UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-05984
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THE NEW IRELAND FUND, INC.
-----------------------------------------------------
(Exact name of registrant as specified in charter)
Bank of Ireland Asset Management (U.S.) Limited
300 First Stamford Place
STAMFORD, CT 06902
-----------------------------------------------------
(Address of principal executive offices) (Zip code)
PFPC Inc.
99 High Street, 27th Floor
BOSTON, MA 02110
-----------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (203) 328-1820
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Date of fiscal year end: OCTOBER 31
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Date of reporting period: APRIL 30, 2008
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
THE
NEW IRELAND
FUND
(GRAPHIC)
SEMI-ANNUAL REPORT
APRIL 30, 2008
COVER PHOTOGRAPH -- BEN BULBEN, CO. SLIGO
PROVIDED COURTESY OF TOURISM IRELAND
LETTER TO SHAREHOLDERS
Dear Shareholder,
As may be seen in the Economic Review section below, along with many of the
world economies, Ireland's growth rate has fallen to a level considerably below
what it had been achieving for the past decade. However, having said this, after
achieving a very satisfactory GDP growth rate of 5.3% in 2007, the forecasts for
2008 and 2009, at 2.4% and 3.6%, respectively, are quite satisfactory as they
continue to be ahead of the forecasts for most western economies.
For the quarter just ended and the fiscal half year, the Fund's Net Asset
Value ("NAV") has considerably outperformed the Irish Equities Market ("ISEQ").
As may be seen below, for the quarter, the NAV increased by 3.5%*, in U.S.
dollar terms as compared to the ISEQ's 0.3% and for the six month period the NAV
declined by only 8.2% as compared to the decline of 13.8% in the ISEQ. In the
context of the difficulties that markets worldwide have been experiencing, the
Fund's performance over the past six months must be viewed as satisfactory and
it is hoped that the next six months will see a further recovery in the Irish
markets.
PERFORMANCE
In the second fiscal quarter, the Fund's NAV increased by 3.5% to $22.62,
which compares to a return of 0.3% in the ISEQ in U.S. dollar terms. Excluding
Bank of Ireland, which the Fund is precluded from investing in, the Irish market
was ahead 0.5%. For the first half of the current fiscal year the Fund's NAV
declined 8.2% compared to a 13.8% decline in the ISEQ and a 12.3% decline in the
ISEQ ex Bank of Ireland.
The Fund's strong NAV performance vis-a-vis the ISEQ resulted mainly from
corporate activity surrounding a number of its holdings in the last three
months. However, in common with most equity markets worldwide, the Irish market
struggled to make headway over the period. Just before the end of the quarter,
the Fund made an investment in the pharmaceutical company, Elan, which is the
fourth largest stock in the ISEQ.
The Euro rose by 5.2% and 7.6% against the U.S. dollar over the three and
six month periods, respectively. The Equity Market Review section below gives a
more detailed analysis of the performance of some of the key stocks held by the
fund.
We continued to implement the Share Repurchase Program with 192,400 shares
being repurchased and retired, since the beginning of the fiscal year, at a cost
of $3,771,881. These repurchases represent a reduction of 4.09% of the shares
outstanding at October 31, 2007 and they have resulted in a positive impact of
10 cents per share.
* All returns are quoted in U.S. Dollars unless otherwise stated.
1
ECONOMIC REVIEW
The Irish economy is transitioning to a period of lower growth in 2008 and
2009 after a decade of above average expansion. Following strong GDP growth of
5.3% in 2007, latest Central Bank of Ireland ("CBOI") forecasts are for 2.4% GDP
growth in 2008 with a pick up to 3.6% in 2009.
The construction sector is playing a significant role in the transition
with residential construction output forecast to reach 48,000 units in 2008
followed by a forecast of 35,000 units for 2009 - a significant correction from
the peak of 88,000 units completed in 2006. This will create an inevitable drag
on growth over the next two years with a related knock-on effect on employment
and consumption. However non-residential construction activity and
infrastructural spending are expected to hold up relatively well, which will
help cushion the impact on domestic investment arising from the residential
construction slowdown.
Despite currency headwinds, exports performance is expected to be strong
over the coming year with exports growth of 5.6% being forecast for 2008 driven
by continued strength in high technology and services. The improved exports
picture combined with weaker domestic demand will accelerate a necessary
rebalancing of the Irish economic mix.
The international economic backdrop has deteriorated in recent months as
problems in the global financial system have spilled into the real economy
through restrictions in the availability of credit. U.S. growth has slowed
considerably with weakness no longer confined to the residential sector. The
U.K. has seen a significant softening in its domestic housing market which along
with a deteriorating labor market has damaged consumer confidence and spending.
The Euro area has also seen an easing of growth from the high levels experienced
in the first nine months of 2007.
Central banks across the world have undertaken extensive actions in recent
months to improve confidence and restore liquidity in inter-bank and money
markets. The U.S. Federal Reserve has moved aggressively on interest rates with
325 bps of cuts since September 2007. U.K. base rates have also been lowered to
5.0% while the tightening cycle in Europe would seem to have peaked. The
combination of these measures should guard against further significant
deterioration in the macro environment.
Irish consumer sentiment declined in April. The overall Consumer Sentiment
Index stood at 56.0 in April, compared to a figure of 63.3 in March. The
corresponding figure for April 2007 was 83.0. The Live Employment Register total
fell slightly in April to 199,700 from March. The number of male claimants
continued to rise in the month reflecting the continued slowdown in domestic
construction activity. Female claimants have also edged up over the last three
months indicating that recent trends in the labor market are not solely confined
to the construction sector. The estimated unemployment rate remained unchanged
at 5.5% in the period. The CBOI forecasts an unemployment rate of 5.9% for 2008.
2
Retail sales dropped 1.9% in February compared with January and 0.1%
year-on-year. Car sales were the most obvious area of weakness primarily due to
some negative tax changes for motorists. The trends in new housing also had some
impact on furniture and electrical goods spending in the period. The CBOI
forecasts domestic consumption growth at 3.4% for 2008 and 3.0% for 2009.
The annual Harmonized Index of Consumer Prices ("HCIP") fell from 3.7% in
March to 3.3% in April. Notable increases on a yearly basis included
housing/water/gas (+9.7%) and food/non-alcoholic beverages (+8.1%). The decline
in the headline number was assisted by clothing and footwear (-2.8%) and
household furnishings (-1.0%). CBOI forecasts are for a decline in the annual
inflation rate to 2.9% in 2008 and 2.2% in 2009.
Annual private sector credit growth was 17.1% in March, little changed from
2007 year end levels. Non-mortgage credit rose to 20.8% in March up from a
revised 18.9% in February. The slower housing market continued to impact on
residential mortgages with the annual increase of 11.6% the lowest recorded
since May 1992.
EQUITY MARKET REVIEW
World stock markets posted marginally positive returns during the quarter:
QUARTER ENDED YEAR TO DATE
APRIL 30TH, 2008 APRIL 30TH, 2008
----------------- ------------------
LOCAL LOCAL
CURRENCY U.S. $ CURRENCY U.S. $
-------- ------ -------- -------
Irish Equities (ISEQ) -4.89% -0.26% -19.88% -13.75%
S&P 500 0.51% 0.51% -10.57% -10.57%
NASDAQ 0.96% 0.96% -15.61% -15.61%
UK Equities (FTSE 100) 3.53% 3.24% -9.44% -13.61%
Japanese Equities 0.92% 2.92% -16.14% -7.45%
Dow Jones Eurostoxx 50 1.57% 6.51% -15.24% -8.76%
German Equities (DAX) 1.42% 6.35% -13.35% -6.72%
French Equities (CAC 40) 2.60% 7.60% -14.56% -8.03%
Dutch Equities (AEX) 7.76% 13.00% -13.20% -6.56%
There was notable news flow in relation to a number of the Fund's holdings
over recent months, highlights of which are as follows;
HORIZON TECHNOLOGY GROUP PLC: Horizon Technology advanced strongly over the
period as the Group was subject to a cash offer of E 1.18 a share from a U.S. IT
distributor. Avnet has received irrevocable undertakings from shareholders in
respect of almost 62% of outstanding shares including founder Samir Najib,
making it highly likely the deal will close at this level.
3
ORIGIN ENTERPRISES PLC: Origin Enterprises released exceptionally strong
first half 2008 results with operating profit ahead almost 70%, driven by a
doubling of agri-nutrition profits and a strong advance in the Group's core food
business. Origin continues to be a prime beneficiary of renewed strength in
primary agricultural production and has further expanded its reach in this area
through the acquisition of agricultural consultant Masstock. Consensus forecasts
for full year 2008 were raised 25% post the interim results.
IAWS GROUP PLC: IAWS reported strong first half 2008 results with Group
operating profit ahead 43% year-on-year. Despite increased raw material
pressures the Group's Lifestyle Foods business in both Europe and North America
saw advances in both volume and pricing. IAWS also continues to benefit from the
strong operating performance in Origin Enterprises PLC in which it retains a 72%
stake.
MCINERNEY HOLDINGS PLC: McInerney continued to underperform in the period
as housing markets in both Ireland and the U.K. showed signs of further
deterioration. The tighter lending conditions being experienced in the U.K. in
particular, have impacted volumes and profit forecasts for the current fiscal
year. McInerney now trades at above a 40% discount to book value, implying a
level of asset write-down which seems unrealistic despite the current poor
operational conditions.
RYANAIR HOLDINGS PLC: Ryanair struggled in the period as soaring fuel costs
and the Group's un-hedged position for full year 2009 saw a material reduction
in the year's earnings forecast. Despite passenger numbers and ancillary
revenues being broadly in line with previous expectations, spot fuel prices are
currently the key driver of earnings. Ryanair is currently trading at
approximately a 20% premium to its realistic asset value, a level which
attributes little value to the strength of the franchise and the unique cost
advantage the firm enjoys over its peers. For this reason, despite the current
short term difficulties the stock remains a core holding.
DCC PLC: DCC performed poorly over the period as profit guidance for 2008
and 2009 was reined in primarily due to the group's translation exposure to
sterling. However the Group's underlying businesses continue to perform well and
the balance sheet remains significantly underleveraged giving the Group a solid
platform for value enhancing deals over the coming months.
CURRENT OUTLOOK
The Irish economy is transitioning to a period of slower growth over the
next two years with CBOI forecasts of 2.4% and 3.6% for 2008 and 2009,
respectively, below the trend of GDP growth achieved in the last decade. The
international backdrop has also deteriorated in recent months as financial
sector issues have spilled into the broader economy.
4
The ISEQ continues to hover near a multi-year low with the benchmark index
now trading at 9.7x 2008 earnings. This equates to a 20% discount to the broader
European market for similar levels of earnings growth. Earnings risk remains to
the downside but the market should be supported by continued corporate activity
in the months ahead.
Sincerely,
/s/ Peter Hooper
Peter Hooper
Chairman
June 20, 2008
5
INVESTMENT SUMMARY (UNAUDITED)
TOTAL RETURN (%)
MARKET VALUE (A) NET ASSET VALUE (A)
---------------------- ----------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL(B) CUMULATIVE ANNUAL(B)
---------- --------- ---------- ---------
Six Months (12.29) (12.29) (8.23) (8.23)
One Year (29.38) (29.38) (21.30) (21.30)
Three Year 41.56 12.28 40.29 11.95
Five Year 198.75 24.47 164.52 21.48
Ten Year 81.46 6.14 88.28 6.53
PER SHARE INFORMATION AND RETURNS
SIX
MONTHS
ENDED
APRIL 30,
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
----- ----- ----- ------ ------ ----- ----- ----- ----- ----- ---------
Net Asset
Value ($) 21.36 19.75 20.06 13.28 11.04 16.29 20.74 24.36 32.55 30.95 22.62
Income
Dividends ($) (0.07) -- (0.13) (0.01) (0.03) -- (0.09) (0.03) (0.16) (0.24) (0.36)
Capital Gains
Other
Distributions ($) (0.70) (1.14) (1.60) (2.65) (0.69) -- -- -- (1.77) (2.40) (4.86)
Total
Return (%) (a)(b) 11.68 (2.37) 12.86 (20.99) (11.44) 47.55 28.14 17.51 45.97 2.88 (8.23)
NOTES
(a) Total Market Value returns reflect changes in share market prices and
assume reinvestment of dividends and capital gain distributions, if any, at
the price obtained under the Dividend and Cash Purchase Plan. Total Net
Asset Value returns reflect changes in share net asset value and assume
reinvestment of dividends and capital gain distributions, if any, at the
price obtained under the Dividend and Cash Purchase Plan. For more
information with regard to Dividend and Cash Purchase Plan, see the most
recent annual report filed with the Securities and Exchange Commission.
(b) Periods less than one year are not annualized.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF THE FUND.
6
PORTFOLIO BY MARKET SECTOR AS OF APRIL 30, 2008
(PERCENTAGE OF NET ASSETS)
(UNAUDITED)
(PIE CHART)
Construction and Building Materials 25.28%
Financial 19.87%
Food and Beverages 10.38%
Other Assets 9.80%
Transportation 7.69%
Health Care Services 7.64%
Diversified Financial Services 5.29%
Food and Agriculture 5.23%
Technology 4.60%
Business Services 4.22%
TOP 10 HOLDINGS BY ISSUER AS OF APRIL 30, 2008 (UNAUDITED)
HOLDING SECTOR % OF NET ASSETS
------------------------- ----------------------------------- ---------------
CRH PLC Construction and Building Materials 20.42%
Allied Irish Banks PLC Financial 15.66%
Ryanair Holdings PLC Transportation 5.24%
IAWS Group PLC Food and Agriculture 5.23%
Kerry Group PLC, Series A Food and Beverages 4.69%
Elan Corp. PLC-ADR Health Care Services 4.58%
DCC PLC Business Services 4.07%
C&C Group PLC Food and Beverages 3.29%
Origin Enterprises PLC Agricultural Operations 3.06%
United Drug PLC Health Care Services 3.05%
7
THE NEW IRELAND FUND, INC.
PORTFOLIO HOLDINGS (UNAUDITED)
Value (U.S.)
April 30, 2008 Shares (Note A)
-------------------------------------------- ------------ ------------
COMMON STOCKS (98.77%)
COMMON STOCKS OF IRISH COMPANIES (98.77%)
AGRICULTURAL OPERATIONS (3.06%)
Origin Enterprises PLC (a)* 428,163 $ 3,499,697
------------
BUSINESS SERVICES (4.22%)
DCC PLC 202,501 4,656,609
Newcourt Group PLC* 155,655 174,485
------------
4,831,094
------------
BUSINESS SUPPORT SERVICES (1.09%)
Veris PLC* 500,000 1,245,524
------------
CONSTRUCTION AND BUILDING MATERIALS (25.28%)
CRH PLC 610,929 23,360,451
Grafton Group PLC-UTS 318,159 2,551,018
Kingspan Group PLC 80,595 934,817
McInerney Holdings PLC 1,518,564 2,080,549
------------
28,926,835
------------
DIVERSIFIED FINANCIAL SERVICES (5.29%)
Boundary Capital PLC (a)* 635,534 435,365
FBD Holdings PLC 64,713 2,570,183
IFG Group PLC 556,276 1,836,066
TVC Holdings PLC (a)* 815,973 1,206,873
------------
6,048,487
------------
FINANCIAL (19.87%)
Allied Irish Banks PLC 849,471 17,920,494
Anglo Irish Bank Corp. PLC 114,660 1,606,633
Irish Life & Permanent PLC 200,477 3,210,192
------------
22,737,319
------------
FOOD & AGRICULTURE (5.23%)
IAWS Group PLC 237,441 5,988,704
------------
8
THE NEW IRELAND FUND, INC.
PORTFOLIO HOLDINGS (UNAUDITED) (CONTINUED)
Value (U.S.)
April 30, 2008 Shares (Note A)
-------------------------------------------- ------------ ------------
COMMON STOCKS (CONTINUED)
COMMON STOCKS OF IRISH COMPANIES (CONTINUED)
FOOD AND BEVERAGES (10.38%)
C&C Group PLC 550,158 $ 3,768,792
Fyffes PLC 552,258 765,234
Glanbia PLC 186,411 1,439,512
Kerry Group PLC, Series A 173,211 5,366,494
Total Produce PLC 552,258 533,084
------------
11,873,116
------------
FOREST PRODUCTS & PAPER (0.78%)
Smurfit Kappa Group PLC (a) 71,540 891,048
------------
HEALTH CARE SERVICES (7.64%)
Elan Corp. PLC-Sponsored ADR* 199,400 5,242,226
United Drug PLC 587,476 3,493,941
------------
8,736,167
------------
MINING (0.64%)
Kenmare Resources PLC* 738,325 735,681
------------
PUBLISHING AND NEWS (2.38%)
Independent News & Media PLC 916,258 2,724,666
------------
REAL ESTATE DEVELOPMENT (0.08%)
Blackrock International Land PLC* 218,009 89,946
------------
TECHNOLOGY (4.60%)
Horizon Technology Group PLC* 1,321,900 2,346,203
Norkom Group PLC (a)* 364,481 896,590
Norkom Group PLC* 818,699 2,013,926
------------
5,256,719
------------
TELECOMMUNICATIONS (0.54%)
Zamano PLC* 1,100,000 616,534
------------
9
THE NEW IRELAND FUND, INC.
PORTFOLIO HOLDINGS (UNAUDITED) (CONTINUED)
Value (U.S.)
April 30, 2008 Shares (Note A)
-------------------------------------------- ------------ ------------
COMMON STOCKS (CONTINUED)
COMMON STOCKS OF IRISH COMPANIES (CONTINUED)
TRANSPORTATION (7.69%)
Aer Lingus Group PLC* 192,627 $ 539,823
Aer Lingus Group PLC (a)* 249,183 698,318
Ryanair Holdings PLC* 1,300,000 5,990,970
Ryanair Holdings PLC-Sponsored ADR* 57,996 1,572,272
------------
8,801,383
------------
TOTAL COMMON STOCKS OF IRISH COMPANIES
(Cost $72,864,040) 113,002,920
------------
TOTAL COMMON STOCKS BEFORE FOREIGN CURRENCY ON DEPOSIT
(Cost $72,864,040) $113,002,920
------------
Face
Value
------------
FOREIGN CURRENCY ON DEPOSIT (0.00%)
British Pounds Sterling L 600 $ 1,189
Euro E1,595 2,483
------------
TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost $3,711)** 3,672
------------
TOTAL INVESTMENTS (98.77%)
(Cost $72,867,751) 113,006,592
OTHER ASSETS AND LIABILITIES (1.23%) 1,409,730
------------
NET ASSETS (100.00%) $114,416,322
============
----------
(a) Securities exempt from registration pursuant to Rule 144A under the
Securities Act of 1933, as amended. These securities may only be resold, in
transactions exempt from registration, to qualified institutional buyers.
At April 30, 2008, these securities amounted to $7,627,891 or 6.67% of net
assets.
* Non-income producing security.
** Foreign currency held on deposit at JPMorgan Chase & Co.
ADR - American Depositary Receipt traded in U.S. dollars.
UTS - Units
10
THE NEW IRELAND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
April 30, 2008
ASSETS:
Investments at value (Cost $72,864,040)
See accompanying schedule U.S.$113,002,920
Cash 100,300
Foreign currency (Cost $3,711) 3,672
Dividends receivable 1,673,473
Prepaid expenses 32,612
------------
Total Assets 114,812,977
------------
LIABILITIES:
Payable for Fund shares redeemed 165,965
Investment advisory fee payable (Note B) 68,286
Printing fees payable 39,594
Accrued audit fees payable 53,729
Administration fee payable (Note B) 14,338
Directors' fees and expenses (Note C) 18,307
Custodian fees payable (Note B) 4,945
Accrued legal fees payable 30,274
Transfer agent fees payable 594
Accrued expenses and other payables 623
------------
Total Liabilities 396,655
------------
NET ASSETS U.S.$114,416,322
============
AT APRIL 30, 2008 NET ASSETS CONSISTED OF:
Common Stock, U.S. $.01 Par Value -
Authorized 20,000,000 Shares
Issued and Outstanding 5,057,384 Shares U.S.$ 50,574
Additional Paid-in Capital 58,858,674
Undistributed Net Investment Income 1,105,595
Accumulated Net Realized Gain 14,247,856
Net Unrealized Appreciation of Securities,
Foreign Currency and Net Other Assets 40,153,623
------------
TOTAL NET ASSETS U.S.$114,416,322
============
NET ASSET VALUE PER SHARE
(Applicable to 5,057,384 outstanding shares)
(authorized 20,000,000 shares)
(U.S. $114,416,322 / 5,057,384) U.S.$ 22.62
============
See Notes to Financial Statements.
11
THE NEW IRELAND FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended
April 30, 2008
(unaudited)
------------------------
INVESTMENT INCOME
Dividends U.S.$ 1,932,276
Interest 24,085
------------
TOTAL INVESTMENT INCOME 1,956,361
------------
EXPENSES
Investment advisory fee (Note B) $ 408,593
Administration fee (Note B) 85,291
Directors' fees and expenses (Note C) 128,424
Audit fees 18,729
Compliance fees 31,930
Legal fees 39,918
Printing fees 29,216
Custodian fees (Note B) 24,773
Other 93,516
-----------
TOTAL EXPENSES 860,390
------------
NET INVESTMENT INCOME U.S.$ 1,095,971
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE E)
Realized gain on:
Securities transactions 14,229,690
Foreign currency transactions 19,593
-----------
Net realized gain on investments during the period 14,249,283
------------
Net change in unrealized appreciation/(depreciation) of:
Securities (29,370,654)
Foreign currency and net other assets 208
-----------
Net unrealized depreciation of investments during the period (29,370,446)
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (15,121,163)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS U.S.$(14,025,192)
============
See Notes to Financial Statements.
12
THE NEW IRELAND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
April 30, 2008 Year Ended
(unaudited) October 31, 2007
---------------- ----------------
Net investment income U.S.$ 1,095,971 U.S.$ 1,630,314
Net realized gain on investments 14,249,283 22,978,204
Net unrealized depreciation of investments,
foreign currency holdings and net other assets (29,370,446) (20,214,528)
------------ ------------
Net increase/(decrease) in net assets
resulting from operations (14,025,192) 4,393,990
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,695,425) (1,113,999)
Net realized gains (22,888,234) (11,139,986)
------------ ------------
Total distributions (24,583,659) (12,253,985)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Value of 192,400 and 125,300 shares
repurchased, respectively (Note G) (3,771,881) (3,696,735)
Value of shares issued to shareholders in
connection with a stock distribution (Note F) 11,032,330 6,219,513
------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 7,260,449 2,522,778
------------ ------------
Total decrease in net assets (31,348,402) (5,337,217)
------------ ------------
NET ASSETS
Beginning of period 145,764,724 151,101,941
------------ ------------
End of period (Including undistributed
net investment income of $1,105,595
and $1,705,049, respectively) U.S.$114,416,322 U.S.$145,764,724
============ ============
See Notes to Financial Statements.
13
THE NEW IRELAND FUND, INC.
FINANCIAL HIGHLIGHTS (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR)
Six Months Ended Year Ended October 31,
April 30, 2008 ----------------------------------------------------
(unaudited) 2007 2006 2005 2004 2003
----------------- -------- -------- -------- ------- -------
Operating Performance:
Net Asset Value,
Beginning of Year U.S.$ 30.95 $ 32.55 $ 24.36 $ 20.74 $ 16.29 $ 11.04
-------- -------- -------- -------- ------- -------
Net Investment Income/(Loss) 0.22 0.35 0.23 0.16 (0.00)# 0.07
Net Realized and Unrealized
Gain/(Loss) on Investments (3.18) 0.69 9.98 3.38 4.49 5.08
-------- -------- -------- -------- ------- -------
Net Increase/(Decrease) in
Net Assets Resulting from
Investment Operations (2.96) 1.04 10.21 3.54 4.49 5.15
-------- -------- -------- -------- ------- -------
Distributions to Shareholders from:
Net Investment Income (0.36) (0.24) (0.16) (0.03) (0.09) --
Net Realized Gains (4.86) (2.40) (1.77) -- -- --
-------- -------- -------- -------- ------- -------
Total from Distributions (5.22) (2.64) (1.93) (0.03) (0.09) --
-------- -------- -------- -------- ------- -------
Anti-Dilutive/(Dilutive) Impact
of Capital Share Transactions (0.15)+++ 0.00++ (0.09)+ 0.11 0.05 0.10
-------- -------- -------- -------- ------- -------
Net Asset Value,
End of Period U.S.$ 22.62 $ 30.95 $ 32.55 $ 24.36 $ 20.74 $ 16.29
======== ======== ======== ======== ======= =======
Share Price, End of Period U.S.$ 20.23 $ 28.96 $ 30.67 $ 21.95 $ 18.46 $ 13.81
======== ======== ======== ======== ======= =======
Total NAV Investment Return (a) (8.23)%(c) 2.88% 45.97% 17.51% 28.14% 47.55%
======== ======== ======== ======== ======= =======
Total Market Investment
Return (b) (12.29)%(c) 2.17% 52.47% 19.07% 34.47% 59.28%
======== ======== ======== ======== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets,
End of Year (000's) U.S.$114,416 $145,765 $151,102 $110,189 $97,253 $77,790
Ratio of Net Investment
Income/(Loss) to Average
Net Assets 1.93%++++ 1.02% 0.86% 0.66% (0.00%)@@ 0.54%
Ratio of Operating Expenses
to Average Net Assets 1.51%++++ 1.31% 1.40% 1.34% 1.80% 1.78%
Portfolio Turnover Rate 10% 13% 11% 13% 5% 10%
(a) Based on share net asset value and reinvestment of distribution at the
price obtained under the Dividend Reinvestment and Cash Purchase Plan.
(b) Based on share market price and reinvestment of distributions at the price
obtained under the Dividend Reinvestment and Cash Purchase Plan.
(c) Return is based on the six months ended April 30, 2008. Periods less than
one year are not annualized.
+ Amount represents $0.03 per share impact for shares repurchased by the Fund
under the Share Repurchase Program and $0.12 per share impact for the new
shares issued as Capital Gain Stock Distribution.
++ Amount represents $0.07 per share impact for shares repurchased by the Fund
under the Share Repurchase Program and $0.07 per share impact for the new
shares issued as Capital Gain Stock Distribution.
+++ Amount represents $0.10 per share impact for shares repurchased by the Fund
under the Share Repurchase Program and $0.25 per share impact for the new
shares issued as Capital Gain Stock Distribution.
++++ Annualized
# Amount represents less than $0.01 per share.
@@ Amount represents less than 0.01%.
14
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The New Ireland 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 (the "1940 Act"). The Fund's investment
objective is long-term capital appreciation through investment primarily in
equity securities of Irish Companies. The Fund is designed for U.S. and other
investors who wish to participate in the Irish securities markets. In order to
take advantage of significant changes that have occurred in the Irish economy
and to advance the Fund's investment objective, the investment strategy now has
a bias towards Ireland's growth companies.
Under normal circumstances, the Fund will invest at least 80% of its total
assets in equity and fixed income securities of Irish companies. To the extent
that the balance of the Fund's assets is not so invested, it will have the
flexibility to invest the remaining assets in non-Irish companies that are
listed on a recognized stock exchange. The Fund may invest up to 25% of its
assets in equity securities that are not listed on any securities exchange.
A. SIGNIFICANT ACCOUNTING POLICIES:
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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, or whose values have been materially affected by events occurring
before the Funds' pricing time but after the close of the securities' primary
markets, are valued by methods deemed by the Board of Directors to represent
fair value. Short-term securities that mature in 60 days or less are valued at
amortized cost.
DIVIDENDS AND DISTRIBUTIONS TO STOCKHOLDERS: Distributions are determined
on a tax basis and may differ from net investment income and realized capital
gains for financial reporting purposes. Differences may be permanent or
temporary. Permanent differences are reclassified among capital accounts in the
financial statements to reflect their tax character. Temporary differences arise
when certain items of income, expense, gain or loss are recognized in different
periods for financial statement and tax purposes; these differences will reverse
at some point in the future. Differences in classification may also result from
the treatment of short-term gain as ordinary income for tax purposes.
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.
15
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Fund adopted, the provision of Financial Accounting Standards Board
(FASB) Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). This pronouncement provides guidance on the recognition, measurement,
classification, and disclosures related to uncertain tax positions, along with
any related interest and penalties. As of April 30, 2008, management has
reviewed the tax positions in the open tax years 2004 to 2007 and evaluated the
application of FIN 48 to the Fund, and has determined that there is no material
impact resulting from the adoption of this Interpretation on the fund's
financial statements.
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
spot rate of such currencies against U.S. dollars by obtaining from FT-IDC each
day the current 4:00pm London time spot rate and future rate (the future rates
are quoted in 30-day increments) on foreign currency contracts. 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 April 30, 2008.
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. Non-cash
dividends, if any, are recorded at the fair market value of the securities
received. Interest income is recorded on the accrual basis.
USE OF ESTIMATES: The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Accrual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS: In September 2006, Statement of Financial
Accounting Standards No. 157 Fair Value Measurements ("SFAS 157") was issued and
is effective for fiscal years beginning after November 15, 2007. SFAS 157
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements.
16
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Also, in February 2007, FASB issued Statement of Financial Accounting
Standards No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities ("SFAS 159"), which provides companies with an option to report
selected financial assets and liabilities at fair value. The objective of SFAS
159 is to reduce both complexity in accounting for financial instruments and the
volatility in earnings caused by measuring related assets and liabilities
differently. SFAS 159 establishes presentation and disclosure requirements
designed to facilitate comparisons between companies that choose different
measurement attributes for similar types of assets and liabilities and to more
easily understand the effect of the Funds' choice to use fair value on their
earnings. SFAS 159 also requires entities to display the fair value of the
selected assets and liabilities on the face of the balance sheet. SFAS 159 does
not eliminate disclosure requirements of other accounting standards, including
fair value measurement disclosures in SFAS 157. SFAS 159 is effective for fiscal
years beginning after November 15, 2007.
At this time, management is evaluating the implications SFAS 157 and SFAS
159 and their impact on the Funds' financial statements, if any, has not been
determined.
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 daily net assets of the Fund up to
the first $100 million and 0.50% of the value of the average daily net assets of
the Fund on amounts in excess of $100 million. In addition, Bank of Ireland
Asset Management provides investor services to existing and potential
shareholders.
The Fund has entered into an administration agreement (the "Administration
Agreement") with PFPC Inc. The Fund pays PFPC Inc. an annual fee payable
monthly. During the six months ended April 30, 2008, the Fund incurred expenses
of U.S. $85,291 on administration fees to PFPC, Inc.
The Fund has entered into an agreement with JPMorgan Chase & Co. to serve
as custodian of the Fund's assets. During the six months ended April 30, 2008,
the Fund incurred expenses for JPMorgan Chase & Co. of U.S. $24,773.
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. $16,000, plus U.S. $2,000 for each meeting
of the Board of Directors attended in person or via telephone and any
shareholder meeting attended in person not held on the same day as a meeting of
the Board. A fee of U.S. $2,000 is paid for each meeting of a Committee of the
Board attended in person or via telephone. The Fund pays the Chairman of the
Board of Directors of the Fund an additional annual fee of U.S. $36,750. Also,
the Fund pays the Chairperson of the Audit Committee an additional U.S. $3,000
for each meeting of the Audit Committee attended. 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 six
months ended April 30, 2008 excluding U.S. government and short-term
investments, aggregated U.S. $11,877,976 and U.S. $26,161,433, respectively.
17
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
E. COMPONENTS OF DISTRIBUTABLE EARNINGS:
At October 31, 2007, the components of distributable earnings on a tax
basis were as follows:
Undistributed Accumulated
Ordinary Long-Term Net Unrealized
Income Gains Appreciation
------------- ----------- --------------
$2,655,292 $21,936,564 $69,524,069
The aggregate cost of investments and the composition of unrealized
appreciation and depreciation on investments and appreciation on assets and
liabilities in foreign currencies on a tax basis as of April 30, 2008 were as
follows:
Gross
Gross Gross Unrealized
Unrealized Unrealized Net Unrealized Appreciation Net
Total Cost of Appreciation Depreciation Appreciation on Foreign Unrealized
Investments on Investments on Investments on Investments Currency Appreciation
------------- -------------- -------------- -------------- ------------ ------------
$72,864,040 $45,352,265 $(5,213,385) $40,138,880 $14,743 $40,153,623
There were no permanent tax and book differences in gross
appreciation/depreciation of securities or the cost basis of securities.
F. COMMON STOCK:
For the six months ended April 30, 2008, the Fund issued 540,271 shares in
connection with stock distribution in the amount of $11,032,330.
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 six months ended April 30, 2008, the Fund repurchased 192,400
(4.09% of the shares outstanding at October 31, 2007 year end) of its shares for
a total cost of $3,771,881, at an average discount of 11.91% of net asset value.
For the year ended October 31, 2007, the Fund repurchased 125,300 (2.70% of
the shares outstanding at October 31, 2006 year end) of its shares for a total
cost of $3,696,735, at an average discount of 8.79% of net asset value.
H. 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.
18
ADDITIONAL INFORMATION (UNAUDITED)
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund will distribute to shareholders, 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 (the "Plan") approved by the
Fund's Board of Directors (the "Directors"), each shareholder will be deemed to
have elected, unless American Stock Transfer & Trust Company (the "Plan Agent")
is instructed otherwise by the shareholder 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 shareholder elects to
receive distributions in cash. Investors who own Fund shares registered in
street names may not be able to transfer those shares to another broker-dealer
and continue to participate in the Plan. These shareholders should consult their
broker-dealer for details. Shareholders who do not participate in the Plan will
receive all distributions in cash paid by check in U.S. dollars mailed directly
to the shareholder by the Plan Agent, as paying agent. Shareholders who do not
wish to have distributions automatically reinvested should notify the Fund, in
care of the Plan Agent for The New Ireland Fund, Inc.
The Plan Agent will serve as agent for the shareholders 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
shareholders 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 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.
19
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders 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 shareholder's
proxy will include those shares purchased pursuant to the Plan.
In the case of shareholders 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 shareholder as
representing the total amount registered in the shareholder'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 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 shareholders 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 shareholders. All correspondence concerning the Plan should be directed
to the Plan Agent for The New Ireland Fund, Inc. in care of American Stock
Transfer & Trust Company, 59 Maiden Lane, New York, New York, 10038, telephone
number (718) 921-8283.
PORTFOLIO INFORMATION
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Fund's Form N-Q is available (1) by calling
1-800-468-6475; (2) on the Fund's website located at
HTTP://WWW.NEWIRELANDFUND.COM; (3) on the SEC's website at HTTP://WWW.SEC.GOV;
or (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling 1-800-SEC-0330.
20
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
PROXY VOTING INFORMATION
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities held by the Fund
is available, without charge and upon request, by calling 1-800-468-6475. This
information is also available from the EDGAR database or the SEC's website at
HTTP://WWW.SEC.GOV. Information regarding how the Fund voted proxies relating to
portfolio securities during the most recent twelve-month period ended June 30 is
available at HTTP://WWW.SEC.GOV.
ADVISORY AGREEMENT
(In this disclosure, the term "Fund" refers to The New Ireland Fund, Inc.,
the term "Adviser" refers to Bank of Ireland Asset Management (U.S.) Limited and
the term "Administrator" refers to PFPC).
The Directors unanimously approved the continuance of the Investment
Advisory Agreement (the "Advisory Agreement") between the Fund and the Adviser
in respect of the Fund at a meeting held on March 4, 2008.
In preparation for the meeting, the Directors had requested and evaluated
various materials from the Adviser and the Administrator, including performance
and expense information for other investment companies with analogous objectives
(i.e., single country closed-end funds) derived from data compiled by an
independent third party provider ("15c Provider"). Prior to voting, the
Directors reviewed the proposed continuance of the Advisory Agreement with
management and with experienced counsel to the Fund and received a memorandum
from such counsel discussing the legal standards for their consideration of the
proposed continuances. The Directors who were not "interested persons" of the
Fund or the Adviser also discussed the proposed continuances in a private
session with counsel at which no representatives of the Adviser were present. In
reaching their determinations relating to continuance of the Advisory Agreement
in respect of the Fund, the Directors considered all factors they believed
relevant, including the following:
1. information comparing the performance of the Fund to other investment
companies with analogous investment objectives and to the Irish Stock
Exchange index;
2. the nature, extent and quality of investment and other services
rendered by the Adviser;
3. payments received by the Adviser from all sources in respect of the
Fund;
4. the costs borne by, and profitability of, the Adviser and its
affiliates in providing services to the Fund;
5. comparative fee and expense data for the Fund and other investment
companies with analogous investment objectives;
6. the extent to which economies of scale would be realized as the Fund
grows and whether fee levels reflect these economies of scale for the
benefit of investors;
7. fall-out benefits which the Adviser and its affiliates receive from
their relationships to the Fund;
8. the professional experience and qualifications of the Fund's portfolio
management team and other senior personnel of the Adviser; and
9. the terms of the Advisory Agreement.
21
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
The Directors also considered the nature and quality of the services
provided by the Adviser to the Fund, based on their experience as directors of
the Fund, their confidence in the Adviser's integrity and competence gained from
that experience and the Adviser's responsiveness to concerns raised by them in
the past and to personnel changes in the Adviser's portfolio managers.
The Directors determined that the overall arrangements between the Fund and
the Adviser, as provided in the Advisory Agreement, were fair and reasonable in
light of the services performed, the expenses incurred and such other matters as
the Directors considered relevant in the exercise of their reasonable judgment.
NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE ADVISER
The Adviser manages the investment of the assets of the Fund, including
making purchases and sales of portfolio securities consistent with the Fund's
investment objective and policies. Although the Fund retains a separate third
party administrator, the Adviser also provides the Fund with certain other
services (exclusive of, and in addition to, any such services provided by any
others retained by the Fund) and with certain executive personnel necessary for
its operations. The Adviser pays all of the compensation of the Director and the
Officers of the Fund who are employees of the Adviser.
The Directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
provided had expanded over time as a result of regulatory and other
developments. The Directors noted that, for example, the Adviser is responsible
for maintaining and monitoring its own compliance program and coordinates
certain activities with the Fund's Chief Compliance Officer, and these
compliance programs have recently been refined and enhanced in light of new
regulatory requirements. The Directors considered the quality of the investment
research capabilities of the Adviser and the other resources they have dedicated
to performing services for the Fund. The quality of other services, including
the Adviser's assistance in the coordination of the activities of some of the
Fund's other service providers, also were considered. The Directors also
considered the Adviser's response to recent regulatory compliance issues
affecting it and the Fund. The Directors concluded that, overall, they were
satisfied with the nature, extent and quality of services provided (and expected
to be provided) to the Fund under the Advisory Agreement.
COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISER
At the request of the Directors, the Adviser provided information
concerning the profitability to the Adviser of the Advisory Agreement. The
Directors reviewed with the Adviser assumptions and methods of allocation used
by the Adviser in preparing this Fund-specific profitability data. The Adviser
stated its belief that the methods of allocation used were reasonable, but it
noted that there are limitations inherent in allocating costs to multiple
individual advisory products served by an organization such as the Adviser where
each of the advisory products draws on, and benefits from, the research and
other resources of the organization.
The Directors recognized that it is difficult to make comparisons of
profitability from investment advisory contracts. This is because comparative
information is not generally publicly available and is affected by numerous
factors, including the structure of the particular adviser, the type of clients
it advises, its business mix, and numerous assumptions regarding allocations and
the adviser's capital structure and cost of capital. In considering
profitability information, the Directors considered the effect of fall-out
22
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
benefits on the Adviser's expenses. The Directors recognized that the Adviser
should, in the abstract, be entitled to earn a reasonable level of profits for
the services it provides, to the Fund. Based on their review, they concluded
they were satisfied that the Adviser's level of profitability, from its
relationship with the Fund, was not excessive.
FALL-OUT BENEFITS
The Adviser advised the Directors that no portfolio transactions were
allocated pursuant to arrangements whereby the Adviser receives brokerage and
research services from brokers that execute the Fund's purchases and sales of
securities. As a result, none of the Adviser's research or other expenses were
offset by the use of the Fund's commissions.
The Directors also noted that the Adviser derives reputational and other
benefits from its association with the Fund.
INVESTMENT RESULTS
The Directors considered the investment results of the Fund as compared to
investment companies with analogous investment objectives. This was determined
based on the information provided by the 15c Provider and by reviewing the Irish
Stock Exchange index ("ISEQ"). The ISEQ was reviewed, both including and
excluding the common shares, of the Adviser's parent company, which represents
approximately 11% of the capitalization weighted ISEQ index, and which the Fund
is not permitted to purchase. In addition to the information received by the
Directors for the meeting, the Directors receive detailed performance
information for the Fund at each regular Board meeting during the year.
At the meeting, the Directors also reviewed information, showing the
performance of the Fund. This compared the Fund to certain funds in its 15c
Provider category (i.e., Western European single-country closed-end funds) over
annualized rolling one-, three-, five- and ten-year periods ended at January 31,
2008. They also compared the Fund to a securities index over one-year and
annualized rolling three-year periods, and for the most recent interim period.
The comparative information showed that the performance of the Fund compared
favorably to such funds and was at or above that of the securities index. The
Directors also noted that the Fund's diversification criteria limited its
investment flexibility compared to many advisory accounts advised by the
Adviser. Based upon their review, the Directors concluded that the Fund's
relative investment performance over time had been satisfactory.
EXPENSE RATIO
The Directors also considered the total expense ratio of the Fund in
comparison to the fees and expenses of funds within the relevant 15c Provider
category (referred to herein as the Fund's "peer group") and viewed such
comparison to be favorable to the Fund.
ADVISORY FEE
The Directors were advised that the Fund is the Adviser's only U.S. client,
managed exclusively, in Irish equity securities and subject to its
diversification restraints and inability to purchase the common shares of the
Adviser's parent company. Other institutional accounts, which included Irish
equities, generally had much broader mandates with fee structures differing
substantially from the Fund and, recognizing its current level of assets, such
institutional fees appeared somewhat but not significantly lower.
23
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
The Adviser reviewed with the Directors the major differences in the scope
of services, it provides to institutional clients and to the Fund. For example,
despite not being required, under the Advisory Agreement, the Adviser provides,
among other things, employees who serve as Officers of the Fund (which officers
provide required certifications, with the attendant costs and exposure to
liability). The Adviser also assists in coordinating the provision of services
to the Fund by certain nonaffiliated service providers. In looking at fee
comparisons, the Directors took these aspects into consideration.
The Fund's peer group consisted of 29 portfolios in the relevant 15c
Provider category. The information showed that the Fund's effective advisory fee
rate of .66% (based on net assets at January 31, 2008) was well within the range
of advisory fees paid by the portfolios in the group, and was below the average
and the median for the group.
The Directors recognized the limitations on the usefulness of these
comparisons, given the nature, extent and quality of the services provided by
the advisers of other portfolios. Similar limitations are inherent in comparing
services etc. being provided by the Adviser to its other clients.
The Directors noted that the Adviser's fee has a substantial decrement
(from .75% to .50% of average net assets) at a relatively low level of total net
assets ($100 million), in comparison to others in the Fund's peer group.
The Directors took into account that, although the Adviser may realize
economies of scale in managing the Fund, as its assets increase, there are
substantial restraints on the growth of Fund assets. These are: (a) a public
offering may only reasonably be made in rights offerings, or when the market
price of the Fund's shares exceeds the net asset value per share; and (b)
stockholders either take dividends or distributions in cash or they reinvest
them in secondary market purchases of Fund shares, neither of which serves to
increase Fund assets.
After considering the information, the Directors concluded that they
believed that the Fund's advisory fee was reasonable, with the breakpoint set at
a relatively low level of assets. They also concluded that the absolute dollar
fees paid to the Adviser were modest, in light of the commitment required to
advise the Fund, and that they were satisfied with the nature and quality of the
services provided.
In addition, the Directors recognized that many industry observers have
noted that the level of services required and risks involved in managing
registered investment companies are significantly different from those for
pension and institutional accounts and that market fees vary accordingly.
Although for investment advisers (such as the Adviser), who are not also
administrators of closed-end funds, this may be true to a lesser extent than for
more full-service fund managers. However, the Directors noted that institutional
client accounts are more portable than registered investment companies that
require Board and stockholder approval, prior to changing investment advisers.
24
THE NEW IRELAND FUND, INC.
DIRECTORS AND OFFICERS
Peter J. Hooper - CHAIRMAN OF THE BOARD
Michael J. Grealy - PRESIDENT AND DIRECTOR
David Dempsey - DIRECTOR
Margaret Duffy - DIRECTOR
Denis P. Kelleher - DIRECTOR
George G. Moore - DIRECTOR
Lelia Long - TREASURER
Colleen Cummings - ASSISTANT TREASURER
Vincenzo Scarduzio - SECRETARY
Salvatore Faia - CHIEF COMPLIANCE OFFICER
PRINCIPAL INVESTMENT ADVISER
Bank of Ireland Asset Management (U.S.) Limited
300 First Stamford Place
Stamford, Connecticut 06902
ADMINISTRATOR
PFPC Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
CUSTODIAN
JPMorgan Chase & Co.
North America Investment Services
3 Metro Tech - 7th Floor
Brooklyn, New York 11245
SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
LEGAL COUNSEL
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
INDEPENDENT PUBLIC REGISTERED ACCOUNTING FIRM
Tait Weller Baker LLP
1818 Market Street
Philadelphia, PA 19103
CORRESPONDENCE
ALL CORRESPONDENCE SHOULD BE ADDRESSED TO:
The New Ireland Fund, Inc.
c/o PFPC Inc.
99 High Street
27th Floor
Boston, Massachusetts 02110
TELEPHONE INQUIRIES SHOULD BE DIRECTED TO:
1-800-GO-TO-IRL (1-800-468-6475)
WEBSITE ADDRESS:
www.newirelandfund.com
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
There has been no change, as of the date of this filing, in any of the portfolio
managers identified in response to paragraph (a)(1) of this Item in the
registrant's most recently filed annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES
(d) Maximum Number (or
(b) Average (c)Total Number of Shares Approximate Dollar Value) of
(a) Total Number Price Paid per (or Units) Purchased as Part Shares (or Units) that May Yet Be
of Shares (or Share (or ofPublicly Announced Plans Purchased Under the Plans or
PERIOD Units) Purchased Unit) or Programs Programs
November 1, 2007 0 0 0 470,951
to November 30,
2007
December 1, 2007 0 0 0 470,951
to December 31,
2007
January 1, 2008 20,000 19.42 20,000 470,951
to January 31,
2008
February 1, 2008 13,400 19.02 13,400 470,951
to February 29,
2008
March 1, 2008 67,400 19.10 67,400 470,951
to March 31,
2008
April 1, 2008 91,600 20.10 91,600 470,951
to April 30,
2008
Total 192,400 19.60 192,400 470,951
a. The date each plan or program was announced: FEBRUARY 2000
b. The dollar amount (or share or unit amount) approved: 10% OF SHARES
OUTSTANDING AT THE PREVIOUS FISCAL YEAR END.
c. The expiration date (if any) of each plan or program: NONE
d. Each plan or program that has expired during the period covered by the
table: NONE
e. Each plan or program the registrant has determined to terminate prior
to expiration, or under which the registrant does not intend to make
further purchases. NONE
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial
officers, or persons performing similar functions, have concluded
that the registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date
within 90 days of the filing date of the report that includes the
disclosure required by this paragraph, based on their evaluation of
these controls and procedures required by Rule 30a-3(b) under the
1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under
the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b)
or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act
and Section 302 of the Sarbanes-Oxley Act of 2002 are attached
hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act
and Section 906 of the Sarbanes-Oxley Act of 2002 are attached
hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) THE NEW IRELAND FUND, INC.
By (Signature and Title)* /S/ MICHAEL GREALY
-------------------------------------------------------
Michael Grealy, President
(principal executive officer)
Date JUNE 18, 2008
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /S/ MICHAEL GREALY
-------------------------------------------------------
Michael Grealy, President
(principal executive officer)
Date JUNE 18, 2008
----------------------------------------------------------------------------
By (Signature and Title)* /S/ LELIA LONG
-------------------------------------------------------
Lelia Long, Treasurer
(principal financial officer)
Date JUNE 18, 2008
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.