October 8, 2005

Dear Unitholder:

The net asset value of Formula Growth Fund as of September 30, 2005 was $3,677.57 per unit. In Canadian dollars, this price reflects a 2.7% decrease for the third quarter and a 1.2% increase for the year to date period. In U.S. dollars, the Fund increased 2.7% for the third quarter and 4.9% for the first nine months of 2005. Significant strength in the Canadian dollar during the third quarter hurt our Canadian dollar returns.

One of the most notable elements about the third quarter was the strength of the Canadian currency. After weakening in the first half of the year, the dollar resumed its relentless rise against the U.S. dollar and, for that matter, against most major currencies. The dollar rose from 82 cents per U.S. dollar at June 30th to 86 cents at September 30th. This represents an impressive 5% move during the quarter alone. Unfortunately, this hurts our reported Canadian dollar results by a corresponding amount.

In the last three years, continuing strength in the Canadian dollar has reduced our reported Canadian dollar returns by a staggering 12% per year! We realize that our performance benefited nicely from the weakness in the Canadian dollar for many years but we remain stunned by the speed of the reversal in the relationship. In the last 2 ½ years, the Canadian dollar has retraced the entirety of an almost unbroken, 11 year cycle of weakening.

We mention this because the weak U.S. currency is obfuscating the otherwise good underlying results that we are achieving. This year the Fund is up 4.9% while the U.S. indexes are roughly flat and the average U.S. small-cap fund is up 3.8%. Over the past three years, we have compounded at a strong 23.3% U.S. but at just 11.1% when measured in Canadian dollars. In other words, since September 30, 2002 we are up 87% in U.S. dollars. The bottom line is that although the U.S. equity markets are grinding sideways, we feel we have been doing a fairly good job. This is particularly true in what has been a difficult climate over the past few years for U.S. growth stock managers as value and commodity funds or trusts have ruled the day.

Going forward, we are confident that we will continue to find good investment opportunities. The U.S. stock market continues to deal with the headwind of negative issues in the U.S. economy. Chief among these are the persistent pressures of rising energy prices, rising interest rates, inflation and deficits as well as the new strain of hurricanes Katrina and Rita. Yet in our 45 years of investing, we have found most of these kinds of issues have tended to be relatively temporary, measured in years, not generations. We have found that the U.S. economy is very resilient and usually adept at correcting imbalances over time.

On an administrative note, we have added a new professional to our firm, Mark Culver, to fill the position of Vice President, Business Development. Mark joins us from CAI Capital where he had been a partner since 1990. Mark will be instrumental in further building our business, particularly as we introduce the new RRSP-eligible Formula Growth Hedge Fund in January 2006.

For our taxable Canadian residents, there are no realized capital gains so far this year and it is unlikely that there will be an allocation this year. Should you require a confirmation of this towards the end of the year for tax planning purposes, please do not hesitate to contact the office directly.

Yours truly,