AGF Management Limited Reports Third Quarter Financial Results



    
    AGF reports 4.3% increase in net income driven by lower interest,
    amortization and tax expense
    

    TORONTO, Sept. 24 /CNW/ - AGF Management Limited (AGF) today announced
financial results for the third quarter ended August 31, 2008 with net income
from continuing operations up 4.3% over the previous year, driven by
reductions in interest, amortization and taxes. This resulted in a 7.0%
increase in earnings per share on a fully diluted basis over the third quarter
of last year. Global stock market volatility prevailed in the third quarter,
resulting in a 7.3% decline in revenue and a 10.7% decrease in earnings before
interest, taxes, depreciation and amortization (EBITDA) compared with the
third quarter of 2007.
    "As our industry faces turbulence in the financial markets, we are
sticking with a long-term view and remain committed to our long-term business
strategy. Our business fundamentals are solid and we will continue to employ a
client-centric focus to realize our key growth initiatives," said Chairman and
CEO Blake C. Goldring. "Our best strategy, especially during periods of
volatility, is to closely monitor expenses and be prudent with capital by
paying down debt and strengthening our balance sheet. In the third quarter, we
continued to achieve success in controlling expenses in our investment
management operations, paid down debt and realized significant year-over-year
growth in our Trust Company loan assets and profitability."
    In the third quarter of fiscal 2008, total consolidated revenue from
continuing operations decreased to $184.7 million compared with $199.2 million
in the third quarter of the prior year. EBITDA from continuing operations
totalled $81.5 million for the three months ended August 31, 2008, compared
with $91.3 million for the three months ended August 31, 2007. For the third
quarter of 2008, EBITDA margins declined slightly to 44.1% from 45.8% in the
same period a year earlier. In addition, the company paid down $24.2 million
of long-term debt.
    Total assets under management (AUM) decreased 9.4% to $48.7 billion at
August 31, 2008 from $53.8 billion as at August 31, 2007. Over the same
period, mutual fund assets declined by 12.2% as a result of market
depreciation and lower levels of gross sales. Average mutual fund assets for
the quarter decreased 11.9% over the third quarter of 2007 and 5.4%
year-over-year. Institutional and high-net-worth client assets declined 5.8%
year-over-year primarily as a result of client rebalancing and redemptions.
Our Trust Company operations, however, continued to grow with loans assets
increasing substantially by 31.0% over August 31, 2007 to $4.4 billion as at
August 31, 2008.

    Caution Regarding Forward-Looking Statements

    This Management's Discussion and Analysis (MD&A) includes forward-looking
statements about the Company, including its business operations, strategy and
expected financial performance and condition. Forward-looking statements
include statements that are predictive in nature, depend upon or refer to
future events or conditions, or include words such as 'expects',
'anticipates', 'intends', 'plans', 'believes' or negative versions thereof and
similar expressions, or future or conditional verbs such as 'may', 'will',
'should', 'would' and 'could'. In addition, any statement that may be made
concerning future financial performance (including revenues, earnings or
growth rates), ongoing business strategies or prospects, and possible future
action on our part, is also a forward-looking statement. Forward-looking
statements are based on certain factors and assumptions, including expected
growth, results of operations, business prospects, performance and
opportunities. Forward-looking statements are based on current expectations
and projections about future events and are inherently subject to, among other
things, risks, uncertainties and assumptions about our operations, economic
factors and the financial services industry generally. They are not guarantees
of future performance, and actual events and results could differ materially
from those expressed or implied by forward-looking statements made by us due
to, but not limited to, important factors such as level of assets under our
management, volume of sales and redemption of our investment products,
performance of our investment funds and of our investment managers and
advisors, competitive fee levels for investment management products and
administration, and competitive dealer compensation levels, size and default
experience on our loan portfolio and cost efficiency in our loan operations,
as well as interest and foreign exchange rates, taxation, changes in
government regulations, unexpected judicial or regulatory proceedings, and our
ability to complete strategic transactions and integrate acquisitions. We
caution that the foregoing list is not exhaustive. The reader is cautioned to
consider these and other factors carefully and not place undue reliance on
forward-looking statements. Other than specifically required by applicable
law, we are under no obligation (and expressly disclaim any such obligation)
to update or alter the forward-looking statements, whether as a result of new
information, future events or otherwise. For a more complete discussion of the
risk factors that may impact actual results, please refer to the 'Managing
Risk - Overview' section of this MD&A and to the 'Risk Factors and Management'
section of our 2007 annual MD&A.


    Dear fellow shareholders

    Our industry continued to be challenged during the third quarter of 2008
with significant swings in global stock markets. This volatility has caused
investors to be cautious, as evidenced by the continued substantial flows into
money market funds throughout the industry. Yet, AGF remained focused on
executing its long-term strategic plan for future growth, continuing to
enhance client relationships and recognizing that market volatility is part of
our industry and a short-term obstacle.
    Consistent with the overall industry, gross sales of mutual funds were
down in the third quarter of 2008 compared to 2007. While redemptions of
long-term funds were higher year-over-year due in part to a client
rebalancing, we were encouraged that they were at their lowest level in over a
year in August 2008. This indicates that our clients are committed to keeping
funds invested in the market. We continue to work in close partnership with
advisors to help them guide their clients through this market downturn by
providing strong investment expertise that focuses on long-term financial
success.
    Mutual fund assets under management (AUM) were $26.4 billion,
institutional and strategic accounts AUM were $18.6 billion and high-net-worth
AUM were $3.8 billion at the end of the third quarter of 2008. While AUM were
lower than expected, we successfully reduced expenses in our Investment
Management operations and continued to enhance our product offering with the
introduction of innovative client solutions. With the new Harmony
Non-traditional Pool launched at the end of August, we became one of the first
fund companies in Canada to give investors access to global non-traditional
investments such as infrastructure, water, agriculture, oil sands, mining and
real estate in a managed assets program.
    Our Trust Company continued to experience substantial growth with loan
assets increasing 31.0% year-over-year by the end of the third quarter of 2008
and revenue up 17.4% over the third quarter of 2007. The Trust Company's
funding sources remain stable since our loans are primarily funded by selling
Guaranteed Investment Certificates (GICs) with Canada Deposit Insurance
Corporation (CDIC) insurance and we continue to closely monitor the collateral
values on our secured loans given the current market conditions.(1)
    Consolidated revenue was $184.7 million, compared with $199.2 million in
the third quarter of the prior year. Earnings before interest, taxes,
depreciation and amortization(2) (EBITDA) from continuing operations were
$81.5 million, compared with $91.3 million for the three months ended
August 31, 2007. EBITDA margins(2) for the three months ended August 31, 2008,
were 44.1% compared with 45.8% in the three-month period ended August 31,
2007.
    For the three months ended August 31, 2008, AGF reported cash flow from
continuing operations(2) (before net change in non-cash balances related to
operations) of $66.2 million, compared with $69.7 million one year ago. Free
cash flow(2) (cash flow from continuing operations less selling commissions
paid) for the same period was $48.6 million, compared with $38.1 million
one year ago as a result of a decrease in deferred selling commissions paid.
    With over 50 years in business, we have lived through many bull and bear
markets. Our long-term success is based on prudent management that will allow
our organization to weather the storm.
    We remain committed to achieving our long-term objectives and are
well-positioned to participate strongly when markets stabilize and deliver
superior value to our shareholders, advisors and unitholders.

    
    (signed)

    Blake C. Goldring, CFA, M.S.M.
    Chairman and Chief Executive Officer
    August 31, 2008


    (1) Refer to page 16 of this report for further information on our
        conventional mortgage loan-to-value ratio, and our unsecured exposure
        on our investment loan portfolio.
    (2) Cash flow from continuing operations, free cash flow, EBITDA and
        EBITDA margins are non-GAAP measures. Please refer to pages 5 and 6
        of this report for definitions of these metrics.


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

    For the three and nine months ended August 31, 2008
    

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

    Overview

    With approximately $49 billion in assets under management (AUM), AGF is
one of Canada's largest independent investment management companies, with
operations and investments in Canada, the United Kingdom, Ireland and Asia. We
commenced operations in 1957 by introducing the first mutual fund available to
Canadians seeking to invest in the United States. As of August 31, 2008, we
offered more than 50 domestic and international mutual funds, as well as
managed-asset programs, sold under our Elements and Harmony brands. We also
have a substantial institutional investment management business,
high-net-worth business and a growing trust company.
    For purposes of this discussion, the operations of AGF and our subsidiary
companies are referred to as "we", "us", "our" or "the Company". The financial
results relating to the operations have been reported in three segments:
Investment Management Operations, Trust Company Operations and Other.
    The Investment Management Operations segment includes the results of our
retail mutual fund, institutional and high-net-worth client businesses. The
Trust Company Operations segment includes the results of AGF Trust Company,
and the Other segment includes our equity interest in Smith and Williamson
Holdings Limited (S&WHL).
    Investmaster Holdings Limited (Investmaster) was divested on April 30,
2007, and, as such, Investmaster's results have been reported as discontinued
operations for the periods disclosed prior to the sale.

    Strategy and Quarterly Overview

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

    
    -   Revenue decreased 7.3% in the quarter as compared with the same
        period in 2007. Year-over-year declines in the Investment Management
        segment were partly offset by revenue growth in the Trust Company
        segment. Earnings before interest, taxes, depreciation and
        amortization (EBITDA) decreased 10.7% during the same period.

    -   Net income from continuing operations in the third quarter of 2008
        increased 4.3% over the same period of 2007, primarily due to the
        effective tax rate declining to 22.3% from 25.0% in 2007, as well as
        lower interest and amortization expenses.

    -   Market volatility continued, resulting in total AUM declining 9.4%
        from $53.8 billion at August 31, 2007 to $48.7 billion as at
        August 31, 2008.

    -   AGF Trust real estate secured loan assets grew 25.9% over the
        previous year and investment loans grew 35.7% with total loan assets
        rising 31.0% year-over-year.

    -   Credit profiles of the AGF Trust borrowers remain consistent, with
        impaired loans expressed as a percentage of total loans outstanding
        representing 0.5% and 0.7% at August 31, 2008 and November 30, 2007.

    -   We delivered value directly to our shareholders through dividend
        payments. Dividends paid, including dividends reinvested, on Class A
        voting common shares (Class A shares) and Class B non-voting shares
        (Class B shares) increased 23.8% to $22.4 million in the third
        quarter of 2008. This is compared with $18.1 million in the same
        period in 2007.

    -   During the quarter, we continued to pay down long-term debt repaying
        $24.2 million and reducing our long-term debt to EBITDA ratio to
        45.3%, which is amongst the lowest compared to our publicly-traded
        peers.
    

    Key Performance Indicators and Non-GAAP Measures

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

    (a) Consolidated Operations

    Revenue

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

    
        We derive our revenue principally from a combination of:

        -  management and advisory fees based on AUM

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

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

    EBITDA

    We define EBITDA as earnings before interest, taxes, depreciation and
amortization. EBITDA is a standard measure used in the mutual fund industry by
management, investors and investment analysts to understand and compare
results. We believe this is an important measure because it allows us to
assess our investment management businesses without the impact of
amortization. EBITDA for the Trust Company Operations segment includes
interest expense related to deposits. These deposits fund our investment loan
and real estate secured loan programs and are therefore considered an
operating cost directly related to generating interest revenue. We include
this interest expense in Trust Company Operations EBITDA to provide a
meaningful comparison to our other business segments and our competitors.
    Please see the "Consolidated Operating Results" section on page 11 of
this MD&A for a schedule showing how EBITDA reconciles to our GAAP financial
statements.

    Cash Flow from Operations

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

    
    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                               ----------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------

    Net cash provided by
     continuing operating
     activities            $     97.0   $    130.0   $    283.0   $    288.5
    Less: net changes in
     non-cash balances
     related to operations       30.8         60.3         62.9         65.7
    -------------------------------------------------------------------------
    Cash flow from
     continuing operations $     66.2   $     69.7   $    220.1   $    222.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Free Cash Flow from Operations

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

    
    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                               ----------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------

    Cash flow from
     continuing operations
     (defined above)       $     66.2   $     69.7   $    220.1   $    222.8
    Less: selling
     commissions paid            17.6         31.6         72.2        124.9
    -------------------------------------------------------------------------
    Free cash flow         $     48.6   $     38.1   $    147.9   $     97.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    EBITDA Margin

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

    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                               ----------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------

    EBITDA                 $     81.5   $     91.3   $    259.7   $    269.7
    Divided by revenue          184.7        199.2        573.4        581.2
    -------------------------------------------------------------------------
    EBITDA margin               44.1%        45.8%        45.3%        46.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Pre-Tax Profit Margin

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

    
    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                               ----------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------

    Income before taxes
     and non-segmented
     items                 $     51.3   $     57.3   $    165.8   $    169.6
    Divided by revenue          184.7        199.2        573.4        581.2
    -------------------------------------------------------------------------
    Pre-tax profit margin       27.8%        28.8%        28.9%        29.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Return on Equity (ROE)

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

    Long-term Debt to EBITDA Ratio

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

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

    Long-term debt                                   $    147.8   $    169.2
    EBITDA (annualized)                                   326.0        365.2
    -------------------------------------------------------------------------
    Long-term debt to EBITDA                              45.3%        46.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    (b) Investment Management Operations

    Assets Under Management (AUM)

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

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

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

    Net Sales

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

    EBITDA Margin

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

    
    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                               ----------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------

    EBITDA                 $     66.0   $     76.6   $    212.3   $    224.3
    Divided by revenue          155.2        173.4        483.3        501.7
    -------------------------------------------------------------------------
    EBITDA margin               42.5%        44.2%        43.9%        44.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Pre-Tax Profit Margin

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

    
    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                               ----------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------

    Income before taxes and
     non-segmented items   $     38.8   $     45.7   $    127.8   $    132.2
    Divided by revenue          155.2        173.4        483.3        501.7
    -------------------------------------------------------------------------
    Pre-tax profit margin       25.0%        26.4%        26.4%        26.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    (c) Trust Company Operations

    Loan Asset Growth

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

    Net Interest Income

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

    Net Interest Margin

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

    Efficiency Ratio

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

    
    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                               ----------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------

    Selling, general and
     administrative
     expenses              $     10.6   $      8.7   $     32.8   $     26.5
    Add: amortization
     expense                      0.9          0.4          1.9          1.0
    -------------------------------------------------------------------------
    Non-interest expense   $     11.5   $      9.1   $     34.7   $     27.5
    -------------------------------------------------------------------------

    Other revenue          $      2.6   $      2.4   $      8.6   $      5.0
    Gain on RSP loan
     securitization and
     related income (loss),
     net of impairment            0.2          1.4          0.3         11.4
    -------------------------------------------------------------------------
    Non-interest income    $      2.8   $      3.8   $      8.9   $     16.4
    -------------------------------------------------------------------------

    Net interest income    $     25.6   $     20.4   $     73.4   $     57.0
    Add: non-interest
     income                       2.8          3.8          8.9         16.4
    -------------------------------------------------------------------------
    Total of net interest
     income and non-
     interest income       $     28.4   $     24.2   $     82.3   $     73.4
    -------------------------------------------------------------------------
    Efficiency ratio            40.5%        37.6%        42.2%        37.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    EBITDA Margin

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

    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                               ----------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------

    EBITDA                 $     14.4   $     13.1   $     39.6   $     39.3
    Divided by revenue           28.4         24.2         82.3         73.4
    -------------------------------------------------------------------------
    EBITDA margin               50.7%        54.1%        48.1%        53.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Pre-Tax Profit Margin

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

    
    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                               ----------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------

    Income before taxes and
     non-segmented items   $     13.4   $     12.7   $     37.7   $     38.2
    Divided by revenue           28.4         24.2         82.3         73.4
    -------------------------------------------------------------------------
    Pre-tax profit margin       47.2%        52.5%        45.8%        52.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Assets-to-Capital Multiple

    Federally regulated deposit-taking institutions (DTI) are expected to
meet an assets-to-capital multiple test. The assets-to-capital multiple is
determined by dividing the DTI's total assets by its total regulatory capital.

    Loan-to-Value Ratio

    Loan-to-value ratio on our conventional mortgage loans is calculated
using outstanding balance of conventional mortgage loans divided by the
estimated fair value of the real estate serving as collateral for the
conventional mortgage loans as at the date the loans were funded.

    Significant Accounting Policies

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

    Changes in Significant Accounting Policies

    Capital Disclosures

    Effective December 1, 2007, AGF adopted the CICA's new accounting
standard "Handbook Section 1535, Capital Disclosures". This standard requires
the disclosure of both qualitative and quantitative information to enable
users of financial statements to evaluate the entity's objectives, policies
and processes for managing capital. The new standard did not have any impact
on the financial position or earnings of the Company. Refer to Note 13 of our
Q3 2008 Consolidated Financial Statements.

    Financial Instruments Disclosures and Presentation

    Effective December 1, 2007, AGF adopted the accounting and disclosure
requirements of the CICA's two new accounting standards: "Handbook Section
3862, Financial Instruments - Disclosures" and "Handbook Section 3863,
Financial Instruments - Presentation". The new standards did not have any
impact on the financial position or earnings of the Company. Refer to Note 14
of our Q3 2008 Consolidated Financial Statements.

    Future Accounting Changes

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

    Managing Risk

    AGF is subject to a number of company and non-company specific risk
factors that may impact our operating and financial performance. These risks
and the management of those risks are detailed in our 2007 annual MD&A in the
section entitled 'Risk Factors and Management'. Refer to Note 14 of the
Consolidated Financial Statements and Notes for risks arising from the use of
financial instruments.

    Market Risk in Assets under Management (AUM)

    AUM are exposed to various market risks, including changes in equity
prices, interest rates and foreign exchange rates. These risks transfer to the
Company as our management fee revenue is calculated as a percentage of the
average net asset value of each mutual fund or portfolio managed. The Company
does not quantify these risks in isolation, however, in general, for every
$1 billion reduction of AUM, management fee revenues would decline by
approximately $20 million. The Company monitors these risks as they may impact
earnings, however, it is at the discretion of the fund manager to decide on
the appropriate risk-mitigating strategies for each fund.
    To provide additional details on the Company's exposure to these market
risks, the following provides further information on our AUM by asset type and
base currency:

    
    -------------------------------------------------------------------------
    As at August 31, 2008
    -------------------------------------------------------------------------

    AUM by Asset Type
      Equity                                                           77.7%
      Balanced                                                         12.0%
      Fixed Income                                                      8.7%

    AUM by Base Currency
      Canadian dollar                                                  65.2%
      Other                                                            34.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Foreign Exchange Risk

    The Company is exposed to foreign exchange risks through its 30.4% equity
interest in Smith and Williamson Holdings Limited (S&WHL), which is
denominated in U.K. pounds. The investment is translated into Canadian dollars
at the rate of exchange in effect at the balance sheet date. Unrealized
translation gains and losses are reported in other comprehensive income. Based
on the carrying value at August 31, 2008, a 5% change in the value of the
Canadian dollar would result in a change in other comprehensive income of
$5.1 million.

    Changes in Internal Controls over Financial Reporting

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

    Consolidated Operating Results

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

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

    Revenue
      Investment
       Management
       Operations       $ 155.2  $ 173.4   (10.5%) $ 483.3  $ 501.7    (3.7%)
      Trust Company
       Operations(1)       28.4     24.2    17.4%     82.3     73.4    12.1%
      Other                 1.1      1.6   (31.3%)     7.8      6.1    27.9%
    -------------------------------------------------------------------------
                          184.7    199.2    (7.3%)   573.4    581.2    (1.3%)
    Expenses
      Investment
       Management
       Operations          89.2     96.8    (7.9%)   271.0    277.4    (2.3%)
      Trust Company
       Operations          14.0     11.1    26.1%     42.7     34.1    25.2%
    -------------------------------------------------------------------------
                          103.2    107.9    (4.4%)   313.7    311.5     0.7%

    EBITDA(2) (continuing
     operations)           81.5     91.3   (10.7%)   259.7    269.7    (3.7%)
      Amortization         28.1     31.2    (9.9%)    86.4     93.1    (7.2%)
      Interest expense      2.1      2.8   (25.0%)     7.5      7.0     7.1%
      Non-controlling
       interest             0.2      0.2     0.0%      0.5      0.7   (28.6%)
      Income taxes         10.0     17.7   (43.5%)    17.5     42.4   (58.7%)
    -------------------------------------------------------------------------
    Net income from
     continuing
     operations         $  41.1  $  39.4     4.3%  $ 147.8  $ 126.5    16.8%
    Loss on dissolution
     of limited
     partnerships, net
     of tax                   -        -                 -     (2.1)
    Gain on sale of
     discontinued
     operations, net
     of tax                   -        -                 -      4.7
    Net earnings (loss)
     from discontinued
     operations, net
     of tax(3)                -        -                 -      0.2
    -------------------------------------------------------------------------
    Net income          $  41.1  $  39.4     4.3%  $ 147.8  $ 129.3    14.3%
    -------------------------------------------------------------------------
    Earnings per share
     from continuing
     operations -
     diluted            $  0.46  $  0.43     7.0%  $  1.65  $  1.39    18.7%
    -------------------------------------------------------------------------

    (1) The nine months ended August 31, 2007 include an $8.0 million
        securitization gain.
    (2) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section. The items required to reconcile EBITDA to
        net income, a defined term under Canadian GAAP, are detailed above.
    (3) On April 30, 2007, AGF sold 100% of Investmaster. Accordingly,
        Investmaster's results have been reported as discontinued operations.
    

    Revenue for the three and nine months ended August 31, 2008, declined by
7.3% and 1.3%, respectively, from the corresponding periods in 2007. Revenue
in the Investment Management Operations segment declined 10.5% and 3.7% for
the three and nine months ended August 31, 2008. This corresponds to lower
average levels of AUM offset by higher DSC revenue. The Trust Company
Operations segment, excluding an $8.0 million securitization gain in the nine
months ended August 31, 2007, reported increases in revenue of 17.4% and 25.8%
for the three and nine months ended August 31, 2008, resulting from loan
assets being up 31.0% year-over-year. Revenue from Other, which represents the
results of our 30.4% equity interest in S&WHL, were lower for the three months
ended August 31, 2008 and increased for the nine months ended August 31, 2008.
Traditionally, S&WHL experiences seasonality in earnings related to the
billing of work in progress for its tax, audit and business sources
operations.
    Expenses for the three and nine months ended August 31, 2008, decreased
by 4.4% and increased 0.7% compared with the same periods in 2007. The
Investment Management operations' decline in expenses was consistent with the
decline in AUM and reduced SG&A expenses, while Trust operations experienced
higher overall expenses related to volumes and a move to new office premises.
For further details refer to the segment discussions.
    The combination of declining revenue and expenses served to decrease
EBITDA by 10.7% and 3.7% for the three and nine months ended August 31, 2008,
from the corresponding periods of 2007. Excluding the $8.0 million
securitization gain in the nine months ended August 31, 2007, EBITDA has
remained relatively stable, declining only 1.0% for the nine months ended
August 31, 2008.
    Amortization expense decreased 9.9% and 7.2% for the three and nine
months ended August 31, 2008, compared to the same periods in 2007. The
decline was due to lower amortization of deferred selling commissions in the
Investment Management Operations segment. Amortization of deferred selling
commissions for the three and nine months ended August 31, 2008 accounted for
$23.9 million and $74.8 million (2007 - $27.5 million and $81.2 million) of
the total amortization expense.
    Interest expense was $2.1 million and $7.5 million for the three and nine
months ended August 31, 2008, as compared with $2.8 million and $7.0 million
in the same periods of 2007. Lower interest expense in the quarter is
reflective of declining average debt levels and interest rates.
    For the three and nine months ended August 31, 2008, income tax expense
was $10.0 million and $17.5 million as compared with $17.7 million and
$42.4 million in the same periods in 2007. Results from the nine months ended
August 31, 2008 include an income reduction of $19.5 million related to the
reduction in the federal income tax rate to 15% from 18.5% by January 1, 2012.
Excluding the impact of this tax reduction, the effective tax rate for the
first nine months of 2008 was 22.3% compared with 25.0% in the same period in
2007.
    The impact of the above revenue and expense items resulted in net income
from continuing operations of $41.1 million and $147.8 million for the three
and nine months ended August 31, 2008. This compares with $39.4 million and
$126.5 million in the same periods of 2007. Basic earnings per share from
continuing operations were $0.46 and $1.66 for the three and nine months
ending August 31, 2008, compared with $0.44 and $1.41 per share in the same
periods of 2007. For the nine months ending August 31, 2008, excluding the
impact of the tax reduction of $19.5 million, income from continuing
operations was $128.3 million or $1.43 per share diluted. This compares to
$1.39 for the nine months ended August 31, 2007.
    Net income was $41.1 million and $147.8 million for the three and
nine-month period ended August 31, 2008. This compares with $39.4 million and
$129.3 million in the same periods of 2007. Excluding the impact of income tax
as previously discussed, net income for the nine-month period ended August 31,
2008 was $128.3 million. The nine-month period ended August 31, 2007 included
a gain of $4.7 million net of tax related to the gain on sale of discontinued
operations, and a loss of $2.1 million net of tax related to the dissolution
of limited partnerships.
    A further discussion follows of the results of each business segment for
the three and nine months ended August 31, 2008, compared with August 31,
2007.

    Business Segment Performance

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

    Investment Management Operations

    Business and Industry Profile

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

    Segment Strategy and Quarterly Overview

    The strategic priorities for our Investment Management Operations,
detailed in the 2007 annual MD&A, are to continue to build predictable
excellence in three core areas: investment management, relationship management
and product management.
    Despite the volatile markets in 2008, we continue to focus on our
strategy to better serve our clients. During the quarter:

    
    -   We launched an innovative managed assets solution called the Harmony
        Non-traditional Pool which gives investors access to global non-
        traditional investments such as infrastructure, water, agriculture,
        oil sands, mining and real estate. The new pool will also be offered
        along with three other Harmony pools and four Harmony portfolios,
        within the new Harmony Tax Advantage Group Limited, a new mutual fund
        corporation that houses a range of corporate class offerings allowing
        investors to switch between them without generating immediate tax
        consequences on the switch.

    -   We introduced new series options on two Harmony portfolios (both in
        the trust and corporate class structures) that provide monthly income
        and tax efficiencies.

    Assets Under Management
    

    The primary sources of revenue for AGF's Investment Management Operations
segment are management and advisory fees. The amount of management and
advisory fees depends on the level and composition of AUM. Under the
management and investment advisory contracts between AGF and each of the
mutual funds, we are entitled to monthly fees. These fees are based on a
specified percentage of the average daily net asset value of the respective
fund. In addition, we earn fees on our institutional, strategic accounts and
high-net-worth client AUM. As a result, the level of AUM has a significant
influence on financial results.
    The following table illustrates the composition of the changes in total
AUM during the three and nine months ended August 31, 2008, and August 31,
2007.

    
    -------------------------------------------------------------------------
                               Three months ended          Nine months ended
                                    August 31,                 August 31,
                        -----------------------------------------------------
    ($ millions)           2008     2007 % change     2008     2007 % change
    -------------------------------------------------------------------------
    Mutual fund AUM,
     beginning of
     period             $28,627  $30,606    (6.5%) $30,052  $26,857    11.9%

    Gross sales of
     mutual funds           854    1,345   (36.5%)   2,927    5,529   (47.1%)
    Redemptions of
     mutual funds        (1,426)  (1,003)   42.2%   (3,983)  (3,242)   22.9%
    -------------------------------------------------------------------------
    Net mutual fund
     sales                 (572)     342  (267.2%)  (1,056)   2,287  (146.2%)

    Market appreciation
     (depreciation) of
     fund portfolios     (1,684)    (924)   82.3%   (2,625)     880  (398.3%)
    -------------------------------------------------------------------------

    Mutual fund AUM,
     end of period      $26,371  $30,024   (12.2%) $26,371  $30,024   (12.2%)

    Institutional and
     strategic accounts
     AUM                 18,579   19,773    (6.0%)  18,579   19,773    (6.0%)
    High-net-worth AUM    3,787    3,973    (4.7%)   3,787    3,973    (4.7%)
    -------------------------------------------------------------------------

    Total AUM, end of
     period             $48,737  $53,770    (9.4%) $48,737  $53,770    (9.4%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average daily mutual
     fund AUM for the
     period             $26,725  $30,333   (11.9%) $27,901  $29,477    (5.4%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Global market declines and an industry trend of reduced gross sales of
long-term funds resulted in a decrease in mutual fund AUM to $26.4 billion at
August 31, 2008, from $30.0 billion as at August 31, 2007. The average daily
mutual fund AUM for the three months ended August 31, 2008, decreased 11.9% to
$26.7 billion, compared with the same period in 2007. The average daily mutual
fund AUM for the nine months ended August 31, 2008, decreased 5.4% to
$27.9 billion, compared with the same period in 2007. During the past 12
months, institutional and strategic accounts AUM decreased by $1.2 billion to
$18.6 billion. This was as a result of market volatility and client
rebalancing as well as redemptions. High-net-worth AUM decreased by
$0.2 billion to $3.8 billion due to market volatility. These decreases
resulted in total AUM decreasing by 9.4% to $48.7 billion.
    Market performance influences the level of AUM. During the three and nine
months ended August 31, 2008, the Canadian-dollar-adjusted S&P 500 Index
decreased 1.5% and 6.5%, the Canadian-dollar-adjusted NASDAQ Index increased
0.3% and decreased 5.5%, and the S&P/TSX Composite Index decreased 5.8% and
increased 2.7%. The aggregate market depreciation of our mutual fund
portfolios for the three months ended August 31, 2008, divided by the average
daily mutual fund AUM for the period was 6.3%, after management fees and
expenses paid by the funds. For the nine months ended August 31, 2008, this
represented a market depreciation of 9.4%.
    The impact of the U.S. dollar increase relative to the Canadian dollar on
the market value of AGF mutual funds for the three months ended August 31,
2008, has been an increase in AUM of $0.3 billion. For the nine months ended
August 31, 2008, the impact of the U.S. dollar has been an increase in AUM of
$0.3 billion.

    Financial and Operational Results

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

    
    -------------------------------------------------------------------------
                               Three months ended          Nine months ended
                                    August 31,                 August 31,
                        -----------------------------------------------------
    ($ millions)           2008     2007 % change     2008     2007 % change
    -------------------------------------------------------------------------
    Revenue
      Management and
       advisory fees    $ 146.8  $ 166.6   (11.9%) $ 457.2  $ 482.9    (5.3%)
      Deferred sales
       charges              6.4      4.9    30.6%     18.6     15.0    24.0%
      Investment income
       and other
       revenue              2.0      1.9     5.3%      7.5      3.8    97.4%
    -------------------------------------------------------------------------
                          155.2    173.4   (10.5%)   483.3    501.7    (3.7%)

    Expenses
      Selling, general
       and
       administrative      44.8     49.5    (9.5%)   135.3    142.1    (4.8%)
      Trailing
       commissions         40.7     43.7    (6.9%)   124.2    124.5    (0.2%)
      Investment advisory
       fees                 3.7      3.6     2.8%     11.5     10.8     6.5%
    -------------------------------------------------------------------------
                           89.2     96.8    (7.9%)   271.0    277.4    (2.3%)
    -------------------------------------------------------------------------

    EBITDA(*)              66.0     76.6   (13.8%)   212.3    224.3    (5.4%)
    Amortization           27.2     30.9   (12.0%)    84.5     92.1    (8.3%)
    -------------------------------------------------------------------------
    Income before taxes
     and non-segmented
     items              $  38.8  $  45.7   (15.1%) $ 127.8  $ 132.2    (3.3%)
    -------------------------------------------------------------------------

    (*) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section.

    Revenue
    

    For the three and nine-month periods ended August 31, 2008, revenue for
the Investment Management Operations segment decreased by 10.5% and 3.7%
compared with the previous-year periods, with changes in the following
categories:

    Management and Advisory Fees

    The 11.9% and 5.4% decline in average daily mutual fund AUM in the three
and nine months ended August 31, 2008, contributed to a 11.9% and 5.3%
decrease in management and advisory fee revenue from the same periods in 2007.
Management and advisory fee revenue is reported net of distribution fees paid
to limited partnerships and other third-party financing entities. These
distribution fees totalled $1.5 million (2007 - $2.1 million) for the three
months ended August 31, 2008 and $4.9 million (2007 - $6.9 million) for the
nine months ended August 31, 2008.

    Deferred Sales Charges (DSC)

    We receive DSC upon redemption of securities sold on the contingent DSC
or back-end commission basis for which we finance the selling commissions paid
to the dealer. The DSC is generally 5.5% of the original subscription price of
the funds purchased if the funds are redeemed within the first two years, and
declines to zero after seven years. DSC revenue fluctuates based on the level
of redemptions, the age of the assets being redeemed and the proportion of
redemptions composed of back-end assets. DSC revenues for the three and nine
months ended August 31, 2008, increased by 30.6% and 24.0% from the same
periods in 2007, reflecting higher retail mutual fund redemptions of DSC AUM
that are subject to a charge.

    Expenses

    For the three and nine-month periods ended August 31, 2008, expenses
decreased by 7.9% and 2.3% from the previous-year period. Changes in specific
categories are described in the discussion that follows.

    Selling, General and Administrative Expenses

    Selling, general and administrative expenses (SG&A) for the three and
nine-month periods ended August 31, 2008, were $44.8 million and
$135.3 million. This represents a 9.5% and 4.8% decrease over the same periods
in 2007. The decrease is made up of the following amounts:

    
    -------------------------------------------------------------------------
                                              Three months       Nine months
                                                     ended             ended
                                                 August 31,        August 31,
                                          -----------------------------------
    ($ millions)                                      2008              2008
    -------------------------------------------------------------------------
    Increase in fund absorption expenses           $   1.7           $   2.2
    Decrease in compensation-related expenses         (5.6)             (5.5)
    Decrease in other expenses                        (0.8)             (3.5)
    -------------------------------------------------------------------------
                                                   $  (4.7)          $  (6.8)
    -------------------------------------------------------------------------

    The following explains expense changes in the three and nine-month periods
ended August 31, 2008, compared with the previous-year periods:

    -   Our current estimate for 2008 absorption expense increased during the
        quarter as a result of lower average levels of AUM as compared to
        2007.
    -   Compensation-related expenses decreased due to lower estimates for
        performance based payouts and lower severance payments.
    -   Other expenses decreased primarily as a result of reduced spending
        across a number of expense categories as we continue to focus on
        controlling expenses.
    

    Trailing Commissions

    Trailing commissions paid to investment dealers depend on total AUM, the
proportion of mutual fund AUM sold on a front-end versus back-end commission
basis and the proportion of equity fund AUM versus fixed-income fund AUM.
Annualized trailing commissions as a percentage of average daily mutual fund
AUM increased to 0.61% and 0.59% for the three and nine months ended August
31, 2008, from 0.58% and 0.56% in the same 2007 periods. The trend in
increasing trailers expressed as a percentage of AUM is attributable to an
increased proportion of mutual fund AUM sold on a front-end basis. It is also
attributable to a change in the mix of assets toward managed products, such as
Harmony and Elements, which generally have higher trailer commissions.

    Investment Advisory Fees

    External investment advisory fees increased 2.8% and 6.5% for the three
and nine-month periods ended August 31, 2008, compared with the previous-year
period. The year-over-year increase relates primarily to the AGF Dividend
Income Fund, which was managed internally for a portion of 2007.

    EBITDA

    EBITDA for the Investment Management Operations segment were
$66.0 million and $212.3 million for the three and nine months ended August
31, 2008. This represents a decrease of 13.8% and 5.4% from $76.6 million and
$224.3 million for the same periods of fiscal 2007. The decrease is directly
attributable to lower revenue levels resulting from lower average AUM.

    Amortization

    The largest item in this category is amortization of deferred selling
commissions. The category also represents amortization of property, equipment,
customer contracts and other intangible assets. We internally finance all
selling commissions paid. These selling commissions are capitalized and
amortized on a straight-line basis over a period that corresponds with their
applicable DSC schedule. Amortization expense related to deferred selling
commissions was $23.9 million and $74.8 million in the three and nine months
ended August 31, 2008, compared with $27.5 million and $81.2 million in the
same periods in 2007.
    During the third quarter of fiscal 2008, we paid $17.6 million in selling
commissions, compared with $31.6 million in 2007. The decline is due to lower
sales in 2008. As at August 31, 2008, the unamortized balance of deferred
selling commissions stood at $313.1 million. This is a decrease of
$6.0 million from the balance of $319.1 million as at May 31, 2008. The
contingent DSC that would be received if all of the DSC securities were
redeemed at August 31, 2008, were estimated to be approximately $414.7 million
(August 31, 2007 - $405.2 million).

    Trust Company Operations

    Business and Industry Profile

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

    Segment Strategy and Highlights

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

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

    For the three and nine months ended August 31, 2008, loan originations
were $362.0 million and $1.3 billion. The majority of the funding for lending
and investment activity comes from the ability to attract funds through the
sale of GICs and the sale of loans through securitization. With the current
global market volatility and the Asset-Backed Commercial Paper (ABCP)
situation, AGF Trust continues to adapt to changing business conditions and
increased funding costs across the industry. As previously reported, AGF Trust
holds only bank-sponsored ABCP investments, and in the current and prior
fiscal years, has used only a small portion of its funding in ABCP
investments.
    Net loan write-offs were $3.2 million and $6.7 million for the three and
nine months ended August 31, 2008, compared to $0.9 million and $2.9 million
in the same periods in the previous year. The increase in write-offs was due
primarily to a 45% increase in the average balances, aging of the portfolio
and equity market declines (which decrease the value of collateral on the
investment loan portfolio). As at August 31, 2008, collateral value declines
have resulted in approximately $174.0 million of unsecured exposures in our
secured investment loan portfolio. Our weighted average loan-to-value ratio on
our conventional mortgage loan portfolio as at August 31, 2008 was 68.0%.
    Total impaired loans expressed as a percentage of total loans outstanding
were 0.5% as at August 31, 2008 and 0.7% as at November 30, 2007.

    Securitization Transaction

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

    Financial and Operational Results

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

    
    -------------------------------------------------------------------------
                               Three months ended          Nine months ended
                                    August 31,                 August 31,
                        -----------------------------------------------------
    ($ millions)           2008     2007 % change     2008     2007 % change
    -------------------------------------------------------------------------
    Interest income
      Loan interest     $  68.6  $  56.5    21.4%  $ 203.8  $ 150.6    35.3%
      Investment interest   7.7      6.1    26.2%     25.2     14.2    77.5%
    -------------------------------------------------------------------------
                           76.3     62.6    21.9%    229.0    164.8    39.0%
    Interest expense
      Deposit interest     52.6     36.2    45.3%    149.9     93.5    60.3%
      Other interest
       expense             (1.8)     6.0  (130.0%)     5.7     14.3   (60.1%)
    -------------------------------------------------------------------------
                           50.7     42.2    20.1%    155.6    107.8    44.3%
    -------------------------------------------------------------------------
    Net interest income    25.6     20.4    25.5%     73.4     57.0    28.8%
    Other revenue           2.6      2.4     8.3%      8.6      5.0    72.0%
    Gain on RSP loan
     securitization and
     related income
     (loss), net of
     impairment(1)          0.2      1.4   (85.7%)     0.3     11.4   (97.4%)
    -------------------------------------------------------------------------
    Total revenue          28.4     24.2    17.4%     82.3     73.4    12.1%

    Expenses
      Selling, general
       and
       administrative      10.6      8.7    21.8%     32.8     26.5    23.8%
      Provision for loan
       losses               3.4      2.4    41.7%      9.9      7.6    30.3%
    -------------------------------------------------------------------------
                           14.0     11.1    26.1%     42.7     34.1    25.2%

    EBITDA(2)              14.4     13.1     9.9%     39.6     39.3     0.8%
    Amortization            0.9      0.4   125.0%      1.9      1.1    72.7%
    -------------------------------------------------------------------------
    Income before taxes
     and non-segmented
     items              $  13.5  $  12.7     6.3%  $  37.7  $  38.2    (1.3%)
    -------------------------------------------------------------------------

    (1) The nine months ended August 31, 2007 includes an $8.0 million
        securitization gain.
    (2) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section. The items required to reconcile EBITDA to
        net income, a defined term under Canadian GAAP, are detailed above.
    

    Revenue, Net Interest Income and Net Interest Margin

    Net interest income, which is expressed net of interest on deposits and
other interest expense, increased 25.5% and 28.8% in the three and nine months
ended August 31, 2008, over the same periods in 2007. Loan balances were
approximately 31.0% higher as at August 31, 2008, compared to 2007. Other
revenue increased by $0.2 million and $3.6 million in the three and nine-month
periods ended August 31, 2008, over the same periods in the previous year. The
increase in the nine-month period is due to higher loan balances and a gain
from hedge ineffectiveness. Securitization gains and related items decreased
$1.2 million in the third quarter of 2008 versus the same quarter last year.
The decrease is primarily due to a write down of retained interests, as a
result of higher than anticipated prepayment rates on securitized loans in
2008. Total revenue increased by 17.4% and 12.1% for the three and nine months
ended August 31, 2008.
    The average net interest margin on lending products in the third quarter
of 2008 was 2.33% (Q3 2007 - 2.55%). This spread decrease resulted from
compression in the Prime-Canadian Dollar Offered Rate (CDOR) spread, an
increase in the cost of GIC funding over the past nine months, a slight
decrease in spreads on the investment loan portfolio and a change in the
business mix to include a greater proportion of high credit-quality HELOCs.
Since HELOCs are risk-priced, they earn lower spreads than the Trust Company's
other lending products.

    Selling, General and Administrative Expenses

    The increases in SG&A expenses of 21.8% and 23.8% in the three and
nine-month periods ended August 31, 2008, over the same periods in 2007,
result from increased staffing levels to support the significant loan growth
during the past 12 months and costs related to a move to new office premises.

    Provision for Loan Losses

    The total provision for loan losses increased 41.7% in the third quarter
of 2008, compared with the previous-year period. This increase is attributable
to the growth in the loan portfolio, the mix of loan types and an increase in
loan write-offs primarily related to RSP loans. In addition, we have seen an
increase in our loans past due but not impaired balances as at August 31,
2008, compared to November 30, 2007, as detailed in Note 7 of our Q3 2008
Consolidated Financial Statements. The majority of this increase is in the
mortgage loans category and is reflective of seasonality issues surrounding
collections of accounts.

    EBITDA

    EBITDA of $14.4 million and $39.6 million in the three and nine-month
periods ended August 31, 2008 increased 9.9% and 0.8% compared with the same
periods ended August 31, 2007. Excluding the securitization gain of
$8.0 million in the nine months ended August 31, 2007, EBITDA increased 26.5%
in the nine-month period ended August 31, 2008, compared to the same period in
2007, which is consistent with the growth in loan assets.

    Operational Performance

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

    
    -------------------------------------------------------------------------
                               Three months ended          Nine months ended
                                    August 31,                 August 31,
                        -----------------------------------------------------
    ($ millions)           2008     2007 % change     2008     2007 % change
    -------------------------------------------------------------------------
    Real estate secured
     loans(1)
      Insured mortgage
       loans            $ 626.2  $ 532.0    17.7%  $ 626.2  $ 532.0    17.7%
      Conventional
       mortgage loans     800.4    701.5    14.1%    800.4    701.5    14.1%
      HELOCs              620.0    391.6    58.3%    620.0    391.6    58.3%
    -------------------------------------------------------------------------
                        2,046.6  1,625.1    25.9%  2,046.6  1,625.1    25.9%
    Investment loans(1)
      Secured investment
       loans            1,759.0  1,368.2    28.6%  1,759.0  1,368.2    28.6%
      RSP loans           589.2    356.9    65.1%    589.2    356.9    65.1%
      Other loans          13.0     15.5   (16.1%)    13.0     15.5   (16.1%)
    -------------------------------------------------------------------------
                        2,361.2  1,740.6    35.7%  2,361.2  1,740.6    35.7%
    Other assets          959.5    635.0    51.1%    959.5    635.0    51.1%
    -------------------------------------------------------------------------
    Total Assets       $5,367.3 $4,000.7    34.2% $5,367.3 $4,000.7    34.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net interest
     income            $   25.6  $  20.4    25.5%  $  73.4  $  57.0    28.8%
    Gain on RSP loan
     securitization and
     related income
     (loss), net of
     impairment(2)          0.2      1.4   (85.7%)     0.3     11.4   (97.4%)
    Other revenue           2.6      2.4     8.3%      8.6      5.0    72.0%
    Non-interest
     expenses(3)          (11.5)    (9.1)   26.4%    (34.7)   (27.6)   25.7%
    Provision for loan
     losses                (3.4)    (2.4)   41.7%     (9.9)    (7.6)   30.3%
    -------------------------------------------------------------------------
    Income before taxes
     and non-segmented
     items              $  13.5  $  12.7     6.3%  $  37.7  $  38.2    (1.3%)
    -------------------------------------------------------------------------

    Efficiency ratio(4)   40.5%    37.6%             42.2%    37.5%
    Assets-to-capital
     multiple(4)           15.1     15.4              15.1     15.4
    -------------------------------------------------------------------------

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

    Loan Asset Growth

    Our continued sales efforts directed at the mortgage broker and advisor
channels resulted in significant loan assets growth year-over-year. Real
estate secured loan assets grew 25.9% year-over-year and benefited from a
steady originations of HELOCs.
    Secured investment loans increased 28.6% to $1.8 billion as at August 31,
2008, over the same period in 2007. RSP loan balances increased by
$233.0 million as at August 31, 2008. This is a result of a strong RSP season
despite volatile equity markets.

    Efficiency Ratio

    The efficiency ratio is defined as non-interest expenses divided by the
total of net interest income and non-interest income. It is a key industry
performance indicator used to ensure expenses are contained as the Trust
business grows. In the third quarter of 2008, the efficiency ratio experienced
an unfavourable change to 40.5% from 37.6% in the same period of 2007. The
efficiency ratio for the nine-month period ended August 31, 2008, also
experienced an unfavourable change to 42.2% from 37.5% in the same period in
2007.

    Balance Sheet

    Our balance sheet has grown significantly during the past year, with our
financial position remaining solid. Total assets increased 34.2% to
$5.4 billion as at August 31, 2008, compared with the previous year. As at
August 31, 2008, our asset-to-capital multiple stood at 15.1 times, compared
with 15.4 times at the same time last year. Our risk-based capital ratio was
15.6% as at August 31, 2008. AGF Trust received $35.0 million in debt and
equity capital from AGF Management Limited during the nine-month period ended
August 31, 2008, to support increased asset levels. Liquid assets were high
with $689.8 million in cash and cash equivalents as at August 31, 2008
(November 30, 2007 - $791.3 million), excluding cash currently pledged to
counterparties.

    Loan Portfolio Credit

    The general allowance for real estate secured loan losses was increased
during the year to $9.2 million from $7.4 million a year ago. The general
allowance for investment loan losses increased to $9.2 million from
$6.7 million a year ago. Approximately 43.9% of real estate secured loan
assets, excluding HELOCs, are insured. We have security for non-RSP investment
loans, consisting of mutual funds and other investments. The value of this
collateral fluctuates with the changes in the underlying investments. The
expense for impaired RSP loans, which consists of the increase in specific
allowances, plus write-offs net of recoveries (excluding securitized RSP
loans) was $3.9 million for the nine months ended August 31, 2008 (2007 -
$2.1 million). For the balance of our loan products, the expense for impaired
loans was $2.8 million (2007 - $0.8 million).

    Liquidity and Capital Resources

    Consolidated cash flow generated from continuing operating activities,
before net change in non-cash balances related to operations, was
$66.2 million and $220.1 million for the three and nine months ended August
31, 2008. This compares with $69.7 million and $222.8 million in the same
periods of 2007.
    Consolidated free cash flow is defined as cash flow from operations less
selling commissions paid. It was $48.6 million and $147.9 million for the
three and nine months ended August 31, 2008, compared with $38.1 million and
$97.9 million in the same period of 2007. We paid $17.6 million and
$72.2 million in selling commissions during the three and nine months ended
August 31, 2008, which were deferred for accounting purposes. This compares
with $31.6 million and $124.9 million paid and deferred in the same periods in
2007.
    Our free cash flow was used primarily to fund the following:

    
    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                     August 31,                August 31,
                           --------------------------------------------------
    ($ millions)                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Payment of dividends   $     21.5   $     17.5   $     58.5   $     49.0
    Acquisitions of
     subsidiaries                 0.0          7.8         20.8         27.7
    Purchase of property,
     equipment and other
     intangible assets            2.6          3.5          5.3          6.1
    Bank credit facility
     repayment (borrowing)       24.2         (5.0)        12.1        (89.0)
    Investment in Trust
     Operations (eliminated
     on consolidation)            0.0         17.0         35.0         65.5
    -------------------------------------------------------------------------
                           $     48.3   $     40.8   $    131.7   $     59.3
    -------------------------------------------------------------------------
    

    During the three months ended August 31, 2008, our revolving term loan
balance decreased $24.2 million to $147.8 million. Consolidated cash and cash
equivalents of $733.6 million decreased by $94.3 million from November 30,
2007 levels of $827.9 million (2007 - increased by $200.1 million). This was
primarily due to Trust investing $140.0 million of cash into investments
available for sale.
    On May 26, 2008, the Company, under its current loan agreement, arranged
an additional three-year prime-rate based reducing term loan to a maximum of
$60.0 million (Facility 2). Facility 2 will be used to finance share
repurchases, permitting AGF to draw down the reducing term loan by direct
advances or bankers' acceptances (BAs). No share repurchases were made in the
third quarter and the availability of Facility 2 has been extended to the
earlier of December 31, 2008 (from September 30, 2008), or the date the
facility is fully drawn. Following this date, Facility 2 is payable in equal
quarterly instalments over twelve quarters. Any undrawn portion of Facility 2
at the end of the availability date will be permanently cancelled.
    We also have a six-year prime rate-based revolving term loan facility to
a maximum of $300.0 million, of which $146.9 million was available to be drawn
as at August 31, 2008. Aside from cash held in the Trust Company Operations
segment, which is held to fund loans to clients and GIC maturities, AGF had
$43.8 million of cash as at August 31, 2008. Some of this cash will be used to
repay bank debt in the remainder of 2008. The loan facility will be available
to meet future operational and investment needs. We anticipate that cash flow
from operations, together with the available loan facility, will be sufficient
in the foreseeable future to implement our business plan, finance selling
commissions, satisfy regulatory requirements, service debt repayment
obligations, meet capital spending needs and pay quarterly dividends.

    Capital Management Activities

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

    Investment Management Operations - Regulatory Capital

    A significant objective of the Capital Management program is to ensure
regulatory requirements are met regarding regulatory capital requirements. Our
Investment Management businesses, in general, are not subject to significant
regulatory capital requirements in each of the jurisdictions in which they are
registered and operate. The cumulative amount of minimum regulatory capital
across all of our investment management operations is approximately
$6.0 million.

    AGF Trust - Regulatory Capital

    AGF Trust's regulatory capital consists primarily of common shareholders'
equity, preferred shares and subordinated debentures. Regulatory capital is a
factor that allows the AGF Trust Board of Directors (Trust Board) to assess
the stability and security in relation to the overall risks inherent in AGF
Trust's activities. AGF Trust's policy is to maintain its regulatory capital
ratios consistent with requirements as laid out by the Company's principal
regulator. As of January 1, 2008, AGF Trust is monitoring its regulatory
capital based on the Bank for International Settlements (BIS) regulatory
risk-based capital framework (commonly known as Basel II). AGF Trust uses the
Standardized Approach for credit risk and the Basic Indicator Approach for
operational risk. During the third quarter of 2008, AGF Trust has complied
with these Basel II requirements. Refer to the following section for more
information on Basel II and to Note 13 of the Q3 2008 Consolidated Financial
Statements.
    A capital plan prepared annually specifies the target capital ratios by
taking into account the projected risk-weighted asset levels and expected
capital management initiatives. Regulatory capital ratios are reported monthly
to management. Regulatory capital ratio monitoring reports are provided on a
quarterly basis to the Trust Board.

    AGF Trust - Basel II Capital Accord

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

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

    Tier 1 capital
      Common shares                                  $   82,768   $   82,768
      Contributed surplus                                 1,234          910
      Retained earnings                                 105,299       79,863
      Non-cumulative preferred shares                    64,000       49,000
      Less: securitization and other                    (18,802)           -
    -------------------------------------------------------------------------
                                                        234,499      212,541
    Tier 2 capital
      Subordinated debentures                           109,500       89,500
      General allowances                                 18,357       15,277
      Less: securitization and other                     (7,165)     (26,669)
    -------------------------------------------------------------------------
                                                        120,692       78,108

    -------------------------------------------------------------------------
    Total capital                                    $  355,191   $  290,649
    -------------------------------------------------------------------------

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

    Dividends

    On September 23, 2008, we declared a 25-cents-per-share dividend on Class
A and Class B shares, which approximates a 4.0% dividend yield. This dividend
will be payable on October 21, 2008, to shareholders of record on October 10,
2008.
    The holders of Class B shares are entitled to receive cash dividends.
Dividends are paid in equal amounts per share on all Class B and Class A
shares at the time outstanding, without preference or priority of one share
over another. No dividends may be declared if there is a default of a
condition of our loan facility or where such payment of dividends would create
a default.
    Our Board of Directors may determine that Class B shareholders shall have
the right to elect to receive part or all of such dividend in the form of a
stock dividend. They also determine whether a dividend in Class B shares is
substantially equal to a cash dividend. This determination is based on the
weighted average price at which the Class B shares traded on the Toronto Stock
Exchange (TSX) during the 10 trading days immediately preceding the record
date applicable to such dividend.
    The following table sets forth the dividends paid by AGF on Class B
shares and Class A shares for the periods indicated:

    
    -------------------------------------------------------------------------
    Years Ended
    November 30    2008(*)        2007         2006         2005         2004
    -------------------------------------------------------------------------
    Per share  $    0.950   $    0.780   $    0.690   $    0.560   $    0.410
    -------------------------------------------------------------------------
    Percentage
     increase         22%          13%          23%          37%          39%
    -------------------------------------------------------------------------

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

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

    Normal Course Issuer Bid

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

    Outstanding Share Data

    Set out below is our outstanding share data as at August 31, 2008. For
additional details, see Note 9 of the Q3 2008 Consolidated Financial
Statements.

    
    -------------------------------------------------------------------------
    As at August 31,                                        2008         2007
    -------------------------------------------------------------------------
    Shares
    Class A voting common shares                          57,600       57,600
    Class B non-voting shares                         89,442,224   90,290,515

    Stock Options
    Outstanding options                                3,909,948    3,547,766
    Exercisable options                                1,943,192    1,545,034
    -------------------------------------------------------------------------



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

    Revenue (continuing
     operations)          $     184.7  $     194.3  $     194.3  $     199.1
    Cash flow from
     continuing
     operations(1)               66.2         71.5         82.3         90.7
    EBITDA (continuing
     operations)(2)              81.5         88.6         89.5         87.5
    Pre-tax income
     (continuing operations)     51.3         57.9         56.6         53.9
    Net income                   41.1         44.0         62.7         49.4

    Earnings per share
      Basic               $      0.46  $      0.49  $      0.70  $      0.55
      Diluted             $      0.46  $      0.49  $      0.70  $      0.54

    Weighted average
     basic shares          89,451,578   89,349,275   89,039,394   90,200,924
    Weighted average fully
     diluted shares        89,870,475   89,785,796   89,807,506   91,566,659
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

    Revenue (continuing
     operations)          $     199.2  $     204.9  $     177.0  $     158.5
    Cash flow from
     operations(1)               69.7         84.4         68.7         53.1
    EBITDA (continuing
     operations)(2)              91.3         98.0         80.4         60.3
    Pre-tax income
     (continuing operations)     57.3         63.3         49.1         26.2
    Net income                   39.4         53.6         36.3         21.0

    Earnings per share
      Basic               $      0.44  $      0.60  $      0.41  $      0.24
      Diluted             $      0.43  $      0.59  $      0.40  $      0.23

    Weighted average
     basic shares          90,299,033   89,798,419   89,474,827   89,174,064
    Weighted average fully
     diluted shares        91,847,103   91,316,967   90,640,734   89,890,105
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Additional Information

    Additional information relating to the Company can be found in our
Consolidated Financial Statements and accompanying Notes for the three and
nine months ended August 31, 2008, our 2007 annual MD&A and Consolidated
Financial Statements, our 2007 Annual Information Form (AIF) and other
documents filed with applicable securities regulators in Canada. They may be
accessed at www.sedar.com.


    
                           AGF Management Limited
                         Consolidated Balance Sheets

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

    Assets
      Current Assets
        Cash and cash equivalents                  $   733,597   $   827,874
        Investments available for sale                 163,429        26,149
        Accounts receivable and prepaid expenses        78,078        93,141
        Current portion of retained interest
         from securitization (note 2)                    6,258         7,501
        Real estate secured and investment loans
         due within one year (note 7)                  627,043       492,756
    -------------------------------------------------------------------------
                                                     1,608,405     1,447,421

      Retained interest from securitization (note 2)    40,549        43,424
      Real estate secured and investment
       loans (note 7)                                3,780,550     3,187,605
      Investment in associated company                 102,664       102,600
      Management contracts                             504,269       504,269
      Customer contracts, net of accumulated
       amortization                                     59,981        65,805
      Deferred selling commissions, net of
       accumulated amortization                        313,104       315,275
      Property, equipment and computer software,
       net of accumulated amortization                  20,276        20,812
      Goodwill                                         180,058       180,058
      Trademarks                                         1,935         1,935
      Other assets (notes 3 and 7(e))                   45,403         7,608
    -------------------------------------------------------------------------
    Total assets                                   $ 6,657,194   $ 5,876,812
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
      Current Liabilities
        Accounts payable and accrued liabilities   $   304,636   $   261,115
        Future income taxes (note 12)                   40,383        48,304
        Long-term debt due within one year (note 8)     25,325        25,611
        Deposits due within one year (note 7)        2,472,708     1,847,494
    -------------------------------------------------------------------------
                                                     2,843,052     2,182,524

      Deposits (note 7)                              2,317,434     2,235,848
      Long-term debt (note 8)                          147,759       184,486
      Future income taxes (note 12)                    183,966       202,923
      Other long-term liabilities (note 9 (e))           5,510         1,638
    -------------------------------------------------------------------------
    Total liabilities                                5,497,721     4,807,419
    -------------------------------------------------------------------------

      Non-controlling interest                             242           391

      Shareholders' equity
        Capital stock (note 9)                         436,149       421,923
        Contributed surplus                             16,062        14,948
        Retained earnings                              720,728       635,369
        Accumulated other comprehensive income         (13,708)       (3,238)
    -------------------------------------------------------------------------
    Total shareholders' equity                       1,159,231     1,069,002
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity     $ 6,657,194   $ 5,876,812
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
                      Consolidated Statements of Income

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                       August 31,              August 31,
                             ------------------------------------------------
    ($ thousands)                   2008        2007        2008        2007
    (unaudited)                              (note 3)                (note 3)
    -------------------------------------------------------------------------

    Revenue
      Management and
       advisory fees          $  146,827  $  166,609  $  457,201  $  482,919
      Deferred sales charges       6,375       4,998      18,597      15,007
      Gain on RSP loan
       securitization and
       related income (loss),
      net of impairment (note 2)     163       1,424         250      11,404
      Investment income and
       other revenue               5,737       5,754      23,877      14,850
    -------------------------------------------------------------------------
                                 159,102     178,785     499,925     524,180
    -------------------------------------------------------------------------
        AGF Trust interest
         income (note 11)         76,293      62,549     229,048     164,785
        AGF Trust interest
         expense (note 11)       (50,729)    (42,151)   (155,620)   (107,812)
    -------------------------------------------------------------------------
      AGF Trust net
       interest income            25,564      20,398      73,428      56,973
    -------------------------------------------------------------------------
    Total Revenue                184,666     199,183     573,353     581,153
    -------------------------------------------------------------------------

    Expenses
      Selling, general and
       administrative             55,296      58,161     168,069     168,499
      Trailing commissions        40,746      43,700     124,191     124,566
      Investment advisory fees     3,719       3,615      11,516      10,815
      Amortization of deferred
       selling commissions        23,907      27,502      74,760      81,209
      Amortization of
       customer contracts          1,856       1,976       5,825       5,944
      Amortization of property,
       equipment, computer
       software and other
       intangible assets           2,339       1,822       5,832       5,946
      Interest expense             2,098       2,754       7,494       7,030
      Provision for AGF Trust
       loan losses                 3,396       2,412       9,857       7,597
    -------------------------------------------------------------------------
                                 133,357     141,942     407,544     411,606

    Income from continuing
     operations before
     income taxes and
     non-controlling interest     51,309      57,241     165,809     169,547

    Income tax expense
     (reduction) (note 12)
      Current                     17,813      22,150      42,281      38,996
      Future                      (7,793)     (4,471)    (24,763)      3,391
    -------------------------------------------------------------------------
                                  10,020      17,679      17,518      42,387
    -------------------------------------------------------------------------

    Non-controlling interest
     (note 4)                        150         211         446         678

    -------------------------------------------------------------------------
    Net income from continuing
     operations for the period    41,139      39,351     147,845     126,482
    -------------------------------------------------------------------------
    Loss on dissolution of
     Limited Partnerships,
     net of tax (note 6)               -           -           -      (2,128)
    Gain on sale of
     discontinued operations,
     net of tax (note 3)               -           -           -       4,702
    Net earnings from
     discontinued operations,
     net of tax (note 3)               -           -           -         247
    -------------------------------------------------------------------------
    Net income for the period $   41,139  $   39,351  $  147,845  $  129,303
    -------------------------------------------------------------------------

    Earnings per share
     (note 9)
      Basic from continuing
       operations             $     0.46  $     0.44  $     1.66  $     1.41
      Diluted from
       continuing operations  $     0.46  $     0.43  $     1.65  $     1.39
      Basic                   $     0.46  $     0.44  $     1.66  $     1.44
      Diluted                 $     0.46  $     0.43  $     1.65  $     1.42
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
         Consolidated Statements of Changes in Shareholders' Equity

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                       August 31,              August 31,
    ($ thousands)            ------------------------------------------------
    (unaudited)                     2008        2007        2008        2007
    -------------------------------------------------------------------------

    Common shares
      Balance, beginning
       of period              $  434,621  $  425,122  $  421,923  $  403,566
      Issued through dividend
       reinvestment plan             819         594       3,989       3,069
      Stock options exercised        709         285       5,121      13,694
      Issued on acquisition
       of Highstreet Partners
       Limited (note 4)                -           -       5,116       5,672
      Issued for Cypress
       contingent consideration
       (note 5)                        -       1,200           -       1,200
    -------------------------------------------------------------------------
      Balance, end of period     436,149     427,201     436,149     427,201
    -------------------------------------------------------------------------

    Contributed surplus
      Balance, beginning
       of period                  14,962      12,720      14,948      10,470
      Stock options                1,100       1,072       1,114       3,322
    -------------------------------------------------------------------------
      Balance, end of period      16,062      13,792      16,062      13,792
    -------------------------------------------------------------------------

    Retained earnings
      Balance, beginning
       of period                 701,947     621,477     635,369     565,576
      Transitional adjustment
       on adoption of new
       accounting policies             -           -           -         (25)
    -------------------------------------------------------------------------
      Balance, beginning of
       period, as restated       701,947     621,477     635,369     565,551
      Net income for the period   41,139      39,351     147,845     129,303
      Dividends on AGF Class A
       voting common shares
       and AGF Class B non-
       voting shares             (22,358)    (18,057)    (62,486)    (52,083)
    -------------------------------------------------------------------------
      Balance, end of period     720,728     642,771     720,728     642,771
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive income (loss)
      Balance, beginning
       of period                 (10,444)      2,917      (3,238)      3,792
      Other comprehensive
       income (loss)              (3,264)     (1,774)    (10,470)     (2,649)
    -------------------------------------------------------------------------
      Balance, end of period     (13,708)      1,143     (13,708)      1,143
    -------------------------------------------------------------------------

    Total shareholders'
     equity                   $1,159,231  $1,084,907  $1,159,231  $1,084,907
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
               Consolidated Statements of Comprehensive Income

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                       August 31,              August 31,
    ($ thousands)            ------------------------------------------------
    (unaudited)                     2008        2007        2008        2007
    -------------------------------------------------------------------------

    Net income                $   41,139  $   39,351  $  147,845  $  129,303
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other comprehensive
     income (losses),
     net of tax

      Foreign currency
       translation adjustments
       related to net
       investments in self-
       sustaining foreign
       operations(1)              (1,594)        293      (5,570)     (5,276)
      Reclassification of
       realized loss to
       earnings                        -        (509)          -           -
    -------------------------------------------------------------------------
                                  (1,594)       (216)     (5,570)     (5,276)
    -------------------------------------------------------------------------
      Net unrealized gains
       (losses) on available
       for sale securities
        Unrealized gains
         (losses)(2)              (2,112)     (1,554)     (4,276)      2,631
        Reclassification of
         realized loss or other
         than temporary
         impairment to earnings        -          (4)        (77)         (4)
    -------------------------------------------------------------------------
                                  (2,112)     (1,558)     (4,353)      2,627
    -------------------------------------------------------------------------
      Net unrealized gains
       (losses) on cash
       flow hedges
        Unrealized gains
         (losses)(3)                 291           -        (946)          -
        Reclassification of
         realized gain on cash
         flow hedges                 151           -         399           -
    -------------------------------------------------------------------------
                                     442           -        (547)          -
    -------------------------------------------------------------------------
    Total other
     comprehensive income
     (loss), net of tax       $   (3,264) $   (1,774) $  (10,470) $   (2,649)
    -------------------------------------------------------------------------

    Comprehensive income      $   37,875  $   37,577  $  137,375  $  126,654
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net of income tax reduction of $0.2 million and $0.9 million for the
        three and nine months ended August 31, 2008. Net of income tax
        expense of $0.1 million and income tax reduction of $1.0 million for
        the three and nine months ended August 31, 2007.
    (2) Net of income tax reduction of $0.4 million and $0.9 million for the
        three and nine months ended August 31, 2008. Net of income tax
        reduction of $0.6 million and income tax expense of $0.5 million for
        the three and nine months ended August 31, 2007.
    (3) Net of income tax expense of $0.1 million and net of income tax
        reduction of $0.5 million for the three and nine months ended
        August 31, 2008.

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



                           AGF Management Limited
                    Consolidated Statements of Cash Flow

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                       August 31,              August 31,
    ($ thousands)            ------------------------------------------------
    (unaudited)                     2008        2007        2008        2007
    -------------------------------------------------------------------------

    Operating Activities
      Net income for the
       period                 $   41,139  $   39,351  $  147,845  $  129,303
      Loss on dissolution of
       limited partnerships,
       net of tax                      -           -           -       2,128
      Gain on sale of
       discontinued operation,
       net of tax                      -           -           -      (4,702)
      Earnings from
       discontinued operations,
       net of tax                      -           -           -        (247)
    -------------------------------------------------------------------------
      Net income from
       continuing operations      41,139      39,351     147,845     126,482

      Items not affecting cash
        Amortization              28,102      31,300      86,417      93,099
        Future income taxes       (7,793)     (4,471)    (24,763)      3,391
        Gain on RSP loan
         securitization and
         related income (loss),
         net of impairment          (163)     (1,424)       (250)    (11,404)
        Stock-based
         compensation              2,225       1,593       6,684       4,841
        Provision for AGF Trust
         loan losses               3,396       2,412       9,857       7,597
        Other                       (660)        941      (5,701)     (1,226)
    -------------------------------------------------------------------------
                                  66,246      69,702     220,089     222,780
      Net increase in non-cash
       balances related to
       operations                 30,810      60,341      62,888      65,712
    -------------------------------------------------------------------------
      Net cash provided by
       continuing operating
       activities                 97,056     130,043     282,977     288,492
      Net cash used in
       discontinued operating
       activities                      -           -           -      (1,271)
    -------------------------------------------------------------------------
      Net cash provided by
       operating activities       97,056     130,043     282,977     287,221
    -------------------------------------------------------------------------

    Financing Activities
      Issue of Class B
       non-voting shares             581         286       2,483      13,694
      Dividends                  (21,539)    (17,464)    (58,497)    (49,014)
      Increase (decrease)
       in bank loan              (24,209)      5,000     (12,133)     89,000
      Net increase in AGF
       Trust deposits             74,945     413,995     669,068   1,093,648
    -------------------------------------------------------------------------
      Net cash provided by
       continuing financing
       activities                 29,778     401,817     600,921   1,147,328

    Investing Activities
      Deferred selling
       commissions paid          (17,574)    (31,589)    (72,242)   (124,901)
      Proceeds of RSP loan
       securitization                  -           -           -     252,878
      Acquisition of
       subsidiaries, net of
       cash acquired                   -      (7,800)    (20,784)    (27,673)
      Proceeds of sale of
       discontinued operations         -           -           -       2,747
      Purchase of property,
       equipment and other
       intangible assets          (2,553)     (3,503)     (5,296)     (6,101)
      Other investment
       activities                 (2,543)     (2,070)   (142,709)     (5,440)
      Net increase in AGF
       Trust real estate
       secured and
       investment loans         (119,058)   (390,986)   (737,144) (1,325,964)
    -------------------------------------------------------------------------
      Net cash used in
       continuing investing
       activities               (141,728)   (435,948)   (978,175) (1,234,454)
    -------------------------------------------------------------------------

    Increase (decrease) in
     cash and cash equivalents
     during the period           (14,894)     95,912     (94,277)    200,095

    Balance of cash and cash
     equivalents beginning
     of period                   748,491     508,298     827,874     404,115
    -------------------------------------------------------------------------

    Balance of cash and cash
     equivalents, end of
     period                   $  733,597  $  604,210  $  733,597  $  604,210
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents
     related to:
      Continuing operations                           $  733,597  $  604,210
      Discontinued operations                                  -           -
    -------------------------------------------------------------------------
                                                      $  733,597  $  604,210
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
      Cash and cash equivalents                       $   43,821  $   52,001
      AGF Trust cash and cash
       equivalents                                       689,776     552,209
    -------------------------------------------------------------------------
                                                      $  733,597  $  604,210
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Refer to note 10 for supplemental cash flow information.

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



    Notes to Consolidated Financial Statements

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

    These unaudited Q3 2008 Consolidated Financial Statements of AGF
    Management Limited (AGF or the Company) have been prepared in accordance
    with Canadian Generally Accepted Accounting Principles (GAAP), using the
    same significant accounting policies as AGF's Consolidated Financial
    Statements for the year ended November 30, 2007. These financial
    statements do not contain all the disclosures required by Canadian GAAP
    for annual financial statements and should be read in conjunction with
    the Consolidated Financial Statements for the year ended November 30,
    2007, published in AGF's 2007 Annual Report. Certain comparative amounts
    in these financial statements have been reclassified to conform to the
    current year's presentation.

    Note 1: Changes in Accounting Policy

    Capital Disclosures

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

    Financial Instruments Disclosures and Presentation

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

    Future Accounting Changes

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

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

    Note 2: Securitization of AGF Trust Loans

    The Company, through its wholly-owned subsidiary AGF Trust Company (AGF
    Trust), has securitized RSP loans through the sale of these loans to a
    securitization trust. As at August 31, 2008, $186.7 million (November 30,
    2007 - $291.1 million) of securitized loans were outstanding.

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

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

    The Company has recorded retained interests of $46.8 million
    (November 30, 2007 - $50.9 million) made up of i) the rights to future
    excess interest on these RSP loans after investors in the securitization
    trust have received the return for which they contracted, valued at
    $14.7 million (November 30, 2007 - $20.4 million), ii) cash collateral of
    $11.9 million (November 30, 2007 - $11.3 million) and iii) over-
    collateralization of $20.2 million (November 30, 2007 - $19.2 million).

    As at August 31, 2008, the impaired loans included in the securitized
    balances were equal to $0.3 million (November 30, 2007 - $0.7 million),
    and during the three and nine months ended August 31, 2008, $0.6 million
    (2007 - $0.5 million) and $2.2 million (2007 - $1.1 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 are limited to the retained interests. For the three
    months ended August 31, 2008, cash flows of $1.9 million (2007 -
    $5.7 million) were received on the securitized loans. Of this,
    $1.9 million was related to the interest-only strip (2007 - $3.4 million)
    and none related to the over-collateralization (2007 - $2.3 million). For
    the nine months ended August 31, 2008, cash flows of $6.1 million (2007 -
    $13.4 million) were received on the securitized loans, of which
    $6.1 million was related to the interest-only strip (2007 - $8.6 million)
    and none related to the over-collateralization (2007 - $4.8 million). The
    total other expense recognized from securitization during the three
    months ended August 31, 2008, was $0.2 million (2007 - $1.4 million
    income), net of securitization writedown. The total other income
    recognized from securitization during the nine months ended August 31,
    2008, was $0.3 million (2007 - $3.4 million), net of securitization
    writedown.

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

    Excess spread                                    3.7% - 3.9%
    Discount rate on interest-only strip             7.5%
    Expected credit losses                           0.8%
    Prepayment rate                                  16.3% - 18.3%
    Expected weighted average life of RSP loans      23 - 25 months

    The Trust Company retained servicing responsibilities for the securitized
    loans. A servicing liability of $1.2 million was recorded as at
    August 31, 2008 (November 30, 2007 - $1.8 million). This amount
    represents the estimated future cost of servicing the securitized loans
    and has been offset against the gain on the sale of the RSP loans. The
    amount amortized related to the servicing liability during the three and
    nine months ended August 31, 2008, was $0.2 million (2007 - $0.3 million)
    and $0.6 million (2007 - $0.7 million).

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

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

    Discount rate
      +10%                                                       $       137
      +20%                                                               271
    Prepayment rate
      +10%                                                       $       290
      +20%                                                               517
    Expected credit losses
      +10%                                                       $       267
      +20%                                                               535
    Excess spread
      +10%                                                       $     1,117
      +20%                                                             2,246
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 3: Discontinued Operations

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

    -------------------------------------------------------------------------
                                                  Three months   Nine months
                                                      ended         ended
                                                    August 31,    August 31,
    ($ thousands, except                          ---------------------------
     per share amounts)                                2007          2007
    -------------------------------------------------------------------------

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

    Note 4: Acquisition of Highstreet Partners Limited

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

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

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

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

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

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

    Note 5: Acquisition of Cypress Capital Management Limited

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

    Note 6: Dissolution of Partnerships

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

    Note 7: AGF Trust

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

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

    Mortgage
     loans        $    1,567  $  565,149  $  865,756  $1,432,472  $1,326,327
    Home equity
     lines of
     credit (HELOC)  615,942           -           -     615,942     449,151
    -------------------------------------------------------------------------
    Total real
     estate secured
     loans           617,509     565,149     865,756   2,048,414   1,775,478
    Investment
     loans         2,356,987       5,084       7,938   2,370,009   1,914,686
                  -----------------------------------
                  -----------------------------------
                   2,974,496     570,233     873,694   4,418,423   3,690,164
                  -----------------------------------
    Less:
     allowance for
     loan losses                                         (20,319)    (17,137)
    Add: net
     deferred sales
     commissions and
     commitment fees                                       9,489       7,334
                                                      -----------------------
                                                       4,407,593   3,680,361
    Less: current
     portion                                            (627,043)   (492,756)
                                                      -----------------------
                                                      -----------------------
                                                      $3,780,550  $3,187,605
    -------------------------------------------------------------------------

    Impaired loans
     included in
     above                                            $   23,448  $   25,821
    Less: specific
     allowance for
     loan losses                                          (1,962)     (1,860)
                                                      -----------------------
                                                      -----------------------
                                                      $   21,486  $   23,961
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) Real Estate Secured and Investment Loans

        The table represents the period of contractual repricing of interest
        rates on outstanding amounts. Principal repayments due on real estate
        and investment loans due within one year as at August 31, 2008, were
        $627.0 million (November 30, 2007 - $492.8 million).

        As at August 31, 2008, AGF Trust's mortgage portfolio comprises a
        combination of fixed rate and variable rate residential mortgages, of
        which $626.2 million (November 30, 2007 - $563.5 million) is insured,
        with a weighted average term to repricing of 2.0 years (November 30,
        2007 - 2.0 years) and a weighted average yield of 7.17% (November 30,
        2007 - 7.20%). Investment loans have interest rates based on prime.
        As at August 31, 2008, the average interest rate on HELOCs was 4.79%
        (November 30, 2007 - 6.30%) and on investment loans was 6.09%
        (November 30, 2007 - 7.60%). Mortgage and HELOC loans are secured
        primarily by residential real estate. Investment loans, excluding RSP
        loans, are secured primarily by the investment made using the initial
        loan proceeds.

    (b) Loans Past Due but Not Impaired

        Loans are considered to be past due where repayment of principal or
        interest is contractually in arrears. Loans are classified as
        impaired when, in the opinion of management, there is reasonable
        doubt as to the collectability, either in whole or in part, of
        principal or interest, or when principal or interest is 90 days past
        due, except where the loan is both well-secured and in the process of
        collection. The following table provides an analysis of loans that
        are past due but not impaired:

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

    Mortgage loans                     $    22,459  $    10,586  $    33,045
    Investment loans                         2,207          997        3,204
    RSP loans                                4,024        1,830        5,854
    HELOC receivable                           147            -          147
    -------------------------------------------------------------------------
                                       $    28,837  $    13,413  $    42,250
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

    (c) Allowance for Credit Losses

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

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

    Balance, beginning of the year     $     1,860  $    15,277  $    17,137
    Amounts written off                     (7,327)           -       (7,327)
    Recoveries                                 652            -          652
    Provision for loan losses                6,777        3,080        9,857
    -------------------------------------------------------------------------
                                       $     1,962  $    18,357  $    20,319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                   August 31, 2007
                                      ---------------------------------------
                                          Specific      General        Total
    ($ thousands)                       allowances   allowances   allowances
    -------------------------------------------------------------------------

    Balance, beginning of the year     $     2,448  $    10,251  $    12,699
    Amounts written off                     (4,890)                   (4,890)
    Recoveries                               2,006            -        2,006
    Reduction due to RSP loan
     securitization                              -       (1,766)      (1,766)
    Provision for loan losses                1,981        5,616        7,597
    -------------------------------------------------------------------------
                                       $     1,545  $    14,101  $    15,646
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (d) AGF Trust Deposits

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

    Deposits      $    5,244  $2,467,464  $2,332,195  $4,804,903  $4,099,663
    Less:
     deferred
     selling
     commissions                                         (14,761)    (16,321)
    Less: current
     portion                                          (2,472,708) (1,847,494)
    -------------------------------------------------------------------------
    Long-term
     deposits                                         $2,317,434  $2,235,848
    -------------------------------------------------------------------------

        As at August 31, 2008, deposits were substantially comprised of GICs
        with a weighted average term to maturity of 1.4 years (November 30,
        2007 - 1.8 years) and a weighted average interest rate of 4.30%
        (November 30, 2007 - 4.38%).

    (e) Interest Rate Swaps

        To hedge its exposure to fluctuating interest rates, AGF Trust has
        entered into interest rate swap transactions with four Canadian
        chartered banks, as noted below. The swap transactions expire between
        September 2008 and October 2012. They involve the exchange of either
        the one-month bankers' acceptance rate or the three-month bankers'
        acceptance rate to receive fixed interest rates. The swap contracts
        designated as fair value hedging instruments for deposits are used by
        AGF Trust for balance sheet matching purposes and to mitigate net
        interest revenue volatility. As at August 31, 2008, the aggregate
        notional amount of the swap transactions was $3.3 billion
        (November 30, 2007 - $2.8 billion). The aggregate fair value of the
        swap transactions, which represents the amount that would be received
        by AGF Trust if the transactions were terminated at August 31, 2008,
        was $44.6 million (November 30, 2007 - $6.7 million).

    -------------------------------------------------------------------------
    Notional amount                                           Fixed interest
        of swap         Fair value        Maturity date        rate received
    -------------------------------------------------------------------------
     ($ thousands)
    $     833,000     $       1,980            2008            3.39% - 4.73%
        1,197,000             7,842            2009            2.74% - 4.97%
          775,000            16,334            2010            3.08% - 5.05%
          375,000            14,207            2011            3.38% - 5.08%
          140,000             4,267            2012            3.60% - 5.01%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (f) Interest Rate Sensitivity

        For AGF Trust, the impact of a 1% change in interest rates either up
        or down would be an increase or decrease of annual net interest
        income of approximately $3.7 million. This sensitivity analysis is
        based on an immediate parallel shift of the yield curve and assumes
        no change in the repricing profile of the balance sheet after the
        balance sheet date.

    Note 8: Long-Term Debt

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

    Revolving term loan                            $   147,759   $   160,000
    Payment related to acquisition of Highstreet
     Partners Limited (note 4)
      February 28, 2008                                      -        25,611
      February 28, 2009                                 25,325        24,486
    -------------------------------------------------------------------------
                                                       173,084       210,097

    Less: amount included in current liabilities        25,325        25,611
    -------------------------------------------------------------------------

                                                   $   147,759   $   184,486
    -------------------------------------------------------------------------

    (a) Revolving Term Loan

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

        On May 26, 2008, the Company, under its current loan agreement,
        arranged an additional three-year prime rate based reducing term loan
        to a maximum of $60.0 million (Facility 2). Facility 2 will be used
        to finance share repurchases. Under this facility, AGF is permitted
        to draw down the reducing term loan by direct advances and/or BAs.
        The reducing term loan is available to the latest of December 31,
        2008, or the date that the facility is fully drawn. Following this
        date, Facility 2 is payable in equal quarterly instalments over
        twelve quarters. Any undrawn portion of the facility at the end of
        the availability date will be permanently cancelled.

        As at August 31, 2008, AGF has drawn $147.8 million (2007 -
        $160.0 million) against Facility 1 in the form of four to 55-day BAs
        at an effective average interest rate of 3.87% per annum. No amounts
        were drawn against Facility 2 as at August 31, 2008.

        Security for the bank loans includes a specific claim over the
        management fees owing from the mutual funds (subject to the existing
        claims of related limited partnerships) for which AGF acts as manager
        and a pledge of assets by AGF Management Limited and certain
        subsidiaries, including AGF Funds Inc. and 20/20 Financial
        Corporation.

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

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

    Note 9: Capital Stock

    (a) Authorized Capital

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

    (b) Change During the Period

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

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

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

    Class B shares
      Balance, beginning
       of period              88,922,157  $  421,923  89,171,997  $  403,566
      Issued through dividend
       reinvestment plan         174,034       3,989      94,435       3,069
      Stock options exercised    130,150       5,121     765,600      13,694
      Issued on acquisition
       of Highstreet Partners
       Limited (note 4)          215,883       5,116     225,116       5,672
      Issued for Cypress
       contingent consideration
       (note 5)                        -           -      33,367       1,200
    -------------------------------------------------------------------------
      Balance, end of period  89,442,224  $  436,149  90,290,515  $  427,201
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Class B Shares Purchased for Cancellation

        AGF has obtained regulatory approval to purchase for cancellation,
        from time to time, certain of its Class B shares through the
        facilities of the TSX (or as otherwise permitted by the TSX). Under
        its normal course issuer bid, AGF may purchase up to 10% of the
        public float outstanding on the date of the receipt of regulatory
        approval or up to 7,253,822 shares through to February 25, 2009. No
        Class B shares were purchased during the nine months ended August 31,
        2008 and August 31, 2007.

    (d) Stock Option Plans

        AGF has established stock option plans for senior employees under
        which stock options to purchase an aggregate maximum of 6,761,002
        Class B shares could have been granted as at August 31, 2008 (2007 -
        7,303,584). The stock options are issued at a price not less than the
        market price of these Class B shares immediately prior to the grant
        date. Stock options are vested to the extent of 25% to 33% of the
        individual's entitlement per annum, or in some instances, vest at the
        end of the term of the option.

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

    -------------------------------------------------------------------------
    Nine months ended
     August 31,                         2008                    2007
                             ------------------------------------------------
                                            Weighted                Weighted
                                             average                 average
                                            exercise                exercise
                                 Options       price     Options       price
    -------------------------------------------------------------------------

    Class B share options
      Balance, beginning
       of period               4,268,765  $    22.50   4,324,084  $    19.93
      Options granted             40,000       22.36      12,732       35.70
      Options cancelled         (268,667)      26.54     (23,450)      19.93
      Options exercised         (130,150)      19.08    (765,600)      17.89
    -------------------------------------------------------------------------
      Balance, end of period   3,909,948  $    22.33   3,547,766  $    20.41
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        During the three months ended August 31, 2008, AGF granted 40,000
        options (2007 - Nil) and recorded $1.3 million (2007 - $1.1 million)
        in compensation expense and contributed surplus.

        During the nine months ended August 31, 2008, AGF granted 40,000
        options (2007 - 12,732) and recorded $3.8 million (2007 -
        $3.3 million) in compensation expense and contributed surplus.

        The following assumptions were used to determine the fair value of
        the options granted during the quarter:

              Risk-free interest rate                   3.4%
              Expected dividend yield                   4.7%
              Expected share price volatility           26.0%
              Option term                               4.8 years


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

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

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

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

    Outstanding, beginning
     of period
      Non-vested                 345,257  $    29.65     142,992  $    23.33
    Issued
      Initial allocation               -           -      57,953           -
      In lieu of dividends        10,180           -       2,664           -
    Settled in cash                 (340)          -        (334)          -
    Forfeited and cancelled      (19,650)          -      (1,929)          -
    -------------------------------------------------------------------------
    Outstanding, end
     of period                   335,447           -     201,346           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        Compensation expense for the three months ended August 31, 2008,
        related to these units was $0.9 million (2007 - $0.5 million), and
        for the nine months ended August 31, 2008, was $1.4 million (2007-
        $1.4 million). AGF has entered into a swap agreement to fix the cost
        of compensation related to certain RSUs and PSUs, a portion of which
        has been designated as a cash flow hedge. As at August 31, 2008, a
        $2.6 million liability (2007 - $0.7 million) related to the swap
        agreement has been included under other long-term liabilities.
        Compensation expense includes the effect resulting from the change in
        fair value of the swap held to economically hedge the RSU and PSU
        plans. As at August 31, 2008, AGF has hedged 312,295 share units at a
        fixed cost between $30.36 and $34.03.

    (f) Deferred Share Unit (DSU) Plan

        Under the Company's DSU plan for non-employee directors, AGF
        directors may elect to receive their remuneration in DSUs. On
        termination, AGF will redeem all of the participants' DSUs in cash or
        shares equal to the value of one Class B share at the termination
        date for each DSU. There is no unrecognized compensation related to
        directors' DSUs since these awards vest immediately when granted. As
        at August 31, 2008, 14,411 (2007 - 1,699) DSUs were outstanding.
        Compensation expense related to these DSUs for the three months ended
        August 31, 2008, was $0.1 million (2007 - $0.1 million), and for the
        nine months ended August 31, 2008, was $0.3 million (2007 -
        $0.1 million).

    (g) Earnings Per Share

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

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

    Numerator
      Net income from
       continuing operations
       for the period         $   41,139  $   39,351  $  147,845  $  126,482
      Loss on dissolution
       of partnerships,
       net of tax (note 6)             -           -           -      (2,128)
      Gain on sale of
       discontinued operations,
       net of tax (note 3)             -           -           -       4,702
      Net earnings from
       discontinued operations,
       net of tax (note 3)             -           -           -         247
    -------------------------------------------------------------------------
      Net income for the
       period                 $   41,139  $   39,351  $  147,845  $  129,303

    Denominator
      Weighted average number
       of shares - basic      89,451,578  90,299,033  89,280,734  89,860,219
      Dilutive effect of
       employee stock options    418,897   1,548,070     518,892   1,363,927
    -------------------------------------------------------------------------
      Weighted average number
       of shares - diluted    89,870,475  91,847,103  89,799,626  91,224,146

    Earnings per share
      Basic from continuing
       operations             $     0.46  $     0.44  $     1.66  $     1.41
      Diluted from continuing
       operations             $     0.46  $     0.43  $     1.65  $     1.39
      Basic                   $     0.46  $     0.44  $     1.66  $     1.44
      Diluted                 $     0.46  $     0.43  $     1.65  $     1.42
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 10: Supplemental Disclosure of Cash Flow Information

    Interest payments for the three months ended August 31, 2008, were
    $46.4 million (2007 - $41.8 million). Interest payments for the nine
    months ended August 31, 2008 were $144.3 million (2007 - $102.3 million).

    Income tax payments for the three months ended August 31, 2008, were
    $7.9 million (2007 - $0.1 million). Income tax payments for the nine
    months ended August 31, 2008 were $29.0 million (2007 - $15.6 million).

    Note 11: AGF Trust Net Interest Income

    The breakdown of net interest income is as follows:

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                       August 31,              August 31,
                             ------------------------------------------------
    ($ thousands)                   2008        2007        2008        2007
    -------------------------------------------------------------------------

    AGF Trust interest income:
      Loan interest               68,576  $   56,492     203,784  $  150,556
      Investment interest          7,717       6,057      25,264      14,229
    -------------------------------------------------------------------------
                                  76,293      62,549     229,048     164,785

    AGF Trust interest expense:
      Deposit interest            52,557      36,236     149,926      93,491
      Other interest expense      (1,828)      5,915       5,694      14,321
    -------------------------------------------------------------------------
                                  50,729      42,151     155,620     107,812

    AGF Trust net
     interest income              25,564  $   20,398      73,428  $   56,973
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 12: Income Tax

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

    Note 13: Capital Management

    The Company's objectives when managing capital are to:

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

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

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

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

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

    Regulatory capital for AGF Trust is detailed as follows:

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

    Tier 1 capital
      Common shares                                $    82,768   $    82,768
      Contributed surplus                                1,234           910
      Retained earnings                                105,299        79,863
      Non-cumulative preferred shares                   64,000        49,000
      Less: securitization and other                   (18,802)            -
    -------------------------------------------------------------------------
                                                       234,499       212,541
    Tier 2 capital
      Subordinated debentures                          109,500        89,500
      General allowances                                18,357        15,277
      Less: securitization and other                    (7,165)      (26,669)
    -------------------------------------------------------------------------
                                                       120,692        78,108

    -------------------------------------------------------------------------
    Total capital                                  $   355,191   $   290,649
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Information based on capital adequacy requirements in force at that
        date.

    Note 14: Financial Instruments

    The carrying values of the Company's financial instruments approximate
    their fair value. Financial instruments are classified based on
    categories according to CICA Handbook Section 3855 "Financial
    Instruments - Recognition and Measurement" as follows:

    -------------------------------------------------------------------------
    ($ thousands)                                                  Loans and
                                                                 Receivables
                                                                    or Other
                                         Available     Held for    Financial
    As at August 31, 2008                 for Sale      Trading  Liabilities
    -------------------------------------------------------------------------

    Cash and cash equivalents          $         -  $   733,597  $         -
    Investments                            163,429            -            -
    Retained interest from
     securitization                         46,807            -            -
    Accounts receivable                          -            -       74,553
    Real estate secured and
     investment loans                            -            -    4,407,593
    Other assets                                 -            -       45,403
    -------------------------------------------------------------------------
    Total financial assets             $   210,236  $   733,597  $ 4,527,549
    -------------------------------------------------------------------------

    Accounts payable and accrued
     liabilities                                 -            -      304,636
    Long-term debt                               -            -      173,084
    Deposits                                     -            -    4,790,142
    Other long-term liabilities                  -            -        5,510
    -------------------------------------------------------------------------
    Total financial liabilities        $         -  $         -  $ 5,273,372
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ thousands)                                                  Loans and
                                                                 Receivables
                                                                    or Other
                                         Available     Held for    Financial
    As at November 30, 2007               for Sale      Trading  Liabilities
    -------------------------------------------------------------------------

    Cash and cash equivalents          $         -  $   827,874  $         -
    Investments                             26,149            -            -
    Retained interest from
     securitization                         50,925            -            -
    Accounts receivable                          -            -       91,107
    Real estate secured and
     investment loans                            -            -    3,680,361
    Other assets                                 -            -        7,608
                                      ---------------------------------------
    Total financial assets             $    77,074  $   827,874  $ 3,779,076
                                      ---------------------------------------

    Accounts payable and accrued
     liabilities                       $         -  $         -  $   261,115
    Long-term debt                               -            -      210,097
    Deposits                                     -            -    4,083,342
    Other long-term liabilities                  -            -        1,638
    -------------------------------------------------------------------------
    Total financial liabilities        $         -  $         -  $ 4,556,192
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Available for sale financial assets are measured at fair value with
    unrealized gains and losses, including changes in foreign exchange rates,
    recognized in other comprehensive income (OCI) until the financial asset
    is disposed of or becomes impaired.

    Held for trading assets are measured at fair value, with the changes in
    fair value reported in earnings. Loans and receivable and other financial
    liabilities are measured at amortized costs using the effective interest
    method.

    Risk Management

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

    Market Risk

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

    Fair Value Risk

    The Company is exposed to fair value risk on its investments available
    for sale and retained interest from securitization. Any unrealized gains
    or losses arising from changes in the fair value of these financial
    instruments available for sale are recorded in other comprehensive
    income. Based on the carrying value of these investments at August 31,
    2008, the effect of a 10% decline or increase in the value of securities
    would result in a $16.3 million unrealized gain or loss to other
    comprehensive income. Refer to Note 2 for the effect of changes to key
    assumptions on the fair value of retained interests.

    The Company uses derivative financial instruments held for fair value
    hedging purposes to manage its exposure to interest rate risks and cash
    flow hedges to manage its exposure to increases in compensation costs
    arising from certain share-based compensation. 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. If it is determined that hedge
    accounting is applicable, a hedge relationship is designated as a fair-
    value 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 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. The
    accumulated ineffectiveness of hedging relations is measured, and the
    ineffective portion of changes in fair value is recognized in the income
    statement through investment income and other revenue. Fair-value hedges
    are recognized at fair value and the changes in fair value are recognized
    through net interest income. Cash-flow hedges are held at fair value and
    the changes in fair value are recognized through OCI.

    At August 31, 2008, details of the Company's derivative instruments are
    as follows:

    -------------------------------------------------------------------------
                                        Hedging item
                                             maximum
                                            maturity    Notional        Fair
    ($ thousands)          Interest Rate        date      amount       Value
    -------------------------------------------------------------------------

    Derivatives used to
     manage interest rate
     exposure:             2.74% - 5.08%   2008-2012   3,320,000      44,630
    Derivatives used to
     manage changes in
     share-based
     compensation:                         2009-2010      10,275      (2,633)
    -------------------------------------------------------------------------

    Interest Rate Risk

    The Company, through AGF Trust, is exposed to interest rate risk through
    its real estate secured and investment loans receivable. AGF Trust's
    management of this risk is supervised by AGF Trust's Asset and Liability
    Management Committee. AGF Trust employs a number of techniques to manage
    this risk, including the matching of asset and liability terms, that
    measure changes in the portfolios and the impact this will have on AGF
    Trust's earning capacity. AGF Trust also uses interest rate swaps to
    manage any residual mismatches.

    A 1% change in interest rates, either up or down, would result in an
    increase or decrease in annual net interest income of approximately
    $3.8 million. The Company is also exposed to interest rate risk through
    its floating rate debt. As at August 31, 2008, the effect of a 1% change
    in the variable interest rates on the average loan balance outstanding
    for the year would have resulted in an annualized change in interest
    expense of approximately $1.5 million.

    Foreign Exchange Risk

    The Company is subject to foreign exchange risk on its integrated foreign
    subsidiaries in Ireland and Singapore, which provide investment advisory
    services. These subsidiaries retain minimal monetary exposure to the
    local currency, as the majority of revenues are earned in Canadian
    dollars and salaries and wages, which are paid for the most part monthly,
    represent the majority of the local currency expenses. As such, these
    foreign subsidiaries have limited use of financial instruments
    denominated in local currencies, thus resulting in minimal foreign
    exchange risk.

    Liquidity Risk

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

    The Company manages its liquidity risk through the management of its
    capital structure and financial leverage as outlined in Note 13. Through
    its Investment Management segment, it manages liquidity by monitoring
    actual and projected cash flows to ensure that it has sufficient
    liquidity through cash received from operations as well as borrowings
    under its credit facility. The key liquidity requirements within this
    segment are the funding of commissions paid on mutual funds and dividends
    paid to shareholders. The Company is subject to certain financial loan
    covenants under its credit facility and has met all of these conditions.

    AGF Trust manages liquidity risk through deposit taking activities and
    through the securitization of loans. The key liquidity requirements
    within this segment are the funding of mortgages and loans and the
    ability to payout maturing GICs. AGF Trust's overall liquidity risk is
    managed by its treasury department and is supervised by AGF Trust's Asset
    and Liability Management Committee in accordance with the policies for
    management of assets and liabilities, liquidity and loan financing
    activities. These policies ensure that AGF Trust has sufficient cash
    resources to meet its current and future financial obligations in the
    regular course of business and under a variety of conditions.

    Management monitors cash resources daily to ensure that AGF Trust's
    liquidity measurements are within the limits established by policies. In
    addition, management meets regularly to assess the timing of cash inflows
    and outflows related to loan and deposit maturities, and to review
    various possible stress scenarios. AGF Trust maintains a prudent reserve
    of unencumbered liquid assets that are readily available if required. It
    strives to maintain a stable volume of base deposits that originate from
    its deposit brokerage clientele.

    The Company's internal audit department reviews the compliance of AGF
    Trust's liquidity policies. Internal audit reports are presented to the
    Audit Committee of the Trust Board for review.

    The following table presents contractual terms to maturity of the
    financial liabilities owed by the Company at August 31, 2008:

    -------------------------------------------------------------------------
                                                         1 Year         1 to
                                            Demand      or Less      5 Years
    -------------------------------------------------------------------------

    Accounts payable and accrued
     liabilities                       $         -  $   304,636  $         -
    Long-term debt                               -       25,325      147,759
    Deposits(*)                              5,244    2,467,464    2,332,195
    Other liabilities                            -            -        5,510
    -------------------------------------------------------------------------
    Total                              $     5,244  $ 2,797,425  $ 2,485,464
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Excluding deferred commission.

    Credit Risk

    Credit risk is the potential of financial loss arising from a
    counterparty's inability or refusal to honour its contractual obligations
    to the Company. As at August 31, 2008, financial assets of $5.5 billion,
    consisting of cash and cash equivalents, investments, retained interests
    from securitization, real estate secured and investment loans, accounts
    receivable and other assets, were exposed to credit risk.

    Cash and cash equivalents consist primarily of highly liquid temporary
    deposits with Canadian and Irish banks, as well as commercial paper,
    bank-sponsored ABCP, bank deposit notes, reverse re-purchase agreements,
    BA's and floating rate notes.

    Investments consist primarily of floating rate notes, senior debt
    instruments, investments in mutual funds of AGF and other securities. For
    investing activities done through AGF Trust, policies have been
    established that identify the types and rating of debt and equity
    investments in which AGF Trust can invest. These policies also restrict
    AGF Trust's transactions primarily to major chartered banks and
    recognized investment dealers who are members of the Investment Industry
    Regulatory Organization of Canada (IIROC). AGF Trust Executive Committee
    (EXCO) maintains a list of the approved securities and counterparties,
    which are review at least annually by the Trust Board.

    The Company's most significant credit risk is through AGF Trust's real
    estate secured and investment loans. AGF Trust mitigates this risk
    through credit policies and lending practices. These policies ensure that
    the authority to approve credit applications is appropriately delegated
    by senior management or the Investment Committee of AGF Trust, depending
    on the risk and the amount of the credit application. The credit policies
    also provide guidelines for pricing based on risk, for reviewing any
    collateral pledged for a credit application, monitoring of impaired loans
    and for establishing and reviewing loan loss provisions to ensure they
    are adequate. The policies establish risk limits for credit concentration
    by counterparty, geographic location, and other risk factors that would
    impact AGF Trust's credit risk profile.

    AGF Trust's credit risk on these loans is also mitigated through the use
    of collateral, primarily in the form of residential real estate and
    mutual fund investments. Risk is also mitigated through residential
    mortgage insurance through Canada Mortgage and Housing Corporation (CMHC)
    or another insurer. As at August 31, 2008, $626.2 million of AGF Trust's
    residential mortgage portfolio was insured.

    Derivative financial instruments expose AGF Trust to credit risk to the
    extent that if a counterparty default occurs, market conditions are such
    that AGF Trust would incur a loss in replacing the defaulted transaction.
    AGF Trust negotiates derivative master netting agreements with
    counterparties with which it contracts. These agreements reduce credit
    risk exposure. AGF Trust assesses the credit worthiness of the
    counterparties in order to minimize the risk of counterparty default
    under the agreements. AGF Trust only uses major Chartered banks as
    counterparties with a minimum credit rating of AA.

    Note 15: Segment Information

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

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

    -------------------------------------------------------------------------
    ($ thousands)             Investment       Trust
    Three months ended        Management     Company
    August 31, 2008           Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue                   $  155,168  $   28,356  $    1,142  $  184,666
    Operating expenses            89,190      13,967           -     103,157
    Amortization and other        27,182         920       2,098      30,200
    -------------------------------------------------------------------------
    Segment income (loss) from
     continuing operations
     before taxes             $   38,796  $   13,469  $     (956) $   51,309
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ thousands)             Investment       Trust
    Three months ended        Management     Company
    August 31, 2007           Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue                   $  173,410  $   24,176  $    1,597  $  199,183
    Operating expenses            96,827      11,061           -     107,888
    Amortization and other        30,873         427       2,754      34,054
    -------------------------------------------------------------------------
    Segment income (loss) from
     continuing operations
     before taxes             $   45,710  $   12,688  $   (1,157) $   57,241
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ thousands)             Investment       Trust
    Nine months ended         Management     Company
    August 31, 2008           Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue                   $  483,274  $   82,332  $    7,747  $  573,353
    Operating expenses           270,963      42,670           -     313,633
    Amortization and other        84,474       1,943       7,494      93,911
    -------------------------------------------------------------------------
    Segment income (loss) from
     continuing operations
     before taxes             $  127,837  $   37,719  $      253  $  165,809

    Total assets              $1,289,849  $5,367,345  $        -  $6,657,194
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ thousands)             Investment       Trust
    Nine months ended         Management     Company
    August 31, 2007           Operations  Operations       Other       Total
    -------------------------------------------------------------------------

    Revenue(1)                $  501,659  $   73,439  $    6,055  $  581,153
    Operating expenses           277,422      34,055           -     311,477
    Amortization and other        92,016       1,083       7,030     100,129
    -------------------------------------------------------------------------
    Segment income from
     continuing operations
     before taxes             $  132,221  $   38,301  $     (975) $  169,547

    Total assets              $1,332,327  $4,000,706  $        -  $5,333,033
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The Trust Company results for the nine months ended August 31, 2007
        include an $8.0 million securitization gain.
    

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

    About AGF Management Limited

    AGF Management Limited is one of Canada's premier investment management
companies with offices across Canada and subsidiaries around the world. AGF's
products and services include a diversified family of more than 50 mutual
funds, the evolutionary AGF Elements portfolios, the Harmony asset management
program, AGF Asset Management Group services for institutional and high-net-
worth clients, as well as AGF Trust GICs, loans and mortgages. With
approximately $49 billion in total assets under management, AGF serves more
than one million investors. AGF trades on the Toronto Stock Exchange under the
symbol AGF.B.




For further information:

For further information: AGF Management Limited shareholders and
analysts, please contact: Greg Henderson, CA, Senior Vice-President and Chief
Financial Officer, (416) 865-4156, greg.henderson@AGF.com; Deirdre Neary,
Director, Investor Relations, (416) 815-6268, deirdre.neary@AGF.com; Media,
please contact: Lucy Becker, Vice-President, Corporate Communications, (416)
865-4284, lucy.becker@AGF.com


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