January 6, 2004

Dear Unitholder:

The net asset value of the Fund as of December 31, 2003 was $3,581.97 per unit in Canadian dollars. This represents a 30.4% increase for the year and an 8.4% increase for the fourth quarter in Canadian dollars.

While we are very satisfied with our results in Canadian dollars, the returns are far more impressive when measured in U.S. currency. In U.S. dollars, the Fund increased 59.3% for the year and 13.3% for the fourth quarter. During the year, the Canadian dollar strengthened by a startling 22% against the U.S. dollar. This raised the Canadian dollar to a ten year high. If the currency relationship had held constant for 2003, the Fund would have ended the year at $4,378 Canadian.

We are particularly pleased with our results this year since they follow the extremely difficult bear market returns achieved over the prior three years. In 2003, we substantially outperformed the popular U.S. indexes noted above as well as the majority of other money managers. According to the Lipper Index Survey, the average U.S. small cap growth fund returned 44.8% for the year while the average U.S. mid cap growth fund returned 35.4% in U.S. dollars.

Throughout the year, the fears and volatility associated with the war in Iraq, terrorism and scandals subsided as the markets focused on continued improvements in the economy and corporate earnings. In general, we expect the positive trend for equities to continue into 2004. Monetary and fiscal conditions remain very positive while the outlook for forward earnings remains healthy. That being said, we believe the real opportunity in equities in 2004 will remain with small cap growth stocks which surpassed their big cap counterparts by a two to one ratio in 2003.

We believe that a number of factors will contribute to small cap outperformance. Firstly, small cap stocks typically outperform or under-perform in cycles that are generally quite long in duration (historically 5-7 years). Secondly, there has been a decrease in the information efficiency of small cap research as large Wall Street firms have abandoned the small cap sector or tightened their coverage lists significantly. Sixty percent of publicly traded companies have little or no coverage giving research-intensive stock pickers such as ourselves an advantage. Thirdly, an improving economy has a disproportionately more positive impact on a small company's sales and profits than on those of a larger company.

Finally, despite the big move small caps have experienced this year, the sector has roughly the same valuation as the slower growing large cap stocks. For example, our portfolio sells for about the same multiple as the S&P 500 at 17 times 2004 earnings but has more than twice the expected EPS growth rate.

We caution, as always, that we have no crystal ball. There is little doubt that a number of events will occur during the year that are unanticipated and that will surprise us all. Investment success comes from having sufficient flexibility and imagination, not to mention humility, to deal with these changes as they come along.

For 2003 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 2004!

Yours truly,