Ag Growth Income Fund Reports Results for the Year Ended December 31, 2005.

WINNIPEG, Manitoba -- Ag Growth Income Fund (TSX:AFN.UN) today reported its financial results for its year ended December 31, 2005.

Results for the year ended December 31, 2005

For the year ended December 31, 2005, the Fund reported revenue of $84.0 million and earnings before interest, taxes, depreciation, and amortization of $25.0 million. This compares to sales of $43.5 million and EBITDA of $11.1 million for the Fund's first fiscal period that encompassed the period May 18, 2004, the date of the Fund's initial public offering, to December 31, 2004.

During the year the Fund raised monthly distributions from $0.1083 to $0.1300 per unit, an increase of 20%. For the year-ended December 31, 2005, the Fund declared regular distributions of $1.4315 per unit, or 68.3% of total distributable cash generated per unit of $2.095. In addition to regular distributions, the Fund declared two special distributions totaling $0.3000 per unit, bringing total distributions declared to $1.7315 per unit or 82.7% of distributable cash generated. For the period from the Fund's initial public offering on May 18, 2004 to December 31, 2005, the Fund declared distributions of $28.0 million, or 86.7% of the $32.3 million total distributable cash generated in that period.

Results for the three-month period ended December 31, 2005

For the three-month period ended December 31, 2005, the Fund reported sales of $16.9 million and EBITDA of $4.9 million, compared to sales of $13.9 million and EBITDA of $2.5 million for the same period in 2004. The Fund declared distributions of $0.69 per unit in the fourth quarter of 2005, including special distributions of $0.30 per unit. Distributions declared in the fourth quarter of 2004 were $0.4629 per unit, including special distributions of $0.1380 per unit.

Overview of Results

The favourable results reported for the periods ended December 31, 2005 are attributable to a number of factors. The acquisition of the Edwards Group on April 8, 2005 had a significant positive impact on sales and EBITDA. In addition to the contribution by Edwards, sales and EBITDA increased significantly over the prior year due primarily to higher auger unit sales, an increase in per unit revenue that resulted from price increases and a trend towards larger, more expensive units, and new product revenue. "We are very pleased with our results," said Rob Stenson, President and CEO of Ag Growth Income Fund, "We achieved sales and EBITDA growth despite a stronger Canadian dollar and a somewhat smaller crop in the U.S. The sales and EBITDA growth is an acknowledgment of the strength of our brands, the success of recent distribution network initiatives, and improvements in production throughput."

Distribution Policy

The Fund's policy is to make monthly distributions to holders of both Fund units and Class B Exchangeable limited partnership units. Furthermore, in accordance with the terms of the Fund's prospectus, holders of Class C Subordinated Exchangeable limited partnership units receive distributions quarterly provided the relevant terms of subordination have been met, which they have since the inception of the Fund.

The Fund's Declaration of Trust requires that it distribute all taxable income earned in its fiscal period ending December 31. It may be necessary for the Fund to estimate special distributions to achieve this requirement. In any event, the final amount determined to be payable will be distributed in January to unitholders on December 31.

The Fund's Board of Trustees reviews financial performance and other factors when assessing the Fund's distribution levels. An adjustment to distribution levels will be made at such time as the Board determines the adjustment is sustainable and in the long-term best interest of the Fund and its unitholders.

Company Profile

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

Non-GAAP measures

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

Forward-Looking Statements

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

AG GROWTH INCOME FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 16, 2006

This Management's Discussion and Analysis should be read in conjunction with the audited consolidated financial statements and accompanying notes of Ag Growth Income Fund for the year ended December 31, 2005. Results are reported in Canadian dollars unless otherwise stated and have been prepared in accordance with Canadian generally accepted accounting principles.

OVERVIEW OF THE FUND

Ag Growth Income Fund (the "Fund") is an unincorporated, open-ended, limited purpose trust established under the laws of the Province of Ontario by a Declaration of Trust made as at March 24, 2004. On May 5, 2004, the Fund filed a final prospectus for the sale of 6,904,000 units at $10 per unit. In conjunction with the IPO, the Fund acquired indirectly all of the securities and assets of Ag Growth Industries Inc. ("Ag Growth"), which conducts business in the grain handling, storage, and conditioning market. As consideration for the acquisition, the owners of Ag Growth received, in addition to cash, 800,000 Class B Exchangeable units and 1,926,000 Class C Exchangeable Subordinated units of AGX Holdings Limited Partnership ("AGHLP"), a wholly owned subsidiary of the Fund. The units of the Fund and the Class B and Class C units of AGHLP participate pro rata  in the distributions of net earnings. Subsequent to the date of the offering, a total of 630,022 Class B units of AGHLP have been exchanged for 630,022 units of the Fund. Effective April 8, 2005, the Fund acquired substantially all of the assets of The Edwards Group of Companies, a leading manufacturer of agricultural aeration equipment. In conjunction with the acquisition of the Edwards Group, the Fund issued an additional 1,595,000 units via a private placement. Subsequent to this unit issuance, the prior owners of Ag Growth hold a 19% interest in the Fund and hold 2,095,978 Special Voting Units.

As at March 16, 2006, the following units were issued and
outstanding:

Trust units                                                 9,129,022
Class B Exchangeable units                                    169,978
Class C Exchangeable Subordinated units                     1,926,000
                                                          -----------
Total units that participate pro rata in distributions     11,225,000
                                                          -----------
                                                          -----------

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

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

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

BASIS OF MANAGEMENT'S DISCUSSION AND ANALYSIS

The Fund was inactive until its acquisition of Ag Growth on May 18, 2004. To provide meaningful information to the reader, comparative results for the year ended December 31, 2004 include Ag Growth's results of operations for the 137-day period ended May 17, 2004. Management's Discussion and Analysis will refer to the Combined Operating Results of the Fund for the year ended December 31, 2004, which is comprised of the operations of the Fund for the 228-day period ended December 31, 2004, and Ag Growth's results of operations for the 137-day period ended May 17, 2004 (the "combined operating results"). Readers are cautioned that the combined operating results presented are not the results of the Fund for the year ended December 31, 2004 and have been presented only to provide the reader with additional information to enhance comparability to operating results of the Fund for the year ended December 31, 2005.

Comparative results - Year- ended December 31, 2004

The table below reconciles the operating results reported by the Fund to the combined operating results for the year ended December 31, 2004. Other than transactions related to the initial public offering on May 18, 2004, and the gain on sale of Ag Growth's outstanding foreign exchange contracts in January 2004, there are no unusual items in either Ag Growth's or the Fund's results for the year ended December 31, 2004. Certain comparative figures have been reclassified to conform with the current period's presentation.

Combined
                               Ag Growth   The Fund (1)    Operating
                               (Pre Fund)                    Results
                             January 1 -   Inception -    Year Ended
                            May 17, 2004  Dec 31, 2004  Dec 31, 2004

Sales                        $19,746,893   $43,547,884   $63,294,777
Cost of sales                 11,017,758    22,683,058    33,700,816
                            ------------- ------------- -------------
Gross margin                   8,729,135    20,864,826    29,593,961

General and administration     4,359,563     7,246,922    11,606,485
Professional fees                249,271       678,554       927,825
Long term incentive plan               0       265,788       265,788
Research and development         205,138       290,502       495,640
Capital taxes                    203,605       236,321       439,926
Loss (gain) on foreign exchange (587,173)    1,143,298       556,125
Other income                     (28,352)     (138,963)     (167,315)
                            ------------- ------------- -------------
Total operating expenses       4,402,052     9,722,422    14,124,474
                            ------------- ------------- -------------

EBITDA before gain on sale
 and IPO expenses              4,327,083    11,142,404    15,469,487
Gain on sale (2)              (4,553,611)            0    (4,553,611)
IPO expenses                   1,401,750             0     1,401,750
                            ------------- ------------- -------------
EBITDA (3)                     7,478,944    11,142,404    18,621,348
Amortization (3)                 287,486     1,566,528     1,854,014
Interest expense               1,082,401       688,467     1,770,868
                            ------------- ------------- -------------
Earnings before tax            6,109,057     8,887,409    14,996,466
Tax expense                    2,562,000       164,000     2,726,000
                            ------------- ------------- -------------
Net earnings                 $ 3,547,057   $ 8,723,409   $12,270,466
                            ------------- ------------- -------------
                            ------------- ------------- -------------

(1) The Fund was inactive until its acquisition of Ag Growth on May
    18, 2004. Included in the Fund's results of operations are the
    results of Ag Growth's operations for only the 228-day period
    from the date of acquisition, May 18, 2004, to December 31,
    2004. Also, certain figures have been reclassified to conform
    with the current period's presentation.
(2) In January 2004 Ag Growth realized a gain on the sale of its
    outstanding forward foreign exchange contracts. Due to the
    significance of the gain it has been segregated from operating
    expenses.
(3) See discussion of non-GAAP measures.

The Edwards Group Acquisition

Effective April 8, 2005, the Fund acquired substantially all of the assets of The Edwards Group of Companies. Results of operations of the Edwards Group are included in the results of the Fund for the period subsequent to the acquisition. Furthermore, Edwards' assets and liabilities have been consolidated with those of the Fund. In conjunction with the acquisition, the Fund completed a private placement of 1,595,000 Trust Units priced at $13.50 per unit for gross proceeds of approximately $21.5 million. The Fund's expenses in connection with the offering were approximately $1.1 million. Net assets acquired were as follows:

Accounts receivable                                        1,348,830
Inventory                                                  3,672,603
Prepaid expenses and other assets                            174,246
Property, plant and equipment                              6,992,000
Intangible assets
 Brand name                                                4,363,000
 Distribution network                                      2,839,000
 Patent                                                      250,000
Goodwill                                                   3,406,168
Accounts payable and accrued liabilities                  (1,360,104)
                                                        -------------
                                                         $21,685,743
                                                        -------------
                                                        -------------


OPERATING RESULTS

                                             Year Ended December 31
                                                  2005      2004 (1)

Sales                                       $84,033,945  $63,294,777
Cost of sales                                45,132,586   33,700,816
                                           ------------- ------------
Gross margin                                 38,901,359   29,593,961
                                           ------------- ------------

General and administration                   13,235,750   11,606,485
Professional fees                               530,532      927,825
Long term incentive plan                        933,001      265,788
Research and development                        622,695      495,640
Capital taxes                                   328,716      439,926
Loss (gain) on foreign exchange              (1,355,991)     556,125
Other income                                   (436,638)    (167,315)
                                           ------------- ------------
Total operating expenses                     13,858,065   14,124,474
                                           ------------- ------------

EBITDA before gain on sale and
 IPO expenses                                25,043,294   15,469,487
Gain on sale (1)                                      0   (4,553,611)
IPO expenses                                          0    1,401,750
                                           ------------- ------------
EBITDA (2)                                   25,043,294   18,621,348

Amortization (3)                              4,040,948    1,854,014
Interest expense                              1,035,153    1,770,868
                                           ------------- ------------
Earnings before tax                          19,967,193   14,996,466
Tax expense                                     315,123    2,726,000
                                           ------------- ------------
Net earnings                                $19,652,070  $12,270,466
                                           ------------- ------------
                                           ------------- ------------

Net earnings per unit                       $      1.82  $    0.91(1)
                                           ------------- ------------
                                           ------------- ------------

(1) Results for the year ended December 31, 2004 include the results
    of Ag Growth for the period January 1 to May 17, 2004. See "Basis
    of Management's Discussion and Analysis". Also, certain figures
    have been reclassified to conform with the current period's
    presentation.
(2) In January 2004 Ag Growth realized a gain on the sale of its
    outstanding forward foreign exchange contracts. Due to the
    significance of the gain it has been segregated from operating
    expenses.
(3) See discussion of non-GAAP measures.


                              December 31, 2005    December 31, 2004

Total assets                       $144,352,812         $120,671,166
Total liabilities                  $ 33,574,028         $ 31,102,526

For the year ended December 31, 2005, the Fund generated distributable cash of $2.10 per weighted average unit and declared cash distributions of $1.73 per unit. The table below summarizes the distributions declared for trust units of the Fund and for Class B Exchangeable limited partnership units and Class C Subordinated limited partnership units of AGX Holdings Limited Partnership. The Fund's distribution policy is described in the "Distributions" section of this document.

Trust units                                              $15,288,686
Class B Exchangeable units                                   294,317
Class C Exchangeable Subordinated units                    3,334,869
                                                        -------------
                                                         $18,917,872
                                                        -------------
                                                        -------------

Overall Performance

Operating results for the year-ended December 31, 2005 were positively impacted by the acquisition of the Edwards Group on April 8, 2005. Sales, EBITDA, and net earnings increased significantly over the prior year in part due to the inclusion of the Edwards results, which were consistent with management expectations. Also, as described under "The Edwards Group Acquisition" above, several balance sheet items were affected by the acquisition.

The Fund reported a substantial increase in sales, EBITDA, and net earnings for the year ended December 31, 2005 even after allowing for the inclusion of Edwards. Sales in 2005 were positively influenced by favourable crop conditions in many key U.S. markets, an increase in the number of auger units sold, higher per unit revenue on most products, and new product development. Gross margins remained relatively stable while total operating expenses decreased. The strong financial performance in 2005 was achieved despite the continued strengthening of the Canadian dollar.

Foreign Exchange

Sales and expenses are recorded at the monthly rate of exchange. In 2005, Ag Growth generated 65% of its sales in US dollars (2004 - 67%), with a much lower proportion of its expenses being US dollar denominated. As a result, only a portion of the negative impact on sales that results from a strengthening of the Canadian dollar is offset by the benefit related to US dollar purchases. Sales and expenses are recorded at the actual monthly rate of exchange and, accordingly, gains or losses on the Fund's foreign currency hedging instruments are included in operating expenses.

The impact of foreign currency hedges has been included, along with the gain or loss on the translation of US dollar working capital, in operating expenses as a gain or loss on foreign exchange. Ag Growth's foreign currency hedging instruments impact the sales line on the income statement only to the extent that the contract premium is amortized to sales. This amortization to sales amounted to $220,826 for the year-ended December 31, 2005.

The Canadian dollar strengthened further in 2005 and as a result sales denominated in US dollars were translated to Canadian dollars at a lower rate. For the year-ended December 31, 2005, US dollar sales were translated to Canadian dollars at an average rate of $1.21 ($0.83) compared to $1.31 ($0.76) in 2004, a decrease of 8%. As the Fund generated approximately 65% of its 2005 sales in US dollars, the stronger Canadian dollar had a significant negative effect on sales.

Sales

For the year ended December 31, 2005, sales increased $20.7 million or 32.8% over 2004. Excluding Edwards, sales for the year increased $9.1 million or 14.4% over 2004. The significant increase in sales is largely the result of an increase in auger sales that resulted from the Fund's ability to use its strong market share and geographic diversification to capitalize on favourable conditions in several key U.S. markets. The strength of the Fund's distribution network also contributed to strong sales in certain drought-impacted areas of the U.S. corn belt. Sales benefited from the large price increases on most products implemented throughout 2004 in response to rising input costs, and a trend towards larger, more expensive auger units, which resulted in higher per unit revenue in 2005. Sales from recently developed products, including a heavier line of augers and a new line of post pounders, also contributed to the increase in sales compared to 2004. These factors more than offset the negative impact of a stronger Canadian dollar, which resulted in U.S. dollar denominated sales being recorded at exchange rates approximately 8% lower than in the same period in 2004.

Expenses

Gross margin as a percentage of sales for year ended December 31, 2005 was 46.3%, compared to 46.8% in 2004. The inclusion of results for the Edwards Group in 2005 did not significantly impact gross margin percentages compared to the prior year. The Fund was able to maintain a strong gross margin percentage despite the significant strengthening of the Canadian dollar, as gross margins benefited from production efficiencies, high sales volumes, price increases implemented in 2004 to offset rising input costs, and a decline in certain input costs compared to the prior year.

For the year ended December 31, 2005, total operating expenses were $13.9 million, including $1.4 million recorded by the Edwards Group, compared to $14.1 million in 2004, prior to the gain Ag Growth realized on the sale of its outstanding forward foreign exchange contracts and the accrual of IPO expenses. Excluding Edwards, the $1.6 million decrease from 2004 is primarily due to the following:

- General and administrative expenses increased $0.3 million or 2.3%, as savings related to the rationalization of the Fund's distribution network and the elimination of management fees payable to the owners of Ag Growth prior to the IPO were offset by higher sales and marketing costs and an increase in earnings based compensation bonuses.

- Professional fees decreased $0.4 million as the majority of the costs related to a successful patent defence were incurred in the prior year.

- Long-term incentive plan expense increased $0.7 million due to a 20% rise in the Fund's distribution rate and a 217% increase in per unit special distributions.

- In 2005, largely due to gains on foreign exchange contracts, the Fund recorded a gain on foreign exchange of $1.4 million. In 2004 the Fund recorded a loss on foreign exchange of $0.6 million, as the gain on foreign exchange contracts was much smaller and it was more than offset by the downward revaluation of US dollar working capital that resulted from the significant strengthening of the Canadian dollar in that year.

- Other income increased $0.3 million, primarily due to the inclusion in 2005 of $0.2 million related to the fair value of the Fund's interest rate swap.

- A number of smaller miscellaneous items accounted for the remaining change.

Prior to the initial public offering on May 18, 2004, Ag Growth realized a net gain of $4.6 million on the sale of its forward foreign exchange contracts. Ag Growth subsequently entered into a number of new forward foreign exchange contracts that continue to form part of the Fund's hedging strategy. The $4.6 million gain on sale significantly affected Ag Growth's financial results for the year ended December 31, 2004.

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

EBITDA for the year ended December 31, 2005 was $25.0 million, compared to $15.5 million in 2004 prior to the gain Ag Growth realized on the sale of its outstanding foreign exchange contracts and the accrual of IPO expenses in that year. The significant increase in EBITDA is the result of the acquisition of the Edwards Group, strong sales, stable gross margins, and a decrease in total operating expenses. After recognition of the gain on the sale of foreign exchange contracts and the accrual of IPO expenses, EBITDA for the year ended December 31, 2004 was $18.6 million.

Upon completion of the IPO on May 18, 2004, the Fund retired the existing debt obligations of Ag Growth and entered into a new credit facility with a single lender. The credit facility includes term debt of $20 million and an operating facility of $15 million, increasing to $18 million for the period May 31 to September 30 each year. Both facilities bear interest at rates based on performance calculations. For the year ended December 31, 2005, the Fund's effective interest rate on its term debt was 4.8%, and after consideration of the effect of the Fund's interest rate swap (see "Financial Instruments") was 4.5%.

Amortization for the year ended December 31, 2005 was $4.0 million and includes the amortization of intangible assets of $1.7 million, the amortization of deferred financing costs of $0.4 million, and the amortization of property, plant and equipment of $1.9 million. Compared to 2004, the increase in amortization of property, plant and equipment and intangibles is largely the result of the acquisition of the Edwards Group.

The Fund is a mutual fund trust for income tax purposes and therefore is not subject to tax on income distributed to unitholders. The manufacturing business operations of the Fund are carried out within a limited partnership. Income from the limited partnership is not subject to tax but flows through to the holders of the partnership units, which include the Fund. The Fund's distributions are taxable in the hands of the unitholders. As a result of the Fund's structure, tax expense is recorded only for the Fund's subsidiary corporations. The recorded tax expense of $315,123 for the year ended December 31, 2005 represents primarily income taxes and large corporation tax payable on the net income and taxable capital primarily allocated to Ag Growth through its ownership in AGLP after deductions for interest expense, financing fees and capital taxes.

Net earnings for the year ended December 31, 2005 was $19.7 million and earnings per basic and diluted unit for the year was $1.82.

Quarterly Financial Information

                      2005 Q4      2005 Q3      2005 Q2      2005 Q1
---------------------------------------------------------------------

Total sales       $16,900,725  $26,755,797  $24,363,985  $16,013,438
Gain (loss) on
 foreign exchange $ 1,294,912  $  (274,763) $   115,822  $   220,020
Net earnings      $ 3,380,300  $ 6,567,557  $ 6,255,028  $ 3,449,185
Basic and diluted
 net earnings per
 unit             $      0.31  $      0.59  $      0.56  $      0.36
---------------------------------------------------------------------

                      2004 Q4      2004 Q3    2004 Q2(1)   2004 Q1(2)
---------------------------------------------------------------------

Total sales       $13,911,771  $21,780,593  $ 7,855,520          N/A
Gain (loss) on
 foreign exchange $     3,552  $  (626,254) $  (520,596)         N/A
Net earnings      $ 1,798,911  $ 5,483,492  $ 1,441,006          N/A
Basic and diluted
 net earnings per
 unit             $      0.19  $      0.57  $      0.15          N/A
---------------------------------------------------------------------

(1) Includes results of operations only for the 44-day period May 18
    to June 30, 2004.
(2) Prior to IPO date of May 18, 2004.
(3) Certain comparative figures have been reclassified to conform to
    the current period's presentation.

Interim period revenues and earnings historically reflect some seasonality. The third quarter is typically the strongest primarily due to high in-season demand at the farm level. Distributable cash generated per unit will also typically be highest in the third quarter. The second, third, and fourth quarters of 2005, compared to the same periods in 2004, were significantly impacted by the April 8, 2005 acquisition of the Edwards Group. The gain on foreign exchange in the fourth quarter of 2005 was largely the result of gains on the Fund's foreign exchange contracts. A similar gain was not recorded in the fourth quarter of 2004, as the Fund's contract rates were more similar to prevailing market rates. The first and second quarters of 2005 were stronger than 2004 largely due to demand that resulted from the record 2004 U.S. harvest. The second quarter of 2004 reflects the operations of Ag Growth for only the 44-day period from the date of the Fund's May 18, 2004 IPO to the quarter-end date.

FOURTH QUARTER

Operating results for the three months ended December 31, 2005 were positively impacted by the acquisition of the Edwards Group. Sales, EBITDA, and net earnings increased significantly over the same period in 2004 in part due to the inclusion of Edwards. However, even after excluding the effect of Edwards, the Fund reported a substantial increase in sales, EBITDA, and net earnings. The positive results recorded in the fourth quarter of 2005 were the result of the following factors.

Sales for the three-months ended December 31, 2005 were $16.9 million, an increase of 21.5% over the $13.9 million recorded in the same period in 2004. Excluding Edwards, sales increased $1.1 million or 8.3% over 2004. Fourth quarter demand was high in both 2005 and 2004. The increase in 2005 was primarily the result of increased overseas sales, as the Fund continues to expand markets in Australia  and Europe, higher auger sales at the Wheatheart division, and new product revenue, offset by a strengthening Canadian dollar.

Gross margin as a percentage of sales was 42.1% in the fourth quarter of 2005, compared with 45.2% for the three months ended December 31, 2004. The decrease in gross margin percentage is primarily the result of a lower US exchange rate, as the effective rate of exchange decreased from $1.26 in the fourth quarter of 2004 to $1.17 in the fourth quarter of 2005, partially offset by the benefit of lower input costs compared to the prior year.

Total operating expenses for the three-month period ended December 31, 2005 were $2.2 million, including Edwards' costs of $0.5 million. This compares to total operating expenses of $3.8 million for the same period in 2004. Excluding Edwards, the decrease of $2.1 million from 2004 is largely the result of a $1.3 million increase in the gain on foreign exchange. Operating expenses compared to the fourth quarter of 2004 also decreased due to a $0.3 million decline in legal fees, an insurance recovery that led to a $0.2 million decrease in repairs and maintenance expense, and an increase in other income of $0.2 million that related to the Fund's interest rate swap. A number of smaller miscellaneous items accounted for the remaining change.

EBITDA for the three-month period ended December 31, 2005 was $4.9 million, compared to $2.5 million for the same period in 2004. The increase in EBITDA compared to 2004 is primarily the result of the acquisition of the Edwards Group and lower total operating expenses, offset by a lower gross margin. Net earnings for the three months ended December 31 increased from $1.8 million in 2004 to $3.4 million in 2005 due to the factors discussed above.

In the three months ended December 31, 2005, the Fund generated $15.3 million from operating activities, including $0.5 million generated by Edwards, compared to $14.4 million in the same period in 2004. Excluding Edwards, the $0.4 million increase was due to a $2.0 million increase in earnings before non-cash charges, offset by a decrease in the cash generated through movement in non-cash working capital. During the three months ended December 31, 2005, the Fund had capital expenditures of $0.4 million (2004 - $0.3 million) that related primarily to purchases of manufacturing equipment, computer hardware and software, and building improvements. During the three months ended December 31, 2005 the Fund paid off its bank revolver of $1.0 million (2004 - $4.2 million) and ended the period with a cash balance of $8.1 million (2004 - $7.0 million).

CASHFLOW AND LIQUIDITY

The table below reconciles net income to cash flow from operations for the years ended December 31, 2005 and 2004.

December 31
                                                2005          2004(1)

Net income                               $19,652,070     $12,270,466
Add charges (deduct credits) to
 operations not requiring a
 current cash payment:
 Amortization                              4,040,948       1,854,014
 Future income taxes                         236,000         317,000
 Deferred foreign exchange loss               34,540         (47,900)
 Loss (gain) on sale of assets                12,120         (16,419)
                                         ------------    ------------
                                          23,975,678      14,377,161
Net change in non-cash working capital
 balances related to operations:
 Accounts receivable                      (1,441,926)      1,404,431
 Inventory                                  (967,153)     (2,949,234)
 Prepaid expenses and other                 (270,328)       (703,721)
 Accounts payable                           (442,001)        655,729
 Long term incentive plan                    667,213         265,788
 Customer deposits                          (721,769)      3,240,883
 Income tax payable                          477,481        (864,900)
                                         ------------    ------------
                                          (2,698,483)      1,048,976
                                         ------------    ------------

Cash flow from operations                $21,277,195     $15,426,137
Add (deduct) unusual items: (2)
 IPO expenses                                      0       1,401,750
 Gain on sale (3)                                  0      (4,553,611)
                                         ------------    ------------
Cash flow from operations excluding
 unusual items                           $21,277,195     $12,274,276
                                         ------------    ------------
                                         ------------    ------------

(1) Results for the period ended December 31, 2004 include the
    results of Ag Growth for the period January 1 to May 17, 2004.
    See "Basis of Management's Discussion and Analysis".
(2) Due to the significance of the IPO expenses and the gain on sale
    of foreign exchange contracts, and their impact on the
    comparability of results, cash flow used in operations has also
    been presented net of these items.
(3) In January 2004 Ag Growth realized a gain on the sale of its
    outstanding forward foreign exchange contracts. Due to the
    significance of the gain it has been presented separately.

Cash flow from operations for the year ended December 31, 2005 was $21.3 million, an increase of $9.0 million over the same period in 2004, prior to the gain Ag Growth realized on the sale of its outstanding foreign exchange contracts and the accrual of IPO expenses. Excluding cash flow generated from Edwards of $2.6 million, the remaining $6.3 million increase resulted from substantial growth in earnings before non-cash charges, offset by a decrease in the cash generated through movement in non-cash working capital.

Interim period working capital requirements typically reflect some seasonality. The Fund's collections of accounts receivable are weighted towards the third and fourth quarters. This collection pattern, combined with seasonally high sales in the third quarter, result in accounts receivable levels increasing throughout the year and peaking in the third quarter. In order to ensure the Fund has adequate supply throughout its distribution network in advance of in-season demand, inventory levels must be gradually increased throughout the year. Accordingly, inventory levels typically increase in the first and second quarters and then begin to decline in the third or fourth quarter as sales levels exceed production. As a result of these working capital movements, historically, Ag Growth's use of its bank revolver is typically highest in the first and second quarters. The revolver balance would normally begin declining in the third quarter as collections of accounts receivable increase. Ag Growth has generally fully repaid its revolver balance by early in the fourth quarter.

The Fund had capital expenditures of $1.3 million in the year ended December 31, 2005, compared to $0.7 million for the period May 18, 2004 to December 31, 2004. Capital expenditures in 2005 related primarily to purchases of manufacturing equipment, forklifts, semi trailer units, computer hardware and software, and building improvements. The Fund anticipates total capital expenditures in 2006 will approximate the amounts expended in 2005, and that all 2006 capital expenditures will be funded through operations.

For the year ended December 31, 2005, the Fund's cash balance increased $1.1 million.

CONTRACTUAL OBLIGATIONS

                                        Total       2006         2007

Long-term debt                   $ 20,041,093   $ 23,502 $ 10,015,331
Operating leases                    1,296,037    451,814      396,650
---------------------------------------------------------------------
Total obligations                  21,337,130    475,316   10,411,981
---------------------------------------------------------------------
---------------------------------------------------------------------

                                          2008       2009       2010+
Long-term debt                    $ 10,002,260  $       0    $      0
Operating leases                       248,438    140,820      58,315
---------------------------------------------------------------------
Total obligations                   10,250,698    140,820      58,315
---------------------------------------------------------------------
---------------------------------------------------------------------

The term loan of $20 million included in long-term debt above matures May 2006 and is extendible annually for an additional one-year term at the lender's option. Under the terms of the credit facility agreement, if the bank elects to not extend the operating and term loan facilities beyond the current May 31, 2006 maturity date, all amounts outstanding under the facilities become repayable  in four equal quarterly instalments of principal, commencing August 31, 2007.

The operating leases relate to vehicle, equipment, and warehouse facility leases entered into in the normal course of business.

DISTRIBUTIONS

The Fund declared distributions to public unitholders of $15.3 million for the year ended December 31, 2005, including $6.3 million in the three-month period then ended. Furthermore, consistent with the Fund's prospectus dated May 5, 2004, the Fund declared distributions to Ag Growth's previous owners of $3.6 million and $1.4 million for the year and three months ended December 31, 2005 respectively.

The Fund's policy is to make monthly distributions to holders of both Trust units and Class B Exchangeable limited partnership units. Furthermore, in accordance with the terms of the Fund's prospectus, holders of Class C Subordinated Exchangeable limited partnership units receive distributions quarterly provided the relevant terms of subordination have been met, which they have since the inception of the Fund. The Fund's Declaration of Trust requires that it distribute all taxable income earned in its fiscal period ending December 31. It may be necessary for the Fund to estimate one or more special distributions to achieve this requirement.

The Fund's Board of Trustees reviews financial performance and other factors when assessing the Fund's distribution levels. An adjustment to distribution levels will be made at such time as the Board determines the adjustment is sustainable and in the long-term best interest of the Fund and its unitholders.

Distributable cash generated for the year and quarter ended December 31, 2005 and the 283-day period and quarter ended December 31, 2004 is calculated as follows:

December 31, 2005       December 31, 2004
                       12 Months    3 Months 12 Months(1)   3 Months

Net income for the
 period              $19,652,070  $3,380,300  $8,723,409  $1,798,911
Add: Amortization      4,040,948   1,167,305   1,566,528     361,405
 Interest expense      1,035,153     267,909     688,467     250,767
 Tax expense             315,123      87,123     164,000      71,500
                     ------------ ----------- ----------- -----------
EBITDA (2)            25,043,294   4,902,637  11,142,404   2,482,583
Less:
 Interest expense      1,035,153     267,909     688,467     250,767
 Net capital
  expenditures         1,300,295     423,086     730,790     296,542
 Current income taxes     79,123      34,123      37,000      21,500
                     ------------ ----------- ----------- -----------
Distributable
 cash (2)            $22,628,723  $4,177,519  $9,686,147  $1,913,774
                     ------------ ----------- ----------- -----------
                     ------------ ----------- ----------- -----------

Weighted average
 units outstanding    10,801,123  11,225,000   9,630,000   9,630,000
Distributable cash
 generated per unit  $    2.0950  $   0.3722  $   1.0058  $   0.1987

Distributions per
 weighted average unit
 Regular
  distributions      $    1.4515  $   0.3900  $   0.8079  $   0.3249
 Special
  distributions           0.3000      0.3000      0.1380      0.1380
                     ------------ ----------- ----------- -----------
                     $    1.7515  $   0.6900   $  0.9459  $   0.4629
                     ------------ ----------- ----------- -----------
                     ------------ ----------- ----------- -----------
Distribution Percentage
 Before special
  distribution             69.28%     104.78%      80.32%     163.51%
 After special
  distribution             83.60%     185.38%      94.04%     232.96%

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

(2) See discussion of non-GAAP measures below.

(3) On a non-weighted basis, per unit cash distributions for the year
    and quarter ended December 31, 2005 were $1.7315 and $0.6900
    respectively.

Distributions for 2004 and 2005 were funded entirely through operations, and no portion of the distribution represents a return of capital. For tax purposes, the 2004 distributions are comprised of 96.9599% other income and 3.0401% dividends, while the 2005 distributions are 100% other income. The cash distribution in 2005 of $1.73 per unit represents a 33% increase over the $1.30 per unit distribution disclosed in the Fund's 2004 prospectus.

Historical distributable cash generated per unit and distributions declared as a percentage of distributable cash generated is as follows:

---------------------------------------------------------------------
Distributable Cash for Periods Ended December 31, 2004
---------------------------------------------------------------------
                    Generated per Unit              Distribution %
                   3 mos.           YTD        Quarter           YTD
Q2(1)              $0.18          $0.18           88.8%         88.8%
Q3                 $0.63          $0.81           51.6%         59.8%
Q4                 $0.20          $1.01          163.5%         80.3%
Special(2)           N/A            N/A            N/A          94.0%

(1) Includes results of operations only for the 44-day period May 18
    to June 30, 2004.
(2) Total special distributions of $0.138 per unit consists of $0.07
    per unit paid January 30, 2005 to unitholders of record on
    December 31, 2004, and $0.068 per unit paid April 30, 2005 to
    unitholders of record on March 31, 2005.


---------------------------------------------------------------------
Distributable Cash for Periods Ended December 31, 2005
---------------------------------------------------------------------
                    Generated per Unit              Distribution %
                   3 mos.           YTD        Quarter           YTD
Q1                 $0.40          $0.40           82.6%         82.6%
Q2                 $0.64          $1.04           54.2%         64.2%
Q3                 $0.69          $1.73           55.4%         60.6%
Q4                 $0.37          $2.10          104.8%         68.7%
Special(1)           N/A            N/A            N/A          83.6%

(1) Total special distributions of $0.30 per unit consists of $0.12
    per unit paid December 30, 2005 to unitholders of record on
    November 30,2005, and $0.18 per unit paid January 30, 2006 to
    unitholders of record on December 30, 2005.

---------------------------------------------------------------------
Distributable Cash Summary
---------------------------------------------------------------------
                           Distributable Cash  Distributions  Payout
                                    Generated    Declared (1)  Ratio

Period Ended December 31, 2004   $  9,686,147   $  9,109,017    94.0%
Year Ended December 31, 2005       22,628,723     18,917,872    83.6%
---------------------------------------------------------------------
Cumulative                       $ 32,314,870   $ 28,026,889    86.7%
---------------------------------------------------------------------

(1) Distributions declared include special distributions of
    $1,328,940 in 2004 and $3,367,500 in 2005.

CAPITAL RESOURCES

The term loan matures May 2006 and is extendible annually at the lender's option. The Fund also has available a $15 million operating facility, increasing to $18 million for the period May 31 to September 30. At December 31, 2005, the Fund's bank indebtedness was $Nil. Under the terms of the credit facility agreement, if the bank elects to not extend the operating loan and term loan facilities beyond the current May 31, 2006 maturity date, all amounts outstanding under the facilities become repayable in four equal quarterly instalments of principal, commencing August 31, 2007. In addition, under the terms of the facility agreement, the operating and term loan facilities will bear interest at prime plus 0.0%, 0.50%, or 1.00% per annum based on performance calculations. The Fund is party to an interest rate swap agreement to mitigate the impact of fluctuating interest rates on its term loan.

OFF-BALANCE SHEET ARRANGEMENTS

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

CRITICAL ACCOUNTING ESTIMATES

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

FINANCIAL INSTRUMENTS

Risk from foreign exchange arises as a result of variations in exchange rates between the Canadian and the U.S. Dollar. Historically, over 60% of Ag Growth's sales are denominated in US Dollars while a much smaller proportion of its expenses are denominated in this currency. The Fund has entered into foreign exchange contracts with a Canadian chartered bank to hedge its foreign currency exposure on anticipated US dollar sales transactions and the collection of the related accounts receivable. At December 31, 2005, the Fund had outstanding USD $23.1 million of forward foreign exchange contracts, dated from March 2006 to December 2007, with a Canadian Dollar equivalent of $30.2 million. The Fund also has outstanding reverse knock-in currency options consisting of a series of call and put options, with a face value of U.S. $4.6 million, at rates of $1.1363 and $1.2750 respectively, with maturities dated from March 2007 to December 2007. As at December 31, 2005, the Fund has recorded a deferred foreign exchange loss of $13,360 with respect to its hedged accounts receivable. At December 31, 2005, the unrealized gain on forward foreign exchange contracts was $3.4 million.

The Fund is subject to risks associated with fluctuating interest rates on its long-term debt. To manage this risk, the Fund has entered into an interest rate swap transaction with a Canadian chartered bank. The swap transaction expires on May 4, 2008 and involves the exchange of the underlying floating interest rate for an effective fixed interest rate of 3.68%, resulting in interest charges to the Fund of 3.68% plus a variable rate based on performance calculations. The notional amount of the swap transaction at December 31, 2005 was $20.0 million. At December 31, 2005, the fair value of the interest rate swap contract was $175,803, and this amount has been recorded to prepaid expenses and other assets and included in other income on the income statement.

CHANGES IN ACCOUNTING POLICIES

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

- 1530, Comprehensive Income;

- 3855, Financial Instruments-Recognition and Measurement; and

- 3865, Hedges.

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

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

- Certain financial instruments that qualify for hedge accounting.

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

RISKS AND UNCERTAINTIES

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

Industry Cyclicality

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

Seasonality of Business

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

Risk of Decreased Crop Yields

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

Potential Volatility of Production Costs

Various materials and components are purchased in connection with Ag Growth's manufacturing process, some or all of which may be subject to wide price variation. Consistent with past and current practices within the industry, Ag Growth manages its exposure to material and component price volatility by planning and negotiating significant purchases on an annual basis, and passing through to customers, most, if not all, of the price volatility. There can be no assurance that industry dynamics will allow Ag Growth to continue to reduce its exposure to volatility of production costs by passing through price increases to its customers.

Commodity Prices, International Trade and Political Uncertainty

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

Competition

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

Business Interruption

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

Litigation

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

Dependence on Key Personnel

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

Distribution, Sales Representative and Supply Contracts

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

Foreign Exchange Risk

Ag Growth generates a majority of its sales in US dollars, but a materially smaller proportion of its expenses are denominated in US dollars. As a result, a significant strengthening of the Canadian dollar against the US dollar will negatively impact the return from US dollar sales revenue. To mitigate the effects of exchange rate fluctuation, management has implemented a hedging strategy of purchasing foreign exchange contracts. Ag Growth has entered into a series of hedging arrangements to mitigate the potential effect of fluctuating exchange rates through December 2007. To the extent that Ag Growth does not adequately hedge its foreign exchange risk, changes in the exchange rate between the Canadian dollar and the US dollar may have a material adverse effect on Ag Growth's results of operations, business, prospects and financial condition.

Potential Undisclosed Liabilities Associated with Acquisitions

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

Uninsured and Underinsured Losses

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

Distributions

The Fund's Declaration of Trust requires that it distribute all taxable income earned in its fiscal period ending December 31. It may be necessary for the Fund to estimate special distributions to achieve this requirement. In any event, the final amount determined to be payable will be distributed in January to unitholders on December 31.

Taxation of Income Trusts

There can be no assurance that Canadian federal income tax laws or the judicial interpretation thereof or the administrative and/or assessing practices of the Canada Revenue Agency and/or the treatment of mutual fund trusts will not be changed in a manner that adversely affects the holders of Trust Units.

OUTLOOK

The Fund anticipates strong demand in the first half of 2006. Market sentiment in the U.S. remains positive, primarily due to a very strong 2005 harvest, and as a result product order backlog is high. Although the 2005 U.S. crop was large, it was slightly smaller than the record 2004 crop, which may translate into slightly lower demand in the first half of 2006 compared to the prior year. Sentiment in western Canada remains subdued after two successive years of excessive moisture. The Fund continues to face challenges with respect to the stronger Canadian dollar. Although the impact of a stronger currency has been largely addressed in 2006 through foreign currency hedging, a further strengthening of the dollar will continue to pressure gross margins. Although demand in the second half of 2006 will be influenced by crop conditions, existing indicators suggest that in the absence of severe weather patterns the Fund can look forward to sound financial results in fiscal 2006.

NON-GAAP MEASURES

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

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

Amortization in the Combined Operating Results for the period ended December 31, 2004 is a non-GAAP measure as amortization, based on a combination of assets valued at historical cost and fair value, would not be combined when reporting under GAAP. The combined operating results for the period ended December 31, 2004, representing the financial results of Ag Growth prior to its acquisition by the Fund (January 1, 2004 to May 17, 2004) and the Fund's financial results from inception to December 31, 2004, have been presented to provide the reader with additional information to enhance comparability to operating results of the Fund for the period ended December 31, 2005.

DISCLOSURE CONTROLS AND PROCEDURES

Ag Growth's management is responsible for establishing and maintaining disclosure controls and procedures to ensure that information used internally and disclosed externally is complete and reliable. The Fund's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the disclosure controls and procedures and have concluded that they are adequate and effective for the year ended December 31, 2005.

FORWARD-LOOKING STATEMENTS

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

ADDITIONAL INFORMATION

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

Consolidated Financial Statements
Ag Growth Income Fund
December 31, 2005

To the Unitholders of Ag Growth Income Fund

We have audited the consolidated balance sheets of Ag Growth Income Fund as at December 31, 2005 and 2004 and the consolidated statements of earnings, unitholders'equity and cash flows for the year ended December 31, 2005 and the 283-day period ended 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 audits.

We conducted our audits 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, 2005 and 2004 and the results of its operations and its cash flows for the year ended December 31, 2005 and the 283-day period ended December 31, 2004 in accordance with Canadian generally accepted accounting principles.

"signed" Ernst & Young LLP
Winnipeg, Canada,
February 22, 2006.
Chartered Accountants


CONSOLIDATED BALANCE SHEETS

As at December 31

                                                   2005         2004
                                                      $            $
---------------------------------------------------------------------
ASSETS (notes 9 and 10)
Current
Cash and cash equivalents                     8,148,634    7,001,929
Accounts receivable                           7,305,809    4,515,053
Inventory (note 5)                           20,113,333   15,473,577
Prepaid expenses and other assets             1,402,999      958,425
Future tax assets                               221,000            -
---------------------------------------------------------------------
Total current assets                         37,191,775   27,948,984
Property, plant and equipment (note 6)       11,913,442    5,623,174
Goodwill                                     35,970,059   32,888,891
Intangible assets (note 7)                   58,923,988   53,144,658
Deferred financing costs (note 8)               149,188      454,559
Future tax assets (note 12)                     191,000      563,000
Deferred foreign exchange loss                   13,360       47,900
---------------------------------------------------------------------
                                            144,352,812  120,671,166
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities      4,962,948    4,044,845
Customer deposits                             3,103,402    3,825,171
Income taxes payable                            553,074       75,593
Distributions payable                         3,980,510    2,789,041
Long-term incentive plan (note 14)              933,001      265,788
Current portion of long-term debt (note 10)      23,502       33,495
---------------------------------------------------------------------
Total current liabilities                    13,556,437   11,033,933
Long-term debt (note 10)                     20,017,591   20,068,593
---------------------------------------------------------------------
Total liabilities                            33,574,028   31,102,526
Commitments (notes 15 and 17)
Unitholders' equity (note 11)               110,778,784   89,568,640
---------------------------------------------------------------------
                                            144,352,812  120,671,166
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes
On behalf of the Board of Trustees:

(signed) Rod Senft             (signed) John R. Brodie, FCA
      Trustee                              Trustee


CONSOLIDATED STATEMENTS OF EARNINGS

                                                             283-day
                                         Year ended     period ended
                                        December 31,     December 31,
                                               2005           2004(a)
                                                             (note 2)
                                                  $                $
---------------------------------------------------------------------
Sales                                    84,033,945       43,547,884
Cost of goods sold                       45,132,586       22,683,058
---------------------------------------------------------------------
Gross margin                             38,901,359       20,864,826
---------------------------------------------------------------------
Expenses
 Selling, general and administration     13,235,750        7,246,922
 Professional fees                          530,532          678,554
 Long-term incentive plan                   933,001          265,788
 Research and development                   622,695          290,502
 Capital taxes                              328,716          236,321
 Loss (gain) on foreign exchange         (1,355,991)       1,143,298
 Other income                              (436,638)        (138,963)
---------------------------------------------------------------------
                                         13,858,065        9,722,422
---------------------------------------------------------------------
Earnings before the following            25,043,294       11,142,404
---------------------------------------------------------------------
Interest expense
 Short-term debt                            121,364          122,767
 Long-term debt                             913,789          565,700
---------------------------------------------------------------------
                                          1,035,153          688,467
---------------------------------------------------------------------
Earnings before amortization
 and income taxes                        24,008,141       10,453,937
---------------------------------------------------------------------
Amortization of property, plant
 and equipment                            1,928,907          504,734
Amortization of deferred
 financing costs                            439,371          206,452
Amortization of intangible assets         1,672,670          855,342
---------------------------------------------------------------------
                                          4,040,948        1,566,528
---------------------------------------------------------------------
Earnings before provision for
 income taxes                            19,967,193        8,887,409
---------------------------------------------------------------------
Provision for income taxes
 (note 12)
 Current                                     79,123           37,000
 Future                                     236,000          127,000
---------------------------------------------------------------------
                                            315,123          164,000
---------------------------------------------------------------------
Net earnings for the period              19,652,070        8,723,409
---------------------------------------------------------------------
---------------------------------------------------------------------

Basic and diluted net earnings
 per unit                                     $1.82            $0.91
---------------------------------------------------------------------
---------------------------------------------------------------------

Basic and diluted weighted average
 number of units outstanding             10,801,123        9,630,000
---------------------------------------------------------------------
---------------------------------------------------------------------

(a) (includes the results of Ag Growth's operations for the 228-day
     period from May 18, 2004 to December 31, 2004).

See accompanying notes


CONSOLIDATED STATEMENT OF UNITHOLDERS' EQUITY

Year ended December 31, 2005

               Unitholders' Accumulated     Accumulated
                   capital     earnings   distributions        Total
                         $            $               $            $
---------------------------------------------------------------------
                  (note 11)
Balance,
 Beginning
 of period      89,954,248    8,723,409      (9,109,017)  89,568,640
Issuance
 of units
 (note 4)       21,532,500            -               -   21,532,500
Issuance costs
 (note 4)       (1,056,554)           -               -   (1,056,554)
Net earnings
 for the period          -   19,652,070               -   19,652,070
Distributions
 declared                -            -     (18,917,872) (18,917,872)
---------------------------------------------------------------------
Balance,
 end of
 period        110,430,194   28,375,479     (28,026,889) 110,778,784
---------------------------------------------------------------------
---------------------------------------------------------------------


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

               Unitholders' Accumulated      Accumulated
                   capital     earnings    distributions       Total
                         $            $                $           $
---------------------------------------------------------------------
Balance,
 Beginning
 of period               -            -                -           -
Issuance of
 Initial
 subscriber
 units                  30            -                -          30
Redemption
 of initial
 subscriber
 units                 (30)           -                -         (30)
Issuance of
 units on
 initial
 public
 offering       69,040,000            -                -  69,040,000
Issuance costs  (6,345,752)           -                -  (6,345,752)
Issuance of
 AGHLP units
 as consideration
 on acquisition
 of Ag Growth   27,260,000            -                -  27,260,000
Net earnings
 for the period          -    8,723,409                -   8,723,409
Distributions
 declared                -            -       (9,109,017) (9,109,017)
---------------------------------------------------------------------
Balance,
 end of
 period         89,954,248    8,723,409       (9,109,017) 89,568,640
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes


CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                             283-day
                                         Year ended     period ended
                                        December 31,     December 31,
                                               2005           2004(a)
                                                             (note 2)
                                                  $                $
---------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings for the period              19,652,070        8,723,409
Add charges to operations
 not requiring a
 current cash payment
 Amortization                             4,040,948        1,566,528
 Future income taxes                        236,000          127,000
 Deferred foreign exchange
  gain (loss)                                34,540          (47,900)
 Loss (gain) on sale of property,
  plant and equipment                        12,120          (16,419)
---------------------------------------------------------------------
                                         23,975,678       10,352,618
Net change in non-cash
 working capital balances related
 to operations (note 18)                 (2,698,483)       8,112,322
---------------------------------------------------------------------
Cash provided by operating
 activities                              21,277,195       18,464,940
---------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of property,
 plant and equipment                     (1,300,295)        (730,790)
Acquisition of assets of the
 Edwards Group of Companies             (21,685,743)               -
Proceeds from sale of property,
 plant and equipment                         61,000           42,776
Acquisition of Ag Growth
 Industries Inc.                                  -      (32,133,771)
Pre-existing Fund structure
 tax credits received                       240,000                -
---------------------------------------------------------------------
Cash used in investing activities       (22,685,038)     (32,821,785)
---------------------------------------------------------------------
FINANCING ACTIVITIES
Decrease in bank indebtedness                     -       (5,266,052)
Repayment of long-term debt                 (60,995)     (32,899,936)
Distributions paid                      (17,726,403)      (6,319,976)
Inssuance of units, net of expenses      20,475,946                -
Inssuance of long-term debt                       -       20,119,967
Increase in deferred financing
 costs on long-term debt                   (134,000)        (661,011)
Initial public offering of fund
 units, net of expenses                           -       62,694,248
Redemption of Class D preferred
 shares of Ag Growth                              -      (16,000,000)
Payment of dividend on Class D
 preferred shares of Ag Growth                    -         (308,466)
---------------------------------------------------------------------
Cash provided by financing activities     2,554,548       21,358,774
---------------------------------------------------------------------
Net increase in cash and cash
 equivalents during the period            1,146,705        7,001,929
Cash and cash equivalents,
 beginning of period                      7,001,929                -
---------------------------------------------------------------------
Cash and cash equivalents,
 end of period                            8,148,634        7,001,929
---------------------------------------------------------------------
---------------------------------------------------------------------
Supplemental cash flow information
Interest paid                             1,032,655          680,606
Income taxes paid (recovered)              (339,970)       1,394,013
---------------------------------------------------------------------
---------------------------------------------------------------------

(a) (includes the results of Ag Growth's operations for the 228-day
     period from May 18, 2004 to December 31, 2004).

See accompanying notes

Notes To Consolidated Financial Statements

December 31, 2005

1. ORGANIZATION AND NATURE OF BUSINESS

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

2. BASIS OF PRESENTATION

The Fund prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles. These consolidated financial statements reflect the results of operations of the Fund for the year ended December 31, 2005. Although a Declaration of Trust for the Fund was made on March 24, 2004, the Fund was inactive until its acquisition of Ag Growth Industries Inc.("Ag Growth") on May 18, 2004. As a result, comparative financial information provided on the statements of earnings, unitholders' equity and cash flows only include the results of Ag Growth's operations for the period May 18, 2004 to December 31, 2004.

3. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies are summarized below:

Principles of consolidation

The consolidated financial statements include the accounts of the Fund and its wholly-owned subsidiaries Ag Growth Operating Trust, AGX Holdings Inc., AGX Holdings Limited Partnership("AGHLP"), Ag Growth Industries Limited Partnership, Ag Growth, Westfield Distributing Ltd. and Westfield Distributing (North Dakota) Inc. All material intercompany balances and transactions have been eliminated.

Cash and cash equivalents

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

Inventory

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

Property, plant and equipment

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

Buildings                      4% -5%         declining balance
Leasehold improvements            20%         straight line
Furniture and fixtures            20%         declining balance
Automotive equipment         20% -30%         declining balance
Computer equipment                30%         declining balance
Manufacturing equipment      20% -30%         declining balance

Goodwill

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

Intangible assets

Intangible assets are comprised of brand names, which are considered to have an indefinite life, distribution networks, which are being amortized over 25 years on a straight-line basis, and a patent acquired from the Edwards Group which is being amortized over a one year period. Indefinite life intangible assets are tested for impairment at least annually by comparing their estimated fair values to their carrying values. The carrying value of an indefinite life intangible asset is written down to its estimated fair value if its carrying value exceeds its estimated fair value.

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

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

Deferred financing costs

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

Income taxes

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

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

Foreign currency translation

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

Revenue recognition

The Fund recognizes revenue at the time product is shipped, free on board shipping point, and title passes and there is evidence a sales arrangement exists, the sales price is fixed and determinable  and collectibility is reasonably assured. For products on consignment, revenue is recognized upon the sale of the product by the consignee. Provision is made at the time revenue is recognized for estimated product returns and warranties based on historical experience.

Research and development

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

Leases

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

Net earnings per unit

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

Long-term incentive plan

Under the terms of the long-term incentive plan("LTIP"), the Fund establishes an amount to be allocated to eligible participants based on 10% to 20% of cash distributions in excess of an established threshold. The cost is accrued as an expense in the period when it is determined an amount payable under the LTIP appears likely.

Derivative financial instruments

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

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

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

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

The Fund uses foreign currency swap agreements to manage its cash positions. The Fund's foreign currency swap agreements do not qualify for hedge accounting. The Fund also enters into interest rate swaps in order to reduce the impact of fluctuating interest rates on its long-term debt. These swap agreements require the periodic exchange of payments without the exchange of the notional principal amount on which the payments are based. During the year, the terms of the interest rate swap were changed and it no longer qualifies for hedge accounting. These swaps are measured at their fair value and included in prepaid expenses and other assets on the consolidated balance sheet. Changes in the fair value of the foreign currency swaps and interest rate swaps are recognized in earnings and are included in loss (gain) on foreign exchange and interest expense, respectively, in the corresponding period.

Employee benefit plans

The Fund contributes to a group retirement savings plan subject to maximum limits per employee. The Fund accounts for such defined contributions as an expense in the period in which the contributions are made. The expense recorded in 2005 was $346,730 (2004 - $172,445).

Use of estimates

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

4. ISSUANCE OF FUND UNITS AND ACQUISITION

Effective April 8, 2005, the Fund acquired substantially all of the assets of The Edwards Group of Companies ("the Edwards Group"), a leading manufacturer of agricultural aeration equipment, for cash consideration in the amount of $21,685,743. In conjunction with the acquisition, the Fund completed a private placement of 1,595,000 Trust Units priced at $13.50 per unit for gross proceeds of $21,532,500. The Fund has recorded expenses in connection with the offering, including commissions payable to the underwriters, of $1,056,554.

The acquisition has been accounted for by the purchase method with the results of the Edwards Group's operations included in the Fund's earnings from the date of acquisition (the consolidated statement of earnings includes the results of the Edward Group's operations for the 268-day period from April 8, 2005 to December 31, 2005). The assets and liabilities of the Edwards Group were initially recorded in the consolidated financial statements at their estimated fair values, as follows:

$
---------------------------------------------------------------------
Net assets acquired
 Accounts receivable                                       1,348,830
 Inventory                                                 3,672,603
 Prepaid expenses and other assets                           174,246
 Property, plant and equipment                             6,992,000
 Intangible assets
  Brand name                                               4,363,000
  Distribution network                                     2,839,000
  Patent                                                     250,000
 Goodwill                                                  3,406,168
 Accounts payable and accrued liabilities                 (1,360,104)
---------------------------------------------------------------------
                                                          21,685,743
---------------------------------------------------------------------
---------------------------------------------------------------------


5. INVENTORY

                                         December 31,    December 31,
                                                2005            2004
                                                   $               $
---------------------------------------------------------------------
Raw materials                              6,019,628       4,080,743
Finished goods                            14,093,705      11,392,834
---------------------------------------------------------------------
                                          20,113,333      15,473,577
---------------------------------------------------------------------
---------------------------------------------------------------------



6. PROPERTY, PLANT AND EQUIPMENT

                                           December 31, 2005
---------------------------------------------------------------------
                                            Accumulated     Net book
                                  Cost     amortization        value
                                     $                $            $
---------------------------------------------------------------------
Land                           861,315                -      861,315
Buildings                    5,177,931          287,744    4,890,187
Leasehold Improvements           7,000            7,000            -
Furniture and fixtures         121,047           26,282       94,765
Automotive equipment         1,438,283          480,185      958,098
Computer equipment             565,714          159,442      406,272
Manufacturing equipment      6,127,774        1,424,969    4,702,805
---------------------------------------------------------------------
                            14,299,064        2,385,622   11,913,442
---------------------------------------------------------------------
---------------------------------------------------------------------

                                           December 31, 2004
---------------------------------------------------------------------
                                            Accumulated     Net book
                                  Cost     amortization        value
                                     $                $            $
---------------------------------------------------------------------
Land                           611,315                -      611,315
Buildings                    2,940,739           80,893    2,859,846
Leasehold Improvements          10,486            2,942        7,544
Furniture and fixtures          83,543           10,831       72,712
Automotive equipment         1,197,541          183,447    1,014,094
Computer equipment             285,842           60,667      225,175
Manufacturing equipment        998,442          165,954      832,488
---------------------------------------------------------------------
                             6,127,908          504,734    5,623,174
---------------------------------------------------------------------
---------------------------------------------------------------------

7. INTANGIBLE ASSETS

                                           December 31, 2005
---------------------------------------------------------------------
                                            Accumulated     Net book
                                  Cost     amortization        value
                                     $                $            $
---------------------------------------------------------------------
Distribution network        37,839,000        2,340,512   35,498,488
Brand name                  23,363,000                -   23,363,000
Patent                         250,000          187,500       62,500
---------------------------------------------------------------------
                            61,452,000        2,528,012   58,923,988
---------------------------------------------------------------------
---------------------------------------------------------------------



                                           December 31, 2004
---------------------------------------------------------------------
                                            Accumulated     Net book
                                  Cost     amortization        value
                                     $                $            $
---------------------------------------------------------------------
Distribution network        35,000,000          855,342   34,144,658
Brand name                  19,000,000                -   19,000,000
Patent                               -                -            -
---------------------------------------------------------------------
                            54,000,000          855,342   53,144,658
---------------------------------------------------------------------
---------------------------------------------------------------------


8. DEFERRED FINANCING COSTS

             December 31, 2005                 December 31, 2004
---------------------------------------------------------------------
             Accumulated   Net book            Accumulated  Net book
      Cost  amortization      value     Cost  amortization     value
         $             $          $        $             $         $
---------------------------------------------------------------------
   795,011       645,823    149,188  661,011       206,452   454,559
---------------------------------------------------------------------
---------------------------------------------------------------------

9. BANK INDEBTEDNESS

The Fund has an operating facility of $15 million, increasing to $18 million for the period May 31 to September 30. The facility bears interest at a rate of prime to prime plus 1.0% per annum based on performance calculations. The effective interest rate during the year was 4.81% (2004 -4.50%). At December 31, 2005 and 2004, there was no amount outstanding under this facility. Collateral for the operating facility includes a general security agreement over all assets and first position collateral mortgages on land and buildings.

10. LONG-TERM DEBT

                                            December 31, December 31,
                                                   2005         2004
                                                      $            $
---------------------------------------------------------------------
Term loan, interest payable monthly at
 prime to prime plus 1% per annum based
 on performance calculations. As
 described in note 15, the Fund has
 entered into a swap contract that
 effectively fixes the Fund's interest
 rate at 3.68%, plus 1.0%, 1.5%, or
 2.0% per annum based on performance
 calculations. The effective interest
 rate during the year ended December 31,
 2005 would have been 4.81%
 (2004 - 4.50%) and after consideration
 of the effect of the interest rate swap
 was 4.48% (2004 - 4.32%)                    20,000,000   20,000,000
GMAC loans, 0% maturing in 2007 and
 2008, with monthly payments of
 $1,958. Vehicles financed are
 pledged as collateral                           41,093      102,088
---------------------------------------------------------------------
                                             20,041,093   20,102,088
Less current portion                             23,502       33,495
---------------------------------------------------------------------
                                             20,017,591   20,068,593
---------------------------------------------------------------------
---------------------------------------------------------------------

Under the agreement for the term loan, the Fund is required to maintain certain financial covenants. As at December 31, 2005 and 2004, the Fund was in compliance with the applicable financial covenant terms. Collateral for the term loan and operating facility (note 9) includes a general security agreement over all assets and first position collateral mortgages on land and buildings.

The term loan matures May 2006 and is extendible annually for an additional one-year term at the lender's option. Under the terms of the credit facility agreement, if the bank elects to not extend the operating loan and term loan facilities beyond the current May 31, 2006 maturity date, all amounts outstanding under the facilities become repayable in four equal quarterly instalments of principal, commencing on August 31, 2007.

Principal repayments due within the next four fiscal years, if the term loan is not renewed and is repayable commencing August 31, 2007, are as follows:

$
---------------------------------------------------------------------
2006                                                          23,502
2007                                                      10,015,331
2008                                                      10,002,260
---------------------------------------------------------------------
                                                          20,041,093
---------------------------------------------------------------------
---------------------------------------------------------------------

11. UNITHOLDERS' CAPITAL

Unitholders' capital is comprised of the following:

                                  Class B       Class C
                        Fund Exchangeable  Exchangeable        Total
                       Trust     units of      units of  Unitholders'
                       units        AGHLP         AGHLP      capital
                           $            $             $            $
---------------------------------------------------------------------
Issuance of
 initial
 subscriber
 units                    30            -             -           30
Redemption
 of initial
 subscriber
 units                   (30)           -             -          (30)
Issuance of
 units on initial
 public offering  69,040,000            -             -   69,040,000
Issuance costs    (6,345,752)           -             -   (6,345,752)
Issuance of
 units of AGHLP
 as consideration
 on acquisition
 of Ag Growth              -    8,000,000    19,260,000   27,260,000
Exchange
 of units          6,189,130   (6,189,130)            -            -
---------------------------------------------------------------------
Balance, December
 31, 2004         68,883,378    1,810,870    19,260,000   89,954,248
Issuance of units,
 net of costs     20,475,946            -             -   20,475,946
Exchange of units    111,090     (111,090)            -            -
---------------------------------------------------------------------
Balance, December
 31, 2005         89,470,414    1,699,780    19,260,000  110,430,194
---------------------------------------------------------------------
---------------------------------------------------------------------


                                               Class B       Class C
                                    Fund  Exchangeable  Exchangeable
                                   Trust      units of      units of
                                   units         AGHLP         AGHLP
                                       #             #             #
---------------------------------------------------------------------
Issuance of initial
 subscriber units                      3             -             -
Redemption of initial
 subscriber units                     (3)            -             -
Issuance of units on
 initial public offering       6,904,000             -             -
Issuance of units of
 AGHLP as consideration
 on acquisition of Ag Growth           -       800,000     1,926,000
Exchange of units                618,913      (618,913)            -
---------------------------------------------------------------------
Balance, December 31, 2004     7,522,913       181,087     1,926,000
Issuance of units (note 4)     1,595,000             -             -
Exchange of units                 11,109       (11,109)            -
---------------------------------------------------------------------
Balance, December 31, 2005     9,129,022       169,978     1,926,000
---------------------------------------------------------------------
---------------------------------------------------------------------

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

The Fund Declaration of Trust also provides for the issuance of an unlimited number of Special Voting Units. The Special Voting Units are only issuable for the purpose of providing voting rights to the holders of Exchangeable LP Units or Subordinated LP Units. Each unit is entitled to one vote on matters related to the Fund. The Special Voting Units are not entitled to any interest or share in the Fund or in any distribution from the Fund. There is no value attached to these units. At December 31, 2005, there were 2,095,978 Special Voting

Units outstanding (December 31, 2004 -2,107,087 units), which were attached to the outstanding Class B Exchangeable LP Units of AGHLP and the Class C Exchangeable Subordinated LP Units of AGHLP.

The Class B Exchangeable LP Units of AGHLP are exchangeable for trust units of the Fund at the option of the holder on a one-for-one basis at any time. During the year ended December 31, 2005, 11,109 Class B Exchangeable LP Units of AGHLP, with a value of $111,090, were exchanged into 11,109 Units of the Fund.

The Class C Subordinated Exchangeable LP Units of AGHLP are exchangeable for Class B Exchangeable LP Units of AGHLP on a one-for-one basis at the option of the holder after December 31, 2009 and by AGHLP on the subordination end date which is determined based on certain earnings and cumulative cash distribution thresholds of the Fund over a twenty-four month period.

12. INCOME TAXES

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

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

283-day
                                        Year ended      period ended
                                       December 31,      December 31,
                                              2005              2004
                                  -----------------------------------
                                           $     %            $     %
---------------------------------------------------------------------

Earnings before income taxes      19,967,193          8,887,409
Temporary differences and
 non-tax deductible expenses        (446,488)           565,566
Earnings subject to tax in
 the hands of unitholders/
 limited partners                (18,917,872)        (9,109,017)
---------------------------------------------------------------------
Income of subsidiary companies
 subject to tax                      602,833            343,958
---------------------------------------------------------------------
---------------------------------------------------------------------

Provision for income taxes          236,000    39      127,000    37
Large corporation tax                 79,123    13       37,000    11
---------------------------------------------------------------------
Income tax provision                 315,123    52      164,000    48
---------------------------------------------------------------------
---------------------------------------------------------------------

During the year ended December 31, 2005, the Fund recorded $240,000 of tax credits and $85,000 of benefits related to non-capital loss carryforwards which pre-existed the Fund structure and have been credited to goodwill.

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

                                       December 31,      December 31,
                                              2005              2004
                                                 $                 $
---------------------------------------------------------------------
Future tax assets
Financing costs                            116,500           377,000
Non-capital losses                         295,500           186,000
---------------------------------------------------------------------
                                           412,000           563,000
---------------------------------------------------------------------
---------------------------------------------------------------------

The non-capital
 losses expire as follows:
                                                                    $
---------------------------------------------------------------------
2014                                                          264,500
2015                                                           31,000

13. DISTRIBUTIONS TO UNITHOLDERS

For the year ended December 31, 2005, the Fund made distributions of $18,917,872 which equated to $1.7515 weighted average per unit (283-day period ended December 31, 2004 - $9,109,017 or $0.95 weighted average per unit).

14. LONG TERM INCENTIVE PLAN

Key senior management of the Fund are eligible to participate in the Fund's LTIP. The purpose of the LTIP is to provide eligible participants with compensation opportunities that encourage ownership of units of the Fund, enhance the Fund's ability to attract, retain and motivate key personnel and reward key senior management for significant performance and associated growth in distributions. Pursuant to the LTIP, the Fund establishes the amount to be allocated to eligible participants based upon the amount by which the Fund's distributions exceed cash distribution thresholds (as defined in the LTIP plan documents). The LTIP is administered by the Corporate Governance and Compensation Committee.

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

The Fund has a recorded liability with respect to the fiscal 2005 LTIP at December 31, 2005 of $933,001 (December 31, 2004 - $265,788).

15. FINANCIAL INSTRUMENTS

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

Currency exposures

Risk from foreign exchange arises as a result of variations in exchange rates between the Canadian and the U.S. dollar. The Fund has entered into foreign exchange contracts to hedge its foreign currency exposure on anticipated U.S. dollar sales transactions and the collection of the related accounts receivable.

At December 31, 2005, the Fund had outstanding forward foreign exchange contracts as follows:

Settlement dates                          Face value    Average rate
                                                $U.S.           $Cdn
---------------------------------------------------------------------
March 2006 to December 2006               18,500,000          1.3227
March 2007 to December 2007                4,625,000          1.2357
---------------------------------------------------------------------
---------------------------------------------------------------------

In addition, the Fund entered into currency options consisting of a series of call and put options at rates of $1.1363 and $1.2750 respectively. These contracts mature in 2007 and have a total face value of U.S. $4,625,000.

Interest rate exposures

The Fund is subject to risks associated with fluctuating interest rates on its long-term debt. To manage this risk, the Fund has entered into an interest rate swap transaction with a Canadian chartered bank. The swap transaction expires on May 4, 2008. The swap transaction involves the exchange of the underlying floating interest rate of prime to prime plus 1.00% per annum for an effective fixed interest rate of 3.68% plus 1.00% to 2.00% per annum based on performance calculations. The notional amount of the swap transaction at December 31, 2005 and 2004 was $20,000,000.

Fair value

At December 31, 2005, the carrying value of the Fund's financial instruments approximates their fair value with the exception of derivative financial instruments. The unrealized gain on foreign exchange contracts was $3,384,312 at December 31, 2005 (December 31, 2004 - $3,588,689). Upon maturity of the foreign exchange contracts, any gain/loss would be recognized in sales and/or realized foreign exchange gain/loss in the consolidated statement of earnings.

16. SEGMENTED DISCLOSURE

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

Revenues                 Property, plant and
              --------------------------    equipment, goodwill and
                                283-day     intangible assets as at
               Year ended  period ended  ---------------------------
              December 31,  December 31,  December 31,  December 31,
                     2005          2004          2005          2004
                        $             $             $             $
---------------------------------------------------------------------
Canada         25,369,699    10,079,209   106,577,247    91,420,726
United States  55,166,890    31,105,714       230,242       235,997
International   3,497,356     2,362,961             -             -
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               84,033,945    43,547,884   106,807,489    91,656,723
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17. COMMITMENTS

The Fund has entered into various operating leases for office and
manufacturing equipment, warehouse facilities and vehicles. Minimum
annual lease payments required in aggregate are as follows:

                                                                   $
---------------------------------------------------------------------
2006                                                         451,814
2007                                                         396,650
2008                                                         248,438
2009                                                         140,820
2010 and forward                                              58,315
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                                                           1,296,037
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18. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES RELATED TO
    OPERATIONS

                                                             283-day
                                          Year ended    period ended
                                         December 31,    December 31,
                                                2005          2004(a)
                                                             (note 2)
                                                   $               $
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Accounts receivable                       (1,441,926)      7,781,221
Inventory                                   (967,153)        (34,470)
Prepaid expenses and other assets           (270,328)       (487,740)
Accounts payable and accrued liabilities    (442,001)     (1,347,304)
Long-term incentive plan                     667,213         265,788
Income taxes payable                         477,481      (1,357,012)
Customer deposits                           (721,769)      3,291,839
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                                          (2,698,483)      8,112,322
---------------------------------------------------------------------
---------------------------------------------------------------------

(a) Includes the result of Ag Growth's operations for the 228-day
    period from May 18, 2004 - December 31, 2004.

19. COMPARATIVE FIGURES

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

Ag Growth Income Fund (TSX:AFN.UN)