AGF Management Limited Reports First Quarter Financial Results



    Income from continuing operations before taxes up 15.8% and net income
    from continuing operations up 64.6% in the first quarter compared to
    prior year.

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    AGF MANAGEMENT LIMITED
    First Quarter Report to Shareholders for the three months ended
    February 29, 2008
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    TORONTO, March 26 /CNW/ - AGF Management Limited (AGF) today announced
solid financial results for the first quarter ended February 29, 2008, with
strong revenue and net income growth. Revenue increased 9.8% and EBITDA
increased 11.3% compared to the first quarter of 2007.
    "Continued market volatility impacted sales in the first quarter as
investors remained cautious," said Blake C. Goldring, Chairman and Chief
Executive Officer, AGF. "Despite this, our financial results remained strong,
with revenue up 9.8% and income from continuing operations before taxes
increasing by 15.8%. Enhancing our relationships and world-class investment
management expertise are the cornerstone of our business platform, and we will
continue to focus on these areas to realize the potential of our key growth
initiatives."
    In the first quarter of fiscal 2008, consolidated revenue from continuing
operations rose to $194.3 million compared with $177.0 million in the first
quarter of the prior year, with both operating segments reporting
year-over-year increases. Earnings before interest, taxes, depreciation and
amortization (EBITDA) from continuing operations were $89.5 million for the
three months ended February 29, 2008, compared with $80.4 million for the
three months ended February 28, 2007. However, continued market volatility
resulted in net redemptions of mutual funds for the quarter, with $221 million
of net redemptions of long-term funds during the first quarter of fiscal 2008.
    Income from continuing operations before taxes for the three months ended
February 29, 2008, was up 15.8% to $56.5 million, compared with $48.8 million
for the three months ended February 28, 2007. Net income from continuing
operations for the three months ended February 29, 2008, was up 64.6% to
$62.7 million or $0.70 per share diluted, compared with $38.1 million or $0.42
per share diluted for the three months ended February 28, 2007. Included in
net income is a reduction in future income tax of $19.5 million related to the
reduction in the federal income tax rate to 15% from 18.5% by January 1, 2012.
Excluding the impact of this change, net income from continuing operations was
up 13.4% to $43.2 million or $0.48 per share diluted.
    Total assets under management (AUM) decreased by 4.7% to $49.3 billion at
the end of the first quarter of 2008 from $51.7 billion as at February 28,
2007. Over the same period, mutual fund assets declined by 3.8%, primarily as
a result of market depreciation, however, average mutual fund assets increased
2.0% year over year. Institutional and high-net-worth client assets declined
5.9% because of market volatility as well as client rebalancing and
redemptions, which were non-performance related. The AGF Trust Operations
segment continued to grow significantly with total loan assets rising 47.3%
year over year.

    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.

    Dear fellow shareholders

    The markets continued to be very challenging during the first quarter of
2008 - stock markets were volatile and investors remained cautious, as
evidenced by the substantial flows into money market funds. Throughout, AGF
has remained focused on executing its long-term strategic plan, recognizing
that market volatility is part of our industry and a short-term obstacle.
    Our mutual fund sales were slower in the first quarter of 2008 compared
to 2007, with net redemptions of long-term funds of $221 million. We continue
to work in close partnership with advisors to ensure we meet their needs and
to help them guide their clients through this market downturn by providing
strong investment expertise that focuses on the long term.
    We offer an innovative and diverse product shelf designed to address our
clients' needs. During the quarter, we introduced three new quantitative funds
that are managed by our subsidiary, Highstreet Asset Management Inc. With the
launch of these funds, we are providing advisors the opportunity to offer
Highstreet's successful quantitative style of investing to their clients.
    Our Trust Company continued to experience strong growth in the quarter,
with loan assets increasing 47.3% over the first quarter of 2007. The Trust
Company Operations' funding sources remain robust since our loans are
primarily funded by selling Guaranteed Investment Certificates with Canada
Deposit Insurance Corporation insurance, and the credit quality of our loans
remains solid.
    Our continued focus and discipline during this quarter translated into
strong financial performance. Consolidated revenue was $194.3 million,
compared with $177.0 million in the first quarter of the prior year. Earnings
before interest, taxes, depreciation and amortization(*) (EBITDA) from
continuing operations were $89.5 million, compared with $80.4 million for the
three months ended February 28, 2007. EBITDA margins(*) improved for the three
months ended February 29, 2008, at 46.1% compared with 45.4% in the
three-month period ended February 28, 2007.
    For the three months ended February, 29, 2008, AGF reported cash flow
from continuing operations(*) (before net change in non-cash balances related to
operations) of $82.3 million, compared with $68.7 million one year ago. Free
cash flow(*) (cash flow from continuing operations less selling commissions
paid) was $55.5 million, compared with $25.0 million one year ago as a result
of a decrease in deferred selling commissions paid.
    It is a challenging time for the industry; however, our business
fundamentals are strong and we remain focused on achieving our long-term
objectives. We are well-positioned to both weather market downturns and
participate strongly when markets stabilize.

    (signed)
    Blake C. Goldring, CFA
    Chairman and Chief Executive Officer
    March 26, 2008

    (*) Cash flow from continuing operations, free cash flow, EBITDA and
    EBITDA margins are non-GAAP measures. Please refer to pages 5 and 6
    of this report for definitions of these metrics.


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

    For the three months ended February 29, 2008

    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 29, 2008, compared with November 30, 2007, and the results of
operations for the three months ended February 29, 2008, compared with the
corresponding period of 2007. This discussion should be read in conjunction
with our 2007 annual MD&A and 2007 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 2007 annual MD&A: "Risk Factors and Management,"
"Controls and Procedures," "Contractual Obligations," "Intercompany and
Related Party Transactions" and "Government Regulations." There has been
additional disclosure regarding the adoption of new accounting policies, which
are discussed in the "Significant Accounting Policies" section of this MD&A.
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 $49.3 billion in assets under
management (AUM), is one of Canada's largest independent mutual fund and
investment management companies, with operations and investments in Canada,
the United Kingdom, Ireland and Asia. We commenced operations in 1957 with one
of the first mutual funds available to Canadians seeking to invest in the
United States. As of February 29, 2008, we offered more than 50 domestic and
international mutual funds, as well as managed-asset programs (sold under our
Elements and Harmony brands). We also have a substantial institutional
investment management business, high-net-worth business and a growing trust
company.
    For purposes of this discussion, the operations of AGF 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
retail mutual fund, institutional and high-net-worth client businesses. 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 Holdings Limited (Investmaster) was divested on April 30,
2007, and, as such, Investmaster's results have been reported as discontinued
operations for the periods disclosed prior to the sale.

    Strategy and Highlights

    As stated in our 2007 annual MD&A, our overall business strategy is to
foster the development of best-in-class operating segments to provide
world-class financial services and to maximize shareholder value over the long
term.

    
    During the first quarter of 2008:

    -   Revenue increased 9.8% year over year and earnings before interest,
        taxes, depreciation and amortization (EBITDA) increased 11.3% during
        the same period. This trend resulted in improved margins.

    -   Market volatility continued, resulting in total assets under
        management declining 4.7% to $49.3 billion as at February 29, 2008.

    -   We delivered value directly to our shareholders through dividend
        payments. Dividends paid on Class A voting common shares (Class A
        shares) and Class B non-voting shares (Class B shares) increased
        10.6% to $17.8 million in the first quarter of 2008, compared with
        $16.1 million in the same period in 2007.

    -   We continued to support the growth of our Trust Company Operations
        (AGF Trust) and invested $35.0 million during the three months ended
        February 29, 2008 (2007 - $32.5 million), bringing our total
        investment in debt and equity capital to $256.3 million. AGF Trust
        real estate secured loan assets grew 54.6% over the prior year and
        investment loans grew 41.6%.

    -   In January 2008, we launched three new quantitative funds: the AGF
        Canadian All Cap Equity Fund, the AGF Global High Income Fund, and
        the AGF Global Balanced High Income Fund, all managed by Highstreet
        Asset Management Inc. (Highstreet).

    -   We renewed our normal course issuer bid to allow us to repurchase
        shares during the period of February 26, 2008, to February 25, 2009.
        No shares were repurchased during the first quarter of 2008 and 2007.
    

    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 KPIs 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 KPIs that are relevant to each segment.

    (a) 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
    -   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 earnings before interest, 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 because 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 on page 10 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.

    
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    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
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    Net cash provided by continuing operating
     activities                                       $   11.0      $   55.9
    Less: net changes in non-cash balances related
     to operations                                       (71.3)        (12.8)
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    Cash flow from continuing operations              $   82.3      $   68.7
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    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 since 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.

    
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    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
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    Cash flow from continuing operations (defined
     above)                                           $   82.3      $   68.7
    Less: selling commissions paid                        26.8          43.7
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    Free cash flow                                    $   55.5      $   25.0
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    EBITDA Margin

    EBITDA margin provides useful information to management and investors as
an indicator of our overall operating performance. We believe EBITDA margin is
a valuable measure because 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.

    
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    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
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    EBITDA                                            $   89.5      $   80.4
    Divided by revenue                                   194.3         177.0
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    EBITDA margin                                        46.1%         45.4%
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    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 because 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.

    
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    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
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    Income before taxes and non-segmented items       $   56.5      $   48.8
    Divided by revenue                                   194.3         177.0
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    Pre-tax profit margin                                29.1%         27.6%
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    Return on Equity (ROE)

    We monitor ROE to assess the profitability of the consolidated company on
an annual basis. We calculate ROE by dividing net income by average
shareholders' equity.

    (b) Investment Management Operations

    Assets Under Management (AUM)

    The amount of AUM is critical to our business since it is from these
assets that we generate fees from our mutual fund, institutional, strategic
accounts, and high-net-worth relationships. AUM will fluctuate in value as a
result of investment performance, sales and redemptions. Mutual fund AUM
determine a significant portion of our expenses because we pay upfront
commissions and trailing commissions to financial advisors as well as
investment advisory fees based on the value of AUM.

    Investment Performance (Market Appreciation (Depreciation) 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, which reduce our AUM levels 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 allows for increasing revenues. Gross sales
and redemptions as a percentage of AUM are monitored separately, and the sum
of these two amounts comprises net sales. Net sales, together with investment
performance and fund expenses, determine the level of average daily mutual
fund AUM, which is the basis on which management fees are charged. The average
daily mutual fund AUM is equal to the average daily net asset value of the AGF
mutual funds.
    We monitor inflows and outflows in our high-net-worth client and
institutional business separately. Due to the reporting systems used in these
businesses, we do not compute an average daily AUM figure for these
businesses.

    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 since 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.

    
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    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
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    EBITDA                                            $   74.8      $   71.0
    Divided by revenue                                   165.2         156.5
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    EBITDA margin                                        45.3%         45.4%
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    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 because 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.

    
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    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
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    Income before taxes and non-segmented items       $   45.4      $   41.0
    Divided by revenue                                   165.2         156.5
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    Pre-tax profit margin                                27.5%         26.2%
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    (c) Trust Company Operations

    Loan Asset Growth

    In the Trust Company Operations segment (AGF Trust), 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.

    Net Interest Margin

    Net interest margin is equal to annualized net interest income divided by
the average quarterly total loan balance.

    Efficiency Ratio

    The efficiency ratio is a lending industry KPI that measures the
efficiency of the organization. We use 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.

    
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    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
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    Selling, general and administrative expense       $   11.3      $    8.5
    Add: amortization expense                              0.5           0.3
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    Non-interest expense                              $   11.8      $    8.8
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    Other income                                      $    3.7      $    1.2
    Gain from securitization and related items             0.8           0.6
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    Non-interest income                               $    4.5      $    1.8
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    Net interest income                               $   22.8      $   17.5
    Add: non-interest income                               4.5           1.8
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    Total of net interest income and non-interest
     income                                           $   27.3      $   19.3
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    Efficiency ratio                                     43.2%         45.6%
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    EBITDA Margin

    EBITDA margin provides useful information to management and investors as
an indicator of our operating performance in our Trust Company Operations
segment. We believe EBITDA margin is a valuable measure because 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.

    
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    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
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    EBITDA                                            $   12.9      $    8.1
    Divided by revenue                                    27.3          19.3
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    EBITDA margin                                        47.3%         42.0%
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    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
because 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.

    
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    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
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    Income before taxes and non-segmented items       $   12.4      $    7.8
    Divided by revenue                                    27.3          19.3
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    Pre-tax profit margin                                45.4%         40.4%
    -------------------------------------------------------------------------
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    Significant Accounting Policies

    A summary of AGF's significant accounting policies can be found in Note 1
of our 2007 audited Consolidated Financial Statements.

    Changes in Significant Accounting Policies

    Capital Disclosures

    Effective December 1, 2007, AGF adopted CICA's new accounting standard
"Handbook Section 1535, Capital Disclosures," which requires the disclosure of
both qualitative and quantitative information to enable users of financial
statements to evaluate the entity's objectives, policies and processes for
managing capital. The new guidance did not have an effect on the financial
position or earnings of AGF. Refer to Note 13 in the Q1 2008 unaudited
Consolidated Financial Statements.

    Financial Instruments Disclosures and Presentation

    Effective December 1, 2007, AGF adopted the accounting and disclosure
requirements of CICA's two new accounting standards: "Handbook Section 3862,
Financial Instruments - Disclosures" and "Handbook Section 3863, Financial
Instruments - Presentation." The new guidance did not have an effect on the
financial position or earnings of AGF. Refer to Note 14 in the Q1 2008
unaudited Consolidated Financial Statements.

    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 29, 2008, there was no
significant change to the systems of internal controls within AGF.

    Consolidated Operating Results

    The table below summarizes our consolidated operating results for the
three months ended February 29, 2008, and February 28, 2007:

    
    -------------------------------------------------------------------------
    ($ millions, except per share
     amounts)                        February 29,  February 28,
    Three months ended                      2008          2007      % change
    -------------------------------------------------------------------------

    Revenue
      Investment Management Operations   $ 165.2       $ 156.5          5.6%
      Trust Company Operations              27.3          19.3         41.5%
      Other                                  1.8           1.2         50.0%
    -------------------------------------------------------------------------
                                           194.3         177.0          9.8%

    Expenses
      Investment Management Operations      90.4          85.5          5.7%
      Trust Company Operations              14.4          11.1         29.7%
    -------------------------------------------------------------------------
                                           104.8          96.6          8.5%

    EBITDA(1) (continuing operations)       89.5          80.4         11.3%
      Amortization                          29.9          30.4         (1.6%)
      Interest expense                       3.0           1.0        200.0%
      Non-controlling interest               0.1           0.2           n/m
      Income taxes                          (6.2)         10.7       (157.9%)
    -------------------------------------------------------------------------
    Net income from continuing
     operations                          $  62.7       $  38.1         64.6%
    Loss on dissolution of limited
     partnerships, net of tax                  -          (2.2)
    Net earnings from discontinued
     operations, net of tax(2)                 -           0.4
    -------------------------------------------------------------------------
    Net income                           $  62.7       $  36.3         72.7%
    -------------------------------------------------------------------------
    Earnings per share from continuing
     operations - diluted                $  0.70       $  0.42         66.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For the definition of EBITDA, see the "Key Performance Indicators
        and Non-GAAP Measures" section. The items required to reconcile
        EBITDA to net income, a defined term under Canadian GAAP, are
        detailed above.
    (2) On April 30, 2007, AGF sold 100% of Investmaster. Accordingly,
        Investmaster's results have been reported as discontinued operations.
    

    Revenue for the three months ended February 29, 2008, increased by 9.8%
from the corresponding period in 2007, and all of our operations experienced
growth. Revenue in the Investment Management Operations segment was up 5.6%
for the three months ended February 29, 2008, corresponding to higher average
levels of AUM combined with higher deferred sales charge revenue. The Trust
Company Operations segment reported increases in revenue of 41.5% for the
three months ended February 29, 2008, as a result of loan assets being up
47.3% year over year. Revenues from Other, which represents the results of our
31.4% equity interest in S&WHL, were higher for the three months ended
February 29, 2008, compared with the corresponding period in 2007, with the
growth attributable to the growth in S&WHL operations.
    Expenses for the three months ended February 29, 2008, increased by 8.5%
compared with the corresponding period in 2007, with increases in the
Investment Management Operations and Trust Company Operations segments. The
increases for both segments are primarily due to higher average assets and
loan levels. For more detail, see the segment discussions.
    The revenue and expense impact contributed to the increase in EBITDA of
11.3% for the three months ended February 29, 2008, from the corresponding
period of 2007.
    Amortization expense was relatively flat for the three months ended
February 29, 2008, compared to the corresponding period in 2007. For the three
months ended February 29, 2008, amortization of deferred selling commissions
in the Investment Management Operations segment accounted for $26.1 million
(2007 - $26.5 million) of the total amortization expense.
    Interest expense increased to $3.0 million for the three months ended
February 29, 2008, from $1.0 million in the corresponding period of 2007. The
increase is mainly the result of higher average outstanding loan balances.
    For the three months ended February 29, 2008, the Company had an income
tax reduction of $6.2 million compared with income tax expense of $10.7
million in the corresponding period in 2007. The February 29, 2008, results
include an income reduction of $19.5 million related to the reduction in the
federal income tax rate to 15% from 18.5% by January 1, 2012. Excluding the
impact of this tax reduction, the effective tax rate for the first three
months of 2008 was 23% compared with 22% in the corresponding period in 2007.
    The impact of the above revenue and expense items resulted in net income
from continuing operations of $62.7 million in the quarter ended February 29,
2008, compared with $38.1 million in the comparable period of 2007. Basic
earnings per share from continuing operations were $0.70 in the first quarter
of 2008 compared with $0.43 per share in the first quarter of 2007. Excluding
the impact of the tax reduction of $19.5 million, income from continuing
operations was $43.2 million or $0.48 per share diluted compared to $0.42 for
the three months ended February 28, 2007.
    Net income was $62.7 million in the quarter ended February 29, 2008,
compared with $36.3 million in the comparable period of 2007. Excluding the
impact of income tax as previously discussed, net income for the quarter was
$43.2 million. The three-month period ended February 28, 2007, included a loss
of $2.2 million net of tax related to the dissolution of limited partnerships
and $0.4 million net of tax related to net earnings of operations held for
sale.
    A further discussion follows of the results of each business segment for
the three months ended February 29, 2008, compared with February 28, 2007.

    Business Segment Performance

    We report on three business segments: Investment Management Operations,
Trust Company Operations and Other. AGF's reportable segments are strategic
business units that offer different products and services. 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 funds, institutional
and high-net-worth client investment counselling services. 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 our interest expense.

    Investment Management Operations

    Business and Industry Profile

    Our Investment Management Operations segment provides products and
services, including mutual funds, managed-asset programs 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,
detailed in the 2007 annual MD&A, are to continue 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
2008 we achieved the following:

    
    -   EBITDA margins remained relatively constant in 2008 over 2007, with
        an EBITDA margin of 45.3% for the three months ended February 29,
        2008, compared with 45.4% in the three months ended February 28,
        2007.
    -   We continued to build our diversified and strong product shelf by
        introducing three new quantitative funds, all managed by Highstreet.
    -   During this time of market volatility, we continued to focus on
        relationship management. During the quarter we worked to solidify our
        relationships with financial advisors in the domestic market. On the
        strategic accounts side, we furthered our plans to expand our reach
        both in Canada and abroad. In December, we closed a $26 million
        Canadian resources sub-advisory mandate with a client in Japan.
    

    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 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, strategic accounts, and high-net-worth client
AUM. As a result, the level of AUM has a significant influence on financial
results. The following table illustrates the composition of the changes in
total AUM during the three months ended February 29, 2008, and February 28,
2007:

    
    -------------------------------------------------------------------------
    ($ millions)                     February 29,  February 28,
    Three months ended                      2008          2007      % change
    -------------------------------------------------------------------------
    Mutual fund AUM, beginning of
     period                            $  30,052     $  26,857         11.9%

    Gross sales of mutual funds            1,128         2,171        (48.0%)
    Redemptions of mutual funds           (1,353)       (1,129)        19.8%
    -------------------------------------------------------------------------
    Net mutual fund sales                   (225)        1,042           n/m

    Market appreciation (depreciation)
     of fund portfolios                   (2,124)          899       (336.3%)
    -------------------------------------------------------------------------

    Mutual fund AUM, end of period     $  27,703     $  28,798         (3.8%)

    Institutional and strategic
     accounts AUM(*)                      17,910        19,043         (6.0%)
    High-net-worth AUM(*)                  3,672         3,886         (5.5%)
    -------------------------------------------------------------------------

    Total AUM, end of period           $  49,285     $  51,727         (4.7%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average daily mutual fund AUM
     for the period                    $  28,621     $  28,053          2.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Institutional assets previously categorized as high-net-worth are now
        classified as institutional.
    

    Continued market volatility and net redemptions over the three months
resulted in a decrease in mutual fund AUM to $27.7 billion at February 29,
2008, from $28.8 billion as at February 28, 2007. The average daily mutual
fund AUM for the three months ended February 29, 2008, increased by 2.0% to
$28.6 billion. Average assets remained higher year over year, as most of the
market decline occurred in February 2008. During the past 12 months,
institutional AUM decreased by $1.1 billion to $17.9 billion as a result of
market volatility and client rebalancing and redemptions, which were
non-performance related, and high-net-worth AUM decreased by $0.2 billion to
$3.7 billion due to market volatility. These decreases resulted in total AUM
decreasing by 4.7% to $49.3 billion.
    Stock market performance influences the level of AUM. During the three
months ended February 29, 2008, the Canadian-dollar-adjusted S&P 500 Index
declined 11.2%, the Canadian-dollar-adjusted NASDAQ Index declined 16.0%, and
the S&P/TSX Composite Index declined 0.1%. The aggregate market depreciation
of our mutual fund portfolios for the three months ended February 29, 2008,
divided by the average daily mutual fund AUM for the period was 7.4% after
management fees and expenses paid by the funds.
    The impact of the U.S. dollar decrease relative to the Canadian dollar on
the market value of AGF mutual funds since November 30, 2007, has been a
decrease in AUM of $0.1 billion.

    Financial and Operational Results

    The Investment Management Operations segment results for the three months
ended February 29, 2008, and February 28, 2007, are as follows:

    
    -------------------------------------------------------------------------
    ($ millions)                     February 29,  February 28,
    Three months ended                      2008          2007      % change
    -------------------------------------------------------------------------

    Revenue
      Management and advisory fees     $   156.4     $   150.8          3.7%
      Deferred sales charges                 6.1           4.9         24.5%
      Investment income and other
       revenue                               2.7           0.8           n/m
    -------------------------------------------------------------------------
                                           165.2         156.5          5.6%

    Expenses
      Selling, general and
       administrative                       44.6          43.1          3.5%
      Trailing commissions                  41.8          38.4          8.9%
      Investment advisory fees               4.0           4.0          0.0%
    -------------------------------------------------------------------------
                                            90.4          85.5          5.7%
    -------------------------------------------------------------------------

    EBITDA(*)                               74.8          71.0          5.4%
      Amortization                          29.4          30.0         (2.0%)
    -------------------------------------------------------------------------
      Income before taxes and
       non-segmented items             $    45.4     $    41.0         10.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section.
    

    Revenue

    For the three-month period ended February 29, 2008, revenue for the
Investment Management Operations segment increased by 5.6% from the
previous-year period, with changes in the categories as follows:

    Management and Advisory Fees

    The higher average daily mutual fund AUM in the first quarter of fiscal
2008 contributed to a 3.7% increase in management and advisory fee revenue
from the corresponding period in 2007. Management and advisory fee revenue is
reported net of distribution fees paid to limited partnerships and other
third-party financing entities. These distribution fees totalled $1.8 million
(2007 - $2.1 million) for the three months ended February 29, 2008.

    Deferred Sales Charges

    We receive deferred sales charges (DSC) upon redemption of securities
sold on the contingent DSC or back-end commission basis for which we finance
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 29, 2008, increased by
24.5% from the corresponding period in 2007, reflecting higher retail mutual
fund redemptions of DSC AUM that are subject to a charge.

    Expenses

    For the three-month period ended February 29, 2008, expenses increased by
5.7% from the previous-year period. 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 29, 2008, were $44.6 million, representing a 3.5%
increase over the comparable period in 2007. The increase is made up of the
following amounts:

    
    -------------------------------------------------------------------------
    ($ millions)                                           February 29, 2008
    -------------------------------------------------------------------------

    Increase in fund absorption expenses                           $     1.1
    Increase in compensation-related expenses                            1.9
    Decrease in other expenses                                          (1.5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                   $     1.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The following are explanations for expense changes in the three-month
period ended February 29, 2008, compared with the prior-year period:

    -   Our current estimate for 2008 absorption expense is generally
        consistent with 2007. The increase reflects higher programming-
        related costs
    -   Compensation-related expenses increased due to severance payments and
        increases in the number of share-based compensation units outstanding
    -   Other expenses decreased primarily as a result of decreased spending
        on sales and marketing initiatives
    

    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 0.584% for the three months ended February 29,
2008, from 0.548% in the comparable 2007 period. The trend in increasing
trailers expressed as a percentage of AUM is attributable to 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 remained flat for the three-month
period ended February 29, 2008, compared with the prior-year period since
average AUM managed by sub-advisors remained relatively constant compared with
the same period in 2007.

    EBITDA

    EBITDA for the Investment Management Operations segment was $74.8 million
for the three months ended February 29, 2008, an increase of 5.4% from
$71.0 million for the same period of fiscal 2007. The increase is primarily
due to higher average assets under management and higher deferred sales charge
revenue.

    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.
    We internally finance all selling commissions paid. These selling
commissions are capitalized and amortized on a straight-line basis over a
period that corresponds with their applicable DSC schedule. Amortization
expense related to deferred selling commissions was $26.1 million in the three
months ended February 29, 2008, compared with $26.5 million in the comparable
period in 2007.
    During the first quarter of fiscal 2008, we paid $26.8 million in selling
commissions, compared with $43.7 million in 2007. As at February 29, 2008, the
unamortized balance of deferred selling commissions stood at $316.0 million,
an increase of $0.7 million from the balance of $315.3 million as at
November 30, 2007. The contingent deferred sales charges that would be
received if all of the DSC securities were redeemed at February 29, 2008, were
estimated to be approximately $418.9 million (Q1 2007 - $381.3 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 over 50 years.
    We offer real estate secured loans to Canadians who have sound credit,
but who may not have met the requirements of Canada's large banks to qualify
for their lowest rate real estate secured loan products. Real estate secured
loan products are distributed primarily through mortgage brokers. The mortgage
broker channel has 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. HELOC loans are distributed through financial
advisors to clients who generally have superior credit profiles.

    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 focus on organic growth in our real estate secured and
        investment loan portfolios
    -   introducing new products that directly serve the needs of advisors'
        clients
    -   developing effective sales strategies and targeted marketing
    -   using disciplined loan-underwriting standards and enterprise risk-
        management measures
    

    In the first quarter of 2008, we continued to expand our dedicated sales
staff to promote investment lending and mortgage products, resulting in loan
originations of $525 million for the three-month period ended February 29,
2008.
    With the continued capital market volatility being experienced around the
world, particularly in the United States, and the related effects of the ABCP
markets, AGF Trust is prepared to continue to adapt to changing business
conditions. As previously reported, AGF Trust holds only bank-sponsored ABCP
and has relied on the ABCP markets for only a small portion of funding in the
current and prior fiscal year. The majority of the funding for the operations
comes from the ability to sell GICs.
    The credit quality of our loan portfolio remains strong. Actual loan
write-offs net of recoveries for the three months ended February 29, 2008,
were $3.1 million compared to $2.7 million for the three months ended
February 28, 2007. Impaired loans expressed as a percentage of loans
outstanding were 0.7% as at February 29, 2008, which is consistent with the
rate at November 30, 2007.

    
    Financial and Operational Results

    The Trust Company Operations segment results for the three months ended
February 29, 2008, and February 28, 2007, are as follows:

    -------------------------------------------------------------------------
    ($ millions)                     February 29,  February 28,
    Three months ended                      2008          2007      % change
    -------------------------------------------------------------------------
    Interest income
      Loan interest                    $    66.5     $    43.1         54.3%
      Investment interest                   10.3           4.1        151.2%
    -------------------------------------------------------------------------
                                            76.8          47.2         62.7%
    Interest expense
      Deposit interest                      47.1          26.4         78.4%
      Other interest expense                 6.9           3.3        109.1%
    -------------------------------------------------------------------------
                                            54.0          29.7         81.8%
    -------------------------------------------------------------------------
    Net interest income                     22.8          17.5         30.3%
    Other revenue                            3.7           1.2        208.3%
    Securitization gains and
     related items                           0.8           0.6         33.3%
    -------------------------------------------------------------------------
    Total revenue                           27.3          19.3         41.5%

    Expenses
      Selling, general and
       administrative                       11.3           8.5         32.9%
      Provision for loan losses              3.1           2.7         14.8%
    -------------------------------------------------------------------------
                                            14.4          11.2         28.6%

    EBITDA(*)                               12.9           8.1         59.3%
    Amortization                             0.5           0.3         66.7%
    -------------------------------------------------------------------------
    Income before taxes and
     non-segmented items               $    12.4           7.8         59.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" 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 and
other interest expense, increased 30.3% in the three-month period ended
February 29, 2008, over the respective period in 2007, as the average loan
balances were approximately 47.6% higher than average balances during the
respective period in 2007. Other revenue increased $2.5 million in the
three-month period ended February 29, 2008, over the corresponding period in
the prior year due to higher loan balances and a gain from hedge
ineffectiveness. Securitization gains and related items increased by $0.2
million in the first quarter of 2008 versus the same quarter last year. These
factors resulted in an increase in revenue of 41.5% for the three months ended
February 29, 2008.
    The average net interest margin on lending products in the first quarter
of 2008 was 2.38% (Q1 2007 - 2.73%). This spread decrease resulted from
compression in the Prime-CDOR spread, an increase in the cost of GIC funding
experienced over the past six months, a slight decrease in spreads on the
investment loan portfolio and a change in the business mix to include a
greater proportion of high credit-quality HELOCs, which are risk-priced and
therefore earn lower spreads than the Trust Company's other lending products.
The net interest margin declined four basis points relative to the fourth
quarter of 2007.

    Selling, General and Administrative Expenses

    The increases in SG&A expenses of 32.9% in the three-month period ended
February 29, 2008, over the respective period in 2007 was as a result of
increased staffing levels to support the significant loan growth during the
past 12 months.

    Provision for Loan Losses

    The total provision for loan losses increased by 14.8% in the first
quarter of 2008 compared with the prior-year period. The increase is
attributable to the increase in our loan portfolios and the mix of loans. This
increase in the loan loss provision was moderated due to a higher proportion
of newly originated loans that are lower-risk investment loans and HELOCs.

    EBITDA

    Strong asset growth contributed to EBITDA of $12.9 million in the
three-month period ended February 29, 2008. This represented a 59.3% increase
compared with the three months ended February 28, 2007.

    Operational Performance

    The table below highlights our key operational measures for the Trust
Company Operations segment for the three months ended February 29, 2008, and
February 28, 2007.

    
    -------------------------------------------------------------------------
    ($ millions)                     February 29,  February 28,
    Three months ended                      2008          2007      % change
    -------------------------------------------------------------------------
    Real estate secured loans(1)
      Insured mortgage loans           $   574.6     $   404.3         42.1%
      Conventional mortgage loans          798.6         605.6         31.9%
      HELOCs                               508.1         207.0        145.5%
    -------------------------------------------------------------------------
                                         1,881.3       1,216.9         54.6%
    Investment loans(1)
      Secured investment loans           1,606.2       1,005.6         59.7%
      RSP loans                            554.0         515.4          7.5%
      Other loans                           15.0          15.5         (3.2%)
    -------------------------------------------------------------------------
                                         2,175.2       1,536.5         41.6%
    Other assets                           857.4         356.8        140.3%
    -------------------------------------------------------------------------
    Total Assets                       $ 4,913.9     $ 3,110.2         58.0%
    -------------------------------------------------------------------------
    Net interest income                $    22.8     $    17.5         30.3%
    Gain from securitization and
     related items                           0.8           0.6         33.3%
    Other revenue                            3.7           1.2        208.3%
    Non-interest expenses(2)                11.8           8.8         34.1%
    Provision for loan losses                3.1           2.7         14.8%
    -------------------------------------------------------------------------
    Income before taxes and
     non-segmented items               $    12.4     $     7.8         59.0%
    -------------------------------------------------------------------------

    Efficiency ratio(3)                    43.2%         45.6%
    Assets-to-capital multiple              14.7          14.4
    -------------------------------------------------------------------------
    (1) Net of loan provision and deferred sales commission.
    (2) Includes SG&A and amortization expense.
    (3) The efficiency ratio is calculated by dividing non-interest expenses
        by the total of net interest income and non-interest income.
    

    Loan Asset Growth

    Loan assets experienced continued growth during the first quarter of
2008. Real estate secured loan assets grew 54.6% year over year, 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.
    Strong equity markets in the first half of 2007 and improved
collaboration with AGF mutual fund wholesalers contributed to overall growth
in loan advances. Secured investment loans increased 59.7% to $1.6 billion as
at February 29, 2008, over the respective period in 2007. RSP loan balances
increased by $38.6 million ($140.1 million excluding the impact of the
securitization) at February 29, 2008, as a result of the RSP season and
financial advisors' continued use of AGF Trust's Internet-based loan
application system.

    Efficiency Ratio

    The efficiency ratio (non-interest expenses divided by the total of net
interest income and non-interest income) is a key industry performance
indicator used to ensure expenses are contained as the Trust business grows.
The efficiency ratio decreased to 43.2% in the first fiscal quarter of 2008
from 45.6% during the comparable quarter in 2007.

    Balance Sheet

    Our balance sheet has grown significantly during the past year, with our
financial position remaining solid. Total assets increased 58.0% to
$4.9 billion at February 29, 2008, compared with the prior year. At February
29, 2008, our asset-to-capital multiple stood at 14.7 times, compared with
14.4 times at the same time last year, which is below our authorized multiple
of 17.5 times. Our risk-based capital ratio was 15.7% at February 29, 2008.
AGF Trust received $35.0 million in debt and equity capital from AGF
Management Limited during the three-month period ended February 29, 2008, to
support increased asset levels. Liquid assets were high, with $622.3 million
in cash and cash equivalents at February 29, 2008 (2007 - $305.6 million),
excluding cash currently pledged to counterparties.

    Loan Portfolio Credit

    Portfolio credit quality remains consistent at February 29, 2008,
compared with February 28, 2007. The general allowance for real estate secured
loan losses was increased during the year to $7.4 million from $5.5 million a
year ago. The general allowance for investment loan losses was increased to
$8.2 million from $6.2 million a year ago. Approximately 41.8% of real estate
secured loan assets, excluding HELOC, 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 $0.7 million for the three
months ended February 29, 2008 (2007 - $0.4 million). For the balance of our
loan products, the expense for impaired loans was $0.8 million (2007 -
$0.3 million).

    Liquidity and Capital Resources

    Consolidated cash flow generated from continuing operating activities
(before net change in non-cash balances related to operations) was
$82.3 million for the three months ended February 29, 2008, compared with
$68.7 in the comparable period of 2007.
    Consolidated free cash flow (defined as cash flow from operations less
selling commissions paid) was $55.5 million for the three months ended
February 29, 2008, compared with $25.0 in the comparable period of 2007. We
paid $26.8 million in selling commissions during the three months ended
February 29, 2008, which were deferred for accounting purposes, compared with
$43.7 paid and deferred in the respective period in 2007. Our free cash flow
was used primarily to fund the following:

    
    -------------------------------------------------------------------------
    ($ millions)                                   February 29,  February 28,
    Three months ended                                    2008          2007
    -------------------------------------------------------------------------
    Payment of dividends                             $    17.8     $    16.1
    Acquisitions of subsidiaries                          20.8          19.9
    Purchase of property, equipment and other
     intangible assets                                     1.5           0.8
    Investment in Trust Operations (eliminated on
     consolidation)                                       35.0          32.5
    -------------------------------------------------------------------------
                                                     $    75.1     $    69.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    During the three months ended February 29, 2008, our revolving term loan
balance increased $99.1 million to $259.1 million to fund the items listed
above and to pay previously accrued amounts such as bonuses. The first quarter
of each fiscal period represents a quarter in which the Company draws on its
credit facility and, barring any unusual transactions, the remaining quarters
result in bank debt being reduced.
    Cash and cash equivalents decreased by $137.5 million (2007 - increased
by $61.3 million) from November 30, 2007, primarily due to Trust investing
$115.0 million of cash into investments available for sale. Consolidated cash
and cash equivalents amounted to $690.4 million as at February 29, 2008,
compared with $827.9 million as at November 30, 2007.
    We have a six-year prime-rate-based revolving term loan facility to a
maximum of $300 million, of which $40.5 million was available to be drawn as
at February 29, 2008. Aside from cash held in the Trust Company Operations
segment, which is held to fund loans to clients and GIC maturities, AGF had
$68.1 million of cash at February 29, 2008, some of which will be used to
repay bank debt in the remainder of 2008. 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.

    Capital Management Activities

    We actively manage our capital to maintain a strong and efficient capital
base, to maximize risk-adjusted returns to shareholders, to invest in future
growth opportunities, including acquisitions, and to ensure that the
regulatory capital requirements are met for each of our subsidiary companies.
    Capital is primarily derived from ongoing earnings and from our publicly
traded AGF Class B shares. On an annual basis, AGF Management Limited (AGF)
prepares a five-year plan detailing projected operating budgets and capital
requirements. Each of AGF's operating companies is required to prepare and
submit a five-year operating plan and budget to the Finance Committee of AGF
for approval prior to seeking Board approval. The membership of the Finance
Committee consists of the Chairman and Chief Executive Officer (CEO), the
Vice-Chairman, the Senior Vice-President and Chief Financial Officer, and the
Senior Vice-President and General Counsel of AGF Management Limited. Once
approved by the Finance Committee, the five-year plans are reviewed and
approved by the Board of Directors of AGF. These plans become the basis for
the payment of dividends to shareholders, the repurchase of Class B shares
and, combined with the reasonable use of leverage, the source of funds for
acquisitions.

    Investment Management Operations - Regulatory Capital

    A significant objective of the Capital Management program is to ensure
that regulatory requirements are met regarding regulatory capital
requirements. Our Investment Management businesses, in general, are not
subject to significant regulatory capital requirements in each of the
jurisdictions in which they are registered and operate. The cumulative amount
of minimum regulatory capital across all of our investment management
operations is in the range of $10 to $15 million.

    AGF Trust - Regulatory Capital

    AGF Trust's regulatory capital consists primarily of common shareholders'
equity, preferred shares and subordinated debentures. Regulatory capital is a
factor that allows the Board of Directors of AGF Trust to assess the stability
and security in relation to the overall risks inherent in AGF Trust's
activities. AGF Trust's policy is to maintain its regulatory capital ratios
consistent with regulatory requirements as defined by the Office of the
Superintendent of Financial Institutions Canada (OSFI). As of January 1, 2008,
AGF Trust is now monitoring its regulatory capital based on the Bank for
International Settlements (BIS) regulatory risk-based capital framework (Basel
II). AGF Trust has decided to use the Standard Approach for credit risk and
the Basic Indicator Approach for operational risk. During the first quarter of
2008, AGF Trust has complied with these Basel II requirements.
    A capital plan prepared annually specifies the target capital ratios by
taking into account the projected risk-weighted asset levels and expected
capital management initiatives. Regulatory capital ratios are reported monthly
to management. Regulatory capital ratio monitoring reports are provided on a
quarterly basis to AGF Trust's Board of Directors.

    
    Regulatory capital is detailed as follows:

    -------------------------------------------------------------------------
                                                         As at         As at
                                                   February 29,  November 30,
    ($ thousands)                                         2008        2007(1)
    -------------------------------------------------------------------------
    Tier 1 capital
      Common shares                                  $  82,768     $  82,768
      Contributed surplus                                1,019           910
      Retained earnings                                 88,641        79,863
      Non-cumulative preferred shares                   64,000        49,000
      Less: securitization and other                   (20,684)            -
    -------------------------------------------------------------------------
                                                       215,744       212,541
    Tier 2 capital
      Subordinated debentures                          109,500        89,500
      General allowances                                16,860        15,277
      Less: securization and other                      (9,048)      (26,669)
    -------------------------------------------------------------------------
                                                       117,312        78,108

    -------------------------------------------------------------------------
    Total capital                                    $ 333,056     $ 290,649
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Information based on capital adequacy requirements in force at that
        date.
    

    Dividends

    For the three months ended February 29, 2008, we declared a
25-cents-per-share dividend on Class A and Class B shares. This dividend will
be payable on April 21, 2008, to shareholders of record on April 10, 2008.
    The holders of Class B shares are entitled to receive cash dividends.
Dividends are paid in equal amounts per share on all Class B shares and all
Class A shares at the time outstanding without preference or priority of one
share over another. No dividends may be declared if 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 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 (TSX) 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 Class B
shares and Class A shares for the periods indicated:

    
    -------------------------------------------------------------------------
    Years Ended
     November 30          2008(*)      2007       2006       2005       2004
    -------------------------------------------------------------------------
    Per share              0.950   $  0.780   $  0.690    $ 0.560    $ 0.410
    -------------------------------------------------------------------------
    Percentage increase       22%        13%        23%        37%        39%
    -------------------------------------------------------------------------
    (*) Subject to quarterly review and approval by AGF's Board of Directors.
    

    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.

    Normal Course Issuer Bid

    In February 2008, the Company's Board of Directors authorized the renewal
of AGF's normal course issuer bid for the purchase of up to 7,253,822 Class B
non-voting shares or 10% of the public float for such shares. The Company
received approval from the TSX on February 22, 2008, for the renewal of its
normal course issuer bid, which allows AGF to purchase up to 7,253,822 Class B
non-voting shares through the facilities of the TSX (or as otherwise permitted
by the TSX) between February 26, 2008, and February 25, 2009. The Class B
non-voting shares may be repurchased from time to time at prevailing market
prices or such other price as may be permitted by the TSX.
    As at February 29, 2008, under this current normal course issuer bid, no
Class B non-voting shares have been repurchased. AGF's previous normal course
issuer bid, initiated on February 26, 2007, allowed for the repurchase of up
to 7,303,844 Class B non-voting shares between February 26, 2007, and February
25, 2008, at prevailing market prices. Under the previous normal course issuer
bid, AGF purchased an aggregate of 1,437,800 Class B non-voting shares, for a
total consideration of $45,535,126 at an average price of $31.67 per share.

    Outstanding Share Data

    Set out below is our outstanding share data as at February 29, 2008. For
additional details, see Note 9 of the Q1 2008 Consolidated Financial
Statements.

    
    -------------------------------------------------------------------------
                                                   February 29,  February 28,
                                                          2008          2007
    -------------------------------------------------------------------------
    Shares
    Class A voting common shares                        57,600        57,600
    Class B non-voting shares                       89,230,096    89,559,274

    Stock Options
    Outstanding options                              4,183,698     4,173,434
    Exercisable options                              2,110,092     2,122,517
    -------------------------------------------------------------------------
    

    During the quarter, 92,056 Class B shares were issued through the
exercise of options and the dividend reinvestment plan. In addition, 215,883
Class B shares were issued related to subsequent payments for the 2006
acquisition of Highstreet. During the quarter, we did not repurchase any Class
B shares.

    Managing Risk - Overview

    Risk Overview

    Our approach to and the management of risk is described below. During the
quarter we adopted CICA "Handbook Section 3862, Financial Instruments -
Disclosures." This section establishes standards for the comprehensive
disclosure requirements for financial instruments.
    In the normal course of business, each of our operating segments is
exposed to a variety of financial risks: credit risk, liquidity risk and
market risk, including interest rate risk, other price risk and foreign
currency risk.
    Risk is the responsibility of the Executive Committee of AGF. The
committee is comprised of the CEO of AGF, the Senior Vice-President and the
Chief Financial Officer of AGF, the Senior Vice-President and General Counsel
of AGF, as well as the presidents of each of AGF Funds Inc., AGF Asset
Management Group Limited and AGF Trust. Oversight of reputational, regulatory,
legal and financial risk is within the mandate of the Executive Committee.
    The Chairman and CEO is directly accountable to the Board of Directors
for all of AGF's risk-taking activities. The Executive Committee reviews and
discusses significant risk action plans that arise in executing the
enterprise-wide strategy and ensures that risk oversight and governance occur
at the most senior levels of management. Each of the business units owns and
assumes responsibility for managing its risk. They do this by ensuring that
policies, processes and internal controls are in place and by reporting any
significant risk identified in the business units to the Executive Committee.
    AGF also has a strong commitment to governance, as outlined in the AGF
Corporate Governance summary on page 18 of our 2007 Annual Report. The Board
of Directors of AGF has responsibility for the stewardship of the Company,
including oversight of its business and affairs.
    AGF also oversees or operates key functions for each of the business
units on a shared services basis. These functions include Finance, Internal
Audit, Human Resources, Compensation, Information Technology, Fund Oversight,
Legal and Compliance. These functions also play a significant role in ensuring
the consistency of risk management practices and standards across the company
in areas that are common to the business units. In addition, AGF facilitates a
disciplined approach to risk-taking through policy formation, reporting and
oversight of the operational units.
    AGF's risk governance structure is designed to balance risk and reward
and promote business activities consistent with our standards and
risk-tolerance levels, with the objective of maximizing long-term shareholder
value.

    Risk Factors that May Affect Future Results

    There are many factors that may affect our ability to execute against our
strategy. Some of these factors are within our control and others, because of
their nature, are beyond our control. These factors apply to our corporate
strategy as well as to the business-specific strategies, which are included in
the segment discussions that follow.

    Managing Risk - Investment Management Operations

    Demand for our products depends on the ability of our investment
management team to deliver value in the form of strong investment returns, as
well as the demand for specific investment products. A specific fund manager's
style may fall out of favour with the market, resulting in lower sales and/or
higher redemptions.
    Our future financial performance will be influenced by our ability to
successfully execute our client-centric strategy and maintain our net sales.
If sales do not materialize as planned or key personnel cannot be retained,
margins may erode.
    Our strategy includes strategic acquisitions. There is no assurance that
we will be able to complete acquisitions on the terms and conditions that
satisfy our investment criteria. After transactions are completed, meeting
target return objectives is contingent upon many factors, including retaining
key employees and growth in AUM of the acquired companies.
    Most of our AUM are from financial advisors or strategic partners that
offer our products along with competing products. AGF's brand and investment
performance have contributed to our success in the past; however, our future
success is dependent on access to distribution channels that are independent
of our company.
    The level of competition in the industry is high. Sales and redemptions
of mutual funds may be influenced by relative service levels, management fees,
attributes of specific products in the marketplace and actions taken by
competitors.
    We take all reasonable measures to ensure compliance with governing
statutes, regulations or regulatory policies. A failure to comply with
statutes, regulations or regulatory policies could result in sanctions or
fines that could adversely affect earnings and reputation. Changes to laws,
statutes, regulations or regulatory policies could affect us by changing
certain economic factors in our industry. See the "Government Regulations"
section of our 2007 Annual MD&A for further details.
    Revenues are generally not subject to significant seasonal swings. We
experience somewhat higher sales during the Retirement Savings Plan (RSP)
season; however, the immediate impact of the level of sales on total revenue
is not significant. The Selected Quarterly Information table of this MD&A
shows key performance statistics for the past eight quarters.
    Our management fee revenue is highly correlated to the value of AUM. As a
result, we are exposed to general stock market fluctuations and other factors
such as credit risk, liquidity risk, interest rate risk, other price risk and
currency risk. A prolonged stock market decline would reduce revenue and
therefore earnings in our Investment Management Operations segment.
    It is difficult to quantify these risks in isolation; however, in
general, for every $1 billion reduction of AUM of mutual funds, annual
revenues would decline by approximately $20 million.

    Currency Risk

    Our main foreign exchange risk derives from the U.S. and international
portfolio securities held in the mutual fund AUM. Change in the value of the
Canadian dollar relative to foreign currencies will cause fluctuations in the
Canadian-dollar value of non-Canadian AUM upon which our management fees are
calculated. We monitor this risk since currency fluctuation may influence the
financial results of AGF. However, it is at the discretion of the fund manager
to decide whether to enter into foreign exchange contracts to hedge foreign
exposure on U.S. and international securities held in funds. For example, the
impact of the U.S. dollar decrease relative to the Canadian dollar on the
market value of AGF mutual funds since November 30, 2007, has been a decrease
in AUM of $0.1 billion.

    Interest Rate Risk

    Our Investment Management segment has limited exposure to the risk
related to changes in interest rates on floating rate debt at November 30,
2007. Using average loan balances outstanding, the effect of a 1% change in
variable interest rates on this debt in fiscal 2007 would have resulted in a
change of approximately $1.6 million in interest expense for the year ended
November 30, 2007. As the amount of interest paid is small relative to our
operating cash flow, such a change in interest rates would not have a material
impact on the results of operations or the fair value of the related debt.

    Managing Risk - Trust Company Operations

    AGF Trust has experienced a substantial amount of growth in recent
reporting periods. The success of this fast-growing business is dependent on
systems and processes being adequate to process increasing volumes of
business. System or process failures could result in financial losses or an
inability to sustain high growth rates.
    A general economic downturn and an increased unemployment rate could lead
to reduced credit-worthiness of the Trust segment borrowers. This could lead
to increased default rates and an adverse impact on financial results. There
is a risk that an increase in interest rates could slow the pace of housing
sales and adversely affect growth in the residential mortgage market, which
could adversely affect the ability to sustain present growth rates.
    The Trust Operations' lending depends on a network of independent
financial advisors, mortgage brokers and referral institutions. If service
levels were to decline or if AGF Trust's products no longer meet the needs of
clients, it may become difficult to attract new lending business.

    Basel II Capital Accord

    AGF Trust is subject to the Basel II framework, which was developed by
the Basel Committee on Banking Supervision, with the objectives of improving
the consistency of capital requirements internationally and making required
regulatory capital more risk sensitive. Basel II sets out several options,
which represent increasingly risk-sensitive approaches to calculating credit-,
market- and operational-risk-based regulatory capital. AGF Trust will use the
Standard Approach for credit risk under the Basel II capital adequacy regime.
It is the simplest approach, which uses supervisory determined risk weights to
measure risk-weighted assets. The Standard Approach under Basel II is
principally distinguished from the prior capital adequacy regime for AGF
Trust; Basel II allows some recognition of the credit risk mitigation provided
by mutual funds as collateral for secured investment loans and imposes a
somewhat lower risk weight for retail credit exposures.
    AGF Trust uses the Basic Indicators Approach under the Basel II capital
adequacy regime for determining the capital required for operational risk. The
Basic Indicators Approach uses gross income as a proxy for the institution's
overall operation risk. The capital required for operational risk is
determined by multiplying the average of the trailing three years' gross
income by a fixed percentage. Details of the capital requirements can be found
in the "Capital Management Activities" section of this MD&A.

    Credit risk

    The use of financial instruments, including financial derivative
instruments, can result in exposure to credit risk, which is the risk of
financial loss arising from a counterparty's inability or refusal to honour
its contractual obligations to AGF Trust.
    Extensive reviews of credit policies and lending practices are undertaken
by management. The Board of Directors of AGF Trust (Trust Board) periodically
reviews and approves AGF Trust's policies. These policies ensure that the
authority to approve credit applications is appropriately delegated by senior
management or the Investment Committee of AGF Trust, depending on the risk and
amount of the credit application. The credit policies also provide guidelines
for pricing based on risk, for reviewing any collateral pledged for a credit
application, for monitoring of impaired loans, and for establishing and
reviewing loss provisions.
    The policies establish risk limits for credit concentration by
counterparty, geographic location, and other risk factors that would impact
AGF Trust's credit risk profile. The Company's internal audit department
reviews AGF Trust's adherence to policies and procedures for credit risk
management.
    Loans are classified as impaired when, in the opinion of management,
there is reasonable doubt as to the collectability, either in whole or in
part, of principal or interest, or when principal or interest is past due
90 days, except where the loan is both well-secured and in the process of
collection. In any event, a loan that is insured by the federal government, an
agency thereof or another third-party insurer is classified as impaired when
interest or principal is past due 365 days, or in the case of other loans,
when they are contractually in arrears for 180 days.
    When a loan is identified as impaired, the carrying amount of the loan is
reduced to its estimated realizable value using a specific allowance. When
management has no further basis to expect recovery from any sources, including
underlying collateral or borrower covenants, the specific allowance is removed
and the carrying amount of the impaired loan is reduced directly. This
determination is made based on any proceeds from the disposition of
collateral, an evaluation of all borrowers' and guarantors' financial
capacities, and any other potential sources of loss mitigation or credit
enhancement.
    AGF Trust's credit risk is mitigated through the use of collateral,
primarily in the form of residential real estate and mutual fund investments.
Credit risk is also mitigated through residential mortgage insurance through
the Canada Mortgage and Housing Corporation (CMHC) or another insurer. At
February 29, 2008, $583 million of AGF Trust's residential mortgage portfolio
was insured through CMHC or another insurer.
    Investing activities also expose AGF Trust to credit risk through its
securities portfolio. AGF Trust has established the securities and portfolio
management policies that identify the types and ratings of debt and equity
investments that AGF Trust can invest in. These policies also restrict AGF
Trust's transaction dealings primarily to major chartered banks and recognized
investment dealers who are members of the Investment Dealers Association. The
Operations Committee (OPCO) of AGF Trust maintains a list of the approved
securities and counterparties, which are reviewed at least annually by the
Trust Board. The investment portfolio is regularly reviewed by OPCO and the
Trust Board to ensure the portfolio conforms to AGF Trust's policies.
    Cash and short-term investments primarily consist of highly liquid
temporary deposits with Canadian chartered banks as well as commercial paper,
bank-sponsored asset-backed commercial paper (ABCP), bank deposit notes,
reverse re-purchase agreements, bankers' acceptances, and floating rate notes.
Long-term investments consist primarily of floating rate notes and senior debt
instruments that qualify under AGF Trust's securities and portfolio management
policies. AGF Trust mitigates credit risk by regularly reviewing the market
value of short- and long-term investments through the use of market quotations
and adjusts the carrying amount of long-term investments per the Company's
accounting policies.
    Derivative financial instruments expose AGF Trust to credit risk to the
extent that if a counterparty default occurs, market conditions are such that
AGF Trust would incur a loss in replacing the defaulted transaction. AGF Trust
negotiates derivative master netting agreements with counterparties with which
it contracts. These agreements reduce credit risk exposure if a default occurs
by providing for the simultaneous netting of all transactions with a given
counterparty. Credit risk related to derivative financial instruments is also
managed through an approved counterparty list that includes only major
Canadian chartered banks.
    As at February 29, 2008, the amount that best represents AGF Trust's
maximum exposure to credit risk, without taking into account collateral held
or other credit enhancements, is $5.1 billion, which corresponds to the sum of
financial assets in the Operational Performance table on page 17 of this MD&A,
to which are added undrawn mortgage commitments amounting to $156.7 million
and $88.4 million of undrawn HELOC commitments.

    Market risk

    Market risk measures the vulnerability of AGF Trust to financial loss
from fluctuations in the value of financial instruments due to adverse
movements in interest rates or quoted market prices. AGF Trust actively
manages interest rate risk by employing a number of techniques. These include
the matching of asset and liability terms that measure changes in the
portfolios and the impact this will have on AGF Trust's earning capacity. AGF
Trust also uses interest rate swaps to manage any residual mismatches.
Management meets regularly to discuss the matching of assets and liabilities,
emphasizing the importance of managing all material mismatched positions in
order to reduce AGF Trust's exposure to interest rate fluctuations.
    The Company's internal audit department reviews the compliance of AGF
Trust's interest rate risk management policies and procedures. Internal audit
reports are presented to the Audit Committee of the Trust Board for review.
    For the AGF Trust Operations, the impact of a 1% change in interest rates
either up or down would result in a change of annual net interest income of
approximately $2.2 million for the year ended November 30, 2007.

    Liquidity risk

    Liquidity risk represents the possibility that AGF Trust may not be able
to gather sufficient cash resources when required and under reasonable
conditions to meet its financial obligations.
    AGF Trust's overall liquidity risk is managed by its treasury department
and is supervised by AGF Trust's Asset and Liability Management Committee and
the CFO of AGF Management Limited in accordance with the policies for
management of assets and liabilities, liquidity and loan financing activities.
These policies are primarily to ensure that AGF Trust has sufficient cash
resources to meet its current and future financial obligations in the regular
course of business and under a variety of conditions.
    Management monitors cash resources daily to ensure that AGF Trust's
liquidity measurements are within the limits established by policies. In
addition, management meets regularly to assess the timing of cash inflows and
outflows related to loan and deposit maturities. These meetings also encompass
AGF Trust's requirements to maintain cash resources to fund committed loans,
raise deposits and invest excess funds. AGF Trust maintains a prudent reserve
of unencumbered liquid assets that are readily available if required and
strives to maintain a stable volume of base deposits that originate from its
deposit brokerage clientele. AGF Trust also diversifies its financing sources
through the securitization of loans.
    The Company's internal audit department reviews the compliance of AGF
Trust's liquidity policies. Internal audit reports are presented to the Audit
Committee of the Trust Board for review.

    Managing Risk - Other Operations

    We are subject to foreign exchange risk on our integrated foreign
subsidiaries in Ireland and Singapore, which provide investment advisory
services. These subsidiaries retain minimal monetary exposure to the local
currency, their revenues are calculated in Canadian dollars and the local
currency expenses are comparatively small.
    We are subject to foreign exchange risk related to our 31.4% interest in
S&WHL, which is denominated in U.K. pounds. On our balance sheet, the
investment is presented in Canadian dollars using the exchange rate prevailing
on the balance sheet date.

    Financial Instruments

    Derivative financial instruments

    Interest rate and total return equity swap transactions designated as
hedging instruments are used by the Company for balance sheet matching
purposes and to reduce exposure to interest rate and share-based compensation
payout fluctuations. The changes in the fair value of derivative financial
instruments held for fair value hedging purposes and the changes in fair value
of the hedged items attributable to the hedged risk could result in
significant changes in the Consolidated Statements of Income and Comprehensive
Income. As at February 29, 2008, the aggregate notional amount of the swap
transactions was $3.0 billion and the aggregate fair value of the swap
transactions, which represents the net amount that would be received by the
Company if the transactions were terminated at February 29, 2008, was
$35.3 million.

    Fair value of financial instruments

    The fair value of a financial instrument is defined as the amount of
consideration for a financial instrument that would be agreed upon in an arm's
length transaction between knowledgeable, willing parties who are under no
compulsion to act. Quoted market prices are not available for a significant
portion of the Company's financial instruments. For these instruments, the
fair values presented are estimates derived using the present value or other
valuation techniques and may not be indicative of the net realizable value.

    Methods and assumptions used to estimate the fair value of financial
    instruments

    Short-term investments

    The carrying value of short-term investments represents their fair value
because they are classified as available for sale. Short-term investments are
valued based on quoted market values and include $18.4 million invested in AGF
mutual funds.

    Loans

    The estimated fair value of mortgage loans and finance loans is
determined by discounting the future cash flow at prevailing interest rates.
Due to the variable pricing of investment loans, RRSP loans, and HELOC
receivables, their carrying values are deemed to represent a reasonable
approximation of their fair values.

    Derivative instruments

    Derivative instruments used to manage the Company's exposure to interest
risks and share-based compensation payout are based on quoted values from the
related counterparties that represent the value that would be received or paid
by the Company if the transactions were terminated.

    Retained interest from securitizations

    The carrying value of retained interest from securitizations represents
the fair value because they are classified as available-for-sale assets. The
estimated fair value is determined by discounting future cash flow at
prevailing interest rates for 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, ii) cash collateral, and iii)
over-collateralization.

    Deposits

    The carrying value of demand deposits and short-term deposits represents
a reasonable approximation of their fair value due to their relatively short
term to maturity. The estimated fair value of GICs is determined by
discounting the future cash flow at prevailing interest rates.

    Other financial assets and liabilities

    Other financial assets are comprised primarily of interest receivables
and include accounts receivables. Other financial liabilities are comprised
primarily of interest payable and include accounts payable. The carrying
amounts of other financial assets and liabilities are a reasonable estimate of
their fair value due to the relatively short collection or payment period.

    
    Selected Quarterly Information

    -------------------------------------------------------------------------
    ($ millions, except
     per share amounts)
    For the three-month    Feb. 29,      Nov. 30,      Aug. 31,       May 31,
     period ended             2008          2007          2007          2007
    -------------------------------------------------------------------------
    Revenue (continuing
     operations)       $     194.3   $     199.1   $     199.2   $     204.9
    Cash flow from
     continuing
     operations(1)            82.3          90.7          69.7          84.4
    EBITDA (continuing
     operations)(2)           89.5          87.5          91.3          98.0
    Pre-tax income
     (continuing
     operations)              56.6          53.9          57.3          63.3
    Net income                62.7          49.4          39.4          53.6

    Earnings per share
      Basic            $      0.70   $      0.55   $      0.44   $      0.60
      Diluted          $      0.70   $      0.54   $      0.43   $      0.59

    Weighted average
     basic shares       89,039,394    90,200,924    90,299,033    89,740,819
    Weighted average
     fully diluted
     shares             89,807,506    91,566,659    91,847,103    91,012,708
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    ($ 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   $     158.5   $     146.9   $     152.2
    Cash flow from
     operations(1)            68.7          53.1          60.2          52.5
    EBITDA (continuing
     operations)(2)           80.4          60.3          56.2          64.6
    Pre-tax income
     (continuing
     operations)              49.1          26.2          22.8          30.9
    Net income                36.3          21.0          34.6          33.0

    Earnings per share
      Basic            $      0.41   $      0.24   $      0.39   $      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
    -------------------------------------------------------------------------
    (1) Cash flow from operations before net change in non-cash balances
        related to operations.
    (2) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" 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 29, 2008, our 2007 annual MD&A and Consolidated Financial
Statements, our 2007 AIF and other documents filed with applicable securities
regulators in Canada, which may be accessed at www.sedar.com.



    
                           AGF Management Limited
                         Consolidated Balance Sheets

    -------------------------------------------------------------------------
                                                   February 29,  November 30,
    (in thousands of dollars)                             2008          2007
                                                    (unaudited)     (audited)
    -------------------------------------------------------------------------
    Assets
      Current Assets
        Cash and cash equivalents                  $   690,372   $   827,874
        Short-term investments available for sale      144,191        26,149
        Accounts receivable and prepaid expenses        82,107        93,141
        Current portion of retained interest from
         securitization (note 2)                         7,416         7,501
        Real estate secured and investment loans
         due within one year (note 7)                  588,945       492,756
    -------------------------------------------------------------------------
                                                     1,513,031     1,447,421

      Retained interest from securitization (note 2)    42,471        43,424
      Real estate secured and investment
       loans (note 7)                                3,467,292     3,187,605
      Investment in associated company                  97,567       102,600
      Management contracts                             504,269       504,269
      Customer contracts, net of accumulated
       amortization                                     63,653        65,805
      Deferred selling commissions, net of
       accumulated amortization                        315,987       315,275
      Property, equipment and computer software,
       net of accumulated amortization                  20,692        20,812
      Goodwill                                         180,058       180,058
      Trademarks                                         1,935         1,935
      Other assets                                      36,862         7,608
    -------------------------------------------------------------------------
    Total assets                                   $ 6,243,817   $ 5,876,812
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
      Current Liabilities
        Accounts payable and accrued liabilities   $   228,154   $   261,115
        Future income taxes (note 12)                   41,648        48,304
        Long-term debt due within one year (note 8)     24,762        25,611
        Deposits due within one year (note 7)        2,088,419     1,847,494
    -------------------------------------------------------------------------
                                                     2,382,983     2,182,524

      Deposits (note 7)                              2,294,857     2,235,848
      Long-term debt (note 8)                          259,107       184,486
      Future income taxes (note 12)                    189,730       202,923
      Other long-term liabilities                        2,093         1,638
    -------------------------------------------------------------------------
    Total liabilities                                5,128,770     4,807,419
    -------------------------------------------------------------------------

      Non-controlling interest                             235           391

      Shareholders' equity
        Capital stock (note 9)                         431,393       421,923
        Contributed surplus (note 9)                    13,818        14,948
        Retained earnings                              680,222       635,369
        Accumulated other comprehensive income         (10,621)       (3,238)
    -------------------------------------------------------------------------
    Total shareholders' equity                       1,114,812     1,069,002
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity     $ 6,243,817   $ 5,876,812
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
                      Consolidated Statements of Income


    -------------------------------------------------------------------------
    Three months ended                             February 29,  February 28,
    (in thousands of dollars)                             2008          2007
    (unaudited)                                                      (note 3)
    -------------------------------------------------------------------------
    Revenue
      Management and advisory fees                 $   156,417   $   150,883
      Deferred sales charges                             6,175         4,850
      Gain on sale of RSP loan securitization and
       related income                                      759           661
      Investment income and other revenue                8,199         3,145
    -------------------------------------------------------------------------
                                                       171,550       159,539
    -------------------------------------------------------------------------
        AGF Trust interest income (note 11)             76,752        47,215
        AGF Trust interest expense (note 11)           (53,956)      (29,724)
    -------------------------------------------------------------------------
      AGF Trust net interest income                     22,796        17,491
    -------------------------------------------------------------------------
    Total Revenue                                      194,346       177,030
    -------------------------------------------------------------------------

    Expenses
      Selling, general and administrative               55,959        51,496
      Trailing commissions                              41,836        38,434
      Investment advisory fees                           3,951         4,041
      Amortization of deferred selling commissions      26,054        26,515
      Amortization of customer contracts                 2,152         1,479
      Amortization of property, equipment, computer
       software and other intangible assets              1,661         2,305
      Interest expense                                   3,022         1,047
      Provision for AGF Trust loan losses                3,062         2,695
    -------------------------------------------------------------------------
                                                       137,697       128,012

    Income from continuing operations before income
     taxes and non-controlling interest                 56,649        49,018

    Income tax expense (reduction) (note 12)
      Current                                           12,106        13,664
      Future                                           (18,261)       (2,928)
    -------------------------------------------------------------------------
                                                        (6,155)       10,736
    -------------------------------------------------------------------------

    Non-controlling interest (note 4)                      145           220

    -------------------------------------------------------------------------
    Net income from continuing operations for the
     period                                             62,659        38,062
    -------------------------------------------------------------------------
    Loss on dissolution of Limited Partnerships, net
     of tax (note 6)                                         -        (2,128)
    Net earnings from discontinued operations, net of
     tax (note 3)                                            -           382
    -------------------------------------------------------------------------
    Net income for the period                      $    62,659   $    36,316
    -------------------------------------------------------------------------

    Earnings per share (note 9)
      Basic from continuing operations             $      0.70   $      0.43
      Diluted from continuing operations           $      0.70   $      0.42
      Basic                                        $      0.70   $      0.41
      Diluted                                      $      0.70   $      0.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
         Consolidated Statements of Changes in Shareholders' Equity


    -------------------------------------------------------------------------
                                                   February 29,  February 28,
    (in thousands of dollars)                             2008          2007
    (unaudited)
    -------------------------------------------------------------------------

    Common shares
      Balance, beginning of period                 $   421,923   $   403,566
      Issued through dividend reinvestment plan            533           662
      Stock options exercised                            3,821         2,605
      Issued on acquisition of Highstreet Partners
       Ltd. (note 4)                                     5,116         5,672
    -------------------------------------------------------------------------
      Balance, end of period                           431,393       412,505
    -------------------------------------------------------------------------

    Contributed surplus
      Balance, beginning of period                      14,948        10,470
      Stock options                                     (1,130)        1,151
    -------------------------------------------------------------------------
      Balance, end of period                            13,818        11,621
    -------------------------------------------------------------------------

    Retained earnings
      Balance, beginning of period                     635,369       565,576
        Transitional adjustment on adoption of new
         accounting policies                                 -           (25)
    -------------------------------------------------------------------------
      Balance, beginning of period, as restated        635,369       565,551
      Net income for the period                         62,659        36,316
      Dividends on AGF Class A voting common shares
       and AGF Class B non-voting shares               (17,806)      (16,094)
    -------------------------------------------------------------------------
      Balance, end of period                           680,222       585,773
    -------------------------------------------------------------------------

    Accumulated other comprehensive income (loss)
      Balance, beginning of period                      (3,238)        3,792
      Other comprehensive income (loss)                 (7,383)        2,057
    -------------------------------------------------------------------------
      Balance, end of period                           (10,621)        5,849
    -------------------------------------------------------------------------

    Total shareholders' equity                     $ 1,114,812   $ 1,015,748
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
               Consolidated Statements of Comprehensive Income

    -------------------------------------------------------------------------
    Three months ended                             February 29,  February 28,
    (in thousands of dollars)                             2008          2007
    (unaudited, note 1)
    -------------------------------------------------------------------------

    Net income                                     $    62,659   $    36,316
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other comprehensive income (loss), net of tax:
      Foreign currency translation adjustments
       related to net investments in self-sustaining
       foreign operations(1)                            (4,851)        1,598
      Net change in unrealized gain (loss) on
       available-for-sale securities(2)                 (1,443)          459
      Net change in unrealized gains (losses) on
       cash flow hedges(3)                              (1,089)            -
    -------------------------------------------------------------------------
    Total other comprehensive income (loss), net
     of tax                                             (7,383)        2,057
    -------------------------------------------------------------------------

    Comprehensive income                           $    55,276   $    38,373
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net of income tax reduction of $0.8 million for the three months
        ended February 29, 2008. Net of income tax expense of $0.3 million
        for the three months ended February 28, 2007.
    (2) Net of income tax reduction of $0.2 million for the three months
        ended February 29, 2008. Net of income tax expense of $0.1 million
        for the three months ended February 28, 2007.
    (3) Net of income tax reduction of $0.5 million for the three months
        ended February 29, 2008.
        (The accompanying notes are an integral part of these Consolidated
        Financial Statements.)



                           AGF Management Limited
                    Consolidated Statements of Cash Flow

    -------------------------------------------------------------------------
    Three months ended                             February 29,  February 28,
    (in thousands of dollars)                             2008          2007
    (unaudited)
    -------------------------------------------------------------------------
    Operating Activities
      Net income for the period                    $    62,659   $    36,316
      Loss on dissolution of limited partnerships,
       net of tax                                            -         2,128
      Loss (earnings) from discontinued operations,
       net of tax                                            -          (382)
    -------------------------------------------------------------------------
      Net income from continuing operations             62,659        38,062

      Items not affecting cash
        Amortization                                    29,867        30,299
        Future income taxes                            (18,261)       (2,928)
        Gain on sale of RSP loan securitization and
         related income, net of impairment                (759)         (661)
        Stock-based compensation                         2,359         1,558
        Provision for AGF Trust loan losses              3,062         2,695
        Other                                            3,425          (344)
    -------------------------------------------------------------------------
                                                        82,352        68,681
      Net increase in non-cash balances related to
       operations                                      (71,308)      (12,782)
    -------------------------------------------------------------------------
      Net cash provided by continuing operating
       activities                                       11,044        55,899
      Net cash provided (used) in discontinued
       operating activities                                  -          (254)
    -------------------------------------------------------------------------
      Net cash provided by operating activities         11,044        55,645
    -------------------------------------------------------------------------

    Financing Activities
      Issue of Class B non-voting shares                 1,943         3,267
      Dividends                                        (17,803)      (16,094)
      Increase in bank loan                             99,215        99,000
      Net increase in AGF Trust deposits               269,529       306,930
    -------------------------------------------------------------------------
      Net cash provided by continuing financing
       activities                                      352,884       393,103

    Investing Activities
      Deferred selling commissions paid                (26,766)      (43,694)
      Acquisition of Highstreet Partners Limited, net
       of cash acquired                                (20,784)      (19,873)
      Purchase of property, equipment and other
       intangible assets                                (1,541)         (776)
      Other investment activities                     (118,569)            -
      Net increase in AGF Trust mortgages and
       consumer loans                                 (333,770)     (445,370)
    -------------------------------------------------------------------------
      Net cash used in continuing investing
       activities                                     (501,430)     (509,713)
      Net cash used in discontinued investing
       activities of operations held for sale                -          (326)
    -------------------------------------------------------------------------
      Net cash used in investing activities           (501,430)     (510,039)
    -------------------------------------------------------------------------
    Decrease in cash and cash equivalents during
     the period                                       (137,502)      (61,291)

    Balance of cash and cash equivalents,
     beginning of period                               827,874       404,115
    -------------------------------------------------------------------------

    Balance of cash and cash equivalents, end of
     period                                        $   690,372   $   342,824
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents related to:
      Continuing operations                        $   690,372   $   342,129
      Discontinued operations                                -           695
    -------------------------------------------------------------------------
                                                   $   690,372   $   342,824
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
      Cash and cash equivalents                    $    68,066   $    37,225
      AGF Trust cash and cash equivalents              622,306       305,599
    -------------------------------------------------------------------------
                                                   $   690,372   $   342,824
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Refer to note 10 for supplemental cash flow information.
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)
    



    Notes to Consolidated Financial Statements

    For the three months ended February 29, 2008, and February 28, 2007
    (tabular amounts in thousands of dollars, except per share amounts)
    (unaudited)

    These unaudited Q1 2008 Consolidated Financial Statements of AGF
    Management Limited (AGF or the Company) have been prepared in accordance
    with Canadian generally accepted accounting principles (GAAP) using the
    same significant accounting policies as AGF's Consolidated Financial
    Statements for the year ended November 30, 2007. These financial
    statements do not contain all the disclosures required by Canadian GAAP
    for annual financial statements and should be read in conjunction with
    the Consolidated Financial Statements for the year ended November 30,
    2007, published in AGF's 2007 Annual Report. Certain comparative amounts
    in these financial statements have been reclassified to conform to the
    current year's presentation.

    Note 1: Change in Accounting Policy

    Capital Disclosures

    Effective December 1, 2007, the CICA's new accounting standard "Handbook
    Section 1535, Capital Disclosures" was adopted, which requires the
    disclosure of both qualitative and quantitative information to enable
    users of financial statements to evaluate the entity's objectives,
    policies and processes for managing capital. The new guidance did not
    have any impact on the financial position or earnings of the Company.
    Refer to Note 13.

    Financial Instruments Disclosures and Presentation

    Effective December 1, 2007, the accounting and disclosure requirements of
    the CICA's two new accounting standards were adopted: "Handbook Section
    3862, Financial Instruments - Disclosures" and "Handbook Section 3863,
    Financial Instruments - Presentation." The new guidance did not have any
    impact on the financial position or earnings of the Company. Refer to
    Note 14.

    Note 2: Securitization of AGF Trust Loans

    In 2006 and 2007 the Company, through its wholly owned subsidiary AGF
    Trust Company (AGF Trust), has securitized RSP loans through the sale of
    these loans to a securitization trust. As at February 29, 2008,
    $246.3 million (November 30, 2007 - $291.1 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 and are determined using the present value of future expected cash
    flows. A gain or loss on the sale of 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 $49.9 million
    (November 30, 2007 - $50.9 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
    $18.9 million (November 30, 2007 - $20.4 million), ii) cash collateral of
    $11.5 million (2007 - $11.3 million) and iii) over-collateralization of
    $19.5 million (2007 - $19.2 million).

    As at February 29, 2008, the impaired loans included in the securitized
    balances were equal to $0.6 million (November 30, 2007 - $0.7 million),
    and during the three months ended February 29, 2008, $0.7 million (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 are limited to the retained interests. For the
    three months ended February 29, 2008, cash flows of $2.3 million were
    received on the securitized loans, all of which was related to the
    interest-only strip. The total other income recognized from
    securitization during the three months ended February 29, 2008, was
    $1.0 million.

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

        Excess spread                                    3.1% - 3.9%
        Discount rate on interest-only strip             7.5%
        Expected credit losses                           0.8%
        Prepayment rate                                  16.3%
        Expected weighted average life of RSP loans      24 - 26 months
    

    The Trust Company retained servicing responsibilities for the securitized
    loans. A servicing liability of $1.6 million was recorded as at
    February 29, 2008 (November 30, 2007 - $1.8 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 29, 2008, was $0.2 million (2007 -
    $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 29, 2008. Since the sensitivity is
    hypothetical, it should be used with caution. The effect of changes in
    the fair value of retained interests was calculated using a discounted
    cash flow analysis.

    
    -------------------------------------------------------------------------
    (in thousands of dollars)
    -------------------------------------------------------------------------

      Discount rate
        +10%                                                     $       198
        +20%                                                             391
      Prepayment rate
        +10%                                                     $       338
        +20%                                                             657
      Expected credit losses
        +10%                                                     $       363
        +20%                                                             727
      Excess spread
        +10%                                                     $     1,630
        +20%                                                           3,229
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Note 3: Discontinued Operations and Assets Held for Sale

    On April 30, 2007, AGF sold 100% of Investmaster for $6.8 million and the
    additional contingent consideration that is not determinable at this
    time, recognizing a gain on the sale of $4.7 million. The purchase
    consideration included $5.0 million in cash and two notes receivable from
    the buyer, totalling $1.8 million, due on April 30, 2009, and April 30,
    2010, respectively. The contingent consideration will be payable to AGF
    in 2009 and 2010 if certain working capital and revenue targets are
    reached by Investmaster. Accordingly, Investmaster's operations for the
    2007 period have been reported as discontinued operations.

    
    -------------------------------------------------------------------------
    Three months ended                                           February 28,
    (in thousands of dollars, except per share amounts)                 2007
    -------------------------------------------------------------------------

    Revenue                                                      $     3,603
    Net earnings (loss) from discontinued
     operations, net of tax                                      $       382
    Basic net earnings per share                                 $         -
    Diluted net earnings per share                               $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Note 4: Acquisition of Highstreet Partners Ltd.

    On December 1, 2006, AGF 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 issue of Class
    B non-voting shares (Class B shares). As at February 29, 2008, AGF has
    made payments of $41.0 million in cash and $10.8 million through the
    issue of 439,191 AGF Class B shares, which approximates 66.6% of the
    purchase price. An additional payment of $25.9 million (principal and
    imputed interest) is due on February 28, 2009, for total minimum
    consideration, including acquisition costs, of $74.4 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 fair value of the net assets acquired and consideration paid are
    summarized as follows:

    -------------------------------------------------------------------------
    (in thousands of dollars)
    -------------------------------------------------------------------------

    Net assets acquired
      Cash                                                       $       354
      Other assets                                                     3,011
      Management contracts                                            26,010
      Customer contracts                                              14,160
      Goodwill                                                        45,895
      Trademarks                                                       1,935
      Current liabilities                                             (2,955)
      Future income taxes                                            (14,014)
    -------------------------------------------------------------------------
                                                                 $    74,396
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration paid (including acquisition costs)
      Cash                                                       $    20,228
      Issue of Class B shares (note 9)                                 5,672
      Payments subsequent to acquisition date (note 8)                47,896
      Acquisition costs                                                  600
    -------------------------------------------------------------------------
                                                                 $    74,396
    -------------------------------------------------------------------------
    

    Note 5: Acquisition of Cypress Capital Management Ltd.

    On June 30, 2004, AGF acquired 100% of the shares of Cypress. At the time
    of purchase, contingent consideration of up to $9.0 million was due to
    the vendors, subject to Cypress achieving certain revenue levels over the
    three-year period ended June 30, 2007. During 2007, AGF determined that
    these revenue levels were exceeded, and the consideration of $9.0 million
    was paid. The payment consisted of $7.8 million in cash and the issue of
    33,367 Class B non-voting shares valued at $1.2 million. The payment was
    recorded as an increase in goodwill on June 30, 2007.

    Note 6: 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 LP. On
    March 1, 2007, as part of the LP dissolution process, AGF purchased the
    future distribution fees remaining payable by AGF to the LPs or purchased
    the outstanding units for total cash consideration of $3.2 million
    ($2.1 million net of taxes). As a result of the aforementioned
    transaction, no further distribution will be made to these LPs.

    Note 7: AGF Trust

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

    
    -------------------------------------------------------------------------
                       Term to contractual repricing
                  -----------------------------------------------------------
    (in thousands   Variable   1 year or      1 to 5    February    November
     of dollars)        rate        less       years    29, 2008    30, 2007
    -------------------------------------------------------------------------

    Mortgage
     loans        $    1,567  $  559,137  $  817,537  $1,378,241  $1,326,327
    Home equity
     lines of
     credit (HELOC)  504,591           -           -     504,591     449,151
    -------------------------------------------------------------------------
    Total real
     estate secured
     loans           506,158     559,137     817,537   1,882,832   1,775,478
    Investment
     loans         2,168,673       5,355       9,668   2,183,696   1,914,686
                  -----------------------------------------------------------
                   2,674,831     564,492     827,205   4,066,528   3,690,164
                  -----------------------------------
                  -----------------------------------
    Less: allowance
     for loan losses                                     (18,696)    (17,137)
    Add: net
     deferred sales
     commissions and
     commitment fees                                       8,405       7,334
                                                      -----------------------
                                                       4,056,237   3,680,361
    Less: current
     portion                                            (588,945)   (492,756)
                                                      -----------------------
                                                      $3,467,292  $3,187,605
                                                      -----------------------
                                                      -----------------------
    Impaired loans
     included in above                                $   27,386  $   25,821
    Less: specific
     allowance for
     loan losses                                          (1,836)     (1,860)
                                                      -----------------------
                                                      $   25,550  $   23,961
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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 29, 2008,
        were $588.9 million (November 30, 2007 - $492.8 million).

        As at February 29, 2008, the AGF Trust's mortgage portfolio comprises
        a combination of fixed rate and variable rate residential mortgages,
        of which $582.7 million (November 30, 2007 - $563.5 million) is
        insured, with a weighted average term to repricing of 2.0 years
        (November 30, 2007 - 2.0 years) and a weighted average yield of 7.28%
        (November 30, 2007 - 7.20%). Investment loans have interest rates
        based on prime. As at February 29, 2008, the average interest rate on
        HELOCs was 5.80% (November 30, 2007 - 6.30%) and on investment loans
        was 7.07% (November 30, 2007 - 7.60%). Mortgage and HELOC loans are
        secured primarily by residential real estate. Investment loans are
        secured by the investment made using the initial loan proceeds.

    (b) Past Due Loans but Not Impaired

        Loans are considered to be past due where repayment of principal or
        interest is contractually in arrears. The following table provides an
        aging analysis of loans that are past due but not impaired:

        ---------------------------------------------------------------------
        (in thousands of dollars)
        as at                                  31 to       61 to
        February 29, 2008                    60 days     90 days       Total
        ---------------------------------------------------------------------

        Mortgage loans                    $   19,021  $    8,683  $   27,704
        Investment loans                       2,897         943       3,840
        RSP loans                              1,889       1,000       2,889
        HELOC receivable                       1,176       1,211       2,387
        ---------------------------------------------------------------------
                                          $   24,983  $   11,837  $   36,820
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        (in thousands of dollars)
        as at                                  31 to       61 to
        November 30, 2007                    60 days     90 days       Total
        ---------------------------------------------------------------------

        Mortgage loans                    $   15,840  $   12,297  $   28,137
        Investment loans                       1,882         580       2,462
        RSP loans                              2,796       1,260       4,056
        HELOC receivable                         970         294       1,264
        ---------------------------------------------------------------------
                                          $   21,488  $   14,431  $   35,919
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    (c) Allowance for Credit Losses

    -------------------------------------------------------------------------
                         February 29, 2008            November 30, 2007
                 ------------------------------------------------------------
                  Specific   General     Total  Specific   General     Total
    (in thousands   allow-    allow-    allow-    allow-    allow-    allow-
     of dollars)     ances     ances     ances     ances     ances     ances
    -------------------------------------------------------------------------

    The change in
     the allowance
     for loan
     losses is as
     follows:
      Balance,
       beginning
       of period  $  1,860  $ 15,277  $ 17,137  $  1,545  $ 14,101  $ 15,646
      Amounts
       written off  (1,638)        -    (1,638)   (2,073)        -    (2,073)
      Recoveries       135         -       135       166         -       166
      Reduction due
       to RSP loan
       securitization    -         -                   -         -         -
      Provision for
       loan losses
       less insurance
       premium       1,479     1,583     3,062     2,222     1,176     3,398
    -------------------------------------------------------------------------
                  $  1,836  $ 16,860  $ 18,696  $  1,860  $ 15,277  $ 17,137
    -------------------------------------------------------------------------


    (d) AGF Trust Deposits

    -------------------------------------------------------------------------
                             Term to maturity
                  -----------------------------------------------------------
    (in thousands              1 year or      1 to 5    February    November
     of dollars)      Demand        less       years    29, 2008    30, 2007
    -------------------------------------------------------------------------

    Deposits      $    7,081  $2,081,338  $2,310,960  $4,399,379  $4,099,663
    Less: deferred
     selling
     commissions                                         (16,103)    (16,321)
    Less: current
     portion                                          (2,088,419) (1,847,494)
    -------------------------------------------------------------------------
    Long-term deposits                                $2,294,857  $2,235,848
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


        As at February 29, 2008, deposits were substantially comprised of
        GICs with a weighted average term to maturity of 1.7 years
        (November 30, 2007 - 1.8 years) and a weighted average interest rate
        of 4.41% (November 30, 2007 - 4.38%).

    (e) Interest Rate Swaps

        To hedge its exposure to fluctuating interest rates, AGF Trust has
        entered into interest rate swap transactions with four Canadian
        chartered banks, as noted below. The swap transactions expire between
        March 2008 and July 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 fair value hedging instruments for deposits are used by AGF Trust
        for balance sheet matching purposes and to mitigate net interest
        revenue volatility. As at February 29, 2008, the aggregate notional
        amount of the swap transactions was $3.0 billion (November 30, 2007 -
        $2.8 billion). The aggregate fair value of the swap transactions,
        which represents the amount that would be received by AGF Trust if
        the transactions were terminated at February 29, 2008, was
        $38.4 million (November 30, 2007 - $6.7 million).

    -------------------------------------------------------------------------
                                                              Fixed interest
     Notional amount of swap      Fair Value   Maturity date   rate received
    -------------------------------------------------------------------------
    (in thousands of dollars)
          $  1,222,000          $      5,652       2008        3.17% - 4.83%
               727,000                 8,728       2009        3.30% - 4.97%
               575,000                11,586       2010        3.45% - 5.05%
               355,000                10,332       2011        3.94% - 5.08%
                85,000                 2,130       2012        4.06% - 5.01%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (f) Interest Rate Sensitivity

        For AGF Trust, the impact of a 1% change in interest rates either up
        or down would be an increase or decrease of annual net interest
        income of approximately $3.1 million. This sensitivity analysis is
        based on an immediate parallel shift of the yield curve and assumes
        no change in the repricing profile of the balance sheet after the
        balance sheet date.


    Note 8: Long-Term Debt

    -------------------------------------------------------------------------
                                                    February 29, November 30,
    (in thousands of dollars)                              2008         2007
    -------------------------------------------------------------------------

    Revolving term loan                              $  259,107   $  160,000

    Payment related to acquisition of
     Highstreet Partners Ltd. (note 4)
      February 28, 2008                                       -       25,611
      February 28, 2009                                  24,762       24,486
    -------------------------------------------------------------------------
                                                        283,869      210,097

    Less: amount included in current liabilities         24,762       25,611
    -------------------------------------------------------------------------

                                                     $  259,107   $  184,486
    -------------------------------------------------------------------------


    (a) Revolving Term Loan

        The Company has arranged a six-year prime-rate-based revolving term
        loan to a maximum of $300.0 million (November 30, 2007 -
        $300.0 million) with a Canadian chartered bank. Under the loan
        agreement, AGF is permitted to draw down 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, 2008. However, AGF may
        request by April 15, 2008, 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 the principal outstanding.

        As at February 29, 2008, AGF has drawn $259.1 million (2007 -
        $160.0 million) against the available loan amount in the form of 1-
        to 31-day BAs at an effective average interest rate of 4.58% per
        annum.

        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 AGF 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, AGF acquired 79.9% of Highstreet (Note 4). On
        February 29, 2008, a payment of $25.9 millon was paid.  The payment
        consisted of $20.8 million in cash and the issuance of 215,883 Class
        B shares valued at $5.1 million. A final payment of $25.9 million,
        which includes principal and imputed interest at the rate of 4.5% per
        annum, is due to the vendors on February 28, 2009, and will be
        satisfied through a combination of cash and Class B shares.

    Note 9: Capital Stock

    (a) Authorized Capital

        The authorized capital of AGF consists of an unlimited number of
        Class B non-voting shares (Class B shares) and an unlimited number of
        Class A voting common shares (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 29, 2008, and 2007 is as follows:

                              -----------------------------------------------
                                  Three months ended      Three months ended
                                   February 29, 2008       February 28, 2007
                              -----------------------------------------------
    (in thousands of dollars,                 Stated                  Stated
     except per share amounts)    Shares       value      Shares       value
    -------------------------------------------------------------------------

    Class A shares                57,600  $        -      57,600  $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Class B shares
      Balance, beginning
       of period              88,922,157  $  421,923  89,171,997  $  403,566
      Issued through dividend
       reinvestment plan          19,156         533      25,711         662
      Stock options exercised     72,900       3,821     136,450       2,605
      Issued on acquisition
       of a subsidiary
       (note 4)                  215,883       5,116     225,116       5,672
    -------------------------------------------------------------------------
      Balance, end of period  89,230,096  $  431,393  89,559,274  $  412,505
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (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, 2009.
        Under this normal course issuer bid, AGF may purchase up to 10% of
        the public float outstanding on the date of the receipt of regulatory
        approval or up to 7,253,822 shares. No Class B shares were purchased
        during the three months ended February 29, 2008, and February 28,
        2007.

    (d) Stock Option Plans

        AGF has established stock option plans for senior employees under
        which stock options to purchase an aggregate maximum of 6,544,502
        Class B shares could have been granted as at February 29, 2008
        (2007 - 7,310,066). 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 29, 2008, and 2007 is summarized as follows:

                              -----------------------------------------------
                                  Three months ended      Three months ended
                                   February 29, 2008       February 28, 2007
                              -----------------------------------------------
                                            Weighted                Weighted
                                             average                 average
                                            exercise                exercise
                                 Options       price     Options       price
    -------------------------------------------------------------------------

    Class B share options
      Balance, beginning
       of period               4,268,765  $    22.50   4,324,084  $    19.93
      Options granted                  -         n/m           -         n/m
      Options cancelled          (12,167)      18.30     (14,200)      21.75
      Options exercised          (72,900)      19.34    (136,450)      19.09
    -------------------------------------------------------------------------
      Balance, end of period   4,183,698  $    22.57   4,173,434  $    19.94
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


        During the three months ended February 29, 2008, AGF did not grant
        any options (2007 - nil) and recorded $1.3 million (2007 -
        $1.2 million) in compensation expense and contributed surplus.

    (e) Restricted Share Unit (RSU) and Performance Share Unit (PSU) Plans

        Under the Company's RSU and PSU plans, certain senior employees are
        issued either RSUs or PSUs. These units vest three years from the
        grant date provided the employee meets certain performance criteria.
        On the vesting dates, AGF will redeem all of the participants' share
        units in cash equal to the value of one Class B share for each RSU or
        PSU as applicable.

        The changes in share units during the three months ended February 29,
        2008, and February 28, 2007, are as follows.

    -------------------------------------------------------------------------
    Three months ended             February 29, 2008       February 28, 2007
                            -------------------------------------------------
                                            Weighted                Weighted
                                             average                 average
                               Number of  grant date   Number of  grant date
                             share units  fair value share units  fair value
    -------------------------------------------------------------------------
    Outstanding, beginning
     of the year
      Non-vested                 345,257  $    29.65     142,992  $    23.33
      Vested                           -                       -
    Issued
      Initial allocation               -                       -
      In lieu of dividends         2,758                   1,000
    Vested                             -                       -
    Settled in cash                    -                       -
    Forfeited and cancelled       (4,798)                      -
    -------------------------------------------------------------------------
    Outstanding,
     end of the year             343,217                 143,992
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


        Compensation expense for the three months ended February 29, 2008,
        related to these units was $1.0 million (2007 - $0.4 million). AGF
        has entered into swap agreements to fix the cost of compensation
        related to certain RSUs and PSUs. Compensation expense includes the
        effect resulting from the change in fair value of the swap held to
        economically hedge the RSU and PSU plans. As at February 29, 2008,
        AGF has hedged 303,045 share units at a fixed cost between $31.28 and
        $35.07.

    (f) Deferred Share Unit (DSU) Plan

        The Company has established a DSU plan for non-employee directors.
        The plan enables AGF directors to elect to receive their remuneration
        in DSUs. On termination, AGF will redeem all of the participants'
        DSUs in cash or shares equal to the value of one Class B share at the
        termination date for each DSU. There is no unrecognized compensation
        related to directors' DSUs since these awards vest immediately when
        granted. As at February 29, 2008, 11,591 (2007 - nil) DSUs were
        outstanding. Compensation expense related to these DSUs for the three
        months ended February 29, 2008, was $0.1 million (2007 - 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 ended
    (in thousands of dollars,                       February 29, February 28,
     except per share amounts)                             2008         2007
    -------------------------------------------------------------------------

    Numerator
      Net income from continuing
       operations for the period                     $   62,659   $   38,062
      Loss on dissolution of partnerships,
       net of tax (note 6)                                    -       (2,128)
      Net earnings from discontinued operations,
       net of tax (note 3)                                    -          382
    -------------------------------------------------------------------------
      Net income for the period                      $   62,659   $   36,316

    Denominator
      Weighted average number of shares - basic      89,039,394   89,474,827
      Dilutive effect of employee stock options         768,112    1,165,907
    -------------------------------------------------------------------------
      Weighted average number of shares - diluted    89,807,506   90,640,734

    Earnings per share
      Basic from continuing operations               $     0.70   $     0.43
      Diluted from continuing operations             $     0.70   $     0.42
      Basic                                          $     0.70   $     0.41
      Diluted                                        $     0.70   $     0.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 10: Supplemental Disclosure of Cash Flow Information

    Interest payments for the three months ended February 29, 2008, were
    $50.7 million (2007 - $30.7 million). Income tax payments for the
    three months ended February 29, 2008, were $14.0 million (2007 -
    $8.5 million).

    Note 11: AGF Trust Net Interest Income

    The breakdown of net interest income is as follows:

    -------------------------------------------------------------------------
    Three months ended                              February 29, February 28,
    (in thousands of dollars)                              2008         2007
    -------------------------------------------------------------------------

    AGF Trust interest income:
      Loan interest                                  $   66,497   $   43,155
      Investment interest                                10,255        4,060
    -------------------------------------------------------------------------
                                                         76,752       47,215

    AGF Trust interest expense:
      Deposit interest                                   47,144       26,417
      Other interest expense                              6,812        3,307
    -------------------------------------------------------------------------
                                                         53,956       29,724

    -------------------------------------------------------------------------
    AGF Trust net interest income                    $   22,796   $   17,491
    -------------------------------------------------------------------------

    Note 12: Income Tax

    On October 30, 2007, the Department of Finance proposed to reduce the
    federal corporate income tax rate to 15% from 18.5% by January 1, 2012.
    The change was substantially enacted in December 2008. Consequently, the
    Company recognized a $19.5 million reduction in future income tax
    liabilities.

    Note 13: Capital Management

    Objective, policies and procedures

    The Company's objectives when managing capital are to:

    -   Provide returns for shareholders through the payment of dividends,
        the repurchase of Class B shares and the reasonable use of leverage.

    -   Ensure that AGF Trust maintains the level of capital to meet the
        requirements of its regulator, the Office of the Superintendent of
        Financial Institutions Canada (OSFI).
    

    Our capital is primarily derived from the common shareholders and
    retained earnings. The Executive Committee of AGF is responsible for the
    management of capital. The Board of Directors of AGF is responsible for
    overseeing the Company's capital policy and management. The Company
    reviews its five-year capital plan annually.

    AGF Trust's regulatory capital requirements are determined in accordance
    with guidelines issued by the OSFI. The OSFI guidelines are based on a
    framework of risk-based capital standards developed by the Bank for
    International Settlements (BIS). Effective January 1, 2008, AGF Trust is
    monitoring its regulatory capital based on the BIS regulatory risk-based
    capital framework (Basel II). BIS standards require that AGF Trust
    maintain minimum Tier 1 and Total capital ratios of 4% and 8%,
    respectively. The OSFI has established that Canadian deposit-taking
    financial institutions maintain Tier 1 and Total capital ratios of at
    least 7% and 10%, respectively. During the quarter, AGF Trust has
    complied with these regulatory capital requirements.

    A capital plan prepared annually specifies the target capital ratios by
    taking into account the projected risk-weighted asset levels and expected
    capital management initiatives. Regulatory capital ratios are reported
    monthly to management. Regulatory capital ratio monitoring reports are
    provided on a quarterly basis to AGF Trust's Board of Directors.

    
    Regulatory capital is detailed as follows:

    -------------------------------------------------------------------------
                                                          As at        As at
                                                    February 29, November 30,
    ($ thousands)                                          2008       2007(1)
    -------------------------------------------------------------------------

    Tier 1 capital
      Common shares                                  $   82,768   $   82,768
      Contributed surplus                                 1,019          910
      Retained earnings                                  88,641       79,863
      Non-cumulative preferred shares                    64,000       49,000
      Less: securitization and other                    (20,684)           -
    -------------------------------------------------------------------------
                                                        215,744      212,541
    Tier 2 capital
      Subordinated debentures                           109,500       89,500
      General allowances                                 16,860       15,277
      Less: securization and other                       (9,048)     (26,669)
    -------------------------------------------------------------------------
                                                        117,312       78,108

    -------------------------------------------------------------------------
    Total capital                                    $  333,056   $  290,649
    -------------------------------------------------------------------------

    (1) Information based on capital adequacy requirements in force at that
        date.
    

    Note 14: Risk management

    The risk management policies and procedures of the Company relating to
    credit, market and liquidity risks are provided in the "Managing Risk"
    section of the Management's Discussion & Analysis for the three months
    ended February 29, 2008, which are an integral part of the Q1 2008
    Consolidated Financial Statements.

    Note 15: Segment Information

    AGF has three reportable segments: Investment Management Operations,
    Trust Company Operations and Other. The reportable segments are strategic
    business units that offer different products and services. The Investment
    Management Operations segment provides investment management and advisory
    services and is responsible for the management and distribution of AGF
    investment products. AGF Trust Company offers a wide range of trust
    services, including GICs, term deposits, real estate secured loans,
    investment loans and HELOC loans. The results of S&WHL are included in
    Other.

    The results of the reportable segments are based on AGF's internal
    financial reporting systems. The accounting policies used in these
    segments are generally consistent with those described in the "Summary of
    Significant Accounting Policies" detailed in AGF's 2007 Annual Report.

    
    -------------------------------------------------------------------------
    (in thousands
     of dollars)              Investment       Trust
    Three months ended        Management     Company
    February 29, 2008         Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue                   $  165,228  $   27,310  $    1,808  $  194,346
    Operating expenses            90,423      14,385           -     104,808
    Amortization and other        29,415         452       3,022      32,889
    -------------------------------------------------------------------------
    Segment income (loss)
     from continuing
     operations before taxes  $   45,390  $   12,473  $   (1,214) $   56,649

    Total assets              $1,329,913  $4,913,904  $        -  $6,243,817
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    (in thousands
     of dollars)              Investment       Trust
    Three months ended        Management     Company
    February 28, 2007         Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue                   $  156,482  $   19,268  $    1,280  $  177,030
    Operating expenses            85,513      11,153           -      96,666
    Amortization and other        29,994         305       1,047      31,346
    -------------------------------------------------------------------------
    Segment income from
     continuing operations
     before taxes             $   40,975  $    7,810  $      233  $   49,018

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

    Conference Call

    AGF will host a conference call to review its earnings results today at
11:00 a.m. EST. The live audio webcast with supporting materials will be
available in the Investor Relations section of AGF's website at www.agf.com or
at http://webcast.streamlogics.com/audience/index.asp?eventid=78485.
    Alternatively, the call can be accessed by dialing 1-888-825-9691
(toll-free in North America). A complete archive of this discussion, along
with supporting materials, will be available at the same webcast address by
5:00 p.m. EST.

    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. 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 Asset Management Group services for institutional and
high-net-worth clients, as well as AGF Trust GICs, loans and mortgages. With
over $49 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.





For further information:

For further information: AGF Management Limited shareholders and
analysts, please contact: Greg Henderson, CA, Senior Vice-President and Chief
Financial Officer, (416) 865-4156, greg.henderson@AGF.com

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