Copy of Fund Manager's Report from the 31 December 2007 Annual Report.

In my 2007 Interim Report I had raised some serious concerns about the overall state of the global economy. Rising interest rates, fears of a slowdown in the US economy with the possibility of a recession and the worsening situation in the US sub-prime mortgage market and its potential impact on the global financial system were rapidly becoming apparent and leading to increased stock market volatility. However, the impact on the overall market levels was not very noticeable as deteriorating performance of the financial and consumer related sectors was somewhat offset by the positive trends in the energy and resource based sectors with the FTSE All share index ending the year with a 2% rise.

The renewed focus for the Fund, which I wrote about in the 2005 Annual Report, has continued to contribute positively to the Fund’s performance. Following an excellent 2005, and a somewhat disappointing 2006, the Fund delivered outstanding performance in 2007, positioning it amongst the top performing funds in its sector over the three years. Bearing in mind the rapidly deteriorating macro environment, we generally managed to avoid financial, bank, house builder, property and retail stocks. Technology, telecom, oil and oil related and some cyclical holdings in the portfolio performed well. Our exposure to stocks outside the UK, have continued to contribute positively to the overall performance and we may increase this to capture some of the outstanding growth opportunities, particularly in India. Whilst we continued to maintain an overall growth oriented approach in our stock selection, we had some serious concerns about the state of the macro economic environment and its potential impact on the overall market. In order to cushion against an increasing possibility of a fall in the market we increased the Fund’s defensive position through the use of index futures.

Performance

In the year ended 31 December 2007, the value of the Fund increased by 14.1%* compared with a 2.2%* increase for the average UK All Companies unit trust. This performance ranked the Fund 3rd* out of 319 funds in the UK All Companies sector during the period. Since implementing our renewed focus the Fund is up 59.6%** compared with 45.2%** for the average UK All Companies unit trust over three years, placing it in the top decile in its sector.

Portfolio

At 31 December 2007, the portfolio consisted of 57 companies. The Fund was almost fully invested during the period except towards the end of the year. The cash position at the period end was 8.4%. The Oil & Gas Producers made up 19.7% of the portfolio followed by Software & Computer Services 7.3% with Support Services and Oil Equipment Service & Distribution 6.1% each. The Fund’s overseas exposure was 24.6% of the portfolio.

Outlook

After over four years of strong performance, global markets have experienced the first significant correction since the period end, triggered by the deepening crisis in the US sub-prime mortgage market forcing leading financial institutions to billions of dollars worth of write-offs. Given the strong run by the market there was a clear possibility of a pause at some stage. The US has acted decisively by aggressively slashing interest rates five times since September, with talk of more cuts to come. This has increased the possibility of further rate cuts in the UK. We expect the stock market to remain volatile over the next few months as investors are becoming increasingly concerned about the possibility of a US recession and its likely impact on the global economy.

Despite the sharp correction the Fund has continued to perform well. It is currently No. 1 in its sector over one year^† and in the top ten over three years^††. We believe that we are favourably positioned for the current uncertainty and the possibility of further downside in the market. We remain confident about identifying new opportunities in the subsequent recovery to continue the Fund’s strong performance.

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