Chairman's Statement

The fund’s remit still aims to exploit opportunities for investment in smaller quoted companies in the multimedia field; this includes media, IT, computing and communications in the belief that this area of the economy will perform relatively well. Although the growth in assets did not match the 47.2% achieved in 1995, the relative outperformance achieved since the fund was set up has been sustained in 1996, and by the end of 1996 was cumulatively 38.4% ahead of the FTSE-100, and 51.6% ahead of the Hoare Govett Smaller Companies Index. This is in spite of a period of consolidation in the second half of the year. The capital growth in assets per share for the year as a whole as 13.7% versus the FTSE-100 growth of 11.6%, and the Hoare Govett Smaller Companies Index return of 14.9%. Whilst superficially this performance can only be described as adequate, it did benefit from a more cautious investment approach in the second half as poor share price performances occurred in many of the more embryonic companies in the area. This should provide a sounder base for 1997. Growth in a number of markets central to the orbit of digital communications will continue to provide interesting investment opportunities, and there is every reason to believe that the Herald investment universe will continue to offer the potential for superior returns.

The most important strategic development for the Trust in 1996 was the ‘C’ share issue which raised £30m in April, in order that the fund could diversify geographically. At least 50% of the portfolio will continue to be invested in the UK, but up to 50% in the rest of the world. The particular overseas focus is the United States which seems to continue to command the intellectual leadership in many areas, and benefits from a vibrant venture capital base. The board supports the view of the manager that an understanding in this market is essential to further the aim of expert investment in the UK and elsewhere.

In order to comply with the SORP, the statement of total return now recognises dividends based on the ex-dividend date. In previous years a due date basis has been used. The board has continued the policy of expensing all costs through the revenue account. The growth in revenue return per share of 10% enables the board to recommend a satisfactory rise in the dividend of 25% to 0.81p/share.

I continue to look to the future with confidence.

The information on this page is taken from the Report & Accounts 1996