AG Growth Income Fund

AG Growth Income Fund

March 22, 2005 09:00 ET

Ag Growth Income Fund Reports Results for the Period Ended December 31, 2004


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: AG GROWTH INCOME FUND

TSX SYMBOL: AFN.UN

MARCH 22, 2005 - 09:00 ET

Ag Growth Income Fund Reports Results for the Period
Ended December 31, 2004

ROSENORT, MANITOBA--(CCNMatthews - March 22, 2005) - Ag Growth Income
Fund (TSX:AFN.UN) today reported its financial results for its first
fiscal period ended December 31, 2004.

Results for the 283-day Period Ended December 31, 2004

The Fund was inactive until its acquisition of Ag Growth on May 18,
2004. The financial results for the 283-day period ended December 31,
2004 include the results of operations of Ag Growth for the 228-day
period from May 18, 2004 to December 31, 2004.

For the 283-day period ended December 31, 2004, the Fund reported
revenue of $42.4 million and earnings before interest, taxes,
depreciation, and amortization of $11.1 million. During the period the
Fund generated distributable cash of $1.0058 per unit and declared
regular distributions, in accordance with the Fund's targeted monthly
distributions, of $0.8079 per unit. In addition, the Fund declared two
special distributions totaling $0.1380 per unit. The special
distributions were the result of the Fund's operational success in the
third and fourth quarters, resulting in its taxable income exceeding
expectations. The special distributions ensure the Fund will not be
liable for income taxes in respect of this income.

Overview of Results

The favourable results reported for the period ended December 31, 2004
are attributable to a number of factors. The Fund was able to capitalize
on its strong market share in the U.S. and take advantage of excellent
crop conditions. The Fund also benefited from an increase in new product
revenue, primarily due to the continued success of its new auger and bin
load-out lines. Finally, price increases implemented throughout 2004 in
response to rising input costs, and a trend towards larger, more
expensive units, resulted in higher per unit revenue. "We are very
pleased with our results," said Rob Stenson, President and CEO of Ag
Growth Income Fund, "We had a very strong finish in all of our key U.S.
markets. We are encouraged looking towards fiscal 2005, as a combination
of positive market sentiment and a dealer network eager to replenish
their inventory levels has resulted in significant order backlogs".

Profile of Ag Growth Income Fund

Ag Growth Income Fund (the "Fund") was established under the laws of the
Province of Ontario on March 24, 2004 to acquire approximately 72% of
the partnership units of AGX Holdings Limited Partnership ("AGHLP")
which, in turn, acquired, directly and indirectly, all of the securities
and assets of Ag Growth Industries Inc. ("Ag Growth"), which conducts
business in the grain handling, storage and conditioning equipment
market. Subsequent to the initial public offering, an additional 630,022
trust units were issued to provide the Fund with approximately 78% of
the partnership units of AGHLP. The owners of Ag Growth retain a 22%
interest as consideration for the acquisition of Ag Growth.

About Ag Growth Income Fund

Ag Growth is a leading manufacturer of portable grain handling equipment
including augers, belt conveyors and numerous other grain handling
accessories. Ag Growth has a leading North American sales, marketing
and distribution system within the short-line farm equipment industry,
including approximately 1,400 dealers and distributors, in 48 states and
nine provinces.

Non-GAAP measures

References to "EBITDA" are to earnings before interest, income taxes,
depreciation, and amortization. Management believes that, in addition to
net income or loss, EBITDA is a useful supplemental measure in
evaluating its performance. Specifically, management believes that
EBITDA is the appropriate measure from which to make adjustments to
determine the Fund's distributable cash. EBITDA is not a financial
measure recognized by Canadian generally accepted accounting principles
("GAAP") and does not have a standardized meaning prescribed by GAAP.
Management cautions investors that EBITDA should not replace net income
or loss as an indicator of performance, or cash flows from operating,
investing, and financing activities as a measure of the Fund's liquidity
and cash flows. The Fund's method of calculating EBITDA may differ from
the methods used by other issuers.

Forward-Looking Statements

The statements contained in this news release that are forward-looking
are based on current expectations, and are subject to a number of
uncertainties and risks, and actual results may differ materially.
These uncertainties and risks include, but are not limited to, the
dependence of Ag Growth Income Fund on the operations and assets
currently owned by Ag Growth Industries Limited Partnership, the degree
to which Ag Growth Industries Limited Partnership and its affiliates are
leveraged, the fact that cash distributions are not guaranteed and will
fluctuate with Ag Growth Industries Limited Partnership's financial
performance, dilution, restrictions on potential future growth, the risk
of unitholder liability, competitive pressures (including price
competition), changes in market activity, the cyclicality of the farm
equipment industry, seasonality of the business, poor weather
conditions, international operations and foreign currency fluctuations,
legal proceedings, commodity price and raw material exposure, dependence
on key personnel, and environmental, health and safety and other
regulatory requirements. Further information about these and other
risks and uncertainties can be found in the disclosure documents filed
by Ag Growth Income Fund with the securities regulatory authorities,
available at www.sedar.com.


Consolidated Financial Statements

Ag Growth Income Fund

December 31, 2004


AUDITORS' REPORT

To the Unitholders of

Ag Growth Income Fund

We have audited the consolidated balance sheet of the Ag Growth Income
Fund as at December 31, 2004 and the consolidated statements of
earnings, unitholders' equity and cash flows for the 283-day period then
ended. These financial statements are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Fund as at
December 31, 2004 and the results of its operations and its cash flows
for the 283-day period then ended in accordance with Canadian generally
accepted accounting principles.



"Ernst & Young LLP"

Winnipeg, Canada,
March 11, 2005. Chartered Accountants


Ag Growth Income Fund
CONSOLIDATED BALANCE SHEET

As at December 31, 2004

$
---------------------------------------------------------------------

ASSETS (notes 10 and 11)
Current
Cash and cash equivalents (note 4) 6,736,141
Restricted cash (note 15) 265,788
Accounts receivable 4,515,053
Inventory (note 6) 15,473,577
Prepaid expenses and other assets 958,425
---------------------------------------------------------------------
Total current assets 27,948,984
---------------------------------------------------------------------
Property, plant and equipment (note 7) 5,623,174
---------------------------------------------------------------------
Other assets
Goodwill (note 3) 32,888,891
Intangible assets (note 8) 53,144,658
Deferred financing costs (note 9) 454,559
Future tax assets (note 13) 563,000
Deferred foreign exchange loss 47,900
---------------------------------------------------------------------
87,099,008
---------------------------------------------------------------------
120,671,166
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 4,044,845
Income taxes payable 75,593
Customer deposits 3,825,171
Distributions payable 2,789,041
Long-term incentive plan (note 15) 265,788
Current portion of long-term debt (note 11) 33,495
---------------------------------------------------------------------
Total current liabilities 11,033,933
Long-term debt (note 11) 20,068,593
---------------------------------------------------------------------
Total liabilities 31,102,526
Commitments (notes 16 and 18)
Unitholders' equity 89,568,640
---------------------------------------------------------------------
120,671,166
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes

On behalf of the Board of Trustees:
(signed) Rod Senft (signed) John R. Brodie, FCA
Trustee Trustee


Ag Growth Income Fund

CONSOLIDATED STATEMENT OF EARNINGS

For the 283-day period ended December 31, 2004
(including Ag Growth's results of operations for the
228-day period ended December 31, 2004 (note 2))


$
---------------------------------------------------------------------

Sales 42,404,586
Cost of goods sold 22,683,058
---------------------------------------------------------------------
Gross margin 19,721,528
---------------------------------------------------------------------
Expenses
Selling, general and administration 7,246,922
Professional fees 678,554
Research and development 290,502
Long-term incentive plan 265,788
Capital taxes 236,321
Other income (138,963)
---------------------------------------------------------------------
8,579,124
---------------------------------------------------------------------
Earnings before the following 11,142,404
Interest expense
Short-term debt 122,767
Long-term debt 565,700
---------------------------------------------------------------------
Earnings before amortization and income taxes 10,453,937
---------------------------------------------------------------------
Amortization of intangible assets 855,342
Amortization of deferred financing costs 206,452
Amortization of property, plant and equipment 504,734
---------------------------------------------------------------------
1,566,528
---------------------------------------------------------------------
Earnings before income taxes 8,887,409
---------------------------------------------------------------------
Provision for income taxes (note 13)
Current 37,000
Future 127,000
---------------------------------------------------------------------
164,000
---------------------------------------------------------------------
Net earnings for the period 8,723,409
---------------------------------------------------------------------
---------------------------------------------------------------------

Basic and diluted net earnings per unit $0.91
---------------------------------------------------------------------
---------------------------------------------------------------------

Basic and diluted weighted average number
of units outstanding 9,630,000
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes


Ag Growth Income Fund

CONSOLIDATED STATEMENT OF UNITHOLDERS' EQUITY

For the 283-day period ended December 31, 2004
(including Ag Growth's results of operations for the
228-day period ended December 31, 2004 (note 2))

Unitholders' Accumulated Accumulated
capital earnings distributions Total
$ $ $ $
---------------------------------------------------------------------
(note 12)

Issuance of
initial subscriber
units 30 - - 30
Redemption of
initial subscriber
units (30) - - (30)
Issuance of units
on initial
public offering
(note 3) 69,040,000 - - 69,040,000
Issuance costs
(note 3) (6,345,752) - - (6,345,752)
Issuance of
AGHLP units as
consideration
on acquisition
of Ag Growth
(note 3) 27,260,000 - - 27,260,000
Net earnings for
the period - 8,723,409 - 8,723,409
Distributions
declared - - (9,109,017) (9,109,017)
---------------------------------------------------------------------
Balance,
December 31,
2004 89,954,248 8,723,409 (9,109,017) 89,568,640
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes


Ag Growth Income Fund

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 283-day period ended December 31, 2004
(including Ag Growth's results of operations for the
228-day period ended December 31, 2004 (note 2))

$
---------------------------------------------------------------------

OPERATING ACTIVITIES
Net earnings for the period 8,723,409
Add (deduct) charges (credits) to operations
not requiring a current cash payment (receipt)
Amortization 1,566,528
Deferred foreign exchange loss (47,900)
Future income taxes 127,000
Gain on sale of property, plant and equipment (16,419)
Long-term incentive plan 265,788
---------------------------------------------------------------------
10,618,406
---------------------------------------------------------------------
Net change in non-cash working capital
balances related to operations
Accounts receivable 7,781,221
Inventory (34,470)
Prepaid expenses and other assets (487,740)
Accounts payable and accrued liabilities (1,347,304)
Income taxes payable (note 13) (1,357,012)
Customer deposits 3,291,839
---------------------------------------------------------------------
7,846,534
---------------------------------------------------------------------
Cash provided by operating activities 18,464,940
---------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisition of property, plant and equipment (730,790)
Proceeds from sale of property, plant, and equipment 42,776
Acquisition of Ag Growth Industries Inc. (note 3) (32,133,771)
Transfers to restricted cash for long-term
incentive plan (265,788)
---------------------------------------------------------------------
Cash used in investing activities (33,087,573)
---------------------------------------------------------------------

FINANCING ACTIVITIES
Decrease in bank indebtedness (5,266,052)
Repayment of long-term debt (32,899,936)
Issuance of long-term debt 20,119,967
Increase in deferred financing costs on long-term debt (661,011)
Initial public offering of fund units,
net of expenses (note 3) 62,694,248
Distributions paid (6,319,976)
Redemption of Class D preferred shares of Ag Growth (16,000,000)
Payment of dividend on Class D preferred shares
of Ag Growth (308,466)
---------------------------------------------------------------------
Cash provided by financing activities 21,358,774
---------------------------------------------------------------------

Net increase in cash during the period 6,736,141
Cash position, beginning of period -
---------------------------------------------------------------------
Cash position, end of period 6,736,141
---------------------------------------------------------------------
---------------------------------------------------------------------

Supplemental cash flow information
Interest paid 680,606
Income taxes paid (note 13) 1,394,013
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes


Ag Growth Income Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004


1. ORGANIZATION AND NATURE OF BUSINESS

Ag Growth Income Fund (the "Fund") is an unincorporated, open-ended,
limited purpose trust established under the laws of the Province of
Ontario by a Declaration of Trust made as at March 24, 2004. The Fund
conducts business in the grain handling, storage, and conditioning
market. Each unitholder participates pro rata in distributions of net
earnings and, in the event of termination, participates pro rata in the
net assets remaining after satisfaction of all liabilities. Income tax
obligations related to the distribution of net earnings by the Fund are
the obligations of the unitholders.

2. BASIS OF PRESENTATION

The Fund prepares its consolidated financial statements in accordance
with Canadian generally accepted accounting principles. These
consolidated financial statements reflect the Fund's results of
operations for the 283-day period ended December 31, 2004 (including the
results of Ag Growth's operations for the 228-day period from May 18,
2004 to December 31, 2004). As the Fund commenced operations on March
24, 2004, no comparative information is provided.

3. ISSUANCE OF FUND UNITS AND ACQUISITION

On May 5, 2004, the Fund filed a final prospectus for the sale of
6,904,000 units at $10 per unit for aggregate proceeds of $69,040,000.
The costs of issuance were $6,345,752 resulting in net proceeds of
$62,694,248. On May 18, 2004, in conjunction with the initial public
offering, the Fund acquired indirectly all of the securities and assets
of Ag Growth Industries Inc. ("Ag Growth") and repaid certain
indebtedness of Ag Growth. Concurrently, Ag Growth amalgamated with its
subsidiaries and continued under the name Ag Growth.

The acquisition has been accounted for by the purchase method with the
results of Ag Growth's operations included in the Fund's earnings from
the date of acquisition (the consolidated statement of earnings includes
the results of Ag Growth's operations for the 228-day period from May
18, 2004 to December 31, 2004). The consolidated financial statements
reflect the assets and liabilities of Ag Growth at assigned fair values
as follows:



$
------------------------------------------------------------------------
Net assets acquired
Accounts receivable 12,296,274
Inventory 15,439,107
Prepaid expenses and other assets 470,685
Property, plant and equipment 5,423,475
Future tax assets 690,000
Intangible assets
Brand name 19,000,000
Distribution network 35,000,000
Goodwill 32,888,891
Bank indebtedness (5,266,052)
Accounts payable and accrued liabilities (5,925,481)
Income taxes payable (1,432,605)
Dividends payable (308,466)
Long-term debt (32,882,057)
Redeemable preferred shares (16,000,000)
------------------------------------------------------------------------
59,393,771
------------------------------------------------------------------------
------------------------------------------------------------------------

Consideration given
Cash 32,133,771
Class B Exchangeable Units of AGX Holdings
Limited Partnership (note 12) 8,000,000
Class C Exchangeable Subordinated Units of
AGX Holdings Limited Partnership (note 12) 19,260,000
------------------------------------------------------------------------
59,393,771
------------------------------------------------------------------------
------------------------------------------------------------------------


Supplemental cash flow information

Details of sources and use of cash upon issuance of Fund units and
acquisition of securities and assets of Ag Growth are as follows:



$
------------------------------------------------------------------------
Aggregate proceeds from issuance of Fund units 69,040,000
Costs of issuance (6,345,752)
Proceeds from long-term debt 20,000,000
Financing costs (661,011)
82,033,237
Debt retirement (32,841,000)
Redemption of Class D redeemable preferred shares (16,000,000)
Payment of costs associated with the transaction (750,000)
Dividends paid on Class D redeemable preferred shares (308,466)
------------------------------------------------------------------------
Cash consideration given on acquisition of Ag Growth 32,133,771
------------------------------------------------------------------------
------------------------------------------------------------------------


4. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies are summarized below:

Principles of consolidation

The consolidated financial statements include the accounts of the Fund
and its wholly-owned subsidiaries Ag Growth Operating Trust, AGX
Holdings Inc., AGX Holdings Limited Partnership ("AGHLP"), Ag Growth
Industries Limited Partnership, Ag Growth, Westfield Distributing Ltd.
and Westfield Distributing (North Dakota) Inc. All material intercompany
balances and transactions have been eliminated. The financial statements
consolidate 100% of the assets and liabilities of Ag Growth as at
December 31, 2004 and 100% of the revenues and expenses of the
operations of Ag Growth for the period from May 18, 2004 to December 31,
2004.

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid money market
funds with maturities of less than three-months.

Inventory

Inventory is comprised of raw material and finished goods. Raw material
is recorded at the lower of cost and replacement cost. Finished goods
are recorded at the lower of cost, which includes direct costs and an
allocation of direct manufacturing overhead, and net realizable value.
Cost is determined on a first-in, first-out basis.

Property, plant and equipment

Property, plant and equipment are recorded at cost, net of amortization.
Amortization is provided over the estimated useful lives of the assets
using the following rates and methods:



Buildings 4% - 10% declining balance
Leasehold improvements 20% straight line
Furniture and fixtures 20% declining balance
Automotive equipment 20% - 30% declining balance
Computer equipment 30% declining balance
Manufacturing equipment 20% - 30% declining balance


Goodwill

Goodwill represents the amount paid to acquire Ag Growth in excess of
the fair value of the net identifiable assets acquired. Goodwill is not
subject to amortization. Goodwill is tested for impairment at least
annually by comparing the fair value of its reporting unit to its
carrying value. The carrying value of goodwill is written down to fair
value if the carrying value of the reporting unit's goodwill exceeds its
fair value.

Intangible assets

Intangible assets are comprised of Ag Growth's brand name, which is
considered to have an indefinite life, and Ag Growth's distribution
network, which is being amortized over 25 years on a straight-line
basis. Indefinite life intangible assets are tested for impairment at
least annually by comparing their fair values to their carrying values.
The carrying value of an indefinite life intangible asset is written
down to its fair value if its carrying value exceeds its fair value.

Impairment of property, plant and equipment and finite life intangible
assets

Impairment of property, plant and equipment and finite life intangible
assets is recognized when an event or change in circumstances causes the
asset's carrying value to exceed the total undiscounted cash flows
expected from its use and eventual disposition. The impairment loss is
calculated by deducting the fair value of the asset from its carrying
value.

Deferred financing costs

Deferred financing costs are amortized on a straight-line basis over the
two-year term of the related debt financing.

Income taxes

The Fund is a mutual fund trust for income tax purposes and therefore is
not subject to tax on income distributed to unitholders. Taxes payable
on income of the Fund distributed to unitholders is the responsibility
of individual unitholders.

The Fund's corporate subsidiaries use the liability method of accounting
for income taxes. Under this method, assets or liabilities are
recognized for the future income tax consequences of temporary
differences between the carrying amounts of assets and liabilities and
their tax bases. Future income taxes are measured using the
substantively enacted tax rates expected to be in effect in the years in
which those temporary differences are expected to reverse. Future income
tax benefits are recognized when realization is considered more likely
than not.

Foreign currency translation

The Fund follows the temporal method of accounting for the translation
of its integrated foreign subsidiary and foreign currency transactions.
Monetary assets and liabilities denominated in foreign currencies are
translated to Canadian dollars at the exchange rates in effect at the
consolidated balance sheet date. Non-monetary assets and liabilities
denominated in foreign currencies are translated to Canadian dollars at
their historical exchange rates. Revenue and expenses denominated in
foreign currencies are translated to Canadian dollars at the monthly
rate of exchange. Gains and losses on translation are reflected in net
earnings for the period.

Revenue recognition

The Fund recognizes revenue when the risks and rewards of ownership in
the products have transferred to its customer and collection is
reasonably assured. Subject to the terms of the contract, these criteria
are generally met when the products are shipped, freight on board
shipping point. For products on consignment, revenue is recognized upon
the sale of the product by the consignee. Provision is made at the time
revenue is recognized for estimated product returns and warranties.

Research and development

Research expenses are charged to earnings in the period they are
incurred. Development expenses are charged to earnings unless the Fund
believes the costs meet generally accepted criteria for deferral and
amortization.

Leases

Leases are classified as either capital or operating. Leases which
transfer substantially all the benefits and risks of ownership of the
property to the Fund are accounted for as capital leases. Capital lease
obligations reflect the present value of future lease payments,
discounted at the appropriate interest rate. All other leases are
accounted for as operating leases wherein rental payments are expensed
as incurred.

Net earnings per unit

Net earnings per unit is based on the consolidated net earnings for the
period divided by the weighted average number of units outstanding
during the period. Diluted earnings per unit is computed in accordance
with the treasury stock method and based on the weighted average number
of units and dilutive unit equivalents.

Long-term incentive plan

Under the terms of the long-term incentive plan ("LTIP"), 10% to 20% of
cash distributions in excess of an established threshold are contributed
to a pool of funds set aside to purchase units of the Fund in the
market. The cost is accrued as an expense in the period when cash
distributions exceed the thresholds established by the LTIP.

Derivative financial instruments

Derivative financial instruments are utilized by the Fund in the
management of its foreign currency and interest rate exposures. The
Fund's policy is not to utilize derivative financial instruments for
trading or speculative purposes.

The Fund formally documents all relationships between hedging
instruments and hedged items, as well as its risk management objective
and strategy for undertaking various hedge transactions. This process
includes linking all derivatives to specific anticipated sales
transactions and long-term debt on the consolidated balance sheet. The
Fund also formally assesses, both at the hedge's inception and on an
ongoing basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values
or cash flows of hedged items.

The Fund purchases forward foreign exchange contracts to hedge
anticipated sales to customers in the United States and the related
accounts receivable. Foreign exchange translation gains and losses
on foreign currency denominated derivative financial instruments used to
hedge anticipated U.S. dollar denominated sales are recognized as an
adjustment of the revenues when the sale is recorded. For forward
foreign exchange contracts used to hedge anticipated U.S. dollar
denominated sales and the collection of the related accounts receivable,
the portion of the forward premium or discount on the contract relating
to the period prior to consummation of the sale is also recognized as an
adjustment of the revenues when the sale is recorded; and the portion of
the premium or discount that relates to the resulting account receivable
is amortized over the expected period to collection of the accounts
receivable.

The Fund also enters into interest rate swaps in order to reduce the
impact of fluctuating interest rates on its long-term debt. These swap
agreements require the periodic exchange of payments without the
exchange of the notional principal amount on which the payments are
based. The Fund designates its interest rate hedge agreements as hedges
of the underlying debt. Interest expense on the debt is adjusted to
include the payments made or received under the interest rate swaps.

Realized and unrealized gains or losses associated with derivative
instruments, which have been terminated or cease to be effective prior
to maturity, are deferred under other current, or non-current, assets or
liabilities on the consolidated balance sheet and recognized in earnings
in the period in which the underlying hedged transaction is recognized.
In the event a designated hedged item is sold, extinguished or matures
prior to the termination of the related derivative instrument, any
realized or unrealized gain or loss on such derivative instrument is
recognized in earnings.

The Fund also uses foreign currency swap agreements to manage its cash
positions. The Fund's foreign currency swap agreements do not qualify
for hedge accounting. These swaps are measured at their fair value and
recorded on the consolidated balance sheet. Changes in the fair value of
the swaps are recognized in earnings in the corresponding period.

Use of estimates

The preparation of financial statements in accordance with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingencies at the consolidated balance
sheet date and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from these estimates.

5. CHANGE IN ACCOUNTING POLICY

On January 19, 2005 the Canadian Institute of Chartered Accountants
issued Emerging Issues Committee Abstract 151 ("EIC 151"), "Exchangeable
Securities Issued by Subsidiaries of Income Trusts". The abstract sets
out the conditions that must be met in order to present exchangeable
securities representing the retained interest in a subsidiary of an
income trust as part of unitholders' equity. Management has determined
that the characteristics of the Class B and C Exchangeable units of
AGHLP, a subsidiary of the Fund, satisfy the conditions of EIC 151 and
are therefore appropriately presented as part of unitholders' equity
rather than as a non-controlling interest. As required, the Fund has
chosen to adopt the provisions of this abstract for the 283-day period
ended December 31, 2004. The implementation of this abstract results in
an increase in net earnings for the period ended December 31, 2004 of
$1,908,721, an increase in unitholders' equity of $21,070,870 and a
decrease in non-controlling interest on the balance sheet of $22,979,591.



6. INVENTORY

$
------------------------------------------------------------------------
Raw materials 4,080,743
Finished goods 11,392,834
------------------------------------------------------------------------
15,473,577
------------------------------------------------------------------------
------------------------------------------------------------------------


7. PROPERTY, PLANT AND EQUIPMENT

2004
--------------------------------
Accumulated Net book
Cost amortization value
$ $ $
---------------------------------------------------------------------

Land 611,315 - 611,315
Buildings 2,940,739 80,893 2,859,846
Leasehold improvements 10,486 2,942 7,544
Furniture and fixtures 83,543 10,831 72,712
Automotive equipment 1,197,541 183,447 1,014,094
Computer equipment 285,842 60,667 225,175
Manufacturing equipment 998,442 165,954 832,488
---------------------------------------------------------------------
6,127,908 504,734 5,623,174
---------------------------------------------------------------------
---------------------------------------------------------------------


8. INTANGIBLE ASSETS

2004
--------------------------------
Accumulated Net book
Cost amortization value
$ $ $
---------------------------------------------------------------------

Distribution network 35,000,000 855,342 34,144,658
Brand name 19,000,000 - 19,000,000
---------------------------------------------------------------------
54,000,000 855,342 53,144,658
---------------------------------------------------------------------
---------------------------------------------------------------------


9. DEFERRED FINANCING COSTS

2004
--------------------------------
Accumulated Net book
Cost amortization value
$ $ $
---------------------------------------------------------------------

661,011 206,452 454,559
---------------------------------------------------------------------
---------------------------------------------------------------------


10. BANK INDEBTEDNESS

The Fund has an operating facility of $15 million, increasing to $18
million for the period May 31 to September 30. The facility bears
interest at rates of prime plus 0.25%, 0.75% or 1.25% per annum based on
performance calculations. The effective interest rate during the period
was 4.50%. At December 31, 2004, no amount was outstanding under this
facility. Collateral for the operating facility includes a general
security agreement over all assets and first position collateral
mortgages on land and buildings.



11. LONG-TERM DEBT

$
---------------------------------------------------------------------

Term loan, matures May 2006, extendible annually
for additional one-year terms at the lender's
option, interest payable monthly at prime plus
0.25%, 0.75% or 1.25% per annum based on
performance calculations. As described in note
16, the Fund has entered into a swap contract
that effectively fixes the Fund's interest rate
at 3.07% plus 1.25%, 1.75% or 2.25% per annum
based on performance calculations. The effective
interest rate during the period was 4.50% and
after consideration of the effect of the interest
rate swap was 4.32%. 20,000,000
GMAC loans, 0% maturing in 2007 and 2008, with monthly
payments of $2,791. Vehicles financed are pledged as
collateral. 102,088
---------------------------------------------------------------------
20,102,088
Less current portion 33,495
---------------------------------------------------------------------
20,068,593
---------------------------------------------------------------------
---------------------------------------------------------------------


Under the agreement for the term loan, the Fund is required to
maintain certain financial covenants. As at December 31, 2004, the
Fund is in compliance with the applicable financial covenant terms.


Principal repayments due within the next four fiscal years are as
follows:

$
---------------------------------------------------------------------
2005 33,495
2006 20,033,495
2007 27,008
2008 8,090
---------------------------------------------------------------------
20,102,088
---------------------------------------------------------------------
---------------------------------------------------------------------


Collateral for the term loan and operating facility (note 10)
includes a general security agreement over all assets and first
position collateral mortgages on land and buildings.


12. UNITHOLDERS' CAPITAL

Unitholders' capital is comprised of the following:

Class B Class C
Fund Exchangeable Exchangeable Total
Trust units of units of Unitholders'
units AGHLP AGHLP capital
$ $ $ $
---------------------------------------------------------------------

Issuance of initial
subscriber units 30 - - 30
Redemption of initial
subscriber units (30) - - (30)
Issuance of units on
initial public
offering
(note 4) 69,040,000 - - 69,040,000
Issuance costs
(note 4) (6,345,752) - - (6,345,752)
Issuance of
units of AGHLP
as consideration
on acquisition
of Ag Growth
(note 4) - 8,000,000 19,260,000 27,260,000
Exchange of
units 6,189,130 (6,189,130) - -
---------------------------------------------------------------------
Balance,
December 31,
2004 68,883,378 1,810,870 19,260,000 89,954,248
---------------------------------------------------------------------
---------------------------------------------------------------------


Class B Class C
Fund Exchangeable Exchangeable
Trust units of units of
units AGHLP AGHLP
# # #
---------------------------------------------------------------------

Issuance of initial
subscriber units 3 - -
Redemption of initial
subscriber units (3) - -
Issuance of units on initial
public offering (note 4) 6,904,000 - -
Issuance of units of AGHLP
as consideration on
acquisition of Ag Growth
(note 4) - 800,000 1,926,000
Exchange of units 618,913 (618,913) -
---------------------------------------------------------------------
Balance, December 31, 2004 7,522,913 181,087 1,926,000
---------------------------------------------------------------------
---------------------------------------------------------------------


The Fund Declaration of Trust provides that an unlimited number of trust
units may be issued. Each trust unit represents an equal undivided
beneficial interest in the Fund and any distributions from the Fund.
Each trust unit is transferable, entitles the holder thereof to
participate equally in distributions of the Fund, is not subject to
future calls or assessments, entitles the holder to rights of redemption
and entitles the holder to one vote at all meetings of unitholders.

The Fund Declaration of Trust also provides for the issuance of an
unlimited number of Special Voting Units. The Special Voting Units are
only issuable for the purpose of providing voting rights to the holders
of Exchangeable LP Units or Subordinated LP Units. Each unit is entitled
to one vote on matters related to the Fund. The Special Voting Units are
not entitled to any interest or share in the Fund or in any distribution
from the Fund. There is no value attached to these units. At December
31, 2004, there were 2,107,087 Special Voting Units outstanding, which
were attached to the outstanding Class B Exchangeable LP Units of AGHLP
and the Class C Exchangeable Subordinated LP Units of AGHLP.

The Class B Exchangeable LP Units of AGHLP are exchangeable for trust
units of the Fund at the option of the holder on a one-for-one basis at
any time. During the period, 618,913 Class B Exchangeable LP Units of
AGHLP, with a value of $6,189,130, were exchanged into 618,913 Units of
the Fund.

The Class C Subordinated Exchangeable LP Units of AGHLP are exchangeable
for Class B Exchangeable LP Units of AGHLP on a one-for-one basis at the
option of the holder after December 31, 2009 and by AGHLP on the
subordination end date which can be no earlier than June 30, 2006, and
is determined based on certain earnings and cash distribution thresholds
of the Fund.

13. INCOME TAXES

Income tax obligations relating to distributions from the Fund are the
obligations of the unitholders and accordingly, no provision for income
taxes on the income of the Fund has been made. A provision for income
taxes is recognized for Ag Growth. Ag Growth is subject to tax,
including large corporation tax.

The provision for income taxes varies from the amount that would be
expected if computed by applying the Canadian federal and provincial
statutory income tax rates to the earnings before income taxes as shown
in the following table:



283-day
period ended
December 31,
2004
------------------
$ %
---------------------------------------------------------------------

Earnings before income taxes 8,887,409
Temporary differences and non-tax
deductible expenses 565,566
Earnings subject to tax in the hands
of unitholders (9,109,017)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income of subsidiary companies 343,958
---------------------------------------------------------------------

Provision for income taxes 127,000 37
Large corporation tax 37,000 11
---------------------------------------------------------------------
Income tax provision 164,000 48
---------------------------------------------------------------------
---------------------------------------------------------------------

Significant components of the Fund's future tax assets are shown
below:


$
---------------------------------------------------------------------

Future tax assets
Financing costs 377,000
Non-capital loss (expires in 2014) 186,000
---------------------------------------------------------------------
563,000
---------------------------------------------------------------------
---------------------------------------------------------------------


Cash paid for income taxes of $1,394,013 includes amounts paid towards
Ag Growth's taxes payable for the 137-day period ended May 17, 2004.

14. DISTRIBUTIONS TO UNITHOLDERS

Distributions of $0.95 per unit of the Fund and per Class B and Class C
Exchangeable units of AGHLP, totalling $9,109,017 were declared for the
283-day period ended December 31, 2004.

15. LONG TERM INCENTIVE PLAN

Key senior management of the Fund are eligible to participate in the
Fund's LTIP. The purpose of the LTIP is to provide eligible participants
with compensation opportunities that encourage ownership of units of the
Fund, enhance the Fund's ability to attract, retain and motivate key
personnel and reward key senior management for significant performance
and associated growth in distributions. Pursuant to the LTIP, the Fund
sets aside a pool of funds based upon the amount by which the Fund's
distributions exceed cash distribution thresholds (as defined in the
LTIP plan documents). A trustee then purchases units of the Fund in the
market with such pool of funds and holds these units until such time as
ownership vests to each participant. The LTIP is administered by the
Corporate Governance and Compensation Committee.

The Board of Trustees of the Fund or the Corporate Governance and
Compensation Committee has the power to, among other things, determine
those individuals who participate in the LTIP and determine the level of
participation of each participant.

The Fund has recorded an accrual of $265,788 with respect to purchases
of units to be made in the market. An equal amount of cash has been
restricted for this purpose.

16. FINANCIAL INSTRUMENTS

The Fund has the following financial instruments: cash and cash
equivalents, restricted cash, accounts receivable, accounts payable and
accrued liabilities, distributions payable, long-term debt, an interest
rate swap arrangement, and forward foreign exchange contracts. It is
management's opinion that the Fund is not exposed to significant credit
risks arising from these financial instruments.

Currency exposures

Risk from foreign exchange arises as a result of variations in exchange
rates between the Canadian and the U.S. dollar. The Fund has entered
into foreign exchange contracts to hedge its foreign currency exposure
on anticipated U.S. dollar sales transactions and the collection of the
related accounts receivable. At December 31, 2004, the Fund had
outstanding forward foreign exchange contracts as follows:



Settlement dates Face value Average rate
$U.S. $Cdn
---------------------------------------------------------------------

March 2005 to December 2005 18,500,000 1.3121
March 2006 to December 2006 18,500,000 1.3227
---------------------------------------------------------------------
---------------------------------------------------------------------


Interest rate exposures

The Fund is subject to risks associated with fluctuating interest rates
on its long-term debt. To manage this risk, the Fund has entered into,
for hedging purposes, an interest rate swap transaction with a Canadian
chartered bank. The swap transaction expires on May 4, 2006. The swap
transaction involves the exchange of the underlying floating interest
rate of prime plus 0.25% to 1.25% per annum for an effective fixed
interest rate of 3.07% plus 1.25% to 2.25% per annum based on
performance calculations. The notional amount of the swap transaction at
December 31, 2004 was $20,000,000.

Fair value

At December 31, 2004, the carrying value of the Fund's financial
instruments approximates their carrying value with the exception of
derivative financial instruments. At December 31, 2004, a cash payment
of $63,418 would have been due to settle the interest rate swap
agreement. The unrealized gain on forward foreign exchange contracts was
$3,588,689.


17. SEGMENTED DISCLOSURE

The Fund operates in one business segment related to the manufacturing
and distributing of portable grain handling equipment. Geographic
information about the Fund's revenues is based on the product shipment
destination. Assets are based on their physical location as at the
period end:



Property,
plant and
equipment,
Revenues goodwill
for the and
283-day intangible
period ended assets at
December 31, December 31,
2004 2004
$ $
---------------------------------------------------------------------

Canada 10,079,209 91,420,726
United States 29,962,416 235,997
International 2,362,961 -
---------------------------------------------------------------------
42,404,586 91,656,723
---------------------------------------------------------------------
---------------------------------------------------------------------


18. COMMITMENTS

The Fund has entered into various operating leases for office equipment
and vehicles. Minimum annual lease payments required in aggregate and
over the next five fiscal years are as follows:



$
---------------------------------------------------------------------

2005 274,852
2006 171,274
2007 109,985
2008 67,321
2009 14,151
---------------------------------------------------------------------
637,583
---------------------------------------------------------------------
---------------------------------------------------------------------


In addition, the Fund is committed to a lease for equipment over a 5
year period with total lease payments of approximately $587,000. The
lease terms will be finalized in 2005.

19. SUBSEQUENT EVENT

On March 14, 2005, the Fund entered into an agreement to acquire
substantially all of the assets of The Edwards Group of Companies, a
leading manufacturer of agricultural equipment, for cash consideration
in the amount of $20.0 million. In conjunction with the acquisition, the
Fund has reached an agreement to offer for sale on a "bought deal" basis
a private placement of Trust Units priced at $13.50 per unit for gross
proceeds of approximately $21.5 million. The Fund's estimated expenses
in connection with the acquisition and the offering are $1.5 million.
The offering is subject to receipt of Toronto Stock Exchange approval
and other customary conditions, and is scheduled to close on March 31,
2005, subject to the concurrent closing of the Edwards acquisition.

AG GROWTH INCOME FUND

MANAGEMENT'S DISCUSSION AND ANALYSIS

MARCH 21, 2005

This Management's Discussion and Analysis should be read in conjunction
with the audited consolidated financial statements and accompanying
notes ("Financial Statements") of Ag Growth Income Fund for the initial
283-day period ended December 31, 2004. Results are reported in Canadian
dollars unless otherwise stated and have been prepared in accordance
with Canadian generally accepted accounting principles.

OVERVIEW OF THE FUND

Ag Growth Income Fund (the "Fund") is an unincorporated, open-ended,
limited purpose trust established under the laws of the Province of
Ontario by a Declaration of Trust made as at March 24, 2004. On May 5,
2004, the Fund filed a final prospectus for the sale of 6,904,000 units
at $10 per unit. In conjunction with the IPO, the Fund acquired
indirectly all of the securities and assets of Ag Growth Industries Inc.
("Ag Growth"), which conducts business in the grain handling, storage,
and conditioning market. As consideration for the acquisition, the
owners of Ag Growth received, in addition to cash, 800,000 Class B
Exchangeable units and 1,926,000 Class C Exchangeable Subordinated units
of AGX Holdings Limited Partnership ("AGHLP"), a wholly owned subsidiary
of the Fund. The units of the Fund and the Class B and Class C units of
AGHLP participate pro rata in the distributions of net earnings.
Subsequent to the date of the offering, a total of 630,022 Class B units
of AGHLP have been exchanged for 630,022 units of the Fund. The owners
of Ag Growth currently retain a 22% interest in the Fund as well as
holding 2,095,978 Special Voting Units (1).

As at March 21, 2005, the following units of the Fund were issued and
outstanding:



Fund units 7,534,022
Class B Exchangeable units 169,978
Class C Exchangeable Subordinated units 1,926,000
--------------
Total units that participate pro rata in distributions 9,630,000
--------------
--------------

Special Voting Units (1) 2,095,978
--------------
--------------


(1) The Fund has issued a Special Voting Unit for each Class B and
Class C unit outstanding. The Special Voting Units are not entitled to
any interest or share in the Fund, or in any distribution from the Fund,
but are entitled to vote on matters related to the Fund.

Ag Growth Income Fund units trade on the Toronto Stock Exchange under
the symbol AFN.UN.

BASIS OF MANAGEMENT'S DISCUSSION AND ANALYSIS

The Fund was inactive until its acquisition of Ag Growth on May 18,
2004. Included in the Fund's results of operations are the results of Ag
Growth's operations for the 228-day period from the date of acquisition
to December 31, 2004. Comparative results provided, for purposes of
Management's Discussion and Analysis, are Ag Growth's results of
operations for the nine-month period ended December 31, 2003.
Comparative results for a 228-day period ended December 31, 2003 are not
available for Ag Growth. Therefore, to provide meaningful information to
the reader, the following Management Discussion and Analysis will refer
to the Combined Operating Results of the Fund for the nine-month period
ended December 31, 2004 which are comprised of the operations of the
Fund for the 283 day period ended December 31, 2004 (which includes only
228 days of active operations from May 18 to December 31, 2004), and Ag
Growth's results of operations from April 1 to May 17, 2004 (the
"combined operating results"). The combined operating results will be
compared to Ag Growth's results of operations for the nine-month period
ended December 31, 2003. Readers are cautioned that the combined
operating results presented are not the results of the Fund for the
283-day period ended December 31, 2004 and have been presented only to
provide the reader with additional information to enhance the
comparability of operating results to Ag Growth's nine-month period
ended December 31, 2003.

The table below reconciles the operating results reported by the Fund to
the combined operating results for the nine-month period ended December
31, 2004 that includes the operations of Ag Growth for the period April
1 - May 17, 2004. Other than transactions related to the initial public
offering on May 18, 2004, there are no unusual items in either Ag
Growth's or the Fund's results for the nine-month period ended December
31, 2004.



SUMMARY FINANCIAL INFORMATION

Ag Growth Combined Ag Growth
The Fund (Pre Fund) operating (Pre Fund)
results

283 Day April 1 -
Period May 17, Nine-month Nine-month
December 31, 2004 period period
2004(a) December 31, December 31,
2004 2003

Sales $42,404,586 $8,654,417 $51,059,003 $43,871,318
Cost of sales 22,683,058 4,608,315 27,291,373 22,433,809
-------------------------------------------------------
Gross margin 19,721,528 4,046,102 23,767,630 21,437,509
Operating
expenses 8,579,124 1,993,422 10,572,546 9,040,759
-------------------------------------------------------
EBITDA before
IPO expenses 11,142,404 2,052,680 13,195,084 12,396,750
IPO expenses 0 1,401,750 1,401,750 0
-------------------------------------------------------
EBITDA(b) 11,142,404 650,930 11,793,334 12,396,750
Amortization 1,566,528 101,671 1,668,199 1,142,157
Interest expense 688,467 384,654 1,073,121 3,274,298
Write-off deferred
finance fees 0 0 0 1,749,156
-------------------------------------------------------
Earnings before
tax 8,887,409 164,605 9,052,014 6,231,139
Tax expense
(recovery) 164,000 (184,557) (20,557) 3,544,501
-------------------------------------------------------
Net earnings $ 8,723,409 $ 349,162 $ 9,072,571 $ 2,686,638
-------------------------------------------------------
-------------------------------------------------------

Net earnings
per unit $0.91 N/A N/A N/A

(a) The Fund was inactive until its acquisition of Ag Growth on
May 18, 2004. Included in the Fund's results of operations are
the results of Ag Growth's operations for only the 228-day period
from the date of acquisition, May 18, 2004, to December 31, 2004.

(b) See discussion of non-GAAP measures.


December 31, 2004 December 31, 2003

Total assets $120,671,166 $102,561,321
Total long-term liabilities $20,068,593 $45,486,755


For the period May 18 to December 31, 2004, the Fund generated
distributable cash of $1.0058 per unit and declared regular
distributions, in accordance with the Fund's targeted monthly
distributions, of $0.8079 per unit. In addition, the Fund declared two
special distributions totalling $0.1380 per unit. With respect to the
283-day period ended December 31, 2004, the table below summarizes the
distributions declared for trust units of Ag Growth and for Class B
Exchangeable limited partnership units and Class C Subordinated limited
partnership units of AGX Holdings Limited Partnership:




Trust units $ 7,033,487
Class B Exchangeable units 253,727
Class C Exchangeable Subordinated units 1,821,803
---------------
$ 9,109,017
---------------
---------------


OPERATING RESULTS

Impact of Foreign Exchange

The average exchange rate used by the Fund to record its US Dollar
denominated sales decreased significantly in 2004 compared to 2003. As a
result, sales for the three and nine months ended December 31, 2004 were
negatively impacted by foreign exchange, compared to the same periods in
2003.

Historically, Ag Growth has entered foreign exchange contracts to
mitigate foreign exchange risk. In fiscal 2004, foreign exchange
contracts totalled USD $14.0 million with an average rate of $1.3279. In
2003, foreign exchange contracts totalled USD $12.8 million with an
average rate of $1.5957. Largely as a result of the differing hedge
rates, the company's effective exchange rate on sales for the nine
months ended December 31, 2004 is significantly lower than for the
comparable period in 2003.

The effect of foreign exchange on the three-month periods ended December
31, 2004 and 2003 is slightly less significant than for the nine-month
periods then ended. Ag Growth did not apply hedge accounting in fiscal
2003 and consequently 2003 sales at the favourable hedge rate had all
been recorded by the end of the third quarter. As a result, sales in the
fourth quarter of 2003 were recorded at an average rate of approximately
$1.36. This compares to an average exchange rate on sales of
approximately $1.24 for the three months ended December 31, 2004.

Sales

Combined sales for the nine-month period ended December 31, 2004
increased 16.4% over the same period in 2003. The significant increase
was largely the result of the Fund's ability to capitalize on the record
U.S. corn crop using its sizable market share and its widespread
distribution network. The Fund also benefited from an increase in new
product revenue, primarily due to the continued success of its new auger
and bin load-out lines. Finally, price increases implemented throughout
2004 in response to rising input costs, and a trend towards larger, more
expensive units, has resulted in higher per unit revenue. The increase
also reflects a recovery from the poor market conditions experienced in
the first half of 2003. It is important to note that the increase was
achieved even though US Dollar denominated sales were recorded at
considerably lower exchange rates in 2004, and despite poor crop
conditions in Western Canada.

Expenses

Gross margin as a percentage of sales for the nine-month periods ended
December 31, 2004 and 2003 were 46.5% and 48.9% respectively. As a
percentage of sales, the decline in gross margin was expected and is
largely due to the impact of recording US Dollar denominated sales at a
lower exchange rate. Gross margin in 2004 has also been negatively
impacted by rising steel costs, as there is a delay between the time the
higher input costs are incurred and the time the price increases
implemented to offset the higher input costs appear in the Fund's
results.

Combined operating expenses for the nine-months ended December 31, 2004
increased $1.5 million over the same period in 2003. The increase was
the result of higher salary expenses of $0.7 million that related
largely to higher earnings based bonus accruals, a $0.6 million increase
in professional fees that related primarily to the successful defence of
a patent infringement lawsuit, a $0.3 million increase in warehousing
costs that related largely to the addition of a new warehouse in
Illinois, and an accrual to the Fund's long term incentive plan of $0.3
million. These increases were offset by lower capital taxes of $0.3
million and the elimination of management fees payable prior to the IPO
that totalled $0.5 million in the nine-months ended December 31, 2003. A
number of smaller miscellaneous items accounted for the remaining change.

Included in the results of the Ag Growth period April 1 to May 17, 2004
is the accrual of $1.4 million of IPO related costs. No unusual expenses
were recorded in the 283-day period ended December 31, 2004.

Net earnings and EBITDA (see discussion of non-GAAP measures)

For the nine-months ended December 31, 2004, EBITDA before IPO costs as
a percentage of sales was 25.8%, compared to 28.3% for the nine-month
period ended December 31, 2003. The decrease in EBITDA percentage
compared to 2003 was expected and is primarily the result of recording
US Dollar denominated transactions at a lower exchange rate. Also,
EBITDA in 2004 has been negatively impacted by rising steel costs, as
there is a delay between the time the higher input costs are incurred
and the time the price increases implemented to offset the higher input
costs appear in the Fund's results. As a percentage of sales, EBITDA
after IPO costs decreased from 28.3% to 23.1% for the nine months ended
December 31, 2003 and 2004 respectively.

Upon completion of the IPO on May 18, 2004, the Fund retired the
existing debt obligations of Ag Growth and entered into a new credit
facility with a single lender. The credit facility includes term debt of
$20 million and an operating facility of $15 million, increasing to $18
million for the period May 31 to September 30 each year. Both facilities
bear interest at rates based on performance calculations. For the
228-day period ended December 31, 2004, the Fund's effective interest
rate on both its term debt and operating facility was 4.5%, which is in
line with management expectations.

Amortization for the 228-day period ended December 31, 2004 of $1.6
million includes the amortization of intangible assets of $0.9 million,
the amortization of deferred financing costs of $0.2 million, and the
amortization of property, plant and equipment of $0.5 million.

The Fund is a mutual fund trust for income tax purposes and therefore is
not subject to tax on income distributed to unitholders. The
manufacturing business operations of the Fund are carried out within a
limited partnership. Income from the limited partnership is not subject
to tax but flows through to the holders of the partnership units, which
include the Fund. The Fund's distributions are taxable in the hands of
the unitholders. As a result of the Fund's structure, tax expense is
recorded only for the Fund's subsidiary corporation, Ag Growth. The
recorded tax expense of $164,000 for the nine months ended December 31,
2004 represents taxes payable on the net income allocated to Ag Growth
through its ownership in AGLP after deductions for interest expense and
capital taxes.

Net earnings for the nine-month period ended December 31, 2004 were $8.7
million, or $0.91 per basic and diluted unit.



Quarterly Financial Information

2004 2004 2004
Fourth Quarter Third Quarter Second Quarter(a)

Total sales $13,915,323 $21,154,339 $7,334,924
Net earnings $ 1,798,911 $5,483,492 $1,441,006
Net earnings per unit $0.19 $0.57 $0.15


(a) Includes the results of Ag Growth's operations only for the 44-day
period May 18, 2004 to June 30, 2004. See "Basis of Management's
Discussion and Analysis".

Interim period revenues and earnings historically reflect some
seasonality. The third quarter is typically the strongest primarily due
to high in-season demand at the farm level. Historically, revenues and
earnings in the first, second, and fourth quarters are relatively
similar. Distributable cash generated per unit will also typically be
highest in the third quarter.

The Fund's collections of accounts receivable are weighted towards the
third and fourth quarters. This collection pattern, combined with
seasonally high sales in the third quarter, result in accounts
receivable levels increasing throughout the year and peaking in the
third quarter. In order to ensure the Fund has adequate supply
throughout its distribution network in advance of the in-season demand
experienced primarily in the third quarter, inventory levels must be
gradually increased throughout the year. Accordingly, inventory levels
increase in the first and second quarters and then begin to decline in
the third and fourth quarters as sales levels exceed production.

As a result of these working capital movements, historically, Ag
Growth's use of its bank revolver is higher in the first and second
quarters. The revolver balance begins to decline in the third quarter as
collections of accounts receivable increase and inventory levels begin
to decrease. Ag Growth has generally fully repaid its revolver balance
by early in the fourth quarter.

FOURTH QUARTER

Sales for the three-months ended December 31, 2004 were $13.9 million,
an increase of 15.2% over the same period in 2003. The significant
increase was largely the result of high preseason demand, as the Fund's
U.S. distribution network began the process of rebuilding their
inventory levels for 2005 after a very strong 2004 harvest season. Sales
in the fourth quarter also benefited from the continued success of the
Fund's new auger and bin load-out lines, and from an extended harvest in
certain areas of the U.S. The strong fourth quarter sales in 2004 were
slightly offset by a decrease in Canadian sales compared to 2003.

Gross margin as a percentage of sales increased to 45.2% for the three
months ended December 31, 2004, from 38.6% for the same period in 2003.
Gross margin in the fourth quarter of 2004 benefited from the impact of
price increases implemented earlier in the year to offset rising input
costs, as well as from the efficiencies gained from higher volumes.
These margin gains were offset by the impact of a lower effective US
exchange rate.

Operating expenses for the three-month period ended December 31, 2004
were $3.8 million, up from $2.8 million for the same period in 2003. The
increase in 2004 was largely the result of a $0.4 million increase in
professional fees related primarily to the successful defence of a
patent infringement lawsuit. Salary expense increased $0.4 million due
to higher earnings based bonus accruals, and the Fund accrued $0.3
million in the fourth quarter related to its long-term incentive plan.
These increases were partially offset by a $0.2 million decrease in
capital taxes.

EBITDA as a percentage of sales for the three-months ended December 31,
2004 was 17.8%, compared to 15.5% for the three-month period ended
December 31, 2003. The increase in EBITDA percentage compared to 2003 is
primarily the result of a stronger gross margin offset by an increase in
operating expenses as described above.

In the three months ended December 31, 2004, the Fund generated $14.4
million from operating activities. As the Fund's collections of accounts
receivable are weighted towards the fourth quarter, cash generated from
the reduction of accounts receivable in the quarter totalled $12.0
million. The Fund also received $3.1 million in customer deposits
related to orders to be shipped in 2005. During the three months ended
December 31, 2004, the Fund had capital expenditures of $0.3 million
that related primarily to purchases of manufacturing equipment and a
semi tractor unit. During the period the Fund paid off its bank revolver
of $4.2 million and ended the period with a cash balance of $6.8 million.

CASHFLOW AND LIQUIDITY

On May 5, 2004, the Fund filed a final prospectus for the sale of
6,904,000 units at $10 per unit for aggregate proceeds of $69,040,000.
The costs of issuance were $6,345,752 resulting in net proceeds of
$62,694,248. On May 18, 2004, in conjunction with the initial public
offering, the Fund acquired indirectly, all of the securities and assets
of Ag Growth, which conducts business in the grain handling, storage and
conditioning equipment market. The owners of Ag Growth received cash and
Class B Exchangeable units and Class C Exchangeable Subordinated units
of AGHLP as consideration for the acquisition of Ag Growth, and retained
a 28% interest in the Fund as well as holding 2,760,000 Special Voting
Units. The Special Voting Units are not entitled to any interest or
share in the Fund, or in any distribution from the Fund, but are
entitled to vote on matters related to the Fund. In the period May 18,
2004 to December 31, 2004, 618,913 Class B Exchangeable units were
exchanged into 618,913 trust units of the Fund. Subsequent to December
31, 2004, 11,109 Class B Exchangeable Units were exchanged into 11,109
units of the Fund. Currently, the previous owners of Ag Growth hold a 22
% interest in the Fund as well as holding 2,095,978 Special Voting Units.

During the period May 18, 2004 to December 31, 2004, the successful
completion of the Fund's business cycle was reflected in the $18.5
million generated from operating activities. During the period the Fund
had capital expenditures of $0.7 million that related primarily to the
purchases of two semi-tractor units, a forklift, a trailer, and
manufacturing equipment. In the period from May 18 to December 31, 2004,
the Fund paid off its bank revolver of $5.3 million and ended the period
with a cash balance of $6.8 million.



CONTRACTUAL OBLIGATIONS

Total 2005 2006

Long-term debt $20,102,088 $ 33,495 $20,033,495
Operating leases 637,583 274,852 171,274
---------- ------- ----------
Total obligations $20,739,671 $308,347 $20,204,769
----------- -------- ------------
----------- -------- ------------


2007 2008 2009
Long-term debt $ 27,008 $ 8,090 $ 0
Operating leases 109,985 67,321 14,151
------- ------ ------
Total obligations $136,993 $75,411 $14,151
-------- ------- -------
-------- ------- -------


On May 18, 2004 the Fund entered a two-year, non-amortizing, $20 million
term loan facility that upon maturity is extendible annually for twelve
months at the lenders option. The operating leases relate to vehicle,
equipment, and warehouse facility leases entered in the normal course of
business. In addition, the Fund is committed to a lease for equipment
over a five-year period with total lease payments of approximately
$587,000. The lease terms will be finalized in 2005.

TRANSACTIONS WITH RELATED PARTIES

Under the terms of the long term incentive plan ("LTIP"), 10% to 20% of
cash distributions in excess of an established threshold are contributed
to a pool of funds set aside to purchase units of the Fund in the
market. The cost is accrued as an expense in the period when cash
distributions paid or payable exceed the thresholds established by the
LTIP. As at December 31, 2004, a total of $265,788 has been accrued for
the LTIP.

DISTRIBUTIONS

Distributions are paid at the end of the month that follows the month
when the cash was earned. Consistent with the distribution amount
anticipated in the IPO, the Fund declared distributions to public
unitholders of $6.0 million for the 283-day period ended December 31,
2004, including $2.4 million in the three-month period ended December
31, 2004. Furthermore, consistent with the Fund's prospectus dated May
5, 2004, the Fund declared distributions to Ag Growth's previous owners
of $1.8 million for the 283 day period ended December 31, 2004,
including $0.7 million in the fourth quarter.

The Fund may make additional distributions in excess of monthly
distributions. Distributions in respect of the month ended December 31
of each year will include such amounts as are necessary to ensure that
the Fund will not be liable for income taxes under Part I of the Tax
Act. Accordingly, on December 17, 2004 the Fund announced a special
distribution of $0.07 per unit, representing the Fund's estimate of the
distribution required to ensure the Fund was not liable for income taxes
under Part I of the Tax Act. Upon completion of the fiscal year it
became apparent that an additional special distribution was required,
and as a result the Fund announced a second special distribution of
$0.068 per unit to unitholders of record on March 31, 2005.

The Fund's policy is to make stable monthly distributions to unitholders
based on estimated distributable cash for the year. Due to the seasonal
nature of its business, it is anticipated that distributable cash
generated in the third quarter will be higher than in other quarters.
Distributable cash for the periods is calculated as follows:



283 Day Period Three-months
Ended December 31, Ended December 31,
2004(a) 2004

Net income for the period $ 8,723,409 $ 1,798,911
Amortization 1,566,528 361,405
Interest expense 688,467 250,767
Tax expense 164,000 71,500
----------- -----------

EBITDA(b) $ 11,142,404 $ 2,482,583
Less: Interest expense 688,467 250,767
Net maintenance capital expenditures 730,790 296,542
Current income taxes 37,000 21,500
---------- ---------
Distributable cash(b) $ 9,686,147 $ 1,913,774
----------- -----------
----------- -----------

Distributable cash
generated per unit $1.0058 $0.1987

Regular distributions
declared per unit $0.8079 $0.3249
Special distributions
declared per unit $0.1380 $0.1380
------- -------
Total distributions
declared per unit $0.9459 $0.4629
------- -------
------- -------

Distribution % before
special distribution 80.32% 163.51%
Distribution % including
special distribution 94.04% 232.96%

(a) The Fund was inactive until its acquisition of Ag Growth on May
18, 2004. Included in the Fund's results of operations are the
results of Ag Growth's operations for only the 228-day period
from the date of acquisition, May 18, 2004, to December 31, 2004.
(b) See discussion of non-GAAP measures below.


The table below reconciles net income to cash flow from operations:

Net income $ 8,723,409
Add charges (deduct credits) to operations not requiring
a current cash payment:
Amortization 1,566,528
Deferred foreign exchange loss (47,900)
Future income taxes 127,000
Gain on sale of property, plant and equipment (16,419)
Long term incentive plan 265,788
Add charges (deduct credits) for net change in non-cash
working capital balances related to operations 7,846,534
-------------
Cash provided by operating activities $18,464,940
-------------
-------------


CAPITAL RESOURCES

The Fund has a two-year, non-amortizing, $20 million term loan with a
single lender. The loan expires in May 2006 and is extendible annually
for additional one-year terms at the lenders option. The Fund also has
available a $15 million operating facility, increasing to $18 million
for the period May 31 to September 30. At December 31, 2004, the
operating facility was not being utilized. Interest rates on both
facilities are based on performance calculations. The Fund is party to
an interest rate swap agreement to hedge the impact of fluctuating
interest rates on its term loan.

OFF-BALANCE SHEET ARRANGEMENTS

The Fund has no off balance sheet arrangements with the exception of the
interest rate swap and foreign currency contracts discussed below in
Financial Instruments.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues and
expenses during the period. We believe the accounting policies that are
critical to our business relate to our use of estimates regarding the
recoverability of accounts receivable and the valuation of inventory,
intangibles, and goodwill. Due to the nature of Ag Growth's business and
the credit terms it provides to its customers, estimates and judgments
are inherent in the on-going assessment of the recoverability of
accounts receivable. In addition, assessments and judgments are inherent
in the determination of the net realizable value of inventories. Another
area requiring judgment includes the allocation of the purchase price at
the time of the IPO, specifically the allocation between goodwill and
other intangible assets, and the amortization period of the intangible
assets. In the normal course of its operations, the Fund may become
involved in various legal actions. The Fund maintains, and regularly
updates on a case-by-case basis, provisions when the expected loss is
both likely and can be reasonably estimated. While management has
applied judgment based on assumptions believed to be reasonable in the
circumstances, actual results can vary from these assumptions. It is
possible that materially different results would be reported using
different assumptions.

FINANCIAL INSTRUMENTS

Risk from foreign exchange arises as a result of variations in exchange
rates between the Canadian and the U.S. Dollar. Historically,
approximately 60% of Ag Growth's sales are denominated in US Dollars
while a much smaller proportion of its expenses are denominated in this
currency. The Fund has entered into foreign exchange contracts with a
Canadian chartered bank to hedge its foreign currency exposure on
anticipated US dollar sales transactions and the collection of the
related accounts receivable. At December 31, 2004, the Fund had
outstanding USD $37.0 million of forward foreign exchange contracts,
dated from March 2005 to December 2006, with a Canadian Dollar
equivalent of $48.7 million. As at December 31, 2004, the Fund has
recorded a deferred foreign exchange loss of $47,900 with respect to its
foreign exchange contracts. At December 31, 2004, the unrealized gain on
forward foreign exchange contracts was $3,588,689.

The Fund is subject to risks associated with fluctuating interest rates
on its long-term debt. To manage this risk, the Fund has entered into an
interest rate swap transaction with a Canadian chartered bank. The swap
transaction expires on May 4, 2006. The swap transaction involves the
exchange of the underlying floating interest rate for an effective fixed
interest rate of 3.07% plus 1.25% to 2.25% based on performance
calculations. The notional amount of the swap transaction at December
31, 2004 was $20.0 million. At December 31, 2004, a cash payment of
$63,418 would have been required to settle the interest rate swap.

CHANGES IN ACCOUNTING POLICIES

On January 19, 2005 the Canadian Institute of Chartered Accountants
issued Emerging Issues Committee Abstract 151 ("EIC 151"), "Exchangeable
Securities Issued by Subsidiaries of Income Trusts". The abstract sets
out the conditions that must be met in order to present exchangeable
securities representing the retained interest in a subsidiary of an
income trust as part of unitholders' equity. Management has determined
that the characteristics of the Class B and C Exchangeable units of
AGHLP, a subsidiary of the Fund, satisfy the conditions of EIC 151 and
are therefore appropriately presented as part of unitholders' equity
rather than as a non-controlling interest. As permitted, the Fund has
chosen to adopt the provisions of this abstract for the nine-month
period ended December 31, 2004. The implementation of this abstract
results in an increase in net earnings for the period ended December 31,
2004 of $1,908,721, an increase in unitholders' equity of $21,070,870
and a decrease in non-controlling interest on the balance sheet of
$22,979,591.

In an effort to harmonize Canadian GAAP with US GAAP, the Canadian
Accounting Standards Board has issued sections:

- 1530, Comprehensive Income;

- 3855, Financial Instruments-Recognition and Measurement; and

- 3865, Hedges.

Under these new standards, all financial assets should be measured at
fair value with the exception of loans, receivables and investments that
are intended to be held to maturity and certain equity investments,
which should be measured at cost. Similarly, all financial liabilities
should be measured at fair value when they are held for trading or they
are derivatives. Gains and losses on financial instruments measured at
fair value will be recognized in the income statement in the periods
they arise with the exception of gains and losses arising from:

- Financial assets held for sale, for which unrealized gains and losses
are deferred in other comprehensive income until sold or impaired; and

- Certain financial instruments that qualify for hedge accounting.

Sections 3855 and 3865 make use of "other comprehensive income". Other
comprehensive income comprises revenues, expenses, gains and losses that
are recognized in comprehensive income, but are excluded from net
income. Unrealized gains and losses on qualifying hedging instruments,
translation of self-sustaining foreign operations, and unrealized gains
or losses on financial instruments held for sale will be included in
other comprehensive income and reclassified to net income when realized.
Comprehensive income and its components will be a required disclosure
under the new standard. These new standards are effective for fiscal
years beginning on or after October 1, 2006 and early adoption is
permitted. Management has not yet determined the impact of the adoption
of these standards on the presentation of the Fund's results from
operations or financial position.

RISKS AND UNCERTAINTIES

The risks and uncertainties described below are not the only risks and
uncertainties we face. We believe that the risks mentioned are the
principal risks relating to our operations. There are other risks that
relate to the structure of the Fund. Additional risks and uncertainties
not currently known to us or that we currently deem immaterial also may
impair operations. If any of the following risks actually occur, our
business, results of operations and financial condition, and the amount
of cash available for distribution could suffer.

Industry Cyclicality

The performance of the farm equipment industry is cyclical, with sales
depending on the performance of the agricultural sector. To the extent
that the agricultural sector declines or experiences a downturn, this is
likely to have a negative impact on the farm equipment industry.

Seasonality of Business

The seasonality of the demand for Ag Growth's products results in lower
cash flow in the first three quarters of each calendar year and may
impact the ability of the Fund to make cash distributions to
Unitholders, or the quantum of such distributions, if any. No assurance
can be given that the Fund's credit facility will be sufficient to
offset the seasonal variations in Ag Growth's cash flow.

Risk of Decreased Crop Yields

Decreased crop yields due to poor weather conditions and other factors
are a significant risk affecting Ag Growth. Both reduced crop volumes
and the accompanying decline in farm incomes can negatively affect
demand for grain handling equipment.

Potential Volatility of Production Costs

Various materials and components are purchased in connection with Ag
Growth's manufacturing process, some or all of which may be subject to
wide price variation. In particular, steel purchases represented 30% of
2004 production costs, and other major components such as drivelines,
gear boxes, hydraulic motors, valves, winches, gasoline engines and
belting represented 32% of 2004 production costs. Consistent with past
and current practices within the industry, Ag Growth manages its
exposure to material and component price volatility by planning and
negotiating significant purchases on an annual basis, and passing
through to customers, most, if not all, of the price volatility. There
can be no assurance that industry dynamics will allow Ag Growth to
continue to reduce its exposure to volatility of production costs by
passing through price increases to its customers.

Commodity Prices, International Trade and Political Uncertainty

Prices of commodities are influenced by a variety of unpredictable
factors that are beyond the control of Ag Growth, including weather,
government (Canadian, United States and other) farm programs and
policies, and changes in global demand or other economic factors. The
world grain market is subject to numerous risks and uncertainties,
including risks and uncertainties related to international trade and
global political conditions.

Competition

Ag Growth experiences competition in the markets in which it operates.
Certain of Ag Growth's competitors may have greater financial and
capital resources than Ag Growth. Ag Growth could face increased
competition from newly formed or emerging entities, as well as from
established entities that choose to focus (or increase their existing
focus) on Ag Growth's primary markets. As the grain handling equipment
sector is fragmented, there is also a risk that a larger, formidable
competitor may be created through a combination of one or more smaller
competitors. Ag Growth may also face potential competition from the
emergence of new products or technology.

Business Interruption

The operation of the manufacturing facilities of Ag Growth are subject
to a number of business interruption risks, including delays in
obtaining production materials, plant shutdowns, labour disruptions and
weather conditions/natural disasters. Ag Growth may suffer damages
associated with such events that it cannot insure against or which it
may elect not to insure against because of high premium costs or other
reasons. For instance, Ag Growth's Rosenort facility is located in an
area that was affected by widespread floods experienced in Manitoba in
1997, and insurance coverage for this type of business interruption is
limited. Ag Growth is not able to predict the occurrence of business
interruptions.

Litigation

In the ordinary course of its business, Ag Growth may be party to
various legal actions, the outcome of which cannot be predicted with
certainty. One category of potential legal actions is product liability
claims. Farming is an inherently dangerous occupation. Grain handling
equipment used on farms may result in product liability claims that
require not only proper insuring of risk, but management of the legal
process as well.

Dependence on Key Personnel

Ag Growth's future business, financial condition, and operating results
depend on the continued contributions of certain of Ag Growth's
executive officers and other key management and personnel, certain of
whom would be difficult to replace.

Distribution, Sales Representative and Supply Contracts

Ag Growth typically does not enter into written agreements with its
dealers, distributors or suppliers. As a result, such parties may,
without notice or penalty, terminate their relationship with Ag Growth
at any time. In addition, even if such parties should decide to continue
their relationship with Ag Growth, there can be no guarantee that the
consideration or other terms of such contracts will continue on the same
basis.

Foreign Exchange Risk

Ag Growth generates a majority (approximately 65% in 2004) of its sales
in US dollars, but a materially smaller proportion of its expenses are
denominated in US dollars. As a result, a significant strengthening of
the Canadian dollar against the US dollar will negatively impact the
return from US dollar sales revenue. To mitigate the effects of exchange
rate fluctuation, management has implemented a hedging strategy of
purchasing forward foreign exchange contracts. Ag Growth has entered
into a series of hedging arrangements at average exchange rates of
$C1.3121 in 2005 and C$1.3227 in 2006 to mitigate the potential effect
of fluctuating exchange rates through December 2006. To the extent that
Ag Growth does not adequately hedge its foreign exchange risk, changes
in the exchange rate between the Canadian dollar and the US dollar may
have a material adverse effect on Ag Growth's results of operations,
business, prospects and financial condition.

Acquisitions and Integration of Additional Businesses

As part of its business strategy, Ag Growth may pursue select strategic
acquisitions. While Ag Growth has historically acquired businesses and
successfully integrated their operations into its existing corporate
structure, there can be no assurance that Ag Growth will find additional
attractive acquisition candidates or succeed at effectively managing the
integration of any businesses acquired in the future.

Potential Undisclosed Liabilities Associated with Acquisitions

To the extent that prior owners of businesses acquired by Ag Growth
failed to comply with or otherwise violated applicable laws, Ag Growth,
as a successor owner, may be financially responsible for these
violations. In particular, to the extent that businesses acquired by Ag
Growth have failed to make all necessary filings with applicable
governmental, regulatory or tax authorities prior to the date of their
acquisition by Ag Growth, Ag Growth may be subject to certain penalties
and/or liabilities.

Uninsured and Underinsured Losses

Ag Growth will use its discretion in determining amounts, coverage
limits and deductibility provisions of insurance, with a view to
maintaining appropriate insurance coverage on its assets and operations
at a commercially reasonable cost and on suitable terms. This may result
in insurance coverage that, in the event of a substantial loss, would
not be sufficient to pay the full current market value or current
replacement cost of its assets or cover the cost of a particular claim.

Distributions

The Fund's Declaration of Trust requires that it distribute all taxable
income earned in its fiscal period ending December 31. It may be
necessary for the Fund to estimate a special year-end distribution to
achieve this requirement. The initial distribution, if any, will be made
in December and paid to unitholders of record on December 31. Upon
completion of the annual financial statements, a final determination of
any additional distribution will be made, and the additional amount, if
any, will be paid to unitholders of record at that time. If the Fund is
required to make an additional distribution, the unitholders of record
on December 31 will be required to include the amount of the additional
distribution in their taxable income. If they are not unitholders at the
record date of the additional payment they will be required to include
the amount in their taxable income even though they do not receive the
distribution.

OUTLOOK

Current conditions point to a strong fiscal 2005 for the Fund. Market
demand is high, particularly in key U.S. markets, as the Fund's
distribution network replenishes its inventory after a very strong 2004
harvest. The Fund's product order backlog is significant, and in
anticipation of strong demand throughout 2005 the Fund has continued to
take steps to increase production capacity through automation, labour
efficiencies, and inter-divisional production opportunities. The Fund
continues to face challenges with respect to the high cost of steel and
a stronger Canadian dollar, however the impact of these developments has
been largely addressed through price increases and a foreign currency
hedging program. Although demand in the second half of 2005 will be
influenced by crop conditions, existing indicators suggest that in the
absence of severe weather patterns the Fund can look forward to sound
financial results in fiscal 2005.

PROPOSED TRANSACTION

The Fund has entered into an agreement to acquire substantially all of
the assets of The Edwards Group of Companies ("Edwards") for $20
million. Edwards is a manufacturer of agricultural equipment, largely
focused on grain aeration systems and related products. The acquisition
is to be financed through a bought deal private placement of units
priced at $13.50 per unit for estimated net proceeds of $21.5 million.
The Fund's estimated expenses in connection with the acquisition and the
offering are $1.5 million. The offering is subject to receipt of Toronto
Stock Exchange approval and other customary conditions, and is scheduled
to close on March 31, 2005, subject to the concurrent closing of the
Edwards acquisition.

NON-GAAP MEASURES

References to "EBITDA" are to earnings before interest, income taxes,
depreciation, and amortization. Management believes that, in addition to
net income or loss, EBITDA is a useful supplemental measure in
evaluating its performance. Specifically, management believes that
EBITDA is the appropriate measure from which to make adjustments to
determine the Fund's distributable cash. EBITDA is not a financial
measure recognized by Canadian generally accepted accounting principles
("GAAP") and does not have a standardized meaning prescribed by GAAP.
Management cautions investors that EBITDA should not replace net income
or loss as an indicator of performance, or cash flows from operating,
investing, and financing activities as a measure of the Fund's liquidity
and cash flows. The Fund's method of calculating EBITDA may differ from
the methods used by other issuers.

Distributable cash is a non-GAAP measure generally used by Canadian
income funds as an indicator of financial performance. The Fund defines
distributable cash as EBITDA less interest expense, maintenance capital
expenditures, and current taxes. The method of calculating the Fund's
distributable cash may differ from similar computations as reported by
similar entities and, accordingly, may not be comparable to
distributable cash as reported by such entities.

FORWARD-LOOKING STATEMENTS

This Management Discussion and Analysis may contain forward-looking
statements which reflect our expectations regarding the future growth,
results of operations, performance and business prospects, and
opportunities of the Fund. Forward-looking statements contain such words
as "anticipate", "believe", "continue", "could", "expects", "intend",
"plans" or similar expressions suggesting future conditions or events.
Such forward-looking statements reflect our current beliefs and are
based on information currently available to us. Forward-looking
statements involve significant risks and uncertainties. A number of
factors could cause actual results to differ materially from results
discussed in the forward-looking statements, including the effects, as
well as changes in national and local business conditions, decreased
crop yields, industry cyclicality, and competition. Although the
forward-looking statements contained in this MD&A are based on what we
believe to be reasonable assumptions, we cannot assure readers that
actual results will be consistent with these forward-looking statements.

ADDITIONAL INFORMATION

Additional information relating to the Fund, including all public
filings, is available on SEDAR (www.sedar.com).

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Ag Growth Income Fund
    Rob Stenson
    Investor Relations
    (204) 746-2396
    Email: robstenson@aggrowth.com
    or
    Ag Growth Income Fund
    Box 39
    Rosenort, MB R0G 1W0
    Website: www.aggrowth.com