AGF Management Limited

Blake Goldring - Chairman of the Board and Chief Executive Officer Robert Bogart - Chief Financial Officer, Executive Vice President and Member of Executive Committee Mario Causarano - President of AGF Trust Company and Chief Operating Officer of AGF Trust Company

John Reucassel - BMO Capital Markets Canada Jeff Fenwick - Cormark Securities Inc. Paul Holden - CIBC World Markets Inc.

Geoffrey Kwan - RBC Capital Markets, LLC Scott Chan - Canaccord Genuity Stephen Boland - GMP Securities L.P. John Aiken - Barclays Capital

Thank you, operator. Good morning, everyone.

I'm Bob Bogart, CFO of AGF Management Limited. It's a pleasure to have you join us today for our first quarter results for fiscal year '11.

Please note that the slide supporting today's call and webcast can be found in the Investor Relations section of agf.com. Today, Blake Goldring, Chairman and CEO, and I will discuss AGF's first quarter results.

Also joining us on the call and available to answer questions is Mario Causarano, President and COO of AGF Trust. I'll now turn the call over to Blake.

Thank you, Bob, and welcome to everyone listening to today's call. Since our last update in late January, AGF completed the acquisition of Acuity on February 1, 2011.

The Acuity integration is well on track, and we're confident the acquisition will produce long-term synergies with our existing strong business. The acquisition exemplifies AGF's commitment to diversification while effectively leveraging our core focus as an investment management firm.

For example, we've established ourselves as both a retail and institutional firm, and this acquisition reinforces that strategy. We have good sales momentum, which I'll speak to you in detail in just a moment.

Our strategy is well on track, and sales are improving despite ongoing challenges in the broader marketplace. In fact, our gross retail sales in the past quarter grew 26.5% compared to the same period last year.

We're really optimistic about this trend. There continues to be solid interest in the marketplace for AGF and Acuity products.

While net redemptions remain an issue, they're concentrated in a few mandates that we continue to manage closely. At AGF Trust, while assets are down, we continue to build our strategy programs -- our mortgage programs in both the broker and advisor channel.

And in doing so, the credit quality of our loan book has improved considerably. AGF Trust views the mortgage broker market as an attractive source of high-quality loan originations.

We don't expect significant growth overnight, but we will take a strategic and long-term approach to growing our loan assets in a profitable manner. Slide 5.

Let me turn to assets under management. We are one of the largest independent investment management firms in Canada.

Our assets under management have increased 19.7% to $52.5 billion year-over-year. While the Acuity acquisition helped boost our assets under management, we're confident that we can continue to grow our assets organically across-the-board.

You will notice from this slide that we've had growth across all three client lines: Retail, institutional and high net worth. Speaking of which, let's turn to institutional sales.

I'll begin with the quarter which shows that we are continuing to achieve good momentum in the institutional space. For example, while total institutional net flows were at negative in Q1, we have another $750 million of mandates committed in the pipeline.

We continue to be encouraged by the strength and opportunities in the institutional space. Let's turn our attention to the trend over the last five years.

You'll recall that we spent considerable time building the institutional foundation back in 2006 with the acquisition of Highstreet, which really cemented our foothold in this space. Our acquisition of Acuity continues to reinforce this strength.

2008 was a difficult year for all markets, as we can all remember too well, and we've now seen a rebound over the past three years. We're now at a historical high in institutional assets under management and have surpassed our previous high in 2007.

We've almost doubled our institutional assets under management since the crash of 2008. We're confident we can continue to grow and make inroads in this very important space, both domestically and globally.

Now let's turn our attention to retail. In terms of retail sales, we saw positive trends in gross sales grow over the year period.

Our gross sales growth is actually 26.5% higher in Q1 2011 versus the same period in 2010. Our retail gross sales growth is outpacing the overall market, and we’ve gained gross sales market share based on [indiscernible] (12:46) data.

Again, we're confident that we are on track and our strategy is working. Our comprehensive product shelf, our strong relationships and our Focus Funds approach will all contribute to future growth.

Bob, I'd like to now turn it back you.

Thank you, Blake. On Slide 8, we provided a summary of our consolidated financial results for the first quarter of 2011 compared to 2010.

Please note our first quarter results include only one month of Acuity earnings. As Blake mentioned, we've recognized $5.4 million in acquisition and integration costs during the quarter related to Acuity and a onetime $1 million regulatory levy related to Smith & Williamson.

For the acquisition accounting related to the Acuity transaction, we have adopted CICA 1582, which provides guidance on accounting for business combinations and is aligned with IFRS standards. Adopting this standard implies that all consideration is included and recorded in the financial statements, even contingent consideration, which would, under the previous set of rules, not necessarily be reported.

Additionally, transaction costs are now expensed instead of capitalized under previous accounting rules. Consolidated revenue was up 4.3% due to higher revenue in the Investment Management segment.

Overall, SG&A was up 5%, primarily related to the onetime acquisition and integration costs of $5.4 million related to the Acuity transaction. EBITDA was down 4.6% to $64 million in the first quarter of 2011.

Excluding those onetime costs, adjusted EBITDA increased 4.9% to $70.4 million. Net income for the quarter was down 9.5%, with diluted earnings per share of $0.30 as compared to $0.34 a year ago.

Again, excluding onetime costs, diluted EPS increased to $0.35. Finally, free cash flow decreased 17.6% to $37.5 million, again, as a result of those acquisition-related expenses.

Moving to Slide 9. Let's look at the Investment Management segment.

First quarter revenues in our Investment Management segment were up 6.6% year-over-year to $139.3 million and up 5.2% on a sequential quarter basis. This is directly related to higher AUM levels as a result of the Acuity acquisition and market growth.

SG&A expenses remained relatively flat year-over-year and increased 2.3% on a sequential quarter basis. Compensation-related expenses were higher in the first quarter of 2011 as a result of increased hedge from the Acuity acquisition and higher stock-based compensation.

This was partially offset by fund absorption expenses, which declined $1.4 million compared to 2010. Reported EBITDA of $54.6 million was essentially flat on a year-over-year basis.

Excluding onetime costs, EBITDA increased to $60 million or 10.3%, directly related to higher average AUM levels as a result of favorable equity markets combined with one month of Acuity operations. Overall, our adjusted EBITDA margin increased to 43.1%.

Turning to Slide 10. This slide lets you see our segment performance on a longer trended basis and smoothing out some of the impacts of market volatility.

It shows our Investment Management segment revenue operating expenses and EBITDA as a percentage of average AUM on the current quarter, a trailing 12-month basis and the prior year's quarter. Note the quarters have been annualized, and Q1 '11 excludes the impact of onetime costs.

As AUM has increased, we are experiencing an increase in EBITDA yield. And although we remind ourselves that it is just one quarter, the effect of increase in the AUM base allows for the further realization of scale into the results.

Moving on to Slide 11. Let me take you through the financial impact of the Acuity acquisition.

As Blake mentioned, we completed the acquisition of Acuity on February 1, 2011 and have already seen positive results from the integration. Again, as Blake mentioned, our integration and execution is very much on track and slightly ahead of schedule.

We expect to be fully integrated by the end of November 2011. We had incurred the $5.4 million onetime expense as a result of the acquisition and integration, of which $2 million was related to severance costs.

We estimate that AGF will incur an additional $5 million over the course of 2011 related to systems conversions, fund mergers, product changes and other costs. We view diluted EPS accretion to be neutral to slightly positive in 2011 due to the level of amortization we expect to incur as it relates to fixed life intangible assets acquired.

On an EBITDA per share basis, we expect to see cash accretion beginning in Q2. Moving to Slide 12.

We can see the impact of one month of Acuity on our EBITDA levels. Our Investment Management segment reflects a very positive EBITDA trend on an adjusted basis.

Adjusted EBITDA per share rose to $0.65 from $0.60 a year ago. While we have adjusted the results for the $0.06 of onetime cost due to the integration of Acuity and added in the benefit from one month of Acuity operations which contributed $0.05 per share.

Turning to Slide 13 in the Trust segment. Trust revenue for the first quarter of 2011 was $22.8 million.

That's a decline of 4.6% on a year-over-year basis. That decline is solely attributable to lower average loan balances.

SG&A expenses in the first quarter increased $1.8 million year-over-year due to an increase in seasonal heads for the RSP loan season, and more importantly, as Trust repositions its operations for expected growth in the mortgage broker channel, additional underwriting and operational heads have been added. This was offset by a decline in loan loss provision, which was down 10.3%, reflecting both improved credit standards and economic conditions coming into 2011.

The result in EBITDA decreased 22.5% to $8.6 million. And turning to Slide 14.

Loan assets decreased to $3 billion, but again, the focus has remained on underwriting good quality and profitable loans. We have seen a stable trend in our risk profile with improving capital ratios and a strong liquidity position.

Loan originations were slightly down on the quarter as compared to the same period last year. However, we view this as a transition time for the Trust business, as we begin to execute against our new relationship with a significant mortgage broker that began in mid-January.

Additionally, we're looking to expand into similar relationships in fiscal year '11. This mortgage broker relationship, coupled with our expanding sales force is part of the overall strategy to growth the Trust loan portfolio.

Moving to Slide 15. Trust efficiency ratio in the first quarter was 48.7%, up 39.7% a year ago.

As I highlighted in last quarter's call, we expected this near-term increase in the efficiency ratio, as our operational capability will be built out in advance of our loan growth. We anticipate that the efficiency ratio will begin to trend down over time as loan origination volumes and increased revenue begin to catch up with the human capital investment.

Turning to Slide 16. This reflects our EPS trajectory on an actual and adjusted basis for the last five quarters.

EPS for the first quarter of 2011 on an adjusted basis was $0.35, a 2.9% improvement over 2010. With that, I'll turn the call back over to Blake.

Thank you, Bob. I'd like you to turn your attention to Slide 17, which shows the shareholder value creation and our dividend history.

And I think it's significant because it really demonstrates that our yield today is significantly higher than other large solid financial institutions. Our dividend has had a compound annual growth rate of 19% in the past decade.

Since 2001, we've increased our dividend 9x and have never decreased it. Our dividend payout is sustainable, and we continue to evaluate ways to return value to shareholders.

AGF's an attractive investment to those seeking a high-quality company with a good deal. In closing, I'd like to reiterate that the Acuity deal is an important development for AGF, and we expect to see the benefits going forward.

It’s helped us diversify into new product lines and strengthens us as one of Canada's leading independent investment management firms. We'll continue to enhance our products where warranted and build our existing relationships with clients on both the retail and institutional fronts.

We now have a comprehensive suite of products to address every market cycle and life stage. With those comments, that really concludes our review of our first quarter, and now I’d like to open it up for questions.

I know there’s going to be a lot of discussion with the Acuity acquisition. But my actual line of questioning focuses in on the Trust.

Mario, can you -- in the MD&A, there's discussion with the co-branded mortgage about a distinctive compensation structure, can you give us a little more color around that? And some comfort around the fact that given the competitive nature within the brokerage industry, whether or not this means incremental or higher compensation that you're offering to the distribution channel?

Well, I can answer the last question first, John. And it is -- there are other compensation models out there that are equivalent in terms of overall comp.

What's different about this model is that it is a trailer fee model, and we're not unique in it, but across the whole industry, there are only a few players doing it. And so we think that, that's going to give us some leverage in terms of getting inside of that network.

And they're used to doing it because they've been with another lender and using that program. That's why we came with it because we think this is a good -- it is a good network, it's good, strong brokers within the channel.

They're reorienting their business towards this trailer fee model. And we thought it was a good opportunity for us to build a longer-term relationship with them.

That’s great, Mario. And in relation to the rising capital ratios within the Trust business.

It does appear that the Trust business is very, well I’ll characterize it is over capitalized. And what is the stance, particularly when we look at [indiscernible] (23:57) releasing or relaxing the rules around what they want for capital?

Do you believe that you're truly going to be able to grow into all this capital, or will some of that be actually pushed back up into the parent company?

Well, both of those are options, quite frankly. Because I actually do believe that over time, we will get this -- you get the growth rate up to where we're using significant amounts of capital.

I mean, that's pretty clear to me on a longer-term basis. And Bob talked about this in terms of how we're coming out, and we're very controlled in terms of how we're coming out.

But I can see a time where that's going to take off, and you'll start eating up more and more capital. So we're kind of always looking out on a longer-term time horizon with respect to the capital and how much we will need.

And obviously, looking at how much capital we think is in the organization to manage stress scenarios as well. And that's what the regulator will do.

They will look out and say, “Given what everybody's gone through in this economic cycle, are you allowing for capital buffers that can anticipate that?” As we are changing the mix of our business and the quality of our assets, that should bode well for arriving at a scenario where there's just excess capital there.

And we'll really address that going forward as well in terms of what we might get back in dividends and so forth. So we will look at both of those opportunities.

And both of them are available, quite frankly.

I just had a couple of questions. First off was just, the reference in the presentation about the funds that are net redemptions.

You mentioned that they're being managed closely. Just wanted to get an understanding of what exactly you meant by that?

Is it in the actual investment management aspect of, it or are you doing specific things to try and stem the redemptions in those products?

Geoff, it's Blake here. Certainly, we look at -- in all portfolios, on a quarterly basis we're meeting with managers.

And we look over a cycle, which is in our view, is a four-year period, to take a look and make sure that people are operating within the mandate they've been given. But obviously, they're providing value to our unitholders.

So it's something we're acutely aware of, obviously in any specific portfolios that might be temporarily underperforming. But we take a long-term view on overall performance and have faith in our managers and providing the tools to achieve returns that our unitholders expect.

So I guess, if I can characterize it a little bit more directionally more oversight of those products than for some of the funds that are experiencing positive net sales? Is that a fair way to look at it?

Well, I'd say any time you have underperformance, you're getting a little closer than just sort of oversight. So I can say that unless -- in the Investment Management business, there's nobody that knows better how they're doing on a day-to-day basis than the actual portfolio managers or the teams involved.

So there's a lot of focus. I can just leave it there.

Okay. The other questions I had were for Mario on the Trust side.

The originations, I think, were indicated as being a little bit disappointing relative to expectations. When I look at the balance sheet in the quarter-over-quarter loans outstanding, they continue to come down.

Do you have a timeframe of where you think that might tick up? Is it something where we may see it by the end of the year or is this maybe something we might see sometime in 2012?

No, we would definitely have our sights on 2011, Geoff. And we've got lots of items in the fire here in terms of how they're working.

I mean, we're just careful about how we're coming out, who we're working with, how we're managing the quality. We're doing some great work with in the advisor channel in terms of the work we're doing there in adding additional value to our overall value proposition from AGF.

So I'm positive in terms of getting back to growth. The timing will stretch out a little, but it will happen before 2012.

Okay. And then the other two questions I had within the Trust were, the SG&A ramp-up, is that going to be happening for another quarter or two?

And just trying to get a sense on the timing around that? And then the last question I had was, given you're slightly expanding in terms of the product and the quality on the mortgage side of the business, are there opportunities for you to try and target more brokers that you might not have dealt with, say, two or three years ago?

Well, so let me answer the SG&A first. The SG&A is up, and that's a -- we have to ramp up to get into the RSP season.

The RSP season, and unfortunately for us, was a little bit softer than we would have liked. I think that’s a function of what's happening out in the marketplace.

And we've gone out to see what competitors have done, it's been a bit soft for them, for those who are doing loans as well. I think with everything that's happening from a headline perspective in terms of interest rates and debt and borrowing and so forth, there's some dampening of what's happening out there.

But it's a short period of time. And so we obviously had to ramp up in order to get to the volumes that we were forecasting or anticipating.

And so those of which we're quickly taking down going into the next quarter. And so there was some onetime kind of ramp-up costs that were built into that.

With respect to the products and the brokers, we're being clear in terms of our approach to distribution. We are not going to take a shotgun approach.

What we really want to do is take a strategic account management approach to getting back into the channel. That's why we chose VERICO, the group that we're with initially.

We've got others in behind there that we've already had discussions with. And we will layer them in based on managing the volume, so that we can deliver on our value proposition of service.

So we've got guys in behind that. And that will start to expand the number, I think at least the bigger brokerage distribution houses that we're dealing with that you may be interested in.

So you're probably targeting Canada for sure so super brokers in the industry?

Yes. I mean, we're being -- we will look at all the super brokers, and we've had conversations with them in terms of who we would take on, who we might not.

We're also managing the mix of our business in terms of prime versus old prime, which distribution networks are doing it. And so we will choose them based on how we want the mix to come in as well as opposed to kind of going to all the big super brokers.

And I think John mentioned it in terms of competing against everyone else in the marketplace. That's not our strategy.

Our strategy is to find ways that we can differentiate ourselves. And that has a lot to do with who we're picking in terms of going into.

I was hoping you could provide a little more color on the integration with Acuity, i.e. what's been done to date and maybe what needs to be done over the next couple quarters?

Sure, Paul. Well certainly what’s been done to date is a rationalization of the product lineup.

And we'll be going public with some of the product changes in a couple of weeks. Also, what we've done to date is to assess the level of resourcing that we brought over on day one with respect to the Acuity acquisition.

And so, there has been some rightsizing with respect to the organization. Going forward, we've got several key conversions, fund accounting conversions, platform conversions moving from the existing Acuity platforms to the AGF platforms to wring out more of the operational efficiencies and synergies.

Okay, and how about on the wholesaling side? Any changes complete?

Those changes are complete. And we've actually ended up expanding our wholesaling force by virtue of the acquisition.

We didn't -- It wasn't 100% absorption, but we've increased our coverage throughout Canada with the acquisition.

And let me say too, Paul, that we've undertaken detailed training of the Acuity product with AGF wholesalers, and vice versa. And in fact, start of this week, we completed the pooled fund training, so we're looking forward to hitting the road on a major concerted roadshow with Acuity focus in May.

So that will be very exciting. And of course as Bob just mentioned, as we complete the overall integration by mid-August, we'll have transferability.

And I think that will be a huge win for us as we complete the integration.

Okay. Yes, that's an important part of the integration having the AGF wholesalers trained and ready to sell the Acuity funds.

Definitely.

Okay, and then with respect to the institutional pipeline, that $750 million, not sure if you stated this, but when do you expect that to flow through into AUM?

We didn't state it, but we would imagine that a large portion of that $750 million would come in to Q2, Paul.

Okay, so that’s very short term. And then with respect to longer-term pipeline, I mean, can we take that as an indication?

I know it's a big number, but an indication that the pipeline looks more robust as we look longer term, and maybe you can speak to sort of the specific mandates that that $750 million relates to as well?

Sure. The second question first.

As we've stated in previous calls, the three products that we see a lot of traction in are global resources, global core and the emerging market mandate. So those continue to be driving a lot of the activity.

On a longer-term pipeline, we see probably slightly reduced activity from maybe six months ago, but still very -- we're very happy and pleased with the level of activity in the institutional space. So this order of magnitude, it may be slightly down from six months ago.

Just wanted to follow up with some questions on the expense side. It looks like some pretty good cost containment in the quarter within the Investment Management Operations considering you were layering in the new Acuity business.

And in particular, you mentioned a actual decrease year-over-year in the other expenses of almost $2 million related to, I guess, IT and some other fund-related costs. So what's kind of the outlook from here then, in terms of the SG&A line?

And what should we be thinking with respect to layering in Acuity?

Well, Jeff, I think we should expect kind of the run rate that you're seeing for the, let's call it the AGF proper business. We still haven't extracted all the synergies with respect to the Acuity business.

But -- and I wouldn't anticipate significant increases in the SG&A line from where we are today on the core business.

Okay. And then maybe just talking a little bit about your balance sheet now.

You obviously, you layered in some debt here to complete your transaction with Acuity. What's you comfort level with where you're sitting in terms of debt to EBITDA?

Do you have a target there? Would you like to put some of your excess cash, maybe from the Trust or just from free cash flow to pay that down?

Or how are you feeling about that?

I think as you look at the comparables of the competitive space, we're both on a total debt to capital as well as a coverage ratio we're well within and below those comparables. So we're comfortable, quite frankly, at where we're at.

And the question as to what we do with excess cash. I mean, Mario is working hard to think through a dividend policy, and we'll redeploy that either through a pay down of debt, buyback of shares, or as we've stated in the past, probably our short-term focus will be on increasing the dividend.

But at this point, we haven't made any decisions on that.

Okay. And then just one small item there, you mentioned this onetime levy with Smith & Williamson.

What was that related to? That's not an annual fee obviously.

Is there some sort of regulatory change over...

Yes, it was a regulatory charge by the FSA with respect to, I think, the official name with some financial services compensation scheme. So it's a onetime, based on our conversations with the Smith & Williamson, and the understanding of the charge it's a one-timer.

And what's the status of that business today now in terms of it’s come through to the cycle? At one point there were hopes that you could IPO this and get a return out of it from that standpoint?

Where do you sit in terms of that kind of relationship with them?

Yes, Jeff. Blake.

It's one where we have a significant minority share in the business. And for quite a period of time, doing something interesting like going in public markets where, it was just out of the question, it's something we look at, at a board [ph] in the U.K.

And frankly, it still on the table. Conditions haven't quite -- I mean, they’re still not what they are on this side of the pond.

Things are still tough over there, and it’s something which we assess on a regular basis.

Just a couple of clarifications on the Acuity deal, Blake. Are AGF wholesalers now selling Acuity Funds?

They are. Yes.

So that started in February but probably not in time for the RSP season?

That's correct, and the deal closed on Feb. 1, John.

So by the time people were trained, let's say, just this last week, completed on the pooled [ph] fund training, which we see a huge potential for that.

Okay, I just wanted to make sure. And then on the deal, Bob, again, I may have misheard, but did you say you expect it to be neutral to earnings this year?

Because I thought in the Acuity call, you mentioned it back late last year, you said it should be accretive to year one.

It would be -- the word, the term I used was cash accretive, John. Because we didn't have any insight in terms of the purchase price accounting at that point, and so that has been completed.

And so we've got sizable maybe $70 million or so that's been allocated to determinable life intangibles. So that will flow through the P&L in form of amortization.

I see. And so what do you have -- so what your cash accretion, two- or three-year -- are you willing to talk about a percentage?

No. We're not going to -- I think based on what you see in the conference call slides, is a good indication for fiscal '11.

We won't get into fiscal year '12 estimates at this point. We're really too focused on the significant integration effort that we still have ahead of us.

Okay. And then last question is on the institutional mandate.

Are these mainly domestic or foreign of the $750 million, again, I apologize if I missed that, but are they domestic or foreign?

No, we didn't state that. We had -- the number that Blake showed on the slide, this $58 million net.

There is obviously gross sales associated with that. Those were primarily domestic on the Canadian side.

The $750 million is primarily Europe and Americas.

Okay. And we should view that $750 million as a gross number, correct?

That’s correct. We don’t plan for failure.

I guess if you could just talk a little bit about we saw an increase in gross sales and redemptions. I'm wondering if you can -- because we're not getting that data anymore in terms of what funds or equity bond balance in terms of what trends you're seeing on the gross sales side as well as the redemption side?

Well, I can say that on the -- top performers continue to be emerging markets that we have some great -- we're seeing some signs on the American growth, precious metals, global equity dividend, EM continued to be very strong. On the Acuity side it’s had a number of very good performers, particularly Acuity diversified income fund.

It's a very, very solid high-income fund, remained very good. Some of our international portfolios because I think markets have been impacted by things like what we're seeing in Middle East right now, and of course, the earthquake more recently has created some uncertainty.

And I think that's impacted sort of people looking more for international mandates. The international, I just want to point out that people who look at our international fund, which has had some underperformance.

It's added in two key mandates between 500 and 700 basis points, two respective mandates since the start of the year. So things are starting to turn around there.

A little bit of the under waiting [ph] in the small cap sector and resources. I heard some of our large-cap domestic funds, there again, as market sort of looks to more quality.

We're seeing a steady improvement there. So our overall suite of products, Steve, have started to improve.

And I think the trend is right, and we're very comfortable. We’re on track from a performance perspective.

And just to confirm, there is one month of Acuity sales in both those numbers, right?

That's correct.

Okay. And are you willing to split that out, or is that going to be a consolidated number going forward?

The gross sales for Acuity were roughly $38 million for the one month.

The second question, just on the integration, are the costs over $5 million this quarter, another $5 million to come, is that in-line with your expectations in terms of integration cost?

Yes, it actually is somewhat lower than what we had modeled as part of the acquisition.

And is that next $5 million, is that pretty much what you expect to see for in total?

Yes. That would capture the remaining conversion and any other trend, kind of transition, transaction-related cost.

And just lastly, on the Trust. I guess, I just got to ask a question on the Trust.

There was a -- you did talk a little bit about the delay in the growth, and there was -- it's a subtle change in your MD&A where you said in Q4 that you're looking at net loan growth in 2011. And now it's been changed by the end of 2011.

So obviously, there is a delay. I guess, how do we comfort that, that's not going to be pushed out another quarter or two after that?

Well, I think on the last call, Steve, I said we are going it in 2011, and it wasn't linear. So we launched with VERICO, as Bob said, mid-January.

And quite frankly, it's a soft launch. We're getting the broker-dealers in places, there’s about 150, about 125 of them.

We’ve got 75 of them in place now willing to work with us. We're on boarding their agents.

So we're only about six weeks into this program. So I'm comfortable with the fact that we're going to get now down to the next level in terms of getting lower to their people.

So in our other programs, we've got line of sight in terms of the things that are working and not working in the advisor model that we have. We're clear in terms of what we need to do, and as I said earlier, we've got line of sight in terms of who are the next distributors that we're going to work with.

So 2011 is when I said we would turn it, and it's not linear, but I'm happy with kind of the progress that we're making and the line of sight we have in terms of getting back to growing the balance sheet.

Great. And just one request of that we've -- I guess, I’ve asked on several calls without your competitors, just about perhaps getting a little disclosure on gross sales and redemptions even by asset class because it does impact the margin that we put on the margin going forward.

So if you could consider that, just to provide [ph] that we're not seeing all your gross sales going into money market funds, that would be helpful.

That’s a big seller here, Steve.

Steve, we'll take that into consideration.

Just a quick question on the institutional side. From what you reported this quarter, and adding the $3.8 billion of Acuity AUM, if I kind of back out the positive markets in the quarter of about 5%, is it true, are they lost, or there's a net reduction of about over $1 billion on the institutional side in the quarter?

Or is that -- or is my math kind of wrong there?

Yes, that math is wrong. I think if you looked at the slide that Blake spoke to, that tells you it's pretty transparent there in terms of what the net sales were or the net outflows in that case.

It's roughly $230 million, Scott.

Okay, perfect. Just a follow-up question on the wholesaling side.

Just on the retail side, you mentioned that the AGF wholesalers are learning the Acuity product. The Acuity wholesalers that you kept on board, are they just focusing on just the Acuity product?

Are they learning the AGF product as well too? And you're just going to have I guess more wholesalers per region and better coverage, is that the strategy there?

Yes. So they -- I mean everybody's going to be selling everybody's -- we're one family really.

So the key is to make sure everybody can speak about new products that are on their shelves. So, yes, it just means better coverage and more people talking about the products.

Okay. Sorry, just one last question.

I might have missed it. But you talked about, I guess, with the retail products, you said you might press release in a couple weeks.

But I was wondering if you might give us some color just in terms of fund mergers, perhaps collapsing some AGF and probably more Acuity products with the lower AUM. And lastly, do you think you're going to perhaps assign more AUM to Acuity PMs or vice versa on the AGF side when this whole thing plays out?

Scott, we'll just make you wait for that in anticipation for that press release.

Thank you, operator. Thank you very much for joining us today on the call.

Our next earnings call will take place on June 22, when we review our second quarter results for fiscal year '11. Details of the call will be posted on our website.

Finally, an archive of the audio webcast of today's call with supporting materials will be available in the Investor Relations section of our website as well. That concludes the call.

Good day, everyone.