January 7, 2002

Dear Unitholder:

The net asset value of the Fund as of December 31, 2001 was $4,293.46 per unit in Canadian dollars. This represents a 6.9% increase for the year and a 29.7% increase for the fourth quarter.

We are obviously pleased to have rebounded strongly from a brutal third quarter and to have finished the year in positive territory. The Fund's 0.7% U.S. dollar increase compares favourably to the indexes listed above. Other major indexes like the S&P 500 and the NASDAQ registered declines of 13% and 21% respectively. Clearly it was another difficult year for investors with the average U.S. diversified equity fund down 10.9% and growth funds down roughly twice this amount. We exit the year breathing a sigh of relief that a turbulent year for stocks is over and we emerge, after a bumpy ride, relatively unscathed.

A year ago following the technology stock collapse of 2000, investors harboured hopes for a return to the double-digit returns of the late nineties. Instead, hopes were dashed by very weak corporate earnings performance as well as the September 11th attacks. The result was a volatile market, which despite the surge in the 4th quarter, was down again, marking the first two year string of losses since the 1970's. Perhaps the last two years are simply reflecting a reversion to the mean for stock returns. The Dow Industrials averaged a 25% return from 1995 to 1999 - clearly unsustainable given stocks' historical long term returns of around 10%. After the past two down years the Dow now has a more normal ten year compounded return of 12%. As investors, it is worth remembering that we will be less likely to be disappointed if we keep our return expectations in check.

As to the future, the good news is that the major indexes have not had three down years in a row in sixty years. Furthermore, notwithstanding all the current trouble it would appear that the world is a safer place as the war on terrorism has been mostly won. More importantly, from an investment perspective, the U.S. economy is expected to experience at least a mild recovery in the later part of the year which should help corporate profits. So while we stand by our position that we can't time the market, the current environment for stocks appears healthier going forward. We particularly feel small stocks should do well as they are less well known and, therefore, far less expensive than their large cap counterparts.

For 2001 there is no capital gain distribution. No T3 forms will be issued to our Canadian resident unitholders. Please do not hesitate to call the office if you need any clarification.

On behalf of the Officers and the Advisory Board of Formula Growth Limited, Manager of Formula Growth Fund, please accept our best wishes for a healthy, happy and prosperous 2002!

Yours truly,