July 7, 2003

Dear Unitholders:

The net asset value of Formula Growth Fund as of June 30, 2003 was $2,948.60 per unit. In U.S. dollars, this represents a 31.9% increase for the second quarter and a 25.1% increase for the first half of 2003. Unprecedented strength in the Canadian dollar impacted the Fund's excellent U.S. returns for both the quarter and the half. The Canadian dollar surged 16.5% for the first six months lowering the Canadian dollar results to 21.6% and 7.3% for the quarter and year-to-date respectively.

We remind you that Formula Growth makes no attempt to hedge currency. Our sole aim is to identify a portfolio of U.S. stocks with good long term growth prospects. On that front, we have been well rewarded so far this year as we have significantly outperformed the popular indexes above as well as the majority of other money managers. In U.S. dollars, the second quarter represents the ninth best quarter we have had since we began on July 1st, 1960.

We are very pleased with these results because we have been preaching for some time that turns in the stock market often come when you least expect them and frequently arrive in sharp bursts. Unlike many growth fund managers who decided to lighten their holdings in aggressive growth stocks during the bear market we, as always, stayed fully invested in the sector. Today we are reaping the rewards while growth managers who shifted their investment style to more conservative stocks are scrambling to catch up. According to the Prudential Equity Group, only 20.8% of small-cap growth managers beat the Russell 2000 in the second quarter.

We begin the second half with the belief that there remains a compelling opportunity in the market for our niche of growth stock investing. The valuation of our portfolio remains inexpensive when contrasted with the price earnings multiple of the S&P 500 and relative to current interest rates. More importantly, our stocks are very reasonably valued when one considers the growth in earnings we are projecting. The current environment is reminiscent of others we have seen in our long history. After substantial declines, the Fund often exhibits multi-year strong gains.

As we close our 43rd year in business, we have reflected upon the tumultuous markets of the past several years and the performance of the Fund. Performance measurement is a tricky task because the results can be so affected by the conditions at the beginning and ending points of the measurement period. As an illustration, the Fund's ten year annual return is a muted 9.3%. The obvious factor at work here is the negative effect of the three year bear market on recent returns. Less obvious is that the ten year return has been equally hurt by the starting point in 1993 that saw the Fund at new highs following the very strong years of 1991 and 1992.

It is important to recognize that the difficulty of performance measurement lessens as returns normalize over the course of multiple market and economic cycles. This is evidenced by the Fund's healthy 14.4% Canadian (13.5% U.S.) annual return since 1960. The bottom line is our system and sector can be volatile over the shorter term but with time and patience our philosophy produces solid long term results.

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,