AGF Reports Fiscal 2006 Results



    Net income from continuing operations up 41 Per Cent

    TORONTO, Jan. 31 /CNW/ - AGF Management Limited today announced solid
financial results for the year ended November 30, 2006, with net income from
continuing operations of $102.2 million, an increase of 41 per cent from
$72.7 million in fiscal 2005. During 2006, AGF recorded a $13.3 million
non-cash gain on repayment of debt and a $15.9 million reduction of future
income tax liabilities. In 2005, AGF recorded a $15.6 million gain net of tax
related to the disposition of Unisen. AGF also announced an 11 per cent
quarterly dividend increase on Class A voting common and Class B non-voting
shares from 18 cents per share to 20 cents per share, effective March 2007.
    For the year ended November 30, 2006, AGF's cash flow from continuing
operations (before net change in non-cash balances related to operations) rose
1 per cent to $219.9 million, compared with $217.2 million in fiscal 2005.
Earnings before interest, taxes, depreciation and amortization (EBITDA) from
continuing operations were up 3 per cent to $251.0 million in 2006 from $244.8
million for the year ended 2005. Revenue also increased, rising 18 percent to
$703.5 million.
    "Our success in the areas of investment management, relationship
management and product management was recognized this year by our clients as
they rewarded us with more of their business" said Blake Goldring, chairman
and chief executive officer. "We are very encouraged by our strong sales
results and also pleased with improved fiscal year financial results."
    Mr. Goldring added "AGF's success in building relationships with clients
was recognized recently, when AGF was named Advisors' Choice Favourite
Investment Fund Company of the Year at the 2006 annual Canadian Investment
Awards".
    AGF products were also recognized at this ceremony as AGF won for five of
its mutual funds. In addition, AGF has been successful in maintaining its
industry leading investment performance. To the end of AGF's fiscal year ended
November 2006, AGF has the highest percentage of funds in the first quartile
over one and three years of any of the 10 largest mutual fund firms in Canada.
    Strong relationships, popular products and industry leading investment
performance translated into tangible results during the year. During fiscal
2006, AGF recorded $437 million in net sales, which is a strong improvement
over the $2.7 billion in net redemptions recorded in the prior year period.
AGF finished the year by having the highest long-term net sales of any
non-bank firm in Canada and AGF was third overall in the industry for the
months of October and November. During the year, AGF's institutional and PIM
assets rose 34% due to new mandates and investment performance. On December 1,
2006, AGF closed the transaction to purchase 80 per cent of Highstreet
Partners Limited, which wholly owns Highstreet Asset Management Inc., an
investment counsel firm based in London, Ontario, with $4.8 billion in assets
under management.
    Momentum also extended to the Trust Company Operations segment, which
provides a financial contribution and strong synergies with AGF's investment
management operations. AGF Trust investment loans assist advisors in
implementing comprehensive financial plans for their clients. During fiscal
2006, AGF Trust successfully piloted a home equity line of credit product in
the advisor channel. Real estate secured loan assets rose 91 per cent during
the fiscal year and investment loan assets rose 48 per cent. Income before
taxes and non-segmented items in the trust company operations segment rose
130 per cent to $31.0 million in 2006 compared to $13.5 million in 2005.
    Dividends paid per share by AGF rose by 23 per cent in fiscal 2006 and
AGF was named a Dividend Achiever(TM) by Mergent Inc., a leading provider of
global business and financial information for paying increasing regular annual
dividends for nine consecutive years. AGF has paid dividends for over 25 years
and has increased dividends for 10 years, including the announcement today.

    January 2007 Gross Sales

    On February 2 2007, AGF will release sales figures for the month of
January 2007. AGF expects to report the highest gross sales of any January in
the history of the firm. AGF's previous high was $687 million in gross sales,
recorded in 2001.

    Conference Call

    AGF will host a conference call to review its earnings results today at
10:00 am ET. The live audio webcast with supporting materials will be
available in the Investor Relations section of AGF's website at www.agf.com or
by clicking on http://events.streamlogics.net/agf/jan31-07/index.asp.
Alternatively, the call can be accessed by dialling 1-888-825-9691 (toll-free
in North America). A complete archive of this discussion along with supporting
materials will be available on the same webcast link as of 5 p.m. ET.

    Stakeholder Day

    On February 21st 2007 at 9:00 am ET, AGF will host a stakeholder day,
which will consist of presentations by AGF executives along with a question
and answer session. The event is designed to provide a fulsome understanding
of AGF Management Limited and its various companies, their business objectives
and strategies. AGF will invite a group of investment professionals and media
to attend the event and the session will be webcast to allow participation by
a broader audience. The live audio webcast with supporting materials will be
available in the Investor Relations section of AGF's website.

    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. With
approximately $49 billion in total assets under management as at December 31,
2006, AGF serves more than one million investors. AGF's products and services
include a diversified family of over 50 mutual funds, AGF Harmony tailored
investment program, the evolutionary AGF Elements portfolios, AGF Private
Investment Management and AGF Trust GICs, loans and mortgages. AGF trades on
the Toronto Stock Exchange under the symbol "AGF.B".



    AGF Management Limited
    Consolidated Financial Statements

    

                           AGF Management Limited
                         Consolidated Balance Sheets

    -------------------------------------------------------------------------
    November 30                                           2006          2005
    (in thousands of dollars)
    -------------------------------------------------------------------------

    ASSETS
      Current assets
        Cash and cash equivalents                  $   405,907   $   159,974
        Short-term investments (note 7)                 10,723        23,805
        Current portion of retained interest from
         securitization (note 2)                         3,767             -
        Accounts receivable and prepaid expenses        94,063        49,386
        Income taxes receivable                          4,703             -
        Real estate secured and investment loans
         due in one year (note 8)                      309,329       315,987
    -------------------------------------------------------------------------
                                                       828,492       549,152

      Real estate secured and investment loans
       (note 8)                                      1,997,294     1,079,280
      Retained interest from securitization
       (note 2)                                         23,893             -
      Investment in associated company (note 5)        107,735        96,000
      Other investments                                  5,524         7,142
      Management contracts (note 4)                    478,259       478,749
      Customer contracts, relationships and
       investment advisory contracts, net of
       accumulated amortization of $70,787
       (2005 - $55,516)                                 59,583        75,281
      Deferred selling commissions, net of
       accumulated amortization of $430,197
       (2005 - $847,718)                               268,243       275,015
      Property, equipment and other intangible
       assets, net of accumulated amortization
       (note 9)                                         23,446        21,639
      Goodwill                                         126,399       126,183
      Other assets                                         900         1,226
    -------------------------------------------------------------------------
                                                   $ 3,919,768   $ 2,709,667
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
      Current liabilities
        Accounts payable and accrued liabilities   $   164,545   $    95,197
        Long-term debt due within one year
         (note 10)                                      56,000         8,277
        Income taxes payable                                 -        14,252
      Deposits due within one year (note 8)          1,022,774       467,317
    -------------------------------------------------------------------------
                                                     1,243,319       585,043

      Deposits (note 8)                              1,465,490       940,435
      Long-term debt (note 10)                               -        17,364
      Participation units (note 10)                          -         6,157
      Future income taxes (note 14)                    231,061       242,188
      Leasehold inducements                                127           154
    -------------------------------------------------------------------------
                                                     2,939,997     1,791,341
    -------------------------------------------------------------------------
      Shareholders' Equity
        Capital stock (note 15)                        403,566       394,154
        Contributed surplus (note 16)                   10,470         5,900
        Retained earnings                              565,576       527,197
        Foreign currency translation adjustment            159        (8,925)
    -------------------------------------------------------------------------
                                                       979,771       918,326
    -------------------------------------------------------------------------
                                                   $ 3,919,768   $ 2,709,667
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Commitments (note 22)
    Guarantees (note 23)
    Contingent liabilities (note 24)
    Subsequent events (note 25)
    (See accompanying notes to Consolidated Financial Statements.)

        Approved by the Board:

        Blake C. Goldring CFA                Douglas L. Derry FCA
        Director                             Director



                           AGF Management Limited
                      Consolidated Statements of Income

    -------------------------------------------------------------------------
    For the years ended November 30                       2006          2005
    (in thousands of dollars,
    except per share amounts)
    -------------------------------------------------------------------------

    Revenue:
      Net management and advisory fees             $   430,907   $   404,463
      Administration fees, interest and other
       revenue                                         233,491       148,017
      Deferred sales charges                            25,474        37,342
      Gain on sale of RSP loan securitization
       and related income (note 2)                      12,086             -
      Gain on sale of short-term investments
       (note 7)                                             17         4,478
      Investment income                                  1,506           146
    -------------------------------------------------------------------------
                                                       703,481       594,446
    -------------------------------------------------------------------------

    Expenses:
      Selling, general and administrative              214,547       177,360
      Trailing commissions                             125,331       110,283
      Investment advisory fees                          27,647        26,759
      Amortization of deferred selling commissions     108,169       112,625
      Amortization of customer contracts,
       relationships and investment advisory
       contracts                                        15,270        14,898
      Amortization of property, equipment and other
       intangible assets                                11,335        11,490
      Interest on Trust Company deposits                76,504        29,831
      Interest expense                                   2,861         4,095
      Provision for Trust Company loan losses
       (note 8)                                          8,501         5,375
    -------------------------------------------------------------------------
                                                       590,165       492,716
    -------------------------------------------------------------------------

    Income from continuing operations before
     income taxes                                      113,316       101,730

    Income tax expense (reduction) (note 14)
      Current                                           31,492        36,476
      Future                                           (20,411)       (7,458)
    -------------------------------------------------------------------------
                                                        11,081        29,018
    -------------------------------------------------------------------------

    Net income from continuing operations
     for the year                                      102,235        72,712
    Gain on repayment of debt, net of tax
     (note 10(b))                                       13,309             -
    (Loss) gain on sale of discontinued operations,
     net of tax (note 3)                                (2,887)       15,617
    Net earnings from discontinued operations,
     net of tax (note 3)                                     -         3,543
    -------------------------------------------------------------------------
    Net income for the year                        $   112,657   $    91,872
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings Per Share (note 17)
      Basic from continuing operations             $      1.15   $      0.81
      Diluted from continuing operations           $      1.14   $      0.80
      Basic                                        $      1.26   $      1.02
      Diluted                                      $      1.25   $      1.01
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     (See accompanying notes to Consolidated Financial Statements.)



                           AGF Management Limited
                Consolidated Statements of Retained Earnings

    -------------------------------------------------------------------------
    For the years ended November 30                       2006          2005
    (in thousands of dollars)
    -------------------------------------------------------------------------

    Retained earnings, beginning of year           $   527,197   $   517,681

    Net income for the year                            112,657        91,872
    -------------------------------------------------------------------------
                                                       639,854       609,553

    Deduct:
      Dividends on AGF Class A Voting Common
       Shares and AGF Class B Non-Voting Shares         61,521        50,522
      Excess paid over book value of AGF Class B
       Non-Voting Shares purchased for
       cancellation (note 16)                           12,757        31,834
    -------------------------------------------------------------------------
                                                        74,278        82,356
    -------------------------------------------------------------------------

    Retained earnings, end of year                 $   565,576   $   527,197
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (See accompanying notes to Consolidated Financial Statements.)



                           AGF Management Limited
                    Consolidated Statements of Cash Flow

    -------------------------------------------------------------------------
    For the years ended November 30                       2006          2005
    (in thousands of dollars)                                        (note 3)
    -------------------------------------------------------------------------

    Operating activities
      Net income for the year                      $   112,657   $    91,872
      Loss (gain) on sale of discontinued
       operations, net of tax                            2,887       (15,617)
      Gain on early retirement of debt, net of
       income taxes                                    (13,309)            -
      Results of discontinued operations, net
       of tax                                                -        (3,543)
    -------------------------------------------------------------------------
      Net income from continuing operations for
       the year                                        102,235        72,712

      Items not affecting cash
        Amortization of deferred selling
         commissions                                   108,169       112,625
        Amortization of customer contracts,
         relationships and investment advisory
         contracts                                      15,270        14,898
        Amortization of property, equipment and
         other intangible assets                        11,335        11,490
        Future income taxes                            (20,411)       (7,458)
        Gain on sale of RSP loan securitization         (9,850)            -
        Gain on sale of short-term investments             (17)       (4,478)
        Mark-to-market on swap transactions                365        (1,244)
        Provision for Trust Company loan losses          8,501         5,375
        Other                                            4,308        13,289
    -------------------------------------------------------------------------
                                                       219,905       217,209

      Net increase in non-cash balances related to
       continuing operations                             2,305         6,963
    -------------------------------------------------------------------------
      Net cash provided by continuing operations       222,210       224,172
      Net cash provided by discontinued operating
       activities                                            -        10,172
    -------------------------------------------------------------------------
      Net cash provided by operating activities        222,210       234,344
    -------------------------------------------------------------------------

    Financing activities
      Purchase of AGF Class B Non-Voting Shares
       for cancellation                                (15,865)      (42,521)
      Issuance of AGF Class B Non-Voting Shares          9,920         8,117
      Dividends                                        (61,521)      (50,522)
      Increase (decrease) in bank loan                  56,000       (78,700)
      Retirement of debt                                (3,360)            -
      Decrease in other long-term debt                  (1,324)       (1,252)
      Increase in leasehold inducements                      -            27
      Increase in Trust Company deposits             1,080,512       646,520
    -------------------------------------------------------------------------
      Net cash provided by continuing financing
       activities                                    1,064,362       481,669
      Net cash used in discontinued financing
       activities                                            -        (1,641)
    -------------------------------------------------------------------------
      Net cash provided by financing activities      1,064,362       480,028
    -------------------------------------------------------------------------

    Investing activities
      Deferred selling commissions paid               (101,397)      (60,022)
      Proceeds of RSP loan securitization              206,274             -
      Purchase of management contracts and customer
       relationships                                       918        (9,104)
      Acquisition of subsidiaries, net of cash
       acquired                                         (4,116)       (5,376)
      Payments associated with sale of discontinued
       operations (see note 3)                          (7,767)      105,981
      Purchase of property, equipment and other
       intangible assets                               (14,042)       (8,749)
      Purchase of investments                           (9,677)      (24,222)
      Sale of investments                               25,643        24,893
      Increase in Trust Company real estate secured
       and investment loans                         (1,136,475)     (693,336)
    -------------------------------------------------------------------------
      Net cash used in continuing investing
       activities                                   (1,040,639)     (669,935)
      Net cash used in discontinued investing
       activities                                            -        (3,268)
    -------------------------------------------------------------------------
      Net cash used in investing activities         (1,040,639)     (673,203)
    -------------------------------------------------------------------------

    Increase in cash and cash equivalents during
     the year                                          245,933        41,169

    Balance of cash and cash equivalents,
     beginning of year                                 159,974       118,805
    -------------------------------------------------------------------------

    Balance of cash and cash equivalents,
     end of year                                   $   405,907   $   159,974
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Represented by:
      Cash and cash equivalents                    $    17,159   $    30,095
      Trust Company cash and cash equivalents          388,748       129,879
    -------------------------------------------------------------------------
                                                   $   405,907   $   159,974
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (See accompanying notes to Consolidated Financial Statements.)
    


    Notes to Consolidated Financial Statements

    Years ended November 30, 2006 and 2005
    (tabular amounts in thousands of dollars, except per share amounts)

    Description of Business

    AGF Management Limited ('the Company') is incorporated under the Business
    Corporations Act (Ontario). The Company is an integrated, global wealth
    management corporation whose principal subsidiaries provide mutual fund
    management, private investment counseling services for high-net-worth
    clients, estates, endowments, institutions and corporations, trust
    products and services (including real estate secured and investment
    lending and deposit-taking activities), investment advisory services and
    investment industry software development for individual and institutional
    clients. The Company conducts the management and distribution of mutual
    funds in Canada under the brand names AGF, Elements and Harmony
    (collectively, the 'AGF Funds'). The Company conducts its trust business
    under the name of AGF Trust (the 'Trust Company').

    Note 1: Significant Accounting Policies

    Basis of Presentation

    The consolidated financial statements have been prepared in accordance
    with Canadian generally accepted accounting principles. The consolidated
    financial statements include the accounts of the Company and its directly
    and indirectly owned subsidiaries and partnership as listed below.
    Intercompany transactions and balances are eliminated on consolidation.
    Investments over which the Company is able to exercise significant
    influence are accounted for by the equity method. Other long-term
    investments are recorded at cost and written down when there is evidence
    that a decline in value that is other than temporary has occurred.
    Short-term investments are recorded at cost and written down to market
    value when market value declines below recorded cost. Certain comparative
    amounts in these financial statements have been reclassified to conform
    with the current year's presentation.

    The principal subsidiaries of AGF are:

    
      AGF Funds Inc.
      AGF International Advisors Company Ltd.
      AGF Asset Management Asia Ltd.
      AGF Private Investment Management Ltd.
      AGF Trust Company ('Trust Company')
      AGF Securities (Canada) Ltd.
      AGF Securities, Inc.
      AGF Limited Partnership 1998
      AGF International Company Ltd.
      Cypress Capital Management Ltd.
      Investmaster Group Ltd.
      Investmaster Holdings Ltd.
      P.J. Doherty & Associates Co. Ltd.
      20/20 Financial Corporation
    

    In addition, the Company holds a 30.7% interest in Smith & Williamson
    Holdings Limited ('S&WHL'), an independent U.K.-based company providing
    private client investment management, financial advisory, tax and
    accounting services. This investment is accounted for using the equity
    method.

    Revenue Recognition

    Management and advisory fees are based on the net asset value of funds
    under management and are recognized on an accrual basis. These fees are
    shown net of management fee rebates and distribution fees payable to
    third-party, selling-commission financing entities.

    Administration fees and other revenue are recognized on an accrual basis
    when the services are performed.

    Deferred sales charge ('DSC') revenue is received from investors when
    mutual fund securities sold on a DSC basis are redeemed. DSC revenue is
    recognized on the trade date of redemption of the applicable mutual fund
    securities.

    Interest income on real estate secured and investment loans, dividends
    and other investment income earned are recognized on an accrual basis in
    the period earned.

    Cash and Cash Equivalents

    Cash and cash equivalents are comprised of cash and temporary investments
    consisting of highly liquid investments with short-term maturities.

    Short-term Investments

    Short-term investments primarily consist of investments in mutual funds
    of AGF and securities which will form the basis for commercial products.
    As such, short-term investments are usually held for periods of less than
    one year. These investments are valued at the lower of cost or market.

    Other Investments

    Other investments represent those made by the Company with a view to hold
    the investment for periods in excess of 12 months. These investments are
    recorded at cost and written down when there is evidence that a decline
    in value that is other than temporary has occurred.

    Income Taxes

    The Company follows the liability method in accounting for income taxes
    whereby future income tax assets and liabilities reflect the expected
    future tax consequences of temporary differences between the carrying
    amounts of assets and liabilities and their tax bases. Future income tax
    assets and liabilities are measured based on the enacted or substantively
    enacted tax rates, which are expected to be in effect when the future
    income tax assets or liabilities are expected to be realized or settled.
    The effect on future income tax assets and liabilities of a change in tax
    rates is recognized in income in the period that includes the substantive
    enactment date. Future income tax assets are recognized to the extent
    that realization is considered more likely than not.

    Foreign Currency Translation

    Foreign currency denominated items are translated in Canadian dollars as
    follows:

    Financial statements of integrated foreign subsidiaries are translated
    using the temporal method. Under this method, monetary assets and
    liabilities are translated into Canadian dollars at the exchange rate in
    effect at the balance sheet date. Non-monetary assets are translated at
    historical exchange rates. Revenue and expenses are translated at average
    exchange rates for the period, except for amortization, which is
    translated on the same basis as the related asset. Translation gains and
    losses are included in net income.

    Financial statements of self-sustaining operations are translated into
    Canadian dollars using the current rate method. Under this method assets
    and liabilities are translated at the exchange rate prevailing at the
    balance sheet date. Revenue and expenses are translated at average
    exchange rates for the period. Translation gains and loss are included in
    the foreign currency translation adjustment account.

    Investments in foreign associated companies are translated into Canadian
    dollars at the rate of exchange in effect at the balance sheet date.
    Unrealized translation gains and losses are reported in a separate
    component of shareholders' equity as a foreign currency translation
    adjustment.

    Deferred Selling Commissions

    Selling commissions paid to brokers on mutual fund securities sold on a
    DSC basis are recorded at cost and are amortized on a straight-line basis
    over a period that corresponds with the applicable DSC schedule (which
    ranges from three to seven years). Unamortized deferred selling
    commissions are written down to the extent that the carrying value
    exceeds the expected future revenue on an undiscounted basis.

    Property and Equipment

    Property and equipment, which is comprised of furniture and equipment,
    computer hardware, leasehold improvements and equipment under capital
    lease, is stated at cost, net of accumulated amortization. Amortization
    is computed on the following methods based on the estimated useful lives
    of these assets:

    
        Furniture and equipment             20% declining balance
        Computer hardware                   30% declining balance
        Leasehold improvements              straight-line over term of lease
    

    Finite Life Intangible Assets

    Finite life intangible assets, which are comprised of customer contracts
    and relationships and investment advisory contracts and computer
    software, are stated at cost, net of accumulated amortization.
    Amortization is computed on a straight-line basis based on the estimated
    useful lives of these assets:

    
      Customer contracts and relationships  7 to 15 years
      Investment advisory contracts         5 years
      Computer software                     3 to 5 years
    

    Impairment of Long-lived Assets

    Impairment of long-lived assets is recognized when an event or change in
    circumstance causes the assets' carrying value to exceed the total
    undiscounted cash flows expected from their use and eventual disposition.
    The impairment loss is calculated by deducting the fair value of the
    asset or group of assets from its carrying value.

    Goodwill and Management Contracts

    The purchase price of acquisitions accounted for under the purchase
    method and the purchase price of investments accounted for under the
    equity method are allocated based on the fair values of the net
    identifiable assets acquired, including management contracts. The excess
    of the purchase price over the values of such assets is recorded as
    goodwill. Management contracts have been determined to have an indefinite
    life.

    Goodwill and management contracts are not amortized, but are subject to
    impairment tests on at least an annual basis. Goodwill is allocated to
    the reporting units, and any impairment is identified by comparing the
    carrying value of a reporting unit with its fair value. If any impairment
    is indicated, then it is quantified by comparing the carrying value of
    goodwill to its fair value, based on the fair value of the assets and
    liabilities of the reporting unit. As of November 30, 2006 and 2005, the
    Company has completed its annual impairment testing on the carrying
    values of goodwill and management contracts. No impairment losses were
    required to be recognized as a result of this testing.

    Real Estate Secured Loans and Investment Loans

    Real estate secured loans and investment loans are carried at amortized
    cost less principal repayments less any holdbacks, net of an allowance
    for loan losses. Interest income from loans is recorded on an accrual
    basis. Accrued but uncollected interest on uninsured real estate secured
    and investment loans is reversed when a loan is identified as impaired.
    Principal payments on the real estate secured loans and investment loans
    that are contractually due to the Company in the 12 month period from the
    balance sheet date are classified as current assets.

    Fees that relate to the origination of loans are deferred and recognized
    as selling expenses on a straight-line basis over the average expected
    term of the loans.

    Allowance for Loan Losses

    The allowance for loan losses consists of both specific allowances on
    impaired loans, and general allowances. General allowances are based on
    management's assessment of probable, unidentified losses in the portfolio
    that have not been captured in the determination of specific allowances.
    The assessment includes portfolio-specific credit factors, general
    economic factors and geographic exposure.

    Impaired Loans

    Loans are classified as impaired when, in the opinion of management,
    there is reasonable doubt as to the collectibility, either in whole or in
    part, of principal or interest, or when principal or interest is past due
    90 days, except where the loan is both well-secured and in the process of
    collection. In any event, a loan that is insured by the federal
    government, an agency thereof or another third-party insurer is
    classified as impaired when interest or principal is past due 365 days,
    or in the case of other loans, when they are contractually in arrears for
    180 days.

    When a loan is identified as impaired, the carrying amount of the loan is
    reduced to its estimated realizable value. In subsequent periods,
    recoveries of amounts previously written off and any increase in the
    carrying value of the loan are credited to the provision for loan losses
    in the consolidated statements of income. Where a portion of the loan is
    written off and the remaining balance is restructured, the new loan is
    carried on an accrual basis when there is no longer any reasonable doubt
    regarding the collectibility of principal or interest. Interest income is
    recognized on impaired loans on a cash basis only after the specific
    allowance for losses has been reversed and provided there is no further
    doubt as to the collectibility of the principal.

    Deposits

    Deposits are substantially guaranteed investment certificates (GICs) that
    require the Company to pay a fixed interest rate until the maturity date
    of the certificate. Interest expense is recorded on an accrual basis.

    GICs that mature in the 12-month period following the balance sheet date
    are classified as current liabilities.

    Stock-based Compensation and Other Stock-based Payments

    The Company has stock-based compensation plans as described in note 16.
    The Company utilizes the fair-value-based method of accounting for
    stock-based compensation. The fair value of stock-based compensation is
    recorded as a charge to net earnings with a corresponding credit to
    contributed surplus.

    The Company also has a share purchase plan under which employees can have
    a portion of their annual earnings withheld to purchase the AGF's Class B
    Non-Voting Shares (Class B Shares). The Company matches a portion of
    these amounts. The Company's contribution vests immediately and is
    recorded as a charge to net income in the period in which the cash
    contribution is made.

    During the year, the Company established a Restricted Share Unit ('RSU')
    plan for senior employees under which certain employees were granted
    RSU's of Class B Shares. Compensation expense and the related liability
    are recorded equally over the vesting period, taking into account
    fluctuations in the market price of Class B Shares, dividends paid and
    forfeitures.

    Effective November 30, 2006, the Company established a Performance Share
    Unit ('PSU') plan for senior employees under which certain employees were
    granted PSUs of Class B Shares. Compensation expense and the related
    liability are recorded equally over the vesting period, taking into
    account the likelihood of the performance criteria being met,
    fluctuations in the market price of Class B Shares, dividends paid and
    forfeitures.

    Assets Under Management

    The Company manages and provides advisory services in respect of mutual
    fund and other investment assets owned by clients and third parties that
    are not reflected on the consolidated balance sheet.

    Earnings Per Share

    Basic earnings per share are calculated using the daily weighted average
    number of shares outstanding. Diluted earnings per share are calculated
    using the daily weighted average number of shares that would have been
    outstanding during the year had all potential common shares been issued
    at the beginning of the year, or when other potentially dilutive
    instruments were granted or issued, if later.

    The treasury stock method is employed to determine the incremental number
    of shares that would have been outstanding had the Company used proceeds
    from the exercise of options to acquire shares.

    Use of Estimates

    The preparation of financial statements requires management to make
    estimates and assumptions that affect the reported amounts of assets and
    liabilities and disclosure of contingent assets and liabilities at the
    date of the financial statements and the reported amounts of revenue and
    expenses during the year. Actual amounts could differ from these
    estimates.

    Key areas of estimation, where management has made difficult, complex or
    subjective judgements - often in respect of matters that are inherently
    uncertain - are the provision for useful lives of depreciable assets,
    commitments and contingencies, loan loss provisions, valuation of
    securitized loans, stock-based compensation, performance share unit plan
    expense and the recoverability of property, equipment, goodwill and
    intangible assets using estimates of future cash flows. In addition, the
    Company has made investments in companies or businesses, some of which
    have experienced operating losses. Significant changes in the
    assumptions, including those with respect to future business plans and
    cash flows, could change the recorded amounts by a material amount. In
    addition, further operating losses of certain investees could result in
    impairment of these investments.

    Disposal of Long-lived Assets and Discontinued Operations

    Long-lived assets to be disposed of by sale are measured at the lower of
    their carrying amount or fair value less cost to sell, and are not
    depreciated while classified as held for sale.

    During 2005, the Company concluded the sale of its wholly owned
    subsidiary Unisen Holdings Inc. ("Unisen"). Unisen's assets and
    liabilities have been reclassified as discontinued operations and
    Unisen's operations for the 2005 period are reported as discontinued
    operations.

    Hedging

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

    Income and expenses on derivative instruments designated and qualifying
    as hedges are recognized in the same period as the related hedge item. If
    a designated hedge is no longer effective, the associated derivative
    instrument is subsequently carried at fair value. Derivatives that do not
    qualify for hedge accounting are carried at fair value in the
    Consolidated Balance Sheet, and subsequent changes in their fair value
    are recorded in interest income or expense. Accrued income and expenses
    and deferred gains and losses are included in other assets and other
    liabilities, as appropriate, in the Consolidated Balance Sheet.

    Foreign exchange forward contracts are used from time to time to manage
    foreign currency exposures from the investment in associated company
    having a functional currency other than the Canadian dollar. Foreign
    exchange gains or losses on these derivative financial instruments are
    recorded in a separate component of shareholders' equity as a foreign
    currency translation adjustment.

    Accounting for Securitizations

    The Company has securitized certain registered Retirement Savings Plan
    (RSP) loans through the sale of these loans to a securitization trust. In
    order for a securitization to be treated as a sale, the Company must
    surrender control over those loans included in the securitization. To
    surrender control, the securitized assets must be isolated from the
    Company and its creditors, even in the case of bankruptcy or
    receivership, and the Company must receive consideration other than the
    beneficial interest in the transferred assets.

    In determining the gain or loss on sale, management estimates future cash
    flows by relying on estimates of the amount of interest that will be
    collected on the securitized assets, the yield paid to investors, the
    portion of the securitized assets that will be prepaid before their
    scheduled maturity, expected credit losses, the cost of servicing the
    assets and the rate at which to discount these expected future cash
    flows. Actual cash flows may differ significantly from those estimated by
    management. If actual cash flows are different from management's estimate
    of future cash flows then the gains or losses on the securitization
    recognized in income will be adjusted. Note 2 to the financial statements
    provides additional disclosure regarding the securitizations and related
    balance sheet and income statement impacts.

    AGF Elements

    In November 2005, the Company launched AGF Elements, which consists of
    five diversified fund-of-fund portfolios. If an AGF Elements portfolio
    does not match or outperform its customized benchmark over a 3-year
    period, each individual investor will receive up to 90 basis points in
    additional units, calculated based on the value of such investment at the
    end of its related 3-year period.

    The Company will include in other liabilities up to 30 basis points per
    year of each investor's assets under management, adjusted for
    redemptions, until the end of the three-year measurement period of each
    investment made by such investor. At that time, if an individual
    investor's returns match or exceed the corresponding benchmark, the
    Company will recognize the entire amount as management fee revenue. If an
    individual investor's actual returns are below the customized benchmark,
    a corresponding amount will be distributed to the investor in the form of
    additional units.

    Consolidation of Variable Interest Entities

    CICA AcG 15, 'Consolidation of Variable Interest Entities ('VIE')'
    provides guidance for applying consolidation principles to certain
    entities that are subject to control on a basis other than ownership of
    voting interests.

    An entity is a VIE when, by design, one or both of the following
    conditions exist: (a) total equity investment at risk is insufficient to
    permit the entity to finance its activities without additional
    subordinated support from others; (b) as a group, the holders of the
    equity investment at risk lack certain essential characteristics of a
    controlling financial interest.

    The Company has reviewed its relationships and determined that there are
    no entities whose financial results would be required to be included or
    disclosed in the consolidated results for the year ended November 30,
    2006 and 2005.

    Future Accounting Changes

    The CICA has issued three new accounting standards: CICA Handbook Section
    3855 Financial Instruments - Recognition and Measurement; Section 3865
    Hedges; and Section 1530, Comprehensive Income. These standards will
    increase harmonization with U.S. and international accounting standards
    and became effective for the Company on December 1, 2006.

    These standards require that all financial assets be classified as
    available for sale, trading, held to maturity or loans and receivables.
    Financial liabilities will be classified as trading or other. Initially,
    all financial assets and financial liabilities must be recorded on the
    balance sheet at fair value with subsequent measurement determined by the
    classification of each financial asset and liability.

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

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

    Accumulated other comprehensive income ('AOCI') will be a new component
    of shareholders' equity and a new statement entitled, Statement of
    Comprehensive Income will be added to the Company's financial statements.
    Comprehensive income is composed of the Company's net income and other
    comprehensive income. Other comprehensive income will include unrealized
    gains and losses on available-for-sale financial assets, foreign currency
    translation and changes in the fair market value of derivative
    instruments designated as cash flow hedges, all net of income taxes.

    A transition adjustment attributable to the following will be recognized
    in the opening balance of retained earnings as at December 1, 2006 for
    the following: (i) financial instruments that the Company classifies as
    held-for-trading and that were not previously recorded at fair value
    (ii) the difference in the carrying amount of loans and deposits at
    December 1, 2006 and the carrying amount calculated using the effective
    interest rate from inception of the loan or deposit. A transition
    adjustment will be recognized in the opening balance of AOCI relating to
    adjustments arising due to the remeasuring of financial assets classified
    as available-for-sale. Neither of the transition amounts that will be
    recorded in the opening retained earnings or in the AOCI balance on
    December 1, 2006 is expected to be material to the Company's consolidated
    financial position.

    Note 2: Securitization of AGF Trust Loans

    On February 28, 2006, the Company, through its wholly owned subsidiary
    AGF Trust Company, securitized $218.4 million of RSP loans through the
    sale of these loans to a securitization trust. Cash flows of
    $206.3 million were received on the securitization and a gain net of
    transaction fees and expenses of $9.9 million was recorded. As at
    November 30, 2006, $161.3 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
    cost. A gain or loss on sale of the loan receivables is recognized
    immediately in income. The amount of the gain or loss is determined by
    estimating the fair value of future expected cash flows using
    management's best estimates of key assumptions: excess spread, discount
    rate on the interest-only strip, expected credit losses, prepayment rates
    and the expected weighted average life of RSP loans that are commensurate
    with the risks involved. Subsequent to securitization, any retained
    interest that cannot be contractually settled in such a way that the
    Company can recover substantially all of its recorded investment will be
    adjusted to fair value. The current fair value of retained interests is
    determined using the present value of future expected cash flows as
    discussed above.

    The Company has recorded retained interests of $27.7 million
    (February 28, 2006 - $34.0 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
    $13.7 million (February 28, 2006 - $16.6 million), ii) cash collateral of
    $5.7 million (February 28, 2006 - $5.4 million) and iii)
    over-collateralization of $8.3 million (February 28, 2006 -
    $12.0 million).

    The impaired loans included in the securitized balances were equal to
    $0.3 million as of November 30, 2006. During the twelve months ended
    November 30, 2006, $0.8 million of securitized RSP loans were written
    off.

    The Company's claim on the retained interests is subordinate to
    investors' interests. Recourse available to investors and the
    securitization trust is limited to the retained interests. For the
    12 months ended November 30, 2006, cash flows of $9.9 million were
    received on the securitized loans, of which $4.1 million related to the
    over-collateralization, and $5.8 million related to the interest-only
    strip. The total other income recognized from securitization during the
    twelve months ended November 30, 2006 was $2.2 million.

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

    
      Excess spread                          3.8%
      Discount rate on interest-only strip   7.5%
      Expected credit losses                 0.8%
      Prepayment rate                       14.0%
      Expected weighted average life
       of RSP loans                         30.2 months
    


    The Company retained servicing responsibilities for the securitized
    loans. A servicing liability of $1.1 million was recorded as at
    November 30, 2006 (February 28, 2006 - $1.7 million). This amount
    represents the estimated future cost of servicing the securitized loans
    and has been offset against the gain on the sale of the RSP loans. The
    amount amortized related to the servicing liability during the twelve
    months ended November 30, 2006, was $0.5 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 November 30, 2006. As the sensitivity is
    hypothetical, it should be used with caution. The impact of changes in
    the fair value of retained interests was calculated using a discounted
    cash flow analysis.

    
    -------------------------------------------------------------------------
    Fair value of retained interests                             $    29,042
      Discount rate                                                      7.5%
        +10%                                                     $      (180)
        +20%                                                            (355)
      Prepayment rate                                                   14.0%
        +10%                                                     $      (242)
        +20%                                                            (465)
      Expected credit losses                                             0.8%
        +10%                                                     $      (287)
        +20%                                                            (573)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Note 3: Discontinued Operations and Assets Held for Sale

    On October 3, 2005 the Company sold 100% of wholly owned subsidiary
    Unisen Holdings Inc. ('Unisen') to CitiFinancial Canada Inc.
    ('CitiFinancial'), for cash consideration of US$97.5 million
    (C$114.0 million). Expenses related to this transaction amounted to
    $5.0 million. The consideration was subject to two adjustments for which
    the Company had accrued a net amount owing to CitiFinancial of
    $1.8 million. The two adjustments were a working capital adjustment that
    provided that any working capital above a threshold is payable to AGF and
    the purchase price is subject to a clawback should Unisen's revenue fall
    below a threshold during the 12-month period ended June 30, 2006. AGF
    received $5.0 million in respect of the working capital adjustment in the
    second quarter of 2006 and AGF paid $10.0 million to CitiFinancial in
    respect of the clawback. In addition, AGF paid $0.3 million to
    CitiFinancial in respect of a potential tax liability, including
    estimated interest and penalties owed by Unisen Holdings Inc. for periods
    prior to October 3, 2005. This has been recorded as a loss on sale of
    discontinued operations net of taxes of $0.2 million. The Company has
    issued a put option in favour of CitiFinancial relating to certain Unisen
    assets. The put option expires 18 months after the date of acquisition.
    No value has been attributed to this option, as management does not
    believe it will be exercised.

    Concurrent with the sale of Unisen to CitiFinancial, AGF has capped the
    management expense ratio on all of the AGF funds for three years at the
    lower of the actual levels reported in 2004 and 2005. In addition, the
    Company is committed for a 10-year period from the date of sale to
    reimburse CitiFinancial should CitiFinancial's annual revenues derived
    from AGF fund administration services fall below a pre-determined level.

    Unisen's operations for 2005 have been reported as discontinued
    operations and previously reported financial statements have been
    reclassified to reflect the following:

    
    Summary of discontinued operations
    -------------------------------------------------------------------------
    ($000's)
    For the year ended November 30,                                     2005
    -------------------------------------------------------------------------

    Revenue                                                      $    86,528
    Income before income taxes                                         6,137
    Income tax expense                                                 2,594
    Net earnings from discontinued operations                          3,543
    Basic net earnings per share                                 $      0.04
    Diluted net earnings per share                               $      0.04
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Details of the gain on sale net of income taxes are as follows:

    Gain on sale of discontinued operations
    -------------------------------------------------------------------------
    ($000's)
    For the year ended November 30,                        2006         2005
    -------------------------------------------------------------------------

    Proceeds on sale                                $         -  $   113,958
    Expenses related to transaction                           -       (5,027)
    Net reserve for subsequent adjustments                    -       (1,826)
    Subsequent purchase price adjustments in
     excess of reserve                                   (3,523)           -
    Cost base of investment                                   -      (87,903)
    -------------------------------------------------------------------------
    (Loss) gain on sale before income taxes              (3,523)      19,202
    Income taxes                                            636       (3,585)
    -------------------------------------------------------------------------
    (Loss) gain on sale, net of income taxes        $    (2,887) $    15,617
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Note 4: Acquisition of Mutual Fund Assets from ING Investment
    Management Inc.

    On August 5, 2005, the Company acquired the management rights to
    $276 million in mutual fund assets from ING Investment Management Inc.
    ('ING') for cash consideration of $9.1 million. Thirteen ING funds have
    been merged into corresponding AGF funds. The agreement also includes the
    acquisition of the management contract for the ING Canadian Dividend
    Income Fund, which has been renamed the AGF Dividend Income Fund.

    The purchase price for the assets acquired was allocated as follows:

    
    -------------------------------------------------------------------------
                                                                     ($000's)

    Net assets acquired
    Management contracts                                         $     5,081
    Customer relationships                                             4,023
    -------------------------------------------------------------------------
                                                                 $     9,104
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    The portion allocated to customer relationships is being amortized over
    their estimated useful life of seven years. The purchase price was also
    subject to a future reduction based on the level of mutual fund
    redemptions during the first year subsequent to acquisition. The Company
    received a payment of $0.9 million in September 2006 of which
    $0.5 million was allocated to Management Contracts and the remainder to
    Customer Relationships.

    Note 5: Investment in Associated Company

    On May 27, 2005, Smith & Williamson Holdings Limited ('S&WHL') completed
    the acquisition of 100% of the outstanding shares of Solomon Hare
    Personal Finance Limited ('SHPF') and the business of Solomon Hare LLP.
    The total consideration paid by S&WHL of $20.6 million included cash of
    $4.9 million and the issuance of 2.3 million shares valued at
    $15.7 million. Prior to this transaction, the Company had a 31.8%
    interest in S&WHL. The Company holds a 30.7% interest in S&WHL. The
    dilution gain recorded in 2005 with respect to the acquisition of SHPF
    was $0.1 million.

    Note 6: Acquisitions of Cypress Capital Management Ltd. and P.J. Doherty
    & Associates Co. Ltd.

    On June 30, 2004, the Company acquired 100% of the shares of Cypress
    Capital Management Ltd. ('Cypress') for consideration of $26.1 million,
    including $0.1 million of acquisition costs. The acquisition has been
    accounted for by the purchase method of accounting, with the results of
    operations of Cypress included in the consolidated financial statements
    from the date of the acquisition.

    Consideration paid on closing consisted of $7.9 million of cash and
    285,553 Class B Non Voting Shares. Further payments were required and
    made subsequent to closing. On June 30, 2005, consideration consisted of
    $3.9 million in cash and issuance of 159,696 AGF Class B Non-Voting
    Shares valued at $2.6 million. On June 30, 2006, consideration consisted
    of $3.9 million in cash and issuance of 129,601 Class B Non-Voting Shares
    valued at $2.6 million.

    In addition to the aforementioned consideration paid, there is additional
    consideration due June 30, 2007 subject to Cypress achieving certain
    revenue levels. This amount is not determinable at the present time.

    On January 15, 2004, the Company acquired 100% of the shares of
    P.J. Doherty & Associates Co. Ltd. During 2006, the Company paid the
    final scheduled payment of $0.2 million (2005 - $0.2 million) related to
    this acquisition based on revenue growth during these years. This payment
    was recorded as an increase in goodwill.

    Note 7: Gain on Sale of Short-Term Investments

    During the year, the Company sold short-term investments of $22.8 million
    (2005 - $23.9 million). The gain related to the sale of short-term
    investments in 2006 was not significant (2005 - $4.5 million).

    Note 8: Trust Company

    The Trust Company's principal business activities are real estate secured
    loans, investment loans and deposit taking. Details related to these
    activities are as follows:

    
    (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 November 30, 2006 were
        $309.3 million (2005 - $316.0 million)

    -------------------------------------------------------------------------
    ($000's)           Term To Contractual Repricing
                  -----------------------------------------------------------
                    Variable      1 Year      1 to 5
                        Rate     or Less       Years        2006        2005
    -------------------------------------------------------------------------

    Residential
     mortgage
     loans        $    2,275  $  451,682  $  462,080  $  916,037  $  516,978
    Commercial
     mortgage
     loans                 -      14,838      11,087      25,925      35,823
    Home equity
     lines of
     credit (HELOC)  116,194           -           -     116,194           -
                  -----------------------------------------------------------
    Total real
     estate secured
     loans           118,469     466,520     473,167   1,058,156     552,801
    Investment
     loans         1,246,255         985      13,926   1,261,166     850,666
                  -----------------------------------------------------------
                   1,364,724     467,505     487,093   2,319,322   1,403,467
                  -----------------------------------
                  -----------------------------------
    Less allowance
     for loan losses                                      12,699       8,200
                                                      -----------------------
                                                      $2,306,623  $1,395,267
    Less: current
     portion                                             309,329     315,987
                                                      -----------------------
                                                      $1,997,294  $1,079,280
                                                      -----------------------
                                                      -----------------------

    Impaired loans
     included in
     above                                                16,368       5,199
    Less specific
     allowance for
     loan losses                                           2,448       1,488
                                                      -----------------------
                                                      $   13,920  $    3,711
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    ($000's)                                                2006        2005
    -------------------------------------------------------------------------

    The change in the allowance for loan losses
     is as follows:
      Balance, beginning of year                      $    8,200  $    4,267
      Amounts written-off                                 (2,697)     (1,668)
      Recoveries                                             465         226
      Reduction due to RSP loan securitization            (1,770)          -
      Provision for loan losses                            8,501       5,375
                                                      -----------------------
      Balance, end of year                            $   12,699  $    8,200
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


        As at November 30, 2006, the Company's mortgage portfolio was
        comprised of a combination of fixed rate and variable rate
        residential mortgages, of which $403.4 million (2005 -
        $309.9 million) is insured, with a weighted average term to maturity
        of 1.8 years (2005 - 1.2 years) and a weighted average yield of 6.81%
        (2005 - 5.80%). Investment loans have interest rates based on prime.
        For the year ended November 30, 2006, the average interest rate on
        HELOC was 6.08% and on investment loans was 7.39% (2005 - 6.52%)

    (b) Trust Company Deposits

    -------------------------------------------------------------------------
                             Term To Maturity
                  -----------------------------------------------------------
                                  1 Year      1 to 5    November    November
    ($000's)          Demand     or Less       Years    30, 2006    30, 2005
    -------------------------------------------------------------------------

    Deposits      $   10,047  $1,012,727  $1,465,490  $2,488,264  $1,407,752
    -------------------------------------------------------------------------

        As at November 30, 2006, deposits were comprised substantially of
        GICs with a weighted average term to maturity of 1.9 years
        (2005 - 1.9 years) and a weighted average interest rate of 4.05%
        (2005 - 3.64%).

    (c) Interest Rate Swaps

        To hedge its exposure to fluctuating interest rates, the Trust
        Company has entered into interest-rate-swap transactions with four
        Canadian chartered banks as noted below. The swap transactions expire
        between December 31, 2006 and November 30, 2011 and involve the
        exchange of either the one-month bankers' acceptance rate or the
        three-month bankers' acceptance rate, to receive fixed interest
        rates. As at November 30, 2006, the aggregate notional amount of the
        swap transactions was $1,712.7 million (2005 - $939.7 million). The
        aggregate fair value of the swap transactions, which represents the
        amount that would be received by the Trust Company if the
        transactions were terminated at November 30, 2006, was $3.8 million
        (2005 - the Trust Company would have paid $2.4 million).

    -------------------------------------------------------------------------
    Notional Amount of Swap        Maturity Date          Fixed Interest
                                                          Rate Received
    -------------------------------------------------------------------------
            ($000's)
             40,000                     2006                3.64%-3.91%
            633,700                     2007                3.00%-5.11%
            367,000                     2008                3.18%-4.68%
            242,000                     2009                3.47%-4.66%
            280,000                     2010                3.62%-4.78%
            150,000                     2011                4.10%-4.86%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (d) Interest Rate Sensitivity

        For the Trust Company, the impact of a 1% change in interest rates
        either up or down would be a change of annual net interest income of
        approximately $0.2 million as most of the loan portfolios are hedged.

    Note 9: Property, Equipment and Other Intangible Assets

    -------------------------------------------------------------------------
    ($000's)                                          Accumulated
    November 30, 2006                       Cost     Amortization      Net
    -------------------------------------------------------------------------

    Property and Equipment
      Furniture and equipment          $    19,753  $    16,532  $     3,221
      Leasehold improvements                20,430       12,792        7,638
      Computer hardware                      8,859        3,572        5,287
    -------------------------------------------------------------------------
                                            49,042       32,896       16,146

    Other Intangible Assets
      Computer software                     52,217       44,917        7,300
    -------------------------------------------------------------------------
                                       $   101,259  $    77,813  $    23,446
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    ($000's)                                          Accumulated
    November 30, 2005                       Cost     Amortization      Net
    -------------------------------------------------------------------------

    Property and Equipment
      Furniture and equipment          $    15,457  $    11,576  $     3,881
      Leasehold improvements                15,759       11,016        4,743
      Computer hardware                      7,443        3,607        3,836
    -------------------------------------------------------------------------
                                            38,659       26,199       12,460

    Other Intangible Assets
      Computer software                     47,069       37,890        9,179
    -------------------------------------------------------------------------
                                       $    85,728  $    64,089  $    21,639
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Note 10: Long-term Debt

    -------------------------------------------------------------------------
    ($000's)                                                 November 30,
                                                    -------------------------
                                                           2006         2005
    -------------------------------------------------------------------------
    Revolving term loan                             $    56,000  $         -
    Notes payable due April 30, 2013                          -       18,074
    Payment re CISL due January 31, 2006                      -        1,067
    Cypress payment due June 30, 2006 (note 6)                -        6,500
    -------------------------------------------------------------------------
                                                         56,000       25,641
    Less: amount included in current liabilities         56,000        8,277
    -------------------------------------------------------------------------
                                                    $         -  $    17,364
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (a) Revolving Term Loan

        The Company has arranged a six-year prime-rate-based revolving term
        loan to a maximum of $200.0 million with a Canadian chartered bank.
        Under the loan agreement, the Company is permitted to draw down the
        revolving term loan by direct advances and/or bankers' acceptances
        (BAs). The revolving term loan is available at any time for a period
        of 364 days from commencement of the loan (the 'Commitment Period').
        The expiration of the current commitment period is June 30, 2007.
        However, the Company may request by April 15, 2007, and prior to
        April 15 in any calendar year thereafter, a recommencement of the
        six-year term at the expiry of the then-current commitment period. No
        repayment of the principal amount outstanding pursuant to the
        revolving term loan is required during the first three years of the
        then-applicable term. Thereafter, the loan balance shall be repaid in
        minimum monthly instalments of at least one-thirty-sixth of the
        amount of principal outstanding.

        As at November 30, 2006, the Company has drawn $56.0 million against
        the available loan amount in the form of a one-day bankers'
        acceptance at an effective average interest rate of 4.60% per year.
        As this loan functions as a working capital facility, it has been
        included in current liabilities.

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

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

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

        Details of the gain recorded on repayment of debt were as follows:

    -------------------------------------------------------------------------
    ($000's)                                                     November 30,
                                                                        2006
    -------------------------------------------------------------------------

    Notes payable due April 30, 2013                             $    17,817
    Participation units                                                6,157
    -------------------------------------------------------------------------
                                                                      23,974
    Cash consideration paid, June 12, 2006                            (3,360)
    -------------------------------------------------------------------------
    Gain on early repayment of debt                                   20,614
    Income taxes                                                       7,305
    -------------------------------------------------------------------------
    Gain on early repayment of debt, net of income taxes         $    13,309
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (c) Payment to Consort Information Systems Limited ('CISL') due
        January 31, 2006

        In 2003 the Company, through its wholly owned subsidiary,
        Investmaster Group Limited ('Investmaster'), acquired all the
        outstanding shares of CISL. Cash consideration paid was $8.3 million
        with an additional payment of $1.1 million due, which was paid on
        January 31, 2006.

    (d) Interest Rate Sensitivity

        The effect of a 1% change in interest rates will increase or decrease
        annual interest expense on the Company's debt by approximately
        $0.2 million (2005 - $0.1 million).
    

    Note 11: Interest Rate Swap and Foreign Exchange Hedge Transactions

    To fix the interest rate paid on a portion of its revolving term loan,
    the Company has entered into three interest rate swap transactions (the
    'Swap Transactions') with a Canadian chartered bank. The Swap
    Transactions expire between October 28, 2007 and January 27, 2008. They
    involve the exchange of three-month bankers' acceptance floating interest
    rates for fixed interest rates of 5.47% to 5.56% per annum. As at
    November 30, 2006, the aggregate notional amount of the Swap Transactions
    was $10.9 million (2005 - $20.6 million). The aggregate fair value of the
    Swap Transactions, which represents the amount that would be paid by the
    Company if the transactions were terminated at November 30, 2006, was
    $0.1 million (2005 - $0.4 million).

    To hedge its currency exposure and to fix the interest rate on borrowings
    in connection with a Japanese yen-denominated investment included in
    Other Investments, the Company entered into a cross-currency swap
    transaction, which expired on November 29, 2006. The cross-currency swap
    transaction was settled on November 29, 2006 and the Company received a
    payment of $0.4 million (if the transaction had been terminated on
    November 30, 2005, the Company would have received $0.4 million).

    The Company did not hedge its currency exposure in connection with its
    investment in S&WHL in 2006 and 2005.

    Note 12: Fair Value of Financial Instruments

    
    -------------------------------------------------------------------------
    ($000's)                     November 30, 2006         November 30, 2005
                          ---------------------------------------------------
                             Carrying    Estimated     Carrying    Estimated
                                Value   Fair Value        Value   Fair Value
    -------------------------------------------------------------------------

    Real estate secured
     and investment loans $ 2,306,623  $ 2,310,359  $ 1,395,267  $ 1,396,040
    Short-term investments     10,723       13,529       23,805       25,216
    Other investments           5,524        8,492        7,142        9,994
    -------------------------------------------------------------------------

                          $ 2,322,870  $ 2,332,380  $ 1,426,214  $ 1,431,250
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Deposits              $ 2,488,264  $ 2,492,530  $ 1,407,752  $ 1,402,174
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    The estimated fair value of loans and deposits is determined using the
    amortized cost method by discounting the future cash flow at prevailing
    interest rates for loans and deposits with similar terms and applicable
    credit risks.

    The estimated fair value of investments with an available trading market
    is based on their quoted market value. Investments that have no trading
    market are valued based on management estimates using common valuation
    techniques. Other financial assets and financial liabilities of the
    Company are recorded at cost, which approximates fair value. Short-term
    investments include $10.1 million (2004 - $22.4 million) invested in
    AGF mutual funds.

    The fair values of the Trust Company derivative transactions are
    disclosed in note 8 and note 11.

    Note 13: Limited Partnership Financings

    Selling commissions paid on certain sales of mutual fund securities of
    the AGF Funds made on the DSC basis ('DSC securities') have been financed
    by limited partnerships held by third party investors. Up to November 30,
    2006, such limited partnerships have financed selling commissions of
    approximately $440 million in respect of such DSC securities. The Company
    is obligated to pay the relevant limited partnership an annual fee of
    0.47% to 0.90% of the net asset value of DSC securities. The limited
    partnerships also receive any deferred sales charges resulting from the
    redemption of such securities. These obligations continue as long as such
    DSC securities remain outstanding except for certain of the limited
    partnerships, in which case the obligation terminates at various dates
    from December 31, 2006 to December 31, 2020. For certain limited
    partnerships the obligation is secured by the Company's mutual fund
    management contracts to the extent of the particular obligation.

    The Company is responsible for the management and administration of the
    limited partnerships. These services are provided in the normal course of
    operations and are recorded at the amount of consideration agreed to by
    the parties. The amount of fees received in 2006 was $0.6 million
    (2005 - $0.7 million). As at November 30, 2006, the net asset value of
    DSC securities financed by the limited partnerships was $1.6 billion
    (2005 - $1.7 billion). It is the Company's intention to recommend the
    dissolution of certain of these partnerships. Refer to note 25 -
    Subsequent events.

    Note 14: Income Taxes

    
    (a) The Company's effective income tax rate for continuing operations is
        comprised as follows:

    -------------------------------------------------------------------------
                                                     Years ended November 30
                                                    -------------------------
                                                           2006         2005
    -------------------------------------------------------------------------

    Canadian corporate tax rate                            35.9%        35.9%
    Changes in future federal and provincial
     income tax rates                                     (14.1)           -
    Rate differential on earnings of subsidiaries         (11.3)       (10.4)
    Tax benefit of losses of foreign subsidiaries             -          1.3
    Amortization of customer contracts and
     relationships                                          1.1          1.0
    Tax-exempt investment income                           (0.9)        (1.8)
    Other                                                  (0.9)         2.5
    -------------------------------------------------------------------------
    Effective income tax rate                               9.8%        28.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) The tax effects of temporary differences which gave rise to future
        tax liabilities and assets are as follows:

    -------------------------------------------------------------------------
                                                              November 30
                                                    -------------------------
                                                           2006         2005
    -------------------------------------------------------------------------

    Future income tax liability

      Deferred sales commissions                    $   (92,405) $   (98,280)
      Deferred revenue                                      518        2,280
      Undepreciated capital cost in excess of
       carrying values                                    2,043        1,109
      Loss carryforwards                                  1,484           37
      Expenses deductible or gain to be
       recognized in future periods                         542        1,605
      Provision for loan losses                           3,057          807
      Securitization of RSP loans                        (5,046)           -
      Deferred charges                                   (4,430)        (951)
      Goodwill and management contracts                (136,259)    (150,990)
      Investments                                            (6)       2,113
      Other                                                (559)          82
    -------------------------------------------------------------------------
    Future income tax liability                     $  (231,061) $  (242,188)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (c) As at November 30, 2006, certain subsidiaries of the Company have
        accumulated aggregate income tax losses of approximately
        $21.4 million (2005 - $18.1 million) that may be used to reduce
        taxable income in the future. These tax loss carry-forwards expire as
        follows:

            $4.2 million        2014 to 2026
           $17.2 million      no expiry date

        The potential tax benefits of $17.2 million of these losses have not
        been recognized in the consolidated financial statements.

    (d) The 2006 federal budget announced on May 2, 2006 proposed to reduce
        the federal corporate income tax rate to 19% from 21% by January 1,
        2010 and to eliminate the federal corporate surtax rate of 1.12%
        effective January 1, 2008. On June 6, 2006, these tax rate changes
        were considered to be substantively enacted. Consequently, during the
        year, the Company recognized a $15.9 million reduction in future
        income tax liabilities.

    Note 15: Capital Stock

    (a) Authorized Capital

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

    (b) Changes During the Year

        The change in capital stock is summarized as follows:

    -------------------------------------------------------------------------
                                                    Number of
                                                  Shares issued       Amount
    -------------------------------------------------------------------------
    Class B Shares                                                    (000's)

      Balance, November 30, 2004                     90,739,463  $   394,125

        Issued on acquisition of a
         subsidiary (note 6)                            159,696        2,600
        Issued through dividend
         reinvestment plan                               20,931          377
        Stock options exercised (note 16)               648,015        7,739
        Purchased for cancellation                   (2,444,900)     (10,687)
    -------------------------------------------------------------------------

      Balance, November 30, 2005                     89,123,205  $   394,154

        Issued on acquisition of a
         subsidiary (note 6)                            129,601        2,600
        Issued through dividend
         reinvestment plan                               87,891        1,985
        Stock options exercised (note 16)               531,300        7,935
        Purchased for cancellation                     (700,000)      (3,108)
    -------------------------------------------------------------------------

      Balance, November 30, 2006                     89,171,997  $   403,566

    Class A Shares

      Balance, November 30, 2006 and 2005                57,600            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total stated capital, November 30, 2006
     (2005 - $394,154)                                           $   403,566
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Class B Shares Purchased for Cancellation

        AGF has obtained applicable regulatory approval to purchase for
        cancellation, from time to time, certain of its Class B Shares
        through the facilities of the Toronto Stock Exchange. Present
        approval for such purchases extends through to February 17, 2007.
        Under this issuer bid, the Company may purchase up to 10% of the
        public float outstanding on the date of the receipt of regulatory
        approval or up to 7,214,698 shares. During the year ended
        November 30, 2006, 700,000 (2005 - 2,444,900) Class B Shares were
        purchased at a cost of $15.9 million (2005 - $42.5 million) and the
        excess paid of $12.8 million (2005 - $31.8 million) over the book
        value of the shares purchased for cancellation was charged to
        retained earnings.

    Note 16: Stock-based Compensation and Other Stock-based Payments

    (a) Stock Option Plans

        AGF has established stock option plans for senior employees under
        which stock options to purchase an aggregate maximum of 5,421,773
        (2005 - 5,953,073) Class B shares could have been granted as at
        November 30, 2006. The stock options are issued at a price not less
        then the market price of the Class B Shares immediately prior to the
        grant date. Stock options are vested to the extent of 25% to 33% of
        the individual's entitlement per annum or, in some instances 100%
        vest at the end of the term of the option.

        The change in stock options during 2005 and 2006 is summarized as
        follows:

    -------------------------------------------------------------------------
                                                                    Weighted
                                                                     average
                                                      Number of     exercise
                                                        Options        price
    -------------------------------------------------------------------------
    Class B Share Options

      Balance outstanding, November 30, 2004          3,566,604  $     17.86

        Options granted                               2,063,000  $     18.25
        Options cancelled                              (199,714) $     20.27
        Options exercised                              (648,015) $     11.94
    -------------------------------------------------------------------------

      Balance outstanding, November 30, 2005          4,781,875  $     18.72

        Options granted                                 730,000  $     25.14
        Options cancelled                              (711,492) $     20.88
        Options exercised                              (531,300) $     14.98
    -------------------------------------------------------------------------

      Balance outstanding, November 30, 2006          4,269,083  $     19.93
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        The following summarizes information about stock options outstanding
        as at November 30, 2006:

    -------------------------------------------------------------------------
                                  Weighted  Weighted                Weighted
    Range of          Number of   average    average    Number of    average
    exercise            options  remaining  exercise      options   exercise
    prices          outstanding    life        price  exercisable      price
    -------------------------------------------------------------------------

    $11.27 to $16.87    580,000  3.4 years   $ 15.32      488,334    $ 15.04
    $17.06 to $17.36    809,000     5.2      $ 17.13      193,500    $ 17.14
    $17.87 to $18.94    612,583     5.4      $ 18.72      273,749    $ 18.50
    $18.95 to $19.38    970,000     5.9      $ 19.38      242,500    $ 19.38
    $19.39 to $27.73  1,297,500     4.8      $ 24.73      567,500    $ 24.20
    -------------------------------------------------------------------------
                      4,269,083     5.0      $ 19.93    1,765,583    $ 19.34
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


        The outstanding stock options have expiry dates ranging from
        December 2006 to December 2013. Options granted prior to 2005 require
        the Company or employee to meet performance criteria for certain of
        the options to vest.

        During 2006 the Company granted 730,000 options (2005 - 2,063,000)
        and recorded $4.6 million (2005 - $4.1 million) in compensation
        expense and contributed surplus in respect of the options granted
        since December 31, 2002. The fair value of options granted during
        2006 has been estimated at between $5.63 and $7.16 per share
        (2005 - between $3.70 and $4.30 per share) using the Black-Scholes
        option-pricing model. The following ranges of assumptions were used
        to determine the fair value of the options on the date of grant:

            Risk-free interest rate             3.94% - 4.26%
            Expected dividend yield             2.83% - 3.30%
            Expected share price volatility     29.85% - 30.15%
            Option term                         6.7 years

    (b) Share Purchase Plan

        Under the Company's share purchase plan, eligible employees can have
        a percentage of their annual earnings withheld subject to a maximum
        of 6%, to purchase the Class B Shares. The Company matches up to 60%
        of the amounts contributed by employees. All contributions are used
        by the plan trustee to purchase Class B Shares on the open market.
        Shares purchased with Company contributions vest immediately. The
        Company's contributions are recorded in payroll costs and amounted to
        $0.7 million for the year ended November 30, 2006 (2005 -
        $0.7 million)

    (c) Restricted Share Unit Plan

        Under the Company's restricted share unit ('RSU') plan, certain
        senior employees are issued RSUs. These units vest three years from
        the grant date. The RSU's vest after three years provided the
        employee meets certain performance criteria. On the vesting date, the
        Company will redeem all of the participants' RSUs in cash equal to
        the value of one Class B Share for each RSU.

        At November 30, 2006, 75,686 RSUs were outstanding to employees of
        the Company. Compensation expense for the year ended November 30,
        2006 related to these RSUs was $0.2 million (2005 - nil).

    (d) Performance Share Unit Plan

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

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

        At November 30, 2006, 67,305 PSUs were outstanding to employees of
        the Company. The PSUs were issued on November 30, 2006 and
        accordingly no compensation expense has been recorded for the year
        ended November 30, 2006.

    Note 17: Earnings Per Share

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

    -------------------------------------------------------------------------
                                                    Years ended, November 30,
                                                    -------------------------
                                                           2006         2005
    -------------------------------------------------------------------------
    Numerator ($000's)

      Net income from continuing operations
       for the year                                 $   102,235  $    72,712
      Gain on early retirement of debt, net
       of income taxes                              $    13,309  $         -
      (Loss)/gain on sale of discontinued
       operations                                        (2,887)      15,617
      Net earnings from discontinued
       operations, net of income taxes                        -        3,543
    -------------------------------------------------------------------------
      Net income for the year                       $   112,657  $    91,872
    -------------------------------------------------------------------------

    Denominator

      Weighted average number of shares - basic      89,105,541   90,296,830
      Dilutive effect of employee stock options         734,510      363,139
    -------------------------------------------------------------------------
      Weighted average number of shares - diluted    89,840,051   90,659,969
    -------------------------------------------------------------------------

    Earnings Per Share
      Basic from continuing operations              $      1.15  $      0.81
      Diluted from continuing operations            $      1.14  $      0.80
      Basic                                         $      1.26  $      1.02
      Diluted                                       $      1.25  $      1.01
    -------------------------------------------------------------------------
    


    Note 18: Agreements with Mutual Funds

    The Company acts as manager for the AGF Funds and receives management and
    advisory fees from the AGF Funds in accordance with the respective
    agreements between the Funds and the Company. In return, the Company is
    responsible for management and investment advisory services and all costs
    connected with the distribution of securities of the Funds. Substantially
    all the management and advisory fees the Company earned in 2006 and 2005
    were from the AGF Funds. As at November 30, 2006, the Company had
    $35.7 million (2004 - $14.8 million) receivable from the AGF Funds. The
    Company also acts as trustee for the AGF Funds that are mutual fund
    trusts.

    Up until the sale of Unisen to CitiFinancial on October 3, 2005, the
    Company directly provided unitholder services to the funds and was
    compensated for such services. These services were provided in the normal
    course of operations and were recorded at the amount of consideration
    agreed to by the parties. Concurrent with the sale of Unisen, the Company
    entered into a new 10 year services agreement with Citigroup Global
    Transaction Services. The aggregate unitholder services costs absorbed
    and management and advisory fees waived by the Company during the year on
    behalf of these service agreements were approximately $15.7 million
    (2005 - $10.0 million).

    Note 19: Related Party Transactions

    The Company has entered into certain transactions with entities or senior
    officers who are directors of the Company. During 2006, total amounts
    paid by the Company to these related parties aggregated $0.1 million
    (2005 - $0.1 million)

    Note 20: Supplemental Disclosure of Cash Flow Information

    Interest payments in 2006 were $79.4 million (2005 - $33.9 million).
    Income tax payments in 2006 were $48.1 million (2005 - $26.2 million).

    Note 21: Segment Information

    AGF has three reportable segments: Investment Management Operations,
    Trust Company Operations and Other. The Investment Management segment
    provides investment management and advisory services and is responsible
    for the management and distribution of the AGF investment products. AGF
    Trust Company offers a wide range of trust services including GICs, real
    estate secured and investment loans and Home Equity Line of Credit loans.
    In prior periods the Company had reported a fund administration segment,
    which consisted of Unisen Holdings Inc. ('Unisen') and Investmaster Group
    Limited ('Investmaster'). As a result of the sale of Unisen (see note 3)
    Unisen's operations have been reported as discontinued operations. The
    results of Investmaster a supplier of software products and services to
    the private wealth management industry and the results of the Company's
    30.7% interest in S&WHL, an independent private client investment
    management, financial advisory and accounting group based in the U.K. are
    included in the other segment as these entities do not meet the criteria
    for separate disclosure. AGF's reportable segments are strategic business
    units that offer different products and services.

    The results of the reportable segments are based upon the internal
    financial reporting systems of AGF. The accounting policies used in these
    segments are generally consistent with those described in the summary of
    significant accounting policies detailed in note 1.

    
    For the year ended November 30, 2006
    -------------------------------------------------------------------------
                  Investment       Trust                  Inter-
                  Management     Company                 Segment
    ($000's)      Operations  Operations      Other  Elimination       Total
    -------------------------------------------------------------------------
    External
     revenue      $  535,897  $  147,901  $   19,683  $        -  $  703,481
    Intersegment
     revenue           1,115       1,067           -      (2,182)          -
    -------------------------------------------------------------------------
    Segment revenue  537,012     148,968      19,683      (2,182)    703,481
    Operating
     expenses        326,261     116,836      11,615      (2,182)    452,530
    Interest expense       -           -       2,861           -       2,861
    Amortization     130,730       1,117       2,927           -     134,774
    -------------------------------------------------------------------------
    Segment income
     (loss) from
     continuing
     operations
     before taxes $   80,021  $   31,015  $    2,280  $        -  $  113,316
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in
     external
     revenue
      Interest
       revenue    $      967  $  131,351  $        -  $        -  $  132,318
    Total assets  $1,040,002  $2,760,071  $  119,695  $        -  $3,919,768
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the year ended November 30, 2005
    -------------------------------------------------------------------------
                  Investment       Trust                  Inter-
                  Management     Company                 Segment
    ($000's)      Operations  Operations      Other  Elimination       Total
    -------------------------------------------------------------------------
    External
     revenue      $  509,632  $   67,302  $   17,512  $        -  $  594,446
    Intersegment
     revenue              15       1,100           -      (1,115)          -
    -------------------------------------------------------------------------
    Segment revenue  509,647      68,402      17,512      (1,115)    594,446
    Operating
     expenses        279,814      53,918      16,991      (1,115)    349,608
    Interest expense       -           -       4,095           -       4,095
    Amortization     134,724         987       3,302           -     139,013
    -------------------------------------------------------------------------
    Segment income
     (loss) from
     continuing
     operations
     before taxes $   95,109  $   13,497  $   (6,876) $        -  $  101,730
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in
     external
     revenue
      Interest
       revenue    $    1,171  $   64,919  $        -  $        -  $   66,090
    Total assets  $1,052,830  $1,545,941  $  110,896  $        -  $2,709,667
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Note 22: Commitments

    The Company is committed under operating leases for office premises and
    equipment, which require approximate minimum annual cash rental payments
    as follows:

                       2007                        5,372
                       2008                        2,596
                       2009                        2,236
                       2010                        2,152
                       2011                        2,015
                       Thereafter                 10,303
    

    AGF Trust Company has outstanding mortgage commitments at rates of
    interest prevailing at the time the commitments were issued of
    $144.7 million as at November 30, 2006 (2005 - $127.2 million). Any
    interest rate commitment has a term of less than 60 days.

    Concurrent with the sale of Unisen to CitiFinancial, AGF has capped the
    management expense ratio on all of the AGF funds for three years at the
    lower of the actual levels reported in 2004 and 2005.

    Note 23: Guarantees

    The Company, under an indemnification agreement with each of the
    directors of the Company, as well as directors of the mutual fund
    corporations has agreed to indemnify the directors against any costs in
    respect of any action or suit brought against them in respect of the
    proper execution of their duties. To date, there have been no claims
    under these indemnities and the Company does not anticipate that any will
    occur.

    The Company is committed for a ten-year period to reimburse CitiFinancial
    should CitiFinancial's annual revenues derived from AGF fund
    administration services fall below a pre-determined level. The Company is
    not able to reasonably estimate this amount, if any, and does not
    anticipate this amount to be significant.

    Note 24: Contingent Liabilities

    There are certain claims and potential claims against the Company. None
    of these claims or potential claims are expected to have a material
    adverse effect on the consolidated financial position of the Company.

    Note 25: Subsequent Events

    On December 1, 2006, the Company acquired approximately 80% of Highstreet
    Partners Limited, which wholly owns Highstreet Asset Management Inc., an
    investment counsel firm based in London, Ontario. The purchase price is
    based on actual results for the period ending December 31, 2006 and
    consideration will be paid over a three-year period. The purchase
    consideration is payable by a combination of cash and the issuance of
    Class B Shares. On December 1, 2006, AGF made a payment of $14.8 million
    in cash and $4.4 million in shares.

    In 2007, it is the Company's intention to recommend the dissolution of
    the following Limited Partnerships ('LPs'): AGF Limited Partnership 1990,
    AGF Limited Partnership 1991, 20/20 Group 1990 Private Limited
    Partnership, 20/20 Group 1990 Limited Partnership and 20/20 Group 1992
    Limited Partnership. For all of these LPs, except for 20/20 Group 1990
    Private Limited Partnership, the dissolution is subject to approval by
    the respective limited partners. As part of the LP dissolution process,
    the Company will either purchase the future distribution fees remaining
    payable by the Company to the LPs or purchase the outstanding units for
    total cash consideration of $3.1 million. In 2006, distributions of
    $1.0 million were made to these LPs.


    AGF Management Limited
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
    OF OPERATIONS

    For the year ended November 30, 2006

    Consolidated Performance

    Overview

    Management's Discussion and Analysis ('MD&A') presents an analysis of the
financial condition of AGF Management Limited and its subsidiaries as at
November 30, 2006 compared with November 30, 2005, and the results of
operations for the year ended November 30, 2006 compared with the
corresponding period of 2005. A discussion of the results for the three months
ended November 30, 2006 compared with the three months ended November 30, 2005
is also included under the section 'Fourth Quarter Analysis'. This discussion
should be read in conjunction with our audited Consolidated Financial
Statements and Notes for 2006.
    Throughout this discussion, percentage changes are calculated based on
results rounded to the nearest thousand. Results, except per share
information, are presented in millions of dollars.
    AGF Management Limited ('AGF') is one of Canada's largest independent
mutual fund and investment management companies with operations and
investments in Canada, England, Ireland and Asia. AGF finished the fiscal year
with approximately $43 billion in assets under management ('AUM'), and
including the acquisition of Highstreet Partners Limited ('Highstreet'), which
closed on December 1, 2006, AGF's total AUM reached approximately $48 billion.
AGF commenced operations in 1957 with one of the first mutual funds available
to Canadians wishing to invest internationally and as at November 30, 2006
offered over 50 mutual funds to investment advisors and their clients. We also
offer investment management services to high-net-worth and institutional
clients.
    For purposes of this discussion, the operations of AGF Management Limited
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 principal subsidiaries and associated companies included within each
of our reportable segments, which are collectively referenced to as the AGF
Group of Companies ('the AGF Group') include:

    Investment Management Operations Segment

    AGF Funds Inc. ('AGFFI') - provides investment management and advisory
services and is responsible for the sales and marketing of the AGF mutual
funds. Based on AUM, AGFFI is one of the larger mutual fund organizations in
Canada. We manage 49 mutual funds, AGF Harmony tailored investment program and
the AGF Elements portfolios, totalling $26.9 billion in AUM.
    In addition, AGFFI and the operations listed below manage or advise
international and domestic AUM through or under separate investment management
mandates totalling almost $21 billion including the Highstreet acquisition,
which brings total AUM to approximately $48 billion.

    AGF Private Investment Management Ltd. ('PIM') - PIM provides investment
counselling services for high-net-worth clients, estates, endowments,
institutions and corporations. PIM has a national scope with offices in
Vancouver, Calgary, London, Waterloo, Toronto, Ottawa and Montreal and has
total AUM of $11.3 billion, including the assets of Highstreet. On December 1,
2006, AGF closed the transaction to purchase 80% of Highstreet Partners
Limited, which wholly owns Highstreet Asset Management Inc., an investment
counsel firm based in London, Ontario, with $4.8 billion in assets under
management.

    AGF International Advisors Company Ltd. - Dublin-based and established in
1991, this operation provides investment research and advisory services on
European and other international markets for the AGF mutual funds and other
clients. In addition, they also have institutional investment management and
advisory mandates.

    AGF Asset Management Asia Ltd. - Singapore-based and established in 1996,
this operation provides investment research and advisory services on Asian
markets for the AGF mutual funds and other clients.

    Trust Company Operations Segment

    AGF Trust Company ('AGF Trust') - in operation since 1988, AGF Trust has
$2.8 billion in assets and offers a broad range of web-enabled products and
services including GICs, term deposits, real estate secured loans and
investment loans. AGF Trust is federally incorporated and licensed across
Canada and is a member of the Canadian Payments Association.

    Other Segment

    Smith & Williamson Holdings Limited ('S&WHL') - a leading, independent
private client investment management, financial advisory and accounting group
based in the U.K. with pnds stlg 7.8 billion of assets under management. We
hold a 30.7% interest in this company as at November 30, 2006.

    Investmaster Group Limited - a wholly-owned subsidiary, which is a
leading supplier of software products and services to the private wealth
management community in the U.K.

    The following discussion provides details of our overall corporate
business strategy and achievements in connection with these strategies in
fiscal 2006 and is followed by a discussion of our key performance indicators,
which are measures that we use to determine whether or not we have been
successful in achieving our stated strategies.
    It is also important to understand that significant risks and
uncertainties related to our business exist that may impact the achievement of
our objectives and strategies. An overview of Factors that May Affect Future
Results (Risk Factors) related to our business has also been provided.
Finally, a discussion of Critical Accounting Policies follows. These
accounting policies are an integral part of the preparation of our financial
statements and require us to make estimates and assumptions that affect the
amount of assets, liabilities, revenues and expenses reported in our financial
statements.
    With an understanding of our corporate strategy, relevant measures to
determine success, an understanding of the risk factors and critical
accounting policies, the discussion that follows should provide the readers of
this material with a management perspective of our operations.

    Corporate Strategy

    AGF Management Limited assists in the identification and facilitation of
opportunities for our business segments and ensures that segment strategies
are aligned with the overall corporate strategy of targeting sustainable
profitability and value for our shareholders over the long term. In our 2005
MD&A, we indicated that our principal focus in fiscal 2006 was to enhance our
client-centric approach and promote our international investment management
capabilities in multiple channels; this continues to be the focus into 2007,
which in turn will translate into improved financial results.
    In 2006 we achieved the following:

    
    -   Our client-centric approach resulted in net sales improvement in our
        core mutual fund business. During fiscal year 2006, we recorded
        $437 million in net sales, which is a strong improvement over the
        $2.7 billion in net redemptions recorded in the prior year. Our
        momentum increased steadily during the year, and in the final two
        months of our fiscal year we had the highest long-term fund net sales
        of any non-bank firm in Canada. We were also third overall in the
        industry for the months of October and November.
    -   At the 2006 annual Canadian Investment Awards, we received the top
        prize for Advisors' Choice Favourite Investment Fund Company of the
        Year. We also won awards for five of our mutual funds, making AGF the
        winner of the highest number of awards.
    -   We addressed succession at the most senior level of management. On
        June 30, 2006, C. Warren Goldring, co-founder and chairman of the
        board stepped down and assumed the role of honorary chairman, and
        Blake Goldring, president and chief executive officer of AGF
        Management Limited, became chairman and CEO. We also appointed Randy
        Ambrosie to the role of president, AGF Funds Inc.
    -   On December 1, 2006 we completed an agreement to purchase 80% of
        Highstreet Partners Limited, which wholly owns Highstreet Asset
        Management Inc., an investment counsel firm based in London, Ontario,
        with $4.8 billion in assets under management. Rob Badun, formerly
        chief executive officer of Highstreet, was appointed president, AGF
        Private Investment Management Limited and will be responsible for
        overseeing the strategic plan for growth for the PIM group of
        companies. The Highstreet acquisition expanded our presence in the
        growing high-net-worth market and broadened our capabilities in the
        institutional market. Highstreet's investment style is quantitative,
        which is a complement to our existing investment management
        expertise.
    -   We repurchased debt owed to Multi-Fund Income Trust ("Multi-Fund"),
        which is a financing vehicle that we used to fund selling
        commissions. The $3.4 million payment to Multi-Fund resulted in a
        $13.3 million non-cash gain net of tax and the removal from our
        balance sheet of $24.0 million in debt.
    -   We delivered value directly to our shareholders through dividend
        payments and our share buyback program.
        i)  Dividends paid on AGF Class A Voting Common Shares and AGF Class
            B Non-Voting Shares ('AGF Class B Shares') increased to
            $61.5 million in 2006 as compared to $50.5 million in fiscal
            2005. This represented an increase of $0.13 per share or 23.2%
            over the $0.56 per share paid in 2005.
        ii) We continued our share buy back program. We repurchased 700,000
            AGF Class B Shares during 2006 as compared to repurchases of
            2,444,900 shares in fiscal 2005. Blackout restrictions and
            limited availability of large blocks of AGF Class B Shares
            limited repurchase activity in 2006.
        Including dividends and share repurchases, we returned 65% of our
        free cash flow to shareholders. We define free cash flow as cash flow
        from operations before net change in non-cash balances related to
        operations less selling commissions paid.
    -   AGF Management Limited has supported the growth of AGF Trust by
        investing $62.4 million in 2006, bringing our total investment of
        debt and equity capital to $134.8 million. AGF Trust real estate
        secured loans have grown 91.3% over the prior year and investment
        loans have grown 48.4%. AGF Trust now has over $2.8 billion in assets
        and is a meaningful contributor to the financial results of AGF. The
        estimated value of AGF Trust is well in excess of the capital
        invested in the business.
    

    We remain committed to our corporate strategy, which targets
sustainability, profitability and value for our shareholders in the years to
come, and further discussion of specific business segment strategies is
included in the segment discussions.

    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 key performance indicators are not measurements in
accordance with Canadian GAAP and should not be considered as an alternative
to net income or any other measure of performance under Canadian GAAP. Segment
discussions include a review of key performance indicators that are relevant
to each segment.

    Consolidated Operations

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

    We derive our revenue principally from a combination of:

    
    -   management and advisory fees based on AUM
    -   administration fees earned on Harmony, institutional and private
        investment management AUM
    -   deferred sales charges ("DSC") earned from investors when mutual fund
        securities sold on a DSC basis are redeemed
    -   interest earned on our Trust Company loan portfolio.
    

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

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

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                               2006          2005
    -------------------------------------------------------------------------

    Net cash provided by continuing
     operating activities                           $    222.2    $    224.2
    Less: net changes in non-cash balances
     from operations                                       2.3           7.0
    -------------------------------------------------------------------------
    Cash flow from continuing operations            $    219.9    $    217.2
    -------------------------------------------------------------------------
    

    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, as a substantial
amount of cash is spent on upfront commission payments. Free cash flow
represents cash available for distribution to our shareholders or for general
corporate purposes.

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                               2006          2005
    -------------------------------------------------------------------------

    Cash flow from continuing operations            $    219.9    $    217.2
    Less: selling commissions paid                       101.4          60.0
    -------------------------------------------------------------------------
    Free cash flow from operations                  $    118.5    $    157.2
    -------------------------------------------------------------------------
    

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

    Investment Management Operations

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

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

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

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

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                               2006          2005
    -------------------------------------------------------------------------

    EBITDA                                          $    210.7    $    229.8
    Divided by: revenue                                  537.0         509.6
    -------------------------------------------------------------------------
    EBITDA margin                                        39.2%         45.1%
    -------------------------------------------------------------------------
    

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

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                               2006          2005
    -------------------------------------------------------------------------

    Income before taxes and non-segmented items     $     80.0    $     95.1
    Divided by: revenue                                  537.0         509.6
    -------------------------------------------------------------------------
    Pre-tax profit margin                                14.9%         18.7%
    -------------------------------------------------------------------------
    

    Trust Company Operations

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

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

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                               2006          2005
    -------------------------------------------------------------------------

    Interest income                                 $    131.4    $     64.9
    Less: interest expense                                78.7          30.9
    -------------------------------------------------------------------------
    Net interest income                             $     52.7    $     34.0
    -------------------------------------------------------------------------
    

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

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                               2006          2005
    -------------------------------------------------------------------------

    Selling, general and administrative expense     $     29.7    $     17.6
    Add: amortization expense                              1.1           1.0
    -------------------------------------------------------------------------
    Non-interest expense                                  30.8          18.6
    -------------------------------------------------------------------------

    Net interest income                                   52.7          34.0
    Add: non-interest income                              17.6           3.5
    -------------------------------------------------------------------------
    Divided by: total of net interest income
     and non-interest income                              70.3          37.5
    -------------------------------------------------------------------------
    Efficiency ratio                                     43.8%         49.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                               2006          2005
    -------------------------------------------------------------------------

    Income before taxes and non-segmented items     $     31.0    $     13.5
    Divided by: net interest income                       52.7          34.0
    -------------------------------------------------------------------------
    Pre-tax profit margin                                58.8%         39.7%
    -------------------------------------------------------------------------
    

    Factors that May Affect Future Results (Risk Factors)

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

    Company-Specific Factors

    Investment Management
    Demand for our products depends on the ability of our investment
management team to deliver value in the form of strong investment returns, as
well as the demand for specific investment products. A specific fund manager's
style may fall out of favour with the market, resulting in lower sales and/or
higher redemptions.
    Our future financial performance will be influenced by our ability to
successfully execute our client-centric strategy and maintain our net sales.
If sales do not materialize as planned or key personnel cannot be retained,
margins may erode.
    Our strategy includes strategic acquisitions. There is no assurance that
we will be able to complete acquisitions on terms and conditions that satisfy
our investment criteria. After transactions are completed, meeting target
return objectives is contingent upon many factors, including retaining key
employees and growth in AUM of the acquired companies.
    Most of our AUM are from investment advisors or strategic partners that
offer our products, along with competing products. A GF's brand and investment
performance have contributed to our success in the past; however, our future
success is dependent on access to distribution channels that are independent
of our company.

    AGF Trust
    AGF Trust has experienced a substantial amount of growth in recent
reporting periods. The success of this fast-growing business is dependent on
systems and processes being adequate to process increasing volumes of
business. Systems or process failures could result in financial losses or an
inability to sustain high growth rates.
    The Trust Operations lending depends on a network of independent
advisors, mortgage brokers and referral institutions. If service levels were
to decline or if the Trust Operations products no longer met the needs of
clients, it might become difficult to attract new lending business.

    Non-Company Factors

    Investment Management
    The level of competition in the industry is high. Sales and redemptions
of mutual funds may be influenced by relative service levels, management fees,
attributes of specific products in the marketplace and actions taken by
competitors.
    We take all reasonable measures to ensure compliance with governing
statutes, regulations or regulatory policies. A failure to comply with
statutes, regulations or regulatory policies could result in sanctions or
fines that could adversely affect earnings and reputation. Changes to laws,
statutes, regulations or regulatory policies could affect us by changing
certain economic factors in our industry. See the 'Government Regulations'
section for further details.
    Revenues are generally not subject to significant seasonal swings. We
experience somewhat higher sales during the RSP season; however, the immediate
impact of the level of sales on total revenue is not significant. The
'Selected Quarterly Information' table shows key performance statistics for
the past eight quarters.
    Our revenue is highly correlated to the value of AUM. As a result, we are
exposed to general stock market fluctuations. A prolonged stock market decline
would reduce revenue and therefore earnings in our Investment Management
Operations segment.

    AGF Trust
    A general economic downturn and an increased unemployment rate could lead
to reduced credit worthiness of the Trust segment borrowers. This could lead
to increased default rates and an adverse impact on financial results. There
is a risk that an increase in interest rates could slow the pace of housing
sales and adversely affect growth in the residential mortgage market, which
could adversely affect the ability to sustain present growth rates.
    Pricing pressures in the real estate secured or investment loan markets
could potentially result in net interest margin compression for our Trust
Company Operations segment. Net interest margin compression would adversely
affect profitability.
    Our Trust Company Operations segment is also exposed to stock market
levels as collateral for secured investment loans consists of mutual fund
assets, which are highly correlated to general stock market levels. In
addition, the Trust Company Operations segment is exposed to the level of
housing prices, as collateral for real estate secured loans consists of the
borrower's home.

    Foreign Exchange Risk
    Our main foreign exchange risk derives from the U.S. and international
portfolio securities held in the mutual fund AUM. Change in the value of the
Canadian dollar relative to foreign currencies will cause fluctuations in the
Canadian-dollar value of non-Canadian AUM upon which our management fees are
calculated. We monitor this risk as currency fluctuation may influence the
financial results of AGF. However, it is the discretion of the fund manager to
decide whether to enter into foreign exchange contracts to hedge foreign
exposure on U.S. and international securities held in funds.
    We are subject to foreign exchange risk on our integrated foreign
subsidiaries in Ireland and Singapore, which provide investment advisory
services. These subsidiaries retain minimal monetary exposure to the local
currency, their revenues are calculated in Canadian dollars and the local
currency expenses are comparatively small.
    We are subject to foreign exchange risk related to our 30.8% interest in
S&WHL, which is denominated in U.K. pounds. On our balance sheet, the
investment is presented in Canadian dollars using the exchange rate prevailing
on the balance sheet date.

    Interest Rate Risk
    Excluding the AGF Trust operations, we have limited exposure to the risk
related to changes in interest rates on floating rate debt at November 30,
2006. Using average loan balances outstanding, the effect of a 1% change in
variable interest rates on this debt in fiscal 2006 would have resulted in a
change of approximately $0.2 million in interest expense for the year ended
November 30, 2006. As the amount of interest paid is small relative to our
operating cash flow, such a change in interest rates would not have a material
impact on the results of operations or the fair value of the related debt.
    For the AGF Trust operations, the impact of a 1% change in interest rates
either up or down would be a change of annual net interest income of
approximately $0.2 million, as most of the loan portfolios is hedged.

    The foregoing discussion is not an exhaustive list of all risks and
uncertainties with respect to our ability to execute against our strategy and
readers are cautioned to consider other potential risk factors when assessing
our ability to execute against our strategy.

    Critical Accounting Policies

    Accounting policies are an integral part of the preparation of our
financial statements in accordance with accounting principles generally
accepted in Canada (GAAP). Understanding these policies is a key factor in
understanding our reported results of operations and financial position. See
Note 1 of the Notes to Consolidated Financial Statements for a discussion of
all of our significant accounting policies. Certain critical accounting
policies require us to make estimates and assumptions that affect the amount
of assets, liabilities, revenues and expenses reported in the financial
statements. Due to their nature, estimates involve judgment based on available
information. Therefore, actual results or amounts could differ from estimates
and the difference could have a material impact on the consolidated financial
statements.
    We consider the following to be among our current accounting policies
that involve significant estimates or judgements.

    Income Taxes
    The Company follows the liability method in accounting for income taxes,
whereby future income tax assets and liabilities reflect the expected future
tax consequences of temporary differences between the carrying amounts of
assets and liabilities and their tax bases. Future income tax assets and
liabilities are measured based on the enacted or substantively enacted tax
rates, which are expected to be in effect when the future income tax assets or
liabilities are expected to be realized or settled. The effect on future
income tax assets and liabilities of a change in tax rates is recognized as
income in the period that includes the substantive enactment date. Future
income tax assets are recognized to the extent that realization is considered
more likely than not.

    Deferred Selling Commissions
    Selling commissions paid to brokers on mutual fund securities sold on a
DSC basis are recorded at cost and are amortized on a straight-line basis over
a period that corresponds with the applicable DSC schedule (which ranges from
three to seven years). Unamortized deferred selling commissions are written
down to the extent that the carrying value exceeds the expected future revenue
on an undiscounted basis.

    Property and Equipment
    Property and equipment, which is comprised of furniture and equipment,
computer hardware, leasehold improvements and equipment under capital lease,
is stated at cost, net of accumulated amortization. Amortization is computed
on the following methods based on the estimated useful lives of these assets:

    
        Furniture and equipment      20% declining balance
        Computer hardware            30% declining balance
        Leasehold improvements       straight-line over term of lease
    

    Finite-life Intangible Assets
    Finite-life intangible assets, which are comprised of customer contracts
and relationships and investment advisory contracts and computer software, are
stated at cost, net of accumulated amortization. Amortization is computed on a
straight-line basis based on the estimated useful lives of these assets:

    
        Customer contracts and relationships    7 to 15 years
        Investment advisory contracts           5 years
        Computer software                       3 to 5 years
    

    Impairment of Long-lived Assets
    Impairment of long-lived assets is recognized when an event or change in
circumstance causes the assets' carrying value to exceed the total
undiscounted cash flows expected from their use and eventual disposition. The
impairment loss is calculated by deducting the fair value of the asset or
group of assets from its carrying value.

    Goodwill and Management Contracts
    The purchase price of acquisitions accounted for under the purchase
method and the purchase price of investments accounted for under the equity
method are allocated based on the fair values of the net identifiable assets
acquired, including management contracts. The excess of the purchase price
over the values of such assets is recorded as goodwill. Management contracts
have been determined to have an indefinite life.
    Goodwill and management contracts are not amortized, but are subject to
impairment tests on at least an annual basis. Goodwill is allocated to the
reporting units and any impairment is identified by comparing the carrying
value of a reporting unit with its fair value. If any impairment is indicated,
then it is quantified by comparing the carrying value of goodwill to its fair
value, based on the fair value of the assets and liabilities of the reporting
unit. As of November 30, 2006 and 2005, the Company has completed its annual
impairment testing on the carrying values of goodwill and management
contracts. No impairment losses were required to be recognized as a result of
this testing.

    Real Estate Secured Loans and Investment Loans
    Real estate secured loans and investment loans are carried at amortized
cost less principal repayments less any holdbacks, net of an allowance for
loan losses. Interest income from loans is recorded on an accrual basis.
Accrued but uncollected interest on uninsured mortgage and investment loans is
reversed when a loan is identified as impaired. Principal payments on real
estate secured loans and investment loans that are contractually due to the
Company in the 12-month period from the balance sheet date are classified as
current assets.
    Fees that relate to the origination of loans are deferred and recognized
as selling expenses on a straight-line basis over the average expected term of
the loans.

    Allowance for Loan Losses
    The allowance for loan losses consists of both specific allowances on
impaired loans, and general allowances. General allowances are based on
management's assessment of probable, unidentified losses in the portfolio that
have not been captured in the determination of specific allowances. The
assessment includes general economic factors and geographic exposure.

    Impaired Loans
    Loans are classified as impaired when, in the opinion of management,
there is reasonable doubt as to the collectibility, either in whole or in
part, of principal or interest or when principal or interest is past due
90 days, except where the loan is both well-secured and in the process of
collection. In any event, a loan that is insured by the federal government, an
agency thereof or another third-party insurer is classified as impaired when
interest or principal is past due 365 days, or in the case of other loans,
when they are contractually in arrears for 180 days.
    When a loan is identified as impaired, the carrying amount of the loan is
reduced to its estimated realizable value. In subsequent periods, recoveries
of amounts previously written off and any increase in the carrying value of
the loan are credited to the provision for loan losses in the consolidated
statements of income. Where a portion of the loan is written off and the
remaining balance is restructured, the new loan is carried on an accrual basis
when there is no longer any reasonable doubt regarding the collectibility of
principal or interest. Interest income is recognized on impaired loans on a
cash basis only after the specific allowance for losses has been reversed and
provided there is no further doubt as to the collectibility of the principal.

    Stock-based Compensation and Other Stock-based Payments
    The Company has stock-based compensation plans as described in Note 16.
The Company utilizes the fair value-based method of accounting for stock-based
compensation. The fair value of stock-based compensation is recorded as a
charge to net earnings with a corresponding credit to contributed surplus.
    The Company also has a share purchase plan under which employees can have
a portion of their annual earnings withheld to purchase AGF Class B Shares.
The Company matches a portion of these amounts. The Company's contribution
vests immediately and is recorded as a charge to net income in the period in
which the cash contribution is made.
    During the year, the Company established a Restricted Share Unit ('RSU')
plan for senior employees under which certain employees were granted RSU's of
AGF Class B Shares. Compensation expense and the related liability are
recorded equally over the vesting period, taking into account fluctuations in
the market price of AGF Class B Shares and forfeitures.
    Effective November 30, 2006, the Company established a Performance Share
Unit ('PSU') plan for senior employees under which certain employees were
granted PSUs of AGF Class B Shares. Compensation expense and the related
liability are recorded equally over the vesting period, taking into account
the likelihood of the performance criteria being met, fluctuations in the
market price of AGF Class B Shares and forfeitures.

    Accounting for Securitizations
    The Company has securitized certain RSP loans through the sale of these
loans to a securitization trust. In order for a securitization to be treated
as a sale, the Company must surrender control over those loans included in the
securitization. To surrender control, the securitized assets must be isolated
from the Company and its creditors, even in the case of bankruptcy or
receivership, and the Company must receive consideration other than the
beneficial interest in the transferred assets.
    In determining the gain or loss on a sale, management estimates future
cash flows by relying on estimates of the amount of interest that will be
collected on the securitized assets, the yield paid to investors, the portion
of the securitized assets that will be prepaid before their scheduled
maturity, expected credit losses, the cost of servicing the assets and the
rate at which to discount these expected future cash flows. Actual cash flows
may differ significantly from those estimated by management. If actual cash
flows are different from management's estimate of future cash flows, then the
gains or losses on the securitization recognized in income will be adjusted.
Note 2 to the financial statements provides additional disclosure regarding
the securitizations and related balance sheet and income statement impacts.

    AGF Elements
    In November 2005, the Company launched AGF Elements, which consists of
five diversified fund-of-fund portfolios. If an AGF Elements portfolio does
not match or outperform its customized benchmark over a 3-year period, each
individual investor will receive up to 90 basis points in additional units,
calculated based on the value of such investment at the end of the 3-year
period.
    The Company will include in other liabilities up to 30 basis points per
year of each investor's assets under management, adjusted for redemptions,
until the end of the three-year measurement period of each investment made by
such investor. At that time, if an individual investor's returns match or
exceed the corresponding benchmark, the Company will recognize the entire
amount as management fee revenue. If an individual investor's actual returns
are below the customized benchmark, a corresponding amount will be distributed
to the investor in the form of individual units.

    Future Accounting Changes
    The CICA has issued three new accounting standards: CICA Handbook Section
3855 Financial Instruments - Recognition and Measurement; Section 3865 Hedges;
and Section 1530 Comprehensive Income. These standards will increase
harmonization with U.S. and international accounting standards, and became
effective for the Company on December 1, 2006.
    These standards require that all financial assets be classified as
available for sale, trading, held to maturity or loans and receivables.
Financial liabilities will be classified as trading or other. Initially, all
financial assets and financial liabilities must be recorded on the balance
sheet at fair value, with subsequent measurement determined by the
classification of each financial asset and liability.
    Financial assets and financial liabilities held-for-trading will be
measured at fair value with the changes in fair value reported in earnings.
Financial assets held-to-maturity, loans and receivables and financial
liabilities other than those held-for-trading will be measured at amortized
cost. Available-for-sale financial assets will be measured at fair value with
changes in fair value reported in other comprehensive income ('OCI') until the
financial asset is disposed of, or becomes impaired.
    Derivative instruments must be recorded on the balance sheet at fair
value. Changes in the fair values of derivative instruments will be recognized
in earnings, except for derivatives that are designated as a cash flow hedge,
the fair value change for which will be recognized in OCI.
    OCI will be a new component of shareholders' equity and a new statement
entitled 'Statement of Comprehensive Income' will be added to the Company's
financial statements. OCI is composed of the Company's net income and other
comprehensive income. Other comprehensive income will included unrealized
gains and losses on available-for-sale financial assets, foreign currency
translation and changes in the fair market value of derivative instruments
designated as cash flow hedges, all net of income taxes.
    The transition adjustment attributable to the following will be
recognized in the opening balance of retained earnings as at December 1, 2006:
(i) financial instruments that the Company classifies as held-for-trading and
that were not previously recorded at fair value, and (ii) the difference in
the carrying amount of loan or deposit at December 1, 2006 and the carrying
amount calculated using the effective interest rate from inception of the
loan. Adjustments arising due to the remeasuring of financial assets
classified as available-for-sale will be recognized in the opening balance of
OCI. Neither of the transition amounts that will be recorded in the opening
retained earnings or in the opening OCI balance on December 1, 2006 is
expected to be material to the Company's consolidated financial position.

    Disclosure Controls

    Disclosure Controls and Procedures

    Pursuant to Multilateral Instrument 52-109, the chief executive officer
and chief financial officer must certify that they are responsible for
establishing and maintaining disclosure controls and procedures and have
designed such disclosure controls and procedures (or caused such disclosure
controls and procedures to be designed under their supervision) to ensure that
material information with respect to AGF, including its consolidated
subsidiaries, is made known to them and that they have evaluated the
effectiveness of AGF's disclosure controls and procedures as of the end of the
period covered by these annual filings. The Company's chief executive officer
and chief financial officer, after evaluating the effectiveness of the
Company's disclosure controls and procedures, have found them to be effective.

    Changes in Internal Controls over Financial Reporting

    Also pursuant to Multilateral Instrument 52-109, the chief executive
officer and chief financial officer must also certify that they are
responsible for the design of internal controls over financial reporting (or
caused them to be designed under their supervision). Internal controls over
financial reporting are designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with Canadian generally accepted
accounting principles. During the year ended November 30, 2006, there were no
significant changes to the systems of internal control within our company.

    Consolidated Operating Results

    The table below summarizes our Consolidated Operating Results for the
    years ended November 30, 2006 and 2005.

    
    -------------------------------------------------------------------------
    ($ millions, except per
     share amounts)
    Years ended November 30                 2006          2005      % change
    -------------------------------------------------------------------------
    Revenue
      Investment management
       operations                     $    537.0    $    509.6          5.4%
      Trust company operations             149.0          68.4        117.8%
      Other                                 19.7          17.5         12.6%
      Intersegment eliminations             (2.2)         (1.1)       100.0%
    -------------------------------------------------------------------------
                                           703.5         594.4         18.4%

    Expenses
      Investment management
       operations                          326.3         279.8         16.6%
      Trust company operations(1)          116.8          53.9        116.7%
      Other                                 11.6          17.0        (31.8%)
      Intersegment eliminations             (2.2)         (1.1)       100.0%
    -------------------------------------------------------------------------
                                           452.5         349.6         29.4%

    EBITDA(2) (continuing operations)      251.0         244.8          2.5%
      Amortization                         134.8         139.0         (3.0%)
      Interest expense                       2.9           4.1        (29.3%)
      Income taxes                          11.1          29.0        (61.7%)
    -------------------------------------------------------------------------
    Net income from continuing
     operations                       $    102.2    $     72.7         40.6%
    Gain on repayment of debt,
     net of taxes                           13.3           0.0           n/m
    (Loss)/gain on sale of
     discontinued operations,
     net of tax                             (2.8)         15.6       (117.9%)
    Net earnings of discontinued
     operations, net of tax                  0.0           3.5           n/m
    -------------------------------------------------------------------------
    Net income for the year           $    112.7    $     91.8         22.8%
    -------------------------------------------------------------------------
    Cash flow from continuing
     operations(3)                         219.9         217.2          1.2%
    Earnings per share from
     continuing operations - diluted  $     1.14    $     0.80         42.5%
    Return on equity                       11.9%         10.0%         19.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes interest expense related to deposits the funds of which are
        used in our investment loan and real estate secured loan programs.
    (2) As previously defined, see the 'Key Performance Indicators and Non-
        GAAP Measures - EBITDA' section. The items required to reconcile
        EBITDA to net income, a defined term under Canadian GAAP, are
        detailed above.
    (3) Cash flow from operations before net change in non-cash balances
        related to operations.
    

    Results from Continuing Operations
    Consolidated revenues increased by 18.4% for the year ended November 30,
2006. Investment Management Operations revenue increased by 5.4% primarily on
the strength of average daily mutual fund AUM increasing by 11.5%. In
addition, there was significant growth in institutional and PIM AUM. These
were partially offset by lower deferred sales charge revenues related to
declining redemptions of mutual funds. Trust Company Operations revenues
increased by 117.8% in fiscal 2006 over 2005 on the strength of increased real
estate secured and investment loans. Other revenue, which includes revenue of
Investmaster and our equity interest in Smith & Williamson Holdings Limited
(S&WHL), was higher for the year ended 2006 as compared with 2005, due to
strong performance at S&WHL.
    Expenses increased by 29.4% in fiscal 2006 as compared to 2005. The
expense increase was primarily in the Investment Management Operations and in
the Trust Company Operations segments. Investment management expenses are
higher due to increased compensation expenses, sales and marketing efforts,
fund absorption related to the capping and soft capping of management expense
ratios in our funds, and increased expenses in the Private Investment
Management business. The increase in the Trust Company Operations segment was
due to higher volume of business and increases in interest costs on deposits
held to fund real estate secured and investment loans. The declining expenses
in the Other segment relates solely to Investmaster's operations, which have
been significantly restructured to reduce costs.
    The revenue and expense impact contributed to EBITDA increasing by 2.5%
for the year ended November 30, 2006 over the respective 2005 period. The
EBITDA recorded in 2006 is a result of reduced EBITDA in the Investment
Management Operations segment, offset by strong performance in our Trust
Company Operations segment. The three months ended November 30, 2006 marked a
strong quarter for mutual fund sales and continued growth in the Institutional
and Private Investment Management AUM. To this end, we continue to invest in
and support initiatives that will facilitate future growth in the Investment
Management Operations segment.
    Amortization expense for the year ended November 30, 2006 decreased by
3.0% compared to the corresponding period in 2005. Amortization of deferred
selling commissions in the Investment Management Operations segment accounted
for $108.2 million of the total amortization expense and was the driver in the
year-over-year decrease.
    Interest expense decreased to $2.9 million for the year ended
November 30, 2006 from $4.1 million in the same period in 2005. The decrease
is primarily a result of lower average outstanding bank loan balances in 2006
as compared to 2005.
    Income tax expense for the year ended November 30, 2006 was $11.1 million
as compared to $29.0 million in 2005. The decrease is primarily due to a
$15.9 million reduction of future income tax liabilities recorded in the third
quarter, which related to the Canadian federal corporate income tax rate
reduction that was substantially enacted in June 2006.
    The impact of the above revenue and expense items resulted in net income
from continuing operations of $102.2 million in 2006 as compared with
$72.7 million in the prior year. Basic earnings per share from continuing
operations were $1.15 per share in 2006 as compared to $0.81 per share in
2005. Diluted earnings per share from continuing operations were $1.14 per
share in 2006 as compared to $0.80 per share in 2005.

    Net Earnings
    Net income for the year ended November 30, 2006 was $112.7 million as
compared with $91.8 million in 2005. The 12-month period ended November 30,
2006 included a $13.3 million non-cash gain on repayment of debt. During the
second quarter of 2006, we reached an agreement with Multi-Fund to terminate
our obligation for a cash payment of $3.4 million. The gain resulted because
the liability recorded on our balance sheet was higher than the cash buy-out
price. The 12 months ended November 30, 2006 also included a $2.8 million loss
net of tax related to subsequent adjustments to the final purchase price on
the sale of Unisen. In 2005, the Company recorded a $15.6 million gain net of
tax related to the disposition of Unisen and recorded $3.5 million in earnings
from Unisen as discontinued operations.
    For a more detailed discussion of revenue and expense items, please refer
to the individual operating segment discussions.
    An analysis of the 2006 fourth-quarter results compared to the
corresponding period in 2005 is included under the heading 'Fourth Quarter
Analysis'.

    Return on Equity
    Return on equity increased by 19.0% for the year ended November 30, 2006
over 2005 on the strength of increased income from continuing operations.

    Outlook

    After a period of rapid growth and consolidation of industry players, we
believe that the investment fund industry in Canada is now in the early stages
of maturity. Demand for investment products will remain strong due to factors
such as Canada's projected population growth and its significant amount of
unused registered Retirement Savings Plan contribution room. Mutual funds
remain a very accessible and attractive investment solution for these
retirement accounts. Despite the announcement by the federal government of
their intention to tax income trusts, we believe the demand for income/yield-
producing products will continue. An aging and increasingly wealthy Canadian
population will underpin demand for PIM services. We also see growth
opportunities in the institutional investment management space both
domestically and abroad.
    AGF's strategy of focusing on client-centric activities has recently
resulted in higher gross sales and declining redemptions resulting in strong
net sales. A reduction in redemptions increases the value of our franchise in
the long term, but in the short term, reduced redemptions can affect EBITDA as
DSC revenue is reduced. The recent strength in net sales is positive for long-
term value creation, but typically the net financial contribution from mutual
funds in the year of sale is minimal. Investment performance may have a more
significant impact on our financial performance in 2007.
    Business-specific outlooks are included in the segment discussions.

    Business Segment Performance

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

    Investment Management Operations

    Business and Industry Profile

    Our Investment Management Operations segment provides products and
services across the wealth continuum, including mutual funds, wrap products
and private investment management. Our products are delivered through multiple
channels, including advisors, financial planners, brokers, banks, life
insurance companies and consultants.
    Income-oriented products continue to experience strong inflows. On
October 31, 2006 the federal government announced that it would tax income
trusts beginning in 2011. However, this policy announcement will not influence
secular factors associated with an aging population, which should bolster the
demand for dividend and income products going forward. AGF is well-positioned
to benefit from this continued trend with income-generating funds such as AGF
Monthly High Income and AGF Diversified Dividend Income, and AGF Dividend
Income Fund, which continues to be a strong seller.
    An emerging trend in the Canadian mutual fund industry is a rise in the
popularity of international funds. International funds were in severe net
redemptions last year, but in recent months they have experienced strong net
sales. If factors that have influenced this trend stay intact, we expect that
sales of international funds will comprise a large portion of our mutual fund
net sales in 2007.
    AGF is an aggressive player within the highly competitive Canadian
investment management business. We compete with numerous domestic as well as
foreign players serving the market. We believe that although the Canadian
mutual fund business is reaching the early stages of maturity, there are many
opportunities for growth. We believe our status as an independent fund
manufacturer with no distribution channel conflict will benefit us as the
industry continues to evolve.
    AGF is also building a reputation internationally as an institutional
investment management boutique. Our success in this area has contributed to
growth in institutional AUM of 49% during the 12 months ended November 30,
2006. We believe that further developing our reputation and relationships with
international institutions will be a future growth opportunity.

    Investment Management Operations Segment Strategy

    In 2005, we stated that our primary focus was to continue to enhance the
client-centric model in our investment management business. In order to
achieve this, we maintained a high level of contact with our clients and
refined the way we deal with advisors. We implemented a client engagement
strategy that defines the way we interact with our clients and allows us to
deliver services in a predictable manner. We implemented an advisor contact
evaluation program, a method of reaching out to advisors to determine whether
we are having a positive impact. We also utilized our activity management
program and our customer relationship management system to ensure we were
making the right number of contacts and engaging in the most effective
activities. During 2006, this consistent effort resulted in the following:

    
    -   Our net sales improved greatly. During the final quarter of fiscal
        2006, we recorded $424 million in net sales, which is a strong
        improvement over the $329 million in net redemptions recorded in the
        prior-year period. Our momentum increased steadily during the year
        and we finished the year by having the highest net sales of any non-
        bank firm in Canada in October and November.
    -   At the 2006 annual Canadian Investment Awards, we received the top
        prize for Advisors' Choice Favourite Investment Fund Company of the
        Year. We also won awards for five of our mutual funds, making AGF the
        winner of the highest number of awards.
    -   We successfully marketed products that were introduced in 2005. For
        example, AGF Dividend Income Fund, formerly ING Dividend Income Fund
        was introduced in the popular dividend category. This Fund purchases
        the best Canadian dividend-paying companies and has achieved superior
        performance by using yield-enhancing strategies. AGF Dividend Income
        Fund started the year with $273.4 million in AUM and by year-end
        reached $827.6 million. In November 2005, we launched AGF Elements, a
        fund of AGF funds, which brings state-of-the-art portfolio
        construction and monitoring, along with a unique commitment to return
        up to 90 basis points in new units if the portfolios' average
        annualized rate of return does not perform at or above the customized
        benchmark over a three-year period. This product became one of the
        most successful products in our history and reached $1 billion in
        assets by November 30, 2006.

    The strategic priorities for our investment management operations for
    2007 are to:

    -   Focus on predictable excellence in three core activities: investment
        management, relationship management and product management.
    -   Promote international investment management competency across
        multiple channels.
    -   Pursue strategic acquisitions to supplement organic growth.
    

    Focus on Three Core Activities
    We are focused on building predictable excellence in three core areas:
investment management, relationship management and product management.

    Investment Management
    We believe that our strong long-term investment performance record will
be maintained by having the right people in place, with the right tools and a
heavy focus on research. In 2006, our investment management operation
implemented a new trade order management system, which resulted in enhanced
operational effectiveness and created greater back office independence and
business flexibility.
    Our investment performance is bolstered by our presence in international
markets. In addition to investment professionals in various locations across
Canada, we maintain investment management offices in Dublin and Singapore.

    Relationship Management
    We have chosen to utilize independent channels of distribution. We
believe that supporting independent advice is an attractive distribution
model. We were recognized for our ability to execute on this strategy at the
2006 annual Canadian Investment Awards, where, as noted above, we received the
top prize for Advisors' Choice Favourite Investment Fund Company of the Year.
    We are committed to our effective multi-channel distribution approach. We
now have tactical plans in place in three broad distribution categories: the
advisor channel, national accounts and institutional. In each channel, we
strive to make it easy to do business with AGF.

    Product Management
    Our client-centric approach includes listening to advisors and developing
and marketing products in a way that meets advisors' needs. This approach was
recognized at the 2006 Canadian Investment Awards where AGF was given
Honourable Mention in the category of Canadian Investment Marketing Awards for
its marketing of Elements. Launched in November 2005, Elements is an example
of a product perfectly tailored to the needs of advisors. Elements has
achieved more than $1 billion in assets in only one year, making it one of the
most successful product launches in AGF's history.

    Promote International Investment Management Competency
    AGF has a strong product lineup and a diverse range of investment
alternatives. We have a particular strength in the area of international
investment management. We have had success marketing our international money
management expertise to international institutional clients. Our success in
this area has contributed to growth in institutional AUM of 49% during the
12 months ended November 30, 2006. The elimination of the foreign content
restrictions on registered retirement accounts and the cooling of the rise in
the Canadian dollar have already sparked a resurgence by Canadian retail
investors embracing international investing. Our product lineup includes some
star performers. The following international funds won awards at the 2006
Canadian Investment Awards:

    
    -   AGF International Stock Class, managed by John Arnold and Rory Flynn
        of AGF International Advisors Company Limited ('AGFIA'), won the
        International Equity Fund Award
    -   AGF Global Financial Services Class, managed by Rory Flynn of AGFIA,
        won the Financial Services Equity Fund Award
    -   AGF Emerging Markets Fund, managed by Patricia Perez-Coutts, won the
        Emerging Markets Equity Fund Award
    -   AGF European Equity Class, managed by John Arnold and Rory Flynn,
        won the European Equity Fund Award
    

    Pursue Strategic Acquisitions to Supplement Organic Growth
    Our organic growth will be supplemented by acquisitions in the investment
management segment. We have a disciplined acquisition approach. AGF targets
long-term after-tax return on investment in excess of 15% per annum. We look
for acquisitions that have a financial as well as a strategic rationale, such
as our transactions with ING Investment Management Inc. and Highstreet
Partners Limited.

    AGF Private Investment Management
    On December 1, 2006, AGF acquired 80% of Highstreet Partners Limited,
which wholly owns Highstreet Asset Management Inc., an investment counsel firm
based in London, Ontario with $4.8 billion in assets under management.
Highstreet joined AGF PIM, and Highstreet's chief executive officer, Rob
Badun, became president of AGF Private Investment Management Limited. Rob
Badun is now working with the AGF PIM firms to maximize growth synergies with
other members of the AGF group of companies. Part of the strategy will include
ensuring AGF takes advantage of Highstreet's proprietary quantitative
investment process that has proven to consistently outperform. The strategy
will also leverage the unique offerings of AGF PIM's other three platforms:
Magna Vista Investment Management in Montreal, P.J. Doherty & Associates in
Ottawa and Cypress Capital Management in Vancouver and Calgary. The strategic
plan is in progress and is expected to include items such as:

    
    -   realizing synergies with other AGF Companies
    -   pursuing strategic acquisitions
    -   delivering consistent investment performance
    

    Assets Under Management
    The primary sources of revenue for AGF's Investment Management Operations
are management and advisory fees. The amount of management and advisory fees
is dependent 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 based on a specified percentage of the average daily
net asset value of the respective fund. In addition, we earn fees on our
institutional and private investment management AUM. As a result, the level of
AUM has a significant influence on financial results. The following table
illustrates the composition of the changes in total AUM during the years ended
November 30, 2006 and 2005:

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                 2006          2005      % change
    -------------------------------------------------------------------------

    Mutual fund AUM,
     beginning of period              $   22,209    $   22,747         (2.4%)

    Gross sales of mutual funds            4,686         3,005         55.9%
    Redemptions of mutual funds           (4,249)       (5,749)       (26.1%)
    -------------------------------------------------------------------------
    Net mutual fund sales (redemptions)      437        (2,744)      (115.9%)

    Market appreciation of fund
     portfolios                            4,211         2,206         90.9%
    -------------------------------------------------------------------------

    Mutual fund AUM, end of period        26,857        22,209         20.9%

    Institutional AUM                      9,425         6,332         48.8%
    PIM AUM                                6,489         5,589         16.1%
    -------------------------------------------------------------------------

    Total AUM                         $   42,771    $   34,130         25.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average daily mutual fund
     AUM for the period               $   24,129    $   21,639         11.5%
    -------------------------------------------------------------------------
    

    Total AUM increased by 25.3% on the strength of market appreciation and
growth related to institutional and private investment management AUM. The
mutual fund AUM figure was up significantly on a year-over-year basis as a
result of strong investment performance and positive net sales. The average
daily mutual fund AUM figure was up 11.5% as compared to 2005.
    Details of mutual fund net sales and investment performance were as
follows:

    Net Sales
    Net sales are a key performance indicator for our Investment Management
Operations segment. AGF recorded net sales of $437 million during fiscal 2006,
a significant improvement from the $2.7 billion of net redemptions in 2005.
Long-term funds sales improved from net redemptions of $70 million in November
2005 to net sales of $226 million in November 2006. In December 2006, the
positive trend continued, as we reported $182.9 million in long-term fund net
sales.

    Investment Performance
    Stock market performance influences the level of AUM. During the year
ended November 30, 2006, the Canadian-dollar-adjusted S&P 500 Index rose
11.7%, the Canadian-dollar-adjusted NASDAQ Index rose 6.5% and the S&P/TSX
Composite Index rose 20.6%. The total market appreciation of our mutual fund
assets net of fees for the year ended November 30, 2006 divided by the average
daily mutual fund AUM for the year equals 17.5%.
    The impact of the U.S. dollar decline relative to the Canadian dollar on
the market value of AGF mutual funds since November 30, 2005 has been a
reduction in AUM of approximately $0.1 billion.
    Consistent with the rise in the stock market, market appreciation net of
management fees increased mutual fund AUM by $4.2 billion since November 30,
2005. For the five-year period ended November 30, 2006, 60% of ranked AUM
performed above median. Over the 10-year period ended November 30, 2006, 64%
of ranked AUM performed above median.
    Strong markets combined with solid performance by our fund managers and
with net sales have served to increase the overall mutual fund AUM level as at
November 30, 2006 compared to November 30, 2005.

    
    The composition of our mutual fund AUM is summarized as follows:

    -------------------------------------------------------------------------
                                          Percentage of total mutual fund
                                                 AUM at November 30
                                       --------------------------------------
                                             2006                 2005
    -------------------------------------------------------------------------

    Domestic equity funds                   37.9%                35.6%
    U.S. and international equity funds     39.0%                39.6%
    Domestic balanced funds                  9.4%                11.1%
    U.S. and international balanced funds    2.3%                 2.2%
    Domestic fixed income funds              9.5%                 9.3%
    International fixed income funds         1.9%                 2.2%
    -------------------------------------------------------------------------
                                             100%                 100%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The change in composition of mutual fund AUM in 2006 was due to strong
relative performance of the S&P/TSX Composite Index.
    The composition of AUM has direct influence on our revenues. Generally,
equity funds have higher management fees than fixed income funds and
international funds have higher management fees than domestic funds.

    Financial and Operational Results
    The table below highlights the Investment Management Operations segment
results for the years ended November 30, 2006 and 2005.

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                 2006          2005      % change
    -------------------------------------------------------------------------

    Revenue
      Net management and
       advisory fees                  $    430.9    $    404.4          6.6%
      Administration fees and
       other revenue                        78.0          63.4         23.0%
      Deferred sales charges                25.5          37.3        (31.6%)
      Investment income                      2.6           4.5        (42.2%)
    -------------------------------------------------------------------------
                                           537.0         509.6          5.4%
    Expenses
      Selling, general and
       administrative                      173.4         142.7         21.5%
      Trailing commissions                 125.3         110.3         13.6%
      Investment advisory fees              27.6          26.8          3.0%
    -------------------------------------------------------------------------
                                           326.3         279.8         16.6%
    -------------------------------------------------------------------------

    EBITDA(1)                              210.7         229.8         (8.3%)
    Amortization                           130.7         134.7         (3.0%)
    -------------------------------------------------------------------------
    Income before taxes and
     non-segmented items              $     80.0    $     95.1        (15.9%)
    -------------------------------------------------------------------------
    (1) As previously defined, see the 'Key Performance Indicators and Non
        GAAP Measures - EBITDA' section.
    

    Revenue
    Revenue for the Investment Management Operations segment increased by
5.4% over the previous year, with changes in the categories being:

    Net Management and Advisory Fees
    The increase in average daily mutual fund AUM in fiscal 2006 of 11.5%
directly contributed to a 6.6% increase in net management and advisory fee
revenue from the same period a year ago. Average mutual fund AUM includes
Harmony, our fast-growing tailored investment product. However, Harmony
revenues are recorded in the administration fees and other revenue line, which
is discussed below. Harmony made up 7.1% of the average daily AUM in the 12
months ended November 30, 2006. Excluding the Harmony AUM, the period-over-
period percentage change in net management and advisory fees is comparable to
the remaining average daily mutual fund AUM increase.

    Management and advisory fee revenue in fiscal 2006 is reported net of
distribution fees paid to limited partnerships and other third-party financing
entities of $10.3 million (2005 - $12.9 million).

    Administration Fees and Other Revenue
    Administration fees and other revenue, which includes fees earned on
Harmony, institutional and PIM AUM increased by 23.0% in the year ended
November 30, 2006 as compared to the same period in the prior year. There was
strong growth in Harmony AUM as well as organic growth in institutional and
PIM AUM.

    Deferred Sales Charges
    We receive deferred sales charges upon redemption of securities sold on
the contingent DSC or 'back-end' commission basis for which we financed the
selling commissions paid to the dealer. The DSC is generally 5.5% of the
original subscription price of the funds purchased if the funds are redeemed
within the first two years, and declines to zero after seven years. DSC
revenue fluctuates based on the level of redemptions, the age of the assets
being redeemed and the proportion of redemptions composed of back-end assets.
DSC revenues declined by 31.6% in 2006 as compared to 2005 as the redemption
rate on DSC securities declined.

    Expenses

    Expenses for the Investment Management Operations segment increased 16.6%
versus the previous year. Changes in specific categories are described in the
discussion that follows.

    Selling, General and Administrative (SG&A) Expenses
    SG&A expenses increased by 21.5% in 2006 compared to 2005. The increase
is made up of the following amounts:

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                                             2006
    -------------------------------------------------------------------------
    Increase in fund absorption accrual                            $     5.7
    Increase in stock option expense                                     1.4
    Increase in compensation-related expenses                           15.6
    IT costs related to transition of services from CitiFinancial        1.0
    Additional facilities and other staff-related costs                  2.7
    System enhancements for sales and marketing initiatives              4.1
    -------------------------------------------------------------------------
    

    The increase in fund absorption accrual is a result of soft caps on
management fees as well as the management expense ratio cap on all of our
funds to the lower of the amount incurred in 2004 and 2005, which we announced
with the sale of Unisen in October 2005. Compensation expense increased
primarily as a result of variable performance compensation tied to our sales
results and investment performance. Both our sales and investment performance
were strong in 2006 and have resulted in increased year-over-year payouts.
Additional facilities and other staff-related costs were related to increased
staffing levels and the repatriation of our Information Technology Services
Group from Unisen. Systems enhancements with respect to sales and marketing
initiatives have been designed to make AGF easier to do business with and more
responsive to clients' needs.

    Trailing Commissions
    Trailing commissions paid to investment dealers are dependent on total
AUM, the proportion of mutual fund AUM sold on a front-end versus back-end
commission basis, and the proportion of equity fund AUM versus fixed income
fund AUM. Trailing commissions as a percentage of average daily mutual fund
AUM increased to 0.520% for the 12 months ended November 30, 2006 from 0.510%
in the comparable 2005 period, due to an increased proportion of mutual fund
AUM sold on a front-end basis.

    Investment Advisory Fees
    External investment advisory fees increased by 3.0% as the average AUM
managed by external sub-advisors increased by a like amount.

    EBITDA

    EBITDA for the Investment Management Operations segment were
$210.7 million for the year ended November 30, 2006, a decrease of 8.3% from
$229.8 million for the same period of fiscal 2005.

    Amortization

    The largest item in this category is amortization of deferred selling
commissions. Amortization also includes amortization of property, equipment
and other intangible assets, customer contracts, relationships and investment
advisory contracts. We internally finance all selling commissions paid. These
selling commissions are capitalized and are amortized on a straight-line basis
over a period that corresponds with their applicable DSC schedule.
    Amortization expense related to deferred selling commissions was
$108.2 million in 2006 as compared to $112.6 million in 2005. The year-over-
year decrease is reflective of the prior-year's mix in sales on a DSC basis as
compared to sales on a front-end basis. Front-end load sales result in us
paying no upfront commission to the advisor.
    During fiscal 2006, we paid $101.4 million in selling commissions,
compared to $60.0 million in 2005. As at November 30, 2005, the unamortized
balance of deferred selling commissions financed stood at $268.2 million, a
decrease of $6.8 million from the prior-year balance of $275.0 million. The
contingent deferred sales charges that would be received if all of the DSC
securities were redeemed at November 30, 2006 were to be approximately
$357.4 million (2005 - $370.5 million).

    Segment Outlook

    We have experienced a steady reduction in the amount of redemptions and
an increase in gross sales over the course of fiscal 2006. As a result, we
have consistently reported positive net sales in recent months. We expect that
this trend will continue and that net sales in our mutual fund business will
have a significant impact on AUM in fiscal 2007. Stock market levels, which
cannot be precisely predicted, can also be a major influence on the value of
our AUM. Declining redemptions could cause DSC revenue to decline, which could
serve to reduce EBITDA in the Investment Management Operations segment.
However, DSC is influenced not only by the level of redemptions, but also the
age of the assets being redeemed and the proportion of redemptions composed of
back-end assets.
    On September 6, 2006, AGF International Advisors Company Limited (AGFIA)
assumed the role of Portfolio Advisor to AGF International Value Fund and AGF
International Value Class. AGF International Value Fund is our largest fund,
with $3.3 billion in assets. The move will result in a significant decrease in
the sub-advisory fees paid in 2007, when compared to 2006.

    Trust Company Operations

    Business and Industry Profile

    Through AGF Trust we offer financial solutions including GICs, real
estate secured and investment loans, and Home Equity Lines of Credit
('HELOC').
    AGF Trust investment loans consist of secured investment loans and RSP
loans distributed through financial advisors. The market for these products is
healthy and growing due to the efforts of financial advisors who continue to
broaden their suite of products as they service the needs of their customers.
AGF Trust has a competitive edge in the advisor channel as we leverage AGF's
mutual fund wholesaler relationships. AGF mutual fund wholesalers have
operated successfully in the advisor channel for 49 years.
    We offer real estate secured loans to Canadians who have sound credit but
in some cases have not met the requirements of Canada's large banks to qualify
for their lowest rate real estate secured loan products. This alternative real
estate secured loan space is underdeveloped and fragmented, which makes it a
very attractive market. In addition to the strong secular demand created by an
underserved market, demand has recently been underpinned by low interest rates
and a healthy housing market. Real estate secured loan products are
distributed primarily through mortgage brokers. The mortgage broker channel
has also experienced strong growth. Borrowers have chosen to deal with
mortgage brokers to take advantage of independent advice and competitive
rates, while lenders have provided real estate secured loans in this channel
to reduce distribution costs.

    Trust Company Operation Segment Strategy

    AGF Trust is aligned very closely with the strategy of the investment
management business. The AGF Trust sales team works collaboratively with AGF's
mutual fund wholesalers and offers a compelling suite of products to advisors,
including secured investment loans and RSP loans. The real estate secured loan
business also holds promise in adding value to the advisor relationship. As
advisors seek to manage both sides of their clients' balance sheets, AGF
Trust's lending capabilities will be in increasing demand by advisors. We also
know that as Canadians approach retirement, many will find that their home is
their largest retirement asset. Knowing this, we may be able to assist
advisors in future by leveraging our experience in the real estate secured
loan business to help advisors' clients use their homes as a financial
planning tool. We have already used our real estate secured loan business to
help advisors' clients in this manner. We successfully operated a pilot
project in the advisor channel in 2006. The project introduced a Home Equity
Line of Credit ('HELOC'), and it proved to add value to the mutual fund
advisor relationship and to our partners' businesses.
    We will continue to strive to earn a high financial return as well as
maximize synergies with the investment management segment by using the
following strategies:
    
    -   leverage wholesaler relationships and market intelligence to
        penetrate the advisor channel
    -   provide superior client service and delivery to mortgage broker
        channel
    -   introduce new products that directly serve client needs
    -   utilize disciplined loan underwriting standards and cost control
    

    In fiscal 2006, we expanded our dedicated sales staff and broadened our
geographical coverage within Canada to promote investment and real estate
secured loan products and as a result, the loan portfolio increased
significantly in 2006.
    AGF Trust also continued to support AGF investment management wholesalers
with the aim to make it easier for AGF wholesalers to serve their clients and
promote trust products to advisors.
    AGF Trust will continue to maximize operational synergies with our
investment management business through trust products that assist financial
advisors in broadening and deepening their relationship with their clients. In
addition, we will focus on expanding returns by increasing our mutual fund and
real estate secured loan portfolios.

    Securitization Transaction

    On February 28, 2006, AGF Trust Company securitized $218.4 million of RSP
loans through the sale of these loans to a securitization trust. As at
November 30, 2006, the balance of securitized loans outstanding was equal to
$161.3 million.
    When RSP loan receivables are securitized, the transaction is recognized
as a sale. Based on assumptions such as prepayments and expected credit
losses, a gain or loss on sale of the loan receivables is recognized
immediately in income. The related loan assets are removed from the
consolidated balance sheet. As part of the securitization, certain financial
assets are retained and a servicing liability is incurred. Each quarter, an
amount is included in the financial results of AGF Trust Company, which
relates to the amortization of retained interest and servicing liability as
well as any change in assumptions.

    Financial and Operational Results

    The table below highlights our operating segment results for the years
ended November 30, 2006 and 2005:

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                 2006          2005      % change
    -------------------------------------------------------------------------
    Interest, administration fees
     and other revenue                 $   136.9     $    68.4        100.1%
    Securitization gain and
     related items                          12.1           0.0           n/m
    -------------------------------------------------------------------------
                                           149.0          68.4        117.8%

    Expenses
      Selling, general and
       administrative                       29.7          17.6         68.8%
      Interest on deposits                  78.7          30.9        154.7%
      Provision for loan losses              8.5           5.4         57.4%
    -------------------------------------------------------------------------
                                           116.9          53.9        116.9%

    EBITDA(1)                               32.1          14.5        121.4%
    Amortization                             1.1           1.0         10.0%
    -------------------------------------------------------------------------
    Income before taxes and
     non-segmented items               $    31.0     $    13.5        129.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest, administration fees
     and other revenue                     136.9          68.4        100.1%
      Less: administration fees and
       other revenue                         5.5           3.5         57.1%
    -------------------------------------------------------------------------
    Total interest income                  131.4          64.9        102.5%

    Total interest expense                  78.7          30.9        154.7%
    -------------------------------------------------------------------------
    Net interest income                     52.7          34.0         55.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As previously defined, see the 'Key Performance Indicators - EBITDA'
        section.
    

    Revenue and Net Interest Margin
    The average net interest margin was 2.57% in 2006, as the average
interest rate on loans was 6.54% and the average interest rate on deposits was
3.97% after the impact of swaps. The average net interest margin was 2.95% in
2005, as the average interest rate on loans was 5.84%, and the average
interest rate on deposits was 2.89% after the impact of swaps. This spread
decrease resulted from a change in the mix of RSP loans (as a higher
percentage of RSP loans were shorter term, lower rate contribution loans in
2006 compared to 2005), a slight decrease in spreads on the investment loan
portfolio, and a change in the business mix to include a higher proportion of
real estate secured loans, which on average earn lower spreads than AGF
Trust's other lending products. The 91.3% year-over-year increase in the real
estate secured loan portfolio and a 48.4% year-over-year increase in the
investment loan portfolio, along with the introduction of the HELOC product in
2006, resulted in the overall increase in total revenue and net interest
income.

    Selling, General and Administration Expenses
    SG&A increased by 68.8% in fiscal 2006 as compared to 2005 principally as
a result of higher staffing levels. New staff supported balance sheet growth,
assisted with new product introductions and ensured the maintenance of high
service levels. In addition, expenses increased due to increased variable
compensation to salespeople and external brokers related to the high
origination levels in 2006.

    Provision for Loan Losses
    The provision for loan losses increased by 57.4% in the year as compared
to 2005, with the increase attributable to the increase in our loan
portfolios.

    EBITDA

    The strong real estate secured and investment loan growth and the RSP
loan securitization resulted in EBITDA increasing by 121.4% in 2006, as
compared to 2005.

    Operational Performance

    The table below highlights our key operational measures for the segment
for the years ended November 30, 2006 and 2005:

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                 2006          2005      % change
    -------------------------------------------------------------------------
    Real estate secured loans
      Insured mortgage loans           $   403.4     $   309.9         30.2%
      Conventional mortgage loans          533.4         240.5        121.8%
      HELOC                                116.2           0.0           n/m
                                      ---------------------------------------
                                         1,053.0         550.4         91.3%
    Investment loans
      Secured investment loans             892.5         484.3         84.3%
      RSP loans                            346.3         349.9         (1.0%)
      Other loans                           14.9          10.6         40.6%
                                      ---------------------------------------
                                         1,253.7         844.8         48.4%
      Other assets                         453.4         150.7        200.9%
    -------------------------------------------------------------------------
      Total assets                     $ 2,760.1     $ 1,545.9         78.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Net interest income(1)           $    52.7     $    34.0         55.0%
      Gain from securitization and
       related items                        12.1           0.0           n/m
      Other income                           5.5           3.5         57.1%
      Non-interest expenses                 30.8          18.6         65.6%
      Provision for loan losses              8.5           5.4         57.4%
    -------------------------------------------------------------------------
      Income before taxes and
       non-segmented items             $    31.0     $    13.5        129.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Efficiency ratio(2)                   43.8%         49.6%
      Assets-to-capital multiple            15.8          14.4
    -------------------------------------------------------------------------
    (1) Net interest income above is reported net of agent commissions
    (2) The efficiency ratio is calculated by dividing non-interest expenses
        by the total of net interest income and fee income. The 2005 amount
        has been modified to incorporate broker commissions in non-interest
        expenses, consistent with 2006.
    

    Loan Asset Growth
    Loan assets experienced substantial growth during fiscal 2006. Real
estate secured loan assets grew 91.3%, as sales efforts in the mortgage broker
channel continued to be successful. RSP loan advances were strong, as
financial advisors continued to make use of AGF Trust's Internet-based loan
application system. New investment loan products and improved tie-ins with AGF
mutual fund wholesalers also contributed to overall growth in loan advances,
as consumer loans increased by 48.4% in 2006. RSP loan balances were lower by
$161.3 million as at November 30, 2006 as a result of the securitization
transaction.

    Efficiency Ratio
    The efficiency ratio (non-interest expenses divided by the total of net
interest income and fee income) is a key performance indicator utilized to
ensure that expenses are contained as the Trust business grows. The efficiency
ratio improved to 43.8% in 2006 from 49.6% in 2005, largely as a result of the
impact of the gain on sale from securitization.

    Balance Sheet
    Our balance sheet has grown significantly during the past year, with our
financial position remaining solid. Total assets increased 78.5% to
$2.8 billion at November 30, 2006 as compared to the previous year-end. At
November 30, 2006, our asset-to-capital multiple stood at 15.8 times compared
to 14.4 times at the same time last year, which is below our authorized
multiple of 17.5 times. Our risk-based capital ratio was 10.5% at November 30,
2006. AGF Trust received $62.4 million in debt and equity capital from AGF
Management Ltd. during the year, in order to support increased asset levels.
Liquid assets were high, with $388.8 million in cash and short-term
investments at November 30, 2006, ensuring that we can easily meet the loan
funding requirements during the 2007 RSP season.

    Loan Portfolio Credit
    Portfolio credit quality remains consistent as at November 30, 2006
compared to the prior year. The general allowance for conventional mortgage
loan losses was increased during the year to $4.9 million from $2.4 million a
year ago. The general allowance for investment loan losses was increased to
$2.2 million from $1.2 million a year ago. Due to the reduction in balance
sheet RSP loans from the securitization, the general allowance for RSP loans
was decreased to $2.8 million from $3.1 million a year ago. Some 43% of real
estate secured loan assets are insured. We have strong security for non-RSP
investment loans, and loan losses during the history of the program have been
minimal. For RSP loans, the expense for impaired loans, which consists of the
increase in specific allowances plus write-offs (excluding securitized RSP
loans) was $2.7 million in fiscal 2006 (2005 - $2.3 million). For the balance
of our loan products, the expense for impaired loans was less than
$0.5 million (2005 - less than $0.1 million).

    Segment Outlook

    We anticipate that execution of AGF Trust's stated strategy will result
in the level of growth achieved in 2006 being sustained in 2007. A rise in
interest rates or a softening of housing prices would negatively affect real
estate secured loan growth, but even if these factors materialize,, we believe
the alternative real estate secured loan market would still sustain a high
level of growth. Stock market levels influence investment loans. However, the
2007 RSP season has started strongly for AGF Trust Company, with lending
volumes above last year's pace.
    AGF Trust can accommodate this level of expansion due to scalable
technology platforms and disciplined underwriting and risk analysis.
Management believes the company is on track to solidify its position as a
trusted alternative to traditional banks for the lending products that it
distributes.

    Liquidity and Capital Resources

    Free cash flow from operations generated from continuing operating
activities (before net change in non-cash balances related to operations) was
$219.9 million for the year ended November 30, 2006, compared to
$217.2 million in the prior year.
    Our free cash flow (defined as cash flow from continuing operations less
selling commissions paid) was $118.5 million for the year ended November 30,
2006, compared to $157.2 million in the prior year. In fiscal 2006, we paid
$101.4 million in selling commissions, which were capitalized and amortized
for accounting purposes, compared with $60.0 million in 2005. Free cash flow
from operations and our bank facility were used primarily to fund the
following:

    
    -------------------------------------------------------------------------
    ($ millions)
    Years ended November 30                               2006          2005
    -------------------------------------------------------------------------
    Payment of dividends                             $    61.5     $    50.5
    Repurchase of AGF Class B non-voting shares
     for cancellation                                     15.9          42.5
    Acquisitions                                           3.2          14.5
    Purchase of property, equipment and other
     intangible assets                                    14.0           8.7
    Debt repayment                                         4.7          80.0
    Investment in Trust Operations
     (eliminated on consolidation)                        62.4          42.0
    -------------------------------------------------------------------------
                                                     $   161.7     $   238.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Consolidated cash and cash equivalents increased by $245.9 million from
November 30, 2005. The increase is primarily due to an increase in cash in the
Trust Company Operations segment. The investment in Trust Company Operations
is eliminated on consolidation; however, it represents a transfer of cash from
our cash and cash equivalents balance shown as supplemental information on the
Consolidated Statements of Cash Flow to the Trust Company Operations' cash and
cash equivalents balance. In periods in which the Company has a free cash flow
deficiency, these amounts will be financed by increasing our bank
indebtedness.
    During fiscal 2006, we used $15.9 million of free cash flow to repurchase
700,000 AGF Class B Shares at an average price of $22.67 per share.
    We have a six-year prime-rate-based revolving term loan facility to a
maximum of $200.0 million, of which $144.0 million was available to be drawn
as of November 30, 2006. To date, we have utilized short-term borrowings under
our credit facility. With the trend in gross sales improving and the Trust
Company Operations segment requiring substantial investments, we will look to
finance any free cash flow deficiency with longer-term bankers' acceptances
and categorize any amount with repayment terms in excess of 12 months as long
term. This 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.

    Limited Partnership Financing

    Selling commissions paid on certain sales of mutual fund securities of
the AGF Funds made on the DSC basis ('DSC securities') have been financed by
limited partnerships held by third-party investors. Up to November 30, 2006,
such limited partnerships have financed selling commissions of approximately
$440 million in respect of such DSC securities. The Company is obligated to
pay the relevant limited partnership an annual fee of 0.47% to 0.90% of the
net asset value of DSC securities. The limited partnerships also receive any
deferred sales charges resulting from the redemption of such securities. These
obligations continue as long as such DSC securities remain outstanding except
for certain of the limited partnerships, in which case the obligation
terminates at various dates from December 31, 2006 to December 31, 2020. For
certain limited partnerships the obligation is secured by the Company's mutual
fund management contracts to the extent of the particular obligation.
    The Company is responsible for the management and administration of the
limited partnerships. These services are provided in the normal course of
operations and are recorded at the amount of consideration agreed to by the
parties. The amount of fees received in 2006 was $0.6 million (2005 -
$0.7 million). As at November 30, 2006, the net asset value of DSC securities
financed by the limited partnerships was $1.6 billion (2005 - $1.7 billion).

    Contractual Obligations

    The table below is a summary of our contractual obligations at
November 30, 2006. See also Notes 11 & 24 of the Consolidated Financial
Statements.

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

    ($ millions)           Total       2007  2008-2009  2010-2011 Thereafter
    -------------------------------------------------------------------------

    Long-term debt      $   56.0   $   56.0   $      -   $      -   $      -
    Operating leases        24.7        5.4        4.8        4.2       10.3
    Purchase obligations     5.6        2.1        2.3        1.2          -
    -------------------------------------------------------------------------
    Total contractual
     obligations        $   86.3   $   63.5   $    7.1   $    5.4   $   10.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    In addition to the contractual obligations detailed above, the following
obligations exist that vary depending upon business volume and other factors:

    -   The AGF Trust Company is required to pay depositors amounts
        representing principal and interest on funds on deposit.
    -   A portion of our selling commissions paid on a DSC basis has been
        financed by limited partnerships held by third-party investors. As at
        November 30, 2006, the net asset value of DSC securities financed by
        the limited partnerships was $1.7 billion and amounts paid to these
        partnerships in 2006 were $10.3 million.
    -   We pay trailing commissions to investment advisors based on AUM of
        their respective clients. This obligation varies based on fund
        performance, sales and redemptions, and in 2006 we paid
        $125.3 million in trailing commissions.
    -   In conjunction with the sale of Unisen, we capped the management
        expense ratio on all our funds until 2008 to the lower of the levels
        incurred in 2004 and 2005. This could result in increased absorption
        of fund expenses if the individual mutual funds do not show growth in
        AUM in 2007 and 2008 as compared to November 30, 2005 AUM. AGF also
        has issued a put option in favour of CitiFinancial relating to
        certain Unisen assets. The put option expires 18 months after the
        date of acquisition. No value has been attributed to this option, as
        management does not believe it will be exercised. In addition, AGF is
        committed for a 10-year period from the date of sale to reimburse
        CitiFinancial should CitiFinancial's annual revenues derived from AGF
        fund administration services fall below a pre-determined level.
    -   In conjunction with the purchase of Cypress Capital Management Ltd.,
        there is additional consideration due June 30, 2007 subject to
        Cypress achieving certain revenue levels. This amount is not
        determinable at the present time.
    -   In conjunction with the launch of the Elements portfolios, AGF has
        guaranteed investors that if a portfolio does not match or outperform
        its customized benchmark over a three-year average annualized period,
        investors will receive up to 90 basis points in new units.
    

    Intercompany and Related Party Transactions

    The Company has entered into certain transactions with entities or senior
officers who are directors of the Company. During 2006, total amounts paid by
the Company to these related parties aggregated $0.1 million (2005 -
$0.1 million)

    Subsequent Events

    On December 1, 2006, the Company acquired approximately 80% of Highstreet
Partners Limited, which wholly owns Highstreet Asset Management Inc., an
investment counsel firm based in London, Ontario. The purchase price is based
on actual results for the period ending December 31, 2006 and consideration
will be paid over a three-year period. The purchase consideration is payable
by a combination of cash and the issuance of AGF Class B Shares. On
December 1, 2006, AGF made a payment of $14.8 million in cash and $4.4 million
in shares.
    In 2007, it is the Company's intention to recommend the dissolution of
the following Limited Partnerships ('LPs'): AGF Limited Partnership 1990, AGF
Limited Partnership 1991, 20/20 Group 1990 Private Limited Partnership, 20/20
Group 1990 Limited Partnership and 20/20 Group 1992 Limited Partnership. For
all of these LPs, except for 20/20 Group 1990 Private Limited Partnership, the
dissolution is subject to approval by the respective limited partners. As part
of the LP dissolution process, the Company will either purchase the future
distribution fees remaining payable by the Company to the LPs or the LP
outstanding units for cash consideration of $3.1 million. In 2006,
distributions of $1.0 million were made to these LPs.

    Dividends

    The holders of AGF Class B Shares are entitled to receive cash dividends.
Dividends are paid in equal amounts per share on all the AGF Class B Shares
and all the Class A Voting Common Shares at the time outstanding without
preference or priority of one share over another. No dividends may be declared
in the event that there is a default of a condition of our loan facility or
where such payment of dividends would create a default.
    Our Board of Directors may determine that the AGF Class B shareholders
shall have the right to elect to receive part or all of such dividend in the
form of a stock dividend. In determining whether a dividend in AGF Class B
Shares is substantially equal to a cash dividend, the Board of Directors may
make a determination based on the weighted average price at which the AGF
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 dividends paid by AGF on the AGF Class B
Shares and the Class A Voting Common Shares for the periods indicated:

    
    -------------------------------------------------------------------------
    Years ended
     November 30            2006       2005       2004       2003       2002
    -------------------------------------------------------------------------

    Per share           $  0.690   $  0.560   $  0.410   $  0.295   $  0.255
    -------------------------------------------------------------------------
    Percentage increase      23%        37%        39%        16%        16%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    Outstanding Share Data

    Set out below is our outstanding share data as at November 30, 2006. For
additional detail, see Notes 15 and 16 to the 2006 Consolidated Financial
Statements.

    
    -------------------------------------------------------------------------
                                                          2006          2005
                                                   --------------------------
    Shares
    Class A voting common shares                        57,600        57,600
    Class B non-voting shares                       89,171,997    89,123,205

    Stock options
    Outstanding options                              4,269,083     4,781,875
    Exercisable options                              1,765,583     1,358,549
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Government Regulations

    AGF Management Limited

    AGF Management Limited ('AGF') is incorporated under the laws of the
Province of Ontario and is a reporting issuer in each province and territory
of Canada. Accordingly, AGF is subject to applicable securities laws in each
jurisdiction. In addition, the Class B Non-Voting Shares of AGF are listed for
trading on the Toronto Stock Exchange under the trading symbol AGF.B.

    Investment Management Operations

    AGF Funds Inc.
    AGF Funds Inc. ('AGFFI') is registered with the Ontario Securities
Commission ('OSC') as an investment counsel and portfolio manager and
maintains equivalent registrations in each of the other provinces and
territories of Canada in which AGFFI carries on business. AGFFI is also
registered as a mutual fund dealer, limited market dealer and commodity
trading manager in certain jurisdictions where required.
    In its capacity as investment counsel and portfolio manager, AGFFI is
subject to conflict of interest regulations made pursuant to the Securities
Act (Ontario) and certain other provincial and territorial securities
legislation. Amongst other things, these regulations impose limitations on the
ability of AGFFI to advise or make recommendations with respect to its own
securities or securities of a related or connected issuer. AGFFI is also
subject to certain restrictions that are imposed by applicable provincial and
territorial securities legislation on advertising and sales incentives.

    AGF Mutual Funds
    In order to qualify for continuous distribution, each of the mutual funds
managed by AGFFI must file each year an annual information form and simplified
prospectus in every province and territory of Canada in which it intends to
distribute securities and obtain a receipt for the same from provincial and
territorial securities regulatory authorities. Certain funds are offered in
overseas jurisdictions, each of which have their own filing requirements.
Similarly, the Goldrings Group of Funds, off-shore mutual funds domiciled in
Ireland and managed by AGF International Advisors Company Limited, must file
offering documents annually in Ireland and Japan in order to qualify for
distribution in Japan.
    Each mutual fund managed by AGFFI, as well as AGFFI as manager, is liable
for any misrepresentation in the offering documents of the fund, as is AGF
International Advisors Company Limited with respect to the Goldrings Group of
Funds. Pursuant to securities legislation in certain of the provinces and
territories of Canada, none of the mutual funds managed by AGFFI can make
portfolio investments in substantial securityholders of the funds, in AGF or
in corporations in which the directors or officers of the funds, or their
substantial securityholders, have a significant interest.

    AGF International Advisors Company Limited
    AGF International Advisors Company Limited is a private limited company
incorporated under the laws of the Republic of Ireland and is authorized by
the Irish Financial Services Regulatory Authority (IFSRA), under Section 10 of
the Investment Intermediaries Act 1995, to provide a range of financial
services including the provision of investment advice, the managing of
portfolios on a discretionary basis and the execution of orders, other than
for own account. As an authorised entity, AGF International Advisors Company
Limited is subject to a range of Irish and EU regulations. AGF International
Advisors Company Limited is the manager of the Goldrings Group of Funds, an
umbrella unit trust domiciled in Ireland. The Goldrings Group of Funds must
file offering documents annually in Ireland and Japan in order to qualify for
distribution in Japan. As manager, AGF International Advisors Company Limited
is liable for any misrepresentation in these offering documents.

    AGF Asset Management Asia Ltd.
    Established in 1996, AGF Asset Management Asia Ltd. provides investment
research and advisory services on Asian markets for AGF mutual funds and other
clients. AGF Asset Management Asia Ltd. is regulated by the Monetary Authority
of Singapore (MAS) under the Securities and Futures Act. The company holds a
Capital Markets Services licence which permits it to offer fund management
services to accredited investors. AGF Asset Management Asia Ltd. is required
to obtain the prior approval of MAS for any significant change of its members
or shareholdings of its members.

    AGF Private Investment Management
    AGF Private Investment Management Limited ('AGF PIM'), Cypress Capital
Management Ltd. ('Cypress'), P.J. Doherty & Associates Co. Ltd. ('Doherty')
and Highstreet Asset Management Inc. ('Highstreet') are each registered with
the OSC as an investment counsel and portfolio manager, and maintain
equivalent registrations in each of the other provinces and territories of
Canada in which they respectively do business. AGF PIM, Cypress, Doherty and
Highstreet are also registered with the OSC as limited market dealers for the
purpose of facilitating the distribution of certain securities to their
clients. In addition, Highstreet is registered in Ontario as a Commodity
Trading Manager.

    AGF Securities (Canada) Limited
    AGF Securities (Canada) Limited is a member of the Investment Dealers
Association and is registered as an investment dealer with the securities
regulatory authorities in each of Alberta, British Columbia, Ontario and
Saskatchewan. AGF Securities (Canada) Limited is also a member of the Canadian
Investor Protection Fund.

    Trust Company Operations

    AGF Trust Company
    AGF Trust Company ('AGF Trust') is incorporated under and governed by the
federal Trust and Loan Companies Act (Canada) and is extra-provincially
licensed and registered under the applicable legislation in all provinces and
territories of Canada. The Trust and Loan Companies Act (Canada) specifies the
powers of a trust company and imposes investment restrictions. Most
significantly, the legislation provides for annual and other reports to be
filed on the financial condition of the trust company; periodic examinations
of the trust company's affairs; restrictions on transactions with related
parties; corporate governance provisions; and minimum capital adequacy
standards based on the total assets and risk-weighted assets of the trust
company. AGF Trust is supervised by the federal Office of the Superintendent
of Financial Institutions. As a federally regulated financial institution, AGF
Trust is also subject to oversight from the Financial and Consumer Agency of
Canada and, along with AGF and its other affiliates, the Privacy Commissioner,
the Financial Transactions and Reports Analysis Centre of Canada, and other
government agencies, including provincial authorities.
    AGF Trust is a member of Canadian Deposit Insurance Corporation, which
provides a statutory scheme for the insurance of certain qualifying deposits
made and payable in Canada in Canadian currency. AGF Trust is also a member of
the Canadian Payments Association, the Ombudsman for Banking Services and
Investments and is an approved Canadian Mortgage and Housing Corporation
lender.

    Fourth Quarter Analysis

    Summary of Consolidated Operating Results

    The table below highlights our results for the three months ended
November 30, 2006 and 2005:

    
    -------------------------------------------------------------------------
    ($ millions, except per
     share amounts)
    Three months ended November 30          2006          2005      % change
    -------------------------------------------------------------------------
    Revenue
      Investment management
       operations                     $    140.8    $    122.7         14.8%
      Trust company operations              42.9          21.7         97.7%
      Other                                  4.4           4.6         (4.3%)
      Intersegment eliminations             (0.6)         (0.4)          n/m
    -------------------------------------------------------------------------
                                           187.5         148.6         26.2%

    Expenses
      Investment management
       operations                           89.5          79.0         13.3%
      Trust company operations(1)           35.4          16.8        110.7%
      Other                                  2.6           2.3         13.0%
      Intersegment eliminations             (0.6)         (0.4)          n/m
    -------------------------------------------------------------------------
                                           126.9          97.7         29.9%

    EBITDA(1) (continuing operations)       60.6          50.9         19.1%
      Amortization                          33.5          34.9         (4.0%)
      Interest expense                       0.9          (0.1)     (1000.0%)
      Income taxes                           5.2           4.0         30.0%
    -------------------------------------------------------------------------
    Net income from continuing
     operations                       $     21.0    $     12.1         73.6%
    Gain on sale of discontinued
     operations, net of tax                  0.0          15.6
    Net earnings of discontinued
     operations, net of tax                  0.0           0.3           n/m
    -------------------------------------------------------------------------
    Net income                              21.0          28.0        (25.0%)
    -------------------------------------------------------------------------
    Cash flow from continuing
     operations(2)                          53.8          47.8         12.6%

    Earnings per share from
     continuing operations - diluted  $     0.23    $     0.13         76.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As previously defined, see 'Key Performance Indicators and Non-GAAP
        Measures - EBITDA'. The items required to reconcile EBITDA to Net
        Income a defined term under Canadian GAAP, are detailed above.
    (2) Cash flow from operations before net change in non-cash balances
        related to operations.
    

    Results from Continuing Operations

    Revenue for the fourth quarter ended November 30, 2006 was up 26.2% from
the same period in 2005, with the Trust Company segment contributing an
increase of $21.2 million and the Investment Management segment contributing
an increase of $18.1 million. Revenues from the Other segment were down 4.3%.
    Expenses in the fourth quarter ended November 30, 2006 increased by
$29.2 million over the same period a year ago with $18.6 million of the
increase coming from the Trust Company Operations segment primarily due to
higher quarter-over-quarter interest expense and increased provisions for loan
loses. The remaining increase is attributable to the Investment Management
Operations segment with close to half the increase coming in the form of
increased trailing commissions related to increased levels of AUM and the
remainder due to higher compensation costs.
    Cash flow from operations and EBITDA were higher for the quarter ended
November 30, 2006, compared to the respective quarter in 2005, predominantly
due to increased revenue in both the Investment Management and Trust Company
Operations segments.
    Our income tax expense for the three months ended November 30, 2006 was
$5.2 million, as compared to an income tax expense of $4.0 million in the
three months ended November 30, 2005.
    The impact of the above revenue and expense items resulted in net income
from continuing operations of $21.0 million in the three months ended 2006
compared to a net income from continuing operations of $12.1 million in fiscal
2005. Basic and fully diluted earnings per share from continuing operations
were $0.24 and $0.23 per share, respectively, in the three months ended
November 30 2006 as compared to $0.13 per share (basic and fully diluted) in
2005.
    On a diluted per share basis, cash flow from continuing operations for
the three months ended November 30, 2006 was $0.60 per share (2005 - $0.53).

    Net Earnings

    Net income for the three months ended November 30, 2006 was $21.0 million
as compared with $28.0 million in the prior year. The 25% decrease in net
income related to gains from discontinued operations recorded in the fourth
quarter of 2005. The 2005 results from discontinued operations reflected the
results of Unisen, which was sold on October 3, 2005.
    The details of the 2006 fourth-quarter results for each business segment
follow.

    Investment Management Operations

    Assets Under Management

    The following table illustrates the composition of the changes in mutual
fund AUM during the three months ended November 30, 2006 and 2005:

    
    -------------------------------------------------------------------------
    ($ millions)
    Three months ended November 30          2006          2005      % change
    -------------------------------------------------------------------------
    Mutual fund AUM, beginning
     of period                        $   24,429    $   22,198         10.1%

    Gross sales of mutual funds            1,396           737         89.4%
    Redemptions of mutual funds             (972)       (1,066)        (8.8%)
    -------------------------------------------------------------------------
      Net mutual fund sales
       (redemptions)                         424          (329)      (228.9%)

    Market appreciation of fund
     portfolios                            2,004           340        489.4%
    -------------------------------------------------------------------------

    Mutual fund AUM, end of period    $   26,857    $   22,209         20.9%

    Institutional AUM                      9,425         6,332         48.8%
    PIM AUM                                6,489         5,589         16.1%
    -------------------------------------------------------------------------

    Total AUM                         $   42,771    $   34,130         25.3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average daily mutual fund AUM
     for the period                   $   25,251    $   22,145         14.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    During the three months ended November 30, 2006, the Canadian-dollar-
adjusted S&P 500 Index rose 11.26%, the Canadian-dollar-adjusted NASDAQ Index
rose 14.8% and the S&P/TSX Composite Index rose 6.27%.
    The impact of the U.S. dollar increase relative to the Canadian dollar on
the market value of AGF mutual funds since August 31, 2006 has been an
increase in AUM of approximately $0.2 billion (2005 - reduction of
$0.1 billion).
    Net sales of $424 million, $2.0 billion of market appreciation in AUM and
additional Institutional AUM resulted in a significant increase in total AUM
of 25.3% since August 31, 2006.

    Financial and Operational Results

    The table below highlights the Investment Management Operations segment
results for the three months ended November 30, 2006 and 2005:

    
    -------------------------------------------------------------------------
    ($ millions)
    Three months ended November 30          2006          2005      % change
    -------------------------------------------------------------------------
    Revenue
      Net management and
       advisory fees                  $    113.0    $     98.5         14.7%
      Administration fees and
       other revenue                        21.7          17.2         26.2%
      Deferred sales charges                 5.5           8.2        (32.9%)
      Investment income                      0.6          (1.2)      (150.0%)
    -------------------------------------------------------------------------
                                           140.8         122.7         14.8%

    Expenses
      Selling, general and
       administrative                       49.3          44.5         10.8%
      Trailing commissions                  33.0          27.8         18.7%
      Investment advisory fees               7.2           6.7          7.5%
    -------------------------------------------------------------------------
                                            89.5          79.0         13.3%
    -------------------------------------------------------------------------

    EBITDA(1)                               51.3          43.7         17.4%
    Amortization                            32.5          33.7         (3.6%)
    -------------------------------------------------------------------------
    Income before taxes and
     non-segmented items              $     18.8    $     10.0         88.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As previously defined, see the 'Key Performance Indicators and non
        GAAP Measures - EBITDA' section.

    

    Trust Company Operations

    Financial and Operational Results

    The table below highlights the results for the three months ended
November 30, 2006 and 2005:

    
    -------------------------------------------------------------------------
    ($ millions)
    Three months ended November 30          2006          2005      % change
    -------------------------------------------------------------------------
    Interest, administration fees
     and other revenue                $     42.2    $     21.7         94.5%
    Securitization gain and
     related items                           0.7           0.0           n/m
    -------------------------------------------------------------------------
                                            42.9          21.7         97.7%

    Expenses
      Selling, general and
       administrative                        8.3           5.3         56.6%
      Interest on deposits                  24.8          10.0        148.0%
      Provision for loan losses              2.4           1.5         60.0%
    -------------------------------------------------------------------------
                                            35.5          16.8        111.3%

    EBITDA(1)                                7.4           4.9         51.0%
    Amortization                             0.3           0.2         50.0%
    -------------------------------------------------------------------------
    Income before taxes and
     non-segmented items              $      7.1    $      4.7         51.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest, administration fees
     and other revenue                      42.2          21.7         94.5%
    Administration fees and other
     revenue                                (2.0)         (1.0)       100.0%
    -------------------------------------------------------------------------
    Total interest income                   40.2          20.7         94.2%

    Total interest expense                  24.8          10.0        148.0%
    -------------------------------------------------------------------------
    Net interest margin                     15.4          10.7         43.9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As previously defined, see the 'Key Performance Indicators and Non-
        GAAP Measures - EBITDA' section.


    Selected Quarterly Information

    -------------------------------------------------------------------------
    ($ millions, except per
     share amounts)              Nov. 30,    Aug. 31,     May 31,    Feb. 28,
    Three months ended              2006        2006        2006        2006
    -------------------------------------------------------------------------
    Revenue                    $   187.5   $   172.6   $   174.2   $   169.2
    Cash flow from continuing
     operations(1)                  53.8        61.7        54.3        50.1
    EBITDA(2)                       60.6        56.1        65.6        68.7
    Pretax income (continuing
     operations)                    26.2        21.7        31.0        34.4
    Net income (loss)               21.0        34.6        33.0        24.1

    Earnings per share
      Basic                    $    0.24   $    0.40   $    0.37   $    0.27
      Diluted                  $    0.23   $    0.39   $    0.37   $    0.27

    Weighted average
     basic shares             89,174,064  89,055,124  89,006,146  89,190,007
    Weighted average fully
     diluted shares           89,890,105  89,457,921  89,973,999  90,031,001
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    ($ millions, except per
     share amounts)              Nov. 30,    Aug. 31,     May 31,    Feb. 28,
    Three months ended              2005        2005        2005        2005
    -------------------------------------------------------------------------
    Revenue                    $   148.6   $   153.0   $   147.1   $   145.7
    Cash flow from continuing
     operations(1)                  47.8        53.9        57.6        56.9
    EBITDA(2)                       50.9        65.3        63.7        65.0
    Pretax income (continuing
     operations)                    16.1        29.6        27.4        28.7
    Net income                      28.0        20.3        22.4        21.2

    Earnings per share
      Basic                    $    0.31   $    0.23   $    0.25   $    0.23
      Diluted                  $    0.31   $    0.23   $    0.25   $    0.23

    Weighted average
     basic shares             89,203,949  89,615,145  90,553,323  90,739,413
    Weighted average fully
     diluted shares           89,868,786  89,915,619  90,886,073  91,085,474
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Cash flow from operations before net change in non-cash balances
        related to operations.
    (2) As previously defined, see 'Key Performance Indicators and Non-GAAP
        Measures - EBITDA' section.


    Selected Annual Information

    -------------------------------------------------------------------------
    ($ millions, except per
     share amounts)
    Years ended November 30                 2006          2005          2004
    -------------------------------------------------------------------------
    Revenue (continuing operations)    $   703.5    $    594.4    $    585.4
    Cash flow from operations(1)           219.9         217.2         196.0
    EBITDA (continuing operations)(2)      251.0         244.8         235.7
    Pretax income                          113.3         101.7          80.5
    Net income (continuing operations)     102.2          72.7          74.7

    Earnings per share
     (continuing operations)
      Basic                            $    1.15    $     0.81    $     0.82
      Diluted                          $    1.14    $     0.80    $     0.81

    Cash flow from continuing
     operations
      Basic                            $    2.47    $     2.42    $     2.15
      Diluted                          $    2.45    $     2.41    $     2.14

    Dividends per share                $    0.69    $     0.56    $     0.41

    Total corporate assets             $ 3,919.8    $  2,709.7    $  2,169.4

    Total long-term debt               $       -    $     17.4    $     68.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Cash flow from operations before net change in non-cash balances
        related to operations.
    (2) As previously defined, see 'Key Performance Indicators and Non-GAAP
        Measures - EBITDA' section.
    

    Additional Information

    Additional information relating to the Company can be found in the
Company's Consolidated Financial Statements and accompanying notes for year
ended November 30, 2006, the Company's 2006 AIF and other documents filed with
applicable securities regulators in Canada and may be accessed at
www.sedar.com.

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





For further information:

For further information: AGF Management Limited shareholders and
analysts, please contact: Adrian Basaraba, Vice President, Finance and
Investor Relations, (416) 865-4203, adrian.basaraba@AGF.com; Media, please
contact: Lucy Becker, Vice President, Communications, AGF Funds Inc., (416)
865-4284, lucy.becker@AGF.com


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