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Davis + Henderson Reports Second Quarter 2009 Results

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TSX Stock Symbol: "DHF.UN".
Website: www.dhltd.com
>>

TORONTO, July 28 /CNW/ - Davis + Henderson reported solid financial
results for the three months and six months ended June 30, 2009.

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Second Quarter Highlights

- Revenue was $94.6 million, a decrease of $0.9 million, or 0.9%, as
compared to the same quarter in 2008.

- EBITDA(1) was $32.5 million, a decrease of $1.6 million, or 4.7%, as
compared to the same quarter in 2008.

- Adjusted income(1) was $27.0 million, a decrease of $1.5 million, or
5.4%, as compared to the same quarter in 2008.

- Net income was $25.2 million, a decrease of $0.1 million, or 0.6%, as
compared to the same quarter in 2008.

- Cash distributions declared were $0.4599 per unit, an increase of
2.3%, compared to $0.4496 per unit for the second quarter of 2008.

Six-Month Highlights

- Revenue was $183.1 million for the first six months of 2009, an
increase of $0.3 million, or 0.1%, as compared to the same period in
2008.

- EBITDA(1) was $60.9 million for the first six months of 2009, a
decrease of $0.3 million, or 0.5%, as compared to the same period in
2008.

- Adjusted income(1) was $49.9 million for the first six months of
2009, a decrease of $0.3 million, or 0.6%, as compared to the same
period in 2008.

- Net income was $44.5 million, an increase of $3.3 million, or 7.9%,
as compared to the first six months of 2008.

- Cash distributions declared were $0.9198 per unit, a 4.7% increase,
compared to $0.8786 per unit for the same period in 2008.

(1) Davis + Henderson reports several non-GAAP measures, including EBITDA
and Adjusted income used above. Adjusted income is calculated as net
income, adjusted to remove the non-cash impacts of certain fair value
and purchase accounting items and future tax recoveries or expenses.
These items are excluded in calculating Adjusted income as they are
non-cash items and are not considered indicative of the financial
performance of the Business for the period being reviewed. Any non-
GAAP measures should be considered in context with the GAAP financial
presentation and should not be considered in isolation or as a
substitute for GAAP net earnings or cash flow. Further, Davis +
Henderson's measures may be calculated differently from similarly
titled measures of other companies. A reconciliation of these non-
GAAP measures to related GAAP measures is included in the attachments
to this quarterly report.
>>

Management Commentary

We were pleased with our quarterly and first half results. Positive
contributions from the inclusion of revenue from a small acquisition completed
late in 2008, together with several other incremental initiatives essentially
offset volume reductions attributed to the weaker economic environment. In
recognition of this difficult environment, we remained focused on cost
management activities. Year to date, EBITDA and Adjusted income were
approximately the same as compared to last year, a result that we consider
solid.
During this challenging period, we remained focused on advancing our
strategies, including expanding our business by way of selective acquisitions.
On July 27, 2009, we completed the acquisition of Resolve Business Outsourcing
Income Fund ("Resolve"). With this acquisition, we have strategically expanded
our service offerings, established market leading positions in several niche
markets and added to the capability of our overall business, all positive to
our business moving forward. For a more detailed description of this
transaction, refer to the "Subsequent Events" section below.
Looking forward, we expect the challenging economic conditions to remain.
Over the immediate future period, we will focus on integrating the business of
Resolve, executing our organic growth initiatives and continuing to diligently
manage costs. Beyond the immediate term, we believe that combining D+H and
Resolve will position the Business well in the markets we serve and allow us
to grow consistent with our long-term objectives.
For a more detailed discussion of second quarter results and management's
outlook, please see the Management's Discussion and Analysis below.

Caution Concerning Forward-looking Statements

This press release contains certain statements that constitute
forward-looking information within the meaning of applicable securities laws
("forward-looking statements"). Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Business, or developments in Davis
+ Henderson's industry, to differ materially from the anticipated results,
performance, achievements or developments expressed or implied by such
forward-looking statements. Forward-looking statements include all disclosure
regarding possible events, conditions or results of operations that are based
on assumptions about future economic conditions and courses of action.
Forward-looking statements may also include, without limitation, any statement
relating to future events, conditions or circumstances. Davis + Henderson
cautions you not to place undue reliance upon any such forward-looking
statements, which speak only as of the date they are made.
Risks related to forward-looking statements include, among other things,
challenges presented by declines in the use of cheques by consumers; the
Fund's dependence on a limited number of large financial institution customers
and dependence on their acceptance of new programs; strategic initiatives
being undertaken to meet the Fund's financial objective; stability and growth
in the real estate and mortgage markets; as well as general market conditions,
including economic and interest rate dynamics and investor interest in, and
government regulations relating to, income trusts. Forward-looking statements
are based on management's current plans, estimates, projections, beliefs and
opinions, and Davis + Henderson does not undertake any obligation to update
forward-looking statements should assumptions related to these plans,
estimates, projections, beliefs and opinions change.

Conference Call

Davis + Henderson will discuss its financial results for the second
quarter ended June 30, 2009 via conference call at 10:00 a.m. EST (Toronto
time) on Wednesday July 29, 2009. The number to use for this call is
416-644-3417 for Toronto area callers or 1-800-732-9303 for all other callers.
The conference call will be hosted by Bob Cronin, Chief Executive Officer and
by Catherine Martin, Chief Financial Officer. The conference call will also be
available on the web by accessing CNW Group's website
www.newswire.ca/webcast/. For anyone unable to listen to the scheduled call,
the rebroadcast number is: 416-640-1917 for Toronto area callers, or
1-877-289-8525 for all other callers, with reservation number 21310271
followed by the number sign (No.). The rebroadcast will be available until
Wednesday August 12, 2009. An archive recording of the conference call will
also be available at the above noted web address for one month following the
call and a text version of the call will be available at www.dhltd.com.

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's Discussion and Analysis ("MD&A") for the second quarter of
2009 should be read in conjunction with MD&A in Davis + Henderson Income
Fund's (the "Fund" or the "Company" or the "Business" or "Davis + Henderson")
Annual Report for the year ended December 31, 2008, dated February 24, 2009,
and the attached interim unaudited consolidated financial statements. External
economic and industry factors remain substantially unchanged from those
described in the annual MD&A and the Fund's most recently filed Annual
Information Form, unless otherwise stated.

STRATEGY

The Fund's financial goal is to deliver stable and modestly growing cash
distributions to unitholders by targeting annual revenue growth in the range
of 3% to 5% and maintaining margins. The Fund has three primary strategies to
meet this financial goal. These are to enhance the value of the Davis +
Henderson cheque supply program, to offer additional programs to serve the
chequing and credit card accounts, and to deliver services and solutions
within the lending services market. The Fund advances its strategies through
internal (or organic) initiatives, as well as by partnering with third parties
and by way of selective acquisitions.
In growing its cheque supply program, Davis + Henderson is focused on
increasing value by continuously introducing product design alternatives,
enhancing security components and combining other logical products and
services into convenient and valuable packages for chequing account holders.
Other Davis + Henderson programs that serve the chequing and/or credit
card account include a deposit program, which is directed towards small
business chequing account holders, and eSwitch®, a service that allows
financial institutions to more easily move electronic pre-authorized payments
and direct deposit authorizations between chequing accounts or credit card
accounts on behalf of account holders at the time of new account openings.
Through acquisitions, including the acquisition of Filogix in 2006, Davis
+ Henderson significantly expanded its offerings to the lending services
market. Currently, Davis + Henderson, through Filogix, offers a comprehensive
range of technology and other business solutions, which together the Company
refers to as credit lifecycle management services. These offerings include
technology, processing and professional services related to the mortgage,
consumer, small business, commercial and industrial finance areas.
In July 2009, the Business' strategy was further advanced with the
acquisition of Resolve. The Company looks to expand the services of Resolve
through combining the capabilities of the D+H Segment and Filogix Segment
together with those of Resolve to provide increased value for customers. For
further details, refer to the "Subsequent Events" section.
In 2007, changes were made to the Income Tax Act that will require
certain income trusts, including the Fund, to pay taxes after fiscal 2010,
similar to those paid by taxable Canadian corporations. The payment of such
taxes will, in the future, reduce the cash flow of the Fund, thereby reducing
the amount available for distribution to unitholders. Since the announcement
of this change in tax legislation, management and the Trustees have monitored
the changes in the income trust environment and capital markets and continue
to review potential impacts on the Fund's current strategies and the
alternatives available to the Fund, consistent with protecting and enhancing
unitholder value.

FINANCIAL INFORMATION PRESENTATION

The Fund operates in two business segments, the "Davis + Henderson or D+H
Segment" and the "Filogix Segment". The Davis + Henderson Segment includes the
cheque supply program, deposit program, and eSwitch, among other offerings.
The Filogix Segment includes services related to the origination and
underwriting of mortgages in Canada, the personal property, search and
registration ("PPSA") program, and, with the addition of Cyence in late 2008,
technology solutions related to consumer, small business, commercial and
industrial finance loans, among other offerings. Corporate expenses have also
been segmented and include expenditures related to public company activities,
a share of executive corporate management costs, corporate development costs
and certain other business-wide costs.
Effective December 31, 2008, the D+H Segment ceased providing service
under a U.S. cheque supply contract. As a result, the 2008 revenues and
expenses related to the U.S. operations have been removed from the operating
results of continuing operations and have been reclassified as discontinued
operations for the comparative prior periods presented.

OPERATING RESULTS FOR THE SECOND QUARTER - CONSOLIDATED

The following table is derived from and should be read in conjunction
with, the Consolidated Statements of Income and includes non-GAAP measures.
Management believes this supplementary disclosure provides useful additional
information. See Non-GAAP Measures section for a discussion of non-GAAP terms
used.

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Consolidated Operating and Financial Results
(in thousands of Canadian dollars, except per unit amounts, unaudited)

Three months ended Six months ended
June 30, June 30,
2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue $ 94,557 $ 95,407 $ 183,086 $ 182,819
Expenses 62,080 61,334 122,171 121,601
-------------------------------------------------------------------------
EBITDA(1) 32,477 34,073 60,915 61,218

Amortization of capital
assets and non-acquisition
intangibles 3,679 3,771 7,498 7,519
Interest expense 1,787 1,754 3,534 3,510
-------------------------------------------------------------------------

Adjusted income(1) 27,011 28,548 49,883 50,189

Amortization of mark-to-market
adjustment of interest-rate
swaps 136 152 272 259
Net unrealized loss (gain)
on interest-rate swaps(2) (1,069) (1,034) (878) 1,310
Future income tax expense
(recovery) (718) 766 (782) 766
Amortization of intangibles
from acquisition 3,441 3,447 6,815 6,895
-------------------------------------------------------------------------

Income from continuing
operations 25,221 25,217 44,456 40,959
Income from discontinued
operations(3) - 149 - 247
-------------------------------------------------------------------------
Net income $ 25,221 $ 25,366 $ 44,456 $ 41,206
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted income per unit,
basic and diluted(1) $ 0.6146 $ 0.6496 $ 1.1351 $ 1.1420

Net income per unit,
basic and diluted $ 0.5739 $ 0.5772 $ 1.0116 $ 0.9376
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Three months ended Six months ended
June 30, June 30,
2009 vs. 2008 2009 vs. 2008
% change % change
-------------------------------------------------------------------------
Revenue -0.9% 0.1%
EBITDA(1) -4.7% -0.5%
Adjusted income per unit(1) -5.4% -0.6%
Net income per unit -0.6% 7.9%
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) EBITDA and Adjusted income are non-GAAP terms. Please see Non-GAAP
Measures section for a more complete description of these terms.
(2) The Business enters into contracts to fix the interest rates on a
significant portion of its outstanding bank debt. For accounting
purposes, these interest-rate swaps are not considered hedges and,
accordingly, any change in the fair value of these contracts is
recorded through income. Provided the Business does not cancel its
interest-rate swap contracts, the amounts represent a non-cash
unrealized gain or loss that will subsequently reverse through
income.
(3) Effective December 31, 2008, the Fund ceased providing services under
a U.S. cheque supply contract. As a result, the U.S. operations
related to the service of this contract have been classified as
discontinued operations.
>>

Revenue

Consolidated revenue for the second quarter was $94.6 million, a decrease
of $0.9 million, or 0.9%, compared to the same quarter in 2008. The decrease
is primarily attributable to the economic slow down which has negatively
impacted small business demand for cheque orders within the D+H Segment and
revenues from mortgage origination fees within the Filogix Segment. These
decreases in revenue were primarily offset by the inclusion of the results of
the Cyence business acquired late in 2008 and other positive initiatives.
For the first six months of 2009, total revenue increased by $0.3
million, or 0.1%, compared to the first six months of 2008 with the inclusion
of the Cyence business and other organic initiatives, offsetting the decreases
due to the impacts of the economic slow down referred to above.
Results for both segments are discussed in more detail in the sections
that follow.

Expenses

On a consolidated basis, expenses for the second quarter of 2009
increased by $0.7 million, or 1.2%, compared to the same quarter in 2008. For
the first half of 2009, consolidated expenses increased by $0.6 million, or
0.5%, when compared to the first half of 2008. The net increase was due to the
inclusion of the expense base of the Cyence business, largely offset by
reduced costs related to company-wide cost reduction initiatives and decreases
related to lower business order volume, as more fully described below.

Amortization of Capital and Non-acquisition Intangible Assets

Amortization of capital and non-acquisition intangible assets decreased
by $0.1 million, or 2.4% when compared to the second quarter of 2008. This
decrease related to certain capital and other assets having become fully
amortized. For the first six months of 2009, amortization of capital and
non-acquisition intangible assets were substantially unchanged.

Other Expenses

Interest expense for the second quarter of 2009 was substantially
unchanged compared to the prior year, with the impact of an increase in the
level of outstanding debt offset by lower interest rates. The Business
partially financed its acquisition of Cyence by borrowing on its credit
facility. Similarly, for the first six months of 2009, interest expense was
substantially unchanged.
Amortization of mark-to-market adjustment of interest-rate swap refers to
the amortization of net losses in fair market value of interest-rate swaps
that were deferred prior to January 1, 2007. Commencing January 1, 2007, the
Business no longer designated its interest-rate swaps as hedges for accounting
purposes.
An unrealized gain on interest-rate swaps of $1.1 million was recognized
in the second quarter of 2009 (Q2 2008 - $1.0 million gain), reflecting
mark-to-market adjustments related to changes in market interest rates at June
30 as compared to March 31 for both periods. For the six months ended June 30,
2009, an unrealized gain on interest-rate swaps of $0.9 million was recorded
(six months ended June 30, 2008 - unrealized loss of $1.3 million), reflecting
mark-to-market adjustments related to changes in market interest rates at June
30, 2009 as compared to December 31, 2008. These unrealized gains and losses
are recognized in income as these swaps are not designated as hedges for
accounting purposes. Provided the business does not cancel its interest-rate
swap contracts, the amounts represent a non-cash unrealized gain or loss that
will subsequently reverse through income as the related swaps mature.
Most income earned by the Business and distributed annually to
unitholders is not subject to taxation in the Fund, but is taxed at the
individual unitholder level. The Fund and its subsidiaries do not anticipate
paying taxes until 2011, as long as all taxable income generated by the Fund
is paid to unitholders in the form of distributions. In 2011 and subsequent
years, the Fund will pay a tax on its income that is distributed to its
unitholders at a rate similar to that paid by taxable corporations. The Fund
does recognize future income tax assets and liabilities, with a corresponding
impact on future income tax expense or recovery based on temporary differences
expected to reverse after December 31, 2010 and for temporary differences in
businesses in corporate form. These include the entities purchased with the
acquisition of the Cyence business. In the second quarter of 2009, the Fund
recorded a future tax recovery of $0.7 million (second quarter 2008 - $0.8
million expense). For the six months ended June 30, 2009, the Fund recorded a
future tax recovery of $0.8 million (six months ended June 30, 2008 - $0.8
million expense).
Amortization of acquisition related intangibles for the second quarter
and first six months of 2009 was comparable to the same periods in 2008. The
increase in amortization related to the incremental intangible assets arising
on the acquisition of the Cyence business was offset by reductions related to
certain intangible assets having become fully amortized.

Income from Discontinued Operations

Effective December 31, 2008, the Fund ceased providing services under a
U.S. cheque supply contract. As a result, the 2008 operating results from the
U.S. operations related to the service of this contract have been classified
as discontinued operations.

Net Income

Net income of $25.2 million for the second quarter of 2009 decreased by
$0.1 million, or 0.6%, compared to the same period in 2008. On a per unit
basis, net income per unit of $0.5739 decreased by $0.0033 compared with the
second quarter of 2008. For the six-month period ended June 30, 2009, net
income was $44.5 million, or $1.0116 per unit. This represents an increase of
$3.3 million, or $0.0740 per unit. Excluding the non-cash impacts of
mark-to-market gains and losses on interest-rate swaps, future income taxes
and amortization of intangibles from acquisitions, Adjusted income decreased
by $1.5 million, or 5.4%, in the second quarter of 2009 and $0.3 million, or
0.6% during the first six months of 2009 over the same periods in the prior
year.

<<
Operating Results by Business Segment
(in thousands of Canadian dollars, unaudited)

Revenue $ 74,013 $ 76,090 $ 20,544 $ 19,317
Expenses 48,615 50,282 12,436 10,229
-------------------------------------------------------------------------
EBITDA(1) 25,398 25,808 8,108 9,088

Amortization of capital
assets and non-acquisition
intangibles 1,991 2,495 1,688 1,276
Interest expense - - - -
-------------------------------------------------------------------------

Adjusted income (loss)(1) 23,407 23,313 6,420 7,812

Amortization of
mark-to-market adjustment
of interest-rate swaps - - - -
Net unrealized loss (gain)
on interest-rate swaps(2) - - - -
Future income tax expense
(recovery) - - - -
Amortization of intangibles
from acquisition 197 723 3,244 2,724
-------------------------------------------------------------------------
Income (loss) from
continuing operations 23,210 22,590 3,176 5,088
Income (loss) from
discontinued operations(3) - 149 - -
-------------------------------------------------------------------------
Net income (loss) $ 23,210 $ 22,739 $ 3,176 $ 5,088
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Revenue $ - $ - $ 94,557 $ 95,407
Expenses 1,029 823 62,080 61,334
-------------------------------------------------------------------------

EBITDA(1) (1,029) (823) 32,477 34,073

Amortization of capital
assets and non-acquisition
intangibles - - 3,679 3,771
Interest expense 1,787 1,754 1,787 1,754
-------------------------------------------------------------------------

Adjusted income (loss)(1) (2,816) (2,577) 27,011 28,548

Amortization of
mark-to-market adjustment
of interest-rate swaps 136 152 136 152
Net unrealized loss (gain)
on interest-rate swaps(2) (1,069) (1,034) (1,069) (1,034)
Future income tax expense
(recovery) (718) 766 (718) 766
Amortization of intangibles
from acquisition - - 3,441 3,447
-------------------------------------------------------------------------
Income (loss) from
continuing operations (1,165) (2,461) 25,221 25,217
Income (loss) from
discontinued operations(3) - - - 149
-------------------------------------------------------------------------
Net income (loss) $ (1,165) $ (2,461) $ 25,221 $ 25,366
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Revenue $ 146,840 $ 149,138 $ 36,246 $ 33,681
Expenses 96,646 98,886 23,617 21,300
-------------------------------------------------------------------------
EBITDA(1) 50,194 50,252 12,629 12,381

Amortization of capital
assets and non-acquisition
intangibles 4,035 5,006 3,463 2,513
Interest expense - - - -
-------------------------------------------------------------------------

Adjusted income (loss)(1) 46,159 45,246 9,166 9,868

Amortization of
mark-to-market adjustment
of interest-rate swaps - - - -
Net unrealized loss (gain)
on interest-rate swaps(2) - - - -
Future income tax expense
(recovery) - - - -
Amortization of intangibles
from acquisition 337 1,447 6,478 5,448
-------------------------------------------------------------------------
Income (loss) from
continuing operations 45,822 43,799 2,688 4,420
Income (loss) from
discontinued operations(3) - 247 - -
-------------------------------------------------------------------------
Net income (loss) $ 45,822 $ 44,046 $ 2,688 $ 4,420
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Revenue $ - $ - $ 183,086 $ 182,819
Expenses 1,908 1,415 122,171 121,601
-------------------------------------------------------------------------
EBITDA(1) (1,908) (1,415) 60,915 61,218

Amortization of capital
assets and non-acquisition
intangibles - - 7,498 7,519
Interest expense 3,534 3,510 3,534 3,510
-------------------------------------------------------------------------

Adjusted income (loss)(1) (5,442) (4,925) 49,883 50,189

Amortization of
mark-to-market adjustment
of interest-rate swaps 272 259 272 259
Net unrealized loss (gain)
on interest-rate swaps(2) (878) 1,310 (878) 1,310
Future income tax expense
(recovery) (782) 766 (782) 766
Amortization of intangibles
from acquisition - - 6,815 6,895
-------------------------------------------------------------------------
Income (loss) from
continuing operations (4,054) (7,260) 44,456 40,959
Income (loss) from
discontinued operations(3) - - - 247
-------------------------------------------------------------------------
Net income (loss) $ (4,054) $ (7,260) $ 44,456 $ 41,206
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Operating Results - D+H Segment

Revenue
>>

Revenue within the Davis + Henderson Segment for the second quarter of
2009 decreased by $2.1 million, or 2.7%, compared with the same period in
2008. For the six-month period ended June 30, 2009, revenue within the Davis +
Henderson Segment decreased by $2.3 million, or 1.5%, compared to the same
period in 2008.
Revenue decreased in both the second quarter and first six months of 2009
due to lower cheque order volumes, particularly related to small business
demand for our cheque products, partially offset by annual program changes and
product and service enhancements, such as IDefence® and BizAssist®, which
positively impacted revenues in the second quarter and first six months of
2009.
Management believes that cheque orders from small business consumers were
negatively impacted by the economic downturn, which both reduced cheque usage
by existing businesses and reduced the number of small business start-ups. In
general, not withstanding the larger than anticipated decline in the first
half 2009 volumes, management believes that the long-term historical trend
related to cheque order decline is unchanged and continues to be in the low
single digits.

Expenses

Expenses within the Davis + Henderson Segment for the second quarter of
2009 decreased by $1.7 million, or 3.3%, compared to the same period in 2008.
For the first-six months of 2009, expenses decreased by $2.2 million, or 2.3%.
Expenses decreased in both the second quarter and first six months of
2009 primarily as the result of reduced costs related to the decline in cheque
order volumes, the implementation of expense reduction measures, and reduced
compensation related to incentive plans. In addition, a greater proportion of
executive corporate management costs and certain other business-wide costs
have been allocated to the Corporate Segment, reflecting the centralization of
selected corporate functions and a reallocation of resources to focus on
corporate development activities.

<<
Operating Results - Filogix Segment

Revenue
>>

Revenue in the Filogix Segment for the second quarter of 2009 increased
by $1.2 million, or 6.4%, over the same period in 2008. Revenue for the second
quarter included the results of the Cyence business which was acquired in late
2008. Excluding the Cyence business, revenue decreased approximately 10.1%
compared with the same period in 2008 primarily as a result of the reduced
origination services revenue, a decrease in revenues from project
implementation and customization services and the receipt, in 2008, of a
one-time licensing fee for use of the Business' underwriting technology in the
Australian and New Zealand marketplaces.
Similarly, revenue for the first six months of 2009 increased by $2.6
million, or 7.6% over the same period in 2008. Excluding the Cyence business,
revenue decreased 12.5% compared to the same period in 2008.
A significant component of the Filogix Segment revenue is derived from
services related to the origination of mortgages. The volume of origination
transactions is driven by new mortgages and, in the case of broker-originated
transactions, also by refinancing and renewal of existing mortgages. As such,
while the Filogix Segment revenue is impacted by changes in housing market
activity, negative market impacts are partially mitigated by refinancing and
renewal activity. Consistent with reduced activities in the real estate and
mortgage markets, origination services revenues were down 4% and 9%,
respectively for the second quarter and first six months of 2009 compared to
the same periods last year. Management believes that reduction in the decline
in origination services in the second quarter compared to the first quarter
was supported by increased home sales and refinancing activity attributed to
increased affordability, lower interest rates and seasonal activity. Revenues
for the Cyence business were consistent with management's expectations.

Expenses

Expenses for the Filogix Segment increased by $2.2 million, or 21.6%, in
the second quarter of 2009 and $2.3 million, or 10.9% for the six months ended
June 30, 2009, compared with the same periods in 2008. The year-over-year
increases in expenses during the second quarter of 2009 and the first six
months of 2009 was primarily due to the inclusion of the Cyence expense base,
partially offset by expense reduction measures including fewer personnel and
reduced variable partner fees, although the latter was a smaller factor in the
second quarter. The EBITDA of the Filogix Segment in the second quarter of
2009, as compared to 2008, was positively impacted by the contribution from
expense reduction initiatives and fees on the implementation of new services,
offset by a reduction in high margin services including lower origination
services volumes and no equivalent licensing fee to that recorded in the
second quarter of 2008.

Operating Results - Corporate Segment

Expenses within the Corporate Segment increased by $0.2 million for the
second quarter of 2009 and $0.5 million for the first six months of 2009,
respectively compared with the same periods in the prior year. The increase in
both periods reflects centralization of selected corporate functions and an
increase in corporate development activities.

<<
EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME - SUMMARY
(in thousands of Canadian dollars, except per unit amounts, unaudited)

2009 2008
Q2 Q1 Q4 Q3
-------------------------------------------------------------------------
Revenue $ 94,557 $ 88,529 $ 89,357 $ 95,055
Expenses 62,080 60,091 62,413 61,664
-------------------------------------------------------------------------

EBITDA(1) 32,477 28,438 26,944 33,391

Amortization of capital
assets and non-acquisition
intangibles 3,679 3,819 3,800 4,219
Interest expense 1,787 1,747 1,647 1,690
Minority interest - - - -
-------------------------------------------------------------------------

Adjusted income(1) 27,011 22,872 21,497 27,482

Amortization of
mark-to-market adjustment
of interest-rate swaps 136 136 151 151
Net unrealized loss (gain)
on interest-rate swaps(2) (1,069) 191 3,653 728
Future income tax expense
(recovery) (718) (64) 399 52
Amortization of intangibles
from acquisition 3,441 3,374 3,409 3,412
-------------------------------------------------------------------------
Income from continuing
operations 25,221 19,235 13,885 23,139
Income from discontinued
operations(3) - - 51 167
-------------------------------------------------------------------------
Net income $ 25,221 $ 19,235 $ 13,936 $ 23,306
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted income per unit,
basic and diluted(1) $ 0.6146 $ 0.5204 $ 0.4892 $ 0.6253

Net income per unit,
basic and diluted $ 0.5739 $ 0.4377 $ 0.3172 $ 0.5303
-------------------------------------------------------------------------
-------------------------------------------------------------------------

2008 2007
Q2 Q1 Q4 Q3
-------------------------------------------------------------------------

Revenue $ 95,407 $ 87,412 $ 88,641 $ 92,724
Expenses 61,334 60,267 62,075 61,695
-------------------------------------------------------------------------
EBITDA(1) 34,073 27,145 26,566 31,029

Amortization of capital
assets and non-acquisition
intangibles 3,771 3,748 3,970 3,809
Interest expense 1,754 1,756 1,713 1,819
Minority interest - - (139) 205
-------------------------------------------------------------------------

Adjusted income(1) 28,548 21,641 21,022 25,196

Amortization of
mark-to-market adjustment
of interest-rate swaps 152 107 163 163
Net unrealized loss (gain)
on interest-rate swaps(2) (1,034) 2,344 823 957
Future income tax expense
(recovery) 766 - 137 -
Amortization of intangibles
from acquisition 3,447 3,448 3,386 3,347
-------------------------------------------------------------------------
Income from continuing
operations 25,217 15,742 16,513 20,729
Income from discontinued
operations(3) 149 98 109 147
-------------------------------------------------------------------------
Net income $ 25,366 $ 15,840 $ 16,622 $ 20,876
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted income per unit,
basic and diluted(1) $ 0.6496 $ 0.4924 $ 0.4784 $ 0.5733

Net income per unit,
basic and diluted $ 0.5772 $ 0.3604 $ 0.3782 $ 0.4750
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Fund has generally reported quarterly revenues that are stable and
growing when measured on a year-over-year basis. Measured on a
quarter-over-quarter basis, revenues can vary as they are subject to
seasonality and are generally stronger in the second and third quarter of each
year. As a result of the weakening economic environment, commencing in the
later part of 2008, the Business has experienced reduced mortgage origination
fees and lower small business cheque order volumes as previously described.
Adjusted income per unit has generally been trending consistently with
changing revenue. Net income has been more variable as it has been
significantly affected by the variability in the changes in non-cash items
such as mark-to-market adjustments on interest-rate swaps and future income
tax provisions.

CASH FLOW AND LIQUIDITY

The following table is derived from, and should be read in conjunction
with, the Consolidated Statements of Cash Flows and includes non-GAAP
measures. Management believes this supplementary disclosure provides useful
additional information related to the cash flows of the Fund, repayment of
debt and other investing activities. See Non-GAAP Measures section for a
discussion of non-GAAP terms used.

<<
Summary of Cash Flows(1)
(in thousands of Canadian dollars, unaudited)

Three months ended Six months ended
June 30, June 30,
2009 2008 2009 2008
-------------------------------------------------------------------------

Cash flows from operating
activities $ 27,173 $ 32,623 $ 40,188 $ 49,146

Add:
Changes in non-cash working
capital and other items(2) 3,517 (82) 17,193 8,955
-------------------------------------------------------------------------
Adjusted cash flows from
operating activities 30,690 32,541 57,381 58,101

Less:
Maintenance asset
expenditures(3) 1,397 2,296 2,699 3,313
Growth asset expenditures(3) 794 666 1,338 666
Contract payments(4) 300 - 2,817 1,517
-------------------------------------------------------------------------
Adjusted cash flows after
capital expenditures
and contract payments(3) 28,199 29,579 50,527 52,605

Less:
Distributions paid to
unitholders 20,211 19,305 40,422 38,158
-------------------------------------------------------------------------
7,988 10,274 10,105 14,447

Cash flows provided by
(used in) other financing
activities (2,000) (5,000) (2,000) (5,000)
Cash flows used in
acquisitions 103 - 163 (4,250)
Changes in non-cash working
capital and other items(2) (3,517) 82 (17,193) (8,955)
-------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents for
the period $ 2,574 $ 5,356 $ (8,925) $ (3,758)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) The subtotals in this table are not consistent with GAAP and
accordingly are considered non-GAAP measures. Please see Non-GAAP
Measures section for a more complete discussion of non-GAAP terms.
(2) Changes in non-cash working capital and certain other balance sheet
items have been excluded from adjusted cash flows from operating
activities so as to remove the effects of timing differences in cash
receipts and cash disbursements, which generally reverse themselves
but can vary significantly across quarters. For details, see the
Changes in Non-Cash Working Capital and Other Items section.
(3) Maintenance asset expenditures are defined by the Fund as asset
expenditures necessary to maintain and sustain the current productive
capacity of the Business or generally improve the efficiency of the
Business. Growth asset expenditures are defined by the Fund as asset
expenditures that increase the productive capacity of the Business
with a reasonable expectation of an increase in cash flow.
(4) The Business has various payment obligations under customer and
partner contracts, which include fixed contract or program initiation
payments and annual payments payable over the life of the contract.
The aggregate of all contract payments, both fixed and variable,
reflects, among other things, the high degree of integration and
sharing between Davis + Henderson and its customers and partners of
the many activities related to ordering, data handling, customer
service, customer access and other activities.

Summary of Cash Flows per Unit
(in Canadian dollars, unaudited)

Three months ended
June 30,
2009 2008 % change
-------------------------------------------------------------------------
Adjusted cash flows from operating
activities $ 0.6983 $ 0.7405 -5.7%
Adjusted cash flows after capital
expenditures and contract payments $ 0.6417 $ 0.6731 -4.7%
Distributions paid to unitholders $ 0.4599 $ 0.4393 4.7%
Cash distributions declared
during period $ 0.4599 $ 0.4496 2.3%
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Six months ended
June 30,
2009 2008 % change
-------------------------------------------------------------------------
Adjusted cash flows from operating
activities $ 1.3057 $ 1.3221 -1.2%
Adjusted cash flows after capital
expenditures and contract payments $ 1.1497 $ 1.1970 -4.0%
Distributions paid to unitholders $ 0.9198 $ 0.8683 5.9%
Cash distributions declared
during period $ 0.9198 $ 0.8786 4.7%
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cash Flows, Income and Distributions Paid

The following table compares cash flows from operating activities and
income to distributions paid:

Three Six
months months Year Year
ended ended ended ended
June June December December
(in thousands of Canadian 30, 30, 31, 31,
dollars, unaudited) 2009 2009 2008 2007
-------------------------------------------------------------------------

Cash flows from
operating activities $ 27,173 $ 40,188 $ 116,062 $ 117,401
Net income $ 25,221 $ 44,456 $ 78,448 $ 82,239
Adjusted income(1) $ 27,011 $ 49,883 $ 99,168 $ 96,499
Distributions paid
during period $ 20,211 $ 40,422 $ 78,580 $ 78,357
Excess (shortfall) of cash
flows from operating
activities over cash
distributions paid $ 6,962 $ (234) $ 37,482 $ 39,044
Excess (shortfall) of net
income over cash
distributions paid $ 5,010 $ 4,034 $ (132) $ 3,882
Excess (shortfall) of
Adjusted income over cash
distributions paid $ 6,800 $ 9,461 $ 20,588 $ 18,142

-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Adjusted income is a non-GAAP term. See Non-GAAP Measures section for
a more complete description of this term.
>>

Historically, excess cash flows from operating activities over cash
distributions paid have been used to fund capital expenditures, pay down debt
and to fund acquisitions. During the first six months of 2009, cash flow from
operating activities was less than cash distributions paid as $17.6 million of
cash was applied to fund reductions in non-cash working capital. The
application of this cash reflects the reversing of the growth in cash balances
from the fourth quarter of 2008, and also includes payments made pursuant to
multi-year incentive compensation plans.

Expenditures on Capital Assets and Contract Payments

Total capital asset expenditures for the second quarter of 2009 were $2.2
million, a decrease of $0.8 million compared to the same period in 2008. The
Filogix Segment expenditures decreased $0.7 million over the same period last
year, while the Davis + Henderson Segment expenditures were down $0.1 million.
For the first six months of 2009, total capital expenditures increased by
$0.1 million compared to the first six months of 2008. The Filogix Segment,
which now includes the Cyence capital program, accounted for $0.8 million of
the increase, primarily growth capital, partially offset by a $0.7 million
decrease in the Davis + Henderson Segment.
Additionally, fixed contract payments increased in the second quarter of
2009 and first six months of 2009, as compared to 2008.
The fluctuations in both segments in the three and six month periods
ended June 30, 2009 reflects the timing of capital project expenditures, and
does not reflect a change in the expected overall capital expenditures program
for the year. The Business' capital program provides for continued
expenditures to be funded by cash flows from operations.

Distributions

The Trustees of the Fund establish distribution levels of the Fund with
reference to its financial position, the historical results, projected
performance of the business and funds required for potential acquisitions. The
Fund intends to make monthly cash distributions of its adjusted cash flows
after capital asset and contract expenditures, subject to working capital
requirements, debt repayments and other reserves.
The Fund paid cash distributions of $20.2 million ($0.4599 per unit)
during the second quarter of 2009 and $40.4 million ($0.9198 per unit) in the
first six months of 2009 compared to $19.3 million ($0.4393 per unit) and
$38.2 million ($0.8683 per unit) in the same periods in 2008. On a per unit
basis, for the three and six months ended June 30, 2009, distributions paid
increased by 4.7% and 5.9%, and distributions declared by 2.3% and 4.7%,
respectively, when compared to the same periods in 2008.
On an annualized basis, the monthly cash distribution rate for June 2009
was $1.84 per unit, unchanged compared to June 2008.
Distributions paid can be different than distributions declared during a
period. Monthly distributions are declared by the Fund for unitholders of
record on the last business day of each month and are paid within 31 days
following each month end. In the second quarter of 2009, these amounts were
the same.
In general, mutual fund trusts, like the Fund, must distribute all their
taxable income to their unitholders in order not to pay income taxes in the
trust. Historically, Davis + Henderson has paid distributions below the level
of adjusted cash flows after capital asset and contract expenditures generated
and has not paid taxes as the Business had excess tax deductions available to
eliminate taxable income.
The estimated tax allocation of distributions to be declared for 2009 is
100% "other income", as was the case for all of 2008.
The Fund may issue an unlimited number of trust units. Each trust unit is
transferable and represents an equal, undivided beneficial interest in any
distribution from the Fund and the net assets of the Fund. All units are of
the same class with equal rights and privileges and are not subject to future
calls or assessments. Each unit entitles the holder to one vote at all
meetings of unitholders. As at June 30, 2009 and December 31, 2008, 43,946,792
trust units were outstanding.

<<
Changes in Non-Cash Working Capital and Other Items
(in thousands of Canadian dollars, unaudited)

Three months ended Six months ended
June 30, June 30,
2009 2008 2009 2008
-------------------------------------------------------------------------

Decrease (increase) in non-
cash working capital items $ (3,724) $ 2,018 $ (17,609) $ (7,074)
Decrease (increase) in other
operating assets and
liabilities 207 (1,936) 416 (1,881)
-------------------------------------------------------------------------
Decrease (increase) in
non-cash working capital
and other items $ (3,517) $ 82 $ (17,193) $ (8,955)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

The increase in non-cash working capital items for the second quarter of
2009 was primarily related to increases in receivables reflecting normal
course timing differences of when sales are made. The increase in non-cash
working capital items for the first six months of 2009 also included a
significant decrease in payables in the first quarter reflecting normal course
timing differences of when payments are made, payments under certain
multi-year compensation programs and severance payments made during the
period. Most of the reduction in payables reflects a reversal of the growth in
payables in the fourth quarter of 2008.

Cash Balances and Long-term Indebtedness

At June 30, 2009, cash and cash equivalents totalled $3.1 million,
compared to $12.1 million at December 31, 2008. This decrease relates
primarily to the increase of non-cash working capital as described above and
to a voluntary debt repayment made in the second quarter.
The balance of long-term indebtedness as at June 30, 2009 was $146.0
million compared with $148.0 million at December 31, 2008. During the second
quarter of 2009, the Business made a voluntary debt payment of $2.0 million.
The long-term indebtedness is recorded on the Balance Sheet net of $0.5
million of unamortized deferred financing fees as at June 30, 2009.
Management expects to continue to use a portion of any excess cash flow
to pay down debt and fund acquisitions.
Total debt facilities available at June 30, 2009 were $170.0 million and
included a $120.0 million non-revolving term loan and a $50.0 million
revolving term credit facility. As of June 30, 2009, the Business had drawn
$120.0 million under the non-revolving term loan and $26.0 million under the
revolving term credit facility. The Business is permitted to draw on the
revolving facility's available balance of $24.0 million to fund capital
expenditures or for other general purposes.
The Credit Agreement contains a number of covenants and restrictions,
including the requirement to meet certain financial ratios and financial
condition tests. The financial covenants include a leverage test, a fixed
charge coverage ratio test, a minimum net worth test and a limit on the
maximum amount of distributions that may be made by Davis + Henderson Limited
Partnership to the Fund during each rolling, four-quarter period. Davis +
Henderson was in compliance with all of its financial covenants and financial
condition tests as of the end of its latest quarterly period. A copy of the
Credit Agreement is available at www.sedar.com.
As of June 30, 2009, the Fund had interest-rate swap hedge contracts in
place with certain of its lenders, such that the borrowing rates on 82.2% of
outstanding indebtedness are effectively fixed at the interest rates and for
the time periods ending as follows:

<<
(in thousands of Canadian dollars, unaudited)
-------------------------------------------------------------------------
Fair value of interest-rate swaps
-----------------------------------
Maturity Date Notional Amount Asset Liability Interest Rate(1)
-------------------------------------------------------------------------
July 15, 2009 $ 20,000 - $ 207 5.813%
July 15, 2010 33,000 - 1,749 5.815%
January 5, 2011 22,000 - 465 2.980%
June 15, 2011 20,000 - 1,537 5.685%
June 15, 2011 25,000 - 1,923 5.685%
-------------------------------------------------------------------------
$ 120,000 $ - $ 5,881
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) The listed interest rates are inclusive of bankers' acceptance fees
currently in effect. Such fees could increase or decrease depending
on the Fund's financial leverage as compared to certain levels
specified in the Credit Agreement.
>>

As at June 30, 2009, the Fund would have to pay the fair value of $5.9
million, the liability on the balance sheet, if it were to close out the
interest-rate swap contracts. It is not the present intention of management to
close out these contracts. The Fund expects to continue to enter into
interest-rate swaps for the purpose of hedging interest rates.
The Fund's remaining indebtedness is subject to floating interest rates
that may be funded either by way of prime-rate loans or through the issuance
of bankers' acceptance with maturities and interest rates which reset
typically in the one-month to three-month range.
The average effective interest rate applicable to the Fund's total
indebtedness was 4.56% as at June 30, 2009.
Cash flows from operations, together with cash balances on hand and
unutilized term credit facilities are expected to be sufficient to fund the
Business' operating requirements, asset expenditures, contractual obligations
and anticipated distributions.
The Company believes that its customers, suppliers and lenders, while
impacted by the current economic recession, will continue to operate with the
Company on similar terms to those currently in place. As well, while the
Company's products and services will be impacted by the changing economic
environment, the Company expects to remain profitable and generate positive
cash flow.
The Company has expanded into the lending services marketplace over the
past several years through acquisitions and we expect to continue to use an
acquisition strategy to expand in the future. As noted under the Subsequent
Events section below, the Company has successfully completed the acquisition
of Resolve through the issuance of additional units of the Fund and the
assumption of the acquiree's debt obligations.

Non-GAAP Measures

The information presented within the above tables include certain
adjusted financial measures such as Earnings before income taxes, depreciation
and amortization ("EBITDA") and "Adjusted income" (net income before certain
non-cash charges), "Adjusted cash flow after capital expenditures and contract
payments", all of which are not defined terms under Canadian generally
accepted accounting principles ("GAAP"). These non-GAAP financial measures are
derived from, and should be read in conjunction with, the Consolidated
Statements of Income and the Consolidated Statements of Cash Flow. Management
believes these supplementary disclosures provide useful additional information
related to the operating results of the Fund.
Management uses these subtotals as measures of financial performance and
as a supplement to the Consolidated Statements of Income and Consolidated
Statements of Cash Flow. Investors are cautioned that these measures should
not be construed as an alternative to using net income as a measure of
profitability or as an alternative to the GAAP Consolidated Statements of
Income or other GAAP statements. Further, the Fund's method of calculating
each balance may not be comparable to calculations used by other income trusts
bearing the same description.

EBITDA

In addition to its use by management as an internal measure of financial
performance, EBITDA is used to measure (with adjustments) compliance with
certain financial covenants under the Fund's credit facility. EBITDA is also
widely used by the Fund and others in assessing performance and value of a
business. EBITDA has limitations as an analytical tool, and the reader should
not consider it in isolation or as a substitute for analysis of results as
reported under GAAP.

Adjusted Income

Adjusted income is used as a measure of internal performance similar to
net income, but is calculated after removing the non-cash impacts of certain
fair value and purchase accounting items and future tax recoveries or
expenses. These items are excluded in calculating adjusted income as they are
non-cash items and not considered indicative of the financial performance of
the Business for the period being reviewed.

<<
Adjusted Cash Flows from Operating Activities and Adjusted Cash Flows
after Capital Expenditures and Contract Payments
>>

Certain subtotals presented within the cash flows table above, such as
"Adjusted cash flows from operating activities" and "Adjusted cash flows after
capital expenditures and contract payments", are not defined terms under GAAP.
Management uses these subtotals as measures of internal performance and as a
supplement to the Consolidated Statements of Cash Flows.

CHANGES IN ACCOUNTING POLICY

The Fund reviews all revisions to the Canadian Institute of Chartered
Accountants ("CICA") Handbook when issued. All revisions are considered and
applied by the effective date or earlier if practical. Effective January 1,
2009, the Fund adopted CICA Handbook Section 3064, Goodwill and Intangible
Assets. This section, which replaces Section 3062, Goodwill and Other
Intangible Assets, and Section 3450, Research and Development Costs,
establishes standards for the recognition, measurement and disclosure of
goodwill and intangible assets. The provisions relating to the definition and
initial recognition of intangible assets are equivalent to the corresponding
provision of International Financial Reporting Standard IAS 38, Intangible
Assets. The new standard also provides guidance for the recognition of
internally developed intangible assets, including assets developed from
research and development activities, ensuring consistent treatment of all
intangible assets, whether separately acquired or internally developed. The
Fund has evaluated the impact of adopting Section 3064 and has reclassified
all software and its related amortization from capital assets to intangible
assets. For a more detailed discussion of this change and its related impact,
refer to Note 1 to the attached unaudited interim consolidated financial
statements.

Future Accounting and Reporting Changes

International Financial Reporting Standards - The Accounting Standards
Board of Canada (AcSB) plans to converge Canadian GAAP for publicly
accountable enterprises with International Financial Reporting Standards
(IFRS) over a transition period that will end effective January 1, 2011 with
the adoption of IFRS. The AcSB announced on February 13, 2009 thatIFRS will be
required in 2011 for publicly accountable profit-oriented enterprises. The
changeover date is for interim and annual financial statements relating to
fiscal years beginning on or after January 1, 2011. The Fund has implemented a
changeover plan to convert to these new standards according to the timetable
set with these new rules. An implementation team has been created, and third
party advisors have been engaged to provide training to staff. The
implementation team has significantly advanced its assessment of the
differences between IFRS and Canadian GAPP standards. The team will be
expanding its assessment to identify any differences arising from the
acquisition of Resolve. The Fund is also asssessing the impact of the
conversion on business activities including the effect on information
technology and data systems, internal controls over financial reporting and
disclosure controls. The Fund will continually review and adjust the
changeover plan to ensure the implementation process properly addresses the
key elements of the plan.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS

The Fund and its subsidiaries have designed and maintain a set of
disclosure controls and procedures designed to ensure that information
required to be disclosed in filings made pursuant to Multilateral Instrument
52-109 is recorded, processed, summarized and reported within the time periods
specified in the Canadian Securities Administrators' rules and forms.
The Fund and its subsidiaries have also designed and maintain a set of
internal controls over financial reporting to provide reasonable assurance
regarding the reliability of financial reporting and preparation of financial
statements for external purposes in accordance with Canadian GAAP.
There have been no changes in the Fund's internal controls over financial
reporting during the quarter ended June 30, 2009 that have materially
affected, or are reasonably likely to materially affect, its internal control
over financial reporting.

SUBSEQUENT EVENTS

On July 27, 2009, Davis + Henderson completed an offer to acquire all of
the outstanding units of Resolve Business Outsourcing Income Fund. Resolve is
a leading provider in Canada of consumer and student loan administration
services, credit card portfolio management services, search and registration
services and credit and loyalty application processing, among many offerings.
The acquisition of Resolve was financed through an exchange of units, whereby
Resolve owners receive 0.285 units of Davis + Henderson for each unit of
Resolve. Based on the closing unit price immediately preceding the
announcement date, the acquisition, including transaction costs and the
assumption of $70 million of outstanding debt, is valued at $199 million.
The addition of the Resolve business will provide leading market
positions within several targeted markets and strategically diversifies the
Business' services, revenues and cash flows. It is expected that the
acquisition will be modestly accretive starting in 2010 at the Adjusted income
level with accretion coming primarily from the attainment of cost synergies.
Beyond 2010, the Fund expects that the acquisition will be more accretive as
the Fund will realize the combined benefit of growing revenues and additional
synergies.
As a result of this transaction, the Fund has increased its credit
facility. Credit facilities available to the Fund total $260 million,
consisting of $190 million non-revolving term loans and $70 million revolving
term credit facilities that may be used for general corporate purposes. As at
the date of this report, the Business has drawn $190 million under the
non-revolving term loans and $26 million under the revolving term credit
facilities.

OUTLOOK

Davis + Henderson's overall long-term objective is to deliver stable and
modestly growing cash distributions through growing revenue in the 3% to 5%
range and maintaining margins. For the six months ended June 30, 2009, revenue
was below this target, primarily due to the weak economic environment, as
previously described in this report. Additionally, over the past two years,
the financial results have been more variable than those experienced
historically due to changes in the imaging standards on cheques in Canada that
affected the cheque reordering cycle, and dramatic growth followed by cyclical
contraction within the real estate and mortgage origination market that
affected our origination services fees. Although the long-term revenue growth
objective remains unchanged, for the balance of 2009 and into 2010, revenues
are expected to grow in excess of the targeted range as a result of the
inclusion of the Resolve business acquired in July 2009.
As set out in the Fund's statement of strategy, the objective is to grow
profits and cash flow by enhancing the value of our cheque supply program,
offering additional programs to serve the chequing account, delivering
programs within the lending services market and by way of selective
acquisition.
Management's operational plans include many initiatives which, when
combined, are intended to allow the Fund to meet its objective. Examples
include further implementations and enhancements of IDefence, BizAssist and
eSwitch programs. Relating to lending markets, the Business looks to grow
revenues related to services directed toward underwriting activities, PPSA
activities and, generally, the inclusion of and growth of services
attributable to the newly acquired Cyence and Resolve businesses.
Looking forward, we expect the challenging economic conditions to remain
through 2009. This in turn will affect our revenues related to lending
origination and underwriting services (which represent approximately 13% of
our historical revenues), and may continue to have an impact on our cheque
program as it relates to small business demand for our products (which
represent approximately 40% of consolidated historical revenues). In the
immediate future, we will focus on integrating the business of Resolve,
executing our organic growth initiatives and continuing to diligently manage
costs. Beyond the immediate term, we believe that combining Davis + Henderson
and Resolve will solidly position the Business in the markets we serve and
allow us to grow consistent with our long-term objectives. We believe that the
combination of our revenue base, business model and capital structure
positions the Business to deal with the challenging environment we are facing
currently.
The Business' 2009 capital program for the D+H and Filogix Segments
combined are expected to be in the range of $12.0 million to $14.0 million as
compared to $13.4 million and $15.5 million in 2008 and 2007, respectively.
Combined with the Resolve Business, capital expenditures are expected to be in
the $13 million to $16 million range.
Changes made to the Income Tax Act require certain income trusts,
including the Fund, to pay taxes after fiscal 2010, similar to those paid by
taxable Canadian corporations. The payment of such taxes will, in the future,
reduce the cash flow of the Fund, thereby reducing the amount available for
distributions to unitholders. Since the announcement of this change in tax
legislation, management and the Trustees have monitored the changes in the
income trust environment and capital markets and continue to review potential
impacts on the Fund's current strategies and the alternatives available to the
Fund, consistent with protecting and enhancing unitholder value.

Caution Concerning Forward-looking Statements

This MD&A contains certain statements that constitute forward-looking
information within the meaning of applicable securities laws ("forward-looking
statements") including those set out in the Outlook above. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of the Business, or developments in Davis + Henderson's industry, to differ
materially from the anticipated results, performance, achievements or
developments expressed or implied by such forward-looking statements.
Forward-looking statements include all disclosure regarding possible events,
conditions or results of operations that are based on assumptions about future
economic conditions and courses of action. Forward-looking statements may also
include, without limitation, any statement relating to future events,
conditions or circumstances. Davis + Henderson cautions you not to place undue
reliance upon any such forward-looking statements, which speak only as of the
date they are made.
Risks related to forward-looking statements include, among other things,
challenges presented by declines in the use of cheques by consumers; the
Fund's dependence on a limited number of large financial institution customers
and dependence on their acceptance of new programs; strategic initiatives
being undertaken to meet the Fund's financial objective; stability and growth
in the real estate and mortgage markets; as well as general market conditions,
including economic and interest rate dynamics and investor interest in, and
government regulations relating to, income trusts. Forward-looking statements
are based on management's current plans, estimates, projections, beliefs and
opinions, and Davis + Henderson does not undertake any obligation to update
forward-looking statements should assumptions related to these plans,
estimates, projections, beliefs and opinions change.

ADDITIONAL INFORMATION

Additional information relating to the Fund, including the Fund's most
recently filed Annual Information Form, is available on SEDAR at
www.sedar.com.

<<
CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars, unaudited)

June 30, December 31,
2009 2008
-------------------------------------------------------------------------

ASSETS
Current assets:
Cash and cash equivalents $ 3,141 $ 12,066
Accounts receivable 21,341 16,180
Inventory (note 3) 4,638 4,475
Prepaid expenses 4,017 2,813
-------------------------------------------------------------------------
33,137 35,534

Future income tax asset (note 12) 3,875 3,162
Capital assets (note 4) 19,246 20,464
Other assets (note 5) 1,082 1,082
Intangible assets (note 6) 136,905 144,675
Goodwill (note 7) 457,636 458,989
-------------------------------------------------------------------------
$ 651,881 $ 663,906
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 29,988 $ 40,827
Distributions payable to unitholders 6,737 6,737
Current portion of disbursement obligations
on customer contracts (note 8) 20 1,537
-------------------------------------------------------------------------
36,745 49,101

Disbursement obligations on customer
contracts (note 8) 30 30
Long-term indebtedness (note 9) 145,470 147,331
Interest-rate swaps (note 10) 5,881 6,759
Other long-term liabilities (note 11) 1,089 812
Future income tax liability (note 12) 8,691 10,204
-------------------------------------------------------------------------
197,906 214,237

Unitholders' equity:
Trust units (note 13) 476,343 476,343
Deficit (21,680) (25,714)
Accumulated other comprehensive income (loss) (688) (960)
-------------------------------------------------------------------------
453,975 449,669

Commitments (note 15)
-------------------------------------------------------------------------
$ 651,881 $ 663,906
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated
financial statements.

CONSOLIDATED STATEMENTS OF INCOME
(in thousands of Canadian dollars, except per unit amounts, unaudited)

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
-------------------------------------------------------------------------

Revenue $ 94,557 $ 95,407 $ 183,086 $ 182,819
Cost of sales and operating
expenses (note 3) 62,393 61,723 122,794 122,424
Amortization of capital assets 1,078 993 2,176 1,975
-------------------------------------------------------------------------
31,086 32,691 58,116 58,420

Interest expense 1,923 1,906 3,806 3,769
Net unrealized loss (gain)
on interest-rate swaps (1,069) (1,034) (878) 1,310
Amortization of intangible
assets 5,729 5,836 11,514 11,616
-------------------------------------------------------------------------
Income from continuing
operations before income
taxes 24,503 25,983 43,674 41,725
Future income tax expense
(recovery) (718) 766 (782) 766
-------------------------------------------------------------------------
Income from continuing
operations 25,221 25,217 44,456 40,959
Income from discontinued
operations (note 18) - 149 - 247
-------------------------------------------------------------------------
Net income $ 25,221 $ 25,366 $ 44,456 $ 41,206
-------------------------------------------------------------------------
Net income per unit, basic
and diluted $ 0.5739 $ 0.5772 $ 1.0116 $ 0.9376
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated
financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of Canadian dollars, unaudited)

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
-------------------------------------------------------------------------

Net income $ 25,221 $ 25,366 $ 44,456 $ 41,206

Other comprehensive income:
Amortization of mark-to-market
adjustment of interest-rate
swaps 136 152 272 259
-------------------------------------------------------------------------
Total comprehensive income $ 25,357 $ 25,518 $ 44,728 $ 41,465
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated
financial statements.

CONSOLIDATED STATEMENTS OF DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
(in thousands of Canadian dollars, unaudited)

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
-------------------------------------------------------------------------

Deficit
Deficit, beginning of period $ (26,690) $ (26,384) $ (25,714) $ (23,371)
Net income 25,221 25,366 44,456 41,206
Distributions (20,211) (19,758) (40,422) (38,611)
-------------------------------------------------------------------------
Deficit, end of period (21,680) (20,776) (21,680) (20,776)
-------------------------------------------------------------------------

Accumulated Other
Comprehensive Income (Loss)
Accumulated other comprehensive
income (loss),
beginning of period (824) (1,414) (960) (1,521)
Other comprehensive income:
Amortization of mark-to-market
adjustment of interest-rate
swaps 136 152 272 259
-------------------------------------------------------------------------
Accumulated other
comprehensive income (loss),
end of period (688) (1,262) (688) (1,262)
-------------------------------------------------------------------------
Deficit and accumulated other
comprehensive income (loss),
end of period $ (22,368) $ (22,038) $ (22,368) $ (22,038)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars, unaudited)

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
-------------------------------------------------------------------------

Cash and cash equivalents
provided by (used in):

OPERATING ACTIVITIES
Net income $ 25,221 $ 25,366 $ 44,456 $ 41,206
Add:
Amortization of capital
assets 1,078 1,052 2,176 2,092
Amortization of capital
assets included in cost
of sales 313 389 623 823
Amortization of intangible
assets 5,729 5,850 11,514 11,645
Amortization of mark-to-
market adjustment of
interest-rate swaps 136 152 272 259
Net unrealized loss (gain)
on interest-rate swaps (1,069) (1,034) (878) 1,310
Future income tax expense
(recovery) (718) 766 (782) 766
-------------------------------------------------------------------------
30,690 32,541 57,381 58,101

Decrease (increase) in
non-cash working capital
items (3,724) 2,018 (17,609) (7,074)
Changes in other operating
assets and liabilities 207 (1,936) 416 (1,881)
-------------------------------------------------------------------------
27,173 32,623 40,188 49,146
-------------------------------------------------------------------------

FINANCING ACTIVITIES
Net proceeds from (repayment
of) long-term indebtedness (2,000) (5,000) (2,000) (5,000)
Distributions paid to
unitholders (20,211) (19,305) (40,422) (38,158)
-------------------------------------------------------------------------
(22,211) (24,305) (42,422) (43,158)
-------------------------------------------------------------------------

INVESTING ACTIVITIES
Expenditures on capital
assets, non-acquisition
intangible assets and
long-term contracts (2,491) (2,962) (6,854) (5,496)
Acquisition of businesses
(note 2) 103 - 163 (4,250)
-------------------------------------------------------------------------
(2,388) (2,962) (6,691) (9,746)
-------------------------------------------------------------------------

Increase (decrease) in cash
and cash equivalents
for the period 2,574 5,356 (8,925) (3,758)
Cash and cash equivalents,
beginning of period 567 4,034 12,066 13,148
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 3,141 $ 9,390 $ 3,141 $ 9,390
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Supplementary information:
Cash interest paid $ 1,617 $ 1,588 $ 2,717 $ 3,156
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated
financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and six months ended June 30, 2009 and 2008
(in thousands of Canadian dollars, except unit and per unit amounts,
unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared using accounting
policies generally accepted in Canada and follow the same accounting
policies and their method of application as the Fund's consolidated
financial statements for the year ended December 31, 2008, which are
included in the 2008 Annual Report along with changes in accounting
policies that became effective January 1, 2009. They do not conform in
all respects with disclosures required for annual financial statements
and should be read in conjunction with the audited consolidated financial
statements of the Fund for the year ended December 31, 2008.

2. ACQUISITIONS

a. Cyence Business

On December 19, 2008, the Fund completed an agreement to acquire a 100%
interest in Cyence International Inc., an international provider of
credit lifecycle management software and service solutions to financial
institutions in Canada, United States and Australia. The assets acquired
and consideration given were as follows:

Net assets acquired, at fair value:
Assets $ 5,092
Intangible assets 24,800
Liabilities (8,622)

-------------------------------------------------------------------------
21,270
Goodwill 16,443

-------------------------------------------------------------------------
Total $ 37,713
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Consideration for 100% ownership:
Cash $ 37,713
-------------------------------------------------------------------------
Total $ 37,713
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The purchase price and related transaction costs were financed with
$28 million from the drawdown of the existing credit facility, and the
balance from cash on hand. The Fund has not completed its assessment and
valuation of the assets acquired and liabilities assumed for this
acquisition. As a result, the amount of the purchase price in excess of
the carrying value of the acquired assets and liabilities has not been
fully allocated to the acquired assets and liabilities in the
consolidated balance sheet.

The results of the Cyence operations have been reported as part of the
Filogix Segment for segment reporting purposes.

b. AVS Business

On April 28, 2005, the Fund entered into an agreement to acquire a 50%
interest in AVS L.P. through a step-by-step acquisition over 20 months
ending January 2007. On May 25, 2006, the Fund entered into an amending
agreement to accelerate its remaining obligation as well as exercising
its option to acquire a further 25% interest in the AVS business. Total
consideration paid for the 75% interest in the AVS business was
$11.1 million of which $3.5 million was allocated to intangible assets,
$7.2 million to goodwill and the remaining balance to net assets.

Effective January 2, 2008, the Fund acquired the remaining 25% of
interest in the AVS business for a consideration of $4.2 million of which
$1.4 million was allocated to intangible assets, $2.7 million to
goodwill, and the remaining balance to net assets.

Each step acquisition was made with available cash on hand.

3. INVENTORY

June 30, December 31,
2009 2008
-------------------------------------------------------------------------
Raw materials $ 2,098 $ 1,988
Work-in-process 1,331 1,503
Finished goods 1,209 984
-------------------------------------------------------------------------
$ 4,638 $ 4,475
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Raw materials primarily consist of paper but also include foil, hologram
and ink. Work-in-process consists of base stock which refers to sheets of
cheque stock with non-personalized background print. Finished goods
primarily consist of retail products, labels, accessories and security
bags.

Inventory that was recognized as cost of sales during the three months
ended June 30, 2009 was $11,248 (Q2 2008 - $12,394) and six months ended
June 30, 2009 was $21,715 (six months ended June 30, 2008 - $24,882). The
amount of write-down of inventories recognized as an expense during the
three months ended June 30, 2009 was $83 (Q2 2008 - $43) and six months
ended June 30, 2009 was $126 (six months ended June 30, 2008 - $130).

4. CAPITAL ASSETS

June 30, 2009
-------------------------------------------------------------------------
Accumulated
Cost amortization Net
-------------------------------------------------------------------------
Machinery and equipment $ 15,667 $ 9,031 $ 6,636
Computer equipment 18,238 7,740 10,498
Furniture, fixtures and
leasehold improvements 8,814 6,702 2,112
-------------------------------------------------------------------------
$ 42,719 $ 23,473 $ 19,246
-------------------------------------------------------------------------
-------------------------------------------------------------------------

December 31, 2008
-------------------------------------------------------------------------
Accumulated
Cost amortization Net
-------------------------------------------------------------------------
Machinery and equipment $ 15,589 $ 8,609 $ 6,980
Computer equipment 18,492 7,439 11,053
Furniture, fixtures and
leasehold improvements 9,048 6,617 2,431
-------------------------------------------------------------------------
$ 43,129 $ 22,665 $ 20,464
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Commencing January 1, 2009, in accordance with Section 3064, Goodwill and
Intangible Assets, the Fund reclassified software costs previously
recorded in capital assets to intangible assets. Accordingly, net book
value of $10,816 at December 31, 2008 was reclassified from computer
equipment and software to intangible assets.

Amortization during the three months ended June 30, 2009 was $1,391 (Q2
2008 - $1,441) and during the six months ended June 30, 2009 was $2,799
(six months ended June 30, 2008 - $2,915), of which $313 was included in
cost of sales during the three months ended June 30, 2009 (Q2 2008 -
$389) and $623 is included in cost of sales during the six months ended
June 30, 2009 (six months ended June 30, 2008 - $823). For the three and
six months ended June 30, 2008, amortization of $1,482 and $2,908 was
reclassified respectively from capital assets to intangible assets. Fully
amortized capital assets removed from the accounts during the three
months ended June 30, 2009 was $0 (Q2 2008 - $8) and during the six
months ended June 30, 2009 was $1,973 (six months ended June 30, 2008 -
$4,151).

5. OTHER ASSETS

June 30, December 31,
2009 2008
-------------------------------------------------------------------------
Investments $ 1,000 $ 1,000
Other 82 82
-------------------------------------------------------------------------
$ 1,082 $ 1,082
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Commencing January 1, 2009, the Fund reclassified long-term supply
contracts previously recorded in other assets to intangible assets.
Accordingly, net book value of $3,347 at December 31, 2008 was
reclassified from other assets to intangible assets.

On December 19, 2008, the Fund acquired a portfolio investment in a
technology services company for a cash consideration of $1 million. This
investment has been accounted for using the cost method.

6. INTANGIBLE ASSETS

Three months ended June 30, 2009
---------------------------------------------------
Software
---------------------
Internally
Contracts Purchased developed
---------------------------------------------------
Cost
At April 1, 2009 $ 6,599 $ 19,693 $ 9,703
Additions 300 636 719
Other movements(1) (400) 93 -
---------------------------------------------------
At June 30, 2009 $ 6,499 $ 20,422 $ 10,422
---------------------------------------------------
---------------------------------------------------

Amortization and
impairment loss
At April 1, 2009 $ 3,169 $ 15,951 $ 3,112
Amortization 732 1,148 408
Other movements(1) (400) 16 -
---------------------------------------------------
At June 30, 2009 $ 3,501 $ 17,115 $ 3,520
---------------------------------------------------
---------------------------------------------------

Net carrying amount
At June 30, 2009 $ 2,998 $ 3,307 $ 6,902
---------------------------------------------------
---------------------------------------------------

Three months ended June 30, 2009
-------------------------------------------------------------------------
Acquisition of businesses
--------------------------------------------
Customer
Proprietary Brand relation-
Contracts software names ships Total
-------------------------------------------------------------------------
Cost
At April 1, 2009 $ 1,201 $ 55,900 $ 10,900 $ 90,735 $194,731
Additions - - - - 1,655
Other movements(1) - - - (307)
-------------------------------------------------------------------------
At June 30, 2009 $ 1,201 $ 55,900 $ 10,900 $ 90,735 $196,079
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Amortization and
impairment loss
At April 1, 2009 $ 1,004 $ 12,221 $ 1,634 $ 16,738 $ 53,829
Amortization 197 1,408 182 1,654 5,729
Other movements(1) - - - - (384)
-------------------------------------------------------------------------
At June 30, 2009 $ 1,201 $ 13,629 $ 1,816 $ 18,392 $ 59,174
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Net carrying amount
At June 30, 2009 $ - $ 42,271 $ 9,084 $ 72,343 $136,905
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Six months ended June 30, 2009
---------------------------------------------------
Software
---------------------
Internally
Contracts Purchased developed
---------------------------------------------------
Cost
At January 1, 2009 $ 8,761 $ 21,727 $ 10,676
Additions 1,300 1,118 1,254
Other movements(1) (3,562) (2,423) (1,508)
---------------------------------------------------
At June 30, 2009 $ 6,499 $ 20,422 $ 10,422
---------------------------------------------------
---------------------------------------------------

Amortization and
impairment loss
At January 1, 2009 $ 5,414 $ 17,393 $ 4,194
Amortization 1,649 2,222 829
Other movements(1) (3,562) (2,500) (1,503)
---------------------------------------------------
At June 30, 2009 $ 3,501 $ 17,115 $ 3,520
---------------------------------------------------
---------------------------------------------------

Net carrying amount
At June 30, 2009 $ 2,998 $ 3,307 $ 6,902
At December 31,
2008 $ 3,347 $ 4,334 $ 6,482
---------------------------------------------------
---------------------------------------------------

Six months ended June 30, 2009
-------------------------------------------------------------------------
Acquisition of businesses
--------------------------------------------
Customer
Proprietary Brand relation-
Contracts software names ships Total
-------------------------------------------------------------------------
Cost
At January 1, 2009 $ 1,201 $ 56,093 $ 10,900 $107,064 $216,422
Additions - - - - 3,672
Other movements(1) - (193) - (16,329) (24,015)
-------------------------------------------------------------------------
At June 30, 2009 $ 1,201 $ 55,900 $ 10,900 $ 90,735 $196,079
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Amortization and
impairment loss
At January 1, 2009 $ 864 $ 11,017 $ 1,452 $ 31,413 $ 71,747
Amortization 337 2,805 364 3,308 11,514
Other movements(1) - (193) - (16,329) (24,087)
-------------------------------------------------------------------------
At June 30, 2009 $ 1,201 $ 13,629 $ 1,816 $ 18,392 $ 59,174
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Net carrying amount
At June 30, 2009 $ - $ 42,271 $ 9,084 $ 72,343 $136,905
At December 31,
2008 $ 337 $ 45,076 $ 9,448 $ 75,651 $144,675
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Other movements primarily relate to fully amortized assets removed
from the accounts during the period.

Three months ended June 30, 2008
---------------------------------------------------
Contracts Software
----------- ---------------------
Internally
Purchased developed
---------------------------------------------------
Cost
At April 1, 2008 $ 8,863 $ 18,815 $ 8,337
Additions - 1,219 705
Other movements(1) - - -
---------------------------------------------------
At June 30, 2008 $ 8,863 $ 20,034 $ 9,042
---------------------------------------------------
---------------------------------------------------

Amortization and
impairment loss
At April 1, 2008 $ 4,075 $ 14,173 $ 2,934
Amortization 906 1,062 420
Other movements(1) - - -
---------------------------------------------------
At June 30, 2008 $ 4,981 $ 15,235 $ 3,354
---------------------------------------------------
---------------------------------------------------

Net carrying amount
At June 30, 2008 $ 3,882 $ 4,799 $ 5,688
---------------------------------------------------
---------------------------------------------------

Three months ended June 30, 2008
-------------------------------------------------------------------------
Acquisition of businesses
--------------------------------------------
Customer
Proprietary Brand relation-
Contracts software names ships Total
-------------------------------------------------------------------------
Cost
At April 1, 2008 $ 1,201 $ 41,993 $ 8,400 $ 98,864 $186,473
Additions - - - - 1,924
Other movements(1) - - - - -
-------------------------------------------------------------------------
At June 30, 2008 $ 1,201 $ 41,993 $ 8,400 $ 98,864 $188,397
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Amortization and
impairment loss
At April 1, 2008 $ 443 $ 7,840 $ 1,027 $ 25,168 $ 55,660
Amortization 140 1,066 141 2,101 5,836
Other movements(1) - - - - -
-------------------------------------------------------------------------
At June 30, 2008 $ 583 $ 8,906 $ 1,168 $ 27,269 $ 61,496
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Net carrying amount
At June 30, 2008 $ 618 $ 33,087 $ 7,232 $ 71,595 $126,901
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Six months ended June 30, 2008
---------------------------------------------------
Software
---------------------
Internally
Contracts Purchased developed
---------------------------------------------------
Cost
At January 1, 2008 $ 12,581 $ 20,509 $ 10,230
Additions - 1,267 1,282
Other movements(1) (3,718) (1,742) (2,470)
---------------------------------------------------
At June 30, 2008 $ 8,863 $ 20,034 $ 9,042
---------------------------------------------------
---------------------------------------------------

Amortization and
impairment loss
At January 1, 2008 $ 6,757 $ 14,875 $ 5,018
Amortization 1,812 2,102 806
Other movements(1) (3,588) (1,742) (2,470)
---------------------------------------------------
At June 30, 2008 $ 4,981 $ 15,235 $ 3,354
---------------------------------------------------
---------------------------------------------------

Net carrying amount
At June 30, 2008 $ 3,882 $ 4,799 $ 5,688
---------------------------------------------------
---------------------------------------------------

Six months ended June 30, 2008
-------------------------------------------------------------------------
Acquisition of businesses
--------------------------------------------
Customer
Proprietary Brand relation-
Contracts software names ships Total
-------------------------------------------------------------------------
Cost
At January 1, 2008 $ 1,201 $ 41,993 $ 8,400 $ 97,521 $192,435
Additions - - - 1,343 3,892
Other movements(1) - - - - (7,930)
-------------------------------------------------------------------------
At June 30, 2008 $ 1,201 $ 41,993 $ 8,400 $ 98,864 $188,397
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Amortization and
impairment loss
At January 1, 2008 $ 303 $ 6,773 $ 887 $ 23,067 $ 57,680
Amortization 280 2,133 281 4,202 11,616
Other movements(1) - - - (7,800)
-------------------------------------------------------------------------
At June 30, 2008 $ 583 $ 8,906 $ 1,168 $ 27,269 $ 61,496
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Other movements primarily relate to fully amortized assets removed
from the accounts during the period.

7. GOODWILL

June 30, December 31,
2009 2008
-------------------------------------------------------------------------

Balance, beginning of period $ 458,989 $ 438,502
Goodwill acquired during the period:
AVS acquistion - 2,691
Cyence acquisition (1,353) 17,796
-------------------------------------------------------------------------
Balance, end of period $ 457,636 $ 458,989
-------------------------------------------------------------------------
-------------------------------------------------------------------------

8. DISBURSEMENT OBLIGATIONS ON CUSTOMER CONTRACTS

June 30, December 31,
2009 2008
-------------------------------------------------------------------------
Current portion $ 20 $ 1,537
Long-term portion 30 30
-------------------------------------------------------------------------
Total disbursement obligations on customer
contracts $ 50 $ 1,567
-------------------------------------------------------------------------

The Fund has fixed customer contract disbursement obligations payable as
of June 30, 2009 as follows:

2009 $ 20
2010 15
2011 10
2012 5

-------------------------------------------------------------------------
$ 50
-------------------------------------------------------------------------
-------------------------------------------------------------------------

9. LONG-TERM INDEBTEDNESS

June 30, December 31,
2009 2008
-------------------------------------------------------------------------

Non-revolving term loan $ 120,000 $ 120,000
Revolving credit facility 26,000 28,000
-------------------------------------------------------------------------
146,000 148,000
Deferred finance costs (530) (669)
-------------------------------------------------------------------------
$ 145,470 $ 147,331
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Fund has $170.0 million of available term credit facilities due
June 15, 2011 (December 31, 2008 - $170.0 million), consisting of a
$120.0 million non-revolving term loan and a $50.0 million revolving
credit facility. The credit facilities do not require the Fund to make
any principal payments prior to their maturity. The facilities bear
interest at rates that depend on certain financial ratios of the Fund and
vary in accordance with borrowing rates in Canada and the United States.
The credit facilities, including any hedge contracts with the lenders,
are secured in first priority by a pledge of substantially all of the
Fund's assets and by a pledge of the Fund's indirect ownership interest
in Davis + Henderson L.P. The carrying value of long-term indebtedness
approximates its fair value as it bears interest at floating rates that
reset in most cases within three months and in all cases within one year.

The Credit Agreement for the Fund contains a number of covenants and
restrictions including the requirement to meet certain financial ratios
and financial condition tests. As at June 30, 2009, the Fund was in
compliance with all of its financial covenants and financial condition
tests.

Deferred finance costs relate to the renewal and amendment of long-term
indebtedness on June 15, 2006. Amortization of deferred finance costs
during the three months ended June 30, 2009 was $69 (Q2 2008 - $69) and
during the six months ended June 30, 2009 was $138 (six months ended
June 30, 2008 - $139). Amortization of deferred finance costs is
recognized over the term of the facilities as interest expense using the
effective interest method.

10. FINANCIAL INSTRUMENTS

Recognition and Measurement

The Fund's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities,
disbursement obligations on customer contracts, distributions payable to
unitholders, interest-rate swaps and long-term indebtedness. The Fund
does not enter into financial instruments for trading or speculative
purposes. Financial assets are classified as available for sale, held to
maturity, held for trading, or loans and receivables. Financial
liabilities are recorded at amortized cost. Initially, all financial
assets and financial liabilities must be recorded on the balance sheet at
fair value. Subsequent measurement is determined by the classification of
each financial asset and financial liability. Unrealized gains and losses
on financial assets that are held as available for sale are recorded in
other comprehensive income until realized, at which time they will be
recorded in the consolidated statement of income. All derivatives,
including embedded derivatives that must be separately accounted for, are
recorded at fair value in the consolidated balance sheet. Transaction
costs related to financial instruments are generally capitalized and then
amortized over the expected life of the financial instrument using the
effective yield method.

Credit Risk

The Fund's financial assets that are exposed to credit risk consist
primarily of cash and cash equivalents, accounts receivable and interest-
rate swaps. The Fund, in its normal course of business, is exposed to
credit risk from its customers. The Fund is exposed to credit loss in the
event of non-performance by counterparties to the interest-rate swaps.
Risks associated with concentrations of credit risk with respect to
accounts receivable and interest-rate swaps are limited due to the credit
rating of customers and swap counterparties serviced by the Fund and the
generally short payment terms and frequent settlement of swap
differences.

Market Risk

The Fund is subject to interest-rate risks as its credit facilities bear
interest at rates that depend on certain financial ratios of the Fund and
vary in accordance with borrowing rates in Canada and the United States.

The following table presents a sensitivity analysis to changes in market
interest rates and their potential impact on the Fund for the three
months and six months ended June 30, 2009. As the sensitivity is
hypothetical, it should be used with caution.

Three months ended Six months ended
June 30, 2009 June 30, 2009
-------------------------------------------------------------------------
+ 100 bps - 100 bps + 100 bps - 100 bps
-------------------------------------------------------------------------

Increase (decrease) in
interest expense $ 65 $ (65) $ 129 $ (129)
Change to net unrealized
(gain) loss on interest-
rate swaps (1,600) 1,600 (1,600) 1,600
-------------------------------------------------------------------------
Increase (decrease) in
net income $ 1,535 $ (1,535) $ 1,471 $ (1,471)
-------------------------------------------------------------------------
Increase (decrease) in total
comprehensive income $ 1,535 $ (1,535) $ 1,471 $ (1,471)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Fund manages its interest-rate risks through the use of interest-rate
swaps for most of its outstanding long-term indebtedness. As of June 30,
2009, the Fund has entered into interest-rate swap contracts with its
lenders, such that the floating borrowing rates on $120.0 million, or
82.2%, of its outstanding term indebtedness are effectively fixed at
interest rates and for periods shown in the following table:

-------------------------------------------------------------------------
Fair value of
interest-rate swaps
------------------------- Interest
Maturity date Notional Amount Asset Liability rate(1)
-------------------------------------------------------------------------
July 15, 2009 $ 20,000 $ - $ 207 5.813%
July 15, 2010 33,000 - 1,749 5.815%
January 5, 2011 22,000 - 465 2.980%
June 15, 2011 20,000 - 1,537 5.685%
June 15, 2011 25,000 - 1,923 5.685%
-------------------------------------------------------------------------
$ 120,000 $ - $ 5,881
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liquidity Risk

The Fund has long-term indebtedness with a maturity date of June 15,
2011. The degree to which the Fund is leveraged may reduce its ability to
obtain additional financing for working capital and to finance
investments to maintain and grow the current levels of cash flows from
operations. The Fund may be unable to extend the maturity date of the
credit facilities or to refinance outstanding indebtedness.

Management, to reduce liquidity risk, has historically renewed the terms
of the Fund's long-term indebtedness in advance of its maturity dates and
the Fund has maintained financial ratios that are conservative compared
to financial covenants applicable to the credit facilities. Further, the
Fund has made numerous voluntary payments on its outstanding long-term
indebtedness and a portion of its committed term credit facilities
remains undrawn.

Management measures liquidity risk through comparisons of current
financial ratios with financial covenants contained in the Credit
Agreement.

Hedge Accounting

Where derivatives are held for risk management purposes or when
transactions meet the criteria, including documentation requirements,
specified in the CICA Handbook Section 3865, hedge accounting is applied
to the risks being hedged. When hedge accounting is not applied, the
change in the fair value of the derivative is recognized in income,
including instruments used for economic hedging purposes that do not meet
the requirements for hedge accounting.

Effective January 1, 2007, the Fund ceased applying hedge accounting on
the outstanding interest-rate swaps.

Derivative Financial Instruments

Derivatives are carried at fair value and are reported as assets where
they have a positive fair value and liabilities where they have a
negative fair value. Derivatives may be embedded in other financial
instruments or contracts. Derivatives embedded in other financial
instruments are valued as separate derivatives when their economic
characteristics and risks are not clearly and closely related to those of
the host contract unless such contracts relate to normal course
operations and qualify for the normal purchase and sale exemption in
accordance with the standards.

Accumulated Other Comprehensive Income (Loss)

When applicable, changes in the fair value of cash flow hedging
instruments are recorded in accumulated other comprehensive income (loss)
until recognized in the consolidated statement of income. Accumulated
other comprehensive income (loss) forms part of unitholders' equity.

11. OTHER LONG-TERM LIABILITIES

June 30, December 31,
2009 2008
-------------------------------------------------------------------------

Deferred compensation program $ 366 $ -
Employee future benefits 668 707
Capital lease 55 105
-------------------------------------------------------------------------
$ 1,089 $ 812
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The deferred compensation program, which commenced on January 1, 2009, is
a long-term incentive plan that includes a cash award component and a
cash-settled unit-based payment component. Both the cash component and
the cash-settled unit-based payment component awarded at the grant date
are subject to a 3-year performance target for compound annual growth in
adjusted income. The units awarded will earn distributions through the
3 years equal to the actual per unit distributions declared on the units
of Davis + Henderson during the fiscal periods that form the performance
period. The cash-settled unit-based payment is determined based on the
average trading price for the units in the 30 days following the release
of the results for the last fiscal year in the performance period, along
with the annualized growth rate achieved and the distributions earned.
The employee must remain an employee throughout the three year
performance period in order for the plan to vest. The first possible
payment under this program is in 2012.

Employee future benefits consist of defined contribution pension plans
and a non-pension post-retirement benefit plan. Obligations relating to
employee future benefits relate to the non-pension post-retirement
benefit plan.

The Fund's principal pension plans are defined contribution pension plans
that provide pensions to substantially all eligible employees. Total
expense for the Fund's defined contribution pension plan for the three
months ended June 30, 2009 was $0.4 million (Q2 2008 - $0.3 million) and
for six months ended June 30, 2009 was $0.9 million (six months ended
June 30, 2008 - $0.8 million)

12. INCOME TAXES

The Fund is a mutual fund trust for income tax purposes and will be a
specified investment flow through trust ("SIFT") for years commencing
after 2010. As such, the Fund is subject to current income taxes on any
taxable income not distributed to unitholders prior to January 1, 2011
and on all taxable income subsequent to December 31, 2010. If the Fund's
equity capital grows beyond certain dollar limits prior to January 1,
2011, the Fund would become a SIFT and would commence in that year being
subject to tax on income distributed. The Fund expects that its income
distributed will not be subject to tax prior to 2011 and accordingly has
not provided for future income taxes on its temporary differences and
those of its flow-through subsidiary trust and partnerships expected to
reverse prior to 2011 as it is considered tax exempt for accounting
purposes.

Taxable income distributed by the Fund to its unitholders will be taxable
income of those unitholders.

Significant components of the Fund's future tax assets and liabilities
with respect to the consolidated carrying values related to its
investments in certain partnership and trust subsidiaries and their
corporate subsidiaries are as follows:

June 30, December 31,
2009 2008
-------------------------------------------------------------------------
Future income tax assets:
Capital assets less than tax values $ 2,526 $ 3,121
Intangible assets less than tax values 11,549 10,979
Loss carryforwards 2,705 1,677
Valuation allowance (12,905) (12,615)
-------------------------------------------------------------------------
Total future tax assets 3,875 3,162
-------------------------------------------------------------------------

Future income tax liabilities:
Capital assets greater than tax values 2,224 2,849
Intangible assets greater than tax values 6,467 7,355
-------------------------------------------------------------------------
Total future tax liabilities 8,691 10,204
-------------------------------------------------------------------------
Net future income tax liabilities $ 4,816 $ 7,042
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Fund does not expect the temporary differences between the carrying
amount and tax base of certain intangible assets to reverse in the
foreseeable future and accordingly has reduced the related future income
tax asset by a valuation allowance for the portion that is not expected
to reverse. The Fund also does not expect to realize the benefit of
certain loss carryforwards of certain corporate subsidiaries in the
foreseeable future and accordingly has reduced the related future income
tax asset by a valuation allowance for the portion that is not expected
to be realized.

With the acquisition of the Cyence business, the Fund recognized a future
income tax asset of $3,995 relating to capital assets that are less than
their tax values and a future income tax liability of $6,785 relating to
intangible assets that are greater than their tax values. Both the future
income tax asset and the future income tax liability are expected to
reverse in the foreseeable future.

No future tax liability has been provided for the taxable temporary
difference related to goodwill since this amount is not deductible for
tax purposes and is therefore specifically exempt from the recognition
requirements.

The provision for future income taxes in the consolidated statement of
income represents the change in the consolidated net future income tax
liabilities, after giving effect to the increase in the future income tax
liability arising on the acquisition of Cyence International Inc. The
effective tax rate for the period differs from the expected tax rate of
nil due to the change in temporary differences of the Fund and its
flow-through trust and partnership subsidiaries expected to reverse after
2010 and the results of operations of its corporate subsidiaries.

13. TRUST UNITS

An unlimited number of trust units may be issued by the Fund pursuant to
the Fund's Declaration of Trust. Each unit is transferable and represents
an equal, undivided beneficial interest in any distributions from the
Fund and in the net assets of the Fund. All units are of the same class
with equal rights and privileges and are not subject to future calls or
assessments. Each unit entitles the holder to one vote at all meetings of
unitholders and a pro rata share of distributions declared by the Fund.
The Fund intends to make monthly cash distributions of its distributable
cash, as defined in the Fund's Declaration of Trust, subject to working
capital requirements and other reserves. The net proceeds from the
issuance of trust units and the number of units outstanding are as
follows:

June 30, December 31,
2009 2008
-------------------------------------------------------------------------

Balance, beginning of period $ 476,343 $ 474,585
Non-cash distribution - 1,758
-------------------------------------------------------------------------
Balance, end of period $ 476,343 $ 476,343
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Units outstanding, end of period 43,946,792 43,946,792
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The weighted average number of units outstanding during the three months
and six months ended June 30, 2009 was 43,946,792 (three and six months
ended June 30, 2008 - 43,946,792).

14. CAPITAL

The Fund views its capital as the combination of its indebtedness and
equity balances. In general, the overall capital of the Fund is evaluated
and determined in the context of its financial objectives and its
strategic plan.

While the Fund carries a level of cash on hand, this amount is modest in
relation to its overall capital and is generally in an amount determined
in reference to its pending distribution obligations and short-term
changes in non-cash working capital balances.

With respect to its level of indebtedness, the Fund determines the
appropriate level in the context of its cash flow and overall business
risks. Generally, the Fund has maintained a low level of indebtedness
relative to cash flow in order to provide increased financial flexibility
and to provide increased protection for unitholders relative to their
expectation of distributions. Additionally, the Fund has historically
generated cash flow in excess of distributions and has used a portion of
such excess to pay down indebtedness. The Fund would consider increasing
its level of indebtedness relative to cash flow to assist in the
financing of an acquisition. As well, the Fund will review its level of
indebtedness in the context of the change in taxation impacting the Fund
commencing 2011.

The Fund's indebtedness is subject to a number of covenants and
restrictions including the requirement to meet certain financial ratios
and financial condition tests at a subsidiary level. One such ratio is
the "Total Funded Debt/EBITDA Ratio" as defined in the Credit Agreement.
The maximum ratio allowed for a 12-month trailing period is 2.50. For the
12-month trailing period ended June 30, 2009, this ratio was calculated
at 1.25 (12-month trailing period ended June 30, 2008 - 1.06). Management
also uses this ratio as a key indicator in managing the Fund's capital.

With respect to its equity, the current level of capital is considered
adequate in the context of current operations and the present strategic
plan of the Fund. The equity component of capital increases primarily
based upon the income of the business less the distribution paid. Any
major acquisition would be financed in part with additional equity. The
Fund will also review its level of equity in the context of the change in
taxation impacting the Fund commencing in 2011.

15. COMMITMENTS

As of June 30, 2009, the Fund has annual lease obligations with respect
to real estate, vehicles and equipment as follows:

2009 $ 3,910
2010 4,373
2011 2,834
2012 1,353
2013 619
Thereafter 351
-------------------------------------------------------------------------
$ 13,440
-------------------------------------------------------------------------
-------------------------------------------------------------------------

16. SIGNIFICANT CUSTOMERS

For the three months ended June 30, 2009, the Fund earned 75% of its
consolidated revenue from its seven largest customers (Q2 2008 - 78%).
For the three months ended June 30, 2009 three of these customers
individually accounted for greater than 10%, but not more than 17% of the
Fund's total revenue (for the three months ended June 30, 2008, four of
these customers individually accounted for greater than 10%, but not more
than 17% of the Fund's total revenue).

For the six months ended June 30, 2009, the Fund earned 76% of its
consolidated revenue from its seven largest customers (for the six months
ended June 30, 2008 - 79%). For the six months ended June 30, 2009, three
of these customers individually accounted for greater than 10%, but not
more than 17% of the Fund's total revenue (for the six months ended
June 30, 2008, four of these customers individually accounted for greater
than 10%, but no more than 17% of the Fund's total revenue).

17. SEGMENTED INFORMATION

The Fund operates its business in two segments, organized on the basis of
products, services and markets served. The Davis + Henderson Segment
includes the cheque supply program, deposit bags program and eSwitch®,
among other offerings. The Filogix Segment includes services related to
the credit lifecycle management, including origination and underwriting
of mortgages in Canada, and the personal property, search and
registration programs, among other offerings.

Segment assets include goodwill and intangible assets recognized with the
acquisition of businesses included with each respective Segment.

Corporate costs include expenditures related to public company
activities, a share of executive corporate management costs, corporate
development costs and certain other business-wide costs. Corporate assets
consist primarily of cash and cash equivalents.

Summarized financial information for the three and six months ended
June 30, 2009 and 2008 are as follows:

Three months ended June 30,
-------------------------------------------------------------------------
Davis +
Henderson Segment Filogix Segment
--------------------- ---------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue $ 74,013 $ 76,090 $ 20,544 $ 19,317
Cost of sales and
operating expenses 48,928 50,671 12,436 10,229
Amortization of capital
assets 435 480 643 513
-------------------------------------------------------------------------
24,650 24,939 7,465 8,575

Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of intangible
assets 1,440 2,349 4,289 3,487
-------------------------------------------------------------------------

Income (loss) from
continuing operations
before income taxes 23,210 22,590 3,176 5,088
Future income tax expense
(recovery) - - - -
-------------------------------------------------------------------------
Income (loss) from
continuing operations 23,210 22,590 3,176 5,088
Income (loss) from
discontinued operations - 149 - -
-------------------------------------------------------------------------

Net income (loss) $ 23,210 $ 22,739 $ 3,176 $ 5,088
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Asset expenditures $ 993 $ 1,098 $ 1,498 $ 1,864
Intangible assets $ 5,089 $ 9,785 $ 131,816 $ 117,117
Goodwill $ 359,385 $ 359,385 $ 98,251 $ 81,808
Total assets $ 455,043 $ 427,121 $ 193,698 $ 187,799
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Three months ended June 30,
-------------------------------------------------------------------------
Corporate Consolidated
--------------------- ---------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue $ - $ - $ 94,557 $ 95,407
Cost of sales and
operating expenses 1,029 823 62,393 61,723
Amortization of capital
assets - - 1,078 993
-------------------------------------------------------------------------
(1,029) (823) 31,086 32,691

Interest expense 1,923 1,906 1,923 1,906
Net unrealized loss (gain)
on interest-rate swaps (1,069) (1,034) (1,069) (1,034)
Amortization of intangible
assets - - 5,729 5,836
-------------------------------------------------------------------------

Income (loss) from
continuing operations
before income taxes (1,883) (1,695) 24,503 25,983
Future income tax expense
(recovery) (718) 766 (718) 766
-------------------------------------------------------------------------
Income (loss) from
continuing operations (1,165) (2,461) 25,221 25,217
Income (loss) from
discontinued operations - - - 149
-------------------------------------------------------------------------

Net income (loss) $ (1,165) $ (2,461) $ 25,221 $ 25,366
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Asset expenditures $ - $ - $ 2,491 $ 2,962
Intangible assets $ - $ - $ 136,905 $ 126,902
Goodwill $ - $ - $ 457,636 $ 441,193
Total assets $ 3,140 $ 9,390 $ 651,881 $ 624,310
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Six months ended June 30,
-------------------------------------------------------------------------
Davis +
Henderson Segment Filogix Segment
--------------------- ---------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue $ 146,840 $ 149,138 $ 36,246 $ 33,681
Cost of sales and
operating expenses 97,269 99,709 23,617 21,300
Amortization of capital
assets 884 950 1,292 1,025
-------------------------------------------------------------------------
48,687 48,479 11,337 11,356

Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of intangible
assets 2,865 4,680 8,649 6,936
-------------------------------------------------------------------------

Income (loss) from
continuing operations
before income taxes 45,822 43,799 2,688 4,420
Future income tax expense
(recovery) - - - -
-------------------------------------------------------------------------
Income (loss) from
continuing operations 45,822 43,799 2,688 4,420
Income (loss) from
discontinued operations - 247 - -
-------------------------------------------------------------------------

Net income (loss) $ 45,822 $ 44,046 $ 2,688 $ 4,420
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Capital and other asset
expenditures $ 2,822 $ 3,563 $ 4,032 $ 1,933
Intangible assets $ 5,089 $ 9,785 $ 131,816 $ 117,117
Goodwill $ 359,385 $ 359,385 $ 98,251 $ 81,808
Total assets $ 455,043 $ 427,121 $ 193,698 $ 187,799
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Six months ended June 30,
-------------------------------------------------------------------------
Corporate Consolidated
--------------------- ---------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue $ - $ - $ 183,086 $ 182,819
Cost of sales and
operating expenses 1,908 1,415 122,794 122,424
Amortization of capital
assets - - 2,176 1,975
-------------------------------------------------------------------------
(1,908) (1,415) 58,116 58,420

Interest expense 3,806 3,769 3,806 3,769
Net unrealized loss (gain)
on interest-rate swaps (878) 1,310 (878) 1,310
Amortization of intangible
assets - - 11,514 11,616
-------------------------------------------------------------------------

Income (loss) from
continuing operations
before income taxes (4,836) (6,494) 43,674 41,725
Future income tax expense
(recovery) (782) 766 (782) 766
-------------------------------------------------------------------------
Income (loss) from
continuing operations (4,054) (7,260) 44,456 40,959
Income (loss) from
discontinued operations - - - 247
-------------------------------------------------------------------------

Net income (loss) $ (4,054) $ (7,260) $ 44,456 $ 41,206
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Asset expenditures $ - $ - $ 6,854 $ 5,496
Intangible assets $ - $ - $ 136,905 $ 126,902
Goodwill $ - $ - $ 457,636 $ 441,193
Total assets $ 3,140 $ 9,390 $ 651,881 $ 624,310
-------------------------------------------------------------------------
-------------------------------------------------------------------------

For the three months ended June 30, 2009, the Davis + Henderson Segment
had six customers that individually accounted for greater than 10% but
not more than 18% of the Davis + Henderson Segment revenue and the
Filogix Segment had two customers that individually accounted for greater
than 10% but not more than 16% of the Filogix Segment revenue (for the
three months ended 2008 - Davis + Henderson Segment had six customers
that individually accounted for greater than 10% but not more than 21% of
the Davis + Henderson Segment revenue and the Filogix Segment had three
customers that individually accounted for greater than 10% but not more
than 19% of the Filogix Segment revenue).

For the six months ended June 30, 2009, the Davis + Henderson Segment had
six customers that individually accounted for greater than 10% but not
more than 18% of the Davis + Henderson Segment revenue and the Filogix
Segment had two customers that individually accounted for greater than
10% but not more than 15% of the Filogix Segment revenue (for the six
months ended 2008 - Davis + Henderson Segment had six customers that
individually accounted for greater than 10% but not more than 20% of the
Davis + Henderson Segment revenue and the Filogix Segment had three
customers that individually accounted for greater than 10% but not more
than 19% of the Filogix Segment revenue).

18. DISCONTINUED OPERATIONS

Effective December 31, 2008, the Fund ceased servicing a U.S. cheque
supply contract. As a result, the U.S. operations were classified as
discontinued operations at December 31, 2008.

Revenue attributable to the discontinued operations during the three
months and six months ended June 30, 2009 was nil (Q2 20008 - $1,856, six
months ended June 30, 2008 - $3,532). Earnings per share information
relating to the discontinued operations is as follows:

Three months ended Six months ended
-------------------------------------------------------------------------
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
-------------------------------------------------------------------------

Income from discontinued
operations, per unit,
basic and diluted $ - $ 0.0034 $ - $ 0.0056
Income from continuing
operations, per unit,
basic and diluted 0.5739 0.5738 $ 1.0116 $ 0.9320
Net income per unit,
basic and diluted $ 0.5739 $ 0.5772 $ 1.0116 $ 0.9376
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The results of the U.S. operations were reported as part of the Davis +
Henderson segment in both the current and prior periods.

19. SUBSEQUENT EVENTS

On July 27, 2009 the Fund closed the acquisition of Resolve Business
Outsourcing Income Fund ("Resolve") through the acquisition of all of the
outstanding units of Resolve on the basis of 0.285 of a unit of the Fund
for each unit of Resolve. Based on the issuance of 9,286,583 trust units,
the assumption of Resolve's outstanding debt and estimated transaction
costs, the total cost of the acquisition is approximately $199.1 million.
The Fund has commenced its accounting assessment and valuation of the
assets acquired and liabilities assumed for this acquisition.

Resolve works with businesses as an outsourced resource taking on
critical processes and managing them better, faster and more cost-
effectively. Resolve has over 35 years experience managing processes for
clients in the financial services, retail, government, consumer goods and
communications industries.

On July 28, 2009, with the acquisition of Resolve, the Fund amended its
existing credit facilities to establish a new $70 million non-revolving
term facility and a new $20 million revolving term facility, both with a
maturity date of January 2, 2011. Financing fees of $1.6 million are
recognized as a reduction of outstanding long-term indebtedness and will
be amortized as interest expense over the term of the new credit
facilities.

20. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the
current period's presentation.

SUPPLEMENTARY FINANCIAL INFORMATION

Consolidated Operating Results by Period
-------------------------------------------------------------------------
Three Three Three Three Three
months months months months months
ended ended ended ended ended
(in thousands of June March December September June
Canadian dollars, 30, 31, 31, 30, 30,
unaudited) 2009 2009 2008 2008 2008
-------------------------------------------------------------------------

Revenue $ 94,557 $ 88,529 $ 89,357 $ 95,055 $ 95,407
Expenses 62,080 60,091 62,413 61,664 61,334
-------------------------------------------------------------------------
EBITDA 32,477 28,438 26,944 33,391 34,073

Amortization of
capital assets and
non-acquisition
intangibles 3,679 3,819 3,800 4,219 3,771
Interest expense 1,787 1,747 1,647 1,690 1,754
-------------------------------------------------------------------------
Adjusted income 27,011 22,872 21,497 27,482 28,548

Amortization of
mark-to-market
adjustment of
interest-rate
swaps 136 136 151 151 152
Net unrealized
loss (gain) on
interest-rate
swaps (1,069) 191 3,653 728 (1,034)
Future income tax
expense (recovery) (718) (64) 399 52 766
Amortization of
intangibles from
acquisition 3,441 3,374 3,409 3,412 3,447
-------------------------------------------------------------------------

Income from
continuing
operations 25,221 19,235 13,885 23,139 25,217
Income from
discontinued
operations - - 51 167 149
-------------------------------------------------------------------------

Net income $ 25,221 $ 19,235 $ 13,936 $ 23,306 $ 25,366
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cash flows from
operating
activities $ 27,173 $ 13,015 $ 31,806 $ 35,110 $ 32,623
Changes in
non-cash working
capital - - - - -
and other items(1) 3,517 13,676 (6,380) (3,169) (82)
-------------------------------------------------------------------------
Adjusted cash flows
from operating
activities 30,690 26,691 25,426 31,941 32,541

Less:
Asset
expenditures
and contract
payments(2) 2,491 4,363 4,915 3,027 2,962
-------------------------------------------------------------------------
Adjusted cash flows
after capital
asset expenditures
and contract
payments 28,199 22,328 20,511 28,914 29,579

Distributions paid
to unitholders 20,211 20,211 20,211 20,211 19,305
-------------------------------------------------------------------------
7,988 2,117 300 8,703 10,274

Cash flows provided
by (used in) other
financing
activities (2,000) - 28,000 (5,000) (5,000)
Cash flows used in
acquisition of
Cyence business 103 60 (37,876) - -
Cash flows used in
other acquisitions - - (1,000) - -
Changes in non-cash
working capital and
other items(1) (3,517) (13,676) 6,380 3,169 82
-------------------------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents for
the period $ 2,574 $ (11,499) $ (4,196) $ 6,872 $ 5,356
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Changes in non-cash working capital and certain other balance sheet
items have been excluded from adjusted cash flows from operating
activities so as to remove the effects of timing differences in cash
receipts and cash disbursements, which generally reverse themselves
but can, vary significantly across quarters. This balance also
includes changes to other long-term liabilities.
(2) Asset expenditures include expenditure on capital asset, contract
payments and non-acquisition intangibles
(3) Certain comparative figures have been reclassified to conform to the
current period's presentation.

Summary of Cash Flows Per Unit
-------------------------------------------------------------------------
Three Three Three Three Three
months months months months months
ended ended ended ended ended
(in Canadian June March December September June
dollars, 30, 31, 31, 30, 30,
unaudited) 2009 2009 2008 2008 2008
-------------------------------------------------------------------------
Adjusted income
per unit, basic
and diluted $ 0.6146 $ 0.5204 $ 0.4892 $ 0.6253 $ 0.6496
Net income per
unit, basic and
diluted $ 0.5739 $ 0.4377 $ 0.3172 $ 0.5303 $ 0.5772
Adjusted cash
flows from
operating
activities $ 0.6983 $ 0.6073 $ 0.5786 $ 0.7268 $ 0.7405
Adjusted cash
flows after
capital asset
expenditures
and contract
payments $ 0.6417 $ 0.5081 $ 0.4667 $ 0.6579 $ 0.6731
Distributions
paid to
unitholders $ 0.4599 $ 0.4999 $ 0.4599 $ 0.4599 $ 0.4393
Distributions
declared
during period $ 0.4599 $ 0.4599 $ 0.4999 $ 0.4599 $ 0.4496
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Condensed Consolidated Balance Sheet

-------------------------------------------------------------------------
(in thousands of June March December September June
Canadian dollars, 30, 31, 31, 30, 30,
unaudited) 2009 2009 2008 2008 2008
-------------------------------------------------------------------------

Cash and cash
equivalents $ 3,141 $ 567 $ 12,066 $ 16,262 $ 9,390
Other current
assets 29,996 27,137 23,468 25,604 26,847
Capital and other
assets 24,203 23,854 24,708 18,883 19,977
Goodwill and
intangible assets 594,541 599,939 603,664 564,463 568,096
-------------------------------------------------------------------------
$ 651,881 $ 651,497 $ 663,906 $ 625,212 $ 624,310
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Payables and
other current
liabilities $ 36,745 $ 37,464 $ 49,101 $ 44,119 $ 42,427
Other long-term
liabilities 15,691 17,804 17,805 6,038 5,143
Long-term
indebtedness 145,470 147,400 147,331 119,262 124,193
Unitholders'
equity 453,975 448,829 449,669 455,793 452,547
-------------------------------------------------------------------------
$ 651,881 $ 651,497 $ 663,906 $ 625,212 $ 624,310
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Distribution History
-------------------------------------------------------------------------
Distributions per unit(1)
Month 2009 2008 2007 2006 2005
-------------------------------------------------------------------------
January $ 0.1533 $ 0.1430 $ 0.1280 $ 0.1220 $ 0.1200
February 0.1533 0.1430 0.1280 0.1220 0.1200
March 0.1533 0.1430 0.1320 0.1250 0.1200
April 0.1533 0.1430 0.1320 0.1250 0.1200
May 0.1533 0.1533 0.1320 0.1250 0.1200
June 0.1533 0.1533 0.1320 0.1250 0.1200
July 0.1533 0.1320 0.1250 0.1200
August 0.1533 0.1320 0.1250 0.1220
September 0.1533 0.1320 0.1250 0.1220
October 0.1533 0.1320 0.1250 0.1220
November(2) 0.1533 0.3430 0.1280 0.1220
December(3) 0.1933 0.1430 0.1280 0.1220
-------------------------------------------------------------------------
$ 0.9198 $ 1.8384 $ 1.7980 $ 1.5000 $ 1.4500
-------------------------------------------------------------------------
-------------------------------------------------------------------------

---------------------------------------------------------------
Distributions per unit(1)
Month 2004 2003 2002 2001
---------------------------------------------------------------
January $ 0.1150 $ 0.1117 $ 0.1083 $ -
February 0.1150 0.1117 0.1083 -
March 0.1168 0.1117 0.1083 -
April 0.1168 0.1133 0.1083 -
May 0.1168 0.1133 0.1083 -
June 0.1168 0.1133 0.1083 -
July 0.1168 0.1133 0.1117 -
August 0.1168 0.1133 0.1117 -
September 0.1168 0.1133 0.1117 -
October 0.1168 0.1150 0.1117 -
November(2) 0.1200 0.1150 0.1117 -
December(3) 0.1200 0.1150 0.1117 0.0427
---------------------------------------------------------------
$ 1.4044 $ 1.3599 $ 1.3200 $ 0.0427
---------------------------------------------------------------
---------------------------------------------------------------

(1) Monthly distributions are made to unitholders of record on the last
business day of each month and are paid within 31 days following each
month end.
(2) November 2007 declared distributions included a special distribution
of $0.20 for unitholders of record on November 15, 2007 and was paid
on November 30, 2007.
(3) Distributions in 2001 are in respect of the 12 calendar days from
December 20, 2001 to December 31, 2001. December 2008 declared
distributions included a non-cash special distribution of $0.04 for
unitholders of record on December 31, 2008 and was paid on
December 31, 2008.

Tax Allocation of Distributions

-------------------------------------------------------------------------
2009 2008 2007 2006

-------------------------------------------------------------------------
Dividend income 0.0% 0.0% 0.0% 0.0%
Other income 100.0% 100.0% 100.0% 100.0%
Return of capital 0.0% 0.0% 0.0% 0.0%
-------------------------------------------------------------------------
100.0% 100.0% 100.0% 100.0%
-------------------------------------------------------------------------

-------------------------------------------------------------------------
2005 2004 2003 2002

-------------------------------------------------------------------------
Dividend income 0.0% 15.0% 19.5% 16.9%
Other income 91.6% 75.2% 69.5% 71.5%
Return of capital 8.4% 9.8% 11.0% 11.6%
-------------------------------------------------------------------------
100.0% 100.0% 100.0% 100.0%
-------------------------------------------------------------------------

The above tax allocation of distributions for 2009 represents an estimate
based on the total expected distributions for the year ended December 31,
2009.

Other Statistics
(in thousands, except per unit amounts)

Number Market
Trading price range of units of units capital-
(TSX: "DHF.UN") outstand- ization
---------------------------- Average ing at at
Quarter High Low Close daily quarter quarter
volume end end
-------------------------------------------------------------------------

2009 - Q2 14.29 - Q1 16.76 2008 - Q4 17.15 - Q3 16.40 - Q2 17.85 - Q1 21.75 2007 - Q4 22.00 - Q3 20.10 - Q2 19.79 - Q1 17.19 2006 - Q4 19.80 - Q3 19.49 - Q2 21.99 - Q1 23.18 2005 - Q4 24.00 - Q3 24.07 - Q2 22.85 - Q1 23.25 2004 - Q4 23.25 - Q3 19.62 - Q2 19.34 - Q1 19.40 2003 - Q4 17.50 - Q3 15.65 - Q2 15.20 - Q1 13.69 2002 - Q4 13.25 - Q3 12.13 - Q2 11.25 - Q1 11.20 11.51 12.25 126 43,947 538,348
10.40 11.92 104 43,947 523,846
10.30 16.79 117 43,947 737,867
13.50 15.47 93 43,947 679,857
15.53 15.58 83 43,947 684,691
15.77 17.19 107 43,947 755,445
18.75 21.00 98 43,947 922,883
17.14 19.80 78 43,947 870,146
16.30 19.31 90 43,947 848,613
15.00 16.60 87 43,947 729,517
13.80 15.46 143 43,947 679,417
17.21 19.19 96 43,947 843,339
16.99 17.70 100 43,947 777,858
19.50 21.50 61 37,921 815,297
16.32 23.19 92 37,921 879,383
19.50 21.19 88 37,921 803,542
19.58 20.92 61 37,921 793,303
19.65 22.00 67 37,921 834,257
18.80 22.70 81 37,921 860,802
16.75 19.45 58 37,921 737,559
15.05 18.00 93 37,921 682,574
16.71 19.40 92 37,921 735,663
15.10 17.45 67 37,921 661,718
14.52 15.30 99 37,921 580,188
12.91 15.00 82 37,921 568,812
12.48 12.94 92 37,921 490,695
11.22 12.86 139 37,921 487,661
10.45 12.10 165 37,921 458,842
10.00 10.95 176 37,921 415,233
10.11 10.51 149 18,955 199,217

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About Davis + Henderson

Davis + Henderson uses its market-leading capabilities to meet the
evolving needs of the financial services industry in Canada and abroad.
Founded in 1875, the company today provides innovative programs to customers
who offer chequing and credit card accounts, and a comprehensive array of
technology-based solutions to support our customers' credit lifecycle
management services. Davis + Henderson Income Fund is listed on the Toronto
Stock Exchange under the symbol DHF.UN. Further information can be found in
the disclosure documents filed by Davis + Henderson Income Fund with the
securities regulatory authorities, available at www.sedar.com.

%SEDAR: 00017092EF

For further information: Bob Cronin, Chief Executive Officer, Davis + Henderson, Limited Partnership, (416) 696-7700, extension 5301, bob.cronin@dhltd.com; Catherine Martin, Chief Financial Officer, Davis + Henderson, Limited Partnership, (416) 696-7700, extension 5265, catherine.martin@dhltd.com