EVEREADY INCOME FUND
TSX : EIS.UN

EVEREADY INCOME FUND

November 14, 2005 19:38 ET

Eveready Announces Third Quarter Financial Results

EDMONTON, ALBERTA--(CCNMatthews - Nov. 14, 2005) - Eveready Income Fund (TSX:EIS.UN)

HIGHLIGHTS:

- Revenue for the third quarter exceeds $56.4 million reflecting an increase of 185% over the same period in 2004

- Eveready reports net earnings of $3.7 million or $0.09 per unit on a diluted basis for the third quarter and $11.9 million or $0.34 per unit for the nine month period ended September 30, 2005

- Eveready increases monthly distribution to $0.04 per unit ($0.48 per unit on an annualized basis)

- Eveready completes acquisition of Allstar Oilfield Services Ltd. and related assets

- Eveready enters into letter of intent to acquire Byram Industrial Services Ltd. for $18.5 million

- In November, Eveready completes the acquisition of Canada-Wide Industries Ltd. for $7.8 million and announces an agreement to acquire the assets and business of another private Alberta-based oilfield equipment rental company for a minimum purchase price of $15.7 million

- In November, Eveready files Final Prospectus to raise $25 million to $50 million in new growth capital



SELECTED CONSOLIDATED FINANCIAL INFORMATION:

------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
$ thousands, except 2005 2004 2005 2004
per unit amounts (unaudited) (unaudited) (unaudited) (unaudited)
------------------------------------------------------------------------

Revenue $ 56,415 $ 19,787 $ 155,616 $ 64,902

Gross profit 17,805 7,434 50,593 24,018
Gross margin (%) 31.6% 37.6% 32.5% 37.0%

EBITDA(1) 7,627 2,308 23,414 6,953
EBITDA margin (%) 13.5% 11.7% 15.0% 10.7%

Net earnings (loss) 3,684 (295) 11,896 422
Per unit - basic
and diluted(2,3) 0.09 N/A 0.34 N/A
------------------------------------------------------------------------

Cash flow from
operations(1) 6,233 1,026 19,546 4,676
Per unit - basic
and diluted (2,3) 0.15 N/A 0.56 N/A
------------------------------------------------------------------------

Weighted average number
of units outstanding (2,3) 40,928 N/A 34,887 N/A
------------------------------------------------------------------------
------------------------------------------------------------------------

Notes: (1) These financial measures are identified and defined under the
section "Non-GAAP Financial Measures".
(2) Basic and diluted per unit amounts have been calculated on
the basis that all rollover limited partnership units
("Rollover LP Units") have been converted into Fund units.
(3) Per share amounts for the comparative periods ended September
30, 2004 have not been calculated as the Fund's predecessor,
Eveready Industrial Group Ltd. was a privately owned company
during those periods.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION,
RESULTS OF OPERATIONS AND CASH FLOWS
For the three and nine months ended September 30, 2005


Introduction

The following Management's Discussion and Analysis ("MD&A") was prepared as of November 14, 2005 and is provided to assist readers in understanding Eveready Income Fund's ("Eveready" or the "Fund") financial performance for the three and nine month periods ended September 30, 2005 and significant trends that may impact future performance of the Fund.

This MD&A should be read in conjunction with the accompanying unaudited consolidated interim financial statements for the three and nine month periods ended September 30, 2005 and 2004 and the notes contained therein. In addition, this MD&A should be read in conjunction with the Joint Management Information Circular of River Valley Income Fund and Eveready Industrial Group Ltd. dated February 24, 2005. The accompanying consolidated interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and the Fund's reporting currency is the Canadian dollar. Eveready is a reporting issuer in each of the provinces of Canada, except Quebec. The Fund's units trade on the Toronto Stock Exchange under the symbol "EIS.UN".

Additional information relating to the Fund, including the above Information Circular, is available on the System for Electronic Document Analysis and Retrieval ("SEDAR") web site at www.sedar.com.

This MD&A contains forward-looking statements. Please see the section "Note Regarding Forward-Looking Statements" for a discussion of the risks, uncertainties and assumptions relating to those statements. This MD&A also makes reference to certain non-GAAP financial measures to assist users in assessing the Fund's performance. Non-GAAP financial measures do not have any standard meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures are identified and described under the section "Non-GAAP Financial Measures".

Overview of the Business

Operating from 30 facilities located across Canada and two locations in the United States, Eveready is a growth oriented income fund that, through its subsidiaries, provides industrial and oilfield services, health, safety and environmental services, and oilfield equipment rental services to the energy, resource, and manufacturing sectors.

Eveready has achieved year over year growth in revenues in each of the past 10 years. This growth has provided a significant increase in operational capability, depth, and diversity. Growth in seasonally "counter-cyclic" but related business areas has also resulted in improved staffing stability which is critical to the specialized and potentially hazardous work in which Eveready is engaged. Additionally, geographic and equipment expansion has resulted in a much improved capability to field several large projects simultaneously while maintaining our high level of customer service. Eveready is committed to continue this growth, both organically and through acquisition, to maximize per-unit distributable income.

A cornerstone of our customer service is our commitment to safety. Eveready promotes behaviour-based safety through extensive training for our employees as well as basing management remuneration on safe work performance and safety leadership. The professionalism and motivation of our employees to work safely has resulted in a strong safety record for Eveready.

Acquisition of River Valley Income Fund

Pursuant to an arrangement agreement dated December 3, 2004, River Valley Income Fund ("River Valley") acquired 100% of the issued and outstanding shares of Eveready Industrial Group Ltd. ("ER Group"), effective January 1, 2005. In consideration for this purchase, River Valley issued 22,461,875 Fund units, or economically equivalent units in a subsidiary limited partnership which are indirectly exchangeable for units of the Fund ("Rollover LP Units") valued at $1.77 per unit to the former shareholders of ER Group. As a result of this arrangement, ER Group and all of its subsidiaries became, indirectly, wholly-owned by the Fund. Concurrent with the Plan of Arrangement, the Fund changed its name to "Eveready Income Fund".

Reverse Takeover Treatment

By issuing 22,461,875 Fund units or economically equivalent Rollover LP units, sufficient units of River Valley were issued so that controlling interest (approximately 74.6%) of the fund passed to the former shareholders of ER Group. As a result, the acquisition has been accounted for as a reverse takeover whereby ER Group has been treated as the purchaser, effective January 1, 2005. The accompanying consolidated interim financial statements for the three and nine month periods ended September 30, 2005 consist of the consolidated operations of ER Group and River Valley after giving effect to the reverse takeover transaction. The comparative figures reported for the three and nine month periods ended September 30, 2004 discussed in this MD&A and included in the accompanying consolidated interim financial statements are those of ER Group, the accounting acquirer.

Income Fund Reorganization

This merger was of particular significance to Eveready in that through this merger, Eveready was reorganized into a publicly traded income fund. Management believes that the reorganized structure will allow greater access to capital markets to fund the continued growth of Eveready by attracting new investors and providing a more liquid market for the units than what previously existed for ER Group shares.

Management also believes the income fund structure itself is beneficial to Unitholders in a number of ways. First, the income fund structure will allow Eveready to more efficiently handle its taxes by reducing its liability at the corporate level and thereby increasing the amount of cash available for distribution to Unitholders.

Secondly, the Fund currently intends to distribute a large portion of its available cash to its Unitholders. Not only will this provide Unitholders with a continuous stream of income, this intention demands that management have a disciplined approach to its business activities. Management must properly manage its capital to ensure that operating cash flows are maintained or increased to meet distribution expectations. This prevents management from deploying capital for questionable investments, such as out-of-core businesses or those with unproven potential.

Current Developments

A. Business Acquisitions:

During the third quarter, management continued to pursue strategic acquisitions that management believes will compliment existing services and increase Eveready's operational capability to deliver a broad offering of services to its customers. Management also expects these acquisitions to provide accretive earnings growth in the future. A summary of the major acquisitions completed or announced during the quarter and up to the date of this MD&A are as follows:

Acquisition of Allstar Oilfield Services Ltd.

Effective July 1, 2005, Eveready acquired 100% of the issued and outstanding shares of Allstar Oilfield Services Ltd. ("Allstar") and related assets used in the business of Allstar, but not previously owned by Allstar. Allstar is based in Lloydminster, Alberta, and provides a broad range of oilfield services to the energy sector including vacuum truck, pressure testing, flush-by, and hydro excavation services.

Managements believes this acquisition is an exceptional fit with Eveready allowing Eveready to expand into the Lloydminster area. Management estimates that Allstar could generate revenues in excess of $6.0 million and provide an additional $1.5 million EBITDA (see "Non GAAP Earnings Measures") to operations on an annual basis.

Acquisition of Canada Wide Industries Ltd.

Effective November 1, 2005, Eveready acquired 100% of the issued and outstanding shares of Canada Wide Industries Ltd. ("CWI"). CWI is a private Alberta-based oilfield equipment rental company that provides, among other services, access mats to distribute heavy loads over pipelines, and temporary or permanently installed bridges used for remote site logistics. This acquisition allows Eveready to significantly expand into the oilfield equipment rental industry. Management estimates that this acquisition could provide an additional $3.0 to $3.2 million EBITDA (see "Non-GAAP Earnings Measures") to operations on an annual basis with the potential to grow significantly in the future.

Eveready is pursuing additional growth opportunities in this area that will build on the above acquisition. On November 14, 2005, Eveready entered into an agreement to acquire the majority of the assets and business of another private Alberta-based oilfield equipment rental company. The assets include, among other items, well-site units, generators, truck and trailer units, and camps used for employee housing. The purchase price will be equal to the fair market value of the assets acquired, but subject to a minimum purchase price of $15.7 million. Fair market value will be determined by third party appraisers approved by the vendor and Eveready. Management estimates that the acquired assets and business will generate revenues of between $12.0 and $14.0 million and that EBITDA (see "Non-GAAP Earnings Measures") will approximate $5.0 to $6.0 million for the year ended December 31, 2006. This agreement is anticipated to close on or before December 9, 2005.

Proposed Acquisition of Byram Industrial Services Ltd.

On September 30, 2005, the Fund entered into a letter of intent to acquire 100% of the issued and outstanding shares of Byram Industrial Services Ltd. ("Byram"). Byram owns and operates the Pembina Area Landfill ("PAL") near Drayton Valley, Alberta. The PAL facility is engineered, constructed and operated to meet and exceed all government regulations associated with this type of facility.

Byram has been a provider of quality waste disposal services in the Drayton Valley area for almost 25 years. In 1999, Byram developed and constructed the PAL facility and opened its first Class IA hazardous waste cell. This Class IA landfill is one of only two facilities in the Province of Alberta. The Class IA landfill design consists of an engineered clay liner, two synthetic liners, leak detection, leachate collection system and a host of environmental monitoring programs. In 2002, Byram opened its first Class II waste cell. The Class II cells provide industry access to economical non-hazardous waste disposal within the strict environmental framework associated with a hazardous waste management facility.

The Letter of Intent contemplates a purchase price of $18,500,000. The purchase price will be payable by way of a combination of: (i) $12,000,000 in cash and (ii) $6,500,000 via the issuance of Units of Eveready at a deemed price per Unit based on the 10 day weighted average trading price of the Units of the Fund less a 10% discount. The vendor may, at its option and instead of Units, choose to receive limited partnership units of an indirect wholly owned limited partnership of Eveready. This will be an arms length transaction. As part of the proposed acquisition, Eveready will also enter into a 25 year royalty agreement with the shareholder of Byram. Royalty payments required under this agreement will be calculated at 5% of the gross revenues earned from the PAL facility.

Management expects that this will be a very profitable business for Eveready and will significantly expand Eveready's environmental services capability to dispose of waste materials in an environmentally sound manner. Management estimates that this proposed acquisition could generate revenues of between $7.0 and $10.0 million and that EBITDA (see "Non-GAAP Earnings Measures") will approximate $5.0 to $7.0 million for the year ended December 31, 2006. Completion of this acquisition is subject to a number of conditions which have not yet been satisfied.

B. Financing Growth:

A key component in achieving Eveready's growth strategy is to ensure that the Fund has sufficient capital available to realize on growth opportunities. The Fund has taken some significant steps during the quarter and up to the date of this MD&A to build up its growth capital. These developments are summarized below:

Equity Offering

Pursuant to a final prospectus dated November 10, 2005 filed with the applicable securities regulatory authorities, the Fund has qualified for a public distribution of a minimum of 5,000,000 and a maximum of 10,000,000 Fund units at a price of $5.00 per Fund unit. Under an agency agreement dated November 10, 2005 among Blackmont Capital Inc., BMO Nesbitt Burns Inc., Acumen Capital Finance Partners Limited and Sprott Securities Inc. (the "Agents") and the Fund, the Fund has appointed the Agents to offer the Units for sale on a best efforts basis, subject to compliance with all necessary legal requirements.

The Fund has agreed to pay the Agents a commission of 5.5% of the aggregate gross proceeds from the sale of the Fund units. In addition, the Fund will pay reasonable out of pocket costs of the Agents and the reasonable fees and disbursements of the Agent's legal counsel. Closing of this equity financing is expected to occur on or prior to November 23, 2005.

Debt Credit Facility

On September 30, 2005, Eveready established a $60 million revolving extendible senior secured credit facility. The purpose of the credit facility was to refinance existing term indebtedness, subordinated debt and operating leases; and to finance future capital expenditures and acquisitions. This credit facility requires payments of interest only at the Canadian dollar one month bankers' acceptance rate plus 3.25%. An additional stand-by fee calculated at an annual rate of 0.25% per annum is also required on the unused portion of the credit facility.

ANALYSIS OF OPERATING AND FINANCIAL RESULTS

Revenue

Revenue for the three months ended September 30, 2005 increased by $36.6 million or 185% to $56.4 million from $19.8 million reported for the three months ended September 30, 2004. Year-to-date, revenue increased $90.7 million or 140% to $155.6 million. This compares with revenue of $64.9 million for the same nine month period in 2004. These results reflect the significant growth that Eveready has experienced over the past year. This growth can be attributed to a number of acquisitions carried out over the past 12 months as well as organic growth in existing locations. Increases in revenue for the nine months ended September 30, 2005 resulted from:

- The acquisition of River Valley contributed an additional $36.8 million of revenue to operations;

- Revenue from industrial and oilfield services in the Provost and Whitecourt region contributed $29.7 million to the increase. Operations began in these regions as a result of the acquisition of Winterhawk Enterprises (Provost) Ltd. ("Winterhawk");

- Eveready provided more oilfield and industrial services in the Alberta Oil Sands region resulting in a revenue increase of $12.2 million compared to the comparative period;

- The acquisition of the business and assets of the ICE Joint Venture effective April 30, 2005 contributed $1.7 million of revenue to operations;

- The acquisition of Allstar and related assets effective July 1, 2005 added $1.4 million to revenue.

The remaining $8.9 million in additional revenue was achieved by providing more services across various regions through acquisitions and the expansion of existing services. This increase included approximately $3.6 million of environmental and industrial services provided at Lake Wabamum during the third quarter to assist in cleaning up a large oil spill caused by a train derailment.

Gross Profit

With its growth, the Fund increased its gross profit to $17.8 million and $50.6 million respectively for the three and nine month periods ended September 30, 2005 compared with $7.4 million and $24.0 million respectively for the same periods in 2004. Eveready's gross margin for the nine months ended September 30, 2005 decreased to 32.5% compared with 37.0% for the same nine month period in 2004. The acquisition of Winterhawk in November 2004 contributed to the majority of this decline. Winterhawk provides a significant portion of its oilfield services using third party lease operators that supplement those services provided by Winterhawk's own employees and equipment. This allows Winterhawk to maximize its growth while also retaining flexibility in managing its costs. However, services provided using third party lease operators results in a lower gross margin percentage.

Gross margin for the three months ended September 30, 2005 was 31.6%. This compares with a gross margin of 32.1% for the three months ended June 30, 2005 and 33.8% for the three months ended March 31, 2005. Eveready provides a wide variety of industrial and oilfield services and health, safety, and environmental services to its customers. The mix of these services can vary from quarter to quarter based on the seasonal market forces present in each service line. As a result, Eveready will experience a certain degree of variability in its gross margin percentage from quarter to quarter.

Expenses

Administrative and General

Administrative and general expenses were $10.2 million for the three month period ended September 30, 2005 compared with $5.1 million for the same period in 2004, an increase of $5.1 million. Administrative and general expenses increased $10.5 million to $27.2 million for the nine month period ended September 30, 2005 compared with $16.7 million for the comparative nine month period in 2004. These increases are attributable to additional salary and wage costs and other fixed expenses required to support Eveready's increased level of revenue for new and existing services. This includes additional administrative support required for River Valley, Winterhawk, the ICE Joint Venture, Allstar, and other acquisitions over the past 12 months. The Fund also incurs additional administrative costs associated with being a public income fund that were not required as a private company in fiscal 2004.

As a percentage of revenue, administrative and general expenses for the three and nine month periods ended September 30, 2005 were 18.0% and 17.5% respectively compared to 25.9% and 25.7% respectively for the same periods in 2004. Management believes that this improvement over the prior year reflects Eveready's ability to expand and grow its operations efficiently by keeping the growth in overhead costs to a minimum and benefiting from the economies of scale improvements that come with a larger revenue base.

Amortization

Amortization increased to $2.7 million and $6.7 million respectively for the three and nine month periods ended September 30, 2005 compared with $1.1 million and $3.1 million respectively for the same periods in 2004. The increases are a result of a significant increase in Eveready's property, plant and equipment over the past fiscal year to support its revenue growth. Amortization calculated as a percentage of revenue was 4.3% for the nine months ended September 30, 2005 compared with 4.9% for the same period in 2004, which is comparable.

EBITDA

EBITDA is defined as earnings before interest, taxes, amortization, loss on settlement of subordinated debt, and loss (gain) on disposal of property, plant and equipment. Management believes, in addition to net earnings, EBITDA is a useful supplemental measure as it provides an indication of the cash flows generated by the Fund's principal business activities prior to consideration of how these activities are financed or how the results are taxed in various jurisdictions. A reconciliation of EBITDA to net earnings of the Fund is provided under the section "Non-GAAP Earnings Measures".

EBITDA increased by $5.3 million to $7.6 million for the three months ended September 30, 2005 compared with $2.3 million for the comparative period in 2004. Likewise, EBITDA margin (calculated as EBITDA divided by revenue) increased to 13.5% compared with 11.7% for the comparative period in 2004. On a year-to-date basis, EBITDA increased by $16.4 million to $23.4 million or 15.0% of revenue compared with $7.0 million or 10.7% of revenue for the comparative nine month period in 2004. These increases represent the strong revenue growth of Eveready over the past year while also being able to control increases in direct costs and administrative and general expenditures.

Other Expenses

Total interest and financing costs (interest on long-term debt, subordinated debt and other debt obligations) for the three months ended September 30, 2005 was $0.9 million compared with $1.3 million for the same three months in 2004. The comparative period in 2004 includes a non-recurring interest expense of $584 thousand relating to dividends declared on redeemable preferred shares that were required to be recognized as interest expense. Excluding this item, interest and financing costs for the three months ended September 30, 2004 was $0.7 million. The increase in 2005 reflects the increases in long-term debt and bank indebtedness over the past 12 months that were required to support the Fund's growth in operating activity. However, total interest and financing costs was $0.3 million less than that reported for the three month period ended June 30, 2005. This was a direct result of Eveready's bank indebtedness being significantly lower during the current quarter. This reduction was a result of the application of $22.3 million in net cash flow after issuance costs raised in a private placement completed in June 2005.

During the three months ended September 30, 2005, the Fund recognized a loss on settlement of subordinated debt of $422 thousand. This was a non-recurring charge associated with extinguishing the Fund's subordinated debt pursuant to the establishment of a new $60 million credit facility (see "Current Developments"). The settlement of the subordinated debt, which was bearing interest at an annual rate of 18%, will result in lower interest expense being recognized in future periods.

Income Taxes

Income tax expense for the three month period ended September 30, 2005 was $146 thousand or 3.8% of earnings before income taxes. This significant decline in income tax expense is a direct result of Eveready's reorganization into an income fund.

The Fund complies with the Income Tax Act (Canada) to qualify as a mutual fund trust. As a result, the Fund is not subject to income taxes to the extent that its taxable income in a year is paid or payable to Unitholders. Accordingly, no provision for current income taxes for the Fund is made. In addition, the Fund is not subject to the recommendations of CICA section 3465 "Income Taxes", as the Fund distributes to its Unitholders all or virtually all of its taxable income that would otherwise be taxable by the Fund. The Fund intends to continue to meet the requirements under the Income Tax Act applicable to such trusts, and there is no indication that the Fund will fail to meet those requirements.

However, the Fund continues to follow the liability method of accounting for any incorporated subsidiaries that are subject to income taxes. Income tax expense recognized during the three months ended September 30, 2005 relates to on-going operations that remain within taxable incorporated subsidiaries of the Fund. Management expects that going forward, while the Fund will continue to recognize some income tax expense related to operations conducted in incorporated subsidiaries, the majority of the Fund's earnings will not be subject to corporate income taxes.

The Department of Finance (Canada) is currently conducting a consultation process regarding potential changes to how business income trusts and other flow-through entities are taxed under the Income Tax Act (Canada). At this time, it is unknown what effect, if any, the results of this process may have on the Fund's exposure to income taxes in the future. Management continues to monitor new developments in this regard.

Income tax expense for the comparative three month period in 2004 was $201 thousand. This expense resulted because interest expense of $584 thousand recognized on the redeemable preferred shares was not deductible for income tax purposes. Therefore, despite being in a loss position, Eveready did incur income tax expense during that period.

Net earnings and earnings per unit

Net earnings for the three month period ended September 30, 2005 was $3.7 million compared with a loss of $0.3 million for the comparative period in 2004. The loss in the comparative period resulted from the declaration of a dividend of $584 thousand payable on redeemable preferred shares that was classified as interest expense. Net earnings for the nine month period ended September 30, 2005 was $11.9 million compared with $0.4 million for the same period in 2004. Basic and diluted earnings per unit for the three and nine month periods ended September 30, 2005 were $0.09 and $0.34 respectively.

Earnings per unit for the three and nine month periods ended September 30, 2005 were based on the weighted average number of units outstanding during the period. Basic and diluted per unit amounts have been calculated on the basis that all outstanding Rollover LP units have been converted into Fund units. The basic and diluted weighted average number of units outstanding for the three and nine month periods ended September 30, 2005 were 40,928,042 and 34,886,813 respectively.

Earnings per share for the comparative periods of the Fund's predecessor, ER Group, for fiscal 2004 have not been disclosed as ER Group was a privately owned company during those periods.

Seasonality of Operations

The Fund's operations follow a seasonal pattern, with earnings traditionally being higher in the first three months than in the other quarters of the year. Due to this seasonality, interim earnings reported for the three months ended September 30, 2005 may not be reflective of earnings on an annual basis.



Summary of Quarterly Data

------------------------------------------------------------------------
($ thousands, except Sept June March Dec Sept June March
per unit amounts) 2005 2005 2005 2004 2004 2004 2004
------------------------------------------------------------------------
Revenue 56,415 44,016 55,185 26,948 19,787 21,378 23,737
EBITDA(1) 7,627 5,082 10,705 2,447 2,308 2,347 2,299
Net earnings 3,684 1,738 6,474 169 (295) 238 478
------------------------------------------------------------------------
Earnings per unit -
basic and diluted
(2,3) 0.09 0.05 0.21 N/A N/A N/A N/A
------------------------------------------------------------------------
------------------------------------------------------------------------

Notes: (1) EBITDA is identified and defined under the section "Non-GAAP
Financial Measures".
(2) Basic and diluted earnings per unit have been calculated on
the basis that all Rollover LP Units have been converted into
Fund units.
(3) Per share amounts for the comparative quarters ended in
fiscal 2004 have not been calculated as the Fund's
predecessor, ER Group, was a privately owned company.


Historical quarterly data for the Fund's predecessor, ER Group, prior to January 1, 2004 have not been presented in this MD&A. ER Group was a privately owned company prior to the reverse takeover of River Valley and quarterly financial statements for periods prior to 2004 are not readily available.



FINANCIAL CONDITION AND LIQUIDITY

------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL INFORMATION
($ thousands, except ratio amounts) September 30 December 31
(unaudited) 2005 2004
------------------------------------------------------------------------
Current assets $ 55,241 $ 27,836
Total assets 170,507 98,044
------------------------------------------------------------------------

Current liabilities 33,250 33,592
Total liabilities 83,877 79,117
------------------------------------------------------------------------

Unitholders' Equity 86,630 18,927
------------------------------------------------------------------------

Working capital ratio (1) 1.66 0.83
Funded Debt to total capital ratio (2) 0.40 0.67
------------------------------------------------------------------------
------------------------------------------------------------------------

Notes: (1) Working capital ratio is calculated as current assets divided
by current liabilities (see "Non-GAAP Financial Measures").
(2) Funded debt to total capital is calculated as funded debt
(bank indebtedness, long-term debt, notes payable,
subordinated debt and the current portions of long-term debt,
notes payable, and subordinated debt) divided by total
capital (funded debt plus unitholders' equity plus preferred
shares and amounts due to unitholders) - (see "Non-GAAP
Financial Measures").


Working Capital

Eveready's working capital improved from a working capital deficit of $5.7 million at December 31, 2004 to a positive working capital position of $22.0 million at September 30, 2005. Strong cash flow generated from operations during the first nine months of 2005 contributed to this improvement. In addition, Eveready completed a private placement in June that raised $22.3 million in net cash flow after issuance costs. Finally, on September 30, 2005 pursuant to the establishment of a $60 million interest-only credit facility, the current portion of long-term debt was eliminated. The new credit facility does not currently require any principal repayments.

Eveready expects its working capital to remain strong through the remainder of 2005 due to continued positive cash flow from operations. In addition, management believes that Eveready's working capital position will allow the Fund to make growth capital expenditures and pursue additional business acquisition opportunities including those that have been announced or completed subsequent to September 30, 2005.

Cash Flow from Operations

Cash flow from operations (excluding changes in working capital balances) during the three month period ended September 30, 2005 was $6.2 million compared with $1.0 million for the same period in 2004. Cash flow from operations for the nine month period ending September 30, 2005 was $19.5 million compared with $4.7 million for the same nine month period in 2004. This improvement is a result of the increase in revenue and earnings in 2005. The Fund expects to continue to generate strong cash flow from operations throughout the remainder of 2005 and into 2006.

Capital Expenditures

Eveready acquired a total of $36.6 million in additional property, plant and equipment during the nine month period ended September 30, 2005. Property, plant and equipment of $23.0 million were acquired through business acquisitions completed during the period including the acquisitions of River Valley, the ICE Joint Venture and Allstar. In addition, capital expenditures of $13.6 million were incurred to expand Eveready's servicing capability in existing markets and capital expenditures of $5.6 million were incurred to buy out existing equipment lease commitments. This significant investment in property, plant and equipment was necessary to support the growing demand for the industrial and oilfield services, and health, safety, and environmental services that Eveready provides. These capital expenditures are also reflective of Eveready's capital expenditure program which plans for the replacement of old equipment when it becomes cost prohibitive to operate due to high equipment and vehicle costs.

During the remainder of 2005 and into 2006, Eveready intends to continue to expand its fleet of industrial and oilfield service equipment to meet the anticipated growing demand for these services.

Long Term Debt and Contractual Obligations

On September 30, 2005, Eveready established a $60 million revolving extendible senior secured credit facility. The purpose of the credit facility was to refinance existing term indebtedness, subordinated debt and operating leases; and to finance future capital expenditures and acquisitions. Pursuant to the establishment of this credit facility, the Fund's subordinated debt and the majority of its other long-term debt obligations were extinguished.

This credit facility requires payments of interest only at the Canadian dollar one month bankers' acceptance rate plus 3.25%. At September 30, 2005, the effective interest rate on this credit facility was 6.07%. An additional stand-by fee calculated at an annual rate of 0.25% per annum is also required on the unused portion of the credit facility. The credit facility is secured by a first fixed charge over equipment and a second position charge over accounts receivable and inventory.

Long-term debt increased by $15.9 million to $49.9 million as at September 30, 2005 compared with long term debt of $34.0 million as at December 31, 2004. The majority of this increase resulted from the following factors:

- long-term debt obligations of $2.6 million were acquired upon the reverse takeover acquisition of River Valley;

- subordinated debt of $3.7 million was refinanced through the new credit facility;

- equipment lease commitments of $5.6 million were bought out pursuant to the establishment of the above credit facility; and

- additions to property, plant and equipment acquired during the period that were financed through long-term debt.

The Fund's contractual obligations for the next five years (12 month periods ending on September 30th) are as follows:



------------------------------------------------------------------------
Contractual
Obligations
(in thousands of CAD) 2006 2007 2008 2009 2010 Total
------------------------------------------------------------------------
Notes payable 4,443 327 84 - - 4,854
Operating leases 4,065 2,964 1,827 617 218 9,691
------------------------------------------------------------------------

Total 8,508 3,291 1,911 617 218 14,545
------------------------------------------------------------------------
------------------------------------------------------------------------


The new long-term debt credit facility does not require any principal repayments. The credit facility is renewable semi-annually subject to the mutual consent of both parties. To the extent that the credit facility is not renewed, the outstanding credit facility will be subject to a 12 month interest-only phase followed by a straight line amortization period of 30 months. Therefore, the above table excludes any repayment obligations relating to the Fund's new long-term debt credit facility.

Notes payable consist of unsecured promissory notes due to various entities. These balances were previously classified as long-term debt and amounts due to unitholders and have been reclassified to notes payable in the accompanying consolidated interim financial statements. Notes payable of $3.9 million bear interest at a rate of 6.0% and are due July 1, 2006. The remainder of the notes payable bear interest at rates of either 0.0% or 6.7% and are repayable in varying instalments until October 2007.

Unitholders' Equity

Unitholders' Equity increased by $67.7 million to $86.6 million at September 30, 2005 compared with $18.9 million at December 31, 2004. This increase results from an increase in accumulated earnings during the year as well as a significant increase in Unitholders' Capital. The notes to the accompanying consolidated interim financial statements provide a schedule showing the changes in Unitholders' Capital during the year. The increase in Unitholders' Capital results from a number of factors that include the issuance of Fund units upon the reverse take over acquisition of River Valley Income Fund, the Distribution Reinvestment Plan, acquisitions, and the equity private placement in June 2005.



----------------------------------------------------
Outstanding Unit Data

As of November 14, 2005:
----------------------------------------------------

Fund units 24,205,585
Rollover LP Units 17,178,917
----------------------------------------------------

Total 41,384,502
----------------------------------------------------
----------------------------------------------------


As at November 14, 2005, the Fund had 24,205,585 Fund units and 17,178,917 Rollover LP Units outstanding totalling 41,384,502 units on a fully-diluted basis. The Rollover LP Units were issued in conjunction with the completion of various acquisitions of the Fund, are units of subsidiary limited partnerships of the Fund and are designed to be, to the greatest extent practicable, the economic equivalent of Fund units. Rollover LP Units are non-transferable (except to certain permitted assigns) and the holders thereof are entitled to receive distributions on a per unit basis equivalent to holders of units of the Fund. When each of the Rollover LP Units were issued, the holder thereof was also issued a non-transferable (except to permitted assigns) right (a "Right") to acquire one unit of the Fund for each Rollover LP Unit held.



Cash Distributions

The following table summarizes the Fund's distributions on units of
record during the nine months ended September 30, 2005:

------------------------------------------------------------------------
$ thousands, except
per unit amounts

Distribution Distributions Net
per Distributions Reinvested Distributions
Record Date Unit ($) ($) ($) Paid ($)
------------------------------------------------------------------------

January 31, 2005 0.02 153 122 31
March 4, 2005 0.02 154 124 30
March 30, 2005 0.02 154 126 28
April 29, 2005 0.03 906 609 297
May 31, 2005 0.03 1,012 617 395
June 30, 2005 0.03 1,207 602 605
July 29, 2005 0.03 1,224 623 601
August 31, 2005 0.03 1,228 620 608
September 30, 2005 0.03 1,231 615 616
------------------------------------------------------------------------

Total 0.24 7,269 4,058 3,211
------------------------------------------------------------------------
------------------------------------------------------------------------


Cash distributions are normally paid by the Fund on a monthly basis to Unitholders of record the last business day of each month. Distributions are payable on or about the 15th day of the month following the record date. In October 2005, the Board of Trustees increased the monthly cash distribution to Unitholders to $0.04 per unit or $0.48 per unit on an annualized basis.

A portion of the distributions paid or payable to a Unitholder in 2005 will be taxable to that Unitholder. The amount taxable will be determined based on the taxable income of the Fund for the year ended December 31, 2005. Preliminarily, management estimates that the taxable portion of the distributions paid or payable in 2005 will be approximately 50% to 60% of total distributions declared. Distributions that are not taxable are considered to be a return of capital for income tax purposes and will reduce the adjusted cost base of the Fund units held. Currently, the Fund benefits from capital cost allowance deductions for income tax purposes exceeding amortization expense for financial reporting purposes. The benefit of these tax deductions flows through to the Unitholders by reducing the taxable portion of the distributions they receive.

Distribution Reinvestment Plan

During the nine months ended September 30, 2005, the Fund declared total distributions of $0.24 per unit or $7,269,000. Of this amount, there was a $4,058,000 reinvestment through the Fund's Distribution Reinvestment Plan ("DRIP"). In addition, there was a reinvestment of $58 thousand of cash distributions payable as at December 31, 2004 resulting in the issuance of a total of 849,861 Fund units for deemed proceeds of $4,116,000. Distributions declared during the three months ended March 31, 2005 were based on the number of units outstanding of River Valley prior to completion of the income trust reorganization.

The DRIP is a voluntary program that permits eligible Unitholders to reinvest monthly distributions in additional Fund units. Eligible Unitholders may participate in the DRIP by directing their broker, dealer, or investment advisor holding their units to notify the plan administrator, Computershare Trust Company of Canada Ltd., through the Canadian Depository for Securities Inc. ("CDS").

Principal Unitholder Agreement

As a term under the arrangement agreement between ER Group and River Valley, certain of the unitholders of the Fund (the "Principal Unitholders") signed a Principal Unitholder Agreement that requires each Principal Unitholder to immediately reinvest through the DRIP, 100% of any cash distributions made by the Fund on that Principal Unitholder's Fund units or Rollover LP Units prior to March 31, 2010. In addition, each Principal Unitholder is restricted from selling more than 10% of their aggregate Fund units or Rollover LP Units in any one twelve month period before March 31, 2010. Management believes that these agreements will ensure that the Fund will have sufficient growth capital to continue to expand and grow its operations. As at September 30, 2005 Principal Unitholders owned approximately 47% of the Fund's total outstanding Fund units and Rollover LP units in aggregate.

Although the Fund intends to continue making distributions to its Unitholders, these cash distributions are not assured and may be reduced or suspended. The ability of the Fund to make cash distributions and the actual amount distributed will be dependent upon, among other things, the financial performance of the Fund and its subsidiaries, their debt covenants and obligations, their working capital requirements, and their future capital requirements. In addition, the market value of the units may decline if the Fund is unable to meet its cash distribution targets in the future, and that decline may be significant.



Distributable Cash

------------------------------------------------------------------------
Three months Nine months
ended ended
September 30 September 30
2005 2005
$ thousands, except per unit amounts (unaudited) (unaudited)
------------------------------------------------------------------------
Cash Flow from operations(1) $ 6,233 $ 19,546
Principal repayment of long-term
debt and notes payable (3) (2,982) (7,668)
Maintenance capital expenditures(1) (866) (2,242)
------------------------------------------------------------------------
Cash available for distribution
and growth (c)(1) 2,385 9,636
Per unit(1) 0.06 0.28
------------------------------------------------------------------------
Distributions declared (a) 3,683 7,269
Payout ratio - including DRIP (a)/(c)(1) 154.4% 75.4%
Cash distributions declared (b) 1,825 3,211
Payout ratio - excluding DRIP (b)/(c)(1) 76.5% 33.3%
------------------------------------------------------------------------
------------------------------------------------------------------------

Notes: (1) These terms are identified and defined under the section"
Non-GAAP Financial Measures".
(2) Distributable cash information prior to January 1, 2005 is
not applicable because the Fund's predecessor,
ER Group, was a privately owned company during those periods.
(3) For the three months ended September 30, 2005, principal
repayment of long-term debt excludes those amounts refinanced
in connection with the establishment of the new $60 million
credit facility (see "Current Developments")


The excess of cash available for distribution and growth over distributions declared for the nine months ended September 30, 2005 reflects the Fund's reserves for such factors as seasonal fluctuations in working capital and future growth capital expenditures.

Pro-forma Distributable Cash

As a result of the $60 million credit facility established on September 30, 2005 (see "Current Developments"), the Fund's long-term debt no longer requires principal debt repayments. The following table illustrates what the Fund's cash available for distribution and growth and payout ratios would be both including and excluding the effect of the DRIP if there were no required principal repayments of long-term debt or notes payable.



------------------------------------------------------------------------
Three months Nine months
ended ended
September 30 September 30
2005 2005
$ thousands, except per unit amounts (unaudited) (unaudited)
------------------------------------------------------------------------
Cash Flow from operations(1) $ 6,233 $ 19,546
Maintenance capital expenditures(1) (866) (2,242)
------------------------------------------------------------------------
Cash available for distribution
and growth (c)(1) 5,367 17,304
Per unit(1) 0.13 0.50
------------------------------------------------------------------------
Distributions declared (a) 3,683 7,269
Payout ratio - including DRIP (a)/(c)(1) 68.6% 42.0%
Cash distributions declared (b) 1,825 3,211
Payout ratio - excluding DRIP (b)/(c)(1) 34.0% 18.6%
------------------------------------------------------------------------
------------------------------------------------------------------------

Notes: (1) These terms are identified and defined under the section
" Non-GAAP Financial Measures".
(2) Distributable cash information prior to January 1, 2005 is
not applicable because the Fund's predecessor, ER Group, was
a privately owned company during those periods.


Outlook and Strategy

The industrial and resources service sectors, especially in Canada, are experiencing a very tight supply / demand environment, a situation which applies to both labour and equipment. In this highly-competitive environment for services, the largest and most capable industry competitors are beginning to value at a premium those providers who are able to deliver a broad, top-quality offering. Management thus expects that Eveready's major clients will continue to provide growth opportunities in terms of both increased market share in existing businesses and geographies, as well as expansion to other related business lines and new geographical areas.

While industrial and oilfield services, health, safety and environmental services, and oilfield equipment rental services are relatively mature businesses of the Canadian infrastructure service industry in general, they remain quite fragmented (notwithstanding the efforts of several very active public and private acquisition-oriented businesses - especially in recent years - which are either focused on particular niches or intentionally diversified). Thus, while there is absolute growth potential in each of the services provided by Eveready, the potential for consolidation of industry peers and competitors also remains very high.

With nearly one third of its cash flow driven by oilsands-related activities, Eveready has already positioned itself as a leading provider of infrastructure services to the oilsands sector. Eveready thus expects to enjoy substantial growth going forward in conjunction with the substantial growth expected in oilsands infrastructure development. This includes not only with respect to large-scale infrastructure construction, but also regarding long-term infrastructure maintenance requirements.

Off-Balance Sheet Arrangements

(a) The Fund has guaranteed certain loan balances owing by key employees to a chartered bank. The loans are secured by Units of the Fund that were issued to the employees with the loan proceeds. At no time may the outstanding balance of the loans exceed the unit buy-back value. The principal balance of the loans guaranteed as at September 30, 2005 was $1,439,800.

(b) The Fund has provided certain guarantees to GE Canada Equipment Finance ("GE Finance") regarding financing that GE Finance has provided to certain contractors. The loans were provided for the purchase of specific service and automotive equipment used by the contractors in providing services to the Fund. The loans are secured by the specific equipment. The total balance of the loans guaranteed by the Fund as at September 30, 2005 was $1,031,000.

Changes in Accounting Policies

Income taxes

Effective January 1, 2005 and in connection with the reverse takeover of River Valley, ER Group was reorganized into an unincorporated, open ended mutual fund trust. Concurrent with the reverse takeover, ER Group prospectively adopted the recommendations of the Canadian Institute of Chartered Accountants ("CICA") Emerging Issues Committee Abstract 107 - "Application of CICA 3465 to Mutual Fund Trusts, Real Estate Investment Trusts, Royalty Trusts and Income Trusts."

The Fund complies with the Income Tax Act (Canada) to qualify as a mutual fund trust. As a result, the Fund is not subject to income taxes to the extent that its taxable income in a year is paid or payable to a Unitholder. Accordingly, no provision for current income taxes for the Fund is made. In addition, the Fund is not subject to the recommendations of CICA section 3465 "Income Taxes", as the Fund distributes to its Unitholders all or virtually all of its taxable income that would otherwise be taxable by the Fund. The Fund intends to continue to meet the requirements under the Income Tax Act applicable to such trusts, and there is no indication that the Fund will fail to meet those requirements.

The Fund continues to follow the liability method of accounting for any incorporated subsidiaries. Under this method, the Fund recognizes both the current and future income tax consequences of all transactions that have been recognized in the financial statements.

Related Party Transactions

The Fund's related party transactions are disclosed in the notes to the accompanying interim consolidated financial statements.

Critical Accounting Estimates

The Fund's critical accounting estimates are substantially the same as those disclosed in the MD&A section of the Fund's 2005 Q1 interim report.

Risk Factors

The Fund's business risks as well as risks and uncertainties related to financial instruments are substantially the same as those disclosed in the MD&A section of the Fund's 2005 Q1 interim report, the Joint Management Information Circular of River Valley Income Fund and Eveready Industrial Group Ltd. dated February 24, 2005, and the final prospectus dated November 10, 2005.

Non-GAAP Financial Measures

This MD&A contains certain financial measures that do not have any standardized meaning prescribed by Canadian Generally Accepted Accounting Principles ("GAAP"). Therefore, these financial measures may not be comparable to similar measures presented by other issuers. Investors are cautioned that these measures should not be construed as an alternative to net earnings or to cash flow from operating, investing, and financing activities determined in accordance with Canadian GAAP as indicators of the Fund's performance. These measures are provided to assist investors in determining the Fund's ability to generate cash flow from operations and to provide additional information on how these cash resources are used.

These financial measures are identified and defined below:

EBITDA:

EBITDA is defined as earnings before interest, taxes, amortization, loss on settlement of subordinated debt, and loss (gain) on disposal of property, plant and equipment. Management believes, in addition to net earnings, EBITDA is a useful supplemental measure as it provides an indication of the cash flows generated by the Fund's principal business activities prior to consideration of how these activities are financed or how the results are taxed in various jurisdictions.

The following is a reconciliation of EBITDA to net earnings for the Fund:



------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
$ thousands, except 2005 2004 2005 2004
per unit amounts (unaudited) (unaudited) (unaudited) (unaudited)
------------------------------------------------------------------------
Net earnings (loss) $ 3,684 $ (295) $ 11,896 $ 422
Add:
Income taxes 146 201 1,192 774
Amortization 2,716 1,136 6,697 3,149
Interest on long-term debt 557 348 1,878 1,068
Interest - other 178 175 962 532
Interest on subordinated
debt 158 177 499 489
Interest on redeemable
preferred shares - 584 - 584
Loss on settlement of
subordinated debt 422 - 422 -
Gain on disposal of property,
plant and equipment (234) (18) (132) (65)
------------------------------------------------------------------------
EBITDA 7,627 2,308 23,414 6,953
------------------------------------------------------------------------
------------------------------------------------------------------------


Cash available for distribution and growth:

Cash available for distribution and growth is calculated as cash flow from operations, less required principal repayments of long term debt and maintenance capital expenditures. Per unit amounts refer to cash available for distribution and growth divided by the weighted average number of units outstanding during the period. Management believes that cash available for distribution and growth is a useful supplemental measure as it provides an indication of cash available for distribution to the Fund's Unitholders. The components of this supplemental measure are described below:

- "Cash flow from operations" is derived from the consolidated statements of cash flows and is calculated as cash provided from operating activities before changes in non-cash operating working capital. Cash flow from operations per Unit refers to cash flow from operations divided by the weighted average number of Units outstanding during the period.

- "Maintenance capital expenditures" are capital expenditures required to maintain existing levels of service. This includes capital expenditures to replace property, plant and equipment disposed of and any costs incurred to enhance the operational life of existing property, plant and equipment. Growth capital expenditures are excluded from this calculation. These expenditures include additions of new equipment to grow the Fund's capital asset base.

- "Payout ratio - including DRIP" is calculated as distributions declared for the period divided by cash available for distribution and growth.

- "Payout ratio - excluding DRIP" is calculated as cash distributions declared for the period (excluding those distributions participating in the DRIP) divided by cash available for distribution and growth.

Working capital

Working capital is calculated as current assets less current liabilities. Working capital ratio is calculated as current assets divided by current liabilities. This definition has been updated from that previously presented the in Fund's second quarter report where the calculations of working capital and working capital ratio excluded the current portions of long-term debt and subordinated debt.

Funded debt to total capital

Funded debt to total capital is calculated as funded debt (bank indebtedness, long-term debt, notes payable, subordinated debt and the current portions of long-term debt, notes payable, and subordinated debt) divided by total capital (funded debt plus unitholders' equity plus preferred shares and amounts due to unitholders).

Note Regarding Forward-Looking Statements

Certain statements contained in this MD&A are forward-looking statements. The use of any of the words "estimate", "may", "will", "expect", "should", "believe", and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Fund believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such statements included in this MD&A should not be unduly relied upon. These statements speak only as of the date of this MD&A. The Fund does not undertake any obligation to publicly update or revise any forward-looking statements (except as required by applicable securities law).



Eveready Income Fund
Consolidated Balance Sheets
(Unaudited)

------------------------------------------------------------------------
September 30 December 31
2005 2004
$ $
------------------------------------------------------------------------
(thousands of Canadian dollars) (Note 2)

ASSETS

Current
Accounts receivable 46,052 23,642
Work in progress 2,865 199
Inventory 4,829 3,397
Income taxes recoverable - 2
Prepaid expenses and deposits 1,495 596
------------------------------
55,241 27,836

Property, plant and equipment 91,719 58,122
Goodwill 21,614 11,805
Intangible assets 1,112 -
Other long-term assets 821 281
------------------------------

170,507 98,044
------------------------------
------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY

Current
Bank indebtedness (Note 5a) 3,060 10,979
Accounts payable and accrued
liabilities 25,078 13,627
Unitholder distributions payable 599 -
Income taxes payable 70 -
Due to unitholders - 230
Current portion of long-term debt - 8,256
Current portion of notes payable 4,443 250
Current portion of subordinated debt - 250
------------------------------
33,250 33,592

Long-term debt (Note 5b) 49,888 25,781
Notes payable (Note 5c) 411 4,415
Subordinated debt - 3,563
Due to unitholders - 1,899
Preferred shares - 4,763
Future income taxes 328 5,104
------------------------------
83,877 79,117
------------------------------
Unitholders' Equity
Unitholders' capital (note 6) 73,305 -
Share capital (note 6) - 16,408
Accumulated earnings 20,594 2,519
Accumulated distributions (7,269) -
------------------------------
86,630 18,927
------------------------------
170,507 98,044
------------------------------
------------------------------

(see accompanying notes)


Eveready Income Fund
Consolidated Statements of Earnings and Accumulated Earnings
(Unaudited)

------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
$ $ $ $
------------------------------------------------------------------------
(thousands of Canadian
dollars, except per unit
amounts) (Note 2) (Note 2)

Revenue 56,415 19,787 155,616 64,902

Direct costs 38,610 12,353 105,023 40,884
------------------------------------------

Gross profit 17,805 7,434 50,593 24,018

Expenses
Administrative and
general 10,178 5,126 27,179 16,671
Amortization 2,716 1,136 6,697 3,149
------------------------------------------
Earnings from operations 4,911 1,172 16,717 4,198
------------------------------------------

Other expenses
Interest on long-term debt 557 348 1,878 1,068
Interest - other 178 175 962 532
Interest on subordinated debt 158 177 499 489
Interest on redeemable
preferred shares - 584 - 584
Stock-based compensation - - - 394
Loss on settlement of
subordinated debt 422 - 422 -
Gain on disposal of property,
plant and equipment (234) (18) (132) (65)
------------------------------------------
1,081 1,266 3,629 3,002
------------------------------------------

Earnings (loss) before
income taxes 3,830 (94) 13,088 1,196
------------------------------------------
Income taxes
Current 79 (2) 107 (2)
Future 67 203 1,085 776
------------------------------------------
146 201 1,192 774
------------------------------------------

Net earnings (loss) 3,684 (295) 11,896 422

Accumulated earnings,
beginning of period 17,779 2,843 2,519 2,126
Trust reorganization
adjustment (note 4) (869) - 6,179 -
------------------------------------------

Accumulated earnings,
end of period 20,594 2,548 20,594 2,548
------------------------------------------
------------------------------------------

Earnings per unit
- basic and diluted
(note 7) 0.09 N/A 0.34 N/A
------------------------------------------
------------------------------------------

(see accompanying notes)


Eveready Income Fund
Consolidated Statements of Cash Flows
(Unaudited)


------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
$ $ $ $
------------------------------------------------------------------------
(thousands of Canadian dollars) (Note 2) (Note 2)

Operating activities
Net earnings (loss) 3,684 (295) 11,896 422
Items not affecting cash:
Amortization 2,716 1,136 6,697 3,149
Gain on disposal of property,
plant and equipment (234) (18) (132) (65)
Stock-based compensation - - - 394
Future income taxes 67 203 1,085 776
------------------------------------------
6,233 1,026 19,546 4,676
Net change in non-cash
operating working capital
(note 8) (4,563) 301 (9,937) 69
------------------------------------------
1,670 1,327 9,609 4,745
------------------------------------------

Investing activities
Purchase of property,
plant and equipment (7,340) (2,915) (13,580) (9,494)
Purchase of property,
plant and equipment
- buy out of equipment
lease commitments (5,633) - (5,633) -
Proceeds on disposal
of property, plant and
equipment 1,208 440 2,100 905
Business acquisitions,
net of cash acquired
(bank indebtedness assumed) (1,412) - (4,895) (141)
Other long term assets - net (557) 7 (445) 71
------------------------------------------
(13,734) (2,468) (22,453) (8,659)
------------------------------------------

Financing activities
Distributions to
unitholders, net of
distribution
reinvestments (1,813) - (2,707) -
Proceeds from
long-term debt 50,443 1,290 53,338 7,215
Repayment of
long-term debt (41,739) (729) (46,226) (3,752)
Repayment of notes payable - - (227) -
Repayment of
subordinated debt (3,688) (63) (3,813) (187)
Proceeds from issuance
of units/share capital - - 22,300 484
Redemption of preferred shares - (208) - (270)
Fund restructuring costs
- reverse takeover
transaction - - (162) -
Collection of employee
share purchase loans
receivable 204 133 609 1,287
Repayment of advances
from unitholders - (2) (2,349) (1,107)
------------------------------------------
3,407 421 20,763 3,670
------------------------------------------

Net change in cash
and cash equivalents (8,657) (720) 7,919 (244)

Cash and cash equivalents
(bank indebtedness),
beginning of period 5,597 (8,858) (10,979) (9,334)
------------------------------------------
Bank indebtedness,
end of period (3,060) (9,578) (3,060) (9,578)
------------------------------------------
------------------------------------------

(see accompanying notes)

Eveready Income Fund
Notes to the Consolidated Financial Statements
(thousands of Canadian dollars, except unit and per unit amounts)
(Unaudited)


1. Nature of operations and summary of significant accounting policies

Eveready Income Fund ("Eveready" or the "Fund") provides industrial and oilfield services, health, safety and environmental services, and oilfield equipment rental services to the energy, resource, and manufacturing sectors. The Fund's operations follow a seasonal pattern, with earnings traditionally being higher in the first three months than in the other quarters of the year. Due to this seasonality, interim earnings reported for the three months ended September 30, 2005 may not be reflective of earnings on an annual basis.

These interim financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles ("GAAP") and have been prepared following the same accounting policies and methods of application as those disclosed in the consolidated financial statements of the Fund's predecessor, Eveready Industrial Group Ltd. ("ER Group"), for the fiscal period ended December 31, 2004, except as noted in Note 4 below.

Because the disclosures provided in these interim consolidated financial statements do not conform in all respects with Canadian generally accepted accounting principles for annual financial statements, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes of ER Group for the period ended December 31, 2004.

2. Basis of presentation and Plan of Arrangement

Pursuant to an arrangement agreement dated December 3, 2004, River Valley Income Fund ("River Valley") acquired 100% of the issued and outstanding shares of ER Group. In consideration for this purchase, River Valley issued 22,461,875 Fund units or economically equivalent units in a subsidiary limited partnership which are indirectly exchangeable for units of the Fund ("Rollover LP Units") valued at $1.77 per unit to the former shareholders of ER Group. As a result of this arrangement, ER Group and all of its subsidiaries became, indirectly, wholly-owned by the Fund. Concurrent with the Plan of Arrangement, the Fund changed its name to "Eveready Income Fund".

Reverse Takeover Treatment

By issuing 22,461,875 Fund units or equivalent Rollover LP units, sufficient units of River Valley were issued so that controlling interest (approximately 74.6%) of the fund passed to the former shareholders of ER Group. As a result, the acquisition has been accounted for as a reverse takeover whereby ER Group has been treated as the purchaser, effective January 1, 2005. These consolidated financial statements are a continuation of the financial statements of the accounting acquirer, ER Group, whereby the assets and liabilities of ER Group are included in the consolidated financial statements at their historical carrying amounts. The comparative figures presented at December 31, 2004 are those of ER Group, the accounting acquirer.

The consolidated financial statements for the three and nine month periods ended September 30, 2005 consist of the consolidated operations of ER Group and River Valley after giving effect to the reverse takeover transaction. The comparative figures presented for the three and nine month periods ended September 30, 2004 are those of ER Group, the accounting acquirer.

The preliminary purchase price allocation of the reverse takeover transaction is as follows:



------------------------------------------------------------------------
Purchase
Fair value of net assets Price
of River Valley acquired: Allocation
------------------------------------------------------------------------
Current assets $ 6,238
Property, plant, and equipment 10,047
Goodwill 7,378
Other long-term assets 95
------------------------------------------------------------------------
Total assets 23,758
------------------------------------------------------------------------

Current liabilities 7,645
Long-term liabilities 2,615
------------------------------------------------------------------------
Total liabilities 10,260
------------------------------------------------------------------------
$ 13,498
------------------------------------------------------------------------
------------------------------------------------------------------------


Consideration given was comprised of the 7,626,167 units outstanding of River Valley prior to the reverse takeover at a computed price of $1.77 per unit. The reverse takeover transaction involved the acquisition of all classes of shares of ER Group, including preferred shares accounted for by ER Group as liabilities. The ER Group preferred shares have been reclassified to Unitholders' equity in these consolidated financial statements.

3. Business acquisitions

ICE Joint Venture

Effective April 30, 2005, Eveready acquired all of the business and assets of a joint venture between Diamond Tree Energy Ltd. and Innovative Coke Expulsion Inc. known as the ICE Joint Venture ("ICE"). Eveready also acquired from ICE all of the shares in its American subsidiary, Innovative Coke Explusion (USA) Inc., which conducted all of the United States based operations of the joint venture on behalf of the joint venture.

The purchase price for the equipment, material agreements, and intangible assets of the joint venture was $6,500. In addition to this sum, Eveready acquired the working capital balances of the joint venture including inventory, accounts receivable, prepaid expenses, and the assumption of accounts payable liabilities, subject to any working capital adjustments to be determined in due course. The aggregate purchase price, subject to any working capital adjustments, was $8,249. The majority of the purchase price was satisfied by the issuance of 2,599,179 Fund units for proceeds of $7,927. The remainder of the purchase price was satisfied through cash consideration.

The joint venture operates primarily out of Houston, Texas and is in the business of industrial cleaning using pigs to de-coke furnaces at oil and gas refineries. The pigs are also used to clean pipelines and other piping and tubing in the oil and gas industry.



The preliminary purchase price allocation for ICE is as follows:

------------------------------------------------------------------------
Purchase
Price
Fair value of net assets acquired: Allocation
------------------------------------------------------------------------

Current assets $ 2,461
Property, plant, and equipment 4,947
Intangible assets 691
Goodwill 730
------------------------------------------------------------------------
Total assets 8,829
------------------------------------------------------------------------

Current liabilities 580
------------------------------------------------------------------------
Total liabilities 580
------------------------------------------------------------------------

$ 8,249
------------------------------------------------------------------------
------------------------------------------------------------------------


Intangible assets acquired include customer relationships ($254) and patents ($437) which will be amortized straight-line over their estimated useful lives of 5 years and 10 years respectively.

Allstar Oilfield Services Ltd.

Effective July 1, 2005, Eveready acquired 100% of the issued and outstanding shares of Allstar Oilfield Services Ltd. ("Allstar") and related assets used in the business of Allstar, but not previously owned by Allstar (the "Related Assets"). Allstar is based in Lloydminster, Alberta, and provides a broad range of oilfield services to the energy sector including vacuum truck, pressure testing, flush-by, and hydro excavation services.

The final purchase price payable for Allstar and the Related Assets will be based on the earnings of Allstar and the Related Assets over the 12 month period ending June 30, 2006. However, as required by the purchase agreement, the minimum purchase price of $6,090 less assumed debt of approximately $4,134 was satisfied on closing via the issuance of an aggregate of 454,996 Fund units for consideration of $1,956. In addition, acquisition costs of $21 were incurred providing for aggregate consideration of $1,977.

The final purchase price will be based on a multiple of 4.25 times earnings before interest, depreciation and amortization, and other adjustments realized during the 12 month period ending June 30, 2006. Any additional consideration resulting from this purchase price adjustment clause, if any, will be recognized as an addition to goodwill in the period in which confirmation of the consideration to be paid is known.

The preliminary purchase price allocation for Allstar and the Related Assets is as follows:



------------------------------------------------------------------------
Purchase
Price
Fair value of net assets acquired: Allocation
------------------------------------------------------------------------

Current assets $ 1,317
Property, plant, and equipment 5,120
Intangible assets 297
Goodwill 1,197
------------------------------------------------------------------------
Total assets 7,931
------------------------------------------------------------------------

Current liabilities 1,568
Long-term liabilities 4,386
------------------------------------------------------------------------
Total liabilities 5,954
------------------------------------------------------------------------

$ 1,977
------------------------------------------------------------------------
------------------------------------------------------------------------


Intangible assets acquired consist of customer relationships that will be amortized straight-line over their estimated useful lives of 5 years.

Camp Company

Effective May 1, 2005, Eveready acquired certain of the property, plant and equipment of a private Alberta company that provides camps and camp related equipment to customers in the oil and gas industry in Western Canada that allow such customers to house their employees and contractors at or near their work sites. The assets acquired included, among other items, two John Deere crawler tractors and three camps with an aggregate of 235 beds.

The purchase price of $2,855 for the property, plant and equipment was paid via: (i) the assumption of certain liabilities related to the assets of $538; (ii) $2,305 payable via the issuance of 755,738 Rollover LP Units; and (iii) the balance of $12 in cash. Additional information regarding Eveready's Rollover LP Units is provided in Note 6 to these consolidated interim financial statements.

The above acquisition was a related party transaction since the vendor was a private Alberta company that a trustee and officer of Eveready each own a 50% beneficial interest. The transaction was measured at its exchange amount, which was the consideration established and agreed to by the related parties. In management's opinion, this transaction was conducted at terms that represent fair value for the assets acquired.

AAA Precision Mobile Lab Services Inc.

Effective August 1, 2005, Eveready acquired 100% of the issued and outstanding shares of AAA Precision Mobile Lab Services Inc. ("AAA"). Based out of Edmonton, Alberta, AAA provides medical testing services for companies in a wide range of industries that employ personnel in safety sensitive positions. The purchase price of $500 was satisfied through cash consideration.



The preliminary purchase price allocation for AAA is as follows:

------------------------------------------------------------------------
Purchase
Price
Fair value of net assets acquired: Allocation
------------------------------------------------------------------------

Current assets $ 172
Property, plant, and equipment 20
Intangible assets 184
Goodwill 284
------------------------------------------------------------------------
Total assets 660
------------------------------------------------------------------------

Current liabilities 97
Future income taxes 63
------------------------------------------------------------------------
Total liabilities 160
------------------------------------------------------------------------

$ 500
------------------------------------------------------------------------
------------------------------------------------------------------------


Intangible assets acquired consist of customer relationships that will be amortized straight-line over their estimated useful lives of 5 years.


4. New accounting policy

Effective January 1, 2005 and in connection with the reverse takeover of River Valley, ER Group was reorganized into an unincorporated, open ended mutual fund trust. Concurrent with the reverse takeover, ER Group, as the accounting acquirer, prospectively adopted the recommendations of the Canadian Institute of Chartered Accountants ("CICA") Emerging Issues Committee Abstract 107 - "Application of CICA 3465 to Mutual Fund Trusts, Real Estate Investment Trusts, Royalty Trusts and Income Trusts."

The Fund complies with the Income Tax Act (Canada) to qualify as a mutual fund trust. As a result, the Fund is not subject to income taxes to the extent that its taxable income in a year is paid or payable to its Unitholders. Accordingly, no provision for current income taxes for the Fund is made, except for its incorporated subsidiaries as indicated below. In addition, the Fund is not subject to the recommendations of CICA section 3465 "Income Taxes", as the Fund distributes to its Unitholders all or virtually all of its taxable income that would otherwise be taxable by the Fund. The Fund intends to continue to meet the requirements under the Income Tax Act applicable to such trusts, and there is no indication that the Fund will fail to meet those requirements. As a result of the conversion of ER Group to a mutual fund trust, the Fund's future income tax liability was reduced by $7,048 with the adjustment being credited to accumulated earnings.

Upon finalizing the pre-reorganization tax filings of Eveready's incorporated subsidiaries in the three month period ended September 30, 2005, Eveready set the amount of its capital cost allowance claims such that it utilized its non-capital tax losses. This resulted in a reduction of the future tax asset related to tax losses by $869. This adjustment has been charged to accumulated earnings for the three month period ended September 30, 2005. The aggregate adjustment to the future tax liability, future tax assets and accumulated earnings resulting from the conversion of ER Group to a mutual fund trust and completion of the related reorganization and tax filings was $7,048, $869, and $6,179 respectively. The reduction of the tax losses of Eveready's incorporated subsidiaries increased the tax basis of property, plant and equipment held by the Fund. This will result in the Fund's ability to claim additional capital cost allowance tax deductions on property, plant and equipment in future years that will directly benefit Unitholders through a reduction of the taxable portion of distributions paid.

The Fund continues to follow the liability method of accounting for its incorporated subsidiaries. Under this method, the Fund recognizes both the current and future income tax consequences of all transactions that have been recognized in the financial statements of the incorporated subsidiaries. Future tax expense of $1,018 recognized for the three month period ended March 31, 2005 was a result of a large portion of the earnings of Eveready for the three month period being earned within taxable subsidiaries of the Fund, until the reorganization transaction was completed. Income tax expense of $146 recognized for the three month period ended September 30, 2005 relates to on-going operations that remain within taxable incorporated subsidiaries of the Fund.

5. Debt obligations

a) Bank indebtedness

The Fund's bank indebtedness consists of a demand revolving credit facility by way of bank account overdraft with a maximum principal amount of $18,000. The credit facility bears interest at prime plus 0.25% and is secured by general security agreements covering all assets of the Fund and its subsidiaries. At September 30, 2005, the effective interest rate on this credit facility was 4.75%. In November 2005, the maximum principal amount available under the credit facility was increased to $27,000.

b) Long-term debt

On September 30, 2005, Eveready established a $60,000 revolving extendible senior secured credit facility. The purpose of the credit facility was to refinance existing term indebtedness, subordinated debt and operating leases; and to finance future capital expenditures and acquisitions. This credit facility requires payments of interest only at the Canadian dollar one month bankers' acceptance rate plus 3.25%. At September 30, 2005, the effective interest rate on this credit facility was 6.07%. An additional stand-by fee calculated at an annual rate of 0.25% per annum is also required on the unused portion of the credit facility.

The credit facility is secured by a first fixed charge over equipment and a second position charge over accounts receivable and inventory. The credit facility is renewable semi-annually subject to the mutual consent of both parties. To the extent that the credit facility is not renewed, the outstanding credit facility will be subject to a 12 month interest-only phase followed by a straight line amortization period of 30 months. The amount drawn on this credit facility as at September 30, 2005 was $49,888.

c) Notes payable

Notes payable consist of unsecured promissory notes due to various entities. These balances were previously classified as long-term debt and amounts due to unitholders and have been reclassified to notes payable in these consolidated interim financial statements. Notes payable of $3,923 bear interest at a rate of 6.0% and are due July 1, 2006. The remainder of the notes payable bear interest at rates of either 0.0% or 6.7% and are repayable in varying instalments until October 2007.



6. Unitholders' capital

------------------------------------------------------------------------
Number of Units Amount $
------------------------------------------------------------------------

Issued:
Opening balances:
Share capital of ER Group (accounting
acquirer) as at December 31, 2004 16,408
Number of units outstanding of River Valley
(legal parent) as at December 31, 2004 7,626,167

Activity during the nine month period
ended September 30, 2005:
Preferred shares of ER Group reclassified
to equity (net of shares redeemed) - 4,348
Units issued upon the reverse takeover
of River Valley (note 2) 22,461,875 13,498
Unit issuance costs - reverse takeover - (162)
Units issued - acquisition of ICE
Joint Venture (note 3) 2,599,179 7,927
Units issued - acquisition of Camp
Company (note 3) 755,738 2,305
Units issued - acquisition
of Allstar (note 3) 454,996 1,956
Units issued - private placement
(net of issuance costs) 6,400,000 22,300
Units issued - distribution
reinvestment plan 849,861 4,116
Repayment of employee share purchase
loans receivable - 609
------------------------------------------------------------------------

Balance at September 30, 2005 41,147,816 73,305
------------------------------------------------------------------------
------------------------------------------------------------------------

The number of units outstanding as
at September 30, 2005 consisted
of the following components:
Fund units 23,306,076
Rollover LP Units 17,841,740
------------------------------------------------------------------------

41,147,816
------------------------------------------------------------------------
------------------------------------------------------------------------


As a result of the reverse take over transaction, the amount shown as issued capital of the Fund is determined by adding to the issued capital of the legal subsidiary, ER Group, the amount of the cost of the purchase as determined in Note 2 to these consolidated financial statements. However, the number and type of units issued appearing in the table above reflects that of the legal parent, River Valley, including the units issued to affect the reverse takeover.

Rollover LP Units

The Rollover LP Units, issued in conjunction with the completion of various acquisitions of the Fund, are units of subsidiary limited partnerships of the Fund and are designed to be, to the greatest extent practicable, the economic equivalent of Fund units. Rollover LP Units are non-transferable (except to certain permitted assigns) and the holders thereof are entitled to receive distributions on a per unit basis equivalent to holders of units of the Fund. When each of the Rollover LP Units were issued, the holder thereof was also issued a non-transferable (except to permitted assigns) right (a "Right") to acquire one unit of the Fund for each Rollover LP Unit held.

A total of 18,077,169 Rollover LP Units and 18,077,169 Rights were issued on March 31, 2005, each Rollover LP Unit being redeemable at the option of the applicable subsidiary limited partnership at any time on or before March 31, 2010 at a redemption price of $1.77 per unit and each Right entitling the holder thereof to acquire one unit of the Fund at an exercise price of $1.77 per unit at any time on or before March 31, 2010. Upon the exercise of any of the aforementioned Rights, the applicable subsidiary limited partnership has an obligation to promptly redeem from the exercising holder, or that person's permitted assigns, a number of Rollover LP Units equal to the number of Rights so exercised. The Rollover LP Units issued on March 31, 2005 also carry the right to one vote per unit held at each meeting of the unitholders of the Fund.

A total of 755,738 Rollover LP Units and 755,738 Rights were issued on May 20, 2005, each Rollover LP Unit being redeemable at the option of the applicable subsidiary limited partnership at any time on or before May 20, 2010 at a redemption price of $3.05 per unit and each Right entitling the holder thereof to acquire one unit of the Fund at an exercise price of $3.05 per unit at any time on or before May 20, 2010. Upon the exercise of any of the aforementioned Rights, the applicable subsidiary limited partnership has an obligation to promptly redeem from the exercising holder, or that person's permitted assigns, a number of Rollover LP Units equal to the number of Rights so exercised. The Rollover LP Units issued on May 20, 2005 do not carry any voting rights at meetings of unitholders of the Fund.

During the nine month period ended September 30, 2005, 991,167 Rights were exercised and the related Rollover LP Units redeemed resulting in the issuance of 991,167 Fund units. At September 30, 2005, 17,841,740 Rollover LP Units remained outstanding.

Private Placement

Pursuant to a private placement completed June 16, 2005, the Fund issued 6,400,000 Fund units at a price of $3.75 per Fund unit for net proceeds of $22,300 after issuance costs.

Employee share purchase loans receivable

Included in Unitholders' capital are employee share purchase loans receivable of $907 (December 31, 2004 - $1,516). These loans were issued by ER Group in prior years to assist employees in acquiring shares in the capital stock of the company. These loans are non-interest bearing and are secured by the share certificates issued (which pursuant to ER Group's reorganization into an income fund were converted into unit certificates of the Fund). The employee share purchase loans receivable are classified in these financial statements as a reduction against Unitholders' capital.

7. Earnings per unit

Earnings per unit for the three and nine month periods ended September 30, 2005 were based on the weighted average number of units outstanding during the period. Basic and diluted per unit amounts have been calculated on the basis that all outstanding Rollover LP Units have been converted into Fund units. The basic and diluted weighted average number of units outstanding for the three and nine month periods ended September 30, 2005 were 40,928,042 and 34,886,813 respectively.

Earnings per share for the comparative periods ended September 30, 2004 of the Fund's predecessor, ER Group, have not been disclosed as ER Group was a privately owned company during those periods.



8. Net change in non-cash operating working capital

------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
------------------------------------------------------------------------

Accounts receivable (6,386) 963 (13,278) (1,463)
Work in progress (1,166) (752) (2,666) (771)
Inventory (479) 44 (870) (697)
Prepaid expenses
and deposits (46) 219 (576) (22)
Accounts payable and
accrued liabilities 3,459 (173) 7,381 3,022
Income taxes payable 55 - 72 -
------------------------------------------------------------------------

(4,563) 301 (9,937) 69
------------------------------------------------------------------------
------------------------------------------------------------------------


9. Segmented reporting

Management regards the current activities of the Fund as being conducted in one reportable operating segment, that being industrial and oilfield services.

10. Related party transactions

a) During the three and nine month periods ended September 30, 2005 the Fund incurred $44 and $284 respectively for professional fees from a partnership of which one of the trustees of the Fund is an associate.

b) During the three and nine month periods ended September 30, 2005, the Fund incurred $30 and $162 respectively for professional fees from a partnership of which one of the trustees of the Fund is a partner.

c) Included in general and administrative expenses for the three and nine month periods ended September 30, 2005 are occupancy costs of $108 and $325 respectively that were paid to companies controlled by certain officers and/or trustees of the Fund.

d) During the nine month period ended September 30, 2005 the Fund incurred camp costs and equipment rental charges of $410 paid to a company that an officer and trustee of the Fund each own a 50% beneficial interest. In May, 2005 the Fund acquired the majority of the assets of the company at a cost of $2,855 (see Note 3 - Camp Company).

These related party transactions were measured at their exchange amounts, which was the consideration established and agreed to by the related parties. Management's opinion is that these transactions were conducted in the normal course of operations and at terms and rates that represent fair value for services provided.

11. Subsequent events and proposed acquisitions

(a) Byram Industrial Services Ltd. Acquisition

On September 30, 2005, the Fund entered into a letter of intent to acquire 100% of the issued and outstanding shares of Byram Industrial Services Ltd. ("Byram"). Byram owns and operates the Pembina area landfill (the "PAL") near Drayton Valley in Alberta. The PAL facility is engineered, constructed and operated to meet all government regulations associated with this type of facility. The letter of intent contemplates a purchase price of $18,500. The purchase price will be payable by way of a combination of: (i) $12,000 in cash; and (ii) $6,500 via the issuance of Units of the Fund at a deemed price per unit based on the 10 day weighted average trading price of the Units of the Fund less a 10% discount. The vendor may, at its option and instead of Units, choose to receive Exchangeable Securities of the Fund. This will be an arm's-length transaction. As part of the proposed acquisition, the Fund will also enter into a 25 year royalty agreement with the shareholder of Byram. Royalty payments required under this agreement will be calculated at 5% of the gross revenues earned from the PAL facility. Completion of this transaction is subject to a number of conditions which have not yet been satisfied.

(b) Distributions

On October 3, 2005, the Fund announced a cash distribution of $0.04 per unit for the month of October to holders of the Fund's units. This payment represents an increase from the previous monthly distribution of $0.03 per unit. Payment will be made on or about November 15, 2005 to Unitholders of record as of the close of business on October 31, 2005.

(c) Oilfield Equipment Rental Company Acquisitions

Effective November 1, 2005 the Fund acquired 100% of the issued and outstanding shares of Canada Wide Industries Ltd. ("CWI"). CWI is a private Alberta-based oilfield equipment rental company that provides, among other services, access mats to distribute heavy loads over pipelines, and temporary or permanently installed bridges used for remote site logistics. The purchase price for this acquisition was $7,837 payable through a combination of $6,637 in cash and $1,200 via the issuance of 236,686 Fund units at a deemed price of $5.07 per Unit.

On November 14, 2005, Eveready entered into an agreement to acquire the majority of the assets and business of another private Alberta-based oilfield equipment rental company. The assets include, among other items, well-site units, generators, truck and trailer units, and camps used for employee housing. The purchase price will be equal to the fair market value of the assets acquired, but subject to a minimum purchase price of $15.7 million. Fair market value will be determined by third party appraisers approved by the vendor and Eveready. This agreement is anticipated to close on or before December 9, 2005.

(d) Equity offering

Pursuant to a final prospectus dated November 10, 2005 filed with the applicable securities regulatory authorities, the Fund has qualified for a public distribution of a minimum of 5,000,000 and a maximum of 10,000,000 Fund units at a price of $5.00 per Fund unit. Under an agency agreement dated November 10, 2005 among Blackmont Capital Inc., BMO Nesbitt Burns Inc., Acumen Capital Finance Partners Limited and Sprott Securities Inc. (the "Agents") and the Fund, the Fund has appointed the Agents to offer the Units for sale on a best efforts basis, subject to compliance with all necessary legal requirements.

The Fund has agreed to pay the Agents a commission of 5.5% of the aggregate gross proceeds from the sale of the Fund units. In addition, the Fund will pay the reasonable out of pocket costs of the Agents and the reasonable fees and disbursements of the Agent's legal counsel. Closing of this equity financing is expected to occur on or prior to November 23, 2005.

12. Comparative figures

Certain of the comparative figures have been reclassified to conform to the current period's presentation.

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