Annual Financial Report

Annual Financial Report Announcement
Aurora Investment Trust plc

CHAIRMAN'S STATEMENT


The Year's Returns:                           NAV:      - 44.9% to
111.9p;              Benchmark:         - 36.0%

I am afraid the results for  the last year make pretty grim  reading,
with our net asset value having  collapsed in the second half of  our
year.  At the half way  stage - to 31st  August 2008 - things  didn't
look all that bad, our net asset value having declined 3.3%, a little
better than that  of the market's  fall of 4.8%  (the FTSE  All-share
Index).  But it  proved to  be the eve  of the  storm because  within
weeks of our half  year end Lehman Brothers  had gone bust and  stock
markets around the  world were in  freefall.  We were,  I am  afraid,
poorly positioned  for the  events that  followed -  overloaded  with
holdings  in  the  mining  and  in  the  financial  sectors.   As   a
consequence our net asset value declined by 43.0% in the second  half
of our year, a lot worse than the market which fell by 32.7%.

Our portfolio  was not  without one  or two  successes but  with  one
exception, our holding in BTG Group, they made little difference; the
declines in some of our holdings in mining and financial stocks  were
rather large - to put it  mildly.  The top five contributors and  the
top five detractors to the returns of the portfolio were as follows:




+-----------------------------------------------------------------+
|                       | Increase in value | Contribution to NAV |
| Top 5 Contributors    |                   |                     |
|-----------------------+-------------------+---------------------|
| 1. BTG                |    + £706,000     |        +5.5p        |
|-----------------------+-------------------+---------------------|
| 2. Orca Interactive   |    + £169,000     |       + 1.3p        |
|-----------------------+-------------------+---------------------|
| 3. Drax Group         |    + £142,000     |       + 1.1p        |
|-----------------------+-------------------+---------------------|
| 4. Vendanta Resources |      + £28,000    |       + 0.2p        |
|-----------------------+-------------------+---------------------|
| 5. Emblaze Systems    |      + £23,000    |       + 0.2p        |
|-----------------------+-------------------+---------------------|
| TOP 5 CONTRIBUTORS    | + £1,068,000      |       + 8.2p        |
+-----------------------------------------------------------------+

.

+------------------------------------------------------------------+
|                        | Decrease in value | Detraction from NAV |
| Top 5 Detractors       |                   |                     |
|------------------------+-------------------+---------------------|
| 1. Xstrata             | - £1,856,000      |       - 11.3p       |
|------------------------+-------------------+---------------------|
| 2. Rio Tinto Zinc      | - £1,418,000      |       - 10.8p       |
|------------------------+-------------------+---------------------|
| 3. Antofagasta         | - £1,056,000      |       - 10.3p       |
|------------------------+-------------------+---------------------|
| 4. Charlemagne Capital |   - £ 847,000     |      -   8.8p       |
|------------------------+-------------------+---------------------|
| 5. GCM Resources       |   - £ 793,000     |       -  6.8p       |
|------------------------+-------------------+---------------------|
| TOP 5 DETRACTORS       | - £6,527,000      |       - 46.1p       |
+------------------------------------------------------------------+



We went through  much of the  year with  little or no  borrowings, having  just
£675,000 at the end of the year but what we had will have made matters a little
bit worse; however we  bought back 650,000 shares  which we estimate will  have
added about 1p to the net asset value.

Long Term NAV Returns:                5 Years:                 -
40.7%;              Benchmark:         - 14.0%
                                                                Since
launch:       + 14.4%;              Benchmark:         - 10.5%

Each year I emphasise that our stated objective for shareholders is to  achieve
capital growth over  the long-term.  We  regard five years  as the  appropriate
time over which to judge the long-term returns of the Company.  A year like the
last one is likely scupper any long term record and indeed, as the number above
show, it has done so to our five year returns.  That the stock market also lost
money is of little  comfort - particularly  as we did a  lot worse.  The  first
half of  our life  as  an investment  trust  company produced  quite  excellent
returns as the themes that we backed - based on a high growth, low inflationary
global economy -  produced a  number of portfolio  winners for  us, notably  in
companies involved in house building, mining  and in Ireland.  However we  were
slow to  recognise  that  things  were  changing  and,  as  a  consequence,  we
overstayed our welcome; so  we ended up  giving away much of  the gains we  had
made.  We have also, as I have mentioned in previous statements, lost rather  a
lot in smaller  concept stocks.  As  a consequence of  all of this  and of  the
financial crisis that we find  ourselves embroiled in, we  have given a lot  of
thought about future investment themes - about which I comment below.

For the record the net  asset value return since launch  is 14.4%, not a  great
return over 12  years but  rather better than  the stock  market itself,  which
declined by 10.5%.
Shareholders' Total Returns:                         Over one year:      -
92.5p                  or            - 50.9%

Over five years:   - 70.4p                    or            - 40.8%

Since launch:       +20.6p                    or            +
20.6%

The share  price suffered  particularly badly  last year  because the  discount
widened on the back of  the decline in the net  asset value.  We are  conscious
that it  is  the  share  price which  determines  the  value  of  shareholders'
investment and are concerned when the discount gets too large.  At 24.9%, which
is where it ended  the year, it was  far too large.  As  I mentioned above,  we
have bought back some shares but we are  limited in the amount that we can  buy
back and for the moment  we are not buying any  more, although the position  is
kept under  close review.   In any  event  all shares  bought back  reduce  the
liquidity of our shares in the market place, something we give consideration to
in determining whether or not to buy  back shares.  The best way to reduce  the
discount is to perform well -  thereby encouraging investors to buy shares  and
become investors.  That is what we are giving particular attention to.



+-------------------------------------------------------------------+
| Analysis    of |    One year    |  Five years   |  Since Launch   |
| shareholders'  |                |               |                 |
| return         |                |               |                 |
|----------------+----------------+---------------+-----------------|
| Change in  NAV |   -   | -44.9% |   -   |   -   |   +   | + 14.4% |
| p sh.          | 91.1p |        | 76.6p | 40.7% | 14.1p |         |
|----------------+-------+--------+-------+-------+-------+---------|
| Change      in |   -   |        |   -   |       |   -   |         |
| discount       | 6.4p  |        | 11.9p |       | 30.1p |         |
|----------------+-------+--------+-------+-------+-------+---------|
|                |       |        |       |       |       |         |
|----------------+-------+--------+-------+-------+-------+---------|
| Change      in |   -   | -53.7% |  -    |  -    |   -   |  -16.0% |
| share price    | 97.5p |        | 88.5p | 51.3% | 16.0p |         |
|----------------+-------+--------+-------+-------+-------+---------|
| Dividends      |  +    |        |   +   |       |  +    |         |
|                | 5.0p  |        | 18.1p |       | 36.6p |         |
|----------------+-------+--------+-------+-------+-------+---------|
|                |       |        |       |       |       |         |
|----------------+-------+--------+-------+-------+-------+---------|
| Total          |   -   | -50.9% |  -    |  -    |   +   | + 20.6% |
| Shareholders'  | 92.5p |        | 70.4p | 40.8% | 20.6p |         |
| Return*        |       |        |       |       |       |         |
+-------------------------------------------------------------------+

*NB dividends not reinvested


Annual General Meeting:                  at 12 pm on 15th July, 2009
at 145-157 St John St., London, EC1

The Dividend:  In an otherwise dismal year, the one piece of cheer
has been the income account where there has been a quite dramatic
improvement in the net income we have earned.  There were a number of
contributory factors to the increase in the net income (the "Revenue"
columns in the Consolidated Income Statement), which rose from
£62,000 to £879,000 - including profitable trading in our trading
subsidiary, lower costs and the one-off rebate of VAT, which was paid
in the past but which has now been recovered from HMRC.

As a consequence of this we are recommending the payment of a total
of 5.0p per share, an increase of 58.7% over last year's payment of
3.15p per share.  We like, if we can, to keep the dividend growing
(in line with inflation if possible), but the 2007/8 net income was
abnormally high so that a dividend of 5.0p per share will not be
earned or paid for 2008/9.

The Board of Directors:  Last September Michael Heathcoat Amory
retired from the Board and David Hunter will not be standing for
re-election at the forth coming annual general meeting.  Both of them
were founder directors of the Company in 1997.  Being a director of
any public company has become more and more of a chore over these
last 12 years, as the focus of governance has changed from directing
management in the interest of shareholders to observing best practice
process (business equivalent of political correctness) and complying
with the tsunami of rules, regulations and standards that have been
heaped upon us. They have both made a huge contribution to the
workings of the board in difficult times and their experience and
wisdom has been invaluable.  On behalf of all of us shareholders I
would like to thank them.  Michael and David - thank you very much
indeed.  As a consequence of losing them as directors, the Board is
engaged in looking for a new director; we would expect to make an
appointment during the course of the current year.

The Annual General Meeting:  I do urge as many shareholders as
possible to join us for the Annual General Meeting.  It will be held
at 12pm at Cavendish Administration's offices, 145-157 St John
Street, London (Farringdon tube station).  It is the occasion when
shareholders can meet all of the directors and ask questions or make
comments or suggestions which we would welcome and which we feel that
all shareholders should have the benefit of hearing.  Please come and
join us.



Current Outlook and Prospects:

We have had five bad years; furthermore we are now in the middle of a
financial crisis much more serious than almost anyone involved in the
financial business today has ever experienced.  Our future as an
investment trust has therefore been a matter of considerable concern
to you board of directors.  In September 2008, we had a special away
day board meeting devoted entirely to the investment environment in
which we find ourselves.  The purpose of the meeting was to consider
our investment strategy in the light of the conditions that we found
ourselves in.

So much has been said and written about the financial crisis and its
consequences that I don't propose to agonise over the issues here.
Suffice it to say that we are of the view that the virtual collapse
of the banking system will have brought about a new order in the
global economy, one that is quite different to that of the past
quarter of a century.  The global economy had grown at a rather
spectacular rate:  ever increasing consumer and government spending
was financed by ever increasing quantities of debt but the inflation,
which such debt financed demand would normally induce, never emerged
because of the supply of cheap goods manufactured in countries with
emerging economies (notably China) at very low cost.  However the
structure of global trade was unbalanced and depended on the
producers keeping their currencies competitive by, in turn, keeping
their export earnings invested in dollars, pounds, euros.  Not only
did consumers and governments become over borrowed but so did the
banks which made the loans.  This state of affairs has broken down
and we are now faced with a number of years of, if we are lucky, sub
par global economic growth.  Restabilising the global economy is
going to take some time; some areas will recover much more quickly
than others (almost certainly those emerging market economies).

In May 2009 the Board of Directors met to consider the
appropriateness of our investment policy.  We considered a number of
propositions, including whether, in the current circumstances, we
could expect to make money for shareholders over the next five
years.  While inevitably there were different views around the
boardroom table in relation to the seriousness of the situation, we
concluded that - providing we understood the nature of this new
economic order - there would be good opportunities to make profitable
investments.  Our view is that for the time being there will be a
drawn out recession during which there will be little or no
inflation; it will be a difficult time for corporate profits.
However the quite extraordinary monetary and fiscal stimulus being
imposed will revive economies (some more than others) but at the cost
of inflation - possibly quite considerable inflation.  Governments
will find themselves torn between containing inflation and dealing
with high unemployment.  Inflation devalues the debts that
governments will have incurred and is the easy politically option.
It is therefore the likely course of events - even if later rather
than sooner.

In these circumstances some thoughts sprang to mind:
*          It is possible that the pound will decline further (maybe
  - the US is in just as big an economic pickle); exposure to
  overseas, particularly to emerging market economies, should prove
  profitable from an investment and from a currency point of view.

*          The demographics of the UK (and of Europe) are such that
  there is a fast growing aging population, which typically needs,
  amongst other things, income from savings, from pensions, insurance
  policies and investments.  And yet interest rates have been cut to
  almost nothing, dividends are being cut and, for some, taxes have
  risen; there will be, indeed there is already is, a shortage of
  income investing opportunities.  Identifying reliable sources of
  income, particularly growing income, should produce good capital
  profits.

*          Given that, for the time being, the indebtedness of low
  savings economies - most particularly the UK - will continue to
  rise, stock markets are likely to remain very volatile with some
  periods of relief rallies and with other periods of pessimistic
  declines.  Such volatility creates investment opportunities, even
  if they tend to be of short duration.  This is particularly
  attractive to us with our goal of progressively raising our
  dividend.

*          There will remain certain themes that will continue to
  make progress; they include the infrastructure, the environment,
  renewable energy, healthcare, electronics technology etc.  It will
  be important to identify those that prove profitable because a
  feature of higher levels of inflation is profitless prosperity.
  Inflation does not create real wealth, only the illusion of it.
So while we are not particularly enthusiastic about the prospects for
our economy and while we are a lot less enthusiastic about our
government (which has proven to be self-serving, dishonest and
thoroughly incompetent), we do believe that there will be good
opportunities to make money, particularly so given the huge decline
in stock markets that has already taken place.  We do need to be
vigilant but not naïve about what lies ahead of us.  I am, however,
pleased that the portfolio has performed strongly in the current year
to date.


Alex Hammond-Chambers
Chairman
5 June 2009

MANAGER'S REVIEW AND OUTLOOK


If the  Prime  Minister does  not  have  the courage  or  manners  to
apologise to the electorate for his mistakes of having mismanaged the
economy,  for  his  hollow  and   failed  promises  to  abolish   the
boom-and-bust cycles, and for having stripped the Bank of England  of
its powers to regulate banks, then it makes me all the more resolute.
I wish to put up my hand to say sorry to our shareholders for my many
and varied mistakes during the last year. Sadly, I possessed  neither
the vision and foresight of  Prof Nouriel Roubini nor the  brainpower
and reactions of Miss Gael Trimble (the outstanding points winner  of
University Challenge).  I  am not  alone, but  rather unfortunate  to
have had a year end which coincided with what appears to date to have
been the bottom of the market.

The last year was an  exceptional one, (I hope  a once in a  lifetime
experience) notable both for fear  and greed. Fear of plunging  stock
and commodity  prices, and  greed,  as manifested  through  excessive
bonuses, pension pots, Ponzi schemes,  and in one extraordinary  case
(Anglo Irish Bank) for massive  directors' loans. The acquisition  by
Lloyds Bank of HBOS, following a mere brief discussion at a  cocktail
party, is also a  notable example.  How  apposite is Warren  Buffet's
remark about seeing the naked swimmers when the tide goes out.

The period witnessed previously unimaginable events such as not  only
the collapse of two Scottish banks and one building society, but also
Lehman Brothers and even AIG, the world's largest insurer, while many
other financial  institutions  are teetering  on  the brink  of  full
public ownership. In  addition, the  price of  many hard  commodities
collapsed below the  marginal cost  of production, oil  fell by  more
than $100 per barrel, and the  Baltic dry cargo index collapsed  from
11,793 to 663 in the space  of five months. Furthermore, UK  interest
rates have been  rapidly reduced  and currently stand  at the  lowest
level since the  foundation of the  Bank of England  in 1694. It  was
indeed the year  when 'Christmas week'  became 'Christmas month'  and
the more  frequent  use  of  the abbreviation  R  and  D  related  to
recession and /or  depression rather than  research and  development.
Unemployment continues to  soar. It  was certainly  not a  successful
year for the Governor of the  Bank of England, whose stated  ambition
is to make economic events appear boring!



In the  UK stock-market  there  has been  an unprecedented  level  of
volatility and overall a massive flight to size and quality companies
of a defensive nature away from their smaller brethren; all  thoughts
of future growth prospects were discarded.  In summary, it was almost
impossible to make money, other than for very short term periods,  by
owning  equities  (even  including  the  dullest  of  utilities)   or
corporate bonds;  only gold  and government  bonds proved  profitable
holdings.  Meanwhile, the return on cash has almost reached zero.

Twelve months ago, on account of its huge relevance to the portfolio,
my colleague Stephen and I paid a three day visit to Dublin, to  gain
first hand  experience  of the  state  and prospects  for  the  Irish
economy.  Since then, the  banking sector has  imploded, partly as  a
result  of  external  events,  but   also  on  account  of   internal
mismanagement or worse.  The 'final  straw' for Anglo Irish Bank  was
the disclosure of the huge loans to several of the directors and  the
massaging of  the  level  of  deposits at  the  company's  year  end.
Fortunately, we reduced our exposure to zero before the full  horrors
unfolded. It will be, in my opinion, several years before the  Celtic
tiger roars once more.

A year ago the portfolio also  had a very overweight position in  the
mining sector. I was a firm  believer in the theory of the  commodity
'super- cycle'  and the  prospect that  decoupling would  take  place
between the  rate  of  growth  in the  western  economies  and  those
prevalent amongst the emerging nations who would remain unscathed  by
the credit crunch  due to their  high savings ratios.  In the  event,
what appeared to be a slow-down in western economies, in response  to
the credit crunch, became a  much more dramatic recession.  More-over
it occurred at the  same time as the  Chinese government was  cooling
the domestic economy by means of higher interest rates after a  major
housing boom.

The consequence was that companies  everywhere 'drew in their  horns'
and precipitated  a synchronised  global  contraction in  demand  for
commodities at  a hitherto  unprecedented rate.  Although still  left
with large  exposure, on  the  grounds that  the Chinese  and  Indian
economies will continue to expand, despite the current turmoil,  some
reductions to the holdings  were made in the  autumn. The holding  in
Rio Tinto was completely disposed of before the take-over attempt  by
BHP Billiton was terminated.



I remain,  however,  strongly  of  the  opinion  that  the  commodity
super-cycle  is  temporarily  being  interrupted;  it  has  not  been
terminated. The Chinese,  in particular, are  known to be  increasing
their stockpiles of commodities in huge quantities for future use  on
their  proposed  massive  infrastructure  projects  in  the   certain
knowledge that  prices  will rise  rapidly  when the  global  economy
recovers.  Furthermore they now regard it as a more sensible store of
value than to purchase yet more US Treasury bonds.

At a  time of  recession  it seems  sensible  to reduce  exposure  to
'cyclicals' and replace them with  holdings in sectors which are  not
economically  sensitive,   such  as   tobacco  and   pharmaceuticals.
Unfortunately, however, tobacco companies  have never before been  so
highly rated  as they  are currently.  Also, the  only two  major  UK
listed pharmaceutical companies are desperately short of exciting new
products to promote  at a time  when many old  ones are losing  their
patent protection.

BTG, however, currently the  largest holding in  the portfolio, is  a
company which fills  me with excitement  about its future  prospects,
particularly following  its  successful takeover  of  Protherics  and
entry into  the FTSE  250 index.   It now  not only  has a  huge  and
growing cash pile,  a US  $ based  revenue stream  from an  excellent
portfolio of existing products, but no less than four, possibly  even
more,  potential  'blockbusters'  in  'phase  three'  development  in
exciting areas  such  as  leukaemia,  multiple  sclerosis,  diabetes,
poison serums, prostate cancer  and, hopefully also, a  revolutionary
treatment for  varicose veins  later this  year. Since  the year  end
Genzyme has announced  that it has  agreed to  pay up to  US $1bn  to
Bayer for  the right  to  market Campath,  a treatment  for  multiple
sclerosis on which  BTG will  earn huge annual  royalties.  Thus  BTG
certainly would not appear to be  lacking growth potential at a  time
of  likely  prolonged  recessionary  conditions  and  thus  is   well
positioned for a possible major re-rating.

The portfolio's second largest holding  at the year end was  Scottish
and Southern Electricity, another long- standing favourite, which has
proved more reliable during the period than other Scottish  exposure!
Its defensive characteristics and high dividend yield have, alongside
a new purchase of United Utilities, stood the portfolio in good stead
in  these  turbulent  times.  On  a  similar  theme,  a  holding  was
re-established in Rolls-Royce  and a  new position  taken in  British
Aerospace - both beneficiaries of a stronger US $, together with  the
excellent visibility of defence related earnings.



Another new  theme  this  year  has been  to  gain  exposure  to  the
insurance sector where rates  have hardened (at  a time when  pricing
power is a scarce  feature) following the demise  of AIG - hence  the
purchase  of  Aviva  and  Prudential,  both  of  which  produce  good
dividends at a time when dividends from the banking sector are almost
as rare  as the  elusive salmon  which  I try  to catch  on  holiday.
Placing that remark in context I feel sure that shareholders will  be
pleased to learn that not only is the revenue account extremely  well
placed both for  last year -  hence the third  special dividend -  as
well as  for the  current one  but I  also caught  (and released)  my
largest salmon (c.25lbs) to date in July.

Venture Production  is a  scarcely known  mid cap  oil company  which
specialises in  buying good  prospective acreages  in the  North  Sea
which are too  small for the  oil majors to  develop themselves -  in
other words it feeds  off the crumbs which  fall from the rich  man's
table. The company is well  financed and has been notably  successful
with the drill-bit in extracting both  oil and more so gas.  To  date
the company has not yet achieved the rating it deserves, possibly  on
account of past delays  in meeting its targets.  It has, however,  an
unstable shareholder base, which may result in an unwanted  take-over
attempt in the near future  by possibly either Centrica, which  since
the year  end  has declared  a  large holding,  or  another  utility.
Several companies have not only  expressed an interest in  increasing
their exposure to natural gas but also recently raised new money  for
possibly this purpose.

Two oil  majors,  namely  BP  and BG,  continue  to  feature  in  the
portfolio's top ten  holdings for good  reasons. In the  case of  the
former, it is on  account of a high  and, in Sterling terms,  growing
dividend stream,  which management  have recently  indicated will  be
maintained,  even  if  not  covered  by  operational  cash  flow.  BG
continues to demonstrate its ability to grow its profits and reserves
both organically and by acquisition.

The portion of the portfolio  in small future growth companies,  with
the exception  of BTG  and Emblaze,  has performed  badly. As  stated
earlier, investors  have  lost  all  their  appetite  for  risk  and,
accordingly,  are   currently  ignoring   future  growth   prospects.
Valuations are derisory and yet may possibly be seen before too  long
to offer the  opportunity of a  lifetime.  The change  in the  recent
Budget which  increased the  top rate  of income  tax to  50%  whilst
leaving unchanged the  18% rate  of capital  gains tax  is likely  to
stimulate  investors  to  pay   greater  attention  to  growth   than
previously.



Two recent new small additions to the portfolio, both with attractive
safe yields, are Anglo Pacific and Asian Citrus.  Whereas the  former
earns a  royalty  from  its extensive  mining  interests,  mainly  in
Australia and  Canada, the  latter  is the  operator of  three  large
orange groves  in  China.  Its already  attractive  yield  should  be
boosted further by an exciting combination of - increased  production
as the trees mature, and higher  prices from a growing proportion  of
sales to supermarkets rather than local wholesalers. More-over it  is
also a pure 'play' on the Chinese currency, which has appreciated  by
no less than  30 % against  sterling during the  past year, with  the
high probability  of  further  gains, particularly  if  Gordon  Brown
continues to work his  magic.  In addition  should the current  swine
fever epidemic reach China then the demand for vitamin c would likely
surge.

Prospects

What started as  a financial  problem in  the US  housing market  (on
account of President Clinton's  reforms which forbade  discrimination
against the underprivileged  sections of  society) rapidly  developed
into a  full blown  economic crisis  on a  global scale.  The IMF  is
currently forecasting the first  global contraction since the  Second
World  War.  Manufacturing  output  is  spiralling  downwards,  while
unemployment continues  to soar  at an  unprecedented rate.  Reported
macro economic data  is set  to deteriorate  for some  time to  come.
Meanwhile, interest rates around the world have been slashed and many
of the major nations have  produced economic packages to support  key
sectors. Quantitative easing is  a phrase of which  we will all  soon
have to learn the meaning!

Whereas recent moves, both in the UK and USA, to separate and  insure
toxic loans will  assist stabilisation  and recovery  in the  banking
system, the  damage  to  the  real economy  continues  apace  and  is
expected  to  do  so  for  at  least  another  six  to  nine  months.
Fortunately,  however,  stock-markets   are  prone  to   anticipating
recovery by two/three quarters.  It would therefore be  extraordinary
not to see  some upward momentum  developing towards the  end of  the
calendar year, particularly as money market funds currently represent
a huge proportion of the capitalisation of Wall Street.



The Chinese and Indian  economies are expected  to continue to  grow,
albeit not quite at the rapid  pace of last year; recent evidence  of
this has been manifested  through the rapid  growth in bank  lending,
the surge above  50 in the  purchasing manager's index  but also  the
rapid rise in certain commodity prices as well as the strong recovery
in the Baltic Dry cargo index.

The USA, where the crisis started,  is probably, if history is to  be
repeated, the  first Western  economy which  will witness  the  first
green shoots  of  recovery,  on account  of  the  nation's  resilient
nature. It is worth noting that the US economy is benefiting from the
fall in the oil price to an extent many times greater this year  than
from President Obama's not  inconsiderable reflation package. It  may
well be followed  in turn by  the UK, where  the government has  been
relatively pro-active  in recent  months. Meanwhile,  Germany,  whose
government officials have,  by contrast, been  slow to recognise  the
problem, will  remain, like  neighbouring  Austria and  some  Eastern
European countries, mired in recession for some time to come.

In passing, how ironic it seems to me that the USA and Germany, which
suffered from deflation and  hyper-inflation respectively during  the
inter-war years,  should now,  directly  as a  result of  their  deep
seated fear of a repetition of the  past, be soon set to enjoy  rapid
inflation and deflation respectively.

At a time of  recession there will always  be major opportunities  in
the stock-market. Whereas  many companies in  any sector will  wither
and die their stronger brethren  will survive and prosper by  gaining
market share. More-over spending patterns will change- premium brands
may suffer  as  'trading down'  occurs.  Government edicts  may  also
compel companies to  incur expenditure, whether  on the  environment,
health and safety or compliance.

In this  latter respect,  one of  my long  time favourite  companies,
Gresham Computing, should certainly be a beneficiary of the  recently
announced requirement by  the FSA  for the banking  sector to  invest
£1bn on software, to enable it to  know its true positions on a  real
time basis. Furthermore it has recently announced that it has  signed
a massive software  contract to  enhance the  systems at  one of  the
world's largest international  banks. Moreover the  contract is on  a
revenue sharing (of the savings) basis.



In  the  light  of  the  prevailing  challenging  circumstances,   my
preferred strategy is to  remain invested in  the companies with  the
best  prospects  for  growth  -  stronger  companies  with   superior
management skills and sound balance sheets.  History has proved  many
times over that these will prosper  at the expense of others. I  will
also be adding to the fixed interest element, in view of the low cost
of borrowing  (currently 1.5%  p.a.) and  the current  mouth-watering
high yields, as a  method of boosting  the income generated,  without
having to  sacrifice  the  huge long-term  growth  potential  of  the
smaller companies in the portfolio.

At a time when the global economy is set at best to grow very slowly,
those companies, which manage to grow their profits and dividends  at
a superior pace will, on account of their rarity, be re-rated. I will
not have been the  only investment manager in  recent months to  have
learned for oneself that the saying 'the darkest hour is just  before
dawn' is true.

I do now feel confident that  'dawn' is fast approaching for  several
companies in the portfolio. For  example, amongst others, Emblaze  is
set for the global launch of its 'best of breed' telephone, which  is
claimed by the company  to be far superior  to the Apple Iphone.  The
Emoze method  of providing  emails  for free,  to those  one  billion
handset users currently unwilling to pay BlackBerry service  charges,
may also prove a winner for that company, having trounced  BlackBerry
in two recent competitions. BTG is likely, in the near future, to  be
making several additional important announcements on a variety of its
new  products.  Gresham  Computing  will  benefit  hugely  from   the
requirement by  the FSA  for  the banking  sector  to know  its  true
positions in  'real  time'.  Furthermore, the  consent  to  mine  its
massive coal reserves will most probably be awarded to Global Coal in
the  very  near  future,  following  the  landslide  victory  by  the
Bangladeshi opposition party in the recent elections.

Accordingly, unless there are further unscheduled delays, which  have
dogged these  companies  and  tried  the  patience  of  myself,  your
directors and  loyal  shareholders  for  too  long  already,  I  feel
confident that the outlook for this growth oriented trust appears set
to improve - it is certainly pregnant with potential!



I also  wish  to  make  one final  if  fairly  simple  but  important
observation.  Shareholders will know that, to date, I have long since
been an  advocate of  falling  inflation rates;  these are  only  too
apparent today.  I must  confess, however,  that I  now have  a  very
different vision  of the  future. Resulting  from all  the  excessive
government expenditure, at previously  inconceivable levels, I  share
the Sage  of Omaha's  fear that  within  a few  years, but  I  cannot
predict exactly when,  the rate  of inflation  is set  to soar,  once
wages have stopped falling and the spare industrial capacity is being
utilised once more  . Accordingly,  I will be  anticipating that  new
trend through  the purchase  of inflation  hedges, such  as gold  and
asset based companies particularly mining stocks, on account of their
high exposure to  the Chinese economy.

Meanwhile, the  Chinese have  recently celebrated  the start  of  the
'Year of  the  Ox';  an event  which  surely  provides  superstitious
investors with a conundrum.  Will it prove a  female of the  species,
renowned for its characteristics of strength and thick skin (features
vital for investors in recessionary conditions) or is it a male,  and
therefore the year of the bull?


M.               J.               Barstow

5 June 2009

STATEMENT OF DIRECTORS' RESPONSIBILITIES FOR THE ANNUAL REPORT

The directors are responsible for preparing the Annual Report and the
financial  statements   in  accordance   with  applicable   law   and
regulations.

Company law in the United  Kingdom requires the directors to  prepare
financial statements for each  financial year which  give a true  and
fair view of the state of affairs of the Company and of the profit or
loss of the Company for that  period.  The directors are required  to
prepare  financial  statements  for  the  Group  in  accordance  with
International  Financial  Reporting  Standards  as  adopted  by   the
European Union  (IFRS) and  have also  elected to  prepare  financial
statements  for  the  Company  on  the  same  basis.   The  financial
statements are prepared  in accordance with  the Companies Act  1985,
IFRS and,  in the  case  of the  Group, Article  4  of the  EU's  IAS
Regulation.

In preparing these financial  statements, the directors are  required
to:

*            select suitable accounting policies and then apply them
  consistently;
*            make judgements and estimates which are reasonable and
  prudent;
*            follow applicable International accounting standards as
  adopted by the European Union; and
*            prepare the financial statements on the going concern
  basis, unless it is inappropriate to assume the Company will
  continue.

The directors are responsible for ensuring that proper accounting
records are kept which disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 1985.  They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.

Under  applicable  law  and  regulations,  the  directors  are   also
responsible   for   preparing   a   Directors'   Report,   Directors'
remuneration Report and  Corporate Governance  Statement that  comply
with that law and those regulations.   The directors are  responsible
for the  maintenance and  integrity of  the corporate  and  financial
information included on the website used by the Company.

Legislation in  the  United  Kingdom governing  the  preparation  and
dissemination of financial statements may differ from legislation  in
other jurisdictions.



Statement under the Disclosure & Transparency Rules 4.1.12
The Directors each confirm to the best of their knowledge that:
a) the accounts,  prepared in accordance  with applicable  accounting
standards, give  a true  and fair  view of  the assets,  liabilities,
financial position and profit or loss of the Company; and

b) this Annual Report includes a  fair review of the development  and
performance of  the   business  and  the  position  of  the  Company,
together with a description of the principal risks and  uncertainties
that it faces.

For and on behalf of the Board


Alex Hammond-Chambers
Chairman
5 June 2009


RISK ANALYSIS


The  Board  considers   that  the  principal   risks  faced  by   the
shareholders of the Company fall into two categories:
External Risks
Poor performance in  the UK  and/or world  economies; poor  corporate
profits and dividends.

Poor stock market performance caused by market-specific factors, such
as rising interest rates, the unwinding of "bubbles" or disinvestment
by institutions, superimposed on general economic factors, or  caused
by shocks, wars, disease etc.  The Board does not consider,  however,
that short-term  volatility  represents  a  risk  for  the  long-term
shareholder that  the  Company  seeks  to  avoid,  since  it  regards
long-term performance to be of primary importance.
Internal Risks
Poor asset management, which may include poor stock selection,
excessive concentration of the portfolio, mistakes regarding currency
movements, speculation in shares of companies without sound or
established businesses and speculation in derivatives.

Poor control of borrowing, including borrowing at excessive rates  of
interest relative to likely  returns and borrowing excessive  amounts
leading to the  breach of  covenants and possible  enforced sales  of
assets at disadvantageous prices.

Poor governance, compliance or administration, including particularly
the risk of loss of S842 status.

All these  and other  risks  can result  in shareholders  not  making
acceptable returns from their investment in the Company.




CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 28 FEBRUARY 2009


                                Year ended 29 February 2008
  Year ended 28 February 2009




                Revenue  Capital    Total   Revenue  Capital    Total
                  £'000    £'000    £'000     £'000    £'000    £'000


Gains        on       - (12,643) (12,643)         -  (5,860)  (5,860)
investments
designated   at
fair      value
through  profit
or loss
Exchange              -      (8)      (8)         -    (177)    (177)
differences  on
overdraft
Realised            129        -      129     (353)        -    (353)
gains/(losses)
of trading
subsidiary at
fair value
through profit
or loss

Investment          876        -      876     1,111        -    1,111
income
Interest on VAT      49        -       49         -        -        -
recovered
Total income      1,054 (12,651) (11,596)       758  (6,037)  (5,279)
Investment         (80)     (80)    (160)     (169)    (169)    (338)
management fees
Recovery of VAT     124      243      367         -        -        -
on   management
fees
Other expenses    (217)        -    (217)     (282)        -    (282)
Loss     before     881 (12,488) (11,607)       307  (6,206)  (5,899)
finance   costs
and tax
Finance costs      (14)     (14)     (28)     (236)    (236)    (472)
Loss before tax     867 (12,502) (11,635)        71  (6,442)  (6,371)
Tax                  12        -       12       (9)        -      (9)
Loss  for   the     879 (12,502) (11,623)        62  (6,442)  (6,380)
year

Earnings    per    6.76 (96.20p) (89.44p)      0.42 (43.83p) (43.41p)
share  -  basic
and diluted



The total  column of  this statement  represents the  Group's  Income
Statement, prepared  under IFRS.   The revenue  and capital  columns,
including the  revenue  and  capital earnings  per  share  data,  are
supplementary information prepared  under guidance  published by  the
AIC.

All revenue  and capital  items in  the above  statement derive  from
continuing operations.  No operations  were acquired or  discontinued
during the period.  All revenue is attributable to the equity holders
of the parent company.  There are no minority interests.

The Board recommends a final dividend of 3.25p per share and a
special dividend of 1.75p per share


CONSOLIDATED BALANCE SHEET
AT 28 FEBRUARY 2009


                                                       2009      2008
                                                      £'000     £'000

NON-CURRENT ASSETS
Investments designated at fair value through         14,242    28,527
profit or loss

CURRENT ASSETS
Sales for future settlement                              91       294
Other receivables                                        95       101
Taxation recoverable                                      -        14
Cash and cash equivalents                               908       322
                                                      1,094       731

TOTAL ASSETS                                         15,336    29,258

CURRENT LIABILITIES:
Purchases for future settlement                         123       447
Other payables                                           50       126
Bank overdraft                                          675     1,067
                                                        848     1,640


TOTAL ASSETS LESS CURRENT LIABILITIES                14,488    27,618

EQUITY
Called up share capital                               3,598     3,777
Capital redemption reserve                              179         -
Share premium account                                10,997    10,997
Realised capital reserve                             11,382    15,067
Unrealised capital reserve                         (11,839)   (1,923)
Revenue reserve                                         171     (300)

TOTAL EQUITY                                         14,488    27,618

Net assets per ordinary share                       111.86p   203.04p


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 28 FEBRUARY 2009


2009
                Share    Capital   Share Realised Unrealised Revenue    Total
              capital redemption premium  capital    capital reserve
                         reserve account  reserve    reserve
                £,000      £'000   £,000    £,000      £,000   £,000    £,000

Opening         3,777          -  10,997   15,067    (1,923)   (300)   27,618
equity

Profit/(loss)       -          -       -  (2,586)    (9,916)     879 (11,623)
for the year

Dividends           -          -       -        -          -   (408)    (408)
paid

Purchase of     (179)        179       -  (1,099)          -       -  (1,099)
own shares

Closing         3,598        179  10,997   11,382   (11,839)     171   14,488
equity





2008
                    Share   Share Realised Unrealised Revenue   Total
                  capital premium  capital    capital reserve
                          account  reserve    reserve
                    £,000   £,000    £,000      £,000   £,000   £,000


Opening equity      3,777  10,997   14,886      7,539      98  37,297

Profit/(loss) for       -       -    3,020    (9,462)      62 (6,380)
the year

Dividends paid          -       -        -          -   (460)   (460)

Purchase of own         -       -  (2,839)          -       - (2,839)
shares

Closing equity      3,777  10,997   15,067    (1,923)   (300)  27,618



CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 28 FEBRUARY 2009



                                                      2009       2008
                                                     £'000      £'000

NET CASH FLOW FROM OPERATING ACTIVITIES
Cash inflow from investment income and interest        927      1,053
Cash inflow/(outflow) from held for trading             41      (353)
current asset investments
Cash outflow from management expenses                (403)      (621)
Cash inflow from reclaim of VAT expense                367          -

Payments to acquire non-current asset investments (13,813)    (6,027)
Receipts on disposal of non-current asset           15,422     16,536
investments

Tax recovered                                           26         18

NET CASH FLOW FROM OPERATING ACTIVITIES              2,567     10,606


CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares                             (1,099)    (2,839)
Dividends paid                                       (408)      (460)
Decrease in bank borrowings                          (392)    (6,673)
Interest paid                                         (74)      (472)
NET CASH FLOW FROM FINANCING ACTIVITIES            (1,973)   (10,444)


INCREASE IN CASH                                       594        162



Cash and cash equivalents at beginning of year         322        337

Increase in cash                                       594        162
Currency translation difference                        (8)      (177)

Cash and cash equivalents at end of year               908        322




NOTES



   1.    BASIS OF ACCOUNTING

The financial statements of the Company and the Group have been
prepared in accordance with International Financial Reporting
Standards (IFRS), which comprise standards and interpretations
approved by the IASB and International Accounting Standards and
Standing Interpretations Committee interpretations approved by the
IASC that remain in effect, and to the extent that they have been
adopted by the European Union.

Under IFRS, the  Statement of Recommended  Practice (SORP) issued  by
the Association of Investment Companies has no formal status, but the
Group has taken the guidance of  the SORP into account to the  extent
that is appropriate and compatible with IFRS.
The accounting policies  are unchanged  from those used  in the  last
annual financial statements except where otherwise stated.




2. INCOME                                                2009    2008
   Income from investments:                             £'000   £'000
   Franked dividends from listed  or quoted investments   742     959
   Unfranked income from overseas dividends                47      93
   Income from listed fixed interest securities            60      34
                                                          849   1,086



  Other income:
  Bank interest receivable  27      25

                           876   1,111

  Interest on VAT reclaim   49       -

                           925   1,111




3. INVESTMENT MANAGEMENT FEES AND OTHER          2009                    2008
   EXPENSES
                                        Revenue Capital Total   Revenue Capital Total
                                          £'000   £'000 £'000     £'000   £'000 £'000
   Investment management fees
                                             80      80   160       169     169   338
   - monthly                                  -       -     -         -       -     -

   - performance
                                             80      80   160       169     169   338
   Administration fees                       31       -    31        60       -    60
   Custodian's fees                          14       -    14        14       -    14
   Registrar's fees                           7       -     7        11       -    11
   Directors' fees                           96       -    96        76       -    76
   Consultancy payment to broker             19       -    19        59       -    59
   Auditors' fees - audit of the             24       -    24        18       -    18
   Company
          and of the consolidated
   financial
          statements
          Tax advice                        (8)       -   (8)         5       -     5
   Miscellaneous expenses                    34       -    34        39       -    39
   Total other expenses                     217       -   217       282       -   282



4.          ORDINARY DIVIDENDS

                                                         2009   2008
                                                        £'000   £'000
Dividends reflected in the financial
statements:
Final dividend paid for the year 2008 at 3.15p (2007:
3.10p)                                                    408     460

Dividends not reflected in the financial statements:
Proposed final dividend for the year 2009 at 3.25p
(2008: 3.15p) and special dividend at 1.75p (2008:
Nil)                                                      648     408



If approved  by the  Annual General  meeting, the  final and  special
dividends will  be  paid on  23  July  2009 to  shareholders  on  the
register at the close of business on 19 June 2009.



5.         EARNINGS PER SHARE

Earnings per  share  are based  on  the loss  of  £11,622,457  (2008:
£6,380,123) attributable    to  the weighted  average  of  12,995,045
(2008: 14,697,174) ordinary shares of  25p in issue during the  year,
excluding shares held in Treasury.

Supplementary information is  provided as  follows: revenue  earnings
per share  are  based  on  the  revenue  profit  of  £879,243  (2008:
£61,808); capital earnings  per share  are based on  the net  capital
losses of £12,501,700 (2008: £6,441,931), attributable to  12,995,045
(2008: 14,697,174) ordinary shares of 25p.



6.         RELATED PARTY TRANSACTIONS

Mr Barstow is  a director both  of the Company  and of the  Manager.
Fees payable to  the Manager  are detailed  in note  3 above.   Other
payables include  accruals  of a  monthly  management fee  of  £8,978
(2008: £17,688) and an administration fee of £1,721 (2008:  £3,464).
No performance fee  was accrued  (2008: £Nil).   All figures  include
VAT.



7.         FINANCIAL INFORMATION

The financial  information for  2009 is  derived from  the  statutory
accounts for  2009,  which will  be  delivered to  the  registrar  of
companies  following  the  company's  Annual  General  Meeting.   The
statutory accounts for 2008 have  been delivered to the registrar  of
companies.  The auditors have reported on the 2008 and 2009 accounts;
their reports were unqualified and did not include a statement  under
Section 237(2) or (3) of the Companies Act 1985.

The Annual Report for the year ended 28 February 2009 was approved on
5 June 2009.   It will  be posted to  shareholders and  will be  made
available on the Manager's website.

This announcement contains regulated information under the Disclosure
Rules and Transparency Rules of the FSA.

The Annual General Meeting will be held on 15 July 2009 at 12.00 noon
at 145-157 St. John Street, London, EC1V 4RU.


5 June 2009

Secretary and registered office:
Cavendish Administration Limited
145-157 St John Street
London
EC1V 4RU

Tel: [phone]

---END OF MESSAGE---




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