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AGF Management Limited Reports Third Quarter 2020 Financial Results

Globe Newswire - Wed Sep 23, 7:00AM CDT

TORONTO, Sept. 23, 2020 (GLOBE NEWSWIRE) --

- Closed Smith & Williamson merger.

- Reported adjusted diluted EPS of $0.19 for the third quarter of 2020.

- Announces intention to launch a substantial issuer bid.

- Private alternative AUM increased 14% to $2.8 billion. Establishes new advisory committee for its alternatives business.

AGF Management Limited (AGF or the Company) (TSX:AGF-B.TO) today announced financial results for the third quarter ended August 31, 2020.

AGF reported total assets under management (AUM) of $37.0 billion compared to $37.4 billion in the same period in 2019. Average daily mutual fund AUM remained flat at $18.9 billion compared to the same period in 2019. Ending mutual fund AUM was $19.2 billion. AUM related to AGF's private alternatives increased 14% to $2.8 billion compared to $2.4 billion in the same period of 2019.

Equity markets performed strongly in the third quarter with many regions recovering losses experienced during the market downturn in spite of high levels of volatility from the continued impacts of the COVID-19 pandemic.

In this uncertain environment AGF's mutual funds held up well against the industry, reporting net redemptions of $22.0 million compared to net redemptions of $103.0 million in Q3 2019. Excluding net flows from institutional clients invested in mutual funds, net redemptions were $4.0 million for the quarter compared to $103.0 million in the comparative period of 2019.

"In the current environment we have been able to maintain our business trajectory in the retail space and close the Smith & Williamson merger providing us the ability to redeploy capital in a number of ways to ensure our resources remain focused against our stated strategic goals while delivering continued value to our shareholders," said Kevin McCreadie, Chief Executive Officer and Chief Investment Officer, AGF. "We will be taking a three-pronged balanced approach to use our capital to return value to our shareholders through funding share buybacks, paying down our debt, and seeding continued areas of growth, including private alternatives."

The Board has authorized AGF to use up to $40 million of the cash received as a result of the merger between Tilney and Smith & Williamson in order to return capital to its shareholders through a substantial issuer bid made to all holders of AGF's Class B non-voting shares (the "Offer"). The Offer may be at a premium to the then-current market price of the Company's Class B non-voting shares. Holders of the Company's Class A voting shares and insiders of AGF are not expected to participate in the Offer. Subject to market and other conditions, AGF anticipates that the terms of the Offer will be finalized later this month, with the Offer expected to be completed by the end of November 2020.a^

Focused on driving growth in its key strategic pillars, AGF has established a new advisory committee for its alternatives business, the AGF Alternatives Advisory Committee (Committee), comprised of individuals who have made a significant impact in an investment and/or leadership role in organizations noteworthy for their success in the alternatives sector. The Committee will provide strategic insight and advice to the Executive Management Team of AGF. Ron Mock, former President and CEO at the Ontario Teachers' Pension Plan, and Michael Latimer, former President and CEO of OMERS, have joined the newly established Committee.

"Now more than ever we have seen the value of alternatives as we navigate these uncertain times reaffirming this space as integral to AGF's growth strategy, delivering value for our shareholders while providing our clients access to the uncorrelated asset classes they are seeking," added McCreadie. "To have these two tenured industry leaders with substantial knowledge and experience at the table with us will be invaluable as we look to grow our alternatives capabilities and partnerships, including our recently announced expansion with SAF Group."

Business Highlights:

- On September 1, the merger between Tilney and Smith & Williamson to create one of the U.K.'s leading integrated wealth management and professional services groups closed. As a result, AGF received total cash of �177 million (C$296 million), excluding tax and one-time expenses and subject to closing adjustments.

- AGF has entered into a definitive option agreement with the SAF Group which grants AGF the right to acquire an indirect controlling interest in the management fee partnerships of select SAF Group (SAF) funds exercisable at any time in a 12 month period, in addition to any new private credit fund AGF and SAF bring to market together. Additionally, AGF announced that the General Partners will commit $15 million in capital to a new private credit fund the firms expect to bring to market together later this year.

- AGF and WaveFront Global Asset Management Corporation announced on September 21st the launch of AGFWave Asset Management Inc. (AGFWave), a new joint venture for providing asset management services and products in China and South Korea.

- AGF reinforced its commitment to furthering responsible and sustainable investing practices across the organization with new dedicated investment management hires and a new industry membership focused on enhancing sustainability research.

- AGF is a signatory to the United Nations supported Principles for Responsible Investment (PRI) as a sustaining member of the Responsible Investment Association. In *PRI's 2020 Assessment Report, AGF maintained its overall "Strategy and Governance" score of 'A+', and its overall score of 'A' under "Listed Equity - Incorporation". In 2020, AGF also improved to an overall score of 'A' for "Listed Equity - Active Ownership" and "Fixed Income - Corporate Non-Financial". Overall, AGF either maintained or exceeded the median score in all six modules.

- AGF filed prospectuses with the Canadian securities regulators for the launch of two ETFs (AGF Global Sustainable Growth Equity ETF and AGF Global Opportunities Bond ETF) and two mutual funds (AGFiQ Global Balanced ETF Portfolio Fund and AGFiQ Global Income ETF Portfolio Fund) to offer clients choice and expand its distribution reach through a variety of investment vehicles.

"During the quarter and throughout the pandemic we have been focused on delivering for our clients and strengthening relationships with our partners," said Judy Goldring, President and Head of Global Distribution, AGF. "This will keep us top of mind over the long-term and has led to strong results, increased engagement and a growing interest in many of our top performing global and liquid alternatives strategies."

For further information on AGF's pandemic response plan statement visit AGF.com.

Financial Highlights:

- Income for the three months ended August 31, 2020 was $138.7 million, compared to $107.4 million in the prior year and $89.0 million recorded in the three months ended May 31, 2020.

- Income in the quarter includes $41.3 million in dividend income related to Smith & Williamson, comprised of an interim dividend of $8.8 million received in June and a special distribution of $32.5 million received September 2, 2020.

- Adjusted EBITDA before commissions for the three months ended August 31, 2020 was $30.1 million compared to $30.2 million in the three months ended August 31, 2019 and $21.2 million in the three months ended May 31, 2020.

- For the three months ended August 31, 2020, AGF reported adjusted net income of $14.8 million ($0.19 per diluted share) compared to adjusted net income of $14.6 million ($0.18 per diluted share) in the corresponding period in 2019 and net income of $5.3 million ($0.07 per diluted share) in the three months ended May 31, 2020.

- Upon final close of the S&WHL transaction, the Company received total cash of �177 million (C$296 million), excluding tax and one-time expenses and subject to closing adjustments. On September 9, 2020, AGF received cash proceeds of �148.8 million (C$250.4 million), resulting in a gain on the sale, after tax and one-time expenses, of approximately $96 million. With the transaction now complete, AGF possesses no financial interest in the merged group.

- On September 14, 2020, AGF used a portion of the proceeds from the sale of Smith & Williamson to pay down its credit facility in full.

(from continuing operations)                    Three months ended                                                                                                                                                      Nine months ended
                               August 31,                           May 31,                              August 31,                           August 31,                           August 31,
(in millions of dollars, except per share data)   2020                                 2020                                 2019                                 2020                                 2019
                                                                                                        
Income                                                                                                                     
Management, advisory, administration fees                                                                                  
and deferred sales charges                      $                    94.9                               $                    88.8                               $                    97.3                               $                    283.2                              $                    290.9
Share of profit of joint ventures                 0.6                                  0.6                                  0.1                                  1.3                                  0.2
Share of profit of associate (S&WHL)               -    -   5.8                                   -   16.8
Dividend income, net of currency                                                                                           
hedge (S&WHL)                                     41.3                                  -    -   45.8                                  -
Fair value adjustments and other income (loss)    1.9                                  (0.4)                                4.2                                  4.3                                  14.3
Total Income                                      138.7                                89.0                                 107.4                                334.6                                322.2
                                                                                                        
Selling, general and administrative               46.1                                 40.2                                 47.3                                 131.6                                143.9
                                                                                                        
EBITDA before commissions1                        62.6                                 21.2                                 29.0                                 114.1                                71.2
Adjusted EBITDA before commissions1               30.1                                 21.2                                 30.2                                 81.6                                 89.1
                                                                                                        
Net income                                        47.3                                 5.3                                  14.4                                 63.5                                 25.7
Adjusted net income1                              14.8                                 5.3                                  14.6                                 31.0                                 37.4
                                                                                                        
Diluted earnings per share                        0.60                                 0.07                                 0.18                                 0.80                                 0.32
                                                                                                        
Adjusted diluted earnings per share1              0.19                                 0.07                                 0.18                                 0.39                                 0.47
                                                                                                        
Free cash flow1                                   15.5                                 6.1                                  9.7                                  36.1                                 34.4
Dividends per share                               0.08                                 0.08                                 0.08                                 0.24                                 0.24
Long-term debt                                    194.3                                199.9                                158.9                                194.3                                158.9
(end of period)                                  Three months ended
                                August 31,             May 31,                February 29,           November 30,           August 31,
(in millions of dollars)                           2020                   2020                   2020                   2019                   2019
                                                 
Mutual fund assets under management (AUM)2       $                    19,232               $                    18,259               $                    18,492               $                    19,346               $                    18,839
Institutional, sub-advisory and ETF accounts AUM   9,252                  9,591                  10,313                 10,755                 10,391
Private client AUM                                 5,773                  5,624                  5,905                  6,100                  5,778
Private alternatives AUM3                          2,755                  2,862                  2,716                  2,580                  2,413
Total AUM, including private alternatives AUM      37,012                 36,336                 37,426                 38,781                 37,421
                                                 
Net mutual fund redemptions2                       (22)                   (93)                   (344)                  (181)                  (103)
Average daily mutual fund AUM2                     18,879                 17,386                 19,462                 19,015                 18,915
1 EBITDA before commissions (earnings before interest, taxes, depreciation, amortization and deferred selling commissions), adjusted EBITDA before commissions, adjusted net income, adjusted diluted earnings per share and Free Cash Flow are not standardized measures prescribed by IFRS. The Company utilizes non-IFRS measures to assess our overall performance and facilitate a comparison of quarterly and full-year results from period to period. They allow us to assess our investment management business without the impact of non-operational items. These non-IFRS measures may not be comparable with similar measures presented by other companies. These non-IFRS measures and reconciliations to IFRS, where necessary, are included in the Management's Discussion and Analysis available at www.agf.com.
2 Mutual fund AUM includes retail AUM, pooled fund AUM and institutional client AUM invested in customized series offered within mutual funds.
3 Represents fee-earning committed and/or invested capital from AGF and external investors held through joint ventures. AGF's portion of this commitment is $207.4 million, of which $146.1 million has been funded as at August 31, 2020.

For further information and detailed financial statements for the third quarter ended August 31, 2020, including Management's Discussion and Analysis, which contains discussions of non-IFRS measures, please refer to AGF's website at www.agf.com under 'About AGF' and 'Investor Relations' and at www.sedar.com.

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 https://edge.media-server.com/mmc/p/dfgu2kmg. Alternatively, the call can be accessed toll-free in North America by dialing 1 (800) 708-4540 (Passcode #: 49913104).

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.

a^This press release is for informational purposes only and does not constitute an offer to buy or a solicitation of an offer to sell AGF's Class B non-voting shares. The substantial issuer bid referred to in this press release has not yet commenced. The solicitation and offer to buy the Class B non-voting shares will only be made pursuant to a separate issuer bid circular, which will contain full details of the substantial issuer bid and will be filed with the securities regulatory authorities and mailed to AGF's shareholders.

*The PRI works with its international network of signatories to put the six Principles for Responsible Investment into practice. Its goals are to understand the investment implications of environmental, social and governance issues and to support signatories in integrating these issues into investment and ownership decisions. The Assessment Report is designed to provide feedback to the signatories to support them in their ongoing learning and development in this regard. More information about PRI and its assessment reports can be found on the following website: https://www.unpri.org/reporting. To view AGF's PRI signatory page, please click here.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF's suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

AGF has investment operations and client servicing teams on the ground in North America, Europe and Asia. With $37 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.

AGF Management Limited shareholders, analysts and media, please contact:

Adrian Basaraba

Senior Vice-President and Chief Financial Officer

416-865-4203, InvestorRelations@agf.com

Baoqin Guo

Vice-President, Finance

416-865-4228, InvestorRelations@agf.com

Caution Regarding Forward-Looking Statements

This press release includes forward-looking statements about the Company, including its business operations, strategy and expected financial performance and condition and its intention to launch a substantial issuer bid. 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,' 'estimates,' '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, revenues, earnings or growth rates), ongoing business strategies or prospects, fund performance, 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, client-driven asset allocation decisions, 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 general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, business competition, taxation, changes in government regulations, unexpected judicial or regulatory proceedings, technological changes, cybersecurity, the possible effects of war or terrorist activities, outbreaks of disease or illness that affect local, national or international economies (such as COVID-19), natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply or other catastrophic events, and our ability to complete strategic transactions and integrate acquisitions, and attract and retain key personnel. 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 2019 Annual MD&A.

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