Big Rock Income Trust

Financial Analysis Report

Big Rock Income Trust

Table of Contents

Executive Summary and Recommendation 2

Overview of Company 2

Management 2

Strategy 3

Income Trust 3

Competitors 3

Government 3

Operations and Performance 4

Activity (Turnover) 4

Financing 4

Liquidity / Solvency / Warning 5

Investment Recommendation 5

Financial Statements and Ratios 1

Financial Analysis Report

Executive Summary and Recommendation

Big Rock is a specialty brewing company that concentrates its efforts and resources on its core, high margin, and specialty brands. Continued focus on products that target the super-premium segment of the markets continues to provide strong margins. Government policy changes create a barrier to entry for other potential firms. Reduced interest costs by changing banks and the sale of Kamloops' Brewery will continue to improve Big Rock's operating expenses. AMI recommends continued investment in Big Rock Brewery Income Trust.

Big Rock is positioned well to expand in the future or would be a viable business acquisition for a multi-national brewing company.

Overview of Company

Big Rock Brewery was founded in 1984 by Chairman Ed McNally. Big Rock commenced operations in 1985. The first three beers Big Rock produced were Traditional Ale, Bitter and Porter. All were full flavored natural unpasteurized beers. The original Brewery was an existing building on Barlow Trail in SE Calgary. The new brewery was completed and opened in 1996. The Brewery as of 2005 celebrated 20 years of distribution and production in quality craft beers.

Management

Ed McNally, Chairman of the Board, is a native Albertan, a former lawyer, rancher and farmer, foresaw that Canada needed a brewery that would provide consumers with "real" beer. To Ed, a "real" beer had to be brewed according to European tradition, containing no additives, no preservatives or no pasteurization.

His formula for success is a combination of excellent people, superior quality and world-class beer.

Ed has been the recipient of numerous awards of distinction including; 2000 Alberta Venture's Marker of the Year;1998 an Honorary Doctorate of Law degree 1995 National Entrepreneur of the Year, 1992 Pinnacle Entrepreneurship Award, and the Distinguished Business Leader Award.

Management will continue to focus on effective cost controls as a priority to ensure that there is a direct correlation between spending and achieving results in sales and earnings.

The recent sale of the Kamloops Brewery, with plans to fully utilize the production capabilities in Calgary's operation are a strong example of effective cost controls.

Strategy

The company is committed to four business fundamentals:

* consistently brewing distinctive, premium quality beers;

* profitable growth in business operations;

* constantly providing superior, personalized customer service;

* creating and sustaining strong community relationships.

Income Trust

Big Rock was reorganized into an Income Trust fund on January 10, 2003. Income trust provides overall tax savings to shareholders. Unit holders receive an attractive monthly yield as compared to holding a Big Rock share which was relatively illiquid and did not pay monthly/quarterly dividends.

Big Rock has low ongoing maintenance and capital cash requirements relative to its ability to generate stable cash flow. Big Rock believes that there are growth opportunities in the specialty beer brewing industry. By reorganizing into an income trust, Big Rock believes it will have improved access to equity capital which will enable Big Rock to pursue growth strategies and allow investors to more directly participate in the cash flow derived from its operations.

Competitors

There are numerous competitors in the brewery business, 25 in Canada along with many more around the world. This report focuses on two Canadian competitors, Sleeman Breweries Ltd. and Brick Brewing Co. Ltd. Like Big Rock Brewery, they are listed on the Toronto stock exchange. Brick Brewing Co. focuses on specialty beers; Sleeman Breweries is 6 times larger from a revenue perspective and targets value priced market segments and specialty brands.

Consolidation through mergers and acquisitions continues within the industry, resulting with increased concentration of market power in the hands of multi-national brewing companies.

Big Rock signed reciprocal sales representation agreements with Brick Brewing Co. Ltd., of Waterloo, Ontario where by Brick through its sales agency was appointed exclusive sales representative for selected Big Rock brands in Ontario and Big Rock has exclusive representation for selected Brick brands in Alberta and BC.

Government

The government has changed their policy regarding the "small brewers' tax benefit". This change in policy has increased the threshold from 200,000 to 400,000 hectoliters, which allows the company to aggressively pursuer its growth strategy.

The government could introduce changes to the tax laws regarding income trust funds making them less attractive in the future.

Operations and Performance

Since inception, Bid Rock's annual capacity has expanded from original 10,000 hl to its current capacity of 450,000 hl. Big Rock employs approximately 140 people. Distribution