AGF Management Limited

Robert Bogart – Executive Vice-President and Chief Financial Officer Blake Goldring – Chairman and Chief Executive Officer Kevin McCreadie – President and Chief Investment Officer Greg Smith – President and Chief Executive Officer, InstarAGF

Gary Ho – Desjardins Capital Graham Ryding – TD Securities Geoff Kwan – RBC Capital Markets Tom MacKinnon – BMO Capital Paul Holden – CIBC Scott Chan – Canaccord

Thank you, operator. Good morning everyone.

I'm Bob Bogart, CFO of AGF Management Limited. Thank you for joining us today for a discussion of our fourth quarter and 2014 financial results.

Please note that the slides supporting today's call and webcast can be found in the Investor Relations section of agf.com. Today, we’ll discuss our fourth quarter and fiscal 2014 financial results.

Joining me will be Blake Goldring, Chairman and CEO; and Kevin McCreadie, President and Chief Investment Officer. Also on the call today, we would like to welcome Greg Smith, President and CEO of InstarAGF.

Greg is here to provide some color on the announcement earlier this week, regarding our investment in the Billy Bishop terminal through Nieuport Aviation and provide an update on our alternative asset management platform. Turning to Slide 4, I’ll provide the agenda for today's call and we’ll discuss the highlights of the fourth quarter, provide a business update on the key segments of our business including a brief discussion regarding CRM2 and the aforementioned alternatives platform.

We’ll review the financial results, discuss our capital and liquidity position, and finally close out outlining our focus for 2015. And after the prepared remarks, we will be happy to take questions.

With that, I’ll turn the call over to Blake.

Thank you Bob and thank you everyone for joining us on today's earnings call. Today, we’re reviewing our fourth quarter and our 2014 fiscal results.

Reflecting on 2014 we executed on many of our stated goals set out at the beginning of the year. Specifically, we successfully brought a new leadership, welcoming our President and Chief Investment Officer, Kevin McCreadie.

The progress that Kevin is making is key to AGF to bring consistent superior investment performance. We launched our user’s platform, which are pooled funds marketable in Europe and in Asia with over $700 million of new client assets under management.

We will grow the users further by expanding by platform in 2015. We earned four new buy ratings from tier 1 consultants for our global products in 2014.

Coming into the year, we do not have any such ratings, so this is a significant accomplishment and key to winning new institutional business. Our retail net fund redemptions improved by nearly 20% in 2014 and this trend of improvement continues into fiscal 2015.

For the current quarter, our dividend is $0.27 per share. In December, we adjusted our future quarterly dividend to $0.08 per share to bring our yield in line with our competitors.

As part of that change, we have freed up the capital for growth plans. Yesterday, we announced InstarAGF’s investment in Nieuport Aviation, the terminal at Billy Bishop Airport.

InstarAGF acting as a lead along with impressive consortium prevailed in a highly competitive process. This is a marquee asset that, as a cornerstone investment will bode extremely well for future capital rising.

Greg, will address this more specifically in a moment. We’ll also provide updates on our retail and institutional businesses.

Turning to Slide 6, we will start with retail. Over the course of our fiscal year, markets were strong overall led by the U.S.

where growth in a favorable labor market improves steadily along with the rising U.S. dollar.

European markets underperformed as a region struggled with deflation concerns, but the recent ECB quantitative easing announcement may provide needed stimulusto get equity markets moving in the right direction. In Canada, markets were strong for much of the year.

Recently though Canadian equities fell along with the price of oil. And the recent rate cut by the Bank of Canada has also weighed on the Canadian dollar.

The Canadian mutual fund industry experienced a strong 2014 with assets under management and net sales higher on a year-over-year basis. December industry long-term fund net sales were strong at $2 billion albeit lower than the same month last year.

In December, balance funds continue to dominate of the expensive equity funds, which fell into net redemptions. AGF’s December net redemptions improved over the prior year on the strength of solution oriented products that fit well with the current environment.

Including December, AGF’s mutual fund net outflows have improved for 23 consecutive months, when compared to the same month in the previous year. In Q4, mutual fund net redemptions were 34% lower than the same quarter last year reflecting this continuing trend.

Addressing the redemption issue is primary. We’re now looking to increase the level of gross sales.

Gross sales were up 12% in Q4 2014 over the same quarter last year. To continue this trend, AGF has three strategic priorities in our retail business.

One, enhance the firm’s overall investment performance. Two, work closely with strategic business partners to facilitate distribution.

And three, provide innovative hit product and pricing solutions around specific needs. Under Kevin’s leadership, we’re mid-phased in establishing the required processes and risk controls to enhance investment performance.

Kevin will provide an update on his progress in just a moment. We continue to be encouraged by the engagement of our strategic partners and have secured $300 million of new mandates with strategic retail partners over the last four quarters.

Our distribution partners increasingly value AGF’s investment capabilities, our independence, and our brands. We expect to make more progress on this front in fiscal year 2015.

Product innovation has been a positive development for us. Since 2012, we have launched a number of new funds that have addressed specific needs and raised over $1.3 billion in new assets.

Our team is on the road right now promoting our recently launched AGF Global Convertible Bond Fund, which is designed to help our clients to diversify their portfolios in an uncertain rate environment. Turning to Slide 7, we’ve also added design features to our key products to help facilitate advisors move toward E-based platforms and to address the needs of high net worth investors.

During the year, we selectively lowered pricing on our fee-based series, which does not pay a trailing commission, but rather allows advisors to deal with the service fee separately. We’re also actively marketing AGF Gold Label, which is targeted at affluent investors and has tiered management fees and a flexible trailer.

These are examples of products that provide choice to Canadians in terms of how they work with their advisor. Regulators in Canada are reviewing the advisor client relationship under a broad set of reforms often referred to as CRM2.

CRM2 requires disclosure fees paid to advisors in addition to account level investment performance. It will be fully implemented by July 2016.

As a firm AGF fully supports CRM2 and we believe disclosure and transparency are good things for clients, distributors and manufacturers alike. There has been a brouhaha around the possibility of disembedding trailers from mutual fund fees.

While, the discourse has managed to attract the attention of pundits, the fact is that disembedding trailers were potentially disruptive was nearly one of many items mentioned in a discussion paper on mutual fund fees. In Canada, we have had the benefit of observing changes made in jurisdictions such as the U.K.

and Australia. In July, preliminary findings were released from the huge report, which focuses on the advice gap created by retail distribution review, RDR, which was a review of a wealth industry in the United Kingdom that ended up banning embedded commissions.

The results are startling. Three and a half million clients lost access to an advisor, another 3 million clients were attached to an advisor that could no longer serve them and banks also reduce their advisor network leading to a potential further 6 million clients losing access to advice.

That’s a potential of 12.5 million clients had lost access to advice, fully 20% of the entire UK population. Fundamentally, advice is good for net investors.

Any regulatory changes which directly or indirectly cause a reduction in the level of advice and reduce choice for the investment public is simply not good public policy. We have been advocating for financial literacy and have been working with advisors to help and prepare for regulatory change and to assist them in explaining their value - to investors.

This value add has been confirmed in study after study. For example, CIRANO the highly respected research center release a report on the value of advice that showed that after controlling for 50 different factors having advisor for 15 years or more decreased household assets by 2.73 times compared to those households without the financial advisor.

Advisors serve a social purpose. They help to educate Canadians of both savings and investments and serve as a coach to help families to meet their financial goals.

We all benefit when families can afford to educate their children and support themselves in retirement. That said in the end, we have to make sure Canadians are receiving good advice and products that are best suited for their particular situation, which is why as set forth in a CFA discussion paper there is interest on reviewing important issues such as conflict of interest and fiduciary standards.

To date there has been little coverage about this paper or its potential implications. Currently, Canadian legislation only imposes a duty to these deals fairly honestly in a good phase.

In other markets like U.S., advisors are held to a fiduciary standard, which is our higher bar. Kevin came to us recently from the United States and he has direct experience with this.

Kevin, could I ask you to please perhaps say a few words about your experience and how this has played out in the United States.

Sure, Blake. Yes, in the States, there is definitely more awareness regarding conflicts of interest, which leads the debate about open architecture.

This has resulted in law suites, corporate transactions where banks have sold off their asset management arms to facilitate in more open platform. I don’t want to talk too much about the firms involved but the law suites have highlighted the conflicts of interest where firms recommend products based on their own profit instead of client suitability.

In terms of result of these conflicts via corporate transaction are just a couple of examples. You probably all remember 2005 Citi exited the money management business by swapping assets of Legg Mason separate itself from its distribution and by transferring it to Citi.

Similarly in 2012, Fifth Third sold its mutual funds to Touchstone at the time one of the key rationales for the deal was for to create an open architecture platform that offer greater choice. In Canada, it feels that the way it was over a decade to go in the U.S.

So I think the debate here could naturally lead to questions about the fundamentals of distribution in this country, which are increasingly closed in the AGM, particularly at a time - the microscope it is fare to clients and regulators to ask why in Canada in contrast to the rest of the world, there are increasingly less independent industrial managers. On a global basis, the trend has gone the other way.

A decade ago, only 20% of the top 20 global asset mangers were independent. Today almost half are independent.

Now, we’re not making prediction about where this will lead, but we do think there will be more discussion that’s my perspective.

Thanks very much Kevin. We’ve certainly talked about independence as a cornerstone of our operating philosophy.

As the industry in Canada begins to deal with issues of fiduciary duty and conflict of interest, Asia as well positioned as an independent firm, we believed in open architecture. We already deal with many of the progressive firms in Canada that have us on their shelves not because of the ownership interest but because of the products and services we provide that in turn help them to serve their own clients.

We have applied the regulators in Canada for taking a thoughtful and measured approach to regulatory reform. There has been a great deal of research discussion papers and forums to conversation.

As a result, we don’t think the industry is facing a sudden or series of disruption. If we dose see something like dis-embedding of trailers, we believe there will be a great deal of advance notice and the regulators here in Canada would work closely with the industry.

As I mentioned before, the industry and AGF are already moving towards offering more choice including products suited for fee based accounts such as F series and our Gold Label. We think being an independent manager is the best model for regulatory scrutiny because we don’t own distribution, you know there is no conflict of interest when advisor recommends one of our funds.

I’m happy to deal questions about this topic during the Q&A session. But for now, I’ll hand it back over to Kevin, who will continue with an update on investment management and institutional.

Thanks Blake and moving to Slide 8, I’ll start with talking about the investment platform. We cited about the capabilities we have, when you compare them to the searches being completed in the marketplace today.

For example, global and emerging markets remain in very high demand and we believe this trend is still early in the cycle, plan sponsors and consultants continue to move to reduce home country buyers and invest in global oriented strategies. We have a strong and established global team led by Steve Way.

Our global team manages strategies and key categories such as Global Core, emerging markets in global dividends. As we stated in the past, Global Core has an impressive long-term track record and ranked in the first quartile of most risk adjusted performance measures among its investment peers.

If we can execute on sales and distribution, this will be the basis for a significant amount of AUM in the future. With the close of the Nieuport deal, infrastructure looks even more promising asset capability that we can profile to our clients.

I want to give you a quick update on our progress reviewing the investment platform. On our last call, I mentioned that we were going through each strategy to determine in depth what process changes were necessary.

That in depth review is complete and we’re now implementing changes primarily to the investment process for certain strategies and how we manage risk. This will take time for a number of reasons as we need to be thoughtful on exiting positions that are oversold and the client considerations involved to many.

I have targeted completing most of the changes by midyear. Longer term, we target having 60% of our AUM above median over three years and 50% above median over one year.

I can’t commit through exact timing of reason of goal but we are making progress. If we do this in a disciplined fashion, we will see our proportion of fourth and five star funds increase.

As Blake mentioned, this is what we need to fulfill the value proposition we have committed to deliver to our clients. It is about execution, so we can deliver on that promise.

Turning to Slide 9, I’ll talk about our institutional business. The institutional business had a tough Q4 as we doubled the redemptions from two of our last legacy clients in emerging markets.

Overall, we ended the year in net redemption, but those redemptions were much improved in fiscal 2014 when compared to 2013. The negative pipeline is a concern - pipeline are a few notable wins totaling $280 million in assets including $180 million winning Global Core.

To me this indicates the success we can have in the global space. The majority of our remaining institutional clients have had a positive experience with the mandates performing much in line with the expectations we set going in.

So going forward we expect redemptions to moderate, so the focus will be on driving new business. This will be based on the following.

First, leveraging the essential infrastructure fund launch; second, utilizing commingled vehicles to a greater degree and targeting a wider range of mandate size. To date, we have brought in a lot of large segregated accounts and even our pooled vehicles such as UCITS the size of our client is large.

With UCITS in particular, we’re looking at a commingled share class to come with smaller account sets. We’re looking at creating share class designed for distribution in sub-advisory agreements.

We will be working hard to capitalize on the progress we have made in consultant relations. We have around four consultants buy ratings from tier 1 firms in the U.S.

in 2014 for our global products. While this doesn’t guarantee sales, if one of these consultants has a client need that lines up with one of our top rated strategies, we have enhanced chance to win that business.

So overall, we entered 2015 with optimism about the potential growth in the institutional business. I’ll turn the call back to you Blake.

Thanks, Kevin. I’d now like to spend a few minutes speaking about our alternatives platform InstarAGF.

One year ago, AGF formed a joint venture with Instar, which is founded by Greg Smith. Greg is leading the joint venture in providing the intellectual capital.

AGF has committed cornerstone capital and will provide distribution and administrative support. Greg is a 20 year industry veteran with unparalleled experience in investing in real assets.

He is a former Managing Director of Brookfield’s Global Infrastructure Advisory Group and past President of Macquarie Capital Funds Canada. Greg is also past Chair and past President of Canada’s Venture Capital and Private Equity Association.

Greg will provide context around the platform that we are jointly building and update you on the investments today. Greg, over to you.

Thanks Blake and good morning everyone. I’m very pleased to be here.

Today, I’ll discuss the growth of InstarAGF alternative platform over the past year. I will update you in the progress and timing of our Essential Infrastructure Fund including the recent investment in the passenger terminal at Billy Bishop Toronto City Airport and I’ll share our outlook on the market and growth opportunity for InstarAGF in years ahead.

InstarAGF’s goal is to provide a broad suite of alternative investment products to institutional, retail and high net worth investors. When we launched InstarAGF, in January of 2014, we had two immediate priorities to assemble a strong team and to establish command completely.

We know how it’s important to demonstrate to our investors our ability to execute and that’s exactly what we’ve done on a number of fronts. To start, we put together our first great team from two imported [ph] last year.

We now have a total of 11 professionals, but that gave us a combined infrastructure and private equity experience in acquisitions, asset management and operations, corporate finance and deal sourcing. Members of our team have strong pedigrees and backgrounds of leading infrastructure advisors and investors including senior roles of Macquarie, Brookfield and I’m sorry if you just mentioned Macquarie and experience across the infrastructures background, including power, renewable power, utilities, transportation systems, airports, and public/private partnerships.

We expect to continue to onboard roughly one employee a month to both support and accelerate the pace of our investment opportunities. And we’re also establishing an advisory board for InstarAGF of highly regarded Canadian corporate executives with deep sector expertise and relationships to provide strategic counsel with respect to transaction opportunities.

Second, we’ve demonstrated our ability to deliver innovative products to market. And in spring of 2014, we achieved an important milestone for our business by partnering with Stream Asset Financial to launch Stream Asset Financial LP, a fund that’s invested in midstream energy infrastructure.

This fund was oversubscribed with $210 million in capital commitments from both high net worth and institutional investors, reflecting a clear demand for yielding alternative investments. There we developed a robust deal pipeline, evaluating dozens of investment opportunities since the start of 2014.

Our ability to establish InstarAGF’s profile with domestic and international bankers, advisors, lenders, asset vendors, and other partners is a decisive measure of our team’s expensive network and deep relationships here at home and globally. Our pipeline has included power assets and renewable power projects, water and other regular utilities, transportation assets including the Billy Bishop Airport Passenger Terminal, which is significant for our team and our growing business.

The Billy Bishop terminal is a premier infrastructure asset that needs all of InstarAGF’s investment criteria, which improved a strong credit or off stake qualities, a stable and predictable cash flows that are linked to inflation and the potential for long-term capital appreciation. Our consortium Newport Aviation partners have acquired the right to manage and operate the passing the terminal under a long-term lease from Ports Toronto, which owns and operate the airport.

It’s a new state-of-the-art facility built in 2010. Our responsibilities are to manage the terminals operations and to ensure high service standards in an outstanding passenger experience.

We’re especially proud to investing in the terminal along the world class, local and international partners including Kilmer Van Nostrand, a private investment company based here in Toronto, Partners Group, a Switzerland based global firm with more than 40 billion under management in private equity, debt, real estate and infrastructure and institutional investors advice the JPMorgan Asset Management, which is based in New York and manages more than 1.7 trillion in total assets including more than $79 billion in real estate, maritime and infrastructure. These partnerships demonstrate the strength and reach of our relationships and our feasibility to deliver access to exceptional infrastructure assets.

Normally some of our equity partners and member of InstarAGF senior team have direct experience in airport operation and aviation infrastructure, which will result in seamless ownership transition for passengers and all other stakeholders. InstarAGF has made 105 million commitments to this investment, which can be a compelling key to asset in InstarAGF’s essential infrastructure fund.

Airport assets are rarely available to private investors particularly in North America. The terminal has a number of attractive features.

First as part of the Billy Bishop Toronto City Airport, which is an essential infrastructure for the City of Toronto and the surrounding regions, generating $1.9 billion of economic impact per year and contributing $640 million in Toronto’s annual growth semester product. Second is a long-term cash flow profile that’s supported by strong market fundamentals including its location in Canada’s largest urban center, a strong demand for the airport from existing and respective airline carriers.

Third, the airport have sustainable competitive advantage based on a strategic location in a proximately to downturn Toronto. 86% of passengers liking speed and convenience is our primary reason for choosing Billy Bishop Airport.

And fourth, the terminal is a well managed asset that will further benefit on the opening of Toronto’s new pedestrian tunnel in 2015, which is expected to increase the overall deal in market position of the airport. Overall, we believe Billy Bishop Airport and the terminal have strong fundamentals in a bright future, as a critical transportation hub in the City of Toronto and surrounding region.

This investment is particularly exciting for us that accelerate the development of InstarAGF’s alternative platform and positions us to achieve the first closure of essential infrastructure fund in the first half of 2015 with AGF and other Canadian and international investors. I should also note the InstarAGF’s principle: employees will be investors in the fund thereby enhancing our long-term alignment with investors.

We believe our fund will be distinguished in the market by its focus on middle market infrastructure assets in North America, requiring equity commitments of $20 million to $200 million, a segment of the market whether its typically less competition and better value for investors. We expect the funds beside from the range of $750 million hold a mix of operating and development staged assets in the power, utilities, civil and social infrastructure sectors.

We typically see net returns of 9% to 14% on its investments and yield about 5% annually, which will escalate over the life of fund. In addition to the Billy Bishop Airport terminal, we’ve also reached commercial close in one of this year’s investment and 45 megawatt wind power development project in British Columbia.

Our goal is to build a diversified portfolio with roughly 8 to 12 assets. Looking ahead, we expect the North American infrastructure market to present a wealth of investment opportunities and provide attractive returns for investors, a significant infrastructure is reaching the end of its useful life and requires private sector investment to maintain, upgrade and build the critical infrastructure that our economy and quality of life depended on.

More broadly, the alternative sector is benefiting from strong investment management for diversification and income and this represents an opportunity for managers who can bring innovative products to market such that InstarAGF intend to do in a controlled manner with new alternative asset products annually for institutional and retail investors including a specialized retail oriented infrastructure funds. Overall, I am delighted with InstarAGF’s progress and for our team I would say that we’re dedicated to building an enduring business that generates a superior performance that are investor demand.

Thanks Greg. The InstarAGF update has meant to help our stakeholders to understand a considerable time and effort that have been spent to date to develop the platform in our execution against that.

We’re devoting significant energy and capital to this growth platform because we think it represents a compelling long-term value proposition for shareholders. Overall, we target a 15% return on invested capital recognized through our direct returns on the investment, in addition to the prorate share of the management fee, longer-term incentive carry payments will increase those returns further.

As we have covered in previous calls, we’re realizing economics through our LP investment and stream in addition to our prorate share of management fees from our interest in the managing partner. With the launch of the essential infrastructure fund, we expect similar benefits in terms of our seed investment, as Greg mentioned the fund is targeted to deliver a total return of 9% to 14%.

We expected the platform - we are employing a controlled growth approach. It means as we launch the initial fund and recognize management fee revenue, we will reinvest that revenue back into the platform to add new capabilities and investment teams for subsequent product launches.

As so if you will recognize much more as increased profitability of the manager until we scaled through additional fund launches and AUM growth of the platform. Now, I will expand on how this business effects our capital position in a moment but for now let’s review our reported financial results.

In our published financials and MD&A, you’ll notice that our presentation has been divided into continuing operations and discontinuing operations. This is consistent with the presentation of other results from previous quarters.

Discontinued operations were identified as a single line item just below the income from continuing ops. This slide reflects a summary of our financial results for fiscal 2014 as compared to fiscal 2013 as well as trending quarterly results.

EBITDA for the quarter was $34.4 million as compared to $38.5 million in Q3. Market volatility experienced in the quarter, coupled with redemptions to our institutional business drilled a decrease in average assets resulting in lower revenue.

Improving markets in December and January have provided welcome lift in the retail AUM. EBITDA for fiscal 2014 was $154.9 million compared to $163.6 million in 2013.

Lower institutional AUM and lower revenue rates within our retail business were somewhat offset by reduced SG&A, improved earnings at Smith & Williamson in the addition of the alternatives platform. Fourth quarter EPS came in at $0.14 per share compared to $0.17 per share in Q3.

EPS for the year came in at $0.68 per share compared to $0.53 per share adjusted a year ago. The increase in EPS related to decline in amortization primarily related to deferred sales commissions.

Consolidated EPS which takes into account the additional purchase price consideration received in Q1 from the disposition of AGF Trust net of the loss provision in Q4 was $0.70. Turning to Slide 13, I’ll walk to the basis points yield on our business.

This is a Slide we regularly discuss on our calls that shows our investment management revenue, operating expenses and EBITDA as a percentage of average AUM in the current quarter and the prior year’s quarter as well as the full year view. Note that the results reflect our core investment management business excluding one-time items in other income.

With respect to revenue, the operations reflects a quarter-over-quarter decrease in revenue deals due to a lower rate within our retail business, driven by higher proportion of assets and funds with lower fees. The year-over-year increase is attributable to a higher mix of retail AUM as compared to the institutional business.

SG&A in the quarter is lower than a year ago as a result of lower absorption in stock based compensation. Year-over-year SG&A as a percentage of AUM is flat.

SG&A for 2014 came in at $175 million in line with our guidance provided during our Q3 call. Turning to Slide 14, I’ll discuss free cash flow and dividend coverage.

This slide represents the last five quarters of free cash flow shown by the blue bars in the chart; the cash flow representative is a consolidated free cash flow. Our Q4 payout ratio was 101% with the updated capital allocation policy announced in December.

We expect this ratio to be in the range of 55% to 65%, starting in the second quarter of 2015. In Q1 of 2015, our ratio will remain higher reflecting the payment of the Q4 dividend in January.

At the end of our fiscal year, we have $285 million in cash and short-term investments on the balance sheet with net debt of $23 million. With respect to capital, I’ve previously mentioned our current capital commitment of the alternatives platform is a $150 million.

$50 million of that amount relates to stream energy infrastructure fund of which roughly 50% has been funded. AGF earned approximately $1.5 million from stream in 2014 including our investment in the fund and its share of management fees.

For 2015 has future capital was deployed and we have a full year of operations behind us that amount will increase. The remaining $100 million is committed to the essential infrastructure fund.

As Blake and Greg mentioned, the AGF advanced $103 million to facilitate the Nieuport investment. Upon closing of the fund with external investors we’ll receive a portion of that seed capital back to bring our invested capital down to our proportionate share of total committed capital.

We were not active with NCIB in Q4. However since the dividend announcement in early December, we’ve repurchased 2.2 million shares for a total consideration of approximately $17 million.

Going forward the NCID will be used opportunistically to both purchase shares for the employee benefit trust and to step in as needed when the stock market - stock movement is erratic. Turning to Slide 15, I’ll put the call back to Blake to wrap up.

Thanks Bob. In closing I would like to reiterate that 2014 was a year we settled specific objectives and met them.

New leadership and investment management uses for alternatives platform all stated goal that have been successfully advanced. I expect that in 2015, we’ll have another year that we can achieve goals that are clearly laid out.

For 2015, we’ll be focused on the following: investment management, performance and process as Kevin mentioned, we want to execute on the changes that we’ve identified by the midyear of 2015. Second, our retail product platform, you can expect us to make progress on a number of things that we’re doing research on right now.

Later in the year, I’ll update you on work that we’re doing in the area of low volatility. We’ll also be in a position to talk about the initiative underway to launch an infrastructure fund in the retail space.

Third alternatives, we said before that by mid 2015 we will have our second alternatives fund launched. This is on track this was evident from the update on the essential infrastructure fund today.

I want to thank everyone on the AGF team for all their hard work and I’m proud of the results that we’ve achieved in 2014 and excited to accomplish more in 2015. We’ll now take your questions.

Thank you.

Hi, Kevin, last time we chatted you talked about having investment processes in place and leveraging out technology for better risk management and so forth. Just want again an update on that and digging deeper in your comments.

What are you doing specifically that wasn’t done previously and how do you think that will lead to a better fund performance?

Yes, thanks Gary. I think as everyone mentioned, where I mentioned on the last call with everyone.

On the first six months, and I’ve just crossed that six months line recently, we’re really about - really getting understanding of everything, we do in a very deep level from a process standpoint. So that work is done now.

We’re now moving into what I would say the implementation phase on certain of our processes, where the volatility of the underlying process meaning that maybe the best sides at the security level, the sector level and at the country level is too wide. So we’re working a little bit now in the implementation side actually start to tweak, work with managers to drive what I would say is a more consistent return profile and reducing that longer term volatility.

So again not every strategy, not every manager but we’re basically taking a very disciplined approach and it takes probably another six months or so. With the key notes where the risk we’re taking, add which even more consistent outcome.

Okay great and then next question, we don’t talk lot about Smith & Williamson. I just want to again update on that, any thoughts on kind of surfacing value added through disposition, where appetite for client paper stake of that?

Yes we are very content right now there are 232% stake is performing extremely well. All the asset managers, such as Smith & Williamson have increased significantly in values since we made our original investment in that organization and we are very pleased by rising cash flows.

Okay and then, just last question. Just want to confirm, I think the last kind of telling to your comments there.

Are you guys suggesting did you guys say 55% to 65% in terms of free cash flow payout for 2015? So I catch you right?

Yes. This is Bob, yes that you heard that correctly.

Okay and how do you - is that under assumption that the free cash flow will stay relatively to same versus 2014 or what’s baking into that?

Yes, it’s going to fluctuate obviously with asset levels in our execution, but that’s the - that’s our policy with respect to - our municipality with respect to that metric.

Okay, right. That’s it from me.

Hi thanks. May be I can touch on the retail side.

Kevin you obviously sound where the firms are very engaged on the performance side of the retail business in Tornado improve that. Is there anything else that you’re looking at, either from a product perspective or wholesalers relationships or pricing that you think and needs to be adjusted to turnaround the retial net sales?

This is Blake when I take it first that I’ve been meeting many advisors, coast-to-coast, in fact, tomorrow, hope back on the road and I can tell you that, we’re engaging with a number of new faces, and frankly haven’t been attending some sessions for sometime and why we’re doing this. Because I think there is a great excitements about some of the products that we come up with and I mentioned in comments that we’ve introduced some - introduced new products in last few years where - met the needs of clients and then very, very successful.

We’ve also been engaged in an advertising campaign quite extensively talking about the value of advice and retouching and reaching out to advisors, who are concerned about some of the regulatory changes coming down in particular CRM2. And in fact, we’ve had webinars and we’ve had individual meetings with probably more than 5,000 advisors on this topic.

So, it’s obviously something very, very important and bringing value to advisors. We’ve been making sure that from pricing areas introducing things like our Gold Label funds, for instance, making sure that we have different options available, so that clients can engage in discussions with their clients and offer them different choices.

That is also I think help to engage a number of clients. So perhaps, Kevin…

Yes, hi Graham, [indiscernible] we mentioned I think in the last call, but we’ve had a lot of success with launches we did last year. I think $1.3 billion on the three new initiatives we had.

We’ve got a new convertible launch, which has been pretty well met. And that’s really a solution that try to really help investors defend against what we think is ultimately going to be rising rate environment and so differentiated solution for a need.

You will see us to think about different types of managed account solution as we go through the year, potentially somewhere lower volatility products. So again, I would say, it’s about fixing performance first.

It’s probably products equally - if the need is there.

Okay, great. And then jump into the infrastructure side of your business, it looks like - what should we expect if you were successful in launching this roughly $750 million essential infrastructure fund, what would you expect is reasonable as far as the capital that would be returned of the $105 million that you’re investing upfront?

Well, over time if we hit the $750 million boogie, we hope to be $100 million of that $750 really based on the closes - the amount that we close on - on first close and in subsequent closes that that amount will be repatriated, but again - Graham that its committed to - the $100 million is committed over a period of time over the next two to four years as that capital is called.

Okay. So it’s a $100 million of $750 million is what you’re thinking over the longer term?

That is correct.

A smaller amount perhaps half of the $750 million then your participation would equate to that?

Yes. Like…

First closure to be $750 million…

That’s right. For example the first closure $300 million is used an example…

Yes.

We would have the pro rata piece of that $100 million capital return to us.

Okay and that makes sense to me. And then going forward as you deploy capital towards these investments, I think you’ve targeted a $150 million over two to three years.

Is it reasonable to expect that there will be upfront investments like this one that you’ve done for the passenger terminal and then capital to be returned or will it just be smaller increments over time in a more regular basis? How should we think about that?

Well, I think, you should think about on the latter because the - when we launched stream, this was a similar occurrence where we seeded and essentially warehouse, the fairly large seed investment. And contributed that to the fund and then we’ll return to capital as new investors came into the fund that happened in Q3 of this year of 2014.

Similar approach in terms of the InstarAGF Essential Infrastructure Fund, where we’re housing a fairly significant asset contributing that to the fund and will be bought down as the new investors come in. But ongoing with respect to those two platforms specifically though just be capital cost of a more incremental nature going forward.

Okay, great. And then lastly, it sounds like you’re targeting a 9% to 14% yield from these funds.

What sort of management fee are you targeting or expecting from these funds?

Well, that appreciate - this is a nascent business for us and we’re developing this from a standing Instar approximately 12 months ago. So we’re really excited about the progress to date and our ability to execute on that.

In terms of the economics, I think it’s pretty straightforward to mentally model - the management fees recognized will be - the net management fees let’s say after OpEx will be minimal over the short-term, let’s say about $1 million a year. As I mentioned in my remarks, this is because a portion of the fees that - that we’ll be getting will be used to offset startup expenses and we’ll reinvest back into the platform to bring on additional capabilities and launch new products.

So over the next few years, our earnings and cash flows will be primarily generated from the investments in the funds as oppose to the general partner and Management Company.

Okay, great. And then maybe one question for Greg, if I could.

With the midstream infrastructure investments, is there any color you can provide with I guess the nature of those investments and is there any concern at all with the dynamic that we’re seeing with the energy prices and whatnot in Alberta that - is there any concern over the investments and the demand for those investments?

The size of the investments that stream is looking for a critical infrastructure pieces associated with the producers. We look at fragile structures on our investment that protects that cash flow.

Producers are coming or either on a take-or-pay kind of contract or they are appropriately hedged on a go forward basis. So, we look at all the investment characteristics, but fundamentally the types of midstream investments that they are making are critical and essential to those reserves.

And we are very comfortable. And in fact the current prices are creating additional investment opportunities for us that are quite attractive.

Yes, we are using the scarcity of substitute capital as an opportunity to secure investments by closing with higher quality companies yet still maintaining the expected above average returns. So we are excited that we are actually able to get the attention of those higher quality companies in this type of an environment.

Got it. That makes sense, thanks.

Hi, good morning. Just wanted to maybe just tagalong to Graham's last question on the midstreaming side.

So it sounds to me like you have got the protection through the take-or-pay or the hedging. And so on the existing contracts I guess then theoretically even though it sounds like you probably have good clients, the theoretical risk around it is just bankruptcy of those clients?

Is that the right way to think about it?

Yes, I guess ultimately. But the midstreamers are the last person not to not to get paid because it's what brings this year - it’s what brings the product the hydrocarbons to market, so but with respect to our current portfolio, which performing very well and as planned.

So there is three I’d say key support drivers in the general market conditions that we are facing in the oil and gas batch. First as Greg mentioned, the portfolio companies are on average 75% oil hedged in 2015.

Investments are very early in the investment cycle so the cash flow coverage is very robust. And then finally we’re really an immaterial piece of the capital structure with these firms.

Okay. The next question I had was on the institutional side.

So I think, if I understood correctly, the redemptions that you saw in Q4 tended to be more around the emerging markets side. And are you able to say like was it - I'm just trying to understand the nature of these in terms of the redemptions because you talked about legacy accounts - whether or not it was just an asset allocation shift or something going on there and then also if there was any other color that you've got on the pipeline where those redemptions are coming from?

Yes, thanks Jeff. It’s Kevin.

So when I look backwards, so to take 2014 in EM our performance was actually really strong. We were probably close to 300 basis points above the benchmark and probably just outside the top quartile in terms of performance against the institutional universe.

So the issues really relate to the turnover we have in some of the team members back in 2012 and a tough 2013 in terms of those legacy clients that had been in back for those events, so not really about 2014 performance. I suspect some of it was about people de-risking as EM was - is that two tough years in a row with an asset class, but some of it obviously related to our performance in 2013, it’s not 2014.

But most of those when you look at the book of clients that have come on since then have had actually a very strong performance. So that’s what gives us some comfort that on the EM side that we’re through worse of it.

And so I'm just trying to reconcile was you had the bit of the negative pipeline when you reported last quarter. And then obviously you had the additional net redemptions in the quarter that were higher.

Do you think that is maybe just a function of calendar year-end and then making the decision on, as you mentioned, some of these were from prior to the PM's departure and them finally making a decision on it and therefore, I guess, going forward should hopefully dissipate?

Yes, it certainly was related to again I think people making some asset allocation change, but potentially also thinking - we had a tough performance issue in 2013, so some of those decisions probably made midyear or first quarter that get implement in the later part of the year. We look again back.

As I said we look through the book. The pipeline that you’re seeing for Q1 really reflects the last of those legacy one.

So it’s a combination of I think asset allocation and people making decision based upon 2013 even though on the year and 2014 very strong.

Okay. The last question I had was just as we are entering into RSP season, any color on the flows that you are seeing, just given particularly the volatility in the markets?

I think it’s very, very tough to generalize right now at this point, we’ll need to say that we’re seeing interest in new products that we’re coming out with and I can’t generalize for the whole industry candidly. I mean its just too early right now, Jeff.

How about from your own experience?

Just as we mentioned I think through the - midst of the prepared comments that our December was improved year-on-year.

And any sort of insight on what you’ve seen so far in January?

No, not yet. We have insight, but we’re not willing to share it.

All right, thank you.

Yes, thanks very much and thanks for the color on institutional net redemptions as well. Just a question with respect to the fees as a percent of average AUM down quarter-over-quarter down year-over-year.

Is it entirely a mix issue, to what extend do you think the impact of your reduction in the F series funds in earlier this year, had an impact, may be just a little bit more color on that and what do you expect to see, with respect to that going forward?

Yes, I’ll start and you guys can jump in. With respect to the F series part of your question, it’s fairly at this point - fairly de minimis piece of our overall asset mix, we expect of that will gain significant traction over the next decade.

But at this point, any looping in that is pretty much noise. The effect that we’re seeing on the rate is really attributable to our newer product launches, having much more success versus legacy fund.

So the legacy funds particularly in the EM spacing - global space may have carried or do carry a higher management fee and being replaced by new funds that are lower management fee. We’ve taken the approach on any new product to ensure that we’re properly placed with the median of the industry with respect to that particular asset category and so as the book evolves, naturally will see some impact on pricing.

And I guess the last point would be the success that we’ve been having in the sub-advisory space particularly with - our relationships with Prudential America and some of the banks as we have more success in the sub-advisory space which obviously doesn’t have a full fee associated with it. We’ll see that the impact on the rate.

Okay, thanks for that. And I think there was a cost guidance estimate of a $175 million for 2014.

Is there - what should we expect for 2015 with respect to that or you prepared to have any issue any guidance with respect to that for this year?

Tom, we generally don’t like to issue full year guidance. I will say those our adjusted run rate, when you take into consideration that, we had a favorable true down and absorption expense in Q4.

But are adjusted run rate coming out of Q4 is approximately $45 million a quarter. So we’re comfortable with that, we don’t intend on bringing on significant new capacity to hiring, we are going to fund our growth initiatives with existing capacity or rotating capacity.

But as we go through the year, our SG&A will fluctuate just based on market performance, investment performance, incentive bonus payments in whatnot but, I think the purposes of today $45 a quarter will suffice.

Great, thank you very much.

Thank you, first question is with respect to mutual fund performance, so we saw bit of a slight Q-over-Q with a number, I believe, going from 46% above median to 34%, so I am wondering if there is any specific factor as you can point to for that slide?

Yes, hi, Paul. This is Kevin.

So if you think about we had a very strong Q4 last year in 2013. We rolled that off and replaced with probably a pretty sub-par so that 34% of our funds are above the median in Q4 this year.

Part of that is frankly there is a Canadian firm, while we don’t have - we have a lot of global assets, we still have probably 25% close to the Canadian market which was one of the worst performing markets in the quarter and we probably over exposed within that some energy place which would be natural for us. And as you’ve seen those were two and three standard deviation moves on names related to the commodity.

And so I think aberrational quarter and unfortunate because we’re in the middle of them are process reduce at the end we’ve been out six or seven months, nine months, may have had some different thinking around banding on some of those bets but yes, it’s replacing a very strong quarter in Q4 2013 with sub-par one in 2014.

Okay. And so as we think about that overexposure to energy and what energy has done post quarter-end, will we see a similar slide in Q1, or have you already had time to implement some of those risk controls?

Yes, I mean Q1 right now. I mean, it’s early, I would say we’re only three or four weeks in but performance has been very strong.

Okay. And then it sounds like you are going to get or increase the pace of innovation in retail products in 2015 versus 2014.

Is that fair to say? And if it is, the implication for costs, you are saying, isn't going to be much?

We wouldn’t expect still, I mean clearly we have a number of strategy right now and I’m going to go and test two base and it’s normally some cost when you introduce product to the marketplace, but clearly goes to.

Yes, capital isn’t - it’s not a capital required or OpEx required both in terms of the product launch obviously the sales and marketing and the promotional around it, we’ll have a little bit OpEx.

Okay, but just a little?

Yes.

And then, Bob, in one of your answers I think to one of Tom's questions was that the F Series today, and I assume that would also include the Gold Label, would be a small percentage of AUM. So that's not unexpected.

But any sense of for percentage of gross sales those types of products would be or how are those sales trending year over year? Any kind of color you could give us on the growth from those products?

I don’t have that information, it’s not in my fingertips, Paul, it’s not enough to actually rise to someone’s attention. So it’s above, it’s - I would say that the gross sales are above the market share of AUM, but not significantly.

Okay, okay fair enough. And this is one of the - how should I phrase the question?

Gross sales actually improved this quarter, whereas we saw gross sales come down in the prior two quarters. So what do you think was kind of the turning point for that?

Is there any specific mandates you can point to or factors?

Well we continue to see that our floating rate in fact our focus funds and AlphaSector have been very, very solid and at least continue to meet the needs of nervous clients right now.

Okay

I will say the state of our strategic sub-advisory clients have contributed to the increase in gross sales as well.

Okay. And then my understanding on the answers for the institutional flow is it sounds like most of the redemptions are coming out of EM still and not so much other mandates.

Is that correct?

Yes, so the majority of what we saw in 2014 that is correct. I think in the pipeline for that 15 pipeline we’ve got one sub-advisory situation where the actual fund that were sub-advising, where we’re amongst a couple of managers who are sub-advisors to that fund.

That fund is actually is closing and so that’s in there - but that’s a - but I would say the majority has been legacy EM book.

Okay, okay. And no impact from the departure of Bob Lyon to date, either on the retail or institutional side?

Not that we can tell. I mean we are in front of our consultants and clients, the client base there in terms of our institutional accounts remain stable.

Obviously, we had a pretty talented team behind Bob and it was nice fit to move [indiscernible] in that shift. So, yes, no dislocation from Bob’s departure.

Thanks a lot. Just a follow-up question on Bob Lyons.

Can you give us a sense how much institutional AUM he was kind of managing or a part of, before his departure?

Yes, I don’t think we disclose that, but I would tell you that that the institutional clients that we had before his departure remain and we haven’t had any flow issues from those accounts.

And Kevin, can you disclose the three-year number in terms of your AUM above the median? I think you disclosed it last quarter, but I was wondering if you guys had that handy.

I believe that’s in the deck, but I would - yes, it’s about 34%. So it’s actually I think starting to improve - the starting meet.

So as we roll off some of the tough years and we start to hopefully tack on decent one, just start to see both one and three start to improve.

Okay, thank you very much for joining us on today’s call. Our next earnings call will take place on March 25, 2015 when we’ll review our first quarter results for fiscal 2015.

Details with the call will be posted on our website. Finally, an archive of today’s audio webcast will - with supporting materials will be available on the Investor Relations section of our website.

Thank you and good day everyone.