July 6, 2004

Dear Unitholders:

The net asset value of Formula Growth Fund as of June 30, 2004 was $3,802.47 per unit. For the quarter, this represents a 1.9% increase in Canadian dollars and a 0.3% decrease in U.S. dollars.

The performance of the major U.S. indexes was not very inspiring in the second quarter of 2004 as only very small gains were achieved. The Fund's own performance was similarly unimpressive, down 0.3% for the three-month period. In the first half, our 2.4% U.S. dollar increase was slightly behind the average U.S. small cap growth manager who returned 3.4% but was in line with the 2.2% return of the average balanced U.S. fund manager.

In a typical small cap cycle, stocks characteristically rise rapidly off the bear market bottom and then consolidate for nine to twelve months before moving on to new highs. This consolidation process occurs because generally the easy money has been made by this stage and the market needs to transition to the next level by digesting and discounting a new set of worries. Essentially, the sentiment evolves from extraordinary fear at the market bottom to skepticism about the sustainability of the recovery.

From the March 2003 bottom through to June 30, 2004 , the Fund increased 81% in U.S. dollars. The vast majority of this advance was earned in the first 9 months through December 2003. Since then, we have been grinding sideways. It appears to us that this is a classic version of the traditional small cap cycle. We are confident that the consolidation phase that we are currently experiencing bodes well for a good run of future gains.

Today's investment climate continues to harbour numerous concerns that include global risks as well as investment specific issues. We would be remiss if we didn't at least list the worries to assure you that we have seriously considered them. At the top of the list is geopolitical uncertainty, with matters such as terrorism, high oil prices and rising interest rates not far behind. There is also apprehension over what appears to be the end of fiscal and monetary stimulus as well as nascent signs of inflation. There are those, too, who are concerned with high stock valuations, peak earnings growth rates and optimistic margin expectations. Finally, there are fears that the consumer is over-extended and ready to shift the U.S. administration to the left in the upcoming election. Without this "Wall of Worry", we at Formula would be afraid that stocks are priced for perfection. This is clearly not the case given this litany of pessimism. It is our strong belief that corporate America will successfully wrestle with these issues and the U.S. economy will yet again prove its resilience.

On an administrative note, we are delighted to announce the recent launch of a new fund, FG Limited Partnership, on May 31, 2004 with $15M in assets. This is our first new fund since Formula Growth Limited started Formula Unit Trust, our institutional fund, in 1976. FG Limited Partnership is structured as a long/short hedge fund. John Liddy is the lead portfolio manager and he is utilizing the firm's general idea flow with a somewhat more aggressive tactical approach. The highlights of this approach include taking larger individual position sizes and shorting stocks as well as using options and leverage if and when appropriate. We have been incubating this Fund for 18 months in order to refine and prove out its process. Attached is a recent interview discussing the new fund from the Financial Post. Please call René Catafago at our offices if you are interested in additional information.

For our taxable Canadian residents there are no realized capital gains so far this year. We will provide an update in the next quarterly letter.

Yours truly,