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: 508 871 8500
Date of fiscal year end: October 31
Date of reporting period: April 30, 2010
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. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
THE
NEW IRELAND
FUND
(GRAPHIC)
SEMI-ANNUAL REPORT
APRIL 30, 2010
COVER PHOTOGRAPH -- DROMOLAND CASTLE, CO. CLARE
PROVIDED COURTESY OF TOURISM IRELAND
LETTER TO SHAREHOLDERS
Dear Shareholder,
INTRODUCTION
As may be seen in the Economic Review section below, Ireland's economy is
forecast to contract by just 0.5% for the full year 2010, although it is
expected to show growth towards the end of the year. Having said this, growth of
2.8% is expected for calendar 2011. This growth pattern is fairly similar to the
majority of countries within the European Community, although the 2011 projected
figure for Ireland is better than the forecast for many of these countries.
The Irish Government introduced harsh measures in its December 2009 Budget,
which reflected the need to take action with a view to reducing the Country's
overall deficit. Measures taken ranged from the cutting back of capital
expenditures to wage reductions across the public sector and to increased
taxation in some other sectors of the economy. These steps have been viewed
positively within the European Community and, together with the commitment of
the Irish Government to continue such measures over the next couple of years,
they have resulted in the general belief that Ireland will be able to work its
way out of its economic problems.
As shown below, the Fund has performed satisfactorily over the past six
months with its Net Asset Value ("NAV") increasing by 7.0% despite the weakening
of the Euro over this same period. With the continued weakening of the Euro
versus the U.S. dollar, the Irish Equities market ("ISEQ") will have a difficult
time continuing the same level of growth it has been showing but hopefully, the
Fund's performance will continue to be positive.
PERFORMANCE
Over the first six months of the current fiscal year the Fund's NAV, in
U.S. dollar terms*, increased by 7.0%. The ISEQ and ISEQ ex Bank of Ireland
("BOI"), in which the Fund is precluded from investing, were ahead 6.8% and 7.6%
respectively over the same period. In the most recent quarter, the Fund's NAV
increased by 8.8% to $8.77, matching the ISEQ, excluding BOI, which also
returned 8.8% over the same period.
The Irish market advanced in local currency terms, along with equity
markets globally, during the most recent quarter as economic indicators
continued to improve while corporate results showed some encouraging trends.
Currency movements were again generally unfavorable for the Fund with the U.S.
dollar advancing by 4% and 10% respectively against the Euro over the quarter
and fiscal year to date.
* All returns are quoted in U.S. Dollars unless otherwise stated.
1
During the half year, we continued to implement the Share Repurchase
Program with 367,300 shares being repurchased and retired since October 31,
2009, at a cost of $2.6 million. These repurchases represent a reduction of
5.21% of the shares outstanding at October 31, 2009 and they have resulted in a
positive impact of 6 cents per share.
ECONOMIC REVIEW
Domestic GDP forecasts were adjusted upwards in the most recent period.
Latest Central Bank of Ireland ("CBOI") forecasts are for a contraction in GDP
of 0.5% in 2010 followed by a resumption of growth to 2.8% in 2011. Public and
private forecasters continue to make upward revisions to their GDP forecasts.
Consumer spending and the net trade balance remain the areas with most potential
for positive surprise in the coming months.
Consumer spending is forecast to decline 1.0% in 2010 and to rise 1.1% in
2011. Employment growth continues to be subdued but a decline in the savings
ratio is anticipated which should help boost consumption.
Gross fixed capital formation is expected to decline by 16.1% in 2010 and
3.4% in 2011 as the decline in residential construction output becomes less of a
drag on economic growth. New housing completions are expected to reach 12,000
units in 2010. Non-residential activity is forecast to decline further in 2010
and 2011 due to elevated vacancy levels and a lack of credit availability.
However, capital values would seem to be bottoming at 55-60% below peak levels
according to the latest survey data.
Exports are expected to rise by 2.0% in 2010 and 4.3% in 2011. Services
have grown strongly in the first four months of 2010 and will continue to
outpace merchandise trade. The recent weakness of the Euro against the U.S.
Dollar and the British Pound will further assist the competitiveness of Irish
exports. Imports are expected to lag in 2010 (-1.1%) but should see some
recovery in 2011 with growth forecast at 2.6%. The current account deficit is
expected to move into surplus by 2011.
Market concerns are largely macro-related at present with the budget
deficits and general government debt positions of peripheral European nations
coming into focus. Ireland will run a budget deficit of 11.6% in 2010 but
credible fiscal stability plans have been put in place to reduce the deficit to
less than 3% by 2014. General government debt reached 64.5% of GDP in 2009 and
will reach 83% by 2012 before steadily declining to 2014. Importantly, tax
revenues have begun to show signs of stabilization while the gross debt burden
is buffered by National Treasury Management Agency cash balances and the
National Pension Reserve Fund which totaled over Euro 50 billion at the end of
April. However, contagion from weaker Euro-zone nations remains a risk and has
driven up Irish bond yield spreads in recent weeks.
While sovereign debt and deficit concerns have come to the fore, recent
months have seen continued strong profitability and deleveraging from global
corporations. Non-financial Irish corporations have posted strong results,
2
reduced cost bases and strengthened balances sheets. Funding and balance sheet
risk at the corporate level in Ireland still revolves around the quoted
financial stocks although the recent capital raising by Bank of Ireland may
provide a template for other players in the sector to address solvency and
liquidity concerns.
Irish consumer sentiment improved in March with the overall Consumer
Sentiment Index reaching 61.9 compared to 59.4 in February. The corresponding
figure for March 2009 was 44.1. Employment trends and the stability of
government finances continue to be the main confidence drivers.
The Live Register fell in April to a seasonally adjusted rate of 432,500
claimants down from 433,000 in March. The unemployment rate at the end of April
was estimated to be approximately 13.4%. The CBOI is forecasting an average
unemployment rate of 13.7% for 2010.
The volume of retail sales increased by 3.6% on an annual basis in March
however, excluding the volatile autos component, core retail sales were down
1.2% over the same period. Retail sales volume grew by 1.1% in Q1 2010, the
first quarterly increase since 2007.
The Annual Harmonized Index of Consumer Prices ("HCIP") declined by 2.4% in
the year to March 2010. The largest contributors over the period included
Education (+8.7%) and Transport (+5.0%) while the main detractors included
Clothing & Footwear (-13.7%) and Gas & Other Fuels (-9.0%).
Demand for credit from businesses and households remains muted with
corporations and consumers in deleveraging mode while credit criteria have
tightened considerably. Non-financial credit fell by 4.6% over the year to March
2010 while household credit was 2.6% lower on an annual basis.
EQUITY MARKET REVIEW
World stock markets posted good returns in local currency terms during the
quarter;
FISCAL YEAR
QUARTER ENDED TO DATE
APRIL 30TH, 2010 APRIL 30TH, 2010
----------------- -----------------
LOCAL LOCAL
CURRENCY U.S. $ CURRENCY U.S. $
-------- ------ -------- ------
Irish Equities (ISEQ) +14.1% +9.2% +18.5% +6.8%
S&P 500 +10.5% +10.5% +14.5% +14.5%
NASDAQ +14.6% +14.6% +20.4% +20.4%
UK Equities (FTSE 100) +7.0% +2.2% +10.1% +2.3%
Japanese Equities +9.5% +5.4% +10.3% +5.6%
Dow Jones Eurostoxx 50 +2.9% -1.7% +5.0% -5.5%
German Equities (DAX) +9.4% +4.5% +13.3% +2.1%
French Equities (CAC 40) +2.1% -2.5% +5.8% -4.7%
Dutch Equities (AEX) +5.5% +0.8% +14.4% +3.0%
3
There was news flow in relation to a number of the Fund's holdings in
recent months, highlights are as follows:
GRAFTON GROUP PLC: Grafton was the Fund's best performer over the period.
In early May the Group released a trading update indicating improved operating
performance across its U.K. and Irish divisions. U.K. turnover has grown 4% in
local currency terms in the three months to end April 2010. Irish revenues
continue to decline but at a moderating rate. The Group should see good
operating margin expansion for 2010 if these trends continue. Grafton is
attractively valued at 0.9x's 2010 book value and remains highly operationally
leveraged into any top line recovery.
C&C GROUP PLC: C&C performed strongly over the period as evidence of
continued improvement in underlying trading continued to emerge from industry
statistics. The Group also disposed of its non-core Spirits division to a trade
buyer for a cash consideration of E300m reducing pro-forma net debt/EBITDA
to 0.6x's. This clears the way for further organic/acquisitive investment in the
Group's core cider business and raises the prospect of higher capital returns to
shareholders in due course.
FBD HOLDINGS PLC: FBD released a trading statement at the end of April
indicating an improvement in operating conditions in Q1 2010. Gross premiums
written in Ireland increased in the quarter for the first time since H1 2007.
Premium rates have continued to harden, in particular for home and business
insurance. The Group expects to deliver a 2010 performance in line with
consensus analyst expectations.
ICON PLC: Icon delivered a strong performance in Q1 2010 with net revenues
of $219 million in line with the prior year. Operating margin also remained
stable at 12.2% in the period with EPS up 6% on lower interest charges. The key
book to bill metric improved sequentially to 1.2x's suggesting acceleration in
revenue can be expected in the coming quarters. The Group continues to take
market share and its net cash position of $200 million provides scope for bolt
on deals going forward.
CURRENT OUTLOOK
The Irish economy is currently moving through a transitional growth period
with a further decline in GDP of 0.5% forecast for 2010 followed by a resumption
of growth to 2.8% in 2011. Consumer spending and net trade will be the key
drivers of forecasts over the coming quarters.
The ISEQ is currently trading on a price to book multiple of 1.4x's which
is undemanding in a historic context and assumes individual market components
will see their future earnings and returns settle well below average trends.
4
The trend in earnings revisions continues to be positive with an increasing
number of the Fund's holdings seeing forecast upgrades in recent months. The
Fund will continue with its core strategy of deploying its capital towards
businesses with strong franchises, balance sheets and management where it is
believed that current valuations fail to capture the potential upside to equity
investors.
Sincerely,
/s/ Peter J. Hooper
Peter J. Hooper
Chairman
June 18, 2010
5
INVESTMENT SUMMARY (UNAUDITED)
TOTAL RETURN (%)
MARKET VALUE (a) NET ASSET VALUE (a)
----------------------- -----------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL (b) CUMULATIVE ANNUAL (b)
---------- ---------- ---------- ----------
Six Months 5.22 5.22 6.95 6.95
One Year 48.31 48.31 38.77 38.77
Three Year (58.89) (25.64) (51.83) (21.61)
Five Year (17.59) (3.80) (14.14) (3.00)
Ten Year 53.61 4.39 31.60 2.78
PER SHARE INFORMATION AND RETURNS
SIX
MONTHS
ENDED
APRIL 30,
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
----- ------ ------ ----- ----- ----- ----- ----- ------ ----- ---------
Net Asset
Value ($) 20.06 13.28 11.04 16.29 20.74 24.36 32.55 30.95 10.18 8.20 8.77
Income
Dividends ($) (0.13) (0.01) (0.03) -- (0.09) (0.03) (0.16) (0.24) (0.36) (0.33) --
Capital Gains
Other
Distributions ($) (1.60) (2.65) (0.69) -- -- -- (1.77) (2.40) (4.86) (2.76) --
Total
Return (%) (a) 12.86 (20.99) (11.44) 47.55 28.14 17.51 45.97 2.88 (58.62) 26.91 6.95
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.
6
PORTFOLIO BY MARKET SECTOR AS OF APRIL 30, 2010
(PERCENTAGE OF NET ASSETS)
(UNAUDITED)
(PIE CHART)
Construction and Building Materials 30.30%
Other Assets 13.65%
Food and Beverages 11.94%
Transportation 11.69%
Health Care Services 8.57%
Financial 5.97%
Business Services 5.24%
Diversified Financial Services 4.52%
Leisure and Hotels 4.08%
Energy 4.04%
TOP 10 HOLDINGS BY ISSUER AS OF APRIL 30, 2010 (UNAUDITED)
HOLDING SECTOR % OF NET ASSETS
------- ------ ---------------
CRH PLC Construction and Building Materials 21.99%
Ryanair Holdings PLC Transportation 8.32%
DCC PLC Business Services 5.24%
Kerry Group PLC, Series A Food and Beverages 4.71%
C&C Group PLC Food and Beverages 4.43%
Elan Corp. PLC-Sponsored ADR Health Care Services 4.28%
Kingspan Group PLC Construction and Building Materials 4.20%
Grafton Group PLC-UTS Construction and Building Materials 4.11%
Paddy Power PLC Leisure and Hotels 4.08%
Dragon Oil PLC Energy 4.04%
7
THE NEW IRELAND FUND, INC.
PORTFOLIO HOLDINGS (UNAUDITED)
Value (U.S.)
April 30, 2010 Shares (Note A)
------------------------------------------------------ ---------- ------------
COMMON STOCKS (99.06%)
COMMON STOCKS OF IRISH COMPANIES (98.88%)
AGRICULTURAL OPERATIONS (2.63%)
Origin Enterprises PLC 472,595 $ 1,539,541
------------
BUSINESS SERVICES (5.24%)
DCC PLC 114,664 3,065,564
------------
BUSINESS SUPPORT SERVICES (2.35%)
CPL Resources PLC 382,417 1,372,894
------------
CONSTRUCTION AND BUILDING MATERIALS (30.30%)
CRH PLC 451,950 12,878,606
Grafton Group PLC-UTS 496,148 2,407,909
Kingspan Group PLC* 260,706 2,461,191
------------
17,747,706
------------
DIVERSIFIED FINANCIAL SERVICES (4.34%)
FBD Holdings PLC 51,296 532,003
IFG Group PLC 624,801 996,917
TVC Holdings PLC* 815,973 726,920
Worldspreads Group PLC* 238,839 282,638
------------
2,538,478
------------
ENERGY (4.04%)
Dragon Oil PLC* 319,386 2,365,414
------------
FINANCIAL (5.97%)
Allied Irish Banks PLC* 849,471 1,623,085
Irish Life & Permanent Group Holdings PLC* 462,216 1,873,251
------------
3,496,336
------------
FOOD & AGRICULTURE (3.99%)
Aryzta AG 60,615 2,337,298
------------
FOOD AND BEVERAGES (11.94%)
C&C Group PLC 541,889 2,593,874
Glanbia PLC 317,890 1,361,033
Kerry Group PLC, Series A 86,131 2,761,167
Total Produce PLC 552,258 279,037
------------
6,995,111
------------
8
THE NEW IRELAND FUND, INC.
PORTFOLIO HOLDINGS (UNAUDITED) (CONTINUED)
Value (U.S.)
April 30, 2010 Shares (Note A)
------------------------------------------------------ ---------- ------------
COMMON STOCKS (CONTINUED)
HEALTH CARE SERVICES (8.57%)
Elan Corp. PLC-Sponsored ADR* 372,800 $ 2,505,216
ICON PLC-Sponsored ADR* 60,335 1,759,972
United Drug PLC 216,966 755,839
------------
5,021,027
------------
LEISURE AND HOTELS (4.08%)
Paddy Power PLC 68,141 2,391,024
------------
TECHNOLOGY (3.41%)
Norkom Group PLC* 938,776 1,997,184
------------
TELECOMMUNICATIONS (0.33%)
Zamano PLC* 1,100,000 191,602
------------
TRANSPORTATION (11.69%)
Aer Lingus Group PLC* 501,223 486,508
Irish Continental Group PLC 66,141 1,486,256
Ryanair Holdings PLC* 983,063 4,875,579
------------
6,848,343
------------
TOTAL COMMON STOCKS OF IRISH COMPANIES
(Cost $62,206,210) 57,907,522
------------
COMMON STOCKS OF FRENCH COMPANIES (0.18%)
DIVERSIFIED FINANCIAL SERVICES (0.18%)
BNP Paribas 1,551 107,507
------------
TOTAL COMMON STOCKS OF FRENCH COMPANIES
(Cost $101,345) 107,507
------------
TOTAL COMMON STOCKS BEFORE FOREIGN CURRENCY ON DEPOSIT
(Cost $62,307,555) $ 58,015,029
------------
9
THE NEW IRELAND FUND, INC.
PORTFOLIO HOLDINGS (UNAUDITED) (CONTINUED)
Face Value (U.S.)
April 30, 2010 Value (Note A)
------------------------------------------------------ ---------- ------------
FOREIGN CURRENCY ON DEPOSIT (0.10%)
British Pounds Sterling L 600 $ 919
Euro E 41,564 55,265
------------
TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost $56,270)** 56,184
------------
TOTAL INVESTMENTS (99.16%)
(Cost $62,363,825) 58,071,213
OTHER ASSETS AND LIABILITIES (0.84%) 494,674
------------
NET ASSETS (100.00%) $ 58,565,887
============
* 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 the Fund's net assets as of April 30, 2010
is as follows (See Note A - Security Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
04/30/10 PRICE INPUT INPUT
----------- ----------- ----------- ------------
Investments in Securities*+ $58,015,029 $58,015,029 $-- $--
* See Portfolio Holdings detail for industry breakout.
+ Total Investments exclude Foreign Currency on Deposit.
10
THE NEW IRELAND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
April 30, 2010
ASSETS:
Investments at value (Cost $62,307,555)
See accompanying schedule U.S. $58,015,029
Cash 243,786
Foreign currency (Cost $56,270) 56,184
Dividends receivable 359,028
Receivable for investment securities sold 181,912
Prepaid expenses 32,354
-----------
Total Assets 58,888,293
-----------
LIABILITIES:
Payable for investments purchased 168,424
Printing fees payable 39,798
Investment advisory fee payable (Note B) 31,197
Accrued legal fees payable 29,833
Accrued audit fees payable 19,109
Directors' fees and expenses 18,920
Administration fee payable (Note B) 8,333
Custodian fees payable (Note B) 1,815
Accrued expenses and other payables 4,977
-----------
Total Liabilities 322,406
-----------
NET ASSETS U.S. $58,565,887
===========
AT APRIL 30, 2010 NET ASSETS CONSISTED OF:
Common Stock, U.S. $.01 Par Value -
Authorized 20,000,000 Shares
Issued and Outstanding 6,676,484 Shares U.S. $ 66,765
Additional Paid-in Capital 65,175,837
Accumulated Net Investment Loss (7,442)
Accumulated Net Realized Loss (2,366,422)
Net Unrealized Depreciation of Securities,
Foreign Currency and Net Other Assets (4,302,851)
-----------
TOTAL NET ASSETS U.S. $58,565,887
===========
NET ASSET VALUE PER SHARE
(Applicable to 6,676,484 outstanding shares)
(authorized 20,000,000 shares)
(U.S. $58,565,887 / 6,676,484) U.S. $ 8.77
===========
See Notes to Financial Statements.
11
THE NEW IRELAND FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended
April 30, 2010
(unaudited)
------------------------
INVESTMENT INCOME
Dividends U.S. $ 569,803
Less: foreign taxes withheld (4,753)
----------
TOTAL INVESTMENT INCOME 565,050
----------
EXPENSES
Investment advisory fee (Note B) $ 182,733
Directors' fees and expenses 107,141
Administration fee (Note B) 64,301
Insurance premiums 61,603
Printing fees 35,674
Compliance fees 32,776
Legal fees 21,764
Audit fees 19,109
Custodian fees (Note B) 12,781
Other 34,610
----------
TOTAL EXPENSES 572,492
----------
NET INVESTMENT LOSS U.S. $ (7,442)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE D)
Realized gain/(loss) on:
Securities transactions 1,218,666
Foreign currency transactions (8,348)
----------
Net realized gain on investments during the period 1,210,318
----------
Net change in unrealized appreciation/(depreciation) of:
Securities 2,223,075
Foreign currency and net other assets (14,244)
----------
Net unrealized appreciation of investments during the period 2,208,831
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 3,419,149
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS U.S. $3,411,707
==========
See Notes to Financial Statements.
12
THE NEW IRELAND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
April 30, 2010 Year Ended
(unaudited) October 31, 2009
---------------- -----------------
Net investment loss U.S. $ (7,442) U.S. $ (431,124)
Net realized gain/(loss) on investments 1,210,318 (3,567,628)
Net unrealized appreciation of investments,
foreign currency holdings and net other
assets 2,208,831 15,847,635
----------- ------------
Net increase in net assets resulting from
operations 3,411,707 11,848,883
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (1,649,841)
Net realized gains -- (13,797,196)
----------- ------------
Total distributions -- (15,447,037)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Value of 367,300 and 558,500 shares
repurchased, respectively (Note F) (2,631,382) (3,414,029)
Value of shares issued to shareholders in
connection with a stock distribution (Note E) -- 13,901,795
----------- ------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS (2,631,382) 10,487,766
----------- ------------
Total increase in net assets 780,325 6,889,612
----------- ------------
NET ASSETS
Beginning of period 57,785,562 50,895,950
----------- ------------
End of period (Including undistributed/
accumulated net investment income/(loss)
of $(7,442) and $0, respectively) U.S. $58,565,887 U.S. $ 57,785,562
=========== ============
See Notes to Financial Statements.
13
THE NEW IRELAND FUND, INC.
FINANCIAL HIGHLIGHTS (FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Six Months Ended Year Ended October 31,
April 30, 2010 -------------------------------------------------------
(unaudited) 2009 2008 2007 2006 2005
---------------- ------- ------- -------- -------- --------
Operating Performance:
Net Asset Value,
Beginning of Period U.S. $ 8.20 $ 10.18 $ 30.95 $ 32.55 $ 24.36 $ 20.74
------- ------- ------- -------- -------- --------
Net Investment Income/(Loss) (0.00)# (0.06) 0.34 0.35 0.23 0.16
Net Realized and Unrealized
Gain/(Loss) on Investments 0.51 1.23 (15.77) 0.69 9.98 3.38
------- ------- ------- -------- -------- --------
Net Increase/(Decrease) in
Net Assets Resulting from
Investment Operations 0.51 1.17 (15.43) 1.04 10.21 3.54
------- ------- ------- -------- -------- --------
Distributions to Shareholders from:
Net Investment Income -- (0.33) (0.36) (0.24) (0.16) (0.03)
Net Realized Gains -- (2.76) (4.86) (2.40) (1.77) --
------- ------- ------- -------- -------- --------
Total from Distributions -- (3.09) (5.22) (2.64) (1.93) (0.03)
------- ------- ------- -------- -------- --------
Anti-Dilutive/(Dilutive) Impact of
Capital Share Transactions 0.06+++++ (0.06)++++ (0.12)+++ 0.00++ (0.09)+ 0.11
------- ------- ------- -------- -------- --------
Net Asset Value,
End of Period U.S. $ 8.77 $ 8.20 $ 10.18 $ 30.95 $ 32.55 $ 24.36
======= ======= ======= ======== ======== ========
Share Price, End of
Period U.S. $ 7.46 $ 7.09 $ 8.95 $ 28.96 $ 30.67 $ 21.95
======= ======= ======= ======== ======== ========
Total NAV Investment
Return (a) 6.95% 26.91% (58.62)% 2.88% 45.97% 17.51%
======= ======= ======= ======== ======== ========
Total Market Investment
Return (b) 5.22% 25.06% (61.20)% 2.17% 52.47% 19.07%
======= ======= ======= ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net Assets,
End of Period (000's) U.S. $58,566 $57,786 $50,896 $145,765 $151,102 $110,189
Ratio of Net Investment
Income/(Loss) to Average
Net Assets (0.03)%* (0.87)% 1.67% 1.02% 0.86% 0.66%
Ratio of Operating Expenses
to Average Net Assets 2.04%* 2.65% 1.56% 1.31% 1.40% 1.34%
Portfolio Turnover Rate 4% 16% 21% 13% 11% 13%
(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 $0.08 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.
+++++ Amount represents $0.06 per share impact for shares repurchased by the
Fund under the Share Repurchase Program and $0.00 per share impact for the
new shares issued as Capital Gain Stock Distribution.
* Annualized.
# Amount represents less than $(0.01) per share.
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 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.
FAIR VALUE MEASUREMENTS: The inputs and valuations techniques used to
measure fair value of the Fund's net assets are summarized into three levels as
described in the hierarchy below:
Level 1 - unadjusted quoted prices in active markets for identical assets
or liabilities that the Fund has the ability to access.
Level 2 - observable inputs other than quoted prices included in level 1
that are observable for the asset or liability, either directly
or indirectly. These inputs may include quoted prices for the
identical instrument on an inactive market, prices for similar
instruments, interest rates, prepayment speeds, credit risk,
yield curves, default rates and similar data.
Level 3 - unobservable inputs for the asset or liability, to the extent
relevant observable inputs are not available, representing the
Fund's own assumptions about the assumptions a market participant
would use in valuing the asset or liability, and would be based
on the best information available.
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 levels of the Fund's investments as of April 30, 2010 is included
with the Fund's Portfolio of Investments.
15
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
Management has analyzed the Fund's tax positions taken on Federal income
tax returns for all open tax years (October 31, 2009, 2008, 2007 and 2006), and
has concluded that no provision for federal income tax is required in the Fund's
financial statements. The Fund's federal and state income and federal excise tax
returns for tax years for which the applicable statutes of limitations have not
expired are subject to examination by the Internal Revenue Service and state
departments of revenue. 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.
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-Interactive Data Corp. ("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 been 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, 2010.
16
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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. Withholding
taxes on foreign dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. 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 PRONOUNCEMENT: In January 2010, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-06
"Improving Disclosures about Fair Value Measurements". ASU 2010-06 amends FASB
Accounting Standards Codification Topic 820, Fair Value Measurements and
Disclosures, to require additional disclosures regarding fair value
measurements. Certain disclosures required by ASU No. 2010-06 are effective for
interim and annual reporting periods beginning after December 15, 2009, and
other required disclosures are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years. Management
is currently evaluating the impact ASU No. 2010-06 will have on its financial
statement disclosures.
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"). Effective May
1, 2009, under the Investment Advisory Agreement, the Fund pays 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. Prior to May
1, 2009, the Fund paid 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 PNC Global Investment Servicing (U.S.) Inc. ("PNC"). The Fund
pays PNC an annual fee payable monthly. During the six months ended April 30,
2010, the Fund incurred expenses of U.S. $64,301 on administration fees to PNC.
On February 2, 2010, The PNC Financial Services Group, Inc. entered into a
Stock Purchase Agreement (the "Stock Purchase Agreement") with The Bank of New
York Mellon Corporation ("BNY Mellon"). Upon the terms and subject to the
conditions set forth in the Stock Purchase Agreement, which has been approved by
the board of directors of each company, The PNC Financial Services Group, Inc.
will sell to BNY Mellon (the "Stock Sale") 100% of the issued and outstanding
shares of PNC, an indirect,
17
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
wholly-owned subsidiary of The PNC Financial Services Group, Inc. The Stock Sale
includes PNC, PFPC Trust Company and PFPC Distributors, Inc. and is expected to
close in the third quarter of 2010.
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, 2010,
the Fund incurred expenses for JPMorgan Chase & Co. of U.S. $12,781.
C. PURCHASES AND SALES OF SECURITIES:
The cost of purchases and proceeds from sales of securities for the six
months ended April 30, 2010 excluding U.S. government and short-term
investments, aggregated U.S. $2,243,027 and U.S. $5,289,565, respectively.
D. COMPONENTS OF DISTRIBUTABLE EARNINGS:
At October 31, 2009, the components of distributable earnings on a tax
basis were as follows:
Capital Undistributed Undistributed
Loss Ordinary Long-Term Net Unrealized
Carryforward Income Gains Depreciation
------------ ------------- ------------- --------------
$(1,267,836) $-- $-- $(8,820,586)
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, 2010 were as
follows:
Gross
Gross Gross Unrealized
Unrealized Unrealized Net Unrealized Depreciation Net
Total Cost of Appreciation Depreciation Depreciation on Foreign Unrealized
Investments on Investments on Investments on Investments Currency Depreciation
------------- -------------- -------------- -------------- ------------ ------------
$62,307,555 $16,254,365 $(20,546,891) $(4,292,526) $(10,325) $(4,302,851)
There were no permanent tax and book differences in gross appreciation/
depreciation of securities or the cost basis of securities.
E. COMMON STOCK:
For the six months ended April 30, 2010, the Fund issued no shares in
connection with stock distribution.
For the year ended October 31, 2009, the Fund issued 2,603,300 shares in
connection with stock distribution in the amount of $13,901,795.
F. 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, 2010, the Fund repurchased 367,300
(5.21% of the shares outstanding at October 31, 2009) of its shares for a total
cost of $2,631,382, at an average discount of 12.83% of net asset value.
For the year ended October 31, 2009, the Fund repurchased 558,500 (7.35% of
the shares outstanding at January 31, 2009 year end) of its shares for a total
cost of $3,414,029, at an average discount of 14.13% of net asset value.
18
THE NEW IRELAND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
G. 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.
H. SUBSEQUENT EVENT:
Management has evaluated the impact of all subsequent events on the Fund
through the date the financial statements were issued, and has determined that
there were no subsequent events.
19
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.
20
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.
21
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
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.
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 9, 2010.
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;
22
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
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.
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 are
routinely 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
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
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.
23
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
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 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 5.9% 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, 2010. 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
24
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
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"). The Directors noted
that the information provided by the 15c Provider was as of January 31, 2010 and
that the expense ratio had decreased since this date due to an increase in the
asset size of the Fund and reductions in certain expense categories.
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.
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 45 portfolios in the relevant 15c
Provider category. The information showed that the Fund's effective advisory fee
rate of 0.691% (based on net assets at December 31, 2009) 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 took into account that the Advisory Agreement was amended in
2009 to lower the advisory fee from .75% to .65% for assets up to $100 million
with the fee for assets over $100 million remaining at .50%. As mentioned above,
the Fund's advisory fees are below the average of the 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.
25
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
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.
26
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THE NEW IRELAND FUND, INC.
DIRECTORS AND OFFICERS
Peter J. Hooper - CHAIRMAN OF THE BOARD
Chris Johns - 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 04/10
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
(c) TOTAL NUMBER OF SHARES APPROXIMATE DOLLAR VALUE)
(a) TOTAL NUMBER (b) AVERAGE (OR UNITS) PURCHASED AS PART OF SHARES (OR UNITS)
OF SHARES (OR PRICE PAID PER OF PUBLICLY ANNOUNCED PLANS THAT MAY YET BE PURCHASED
PERIOD UNITS) PURCHASED SHARE (OR UNIT) OR PROGRAMS UNDER THE PLANS OR PROGRAMS
------ ---------------- --------------- ---------------------------- ---------------------------
November 1, 2009 to
November 30, 2009 81,900 7.47 81,900 622,478
December 1, 2009 to
December 31, 2009 97,600 7.28 97,600 524,878
January 1, 2010 to
January 31, 2010 79,400 7.33 79,400 445,478
February 1, 2010 to
February 28, 2010 77,100 6.67 77,100 368,378
March 1, 2010 to
March 31, 2010 31,300 6.78 31,300 337,078
April 1, 2010 to
April 30, 2010 0 0 0 337,078
Total 367,300 7.16 367,300 337,078
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 AS AT OCTOBER 31, 2009
(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/ Chris Johns
-----------------------------------
Chris Johns, President
(principal executive officer)
Date 6/23/10
----------
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/ Chris Johns
-----------------------------------
Chris Johns, President
(principal executive officer)
Date 6/23/10
----------
By (Signature and Title)* /s/ Lelia Long
-----------------------------------
Lelia Long, Treasurer
(principal financial officer)
Date 6/23/10
----------
* Print the name and title of each signing officer under his or her
signature.