AGF MANAGEMENT LIMITED REPORTS SECOND QUARTER FINANCIAL RESULTS

AGF reports 20.8% increase in assets under management and an increase to the quarterly dividend

Net income increases 18.9% to $32.7 million

TORONTO, June 22, 2011 /CNW/ - AGF Management Limited (AGF) today announced financial results for the second quarter ended May 31, 2011, with net income of $32.7 million, up 18.9% or $5.2 million from net income of $27.5 million reported in the second quarter of 2010. The increase was the result of higher Investment Management Operations revenue corresponding to higher average levels of AUM, including the acquisition of Acuity.

Earnings per share in the second quarter of 2011, on a diluted basis, were $0.34 compared to $0.30 in the second quarter of 2010. Excluding the one-time acquisition and integration costs related to Acuity in the second quarter of 2011 and one-time charges related to Smith & Williamson Holdings Limited in the second quarter of 2010, adjusted earnings per share were $0.37 compared to $0.35, an increase of 5.7%.

On June 21, 2011, the Board of Directors of AGF declared an increase in the quarterly dividend on both the Class A Voting common shares and Class B Non-Voting shares from $0.26 per share to $0.27 per share, representing an annualized dividend of $1.08 per share, an increase of 3.8%. The dividend will be payable July 20, 2011, to shareholders of record July 8, 2011.

"With the announcement of an increase in our dividends paid to shareholders for the 14th consecutive year, we are exemplifying our commitment to returning value to shareholders and paying an attractive dividend yield," said Chairman and CEO Blake C. Goldring. "We continue to achieve positive results from the Acuity acquisition with the integration and synergies surpassing our original expectations."

Total assets under management (AUM) increased 20.8% to $51.8 billion at May 31, 2011, from $42.9 billion at May 31, 2010, as a result of the acquisition of Acuity and global market improvements. Total retail fund AUM, including retail pooled funds, increased 22.7% to $26.2 billion at the end of May 2011 compared to $21.4 billion the prior year. Institutional and sub-advisory accounts AUM increased 19.2% to $22.1 billion from $18.5 billion a year earlier. High-net-worth AUM increased 16.5% year-over-year to $3.5 billion from $3.0 billion.

During the quarter, total consolidated revenue increased to $180.1 million compared to $153.8 million in the second quarter of last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) totalled $75.4 million for the three months ended May 31, 2011, an increase of 20.4% compared to $62.6 million for the three months ended May 31, 2010. For the second quarter of 2011, EBITDA margins improved to 41.9% from 40.7% in the same period a year earlier. Excluding the one-time costs mentioned above, adjusted EBITDA for the three months ended May 31, 2011, increased 16.0% to $79.0 million, while EBITDA margin increased to 44.0% from 42.7%.

AGF Trust loan assets declined 11.8% year-over-year to $3.0 billion as at May 31, 2011. Provision for loan losses decreased 36.7% and loan originations increased 118% to $87.0 million in the second quarter, compared to $39.9 million in the second quarter of 2010.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis (MD&A) 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, or future or conditional verbs such as 'may,' 'will,' 'should,' 'would' and 'could.' 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, business performance and opportunities. While we consider these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. 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 risk factors such as level of assets under our management, volume of sales and redemptions 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 and investment management 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. Other than specifically required by applicable laws, 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. For a more complete discussion of the risk factors that may impact actual results, please refer to the 'Risk Factors and Management of Risk' section of AGF's 2010 Annual Report MD&A.

Dear fellow shareholders

Since the acquisition of Acuity in February, we have achieved positive results with the integration of our business and the synergies are surpassing our original expectations. In May 2011, AGF Investments Inc. and Acuity Funds Ltd. fund mergers were approved at the special investor meetings. Our continued commitment to working in the best interest of investors and ensuring their needs are met remain foremost.

We continued our tradition and commitment to delivering value to our shareholders with the announcement of an increase in our dividends paid to shareholders for the 14th consecutive year from $0.26 per share to $0.27 per share per quarter, representing an annualized dividend of $1.08 per share. We continue to deliver an attractive yield as compared to other large, high-quality companies in the Canadian market.

With the addition of Acuity to the AGF family, total AUM at May 31, 2011, increased 20.8% to $51.8 billion compared to $42.9 billion in 2010. Revenue increased 17.1% to $180.1 million, compared to the same period in 2010, and EBITDA increased 20.4% to $75.4 million for the three months ended May 31, 2011, compared to $62.6 million a year earlier. During the quarter, we incurred $3.6 million in costs associated with the acquisition and integration of Acuity. Excluding these one-time costs, EBITDA increased 16.0% to $79.0 million, while EBITDA margin increased to 44.0% from 42.7%.

While AGF experienced retail net redemptions of $547.0 million compared to $477.0 million in the second quarter of last year, gross sales in the retail business were up 7.9% year-over-year. On the institutional side of the business, investors continued to show strong interest in placing new mandates and we are encouraged by these trends.

Our earnings per share in the second quarter of 2011, on a diluted basis, were $0.34 compared to $0.30 in the second quarter of 2010. Excluding the one-time costs, diluted earnings per share were $0.37 in the second quarter of 2011 compared to $0.35 in 2010.

AGF Trust experienced an 11.8% decline in loan assets compared to the second quarter of 2010, while loan originations were 118% higher and provision for loan losses decreased 36.7%. AGF Trust remains focused on quality growth through its mortgage broker channel and leveraging strong relationships with financial advisors.

Our focus and commitment continues to be providing excellent products and services across all client segments and achieving our long-term objectives. We continue to build enduring relationships while delivering superior value to our shareholders, clients and unitholders.

    <<
    "Signed"

    Blake C. Goldring, M.S.M., CFA
    Chairman and Chief Executive Officer
    June 22, 2011

    (1) Cash flow from operations, free cash flow and EBITDA are non-GAAP
        measures. Please refer to page 18 of this report for definitions of
        these metrics.
    >>

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

For the three and six months ended May 31, 2011

This Management's Discussion and Analysis (MD&A) is as of June 22, 2011, and presents an analysis of the financial condition of AGF Management Limited and its subsidiaries (AGF) as at May 31, 2011, compared to November 30, 2010. The MD&A also includes the results of operations for the three and six months ended May 31, 2011, compared to the corresponding periods of 2010. This discussion should be read in conjunction with our 2010 Annual MD&A and Annual audited Consolidated Financial Statements and Notes. 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 2010 Annual MD&A: 'Risk Factors and Management of Risk,' 'Controls and Procedures,' 'Contractual Obligations' and 'Intercompany and Related Party Transactions.' The 'Key Performance Indicators and Non-GAAP Measures' section contains a reconciliation of non-GAAP measures to GAAP measures.

Overview

AGF Management Ltd. consists of two distinct businesses: AGF Investments and AGF Trust. AGF Investments, with $51.8 billion in assets under management (AUM) as at May 31, 2011, is one of the largest independent Canadian-based investment management firms, with operations and investments in Canada, the United States, the United Kingdom, Ireland and Asia. On February 1, 2011, we completed the acquisition of Acuity Funds Ltd. and Acuity Investment Management Inc. (Acuity), which added approximately $7.5 billion in AUM. AGF Trust, with $3.0 billion in loan assets as at May 31, 2011, offers mortgage, deposit and consumer lending products to clients of financial advisors and mortgage brokers.

The origin of our Company dates back to 1957 with the introduction of the American Growth Fund (AGF), the first mutual fund available to Canadians seeking to invest in the United States. As of May 31, 2011, our products and services include a diversified family of award-winning mutual funds, mutual fund wrap programs and pooled funds. AGF also manages assets on behalf of institutional investors including pension plans, foundations and endowments as well as for private clients. In addition, AGF Trust is a complementary business that offers GICs, loans and mortgages through financial advisor and mortgage broker channels.

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, institutional, sub-advisory 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 & Williamson Holdings Limited (S&WHL).

Strategy and Quarterly Overview

AGF Management Limited is committed to providing world-class financial solutions to clients in Canada and abroad. We look to expand our business through strategic acquisitions and organic growth while focusing on our key financial priorities to create long-term value for shareholders, clients and unitholders.

Our Investment Management Operations provide a diverse suite of investment solutions to retail, institutional and sub-advisory and high-net-worth clients. We are focused on delivering strong long-term investment performance and excellence in client service while continuing to build and maintain strong relationships with distribution partners.

Our Trust Company Operations complement our Investment Management Operations and contribute to the profitability of AGF Management Limited. AGF Trust supports the AGF brand through delivery of value-added products and services, effectively leveraging our advisor distribution channel.

During the second quarter of 2011:

    <<
    -   Total AUM increased 20.8% from $42.9 billion at May 31, 2010, to
        $51.8 billion at May 31, 2011, with the Acuity acquisition in the
        first quarter of 2011, adding approximately $7.5 billion in AUM.

    -   Retail fund gross sales increased 7.9% year-over-year.

    -   While redemptions continue to be a focus of the Company, a spike in
        redemption levels is typically expected after an acquisition. In the
        second quarter of 2011, retail fund net redemptions increased
        $97.0 million to $574.0 million compared to net redemptions of
        $477.0 million in the second quarter of last year.

    -   Revenue increased 17.1% to $180.1 million compared to the same period
        in 2010, driven by a 19.4% increase in Investment Management
        Operations revenue, which was related to higher year-over-year AUM
        levels, resulting from the acquisition of Acuity and improved
        markets.

    -   Earnings before interest, taxes, depreciation and amortization
        (EBITDA) increased 20.4% to $75.4 million from $62.6 million in the
        second quarter of 2010. EBITDA margin increased to 41.9% compared to
        40.7% in the second quarter of 2010.

    -   In May 2011, AGF Investments Inc. and Acuity Funds Ltd. announced the
        fund mergers were approved at the special investor meetings. In
        addition, the Company completed the fund accounting conversion
        related to the Acuity funds.

    -   As a result, the second quarter of 2011 included one-time expenses of
        $3.6 million in integration costs related to Acuity, while the second
        quarter of 2010 included one-time charges of approximately
        $5.5 million related to S&WHL. Excluding one-time expenses, adjusted
        EBITDA increased 16.0% to $79.0 million.

    -   Diluted EPS in the second quarter of 2011 was $0.34 per share
        compared to $0.30 per share in the second quarter of 2010. Excluding
        one-time costs referenced above, diluted EPS was $0.37 and $0.35.

    -   AGF Trust total loan assets declined 11.8% year-over-year, as real
        estate secured loan assets declined 14.4% and investment loans
        declined 10.3% year-over-year. Loan originations of $87.0 million
        were 118.0% higher than in the second quarter of 2010, due to higher
        volumes associated with the mortgage loan product.

    -   We delivered value directly to our shareholders through dividend
        payments. Dividends paid, including dividends reinvested, on Class A
        Voting common shares and Class B Non-Voting shares were $24.8 million
        in the second quarter of 2011 compared to $23.2 million in the same
        period in 2010.

    -   On June 21, 2011, the Board of Directors of AGF declared an increase
        of the quarterly dividend on both the Class A Voting common shares
        and Class B Non-Voting shares of the Company from $0.26 per share to
        $0.27 per share. The dividend will be payable July 20, 2011, to
        shareholders of record July 8, 2011. This represents a 3.8% increase
        on an annualized basis.
    >>

Consolidated Operating Results

The table below summarizes our consolidated operating results for the three and six months ended May 31, 2011 and 2010:

    <<
    -------------------------------------------------------------------------
                      Three months ended May 31,     Six months ended May 31,
                    ---------------------------------------------------------
                                           %                            %
    ($ millions)        2011      2010   change      2011      2010   change
    -------------------------------------------------------------------------
    Revenue
      Investment
       Management
       Operations   $  157.8  $  132.2    19.4%  $  297.1  $  262.9    13.0%
      Trust Company
       Operations       21.3      24.8   (14.1%)     44.1      48.7    (9.4%)
      Other              1.0      (3.2)     n/m       1.8      (1.6)     n/m
    -------------------------------------------------------------------------
                       180.1     153.8    17.1%     343.0     310.0    10.6%

    Expenses
      Investment
       Management
       Operations       91.9      76.8    19.7%     176.6     153.1    15.3%
      Trust Company
       Operations       12.8      14.4   (11.1%)     27.0      27.2    (0.7%)
    -------------------------------------------------------------------------
                       104.7      91.2    14.8%     203.6     180.3    12.9%

    EBITDA(1)           75.4      62.6    20.4%     139.4     129.7     7.5%
      Amortization      26.1      22.0    18.6%      48.7      44.5     9.4%
      Interest expense   3.6       2.0    80.0%       5.6       3.8    47.4%
      Income taxes      12.7      10.8    17.6%      24.2      22.8     6.1%
      Net income
       attributable to
       non-controlling
       interest          0.3       0.3        -       0.5       0.5        -
    -------------------------------------------------------------------------
    Net income
     attributable to
     equity owners
     of the Company $   32.7  $   27.5    18.9%  $   60.4  $   58.1     4.0%
    -------------------------------------------------------------------------
    Earnings per
     share -
     diluted        $   0.34  $   0.30    13.3%  $   0.64  $   0.64        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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.
    >>

Revenue for the three and six months ended May 31, 2011, increased by 17.1% and 10.6% from the corresponding periods in 2010. Revenue in the Investment Management Operations segment increased 19.4% and 13.0% for the three and six months ended May 31, 2011. This corresponds to higher average levels of AUM, as a result of the acquisition of Acuity, combined with favourable market performance. The Trust Company Operations segment reported a decrease in revenue of 14.1% and 9.4% in the three and six months ended May 31, 2011, compared to the same periods in 2010, as average loan balances declined by 12.2% and 12.9% in the respective periods. Revenue from Other, which represents the results of our 30.9% equity interest in S&WHL, were gains of $1.0 million and $1.8 million for the three and six months ended May 31, 2011, compared to losses of $3.2 million and $1.6 million for the same periods in 2010. The results of S&WHL for the six months ended May 31, 2011, included a one-time levy related to an industry-wide regulatory scheme affecting fund managers in the U.K. Under the scheme, fund managers must contribute to the Financial Services Compensation Scheme to cover the costs related to the collapse of certain investment advisors in the U.K. The results of S&WHL for the six months ended May 31, 2010, included AGF's proportion of one-time charges of approximately $5.5 million primarily related to a goodwill impairment charge and costs related to investment team recruitment arrangements.

Expenses for the three and six months ended May 31, 2011, increased 14.8% and 12.9%, compared to the same periods in 2010. Investment Management Operations' expenses, excluding one-time acquisition and integration costs related to Acuity, increased 15.0% and 9.5% for the three and six months ended May 31, 2011. Trust Company Operations' expenses decreased 11.1% and 0.7% in the three- and six-month periods ended May 31, 2011, compared to the same periods in 2010. For further details refer to each of the segment discussions.

The impact of the above items resulted in an increase in total EBITDA of 20.4% and 7.5% for the three- and six-month periods ended May 31, 2011, over the respective 2010 periods. Excluding one-time charges, EBITDA increased 16.0% and 9.7% for the three and six months ended May 31, 2011. Amortization expense for the three and six months ended May 31, 2011, increased by 18.6% and 9.4%, compared to the corresponding periods in 2010. Amortization of deferred selling commissions for the three and six months ended May 31, 2011, accounted for $19.2 million and $38.4 million (2010 - $19.7 million and $39.9 million) of the total amortization expense, while amortization related to definite life intangibles increased to $5.8 million and $8.2 million related to the Acuity acquisition. Interest expense increased because of higher debt levels and increased rates.

Income tax expense for the three and six months ended May 31, 2011, was $12.7 million and $24.2 million, as compared to $10.8 million and $22.8 million in 2010. The effective tax rate for the first six months of 2011 was 28.4%, compared to 28.0% in the same period of 2010.

The impact of the above revenue and expense items resulted in net income attributable to equity owners of the Company of $32.7 million and $60.4 million for the three and six months ended May 31, 2011 as compared to $27.5 million and $58.1 million in the prior year. Basic earnings per share were $0.34 and $0.65 for the three and six months ended May 31, 2011, compared to $0.31 and $0.65 in the same periods of 2010. Diluted earnings per share were $0.34 and $0.64 for the three and six months ended May 31, 2011, compared to $0.30 and $0.64 in the same periods of 2010. Excluding one-time costs, diluted earnings per share was $0.37 for the three months ended May 31, 2011, and $0.71 for the six months ended May 31, 2011. Excluding one-time accounting charges related to S&WHL, adjusted diluted earnings per share was $0.35 for the three months ended May 31, 2010, and $0.69 for the six months ended May 31, 2010.

A further discussion follows of the results of each business segment for the three and six months ended May 31, 2011, compared to May 31, 2010.

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. It is responsible for the management and distribution of AGF investment products and services, including retail mutual fund and pooled fund operations, institutional investment management and high-net-worth client investment counselling services. The Trust Company Operations segment offers a range of 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 interest expense.

Investment Management Operations

Business and Industry Profile

We are an independent investment management operation servicing Canadian and international investors through our retail, institutional and high-net-worth businesses.

Our investment management teams provide a diverse range of investment strategies and philosophies and unique research-driven investment processes including Socially Responsible Investing products.

Our retail business delivers a wide-range of products across a number of investment strategies including AGF mutual funds, the AGF Elements portfolios and the Harmony asset management program. We compete with numerous domestic and foreign players serving the market. Our products are delivered through multiple channels, including advisors, financial planners, banks, life insurance companies and brokers. We have seven sales offices located across Canada serving regional advisors and their clients while our strategic accounts team serves our corporate distribution partners.

Our institutional business offers a variety of investment mandates through pooled funds and segregated accounts. We compete domestically and globally as an institutional investment manager and have sales and client service offices in Canada, the United States, Europe and Asia serving pension funds, foundations, institutions, endowments and sovereign wealth funds.

Our high-net-worth business delivers investment management and counselling services in local markets in Canada. It includes the operations of Cypress Capital Management Limited in Vancouver, Highstreet Asset Management in London, Ontario, and Doherty & Associates in Ottawa and Montreal.

Segment Strategy and Highlights

Building on our 50-year tradition of being independent, fostering innovation and maintaining integrity, we work to provide excellent products and services across all client segments while building enduring relationships and delivering value to shareholders, clients and unitholders. Our goal is to deliver strong long-term investment performance and client service excellence to the retail mutual fund, institutional and high-net-worth markets. We continue to foster our relationships with advisors and strategic distribution partners and provide a diverse suite of investment solutions. We strive to build strong portfolio management teams to ensure continuity and strength in investment management and to leverage our in-house investment management expertise across multiple client channels.

In a consolidating industry, AGF's ability to increase scale through strategic acquisitions and organic growth strengthens our position as one of Canada's largest independent investment management firms. On February 1, 2011, AGF completed the acquisition of Acuity, which managed approximately $7.5 billion in retail and institutional assets. The acquisition further strengthens AGF's commitment to diversification and providing excellence in money management to meet the needs of a diverse range of clients in both the retail and institutional markets.

In May 2011, AGF Investments Inc. and Acuity Funds Ltd. announced the fund mergers were approved at the special investor meetings. If also approved by the regulators, these mergers will take effect on or about August 26, 2011.

As a result of the acquisition, total AUM grew by 20.8% to $51.8 billion, compared to $42.9 billion in the previous year. Our retail fund AUM, including retail pooled funds, grew 22.7% to $26.2 billion. Gross sales were up 7.9% for the three months ended May 31, 2011, compared to the same period last year. As typically expected after an acquisition, retail fund net redemptions, including retail pooled funds, increased $97.0 million to $574.0 million from $477.0 million in the second quarter of last year. On the institutional side, institutional and sub-advisory accounts AUM increased 19.2% to $22.1 billion from $18.5 billion in the second quarter of last year. The acquisition of Acuity contributed $3.8 billion of AUM. Excluding Acuity, AUM increased 3.7% as a result of market performance, offset by redemptions.

Our high-net-worth AUM increased 16.5% to $3.5 billion for the three months ended May 31, 2011, compared to $3.0 billion in the second quarter of 2010, as a result of market performance.

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 depend on the level and composition of AUM, which in turn are dependent upon investment performance and net sales. Under the management and investment advisory contracts between AGF and each of the mutual funds, we are entitled to monthly fees. These fees are based on a specified percentage of the average daily net asset value of the respective fund. In addition, we earn fees on our institutional and sub-advisory 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 and six months ended May 31, 2011 and 2010:

    <<
    -------------------------------------------------------------------------
                      Three months ended May 31,     Six months ended May 31,
                    ---------------------------------------------------------
                                           %                            %
    ($ millions)        2011      2010   change      2011      2010   change
    -------------------------------------------------------------------------
    Mutual fund AUM,
     beginning of
     period         $ 25,899  $ 22,076    17.3%  $ 22,264  $ 22,746    (2.1%)

      Acquisition
       of Acuity(1)        -         -        -     2,845         -      n/m

      Gross sales        685       660     3.8%     1,606     1,400    14.7%
      Redemptions     (1,221)   (1,137)    7.4%    (2,540)   (2,213)   14.8%
    -------------------------------------------------------------------------
      Net mutual
       fund sales       (536)     (477)   12.4%      (934)     (813)   14.9%

      Market
       appreciation
       (depreciation)
       of fund
       portfolios        (36)     (225)  (84.0%)    1,152      (559)     n/m
    -------------------------------------------------------------------------

    Mutual fund AUM,
     end of period  $ 25,327  $ 21,374    18.5%  $ 25,327  $ 21,374    18.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retail pooled
     fund AUM,
     beginning of
     period         $    943  $      -      n/m  $      -  $      -        -

      Acquisition
       of Acuity(1)        -         -        -       923         -      n/m

      Gross sales         27         -      n/m        38         -      n/m
      Redemptions        (65)        -      n/m       (80)        -      n/m
    -------------------------------------------------------------------------
      Net retail
       pooled funds
       sales             (38)        -      n/m       (42)        -      n/m

      Market
       appreciation
       (depreciation)
       of fund
       portfolios         (6)        -      n/m        18         -      n/m
    -------------------------------------------------------------------------

    Retail pooled
     fund AUM, end
     of period      $    899  $      -      n/m  $    899  $      -      n/m
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total retail
     fund (including
     retail pooled
     funds)         $ 26,226  $ 21,374    22.7%  $ 26,226  $ 21,374    22.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average daily
     retail fund AUM
     for the period $ 26,384  $ 22,236    18.7%  $ 25,246  $ 22,392    12.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Institutional and
     sub-advisory
     accounts AUM,
     beginning of
     period         $ 22,226  $ 18,687    18.9%  $ 17,585  $ 18,921    (7.1%)

      Acquisition
       of Acuity(1)        -         -        -     3,754         -      n/m

      Net change in
       institutional
       and sub-
       advisory
       accounts         (111)     (139)  (20.1%)      776      (373)     n/m
    -------------------------------------------------------------------------

    Total
     institutional
     and sub-
     advisory
     accounts AUM   $ 22,115  $ 18,548    19.2%  $ 22,115  $ 18,548    19.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    High-net-worth
     AUM            $  3,460  $  2,970    16.5%  $  3,460  $  2,970    16.5%
    -------------------------------------------------------------------------

    Total AUM, end
     of period      $ 51,801  $ 42,892    20.8%  $ 51,801  $ 42,892    20.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Acuity was acquired on February 1, 2011.
    >>

Global market improvements and the addition of $3.7 billion in retail AUM from the acquisition of Acuity resulted in an increase in retail fund AUM, including retail pooled funds, to $26.2 billion at May 31, 2011, from $21.4 billion as at May 31, 2010. The average daily retail fund AUM for the six months ended May 31, 2011, increased 18.7% to $26.4 billion, compared to $22.2 billion for the same period in 2010. Institutional and sub-advisory accounts AUM increased by $3.6 billion to $22.1 billion primarily because of the Acuity acquisition, which added $3.8 billion to our institutional assets. High-net-worth AUM increased 16.5% to $3.5 billion at May 31, 2011. Overall, these factors resulted in a total AUM increase of 20.8% to $51.8 billion.

Stock market performance influences the level of AUM. During the three and six months ended May 31, 2011, the Canadian-dollar-adjusted S&P 500 Index increased 1.3% and 8.6%, the Canadian-dollar-adjusted NASDAQ Index increased 1.4% and 7.1%, the S&P/TSX Composite Index decreased 1.8% and increased 7.9%, and the MSCI World Index increased 1.4% and 8.1%. The aggregate market depreciation of our retail fund portfolios for the three months ended May 31, 2011, divided by the average daily retail fund AUM for the period was 0.1% after management fees and expenses paid by the funds. The aggregate market appreciation of our retail fund portfolios for the six months ended May 31, 2011, divided by the average daily retail fund AUM for the period was 4.6% after management fees and expenses paid by the funds.

The impact of the U.S. dollar depreciation relative to the Canadian dollar on the market value of AGF mutual funds for the three and six months ended May 31, 2011, has been a decrease in AUM of approximately $29.8 million and $324.0 million, respectively (2010 - $33.5 million and $50.8 million).

The impact of the euro appreciation relative to the Canadian dollar on the market value of AUM for the three and six months ended May 31, 2011, has been an increase in AUM of approximately $73.8 million and $82.5 million, respectively. In the second quarter of 2010, the impact of the euro depreciation relative to the Canadian dollar on the market value of AUM was a decrease in AUM of approximately $421.7 million and $828.9 million.

Financial and Operational Results

The table below highlights the Investment Management Operations segment results for the three and six months ended May 31, 2011 and 2010:

    <<
    -------------------------------------------------------------------------
                      Three months ended May 31,     Six months ended May 31,
                    ---------------------------------------------------------
                                           %                            %
    ($ millions)        2011      2010   change      2011      2010   change
    -------------------------------------------------------------------------

    Revenue
      Management
       and advisory
       fees         $  150.7  $  124.6    20.9%  $  283.3  $  248.1    14.2%
      Deferred
       sales charges     6.5       6.1     6.6%      12.4      11.8     5.1%
      Investment
       income and
       other revenue     0.6       1.5  (60.0)%       1.4       3.0  (53.3)%
    -------------------------------------------------------------------------
                       157.8     132.2    19.4%     297.1     262.9    13.0%

    Expenses
      Selling,
       general and
       administrative   43.9      39.3    11.7%      83.6      78.5     6.5%
      Business
       acquisition
       and integration   3.6         -      n/m       8.9         -      n/m
      Trailing
       commissions      41.8      35.2    18.8%      79.2      69.9    13.3%
      Investment
       advisory fees     2.6       2.3    13.0%       4.9       4.7     4.3%
    -------------------------------------------------------------------------
                        91.9      76.8    19.7%     176.6     153.1    15.3%
    -------------------------------------------------------------------------

    EBITDA(1)           65.9      55.4    19.0%     120.5     109.8     9.7%
    Amortization        25.7      21.4    20.1%      48.0      43.2    11.1%
    -------------------------------------------------------------------------
    Income before
     taxes and non-
     segmented
     items          $   40.2  $   34.0    18.2%  $   72.5  $   66.6     8.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As previously defined, see the 'Key Performance Indicators and Non-
        GAAP Measures - EBITDA' section.
    >>

Revenue

For the three and six months ended May 31, 2011, revenue for the Investment Management Operations segment increased by 19.4% and 13.0% over the previous year, with changes in the categories as follows:

Management and Advisory Fees

Management and advisory fees are directly related to our AUM levels. The 18.7% and 12.7% increase in average daily retail fund AUM for the three and six months ended May 31, 2011, combined with a 19.2% increase in institutional and sub-advisory accounts and high-net-worth AUM at May 31, 2011, contributed to a 20.9% and 14.2% increase in management and advisory fee revenue for the three and six months ended May 31, 2011, compared to 2010.

Deferred Sales Charges (DSC)

We receive deferred sales charges upon redemption of securities sold on the contingent DSC or low-load commission basis for which we finance the selling commissions paid to the dealer. The DSC ranges from 1.5% to 5.5%, depending on the commission option of the original subscription price of the funds purchased if the funds are redeemed within the first two years, and declines to zero after three or 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 increased by 6.6% and 5.1% in the three and six months ended May 31, 2011, compared to 2010, due to higher redemptions of back-end assets as well as a higher proportion of redemptions at a higher DSC rate in the six-month period.

Investment Income and Other Revenue

Investment income and other revenue decreased by $0.9 million and $1.6 million in the three and six months ended May 31, 2011, over the same periods in 2010. The decrease is due to a charge in the three and six months ended May 31, 2011, of $0.8 million and $1.7 million related to the fair value adjustment on the acquisition consideration payable associated with future share payments.

Expenses

For the three- and six-month periods ended May 31, 2011, expenses for the Investment Management Operations segment increased 19.7% and 15.3% from the previous year. Changes in specific categories are described in the discussion that follows:

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses increased by $4.6 million in the three months ended May 31, 2011, and increased by $5.1 million in the six months ended May 31, 2011, compared to the same periods in 2010. This represents increases of 11.7% and 6.5% over the same periods in 2010. The changes are made up of the following amounts:

    <<
    -------------------------------------------------------------------------
                                                  Three months    Six months
                                                         ended         ended
    ($ millions)                                  May 31, 2011  May 31, 2011
    -------------------------------------------------------------------------

    Increase in compensation-related expenses     $        8.8  $       12.5
    Decrease in other expenses                            (1.0)         (2.8)
    Decrease in fund absorption expenses                  (3.2)         (4.6)
    -------------------------------------------------------------------------
                                                  $        4.6  $        5.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

The following explains expense changes in the three- and six-month periods ended May 31, 2011, compared to the same periods in the prior year:

    <<
    -   Compensation-related expenses increased primarily because of the
        acquisition of Acuity combined with higher headcount levels.

    -   Other expenses decreased $1.0 million and $2.8 million primarily
        because of lower costs associated with operational activity related
        to the funds.

    -   Fund absorption expenses declined $3.2 million and $4.6 million for
        the three and six months ended May 31, 2011. During the second
        quarter, it was determined that the Company's revenue commitment with
        Citigroup Fund Services would be achieved. As a result, our
        absorption estimate was reduced to reflect this. In addition, the
        lower absorption costs reflect an increase of the management expense
        ratio cap on certain funds in 2010.
    >>

Business Acquisition and Integration

Business acquisition and integration costs related to Acuity totalled $3.6 million and $8.9 million for the three and six months ended May 31, 2011. The costs incurred in the three months ended May 31, 2011, are primarily related to the fund mergers announced in the quarter as well as the integration and conversion of back office fund accounting systems. The costs in the six months ended May 31, 2011, include integration costs as well as severance and acquisition-related costs.

Trailing Commissions

Trailing commissions paid to distribution depend on total AUM, the proportion of retail 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 retail fund AUM were 0.63% and 0.63% for the three and six months ended May 31, 2011, compared to 0.63% and 0.62% in the same periods of 2010.

Investment Advisory Fees

External investment advisory fees increased by $0.3 million and $0.2 million during the three and six months ended May 31, 2011 as compared to the same periods in 2010.

EBITDA and EBITDA Margin

EBITDA for the Investment Management Operations segment increased to $65.9 million and $120.5 million for the three and six months ended May 31, 2011, a 19.0% and 9.7% increase from $55.4 million and $109.8 million for the same periods a year earlier. Excluding one-time costs, EBITDA for the three and six months ended May 31, 2011, increased to $69.5 million and $129.4 million. The increase is attributable to the acquisition of Acuity, combined with a higher average daily retail fund AUM level.

EBITDA margins adjusted for one-time acquisition and integration costs associated with Acuity, increased to 44.0% and 43.6% for the three and six months ended May 31, 2011, compared to 41.9% and 41.8% in 2010.

Amortization

The category represents amortization of deferred selling commissions, customer contracts, other intangible assets, property, equipment and computer software. Deferred selling commission amortization represents the most significant category of amortization. We internally finance all selling commissions paid. The 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 $19.2 million and $38.4 million for the three and six months ended May 31, 2011, compared to $19.7 million and $39.9 million for the same periods of 2010.

During the three and six months ended May 31, 2011, we paid $15.9 million and $30.4 million in selling commissions, compared to $15.2 million and $29.1 million in the same periods of 2010, reflecting a 7.9% increase in gross sales in the three-month period and 17.4% increase in gross sales in the six-month period. As at May 31, 2011, the unamortized balance of deferred selling commissions financed was $237.5 million (November 30, 2010 - $243.9 million). The contingent deferred sales charges that would be received if all of the DSC securities were redeemed at May 31, 2011, were estimated to be approximately $364.8 million (November 30, 2010 - $335.7 million).

As a result of the intangible assets acquired as a result of the Acuity acquisition, additional amortization of approximately $5.1 million was recognized in the quarter. Customer contracts related to the Acuity acquisition are amortized over seven years and other intangible assets are amortized over periods of three to 10 years.

Pre-Tax Profit Margin

Pre-tax profit margin decreased to 25.5% and 24.4% for the three and six months ended May 31, 2011, compared to 25.7% and 25.3% in 2010, reflecting one-time acquisition and integration costs and higher amortization associated with $68.3 million of definite life assets acquired on the acquisition of Acuity.

Trust Company Operations

Business and Industry Profile

AGF Trust has offered mortgage, deposit and consumer lending products to the clients of financial advisors and mortgage brokers for more than 20 years. Our product offerings serve to complement wealth management products sold by financial advisors and reinforce relationships with our parent company. We remain committed to helping financial advisors serve their clients and supporting AGF Investments Inc. in its mutual fund sales efforts.

The residential mortgage market in Canada remains a key driver of balance sheet growth for financial institutions of all sizes. The domestic housing sector, despite signs of stretched valuations in certain markets, continues to be supported by economic fundamentals. The mortgage broker share of total loan origination has been resilient in the past year, and our expectation is that mortgage brokers will retain a significant market share. Our strategy is to partner with select mortgage brokerage firms to capture a greater share of mortgage origination volumes. The depth of our management's experience in the broker channel, the strength of the AGF brand and our ability to deploy a substantial capital base relative to current lending assets will all support our efforts to grow our mortgage book.

Segment Strategy and Highlights

During the past year, AGF Trust has been positioning for renewed balance sheet growth by negotiating distribution agreements with key partners, building underwriting, sales and distribution capacity and updating and reviewing credit and collection policies.

For the three and six months ended May 31, 2011, loan originations were $87.0 million and $136.4 million compared to $39.9 million and $90.3 million in the second quarter of 2010. Net loan write-offs were $4.4 million and $9.0 million for the three and six months ended May 31, 2011, compared to $7.8 million and $13.7 million in the corresponding periods in 2010. AGF Trust loan assets declined 11.8% from May 31, 2010.

AGF Trust is building out mortgage programs in both the broker and advisor channel, which are expected to gradually increase levels of new originations. A partnership program with a large national mortgage broker firm was launched in January 2011, featuring a co-branded mortgage with a distinctive compensation structure. AGF Trust views the mortgage broker market as an attractive source of high-quality loan originations. In addition, AGF Trust continues to support the advisor channel and is looking to expand on the advisor-focused mortgage loan program introduced during 2010 in collaboration with a key partner.

Financial and Operational Results

The Trust Company Operations segment results for the three and six months ended May 31, 2011 and 2010 are as follows:

    <<
    -------------------------------------------------------------------------
                      Three months ended May 31,     Six months ended May 31,
                    ---------------------------------------------------------
                                           %                            %
    ($ millions)        2011      2010   change      2011      2010   change
    -------------------------------------------------------------------------

    Interest income
      Loan interest $   39.8  $   42.1   (5.5)%  $   80.0  $   85.0   (5.9)%
      Investment
       interest          3.4       3.5   (2.9)%       7.6       6.5    16.9%
    -------------------------------------------------------------------------
                        43.2      45.6   (5.3)%      87.6      91.5   (4.3)%
    Interest expense
      Deposit
       interest         25.3      32.9  (23.1)%      51.2      66.8  (23.4)%
      Hedging interest
       income           (5.6)    (14.4)   61.1%     (12.4)    (28.8)   56.9%
      Other interest
       expense           4.2       4.7  (10.6)%       8.6       9.5   (9.5)%
    -------------------------------------------------------------------------
                        23.9      23.2     3.0%      47.4      47.5   (0.2)%
    -------------------------------------------------------------------------
    Net interest
     income             19.3      22.4  (13.8)%      40.2      44.0   (8.6)%
    Other revenue        1.3       2.0  (35.0)%       2.6       3.8  (31.6)%
    RSP loan
     securitization
     income (loss),
     net of impairment   0.7       0.4    75.0%       1.3       0.9    44.4%
    -------------------------------------------------------------------------
    Total revenue       21.3      24.8  (14.1)%      44.1      48.7   (9.4)%

    Expenses
      Selling,
       general and
       administrative    9.7       9.5     2.1%      20.4      18.4    10.9%
      Provision for
       loan losses       3.1       4.9  (36.7)%       6.6       8.8  (25.0)%
    -------------------------------------------------------------------------
                        12.8      14.4  (11.1)%      27.0      27.2   (0.7)%

    EBITDA(1)            8.5      10.4  (18.3)%      17.1      21.5  (20.5)%
    Amortization         0.3       0.7  (57.1)%       0.7       1.3  (46.2)%
    -------------------------------------------------------------------------
    Income before
     taxes and non-
     segmented
     items          $    8.2  $    9.7  (15.5)%  $   16.4  $   20.2  (18.8)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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.
    >>

Revenue, Net Interest Income and Net Interest Margin

Net interest income, which is expressed net of interest on deposits and other interest expenses, was lower by 13.8% and 8.6% for the three and six months ended May 31, 2011, compared to the same periods in 2010. The decreases were primarily due to decreases in average loan balances of 12.2% and 12.9% for the three and six months ended May 31, 2011, compared to the prior year periods. The average net interest margin on lending products was 2.6% and 2.7% for the three and six months ended May 31, 2011 (2010 - 2.6% and 2.5%). AGF Trust manages its interest rate risk through the use of interest rate swaps. Interest expense includes hedging interest income of $5.6 million and $12.4 million related to interest rate swaps for the three and six months ended May 31, 2011 (2010 - $14.4 million and $28.8 million). Other revenue decreased 35.0% and 31.6% in the three and six months ended May 31, 2011, primarily because of a $0.7 million and $1.2 million decrease in hedge ineffectiveness and other fees and income. During the three and six months ended May 31, 2011, the Trust Company recognized a nil and $0.1 million writedown of its retained interest in securitized RSP loans compared to a $0.3 million and $0.6 million writedown in the same periods in 2010. These factors resulted in an overall revenue decrease of 14.1% and 9.4% in the three and six months ended May 31, 2011, as compared to 2010.

Selling, General and Administrative Expenses

SG&A expenses increased to $9.7 million and $20.4 million in the three and six months ended May 31, 2011, compared to $9.5 million and $18.4 million in the same periods in 2010. The increase in the three and six months ended May 31, 2011, reflects higher compensation costs.

Provision for Loan Losses

The total provision for loan losses decreased $1.8 million and $2.2 million to $3.1 million and $6.6 million for the three and six months ended May 31, 2011, compared to $4.9 million and $8.8 million in 2010, reflecting improved economic conditions and a reduced loan portfolio in 2011.

EBITDA and EBITDA Margin

A decrease in the loan loss provision, offset by a decline in revenue and an increase in SG&A costs, contributed to a decrease in EBITDA for the three and six months ended May 31, 2011, to $8.5 million and $17.1 million compared to $10.4 million and $21.5 million in the same periods in 2010. EBITDA margin decreased to 39.9% and 38.8% from 41.9% and 44.1% over the same periods of 2010.

Pre-Tax Profit Margin

As a result of the factors outlined above, pre-tax margin decreased to 38.5% and 37.2% in the three and six months ended May 31, 2011 from 39.1% and 41.5% in the same periods in 2010.

Operational Performance

The table below highlights our key operational measures for the segment for the three and six months ended May 31, 2011 and 2010:

    <<
    -------------------------------------------------------------------------
                      Three months ended May 31,     Six months ended May 31,
                    ---------------------------------------------------------
                                           %                            %
    ($ millions)        2011      2010   change      2011      2010   change
    -------------------------------------------------------------------------

    Real estate
     secured loans(1)
      Insured mortgage
       loans                                     $  404.9  $  442.3   (8.5)%
      Conventional
       mortgage loans                               425.9     472.8   (9.9)%
      HELOCs                                        229.5     323.4  (29.0)%
    -------------------------------------------------------------------------
                                                  1,060.3   1,238.5  (14.4)%
    Investment loans(1)
      Secured
       investment loans                           1,538.1   1,689.5   (9.0)%
      RSP loans                                     355.2     418.7  (15.2)%
      Other loans                                     1.1       3.3  (66.7)%
    -------------------------------------------------------------------------
                                                  1,894.4   2,111.5  (10.3)%
    Other assets                                    765.2     890.6  (14.1)%
    -------------------------------------------------------------------------
    Total assets                                  3,719.9   4,240.6  (12.3)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net interest
     income             19.3      22.4  (13.8)%      40.2      44.0   (8.6)%
    RSP loan
     securitization
     income (loss),
     net of
     impairment          0.7       0.4    75.0%       1.3       0.9    44.4%
    Other revenue        1.3       2.0  (35.0)%       2.6       3.8  (31.6)%
    Non-interest
     expenses(2)       (10.0)    (10.2)  (2.0)%     (21.1)    (19.7)    7.1%
    Provision for
     loan losses        (3.1)     (4.9) (36.7)%      (6.6)     (8.8) (25.0)%
    -------------------------------------------------------------------------
    Income before
     taxes and non-
     segmented
     items          $    8.2  $    9.7  (15.5)%  $   16.4  $   20.2  (18.8)%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Efficiency
     ratio(3)          46.9%     41.1%              47.8%     40.5%
    Assets-to-capital
     multiple(3)         8.8      10.8                8.8      10.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes loan provision and deferred sales commission.
    (2) Includes SG&A and amortization expenses.
    (3) For the definition of efficiency ratio and assets-to-capital
        multiple, see the 'Key Performance Indicators and Non-GAAP Measures'
        section.
    >>

Loan Assets

Real estate secured loan assets decreased by 14.4% to $1,060.3 million, compared to the second quarter of 2010. Secured investment loans decreased by 9.0% year-over-year to $1.5 billion as at May 31, 2011, while RSP loan balances and other loans decreased $65.7 million or 15.6% year-over-year.

Efficiency Ratio

The efficiency ratio is defined as non-interest expenses divided by the total of net interest income and non-interest income. It is a key industry performance indicator used to measure the efficiency of the organization. During the three months ended May 31, 2011, the efficiency ratio experienced an unfavourable change to 46.9% from 41.1% in the second quarter of 2010. The efficiency ratio for the six-month period ended May 31, 2011, was 47.8%, compared to 40.5% for the six-month period ended May 31, 2010. The increase is due to lower interest revenue as a result of declining loan balances and higher expenses related to increased staffing levels to support growth initiatives.

Balance Sheet

Total assets decreased to $3.7 billion as at May 31, 2011, compared to the same period in the previous year and decreased 9.7% compared to November 30, 2010. As at May 31, 2011, our assets-to-capital multiple stood at 8.8 times, compared to 10.8 times at the same time last year and 10.2 times at November 30, 2010. Our risk-based capital ratio was 25.3% as at May 31, 2011, compared to 22.5% at November 30, 2010. Liquid assets remained high with $685.2 million in cash and cash equivalents as well as investments available for sale as at May 31, 2011 (2010 - $794.3 million).

Loan Portfolio Credit

The credit risk factors considered when assessing the collectability of the various loan portfolios are primarily based on the individuals' ability and willingness to make future loan payments, coupled with the underlying collateral security held for each of the loan categories. The key risk factors considered include:

    <<
    -   Employment rates: higher unemployment rates will likely result in
        higher default rates as individuals' ability to pay deteriorates.

    -   Residential property prices and sales volume: declining residential
        property prices and reduced volumes of residential property sales may
        result in lower resale prices and longer disposal times, thereby
        increasing losses incurred on the disposition of the property.

    -   Equity market performance: declining global equity markets present
        increased risk on the secured investment loan portfolio as the value
        of the underlying collateral is lower. While the Trust Company has
        recourse to the personal assets of clients with respect to investment
        loans, the global macro-economic situation and employment levels may
        impede the Trust Company's ability to realize on the full value of
        the loan.
    >>

The general allowance for real estate secured loan losses decreased to $7.2 million as compared to $9.2 million a year ago. This included a general allowance for insured mortgage loans of $2.4 million (2010 - $3.9 million), which was set up in response to certain mortgage insurers taking a stricter interpretation of policy exclusions for fraud and misrepresentation as a result of the current environment. We have written off nil and $0.1 million of insured mortgage loans during the three and six months ended May 31, 2011 (2010 - nil and nil). As at May 31, 2011, approximately 48.7% (2010 - 48.3%) of real estate secured loan assets, excluding HELOCs, were insured. We have security for non-RSP investment loans, consisting of mutual funds and other investments. The value of this collateral fluctuates with the changes in the underlying investments. The amount of RSP loans written off, net of recoveries (excluding securitized RSP loans), was $1.9 million and $3.9 million for the three and six months ended May 31, 2011 (2010 - $4.1 million and $7.7 million). For the balance of our loan products, the amount written off net of recoveries for the three and six months ended May 31, 2011, was $2.6 million and $5.1 million (2010 - $3.6 million and $6.0 million).

AGF Management Limited

Liquidity and Capital Resources

Consolidated cash flow generated from operating activities, before net change in non-cash balances related to operations, was $67.7 million and $119.8 million for the three and six months ended May 31, 2011, compared to $61.8 million and $121.2 million in the prior year. The primary uses of cash during the three and six months ended May 31, 2011, were as follows:

    <<
    -   We paid $15.9 million and $30.4 million in selling commissions for
        the three and six months ended May 31, 2011, which were capitalized
        and are being amortized for accounting purposes, compared to
        $15.2 million and $29.1 million in 2010.

    -   We paid $24.3 million and $46.9 million in dividends for the three
        and six months ended May 31, 2011, compared to $22.6 million and
        $44.2 million in 2010. For the three months ended May 31, 2011, we
        repaid $35.6 million in long-term debt.

    -   For the six months ended May 31, 2011, we paid $173.4 million in cash
        consideration related to the acquisition of Acuity, with an
        additional $25.6 million payable in cash within three years.

    -   For the six months ended May 31, 2011, we funded the cash portion of
        the Acuity acquisition by way of a one-time drawdown of
        $185.0 million through a four-year non-amortization bank loan
        facility.
    >>

Consolidated cash and cash equivalents of $312.4 million decreased by $144.2 million from the November 30, 2010 level of $456.6 million (2010 - increased by $16.2 million). Aside from cash held in the Trust Company Operations segment, which is held to fund loans to clients and GIC maturities, AGF had $33.4 million of cash as at May 31, 2011 (May 31, 2010 - $27.2 million).

On January 28, 2011, we arranged a four-year non-amortizing acquisition facility with two Canadian chartered banks. The facility allowed for a one-time drawdown of $185.0 million.

We also have a four-year prime rate-based revolving term loan facility to a maximum of $300.0 million, of which $169.9 million was available to be drawn as at May 31, 2011. 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.

AGF capital consists of shareholders' equity. On an annual basis, AGF prepares a five-year plan detailing projected operating budgets and capital requirements. Each of AGF's operating segments are required to prepare and submit a five-year operating plan and budget to AGF's Finance Committee for approval prior to seeking Board approval. AGF's Finance Committee consists of the Chairman and CEO, the Vice-Chairman, Executive Vice-President and CFO, and the Executive Vice-President, Chief Operating Officer and General Counsel. Once approved by the Finance Committee, the five-year plans are reviewed and approved by AGF's Board of Directors. These plans become the basis for the payment of dividends to shareholders, the repurchase of Class B Non-Voting 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 regulatory requirements are met for capital. 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 approximately $6.0 million.

AGF Trust - Capital Management Framework

AGF Trust's regulatory capital consists primarily of common shareholders' equity, preferred shares and subordinated debentures. Regulatory capital is a factor that allows the AGF Trust Board of Directors (Trust Board) to assess the stability and security in relation to the overall risks inherent in AGF Trust's activities.

AGF Trust actively manages regulatory capital levels in conjunction with management's internal assessment of capital. Consideration is given to many factors including regulatory guidance, strategic planning, shareholder interests, interests of depositors and internally generated target capital ratios. Minimum regulatory capital requirements are set by the Trust and Loan Companies Act and the Office of the Superintendent of Financial Institutions (OSFI). AGF Trust adopted the Standardized Approach for credit risk and the Basic Indicator Approach for operational risk.

A key component of AGF Trust's capital framework is its internal capital adequacy assessment process (ICAAP). This process attributes capital for identified risks in proportion to the assessed risk. Risks are assessed using both qualitative and quantitative factors. The process also incorporates a variety of stress-testing approaches to evaluate the income and capital impacts of potential stress events.

Normal Course Issuer Bid

In January 2011, the Company's Board of Directors authorized the renewal of AGF's normal course issuer bid for the purchase of up to 7,430,257 Class B Non-Voting shares, or 10% of the public float for such shares. The Company received approval from the Toronto Stock Exchange on March 3, 2011, for the renewal of its normal course issuer bid. This allows AGF to purchase up to 7,430,257 Class B Non-Voting shares through the facilities of the Toronto Stock Exchange (or as otherwise permitted by the Toronto Stock Exchange) between March 7, 2011 and March 6, 2012. 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 Toronto Stock Exchange.

AGF's previous normal course issuer bid allowed for the repurchase of up to 7,167,620 Class B Non-Voting shares between February 26, 2010 and February 25, 2011, at prevailing market prices. Under the previous normal course issuer bid, AGF purchased 846,100 Class B Non-Voting shares for a total consideration of $12.2 million at an average price of $14.44.

Dividends

On June 21, 2011, the Board of Directors of AGF declared an increase of the quarterly dividend on both the Class A Voting Common shares and Class B Non-Voting shares of the Company from $0.26 per share to $0.27 per share for the three months ended May 31, 2011. This dividend will be payable on July 20, 2011, to shareholders of record on July 8, 2011.

The holders of Class B Non-Voting and Class A Voting common shares are entitled to receive cash dividends. Dividends are paid in equal amounts per share on all the Class B Non-Voting shares and all the Class A Voting common shares at the time outstanding without preference or priority of one share over another. No dividends may be declared in the event that there is a default of a condition of our loan facility or where such payment of dividends would create a default.

Our Board of Directors may determine that Class B Non-Voting shareholders shall have the right to elect to receive part or all of such dividend in the form of a stock dividend. They also determine whether a dividend in Class B Non-Voting shares is substantially equal to a cash dividend. This determination is based on the weighted average price at which the Class B Non-Voting shares traded on the Toronto Stock Exchange during the 10 trading days immediately preceding the record date applicable to such dividend.

The following table sets forth the dividends paid by AGF on Class B Non-Voting shares and Class A Voting common shares for the years indicated:

    <<
    -------------------------------------------------------------------------
    Years ended
     November 30              2011(1)     2010      2009      2008      2007
    -------------------------------------------------------------------------
    Per share                $  0.79   $  1.04   $  1.00   $  0.95   $  0.78
    -------------------------------------------------------------------------
    Percentage increase            -        4%        5%       22%       13%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The total of dividends paid in January 2011 and April 2011, and to be
        paid in July 2011.
    >>

We review our dividend distribution policy on a quarterly basis, taking into account our financial position, profitability, cash flow and other factors considered relevant by our Board of Directors. The quarterly dividend paid on April 20, 2011, was $0.26 per share.

Outstanding Share Data

Set out below is our outstanding share data as at May 31, 2011 and 2010. On February 1, 2011, we issued 6.5 million Class B Non-Voting shares as part consideration related to the acquisition of Acuity. For additional detail, see Note 10 to the Q2 2011 Consolidated Financial Statements.

    <<
    -------------------------------------------------------------------------
    May 31,                                               2011          2010
    -------------------------------------------------------------------------

    Shares
      Class A Voting common shares                      57,600        57,600
      Class B Non-Voting shares                     95,561,092    89,310,247

    Stock Options
      Outstanding options                            5,695,679     5,618,549
      Exercisable options                            3,152,147     2,672,889
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

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 non-GAAP measures that are not defined under Canadian GAAP. They should not be considered as an alternative to net income attributable to equity owners of the Company 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 our 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, amortization and non-controlling interest. EBITDA is a standard measure used in the mutual fund industry by management, investors and investment analysts to understand and compare results. We believe this is an important measure as it allows us to assess our investment management businesses without the impact of non-operational items. 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 are therefore 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 6 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 sales commissions, pay down debt and fund other needs.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    Net cash provided by
     operating activities     $     64.4  $     56.9  $     73.6  $     65.8
    Less: net changes in
     non-cash balances
     related to operations          (3.3)       (5.0)      (46.2)      (55.5)
    -------------------------------------------------------------------------
    Cash flow from operations $     67.7  $     61.9  $    119.8  $    121.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

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 and for general corporate purposes.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    Cash flow from operations
     (defined above)          $     67.7  $     61.9  $    119.8  $    121.3
    Less: selling commissions
     paid                           15.9        15.2        30.4        29.1
    -------------------------------------------------------------------------
    Free cash flow            $     51.8  $     46.7  $     89.4  $     92.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

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 we are able to earn profit from each dollar of revenue. We define EBITDA margin as the ratio of EBITDA to revenue.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    EBITDA                    $     75.4  $     62.6  $    139.4  $    129.7
    Divided by revenue             180.1       153.8       343.0       310.0
    -------------------------------------------------------------------------
    EBITDA margin                  41.9%       40.7%       40.6%       41.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Pre-Tax Profit Margin

Pre-tax profit margin provides useful information to management and investors as an indicator of our overall operating performance. We believe pre-tax profit margin is a valuable measure because it assesses the extent we are able to earn profit from each dollar of revenue. We define pre-tax profit margin as the ratio of income before taxes to revenue.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    Net income attributable
     to equity owners of
     the Company              $     32.7  $     27.5  $     60.4  $     58.1
    Add: income taxes               12.7        10.8        24.2        22.8
    -------------------------------------------------------------------------
    Income before taxes       $     45.4  $     38.3  $     84.6  $     80.9
    Divided by revenue             180.1       153.8       343.0       310.0
    -------------------------------------------------------------------------
    Pre-tax profit margin          25.2%       24.9%       24.7%       26.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

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 attributable to equity owners of the Company by average shareholders' equity.

    <<
    -------------------------------------------------------------------------
    For the three months ended                            May 31,     May 31,
    ($ millions)                                            2011        2010
    -------------------------------------------------------------------------

    Net income attributable to equity owners
     of the Company (annualized)                      $    130.8  $    110.0
    Divided by average shareholders' equity              1,213.4     1,137.8
    -------------------------------------------------------------------------
    Return on equity                                       10.8%        9.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Long-Term Debt to EBITDA Ratio

Long-term debt to EBITDA ratio provides useful information to management and investors as an indicator of our ability to service our long-term debt. We define long-term debt to EBITDA ratio as long-term debt at the end of the quarter divided by EBITDA for the quarter annualized.

    <<
    -------------------------------------------------------------------------
    For the three months ended                            May 31,     May 31,
    ($ millions)                                            2011        2010
    -------------------------------------------------------------------------

    Long-term debt(1)                                 $    316.3  $    121.6
    Divided by EBITDA (annualized)                         301.6       250.4
    -------------------------------------------------------------------------
    Long-term debt to EBITDA                              104.9%       48.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes deferred cash consideration related to the Acuity
        acquisition.
    >>

b) Investment Management Operations

Assets Under Management (AUM)

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

Investment Performance

Investment performance, which represents market appreciation (depreciation) of fund portfolios and 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 investment performance will reduce our AUM levels and result in lower management fee revenues. Strong relative investment performance may also contribute to growth in gross sales or reduced levels of redemptions. Conversely, poor relative investment performance may result in lower gross sales and higher levels of redemptions. Refer to the 'Risk Factors and Management of Risk' section of our 2010 Annual MD&A for further information.

Net Sales (Redemptions)

Gross sales and redemptions are monitored separately and the sum of these two amounts comprises net sales (redemptions). Net sales (redemptions), together with investment performance and fund expenses, determine the level of average daily retail fund AUM, which is the basis on which management fees are charged. The average daily retail fund AUM is equal to the aggregate average daily net asset value of the AGF retail funds. We monitor AUM in our institutional, sub-advisory and high-net-worth businesses separately. We do not compute an average daily retail fund AUM figure for them.

EBITDA Margin - Investment Management

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 because it assesses the extent we are able to earn profit from each dollar of revenue. We define EBITDA margin as the ratio of EBITDA to revenue.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    EBITDA                    $     65.9  $     55.4  $    120.5  $    109.8
    Divided by revenue             157.8       132.2       297.1       262.9
    -------------------------------------------------------------------------
    EBITDA margin                  41.8%       41.9%       40.6%       41.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Pre-Tax Profit Margin - Investment Management

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 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.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    Income before taxes and
     non-segmented items      $     40.2  $     34.0  $     72.5  $     66.6
    Divided by revenue             157.8       132.2       297.1       262.9
    -------------------------------------------------------------------------
    Pre-tax profit margin          25.5%       25.7%       24.4%       25.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

c) Trust Company Operations

Loan Assets

In the Trust Company Operations segment (AGF Trust), new originations, net of repayments, drive the outstanding balance of loans on which we charge interest. Loan asset growth contributes to increases in our revenue. Conversely, a decline in loan assets will negatively impact our revenue.

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.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    Interest income           $     43.2  $     45.6  $     87.6  $     91.5
    Less: interest expense          23.9        23.2        47.4        47.5
    -------------------------------------------------------------------------
    Net interest income       $     19.3  $     22.4  $     40.2  $     44.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Net Interest Margin

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

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    Annualized net interest
     income                   $     77.2  $     89.6  $     77.2  $     89.6
    Divided by average total
     loan balance                2,990.6     3,405.3     2,990.6     3,405.3
    -------------------------------------------------------------------------
    Net interest margin             2.6%        2.6%        2.6%        2.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Efficiency Ratio

The efficiency ratio is a financial services industry KPI that measures the efficiency of the organization. We use this ratio to monitor expenses, excluding loan loss provisions. The ratio is calculated from AGF Trust results by dividing non-interest expenses by the total of net interest income and non-interest income.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    Selling, general and
     administrative expenses  $      9.7  $      9.5  $     20.4  $     18.4
    Add: amortization expense        0.3         0.7         0.7         1.3
    -------------------------------------------------------------------------
    Non-interest expense            10.0        10.2        21.1        19.7
    -------------------------------------------------------------------------

    Other revenue             $      1.3  $      2.0  $      2.6  $      3.8
    RSP loan securitization
     income (loss), net of
     impairment                      0.7         0.4         1.3         0.9
    -------------------------------------------------------------------------
    Non-interest income              2.0         2.4         3.9         4.7
    -------------------------------------------------------------------------

    Net interest income       $     19.3  $     22.4  $     40.2  $     44.0
    Add: non-interest income         2.0         2.4         3.9         4.7
    -------------------------------------------------------------------------
    Total of net interest
     income and non-interest
     income                         21.3        24.8        44.1        48.7
    -------------------------------------------------------------------------
    Efficiency ratio               46.9%       41.1%       47.8%       40.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

EBITDA Margin - Trust

EBITDA margin provides useful information to management and investors as an indicator of AGF Trust's operating performance. We believe EBITDA margin is a valuable measure because it assesses the extent we are able to earn profit from each dollar of revenue. We define EBITDA margin as the ratio of EBITDA to revenue.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    EBITDA                    $      8.5  $     10.4  $     17.1  $     21.5
    Divided by revenue              21.3        24.8        44.1        48.7
    -------------------------------------------------------------------------
    EBITDA margin                  39.9%       41.9%       38.8%       44.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Pre-Tax Profit Margin - Trust

Pre-tax profit margin provides useful information to management and investors as an indicator of AGF Trust's operating performance. We believe pre-tax profit margin is a valuable measure because it assesses the extent 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 total revenue.

    <<
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    ($ millions)                    2011        2010        2011        2010
    -------------------------------------------------------------------------

    Income before taxes and
     non-segmented items      $      8.2  $      9.7  $     16.4  $     20.2
    Divided by revenue              21.3        24.8        44.1        48.7
    -------------------------------------------------------------------------
    Pre-tax profit margin          38.5%       39.1%       37.2%       41.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Assets-to-Capital Multiple

Federally regulated deposit-taking institutions (DTIs) are expected to meet an assets-to-capital multiple test. The assets-to-capital multiple is determined by dividing the DTI's total assets by its total regulatory capital, and expresses the extent by which capital is leveraged into the assets of the DTI.

    <<
    -------------------------------------------------------------------------
                                                        May 31,  November 30,
    ($ millions)                                          2011          2010
    -------------------------------------------------------------------------

    Total assets per OSFI(1) guidelines             $  3,760.5    $  4,112.7
    Divided by adjusted Tier 1 and Tier 2 capital        428.4         403.8
    -------------------------------------------------------------------------
    Assets-to-capital multiple                             8.8          10.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) OSFI is the Office of the Superintendent of Financial Institutions.
    >>

Impaired Loans as a Percentage of Loans Outstanding

Impaired loans as a percentage of loans outstanding is calculated by dividing total impaired loans by total loans outstanding.

    <<
    -------------------------------------------------------------------------
                                                        May 31,  November 30,
    ($ millions)                                          2011          2010
    -------------------------------------------------------------------------

    Impaired loans                                  $     30.5    $     35.7
    Divided by total loans outstanding(1)              2,954.7       3,122.2
    -------------------------------------------------------------------------
    Impaired loans as a percentage of loans
     outstanding                                          1.0%          1.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes loan provision and deferred sales commission of
        $25.7 million at May 31, 2011, and $28.6 million at November 30,
        2010.
    >>

Government Regulations

The following section should be read in conjunction with the 'Government Regulations' section of the 2010 Annual MD&A.

Acuity Funds Ltd.

Acuity Funds Ltd. (AFL) is registered with the OSC as an investment fund manager and mutual fund dealer. AFL is also registered with the OSC as an exempt market dealer for the purposes of facilitating the distribution of certain securities to clients and is subject to oversight by federal and provincial Privacy Commissions and FINTRAC.

Acuity Investment Management Inc.

Acuity Investment Management Inc. (AIMI) is registered with the OSC as a portfolio manager and maintains equivalent registration in each of the other provinces in Canada in which it does business. AIMI is also registered as an exempt market dealer in certain jurisdictions for the purposes of facilitating the distribution of certain securities to clients and is subject to oversight by federal and provincial Privacy Commissions and FINTRAC.

Significant Accounting Policies

A summary of AGF's significant accounting policies can be found in Note 1 of our 2010 Annual Consolidated Financial Statements.

Business Combinations, Consolidated Financial Statements and Non-Controlling Interests

Effective December 1, 2010, the Company elected to early adopt the CICA's "Handbook Section 1582, Business Combinations" (Section 1582), "Handbook Section 1601, Consolidated Financial Statements" (Section 1601) and "Handbook Section 1602, Non-Controlling Interests" (Section 1602). In accordance with the transitional provisions, these standards were applied on a prospective basis, with the exception of the presentation and disclosure requirements for non-controlling interest, which were applied retrospectively. The adoption of these standards did not have a significant impact on the Company's consolidated financial statements other than the reclassification of non-controlling interests, as described below, and the Company's accounting for the acquisition of Acuity as described in Note 5(a) of the Consolidated Financial Statements.

Pursuant to Section 1582 (equivalent to IFRS 3 "Business Combinations"), business combinations completed on or after December 1, 2010, were accounted for using the acquisition method of accounting. Under the acquisition method of accounting, the consideration transferred in a business combination is measured at fair value at the date of acquisition. This consideration includes any cash paid plus the fair value at the date of exchange of assets given, liabilities incurred and equity instruments issued by the Company or its subsidiaries. The consideration transferred also includes contingent consideration arrangements recorded at fair value. Directly attributable acquisition-related costs are expensed in the current period and reported within operating expenses. At the date of acquisition, the Company recognizes the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired business. The identifiable assets acquired and the liabilities assumed are initially recognized at fair value. Where the fair value of consideration paid is less than the fair value of net assets acquired, the excess is recognized in the Consolidated Statement of Income. Any pre-existing equity interests in an acquiree are re-measured to fair value at the date of the business combination and any resulting gain or loss is recognized in the Consolidated Statement of Income.

Business combinations completed prior to December 1, 2010, were accounted for using the purchase method under previous Canadian GAAP. The fundamental requirements of the purchase method of accounting are similar to the acquisition method of accounting described above except that, among other differences, the purchase method required that share consideration issued by the acquirer be measured by reference to its market price for a reasonable period before and after the acquisition was announced, acquisition-related costs were included as part of the fair value of the purchase consideration, contingent consideration was generally not recognized initially as part of the consideration transferred, and identifiable assets acquired and liabilities assumed were adjusted to reflect fair values only to the extent of the acquirer's interest in the acquiree when that interest was less than 100%. Furthermore, where the fair value of consideration paid was less than the fair value of net assets acquired, the excess amount was first deducted proportionally from the purchase price allocated to certain acquired non-current assets until their carrying amounts were reduced to nil. Only then was any remaining excess recognized in the Consolidated Statement of Income.

A non-controlling interest may be measured at fair value or at the proportionate share of identifiable net assets acquired. Under previous Canadian GAAP, a non-controlling interest was recorded at the proportionate share of the carrying value of the acquiree.

Section 1601 carries forward existing guidance on aspects of the preparation of consolidated financial statements subsequent to the acquisition date other than those pertaining to a non-controlling interest. Section 1602 provides guidance on the treatment of a non-controlling interest after acquisition in a business combination and requires: a non-controlling interest to be presented clearly in equity, but separately from the parent's equity; the amount of consolidated net income and other comprehensive income attributable to the parent and to a non-controlling interest to be clearly identified and presented on the Consolidated Statement of Income and Consolidated Statements of Comprehensive Income, respectively; and changes in ownership interests of a subsidiary that do not result in a loss or acquisition of control to be accounted for as an equity transaction.

Future Accounting Changes

Transition to International Financial Reporting Standards

Canadian public companies are required to prepare their financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), for fiscal years beginning on or after January 1, 2011. Effective December 1, 2011, we will adopt IFRS as the basis for preparing our consolidated financial statements. We will report our financial results for the quarter ended February 29, 2012, prepared on an IFRS basis. We will also provide comparative data on an IFRS basis, including an opening balance sheet as at December 1, 2010.

To meet the requirement to transition to IFRS, in 2008 we established an enterprise-wide project. We are following a transition plan comprising three phases: (1) IFRS diagnostic assessment, (2) impact analysis, evaluation and design, and (3) implementation and review. The project remains on track; we have completed the diagnostic assessment, and the impact analysis, evaluation and design phase of our transition is well advanced.

The IFRS diagnostic assessment identified the areas that would be the most impactful to AGF. Those areas included provision for credit losses on loans, hedge accounting, asset securitization, and deferred sales commission and customer contracts. The Company expects to record adjustments to its opening balance sheet under IFRS related to deferred sales commissions and customer contracts.

The second phase, impact analysis, evaluation and design, included identifying and implementing the necessary changes within our existing financial reporting or data collection processes to address the IFRS differences identified in our diagnostic assessment; developing and executing internal training and awareness programs; and selecting accounting policy options permitted under IFRS. The impact to our data collection processes and existing financial reporting and data collection processes is minimal. No significant changes to IT systems were identified. As a result, the amendments to our financial systems were assessed and have been completed. Our internal training is ongoing, with the continued training of key finance and operational staff responsible for IFRS.

We provide updates to the Audit Committee on a quarterly basis. These updates include a review of timelines, disclosure requirements, expected impact of the new standards on the financial statements and note disclosures, as well as an update on the progress of the IFRS project. Based on our diagnostic, we have reviewed and determined accounting policy options permitted under IFRS that are expected to impact AGF. The assessment and selection of accounting policy options is complete and in the process of final review. In addition, we have assessed the exemptions to full restatement that are permitted under IFRS. Generally, with the adoption of IFRS, any change to our existing accounting policies must be applied retroactively and reflected in our opening balance sheet of the comparative period. There are, however, a number of exemptions from full restatement available under IFRS. The most impactful election under IFRS 1 to AGF is related to business combinations. Under IFRS 1, a company can elect to (a) restate retrospectively all business combinations after a particular date in accordance with IFRS 3; or (b) apply IFRS 3 prospectively, whereby the value at transition is considered deemed cost under IFRS. Under both options, goodwill must be tested for impairment at transition and on a periodic basis thereafter. We intend to apply IFRS 3 prospectively. In addition, IFRS 1 allows entities to elect to charge the Cumulative Translation Account (CTA) to retained earnings at transition. AGF intends to apply this election. This will result in a reclassification from Accumulated Other Comprehensive Income (AOCI) to retained earnings. During 2010, a revision was made to IFRS 1 that amended the derecognition date from January 1, 2004, to the date of transition. As a result, we will not recognize securitized assets on the balance sheet at transition.

As each accounting policy option is selected, we will complete a review of its impact to our internal controls over financial reporting as well as disclosure controls and procedures and make changes where necessary.

Managing Risk

AGF is subject to a number of company and non-company specific risk factors that may impact our operating and financial performance. These risks and the management of those risks are detailed in our 2010 Annual MD&A in the section entitled 'Risk Factors and Management of Risk.' The Company has not identified any material changes to the risk factors affecting its business or in the management of those risks. Refer to Note 15 of the Consolidated Financial Statements and Notes for risks arising from the use of financial instruments.

Internal Controls Over Financial Reporting

The Chief Executive Officer and the Chief Financial Officer have designed or caused the design of the Internal Controls over Financial Reporting (ICFR) and Disclosure Controls and Procedures. There has been no material weaknesses identified relating to the design of the ICFR. On February 1, 2011, the Company completed its acquisition of Acuity. During the first quarter of 2011, certain internal controls over financial reporting were impacted and interim controls were relied upon. During the second quarter of 2011, the financial reporting processes were fully integrated within AGF.

Selected Quarterly Information

    <<
    -------------------------------------------------------------------------
    For the three-month
     period ended
    ($ millions, except per       May 31,    Feb. 28,    Nov. 30,    Aug. 31,
     share amounts)                 2011        2011        2010        2010
    -------------------------------------------------------------------------

    Revenue                   $    180.1  $    162.9  $    155.9  $    148.7
    Cash flow(1)                    67.7        52.0        50.1        51.8
    EBITDA(2)                       75.4        64.0        66.1        61.0
    Pre-tax income                  45.4        39.1        43.3        38.7
    Net income attributable
     to equity owners of
     the Company                    32.7        27.7        30.9        27.8

    EBITDA per share
      Basic                         0.79        0.70        0.75        0.68
      Diluted                       0.78        0.70        0.74        0.68

    Earnings per share
     attributable to equity
     owners of the Company
      Basic                   $     0.34  $     0.31  $     0.35  $     0.31
      Diluted                 $     0.34  $     0.30  $     0.34  $     0.31

    Weighted average basic
     shares                   95,568,899  90,799,935  88,616,451  89,286,335
    Weighted average fully
     diluted shares           96,794,115  92,010,135  89,665,401  90,232,708
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    For the three-month
     period ended
    ($ millions, except per       May 31,    Feb. 28,    Nov. 30,    Aug. 31,
     share amounts)                 2010        2010        2009        2009
    -------------------------------------------------------------------------

    Revenue                   $    153.8  $    156.2  $    157.7  $    146.9
    Cash flow(1)                    61.9        59.4        65.7        49.0
    EBITDA(2)                       62.6        67.1        71.6        56.1
    Pre-tax income                  38.3        42.6        46.6        30.4
    Net income attributable
     to equity owners of
     the Company                    27.5        30.6        45.5        22.8

    EBITDA per share
      Basic                         0.70        0.75        0.80        0.63
      Diluted                       0.69        0.74        0.79        0.62

    Earnings per share
     attributable to equity
     owners of the Company
      Basic                   $     0.31  $     0.34  $     0.51  $     0.26
      Diluted                 $     0.30  $     0.34  $     0.50  $     0.25

    Weighted average basic
     shares                   89,332,374  89,211,983  89,072,123  88,914,200
    Weighted average fully
     diluted shares           90,482,468  90,390,172  90,331,497  89,931,517
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Cash flow from operations before net change in non-cash balances
        related to operations.
    (2) As previously defined, see the 'Key Performance Indicators and Non-
        GAAP Measures - EBITDA' section.
    >>

Additional Information

Additional information relating to the Company can be found in our Consolidated Financial Statements and accompanying Notes for the three and six months ended May 31, 2011, our 2010 Annual MD&A and Consolidated Financial Statements, our 2010 Annual Information Form (AIF) and other documents filed with applicable securities regulators in Canada. They may be accessed at www.sedar.com.

    <<
    AGF Management Limited
    CONSOLIDATED FINANCIAL STATEMENTS

    For the three and six months ended May 31, 2011


                           AGF Management Limited
                         Consolidated Balance Sheet

    -------------------------------------------------------------------------
                                                        May 31,  November 30,
                                                          2011          2010
    ($ thousands)                                   (unaudited)     (audited)
    -------------------------------------------------------------------------

    Assets
      Current Assets
        Cash and cash equivalents                  $   312,376   $   456,550
        Investments available for sale (Note 2(a))     424,801       503,963
        Accounts receivable, prepaid expenses
         and other assets                               89,891        94,963
        Current portion of retained interest
         from securitization (Note 3)                   38,557        21,334
        Real estate secured and investment loans
         due within one year (Note 6)                  417,216       433,537
    -------------------------------------------------------------------------
                                                     1,282,841     1,510,347

      Retained interest from securitization
       (Note 3)                                              -        17,365
      Real estate secured and investment loans
       (Note 6)                                      2,537,436     2,688,677
      Investment in associated company (Note 2(b))      77,348        77,049
      Management contracts (Note 5(a))                 715,769       504,269
      Customer contracts, net of accumulated
       amortization (Note 5(a))                         45,277        11,383
      Goodwill (Note 5(a))                             289,705       173,708
      Other intangibles, net of accumulated
       amortization (Note 5(a))                         26,205             -
      Deferred selling commissions, net of
       accumulated amortization                        237,471       243,861
      Property, equipment and computer software,
       net of accumulated amortization                  12,247        11,230
      Other assets (Note 7)                             14,902        15,972
    -------------------------------------------------------------------------
    Total assets                                   $ 5,239,201   $ 5,253,861
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
      Current Liabilities
        Accounts payable and accrued liabilities   $   221,319   $   258,728
        Future income taxes                             25,538        18,024
        Acquisition consideration payable
         (Note 5(a))                                    32,548             -
        Deposits due within one year (Note 6(f))     1,552,918     1,814,701
    -------------------------------------------------------------------------
                                                     1,832,323     2,091,453

      Deposits (Note 6(f))                           1,613,404     1,721,264
      Long-term debt (Note 8)                          308,763       143,678
      Future income taxes                              181,225       129,574
      Acquisition consideration payable
       (Note 5(a))                                      12,643             -
      Other long-term liabilities (Note 9)              14,064        16,701
    -------------------------------------------------------------------------
    Total liabilities                                3,962,422     4,102,670
    -------------------------------------------------------------------------

    Equity
      Equity attributable to owners of the Company
        Capital stock (Note 10)                        560,009       439,216
        Contributed surplus                             23,709        22,580
        Retained earnings                              712,900       702,017
        Accumulated other comprehensive loss
         (Note 11)                                     (20,437)      (13,119)
    -------------------------------------------------------------------------
                                                     1,276,181     1,150,694

    Non-controlling interest                               598           497

    -------------------------------------------------------------------------
    Total equity                                     1,276,779     1,151,191
    -------------------------------------------------------------------------
    Total liabilities and equity                   $ 5,239,201   $ 5,253,861
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
                      Consolidated Statement of Income

    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
    (unaudited)               -----------------------------------------------
    ($ thousands)                   2011        2010        2011        2010
    -------------------------------------------------------------------------

    Revenue
      Management and
       advisory fees          $  150,716  $  124,558  $  283,257  $  248,069
      Deferred sales charges       6,454       6,134      12,384      11,842
      RSP loan securitization
       income, net of
       impairment (Note 3)           676         474       1,295         936
      Investment income and
       other revenue               3,026         131       5,933       5,136
    -------------------------------------------------------------------------
                                 160,872     131,297     302,869     265,983
    -------------------------------------------------------------------------
        AGF Trust interest
         income                   43,170      45,628      87,571      91,499
        AGF Trust interest
         expense                 (23,921)    (23,171)    (47,425)    (47,484)
    -------------------------------------------------------------------------
      AGF Trust net interest
       income (Note 13)           19,249      22,457      40,146      44,015
    -------------------------------------------------------------------------
    Total revenue                180,121     153,754     343,015     309,998
    -------------------------------------------------------------------------

    Expenses
      Selling, general and
       administrative             53,679      48,849     104,097      96,889
      Business acquisition and
       integration (Note 5(a))     3,584           -       8,935           -
      Trailing commissions        41,780      35,229      79,155      69,938
      Investment advisory fees     2,587       2,335       4,877       4,698
      Amortization of deferred
       selling commissions        19,174      19,733      38,418      39,854
      Amortization of customer
       contracts                   3,730         710       5,384       1,419
      Amortization of other
       intangibles                 2,096           -       2,794           -
      Amortization of property,
       equipment and computer
       software                    1,069       1,575       2,100       3,234
      Interest expense             3,640       2,053       5,569       3,887
      Provision for AGF Trust
       loan losses (Note 6(e))     3,097       4,819       6,588       8,763
    -------------------------------------------------------------------------
                                 134,436     115,303     257,917     228,682

    Income before income taxes    45,685      38,451      85,098      81,316

    Income tax expense
     (recovery)
      Current                     14,735      15,211      28,806      26,184
      Future                      (1,997)     (4,444)     (4,638)     (3,415)
    -------------------------------------------------------------------------
                                  12,738      10,767      24,168      22,769
    -------------------------------------------------------------------------

                              $   32,947  $   27,684  $   60,930  $   58,547
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income attributable to:
      Equity owners of the
       Company                $   32,692  $   27,429  $   60,397  $   58,068
      Non-controlling
       interest                      255         255         533         479
    -------------------------------------------------------------------------
                              $   32,947  $   27,684  $   60,930  $   58,547
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
     attributable to equity
     owners of the Company
     (Note 10(h))
      Basic                   $     0.34  $     0.31  $     0.65  $     0.65
      Diluted                 $     0.34  $     0.30  $     0.64  $     0.64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
                 Consolidated Statement of Changes in Equity

    -------------------------------------------------------------------------
    (unaudited)                                                  Accumulated
                                                                       other
                                              Contri-                 compre-
                                   Share       buted    Retained     hensive
    ($ thousands)                capital     surplus    earnings        loss
    -------------------------------------------------------------------------

    Balance, February 28,
     2010                     $  440,099  $   20,676  $  693,404  $  (16,957)
    Net income for the period          -           -      27,429           -
    Other comprehensive loss
     (net of tax)                      -           -           -      (5,259)
    -------------------------------------------------------------------------
    Comprehensive income
     (loss) for the period             -           -      27,429      (5,259)
    Issued through dividend
     reinvestment plan               654           -           -           -
    Stock options                    852         669           -           -
    Dividends on AGF Class A
     Voting common shares and
     AGF Class B Non-Voting
     shares                            -           -     (23,223)          -
    Dividends to non-
     controlling interest              -           -           -           -
    -------------------------------------------------------------------------
    Balance, May 31, 2010     $  441,605  $   21,345  $  697,610  $  (22,216)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance, February 28,
     2011                     $  557,895  $   23,380  $  706,653  $  (23,274)
    Net income for the period          -           -      32,692           -
    Other comprehensive income
     (net of tax)                      -           -           -       2,837
    -------------------------------------------------------------------------
    Comprehensive income for
     the period                        -           -      32,692       2,837
    Issued through dividend
     reinvestment plan               528           -           -           -
    Stock options                  1,586         329           -           -
    Dividends on AGF Class A
     Voting common shares and
     AGF Class B Non-Voting
     shares                            -           -     (24,849)          -
    Increase in ownership
     interest in Highstreet
     Partners Limited
     (Note 5(b))                       -           -      (1,596)          -
    Dividends to non-
     controlling interest              -           -           -           -
    -------------------------------------------------------------------------
    Balance, May 31, 2011     $  560,009  $   23,709  $  712,900  $  (20,437)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------
    (unaudited)                  Attribu-
                                   table
                               to equity         Non-
                                  owners    controll-
                                  of the         ing       Total
    ($ thousands)                Company    interest      equity
    -------------------------------------------------------------

    Balance, February 28,
     2010                     $1,137,222  $      406  $1,137,628
    Net income for the period     27,429         255      27,684
    Other comprehensive loss
     (net of tax)                 (5,259)          -      (5,259)
    -------------------------------------------------------------
    Comprehensive income
     (loss) for the period        22,170         255      22,425
    Issued through dividend
     reinvestment plan               654           -         654
    Stock options                  1,521           -       1,521
    Dividends on AGF Class A
     Voting common shares and
     AGF Class B Non-Voting
     shares                      (23,223)          -     (23,223)
    Dividends to non-
     controlling interest              -        (225)       (225)
    -------------------------------------------------------------
    Balance, May 31, 2010     $1,138,344  $      436  $1,138,780
    -------------------------------------------------------------
    -------------------------------------------------------------

    Balance, February 28,
     2011                     $1,264,654  $      550  $1,265,204
    Net income for the period     32,692         255      32,947
    Other comprehensive income
     (net of tax)                  2,837           -       2,837
    -------------------------------------------------------------
    Comprehensive income for
     the period                   35,529         255      35,784
    Issued through dividend
     reinvestment plan               528           -         528
    Stock options                  1,915           -       1,915
    Dividends on AGF Class A
     Voting common shares and
     AGF Class B Non-Voting
     shares                      (24,849)          -     (24,849)
    Increase in ownership
     interest in Highstreet
     Partners Limited
     (Note 5(b))                  (1,596)          -      (1,596)
    Dividends to non-
     controlling interest              -        (207)       (207)
    -------------------------------------------------------------
    Balance, May 31, 2011     $1,276,181  $      598  $1,276,779
    -------------------------------------------------------------
    -------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
                 Consolidated Statement of Changes in Equity

    -------------------------------------------------------------------------
    (unaudited)                                                  Accumulated
                                                                       other
                                              Contri-                 compre-
                                   Share       buted    Retained     hensive
    ($ thousands)                capital     surplus    earnings        loss
    -------------------------------------------------------------------------

    Balance, November 30,
     2009                     $  438,612  $   19,964  $  685,063  $  (13,236)
    Net income for the period          -           -      58,068           -
    Other comprehensive loss
     (net of tax)                      -           -           -      (8,980)
    -------------------------------------------------------------------------
    Comprehensive income
     (loss) for the period             -           -      58,068      (8,980)
    Issued through dividend
     reinvestment plan             1,315           -           -           -
    Stock options                  1,678       1,381           -           -
    Dividends on AGF Class A
     Voting common shares and
     AGF Class B Non-Voting
     shares                            -           -     (45,521)          -
    Dividends to non-
     controlling interest              -           -           -           -
    -------------------------------------------------------------------------
    Balance, May 31, 2010     $  441,605  $   21,345  $  697,610  $  (22,216)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance, November 30,
     2010                     $  439,216  $   22,580  $  702,017  $  (13,119)
    Net income for the period          -           -      60,397           -
    Other comprehensive
     income (net of tax)               -           -           -      (7,318)
    -------------------------------------------------------------------------
    Comprehensive income
     (loss) for the period             -           -      60,397      (7,318)
    Issued through dividend
     reinvestment plan             1,011           -           -           -
    Stock options                  5,103       1,129           -           -
    Issued on acquisition
     of Acuity                   114,679           -           -           -
    Dividends on AGF Class A
     Voting common shares and
     AGF Class B Non-Voting
     shares                            -           -     (47,918)          -
    Increase in ownership
     interest in Highstreet
     Partners Limited
     (Note 5(b))                       -           -      (1,596)          -
    Dividends to non-
     controlling interest              -           -           -           -
    -------------------------------------------------------------------------
    Balance, May 31, 2011     $  560,009  $   23,709  $  712,900  $  (20,437)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------
    (unaudited)                  Attribu-
                                   table
                               to equity         Non-
                                  owners    controll-
                                  of the         ing       Total
    ($ thousands)                Company    interest      equity
    -------------------------------------------------------------

    Balance, November 30,
     2009                     $1,130,403  $      408  $1,130,811
    Net income for the period     58,068         479      58,547
    Other comprehensive loss
     (net of tax)                 (8,980)          -      (8,980)
    -------------------------------------------------------------
    Comprehensive income
     (loss) for the period        49,088         479      49,567
    Issued through dividend
     reinvestment plan             1,315           -       1,315
    Stock options                  3,059           -       3,059
    Dividends on AGF Class A
     Voting common shares and
     AGF Class B Non-Voting
     shares                      (45,521)          -     (45,521)
    Dividends to non-
     controlling interest              -        (451)       (451)
    -------------------------------------------------------------
    Balance, May 31, 2010     $1,138,344  $      436  $1,138,780
    -------------------------------------------------------------
    -------------------------------------------------------------

    Balance, November 30,
     2010                     $1,150,694  $      497  $1,151,191
    Net income for the period     60,397         533      60,930
    Other comprehensive
     income (net of tax)          (7,318)          -      (7,318)
    -------------------------------------------------------------
    Comprehensive income
     (loss) for the period        53,079         533      53,612
    Issued through dividend
     reinvestment plan             1,011           -       1,011
    Stock options                  6,232           -       6,232
    Issued on acquisition
     of Acuity                   114,679           -     114,679
    Dividends on AGF Class A
     Voting common shares and
     AGF Class B Non-Voting
     shares                      (47,918)          -     (47,918)
    Increase in ownership
     interest in Highstreet
     Partners Limited
     (Note 5(b))                  (1,596)          -      (1,596)
    Dividends to non-
     controlling interest              -        (432)       (432)
    -------------------------------------------------------------
    Balance, May 31, 2011     $1,276,181  $      598  $1,276,779
    -------------------------------------------------------------
    -------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
               Consolidated Statement of Comprehensive Income

    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
    (unaudited)               -----------------------------------------------
    ($ thousands)                   2011        2010        2011        2010
    -------------------------------------------------------------------------

    Net income for the period $   32,947  $   27,684  $   60,930  $   58,547
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other comprehensive income
     (loss), net of tax
      Foreign currency
       translation adjustments
       related to net
       investments in self-
       sustaining foreign
       operations                    404      (3,543)       (298)     (9,606)
    -------------------------------------------------------------------------
                                     404      (3,543)       (298)     (9,606)
    -------------------------------------------------------------------------
    Net unrealized gain (loss)
     on available for sale
     securities
      Unrealized gain (loss)       2,200      (1,746)     (7,317)        554
      Reclassification of
       realized loss or other
       than temporary
       impairment to earnings        233           -         297           -
    -------------------------------------------------------------------------
                                   2,433      (1,746)     (7,020)        554
    -------------------------------------------------------------------------
    Net change related to
     cash flow hedges
      Reclassification of
       realized loss on cash
       flow hedges                     -          30           -          72
    -------------------------------------------------------------------------
                                       -          30           -          72
    -------------------------------------------------------------------------
    Total other comprehensive
     loss, net of tax         $    2,837  $   (5,259) $   (7,318) $   (8,980)
    -------------------------------------------------------------------------

    Comprehensive income for
     the period               $   35,784  $   22,425  $   53,612  $   49,567
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Comprehensive income
     attributable to:
      Equity owners of the
       Company                $   35,529  $   22,170  $   53,079  $   49,088
      Non-controlling
       interests                     255         255         533         479
    -------------------------------------------------------------------------
                              $   35,784  $   22,425  $   53,612  $   49,567
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
                     Consolidated Statement of Cash Flow

    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
    (unaudited)               -----------------------------------------------
    ($ thousands)                   2011        2010        2011        2010
    -------------------------------------------------------------------------

    Operating Activities
      Net income for the
       period                 $   32,947  $   27,684  $   60,930  $   58,547

      Items not affecting cash
        Amortization              26,069      22,018      48,696      44,507
        Future income taxes       (1,997)     (4,444)     (4,638)     (3,415)
        RSP loan securitization
         income, net of
         impairment                 (676)       (474)     (1,295)       (936)
        Provision for AGF
         Trust loan losses         3,097       4,819       6,588       8,763
        Stock-based compensation   2,303       1,800       5,727       3,527
        Equity investment in
         S&WHL                      (962)      3,290      (1,807)      1,615
        Other                      5,692       3,165       4,297       4,659
      Dividends from S&WHL         1,247       3,962       1,247       3,962
    -------------------------------------------------------------------------
                                  67,720      61,820     119,745     121,229
      Net change in non-cash
       balances related to
       operations (Note 12)       (3,277)     (4,970)    (46,159)    (55,463)
    -------------------------------------------------------------------------
      Net cash provided by
       operating activities       64,443      56,850      73,586      65,766
    -------------------------------------------------------------------------

    Financing Activities
      Issue of Class B Non-
       Voting shares               1,124         714       4,251       1,477
      Dividends paid             (24,321)    (22,570)    (46,907)    (44,206)
      Increase (decrease) in
       long-term debt            (35,858)    (22,564)    165,085       5,470
      Net decrease in AGF
       Trust deposits           (144,639)   (164,463)   (366,724)   (218,512)
    -------------------------------------------------------------------------
      Net cash used in
       financing activities     (203,694)   (208,883)   (244,295)   (255,771)
    -------------------------------------------------------------------------

    Investing Activities
      Deferred selling
       commissions paid          (15,898)    (15,183)    (30,421)    (29,122)
      Increase in ownership
       interest in Highstreet
       Partners Limited
       (Note 5(b))                (1,596)          -      (1,596)          -
      Acquisition of
       subsidiaries, net of
       cash acquired
       (Note 5(a))                     -           -    (173,415)          -
      Purchase of property,
       equipment and
       computer software            (430)       (585)       (919)       (795)
      Net proceeds from sale
       (purchase) of
       investments available
       for sale                    4,701     (17,861)     71,988       2,654
      Net decrease in AGF
       Trust real estate
       secured and investment
       loans                      71,524     135,936     160,898     233,481
    -------------------------------------------------------------------------
      Net cash provided by
       investing activities       58,301     102,307      26,535     206,218
    -------------------------------------------------------------------------

    Increase (decrease) in
     cash and cash equivalents   (80,950)    (49,726)   (144,174)     16,213

    Balance of cash and cash
     equivalents, beginning
     of period                   393,326     340,809     456,550     274,870
    -------------------------------------------------------------------------

    Balance of cash and cash
     equivalents, end of
     period                   $  312,376  $  291,083  $  312,376  $  291,083
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
      Investment Management
       cash and cash equivalents                      $   33,368  $   27,177
      AGF Trust cash and cash
       equivalents                                       279,008     263,906
    -------------------------------------------------------------------------
                                                      $  312,376  $  291,083
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Refer to Note 12 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 and six months ended May 31, 2011 (unaudited)

These unaudited Q2 2011 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, 2010. 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, 2010.

Note 1: Changes in Accounting Policies

Business Combinations, Consolidated Financial Statements and Non-Controlling Interests

Effective December 1, 2010, the Company elected to early adopt the CICA's "Handbook Section 1582, Business Combinations" (Section 1582), "Handbook Section 1601, Consolidated Financial Statements" (Section 1601) and "Handbook Section 1602, Non-Controlling Interests" (Section 1602). In accordance with the transitional provisions, these standards were applied on a prospective basis, with the exception of the presentation and disclosure requirements for non-controlling interest, which were applied retrospectively. The adoption of these standards did not have a significant impact on the Company's consolidated financial statements other than the reclassification of non-controlling interests, as described below, and the Company's accounting for the acquisition of Acuity Funds Ltd. and Acuity Investment Management Inc. (Acuity) as described in Note 5(a).

Pursuant to Section 1582 (equivalent to IFRS 3 "Business Combinations"), business combinations completed on or after December 1, 2010, have been accounted for using the acquisition method of accounting. Under the acquisition method of accounting, the consideration transferred in a business combination is measured at fair value at the date of acquisition. This consideration includes any cash paid plus the fair value at the date of exchange of assets given, liabilities incurred and equity instruments issued by the company or its subsidiaries. The consideration transferred also includes contingent consideration arrangements recorded at fair value. Directly attributable acquisition-related costs are expensed in the current period and reported within operating expenses. At the date of acquisition, the Company recognizes the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired business. The identifiable assets acquired and the liabilities assumed are initially recognized at fair value. Where the fair value of consideration paid is less than the fair value of net assets acquired, the excess is recognized in the Consolidated Statement of Income. Any pre-existing equity interests in an acquiree are re-measured to fair value at the date of the business combination and any resulting gain or loss is recognized in the Consolidated Statement of Income.

Business combinations completed prior to December 1, 2010, were accounted for using the purchase method under previous Canadian GAAP. The fundamental requirements of the purchase method of accounting are similar to the acquisition method of accounting described above except that, among other differences, the purchase method required that share consideration issued by the acquirer be measured by reference to its market price for a reasonable period before and after the acquisition was announced, acquisition-related costs were included as part of the fair value of the purchase consideration, contingent consideration was generally not recognized initially as part of the consideration transferred, and identifiable assets acquired and liabilities assumed were adjusted to reflect fair values only to the extent of the acquirer's interest in the acquiree when that interest was less than 100%. Furthermore, where the fair value of consideration paid was less than the fair value of net assets acquired, the excess amount was first deducted proportionally from the purchase price allocated to certain acquired non-current assets until their carrying amounts were reduced to nil. Only then was any remaining excess recognized in the Consolidated Statement of Income.

A non-controlling interest may be measured at fair value or at the proportionate share of identifiable net assets acquired. Under previous Canadian GAAP, a non-controlling interest was recorded at the proportionate share of the carrying value of the acquiree.

Section 1601 carries forward existing guidance on aspects of the preparation of consolidated financial statements subsequent to the acquisition date other than those pertaining to a non-controlling interest. Section 1602 provides guidance on the treatment of a non-controlling interest after acquisition in a business combination and requires: a non-controlling interest to be presented clearly in equity, but separately from the parent's equity; the amount of consolidated net income and other comprehensive income attributable to the parent and to a non-controlling interest to be clearly identified and presented on the Consolidated Statement of Income and Consolidated Statements of Comprehensive Income, respectively; and changes in ownership interests of a subsidiary that do not result in a loss or acquisition of control to be accounted for as an equity transaction.

Future Accounting Changes

Transition to International Financial Reporting Standards

The CICA Accounting Standards Board requires all Canadian publicly accountable enterprises to adopt International Financial Reporting Standards (IFRS) for years beginning on or after January 1, 2011. The Company will adopt IFRS for the fiscal year 2012 starting December 1, 2011. The fiscal 2012 Consolidated Financial Statements will include comparative 2011 financial results under IFRS. The Company will report its financial results for the quarter ended February 29, 2012, on an IFRS basis, including comparative IFRS financial results and an opening balance sheet as at December 1, 2010.

Note 2: Investments Available for Sale and Investment in S&WHL

    <<
    (a) The following table presents a breakdown of available for sale
        investments, excluding retained interest from securitization:

    -------------------------------------------------------------------------
                                                        May 31,  November 30,
    ($ thousands)                                         2011          2010
    -------------------------------------------------------------------------

    AGF Trust:
      Canadian government debt(1)
        Provincial                                  $  406,153    $  392,261
      Deposits with regulated institutions                   -        85,557
    -------------------------------------------------------------------------
                                                       406,153       477,818

    Investment Management:
      Canadian government debt
        Federal                                            298           297
      AGF mutual funds and other                        12,316        19,572
      Equity securities                                  6,034         6,276
    -------------------------------------------------------------------------
                                                        18,648        26,145

    -------------------------------------------------------------------------
                                                    $  424,801    $  503,963
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes investments issued and/or guaranteed by the Canadian
        government.


        The following table presents a breakdown of AGF Trust available for
        sale investments by maturity, excluding retained interest from
        securitization:

    -------------------------------------------------------------------------
                                                           Greater
    May 31, 2011                        1 year      1 to      than
    ($ thousands)      Credit rating   or less   5 years   5 years     Total
    -------------------------------------------------------------------------

    AGF Trust:
      Canadian
       government debt
        Provincial        A to AAA    $ 82,701  $304,154  $ 19,298  $406,153
      Deposits with
       regulated
       institutions           -              -         -         -         -
    -------------------------------------------------------------------------
                                      $ 82,701  $304,154  $ 19,298  $406,153
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                           Greater
    November 30, 2010                   1 year      1 to      than
    ($ thousands)      Credit rating   or less   5 years   5 years     Total
    -------------------------------------------------------------------------

    AGF Trust:
      Canadian
       government debt
        Provincial        A to AAA    $ 36,169  $328,545  $ 27,547  $392,261
      Deposits with
       regulated
       institutions          AA         85,557         -         -    85,557
    -------------------------------------------------------------------------
                                      $121,726  $328,545  $ 27,547  $477,818
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        AGF Trust's available for sale investments include provincial
        guaranteed bonds and floating-rate notes (FRNs) with original terms
        to maturity greater than three months. As at May 31, 2011,
        $25.0 million of AGF Trust's available for sale investments were
        floating-rate securities subject to repricing (November 30, 2010 -
        $85.1 million) and $381.2 million were fixed-rate securities
        (November 30, 2010 - $392.7 million).

        Investment Management's available for sale investment in Canadian
        government debt is a fixed-rate treasury bond with a maturity date
        within one year and a credit rating of AAA.

        During the three and six months ended May 31, 2011 and 2010, no
        impairment charges were required.

    (b) The Company holds a 30.9% investment in S&WHL accounted for using the
        equity method. At May 31, 2011, the carrying value was $77.3 million
        (November 30, 2010 - $77.0 million). During the three and six months
        ended May 31, 2011, the Company recognized earnings of $1.0 million
        and $1.8 million, respectively (2010 - losses of $3.3 million and
        $1.6 million, respectively). During the six months ended May 31,
        2011, the Company received $1.2 million in dividends (2010 -
        $4.0 million) from S&WHL. No dividends were received from S&WHL
        during the first quarter of 2011.
    >>

Note 3: Securitization of AGF Trust Loans

The Company has recorded retained interests of $38.6 million (November 30, 2010 - $38.7 million) made up of (i) the rights to future excess interest on these RSP loans after investors in the securitization trust have received the return for which they contracted, valued at $1.4 million (November 30, 2010 - $2.5 million), (ii) cash collateral of $14.0 million (November 30, 2010 - $13.6 million) and (iii) over-collateralization of $23.2 million (November 30, 2010 - $22.6 million).

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

    <<
    -------------------------------------------------------------------------
                                                      May 31,    November 30,
                                                        2011            2010
    -------------------------------------------------------------------------

    Excess spread                                       5.0%     4.9% - 5.0%
    Discount rate on interest-only strip                7.5%            7.5%
    Expected credit losses                       2.3% - 2.4%     2.3% - 2.4%
    Prepayment rate                            16.2% - 17.0%   16.2% - 17.0%
    Expected weighted average life of
     RSP loans                                     1.5 years       1.6 years
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

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 May 31, 2011 and 2010. 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.

    <<
    -------------------------------------------------------------------------
                                                    Impact on fair value of
                                                       retained interests
                                                   --------------------------
                                                        May 31,       May 31,
    ($ thousands)                                         2011          2010
    -------------------------------------------------------------------------

    Discount rate
      +10%                                         $        (3)  $       (21)
      +20%                                                  (6)          (41)
    Prepayment rate
      +10%                                         $        (4)  $       (24)
      +20%                                                   8           (42)
    Expected credit losses
      +10%                                         $      (177)  $      (251)
      +20%                                                (355)         (502)
    Excess spread
      -10%                                         $      (142)  $      (446)
      -20%                                                (284)         (868)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Note 4: Discontinued Operations

On April 30, 2007, AGF sold 100% of Investmaster for $6.8 million, recognizing a gain on the sale of $4.7 million. The purchase consideration included $5.0 million in cash and two notes receivable totalling pnds stlg 0.8 million or $1.8 million at the time of sale from the buyer. In 2009, AGF received a payment o,f pnds stlg 0.4 million or $0.7 million related to the first note receivable. In 2010, AGF received the final payment of pnds stlg 0.4 million or $0.6 million related to the second note receivable. No additional contingent consideration is receivable by AGF.

Note 5: Acquisitions

    <<
    (a) Acquisition of Acuity Funds Ltd. and Acuity Investment Management
        Inc.

        On February 1, 2011, the Company completed its acquisition of 100% of
        the shares of Acuity for a purchase price of $335.6 million. Acuity
        is included in the Company's Investment Management Operations segment
        and manages retail and institutional assets. Goodwill of $116.0
        million was recognized as the fair value of consideration paid in
        excess of the fair value of separately recognized tangible and
        intangible assets acquired, net of liabilities assumed.

        The fair value of net assets acquired and consideration paid are
        summarized in the table below, based on the Company's preliminary
        purchase price allocation:

    -------------------------------------------------------------------------

    ($ thousands)
    -------------------------------------------------------------------------

    Net assets acquired
      Cash                                                        $    4,842
      Other assets                                                    12,844
      Management contracts                                           211,500
      Customer contracts                                              39,278
      Non-competition agreement(1)                                    21,900
      Finite-life management contracts(1)                              5,500
      Trademark(1)                                                     1,600
      Goodwill                                                       115,997
      Liabilities                                                    (14,076)
      Future income taxes                                            (63,836)
    -------------------------------------------------------------------------
                                                                   $ 335,549
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration paid
      Cash                                                        $  178,257
      Cash payments due February 1, 2012                              18,391
      Cash payments due February 1, 2013                               3,644
      Cash payments due February 1, 2014                               3,579
      Issuance of Class B Non-Voting shares (Note 10(b))              55,683
      Issuance of Class B Non-Voting shares held in escrow
       (Note 10(b))                                                   58,996
      Issuance of Class B exchangeable preferred shares,
       redeemable February 1, 2012                                     9,756
      Issuance of Class C exchangeable preferred shares,
       redeemable February 1, 2012                                     2,517
      Issuance of Class D exchangeable preferred shares,
       redeemable February 1, 2013                                     2,400
      Issuance of Class E exchangeable preferred shares,
       redeemable February 1, 2014                                     2,326
    -------------------------------------------------------------------------
                                                                  $  335,549
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Grouped as Other Intangibles on the Consolidated Balance Sheet.

        The non-competition agreement, finite-life management contracts, and
        trademarks are stated at cost (being the fair value at the date of
        acquisition), net of accumulated amortization and impairment, if any,
        on the Consolidated Balance Sheet under Other Intangibles.
        Amortization is computed on a straight-line basis over three to 10
        years based on the estimated useful lives of these assets.

        The deferred cash payments and Class B, C, D and E exchangeable
        preferred shares are subject to an adjustment based on Acuity's net
        sales of institutional AUM between the date of acquisition and the
        payment or redemption date of these preferred shares. The adjustment
        is not expected to be significant, but could range between the fair
        value of the acquisition consideration payable and an unlimited
        amount. The Class B, C, D and E exchangeable preferred shares are to
        be settled by the issuance of a variable number of AGF Class B Non-
        Voting shares, the number of which is determined by reference to a
        fixed exchange ratio. The deferred cash payments and Class B, C, D
        and E exchangeable preferred shares are accounted for as contingently
        returnable consideration carried at fair value and have been
        classified on the Consolidated Balance Sheet as acquisition
        consideration payable.

        The Class B Non-Voting shares held in escrow are to be released to
        the Acuity vendors between the earliest of August 1, 2011 and
        February 1, 2014. Dividends declared on the Class B Non-Voting shares
        are paid to the vendors during the escrow period. Prior to the
        acquisition, the Company also advanced $14.0 million to Acuity, which
        was converted into common shares of Acuity upon closing and has been
        reflected above as cash consideration paid.

        The following is a summary of the fair values of contingently
        returnable consideration as at May 31, 2011:

    -------------------------------------------------------------------------
                                                                      May 31,
    ($ thousands)                                                       2011
    -------------------------------------------------------------------------

    Cash payments due February 1, 2012                            $   19,053
    Cash payments due February 1, 2013                                 3,768
    Cash payments due February 1, 2014                                 3,690
    Issuance of Class B exchangeable preferred shares,
     redeemable February 1, 2012                                      10,727
    Issuance of Class C exchangeable preferred shares,
     redeemable February 1, 2012                                       2,768
    Issuance of Class D exchangeable preferred shares,
     redeemable February 1, 2013                                       2,635
    Issuance of Class E exchangeable preferred shares,
     redeemable February 1, 2014                                       2,550
    -------------------------------------------------------------------------
                                                                  $   45,191
    Less: current portion                                             32,548
    -------------------------------------------------------------------------
                                                                  $   12,643
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        The following is a summary of post-acquisition amounts included in
        the Company's Consolidated Statement of Income for the three and six
        months ended May 31, 2011:

    -------------------------------------------------------------------------
                                                    Three months  Six months
                                                           ended       ended
                                                          May 31,     May 31,
    ($ thousands)                                           2011        2011
    -------------------------------------------------------------------------

    Revenue                                           $   22,869      30,272
    Net income(1)                                          7,250       9,744
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excluding integration costs and fair value adjustments related to the
        acquisition consideration payable.

        During the three and six months ended May 31, 2011, the Company
        recognized $3.6 million and $8.9 million (2010 - nil) in expenses
        related to the acquisition and integration of Acuity and $0.8 million
        and $2.6 million in charges related to the fair value adjustment on
        the acquisition consideration payable.

    (b) Acquisition of Highstreet Partners Ltd.

        On December 1, 2006, AGF acquired 79.9% of Highstreet Partners
        Limited (Highstreet). During the year ended November 30, 2009,
        contingent consideration, based on certain financial profitability
        targets being achieved by Highstreet, of $0.7 million was recorded as
        an increase in goodwill. This amount was paid on March 3, 2010. In
        March 2011, the Company increased their ownership interest in
        Highstreet to 81.7% for cash consideration of $1.6 million. The
        payment was recorded as an adjustment to retained earnings.
    >>

Note 6: AGF Trust

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

    <<
    -------------------------------------------------------------------------
                     Term to contractual repricing
                  -----------------------------------------------------------
                                                                    November
                    Variable   1 year or      1 to 5      May 31,         30,
    ($ thousands)       rate        less       years        2011        2010
    -------------------------------------------------------------------------
    Mortgage
     loans        $    1,182  $  305,751  $  531,575  $  838,508  $  861,007
    HELOCs           229,437           -           -     229,437     273,272
    -------------------------------------------------------------------------
    Total real
     estate
     secured
     loans           230,619     305,751     531,575   1,067,945   1,134,279
    Investment
     loans         1,911,315         817         279   1,912,411   2,016,501
                  -----------------------------------------------------------
    Total loans    2,141,934     306,568     531,854   2,980,356   3,150,780
                  -----------------------------------------------------------
    Less: allowance for
     loan losses                                         (29,689)    (32,063)
    Add: net deferred sales
     commissions and
     commitment fees                                       3,985       3,497
                                                      -----------------------
                                                       2,954,652   3,122,214
    Less: current portion                               (417,216)   (433,537)
                                                      -----------------------
                                                      $2,537,436  $2,688,677
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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 May 31, 2011, were
        $417.2 million (November 30, 2010 - $433.5 million).

        As at May 31, 2011, AGF Trust's mortgage portfolio comprises a
        combination of fixed rate and variable rate residential mortgages
        with a weighted average term to repricing of 1.7 years (November 30,
        2010 - 1.7 years) and a weighted average yield of 5.8% (November 30,
        2010 - 6.1%). Insured mortgage loans, excluding loan loss allowance,
        deferred commissions and pending representment, were $406.0 million
        as at May 31, 2011 (November 30, 2010 - $413.9 million). HELOCs,
        which totalled $229.4 million as at May 31, 2011 (November 30, 2010 -
        $273.3 million), had an average interest rate of 4.9% (November 30,
        2010 - 4.9%). Investment loans, excluding RSP loans, totalled
        $1.5 billion as at May 31, 2011 (November 30, 2010 - $1.6 billion),
        and had an average interest rate (based on the prime interest rate)
        of 4.8% (November 30, 2010 - 4.8%). RSP loans totalled $366.7 million
        as at May 31, 2011 (November 30, 2010 - $378.0 million), and had an
        average interest rate of 6.1% (November 30, 2010 - 6.2%). The average
        interest rate on all investment loans as at May 31, 2011, was 5.0%
        (November 30, 2010 - 5.0%). Mortgage and HELOC loans are secured
        primarily by residential real estate. Secured investment loans of
        $1.5 billion (November 30, 2010 - $1.6 billion) are secured primarily
        by the investment made using the initial loan proceeds. The market
        value of this investment loan collateral is approximately
        $1.4 billion (November 30, 2010 - $1.4 billion).

    (b) Loans by Province and by Type

        The following tables are a breakdown of the total value and total
        number of loans by province and by type:

    -------------------------------------------------------------------------
    May 31, 2011                          Conventio-
                                 Insured         nal     Secured
                                mortgage    mortgage  investment         RSP
    ($ millions)                   loans       loans       loans       loans
    -------------------------------------------------------------------------
    British Columbia          $     13.6  $     26.9  $    285.0  $     32.0
    Alberta                         62.9       110.7       173.9        38.1
    Ontario                        223.7       200.1       757.8       113.6
    Quebec                         100.1        85.6       114.0       150.7
    Other                            5.7         9.2       214.0        32.3
    -------------------------------------------------------------------------
    Total value of loans      $    406.0  $    432.5  $  1,544.7  $    366.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------
    May 31, 2011
                                   HELOC
                                receiva-     Finance
    ($ millions)                    bles       loans       Total
    -------------------------------------------------------------
    British Columbia          $     15.9  $      0.1  $    373.5
    Alberta                        175.5         0.2       561.3
    Ontario                         15.4         0.2     1,310.8
    Quebec                           0.2         0.2       450.8
    Other                           22.4         0.4       284.0
    -------------------------------------------------------------
    Total value of loans      $    229.4  $      1.1  $  2,980.4
    -------------------------------------------------------------
    -------------------------------------------------------------



    -------------------------------------------------------------------------
    May 31, 2011                          Conventio-
                                 Insured         nal     Secured
                                mortgage    mortgage  investment         RSP
                                   loans       loans       loans       loans
    -------------------------------------------------------------------------
    British Columbia                  64         113       4,326       3,448
    Alberta                          274         553       3,051       3,126
    Ontario                        1,441       1,148      12,297      11,988
    Quebec                           586         624       2,116      15,071
    Other                             34          61       3,111       2,851
    -------------------------------------------------------------------------
    Total number of loans          2,399       2,499      24,901      36,484
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------
    May 31, 2011
                                   HELOC
                                receiva-     Finance
                                    bles       loans       Total
    -------------------------------------------------------------
    British Columbia                  77          37       8,065
    Alberta                          746         175       7,925
    Ontario                           96          98      27,068
    Quebec                             3         146      18,546
    Other                            162         289       6,508
    -------------------------------------------------------------
    Total number of loans          1,084         745      68,112
    -------------------------------------------------------------
    -------------------------------------------------------------



    -------------------------------------------------------------------------
    November 30, 2010                     Conventio-
                                 Insured         nal     Secured
                                mortgage    mortgage  investment         RSP
    ($ millions)                   loans       loans       loans       loans
    -------------------------------------------------------------------------
    British Columbia          $     10.5  $     26.2  $    305.0  $     33.4
    Alberta                         59.1       115.7       190.0        38.5
    Ontario                        237.0       210.0       800.2       117.6
    Quebec                         104.0        90.3       120.4       154.8
    Other                            3.3         4.9       220.9        33.7
    -------------------------------------------------------------------------
    Total value of loans      $    413.9  $    447.1  $  1,636.5  $    378.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------
    November 30, 2010
                                   HELOC
                                receiva-     Finance
    ($ millions)                    bles       loans       Total
    -------------------------------------------------------------
    British Columbia          $     21.0  $      0.1  $    396.2
    Alberta                        207.5         0.5       611.3
    Ontario                         17.8         0.3     1,382.9
    Quebec                           0.3         0.5       470.3
    Other                           26.7         0.6       290.1
    -------------------------------------------------------------
    Total value of loans      $    273.3  $      2.0  $  3,150.8
    -------------------------------------------------------------



    -------------------------------------------------------------------------
    November 30, 2010                     Conventio-
                                 Insured         nal     Secured
                                mortgage    mortgage  investment         RSP
                                   loans       loans       loans       loans
    -------------------------------------------------------------------------
    British Columbia                  54         112       4,583       3,591
    Alberta                          262         576       3,332       3,094
    Ontario                        1,551       1,206      12,887      12,423
    Quebec                           604         653       2,234      15,281
    Other                             19          33       3,214       2,912
    -------------------------------------------------------------------------
    Total number of loans          2,490       2,580      26,250      37,301
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------
    November 30, 2010
                                   HELOC
                                receiva-     Finance
                                    bles       loans       Total
    -------------------------------------------------------------
    British Columbia                 105          57       8,502
    Alberta                          877         260       8,401
    Ontario                          114         162      28,343
    Quebec                             4         253      19,029
    Other                            193         441       6,812
    -------------------------------------------------------------
    Total number of loans          1,293       1,173      71,087
    -------------------------------------------------------------
    -------------------------------------------------------------

    (c) Impaired Loans

        Loans are considered to be past due where repayment of principal or
        interest is contractually in arrears. 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 90 days past
        due, except where the loan is both well-secured and in the process of
        collection. Loans that are insured by the federal government, an
        agency thereof, or a third-party insurer are classified as impaired
        when interest or principal is past due 365 days. As at May 31, 2011,
        impaired loans were $30.5 million (November 30, 2010 - $35.7 million)
        and $21.5 million (November 30, 2010 - $25.8 million), net of the
        specific allowance for loan losses.

    -------------------------------------------------------------------------
                                                                    November
                                                          May 31,         30,
    ($ thousands)                                           2011        2010
    -------------------------------------------------------------------------

    Impaired Loans:
      Insured mortgage loans                          $    5,453  $    6,488
      Conventional mortgage loans                         19,455      25,157
      Secured investment loans                             1,305       1,357
      RSP loans                                            1,812       1,335
      HELOC receivables                                    2,481       1,412
    -------------------------------------------------------------------------
                                                      $   30,506  $   35,749
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        The following tables provide an aging of loans:

    -------------------------------------------------------------------------
    May 31, 2011
                              1 to 29    30 to    61 to     Over
    ($ thousands)    Current     days  60 days  90 days  90 days       Total
    -------------------------------------------------------------------------

    Insured
     mortgage
     loans        $  366,975  $16,978  $ 3,621  $ 2,299  $16,117  $  405,990
    Conventional
     mortgage
     loans           393,186   13,275    4,637    2,939   18,481     432,518
    Secured
     investment
     loans         1,528,189   12,468    2,604      802      591   1,544,654
    RSP loans        360,986    2,850    1,604      304      917     366,661
    HELOC
     receivables     222,620    1,939    2,296      540    2,042     229,437
    Finance loans      1,096        -        -        -        -       1,096
    -------------------------------------------------------------------------
                  $2,873,052  $47,510  $14,762  $ 6,884  $38,148  $2,980,356
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    November 30, 2010
                              1 to 29    30 to    61 to     Over
    ($ thousands)    Current     days  60 days  90 days  90 days       Total
    -------------------------------------------------------------------------

    Insured
     mortgage
     loans        $  371,731  $16,391  $ 2,518  $ 2,627  $20,588  $  413,855
    Conventional
     mortgage
     loans           400,783   17,722    2,866    1,174   24,607     447,152
    Secured
     investment
     loans         1,617,556   14,701    2,525      862      898   1,636,542
    RSP loans        371,553    4,301    1,043      661      420     377,978
    HELOC
     receivables     266,663    4,289      375        -    1,945     273,272
    Finance loans      1,981        -        -        -        -       1,981
    -------------------------------------------------------------------------
                  $3,030,267  $57,404  $ 9,327  $ 5,324  $48,458  $3,150,780
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (d) Mortgages in Legal Action

        As at May 31, 2011, there are $20.1 million (2010 - $30.7 million) of
        insured mortgages in legal action. In addition, the following table
        provides a summary of conventional mortgages in legal action, which
        includes demand for payment, power of sale and foreclosures. The
        table details opening mortgages in legal action for the period and
        related changes to the pool, being additions, discharged mortgages
        other than sold, proceeds on foreclosed mortgages discharged and
        related losses, to arrive at the ending balance of mortgages in legal
        action.

    -------------------------------------------------------------------------
    Six months ended May 31,                                2011        2010
    ($ thousands)
    -------------------------------------------------------------------------

    Balance outstanding, beginning of the period      $   28,297  $   50,513
     Additions                                            11,221      19,952
     Discharged mortgages other than sold                 (5,554)    (14,567)
     Proceeds on foreclosed mortgages discharged          (7,341)    (12,878)
     Loss on foreclosed mortgages discharged              (2,045)     (1,601)
    -------------------------------------------------------------------------
                                                      $   24,578  $   41,419
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (e) Allowance for Credit Losses

        The continuity in the allowance for loan losses is as follows:

    -------------------------------------------------------------------------
    Six months ended May 31, 2011           Specific     General       Total
    ($ thousands)                         allowances  allowances  allowances
    -------------------------------------------------------------------------

    Balance, beginning of period          $    9,866  $   22,197  $   32,063
    Amounts written off                      (10,444)          -     (10,444)
    Recoveries                                 1,482           -       1,482
    Provision for loan losses                  8,060      (1,472)      6,588
    -------------------------------------------------------------------------
                                          $    8,964  $   20,725  $   29,689
    -------------------------------------------------------------------------

    Breakdown by category as at
     May 31, 2011
      Insured mortgage loans              $        -  $    2,400  $    2,400
      Conventional mortgage loans              3,836       4,254       8,090
      Secured investment loans                 1,301       5,544       6,845
      RSP loans                                3,475       8,000      11,475
      HELOC receivables                          352         527         879
    -------------------------------------------------------------------------
                                          $    8,964  $   20,725  $   29,689
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Six months ended May 31, 2010           Specific     General       Total
    ($ thousands)                         allowances  allowances  allowances
    -------------------------------------------------------------------------

    Balance, beginning of period          $   15,064  $   24,754  $   39,818
    Amounts written off                      (14,641)          -     (14,641)
    Recoveries                                   920           -         920
    Provision for loan losses                 10,399      (1,636)      8,763
    -------------------------------------------------------------------------
                                          $   11,742  $   23,118  $   34,860
    -------------------------------------------------------------------------

    Breakdown by category as at
     May 31, 2010
      Insured mortgage loans              $        -  $    3,900  $    3,900
      Conventional mortgage loans              5,175       4,490       9,665
      Secured investment loans                 2,490       4,248       6,738
      RSP loans                                3,787       9,716      13,503
      HELOC receivables                          290         764       1,054
    -------------------------------------------------------------------------
                                          $   11,742  $   23,118  $   34,860
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (f) AGF Trust Deposits

    -------------------------------------------------------------------------
                           Term to maturity
                  -----------------------------------------------------------
                                                                    November
                               1 year or      1 to 5      May 31,         30,
    ($ thousands)     Demand        less       years        2011        2010
    -------------------------------------------------------------------------

    Deposits      $    3,340  $1,549,578  $1,621,935  $3,174,853  $3,545,529
    Less: deferred
     selling
     commissions                                          (8,531)     (9,564)
    Less: current
     portion                                          (1,552,918) (1,814,701)
    -------------------------------------------------------------------------
    Long-term
     deposits                                         $1,613,404  $1,721,264
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        As at May 31, 2011, deposits were substantially comprised of GICs
        with a weighted average term to maturity of 1.3 years (November 30,
        2010 - 1.3 years) and a weighted average interest rate of 3.0%
        (November 30, 2010 - 3.1%). Approximately 10.6% (November 30, 2010 -
        13.8%) of deposits mature within 90 days.

    (g) 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
        June 2011 and March 2015. They involve the exchange of either the
        one-month bankers' acceptance (BA) rate or the three-month BA 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 May 31, 2011, the aggregate notional amount of the
        swap transactions was $2.1 billion (November 30, 2010 -
        $2.4 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 May 31, 2011, was $11.6 million
        (November 30, 2010 - $15.9 million). During the three and six months
        ended May 31, 2011, the ineffective portion of accumulated changes in
        fair value of hedging relationships recognized in the Consolidated
        Statement of Income amounted to a loss of $0.1 million and
        $0.4 million (2010 - $0.6 million loss and $1.0 million loss), as it
        relates to fair value hedging relationships.

    -------------------------------------------------------------------------
                                                                       Fixed
                          Notional                                  interest
    May 31, 2011            amount          Fair    Maturity            rate
    ($ thousands)          of swap         value        date        received
    -------------------------------------------------------------------------
                        $  780,000    $    2,107        2011   1.08% - 5.08%
                           810,000         5,283        2012   1.26% - 5.01%
                           355,000         2,270        2013   1.73% - 2.71%
                            80,000           955        2014   2.09% - 2.82%
                            50,000           973        2015   2.48% - 2.93%
    -------------------------------------------------------------------------
                        $2,075,000    $   11,588
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                                       Fixed
                          Notional                                  interest
    November 30, 2010       amount          Fair    Maturity            rate
    ($ thousands)          of swap         value        date        received
    -------------------------------------------------------------------------
                        $  235,000    $      140        2010   0.60% - 4.34%
                         1,290,000         6,523        2011   0.61% - 5.08%
                           685,000         6,252        2012   1.26% - 5.01%
                           170,000         1,501        2013   1.86% - 2.71%
                            40,000           797        2014   2.22% - 2.82%
                            25,000           687        2015   2.82% - 2.93%
    -------------------------------------------------------------------------
                        $2,445,000    $   15,900
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 7: Other Assets

    -------------------------------------------------------------------------
                                                          May 31,   November
    ($ thousands)                                           2011    30, 2010
    -------------------------------------------------------------------------
    Long-term portion of derivatives used to manage
     interest rate exposure                           $    6,765  $    9,746
    Other                                                  8,137       6,226
    -------------------------------------------------------------------------
                                                      $   14,902  $   15,972
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The current portion of derivatives used to manage interest rate exposure
    is included under accounts receivable, prepaid expenses and other assets.
    As at May 31, 2011, the current portion was $4.8 million (November 30,
    2010 - $6.2 million). Refer to Note 6(g) for details on the derivatives
    used to manage interest rate exposure. Refer to Note 15 for further
    details of the Company's derivative instruments.


    Note 8: Long-Term Debt
    -------------------------------------------------------------------------
                                                          May 31,   November
    ($ thousands)                                           2011    30, 2010
    -------------------------------------------------------------------------
    Revolving term loan                               $  124,735  $  143,678
    Acquisition facility (Note 5(a))                     184,028           -
    -------------------------------------------------------------------------
                                                      $  308,763  $  143,678
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) Revolving Term Loan

        On January 28, 2011, the Company amended and restated its revolving
        committed term loan with a major Canadian chartered bank. The amended
        loan facility is a four-year revolving term loan with a maximum
        aggregate principal of $300.0 million (November 30, 2010 - $300.0
        million). Advances under the facility are made available by prime-
        rate loans in U.S. or Canadian dollars, under BAs or by issuance of
        letters of credit. The facility, if not renewed, is due in full on
        January 28, 2015. As at May 31, 2011, AGF had drawn $124.7 million
        (November 30, 2010 - $143.7 million) against the facility in the form
        of 13- to 30-day BAs at an effective average interest rate of 2.9%
        (November 30, 2010 - 2.6%) per annum.

        The facility is guaranteed by AGF Management Limited and certain
        subsidiaries, including the Acuity group of companies and 20/20
        Financial Corporation.

    (b) Acquisition Facility

        On January 28, 2011, the Company arranged a syndicated four-year non-
        amortizing term loan credit facility with two Canadian chartered
        banks (acquisition facility). The acquisition facility consists of a
        one-time drawdown of $185.0 million to partially fund the acquisition
        of Acuity. The facility must be fully repaid by January 28, 2015, and
        is not renewable. Advances under the facility are made available by
        way of Canadian dollar prime-rate loans or Canadian dollar BAs. As at
        May 31, 2011, AGF had drawn $184.0 million against the facility in
        the form of a three-month BA at an effective average interest rate of
        3.0% per annum.

        The facility is guaranteed by AGF Management Limited and certain
        subsidiaries, including the Acuity group of companies and 20/20
        Financial Corporation.

    Note 9: Other Long-Term Liabilities

    -------------------------------------------------------------------------
                                                          May 31,   November
    ($ thousands)                                           2011    30, 2010
    -------------------------------------------------------------------------
    Long-term compensation-related liabilities            10,647      12,772
    Long-term portion of Elements Advantage                2,868       3,883
    Other                                                    549          46
    -------------------------------------------------------------------------
                                                      $   14,064  $   16,701
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In November 2005, the Company launched AGF Elements, which consists of
    five diversified fund-of-fund portfolios. Until June 22, 2009, four of
    these portfolios included the Elements Advantage Commitment, which is a
    commitment to investors that if their portfolio does not match or
    outperform its customized benchmark over a three-year period, AGF will
    provide each individual investor up to 90 basis points in additional
    units. This is calculated based on the value of such investment at the
    end of its related three-year period. As of June 22, 2009, the Company
    discontinued the Elements Advantage feature on its Elements products.
    Eligible units purchased prior to June 22, 2009, have been grandfathered
    and will retain the Elements Advantage feature. The current portion of
    the Elements Advantage liability is included under accounts payable and
    accrued liabilities. As at May 31, 2011, the current portion was $3.5
    million (November 30, 2010 - $3.1 million).

    Note 10: Capital Stock

    (a) Authorized Capital

        The authorized capital of AGF consists of an unlimited number of AGF
        Class B Non-Voting shares and an unlimited number of AGF Class A
        Voting common shares. The Class B Non-Voting shares are listed for
        trading on the Toronto Stock Exchange (TSX).

    (b) Changes During the Period

        The change in capital stock is summarized as follows:

    -------------------------------------------------------------------------
    Six months ended May 31,            2011                    2010
                             ------------------------------------------------
    ($ thousands, except                       Stated                 Stated
     share amounts)               Shares       value      Shares       value
    -------------------------------------------------------------------------

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

    Class B Non-Voting shares
      Balance, beginning
       of period              88,606,196  $  439,216  89,097,400  $  438,612
      Issued through stock
       dividend plan              52,043       1,011      74,497       1,315
      Stock options exercised    415,650       5,103     138,350       1,678
      Issued on acquisition
       of Acuity (Note 5)      6,487,203     114,679           -           -
    -------------------------------------------------------------------------
      Balance, end of period  95,561,092  $  560,009  89,310,247  $  441,605
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Class B Non-Voting Shares Purchased for Cancellation

        AGF has obtained applicable regulatory approval to purchase for
        cancellation, from time to time, certain of its Class B Non-Voting
        shares through the facilities of the TSX (or as otherwise permitted
        by the TSX). Under its 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 7,430,257 shares through to March 6,
        2012. No shares were repurchased during the three and six months
        ended May 31, 2011 and 2010.

    (d) Stock Option Plan

        AGF has established stock option plans for senior employees under
        which stock options to purchase an aggregate maximum of 4,179,421
        Class B Non-Voting shares could have been granted as at May 31, 2011
        (2010 - 4,724,551). The stock options are issued at a price not less
        than the market price of the Class B Non-Voting 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, vest at the end of the term of the option.

        The change in stock options during the six months ended May 31, 2011
        and 2010 is summarized as follows:

    -------------------------------------------------------------------------
    Six months ended May 31,            2011                    2010
                             ------------------------------------------------
                                            Weighted                Weighted
                                             average                 average
                                            exercise                exercise
                                 Options       price     Options       price
    -------------------------------------------------------------------------

    Class B Non-Voting share
     options
      Balance, beginning of
       period                  5,540,399  $    16.35   6,627,398  $    16.34
      Options granted            678,780       19.03      75,000       16.20
      Options forfeited/
       expired                  (107,850)      17.19    (945,499)      17.65
      Options exercised         (415,650)      10.81    (138,350)      10.68
    -------------------------------------------------------------------------
      Balance, end of period   5,695,679  $    17.06   5,618,549  $    16.26
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        During the three months ended May 31, 2011 and 2010, no stock options
        were granted and compensation expense and contributed surplus of $0.7
        million (2010 - $0.8 million) were recorded. During the six months
        ended May 31, 2011 and 2010, 678,780 stock options were granted (2010
        - 75,000) and compensation expense and contributed surplus of $1.1
        million (2010 - $1.6 million) were recorded. The fair value of
        options granted during the six months ended May 31, 2011, has been
        estimated at $4.43 per share using the Black-Scholes option-pricing
        model. The following assumptions were used to determine the fair
        value of the options granted during the six months ended May 31,
        2011.

        Risk-free interest rate                   2.45%
        Expected dividend yield                   5.47%
        Expected share price volatility           41.37%
        Option term                               5 years

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

        The change in share units during the six months ended May 31, 2011
        and 2010 is as follows:

    -------------------------------------------------------------------------
    Six months ended May 31,                               2011        2010
                                                      -----------------------
                                                       Number of   Number of
                                                           share       share
                                                           units       units
    -------------------------------------------------------------------------
    Outstanding, beginning of period
      Non-vested                                         487,761     685,862
    Issued
      Initial allocation                                 315,877      12,122
      In lieu of dividends                                17,134      20,478
    Settled in cash                                       (6,427)     (1,715)
    Forfeited and cancelled                              (12,448)    (24,146)
    -------------------------------------------------------------------------
    Outstanding, end of period                           801,897     692,601
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        Compensation expense for the three months ended May 31, 2011, related
        to these share units was $1.6 million (2010 - $0.9 million), and for
        the six months ended May 31, 2011, was $3.7 million (2010 - $1.9
        million). AGF entered into a swap agreement to fix the cost of
        compensation related to certain RSUs and PSUs. AGF had economically
        hedged no share units as at May 31, 2011 (2010 - 145,768 share units
        at a fixed cost of $28.87). Refer to Note 15 for further details on
        the Company's derivative instruments. On December 3, 2010, AGF fully
        settled with its counterparty the remaining 124,626 units having a
        notional value of $3.4 million based on their November 30, 2010, fair
        value thereby terminating the hedging relationship.

    (f) Deferred Share Unit (DSU) Plan

        There is no unrecognized compensation expense related to directors'
        DSUs since these awards vest immediately upon grant. As at May 31,
        2011, 61,126 (2010 - 49,217) DSUs were outstanding. Compensation
        expense related to these DSUs for the three months ended May 31,
        2011, was $0.2 million (2010 - $0.1 million), and for the six months
        ended May 31, 2011, was $0.3 million (2010 - $0.1 million).

    (g) Partners Incentive Plan (PIP)

        Compensation expense related to this incentive plan are recorded in
        payroll costs and amounted to $0.3 million for the three months ended
        May 31, 2011 (2010 - $1.8 million) and $0.9 million for the six
        months ended May 31, 2011 (2010 - $1.8 million).

    (h) Earnings Per Share

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

    -------------------------------------------------------------------------
                                      Three months             Six months
                                      ended May 31,           ended May 31,
                             ------------------------------------------------
    ($ thousands, except per
     share amounts)                 2011        2010        2011        2010
    -------------------------------------------------------------------------

    Numerator
      Net income for the period
       attributable to equity
       owners of the Company  $   32,692  $   27,429      60,397  $   58,068

    Denominator
      Weighted average number
       of shares - basic      95,568,899  89,332,374  93,210,619  89,272,840
      Dilutive effect of
       employee stock options  1,225,216   1,150,094   1,189,990   1,132,360
    -------------------------------------------------------------------------
      Weighted average number
       of shares - diluted    96,794,115  90,482,468  94,400,609  90,405,200

    Earnings per share
     attributable to equity
     owners of the Company
      Basic                   $     0.34  $     0.31  $     0.65  $     0.65
      Diluted                 $     0.34  $     0.30  $     0.64  $     0.64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 11: Accumulated Other Comprehensive Loss

    -------------------------------------------------------------------------
                                 Foreign   Available
                                currency    for sale   Cash flow
    ($ thousands)            translation  securities       hedge       Total
    -------------------------------------------------------------------------

    Opening Balance
      Other comprehensive
       income (loss)          $  (27,606) $   13,817  $     (126) $  (13,915)
      Income tax recovery
       (expense)                   4,099      (3,467)         47         679
    -------------------------------------------------------------------------
    Balance, November 30,
     2009                        (23,507)     10,350         (79)    (13,236)
    Transactions during
     the year ended
     November 30, 2010
      Other comprehensive
       income (loss)              (7,347)      9,668         126       2,447
      Income tax recovery
       (expense)                     918      (3,201)        (47)     (2,330)
    -------------------------------------------------------------------------
    Balance, November 30,
     2010                        (29,936)     16,817           -     (13,119)
    Transactions during
     the six months ended
     May 31, 2011
      Other comprehensive
       loss                         (341)    (10,171)          -     (10,512)
      Income tax recovery             43       3,151           -       3,194
    -------------------------------------------------------------------------
    Balance, May 31, 2011     $  (30,234) $    9,797  $        -  $  (20,437)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 12: Supplemental Disclosure of Cash Flow Information

    (a) Changes in Non-Cash Operating Working Capital Items

    -------------------------------------------------------------------------
                                      Three months             Six months
                                      ended May 31,           ended May 31,
                             ------------------------------------------------
    ($ thousands)                   2011        2010        2011        2010
    -------------------------------------------------------------------------
    Decrease in accounts
     receivable               $    3,124  $    5,317  $   13,938  $   10,167
    Increase in other assets      (2,975)     (4,298)     (5,428)     (6,839)
    Increase (decrease) in
     accounts payable and
     accrued liabilities          (3,263)      3,555     (57,424)    (45,774)
    Increase (decrease) in
     deposits and other
     liabilities                    (163)     (9,544)      2,755     (13,017)
    -------------------------------------------------------------------------
                              $   (3,277) $   (4,970) $  (46,159) $  (55,463)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Income Taxes and Interest Paid

    -------------------------------------------------------------------------
                                      Three months             Six months
                                      ended May 31,           ended May 31,
                             ------------------------------------------------
    ($ thousands)                   2011        2010        2011        2010
    -------------------------------------------------------------------------

    Income taxes paid         $   15,525  $   14,904  $   29,140  $   42,416
    Interest paid                 22,407      19,593      43,220      40,210
    -------------------------------------------------------------------------
                              $   37,932  $   34,497  $   72,360  $   82,626
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 13: AGF Trust Net Interest Income

    The breakdown of net interest income is as follows:

    -------------------------------------------------------------------------
                                      Three months             Six months
                                      ended May 31,           ended May 31,
                             ------------------------------------------------
    ($ thousands)                   2011        2010        2011        2010
    -------------------------------------------------------------------------

    AGF Trust interest income
      Loan interest           $   39,825  $   42,082  $   80,019  $   84,983
      Investment interest          3,345       3,546       7,552       6,516
    -------------------------------------------------------------------------
                                  43,170      45,628      87,571      91,499

    AGF Trust interest
     expense
      Deposit interest            25,293      32,850      51,233      66,767
      Hedging interest income     (5,682)    (14,380)    (12,448)    (28,829)
      Other interest expense       4,310       4,701       8,640       9,546
    -------------------------------------------------------------------------
                                  23,921      23,171      47,425      47,484

    -------------------------------------------------------------------------
    AGF Trust net interest
     income                   $   19,249  $   22,457  $   40,146  $   44,015
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 14: Capital Management

    Detailed disclosure of the Company's capital, including management
    objectives and policies and regulatory capital requirements, are included
    in Note 22 to AGF's 2010 Annual Report. The Company's 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.

    Regulatory capital ratios and the asset-to-capital multiple for AGF Trust
    are detailed as follows:

    -------------------------------------------------------------------------
                                                     May 31,    November 30,
    ($ thousands)                                       2011            2010
    -------------------------------------------------------------------------
    Tier 1 capital                                $  305,997      $  287,183
    Total regulatory capital                         428,352         403,814
    Risk-weighted assets                           1,692,609       1,795,568
    Tier 1 capital ratio                               18.1%           16.0%
    Total capital ratio                                25.3%           22.5%
    Assets-to-capital multiple                           8.8           10.2
    -------------------------------------------------------------------------


    Note 15: Financial Instruments

    Financial instruments are classified based on categories according to
    CICA Handbook "Section 3855 Financial Instruments - Recognition and
    Measurement" as follows:

    -------------------------------------------------------------------------
    May 31, 2011                            Carrying amount on balance sheet
                                         ------------------------------------
                                                                   Amortized
                                                  Fair value            cost
                                         ------------------------------------
                                                                   Loans and
                                                                 receivables
                                           Available        Held    or other
                                                 for         for   financial
    ($ thousands)                               sale     trading liabilities
    -------------------------------------------------------------------------

    Cash and cash equivalents             $        -  $  312,376  $        -
    Investments                              424,801           -           -
    Retained interest from
     securitization                           38,557           -           -
    Accounts receivable                            -           -      81,322
    Real estate secured and investment
     loans                                         -           -   2,954,652
    Derivatives                                    -      11,588           -
    Other assets                                   -           -       6,202
    -------------------------------------------------------------------------
    Total financial assets                $  463,358  $  323,964  $3,042,176
    -------------------------------------------------------------------------

    Accounts payable and accrued
     liabilities                          $        -  $        -  $  221,319
    Long-term debt                                 -           -     308,763
    Deposits                                       -           -   3,166,322
    Acquisition consideration payable              -      45,191           -
    Other long-term liabilities                    -           -      14,064
    -------------------------------------------------------------------------
    Total financial liabilities           $        -  $   45,191  $3,710,468
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    November 30, 2010                       Carrying amount on balance sheet
                                         ------------------------------------
                                                                   Amortized
                                                  Fair value            cost
                                         ------------------------------------
                                                                   Loans and
                                                                 receivables
                                           Available        Held    or other
                                                 for         for   financial
    ($ thousands)                               sale     trading liabilities
    -------------------------------------------------------------------------
    Cash and cash equivalents             $        -  $  456,550  $        -
    Investments                              503,963           -           -
    Retained interest from securitization     38,699           -           -
    Accounts receivable                            -           -      85,925
    Real estate secured and investment
     loans                                         -           -   3,122,214
    Derivatives                                    -      15,900           -
    Other assets                                   -           -       4,291
    -------------------------------------------------------------------------
    Total financial assets                $  542,662  $  472,450  $3,212,430
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accounts payable and accrued
     liabilities                          $        -  $        -  $  257,451
    Long-term debt                                 -           -     143,678
    Deposits                                       -           -   3,535,965
    Derivatives                                    -       1,277           -
    Other long-term liabilities                    -           -      16,701
    -------------------------------------------------------------------------
    Total financial liabilities           $        -  $    1,277  $3,953,795
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Fair Value Hierarchy

Financial Instruments Carried at Fair Value

The financial instruments carried at fair value have been categorized under three levels of fair value hierarchy as follows:

Quoted Prices in an Active Market (Level 1)

This level of the hierarchy includes listed equity securities on major exchanges, investments in AGF mutual funds, highly liquid temporary deposits with Canadian banks, an Irish government guaranteed bank and non-Irish banks in Ireland, as well as bank term deposits. The fair value of instruments that are quoted in active markets are determined using the quoted prices where they represent those at which regularly and recently occurring transactions take place.

Valuation Techniques with Observable Parameters (Level 2)

This level of the hierarchy includes derivative instruments with major Canadian chartered banks, as well as investments held by AGF Trust, which include FRNs. AGF Trust values its investment holdings primarily using a third party investment valuation service. If prices are not readily available, the Company relies on counterparty valuations from financial institutions and brokerages with which it deals.

The fair value of derivatives used to manage interest rate exposure is calculated through discounting future expected cash flows using the BA-based swap curve. Since the BA-based swap curve is an observable input, these financial instruments are considered Level 2.

The fair value of the derivative used to manage changes in share-based compensation was calculated as the difference between the initial swap price and the market value of Class B Non-Voting shares on the valuation date, multiplied by the total number of shares outstanding. The initial price was equal to the price agreed to at the onset of the swap agreement, adjusted for dividends that had been reinvested by the equity holder. Since the market value of Class B Non-Voting shares is an observable input, this financial instrument was considered Level 2.

Valuation Techniques with Significant Unobservable Parameters (Level 3)

This level of the hierarchy includes the retained interest from securitization. Instruments classified in this category have a parameter input or inputs that are unobservable and that have a more than insignificant impact on either the fair value of the instrument or the profit or loss of the instrument. The fair value of the retained interest from securitization is determined using the present value of future expected cash flows. The expected cash flow model incorporates expected credit losses, prepayment rates, discount rate and excess spread. Expected credit losses and prepayment rates are primarily based on historical portfolio performance, while discount rate and excess spread are based on portfolio performance combined with management's assessment of the impact of market and economic factors on expected cash flows.

Refer to Note 5(a) for a discussion of the fair value of the acquisition consideration payable. The following table classifies the carrying value of the financial instruments held at fair value across the fair value hierarchy:

    <<
    -------------------------------------------------------------------------
    May 31, 2011               Financial instruments at fair value
                             ------------------------------------------------
    ($ thousands)                Level 1     Level 2     Level 3       Total
    -------------------------------------------------------------------------
    Cash and cash
     equivalents              $  312,376  $        -  $        -  $  312,376
    Investments                   18,648     406,153           -     424,801
    Retained interest from
     securitization                    -           -      38,557      38,557
    Derivatives                        -      11,588           -      11,588
    -------------------------------------------------------------------------
    Total financial assets    $  331,024  $  417,741  $   38,557  $  787,322

    Acquisition consideration
     payable                  $        -  $        -  $   45,191  $   45,191
    -------------------------------------------------------------------------
    Total financial
     liabilities              $        -  $        -  $   45,191  $   45,191
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    November 30, 2010          Financial instruments at fair value
                             ------------------------------------------------
    ($ thousands)                Level 1     Level 2     Level 3       Total
    -------------------------------------------------------------------------
    Cash and cash
     equivalents              $  456,550  $        -  $        -  $  456,550
    Investments                   26,145     477,818           -     503,963
    Retained interest from
     securitization                    -           -      38,699      38,699
    Derivatives                        -      15,900           -      15,900
    -------------------------------------------------------------------------
    Total financial assets    $  482,695  $  493,718  $   38,699  $1,015,112

    Derivatives               $        -  $    1,277  $        -  $    1,277
    -------------------------------------------------------------------------
    Total financial
     liabilities              $        -  $    1,277  $        -  $    1,277
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

During the three and six months ended May 31, 2011 and 2010, there were no significant transfers between Level 1 and Level 2 of the fair value hierarchy.

The following is a reconciliation of Level 3 fair value measurements from November 30, 2010 to May 31, 2011, and November 30, 2009 to May 31, 2010:

    <<
    -------------------------------------------------------------------------
                                Fair value measurements using Level 3 inputs
                             ------------------------------------------------
                                                           Retained interest
    ($ thousands)                                        from securitization
    -------------------------------------------------------------------------
    Balance at November 30, 2010            	                   $   38,699
    Accretion income                                                   1,279
    Cash receipts, net of write-offs                                  (1,144)
    Securitization write-down                                           (100)
    Unrealized losses recognized in other
     comprehensive income                                               (177)
    -------------------------------------------------------------------------
    Balance at May 31, 2011                                       $   38,557
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                Fair value measurements using Level 3 inputs
                             ------------------------------------------------
                                                           Retained interest
    ($ thousands)                                        from securitization
    -------------------------------------------------------------------------
    Balance at November 30, 2009                                  $   40,448
    Accretion income                                                   1,362
    Cash receipts, net of write-offs                                  (1,517)
    Securitization write-down                                           (604)
    Unrealized losses recognized in other
     comprehensive income                                               (207)
    -------------------------------------------------------------------------
    Balance at May 31, 2010                                      $    39,482
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Financial Instruments Not Carried at Fair Value

The following table presents the estimated fair value of the Company's financial instruments that are not carried at fair value in the balance sheet:

    <<
    -------------------------------------------------------------------------
                                      May 31, 2011        November 30, 2010
                              -----------------------------------------------
                                Carrying        Fair    Carrying        Fair
    ($ thousands)                  value       value       value       value
    -------------------------------------------------------------------------
    Accounts receivable       $   81,322  $   81,322  $   85,925  $   85,925
    Real estate secured loans
     and investment loans      2,954,652   2,967,646   3,122,214   3,135,568
    Other assets                   6,202       6,202       4,291       4,291
    -------------------------------------------------------------------------
    Total financial assets    $3,042,176  $3,055,170  $3,212,430  $3,225,784

    Accounts payable and
     accrued liabilities      $  221,319  $  221,319  $  257,451  $  257,451
    Long-term debt               308,763     308,763     143,678     143,678
    Deposits                   3,166,322   3,189,579   3,535,965   3,568,319
    Other long-term
     liabilities                  14,064      14,064      16,701      16,701
    -------------------------------------------------------------------------
    Total financial
     liabilities              $3,710,468  $3,733,725  $3,953,795  $3,986,149
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

For accounts receivable, other assets, accounts payable and accrued liabilities, long-term debt and other long-term liabilities, the carrying amount represents a reasonable approximation of fair value.

Real estate secured loans, investment loans, RSP loans, HELOC receivables, and finance loans are classified as loans and receivables and are recorded at amortized cost using the effective interest method, net of any allowance for loan losses and related deferred fees and charges. The fair value of mortgage loans and deposits is calculated based on the discounted present value of future cash flows associated with the loans and deposits. The discount rates used reflect prevailing market rates for loans and deposits with similar residual terms to maturity and product characteristics. For all other loan types, the carrying value is considered to be a reasonable approximation of fair value because of the variable interest rate nature of the loan.

Risk Management

In the normal course of business, the Company manages risks that arise as a result of its use of financial instruments. These risks include market, liquidity and credit risk.

Market Risk

Market risk is the risk that the fair value of financial instruments will fluctuate because of changes in market factors. Market risk includes fair value risk, interest rate risk and foreign currency risk. The Company is exposed to these risks directly through its financial instruments.

Fair Value Risk

Fair value risk is the risk of loss due to adverse changes in prices other than from changes in interest rates and foreign currency. The Company is exposed to fair value risk on certain investments available for sale and certain derivative positions. The Company's investments that have fair value risk include mutual funds managed by the Company and equity securities of $18.3 million as at May 31, 2011 (May 31, 2010 - $20.1 million). Any unrealized gains or losses arising from changes in the fair value of these financial instruments available for sale are recorded in other comprehensive income. Based on the carrying value of these investments at May 31, 2011, the effect of a 10% decline or increase in the value of investments would result in a $1.8 million (May 31, 2010 - $2.0 million) pre-tax unrealized gain or loss to other comprehensive income. The Company is also exposed to fair value risk on its acquisition consideration payable associated with future share payments. The Class B, C, D and E exchangeable preferred shares are to be settled by the issuance of a variable number of AGF Class B Non-Voting shares, the number of which is determined by reference to a fixed exchange ratio. As at May 31, 2011, the effect of a $1.00 increase or decrease in the market value of the AGF Class B Non-Voting shares would result in a $1.2 million gain or loss to investment income and other revenue.

Details of the Company's derivative instruments are as follows:

    <<
    -------------------------------------------------------------------------
    May 31, 2011                        Hedging item
                                             maximum
                                Interest    maturity    Notional        Fair
    ($ thousands)                   rate        date      amount       value
    -------------------------------------------------------------------------
    Derivatives used to
     manage interest rate
     exposure              1.08% - 5.08%        2015   2,075,000      11,588
    Derivatives used to
     manage changes in
     share-based
     compensation                      -           -           -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    November 30, 2010                   Hedging item
                                             maximum
                                Interest    maturity    Notional        Fair
    ($ thousands)                   rate        date      amount       value
    -------------------------------------------------------------------------
    Derivatives used to
     manage interest rate
     exposure              0.60% - 5.08%        2015   2,445,000      15,900
    Derivatives used to
     manage changes in
     share-based
     compensation                      -        2010       3,426      (1,277)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Interest Rate Risk

Interest rate risk, inclusive of credit spread risk, is the risk of loss due to the following: changes in the level, slope and curvature of the yield curve; the volatility of interest rates; mortgage prepayment rates; changes in the market price of credit and the creditworthiness of a particular client.

The Company, through AGF Trust, is exposed to interest rate risk primarily through its cash and cash equivalents, investments available for sale, real estate secured and investment loans receivable and deposits, managed and supervised by AGF Trust's Asset and Liability Committee. AGF Trust employs a number of techniques to manage this risk, including the matching of asset and liability terms. AGF Trust also uses interest rate swaps to manage any residual mismatches. At May 31, 2011, a 1% increase in interest rates in the aforementioned financial instruments would result in an increase in annual net interest income of approximately $2.9 million, while a 1% decrease in interest rates would result in a decrease of net interest income of approximately $2.9 million. At May 31, 2010, a 1% increase in interest rates in the aforementioned financial instruments would result in an increase in annual net interest income of approximately $3.4 million. As a result of interest rate levels in prior year, a sensitivity analysis based on a 1% decrease would not provided meaningful information. Refer to Note 3 for the effect of changes to key assumptions on the fair value of retained interests.

The Company, excluding AGF Trust, is also exposed to interest rate risk through its floating-rate debt and cash balances. As at May 31, 2011, the effect of a 1% change in the variable interest rates on the average balances for the year would have resulted in an annualized change in interest expense of approximately $2.3 million (May 31, 2010 - $1.6 million).

Foreign Currency Risk

Foreign currency risk is the risk of loss due to changes in spot and forward rates and the volatility of currency exchange rates. The Company is subject to foreign exchange risk on its integrated foreign subsidiaries. These subsidiaries retain minimal monetary exposure to the local currency, as the majority of revenues are earned in Canadian dollars and salaries and wages are primarily paid on a monthly basis and represent the majority of the local currency expenses. As such, these foreign subsidiaries have limited use of financial instruments denominated in local currencies, thus resulting in minimal foreign exchange risk.

Liquidity Risk

Liquidity risk arises from the possibility that the Company cannot meet a demand for cash resources when required or meet its financial obligations.

The Company manages its liquidity risk through the management of its capital structure and financial leverage as outlined in Note 10 and 14. In its Investment Management segment, the Company manages its liquidity by monitoring actual and projected cash flows to ensure that it has sufficient liquidity through cash received from operations as well as borrowings under its credit and acquisition facilities. The key liquidity requirements within this segment are the funding of commissions paid on mutual funds, dividends paid to shareholders and the repayment of its acquisition facility. The Company is subject to certain financial loan covenants under its credit and acquisition facilities and has met all of these conditions.

AGF Trust manages liquidity risk through deposit-taking activities and through the securitization of loans. The key liquidity requirements within this segment are the funding of mortgages and loans and the ability to pay out maturing GICs. AGF Trust's overall liquidity risk is managed by its treasury department and is supervised by AGF Trust's Asset and Liability Committee in accordance with the policies for management of assets and liabilities, liquidity and loan financing activities. These policies aim 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, and to review various possible stress scenarios. AGF Trust aims to maintain a prudent reserve of unencumbered liquid assets that are readily available if required. It strives to maintain a stable volume of base deposits that originate from its deposit brokerage clientele.

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.

The following table presents contractual terms to maturity of the financial liabilities owed by the Company:

    <<
    -------------------------------------------------------------------------
    May 31, 2011                                          1 year        1 to
    ($ thousands)                             Demand     or less     5 years
    -------------------------------------------------------------------------
    Accounts payable and accrued
     liabilities                          $        -  $  221,319  $        -
    Long-term debt                                 -           -     310,000
    Deposits(1)                                3,340   1,571,993   1,726,389
    Acquisition consideration payable              -      20,448       9,176
    Other liabilities                              -           -      14,064
    -------------------------------------------------------------------------
    Total                                 $    3,340  $1,813,760  $2,059,629
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    November 30, 2010                                     1 year        1 to
    ($ thousands)                             Demand     or less     5 years
    -------------------------------------------------------------------------
    Accounts payable and accrued
     liabilities                          $        -  $  258,728  $        -
    Long-term debt                                 -           -     144,000
    Deposits(1)                                3,630   1,839,525   1,850,820
    Other liabilities                              -           -      16,701
    -------------------------------------------------------------------------
    Total                                 $    3,630  $2,098,253  $2,011,521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes future interest payments and excludes deferred selling
        commissions.
    >>

Credit Risk

Credit risk is the potential of financial loss arising from the failure of a borrower or counterparty to honour its financial or contractual obligations to the Company. The Company's overall credit risk strategy and credit risk policy are developed by senior management and further refined at the business unit level, through the use of policies, processes and internal controls designed to promote business activities while ensuring these activities are within the standards of risk tolerance levels. As at May 31, 2011, financial assets of $3.8 billion (November 30, 2010 - $4.2 billion), consisting of cash and cash equivalents, investments, retained interests from securitization, real estate secured loans and investment loans, accounts receivable and other assets, were exposed to credit risk up to the maximum of their respective carrying value.

Cash and cash equivalents consist primarily of highly liquid temporary deposits with Canadian banks, an Irish government guaranteed bank and non-Irish banks in Ireland, as well as bank term deposits.

Investments subject to credit risk consist primarily of FRNs, senior debt instruments, investments in mutual funds of AGF and other securities. For investing activities done through AGF Trust, policies have been established that identify the types and rating of debt investments in which AGF Trust can invest. These policies also restrict AGF Trust's transactions primarily to major chartered banks and recognized investment dealers who are members of the Investment Industry Regulatory Organization of Canada (IIROC). AGF Trust maintains a list of approved securities dealers and counterparties, which are reviewed at least annually by the Trust Board. AGF Trust uses external credit rating agencies in assessing the credit quality of certain investments in financial assets. The credit rating agencies used include DBRS, S&P and Moody's. Refer to Note 2 for a breakdown of the credit ratings for AGF Trust's investments available for sale.

The Company's most significant credit risk is through AGF Trust's real estate secured loans and investment loans. AGF Trust mitigates this risk through stringent credit policies and lending practices. These policies aim to ensure that the authority to approve credit applications is appropriately delegated by senior management of AGF Trust, depending on the risk and the 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 loan loss provisions to ensure they are adequate. 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.

At May 31, 2011, AGF Trust's loan assets totalled $3.0 billion (November 30, 2010 - $3.2 billion) and were comprised of mortgage loans, investment loans, RSP loans, finance loans and HELOC receivables. Of this amount, $0.8 billion (November 30, 2010 - $0.9 billion) was represented by mortgage loans and $0.2 billion (November 30, 2010 - $0.3 billion) was represented by HELOC receivables, both of which are secured by residential real estate. At May 31, 2011, 48.7% of mortgage loans were insured by Canada Mortgage and Housing Corporation (CMHC) or another insurer (November 30, 2010 - 48.1%). Conventional uninsured mortgages have loan-to-value ratios of less than 80% of the appraised value of the property at the time the mortgage loan was granted.

Residential mortgages represent the largest component of the total mortgage portfolio, comprising 95.6% as at May 31, 2011 (November 30, 2010 - 97.2%). AGF Trust's credit risk on these loans is also mitigated through the use of collateral, primarily in the form of residential real estate. Under AGF Trust's lending criteria, management reviews all mortgage loans on a regular basis to determine the appropriate allowance for loss required by AGF Trust. Risk is also mitigated through residential mortgage insurance through CMHC or another insurer. As at May 31, 2011, AGF Trust's insured residential mortgage portfolio was $404.9 million, net of deferred sales commission and allowances (November 30, 2010 - $413.9 million).

Credit risk for HELOCs and investment loans is mitigated by collateral in the form of residential mortgages and investment funds, respectively. Investment loans, excluding RSP loans, of $1.5 billion as at May 31, 2011, are secured primarily by the investment made using the initial loan proceeds. The market value of this investment loan collateral is approximately $1.4 billion as at May 31, 2011.

RSP loans are used by borrowers to purchase assets in a retirement savings plan. The creditworthiness of each borrower is assessed prior to approval of the loan. Predictive scorecards are used to determine the probability of default and bankruptcy of the borrowers. On a regular basis, AGF Trust reviews the credit quality in the portfolio. Loans in arrears are also reviewed regularly to determine the appropriate loan loss reserves.

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. AGF Trust assesses the creditworthiness of the counterparties to minimize the risk of counterparty default under the agreements. AGF Trust only uses major Chartered banks with a minimum credit rating of AA as counterparties.

Note 16: Segment Information

AGF has three reportable segments: Investment Management Operations, Trust Company Operations and Other. The Investment Management Operations segment provides investment management and advisory services and is responsible for the management and distribution of AGF investment products. AGF Trust offers a wide range of trust services including GICs, term deposits, real estate secured loans and investment loans. The results of Smith & Williamson Holdings Limited have been included in Other.

The results of the reportable segments are based upon the internal financial reporting systems of AGF. The accounting policies used in these segments are generally consistent with those described in the 'Summary of Significant Accounting Policies' detailed in AGF's 2010 Annual Report.

    <<
    -------------------------------------------------------------------------
    Three months ended        Investment       Trust
    May 31, 2011              Management     Company
                                    Oper-       Oper-
    ($ thousands)                 ations      ations     Other(1)      Total
    -------------------------------------------------------------------------
    Revenue                   $  157,820  $   21,339  $      962  $  180,121
    Operating expenses            91,878      12,849           -     104,727
    Amortization and other
     expenses                     25,740         329       3,640      29,709
    -------------------------------------------------------------------------
    Segment income before
     taxes                    $   40,202  $    8,161  $   (2,678) $   45,685
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Three months ended        Investment       Trust
    May 31, 2010              Management     Company
                                    Oper-       Oper-
    ($ thousands)                 ations      ations     Other(1)      Total
    -------------------------------------------------------------------------

    Revenue                   $  132,254  $   24,789  $   (3,289) $  153,754
    Operating expenses            76,793      14,439           -      91,232
    Amortization and other
     expenses                     21,402         616       2,053      24,071
    -------------------------------------------------------------------------
    Segment income before
     taxes                    $   34,059  $    9,734  $   (5,342) $   38,451
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
    Six months ended          Investment       Trust
    May 31, 2011              Management     Company
                                    Oper-       Oper-
    ($ thousands)                 ations      ations     Other(1)      Total
    -------------------------------------------------------------------------

    Revenue                   $  297,121  $   44,087  $    1,807  $  343,015
    Operating expenses           176,621      27,031           -     203,652
    Amortization and other
     expenses                     47,977         719       5,569      54,265
    -------------------------------------------------------------------------
    Segment income before
     taxes                    $   72,523  $   16,337  $   (3,762) $   85,098

    -------------------------------------------------------------------------
    Total Assets              $1,519,334  $3,719,867  $        -  $5,239,201
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Six months ended          Investment       Trust
    May 31, 2010              Management     Company
                                    Oper-       Oper-
    ($ thousands)                 ations      ations     Other(1)      Total
    -------------------------------------------------------------------------

    Revenue                   $  262,943  $   48,670  $   (1,615) $  309,998
    Operating expenses           153,093      27,195           -     180,288
    Amortization and other
     expenses                     43,245       1,262       3,887      48,394
    -------------------------------------------------------------------------
    Segment income before
     taxes                    $   66,605  $   20,213  $   (5,502) $   81,316

    -------------------------------------------------------------------------
    Total Assets              $1,136,133  $4,240,618  $        -  $5,376,751
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Other revenue relates to S&WHL.
    >>

This report contains forward-looking statements with respect to AGF, including its business operations, strategy, financial performance and condition. Although management believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially include, among other things, general economic and market factors including interest rates, business competition, changes in government regulations or in tax laws, and other factors discussed in materials filed with applicable securities regulatory authorities from time to time.

Conference Call

AGF will host a conference call to review its earnings results today at 11 a.m. ET. 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://www.bellwebcasting.ca/audience/index.asp?eventid=82796876. Alternatively, the call can be accessed by dialing 1-877-240-9772 (toll-free in North America). A complete archive of this discussion along with supporting materials will be available at the same webcast address within 24 hours of the end of the conference call.

About AGF Management Limited

AGF Management Limited is one of Canada's premier independent investment solutions firms with offices across Canada and subsidiaries around the world. AGF's products include a diversified family of award-winning mutual funds, mutual fund wrap programs and pooled funds. AGF also manages assets on behalf of institutional investors including pension plans, foundations and endowments as well as for private clients. In addition, AGF Trust is a complementary business that offers GICs, loans and mortgages through the financial advisor and mortgage broker channels. With approximately $52 billion in total assets under management, AGF serves more than one million investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.

SOURCE AGF

For further information: AGF Management Limited shareholders and analysts, please contact: Robert J. Bogart, CPA, Executive Vice-President and Chief Financial Officer, 416-865-4264, bob.bogart@agf.com; Michael Clabby, Vice-President, Investor Relations and Corporate Development, 416-815-6275, michael.clabby@agf.com; Media, please contact: Lucy Becker, Vice-President, Public Relations and Public Affairs, 416-865-4284, lucy.becker@agf.com; Odette Coleman, Director, Public Relations and Public Affairs, 416-865-4308, odette.coleman@agf.com

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