Copy of the Fund Manager’s Report from the Annual Report 31 December 2009.

Global stock markets began the year in the midst of a significant sell-off as concerns over credit availability, stability of the financial markets and the impact of the financial crisis on the economy continued to weigh on investors. The FTSE All share index reached a multi-year low in March. Unprecedented action by policy makers in the major economies of slashing interest rates to historical lows, flooding the system with substantial injection of liquidity through quantitative easing, stimulus packages and government programmes restored confidence in
the financial system and triggered a major rally in stocks. Positive corporate earnings through significant cost cuts and layoffs provided additional support for the market.

We generally avoided sectors which we believed would remain under pressure i.e. financials, banks, house builders, property and retail, and focused more on technology, oil and oil related and some cyclical stocks. Towards the end of the year, we felt that the market rally was over extended and as a result accelerated rotation into more defensive sectors, including utilities and pharmaceuticals. We continued to maintain a defensive bias through the use of index futures to mitigate the risk of an increasing possibility of a pull back in the market. The Fund’s performance during the year reflected this balanced approach between risk and reward.

Performance

For the year to 31 December 2009, the value of the Fund increased by 24.0%* compared with a rise of 31.3%* for the average fund in the UK All Companies sector. The FTSE All Share index rose 25.0%^ for the year.

Portfolio

At 31 December 2009, the portfolio consisted of 38 companies. Utilities made up 13.9% of the portfolio followed by Food Producers 11.9% and Software & Computer Services 11.6%. The Fund’s overseas exposure was 2.2% of the portfolio. The cash position at the year end was 8.4%.

Outlook

We have seen the deepest recession since the second world war, with sharp increases in unemployment and bankruptcies. Over the past ten years, growth in the UK and US was largely driven by consumer spending which was in turn driven by borrowing on appreciated property assets. With the collapse of the housing market, particularly in the US, household ability to take on more debt has declined significantly and will continue to hamper loan demand, and therefore spending, for some time to come. Furthermore, unemployment is not likely to fall as rapidly as in prior recessions due to the fact that a lot of excess capacity built up over the past decade needs to be worked off. The banking sector is still healing and the fiscal policies put in place across the world have led to an unprecedented rise in budget deficits. The excesses and imbalances that have built up over recent decades have contributed to the downturn and may continue to act as an impediment to growth.

Dramatic though the events in 2008 and 2009 have been, more important is what is likely to happen in 2010. Given the lack of ammunition policy makers are left with, even a small negative shock could impact the financial markets significantly. Major areas of concerns include a sovereign default and a currency crisis as fractures in the eurozone increase, a hung parliament in the UK or premature withdrawal of stimulus and monetary tightening in major economies.

The market has experienced a pull back since the beginning of this year.We continue to remain cautious and have maintained a defensive bias whilst focusing on stocks we consider have company-specific drivers and can navigate successfully in this challenging environment. We believe that we are appropriately positioned for an uncertain and a potentially volatile 2010. Although the Fund may underperform over short periods, we remain confident that in such an uncertain situation our balanced approach provides some protection on the downside with the best opportunity for a better relative performance over the longer term. The Fund is up 6.9%** since the beginning of 2010 compared with a fall of 1.3%^ for the FTSE All Share index.

I thank you for your investment in the Manek Growth Fund and your continued support.