July 6, 2006

Dear Unitholder:

The net asset value of Formula Growth Fund as of June 30, 2006 was $3,797.89 per unit. For the quarter, this represents a 9.3% decrease in Canadian dollars and a 5% decrease in U.S. dollars. The strengthening Canadian dollar continues to hurt our reported Canadian dollar returns.

In the second quarter, and for the year, the Fund's U.S. dollar returns were in line with the U.S. stock market indexes listed in the table above. Our performance is ahead of the average U.S. small-cap growth manager which declined 7.3% during the second quarter and gained 4.8% in the year to date period.

Unfortunately, the second quarter was a boom-to-bust story. The quarter began with the U.S. market sharply extending the first quarter rally based on the view that the economic outlook was stable. There was a sudden shift in sentiment on May 10th when Federal Reserve officials made it clear that they would raise interest rates more than the market had expected and that inflation had become an increasing concern. The result was a very challenging market during the second quarter and much of the year's gains evaporated.

Frankly, there was really no place to hide during the turbulent, last seven weeks of the quarter. All asset categories suffered and the hardest hit areas were those which had previously provided the biggest gains. These include emerging markets and small company funds like ours. Almost overnight, it was apparent that investors wanted far less to do with any asset that was perceived to be sensitive to an economic slowdown due to rising interest rates.

Like most investors, we are not happy with the results in the second quarter. Yet, we remain optimistic that market participants have overreacted to uncertainty in the economy. We see little evidence of a significant slowdown in the global economy, runaway inflation or a collapse in corporate profits that could lead to additional big declines in stocks. In fact, more recent commentary out of the Federal Reserve has been more dovish in tone, leading some pundits to believe that after 17 straight increases in the overnight lending rate to 5 ¼ %, the Fed could be just about finished.

If this is so, we believe the outlook for Formula Growth is very good. We feel that we will see a continuation of the constructive growth environment we have experienced during the past three years that has resulted in a 16.1% U.S. dollar compounded return for the Fund. We find it is always a good opportunity for us when sentiment is weak and the portfolio valuation is low.

For those unitholders who were unable to attend our annual general meeting on May 16th, 2006, the presentation is available here. The presentation includes additional qualitative and quantitative information that may be of interest.

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,