Growth International
Annual Report 2006

Annual Report 2006

Ag Growth IPO: May 18, 2004 (Founded 1996) 

Batco Manufacturing, Acquired: 1997 (Founded 1992) 

Wheatheart Manufacturing, Acquired: 1998 (Founded 1973) 

Westfi eld Industries, Acquired: 2000 (Founded 1950) 

Edwards Group, Acquired: 2005 (Founded 1991) 

Hansen Manufacturing, Acquired: 2006 (Founded 1982) 

Ag Growth Income Fund
#3 – 59 Scurfi eld Blvd, Winnipeg, MB R3Y 1V2
Telephone: 204.489.1855 • Fax: 204.488.6929

Investor Relations: Steve Sommerfeld
Telephone: 204.489.1855 • Email: steve@aggrowth.com

Auditors: Ernst & Young LLP (Winnipeg)

Transfer Agent: Computershare Investor Services Inc.

Shares Listed: Toronto Stock Exchange
Stock Symbol: AFN.UN

On behalf of management, our employees, and the Board of Trustees of Ag Growth Income Fund, 

we invite existing and prospective investors to review our 2006 annual report. The Fund made a 

number of positive strides in 2006, despite challenges that included a strengthening currency, a 

pullback in U.S. crop production, adverse weather conditions in many core markets, and internal 

succession issues. Our 2006 operating results refl ect the strength of our brands, distribution, and 

business plan as we ended the year within reach of the record numbers posted in 2005.

The assessment of our company is often impacted by factors other than our operating results. 

Sentiment towards the agriculture sector, which is often under appreciated and misunderstood 

by the investment community, can eclipse the impact of our fundamental drivers of grain volume 

and trends in storage practices. In 2006, the decision of the Canadian Finance Minister to propose 

changes to the future of the income trust market provided another, unanticipated challenge. 

Nonetheless, the support of our core unitholder base allowed the Fund to persevere and at the 

time of writing our unit price approached new highs.

The Fund punctuated the close of a successful 2006 with a USD $18.5 million debt fi nancing to 

purchase the assets of Hansen Manufacturing, based in Sioux Falls, South Dakota. We are excited 

about the acquisition and welcome Hansen’s excellent management team and respected Hi Roller 

brand name to the Ag Growth family. The acquisition is our fi rst foray into stationary grain handling 

equipment, providing an opportunity for the further consolidation of suppliers to larger farms, 

commercial grain handling facilities and newly emerging bio-energy facilities. As well as adding an 

industry leader to the Ag Growth group of companies, the acquisition provided reassurance that 

the Fund can carry out its business plan within the proposed rules restricting the expansion of the 

trust sector.

I would like to devote my remaining remarks to share with you our perspective on how the 

dramatic changes taking place in the agriculture sector position the Fund for substantial growth in 

the years ahead. 

The advancement of technology in hybrid and genetically modifi ed seeds, combined with improved 

farming techniques, has resulted in a steady increase in the productivity of the North American 

farmer. As grain volumes are a key driver for our business, these advancements have provided 

a steady, if somewhat subdued growth platform for our company. Ag Growth has capitalized 

To Our Unitholders

1

on increasing grain volumes through the development of a broad catalogue of grain handling 

equipment and the strength of an industry leading distribution network. 

The foundation Ag Growth has developed over the last decade has positioned it well to capitalize 

on a fundamental shift in our industry. Due to a number of factors, including increased demand 

from heavily populated countries including China and India, the supply demand dynamic for most 

grains has experienced pressure not seen since 1972. Stock-to-use ratios are approaching 30 

year lows and we are optimistic that an even stronger supply imbalance is currently emerging, 

positioning grain prices for a sustained rally. 

An increase in food demand positions agriculture for a short-term bull cycle. However, we believe 

the development of the corn-based ethanol industry has initiated a longer-term shift in supply 

demand fundamentals. Environmental and political concerns, demonstrated by the introduction of 

the U.S. Energy Policy Act of 2005, which in essence triples the amount bio-fuel required by 2012, 

have created unprecedented demand for alternatives to fossil based fuels.

To meet the requirements of the Act, a dramatic buildup of ethanol capacity is underway. Current 

estimates are that the ethanol industry has the potential to absorb 35% of the total U.S. corn 

crop in the next couple of years, fundamentally changing the supply available for traditional 

food demand.

Planted area: Corn, wheat, and soybeans (USDA)

These developments bode well for Ag Growth for a number of reasons. 

First, we are seeing signs of competition for acreage between agriculture 

commodities, resulting in a shift towards corn acres. As corn typically 

yields over three times the number of bushels per acre as other grains, 

this shift adds a very important, new demand factor to the grain handling 

industry. The United States Department of Agriculture (USDA) has released 

its planting intentions forecast and expects 86 million acres to be seeded 

to corn in 2007. This is up from approximately 79 million acres in 2006 and 

greatly exceeds the historical average of 75 million acres. The USDA also forecasts that corn may 

exceed 90 million acres in the next few years. 

Secondly, we expect that a large amount of grain traditionally bound for the export market will 

be handled and conditioned at the farm gate. This transition is in the early stages as farmers add 

To Our Unitholders

2

Corn: Domestic use and exports (USDA)

storage capacity to accommodate increased volumes. More on-farm storage 

means more handling equipment is required. The magnitude of this shift will 

make itself apparent as the ethanol industry begins to mature and stabilize. We 

are confi dent that the trend is entrenched and will be positive for the increased 

use of our equipment. We are actively engaged in improving plant capacity to 

accommodate the anticipated increased demand over the next few years.

We also expect that higher grain prices should accelerate worldwide investment in farm infrastructure. 

As the world is challenged to produce more grain volume to meet increasing demand, we expect 

other countries to attempt to emulate North American grain production and storage practices. North 

American farmers are the most effi cient producers in the world. As capital is invested to modernize 

overseas farming, we would anticipate an acceleration of the trend towards on-farm storage, 

handling and conditioning of grain as these measures increase crop quality and reduce spoilage. 

Again, the more volume of harvested crop that is handled on the farm, the more equipment we sell.

There is much debate as to the viability and profi t potential of the huge number of new ethanol 

plants that are coming online. I will not venture an opinion. The industry is in such a rapid state of 

development that it is diffi cult to foresee the ethanol landscape a few years ahead. However, we 

are confi dent that, no matter what the future holds for ethanol producers, there will be a dramatic 

increase in demand for the crops that our equipment handles.

I am very proud to be associated with the skilled and professional individuals that have joined our 

team as we have grown from a start-up company with $2 million revenue into a market leader with over 

$80 million in sales and EBITDA of over $24 million. Our strategic focus on grain handling has been 

instrumental to our strong operating results, which have often exceeded the expectations related to 

our sector.

We are very optimistic about the outlook for agriculture. We would like to express our most sincere 

gratitude to our current unitholders for their support over the last year. We would also like to thank the 

members of our Board of Trustees who resigned in 2006 for their important contributions since the IPO 

of the Fund. We are committed to continuing to work hard at creating value for our customers and our 

unitholders in the years to come.

Rob Stenson
CEO, Ag Growth Income Fund 

3

As many of you already know, 2006 was a year of particular challenge for Ag Growth. We were 

confronted with fundamental succession issues that made a rising Canadian currency, drought 

in areas of the Great Plains, and a quick, dry harvest in western Canada pale in comparison. 

The good news is that, to everyone’s credit, we were able to work through it. I would like to 

acknowledge the exceptional strength and dedication of our senior management team. They kept 

their eyes on the ball and delivered the results. 

A capacity improvement project at Westfi eld, our largest Division, is well underway and on 

schedule for completion by spring 2007. We were also able to fi nalize the exciting acquisition of 

Hansen Manufacturing Corp of Sioux Falls, South Dakota. The acquisition provides immediate 

accretion as well as a strategic platform for further growth. By year end, we had also concluded 

the Board succession process and subsequently reappointed Rob Stenson as CEO.

We feel we have successfully positioned Ag Growth to capitalize on what we strongly believe to 

be opportune times for our company. We are proud to share the following highlights from 2006 

and remain very optimistic about the possibilities in 2007. 

In 2006, Ag Growth Industries celebrated 10 years of success. Our roots are in Batco Manufacturing, Swift Current, Saskatchewan.

President’s Message

4

$90
$80

$70

$60
$50

$40

$30
$20

$10

$0

Sales and EBITDA
After adjusting for movements 

in foreign exchange, and 

considering several weather 

related factors, we are confi dent 

that we were able to sustain our 

market share gains from 2005.

  Sales 2005 

EBITDA 
2005 

Sales 2006 

EBITDA
2006

(F/X adjusted 2005 to 2006)

Geographic Diversifi cation of Sales for 2006

Canada 
30%

Great Plains 
18%

Midwest 
41%

Offshore 
3%

Peripheral Regions
8%

No one state or province in North America represents more than 15% of sales. Only six states or provinces represent more than 5% of sales.

5

 
 
 
Capacity Improvement Project – Westfi eld Division
Until recently, Westfi eld’s manufacturing processes were based on long cycle, high volume 

production runs. While we achieved low cost producer status, we were beginning to bump up 

against capacity constraints. Traditional mass production processes were creating wasted 

motion and wasted space. In February 2006 we began introducing lean manufacturing principles 

to the shop fl oor. After initial training, our employees quickly embraced the concepts through 

a series of power change events. By summer we envisioned an entirely new plant layout 

and production fl ow. A total of 22 truckloads of new equipment were ordered for delivery in 

December and January. At the time of this writing, we are commissioning the equipment. The 

state-of-the-art paintline will provide an entirely new backbone for further process improvements 

and effi ciencies. We intend to lever off of our successes at Westfi eld by introducing lean 

manufacturing principles to our other manufacturing facilities in the near future.

We are addressing capacity constraints by automating manual processes. 
The new paint line is considered leading-edge in the shortline industry.

Lean manufacturing cells will improve effi ciencies and throughput. 
Continuous improvement is driven by the empowerment of our workforce.

President’s Message

6

Hansen Manufacturing Corp.

PROFILE

ACQUISITION DETAILS

•  Founded in 1982

•  Acquired on Dec 31, 2006

•  Located in Sioux Falls, South Dakota

•  Purchase price of USD $18.5 million

•  50 - 65 full-time, non-union employees

•  Debt fi nanced

•  8-acre site, with approximately 62,600 sq. ft. facility

•  Strong strategic fi t

•  Hi Roller brand is recognized as the market leader 

•  Immediately accretive

in its space

Hansen Installation: Conveyor and Support Walkway

Hansen Installation: Fill Conveyors and Support Walkways

7

R & D
Ag Growth has always prided itself on its ability to listen to its customers and develop ideas 

relevant to the marketplace. However, the challenge at times has been to turn these ideas into 

product offerings in a timely manner. Last summer, we established a stand-alone Research 

and Development Centre in Saskatoon. The intent was to create an environment free from the 

day-to-day distractions of our manufacturing operations. While the Centre is still in its infancy, 

the benefi ts are already apparent. 

The expansion of Wheatheart’s auger line will enable us to geographically expand our double 

branding strategy into the heart of the U.S. Midwest. At Edwards, a line of U.S. style aeration 

equipment was developed to offset the risk of regional concentration. While our R&D efforts 

to develop this line were not in time to offset harvest conditions in western Canada, we are 

confi dent they will provide us with valuable geographic diversifi cation in the long run.

The Wheatheart GH Series galvanized auger was designed to take 
advantage of an opening in the U.S. galvanized auger market. It is 
tailor-made for the U.S. corn-belt. 

The Grain Guard low speed centrifugal fan 
line by Edwards is targeting corn growers 
throughout the midwest U.S.

8

MANAGEMENT’S DISCUSSION AND ANALYSIS
MARCH 15, 2007 

This Management’s Discussion and Analysis should be read in conjunction with the audited 
consolidated fi nancial statements and accompanying notes of Ag Growth Income Fund for the 
year ended December 31, 2006. Results are reported in Canadian dollars unless otherwise stated 
and have been prepared in accordance with Canadian generally accepted accounting principles.

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis may contain forward-looking statements that refl ect 
our expectations regarding the future growth, results of operations, performance, 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 refl ect our current 
beliefs and are based on information currently available to us. Forward-looking statements 
involve signifi cant risks and uncertainties. A number of factors could cause actual results to 
differ materially from results discussed in the forward-looking statements, including changes 
in national and local business conditions, decreased crop yields, crop conditions, seasonality, 
industry cyclicality, volatility of production costs, commodity prices, foreign exchange rates, and 
competition. These risks and uncertainties are fully described in our 2006 Annual Report and our 
Annual Information Form. 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 and we undertake no obligation 
to update such statements.

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. The Fund holds 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. 

The previous owners of Ag Growth were issued Class B exchangeable limited partnership 
units (“Class B units”) and Class C exchangeable subordinated limited partnership units 
(“Class C units”) of AGX Holdings Limited Partnership (“AGHLP”), a wholly owned subsidiary of 
the Fund, as partial consideration for the Fund’s acquisition of Ag Growth. The units of the Fund 
and the Class B and Class C units of AGHLP participate pro rata in distributions. AGHLP converted 
all Class C units to Class B units on a one-for-one basis upon the occurrence of the subordination 
end date in 2006. The Class B units are exchangeable for trust units of the Fund at the option of 
the holder on a one-for-one basis at any time. 

The following table illustrates the exchange of Class C units to Class B units, and exchanges 
of Class B units to trust units of the Fund. The total number of units that participate in the 
distribution of net earnings has not changed. 

9

December 31, 2005
Exchange of Class C units for Class B units
Exchange of Class B units for units of the Fund

9,129,022
0
1,959,893

  169,978
1,926,000
(1,959,893)

 1,926,000
(1,926,000)
        0

Trust Units

Class B Units  Class C Units

December 31, 2006 and March 15, 2007

11,088,915

   136,085

Special Voting Units (1)

        0

   136,085

        0

        0

(1)   The Fund has issued a Special Voting Unit for each Class B unit 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.

The Fund’s units trade on the Toronto Stock Exchange under the symbol AFN.UN.

OPERATING RESULTS

Sales
Cost of goods sold
Gross margin

Selling, general and administration
Professional fees
Long-term incentive plan
Research and development
Capital taxes
Gain on foreign exchange
Other income

EBITDA *

Amortization
Interest expense
Earnings before provision for income taxes 
Provision for income taxes
Net earnings for the year

Net earnings per unit

* See discussion of non-GAAP measures.

2006

2005

$81,525,437
 46,207,537
 35,317,900

$84,033,945
45,132,586
38,901,359

12,587,274
461,026
854,000
1,160,200
297,189
(3,973,443)
  (243,099)
11,143,147

13,235,750
530,532
933,001
622,695
328,716
(1,355,991)
 (436,638)
13,858,065

24,174,753

25,043,294

3,834,891
  1,017,516
19,322,346
    278,505
$19,043,841

4,040,948
 1,035,153
19,967,193
   315,123
$19,652,070

$1.70

$1.82

Management’s Discussion and Analysis

10

Total assets
Total liabilities

ACQUISITIONS

 December 31, 2006

December 31, 2005

$170,232,551
$59,267,926

$144,352,812
$33,574,028

Effective December 31, 2006, the Fund acquired substantially all of the assets of Hansen 
Manufacturing Corp. (“Hansen”) a leading manufacturer of enclosed belt conveyors. The 
acquisition was effective at the close of business on December 31, 2006, and accordingly the 
operating results of Ag Growth for the year then ended do not include the results of Hansen’s 
operations. The inclusion of Hansen signifi cantly impacts the comparison of assets and liabilities 
as at December 31, 2006 and 2005. 

Effective April 8, 2005, the Fund acquired substantially all of the assets of The Edwards Group of 
Companies. The inclusion of Edwards signifi cantly impacts the comparison of operating results 
for the twelve months ended December 31, 2006 to the same period in 2005. 

DISTRIBUTIONS AND DISTRIBUTABLE CASH

For the twelve-month period ended December 31, 2006, the Fund generated distributable cash 
from operations of $1.96 per unit (2005 – $2.10) and declared cash distributions of $1.68 per 
unit (2005 – $1.73). As per the table below, distributable cash available to unitholders for the 
twelve-month period ended December 31, 2006 was $1.71 per unit (see “Distributions”). 

The following table summarizes the distributions declared for trust units of the Fund and for 
Class B units and Class C units of AGHLP. The Fund’s distribution policy is described in the 
“Distributions” section of this document. Distributable cash is a non-GAAP measure and is 
described and reconciled to cash fl ow from operating activities under the sections “Distributions” 
and “Non-GAAP Measures”. 

11

Distributions Declared
Trust units of the Fund
Class B units
Class C units

Distributable Cash from Operations
Generated from operations

Distributable Cash Available
Generated from operations
Non-maintenance CAPEX (1)
Costs of acquisition (2)
Available to unitholders

2006

2005

$

Per unit

$

Per unit

$17,257,452
252,348
  1,348,200
$18,858,000

$1.68
$1.68
$0.70
$1.68

$15,288,686
294,317
  3,334,869
$18,917,872

$1.73
$1.73
$1.73
$1.73

$21,978,594

$1.96

$22,628,723

$2.10

$21,978,594
(1,881,932)
  (894,182)
$19,202,480

$1.96
(0.17)
(0.08)
$1.71 

$22,628,723
0
         0
$22,628,723

$2.10
 0.00
 0.00
$2.10

(1)  Non-maintenance capital expenditures are defi ned as cash outlays related to increasing 

operating capacity or improving operating effi ciency. In the fourth quarter of 2006, the Fund 
incurred costs of $1.9 million related to a capacity improvement initiative at its Westfi eld 
facility. The total cost of the project is expected to be approximately $3.8 million. See 
“Capital Expenditures”.

(2)  Costs incurred in relation to the acquisition of Hansen were funded from retained cash fl ow. 

See “Acquisitions” and “Distributions”. 

All Class C units were exchanged for Class B units upon the subordination end date in June 2006. 
There were no Class C distributions declared subsequent to their exchange. 

OVERALL PERFORMANCE

For the year-ended December 31, 2006, sales and EBITDA were $81.5 million and $24.2 million 
respectively, compared to $84.0 million and $25.0 million in 2005. The appreciation of the 
Canadian dollar in 2006 signifi cantly impacted the comparability of results between the two 
years. After adjusting 2006 results to refl ect the average foreign exchange rates in effect in 2005, 
sales and EBITDA in 2006 would have been $85.5 million and $25.5 million respectively. 

Sales in the U.S. corn-belt increased signifi cantly in 2006 due primarily to market gains related 
to distribution network rationalization, a trend towards more on-farm storage, and per unit price 
increases. Sales of the Fund’s bin unload equipment also increased signifi cantly compared to 
2005 due to the strength of the North American storage market. Hot and dry weather conditions 
in western Canada and certain Plains states led to reduced crop quantity and an exceptionally 
early harvest, which reduced demand for both grain handling and aeration equipment. Gross 

Management’s Discussion and Analysis

12

margin was negatively impacted by the appreciation of the Canadian dollar as well as lower 
sales volume, particularly at Edwards. Operating expenses decreased signifi cantly in 2006, due 
primarily to lower general and administrative expenses and a higher gain on foreign exchange 
(see “Foreign Exchange”). 

SALES

Sales for the year-ended December 31, 2006 were $81.5 million, compared to $84.0 million for the 
same period in 2005. The decrease of $2.5 million was largely the result of the following:
•  As discussed under “Foreign Exchange”, the appreciation of the Canadian dollar resulted 

in a decrease in recorded sales of $4.0 million compared to the twelve-month period ended 
December 31, 2005. Excluding the impact of foreign exchange, sales increased $1.5 million 
over 2005.

•  Sales in the U.S. market, adjusted to refl ect the average foreign exchange rate in effect in 

2005, increased $3.3 million over the prior year. The increase was due to robust sales in the 
key U.S. corn-belt, the result of market gains related to changes in the Fund’s distribution 
network and the continued trend towards more on-farm storage, and per unit price increases. 
Sales of bin-unload equipment increased due to the strength of the North American storage 
market. Drought conditions in certain Plains states negatively impacted sales of grain 
handling and aeration equipment.

•  Sales in Canada decreased $1.1 million compared to 2005, primarily due to unusually hot and 

dry weather in western Canada that led to an exceptionally early harvest. The adverse weather 
conditions resulted in reduced demand for both grain handling and aeration equipment.
International sales decreased $0.7 million compared to 2005, due primarily to severe drought 
conditions in Australia.

• 

•  The Edwards Group, a manufacturer of aeration equipment, was severely impacted by the 

poor weather conditions in western Canada and certain Plains states, due both to the nature 
of its products and its exposure to these regional markets. Edwards’ North American sales 
decreased $0.7 million from the exceptional results recorded in 2005, even though 2006 
included twelve months of sales while 2005 included sales only for the period subsequent to 
its April 8, 2005 acquisition. 

FOREIGN EXCHANGE

Sales and expenses are recorded at a monthly rate of exchange. For the twelve-month period 
ended December 31, 2006, Ag Growth generated 67% of its sales in U.S. dollars (2005 – 65%). 
Historically, U.S. dollar denominated expenses have equated to approximately 15% to 20% of 
sales. As a result of this imbalance, the negative impact on sales from a stronger Canadian dollar 
is only partially offset by the benefi t of lower U.S. dollar expenses. 

The average rate of exchange for the twelve-month period ended December 31, 2006 was $1.13, 
compared to $1.21 in 2005. Had the average exchange rates experienced in 2005 been in effect 
in 2006, sales and EBITDA for the twelve month period ended December 31, 2006 would have 
increased $4.0 million and $1.3 million respectively. 

13

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 U.S. 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. 
Amortization to sales for the twelve-month period ended December 31, 2006 was $238,185 
(2005 – $220,826). 

The Fund’s 2006 foreign exchange hedging instruments were at contract rates similar to those of 
2005. As the actual foreign exchange spot rate in 2006 was lower than 2005, the spread between 
the contract rate and the actual spot rate was greater, the result of which was a higher gain on 
foreign exchange compared to the prior year (see “Expenses”). 

EXPENSES

Gross margin as a percentage of sales for the year ended December 31, 2006 was 43.3%, 
compared to 46.3% in 2005. The decline in gross margin percentage is largely due to the 
strengthening of the Canadian dollar. As discussed under Foreign Exchange, the Fund’s U.S. 
dollar sales greatly exceed its U.S. dollar purchases, and accordingly a stronger Canadian dollar 
negatively impacts the Fund’s gross margin percentage. Had the exchange rates experienced 
in 2005 been in effect in 2006, gross margin for the year ended December 31, 2006 would have 
been 44.9%. Lower sales volumes, particularly at Edwards, have also negatively impacted gross 
margin compared to 2005. 

For the year ended December 31, 2006, total operating expenses were $11.1 million, compared 
to $13.9 million in 2005, a decrease of $2.8 million. Excluding Edwards, as its 2005 operating 
expenses were included in results only subsequent to its April 8, 2005 acquisition date, total 
operating expenses decreased $3.3 million compared to 2005, primarily due to the following:
•  Selling, general and administration expenses decreased $1.1 million compared to 2005 

due to a $0.4 million decrease in commission expenses, largely the result of changes made 
to the Fund’s distribution network, and lower salary expenses of $0.6 million that were 
largely the result of lower performance based bonuses. These decreases were partially 
offset by consulting fees of $0.2 million related to the capacity improvement initiative at the 
Westfi eld facility.

•  The Fund’s gain on foreign exchange increased from $1.4 million in 2005 to $4.0 million in 
2006, due to an increase in the spread between its foreign exchange contract rates and the 
actual foreign exchange spot rate.

•  Research and development expenses increased $0.4 million due to costs related to the start 
up of the Fund’s new research and development facility and to product line expansions at 
Westfi eld and Edwards.

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

Management’s Discussion and Analysis

14

EBITDA AND NET EARNINGS (see discussion of non-GAAP measures)

EBITDA for the year-ended December 31, 2006 was $24.2 million, compared to $25.0 million in 
2005. The comparison to 2005 was most signifi cantly impacted by the further appreciation of the 
Canadian dollar. 

Prior to its acquisition of Hansen, the Fund’s credit facility included 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, with interest rates on both facilities based on performance calculations. 
For the year-ended December 31, 2006, the Fund’s effective interest rate on its term debt was 
5.8% (2005 – 4.8%), and after consideration of the effect of the Fund’s interest rate swap (see 
“Financial Instruments”) was 4.7% (2005 – 4.5%). The Hansen acquisition was effective at the 
close of business December 31, 2006, and accordingly Ag Growth’s results for the year then 
ended do not include interest expense related to the USD $18.5 million term debt.

Amortization for the year-ended December 31, 2006 was $3.8 million compared to $4.0 million in 
2005. Amortization for the year-ended December 31, 2006 includes the amortization of intangible 
assets of $1.6 million, the amortization of deferred fi nancing costs of $0.1 million, and the 
amortization of property, plant and equipment of $2.1 million. Compared to 2005, the decrease in 
amortization is largely the result of lower amortization of deferred fi nance costs. 

The Fund is a mutual fund trust for income tax purposes at this time, 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 fl ows through to the holders of the partnership units, which includes 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 current tax 
expense of $48,705 for the year-ended December 31, 2006 represents primarily tax payable on 
the net income and taxable capital primarily allocated to Ag Growth and its subsidiaries through 
its ownership in Ag Growth Industries Limited Partnership after deductions for interest expense, 
fi nancing fees and capital taxes. On October 31, 2006 the Federal Government announced 
proposed changes to the taxation of income trusts that, if enacted, would result in certain of the 
Fund’s distributions being subject to tax (see “Risk Factors”). 

For the year-ended December 31, 2006, the Fund recorded net earnings of $19.0 million and 
earnings per basic and diluted unit of $1.70, compared to net earnings of $19.7 million and 
earnings per basic and diluted unit of $1.82 in 2005. 

15

QUARTERLY FINANCIAL INFORMATION

2006

Q1
Q2
Q3
Q4
Fiscal 2006

Q1
Q2
Q3
Q4
Fiscal 2005

Q1 (2)
Q2 (3)
Q3
Q4
Fiscal 2004

Sales

$19,705,011
22,571,529
22,049,541
17,199,356
$81,525,437

Sales

$16,013,438
24,363,985
26,755,797
16,900,725
$84,033,945

Sales

N/A
$7,855,520
21,780,593
13,911,771
$43,547,884

Gain (Loss) 
on FX (1)

Net 
Earnings

Net Earnings
per Unit

$201,001
120,997
1,102,119
2,549,326
$3,973,443

$4,115,585
5,157,065
5,771,138
4,000,053
$19,043,841

$0.37
 0.46
 0.51
 0.36
$1.70

2005

Gain (Loss)
on FX (1)

Net 
Earnings

Net Earnings 
per Unit

$220,020
115,822
(274,763)
1,294,912
$1,355,991

$3,449,185
6,255,028
6,567,557
3,380,300
$19,652,070

$0.36
 0.56
 0.59
 0.31
$1.82

2004

Gain (Loss)
on FX (1)

Net 
Earnings

Net Earnings 
per Unit

N/A
$(520,596)
(626,254)
3,552
$(1,143,298)

N/A
$1,441,006
5,483,492
1,798,911
$8,723,409

N/A
$0.15
 0.57
 0.19
$0.91

(1)   Certain comparative fi gures have been reclassifi ed to conform to the current period’s 

presentation. 

(2)   Prior to IPO date of May 18, 2004.

(3)  Includes results of operations only for the 44-day period May 18 to June 30, 2004.

Management’s Discussion and Analysis

16

 
Interim period revenues and earnings historically refl ect 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 following factors 
impact comparability between quarters in the previous table:
•  Sales, gain (loss) on foreign exchange, net earnings, and net earnings per unit are signifi cantly 

impacted by the prevailing rate of exchange between the Canadian and U.S. dollars.

•  The third quarter of 2006 was adversely affected by hot and dry weather conditions in western 

Canada that negatively impacted sales of grain handling and aeration equipment.

•  The fi rst quarter of 2006, compared to the same period in 2005, was signifi cantly impacted by 

the April 8, 2005 acquisition of the Edwards Group.

•  The fi rst and second quarters of 2005 were exceptionally strong due to demand that resulted 

from the record 2004 U.S. harvest. 

FOURTH QUARTER

Sales for the three-months ended December 31, 2006 were $17.2 million, compared to 
$16.9 million for the same period in 2005. The increase of $0.3 million was largely the result of 
the following:
•  The appreciation of the Canadian dollar resulted in a decrease in recorded sales of 

$0.5 million compared to the three-month period ended December 31, 2005. Excluding the 
impact of foreign exchange, sales increased $0.8 million over the same period in 2005 (see 
“Foreign Exchange”).

•  Sales in the U.S. market, after adjusting for the change in foreign exchange rates (see “Foreign 
Exchange”), increased $2.9 million compared to the prior year. The increase resulted from 
robust sales in the key U.S. corn-belt, higher sales of bin-unload equipment, and per unit price 
increases, partially offset by the impact of drought conditions in certain Plains states.
•  Sales in Canada decreased $1.5 million compared to the fourth quarter of 2005 due to 

an exceptionally early harvest in western Canada that resulted in lower demand for grain 
handling and aeration equipment.
International sales decreased $0.6 million compared to 2005, due primarily to severe drought 
conditions in Australia. 

• 

Gross margin as a percentage of sales for the three-months ended December 31, 2006 was 
40.0%, compared to 42.1% in 2005. Gross margin in the fourth quarter is typically lower 
than other quarters due primarily to preseason sales initiatives. The decline in gross margin 
percentage from the fourth quarter of 2005 is largely due to the strengthening of the Canadian 
dollar. As discussed under Foreign Exchange, the Fund’s U.S. dollar sales greatly exceed its U.S. 
dollar purchases, and as a result a stronger Canadian dollar negatively impacts the Fund’s gross 
margin percentage. Had the average exchange rate experienced in 2005 been in effect in 2006, 
gross margin for the three months ended December 31, 2006 would have been 41.2%. Lower 
sales volumes, particularly at Edwards, also negatively impacted gross margin. 

17

For the three months ended December 31, 2006, total operating expenses were $1.6 million, 
compared to $2.2 million in 2005, a decrease of $0.6 million. The decrease is primarily due to 
the following:
•  For the three months ended December 31, 2006, the Fund recorded a gain on foreign exchange 
of $2.5 million, compared to $1.3 million for the same period in 2005. The Fund’s gain on its 
foreign exchange contracts was higher than the previous year due to the further strengthening 
of the Canadian dollar.

•  Research and development expenses increased $0.3 million, largely due to costs incurred 
at the Fund’s new research and development facility and to product line expansions at the 
Westfi eld and Edwards divisions.

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

EBITDA for the three-month period ended December 31, 2006 was $5.3 million, compared to 
$4.9 million in 2005. The comparison to 2005 was most signifi cantly impacted by fourth quarter 
demand in the U.S. corn-belt and increased sales of bin-unload equipment, an increase in the 
gain on the Fund’s foreign exchange contracts, offset by the negative impact on sales and gross 
margin of the further appreciation of the Canadian dollar. 

For the three months ended December 31, 2006, the Fund recorded net earnings of $4.0 million 
and earnings per basic and diluted unit of $0.36, compared to net earnings of $3.4 million and 
earnings per basic and diluted unit of $0.31 in 2005. 

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. EBITDA is not a fi nancial 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 fl ows from operating, 
investing, and fi nancing activities as a measure of the Fund’s liquidity and cash fl ows. 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 fi nancial performance. The Fund defi nes distributable cash from operations as 
EBITDA less interest expense, maintenance capital expenditures (see “Capital Expenditures”), 
and current taxes. The Fund defi nes distributable cash available to unitholders as distributable 
cash from operations, adjusted for non-operational expenditures. Distributable cash is not a 
fi nancial measure recognized by Canadian generally accepted accounting principles (“GAAP”) and 
does not have a standardized meaning prescribed by GAAP. 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. 

Management’s Discussion and Analysis

18

Payout ratio is a non-GAAP measure used by Canadian income funds as an indicator of the 
amount of generated distributable cash that is distributed to the unitholders. The Fund defi nes 
payout ratio as total distributions expressed as a percentage of distributable cash generated 
from operations. Payout ratio is not a fi nancial measure recognized by Canadian generally 
accepted accounting principles (“GAAP”) and does not have a standardized meaning prescribed 
by GAAP. The method of calculating the Fund’s payout ratio may differ from similar computations 
as reported by similar entities and, accordingly, may not be comparable to payout ratio as 
reported by such entities.

CASH FLOW AND LIQUIDITY

The table below reconciles net earnings to cash provided by operations for the years ended 
December 31, 2006 and 2005. 

Net earnings
Add charges (deduct credits) to operations not requiring a 
current cash payment:
     Amortization
     Future income taxes
     Deferred foreign exchange gain
     Loss (gain) on sale of property, plant & equipment

Net change in non-cash working capital related to operations:
     Accounts receivable
     Inventory
     Prepaid expenses and other assets
     Accounts payable and accrued liabilities
     Long-term incentive plan
     Customer deposits
     Income taxes payable

Twelve Months Ended 
December 31
2006

2005

$19,043,841

$19,652,070

3,834,891
229,800
33,476
   (37,546)

4,040,948
236,000
34,540
    12,120

 23,104,462

23,975,678

(408,816)
(505,850)
329,687
267,421
(79,001)
2,558,018
   (29,219)

(1,441,926)
(967,153)
(270,328)
(442,001)
667,213
(721,769)
   477,481

Cash provided by operations

$25,236,702

$21,277,195

Cash provided by operations for the year-ended December 31, 2006 was $25.2 million, an 
increase of $4.0 million over 2005. An increase in customer deposits that resulted from the timing 
of certain pre-season sales initiatives increased cash provided by operations by $3.3 million 
compared to 2005. A number of smaller changes account for the remaining variance. 

19

WORKING CAPITAL

Interim period working capital requirements typically refl ect 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 fi rst 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 begins to draw on its bank revolver in the fi rst or second quarter. The 
revolver balance typically peaks in the second or third quarter and normally begins to decline 
later in the third quarter as collections of accounts receivable increase. Ag Growth has typically 
fully repaid its revolver balance by early in the fourth quarter. Results in 2006 have generally 
refl ected these expectations. The inclusion of Hansen in 2007 is not expected to signifi cantly 
impact the seasonality of working capital requirements. 

CAPITAL EXPENDITURES

The Fund had maintenance capital expenditures of $1.1 million for the year-ended 
December 31, 2006 (2005 – $1.3 million). Maintenance capital expenditures in 2006 relate 
primarily to purchases of a semi tractor unit and trailer, a building addition, and manufacturing 
equipment. The Fund anticipates total maintenance capital expenditures in 2007 will approximate 
the amounts expended in 2006, plus approximately $0.3 million related to the newly acquired 
Hansen division. All 2007 capital expenditures are expected to be funded through operations. 

The Fund defi nes maintenance capital expenditures as cash outlays required to maintain plant 
and equipment at current operating capacity and effi ciency levels. Non-maintenance capital 
expenditures are defi ned as cash outlays required to increase operating capacity or improve 
operating effi ciency. The Fund has commenced a capacity improvement initiative at its Westfi eld 
facility that has been categorized as a non-maintenance capital expenditure. In addition to 
anticipated capacity enhancements, the initiative is expected to improve the quality and fi nish 
of the Westfi eld product through the implementation of a new paint system. The total cost of the 
project is expected to be approximately $3.8 million and will be fi nanced through working capital. 
For the year-ended December 31, 2006, non-maintenance capital expenditures related to the 
capacity enhancement project totaled $1.9 million. 

The Fund’s credit facility allows for the elimination of capital expenditures from its fi nancial 
covenant calculations provided that the Fund has suffi cient availability in its revolver facility. 
As at December 31, 2006, the non-maintenance capital expenditures did not impact the Fund’s 
fi nancial covenants. 

Management’s Discussion and Analysis

20

CASH BALANCE

For the year ended December 31, 2006, the Fund’s cash balance, including cash held in trust, 
increased $1.1 million, which was in line with management expectations for the reasons 
discussed previously. 

CONTRACTUAL OBLIGATIONS

TOTAL

2007

2008

2009 

2010 

2011 

Long-term debt
Operating leases
CAPEX (1)
Total obligations

$41,575,645
  2,153,552
    385,200
$44,114,397

$10,391,773 $31,168,538
$15,334
    527,448
803,616
   385,200
         0
$1,204,150 $11,048,143 $31,695,986

    656,370
         0

$0
145,424
       0
$145,424

$0
20,694
      0
$20,694

(1)  As at December 31, 2006, the Fund had issued purchase orders totaling $385,200 with 

respect to the capacity improvement project at Westfi eld. A deposit of $346,680 related to 
this equipment was paid in 2006. 

The non-amortizing term loans of $41.6 million mature August 31, 2007 and includes loans of 
CAD $20.0 million and USD $18.5 million. The loans are 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 August 31, 2007 
maturity date, all amounts outstanding under the facilities become repayable in four equal 
quarterly instalments of principal, commencing November 30, 2008. The remaining long-term 
debt relates to GMAC fi nanced vehicle loans that will be fully repaid in 2008. The operating leases 
relate to vehicle, equipment, and warehouse facility leases entered into in the normal course 
of business. 

The Fund has issued purchase orders of $0.4 million for equipment related to the Westfi eld 
capacity initiative (see “Capital Expenditures”) and expects non-maintenance capital 
expenditures related to this project will approximate $1.9 million in 2007. Delivery of the 
remaining equipment is expected to occur in the fi rst quarter of 2007. 

21

DISTRIBUTIONS

The Fund declared distributions to public unitholders of $4.7 million and $17.3 million for the 
three and twelve-month periods ended December 31, 2006 (2005 – $3.9 million and $15.3 million). 
Furthermore, consistent with the Fund’s prospectus dated May 5, 2004, the Fund declared 
distributions to Ag Growth’s previous owners of $0.1 million and $1.6 million for the three and 
twelve-months ended December 31, 2006 (2005 – $1.4 million and $3.6 million). The amounts 
declared to Ag Growth’s previous owners have decreased as a number of exchangeable units 
were exchanged for publicly traded units of the Fund (see “Overview of the Fund”). 

The Fund’s policy is to make monthly distributions to holders of both trust units of the Fund and 
Class B units of AGHLP. Furthermore, in accordance with the terms of the Fund’s prospectus, 
holders of Class C Subordinated Exchangeable limited partnership units received distributions 
quarterly. The Fund’s Declaration of Trust requires that it distribute all taxable income earned in 
its fi scal 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 fi nancial 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 from operations is defi ned as EBITDA, less maintenance capital expenditures, 
interest, and cash income tax expense. The objective of presenting these measures is to calculate 
the amount that is available for distribution to unitholders and exchangeable unitholders. The 
distributable cash defi nition excludes changes in working capital as they are necessary to drive 
organic growth and are expected to be fi nanced by the Fund’s operating facility (see “Capital 
Resources”). Distributable cash should not be construed as an alternative to cash fl ows from 
operating, investing, and fi nancing activities as a measure of the Fund’s liquidity and cash fl ows. 

Management’s Discussion and Analysis

22

Distributable cash can be reconciled to cash provided by operating activities as noted in the 
following chart. 

Cash provided by operating activities
Change in non-cash working capital
Deferred foreign exchange gain
Gain (loss) on sale of property, plant and equipment
Net maintenance capital expenditures
Distributable cash from operations *
Non-maintenance capital expenditures
Acquisition costs
Distributable cash available to unitholders *

Twelve Months ended 
December 31

2006

2005

$25,236,702
(2,132,240)
(33,476)
     37,546
(1,129,938)
21,978,594
 (1,881,932)
   (894,182)
$19,202,480

$21,277,195
2,698,483
(34,540)
    (12,120)
(1,300,295)
22,628,723
         0
         0
$22,628,723

Weighted average units outstanding
Distributions declared per weighted average unit

11,225,000
$1.6800

10,801,123
$1.7515

Distributable cash from operations
     Distributable cash generated per unit *
     Distribution percentage
Distributable cash available to unitholders
     Distributable cash generated per unit *
     Distribution percentage

* See discussion of non-GAAP measures below. 

$1.96
85.8%

$1.71
98.2%

$2.10
83.6%

$2.10
83.6%

Distributions declared for the year ended December 31, 2006 of $1.68 per unit represent a 2.9% 
decrease from distributions of $1.73 in 2005. Distributions in 2006 represent a 29.2% increase 
over the per unit distribution disclosed in the Fund’s 2004 prospectus. Distributions for the years 
ended December 31, 2006 and 2005 were funded entirely through operations. 

23

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

2006 (1)

Specials (2)

Q4

Q3

Q2

Q1

Distributable cash generated
Distributions declared
Distribution percentage
YTD distribution percentage

N/A
N/A
N/A
N/A

$0.4270
$0.4200
98.4%
85.8%

$0.5763
$0.4200
72.9%
82.3%

$0.5214
$0.4200
80.6%
88.0%

$0.4335
$0.4200
96.9%
96.9%

2005

Specials (2)

Q4

Q3

Q2

Q1

Distributable cash generated
Distributions declared
Distribution percentage
YTD distribution percentage

N/A
$0.3000
N/A
83.6%

$0.3722
$0.3900
104.8%
68.7%

$0.6859
$0.3800
55.4%
60.6%

$0.6271
$0.3403
54.3%
64.2%

$0.3936
$0.3249
82.6%
82.6%

(1)   Distributable cash from operations. In 2006 certain adjustments were made to calculate 

distributable cash available to unitholders (see “Distributions”).

(2)   Special distributions declared in excess of the regular monthly distributions. 

Distributable Cash From Operations

Distributable 
Cash Generated

Distributions 
Declared (1)

Payout Ratio

Period Ended December 31, 2004
Year Ended December 31, 2005
Year Ended December 31, 2006
Cumulative since inception

$  9,686,147
  22,628,723
 21,978,594
$ 54,293,464

$  9,109,017
  18,917,872
 18,858,000
$ 46,884,889

94.0%
83.6%
85.8%
86.4%

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

in 2005. 

The Fund’s Declaration of Trust requires that it distribute all taxable income earned in its fi scal 
periods ending December 31. Due to a number of tax deductions available to the Fund and its 
subsidiary entities, since inception the Fund has retained $7.4 million for internal purposes. 
In the fourth quarter of 2006 the Fund invested $1.9 million of its retained cash in a strategic 
capital expenditure at its Westfi eld facility. The total cost of the Westfi eld capacity improvement 
initiative is expected to be $3.8 million, and the remaining $1.9 million will also be funded from 
retained cash. In the fourth quarter of 2006, the Fund acquired Hansen Manufacturing and 

Management’s Discussion and Analysis

24

funded approximately $0.9 million of the related acquisition costs from its retained cash. The 
remaining amounts retained have been used primarily to further strengthen the Fund’s fi nancial 
position and to allow for future strategic or expansionary capital expenditures. 

CAPITAL RESOURCES

The Fund’s credit facility includes term debt of CAD $20.0 million and USD $18.5 million, and 
operating facilities of CAD $15.0 million (increasing to CAD $18.0 million for the period May 31 
to September 30 each year) and USD $1.0 million. Both the term and operating facilities bear 
interest at rates based on performance calculations. For the year ended December 31, 2006, the 
Fund’s effective interest rate on its term debt was 5.8% (2005 – 4.8%), and after consideration of 
the effect of the Fund’s interest rate swap (see “Financial Instruments”) was 4.7% (2005 – 4.5%). 
The term loans mature August 31, 2007 and are extendible annually at the lender’s option. At 
December 31, 2006 and 2005 the Fund had not drawn on its operating facilities. 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 August 31, 2007 maturity date, all amounts outstanding under 
the facilities become repayable in four equal quarterly instalments of principal, commencing 
November 30, 2008. In addition, under the terms of the credit 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 fl uctuating 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 and the interest rate swaps (see “Financial Instruments”). 

CRITICAL ACCOUNTING ESTIMATES

The preparation of fi nancial 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 fi nancial 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 and the fair value of goodwill and 
intangible assets. Goodwill and indefi nite life intangible assets are tested for impairment at least 
annually. 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 

25

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. The Fund has entered into foreign exchange contracts with a 
Canadian chartered bank to hedge its foreign currency exposure on anticipated U.S. dollar sales 
transactions and the collection of the related accounts receivable. At December 31, 2006, the 
Fund had outstanding the following foreign exchange and option contracts: 

Forward Foreign Exchange Contracts

Settlement Dates

March – December 2007

Face Amount 
USD

$8,625,000

Average Rate 
CDN

Unrealized Gain 
(Loss) CDN

$ 1.1943

$308,917

Settlement Dates

March – December 2007
March – December 2007
March – December 2007
January – December 2008
Total

Currency Options

Face Amount 
USD
$4,625,000
4,625,000
  9,250,000
  7,800,000
$26,300,000

Call Rate 
CND
$1.1363
$1.1300
$1.1363
$1.0700

Put Rate 
CDN
$1.2985
$1.1975
$1.2410
$1.2115

Unrealized Gain 
(Loss) CDN
$44,449
(102,992)
(48,385)
 (478,667)
$(585,595)

As at December 31, 2006, the Fund has recorded a deferred foreign exchange gain of $20,116 with 
respect to its hedged accounts receivable. 

The Fund is subject to risks associated with fl uctuating interest rates on its long-term debt. To 
manage this risk, the Fund has entered into a number of interest rate swap transactions with a 
Canadian chartered bank: 
(i)  Notional amount of CAD $20.0 million, expires May 4, 2008, effective interest rate of 3.68%, 
resulting in interest charges to the Fund of 3.68% plus a variable rate based on performance 
calculations.

(ii)  Notional amount of USD $11.0 million, expires August 31, 2007, effective interest rate of 
5.43%, resulting in interest charges to the Fund of 5.43% plus a variable rate based on 
performance calculations.

(iii)  Notional amount of USD $7.5 million, expires August 31, 2007, effective interest rate of 
5.43%, resulting in interest charges to the Fund of 5.43% plus a variable rate based on 
performance calculations. 

Management’s Discussion and Analysis

26

At December 31, 2006, the fair value of the interest rate swap contract (i) was $141,398 and this 
amount has been recorded in prepaid expenses and other assets. Interest rate swap transactions 
(ii) and (iii) above were entered effective January 24, 2007. 

CHANGES IN ACCOUNTING POLICIES

The Canadian Institute of Chartered Accountants has issued three new accounting standards; 
Hedges, Financial Instruments—Recognition and Measurement, and Comprehensive Income. 
These standards are effective for the Fund beginning in fi scal 2007 and management is currently 
assessing the impact these changes will have on its fi nancial statements for the period ending 
March 31, 2007. Management does not believe the impact of the changes will be material. 

The new standard for Hedges specifi es the criteria under which hedge accounting can be applied 
and how hedge accounting can be executed for each of the permitted hedging strategies. For cash 
fl ow hedges where the Fund is hedging the variability in cash fl ows related to anticipated sales to 
customers in the U.S. and the collection of the related accounts receivable, the effective portion 
of the changes in the fair values of the derivative instruments will be recorded through other 
comprehensive income until the hedged items are recognized in the Consolidated Statement of 
Operations. 

The Financial Instruments—Recognition and Measurement standard will require fi nancial assets to 
be classifi ed as available for sale, held to maturity, trading or loans and receivables. 

The Comprehensive Income standard will require a new component of unitholders’ equity on the 
Consolidated Balance Sheet. The major component will be the changes in the fair value of the 
effective portion of cash fl ow hedging instruments. 

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. The Fund’s 
Annual Information Form contains a thorough description of these and 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 fi nancial condition, and the amount of cash available for 
distribution could suffer. 

Industry Cyclicality

The performance of the agricultural industry is cyclical, and to the extent that the agricultural 
sector declines or experiences a downturn, this is likely to have a negative impact on the farm 
equipment and commercial grain handling industry, and the business of Ag Growth. 

27

Seasonality of Business

The seasonality of the demand for Ag Growth’s products results in lower cash fl ow in the fi rst 
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 suffi cient to offset the seasonal variations in Ag 
Growth’s cash fl ow. 

Risk of Decreased Crop Yields

Decreased crop yields due to poor weather conditions and other factors are a signifi cant 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 signifi cant 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 infl uenced by a variety of unpredictable factors that are beyond the 
control of Ag Growth, including weather, government (Canadian, U.S. 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 fi nancial 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. 

Management’s Discussion and Analysis

28

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 fl oods 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, fi nancial condition, and operating results depend on the continued 
contributions of certain of Ag Growth’s executive offi cers and other key management and 
personnel, certain of whom would be diffi cult 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 U.S. dollars, but a materially smaller proportion 
of its expenses are denominated in U.S. dollars. As a result, a signifi cant strengthening of the 
Canadian dollar against the U.S. dollar will negatively impact the return from U.S. dollar sales 
revenue. To mitigate the effects of exchange rate fl uctuation, 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 fl uctuating exchange rates 
through December 2008. 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 U.S. dollar may 
have a material adverse effect on Ag Growth’s results of operations, business, prospects and 
fi nancial condition. 

29

Interest Rates

The Fund’s term and operating credit facilities bear interest at rates that are in part dependant 
on performance based fi nancial ratios. The Fund’s cost of borrowing may be impacted to the 
extent that the ratio calculation results in an increase in the performance based component of the 
interest rate. The Fund is party to a number of interest rate swap arrangements to mitigate the 
impact of fl uctuating market interest rates. These swap arrangements mature on August 31, 2007 
and May 4, 2008. In the event the Fund enters new interest rate swap arrangements, the rate of 
the new contracts will be a function of prevailing market rates. 

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 suffi cient to pay 
the full current market value or current replacement cost of its assets or cover the cost of a 
particular claim. 

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. 

On October 31, 2006, the federal government announced a proposal to disallow as a tax 
deduction the distributions made by most income trusts. If the proposal is implemented, 
taxable income generated by most income trusts will be subject to tax at a special rate based 
on the federal-provincial corporate tax rates. Unitholders will be taxed on such distributions 
as if they have received a taxable dividend paid by a taxable Canadian corporation. There will 
be a transitional period so that existing income trusts and their investors will not be subject to 
the proposed tax until 2011. The proposals also specifi ed that “undue growth” may result in 
immediate taxation of income trusts that would otherwise not be subject to taxation until 2011. 
The government has stated that the maximum growth permissible is 100% of an entity’s market 
capitalization determined as at the close of trading on October 31, 2006, and that the growth limit 
will be phased in annually from 2007 – 2010. The proposed legislation is still in draft form and 
subject to continuing debate. The implementation of the legislation could have an adverse effect 
on the Fund, its ability to pay distributions and the market value of its units. 

Management’s Discussion and Analysis

30

OUTLOOK

Demand in the fi rst half of 2007, excluding Edwards, is expected to be strong due to positive 
market sentiment in the U.S. corn-belt and an increase in on-farm storage. Management expects 
that demand at the Edwards division in the fi rst half of 2007 will continue to be adversely 
impacted by the unfavourable weather conditions experienced in 2006. The implementation of the 
capacity improvement initiative, scheduled for the fi rst quarter of 2007, will result in a brief plant 
slowdown at the Westfi eld division and may result in the deferral of some sales until later in the 
year. The order backlog at Hansen is higher than in previous years, in part due to the expansion 
of the ethanol industry. As Hansen was acquired effective December 31, 2006, the inclusion 
of Hansen’s results will impact the comparability of results to the prior year. Taxable income 
generated at Hansen Manufacturing in 2007 is subject to U.S. and state taxes and accordingly will 
impact the Fund’s tax provision. Consistent with prior years, demand in 2007, particularly in the 
second half, will be infl uenced by crop conditions, crop mix, and storage practices. 

The value of the Canadian dollar relative to its U.S. counterpart will continue to impact the 
fi nancial results of the Fund. The Fund’s foreign currency hedging instruments in place for fi scal 
2007 are at rates less favourable than the 2006 contracts, and as result management does not 
expect the gain on its hedging instruments in 2007 will be as large as the gain realized in 2006. 
The acquisition of Hansen Manufacturing, based in Sioux Falls, South Dakota, will increase the 
Fund’s exposure to foreign exchange. 

On October 31, 2006, the federal government announced a proposal to disallow as a tax 
deduction the distributions made by most income trusts. If the proposal is implemented, taxable 
income generated by most income trusts will be subject to tax at a special rate based on the 
federal-provincial corporate tax rates. Unitholders will be taxed on such distributions as if 
they have received a taxable dividend paid by a taxable Canadian corporation. There will be a 
transitional period so that existing income trusts and their investors will not be subject to the 
proposed tax until 2011 (see “Risk Factors”). 

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS

Evaluation of Disclosure Controls and Procedures 

Disclosure controls and procedures are designed to provide reasonable assurance that all 
relevant information is gathered and reported to senior management, including the Fund’s Chief 
Executive Offi cer and Chief Financial Offi cer, on a timely basis so that appropriate decisions can 
be made regarding public disclosure. 

As at the end of the year covered by this MD&A, management of the Fund, with the participation 
of the Chief Executive Offi cer and the Chief Financial Offi cer, evaluated the effectiveness of 
the Fund’s disclosure controls and procedures as required by Canadian securities laws. Based 
on that evaluation, the Chief Executive Offi cer and the Chief Financial Offi cer have concluded 

31

that, as of the end of the year covered by this MD&A, the disclosure controls and procedures 
were effective to provide reasonable assurance that information required to be disclosed in the 
Fund’s annual fi lings and interim fi lings (as such terms are defi ned under Multilateral Instrument 
52-109-Certifi cation of Disclosure in Issuers’ Annual and interim Filings) and other reports fi led 
or submitted under Canadian securities laws is recorded, processed, summarized and reported 
within the time periods specifi ed by those laws and that material information is accumulated and 
communicated to management of the Fund, including the Chief Executive Offi cer and the Chief 
Financial Offi cer, as appropriate to allow timely decisions regarding required disclosure. 

Internal Controls over Financial Reporting

Management of the Fund is responsible for designing internal controls over fi nancial reporting 
for the Fund as defi ned under Multilateral Instrument 52-109 issued by the Canadian Securities 
Administrators. Management has designed such internal controls over fi nancial reporting, or 
caused them to be designed under their supervision, to provide reasonable assurance regarding 
the reliability of fi nancial reporting and the preparation of the fi nancial statements for external 
purposes in accordance with GAAP. 

There have been no changes in the Fund’s internal controls over fi nancial reporting that occurred 
during the fourth quarter of 2006, the most recent interim period, that have materially affected, 
or are reasonably likely to materially affect, the Fund’s internal controls over fi nancial reporting. 

On December 31, 2006, the Fund acquired substantially all of the assets of Hansen Manufacturing 
Corp. Due to the short period of time between the acquisition date and the certifi cation date of 
March 15, 2007, management was unable to complete its review of internal controls over fi nancial 
reporting for the newly acquired division. At year-end, the related disclosure risks were mitigated 
as all assets and liabilities acquired were evaluated and recorded in the Fund’s consolidated 
fi nancial statements as part of the purchase price allocation. The acquisition was effective at 
the close of business on December 31, 2006 and as a result the Fund’s operating results do not 
include results of Hansen’s operations. 

ADDITIONAL INFORMATION

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

INVESTOR RELATIONS

Steve Sommerfeld
#3 – 59 Scurfi eld Blvd, Winnipeg, MB R3Y 1V2
Telephone: 204.489.1855
Email: steve@aggrowth.com

Management’s Discussion and Analysis

32

AUDITORS’ REPORT

To the Unitholders of Ag Growth Income Fund

We have audited the consolidated balance sheets of Ag Growth Income Fund as 
at December 31, 2006 and 2005 and the consolidated statements of earnings, 
unitholders’ equity and cash fl ows for the years ended December 31, 2006 and 
2005. These fi nancial statements are the responsibility of the Fund’s management. 
Our responsibility is to express an opinion on these fi nancial 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 fi nancial statements are free of 
material misstatement. An audit includes examining, on a test basis, evidence 
supporting the amounts and disclosures in the fi nancial statements. An audit 
also includes assessing the accounting principles used and signifi cant estimates 
made by management, as well as evaluating the overall fi nancial statement 
presentation.

In our opinion, these consolidated fi nancial statements present fairly, in all 
material respects, the fi nancial position of the Fund as at December 31, 2006 
and 2005 and the results of its operations and its cash fl ows for the years ended 
December 31, 2006 and 2005 in accordance with Canadian generally accepted 
accounting principles.

Winnipeg, Canada,

March 1, 2007 

      Chartered Accountants

33

CONSOLIDATED BALANCE SHEETS

As at December 31

ASSETS [notes 8 and 9]
Current
Cash and cash equivalents
Cash held in trust [note 3]
Accounts receivable
Inventory [note 4]
Prepaid expenses and other assets
Future tax assets [note 11]
Total current assets
Property, plant and equipment [note 5]
Goodwill
Intangible assets [note 6]
Deferred fi nancing costs [note 7]
Future tax assets [note 11]
Deferred foreign exchange loss

LIABILITIES AND UNITHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities
Customer deposits
Income taxes payable
Distributions payable
Long-term incentive plan [note 13]
Deferred foreign exchange gain
Acquisition, transaction and fi nancing costs payable
Current portion of long-term debt [note 9]
Total current liabilities
Long-term debt [note 9]
Total liabilities
Commitments [notes 14 and 16]
Unitholders’ equity

See accompanying notes
On behalf of the Board of Trustees:

2006
$

2005
$

8,706,130
582,638
10,882,840
22,641,383
1,185,200
182,200
44,180,391
14,226,481
42,262,026
69,245,641
318,012
—
—
170,232,551

7,236,269
5,661,420
523,855
1,571,500
854,000
20,116
1,825,121
15,334
17,707,615
41,560,311
59,267,926

8,148,634
—
7,437,285
20,113,333
1,271,523
221,000
37,191,775
11,913,442
35,970,059
58,923,988
149,188
191,000
13,360
144,352,812

4,962,948
3,103,402
553,074
3,980,510
933,001
—
—
23,502
13,556,437
20,017,591
33,574,028

110,964,625
170,232,551

110,778,784
144,352,812

Consolidated Financial Statements

Bill Lambert 
Trustee 

John R. Brodie, FCA
Trustee 

34

 
 
CONSOLIDATED STATEMENTS OF EARNINGS

Year ended December 31 

Sales
Cost of goods sold
Gross margin
Expenses

Selling, general and administration
Professional fees
Long-term incentive plan
Research and development
Capital taxes
Gain on foreign exchange
Other income

Earnings before the following
Interest expense

Short-term debt
Long-term debt

Earnings before amortization and income taxes
Amortization of property, plant and equipment
Amortization of deferred fi nancing costs
Amortization of intangible assets

Earnings before provision for income taxes
Provision for income taxes [note 11]

Current
Future

Net earnings for the year

2006
$

81,525,437
46,207,537
35,317,900

12,587,274
461,026
854,000
1,160,200
297,189
(3,973,443)
(243,099)
11,143,147
24,174,753

99,845
917,671
1,017,516
23,157,237
2,109,643
149,188
1,576,060
3,834,891
19,322,346

48,705
229,800
278,505
19,043,841

2005
$

84,033,945
45,132,586
38,901,359

13,235,750
530,532
933,001
622,695
328,716
(1,355,991)
(436,638)
13,858,065
25,043,294

121,364
913,789
1,035,153
24,008,141
1,928,907
439,371
1,672,670
4,040,948
19,967,193

79,123
236,000
315,123
19,652,070

Basic and diluted net earnings per unit

$1.70

$1.82

Basic and diluted weighted average number of units 

outstanding [note 10]

See accompanying notes 

11,225,000

10,801,123

35

CONSOLIDATED STATEMENT OF UNITHOLDERS’ EQUITY

Year ended December 31, 2006

Accumulated 
earnings 
$

Accumulated 
distributions 
$

Total 
$

28,375,479
19,043,841
—
47,419,320

(28,026,889)

(18,858,000)
(46,884,889)

110,778,784
— 19,043,841
(18,858,000)
110,964,625

Accumulated 
earnings 
$

Accumulated 
distributions 
$

Total 
$

8,723,409
—
—
19,652,070
—
28,375,479

(9,109,017)
—
—
—
(18,917,872)
(28,026,889)

89,568,640
21,532,500
(1,056,554)
19,652,070
(18,917,872)
110,778,784

Unitholders’ 
capital 
$
[note 10]

110,430,194
—
—
110,430,194

Unitholders’ 
capital 
$
[note 10]

89,954,248
21,532,500
(1,056,554)
—
—
110,430,194

Balance, beginning of year
Net earnings for the year
Distributions declared [note 12]
Balance, end of year

Year ended December 31, 2005

Balance, beginning of year
Issuance of units [note 3]
Issuance costs [note 3]
Net earnings for the year
Distributions declared [note 12]
Balance, end of year

See accompanying notes 

Consolidated Financial Statements

36

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31

OPERATING ACTIVITIES
Net earnings for the year
Add charges (deduct credits) to operations
not requiring a current cash payment

Amortization
Future income taxes
Deferred foreign exchange gain
Loss (gain) on sale of property, plant and equipment

Net change in non-cash working capital 

balances related to operations [note 17]

Cash provided by operating activities

INVESTING ACTIVITIES
Acquisition of property, plant and equipment
Acquisition of assets of Hansen Manufacturing Corp. [note 3]
Acquisition of assets of the Edwards Group of Companies [note 3]
Proceeds from sale of property, plant and equipment
Pre-existing Fund structure tax credits received
Cash used in investing activities

FINANCING ACTIVITIES
Repayment of long-term debt
Distributions paid
Issuance of units, net of expenses
Issuance of long-term debt
Increase in deferred fi nancing costs on long-term debt
Transfer to cash held in trust
Cash provided by (used in) fi nancing activities

Net increase in cash and cash equivalents during the year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

Supplemental cash fl ow information
Interest paid
Income taxes paid (recovered)
See accompanying notes 

2006
$

2005
$

19,043,841

19,652,070

3,834,891
229,800
33,476
(37,546)
23,104,462

4,040,948
236,000
34,540
12,120
23,975,678

2,132,240
25,236,702

(2,698,483)
21,277,195

(2,767,084)
(21,655,971)

58,945
—
(24,364,110)

(1,300,295)
—
— (21,685,743)
61,000
240,000
(22,685,038)

(23,498)
(21,267,010)
—
21,558,050
 —
(582,638)
(315,096)

557,496
8,148,634
8,706,130

(60,995)
(17,726,403)
20,475,946
—
(134,000)
—
2,554,548

1,146,705
7,001,929
8,148,634

1,028,367
49,600

1,032,655
(339,970)

37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year ended December 31, 2006

1. DESCRIPTION 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. 

On October 31, 2006, the Federal Government of Canada announced proposed changes to the 
taxation of income trusts and other fl ow through entities. If enacted, the legislation would cause 
the Fund to be taxed on certain distributions at a special rate. The Fund is currently evaluating the 
impacts of the proposed legislation. If enacted as proposed, certain of the Fund’s distributions 
will be subject to tax beginning in 2011. 

The anticipated accounting impact of the proposed taxation changes, when substantively 
enacted, would be to trigger the recognition of the future income tax assets and liabilities with 
a corresponding impact on future tax expense. The amount would be based on temporary 
differences expected to reverse after the date that the taxation changes take effect and would be 
measured using income tax rates substantively enacted at the balance sheet date. 

2. SIGNIFICANT ACCOUNTING POLICIES 

The signifi cant accounting policies are summarized below: 

Principles of Consolidation 

The consolidated fi nancial 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 Industries Inc. [“Ag Growth”], 
Westfi eld Distributing Ltd., Westfi eld Distributing (North Dakota) Inc. and Hansen Manufacturing 
Corp. 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 fi nished 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 fi rst-in, fi rst-out basis. 

Notes to Consolidated Financial Statements

38

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 
Furniture and fi xtures 
Automotive equipment 
Computer equipment 
Manufacturing equipment 

4% – 5% 
20% 
30% 
30% 
30% 

declining balance
declining balance
declining balance
declining balance
declining balance 

Leasehold improvements are amortized over the term of the lease. 

Goodwill 

Goodwill represents the amounts paid to acquire Ag Growth, the Edwards Group [note 3] and 
Hansen [note 3] in excess of the estimated fair value of the net identifi able 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 indefi nite life, 
distribution networks, which are being amortized over 10 and 25 years on a straight-line basis, 
and patents acquired from Hansen, which will be amortized over their remaining lives. Indefi nite 
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 indefi nite 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 fi nite life intangible assets is recognized 
when an event or change in circumstances causes the asset’s carrying value to exceed the total 
undiscounted cash fl ows 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 fi nancing costs are amortized on a straight-line basis over thirty-two months. 

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. 

39

 
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 benefi ts are recognized when realization is considered more likely than not to be realized. 

On October 31, 2006, the Federal Government of Canada announced proposed changes to the 
taxation of income trusts and other fl ow through entities. If enacted, the legislation would cause 
the Fund to be taxed on certain distributions at a special rate. The Fund is currently evaluating the 
impacts of the proposed legislation. If enacted as proposed, certain of the Fund’s distributions 
will be subject to tax beginning in 2011. 

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 balance 
sheet dates. 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 refl ected 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 fi xed 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. 
Customer deposits are recorded as a current liability when cash is received from the customer 
and recognized as revenue at the time product is shipped as noted above. 

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 classifi ed as either capital or operating. Leases which transfer substantially all the 
benefi ts and risks of ownership of the property to the Fund are accounted for as capital leases. 
Capital lease obligations refl ect 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. 

Notes to Consolidated Financial Statements

40

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. The cash award is paid directly to eligible 
participants by the Fund. 

Derivative Financial Instruments 

Derivative fi nancial instruments are utilized by the Fund to assist in the management of its 
foreign currency and interest rate exposures. The Fund’s policy is not to utilize derivative fi nancial 
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 specifi c 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 fl ows of hedged items. 

The Fund purchases foreign exchange contracts to hedge anticipated sales to customers in the 
U.S. and the collection of the related accounts receivable. Foreign exchange translation gains 
and losses on foreign currency denominated derivative fi nancial instruments used to hedge 
anticipated U.S. dollar denominated sales are recognized in foreign exchange gain/loss 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 
non-current, assets or liabilities on the consolidated balance sheet and recognized in earnings in 
the period in which the underlying hedged transaction is recognized. In the event a designated 
hedged item is sold, extinguished or matures prior to the termination of the related derivative 
instrument, any realized or unrealized gain or loss on such derivative instrument is recognized 
in earnings. 

41

 
The Fund uses foreign currency swap agreements to manage its cash positions. The Fund’s 
foreign currency swap agreement does not qualify for hedge accounting. The Fund also enters 
into interest rate swaps in order to reduce the impact of fl uctuating 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 ended 
December 31, 2005, the terms of the interest rate swap were changed and it no longer qualifi es 
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 other income, respectively. 

Employee Benefi t Plans 

The Fund contributes to a group retirement savings plan subject to maximum limits per employee.  
The Fund accounts for such defi ned contributions as an expense in the period in which the 
contributions are made. The expense recorded in 2006 was $419,444 [2005 – $346,730]. 

Use of Estimates 

The preparation of fi nancial 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. 

3. ISSUANCE OF FUND UNITS AND ACQUISITIONS 

[a] Acquisition of Hansen Manufacturing Corp. 

Effective December 31, 2006, the Fund acquired substantially all of the assets of Hansen 
Manufacturing Corp. [“Hansen”], a manufacturer of enclosed belt conveyors, for cash 
consideration of $23,163,080. In conjunction with the acquisition, the Fund incurred an additional 
term loan of U.S. $18,500,000 and incurred transaction costs of $576,170.

The acquisition has been accounted for by the purchase method with the results of 
Hansen’s operations included in the Fund’s earnings from the date of acquisition [the 
consolidated statement of earnings does not include results of Hansen’s operations for the 
year ended December 31, 2006 as the acquisition was effective at the close of business 
on December 31, 2006]. The assets and liabilities of Hansen were initially recorded in the 
consolidated fi nancial statements at their estimated fair values, as noted in the following chart.

Notes to Consolidated Financial Statements

42

Net assets acquired

Accounts receivable
Inventory
Prepaid expenses and other assets
Property, plant and equipment
Intangible assets
Brand name
Distribution network
Patent

Goodwill
Accounts payable and accrued liabilities

Consideration
Cash
Acquisition and transaction costs payable

$

3,168,215
2,022,200
111,888
1,497,411

4,071,558
6,786,707
1,039,448
6,291,967
(1,826,314)
23,163,080 

21,655,971
1,507,109
23,163,080

As at December 31, 2006, the Fund had cash held in trust in the amount of $582,638 relating to 
the acquisition of Hansen. 

The asset purchase agreement provides for adjustments to the purchase price for working capital 
adjustments to be fi nalized between the vendor and the Fund, thus the purchase price allocation 
is subject to change. 

[b] Acquisition of the Edwards Group of Companies 

Effective April 8, 2005, the Fund acquired substantially all of the assets of The Edwards Group 
of Companies [“the Edwards Group”], a 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 fi nancial statements at their estimated fair values, as 
noted in the following chart.

43

 
Net assets acquired

Accounts receivable
Inventory
Prepaid expenses and other assets
Property, plant and equipment
Intangible assets
Brand name
Distribution network
Patent

Goodwill
Accounts payable and accrued liabilities

4. INVENTORY

Raw materials
Finished goods

$

1,348,830
3,672,603
174,246
6,992,000

4,363,000
2,839,000
250,000
3,406,168
(1,360,104)
21,685,743 

2005
$

6,019,628
14,093,705
20,113,333

2006
$

7,823,469
14,817,914
22,641,383

Notes to Consolidated Financial Statements

44

5. PROPERTY, PLANT AND EQUIPMENT 

2006

2005

Accumulated Net book
amortization
$

value
$

Cost
$

Cost
$

Accumulated Net book
amortization
$

value
$ 

861,315
5,408,773

—
521,148

861,315
4,887,625

861,315
5,177,931

—
287,744

861,315
4,890,187

Land
Buildings
Leasehold

improvements

16,167

1,855

14,312

7,000

7,000

—

Furniture and 
fi xtures
Automotive 
equipment

Computer 

equipment
Manufacturing 
equipment

187,575

49,231

138,344

121,047

26,282

94,765

1,921,817

807,165

1,114,652

1,438,283

480,185

958,098

793,973

300,909

493,064

565,714

159,442

406,272

9,512,456
18,702,076

2,795,287
4,475,595

6,717,169
14,226,481

6,127,774
14,299,064

1,424,969
4,702,805
2,385,622 11,913,442

Included in the cost above is approximately $1,882,000 [2005 – $Nil] of manufacturing equipment 
which has not been amortized as this asset was not placed in use as of year end.

6. INTANGIBLE ASSETS 

2006

2005

Accumulated Net book
amortization
$

value
$

Cost
$

Cost
$

Accumulated Net book
amortization
$

value
$ 

Distribution
network
Brand name
Patent

44,625,707
27,434,558
1,289,448
73,349,713

3,854,072

40,771,635
— 27,434,558
1,039,448
69,245,641

250,000
4,104,072

37,839,000
23,363,000
250,000
61,452,000

2,340,512 35,498,488
— 23,363,000
62,500
2,528,012 58,923,988

187,500

45

 
7. DEFERRED FINANCING COSTS 

2006

2005

Accumulated Net book
amortization
$

value
$

Cost
$

Cost
$

Accumulated Net book
amortization
$

value
$ 

1,113,023

795,011

318,012

795,011

645,823

149,188

During the year, the Fund incurred $318,012 of deferred fi nancing costs relating to the acquisition 
of Hansen. 

8. 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 5.76% 
[2005 – 4.81%]. At December 31, 2006 and 2005, there was no amount outstanding under this 
facility. Collateral for the operating facility includes a general security agreement over all assets, 
fi rst position collateral mortgages on land and buildings, and assignments of rents and leases 
and security agreements for patents and trademarks. 

In conjunction with the acquisition of Hansen, the Fund added an operating facility of 
U.S. $1.0 million. The facility bears interest at a rate of prime to prime plus 1% per annum based 
on performance calculations. The Hansen acquisition was effective at the close of business on 
December 31, 2006 and accordingly this facility was not utilized in 2006. 

Notes to Consolidated Financial Statements

46

9. LONG-TERM DEBT

Term loan, interest payable monthly at prime to prime plus 
1% per annum based on performance calculations. As 
described in note 14, the Fund has entered into a swap 
contract that effectively fi xes 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, 2006 would have 
been 5.76% [2005 – 4.81%] and after consideration of the 
effect of the interest rate swap was 4.68% [2005 – 4.48%]

Term loan of U.S. $18,500,000, interest payable monthly at 
prime to prime plus 1% per annum based on performance 
calculations. On January 24, 2007 the Fund entered into 
an interest rate swap contract that effectively fi xes the 
Fund’s interest rate at 5.43%, plus 1.0%, 1.5%, or 2.0% 
per annum based on performance calculations. The term 
loan was effective at the close of business on December 
31, 2006 and as a result no interest expense was incurred 
in the year ended December 31, 2006

GMAC loans, 0% maturing in 2007 and 2008, with monthly 
payments of $1,958. Vehicles fi nanced are pledged as 
collateral

Less current portion 

2006
$

2005
$

20,000,000

20,000,000

21,558,050

—

17,595
41,575,645
15,334
41,560,311

41,093
20,041,093
23,502
20,017,591 

Under the agreement for the term loans, the Fund is required to maintain certain fi nancial 
covenants. As at December 31, 2006 and 2005, the Fund was in compliance with the applicable 
fi nancial covenant terms. Collateral for the term loans and operating facility [note 8] includes 
a general security agreement over all assets, fi rst position collateral mortgages on land and 
buildings, assignments of rents and leases and security agreements for patents and trademarks. 

The term loans mature August 31, 2007 and are 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 August 31, 2007 
maturity date, all amounts outstanding under the facilities become repayable in four equal 
quarterly instalments of principal, commencing on November 30, 2008. 

47

 
Principal repayments due within the next three fi scal years, if the term loans are not renewed and 
are repayable commencing November 30, 2008, are as follows:

2007
2008
2009

10. UNITHOLDERS’ CAPITAL 

Unitholders’ capital is comprised of the following: 

Fund
Trust
units
$

68,883,378
20,475,946
111,090
89,470,414
19,598,930
109,069,344

Balance, December 31, 2004
Issuance of units, net of costs
Exchange of units
Balance, December 31, 2005
Exchange of units
Balance, December 31, 2006

Balance, December 31, 2004
Issuance of units [note 3]
Exchange of units
Balance, December 31, 2005
Exchange of units
Balance, December 31, 2006

$ 

15,334
10,391,773
31,168,538
41,575,645

Total
Unitholders’
capital
$ 

Class B

Class C

Exchangeable Exchangeable

units of
AGHLP
$

units of
AGHLP
$

1,810,870
—
(111,090)
1,699,780
(338,930)
1,360,850

Fund
Trust
units
#

7,522,913
1,595,000
11,109
9,129,022
1,959,893
11,088,915

19,260,000
—
—
19,260,000
(19,260,000)

89,954,248
20,475,946
—
110,430,194
—
— 110,430,194 

Class B

Class C

Exchangeable Exchangeable

units of
AGHLP
#

181,087
—
(11,109)
169,978
(33,893)
136,085

units of
AGHLP
#

1,926,000
—
—
1,926,000
(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 benefi cial 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. 

Notes to Consolidated Financial Statements

48

 
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, 2006, there were 136,085 Special Voting Units outstanding 
[December 31, 2005 – 2,095,978 units], which were attached to the outstanding Class B 
Exchangeable LP Units of AGHLP and the Class C Exchangeable Subordinated LP Units of AGHLP. 

AGHLP exchanged all Class C units to Class B units on a one-for-one basis upon the occurrence of 
the subordination end date in 2006. The Class B units are exchangeable for Fund Trust units at the 
option of the holder on a one-for-one basis at any time. 

11. 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: 

2006

2005

$

%

$

% 

Earnings before income taxes
Temporary differences and non-tax 

deductible expenses

Earnings subject to tax in the hands of 

unitholders/limited partners

Income of subsidiary companies subject to tax

19,322,346

19,967,193

260,372

(446,488)

(18,858,000)
724,718

(18,917,872)
602,833 

Provision for income taxes
Large corporation tax
Income tax provision

278,505
—
278,505

38
—
38

236,000
79,123
315,123

39
13
52

Signifi cant components of the Fund’s future tax assets are shown below: 

Future tax assets
Financing costs
Non-capital losses

2006
$

31,200
151,000
182,200

2005
$

116,500
295,500
412,000

49

 
12. DISTRIBUTIONS TO UNITHOLDERS 

For the year ended December 31, 2006, the Fund made distributions of $18,858,000 which 
equated to $1.68 weighted average per unit [2005 – $18,917,872 or $1.75 weighted average 
per unit]. 

13. 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 signifi cant 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 defi ned in the LTIP 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 LTIP at December 31, 2006 of $854,000 
[2005 – $933,001]. 

14. FINANCIAL INSTRUMENTS 

The Fund has the following fi nancial instruments: cash and cash equivalents, cash held in trust, 
accounts receivable, accounts payable and accrued liabilities, customer deposits, distributions 
payable, long-term incentive plan, acquisition, transaction and fi nancing costs payable, 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 signifi cant credit risks 
arising from these fi nancial 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, 2006, the Fund had outstanding forward foreign exchange contracts as follows: 

Settlement dates

Face value
$U.S.

Average rate
$Cdn 

March 2007 to December 2007

8,625,000

1.1943 

Notes to Consolidated Financial Statements

50

At December 31, 2006, the Fund had outstanding a series of foreign exchange call and put options 
as follows: 

Settlement dates

March 2007 to December 2007
March 2007 to December 2007
March 2007 to December 2007
January 2008 to December 2008

Interest Rate Exposures 

Face value
$U.S.

4,625,000
4,625,000
9,250,000
7,800,000

Call
$Cdn

1.1363
1.1300
1.1363
1.0700

Put
$Cdn 

1.2985
1.1975
1.2410
1.2115

The Fund is subject to risks associated with fl uctuating 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 fl oating interest rate of prime to prime plus 1.00% per annum for an effective fi xed 
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, 2006 and 2005 was $20,000,000. 

Fair Value 

At December 31, 2006, the carrying value of the Fund’s fi nancial instruments approximates their 
fair value with the exception of derivative fi nancial instruments. The interest rate swap is marked 
to market. The unrealized loss on foreign exchange contracts was $276,679 at December 31, 2006 
[2005 – unrealized gain of $3,384,312]. Upon maturity of the foreign exchange contracts, any 
gain/loss would be recognized in realized foreign exchange gain/loss in the consolidated 
statement of earnings. 

15. 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:

Canada
United States
International

Revenues

2006
$

24,240,155
54,483,272
2,802,010
81,525,437

2005
$

25,369,699
55,166,890
3,497,356
84,033,945

Property, plant and 
equipment, goodwill and 
intangible assets as at

2006
$

2005
$

105,819,068
19,915,080
—
125,734,148

106,577,247
230,242
—
106,807,489

51

 
16. COMMITMENTS 

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

2007
2008
2009 
2010
2011 and forward

$

803,616
656,370
527,448
145,424
20,694
2,153,552

As at December 31, 2006, the Fund has commitments relating to the purchase of equipment 
outstanding in the amount of $385,000. 

17. NET CHANGE IN NON-CASH WORKING CAPITAL

BALANCES RELATED TO OPERATIONS

Accounts receivable
Inventory
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Long-term incentive plan
Income taxes payable
Customer deposits

18. COMPARATIVE FIGURES 

2006
$

(408,816)
(505,850)
329,687
267,421
(79,001)
(29,219)
2,558,018
2,132,240

2005
$

(1,441,926)
(967,153)
(270,328)
(442,001)
667,213
477,481
(721,769)
(2,698,483)

Certain comparative fi gures have been reclassifi ed to conform to the current year’s presentation.

Notes to Consolidated Financial Statements

52

Offi cers:

Rob Stenson, Chief Executive Offi cer and Trustee

Gary Anderson, President, Chief Operating Offi cer and Trustee

Steve Sommerfeld, Chief Financial Offi cer

Dan Donner, Vice President Sales and Marketing

Paul Franzmann, Vice President Corporate Development

Trustees (left to right):

Gary Anderson

Bill Maslechko

Bill Lambert

David White

Rob Stenson (seated)

John R. Brodie (photo unavailable)

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