In a market which has seen the dividend yield cut to its lowest level in living memory, the idea that any investor would actively seek out an income from equities looks more improbable by the day. "I have nothing but admiration for the boldness with which Max has managed the fund over the past 10 years in terms of company and sector selection."Increasingly, the way you have to view it is that it is the performance of individual companies that is important rather than sectors or markets So we will try to move towards a 'bottom up' management. There is a tendency in the fund business to make great pronouncements about the global economy or trends in interest rates, but our ability to add value at that level is much less than it should be at the stock-specific level."Traditionally, the portfolio has been heavily invested in UK stocks, although the UK proportion has fallen below 50 per cent. But we also have large holdings in Nokia, Ericsson, NTT Mobile, and Intel."We bought NTT Mobile Communications in Japan immediately it went public but we have also been adding to it, because we noticed how well they were doing despite the appalling state of the Japanese economy. It really began to perform in the final quarter of last year, because of the take-off of data business in Japan."Plainly, there was nothing strange about data transmission in Japan which meant that it will work there and not anywhere else in the world, so we identified this as a major growth area."The basic objectives will remain the same, but Mr Anderson foresees changes under his stewardship, with the management process becoming even more stock-specific. If anything, we have moved from Vodafone to Mannesmann because Mannesmann was more lowly rated and was valued below the offer price at one point.

"Our two biggest holdings are Vodafone AirTouch and Mannesmann, and we have been major shareholders of both for some time, well before the bid. The biggest factor has been the performance of the technology and telecoms stocks and there has been a marked shift in Scottish Mortgage's holdings so 10 of the 20 biggest holdings are in those two sectors."The global consolidation story has important implications for the Scottish Mortgage portfolio. "The most important issue over the past 12 months has been the portfolio split in sectors and not geography. "The overall strategy is to try to provide an ideal 'one-stop shopping' investment for private investors. We think investment trusts remain an excellent way for private investors to make geographical and sector changes at a much lower cost relative to unit trusts and OEICs."With globalisation a major theme of modern business, Mr Anderson says the type of company is becoming much more important than its geographical location. So we sold Novartis and we are continuing to reappraise our view of the sector, with the possibility that other projected mergers are being contemplated for similar negative reasons."One of the key attractions of the international generalist type of trust is that it offers a portfolio not bound to one market or type of company. "The most prominent example of one which didn't work from the European portfolio is Novartis This time last year, it was our largest holding.

We had owned Ciba and Sandoz and made money from both and from the merger, but only with hindsight could we see they were merging more out of weakness than out of strength."It now appears companies are running out of blockbuster products throughout the pharmaceutical sector and they have to pump billions into researching replacements. Running a smaller-companies portfolio during a period when blue chips were outperforming was a chastening experience. He says: "It made me even more aware of the need to be blunt in changing a portfolio that is stuck in a rut."The process of trying to weed out past prejudices and get rid of stocks which are no longer performing is probably more important than the buy side in determining the performance of a fund."Sometimes this means major reversals of policy. For the past 12 months he has been "shadowing" Mr Ward, who has run the group's UK department since 1981 and worked as lead manager of Scottish Mortgage for more than a decade.Mr Anderson has had experience of running a globally diversified investment trust as manager of Baillie Gifford's international smaller companies specialist, Mid Wynd International, between 1996 and 1998. "It is a very rewarding job, although it can be depressing to come into the office the day after you have lost a large amount of money."Such an experience is mercifully rare, but that comment reflects the uncertain nature of running a global portfolio where, invariably, one part of the world is doing much better than another and the fund manager's task is to get the balance right.