HERALD INVESTMENT FUND PLC-The Herald Worldwide Fund

INTERIM REPORT &UNAUDITED FINANCIAL STATEMENTS

for the six months ended 30 June 1999

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Interim1999

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HWF - Financials - Interim 1999 - Investment Manager's Report

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Investment Manager's Report

The Fund has seen satisfactory performance in the first half of1999, comparing favorably against a basket of relevant indices(including the technology specific indices in the UK and the US).The Investment Manager's approach of stock-specific, bottom-up investing has proved successful, with performance beingneither geographic nor sub-sector specific — top performershave come from all geographic areas, and from a wide range ofsub-sectors within the defined remit of technology and media.

Capital performance for the 6 months to30/6/99

Herald Worldwide Fund NAV * +30.86%

FTSE-100 +7.4%

FTSE-All Share +10.2%

FTSE-Smallcap +28.0%

FTSE-Information Technology Index +17.5%

S&P 500 (ESTG adjusted) +17.5%

Russell 1000 Large Cap Technology (ESTG adjusted) +27.7%

Russell 2000 Small Cap Technology (ESTG adjusted) +23.8%

* Performance including distribution : +31.49%

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All markets within the remit have seen strong performanceduring the first half of 1999, though only the US and Far Eastwere at their high at the end of the period. Notably, the FTSE-Information Technology Index saw strong performance at thebeginning of the year, but then suffered a significant correctionin the Spring. By the end of the period, this had recoveredsomewhat, but was still more than 18% off its March high.Nevertheless, the UK portion of the portfolio performed well.

The US has seen strong steady growth, though the highlyvalued large-cap technology stocks saw some volatility duringthe period, especially as concern grew over the rapid growth ofthe economy, and the inevitable rise in interest rates. Despitethis, the indices ended the period at their high. One exceptionto this was the Internet sub-sector. The first quarter saw verystrong performance, however, a substantial correction occurredin April. Several factors appear to have caused this, thoughmost conspicuous was the large number of initial public

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HWF - Financials - Interim 1999 - Investment Manager's Report Page 2 of 3

offerings of immature vertically focused Internet companieslooking to cash in on the extraordinary valuations beingafforded to this sector. Whilst there has been an across-the-board partial recovery towards the end of the period, mostInternet Stocks are still significantly off their peak. TheInvestment Manager's approach to being exposed to this sub-sector remains to invest in those companies that are helping tobuild the Internet (hardware, software and services) and toenable its ongoing success. These companies have morerealistic, measurable valuations, suffering less from retailinvestor volatility, yet clearly benefiting from the rapid growththat the Internet is experiencing.

As with the US, the Far East has been strong throughout thefirst half of 1999, benefiting from good economic growth andfalling interest rates. Whilst a short-term correction is possible,the Investment Manager believes that there are attractive long-term opportunities.

The Investment Manager's previously stated concern over thehigh valuations of the new European markets (e.g. the NeuerMarkt in Germany and the Nouveau Marche in France) was wellfounded when there was a major correction in the Spring.Whilst some recovery was seen towards the end of the period,the Euro NM index closed the period up only 14.5% (sterlingadjusted), after being up more than 40% (sterling adjusted) atits peak in February.

Concerns in the second half of last year of a world-widerecession were proved misplaced, and as such the media stocksin the portfolio experienced strong growth, with several of thebest performers coming from this sector.

The use of the Adjustable Rate Index Note instrument hasproved more successful during the first half of 1999, helping todampen the volatility of the portfolio. The Investment Managercontinues to use the instrument as a mechanism to profit fromstock-specific over-valued situations.

Outlook

The second half of the year presents an uncertain period withinthe technology sector, due to concerns over a lock-down ofcorporate spend on information technology, as businesses waitfor the transition to the new millennium. However, theInvestment Manager believes that the major effort and costassociated with fixing the Y2K bug has led to significant pent-updemand within these organisations for new or updated systems,especially in the areas of business-to-business and business-to-consumer e-commerce.

The Investment Manager remains confident that in the longterm the defined remit will outperform, as the world-widedemand for digital media, communications, e-commerce andinformation technology both from consumers and businesses,together with the continuing changes within the enterprise,remain strong.

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HWF - Financials - Interim 1999 - Investment Manager's Report Page 3 of 3

Herald Investment Management LimitedInvestment ManagerDate: 15 July, 1999

The information on this page is taken from the Interim Report for the sixmonths ending 30th June 1999

Published by Herald Investment Management Ltd, authorised and regulated by the Financial Services Authority

Any website comments, contact the Webmaster © Copyright & Disclaimer

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HWF - Financials - Interim 1999 - Balance Sheet

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Balance Sheet

at 30 th June 1999

GBP

Portfolio of Investments 15,569,446

Net current assets

Debtors 172,886

Cash and bank balances 849,802

1,022,688

Less

Creditors (220,032)

Net current assets 802,656

Net assets 16,372,102

Shareholders' funds 16,372,102

Net Asset Value per Share 12.85

The information on this page is taken from the Interim Report for the six monthsended 30th June 1999

COMMUNICATIONS

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Top Ten Holdings as of 30th June 1999

Company Sector

Columbus Group plc Publisher

Manufacturer ofintegrated circuits

Manufacturer ofenterprise storagesolutions

Telephone informationservices

Manufacturer ofelectronic components

Newspaper publisher

Broadcasting andoutdoor advertising

Provider of wirelesscommunications rentaltower space

Integratedcommunicationssolutions

Thin client/serverapplication products

% of TotalInvestments

3.48 0/0

3.11%

2.98%

2.87 0/0

2.65 0/0

2.48%

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2.37 0/0

2.28%

2.18%

Analog Devices, Inc

EMC Corp

IMS Group plc

Telemetrix plc

Star Publications

Clear ChannelCommunications,Inc

Pinnacle Holdings,Inc

Frontier Corp

Citrix Systems, Inc

Columbus Group plc publishes andsells books. Through its subsidiaries,Columbus publishes internationaltravel directories designed for tradeuse, newsletters and books for sale toconsumers and directories in theglobal computing communications andIT areas.

ANALOGDEVICES

Analog Devices, Inc designs,manufactures, and markets integratedcircuits used in analog and digitalsign' processing. The Company'sproducts are used in communications,computer, industrial, instrumentation,military/aerospace, automotive, andhigh-perofmrance consumerelectronics applications. Analog

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TEC ittAWATIONS

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Devices sells its products worldwide.

EMC Corp designs, manufactures,markets, and supports hardware,software, and service products for theenterprise storage market. TheCompany's enterprise storagesystems and software products aresold as integrated storage solutionsfor customers utilising a variety ofcomputing platforms, including "UNIX"and "Windows NT".

EMCThe Dawn SWIG, Comm

Clear Channel Clear Channel Communications,Inc is a diversified media companywith operations in broadcasting andoutdoor advertising. The Companyowns, programs, or sells airtime forvarious United States radio andtelevision stations, as well asinternational radio stations. ClearChannel provides outdoor advertisingservices in United States andinternational markets.

IMS Group plc provides inboundautomated telephone and relatedservices to clients throughout theUnited Kingdom. The Company'sservices are provided to three basicgroups; telephone publishing providessports news, results and otherinformation to the public; mediaservices provides promotions andinformation to media clients; andcorporate services provides callhandling services.

Telemetrix plc manufactureselectronic components. The Group'sproducts are distributed in the UnitedKingdom, Europe, United States, andthe Far East.

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Star Publications publishes anddistributes newpapers and providesadvertising and printing services.Some of the Company's publicationsare "Galaxie", "ShangHai", "Kuntum","Star", and "Flavours".

Pinnacle Holdings, Inc provideswireless communications rental towerspace. The Company operates 865towers in the southeastern UnitedStates. Pinnacle's customers includewireless communications providers,

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operators of private networks, andgovernment agencies.

front'. e rCOMMUNICATIONS "

Frontier Corp offers integratedcommunications solutions to businesscustomers. Solutions includeInternet, Internet protocol and dataapplications, long distance, localtelephone, and wireless. TheCompany's "Frontier OptronicNetwork" provides faster transmissionspeeds and greater bandwidthcapacity.

Citrix Systems, Inc supplies thinclient/server application serverproducts and technologies that enableenterprise-wide deployment ofapplications designed for "Windows"operating systems. The Company's"WinFrame" and "MetaFrame" productlines enable organisations to deployand manage "Windows" applicationswithout regard to location, networkconnection, or type of client hardwareplatform.

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