AGF Management Limited

Bob Bogart – Executive Vice-President and Chief Financial Officer Blake Goldring – Chairman and Chief Executive Officer Kevin McCreadie – President and Chief Investment Officer Gordon Forrester – Executive Vice-President, Product and Marketing and Head of Retail

John Aiken – Barclays 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 first quarter 2015 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 first quarter 2015 financial results.

Also speaking on the call today will be Blake Goldring, Chairman and CEO; and Kevin McCreadie, President and Chief Investment Officer. Also joining is Gordon Forrester, Executive Vice President and Head of Retail, will be available for questions.

Turning to Slide 4, I’ll review the agenda for today's call. We’ll discuss the highlights of the first quarter.

We’ll provide a business update on the key segments of our business and we will review the financial results, discuss our capital and liquidity position, and finally close up by outlining our focus for 2015. After the prepared remarks, we will be happy to take questions.

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

Thank Bob and thank you everyone for joining us on today’s earnings call. Today, we’re reviewing our first quarter 2015 fiscal results.

I will begin with a few highlights. We reported earning per share of $0.16.

Our retail fund net redemptions improved by nearly 20% in Q1 2015 compared to the same quarter last year. We have experienced 25 consecutive months of improving that redemptions.

Investment performance also improved and our three year performance above median now stands at 51%. As we have discussed on our last conference call, during Q1, we announced InstarAGF’s investment in Nieuport Aviation, the terminal at Billy Bishop Airport.

InstarAGF lead the process along with an impressive consortium. The terminal building is a marquee asset that as a cornerstone investment will bode extremely well for future capital rising.

We will also provide general updates on our retail and institutional businesses. Turning to Slide 6, I’ll start with retail.

Markets were strong in Q1 2015. In the U.S., the economy grew albeit a slower rates supported by strong consumption, consumer confidence and labor markets.

European equity markets outperformed as the European Central Bank announced a greater than expected quantitative easing program in January, in an effort to stem deflationary pressures and boost growth in region. Canadian equity outperformed U.S.

equity during the period. A surprise Bank of Canada rate cut in January that’s a significant depreciation in the Canadian dollar, helping to boost returns on foreign holdings for Canadian investors.

Canadian dollar depreciation also benefited AFG as over half of our AUM has invested in foreign equities. Mutual fund net sales have been strong in Canada with $10.9 billion in February, up 13% from the same month last year, balance funds continue to dominate; equity funds lost some steam, but remain in net sales.

As I mentioned, we have experienced continued and consistent improvement in redemptions in retail. Addressing the redemption issue was primary.

We’re now looking to increase the level of gross sales. With the aim of increasing sales, Asia was three strategic priorities for our retail business.

One, enhance the firm’s overall investment performance; two, work closely with strategic partners to facilitate distribution and three provide innovative product and pricing solutions around specific needs. Under Kevin’s leadership, we’re establishing the acquired processes and risk controls to enhance investment performance.

Kevin will shortly provide an update on this progress. We continue to make strides with strategic partners.

One of the segregated funds we sub-advised registered the best performance of any Canadian segregated fund in Canada in 2014. This fund is generating net sales and has strong momentum.

Working with this partner, we have recently added a rip option to the fund. With strategic partners generally, we are positioned our funds for inclusion on their new fee based platforms.

We’re also promoting certain investment strategies that are suitable for inclusion on SMA platforms. Product innovation continues to be a positive development for us.

Since 2012, we have launched number of new funds that have addressed specific needs and raised over $1.5 billion new assets. Our most recent innovation, AGF Global Convertible Bond Fund, was introduced to advisors during RSP season and as we’re getting to record improving sales.

AGF Global Convertible Bond Fund is designed to help our clients to diversify their portfolios in an uncertain rate environment. There’re only a few other comparable funds in the market like this, so we spend a lot of time over RSP season talking device as about how the fund can be used in their portfolios.

Before I’ll leave retail, I’ll talk a little bit about CRM2. On our last conference call, we outlined that CRM2 is all about disclosure.

It’s a law that will be fully implemented in July 2016. We stated at that time the brouhaha, the speculation around the possibility of disembedding trailers was frankly overdone and some folks were predicting a ban on trailers in Q1, 2015.

As it turns out, the CFA has said that there will be no decision till the CSA’s 2016 fiscal year. We continue to believe that the regulators will not make a rash decision, changes will evolve over time.

And so picking winners and losers today is premature. The industry is now anxiously awaiting the research results announced in September and again some believe that this review is solely about unbundling commissions, but remember, the studies were described by the CFA is “a step in advancing a policy decision on mutual fund fees.”

Mutual fund fees is the title of the Discussion Paper 81-407, which mentioned seven times – seven items being considered unbundling trailers being only one. We do believe that we’ll debate around fees, which has lead to questions about fiduciary standards will eventually lead to questions about our open architecture.

This is certainly being the case in other jurisdictions such as the United States. So AGF has positioned very well.

We have focused on our value proposition as an independent partner to distribution firms. If one of the regulatory outcomes is to disembed trailers, AGF like most other firms in the industry already has fee disclosed products such as a high net worth series and our fee based series F class.

We plan further development in the way we structure our product that – to help advisors transitioned to fee based over time. But unlike many of our peers, AGF has a diversified business.

In addition to our $20 billion in the intermediary channel, we have almost $12 billion in institutional and sub-advisory assets under management and over $4.5 billion in our high net worth channel. The last two channels already operate on a fully disclosed basis.

That means that we have about half of our AUM in fee disclosed assets. So we feel very good about not having all of our eggs in one basket and we’re looking for growth in each of the platforms that I mentioned.

With that, I’ll now pass over to Kevin.

Thanks Blake. I’ll start by talking about the investment platforms, in depth review of our investment processes is as complete and we are implementing changes in investment process for each strategy that will also have a managed risk.

It has taken out time for a number of reasons, first we would be thoughtful that exiting position that are oversold. And second, there could be client considerations involved when you endeavor to change how a strategy is managed.

Having said that, we – target having complete most of these changed by mid year. Our target of having 50% of or AUM above median is over three years and 50% above median over any one year.

As Blake mentioned, 51% of our AUM is now above median over three years, one year number is not as strong reflecting the volatility of these measures in short period. We will need to have a very strong one year performance to slow redemptions.

Sustaining that improved performance over a three year basis, we will drive gross flows. We do have specific teams and don’t require too much change in the way of profit.

For example, our global team lead by Steve Way. Our global team manager strategies in key categories such as global core, emerging Markets and global dividends.

Global and emerging markets remain in very high demand and we believe this trend is still early in the cycle. Planned sponsors and consultants continue to move to reduce home country buyers and investing globally oriented strategies.

With the close of the Nieuport deal and launch of the essential infrastructure funds. Infrastructure looks even more promising as the capabilities that we can profile to our clients.

So on the institutional side, we have an opportunity because our capabilities line up very well with consultant searches and the demand we are seeing in the marketplace. So turning to slide 8, I will talk more about our institutional business.

In Q1 2015, we reported $331 million in net redemptions in our institutional business, but most of this was in our Q4 net pipeline transacting in Q1 as we previously reported. Other than the Q4 pipeline close, the business was relatively stable in Q1 with approximately $50 million in redemptions.

That redemption is down from a single client rebalance and not a client loss. Going forward, we expect redemptions to continue to moderate, so the focus will be on driving new business.

One of the most promising opportunities for growth will be the launch of our essential infrastructure funds. We have now completed a private placement memorandum, which is basically the equivalent of perspectives for the funds.

We target the middle of this fiscal year for our first closing of around $400 million. The first close will be – with a few other cornerstone investors.

We will then continue to market the fund and target a final close later in the year. Total size of the fund should be around $700 million to $900 million after final close.

We will also be working hard to capitalize on the progress we have made with our global consultant relations team as well as direct relations with planned sponsors. The activity we are seeing is encouraging.

Just yesterday, we had a perspective client, spend a full day performing an on site due diligence. This was a foreign based wealth management platform that will potentially purchase our usage funds, which is squarely in line with a key strategic priority around distribution.

We infused use our established uses platform to sign a sub-advisory deal with fiduciaries and wealth platforms and leverage the marketing and distribution capability of those firms outside of Canada. We like this business because the relationships tend to be long term in nature and generate recurring assets for us.

So overall, we have optimism about the growth in the institutional business for the remainder 2015. And with that I’ll turn the call back to Bob.

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

Discontinued operations are identified as a single line item just below the income from continuing operations. This slide reflects a summary of our financial results for the current quarter as compared to the previous quarter and from Q1 2014.

EBITDA for the quarter was $33.9 million down slightly from $34.4 million in Q4 2014. First quarter EPS came in at $0.16 per share compared to $0.14 per share in the fourth quarter.

Consolidated EPS which takes into account the results from discontinued operations came in at $0.16 per share compared to $0.13 per share in Q4 2014. Turning to Slide 10, I’ll walk through the basis points yield on our business.

This slide show our investment management revenue, operating expenses and EBITDA as a percentage of average AUM on the current quarter as well as a trailing 12 month views. Note that the results reflect our core investment management business excluding one-time items and other income.

With respect to revenue, the operations reflect a decrease in revenue yield due to a lower rate within our retail business driven by higher proportion of assets in funds with lower fees. Our recent gross sales have been driven by these lower yielding funds.

SG&A for the quarter came in at $45 million in line with our full year guidance provided during the Q4 call. Expenses along with trailing commissions are portrayed in basis points and are in line with the trailing 12 month view.

We generated 32 basis points of EBITDA in the current quarter versus 35 basis points on a trailing 12 month view. The change is mostly attributable to the revenue dynamics mentioned above.

Turning to Slide 11, I will discuss the free cash flow and dividend coverage. This slide represents the last five quarters of free cash flow shown by the blue bars of the chart that cash flow represented is consolidated in free cash flow.

The drop in free cash flow from Q4 2014 to the current quarter relates primarily to the timing of the Smith & Williamson dividends. We received $6 million dividend in Q4 and noted that dividends were received in the current quarter.

Our Q1 payout ratio was 147%. This reflected the payment of the Q4 2014 dividend in January which was still based on the previous payout rate.

On the slide, we show that our dividend to free cash flow would be 44% using the revised $0.08 per share dividend which will be paid going forward. With respect to future capital uses, we have previously mentioned our current capital commitment for the alternatives platform is $150 million.

$50 million of that amount relates to the Stream Asset Financial LP of which roughly 50% has been funded. We will continue to draw down on our commitment over 2015 and 2016.

As a reminder, Stream has $210 million in committed capital. The remaining $100 million is committed to the essential infrastructure fund.

In January, AGF advanced $103 million to facilitate Billy Bishop Airport terminal investment which represents critical infrastructure for the City of Toronto and surrounding region. Earlier this month, as Kevin mentioned, we launched the fund raising with institutional investors in Canada and internationally.

That fund is focused on middle market investment opportunities in North America and is seated with two assets, the terminal and renewable power development project in British Columbia. Mid year upon closing of the fund with external investors, AGF will receive a return of a portion of that seed capital to bring our invested capital down to our proportion at share of total committed capital.

During the quarter, we recognized earnings of $1.5 million from the alternatives platform. This includes our share of platform earnings and capacity as GP in addition to the earnings generated by our limited partnership ownership.

We received approximately $1.3 million of cash distribution from these investments during the quarter. With respect to AGF’s interest in the platform manager, InstarAGF, we will continue to reinvest that management fee income back into the platform to further develop future offerings.

Management fees will be absorbed by operating expenses and this will limit the amount of management fee income, we are recognized for another few years. In the future of AGF, there was ownership in InstarAGF, we will also participate in the profitability of the fund through its carried interest assuming it meets its performance hurdles.

Moving to other capital considerations. During the quarter, we repurchased 2.8 million shares for total consideration of approximately 22 million at an average price of $7.80.

Going forward, the NCIB will be used opportunistically to both purchase shares for the employee benefit trust as well as normal share repurchases. Turning to Slide 12, we provide an update regarding our 32% interest in Smith and Williamson 2014 represented another successful year for the firm in terms of AUM growth and profitability.

S&W was recorded on our balance sheet through the equity method of just over $100 million. Based on comparable valuations for UK wealth managers, we believe the asset is worth $200 million.

And the score this point since 2010, the book value of Smith and Williamson has grown about 4.5%. Over that same period, AUM has grown at a rate of 9% annually.

AGF’s proportional earnings have grown 26% and dividends received by AGF have grown 10%. Earnings in the dividend amounts are stated in Canadian dollar terms.

Accounting for the currency effect Smith and Williamson dividends have grown at a compounding rate of 5.5% over the period shown. So turning to Slide 13, I will put the call back to Blake to wrap up.

Thanks Bob, in closing I would like to remind you of our primary goals for 2015, which were clearly laid out on our last conference call. For 2015 we are focusing on the following, one investment performance and process.

As Kevin mentioned, we want to execute on the changes that we’ve identified by mid-year 2015. We are encouraged by the improvement on three-year AUM above median which is now over 50%.

Two, our retail product platform, we still have more to do to achieve our objective of generating net positive sales. However Q1 was yet another quarter in which we made significant and continued progress.

Three alternatives, we are on track to have our second fund launched by mid-year. I want to thank everyone on the AGF team for their hard work and I’m proud of the results that we achieved in Q1 and excited to accomplish more in the remainder of 2015.

We will now take your questions, thank you.

Good morning, Bob, in terms of the on the investment in the essential infrastructure fund, you were talking about some capital being returned to your proportionate share committed capital once when the fund is launched. Can you please remind me what percentage that is that you’re looking at in terms of go-forward rate?

Well, John really it will be based on the level of the ultimate capital committed to the fund. So if it is for example, as Kevin mentioned, we have a first close of $400 million, we participate 25% of that 400.

Okay, great, thank you. And then in context, I guess for Blake, in terms of the NCIB on a go-forward basis I know that Bob's commentary was it was going to be opportunistic.

But does the repurchase plan I guess the aggressiveness of this contingent on the receipt of cash or can we see that’s AGF going forward at this stage even with the drawdown of cash in the quarter will be fairly aggressive on a go-forward basis?

We've got certainly very, very adequate cash resources and certainly not withstanding the paydown debt we’ve got bank lines are well lots of liquidity available. As Bob said, it's really looking more at a number one, reinvestment in our business and secondly, making sure that if there are opportunistic, opportunities to go and buyback stock at a reasonable price we will do so and not hesitate.

Great. Thanks, Blake.

Hi guys. Just maybe a bit of color on the average management fee rate, you said there was a bit of a shift into lower fee funds.

Is that a reflection of - just the type of funds i.e. like fixed income versus equity or global equity or is that a reflection of a higher percentage of fee based and high net worth funds versus typical commission paying funds?

Hi, Graham, it's Bob. It's a couple of things, but primarily, it's the higher redemption levels of legacy funds which have historically been higher fee product being replaced by lower fee products such as our AlphaSector fund which has been a fairly significant gross seller.

And there is a little bit of the increasing level of the high net worth and F Series dynamic happening as well. And then I guess the final point would be as Blake mentioned the success in the sub-advisory platform which is also at a reduced rate.

And the sub-advisory does that fall within your institutional AUM or within your retail AUM disclosure?

It’s a retail accountability but it really falls in the institution for external reporting purposes within the institutional bucket.

In that 11 or whatnot AUM for 11 or something billion…

That’s correct.

Okay, great and then can you provide how much of your retail AUM is in fee based or high net worth class funds?

I’ll just say, we actually don’t disclose on an – that on an AUM series level that we find that a bit too granular, even though we do expect that in the future that retail based fees will be a larger percentage of AUM as a industry shifts in that direction. Gordon, do you have any comment?

Okay.

Yes, the only other thing I would add is that when you look at the growth of our AUM and the fee based aspects of our book, the growth over – the growth of that side of our business is significant both in terms of AUM percentage year-on-year, but also in terms of the percentage of our gross sales that that fee based aspect of our business represents. The only thing I would add is that we’re looking to continue to expand the competitiveness of our current F share product lineup launching some more F share funds where that fee is very competitive relative to our industry competition and also looking to launch more Gold Label products.

Currently, we have 18 Gold Label products, which is the large ticket pricing. And we’re looking to launch more of those in the next two to three months as well.

So continue to see expansion in the book of business and the fee base and continuing to offer more pricing options on funds within that space.

Okay, great. And then when you say expand the competitiveness of the fee base, does that mean offering more funds under fee based or actually reducing the fees to be more competitive with – or to be in line with competition?

Well we did – initially we basically repriced 12 of our F based share classes and it’s looking to do that. It’s looking to extend that 12 that we originally did in terms of numbers.

It’s not looking to launch additional F shares on existing funds. We’re pretty much well represented with F shares on existing funds.

So, Graham, it’s a little bit of both – both extending the series to more funds and also while in process of doing that also reevaluating the management fee that we’re setting against those F Series.

Got it, great. And then maybe I could be greedy here and just ask Kevin one last question just on the fund performance side, it sounds like you’re getting close to where you want to be with the people in place and the process in place and now should we be thinking about this as really just a matter of executing and time before we start to see the steps that you’ve taken on the fund performance side, start to play out?

Yes, Graham, I’d say that probably we target to be done with a lot of the changes by mid year. So I'd kind of look at that as where I'd mark the line and then as you know you're in the business, I mean, we can create the greatest process that could be out of favor but I would say that's where we start to measure it by probably starting mid year.

We're midway threw that exercise today. So yeah, I think, you're thinking about it the right way.

Okay, great. Thank you.

Hi good morning. I just wanted to tag on to Graham's last question.

So with the mid-year kind of the strategy – the mid-year changes from the strategy review, just want to make sure I've got this right. So it's really more coming down to I guess maybe we’re finding the processes and maybe some of the holdings as you’ve got in execution or is there other aspects that you guys are implementing in the first half of the year?

I think that’s – the first half is really about process. I think we have what we need to be competitive across the asset classes, whatever gaps we have, we’ll fill in over time, but you won't see us make any wholesale change in the next two or three months about that to improve on that.

And I think really the focus has been about tightening process and risk management to drive consistency, but I do think we have pretty much suite of things that we need at this juncture to execute.

Okay on the institutional business, you've talked about what the net sales were in the pipeline, but I was just wondering if you can talk a little bit about the RFP environment, how that might have changed over the past few quarters and any thoughts on maybe the ability to convert some of those RFPs to gross sales?

Yes, the RFP side of the house, where we’re tracking where we want to be in terms of submissions, invites into RFP looks. Frankly Q1 is a good news/bad news story if you look at the redemption side.

You know pretty pleased with the fact that what we said in Q4 we thought the book was stabilizing and actually has. On the new side, we’re in a couple of finals that just didn't fall our way, but we’ve got – we’re getting it back.

So as you know it's a lumpy business. Obviously, the Q1 number that we're showing doesn't reflect searches that we’re in today, which may have again there is a small window that we may get some of those closed in the next coming quarter, but, yes, the activity is there and it's not inconsistent nor is it different than it’s been in the past couple of quarters.

Okay. And one last question I had was – are you able to quantify in the quarter what the impact of the weaker Canadian dollar did to AUM?

Yes, as you know, we have 60% of our assets outside of Canada, Canadian dollars down about 9%, probably 40% of those assets are U.S. denominated, so that's the reference to the 9% hit on the Canadian dollar.

So the total impacts or boost to our AUM is about $900 million or 2.5% of AUM, because of that.

Okay, so $900 million is perfect. Okay, great.

Thank you.

Yes, thank you very much, good morning. Just questions with respect to the improvement in the three-year performance.

It was up, yes and you got 51% above the three – above the median for three year performance now versus 22% a year ago. But is one year performance really driving that or because that one year performance that number actually fell from 38% to 34% or is that just a fall off of a very weak 2011?

Hi, Tom, it’s Kevin – that’s right the three year numbers are going to be driven by legacy quarters that we put on what rolls off versus what we replace it with. And so I think you’re right in thinking about this and we probably dropped a couple of really tough quarters out there in 2011.

And so that starts to show up as we’ve improved some of that. The real improvement as we move through time is to start to track that one year number and if we got that consistency that start to create consistency around the three year, but there is going to be volatility around that three year piece of data until we move through time.

And there is…

If you look at in the last comment I’ll make in the time in the short-term.

Yes.

Last six months were pretty good and we are off to a very strong year-to-date start. So, again while that’s three year number is going to move around a bit, as long as we drive the near-term that should create some longer term stability of that.

And there is no difference in – I guess it looks at as a percentage of your AUM that’s ranked. There is no movement in the AUM that’s ranked from period-to-period.

Is that relatively consistent, or how does that move?

Tom, if you mean some of our funds that are too new to rank is that what your question is or.

I guess it’s the – you’re looking at what percentage of your AUM that’s ranked is above the three year median And is there a significant change in the AUM that’s ranked year-over-year, it’s really a movement that’s nominated if you will.

Yes, I know the base is pretty stable Tom.

Okay good and then…

[Indiscernible]

Okay, thanks. And then just one more – just with respect to the amortization of the DSC, I think we got last couple of quarters it was 13 and 11, its 10.4.

Is that – is this we’ve got a pretty good downward trend here. How should we be looking at that going forward?

Maybe Bob can help there.

Yes, that would I mean it’s all a function of the DSC that we’ve put on and so in terms of the reduction to gross sales over the last couple of years, we would expect that DSC amortization is continue to decline.

And…

But you know, go ahead.

Should we just run at this kind of rate throughout the next several quarters or even lower?

About the same rate.

Okay. All right, thanks.

Thank you. First question is really a follow-up on the institutional business.

So Kevin as you mentioned, for a number of quarters now you’ve been getting good search activity have been kind of maybe in the final round but hasn’t closed anything. Is there any consistency as far as you’re aware of why you haven’t been able to close any mandates?

Yes, I think it’s, Paul one of the things is we’ve talked about it in previous quarters as you know one of the strategy that we’re very pleased with in terms of it’s potential, both from where the industries demanding it in terms end - as well as our products with emerging market. As you know about three years ago, we lost the team there.

That’s obviously impacted us to get through some of these finals as team stability is obviously something that the consultant community looks for, so as we start to anniversary some of those issues that should drive a higher close rate there we hope. But I would say that we have one, if you look through the numbers and they get masked unfortunately by some of the redemptions we have and some of those legacy accounts but last quarter we did win a couple - that funded in Q1 but we’re announcing Q4, some pretty sizeable mandates and so and if you look at what’s type of activities are out there and I wouldn’t draw any kind of conclusion to a win rate that has changed.

Understood. Again, I think this question has come up in the past but I want to ask it again.

Can you breakdown how much of your institutional AUM is sub-advised versus that’s more for pensions endowments, sovereign wealth funds?

It’s roughly – I would say roughly a third is institutional, two-third is sub-advisors.

Okay, okay and most of that sub-advisory I would assume is within Canadian retail?

It’s Canadian and U.S…

Its both.

Canadian, U.S. and some European.

Yes, and European as well.

Okay. And that two-thirds are would include the use it says or no?

That’s right.

Yes, okay.

That type of mandate, that’s correct.

I understand. And then Blake, I wanted to ask you a couple of questions on your remarks regarding potential regulatory change.

So one of the remarks you made infers that the delayed decision coming from the CSA might be related to the ultimate outcome of the decision. So just wondering how you’re relating the two?

Well, my comment related to is the fact that the regulators are taking a very measured and thoughtful approach to the whole study. And unlike some other jurisdictions where they basically shot before doing a proper research and they were unintended to consequences.

Our regulators are taking in fact the opposite approach. In fact just yesterday you may have seen that the [indiscernible] Montréal, in Quebec.

They’ve gone to actually undertake a detailed survey of what actually happened, what were those unintended consequences and other jurisdictions and that precisely the type of research that is going to be so essential to this whole discussion. And as I mentioned and you will know and written about that – embedded commissions that’s only one issue that this is significantly deeper.

And I think Paul, just to continue on this theme is that in all cases where there have been changes to embedded commissions, there’s always been linked to the whole question of fiduciary interests. And that that frankly speaks right to open architecture which I don't think there's been a lot of discussion about that.

Okay. That’s fair.

I mean Fiduciary duty is something else that’s on the table for sure. And then Blake also as you pointed out, I mean, part of the discussion on the original paper was really related to type of fees and so if I think about fees in general and how the regulator might think about them, they – probably their interest would be to bring fees down.

So in that context, how well do you think AGF is positioned? It seems like with a lot of the new products you’re bringing out of lower fees such as on the F series.

So is that the trend going forward and should we expect lower average fees and lower margins going forward?

I can tell you one thing Paul, we’re extremely sensitive to what’s obviously the market conditions are. And then I have to say too we don’t really frame our thinking so much in terms of relating, reacting or trying to get ahead of the regulatory change.

We’re very much driven our customers, our clients. I mean that’s really what our focus is on.

And along that in mind making sure that we have competitive product suite that meets client needs and that’s the most important thing. So we have been very selective as far as making sure that our pricing does – it is right call in the sweet spot and very competitive in those categories that we want to and choose to be very present.

For instance I think of our American growth product where we – price changes really to not only be right in the sweet spot for a very performing product, but also to meet needs to beyond the SMA platforms for instance for a certain of our clients that are in those areas. So you’ll see more of that.

And I don’t know if – Gordon, do you want to make any comment at all?

No, I think I would echo what Blake has said and what I’ve said earlier. We’re looking at launching more large ticket pricing options.

We’re looking at enhancing our fee based or F Class competitive – compatibility across the complex as Bob and I talked about before. And I think we’re engaged in a lot of dialogue and conversations with significant relationships in the industry today about joining their fee based platforms.

One that’s about to be eminently announced and another that should be announced towards the end of the year. So we continue to recognize that there is going to be an evolution towards fee based over time and positioning ourselves competitively in terms of the absolute level of our fees, but also in terms of the various offerings that we have in that space is critical.

I think it also dovetails into some of the things that we’re doing from a product development initiative where we’re looking at active ETF capabilities and how we might be able to take advantage of that opportunity because clearly ETFs tend to play more towards a fee base in that type of environment, but I think irrespective of whether or not the regulators disembed commissions, we’re evolving and the industry is evolving very rapidly towards fee based and we feel we’re well positioned for that both in terms of were we’re focused on from a channel standpoint, the different products that we’re looking at in terms of launch and also the different pricing options that we have.

And Paul, it’s Bob. Just to put a final point on it with respect to your last comment on revenue rate and margin.

Yes, it will reduce our revenue rate going forward, but I think the impact on margin is really more of a function of AUM growth over pricing. We’ve got the capacity in house actually to find new growth.

So to the extent we’re bringing on new volume albeit at a lower revenue rate, our margins will actually increase and expand.

Okay, well that probably makes sense given where you are. And final question, this one is a bit of an open ended question, but you stated and I can also see the trend towards fee based accounts and an asset consolidation through fee discounted products.

So why do think the industry is moving in that direction today? Is it influenced at all by CRM2?

Do you think it’s influenced at all by the potential than [ph] on embedded compensation? Or do you think it’s just competitive dynamics?

Well, I think it’s influenced. If you look down so, and the trend down there has been aggressive move towards fee-based over the last five to ten years, I think for a number of reasons, but primarily it’s driven by, I always look at this as what are the – what’s the client influence and also in terms of our clients, the advisors and the dealer firms profitability, the fee base tends to be a more profitable model for our advisor base and it also tends to align more with what the end client particularly in different wealth segments.

So, I think it’s less influenced by CRM2 because a lot of the – the increased share of fee base was already starting to take place in Canada well before CRM2. I think it’s just an extension of that, I just think it’s an extension of how the advisors do business, how firms want to do business with their clients, and lastly how the end clients want to do business themselves.

But what I would say is that it’s different strokes for different folks and we have relationships where we have the traditional model that works equally well for their dealerships and their clients as well. So, I think it comes down to a thing that Blake echoed before and we've echoed where.

It's all about choice of how the clients want to do business and how dealers firms want to do business with them.

Okay. Thank you very much for your thoughts.

Good morning guys. Just one the retail side, you know, despite a seasonally strong RSP season, the redemptions seemed a bit high.

Was there a particular asset class in the quarter that impacted redemptions in the quarter? Or how do we kind of read that and look at the outlook for the balance of the year?

I think, when I look at this quarter, I think you have to look at – if you look at the industry in terms of ethics reported net sales for December, January, and February, you compare them to the equivalent period for the prior year, long-term net fund flows are basically flat for these three months in aggregate. And therefore I look at it in terms of our 20% improvement relative to that flat industry period.

And I also look at it in context of some of our competitors during the RSP season in particular, January and February have had a drop off in gross sales and some fairly drop off – significant drop off in net flows as well. So we look at it both in terms of the absolute numbers in the industry in terms of our relative competitiveness within the independent space.

In terms of the remainder of the prior year, I look at it in the context of its going to depend significantly on how the markets performed and it’s always the contributing factor. So I start with that, but I would expect to see the continued type of steady improvement that we've had in the past going forward and that’s being supplemented with the recognition of performance is improving.

And just as a third note, we mentioned in the press release about the brand study. One of the outputs of that brand study was that more advisors have stated that they are looking to do more business with us in the future than stated in the equivalent study in the prior year, so we're encouraged by that as well and we're encouraged by conversations that we're having with some of our most significant strategic partners and as Blake talked about the direction at two of our partners in particular in terms of gross sales and net flow trajectory improvement.

Is that the Credo Consulting thing that was described in the MD&A?

I think that is in the survey.

Is that the first time you guys did that survey? Or is this something that's annual that you guys did?

It is an annual survey and just to give you a frame work last year when we participated in that survey, there was 31 industry competitors surveyed and we were ranked 28th, this year there was 34 and we were ranked 16th, so significant improvement in perception.

Okay.

And we were the number one ranked in terms of standings improvement and score improvement over the 12 months.

Okay. And I know this might be a tough question and maybe it's for Blake, but on the retail side, it seems like redemptions are still continuing.

And it seems like it’s – the transfer from our look legacy A high class does into F class and high net worth is probably a bit slower than your competing partners and probably some of that money is coming out the door. There is a lot of that maybe the fee structure on some of these products, particularly maybe the income and balance stuff where yields are very low in this environment and you're starting to see some of your competitors and some of the banks lower fees in those product asset classes?

Yes, I think that – probably Gordon already answered that. And what I would add is in terms of the redemption, Scott I think almost 50% of our year-to-date retail net redemptions are attributable to five funds.

And so that’s obviously a high concentration. What I would say is that that those five funds is that – four of the five are in categories where in the industry that are net redemption, so that’s not helping.

And then what I would also add is that in general type of performance that's still a factor influencing our overall net redemptions and gross sales. So, I think it's a lot less about how we're – our F share percentage of our business and more around legacy performance at this point in time which as Kevin highlighted on the three year, we’re seeing improvement there.

Thank you very much everyone for joining us on today’s call. Our next earnings call will take place on June 24, 2015 when we will review our second quarter results for fiscal 2015.

Details of that 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 and with that good day everyone.