AGF Management Limited Reports Strong Second Quarter Financial Results



    Record setting mutual fund gross sales and financial performance.
    Net income from continuing operations up 128%.

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    AGF MANAGEMENT LIMITED
    Second Quarter Report to Shareholders for the three and six months ended
    May 31, 2007
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    TORONTO, June 27 /CNW/ - AGF Management Limited (AGF) today announced
record financial results for the second quarter ended May 31, 2007 and
historical highs for sales of mutual funds, reporting $0.9 billion of net
sales of long-term funds during the second quarter of fiscal 2007. As a
result, AGF is ranked first among all Canadian non-bank mutual fund firms and
third overall for the three-month period ended May 31, 2007. Sales in June
have also been strong with AGF recording $141.6 million in net sales as of the
close of business on June 25, 2007.
    "AGF has had another very strong quarter for financial results and
business performance," said Blake C. Goldring, chairman and chief executive
officer, AGF. "We appreciate the support of our clients and will continue to
serve them by focusing on excellence in money management, providing great
products and delivering world class service."
    In the second quarter of fiscal 2007, consolidated revenue from
continuing operations rose to $204.9 million compared with $152.2 million in
the second quarter of the prior year. Consolidated revenue in the quarter
included an $8.0 million securitization gain ($0.06 per share after tax) from
the sale of RSP loans by our Trust Company Operations segment.
    Consolidated net income from continuing operations for the three months
ended May 31, 2007, was up 128 per cent to $49.1 million or $0.54 per share
diluted compared with $21.5 million or $0.24 per share diluted for the same
period last year. Not including the securitization gain, net income from
continuing operations was up 104 per cent in the second quarter of fiscal 2007
over the same quarter in 2006. Earnings before interest, taxes, depreciation
and amortization (EBITDA) from continuing operations were $98.0 million,
compared with $64.6 million for the quarter ended May 31, 2006.
    Total assets under management increased by 47.9 per cent, rising to $55.8
billion at the end of the second quarter of 2007 from $37.7 billion as at
May 31, 2006. Over the same period, institutional and private client assets
grew 79.4 per cent and mutual fund assets rose 29.2 per cent. Institutional
and private client assets are up due to investment performance, new mandates
and the acquisition of Highstreet Partners Limited. The Highstreet
acquisition, which closed on December 1, 2006 added $4.8 billion in AUM. The
Trust Company Operations segment continued to grow significantly with total
loan assets rising 75.2 per cent.

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

    Dear fellow shareholders

    During the second quarter of 2007, we celebrated our 50th anniversary. In
1957, my father, Warren Goldring and Allan Manford had a unique vision to
create the American Growth Fund to pool the funds of Canadian investors,
giving them greater access to the U.S. stock market. Using the initials from
the name of the first fund, our co-founders set out to build a company that
was innovative, focused on clients and driven by superior investment
management.
    Over the 50 years in business, AGF has grown from a mutual fund company
to a global investment management firm. Today we have not only mutual fund
assets under management, but also significant institutional and private client
assets, as well as a thriving trust business. We have strong roots and our
financial position today has never been better.
    In the second quarter, we continued the tradition of excellence. Our
investment management business set records for mutual fund gross sales, and
institutional and private client assets increased. AGF Trust, part of a unique
value proposition for our clients, continued with its impressive rate of
growth.
    Our stated focus is to translate business growth into improved financial
performance and this trend continued into the second quarter of 2007.
Consolidated revenue was $204.9 million, compared with $152.2 million in the
second quarter of the prior year. Consolidated net income from continuing
operations for the three months ended May 31, 2007 was $49.1 million, compared
with $21.5 million for the same period last year. Earnings before interest,
taxes, depreciation and amortization(1) (EBITDA) from continuing operations
were $98.0 million, compared with $64.6 million for the three months ended May
31, 2006.
    For the three months ended May 31, 2007, AGF reported cash flow from
continuing operations(1) (before net change in non-cash balances related to
operations) of $84.4 million, compared with $52.4 million one year ago. Free
cash flow(1) (cash flow from continuing operations less selling commissions
paid) was $34.8 million, compared with $22.5 million one year ago.
    On April 30, 2007, we announced the sale of Investmaster Holdings
Limited. With the divestiture of Unisen in 2005 and now Investmaster, AGF's
remaining operations represent our core businesses. With increased focus, we
are in a position to continue to deliver results.
    AGF is an independent Canadian company with a proud history. Our
experience has been a key factor in our ability to thrive in a consolidating
industry with increased competition. We will continue to focus on our
investment management discipline and rigour, and on providing great products
and service. By listening to our clients, we are confident that we will
continue to build value for our shareholders.

    Blake C. Goldring, CFA
    Chairman and Chief Executive Officer
    May 31, 2007

    (1) Cash flow from continuing operations, free cash flow and EBITDA are
    non-GAAP measures. Please refer to page 4 and 5 of this report.



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

    For the three and six months ended May 31, 2007

    This Management's Discussion and Analysis ('MD&A') presents an analysis
of the financial condition of AGF Management Limited and its subsidiaries as
at May 31, 2007, compared with November 30, 2006, and the results of
operations for the three and six months ended May 31, 2007, compared with the
corresponding periods of 2006. This discussion should be read in conjunction
with our 2006 annual MD&A and 2006 annual audited Consolidated Financial
Statements and Notes. Certain comparative amounts in these financial
statements have been reclassified to conform with the current year's
presentation. The financial information presented herein has been prepared on
the basis of Canadian generally accepted accounting principles ('GAAP').
Percentage changes are calculated using numbers rounded to the decimals that
appear in this MD&A. All dollar amounts are in Canadian dollars unless
otherwise indicated.
    There have been no material changes to the information discussed in the
following sections of the 2006 annual MD&A: 'Factors that May Affect Future
Results', 'Disclosure Controls', 'Off Balance Sheet Arrangements',
'Contractual Obligations', 'Intercompany and Related Party Transactions' and
'Government Regulations'. There has been additional disclosure with respect to
the adoption of new accounting policies, which are discussed in the 'Critical
Accounting Policies' section of this MD&A. The 'Key Performance Indicators and
Non-GAAP Measures' section contains a reconciliation of non-GAAP measures to
GAAP measures.

    Overview

    AGF Management Limited ('AGF'), with approximately $56 billion in assets
under management ('AUM'), is one of Canada's largest independent mutual fund
and investment management companies, with operations in Canada, the United
Kingdom, Ireland and Asia. During the quarter we celebrated our 50th
anniversary. We commenced operations in 1957 with one of the first mutual
funds available to Canadians wishing to invest internationally and, as at May
31, 2007, we offered over 50 mutual funds, as well as wrap products (sold
under our Elements and Harmony brands). Today, we also have substantial
institutional and private client businesses along with a very successful 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
mutual fund, institutional, sub-advisory and private client businesses. This
segment also includes the operations of Highstreet Partners Ltd.
('Highstreet'), which wholly owns Highstreet Asset Management Inc. AGF
acquired 79.9% of Highstreet on December 1, 2006. The Trust Company Operations
segment includes the results of AGF Trust Company, and the Other segment
includes our equity interest in Smith and Williamson Holdings Limited
('S&WHL').
    Investmaster Holdings Limited ('Investmaster') was divested on April 30,
2007 and as such, Investmaster's results have been reported as discontinued
operations.

    Strategy and Highlights

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

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

    -  Our client-centric approach resulted in record sales in our core
       mutual fund business. During the second quarter of 2007, we recorded
       over $2.0 billion in gross sales which is a record amount for any
       second quarter in the history of our firm. Net sales were $0.9
       billion, which placed us first among all Canadian non-bank mutual fund
       firms for the three-month period ended May 31, 2007.

    -  We delivered value directly to our shareholders through dividend
       payments. Dividends paid on Class A Voting Common Shares ('Class A
       shares') and Class B Non-Voting Shares ('Class B shares') increased
       11% to $17.9 million in Q2 2007, compared with $16.1 million in 2006.
       On January 31, 2007, we announced an additional 11% increase in the
       dividend rate to 20 cents per share from 18 cents per share on Class A
       and Class B shares for the April 2007 scheduled dividend payment.

    -  We continued to support the growth of our Trust Company Operations
       ('AGF Trust') and invested $16.0 million during the three months ended
       May 31, 2007, bringing our total investment in debt and equity capital
       to $183.3 million. This compares with the investment of $16.0 million
       for the three months ended May 31, 2006. During the period, AGF Trust
       also received cash of $252.9 million from the securitization of
       approximately $263.6 million of loans. AGF Trust real estate secured
       loan assets grew 101.8% over the prior year and investment loans grew
       56.3%

    -  We concluded the sale of Investmaster on April 30, 2007, completing
       our initiative to sell non-core business operations.

    -  During the quarter the Company increased it's revolving term loan to a
       maximum of $300.0 million from $200.0 million further strengthening
       our financial position.

    -  In spite of our record sales, which requires payment of deferred
       selling commissions, and further funding of the Trust Company
       Operations we were able to generate significant cash and reduce our
       bank debt by $15 million over the February 28, 2007 balance.

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

    Key Performance Indicators and Non-GAAP Measures

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

    Consolidated Operations

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

    We derive our revenue principally from a combination of:

    -  management and advisory fees based on AUM

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

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

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

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

    Cash Flow from Operations

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

    
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                                    Three months ended      Six months ended
                                                May 31,               May 31,
                                    -------------------   -------------------
    ($ millions)                       2007       2006       2007       2006
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    Net cash provided by continuing
     operating activities           $ 102.6    $  66.0    $ 158.4    $  81.7
    Less: net changes in non-cash
     balances related to operations    18.2       13.6        5.3      (19.6)
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    Cash flow from continuing
     operations                     $  84.4    $  52.4    $ 153.1    $ 101.3
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    Free Cash Flow

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

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                                    Three months ended      Six months ended
                                                May 31,               May 31,
                                    -------------------   -------------------
    ($ millions)                       2007       2006       2007       2006
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    Cash flow from continuing
     operations (defined above)     $  84.4    $  52.4    $ 153.1    $ 101.3
    Less: selling commissions paid     49.6       29.9       93.3       52.2
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    Free cash flow                  $  34.8    $  22.5    $  59.8    $  49.1
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    Return on Equity (ROE) and Return on Investment (ROI)

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

    Investment Management Operations

    Assets Under Management ('AUM')

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

    Investment Performance (Market Appreciation of Investment Portfolios)

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

    Net Sales

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

    EBITDA Margin

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

    
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                                    Three months ended      Six months ended
                                                May 31,               May 31,
                                    -------------------   -------------------
    ($ millions)                       2007       2006       2007       2006
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    EBITDA                          $  76.7    $  56.8    $ 147.6    $ 110.2
    Divided by revenue                171.8      136.7      328.2      264.5
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    EBITDA margin                      44.6%      41.6%      45.0%      41.7%
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    Pre-Tax Profit Margin

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

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                                    Three months ended      Six months ended
                                                May 31,               May 31,
                                    -------------------   -------------------
    ($ millions)                       2007       2006       2007       2006
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    Income before taxes and
     non-segmented items            $  45.5    $  24.2    $  86.5    $  44.9
    Divided by revenue                171.8      136.7      328.2      264.5
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    Pre-tax profit margin              26.5%      17.7%      26.4%      17.0%
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    Trust Company Operations

    Loan Asset Growth

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

    Net Interest Income

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

    Efficiency Ratio

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

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                                    Three months ended      Six months ended
                                                May 31,               May 31,
                                    -------------------   -------------------
    ($ millions)                       2007       2006       2007       2006
    -------------------------------------------------------------------------

    Selling, general and
     administrative expense         $   9.3    $   5.9    $  17.8    $  11.2
    Add: amortization expense           0.4        0.3        0.7        0.6
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    Non-interest expense            $   9.7    $   6.2    $  18.5    $  11.8
    -------------------------------------------------------------------------

    Other revenue                   $   1.7    $   1.1    $   2.7    $   2.3
    Gain from securitization and
     related items                      9.2        0.8       10.0       10.7
    -------------------------------------------------------------------------
    Non-interest income             $  10.9    $   1.9    $  12.7    $  13.0
    -------------------------------------------------------------------------

    Net interest income             $  19.1    $  11.1    $  36.6    $  21.2
    Add: non-interest income           10.9        1.9       12.7       13.0
    -------------------------------------------------------------------------
    Total of net interest income
     and non-interest income        $  30.0    $  13.0    $  49.3    $  34.2
    -------------------------------------------------------------------------
    Efficiency ratio                   32.3%      47.7%      37.5%      34.5%
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    Pre-Tax Profit Margin

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

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                                    Three months ended      Six months ended
                                                May 31,               May 31,
                                    -------------------   -------------------
    ($ millions)                       2007       2006       2007       2006
    -------------------------------------------------------------------------

    Income before taxes and
     non-segmented items            $  17.8    $   5.0    $  25.6    $  18.1
    Divided by revenue                 30.0       13.0       49.3       34.2
    -------------------------------------------------------------------------
    Pre-tax profit margin              59.3%      38.5%      51.9%      52.9%
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    Critical Accounting Policies

    In the six months ended May 31, 2007, additional significant accounting
policies were adopted by the Company and are supplemental to the 'Critical
Accounting Policies' section of the 2006 annual MD&A. These policies are as
follows:

    1) Financial Instruments, Hedges and Comprehensive Income

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

    Classification of Financial Instruments

    Available-for-sale assets are those non-derivative financial assets that
are designated as AFS or are not classified as loans and receivables, HTM or
held for trading. Available-for-sale assets are measured at fair value with
unrealized gains and losses included in accumulated other comprehensive income
until sale or other-than-temporary impairment when the cumulative gain or loss
is transferred to the Consolidated Statement of Operations. Assets included in
this category are investments and retained interest from securitization. Upon
adoption of Section 3855, the following adjustments were recorded:

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

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

    Hedge Accounting

    Derivative instruments are used to manage the Company's exposure to
interest risks. The Company does not enter into derivative financial
instruments for trading or speculative purposes. When derivative instruments
are used, the Company determines whether hedge accounting can be applied.
Where hedge accounting can be applied, a hedge relationship is designated as a
fair value hedge or a cash flow hedge. The hedge is documented at inception,
detailing the particular risk management objective and the strategy for
undertaking the hedge transaction. The documentation identifies the specific
asset or liability being hedged, the risk that is being hedged, the type of
derivative used and how effectiveness will be assessed. The derivative
instrument must be highly effective in accomplishing the objective of
offsetting either changes in the fair value or forecasted cash flows
attributable to the risk being hedged both at inception and over the life of
the hedge.
    Fair value hedge transactions predominately use interest rate swaps to
hedge the changes in the fair value of an asset, liability or firm commitment.
Derivative financial instruments, held for fair value hedging purposes, are
recognized at fair value and the changes in the fair value are recognized in
the Consolidated Statement of Income under investment income. Changes in the
fair value of the hedged items attributable to the hedged risk are also
recognized in the Consolidated Statement of Income under investment income,
with a corresponding adjustment to the carrying amount of the hedged items in
the Consolidated Balance Sheet. When the derivative instrument no longer
qualifies as an effective hedge or the hedging instrument is sold or
terminated prior to maturity, hedge accounting is discontinued prospectively.
The cumulative adjustment of the carrying amount of the hedged item related to
a hedging relationship that ceases to be effective is recognized in investment
income in the periods during which the hedged item affects income.
Furthermore, if the hedged item is sold or terminated prior to maturity, hedge
accounting is discontinued, and the cumulative adjustment of the carrying
amount of the hedged item is then immediately recognized in investment income.
    In accordance with Section 3865, the accumulated ineffectiveness of
hedging relationships must be measured, and the ineffective portion of changes
in fair value must be recognized in the Consolidated Statement of Income. As a
result, the opening balance of retained earnings was adjusted by $0.025
million, as a result of the adoption of Section 3865.
    During the three and six months ended May 31, 2007, the ineffective
portion of accumulated changes in the fair value of hedging relationships
recognized in the income statement amounted to a loss of $0.9 million and $1.0
million, respectively, as it relates to fair value hedging relationship.
    As required, a transition adjustment has been recognized in the opening
balance of retained earnings as at December 1, 2006 for the following:
i) financial instruments that the Company classifies as held for trading and
that were not previously recorded at fair value and ii) the difference in the
carrying amount of loans and deposits at December 1, 2006 and the carrying
amount calculated using the effective interest rate from inception of the loan
or deposit. A transition adjustment has been recognized in the opening balance
of AOCI relating to adjustments arising due to the re-measuring of financial
assets classified as available for sale. Prior-period balances have not been
restated, except for the reclassification of the foreign currency translation
balances.

    2) Trust Operations Net Interest Income

    Commencing December 1, 2006, the presentation of the Trust Operations
income has been revised to present net deposit interest expense and other
interest expense in net interest income, as detailed in note 11. Comparative
periods presented have been restated, with interest and investment income
being reclassified from administration fees, interest and other revenue, and
other interest expense being reclassified from interest on Trust Company
deposits and selling, general and administrative expenses.

    3) Purchase Price Allocations and Amortization of Intangible Assets

    On December 1, 2006, the Company acquired 79.9% of Highstreet Partners
Ltd. The purchase price of $74.4 million including expenses related to the
acquisition has been allocated to the following asset categories.

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

    Net tangible assets                                                  410
    Management contracts                                              26,010
    Customer contracts                                                14,160
    Goodwill                                                          45,895
    Trademarks                                                         1,935
    Future income taxes                                              (14,014)
    -------------------------------------------------------------------------
                                                                      74,396
    -------------------------------------------------------------------------
    

    Management contracts, trademarks and goodwill are not amortized but are
subject to an annual impairment test. The estimated useful life of customer
contracts acquired is seven years; accordingly, this finite-life asset will be
amortized on a straight-line basis over seven years.

    Changes in Internal Controls over Financial Reporting

    Pursuant to Multilateral Instrument 52-109, the Chief Executive Officer
and Chief Financial Officer must certify that they are responsible for the
design of internal controls over financial reporting (or caused them to be
designed under their supervision). Internal controls over financial reporting
are designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with Canadian generally accepted accounting principles.
During the six-month period ended May 31, 2007, there was no significant
change to the systems of internal controls within our company, except as noted
below.

    Changes in Information Technology Systems

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

    
    Consolidated Operating Results

    Our consolidated operating results for the three and six months ended
May 31, 2007 and May 31, 2006 are as follows:

    -------------------------------------------------------------------------
                            Three Months Ended          Six Months Ended
                                   May 31,                     May 31,
                       ------------------------------------------------------
    ($ millions, except                      %                          %
    per share amounts)     2007     2006   change     2007     2006   change
    -------------------------------------------------------------------------

    Revenue

      Investment
       management
       operations       $ 171.8  $ 136.7    25.7%  $ 328.2  $ 264.5    24.1%
      Trust company
       operations          30.0     13.0   130.8%     49.3     34.2    44.2%
      Other                 3.1      2.5    24.0%      4.5      3.1    45.2%
    -------------------------------------------------------------------------
                          204.9    152.2    34.6%    382.0    301.8    26.6%

    Expenses
      Investment
       management
       operations          95.1     79.9    19.0%    180.6    154.3    17.0%
      Trust company
       operations          11.8      7.7    53.2%     23.0     15.5    48.4%
    -------------------------------------------------------------------------
                          106.9     87.6    22.0%    203.6    169.8    19.9%

    EBITDA(1)
     (continuing
     operations)           98.0     64.6    51.7%    178.4    132.0    35.2%
      Amortization         31.6     32.9    (4.0%)    61.8     65.9    (6.2%)
      Interest Expense      3.2      0.8   300.0%      4.3      1.3   230.8%
      Non-controlling
       interest             0.2      0.0     n/m       0.5      0.0     n/m
      Income Taxes         13.9      9.4    47.9%     24.7     19.9    24.1%
    -------------------------------------------------------------------------
    Net income from
     continuing
     operations         $  49.1  $  21.5   128.4%  $  87.1  $  44.9    94.0%
    Gain on early
     retirement of debt,
     net of tax             0.0     13.3               0.0     13.3
    Loss on dissolution
     of Limited
     Partnerships, net
     of tax                 0.0      0.0              (2.1)     0.0
    Gain (loss) on sale
     of discontinued
     operations, net
     of tax                 4.7     (2.1)              4.7     (2.1)
    Net earnings from
     discontinued
     operations, net
     of tax                (0.2)     0.3               0.3      1.0
    -------------------------------------------------------------------------
    Net income          $  53.6  $  33.0    62.4%  $  90.0  $  57.1    57.6%
    -------------------------------------------------------------------------

    Earnings per share
    from continuing
     operations
     - diluted          $  0.54  $  0.24   125.0%  $   0.96 $  0.50    92.0%
    -------------------------------------------------------------------------

    (1)  As previously defined, see the 'Key Performance Indicators and Non-
         GAAP Measures - EBITDA' section. The items required to reconcile
         EBITDA to net income, a defined term under Canadian GAAP, are
         detailed above.
    

    Revenue for the three and six months ended May 31, 2007 increased by
34.6% and 26.6% from the corresponding periods in 2006 and all of our
operations experienced significant growth. Revenue in the Investment
Management Operations segment was up 25.7% and 24.1% for the three and six
months ended May 31, 2007 corresponding to higher levels of AUM, which were a
result of improved net sales and market performance and the acquisition of 80%
of Highstreet. The Trust Company Operations segment reported increases in
revenue of 130.8% and 44.2% for the three and six months ended May 31, 2007.
The first quarter in 2006 included a $9.9 million securitization gain from the
sale of RSP loans and the second quarter in 2007 included an $8.0 million
securitization gain. Excluding the impact of the securitization gain, revenue
for the Trust Company Operations segment increased 69.2% in Q2 2007 over Q2
2006. Revenues for Other, which includes the results of our 30.4% equity
interest in S&WHL, were higher for the three months ended May 31, 2007,
compared with the corresponding period in 2006.
    Expenses for the three and six months ended May 31, 2007 increased by
22.0% and 19.9%, respectively, as compared with the corresponding periods in
2006, with increases in the Investment Management Operations and Trust Company
Operations segments. The increases for both the Investment Management
Operations and Trust Company Operations segments are primarily attributable to
strong sales results and substantially higher assets and loan levels discussed
in greater detail under the segment discussions.
    The revenue and expense impact contributed to the increase in EBITDA of
51.7% and 35.2% for the three and six months ended May 31, 2007, respectively,
from the corresponding periods of 2006. Excluding the impact of the
securitization gain from the sale of RSP loans in AGF Trust, which occurred in
the three months ended May 31, 2007, EBITDA increased 39.3% in the second
quarter of 2007, compared with the prior year period.
    Amortization expenses decreased 4.0% and 6.2% in the three and six months
ended May 31, 2007, compared with the corresponding periods in 2006. The
decline was primarily due to a decrease in amortization of customer contracts,
which was $1.2 million lower as certain contracts became fully amortized in
the fourth quarter of 2006. For the three and six months ended May 31, 2007,
amortization of deferred selling commissions in the Investment Management
Operations segment accounted for $27.2 million and $53.7 million (2006 - $27.2
million and $54.4 million) of the total amortization expense.
    Interest expense increased to $3.2 million and $4.3 million for the three
and six months ended May 31, 2007 from $0.8 million and $1.3 million in the
corresponding periods of 2006. The increase is mainly the result of higher
average outstanding loan balances and higher interest rates.
    Income tax expense for the three months ended May 31, 2007 was $13.9
million as compared with $9.4 million in the second quarter of 2006. For the
six months ended May 31, 2007, income tax expense was $24.7 million, as
compared with $19.9 million in the corresponding period in 2006. The effective
tax rate for the first six months of 2007 was 22.1%, as compared with 30.7% in
the corresponding period in 2006 with the change being attributable to the
impact of declining substantially enacted Canadian tax rates and the impact of
improved profitability of foreign operations.
    The impact of the above revenue and expense items resulted in net income
from continuing operations of $49.1 million in the quarter ended May 31, 2007,
as compared with $21.5 million in the comparable period of 2006. For the six
months ended May 31, 2007, net income from continuing operations was $87.1
million, compared with $44.9 million in the prior-year period. Basic and fully
diluted earnings per share from continuing operations were $0.55 and $0.54 in
the second quarter of 2007 as compared with $0.24 per share in the second
quarter of 2006.
    Net income was $53.6 million in the quarter ended May 31, 2007, as
compared with $33.0 million in the comparable period of 2006. For the six
months ended May 31, 2007, net income was $90.0 million, compared with $57.1
million in the prior-year period. The three and six month periods ended May
31, 2007 included a gain of $4.7 million net of tax related to the gain on
sale of discontinued operations, and the six-month period ended May 31, 2007
included a loss of $2.1 million net of tax related to the dissolution of
Limited Partnerships.
    A further discussion of the results of each business segment for the
three and six months ended May 31, 2007 as compared with May 31, 2006 follows.

    Business Segment Performance

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

    Investment Management Operations

    Business and Industry Profile

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

    
    Segment Strategy & Highlights

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

    -  Our client-centric approach resulted in record sales in our core
       mutual fund business. During the second quarter of 2007, we recorded
       more than $2.0 billion in gross sales which is a record amount for any
       second quarter in the history of our firm. Net sales were $0.9
       billion, which placed us first among all Canadian non-bank mutual fund
       firms for the three-month period ended May 31, 2007.

    -  We successfully promoted international funds. AGF manages its product
       shelf proactively, with an aim to ensure there is sufficient product
       breadth to satisfy changing client needs. During the current fiscal
       year, AGF has emphasized international investing because Canadians are
       committing more investment dollars outside of Canada. Net sales of
       international equity funds for the quarter ended May 31, 2007 were
       $344.9 million, versus net redemptions of $92.4 million reported in
       the same period last year.

    -  On April 26, 2007 we announced that we were increasing the foreign
       content limits on seven equity funds. This change gives our portfolio
       managers another tool to gain greater access to the numerous
       attractive opportunities abroad. Portfolio managers will also have
       more securities within sectors to choose from to enhance portfolio
       diversification.

    -  We continued to build on the rigour and discipline of our investment
       management process. This has resulted in AGF maintaining its industry-
       leading investment performance.

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

    Assets Under Management

    The primary sources of revenue for AGF's Investment Management Operations
segment are management and advisory fees. The amount of management and
advisory fees is dependent on the level and composition of AUM (AUM is equal
to the net asset value of each fund). Under the management and investment
advisory contracts between AGF and each of the mutual funds, we are entitled
to monthly fees based on a specified percentage of the average daily net asset
value of the respective fund. In addition, we earn fees on our institutional
and private investment management AUM. As a result, the level of AUM has a
significant influence on financial results. The following table illustrates
the composition of the changes in total AUM during the three and six months
ended May 31, 2007 and May 31, 2006:

    -------------------------------------------------------------------------
                            Three Months Ended          Six Months Ended
                                   May 31,                     May 31,
                       ------------------------------------------------------
                                             %                          %
    ($ millions)           2007     2006   change     2007     2006   change
    -------------------------------------------------------------------------
    Mutual fund AUM,
     beginning of
     period             $28,798  $23,505    22.5%  $26,857  $22,209    20.9%

    Gross sales of
     mutual funds         2,013    1,196    68.3%    4,184    2,342    78.7%
    Redemptions of
     mutual funds        (1,110)  (1,142)   (2.8%)  (2,239)  (2,387)   (6.2%)
    -------------------------------------------------------------------------
      Net mutual fund
       sales
    (redemptions)           903       54      n/m    1,945      (45)     n/m

    Market appreciation
     of fund portfolios     905      122   641.8%    1,804    1,517    18.9%
    -------------------------------------------------------------------------

    Mutual fund AUM,
     end of period      $30,606  $23,681    29.2%  $30,606  $23,681    29.2%

    Institutional
     AUM(1)              21,092   10,948    92.7%   21,092   10,948    92.7%
    Private client
     AUM(1)               4,071    3,082    32.1%    4,071    3,082    32.1%
    -------------------------------------------------------------------------

    Total AUM, end of
     period             $55,769  $37,711    47.9%  $55,769  $37,711    47.9%
    -------------------------------------------------------------------------
    Average daily
     mutual fund AUM
     for the period     $30,045  $24,358    23.3%  $29,049  $23,783    22.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) - Institutional assets previously categorized as Private Investment
          Management are now classified as Institutional.
    

    Strong investment performance and net sales of more than $900 million
resulted in an increase in mutual fund AUM to $30.6 billion at May 31, 2007
from $28.8 billion at February 28, 2007. The average daily mutual fund AUM for
the three and six months ended May 31, 2007 increased by 23.3% and 22.1%,
respectively, to $30.0 billion and $29.0 billion. During the past 12 months,
institutional AUM increased by $10.2 billion to $21.1 billion as a result of
strong investment performance and new mandates, and private client AUM
increased by $1.0 billion to $4.1 billion. These increases resulted in total
AUM increasing by 47.9% to $55.8 billion.
    Stock market performance influences the level of AUM. During the three
and six months ended May 31, 2007, the Canadian-dollar-adjusted S&P 500 Index
performance was flat and increased 3.4%, the Canadian-dollar-adjusted NASDAQ
Index declined 1.4% and increased 0.4%, and the S&P/TSX Composite Index rose
8.4% and 11.6%. The aggregate market appreciation of our mutual fund
portfolios for the three and six months ended May 31, 2007 divided by the
average daily mutual fund AUM for the periods was 3.0% and 6.2%, after
management fees and expenses paid by the funds.
    The impact of the U.S. dollar decrease relative to the Canadian dollar on
the market value of AGF mutual funds since November 30, 2006 has been a
decrease in AUM of $0.4 billion. Since February 28, 2007, the impact of the
U.S. dollar decrease has been a decrease in AUM of $0.6 billion.

    Financial and Operational Results

    The Investment Management Operations segment results for the three and
six months ended May 31, 2007 and May 31, 2006 are as follows:

    
    -------------------------------------------------------------------------
                            Three Months Ended          Six Months Ended
                                   May 31,                     May 31,
                       ------------------------------------------------------
                                             %                          %
    ($ millions)           2007     2006   change     2007     2006   change
    -------------------------------------------------------------------------

    Revenue

      Net management
       and advisory
       fees             $ 136.9  $ 109.2    25.4%  $ 261.4  $ 211.3    23.7%
      Administration
       fees and other
       revenue             28.3     20.8    36.1%     55.0     39.1    40.7%
      Deferred sales
       charges              5.2      7.1   (26.8%)    10.0     14.4   (30.6%)
      Investment income     1.4     (0.4)     n/m      1.8     (0.3)     n/m
    -------------------------------------------------------------------------
                          171.8    136.7    25.7%    328.2    264.5    24.1%

    Expenses
      Selling,
       general and
       administrative      49.5     41.5    19.3%     92.5     80.0    15.6%
      Trailing
       commissions         42.4     31.3    35.5%     80.9     60.3    34.2%
      Investment
       advisory fees        3.2      7.1   (54.9%)     7.2     14.0   (48.6%)
    -------------------------------------------------------------------------
                           95.1     79.9    19.0%    180.6    154.3    17.0%
    -------------------------------------------------------------------------

    EBITDA(1)              76.7     56.8    35.0%    147.6    110.2    33.9%
    Amortization           31.2     32.6    (4.3%)    61.1     65.3    (6.4%)
    -------------------------------------------------------------------------
    Income before taxes
     and non-segmented
     items               $ 45.5   $ 24.2    88.0%   $ 86.5   $ 44.9    92.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) As previously defined, see the 'Key Performance Indicators and
        Non-GAAP Measures - EBITDA' section.
    

    Revenue

    For the three- and six-month periods ended May 31, 2007, revenue for the
Investment Management Operations segment increased by 25.7% and 24.1%,
respectively, from the previous-year periods, with changes in the categories
as follows:

    Net Management and Advisory Fees

    The 23.3% higher average daily mutual fund AUM in the second quarter of
fiscal 2007 contributed to a 25.4% increase in net management and advisory fee
revenue from the corresponding period in 2006. For the six months ended
May 31, 2007, average daily mutual fund AUM was up 22.1%, contributing to a
23.7% increase in net management and advisory fee revenue as compared with the
corresponding period in 2006.
    Management and advisory fee revenue is reported net of distribution fees
paid to limited partnerships and other third-party financing entities of
$2.2 million (2006 - $2.8 million) for the three months ended May 31, 2007 and
$4.5 million (2006 - $5.7 million) for the six months ended May 31, 2007.

    Administration Fees and Other Revenue

    Administration fees and other revenue, which includes fees earned on
Harmony, institutional and private investment management AUM, increased by
36.1% in the three months ended May 31, 2007, as compared with the
corresponding period in 2006. Administration fees and other revenue increased
40.7% for the six months ended May 31, 2007, as compared with the
corresponding period in 2006. This was attributable to strong growth in
Harmony revenues and the acquisition of Highstreet, as well as organic growth
in institutional and private client AUM.

    Deferred Sales Charges

    We receive deferred sales charges ('DSC') upon redemption of securities
sold on the contingent DSC or 'back-end' commission basis for which we
financed the selling commissions paid to the dealer. The DSC is generally 5.5%
of the original subscription price of the funds purchased if the funds are
redeemed within the first two years, and declines to zero after seven years.
DSC revenue fluctuates based on the level of redemptions, the age of the
assets being redeemed and the proportion of redemptions composed of 'back-end'
assets.
    DSC revenues for the three and six months ended May 31, 2007 decreased by
26.8% and 30.6%, respectively, from the corresponding periods in 2006,
reflecting lower retail mutual fund redemptions of DSC AUM that are less than
seven years in age.

    Expenses

    For the three- and six-month periods ended May 31, 2007, expenses
increased by 19.0% and 17.0%, respectively, from the previous-year periods.
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, 2007 were $49.5 million and $92.5 million,
respectively, representing a 19.3% and 15.6% increase over the comparable
periods in 2006. The increases are made up of the following amounts:

    
    -------------------------------------------------------------------------
                                                    Three months  Six months
                                                           ended       ended
                                                          May 31,     May 31,
    ($ millions)                                            2007        2007
    -------------------------------------------------------------------------
    Decrease in fund absorption expenses                $   (4.2)   $   (6.2)
    Increase in compensation-related expenses                6.5        12.4
    Increase in other expenses                               3.7         2.6
    Highstreet expenses (Highstreet was acquired
     December 1, 2006)                                       2.0         3.7
    -------------------------------------------------------------------------
                                                             8.0        12.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following are explanations for expense changes in the three- and six-
month period ended May 31, 2007, compared with the prior-year periods:

    -   Our estimates for absorption expense are lower due to increases in
        our assets under management. A substantial portion of the fund
        expenses are fixed in nature.
    -   Compensation-related expenses increased due to performance-related
        bonuses and increases in stock options, RSUs and PSUs.
    -   Other expenses increased primarily as a result of increased spending
        on sales and marketing initiatives.
    -   Highstreet was purchased on December 1, 2006 and therefore there were
        no expenses recorded in the prior-year period.
    

    Trailing Commissions

    Trailing commissions paid to investment dealers are dependent on total
AUM, the proportion of mutual fund AUM sold on a front-end versus back-end
commission basis, and the proportion of equity fund AUM versus fixed-income
fund AUM. Annualized trailing commissions as a percentage of average daily
mutual fund AUM increased to 0.564% for the three months ended May 31, 2007
from 0.514% in the comparable 2006 period. For the six months ended May 31,
2007, annualized trailing commissions as a percentage of average daily mutual
fund AUM increased to 0.557% from 0.507% in the 2006 period. The changes are
due to an increased proportion of mutual fund AUM sold on a front-end basis
and a change in the mix of assets toward managed products, such as Harmony and
Elements, which generally have higher trailers.

    Investment Advisory Fees

    External investment advisory fees decreased by 54.9% and 48.6%,
respectively, for the three- and six-month periods ended May 31, 2007 compared
with the prior-year periods. The average AUM managed by sub-advisors was lower
for the three- and six- months ended May 31, 2007, compared with the same
periods in 2006, due to the decision to have AGF International Advisors
Company Limited assume the role of Portfolio Advisor to AGF International
Value Fund and AGF International Value Class.

    EBITDA

    EBITDA for the Investment Management Operations segment were $76.7
million for the three months ended May 31, 2007, an increase of 35.0% from
$56.8 million for the same period of fiscal 2006. For the six months ended
May 31, 2007, EBITDA was $147.6 million compared with $110.2 million in the
prior-year period, representing an increase of 33.9%. The increases are
primarily due to higher assets under management, lower absorption, lower
investment advisory fees and the impact of the acquisition of Highstreet.

    Amortization

    The largest item in this category is amortization of deferred selling
commissions. Amortization also includes amortization of property, equipment
and other intangible assets and amortization of customer contracts.
    We internally finance all selling commissions paid. These selling
commissions are capitalized and are amortized on a straight-line basis over a
period that corresponds with their applicable DSC schedule. Amortization
expense related to deferred selling commissions was $27.2 million and
$53.7 million, respectively, in the three and six months ended May 31, 2007,
compared with $27.2 million and $54.4 million in the comparable periods in
2006.
    During the second quarter of fiscal 2007, we paid $49.6 million in
selling commissions, compared with $29.9 million in 2006. As at May 31, 2007,
the unamortized balance of deferred selling commissions stood at $308.2
million, an increase of $22.6 million from the February 28, 2007 balance of
$285.6 million. The contingent deferred sales charges that would be received
if all of the DSC securities were redeemed at May 31, 2007 were estimated to
be approximately $400.2 million (Q1 2007 - $381.3 million).


    Trust Company Operations

    Business and Industry Profile

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

    Segment Strategy & Highlights

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

    
    -   continuing to expand mortgage distribution geographically within
        Canada - there are plans to expand AGF Trust's mortgage distribution
        to include Atlantic Canada and the Prairie provinces;
    -   introducing new products that directly serve advisor needs;
    -   developing effective, targeted marketing;
    -   using disciplined loan-underwriting standards and cost control
        measures.
    

    In the second quarter of 2007, we continued to expand our dedicated sales
staff to promote investment lending and mortgage products. The investment loan
program had record originations during the second quarter, due to increased
advisor channel penetration, strong mutual fund performance (which tends to
benefit investment loan sales), and an interest rate environment that remained
supportive of the sale of loans based on the prime rate. AGF Trust also
continued to support AGF investment management wholesalers with the aim to
make it easier for AGF wholesalers to serve their clients and promote trust
products to advisors.
    AGF Trust will continue to maximize operational synergies with our
investment management business through trust products that assist financial
advisors in broadening and deepening their relationship with clients. In
addition, we will focus on expanding returns by increasing our investment and
real estate secured loan portfolios. We are constantly evaluating new
opportunities, including deposit products.
    We anticipate that execution of AGF Trust's stated strategy will result
in continued growth. Our growth plans require investing in product development
initiatives and expanding our sales and administrative teams. As a result,
non-interest expenses may rise more than the corresponding increase in total
interest margin over the remaining quarters of the 2007 fiscal year.

    Securitization Transaction

    On March 30, 2007, AGF Trust securitized $263.6 million of RSP loans
through the sale of these loans to a securitization trust. This represented
the second securitization transaction completed by AGF Trust. As at May 31,
2007, the balance of all securitized loans outstanding was equal to $369.5
million. When RSP loan receivables are securitized, the transaction is
recognized as a sale. Based on assumptions such as prepayments, expected
credit losses and the remaining term, a gain or loss on sale of the loan
receivables is recognized immediately in income. The related loan assets are
removed from the Consolidated Balance Sheet. As part of the securitization,
certain financial assets are retained and a servicing liability is incurred. A
gain of $8.0 million was recognized upon the close of the securitization
transaction on March 30, 2007. Each quarter, an amount will be included in the
financial results of AGF Trust that relates to the amortization of retained
interest and servicing liability as well as any change in assumptions.

    Financial and Operational Results

    The Trust Company Operations segment results for the three and six months
ended May 31, 2007 and May 31, 2006 are as follows:

    
    -------------------------------------------------------------------------
                            Three Months Ended          Six Months Ended
                                   May 31,                     May 31,
                       ------------------------------------------------------
                                             %                          %
    ($ millions)           2007     2006   change     2007     2006   change
    -------------------------------------------------------------------------

    Interest income
      Loan interest      $ 50.9   $ 26.8    89.9%   $ 94.1   $ 50.5    86.3%
      Investment
       interest             4.1      3.4    20.6%      8.2      5.3    54.7%
    -------------------------------------------------------------------------
                           55.0     30.2    82.1%    102.3     55.8    83.3%
    Interest expense
      Deposit interest     30.8     17.0    81.2%     57.3     31.8    80.2%
      Other interest
       expense              5.1      2.1   142.9%      8.4      2.8   200.0%
    -------------------------------------------------------------------------
                           35.9     19.1    88.0%     65.7     34.6    89.9%
    -------------------------------------------------------------------------
    Net interest
     income                19.1     11.1    72.1%     36.6     21.2    72.6%
    -------------------------------------------------------------------------
    Other revenue           1.7      1.1    54.5%      2.7      2.3    17.4%
    Securitization
     gains and related
     items                  9.2      0.8      n/m     10.0     10.7    (6.5%)
    -------------------------------------------------------------------------
                           30.0     13.0   130.8%     49.3     34.2    44.2%

    Expenses
      Selling,
       general and
       administrative       9.3      5.9    57.6%     17.8     11.2    58.9%
      Provision for loan
       losses               2.5      1.8    38.9%      5.2      4.3    20.9%
    -------------------------------------------------------------------------
                           11.8      7.7    53.2%     23.0     15.5    48.4%

    EBITDA(1)              18.2      5.3   243.4%     26.3     18.7    40.6%
    Amortization            0.4      0.3    33.3%      0.7      0.6    16.7%
    -------------------------------------------------------------------------
    Income before taxes
     and non-segmented
     items               $ 17.8      5.0   256.0%   $ 25.6     18.1    41.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) As previously defined, see the 'Key Performance Indicators and Non-
        GAAP Measures - EBITDA' section. The items required to reconcile
        EBITDA to net income, a defined term under Canadian GAAP, are
        detailed above.
    

    Revenue, Net Interest Income and Net Interest Margin

    Net interest income, which is expressed net of interest on deposits and
other interest expense, increased 72.1% and 72.6%, respectively, in the three-
and six-month periods ended May 31, 2007 over the respective periods in 2006
as the average loan balances were approximately 75.9% and 72.0% higher than
average balances during the respective periods in 2006. Other revenue
increased 54.5% and 17.4%, respectively, in the three- and six-month periods
ended May 31, 2007 over the corresponding periods in the prior year due to
higher loan balances. Securitization gains and related items increased by
$8.4 million in Q2 2007, versus the same quarter last year due to the gain
recognized in the quarter on the securitization transaction. For the six-month
period ended May 31, 2007, securitization and related items were down 6.5%
over the prior-year period. These factors resulted in revenue increases of
130.8% and 44.2% for the three and six months ended May 31, 2007. Excluding
the impact of the securitization gains, revenue for the Trust Company
Operations segment increased 69.2% in the quarter ended May 31, 2007 relative
to the same quarter in 2006.
    The average net interest margin on lending products in Q2 2007 was 2.70%
(2.68% in Q2 2006). This spread increase resulted from the larger proportion
of higher margin RSP loans securitized during 2006 (which reduced margins in
Q2 2006), offset by a slight decrease in spreads on the investment loan
portfolio, and a change in the business mix to include a higher proportion of
high credit quality HELOCs, which are risk priced and therefore earn lower
spreads than AGF Trust's other lending products.

    Selling, General and Administrative Expenses

    The increases in SG&A expenses of 57.6% and 58.9% in the three- and
six-month periods ended May 31, 2007 over the respective periods in 2006 were
as a result of increased staffing levels to support the significant volume
growth during the past 12 months. In addition, the higher level of loan
originations resulted in an increase in expenses, as internal sales staff
compensation also includes a variable component related to asset increases,
and headcount increased to service the new relationships.

    Provision for Loan Losses

    The total provision for loan losses increased by 38.9% in the second
quarter of 2007, as compared with the prior-year period, and increased by
20.9% for the six-month period ended May 31, 2007 compared to the same period
in 2006. The increase is attributable to the increase in our loan portfolios.
This increase in the loan loss provision was moderated by the higher
proportion of newly originated loans that are lower risk investment loans or
HELOCs, and by recoveries totalling $0.2 million and $0.8 million in the
three- and six-month periods ended May 31, 2007.

    EBITDA

    Strong asset growth and the completion of a securitization transaction
contributed to EBITDA of $18.2 million and $26.3 million in the three- and
six-month periods ended May 31, 2007. This represented a 243.4% increase as
compared with the three months ended May 31, 2006 and a 40.6% increase as
compared with the six months ended May 31, 2006. Excluding the impact of the
securitization gain on sale recorded in the three months ended May 31, 2007,
EBITDA increased by 92.5% compared with the corresponding period in 2006.

    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, 2007 and
May 31, 2006.

    
    -------------------------------------------------------------------------
                            Three Months Ended          Six Months Ended
                                   May 31,                     May 31,
                       ------------------------------------------------------
                                             %                          %
    ($ millions)           2007     2006   change     2007     2006   change
    -------------------------------------------------------------------------

    Real estate secured
     loans
      Insured mortgage
       loans            $ 494.9  $ 342.1    44.7%  $ 494.9  $ 342.1    44.7%
      Conventional
       mortgage loans     627.3    333.9    87.9%    627.3    333.9    87.9%
      HELOCs              301.3     29.4   924.8%    301.3     29.4   924.8%
    -------------------------------------------------------------------------
                        1,423.5    705.4   101.8%  1,423.5    705.4   101.8%
    Investment loans
      Secured
       investment
       loans            1,193.8    650.9    83.4%  1,193.8    650.9    83.4%
      RSP loans           344.2    330.6     4.1%    344.2    330.6     4.1%
      Other loans          15.7     12.7    23.6%     15.7     12.7    23.6%
    -------------------------------------------------------------------------
                        1,553.7    994.2    56.3%  1,553.7    994.2    56.3%
    Other assets          567.4    356.7    59.1%    567.4    356.7    59.1%
    -------------------------------------------------------------------------
    Total Assets        3,544.6  2,056.3    72.4%  3,544.6  2,056.3    72.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net interest
     income              $ 19.1   $ 11.1    72.1%   $ 36.6   $ 21.2    72.6%
    Gain from
     securitization
     and related
     items                  9.2      0.8      n/m     10.0     10.7    (6.5%)
    Other revenue           1.7      1.1    54.5%      2.7      2.3    17.4%
    Non-interest
     expenses               9.7      6.2    56.5%     18.5     11.8    56.8%
    Provision for
     loan losses            2.5      1.8    38.9%      5.2      4.3    20.9%
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-segmented
     items               $ 17.8    $ 5.0   256.0%   $ 25.6   $ 18.1    41.4%
    -------------------------------------------------------------------------

    Efficiency
     ratio(1)             32.3%    47.7%             37.5%    34.5%
    Assets-to-capital
     multiple              15.3     15.4              15.3     15.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) The efficiency ratio is calculated by dividing non-interest expenses
        by the total of net interest income and non-interest income.
    

    Loan Asset Growth

    Loan assets experienced substantial growth during the second quarter of
2007. Real estate secured loan assets grew 101.8%, as sales efforts in the
mortgage broker channel continued to be successful, and were supplemented by
steady originations of a HELOC product in the advisor channel.
    New investment loan products and improved tie-ins with AGF mutual fund
wholesalers contributed to overall growth in loan advances, as secured
investment loans increased 83.4% to $1.2 billion as at May 31, 2007 over the
respective period in 2006. RSP loan balances increased by $13.6 million
($253.6 million excluding the impact of the securitization) as at May 31, 2007
as a result of the strong RSP season and financial advisors' continued use of
AGF Trust's Internet-based loan application system.

    Efficiency Ratio

    The efficiency ratio (non-interest expenses divided by the total of net
interest income and non-interest income) is a key industry performance
indicator utilized to ensure expenses are contained as the Trust business
grows. The efficiency ratio decreased to 32.3% in the second fiscal quarter of
2007 from 47.7% during the comparable quarter in 2006. The efficiency ratio
for the six-month period ended May 31, 2007 increased to 37.5% from 34.5% in
the comparable period in 2006. The RSP loan securitization gains recorded in
Q1 2006 and Q2 2007 are added to non-interest income for purposes of
calculating the efficiency ratio.

    Balance Sheet

    Our balance sheet has grown significantly during the past year, with our
financial position remaining solid. Total assets increased 72.4% to $3.5
billion at May 31, 2007 as compared with the prior year. At May 31, 2007, our
asset-to-capital multiple stood at 15.3 times, compared with 15.4 times at the
same time last year, which is below our authorized multiple of 17.5 times. Our
risk-based capital ratio was 10.8% at May 31, 2007. AGF Trust received
$16.0 million and $48.5 million in debt and equity capital from AGF Management
Limited during the three- and six-month periods ended May 31, 2007, in order
to support increased asset levels. Liquid assets were high, with $474.9
million in cash and cash equivalents at May 31, 2007 (2006 - $295.1 million).

    Loan Portfolio Credit

    Portfolio credit quality remains consistent as at May 31, 2007, compared
with May 31, 2006. Impaired mortgages as a percentage of the mortgage
portfolio have increased by 21%. However, a loan-by-loan review is conducted
on a monthly basis, and management is comfortable that losses on the portfolio
will remain in line with recent historical experience, given continued stable
real estate market conditions. The general allowance for conventional mortgage
loan losses was increased during the year to $5.8 million from $3.2 million a
year ago. The general allowance for investment loan losses was increased to
$6.1 million from $4.3 million a year ago. Approximately 44% of real estate
secured loan assets, excluding HELOC, are insured. The insured portfolio
increased in part due to the purchase of portfolio insurance on approximately
$60 million of the conventional mortgage portfolio. We have strong security
for non-RSP investment loans, and loan losses during the history of the
program have been minimal. For RSP loans, the expense for impaired loans,
which consists of the increase in specific allowances plus write-offs net of
recoveries (excluding securitized RSP loans) was $0.3 million in Q2 2007 (Q2
2006 - $0.7 million). For the balance of our loan products, the expense for
impaired loans was $0.2 million (Q2 2006 - $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 $84.4
million and $153.1 million, respectively, for the three and six months ended
May 31, 2007, compared with $52.5 million and $101.3 million in the comparable
periods of 2006.
    Consolidated free cash flow (defined as cash flow from operations less
selling commissions paid) was $34.8 million and $59.8 million, respectively,
for the three and six months ended May 31, 2007, compared with $22.5 million
and $49.1 million in the comparable periods of 2006. We paid $49.6 million and
$93.3 million in selling commissions during the three and six months ended
May 31, 2007, which were deferred for accounting purposes, compared with $29.9
and $52.2 million paid and deferred in the respective periods in 2006. Our
free cash flow was used primarily to fund the following:

    
    -------------------------------------------------------------------------
                                  Three months ended       Six months ended
                                        May 31,                 May 31,
                             ------------------------------------------------
    ($ millions)                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Payment of dividends          $ 17.9      $ 16.1      $ 34.0      $ 29.4
    Repurchase of AGF Class
     B non-voting shares for
     cancellation                    0.0        11.5         0.0        15.9
    Acquisitions                     0.0         0.0        19.9         0.0
    Purchase of property,
     equipment and other
     intangible assets               1.8         2.2         2.6         5.8
    Investments                      3.4         3.0         3.4         1.4
    Debt repayment (borrowing)      15.0       (11.0)      (84.0)      (39.0)
    Investment in Trust
     Operations (eliminated on
     consolidation)                 16.0        16.0        48.5        34.0
    -------------------------------------------------------------------------

                                  $ 54.1      $ 37.8      $ 24.4      $ 47.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Despite higher payments for deferred selling commissions, our free cash
flow increased, which allowed us to repay $15.0 million of bank debt
repayments during the quarter. As a result, our revolving term loan balance
declined from $155.0 million at February 28, 2007 to $140.0 million at the end
of May 31, 2007. For the six-month period ended May 31, 2007 our revolving
term loan increased from $56.0 million at November 30, 2006.
    Cash and cash equivalents increased by $104.2 million (2006 - increased
by $141.6 million) from November 30, 2006 primarily due to an increase in cash
in the Trust Company Operations segment. Consolidated cash and cash
equivalents amounted to $508.3 million as at May 31, 2007, compared with
$301.6 million a year ago.
    We have a six-year prime-rate-based revolving term loan facility to a
maximum of $300.0 million, of which $160 million was available to be drawn as
at May 31, 2007. Aside from cash held in the Trust Company Operations segment,
which is held to fund loans to clients and GIC maturities, the Company had
$33.4 million of cash at May 31, 2007, some of which will be used to repay
bank debt in the remainder of 2007. The loan facility will be available to
meet future operational and investment needs. We anticipate that cash flow
from operations, together with the available loan facility, will be sufficient
in the foreseeable future to implement our business plan, finance selling
commissions, satisfy regulatory requirements, service debt repayment
obligations, meet capital spending needs and pay quarterly dividends.

    Dividends

    For the three months ended May 31, 2007, we declared a 20-cents-per-share
dividend on Class A and Class B Shares. This dividend will be payable on
July 20, 2007 to shareholders of record on July 10, 2007.
    The holders of the Class B shares are entitled to receive cash dividends.
Dividends are paid in equal amounts per share on all the Class B shares and
all the Class A shares at the time outstanding without preference or priority
of one share over another. No dividends may be declared in the event that
there is a default of a condition of our loan facility or where such payment
of dividends would create a default.
    Our Board of Directors may determine that the Class B shareholders shall
have the right to elect to receive part or all of such dividend in the form of
a stock dividend. In determining whether a dividend in Class B shares is
substantially equal to a cash dividend, the Board of Directors may make a
determination based on the weighted average price at which the Class B shares
traded on the Toronto Stock Exchange during the 10 trading days immediately
preceding the record date applicable to such dividend.
    The following table sets forth the dividends paid by AGF on the Class B
shares and the Class A shares for the periods indicated:

    
    -------------------------------------------------------------------------
    Years Ended November 30         2006     2005     2004     2003     2002
    -------------------------------------------------------------------------
    Per share                    $ 0.690  $ 0.560  $ 0.410  $ 0.295  $ 0.255
    -------------------------------------------------------------------------
    Percentage increase              23%      37%      39%      16%      16%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    Outstanding Share Data

    Set out below is our outstanding share data as at May 31, 2007. For
additional details, see Note 9 of the Consolidated Financial Statements.

    
    -------------------------------------------------------------------------
                                                            2007        2006
                                                     ------------------------
    Shares
    Class A Voting Common Shares                          57,600      57,600
    Class B Non-Voting Shares                         90,226,680  88,783,659

    Stock Options
    Outstanding options                                3,565,266   4,202,583
    Exercisable options                                1,547,034   1,808,584
    -------------------------------------------------------------------------


    Selected Quarterly Information

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

    Revenue (continuing
     operations)                 $ 204.9     $ 177.0     $ 158.7     $ 146.8
    Cash flow from continuing
     operations(1)                  84.4        68.7        53.8        61.6
    EBITDA (continuing
     operations)(2)                 98.0        80.4        60.0        56.2
    Pretax income (continuing
     operations)                    63.3        49.1        26.1        22.5
    Net income                      53.6        36.3        21.0        34.6

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

    Weighted average basic
     shares                   89,740,819  89,474,827  89,174,064  89,055,124
    Weighted average fully
     diluted shares           91,012,708  90,640,734  89,890,105  89,457,921
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

    Revenue (continuing
     operations)                 $ 152.2     $ 149.5     $ 134.6     $ 141.2
    Cash flow from operations(1)    52.5        48.4        48.4        53.6
    EBITDA (continuing
     operations)(2)                 64.6        67.3        50.2        65.5
    Pretax income (continuing
     operations)                    30.9        33.8        16.2        30.6
    Net income                      33.0        24.1        28.0        20.3

    Earnings per share
      Basic                      $  0.37     $  0.27     $  0.31     $  0.23
      Diluted                    $  0.37     $  0.27     $  0.31     $  0.23

    Weighted average basic
     shares                   89,006,146  89,190,007  89,203,949  89,615,145
    Weighted average fully
     diluted shares           89,973,999  90,031,001  89,868,786  89,915,618
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Additional Information

    Additional information relating to the Company can be found in our
Consolidated Financial Statements and accompanying notes for the three and six
months ended May 31, 2007, our 2006 annual MD&A and Consolidated Financial
Statements, our 2007 AIF and other documents filed with applicable securities
regulators in Canada, and may be accessed at www.sedar.com.


    
                             AGF Management Ltd.
                         Consolidated Balance Sheets

    -------------------------------------------------------------------------
                                                          May 31,   November
    (in thousands of dollars)                               2007    30, 2006
    (unaudited)                                                      (note 3)
    -------------------------------------------------------------------------

    Assets
      Current Assets
        Cash and cash equivalents                     $  508,298  $  404,115
        Short-term investments                            23,290      10,723
        Current portion of retained interest
         from securitization (note 2)                     14,178       3,767
        Accounts receivable and prepaid expenses          88,560      96,031
        Real estate secured and investment loans
         due within one year (note 7)                    367,466     309,329
        Assets of discontinued operations (note 3)             -       4,527
    -------------------------------------------------------------------------
                                                       1,001,792     828,492

      Real estate secured and investment loans
       (note 7)                                        2,609,680   1,997,294
      Retained interest from securitization (note 2)      46,044      23,893
      Investment in associated company                   105,939     107,735
      Management contracts (note 4)                      504,269     478,259
      Customer contracts, net of accumulated
       amortization (note 4)                              69,774      59,583
      Deferred selling commissions, net of
       accumulated amortization                          308,234     268,243
      Property, equipment and other intangible assets,
       net of accumulated amortization                    19,225      19,848
      Goodwill (note 4)                                  181,294     126,399
      Trademarks                                           1,935           -
      Other assets                                         1,753       6,424
      Assets of discontinued operations (note 3)               -       3,598
    -------------------------------------------------------------------------
                                                      $4,849,939  $3,919,768
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
      Current Liabilities
        Accounts payable and accrued liabilities      $  190,222  $  160,259
        Long-term debt due within one year (note 8)      165,042      56,000
        Deposits due within one year (note 7)          1,372,192   1,022,774
        Liabilities of discontinued operations
         (note 3)                                              -       4,286
    -------------------------------------------------------------------------
                                                       1,727,456   1,243,319

      Deposits (note 7)                                1,763,662   1,465,490
      Long-term debt (note 8)                             23,942           -
      Future income taxes                                248,148     230,305
      Other long-term liabilities                         24,123         127
      Liabilities of discontinued operations (note 3)          -         756
    -------------------------------------------------------------------------
                                                       3,787,331   2,939,997
    -------------------------------------------------------------------------

      Non-controlling interest                               372           -

      Shareholders' Equity
        Capital stock (note 9)                           425,122     403,566
        Contributed surplus (note 9)                      12,720      10,470
        Retained earnings                                621,477     565,576
        Accumulated other comprehensive income
         (note 1(a))                                       2,917         159
    -------------------------------------------------------------------------
                                                       1,062,236     979,771
    -------------------------------------------------------------------------
                                                      $4,849,939  $3,919,768
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes to consolidated financial statements.)



                             AGF Management Ltd.
                      Consolidated Statements of Income

    -------------------------------------------------------------------------
                                  Three months ended       Six months ended
                                        May 31,                 May 31,
                             ------------------------------------------------
    (in thousands of dollars)       2007        2006        2007        2006
    (unaudited)                              (note 3)                (note 3)
    -------------------------------------------------------------------------

    Revenue
      Net management and
       advisory fees          $  136,896  $  109,189  $  261,441  $  211,295
      Administration fees
       and other revenue          31,417      23,261      59,478      42,196
      Deferred sales charges       5,159       7,065      10,009      14,374
      Gain on sale of RSP
       loan securitization
       and related income          9,219         815       9,980      10,665
      Investment income            3,165         790       4,487       2,103
    -------------------------------------------------------------------------
                                 185,856     141,120     345,395     280,633
    -------------------------------------------------------------------------
        Trust Company
         interest income
         (notes 1(b) and 11)      55,021      30,147     102,236      55,773
        Trust Company
         interest expense
         (notes 1(b) and 11)     (35,937)    (19,025)    (65,661)    (34,626)
    -------------------------------------------------------------------------
      Trust company net
       interest income            19,084      11,122      36,575      21,147
    -------------------------------------------------------------------------
    Total Revenue                204,940     152,242     381,970     301,780
    -------------------------------------------------------------------------

    Expenses
      Selling, general and
       administrative             58,842      47,353     110,338      91,179
      Trailing commissions        42,432      31,318      80,866      60,257
      Investment advisory fees     3,159       7,089       7,200      14,019
      Amortization of deferred
       selling commissions        27,192      27,244      53,707      54,394
      Amortization of customer
       contracts                   2,489       3,717       3,968       7,438
      Amortization of property,
       equipment and other
       intangible assets           1,819       1,963       4,124       3,984
      Interest expense             3,229         821       4,276       1,337
      Provision for Trust
       Company loan losses         2,490       1,835       5,185       4,322
    -------------------------------------------------------------------------
                                 141,652     121,340     269,664     236,930

    Income from continuing
     operations before
     income taxes and
     non-controlling interest     63,288      30,902     112,306      64,850

    Income tax expense
     (reduction)
      Current                      3,182      11,792      16,846      24,867
      Future                      10,790      (2,340)      7,862      (4,951)
    -------------------------------------------------------------------------
                                  13,972       9,452      24,708      19,916
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
    Net income from continuing
     operations for the period    49,069      21,450      87,131      44,934
    -------------------------------------------------------------------------
    Gain on early retirement
     of debt, net of tax
     (note 8(b))                       -      13,309           -      13,309
    Loss on dissolution of
     Limited Partnerships,
     net of tax (note 6)               -           -      (2,128)          -
    Gain (loss) on sale of
     discontinued operations,
     net of tax (note 3)           4,702      (2,050)      4,702      (2,050)
    Net earnings from
     discontinued operations,
     net of tax (note 3(a))         (135)        271         247         873
    -------------------------------------------------------------------------
    Net income for the period $   53,636  $   32,980  $   89,952  $   57,066
    -------------------------------------------------------------------------

    Earnings Per Share
     (note 9)
      Basic from continuing
       operations             $     0.55  $     0.24  $     0.97  $     0.50
      Diluted from continuing
       operations             $     0.54  $     0.24  $     0.96  $     0.50
      Basic                   $     0.60  $     0.37  $     1.00  $     0.64
      Diluted                 $     0.59  $     0.37  $     0.99  $     0.63
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes to consolidated financial statements.)



                             AGF Management Ltd.
         Consolidated Statements of Changes in Shareholders' Equity

    -------------------------------------------------------------------------
                                  Three months ended       Six months ended
                                        May 31,                 May 31,
                             ------------------------------------------------
    (in thousands of dollars)       2007        2006        2007        2006
    (unaudited)                              (note 1)                (note 1)
    -------------------------------------------------------------------------

    Common shares
      Balance, beginning
       of period              $  412,505  $  393,943  $  403,566  $  394,154
      Issued through dividend
       reinvestment plan           1,813         594       2,475         769
      Stock options exercised     10,804       4,184      13,409       4,684
      Issued on acquisition
       of subsidiary                   -           -       5,672           -
      Purchased for cancellation       -      (2,222)          -      (3,108)
    -------------------------------------------------------------------------
      Balance, end of period     425,122     396,499     425,122     396,499
    -------------------------------------------------------------------------

    Contributed surplus
      Balance, beginning
       of period                  11,621       7,086      10,470       5,900
      Stock options
        Current period expense     1,099       1,082       2,250       2,268
    -------------------------------------------------------------------------
    Balance, end of period        12,720       8,168      12,720       8,168
    -------------------------------------------------------------------------

    Retained earnings
      Balance, beginning of
       period                    585,773     534,475     565,576     527,197
        Transitional adjustment
         on adoption of new
         accounting policies
         (note 1(a))                   -           -         (25)          -
    -------------------------------------------------------------------------
      Balance, beginning of
       period, as restated       585,773     534,475     565,551     527,197
      Net income for the period   53,636      32,980      89,952      57,066
      Dividends on AGF Class A
       Voting Common Shares and
       AGF Class B Non-Voting
       Shares                    (17,932)    (16,059)    (34,026)    (29,430)
      Excess paid over book
       value of AGF Class B
       Non-Voting Shares
       purchased for
       cancellation (note 9)           -      (9,320)          -     (12,757)
    -------------------------------------------------------------------------
      Balance, end of period     621,477     542,076     621,477     542,076
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive income
      Balance, beginning
       of period                   5,849      (9,952)      3,792           -
      Other comprehensive
       income                     (2,932)      2,742        (875)     (7,210)
    -------------------------------------------------------------------------
      Balance, end of period       2,917      (7,210)      2,917      (7,210)
    -------------------------------------------------------------------------

    Total shareholders'
     equity                   $1,062,236  $  939,533  $1,062,236  $  939,533
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes to consolidated financial statements.)



                             AGF Management Ltd.
               Consolidated Statements of Comprehensive Income

    -------------------------------------------------------------------------
                                  Three months ended       Six months ended
                                        May 31,                 May 31,
                             ------------------------------------------------
    (in thousands of dollars)       2007        2006        2007        2006
    (unaudited, note 1)
    -------------------------------------------------------------------------

    Net income                $   53,636  $   32,980  $   89,952  $   57,066
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other comprehensive
     income, net of tax:
      Foreign currency
       translation adjustments
       related to net
       investments in self-
       sustaining foreign
       operations(1)              (7,167)      2,742      (5,569)     (7,210)
      Unrealized gain on
       available-for-sale
       securities(2)               3,726           -       4,185           -
      Reclassification of
       realized loss to
       earnings                      509           -         509           -

    -------------------------------------------------------------------------
    Total other
     comprehensive income,
     net of tax                   (2,932)      2,742        (875)     (7,210)
    -------------------------------------------------------------------------

    Comprehensive income      $   50,704  $   35,722  $   89,077  $   49,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net of income tax reduction of $1.4 million for the three months
        ended May 31, 2007 and $1.1 million for the six months ended May 31,
        2007.
    (2) Net of income tax of $1.0 million for the three months ended May 31,
        2007 and $1.1 million for the six months ended May 31, 2007.

    (See accompanying notes to consolidated financial statements.)



                             AGF Management Ltd.
                    Consolidated Statements of Cash Flow

    -------------------------------------------------------------------------
                                  Three months ended       Six months ended
                                        May 31,                 May 31,
                             ------------------------------------------------
    (in thousands of dollars)       2007        2006        2007        2006
    (unaudited)                              (note 3)                (note 3)
    -------------------------------------------------------------------------

    Operating Activities
      Net income for the
       period                 $   53,636  $   32,980  $   89,952  $   57,066
      Gain on early retirement
       of debt, net of tax             -     (13,309)          -     (13,309)
      Loss on dissolution of
       Limited Partnerships,
       net of tax                      -           -       2,128           -
      (Gain) loss on sale of
       discontinued operation,
       net of tax                 (4,702)      2,050      (4,702)      2,050
      Loss (earnings) from
       discontinued operations,
       net of tax                    135        (271)       (247)       (873)
    -------------------------------------------------------------------------
      Net income from
       continuing operations      49,069      21,450      87,131      44,934

      Items not affecting cash
        Amortization of
         capital assets           31,500      32,924      61,799      65,816
        Future income taxes       10,790      (2,340)      7,862      (4,951)
        Gain on sale of RSP
         loan securitization
         and related income       (9,219)       (815)     (9,980)    (10,665)
        Provision for Trust
         Company loan losses       2,490       1,835       5,185       4,322
        Other                       (233)       (606)      1,081       1,809
    -------------------------------------------------------------------------
                                  84,397      52,448     153,078     101,265
      Net increase in non-cash
       balances related to
       operations                 18,153      13,518       5,371     (19,605)
    -------------------------------------------------------------------------
      Net cash provided by
       continuing operating
       activities                102,550      65,966     158,449      81,660
      Net cash provided (used)
       in discontinued operating
       activities                   (691)        602      (1,271)      1,536
    -------------------------------------------------------------------------
      Net cash provided
       by operating activities   101,859      66,568     157,178      83,196
    -------------------------------------------------------------------------

    Financing Activities
      Purchase of Class B
       Non-Voting Shares for
       cancellation                    -     (11,542)          -     (15,865)
      Issuance of Class B
       Non-Voting Shares          12,617       4,778      15,884       5,453
      Dividends                  (17,932)    (16,059)    (34,026)    (29,430)
      Increase in bank loan      (15,000)     11,000      84,000      39,000
      Decrease in other
       long-term debt                  -        (122)          -      (1,324)
      Net increase in Trust
       Company deposits          372,723     141,448     679,653     436,764
    -------------------------------------------------------------------------
      Net cash provided by
       continuing financing
       activities                352,408     129,503     745,511     434,598

    Investing Activities
      Deferred selling
       commissions paid          (49,618)    (29,936)    (93,312)    (52,179)
      Proceeds of RSP loan
       securitization            252,878           -     252,878     206,274
      Acquisition of Highstreet
       Partners Limited, net of
       cash acquired (note 4)          -           -     (19,873)          -
      Proceeds of sale of
       discontinued operations     2,747       4,207       2,747       2,178
      Purchase of property,
       equipment and other
       intangible assets          (1,822)     (2,186)     (2,598)     (5,836)
      Other investment
       activities                 (3,370)     (3,024)     (3,370)     (1,362)
      Net increase in Trust
       Company mortgages
       and consumer loans       (489,608)   (275,968)   (934,978)   (525,267)
    -------------------------------------------------------------------------
      Net cash used in
       continuing investing
       activities               (288,793)   (306,907)   (798,506)   (376,192)

    Increase (decrease) in
      cash and cash
      equivalents                165,474    (110,836)    104,183     141,602

    Balance of cash and cash
     equivalents, beginning
     of period                   342,824     412,412     404,115     159,974
    -------------------------------------------------------------------------

    Balance of cash and cash
     equivalents, end of
     period                   $  508,298  $  301,576  $  508,298  $  301,576
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents
     related to:
      Continuing operations                           $  508,298  $  300,919
      Discontinued operations                                  -         657
    -------------------------------------------------------------------------
                                                      $  508,298  $  301,576
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
      Cash and cash equivalents                       $   33,386  $    6,477
      Trust Company cash and
       cash equivalents              `                   474,912     295,099
    -------------------------------------------------------------------------
                                                      $  508,298  $  301,576
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes to consolidated financial statements.)



    Notes to Consolidated Financial Statements

    For the three and six months ended May 31, 2007 and May 31, 2006 (tabular
    amounts in thousands of dollars, except per share amounts) (unaudited)

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

    Note 1: Change in Accounting Policy

    (a) Financial Instruments, Hedges and Comprehensive Income

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

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

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

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

        Classification of Financial Instruments

        Available-for-sale assets are those non-derivative financial assets
        that are designated as AFS or are not classified as loans and
        receivables, HTM or held for trading. Available-for-sale assets are
        measured at fair value with unrealized gains and losses included in
        accumulated other comprehensive income until sale or other-than-
        temporary impairment when the cumulative gain or loss is transferred
        to the Consolidated Statement of Operations. Assets included in this
        category are investments and retained interest from securitization.
        Upon adoption of Section 3855, the following adjustments were
        recorded:

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

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

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

        On an ongoing basis, available-for-sale assets are measured at fair
        value, with unrealized gains and losses included in other
        comprehensive income.

        Hedge Accounting

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

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

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

        During the three and six months ended May 31, 2007, the ineffective
        portion of accumulated changes in the fair value of hedging
        relationships recognized in the income statement amounted to a loss
        of $0.9 million and $1.0 million, respectively, as it relates to fair
        value hedging relationship.

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


    -------------------------------------------------------------------------
                                                      Adjustment
                                                            upon
                                               As at    adoption       As at
                                         November 30, of Section  December 1,
    (in thousands of dollars)                   2006        3855        2006
    -------------------------------------------------------------------------

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

    Liabilities and shareholders' equity
      Deposits                             2,488,264      (7,074)  2,481,190
      Derivative instruments
       market valuation                            -      (3,754)     (3,754)
      Future income tax                      230,305         998     231,303
      Accounts payable and accrued
       liabilities                           160,259      (1,900)    158,359
    -------------------------------------------------------------------------
    Impact on total liabilities            2,878,828     (11,730)  2,867,098
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Shareholders' equity
      Foreign currency translation
       adjustments                               159        (159)          -
      Retained earnings                      565,576         (25)    565,551

    Accumulated other comprehensive income
      Foreign currency translation
       adjustments related to net
       investments in self-sustaining
       operations                                  -         159         159
      Unrealized gains on
       available-for-sale assets                   -       3,633       3,633
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accumulated other comprehensive income         -       3,792       3,792
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Impact on shareholders' equity           565,735       3,608     569,343
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Impact on liabilities and
     shareholders' equity                 $3,444,563  $   (8,122) $3,436,441
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Trust Operations Net Interest Income

        Commencing December 1, 2006, the presentation of the Trust Operations
        income has been revised to present net deposit interest expense and
        other interest expense in net interest income, as detailed in
        note 11. Comparative periods presented have been restated, with
        interest and investment income being reclassified from administration
        fees, interest and other revenue, and other interest expense being
        reclassified from interest on Trust Company deposits and selling,
        general and administrative expenses.

    (c) Purchase Price Allocations and Amortization of Intangible Assets

        On December 1, 2006, the Company acquired 79.9% of Highstreet
        Partners Ltd. ('Highstreet'). The allocation of the purchase price
        for this transaction involved significant judgements in determining
        the fair values assigned to the intangible assets acquired on
        acquisition. The determination of these fair values involved the use
        of discounted cash flow analyses, estimated future margins, estimated
        assets under management ('AUM') and estimated market growth.

        The determination of the estimated useful lives of the intangible
        assets being customer contracts involves historical redemption rates
        of the AUM and judgements as to applicability of these rates going
        forward. Based on this, the estimated useful life of customer
        contracts acquired is seven years; accordingly, customer contracts
        will be amortized over a straight-line basis over seven years.
        Management contracts, trademarks and goodwill are not amortized but
        are subject to an annual impairment test. Refer to note 4 for the
        detailed fair value allocation of the net assets acquired.

    Note 2: Securitization of AGF Trust Loans

    On March 30, 2007, the Company, through its wholly owned subsidiary AGF
    Trust Company ('Trust Company'), securitized $263.6 million of RSP loans
    through the sale of these loans to a securitization trust. Cash flows of
    $252.9 million were received on the securitization and a gain of
    $8.0 million was recorded, net of transaction fees of $0.1 million and
    servicing liabilities of $1.5 million. On February 28, 2006,
    $218.4 million of RSP loans was securitized through the sale of these
    loans to a securitization trust. Cash flows of $206.3 million were
    received on the securitization and a gain, net of transaction fees and
    expenses, of $9.9 million was recorded. As at May 31, 2007,
    $369.5 million of securitized loans were outstanding.

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

    The Company has recorded retained interests of $60.2 million (2006 -
    $27.7 million) made up of i) the rights to future excess interest on
    these RSP loans after investors in the securitization trust have received
    the return for which they contracted, valued at $26.5 million (2006 -
    $13.7 million), ii) cash collateral of $10.8 million (2006 -
    $5.7 million) and iii) over-collateralization of $22.9 million (2006 -
    $8.3 million).

    As at May 31, 2007, the impaired loans included in the securitized
    balances were equal to $0.6 million (2006 - $0.3 million), and during the
    three and six months ended May 31, 2007, $0.2 million (2006 -
    $0.1 million) and $0.6 million (2006 - $0.1 million) of securitized RSP
    loans were written off.

    The Company's claim on the retained interests is subordinate to
    investors' interests. Recourse available to investors and the
    securitization trust is limited to the retained interests. For the three
    months ended May 31, 2007, cash flows of $5.3 million were received on
    the securitized loans, of which $1.7 million related to the over-
    collateralization and $3.6 million related to the interest-only strip.
    For the six months ended May 31, 2007, cash flows of $7.7 million were
    received on the securitized loans, of which $2.5 million related to the
    over-collateralization and $5.2 million related to the interest-only
    strip. The total other income recognized from securitization during the
    three and six months ended May 31, 2007 was $1.2 million and
    $1.9 million, respectively.

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

                 Excess spread                             3.5%
                 Discount rate on interest-only strip      7.5%
                 Expected credit losses                    0.8%
                 Prepayment rate                          16.4%
                 Expected weighted average life
                  of RSP loans                            25 months

    The Trust Company retained servicing responsibilities for the securitized
    loans. A servicing liability of $2.3 million was recorded as at May 31,
    2007 (2006 - $1.1 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, 2007
    was $0.2 million and $0.4 million, respectively.

    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, 2007. As the sensitivity is
    hypothetical, it should be used with caution. The impact of changes in
    the fair value of retained interests was calculated using a discounted
    cash flow analysis.

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

    Fair value of retained interests                              $   60,222
      Discount rate
        +10%                                                      $      299
        +20%                                                             594
      Prepayment rate
        +10%                                                      $      482
        +20%                                                             922
      Expected credit losses
        +10%                                                      $      543
        +20%                                                           1,086
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 3: Discontinued Operations and Assets Held for Sale

    (a) On April 30, 2007, the Company sold 100% of Investmaster for
        $6.8 million and additional contingent consideration that is not
        determinable at this time. The purchase consideration includes
        $5.0 million in cash and two notes receivable from the buyer
        totalling $1.8 million due on April 30, 2009 and April 30, 2010,
        respectively. The contingent consideration will be payable to the
        Company in 2007, 2009 and 2010 if certain working capital and revenue
        targets are reached by Investmaster.

        Accordingly, Investmaster's operations for the 2007 and 2006 periods
        have been reported as discontinued operations and previously reported
        financial statements have been reclassified to reflect the following:

    -------------------------------------------------------------------------
                                        Three months              Six months
                                        ended May 31,           ended May 31,
    (in thousands of dollars, -----------------------------------------------
     except per share amounts)      2007        2006        2007        2006
    -------------------------------------------------------------------------

    Revenue                   $      739  $    3,503  $    4,342  $    8,031
    Net earnings from
     discontinued operations,
     net of tax               $     (135) $      271  $      247  $      873
    Basic net earnings
     per share                $     0.00  $     0.00  $     0.00  $     0.01
    Diluted net earnings
     per share                $     0.00  $     0.00  $     0.00  $     0.01
    -------------------------------------------------------------------------

        The carrying values of the assets and liabilities related to the
        discontinued operations are as follows:

    -------------------------------------------------------------------------
                                                                 November 30,
    (in thousands of dollars)                                           2006
    -------------------------------------------------------------------------

    Current assets of discontinued operations
      Cash and term deposits                                      $    1,792
      Accounts receivable and prepaid expenses                         2,735
    -------------------------------------------------------------------------
                                                                  $    4,527
    -------------------------------------------------------------------------

    Long-term assets of discontinued operations
      Property, equipment and other intangible assets, net        $    3,598
    -------------------------------------------------------------------------
                                                                  $    3,598
    -------------------------------------------------------------------------

    Current liabilities of discontinued operations
      Accounts payable and accrued liabilities                    $    4,286
    -------------------------------------------------------------------------
                                                                  $    4,286
    -------------------------------------------------------------------------

    Long-term liabilities of discontinued operations
      Future income tax                                           $      756
    -------------------------------------------------------------------------
                                                                  $      756
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        Details of the gain on sale of Investmaster are as follows:

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

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

    Proceeds on sale                                              $    6,821
    Expenses related to transaction                                   (2,303)
    Carrying cost of investment                                       (3,916)
    -------------------------------------------------------------------------
    Gain on sale before income taxes                                     602
    Income tax reduction                                               4,100
    -------------------------------------------------------------------------
    Gain on sale of discontinued operations                       $    4,702
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) On October 3, 2005, the Company sold 100% of wholly owned subsidiary
        Unisen Holdings Inc. ('Unisen') to Citifinancial Canada Inc.
        ('Citifinancial') for cash consideration of US$97.5 million
        ($114.0 million). The purchase price was subject to a clawback should
        Unisen's revenue fall below a threshold during the 12-month period
        ended June 30, 2006. A provision of $9.5 million was included in
        accounts payable related to this possible clawback. During the three
        months ended May 31, 2006, the aforementioned provision was increased
        by $2.5 million, with the increase being recorded as a loss on sale
        of discontinued operations net of tax of $2.1 million. There is no
        contingent payment remaining related to this transaction.

    Note 4: Acquisition of Highstreet Partners Ltd.

    On December 1, 2006, the Company acquired 79.9% of Highstreet Partners
    Ltd. ('Highstreet'), which wholly owns Highstreet Asset Management Inc.,
    an investment counsel firm based in London, Ontario. The purchase
    consideration is payable in a combination of cash and the issuance of
    Class B Non-Voting Shares ('Class B shares'). As at May 31, 2007, the
    Company has made payments of $20.2 million in cash and $5.7 million
    through the issuance of 225,116 AGF Class B shares, which approximates
    33.3% of the purchase price. Additional payments aggregating
    $51.8 million are due on February 28, 2008 and February 28, 2009 for
    total minimum consideration, including acquisition costs, of
    $74.4 million. In addition, a contingent consideration will be paid in
    2010 if certain financial profitability targets are achieved by
    Highstreet. At this time, the amount of the contingent consideration is
    not determinable.

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

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

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

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

    Note 5: Acquisition of Cypress Capital Management Ltd.

    On June 30, 2004, the Company acquired 100% of the shares of Cypress. At
    the time of purchase, contingent consideration of up to $9.0 million was
    due to the vendors, subject to Cypress achieving certain revenue levels
    over the three-year period ended June 30, 2007. As at May 31, 2007, the
    Company has determined these revenue levels will be exceeded and,
    accordingly, has recognized the $9.0 million due to the vendors as an
    increase in goodwill. This consideration will be paid within 60 days of
    June 30, 2007 in the form of cash and AGF Class B shares.

    Note 6: Dissolution of Partnerships

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

    Note 7: Trust Company

    The Trust Company'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
                  -----------------------------------------------------------
                                                             May    November
    (in thousands  Variable    1 year or      1 to 5          31,         30,
    of dollars)        rate         less       years        2007        2006
    -------------------------------------------------------------------------

    Mortgage
     loans        $   2,401   $  514,199  $  609,609  $1,126,209  $  941,962
    Home equity
     lines of
     credit
     (HELOCs)       299,565            -           -     299,565     116,194
    -------------------------------------------------------------------------
    Total real
     estate secured
     loans          301,966      514,199     609,609   1,425,774   1,058,156
    Investment
     loans        1,549,919            -      10,507   1,560,426   1,261,166
                 ------------------------------------------------------------
                  1,851,885      514,199     620,116   2,986,200   2,319,322
                 ------------------------------------
                 ------------------------------------
    Less: allowance for loan losses                      (14,125)    (12,699)
    Add: net deferred sales commissions
     and commitment fees                                   5,071           -
                                                     ------------------------
                                                       2,977,146   2,306,623
    Less: current portion                               (367,466)   (309,329)
                                                     ------------------------
                                                      $2,609,680  $1,997,294
                                                     ------------------------
                                                     ------------------------

    Impaired loans included in above                  $   18,927  $   16,368
    Less: specific allowance for loan losses              (1,542)     (2,448)
                                                     ------------------------
                                                      $   17,385  $   13,920
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                          May 31,   November
    (in thousands of dollars)                               2007    30, 2006
    -------------------------------------------------------------------------

    The change in the allowance for loan losses
     is as follows:
      Balance, beginning of period                    $   12,699  $    8,200
      Amounts written-off                                 (2,777)     (2,697)
      Recoveries                                             802         465
      Reduction due to RSP loan securitization            (1,486)     (1,770)
      Provision for loan losses                            4,887       8,501
                                                     ------------------------
      Balance, end of period                          $   14,125  $   12,699
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) Real Estate Secured and Investment Loans

        The table represents the period of contractual repricing of interest
        rates on outstanding amounts. Principal repayments due on real estate
        and investment loans due within one year as at May 31, 2007 were
        $367.5 million (November 30, 2006 - $309.3 million).

        As at May 31, 2007, the Company's mortgage portfolio was composed of
        a combination of fixed rate and variable rate residential mortgages,
        of which $494.9 million (November 30, 2006 - $403.4 million) is
        insured, with a weighted average term to repricing of 1.9 years
        (November 30, 2006 - 1.8 years) and a weighted average interest rate
        of 6.98% (November 30, 2006 - 6.81%). Investment loans have interest
        rates based on prime. As at May 31, 2007, the average interest rate
        on HELOCs was 6.07% (November 30, 2006 - 6.08%) and on investment
        loans was 7.37% (November 30, 2006 - 7.39%).

    (b) Trust Company Deposits

    -------------------------------------------------------------------------
                            Term to maturity
                  -----------------------------------------------------------
                                                             May    November
                               1 year or      1 to 5          31,         30,
                      Demand        less       years        2007        2006
    -------------------------------------------------------------------------
    Deposits      $    7,034  $1,365,158  $1,776,186  $3,148,378  $2,488,264
    Less: deferred
     sales
     commissions                                         (12,524)          -
    -------------------------------------------------------------------------
                                                      $3,135,854  $2,488,264
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        As at May 31, 2007, deposits were composed substantially of GICs with
        a weighted average term to maturity of 1.8 years (November 30, 2006 -
        1.9 years) and a weighted average interest rate of 4.12%
        (November 30, 2006 - 4.05%).

    (c) Interest Rate Swaps

        To hedge its exposure to fluctuating interest rates, the Trust
        Company has entered into interest-rate-swap transactions with four
        Canadian chartered banks as noted below. The swap transactions expire
        between June 2007 and April 2012 and involve the exchange of either
        the one-month bankers' acceptance rate or the three-month bankers'
        acceptance rate, to receive fixed interest rates. The swap contracts
        designated as hedging instruments are used by the Trust Company for
        balance sheet matching purposes and to mitigate net interest revenue
        volatility. As at May 31, 2007, the aggregate notional amount of the
        swap transactions was $2,168.0 million (November 30, 2006 -
        $1,712.7 million). The aggregate fair value of the swap transactions,
        which represents the amount that would be paid by the Trust Company
        if the transactions were terminated at May 31, 2007, was
        $22.2 million (November 30, 2006 - $3.8 million).

    -------------------------------------------------------------------------
     Notional amount of swap   Maturity date    Fixed interest rate received
    -------------------------------------------------------------------------
    (in thousands of dollars)
             524,000                2007                3.06% - 4.37%
             637,000                2008                3.17% - 4.68%
             367,000                2009                3.47% - 4.66%
             360,000                2010                3.62% - 4.78%
             220,000                2011                4.07% - 4.86%
              60,000                2012                4.25% - 4.37%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (d) Interest Rate Sensitivity

        For the Trust Company, the impact of an adverse change in interest
        rates of 1% would be a change of annual net interest income of
        approximately $1.7 million, as most of the loan portfolios are
        hedged.

    Note 8: Long-Term Debt

    -------------------------------------------------------------------------
                                                          May 31,   November
    (in thousands of dollars)                               2007    30, 2006
    -------------------------------------------------------------------------

    Revolving term loan                               $  140,000   $  56,000
    Payment related to acquisition of Highstreet
     Partners Ltd. (note 4):
      February 28, 2008                                   25,042           -
      February 28, 2009                                   23,942           -
    -------------------------------------------------------------------------
                                                         188,984      56,000

    Less: amount included in current liabilities         165,042      56,000
    -------------------------------------------------------------------------

                                                      $   23,942   $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) Revolving Term Loan

        The Company has arranged a six-year prime-rate-based revolving term
        loan to a maximum of $300.0 million (2006 - $200.0 million) with a
        Canadian chartered bank. Under the loan agreement, the Company is
        permitted to avail the revolving term loan by direct advances and/or
        bankers' acceptances ('BAs'). The revolving term loan is available at
        any time for a period of 364 days from commencement of the loan (the
        'Commitment Period'). The expiration of the current commitment period
        is June 30, 2008. However, the Company may request by April 15, 2008,
        and prior to April 15 in any calendar year thereafter, a
        recommencement of the six-year term at the expiry of the then-current
        commitment period. No repayment of the principal amount outstanding
        pursuant to the revolving term loan is required during the first
        three years of the then-applicable term. Thereafter, the loan balance
        shall be repaid in minimum monthly instalments of at least one-
        thirty-sixth of the amount of principal outstanding.

        As at May 31, 2007, the Company has drawn $140.0 million
        (2006 - $56.0 million) against the available loan amount in the form
        of five- to 57-day BAs at an effective average interest rate of 4.58%
        per annum. As this loan functions as a working capital facility, it
        has been included in current liabilities.

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

    (b) Notes Payable Due April 30, 2013 and Participation Units

        During the three months ended May 31, 2006, the Company reached an
        agreement with Multi-Fund Management Inc., the manager of Multi-Fund
        Income Trust ('Trust'), to terminate its obligations to the Trust for
        a cash payment of $3.4 million. The termination of the Company's cash
        flow obligation was subject to a Trust Unitholder meeting, which was
        held on June 8, 2006. The Trust Unitholders approved the agreement
        and on June 12, 2006, the Company repurchased the debt related to the
        Trust.

        Details of the gain on repayment of debt are as follows:

    -------------------------------------------------------------------------
                                                                      May 31,
    (in thousands of dollars)                                           2006
    -------------------------------------------------------------------------

    Notes payable due April 30, 2013                              $   17,817
    Participation Units                                                6,157
    -------------------------------------------------------------------------
                                                                      23,974
    Amount due May 31, 2006                                            3,360
    -------------------------------------------------------------------------

    Gain on early repayment of debt                                   20,614
    Income taxes                                                       7,305
    -------------------------------------------------------------------------

    Gain on early repayment of debt, net of tax                   $   13,309
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

        On December 1, 2006, the Company acquired 79.9% of Highstreet
        (note 4). Additional payments of $25.9 million, which includes
        principal and imputed interest at the rate of 4.5% per annum, are due
        to the partners of Highstreet on February 28, 2008 and February 28,
        2009, and will be satisfied through a combination of cash and AGF
        Class B shares.

    Note 9: Capital Stock

    (a) Authorized Capital

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

    (b) Change During the Period

        The change in capital stock during the six months ended May 31, 2007
        and 2006 is summarized as follows:

    -------------------------------------------------------------------------
                                        Six months ended May 31,
                           --------------------------------------------------
                                     2007                      2006
                           --------------------------------------------------
    (in thousands                            Stated                   Stated
    of dollars)                 Shares        value       Shares       value
    -------------------------------------------------------------------------

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

    Class B shares
      Balance, beginning
       of period            89,171,997   $  403,566   89,123,205  $  394,154
      Issued through
       dividend reinvestment
       plan                     78,467        2,475       31,704         769
      Stock options exercised  751,100       13,409      328,750       4,684
      Issued on acquisition
       of a subsidiary
       (note 4)                225,116        5,672            -           -
      Purchased for
       cancellation                  -            -     (700,000)     (3,108)
    -------------------------------------------------------------------------
      Balance, end
       of period            90,226,680   $  425,122   88,783,659  $  396,499
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Class B Shares Purchased for Cancellation

        AGF has obtained applicable regulatory approval to purchase for
        cancellation, from time to time, certain of its Class B shares
        through the facilities of the Toronto Stock Exchange. Present
        approval for such purchases extends through to February 25, 2008.
        Under this issuer bid, the Company may purchase up to 10% of the
        public float outstanding on the date of the receipt of regulatory
        approval or up to 7,303,844 shares. No Class B shares were purchased
        during the six months ended May 31, 2007. During the six months ended
        May 31, 2006, 0.7 million Class B shares were purchased at a cost of
        $15.9 million and the excess paid of $12.8 million over the book
        value of the shares purchased for cancellation was charged to
        retained earnings.

    (d) Stock Option Plans

        AGF has established stock option plans for senior employees under
        which stock options to purchase an aggregate maximum of 7,303,584
        Class B shares could have been granted as at May 31, 2007
        (2006 - 5,624,323). The stock options are issued at a price not less
        than the market price of the Class B shares immediately prior to the
        grant date. Stock options are vested to the extent of 25% to 33% of
        the individual's entitlement per annum, or in some instances 100%
        vest at the end of the term of the option.

        The change in stock options during the six months ended May 31, 2007
        and 2006 is summarized as follows:

    -------------------------------------------------------------------------
                                          Six months ended May 31,
                              -----------------------------------------------
                                        2007                    2006
                              -----------------------------------------------
                                            Weighted                Weighted
                                             average                 average
                                            exercise                exercise
                                 Options       price     Options       price
    -------------------------------------------------------------------------
    Class B share options
      Balance, beginning
       of period               4,324,084  $    19.93   4,781,875  $    18.72
      Options granted             12,732       35.70      90,000       22.98
      Options cancelled          (20,450)      20.34    (340,542)      20.87
      Options exercised         (751,100)      17.85    (328,750)      14.31
    -------------------------------------------------------------------------
      Balance, end of period   3,565,266  $    20.40   4,202,583  $    18.99
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        During the three months ended May 31, 2007, the Company granted
        12,732 options (2006 - 90,000) and recorded $1.1 million
        (2006 - $1.1 million) in compensation expense and contributed
        surplus. During the six months ended May 31, 2007, the Company
        granted 12,732 options (2006 - 90,000) and recorded $2.2 million
        (2006 - $2.3 million) in compensation expense and contributed
        surplus.

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

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

        At May 31, 2007, 70,723 RSUs were outstanding to employees of the
        Company. Compensation expense for the three and six months ended
        May 31, 2007 related to these RSUs was $0.3 million (2006 - nil) and
        for the six months ended May 31, 2007 was $0.5 million (2006 - nil).

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

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

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

        At May 31, 2007, 68,386 PSUs were outstanding to employees of the
        Company. Compensation expense for the three months ended May 31, 2007
        related to these PSUs was $0.2 million (2006 - nil) and for the six
        months ended May 31, 2007 was $0.4 million (2006 - nil).

    (g) Deferred Share Unit ('DSU') Plan

        During the quarter, the Company established a DSU plan for non-
        employee directors. The plan enables directors of the Company to
        elect to receive their remuneration in DSUs. On termination, the
        Company 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, 2007, 1,699 DSUs were outstanding. Compensation expense
        related to these DSUs for the three and six months ended May 31, 2007
        was $0.1 million.

    (h) Earnings Per Share

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

    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    (in thousands of dollars,
     except per share amounts)      2007        2006        2007        2006
    -------------------------------------------------------------------------

    Numerator
      Net Income from
       continuing operations
       for the period         $   49,069  $   21,450  $   87,131  $   44,934
      Gain on early
       retirement of debt,
       net of tax                      -      13,309           -      13,309
      Loss on dissolution of
       partnerships, net
       of tax (note 6)                 -           -      (2,128)          -
      Gain (loss) on sale of
       discontinued operations,
       net of tax                  4,702      (2,050)      4,702      (2,050)
      Net earnings from
       discontinued operations,
       net of tax (note 3(a))       (135)        271         247         873
    -------------------------------------------------------------------------
      Net Income
       for the period         $   53,636  $   32,980  $   89,952  $   57,066

    Denominator
      Weighted average number
       of shares - basic      89,798,419  89,006,364  89,638,401  89,097,176
      Dilutive effect of
       employee stock options  1,518,548     967,853   1,271,889     903,350
    -------------------------------------------------------------------------
      Weighted average number
       of shares - diluted    91,316,967  89,974,217  90,910,290  90,000,526

    Earnings Per Share
      Basic from continuing
       operations             $     0.55  $     0.24  $     0.97  $     0.50
      Diluted from continuing
       operations             $     0.54  $     0.24  $     0.96  $     0.50
      Basic                   $     0.60  $     0.37  $     1.00  $     0.64
      Diluted                 $     0.59  $     0.37  $     0.99  $     0.63
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Note 10: Supplemental Disclosure of Cash Flow Information

    Interest payments for the three months ended May 31, 2007 were
    $33.0 million (2006 - $18.1 million). Interest payments for the
    six months ended May 31, 2007 were $60.5 million (2006 - $32.6 million).

    Income tax payments for the three months ended May 31, 2007 were
    $7.0 million (2006 - $8.6 million). Income tax payments for the
    six months ended May 31, 2007 were $15.5 million (2006 - $27.4 million).

    Note 11: Net Interest Income

    The breakdown of net interest income is as follows:

    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                              May 31,                 May 31,
                              -----------------------------------------------
    (in thousands of dollars)       2007        2006        2007        2006
    -------------------------------------------------------------------------

    Interest income:
      Loan interest           $   50,910  $   26,789  $   94,064  $   50,513
      Investment interest          4,111       3,358       8,172       5,260
    -------------------------------------------------------------------------
                                  55,021      30,147     102,236      55,773

    Interest expense:
      Deposit interest            30,838      16,965      57,255      31,811
      Other interest expense       5,099       2,060       8,406       2,815
    -------------------------------------------------------------------------
                                  35,937      19,025      65,661      34,626

    -------------------------------------------------------------------------
    Net interest income       $   19,084  $   11,122  $   36,575  $   21,147
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Note 12: Segment Information

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

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

    -------------------------------------------------------------------------
    (in thousands of dollars) Investment       Trust
    Three months ended        Management     Company
    May 31, 2007              Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue                   $  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)
     before taxes             $   45,536  $   17,803  $      (51) $   63,288
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    (in thousands of dollars) Investment       Trust
    Three months ended        Management     Company
    May 31, 2006              Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue                   $  136,717  $   13,012  $    2,513  $  152,242
    Operating expenses            79,895       7,700           -      87,595
    Amortization and other        32,636         288         821      33,745
    -------------------------------------------------------------------------
    Segment income
     before taxes             $   24,186  $    5,024  $    1,692  $   30,902
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    (in thousands of dollars) Investment       Trust
    Six months ended          Management     Company
    May 31, 2007              Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue                   $  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
     before taxes             $   86,511  $   25,613  $      182  $  112,306

    Total assets              $1,305,346  $3,544,593  $        -  $4,849,939
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    (in thousands of dollars) Investment       Trust
    Six months ended          Management     Company
    May 31, 2006              Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue                   $  264,469  $   34,206  $    3,105  $  301,780
    Operating expenses           154,276      15,501           -     169,777
    Amortization and other        65,256         560       1,337      67,153
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segment income
     before taxes             $   44,937  $   18,145  $    1,768  $   64,850

    Total assets              $1,043,120  $2,056,251  $  112,175  $3,211,546
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Conference Call

    AGF will host a conference call to review its earnings results today at
11:00 am ET. The live audio webcast with supporting materials will be
available in the Investor Relations section of AGF's website at www.agf.com or
by clicking on http://events.streamlogics.net/agf/jun27-07/index.asp.
Alternatively, the call can be accessed by dialing 1-866-319-8623 (toll-free
in North America). A complete archive of this discussion along with supporting
materials will be available on the same webcast link as of 5 p.m. ET.

    About AGF Management Limited

    AGF Management Limited is one of Canada's premier investment management
companies with offices across Canada and subsidiaries around the world. 2007
marks AGF's 50th anniversary of providing Canadians with innovative investment
solutions across the wealth continuum. AGF's products and services include a
diversified family of more than 50 mutual funds, the evolutionary AGF Elements
portfolios, the Harmony asset management program, AGF Institutional Account
Services, private client products, and AGF Trust GICs, loans and mortgages.
With approximately $56 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: Adrian Basaraba, Vice President, Finance and
Investor Relations, AGF Management Limited, (416) 865-4203,
adrian.basaraba@AGF.com

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