish Central Bank has an
economic growth forecast for 1999 of 7.25% and 6.5% in 2000. Retail sales
volumes increased by 8.9% in the final quarter of 1999 over 1998 levels, with
total retail sales volumes increasing by 7.5% for the whole of 1999. Buoyant
consumer spending and robust business conditions have seen tax receipts for the
first two months of 2000 increase by 19% over 1999 levels, which compares to a
government forecast of 9.6% for the year 2000 as a whole.
Following the introduction of the Euro, our economic analysis must
concentrate on the key issues of sustainability of domestic growth and
competitiveness. As highlighted in the previous quarterly report, the Irish
government is addressing domestic infrastructural bottlenecks through a
substantial national development program. Apart from infrastructure, the other
key supply constraint to economic growth is the availability and cost of labor.
Down from its peak of over 15% in 1993, the Irish unemployment rate stood at
4.9% in January 2000. In the twelve months ended November 1999 total employment
expanded by 6.7%. This remarkable expansion will slow substantially going
forward and this will invariably lead to a slowdown in economic growth. However,
we would expect that the economy will continue to show strong growth, because
the Irish labor force - through demographics and immigration will continue to
expand at a faster pace than most European countries. In turn, productivity
growth in Ireland will remain high, driven by the industrial bias toward the
areas of technology and pharmaceuticals.
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The greatest risk at the present time is domestic inflation. The average
consumer inflation rate in 1999 was 2.8% but in the month of December 1999 the
year over year rate stood at 4.2% and reached 4.3% in January 2000. While these
data points are a concern there are a number of once-off factors. The recent
rapid increase in oil prices accounts for almost 1.0% and tobacco (tax
increases) for 0.8%. The social partners (unions, government, employers) agreed
on a new national wage deal in January 2000 which proposes wage increases of
5.5% in each of the next two years and a further 5.0% in the final nine months
of the agreement. Therefore, potential wage inflation has been capped at
generous but not unreasonable levels given current domestic prosperity. Fiscal
policy is supporting wage restraint through significant tax reductions with both
the standard and top rates of income tax being reduced by 2.0% respectively to
22% and 44% in the recent budget.
EQUITY MARKET REVIEW
The Irish equity market increased by 8.43% over the quarter ended January
31, 2000. A comparison with major international and European markets is shown
below.
QUARTER ENDED JANUARY 31, 2000
LOCAL CURRENCY U.S. $
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Irish Equities + 8.4% + 0.6%
US Equities + 2.3% + 2.3%
UK Equities + 2.5% + 1.2%
Japanese Equities + 9.2% + 6.5%
Euroland Equities +19.6% +11.3%
German Equities +21.8% +13.4%
French Equities +15.8% + 7.8%
Dutch Equities + 7.0% - 0.3%
As highlighted earlier, while the market has increased by 8.4% in local
currency terms it has lagged major markets (particularly in Europe) over this
period. The past three months and indeed the past twelve months have been
challenging periods for global and Irish stock pickers. While overall indices
have increased in value, almost all positive performance has originated from
three sectors - technology, telecom and media. Ireland continues to have
significant exposure to the 'old world' of banking, building materials,
industrial and manufacturing companies.
The de-rating of Irish financial stocks continued over the quarter in line
with international sector trends. Allied Irish Banks ("AIB") (-19.7% in quarter)
continues to suffer both from international investor caution towards the Irish
economy and more broad-based concern on the impact of the Internet on
traditional banks. While a pure Internet bank has not launched into the Irish
market there are clear concerns over the impact of the Internet on banks'
margins. These concerns appear to be reflected in current share prices and at
the quarter end AIB traded at a large discount to Euroland banks on a P/E ratio
of just 9.3 times for 2000.
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The performance of the Fund's investment in Irish technology shares was
the feature of the quarter. Internet fever has resulted in substantial
revaluations for most of our investments in the technology sector. Iona (+122.2%
in quarter) continues to recover from its difficulties in early 1999 and has an
exciting new middleware product focused on enabling traditional companies to
transform and integrate legacy systems in a web environment. Iona has proven
technology and a profitable operating track record and remains our favorite
Irish technology company. Trintech (+253.5% in quarter) benefited from investor
enthusiasm for Internet security software stocks. The Fund held an unquoted
investment in Horizon Technology Group (+566.4% in quarter) and in December 1999
the company listed on the stock market. The company is exposed to the areas of
networking training and Internet consulting and the market has dramatically
re-rated Horizon and other companies in this space. While we are cautious on the
speculative nature of movements in technology companies over the past six
months, it should be highlighted that over recent weeks the Fund has been
realizing profits on a number of these stocks. In turn, our success with these
stocks is not a recent phenomenon and was articulated as a clear strategy for
the Fund a number of years ago. We intend to continue to seek investments in the
area and would expect this sector to become a key part of Irish capital markets
going forward.
Independent News & Media (+59.1% in quarter) and Fyffes (+94.1% in
quarter) are more traditional companies that are benefiting from the Internet
boom. Independent has domestic cable and Internet assets and an investment in a
mobile portal technology company called iTouch. Fyffes has launched
worldoffruit.com and intends to capture a leadership position as a business-to
business fruit exchange.
CURRENT OUTLOOK
Despite gloomy investor sentiment, the Irish economy continues to deliver
strong growth rates and while growth will slow, we remain confident that a rapid
deceleration is unlikely.
International equity markets, including Ireland, are exhibiting unhealthy
trends with performance concentrated into a relatively small number of sectors.
We would anticipate the sector performance will broaden in 2000 and, given
substantial superior earnings growth for most Irish companies, the Fund retains
a fully invested position. The current P/E on the Irish market is 14.1x and it
offers a dividend yield of 2.0%.
Sincerely,
/s/ Peter Hooper signature
Peter Hooper
Chairman of the Board March 24, 2000
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (UNAUDITED)
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January 31, 2000 Shares Value
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IRISH COMMON STOCKS (96.76%)
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COMPUTER SOFTWARE AND SERVICES (7.41%)
IONA Technologies-ADR* 99,300 U.S. $ 4,716,750
Trintech Group-ADR* 44,000 2,579,877
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7,296,627
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CONSTRUCTION AND BUILDING MATERIALS (19.25%)
Abbey 348,600 1,292,358
CRH 664,462 12,660,309
Green Property 607,143 3,376,274
Kingspan 550,000 1,636,569
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18,965,510
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CONSUMER GOODS (9.18%)
DCC 320,000 2,419,489
ICON-ADR* 85,000 1,455,625
I.W.P., International 639,886 1,154,905
United Drug 287,500 2,187,784
Waterford Wedgwood 1,865,739 1,820,215
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9,038,018
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FINANCIAL (21.48%)
Allied Irish Banks 1,567,688 14,606,121
FBD Holding 260,000 1,268,280
Hibernian 300,000 2,692,657
Irish Life & Permanent 306,991 2,590,679
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21,157,737
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FOOD AND BEVERAGES (13.44%)
Fyffes 1,635,000 5,263,851
Glanbia 1,153,610 1,294,282
Greencore 452,568 1,236,271
Kerry Group, Series A 465,000 5,443,849
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13,238,253
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HOTELS AND RESORTS (3.84%)
Jury's Doyle Hotel Group 481,792 3,783,793
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PAPER AND PAPER PRODUCTS (4.12%)
Smurfit Group 1,435,840 4,062,337
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (UNAUDITED)(CONTINUED)
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January 31, 2000 Shares Value
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IRISH COMMON STOCKS (CONTINUED)
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PUBLISHING AND PRINTING (5.21%)
Adare Printing 320,000 U.S. $ 2,029,249
Independent News & Media 397,071 3,099,061
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5,128,310
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TECHNOLOGY (5.31%)
Horizon Technology *+ 812,436 5,231,244
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TELECOMMUNICATIONS (7.52%)
Eircom* 1,800,000 7,410,659
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TOTAL IRISH COMMON STOCKS 95,312,488
(Cost $54,899,600)
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UNITED KINGDOM COMMON STOCKS (2.60%)
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TECHNOLOGY (1.21%)
BCO Technologies* 535,700 1,192,167
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PHARMACEUTICALS (1.39%)
Galen Holdings 150,000 1,371,679
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TOTAL UNITED KINGDOM COMMON STOCKS 2,563,846
(Cost $1,623,230)
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TOTAL INVESTMENTS BEFORE FOREIGN CURRENCY ON DEPOSIT
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(Cost U.S. $ 56,522,830) U.S. $97,876,334
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FOREIGN CURRENCY ON DEPOSIT (0.03%)
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(Interest Bearing)
British Pounds Sterling (pound) 781 U.S. $ 1,264
Euro (euro) 29,204 28,491
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TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost $30,764) 29,755
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (UNAUDITED)(CONTINUED)
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January 31, 2000 Value
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TOTAL INVESTMENTS (99.39%)
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(Cost $56,553,594)** U.S. $97,906,089
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OTHER ASSETS AND LIABILITIES (0.61%)
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Other Assets 759,542
Other Liabilities (162,432)
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597,110
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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. $98,503,199
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NET ASSET VALUE PER SHARE
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(U.S. $98,503,199 / 5,009,000) U.S. $ 19.67
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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
William P. Clark - DIRECTOR
Denis Curran - DIRECTOR
Denis P. Kelleher - DIRECTOR
James M. Walton - DIRECTOR
Richard H. Rose - PRESIDENT AND TREASURER
Elizabeth A. Russell - SECRETARY
Linda J. Hoard - ASSISTANT 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.
c/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)
