A Mutual supply Tiger AGF is sing...

A Mutual supply Tiger

AGF is single of the oldest mutual capital management and distribution companies in Canada; its first foundation American Growth Fund, was launched in 1957 Today the company has united of the largest families of mutual stocks (39 funds) on the market (1400 funds) ranging from fixed income stocks to "aggressive" equity funds. With approximately $125 billion in assets beneath management, AGF has about a 5% market share ($260 billion in mutual capital assets) and is the seventh largest store company in Canada. Approximately 95% of returns and earnings are derived from mutual permanent fund activities.

In December 1995 AGF acquired common of its competitors, 20/20 Financial Corporation, for $108 million in cash ($80 million) and shares. As a deduction AGF has one of the in the greatest degree diversified families of funds in Canada-20/20's permanent funds tended to be more aggressive than AGF's. As well, the 20/20 acquisition amount lackinged AGF's distribution channels for its stocks (largely through investment-dealers) with 20/20's distribution network which was based principally upon financial planners.

In addition to its mutual stock business, AGF sees itself as an "integrated, globally focused financial services corporation." The company has: (1) trust company operations in Canada (AGF Trust); (2) permanent fund administration services for third parties (i.e. institutions) in Canada; and, (3) an international investment advisory service for its acknowledge mutual funds and third parties from one side subsidiaries operating in Europe and Asia.

The company's voting universal equity is owned by Mr C Warren Goldring, Chairman and Chief Executive Officer (80%) and Mr W Robert Farquharson, Vice Chairman (20%) Approximately 60% of the non-voting "B" shares ("AGF.B" TSE) are have a title toed by institutional investors.

PROSPECT FOR futurity GROWTH IN SHARE PRICE

Because long-term pullulation in share price is driven by way of growth in cash flow from operations, which is driven by means of growth in revenues, this illustrative contemplation of AGF's investment potential begins with the close attention of AGF's historical and delineate ed revenues. Revenue, cash flow and other data for the now passing fiscal year ending November 30 1997 have been estimated from interim be deriveds

Historical Revenue Growth

As indicated in the accompanying Stock Selection Guide, returns for the entire study period grew at an average annual settle rate of 26%. However, during the last half of the period, rewards grew at about 43% by year. So far this year, rewards have been about 30% higher than during the comparable period in 1996 In keeping with these interim inferences estimated revenues for fiscal 1997 are throwed at approximately 30% more than in 1996

Like greatest in number mutual fund companies, AGF has succeeded in the 1990s as a accrue of: (1) low rates of get back on competing products (e.g. GICs, mortgages); (2) touchs among `baby boomers' about the events to come availability of government pensions; and, (3) increased returns awareness due to heavy consumer advertising by means of the industry and by the banks following their hall into the fund business.

In addition to these fortuitous external circumstances, AGF's attributes receipts growth to: ( 1 ) the quality and diversity of its team of internal and external stock managers and the relative performance of their funds; (2) its distribution relationships with investment dealers and financial planners from first to last Canada; (3) a strong brand identity for many of its funds; (4) a family of capitals diversified enough to satisfy all shadows of investment objectives; and, (5) a high on a level of service to retail clients and sales agents.

AGF exercises 17 staff members ("wholesalers" operating from offices in Halifax, Montreal, Toronto and Vancouver) who market the company's capitals to representatives of the approximately 25000 financial advisors and planners in Canada who attract favor to fund purchases to retail investors. (Advisors and planners receive selling commissions of about 5% onward funds and trailer fees of about 05% by year.)

During the consideration period AGF generally increased the stores available to finance asset product by retaining an increasing percentage of its annual cash flow-approximately 90% for fiscal 1997 (Chart 1) Early in the thought period AGF also increased its reliance in succession debt by using an increasing proportion of sin to finance asset growth (Chart 2); however, since 1993 reliance upon debt has declined to an historically soft level. In large part, the reduc use of trespass (and the creation of unused due capacity) has resulted from the conversion of the company's convertible debentures into equity shares.

Revenue bourgeoning during the study period generally kept pace with asset bourgeoning until the 20/20 acquisition early in fiscal 1996 Since then the efficiency of AGF's assets in generating sales has more than doubled to about $070 of rewards per dollar of assets.

Project income Growth

An estimated $300 billion is generally invested in term deposits and GICs which are rely uponed to mature in the nearest few years. AGF expects its mutual stock marketing activities and distribution channels to capture at least its traditional share of this coin This view is contingent about the continuation of low interest rates and a stock market that does not `crash.'