AGF Management Limited Reports First Quarter Financial Results



    Net income from continuing operations up 64% and historical records set
    for mutual fund net sales

    TORONTO, March 28 /CNW/ - AGF Management Limited (AGF) today announced
strong financial results for the first quarter ended February 28, 2007 and
historical highs for sales of mutual funds, reporting $2.2 billion of gross
sales and $1.0 billion of net sales during the first quarter of fiscal 2007.
Sales in March have also been strong with AGF recording $340.5 million in net
sales as of the close of business on March 26, 2007.
    "We are gratified by the growing support of our clients," said Blake
Goldring, chairman and chief executive officer, AGF. "We will continue to
listen to our clients and work hard to earn their business as we strive to
build on our success."
    As a result of these solid business fundamentals and strong financial
results, on January 31, 2007, AGF announced an increase in the quarterly
dividend rate from 18 cents per share to 20 cents.
    In the first quarter of fiscal 2007, consolidated revenue from continuing
operations rose to $177.0 million compared with $149.5 million in the first
quarter of the prior year. Consolidated revenue in the prior year included a
$9.9 million securitization gain ($0.07 per share after tax) from the sale of
RSP loans by our Trust Company Operations segment. Consolidated net income
from continuing operations for the three months ended February 28, 2007, was
$38.1 million or $0.42 per share diluted compared with $23.2 million or $0.26
per share diluted for the same period last year. Earnings before interest,
taxes, depreciation and amortization (EBITDA) from continuing operations were
$80.4 million, compared with $67.3 million for the quarter ended February 28,
2006.
    Total assets under management increased by 40.1 per cent, rising to
$51.7 billion at the end of the first quarter of 2007 from $36.9 billion as at
February 28, 2006. Over the same period, private investment management ('PIM')
and institutional assets grew 71.1 per cent and mutual fund assets rose 22.5
per cent. PIM and institutional assets are up due to investment performance,
new mandates and the acquisition of Highstreet Partners Limited. The
Highstreet acquisition, which closed in December 1, 2006 added $4.8 billion in
AUM. The Trust Company Operations segment continued to grow significantly with
total assets rising 64.7 per cent.

    About AGF Management Limited

    AGF Management Limited is one of Canada's premier investment management
companies with offices across Canada and subsidiaries around the world. 2007
marks AGF's 50th anniversary of providing Canadians with innovative investment
solutions across the wealth continuum. AGF's products and services include a
diversified family of more than 50 mutual funds, the evolutionary AGF Elements
portfolios, the Harmony asset management program, AGF Private Investment
Management, Institutional Account Services and AGF Trust GICs, loans and
mortgages. With approximately $52 billion in total assets under management,
AGF serves more than one million investors. AGF trades on the Toronto Stock
Exchange under the symbol "AGF.B".



    
                             AGF Management Ltd.
                         Consolidated Balance Sheets

    -------------------------------------------------------------------------
                                                    February 28, November 30,
    (in thousands of dollars)                              2007         2006
    (unaudited)                                                      (note 3)
    -------------------------------------------------------------------------

    Assets
      Current Assets
        Cash and cash equivalents                    $  342,824   $  404,115
        Short-term investments                           15,968       10,723
        Current portion of retained interest from
         securitization (note 2)                          4,639        3,767
        Accounts receivable and prepaid expenses         70,857       91,328
        Income taxes receivable                               -        4,703
        Real estate secured and investment loans
         due within one year (note 6)                   404,503      309,329
        Current assets related to assets held for
         sale (note 3)                                    3,824        4,527
    -------------------------------------------------------------------------
                                                        842,615      828,492

      Real estate secured and investment loans
       (note 6)                                       2,348,829    1,997,294
      Retained interest from securitization (note 2)     22,957       23,893
      Investment in associated company                  109,810      107,735
      Other investments                                   5,223        5,524
      Management contracts                              478,259      478,259
      Customer contracts, relationships and
       investment advisory contracts, net of
       accumulated amortization                          58,104       59,583
      Deferred selling commissions, net of
       accumulated amortization                         285,649      268,243
      Property, equipment and other intangible assets,
       net of accumulated amortization                   19,155       19,848
      Goodwill (note 4)                                 204,289      126,399
      Other assets                                          451          900
      Long-term assets related to assets held for
       sale (note 3)                                      3,335        3,598
    -------------------------------------------------------------------------
                                                     $4,378,676   $3,919,768
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
      Current Liabilities
        Accounts payable and accrued liabilities     $  141,929   $  160,259
        Income taxes payable                              2,677            -
        Long-term debt due within one year (note 7)     180,900       56,000
        Deposits due within one year (note 6)         1,217,382    1,022,774
        Current liabilities related to assets held
         for sale (note 3)                                3,329        4,286
    -------------------------------------------------------------------------
                                                      1,546,217    1,243,319

      Deposits (note 6)                               1,561,559    1,465,490
      Long-term debt (note 7)                            25,900            -
      Future income taxes                               227,928      230,305
      Other long-term liabilities                           396          127
      Long-term liabilities related to assets held
       for sale (note 3)                                    605          756
    -------------------------------------------------------------------------
                                                      3,362,605    2,939,997
    -------------------------------------------------------------------------

      Non-controlling interest                              323            -

      Shareholders' Equity
        Capital stock (note 8)                          412,505      403,566
        Contributed surplus (note 8)                     11,621       10,470
        Retained earnings                               585,773      565,576
        Accumulated other comprehensive income
         (note 1)                                         5,849            -
        Foreign currency translation adjustment               -          159
    -------------------------------------------------------------------------
                                                      1,015,748      979,771
    -------------------------------------------------------------------------
                                                     $4,378,676   $3,919,768
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes to consolidated financial statements.)



                             AGF Management Ltd.
                      Consolidated Statements of Income

    -------------------------------------------------------------------------
                                              Three months ended February 28,
                                              -------------------------------
    (in thousands of dollars)                              2007         2006
    (unaudited)                                                      (note 3)
    -------------------------------------------------------------------------

    Revenue
      Net management and advisory fees               $  124,545   $  102,106
      Administration fees and other revenue              28,061       18,969
      Deferred sales charges                              4,850        7,309
      Gain on sale of RSP loan securitization and
       related income                                       661        9,850
      Investment income                                   1,422          787
    -------------------------------------------------------------------------
                                                        159,539      139,021
    -------------------------------------------------------------------------
        Trust company interest income
         (notes 1 and 10)                                47,215       25,626
        Trust company interest expense
         (notes 1 and 10)                               (29,724)     (15,111)
    -------------------------------------------------------------------------
      Trust company net interest income                  17,491       10,515
    -------------------------------------------------------------------------
    Total Revenue                                       177,030      149,536
    -------------------------------------------------------------------------

    Expenses
      Selling, general and administrative                51,496       43,826
      Trailing commissions                               38,434       28,939
      Investment advisory fees                            4,041        6,930
      Amortization of deferred selling commissions       26,515       27,150
      Amortization of customer contracts, relationships
       and investment advisory contracts                  1,479        3,821
      Amortization of property, equipment
       and other intangible assets                        2,305        2,393
      Interest expense                                    1,047          516
      Provision for Trust Company loan losses             2,695        2,487
    -------------------------------------------------------------------------
                                                        128,012      116,062
    -------------------------------------------------------------------------

    Income from continuing operations before income
     taxes and non-controlling interest                  49,018       33,474

    Income tax expense (reduction)
      Current                                            13,664       13,075
      Future                                             (2,928)      (2,753)
    -------------------------------------------------------------------------
                                                         10,736       10,322
    -------------------------------------------------------------------------

    Non-controlling interest (note 4)                       220            -

    -------------------------------------------------------------------------
    Net income from continuing operations for the
     period                                              38,062       23,152
    -------------------------------------------------------------------------
    Loss on dissolution of Limited Partnerships,
     net of tax (note 5)                                 (2,128)           -
    Net earnings from operations held for sale,
     net of tax (note 3)                                    382          934
    -------------------------------------------------------------------------
    Net income for the period                        $   36,316   $   24,086
    -------------------------------------------------------------------------

    Earnings Per Share (note 8)
      Basic from continuing operations               $     0.43   $     0.26
      Diluted from continuing operations             $     0.42   $     0.26
      Basic                                          $     0.41   $     0.27
      Diluted                                        $     0.40   $     0.27
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes to consolidated financial statements.)



                             AGF Management Ltd.
                 Consolidated Statements of Retained Earnings

    -------------------------------------------------------------------------
                                              Three months ended February 28,
                                              -------------------------------
    (in thousands of dollars)                              2007         2006
    (unaudited)                                                      (note 3)
    -------------------------------------------------------------------------

    Retained earnings, beginning of period           $  565,576   $  527,197
    Transitional adjustment on adoption of new
     accounting policies (note 1)                           (25)           -
    -------------------------------------------------------------------------
    Balance at beginning of period, as restated         565,551      527,197

    Net income for the period                            36,316       24,086
    -------------------------------------------------------------------------
                                                        601,867      551,283

    Deduct:
      Dividends on AGF Class A Voting Common Shares
       and AGF Class B Non-Voting Shares                 16,094       13,371

      Excess paid over book value of AGF Class B
       Non-Voting Shares purchased for cancellation           -        3,437
    -------------------------------------------------------------------------
                                                         16,094       16,808
    -------------------------------------------------------------------------

    Retained earnings, end of period                 $  585,773   $  534,475
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes to consolidated financial statements.)



                             AGF Management Ltd.
               Consolidated Statements of Comprehensive Income
                 and Accumulated Other Comprehensive Income

    -------------------------------------------------------------------------
    (in thousands of dollars)                                    February 28,
    (unaudited)                                                         2007
                                                                     (note 1)
    -------------------------------------------------------------------------

    Net income                                                    $   36,316
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other comprehensive income, net of tax:
      Foreign currency translation adjustments related to net
       investments in self-sustaining foreign operations(1)            1,598
      Unrealized gain on available-for-sale securities(2)                459
    -------------------------------------------------------------------------

    Total other comprehensive income, net of tax                       2,057
    -------------------------------------------------------------------------

    Comprehensive income                                          $   38,373
    -------------------------------------------------------------------------
    (1) Net of income tax of $0.3 million
    (2) Net of income tax of $0.1 million


    -------------------------------------------------------------------------
    (in thousands of dollars)                                    February 28,
    (unaudited)                                                         2007
                                                                     (note 1)
    -------------------------------------------------------------------------

    Accumulated other comprehensive income, beginning of period   $    3,792
      Total other comprehensive income, net of tax                     2,057
    -------------------------------------------------------------------------

    Accumulated other comprehensive income, end of period         $    5,849
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                             AGF Management Ltd.
                     Consolidated Statements of Cash Flow

    -------------------------------------------------------------------------
                                              Three months ended February 28,
    (in thousands of dollars)                              2007         2006
    (unaudited)                                                      (note 3)
    -------------------------------------------------------------------------
    Operating Activities
      Net income for the period                      $   36,316   $   24,086
      Loss on dissolution of Limited Partnerships,
       net of tax (note 5)                                2,128            -
      Net earnings from operations held for sale
       (note 3)                                            (382)        (934)
    -------------------------------------------------------------------------
      Net income from continuing operations              38,062       23,152

      Items not affecting cash
        Amortization of deferred selling commissions     26,515       27,150
        Amortization of customer contracts,
         relationships and investment advisory
         contracts                                        1,479        3,821
        Amortization of property, equipment and
         other intangible assets                          2,305        2,782
        Future income taxes                              (2,928)      (2,753)
        Gain on sale of RSP loan securitization               -       (9,850)
        Mark-to-market on swap transactions                  28         (116)
        Provision for Trust Company loan losses           2,695        2,487
        Other                                               525        1,714
    -------------------------------------------------------------------------
                                                         68,681       48,387
      Net increase in non-cash balances related to
       operations                                       (12,782)     (34,441)
    -------------------------------------------------------------------------
      Net cash provided by continuing operating
       activities                                        55,899       13,946
      Net cash used in operating activities of
       operations held for sale                            (254)         583
    -------------------------------------------------------------------------
      Net cash provided by operating activities          55,645       14,529
    -------------------------------------------------------------------------

    Financing Activities
      Purchase of Class B Non-Voting Shares for
       cancellation                                           -       (4,323)
      Issuance of Class B Non-Voting Shares               3,267          675
      Dividends                                         (16,094)     (13,371)
      Increase in bank loan                              99,000       28,000
      Decrease in other long-term debt                        -       (1,202)
      Increase in Trust Company deposits                306,930      295,316
    -------------------------------------------------------------------------
      Net cash provided by financing activities         393,103      305,095
    -------------------------------------------------------------------------

    Investing Activities
      Deferred selling commissions paid                 (43,694)     (22,243)
      Proceeds of RSP loan securitization                     -      206,274
      Acquisition of Highstreet Partners Limited,
       net of cash acquired                             (19,873)        (216)
      Payments associated with sale of discontinued
       operation                                              -       (2,029)
      Purchase of property, equipment and other
       intangible assets                                   (776)      (3,650)
      Purchase of investments                            (1,119)        (849)
      Sale of investments                                     -        2,727
      Other investment activities                         1,119            -
      Increase in Trust Company real estate secured
       and investment loans                            (445,370)    (249,299)
    -------------------------------------------------------------------------
      Net cash used in continuing investing activities (509,713)     (69,285)
      Net cash used in investing activities of
       operations held for sale                            (326)         981
    -------------------------------------------------------------------------
      Net cash used in investing activities            (510,039)     (68,304)
    -------------------------------------------------------------------------

    Increase (decrease) in cash and cash equivalents
     during the period                                  (61,291)     251,320

    Balance of cash and cash equivalents, beginning
     of period                                          404,115      159,974
    -------------------------------------------------------------------------

    Balance of cash and cash equivalents, end
     of period                                       $  342,824   $  411,294
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents related to:
      Continuing operations                          $  342,824   $  411,294
      Operations held for sale                              695        1,118
    -------------------------------------------------------------------------
                                                     $  343,519   $  412,412
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
      Cash and cash equivalents                      $   37,225   $   17,020
      Trust Company cash and cash equivalents           305,599      394,274
    -------------------------------------------------------------------------
                                                     $  342,824   $  411,294
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Notes to Consolidated Financial Statements

    For the three months ended February 28, 2007 and February 28, 2006
    (tabular amounts in thousands of dollars, except per share amounts)
    (unaudited)

    These unaudited interim consolidated financial statements of AGF
    Management Limited ('AGF' or the 'Company') have been prepared in
    accordance with Canadian generally accepted accounting principles using
    the same significant accounting policies as AGF's consolidated financial
    statements for the year ended November 30, 2006. These financial
    statements do not contain all the disclosures required by Canadian
    generally accepted accounting principles for annual financial statements
    and should be read in conjunction with the consolidated financial
    statements for the year ended November 30, 2006, as set out in AGF's 2006
    Annual Report. Certain comparative amounts in these financial statements
    have been reclassified to conform to the current year's presentation.

    On December 1, 2006, the Company acquired 79.9% of Highstreet Partners
    Ltd. ('Highstreet'), which wholly owns Highstreet Asset Management Inc.,
    an investment counsel firm based in London, Ontario. Refer to note 4.

    It is the intention of the Company to sell the operations of Investmaster
    Group Limited ('Investmaster'). Accordingly, Investmaster's operations
    for the 2007 and 2006 periods have been reported as operations held for
    sale as outlined in note 3.

    Note 1: Change in Accounting Policy

    (a) Financial Instruments, Hedges and Comprehensive Income

    On December 1, 2006, the Company adopted the CICA Handbook Section 3855
    Financial Instruments - Recognition and Measurement; Section 3865 Hedges;
    and Section 1530 Comprehensive Income. These standards require that all
    financial assets be classified as either available for sale ('AFS'),
    trading, held to maturity ('HTM') or loans and receivables. Financial
    liabilities are classified as either trading or other. Initially, all
    financial assets and financial liabilities must be recorded on the
    balance sheet at fair value with subsequent measurement determined by the
    classification of each financial asset and liability. Transaction costs
    related to trading securities are expensed as incurred. Transaction costs
    related to AFS, HTM, loans and receivables and deposits are generally
    capitalized and are then amortized over the expected life of the
    instrument.

    Financial assets and financial liabilities held for trading are measured
    at fair value with the changes in fair value reported in earnings.
    Financial assets held to maturity, loans and receivables and financial
    liabilities other than those held for trading are measured at amortized
    cost. Available-for-sale financial assets are measured at fair value with
    changes in fair value reported in other comprehensive income ('OCI')
    until the financial asset is disposed of, or becomes impaired.

    Derivative instruments are recorded on the balance sheet at fair value.
    Changes in the fair values of derivative instruments are recognized in
    earnings, except for derivatives that are designated as a cash flow
    hedge, the fair value change for which is recognized in OCI.

    Accumulated other comprehensive income ('AOCI') is a new component of
    shareholders' equity and a new statement entitled Statement of
    Comprehensive Income has been added to the Company's financial
    statements. Comprehensive income is composed of the Company's net income
    and other comprehensive income. Other comprehensive income will include
    unrealized gains and losses on available-for-sale financial assets,
    foreign currency translation on net investments in self-sustaining
    foreign operations and changes in the fair market value of derivative
    instruments designated as cash flow hedges, all net of income taxes.

    Classification of Financial Instruments

    Available-for-sale assets are those non-derivative financial assets that
    are designated as AFS or are not classified as loans and receivables, HTM
    or held for trading. Available-for-sale assets are measured at fair value
    with unrealized gains and losses included in accumulated other
    comprehensive income until sale or other-than-temporary impairment when
    the cumulative gain or loss is transferred to the consolidated statement
    of operations. Assets included in this category are short-term
    investments and retained interest from securitization.

        a) Short-term investments have been re-measured to reflect the
           unrealized gains and losses on these securities. This gave rise to
           an adjustment to accumulated other comprehensive income of
           $3.2 million ($2.7 million net of tax).

        b) Retained interests from securitization have been re-measured to
           reflect the fair value. This gave rise to an adjustment to
           accumulated other comprehensive income of $1.4 million
           ($1.0 million net of tax).

    Loans and receivables are non-derivative financial assets resulting from
    the delivery of cash or other assets by a lender to a borrower in return
    for a promise to repay on a specified date or dates, or on demand,
    usually with interest. They do not include debt securities or loans and
    receivables designated as held for trading or AFS. Assets included in
    this category are accounts receivable and real estate secured and
    investment loans. The adoption of the CICA Handbook Section 3855 gave
    rise to a reclassification of $15.9 million of related transaction costs
    from accounts receivable and $1.9 million of related fees from accounts
    payable and accrued liabilities to real estate secured and investment
    loans and deposits.

    Hedge Accounting

    Derivative instruments are used to manage the Company's exposure to
    interest risks. The Company does not enter into derivative financial
    instruments for trading or speculative purposes. When derivative
    instruments are used, the Company determines whether hedge accounting can
    be applied. Where hedge accounting can be applied, a hedge relationship
    is designated as a fair value hedge or a cash flow hedge. The hedge is
    documented at inception, detailing the particular risk management
    objective and the strategy for undertaking the hedge transaction. The
    documentation identifies the specific asset or liability being hedged,
    the risk that is being hedged, the type of derivative used and how
    effectiveness will be assessed. The derivative instrument must be highly
    effective in accomplishing the objective of offsetting either changes in
    the fair value or forecasted cash flows attributable to the risk being
    hedged both at inception and over the life of the hedge.

    Fair value hedge transactions predominately use interest rate swaps to
    hedge the changes in the fair value of an asset, liability or firm
    commitment. Derivative financial instruments, held for fair value hedging
    purposes, are recognized at fair value and the changes in the fair value
    are recognized in the consolidated statement of income under investment
    income. Changes in the fair value of the hedged items attributable to the
    hedged risk are also recognized in the consolidated statement of income
    under investment income with a corresponding adjustment to the carrying
    amount of the hedged items in the consolidated balance sheet. When the
    derivative instrument no longer qualifies as an effective hedge or the
    hedging instrument is sold or terminated prior to maturity, hedge
    accounting is discontinued prospectively. The cumulative adjustment of
    the carrying amount of the hedged item related to a hedging relationship
    that ceases to be effective is recognized in investment income in the
    periods during which the hedged item affects income. Furthermore, if the
    hedged item is sold or terminated prior to maturity, hedge accounting is
    discontinued, and the cumulative adjustment of the carrying amount of the
    hedged items is then immediately recognized in investment income.

    In accordance with Section 3865, the accumulated ineffectiveness of
    hedging relationships must be measured, and the ineffective portion of
    changes in fair value must be recognized in the consolidated statement of
    income. As a result, the opening balance of retained earnings was
    adjusted by $0.025 million, as a result of the adoption of Section 3865.

    During the quarter ended February 28, 2007, the ineffective portion of
    accumulated changes in the fair value of hedging relationships recognized
    in the income statement amounted to less than $0.1 million as it relates
    to fair value hedging relationship.

    As required, a transition adjustment has been recognized in the opening
    balance of retained earnings as at December 1, 2006 for the following:
    (i) financial instruments that the Company classifies as held for trading
    and that were not previously recorded at fair value (ii) the difference
    in the carrying amount of loans and deposits at December 1, 2006 and the
    carrying amount calculated using the effective interest rate from
    inception of the loan or deposit. A transition adjustment has been
    recognized in the opening balance of AOCI relating to adjustments arising
    due to the remeasuring of financial assets classified as available for
    sale. Prior-period balances have not been restated. The impact of
    adopting these standards as at December 1, 2006 was as follows:

    -------------------------------------------------------------------------
                                                      Adjustment
                                             As at  upon adoption      As at
                                       November 30,   of Section  December 1,
    ($000s)                                   2006       3855           2006
    -------------------------------------------------------------------------

    Assets
      Short-term investments            $   10,723   $    3,271   $   13,994
      Retained interest from
       securization                         27,660        1,352       29,012
      Accounts receivable                   91,328      (15,928)      75,400
      Real estate secured and
       investment loans                  2,306,623        3,183    2,309,806
    -------------------------------------------------------------------------
    Impact on total assets               2,436,334       (8,122)   2,428,212
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders'
     equity
    -------------------------------------------------------------------------
      Deposits                           2,488,264       (7,074)   2,481,190
      Derivative instruments market
       valuation                                 -       (3,754)      (3,754)
      Future income tax                    230,305          998      231,303
      Accounts payable and accrued
       liabilities                         160,259       (1,900)     158,359
    -------------------------------------------------------------------------
    Impact on total liabilities          2,878,828      (11,730)   2,867,098
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Shareholders' equity
      Foreign currency translation
       adjustments                             159         (159)           -
      Retained earnings                    565,576          (25)     565,551
    Accumulated other comprehensive
     income
      Foreign currency translation
       adjustments related to net
       investments in self-sustaining
       operations                                -          159          159
      Unrealized gains on available for
       sale assets                               -        3,633        3,633
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accumulated other comprehensive
      income                                     -        3,792        3,792
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Impact on shareholders' equity         565,735        3,608      569,343
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Impact on liabilities and
     shareholders' equity               $3,444,563   $   (8,122)  $3,436,441
    -------------------------------------------------------------------------

    (b) Trust Operations Net Interest Income

    Commencing December 1, 2006, the presentation of the Trust Operations
    income has been revised to net deposit interest expense and other
    liabilities as detailed in note 10. Comparative periods presented have
    been restated with interest and investment income being reclassified from
    administration fees, interest and other revenue and other liabilities
    being reclassified from interest on Trust Company deposits and selling,
    general and administrative expenses.

    Note 2: Securitization of AGF Trust Loans

    On February 28, 2006, the Company, through its wholly-owned subsidiary
    AGF Trust Company, securitized $218.4 million of RSP loans through the
    sale of these loans to a securitization trust. Cash flows of
    $206.3 million were received on the securitization and a gain net of
    transaction fees and expenses of $9.9 million was recorded. As at
    February 28, 2007, $144.4 million of securitized loans were outstanding.

    When RSP loan receivables are sold in securitization to a securitization
    trust under terms that transfer control to third parties, the transaction
    is recognized as a sale and the related loan assets are removed from the
    consolidated balance sheet. As part of the securitization, certain
    financial assets are retained. The retained interests are carried at fair
    value. A gain or loss on sale of the loan receivables is recognized
    immediately in income. The amount of the gain or loss is determined by
    estimating the fair value of future expected cash flows using
    management's best estimates of key assumptions: excess spread, discount
    rate on the interest-only strip, expected credit losses, prepayment rates
    and the expected weighted average life of RSP loans that are commensurate
    with the risks involved. The current fair value of retained interests is
    determined using the present value of future expected cash flows as
    discussed above.

    The Company has recorded retained interests of $27.6 million (2006 -
    $27.7 million) made up of i) the rights to future excess interest on
    these RSP loans after investors in the securitization trust have received
    the return for which they contracted, valued at $13.0 million (2006 -
    $13.7 million), ii) cash collateral of $6.2 million (2006 - $5.7 million)
    and iii) over-collateralization of $8.4 million (2006 - $8.3 million).

    The impaired loans included in the securitized balances were equal to
    $0.7 million as at February 28, 2007. During the three months ended
    February 28, 2007, $0.4 million of securitized RSP loans were written
    off.

    The Company's claim on the retained interests is subordinate to
    investors' interests. Recourse available to investors and the
    securitization trust is limited to the retained interests. For the three
    months ended February 28, 2007, cash flows of $2.5 million were received
    on the securitized loans, of which $0.8 million related to the over-
    collateralization and $1.7 million related to the interest-only strip.
    The total other income recognized from securitization during the three
    months ended February 28, 2007 was $0.7 million.

    The significant assumptions used to value the sold and retained interests
    were as follows:

        Excess spread                              3.9%
        Discount rate on interest-only strip       7.5%
        Expected credit losses                     0.8%
        Prepayment rate                           16.4%
        Expected weighted average life
         of RSP loans                             28.5 months

    The Company retained servicing responsibilities for the securitized
    loans. A servicing liability of $1.1 million was recorded as at
    February 28, 2007 (2006 - $1.7 million). This amount represents the
    estimated future cost of servicing the securitized loans and has been
    offset against the gain on the sale of the RSP loans. The amount
    amortized related to the servicing liability during the three months
    ended February 28, 2007 was $0.1 million.

    The following table presents key economic assumptions and the sensitivity
    of the current fair value of retained interests to two adverse changes in
    each key assumption as at February 28, 2007. As the sensitivity is
    hypothetical, it should be used with caution. The impact of changes in
    the fair value of retained interests was calculated using a discounted
    cash flow analysis.

    -------------------------------------------------------------------------
    Fair value of retained interests                              $   27,600
      Discount rate
        +10%                                                      $     (158)
        +20%                                                            (312)
      Prepayment rate
        +10%                                                      $     (262)
        +20%                                                            (493)
      Expected credit losses
        +10%                                                      $     (244)
        +20%                                                            (488)
    -------------------------------------------------------------------------

    The Company, through its wholly-owned subsidiary AGF Trust Company, plans
    to securitize approximately $265.0 million of RSP loans in the three-
    month period ended May 31, 2007.

    Note 3: Operations and Assets Held for Sale

    It is the intention of the Company to sell the operations of
    Investmaster. Accordingly, Investmaster's operations for 2007 have been
    reported as operations held for sale, and previously reported financial
    statements have been reclassified to reflect the following:

    -------------------------------------------------------------------------
                                                   Three months Three months
                                                          ended        ended
                                                    February 28, February 28,
                                                           2007         2006
    -------------------------------------------------------------------------

    Revenue                                          $    3,603   $    4,528
    Net earnings from discontinued operations,
     net of tax                                      $      382   $      934
    Basic net earnings per share                     $     0.00   $     0.01
    Diluted net earnings per share                   $     0.00   $     0.01
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                    February 28, November 30,
                                                           2007         2006

    Current assets held for sale
      Cash and term deposits                         $      695   $    1,792
      Accounts receivable and prepaid expenses            3,129        2,735
    -------------------------------------------------------------------------
                                                     $    3,824   $    4,527
    -------------------------------------------------------------------------

    Long-term assets held for sale
      Property, equipment and other intangible
       assets, net                                   $    3,335   $    3,598
    -------------------------------------------------------------------------
                                                     $    3,335   $    3,598
    -------------------------------------------------------------------------

    Current liabilities related to assets held
     for sale
      Accounts payable and accrued liabilities       $    3,329   $    4,286
    -------------------------------------------------------------------------
                                                     $    3,329   $    4,286
    -------------------------------------------------------------------------

    Long-term liabilities related to assets held
     for sale
      Future income tax                              $      605   $      756
    -------------------------------------------------------------------------
                                                     $      605   $      756
    -------------------------------------------------------------------------

    Note 4: Acquisition of Highstreet Partners Ltd.

    On December 1, 2006, the Company acquired 79.9% of Highstreet Partners
    Ltd. ('Highstreet'), which wholly owns Highstreet Asset Management Inc.,
    an investment counsel firm based in London, Ontario. The purchase
    consideration is payable in a combination of cash and the issuance of
    Class B Non-Voting ('Class B') Shares. As at February 28, 2007, the
    Company has made payments of $20.2 million in cash and $5.7 million
    through the issuance of 225,116 AGF Class B Shares, which approximates
    33.3% of the purchase price. Additional payments aggregating
    $51.8 million are due on February 28, 2008 and February 28, 2009 for
    total minimum consideration of $77.7 million. In addition, a contingent
    consideration will be paid in 2010 if certain financial profitability
    targets are achieved by Highstreet. At this time, the amount of the
    contingent consideration is not determinable. The preliminary purchase
    price has been allocated to goodwill and the final allocation will be
    completed once the Company has the necessary information required. The
    final allocation is expected to have been completed when the Company
    releases its May 31, 2007 results.

    Note 5: Dissolution of Partnerships

    On February 28, 2007, the Unitholders and the respective Boards of
    Directors of the following Limited Partnerships (LPs) - AGF Limited
    Partnership 1990, AGF Limited Partnership 1991, 20/20 Group 1990 Private
    Limited Partnership, 20/20 Group 1990 Limited Partnership and 20/20 Group
    1992 Limited Partnership - approved the dissolution of each respective
    LP. On March 1, 2007, as part of the LP dissolution process, the Company
    purchased the future distribution fees remaining payable by the Company
    to the LPs or purchased the outstanding units for total cash
    consideration of $3.2 million ($2.1 million net of taxes). In fiscal
    2006, distributions of approximately $1.0 million were made to these
    partnerships. As a result of the aforementioned transaction, no further
    distribution will be made to these LPs.

    Note 6: Trust Company

    The Trust Company's principal business activities are originating real
    estate secured loans, investment loans and deposit taking. Details
    related to these activities are as follows:

    -------------------------------------------------------------------------
    ($000s)               Term to contractual repricing
                  -----------------------------------------------------------
                    Variable      1 year      1 to 5    February    November
                        rate     or less       years    28, 2007    30, 2006
    -------------------------------------------------------------------------
    Mortgage
     loans        $    2,330  $  493,698  $  518,054  $1,014,048  $  941,962
    Home equity
     lines of
     credit (HELOC)  205,812           -           -     205,812     116,194
                  -----------------------------------------------------------
    Total real
     estate secured
     loans           208,142     493,698     518,054   1,219,860   1,058,156
    Investment
     loans         1,528,210       4,805      10,723   1,543,738   1,261,166
                  -----------------------------------------------------------
                   1,736,352     498,503     528,777   2,763,598   2,319,322
                  -----------------------------------
                  -----------------------------------

    Less: allowance
     for loan losses                                     (14,300)    (12,699)
    Add: net
     deferred sales
     commissions and
     commitment fees                                       4,034           -
                                                      -----------------------
                                                      $2,753,332  $2,306,623
    Less: current
     portion                                            (404,503)   (309,329)
                                                      -----------------------
                                                      $2,348,829  $1,997,294
                                                      -----------------------
                                                      -----------------------

    Impaired loans
     included in
     above                                                16,932      16,368
    Less specific
     allowance for
     loan losses                                          (2,024)     (2,448)
                                                      -----------------------
                                                      $   14,908  $   13,920
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                        February    November
    ($000s)                                             28, 2007    30, 2006
    -------------------------------------------------------------------------
    The change in
     the allowance
     for loan losses
     is as follows:
      Balance,
       beginning
       of the period                                  $   12,699  $    8,200
      Amounts written
       off                                                (1,735)     (2,697)
      Recoveries                                             641         465
      Reduction due
       to RSP loan
       securitization                                          -      (1,770)
      Provision for
       loan losses                                         2,695       8,501
                                                      -----------------------
      Balance,
       end of the
       period                                         $   14,300  $   12,699
    -------------------------------------------------------------------------

    (a) Real Estate Secured and Investment Loans

        The table represents the period of contractual repricing of interest
        rates on outstanding amounts. Principal repayments due on real estate
        and investment loans due within one year as at February 28, 2007 were
        $405 million (November 30, 2006 - $309 million).

        As at February 28, 2007, the Company's mortgage portfolio was
        composed of a combination of fixed rate and variable rate residential
        mortgages, of which $404.3 million (November 30, 2006 -
        $403.4 million) is insured, with a weighted average term to repricing
        of 1.8 years (November 30, 2006 - 1.8 years) and a weighted average
        interest rate of 6.89% (November 30, 2006 - 6.81%). Investment loans
        have interest rates based on prime. As at February 28, 2007, the
        average interest rate on HELOC was 6.08% (November 30, 2006 - 6.08%)
        and on investment loans was 7.40% (November 30, 2006 - 7.39%).

    (b) Trust Company Deposits

                  -----------------------------------------------------------
                                  1 year      1 to 5    February    November
    ($000s)           Demand     or less       years    28, 2007    30, 2006
    -------------------------------------------------------------------------

    Deposits      $    5,877  $1,216,207  $1,568,142  $2,790,226  $2,488,264
    Less: deferred
     sales
     commissions                                         (11,285)          -
    -------------------------------------------------------------------------
                                                      $2,778,941  $2,488,264
    -------------------------------------------------------------------------

        As at February 28, 2007, deposits were composed substantially of GICs
        with a weighted average term to maturity of 1.9 years (November 30,
        2006 - 1.9 years) and a weighted average interest rate of 4.08%
        (November 30, 2006 - 4.05%).

    (c) Interest Rate Swaps

        To hedge its exposure to fluctuating interest rates, the Trust
        Company has entered into interest-rate-swap transactions with four
        Canadian chartered banks as noted below. The swap transactions expire
        between March 1, 2007 and February 28, 2012 and involve the exchange
        of either the one-month bankers' acceptance rate or the three-month
        bankers' acceptance rate, to receive fixed interest rates. The swap
        contracts designated as hedging instruments are used by the Trust
        company for balance sheet matching purposes and to mitigate net
        interest revenue volatility. As at February 28, 2007, the aggregate
        notional amount of the swap transactions was $1,927.7 million
        (November 30, 2006 - $1,712.7 million). The aggregate fair value of
        the swap transactions, which represents the amount that would be paid
        by the Trust Company if the transactions were terminated at
        February 28, 2007, was $1.1 million (November 30, 2006 -
        $3.8 million).

    -------------------------------------------------------------------------
         Notional amount          Maturity date        Fixed interest
            of swap                                     rate received
    -------------------------------------------------------------------------
              ($000s)
              618,700                 2007              3.06% - 5.11%
              497,000                 2008              3.17% - 4.68%
              272,000                 2009              3.47% - 4.66%
              320,000                 2010              3.62% - 4.78%
              190,000                 2011              4.07% - 4.86%
               30,000                 2012              4.30% - 4.35%
    -------------------------------------------------------------------------

    (d) Interest Rate Sensitivity

        For the Trust Company, the impact of a 1% change in interest rates
        either up or down would be a change of annual net interest income of
        approximately $1.2 million as most of the loan portfolios are hedged.

    Note 7: Long-Term Debt

        ---------------------------------------------------------------------
                                                    February 28, November 30,
                                                           2007         2006
        ---------------------------------------------------------------------

        (a) Revolving term loan                      $  155,000   $   56,000
        (b) Payment related to acquisition of
             Highstreet Partners Ltd. (note 4):
              February 28, 2008                          25,900            -
              February 28, 2009                          25,900            -
        ---------------------------------------------------------------------
                                                        206,800       56,000

        Less: amount included in current liabilities    180,900       56,000
        ---------------------------------------------------------------------

                                                     $   25,900   $        -
        ---------------------------------------------------------------------

    (a) Revolving Term Loan

        The Company has arranged a six-year prime-rate-based revolving term
        loan to a maximum of $200.0 million with a Canadian chartered bank.
        Under the loan agreement, the Company is permitted to avail the
        revolving term loan by direct advances and/or bankers' acceptances
        (BAs). The revolving term loan is available at any time for a period
        of 364 days from commencement of the loan (the 'Commitment Period').
        The expiration of the current commitment period is June 30, 2007.
        However, the Company may request by April 15, 2007, and prior to
        April 15 in any calendar year thereafter, a recommencement of the
        six-year term at the expiry of the then-current commitment period. No
        repayment of the principal amount outstanding pursuant to the
        revolving term loan is required during the first three years of the
        then-applicable term. Thereafter, the loan balance shall be repaid in
        minimum monthly instalments of at least one-thirty-sixth of the
        amount of principal outstanding.

        As at February 28, 2007, the Company has drawn $155.0 million against
        the available loan amount in the form of five- to 91-day BAs at an
        effective average interest rate of 4.64% per annum. As this loan
        functions as a working capital facility, it has been included in
        current liabilities.

        Security for the bank loans includes a specific claim over the
        management fees owing from the mutual funds (subject to the existing
        claims of related limited partnerships) for which the Company acts as
        manager and, depending upon the amount of the loan outstanding, an
        assignment of AGF's investments in 20/20 Financial Corporation and
        AGF International Company Limited.

    (b) Payments Due Related to Acquisition of Highstreet Partners Limited

        On December 1, 2006, the Company acquired 79.9% of Highstreet (note
        4). Additional payments aggregating $51.8 million related to this
        transaction are due to the partners of Highstreet, on February 28,
        2008 and February 28, 2009, and will be satisfied through a
        combination of cash and Class B Shares.

    Note 8: Capital Stock

    (a) Authorized Capital

        The authorized capital of AGF consists of an unlimited number of
        Class B Shares and an unlimited number of Class A Voting Common
        ('Class A') Shares. The Class B Shares are listed for trading on the
        Toronto Stock Exchange.

    (b) Change During the Period

        The change in capital stock during the three months ended
        February 28, 2007 and 2006 is summarized as follows:

        ---------------------------------------------------------------------
                                               Number of shares       Amount
        ---------------------------------------------------------------------
        Class B shares

          Balance, November 30, 2006                 89,171,997   $  403,566

          Issued through dividend reinvestment
           plan                                          25,711          662
          Stock options exercised                       136,450        2,605
          Issued on acquisition of a subsidiary
           (note 4)                                     225,116        5,672
        ---------------------------------------------------------------------

          Balance, February 28, 2007                 89,559,274   $  412,505

        Class A shares

          Balance, November 30, 2006 and
           February 28, 2007                             57,600            -
        ---------------------------------------------------------------------

          Total Capital Stock, February 28, 2007                  $  412,505
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
                                               Number of shares       Amount
        ---------------------------------------------------------------------

        Class B shares

          Balance, November 30, 2005                 89,123,205   $  394,154

          Issued through dividend reinvestment
           plan                                           8,020          175
          Stock options exercised                        27,150          500
          Purchased for cancellation                   (200,000)        (886)
        ---------------------------------------------------------------------

          Balance, February 28, 2006                 88,958,375   $  393,943

        Class A shares

          Balance, November 30, 2005 and
           February 28, 2006                             57,600            -

        Total Capital Stock, February 28, 2006                    $  393,943
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    (c) Class B Shares Purchased for Cancellation

        AGF has obtained applicable regulatory approval to purchase for
        cancellation, from time to time, certain of its Class B Shares
        through the facilities of the Toronto Stock Exchange. Present
        approval for such purchases extends through to February 25, 2008.
        Under this issuer bid, the Company may purchase up to 10% of the
        public float outstanding on the date of the receipt of regulatory
        approval or up to 7,303,844 shares. No Class B Shares were purchased
        during the three months ended February 28, 2007. During the three
        months ended February 28, 2006, 200,000 Class B Shares were purchased
        at a cost of $4.3 million and the excess paid of $3.4 million over
        the book value of the shares purchased for cancellation was charged
        to retained earnings.

    (d) Stock Option Plans

        AGF has established stock option plans for senior employees under
        which stock options to purchase an aggregate maximum of 7,310,066
        Class B shares could have been granted as at February 28, 2007 (2006
        - 5,925,923). The stock options are issued at a price not less than
        the market price of the Class B Shares immediately prior to the grant
        date. Stock options are vested to the extent of 25% to 33% of the
        individual's entitlement per annum, or in some instances 100% vest at
        the end of the term of the option.

        The change in stock options during the three months ended
        February 28, 2007 and 2006 is summarized as follows:

    -------------------------------------------------------------------------
                                                                    Weighted
                                                                     average
                                                       Number of    exercise
                                                         options       price
    -------------------------------------------------------------------------

    Class B Share Options
      Balance outstanding, November 30, 2005           4,781,875  $    18.72
        Options granted                                        -         n/m
        Options cancelled                               (188,125) $    19.95
        Options exercised                                (27,150) $    18.39
    -------------------------------------------------------------------------

      Balance outstanding, February 28, 2006           4,566,600  $    18.68
    -------------------------------------------------------------------------

      Balance outstanding, November 30, 2006           4,324,084  $    19.93
        Options granted                                        -         n/m
        Options cancelled                                (14,200) $    21.75
        Options exercised                               (136,450) $    19.09
    -------------------------------------------------------------------------

      Balance outstanding, February 28, 2007           4,173,434  $    19.94
    -------------------------------------------------------------------------

        During the three months ended February 28, 2007 and 2006, the Company
        did not grant any options and recorded $1.2 million (2006 -
        $1.2 million) in compensation expense and contributed surplus in
        relation to options granted since December 31, 2002.

    (e) Restricted Share Unit ('RSU') Plan

        Under the Company's RSU plan, certain senior employees are issued
        RSUs. These units vest three years from the grant date. On the
        vesting date, the Company will redeem all of the participants' RSUs
        in cash equal to the value of one Class B Share for each RSU.

        At February 28, 2007, 76,216 RSUs were outstanding to employees of
        the Company. Compensation expense for the three months ended
        February 28, 2007 related to these RSUs was $0.2 million (2006 -
        nil).

    (f) Performance Share Unit ('PSU') Plan

        Effective November 30, 2006, the Company established a PSU plan,
        which enables certain senior employees to participate in the growth
        and development of AGF by providing such employees with the
        opportunity, through PSUs, to acquire a proprietary interest in AGF.
        Under the terms of the plan, PSUs are issued to the participant and
        the units issued vest three years from the grant date subject to
        certain performance criteria being met.

        On the vesting date, AGF, subject to the performance criteria being
        met, will redeem all of the participants' PSUs in cash equal to the
        value of one Class B Share for each PSU.

        At February 28, 2007, 67,776 PSUs were outstanding to employees of
        the Company. Compensation expense for the three months ended
        February 28, 2007 related to these PSUs was $0.2 million (2006 -
        nil).

    (g) Earnings Per Share

        The following table sets forth the calculation of both basic and
        diluted earnings per share as well as earnings per share and diluted
        earnings per share from continuing operations:

    -------------------------------------------------------------------------
                                                   Three months Three months
                                                          ended        ended
                                                    February 28, February 28,
                                                   --------------------------
                                                           2007 2006 (note 3)
    -------------------------------------------------------------------------

    Numerator
      Net Income from continuing operations for
       the period                                    $   38,062   $   23,152
      Loss on dissolution of partnerships,
       net of tax (note 5)                               (2,128)           -
      Net earnings from discontinued operations,
       net of tax (note 3)                                  382          934
    -------------------------------------------------------------------------
      Net Income for the period                          36,316       24,086

    Denominator
      Weighted average number of shares - basic      89,474,827   89,190,007
      Dilutive effect of employee stock options       1,165,907      840,994
    -------------------------------------------------------------------------
      Weighted average number of shares - diluted    90,640,734   90,031,001

    Earnings per share for the period
      Basic from continuing operations               $     0.43   $     0.26
      Diluted from continuing operations             $     0.42   $     0.26
      Basic                                          $     0.41   $     0.27
      Diluted                                        $     0.40   $     0.27
    -------------------------------------------------------------------------

    Note 9: Supplemental Disclosure of Cash Flow Information

    Interest payments for the three months ended February 28, 2007 were
    $30.7 million (2006 - $14.5 million).

    Income tax payments for the three months ended February 28, 2007 were
    $8.5 million (2006 - $18.8 million).

    Note 10: Net Interest Income

    The breakdown of net interest income is as follows:

    -------------------------------------------------------------------------
                                              Three months ended February 28,
                                              -------------------------------
    (in thousands of dollars)                              2007         2006
    -------------------------------------------------------------------------
    Interest income:
      Loan interest                                  $   43,155   $   23,724
      Investment interest                                 4,060        1,902
    -------------------------------------------------------------------------
                                                     $   47,215   $   25,626

    Interest expense:
      Deposit interest                               $   26,417   $   13,831
      Other liabilities                                   3,307        1,280
    -------------------------------------------------------------------------
                                                     $   29,724   $   15,111
    -------------------------------------------------------------------------
    Net interest income                              $   17,491   $   10,515
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 11: Segment Information

    AGF has three reportable segments: Investment Management Operations,
    Trust Company Operations and Other. The Investment Management Operations
    segment provides investment management and advisory services and is
    responsible for the management and distribution of the AGF investment
    products. AGF Trust Company offers a wide range of trust services
    including GICs, mortgages, investment loans and RSP loans. The results of
    S&WHL have been included in Other. Investmaster's operations have been
    reported as operations held for sale. The reportable segments are
    strategic business units that offer different products and services.

    The results of the reportable segments are based upon the internal
    financial reporting systems of AGF. The accounting policies used in these
    segments are generally consistent with those described in the summary of
    significant accounting policies detailed in AGF's 2006 annual financial
    statements.

    -------------------------------------------------------------------------
    Three months
    ended         Investment       Trust                   Inter-
    February 28,  Management     Company                  Segment
    2007          Operations  Operations       Other  Elimination      Total
    -------------------------------------------------------------------------
    Revenue       $  156,482  $   19,830  $    1,280  $     (562) $  177,030
    Operating
     expenses         85,513      11,715           -        (562)     96,666
    Amortization
     and other        29,994         305       1,047           -      31,346
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segment income
     before taxes $   40,975  $    7,810  $      233  $        -  $   49,018

    Total assets  $1,268,450  $3,110,226  $        -  $        -  $4,378,676
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Three months
    ended         Investment       Trust                   Inter-
    February 28,  Management     Company                  Segment
    2006          Operations  Operations       Other  Elimination      Total
    -------------------------------------------------------------------------
    Revenue       $  127,752  $   21,687  $      590  $     (493) $  149,536
    Operating
     expenses         74,381       8,294           0        (493)     82,182
    Amortization
     and other        32,720         272         888           -      33,880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segment income
     (loss) before
     taxes        $   20,651  $   13,121  $     (298) $        -  $   33,474

    Total assets  $1,051,949  $1,888,296  $  105,016  $        -  $3,045,261
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    



    Management's Discussion and Analysis
    of Financial Condition and Results of Operations

    For the three months ended February 28, 2007

    This Management's Discussion and Analysis ('MD&A') presents an analysis
of the financial condition of AGF Management Limited and its subsidiaries as
at February 28, 2007 compared with November 30, 2006, and the results of
operations for the three months ended February 28, 2007 compared with the
corresponding period of 2006. This discussion should be read in conjunction
with our 2006 annual MD&A and 2006 annual audited Consolidated Financial
Statements and Notes. Certain comparative amounts in these financial
statements have been reclassified to conform with the current year's
presentation. The financial information presented herein has been prepared on
the basis of Canadian generally accepted accounting principles ('GAAP').
Percentage changes are calculated using numbers rounded to the decimals that
appear in this MD&A. All dollar amounts are in Canadian dollars unless
otherwise indicated.
    There have been no material changes to the information discussed in the
following sections of the 2006 annual MD&A: 'Factors that May Affect Future
Results', 'Disclosure Controls', 'Off Balance Sheet Arrangements',
'Contractual Obligations', 'Intercompany and Related Party Transactions' and
'Government Regulations'. There has been additional disclosure with respect to
the adoption of new accounting policies, which are discussed in the 'Critical
Accounting Policies' section; please see the 'Critical Accounting Policies'
section of this MD&A for details. The 'Key Performance Indicators and Non-GAAP
Measures' section contains a reconciliation of non-GAAP measures to GAAP
measures.

    Overview

    AGF Management Limited ('AGF'), with approximately $52 billion in assets
under management ('AUM'), is one of Canada's largest independent mutual fund
and investment management companies, with operations in Canada, the United
Kingdom, Ireland and Asia. Approaching 50 years in business, we commenced
operations in 1957 with one of the first mutual funds available to Canadians
wishing to invest internationally and as at February 28, 2007 offered
55 mutual funds to investment advisors and their clients.
    For purposes of this discussion, the operations of AGF Management Limited
and our subsidiary companies are referred to as 'we', 'us', 'our' or the
'Company'. The financial results relating to the operations have been reported
in three segments: Investment Management Operations, Trust Company Operations
and Other.
    The Investment Management Operations segment includes the results of our
mutual fund, institutional, sub-advisory and private investment management
('PIM') businesses. PIM also includes the operations of Highstreet Partners
Ltd., which wholly owns Highstreet Asset Management Inc., acquired on December
1, 2006. The Trust Company Operations segment includes the results of AGF
Trust Company and the Other segment includes our equity interest in Smith and
Williamson Holdings Limited ('S&WHL').
    Investmaster Group Limited ('Investmaster') is in the process of being
sold and as such AGF's prior period results have been restated to reflect the
operations, assets, liabilities and cash flows of Investmaster as operations
held for sale.

    Strategy and Highlights

    As stated in our 2006 annual MD&A, our overall business strategy is to
help identify and facilitate opportunities for our business segments and
ensure segment strategies are aligned with the overall corporate strategy of
targeting sustainability, profitability and value for our shareholders over
the long term.

    
    During the first quarter of 2007, we achieved the following:

    -  Our client-centric approach resulted in net sales improvement in our
       core mutual fund business. During the first quarter of 2007, we
       recorded over $1.0 billion in net sales, a strong improvement from the
       $99.0 million in net redemptions recorded in the prior year, which
       placed us first among all Canadian non-bank mutual fund firms for the
       three-month period ended February 28, 2007.

    -  Delivered value directly to our shareholders through dividend
       payments. Dividends paid on Class A Voting Common ('Class A') and
       Class B Non-Voting ('Class B') Shares increased 20% to $16.1 million
       in Q1 2007, compared with $13.4 million in 2006. On January 31, 2007,
       we announced an additional 11% increase in the dividend rate to
       20 cents per share from 18 cents per share on Class A and Class B
       Shares for the April 2007 scheduled dividend payment.

    -  We renewed our normal course issuer bid to allow us to repurchase
       shares during the period February 26, 2007 to February 25, 2008.
       During the first quarter of 2007, we did not repurchase any shares;
       in the same period last year, we repurchased 200,000 shares.

    -  We continued to support the growth of our Trust Company Operations
       ('AGF Trust') and invested $32.5 million during the three months ended
       February 28, 2007, bringing our total investment in debt and equity
       capital to $167.3 million. This compares to the investment of
       $18.0 million for the three months ended February 28, 2006. In the
       prior-year period, AGF Trust also received cash from the
       securitization of approximately $218.4 million of RSP loans. AGF Trust
       real estate secured loan assets grew 96.2% over the prior year and
       investment loans grew 89.3%.
    

    We remain committed to our strategy and are pleased with the results to
date.

    Key Performance Indicators and Non-GAAP Measures

    We measure the success of our business strategies using a number of key
performance indicators ('KPIs'), which are outlined below. With the exception
of revenue, the following key performance indicators are not measurements in
accordance with Canadian GAAP and should not be considered as an alternative
to net income or any other measure of performance under Canadian GAAP. Segment
discussions include a review of key performance indicators that are relevant
to each segment.

    Consolidated Operations

    Revenue

    Revenue is a measurement defined by Canadian GAAP and is recorded net of
fee rebates, sales taxes and distribution fees paid to limited partnerships.
Revenue is indicative of the potential to deliver cash flow.

    
    We derive our revenue principally from a combination of:

    -  management and advisory fees based on AUM

    -  administration fees earned on Harmony, institutional and private
       investment management AUM

    -  deferred sales charges ('DSC') earned from investors when mutual fund
       securities sold on a DSC basis are redeemed

    -  net interest income earned on AGF Trust's loan portfolio.
    


    EBITDA

    We define EBITDA as income before interest expense, income taxes,
depreciation and amortization. EBITDA is a standard measure used in the mutual
fund industry by management, investors and investment analysts in
understanding and comparing results. We believe this is an important measure
as it allows us to assess our investment management businesses without the
impact of amortization. EBITDA for the Trust Company Operations segment
includes interest expense related to deposits. These deposits fund our
investment loan and real estate secured loan programs and therefore are
considered an operating cost directly related to generating interest revenue.
We include this interest expense in Trust Company Operations EBITDA to provide
a meaningful comparison to our other business segments and our competitors.
    Please see the 'Consolidated Operating Results' section of this MD&A for
a schedule showing how EBITDA reconciles to our GAAP financial statements.

    Cash Flow from Operations

    We report cash flow from operations before net changes in non-cash
balances related to operations. Cash flow from operations helps to assess the
ability of the business to generate cash, which is used to pay dividends,
repurchase shares, pay down debt and fund other needs.

    
    -------------------------------------------------------------------------
    ($ millions)
    Three months ended February 28                        2007          2006
    -------------------------------------------------------------------------

    Net cash provided by continuing operating
     activities                                      $    55.9     $    14.0
    Less: net changes in non-cash balances
     from operations                                     (12.8)        (34.4)
    -------------------------------------------------------------------------
    Cash flow from continuing operations             $    68.7     $    48.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Free Cash Flow from Operations

    We define free cash flow as cash flow from operations before net changes
in non-cash balances related to operations less selling commissions paid. This
is a relevant measure in the investment management business, as a substantial
amount of cash is spent on upfront commission payments. Free cash flow
represents cash available for distribution to our shareholders or for general
corporate purposes.

    
    -------------------------------------------------------------------------
    ($ millions)
    Three months ended February 28                        2007          2006
    -------------------------------------------------------------------------

    Cash flow from continuing operations             $    68.7     $    48.4
    Less: selling commissions paid                        43.7          22.2
    -------------------------------------------------------------------------
    Free cash flow from operations                   $    25.0     $    26.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Return on Equity (ROE) and Return on Investment (ROI)

    We monitor ROE to assess the profitability of the consolidated company.
We calculate ROE by dividing net income by average shareholders' equity. ROI
is a key performance indicator that we utilize to assess prospective
investments and to monitor past investments. ROI measures cash flow in
relation to the original amount invested and incorporates the time value of
money.

    Investment Management Operations

    Assets Under Management ('AUM')

    The amount of AUM is critical to our business as it is from these assets
that we generate fees from our mutual fund, institutional and private
investment management relationships. AUM will fluctuate in value as a result
of investment performance, sales and redemptions.
    Mutual fund AUM determines a significant portion of our expenses as we
pay upfront commissions and trailing commissions to investment advisors as
well as investment advisory fees based on the value of AUM.

    Investment Performance (Market Appreciation of Investment Portfolios)

    Investment performance, which is shown net of management fees received,
is a key driver of the level of AUM and is central to the value proposition
that we offer advisors and unitholders. Growth in AUM resulting from
investment performance increases the wealth of our unitholders and, in turn,
we benefit from higher revenues. Alternatively, poor relative investment
performance may result in redemptions; redemptions, in turn, reduce our AUM
and management fee revenues. Strong relative investment performance may also
contribute to gross sales growth or reduced levels of redemptions.

    Net Sales

    One of the goals of our mutual fund business is to generate positive net
sales on an annual basis, which in turn allows for increasing revenues. Gross
sales and redemptions as a percentage of AUM are monitored separately. The sum
of these two amounts comprises net sales, which, together with investment
performance, determines the level of average daily mutual fund AUM, the basis
on which management fees are charged.
    We monitor inflows and outflows in our PIM and institutional business
separately. Due to the reporting systems utilized in these businesses, we do
not compute an average daily AUM figure for PIM and Institutional.

    EBITDA Margin

    EBITDA margin provides useful information to management and investors as
an indicator of our operating performance in our Investment Management
Operations segment. We believe EBITDA margin is a valuable measure as it
assesses the extent to which we are able to earn profit from each dollar of
revenue. We define EBITDA margin as the ratio of EBITDA to revenue.

    
    -------------------------------------------------------------------------
    ($ millions)
    Three months ended February 28                        2007          2006
    -------------------------------------------------------------------------

    EBITDA                                           $    71.0     $    53.4
    Divided by: revenue                                  156.5         127.8
    -------------------------------------------------------------------------
    EBITDA margin                                         45.4%         41.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Pre-tax Profit Margin

    Pre-tax profit margin provides useful information to management and
investors as an indicator of our operating performance in our Investment
Management Operations segment. We believe pre-tax profit margin is a valuable
measure, as it assesses the extent to which we are able to earn profit from
each dollar of revenue. We define pre-tax profit margin as the ratio of income
before taxes and non-segmented items to revenue.

    
    -------------------------------------------------------------------------
    ($ millions)
    Three months ended February 28                        2007          2006
    -------------------------------------------------------------------------

    Income before taxes and non-segmented items      $    41.0     $    20.7
    Divided by: revenue                                  156.5         127.8
    -------------------------------------------------------------------------
    Pre-tax profit margin                                 26.2%         16.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Trust Company Operations

    Loan Asset Growth

    In the Trust Company Operations segment, we focus on the growth in our
investment and real estate secured loans. New originations net of repayments
drive the outstanding balance of loans, on which we charge interest. Loan
asset growth increases our revenue and assists with our ability to grow our
profits in the Trust Company Operations segment.

    Net Interest Income

    Net interest income is a common lending industry performance indicator. We
monitor this figure to evaluate the growth of the financial contribution of
AGF Trust. The figure is calculated by subtracting interest expense from
interest income earned from AGF Trust loan assets.

    Efficiency Ratio

    The efficiency ratio is a key lending industry performance indicator. We
utilize this ratio to ensure that expenses are contained as AGF Trust grows.
The ratio is calculated from AGF Trust results by dividing non-interest
expenses by the total of net interest income and non-interest income.

    -------------------------------------------------------------------------
    ($ millions)
    Three months ended February 28                        2007          2006
    -------------------------------------------------------------------------

    Selling, general and administrative expense      $     9.0     $     5.8
    Add: amortization expense                              0.3           0.3
    -------------------------------------------------------------------------
    Non-interest expense                             $     9.3     $     6.1
    -------------------------------------------------------------------------

    Other income                                     $     1.7     $     1.3
    Gain from securitization and related items             0.6           9.9
    -------------------------------------------------------------------------
    Non-interest income                              $     2.3     $    11.2
    -------------------------------------------------------------------------

    Net interest income                              $    17.5     $    10.5
    Add: non-interest income                               2.3          11.2
    -------------------------------------------------------------------------
    Divided by: total of net interest income and
     non-interest income                             $    19.8     $    21.7
    -------------------------------------------------------------------------
    Efficiency ratio                                      47.0%         28.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Pre-tax Profit Margin

    Pre-tax profit margin provides useful information to management and
investors as an indicator of the operating performance in our Trust Company
Operations segment. We believe pre-tax profit margin is a valuable measure as
it assesses the extent to which we are able to earn profit from each dollar of
net interest income. We define pre-tax profit margin as the ratio of income
before taxes and non-segmented items to total revenue.

    -------------------------------------------------------------------------
    ($ millions)
    Three months ended February 28                        2007          2006
    -------------------------------------------------------------------------

    Income before taxes and non-segmented items      $     7.8     $    13.1
    Divided by: total revenue                             19.8          21.7
    -------------------------------------------------------------------------
    Pre-tax profit margin                                 39.4%         60.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Critical Accounting Policies

    In the three months ended February 28, 2007, additional significant
accounting policies were adopted by the Company and are supplemental to the
'Critical Accounting Policies' section of the 2006 annual MD&A. These policies
are as follows:

    1) Financial Instruments, Hedges and Comprehensive Income

    On December 1, 2006, the Company adopted the CICA Handbook Section 3855
Financial Instruments - Recognition and Measurement; Section 3865 Hedges; and
Section 1530 Comprehensive Income. These standards require that all financial
assets be classified as either available for sale ('AFS'), trading, held to
maturity ('HTM') or loans and receivables. Financial liabilities are
classified as either trading or other. Initially, all financial assets and
financial liabilities must be recorded on the balance sheet at fair value with
subsequent measurement determined by the classification of each financial
asset and liability. Transaction costs related to trading securities are
expensed as incurred. Transaction costs related to AFS, HTM, loans and
receivables and deposits are generally capitalized and are then amortized over
the expected life of the instrument.
    Financial assets and financial liabilities held for trading are measured
at fair value with the changes in fair value reported in earnings. Financial
assets held to maturity, loans and receivables and financial liabilities other
than those held for trading are measured at amortized cost. Available-for-sale
financial assets are measured at fair value with changes in fair value
reported in other comprehensive income ('OCI') until the financial asset is
disposed of, or becomes impaired.
    Derivative instruments are recorded on the balance sheet at fair value.
Changes in the fair values of derivative instruments are recognized in
earnings, except for derivatives that are designated as a cash flow hedge, the
fair value change for which is recognized in OCI.
    Accumulated other comprehensive income ('AOCI') is a new component of
shareholders' equity and a new statement entitled Statement of Comprehensive
Income has been added to the Company's financial statements. Comprehensive
income is composed of the Company's net income and other comprehensive income.
Other comprehensive income will include unrealized gains and losses on
available-for-sale financial assets, foreign currency translation on net
investments in self-sustaining foreign operations and changes in the fair
market value of derivative instruments designated as cash flow hedges, all net
of income taxes.

    Classification of Financial Instruments

    Available-for-sale assets are those non-derivative financial assets that
are designated as AFS or are not classified as loans and receivables, HTM or
held for trading. Available-for-sale assets are measured at fair value with
unrealized gains and losses included in accumulated other comprehensive income
until sale or other-than-temporary impairment when the cumulative gain or loss
is transferred to the consolidated statement of operations. Assets included in
this category are short-term investments and retained interest from
securitization.

    
      a) Short-term investments have been re-measured to reflect the
         unrealized gains and losses on these securities. This gave rise to
         an adjustment to accumulated other comprehensive income of
         $3.2 million ($2.7 million net of tax).
      b) Retained interests from securitization have been re-measured to
         reflect the fair value. This gave rise to an adjustment to
         accumulated other comprehensive income of $1.4 million ($1.0 million
         net of tax).
    

    Loans and receivables are non-derivative financial assets resulting from
the delivery of cash or other assets by a lender to a borrower in return for a
promise to repay on a specified date or dates, or on demand, usually with
interest. They do not include debt securities or loans and receivables
designated as held for trading or AFS. Assets included in this category are
accounts receivable and real estate secured and investment loans. The adoption
of the CICA Handbook Section 3855 gave rise to a reclassification of
$15.9 million of related transaction costs from accounts receivable and
$1.9 million of related fees from accounts payable and accrued liabilities to
real estate secured and investment loans and deposits.

    Hedge Accounting

    Derivative instruments are used to manage the Company's exposure to
interest risks. The Company does not enter into derivative financial
instruments for trading or speculative purposes. When derivative instruments
are used, the Company determines whether hedge accounting can be applied.
Where hedge accounting can be applied, a hedge relationship is designated as a
fair value hedge or a cash flow hedge. The hedge is documented at inception,
detailing the particular risk management objective and the strategy for
undertaking the hedge transaction. The documentation identifies the specific
asset or liability being hedged, the risk that is being hedged, the type of
derivative used and how effectiveness will be assessed. The derivative
instrument must be highly effective in accomplishing the objective of
offsetting either changes in the fair value or forecasted cash flows
attributable to the risk being hedged both at inception and over the life of
the hedge.
    Fair value hedge transactions predominately use interest rate swaps to
hedge the changes in the fair value of an asset, liability or firm commitment.
Derivative financial instruments, held for fair value hedging purposes, are
recognized at fair value and the changes in the fair value are recognized in
the consolidated statement of income under investment income. Changes in the
fair value of the hedged items attributable to the hedged risk are also
recognized in the consolidated statement of income under investment income
with a corresponding adjustment to the carrying amount of the hedged items in
the consolidated balance sheet. When the derivative instrument no longer
qualifies as an effective hedge or the hedging instrument is sold or
terminated prior to maturity, hedge accounting is discontinued prospectively.
The cumulative adjustment of the carrying amount of the hedged item related to
a hedging relationship that ceases to be effective is recognized in investment
income in the periods during which the hedged item affects income.
Furthermore, if the hedged item is sold or terminated prior to maturity, hedge
accounting is discontinued, and the cumulative adjustment of the carrying
amount of the hedged items is then immediately recognized in investment
income.
    In accordance with Section 3865, the accumulated ineffectiveness of
hedging relationships must be measured, and the ineffective portion of changes
in fair value must be recognized in the consolidated statement of income. As a
result, the opening balance of retained earnings was adjusted by $0.1 million,
as a result of the adoption of Section 3865.
    During the quarter ended February 28, 2007, the ineffective portion of
accumulated changes in the fair value of hedging relationships recognized in
the income statement amounted to less than $0.1 million as it relates to fair
value hedging relationship.
    As required, a transition adjustment has been recognized in the opening
balance of retained earnings as at December 1, 2006 for the following:
(i) financial instruments that the Company classifies as held for trading and
that were not previously recorded at fair value (ii) the difference in the
carrying amount of loans and deposits at December 1, 2006 and the carrying
amount calculated using the effective interest rate from inception of the loan
or deposit. A transition adjustment has been recognized in the opening balance
of AOCI relating to adjustments arising due to the remeasuring of financial
assets classified as available for sale. Prior-period balances have not been
restated.

    2) Trust Operations Net Interest Income

    Commencing December 1, 2006, the presentation of the Trust Operations
income has been revised to net deposit interest expense and other liabilities.
Comparative periods presented have been restated with interest and investment
income being reclassified from administration fees, interest and other revenue
and other liabilities being reclassified from interest on Trust Company
deposits and selling, general and administrative expenses. This restatement
has no impact on the net earnings of the periods presented.

    Changes in Internal Controls Over Financial Reporting

    Pursuant to Multilateral Instrument 52-109, the Chief Executive Officer
and Chief Financial Officer must certify that they are responsible for the
design of internal controls over financial reporting (or caused them to be
designed under their supervision). Internal controls over financial reporting
are designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with Canadian generally accepted accounting principles.
During the three-month period ended February 28, 2007, there was no
significant change to the systems of internal controls within our company.

    Changes in Information Technology Systems

    Effective December 1, 2006, we converted our general ledger and financial
reporting system to the Multiview Financials Software. The conversion was
implemented successfully.

    Consolidated Operating Results

    Our consolidated operating results for the three months ended February
28, 2007 and February 28, 2006 are as follows:

    
    -------------------------------------------------------------------------
    ($ millions, except per
     share amounts)                  February 28,  February 28,
    Three months ended                      2007          2006      % change
    -------------------------------------------------------------------------

    Revenue
      Investment management operations $   156.5     $   127.8         22.5%
      Trust company operations(1)           19.8          21.7         (8.8%)
      Other                                  1.3           0.5        160.0%
      Intersegment eliminations             (0.6)         (0.5)         n/m
    -------------------------------------------------------------------------
                                           177.0         149.5         18.4%

    Expenses
      Investment management operations      85.5          74.4         14.9%
      Trust company operations(1)           11.7           8.3         41.0%
      Intersegment eliminations             (0.6)         (0.5)         n/m
    -------------------------------------------------------------------------
                                            96.6          82.2         17.5%

    EBITDA(2) (continuing operations)       80.4          67.3         19.5%
      Amortization                          30.4          33.3         (8.7%)
      Interest expense                       1.0           0.5        100.0%
      Non-controlling interest               0.2           0.0          n/m
      Income taxes                          10.7          10.3          3.9%
    -------------------------------------------------------------------------
    Net income from continuing
     operations                        $    38.1     $    23.2         64.2%
    Net earnings of operations held
     for sale, net of tax                    0.4           0.9          n/m
    Loss on dissolution of limited
     partnerships, net of tax               (2.2)          0.0          n/m
    -------------------------------------------------------------------------
    Net income                              36.3          24.1         50.6%
    -------------------------------------------------------------------------

    Earnings per share from continuing
     operations - diluted              $    0.42     $    0.26         61.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes interest expense related to deposits, the funds of which are
        used in our investment loan and real estate secured loan programs.
    (2) As previously defined, see the 'Key Performance Indicators and
        Non-GAAP Measures - EBITDA' section. The items required to reconcile
        EBITDA to net income, a defined term under Canadian GAAP, are
        detailed above.
    


    Revenue for the three months ended February 28, 2007 increased by 18.4%
from the corresponding period in 2006 and all of our operations experienced
significant growth. Revenue in the Investment Management Operations segment
was up 22.5% due to higher levels of AUM, which were a result of improved net
sales, market performance and the acquisition of 80% of Highstreet. The Trust
Company Operations segment reported a decrease in revenue of 8.8% due to the
comparative quarter in 2006 including a $9.9 million securitization gain from
the sale of RSP loans. Excluding the impact of the securitization gain,
revenue for the Trust Company Operations segment increased 67.8%. Revenues for
Other, which includes the results of our 30.9% equity interest in Smith &
Williamson Holdings Limited ('S&WHL'), were higher for the three months ended
February 28, 2007 compared with the corresponding period in 2006.
    Expenses for the three months ended February 28, 2007 increased by 17.5%,
with increases in the Investment Management Operations and Trust Company
Operations segments. The increases for both the Investment Management
Operations and Trust Company Operations segments are primarily attributable to
sales results and underlying assets discussed in greater details under the
segment discussions.
    The revenue and expense impact contributed to the increase in EBITDA of
19.5% for the three months ended February 28, 2007, from the corresponding
period in 2006. Excluding the impact of the securitization gain from the sale
of RSP loans in AGF Trust, which occurred during the three months ended
February 28, 2006, EBITDA increased 40.1%.
    Amortization expenses decreased 8.7% in the three months ended February
28, 2007, compared with the corresponding period in 2006. The decline was
primarily due to a decrease in amortization of customer contracts,
relationships and investment advisory contracts, which was $2.3 million lower
as certain contracts became fully amortized in the fourth quarter of 2006.
Amortization of deferred selling commissions in the Investment Management
Operations segment accounted for $26.5 million (2006 - $27.2 million) of the
total amortization expense.
    Interest expense increased to $1.0 million for the three months ended
February 28, 2007 from $0.5 million in the same period in 2006. The increase
is mainly the result of higher average outstanding loan balances.
    Income tax expense for the three months ended February 28, 2007 was
$10.7 million as compared with $10.3 million in the first quarter of 2006,
based on an effective tax rate of 22% in the first quarter of 2007 as compared
with 30.8% in the corresponding period in 2006.
    The impact of the above revenue and expense items resulted in net income
from continuing operations of $38.1 million in the quarter ended February 28,
2007 as compared with $23.2 million for the same period in 2006. Basic and
fully diluted earnings from continuing operations per share were $0.43 and
$0.42, respectively, in the first quarter of 2007 as compared with $0.26 per
share in 2006.
    Net income was $36.3 million in the quarter ended February 28, 2007, as
compared with $24.1 million in 2006. The three months ended February 28, 2007
included a loss of $2.2 million net of tax related to the dissolution of
Limited Partnerships and $0.4 net of tax related to net earnings of operations
held for sale.
    A further discussion of the results of each business segment for the
three months ended February 28, 2007 as compared with February 28, 2006
follows.

    Business Segment Performance

    We report on three business segments: Investment Management Operations,
Trust Company Operations and Other. The Investment Management Operations
segment provides investment management and advisory services and is
responsible for the management and distribution of AGF investment products and
services, including retail mutual fund operations and high-net-worth client
investment counselling services. This segment also includes the operations of
Highstreet Partnership Ltd., which wholly owns Highstreet Asset Management
Inc. The Trust Company Operations segment offers a wide range of trust
services and products including GICs, real estate secured loans and investment
loans. The Other segment includes the results of S&WHL, which is accounted for
by the equity method as well as the interest expense on our long-term debt.
AGF's reportable segments are strategic business units that offer different
products and services.
    Effective February 28, 2007, it is the intention of the Company to sell
the operations of Investmaster. Accordingly, Investmaster's operations for
2007 have been reported as operations held for sale, and prior period results
have been restated to reflect the operations, assets, liabilities and cash
flows of Investmaster as operations held for sale.

    Investment Management Operations

    Business and Industry Profile

    Our Investment Management Operations segment provides products and
services across the wealth continuum, including mutual funds, wrap products
and private investment management. Our products are delivered through multiple
channels, including advisors, financial planners, banks, life insurance
companies, brokers and consultants.
    Investment management remains a highly competitive business with numerous
domestic and foreign players serving the market. We believe that although the
mutual fund business is reaching the early stages of maturity, there are
opportunities for growth.

    Segment Strategy and Highlights

    The strategic priorities for our investment management operations, which
are detailed in the 2006 annual MD&A, are to build predictable excellence in
three core areas: investment management, relationship management and product
management. Consistent with our stated strategy during the first quarter of
fiscal 2007 we achieved the following:

    
    -  Our net sales improved greatly. During the first quarter of 2007, we
       recorded over $1.0 billion in net sales, which is a strong improvement
       from the $99.0 million in net redemptions recorded in the prior-year
       period. The strong net sales during the quarter was enough to place us
       first on this metric among all Canadian non-bank mutual fund firms for
       the three-month period.

    -  We successfully promoted international funds. AGF manages its product
       shelf proactively, with an aim to ensure there is sufficient product
       breadth to satisfy changing client needs. Recently, AGF has emphasized
       international investing because Canadians are committing more
       investment dollars outside of Canada. Net sales of international
       equity funds for the quarter ended February 28, 2007 were
       $474.9 million, versus net redemptions of $198.2 million reported in
       the same period last year.

    -  We continued to build on the rigour and discipline of our investment
       management process. This has resulted in AGF maintaining its industry-
       leading investment performance. AGF had the highest percentage of
       assets above median and the third-highest percentage of funds above
       median among the top 10 mutual fund firms in Canada for the one-year
       period ended February 28, 2007.

    -  The highest percentage of funds in the first quartile over three years
       and the second-highest percentage of funds in the first quartile over
       one year of any of the 10 largest mutual fund firms in Canada.

    -  Our efforts in relationship management have continued. During the
       quarter we worked to solidify our relationships with financial
       advisors in the domestic market. On the institutional side, we
       furthered our plans to expand our reach both in Canada and abroad.

    -  On December 1, 2006 we completed an agreement to purchase 80% of
       Highstreet Partners Ltd., which wholly owns Highstreet Asset
       Management Inc., an investment counsel firm based in London, Ontario
       with $4.8 billion in assets under management at the time of closing.
       Rob Badun, formerly chief executive officer of Highstreet, is now
       president, AGF Private Investment Management Limited. The Highstreet
       acquisition expanded our presence in the growing high-net-worth market
       and broadened our capabilities in the institutional market.
       Highstreet's investment style is quantitative, which is a complement
       to our existing investment management expertise.
    


    Assets Under Management

    The primary sources of revenue for AGF's Investment Management Operations
segment are management and advisory fees. The amount of management and
advisory fees is dependent on the level and composition of assets under
management ('AUM'). Under the management and investment advisory contracts
between AGF and each of the mutual funds, we are entitled to monthly fees
based on a specified percentage of the average daily net asset value of the
respective fund. In addition, we earn fees on our institutional and private
investment management AUM. As a result, the level of AUM has a significant
influence on our financial results. The following table illustrates the
composition of the changes in total AUM during the three months ended February
28, 2007 and February 28, 2006:

    
    -------------------------------------------------------------------------
    ($ millions)                     February 28,  February 28,
    Three months ended                      2007          2006      % change
    -------------------------------------------------------------------------

    Mutual fund AUM, beginning of
     period                            $  26,857     $  22,209         20.9%

    Gross sales of mutual funds            2,171         1,146         89.4%
    Redemptions of mutual funds           (1,129)       (1,245)        (9.3%)
    -------------------------------------------------------------------------
      Net mutual fund sales (redemptions)  1,042           (99)     (1152.6%)

    Market appreciation of fund portfolios   899         1,395        (35.6%)
    -------------------------------------------------------------------------

    Mutual fund AUM, end of period     $  28,798     $  23,505         22.5%

    Institutional AUM                     10,773         7,532         43.0%
    PIM AUM                               12,156         5,872        107.0%
    -------------------------------------------------------------------------

    Total AUM                          $  51,727     $  36,909         40.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average daily mutual fund AUM
     for the period                    $  28,053     $  23,196         20.9%
    -------------------------------------------------------------------------
    


    Strong investment performance and net sales of over $1.0 billion resulted
in an increase in mutual fund AUM to $28.8 billion at February 28, 2007 from
$26.9 billion at November 30, 2006. Compared to the three-month period ended
February 28, 2006, mutual fund AUM was up by 22.5%. The average daily mutual
fund AUM for the first three months of 2007 increased by 20.9% over the same
quarter in 2006 to $28.1 billion. During the past 12 months, institutional AUM
increased by $3.2 billion to $10.8 billion as a result of strong investment
performance and new mandates. Since February 28, 2006, private investment
management AUM increased by $6.3 billion to $12.2 billion, primarily due to
the Highstreet acquisition. These increases resulted in total AUM increasing
by 40.1% to $51.7 billion.
    Stock market performance influences the level of AUM. During the three
months ended February 28, 2007, the Canadian-dollar-adjusted S&P 500 Index
rose 3.38%, the Canadian-dollar-adjusted NASDAQ Index declined 1.81% and the
S&P/TSX Composite Index rose 2.93%. The aggregate market appreciation of our
mutual fund portfolios for the three months ended February 28, 2007 divided by
the average daily mutual fund AUM for the quarter was 3.2% after management
fees and expenses paid by the funds.
    The impact of the U.S. dollar appreciation relative to the Canadian
dollar on the market value of AGF mutual funds since November 30, 2006 has
been an increase in AUM of approximately $0.1 billion.
    For the five-year period ended February 28, 2007, 62.0% of ranked mutual
fund AUM performed above median. Over the 10-year period ended February 28,
2007, 67.0% of ranked AUM performed above median.

    Financial and Operational Results

    The Investment Management Operations segment results for the three months
ended February 28, 2007 and February 28, 2006 are as follows:

    
    -------------------------------------------------------------------------
    ($ millions)                     February 28,  February 28,
    Three months ended                      2007          2006      % change
    -------------------------------------------------------------------------

    Revenue
      Net management and advisory fees $   124.5     $   102.1         21.9%
      Administration fees and other
       revenue                              26.4          17.1         54.4%
      Deferred sales charges                 4.9           7.3        (32.9%)
      Investment income                      0.7           1.3        (46.2%)
    -------------------------------------------------------------------------
                                           156.5         127.8         22.5%

    Expenses
      Selling, general and administrative   43.1          38.6         11.7%
      Trailing commissions                  38.4          28.9         32.9%
      Investment advisory fees               4.0           6.9        (42.0%)
    -------------------------------------------------------------------------
                                            85.5          74.4         14.9%
    -------------------------------------------------------------------------

    EBITDA(1)                               71.0          53.4         33.0%
    Amortization                            30.0          32.7         (8.3%)
    -------------------------------------------------------------------------
    Income before taxes and
     non-segmented items               $    41.0     $    20.7         98.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As previously defined, see the 'Key Performance Indicators and
        Non-GAAP Measures - EBITDA' section.
    


    Revenue

    Revenue for the Investment Management Operations segment increased 22.5%
over the previous year, with changes in the categories being:

    Net Management and Advisory Fees

    Average daily mutual fund AUM in the first quarter of fiscal 2007 was
20.9% higher than the comparable period last year, while net management and
advisory fees increased by 21.9%. Average mutual fund AUM includes Harmony,
our fast-growing tailored investment product. However, Harmony revenues are
recorded in the administration fees and other revenue line, which is discussed
below.
    Harmony made up 7.6% of the average daily AUM in the three months ended
February 28, 2007 and 6.59% of the average daily AUM for the three months
ended February 28, 2006. Excluding the Harmony AUM, the period-over-period
percentage increase of 20.9% is reflective of average daily mutual fund AUM.
    Management and advisory fee revenue in the first fiscal quarter of 2007
is reported net of distribution fees paid to limited partnerships and other
third-party financing entities of $2.1 million (2006 - $2.9 million).

    Administration Fees and Other Revenue

    Administration fees and other revenue, which includes fees earned on
Harmony, institutional and private investment management AUM, increased by
54.4% in the three months ended February 28, 2007 as compared with the same
period in the prior year. This was attributable to strong growth in Harmony
revenues and the acquisition of Highstreet as well as organic growth in
institutional and PIM AUM.

    Deferred Sales Charges

    We receive deferred sales charges upon redemption of securities sold on
the contingent DSC or 'back-end' commission basis for which we financed the
selling commissions paid to the dealer. The DSC is generally 5.5% of the
original subscription price of the funds purchased if the funds are redeemed
within the first two years, and declines to zero after seven years. DSC
revenue fluctuates based on the level of redemptions, the age of the assets
being redeemed and the proportion of redemptions composed of back-end assets.
    DSC revenues for the three months ended February 28, 2007 decreased 32.9%
over the corresponding period in 2006, reflecting lower retail mutual fund
redemptions.

    Expenses

    Expenses for the Investment Management Operations segment increased 14.9%
over the previous year. Changes in specific categories are described in the
discussion that follows.

    Selling, General and Administrative Expenses

    Selling, general and administrative expenses (SG&A) for the three-month
period ended February 28, 2007 was $43.1 million, a $4.5 million increase over
the comparable period in 2006. The increase is made up of the following
amounts:

    
    -------------------------------------------------------------------------
    ($ millions)                                                 February 28,
    Three months ended                                                  2007
    -------------------------------------------------------------------------

    Decrease in fund absorption accrual                            $    (1.4)
    Increase in stock option, RSU and PSU expense                        0.4
    Increase in compensation-related expenses                            4.3
    Decrease in other expenses                                          (0.5)
    Highstreet expenses (Highstreet was aqcuired
     December 1, 2006)                                                   1.7
    -------------------------------------------------------------------------
                                                                   $     4.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The following are explanations for expense changes in the three months
ended February 28, 2007, compared to the prior-year period:

    
    -  Our estimates for absorption expense are lower due to increases in our
       assets under management. A substantial portion of the fund expenses
       are fixed in nature.

    -  Stock option, RSU and PSU expense increased as a result of grants in
       the later part of 2006, as well as appreciation in the value of RSUs
       and PSUs related to the increase in our share price.

    -  Compensation-related expenses increased due to performance-related
       bonuses.

    -  Other expenses decreased primarily as a result of reduced spending on
       system enhancements for sales and marketing initiatives.

    -  Highstreet was purchased on December 1, 2006 and therefore there were
       no expenses recorded in the prior-year period.
    


    Trailing Commissions

    Trailing commissions paid to investment dealers are dependent on total
AUM, the proportion of mutual fund AUM sold on a front-end versus back-end
commission basis and the proportion of equity fund AUM versus fixed-income
fund AUM. Annualized trailing commissions as a percentage of average daily
mutual fund AUM increased to 0.548% for the three-month period ended February
28, 2007 from 0.499% in the comparable 2006 period because of an increased
proportion of mutual fund AUM sold on a front-end basis and a change in the
mix of assets toward managed products, such as Harmony and Elements, which
generally have higher trailers.

    Investment Advisory Fees

    External investment advisory fees declined by 42.0%, as the average AUM
managed by sub-advisors was lower for the three months ended February 28, 2007
compared with the same quarter in 2006. Sub-advised assets are lower due to
the decision to have AGF International Advisors Company Limited assume the
role of Portfolio Advisor to AGF International Value Fund and AGF
International Value Class.

    EBITDA

    EBITDA for the Investment Management Operations segment were
$71.0 million for the three months ended February 28, 2007, an increase of
33.0% from $53.4 million for the same period of fiscal 2006. The increase of
$17.6 million is primarily due to higher assets under management, lower
absorption, lower investment advisory fees and the impact of the acquisition
of Highstreet.

    Amortization

    The largest item in this category is amortization of deferred selling
commissions. Amortization also includes amortization of property, equipment
and other intangible assets and amortization of customer contracts,
relationships and investment advisory contracts.
    We internally finance all selling commissions paid. These selling
commissions are capitalized and are amortized on a straight-line basis over a
period that corresponds with their applicable DSC schedule. Amortization
expense related to deferred selling commissions was $26.5 million in the first
fiscal quarter of 2007 as compared with $27.2 million in the comparable period
of 2006.
    During the first quarter of fiscal 2007, we paid $43.7 million in selling
commissions, compared with $22.2 million in 2006. As at February 28, 2007, the
unamortized balance of deferred selling commissions stood at $285.6 million, a
decrease of $17.4 million from the November 30, 2006 balance of
$268.2 million. The contingent deferred sales charges that would be received
if all of the DSC securities were redeemed at February 28, 2007 were estimated
to be approximately $381.3 million (2006 - $362.4 million).

    Trust Company Operations

    Business and Industry Profile

    Through AGF Trust, we offer financial solutions including GICs, real
estate secured and investment loans, and Home Equity Lines of Credit
('HELOC').
    AGF Trust investment loans consist of secured investment loans and RSP
loans distributed through financial advisors. The market for these products is
healthy and growing due to the efforts of financial advisors who continue to
broaden their suite of products as they service the needs of their customers.
AGF Trust has a competitive edge in the advisor channel as we leverage AGF's
mutual fund wholesaler relationships. AGF mutual fund wholesalers have
operated successfully in the advisor channel for 50 years.
    We offer real estate secured loans to Canadians who have sound credit,
but in some cases have not met the requirements of Canada's large banks to
qualify for their lowest rate real estate secured loan products. This
alternative real estate secured loan space is underdeveloped and fragmented,
which makes it a very attractive market. In addition to the strong secular
demand created by an underserved market, demand has recently been underpinned
by low interest rates and a healthy housing market. Real estate secured loan
products are distributed primarily through mortgage brokers. The mortgage
broker channel has also experienced strong growth. Borrowers have chosen to
deal with mortgage brokers to take advantage of independent advice and
competitive rates, while lenders have provided real estate secured loans in
this channel to reduce distribution costs.

    Segment Strategy and Highlights

    We strive to earn a high financial return as well as maximize synergies
with the Investment Management Operations segment. Specific strategies
include:

    
    -  Continuing to expand mortgage distribution geographically within
       Canada - there are plans to expand AGF Trust's mortgage distribution
       to include Atlantic Canada and the Prairie provinces

    -  introducing new products that directly serve advisor needs

    -  developing effective, targeted marketing

    -  using disciplined loan-underwriting standards and cost control
       measures.
    

    In the first quarter of 2007, we continued to support our dedicated sales
staff to promote investment lending and mortgage products. The RSP loan
program had record originations during the first quarter, as a larger number
of dealers and advisors offered AGF Trust's RSP loans to their clients. AGF
Trust also continued to support AGF investment management wholesalers with the
aim to make it easier for AGF wholesalers to serve their clients and promote
trust products to advisors.
    AGF Trust will continue to maximize operational synergies with our
investment management business through trust products that assist financial
advisors in broadening and deepening their relationship with their clients. In
addition, we will focus on expanding returns by increasing our consumer and
mortgage loan portfolios.
    We anticipate that execution of AGF Trust's stated strategy will result
in continued growth. Our growth plans require investing in product development
initiatives and expanding our sales and administrative teams. As a result,
non- interest expenses may rise more than the corresponding increase in total
interest margin over the remaining quarters of the 2007 fiscal year.

    Securitization Transactions

    On February 28, 2006, AGF Trust Company securitized $218.4 million of RSP
loans through the sale of these loans to a securitization trust. As at
February 28, 2007, the balance of securitized loans outstanding was equal to
$144.4 million. When RSP loan receivables are securitized, the transaction is
recognized as a sale. Based on assumptions such as prepayments, expected
credit losses and the remaining term, a gain or loss on sale of the loan
receivables is recognized immediately in income. The related loan assets are
removed from the consolidated balance sheet. As part of the securitization,
certain financial assets are retained and a servicing liability is incurred.
Each quarter, an amount is included in the financial results of AGF Trust
Company, which relates to the amortization of retained interest and servicing
liability as well as any change in assumptions.
    AGF Trust Company plans to securitize approximately $265.0 million of RSP
loans in the three-month period ended May 31, 2007.

    Financial and Operational Results

    Trust Company Operations segment results for the three months ended
February 28, 2007 and February 28, 2006 are as follows:

    
    -------------------------------------------------------------------------
    ($ millions)                     February 28,  February 28,
    Three months ended                      2007          2006      % change
    -------------------------------------------------------------------------

    Interest income
      Loan interest                    $    43.1     $    23.7         81.9%
      Investment interest                    4.1           1.9        115.8%
    -------------------------------------------------------------------------
                                            47.2          25.6         84.4%
    Interest expense
      Deposit interest                      26.4          13.8         91.3%
      Other liabilities                      3.3           1.3        153.8%
    -------------------------------------------------------------------------
                                            29.7          15.1         96.7%
    -------------------------------------------------------------------------
    Net interest income                     17.5          10.5         66.7%
    -------------------------------------------------------------------------
    Administration fees and other revenue    1.7           1.3         30.8%
    Securitization gains and related items   0.6           9.9        (93.9%)
    -------------------------------------------------------------------------
                                            19.8          21.7         (8.8%)

    Expenses
      Selling, general and administrative    9.0           5.8         55.2%
      Provision for loan losses              2.7           2.5          8.0%
    -------------------------------------------------------------------------
                                            11.7           8.3         41.0%

    EBITDA(1)                                8.1          13.4        (39.6%)
    Amortization                             0.3           0.3          0.0%
    -------------------------------------------------------------------------
    Income before taxes and
     non-segmented items               $     7.8     $    13.1        (40.5%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As previously defined, see the 'Key Performance Indicators and
        Non-GAAP Measures - EBITDA' section. The items required to reconcile
        EBITDA to net income, a defined term under Canadian GAAP, are
        detailed above.
    


    Revenue, Net Interest Income and Net Interest Margin

    Net interest income, which is expressed net of interest on deposits,
increased 66.7% as the average loan balances during Q1 2007 were approximately
66% higher than average balances during Q1 2006. Administration fees and other
revenue increased 30.8% due to higher loan balances. Securitization gains and
related items were $0.6 million for the three months ended February 28, 2007;
in the same quarter last year, a securitization resulted in a $9.9 million
gain. These factors resulted in a revenue decrease of 8.8%. Excluding the
impact of the securitization gain, revenue for the Trust Company Operations
increased 67.8%.
    The average net interest margin on lending products in Q1 2007 was 2.73%
(2.80% in Q1 2006). This spread decrease resulted from a slight decrease in
spreads on the investment loan portfolio, and a change in the business mix to
include a higher proportion of high credit quality HELOCs, which are risk
priced and therefore earn lower spreads than AGF Trust's other lending
products.

    Selling, General and Administrative Expenses

    SG&A expenses increased 55.2% in the first quarter of fiscal 2007 as
compared with 2006 as a result of increased staffing levels to support the
significant volume growth during the past 12 months. In addition, the higher
level of originations resulted in an increase in expenses, as internal sales
staff compensation also includes a variable component related to asset
increases, and headcount increased to service the new relationships.

    Provision for Loan Losses

    The total provision for loan losses increased 8.0% in the first quarter
of 2007, as compared with the first quarter of 2006. The increase is
attributable to the increase in our loan portfolios. This increase in the loan
loss provision was moderated by recoveries in Q1 2007 totalling $0.6 million.

    EBITDA

    Strong asset growth contributed to EBITDA of $8.1 million in the first
fiscal quarter of 2007. This represented a 39.6% decline as compared with
2006. Excluding the impact of the securitization, EBITDA increased by 131.4%
in the first fiscal quarter of 2007 as compared with 2006.

    Operational Performance

    The table below highlights our key operational measures for the Trust
Company Operations segment for the three months ended February 28, 2007 and
February 28, 2006.

    
    -------------------------------------------------------------------------
    ($ millions)                     February 28,  February 28,
    Three months ended                      2007          2006      % change
    -------------------------------------------------------------------------

    Real estate secured loans
      Insured mortgage loans           $   404.3         330.9         22.2%
      Conventional mortgage loans          605.6         284.9        112.6%
      HELOCs                               207.0           4.4       4604.5%
    -------------------------------------------------------------------------
                                         1,216.9         620.2         96.2%
    Investment loans
      Secured investment loans           1,005.6         549.0         83.2%
      RSP loans                            515.4         250.4        105.8%
      Other loans                           15.5          12.2         27.0%
    -------------------------------------------------------------------------
                                         1,536.5         811.6         89.3%
    Other assets                           356.8         456.5        (21.8%)
    -------------------------------------------------------------------------
    Total Assets                       $ 3,110.2     $ 1,888.3         64.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net interest income(1)             $    17.5     $    10.5         66.7%
    Gain from securitization and
     related items                           0.6           9.9        (93.9%)
    Other income                             1.7           1.3         30.8%
    Non-interest expenses                    9.3           6.1         52.5%
    Provision for loan losses                2.7           2.5          8.0%
    -------------------------------------------------------------------------
    Income before taxes and
     non-segmented items               $     7.8     $    13.1        (40.5%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Efficiency ratio(2)                     47.0%         28.1%
    Assets-to-capital multiple              14.4          16.7
    -------------------------------------------------------------------------
    (1) Net interest income above is reported net of agent commissions.
    (2) The efficiency ratio is calculated by dividing non-interest expenses
        by the total of Net Interest Income and fee income.
    


    Loan Asset Growth

    Loan assets experienced substantial growth during the three months ended
February 28, 2007. Real estate secured loan assets grew 96.2%, as sales
efforts in the mortgage broker channel continued to be successful, and were
supplemented by steady originations of a HELOC product in the advisor channel.
    RSP loan balances increased by $265.0 million as at February 28, 2007 as
a result of the strong RSP season and financial advisors' continued use of AGF
Trust's Internet-based loan application system. New investment loan products
and improved tie-ins with AGF mutual fund wholesalers also contributed to
overall growth in loan advances, as secured investment loans increased 83.2%
to $1.0 billion at the end of Q1 2007 compared to $549 million at the end of
Q1 2006.

    Efficiency Ratio

    The efficiency ratio (non-interest expenses divided by the total of net
interest income and fee income) is a key performance indicator utilized to
ensure that expenses are contained as the Trust business grows. The efficiency
ratio increased to 47.0% in 2007 from 28.1% in 2006, largely as a result of
the positive impact of the gain on sale from securitization in Q1 2006.

    Balance Sheet

    Our balance sheet has grown significantly during the past year, with our
financial position remaining solid. Total assets increased 64.7% to
$3.1 billion at February 28, 2007 as compared with the prior year. At February
28, 2007, our asset-to-capital multiple stood at 14.4 times compared with
16.7 times at the same time last year, which is below our authorized multiple
of 17.5 times. Our risk-based capital ratio was 10.6% at February 28, 2007.
AGF Trust received $32.5 million in debt and equity capital from AGF
Management Limited during the three months ended February 28, 2007, in order
to support increased asset levels. Liquid assets were high, with $305.6
million in cash and short-term investments at February 28, 2007 (2006 - $394
million).

    Loan Portfolio Credit

    Portfolio credit quality remains consistent as at February 28, 2007
compared with the prior year. Impaired mortgages as a percentage of the
portfolio have increased. However, a loan-by-loan review is conducted on a
monthly basis, and management is comfortable that losses on the portfolio will
remain in line with recent historical experience, given continued stable real
estate market conditions. The general allowance for conventional mortgage loan
losses was increased during the year to $5.5 million from $2.9 million a year
ago. The general allowance for investment loan losses was increased to
$6.2 million from $3.6 million a year ago. Some 40.1% of real estate secured
loan assets are insured. We have strong security for non-RSP investment loans,
and loan losses during the history of the program have been minimal. For RSP
loans, the expense for impaired loans, which consists of the increase in
specific allowances plus write-offs net of recoveries (excluding securitized
RSP loans) was $0.4 million in Q1 2007 (Q1 2006 - $0.9 million). For the
balance of our loan products, the expense for impaired loans was $0.3 million
(Q1 2006 - $0.0 million).

    Liquidity and Capital Resources

    Consolidated cash flow generated from continuing operating activities
(before net change in non-cash balances related to operations) was
$68.7 million for the three months ended February 28, 2007, compared with
$48.4 million in the prior-year period.
    Consolidated free cash flow (defined as cash flow from operations less
selling commissions paid) was $25.0 million for the three months ended
February 28, 2007, compared with $26.2 million in the prior-year period.
During the quarter, we paid $43.7 million in selling commissions, which were
deferred for accounting purposes, compared with $22.2 million paid and
deferred in the first quarter of 2006. Our free cash flow was used primarily
to fund the following:

    
    -------------------------------------------------------------------------
    ($ millions)                                   February 28,  February 28,
    Three months ended                                    2007          2006
    -------------------------------------------------------------------------

    Payment of dividends                             $    16.1     $    13.4
    Repurchase of AGF Class B Non-Voting Shares
     for cancellation                                      0.0           4.3
    Acquisitions                                          19.9           0.2
    Purchase of property, equipment and other
     intangible assets                                     0.8           3.7
    Investments                                            1.1           0.8
    Debt repayment                                         0.0           1.2
    Investment in Trust Operations
     (eliminated on consolidation)                        32.5          18.0
    -------------------------------------------------------------------------
                                                     $    70.4     $    41.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Free cash flow was insufficient to fund the above uses of cash and
accordingly our bank loan increased $99.0 million during the three months
ended February 28, 2007 (2006 - $28.0 million).
    Cash and cash equivalents decreased by $61.3 million (2006 - increase
$251.3 million) from November 30, 2006 primarily due to a decrease in cash in
the Trust Company Operations segment. Cash was used by AGF Trust in the three
months ended February 28, 2007 to finance asset growth. Consolidated cash and
cash equivalents amounted to $342.8 million as at February 28, 2007, compared
with $411.3 million a year ago.
    We have a six-year prime-rate-based revolving term loan facility to a
maximum of $200.0 million, of which $45 million was available to be drawn as
at February 28, 2007. Aside from cash held in the Trust Company Operations,
which is held to fund loans to clients, the company has $37.2 million of cash
at February 28, 2007, some of which will be used to repay bank debt in the
second quarter of 2007. Traditionally, the first quarter of each fiscal year
represents the largest use of cash in both our Investment Management
Operations and Trust Company Operations segments as a result of sales activity
and the payment of performance-related compensation that accrued in the prior
year. The loan facility will be available to meet future operational and
investment needs. We anticipate that cash flow from operations, together with
the available loan facility, will be sufficient in the foreseeable future to
implement our business plan, finance selling commissions, satisfy regulatory
requirements, service debt repayment obligations, meet capital spending needs
and pay quarterly dividends.

    Dividends

    For the first three months ended February 28, 2007, we declared a
20-cent- per-share dividend on Class A and Class B Shares. This dividend will
be payable on April 20, 2007 to shareholders of record on April 10, 2007. This
was an 11% increase from the 18-cent-per-share dividend declared for the
previous quarter.
    The holders of the Class B Shares are entitled to receive cash dividends.
Dividends are paid in equal amounts per share on all the Class B shares and
all the Class A Shares at the time outstanding without preference or priority
of one share over another. No dividends may be declared in the event that
there is a default of a condition of our loan facility or where such payment
of dividends would create a default.
    Our Board of Directors may determine that the Class B shareholders shall
have the right to elect to receive part or all of such dividend in the form of
a stock dividend. In determining whether a dividend in Class B Shares is
substantially equal to a cash dividend, the Board of Directors may make a
determination based on the weighted average price at which the Class B Shares
traded on the Toronto Stock Exchange during the 10 trading days immediately
preceding the record date applicable to such dividend.
    The following table sets forth the dividends paid by AGF on the Class B
Shares and the Class A Shares for the periods indicated:

    
    -------------------------------------------------------------------------
    Years ended
     November 30            2006       2005       2004       2003       2002
                        -----------------------------------------------------

    Per share           $  0.690   $  0.560   $  0.410    $ 0.295    $ 0.255
    Percentage increase       23%        37%        39%        16%        16%
    -------------------------------------------------------------------------

    We review our dividend distribution policy on a quarterly basis, taking
into consideration our financial position, profitability, cash flow and other
factors considered relevant by our Board of Directors.

    Outstanding Share Data

    Set out below is our outstanding share data as at February 28, 2007. For
additional detail, see Note 8 of the Consolidated Financial Statements.

    -------------------------------------------------------------------------
                                                          2007          2006
                                                   --------------------------
    Shares
    Class A Voting Common Shares                        57,600        57,600
    Class B Non-Voting Shares                       89,559,274    88,958,375

    Stock Options
    Outstanding options                              4,173,434     4,566,600
    Exercisable options                              2,122,517     1,502,388
    -------------------------------------------------------------------------


    Selected Quarterly Information

    -------------------------------------------------------------------------
    ($ millions, except
     per share amounts)
    For the three-month    Feb. 28,      Nov. 30,      Aug. 31,       May 31,
     period ended             2007          2006          2006          2006
    -------------------------------------------------------------------------

    Revenue (continuing
     operations)       $     177.0   $     158.7   $     146.8   $     152.3
    Cash flow from
     continuing
     operations(1)            68.7          53.8          61.6          55.0
    EBITDA (continuing
     operations)(2)           80.4          60.0          56.2          64.6
    Pretax income
     (continuing
     operations)              48.8          25.8          22.2          30.4
    Net income                36.3          21.0          34.6          33.0

    Earnings per share
      Basic            $      0.41   $      0.24   $      0.40   $      0.37
      Diluted          $      0.40   $      0.23   $      0.39   $      0.37

    Weighted average
     basic shares       89,474,827    89,174,064    89,055,124    89,006,146
    Weighted average
     fully diluted
     shares             90,640,734    89,890,105    89,457,921    89,973,999
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    ($ millions, except
     per share amounts)
    For the three-month    Feb. 28,      Nov. 30,      Aug. 31,       May 31,
     period ended             2006          2005          2005          2005
    -------------------------------------------------------------------------

    Revenue (continuing
     operations)       $     149.5   $     134.6   $     141.2   $     135.7
    Cash flow from
     operations(1)            48.4          48.4          53.6          55.6
    EBITDA (continuing
     operations)(2)           67.3          50.2          65.5          64.6
    Pretax income
     (continuing
     operations)              33.5          15.9          30.3          28.7

    Net income                24.1          28.0          20.3          22.4

    Earnings per share
      Basic            $      0.27   $      0.31   $      0.23   $      0.25
      Diluted          $      0.27   $      0.31   $      0.23   $      0.25

    Weighted average
     basic shares       89,190,007    89,203,949    89,615,145    90,553,323
    Weighted average
     fully diluted
     shares             90,031,001    89,868,786    89,915,618    90,886,073
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Cash flow from operations before net change in non-cash balances
        related to operations.
    (2) As previously defined, see 'Key Performance Indicators and Non-GAAP
        Measures - EBITDA' section.
    


    Additional Information

    Additional information relating to the Company can be found in our
Consolidated Financial Statements and accompanying notes for the three months
ended February 28, 2007, our 2006 annual MD&A and Consolidated Financial
Statements, our 2006 AIF and other documents filed with applicable securities
regulators in Canada, and may be accessed at www.sedar.com.

    Caution Regarding Forward-Looking Statements
    This Management's Discussion and Analysis includes forward-looking
statements about the Company, including its business operations, strategy and
expected financial performance and condition. Forward-looking statements
include statements that are predictive in nature, depend upon or refer to
future events or conditions, or include words such as 'expects',
'anticipates', 'intends', 'plans', 'believes', or negative versions thereof
and similar expressions. In addition, any statement that may be made
concerning future financial performance (including revenues, earnings or
growth rates), ongoing business strategies or prospects, and possible future
action on our part, is also a forward-looking statement. Forward-looking
statements are based on certain factors and assumptions, including expected
growth, results of operations, business prospects, performance and
opportunities. Forward-looking statements are based on current expectations
and projections about future events and are inherently subject to, among other
things, risks, uncertainties and assumptions about our operations, economic
factors and the financial services industry generally. They are not guarantees
of future performance, and actual events and results could differ materially
from those expressed or implied by forward-looking statements made by us due
to, but not limited to important factors such as level of assets under our
management, volume of sales and redemption of our investment products,
performance of our investment funds and of our investment managers and
advisors, competitive fee levels for investment management products and
administration and competitive dealer compensation levels, size and default
experience on our loan portfolio and cost efficiency in our loan operations,
as well as interest and foreign exchange rates, taxation, changes in
government regulations, unexpected judicial or regulatory proceedings, and our
ability to complete strategic transactions and integrate acquisitions. We
caution that the foregoing list is not exhaustive. The reader is cautioned to
consider these and other factors carefully and not place undue reliance on
forward-looking statements. We are under no obligation (and expressly disclaim
any such obligation) to update or alter the forward-looking statements whether
as a result of new information, future events or otherwise. Please see the
'Factors that May Affect Future Results' section for a further discussion of
factors that may affect actual results.




For further information:

For further information: Adrian Basaraba, Vice President, Finance and
Investor Relations, AGF Management Limited, (416) 865-4203,
adrian.basaraba@AGF.com


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