AGF Management Limited reports second quarter financial results



    AGF produces solid financial results despite volatile global stock
    markets

    TORONTO, June 25 /CNW/ - AGF Management Limited (AGF) today announced
financial results for the second quarter ended May 31, 2008. Global stock
market volatility continued into the second quarter, resulting in a modest
1.3% decline in revenue and a 1.6% decline in earnings before interest, taxes,
depreciation and amortization (EBITDA) over the corresponding period in 2007,
excluding the $8.0 million securitization gain recognized in the second
quarter of 2007. In addition, AGF announced plans to repurchase up to
$60 million of AGF Class B non-voting shares over the next several months. To
facilitate the repurchase, AGF has secured an additional bank credit facility
with a three-year repayment term.
    "Although investors remained cautious within the current market
environment, at AGF we believe that our strong long-term business strategy
positions us well for future success. Our business fundamentals remain solid
and we will continue to focus on enhancing relationships to realize our key
growth initiatives," said AGF Chairman and CEO Blake C. Goldring. "Despite the
challenging markets faced by the industry, our assets have held up relatively
well and our trust operations have continued to experience significant growth
with total loan assets rising 44.2% year-over-year at the end of May."
    Mr. Goldring also stated, "In light of the current valuation of our stock
and industry comparables, we believe that AGF remains a superior investment
that provides value for our shareholders and we plan on repurchasing up to
$60 million in AGF stock through our share repurchase program."
    In the second quarter of fiscal 2008, total consolidated revenue from
continuing operations decreased to $194.3 million compared with $204.9 million
in the second quarter of the prior year. EBITDA from continuing operations
totalled $88.6 million for the three months ended May 31, 2008, compared with
$98.0 million for the three months ended May 31, 2007. Excluding the
$8.0 million securitization gain recorded in the second quarter of 2007,
revenue declined $2.6 million and EBITDA decreased $1.4 million while EBITDA
margins remained relatively stable. Continued market volatility in the quarter
resulted in $241 million of net redemptions of long-term mutual funds.
    Excluding the $8.0 million securitization gain, net income from
continuing operations for the three months ended May 31, 2008 increased 7.1%
and earnings per share diluted increased $0.04 or 8.9%, compared with the
three months ended May 31, 2007. Including the 2007 securitization gain, net
income from continuing operations for the quarter was down 10.4% to $44.0
million or $0.49 per share diluted, compared with $49.1 million or $0.54 per
share diluted for the same period last year.
    Total assets under management (AUM) decreased 7.2% to $51.8 billion at
May 31, 2008 from $55.8 billion as at May 31, 2007. Over the same period,
mutual fund assets declined by 6.5% as a result of market depreciation and
lower levels of gross sales. Average mutual fund assets for the quarter
decreased 5.6% over the second quarter of 2007 and 1.9% year-over-year.
Institutional and high-net-worth client assets declined 8.0% year-over-year
primarily as a result of client rebalancing and redemptions, which were
non-performance related. Month-to-date net redemptions of long-term mutual
funds as of the close of business on June 23, 2008 totalled $294.3 million, of
which approximately 68% was related to a client rebalancing.

    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, performance and
opportunities. Forward-looking statements are based on current expectations
and projections about future events and are inherently subject to, among other
things, risks, uncertainties and assumptions about our operations, economic
factors and the financial services industry generally. They are not guarantees
of future performance, and actual events and results could differ materially
from those expressed or implied by forward-looking statements made by us due
to, but not limited to, important factors such as level of assets under our
management, volume of sales and redemption of our investment products,
performance of our investment funds and of our investment managers and
advisors, competitive fee levels for investment management products and
administration, and competitive dealer compensation levels, size and default
experience on our loan portfolio and cost efficiency in our loan operations,
as well as interest and foreign exchange rates, taxation, changes in
government regulations, unexpected judicial or regulatory proceedings, and our
ability to complete strategic transactions and integrate acquisitions. We
caution that the foregoing list is not exhaustive. The reader is cautioned to
consider these and other factors carefully and not place undue reliance on
forward-looking statements. Other than specifically required by applicable
law, 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 'Managing
Risk - Overview' section of this MD&A and to the 'Risk Factors and Management'
section of our 2007 annual MD&A.


    Dear fellow shareholders

    The markets continued to be challenging during the second quarter of
2008. Global stock markets were volatile and investors remained cautious, as
evidenced by the continued substantial flows into money market funds
throughout the industry. Yet, AGF remained focused on executing its long-term
strategic plan for future growth, continuing to enhance client relationships
and recognizing that market volatility is part of our industry and a
short-term obstacle.
    Consistent with the overall industry, gross sales of mutual funds were
down in the second quarter of 2008 compared to 2007, while net redemptions of
long-term funds remained relatively stable year-over-year. The fact that
mutual fund redemptions did not increase significantly year-over-year is a
strong indicator that our clients are taking a long-term approach to
investing. We continue to work in close partnership with advisors to help them
guide their clients through this market downturn by providing strong
investment expertise that focuses on long-term financial success.
    Institutional and strategic accounts assets under management (AUM) at the
end of May 2008 were down 8.8% from the level reported at May 31, 2007.
However, in the second quarter, institutional and strategic accounts AUM
increased by 7.3% from the levels reported at February 29, 2008. This is the
result of new mandates and market appreciation.
    Our Trust Company continued to experience substantial growth in the
quarter, with loan assets increasing 44.2% year-over-year by the end of the
second quarter of 2008. The Trust Company's funding sources remain robust
since our loans are primarily funded by selling Guaranteed Investment
Certificates (GICs) with Canada Deposit Insurance Corporation (CDIC)
insurance, and the credit quality of our loans remains consistent.
    Excluding the $8.0 million securitization gain in the second quarter of
2007, consolidated revenue was $194.3 million, compared with $196.9 million in
the second quarter of the prior year. Earnings before interest, taxes,
depreciation and amortization(*) (EBITDA) from continuing operations were $88.6
million, compared with $90.0 million for the three months ended May 31, 2007.
EBITDA margins(*), excluding the securitization gain, remained stable for the
three months ended May 31, 2008, at 45.6% compared with 45.7% in the
three-month period ended May 31, 2007.
    For the three months ended May 31, 2008, AGF reported cash flow from
continuing operations(*) (before net change in non-cash balances related to
operations) of $71.5 million, compared with $84.4 million one year ago. Free
cash flow(*) (cash flow from continuing operations less selling commissions
paid) for the same period was $43.6 million, compared with $34.8 million one
year ago as a result of a decrease in deferred selling commissions paid.
    Finally, we announced a share repurchase program that will take place
over the next several months and we will buy back up to $60 million of AGF
Class B non-voting shares through an additional three-year term bank facility.
When looking at opportunities to enhance shareholder value, we believe the
best investment opportunity for our shareholders is in AGF shares. The
fundamentals of our investment management business are strong in spite of the
global stock market volatility. Our international operations add great
strength to our investment platform and the value of our investments in AGF
Trust and in Smith and Williamson do not appear to be reflected in our share
price. As a result, we plan on increasing our share repurchases.
    We remain committed to achieving our long-term objectives and are
well-positioned to weather market downturns and participate strongly when
markets stabilize.

    (signed)

    Blake C. Goldring, CFA
    Chairman and Chief Executive Officer
    May 31, 2008


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


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

    For the three and six months ended May 31, 2008

    This Management's Discussion and Analysis (MD&A) presents an analysis of
the financial condition of AGF Management Limited and its subsidiaries (AGF)
as at May 31, 2008, compared with November 30, 2007, and the results of
operations for the three and six months ended May 31, 2008, compared with the
corresponding period of 2007. This discussion should be read in conjunction
with our 2007 annual MD&A and 2007 annual audited Consolidated Financial
Statements and Notes. Certain comparative amounts in these financial
statements have been reclassified to conform with the current year's
presentation. The financial information presented herein has been prepared on
the basis of Canadian Generally Accepted Accounting Principles (GAAP).
Percentage changes are calculated using numbers, rounded to the decimals that
appear in this MD&A. All dollar amounts are in Canadian dollars unless
otherwise indicated.
    There have been no material changes to the information discussed in the
following sections of the 2007 annual MD&A: "Risk Factors and Management",
"Controls and Procedures", "Contractual Obligations", "Intercompany and
Related Party Transactions" and "Government Regulations". There has been
additional disclosure regarding the adoption of new accounting policies, which
are discussed in the "Significant Accounting Policies" section of this MD&A.
The "Key Performance Indicators and Non-GAAP Measures" section contains a
reconciliation of non-GAAP measures to GAAP measures.

    Overview

    With $51.8 billion in assets under management (AUM), AGF is one of
Canada's largest independent investment management companies, with operations
and investments in Canada, the United Kingdom, Ireland and Asia. We commenced
operations in 1957 with one of the first mutual funds available to Canadians
seeking to invest in the United States. As of May 31, 2008, we offered more
than 50 domestic and international mutual funds, as well as managed-asset
programs, sold under our Elements and Harmony brands. We also have a
substantial institutional investment management business, high-net-worth
business and a growing trust company.
    For purposes of this discussion, the operations of AGF and our subsidiary
companies are referred to as "we", "us", "our" or "the Company". The financial
results relating to the operations have been reported in three segments:
Investment Management Operations, Trust Company Operations and Other.
    The Investment Management Operations segment includes the results of our
retail mutual fund, institutional and high-net-worth client businesses. The
Trust Company Operations segment includes the results of AGF Trust Company,
and the Other segment includes our equity interest in Smith and Williamson
Holdings Limited (S&WHL).
    Investmaster Holdings Limited (Investmaster) was divested on April 30,
2007, and, as such, Investmaster's results have been reported as discontinued
operations for the periods disclosed prior to the sale.

    Strategy and Quarterly Overview

    As stated in our 2007 annual MD&A, our overall business strategy is to
foster the development of best-in-class operating segments to provide premier
financial services and to maximize shareholder value over the long term.
During the second quarter of 2008:

    
    -   Revenue decreased 5.2% in the quarter as compared with the same
        period in 2007. Earnings before interest, taxes, depreciation and
        amortization (EBITDA) decreased 9.6% during the same period. The
        second quarter of 2007 included an $8.0 million securitization gain.
        Excluding the securitization gain, revenues declined by a modest 1.3%
        and EBITDA declined by 1.6%.

    -   Market volatility continued, resulting in total AUM declining 7.2%
        from $55.8 billion at May 31, 2007 to $51.8 billion as at May 31,
        2008. However, total AUM increased 5.1% over the $49.3 billion
        reported as at February 29, 2008.

    -   Revenue at AGF Trust increased 21.4% quarter-over-quarter, excluding
        the securitization gain.

    -   AGF Trust real estate secured loan assets grew 38.7% over the
        previous year and investment loans grew 49.1% with total loan assets
        rising 44.2% year-over-year.

    -   Credit quality of the AGF Trust portfolio remains consistent, with
        impaired loans expressed as a percentage of total loans outstanding
        representing 0.7% at May 31, 2008 and November 30, 2007.

    -   We delivered value directly to our shareholders through dividend
        payments. Dividends paid, including dividends reinvested, on Class A
        voting common shares (Class A shares) and Class B non-voting shares
        (Class B shares) increased 24.6% to $22.3 million in the second
        quarter of 2008. This compared with $17.9 million in the same period
        in 2007.

    -   We announced a program, in our second quarter earnings release, to
        buy back up to $60 million AGF Class B shares.
    

    Key Performance Indicators and Non-GAAP Measures

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

    (a) Consolidated Operations

    Revenue

    Revenue is a measurement defined by Canadian GAAP and is recorded net of
fee rebates, sales taxes and distribution fees paid to limited partnerships.
Revenue is indicative of the potential to deliver cash flow.
    We derive our revenue principally from a combination of:

    
    -   management and advisory fees based on AUM

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

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

    EBITDA

    We define EBITDA as earnings before interest, taxes, depreciation and
amortization. EBITDA is a standard measure used in the mutual fund industry by
management, investors and investment analysts to understand and compare
results. We believe this is an important measure because it allows us to
assess our investment management businesses without the impact of
amortization. EBITDA for the Trust Company Operations segment includes
interest expense related to deposits. These deposits fund our investment loan
and real estate secured loan programs and 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 10 of
this MD&A for a schedule showing how EBITDA reconciles to our GAAP financial
statements.

    Cash Flow from Operations

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

    
    -------------------------------------------------------------------------
                                    Three months ended     Six months ended
                                         May 31,               May 31,
                                  -------------------------------------------
    ($ millions)                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Net cash provided by continuing
     operating activities          $  174.9   $  102.6   $  185.9   $  158.4
    Less: net changes in non-cash
     balances related to operations   103.4       18.2       32.1        5.3
    -------------------------------------------------------------------------
    Cash flow from continuing
     operations                    $   71.5   $   84.4   $  153.8   $  153.1
    -------------------------------------------------------------------------
    

    Free Cash Flow from Operations

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

    
    -------------------------------------------------------------------------
                                    Three months ended     Six months ended
                                         May 31,               May 31,
                                  -------------------------------------------
    ($ millions)                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Cash flow from continuing
     operations (defined above)    $   71.5   $   84.4   $  153.8   $  153.1
    Less: selling commissions paid     27.9       49.6       54.7       93.3
    -------------------------------------------------------------------------
    Free cash flow                 $   43.6   $   34.8   $   99.1   $   59.8
    -------------------------------------------------------------------------
    

    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)                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    EBITDA                         $   88.6   $   98.0   $  178.2   $  178.4
    Divided by revenue                194.3      204.9      388.7      382.0
    -------------------------------------------------------------------------
    EBITDA margin                      45.6%      47.8%      45.8%      46.7%
    -------------------------------------------------------------------------
    

    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, non-controlling interest and
non-segmented items to revenue.

    
    -------------------------------------------------------------------------
                                    Three months ended     Six months ended
                                         May 31,               May 31,
                                  -------------------------------------------
    ($ millions)                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Income before taxes and
     non-segmented items           $   57.9   $   63.3   $  114.5   $  112.3
    Divided by revenue                194.3      204.9      388.7      382.0
    -------------------------------------------------------------------------
    Pre-tax profit margin              29.8%      30.9%      29.5%      29.4%
    -------------------------------------------------------------------------
    

    Return on Equity (ROE)

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

    (b) Investment Management Operations

    Assets Under Management (AUM)

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

    Investment Performance (Market Appreciation (Depreciation) of Investment
    Portfolios)

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

    Net Sales

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

    EBITDA Margin

    EBITDA margin provides useful information to management and investors as
an indicator of our operating performance in our Investment Management
Operations segment. We believe EBITDA margin is a valuable measure since it
assesses the extent 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)                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    EBITDA                         $   71.5   $   76.7   $  146.3   $  147.6
    Divided by revenue                162.9      171.8      328.1      328.2
    -------------------------------------------------------------------------
    EBITDA margin                      43.9%      44.6%      44.6%      45.0%
    -------------------------------------------------------------------------
    

    Pre-Tax Profit Margin

    Pre-tax profit margin provides useful information to management and
investors as an indicator of our operating performance in our Investment
Management Operations segment. We believe pre-tax profit margin is a valuable
measure because it assesses the extent 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)                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Income before taxes and
     non-segmented items           $   43.6   $   45.5   $   89.0   $   86.5
    Divided by revenue                162.9      171.8      328.1      328.2
    -------------------------------------------------------------------------
    Pre-tax profit margin              26.8%      26.5%      27.1%      26.4%
    -------------------------------------------------------------------------
    

    (c) Trust Company Operations

    Loan Asset Growth

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

    Net Interest Income

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

    Net Interest Margin

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

    Efficiency Ratio

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

    
    -------------------------------------------------------------------------
                                    Three months ended     Six months ended
                                         May 31,               May 31,
                                  -------------------------------------------
    ($ millions)                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Selling, general and
     administrative expenses       $   10.9   $    9.3   $   22.2   $   17.8
    Add: amortization expense           0.6        0.4        1.0        0.7
    -------------------------------------------------------------------------
    Non-interest expense           $   11.5   $    9.7   $   23.2   $   18.5
    -------------------------------------------------------------------------

    Other revenue                  $    2.3   $    1.7   $    6.0   $    2.8
    Gain on RSP loan securitization
     and related income (loss),
     net of impairment                 (0.7)       9.2        0.1       10.0
    -------------------------------------------------------------------------
    Non-interest income            $    1.6   $   10.9   $    6.1   $   12.8
    -------------------------------------------------------------------------

    Net interest income            $   25.1   $   19.1   $   47.9   $   36.5
    Add: non-interest income            1.6       10.9        6.1       12.8
    -------------------------------------------------------------------------
    Total of net interest income
     and non-interest income       $   26.7   $   30.0   $   54.0   $   49.3
    -------------------------------------------------------------------------
    Efficiency ratio                   43.1%      32.3%      43.0%      37.5%
    -------------------------------------------------------------------------
    

    EBITDA Margin

    EBITDA margin provides useful information to management and investors as
an indicator of our operating performance in AGF Trust. 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)                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    EBITDA                         $   12.4   $   18.2   $   25.3   $   26.3
    Divided by revenue                 26.7       30.0       54.0       49.3
    -------------------------------------------------------------------------
    EBITDA margin                      46.4%      60.7%      46.9%      53.3%
    -------------------------------------------------------------------------
    

    Pre-Tax Profit Margin

    Pre-tax profit margin provides useful information to management and
investors as an indicator of the operating performance in AGF Trust. 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 net interest income. 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)                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Income before taxes and
     non-segmented items           $   11.8   $   17.8   $   24.3   $   25.6
    Divided by revenue                 26.7       30.0       54.0       49.3
    -------------------------------------------------------------------------
    Pre-tax profit margin              44.2%      59.3%      45.0%      51.9%
    -------------------------------------------------------------------------
    

    Assets-to-Capital Multiple

    Federally regulated deposit-taking institutions (DTI) 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.

    Significant Accounting Policies

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

    Changes in Significant Accounting Policies

    Capital Disclosures

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

    Financial Instruments Disclosures and Presentation

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

    Future Accounting Changes

    The Canadian Accounting Standards Board (AcSB) confirmed a plan to adopt
the International Financial Reporting Standards (IFRS) in 2011, for interim
and annual financial statements relating to fiscal years beginning on or after
January 1, 2011. The Company will adopt IFRS. The impact of the adoption of
IFRS is not known at this time.
    On December 1, 2008, the Company will adopt "CICA 3064, Goodwill and
Intangible Assets". This standard contains revised rules on the recognition,
measurement, presentation and disclosure of goodwill and intangible assets.
The adoption of this standard is not expected to have a significant impact on
the Company's financial position or results of operation.

    Changes in Internal Controls over Financial Reporting

    Pursuant to Multilateral Instrument 52-109, the Chief Executive Officer
and Chief Financial Officer must certify that they are responsible for the
design of internal controls over financial reporting (or caused them to be
designed under their supervision). Internal controls over financial reporting
are designed to provide reasonable assurance about the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with Canadian GAAP. During the six-month period ended
May 31, 2008, there was no significant change to the systems of internal
controls within AGF.

    Consolidated Operating Results

    The table below summarizes our consolidated operating results for the
three and six months ended May 31, 2008, and  May 31, 2007.

    
    -------------------------------------------------------------------------
    ($ millions,      Three months ended May 31,    Six months ended May 31,
     except per     ---------------------------------------------------------
     share amounts)   2008      2007   % change    2008      2007   % change
    -------------------------------------------------------------------------

    Revenue
      Investment
       Management
       Operations   $  162.9  $  171.8    (5.2%) $  328.1  $  328.2    (0.0%)
      Trust Company
       Operations(1)    26.7      30.0   (11.0%)     54.0      49.3     9.5%
      Other              4.7       3.1    51.6%       6.6       4.5    46.7%
    -------------------------------------------------------------------------
                       194.3     204.9    (5.2%)    388.7     382.0     1.8%

    Expenses
      Investment
       Management
       Operations       91.4      95.1    (3.9%)    181.8     180.6     0.7%
      Trust Company
       Operations       14.3      11.8    21.2%      28.7      23.0    24.8%
    -------------------------------------------------------------------------
                       105.7     106.9    (1.1%)    210.5     203.6     3.4%

    EBITDA(2)
     (continuing
     operations)        88.6      98.0    (9.6%)    178.2     178.4    (0.1%)
      Amortization      28.3      31.6   (10.4%)     58.3      61.8    (5.7%)
      Interest expense   2.4       3.2   (25.0%)      5.4       4.3    25.6%
      Non-controlling
       interest          0.2       0.2     0.0%       0.3       0.5   (40.0%)
      Income taxes      13.7      13.9    (1.4%)      7.5      24.7   (69.6%)
    -------------------------------------------------------------------------
    Net income from
     continuing
     operations     $   44.0  $   49.1   (10.4%) $  106.7  $   87.1    22.5%
    Loss on
     dissolution
     of limited
     partnerships,
     net of tax            -         -                  -      (2.1)
    Gain on sale of
     discontinued
     operations,
     net of tax            -       4.7                  -       4.7
    Net earnings (loss)
     from discontinued
     operations,
     net of tax(3)         -      (0.2)                 -       0.3
    -------------------------------------------------------------------------
    Net income      $   44.0  $   53.6   (17.9%) $  106.7  $   90.0    18.6%
    -------------------------------------------------------------------------
    Earnings per
     share from
     continuing
     operations -
     diluted        $   0.49  $   0.54    (9.3%) $   1.19  $   0.96    24.0%
    -------------------------------------------------------------------------
    (1) The three and six months ended May 31, 2007 include an $8.0 million
        securitization gain.

    (2) 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.

    (3) On April 30, 2007, AGF sold 100% of Investmaster. Accordingly,
        Investmaster's results have been reported as discontinued operations.
    


    Revenue for the three and six months ended May 31, 2008, declined by 5.2%
and increased 1.8% from the corresponding periods in 2007. Revenue in the
Investment Management Operations segment decreased 5.2% and was unchanged for
the three and six months ended May 31, 2008. This corresponds to lower average
levels of AUM offset by higher DSC and other revenue. The Trust Company
Operations segment, excluding a $8.0 million securitization gain in the second
quarter of 2007, reported increases in revenue of 21.4% and 30.8% for the
three and six months ended May 31, 2008, resulting from loan assets being up
44.2% year-over-year. Revenues from Other, which represents the results of our
31.6% equity interest in S&WHL, were higher for the three and six months ended
May 31, 2008. This compares with the corresponding periods in 2007, with the
increase attributable to the growth in S&WHL operations.
    Expenses for the three and six months ended May 31, 2008, decreased by
1.1% and increased 3.4% compared with the same periods in 2007. This includes
decreases in the Investment Management Operations and increases in the Trust
Company Operations segments. For more detail, refer to the segment
discussions.
    The revenue and expense impact contributed to a decrease in EBITDA of
9.6% and 0.1% for the three and six months ended May 31, 2008, from the
corresponding periods of 2007. Excluding the $8.0 million securitization gain,
EBITDA declined 1.6% for the three months ended May 31, 2008 and increased
4.6% for the six months ended May 31, 2008.
    Amortization expense decreased 10.4% and 5.7% for the three and six
months ended May 31, 2008, compared to the same periods in 2007.The decline
was due to lower amortization of deferred selling commissions in the
Investment Management Operations segment. Amortization of deferred selling
commissions accounted for $24.8 million and $50.9 million (2007 -
$27.2 million and $53.7 million) of the total amortization expense.
    Interest expense was $2.4 million and $5.4 million for the three and six
months ended May 31, 2008, as compared with $3.2 million and $4.3 million in
the same periods of 2007.
    For the three and six months ended May 31, 2008, income tax expense was
$13.7 million and $7.5 million compared with income tax expense of
$13.9 million and $24.7 million in the same periods in 2007. Results from the
six months ended May 31, 2008 include an income reduction of $19.5 million
related to the reduction in the federal income tax rate to 15% from 18.5% by
January 1, 2012. Excluding the impact of this tax reduction, the effective tax
rate for the first six months of 2008 was 23.6% compared with 22.1% in the
same period in 2007.
    The impact of the above revenue and expense items resulted in net income
from continuing operations of $44.0 million and $106.7 million for the three
and six months ended May 31, 2008. This compares with $49.1 million and
$87.1 million in the same periods of 2007. Basic earnings per share from
continuing operations were $0.49 and $1.20 for the three and six months ending
May 31, 2008 compared with $0.55 and $0.97 per share in the same periods of
2007. For the six months ending May 31, 2008, excluding the impact of the tax
reduction of $19.5 million, income from continuing operations was
$87.2 million or $0.97 per share diluted. This compares to $0.96 for the six
months ended May 31, 2007.
    Net income was $44.0 million and $106.7 million for the three and
six-month period ended May 31, 2008. This compares with $53.6 million and
$90.0 million in the same periods of 2007. Excluding the impact of income tax
as previously discussed, net income for the six-month period ended May 31,
2008 was $87.2 million. The six-month period ended May 31, 2007 included a
gain of $4.7 million net of tax related to the gain on sale of discontinued
operations, and a loss of $2.1 million net of tax related to the dissolution
of limited partnerships.
    A further discussion follows of the results of each business segment for
the three and six months ended May 31, 2008, compared with May 31, 2007.

    Business Segment Performance

    We report on three business segments: Investment Management Operations,
Trust Company Operations and Other. AGF's reportable segments are strategic
business units that offer different products and services. The Investment
Management Operations segment provides investment management and advisory
services. It is responsible for the management and distribution of AGF
investment products and services, including retail mutual funds, institutional
investment management and high-net-worth client investment counselling
services. The Trust Company Operations segment offers a wide range of trust
services and products, including GICs, real estate secured loans and
investment loans. The Other segment includes the results of S&WHL, which is
accounted for by the equity method, as well as our interest expense.

    Investment Management Operations

    Business and Industry Profile

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

    Segment Strategy and Highlights

    The strategic priorities for our Investment Management Operations,
detailed in the 2007 annual MD&A, are to continue to build predictable
excellence in three core areas: investment management, relationship management
and product management.
    Consistent with our stated strategy, during the three and six months
ended May 31, 2008, we achieved the following:

    
    -   Revenue for the six months ended May 31, 2008 remained stable
        compared to 2007, while average mutual fund AUM declined 1.9%.

    -   EBITDA margins remained relatively constant in 2008 over 2007, with
        an EBITDA margin of 43.9% for the three months ended May 31, 2008,
        compared with 44.6% in the three months ended May 31, 2007.

    -   We began offering clients more choice and access to potential tax
        benefits by adding three corporate class funds to our All World Tax
        Advantage Group.

    -   We added a dedicated emerging markets equities component and manager
        to the Harmony Overseas Equity Pool to give investors broader
        exposure and better diversification in emerging markets.

    -   We achieved recognition at the 2008 Canadian Lipper Awards getting
        top honours for two of our funds for their consistent long-term
        performance (AGF Precious Metals Fund and AGF China Focus Class).
    

    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 depends on the level and composition of AUM. Under the
management and investment advisory contracts between AGF and each of the
mutual funds, we are entitled to monthly fees. 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, strategic accounts, and
high-net-worth client AUM. As a result, the level of AUM has a significant
influence on financial results.
    The following table illustrates the composition of the changes in total
AUM during the three and six months ended May 31, 2008, and May 31, 2007.

    
    -------------------------------------------------------------------------
                      Three months ended May 31,    Six months ended May 31,
                   ----------------------------------------------------------
    ($ millions)      2008      2007   % change    2008      2007   % change
    -------------------------------------------------------------------------

    Mutual fund
     AUM, beginning
     of period      $ 27,703  $ 28,798    (3.8%) $ 30,052  $ 26,857    11.9%

    Gross sales of
     mutual funds        945     2,013   (53.1%)    2,073     4,184   (50.5%)
    Redemptions of
     mutual funds     (1,204)   (1,110)    8.5%    (2,557)   (2,239)   14.2%
    -------------------------------------------------------------------------
    Net mutual fund
     sales              (259)      903  (128.7%)     (484)    1,945  (124.9%)

    Market appreciation
     (depreciation) of
     fund portfolios   1,183       905    30.7%      (941)    1,804  (152.2%)
    -------------------------------------------------------------------------

    Mutual fund AUM,
     end of period  $ 28,627  $ 30,606    (6.5%) $ 28,627  $ 30,606    (6.5%)

    Institutional
     and strategic
     accounts AUM     19,226    21,092    (8.8%)   19,226    21,092    (8.9%)
    High-net-worth
     AUM               3,927     4,071    (3.5%)    3,927     4,071    (3.5%)
    -------------------------------------------------------------------------

    Total AUM, end
     of period      $ 51,780  $ 55,769    (7.2%) $ 51,780  $ 55,769    (7.2%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average daily
     mutual fund AUM
     for the period $ 28,357  $ 30,045    (5.6%) $ 28,489  $ 29,049    (1.9%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Continued global market volatility and an industry trend of reduced gross
sales of long-term funds resulted in a decrease in mutual fund AUM to
$28.6 billion at May 31, 2008, from $30.6 billion as at May 31, 2007. The
average daily mutual fund AUM for the three months ended May 31, 2008,
decreased 5.6% to $28.4 billion, compared with the same period in 2007. The
average daily mutual fund AUM for the six months ended May 31, 2008, decreased
1.9% to $28.5 billion, compared with the same period in 2007. During the past
12 months, institutional and strategic accounts AUM decreased by $1.9 billion
to $19.2 billion. This was as a result of market volatility and client
rebalancing as well as redemptions, which were non-performance related.
High-net-worth AUM decreased by $0.1 billion to $3.9 billion due to market
volatility. These decreases resulted in total AUM decreasing by 7.2% to
$51.8 billion.
    Market performance influences the level of AUM. During the three and six
months ended May 31, 2008, the Canadian-dollar-adjusted S&P 500 Index
increased 6.8% and decreased 5.1%, the Canadian-dollar-adjusted NASDAQ Index
increased 12.2% and decreased 5.8%, and the S&P/TSX Composite Index increased
9.1% and 8.9%. The aggregate market appreciation of our mutual fund portfolios
for the three months ended May 31, 2008, divided by the average daily mutual
fund AUM for the period was 4.2%, after management fees and expenses paid by
the funds. For the six months ended May 31, 2008, this represented a market
depreciation of 3.3%.
    The impact of the U.S. dollar increase relative to the Canadian dollar on
the market value of AGF mutual funds for the three months ended May 31, 2008,
has been an increase in AUM of $0.1 billion. For the six months ended May 31,
2008, the impact of the U.S. dollar decrease has been a decrease in AUM of
$0.1 billion.

    Financial and Operational Results

    The Investment Management Operations segment results for the three and
six months ended May 31, 2008, and May 31, 2007, are as follows:

    
    -------------------------------------------------------------------------
                      Three months ended May 31,    Six months ended May 31,
                   ----------------------------------------------------------
    ($ millions)      2008      2007   % change    2008      2007   % change
    -------------------------------------------------------------------------

    Revenue
      Management
       and advisory
       fees         $  153.9  $  165.4    (7.0%) $  310.3  $  316.3    (1.9%)
      Deferred
       sales charges     6.0       5.2    15.4%      12.2      10.1    20.8%
      Investment
       income and
       other revenue     3.0       1.2   150.0%       5.6       1.8   211.1%
    -------------------------------------------------------------------------
                       162.9     171.8    (5.2%)    328.1     328.2    (0.0%)

    Expenses
      Selling,
       general and
       administrative   46.0      49.5    (7.1%)     90.6      92.5    (2.1%)
      Trailing
       commissions      41.6      42.4    (1.9%)     83.4      80.9     3.1%
      Investment
       advisory fees     3.8       3.2    18.8%       7.8       7.2     8.3%
    -------------------------------------------------------------------------
                        91.4      95.1    (3.9%)    181.8     180.6     0.7%
    -------------------------------------------------------------------------

    EBITDA(*)           71.5      76.7    (6.8%)    146.3     147.6    (0.9%)
    Amortization        27.9      31.2   (10.6%)     57.3      61.1    (6.2%)
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-segmented
     items          $   43.6  $   45.5    (4.2%) $   89.0  $   86.5     2.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section.
    


    Revenue

    For the three and six-month period ended May 31, 2008, revenue for the
Investment Management Operations segment decreased by 5.2% and remained stable
compared with the previous-year period, with changes in the following
categories:

    Management and Advisory Fees

    The lower average daily mutual fund AUM in the second quarter of fiscal
2008 contributed to a 7.0% decrease in management and advisory fee revenue
from the same period in 2007. Management and advisory fee revenue is reported
net of distribution fees paid to limited partnerships and other third-party
financing entities. These distribution fees totalled $1.7 million (2007 -
$2.2 million) for the three months ended May 31, 2008 and $3.4 million (2007 -
$4.5 million) for the six months ended May 31, 2008.

    Deferred Sales Charges (DSC)

    We receive DSC upon redemption of securities sold on the contingent DSC
or back-end commission basis for which we finance the selling commissions paid
to the dealer. The DSC is generally 5.5% of the original subscription price of
the funds purchased if the funds are redeemed within the first two years, and
declines to zero after seven years. DSC revenue fluctuates based on the level
of redemptions, the age of the assets being redeemed and the proportion of
redemptions composed of back-end assets. DSC revenues for the three and six
months ended May 31, 2008, increased by 15.4% and 20.8% from the same periods
in 2007, reflecting higher retail mutual fund redemptions of DSC AUM that are
subject to a charge.

    Expenses

    For the three and six-month periods ended May 31, 2008, expenses
decreased by 3.9% and increased 0.7% from the previous-year period. Changes in
specific categories are described in the discussion that follows.

    Selling, General and Administrative Expenses

    Selling, general and administrative expenses (SG&A) for the three and
six-month periods ended May 31, 2008, were $46.0 million and $90.6 million.
This represents a 7.1% and 2.1% decrease over the same periods in 2007. The
decrease is made up of the following amounts:

    
    -------------------------------------------------------------------------
                                                 Three months    Six months
                                                 ended May 31,  ended May 31,
                                               ------------------------------
    ($ millions)                                     2008           2008
    -------------------------------------------------------------------------

    Increase in fund absorption expenses           $      0.1     $      1.2
    Increase (decrease) in compensation-related
     expenses                                            (1.7)           0.2
    Decrease in other expenses                           (1.9)          (3.3)
    -------------------------------------------------------------------------
                                                   $     (3.5)    $     (1.9)
    -------------------------------------------------------------------------

    The following are explanations for expense changes in the three and
six-month periods ended May 31, 2008, compared with the previous-year periods:

    -   Our current estimate for 2008 absorption expense is generally
        consistent with 2007.

    -   Compensation-related expenses decreased due to lower estimates for
        bonus payouts and lower severance payments.

    -   Other expenses decreased primarily as a result of reduced spending
        across a number of expense categories.
    

    Trailing Commissions

    Trailing commissions paid to investment dealers depend on total AUM, the
proportion of mutual fund AUM sold on a front-end versus back-end commission
basis and the proportion of equity fund AUM versus fixed-income fund AUM.
Annualized trailing commissions as a percentage of average daily mutual fund
AUM increased to 0.587% and 0.586% for the three and six months ended May 31,
2008, from 0.564% and 0.557% in the same 2007 periods. The trend in increasing
trailers expressed as a percentage of AUM is attributable to an increased
proportion of mutual fund AUM sold on a front-end basis. It is also
attributable to a change in the mix of assets toward managed products, such as
Harmony and Elements, which generally have higher trailer commissions.

    Investment Advisory Fees

    External investment advisory fees increased 18.8% and 8.3% for the three
and six-month periods ended May 31, 2008, compared with the previous-year
period. The year-over-year increase primarily relates to the AGF Dividend
Income Fund, which was managed internally for a portion of 2007.

    EBITDA

    EBITDA for the Investment Management Operations segment were
$71.5 million and $146.3 million for the three and six months ended May 31,
2008. This represents a decrease of 6.8% and 0.9% from $76.7 million and
$147.6 million for the same periods of fiscal 2007. The decrease is primarily
due to lower revenue levels resulting from lower average AUM.

    Amortization

    The largest item in this category is amortization of deferred selling
commissions. The category also represents amortization of property, equipment,
customer contracts and other intangible assets. We internally finance all
selling commissions paid. These selling commissions are capitalized and
amortized on a straight-line basis over a period that corresponds with their
applicable DSC schedule. Amortization expense related to deferred selling
commissions was $24.8 million and $50.9 million in the three and six months
ended May 31, 2008, compared with $27.2 million and $53.7 million in the same
periods in 2007.
    During the second quarter of fiscal 2008, we paid $27.9 million in
selling commissions, compared with $49.6 million in 2007. As at May 31, 2008,
the unamortized balance of deferred selling commissions stood at
$319.1 million. This is an increase of $3.1 million from the balance of
$316.0 million as at February 29, 2008. The contingent deferred sales charges
that would be received if all of the DSC securities were redeemed at May 31,
2008, were estimated to be approximately $418.7 million (May 31, 2007 -
$400.2 million).

    Trust Company Operations

    Business and Industry Profile

    Through AGF Trust, we offer financial solutions, including GICs, real
estate secured and investment loans, and Home Equity Lines of Credit (HELOC).
    AGF Trust investment loans consist of secured investment loans and RSP
loans distributed through financial advisors. The market for these products
derives from the efforts of financial advisors who continue to broaden their
suite of products to meet the needs of their customers. AGF Trust has a
competitive edge in the advisor channel as we leverage AGF's mutual fund
wholesaler relationships. Our mutual fund wholesalers have operated
successfully in the advisor channel for over 50 years.
    We offer real estate secured loans to Canadians who have sound credit,
but who may not have met the requirements of Canada's large banks to qualify
for their lowest rate real estate secured loan products. Real estate secured
loan products are distributed primarily through the mortgage broker channel,
which has experienced strong growth. Borrowers have chosen to deal with
mortgage brokers to take advantage of independent advice and competitive
rates. Lenders have provided real estate secured loans in this channel to
reduce distribution costs. HELOC loans are distributed through financial
advisors to clients who generally have superior credit profiles.

    Segment Strategy and Highlights

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

    
    -   continuing to focus on organic growth in our real estate secured and
        investment loan portfolios

    -   introducing new products that directly serve the needs of advisors'
        clients

    -   developing effective sales strategies and targeted marketing

    -   using disciplined loan-underwriting standards and enterprise
        risk-management measures
    

    For the three and six months ended May 31, 2008, loan originations were
$452.0 million and $977.0 million. With the continued capital market
volatility being experienced around the world, particularly in the U.S., and
the related effects of the Asset-Backed Commercial Paper (ABCP) markets, AGF
Trust is continuing to adapt to changing business conditions as funding costs
have increased across the industry. The majority of the funding for the
operations comes from the ability to sell GICs. As previously reported, AGF
Trust holds only bank-sponsored ABCP and has relied on these markets for only
a small portion of funding in the current and prior fiscal year.
    The credit quality of our loan portfolio remains consistent. Net loan
write-offs were $2.0 million and $3.5 million for the three and six months
ended May 31, 2008, compared to $0.9 million and $2.0 million in the same
periods in the previous year. Impaired loans expressed as a percentage of
loans outstanding were 0.7% as at May 31, 2008 and as at November 30, 2007.

    Securitization Transaction

    In the second quarter of 2007, AGF Trust securitized $263.6 million of
RSP loans, recognizing a gain of $8.0 million. There have been no
securitization transactions in 2008.

    Financial and Operational Results

    The Trust Company Operations segment results for the three and six months
ended May 31, 2008, and May 31, 2007, are as follows:

    
    -------------------------------------------------------------------------
                      Three months ended May 31,    Six months ended May 31,
                   ----------------------------------------------------------
    ($ millions)      2008      2007   % change    2008      2007   % change
    -------------------------------------------------------------------------


    Interest income
      Loan interest $   68.7  $   50.9    35.0%  $  135.2  $   94.1    43.7%
      Investment
       interest          7.3       4.1    78.1%      17.6       8.1   117.3%
    -------------------------------------------------------------------------
                        76.0      55.0    38.2%     152.8     102.2    49.5%
    Interest expense
      Deposit interest  50.2      30.8    63.0%      97.4      57.3    70.0%
      Other interest
       expense           0.7       5.1   (86.3%)      7.5       8.4   (10.7%)
    -------------------------------------------------------------------------
                        50.9      35.9    41.8%     104.9      65.7    59.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net interest
     income             25.1      19.1    31.4%      47.9      36.5    31.2%
    Other revenue        2.3       1.7    35.3%       6.0       2.8   114.3%
    Gain on RSP loan
     securitization
     and related
     income (loss),
     net of
     impairment(1)      (0.7)      9.2  (107.6%)      0.1      10.0   (99.0%)
    -------------------------------------------------------------------------
    Total revenue       26.7      30.0   (11.0%)     54.0      49.3     9.5%

    Expenses
      Selling,
       general and
       administrative   10.9       9.3    17.2%      22.2      17.8    24.7%
      Provision for
       loan losses       3.4       2.5    36.0%       6.5       5.2    25.0%
    -------------------------------------------------------------------------
                        14.3      11.8    21.2%      28.7      23.0    24.8%

    EBITDA(2)           12.4      18.2   (31.9%)     25.3      26.3    (3.8%)
    Amortization         0.6       0.4    50.0%       1.0       0.7    42.9%
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-segmented
     items          $   11.8      17.8   (33.7%) $   24.3      25.6    (5.1%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) The three and six months ended May 31, 2007 includes an $8.0 million
        securitization gain.

    (2) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section. The items required to reconcile EBITDA to
        net income, a defined term under Canadian GAAP, are detailed above.
    


    Revenue, Net Interest Income and Net Interest Margin

    Net interest income, which is expressed net of interest on deposits and
other interest expense, increased 31.4% and 31.2% in the three and six months
ended May 31, 2008, over the same periods in 2007. Loan balances were
approximately 44.2% higher as at May 31, 2008, compared to 2007. Other revenue
increased $0.6 million and $3.2 million in the three and six-month periods
ended May 31, 2008, over the same periods in the previous year. This is due to
higher loan balances and a gain from hedge ineffectiveness. Securitization
gains and related items decreased $9.9 million in the second quarter of 2008
versus the same quarter last year. The second quarter of 2007 included an
$8.0 million gain related to a securitization transaction. These factors
resulted in a decrease in revenue of 11.0% for the three months ended May 31,
2008 and an increase of 9.5% for the six months ended May 31, 2008.
    The average net interest margin on lending products in the second quarter
of 2008 was 2.37% (Q2 2007 - 2.70%). This spread decrease resulted from
compression in the Prime-Canadian Dollar Offered Rate (CDOR) spread, an
increase in the cost of GIC funding over the past six months, a slight
decrease in spreads on the investment loan portfolio and a change in the
business mix to include a greater proportion of high credit-quality HELOCs.
Since HELOCs are risk-priced they earn lower spreads than the Trust Company's
other lending products.

    Selling, General and Administrative Expenses

    The increases in SG&A expenses of 17.2% and 24.7% in the three and
six-month period ended May 31, 2008, over the same periods in 2007, result
from increased staffing levels to support the significant loan growth during
the past 12 months.

    Provision for Loan Losses

    The total provision for loan losses increased 36.0% in the second quarter
of 2008, compared with the previous-year period, and is consistent with the
growth in the loan portfolio. This was attributable to the increase in our
loan portfolios and the mix of loans. This increase in the loan loss provision
was moderated due to a higher proportion of newly originated loans that are
lower-risk investment loans and HELOCs.

    EBITDA

    EBITDA of $12.4 million and $25.3 million in the three and six-month
periods ended May 31, 2008 declined 31.9% and 3.8% compared with the same
periods ended May 31, 2007. Excluding the securitization gain of $8.0 million
in the second quarter of 2007, EBITDA increased 21.6% and 38.3%, in the three
and six-month periods ended May 31, 2008, compared to the same periods in
2007, consistent with the growth in loan assets.

    Operational Performance

    The table below highlights our key operational measures for the Trust
Company Operations segment for the three and six months ended May 31, 2008 and
May 31, 2007.

    
    -------------------------------------------------------------------------
                                                    Three months ended
                                                          May 31,
                                           ----------------------------------
    ($ millions)                                2008        2007    % change
    -------------------------------------------------------------------------

    Real estate secured loans(1)
      Insured mortgage loans               $   607.5   $   494.9       22.8%
      Conventional mortgage loans              808.2       627.3       28.8%
      HELOCs                                   559.3       301.3       85.6%
    -------------------------------------------------------------------------
                                             1,975.0     1,423.5       38.7%
    Investment loans(1)
      Secured investment loans               1,683.9     1,193.8       41.1%
      RSP loans                                618.5       344.2       79.7%
      Other loans                               14.8        15.7       (5.7%)
    -------------------------------------------------------------------------
                                             2,317.2     1,553.7       49.1%
    Other assets                               964.8       567.4       70.0%
    -------------------------------------------------------------------------
    Total Assets                           $ 5,257.0   $ 3,544.6       48.3%
    -------------------------------------------------------------------------

    Net interest income                    $    25.1   $    19.1       31.4%
    Gain on RSP loan securitization
     and related income (loss), net
     of impairment(2)                           (0.7)        9.2     (107.6%)
    Other revenue                                2.3         1.7       35.3%
    Non-interest expenses(3)                   (11.5)       (9.7)      18.6%
    Provision for loan losses                   (3.4)       (2.5)      36.0%
    -------------------------------------------------------------------------
    Income before taxes and non-segmented
     items                                 $    11.8   $    17.8      (33.7%)
    -------------------------------------------------------------------------

    Efficiency ratio(4)                         43.1%       32.3%
    Assets-to-capital multiple(4)               15.2        15.3
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                                     Six months ended
                                                          May 31,
                                           ----------------------------------
    ($ millions)                                2008        2007    % change
    -------------------------------------------------------------------------

     Real estate secured loans(1)
       Insured mortgage loans              $   607.5   $   494.9       22.8%
       Conventional mortgage loans             808.2       627.3       28.8%
       HELOCs                                  559.3       301.3       85.6%
    -------------------------------------------------------------------------
                                             1,975.0     1,423.5       38.7%

    Investment loans(1)
      Secured investment loans               1,683.9     1,193.8       41.1%
      RSP loans                                618.5       344.2       79.7%
      Other loans                               14.8        15.7       (5.7%)
    -------------------------------------------------------------------------
                                             2,317.2     1,553.7       49.1%
    Other assets                               964.8       567.4       70.0%
    -------------------------------------------------------------------------
    Total Assets                           $ 5,257.0   $ 3,544.6       48.3%
    -------------------------------------------------------------------------

    Net interest income                    $    47.9   $    36.5       31.2%
    Gain on RSP loan securitization
     and related income (loss), net
     of impairment(2)                            0.1        10.0      (99.0%)
    Other revenue                                6.0         2.8      114.3%
    Non-interest expenses(3)                   (23.2)      (18.5)      25.4%
    Provision for loan losses                   (6.5)       (5.2)      25.0%
    -------------------------------------------------------------------------
    Income before taxes and non-segmented
     items                                 $    24.3   $    25.6       (5.1%)
    -------------------------------------------------------------------------

    Efficiency ratio(4)                         43.0%       37.5%
    Assets-to-capital multiple(4)               15.2        15.3
    -------------------------------------------------------------------------

    (1) Includes loan provision and deferred sales commission.
    (2) The three and six months ended May 31, 2007 includes an $8.0 million
        securitization gain.
    (3) Includes SG&A and amortization expenses.
    (4) For the definition of efficiency ratio and assets-to-capital
        multiple, see the "Key Performance Indicators and Non-GAAP Measures"
        section.
    

    Loan Asset Growth

    Our continued sales efforts directed at the mortgage broker and advisor
channels resulted in significant loan assets growth year-over-year. Real
estate secured loan assets grew 38.7% year-over-year and were supplemented by
steady originations of HELOCs.
    Secured investment loans increased 41.1% to $1.7 billion as at May 31,
2008, over the same period in 2007. RSP loan balances increased by
$274.3 million or $116.6 million excluding the impact of the securitization,
as at May 31, 2008. This is a result of a strong RSP season despite volatile
equity markets during the early part of 2008.

    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 ensure expenses are contained as the Trust
business grows. Excluding the $8.0 million securitization gain in the second
quarter of 2007, the efficiency ratio decreased to 43.1% from 44.1% in the
same period of 2007. The efficiency ratio for the six-month period ended May
31, 2008, decreased to 43.0% from 44.8% in the same period in 2007.

    Balance Sheet

    Our balance sheet has grown significantly during the past year, with our
financial position remaining solid. Total assets increased 48.3% to
$5.3 billion as at May 31, 2008, compared with the previous year. As at May
31, 2008, our asset-to-capital multiple stood at 15.2 times, compared with
15.3 times at the same time last year. This is below our authorized multiple
of 17.5 times. Our risk-based capital ratio was 15.5% as at May 31, 2008. AGF
Trust received $35.0 million in debt and equity capital from AGF Management
Limited during the six-month period ended May 31, 2008, to support increased
asset levels. Liquid assets were high with $707.8 million in cash and cash
equivalents as at May 31, 2008 (2007 - $474.9 million), excluding cash
currently pledged to counterparties.

    Loan Portfolio Credit

    Portfolio credit quality remained consistent as at May 31, 2008, compared
with May 31, 2007. The general allowance for real estate secured loan losses
was increased during the year to $7.6 million from $5.8 million a year ago.
The general allowance for investment loan losses was increased to $9.1 million
from $6.1 million a year ago. Approximately 42.9% of real estate secured loan
assets, excluding HELOCs, are insured. We have strong security for non-RSP
investment loans, and loan losses during the history of the program have been
minimal. For RSP loans, the expense for impaired loans, which consists of the
increase in specific allowances plus write-offs net of recoveries (excluding
securitized RSP loans) was $1.8 million for the six months ended May 31, 2008
(2007 - $1.7 million). For the balance of our loan products, the expense for
impaired loans was $1.7 million (2007 - $0.2 million).

    Liquidity and Capital Resources

    Consolidated cash flow generated from continuing operating activities,
before net change in non-cash balances related to operations, was
$71.5 million and $153.8 million for the three and six months ended May 31,
2008. This compares with $84.4 million and $153.1 million in the same periods
of 2007.
    Consolidated free cash flow is defined as cash flow from operations less
selling commissions paid. It was $43.6 million and $99.1 million for the three
and six months ended May 31, 2008, compared with $34.8 million and
$59.8 million in the same period of 2007. We paid $27.9 million and
$54.7 million in selling commissions during the three and six months ended May
31, 2008, which were deferred for accounting purposes. This compares with
$49.6 million and $93.3 million paid and deferred in the same periods in 2007.
    Our free cash flow was used primarily to fund the following:

    
    -------------------------------------------------------------------------
                                        Three months ended  Six months ended
                                              May 31,             May 31,
                                   ------------------------------------------
    ($ millions)                       2008       2007       2008       2007
    -------------------------------------------------------------------------

    Payment of dividends            $  19.7    $  16.1    $  37.0    $  31.6
    Acquisitions of subsidiaries        0.0        0.0       20.8       19.9
    Purchase of property, equipment
     and other intangible assets        1.2        1.8        2.7        2.6
    Bank credit facility repayment
     (borrowing)                       87.1       15.0      (12.1)     (84.0)
    Investment in Trust Operations
     (eliminated on consolidation)      0.0       16.0       35.0       48.5
    -------------------------------------------------------------------------
                                    $ 108.0    $  48.9    $  83.4    $  18.6
    -------------------------------------------------------------------------
    

    During the three months ended May 31, 2008, our revolving term loan
balance decreased $87.1 million to $172.0 million.
    Consolidated cash and cash equivalents of $748.5 million decreased by
$79.4 million from November 30, 2007 levels of $827.9 million (2007 -
increased by $104.2 million). This was primarily due to Trust investing
$140.0 million of cash into investments available for sale.
    On May 26, 2008, the Company, under its current loan agreement, arranged
an additional three-year prime-rate based reducing term loan to a maximum of
$60.0 million (Facility 2). Facility 2 will be used to finance share
repurchases, permitting AGF to draw down the reducing term loan by direct
advances or bankers' acceptances (BAs). The reducing term loan is available to
the earlier of September 30, 2008, or the date that the facility is fully
drawn. Following this date, Facility 2 is payable in equal quarterly
instalments over twelve quarters. Any undrawn portion of Facility 2 at the end
of the availability date will be permanently cancelled.
    We also have a six-year prime rate-based revolving term loan facility to
a maximum of $300.0 million, of which $128.0 million was available, to be
drawn as at May 31, 2008. Aside from cash held in the Trust Company Operations
segment, which is held to fund loans to clients and GIC maturities, AGF had
$40.7 million of cash as at May 31, 2008. Some of this cash will be used to
repay bank debt in the remainder of 2008. The loan facility will be available
to meet future operational and investment needs. We anticipate that cash flow
from operations, together with the available loan facility, will be sufficient
in the foreseeable future to implement our business plan, finance selling
commissions, satisfy regulatory requirements, service debt repayment
obligations, meet capital spending needs and pay quarterly dividends.

    Capital Management Activities

    We actively manage our capital to maintain a strong and efficient capital
base to maximize risk-adjusted returns to shareholders, 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, Senior Vice-President and CFO, and
the Senior Vice-President 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 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 regarding regulatory capital requirements. Our
Investment Management businesses, in general, are not subject to significant
regulatory capital requirements in each of the jurisdictions in which they are
registered and operate. The cumulative amount of minimum regulatory capital
across all of our investment management operations is approximately
$6.0 million.

    AGF Trust - Regulatory Capital

    AGF Trust's regulatory capital consists primarily of common shareholders'
equity, preferred shares and subordinated debentures. Regulatory capital is a
factor that allows the 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's policy is to maintain its regulatory capital
ratios consistent with requirements as laid out by the Company's principal
regulator. As of January 1, 2008, AGF Trust is monitoring its regulatory
capital based on the Bank for International Settlements (BIS) regulatory
risk-based capital framework (commonly known as Basel II). AGF Trust uses the
Standardized Approach for credit risk and the Basic Indicator Approach for
operational risk. During the second quarter of 2008, AGF Trust has complied
with these Basel II requirements. See page 23 for more information on Basel
II.
    A capital plan prepared annually specifies the target capital ratios by
taking into account the projected risk-weighted asset levels and expected
capital management initiatives. Regulatory capital ratios are reported monthly
to management. Regulatory capital ratio monitoring reports are provided on a
quarterly basis to the Trust Board.

    Regulatory capital is detailed as follows:


    
    -------------------------------------------------------------------------
                                                         As at         As at
                                                        May 31,  November 30,
    ($ thousands)                                         2008        2007(1)
    -------------------------------------------------------------------------

    Tier 1 capital
      Common shares                                 $   82,768    $   82,768
      Contributed surplus                                1,126           910
      Retained earnings                                 96,563        79,863
      Non-cumulative preferred shares                   64,000        49,000
      Less: securitization and other                   (19,581)            -
    -------------------------------------------------------------------------
                                                       224,876       212,541

    Tier 2 capital
      Subordinated debentures                          109,500        89,500
      General allowances                                18,061        15,277
      Less: securitization and other                    (7,944)      (26,669)
    -------------------------------------------------------------------------
                                                       119,617        78,108

    -------------------------------------------------------------------------
    Total capital                                   $  344,493    $  290,649
    -------------------------------------------------------------------------

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


    Dividends

    On June 24, 2008, we declared a 25-cents-per-share dividend on Class A
and Class B shares, which approximates a 4.0% dividend yield. This dividend
will be payable on July 21, 2008, to shareholders of record on July 10, 2008.
    The holders of Class B shares are entitled to receive cash dividends.
Dividends are paid in equal amounts per share on all Class B and Class A
shares at the time outstanding, without preference or priority of one share
over another. No dividends may be declared if there is a default of a
condition of our loan facility or where such payment of dividends would create
a default.
    Our Board of Directors may determine that Class B shareholders shall have
the right to elect to receive part or all of such dividend in the form of a
stock dividend. They also determine whether a dividend in Class B shares is
substantially equal to a cash dividend. This determination is based on the
weighted average price at which the Class B shares traded on the Toronto Stock
Exchange (TSX) during the 10 trading days immediately preceding the record
date applicable to such dividend.
    The following table sets forth the dividends paid by AGF on Class B
shares and Class A shares for the periods indicated:

    
    -------------------------------------------------------------------------
    Years Ended November 30   2008(*)     2007      2006      2005      2004
    -------------------------------------------------------------------------

    Per share               $  0.950  $  0.780  $  0.690  $  0.560  $  0.410
    -------------------------------------------------------------------------
    Percentage increase          22%       13%       23%       37%       39%
    -------------------------------------------------------------------------

    (*) Subject to quarterly review and  approval by  AGF's Board of
        Directors.
    

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

    Normal Course Issuer Bid

    In February 2008, the Company's Board of Directors authorized the renewal
of AGF's normal course issuer bid for the purchase of up to 7,253,822 Class B
shares or 10% of the public float for such shares. The Company received
approval from the TSX on February 22, 2008, for the renewal of its normal
course issuer bid. This allows AGF to purchase up to 7,253,822 Class B shares
through the facilities of the TSX (or as otherwise permitted by the TSX)
between February 26, 2008 and February 25, 2009. The Class B shares may be
repurchased from time to time at prevailing market prices or such other price
as may be permitted by the TSX.
    As at May 31, 2008, under this current normal course issuer bid, no Class
B shares have been repurchased. AGF's previous normal course issuer bid,
initiated on February 26, 2007, allowed for the repurchase of up to
7,303,844 Class B shares between February 26, 2007 and February 25, 2008, at
prevailing market prices. Under the previous normal course issuer bid, AGF
purchased an aggregate of 1,437,800 Class B shares, for a total consideration
of $45.5 million at an average price of $31.67 per share.

    Outstanding Share Data

    Set out below is our outstanding share data as at May 31, 2008. For
additional details, see Note 9 of the Q2 2008 Consolidated Financial
Statements.

    
    -------------------------------------------------------------------------
    As at May 31,                                        2008         2007
    -------------------------------------------------------------------------

    Shares
    Class A voting common shares                         57,600       57,600
    Class B non-voting shares                        89,372,650   90,226,680

    Stock Options
    Outstanding options                               4,053,698    3,565,266
    Exercisable options                               2,095,942    1,547,034
    -------------------------------------------------------------------------
    

    Managing Risk - Overview

    Risk Overview

    Our approach to and the management of risk is described below. On
December 1, 2007, we adopted the CICA "Handbook Section 3862, Financial
Instruments - Disclosures". This section establishes standards for the
comprehensive disclosure requirements for financial instruments.
    In the normal course of business, each of our operating segments is
exposed to a variety of financial risks: credit risk, liquidity risk and
market risk. Market risk includes interest rate risk, other price risk and
foreign currency risk.
    Risk is the responsibility of AGF's Executive Committee. The Executive
Committee is comprised of AGF's Chairman and CEO, the Senior Vice-President
and CFO, the Senior Vice-President and General Counsel, the Presidents of AGF
Funds Inc., AGF Asset Management Group Limited and AGF Trust and the Chief
Investment Officer of AGF Funds Inc. Oversight of reputational, regulatory,
legal and financial risk is within the mandate of the Executive Committee.
    The Chairman and CEO is directly accountable to the Board of Directors
for all of AGF's risk-taking activities. The Executive Committee reviews and
discusses significant risk action plans that arise in executing the
enterprise-wide strategy. It also ensures that risk oversight and governance
occur at the most senior levels of management. Each of the business units owns
and assumes responsibility for managing its risk. They do this by ensuring
that policies, processes and internal controls are in place and by reporting
any significant risk identified in the business units to the Executive
Committee.
    AGF also has a strong commitment to governance, as outlined in the AGF
Corporate Governance summary on page 18 of our 2007 Annual Report. The AGF
Board of Directors has responsibility for the stewardship of the Company,
including oversight of its business and affairs.
    AGF also oversees or operates key functions for each of the business
units on a shared-services basis. These functions include Finance, Internal
Audit, Human Resources, Compensation, Information Technology, Fund Oversight,
Legal and Compliance. These functions play a significant role in ensuring the
consistency of risk management practices and standards across the company in
areas that are common to the business units. In addition, AGF facilitates a
disciplined approach to risk-taking through policy formation, reporting and
oversight of the operational units.
    AGF's risk governance structure is designed to balance risk and reward
and promote business activities consistent with our standards and
risk-tolerance levels, with the objective of maximizing long-term shareholder
value.

    Risk Factors that May Affect Future Results

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

    Managing Risk - Investment Management Operations

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

    Currency Risk

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

    Interest Rate Risk

    Our Investment Management segment has limited exposure to the risk
related to changes in interest rates on floating rate debt as at May 31, 2008.
Using average loan balances outstanding, the effect of a 1% change in variable
interest rates on this debt would have resulted in a change of approximately
$1.6 million in interest expense for the six months ended May 31, 2008. As the
amount of interest paid is small relative to our operating cash flow, such a
change in interest rates would not have a material impact on the results of
operations or the fair value of the related debt.

    Managing Risk - Trust Company Operations

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

    Basel II Capital Accord

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

    Credit risk

    The use of financial instruments, including financial derivative
instruments, can result in exposure to credit risk. This risk is of financial
loss arising from a counterparty's inability or refusal to honour its
contractual obligations to AGF Trust.
    Extensive reviews of credit policies and lending practices are undertaken
by management. The Trust Board periodically reviews and approves AGF Trust's
policies. These policies ensure that the authority to approve credit
applications is appropriately delegated by senior management or the Investment
Committee of AGF Trust, depending on the risk and amount of the credit
application. The credit policies also provide guidelines for pricing based on
risk for reviewing any collateral pledged for a credit application, monitoring
of impaired loans and establishing and reviewing loss provisions.
    The policies establish risk limits for credit concentration by
counterparty, geographic location, and other risk factors that would impact
AGF Trust's credit risk profile. The Company's internal audit department
reviews AGF Trust's adherence to policies and procedures for credit risk
management.
    Loans are classified as impaired when, in management's opinion, there is
reasonable doubt as to the collectability, either in whole or in part, of
principal or interest, or when principal or interest is past due 90 days. This
excludes where the loan is both well-secured and in the process of collection.
In any event, a loan that is insured by the federal government, an agency
thereof or another third-party insurer is classified as impaired when interest
or principal is past due 365 days or in the case of other loans, when they are
contractually in arrears for 180 days.
    When a loan is identified as impaired, the carrying amount of the loan is
reduced to its estimated realizable value using a specific allowance. When
management has no further basis to expect recovery from any sources, including
underlying collateral or borrower covenants, the specific allowance is removed
and the carrying amount of the impaired loan is reduced directly. This
determination is based on any proceeds from the disposition of collateral, an
evaluation of all borrowers' and guarantors' financial capacities and any
other potential sources of loss mitigation or credit enhancement.
    AGF Trust's credit risk is mitigated through the use of collateral,
primarily in the form of residential real estate and mutual fund investments.
Credit risk is also mitigated through residential mortgage insurance through
the Canada Mortgage and Housing Corporation (CMHC) or another insurer. As at
May 31, 2008, $607.5 million of AGF Trust's residential mortgage portfolio
including deferred commission was insured through CMHC or another insurer.
    Investing activities also expose AGF Trust to credit risk through its
securities portfolio. AGF Trust has established the securities and portfolio
management policies that identify the types and ratings of debt and equity
investments in which AGF Trust can invest. These policies also restrict AGF
Trust's transaction dealings primarily to major chartered banks and recognized
investment dealers who are members of the Investment Dealers Association. The
AGF Trust Operations Committee (OPCO) maintains a list of the approved
securities and counterparties, which are reviewed at least annually by the
Trust Board. The investment portfolio is regularly reviewed by OPCO and the
Trust Board to ensure the portfolio conforms to AGF Trust's policies.
    Cash and short-term investments primarily consist of highly liquid
temporary deposits with Canadian chartered banks as well as commercial paper,
bank-sponsored ABCP, bank deposit notes, reverse re-purchase agreements, BAs
and floating rate notes. Long-term investments consist primarily of floating
rate notes and senior debt instruments that qualify under AGF Trust's
securities and portfolio management policies. AGF Trust mitigates credit risk
by regularly reviewing the market value of short- and long-term investments
through the use of market quotations and adjusts the carrying amount of
long-term investments according to the Company's accounting policies.
    Derivative financial instruments expose AGF Trust to credit risk to the
extent that if a counterparty default occurs, market conditions are such that
AGF Trust would incur a loss in replacing the defaulted transaction. AGF Trust
negotiates derivative master netting agreements with counterparties with which
it contracts. These agreements reduce credit risk exposure if a default occurs
by providing for the simultaneous netting of all transactions with a given
counterparty. Credit risk related to derivative financial instruments is also
managed through an approved counterparty list that includes only major
Canadian chartered banks.
    As at May 31, 2008, the amount that best represents AGF Trust's maximum
exposure to credit risk, without taking into account collateral heId or other
credit enhancements, is $5.5 billion. This amount corresponds to the sum of
financial assets in the Operational Performance table on page 17 of this MD&A,
to which are added undrawn mortgage commitments amounting to $150.7 million
and $99.4 million of undrawn HELOC commitments.

    Market risk

    Market risk measures the vulnerability of AGF Trust to financial loss
from fluctuations in the value of financial instruments due to adverse
movements in interest rates or quoted market prices. AGF Trust's overall
interest rate risk is managed by its treasury department and is supervised by
AGF Trust's Asset and Liability Management Committee. AGF Trust actively
manages interest rate risk by employing a number of techniques. This includes
the matching of asset and liability terms that measure changes in the
portfolios and the impact this will have on AGF Trust's earning capacity. AGF
Trust also uses interest rate swaps to manage any residual mismatches.
Management meets regularly to discuss the matching of assets and liabilities,
emphasizing the importance of managing all material mismatched positions to
reduce AGF Trust's exposure to interest rate fluctuations.
    The Company's internal audit department reviews the compliance of AGF
Trust's interest rate risk management policies and procedures. Internal audit
reports are presented to the Audit Committee of the Trust Board for review.
    For the AGF Trust Operations, the impact of a 1% change in interest rates
either up or down would be an increase or decrease of annual net interest
income of approximately $2.7 million. A 1% change in interest rates would
result in an increase in the economic value of equity (EVE) of AGF Trust of
approximately $1.3 million. Conversely, a 1% decline in interest rates would
result in a lower EVE by approximately $0.9 million.

    Liquidity risk

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

    Managing Risk - Other Operations

    We are subject to foreign exchange risk on our integrated foreign
subsidiaries in Ireland and Singapore, which provide investment advisory
services. These subsidiaries retain minimal monetary exposure to the local
currency, their revenues are calculated in Canadian dollars and the local
currency expenses are comparatively small.
    We are subject to foreign exchange risk related to our 31.6% interest in
S&WHL, which is denominated in U.K. pounds. On our balance sheet, the
investment is presented in Canadian dollars using the exchange rate prevailing
on the balance sheet date.

    Financial Instruments

    Derivative financial instruments

    Interest rate and total return equity swap transactions, designated as
hedging instruments, are used by the Company for balance sheet matching
purposes and to reduce exposure to interest rate and share-based compensation
payout fluctuations. The changes in the fair value of derivative financial
instruments held for fair value hedging purposes and the changes in fair value
of the hedged items attributable to the hedged risk could result in
significant changes in the Consolidated Statements of Income and Comprehensive
Income. As at May 31, 2008, the aggregate notional amount of the swap
transactions was $3.3 billion (May 31, 2007 - $2.2 billion) and the aggregate
fair value of the swap transactions, which represents the net amount that
would be received by the Company if the transactions were terminated as at May
31, 2008, was $34.1 million (May 31, 2007 - $22.2 million).

    Fair value of financial instruments

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

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

    Investments

    The carrying value of investments represents their fair value because
they are classified as available for sale. Investments are valued based on
quoted market values and include $16.1 million invested in AGF mutual funds.

    Loans

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

    Derivative instruments

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

    Retained interest from securitizations

    The carrying value of retained interest from securitizations represents
the fair value as they are classified as available-for-sale assets. The
estimated fair value is determined by discounting future cash flows at
prevailing interest rates for i) the rights to future excess interest on the
securitized RSP loans after investors in the securitization trust have
received the return for which they contracted, ii) cash collateral and iii)
over-collateralization. The significant assumptions used to value the retained
interests are excess spread, discount rate on interest-only strip, expected
credit losses, prepayment rate and expected weighted average life of RSP
loans.

    Deposits

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

    Other financial assets and liabilities

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



    
    Selected Quarterly Information

    -------------------------------------------------------------------------
    ($ millions, except
     per share amounts)
    For the three-month        May 31,     Feb. 29,     Nov. 30,     Aug. 31,
     period ended                2008         2008         2007         2007
    -------------------------------------------------------------------------

    Revenue (continuing
     operations)          $     194.3  $     194.3  $     199.1  $     199.2
    Cash flow from
     continuing
     operations(1)               71.5         82.3         90.7         69.7
    EBITDA (continuing
     operations)(2)              88.6         89.5         87.5         91.3
    Pre-tax income
     (continuing operations)     57.9         56.6         53.9         57.3
    Net income                   44.0         62.7         49.4         39.4

    Earnings per share
      Basic               $      0.49  $      0.70  $      0.55  $      0.44
      Diluted             $      0.49  $      0.70  $      0.54  $      0.43

    Weighted average
     basic shares          89,349,275   89,039,394   90,200,924   90,299,033
    Weighted average fully
     diluted shares        89,785,796   89,807,506   91,566,659   91,847,103
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

    Revenue (continuing
     operations)          $     204.9  $     177.0  $     158.5  $     146.9
    Cash flow from
     operations(1)               84.4         68.7         53.1         60.2
    EBITDA (continuing
     operations)(2)              98.0         80.4         60.3         56.2
    Pre-tax income
     (continuing operations)     63.3         49.1         26.2         22.8
    Net income                   53.6         36.3         21.0         34.6

    Earnings per share
      Basic               $      0.60  $      0.41  $      0.24  $      0.39
      Diluted             $      0.59  $      0.40  $      0.23  $      0.39

    Weighted average
     basic shares          89,798,419   89,474,827   89,174,064   89,055,124
    Weighted average fully
     diluted shares        91,316,967   90,640,734   89,890,105   89,457,921
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Cash flow from operations before net change in non-cash balances
        related to operations.
    (2) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section.
    

    Additional Information

    Additional information relating to the Company can be found in our
Consolidated Financial Statements and accompanying Notes for the three and six
months ended May 31, 2008, our 2007 annual MD&A and Consolidated Financial
Statements, our 2007 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 Balance Sheets

    -------------------------------------------------------------------------
    ($ thousands)                                       May 31,  November 30,
    (unaudited)                                           2008          2007
    -------------------------------------------------------------------------

    Assets
      Current Assets
        Cash and cash equivalents                  $   748,491   $   827,874
        Investments available for sale                 163,545        26,149
        Accounts receivable and prepaid expenses        68,032        93,141
        Current portion of retained interest
         from securitization (note 2)                    6,786         7,501
        Real estate secured and investment loans
         due within one year (note 7)                  631,199       492,756
    -------------------------------------------------------------------------
                                                     1,618,053     1,447,421

      Retained interest from securitization (note 2)    41,342        43,424
      Real estate secured and investment
       loans (note 7)                                3,660,699     3,187,605
      Investment in associated company                 103,388       102,600
      Management contracts                             504,269       504,269
      Customer contracts, net of accumulated
       amortization                                     61,837        65,805
      Deferred selling commissions, net of
       accumulated amortization                        319,090       315,275
      Property, equipment and computer software,
       net of accumulated amortization                  20,062        20,812
      Goodwill                                         180,058       180,058
      Trademarks                                         1,935         1,935
      Other assets (notes 3 and 7(e))                   38,086         7,608
    -------------------------------------------------------------------------
    Total assets                                   $ 6,548,819   $ 5,876,812
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
      Current Liabilities
        Accounts payable and accrued liabilities   $   265,038   $   261,115
        Future income taxes (note 12)                   41,829        48,304
        Long-term debt due within one year (note 8)     25,042        25,611
        Deposits due within one year (note 7)        2,373,914     1,847,494
    -------------------------------------------------------------------------
                                                     2,705,823     2,182,524

      Deposits (note 7)                              2,333,087     2,235,848
      Long-term debt (note 8)                          171,968       184,486
      Future income taxes (note 12)                    190,825       202,923
      Other long-term liabilities (note 9)               5,787         1,638
    -------------------------------------------------------------------------
    Total liabilities                                5,407,490     4,807,419
    -------------------------------------------------------------------------

      Non-controlling interest                             243           391

      Shareholders' equity
        Capital stock (note 9)                         434,621       421,923
        Contributed surplus (note 9)                    14,962        14,948
        Retained earnings                              701,947       635,369
        Accumulated other comprehensive income         (10,444)       (3,238)
    -------------------------------------------------------------------------
    Total shareholders' equity                       1,141,086     1,069,002
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity     $ 6,548,819   $ 5,876,812
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
                      Consolidated Statements of Income

    -------------------------------------------------------------------------
                                  Three months ended       Six months ended
                                        May 31,                 May 31,
                             ------------------------------------------------
    ($ thousands)                   2008        2007        2008        2007
    (unaudited)                              (note 3)                (note 3)
    -------------------------------------------------------------------------

    Revenue
      Management and
       advisory fees          $  153,957  $  165,427  $  310,374  $  316,310
      Deferred sales charges       6,047       5,159      12,222      10,009
      Gain on RSP loan
       securitization and
       related income (loss),
       net of impairment (note 2)   (672)      9,219          87       9,980
      Investment income and
       other revenue               9,941       6,051      18,140       9,096
    -------------------------------------------------------------------------
                                 169,273     185,856     340,823     345,395
    -------------------------------------------------------------------------
        AGF Trust interest
         income (note 11)         76,003      55,021     152,755     102,236
        AGF Trust interest
         expense (note 11)       (50,935)    (35,937)   (104,891)    (65,661)
    -------------------------------------------------------------------------
      AGF Trust net
       interest income            25,068      19,084      47,864      36,575
    -------------------------------------------------------------------------
    Total Revenue                194,341     204,940     388,687     381,970
    -------------------------------------------------------------------------

    Expenses
      Selling, general and
       administrative             56,814      58,842     112,773     110,338
      Trailing commissions        41,609      42,432      83,445      80,866
      Investment advisory fees     3,846       3,159       7,797       7,200
      Amortization of deferred
       selling commissions        24,799      27,192      50,853      53,707
      Amortization of
       customer contracts          1,817       2,489       3,969       3,968
      Amortization of property,
       equipment, computer
       software and other
       intangible assets           1,832       1,819       3,493       4,124
      Interest expense             2,374       3,229       5,396       4,276
      Provision for AGF Trust
       loan losses                 3,399       2,490       6,461       5,185
    -------------------------------------------------------------------------
                                 136,490     141,652     274,187     269,664

    Income from continuing
     operations before
     income taxes and
     non-controlling interest     57,851      63,288     114,500     112,306

    Income tax expense
     (reduction) (note 12)
      Current                     12,362       3,182      24,468      16,846
      Future                       1,291      10,790     (16,970)      7,862
    -------------------------------------------------------------------------
                                  13,653      13,972       7,498      24,708
    -------------------------------------------------------------------------

    Non-controlling interest
     (note 4)                        151         247         296         467

    -------------------------------------------------------------------------
    Net income from continuing
     operations for the period    44,047      49,069     106,706      87,131
    -------------------------------------------------------------------------
    Loss on dissolution of
     Limited Partnerships,
     net of tax (note 6)               -           -           -      (2,128)
    Gain on sale of
     discontinued operations,
     net of tax (note 3)               -       4,702           -       4,702
    Net earnings (loss) from
     discontinued operations,
     net of tax (note 3)               -        (135)          -         247
    -------------------------------------------------------------------------
    Net income for the period $   44,047  $   53,636  $  106,706  $   89,952
    -------------------------------------------------------------------------

    Earnings per share
     (note 9)
      Basic from continuing
       operations             $     0.49  $     0.55  $     1.20  $     0.97
      Diluted from continuing
       operations             $     0.49  $     0.54  $     1.19  $     0.96
      Basic                   $     0.49  $     0.60  $     1.20  $     1.00
      Diluted                 $     0.49  $     0.59  $     1.19  $     0.99
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
         Consolidated Statements of Changes in Shareholders' Equity

    -------------------------------------------------------------------------
                                  Three months ended       Six months ended
                                        May 31,                 May 31,
    ($ thousands)            ------------------------------------------------
    (unaudited)                     2008        2007        2008        2007
    -------------------------------------------------------------------------

    Common shares
      Balance, beginning
       of period              $  431,393  $  412,505  $  421,923  $  403,566
      Issued through dividend
       reinvestment plan           2,637       1,813       3,170       2,475
      Stock options exercised        591      10,804       4,412      13,409
      Issued on acquisition
       of Highstreet Partners
       Limited (note 4)                -           -       5,116       5,672
    -------------------------------------------------------------------------
      Balance, end of period     434,621     425,122     434,621     425,122
    -------------------------------------------------------------------------

    Contributed surplus
      Balance, beginning
       of period                  13,818      11,621      14,948      10,470
      Stock options                1,144       1,099          14       2,250
    -------------------------------------------------------------------------
      Balance, end of period      14,962      12,720      14,962      12,720
    -------------------------------------------------------------------------

    Retained earnings
      Balance, beginning
       of period                 680,222     585,773     635,369     565,576
      Transitional adjustment
       on adoption of new
       accounting policies             -           -           -         (25)
    -------------------------------------------------------------------------
      Balance, beginning of
       period, as restated       680,222     585,773     635,369     565,551
      Net income for the period   44,047      53,636     106,706      89,952
      Dividends on AGF Class A
       voting common shares
       and AGF Class B non-
       voting shares             (22,322)    (17,932)    (40,128)    (34,026)
    -------------------------------------------------------------------------
      Balance, end of period     701,947     621,477     701,947     621,477
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive income (loss)
      Balance, beginning
       of period                 (10,621)      5,849      (3,238)      3,792
      Other comprehensive
       income (loss)                 177      (2,932)     (7,206)       (875)
    -------------------------------------------------------------------------
      Balance, end of period     (10,444)      2,917     (10,444)      2,917
    -------------------------------------------------------------------------

    Total shareholders'
     equity                   $1,141,086  $1,062,236  $1,141,086  $1,062,236
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
               Consolidated Statements of Comprehensive Income

    -------------------------------------------------------------------------
                                  Three months ended       Six months ended
                                        May 31,                 May 31,
    ($ thousands)            ------------------------------------------------
    (unaudited)                     2008        2007        2008        2007
    -------------------------------------------------------------------------

    Net income                $   44,047  $   53,636  $  106,706  $   89,952
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other comprehensive
     income (losses),
     net of tax
      Foreign currency
       translation adjustments
       related to net
       investments in self-
       sustaining foreign
       operations(1)                 875      (7,167)     (3,976)     (5,569)
        Reclassification of
         realized loss to
         earnings                      -         509           -         509
    -------------------------------------------------------------------------
                                     875      (6,658)     (3,976)     (5,060)
    -------------------------------------------------------------------------
      Net unrealized gains
       (losses) on available
       for sale securities
        Unrealized gains
         (losses)(2)                (721)      3,726      (2,164)      4,185
        Reclassification of
         realized loss or other
         than temporary
         impairment to earnings      (77)          -         (77)          -
    -------------------------------------------------------------------------
                                    (798)      3,726      (2,241)      4,185
    -------------------------------------------------------------------------
      Net unrealized gains
       (losses) on cash
       flow hedges
        Unrealized gains
         (losses)(3)                (148)          -      (1,237)          -
        Reclassification of
         realized gain on cash
         flow hedges                 248           -         248           -
    -------------------------------------------------------------------------
                                     100           -        (989)          -
    -------------------------------------------------------------------------
    Total other
     comprehensive income
     (loss), net of tax       $      177  $   (2,932) $   (7,206) $     (875)
    -------------------------------------------------------------------------

    Comprehensive income      $   44,224  $   50,704  $   99,500  $   89,077
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net of income tax expense of $0.1 million and net of income tax
        reduction of $0.7 million for the three and six months ended May 31,
        2008. Net of income tax reduction of $1.4 million and $1.1 million
        for the three and six months ended May 31, 2007.
    (2) Net of income tax reduction of $0.3 million and $0.5 million for the
        three and six months ended May 31, 2008. Net of income tax expense of
        $1.0 million and $1.1 million for the three and six months ended
        May 31, 2007.
    (3) Net of income tax reduction of $0.1 million and $0.6 million for the
        three and six months ended May 31, 2008.

    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
                    Consolidated Statements of Cash Flow

    -------------------------------------------------------------------------
                                  Three months ended       Six months ended
                                        May 31,                 May 31,
    ($ thousands)            ------------------------------------------------
    (unaudited)                     2008        2007        2008        2007
    -------------------------------------------------------------------------

    Operating Activities
      Net income for the
       period                 $   44,047  $   53,636  $  106,706  $   89,952
      Loss on dissolution of
       limited partnerships,
       net of tax                      -           -           -       2,128
      Gain on sale of
       discontinued operation,
       net of tax                      -      (4,702)          -      (4,702)
      Loss (earnings) from
       discontinued operations,
       net of tax                      -         135           -        (247)
    -------------------------------------------------------------------------
      Net income from
       continuing operations      44,047      49,069     106,706      87,131

      Items not affecting cash
        Amortization              28,448      31,500      58,315      61,799
        Future income taxes        1,291      10,790     (16,970)      7,862
        Gain on RSP loan
         securitization and
         related income (loss),
         net of impairment           672      (9,219)        (87)     (9,980)
        Stock-based
         compensation              2,100       1,558       4,459       3,248
        Provision for AGF Trust
         loan losses               3,399       2,490       6,461       5,185
        Other                     (8,466)     (1,791)     (5,041)     (2,167)
    -------------------------------------------------------------------------
                                  71,491      84,397     153,843     153,078
      Net increase in non-cash
       balances related to
       operations                103,383      18,153      32,078       5,371
    -------------------------------------------------------------------------
      Net cash provided by
       continuing operating
       activities                174,874     102,550     185,921     158,449
      Net cash used in
       discontinued operating
       activities                      -        (691)          -      (1,271)
    -------------------------------------------------------------------------
      Net cash provided by
       operating activities      174,874     101,859     185,921     157,178
    -------------------------------------------------------------------------

    Financing Activities
      Issue of Class B
       non-voting shares             492      10,804       1,902      13,409
      Dividends                  (19,685)    (16,119)    (36,958)    (31,551)
      Increase (decrease)
       in bank loan              (87,139)    (15,000)     12,076      84,000
      Net increase in AGF
       Trust deposits            324,594     372,723     594,123     679,653
    -------------------------------------------------------------------------
      Net cash provided by
       continuing financing
       activities                218,262     352,408     571,143     745,511

    Investing Activities
      Deferred selling
       commissions paid          (27,902)    (49,618)    (54,668)    (93,312)
      Proceeds of RSP loan
       securitization                  -     252,878           -     252,878
      Acquisition of Highstreet
       Partners Limited,
       net of cash acquired            -           -     (20,784)    (19,873)
      Proceeds of sale of
       discontinued operations         -       2,747           -       2,747
      Purchase of property,
       equipment and other
       intangible assets          (1,202)     (1,822)     (2,743)     (2,598)
      Other investment
       activities                (21,597)     (3,370)   (140,166)     (3,370)
      Net increase in AGF
       Trust mortgages and
       consumer loans           (284,316)   (489,608)   (618,086)   (934,978)
    -------------------------------------------------------------------------
      Net cash used in
       continuing investing
       activities               (335,017)   (288,793)   (836,447)   (798,506)
    -------------------------------------------------------------------------

    Increase in cash and
     cash equivalents during
     the period                   58,119     165,474     (79,383)    104,183

    Balance of cash and cash
     equivalents beginning
     of period                   690,372     342,824     827,874     404,115
    -------------------------------------------------------------------------

    Balance of cash and cash
     equivalents, end
     of period                $  748,491  $  508,298  $  748,491  $  508,298
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents
     related to:
      Continuing operations                           $  748,491  $  508,298
      Discontinued operations                                  -           -
    -------------------------------------------------------------------------
                                                      $  748,491  $  508,298
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
      Cash and cash equivalents                       $   40,726  $   33,386
      AGF Trust cash and cash
       equivalents                                       707,765     474,912
    -------------------------------------------------------------------------
                                                      $  748,491  $  508,298
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Refer to note 10 for supplemental cash flow information.

    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)
    



    Notes to Consolidated Financial Statements

    For the three and six months ended May 31, 2008, and May 31, 2007
    (tabular amounts in thousands of dollars, except per share amounts)
    (unaudited)

    These unaudited Q2 2008 Consolidated Financial Statements of AGF
    Management Limited (AGF or the Company) have been prepared in accordance
    with Canadian Generally Accepted Accounting Principles (GAAP), using the
    same significant accounting policies as AGF's Consolidated Financial
    Statements for the year ended November 30, 2007. These financial
    statements do not contain all the disclosures required by Canadian GAAP
    for annual financial statements and should be read in conjunction with
    the Consolidated Financial Statements for the year ended November 30,
    2007, published in AGF's 2007 Annual Report. Certain comparative amounts
    in these financial statements have been reclassified to conform to the
    current year's presentation.

    Note 1: Changes in Accounting Policy

    Capital Disclosures

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

    Financial Instruments Disclosures and Presentation

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

    Future Accounting Changes

    The Canadian Accounting Standards Board (AcSB) confirmed a plan to adopt
    the International Financial Reporting Standards (IFRS) in 2011, for
    interim and annual financial statements relating to fiscal years
    beginning on or after January 1, 2011. The Company will adopt IFRS. The
    impact of the adoption of IFRS is not known at this time.

    On December 1, 2008, the Company will adopt "CICA 3064, Goodwill and
    Intangible Assets". This standard contains revised rules on the
    recognition, measurement, presentation and disclosure of goodwill and
    intangible assets. The adoption of this standard is not expected to have
    a significant impact on the Company's financial position or results of
    operation.

    Note 2: Securitization of AGF Trust Loans

    The Company, through its wholly-owned subsidiary AGF Trust Company (AGF
    Trust), has securitized RSP loans through the sale of these loans to a
    securitization trust. As at May 31, 2008, $210.5 million (November 30,
    2007 - $291.1 million) of securitized loans were outstanding.

    On March 30, 2007, AGF Trust securitized $263.6 million of RSP loans.
    Cash flows of $252.9 million were received and a gain of $8.0 million was
    recorded, net of transaction fees of $0.1 million.

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

    The Company has recorded retained interests of $48.1 million
    (November 30, 2007 - $50.9 million) made up of i) the rights to future
    excess interest on these RSP loans after investors in the securitization
    trust have received the return for which they contracted, valued at
    $16.5 million (2007 - $20.4 million), ii) cash collateral of
    $11.7 million (2007 - $11.3 million) and iii) over-collateralization of
    $19.9 million (2007 - $19.2 million).

    As at May 31, 2008, the impaired loans included in the securitized
    balances were equal to $0.7 million (November 30, 2007 - $0.7 million),
    and during the three and six months ended May 31, 2008, $0.9 million
    (2007 - $0.2 million) and $1.6 million (2007 - $0.6 million) of
    securitized RSP loans were written off.

    The Company's claim on the retained interests is subordinate to
    investors' interests. Recourse available to investors and the
    securitization trust are limited to the retained interests. For the
    three months ended May 31, 2008, cash flows of $1.9 million (2007 -
    $5.3 million) were received on the securitized loans. Of this,
    $1.9 million was related to the interest-only strip (2007 - $3.6 million)
    and none related to the over-collateralization (2007 - $1.7 million). For
    the six months ended May 31, 2008, cash flows of $4.2 million (2007 -
    $7.7 million) were received on the securitized loans, of which
    $4.2 million was related to the interest-only strip (2007 - $5.2 million)
    and none related to the over-collateralization (2007 - $2.5 million). The
    total other expense recognized from securitization during the three
    months ended May 31, 2008, was $0.7 million (2007 - $1.2 million income),
    net of a $1.5 million securitization writedown. The total other income
    recognized from securitization during the six months ended May 31, 2008,
    was $0.1 million (2007 - $1.9 million), net of a $1.7 million
    securitization writedown.

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

    Excess spread                                   3.6% - 3.9%
    Discount rate on interest-only strip            7.5%
    Expected credit losses                          0.8%
    Prepayment rate                                 16.3% - 18.3%
    Expected weighted average life of RSP loans     23 - 25 months

    The Trust Company retained servicing responsibilities for the securitized
    loans. A servicing liability of $1.4 million was recorded as at May 31,
    2008 (November 30, 2007 - $1.8 million). This amount represents the
    estimated future cost of servicing the securitized loans and has been
    offset against the gain on the sale of the RSP loans. The amount
    amortized related to the servicing liability during the three and six
    months ended May 31, 2008, was $0.2 million (2007 - $0.2 million) and
    $0.4 million (2007 - $0.4 million).

    The following table presents key economic assumptions and the sensitivity
    of the current fair value of retained interests to two adverse changes in
    each key assumption, as at May 31, 2008. Since the sensitivity is
    hypothetical, it should be used with caution. The effect of changes in
    the fair value of retained interests was calculated using a discounted
    cash flow analysis.

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

    Discount rate
    +10%                                                     $       161
    +20%                                                             318
    Prepayment rate
    +10%                                                     $       300
    +20%                                                             589
    Expected credit losses
    +10%                                                     $       305
    +20%                                                             610
    Excess spread
    +10%                                                     $     1,289
    +20%                                                           2,573
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 3: Discontinued Operations and Assets Held for Sale

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

    -------------------------------------------------------------------------
    Three months    Six months
    ended           ended
    May 31,         May 31,
    ($ thousands, except                       ------------------------------
    per share amounts)                              2007            2007
    -------------------------------------------------------------------------

    Revenue                                     $        739    $      4,342
    Net earnings (loss) from discontinued
    operations, net of tax                     $       (135)   $        247
    Basic net earnings per share                $          -    $          -
    Diluted net earnings per share              $          -    $          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 4: Acquisition of Highstreet Partners Limited

    On December 1, 2006, AGF acquired 79.9% of Highstreet Partners Limited
    (Highstreet), which wholly owns Highstreet Asset Management Inc., an
    investment counsel firm based in London, Ontario. The purchase
    consideration is payable in a combination of cash and the issue of Class
    B non-voting shares (Class B shares). As at May 31, 2008, AGF has made
    payments of $41.0 million in cash and $10.8 million through the issue of
    440,999 AGF Class B shares, which approximates 66.6% of the purchase
    price. An additional payment of $25.9 million (principal and imputed
    interest) is due on February 28, 2009, for total minimum consideration,
    including acquisition costs of $74.4 million. In addition, a contingent
    consideration will be paid in 2010 if certain financial profitability
    targets are achieved by Highstreet. At this time, the amount of the
    contingent consideration is not determinable.

    The fair value of the net assets acquired and consideration paid are
    summarized as follows:

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

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

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

    Note 5: Acquisition of Cypress Capital Management Limited

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

    Note 6: Dissolution of Partnerships

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

    Note 7: AGF Trust

    AGF Trust's principal business activities are originating real estate
    secured loans, investment loans and deposit taking.

    Details relating to these activities are as follows:


    -------------------------------------------------------------------------
    Term to contractual repricing
    -----------------------------------------------------------
    Variable   1 year or      1 to 5      May 31,   November
    ($ thousands)       rate        less       years        2008    30, 2007
    -------------------------------------------------------------------------

    Mortgage
    loans        $    1,820  $  568,723  $  850,797  $1,421,340  $1,326,327
    Home equity
    lines of
    credit (HELOC)  555,442           -           -     555,442     449,151
    -------------------------------------------------------------------------
    Total real
    estate secured
    loans           557,262     568,723     850,797   1,976,782   1,775,478
    Investment
    loans         2,311,683       5,461       9,246   2,326,390   1,914,686
    -----------------------------------------------------------
    2,868,945     574,184     860,043   4,303,172   3,690,164
    -----------------------------------
    -----------------------------------
    Less: allowance
    for loan losses                                     (20,097)    (17,137)
    Add: net
    deferred sales
    commissions and
    commitment fees                                       8,823       7,334
    -----------------------
    4,291,898   3,680,361
    Less: current
    portion                                            (631,199)   (492,756)
    -----------------------
    $3,660,699  $3,187,605
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Impaired loans
    included in above                                $   26,773  $   25,821
    Less: specific
    allowance for
    loan losses                                          (2,035)     (1,860)
    -----------------------
    $   24,738  $   23,961
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) Real Estate Secured and Investment Loans

    The table represents the period of contractual repricing of interest
    rates on outstanding amounts. Principal repayments due on real estate
    and investment loans due within one year as at May 31, 2008, were
    $631.2 million (November 30, 2007 - $492.8 million).

    As at May 31, 2008, AGF Trust's mortgage portfolio comprises a
    combination of fixed rate and variable rate residential mortgages, of
    which $607.5 million (November 30, 2007 - $563.5 million) is insured,
    with a weighted average term to repricing of 2.0 years (November 30,
    2007 - 2.0 years) and a weighted average yield of 7.28% (November 30,
    2007 - 7.20%). Investment loans have interest rates based on prime.
    As at May 31, 2008, the average interest rate on HELOCs was 4.79%
    (November 30, 2007 - 6.30%) and on investment loans was 6.08%
    (November 30, 2007 - 7.60%). Mortgage and HELOC loans are secured
    primarily by residential real estate. Investment loans, excluding RSP
    loans, are secured by the investment made using the initial loan
    proceeds.

    (b) Loans Past Due but Not Impaired

    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. The following table provides an aging analysis of loans
    that are past due but not impaired:

    ---------------------------------------------------------------------
    ($ thousands)                          31 to       61 to
    As at May 31, 2008                   60 days     90 days       Total
    ---------------------------------------------------------------------

    Mortgage loans                    $   17,036  $    9,810  $   26,846
    Investment loans                       3,159       1,827       4,986
    RSP loans                              3,634         683       4,317
    HELOC receivable                         492         213         705
    ---------------------------------------------------------------------
    $   24,321  $   12,533  $   36,854
    ---------------------------------------------------------------------
    ---------------------------------------------------------------------


    ---------------------------------------------------------------------
    ($ thousands)                          31 to       61 to
    As at November 30, 2007              60 days     90 days       Total
    ---------------------------------------------------------------------

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

    (c) Allowance for Credit Losses

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

    ---------------------------------------------------------------------
    May 31, 2008
    -----------------------------------
    Specific     General       Total
    ($ thousands)                     allowances  allowances  allowances
    ---------------------------------------------------------------------

    Balance, beginning of period    $    1,860  $   15,277  $   17,137
    Amounts written off                 (3,915)          -      (3,915)
    Recoveries                             414           -         414
    Provision for loan losses            3,676       2,785       6,461
    ---------------------------------------------------------------------
    $    2,035  $   18,062  $   20,097
    ---------------------------------------------------------------------
    ---------------------------------------------------------------------


    ---------------------------------------------------------------------
    November 30, 2007
    -----------------------------------
    Specific     General       Total
    ($ thousands)                     allowances  allowances  allowances
    ---------------------------------------------------------------------

    Balance, beginning of period    $    1,545  $   14,101  $   15,646
    Amounts written off                 (2,073)          -      (2,073)
    Recoveries                             166           -         166
    Provision for loan losses            2,222       1,176       3,398
    ---------------------------------------------------------------------
    $    1,860  $   15,277  $   17,137
    ---------------------------------------------------------------------
    ---------------------------------------------------------------------

    (d) AGF Trust Deposits

    -------------------------------------------------------------------------
    Term to maturity
    -----------------------------------------------------------
    1 year or      1 to 5      May 31,   November
    ($ thousands)     Demand        less       years        2008    30, 2007
    -------------------------------------------------------------------------

    Deposits      $    7,283  $2,366,631  $2,348,984  $4,722,898  $4,099,663
    Less: deferred
    selling
    commissions                                         (15,897)    (16,321)
    Less: current
    portion                                          (2,373,914) (1,847,494)
    -------------------------------------------------------------------------
    Long-term
    deposits                                         $2,333,087  $2,235,848
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at May 31, 2008, deposits were substantially comprised of GICs
    with a weighted average term to maturity of 1.5 years (November 30,
    2007 - 1.8 years) and a weighted average interest rate of 4.36%
    (November 30, 2007 - 4.38%).

    (e) Interest Rate Swaps

    To hedge its exposure to fluctuating interest rates, AGF Trust has
    entered into interest rate swap transactions with four Canadian
    chartered banks, as noted below. The swap transactions expire between
    June 2008 and October 2012. They involve the exchange of either the
    one-month bankers' acceptance rate or the three-month bankers'
    acceptance rate to receive fixed interest rates. The swap contracts
    designated as fair value hedging instruments for deposits are used by
    AGF Trust for balance sheet matching purposes and to mitigate net
    interest revenue volatility. As at May 31, 2008, the aggregate
    notional amount of the swap transactions was $3.3 billion
    (November 30, 2007 - $2.8 billion). The aggregate fair value of the
    swap transactions, which represents the amount that would be received
    by AGF Trust if the transactions were terminated at May 31, 2008, was
    $37.3 million (November 30, 2007 - $6.7 million).

    -------------------------------------------------------------------------
    Fixed interest
    Notional amount of swap     Fair value    Maturity date    rate received
    -------------------------------------------------------------------------
    ($ thousands)
    $  1,012,000          $      5,154         2008        3.23% - 4.83%
    1,087,000                 9,559         2009        2.74% - 4.97%
    685,000                10,968         2010        3.08% - 5.05%
    375,000                 9,748         2011        3.38% - 5.08%
    140,000                 1,869         2012        3.60% - 5.01%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (f) Interest Rate Sensitivity

    For AGF Trust, the impact of a 1% change in interest rates either up
    or down would be an increase or decrease of annual net interest
    income of approximately $2.7 million. This sensitivity analysis is
    based on an immediate parallel shift of the yield curve and assumes
    no change in the repricing profile of the balance sheet after the
    balance sheet date.

    Note 8: Long-Term Debt

    -------------------------------------------------------------------------
    May 31,  November 30,
    ($ thousands)                                         2008          2007
    -------------------------------------------------------------------------

    Revolving term loan                             $  171,968    $  160,000
    Payment related to acquisition of
    Highstreet Partners Limited (note 4)
    February 28, 2008                                      -        25,611
    February 28, 2009                                 25,042        24,486
    -------------------------------------------------------------------------
    197,010       210,097

    Less: amount included in current liabilities        25,042        25,611
    -------------------------------------------------------------------------

    $  171,968    $  184,486
    -------------------------------------------------------------------------

    (a) Revolving Term Loan

    The Company has arranged a six-year prime-rate-based revolving term
    loan to a maximum of $300.0 million (Facility 1) (November 30, 2007 -
    $300.0 million) with a Canadian chartered bank. Under the loan
    agreement, AGF is permitted to draw down the revolving term loan by
    direct advances and/or bankers' acceptances (BAs). The revolving term
    loan is available at any time for a period of 364 days from
    commencement of the loan (the commitment period). The expiration of
    the current commitment period is June 30, 2009. However, AGF may
    request by April 15, 2009, and prior to April 15 in any calendar year
    thereafter, a recommencement of the six-year term at the expiry of
    the then current commitment period. No repayment of the principal
    amount outstanding pursuant to the revolving term loan is required
    during the first three years of the then applicable term. Thereafter,
    the loan balance shall be repaid in minimum monthly instalments of at
    least one thirty-sixth of the amount of the principal outstanding.

    On May 26, 2008, the Company, under its current loan agreement,
    arranged an additional three-year prime rate based reducing term loan
    to a maximum of $60.0 million (Facility 2). Facility 2 will be used
    to finance share repurchases. Under this facility, AGF is permitted
    to draw down the reducing term loan by direct advances or BAs. The
    reducing term loan is available to the earlier of September 30, 2008,
    or the date that the facility is fully drawn. Following this date,
    Facility 2 is payable in equal quarterly instalments over twelve
    quarters. Any undrawn portion of the facility at the end of the
    availability date will be permanently cancelled.

    As at May 31, 2008, AGF has drawn $172.0 million (2007 -
    $160.0 million) against Facility 1 in the form of one to 31-day BAs
    at an effective average interest rate of 3.36% per annum. No amounts
    were drawn against Facility 2 as at May 31, 2008.

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

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

    On December 1, 2006, AGF acquired 79.9% of Highstreet (Note 4). On
    February 29, 2008, a payment of $25.9 millon was paid. The payment
    consisted of $20.8 million in cash and the issuance of 215,883 Class
    B shares valued at $5.1 million. A final payment of $25.9 million,
    which includes principal and imputed interest at the rate of 4.5% per
    annum, is due to the vendors on February 28, 2009 and will be
    satisfied through a combination of cash and Class B shares.

    Note 9: Capital Stock

    (a) Authorized Capital

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

    (b) Change During the Period

    The change in capital stock during the six months ended May 31, 2008,
    and 2007 is as follows:

    -------------------------------------------------------------------------
    Six months ended May 31,            2008                    2007
    ------------------------------------------------
    ($ thousands, except                      Stated                  Stated
    per share amounts)           Shares       value      Shares       value
    -------------------------------------------------------------------------

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

    Class B shares
    Balance, beginning
    of period             $88,922,157  $  421,923  89,171,997  $  403,566
    Issued through dividend
    reinvestment plan         134,460       3,170      78,467       2,475
    Stock options exercised    100,150       4,412     751,100      13,409
    Issued on acquisition
    of a subsidiary
    (note 4)                  215,883       5,116     225,116       5,672
    -------------------------------------------------------------------------
    Balance, end of period  89,372,650  $  434,621  90,226,680  $  425,122
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Class B Shares Purchased for Cancellation

    AGF has obtained regulatory approval to purchase for cancellation,
    from time to time, certain of its Class B 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 7,253,822 shares through to February 25, 2009. No
    Class B shares were purchased during the six months ended May 31,
    2008 and May 31, 2007.

    (d) Stock Option Plans

    AGF has established stock option plans for senior employees under
    which stock options to purchase an aggregate maximum of 6,647,252
    Class B shares could have been granted as at May 31, 2008 (2007 -
    7,303,584). The stock options are issued at a price not less than the
    market price of these Class B shares immediately prior to the grant
    date. Stock options are vested to the extent of 25% to 33% of the
    individual's entitlement per annum, or in some instances, 100% vest
    at the end of the term of the option.

    The change in stock options during the six months ended May 31, 2008
    and 2007, is summarized as follows:

    -------------------------------------------------------------------------
    Six months ended May 31,            2008                    2007
    -----------------------------------------------
    Weighted                Weighted
    average                 average
    exercise                exercise
    Options       price     Options       price
    -------------------------------------------------------------------------

    Class B share options
    Balance, beginning
    of period               4,268,765  $    22.50   4,324,084  $    19.93
    Options granted                  -         n/m      12,732       35.70
    Options cancelled         (114,917)      25.04     (20,450)      20.34
    Options exercised         (100,150)      18.99    (751,100)      17.85
    -------------------------------------------------------------------------
    Balance, end of period   4,053,698  $    22.51   3,565,266  $    20.40
    -------------------------------------------------------------------------

    During the three months ended May 31, 2008, AGF did not grant any
    options (2007 - 12,732) and recorded $1.2 million (2007 -
    $1.1 million) in compensation expense and contributed surplus.

    During the six months ended May 31, 2008, AGF did not grant any
    options (2007 - 12,732) and recorded $2.5 million (2007 -
    $2.2 million) in compensation expense and contributed surplus.

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

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

    The changes in share units during the six months ended May 31, 2008
    and May 31, 2007, are as follows:

    -------------------------------------------------------------------------
    Six months ended May 31,            2008                    2007
    -----------------------------------------------
    Weighted                Weighted
    average                 average
    Number of  grant date   Number of  grant date
    share units  fair value share units  fair value
    -------------------------------------------------------------------------

    Outstanding, beginning
    of period
    Non-vested                 345,257  $    29.65     142,992  $    23.33
    Vested                           -           -           -           -
    Issued
    Initial allocation               -           -           -           -
    In lieu of dividends         6,303           -       1,664           -
    Vested                             -           -           -           -
    Settled in cash                    -           -        (334)          -
    Forfeited and cancelled      (16,560)          -      (5,213)          -
    -------------------------------------------------------------------------
    Outstanding,
    end of period               335,000           -     139,109           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Compensation expense for the three months ended May 31, 2008, related
    to these units was $0.8 million (2007 - $0.5 million), and for the
    six months ended May 31, 2008, was $1.7 million (2007- $0.9 million).
    AGF has entered into a swap agreement to fix the cost of compensation
    related to certain RSUs and PSUs, a portion of which has been
    designated as a cash flow hedge. As at May 31, 2008, a $3.3 million
    liability (2007 - $0.7 million) related to the swap agreement has
    been included under other long-term liabilities. Compensation expense
    includes the effect resulting from the change in fair value of the
    swap held to economically hedge the RSU and PSU plans. As at May 31,
    2008, AGF has hedged 308,710 share units at a fixed cost between
    $31.28 and $35.07.

    (f) Deferred Share Unit (DSU) Plan

    Under the Company's DSU plan for non-employee directors, AGF
    directors may elect to receive their remuneration in DSUs. On
    termination, AGF will redeem all of the participants' DSUs in cash or
    shares equal to the value of one Class B share at the termination
    date for each DSU. There is no unrecognized compensation related to
    directors' DSUs since these awards vest immediately when granted. As
    at May 31, 2008, 14,245 (2007 - 1,699) DSUs were outstanding.
    Compensation expense related to these DSUs for the three months ended
    May 31, 2008, was $0.1 million (2007 - $0.1 million), and for the six
    months ended May 31, 2008, was $0.2 million (2007 - $0.1 million).

    (g) Earnings Per Share

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

    -------------------------------------------------------------------------
    Three months ended       Six months ended
    May 31,                 May 31,
    ($ thousands, except     ------------------------------------------------
    per share amounts)             2008        2007        2008        2007
    -------------------------------------------------------------------------

    Numerator
    Net income from
    continuing operations
    for the period         $   44,047  $   49,069     106,706  $   87,131
    Loss on dissolution
    of partnerships,
    net of tax (note 6)             -           -           -      (2,128)
    Gain on sale of
    discontinued operations,
    net of tax (note 3)             -       4,702           -       4,702
    Net earnings (loss)
    from discontinued
    operations, net of tax
    (note 3)                        -        (135)          -         247
    -------------------------------------------------------------------------
    Net income for the
    period                 $   44,047  $   53,636  $  106,706  $   89,952

    Denominator
    Weighted average number
    of shares - basic      89,349,275  89,798,419  89,194,845  89,638,401
    Dilutive effect of
    employee stock options    436,521   1,518,548     573,495   1,271,889
    -------------------------------------------------------------------------
    Weighted average number
    of shares - diluted    89,785,796  91,316,967  89,768,340  90,910,290

    Earnings per share
    Basic from continuing
    operations             $     0.49  $     0.55  $     1.20  $     0.97
    Diluted from continuing
    operations             $     0.49  $     0.54  $     1.19  $     0.96
    Basic                   $     0.49  $     0.60  $     1.20  $     1.00
    Diluted                 $     0.49  $     0.59  $     1.19  $     0.99
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 10: Supplemental Disclosure of Cash Flow Information

    Interest payments for the three months ended May 31, 2008, were
    $47.2 million (2007 - $33.0 million). Interest payments for the six
    months ended May 31, 2008 were $97.9 million (2007 - $60.5 million).

    Income tax payments for the three months ended May 31, 2008, were
    $7.1 million (2007 - $7.0 million). Income tax payments for the six
    months ended May 31, 2008 were $21.1 million (2007 - $15.5 million).

    Note 11: AGF Trust Net Interest Income

    The breakdown of net interest income is as follows:

    -------------------------------------------------------------------------
    Three months ended       Six months ended
    May 31,                 May 31,
    ------------------------------------------------
    ($ thousands)                   2008        2007        2008        2007
    -------------------------------------------------------------------------

    AGF Trust interest income:
    Loan interest               68,711  $   50,910     135,208  $   94,064
    Investment interest          7,292       4,111      17,547       8,172
    -------------------------------------------------------------------------
    76,003      55,021     152,755     102,236

    AGF Trust interest expense:
    Deposit interest            50,225      30,838      97,368      57,255
    Other interest expense         710       5,099       7,523       8,406
    -------------------------------------------------------------------------
    50,935      35,937     104,891      65,661

    AGF Trust net interest
    income                       25,068  $   19,084      47,864  $   36,575
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 12: Income Tax

    On October 30, 2007, the Department of Finance Canada proposed to reduce
    the federal corporate income tax rate to 15% from 18.5% by January 1,
    2012. The change was substantially enacted in December 2007.
    Consequently, during the six months ended May 31, 2008, the Company has
    recognized a $19.5 million reduction in future income tax liabilities.

    Note 13: Capital Management

    Objective, Policies and Procedures

    The Company's objectives when managing capital are to:

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

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

    Our capital consists of shareholders' equity. The AGF Finance Committee
    is responsible for the management of capital. The AGF Board of Directors
    is responsible for overseeing the Company's capital policy and
    management. The Company reviews its five-year capital plan annually.

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

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

    Regulatory capital is detailed as follows:

    -------------------------------------------------------------------------
    As at       As at
    May 31,   November
    ($ thousands)                                           2008  30, 2007(1)
    -------------------------------------------------------------------------

    Tier 1 capital
    Common shares                                   $   82,768  $   82,768
    Contributed surplus                                  1,126         910
    Retained earnings                                   96,563      79,863
    Non-cumulative preferred shares                     64,000      49,000
    Less: securitization and other                     (19,581)          -
    -------------------------------------------------------------------------
    224,876     212,541
    Tier 2 capital
    Subordinated debentures                            109,500      89,500
    General allowances                                  18,061      15,277
    Less: securitization and other                      (7,944)    (26,669)
    -------------------------------------------------------------------------
    119,617      78,108

    -------------------------------------------------------------------------
    Total capital                                     $  344,493  $  290,649
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Note 14: Risk Management

    The risk management policies and procedures of the Company relating to
    credit, market and liquidity risks are provided in the "Managing Risk"
    section of the MD&A for the three and six months ended May 31, 2008,
    which are an integral part of the Q2 2008 Consolidated Financial
    Statements.

    Note 15: Segment Information

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

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

    -------------------------------------------------------------------------
    ($ thousands)             Investment       Trust
    Three months ended        Management     Company
    May 31, 2008              Operations  Operations       Other       Total
    -------------------------------------------------------------------------
    Revenue                   $  162,878  $   26,666  $    4,797  $  194,341
    Operating expenses            91,350      14,318           -     105,668
    Amortization and other        27,877         571       2,374      30,822
    -------------------------------------------------------------------------
    Segment income (loss)
    from continuing
    operations
    before taxes             $   43,651  $   11,777  $    2,423  $   57,851
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ thousands)             Investment       Trust
    Three months ended        Management     Company
    May 31, 2007              Operations  Operations       Other       Total
    -------------------------------------------------------------------------
    Revenue(1)                $  171,767  $   29,995  $    3,178  $  204,940
    Operating expenses            95,082      11,841           -     106,923
    Amortization and other        31,149         351       3,229      34,729
    -------------------------------------------------------------------------
    Segment income (loss)
    from continuing
    operations
    before taxes             $   45,536  $   17,803  $      (51) $   63,288
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ thousands)             Investment       Trust
    Six months ended          Management     Company
    May 31, 2008              Operations  Operations       Other       Total
    -------------------------------------------------------------------------
    Revenue                   $  328,106  $   53,976  $    6,605  $  388,687
    Operating expenses           181,773      28,703           -     210,476
    Amortization and other        57,292       1,023       5,396      63,711
    -------------------------------------------------------------------------
    Segment income (loss)
    from continuing
    operations
    before taxes             $   89,041  $   24,250  $    1,209  $  114,500

    Total assets              $1,188,400  $5,257,031  $  103,388  $6,548,819
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ thousands)             Investment       Trust
    Six months ended          Management     Company
    May 31, 2007              Operations  Operations       Other       Total
    -------------------------------------------------------------------------
    Revenue(1)                $  328,249  $   49,263  $    4,458  $  381,970
    Operating expenses           180,595      22,994           -     203,589
    Amortization and other        61,143         656       4,276      66,075
    -------------------------------------------------------------------------
    Segment income from
    continuing
    operations
    before taxes             $   86,511  $   25,613  $      182  $  112,306

    Total assets              $1,199,407  $3,544,593  $  105,939  $4,849,939
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) The Trust Company results for the three and six months ended May 31,
    2007 include an $8.0 million securitization gain



    This report contains forward-looking statements with respect to AGF,
including its business operations and strategy and 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.

    About AGF Management Limited

    AGF Management Limited is one of Canada's premier investment management
companies with offices across Canada and subsidiaries around the world. AGF's
products and services include a diversified family of more than 50 mutual
funds, the evolutionary AGF Elements portfolios, the Harmony asset management
program, AGF Asset Management Group services for institutional and high-net-
worth clients, as well as AGF Trust GICs, loans and mortgages. With
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.





For further information:

For further information: AGF Management Limited shareholders and
analysts, please contact: Greg Henderson, CA, Senior Vice-President and Chief
Financial Officer, (416) 865-4156, greg.henderson@AGF.com; Media, please
contact: Lucy Becker, Vice-President, Corporate Communications, (416)
865-4284, lucy.becker@AGF.com


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890