================================================================================
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)
BNY Mellon Investment Servicing (US) Inc.
One Boston Place, 34th Floor
Boston, MA 02108
-------------------------------------
(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, 2011
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. Sec. 3507.
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ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
THE
NEW IRELAND FUND
(PHOTO)
Semi-Annual Report
April 30, 2011
Cover photograph - Letterfrack, Co. Galway
Provided courtesy of Tourism Ireland
LETTER TO SHAREHOLDERS
Dear Shareholder,
INTRODUCTION
Ireland continues to be working its way through its economic problems with
the European Union and the IMF aid packages now in place. However, even with
this help, it will probably take at least three to four years to get the economy
fully back on track. A major element of the problems relates to the banking
sector, which lent excessively to the property market creating a huge bubble in
both the residential and non-residential sectors across the country. A very
significant side effect of this has been that, in addition to the country's
general economic woes, lending to the banks, particularly from abroad, has dried
up causing significant liquidity issues and it is hoped that once this
particular matter is sorted out, the country will be able to work its way out of
its other problems. Despite all of this, as detailed below, the economy is
expected to grow by 0.9% this year and by 2.2% in 2012.
Unemployment continues to grow and is expected to be 14.3% for the current
year with a marginal improvement expected in 2012. However exports are expected
to grow by over 6% both this year and next and this should result in a current
account trade surplus, which would be a major factor in getting the country back
on track.
As shown below, the Fund performed strongly over the past six months with
its Net Asset Value ("NAV") increasing by 26.54% as compared to the increase of
20.8% of the Irish Stock Market Index ("ISEQ"), in U.S. dollar terms.* For the
most recent quarter, the Fund's NAV increased by 13.92%. The performance, in
both periods, was helped by the strengthening of the Euro versus the Dollar.
As advised in the Annual Report's Shareholder Letter and in the subsequent
press release, Bank of Ireland Asset Management ("BIAM") has recently been
acquired by State Street Global Advisors. Under the terms of the approval for
that transaction given by the European Commission, BIAM's parent, Bank of
Ireland, is required to exit the asset management business. Bank of Ireland is
the ultimate parent company of the Fund's current Investment Adviser, Bank of
Ireland Asset Management (U.S.) Limited ("BIAMUS"). Because of this, the Fund
will have to replace BIAMUS as Adviser and this is currently being addressed
through the seeking of shareholder approval for the appointment of Kleinwort
Benson Investors International Limited ("KBI"), as the Fund's new Adviser, at
the Annual Meeting of Stockholders on June 7, 2011.
* All returns are quoted in U.S. Dollars unless otherwise stated
1
PERFORMANCE
Over the first six months of the current fiscal year, the Fund's NAV
increased by 26.54%. The ISEQ and the ISEQ excluding Bank of Ireland ("BOI"), in
which the Fund is precluded from investing, were ahead by 20.8% and 25.5%,
respectively, over the same period. In the most recent quarter, the Fund's NAV
increased by 13.92%, to $9.66, as compared to the ISEQ, excluding BOI, which
returned 15.8% over the period.
The Irish market outperformed both the Eurostoxx Index and the Global
Index, which rose 11.6% and 7%, respectively, over the three months to the end
of April. This was despite the continued concerns about Sovereign debt issues in
a number of countries within the Eurozone. In addition, currency movements were
favorable for the Fund during the recent quarter with the U.S. Dollar further
weakening by 9%, against the Euro.
In Ireland itself, there was a change of Government which, with the strong
support of the populace, is taking steps to restore confidence in the economy by
working closely with the European Commission and the IMF on a four year program
to reduce the deficit. A key element of this will be to restore confidence in
the major Irish banks by reducing their funding needs.
The Fund continued to implement the Share Repurchase Program and over the
first six months of the current fiscal year, the Fund repurchased and retired
131,283 shares at a cost of $1 million. These repurchases represent a reduction
of 1.97% of the shares outstanding at October 31, 2010, and they positively
impacted the Fund's NAV by 2.4 cents per share.
ECONOMIC REVIEW
For the whole of 2010, Irish GDP fell by 1.0% and GNP fell by 2.1% as the
exports and industrial sectors were the only growth areas for the year. Exports
performed strongly in 2010, with solid growth of 9.4%, but were offset by weak
domestic demand and a large decline in fixed investment reflecting the
continuing weakness of the construction sector. In mid April, the Central Bank
of Ireland ("CBOI") published its latest quarterly forecasts and now expects GDP
to rise by 0.9% in 2011, followed by growth of 2.2% in 2012. Exports continue to
be the driver behind this growth and it is estimated that the sector will grow
by 6.1% in 2011 and by 5.9% in 2012. While domestic demand is predicted to fall
by over 2% this year, stabilization in this sector is anticipated in 2012. Gross
fixed capital formation is expected to decline by 11.5% in 2011 and rise by 2.0%
in 2012.
Consumer spending remained weak with retail sales, year on year, down by
0.7% as worries, over the labor market and the government debt situation, weigh
on the Irish consumer. However, consumer confidence has improved marginally over
the last few months, which may help retail sales over the next quarter.
Also, on the positive side, the manufacturing and services sectors have
shown improvement during the most recent quarter and it is hoped that this trend
will continue for the rest of the year.
2
In March, the Live Unemployment Register showed a marginal increase to a
seasonally adjusted 442,000 claimants. However, over the most recent quarter,
the level decreased marginally indicating a possible stabilization in the labor
market. The CBOI expects the unemployment rate to average 14.3% this year,
followed by a decline to 14.1% in 2012.
The annual Harmonized Index of Consumer Prices ("HICP") increased 1.5% over
the 12 months to the end of April and during the quarter by 0.5%. This can
largely be attributed to the increased cost of energy, and to a lesser degree
food prices. The headline Consumer Price Index ("CPI") was above the HICP over
these periods, as it included increases in mortgage interest payments.
Demand for credit from businesses and households continued to remain
depressed during the most recent quarter. The annual rate of change in loans to
households was negative 5.1% in February 2011, unchanged from the rate observed
in January. Lending for home mortgages was 2.7% lower on an annual basis in
February, whereas lending for consumption and other purposes declined by 13.7%.
Lending to the non-financial corporate sector declined by 1.6% in the year
ending February 2011, following a decline of 1.4% in January. Private sector
credit growth is likely to continue to be weak in line with the continued
weakness of the Irish economy along with the need for financial institutions to
continue to shrink their balance sheets.
Exchequer Returns for February 2011 show that tax receipts were E4.84
billion. This is 2.2% above the figure for February 2010 but is marginally
behind the Government's tax projections for this period. The detailed figures
reveal a Value Added Tax shortfall while excise duties were 7.2% above target.
Overall, total expenditure was 4% lower than the expected target for this stage
of the year.
Despite the financial aid packages that have been agreed with the IMF and
the European Union, Ireland's bond yields remain elevated with the 10 year bond
trading at 10.16%, which is 6.9% ahead of German bonds. It is hoped that, with
the constructive steps the new Irish Government is taking, a reduction in such
interest rates will be seen over the coming months.
EQUITY MARKET REVIEW
World stock markets posted strong returns in local currency terms during
the 6 months ended April 30, 2011 and the last quarter.
QUARTER ENDED 6 MONTHS ENDED
APRIL 30TH, 2011 APRIL 30TH, 2011
------------------- -----------------
LOCAL LOCAL
CURRENCY U.S. $ CURRENCY U.S. $
-------- ------ -------- ------
Irish Equities (ISEQ) +6.3% +15.2% +13.4% +20.8%
S&P 500 +6.5% +6.5% +16.4% +16.4%
NASDAQ +6.6% +6.6% +15.2% +15.2%
UK Equities (FTSE 100) +4.9% +8.9% +8.9% +13.1%
Japanese Equities -2.9% -2.4% +8.2% +6.7%
3
QUARTER ENDED 6 MONTHS ENDED
APRIL 30TH,2011 APRIL 30TH, 2011
------------------- ------------------
LOCAL LOCAL
CURRENCY U.S. $ CURRENCY U.S. $
-------- ------ -------- ------
Dow Jones Eurostoxx 50 +3.1% +11.6% +8.2% +15.2%
German Equities (DAX) +6.1% +14.9% +13.8% +21.2%
French Equities (CAC 40) +2.9% +11.4% +8.2% +15.2%
Dutch Equities (AEX) +1.0% +9.6% +8.8% +15.9%
Note: Indices are total return
MAJOR MOVES IN SOME OF THE FUND'S HOLDINGS OVER THE QUARTER (IN EURO TERMS)
POSITIVE NEGATIVE
-------------- ----------------
IFG Group PLC +20% TVC Holdings PLC -4%
Kerry Group PLC +18% Ryanair Holdings PLC -4%
Aryzta AG +17% Dragon Oil PLC -5%
Paddy Power PLC +14% Worldspreads Group PLC -11%
Glanbia PLC +11% Aer Lingus Group PLC -20%
There was news flow in relation to a number of the Fund's holdings in
recent months, highlights are as follows;
IFG GROUP PLC: IFG reported underlying operating profits of E24.4
million for 2010, slightly higher than forecast. The U.K. accounts for 61% of
profits following the acquisition of James Hay in 2010. The share price rallied
20% over the quarter as the market speculated on bid rumours for the Company.
The Company confirmed in early May that they are in early stage takeover talks.
PADDY POWER PLC: The stock performed well as the Company reported its 2010
results. Operating profits rose 56%, year on year, and shareholders were
rewarded with a 28% increase in the dividend. Management gave a confident
outlook and are comfortable with analyst estimates of EPS of 178c. The Group's
online presence and success in Australia is offsetting weak domestic demand.
ARYZTA AG AND KERRY GROUP PLC: The mid cap European food sector received a
boost as DuPont increased its takeover offer for Danisco. Despite rising input
cost pressures, both of these food stocks were strong performers over the
period. Aryzta's food revenues for their first 6 months came in at E1.3
billion, which was plus 60% as they integrated recent acquisitions. Management
reaffirmed their earnings per share consensus of E3.04 for this year. In an
update with analysts, Kerry outlined the growth opportunities in their
Ingredients business, where 80 of the top 100 food companies are now customers.
4
AER LINGUS GROUP PLC: In line with other airline stocks, Aer Lingus was
impacted by higher fuel costs. Brent crude is up 30% year to date. The Irish
Government's Asset Review Group recently recommended the disposal of their 25%
stake in Aer Lingus.
WORLDSPREADS GROUP PLC: Worldspreads continued to be weak following their
recent reduction in guidance. There has been poor liquidity in the shares and
the market awaits details on progress on their international expansion.
CURRENT OUTLOOK
The Irish economy is currently moving through an uncertain growth period
with little growth forecast for 2011. Consumer spending and net trade will
continue to be the key drivers of forecasts over the coming quarters. Resolution
of the current sovereign and banking difficulties will also be key for the
restoration of private sector confidence. The stress tests for the Irish Banking
sector, announced by the Central Bank and the EU, have provided clarity on
further capital requirements.
The ISEQ is currently trading on a forward price to book multiple of 1.3x
which is undemanding in a historical context and assumes individual market
components will see their future earnings and returns settle well below average
trends.
The trend in earnings revisions continues to be mainly positive with a
number of the Fund's holdings seeing forecast upgrades in recent months through
a combination of revenue growth and operating leverage, post extensive cost
cutting. The Fund remains invested in names with strong franchises, management
teams and balance sheets where, despite the macro concerns prevailing at
present, we continue to see strong potential for capital gains over the medium
term.
Sincerely,
/s/ Peter J. Hooper
------------------------
Peter J. Hooper
Chairman
June 7, 2011
5
INVESTMENT SUMMARY (UNAUDITED)
TOTAL RETURN (%)
MARKET VALUE (A) NET ASSET VALUE (A)
------------------------------- ------------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL (B) CUMULATIVE ANNUAL (B)
---------- --------- ---------- ----------
Six Months 30.46 30.46 26.54 26.54
One Year 13.84 13.84 11.10 11.10
Three Year -33.73 -12.81 -32.00 -12.06
Five Year -30.90 -7.13 -26.98 -6.10
Ten Year 70.08 5.45 55.38 4.51
PER SHARE INFORMATION AND RETURNS
SIX
MONTHS
ENDED
APRIL 30,
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-------------------------------------------------------------------------------------------------------------------------------
Net Asset
Value ($) 13.28 11.04 16.29 20.74 24.36 32.55 30.95 10.18 8.20 7.70 9.66
Income
Dividends ($) (0.01) (0.03) -- (0.09) (0.03) (0.16) (0.24) (0.36) (0.33) -- (0.06)
Capital Gains
Other
Distributions ($) (2.65) (0.69) -- -- -- (1.77) (2.40) (4.86) (2.76) -- --
Total Net Asset Value
Return (%) (a) -20.99 -11.44 47.55 28.14 17.51 45.97 2.88 -58.62 26.91 -6.10 26.54(b)
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 20.
(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, 2011
(Percentage of Net Assets)
(unaudited)
(PIE CHART)
Construction and Building Materials 24.00%
Other Assets 15.76%
Food and Beverages 14.89%
Transportation 13.01%
Health Care Services 7.36%
Energy 5.79%
Leisure and Hotels 5.33%
Diversified Financial Services 4.97%
Business Services 4.59%
Food and Agriculture 4.30%
Top 10 Holdings by Issuer as of April 30, 2011 (unaudited)
HOLDING SECTOR % OF NET ASSETS
------------------------ ---------------------------------- ---------------
CRH PLC Construction and Building Materials 15.53%
Ryanair Holdings PLC Transportation 7.69%
Paddy Power PLC Leisure and Hotels 5.33%
Kerry Group PLC, Series A Food and Beverages 4.83%
DCC PLC Business Services 4.59%
C&C Group PLC Food and Beverages 4.39%
Dragon Oil PLC Energy 4.37%
Aryzta AG Food and Agriculture 4.30%
Grafton Group PLC-UTS Construction and Building Materials 4.28%
Kingspan Group PLC Construction and Building Materials 4.19%
7
THE NEW IRELAND FUND, INC.
Portfolio Holdings (unaudited)
Value (U.S.)
April 30, 2011 Shares (Note A)
-------------------------------------------------------------------------
COMMON STOCKS (96.87%)
COMMON STOCKS OF IRISH COMPANIES (88.08%)
AGRICULTURAL OPERATIONS (3.97%)
Origin Enterprises PLC 434,790 $ 2,509,247
-------------
BUSINESS SERVICES (4.59%)
DCC PLC 86,820 2,898,121
-------------
BUSINESS SUPPORT SERVICES (3.38%)
CPL Resources PLC 497,050 2,138,515
-------------
CONSTRUCTION AND BUILDING MATERIALS (24.00%)
CRH PLC 395,038 9,816,753
Grafton Group PLC-UTS 513,167 2,702,721
Kingspan Group PLC 270,673 2,650,349
-------------
15,169,823
-------------
DIVERSIFIED FINANCIAL SERVICES (4.97%)
FBD Holdings PLC 51,296 551,742
IFG Group PLC 624,801 1,306,998
TVC Holdings PLC* 815,973 980,562
Worldspreads Group PLC* 405,006 300,432
-------------
3,139,734
-------------
ENERGY (4.37%)
Dragon Oil PLC 296,983 2,762,130
-------------
FOOD AND AGRICULTURE (4.30%)
Aryzta AG 49,417 2,719,972
-------------
FOOD AND BEVERAGES (12.80%)
C&C Group PLC 540,907 2,776,597
Glanbia PLC 296,437 1,915,291
Kerry Group PLC, Series A 73,481 3,052,441
Total Produce PLC 552,258 344,117
-------------
8,088,446
-------------
HEALTH CARE SERVICES (7.36%)
Elan Corp. PLC-Sponsored ADR* 237,200 1,921,320
ICON PLC-Sponsored ADR* 80,767 1,983,638
United Drug PLC 216,966 749,035
-------------
4,653,993
-------------
8
THE NEW IRELAND FUND, INC.
Portfolio Holdings (unaudited) (continued)
Value (U.S.)
April 30, 2011 Shares (Note A)
-------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
LEISURE AND HOTELS (5.33%)
Paddy Power PLC 68,771 $ 3,366,925
-------------
TRANSPORTATION (13.01%)
Aer Lingus Group PLC* 836,229 1,023,513
Irish Continental Group PLC 91,000 2,335,617
Ryanair Holdings PLC 937,342 4,860,259
-------------
8,219,389
-------------
TOTAL COMMON STOCKS OF IRISH COMPANIES
(Cost $43,579,078) 55,666,295
-------------
COMMON STOCKS OF DUTCH COMPANIES (2.09%)
FOOD AND BEVERAGES (2.09%)
Unilever NV-CVA 40,000 1,318,616
-------------
TOTAL COMMON STOCKS OF DUTCH COMPANIES
(Cost $1,236,299) 1,318,616
-------------
COMMON STOCKS OF GERMAN COMPANIES (2.90%)
INFORMATION TECHNOLOGY (2.90%)
SAP AG 28,400 1,832,828
-------------
TOTAL COMMON STOCKS OF GERMAN COMPANIES
(Cost $1,690,141) 1,832,828
-------------
COMMON STOCKS OF FRENCH COMPANIES (3.80%)
ENERGY (1.42%)
Total SA 14,000 897,691
-------------
INDUSTRIALS (2.38%)
Schneider Electric SA 8,500 1,504,436
-------------
TOTAL COMMON STOCKS OF FRENCH COMPANIES
(Cost $2,226,266) 2,402,127
-------------
TOTAL COMMON STOCKS BEFORE FOREIGN CURRENCY ON DEPOSIT
(Cost $48,731,784) $ 61,219,866
-------------
9
THE NEW IRELAND FUND, INC.
Portfolio Holdings (unaudited) (continued)
Face Value (U.S.)
April 30, 2011 Value (Note A)
------------------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT (2.20%)
British Pounds Sterling L 601 $ 1,001
Euro E 939,023 1,393,126
--------------
TOTAL FOREIGN CURRENCY ON DEPOSIT
(Cost $1,325,044)** 1,394,127
--------------
TOTAL INVESTMENTS (99.07%)
(Cost $50,056,828) 62,613,993
OTHER ASSETS AND LIABILITIES (0.93%) 585,036
--------------
NET ASSETS (100.00%)
$ 63,199,029
==============
----------
* 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 Inputs of methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. Transfers
in and out of levels are recognized at market value at the end of the period.
The summary of inputs used to value the Fund's net assets as of April 30, 2011
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
04/30/11 PRICE INPUT INPUT
--------- ------- ------------ -------------
Investments in Securities+
Common Stocks
Agricultural Operations $ 2,509,247 $ 2,509,247 $ -- $ --
Business Services 2,898,121 2,898,121 -- --
Business Support Services 2,138,515 2,138,515 -- --
Construction and Building
Materials 15,169,823 15,169,823 -- --
Diversified Financial
Services 3,139,734 2,839,302 300,432 --
Energy 3,659,821 3,659,821 -- --
Food and Agriculture 2,719,972 2,719,972 -- --
Food and Beverages 9,407,062 9,407,062 -- --
Health Care Services 4,653,993 4,653,993 -- --
Industrials 1,504,436 1,504,436 -- --
Information Technology 1,832,828 1,832,828 -- --
Leisure and Hotels 3,366,925 3,366,925 -- --
Transportation 8,219,389 8,219,389 -- --
------------- ------------ ---------- --------
Total Common Stocks $ 61,219,866 $ 60,919,43 $ 300,432 $ --
============= ============ ========== ========
----------
+ Total Investments exclude Foreign Currency on Deposit.
* See Portfolio Holdings detail for country breakout.
The Fund did not have any significant transfers in and out of Level 1 and Level
2 during the period.
10
THE NEW IRELAND FUND, INC.
Statement of Assets and Liabilities (unaudited)
April 30, 2011
------------------------------------------------------------------------------------
ASSETS:
Investments at value (Cost $48,731,784)
See accompanying schedule U.S. $ 61,219,866
Cash 277,010
Foreign currency (Cost $ 1,325,044) 1,394,127
Dividends receivable 510,414
Prepaid expenses 26,377
--------------
Total Assets 63,427,794
--------------
LIABILITIES:
Payable for Fund shares redeemed 92,171
Investment advisory fee payable (Note B) 32,592
Printing fees payable 32,346
Accrued audit fees payable 19,990
Accrued legal fees payable 15,383
Administration fee payable (Note B) 8,334
Custodian fees payable (Note B) 7,113
Directors' fees and expenses 5,136
Accrued expenses and other payables 15,700
--------------
Total Liabilities 228,765
--------------
NET ASSETS U.S. $ 63,199,029
==============
AT APRIL 30, 2011 NET ASSETS CONSISTED OF:
Common Stock, U.S. $.01 Par Value -
Authorized 20,000,000 Shares
Issued and Outstanding 6,545,201 Shares U.S. $ 65,452
Additional Paid-in Capital 64,143,089
Undistributed Net Investment Income 127,941
Accumulated Net Realized Loss (13,720,203)
Net Unrealized Appreciation of Securities,
Foreign Currency and Net Other Assets 12,582,750
--------------
TOTAL NET ASSETS U.S. $ 63,199,029
==============
NET ASSET VALUE PER SHARE
(Applicable to 6,545,201 outstanding shares)
(authorized 20,000,000 shares)
(U.S. $63,199,029 / 6,545,201) U.S. $ 9.66
==============
See Notes to Financial Statements.
11
THE NEW IRELAND FUND, INC.
Statement of Operations
For the Six Months Ended
April 30, 2011
(unaudited)
--------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends U.S. $ 713,869
Less: foreign taxes withheld (6,908)
-------------
TOTAL INVESTMENT INCOME 706,961
-------------
EXPENSES
Investment advisory fee (Note B) $ 180,511
Directors' fees and expenses 114,046
Administration fee (Note B) 50,000
Compliance fees 32,653
Printing fees 32,653
Legal fees 28,953
Audit fees 19,990
Custodian fees (Note B) 14,151
Insurance premiums 27,056
Other 52,802
-----------
TOTAL EXPENSES 552,815
-------------
NET INVESTMENT INCOME U.S. $ 154,146
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY (NOTE D)
Realized gain on:
Securities transactions 2,685,715
Foreign currency transactions 47,933
-----------
Net realized gain on investments and foreign
currency during the period 2,733,648
-------------
Net change in unrealized appreciation of:
Securities 10,223,344
Foreign currency and net other assets 94,934
-----------
Net unrealized appreciation of investments and
foreign currency during the period 10,318,278
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY 13,051,926
-------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS U.S. $ 13,206,072
=============
See Notes to Financial Statement
12
THE NEW IRELAND FUND, INC.
Statement of Changes in Net Assets
Six Months Ended
April 30, 2011 Year Ended
(unaudited) October 31, 2010
------------------ ------------------
Net investment income U.S. $ 154,146 U.S. $ 363,722
Net realized gain/(loss) on investments 2,733,648 (12,866,449)
Net unrealized appreciation of investments,
foreign currency holdings and net other
assets 10,318,278 8,776,154
------------- ------------
Net increase/(decrease) in net assets resulting
from operations 13,206,072 (3,726,573)
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (400,589) -
------------- ------------
Total distributions (400,589) -
------------- ------------
CAPITAL SHARE TRANSACTIONS:
Value of 131,283 and 367,300 shares
repurchased, respectively (Note F) (1,034,061) (2,631,382)
------------- ------------
NET DECREASE IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS (1,034,061) (2,631,382)
------------- ------------
Total Increase/ (decrease) in net assets 11,771,422 (6,357,955)
------------- ------------
NET ASSETS
Beginning of period 51,427,607 57,785,562
------------- ------------
End of year (Including undistributed net
investment income of $127,941 and
$374,384, respectively) U.S. $ 63,199,029 U.S. $ 51,427,607
============= ============
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, 2011 --------------------------------------------------------------
(unaudited) 2010 2009 2008 2007 2006
-----------------------------------------------------------------------------------
Operating Performance:
Net Asset Value,
Beginning of Year U.S.$ 7.70 $ 8.20 $ 10.18 $30.95 $ 32.55 $ 24.36
----------- ------ ------- ------ ------- -------
Net Investment Income/(Loss) 0.02 0.05 (0.06) 0.34 0.35 0.23
Net Realized and Unrealized
Gain/(Loss) on Investments 1.98 (0.61) 1.23 (15.77) 0.69 9.98
----------- ------ ------- ------ ------- -------
Net Increase/(Decrease) in
Net Assets Resulting from
Investment Operations 2.00 (0.56) 1.17 (15.43) 1.04 10.21
----------- ------ ------- ------ ------- -------
Distributions to Shareholders from:
Net Investment Income (0.06) -- (0.33) (0.36) (0.24) (0.16)
Net Realized Gains -- -- (2.76) (4.86) (2.40) (1.77)
----------- ------ ------- ------ ------- -------
Total from Distributions (0.06) -- (3.09) (5.22) (2.64) (1.93)
----------- ------ ------- ------ ------- -------
Anti-Dilutive/(Dilutive) Impact of
Capital Share Transactions 0.02++++++ 0.06+++++ (0.06)++++ (0.12)+++ 0.00++ (0.09)+
Net Asset Value,
End of Period U.S.$ 9.66 $ 7.70 $ 8.20 $10.18 $ 30.95 $ 32.55
=========== ====== ======= ====== ======= =======
Share Price, End of Period U.S.$ 8.42 $ 6.51 $ 7.09 $ 8.95 $ 28.96 $ 30.67
=========== ====== ======= ====== ======= =======
Total NAV Investment Return (a) 26.54% (6.10)% 26.91% (58.62)% 2.88% 45.97%
=========== ====== ======= ====== ======= =======
Total Market Investment
Return (b) 30.46% (8.18)% 25.06% (61.20)% 2.17% 52.47%
=========== ====== ======= ====== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, End of Year (000's) U.S. $63,199 $51,428 $57,786 $50,896 $145,765 $151,102
Ratio of Net Investment Income/(Loss) to Average
Net Assets 0.56%* 0.69% (0.87)% 1.67% 1.02% 0.86%
Ratio of Operating Expenses to Average Net Assets 1.99%* 2.02% 2.65% 1.56% 1.31% 1.40%
Portfolio Turnover Rate 12% 11% 16% 21% 13% 11%
----------
(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.
+++++ Amount represents $0.02 per share impact for the shares repurchased by
the Fund under the Share Repurchase Program and $0.00 per share input
for the new shares issued as Capital Gain Stock Distribution.
* Annualized.
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: As described above, the Fund utilizes various
methods to measure the fair value of most of its investments on a recurring
basis. U.S. Generally Accepted Accounting Principals ("GAAP") establishes a
hierarchy that prioritizes inputs to valuation methods. The three levels of
inputs are:
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 availability of observable inputs can vary from security to security
and is affected by a wide variety of factors, including, for example, the type
of security, whether the security is new and not yet established in the
marketplace, the liquidity of markets, and other characteristics particular to
the security. To the extent that valuation
15
THE NEW IRELAND FUND, INC.
Notes to Financial Statements (unaudited) (continued)
is based on models or inputs that are less observable or unobservable in the
market, the determination of fair value requires more judgment. Accordingly, the
degree of judgment exercised in determining fair value is greatest for
instruments categorized in level 3.
The inputs used to measure fair value may fall into different levels of the
fair value hierarchy. In such cases, for disclosure purposes, the level in the
fair value hierarchy within which the fair value measurement falls in its
entirety, is determined based on the lowest level input that is significant to
the fair value measurement in its entirety. A summary of the levels of the
Fund's investments as of April 30, 2011 is included with the Fund's Portfolio of
Investments.
At the end of each calendar quarter, management evaluates the Level 2 and
Level 3 assets and liabilities, if any, for changes in liquidity, including but
not limited to: whether a broker is willing to execute at the quoted price, the
depth and consistency of prices from third party services, and the existence of
contemporaneous, observable trades in the market. Additionally, management
evaluates the Level 1 and Level 2 assets and liabilities on a quarterly basis
for changes in listings or delistings on national exchanges.
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, 2010, 2009, 2008 and 2007), 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 has satisfied 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
16
THE NEW IRELAND FUND, INC.
Notes to Financial Statements (unaudited) (continued)
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, 2011.
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. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, 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
has evaluated the impact and has incorporated the appropriate disclosures
required by ASU No. 2010-06 in 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. In addition,
Bank of Ireland Asset Management provides investor services to existing and
potential shareholders.
17
THE NEW IRELAND FUND, INC.
Notes to Financial Statements (unaudited) (continued)
The Fund has entered into an administration agreement (the "Administration
Agreement") with BNY Mellon Investment Servicing (US) Inc. ("BNY Mellon"). The
Fund pays BNY Mellon an annual fee payable monthly. During the six months ended
April 30, 2011, the Fund incurred expenses of U.S. $50,000 on administration
fees to BNY Mellon.
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, 2011,
the Fund incurred expenses for JPMorgan Chase & Co. of U.S. $14,151.
C. PURCHASES AND SALES OF SECURITIES:
The cost of purchases and proceeds from sales of securities for the six
months ended April 30, 2011 excluding U.S. government and short-term
investments, aggregated U.S. $6,782,398 and U.S. $8,465,894, respectively.
D. COMPONENTS OF DISTRIBUTABLE EARNINGS:
At October 31, 2010, 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
-------------- -------------- ------------- --------------
$ (14,144,947) $ 374,384 $ -- $ (44,432)
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, 2011 were as
follows:
Gross
Gross Gross Unrealized
Unrealized Unrealized Net Unrealized Appreciation Net
Total Cost of Appreciation Depreciation Appreciation on Foreign Unrealized
Investments on Investments on Investments on Investments Currency Appreciation
--------------- --------------- --------------- -------------- ------------ -------------
$ 48,731,784 $ 17,806,289 $ (5,318,207) $ 12,488,082 $ 94,668 $ 12,582,750
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, 2011, and for the year ended October 31,
2010, the Fund issued no shares in connection with stock distribution.
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 month ended April 30, 2011, the Fund repurchased 131,283 (1.97%
of the shares outstanding at October 31, 2010) of its shares for a total cost of
$1,034,061, at an average discount of 13.32% of net asset value.
For the year ended October 31, 2010, the Fund repurchased 367,300 (5.21% of
the shares outstanding at October 31, 2009 year end) of its shares for a total
cost of $2,631,382, at an average discount of 12.84% 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. RISK FACTORS:
Investing in the Fund may involve certain risks including, but not limited
to,those described below.
The prices of securities held by the fund may decline in response to
certain events, including those directly involving the companies whose
securities are owned by the fund; conditions affecting the general economy;
overall market changes; local, regional or global political, social or economic
instability; and currency, interest rate and commodity price fluctuations. The
growth-oriented, equity-type securities generally purchased by the fund may
involve large price swings and potential for loss.
Investments in securities issued by entities based outside the United
States may also be affected by currency controls; different accounting,
auditing, financial reporting, and legal standards and practices in some
countries; expropriation; changes in tax policy; greater market volatility;
differing securities market structures; higher transaction costs; and various
administrative difficulties, such as delays in clearing and settling portfolio
transactions or in receiving payment of dividends. These risks may be heightened
in connection with investments in developing countries.
I. SUBSEQUENT EVENT:
Management has evaluated the impact of all subsequent events on the Fund
through the date the financial statements were issued.
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 BNY Mellon).
The Directors unanimously approved the continuance of the Investment
Advisory Agreement (the "Advisory Agreement") between the Fund and the Adviser
at a meeting held on March 8, 2011.
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;
22
Additional Information (unaudited) (continued)
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 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 also
considered the scope and quality of services provided by the Adviser in light of
the recent acquisition of the Bank of Ireland's Irish asset management business
by State Street Global Advisors. 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
23
Additional Information (unaudited) (continued)
Fund-specific profitability data. The Adviser stated its belief that the methods
of allocation used were reasonable. The Directors noted that due to the SSGA
acquisition and contraction in the Adviser's business, the Adviser was not
providing advisory services to the Fund at a profit.
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 1.65% 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, 2011. 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. 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 December 31, 2010
and that the expense ratio had decreased since this date due in large part to an
increase in the asset size of the Fund.
ADVISORY FEE
The Directors were advised that the Fund is currently the Adviser's only
discretionary client.
The Adviser reviewed, with the Directors, the scope of services it provides
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
24
Additional Information (unaudited) (continued)
certain nonaffiliated service providers. In looking at fee comparisons, the
Directors took these aspects into consideration.
The Fund's peer group consisted of 40 portfolios in the relevant 15c
Provider category. The information showed that the Fund's effective advisory fee
rate of 0.65% (based on net assets at December 31, 2010) 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.
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.
25
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THE NEW IRELAND FUND, INC.
DIRECTORS AND OFFICERS
Peter J. Hooper - Chairman of the Board
David Dempsey - Director
Margaret Duffy - Director
Denis P. Kelleher - Director
George G. Moore - Director
Leona Nicholson - President
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
BNY Mellon Investment Servicing (US) 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 REGISTERED PUBLIC 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 BNY Mellon Center
One Boston Place
201 Washington Street
34th Floor
Boston, Massachusetts 02109
Telephone inquiries should be directed to:
1-800-GO-TO-IRL (1-800-468-6475)
Website address:
www.newirelandfund.com
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) IDENTIFICATION OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS AND
DESCRIPTION OF ROLE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS
LEONA NICHOLSON, Senior Portfolio manager
Ms. Nicholson has worked with Bank of Ireland Asset Management (U.S.)
Limited ("BIAMUS" of "Adviser") from 1988 to May 2007 and, after a short
break, in September 2007 she rejoined BIAMUS as Head of Irish Equities
and Global Products. Ms. Nicholson holds a degree in European Studies
from Limerick University, and is also an Associate member of the SIP
(UK) and the CFA Institute, and a Fellow of the CISI (UK).
Leona Nicholson is responsible for the management of the Registrant's
portfolio and has responsibility for all the day-to-day management of
the Registrant portfolio including stock research, stock selection and
portfolio management. Leona Nicholson was appointed as Portfolio Manager
of the Registrant on January 12, 2011.
(a)(2) OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM
MEMBER AND POTENTIAL CONFLICTS OF INTEREST
OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER
As of April 30, 2011 Ms. Nicholson did not manage any other registered
investment companies or any other accounts.
As of April 30, 2011 Ms. Nicholson managed the following accounts:
No. of Accounts Total Assets in
Total where Advisory Fee Accounts where
Type of No. of Accounts is Based on Advisory Fee is Based
Accounts Managed Total Assets Performance on Performance
-------------------------------- --------------- ------------ ------------------ ---------------------
Registered Investment Companies: 1 $ 63m 0 0
Other Pooled Investment Vehicles: 0 0 0 0
Other Accounts: 0 0 0 0
POTENTIAL CONFLICTS OF INTERESTS
In recognition of the fact that conflicts of interest are inherent in
the investment management business, the Advisor has adopted policies and
procedures reasonably designed to identify and manage the effects of
actual or potential conflicts of interest in the areas of employee
personal trading, managing multiple accounts for multiple clients and
allocation of investment opportunities.
The Advisor has adopted a code of ethics policy that is designed to
reduce the risk of actual or potential conflicts of interest with
dealings on behalf of clients. The code reflects the Advisor's fiduciary
obligations and those of its employees, and requires that all employees
comply with all applicable federal securities laws. The Advisor's
personal dealing rules apply to all employees. In summary, the code
requires pre-approval of all personal dealings in equity securities or
securities that derive their value from equity securities. As a general
matter, permission to execute a proposed personal trade in a security
will generally be refused if the Advisor has executed, or intends to
execute material client trades in the same security, in the seven days
before or the seven days following the proposed employee deal. The code
requires employees to report any transactions in mutual funds where the
Advisor acts as an adviser or
sub-adviser to the fund. The code also covers issues such as prohibited
transactions, blackout periods for transactions, and short term trading.
As stated above the Portfolio Manager does not manage any other
accounts, other than the Registrant. There is a fiduciary duty for the
Advisor to act in good faith for the benefit of its clients; to disclose
fully and fairly all material facts; and to allocate trades in a fair
and equitable manner. The Advisor has implemented allocation procedures
that specify the factors taken into account in making allocation
decisions for its clients and to ensure that all accounts with
substantially similar investment objectives are treated equitably. These
procedures ensure that clients are treated fairly as to the securities
purchased or sold for their accounts, in the priority of execution of
orders and the allocation of trades.
Generally, the above will be achieved by allocating on a simple pro-rata
basis. However, to ensure that all clients get meaningful order sizes in
a cost effective manner, allocations to clients are generally targeted
to be greater than 0.03% of each client's account assets. There are
exceptions to the 0.03% De Minimus allocation such as when IPO orders
are only partially filled. Partially filled IPO orders are generally
allocated pro-rata in accordance with the original order without
reference to achieving a minimum targeted percentage of client assets.
Lastly the performance of similarly managed accounts is monitored to
ensure consistency of performance and to detect any unexplained
significant differences. The Adviser currently does not have any
discretionary clients, other than the Registrant.
(a)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS
The Registrant pays the Advisor a fee based on the assets under
management of the Fund as set forth in the Advisory Agreement. The
Advisor pays its investment professionals out of its total revenues and
other resources, including the advisory fee earned with respect to the
Registrant. The compensation package is highly competitive and includes
a competitive fixed base salary and a performance-linked bonus.
Compensation is not based on the value of assets held in the
Registrant's portfolio.
The bonuses paid to the portfolio manager are linked both to the quality
of the individual's stock research and also to the contribution they
make to the performance of the product group and/or portfolio to which
they are associated. The primary performance assessment of the portfolio
manager is based on how the client portfolios perform relative to
benchmarks, market indices and similar funds run by competitor managers.
Bonuses are based on the profitability of the Adviser and on individual
achievement.
(a)(4) DISCLOSURE OF SECURITIES OWNERSHIP
As of April 30, 2011 beneficial ownership of shares of the registrant by
the Portfolio Manager is as follows:
Dollar ($) Range of
Name of Portfolio Manager or Fund Shares
Team Member Beneficially Owned
---------------------------- -------------------
Leona Nicholson 0
(b) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES
(d) MAXIMUM NUMBER (OR
(b) AVERAGE (c) TOTAL NUMBER OF SHARES APPROXIMATE DOLLAR VALUE) OF
(a) TOTAL NUMBER PRICE PAID PER (OR UNITS) PURCHASED AS PART SHARES (OR UNITS) THAT MAY YET BE
OF SHARES (OR SHARE (OR OF PUBLICLY ANNOUNCED PLANS OR PURCHASED UNDER THE PLANS OR
PERIOD UNITS) PURCHASED UNIT) PROGRAMS PROGRAMS
------------------- ---------------- --------------- ------------------------------ ---------------------------------
November 1, 2010 to
November 30, 2010 0 0 0 667,648
December 1, 2010 to
December 31, 2010 0 0 0 667,648
January 1, 2011 to
January 31,2011 0 0 0 667,648
February 1, 2011 to
February 28, 2011 0 0 0 667,648
March 1, 2011 to
March 31, 2011 41,450 7.4229 41,450 626,198
April 1, 2011 to
April 30, 2011 89,833 8.0859 89,833 536,365
Total 131,283 7.7544 131,283 536,365
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 the shares
outstanding as of October 31, 2010
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/ Leona Nicholson
------------------------------
Leona Nicholson, President
(principal executive officer)
Date 6/9/11
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/ Leona Nicholson
------------------------------
Leona Nicholson, President
(principal executive officer)
Date 6/9/11
By (Signature and Title)* /s/ Lelia Long
------------------------------
Lelia Long, Treasurer
(principal financial officer)
Date 6/9/11
----------
* Print the name and title of each signing officer under his or her signature.