THE
IRISH
INVESTMENT FUND
[PHOTO OMITTED]
ANNUAL REPORT
OCTOBER 31, 2000
<PAGE>
COVER PHOTOGRAPH -- TRINITY COLLEGE, DUBLIN.
Provided courtesy of Irish Tourist Board.
<PAGE>
CHAIRMAN'S LETTER
Dear Shareholder,
INTRODUCTION
Before discussing the Fund's performance, a few general comments.
I am sure you will have noticed the new format of the report which we
introduced last quarter. We felt it was time to update the image of the way we
present our quarterly reports in order to make them more shareholder friendly.
From now on, the cover will feature a different picture of Ireland each quarter,
portraying its natural beauty, its history and its evolution into the modern and
exciting country it is today.
We have also changed the report's internal presentation to make it more
easily readable and further changes in this direction can be expected in coming
quarters. In addition, in order to make information on the Fund more accessible
to shareholders, brokers and others, we have been working on a web site for the
Fund and expect that this will be in operation within the next quarter. We
encourage you to visit it.
Alongside these changes, we have been doing some practical things which we
believe are in the real interest of shareholders. The Share Repurchase Program
which was introduced earlier in the year has added to shareholder value as
detailed below. We have also appointed a new director, James Boyle, who is
Chairman & President of Cardinal Resources, Inc. We welcome him and believe that
his broad experience will be of considerable benefit to the Fund.
Because the Irish economy has shown such strength in recent years,
particularly in the computer, software and e-Commerce areas, we have seen the
emergence of a new breed of Irish entrepreneurs. This has resulted in many new
start ups which are in turn creating a number of attractive opportunities for
the Fund. Over the past couple of years, we have made small investments in some
of these companies with very successful outcomes and we believe that more such
opportunities will present themselves to us in the future.
Mainly as a result of taking a profit on some of our investments in the
areas mentioned in the last paragraph, but also as a result the Fund's regular
turnover, significant capital gains have been generated over these past twelve
months. Because of our tax status, we are required to pass such gains onto
shareholders at year end and this year, as you will be aware, we have decided to
do so by way of a stock distribution for the fiscal year ended October 31, 2000,
in an amount of $2.66 per share. Accordingly, unless a shareholder has opted for
a cash dividend in lieu, new shares will be issued on December 29, 2000 to
shareholders of record on November 13, 2000. The new share allocation represents
a full distribution of the capital gains based on the lower of net asset value
("NAV") or market value per share on December 15, 2000.
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<PAGE>
PERFORMANCE
Prior to reviewing the Fund's fiscal year ended October 31, 2000, I would
like to comment briefly on the final quarter. During this period, the Irish
equity market increased by 17.6% in euro currency terms. After adjusting for
movements in exchange rates this increase converted into a gain of 7.6% in US
dollar terms. The Fund's NAV increased by 4.3% to $20.06 over the quarter.
For the Fund's fiscal year ended October 31, 2000, the Irish equity market
rose by 29.7% in euro currency terms, but the continued strength of the dollar
converted this increase into a gain of 4.5% in dollar terms. In the same period,
the Fund's NAV rose by 1.6% from $19.75 to $20.06. The Fund paid a cash dividend
of $1.731 to shareholders in December 1999 and when account is taken of the
reinvestment of this distribution, the total return to stockholders at NAV was
13.27% for the year.
During the quarter, we continued to implement the Share Repurchase Program.
Since commencement of the Program earlier this year, up to the end of the fiscal
year, the Fund repurchased and retired 268,700 shares at a cost of $3,908,180.
These repurchases, which represent a reduction of 5.4% of the shares originally
issued, have positively impacted the Fund's NAV by 1.52% or 30 cents per share.
ECONOMIC REVIEW
The pace of Irish economic growth shows no clear signs of deceleration and
the Irish Central Bank expects GNP growth in 2000 to reach 8.5%. This is the
seventh successive year of annual Irish GNP growth in excess of 5%. Despite this
buoyant growth, the focus of economic commentary in 2000 has been on domestic
inflation.
In the month of October the annualized inflation rate was 6.8%. This
represents an unwelcome acceleration from the 6.2% inflation rate observed in
each of the previous three months. Increasing mortgage interest rates and rising
oil prices were the key negative drivers to the data. For the health of the
Irish economy, it is hoped that the final quarter of 2000 represents a "high
water mark" for Irish inflation. The Irish Central Bank is forecasting a
twelve-month average inflation rate of 5.5% for calendar year 2000 and expects
inflation in 2001 to decline to 4.0%. From the point of view of the economy
maintaining its competitiveness, it is clearly important that this reduction is
achieved.
The number of people claiming unemployment benefit in September 2000 stood
at 145,100, which corresponds to an unemployment rate of 3.8%. This is the
lowest unemployment rate recorded in Ireland over the past 30 years and compares
to 4.6% at the beginning of 2000 and 8.5% at the beginning of 1998.
Government finances remain in a robust position. In the first nine months
of 2000, tax receipts increased by 15.8% and the exchequer recorded a surplus of
[EURO] 3.75bn. It is expected that the upcoming budget will see another series
of substantial income tax reductions. These anticipated reductions in income tax
are an important part of the government's policy to encourage wage restraint in
the economy.
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Over the quarter the euro depreciated by 8.5% against the US dollar,
continuing a trend evident over the whole fiscal year when a depreciation of
19.4% occurred. This has negatively impacted the NAV of the Fund over both time
periods. We believe that at current levels the euro represents solid value
against the US dollar.
EQUITY MARKET REVIEW
The Irish equity market increased by 17.6% over the quarter ended October
31, 2000. Over the financial year of the Fund, the market increased by 29.7%. A
comparison for both periods with international and European markets is shown
below:
QUARTER ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 2000
---------------- ----------------
LOCAL LOCAL
CURRENCY U.S. $ CURRENCY U.S. $
-------- ------ -------- ------
Irish Equities +17.6% +7.6% +29.7% +4.5%
US Equities -0.1% -0.1% +4.8% +4.8%
UK Equities +0.5% -2.5% +6.0% -6.2%
Japanese Equities -7.5% -7.2% -18.9% -22.5%
Euroland Equities -1.6% -10.0% +25.7% +1.4%
German Equities -0.9% -9.3% +26.9% +2.4%
French Equities -2.2% -10.5% +30.9% +5.5%
Dutch Equities +2.7% -6.0% +21.8% -1.8%
Over the quarter, the Irish equity market outperformed, helped in
particular by a strong recovery in financial stocks from previously oversold
levels. The continuing volatility in international markets, driven by the
technology, media and telecom (TMT) sector, has seen most major markets in
negative territory over the quarter. Indeed, in US dollar terms, most
international markets have delivered modest nominal returns over the past twelve
months.
The Irish market underperformed in 1999 and early 2000 due to its
relatively modest exposure to the TMT sector and relatively high weightings in
banking/financial stocks. During the past two quarters this trend has reversed.
Over the Fund's fiscal year, Ireland's equity market performance was strong in
euro terms and broadly in line with the US dollar returns of international
equity markets.
In a number of stocks held by the Fund, the performance of the past quarter
was simply a reversal of stock performance over the previous six months. Irish
financials had been oversold in the first half of 2000, driven by international
sector weakness and concerns around overheating in the domestic economy. AIB
(+36.3% IN QUARTER) recovered, in line with sector trends, and was helped by a
resolution to the company's dispute with the Irish tax authorities that was less
than the market's worst fears. IRISH LIFE & PERMANENT (+53.4% IN QUARTER) was a
strong performer recovering from a
3
<PAGE>
previously heavily oversold position which was helped by a solid set of results.
The company has initiated a share repurchase program for up to [EURO] 150m or 5%
of share capital.
We have seen a substantial change, to the negative, in investor sentiment
towards the technology sector over the quarter under review which has continued
into the last two months of 2000. The substantial re-ratings of technology
stocks that had occurred in 1999 and the first quarter of 2000 have been
reversed. Earlier in 2000, the Fund had realized substantial capital gains on
many of its investments in Irish technology stocks in response to extremely high
valuations. Despite current volatility we take the longer-term perspective that
the majority of the exciting future growth prospects in Ireland's capital market
are to be found in this sector and we continue to look for investment
opportunities. The Fund purchased BALTIMORE TECHNOLOGIES during the quarter.
Baltimore is a leading developer of security software and had reached a share
price high of STG(POUND)13.75 in March 2000. The Fund recently purchased a
shareholding in the company at STG(POUND)4.40. While the stock remains highly
valued, its revenues are expected to grow at over 100% in the coming twelve
months and it is regarded as a global leader in this emerging software space.
The Fund's largest shareholding in the sector, IONA TECHNOLOGIES (-6.4% OVER THE
QUARTER), has performed satisfactorily in relation to the overall sector, helped
by recent strong results.
Globally the telecom sector has suffered in line with technology stocks
over the quarter but EIRCOM (+29.7% IN QUARTER) bucked this trend as the company
announced that it had entered into talks with Vodafone that may or may not lead
to a disposal of Eircom's mobile business, Eircell. If this transaction were to
occur it would unlock substantial value in Eircom and also help to resolve the
KPN/Telia 35% share overhang. In a separate development a group, led by the
Irish entrepreneur Denis O'Brien, has launched a bid for the fixed-line assets
of Eircom which values this business at [EURO] 2.25bn. The current volatility in
the telecom sector challenges these interested parties to come to a rapid
conclusion, but a positive outcome for shareholders is anticipated.
CURRENT OUTLOOK
International markets remain volatile given the de-rating of TMT sectors
and concerns over slowing economic growth. The Irish equity market has fared
well through this volatility, helped by relatively modest stock valuations and
the continued strength of the economy.
In aggregate terms, Irish stocks look attractive with forecast
price/earnings ratio and yield for 2001 of 14.4x and 1.7%, respectively. The
Fund retains a fully invested position.
Sincerely,
/S/ SIGNATURE
Peter Hooper
Chairman of the Board
December 11, 2000
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
October 31, 2000 Shares Value (Note A)
--------------------------------------------------------------------------------
IRISH COMMON STOCKS (88.59%)
COMPUTER SOFTWARE AND SERVICES (11.49%)
Datalex Corporation* 157,500 U.S. $ 915,863
Datalex Corporation-ADR* 170,000 1,965,625
IONA Technologies-ADR* 104,300 6,857,725
Spectel Group Limited+ 996,423 1,076,292
Trintech Group-ADR* 10,000 105,956
-----------
10,921,461
-----------
CONSTRUCTION AND BUILDING MATERIALS (18.01%)
Abbey 348,600 880,563
CRH 764,462 11,586,172
Green Property 457,143 2,724,106
Kingspan 800,000 1,932,642
-----------
17,123,483
-----------
CONSUMER GOODS (7.83%)
DCC 320,000 2,753,167
I.W.P., International 639,886 867,839
ICON-ADR* 85,000 1,700,000
United Drug 287,500 2,120,185
-----------
7,441,191
-----------
FINANCIAL (21.63%)
Allied Irish Banks 1,617,688 16,454,799
FBD Holdings 260,000 1,035,828
Irish Life & Permanent 306,991 3,073,209
-----------
20,563,836
-----------
FOOD AND BEVERAGES (11.62%)
Fyffes 1,635,000 1,205,740
Greencore 452,568 1,054,953
Kerry Group, Series A 705,000 8,790,597
-----------
11,051,290
-----------
HOTELS AND RESORTS (3.84%)
Jury's Doyle Hotel Group 481,792 3,655,099
-----------
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
October 31, 2000 Shares Value (Note A)
--------------------------------------------------------------------------------
IRISH COMMON STOCKS (CONTINUED)
PAPER AND PAPER PRODUCTS (2.69%)
Smurfit Group 1,435,840 U.S. $ 2,555,888
-----------
PUBLISHING AND PRINTING (1.88%)
Independent News & Media 578,142 1,788,727
-----------
TECHNOLOGY (2.01%)
Horizon Technology* 264,817 1,908,013
-----------
TELECOMMUNICATIONS (4.91%)
Eircom* 1,350,000 3,741,951
Parthus Technologies* 125,000 426,554
Twelve Horses Ltd.+ 625,000 500,000
-----------
4,668,505
-----------
TRANSPORTATION (2.68%)
Ryanair Holdings* 325,000 2,548,248
-----------
TOTAL IRISH COMMON STOCKS
(Cost U.S. $54,497,477) 84,225,741
-----------
UNITED KINGDOM COMMON STOCKS (7.40%)
PHARMACEUTICALS (2.05%)
Galen Holdings 150,000 1,954,890
-----------
TECHNOLOGY (5.35%)
Baltimore Technology PLC 660,000 5,084,238
-----------
TOTAL UNITED KINGDOM COMMON STOCKS
(Cost U.S. $4,567,996) 7,039,128
-----------
TOTAL INVESTMENTS BEFORE FOREIGN CURRENCY
ON DEPOSIT (Cost U.S. $59,065,473) U.S. $91,264,869
-----------
FOREIGN CURRENCY ON DEPOSIT (2.77%)
(Interest Bearing)
British Pound Sterling [POUND STERLING] 366 U.S. $ 531
Euro [EURO] 3,106,866 2,633,535
-----------
TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost U.S. $2,620,945)** 2,634,066
-----------
6
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
October 31, 2000 Value (Note A)
--------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.76%)
(Cost U.S. $61,686,418) U.S. $93,898,935
-----------
OTHER ASSETS AND LIABILITIES (1.24%) 1,176,535
-----------
NET ASSETS (100.00%)
Applicable to 4,740,300 outstanding
U.S. $.01 par value shares
(authorized 20,000,000 shares) U.S. $95,075,470
-----------
NET ASSET VALUE PER SHARE
(U.S. $95,075,470 [DIVIDE] 4,740,300) U.S. $ 20.06
===========
----------------------
* 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
7
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
Value
(Note A)
--------------------------------------------------------------------------------
AT OCTOBER 31, 2000 NET ASSETS CONSISTED OF:
Common Stock, U.S. $.01 Par Value -
Authorized 20,000,000 Shares;
Issued and Outstanding 4,740,300 Shares U.S. $ 47,403
Additional Paid-in Capital 50,265,967
Accumulated Net Realized Gain 12,531,910
Unrealized Appreciation of Securities,
Foreign Currency and Net Other Assets 32,230,190
-----------
TOTAL NET ASSETS U.S. $95,075,470
===========
See Notes to Financial Statements.
8
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the Year Ended
October 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (Net of Withholding Taxes of U.S. $477) U.S. $ 1,989,728
Interest 126,553
-----------
TOTAL INVESTMENT INCOME 2,116,281
-----------
EXPENSES
Investment Advisory Fee (Note B) U.S. $ 746,361
Administration Fee (Note B) 184,315
Consulting Fee (Note B) 165,000
Directors' Fees and Expenses (Note C) 96,764
Miscellaneous Fee 60,600
Custodian Fees (Note B) 44,040
Legal and Audit Fees 39,450
Printing Fee 35,665
Other 48,645
-----------
TOTAL EXPENSES 1,420,840
-----------
NET INVESTMENT INCOME 695,441
-----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS (NOTE D)
Realized Gain/(Loss) on:
Securities Transactions 12,721,410
Foreign Currency Transactions (880,252)
-----------
Net Realized Gain on Investments
During the Year 11,841,158
-----------
Net Change in Unrealized Depreciation of:
Securities (3,826,915)
Foreign Currency and Net Other Assets 28,987
-----------
Net Unrealized Depreciation of Investments
During the Year (3,797,928)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 8,043,230
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS U.S. $ 8,738,671
===========
See Notes to Financial Statements.
9
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THE IRISH INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
Year Ended Year Ended
October 31, 2000 October 31, 1999
--------------------------------------------------------------------------------
Net Investment Income U.S. $ 695,441 U.S. $ 563,840
Net Realized Gain on Investments 11,841,158 8,106,216
Net Unrealized Depreciation
of Investments (3,797,928) (11,039,342)
----------- ------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations 8,738,671 (2,369,286)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income (633,156) --
Net Realized Gains (8,037,423) (5,720,278)
----------- ------------
Net Increase/(Decrease) in Net Assets 68,092 (8,089,564)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Cost of 268,700 Shares
Repurchased (Note G) (3,908,180) --
----------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM CAPITAL SHARETRANSACTIONS (3,908,180) --
----------- ------------
NET ASSETS
Beginning of Year 98,915,558 107,005,122
----------- ------------
End of Year (Including Undistributed
Net Investment Income of $0
and $633,156 respectively) U.S. $95,075,470 U.S. $ 98,915,558
=========== ============
See Notes to Financial Statements.
10
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THE IRISH INVESTMENT FUND, INC.
FINANCIAL HIGHLIGHTS (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------------------------------------------
2000 1999 1998+ 1997+ 1996
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Perforance:
Net Asset Value,
Beginning of Year U.S. $ 19.75 U.S. $ 21.36 U.S. $ 19.99 U.S. $ 16.90 U.S. $ 13.61
------- ------- ------- ------- -------
Net Investment Income 0.15 0.13 0.07 0.14 0.14
Net Realized and Unrealized
Gain/(Loss) on Investments 1.59 (0.60) 2.07 3.53 3.42
------- ------- ------- ------- -------
Net Increase/(Decrease) in
Net Assets Resulting from
Investment Operations 1.74 (0.47) 2.14 3.67 3.56
------- ------- ------- ------- -------
Distributions to Shareholders
from:
Net Investment Income (0.13) -- (0.07) (0.22) (0.14)
Net Realized Gains (1.60) (1.14) (0.70) (0.36) (0.13)
------- ------- ------- ------- -------
Total from Distributions (1.73) (1.14) (0.77) (0.58) (0.27)
------- ------- ------- ------- -------
Anti-Dilutive Impact Due to
Capital Shares Repurchased 0.30 -- -- -- --
------- ------- ------- ------- -------
Net Asset Value,
End of Year U.S. $ 20.06 U.S. $ 19.75 U.S. $ 21.36 U.S. $ 19.99 U.S. $ 16.90
======= ======= ======= ======= =======
Share Price, End of Year U.S. $ 15.19 U.S. $ 16.38 U.S. $ 17.88 U.S. $ 15.75 U.S. $ 14.00
======= ======= ======= ======= =======
Total Investment Return(a) 13.27% (2.79%) 11.68% 23.04% 26.84%
======= ======= ======= ======= =======
Total Investment Return(b) 3.43% (3.30%) 18.42% 17.03% 27.12%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets,
End of Year (000's) U.S. $95,075 U.S. $98,916 U.S. $107,005 U.S. $100,121 U.S. $84,633
Ratio of Net Investment
Income to Average
Net Assets 0.70% 0.53% 0.33% 0.78% 0.95%
Ratio of Operating Expenses
to Average Net Assets 1.42% 1.33% 1.37% 1.54% 1.63%
Portfolio Turnover Rate 34% 13% 9% 11% 12%
<FN>
(a)Based on share net asset value and reinvestment of distributions at the
price obtained under the Dividend Reimbursement and Cash Purchase Plan.
(b)Based on share market price and reinvestment of distributions at the price
obtained under the Dividend Reimbursement and Cash Purchase Plan.
+ Per-share numbers have been calculated using the average share method, which
more appropriately represents the per-share data for the year since the use
of the undistributed income method did not accord with results of operations.
</FN>
</TABLE>
See Notes to Financial Statements.
11
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THE IRISH INVESTMENT FUND, INC.
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. At October 31, 2000 the Fund held 1.7% of its net assets
in securities valued in good faith by the Board of Directors with an aggregate
cost of $1,653,708 and fair value of $1,576,292. 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.
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
12
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THE IRISH INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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. There were no such contracts open in
the Fund as of October 31, 2000.
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 "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
Investment Advisory Agreement, the Fund pays a monthly fee at an annualized rate
equal to 0.75% of the value of the average net assets of the Fund up to the
first $100 million and 0.50% of the value of the average weekly net assets of
the Fund on amounts in excess of $100 million.
The Fund has entered into a Consulting Agreement with Salomon Brothers
Asset Management Inc. (SBAM). Under this agreement, SBAM evaluates trends in
13
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THE IRISH INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
the closed-end fund marketplace, and provides Fund management with future Fund
development options and comparative fund analysis. In addition, SBAM provides
investor services to existing and potential shareholders. The Fund pays SBAM an
annual fee of $165,000 payable monthly.
The Fund has entered into an administration agreement (the "Administration
Agreement") with PFPC Inc. Effective December 14, 1999, the Fund pays PFPC an
annual fee of $185,000, payable monthly. The Fund incurred $163,265 from
December 14, 1999 to October 31, 2000 under the new agreement. Prior to December
14, 1999 the Fund paid a monthly fee to PFPC at an annual rate of 0.20% of the
value of its average monthly net assets. Fees under this agreement for the
period November 1, 1999 to December 13, 1999 were $21,050.
The Fund has entered into an agreement with The Chase Manhattan Bank to
serve as custodian of the Fund's assets held outside of Ireland. During the year
ended October 31, 2000, the Fund paid The Chase Manhattan Bank U.S. $5,780. Bank
of Ireland serves as the Fund's custodian of the Fund's assets held in Ireland.
During the year ended October 31, 2000, the Fund paid U.S. $38,260 in custodian
fees to Bank of Ireland.
For the year ended October 31, 2000, the Fund incurred total brokerage
commissions of U.S. $121,723, of which U.S. $9,023 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 any affiliate
thereof, an annual retainer of U.S. $11,500, plus U.S. $1,000 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 an additional U.S. $13,500 annually. Each Director is
reimbursed for travel and certain 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, 2000, excluding U.S. government and short-term investments,
aggregated U.S. $32,377,383 and U.S. $47,899,258, respectively.
At October 31, 2000, 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. $36,498,263, 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. $4,298,867. Also on this
date, the tax cost of securities for Federal Income tax purposes is $59,065,473.
14
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THE IRISH INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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 October 31, 2000 Bank of Ireland held
9,000 shares representing 0.19% of the Fund's total issued shares.
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. SHARE REPURCHASE PROGRAM:
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.
For the fiscal year ended October 31, 2000, the Fund repurchased 268,700
(5.4% of the shares outstanding at inception of the repurchase program) of its
shares for a total cost of $3,908,180, at a weighted average discount of 26.38%
of net asset value.
H. LETTER OF CREDIT:
As required by its insurance policy, the Fund participates in a letter of
credit that allows borrowing up to $41,000. For the year ended October 31, 2000,
the Fund did not borrow against the letter of credit.
15
<PAGE>
THE IRISH INVESTMENT FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Board of Directors and Shareholders
of The Irish Investment Fund, Inc.:
In our opinion, the accompanying statements of net assets, and the related
statement 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, 2000, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and 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 auditing
standards generally accepted in the United States of America, 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, 2000 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 21, 2000
16
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
(UNAUDITED)
--------------------------------------------------------------------------------
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 U.S. $100 to U.S. $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
17
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
(UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
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.
18
<PAGE>
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
Pursuant to Internal Revenue Code Section 852(b)(3), the amount of
long-term capital gains designated for the fiscal year ended October 31, 2000
were $10,626,271.
19
<PAGE>
MEETING OF STOCKHOLDERS
(UNAUDITED)
--------------------------------------------------------------------------------
On June 14, 2000, the Fund held its Annual Meeting of Stockholders. The
following Directors were elected by the following votes: William P.
Clark--3,673,756 For; 109,026 Abstaining; Denis Curran--3,672,980 For; 109,802
Abstaining; and Peter J. Hooper--3,670,395 For; 112,388 Abstaining. Denis P.
Kelleher and James M. Walton continue to serve in their capacities as Directors
of the Fund. The selection of PricewaterhouseCoopers LLP as the Fund's
independent accountants for the fiscal year ending October 31, 2000 was ratified
by the following votes: 3,697,720 For; 42,193 Against; and 42,868 Abstaining.
20
<PAGE>
--------------------------------------------------------------------------------
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
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.
101 Federal Street
Boston, Massachusetts 02110
CUSTODIANS
Bank of Ireland
Lower Baggot Street
Dublin 2, Ireland
Chase Manhattan Bank
Global Investor Services
4 Chase Metro Tech Center 18th Floor
Brooklyn, New York 11245
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
Two Commerce Square, Suite 1700
2001 Market Street
Philadelphia, PA 19103-7042
CORRESPONDENCE
ALL CORRESPONDENCE SHOULD BE ADDRESSED TO:
The Irish Investment Fund, Inc.
c/o PFPC Inc.
101 Federal Street
6th Floor
Boston, Massachusetts 02110
TELEPHONE INQUIRIES SHOULD BE DIRECTED TO:
1-800-GO-TO-IRL (1-800-468-6475)
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IR-AR10/00
