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Davis + Henderson Income Fund Reports Fourth Quarter and Full Year 2008 Results

TSX Stock Symbol: "DHF.UN"

TORONTO, Feb. 24 /CNW/ - Davis + Henderson Income Fund reported modest
increases in revenue and cash flow for the fourth quarter ended December 31,
2008.

Fourth Quarter Highlights

<<
- Revenue increased by $0.7 million, or 0.8%, to $89.4 million compared
to the same quarter in 2007.

- EBITDA(1) increased $0.4 million, or 1.4%, to $26.9 million compared
to the same quarter in 2007.

- Adjusted income(1) increased by $0.5 million, or 2.3%, to $21.5
million compared to the same quarter in 2007.

- Net income decreased by $2.7 million, or 16.2%, to $13.9 million
compared to the same quarter in 2007. Included in 2008, is a non-cash
mark-to-market loss on interest-rate swaps of $3.7 million.

- Cash distributions declared were $0.4599 per unit compared to $0.6180
per unit during the fourth quarter of 2007. Included in 2007, is a
special cash distribution paid in November 2007 of $0.20 per unit.

2008 Highlights

- Revenue for the year ended December 31, 2008 was $367.2 million, a
decrease of $2.5 million, or 0.7%, compared to $369.7 million in the
same period in 2007 due to lower revenues in the D+H Segment in the
first six months of 2008. The lower level of revenue within the D+H
Segment was primarily attributable to reduced cheque order volumes as
compared to unusually strong order volumes in 2007.

- EBITDA(1) increased by $2.1 million, or 1.7%, to $121.6 million
compared to the prior year.

- Adjusted income(1) increased by $2.7 million, or 2.8%, to $99.2
million compared to the prior year.

- Net income decreased by $3.8 million, or 4.6%, to $78.4 million
compared to the prior year. Included in 2008, is a non-cash mark-to-
market loss on interest-rate swaps of $5.7 million.

- Cash distributions declared were substantially unchanged at $1.7984
per unit compared to $1.7980 per unit declared during the prior year.

(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 release.
>>

Management Commentary

Davis + Henderson had a solid year in 2008 in the context of a
challenging economic environment. Although full-year revenue was down slightly
compared to 2007, which was an unusually strong year, the Fund reported modest
growth in EBITDA, Adjusted income and cash flow and increased its monthly cash
distributions.
In addition to satisfactory financial results, the Business continued to
build on and evolve its programs to the chequing and lending accounts,
invested in product progression, and in late 2008 expanded its product
offering within the credit lifecycle management services area through the
acquisition of Cyence International.
As we move through the early part of 2009, it is apparent that the
economic environment is likely to be more difficult than it was in 2008. This
in turn will affect our lending service revenues, specifically origination and
underwriting revenues, and may have some impact on our cheque program as it
relates to small business demand for our products. Throughout 2008 and into
2009, we implemented many expense reduction measures, and going forward we
will continue to be diligent in managing costs. In summary, we believe that
the combination of our revenue base, business model and capital structure
positions the Business to deal with the challenges we face.
For a more detailed discussion of fourth quarter and full year results
and management's outlook, please see the Management's Discussion and Analysis
below.

Caution Concerning Forward-Looking Statements

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; exposure to fluctuations
in residential real estate and mortgage activity; strategic initiatives being
undertaken to meet the Fund's financial objectives 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 fourth
quarter ended December 31, 2008 via conference call at 10:00 a.m. EST (Toronto
time) on Wednesday February 25, 2009. The number to use for this call is
416-644-3418 for Toronto area callers or 1-800-732-0232 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 21295610
followed by the number sign (No.). The rebroadcast will be available until
Wednesday March 11, 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.

ADDITIONAL INFORMATION

Additional information relating to the Fund, including the Fund's most
recently filed Annual Information Form and the Short Form Prospectus dated May
30, 2006, is available on SEDAR at www.sedar.com.

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's Discussion and Analysis ("MD&A") for the fourth quarter of
2008 and year ended December 31, 2008 should be read in conjunction with MD&A
in the Fund's Annual Report for the year ended December 31, 2007, dated
February 26, 2008, the Short Form Prospectus, dated May 30, 2006, and the
attached unaudited consolidated financial statements. External economic and
industry factors remain substantially unchanged from the annual MD&A and the
Short Form Prospectus, 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.
With 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 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 and certain other
business-wide costs.
Effective January 1, 2008, the PPSA business has been operated and
reported as part of the Filogix Segment. Prior to this date, this program was
operated and reported as part of the Davis + Henderson Segment. The
comparative segmented information for previous years has not been reclassified
as the operational integration of the PPSA business in previous periods does
not make a separation of these costs practical.
Effective December 31, 2008, the D+H Segment ceased providing service
under a U.S. cheque supply contract. As a result, the 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.
Comparative figures for prior periods have been similarly restated.
The Filogix Segment results include the financial results of the Cyence
business for the twelve-day period from the date of acquisition to December
31, 2008.

OPERATING RESULTS FOR THE FOURTH QUARTER

<<
Consolidated Statement of Income
(in thousands of Canadian dollars, except per unit amounts, unaudited)

Quarter ended December 31,
2008 2007
-------------------------------------------------------------------------
Revenue $ 89,357 $ 88,641
Expenses 62,413 62,075
-------------------------------------------------------------------------
EBITDA(1) 26,944 26,566

Amortization of capital and other assets 3,800 3,970
Interest expense 1,647 1,713
Minority interest - (139)
-------------------------------------------------------------------------

Adjusted income(1) 21,497 21,022

Amortization of mark-to-market adjustment
of interest-rate swaps 151 163
Net unrealized loss (gain) on interest-rate
swaps(2) 3,653 823
Future income tax expense (recovery) 399 137
Amortization of intangibles from acquisition 3,409 3,386
-------------------------------------------------------------------------
Income from continuing operations 13,885 16,513
Income from discontinued operations(3) 51 109
-------------------------------------------------------------------------
Net income $ 13,936 $ 16,622
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted income per unit, basic and diluted(1) $ 0.4892 $ 0.4783

Net income per unit, basic and diluted $ 0.3171 $ 0.3782
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Quarter ended December 31,
2008 vs. 2007% change
-------------------------------------------------------------------------

Revenue 0.8%
EBITDA(1) 1.4%
Adjusted income per unit(1) 2.3%
Net income per unit -16.2%

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

(1) EBITDA and Adjusted income are non-GAAP terms. Please see non-GAAP
measures section for a more complete description of these terms.

(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.

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

Quarter ended December 31,
-------------------------------------------------------------------------
Davis + Henderson Segment(4) Filogix Segment(4)
---------------------------- -----------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ 73,013 $ 73,066 $ 16,344 $ 15,575
Expenses 50,675 50,979 11,185 10,437
-------------------------------------------------------------------------
EBITDA(1) 22,338 22,087 5,159 5,138

Amortization of capital
and other assets 2,143 2,547 1,657 1,423
Interest expense - - - -
Minority interest - - - -
-------------------------------------------------------------------------
Adjusted income (loss)(1) 20,195 19,540 3,502 3,715

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 647 903 2,762 2,483
-------------------------------------------------------------------------
Income (loss) from continuing
operations 19,548 18,637 740 1,232
Income (loss) from
discontinued
operations(3) 51 109 - -
-------------------------------------------------------------------------
Net income (loss) $ 19,599 $ 18,746 $ 740 $ 1,232
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Quarter ended December 31,
-------------------------------------------------------------------------
Corporate Consolidated
---------------------------- -----------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ - $ - $ 89,357 $ 88,641
Expenses 553 659 62,413 62,075
-------------------------------------------------------------------------
EBITDA(1) (553) (659) 26,944 26,566

Amortization of capital
and other assets - - 3,800 3,970
Interest expense 1,647 1,713 1,647 1,713
Minority interest - (139) - (139)
-------------------------------------------------------------------------
Adjusted income (loss)(1) (2,200) (2,233) 21,497 21,022

Amortization of mark-to-
market adjustment of
interest-rate swaps 151 163 151 163
Net unrealized loss (gain)
on interest-rate swaps(2) 3,653 823 3,653 823
Future income tax expense
(recovery) 399 137 399 137
Amortization of
intangibles
from acquisition - - 3,409 3,386
-------------------------------------------------------------------------
Income (loss) from continuing
operations (6,403) (3,356) 13,885 16,513
Income (loss) from
discontinued
operations(3) - - 51 109
-------------------------------------------------------------------------
Net income (loss) $ (6,403) $ (3,356) $ 13,936 $ 16,622
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(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
contracts, the amounts represent a non-cash unrealized gain or loss.
(3) Effective December 31, 2008, the Fund ceased a servicing 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.
(4) Effective January 1, 2008, the results of the PPSA program are
included in the Filogix Segment. Prior to this date, the results were
included in the Davis + Henderson Segment.
>>

Revenue

Revenue for the fourth quarter of 2008 was $89.4 million, relatively
unchanged compared to 2007. Small increases in revenue in several areas of the
Business offset a decline in origination revenues within Filogix. Results for
both segments are discussed in more detail in the sections that follow.

Expenses

On a consolidated basis, expenses for the fourth quarter of 2008 were up
0.5% to $62.4 million, generally consistent to the fourth quarter of 2007,
with increases in the Filogix Segment offset by other modest reductions.
Results for both segments are discussed more in detail in the sections that
follow.

Amortization of Capital and Other Assets

Amortization of capital and other assets decreased by $0.2 million
compared to the fourth quarter of 2007 as a result of certain capital and
other assets having become fully amortized.

Other Expenses

Interest expense decreased by $0.1 million in the fourth quarter of 2008
compared to the fourth quarter of 2007 as a result of lower average borrowing
balances in 2008.
An unrealized loss on interest rate swaps of $3.7 million was recognized
in the fourth quarter of 2008 (Q4 2007 - $0.8 million), reflecting
mark-to-market adjustments related to generally lower interest rates at
December 31, 2008 compared to September 30, 2008. These unrealized gains and
losses are recognized in income as these swaps are no longer designated as
hedges for accounting purposes. Provided the business does not cancel its
contracts, the amounts represent a non-cash unrealized gain or loss that will
subsequently reverse through income.
Amortization of intangibles was $3.4 million for the fourth quarter of
2008, unchanged from the same period in 2007.

Net Income

Net income of $13.9 million for the quarter ended December 31, 2008,
decreased by $2.7 million, or 16.2%, when compared to the same quarter in the
previous year, primarily as a result of the unrealized mark-to-market losses
on interest rate swaps. Excluding the non-cash impacts of mark-to-market gains
and losses on interest-rate swaps, the charge for future income taxes and
amortization of intangibles, Adjusted income per unit of $0.4892 increased by
$0.0108, or 2.3%, over the same quarter last year.

Operating Results - D+H Segment

Revenue

Total revenue for the fourth quarter of 2008 decreased by $0.1 million,
or 0.1%, compared to the same period in 2007. This decrease is net of a $0.6
million reclassification of the PPSA business to the Filogix Segment, which
during 2007 was operated and reported within the Davis + Henderson Segment.
Excluding the impact of this reclassification, there was a $0.5 million, or
0.7%, increase in revenues in the fourth quarter of 2008, compared to the same
period in 2007. This increase was driven by successful cheque program
initiatives, including annual program changes and product and service
enhancements such as IDefence and BizAssist partially offset by the impact of
lower than expected small business cheque order volumes as compared to the
same quarter of the previous year.

Expenses

Expenses within the Davis + Henderson Segment for the fourth quarter of
2008 were $50.7 million and were $0.3 lower than the fourth quarter of 2007 as
reductions related to the transfer the PPSA business to the Filogix Segment
were partially offset by increased selling and project implementation costs.

Operating Results - Filogix Segment

Revenue

Revenue during the fourth quarter of 2008 within the Filogix Segment
increased by $0.8 million, or 4.9%, over the same period in 2007. Excluding
the impact of the reclassification of the PPSA program, revenue decreased by
$0.2 million, or 1.2%, compared with the same quarter in 2007. The decrease is
primarily a result of a decline in origination fees, which fell 13% in the
fourth quarter of 2008 compared with the same period in 2007, partially offset
by a number of positive increases including the inclusion of the Cyence
revenues for the last twelve days of December and from a recovery of $1.4
million related to the resolution of a customer contract item.

Expenses

Expenses for the Filogix Segment increased by $0.7 million, or 7.2%, in
the fourth quarter of 2008 compared with the same period last year primarily
due to the inclusion of the PPSA program, the inclusion of Cyence expenses
after the December 19, 2008 acquisition, and a severance charge related to
staff reductions of approximately $1.1 million, partially offset by cost
savings in other areas. Staff reductions, and other cost savings actions were
initiated in response to reduced activity in the real estate and mortgage
markets.

Operating Results - Corporate Segment

Expenses within the Corporate Segment decreased by $0.1 million, or
16.1%, for the quarter ended December 31, 2008 compared with same period in
the prior year primarily as a result of decreased consulting and legal costs.

Summary of Cash Flows(1)

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.

<<
Quarter ended December 31,
(in thousands of Canadian dollars, unaudited) 2008 2007
-------------------------------------------------------------------------

Cash flows from operating activities $ 31,806 $ 32,141

Add:
Changes in non-cash working capital and
other items(2) (6,380) (6,959)
-------------------------------------------------------------------------
Adjusted cash flows from operating activities 25,426 25,182

Less:
Maintenance capital expenditures(3) 2,791 4,204
Growth capital expenditures(3) 1,731 -
Contract payments(4) 393 150
-------------------------------------------------------------------------
Adjusted cash flows after capital expenditures
and contract payments(3) 20,511 20,828

Less:
Distributions paid to unitholders 20,211 26,676
-------------------------------------------------------------------------
300 (5,848)

Cash flows provided by (used in) other
financing activities 28,000 -
Cash flows used in acquisition of Cyence
business (37,876) -
Cash flows used in other acquisitions (1,000) -
Changes in non-cash working capital and other
items(2) 6,380 6,959
Distributions paid to minority interest - (187)
-------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents for the period $ (4,196) $ 924
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(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. Minority interest and
changes to other long-term liabilities are deducted to arrive at
adjusted cash flows. For details, see the Changes in Non-Cash
Working Capital and Other Items section.

(3) Maintenance capital expenditures are defined by the Fund as capital
expenditures necessary to maintain and sustain the current productive
capacity of the Business or generally improve the efficiency of the
Business. Growth capital expenditures are defined by the Fund as
capital 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
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 the financial institutions of
the many activities related to ordering, data handling, customer
service and other activities undertaken by financial institutions
related to the operation of the cheque supply and other programs.

Summary of Cash Flows per Unit

(in Canadian dollars, unaudited)

Quarter ended December 31,
2008 2007 % change
-------------------------------------------------------------------------
Adjusted cash flows from operating
activities $ 0.5786 $ 0.5730 1.0%
Adjusted cash flows after capital
expenditures and contract payments $ 0.4667 $ 0.4739 -1.5%
Distributions paid to unitholders $ 0.4599 $ 0.6070 -24.2%
Cash distributions declared during
period $ 0.4599 $ 0.6180 -25.6%
-------------------------------------------------------------------------

Cash Flows, Income and Distributions Paid

The following table compares cash flows from operating activities and
income to distributions paid for the fourth quarter and year ended December
31, 2008.

Quarter ended Year ended
(in thousands of Canadian December 31, December 31,
dollars, unaudited) 2008 2007 2008 2007
-------------------------------------------------------------------------
Cash flows from operating
activities $ 31,806 $ 32,141 $ 116,062 $ 117,401

Net income $ 13,936 $ 16,622 $ 78,448 $ 82,239

Adjusted income $ 21,497 $ 21,022 $ 99,168 $ 96,499

Distributions paid during
period $ 20,211 $ 26,676 $ 78,580 $ 78,357

Excess (shortfall) of
cash flows from
operating activities
over cash
distributions paid $ 11,595 $ 5,465 $ 37,482 $ 39,044

Excess (shortfall) of
net income over cash
distributions paid $ (6,275) $ (10,054) $ (132) $ 3,882

Excess (shortfall) of
Adjusted income over
cash distributions
paid $ 1,286 $ (5,654) $ 20,588 $ 18,142
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

Excess cash flows from operating activities over cash distributions paid
have historically been used to fund capital expenditures, reduce debt and to
fund acquisitions. In the fourth quarter of 2008, distributions exceeded net
income as a result of the non-cash charges for mark-to-market adjustments and
future income taxes. In the fourth quarter of 2007, distributions included a
payment of a special cash distribution of $8.8 million, funded by cash
balances on hand accumulated from prior periods resulting in distributions
exceeding net income.

Expenditures on Capital Assets and Contract Payments

Total capital asset expenditures for the fourth quarter of 2008 increased
modestly by $0.3 million over the same quarter in 2007. Total capital asset
expenditures for the year ended December 31, 2008 were $10.2 million, a
decrease of $1.8 million compared to the same period in 2007. Most of the
decrease in 2008 over 2007 reflects a generally lower level of spending on
technology infrastructure following a heavier investing period in 2007. Within
the Filogix Segment, additional capital was spent in support of new customer
initiatives.
The level of investment in 2009, for both capital assets and contract
payments that is required to maintain, sustain and grow the productive
capacity of the Business is 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. The Business' capital program provides for continued
expenditures to be funded by cash flows from operations.

Distributions

During the fourth quarter of 2008, the Fund paid distributions of $20.2
million ($0.4599 per unit), a decrease of $6.5 million over the same period in
the prior year which included an $8.8 million special cash distribution.
On December 31, 2008, a non-cash special distribution at the rate of
$0.04 per unit was paid to unitholders of record on that date. The purpose of
the special distribution was to ensure no taxable income remained in the Fund
in 2008. Immediately after the declaration of the unit distribution, the
number of outstanding Fund units was consolidated such that each unitholder
held, following the consolidation, the same number of units as before the
non-cash distribution.
On an annualized basis, the monthly cash distribution rate for December
2008 was $1.84 per unit as compared to $1.72 per unit annualized in December
2007, representing an increase of 7.2%.

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

Quarter ended December 31,
2008 2007
-------------------------------------------------------------------------
Minority interest $ - $ (139)
Decrease (increase) in non-cash working
capital items 6,022 6,963
Decrease (increase) in other operating assets
and liabilities 358 135
-------------------------------------------------------------------------
Decrease (increase) in non-cash working
capital and other items $ 6,380 $ 6,959
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

The decrease in non-cash working capital for the quarter ended December
31, 2008, a source of cash flow, reflects a decrease in the level of
receivables and an increase in the level of payables, both of which are
considered timing differences that are expected to reverse in future quarters.
The decrease in non-cash working capital for the quarter ended December 31,
2007, reflected a decrease in the level of receivables and an increase in the
level of payables, including those related to capital purchases made in the
later portion of 2007, both of which were the result of timing differences
that largely reversed in the first quarter of 2008.

Cash Flows Provided by Financings and Used in Business Acquisitions

During the fourth quarter of 2008, the Fund advanced its strategy of
providing services to the credit lifecycle management market by acquiring 100%
of Cyence for total cash consideration of $37.9 million. The acquisition was
funded by drawing $28.0 million from the existing debt facility, with the
balance funded from cash on hand. The Business also made a $1.0 million
portfolio investment in a technology services company.

2008 OPERATING RESULTS

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.

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

Year ended December 31,
2008 2007 2006(4)
-------------------------------------------------------------------------
Revenue $ 367,231 $ 369,726 $ 317,967
Expenses 245,678 250,237 223,562
-------------------------------------------------------------------------
EBITDA(1) 121,553 119,489 94,405

Amortization of capital and other
assets 15,538 15,080 13,040
Interest expense 6,847 7,531 6,016
Minority interest - 379 202
-------------------------------------------------------------------------
Adjusted income(1) 99,168 96,499 75,147

Amortization of mark-to-market
adjustment of interest-rate swaps 561 678 -
Net unrealized loss (gain) on
interest-rate swaps(2) 5,691 (740) -
Future income tax expense (recovery) 1,217 1,591 -
Amortization of intangibles from
acquisition 13,716 13,298 8,236
-------------------------------------------------------------------------
Income from continuing operations 77,983 81,672 66,911
Income (loss) from discontinued
operations(3) 465 567 (382)
-------------------------------------------------------------------------
Net income 78,448 82,239 66,529
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted income per unit, basic and
diluted(1) $ 2.2565 $ 2.1958 $ 1.8164
Net income per unit, basic and
diluted $ 1.7851 $ 1.8713 $ 1.6081
-------------------------------------------------------------------------
-------------------------------------------------------------------------

-------------------------------------------------------------------------
2008 vs. 2007 2007 vs. 2006
% change % change
-------------------------------------------------------------------------

Revenue -0.7% 16.3%
EBITDA(1) 1.7% 26.6%
Adjusted income per unit(1) 2.8% 28.4%
Net income per unit -4.6% 23.6%
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(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
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.
(4) The 2006 results include the results for the Filogix business from
the date of acquisition June 15, 2006, to December 31, 2006.
>>

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Revenue

Total consolidated revenue for the year ended December 31, 2008 was
$367.2 million, a decrease of $2.5 million, or 0.7%, compared to 2007. This
decline reflected reduced revenues within the D+H Segment partially offset by
increased revenues within the Filogix Segment. During the first half of 2008,
the D+H Segment experienced increased cheque order volume declines due to a
shift in reorder cycles resulting from accelerated volumes within the first
six months of 2007, as further discussed below. While generally cheque order
volumes during the last six months of 2008 returned to levels directionally
more in line with those historically experienced, cheque program revenues were
lower in 2008 compared with 2007. Results for both segments are discussed in
more detail in the sections that follow.

Expenses

On a consolidated basis, expenses for 2008 decreased by $4.6 million, or
1.8%, compared to 2007 with cost reductions within the D+H Segment offsetting
cost increases within the Filogix Segment and with both business units
continuing to focus on cost containment initiatives. The decline of expenses
within the D+H Segment was primarily driven by reduced costs related to the
decline in cheque order volumes as referenced above and more fully described
below.

Amortization of Capital and Other Assets

Amortization of capital and other assets on a consolidated basis during
2008 increased by $0.5 million, or 3.0%, to $15.5 million compared to the same
period in 2007. The increased amortization was primarily a result of capital
additions within the Business.

Other Expenses

Interest expense decreased by $0.7 million for 2008 compared to the prior
year due primarily to the lower level of outstanding debt prevailing
throughout most of the year. Prior to drawing $28.0 million from existing debt
facilities in December 2008 to finance the acquisition of the Cyence business,
the Fund had made debt repayments of $10.0 million in 2008 and $15.0 million
in 2007.
Effective January 2, 2008, the Fund increased its ownership in AVS to
100%. As AVS is now a wholly-owned subsidiary, the Business no longer
recognizes minority interest as all earnings accrue to the Business.
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.
For 2008, an unrealized loss on interest-rate swaps of $5.7 million (2007
- $0.7 million unrealized gain) was recorded, reflecting mark-to-market
adjustments related to generally lower interest rates at December 31, 2008
compared to December 31, 2007. Provided the business does not cancel its
contracts, the amounts represent a non-cash unrealized gain or loss that will
subsequently reverse through income.
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 being subject to 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. As the new tax rules were
enacted in June 2007, the Fund was required under Canadian GAAP to recognize
future income tax assets and liabilities, with a corresponding impact on
future income tax expense or recovery based on the temporary differences
expected to reverse after the date the tax is effective. Accordingly, the Fund
recognized a future income tax liability and the related expense of $1.2
million during 2008 (2007 - $1.6 million).
Amortization of intangibles increased by $0.4 million in 2008, compared
to 2007. The increase was primarily related to the incremental intangible
assets arising on the acquisition of the remaining 25% interest in the AVS
business discussed above, and to the purchase of a customer service contract.

Income from Discontinued Operations

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. As
the service commitments for the contract were primarily outsourced to a third
party, the termination of this contract has not disrupted business operations.

Net Income
Net income of $78.4 million for 2008 decreased by $3.8 million, or 4.6%,
compared to the same period in 2007. The decrease was primarily the result of
the $5.7 million unrealized loss on interest rate swaps referred to above.
Excluding the non-cash impacts of amortization of market-to-market adjustments
on interest rate swaps, mark-to-market gains and losses on interest-rate
swaps, future income taxes and amortization of intangibles from acquisitions,
Adjusted income increased by $2.7 million, or 2.8%, in 2008 over the prior
year.

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

Year ended December 31,
-------------------------------------------------------------------------
Davis + Henderson Segment(4) Filogix Segment(4)
---------------------------- -----------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ 298,335 $ 306,179 $ 68,896 $ 63,547
Expenses 201,266 210,937 41,904 36,726
-------------------------------------------------------------------------

EBITDA(1) 97,069 95,242 26,992 26,821

Amortization of capital
and other assets 9,591 9,483 5,947 5,597
Interest expense - - - -
Minority interest - - - -
-------------------------------------------------------------------------

Adjusted income (loss)(1) 87,478 85,759 21,045 21,224

-------------------------------------------------------------------------
Net income (loss) $ 85,125 $ 82,960 $ 10,147 $ 11,292

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

Year ended December 31,
-------------------------------------------------------------------------
Corporate Consolidated
---------------------------- -----------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ - $ - $ 367,231 $ 369,726
Expenses 2,508 2,574 245,678 250,237
-------------------------------------------------------------------------

EBITDA(1) (2,508) (2,574) 121,553 119,489

Amortization of capital
and other assets - - 15,538 15,080
Interest expense 6,847 7,531 6,847 7,531
Minority interest - 379 - 379
-------------------------------------------------------------------------

Adjusted income (loss)(1) (9,355) (10,484) 99,168 96,499

Amortization of mark-to-
market adjustment of
interest-rate swaps 561 678 561 678
Net unrealized loss (gain)
on interest-rate swaps(2) 5,691 (740) 5,691 (740)
Future income tax expense
(recovery) 1,217 1,591 1,217 1,591
Amortization of
intangibles
from acquisition - - 13,716 13,298
-------------------------------------------------------------------------
Income (loss) from
continuing operations (16,824) (12,013) 77,983 81,672
Income (loss) from
discontinued
operations(3) - - 465 567

-------------------------------------------------------------------------
Net income (loss) $ (16,824) $ (12,013) $ 78,448 $ 82,239

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

(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
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.
(4) Effective January 1, 2008, the results of the PPSA program are
included in the Filogix Segment. Prior to this date, the results were
included in the Davis + Henderson Segment.
>>

Operating Results - D+H Segment

Revenue

Revenue within the Davis + Henderson Segment for the year ended December
31, 2008 decreased by $7.8 million, or 2.6%, compared with the same period in
2007. This decrease is net of a $4.1 million reclassification of the PPSA
business to the Filogix Segment, which during 2007 was operated and reported
within the Davis + Henderson Segment. Excluding the impact of this
reclassification, there was a $3.8 million, or 1.3%, decrease in revenues in
2008, compared to the same period in 2007. This decrease is primarily
attributed to elevated declines in cheque order volumes during the first half
of 2008 as a result of a shift in reorder cycles as more fully discussed
below. The impact of reduced order volumes was partially offset by annual
program changes and product and service enhancements, such as IDefence® and
BizAssist®, which positively impacted revenues in 2008.
Historically, cheque order volumes have, on average, declined annually by
low single digit percentages as a result of declining cheque usage. In the
first half of 2008, this decline was in excess of historical declines due to
changes in the imaging standards required for cheques produced in Canada,
which generated incremental and accelerated reorders during the first six
months of 2007. Management believes that many of these accelerated reorders
received in 2007 would otherwise have been received in 2008 pursuant to normal
reorder cycles. In the second half of 2008, cheque order volume declines were
directionally more in line with historical experience, although cheque order
volumes related to small business were below anticipated levels.

Expenses

Expenses within the Davis + Henderson Segment decreased by $9.7 million,
or 4.6%, during the year ended December 31, 2008 compared to the same period
in 2007. A large part of the year-over-year decrease was related to the cheque
order volume declines due to the shift in reorder cycles and other revenue
related reductions, including the transfer of the PPSA business to the Filogix
Segment, and an overall reduction in project and other costs generally related
to the PPSA business.

Operating Results - Filogix Segment

Revenue

Revenue in the Filogix Segment for the year ended December 31, 2008
increased by $5.3 million, or 8.4%, over the same period in 2007. Excluding
the PPSA program, revenue increased by $1.2 million, or 1.9%, compared with
the same period in 2007.
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. Year-over-year origination services revenues within Filogix
were down 4.1%, with the largest portion of the reduction occurring in the
later part of the year.
The total revenue increase of $1.2 million over 2007 reflects the reduced
origination services revenues as described above, offset by increased revenues
from the licensing of the Business' underwriting technology in Australia and
New Zealand marketplaces, and in the fourth quarter of 2008 from the recovery
related to the resolution of a customer contract item.

Expenses

Expenses for the Filogix Segment increased by $5.2 million, or 14.1%, for
the year ended December 31, 2008 compared with the same period last year.
These increases were primarily attributed to the inclusion of the PPSA expense
base, planned increases in expenditures in support of product enhancements and
strengthening the general delivery capabilities of the Business, and, in the
fourth quarter of 2008, the recording of severance costs related to staff
reductions. Commencing in the second half of the 2008 year, in response to the
changing market conditions and reduced mortgage transaction volumes, the
Business reduced expenses and personnel. Excluding the inclusion of the PPSA
expense base and certain unusual employee-related expenses, expenses increased
by 3.5% over the 2007 levels.

Operating Results - Corporate Segment

Expenses within the Corporate Segment were substantially unchanged with a
decrease of $0.1 million for the year ended December 31, 2008 compared with
the prior year.

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

2008
Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Revenue $ 89,357 $ 95,055 $ 95,407 $ 87,412
Expenses 62,413 61,664 61,334 60,267

EBITDA(1) 26,944 33,391 34,073 27,145

Amortization of capital
and other assets 3,800 4,219 3,771 3,748
Interest expense 1,647 1,690 1,754 1,756
Minority interest - - - -
-------------------------------------------------------------------------
Adjusted income(1) 21,497 27,482 28,548 21,641

Amortization of mark-to-market
adjustment of interest-rate
swaps 151 151 152 107
Net unrealized loss (gain)
on interest-rate swaps(2) 3,653 728 (1,034) 2,344
Future income tax expense
(recovery) 399 52 766 -
Amortization of intangibles
from acquisition 3,409 3,412 3,447 3,448
-------------------------------------------------------------------------
Income from continuing
operations 13,885 23,139 25,217 15,742
Income from discontinued
operations(3) 51 167 149 98

-------------------------------------------------------------------------
Net income 13,936 23,306 25,366 15,840
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Adjusted income per unit,
basic and diluted(1) 0.4892 0.6253 0.6496 0.4924

Net income per unit,
basic and diluted 0.3171 0.5303 0.5772 0.3604

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

Revenue $ 88,641 $ 92,724 $ 99,250 $ 89,111
Expenses 62,075 61,695 64,450 62,017

EBITDA(1) 26,566 31,029 34,800 27,094

Amortization of capital
and other assets 3,970 3,809 3,670 3,631
Interest expense 1,713 1,819 1,945 2,054
Minority interest (139) 205 204 109
-------------------------------------------------------------------------
Adjusted income(1) 21,022 25,196 28,981 21,300

Amortization of mark-to-market
adjustment of interest-rate
swaps 163 163 176 176
Net unrealized loss (gain) 823 957 (2,196) (324)
Future income tax expense
(recovery) 137 - 1,454 -
Amortization of intangibles
from acquisition 3,386 3,347 3,271 3,294
-------------------------------------------------------------------------
Income from continuing
operations 16,513 20,729 26,276 18,154
Income from discontinued
operations(3) 109 147 244 67

-------------------------------------------------------------------------
Net income 16,622 20,876 26,520 18,221

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

Adjusted income per unit,
basic and diluted(1) 0.4783 0.5733 0.6595 0.4847

Net income per unit,
basic and diluted 0.3782 0.4750 0.6035 0.4146
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) EBITDA and Adjusted income are non-GAAP terms. Please see non-GAAP
measures section for a more complete description of these terms.

(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.
>>

Historically, 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. The quarterly results in 2007 and 2008 were additionally impacted by (1)
for the first three quarters of 2007, by higher than expected cheque order
volume, and (2) by stronger mortgage origination fees, both as described
previously. The impact of the higher than expected cheque order volume was
most pronounced in the second quarter of 2007. As a result of this change in
reorder patterns in 2007, management believes that the Business received fewer
cheque orders in the first two quarters of 2008 than would normally be
expected. The Business also experienced reduced mortgage origination fees in
2008 as compared to 2007, particularly in the later part of the year.
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.

<<
SELECTED BALANCE SHEET INFORMATION
(in thousands of Canadian dollars, unaudited)

Year ended December 31,
2008 2007 2006
-------------------------------------------------------------------------
Total assets $ 663,906 $ 634,152 $ 641,051
-------------------------------------------------------------------------
Total long-term liabilities $ 165,136 $ 135,143 $ 148,493
-------------------------------------------------------------------------
>>

Total assets of $663.9 million at December 31, 2008 increased by $29.8
million compared with total assets at December 31, 2007, primarily as a result
of the acquisition of Cyence and the increased investment in AVS in 2008. The
decrease in total assets between December 31, 2007 and December 31, 2006 was
primarily a result of the amortization of intangible assets.
Long-term liabilities increased by $30.0 million as a result of debt
drawn to fund the Cyence acquisition and adjustments to the fair value of
interest rate swaps and future tax liabilities. The decrease in long-term
liabilities between December 31, 2006 and December 31, 2007 was principally
the result of the Business making $15.0 million in voluntary debt payments in
2007 (2008 - $10.0 million).

CASH FLOW AND LIQUIDITY

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

Year ended December 31,
2008 2007 2006
-------------------------------------------------------------------------
Cash flows from operating
activities $ 116,062 $ 117,401 $ 89,753
Add (deduct):
Changes in non-cash working
capital and other items(2) (594) (4,949) (1,048)
-------------------------------------------------------------------------
Adjusted cash flows from operating
activities 115,468 112,452 88,705

Less:
Maintenance capital expenditures(3) 6,852 11,753 5,831
Growth capital expenditures(3) 3,366 251 1,329
Contract payments(4) 3,220 3,492 2,695
-------------------------------------------------------------------------
Adjusted cash flows after capital
expenditures and contract payments(3) 102,030 96,956 78,850

Distributions paid to unitholders 78,580 78,357 61,191
-------------------------------------------------------------------------
Adjusted cash flows after capital,
contract payments and distributions
paid 23,450 18,599 17,659

Cash flows provided by (used in)
other financing activities 18,000 (15,000) 202,749
Cash flows used in acquisition
of Cyence business (37,876) - -
Cash flows used in other
acquisitions (5,250) (746) (223,852)
Changes in non-cash working capital
and other items(2) 594 4,949 1,048
Distributions paid to minority
interest - (442) (120)
-------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents for the year $ (1,082) $ 7,360 $ (2,516)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(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. Minority interest and changes to
other long-term liabilities are deducted to arrive at adjusted cash
flows. For details, see the Changes in Non-Cash Working Capital and Other
Items section.

(3) Maintenance capital expenditures are defined by the Fund as capital
expenditures necessary to maintain and sustain the current productive
capacity of the Business or generally improve the efficiency of the
Business. Growth capital expenditures are defined by the Fund as capital
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
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 the financial institutions of the many activities related
to ordering, data handling, customer service and other activities
undertaken by financial institutions related to the operation of the
cheque supply and other programs.

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

Year ended December 31,
2008 2007 2006
-------------------------------------------------------------------------
Adjusted cash flows from
operating activities $ 2.6275 $ 2.5588 $ 2.1441
Adjusted cash flows after
capital expenditures and
contract payments $ 2.3217 $ 2.2062 $ 1.9059
Distributions paid to unitholders $ 1.7881 $ 1.7830 $ 1.4940
Cash distributions declared
during year $ 1.7984 $ 1.7980 $ 1.5000
-------------------------------------------------------------------------

-------------------------------------------------------------------------
2008 vs. 2007 vs.
2007 2006
% change % change
-------------------------------------------------------------------------
Adjusted cash flows from operating activities 2.7% 19.3%
Adjusted cash flows after capital expenditures
and contract payments 5.2% 15.8%
Distributions paid to unitholders 0.3% 19.3%
Cash distributions declared during year 0.0% 19.9%
-------------------------------------------------------------------------

Cash Flows, Income and Distributions Paid

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

(in thousands of Canadian Year ended December 31,
dollars, unaudited) 2008 2007 2006
-------------------------------------------------------------------------
Cash flows from operating
activities $ 116,062 $ 117,401 $ 89,753

Net income $ 78,448 $ 82,239 $ 66,529

Adjusted income(1) $ 99,168 $ 96,499 $ 75,147

Distributions paid during year $ 78,580 $ 78,357 $ 61,191

Excess (shortfall) of cash flows
from operating activities over
cash distributions paid $ 37,482 $ 39,044 $ 28,562

Excess (shortfall) of net income
over cash distributions paid $ (132) $ 3,882 $ 5,338

Excess (shortfall) of adjusted
income over cash distributions
paid $ 20,588 $ 18,142 $ 13,956
-------------------------------------------------------------------------

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

Excess cash flows from operating activities over cash distributions paid
have been used to fund capital expenditures, pay down debt and to fund
acquisitions.

Expenditures on Capital Assets and Contract Payments

Total capital asset expenditures for the year ended December 31, 2008
were $10.2 million, a decrease of $1.8 million compared to the same period in
2007. The Davis + Henderson Segment accounted for $2.6 million of the decrease
partially offset by a $0.8 million increase in the Filogix Segment. Most of
the decrease in 2008 reflects lower capital spending after a period of higher
capital spending in 2007. In 2008, a higher proportion of Filogix capital was
expended to support the development and implementation of new customer service
contracts that will generate revenue in future periods. The level of
investment in 2009, for both capital assets and contract payments that is
required to maintain, sustain and grow the productive capacity of the
Business, is 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.
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 $78.6 million ($1.7881 per unit)
during 2008 compared to $78.4 million ($1.7830 per unit) in 2007, an increase
of 0.3%. Included in 2007 was a special distribution of $8.8 million ($0.20
per unit) that was paid to unitholders to ensure no taxable income remained in
the fund and in recognition of the strong and higher than expected financial
results of the Business in 2007.
In 2008, a non-cash special distribution of $0.04 per unit was paid to
unitholders of record on December 31. The purpose of the special distribution
was to ensure no taxable income remained in the Fund in 2008. Immediately
after the declaration of the unit distribution, the number of outstanding Fund
units was consolidated such that each unitholder held, following the
consolidation, the same number of units as before the non-cash distribution.
On an annualized basis, the monthly cash distribution rate for December
2008 was $1.84 per unit as compared to $1.72 per unit annualized in December
2007, representing an increase of 7.2%.
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. On a declared basis, total cash distributions per
unit (both monthly and special) were $1.80 per unit for both 2008 and 2007.
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 declared for 2008 is 100%
"other income", as was the case for all of 2007. The non-cash special
distribution is included in a unitholder's taxable income for 2008 and the
adjusted cost base for tax purposes for the units held increases by the same
amount.
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 December 31, 2008 and February 24, 2009,
43,946,792 trust units were outstanding.

Cash Flows Provided by (Used in) Other Financing Activities

During the year ended December 31, 2008, the Fund repaid $10.0 million of
long-term indebtedness prior to drawing $28.0 million from its debt facility
to finance the acquisition of the Cyence business. During the year ended
December 31, 2007, the Fund repaid $15.0 million of long-term indebtedness.

Cash Flows Used in Acquisition of Business

During the fourth quarter of 2008, the Fund advanced its strategy of
providing services to the credit lifecycle management market by acquiring 100%
of Cyence International Inc. for total cash consideration of $37.9 million.
As well, during 2008, the Fund acquired 25% of the outstanding units of
AVS L.P., taking its interest to 100%, and made a $1.0 million portfolio
investment in a technology service company.

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

Year ended December 31,
2008 2007 2006
-------------------------------------------------------------------------
Minority interest $ - $ 379 $ 202
Change in non-cash working
capital items 1,933 4,256 610
Changes in other operating assets
and liabilities (1,339) 314 236
-------------------------------------------------------------------------
Changes in non-cash working
capital and other items $ 594 $ 4,949 $ 1,048
-------------------------------------------------------------------------
>>

The decrease in non-cash working capital items for the year ended
December 31, 2008 was primarily related to a reclassification to current from
long-term liabilities of amounts owing under a deferred compensation program.
The decrease in non-cash working capital items for the year ended December 31,
2007, a source of cash flow, was primarily related to an increase in trade
payables and other current liabilities.

Cash Balances and Long-term Indebtedness

The Business has continued to generate operating cash flow in excess of
distributions. For 2008, this excess cash flow, together with cash on hand,
was applied primarily to make voluntary repayments of bank debt and finance
acquisitions.
At December 31, 2008, cash and cash equivalents totalled $12.1 million,
compared to $13.1 million at December 31, 2007.
Total debt facilities available at December 31, 2007 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 December 31, 2008, the Business had
drawn $120.0 million under the non-revolving term loan and $28.0 million under
the revolving term credit facility. The Business is permitted to draw on the
revolving facility's available balance of $22.0 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 L.P. 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 December 31, 2008, the Fund had interest-rate swap hedge contracts
in place with certain of its lenders, such that the borrowing rates on 81.1%
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
-----------------------------------
Notional Interest
Maturity Date Amount Asset Liability Rate(1)
-------------------------------------------------------------------------
July 15, 2009 $ 20,000 $ - $ 444 5.688%
July 15, 2010 33,000 - 1,999 5.690%
January 5, 2011 22,000 - 397 2.855%
June 15, 2011 20,000 - 2,177 5.560%
June 15, 2011 25,000 - 1,742 5.560%
-------------------------------------------------------------------------
$ 120,000 $ - $ 6,759
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(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 December 31, 2008, the Fund would have to pay the fair value of
$6.8 million, the liability on the balance sheet ($1.2 million at December 31,
2007) 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 thus interest rates, resetting
typically in the one-month to three-month range.
The average effective interest rate applicable to the Fund's total
indebtedness was 4.77% as at December 31, 2008.
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, capital 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. Weak capital and credit markets may negatively impact the Company's
ability in the near term to expand by way of acquisition.

Contractual Obligations - Payments Due by Period

The table below presents the contractual obligations of the Business as
at December 31, 2008 and the timing of the expected payments.

<<
(in thousands of
Canadian dollars, Less than 1 - 3 4 - 5 After 5
unaudited) Total 1 year years years years
-------------------------------------------------------------------------

Long-term
indebtedness $ 148,000 $ - $ 148,000 $ - $ -

Disbursement
obligations on
customer
contracts 1,567 1,537 25 5 -

Operating leases 13,016 4,151 6,542 1,972 351

Employee future
benefits 707 67 148 100 392

Obligations
relating to a
deferred
compensation
program 1,892 1,892 - - -
-------------------------------------------------------------------------
$ 165,182 $ 7,647 $ 154,715 $ 2,077 $ 743
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

Cumulative Summary of Cash Flows(1)

The table below provides an analysis of cash flows of the Fund since
inception through December 31, 2008, excluding the transactions pertaining to
the purchase of the original Davis + Henderson business by the Fund.

<<
(in thousands of
Canadian dollars,
unaudited) December 20, 2001 to December 31, 2008
-------------------------------------------------------------------------
Cash flows from operating activities $ 618,501

Less:
Expenditures on capital assets and contract payments 85,262
-------------------------------------------------------------------------
Adjusted cash flows after capital expenditures and
contract payments 533,239

Less:
Distributions paid to unitholders 425,373
-------------------------------------------------------------------------
Adjusted cash flows after capital, contract payments
and distributions paid 107,866

Cash flows provided by (used in) other financing activities
Net proceeds from issuance of trust units 109,200
Proceeds from long-term indebtedness net of issuance costs 126,549
Distributions paid to minority interest (562)
Repayments of long-term indebtedness (60,000)
-------------------------------------------------------------------------
175,187
Cash flows used in acquistion of businesses (270,987)
-------------------------------------------------------------------------
Increase in cash and cash equivalents for the period 12,066
Cash and cash equivalents, beginning of period -
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 12,066
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cumulative distributions paid as a % of adjusted cash
flows after capital expenditures and contract payments 79.8%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

(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.

Adjusted cash flows after capital, contract payments and distributions
paid of $107.9 million was retained by the Business and used to contribute to
the funding of acquisitions and to pay down debt.
In general, mutual fund trusts, including the Fund, must distribute all
their taxable income to their unitholders in order not to pay income taxes in
the trust. Taxable income may be less than cash generated if the Business has
excess tax deductions it can utilize to reduce taxable income.

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.

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.
Revenues, earnings and cash flow over the past two years have been more
variable than those experienced historically due to (1) changes in the imaging
standards on cheques in Canada that affected the D+H cheque reordering cycle,
and (2) dramatic growth followed by contraction within the real estate and
mortgage origination market. Historically, it has not been the Business'
experience that cheque order volumes, which currently contribute approximately
80% of the consolidated revenues of the overall Business, vary significantly
with changes in the economic environment. However, a more dramatic
recessionary period may impact the demand for small business cheque orders.
Recent changes in the real estate and mortgage markets and the slowing
economic activity have impacted, and are expected to continue to impact, the
origination and underwriting services revenue which represent approximately
15% of the revenues of the Business.
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 and delivering
programs within the lending services market.
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 underwriting services, PPSA services and the newly added
Cyence offerings.
The Business' capital program provides for continued expenditures to be
funded by cash flows from operations. The 2009 capital program is 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.
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.
Davis + Henderson had a solid year in 2008 in the context of a
challenging economic environment. Although full-year revenue was down slightly
compared to 2007, which was an unusually strong year, the Fund reported modest
growth in EBITDA, Adjusted income and cash flow and increased its monthly cash
distributions.
As we move through the early part of 2009, it is apparent that the
economic environment is likely to be more difficult than it was in 2008. This
in turn will affect our lending service revenues, specifically origination and
underwriting revenues, and may have some impact on our cheque program as it
relates to small business demand for our products. Throughout 2008 and into
2009, we implemented many expense reduction measures, and going forward we
will continue to be diligent in managing costs. In summary, we believe that
the combination of our revenue base, business model and capital structure
positions the Business to deal with the challenges we face.

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
December 31, 2008 and 2007
(in thousands of Canadian dollars)

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

2008 2007
-------------------------------------------------------------------------

ASSETS
Current assets:
Cash and cash equivalents $ 12,066 $ 13,148
Accounts receivable 16,180 17,860
Inventory (note 3) 4,475 5,316
Prepaid expenses 2,813 2,973
-------------------------------------------------------------------------
35,534 39,297

Future income tax asset (note 12) 3,162 -
Capital assets (note 4) 31,280 32,199
Other assets (note 5) 4,429 5,964
Interest-rate swaps (note 10) - 105
Intangible assets (note 6) 130,512 118,085
Goodwill (note 7) 458,989 438,502

-------------------------------------------------------------------------
$ 663,906 $ 634,152
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 40,827 $ 39,870
Distributions payable to unitholders 6,737 6,284
Current portion of disbursement obligations
on customer contracts (note 8) 1,537 2,962
-------------------------------------------------------------------------
49,101 49,116

Disbursement obligations on customer
contracts (note 8) 30 767
Long-term indebtedness (note 9) 147,331 129,054
Interest-rate swaps (note 10) 6,759 1,173
Other long-term liabilities (note 11) 812 2,558
Future income tax liability (note 12) 10,204 1,591
Minority interest - 200

-------------------------------------------------------------------------
214,237 184,459

Unitholders' equity:
Trust units (note 13) 476,343 474,585
Deficit (25,714) (23,371)
Accumulated other comprehensive
income (loss) (960) (1,521)
-------------------------------------------------------------------------
449,669 449,693

Commitments (note 15)
-------------------------------------------------------------------------
$ 663,906 $ 634,152
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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)

Quarter ended Year ended
December 31, December 31,
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ 89,357 $ 88,641 $ 367,231 $ 369,726
Cost of sales and
operating
expenses (note 3) 62,773 62,479 247,215 251,771
Amortization of capital
and other assets 3,440 3,566 14,001 13,546
-------------------------------------------------------------------------
23,144 22,596 106,015 104,409

Interest expense 1,798 1,876 7,408 8,209
Net unrealized loss (gain)
on interest-rate swaps 3,653 823 5,691 (740)
Amortization of
intangible assets 3,409 3,386 13,716 13,298
Minority interest - (139) - 379
-------------------------------------------------------------------------

Income from continuing
operations before
income taxes 14,284 16,650 79,200 83,263
Future income tax expense 399 137 1,217 1,591
-------------------------------------------------------------------------
Income from continuing
operations 13,885 16,513 77,983 81,672
Income from discontinued
operations (note 18) 51 109 465 567
-------------------------------------------------------------------------
Net income $ 13,936 $ 16,622 $ 78,448 $ 82,239
-------------------------------------------------------------------------
Net income per unit,
basic and diluted $ 0.3171 $ 0.3782 $ 1.7851 $ 1.8713
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

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

Quarter ended Year ended
December 31, December 31,
2008 2007 2008 2007
-------------------------------------------------------------------------
Net income $ 13,936 $ 16,622 $ 78,448 $ 82,239
Other comprehensive
income:
Amortization of
mark-to-market
adjustment of
interest-rate swaps 151 163 561 678
-------------------------------------------------------------------------
Total comprehensive
income $ 14,087 $ 16,785 $ 79,009 $ 82,917
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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)

Quarter ended Year ended
December 31, December 31,
2008 2007 2008 2007
-------------------------------------------------------------------------

DEFICIT
Deficit, beginning of
period $ (17,681) $ (12,834) $ (23,371) $ (26,710)
Mark-to-market adjustment
of interest-rate swaps - - - 116
Net income 13,936 16,622 78,448 82,239
Distributions (21,969) (27,159) (80,791) (79,016)
-------------------------------------------------------------------------
Deficit, end of period (25,714) (23,371) (25,714) (23,371)
-------------------------------------------------------------------------

ACCUMULATED OTHER
COMPREHENSIVE INCOME
(LOSS)
Accumulated other
comprehensive income
(loss), beginning of
period (1,111) (1,684) (1,521) -
Mark-to-market adjustment
of interest-rate swaps - - - (2,199)
Other comprehensive income :
Amortization of
mark-to-market
adjustment of
interest-rate swaps 151 163 561 678
-------------------------------------------------------------------------
Accumulated other
comprehensive income
(loss), end of period(1) (960) (1,521) (960) (1,521)
-------------------------------------------------------------------------
Deficit and accumulated
other comprehensive
income (loss), end of
period $ (26,674) $ (24,892) $ (26,674) $ (24,892)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Accumulated other comprehensive income (loss) consists of cumulative
net gains and losses that were deferred prior to January 1, 2007 when
hedge accounting was used by the Fund.

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

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

Quarter ended Year ended
December 31, December 31,
2008 2007 2008 2007
-------------------------------------------------------------------------

Cash and cash equivalents provided by (used in):

OPERATING ACTIVITIES
Net income $ 13,936 $ 16,622 $ 78,448 $ 82,239
Add:
Amortization of capital
assets 2,843 2,698 10,835 10,838
Amortization of capital
assets included in cost
of sales 360 404 1,537 1,534
Amortization of other
assets 675 949 3,463 3,014
Amortization of
intangible assets 3,409 3,386 13,716 13,298
Amortization of
mark-to-market
adjustment of
interest-rate swaps 151 163 561 678
Net unrealized loss
(gain) on
interest-rate swaps 3,653 823 5,691 (740)
Future income tax
expense 399 137 1,217 1,591
Minority interest - (139) - 379
-------------------------------------------------------------------------
25,426 25,043 115,468 112,831

Decrease in non-cash
working capital items 6,022 6,963 1,933 4,256
Changes in other operating
assets and liabilities 358 135 (1,339) 314
-------------------------------------------------------------------------
31,806 32,141 116,062 117,401
-------------------------------------------------------------------------

FINANCING ACTIVITIES
Net proceeds from
(repayment of) long-term
indebtedness 28,000 - 18,000 (15,000)
Distributions paid to
minority interest - (187) - (442)
Distributions paid to
unitholders (20,211) (26,676) (78,580) (78,357)
-------------------------------------------------------------------------
7,789 (26,863) (60,580) (93,799)
-------------------------------------------------------------------------

INVESTING ACTIVITIES
Expenditures on capital
assets (4,522) (4,204) (10,218) (12,004)
Payments pursuant to
long-term supply
contracts (393) (150) (3,220) (3,492)
Acquisition of businesses
(note 2) (37,876) - (42,126) 91
Acquisition of
investments (note 5) (1,000) - (1,000) -
Acquisition of customer
service contracts - - - (837)
-------------------------------------------------------------------------
(43,791) (4,354) (56,564) (16,242)
-------------------------------------------------------------------------
Increase (decrease) in
cash and cash equivalents
for the period (4,196) 924 (1,082) 7,360
Cash and cash equivalents,
beginning of period 16,262 12,224 13,148 5,788
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 12,066 $ 13,148 $ 12,066 $ 13,148
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Supplementary information:
Cash interest paid $ 1,633 $ 1,886 $ 6,398 $ 7,810
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

Davis + Henderson Income Fund
Notes to Consolidated Financial Statements
Years ended December 31, 2008 and 2007
(in thousands of Canadian dollars, except unit and per unit amounts,
unaudited)

NATURE OF BUSINESS

Davis + Henderson Income Fund (the "Fund") is a limited-purpose trust,
formed under the laws of the Province of Ontario by a declaration of
trust dated November 6, 2001 and as amended and restated on July 23,
2004. The Fund holds indirectly all of the partnership units of Davis +
Henderson, Limited Partnership ("Davis + Henderson L.P.") and its
subsidiaries Filogix Limited Partnership ("Filogix L.P."), Filogix Inc.,
Cyence International Inc. ("Cyence") and Advanced Validation System
Limited Partnership ("AVS L.P.").

1. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared using Canadian
generally accepted accounting principles.

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, expanding the
current customer offering. The assets acquired and consideration given
were as follows:

2008
-------------------------------------------------------------------------
Net assets acquired, at fair value:
Assets $ 5,132
Intangible assets 24,800
Liabilities (9,852)
-------------------------------------------------------------------------
20,080

Goodwill 17,796

-------------------------------------------------------------------------
Total $ 37,876
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Consideration for 100% ownership:

Cash $ 37,876
-------------------------------------------------------------------------
Total $ 37,876
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

2008 2007
-------------------------------------------------------------------------
Raw materials $ 1,988 $ 2,202
Work-in-process 1,503 2,152
Finished goods 984 962

-------------------------------------------------------------------------
$ 4,475 $ 5,316
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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 year ended
December 31, 2008 was $48,541 (2007 - $51,874). The amount of write-down
of inventories recognized as an expense during the year ended
December 31, 2008 was $222 (2007 - $144).

4. CAPITAL ASSETS

2008
-------------------------------------------------------------------------
Accumulated
Cost amortization Net
-------------------------------------------------------------------------
Machinery and equipment $ 15,589 $ 8,609 $ 6,980
Computer equipment and software 50,895 29,026 21,869
Furniture, fixtures and leasehold
improvements 9,048 6,617 2,431
-------------------------------------------------------------------------
$ 75,532 $ 44,252 $ 31,280
-------------------------------------------------------------------------
-------------------------------------------------------------------------

2007
-------------------------------------------------------------------------
Accumulated
Cost amortization Net
-------------------------------------------------------------------------
Machinery and equipment $ 15,191 $ 7,679 $ 7,512
Computer equipment and software 47,044 24,887 22,157
Furniture, fixtures and leasehold
improvements 8,324 5,794 2,530
-------------------------------------------------------------------------
$ 70,559 $ 38,360 $ 32,199
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Amortization during the quarter ended December 31, 2008 was $3,203
(Q4 2007 - $3,102) of which $360 was included in cost of sales
(Q4 2007 - $404). Amortization during the year ended December 31, 2008
was $12,372 (2007 - $12,372), of which $1,537 was included in cost of
sales (2007 - $1,534). Fully amortized capital assets removed from the
accounts during the quarter ended December 31, 2008 were $50
(Q4 2007 - $223) and during the year ended December 31, 2008 were $6,480
(2007 - $444).

5. OTHER ASSETS

2008 2007
-------------------------------------------------------------------------
Long-term supply contracts $ 8,761 $ 12,581
Less: Accumulated amortization (5,414) (6,987)
-------------------------------------------------------------------------
3,347 5,594

Investments 1,000 -
Other 82 370
-------------------------------------------------------------------------
$ 4,429 $ 5,964
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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.

Amortization during the quarter ended December 31, 2008 on long-term
supply contracts was $675 (Q4 2007 - $949) and during the year ended
December 31, 2008 was $3,463 (2007 - $3,014). Fully amortized assets
removed from the accounts during the quarter ended December 31, 2008 were
$1,448 (Q4 2007 - nil) and during the year ended December 31, 2008 were
$5,036 (2007 - $nil).

6. INTANGIBLE ASSETS

2008 2007
-------------------------------------------------------------------------
Cost:
Cheque supply outsourcing contracts $ 16,329 $ 16,329
Customer service contracts 5,849 4,506
Proprietary software 56,093 41,993
Brand names 10,900 8,400
Customer relationships 86,087 77,887
-------------------------------------------------------------------------
175,258 149,115
Accumulated amortization (44,746) (31,030)
-------------------------------------------------------------------------
$ 130,512 $ 118,085
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Amortization during the quarter ended December 31, 2008 was $3,409
(Q4 2007 - $3,386) and during the year ended December 31, 2008 was
$13,716 (2007 - $13,298).

7. GOODWILL

2008 2007
-------------------------------------------------------------------------
Balance, beginning of year $ 438,502 $ 438,546
Goodwill acquired during the year:
AVS acquistion 2,691 (44)
Cyence acquisition 17,796 -
-------------------------------------------------------------------------
Balance, end of year $ 458,989 $ 438,502
-------------------------------------------------------------------------
-------------------------------------------------------------------------

8. DISBURSEMENT OBLIGATIONS ON CUSTOMER CONTRACTS

2008 2007
-------------------------------------------------------------------------
Current portion $ 1,537 $ 2,962
Long-term portion 30 767
-------------------------------------------------------------------------
Total disbursement obligations on customer
contracts $ 1,567 $ 3,729
-------------------------------------------------------------------------

The Fund has fixed customer contract disbursement obligations payable as
of December 31, 2008 as follows:

2009 $ 1,537
2010 15
2011 10
2012 5
-------------------------------------------------------------------------
$ 1,567
-------------------------------------------------------------------------
-------------------------------------------------------------------------

9. LONG-TERM INDEBTEDNESS

2008 2007
-------------------------------------------------------------------------
Non-revolving term loan $ 120,000 $ 120,000
Revolving credit facility 28,000 10,000
-------------------------------------------------------------------------
148,000 130,000
Deferred finance costs (669) (946)
-------------------------------------------------------------------------
$ 147,331 $ 129,054
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Fund has $170.0 million of available term credit facilities due
June 15, 2011 (December 31, 2007 - $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 December 31, 2008, 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 quarter ended December 31, 2008 was $69 (Q4 2007 - $69) and
during the year ended December 31, 2008 was $277 (2007 - $276).
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 year ended
December 31, 2008. As the sensitivity is hypothetical, it should be used
with caution.

+ 100 bps -100 bps
-------------------------------------------------------------------------

Increase (decrease) in interest expense $ 280 $ (280)
Change to net unrealized (gain) loss on
interest-rate swaps (2,100) 2,100
-------------------------------------------------------------------------

Increase (decrease) in net income $ 1,820 $ (1,820)
-------------------------------------------------------------------------

Increase (decrease) in total comprehensive
income $ 1,820 $ (1,820)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Fund manages its interest-rate risks through the use of interest-rate
swaps for most of its outstanding long-term indebtedness. As of
December 31, 2008, the Fund has entered into interest-rate swap contracts
with its lenders, such that the floating borrowing rates on
$120.0 million, or 81.1%, 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
-----------------------------------
Notional Interest
Maturity date Amount Asset Liability rate(1)
-------------------------------------------------------------------------
July 15, 2009 $ 20,000 - $ 444 5.688%
July 15, 2010 33,000 - 1,999 5.690%
January 5, 2011 22,000 - 397 2.855%
June 15, 2011 20,000 - 2,177 5.560%
June 15, 2011 25,000 - 1,742 5.560%
-------------------------------------------------------------------------
$ 120,000 $ - $ 6,759
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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 interest-rate swaps outstanding at December 31, 2006.

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

2008 2007
-------------------------------------------------------------------------
Deferred compensation program $ - $ 1,997
Employee future benefits 707 561
Capital lease 105 -
-------------------------------------------------------------------------
$ 812 $ 2,558
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The deferred compensation program, which commenced in 2003, is a
five-year long-term incentive plan for management, subject to certain
performance criteria and vesting terms, payable after December 31, 2008.
The balance has been reclassified to current liabilities as it is payable
in 2009.

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 year
ended December 31, 2008 was $2.0 million (2007 - $1.8 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:

2008 2007
-------------------------------------------------------------------------
Future income tax assets:
Capital assets less than tax values $ 3,121 $ -
Intangible assets less than tax values 10,979 10,854
Loss carryforwards 1,677 1,636
Valuation allowance (12,615) (12,490)
-------------------------------------------------------------------------
Total future tax assets 3,162 -
-------------------------------------------------------------------------

Future income tax liabilities:
Capital assets greater than tax values 2,849 1,591
Intangible assets greater than tax values 7,355 -
-------------------------------------------------------------------------
Total future tax liabilities 10,204 1,591
-------------------------------------------------------------------------
Net future income tax liabilities $ 7,042 $ 1,591
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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 $3,121 relating to capital assets that are less than
their tax values and a future income tax liability of $7,355 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. during
the year. 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:

2008 2007
-------------------------------------------------------------------------
Balance, beginning of year $474,585 $474,585
Non-cash distribution 1,758 -
-------------------------------------------------------------------------
Balance, end of year $476,343 $474,585
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Units outstanding, end of year 43,946,792 43,946,792
-------------------------------------------------------------------------
-------------------------------------------------------------------------

A non-cash special distribution at the rate of $0.04 per unit was made to
the unitholders on December 31, 2008, to unitholders of record on
December 31, 2008. The special distribution, payable in the form of
additional units, was intended to ensure that, as required by its
Declaration of Trust, the fund will not be liable to pay income taxes in
respect of its current taxation year ending December 31, 2008.
Immediately after the unit distribution, the number of outstanding Fund
units was consolidated, such that each unitholder will hold, following
the consolidation, the same number of Fund units as before the non-cash
distribution.

The weighted average number of units outstanding during the year ended
December 31, 2008 was 43,946,792 (2007 - 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 (as compared to many corporate entities) 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 December 31, 2008, this
ratio was calculated at 1.26 (12-month trailing period ended December 31,
2007 - 1.09). 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 December 31, 2008, the Fund has annual lease obligations with
respect to real estate, vehicles and equipment as follows:

2009 $ 4,151
2010 4,040
2011 2,502
2012 1,353
2013 619
Thereafter 351
-------------------------------------------------------------------------
$ 13,016
-------------------------------------------------------------------------
-------------------------------------------------------------------------

16. SIGNIFICANT CUSTOMERS

For the quarter ended December 31, 2008, the Fund earned 77% of its
consolidated revenue from its seven largest customers (Q4 2007 - 79%).
For the quarter ended December 31, 2008, three of these customers
individually accounted for greater than 10%, but not more than 17% of the
Fund's total revenue (Q4 2007 - four of these customers individually
accounted for greater than 10%, but not more than 18% of the Fund's total
revenue).

For the year ended December 31, 2008, the Fund earned 78% of its
consolidated revenue from its seven largest customers (2007 - 78%). For
the years ended December 31, 2008 and 2007, four of these customers
individually accounted for greater than 10%, but not 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 costs incurred by the Fund for the operation of a
public entity. Corporate assets consist primarily of cash and cash
equivalents.

Prior to January 1, 2008, the personal property, search and registration
programs were operated and reported as part of the Davis + Henderson
Segment. Effective January 1, 2008, these programs are operated and
reported as part of the Filogix Segment.

In circumstances where there is a change in the composition of reportable
segments, CICA Handbook Section 1701, Segment Disclosures, requires
restatement of corresponding information for earlier periods if
practical. If information is not restated, the entity is required to
disclose the results for the current period under both the old basis and
the new basis of segmentation. As it is not practical to extract costs
relating to the personal property, search and registration programs for
periods prior to January 1, 2008, the Fund has presented the segment
information for the current period both under the old basis and the new
basis of segmentation.

Summarized financial information for the quarters ended December 31, 2008
and 2007 are as follows:

Quarter ended December 31,
-------------------------------------------------------------------------
Davis + Henderson
Segment Filogix Segment
--------------------- ---------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ 73,013 $ 73,066 $ 16,344 $ 15,575
Cost of sales and operating
expenses 51,035 51,383 11,185 10,437
Amortization of capital and
other assets 1,783 2,143 1,657 1,423
-------------------------------------------------------------------------
20,195 19,540 3,502 3,715

Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of intangible
assets 647 903 2,762 2,483
Minority interest - - - -
-------------------------------------------------------------------------

Income (loss) from continuing
operations before income
taxes 19,548 18,637 740 1,232
Future income tax expense - - - -
-------------------------------------------------------------------------
Income (loss) from continuing
operations 19,548 18,637 740 1,232
Income (loss) from
discontinued operations 51 109 - -
-------------------------------------------------------------------------
Net income (loss) $ 19,599 $ 18,746 $ 740 $ 1,232
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Capital and other assets
expenditures $ 1,791 $ 2,660 $ 3,124 $ 1,694
Intangible assets $ 337 $ 5,282 $ 130,175 $ 112,803
Goodwill $ 359,385 $ 366,562 $ 99,604 $ 71,940
Total assets $ 425,727 $ 452,012 $ 226,113 $ 168,992
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Corporate Consolidated
--------------------- ---------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ - $ - $ 89,357 $ 88,641
Cost of sales and operating
expenses 553 659 62,773 62,479
Amortization of capital and
other assets - - 3,440 3,566
-------------------------------------------------------------------------
(553) (659) 23,144 22,596

Interest expense 1,798 1,876 1,798 1,876
Net unrealized loss (gain)
on interest-rate swaps 3,653 823 3,653 823
Amortization of intangible
assets - - 3,409 3,386
Minority interest - (139) - (139)
-------------------------------------------------------------------------

Income (loss) from continuing
operations before income
taxes (6,004) (3,219) 14,284 16,650
Future income tax expense 399 137 399 137
-------------------------------------------------------------------------
Income (loss) from continuing
operations (6,403) (3,356) 13,885 16,513
Income (loss) from
discontinued operations - - 51 109
-------------------------------------------------------------------------
Net income (loss) $ (6,403) $ (3,356) $ 13,936 $ 16,622
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Capital and other assets
expenditures $ - $ - $ 4,915 $ 4,354
Intangible assets $ - $ - $ 130,512 $ 118,085
Goodwill $ - $ - $ 458,989 $ 438,502
Total assets $ 12,066 $ 13,148 $ 663,906 $ 634,152
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Effective January 1, 2008, the results of the personal property, search
and registration programs are included as part of the results of the
Filogix Segment. Prior to this date, the results were included as part of
the Davis + Henderson Segment. Current period results under both the new
and old basis of segmentation have been presented separately.

For the quarter ended December 31, 2008, the Davis + Henderson Segment
had four customers that individually accounted for greater than 10% but
not more than 21% of the Davis + Henderson Segment revenue and the
Filogix Segment had two customers that individually accounted for greater
than 10% but not more than 14% of the Filogix Segment revenue (Q4 2007 -
Davis + Henderson Segment had five 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 18% of the
Filogix Segment revenue).

The following table illustrates the reporting under the new and old basis
of segmentation for the quarter ended December 31, 2008.

Quarter ended December 31,
-------------------------------------------------------------------------

Davis + Henderson
Segment Filogix Segment
--------------------- ---------------------
New Basis Old Basis New Basis Old Basis
---------- ---------- ---------- ----------
2008 2008 2008 2008
-------------------------------------------------------------------------
Revenue $ 73,013 $ 73,961 $ 16,344 $ 15,396
Cost of sales and operating
expenses 51,035 51,647 11,185 10,573
Amortization of capital and
other assets 1,783 1,783 1,657 1,657
-------------------------------------------------------------------------
20,195 20,531 3,502 3,166
Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of intangible
assets 647 867 2,762 2,542
-------------------------------------------------------------------------
Income (loss) from continuing
operations before income
taxes 19,548 19,664 740 624
Future income tax expense - - - -
-------------------------------------------------------------------------
Income (loss) from continuing
operations 19,548 19,664 740 624
Income (loss) from
discontinued operations 51 51 - -
-------------------------------------------------------------------------
Net income (loss) $ 19,599 $ 19,715 $ 740 $ 624
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Capital and other asset
expenditures $ 1,791 $ 1,791 $ 3,124 $ 3,124
Intangible assets $ 337 $ 2,900 $ 130,175 $ 127,612
Goodwill $ 359,385 $ 369,253 $ 99,604 $ 89,736
Total assets $ 425,727 $ 447,524 $ 226,113 $ 204,316
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Corporate Consolidated
--------------------- ---------------------
New Basis Old Basis New Basis Old Basis
---------- ---------- ---------- ----------
2008 2008 2008 2008
-------------------------------------------------------------------------
Revenue $ - $ - $ 89,357 $ 89,357
Cost of sales and operating
expenses 553 553 62,773 62,773
Amortization of capital and
other assets - - 3,440 3,440
-------------------------------------------------------------------------
(553) (553) 23,144 23,144
Interest expense 1,798 1,798 1,798 1,798
Net unrealized loss (gain)
on interest-rate swaps 3,653 3,653 3,653 3,653
Amortization of intangible
assets - - 3,409 3,409
-------------------------------------------------------------------------
Income (loss) from continuing
operations before income
taxes (6,004) (6,004) 14,284 14,284
Future income tax expense 399 399 399 399
-------------------------------------------------------------------------
Income (loss) from continuing
operations (6,403) (6,403) 13,885 13,885
Income (loss) from
discontinued operations - - 51 51
-------------------------------------------------------------------------
Net income (loss) $ (6,403) $ (6,403) $ 13,936 $ 13,936
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Capital and other asset
expenditures $ - $ - $ 4,915 $ 4,915
Intangible assets $ - $ - $ 130,512 $ 130,512
Goodwill $ - $ - $ 458,989 $ 458,989
Total assets $ 12,066 $ 12,066 $ 663,906 $ 663,906
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The results presented under the old basis for the Davis + Henderson and
Filogix Segments remove the impact of the change in the reporting of the
personal property, search and registration programs from the current
period results.

Summarized financial information for the years ended December 31, 2008
and 2007 are as follows:

Year ended December 31,
-------------------------------------------------------------------------

Davis + Henderson
Segment Filogix Segment
--------------------- ---------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ 298,335 $ 306,179 $ 68,896 $ 63,547
Cost of sales and operating
expenses 202,803 212,471 41,904 36,726
Amortization of capital and
other assets 8,054 7,949 5,947 5,597
-------------------------------------------------------------------------
87,478 85,759 21,045 21,224

Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of intangible
assets 2,818 3,366 10,898 9,932
Minority interest - - - -
-------------------------------------------------------------------------
Income (loss) from continuing
operations before income
taxes 84,660 82,393 10,147 11,292
Future income tax expense - - - -
-------------------------------------------------------------------------
Income (loss) from continuing
operations 84,660 82,393 10,147 11,292
Income (loss) from
discontinued operations 465 567 - -
-------------------------------------------------------------------------
Net income (loss) $ 85,125 $ 82,960 $ 10,147 $ 11,292
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Capital and other asset
expenditures $ 7,034 $ 9,766 $ 6,404 $ 5,730
Intangible assets $ 337 $ 5,282 $ 130,175 $ 112,803
Goodwill $ 359,385 $ 366,562 $ 99,604 $ 71,940
Total assets $ 425,727 $ 452,012 $ 226,113 $ 168,992
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Corporate Consolidated
--------------------- ---------------------
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ - $ - $ 367,231 $ 369,726
Cost of sales and operating
expenses 2,508 2,574 247,215 251,771
Amortization of capital and
other assets - - 14,001 13,546
-------------------------------------------------------------------------
(2,508) (2,574) 106,015 104,409

Interest expense 7,408 8,209 7,408 8,209
Net unrealized loss (gain)
on interest-rate swaps 5,691 (740) 5,691 (740)
Amortization of intangible
assets - - 13,716 13,298
Minority interest - 379 - 379
-------------------------------------------------------------------------
Income (loss) from continuing
operations before income
taxes (15,607) (10,422) 79,200 83,263
Future income tax expense 1,217 1,591 1,217 1,591
-------------------------------------------------------------------------
Income (loss) from continuing
operations (16,824) (12,013) 77,983 81,672
Income (loss) from
discontinued operations - - 465 567
-------------------------------------------------------------------------
Net income (loss) $ (16,824) $ (12,013) $ 78,448 $ 82,239
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Capital and other asset
expenditures $ - $ - $ 13,438 $ 15,496
Intangible assets $ - $ - $ 130,512 $ 118,085
Goodwill $ - $ - $ 458,989 $ 438,502
Total assets $ 12,066 $ 13,148 $ 663,906 $ 634,152
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Effective January 1, 2008, the results of the personal property, search
and registration programs are included as part of the results of the
Filogix Segment. Prior to this date, the results were included as part of
the Davis + Henderson Segment. Current year results under both the new
and old basis of segmentation have been presented separately.

For the year ended December 31, 2008, the Davis + Henderson Segment had
five 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 18% of the Filogix Segment revenue (2007 - Davis +
Henderson Segment had five 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 17% of the Filogix
Segment revenue).

The following table illustrates the reporting under the new and old basis
of segmentation for the year ended December 31, 2008.

Year ended December 31,
-------------------------------------------------------------------------

Revenue $ 298,335 $ 302,478 $ 68,896 $ 64,753
Cost of sales and operating
expenses 202,803 205,599 41,904 39,108
Amortization of capital and
other assets 8,054 8,054 5,947 5,947
-------------------------------------------------------------------------
87,478 88,825 21,045 19,698

Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of intangible
assets 2,818 3,725 10,898 9,991
-------------------------------------------------------------------------
Income (loss) from continuing
operations before income
taxes 84,660 85,100 10,147 9,707
Future income tax expense - - - -
-------------------------------------------------------------------------
Income (loss) from continuing
operations 84,660 85,100 10,147 9,707
Income (loss) from
discontinued operations 465 465 - -
-------------------------------------------------------------------------
Net income (loss) $ 85,125 $ 85,565 $ 10,147 $ 9,707
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Capital and other asset
expenditures $ 7,034 $ 7,034 $ 6,404 $ 6,404
Intangible assets $ 337 $ 2,900 $ 130,175 $ 127,612
Goodwill $ 359,385 $ 369,253 $ 99,604 $ 89,736
Total assets $ 425,727 $ 447,524 $ 226,113 $ 204,316
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Revenue $ - $ - $ 367,231 $ 367,231
Cost of sales and operating
expenses 2,508 2,508 247,215 247,215
Amortization of capital and
other assets - - 14,001 14,001
-------------------------------------------------------------------------
(2,508) (2,508) 106,015 106,015
Interest expense 7,408 7,408 7,408 7,408
Net unrealized loss (gain)
on interest-rate swaps 5,691 5,691 5,691 5,691
Amortization of intangible
assets - - 13,716 13,716
-------------------------------------------------------------------------
Income (loss) from continuing
operations before income
taxes (15,607) (15,607) 79,200 79,200
Future income tax expense 1,217 1,217 1,217 1,217
-------------------------------------------------------------------------
Income (loss) from continuing
operations (16,824) (16,824) 77,983 77,983
Income (loss) from
discontinued operations - - 465 465
-------------------------------------------------------------------------
Net income (loss) $ (16,824) $ (16,824) $ 78,448 $ 78,448
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Capital and other asset
expenditures $ - $ - $ 13,438 $ 13,438
Intangible assets $ - $ - $ 130,512 $ 130,512
Goodwill $ - $ - $ 458,989 $ 458,989
Total assets $ 12,066 $ 12,066 $ 663,906 $ 663,906
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The results presented under the old basis for the Davis + Henderson and
Filogix Segments remove the impact of the change in the reporting of the
personal property, search and registration programs from the current year
results.

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 year ended
December 31, 2008 was $8,148 (2007 - $9,025). Earnings per share
information relating to the discontinued operations is as follows:

2008 2007
-------------------------------------------------------------------------
Income from discontinued operations, per unit,
basic and diluted $ 0.0106 $ 0.0129
Income from continuing operations, per unit,
basic and diluted 1.7745 1.8584
-------------------------------------------------------------------------
Net income per unit, basic and diluted $ 1.7851 $ 1.8713
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The results of the U.S. operations were reported as part of the
Davis + Henderson segment in both current and prior periods.

19. COMPARATIVE FIGURES

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

SUPPLEMENTARY FINANCIAL INFORMATION

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

Revenue $367,231 $ 89,357 $ 95,055 $ 95,407 $ 87,412
Expenses 245,678 62,413 61,664 61,334 60,267
-------------------------------------------------------------------------
EBITDA 121,553 26,944 33,391 34,073 27,145

Amortization of capital
and other assets 15,538 3,800 4,219 3,771 3,748
Interest expense 6,847 1,647 1,690 1,754 1,756
Minority interest - - - - -
Current income tax
expense - - - - -
-------------------------------------------------------------------------

Adjusted income 99,168 21,497 27,482 28,548 21,641

Amortization of
mark-to-market
adjustment of
interest-rate swaps 561 151 151 152 107
Net unrealized loss
(gain) on
interest-rate swaps 5,691 3,653 728 (1,034) 2,344
Future income tax
expense 1,217 399 52 766 -
Amortization of
intangibles from
acquisition 13,716 3,409 3,412 3,447 3,448
-------------------------------------------------------------------------

Income from continuing
operations 77,983 13,885 23,139 25,217 15,742
Income from discontinued
operations 465 51 167 149 98
-------------------------------------------------------------------------

Net income 78,448 13,936 23,306 25,366 15,840

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

Cash flows from
operating activities $116,062 $31,806 $35,110 $32,623 $16,523
Changes in non-cash
working capital and
other items(1) (594) (6,380) (3,169) (82) 9,037
-------------------------------------------------------------------------
Adjusted cash flows from
operating activities 115,468 25,426 31,941 32,541 25,560

Less:
Expenditures on
maintenance capital
Capital asset
expenditures and
contract payments 13,438 4,915 3,027 2,962 2,534

-------------------------------------------------------------------------
Adjusted cash flows
after capital asset
expenditures
and contract payments 102,030 20,511 28,914 29,579 23,026

Distributions paid to
unitholders 78,580 20,211 20,211 19,305 18,853

-------------------------------------------------------------------------
23,450 300 8,703 10,274 4,173

Cash flows provided by
(used in) other
financing activities 18,000 28,000 (5,000) (5,000) -
Cash flows used in
acquisition of Cyence
business (37,876) (37,876) - - -
Cash flows used in other
acquisitions (5,250) (1,000) - - (4,250)
Changes in non-cash
working capital and
other items(1) 594 6,380 3,169 82 (9,037)
Distributions paid to
minority interest - - - - -
-------------------------------------------------------------------------
Increase (decrease) in
cash and cash
equivalents for the
period $ (1,082) $ (4,196) $ 6,872 $ 5,356 $ (9,114)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Three Three Three Three
Year months months months months
ended ended ended ended ended
(in thousands of December December September June March
Canadian dollars, 31, 31, 30, 30, 31,
unaudited) 2007(2) 2007(2) 2007(2) 2007(2) 2007(2)
-------------------------------------------------------------------------

Revenue $369,726 $ 88,641 $ 92,724 $ 99,250 $ 89,111
Expenses 250,237 62,075 61,695 64,450 62,017
-------------------------------------------------------------------------
EBITDA 119,489 26,566 31,029 34,800 27,094

Amortization of capital
and other assets 15,080 3,970 3,809 3,670 3,631
Interest expense 7,531 1,713 1,819 1,945 2,054
Minority interest 379 (139) 205 204 109
Current income tax
expense - - - - -
-------------------------------------------------------------------------

Adjusted income 96,499 21,022 25,196 28,981 21,300

Amortization of
mark-to-market
adjustment of
interest-rate swaps 678 163 163 176 176
Net unrealized loss
(gain) on
interest-rate swaps (740) 823 957 (2,196) (324)
Future income tax
expense 1,591 137 - 1,454 -
Amortization of
intangibles from
acquisition 13,298 3,386 3,347 3,271 3,294
-------------------------------------------------------------------------

Income from continuing
operations 81,672 16,513 20,729 26,276 18,154
Income from discontinued
operations 567 109 147 244 67

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

Net income 82,239 16,622 20,876 26,520 18,221

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

Cash flows from
operating activities $117,401 $ 32,141 $28,802 $ 34,784 $ 21,674
Changes in non-cash
working capital and
other items(1) (4,949) (6,959) 425 (1,814) 3,399
-------------------------------------------------------------------------
Adjusted cash flows from
operating activities 112,452 25,182 29,227 32,970 25,073

Less:
Expenditures on
maintenance capital
Capital asset
expenditures and
contract payments 15,496 4,354 4,598 2,955 3,589

-------------------------------------------------------------------------
Adjusted cash flows
after capital asset
expenditures
and contract payments 96,956 20,828 24,629 30,015 21,484

Distributions paid to
unitholders 78,357 26,676 17,403 17,403 16,875

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

18,599 (5,848) 7,226 12,612 4,609

Cash flows provided by
(used in) other
financing activities (15,000) - (5,000) (10,000) -
Cash flows used in
acquisition of Cyence
business - - - - -
Cash flows used in other
acquisitions (746) - (837) - 91
Changes in non-cash
working capital and
other items(1) 4,949 6,959 (425) 1,814 (3,399)
Distributions paid to
minority interest (442) (187) (255) - -
-------------------------------------------------------------------------

Increase (decrease) in
cash and cash
equivalents for the
period $ 7,360 $ 924 $ 709 $ 4,426 $ 1,301
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Three Three Three Three
Year months months months months
ended ended ended ended ended
(in thousands of December December September June March
Canadian dollars, 31, 31, 30, 30, 31,
unaudited) 2006(2) 2006(2) 2006(2) 2006(2) 2006(2)
-------------------------------------------------------------------------

Revenue $317,967 $ 86,489 $ 86,603 $ 74,482 $ 70,393
Expenses 223,562 60,676 61,500 51,740 49,646
-------------------------------------------------------------------------
EBITDA 94,405 25,813 25,103 22,742 20,747

Amortization of capital
and other assets 13,040 3,677 3,527 3,061 2,775
Interest expense 6,016 2,186 2,248 887 695
Minority interest 202 89 88 25 -
Current income tax
expense - - - - -
-------------------------------------------------------------------------

Adjusted income 75,147 19,861 19,240 18,769 17,277

Amortization of
mark-to-market
adjustment of
interest-rate swaps - - - - -
Net unrealized loss
(gain) on
interest-rate swaps - - - - -
Future income tax
expense - - - - -
Amortization of
intangibles from
acquisition 8,236 3,254 3,339 996 647
-------------------------------------------------------------------------

Income from continuing
operations 66,911 16,607 15,901 17,773 16,630
Income from discontinued
operations (382) (140) (116) (56) (70)
-------------------------------------------------------------------------

Net income 66,529 16,467 15,785 17,717 16,560

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

Cash flows from
operating activities $ 89,753 $ 22,111 $ 22,786 $ 26,498 $ 18,358
Changes in non-cash
working capital and
other items(1) (1,048) 1,512 90 (4,499) 1,849
-------------------------------------------------------------------------
Adjusted cash flows from
operating activities 88,705 23,623 22,876 21,999 20,207

Less:
Expenditures on
maintenance capital
Capital asset
expenditures and
contract payments 9,855 1,966 2,681 2,413 2,795

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

Adjusted cash flows
after capital asset
expenditures
and contract payments 78,850 21,657 20,195 19,586 17,412

Distributions paid to
unitholders 61,311 16,732 16,479 14,221 13,879

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

17,539 4,925 3,716 5,365 3,533

Cash flows provided by
(used in) other
financing activities 202,749 (5,000) - 207,749 -
Cash flows used in
acquisition of Cyence
business - - - - -
Cash flows used in other
acquisitions (223,852) (1,518) 660 (222,447) (547)
Changes in non-cash
working capital and
other items(1) 1,048 (1,512) (90) 4,499 (1,849)
Distributions paid to
minority interest - - - - -
-------------------------------------------------------------------------

Increase (decrease) in
cash and cash
equivalents for the
period $ (2,516) $ (3,105) $ 4,286 $ (4,834) $ 1,137
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Year Year Year Year
ended ended ended ended
December December December December
(in thousands of 31, 31, 31, 31,
Canadian dollars, 2005(2) 2004(2) 2003(2) 2002(3)
unaudited) (proforma)
---------------------------------------------------------------

Revenue $270,470 $268,323 $251,748 $228,259
Expenses 191,401 190,024 177,656 158,287
---------------------------------------------------------------
EBITDA 79,069 78,299 74,092 69,972

Amortization of capital
and other assets 12,206 12,574 14,065 14,212
Interest expense 3,301 4,193 4,630 4,527
Minority interest - - - -
Current income tax
expense - 949 1,012 1,009
---------------------------------------------------------------

Adjusted income 63,562 60,583 54,385 50,224

Amortization of
mark-to-market
adjustment of
interest-rate swaps - - - -
Net unrealized loss
(gain) on
interest-rate swaps - - - -
Future income tax
expense - 3,545 3,583 2,305
Amortization of
intangibles from
acquisition 2,422 2,333 2,332 2,408
---------------------------------------------------------------

Income from continuing
operations 61,140 54,705 48,470 45,511
Income from discontinued
operations (389) (437) (13) -
---------------------------------------------------------------

Net income 60,751 54,268 48,457 45,511

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

Cash flows from
operating activities $ 76,844 $ 77,271 $ 68,569 $ 64,786
Changes in non-cash
working capital and
other items(1) (564) (3,616) (132) (352)
---------------------------------------------------------------

Adjusted cash flows from
operating activities 76,280 73,655 68,437 64,434

Less:
Expenditures on
maintenance capital
Capital asset
expenditures and
contract payments 10,674 11,928 11,192 12,597

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

Adjusted cash flows
after capital asset
expenditures
and contract payments 65,606 61,727 57,245 51,837

Distributions paid to
unitholders 54,910 53,066 51,442 47,827

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

10,696 8,661 5,803 4,010

Cash flows provided by
(used in) other
financing activities (10,000) (7,000) (13,000) -
Cash flows used in
acquisition of Cyence
business - - - -
Cash flows used in other
acquisitions (3,214) - - -
Changes in non-cash
working capital and
other items(1) 564 3,616 132 352
Distributions paid to
minority interest - - - -
---------------------------------------------------------------

Increase (decrease) in
cash and cash
equivalents for the
period $ (1,954) $ 5,277 $ (7,065) $ 4,362
---------------------------------------------------------------
---------------------------------------------------------------

Summary of Cash Flows Per Unit

Three Three Three Three
Year months months months months
ended ended ended ended ended
December December September June March
(in Canadian dollars, 31, 31, 30, 30, 31,
unaudited) 2008 2008 2008 2008 2008
-------------------------------------------------------------------------
Adjusted income per
unit, basic and
diluted $ 2.2565 $ 0.4892 $ 0.6253 $ 0.6496 $ 0.4924
Net income per unit,
basic and diluted $ 1.7851 $ 0.3172 $ 0.5303 $ 0.5772 $ 0.3604
Adjusted cash flows
from operating
activities $ 2.6275 $ 0.5786 $ 0.7268 $ 0.7405 $ 0.5816
Adjusted cash flows
after capital asset
expenditures and
contract payments $ 2.3217 $ 0.4667 $ 0.6579 $ 0.6731 $ 0.5240
Distributions paid to
unitholders $ 1.7881 $ 0.4599 $ 0.4599 $ 0.4393 $ 0.4290
Distributions declared
during period $ 1.8384 $ 0.4999 $ 0.4599 $ 0.4496 $ 0.4290

Three Three Three Three
Year months months months months
ended ended ended ended ended
December December September June March
(in Canadian dollars, 31, 31, 30, 30, 31,
unaudited) 2007(2) 2007(2) 2007(2) 2007(2) 2007(2)
-------------------------------------------------------------------------
Adjusted income per
unit, basic and
diluted $ 2.1959 $ 0.4784 $ 0.5733 $ 0.6595 $ 0.4847
Net income per unit,
basic and diluted $ 1.8713 $ 0.3782 $ 0.4750 $ 0.6035 $ 0.4146
Adjusted cash flows
from operating
activities $ 2.5588 $ 0.5730 $ 0.6651 $ 0.7502 $ 0.5705
Adjusted cash flows
after capital asset
expenditures and
contract payments $ 2.2062 $ 0.4739 $ 0.5604 $ 0.6830 $ 0.4889
Distributions paid to
unitholders $ 1.7830 $ 0.6070 $ 0.3960 $ 0.3960 $ 0.3840
Distributions declared
during period $ 1.7980 $ 0.6180 $ 0.3960 $ 0.3960 $ 0.3880

Three Three Three Three
Year months months months months
ended ended ended ended ended
December December September June March
(in Canadian dollars, 31, 31, 30, 30, 31,
unaudited) 2006(2) 2006(2) 2006(2) 2006(2) 2006(2)
-------------------------------------------------------------------------
Adjusted income per
unit, basic and
diluted $ 1.8164 $ 0.4519 $ 0.4378 $ 0.4742 $ 0.4556
Net income per unit,
basic and diluted $ 1.6081 $ 0.3747 $ 0.3592 $ 0.4477 $ 0.4367
Adjusted cash flows
from operating
activities $ 2.1441 $ 0.5375 $ 0.5205 $ 0.5559 $ 0.5329
Adjusted cash flows
after capital asset
expenditures and
contract payments $ 1.9059 $ 0.4928 $ 0.4595 $ 0.4949 $ 0.4592
Distributions paid to
unitholders $ 1.4940 $ 0.3780 $ 0.3750 $ 0.3750 $ 0.3660
Distributions declared
during period $ 1.5000 $ 0.3810 $ 0.3750 $ 0.3750 $ 0.3690

Year Year Year Year
ended ended ended ended
December December December December
31, 31, 31, 31,
(in Canadian dollars, 2005(2) 2004(2) 2003(2) 2002(3)
unaudited) (proforma)
-------------------------------------------------------------------------
Adjusted income per
unit, basic and
diluted $ 1.6762 $ 1.5976 $ 1.4342 $ 1.3244
Net income per unit,
basic and diluted $ 1.6020 $ 1.4311 $ 1.2778 $ 1.2002
Adjusted cash flows
from operating
activities $ 2.0116 $ 1.9423 $ 1.8047 $ 1.6992
Adjusted cash flows
after capital asset
expenditures and
contract payments $ 1.7301 $ 1.6278 $ 1.5096 $ 1.3670
Distributions paid to
unitholders $ 1.4480 $ 1.3994 $ 1.3566 $ 1.2510
Distributions declared
during period $ 1.4500 $ 1.4044 $ 1.3599 $ 1.3200

Condensed Consolidated Balance Sheet

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

Cash and cash
equivalents $ 12,066 $ 16,262 $ 9,390 $ 4,034
Other current assets 23,468 25,604 26,847 25,382
Capital and other assets 38,871 33,032 34,347 35,229
Goodwill and other
intangible assets 589,501 550,314 553,726 557,173

-------------------------------------------------------------------------
$663,906 $625,212 $624,310 $621,818
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Payables and other
current liabilities $ 49,101 $ 44,119 $ 42,427 $ 38,491
Other long-term
liabilities 17,805 6,038 5,143 7,417
Long-term indebtedness 147,331 119,262 124,193 129,123
Unitholders' equity 449,669 455,793 452,547 446,787

(in thousands of December September June March
Canadian dollars, 31, 30, 31, 31,
unaudited) 2007 2007 2007 2007
-------------------------------------------------------------------------

Cash and cash
equivalents $ 13,148 $ 12,224 $ 11,515 $ 7,089
Other current assets 26,149 29,644 29,772 26,332
Capital and other assets 38,268 38,049 39,303 39,532
Goodwill and other
intangible assets 556,587 559,973 562,483 565,754

-------------------------------------------------------------------------
$634,152 $639,890 $643,073 $638,707
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Payables and other
current liabilities $ 49,116 $ 45,165 $ 45,994 $ 41,034
Other long-term
liabilities 6,289 5,673 6,732 6,688
Long-term indebtedness 129,054 128,985 133,916 143,847
Unitholders' equity 449,693 460,067 456,431 447,138

(in thousands of December September June March
Canadian dollars, 31, 30, 30, 31,
unaudited) 2006 2006 2006 2006
-------------------------------------------------------------------------

Cash and cash
equivalents $ 5,788 $ 8,893 $ 4,607 $ 9,441
Other current assets 27,457 27,384 28,834 17,136
Capital and other assets 38,714 40,554 41,275 29,220
Goodwill and other
intangible assets 569,092 572,215 575,635 369,131

-------------------------------------------------------------------------
$641,051 $649,046 $650,351 $424,928
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Payables and other
current liabilities $ 44,420 $ 47,100 $ 48,064 $ 32,697
Other long-term
liabilities 4,978 5,148 4,867 5,328
Long-term indebtedness 143,778 148,646 148,574 50,000
Unitholders' equity 447,875 448,152 448,846 336,903

(in thousands of December December December December
Canadian dollars, 31, 31, 31, 31,
unaudited) 2005 2004 2003 2002
-------------------------------------------------------------------------

Cash and cash
equivalents $ 8,304 $ 10,258 $ 4,981 $ 12,046
Other current assets 17,076 15,352 15,779 16,142
Capital and other assets 30,673 36,345 67,111 74,912
Goodwill and other
intangible assets 369,250 368,640 370,973 373,305

-------------------------------------------------------------------------
$425,303 $430,595 $458,844 $476,405
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Payables and other
current liabilities $ 35,665 $ 34,422 $ 31,136 $ 32,778
Other long-term
liabilities 5,302 7,603 4,980 4,789
Long-term indebtedness 50,000 60,000 67,000 80,000
Unitholders' equity 334,336 328,570 355,728 358,838

Distribution History
-------------------------------------------------------------------------

Month 2008 2007 2006 2005
-------------------------------------------------------------------------

January $0.1430 $0.1280 $0.1220 $0.1200
February 0.1430 0.1280 0.1220 0.1200
March 0.1430 0.1320 0.1250 0.1200
April 0.1430 0.1320 0.1250 0.1200
May 0.1533 0.1320 0.1250 0.1200
June 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

-------------------------------------------------------------------------
$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
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
unit holders of record on December 31, 2008 and was paid December 31,
2008.

Tax Allocation of Distributions

-------------------------------------------------------------------------
2008 2007 2006 2005 2004 2003 2002
-------------------------------------------------------------------------
Dividend income 0.0% 0.0% 0.0% 0.0% 15.0% 19.5% 16.9%
Other income 100.0% 100.0% 100.0% 91.6% 75.2% 69.5% 71.5%
Return of capital 0.0% 0.0% 0.0% 8.4% 9.8% 11.0% 11.6%
-------------------------------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The above tax allocation of distributions for 2008 represents an estimate
based on the total expected distributions for the year ended December 31,
2008.

Other Statistics
(in thousands, except per unit amounts)

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

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 -------------------- $ 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
-----------------------------------------------------

ABOUT DAVIS + HENDERSON
Davis + Henderson and its predecessors have been serving the Canadian
financial services industry since 1875. Through integrated service offerings,
Davis + Henderson is a market leader in providing programs to customers who
offer chequing account and lending services within Canada. Davis + Henderson
Income Fund is listed on the Toronto Stock Exchange, 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