AGF Management Limited Reports Second Quarter Financial Results Français

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Jun 29, 2016, 08:31 ET

Improved investment performance contributes to AUM increase across all lines of business
Diluted EPS of $0.12

TORONTO, June 29, 2016 /CNW/ - AGF Management Limited ("AGF" or "the Company") today announced financial results for the second quarter ended May 31, 2016. Total assets under management (AUM) increased 6% to $33.7 billion, compared to $31.7 billion as at February 29, 2016. Total AUM as at May 31, 2015 was $36.0 billion. The increase in AUM was broad and covered each of our lines of business including retail, institutional, private client and alternative assets. In addition to improved investment performance, the trend of lower retail redemptions contributed to AUM levels. Total retail fund AUM was $17.5 billion as at May 31, 2016, compared to $16.9 billion as at February 29, 2016 and $19.4 billion as at May 31, 2015. Institutional and sub-advisory AUM was $11.1 billion as at May 31, 2016, compared to $10.4 billion as at February 29, 2016, and $11.7 billion as at May 31, 2015. Private client AUM was $4.6 billion, compared to $4.2 billion as at February 29, 2016, and consistent with the same period in 2015. AUM related to the alternative asset management platform increased to $0.5 billion as InstarAGF Inc. (InstarAGF) announced its first close of the Essential Infrastructure Fund, with total commitments of $372.0 million.

"I am pleased with the momentum in our retail business, as results continue to improve," said Blake C. Goldring, Chairman and Chief Executive Officer, AGF Management Limited. "Our focus on delivering strong investment performance, relevant products and strong client service is contributing to our success."

For the one-year period ended May 31, 2016, 50% of ranked AUM performed above median, compared with 47% for the one-year period ended May 31, 2015. For the three-year period ended May 31, 2016, 54% of ranked AUM performed above median, compared with 45% for the three-year period ended May 31, 2015.

"We continue to see improvement in our investment performance and remain focused on consistently delivering our stated target of 50% and 60% of our AUM above median for the one- and three- year periods, respectively," said Kevin McCreadie, President and Chief Investment Officer, AGF Investments Inc. "Our focus on the client will drive development in the product area as we continue to look at new solutions and structures to meet the needs of our clients."

During the second quarter of 2016, income from continuing operations was $111.1 million, compared to $117.1 million for the three months ended May 31, 2015, reflecting lower average retail AUM levels and a strategic reduction in management fees across 17 retail products. Offsetting this was revenue earned from the internalization of our fund administration business. Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations was $26.2 million, compared to $36.0 million in the second quarter of 2015. Diluted earnings per share (EPS) from continuing operations was $0.12 compared to $0.17 for the three months ended May 31, 2015. During the second quarter of 2016, we recognized $1.5 million of one-time fund custody and accounting transition costs. Excluding these costs, adjusted diluted EPS from continuing operations was $0.13 and $0.26 for the three and six months ended May 31, 2016. Free cash flow from operations increased to $16.4 million for the three and six months ended May 31, 2016, compared to $11.1 million for the three months ended February 29, 2016 and remained stable as compared to the prior year.

For the three months ended May 31, 2016, AGF declared an eight cent per share dividend on Class A Voting common shares and Class B Non-Voting shares, payable July 18, 2016 to shareholders on record as at July 8, 2016.

Conference Call

AGF will host a conference call to review its earnings results today at 11 a.m. 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 at http://edge.media-server.com/m/p/u5kkjv9r Alternatively, the call can be accessed toll-free in North America by dialing 1-800-708-4540 (Passcode #: 42747587).

A complete archive of this discussion along with supporting materials will be available at the same webcast address within 24 hours of the end of the conference call.

ABOUT AGF MANAGEMENT LIMITED

AGF Management Limited is one of Canada's premier independent investment management firms with offices across Canada and subsidiaries around the world. AGF's products include a diversified family of mutual funds, mutual fund wrap programs, pooled funds and an alternative asset management platform. AGF also manages assets on behalf of institutional investors including pension plans, sovereign wealth funds, foundations and endowments as well as for private clients. With approximately $34 billion in total assets under management, AGF serves more than one million investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.

Caution Regarding Forward-Looking Statements

This Management's Discussion and Analysis (MD&A) includes forward-looking statements about the Company, including its business operations, strategy and expected financial performance and condition. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as 'expects,' 'anticipates,' 'intends,' 'plans,' 'believes' or negative versions thereof and similar expressions, or future or conditional verbs such as 'may,' 'will,' 'should,' 'would' and 'could.' In addition, any statement that may be made concerning future financial performance (including income, 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, business performance and opportunities. While we consider these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. 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 risk factors such as level of assets under our management, volume of sales and redemptions of our investment products, performance of our investment funds and of our investment managers and advisors, pipeline, competitive fee levels for investment management products and administration, and competitive dealer compensation levels and cost efficiency in our investment management operations, as well as interest and foreign-exchange rates, taxation, changes in government regulations, unexpected judicial or regulatory proceedings, and our ability to complete strategic transactions and integrate acquisitions. We caution that the foregoing list is not exhaustive. The reader is cautioned to consider these and other factors carefully and not place undue reliance on forward-looking statements. Other than specifically required by applicable laws, we are under no obligation (and expressly disclaim any such obligation) to update or alter the forward-looking statements, whether as a result of new information, future events or otherwise. For a more complete discussion of the risk factors that may impact actual results, please refer to the 'Risk Factors and Management of Risk' section of the 2015 Annual MD&A.

Summary of Quarterly Results
(from continuing operations)


(in millions of Canadian dollars, except per share amounts)			May 31,		Feb. 29,		Nov. 30,		Aug. 31,
Three months ended			2016		2016		2015		2015

Income¹		$	111.1	$	103.3	$	105.0	$	115.8
Expenses^2,3			84.9		76.0		79.5		84.0
EBITDA⁴			26.2		27.3		25.5		31.8
Pre-tax income			11.8		12.9		10.3		15.9

Net income attributable to equity owners of the Company			9.6		10.2		8.1		11.9

EBITDA per share⁴
	Basic	$	0.33	$	0.34	$	0.31	$	0.38
	Diluted		0.33		0.34		0.30		0.38

Earnings per share attributable to equity owners
of the Company
	Basic	$	0.12	$	0.13	$	0.11	$	0.14
	Diluted		0.12		0.13		0.11		0.14

Free cash flow^3,4			16.4		11.1		18.6		17.0
Dividends per share			0.08		0.08		0.08		0.08
Total long-term debt			228.9		268.9		268.8		268.7

Weighted average basic shares			79,252,324		79,449,122		82,532,707		82,826,845
Weighted average fully diluted shares			80,097,391		79,485,581		83,663,389		83,814,065
(in millions of Canadian dollars, except per share amounts)			May 31,		Feb. 28,		Nov. 30,		Aug. 31,
Three months ended			2015		2015		2014		2014

Income		$	117.1	$	111.7	$	111.7	$	116.9
Expenses²			81.1		77.8		77.3		78.4
EBITDA⁴			36.0		33.9		34.4		38.5
Pre-tax income			19.6		18.1		16.7		19.6

Net income attributable to equity owners of the Company			14.7		13.6		12.6		14.8

EBITDA per share⁴
	Basic	$	0.43	$	0.40	$	0.40	$	0.45
	Diluted		0.42		0.40		0.40		0.45

Earnings per share attributable to equity owners
of the Company
	Basic	$	0.17	$	0.16	$	0.15	$	0.17
	Diluted		0.17		0.16		0.14		0.17

Free cash flow^3,4			16.8		15.4		22.0		22.2
Dividends per share			0.08		0.27		0.27		0.27
Total long-term debt			268.6		268.5		308.2		308.2

Weighted average basic shares			84,489,294		84,644,212		85,812,669		85,950,736
Weighted average fully diluted shares			85,426,944		85,447,450		87,000,054		86,459,914

¹	Includes a $5.7 million special distribution from a long-term investment for the three months ended August 31, 2015.
²	Includes selling, general and administrative (SG&A), trailing commissions and investment advisory fees.
³	Includes one-time restructuring costs of $2.8 million and $4.4 million for the six months ended November 30, 2015 and August 31, 2015, respectively.
⁴	See 'Key Performance Indicators, Additional IFRS and Non-IFRS Measures' section.

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

This Management's Discussion and Analysis (MD&A) is as of June 28, 2016, and presents an analysis of the financial condition of AGF and its subsidiaries for the three- and six-month period ended May 31, 2016, compared to the three- and six-month period ended May 31, 2015. The MD&A should be read in conjunction with our unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended May 31, 2016 and our 2015 Annual Report. The financial statements for the three and six months ended May 31, 2016, including required comparative information, have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) applicable to the preparation of interim financial statements, including International Accounting Standard 34 (IAS 34), Interim Financial Reporting, unless otherwise noted.

We also utilize non-IFRS financial measures to assess our overall performance. Details of non-IFRS measures used are outlined in the 'Key Performance Indicators, Additional IFRS and Non-IFRS Measures' section, which provides calculations of the non-IFRS measures.

All dollar amounts are in Canadian dollars unless otherwise indicated. Throughout this discussion, percentage changes are calculated based on numbers rounded to the decimals that appear in this MD&A. Results, except per share information, are presented in millions of dollars. Certain totals, subtotals and percentages may not reconcile due to rounding.

There have been no material changes to the information discussed in the following sections of the 2015 Annual MD&A: 'Risk Factors and Management of Risk,' 'Contractual Obligations' and 'Intercompany and Related Party Transactions.'

Our Business and Strategy

AGF Management Limited (AGF or the Company), with $33.7 billion in assets under management (AUM) as at May 31, 2016, is one of the largest independent Canadian-based investment management firms, with operations and investments in Canada, the United States, the United Kingdom, Ireland and Asia. The origin of our Company dates back to 1957 with the introduction of the American Growth Fund, the first mutual fund available to Canadians seeking to invest in the United States.

We believe that superior investment performance and product innovation are key to our success. Our target is to consistently have 50% of our ranked AUM above median over any one year and 60% above median over three years. For the one-year period ended May 31, 2016, 50% of ranked AUM performed above median, compared with 47% in 2015. For the three-year period ended May 31, 2016, 54% of ranked AUM performed above median, compared with 45% in 2015.

We also believe in diversification, both in terms of investment styles and product solutions offered to our clients in each of the segments in which we operate. AGF offers individuals and institutions a broad array of investment strategies and solutions across four investment management platforms:

Fundamental Active Management
Quantitative Solutions
Private Client
Alternative Assets

Fundamental Active Management
AGF's fundamental actively managed platform includes a broad range of equity and fixed income strategies, managing total AUM of $24.1 billion. Within this platform, we have a number of centres of excellence, including our Global, North American, Fixed Income teams and our Asset Allocation committee, located in Toronto, Dublin and Singapore. This platform delivers products to retail, institutional investors and strategic partners.

We have strong capability and performance within the global space and we intend to leverage this strength as part of our growth strategy. Our marketing efforts are focused on promoting this team and their capabilities to investors.

Our Asset Allocation team has been instrumental in delivering superior performance within our balanced products, in particular, AGF Elements, which continues to produce strong net sales for the Company.

We continually review our product offering with an aim to provide our advisors and clients a product platform that offers innovative solutions around specific needs, ultimately resulting in organic AUM growth for the Company and superior, consistent investment returns to our clients. In May 2016, we completed several fund mergers with the goal of streamlining our product lineup and providing greater focus on our key strategies and capabilities. During the quarter, we also implemented management fee reductions on select funds across the equity, fixed income, balanced and managed solutions lineup effective April 1, 2016.

Quantitative Solutions
Our quantitative solutions platform includes Highstreet Asset Management Inc. (Highstreet), located in London, Ontario, and FFCM, LLC (FFCM), located in Boston, with a total of 22 investment professionals managing AUM of approximately $4.5 billion.

Highstreet's investment foundation is empirically based research and the combination of quantitative and fundamental investing. All of its research and analysis is done internally, backed by an investment team with a diverse skill set ranging from scientists to academics to traditional fundamental analysts.

In November 2015, we acquired a majority interest in FFCM, a U.S.-based advisor that manages factor-based exchange traded funds (ETF) and ETF solutions. FFCM has the capability to manage the Investment Company Act of 1940 registered products, separately managed accounts, and hedge funds in direct or sub-advisory relationship models and have obtained ETF Securities and Exchange Commission (SEC) exemptive relief. FFCM provides us with a complete trading infrastructure to support ETFs and related mutual fund products. Beyond trading capabilities, FFCM has developed and launched five ETFs into the market with performance success and offers ETF solutions. With our expertise and capabilities within Highstreet and FFCM, we believe that there will be opportunities to launch risk-oriented solutions in Canada and the United States to address increasing investor demand in the low volatility and factor-based investing styles.

Private Client
The private client industry in Canada includes bank-owned firms, as well as large independent firms and boutiques, who continue to retain a significant portion of market share. Our private client platform, which includes Cypress Capital Management Limited (Cypress), located in Vancouver, Doherty & Associates Ltd. (Doherty), with offices in Ottawa and Montreal, and Highstreet, provides solutions for high-net-worth individuals, endowments, and foundations in key markets across Canada. These businesses manage total private client AUM of approximately $4.6 billion, representing growth over the past five years of 31.4%.

Alternative Assets
Global economic uncertainty in recent years is driving increasing demand from institutional and individual investors for more stable and sustainable long-term investment returns, including allocating to alternative asset classes such as real assets. These assets, which are physical or tangible in nature, have historically demonstrated a low correlation to the public markets.

In 2014, as part of our capital reallocation strategy, we formed InstarAGF Asset Management Inc. (InstarAGF), a joint venture with Instar Group Inc. (Instar) to develop an alternative asset management platform. AGF holds a 50.0% economic interest in InstarAGF and has also committed equity of $150.0 million to this platform. As alternative assets continue to grow in prominence and represent a greater proportion of institutional portfolios, AGF is well positioned to deliver the long-duration, risk-adjusted solutions institutional, retail and high-net-worth investors are seeking to generate predictable cash flow and meet long-dated liabilities.

InstarAGF is an independent alternative asset management firm with an emphasis on real assets, including infrastructure investments, in the North American middle market. InstarAGF's long-term objective is to develop and manage diversified alternative investment products for institutional and individual investors, which, in addition to infrastructure, could include timber or agriculture and other private equity investments, among others. InstarAGF's team of professionals has more than 100 years of combined investment and asset management expertise in the private capital industry, including infrastructure, private equity and real estate investments.

AGF's $150.0 million of committed equity includes a $100.0 million commitment in the flagship InstarAGF Essential Infrastructure Fund (EIF), which invests in power, utilities, civil and social infrastructure assets in Canada and the United States, and a $50.0 million commitment to a Canadian midstream oil and gas fund managed by Stream Asset Financial Management LP (SAFMLP).

Through its ownership interest in InstarAGF and its 100.0% economic interest in SAFMLP, AGF will earn recurring management fees on these entities' assets under management along with a share of net profit as the alternatives platform achieves scale. Through its investment as a limited partner in the various funds managed by InstarAGF and SAFMLP, AGF expects to earn attractive risk-adjusted returns comprising income and capital appreciation.

On March 2, 2016, InstarAGF and AGF achieved the first close of EIF with a number of institutional and high-net-worth investors from Canada, Europe, the United Kingdom and the United States. These cornerstone investors, including AGF, committed aggregate equity of $372.0 million to the fund and have the ability to upsize their capital commitment to $422.0 million prior to EIF's final close, which is currently expected to occur by the end of 2016 with a targeted fund size of $750.0 million. Following the first close, AGF received net cash of $73.6 million, net of a capital call of $9.6 million, which aligned AGF's invested capital to its proportionate share of total commitments to the fund.

Other Businesses
In addition to our investment management platforms outlined above, we hold a 32.5% interest in Smith & Williamson Holdings Limited (S&WHL), a leading independent private client investment management, financial advisory and accounting group based in the U.K.. S&WHL is one of the top 10 largest firms of accountants in the U.K. and its investment management business has over $30.8 billion (£16.2 billion) of funds under management and advice as at May 31, 2016.

On February 16, 2016, AGF internalized the Company's fund administration function. The fund administration business provides services to the AGF mutual funds.

Our Distribution Channels
Retail
Our sales teams manage advisor and strategic account relationships for our retail business, which provides investment management products to the retail and strategic sub-advisory channel. We have regional sales offices across Canada. AGF's wholesaler teams cover over 35,000 external advisors and 200 investment dealers in support of our retail products. We have a number of key partnerships that provide us with a large and robust distribution channel in which to deliver our products to investors. During the three months ended May 31, 2016, retail fund net redemptions improved 25.0% to $0.3 billion compared to net redemptions of $0.4 billion for the same period last year.

Institutional
We have a global network of salespeople covering North America, Europe and Asia. Our Boston office is dedicated to business development in the institutional space in the United States, while our representative office in London, U.K. is dedicated to institutional sales efforts in the U.K.. AGF also participates in an investment consultant relations program and has earned buy ratings from a number of major firms. Investment consultants act as gatekeepers in the industry, and advise their clients on issues such as asset allocation and manager selection. This constituency is important as a buy rating from a major consultant can lead to an increased number of request for proposal (RFP) searches, which in turn enhances the chance of winning new business. Our key competencies in global equities are aligned with market trends, namely the need for reducing home country bias and investing globally. We also distribute products managed by our alternative platform within InstarAGF to North American and international financial institutions and asset managers through this channel.

Summary of Key Financial and AUM Results for the Second Quarter of 2016:

Total AUM was $33.7 billion at May 31, 2016, increasing $2.0 billion from February 29, 2016 due to improved flows and positive markets.
Income from continuing operations was $111.1 million, compared to $117.1 million in the same period of 2015, reflecting lower average retail AUM levels offset by higher fund administration revenue.
EBITDA from continuing operations was $26.2 million, compared to $36.0 million in 2015.
Diluted EPS from continuing operations for the three months ended May 31, 2016 was $0.12 per share, compared to diluted EPS of $0.17 per share in 2015.
During the quarter, we incurred one-time costs of $1.5 million related to the transfer of our custody and fund accounting operations. Excluding one-time costs, adjusted diluted EPS from continuing operations was $0.13 and $0.26 for the three and six months ended May 31, 2016.
On March 2, 2016, InstarAGF achieved the first close of EIF. Following the first close, AGF received net cash of $73.6 million, net of a capital call of $9.6 million, which aligned AGF's invested capital to its proportionate share of total commitments to the fund. As at May 31, 2016, we had invested $61.8 million in EIF and have a remaining commitment of $38.2 million.
We delivered value directly to our shareholders through dividend payments. During the second quarter of 2016, we paid dividends of $0.08 per share (2015 – $0.08 per share). Dividends paid, including dividends reinvested, on Class A Voting common shares and Class B Non-Voting shares were $6.3 million in the second quarter of 2016, compared to $6.6 million in the same period of 2015.

Assets Under Management


		Three months ended
		May 31,		February 29,		November 30,		August 31,		May 31,
(in millions of Canadian dollars)			2016		2016		2015		2015		2015

Retail fund AUM (including retail pooled funds),
	beginning of period	$	16,853	$	18,030	$	18,215	$	19,355	$	19,955

	Gross sales¹		431		534		458		413		475
	Redemptions¹		(713)		(846)		(707)		(828)		(881)
	Net redemptions		(282)		(312)		(249)		(415)		(406)

	Market appreciation (depreciation) of fund portfolios	$	968	$	(865)	$	64	$	(725)	$	(194)

Retail fund AUM (including retail pooled funds),
	end of period	$	17,539	$	16,853	$	18,030	$	18,215	$	19,355

Average daily retail fund AUM for the period		$	17,376	$	17,327	$	17,964	$	18,967	$	19,442

Institutional and sub-advisory accounts AUM,
	beginning of period	$	10,405	$	10,867	$	10,461	$	11,749	$	11,795

Net change in institutional and sub-advisory accounts,
	including market performance		682		(462)		406		(1,288)		(46)

Institutional and sub-advisory accounts AUM,
	end of period	$	11,087	$	10,405	$	10,867	$	10,461	$	11,749

Private client AUM		$	4,586	$	4,192	$	4,414	$	4,350	$	4,592

AUM, end of period		$	33,212	$	31,450	$	33,311	$	33,026	$	35,696

Alternative asset management platform AUM²		$	535	$	268	$	268	$	268	$	315
Total AUM, including alternative asset management
	platform, end of period	$	33,747	$	31,718	$	33,579	$	33,294	$	36,011

¹	Gross sales and redemptions include rebalancing of AGF Concert Series of $25.6 million for February 29, 2016.
²	Represents fee-earning committed and/or invested capital from AGF and external investors held through joint ventures. AGF's portion of this commitment is $150.0 million, of which $105.1 million has been funded as at May 31, 2016. InstarAGF holds a 37.0% interest in the manager of the fund.

Institutional Pipeline
The following represents forward-looking information. We define the institutional pipeline as client commitments to fund or redeem a portion or all of their account. As at the date of this MD&A, AGF had a net redemptions pipeline of $309.0 million. The majority of the pipeline is a single redemption from one of our clients driven by a reorganization, offset by committed subscriptions from one of our existing clients. Commitments are not necessarily contractual obligations. Actual amounts funded or redeemed may vary.

Consolidated Operating Results


				Three months ended						Six months ended
				May 31,		February 29,			May 31,		May 31,		May 31,
(in millions of Canadian dollars, except per share data)					2016		2016		2015		2016		2015

Income
	Management, advisory and administration fees			$	101.1	$	95.0	$	107.7	$	196.1	$	210.2
	Deferred sales charges				2.4		2.3		2.4		4.7		5.0
	Share of profit of associate and joint ventures				4.6		4.1		4.3		8.7		8.2
	Fair value adjustments and other income				3.0		1.9		2.7		4.9		5.4
					111.1		103.3		117.1		214.4		228.8

Expenses
	Selling, general and administrative				54.0		45.3		46.6		99.3		91.3
	Trailing commissions				30.1		30.0		33.4		60.1		64.8
	Investment advisory fees				0.8		0.7		1.1		1.5		2.8
					84.9		76.0		81.1		160.9		158.9

EBITDA from continuing operations¹					26.2		27.3		36.0		53.5		69.9
	Amortization, derecognition and depreciation				12.0		12.2		13.7		24.2		26.7
	Interest expense				2.4		2.2		2.7		4.6		5.6
Income before taxes					11.8		12.9		19.6		24.7		37.6

	Income taxes				2.5		2.8		4.9		5.3		9.4
Net income from continuing operations					9.3		10.1		14.7		19.4		28.2

Net loss from discontinued operations					(0.1)		–		–		(0.1)		–

Net income for the period					9.2		10.1		14.7		19.3		28.2

Net income (loss) attributable to:
	Equity owners of the Company			$	9.5	$	10.2	$	14.7	$	19.7	$	28.2
	Non-controlling interest				(0.3)		(0.1)		–		(0.4)		–
					9.2		10.1		14.7		19.3		28.2

Earnings per share for the period attributable to
	equity holders of the Company
		Basic earnings per share
			From continuing operations	$	0.12	$	0.13	$	0.17	$	0.25	$	0.34
			From discontinued operations		–		–		–		–		–
		Basic earnings per share		$	0.12	$	0.13	$	0.17	$	0.25	$	0.34

		Diluted earnings per share
			From continuing operations	$	0.12	$	0.13	$	0.17	$	0.25	$	0.33
			From discontinued operations		–		–		–		–		–
	Diluted earnings per share			$	0.12	$	0.13	$	0.17	$	0.25	$	0.33

¹	For the definition of EBITDA, see the 'Key Performance Indicators, Additional IFRS and Non-IFRS Measures' section. The items required to reconcile EBITDA to net income from continuing operations, a defined term under IFRS, are detailed above.

One-time Adjustments


			Three months ended						Six months ended
			May 31,		February 29,			May 31,		May 31,		May 31,
(in millions of Canadian dollars, except per share data)				2016		2016		2015		2016		2015

EBITDA from continuing operations			$	26.2	$	27.3	$	36.0	$	53.5	$	69.9

Add:
	Fund custody and accounting transition costs
		and other one-time costs		1.5		–		–		1.5		–
Adjusted EBITDA from continuing operations			$	27.7	$	27.3	$	36.0	$	55.0	$	69.9

Net income from continuing operations
	attributable to equity owners of the Company		$	9.6	$	10.2		14.7	$	19.8	$	28.2

Add (deduct):
	Adjustments to EBITDA from above			1.5		–		–		1.5		–
	Tax impact on the adjustments to EBITDA above			(0.4)		–		–		(0.4)		–
Adjusted net income from continuing operations
	attributable to equity owners of the Company		$	10.7	$	10.2	$	14.7	$	20.9	$	28.2

Adjusted Diluted EPS from continuing operations			$	0.13	$	0.13	$	0.17	$	0.26	$	0.33

Income
For the three and six months ended May 31, 2016, income decreased by 5.1% and 6.3% over the previous year, with changes in the categories as follows:

Management, Advisory and Administration Fees
Management and advisory fees are directly related to our AUM levels. For the three months ended May 31, 2016, a 10.6% decline in average daily retail fund AUM and 5.6% decline in institutional and sub-advisory accounts AUM contributed to a decrease of 13.0% and 10.2% in management and advisory fees revenue for the three and six months ended May 31, 2016 compared to 2015. This was offset by $7.4 million of fund administration revenue as a result of the internalization of this function. Fund administration revenue is directly related to the number of client accounts and transactions incurred and is recognized on an accrual basis.

Deferred Sales Charges (DSC)
We receive deferred sales charges upon redemption of securities sold on the contingent DSC or low-load commission basis for which we finance the selling commissions paid to the dealer. The DSC ranges from 1.5% to 5.5%, depending on the commission option of the original subscription price of the funds purchased if the funds are redeemed within the first two years and declines to zero after six or seven years. DSC revenue fluctuates based on the level of redemptions, the age of the assets being redeemed and the proportion of redemptions composed of back-end assets. DSC revenue remained stable for the three months ended May 31, 2016 and decreased by 6.0% for the six months ended May 31, 2016 as compared to 2015, reflecting a 19.1% decline in redemptions offset by the redemption of an increased proportion of new higher-yielding DSC assets.

Share of Profit of Associate and Joint Ventures
Share of profit of associate and joint ventures increased 7.0% and 6.1% to $4.6 million and $8.7 million for the three and six months ended May 31, 2016, compared to $4.3 million and $8.2 million during the same period in 2015. Earnings in S&WHL's business increased 4.8% and 5.1% during the three and six months ended May 31, 2016.

Share of profit of joint venture represents earnings related to our ownership in the joint venture which manages our infrastructure funds, which is accounted for under the equity method. For the three and six months ended May 31, 2016, we recorded $0.2 million and $0.4 million (2015 – $0.1 million and $0.3 million) related to earnings from this joint venture. For additional information see Note 5 of the condensed consolidated interim financial statements.

A breakdown of the share of profit of associate and joint ventures is as follows:


	Three months ended						Six months ended
	May 31,		February 29,		May 31,		May 31,		May 31,
(in millions of Canadian dollars)	2016		2016		2015		2016		2015

Share of profit of S&WHL	$	4.4	$	3.9	$	4.2	$	8.3	$	7.9
Share of profit of joint ventures¹		0.2		0.2		0.1		0.4		0.3
	$	4.6	$	4.1	$	4.3	$	8.7	$	8.2

¹	Excludes the Company's portion of the estimated carried interest to be distributed to AGF on crystallization.

Fair Value Adjustments and Other Income
Long-term investments includes the investment in Stream and InstarAGF Essential Infrastructure Fund, which is accounted for at fair value through profit or loss. During the three and six months ended May 31, 2016, we recorded $1.2 million and $4.0 million (2015 – $2.3 million and $3.6 million) as fair value adjustments and income distributions related to the investments in our alternative asset management platform.


		Three months ended						Six months ended
		May 31,		February 29,		May 31,		May 31,		May 31,
(in millions of Canadian dollars)		2016		2016		2015		2016		2015

Fair value adjustment related to
	investment in AGF mutual funds	$	1.0	$	(1.4)	$	–	$	(0.4)	$	0.9
Fair value adjustment and distributions
	related to long-term investments		1.2		2.8		2.3		4.0		3.6
Interest income			0.1		0.3		0.1		0.4		0.8
Other			0.7		0.2		0.3		0.9		0.1
		$	3.0	$	1.9	$	2.7	$	4.9	$	5.4

Expenses
For the three and six months ended May 31, 2016, expenses increased 4.7% and 1.3% from the same periods in 2015. Changes in specific categories are described in the discussion that follows:

Selling, General and Administrative Expenses (SG&A)
SG&A increased by $7.4 million and $8.0 million, or 15.9% and 8.8% for the three and six months ended May 31, 2016, compared to the same period in 2015, primarily as a result of the internalization of our fund administration function and the acquisition of FFCM. Excluding one-time fund custody and accounting transition costs, SG&A increased $5.9 million and $6.5 million, or 12.7% and 7.1% for the three and six months ended May 31, 2016, compared to the same period in 2015. A breakdown of the increase is as follows:


		Three months ended			Six months ended
(in millions of Canadian dollars)		May 31, 2016			May 31, 2016

Increase in salaries and benefits			$	2.9		$	3.9
Decrease in stock-based compensation expenses				–			(0.9)
Decrease in sales and marketing expenses				(0.9)			(1.1)
Increase in professional fees				0.5			1.2
Increase in fund absorption expenses and other fund costs				1.6			0.1
Increase in information technology and facilities				1.6			3.2
Increase in other expenses				0.2			0.1
Adjusted SG&A excluding one-time costs			$	5.9		$	6.5
One-time fund custody and accounting transition costs
	and other one-time costs			1.5			1.5
Total SG&A			$	7.4		$	8.0

The following explains expense changes in the three and six months ended May 31, 2016, compared to the same period in the prior year:

Salaries and benefits increased $2.9 million and $3.9 million for the three and six months ended May 31, 2016, compared to the same period in 2015, as a result of the acquisition of FFCM and internalization of the fund administration function through AGF CustomerFirst Inc.
Stock-based compensation was flat and decreased $0.9 million for the three and six months ended May 31, 2016, compared to the same period in 2015, primarily due to a lower grant share price.
Sales and marketing expenses decreased $0.9 million and $1.1 million for the three and six months ended May 31, 2016, compared to the same period in 2015, as a result of cost-saving initiatives and timing of expenditures.
Professional fees increased $0.5 million and $1.2 million for the three and six months ended May 31, 2016, due to an increase in consulting fees related to acquisitions and costs related to the internalization of the fund administration function.
Absorption and other fund costs expense increased $1.6 million and $0.1 million for the three and six months ended compared to the same period in 2015, as a result of FFCM fund-related expenses and fund merger costs. During the six months ended May 31, 2016, absorption and other fund costs expense were comparable to prior period.
Information technology and facilities increased $1.6 million and $3.2 million for the three and six months ended May 31, 2016, due to the internalization of the fund administration function and the acquisition of FFCM.
One-time costs of $1.5 million related to the transfer of our custody and fund accounting operations were incurred during the three and six months ended May 31, 2016.

Trailing Commissions
Trailing commissions paid to distributors depend on total AUM, the proportion of mutual fund AUM sold on a front-end versus back-end commission basis and the proportion of equity fund AUM versus fixed-income fund AUM. Annualized trailing commissions as a percentage of average daily retail fund AUM were 0.69% and 0.69% for the three and six-months ended May 31, 2016, compared to 0.69% and 0.67% for the same period in 2015, reflecting an increase in the six month period due to an increase in weighting toward higher-rate mature assets.

EBITDA, EBITDA Margin and EBITDA per Share (Non-IFRS Measures)
EBITDA from continuing operations were $26.2 million and $53.5 million for the three and six months ended May 31, 2016, compared to $36.0 million and $69.9 million for the same period of 2015. EBITDA margin was 23.6% and 25.0% for the three and six months ended May 31, 2016, compared to 30.7% and 30.6% in the corresponding period in 2015. Diluted EBITDA per share from continuing operations for the three and six months ended May 31, 2016 was $0.33 and $0.67, compared to $0.42 and $0.82 for the three and six months ended May 31, 2015.

Amortization and Interest Expense
The category represents amortization of deferred selling commissions, customer contracts, other intangible assets, property, equipment, and computer software and interest expense. Deferred selling commissions amortization represents the most significant category of amortization. We internally finance all selling commissions paid. These selling commissions are capitalized and amortized on a straight-line basis over a period that corresponds with their applicable DSC schedule. Unamortized deferred selling commissions related to units redeemed prior to the end of the schedule are immediately expensed. Amortization expense related to deferred selling commissions was $9.3 million and $18.6 million for the three and six months ended May 31, 2016, compared to $10.3 million and $20.7 million for the same period in 2015. During the three and six months ended May 31, 2016, we paid $8.8 million and $17.4 million in selling commissions, compared to $10.8 million and $20.4 million in the same period of 2015, reflecting a trend toward front-end sales, which do not pay a DSC commission. As at May 31, 2016, the unamortized balance of deferred selling commissions financed was $98.1 million (November 30, 2015 – $99.3 million).

Customer contracts amortization and derecognition decreased $0.7 million and $0.7 million for the three and six months ended May 31, 2016, as a result of a lower carrying value. Customer contracts are immediately expensed upon redemption of the AUM.

Other intangibles amortization and derecognition decreased $0.2 million and $0.3 million for the three and six months ended May 31, 2016.

Depreciation increased $0.2 million and $0.5 million for the three and six months ended May 31, 2016, reflecting the investment related to the internalization of the fund administration function.

Interest expense decreased as a result of lower average debt levels.

Income Tax Expense
Income tax expense for the three and six months ended May 31, 2016 was $2.5 million and $5.3 million, as compared to $4.9 million and $9.4 million in the corresponding period in 2015. The estimated effective tax rate for the six months ended May 31, 2016 was 21.6% (2015 – 25.0%).

The Company believes that it has adequately provided for income taxes based on all of the information that is currently available. The calculation of income taxes in many cases, however, requires significant judgement in interpreting tax rules and regulations. The Company's tax filings are subject to audits, which could materially change the amount of the current and deferred income tax assets and liabilities, and could, in certain circumstances, result in the assessment of interest and penalties.

The Company has several ongoing disputes with the Canada Revenue Agency (CRA), of which the final result of the audit and appeals process may vary and may be materially different compared to the estimates and assumptions used by management in determining the Company's consolidated income tax provision and in determining the amounts of its income tax assets and liabilities.

(a) CRA Audit – Transfer Pricing

During the period November 30, 2013 to May 31, 2016, the Company has received a number of notices of reassessment (NOR) from the CRA for its 2005 through 2010 fiscal years relating to the transfer pricing and allocation of income between one of the Company's Canadian legal entities and a foreign subsidiary. Including the NOR received during the second quarter of 2016 for the 2010 fiscal year, the reassessments would increase the Company's taxes payable from its original tax filings by $61.1 million (before the application of interest and penalties of $32.2 million).

The Company strongly disagrees with the CRA's position and filed various objections to the NOR for the taxation years 2005 to 2009. The Company will also object to the NOR for 2010 in the third quarter of 2016. In connection with the filing of an objection to the NORs for the applicable periods 2005 through 2010, the Company has paid approximately $62.1 million of which $8.1 million was paid (including interest and penalties) during the six months ended May 31, 2016 in relation to the 2009 and 2010 NORs.

In consultation with its external advisors, the Company believes that its transfer pricing methodology was reasonable and the Company is contesting the CRA's position and any related transfer pricing penalty. The Company believes it is likely that the CRA will reassess its taxes for subsequent years on a similar basis and that these may result in future cash payments on receipt of the reassessments. During the six months ended May 31, 2016, the Company has recorded a tax expense of $1.1 million (2015 – $0.8 million) in relation to this transfer pricing audit. The amount of tax provision recorded on the consolidated interim statement of financial position reflects management's best estimate on the ultimate resolution of this matter and includes any related estimated interest and penalties for the 2005 to 2016 fiscal years.

Further to the Company's objection to the NOR, the Company is also seeking Competent Authority relief from double taxation under the applicable tax treaty. The Company's provision, which reflects its best estimate of the ultimate resolution of this matter, includes an expected recovery of approximately $14.8 million for the tax years 2005 through 2010. Any relief from double taxation should be granted at the completion of the mutual agreement procedures (MAP) under the applicable tax treaty.

In 2013, the Company was accepted by the CRA into a Bilateral Advance Pricing Arrangement (BAPA) between Canada and the relevant tax authorities to establish the appropriate transfer pricing methodologies for the tax years 2011 through 2016. Under a BAPA, the taxpayer will receive certainty as to its transfer pricing arrangements for the years under consideration, will not be assessed transfer pricing penalties, and can avoid double taxation on transactions covered by the BAPA according to the provision of the income tax treaty between Canada and the foreign country.

(b) CRA Audit – Foreign Accrual Property Income

In May 2015, the Company received a proposal letter from the CRA relating to foreign accrual property income (FAPI) earned by its foreign subsidiaries for the 2007 to 2012 fiscal years. The 2007 fiscal year has since been statute-barred and in September 2015, as a result of further review, the CRA has withdrawn its proposal on this issue for the 2008 to 2012 fiscal years. Despite the withdrawal of the proposal letter, the audit for the 2008 to 2012 fiscal years continues. The Company continues to believe that its tax position is correct and has not recorded a provision for this issue.

(c) CRA Audit – Acquisition of Tax-related Benefits

In July 2015, the Company received a NOR from the CRA denying $30.5 million of tax-related benefits acquired and utilized by the Company in the 2005 fiscal year. The NOR would increase the Company's taxes payable from its original tax filings by $10.9 million (before the application of interest and penalties of $9.7 million). The Company strongly disagrees with the CRA's position and has filed an objection to the NOR. As a result of receiving the NOR, the Company has paid $13.5 million (including interest and penalties) during the year ended November 30, 2015, which was recorded as income tax receivable on the consolidated interim statement of financial position. In consultation with its external advisors, the Company believes that its tax position is probable of being sustained and, as a result, has not recorded a provision in relation to this matter.

Net Income
The impact of the above income and expense items resulted in net income from continuing operations attributable to the equity owners of the Company of $9.6 million and $19.8 million for the three and six months ended May 31, 2016, as compared to net income from continuing operations attributable to the equity owners of the company of $14.7 million and $28.2 million in the corresponding period in 2015.

Earnings per Share
Diluted earnings per share from continuing operations was $0.12 and $0.25 per share for the three and six months ended May 31, 2016, as compared to earnings of $0.17 and $0.33 per share in the corresponding period of 2015.

Liquidity and Capital Resources

As at May 31, 2016, the Company had total cash and cash equivalents of $32.1 million. Free cash flow, as defined on page 17, generated from continuing operating activities was $16.4 million and $27.4 million for the three and six months ended May 31, 2016, compared to $16.8 million and $32.2 million in the prior period. During the six months ended May 31, 2016, we used $16.5 million (2015 – $214.3 million) in cash to fund the following:


(in millions of Canadian dollars)
Six months ended		May 31, 2016			May 31, 2015

Net cash provided by operating activities			$	17.5		$	16.6
Paid to CRA in relation to ongoing tax matters				(8.1)			(14.5)
Repurchase of shares under NCIB
	and treasury stock for EBT			(5.4)			(25.0)
Dividends paid				(12.6)			(29.2)
Return of capital (investment) in the alternative asset management platform				38.4			(115.3)
Repayment of long-term debt				(40.0)			(40.0)
Other				(6.3)			(6.9)
			$	(16.5)		$	(214.3)

During the quarter, following the first close of the EIF, AGF received net cash of $73.6 million, net of a capital call of $9.6 million, which aligned AGF's invested capital to its proportionate share of total commitments to the fund.

Total long-term debt outstanding at May 31, 2016 was $228.9 million (November 30, 2015 – $268.8 million). On November 20, 2015, the Company, through its subsidiary AGF Investments Inc., amended and restated its loan agreement. The amended unsecured revolving credit facility has a maximum aggregate principal amount of $320.0 million and includes a $10.0 million swingline facility commitment. As at May 31, 2016, $84.9 million was available to be drawn. The loan facility will be available to meet future operational and investment needs. We anticipate that cash balances and cash flow from operations, together with the available loan facility, will be sufficient in the foreseeable future to implement our business plan, fund our alternative asset management platform commitments, finance selling commissions, satisfy regulatory and tax requirements, service debt repayment obligations, pay quarterly dividends, and fund any future share buybacks.

On June 28, 2016, the Board of Directors of AGF declared a quarterly dividend on both the Class A Voting common shares and Class B Non-Voting shares of the Company of $0.08 per share in respect of the three months ended May 31, 2016.

Capital Management Activities from Continuing Operations

We actively manage our capital to maintain a strong and efficient capital base to maximize risk-adjusted returns to shareholders, to invest in future growth opportunities, including acquisitions, and to ensure that the regulatory capital requirements are met for each of our subsidiary companies.

AGF capital consists of shareholders' equity and long-term debt. On an annual basis, AGF prepares a five-year plan detailing projected operating budgets and capital requirements. AGF is required to submit this plan to AGF's Finance Committee for approval prior to seeking Board approval. AGF's Finance Committee consists of the Chairman and CEO, the Vice-Chairman, Executive Vice-President and CFO, the Executive Vice-President and Chief Operating Officer, and the President and CIO. Once approved by the Finance Committee, the six-year plans are reviewed and approved by AGF's Board of Directors. These plans become the basis for the payment of dividends to shareholders, the repurchase of Class B Non-Voting shares and, combined with the reasonable use of leverage, the source of funds for expansion through organic growth and strategic investments.

Normal Course Issuer Bid
On February 2, 2016, AGF announced that the Toronto Stock Exchange (TSX) had approved AGF's notice of intention to renew its normal course issuer bid (NCIB) in respect of its Class B Non-Voting shares. AGF believes that the purchase for cancellation of Class B Non-Voting shares represents a desirable use of capital when, if in the opinion of management, the value of the Class B Non-Voting shares is attractive relative to the trading price of said shares. Purchase for cancellation by AGF of outstanding Class B Non-Voting shares may also be used to offset the dilutive effect of treasury stock released for the employee benefit trust and of shares issued through the Company's stock option plans and dividend reinvestment plan. AGF relies on an automatic purchase plan during the normal course issuer bid. The automatic purchase plan allows for purchases by AGF of its Class B Non-Voting shares during certain pre-determined black-out periods, subject to certain parameters. Outside of these pre-determined black-out periods, shares will be purchased in accordance with management's discretion. Under its normal course issuer bid, the Class B Non-Voting shares may be repurchased from time to time at prevailing market prices or such other price as may be permitted by the TSX for amounts as follows:

Between February 4, 2016 and February 3, 2017, up to 4,664,042 Class B Non-Voting shares, or 10% of the public float for such shares, through the facilities of the TSX (or as otherwise permitted by the TSX); and
Between February 4, 2015 and February 3, 2016, up to 6,707,999 Class B Non-Voting shares, or 10% of the public float for such shares, through the facilities of the TSX (or as otherwise permitted by the TSX).

During the three months ended May 31, 2016, AGF repurchased nil shares under its normal course issuer bid. During the six months ended May 31, 2016, under its normal course issuer bid, AGF repurchased 1,000,000 Class B Non-Voting shares for a total consideration of $5.1 million at an average price of $5.10 per share.

During the three months ended May 31, 2016, AGF purchased nil shares for the employee benefit trust. During the six months ended May 31, 2016, under its normal course issuer bid, AGF purchased 60,000 Class B Non-Voting shares for the employee benefit trust for a total consideration of $0.3 million at an average price of $4.45 per share.

Dividends

The holders of Class B Non-Voting and Class A Voting common shares are entitled to receive cash dividends. Dividends are paid in equal amounts per share on all the Class B Non-Voting 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 credit facility or where such payment of dividends would create a default.

Our Board of Directors may determine that Class B Non-Voting shareholders shall have the right to elect to receive part or all of such dividend in the form of a stock dividend. They also determine whether a dividend in Class B Non-Voting shares is substantially equal to a cash dividend. This determination is based on the weighted average price at which the Class B Non-Voting shares traded on the TSX during the 10 trading days immediately preceding the record date applicable to such dividend.

The following table sets forth the dividends paid by AGF on Class B Non-Voting shares and Class A Voting common shares for the years indicated:


Years ended November 30		2016¹		2015		2014		2013		2012

Per share	$	0.24	$	0.51	$	1.08	$	1.08	$	1.08

¹	Represents the total dividends paid in December 2015, April 2016 and to be paid in July 2016.

We review our dividend distribution policy on a quarterly basis, taking into account our financial position, profitability,
cash flow and other factors considered relevant by our Board of Directors. The quarterly dividends paid on April 8, 2016 was $0.08 per share.

Outstanding Share Data
Set out below is our outstanding share data as at May 31, 2016 and 2015. For additional detail, see Notes 9 and 13 of the condensed consolidated interim financial statements.


			May 31,	May 31,
			2016	2015

Shares
	Class A Voting common shares		57,600	57,600
	Class B Non-Voting shares	79,209,167		82,917,656

Stock Options
	Outstanding options		7,657,455	5,720,011
	Exercisable options		3,158,250	2,399,227

Key Performance Indicators, Additional IFRS and Non-IFRS Measures

We measure the success of our business strategies using a number of key performance indicators (KPI), which are outlined below. With the exception of income, the following KPIs are non-IFRS measures, which are not defined under IFRS. They should not be considered as an alternative to net income attributable to equity owners of the Company or any other measure of performance under IFRS.

Income
Income is a measurement defined by IFRS and is recorded net of fee rebates and sales taxes. Income is indicative of our potential to deliver cash flow.

We derive our income principally from a combination of:

management advisory fees based on AUM and from fund administration fees,
DSC earned from investors when mutual fund securities sold on a DSC basis are redeemed,
32.5% equity interest in S&WHL, and
general partnership interest and long-term investments in the alternative asset management platform.

EBITDA
We define EBITDA as earnings before interest, taxes, depreciation and amortization. EBITDA is a standard measure used in the mutual fund industry by management, investors and investment analysts to understand and compare results. We believe this is an important measure as it allows us to assess our investment management businesses without the impact of non-operational items.

Please see the Consolidated Operating Results section on page 8 of this MD&A for a schedule showing how EBITDA reconciles to our IFRS financial statements.

Free Cash Flow
Free cash flow represents cash available for distribution to our shareholders, share buybacks, investment in our alternative asset management platform and general corporate purposes. We define free cash flow as cash flow from operations before net changes in non-cash balances related to operations less interest paid and adjusted for certain tax items outlined below. Free cash flow is a relevant measure in the investment management business since a substantial amount of cash is spent on upfront commission payments.


			Three months ended						Six months ended
			May 31,		February 29,		May 31,		May 31,		May 31,
(in millions of Canadian dollars)			2016		2016		2015		2016		2015

Net cash provided by (used in)
	continuing operating activities		$	25.7	$	(16.3)	$	26.7	$	9.4	$	2.1
Adjusted for:
	Net changes in non-cash working capital
		balances related to operations		(10.5)		25.8		(7.2)		15.3		16.2
	Taxes paid related to transfer pricing audit
		and other tax contingencies		5.3		2.8		–		8.1		14.5
	Interest paid			(2.2)		(2.3)		(2.6)		(4.6)		(5.2)
	Prior years' cash taxes paid and anticipated
		cash taxes to be refunded related to the
		current year continuing operations		(1.9)		1.1		(0.1)		(0.8)		4.6
Free cash flow			$	16.4	$	11.1	$	16.8	$	27.4	$	32.2

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


	Three months ended						Six months ended
	May 31,		February 29,		May 31,		May 31,		May 31,
(in millions of Canadian dollars)	2016		2016		2015		2016		2015

EBITDA from continuing operations	$	26.2	$	27.3	$	36.0	$	53.5	$	69.9
Divided by income		111.1		103.3		117.1		214.4		228.8
EBITDA margin		23.6%		26.4%		30.7%		25.0%		30.6%

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


	Three months ended						Six months ended
	May 31,		February 29,		May 31,		May 31,		May 31,
(in millions of Canadian dollars)	2016		2016		2015		2016		2015

Net income from continuing operations	$	9.3	$	10.1	$	14.7	$	19.4	$	28.2
Add: income taxes		2.5		2.8		4.9		5.3		9.4
Income before taxes	$	11.8	$	12.9	$	19.6	$	24.7	$	37.6
Divided by income		111.1		103.3		117.1		214.4		228.8
Pre-tax profit margin		10.6%		12.5%		16.7%		11.5%		16.4%

Return on Equity (ROE)
We monitor ROE to assess the profitability of the consolidated Company on an annual basis. We calculate ROE by dividing net income from continuing operations by average shareholders' equity.


		Three months ended						Six months ended
		May 31,		February 29,		May 31,		May 31,		May 31,
(in millions of Canadian dollars)		2016		2016		2015		2016		2015

Net income from continuing operations
	(annualized)	$	37.2	$	40.4	$	58.8	$	38.8	$	56.4
Divided by average shareholders' equity			906.8		907.6		910.3		910.1		921.3
Return on equity			4.1%		4.5%		6.5%		4.3%		6.1%

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


	Three months ended						Six months ended
	May 31,		February 29,		May 31,		May 31,		May 31,
(in millions of Canadian dollars)	2016		2016		2015		2016		2015

Long-term debt	$	228.9	$	268.9	$	268.6	$	228.9	$	268.6
Divided by EBITDA (annualized)		104.8		109.2		144.0		107.0	$	139.8
Long-term debt to EBITDA ratio		218.4%		246.2%		186.5%		213.9%		192.1%

Assets Under Management
The amount of AUM and the related fee rates are important to our business as these are the drivers of our revenue from our mutual fund, institutional and sub-advisory accounts and private client relationships and alternative asset management platform. AUM will fluctuate in value as a result of investment performance, sales and redemptions and crystallization of long-term investments. Mutual fund sales and AUM determine a significant portion of our expenses because we pay upfront commissions on gross sales and trailing commissions to financial advisors as well as investment advisory fees based on the value of AUM.

Investment Performance
Investment performance, which represents market appreciation (depreciation) of fund portfolios and is shown net of management fees received, is a key driver of the level of AUM and is central to the value proposition that we offer advisors and unitholders. Growth in AUM resulting from investment performance increases the wealth of our unitholders and, in turn, we benefit from higher revenues. Alternatively, poor investment performance will reduce our AUM levels and result in lower management fee revenues. Strong relative investment performance may also contribute to growth in gross sales or reduced levels of redemptions. Conversely, poor relative investment performance may result in lower gross sales and higher levels of redemptions. Refer to the 'Risk Factors and Management of Risk' section of our 2015 Annual MD&A.

Net Sales (Redemptions)
Gross sales and redemptions are monitored separately and the sum of these two amounts comprises net sales (redemptions). Net sales (redemptions), together with investment performance and fund expenses, determine the level of average daily retail fund AUM, which is the basis on which management fees are charged. The average daily retail fund AUM is equal to the aggregate average daily net asset value of the AGF retail funds. We monitor AUM in our institutional, sub-advisory and private client and alternative businesses separately. We do not compute an average daily retail fund AUM figure for them.

Market Capitalization

The Company's Class B Non-Voting share price continued to experience downward pressure during 2016. As a result, AGF's market capitalization of $418.4 million remained below its recorded net assets of $909.3 million. In 2015, we utilized independent specialists to determine the fair value of AGF's cash-generating units (CGUs). Based on the result of the assessment, the recoverable amount of each CGU exceeded its carrying value as at November 30, 2015. There have been no significant changes to the recoverable amount of each CGU as at May 31, 2016. Estimating the fair value of CGUs is a subjective process that involves the use of estimates and judgements, particularly related to cash flows, the appropriate discount rates, terminal growth rates and an applicable control premium.

Managing Risk

AGF is subject to a number of risk factors that may impact our operating and financial performance. These risks and the management of these risks are detailed in our 2015 Annual MD&A in the section entitled 'Risk Factors and Management of Risk.' The Company has not identified any material changes to the risk factors affecting its business or in the management of these risks.

Internal Control Over Financial Reporting

The Chief Executive Officer and the Chief Financial Officer have designed or caused the design of the Internal Controls Over Financial Reporting (ICFR) and Disclosure Controls and Procedures. There have been no changes in AGF's internal controls during the six months ended May 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Additional Information

Additional information relating to the Company can be found in the Company's Condensed Consolidated Interim Financial Statements and accompanying notes for the three and six months ended May 31, 2016, the Company's 2015 Annual Information Form (AIF) and Annual Report, and other documents filed with applicable securities regulators in Canada, and may be accessed at www.sedar.com.

AGF Management Limited
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three and six months ended May 31, 2016 and 2015

AGF Management Limited Consolidated Interim Statement of Financial Position

(unaudited)					May 31,		November 30,
(in thousands of Canadian dollars)			Note		2016		2015

Assets
	Current Assets
		Cash and cash equivalents		$	32,142	$	48,669
		Investments	4		25,461		23,427
		Accounts receivable, prepaid expenses and other assets			41,408		40,242
		Income tax receivable	14, 19		–		149
					99,011		112,487

	Investment in associate and joint venture		5		106,291		106,229
	Long-term investments		5		97,688		140,534
	Management contracts		7		689,759		689,759
	Customer contracts, net of accumulated amortization and derecognition		7		8,116		9,660
	Goodwill		7		249,952		249,952
	Other intangibles, net of accumulated amortization and derecognition		7		6,094		8,130
	Deferred selling commissions, net of accumulated amortization and derecognition		7		98,052		99,291
	Property, equipment and computer software, net of accumulated depreciation				11,342		9,990
	Deferred income tax assets				6,871		3,102
	Income tax receivable		14, 19		13,705		6,683
	Other assets		5		–		1,108
Total assets				$	1,386,881	$	1,436,925

Liabilities
	Current Liabilities
		Accounts payable and accrued liabilities	13	$	53,609	$	69,325
		Income tax liability	14, 19		525		–
		Provision for Elements Advantage			1,007		1,412
		Derivative financial instrument			805		1,763
					55,946		72,500

	Long-term debt		8		228,934		268,782
	Contingent consideration payable		6		1,997		1,990
	Deferred income tax liabilities				178,657		175,548
	Provision for Elements Advantage				1,005		1,159
	Other long-term liabilities		13		11,051		6,093
Total liabilities					477,590		526,072

Equity
	Equity attributable to owners of the Company
		Capital stock	9		478,809		481,265
		Contributed surplus	13		38,598		40,336
		Retained earnings			369,139		361,383
		Accumulated other comprehensive income	10		20,040		24,734
					906,586		907,718

Non-controlling interest			6		2,705		3,135

Total equity					909,291		910,853
Total liabilities and equity				$	1,386,881	$	1,436,925

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

AGF Management Limited Consolidated Interim Statement of Income

(unaudited)					Three months ended
					May 31,			May 31,
(in thousands of Canadian dollars, except per share data)				Note		2016		2015

Income
	Management, advisory and administration fees					$	101,015	$	107,683
	Deferred sales charges						2,415		2,422
	Share of profit of associate and joint ventures			5			4,621		4,320
	Fair value adjustments and other income			5, 11			3,049		2,626
Total income							111,100		117,051

Expenses
	Selling, general and administrative			12			54,011		46,587
	Trailing commissions						30,110		33,446
	Investment advisory fees						784		1,144
	Amortization and derecognition of deferred selling commissions						9,340		10,296
	Amortization and derecognition of customer contracts						744		1,433
	Amortization and derecognition of other intangibles						982		1,192
	Depreciation of property, equipment and computer software						937		777
	Interest expense						2,312		2,617
							99,220		97,492

Income before income taxes							11,880		19,559

Income tax expense (benefit)
	Current			14			3,685		4,557
	Deferred			14			(1,143)		333
							2,542		4,890

Income from continuing operations, net of tax							9,338		14,669

Loss from discontinued operations, net of tax							(106)		–

Net income for the period						$	9,232	$	14,669

Net income (loss) attributable to:
	Equity owners of the Company					$	9,540	$	14,669
	Non-controlling interest						(308)		–
						$	9,232	$	14,669

Earnings per share for the period attributable to
	equity owners of the Company
		Basic earnings per share
			Continuing operations	15		$	0.12	$	0.17
			Discontinued operations	15			–		–
						$	0.12	$	0.17

		Diluted earnings per share
			Continuing operations	15		$	0.12	$	0.17
			Discontinued operations	15			–		–
						$	0.12	$	0.17

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

AGF Management Limited Consolidated Interim Statement of Income

(unaudited)				Six months ended
				May 31,			May 31,
(in thousands of Canadian dollars, except per share data)			Note	2016		2015

Income
	Management, advisory and administration fees			$	195,980	$	210,197
	Deferred sales charges				4,789		5,020
	Share of profit of associate and joint ventures		5		8,696		8,226
	Fair value adjustments and other income		5, 11		4,966		5,323
Total income					214,431		228,766

Expenses
	Selling, general and administrative		12		99,278		91,339
	Trailing commissions				60,110		64,807
	Investment advisory fees				1,504		2,750
	Amortization and derecognition of deferred selling commissions				18,626		20,681
	Amortization and derecognition of customer contracts				1,544		2,195
	Amortization and derecognition of other intangibles				2,036		2,370
	Depreciation of property, equipment and computer software				1,953		1,432
	Interest expense				4,632		5,560
					189,683		191,134

Income before income taxes					24,748		37,632

Income tax expense (benefit)
	Current		14		6,555		8,768
	Deferred		14		(1,208)		640
					5,347		9,408

Income from continuing operations, net of tax					19,401		28,224

Loss from discontinued operations, net of tax					(106)		–

Net income for the period				$	19,295	$	28,224

Net income (loss) attributable to:
	Equity owners of the Company			$	19,725	$	28,224
	Non-controlling interest				(430)		–
				$	19,295	$	28,224

Earnings per share for the period attributable to
equity owners of the Company
	Basic earnings per share
		Continuing operations	15	$	0.25	$	0.34
		Discontinued operations	15		–		–
				$	0.25	$	0.34

	Diluted earnings per share
		Continuing operations	15	$	0.25	$	0.33
		Discontinued operations	15		–		–
				$	0.25	$	0.33

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

AGF Management Limited Consolidated Interim Statement of Comprehensive Income

(unaudited)			Three months ended May 31,				Six months ended May 31,
(in thousands of Canadian dollars)				2016		2015		2016		2015

Net income for the period			$	9,232	$	14,669	$	19,295	$	28,224

Other comprehensive income (loss), net of tax

	Cumulative translation adjustment
		Foreign currency translation adjustments related to net investments in foreign operations		(515)		(1,372)		(5,846)		6,103
				(515)		(1,372)		(5,846)		6,103
	Net unrealized gains (losses) on investments
		Unrealized gains (losses)		(71)		(107)		448		207
				(71)		(107)		448		207
	Net unrealized gains (losses) on cash flow hedge
		Unrealized gains (losses)		(33)		107		44		(547)
		Reclassification of realized gains (losses) to earnings		(322)		308		660		568
				(355)		415		704		21

Total other comprehensive income (loss), net of tax			$	(941)	$	(1,064)	$	(4,694)	$	6,331

Comprehensive income			$	8,291	$	13,605	$	14,601	$	34,555

Comprehensive income (loss) attributable to:
	Equity holders of the Company		$	8,599	$	13,605	$	15,031	$	34,555
	Non-controlling interest			(308)		–		(430)		–
			$	8,291	$	13,605	$	14,601	$	34,555

All items presented in other comprehensive income (loss) will be reclassified to the consolidated statement of income (loss) in subsequent periods.


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

AGF Management Limited
Consolidated Interim Statement of Changes in Equity

(unaudited)

(in thousands of Canadian dollars)

Capital
stock

Contributed
surplus

Retained
earnings

Accumulated
other
comprehensive
income

Attributable
to equity
owners of
the Company

Non-
controlling
interest

Total
equity

Balance, December 1, 2014

517,467

39,584

361,628

11,096

929,775

–

929,775

Net income for the period

–

28,224

–

28,224

–

28,224

Other comprehensive income

(net of tax)

–

6,331

6,331

–

6,331

Comprehensive income

for the period

–

28,224

6,331

34,555

–

34,555

Issued through dividend

reinvestment plan

379

–

379

–

379

Stock options

101

596

–

697

–

697

AGF Class B Non-Voting

shares repurchased for

cancellation

(18,077)

–

(5,027)

–

(23,104)

–

(23,104)

Dividends on AGF Class A

Voting common shares and

AGF Class B Non-Voting shares,

including tax of $0.3 million

–

(29,903)

–

(29,903)

–

(29,903)

Equity-settled Restricted Share

Units and Partner Points,

net of tax

–

(1,313)

–

(1,313)

–

(1,313)

Treasury stock

1,813

–

1,813

–

1,813

Balance, May 31, 2015

501,683

38,867

354,922

17,427

912,899

–

912,899

Balance, December 1, 2015

481,265

40,336

361,383

24,734

907,718

3,135

910,853

Net income for the period

–

19,725

–

19,725

(430)

19,295

Other comprehensive loss

(net of tax)

–

(4,694)

(4,694)

–

(4,694)

Comprehensive income (loss)

for the period

–

19,725

(4,694)

15,031

(430)

14,601

Issued through dividend

reinvestment plan

184

–

184

–

184

Stock options

–

800

–

800

–

800

AGF Class B Non-Voting shares

repurchased for cancellation

(6,069)

–

954

–

(5,115)

–

(5,115)

Dividends on AGF Class A

Voting common shares and

AGF Class B Non-Voting shares,

including tax of $0.2 million

–

(12,923)

–

(12,923)

–

(12,923)

Equity-settled Restricted Share

Units and Partner Points,

net of tax

–

(2,538)

–

(2,538)

–

(2,538)

Treasury stock

3,429

–

3,429

–

3,429

Balance, May 31, 2016

478,809

38,598

369,139

20,040

906,586

2,705

909,291

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

AGF Management Limited Consolidated Interim Statement of Cash Flow


(unaudited)				Six months ended
					May 31,	May 31,
(in thousands of Canadian dollars)			Note	2016			2015

Operating Activities
	Net income for the period			$	19,295		$	28,224

	Adjustments for
		Net loss from discontinued operations			106			–
		Amortization, derecognition and depreciation			24,159			26,678
		Interest expense			4,632			5,560
		Income tax expense	14		5,347			9,408
		Income taxes paid			(13,013)			(26,184)
		Stock-based compensation	13		2,467			3,944
		Share of profit of associate and joint venture	5		(8,696)			(8,226)
		Distributions from associate	5		3,053			1,680
		Deferred selling commissions paid			(17,387)			(20,394)
		Fair value adjustment on long-term investments	5		4,473			(1,843)
		Other			237			(500)
					24,673			18,347

	Net change in non-cash working capital balances related to operations
		Accounts receivable			(1,038)			(2,002)
		Other assets			1,868			(602)
		Accounts payable and accrued liabilities			(20,720)			(13,799)
		Other liabilities			4,608			205
					(15,282)			(16,198)

	Net cash provided by operating activities				9,391			2,149

Financing Activities
	Repurchase of Class B Non-Voting shares for cancellation		9		(5,115)			(23,104)
	Issue of Class B Non-Voting shares		9		–			91
	Purchase of treasury stock		9		(267)			(1,867)
	Dividends paid		16		(12,578)			(29,238)
	Repayment of long-term debt		8		(40,000)			(40,000)
	Issuance of short-term bridge facility		8		–			89,100
	Repayment of short-term bridge facility		8		–			(89,100)
	Interest paid				(4,575)			(5,236)
	Net cash used in financing activities				(62,535)			(99,354)

Investing Activities
	Purchase of long-term investments		5		(40,646)			(115,269)
	Return of capital from long-term investments		5		79,019			–
	Purchase of property, equipment and computer software, net of disposals				(4,734)			(1,240)
	Purchase of short-term investments		4		(3,605)			(4,768)
	Proceeds from sale of short-term investments		4		1,903			4,183
	Proceeds from acquisitions and disposals				4,680			–
	Net cash provided by (used in) investing activities				36,617			(117,094)

Decrease in cash and cash equivalents					(16,527)			(214,299)

Balance of cash and cash equivalents, beginning of period					48,669			261,498

Balance of cash and cash equivalents, end of period				$	32,142		$	47,199

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

Notes to Condensed Consolidated Interim Financial Statements

For the three and six months ended May 31, 2016 and May 31, 2015 (unaudited)

Note 1: General Information

AGF Management Limited (AGF or the Company) is a limited liability company incorporated and domiciled in Canada under the Business Corporations Act (Ontario). The address of its registered office and principal place of business is Toronto-Dominion Bank Tower, 66 Wellington Street West, Toronto, Ontario.

The Company is an integrated, global wealth management corporation whose principal subsidiaries provide investment management for mutual funds, institutions and corporations, as well as high-net-worth clients. The Company conducts the management and distribution of mutual funds in Canada under the brand names AGF, Elements and Harmony (collectively, AGF Investments). The Company's wholly owned subsidiary AGF CustomerFirst Inc. (AGFC) provides fund administration services to the AGF mutual funds. The Company also holds a controlling interest in FFCM, LLC and investments in an associate, Smith & Williamson Holdings Limited (S&WHL), and in joint ventures InstarAGF Inc. (InstarAGF), Stream Asset Financial Management LP (SAFMLP) and Stream Asset Financial LP (Stream).

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on June 28, 2016.

Note 2: Basis of Preparation

These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) applicable to the preparation of interim financial statements, including International Accounting Standard 34 (IAS 34), Interim Financial Reporting. The accounting policies in these condensed consolidated interim financial statements are consistent with those disclosed in the Company's annual consolidated financial statements for the year ended November 30, 2015. The condensed consolidated interim financial statements should be read in conjunction with the Company's annual consolidated financial statements for year ended November 30, 2015, which have been prepared in accordance with IFRS as issued by the IASB.

Certain comparative figures have been reclassified to conform to the consolidated interim financial statement presentation in the current year.

Note 3: Adoption of New and Revised Accounting Standards

The accounting policies adopted in the preparation of these condensed consolidated interim financial statements are consistent with those followed in the preparation of the Company's annual consolidated financial statements for the year ended November 30, 2015. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Note 4: Investments

The following table presents a breakdown of investments:


			May 31,		November 30,
(in thousands of Canadian dollars)			2016		2015

Fair value through profit or loss
	AGF mutual funds and other	$	18,431	$	17,201
	Equity securities		536		531
			18,967		17,732

Available for sale
	Equity securities and term deposits		6,184		5,385
Loans and receivables
	Canadian government debt – Federal		310		310
		$	25,461	$	23,427

During the three and six months ended May 31, 2016 and 2015, no impairment charges were recognized.

Note 5: Investment in Associate, Joint Ventures and Long-term Investments

(a) Investment in Associate

The Company holds a 32.5% investment in S&WHL accounted for using the equity method. At May 31, 2016, the carrying value was $105.0 million (November 30, 2015 – $105.3 million). During the three and six months ended May 31, 2016, the Company recognized earnings of $4.4 million and $8.3 million (2015 – $4.2 million and $7.9 million) from S&WHL and received $3.1 million and $3.1 million (2015 – $1.7 million and $1.7 million) in dividends from S&WHL.

(b) Investment in Joint Ventures

The Company accounts for Stream Asset Financial GP LP (SAF GP), SAFMLP and InstarAGF, a joint venture with Instar Group Inc., using the equity method of accounting. The continuity for the six months ended May 31, 2016 and 2015 is as follows:


Six months ended		May 31, 2016						May 31, 2015
(in thousands of Canadian dollars)			SAFMLP	InstarAGF			Total		SAFMLP	InstarAGF			Total

Balance, beginning of period		$	933	$	–	$	933	$	312	$	–	$	312
	Share of profit		380		–		380		318		–		318
Balance, end of period		$	1,313	$	–	$	1,313	$	630	$	–	$	630

The Company's share of profit excludes its portion of the estimated carried interest to be distributed to AGF on crystallization. Carried interest will be recognized when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Company, which is generally subsequent to the return of capital and contractual rate of return provided to investors.

The Company holds a 37.0% interest in SAFMLP. For the three and six months ended May 31, 2016, the Company recognized earnings of $0.2 million and $0.4 million (2015 – $0.2 million and $0.3 million) from SAFMLP.

The Company has recorded losses with respect to its equity investment in InstarAGF only to the extent of its initial investment, which has a carrying value of nil, because it is not contractually obligated to fund the losses. As at May 31, 2016, the Company accumulated unrecognized losses of $0.9 million (November 30, 2015 – $1.3 million) related to its interest in InstarAGF. In addition, AGF has agreed to advance up to $5.0 million to InstarAGF on an as-needed basis as a working capital loan facility. The loan facility is non-interest bearing and is repayable on a priority basis once InstarAGF begins to earn fees from funds under management. As at May 31, 2016, the Company had recorded a receivable of $3.2 million (November 30, 2015 – $3.3 million), included in accounts receivable, prepaid expenses and other assets on the consolidated interim statement of financial position.

As at May 31, 2016, the Company had recorded a $0.6 million promissory note receivable from Instar Group Inc. (November 30, 2015 – $1.0 million). The note bears interest at prime and has been included in accounts receivable, prepaid expenses and other assets on the consolidated interim statement of financial position.

(c) Investment in Long-term Investments

The continuity for the investment in Stream and InstarAGF Essential Infrastructure Fund (EIF), accounted for at fair value through profit or loss (FVTPL), for the six months ended May 31, 2016 and May 31, 2015 is as follows:



Six months ended			May 31,		May 31,
(in thousands of Canadian dollars)			2016		2015

Balance, beginning of period		$	140,534	$	19,671
	Purchase of long-term investments		40,646		115,269
	Return of capital		(79,019)		–
	Reclassification of investment		–		(63)
	Fair value adjustment¹		(4,473)		1,843
Balance, end of period		$	97,688	$	136,720

¹	Fair value adjustment is based on the net assets of the fund less the Company's portion of the carried interest that would be payable by the fund upon crystallization.

The Company has committed a total of $150.0 million to funds and investments associated with the alternative asset management platform. The Company may temporarily provide capital to warehouse investments prior to formation of a fund. Upon closing of a fund with external investors, the Company receives a return of its capital in excess of its proportionate participation in the fund. The Company has designated its long-term investments in the funds at FVTPL.

As at May 31, 2016, of its $150.0 million allocation, the Company had committed $50.0 million (November 30, 2015 –$50.0 million) to Stream, a midstream oil and gas infrastructure fund. As at May 31, 2016, the Company had invested $43.3 million (November 30, 2015 – $38.4 million) with $6.7 million (November 30, 2015 – $11.6 million) remaining committed capital to be invested in the Stream fund.

The Company has committed $100.0 million to EIF. On January 27, 2015, the capital invested by the Company, together with amounts invested by Instar, was deployed to acquire an interest in the passenger terminal at Billy Bishop Toronto City Airport alongside other Canadian and international equity investors. On March 2, 2016, InstarAGF announced the first close of EIF with $372.0 million in firm equity commitments. InstarAGF expects to achieve the final closing of the fund by end of 2016. In connection with the first close, the Company received net cash of $73.6 million, net of a capital call of $9.6 million, which aligned AGF's invested capital to its proportionate share of total commitments to the fund.

As at May 31, 2016, of its $100.0 million allocation, the Company had invested $61.8 million (November 30, 2015 – $105.1 million) with $38.2 million (November 30, 2015 – nil) remaining to be invested in EIF.

During the three and six months ended May 31, 2016, the Company recognized $1.2 million and $4.0 million (2015 – $2.3 million and $3.6 million) of income, which is included in fair value adjustment and other income in the consolidated interim statement of income.

Note 6: Acquisitions

(a) Acquisition of FFCM, LLC

On November 16, 2015, the Company acquired 51.0% of FFCM for a cash purchase price of $6.7 million. FFCM is a Boston-based exchange-traded funds (ETF) advisor and asset management firm whose expertise is delivered through a family of alternative and smart-beta ETFs and a number of ETF managed solutions.

In addition, the agreement includes contingent consideration if the annualized advisory revenue of FFCM exceeds certain thresholds in 2018, up to a maximum of $6.7 million. Accordingly, a contingent consideration payable of $2.0 million was recorded upon the acquisition of FFCM. As at May 31, 2016, the fair value of the contingent consideration payable is $2.0 million and is included on the statement of financial position, representing management's best estimate of the fair value thereof. The key assumption used in the analysis was the growth rate in annualized advisory revenue. A 1% increase or decrease in the growth rate would result in an increase or decrease to the undiscounted contingent consideration payable of $0.1 million and $0.3 million, respectively.

The non-controlling interest was measured based on its proportionate share of FFCM's net identifiable assets.

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



(in thousands of Canadian dollars)

Net identifiable assets acquired
	Cash	$	253
	Investments		4
	Accounts receivable, prepaid expenses and other assets		130
	Customer contracts		6,313
	Goodwill		5,403
	Accounts payable and accrued liabilities		(300)
	Non-controlling interest		(3,135)
		$	8,668

Consideration paid
	Cash	$	6,678
	Contingent consideration payable		1,990
		$	8,668

(b) AGF CustomerFirst Inc. (AGFC)

On February 16, 2016, AGF completed the transition to internalize the Company's fund administration function within AGF. The Company did not acquire any significant net assets as a result of the acquisition. The transition included the transfer of 171 employees from Citigroup Fund Services Canada Inc. (CFSC) to AGFC. AGF invested approximately $6.0 million of capital for leaseholds, facilities and technology. As part of this transition agreement, the Company also entered into a four-year service agreement with L&T Infotech Financial Services Technologies Inc. (L&T). The agreement with L&T includes a minimum annual payment commitment of $7.8 million per year for services provided. This commitment expires in 2019.

Note 7: Intangible Assets

Management regularly monitors its intangible assets for indications of potential impairment. There have been no significant changes to the recoverable amounts or indicators for potential impairment of the Company's cash generating units (CGUs) and related inputs from those disclosed in the Company's annual consolidated financial statements for the year ended November 30, 2015. For additional information refer to the Company's annual consolidated financial statements for year ended November 30, 2015.

Note 8: Long-term Debt

(a) As at May 31, 2016, AGF had drawn $230.0 million (November 30, 2015 – $270.0 million) against the unsecured revolving credit facility (the Facility) in the form of a one-month banker's acceptance (BA) at an effective average interest rate of 3.16% per annum. During the six months ended May 31, 2016, the Company repaid $40.0 million (2015 – $40.0 million) of its revolving credit facility.

(b) On January 26, 2015, the Company arranged for a seven-day $100.0 million bridge facility through a Canadian chartered bank to fund an alternative asset investment. On January 26, 2015, AGF drew $89.1 million against the bridge facility, which was secured by the Company's term deposits held by the bank. The bridge facility was fully repaid on February 2, 2015. Refer to Note 5(c) for additional information on the investment in long-term investments.

Note 9: Capital Stock

(a) Authorized Capital

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

(b) Changes During the Period

The change in capital stock is summarized as follows:


Six months ended		May 31, 2016				May 31, 2015
(in thousands of Canadian dollars, except share amounts)			Shares		Stated value		Shares		Stated value

Class A Voting common shares			57,600	$	–		57,600	$	–

Class B Non-Voting shares
	Balance, beginning of the period		79,517,587	$	481,265		85,703,751	$	517,467
	Issued through dividend reinvestment plan		36,390		184		46,252		379
	Stock options exercised		–		–		10,179		101
	Repurchased for cancellation		(1,000,000)		(6,069)		(2,979,040)		(18,077)
	Treasury stock purchased for employee benefit trust		(60,000)		(267)		(243,506)		(1,867)
	Treasury stock released for employee benefit trust		715,190		3,696		380,020		3,680
	Balance, end of the period		79,209,167	$	478,809		82,917,656	$	501,683

(c) Class B Non-Voting Shares Purchased for Cancellation

AGF has obtained applicable regulatory approval to purchase for cancellation, from time to time, certain of its Class B Non-Voting shares through the facilities of the TSX (or as otherwise permitted by the TSX). AGF relies on an automatic purchase plan during the normal course issuer bid. The automatic purchase plan allows for purchases by AGF of its Class B Non-Voting shares during certain pre-determined black-out periods, subject to certain parameters. Outside of these pre-determined black-out periods, shares will be purchased in accordance with management's discretion. Under its normal course issuer bid, AGF may purchase up to 10% of the public float outstanding on the date of the receipt of regulatory approval or up to 4,664,042 shares for the period from February 4, 2016 to February 3, 2017 and up to 6,707,999 shares for the period from February 4, 2015 to February 3, 2016. During the three and six months ended May 31, 2016, under AGF's normal course issuer bid, nil and 1,000,000 (2015 – 191,000 and 2,979,040) Class B Non-Voting shares were repurchased at a cost of nil and $5.1 million (2015 – $1.4 million and $23.1 million) and the excess recovered of nil and $1.0 million (2015 – $0.2 million and $5.0 million excess paid) over the recorded capital stock value of the shares repurchased for cancellation was recorded in retained earnings.

(d) Class B Non-Voting Shares Purchased as Treasury Stock for Employee Benefit Trust

During the three and six months ended May 31, 2016, nil and 60,000 (2015 – 243,506 and 243,506) Class B Non-Voting shares were purchased for the employee benefit trust at a cost of nil and $0.3 million (2015 – $1.9 million and $1.9 million). Shares purchased for the trust are also purchased under the Company's normal course issuer bid and recorded as a reduction to capital stock. During the three and six months ended May 31, 2016, 12,307 and 715,190 (2015 – 7,351 and 380,020) Class B Non-Voting shares purchased as treasury stock were released. As at May 31, 2016, 485,571 (November 30, 2015 – 1,140,761) Class B Non-Voting shares were held as treasury stock.

Note 10: Accumulated Other Comprehensive Income (Loss)


			Foreign		Available
			currency		for sale		Cash flow
(in thousands of Canadian dollars)			translation		securities		hedge		Total

Opening composition of accumulated other
	comprehensive income (loss) at November 30, 2014
	Accumulated other comprehensive income (loss)	$	9,342	$	3,512	$	(2,315)	$	10,539
	Income tax recovery (expense)		–		(57)		614		557
Balance, November 30, 2014			9,342		3,455		(1,701)		11,096

Transactions during the year ended November 30, 2015
	Other comprehensive income		12,366		735		800		13,901
	Income tax expense		–		(51)		(212)		(263)
Balance, November 30, 2015			21,708		4,139		(1,113)		24,734

Transactions during the period ended May 31, 2016
	Other comprehensive income (loss)		(5,846)		500		958		(4,388)
	Income tax expense		–		(52)		(254)		(306)
Balance, May 31, 2016		$	15,862	$	4,587	$	(409)	$	20,040

Note 11: Fair Value Adjustments and Other Income


		Three months ended May 31,				Six months ended May 31,
(in thousands of Canadian dollars)			2016		2015		2016		2015

Fair value adjustment related to
	investment in AGF mutual funds	$	1,021	$	(29)	$	(393)	$	906
Fair value adjustment and distributions related to
	long-term investments		1,194		2,333		3,990		3,589
Interest income			141		110		422		792
Other			693		212		947		36
		$	3,049	$	2,626	$	4,966	$	5,323

Note 12: Expenses by Nature


		Three months ended May 31,					Six months ended May 31,
(in thousands of Canadian dollars)				2016		2015			2016		2015

Selling, general and administrative
	Employee benefit expense		$	29,974	$	27,089		$	57,854	$	54,910
	Sales and marketing			2,765		3,616			5,174		6,280
	Information technology and facilities			8,043		6,443			14,930		11,681
	Professional fees			4,564		4,103			8,913		7,720
	Fund absorption and other fund costs			7,358		4,209			10,057		8,430
	Other			1,307		1,127			2,350		2,318
			$	54,011	$	46,587		$	99,278	$	91,339

Note 13: Stock-based Compensation and Other Stock-based Payments

(a) Stock Option Plans

Under the Company's stock option plans, an additional maximum of 741,208 Class B Non-Voting shares could have
been granted as at May 31, 2016 (November 30, 2015 – 2,293,337).

The change in stock options during the six months ended May 31, 2016 and May 31, 2015 is summarized as follows:


Six months ended		May 31, 2016			May 31, 2015

				Weighted			Weighted
				average			average
		Options		exercise price	Options		exercise price

Class B Non-Voting share options
	Balance, beginning of the period	6,102,781	$	10.69	4,428,542	$	12.86
	Options granted	1,610,394		4.59	1,735,122		8.01
	Options forfeited	(55,720)		7.91	(111,938)		14.82
	Options expired	–		–	(321,536)		14.72
	Options exercised	–		–	(10,179)		8.93
	Balance, end of the period	7,657,455	$	9.43	5,720,011	$	11.25

During the three months ended May 31, 2016, nil (2015 – 539,260) stock options were granted and compensation expense and contributed surplus of $0.4 million (2015 – $0.2 million) was recorded. During the six months ended May 31, 2016, 1,610,394 (2015 – 1,735,122) stock options were granted and compensation expense and contributed surplus of $0.8 million (2015 – $0.6 million) was recorded. The fair value of options granted during the six months ended May 31, 2016 has been estimated at $0.52 per option (2015 – $1.32) using the Black-Scholes option-pricing model. The following assumptions were used to determine the fair value of the options granted during the six months ended May 31, 2016 and May 31, 2015:


Six months ended		May 31, 2016		May 31, 2015

Risk-free interest rate			0.6%		0.7%
Expected dividend yield			7.0%		3.9% - 4.1%
Five-year historical-based
	expected share price volatility		30.5%		28.3% - 33.1%
Forfeiture rate			5.0%		5.2%
Option term			5.0 years		5.0 years

(b) Other Stock-based Compensation

Other stock-based compensation includes Restricted Share Units (RSUs), Performance Share Units (PSUs), Deferred Share Units (DSUs) and Partners Incentive Plan (PIP). Compensation expense for the three and six months ended May 31, 2016 related to these share units was $1.0 million and $1.7 million (2015 – $1.5 million and $3.4 million). As at May 31, 2016, the Company recorded a liability of $1.6 million (November 30, 2015 – $1.8 million) related to other cash-settled stock-based compensation. As at May 31, 2016, the Company recorded contributed surplus of $6.9 million (November 30, 2015 – $9.4 million), net of tax, related to equity-settled RSUs and PIP.

The change in share units of RSUs, PSUs and DSUs during the six months ended May 31, 2016 and May 31, 2015 is as follows:


Six months ended			May 31, 2016			May 31, 2015
		Number of share units			Number of share units
Outstanding, beginning of the period
	Non-vested			1,149,063			1,662,193
Issued
	Initial grant			843,747			676,178
	In lieu of dividends			46,801			63,928
Settled in cash				–			(36,106)
Settled in equity				(12,307)			(380,020)
Forfeited and cancelled				(44,801)			(52,774)
Outstanding, end of the period				1,982,503			1,933,399

Note 14: Income Tax Expense

Income tax expense is recognized based on management's best estimate of weighted average annual income tax rate expected for the full financial year. The estimated effective tax rate for the six months ended May 31, 2016 was 21.6% (2015 – 25.0%).

During the six months ended May 31, 2016, the Company recorded tax contingencies expense of $1.1 million (2015 – $0.8 million) with respect to the Canada Revenue Agency (CRA) transfer pricing audit. Excluding the tax contingencies, the estimated effective tax rate for the six months ended May 31, 2016 was 17.3% (2015 – 22.9%). Refer to Note 19 for additional information on tax contingencies.

Note 15: Earnings per Share


			Three months ended May 31,				Six months ended May 31,
(in thousands of Canadian dollars, except per share amounts)				2016		2015		2016		2015

Numerator
	Net income for the period from continuing operations
		attributable to the equity owners of the Company	$	9,646	$	14,669	$	19,831	$	28,224
	Net loss for the period from discontinued operations
		attributable to the equity owners of the Company		(106)		–		(106)		–
	Net income for the period attributable to the
		equity owners of the Company		9,540		14,669		19,725		28,224

Denominator
	Weighted average number of shares – basic			79,252,324		84,489,294		79,350,185		83,930,634
	Dilutive effect of employee stock-based compensation awards			845,067		937,650		511,429		952,106
	Weighted average number of shares – diluted			80,097,391		85,426,944		79,861,614		84,882,740

Basic earnings per share
	Continuing operations		$	0.12	$	0.17	$	0.25	$	0.34
	Discontinued operations			–		–		–		–
			$	0.12	$	0.17	$	0.25	$	0.34

Diluted earnings per share
	Continuing operations		$	0.12	$	0.17	$	0.25	$	0.33
	Discontinued operations			–		–		–		–
			$	0.12	$	0.17	$	0.25	$	0.33

Note 16: Dividends

During the three and six months ended May 31, 2016, the Company paid dividends of $0.08 and $0.16 (2015 – $0.08 and $0.35) per share. Total dividends paid, including dividends reinvested, in the three and six months ended May 31, 2016 were $6.3 million and $12.7 million (2015 – $6.6 million and $29.6 million). On June 28, 2016, the Board of Directors of AGF declared a quarterly dividend on both the Class A Voting common shares and Class B Non-Voting shares of the Company of $0.08 per share in respect of the six months ended May 31, 2016, amounting to a total dividend of approximately $6.3 million. These condensed consolidated interim financial statements do not reflect this dividend payable.

Note 17: Related Party Transactions

The Company is controlled by Blake C. Goldring, Chairman and Chief Executive Officer of AGF, through his indirect ownership of all the voting shares of Goldring Capital Corporation, which owns 80% of the Company's Class A Voting common shares. The remaining 20% of the Class A Voting common shares are held by the Vice-Chairman of AGF, who is also a Director.

The remuneration of Directors and other key management personnel of AGF is as follows:



	Three months ended May 31,					Six months ended May 31,
(in thousands of Canadian dollars)			2016		2015			2016		2015

Salaries and other short-term employee benefits		$	1,148	$	1,437		$	2,291	$	2,803
Share-based payments			582		651			1,044		1,039
		$	1,730	$	2,088		$	3,335	$	3,842

Note 18: Fair Value of Financial Instruments

Financial assets are classified as FVTPL, available for sale, or loans and receivables. Financial liabilities are classified as FVTPL, other liabilities, or derivatives used for hedging.

The carrying value of accounts receivable and other assets, accounts payable and accrued liabilities and long-term debt approximate fair value.

The table below analyzes financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1	Quoted prices (unadjusted) in active markets for identical assets and liabilities,

Level 2	Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and

Level 3	Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The following table presents the group's assets and liabilities that are measured at fair value at May 31, 2016:


(in thousands of Canadian dollars)
May 31, 2016			Level 1	Level 2		Level 3				Total

Assets
Financial assets at fair value through profit or loss
	Cash and cash equivalents	$	32,142	$	–		$	–	$	32,142
	AGF mutual funds and other		18,431		–			–		18,431
	Equity securities		536		–			–		536
	Long-term investments		–		–			97,688		97,688
Available for sale
	Equity securities and term deposits		6,184		–			–		6,184
Loans and receivables
	Canadian government debt – Federal		–		310			–		310
Total financial assets		$	57,293	$	310		$	97,688	$	155,291

Liabilities
Financial liabilities at fair value through profit or loss
	Contingent consideration payable	$	–	$	–		$	1,997	$	1,997
Derivatives used for hedging			–		805			–		805
Total financial liabilities		$	–	$	805		$	1,997	$	2,802

The following table presents the group's assets and liabilities that were measured at fair value at November 30, 2015:


(in thousands of Canadian dollars)
November 30, 2015			Level 1	Level 2		Level 3				Total

Assets
Financial assets at fair value through profit or loss
	Cash and cash equivalents	$	48,669	$	–		$	–	$	48,669
	AGF mutual funds and other		17,201		–			–		17,201
	Equity securities		531		–			–		531
	Long-term investments		–		–			140,534		140,534
Available for sale
	Equity securities		5,385		–			–		5,385
Loans and receivables
	Canadian government debt – Federal		–		310			–		310
Total financial assets		$	71,786	$	310		$	140,534	$	212,630

Liabilities
Financial liabilities at fair value through profit or loss
	Contingent consideration payable	$	–	$	–		$	1,990	$	1,990
Derivatives used for hedging			–		1,763			–		1,763
Total financial liabilities		$	–	$	1,763		$	1,990	$	3,753

The fair value of financial instruments traded in active markets is determined using the quoted prices where they represent those at which regularly and recently occurring transactions take place.

Level 1 instruments include listed equity securities on major exchanges, investments in AGF mutual funds, highly liquid temporary deposits with an Irish bank and non-Irish banks in Ireland, as well as Singapore bank term deposits.

Level 2 instruments include derivative instruments with major Canadian chartered banks and Canadian federal government debt. The fair value of derivatives used to manage interest rate exposure on deposits and long-term debt is calculated through discounting future expected cash flows using the BA-based swap curve. Since the BA-based swap curve is an observable input, these financial instruments are considered level 2. Canadian federal government debt is measured at amortized cost and its fair value approximates its carrying value due to its short-term nature.

Level 3 instruments include long-term investments related to the alternative asset management platform and contingent consideration payable. Instruments classified in this category have a parameter input or inputs that are unobservable and that have a more than insignificant impact on either the fair value of the instrument or the profit or loss of the instrument. The fair value of the long-term investments is calculated using the Company's percentage ownership and the fair market value of the investment derived from financial information provided by investees. The fair value of the Company's investment in EIF as at May 31, 2016 has been estimated using the net asset value (NAV) as calculated by the asset manager of the fund, adjusted to reflect the Company's agreement to limit its initial return to a specified maximum percentage on the portion of its interest that it expects to be sold to new investors upon the final close of the fund. The fair value of the Company's investment in the Stream fund is determined using NAV as calculated by the asset manager. If the NAV were to increase or decrease by 10%, the fair value of the Company's long-term investment and pre-tax income would increase or decrease by $2.9 million. Refer to Note 5(c) for additional information.

Contingent consideration payable is determined based on the present value of the expected payment to the sellers of FFCM, if the annualized advisory revenue in 2018 exceeds certain thresholds. Refer to Note 6 for additional information.

The following table presents changes in level 3 instruments for the six months ended May 31, 2016:



(in thousands of Canadian dollars)					Contingent
			Long-term		consideration
			investments		payable

Balance at December 1, 2015		$	140,534	$	1,990
	Purchase of investment		40,646		–
	Return of capital		(79,019)		–
	Fair value adjustment recognized in profit or loss		(4,473)		7
Balance at May 31, 2016		$	97,688	$	1,997

The following table presents changes in level 3 instruments for the six months ended May 31, 2015:


(in thousands of Canadian dollars)			Long-term
			investments

Balance at December 1, 2014		$	19,671
	Purchase of investment		115,269
	Fair value adjustment recognized in profit or loss		1,843
	Reclassification of investment		(63)
Balance at May 31, 2015		$	136,720

There were no transfers into or out of level 1 and level 2 during the six months ended May 31, 2016.

Note 19: Tax Contingencies

The Company has several ongoing disputes with the CRA, of which the final result of the audit and appeals process may vary and may be materially different compared to the estimates and assumptions used by management in determining the Company's consolidated income tax provision and in determining the amounts of its income tax assets and liabilities.

(a) CRA Audit – Transfer Pricing

(b) CRA Audit – Foreign Accrual Property Income

(c) CRA Audit – Acquisition of Tax-related Benefits

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

SOURCE AGF

AGF Management Limited shareholders, analysts and media, please contact: Robert J. Bogart, Executive Vice-President and Chief Financial Officer, 416-865-4264, [email protected]; Adrian Basaraba, Senior Vice-President, Finance, 416-865-4203, [email protected]; Adam Cohen, Director, Finance & Investor Relations, 416-865-4228, [email protected]

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