AGF Management Limited Reports Third Quarter Financial Results

AGF reports net income of $22.8 million

TORONTO, Sept. 23 /CNW/ - AGF Management Limited (AGF) today announced financial results for the third quarter ended August 31, 2009 with net income of $22.8 million, up $5.6 million from net income reported in the second quarter ended May 31, 2009. Net income was down from $41.1 million in the same period in 2008 as a result of declines in Investment Management Operations revenue primarily related to declines in global markets and an increase in Trust Company Operations provision for loan losses. These impacts were partially offset by 12.5% decline in selling, general and administrative (SG&A) expenses.

Earnings per share in the third quarter of 2009, on a fully diluted basis, were $0.25 compared with $0.19 in the second quarter of 2009 and $0.46 in the third quarter of last year.

While the global economy continues to face strong challenges, economic indicators suggest a recovery may be starting to take shape. The third quarter showed signs of improvement over the second quarter of 2009 with AGF reporting a 9.6% increase in assets under management (AUM), a 2.4% increase in total revenue, and a 14.5% increase in earnings before interest, taxes, depreciation and amortization (EBITDA). Year-over-year results, however, show that the economy has yet to reach pre-recession levels as evidenced by third quarter numbers that show a 15.8% decline in AUM, a 20.5% decline in revenue and a 31.2% decrease in EBITDA compared with the same period a year earlier.

"There were signs during the third quarter that the global economy is moving toward a recovery. Global markets continued to improve with higher indices contributing to increases in our AUM and profitability compared to the second quarter," said Chairman and CEO Blake C. Goldring. "While encouraged by the steady growth in our AUM over the past quarter, we will continue to strengthen the business through expense discipline, improving our future operating capabilities and servicing our clients."

Added Mr. Goldring, "We are very pleased that Manulife Investments announced on September 16 that its new GIF Select platform will include a number of new investment fund options, including a bundle from AGF. The product, to be called Manulife AGF Bundle, will consist of three AGF funds - AGF Canada Class, AGF Global Equity Class and AGF Canadian Bond Fund. We are enthusiastic about embarking on this new step and look forward to its rollout in October."

During this quarter, total consolidated revenue decreased to $146.9 million compared with $184.7 million in the third quarter of the prior year. EBITDA totalled $56.1 million for the three months ended August 31, 2009, compared with $81.5 million for the three months ended August 31, 2008. For the third quarter of 2009, EBITDA margins declined to 38.2% from 44.1% in the same period a year earlier.

Total AUM decreased 15.8% to $41.0 billion at August 31, 2009 from $48.7 billion as at August 31, 2008. Over the same period, mutual fund assets declined by 16.0% primarily as a result of market depreciation combined with net redemptions. However, the level of net redemptions showed improvement on a year-over-year basis. Institutional and high-net-worth client assets declined 15.5% year-over-year primarily as a result of market depreciation but improved 14.3% quarter-over-quarter with the addition of new institutional mandates.

Also in the quarter, in keeping with our stated strategy to slow loan growth and suspend new originations of lower margin lending products, our Trust Company Operations loan assets declined 14.1% over August 31, 2008 to $3.8 billion as at August 31, 2009. AGF Trust remained focused on credit and collections activities in the third quarter of 2009 to mitigate potential future loan losses.

This strategy has helped to deliver an 87.8% increase in Trust EBITDA in the third quarter ended August 31, 2009 over the second quarter ended May 31, 2009. This improvement was primarily driven by a 51.7% decline in the provision for loan losses in the third quarter ended August 31, 2009 as compared to the second quarter ended May 31, 2009.

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 laws, we are under no obligation (and expressly disclaim any such obligation) to update or alter the forward-looking statements, whether as a result of new information, future events or otherwise. For a more complete discussion of the risk factors that may impact actual results, please refer to the 'Managing Risk - Overview' section of this MD&A and to the 'Risk Factors and Risk Management' section of our 2008 annual MD&A.

Dear fellow shareholders

The mutual fund industry showed some positive signs in the third quarter that investors are slowly regaining confidence in the markets. Industry redemptions of money market funds accelerated during the summer months and net sales of long-term funds showed improvement when compared with the first half of the year. Industry mutual fund assets increased amid improving equity markets but still lagged levels from a year ago.

AGF's total assets under management (AUM) grew to $41.0 billion at the end of the third quarter of fiscal 2009, down 15.8% from August 2008 levels but up 9.6% since the end of May 2009. We are pleased with the steady improvement in our AUM over the past six months. On a year-over-year basis, Investment Management revenues were down 22.4% for the quarter. Accordingly, we will continue to focus on improving gross mutual fund sales by targeting our sales efforts on the categories that matter the most to investors. We are very pleased that Manulife Investments announced on September 16 that its new GIF Select platform will include a number of new investment fund options, including a bundle from AGF. The product, to be called Manulife AGF Bundle, will consist of three AGF funds - AGF Canada Class, AGF Global Equity Class and AGF Canadian Bond Fund. We are enthusiastic about embarking on this new step and look forward to its rollout in October. We were awarded new institutional mandates during the third quarter and we will continue to aggressively market our institutional product platform and expand our international reach as we grow assets in this space. We have reduced our SG&A expenses by 11.5% year-to-date and will continue to take further action to reduce costs in a manner that enhances our future operating capabilities and sustainability.

Our Trust Company Operations continued to focus on responsible management of our lending portfolios during the third quarter of 2009. Despite the fact that loan assets declined 14.1% year-over-year at August 31, 2009 and net interest income decreased 12.5%, results were much improved in the third quarter compared to the first six months of fiscal 2009. The success in the Trust business reflects our stated strategy to ensure that AGF Trust remains well-capitalized and focused on increased credit and collection activities, reducing operating expenses and managing liquidity. AGF Trust remained a profitable contributor to AGF during the third quarter of fiscal 2009 contributing EBITDA of $9.2 million.

Consolidated revenue was $146.9 million, compared with $184.7 million in the third quarter of the prior year. Earnings before interest, taxes, depreciation and amortization(1) (EBITDA) from continuing operations declined to $56.1 million from $81.5 million for the three months ended August 31, 2008 as declining revenue outpaced expense savings. Selling, general and administrative (SG&A) expenses of $48.4 million were 12.5% lower compared to $55.3 million in the third quarter of last year. We continue to target permanent SG&A expense savings compared with 2008.

For the three months ended August 31, 2009, AGF reported cash flow from continuing operations(1) (before net change in non-cash balances related to operations) of $49.0 million, compared with $66.3 million one year ago. Free cash flow(1) (cash flow from continuing operations less selling commissions paid) for the same period was $35.9 million, compared with $48.7 million one year ago.

Our focus and commitment continues to be providing excellence in the investment management business. We believe that prudent management of our expenses and balance sheet will allow AGF to weather future challenges and positions us appropriately as an economic recovery begins to take shape. We remain committed to achieving our long-term objectives and delivering superior value to our shareholders, clients and unitholders.

    
    (signed)

    Blake C. Goldring, M.S.M., CFA
    Chairman and Chief Executive Officer
    September 23, 2009

    (1) Cash flow from continuing operations, free cash flow and EBITDA 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, 2009
    

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, 2009, compared with November 30, 2008. The MD&A also includes the results of operations for the three and nine months ended August 31, 2009, compared with the corresponding periods of 2008. This discussion should be read in conjunction with our 2008 annual MD&A and 2008 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 2008 annual MD&A: "Risk Factors and Risk Management", "Controls and Procedures", "Contractual Obligations", "Intercompany and Related Party Transactions" and "Government Regulations". The "Key Performance Indicators and Non-GAAP Measures" section contains a reconciliation of non-GAAP measures to GAAP measures.

Overview

With $41.0 billion in assets under management (AUM) as at August 31, 2009, AGF is one of Canada's premier investment management companies, with operations and investments in Canada, the United States, the United Kingdom, Ireland and Asia. The origin of our Company dates back to 1957 with the introduction of the American Growth Fund, the first mutual fund available to Canadians seeking to invest in the United States. As of August 31, 2009, our products and services include a diversified family of award-winning mutual funds, AGF Elements portfolios, the Harmony asset management program, services for institutional and high-net-worth clients, as well as AGF Trust GICs, loans and mortgages.

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).

Strategy and Quarterly Overview

As stated in our 2008 annual MD&A, our overall business strategy is to foster the development of best-in-class operating segments to provide world-class financial services to investors in Canada and internationally. We continue to identify opportunities within our business segments to ensure that the appropriate resources are allocated to each of these segments to maximize shareholder value over the long term. Our strategy also recognizes that our investment management and trust businesses operate in cyclical industries and our financial results will be affected by global stock markets, credit availability, employment levels and other economic factors.

Profitability and operating conditions improved in the third quarter of 2009 compared to the second quarter of this year. However, profitability and operating conditions in the third quarter of 2009 compared to the same quarter in 2008 remained challenging due to lower year over year global stock market indices. During the third quarter of 2009:

    
    -   Revenue decreased 20.5% as compared with the same period in 2008,
        driven primarily by a 22.4% decline in Investment Management
        Operations revenue which was directly related to lower year-over-year
        AUM levels.

    -   Earnings before interest, taxes, depreciation and amortization
        (EBITDA) decreased 31.2% during the same period to $56.1 million as
        declining revenue outpaced expense savings.

    -   EBITDA margin declined to 38.2% in the third quarter of 2009 as
        compared to 44.1% in the third quarter of 2008 but increased from
        34.1% in the second quarter of 2009.

    -   Net income decreased 44.5% over the same period in 2008 primarily due
        to a decline in Investment Management Operations revenue and an
        increase in Trust Company Operations provision for loan losses. This
        was partly offset by declines in selling, general and administrative
        (SG&A) expenses.

    -   Total AUM declined 15.8% from $48.7 billion at August 31, 2008 to
        $41.0 billion as at August 31, 2009. AUM increased by 9.6% from
        $37.4 billion at May 31, 2009 due to improving stock markets during
        the third quarter of 2009.

    -   SG&A expenses declined 12.5% in the quarter ended August 31, 2009 as
        compared to the corresponding period in 2008 as a result of cost
        reduction initiatives across the Company.

    -   AGF Trust real estate secured loan assets declined 22.6% over the
        previous year and investment loans declined 6.8% with total loan
        assets declining 14.1% year-over-year. This decline in loan assets is
        reflective of our strategy to suspend new originations of lower
        margin lending products and slow loan growth in 2009.

    -   AGF Trust remained profitable in the third quarter of 2009,
        representing 27.6% of AGF Management Limited's pre-tax income.

    -   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) remained steady at $22.2 million in the third
        quarter of 2009 compared to $22.4 million in the same period in 2008.

    -   Following the end of our third quarter, on September 16, 2009,
        Manulife Investments announced that its new GIF Select platform will
        include a number of new investment fund options, including a bundle
        from AGF. The product, to be called Manulife AGF Bundle, will consist
        of three AGF funds - AGF Canada Class, AGF Global Equity Class and
        AGF Canadian Bond Fund.
    

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 12 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)                    2009        2008        2009        2008
    -------------------------------------------------------------------------

    Net cash provided by
     continuing operating
     activities               $     59.8  $     97.1  $    117.8  $    283.0
    Less: net changes in
     non-cash balances
     related to operations          10.8        30.8       (22.6)       62.9
    -------------------------------------------------------------------------
    Cash flow from
     continuing operations    $     49.0  $     66.3  $    140.4  $    220.1
    -------------------------------------------------------------------------
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Free Cash Flow from Operations

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

    
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                                  Three months ended       Nine months ended
                                           August 31,              August 31,
                              -----------------------------------------------
    ($ millions)                    2009        2008        2009        2008
    -------------------------------------------------------------------------

    Cash flow from
     continuing operations
     (defined above)          $     49.0  $     66.3  $    140.4  $    220.1
    Less: selling
     commissions paid               13.1        17.6        41.0        72.2
    -------------------------------------------------------------------------
    Free cash flow            $     35.9  $     48.7  $     99.4  $    147.9
    -------------------------------------------------------------------------
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EBITDA Margin

EBITDA margin provides useful information to management and investors as an indicator of our overall operating performance. We believe EBITDA margin is a valuable measure because it assesses the extent 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)                    2009        2008        2009        2008
    -------------------------------------------------------------------------

    EBITDA                    $     56.1  $     81.5  $    147.9  $    259.7
    Divided by revenue             146.9       184.7       428.4       573.4
    -------------------------------------------------------------------------
    EBITDA margin                  38.2%       44.1%       34.5%       45.3%
    -------------------------------------------------------------------------
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Pre-Tax Profit Margin

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

    
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                           August 31,              August 31,
                              -----------------------------------------------
    ($ millions)                    2009        2008        2009        2008
    -------------------------------------------------------------------------

    Net income                $     22.8  $     41.1  $     52.2  $    147.8
    Add: income taxes                7.6        10.0        17.5        17.5
    -------------------------------------------------------------------------
    Income before taxes             30.4        51.1        69.7       165.3
    Divided by revenue             146.9       184.7       428.4       573.4
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    Pre-tax profit margin          20.7%       27.7%       16.3%       28.8%
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Return on Equity (ROE)

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

    
    -------------------------------------------------------------------------
    For the three months ended                         August 31,  August 31,
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------

    Net income (annualized)                           $     91.2  $    164.4
    Divided by average shareholders' equity              1,098.8     1,150.2
    -------------------------------------------------------------------------
    Return on equity                                        8.3%       14.3%
    -------------------------------------------------------------------------
    

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.

    
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    For the three months ended                         August 31,  August 31,
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------

    Long-term debt                                    $    182.6  $    147.8
    EBITDA (annualized)                                    224.4       326.0
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    Long-term debt to EBITDA                               81.4%       45.3%
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(b) Investment Management Operations

Assets Under Management (AUM)

The amount of AUM is critical to our business since these assets generate fees from our mutual fund, institutional, 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

Investment performance, which represents market appreciation (depreciation) of fund portfolios and is shown net of management fees received, is a key driver of the level of AUM and is central to the value proposition that we offer advisors and unitholders. Growth in AUM resulting from investment performance increases the wealth of our unitholders, and, in turn, we benefit from higher revenues. Alternatively, poor 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. 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)                    2009        2008        2009        2008
    -------------------------------------------------------------------------

    EBITDA                    $     45.8  $     66.0  $    122.4  $    212.3
    Divided by revenue             120.4       155.2       343.3       483.3
    -------------------------------------------------------------------------
    EBITDA margin                  38.0%       42.5%       35.7%       43.9%
    -------------------------------------------------------------------------
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Pre-Tax Profit Margin

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

    
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                                  Three months ended       Nine months ended
                                           August 31,              August 31,
                              -----------------------------------------------
    ($ millions)                    2009        2008        2009        2008
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    Income before taxes and
     non-segmented items      $     22.6  $     38.8  $     51.5  $    127.8
    Divided by revenue             120.4       155.2       343.3       483.3
    -------------------------------------------------------------------------
    Pre-tax profit margin          18.8%       25.0%       15.0%       26.4%
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(c) Trust Company Operations

Loan Asset Growth

In the Trust Company Operations segment (AGF Trust), we focus on long-term, profitable growth and credit quality 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.

    
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                           August 31,              August 31,
                              -----------------------------------------------
    ($ millions)                    2009        2008        2009        2008
    -------------------------------------------------------------------------

    Interest income           $     52.2  $     76.3  $    177.5  $    229.0
    Less: interest expense          29.9        50.8       103.0       155.6
    -------------------------------------------------------------------------
    Net interest income       $     22.3  $     25.5  $     74.5  $     73.4
    -------------------------------------------------------------------------
    

Net Interest Margin

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

    
    -------------------------------------------------------------------------
    For the three months ended                         August 31,  August 31,
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------

    Annualized net interest income                    $     89.2  $    102.0
    Divided by average quarterly total loan balance      3,870.3     4,374.4
    -------------------------------------------------------------------------
    Net interest margin                                     2.3%        2.3%
    -------------------------------------------------------------------------
    

Efficiency Ratio

The efficiency ratio is a financial services industry KPI that measures the efficiency of the organization. We use this ratio to compare expenses and keep them in line from one period to another as the Trust Company 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)                    2009        2008        2009        2008
    -------------------------------------------------------------------------

    Selling, general and
     administrative expenses  $      9.0  $     10.6  $     26.0  $     32.8
    Add: amortization expense        0.8         0.9         2.2         1.9
    -------------------------------------------------------------------------
    Non-interest expense      $      9.8  $     11.5  $     28.2  $     34.7
    -------------------------------------------------------------------------
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    Other revenue             $      2.5  $      2.7  $      6.6  $      8.6
    RSP loan securitization
     income (loss), net of
     impairment                      0.6         0.2        (0.4)        0.3
    -------------------------------------------------------------------------
    Non-interest income       $      3.1  $      2.9  $      6.2  $      8.9
    -------------------------------------------------------------------------

    Net interest income       $     22.3  $     25.5  $     74.5  $     73.4
    Add: non-interest income         3.1         2.9         6.2         8.9
    -------------------------------------------------------------------------
    Total of net interest
     income and non-interest
     income                   $     25.4  $     28.4  $     80.7  $     82.3
    -------------------------------------------------------------------------
    Efficiency ratio               38.6%       40.5%       34.9%       42.2%
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EBITDA Margin

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

    
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                           August 31,              August 31,
                              -----------------------------------------------
    ($ millions)                    2009        2008        2009        2008
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    EBITDA                    $      9.2  $     14.4  $     21.1  $     39.6
    Divided by revenue              25.4        28.4        80.7        82.3
    -------------------------------------------------------------------------
    EBITDA margin                  36.2%       50.7%       26.1%       48.1%
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Pre-Tax Profit Margin

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

    
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                                  Three months ended       Nine months ended
                                           August 31,              August 31,
                              -----------------------------------------------
    ($ millions)                    2009        2008        2009        2008
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    Income before taxes and
     non-segmented items      $      8.4  $     13.5  $     18.9  $     37.7
    Divided by revenue              25.4        28.4        80.7        82.3
    -------------------------------------------------------------------------
    Pre-tax profit margin          33.1%       47.5%       23.4%       45.8%
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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, and expresses the extent by which capital is leveraged into the assets of the DTI.

    
    -------------------------------------------------------------------------
    As at August 31,
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------

    Total assets per OSFI guidelines                  $  4,796.4  $  5,359.7
    Divided by adjusted Tier 1 and Tier 2 capital          368.1       355.2
    -------------------------------------------------------------------------
    Assets-to-capital multiple                              13.0        15.1
    -------------------------------------------------------------------------
    

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.

    
    -------------------------------------------------------------------------
    As at August 31,
    ($ millions)                                            2009        2008
    -------------------------------------------------------------------------

    Conventional mortgage loans(1)                    $    605.9  $    800.4
    Divided by fair value of collateral                    971.7     1,254.6
    -------------------------------------------------------------------------
    Loan-to-value ratio                                    62.4%       63.8%
    -------------------------------------------------------------------------
    (1) Includes loan provision and deferred sales commission of
        $11.3 million.
    

Significant Accounting Policies

A summary of AGF's significant accounting policies can be found in Note 1 of our 2008 audited Consolidated Financial Statements.

Significant Accounting Estimates

Goodwill and other intangibles are subject to impairment tests on an annual basis or more frequently if events or changes in circumstances indicate that the assets may be impaired. AGF's ongoing review of the valuation of goodwill and other intangibles resulted in a writedown of $46.3 million in the fourth quarter of 2008. During the third quarter of 2009, the annual impairment test was performed and no impairment was identified.

Changes in Significant Accounting Policies

Goodwill, Intangible Assets and Financial Statement Concepts

Effective December 1, 2008, the CICA's new accounting standard "Handbook Section 3064, Goodwill and Intangible Assets" was adopted. The standard clarifies that costs can be deferred only when they relate to an item that meets the definition of an asset, and as a result, start-up costs must be expensed as incurred. "Section 1000, Financial Statements Concepts" was also amended to provide consistency with Section 3064. These standards did not have any impact on the financial position or earnings of the Company.

Credit Risk and Fair Value

Effective December 1, 2008, EIC-173 "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities" was adopted. EIC-173 requires the Company's own credit risk and the credit risk of the counterparty to be taken into account in determining the fair value of financial assets and financial liabilities, including derivatives. The new guidance did not have a material effect on the financial position or earnings of the Company.

Future Accounting Changes

Conversion to International Financial Reporting Standards in Fiscal 2012

In February 2008, the Canadian Accounting Standards Board (AcSB) confirmed that all Canadian publicly-accountable enterprises will be required to adopt International Financial Reporting Standards (IFRS) for years beginning on or after January 1, 2011. AGF will adopt IFRS for the year beginning December 1, 2011 and will present the interim and annual consolidated financial statements, including comparative prior year financial statements in accordance with IFRS.

AGF is currently assessing the differences between IFRS and GAAP, as well as the alternatives available upon adoption. The impact these differences may have on the financial results has not yet been determined and will be part of an ongoing process as our assessment continues and the International Accounting Standards Board and the AcSB issue new standards and recommendations.

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 2008 annual MD&A in the section entitled "Risk Factors and Risk Management". The Company has not identified any material changes to the risk factors affecting its business or in the management of those risks. Refer to Note 14 of the Consolidated Financial Statements and Notes for risks arising from the use of financial instruments.

Changes in Internal Controls over Financial Reporting

The Chief Executive Officer and the Chief Financial Officer have designed or caused the design of the Internal Controls over Financial Reporting (ICFR) and Disclosure Controls and Procedures. There have been no material weaknesses identified relating to the design of the ICFR. There have been no changes to AGF's internal controls for the quarter ended August 31, 2009 that have materially affected or are reasonably likely to materially affect the internal controls over financial reporting.

Consolidated Operating Results

The table below summarizes our consolidated operating results for the three and nine months ended August 31, 2009, and August 31, 2008.

    
    -------------------------------------------------------------------------
                             Three months ended            Nine months ended
                                      August 31,                   August 31,
    ($ millions,    ---------------------------------------------------------
     except per
     share amounts)     2009      2008 % change      2009      2008 % change
    -------------------------------------------------------------------------

    Revenue
      Investment
       Management
       Operations   $  120.4  $  155.2   (22.4%) $  343.3  $  483.3   (29.0%)
      Trust Company
       Operations       25.4      28.4   (10.6%)     80.7      82.3    (1.9%)
      Other              1.1       1.1    (0.0%)      4.4       7.8   (43.6%)
    -------------------------------------------------------------------------
                       146.9     184.7   (20.5%)    428.4     573.4   (25.3%)
    Expenses
      Investment
       Management
       Operations       74.6      89.2   (16.4%)    220.9     271.0   (18.5%)
      Trust Company
       Operations       16.2      14.0    15.7%      59.6      42.7    39.6%
    -------------------------------------------------------------------------
                        90.8     103.2   (12.0%)    280.5     313.7   (10.6%)

    EBITDA(1)           56.1      81.5   (31.2%)    147.9     259.7   (43.0%)
      Amortization      23.9      28.1   (14.9%)     73.1      86.4   (15.4%)
      Interest
       expense           1.6       2.1   (23.8%)      4.7       7.5   (37.3%)
      Non-controlling
       interest          0.2       0.2     0.0%       0.4       0.5   (20.0%)
      Income taxes       7.6      10.0   (24.0%)     17.5      17.5     0.0%
    -------------------------------------------------------------------------
    Net income      $   22.8  $   41.1   (44.5%) $   52.2  $  147.8   (64.7%)
    -------------------------------------------------------------------------

    Earnings
     per share -
     diluted        $   0.25  $   0.46   (45.7%) $   0.58  $   1.65   (64.8%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section. The items required to reconcile EBITDA to
        net income, a defined term under Canadian GAAP, are detailed above.
    

Revenue for the three and nine months ended August 31, 2009, declined by 20.5% and 25.3% from the corresponding periods in 2008. Revenue in the Investment Management Operations segment declined 22.4% and 29.0% for the three and nine months ended August 31, 2009. This corresponds to lower average levels of AUM. The Trust Company Operations segment revenue decreased by 10.6% and 1.9% for the three and nine months ended August 31, 2009. This corresponds with a decline in net interest income in the three-month period and a decline in other revenue in the nine-month period ended August 31, 2009 compared with the corresponding periods in 2008. Revenue from Other, which represents the results of our 30.3% equity interest in S&WHL, was unchanged for the three months ended August 31, 2009 and was lower for the nine months ended August 31, 2009 compared with the corresponding periods in 2008 due to the impact of the economic environment in the U.K.

Expenses for the three and nine months ended August 31, 2009, decreased by 12.0% and 10.6% compared with the same periods in 2008. Expenses in the Investment Management Operations segment declined 16.4% and 18.5%, primarily attributable to lower trailing commissions and investment advisory fees as a result of the decline in AUM, as well as lower SG&A costs related to expense reductions. The Trust Company Operations experienced higher overall expenses related to increased provisions for loan losses partly offset by reduced SG&A expenses. For further details, refer to the segment discussions.

The impact of revenue declining at a faster rate than expenses served to decrease EBITDA by 31.2% and 43.0% for the three and nine months ended August 31, 2009, from the corresponding periods of 2008.

Amortization expense decreased 14.9% and 15.4% for the three and nine months ended August 31, 2009, compared to the same periods in 2008. The decline was attributable 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, 2009 accounted for $20.8 million and $64.1 million (2008 - $23.9 and $74.8 million) of the total amortization expense.

Interest expense was $1.6 million and $4.7 million for the three and nine months ended August 31, 2009, as compared with $2.1 and $7.5 million in the same periods of 2008. Lower interest expense in the quarter is reflective of declining interest rates.

For the three and nine months ended August 31, 2009, the income tax expense was $7.6 million and $17.5 million as compared with $10.0 million and $17.5 million in the same periods in 2008. Results for the nine months ended August 31, 2008 included an income tax reduction of $19.5 million related to the reduction in the federal income tax rate to 15.0% from 18.5% by January 1, 2012. The effective tax rate for the first nine months of 2009 was 25.0% compared with 22.3% in the same period in 2008, excluding the impact of the above $19.5 million tax reduction in 2008.

The impact of the above revenue and expense items resulted in net income of $22.8 million and $52.2 million for the three and nine months ended August 31, 2009 compared with $41.1 million and $147.8 million in the same periods of 2008. Diluted earnings per share were $0.25 and $0.58 for the three and nine months ending August 31, 2009, compared with $0.46 and $1.65 per share in the same periods of 2008. Excluding the impact of the $19.5 million tax reduction in the first quarter of 2008, net income in the nine months ended August 31, 2008 was $128.3 million or $1.43 per share diluted.

A further discussion follows of the results of each business segment for the three and nine months ended August 31, 2009, compared with August 31, 2008.

Business Segment Performance

We report on three business segments: Investment Management Operations, Trust Company Operations and Other. AGF's reportable segments are strategic business units that offer different products and services. The Investment Management Operations segment provides investment management and advisory services. It is responsible for the management and distribution of AGF investment products and services, including retail mutual fund operations, institutional investment management and high-net-worth client investment counselling services. The Trust Company Operations segment offers 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 across the wealth continuum, including mutual funds, wrap products, institutional investment services and high-net-worth investment management. Our products are delivered through multiple channels, including advisors, financial planners, banks, strategic partnerships, life insurance companies, brokers and consultants.

We compete with numerous domestic and foreign players within the Canadian investment management industry. We believe our status as an independent fund manufacturer without distribution conflict will benefit us and our shareholders as the industry continues to evolve. We also remain focused on building our reputation and presence internationally as an institutional investment management firm and we continue to attract a significant amount of interest in our investment strategies from international investors.

Segment Strategy and Quarterly Overview

We continue to consistently apply our strategy to enhance the client-centric model in our investment management business by maintaining a high level of communication with our clients and strong partnerships with advisors. We remain committed to excellence in investment management, relationship management and product management. We continue to focus on leveraging our investment management competency across all distribution channels. On the retail side, we continue to work aggressively to increase our market share in the investment categories that matter the most to investors. We continue to grow our institutional business by increasing our sales efforts in international markets and expanding our institutional product platform.

Global stock markets continued to strengthen in the third quarter of 2009, leading to a sequential increase in our mutual fund AUM. While industry AUM and sales of mutual funds remained below levels from a year ago, investors appeared to regain some confidence in the markets in the third quarter. Industry redemptions of money market funds accelerated during the summer months and long-term funds posted much improved sales numbers compared with the second quarter.

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, 2009 and August 31, 2008:

    
    -------------------------------------------------------------------------
                             Three months ended            Nine months ended
                                      August 31,                   August 31,
    ($ millions,    ---------------------------------------------------------
     except per
     share amounts)     2009      2008 % change      2009      2008 % change
    -------------------------------------------------------------------------

    Mutual fund
     AUM, beginning
     of period      $ 20,907  $ 28,627   (27.0%) $ 19,761  $ 30,052   (34.2%)

    Gross sales of
     mutual funds        592       854   (30.7%)    1,930     2,927   (34.1%)
    Redemptions of
     mutual funds       (759)   (1,426)  (46.8%)   (2,436)   (3,983)  (38.8%)
    -------------------------------------------------------------------------
    Net mutual
     fund sales         (167)     (572)  (70.8%)     (506)   (1,056)  (52.1%)

    Market
     appreciation
     (depreciation)
     of fund
     portfolios        1,402    (1,684) (183.3%)    2,887    (2,625) (210.0%)
    -------------------------------------------------------------------------

    Mutual fund
     AUM, end
     of period      $ 22,142  $ 26,371   (16.0%) $ 22,142  $ 26,371   (16.0%)

    Institutional
     and strategic
     accounts AUM     16,018    18,579   (13.8%)   16,018    18,579   (13.8%)
    High-net-worth
     AUM               2,874     3,787   (24.1%)    2,874     3,787   (24.1%)
    -------------------------------------------------------------------------

    Total AUM,
     end of period  $ 41,034  $ 48,737   (15.8%) $ 41,034  $ 48,737   (15.8%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average daily
     mutual fund
     AUM for the
     period         $ 21,399  $ 26,725   (19.9%) $ 20,069  $ 27,901   (28.1%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Global market declines and an industry trend of reduced gross sales of long-term funds resulted in a decrease in mutual fund AUM to $22.1 billion at August 31, 2009 from $26.4 billion as at August 31, 2008. The average daily mutual fund AUM for the nine months ended August 31, 2009, decreased 28.1% to $20.1 billion compared with the same period in 2008. Institutional and strategic accounts AUM decreased by $2.6 billion to $16.0 billion from $18.6 billion at August 31, 2008 as a result of market volatility, client rebalancing and redemptions offset by new client mandates. High-net-worth AUM decreased by $0.9 billion to $2.9 billion due to market volatility. These decreases resulted in total AUM decreasing by 15.8% to $41.0 billion at August 31, 2009.

Market performance influences the level of AUM. During the three and nine months ended August 31, 2009, the Canadian-dollar-adjusted S&P 500 Index increased 11.7% and 2.8%, respectively. The Canadian-dollar-adjusted NASDAQ Index increased 13.3% and 15.8%, respectively, for the three and nine months ended August 31, 2009, and the S&P/TSX Composite Index increased 5.6% and 20.4%, respectively, for those same time periods. The aggregate market appreciation of our mutual fund portfolios for the nine months ended August 31, 2009, divided by the average daily mutual fund AUM for the period, was 14.5% after management fees and expenses paid by the funds.

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, 2009 has been an increase in AUM of $1.9 million. For the nine months ended August 31, 2009, the impact of the U.S. dollar decrease has been a decrease in AUM of $0.6 billion.

Financial and Operational Results

The Investment Management Operations segment results for the three and nine months ended August 31, 2009, and August 31, 2008, are as follows:

    
    -------------------------------------------------------------------------
                             Three months ended            Nine months ended
                                      August 31,                   August 31,
                    ---------------------------------------------------------
    ($ millions)        2009      2008 % change      2009      2008 % change
    -------------------------------------------------------------------------

    Revenue
      Management
       and advisory
       fees         $  114.8  $  146.8   (21.8%) $  322.7  $  457.2   (29.4%)
      Deferred
       sales charges     4.9       6.4   (23.4%)     16.5      18.6   (11.3%)
      Investment
       income and
       other revenue     0.7       2.0   (65.0%)      4.1       7.5   (45.3%)
    -------------------------------------------------------------------------
                       120.4     155.2   (22.4%)    343.3     483.3   (29.0%)

    Expenses
      Selling,
       general and
       administrative   39.5      44.8   (11.8%)    122.7     135.3    (9.3%)
      Trailing
       commissions      32.8      40.7   (19.4%)     90.3     124.2   (27.3%)
      Investment
       advisory fees     2.3       3.7   (37.8%)      7.9      11.5   (31.3%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                        74.6      89.2   (16.4%)    220.9     271.0   (18.5%)
    -------------------------------------------------------------------------

    EBITDA(1)           45.8      66.0   (30.6%)    122.4     212.3   (42.3%)
    Amortization        23.2      27.2   (14.7%)     70.9      84.5   (16.1%)
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-segmented
     items          $   22.6  $   38.8   (41.8%) $   51.5  $  127.8   (59.7%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section. The items required to reconcile EBITDA to
        net income, a defined term under Canadian GAAP, are detailed above.
    

Revenue

For the three- and nine-month periods ended August 31, 2009, revenue for the Investment Management Operations segment decreased by 22.4% and 29.0% compared with the previous-year periods with changes in the following categories:

Management and Advisory Fees

The 19.9% and 28.1% decline in average daily mutual fund AUM in the three and nine months ended August 31, 2009, contributed to a 21.8% and 29.4% decrease in management and advisory fee revenue from the same periods in 2008.

Deferred Sales Charges (DSC)

We receive DSC upon redemption of securities sold on the contingent DSC or low-load commission basis for which we finance the selling commissions paid to the dealer. The DSC ranges from 3.0% to 5.5%, depending on the commission option, of the original subscription price of the funds purchased if the funds are redeemed within the first two years, and declines to zero after three or seven years. DSC revenue fluctuates based on the level of redemptions, the age of the assets being redeemed and the proportion of redemptions composed of back-end assets. DSC revenues for the three and nine months ended August 31, 2009, decreased by 23.4% and 11.3% from the same periods in 2008, reflecting lower retail mutual fund redemptions of DSC AUM that are subject to a redemption charge.

Expenses

For the three- and nine-month periods ended August 31, 2009, expenses decreased by 16.4% and 18.5% from the previous-year periods. Changes in specific categories are described in the discussion that follows.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the three- and nine-month periods ended August 31, 2009 were $39.5 million and $122.7 million. This represents a 11.8% and 9.3% decrease over the same periods in 2008 and is the result of cost reduction initiatives. The decrease is made up of the following amounts:

    
    -------------------------------------------------------------------------
                                                           Three        Nine
                                                          months      months
                                                           ended       ended
                                                       August 31,  August 31,
                                                      -----------------------
    ($ millions)                                            2009        2009
    -------------------------------------------------------------------------

    Increase (decrease) in fund absorption expenses   $     (0.5) $      1.8
    Increase (decrease) in compensation-related
     expenses                                               (2.1)      (14.5)
    Increase (decrease) in other expenses                   (2.5)       (4.0)
    Increase (decrease) in severance and
     restructuring expenses                                 (0.2)        4.1
    -------------------------------------------------------------------------
                                                      $     (5.3) $    (12.6)
    -------------------------------------------------------------------------

    The following explains expense changes in the three- and nine-month
periods ended August 31, 2009 compared with the previous-year period:

    -   Absorption expense estimates remained relatively flat quarter over
        quarter and were up $1.8 million in the nine-month period. Lower
        transactional volumes, improved contractual pricing and removal of
        the management expense ratio (MER) caps have contributed to our
        improving absorption expenses.

    -   Compensation-related expenses decreased due to staff reductions,
        lower estimates for performance-based payouts and stock-based
        compensation expense.

    -   Other expenses decreased $2.5 million and $4.0 million for the three
        and nine months ended August 31, 2009 due to continued cost savings
        initiatives.

    -   Severance and restructuring expenses decreased $0.2 million and
        increased $4.1 million for the three and nine months ended August 31,
        2009. The increase year-to-date is as a result of longer-term cost
        savings initiatives.
    

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 were 0.61% and 0.60% for the three and nine months ended August 31, 2009, compared to 0.61% and 0.59% in the same 2008 periods.

Investment Advisory Fees

External investment advisory fees decreased 37.8% and 31.3% for the three- and nine-month periods ended August 31, 2009, compared with the previous-year periods. The year-over-year decrease relates to the reduced level of AUM combined with repatriation of certain mandates.

EBITDA

EBITDA for the Investment Management Operations segment were $45.8 million and $122.4 million for the three and nine months ended August 31, 2009. This represents a decrease of 30.6% and 42.3% from $66.0 million and $212.3 million for the same periods of fiscal 2008. The decrease is directly attributable to lower revenue levels resulting from lower average AUM. Compared to the second quarter of 2009, EBITDA for the Investment Management Operations increased 9.6% due to higher AUM levels resulting in higher revenue.

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 $20.8 million and $64.1 million in the three and nine months ended August 31, 2009, compared with $23.9 million and $74.8 million in the same periods in 2008.

During the third quarter of fiscal 2009, we paid $13.1 million in selling commissions compared with $17.6 million in 2008. The decline is due to lower gross sales of retail funds and a slightly higher percentage of funds paid on a front-end basis in 2009 versus 2008. As at August 31, 2009, the unamortized balance of deferred selling commissions stood at $281.1 million. This is a decrease of $23.3 million from the balance of $304.4 million as at November 30, 2008. The contingent DSC that would be received if all of the DSC securities were redeemed at August 31, 2009, were estimated to be approximately $378.7 million (August 31, 2008 - $414.7 million).

Trust Company Operations

Business and Industry Profile

Through AGF Trust, we offer financial solutions that include GICs, real estate secured loans and investment loans.

AGF Trust investment loans consist of secured investment loans and RSP loans distributed through 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 many years and our reputation for quality service is widely acknowledged, as demonstrated by our recognition as Advisors' Choice Investment Fund Company of the Year at the 2008 Canadian Investment Awards.

We offer real estate secured loans to Canadians who have sound credit, but whose circumstances may not meet the traditional 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. 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.

Segment Strategy and Highlights

AGF Trust, similar to other financial institutions in Canada, continues to be impacted by the recession. Our strategy has been to effectively manage through the current economic downturn and slow loan growth to improve our regulatory capital position. In the latter part of 2008, we repositioned our lending programs to focus on higher margin products and suspended new originations of certain business lines, including our Home Equity Line of Credit (HELOC) and 100% No Margin Investment loan products. During the third quarter of 2009, we continued to focus on responsible management of our loan portfolio and increased our collections capacity and activities to mitigate default risk and reduce potential losses. The majority of funding for the lending and investment activity continues to be through the sale of GICs and we remain confident in our ability to raise funds through this channel.

For the three and nine months ended August 31, 2009, loan originations were $8.1 million and $71.6 million, compared to $362.0 million and $1.3 billion in the same periods in the previous year. Net loan writeoffs were $12.3 million and $26.6 million for the three and nine months ended August 31, 2009, compared to $3.2 million and $6.7 million in the same periods in the previous year. The increase in writeoffs was largely attributable to writeoffs in our RSP, secured investment loan and mortgage loan portfolio. Net loan writeoffs for the three and nine months ended August 31, 2009 were $8.5 million and $18.4 million, respectively, in our RSP loan portfolio, $2.0 million and $4.0 million, respectively, in our secured investment loan portfolio and $1.8 million and $4.1 million, respectively, in our mortgage loan portfolio.

As at August 31, 2009, collateral value declines have resulted in approximately $364.5 million of unsecured exposures in our secured investment loan portfolio compared to $445.3 million of unsecured exposures as at May 31, 2009. This improvement was directly related to rising equity markets. Our investment loan program is used by independent investment advisors as part of their overall investment strategy for their clients. We believe that the investment advisor is an integral part of their clients' investment strategies. Combined with other mitigating factors such as relatively high credit scores, sound underwriting and historical experience of other financial institutions with this type of product with little evident correlation between collateral values and propensity to default, we expect that clients will continue to service their debt despite a decline in equity values. The weighted average loan-to-value ratio on our conventional mortgage loan portfolio, as at August 31, 2009, was 62.4%.

Financial and Operational Results

The Trust Company Operations segment results for the three and nine months ended August 31, 2009 and August 31, 2008 are as follows:

    
    -------------------------------------------------------------------------
                             Three months ended            Nine months ended
                                      August 31,                   August 31,
                    ---------------------------------------------------------
    ($ millions)        2009      2008 % change      2009      2008 % change
    -------------------------------------------------------------------------

    Interest income
      Loan interest $   50.2  $   68.6   (26.8%) $  165.1  $  203.8   (19.0%)
      Investment
       interest          2.0       7.7   (74.0%)     12.4      25.2   (50.8%)
    -------------------------------------------------------------------------
                        52.2      76.3   (31.6%)    177.5     229.0   (22.5%)
    Interest expense
      Deposit interest  42.2      52.6   (19.8%)    137.1     149.9    (8.5%)
      Other interest
       expense
       (income)        (12.3)     (1.8)     n/m     (34.1)      5.7      n/m
    -------------------------------------------------------------------------
                        29.9      50.8   (41.1%)    103.0     155.6   (33.8%)
    -------------------------------------------------------------------------
    Net interest
     income             22.3      25.5   (12.5%)     74.5      73.4     1.5%
    Other revenue        2.5       2.7    (7.4%)      6.6       8.6   (23.3%)
    RSP loan
     securitization
     income (loss),
     net of impairment   0.6       0.2      n/m      (0.4)      0.3      n/m
    -------------------------------------------------------------------------
    Total revenue       25.4      28.4   (10.6%)     80.7      82.3    (1.9%)

    Expenses
      Selling,
       general and
       administrative    9.0      10.6   (15.1%)     26.0      32.8   (20.7%)
      Provision for
       loan losses       7.2       3.4   111.8%      33.6       9.9   239.4%
    -------------------------------------------------------------------------
                        16.2      14.0    15.7%      59.6      42.7    39.6%

    EBITDA(1)            9.2      14.4   (36.1%)     21.1      39.6   (46.7%)
    Amortization         0.8       0.9   (11.1%)      2.2       1.9    15.8%
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-segmented
     items          $    8.4  $   13.5   (37.8%) $   18.9  $   37.7   (49.9%)
    -------------------------------------------------------------------------
    (1) For the definition of EBITDA, see the "Key Performance Indicators and
        Non-GAAP Measures" section. The items required to reconcile EBITDA to
        net income, a defined term under Canadian GAAP, are detailed above.
    

Revenue, Net Interest Income and Net Interest Margin

Net interest income, which is expressed net of interest on deposits and other interest expense, decreased 12.5% in the three months ended August 31, 2009 and increased 1.5% during the nine months ended August 31, 2009 over the same periods in 2008. The average net interest margin on lending products was 2.3% (2008 - 2.3%) and declined from 2.5% in the second quarter of 2009. AGF Trust manages its interest rate risk through the use of interest rate swaps. The average quarterly loan balances were approximately 11.5% lower for the three months ended August 31, 2009 compared to 2008. Other interest expense includes $18.1 million and $52.2 million of interest income related to changes in fair value on interest rate swaps for the three and nine months ended August 31, 2009 (2008 - $7.8 million and $12.0 million). Other revenue decreased 7.4% and 23.3% in the three and nine months ended August 31, 2009 primarily due to a $0.7 million and $2.4 million decrease related to hedge ineffectiveness. During the quarter, the Trust Company recognized a $0.3 million writedown of its retained interest in securitized RSP loans compared to $1.5 million in 2008. These factors resulted in an overall revenue decrease of 10.6% and 1.9% in the three and nine months ended August 31, 2009 as compared with 2008.

Selling, General and Administrative Expenses

SG&A expenses decreased 15.1% and 20.7% in the three- and nine-month periods ended August 31, 2009 over the same period in 2008, primarily due to reduced staffing levels and reduced estimates for performance-based payouts.

Provision for Loan Losses

The total provision for loan losses increased to $7.2 million during the third quarter of 2009 compared to $3.4 million in 2008. During the fourth quarter of 2008, AGF Trust reviewed its methodology for allowance for loan losses as a result of the current market and economic conditions. We refined the methodology to be more responsive to changes in the economy and increases in delinquency. The allowance for specific loan losses was refined to include specific allowances for loans past due but not impaired. Previously, this allowance only included loans identified as impaired. As a result of this change, combined with increases in arrears and impaired loans, the total provision for loan losses increased by $3.8 million in the third quarter of 2009, compared with the same period in 2008.

Based on our analysis of the RSP portfolio, we had approximately $25.0 million of loan accounts which, based on certain loan characteristics, were assessed as having a significantly higher risk of default. Accordingly, we have recorded an allowance for loan losses of $7.0 million against these accounts and in addition, we have written off $11.5 million of these loans as at August 31, 2009, resulting in an existing net exposure of approximately $6.5 million. Our net exposure on these same loans was $9.0 million as at May 31, 2009.

Loan writeoffs, net of recoveries for the three months ended August 31, 2009 were $12.3 million compared with $3.2 million for the three-month period ended August 31, 2008, with the increase attributable to RSP, secured investment loan and mortgage loan writeoffs. Loan writeoffs, net of recoveries, for the three months ended August 31, 2009, were $8.5 million in the RSP loan portfolio, $2.0 million in the secured investment loan portfolio and $1.8 million in the mortgage loan portfolio, compared to $2.1 million, $0.5 million and $0.6 million, respectively, for the three months ended August 31, 2008. Impaired loans expressed as a percentage of loans outstanding were 1.5% as at August 31, 2009, compared with 1.0% at November 30, 2008 and 0.5% at August 31, 2008 due to the negative change in economic conditions.

EBITDA and EBITDA Margin

A decline in revenue and an increase in the loan loss provision contributed to a decline in EBITDA for the three and nine months ended August 31, 2009 of 36.1% and 46.7% to $9.2 million and $21.1 million compared to the same periods of 2008. EBITDA margin for the three and nine months ended August 31, 2009 declined to 36.2% and 26.1% from 50.7% and 48.1% over the same periods of 2008.

Pre-Tax Profit Margin

As a result of the factors outlined above, pre-tax profit margin of 33.1% in the third quarter 2009 declined from 47.5% in the third quarter of 2008.

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, 2009 and August 31, 2008.

    
    -------------------------------------------------------------------------
                             Three months ended            Nine months ended
                                      August 31,                   August 31,
                    ---------------------------------------------------------
    ($ millions)        2009      2008 % change      2009      2008 % change
    -------------------------------------------------------------------------

    Real estate
     secured loans(1)
      Insured
       mortgage
       loans        $  533.7  $  626.2   (14.8%) $  533.7  $  626.2   (14.8%)
      Conventional
       mortgage loans  605.9     800.4   (24.3%)    605.9     800.4   (24.3%)
      HELOCs           444.8     620.0   (28.3%)    444.8     620.0   (28.3%)
    -------------------------------------------------------------------------
                     1,584.4   2,046.6   (22.6%)  1,584.4   2,046.6   (22.6%)

    Investment
     loans(1)
      Secured
       investment
       loans         1,748.1   1,759.0    (0.6%)  1,748.1   1,759.0    (0.6%)
      RSP loans        447.2     589.2   (24.1%)    447.2     589.2   (24.1%)
      Other loans        6.3      13.0   (51.5%)      6.3      13.0   (51.5%)
    -------------------------------------------------------------------------
                     2,201.6   2,361.2    (6.8%)  2,201.6   2,361.2    (6.8%)
    Other assets     1,013.8     959.5     5.7%   1,013.8     959.5     5.7%
    -------------------------------------------------------------------------
    Total Assets    $4,799.8  $5,367.3   (10.6%) $4,799.8  $5,367.3   (10.6%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net interest
     income         $   22.3  $   25.5   (12.5%) $   74.5  $   73.4     1.5%
    RSP loan
     securitization
     income (loss),
     net of
     impairment          0.6       0.2   200.0%      (0.4)      0.3  (233.3%)
    Other revenue        2.5       2.7    (7.4%)      6.6       8.6   (23.3%)
    Non-interest
     expenses(2)        (9.8)    (11.5)  (14.8%)    (28.2)    (34.7)  (18.7%)
    Provision for
     loan losses        (7.2)     (3.4)  111.8%     (33.6)     (9.9)  239.4%
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-segmented
     items          $    8.4  $   13.5   (37.8%) $   18.9  $   37.7   (49.9%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Efficiency
     ratio(3)          38.6%     40.5%              34.9%     42.2%
    Assets-to-capital
     multiple(3)        13.0      15.1               13.0      15.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes loan provision and deferred sales commission.
    (2) Includes SG&A and amortization expenses.
    (3) For the definition of efficiency ratio and assets-to-capital
        multiple, see the "Key Performance Indicators and Non-GAAP Measures"
        section.
    

Loan Asset Growth

Loan originations decreased significantly compared to the third quarter of 2008 as a result of amendments to our lending programs. Real estate secured loan assets decreased by 22.6% year-over-year. Secured investment loans decreased 0.6% to $1.7 billion as at August 31, 2009, over the same period in 2008 while RSP loan balances and other loans decreased $148.7 million or 24.7%.

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 2009, the efficiency ratio experienced a favourable change to 38.6% from 40.5% in the same period of 2008. The efficiency ratio for the nine-month period ended August 31, 2009, improved to 34.9% from 42.2% in the same period of 2008.

Balance Sheet

Total assets decreased 10.6% to $4.8 billion as at August 31, 2009, compared with the previous year. As at August 31, 2009, our assets-to-capital multiple stood at 13.0 times, compared with 15.1 times at the same time last year. Our risk-based capital ratio was 17.8% as at August 31, 2009 compared to 14.7% at November 30, 2008. During the nine-month period ended August 31, 2008, AGF Trust received $35.0 million in debt and equity capital from AGF Management Limited to support increased asset levels. AGF Trust has not required capital from AGF Management since the first quarter of 2008. Liquid assets were high with $865.6 million in cash and cash equivalents as well as investments available for sale as at August 31, 2009 (2008 - $828.6 million).

Loan Portfolio Credit

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

    
        -  Employment rates: higher unemployment rates will likely result in
           higher default rates as individuals' ability to pay deteriorates.
        -  Residential property prices and sales volume: declining
           residential property prices and reduced volumes of residential
           property sales may result in lower resale prices and longer
           disposal times, therefore, increasing losses incurred on the
           disposition of the property.
        -  Equity market performance: declining global equity markets present
           increased risk on the secured investment loan portfolio as the
           value of the underlying collateral is lower. While the Trust
           Company has recourse to the personal assets of clients with
           respect to investment loans, the global macro-economic situation
           and employment levels may impede the Trust Company's ability to
           realize on the full value of the loan.
    

The general allowance for real estate secured loan losses decreased to $6.8 million as compared to $9.2 million a year ago. The general allowance for investment loan losses increased to $16.5 million from $9.2 million in the 2008 quarter, due to a refinement in provisioning methodology combined with higher experience of loan writeoffs. Approximately 46.3% 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 amount of RSP loans written off, net of recoveries (excluding securitized RSP loans) was $18.4 million for the nine months ended August 31, 2009 (2008 - $3.9 million). For the balance of our loan products, the amount written off net of recoveries was $8.1 million (2008 - $2.8 million).

Liquidity and Capital Resources

For the three and nine months ended August 31, 2009, consolidated cash flow generated from continuing operating activities, before net change in non-cash balances related to operations, was $49.0 million and $140.4 million compared to $66.3 million and $220.1 million in the prior year.

During the three- and nine-month period ended August 31, 2009, we paid $13.1 million and $41.0 million in selling commissions, which were capitalized and amortized for accounting purposes, compared with $17.6 million and $72.2 million in 2008. Accordingly, our free cash flow (defined as cash flow from continuing operations less selling commissions paid) was $35.9 million and $99.4 million for the three and nine months ended August 31, 2009, compared with $48.7 million and $147.9 million in the prior year.

Our free cash flow was used primarily to fund the following:

    
    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                           August 31,              August 31,
                              -----------------------------------------------
    ($ millions)                    2009        2008        2009        2008
    -------------------------------------------------------------------------

    Payment of dividends      $     21.6  $     21.5  $     64.6  $     58.5
    Acquisitions of
     subsidiaries                      -           -        19.9        20.8
    Purchase of property,
     equipment and other
     intangible assets               0.6         2.6         1.6         5.3
    Investments(1)                  (8.8)        2.5        (4.9)        2.7
    Bank credit facility
     repayment (borrowing)          12.1        24.2       (58.9)       12.1
    Investment in Trust
     Operations (eliminated
     on consolidation)                 -           -           -        35.0
    -------------------------------------------------------------------------
                              $     25.5  $     50.8  $     22.3  $    134.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Excludes $63.8 million and $338.0 million of cash invested by AGF
        Trust into investments available for sale during the three and nine
        months ended August 31, 2009 (2008 - nil and $140.0 million).
    

During the three months ended August 31, 2009, our revolving term loan balance decreased $12.1 million to $182.6 million (2008 - decreased $24.2 million).

Consolidated cash and cash equivalents of $382.9 million decreased by $201.3 million from November 30, 2008 levels of $584.2 million (2008 - decreased by $94.3 million) primarily due to an increase in investments available for sale held by AGF Trust of $342.4 million.

During the quarter, our term loan facility was renewed in the form of a three-year prime-rate-based revolving term loan facility to a maximum of $300.0 million, of which $111.9 million was available to be drawn as at August 31, 2009. Aside from cash held in the Trust Company Operations segment, which is held to fund loans to clients and GIC maturities, AGF had $28.1 million of cash as at August 31, 2009 (August 31, 2008 - $43.8 million). 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's management of its capital and its capital requirements are detailed in the section entitled 'Capital Management Activities' in the Company's Annual MD&A as at November 30, 2008. There have been no material changes to the management of capital or required regulatory amounts. Refer to Note 13 of the Q3 2009 Consolidated Financial Statements for details of capital measures at AGF Trust.

Normal Course Issuer Bid

In February 2009, the Company's Board of Directors authorized the renewal of AGF's normal course issuer bid for the purchase of up to 7,108,630 Class B shares, or 10% of the public float for such shares. The Company received approval from the Toronto Stock Exchange on February 24, 2009, for the renewal of its normal course issuer bid. This allows AGF to purchase up to 7,108,630 Class B shares through the facilities of the Toronto Stock Exchange (or as otherwise permitted by the Toronto Stock Exchange) between February 26, 2009 and February 25, 2010. 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 Toronto Stock Exchange.

As at August 31, 2009, under this current normal course issuer bid, no Class B shares have been repurchased. AGF's previous normal course issuer bid allowed for the repurchase of up to 7,253,822 Class B shares between February 26, 2008, and February 25, 2009, at prevailing market prices. Under the previous normal course issuer bid, AGF purchased an aggregate of 1,000,000 Class B shares, for a total consideration of $7.8 million at an average price of $7.79 per share.

Dividends

For the three months ended August 31, 2009, we declared a 25-cents-per-share dividend on Class A and Class B shares. This dividend will be payable on October 20, 2009, to shareholders of record on October 9, 2009.

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 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 and Class A shares for the period indicated:

    
    -------------------------------------------------------------------------
    Years ended
     November 30          2009*      2008       2007       2006       2005
    -------------------------------------------------------------------------

    Per share           $   1.00   $   0.95   $   0.78   $   0.69    $  0.56
    -------------------------------------------------------------------------
    Percentage increase       5%        22%        13%        23%        37%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    * The total of dividends paid in January, April and July 2009 and to be
        paid in October 2009.
    

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.

Outstanding Share Data

Set out below is our outstanding share data as at August 31, 2009 and August 31, 2008. For additional details, see Note 9 of the Q3 2009 Consolidated Financial Statements.

    
    -------------------------------------------------------------------------
    As at August 31,                                      2009          2008
    -------------------------------------------------------------------------

    Shares
    Class A voting common shares                        57,600        57,600
    Class B non-voting shares                       88,947,873    89,442,224

    Stock Options
    Outstanding options                              5,895,249     3,909,948
    Exercisable options                              2,383,233     1,943,192
    -------------------------------------------------------------------------
    

During the three and nine months ended August 31, 2009, 45,655 and 199,325 (2008 - 39,574 and 174,034) Class B shares were issued through the dividend reinvestment plan.

    
    Selected Quarterly Information
    -------------------------------------------------------------------------
    ($ millions, except per
     share amounts)
    For the three-month        August 31,     May 31,     Feb 28,    Nov. 30,
     period ended                   2009        2009        2009        2008
    -------------------------------------------------------------------------

    Revenue (continuing
     operations)              $    146.9  $    143.5  $    138.0  $    152.2
    Cash flow
     (continuing
     operations)(1)                 49.0        44.7        46.7        57.4
    EBITDA (continuing
     operations)(2)                 56.1        49.0        42.8        54.0
    Pre-tax income
     (continuing operations)        30.4        23.0        16.3       (24.1)
    Net income                      22.8        17.2        12.2       (19.3)

    Earnings per share
      Basic                   $     0.26  $     0.19  $     0.14  $    (0.21)
      Diluted                 $     0.25  $     0.19  $     0.14  $    (0.21)

    Weighted average
     basic shares             88,914,200  88,826,605  88,564,160  89,446,562
    Weighted average fully
     diluted shares           89,931,517  89,234,015  88,564,160  90,679,048
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ 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
     (continuing
     operations)(1)                 66.3        71.5        83.5        95.0
    EBITDA (continuing
     operations)(2)                 81.5        88.6        89.5        87.5
    Pre-tax income
     (continuing operations)        51.1        57.7        56.5        53.7
    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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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, 2009, our 2008 annual MD&A and Consolidated Financial Statements, our 2008 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 Sheet

    -------------------------------------------------------------------------
    As at                                            August 31,  November 30,
                                                          2009          2008
    ($ thousands)                                   (unaudited)     (audited)
    -------------------------------------------------------------------------

    Assets
      Current Assets
        Cash and cash equivalents                  $   382,885   $   584,168
        Investments available for sale (note 2(a))     528,680       188,435
        Accounts receivable, prepaid expenses and
         other assets                                  102,429        78,403
        Current portion of retained interest from
         securitization (note 3)                         4,157         5,487
        Real estate secured and investment loans
         due within one year (note 5)                  520,835       606,844
    -------------------------------------------------------------------------
                                                     1,538,986     1,463,337

      Retained interest from securitization
       (note 3)                                         37,486        39,460
      Real estate secured and investment loans
       (note 5)                                      3,265,174     3,824,006
      Investment in associated company (note 2(b))      96,129        98,338
      Management contracts                             504,269       504,269
      Customer contracts, net of accumulated
       amortization                                     15,484        18,783
      Goodwill                                         172,985       172,985
      Trademarks                                         1,935         1,935
      Deferred selling commissions, net of
       accumulated amortization                        281,105       304,406
      Property, equipment and computer software,
       net of accumulated amortization                  15,396        19,423
      Other assets (note 6)                             46,477        87,017
    -------------------------------------------------------------------------
    Total assets                                   $ 5,975,426   $ 6,533,959
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
      Current Liabilities
        Accounts payable and accrued liabilities   $   284,312   $   306,834
        Future income taxes                             23,516        26,240
        Long-term debt due within one year (note 7)          -        21,171
        Deposits due within one year (note 5(f))     2,304,337     2,486,635
    -------------------------------------------------------------------------
                                                     2,612,165     2,840,880

      Deposits (note 5(f))                           1,911,905     2,275,426
      Long-term debt (note 7)                          182,593       123,740
      Future income taxes                              157,376       171,293
      Other long-term liabilities (note 8)               7,984        14,995
    -------------------------------------------------------------------------
    Total liabilities                                4,872,023     5,426,334
    -------------------------------------------------------------------------

      Non-controlling interest                             396           203

      Shareholders' equity
        Capital stock (note 9)                         436,553       431,897
        Contributed surplus                             19,612        17,127
        Retained earnings                              661,790       676,190
        Accumulated other comprehensive
         income (loss)                                 (14,948)      (17,792)
    -------------------------------------------------------------------------
    Total shareholders' equity                       1,103,007     1,107,422
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity     $ 5,975,426   $ 6,533,959
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
                       Consolidated Statement of Income

    -------------------------------------------------------------------------
                              Three months ended           Nine months ended
                                       August 31,                  August 31,
    ($ thousands)      ------------------------------------------------------
    (unaudited)               2009          2008          2009          2008
    -------------------------------------------------------------------------

    Revenue
      Management and
       advisory fees   $   114,775   $   146,827   $   322,670   $   457,201
      Deferred sales
       charges               4,872         6,375        16,454        18,597
      RSP loan
       securitization
       income (loss),
       net of impairment
       (note 3)                544           163          (437)          250
      Investment income
       and other revenue     4,372         5,737        15,181        23,877
    -------------------------------------------------------------------------
                           124,563       159,102       353,868       499,925
    -------------------------------------------------------------------------
        AGF Trust
         interest income
         (note 11)          52,182        76,293       177,501       229,048
        AGF Trust interest
         expense (note 11) (29,883)      (50,729)     (103,012)     (155,620)
    -------------------------------------------------------------------------
      Trust Company net
       interest income      22,299        25,564        74,489        73,428
    -------------------------------------------------------------------------
    Total Revenue          146,862       184,666       428,357       573,353
    -------------------------------------------------------------------------

    Expenses
      Selling, general
       and administrative   48,391        55,296       148,718       168,069
      Trailing commissions  32,819        40,746        90,272       124,191
      Investment advisory
       fees                  2,288         3,719         7,888        11,516
      Amortization of
       deferred selling
       commissions          20,763        23,907        64,128        74,760
      Amortization of
       customer contracts    1,263         1,856         3,299         5,825
      Amortization of
       property, equipment
       and computer
       software              1,896         2,339         5,649         5,832
      Interest expense       1,633         2,098         4,764         7,494
      Provision for AGF
       Trust loan losses
       (note 5(e))           7,243         3,396        33,596         9,857
    -------------------------------------------------------------------------
                           116,296       133,357       358,314       407,544

    Income before income
     taxes and non-
     controlling interest   30,566        51,309        70,043       165,809

    Income tax expense
     (reduction) (note 12)
      Current               14,431        17,813        35,512        42,281
      Future                (6,789)       (7,793)      (18,001)      (24,763)
    -------------------------------------------------------------------------
                             7,642        10,020        17,511        17,518
    -------------------------------------------------------------------------

    Non-controlling
     interest (note 4)         181           150           381           446

    -------------------------------------------------------------------------
    Net income for the
     period            $    22,743   $    41,139   $    52,151   $   147,845
    -------------------------------------------------------------------------

    Earnings per share
     (note 9(g))
      Basic            $      0.26   $      0.46   $      0.59   $      1.66
      Diluted          $      0.25   $      0.46   $      0.58   $      1.65
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
          Consolidated Statement of Changes in Shareholders' Equity

    -------------------------------------------------------------------------
                              Three months ended           Nine months ended
                                       August 31,                  August 31,
    ($ thousands)      ------------------------------------------------------
    (unaudited)               2009          2008          2009          2008
    -------------------------------------------------------------------------

    Common shares
      Balance, beginning
       of period       $   434,814   $   434,621   $   431,897   $   421,923
      Issued through
       dividend
       reinvestment plan       578           819         1,959         3,989
      Stock options
       exercised             1,161           709         1,161         5,121
      Issued on
       acquisition of
       Highstreet
       Partners Limited
       (note 4)                  -             -         1,536         5,116
    -------------------------------------------------------------------------
      Balance, end of
       period              436,553       436,149       436,553       436,149
    -------------------------------------------------------------------------

    Contributed surplus
      Balance, beginning
       of period            18,803        14,962        17,127        14,948
      Stock options            809         1,100         2,485         1,114
    -------------------------------------------------------------------------
      Balance, end of
       period               19,612        16,062        19,612        16,062
    -------------------------------------------------------------------------

    Retained earnings
      Balance, beginning
       of period           661,267       701,947       676,190       635,369
      Net income for
       the period           22,743        41,139        52,151       147,845
      Dividends on AGF
       Class A voting
       common shares and
       AGF Class B
       non-voting shares   (22,220)      (22,358)      (66,551)      (62,486)
    -------------------------------------------------------------------------
      Balance, end of
       period              661,790       720,728       661,790       720,728
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive income
     (loss)
      Balance, beginning
       of period           (20,300)      (10,444)      (17,792)       (3,238)
      Other comprehensive
       income (loss)         5,352        (3,264)        2,844       (10,470)
    -------------------------------------------------------------------------
      Balance, end of
       period              (14,948)      (13,708)      (14,948)      (13,708)
    -------------------------------------------------------------------------

    Total shareholders'
     equity            $ 1,103,007   $ 1,159,231   $ 1,103,007   $ 1,159,231
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (The accompanying notes are an integral part of these Consolidated
    Financial Statements.)



                           AGF Management Limited
               Consolidated Statement of Comprehensive Income

    -------------------------------------------------------------------------
                              Three months ended           Nine months ended
                                       August 31,                  August 31,
    ($ thousands)      ------------------------------------------------------
    (unaudited)               2009          2008          2009          2008
    -------------------------------------------------------------------------

    Net income         $    22,743   $    41,139   $    52,151   $   147,845
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other comprehensive
     income (losses),
     net of tax
      Foreign currency
       translation
       adjustments
       related to net
       investments in
       self-sustaining
       foreign
       operations(1)           792        (1,594)       (4,850)       (5,570)
    -------------------------------------------------------------------------
                               792        (1,594)       (4,850)       (5,570)
    -------------------------------------------------------------------------
      Net unrealized gains
       (losses) on
       available for
       sale securities
        Unrealized gains
         (losses)(2)         3,765        (2,112)        6,425        (4,276)
        Reclassification
         of realized loss
         (gain) or other
         than temporary
         impairment to
         earnings              737             -         1,087           (77)
    -------------------------------------------------------------------------
                             4,502        (2,112)        7,512        (4,353)
    -------------------------------------------------------------------------
      Net unrealized gains
       (losses) on
       cash flow hedges
        Unrealized gains
         (losses)(3)             -           291             -          (946)
        Reclassification of
         realized loss on
         cash flow hedges       58           151           182           399
    -------------------------------------------------------------------------
                                58           442           182          (547)
    -------------------------------------------------------------------------
    Total other
     comprehensive
     income (loss),
     net of tax        $     5,352   $    (3,264)  $     2,844   $   (10,470)
    -------------------------------------------------------------------------

    Comprehensive
     income            $    28,095   $    37,875   $    54,995   $   137,375
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net of income tax expense of $0.2 million and reduction $0.8 million
        for the three and nine months ended August 31, 2009. Net of income
        tax reduction of $0.2 million and $0.9 million for the three and nine
        months ended August 31, 2008.
    (2) Net of income tax expense of $1.3 million and $1.9 million for the
        three and nine months ended August 31, 2009. Net of income tax
        reduction of $0.4 million and $0.9 million for the three and nine
        months ended August 31, 2008.
    (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)               2009          2008          2009          2008
    -------------------------------------------------------------------------

    Operating Activities
      Net income for
       the period      $    22,743   $    41,139   $    52,151   $   147,845
      Items not
       affecting cash
        Amortization        23,922        28,102        73,076        86,417
        Future income
         taxes              (6,789)       (7,793)      (18,001)      (24,763)
        RSP loan
         securitization
         income (loss),
         net of impairment    (544)         (163)          437          (250)
        Provision for
         AGF Trust loan
         losses              7,243         3,396        33,596         9,857
        Stock-based
         compensation        1,248         2,225         4,054         6,684
        Equity investment
         in S&WHL           (1,131)       (1,142)       (4,390)       (7,747)
        Dividends from
         S&WHL                   -             -         1,031         1,116
        Other                2,224           482        (1,595)          930
    -------------------------------------------------------------------------
                            48,916        66,246       140,359       220,089
      Net change in
       non-cash balances
       related to
       operations (note 10) 10,847        30,810       (22,570)       62,888
    -------------------------------------------------------------------------
      Net cash provided
       by operating
       activities           59,763        97,056       117,789       282,977
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financing Activities
      Issue of Class B
       non-voting shares     1,161           581         1,161         2,483
      Dividends paid       (21,642)      (21,539)      (64,592)      (58,497)
      Increase (decrease)
       in bank loan        (12,061)      (24,209)       58,853       (12,133)
      Net increase
       (decrease) in AGF
       Trust deposits     (191,364)       74,945      (525,316)      669,068
    -------------------------------------------------------------------------
      Net cash provided by
       (used in) financing
       activities         (223,906)       29,778      (529,894)      600,921

    Investing Activities
      Deferred selling
       commissions paid    (13,073)      (17,574)      (40,978)      (72,242)
      Proceeds from sale
       of discontinued
       operations                -             -           702             -
      Acquisition of
       subsidiaries, net
       of cash acquired          -             -       (19,924)      (20,784)
      Purchase of property,
       equipment and
       computer software      (578)       (2,553)       (1,622)       (5,296)
      Purchase of
       investments
       available
       for sale            (55,025)       (2,543)     (333,066)     (142,709)
      Net decrease
       (increase) in AGF
       Trust real estate
       secured and
       investment loans    267,694      (119,058)      605,710      (737,144)
    -------------------------------------------------------------------------
      Net cash provided by
       (used in) investing
       activities          199,018      (141,728)      210,822      (978,175)
    -------------------------------------------------------------------------

    Increase (decrease) in
     cash and cash
     equivalents            34,875       (14,894)     (201,283)      (94,277)

    Balance of cash and
     cash equivalents,
     beginning
     of period             348,010       748,491       584,168       827,874
    -------------------------------------------------------------------------

    Balance of cash and
     cash equivalents,
     end of period     $   382,885   $   733,597   $   382,885   $   733,597
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
      Cash and cash
       equivalents                                 $    28,117   $    43,821
      AGF Trust cash
       and cash
       equivalents                                     354,768       689,776
    -------------------------------------------------------------------------
                                                   $   382,885   $   733,597
    -------------------------------------------------------------------------
    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, 2009 (tabular amounts in
    thousands of dollars, except per share amounts) (unaudited)

    These unaudited Q3 2009 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, 2008. 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,
    2008. Certain comparative amounts in these financial statements have been
    reclassified to conform to the current year's presentation.

    Note 1: Changes in Accounting Policy

    Goodwill, Intangible Assets and Financial Statement Concepts

    Effective December 1, 2008, the CICA's new accounting standard "Handbook
    Section 3064, Goodwill and Intangible Assets" was adopted. The standard
    clarifies that costs can be deferred only when they relate to an item
    that meets the definition of an asset, and as a result, start-up costs
    must be expensed as incurred. "Section 1000, Financial Statements
    Concepts" was also amended to provide consistency with Section 3064.
    These standards did not have any impact on the financial position or
    earnings of the Company.

    Credit Risk and Fair Value

    Effective December 1, 2008, EIC-173 "Credit Risk and the Fair Value of
    Financial Assets and Financial Liabilities" was adopted. EIC-173 requires
    the Company's own credit risk and the credit risk of the counterparty to
    be taken into account in determining the fair value of financial assets
    and financial liabilities, including derivatives. The new guidance did
    not have a material effect on the financial position or earnings of the
    Company.

    Future Accounting Changes

    Conversion to International Financial Reporting Standards in Fiscal 2012

    In February 2008, the Canadian Accounting Standards Board (AcSB)
    confirmed that all Canadian publicly-accountable enterprises will be
    required to adopt International Financial Reporting Standards (IFRS) for
    years beginning on or after January 1, 2011. AGF will adopt IFRS for the
    year beginning December 1, 2011 and will present the interim and annual
    consolidated financial statements including comparative prior year
    financial statements in accordance with IFRS.

    AGF is currently assessing the differences between IFRS and GAAP, as well
    as the alternatives available upon adoption. The impact these differences
    may have on the financial results has not yet been determined and will be
    an ongoing process as our assessment continues and the International
    Accounting Standards Board and the AcSB issue new standards and
    recommendations.

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

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

    -------------------------------------------------------------------------
                                                     August 31,  November 30,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Trust:
      Canadian government debt(1)
        Federal                                     $   10,181    $   10,233
        Provincial                                     310,580        45,767
      Deposits with regulated institutions              85,842        83,498
      Other securities                                 104,252        28,992
    -------------------------------------------------------------------------
                                                       510,855       168,490

    Investment Management:
      Canadian government debt
        Federal                                            296           294
      AGF mutual funds and other                        11,575        15,013
      Equity securities                                  5,954         4,638
    -------------------------------------------------------------------------
                                                        17,825        19,945

    -------------------------------------------------------------------------
                                                    $  528,680    $  188,435
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes investments issued and/or guaranteed by the Canadian
        government


    (b) The Company holds a 30.3% investment in S&WHL accounted for using the
        equity method. At August 31, 2009, the carrying value was
        $96.1 million (November 30, 2008 - $98.3 million). During the three
        and nine months ended August 31, 2009, the Company recognized
        $1.1 million and $4.4 million (2008 - $1.1 million and $7.7 million)
        in revenue from S&WHL. During the first quarter of 2009, the Company
        received $1.0 million in dividends (2008 - $1.1 million) from S&WHL.
        No dividends were received from S&WHL during the second or third
        quarters of 2009 and 2008. A dividend has been declared by S&WHL and
        the Company will receive approximately $5.0 million on October 2,
        2009.

    Note 3: Securitization of AGF Trust Loans

    On March 30, 2007, AGF Trust securitized $263.6 million of RSP loans.
    Cash flows of $252.9 million were received on the securitization and a
    gain of $8.0 million was recorded, net of transaction fees of
    $0.1 million. As at August 31, 2009, $120.6 million (November 30, 2008 -
    $166.6 million) of securitized loans were outstanding.

    When RSP loan receivables are sold in securitization to a securitization
    trust under terms that transfer control to third parties, the transaction
    is recognized as a sale and the related loan assets are removed from the
    Consolidated Balance Sheet. As part of the securitization, certain
    financial assets are retained. The retained interests are carried at fair
    value and are determined using the present value of future expected cash
    flows. A gain or loss on the sale of loan receivables is recognized
    immediately in income. The amount of the gain or loss is determined by
    estimating the fair value of future expected cash flows using
    management's best estimates of key assumptions: excess spread, discount
    rate on the interest-only strip, expected credit losses, prepayment rates
    and the expected weighted average life of RSP loans that are commensurate
    with the risks involved. The current fair value of retained interests is
    determined using the present value of future expected cash flows as
    discussed above. During the three and nine months ended August 31, 2009,
    a $0.3 million and $3.1 million writedown was booked as an other-than-
    temporary impairment (2008 - $1.5 million and $3.2 million).

    The Company has recorded retained interests of $41.6 million
    (November 30, 2008 - $44.9 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
    $7.6 million (November 30, 2008 - $12.4 million), ii) cash collateral of
    $12.7 million (November 30, 2008 - $12.0 million) and iii) over-
    collateralization of $21.3 million (November 30, 2008 - $20.5 million).

    As at August 31, 2009, the impaired loans included in the securitized
    balances were equal to $0.2 million (November 30, 2008 - $0.2 million),
    and during the three and nine months ended August 31, 2009, $0.6 million
    and $2.0 million of securitized RSP loans were written off (2008 -
    $0.6 million and $2.2 million).

    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, 2009, cash flows of $1.5 million (2008 -
    $1.9 million) related to the interest-only strip were received on the
    securitized loans. For the nine months ended August 31, 2009, cash flows
    of $4.4 million (2008 - $6.1 million) related to the interest-only strip
    were received on the securitized loans. The total other income recognized
    from securitization, net of securitization writedown, during the three
    months ended August 31, 2009, was $0.6 million (2008 - $0.2 million
    loss). The total other loss recognized from securitization, including
    securitization writedown, during the nine months ended August 31, 2009,
    was $0.4 million (2008 - $0.3 million income).

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

        Excess spread                                   4.7% - 4.8%
        Discount rate on interest-only strip            7.5%
        Expected credit losses                          1.7% - 2.0%
        Prepayment rate                                 16.3% - 18.3%
        Expected weighted average life of RSP loans     1.8 - 1.9 years

    AGF Trust retained servicing responsibilities for the securitized loans.
    A servicing liability of $0.7 million was recorded as at August 31, 2009
    (November 30, 2008 - $1.1 million). This amount represents the estimated
    future cost of servicing the securitized loans. The amount amortized
    related to the servicing liability during the three and nine months ended
    August 31, 2009 was $0.1 million (2008 - $0.2 million) and $0.4 million
    (2008 - $0.6 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, 2009. Since the sensitivity is
    hypothetical, it should be used with caution. The effect of changes in
    the fair value of retained interests was calculated using a discounted
    cash flow analysis.

    -------------------------------------------------------------------------
                                                     Impact on fair value of
    ($ thousands)                                         retained interests
    -------------------------------------------------------------------------

    Discount rate
      +10%                                                        $      (53)
      +20%                                                              (104)
    Prepayment rate
      +10%                                                        $      (83)
      +20%                                                              (172)
    Expected credit losses
      +10%                                                        $     (379)
      +20%                                                              (758)
    Excess spread
      -10%                                                        $     (768)
      -20%                                                            (1,533)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 4: Acquisition of Highstreet Partners Limited

    On December 1, 2006, AGF acquired 79.9% of Highstreet Partners Limited
    (Highstreet). The purchase consideration was payable in a combination of
    cash and the issue of Class B non-voting shares (Class B shares). On
    March 2, 2009, a final payment of $21.5 million was paid, consisting of
    $20.0 million in cash and the issuance of 188,444 Class B shares valued
    at $1.5 million. The total consideration paid, including acquisition
    costs and imputed interest, was $65.4 million in cash and the issuance of
    629,443 Class B shares valued at $12.3 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.

    Note 5: 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
                      -------------------------------------------------------
                        Variable  1 year or     1 to 5     August   November
    ($ thousands)           rate       less      years   31, 2009   30, 2008
    -------------------------------------------------------------------------

    Mortgage loans    $    1,182 $  461,167 $  687,826 $1,150,175 $1,394,499
    Home equity lines
     of credit (HELOC)   442,092          -          -    442,092    651,893
    -------------------------------------------------------------------------
    Total real estate
     secured loans       443,274    461,167    687,826  1,592,267  2,046,392
    Investment loans   2,225,445      3,222      3,115  2,231,782  2,411,968
                      -------------------------------------------------------
    Total loans        2,668,719    464,389    690,941  3,824,049  4,458,360
                      ---------------------------------
    Less: allowance
     for loan losses                                      (44,171)   (37,130)
    Add: net deferred
     sales commissions
     and commitment fees                                    6,131      9,620
                                                       ----------------------
                                                        3,786,009  4,430,850
    Less: current portion                                (520,835)  (606,844)
                                                       ----------------------
                                                       $3,265,174 $3,824,006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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, 2009 were
        $520.8 million (November 30, 2008 - $606.8 million).

        As at August 31, 2009, AGF Trust's mortgage portfolio comprises a
        combination of fixed rate and variable rate residential mortgages
        with a weighted average term to repricing of 1.8 years (November 30,
        2008 - 2.0 years) and a weighted average yield of 6.8% (November 30,
        2008 - 7.1%). Insured mortgage loans, excluding loan loss allowance,
        deferred commissions and pending representment, were $533.0 million
        as at August 31, 2009 (November 30, 2008 - $616.6 million). HELOCs,
        which totalled $442.1 million as at August 31, 2009, had an average
        interest rate of 4.2% (November 30, 2008 - 4.5%). Investment loans,
        excluding RSP loans, totalled $1.8 billion as at August 31, 2009, and
        had an average interest rate (based on the prime interest rate) of
        4.0% (November 30, 2008 - 5.5%). The average interest rate on all
        investment loans as at August 31, 2009, was 4.3% (November 30, 2008 -
        5.8%). Mortgage and HELOC loans are secured primarily by residential
        real estate. Secured investment loans of $1.8 billion (November 30,
        2008 - $1.8 million) are secured primarily by the investment made
        using the initial loan proceeds. The market value of this investment
        loan collateral is approximately $1.4 billion (November 30, 2008 -
        $1.2 billion).

    (b) Loans by Province and by Type

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

    -------------------------------------------------------------------------
    As at              Conven-
     August             tional   Secured
     31,       Insured   Mort-   Invest-             HELOC
     2009 ($  Mortgage    gage      ment      RSP  Receiv-  Finance
     millions)   Loans   Loans     Loans    Loans    ables    Loans    Total
    -------------------------------------------------------------------------

    British
     Columbia $  10.3  $  38.2  $  331.7  $  44.3  $  47.8   $ 0.3  $  472.6
    Alberta      61.5    164.0     211.4     47.3    315.1     1.6     800.9
    Ontario     324.6    267.6     854.0    159.1     34.4     1.0   1,640.7
    Quebec      136.6    147.4     128.9    176.3      0.2     1.6     591.0
    Other           -        -     232.6     39.8     44.6     1.8     318.8
    -------------------------------------------------------------------------
    Total
     value of
     loans    $ 533.0  $ 617.2  $1,758.6  $ 466.8  $ 442.1   $ 6.3  $3,824.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                       Conven-
                        tional   Secured
    As at      Insured   Mort-   Invest-             HELOC
     August   Mortgage    gage      ment      RSP  Receiv-  Finance
     31, 2009    Loans   Loans     Loans    Loans    ables    Loans    Total
    -------------------------------------------------------------------------

    British
     Columbia      60      159     4,869    5,000      209     163    10,460
    Alberta       787    1,008     3,659    4,140    1,365     679    11,638
    Ontario     2,136    1,620    13,676   18,284      198     368    36,282
    Quebec        284      786     2,372   16,888        4     601    20,935
    Other           -        -     3,375    3,596      300     882     8,153
    -------------------------------------------------------------------------
    Total
     number
     of loans   3,267    3,573    27,951   47,908    2,076   2,693    87,468
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    As at              Conven-
     November           tional   Secured
     30,       Insured   Mort-   Invest-             HELOC
     2008 ($  Mortgage    gage      ment      RSP  Receiv-  Finance
     millions)   Loans   Loans     Loans    Loans    ables    Loans    Total
    -------------------------------------------------------------------------

    British
     Columbia $  12.8  $  48.2  $  340.2  $  57.8  $  84.7   $ 0.6  $  544.3
    Alberta      68.1    214.6     217.9     59.8    446.0     3.0   1,009.4
    Ontario     388.3    335.9     879.9    216.1     60.9     2.0   1,883.1
    Quebec      147.4    179.2     132.5    208.1      0.3     2.6     670.1
    Other           -        -     240.1     48.5     60.0     2.9     351.5
    -------------------------------------------------------------------------
    Total
     value of
     loans    $ 616.6  $ 777.9  $1,810.6  $ 590.3  $ 651.9   $11.1  $4,458.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                       Conven-
    As at               tional   Secured
     Novem-    Insured   Mort-   Invest-             HELOC
     ber 30,  Mortgage    gage      ment      RSP  Receiv-  Finance
     2008        Loans   Loans     Loans    Loans    ables    Loans    Total
    -------------------------------------------------------------------------

    British
     Columbia      66      201     4,944    6,985      354     244    12,794
    Alberta       327      997     3,735    5,551    1,990   1,020    13,620
    Ontario     2,518    2,000    13,930   25,198      327     543    44,516
    Quebec        834    1,221     2,411   19,939        5     857    25,267
    Other           -        -     3,452    4,488      407   1,193     9,540
    -------------------------------------------------------------------------
    Total
     number
     of loans   3,745    4,419    28,472   62,161    3,083   3,857   105,737
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Impaired Loans

        Loans are considered to be past due where repayment of principal or
        interest is contractually in arrears. Loans are classified as
        impaired when, in the opinion of management, there is reasonable
        doubt as to the collectability, either in whole or in part, of
        principal or interest, or when principal or interest is 90 days past
        due, except where the loan is both well-secured and in the process of
        collection. As at August 31, 2009, impaired loans were $55.6 million
        (November 30, 2008 - $45.4 million) and $34.8 million (November 30,
        2008 - $31.3 million) net of the specific allowance for loan losses.

    -------------------------------------------------------------------------
                                                     August 31,  November 30,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Impaired Loans:
      Insured mortgage loans                        $    6,806    $    5,483
      Conventional mortgage loans                       39,163        33,628
      Secured investment loans                           2,406           988
      RSP loans                                          5,368         4,846
      HELOC receivables                                  1,827           478
    -------------------------------------------------------------------------
                                                    $   55,570    $   45,423
    -------------------------------------------------------------------------

        The following table provides an aging of loans:

    -------------------------------------------------------------------------
    As at August 31, 2009                              1 to 29      30 to 60
    ($ thousands)                        Current          days          days
    -------------------------------------------------------------------------

    Insured mortgage loans            $  450,293    $   36,919    $   12,316
    Conventional mortgage loans          514,939        36,743        21,288
    Secured investment loans           1,736,847        13,874         3,861
    RSP loans                            451,822         6,264         3,737
    HELOC receivables                    432,414         6,096         1,680
    Finance loans                          6,336             -             -
    -------------------------------------------------------------------------
                                      $3,592,651    $   99,896    $   42,882
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    As at August 31, 2009               61 to 90       Over 90
    ($ thousands)                           days          days         Total
    -------------------------------------------------------------------------

    Insured mortgage loans            $    5,489    $   28,006    $  533,023
    Conventional mortgage loans            4,999        39,183       617,152
    Secured investment loans               1,633         2,406     1,758,621
    RSP loans                              2,010         2,992       466,825
    HELOC receivables                          -         1,902       442,092
    Finance loans                              -             -         6,336
    -------------------------------------------------------------------------
                                      $   14,131    $   74,489    $3,824,049
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    As at November 30, 2008                            1 to 29      30 to 60
    ($ thousands)                        Current          days          days
    -------------------------------------------------------------------------

    Insured mortgage loans            $  551,772    $   29,567    $    6,085
    Conventional mortgage loans          670,763        53,741        12,176
    Secured investment loans           1,790,788        15,284         2,220
    RSP loans                            574,049         9,958         4,435
    HELOC receivables                    646,891         3,847           658
    Finance loans                         11,061             -             -
    -------------------------------------------------------------------------
                                      $4,245,324    $  112,397    $   25,574
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    As at November 30, 2008             61 to 90       Over 90
    ($ thousands)                           days          days         Total
    -------------------------------------------------------------------------

    Insured mortgage loans            $    3,313    $   25,878    $  616,615
    Conventional mortgage loans            7,537        33,668       777,885
    Secured investment loans               1,510           790     1,810,592
    RSP loans                              1,120           752       590,314
    HELOC receivables                          -           497       651,893
    Finance loans                              -             -        11,061
    -------------------------------------------------------------------------
                                      $   13,480    $   61,585    $4,458,360
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (d) Mortgages in Legal Action

        The following table provides a summary of conventional mortgages in
        legal action which includes demand for payment, power of sale and
        foreclosures. The table details opening mortgages in legal action for
        the period and related changes to the pool, being additions,
        discharged mortgages other than sold, proceeds on foreclosed
        mortgages discharged and related losses, to arrive at the ending
        balance of mortgages in legal action.

    -------------------------------------------------------------------------
    Nine months ended August 31,                          2009          2008
    ($ thousands)
    -------------------------------------------------------------------------

    Balance outstanding, beginning of the period    $   44,987    $   35,070
      Additions                                         40,833        28,073
      Discharged mortgages other than sold             (16,401)      (23,563)
      Proceeds on foreclosed mortgages discharged      (17,001)       (5,585)
      Loss on foreclosed mortgages discharged           (2,729)       (1,310)
    -------------------------------------------------------------------------
                                                    $   49,689    $   32,685
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (e) Allowance for Credit Losses

        During 2008, as a result of economic and market indicators, the
        Company refined its provision for specific allowances to include
        loans in arrears of one to 90 days in addition to impaired loans. The
        change in the allowance for loan losses is as follows:

    -------------------------------------------------------------------------
    Nine months ended
     August 31, 2009                    Specific       General         Total
    ($ thousands)                     allowances    allowances    allowances
    -------------------------------------------------------------------------

    Balance, beginning of the period  $   14,163    $   22,967    $   37,130
    Amounts written off                  (27,766)            -       (27,766)
    Recoveries                             1,211             -         1,211
    Provision for loan losses             33,232           364        33,596
    -------------------------------------------------------------------------
                                      $   20,840    $   23,331    $   44,171
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Breakdown by category as at
     August 31, 2009:
      Conventional mortgage loans     $    6,286    $    5,788    $   12,074
      Secured investment loans             4,943         6,274        11,217
      RSP loans                            9,401        10,216        19,617
      HELOCs receivables                     210         1,053         1,263
    -------------------------------------------------------------------------
                                      $   20,840    $   23,331    $   44,171
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

    Balance, beginning of the period  $    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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Breakdown by category as at
     August 31, 2008:
      Conventional mortgage loans     $    1,556    $    7,640    $    9,196
      Secured investment loans                33         4,407         4,440
      RSP loans                              373         4,772         5,145
      HELOC receivables                        -         1,538         1,538
    -------------------------------------------------------------------------
                                      $    1,962    $   18,357    $   20,319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (f) AGF Trust Deposits

    -------------------------------------------------------------------------
                           Term to maturity
                  -----------------------------------
                               1 year or      1 to 5      August    November
    ($ thousands)     Demand        less       years    31, 2009    30, 2008
    -------------------------------------------------------------------------

    Deposits      $    3,335  $2,301,002  $1,922,690  $4,227,027  $4,776,511
    Less: deferred
     selling
     commissions                                         (10,785)    (14,450)
    Less: current
     portion                                          (2,304,337) (2,486,635)
    -------------------------------------------------------------------------
    Long-term deposits                                $1,911,905  $2,275,426
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        As at August 31, 2009, deposits were substantially comprised of GICs
        with a weighted average term to maturity of 1.3 years (November 30,
        2008 - 1.4 years) and a weighted average interest rate of 3.83%
        (November 30, 2008 - 4.22%). Approximately 17.3% of deposits mature
        within 90 days (November 30, 2008 - 11.7%).

    (g) Interest Rate Swaps

        To hedge its exposure to fluctuating interest rates, AGF Trust has
        entered into interest rate swap transactions with four Canadian
        chartered banks, as noted below. The swap transactions expire between
        September 2009 and October 2012. They involve the exchange of either
        the one-month bankers' acceptance (BA) rate or the three-month BA
        rate to receive fixed interest rates. The swap contracts designated
        as fair value hedging instruments for deposits are used by AGF Trust
        for balance sheet matching purposes and to mitigate net interest
        revenue volatility. As at August 31, 2009, the aggregate notional
        amount of the swap transactions was $2.5 billion (November 30, 2008 -
        $3.2 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, 2009, was
        $60.3 million (November 30, 2008 - $85.0 million).

    -------------------------------------------------------------------------
                                                              Fixed interest
    Notional amount of swap      Fair value   Maturity date    rate received
    -------------------------------------------------------------------------
         ($ thousands)         ($ thousands)
            780,000             $   2,786          2009        0.70% - 4.70%
            945,000                23,958          2010        0.84% - 5.05%
            525,000                24,271          2011        0.85% - 5.08%
            220,000                 9,302          2012        1.60% - 5.01%
    -------------------------------------------------------------------------

    Note 6: Other Assets

    -------------------------------------------------------------------------
                                                     August 31,  November 30,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Long-term portion of derivatives used to
     manage interest rate exposure                  $   43,122    $   85,097
    Other                                                3,355         1,920
    -------------------------------------------------------------------------
                                                    $   46,477    $   87,017
    -------------------------------------------------------------------------

    The current portion of derivatives used to manage interest rate exposure
    is included under accounts receivable, prepaid expenses and other assets.
    As at August 31, 2009, the current portion was $17.2 million
    (November 30, 2008 - nil). Refer to Note 5(g) for details on the
    derivatives used to manage interest rate exposure. Refer to Note 14 for
    further details of the Company's derivative instruments.

    Note 7: Long-Term Debt

    -------------------------------------------------------------------------
                                                     August 31,  November 30,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Revolving term loan                             $  182,593    $  123,740
    Payment related to acquisition of Highstreet
     Partners Limited (note 4)                               -        21,171
    -------------------------------------------------------------------------
                                                       182,593       144,911

    Less: amount included in current liabilities             -        21,171
    -------------------------------------------------------------------------
                                                    $  182,593    $  123,740
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) Revolving Term Loan

        The Company has arranged a three-year prime-rate-based revolving term
        loan to a maximum of $300.0 million (November 30, 2008 -
        $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 July 31, 2010. However, AGF may
        request within 75 to 90 days prior to the end of the commitment
        period a recommencement of the three-year term at the expiry of the
        then-current commitment period. Without recommencement, the loan
        shall be automatically converted to a term loan facility having a
        term of two years. The loan balance shall be repaid over a period of
        two years in minimum quarterly instalments of one-twelfth of the
        amount of principal outstanding with the balance payable at the end
        of the term. As at August 31, 2009, AGF has drawn $182.6 million
        (November 30, 2008 - $123.7 million) against the facility in the form
        of eight to 30 day BAs at an effective average interest rate of 2.9%
        (November 30, 2008 - 2.9%) per annum.

        Security for the bank loans include 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 (refer to
        Note 4). On March 2, 2009, a payment of $21.5 million was paid. The
        payment consisted of $20.0 million in cash and the issuance of
        188,444 Class B shares valued at $1.5 million. In addition, a further
        contingent payment is due as described in Note 4.

    Note 8: Other Long-term Liabilities

    -------------------------------------------------------------------------
                                                     August 31,  November 30,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Long-term portion of derivative used to
     manage changes in share-based compensation     $    1,751    $    7,755
    Long-term compensation-related liabilities           2,842         3,310
    Long-term portion of Elements Advantage              3,329         3,808
    Other                                                   62           122
    -------------------------------------------------------------------------
                                                    $    7,984    $   14,995
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The current portion of the derivative used to manage changes in share-
    based compensation is included under accounts payable and accrued
    liabilities. As at August 31, 2009, the current portion was $2.8 million
    (November 30, 2008 - nil). The notional amount of the derivative used to
    manage share-based compensation is $8.9 million or 295,609 share units
    and matures in 2010. Refer to Note 14 for further details on the
    Company's derivative instruments.

    The current portion of the Elements Advantage liability is included under
    accounts payable and accrued liabilities. As at August 31, 2009, the
    current portion was $5.1 million (November 30, 2008 - $4.0 million).

    Note 9: Capital Stock

    (a) Authorized Capital

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

    (b) Change During the Period

        The change in capital stock is summarized as follows:

    -------------------------------------------------------------------------
    Nine months ended
     August 31,                         2009                    2008
                              -----------------------------------------------
    ($ thousands, except                      Stated                  Stated
     share amounts)               Shares       value      Shares       value
    -------------------------------------------------------------------------

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

    Class B shares
      Balance, beginning
       of period              88,480,104  $  431,897  88,922,157  $  421,923
      Issued through dividend
       reinvestment plan         199,325       1,959     174,034       3,989
      Stock options exercised     80,000       1,161     130,150       5,121
      Issued on acquisition
       of Highstreet Partners
       Limited (note 4)          188,444       1,536     215,883       5,116
    -------------------------------------------------------------------------
      Balance, end of period  88,947,873  $  436,553  89,442,224  $  436,149
    -------------------------------------------------------------------------

    (c) Class B Shares Purchased for Cancellation

        AGF has obtained applicable regulatory approval to purchase for
        cancellation, from time to time, certain of its Class B shares
        through the facilities of the Toronto Stock Exchange (or as otherwise
        permitted by the Toronto Stock Exchange). 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 7,108,630 shares through to February 25, 2010. No Class B shares
        were purchased during the three and nine months ended August 31, 2009
        (2008 - nil).

    (d) Stock Option Plans

        AGF has established stock option plans for senior employees under
        which stock options to purchase an aggregate maximum of 4,695,701
        Class B shares could have been granted as at August 31, 2009 (2008 -
        6,647,252). The stock options are issued at a price not less than the
        market price of the Class B shares immediately prior to the grant
        date. Stock options are vested to the extent of 25% to 33% of the
        individual's entitlement per annum, or in some instances, vest at the
        end of the term of the option.

        The change in stock options during 2009 and 2008 is summarized as
        follows:

    -------------------------------------------------------------------------
    Nine months ended
     August 31,                         2009                    2008
                               ----------------------------------------------
                                            Weighted                Weighted
                                             average                 average
                                            exercise                exercise
                                 Options       price     Options       price
    -------------------------------------------------------------------------

    Class B share options
      Balance, beginning
       of period               6,576,948  $    16.59   4,268,765  $    22.50
      Options granted                  -           -      40,000       22.36
      Options forefeited/
       expired                  (601,699)      20.43    (268,667)      26.54
      Options exercised          (80,000)      14.52    (130,150)      19.08
    -------------------------------------------------------------------------
      Balance, end of period   5,895,249  $    16.23   3,909,948  $    22.33
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        During the three months ended August 31, 2009, no stock options were
        granted (2008 - 40,000) and compensation expense and contributed
        surplus of $0.8 million (2008 - $1.3 million) were recorded.

        During the nine months ended August 31, 2009, no stock options were
        granted (2008 - 40,000) and compensation expense and contributed
        surplus of $2.5 million (2008 - $3.8 million) were recorded.

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

        The changes in share units during the nine months ended August 31,
        2009 and August 31, 2008, are as follows:

    -------------------------------------------------------------------------
    Nine months ended
     August 31,                         2009                    2008
                              -----------------------------------------------
                               Number of share units   Number of share units
    -------------------------------------------------------------------------

    Outstanding, beginning
     of period
      Non-vested                             680,889                 345,257
    Issued
      Initial allocation                           -                       -
      In lieu of dividends                    46,707                  10,180
    Settled in cash                          (47,750)                   (340)
    Forfeited and cancelled                  (72,666)                (19,650)
    -------------------------------------------------------------------------
    Outstanding, end of period               607,180                 335,447
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        Compensation expense for the three months ended August 31, 2009
        related to these share units was $0.7 million (2008 - $0.9 million),
        and for the nine months ended August 31, 2009, was $2.2 million (2008
        - $1.4 million). During the year ended November 30, 2008, it was
        determined that the achievement of certain performance criteria
        necessary for the PSUs to be paid was unlikely. As a result, the
        Company no longer records a liability for PSUs. AGF has entered into
        a swap agreement to fix the cost of compensation related to certain
        RSUs and PSUs. As at August 31, 2009, AGF has economically hedged
        210,061 share units at a fixed cost of $30.17. Refer to Note 14 for
        further details on the Company's derivative instruments.

    (f) Deferred Share Unit (DSU) Plan

        There is no unrecognized compensation expense related to directors'
        DSUs since these awards vest immediately upon grant. As at August 31,
        2009, 38,641 (2008 - 14,411) DSUs were outstanding. Compensation
        expense related to these DSUs for three months ended August 31, 2009
        was $0.1 million (2008 - $0.1 million), and for the nine months
        ending August 31, 2009, was $0.4 million (2008 - $0.3 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)             2009        2008        2009        2008
    -------------------------------------------------------------------------

    Numerator
      Net income for the
       period                 $   22,743  $   41,139  $   52,151  $  147,845

    Denominator
      Weighted average
       number of shares
       - basic                88,914,200  89,451,578  88,769,812  89,280,734
      Dilutive effect of
       employee stock
       options                 1,017,317     418,897     547,118     518,892
    -------------------------------------------------------------------------
      Weighted average
       number of shares
       - diluted              89,931,517  89,870,475  89,316,930  89,799,626

    Earnings per share
      Basic                   $     0.26  $     0.46  $     0.59  $     1.66
      Diluted                 $     0.25  $     0.46  $     0.58  $     1.65
    -------------------------------------------------------------------------

    Note 10: Supplemental Disclosure of Cash Flow Information

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

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                           August 31,              August 31,
                              -----------------------------------------------
    ($ thousands)                   2009        2008        2009        2008
    -------------------------------------------------------------------------

    (Increase) decrease in
     accounts receivable      $   (8,700) $  (10,060) $  (24,070) $   14,941
    Decrease in other assets       3,199       1,006      24,923       3,793
    Increase (decrease) in
     accounts payable and
     accrued liabilities          15,461      38,658     (24,866)     41,766
    Increase in deposits
     and other liabilities           887       1,206       1,443       2,388
    -------------------------------------------------------------------------
                              $   10,847  $   30,810  $  (22,570) $   62,888
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Income Taxes and Interest Paid

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                           August 31,              August 31,
                              -----------------------------------------------
    ($ thousands)                   2009        2008        2009        2008
    -------------------------------------------------------------------------

    Income taxes paid         $   11,709  $    7,930  $   49,508  $   29,030
    Interest paid                 25,552      46,381      88,998     144,266
    -------------------------------------------------------------------------
                              $   37,261  $   54,311  $  138,506  $  173,296
    -------------------------------------------------------------------------

    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)                   2009        2008        2009        2008
    -------------------------------------------------------------------------

    AGF Trust interest income
      Loan interest           $   50,185  $   68,576  $  165,056  $  203,784
      Investment interest          1,997       7,717      12,445      25,264
    -------------------------------------------------------------------------
                                  52,182      76,293     177,501     229,048

    AGF Trust interest expense
      Deposit interest            42,276      52,557     137,140     149,926
      Hedging interest income    (18,138)     (7,838)    (52,199)    (12,028)
      Other interest expense       5,745       6,010      18,071      17,722
    -------------------------------------------------------------------------
                                  29,883      50,729     103,012     155,620

    -------------------------------------------------------------------------
    AGF Trust net interest
     income                   $   22,299  $   25,564  $   74,489  $   73,428
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 12: Income Tax

    In December 2007, a reduction of the federal corporate income tax rate
    from 18.5% to 15.0% by January 1, 2012 was substantively enacted.
    Accordingly, during the nine months ended August 31, 2008, the Company
    recognized a $19.5 million reduction in future income tax liabilities.

    Note 13: Capital Management

    Detailed disclosure of the Company's capital, including management
    objectives and policies and regulatory capital requirements, are included
    in Note 23 to the 2008 Audited Consolidated Financial Statements. The
    cumulative amount of minimum regulatory capital in the Investment
    Management business remains unchanged from November 30, 2008 at
    approximately $6.0 million.

    Capital measures at AGF Trust are detailed as follows:

    -------------------------------------------------------------------------
                                                             Basel II
    As at                                           -------------------------
    ($ thousands, except for risk-                   August 31,  November 30,
     weighted assets in $ millions)                       2009          2008
    -------------------------------------------------------------------------

    Risk-weighted assets(1)
      Credit risk                                   $  1,859.1    $  2,244.3
      Operational risk                                   208.6         172.6
    -------------------------------------------------------------------------
    Total risk-weighted assets                         2,067.7       2,416.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Tier 1 capital
      Common shares                                 $   82,768    $   82,768
      Contributed surplus                                1,565         1,338
      Retained earnings                                113,669       101,432
      Non-cumulative preferred shares                   64,000        64,000
      Less: securitization and other                   (12,466)      (15,567)
    -------------------------------------------------------------------------
                                                       249,536       233,971
    Tier 2 capital
      Subordinated debentures                          109,500       109,500
      General allowances                                16,267        19,638
      Less: securitization and other                    (7,228)       (8,295)
    -------------------------------------------------------------------------
                                                       118,539       120,843

    -------------------------------------------------------------------------
    Total capital                                   $  368,075    $  354,814
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) For operational risk, AGF Trust uses the Basic Indicator Approach -
        calculated as 15% of the previous three-year average of net interest
        income and other income, excluding gain or loss on investments. The
        risk-weighted equivalent is determined by multiplying the capital
        requirement for operational risk by 12.5.


    Note 14: Financial Instruments

    The carrying amounts for the Company's financial instruments classified
    based on categories according to CICA Handbook "Section 3855 Financial
    Instruments - Recognition and Measurement" are as follows:

    -------------------------------------------------------------------------
    As at August 31, 2009                                          Loans and
                                                                 Receivables
                                                                    or Other
                                       Available      Held for     Financial
    ($ thousands)                       for Sale       Trading   Liabilities
    -------------------------------------------------------------------------

    Cash and cash equivalents        $         -   $   382,885   $         -
    Investments                          528,680             -             -
    Retained interest from
     securitization                       41,643             -             -
    Accounts receivable                        -             -        81,892
    Real estate secured and
     investment loans                          -             -     3,786,009
    Derivatives                                -        60,317             -
    Other assets                               -             -         3,355
    -------------------------------------------------------------------------
    Total financial assets           $   570,323   $   443,202   $ 3,871,256
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accounts payable and accrued
     liabilities                     $         -   $         -   $   281,505
    Long-term debt                             -             -       182,593
    Deposits                                   -             -     4,216,242
    Derivatives                                -         4,558             -
    Other long-term liabilities                -             -         6,233
    -------------------------------------------------------------------------
    Total financial liabilities      $         -   $     4,558   $ 4,686,573
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    As at November 30, 2008                                        Loans and
                                                                 Receivables
                                                                    or Other
                                       Available      Held for     Financial
    ($ thousands)                       for Sale       Trading   Liabilities
    -------------------------------------------------------------------------

    Cash and cash equivalents        $         -   $   584,168   $         -
    Investments                          188,435             -             -
    Retained interest from
     securitization                       44,947             -             -
    Accounts receivable                        -             -        76,316
    Real estate secured and
     investment loans                          -             -     4,430,850
    Derivatives                                -        85,097             -
    Other assets                               -             -         1,920
    -------------------------------------------------------------------------
    Total financial assets           $   233,382   $   669,265   $ 4,509,086
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accounts payable and accrued
     liabilities                     $         -   $         -   $   306,834
    Long-term debt                             -             -       144,911
    Deposits                                   -             -     4,762,061
    Derivatives                                -         7,755             -
    Other long-term liabilities                -             -         7,240
    -------------------------------------------------------------------------
    Total financial liabilities      $         -   $     7,755   $ 5,221,046
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Fair Value Risk

    Fair value risk is the risk of loss due to adverse changes in equity
    prices. The Company is exposed to fair value risk on its investments
    available for sale related to mutual funds and equity securities,
    retained interest from securitization and derivative positions used to
    manage changes in share-based compensation. Any unrealized gains or
    losses arising from changes in the fair value of the financial
    instruments available for sale are recorded in other comprehensive
    income. Based on the carrying value of the investments referred to above
    at August 31, 2009, the effect of a 10% decline or increase in the value
    of investments would result in a $1.8 million annualized unrealized gain
    or loss to other comprehensive income (2008 - $2.4 million). Refer to
    Note 3 for the effect of changes to key assumptions on the fair value of
    retained interests.

    Interest Rate Risk

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

    The Company, through AGF Trust, is exposed to interest rate risk through
    its real estate secured and investment loans receivable, managed and
    supervised by AGF Trust's Asset and Liability Committee. AGF Trust
    employs a number of techniques to manage this risk, including the
    matching of asset and liability terms. AGF Trust also uses interest rate
    swaps to manage any residual mismatches. In addition, AGF Trust has
    assessed the interest rate risk for investment loans, RSP loans and HELOC
    receivables, to be low due to the variable rate nature of these products.
    AGF Trust is also exposed to interest rate risk through its investments
    available for sale. As at August 31, 2009, a 1% increase in interest
    rates would result in an increase in annual net interest income of
    approximately $4.6 million (2008 - $3.8 million), while a 1% decrease in
    interest rates will result in an increase in net interest income of
    approximately $0.6 million (2008 - $3.8 million).

    The Company is also exposed to interest rate risk through its floating-
    rate debt and cash balances. As at August 31, 2009, the effect of a 1%
    change in the variable interest rates on the average loan balance
    outstanding for the nine months would have resulted in an annualized
    change in interest expense of approximately $1.5 million (2008 -
    $1.5 million).

    Foreign Currency Risk

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

    Derivative Instruments

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

    -------------------------------------------------------------------------
    As at August 31, 2009               Hedging item
                                             maximum
                                            maturity    Notional        Fair
    ($ thousands)          Interest Rate        date      amount       Value
    -------------------------------------------------------------------------

    Derivatives used to
     manage interest rate
     exposure              0.70% - 5.08%        2012   2,470,000      60,317
    Derivatives used to
     manage changes in
     share-based
     compensation                      -        2010       8,919      (4,558)
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    As at November 30, 2008             Hedging item
                                             maximum
                                            maturity    Notional        Fair
    ($ thousands)          Interest Rate        date      amount       Value
    -------------------------------------------------------------------------

    Derivatives used to
     manage interest rate
     exposure              1.31% - 5.08%        2012   3,167,000      85,097
    Derivatives used to
     manage changes in
     share-based
     compensation                      -        2010      10,275      (7,755)
    -------------------------------------------------------------------------

    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 Notes 9 and 13.
    In its Investment Management and Other segment, the Company manages its
    liquidity by monitoring actual and projected cash flows to ensure that it
    has sufficient liquidity through cash received from operations, as well
    as borrowings under its credit 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 pay out maturing GICs. AGF Trust's overall liquidity risk is
    managed by its treasury department and is supervised by AGF Trust's Asset
    and Liability Committee in accordance with the policies for management of
    assets and liabilities, liquidity and loan financing activities. These
    policies aim to ensure that AGF Trust has sufficient cash resources to
    meet its current and future financial obligations in the regular course
    of business and under a variety of conditions.

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

    The Government of Canada introduced a guarantee program on debt issuances
    of deposit-taking institutions. Under that program, AGF Trust can issue
    up to $952.9 million of debt with a government backstop and a term of up
    to three years.

    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.

    Credit Risk

    Credit risk is the potential of financial loss arising from the failure
    of a borrower or counterparty to honour its financial or contractual
    obligations to the Company. The Company's overall credit risk strategy
    and credit risk policy are developed by its Executive Committee and
    further refined at the business unit level, through the use of policies,
    processes and internal controls. They are designed to promote business
    activities while ensuring these activities are within the standards of
    risk tolerance levels. As at August 31, 2009, financial assets of
    $4.9 billion (November 30, 2008 - $5.4 billion), consisting of cash and
    cash equivalents, investments, retained interests from securitization,
    real estate secured loans and investment loans, accounts receivable and
    other assets, were exposed to credit risk up to the maximum of their
    respective carrying value.

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

    Investments subject to credit risk 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
    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 dealers and
    counterparties, which are reviewed at least annually by the Trust Board.
    AGF Trust uses external credit rating agencies in assessing the credit
    quality of certain investments in financial assets. The credit rating
    agencies used include DBRS, S&P and Moody's. As at August 31, 2009, AGF
    Trust held investments with long term ratings from DBRS of A (high) to
    AAA (or the equivalent from other credit rating agencies). AGF Trust held
    investments with short term ratings from DBRS of R-1 (high) (or the
    equivalent from other credit rating agencies).

    The Company's most significant credit risk is through AGF Trust's real
    estate secured loans and investment loans. AGF Trust mitigates this risk
    through stringent credit policies and lending practices. These policies
    aim to ensure that the authority to approve credit applications is
    appropriately delegated by senior management 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 has adjusted its policies and criteria
    related to its loan provisions and lending practices to reflect the
    higher probability of default that occurs during a weaker economy.

    At August 31, 2009, AGF Trust's loan assets totalled $3.8 billion
    (November 30, 2008 - $4.5 billion) and were comprised of mortgage loans,
    investment loans, RSP loans, finance loans and HELOC receivables. Of this
    amount, $1.1 billion (November 30, 2008 - $1.4 billion) was represented
    by mortgage loans and $0.4 billion (November 30, 2008 - $0.7 billion) was
    represented by HELOC receivables, both of which are secured by
    residential real estate. At August 31, 2009, 46.3% (November 30, 2008 -
    44.2%) of mortgage loans were insured by Canada Mortgage and Housing
    Corporation (CMHC) or another insurer. Conventional uninsured mortgages
    have loan-to-value ratios of less than 80% of the appraised value of the
    property at the time the mortgage loan was granted. The average loan-to-
    value ratio of uninsured mortgage loans was 62.4% as at August 31, 2009
    (2008 - 63.8%).

    Residential mortgages represent the largest component of the total
    mortgage portfolio, comprising 97.2% as at August 31, 2009 (November 30,
    2008 - 97.5%). AGF Trust's credit risk on these loans is also mitigated
    through the use of collateral, primarily in the form of residential real
    estate. Under AGF Trust's lending criteria, management reviews all
    mortgage loans on a regular basis to determine the appropriate allowance
    for loss required by AGF Trust. Risk is also mitigated through
    residential mortgage insurance through CMHC or another insurer. As at
    August 31, 2009, $533.0 million of AGF Trust's residential mortgage
    portfolio was insured (November 30, 2008 - $616.6 million).

    Credit risk for HELOCs and investment loans is mitigated by collateral in
    the form of residential mortgages and investment funds, respectively.
    Investment loans, excluding RSP loans, of $1.78 billion (November 30,
    2008 - $1.8 billion), are secured primarily by the investment made using
    the initial loan proceeds. The market value of this investment loan
    collateral is approximately $1.4 billion (November 30, 2008 -
    $1.2 billion).

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

    Derivative financial instruments expose AGF Trust to credit risk to the
    extent that if a counterparty default occurs, market conditions are such
    that AGF Trust would incur a loss in replacing the defaulted transaction.
    AGF Trust negotiates derivative master netting agreements with
    counterparties with which it contracts. These agreements reduce credit
    risk exposure. AGF Trust assesses the creditworthiness of the
    counterparties to minimize the risk of counterparty default under the
    agreements. AGF Trust only uses major Chartered banks 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 Investment Management Operations
    segment provides investment management and advisory services and is
    responsible for the management and distribution of AGF investment
    products. AGF Trust offers a range of trust services including GICs, term
    deposits, real estate secured loans and investment loans. The results of
    Smith & Williamson Holdings Limited have been included in Other.

    The results of the reportable segments are based on the internal
    financial reporting systems of AGF. The accounting policies used in these
    segments are generally consistent with those described in the "Summary of
    Significant Accounting Policies" detailed in AGF's 2008 Annual Report.

    -------------------------------------------------------------------------
    Three months ended        Investment       Trust
     August 31, 2009          Management     Company
    ($ thousands)             Operations  Operations     Other(1)      Total
    -------------------------------------------------------------------------

    Revenue                   $  120,381  $   25,350  $    1,131  $  146,862
    Operating expenses            74,567      16,174           -      90,741
    Amortization and other
     expenses                     23,203         719       1,633      25,555
    -------------------------------------------------------------------------
    Segment income before
     taxes                    $   22,611  $    8,457  $     (502) $   30,566
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Three months ended        Investment       Trust
     August 31, 2008          Management     Company
    ($ thousands)             Operations  Operations     Other(1)      Total
    -------------------------------------------------------------------------

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


    -------------------------------------------------------------------------
    Nine months ended         Investment       Trust
     August 31, 2009          Management     Company
    ($ thousands)             Operations  Operations     Other(1)      Total
    -------------------------------------------------------------------------

    Revenue                   $  343,280  $   80,687  $    4,390  $  428,357
    Operating expenses           220,877      59,597           -     280,474
    Amortization and other
     expenses                     70,930       2,146       4,764      77,840
    -------------------------------------------------------------------------
    Segment income before
     taxes                    $   51,473  $   18,944  $     (374) $   70,043

    Total Assets              $1,175,584  $4,799,842  $        -  $5,975,426
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Nine months ended         Investment       Trust
     August 31, 2008          Management     Company
    ($ thousands)             Operations  Operations     Other(1)      Total
    -------------------------------------------------------------------------

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

    Total Assets              $1,289,849  $5,367,345  $        -  $6,657,194
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Other revenue relates to S&WHL.

    This report contains forward-looking statements with respect to AGF,
    including its business operations and strategy, as well as 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 award-winning mutual funds, AGF Elements portfolios, the Harmony asset management program, services for institutional and high-net-worth clients, as well as AGF Trust GICs, loans and mortgages. With approximately $41.0 billion in total assets under management, AGF serves more than one million investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.

SOURCE AGF

For further information: 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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