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
THE NEW IRELAND FUND, INC.
(Exact name of registrant as specified in charter)
Bank of Ireland Asset Management (U.S.) Limited
40 Mespil Road
DUBLIN 4, IRELAND
(Address of principal executive offices) (Zip code)
PNC Global Investment Servicing (U.S.) Inc.
99 High Street, 27th Floor
BOSTON, MA 02110
(Name and address of agent for service)
Registrant's telephone number, including area code: 011 353 1 6378000
Date of fiscal year end: OCTOBER 31
Date of reporting period: APRIL 30, 2009
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, 2009
COVER PHOTOGRAPH -- KILKENNY CASTLE, CO. KILKENNY
PROVIDED COURTESY OF TOURISM IRELAND
LETTER TO SHAREHOLDERS
Dear Shareholder,
As may be seen in the Economic Review section below, along with most of the
world economies, Ireland's growth rate continues to fall well below that of
recent years. Over the past 6 months, expectations for 2009 have fallen further
and although the belief is that there will be some improvement in 2010, growth
is still expected to be negative. Despite all of this, because of the underlying
strength of the economy due to labor cost adjustments, a relatively strong trade
surplus and a young population, GDP is expected to have a higher long-term
growth rate than other European economies.
While the Fund's performance was slightly below the market for the past
three months, over the fiscal half year, the performance was very satisfactory
declining by a much lower figure than the Irish Equities market ("ISEQ") as a
whole. Over the past 18 months, the Irish Equity markets fell more than most
equity markets, around the World, as a result of a very large drop in the
capitalization of the major Irish banks, which represented a very significant
percentage of the total market capitalization of the ISEQ. Recent months have
seen some improvement in bank share prices but problems still remain and along
with what is happening in other markets, it is likely to be some time before
these problems will be fully sorted out.
PERFORMANCE
In the second fiscal quarter, the Fund's Net Asset Value ("NAV") increased
by 16.6% to $6.32, which compares to an increase of 17.3% in the ISEQ in U.S.
dollar terms*. Excluding Bank of Ireland, which the Fund is precluded from
investing in, the Irish market was also ahead 17.3% in dollars. For the first
half of the fiscal year, the Fund's NAV declined 2.2% compared to declines of
9.6% and 6.2% respectively in the ISEQ and the ISEQ excluding Bank of Ireland.
Along with equity markets globally, the Irish market rallied during the last
quarter, as some tentative signs of economic stabilization emerged across most
regions. The Fund again saw relatively little impact from currency movements
over both periods with the Euro advancing by 3% and 5% over the three and six
months, respectively versus the dollar.
During the half year, we continued to implement the Share Repurchase
Program with 158,600 shares being repurchased and retired since October 2008, at
a cost of $704,601. These repurchases represent a reduction of 2.09% of the
shares outstanding at January 31, 2009 and they have resulted in a positive
impact of 2 cents per share.
ECONOMIC REVIEW
Forecasts for domestic GDP continue to be reduced in the most recent period
with the latest Central Bank of Ireland ("CBOI") figures indicating a
contraction of 6.9% in 2009. Current leading indicators suggest a bias to the
downside with the main areas of continuing uncertainty being consumer spending
and net trade performance. This constitutes a very sharp decline in activity
from the 5-6% annual growth rates that were a feature of the Irish economy in
the decade up to 2007.
* ALL RETURNS ARE QUOTED IN U.S DOLLARS UNLESS OTHERWISE STATED.
1
Consumer spending is forecast to decline 5% in 2009 driven by rising
unemployment and declining disposable income due to an increased tax take.
Private domestic investment continues to be weighed down by the sharp decline in
residential housing output with 20,000 units forecast for 2009. Non-residential
activity will also decline this year due to lower business confidence and
restrictions on credit availability.
Export growth will slow in the coming months with annual output expected to
decline 6%, a relatively resilient performance relative to trends expected in
other export-oriented economies worldwide. Imports will decline at a sharper
pace due to the weakness in consumer spending and the net trade surplus is
expected to build through the remainder of the year.
The International backdrop remains weak although there have been some signs
of stabilization in leading economic indicators in recent months. Corporate
profitability will remain under pressure until at least the fourth quarter of
the current calendar year.
Central banks have remained proactive in recent months with further rate
reductions in the UK, Europe and Asia with major quantitative easing employed in
the US, China and UK. Money markets remain fragile but have improved
considerably in recent months while credit spreads have tightened with the rally
in risk markets over the last two months. Business and consumer confidence have
increased but remain at depressed levels.
Irish consumer sentiment increased in April. The overall Consumer Sentiment
Index stood at 46.8 in April, compared to a figure of 44.1 in March and 56.0 in
April 2008. Despite this increase in sentiment, the consumer's assessment of
current circumstance declined, perhaps reflecting the fiscal tightening
announced in April's supplementary budget.
The Live Employment Register rose in April to 388,600 claimants up from
372,800 in March. The unemployment rate at the end of April 2009 was estimated
to be approximately 11.4%. The CBOI forecasts an unemployment rate of 11.8% in
2009. Despite some moderation in the rate of workers joining the Live Register
in recent weeks, the risk to this forecast remains biased upwards.
The volume of retail sales decreased by 17.9% in the year to March 2009.
Excluding the volatile autos component, retail sales were down 8.2% over the
same period. Consumer spending was sharply lower in the period due to rising
unemployment and fragile consumer confidence.
Annual Harmonized Index of Consumer Prices ("HICP") inflation was flat over
the month remaining at -0.7% in April. Largest contributors over the period to
inflation included Alcoholic Beverages & Tobacco (+8.0%) and Education (+5.3%).
The main detractors over the period included Gas & Other Fuels (-19.1%) and
Clothing & Footwear (-11.9%).
The pace of private sector credit growth declined in March to an annual
rate of 2.3% from 4.8% in February. The slower housing market continued to
2
impact on residential mortgages with the year-on-year 4.2% increase in net
mortgage lending being the lowest rate recorded in over a decade.
EQUITY MARKET REVIEW
World stock markets rallied from March and posted strong returns during the
quarter:
QUARTER ENDED FISCAL YEAR TO DATE
APRIL 30TH, 2009 APRIL 30TH, 2009
------------------ -------------------
LOCAL LOCAL
CURRENCY U.S.$ CURRENCY U.S.$
-------- ------ -------- -------
Irish Equities (ISEQ) +13.4% +17.3% -13.5% -9.6%
S&P 500 +5.7% +5.7% -9.9% -9.9%
NASDAQ +16.3% +16.3% -0.2% -0.2%
UK Equities (FTSE 100) +2.3% +4.5% -3.1% -11.3%
Japanese Equities +5.5% -4.1% -3.4% -4.0%
Dow Jones Eurostoxx 50 +6.4% +9.6% -7.3% -3.8%
German Equities (DAX) +9.9% +13.2% -4.4% -0.8%
French Equities (CAC 40) +6.3% +9.4% -9.4% -5.9%
Dutch Equities (AEX) -3.2% -0.3% -10.1% -6.6%
There was news flow in relation to a number of the Fund's holdings in
recent months, highlights are as follows:
C&C GROUP PLC: C&C was the Fund's strongest performer over the period. New
management has been installed at the beverage company and the strategy has been
refined to drive volume through the business model and focus on cash flow
generation. Early signs have been encouraging with regard to the stabilization
of trading performance and management has started to rebuild investor confidence
in the Group.
GRAFTON GROUP PLC: Grafton Group rose sharply despite releasing an
operational update in the period showing continued difficult trading across the
Group's UK and Irish building operations. Sales for the first quarter of 2009
were down 32% or 22% in constant currency. Investors have been focussing on
leading indicators for UK housing which are suggesting a stabilization in
activity. The current downturn has also eliminated many independent builders'
merchants which should translate into greater pricing power and market share for
well capitalized companies like Grafton in the future.
DRAGON OIL PLC: Dragon Oil advanced over the period as a combination of
continued strong operational execution and an advance in the oil price boosted
sentiment towards the stock. Average daily production increased by over 19% in
the first quarter, a strong performance relative to global peers. The Group's
financial position continued to strengthen with $833m of net cash accumulated on
the balance sheet. The Company's guidance is for 15% annual production growth
over the next three years.
3
AER LINGUS GROUP: Aer Lingus continued to disappoint investors and
downgraded company profit guidance for the second time in April following the
failed bid for the Group by Ryanair Holdings. CEO Dermot Mannion resigned in the
wake of another poor operational update. The key issue for Aer Lingus is the
need to restrict the current high level of cash burn in the business due to
operating losses and proposed capital expenditure commitments. The Fund
continues to hold its stake in the airline on valuation grounds but expects to
see some action on cash preservation in the months ahead.
ALLIED IRISH BANKS PLC: AIB performed poorly in the period as concerns
relating to asset quality in the Group's property book continued to weigh on
investor sentiment. The Group released an information update increasing bad debt
guidance for 2009 to E4.3bn. The Group's Chairman, CEO and Finance Director have
since resigned. The key issue for AIB in the coming months will be to address
asset quality issues in conjunction with the new proposed National Asset
Management Agency.
CURRENT OUTLOOK
The Irish economy is currently moving through a period of negative growth
with the CBOI forecasting a 6.9% decline in GDP for 2009 and a 3.0% decline for
2010. Risks to these forecasts remain biased towards the downside. Despite these
negative forecasts, developments in the U.S. and the U.K., Ireland's biggest
markets, will be a critical factor in relation to its growth rates.
The ISEQ is currently trading on a historic price to book multiple of 0.9x
implying the average market component will fail to cover its cost of capital
going forward, a highly unlikely scenario when economic conditions normalize.
Aggregate earnings estimates are almost 80% off peak levels and now generally
capture the extent of the economic decline expected domestically over the period
2009 - 2010. Over the last three quarters, the Fund has increased its weightings
in more cyclical companies with strong franchises and balance sheets, despite
current depressed earnings. These companies offer the most compelling long term
returns when economic conditions and corporate profitability return to more
normalized levels.
Sincerely,
/s/ Peter J. Hooper
Peter J. Hooper
Chairman
June 19, 2009
4
INVESTMENT SUMMARY (UNAUDITED)
TOTAL RETURN (%)
MARKET VALUE (a) NET ASSET VALUE (a)
----------------------- -----------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL (b) CUMULATIVE ANNUAL (b)
---------- ---------- ---------- ----------
Six Months (11.28) (11.28) (2.19) (2.19)
One Year (60.75) (60.75) (55.89) (55.89)
Three Year (59.07) (25.76) (52.64) (22.05)
Five Year (21.36) (4.69) (16.50) (3.54)
Ten Year (8.14) (0.84) (4.98) (0.51)
PER SHARE INFORMATION AND RETURNS
SIX
MONTHS
ENDED
APRIL 30,
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
----- ----- ------ ------ ----- ----- ----- ----- ----- ------ ---------
Net Asset
Value ($) 19.75 20.06 13.28 11.04 16.29 20.74 24.36 32.55 30.95 10.18 6.32
Income
Dividends ($) -- (0.13) (0.01) (0.03) -- (0.09) (0.03) (0.16) (0.24) (0.36) (0.33)
Capital Gains
Other
Distributions ($) (1.14) (1.60) (2.65) (0.69) -- -- -- (1.77) (2.40) (4.86) (2.76)
Total
Return (%)(a) (2.37) 12.86 (20.99) (11.44) 47.55 28.14 17.51 45.97 2.88 (58.62) (2.19)
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 Reinvestment and Cash Purchase Plan
("the 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 Plan. For more
information with regard to the Plan, see page 19.
(b) Periods less than one year are not annualized.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF THE FUND.
5
PORTFOLIO BY MARKET SECTOR AS OF APRIL 30, 2009
(PERCENTAGE OF NET ASSETS)
(UNAUDITED)
(PIE CHART)
Construction and Building Materials 30.57%
Transportation 16.34%
Other Assets 12.51%
Food and Beverages 10.21%
Health Care Services 8.01%
Business Services 6.74%
Food and Agriculture 4.42%
Diversified Financial Services 4.21%
Financial 4.06%
Energy 2.93%
TOP 10 HOLDINGS BY ISSUER AS OF APRIL 30, 2009 (UNAUDITED)
% OF NET
HOLDING SECTOR ASSETS
------------------------- ----------------------------------- --------
CRH PLC Construction and Building Materials 24.16%
Ryanair Holdings PLC Transportation 12.08%
DCC PLC Business Services 6.71%
Kerry Group PLC, Series A Food and Beverages 4.80%
Aryzta AG Food and Agriculture 4.42%
Elan Corp. PLC ADR Health Care Services 4.30%
Grafton Group PLC-UTS Construction and Building Materials 3.54%
Ryanair Holdings PLC-
Sponsored ADR Transportation 3.37%
C&C Group PLC Food and Beverages 3.04%
Dragon Oil PLC Energy 2.93%
6
THE NEW IRELAND FUND, INC.
PORTFOLIO HOLDINGS (UNAUDITED)
Value (U.S.)
April 30, 2009 Shares (Note A)
-------------- ---------- ------------
COMMON STOCKS (96.47%)
COMMON STOCKS OF IRISH COMPANIES (96.47%)
AGRICULTURAL OPERATIONS (1.99%)
Origin Enterprises PLC(a)* 428,163 $ 936,142
-----------
BUSINESS SERVICES (6.74%)
DCC PLC 174,079 3,157,670
Newcourt Group PLC* 155,655 12,375
-----------
3,170,045
-----------
BUSINESS SUPPORT SERVICES (1.24%)
CPL Resources PLC 269,995 375,659
Veris PLC* 500,000 205,390
-----------
581,049
-----------
CONSTRUCTION AND BUILDING MATERIALS (30.57%)
CRH PLC 431,676 11,365,916
Grafton Group PLC-UTS 469,211 1,666,294
Kingspan Group PLC 260,706 1,354,209
-----------
14,386,419
-----------
DIVERSIFIED FINANCIAL SERVICES (4.21%)
Boundary Capital PLC(a)* 635,534 33,686
FBD Holdings PLC 119,561 950,582
IFG Group PLC 624,801 521,592
TVC Holdings PLC(a)* 815,973 475,748
-----------
1,981,608
-----------
ENERGY (2.93%)
Dragon Oil PLC* 363,569 1,380,257
-----------
FINANCIAL (4.06%)
Allied Irish Banks PLC 849,471 1,080,609
Irish Life & Permanent PLC 324,867 830,829
-----------
1,911,438
-----------
FOOD & AGRICULTURE (4.42%)
Aryzta AG* 71,179 2,081,627
-----------
FOOD AND BEVERAGES (10.21%)
C&C Group PLC 613,858 1,431,625
Fyffes PLC 552,258 219,539
7
THE NEW IRELAND FUND, INC.
PORTFOLIO HOLDINGS (UNAUDITED) (CONTINUED)
Value (U.S.)
April 30, 2009 Shares (Note A)
-------------- ---------- ------------
COMMON STOCKS (CONTINUED)
COMMON STOCKS OF IRISH COMPANIES (CONTINUED)
FOOD AND BEVERAGES (CONTINUED)
Glanbia PLC 237,543 $ 689,342
Kerry Group PLC, Series A 109,675 2,259,887
Total Produce PLC 552,258 204,903
-----------
4,805,296
-----------
HEALTH CARE SERVICES (8.01%)
Elan Corp. PLC-Sponsored ADR* 342,700 2,025,357
ICON PLC-Sponsored ADR* 29,826 472,444
United Drug PLC 452,235 1,270,424
-----------
3,768,225
-----------
LEISURE AND HOTELS (2.84%)
Paddy Power PLC 72,370 1,335,852
-----------
REAL ESTATE DEVELOPMENT (0.02%)
Blackrock International Land PLC* 218,009 10,978
-----------
TECHNOLOGY (2.42%)
Norkom Group PLC(a)* 364,481 350,156
Norkom Group PLC* 818,699 786,522
-----------
1,136,678
-----------
TELECOMMUNICATIONS (0.47%)
Zamano PLC* 1,100,000 218,641
-----------
TRANSPORTATION (16.34%)
Aer Lingus Group PLC* 252,040 210,406
Aer Lingus Group PLC(a)* 249,183 208,021
Ryanair Holdings PLC* 1,300,000 5,684,679
Ryanair Holdings PLC-Sponsored ADR* 57,996 1,586,191
-----------
7,689,297
-----------
TOTAL COMMON STOCKS OF IRISH COMPANIES
(Cost $66,404,389) 45,393,552
-----------
TOTAL COMMON STOCKS BEFORE FOREIGN CURRENCY ON DEPOSIT
(Cost $66,404,389) $45,393,552
-----------
8
THE NEW IRELAND FUND, INC.
PORTFOLIO HOLDINGS (UNAUDITED) (CONTINUED)
Face Value (U.S.)
April 30, 2009 Value (Note A)
-------------- ---------- ------------
FOREIGN CURRENCY ON DEPOSIT (0.05%)
British Pounds Sterling L 600 $ 890
Euro E17,980 23,825
-----------
TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost $25,078)** 24,715
-----------
TOTAL INVESTMENTS (96.52%)
(Cost $66,429,467) 45,418,267
OTHER ASSETS AND LIABILITIES (3.48%) 1,635,343
-----------
NET ASSETS (100.00%) $47,053,610
===========
----------
(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, 2009, these securities amounted to $2,003,753 or 4.26% of net
assets. These securities have been determined by the Advisor to be liquid.
* Non-income producing security.
** Foreign currency held on deposit at JPMorgan Chase & Co.
ADR - American Depositary Receipt traded in U.S. dollars.
UTS - Units
The summary of inputs used to value each Fund's net assets as of April 30,
2009 is as follows (See Note A - Security Valuation in the Notes to Financial
Statements):
INVESTMENTS
VALUATION INPUTS IN SECURITIES+
---------------- --------------
Level 1 - Quoted Prices $45,393,552
Level 2 - Significant Observable Inputs --
Level 3 - Significant Unobservable Inputs --
-----------
Total Market Value of Investments $45,393,552
===========
+ Investments in Securities exclude Foreign Currency on Deposit.
9
THE NEW IRELAND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
April 30, 2009
--------------
ASSETS:
Investments at value (Cost $66,404,389)
See accompanying schedule U.S.$ 45,393,552
Cash 1,450,517
Foreign currency (Cost $25,078) 24,715
Receivable for investment securities sold 512,633
Dividends receivable 374,778
Prepaid expenses 66,237
----------------
Total Assets 47,822,432
----------------
LIABILITIES:
Payable for investments purchased 520,612
Payable for Fund shares redeemed 74,855
Accrued audit fees payable 54,900
Investment advisory fee payable (Note B) 26,885
Printing fees payable 38,758
Directors' fees and expenses (Note C) 20,802
Administration fee payable (Note B) 11,667
Custodian fees payable (Note B) 14,110
Accrued expenses and other payables 6,233
----------------
Total Liabilities 768,822
----------------
NET ASSETS U.S.$ 47,053,610
================
AT APRIL 30, 2009 NET ASSETS CONSISTED OF:
Common Stock, U.S. $.01 Par Value -
Authorized 20,000,000 Shares
Issued and Outstanding 7,443,684 Shares U.S.$ 74,437
Additional Paid-in Capital 70,954,826
Undistributed Net Investment Loss (138,601)
Accumulated Net Realized Loss (2,838,277)
Net Unrealized Depreciation of Securities,
Foreign Currency and Net Other Assets (20,998,775)
----------------
TOTAL NET ASSETS U.S.$ 47,053,610
================
NET ASSET VALUE PER SHARE
(Applicable to 7,443,684 outstanding shares)
(authorized 20,000,000 shares)
(U.S. $47,053,610 / 7,443,684) U.S.$ 6.32
================
See Notes to Financial Statements.
10
THE NEW IRELAND FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended
April 30, 2009
(unaudited)
------------------------
INVESTMENT INCOME
Dividends U.S.$ 497,660
Less: foreign taxes withheld (1,572)
Interest 151
---------------
TOTAL INVESTMENT INCOME 496,239
---------------
EXPENSES
Investment advisory fee (Note B) $ 159,047
Directors' fees and expenses (Note C) 134,761
Administration fee (Note B) 70,000
Insurance premiums 64,045
Printing fees 37,062
Legal fees 34,264
Compliance fees 31,681
Audit fees 18,200
Custodian fees (Note B) 17,807
Other 58,583
-----------
TOTAL EXPENSES 625,450
---------------
NET INVESTMENT LOSS U.S.$ (129,211)
---------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE D)
Realized loss on:
Securities transactions (2,804,370)
Foreign currency transactions 19,458)
-----------
Net realized loss on investments during the period (2,823,828)
---------------
Net change in unrealized appreciation of:
Securities 1,328,640
Foreign currency and net other assets 31,902
-----------
Net unrealized appreciation of investments during the period 1,360,542
---------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (1,463,286)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS U.S.$(1,592,497)
===============
See Notes to Financial Statements.
11
THE NEW IRELAND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
April 30, 2009 October
(unaudited) 31, 2008
---------------- ----------------
Net investment income/(loss) U.S.$ (129,211) U.S.$ 1,677,245
Net realized gain/(loss) on investments (2,823,828) 13,755,720
Net unrealized appreciation/(depreciation) of
investments, foreign currency holdings and net
other assets 1,360,542 (91,883,386)
--------------- ----------------
Net decrease in net assets resulting from operations (1,592,497) (76,450,421)
--------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,649,841) (1,695,425)
Net realized gains (13,797,196) (22,888,234)
--------------- ----------------
Total distributions (15,447,037) (24,583,659)
--------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Value of 158,600 and 250,800 shares repurchased,
respectively (Note G) (704,601) (4,867,026)
Value of shares issued to shareholders in
connection with a stock distribution (Note F) 13,901,795 11,032,332
--------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS 13,197,194 6,165,306
--------------- ----------------
Total decrease in net assets (3,842,340) (94,868,774)
--------------- ----------------
NET ASSETS
Beginning of period 50,895,950 145,764,724
--------------- ----------------
End of period (Including undistributed/accumulated
net investment income (loss) of $(138,601) and
$1,640,451, respectively) U.S.$47,053,610 U.S.$ 50,895,950
=============== ================
See Notes to Financial Statements.
12
THE NEW IRELAND FUND, INC.
FINANCIAL HIGHLIGHTS (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Six Months Ended Year Ended October 31,
April 30, 2009 ---------------------------------------------------------------
(unaudited) 2008 2007 2006 2005 2004
---------------- ----------- ---------- ---------- --------- -----------
Operating Performance:
Net Asset Value,
Beginning of Period U.S.$ 10.18 $ 30.95 $ 32.55 $ 24.36 $ 20.74 $ 16.29
----------- ------- -------- -------- -------- -------
Net Investment Income/(Loss) (0.02) 0.34 0.35 0.23 0.16 (0.00)#
Net Realized and Unrealized
Gain/(Loss) on Investments (0.63) (15.77) 0.69 9.98 3.38 4.49
----------- ------- -------- -------- -------- -------
Net Increase/(Decrease) in
Net Assets Resulting from
Investment Operations (0.65) (15.43) 1.04 10.21 3.54 4.49
----------- ------- -------- -------- -------- -------
Distributions to Shareholders
from:
Net Investment Income (0.33) (0.36) (0.24) (0.16) (0.03) (0.09)
Net Realized Gains (2.76) (4.86) (2.40) (1.77) -- --
----------- ------- -------- -------- -------- -------
Total from Distributions (3.09) (5.22) (2.64) (1.93) (0.03) (0.09)
----------- ------- -------- -------- -------- -------
Anti-Dilutive/(Dilutive)
Impact of Capital Share
Transactions (0.12)++++ (0.12)+++ 0.00++ (0.09)+ 0.11 0.05
----------- ------- -------- -------- -------- -------
Net Asset Value,
End of Period U.S.$ 6.32 $ 10.18 $ 30.95 $ 32.55 $ 24.36 $ 20.74
=========== ======= ======== ======== ======== =======
Share Price, End of Period U.S.$ 5.03 $ 8.95 $ 28.96 $ 30.67 $ 21.95 $ 18.46
=========== ======= ======== ======== ======== =======
Total NAV Investment Return
(a) (2.19)% (58.62)% 2.88% 45.97% 17.51% 28.14%
=========== ======= ======== ======== ======== =======
Total Market Investment
Return (b) (11.28)% (61.20)% 2.17% 52.47% 19.07% 34.47%
=========== ======= ======== ======== ======== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets,
End of Period (000's) U.S.$47,054 $50,896 $145,765 $151,102 $110,189 $97,253
Ratio of Net Investment
Income/(Loss) to Average
Net Assets (0.61)%* 1.67% 1.02% 0.86% 0.66% (0.00)%@
Ratio of Operating Expenses
to Average Net Assets 2.95%* 1.56% 1.31% 1.40% 1.34% 1.80%
Portfolio Turnover Rate 13% 21% 13% 11% 13% 5%
(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.
+ 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 $0.13 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.
++++ Amount represents $0.02 per share impact for shares repurchased by the Fund
under the Share Repurchase Program and $0.14 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%.
13
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.
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 157 Fair Value Measurements
("FAS 157") effective for fiscal years beginning after November 15, 2007. This
standard clarifies the definition of fair value for financial reporting,
establishes a framework for measuring fair value and requires additional
disclosures about the use of fair value measurements. FAS 157 became effective
for the Fund as of November 1, 2008, the beginning of its current fiscal year.
The three levels of the fair value hierarchy under FAS 157 are described as
follows:
Level 1 - quoted prices in active markets for identical securities
Level 2 - significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit
risk, etc.)
Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities. A
summary of the
14
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
inputs used to value the Fund's net assets as of April 30, 2009 is included with
the Fund's Portfolio of Investments.
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.
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, 2009, management has
reviewed the tax positions in the open tax years 2006 to 2008 and evaluated the
application of FIN 48 to the Fund. Management reviewed the treatment of tax
positions taken by the Fund, including but not limited to whether the Fund
satisfies the various requirements to be treated as a regulated investment
company under the Code. Although there is some uncertainty as to whether the
Fund satisfies these requirements, management determined that the Fund will
satisfy such requirements. Management 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
15
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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, 2009.
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. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS: In March 2008, Statement of Financial
Accounting Standards No. 161, "Disclosures about Derivative Instruments and
Hedging Activities" ("SFAS 161") was issued and is effective for fiscal years
beginning after November 15, 2008. SFAS 161 is intended to improve financial
reporting for derivative instruments by requiring enhanced disclosure that
enables investors to understand how and why an entity uses derivatives, how
derivatives are accounted for, and how derivative instruments affect an entity's
results of operations and financial position. Management has reviewed the
implication of SFAS 161 and believes there is no impact on the Fund.
In April 2009, FASB Staff Position No. 157-4 - Determining Fair Value when
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly ("FSP 157-4") - was
issued. FSP 157-4 clarifies the process for measuring the fair value of
financial instruments when the markets become inactive and quoted prices may
reflect distressed transactions. FSP 157-4 provides a non-exclusive list of
factors a reporting entity should consider when determining whether there has
been a significant decrease in the volume and level of activity for an asset or
liability when compared with normal market activity. Under FSP 157-4, if a
reporting entity concludes there has been a significant decrease in volume and
level of activity for the asset or liability (or similar assets or liabilities),
transactions or quoted prices may not be determinative of fair value. Further
analysis of the transactions or quoted prices is needed, and an adjustment to
the transactions or quoted prices may be necessary to estimate fair value in
accordance with FASB Statement No. 157 - Fair Value Measurements. FSP 157-4 is
effective for interim and annual reporting periods ending after June 15, 2009,
and shall be applied prospectively. Early adoption is permitted for periods
ending after March 15, 2009. Earlier adoption for periods ending before March
15, 2009, is not permitted. Management has reviewed the implication of FSP 157-4
and believes there is no impact on the Fund.
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
16
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
$100 million and 0.50% of the value of the average daily net assets of the Fund
on amounts in excess of $100 million. Effective May 1, 2009, the Fund will pay a
monthly fee at an annualized rate equal to 0.65% 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 PNC Global Investment Servicing (U.S.) Inc. ("PNC"). The Fund
pays PNC an annual fee payable monthly. During the six months ended April 30,
2009, the Fund incurred expenses of U.S. $70,000 on administration fees to PNC.
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, 2009,
the Fund incurred expenses for JPMorgan Chase & Co. of U.S. $17,807.
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, 2009 excluding U.S. government and short-term
investments, aggregated U.S. $5,504,658 and U.S. $6,081,803, respectively.
E. COMPONENTS OF DISTRIBUTABLE EARNINGS:
At October 31, 2008, the components of distributable earnings on a tax
basis were as follows:
Undistributed Undistributed
Ordinary Long-Term Net Unrealized
Income Gains Depreciation
------------- ------------- --------------
$1,640,451 $13,782,747 $(22,359,317)
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, 2009 were as
follows:
Gross
Gross Gross Unrealized
Unrealized Unrealized Net Unrealized Appreciation Net
Total Cost of Appreciation Depreciation Depreciation on Foreign Unrealized
Investments on Investments on Investments on Investments Currency Depreciation
------------- -------------- -------------- -------------- ------------ -------------
$66,404,389 $10,306,873 $(31,317,710) $(21,010,837) $12,062 $(20,998,775)
17
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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, 2009, the Fund issued 2,603,300 shares
in connection with stock distribution in the amount of $13,901,795.
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, 2009, the Fund repurchased 158,600
(2.09% of the shares outstanding at January 31, 2009) of its shares for a total
cost of $704,601, at an average discount of 20.98% of net asset value.
For the year ended October 31, 2008, the Fund repurchased 250,800 (5.33% of
the shares outstanding at October 31, 2007 year end) of its shares for a total
cost of $4,867,026, at an average discount of 11.68% 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 PNC).
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 3, 2009 and this approval was
confirmed at another Board meeting held on March 24th - see below.
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 and consultants 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, or retained as a
consultant by them.
The Directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
continue to expand as a result of regulatory and other market 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 and
current market conditions. 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 and
tax 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
benefits on the Adviser's expenses. The Directors recognized that the Adviser
should, in
22
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
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. These were 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 2.29% 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., Developed Market closed-end funds) over annualized
rolling one-, three-, five- and ten-year periods ended at January 31, 2009. 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
negatively to such funds, but was consistently 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. The Directors noted that the information
provided by the 15c Provider was as of December 31, 2008 and that the expense
ratio of the Fund has increased since this date due in large part to the reduced
asset size of 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, consultants 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 43 portfolios in the relevant 15c
Provider category. The information showed that the Fund's effective advisory fee
rate of 0.75% (based on net assets at December 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. However, even though the Directors had concluded that the
existing fee structure was reasonable, the Adviser offered an additional
reduction and at a subsequent Board meeting this was approved on the following
basis - for all assets up to $100 million - 0.65% and for all assets above $100
million - 0.50%.
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.
As a consequence of recent developments in relation to the financial
services industry in Ireland, the Irish Government has recapitalized Bank of
Ireland. The Bank recapitalization ("Recapitalization Transaction") included a
E3.5 billion capital investment by the Irish Government in Bank of Ireland in
exchange for preference shares
24
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
and warrants. In connection with this investment, the Irish Government will have
(i) the right to appoint 25% of Bank of Ireland's Court of Directors and (ii)
25% of the voting rights in respect of (A) a change of control of Bank of
Ireland and (B) the appointment of the remaining members of Bank of Ireland's
Court of Directors. The Recapitalization Transaction was approved by the
shareholders of Bank of Ireland on March 27, 2009, with the transaction being
completed on March 31, 2009.
Under the Investment Advisers Act of 1940, the Bank Recapitalization
Transaction may be treated as an assignment of the investment advisory agreement
between the Fund and Adviser, an indirect, wholly-owned subsidiary of Bank of
Ireland. At a meeting held on March 24, 2009, the Directors approved the
continuance of the Fund's existing advisory relationship in a written agreement
on materially the same terms and conditions as the investment advisory agreement
between the Adviser and the Fund. In approving the continuance, the Directors
took into consideration the public statement of the Irish Government that it
does not intend to take control of Bank of Ireland. Subsequently, on April 2,
2009, the Adviser received "no-action" relief from the staff of the Division of
Investment Management of the Securities and Exchange Commission permitting the
Adviser to continue to serve as the Fund's investment adviser without
shareholder approval following the Bank Recapitalization Transaction.
25
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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
40 Mespil Road
Dublin 4, Ireland
ADMINISTRATOR
PNC Global Investment Servicing (U.S.) 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 PNC Global Investment Servicing (U.S.) 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
IR-SAR 04/09
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 Shares (or of Publicly Announced Plans Purchased Under the Plans or
Period Units) Purchased Unit) or Programs Programs
November 1, 2008 0 0 0 749,259
to November 30,
2008
December 1, 2008 0 0 0 749,259
to December 31,
2008
January 1, 2009 0 0 0 749,259
to January 31,
2009
February 1, 2009 0 0 0 749,259
to February 28,
2009
March 1, 2009 to 55,900 $4.04 $226,110.92 749,259
March 31, 2009
April 1, 2009 to 102,700 $4.66 $478,490.50 749,259
April 20, 2009
Total 158,600 $4.44 $704,601.42 749,259
Footnote columns (c) and (d) of the table, by disclosing the following
information in the aggregate for all plans or programs publicly announced:
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 6/12/09
----------------------------------------------------------------------------
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 6/12/09
----------------------------------------------------------------------------
By (Signature and Title)* /S/ LELIA LONG
-------------------------------------------------------
Lelia Long, Treasurer
(principal financial officer)
Date 6/17/09
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.