diff --git a/asteroid/state.py b/asteroid/state.py
index 605cfeac..74aac668 100644
--- a/asteroid/state.py
+++ b/asteroid/state.py
@@ -23,6 +23,10 @@ def initialize(self,module="<input>"):
         # stack of 3-tuples for stack trace of function
         # calls: (module,lineno,function name)
         self.trace_stack = [(module,1,"<toplevel>")]
+        # if an exception occurs then error_trace will point to
+        # it.  an exception handler is responsible for clearing
+        # this.
+        self.error_trace = None
 
 state = State()
 
@@ -31,10 +35,15 @@ def warning(str):
     print("Warning: {}: {}: {}".format(module, lineno, str))
 
 def dump_trace():
-    if len(state.trace_stack) == 1:
-        return
+    if state.error_trace:
+        _dump_trace(state.error_trace)
+        return        
     else:
-        print("traceback (most recent call last):")
-        for i in range(0,len(state.trace_stack)):
-            (module,lineno,fname) = state.trace_stack[i]
-            print("{}: {}: calling {}".format(module,lineno,fname))
+        _dump_trace(state.trace_stack)
+        return
+
+def _dump_trace(trace):
+    print("traceback (most recent call last):")
+    for i in range(0,len(trace)):
+        (module,lineno,fname) = trace[i]
+        print("{}: {}: calling {}".format(module,lineno,fname))
diff --git a/asteroid/test-suites/regression-tests/test138.ast b/asteroid/test-suites/regression-tests/test138.ast
new file mode 100644
index 00000000..babbed0f
--- /dev/null
+++ b/asteroid/test-suites/regression-tests/test138.ast
@@ -0,0 +1,18 @@
+-- test case for issue #209
+load system io.
+
+function goo with none do
+   throw Error("exception").
+end
+
+function foo with none do
+   let a = 1.
+   try
+      goo().
+   catch _ do
+      io @println "exception caught".
+   end
+   assert(a==1).  -- make that a is still in scope
+end
+
+foo ().
diff --git a/asteroid/version.py b/asteroid/version.py
index 6626f8c7..9e7dbc25 100644
--- a/asteroid/version.py
+++ b/asteroid/version.py
@@ -5,4 +5,4 @@
 # (c) University of Rhode Island
 ##########################################################################################
 
-VERSION = "1.1.3"
+VERSION = "1.1.4"
diff --git a/asteroid/walk.py b/asteroid/walk.py
index d8995ab5..d414dbda 100644
--- a/asteroid/walk.py
+++ b/asteroid/walk.py
@@ -4,7 +4,7 @@
 # (c) University of Rhode Island
 #########################################################################
 
-from copy import deepcopy
+from copy import deepcopy,copy
 from re import match as re_match
 
 from asteroid.globals import *
@@ -941,6 +941,15 @@ def handle_builtins(node):
         else:
             raise ValueError("unknown builtin unary operation '{}'".format(opname))
 
+#########################################################################
+def pop_stackframe(error_trace=False): 
+    # pop frame off the stack
+    state.symbol_table.pop_scope()
+    state.symbol_table.set_config(state.symbol_table.saved_configs.pop())
+    if error_trace:
+        state.error_trace = copy(state.trace_stack)
+    state.trace_stack.pop()
+
 #########################################################################
 def handle_call(obj_ref, fval, actual_val_args, fname):
     # Needed for later
@@ -1050,19 +1059,11 @@ def handle_call(obj_ref, fval, actual_val_args, fname):
     # Reset settings
     except RedundantPatternFound as r:
         debugging = old_debugging
-
-        # coming back from a function call - restore caller's env
+        # restore caller's env
         state.lineinfo = old_lineinfo
-
         # Keep debugger up to date
-        if debugging:
-            debugger.set_lineinfo(state.lineinfo)
-
-        state.symbol_table.pop_scope()
-        state.symbol_table.set_config(state.symbol_table.saved_configs.pop())
-
-        state.trace_stack.pop()
-
+        if debugging: debugger.set_lineinfo(state.lineinfo)
+        pop_stackframe()
         raise r
 
     # execute the function
@@ -1089,17 +1090,20 @@ def handle_call(obj_ref, fval, actual_val_args, fname):
         function_return_value.pop()
         return_value = val.value
 
-    # coming back from a function call - restore caller's env
+    except Exception as e:
+        # we got some other kind of exception within the function call
+        # clean up our runtime stack and rethrow
+        # Note: do not reset lineinfo, this way the state points at the source 
+        # of the exception
+        pop_stackframe(error_trace=True)
+        raise e
+
+    # all done with function call -- clean up and exit
+    # restore caller's env
     state.lineinfo = old_lineinfo
-
     # Keep debugger up to date
     if debugging: debugger.set_lineinfo(state.lineinfo)
-
-    state.symbol_table.pop_scope()
-    state.symbol_table.set_config(state.symbol_table.saved_configs.pop())
-
-    state.trace_stack.pop()
-
+    pop_stackframe()
     message_explicit("Return: {} from {}",
             [("None" if (not return_value[1]) else gen_t2s(return_value)), 
             fname],
@@ -1331,6 +1335,8 @@ def try_stmt(node):
         except PatternMatchFailed:
             pass
         else:
+            # handler found - null out error_trace
+            state.error_trace = None
             declare_unifiers(unifiers)
             walk_stmt_list(catch_stmts, step_state=stepping)
             return