Gienow Windows & Doors Income Fund

Gienow Windows & Doors Income Fund

March 30, 2005 16:01 ET

Gienow Windows & Doors Income Fund Announces the Results of Operations for the Period from Formation on September 9, 2004 to December 31, 2004


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: GIENOW WINDOWS & DOORS INCOME FUND

TSX SYMBOL: GIF.UN

MARCH 30, 2005 - 16:01 ET

Gienow Windows & Doors Income Fund Announces the
Results of Operations for the Period from Formation on
September 9, 2004 to December 31, 2004

CALGARY, ALBERTA--(CCNMatthews - March 30, 2005) -

NOT FOR DISTRIBUTION IN THE United States OR TO U.S. CITIZENS

Gienow Windows & Doors Income Fund (TSX:GIF.UN) (the "Fund") is pleased
to report the results of its fiscal year 2004. The Fund's audited
consolidated financial statements and Management's Discussion and
Analysis ("MD&A") for the period from formation of the Fund on September
9, 2004 to December 31, 2004 are included in this release.

As the Fund commenced operations on October 19, 2004, the results of
operations reflect the period from October 19, 2004 to December 31, 2004
(the "Operating Period") and there are no comparative figures
representing the operations of the Fund in prior periods in the
consolidated statements of the Fund. The Fund's reporting currency is
the Canadian dollar.

Highlights and Major Events for the Period

- Cash distributions for the Operating Period were $6.0 million or $0.24
cents per unit and distributable cash was $5.8 million or $0.23 cents
per unit, driven by a strong fourth quarter for the Fund.

- Sales of $33.8 million for the Operating Period ended December 31,
2004 increased 13.7% over pro-forma results for the same period last
year.

- Gross profit, as a percentage of sales, for the Operating Period ended
December 31, 2004 was 33.8% and was better than the previous pro-forma
comparable period.

- SG&A expenses, as a percentage of revenues, decreased from 14.2% in
the previous pro-forma period to 13.6% in the Operating Period ended
December 31, 2004.

- EBITDA of $6.8 million for the Operating Period ended December 31,
2004 increased 23.5%, or the equivalent of $0.05 per unit on a pro-forma
basis year-over-year.

- The integration of Farley Windows began immediately after the
acquisition on October 19th. We were successful in implementing several
operational synergies as well as, integrating common raw material
suppliers during the period. The benefits of the raw material savings
were immediately accretive and contributed to improvements in gross
profit during the Operating Period and will continue throughout fiscal
year 2005.

Outlook

Looking forward, key indicators including housing starts, interest
rates, employment rates and renovation spending suggest "there is
strength in the Canadian economy," said David Munro, President and Chief
Executive Officer. "We are very pleased with both the financial and
operational performance during the period and are confident that the
trends established during the period will continue throughout fiscal
year 2005. The incremental business awarded during the period, coupled
with the raw material and operational synergies we are seeing to date
from Farley, validates our strategy and product positioning."

"In the 4th quarter, we generated $0.23 of distributable income which
was a 6.5% increase over management's projections for the period," said
Richard Boyer, Chief Financial Officer.

"We fully expect to meet our distribution targets for fiscal year 2005,"
said Mr. Boyer, "as current performance in the first quarter and the
current visibility into the beginning of second quarter is consistent
with the trend started in the 4th quarter whereby actual results are
tracking ahead of both the budgeted projections for fiscal year 2005 and
the previous pro-forma comparable periods."

"Our business has an annual cycle to it with Q1 and Q4 historically
being the slowest but with offsetting strength in Q2 and Q3. We expect
that trend will continue into the future and, based on performance to
date in 2005, and our assessment of the rest of the year, we remain
confident in delivering our monthly distributions of $0.10."

Conclusion

Mr. Munro concluded that "in this environment, we will be focused on
growing sales and profitability both organically and through
acquisitions. We continue to believe that we are strongly positioned to
capitalize on the organic opportunities through the continued use of our
already proven competitive advantages including our national sales and
manufacturing footprint, as well as our technology and management
information systems. We remain committed, and are strongly positioned to
consolidate a fragmented industry and as such, we will continue to
pursue accretive business additions during fiscal 2005. Our results to
date in the first quarter, coupled with the visibility into second
quarter and beyond, leave us confident in meeting our fiscal year 2005
cash distribution target of $1.20 per unit."

Management will host a conference call today at 3:30 p.m. (MST) to
discuss the Fund's financial results for the period ended December 31,
2004. The conference call dial-in number is 1-800-428-5596. A replay of
the conference call will be available by dialing either 1-416-626-4100
or 1-800-558-5253 (pass-code 21236745) until 5:00 p.m. (MST) on Friday
April 8, 2005.

Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations for the Period from Formation on September 9,
2004 to December 31, 2004

(all amounts in '000's except for unit and unit amounts)

March 30, 2005

The information in this Management's Discussion and Analysis ("MD&A") is
supplemental to, and should be read in conjunction with the audited
consolidated financial statements of Gienow Windows & Doors Income Fund
for the period from formation on September 9, 2004 to December 31, 2004,
the Annual Information Form ("AIF") of the Fund for the same period to
be filed on or about March 31, 2005 and other related materials. These
materials can be found on SEDAR at www.sedar.com. The Fund's financial
statements are prepared in accordance with Canadian generally accepted
accounting principles ("GAAP"). The Fund's reporting currency is the
Canadian dollar. Per unit amounts are calculated using the weighted
average number of units outstanding for the applicable period.

This discussion contains forward-looking statements. Please see "Note
Regarding Forward-Looking Statements" for a discussion of the risks,
uncertainties and assumptions relating to those statements. This
discussion also makes reference to certain non-GAAP measures to assist
in assessing the Fund's financial performance. EBITDA and Distributable
Cash are not measures recognized by GAAP and do not have standardized
meanings prescribed by GAAP. Therefore, EBITDA and Distributable Cash
may not be comparable to similar measures presented by other issuers.
Investors are cautioned that EBITDA and Distributable Cash should not be
construed as alternatives to net earnings as determined in accordance
with GAAP, or as indicators of performance or to cash flows from
operating, investing and financing activities as measures of liquidity
and cash flows.

Formation of the Fund

Gienow Windows & Doors Income Fund (the "Fund"), is an unincorporated,
open-ended, limited purpose mutual fund trust established pursuant to a
deed of trust dated September 9, 2004, as amended and restated on
October 19, 2004, (collectively the "Deeds of Trust") under and governed
by the laws of the Province of Alberta.

Initial Public Offering

The Fund completed an initial public offering on October 19, 2004
through the issuance of 16,500,000 units (the "Offering") for net
proceeds of $153,040 million after deducting estimated expenses of the
Offering and underwriters fees of $11,960 million. Concurrently with the
closing of the Offering, the Fund sold 8,647,500 units on a private
placement basis to Gienow Building Products Ltd., now called GBP
Holdings Inc. ("GBPL") for gross proceeds of $86,475. GBPL is a private
company which previously owned certain of the business and assets of the
Gienow Windows & Doors Limited Partnership (the "Partnership").

The Fund also obtained a syndicated credit facility from a syndicate of
chartered banks comprising of a term loan of $57,000 and an operating
loan of $8,000.

The Fund used the net proceeds of the Offering and the private placement
together with the term loan to indirectly invest in Gienow Windows &
Doors Limited Partnership (the "Partnership") for a limited partnership
interest representing a 98% interest therein, and to indirectly purchase
all of the outstanding shares of Farley Windows Inc. ("Farley") and to
provide funds to Farley so as to enable Farley to repay its debt and
repurchase its outstanding warrants and convertible debentures. Gienow
Management Inc., which is a wholly-owned subsidiary of the Fund, also
owns a nominal general partnership interest in the Partnership through
which it manages the business of the Partnership together with the other
general partner, Gienow Services Inc. ("ServicesCo").

The Partnership was formed under the laws of the Province of Alberta on
June 30, 2004, and acquired substantially all of the operating assets
and related window and door manufacturing, distribution and sales
business of GBPL, Award Windows Inc. ("Award") and Architectural Windows
& Doors Products Inc. ("AWD").

The acquisitions by the Fund of the Partnership and Farley were
accounted for using the purchase method of accounting. The Fund
commenced operations on October 19, 2004 and had no operating activities
for the period from formation on September 9, 2004 to October 18, 2004.

Business Overview

The Fund is one of the largest Canadian window and door manufacturers
with a national manufacturing and sales presence. It designs,
manufactures and sells a full range of high quality, value-priced,
custom windows and doors to new home builders, dealers, professional
renovators and industrial customers from three manufacturing facilities
in Alberta and one in Ontario. The Fund produces a complete line of
vinyl, wood, metal-clad wood and aluminum windows, as well as
complementary entrance systems including steel, wood and fiberglass
entry doors and vinyl, wood, metal-clad wood and aluminum patio doors.
Its window products are available in a wide variety of designs, shapes
and sizes for all styles of architecture. The Fund also offers
installation services and complementary products such as skylights and
glass block windows.

The Fund services a wide variety of customers under its Gienow, Award,
AWD and Farley brand names. Its distribution channels include new home
builders, professional renovators, dealers, a national "big box"
retailer and direct sales to the end consumer.

Analysis of Operating and Financial Results

The results of operations in the following discussion encompass the
consolidated results of the Fund for the period from formation on
September 9, 2004 to December 31, 2004.

Since this is the first reporting period with business operations for
the Fund, there are no comparative figures representing the operations
of the Fund in prior periods in the consolidated financial statements of
the Fund.

Sales

Total sales for the period ended December 31, 2004, were $33,791, and
were better than management's projections for the period. From an
operations perspective, the fourth quarter traditionally represents the
third strongest quarter for the Fund and these results surpassed the
historical performances of the two operating entities.

Cost of sales

Cost of sales for the period ended December 31, 2004, were $22,362 or
66.2% of total sales.

Gross profit, defined as sales less cost of sales, for the period ended
December 31, 2004, was $11,429 or 33.8% and was better than historical
fourth quarter performance.

Selling, general and administrative expense

Selling, general and administrative expenses ("SG&A") for the period
ended December 31, 2004, were $4,589. As a percentage of sales, SG&A was
13.6% and was in line with management's projections for the period ended.

Interest expense

Interest expense for the period ended December 31, 2004, was $693 and
consisted primarily of interest on the term loan, mortgage payable and
capital leases.

Gain on sale of property, plant and equipment

The gain on sale of property, plant and equipment during the period
ended December 31, 2004, was $12 and related to the sale of assets in
the normal course of business operations.

Foreign exchange loss

During the period ended December 31, 2004, the loss on foreign exchange
was $42 resulting from the consolidation of Farley Windows USA Inc.
("Farley USA"), a wholly owned subsidiary of Farley. Farley USA is
treated as an integrated foreign operation. All monetary items are
translated at exchange rates in effect at the balance sheet date and all
non-monetary items are translated at exchange rates in effect on the
transaction date. Revenue and expenses are translated at average
exchange rates prevailing during the period. Translation gains and
losses are included in income during the period.

Depreciation and amortization

Depreciation and amortization for the period ended December 31, 2004,
was $2,110 with $1,332 relating to the amortization of intangible assets
relating to customer relationships which are being amortized on a
straight-line basis over ten years and $778 relating to the depreciation
of property, plant and equipment.

Income taxes

During the period ended December 31, 2004 the Fund incurred Ontario
capital taxes of $17 and a future income tax reduction of $123.

Net earnings

Net earnings for the period ended December 31, 2004, were $4,056 and
better than management's projections for the period.

EBITDA

References to "EBITDA" are to earnings before interest, income taxes,
depreciation and amortization. The Fund believes that EBITDA is a useful
financial measure as it represents a starting point in the determination
of cash available for distribution to unitholders.

The following table reconciles EBITDA to net income for the period
ending December 31, 2004:



------------------------------------------------------------------------
(in thousands of dollars) Period Ended December
31, 2004
------------------------------------------------------------------------
Net earnings for the period $ 4,056
------------------------------------------------------------------------

Interest 693
Depreciation and amortization 2,110
Current income taxes 17
Future income taxes (reduction) (123)

------------------------------------------------------------------------
EBITDA $ 6,753
------------------------------------------------------------------------


Distributable Cash and Distributable Cash per Unit

Distributable cash represents EBITDA, adjusted for debt service
obligations, maintenance capital expenditures, and capital and current
income taxes.

For the period ended December 31, 2004, the Fund distributed $0.24 per
unit compared with distributable cash of $0.23 per unit as calculated
below. The difference of ($0.01) per unit reflects the seasonality of
the Fund's operations for the period ending December 31, 2004, as
traditionally, the second and third fiscal quarters are the stronger
operating quarters. The shortfall in distributable cash was financed
through the working capital of the Fund.



------------------------------------------------------------------------
(thousands of dollars except for trust unit amounts) Period ended
December 31,
2004
------------------------------------------------------------------------
EBITDA $ 6,753

Less:
Debt service obligations (821)
Maintenance capital expenditures (187)
Proceeds from sale of property, plant and
equipment 29
Current income taxes (17)

Distributable cash $ 5,757
------------------------------------------------------------------------
Distributable cash per unit $ 0.23
------------------------------------------------------------------------
Distributions declared $ 6,035
------------------------------------------------------------------------
Distributions declared per unit $ 0.24
------------------------------------------------------------------------

Weighted average units outstanding during the period 25,147,500

------------------------------------------------------------------------


Distributions for the Period

For the period ended December 31, 2004, the Fund met its distribution
targets of $0.10 per unit per month. The details of these distributions
are as follows:



------------------------------------------------------------------------
Period Record Date Payment Date Per Unit Amount
(000's)
------------------------------------------------------------------------

Oct 19 - Oct 31, November 30, December 15,
2004 2004 2004 $0.04 $1,005
------------------------------------------------------------------------

Nov 1 - Nov 30, November 30, December 15,
2004 2004 2004 $0.10 $2,515
------------------------------------------------------------------------

Dec 1 - Dec 31, December 31, January 17,
2004 2004 2005 $0.10 $2,515
------------------------------------------------------------------------

Total Distributions $0.24 $6,035
------------------------------------------------------------------------


Distributions are declared monthly to unitholders of record on the last
business day of each month. The Board of Trustees approve cash
distributions on a monthly basis pursuant to the distribution policy it
has established, taking into account the Fund's current and prospective
performance. Some of the factors considered in making decisions related
to distributions include cash amounts to service debt obligations,
maintenance and growth capital expenditures, seasonality, and other
items considered to be prudent.

Outstanding Unit Data

At December 31, 2004, and March 30, 2005, the Fund had 25,147,500 units
outstanding.

Liquidity and Capital Resources

On October 19, 2004, the Fund raised $165 million gross proceeds,
through an initial public offering and $86,475 million through a private
placement, and acquired a 98% limited partnership interest in the
Partnership and all of the outstanding shares of Farley. In addition,
the Fund, through Gienow Windows & Doors Holdings Trust, a wholly-owned
entity, borrowed $57 million in term debt. As part of the acquisition,
the Fund assumed certain liabilities of Farley totaling $44.2 million
which were paid with the proceeds from the offerings and term debt.

On October 19, 2004, in conjunction with the initial public offering,
the Fund secured new credit facilities with a syndicate Canadian
chartered banks, which include a revolving credit facility of up to $8
million (subject to certain margin requirements) and a term credit
facility in the amount of $57 million (collectively the "Credit
Facilities"). At December 31, 2004, no amount was drawn under the
revolving credit facility and the full $57 million was drawn under the
term credit facility. The Credit Facilities, which have no fixed terms
of repayment, mature on October 19, 2007, at which time all outstanding
amounts are due.

As at December 31, 2004, the Fund was in compliance with all covenants
contained in the Credit Facilities.

The Fund will utilize cash flow from operating activities together with
the revolving credit facility, if required, to fund unit holder
distributions, seasonal working capital fluctuations, maintenance
capital expenditures and debt service obligations.

Cash Flow from Operating Activities

During the period cash generated in operating activities was $7,135
million. Management believes that the Fund has sufficient liquidity to
meet all of its working capital, distribution, and capital expenditure
needs for the next year.

Cash Flow from Financing Activities

During the period, the Fund declared distributions to unitholders of
$6,035 million, of which $2,515 million were paid subsequent to December
31, 2004, resulting in a net $3,520 million payment during the period.

The Fund also made $128 in principal repayments during the period
related to long-term debt and capital leases.

Cash Flow from Investing Activities

During the period, the Fund purchased property, plant and equipment in
the amount of $590. Of this amount, $403 was related to growth capital
expenditures and $187 related to maintenance capital expenditures.
Subsequent to December 31, 2004, the Fund financed the growth capital
expenditures with capital lease arrangements of $403 in support of the
growth capital expenditures made during the quarter.

During the period, the Fund also had proceeds on the sale of property,
plant and equipment totaling $29.

Capital Commitments

The Fund has committed to acquire capital assets through December 31,
2004, of $803. Of this amount, $260 has been paid and the remaining $543
will be paid subsequent to year-end.

Off-Balance Sheet Arrangements

The Fund has entered into premise, vehicle and equipment operating
leases requiring total payments over the next five years of $3,503. At
December 31, 2004, the Fund had also entered into forward purchase
contracts totaling $1,200 million, expiring between January 4, 2005 and
April 15, 2005 with exchange rates in the range of $1.3137 to $1.3343.
Gains and losses on foreign currency standard rate agreements are
recognized in the consolidated statement of earnings in the period in
which the changes in fair value occur.

Contractual Obligations

The Fund had the following contractual obligations as at December 31,
2004:



------------------------------------------------------------------------
Contractual Total Less than 1-3 4-5 Greater than
Obligations 1 year years years 5 years
------------------------------------------------------------------------
Long term debt and
capital lease
obligations $ 65,656 $ 788 $ 64,686 $ 182 $ -
------------------------------------------------------------------------
Operating leases 3,503 1,147 2,319 37 -
------------------------------------------------------------------------
Other capital
commitments 543 543 - - -
------------------------------------------------------------------------
Total contractual
obligations $ 69,702 $ 2,478 $ 67,005 $ 219 $ -
------------------------------------------------------------------------


Related Party Transactions

Gienow Services Inc. ("Service Co") is the corporation continuing from
the amalgamation of Award Windows Inc. and Architectural Windows & Doors
Inc. on September 17, 2004. Service Co is a wholly-owned subsidiary
GBPL, and is therefore controlled by the GBPL shareholders. Service Co
is one of two general partners of the Partnership.

GBPL, and its two wholly-owned subsidiaries, held the assets of the
window and door manufacturing, distribution and sales businesses which
were acquired by the Partnership. GBPL currently owns 30.8% of the
outstanding units of the Fund.

At December 31, 2004, the Fund had a balance payable to Service Co, of
approximately $1.4 million related to proceeds owing from the purchase
of the Partnership on October 19, 2004. The payable has no terms of
repayment and is non-interest bearing. Management expects to settle the
payable prior to the end of the second quarter ended June 30, 2005.

Additionally, the Fund had an account receivable balance due from GBPL
for $100 representing a legal expense paid on behalf of GBPL by the
Partnership. The Fund also had an account receivable in the amount of
$68 due from Service Co representing compensation expenses paid on
behalf of ServiceCo by the Partnership during the period. Both balances
have been received subsequent to year end.

The Fund also leases a manufacturing facility from a partnership of
which one of the partners is controlled by certain officers and
directors of the Fund. Annual lease payments are approximately $265 and
represent normal commercially available terms.

Critical Accounting Estimates

The preparation of financial statements, in conformity with Canadian
GAAP, requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from these estimates.

Valuation on acquisition date

Valuation of acquired assets and liabilities on the acquisition date
required the use of estimates to determine the purchase price
allocation. Estimates are made as to the valuation of capital assets,
intangible assets and goodwill as well as to the fair value of assets
acquired. In certain circumstances, such as the valuation of intangible
and tangible assets, management also relied on independent third party
estimates.

Goodwill and indefinite life intangible assets

Goodwill and intangible assets with indefinite lives are recorded at
cost and are not amortized. Management reviews these assets for
impairment annually, and more frequently if events or changes in
circumstances indicate that the asset may be impaired. Impaired assets
are written down if the carrying value exceeds the fair value.

Property, plant and equipment and finite life intangible assets

Property, plant and equipment and finite life intangible assets are
recorded at cost. Amortization and depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The
carrying value of the assets is evaluated whenever significant
circumstances indicate impairment in the value, based upon a comparison
of the carrying value to the fair value.

Income tax

Income tax provisions, including current and future income tax assets
and liabilities, may require estimates and interpretations of federal
and provincial income tax rules and regulations, and judgments as to
their interpretation and application to the Fund's specific situation.
Current income taxes are only provided for the taxable entities owned by
the Fund. Any change in future income tax assets and liabilities are
charged to income in the period.

Allowance for doubtful accounts

We expect that a small portion of required customer payments may not be
made and maintain an allowance for these doubtful accounts. This
requires an assessment and estimation of the credit worthiness of
customers, the timing of collections, and the amounts that will be
received. This allowance is based on our estimation of likelihood of
recovering our accounts receivable.

Financial Instruments and Other Instruments

The Fund is exposed to financial risks that arise from fluctuations in
interest rates and foreign exchange rates and the degree of volatility
of these rates. The Fund uses financial instruments, from time to time,
to manage these risks.

a) Credit risk:

The Fund is exposed to credit risk from accounts receivable that arise
upon sales to customers. This risk is mitigated by performing credit
assessments and implementing credit limits for each customer. The risk
is also limited due to the large number of customers and their
dispersion across geographic areas.

(b) Interest rate risk:

The Fund is exposed to variable interest rates on the floating-rate
credit facilities.

(c) Foreign currency risk:

The Fund enters into foreign currency forward contracts to fix the
exchange rate used to convert a portion of its US dollar denominated
sales and purchases into Canadian dollars. At December 31, 2004, the
Fund had USD $1,200 of forward purchase contracts at exchange rates
ranging from 1.3137 to 1.3343 expiring between January 4, 2005 and April
15, 2005. At December 31, 2004, an unrealized foreign exchange loss on
the forward exchange contracts of $139 was recognized in the financial
statements.

(d) Fair value disclosures:

The fair values of cash and cash equivalents, accounts receivable, due
from related parties, accounts payable, accrued liabilities, income
taxes payable, note payable to related parties and distributions payable
approximate their carrying values due to the short-term nature of these
items.

Business Risks

Sensitivity to General Economic Conditions

The window and door manufacturing and sales business has historically
been subject to cyclical variations in the general economy and to
uncertainty regarding future economic prospects. Sales are impacted by
the health of the Canadian and U.S. economy as a whole and in the
regional markets where the Fund operates. As such, the Fund's financial
results are sensitive to fluctuations in interest rates, gross domestic
product growth, the level of consumer confidence, and the level of
unemployment, among other factors. A deterioration in economic
conditions could materially adversely affect the overall demand for
windows and doors and as such would impact the Fund and result in a
decrease in sales and earnings.

Interest Rates

The Fund has certain floating rate loans that may be negatively impacted
by increases in interest rates, the effects of which would be to reduce
the amount of cash available for distributions to the unitholders.

Credit Facility

The Fund has a $57.0 million term loan which matures on October 18,
2007. If the Fund cannot successfully re-negotiate the term loan prior
to its maturity date, the cash available for distributions to
unitholders could be adversely affected.

Reliance on Residential Construction Industry

Demand in the residential window and door manufacturing industry is
influenced by the levels of residential construction and renovation
activity. Trends in each of these sectors directly impact the financial
performance of the Fund. Accordingly, the strength of the Canadian and
U.S. economy, the age of existing homes, job growth, the level of
consumer confidence, availability of consumer credit, fluctuations in
interest rates, demographics and migration of population have a direct
impact on the Fund's results of operations. Any decline in new
residential housing starts and/or demand for residential renovation
products could have a material adverse effect on the Fund's business,
financial condition, liquidity and results of operations.

Dependence on Major Customers

As is customary in the industry, the Fund does not have long-term
contracts with any of its customers. A significant reduction of
purchases by any of the Fund's largest customers could have a material
adverse effect on the Fund's business, financial condition, liquidity
and results of operations.

Inability to Sustain and Manage Growth

A principal component of the Fund's strategy is to continue its internal
growth. The Fund may not be successful in growing its business or in
managing its growth. The Fund's growth depends on its ability to
accomplish a number of things, including:

- successfully introducing new products;

- identifying and developing new geographic markets;

- developing new products and market acceptance for them;

- establishing and maintaining favorable relationships with customers in
new markets and market segments and maintaining these relationships in
existing markets; and

- successfully managing expansion and obtaining the required financing.

Any growth the Fund achieves may require additional employees and
increase the scope of both its operating and financial systems and the
geographic area of its operations. This will increase its operating
complexity and the level of responsibility of existing and new
management personnel. The Fund may be unable to attract and retain
qualified management and employees, and its existing operating and
financial systems and controls may not be adequate to support any
growth. The Fund's ability to improve its systems and controls may be
limited by increased costs, technological challenges, or lack of
qualified employees. The past results of the Partnership and Farley may
not be indicative of the Fund's prospects or its ability to penetrate
new markets, many of which may have different competitive conditions and
demographic characteristics than the Fund's current markets.

Future Acquisition and Integration Risks

To grow by acquisition, the Fund must identify and acquire suitable
acquisition candidates at attractive prices and successfully integrate
any acquired businesses with its existing operations. If the expected
synergies from acquisitions do not materialize or the Fund fails to
successfully integrate any new businesses into its existing business,
the Fund's financial performance could be significantly impacted. To the
extent that businesses acquired by the Fund or their prior owners failed
to comply with or otherwise violated applicable laws, the Fund, as a
successor owner, may be financially responsible for these violations.

Inability to Sustain Sales or EBITDA Margins

The Fund's income depends upon its ability to generate sales to
customers and to sustain its EBITDA margins. These margins are dependent
upon the Fund's ability to continue to profitably sell windows and doors
and to continue to provide products and services that make it the
supplier of choice to its customers. If the Fund's costs of goods or
operating costs increase, or other distributors of windows and doors can
compete more favorably with it, the Fund may not be able to sustain its
level of sales or EBITDA margins. In this case, amounts of cash
available for distribution to holders of units of the Fund could be
reduced.

Exchange Rate Fluctuations

A portion of the Fund's revenues and expenses, principally related to
its U.S. operations and to the purchase of raw materials, are
denominated in U.S. dollars. Furthermore, although certain raw materials
may be purchased in Canadian dollars, they may have inputs that are
denominated in foreign currencies. The Fund also sources some of its
materials directly from suppliers in foreign countries in transactions
that are denominated in foreign currencies. Any changes in the exchange
rate between the Canadian dollar and these foreign currencies could have
a material effect on the results of the Fund. The Fund's distributions
to unitholders are denominated in Canadian dollars.

As a result, the Fund's distributions are exposed to currency exchange
risk. For the purposes of financial reporting by the Fund, any change in
the value of the Canadian dollar against the U.S. dollar during a given
financial reporting period would result in a foreign exchange loss or
gain on the translation of any U.S. dollar monetary assets and
liabilities. Further, the Fund's reported earnings could fluctuate
materially as a result of revenues and expenses denominated in U.S.
dollars under Canadian GAAP. There can be no assurance that changes in
the currency exchange rate will not have a material adverse effect on
the Fund or on its ability to maintain a consistent level of
distributions in Canadian dollars.

Dependence on Key Products

The Fund's financial results and condition are substantially dependent
on the continued success and growth in the sales of vinyl windows.
Competitive efforts by other manufacturers of similar or substitute
products, shifts in consumer preferences or the introduction and
acceptance of alternative product offerings could have a material
adverse effect on the Fund's business, financial condition, liquidity
and results of operations.

Labor Disruptions

Approximately 300 of the Fund's employees, all of whom are employed by
Farley at the Alexandria, Ontario facility, are subject to a collective
bargaining agreement which expired in January 2005. Negotiations are
currently underway with regard to a new collective bargaining agreement
and to date there have been no disruptions by its unionized employees
and the Fund does not expect any disruptions.

Cash Distributions

The ability of the Fund to make cash distributions, and the actual
amount distributed, is dependent on the operations and assets of the
Fund, and is subject to various factors including each of its financial
performance, its obligations under the applicable credit facilities,
fluctuations in its working capital, the sustainability of margins and
its capital expenditure requirements. The market value of the Units may
deteriorate if the Fund is unable to meet its distribution targets in
the future, and that deterioration may be significant. In addition, the
composition of cash distributions for tax purposes may change over time
and may affect the after-tax return for investors.

Outlook

The Fund's product sales are affected by general economic trends.
Management has communicated previously that the first quarter of any
fiscal year is historically the weakest of the four quarters and expects
that trend to continue into fiscal year 2005, with the second and third
quarters picking up significantly over the first quarter.

Current visibility into the end of the first quarter and into the
beginning of second quarter is consistent with previous trends and in
line with fiscal year 2005 operating expectations. Accordingly, based on
the current positive economic and operating indicators, the Fund expects
to meet its distribution targets for fiscal year 2005.

In this environment, the Fund will be focused on growing sales and
profitability both organically and through further acquisitions.
Management continues to believe that the Fund is strongly positioned to
capitalize on the organic opportunities through the continued use of its
already proven competitive advantages including its national sales and
manufacturing footprint, as well as its technology and management
information systems.
Management also believes, as previously communicated, that the Fund is
strongly positioned to be an industry consolidator and will continue to
pursue additional accretive business additions to the Fund during fiscal
2005.

Note Regarding Forward-Looking Statements

Certain statements contained in this MD&A constitute forward-looking
statements. The use of any of the words "anticipate", "continue",
"estimate", "may", "will", "project", "should", "believe", and similar
expressions are intended to identify forward-looking statements. These
statements involve known and unknown risk, uncertainties and other
factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking statements. Management
believes 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 forward-looking statements included in
this MD&A should not be unduly relied upon. These statements speak only
as of the date of this MD&A. In particular, this MD&A contains
forward-looking statements pertaining to Distributable Cash and
distributions per unit. The actual results could differ materially from
those anticipated in these forward-looking statements. The Fund does not
undertake any obligation to publicly update or revise any
forward-looking statements.



Consolidated Financial Statements of
GIENOW WINDOWS &
DOORS INCOME FUND
Period from formation on September 9, 2004 to December 31, 2004


AUDITORS' REPORT TO THE UNITHOLDERS

We have audited the consolidated balance sheet of Gienow Windows & Doors
Income Fund as at December 31, 2004 and the consolidated statement of
earnings, accumulated earnings and cash flows for period from formation
on September 9, 2004 to December 31, 2004. These financial statements
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements based on our audit.

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

In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Fund as at
December 31, 2004, and the results of its operations and its cash flows
for the period from formation on September 9, 2004 to December 31, 2004
in accordance with Canadian generally accepted accounting principles.



"signed"
------------------

KPMG, LLP
Chartered Accountants

Calgary, Canada
March 30, 2005


GIENOW WINDOWS & DOORS INCOME FUND
Consolidated Balance Sheet

December 31, 2004
(expressed in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Assets

Current assets:
Cash and cash equivalents $ 5,161
Accounts receivable 19,182
Income taxes receivable 888
Due from related parties (note 1) 168
Inventories (note 4) 6,709
Prepaid expenses 1,344
---------------------------------------------------------------------
33,452

Property, plant and equipment (note 5) 31,358
Intangible assets (note 6) 73,368
Goodwill (note 3) 190,952
---------------------------------------------------------------------
$ 329,130
---------------------------------------------------------------------
---------------------------------------------------------------------
Liabilities and Unitholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $ 13,345
Distributions payable to unitholders 2,515
Note payable to related parties (note 1) 1,402
Current portion of long-term debt (note 7) 307
Current portion of capital leases (note 7) 481
---------------------------------------------------------------------
18,050

Capital leases (note 7) 1,752
Long-term debt (note 7) 63,116
Future income taxes (note 8) 8,217
---------------------------------------------------------------------
91,135

Non-controlling interest (note 1) 459

Unitholders' equity (note 9):
Units 239,515
Accumulated earnings 4,056
Accumulated distributions (6,035)
---------------------------------------------------------------------
237,536
Commitments (note 10)

---------------------------------------------------------------------
$ 329,130
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

Approved on behalf of the Trustees:

"signed"
-----------------
David Munro Trustee


"signed"
-----------------
Bruce Simpson Trustee


GIENOW WINDOWS & DOORS INCOME FUND
Consolidated Statement of Earnings

Period from formation on September 9, 2004 to December 31, 2004
(expressed in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Sales $ 33,791

Cost of sales 22,362
---------------------------------------------------------------------
11,429

Selling, general and administrative expenses 4,589
---------------------------------------------------------------------
Earnings before the undernoted 6,840

Interest 693
Depreciation and amortization 2,110
Foreign exchange loss 42
Gain on sale of property, plant and equipment (12)
---------------------------------------------------------------------
2,833

---------------------------------------------------------------------
Earnings before income taxes and non-controlling interest 4,007

Income taxes (note 8):
Current income taxes 17
Future income taxes (reduction) (123)
---------------------------------------------------------------------
(106)

---------------------------------------------------------------------
Earnings before non-controlling interest 4,113

Non-controlling interest (note 1) (57)
---------------------------------------------------------------------
Net earnings $ 4,056
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic and diluted:
Net earnings per unit $ 0.16
Weighted average number of units outstanding 25,147,500
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


GIENOW WINDOWS & DOORS INCOME FUND
Consolidated Statement of Accumulated Earnings

Period from formation on September 9, 2004 to December 31, 2004
(expressed in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Accumulated earnings, beginning of period $ -

Net earnings 4,056
---------------------------------------------------------------------
Accumulated earnings, end of period $ 4,056
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


GIENOW WINDOWS & DOORS INCOME FUND
Consolidated Statement of Cash Flows

Period from formation on September 9, 2004 to December 31, 2004
(expressed in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash provided by (used in) the following activities:

Operations:
Net income $ 4,056
Add (deduct) items not affecting cash:
Depreciation and amortization 2,110
Gain on sale of property, plant and equipment (12)
Future income taxes (reduction) (123)
Non-controlling interest 57
Change in non-cash working capital (note 12) 1,047
---------------------------------------------------------------------
7,135

Financing:
Initial public offering, net of expenses 239,515
Proceeds from long-term debt 57,000
Repayment of long-term debt (49)
Repayment of obligations under capital lease (79)
Advances to related parties (168)
Distributions paid to unitholders (3,520)
---------------------------------------------------------------------
292,699

Investing:
Purchase of property, plant and equipment (590)
Proceeds from sale of property, plant and equipment 29
Repayment of note payable to related parties (3,793)
Investment in Partnership (note 3) (188,086)
Farley acquisition (note 3) (48,960)
Settlement of acquired Farley liabilities (note 3) (44,190)
Change in non-cash working capital (note 12) (9,083)
---------------------------------------------------------------------
(294,673)

---------------------------------------------------------------------
Increase in cash and cash equivalents 5,161

Cash and cash equivalents, beginning of period -
---------------------------------------------------------------------
Cash and cash equivalents, end of period $ 5,161
---------------------------------------------------------------------
---------------------------------------------------------------------
Supplemental information:
Interest paid $ 433
Income taxes paid 59
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


GIENOW WINDOWS & DOORS INCOME FUND
Notes to Consolidated Financial Statements

Period from formation on September 9, 2004 to December 31, 2004
(expressed in thousands of dollars)


1. Formation of Fund and nature of operations:

Gienow Windows & Doors Income Fund is an unincorporated, open-ended,
limited purpose trust established under a Deed of Trust dated September
9, 2004, which was amended and restated on October 19, 2004, and
governed by the laws of the Province of Alberta. The Fund is in the
business of manufacturing, distributing and sales of windows, doors and
related products and services to industrial and residential customers in
Canada, United States and International markets. The Funds four
manufacturing facilities are located in Calgary, Edmonton and Alexandria.

The Fund completed an initial public offering on October 19, 2004
through the issuance of 16,500,000 units (the "Offering") for net
proceeds of $153,040 after deducting expenses of the Offering and
underwriters' fees of $11,960. Concurrently with the closing of the
Offering, the Fund sold 8,647,500 units on a private placement basis to
GBP Holdings Ltd., formerly Gienow Building Products Ltd., ("GBPL") for
gross proceeds of $86,475. The Fund also obtained a syndicated term
credit facility of $57,000 (see note 6).

After the close of business on June 30, 2004, GBPL and its wholly-owned
subsidiaries, Award Windows Inc. and Architectural Windows & Doors Inc.,
formed Gienow Windows & Doors Limited Partnership (the ''Partnership'')
and transferred all of their operating assets and related window and
doors businesses to the Partnership.

Upon closing of the Offering, the Fund used the net proceeds of the
Offering and private placement together with the term credit facility to
indirectly invest, through its subsidiary Gienow Windows & Doors
Holdings Trust (the "Trust"), in the Partnership for a limited
partnership interest representing a 98% interest therein, and to
indirectly purchase, through the Trust, all of the outstanding shares of
Farley Windows Inc. ("Farley") and provide funds to Farley so as to
enable Farley to repay its long-term debt and repurchase its outstanding
convertible debentures, warrants and option settlement liabilities. The
Partnership investment and Farley acquisition were accounted for using
the purchase method and the accounts reflect results of operations from
the date of the acquisitions on October 19, 2004 (see note 3).

Gienow Management Inc. ("ManagementCo"), which is a wholly-owned
subsidiary of the Fund, also owns a nominal general partnership interest
in the Partnership through which it will manage the business of the
Partnership together with the other general partner, Gienow Services
Inc. ("ServicesCo").

Pursuant to an Administration Agreement, ServicesCo, wholly-owned by
GBPL, provides the Partnership with management and administration
services to assist ManagementCo in strategic planning, developing,
operating and monitoring of the Partnership. In consideration for the
services and its remaining partners' capital of $402, ServicesCo
retained a 2% non-controlling general partnership interest in the
Partnership. Certain officers of the Fund are also officers of
ServicesCo. Certain actions of ServicesCo require the approval of the
independent board of directors of ManagementCo. Unless agreed by the
independent board of directors of ManagementCo, the maximum amount of
ServicesCo's annual non-controlling interest is capped at $500.
ServicesCo is also reimbursed the costs of all reasonable third party
costs incurred in carrying out its responsibilities under the
Administration Agreement.

For the period from October 19, 2004 to December 31, 2004, ServicesCo
earned a non-controlling interest of $57 and received no partnership
distributions or reimbursements of costs. At December 31, 2004, the Fund
had a note payable of $1,402 to ServicesCo relating to the purchase
price consideration owing on the investment in the Partnership.

The Fund also had an account receivable balance due from GBPL for $100
representing a legal expense paid on behalf of GBPL by the Partnership.
Additionally, the Fund also had an account receivable in the amount of
$68 due from ServicesCo representing compensation expenses paid on
behalf of ServicesCo by the Partnership during the period. Both balances
have been received subsequent to year end.

2. Significant accounting policies:

(a) Basis of consolidation:

These financial statements include the operations of the Fund and its
subsidiaries, including Holdings Trust, ManagementCo, the Partnership,
Farley and Farley Windows U.S.A., Inc. ("Farley U.S."). On
consolidation, all intercompany balances and transactions have been
eliminated.

(b) Cash and cash equivalents:

Cash and cash equivalents include balances with banks and short-term
investments with original maturities of three months or less.

(c) Inventories:

Inventories of raw materials are valued at the lower of cost, on a
first-in-first-out basis, and replacement cost. Inventories of finished
goods and work-in-progress are stated at the lower of cost, on a
first-in-first-out basis, and net realizable value.

(d) Property, plant and equipment:

Property, plant and equipment are recorded at cost. Property and
equipment under capital lease is initially recorded at the present value
of minimum lease payments on the inception of the lease. Depreciation is
provided on a straight-line basis over their estimated useful lives at
the following annual rates:



--------------------------------------------------------------
Buildings 3% - 10%
Machinery, equipment and dies 10% - 20%
Vehicles 10% - 20%
Furniture, fixtures and computer equipment 10% - 20%
--------------------------------------------------------------


Leasehold improvements are amortized over the lease terms.

(e) Intangible assets:

Acquired intangible assets are initially recognized and measured at
cost. The cost of acquired intangible assets that meet the specified
criteria for recognition apart from goodwill, is allocated to the
individual assets acquired based on their fair values.

Intangible assets with finite useful lives are amortized over their
useful lives. Intangible assets relating to customer relationships are
amortized on a straight-line basis over 10 years.

Intangible assets with indefinite useful lives are not amortized and are
tested for impairment annually, or more frequently if events or changes
in circumstances indicate that the asset might be impaired. The
impairment test compares the carrying amount of the intangible asset
with its fair value, and an impairment loss is recognized in earnings
for the excess, if any.

(f) Goodwill:

Goodwill is the residual amount that results when the purchase price of
an acquired business exceeds the sum of the amounts allocated to the
assets acquired, less liabilities assumed, based on their fair values.
Goodwill is allocated, as of the date of the business combination, to
the Fund's reporting units.

Goodwill is not amortized and is tested for impairment annually, or more
frequently, if events or changes in circumstances indicate that the
asset might be impaired. The impairment test is carried out in two
steps. In the first step, the carrying amount of the reporting unit is
compared with its fair value. When the fair value of a reporting unit
exceeds its carrying amount, goodwill of the reporting unit is
considered not to be impaired and the second step of the impairment test
is unnecessary.

The second step is carried out when the carrying amount of a reporting
unit exceeds its fair value, in which case, the implied fair value of
the reporting unit's goodwill is compared with its carrying amount to
measure the amount of the impairment loss, if any. When the carrying
amount of reporting units exceeds the implied fair value of the
goodwill, an impairment loss is recognized in an amount equal to the
excess and is presented as a separate line item in the statement of
earnings.

(g) Impairment of long-lived assets:

Long-lived assets, including property, plant and equipment are reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset
exceeds the fair value of the asset. Assets to be disposed of would be
separately presented in the balance sheet and reported at the lower of
the carrying amount or fair value less costs to sell, and are no longer
depreciated. The asset and liabilities of a disposal group classified as
held for sale would be presented separately in the appropriate asset and
liability sections of the balance sheet.

(h) Income taxes:

The Fund is a taxable entity under the Income Tax Act (Canada) and is
taxable only on income that is not distributed or distributable to the
unitholders. As the Fund distributes all of its taxable income to the
unitholders and meets the requirements of the Income Tax Act (Canada)
applicable to the Fund, no provision for income taxes has been made in
the Fund.

The Fund's corporate subsidiaries use the asset and liability method of
accounting for income taxes. Under the asset and liability method,
future income tax assets and liabilities are recognized for the future
income tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Future tax assets and liabilities are
measured using enacted or substantively enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
future tax assets and liabilities of a change in tax rates is recognized
in earnings in the period that includes the date of enactment or
substantive enactment.

(i) Revenue recognition:

Revenue for window and door sales is recognized when the products are
shipped to customers. Repair and installation service revenue is
recognized in the period that the service is provided.

(j) Foreign currency:

Monetary items denominated in foreign currency are translated to
Canadian dollars at exchange rates in effect at the balance sheet date
and non-monetary items are translated at rates of exchange in effect
when the assets were acquired or obligations incurred. Revenues and
expenses are translated at rates in effect at the time of the
transactions. Foreign exchange gains and losses are included in
earnings. Farley U.S. is considered to be an integrated foreign
operation and is translated using the temporal method.

(k) Derivative financial instruments:

The Fund uses derivative financial instruments to reduce its exposure to
fluctuations in foreign exchange rates. The Fund does not enter into
derivative financial instruments for trading and speculative purposes.
Derivative financial instruments are recorded at fair value in the
consolidated balance sheet. Realized and unrealized gains and losses on
these contracts are recognized in earnings as a component of the related
transaction.

(l) Use of estimates:

The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenue
and expenses during the period. Significant items subject to such
estimates and assumptions include the carrying amount of property, plant
and equipment, intangibles and goodwill; valuation allowances for
receivables, inventories and future income taxes; and valuation of
derivative financial instruments. Actual results could differ from those
estimates.

(m) Earnings per unit:

Basic earnings per unit are computed by dividing net earnings by the
weighted average units outstanding during the period. Diluted earnings
per unit are computed similar to basic earnings per unit except that the
weighted average units outstanding are increased to include additional
units from the assumed exercise of dilutive unit-based awards and
securities. At December 31, 2004, the Fund has no dilutive unit-based
awards or securities outstanding.

3. Business combinations:

The consideration paid for the investment by the Fund in the Partnership
(see note 1) has been allocated to the underlying net assets of the
Partnership based on their fair values as follows:



------------------------------------------------------------------------
Net assets of the Partnership acquired:
Net working capital (net of cash acquired of $6,271) $ 3,626
Property, plant and equipment 23,532
Intangible assets 47,800
Goodwill 121,877
Capital leases (1,875)
Long-term debt (6,472)
------------------------------------------------------------------------
188,488

Non-controlling interest (402)
------------------------------------------------------------------------
Cash consideration $ 188,086
------------------------------------------------------------------------
------------------------------------------------------------------------


The consideration paid for Farley (see note 1) has been allocated to the
underlying net assets acquired based on their fair values as follows:


------------------------------------------------------------------------
Net assets acquired:
Net working capital (net of cash acquired of $359) $ (2,044)
Property, plant and equipment 7,996
Intangible assets 26,900
Goodwill 69,075
Convertible debenture settlement liability (6,725)
Warrant settlement liability (5,120)
Option notes settlement liability (4,781)
Capital leases (437)
Long-term debt (27,564)
Future income taxes (8,340)
------------------------------------------------------------------------
Cash consideration $ 48,960
------------------------------------------------------------------------
------------------------------------------------------------------------

The purchase price allocations are preliminary and certain items,
including tax basis, have not been finalized.


4. Inventories:
------------------------------------------------------------------------
Raw materials $ 5,622
Work-in-progress 277
Finished products 810
------------------------------------------------------------------------
$ 6,709
------------------------------------------------------------------------
------------------------------------------------------------------------

5. Property, plant and equipment:

------------------------------------------------------------------------
Accumulated
depreciation and Net book
Cost amortization value
------------------------------------------------------------------------
Land $ 3,325 $ - $ 3,325
Buildings 16,284 113 16,171
Machinery, equipment and dies 7,623 277 7,346
Vehicles 835 37 798
Furniture, fixtures and
computer equipment 3,921 340 3,581
Leasehold improvements 148 11 137
------------------------------------------------------------------------
$ 32,136 $ 778 $ 31,358
------------------------------------------------------------------------
------------------------------------------------------------------------


At December 31, 2004, the Fund had assets under capital leases (see note
7) included in machinery, equipment and dies with a net book value of
$1,991 and in vehicles with a net book value of $339.



6. Intangible assets:

------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
------------------------------------------------------------------------
Customer relationships $ 66,600 $ 1,332 $ 65,268
Tradenames and trademarks 8,100 - 8,100
------------------------------------------------------------------------

$ 74,700 $ 1,332 $ 73,368
------------------------------------------------------------------------
------------------------------------------------------------------------

7. Long-term debt and capital leases:

------------------------------------------------------------------------
Term credit facility $ 57,000
Mortgage 6,423
Capital leases 2,233
------------------------------------------------------------------------

Less current portion of long-term debt and capital leases 788
------------------------------------------------------------------------
$ 64,868
------------------------------------------------------------------------
------------------------------------------------------------------------


On October 19, 2004, the Trust entered into credit arrangement with a
syndicate of Canadian chartered banks comprising a term credit facility
in the amount of $57,000 due in full on October 19, 2007 and a demand
revolving credit facility with a maximum availability of $8,000. At
December 31, 2004, there were no amounts outstanding under the revolving
credit facility. The facilities are secured by a general security
agreement covering all the assets of Holdings Trust and its
subsidiaries. The credit facilities require Holdings Trust to maintain
certain financial ratios and other covenants.

Drawings under the credit facilities bear interest at a floating rates
plus an applicable margin based on certain financial performance ratios.
Margins for borrowing by way of bankers' acceptances and LIBOR loans
vary from 1.75% to 2.25%. Margins for borrowing by way of Canadian prime
rate loans and U.S. base rate loans vary from 0.50% to 1.00%. Standby
fees are charged on the revolving credit facility at rates of 0.40% to
0.55% based on certain financial performance ratios. At December 31,
2004, the term credit facility had an effective interest rate of 5.25%.

The first mortgage, secured by certain land and buildings, is due June
1, 2008, requires monthly installment of $60 and bears interest at a
rate of 6.60%. The capital leases, secured by certain property, plant
and equipment, are due between March 2006 and May 2011, require monthly
payments of $53 and bear interest at rates ranging from 6.01% to 10.00%.

For the period from September 9, 2004 to December 31, 2004, interest on
long-term debt and capital leases was $681.

Principal repayments on long-term debt and capital leases due in each of
the years ending December 31 are as follows:



---------------------------------------------------------------------
---------------------------------------------------------------------
2005 $ 788
2006 808
2007 57,833
2008 6,045
2009 145
Thereafter 37
---------------------------------------------------------------------
---------------------------------------------------------------------


8. Income taxes:

Income tax expense differs from the amount that would be computed by
applying the federal and provincial statutory income tax rates to
earnings before income taxes and non-controlling interest. The reasons
for the differences are as follows:



---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings before income taxes and non-controlling interest $ 4,007
Statutory income tax rate 36.6%
---------------------------------------------------------------------
Expected income taxes 1,467

Earnings of non-corporate entities (1,614)
Provincial capital taxes 17
Other 24
---------------------------------------------------------------------
$ (106)
---------------------------------------------------------------------
---------------------------------------------------------------------

The tax effects of temporary differences that give rise to the future
tax assets and future income tax liability of the corporate subsidiaries
at December 31, 2004 are presented below:

---------------------------------------------------------------------
---------------------------------------------------------------------
Property, plant and equipment $ (925)
Intangible assets (9,545)
Financing costs 1,941
Non-capital losses expiring on or before 2013 312
---------------------------------------------------------------------
Net future income tax liability $ (8,217)
---------------------------------------------------------------------
---------------------------------------------------------------------


9. Unitholders' equity:

(a) Authorized:

The Deed of Trust provides that an unlimited number of units may be
issued. Each unit is transferable and represents an equal undivided
interest in any distributions of the Fund and in the net assets of the
Fund. All units have equal rights and privileges, are not subject to
future calls and assessments and entitle the holders thereof to one vote
for each unit held at all meetings of the unitholders.



---------------------------------------------------------------------
---------------------------------------------------------------------
Number
of units Amount
---------------------------------------------------------------------

Balance, beginning of period - $ -

Issued on Offering 16,500,000 165,000
Issued on private placement 8,647,500 86,475
---------------------------------------------------------------------
25,147,500 251,475

Unit issuance costs (11,960)
---------------------------------------------------------------------
Balance, end of period 25,147,500 $ 239,515
---------------------------------------------------------------------
---------------------------------------------------------------------


(c) Redemption:

Unitholders may redeem their units at any time by tendering their unit
certificates, together with a properly completed notice requesting
redemption in accordance with the Deed of Trust. The redemption amount
per unit will be the lesser of 95 percent of the average closing price
of the units on the principal exchange on which they are traded for the
10 day period ending on the trading day immediately prior to the date of
redemption and the closing market price of the units on the date of
redemption. The redemption amount will be payable no later than the last
day of the calendar month. The closing market price will be the closing
price of the units on the principal exchange on which they are traded on
the date of redemption, or, if there was no trade of the units on that
date, the average of the last bid and ask prices of the unit on that
date. The total amount payable by the Fund in respect of the units
tendered for redemption in the same calendar month shall not exceed $50,
provided that the Trustees may, in their sole discretion, waive this
limitation in respect of all units tendered for redemption in any
calendar month.

(d) Accumulated distributions:

Distributions declared during the period ended December 31, 2004, are as
follows:



---------------------------------------------------------------------
---------------------------------------------------------------------
Per unit Total
amount amount
---------------------------------------------------------------------

Accumulated distributions, beginning of period $ -

Distributions declared $ 0.24 6,035

---------------------------------------------------------------------
Accumulated distributions, end of period $ 6,035
---------------------------------------------------------------------
---------------------------------------------------------------------


10. Commitments:

As of December 31, 2004, the Fund has entered into premise, vehicle and
equipment operating leases requiring annual payments in each of the next
five years as follows:



---------------------------------------------------------------------
---------------------------------------------------------------------
2005 $ 1,220
2006 914
2007 678
2008 363
2009 328
---------------------------------------------------------------------
---------------------------------------------------------------------


11. Risk management and financial instruments:

(a) Credit risk:

The Fund is exposed to credit risk from accounts receivable that arise
upon sales to customers. This risk is mitigated by performing credit
assessments and implementing credit limits for each customer. The risk
is also limited due to the large number of customers and their
dispersion across geographic areas.

(b) Interest rate risk:

The Fund is exposed to variable interest rates on the floating-rate
credit facilities.

(c) Foreign currency risk:

The Fund enters into foreign currency forward contracts to fix the
exchange rate used to convert a portion of its US dollar denominated
sales and purchases into Canadian dollars. At December 31, 2004, the
Fund had US$1,200 of forward purchase contracts at exchange rates
ranging from $1.3137 to $1.3343 expiring between January 4, 2005 and
April 15, 2005. At December 31, 2004, a unrealized foreign exchange loss
on the forward exchange contracts of $139 was recognized in the
financial statements.

(d) Fair value disclosures:

The fair values of cash and cash equivalents, accounts receivable, due
from related parties, accounts payable, accrued liabilities, income
taxes payable, note payable to related parties and distributions payable
approximate their carrying values due to the short-term nature of these
items.

The fair value of the Fund's long-term debt and capital leases
approximates their carrying values because interest rates under the
terms of the debts approximate current interest rates for similar term
loans.



12. Statement of cash flows:

Changes in non-cash working capital are as follows:

---------------------------------------------------------------------
Accounts receivable $ 5,689
Income taxes receivable (123)
Inventories 339
Prepaid expenses 3,496
Accounts payable and accrued liabilities (17,402)
---------------------------------------------------------------------
Change in non-cash working capital $ (8,001)

Relating to investing activities (9,048)
---------------------------------------------------------------------
Relating to operating activities $ 1,047
---------------------------------------------------------------------
---------------------------------------------------------------------


13. Segmented information:

Management has determined that the Fund operates in a single operating
segment in the business of manufacturing, distributing and sales of
windows, doors and related products and services to industrial and
residential customers in Canada, United States and International markets.

The Fund's sales to external customers for the period from September 9,
2004 to December 31, 2004 and property, plant and equipment at December
31, 2004 by geographic area were as follows:



---------------------------------------------------------------------
---------------------------------------------------------------------
Sales to external customers:
Canada $ 27,694
United States and International 6,097
---------------------------------------------------------------------
$ 33,791
---------------------------------------------------------------------
---------------------------------------------------------------------

Property, plant and equipment:
Canada $ 31,147
United States and International 211
---------------------------------------------------------------------
$ 31,358
---------------------------------------------------------------------
---------------------------------------------------------------------


It is not practicable to allocate goodwill by geographic area.

For the period from October 19, 2004 to December 31, 2004, sales to one
customer amounted to approximately 14% of total sales. At December 31,
2004 accounts receivable for this customer amounted to approximately 11%
of total accounts receivable.

14. Related party transactions:

The Fund leases a manufacturing facility from a partnership of which one
of the partners is controlled by certain officers and directors of the
Fund. Annual lease payments are approximately $265 and represent normal
commercially available terms.

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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Gienow Windows & Doors Income Fund
    Richard L. Boyer
    (403) 203-8200
    Website: www.gienowincomefund.ca