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Davis + Henderson Reports Second Quarter 2008 Results

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

TORONTO, July 24 /CNW/ - Davis + Henderson reported solid financial
results for the three and six months ended June 30, 2008 that were consistent
with management's expectations.

<<
Second Quarter Highlights

- Revenue in the second quarter of 2008 was $97.3 million, a decrease
of $4.7 million, or 4.6%, compared to $102.0 million in the same
quarter in 2007. As anticipated, this lower level of revenue reflects
reduced cheque order volumes in the quarter as compared to the
unusually strong order volumes a year ago. Reduced revenues in the
D+H Segment were partially offset by a small revenue increase within
the Filogix Segment.

- Net income decreased 4.4% to $0.5772 per unit compared to the same
period last year. Excluding the non-cash impact of unrealized gains
and losses on interest-rate swaps and the charge for future income
taxes, net income was 2.6% lower compared to a year ago.

- Declared distributions in the second quarter of 2008 of $0.4496 per
unit were 13.5% higher than in the second quarter of 2007.

Six-Month Highlights

- Revenue for the six-month period ending June 30, 2008 was
$186.4 million, a decrease of $6.8 million, or 3.5%, compared to
$193.1 million in the same period in 2007. This decrease reflects
lower revenues for the D+H Segment, which were partially offset by
increases in the Filogix Segment, over the comparable prior period.
This lower level of revenue within the D+H Segment is primarily
attributed to reduced cheque order volumes, consistent with
expectations, and as compared to the unusually strong order volumes
in 2007.

- Net income per unit decreased by 7.9% to $0.9376 , compared to the
first six months of 2007. Excluding the non-cash impact of unrealized
gains and losses on interest-rate swaps and the charge for future
income taxes, net income was 0.9% lower than a year ago.

- Declared distributions for the first six months of 2008 of $0.8786
per unit were 12.1% higher than in the first six months of 2007.
>>

Management Commentary

The Business performed well throughout the first half of 2008 despite the
reduction in revenue, which we had anticipated. The positive contribution from
the continued expansion of our customer programs and effective cost management
allowed the Business to produce strong cash flow for our unitholders.
In the D+H Segment, we experienced positive results in many areas, as we
continued to benefit from the adoption of our IDefence® and BizAssist®
programs and from our annual product repositioning initiatives. As expected,
these contributions were offset by lower cheque order volumes compared to
2007. We believe changes to cheque imaging standards in Canada resulted in
consumers accelerating reorders into the first half of 2007. This resulted in
higher order volumes and revenues than expected during that period. We believe
that these orders would otherwise have been received in later periods,
including the first six months of 2008, and accordingly, their absence
resulted in higher order volume declines in the second quarter and the first
half of 2008 than historically observed. By the end of the third quarter of
2008, we expect the trend in cheque order volumes to return to levels that are
directionally more in line with those historically experienced.
Within our Filogix Segment, increased revenues in several areas
contributed to modest year-over-year growth in the second quarter, despite
lower origination services fees. We are pleased with the overall Filogix
Segment performance, especially given the strong real estate and mortgage
markets in 2007.
Davis + Henderson remains committed to its long-term financial objective
of delivering stable and modestly growing distributions based on achieving
growth in the 3% to 5% range. With the addition of Filogix, Davis + Henderson
has significantly strengthened its capabilities and the breadth of services it
offers to the Canadian financial services marketplace. From Davis +
Henderson's established platforms, management looks to increase value for
customers and unitholders by building on our strong programs.
For a more detailed discussion of second quarter results and management's
outlook, please see 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 second
quarter ended June 30, 2008 via conference call at 10:00 a.m. EST (Toronto
time) on Friday July 25, 2008. The number to use for this call is 416-644-3414
for Toronto area callers or 1-800-733-7571 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 21275792
followed by the number sign. The rebroadcast will be available until Friday
August 8, 2008. 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 is available on SEDAR at www.sedar.com.

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's Discussion and Analysis ("MD&A") for the second quarter of
2008 should be read in conjunction with MD&A in Davis + Henderson Income
Fund's (the "Fund" or the "Business" or "Davis + Henderson") Annual Report for
the year ended December 31, 2007, dated February 26, 2008, and the attached
interim unaudited consolidated financial statements. External economic and
industry factors remain substantially unchanged from the annual MD&A and the
Fund's most recently filed Annual Information Form, unless otherwise stated.

STRATEGY

Davis + Henderson'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, offer additional programs to serve
the chequing account, and deliver programs 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 account include
a deposit program, which is directed towards small business account holders,
and eSwitch®, a service that allows financial institutions to more easily
move electronic pre-authorized payments and direct deposit authorizations on
behalf of account holders at the time of new account openings.
Davis + Henderson significantly advanced its third key strategy with the
acquisition of Filogix in June 2006. Among other services, Filogix provides
processing services related to the origination and underwriting of mortgages
in Canada. Davis + Henderson also acquired Advanced Validation Systems Limited
Partnership ("AVS"), which, under Davis + Henderson's brand
CollateralGuard™, provides lenders with, among other offerings, personal
property search and registration ("PPSA") programs across Canada. The addition
of these business interests has created another business platform for Davis +
Henderson.
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.

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, and the PPSA program, 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 business in previous periods does not
make a separation of these costs practical.

<<
OPERATING RESULTS FOR THE SECOND QUARTER - CONSOLIDATED

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

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue $ 97,263 $ 101,992 $ 186,351 $ 193,141
Cost of sales and operating
expenses(1) 63,357 67,250 125,563 131,528
Amortization of capital and
other assets(1) 3,455 3,368 6,842 6,709
-------------------------------------------------------------------------
30,451 31,374 53,946 54,904

Interest expense 1,906 2,121 3,769 4,351
Net unrealized loss (gain) on
interest-rate swaps (1,034) (2,196) 1,310 (2,520)
Amortization of intangible
assets 3,447 3,271 6,895 6,565
Minority interest - 204 - 313
-------------------------------------------------------------------------

Income before income taxes 26,132 27,974 41,972 46,195

Future income tax expense
(recovery) 766 1,454 766 1,454
-------------------------------------------------------------------------

Net income $ 25,366 $ 26,520 $ 41,206 $ 44,741
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Net income per unit,
basic and diluted $ 0.5772 $ 0.6035 $ 0.9376 $ 1.0181
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Historically, the Business has reported amortization related to
production assets used to manufacture finished products as part of
amortization of capital and other assets. Commencing January 1, 2008,
the Fund has included this amortization with cost of sales and
operating expenses in order to present the total costs incurred in
the manufacturing process in cost of sales. The comparative numbers
for previous periods have been reclassified to conform to this new
presentation format. Amortization included in cost of sales and
operating expenses during the second quarter of 2008 was $389 (Q2
2007 - $377 ) and $823 for the six months ended June 30, 2008
(six months ended June 30, 2007 - $742 ).
>>

Revenue

Revenue for the second quarter of 2008 was $97.3 million, a decrease of
$4.7 million, or 4.6%, when compared to the second quarter of 2007. For the
first six months of 2008, total revenue decreased by $6.8 million, or 3.5%,
compared to the first six months of 2007. While results for both segments are
discussed in more detail in the sections that follow, during the second
quarter and the first six months of 2008, expected declines in cheque order
volumes related to the shift in reorder cycles and the impact on revenue of
slowing mortgage funding activity in Canada offset the positive contribution
from program enhancements.

Cost of Sales and Operating Expenses

On a consolidated basis, cost of sales and operating expenses for the
second quarter of 2008 decreased by $3.9 million, or 5.8%, compared to the
second quarter of 2007. For the first half of 2008, consolidated cost of sales
and operating expenses decreased by $6.0 million, or 4.5%, when compared to
the first half of 2007. This decline during the first half of 2008 was
primarily driven by reduced costs related to the decline in cheque order
volumes in the D+H Segment, partially offset by increased costs in the Filogix
Segment, as more fully described below.
While Davis + Henderson operates primarily in Canada, the Business also
services a U.S. subsidiary of one of its Canadian customers. All revenue and
substantially all expenses relating to the U.S. cheque supply program are
contracted for in U.S. dollars. As the net U.S. dollar contribution from this
activity is relatively modest, the change in relative dollar valuations has
not had a meaningful impact on the results of the Business.

Amortization of Capital and Other Assets

Amortization of capital and other assets on a consolidated basis during
the second quarter of 2008 increased by $0.1 million, or 2.6%, to $3.5 million
compared to the same period in 2007. Increased capital asset amortization in
the D+H Segment of $0.3 million was related to capital additions. This
increase was partially offset by a decline in expense in the Filogix Segment
of $0.2 million, related to certain capital and other assets having become
fully amortized.
Similarly, for the first six months of 2008, amortization of capital and
other assets on a consolidated basis was $6.8 million, an increase of
$0.1 million compared to the first six months of 2007, with the D+H Segment
increase of $0.4 million partially offset by a decrease in $0.3 million for
the Filogix Segment, as described above.

Other Expenses

Interest expense decreased by $0.2 million for the second quarter of 2008
compared to the same quarter in the prior year, reflecting $10.0 million of
debt repayments made over the past twelve months. Similarly, for the first
six months of 2008, interest expense was $0.6 million lower than the
comparable 2007 period.
For the second quarter of 2008, an unrealized gain on interest-rate swaps
of $1.0 million (Q2 2007 - $2.2 million) was recorded reflecting
mark-to-market adjustments related to generally higher interest rates at June
30, 2008 compared to March 31, 2008. For the six months ended June 30, 2008,
an unrealized loss on interest-rate swaps of $1.3 million was recorded
(six months ended June 30, 2007 - unrealized gain of $2.5 million). These
unrealized gains and losses were recognized in income as, effective January 1,
2007, the Business no longer designated its interest-rate swaps as hedges for
accounting purposes.
Amortization of intangibles increased by $0.2 million and $0.3 million
compared with the second quarter and first half of 2007 respectively. These
increases were primarily related to the incremental intangible assets arising
on the acquisition of the remaining 25% interest in the AVS business discussed
below and the purchase of a customer service contract.
Effective January 2, 2008, the Fund increased its ownership in AVS to
100%. The acceleration of the ownership interest in AVS was initiated by the
Business so as to better serve customers on an integrated basis. As AVS is now
a wholly-owned subsidiary, the Business no longer recognizes minority
interest as all earnings accrue to the Business.
Income earned by the Business and distributed annually to unitholders is
not subject to taxation in the Business, 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 $1.5 million during the second quarter of 2007. A non-cash future
income tax charge of $0.8 million was recorded in the second quarter and first
six months of 2008.
With respect to delivery of products and services under its U.S. cheque
supply contract, the Business does not have a permanent establishment in the
U.S. for the purposes of determining tax liability and therefore does not have
U.S. income tax liability.

Net Income

Net income of $25.4 million for the second quarter of 2008 decreased by
$1.2 million compared to the second quarter of 2007. On a per unit basis, net
income of $0.5772 per unit decreased by $0.0263 per unit. For the six-month
period ended June 30, 2008, net income was $41.2 million, or $0.9376 per unit.
This represents a decrease of $3.5 million, or $0.0804 per unit. Excluding the
non-cash impact of the mark-to-market losses on interest-rate swaps and the
non-cash charge for future income taxes, net income per unit decreased
year-over-year by 2.6% in the second quarter of 2008 and 0.9% for the first
six months of 2008.

<<
Operating Results by Business Segment(1)
(in thousands of Canadian dollars, unaudited)

Revenue $ 77,946 $ 84,184 $ 19,317 $ 17,808
Percentage change -7.4% 8.5%

Cost of sales and
operating expenses(2) 52,305 57,760 10,229 8,820
Amortization of capital
and other assets(2) 2,179 1,912 1,276 1,456
-------------------------------------------------------------------------

23,462 24,512 7,812 7,532
Percentage change -4.3% 3.7%

Income (loss) before income
taxes 22,739 23,724 5,088 5,049
Future income tax
expense (recovery) - - - -
-------------------------------------------------------------------------

Net income (loss) $ 22,739 $ 23,724 $ 5,088 $ 5,049
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Three months ended June 30,
-------------------------------------------------------------------------
Corporate Consolidated
--------------------- ---------------------
2008 2007 2008 2007

Revenue $ - $ - $ 97,263 $ 101,992
Percentage change - -4.6%

Cost of sales and
operating expenses(2) 823 670 63,357 67,250
Amortization of capital
and other assets(2) - - 3,455 3,368
-------------------------------------------------------------------------

(823) (670) 30,451 31,374
Percentage change 22.8% -2.9%

Income (loss) before income
taxes (1,695) (799) 26,132 27,974
Future income tax
expense (recovery) 766 1,454 766 1,454
-------------------------------------------------------------------------

Net income (loss) $ (2,461) $ (2,253) $ 25,366 $ 26,520
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) 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.
(2) Historically, the Business has reported amortization related to
production assets used to manufacture finished products as part of
amortization of capital and other assets. Commencing January 1, 2008,
the Fund has included this amortization with cost of sales and
operating expenses in order to present the total costs incurred in
the manufacturing process in cost of sales. The comparative numbers
for previous periods have been reclassified to conform to this new
presentation format. Amortization included in cost of sales and
operating expenses during the second quarter of 2008 was $389
(Q2 2007 - $377 ) for the Davis + Henderson Segment

Revenue $ 152,670 $ 162,681 $ 33,681 $ 30,460
Percentage change -6.2% 10.6%

Cost of sales and
operating expenses (2) 102,848 112,611 21,300 17,568
Amortization of capital
and other assets (2) 4,329 3,924 2,513 2,785
-------------------------------------------------------------------------

45,493 46,146 9,868 10,107
Percentage change -1.4% -2.4%

Income (loss) before income
taxes 44,046 44,547 4,420 5,141
Future income tax expense
(recovery) - - - -
-------------------------------------------------------------------------

Net Income $ 44,046 $ 44,547 $ 4,420 $ 5,141
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Revenue $ - $ - $ 186,351 $ 193,141
Percentage change - -3.5%

Cost of sales and
operating expenses 1,415 1,349 125,563 131,528
Amortization of capital
and other assets - - 6,842 6,709
-------------------------------------------------------------------------

(1,415) (1,349) 53,946 54,904
Percentage change 4.9% -1.7%

Income (loss) before income
taxes (6,494) (3,493) 41,972 46,195
Future income tax expense
(recovery) 766 1,454 766 1,454
-------------------------------------------------------------------------

Net Income (loss) $ (7,260) $ (4,947) $ 41,206 $ 44,741
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) 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.
(2) Historically, the Business has reported amortization related to
production assets used to manufacture finished products as part of
amortization of capital and other assets. Commencing January 1, 2008,
the Fund has included this amortization with cost of sales and
operating expenses in order to present the total costs incurred in
the manufacturing process in cost of sales. The comparative numbers
for previous periods have been reclassified to conform to this new
presentation format. Amortization included in cost of sales and
operating expenses during the first six months of 2008 was
$823 (six months ended June 30, 2007 - $742 ) for the Davis +
Henderson Segment
>>

Operating Results - D+H Segment

Revenue

Revenue within the Davis + Henderson Segment decreased by $6.2 million,
or 7.4%, year-over-year. Of this decrease, $1.2 million relates to the
reclassification of the PPSA business to the Filogix Segment. The PPSA
programs, which were formerly operated and reported within the Davis +
Henderson Segment, are now operated and reported as part of the results of the
Filogix Segment. Excluding the impact of this reclassification, there was a
$5.0 million, or 6.0%,decrease in revenues in the second quarter of 2008,
compared to the same period in 2007.
For the six-month period ended June 30, 2008, revenue within the Davis +
Henderson Segment decreased by $10.0 million, or 6.2%, compared to the same
period in 2007. Excluding the impact of the PPSA business reclassification,
there was a $7.9 million, or 4.8%, decrease in revenues.
The decrease in revenue in both the second quarter and first six months
of 2008 was primarily a result of a decline in cheque order volume partially
offset by successful program initiatives, including products and service
enhancements such as IDefence and BizAssist. Management believes this decline
in cheque order volume was higher than usual due to the change in reorder
patterns that affected 2007, and which also impacted reorder volume in the
first half of 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 in the first half of
2007. Management believes that many of these accelerated reorders would
otherwise have been received in later periods pursuant to normal reorder
cycles. Management also believes that, for this reason, cheque order volumes
were lower in the second quarter of 2008 and in the first six months of 2008
than would otherwise be expected given historical declines. Management expects
order volume trends to return to levels that are directionally more in line
with historical experience by the end of the third quarter.

Cost of Sales and Operating Expenses

Expenses within the Davis + Henderson Segment decreased by $5.5 million,
or 9.4%. A large part of the year-over-year expense decrease was related to
the decrease in cheque volumes and other revenue-related reductions including,
the transfer of the PPSA business to the Filogix Segment, and an overall
reduction in project costs and other costs generally related to the PPSA
business.
Similarly, during the six months ended June 30, 2008, expenses within the
Davis +Henderson Segment decreased by $9.8 million, or 8.7%.

Operating Results - Filogix Segment

Revenue

Total revenue for the second quarter of 2008 for the Filogix Segment
increased by $1.5 million, or 8.5%, over the same period in 2007. Excluding
the PPSA program, revenue increased $0.3 million, or 1.7%, compared with the
same quarter in 2007 with lower origination services revenue offset by higher
revenues in other areas. The lower origination services revenues is consistent
with reduced activities in the real estate and mortgage markets. Origination
services revenue was down 6.0% compared to the same quarter last year, which
was a particularly strong quarter due to the strong market conditions in 2007.
During the second quarter of 2008, Filogix recorded revenue related to the
licensing of the Business' underwriting technology in the Australia and New
Zealand marketplaces.
Revenue for the first six months of 2008 increased by $3.2 million, or
10.6%, over the same period in 2007. Excluding the PPSA program, revenue
increased by $1.1 million, or 3.6%, compared with the same first six months of
2007. Also, for the six month period in 2008, a 6.5% decline in origination
service fees was offset by higher revenues in other areas, including
professional services and the licensing fee referred to above.

Cost of Sales and Operating Expenses

Consistent with expense levels in the previous two quarters and with
management's expectations, direct and operating expenses for the Filogix
Segment increased by $1.4 million, or 16.0%, during the second quarter of 2008
and by $3.7 million, or 21.2% for the six months ended June 30, 2008, compared
to the same periods in 2007. The year-over-year increases in operating costs
during the second quarter of 2008 and the first six months of 2008 include the
expenses related to PPSA services recorded within the Filogix Segment and a
planned increase in expenditures in support of product enhancements and
strengthening the general delivery capabilities of the Business. These
expenditures are expected to continue through 2008.

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

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

Revenue $ 97,263 $ 89,088 $ 90,934 $ 94,676
Cost of sales and
operating expenses 63,357 62,206 64,582 63,813
Amortization of capital
and other assets 3,455 3,387 3,647 3,496
-------------------------------------------------------------------------
30,451 23,495 22,705 27,367
Interest expense 1,906 1,863 1,876 1,982
Net unrealized loss (gain)
on interest-rate swaps (1,034) 2,344 823 957
Amortization of
intangible assets 3,447 3,448 3,386 3,347
Minority interest - - (139) 205
-------------------------------------------------------------------------
Income before income taxes 26,132 15,840 16,759 20,876
Future income tax expense
(recovery) 766 - 137 -
-------------------------------------------------------------------------
Net income $ 25,366 $ 15,840 $ 16,622 $ 20,876
-------------------------------------------------------------------------
Net income per unit $ 0.5772 $ 0.3604 $ 0.3782 $ 0.4750
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average
units outstanding 43,947 43,947 43,947 43,947
-------------------------------------------------------------------------
-------------------------------------------------------------------------

2007 2006
Q2 Q1 Q4 Q3
-------------------------------------------------------------------------

Revenue $ 101,992 $ 91,149 $ 87,932 $ 87,966
Cost of sales and
operating expenses 67,250 64,278 62,461 63,161
Amortization of capital
and other assets 3,368 3,341 3,475 3,345
-------------------------------------------------------------------------
31,374 23,530 21,996 21,460
Interest expense 2,121 2,230 2,186 2,248
Net unrealized loss (gain)
on interest-rate swaps (2,196) (324) - -
Amortization of
intangible assets 3,271 3,294 3,254 3,339
Minority interest 204 109 89 88
-------------------------------------------------------------------------
Income before income taxes 27,974 18,221 16,467 15,785
Future income tax expense
(recovery) 1,454 - - -
-------------------------------------------------------------------------
Net income $ 26,520 $ 18,221 $ 16,467 $ 15,785
-------------------------------------------------------------------------
Net income per unit $ 0.6035 $ 0.4146 $ 0.3747 $ 0.3592
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average
units outstanding 43,947 43,947 43,947 43,947
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

The Fund has generally reported quarterly revenues that are stable and
growing. For the first three quarters of 2007, reported revenues benefited
from higher than expected cheque order volume and mortgage origination fees 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.
Net income and net income per unit has generally been trending
consistently with changing revenue excluding the variability caused by
unrealized gains and losses on interest-rate swaps and future income taxes.
Management believes that the consolidated Davis + Henderson results are
subject to seasonality with the inclusion of revenue from the Filogix Segment.
Historically, Filogix has recorded stronger results in the second and third
quarters. Additionally, real estate market activity affects volumes processed
by Filogix and can result in fluctuation in revenue levels, as was the
experience in the first half of 2008 with origination revenues falling below
historically high 2007 levels.

CASH FLOW AND LIQUIDITY

Non-GAAP Measures

The following tables are derived from, and should be read in conjunction
with, the consolidated statement of cash flows. Management believes this
supplementary disclosure provides useful additional information related to the
cash flows of the Fund, repayment of debt and other investing activities.
Certain subtotals presented within the tables below, such as "Adjusted cash
flows from operating activities", "Adjusted cash flows after capital assets
and contract payments", and "Adjusted net income" are not defined terms under
Canadian generally accepted accounting principles ("GAAP"). Management uses
these subtotals as measures of internal performance and as a supplement to the
consolidated statement of cash flows. 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
statement of cash flows. Further, the Fund's method of calculating each
balance may not be comparable to calculations used by other income trusts
bearing the same description.

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

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------

Cash flows from
operating activities $ 32,623 $ 34,784 $ 49,146 $ 56,458

Add:
Changes in non-cash
working capital and
other items(1) (82) (1,814) 8,955 1,585
-------------------------------------------------------------------------

Adjusted cash flows from
operating activities 32,541 32,970 58,101 58,043

Less:
Maintenance capital
expenditures - D+H(2) 1,098 2,142 2,046 2,720
Maintenance capital
expenditures - Filogix(2) 1,198 813 1,267 2,124
Growth capital
expenditures(2) 666 - 666 183
Contract payments(3) - - 1,517 1,517
-------------------------------------------------------------------------

Adjusted cash flows after
capital expenditures
and contract payments(2) 29,579 30,015 52,605 51,499

Less:
Distributions paid to
unitholders 19,305 17,403 38,158 34,278
-------------------------------------------------------------------------

10,274 12,612 14,447 17,221

Cash flows provided by
(used in) other
financing activities (5,000) (10,000) (5,000) (10,000)
Cash flows used in acquisition
of businesses and customer
service contracts - - (4,250) 91
Changes in non-cash working
capital and other items(1) 82 1,814 (8,955) (1,585)
-------------------------------------------------------------------------

Increase (decrease) in cash
and cash equivalents for
the period $ 5,356 $ 4,426 $ (3,758) $ 5,727
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Changes in non-cash working capital and certain other balance sheet
items have been excluded from adjusted cash flows from operating
activities so as to remove the effects of timing differences in cash
receipts and cash disbursements, which generally reverse themselves
but can vary significantly across quarters. 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.
(2) 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.
(3) 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)

Three months ended
June 30, June 30,
2008 2007 % change
-------------------------------------------------------------------------
Adjusted cash flows from
operating activities $ 0.7405 $ 0.7502 -1.3%
Adjusted cash flows after capital
expenditures and contract payments $ 0.6731 $ 0.6830 -1.4%
Distributions paid to unitholders $ 0.4393 $ 0.3960 10.9%
Distributions declared during period $ 0.4496 $ 0.3960 13.5%
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Six months ended
June 30, June 30,
2008 2007 % change
-------------------------------------------------------------------------
Adjusted cash flows from
operating activities $ 1.3221 $ 1.3208 0.1%
Adjusted cash flows after capital
expenditures and contract payments $ 1.1970 $ 1.1718 2.2%
Distributions paid to unitholders $ 0.8683 $ 0.7800 11.3%
Distributions declared during period $ 0.8786 $ 0.7840 12.1%
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cash Flows, Net Income and Distributions Paid

The following table compares cash flows from operating activities and net
income to distributions paid for the quarter and six months ended June 30,
2008 and for the years ended December 31, 2007 and 2006.

Three Six
months months
ended ended Year ended
(in thousands of Canadian June 30, June 30, December 31,
dollars, unaudited) 2008 2008 2007 2006
-------------------------------------------------------------------------
Cash flows from operating
activities $ 32,623 $ 49,146 $ 117,401 $ 89,753
Net income $ 25,366 $ 41,206 $ 82,239 $ 66,529
Adjusted net income(1) $ 28,697 $ 50,436 $ 97,066 $ 74,765
Distributions paid during
period $ 19,305 $ 38,158 $ 78,357 $ 61,191
Excess (shortfall) of cash
flows from operating
activities over cash
distributions paid $ 13,318 $ 10,988 $ 39,044 $ 28,562
Excess (shortfall) of net
income over cash
distributions paid $ 6,061 $ 3,048 $ 3,882 $ 5,338
Excess (shortfall) of adjusted
net income over cash
distributions paid $ 9,392 $ 12,278 $ 18,709 $ 13,574
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) Adjusted net income is a non-GAAP term and is defined as net income
(Q2 2008 - $25,366) adjusted to remove amortization of intangible
assets (Q2 2008 - $3,447), unrealized gains on interest-rate swaps
(Q2 2008 - $1,034), future income tax expense (Q2 2008 - $766),
and amortization of net losses in fair market value of interest-rate
swaps (Q2 2008 - $152) that were deferred prior to January 1, 2007
and which are included in interest expense. In each case, these
adjustments are non-cash items.
>>

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

Expenditures on Capital Assets and Contract Payments

Total capital asset expenditures for the second quarter of 2008 were
$3.0 million, consistent with the level of expenditures in 2007. A decrease in
the Davis + Henderson Segment expenditures of $1.0 million offset the increase
in Filogix Segment expenditures.
For the first six months of 2008, total capital expenditures decreased by
$1.0 million compared to the first six months of 2007. The Filogix Segment
accounted for $0.4 million of the decrease and the Davis + Henderson Segment
accounted for $0.7 million of the decrease. The fluctuations in both segments
in the three and six month periods ended June 30, 2008 reflects the timing of
capital project expenditures, and does not reflect a change in the overall
capital expenditures program for the year.
The level of investment in 2008 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 $14.0 million to
$16.0 million similar to the level of expenditures made in fiscal 2007. While
the timing of capital projects may vary, the Business expects capital
expenditures in 2008 will be at the upper end of the range. The Business'
capital program provides for continued expenditures to be funded by cash flows
from operations.

Distributions

The Fund paid distributions of $19.3 million ($0.4393 per unit) during
the second quarter of 2008 and $38.2 million ($0.8683 per unit) in the first
six months of 2008 compared to $17.4 million ($0.3960 per unit) and
$34.3 million ($0.7800 per unit), respectively, for the same periods in 2007.
On a per unit basis for the three and six months ended June 30, 2008,
distributions paid increased by 10.9% and 11.3%, respectively, when compared
to the same periods in 2007.
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, the year-over-year increase in
distributions per unit was 13.5% and 12.1% for the three and six-month periods
ended June 30, 2008, respectively.
On an annualized basis, the monthly distribution rate for June 2008 was
$1.84 per unit as compared to $1.58 per unit annualized in June 2007,
representing an increase of 16.4%. This increase in distributions recognizes
the performance of the Business, expectations of future performance and the
need for the Fund to pay distributions sufficient to ensure the Fund itself is
not taxable.
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.
If the Business continues to generate growing cash flow and net income,
and in combination with expected diminishing deductions for tax purposes, the
Fund may pay out a higher proportion of the cash flows it generates to
unitholders in order not to pay taxes in the trust.
The estimated tax allocation of distributions expected to be declared for
2008 is 100% "other income", as was the case for all of 2007.
The Fund may issue an unlimited number of trust units. Each trust unit is
transferable and represents an equal, undivided beneficial interest in any
distribution from the Fund and the net assets of the Fund. All units are of
the same class with equal rights and privileges and are not subject to future
calls or assessments. Each unit entitles the holder to one vote at all
meetings of unitholders.
As at June 30, 2008 and the date of this report, 43,946,792 trust units
were outstanding.

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

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------

Minority interest $ - $ 204 $ - $ 313
Decrease (increase) in
non-cash working capital
items 2,018 1,520 (7,074) (2,006)
Decrease (increase) in other
operating assets and
liabilities (1,936) 90 (1,881) 108
-------------------------------------------------------------------------

Decrease (increase) in
non-cash working capital and
other items $ 82 $ 1,814 $ (8,955) $ (1,585)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

The decrease in non-cash working capital items for the second quarter was
related primarily to the reclassification of a $1.9 million obligation under a
deferred compensation program from a long-term liability to a current
liability, as the plan has become fully vested and is payable after
December 31, 2008. The increase in non-cash working capital items for the
first six months of 2008 was primarily related to decreases in trade payables
reflecting normal course timing differences of when payments are made,
including payments made for capital asset purchases in the latter part of
2007. This change was partially offset by the impact of reclassification
referred to above. In particular, in the fourth quarter of 2007, the Business
had $7.0 million of incremental cash flow generated from changes in working
capital balances. These timing differences largely reversed in the first
quarter of 2008.

Cash Balances and Long-term Indebtedness

At June 30, 2008, cash and cash equivalents totalled $9.4 million,
compared to $13.1 million at December 31, 2007.
The balance of long-term indebtedness as at June 30, 2008 was
$125.0 million compared with $130.0 million at December 31, 2007. During the
second quarter of 2008, the Business made a voluntary debt payment of
$5.0 million. The long-term indebtedness is recorded on the Balance Sheet net
of $0.8 million of unamortized deferred financing fees as at June 30, 2008.
Management expects to continue to use a portion of any future excess cash
flow to pay down debt and fund acquisitions.
Total debt facilities available at June 30, 2008 and December 31, 2007
were $170.0 million, comprised of a $120.0 million non-revolving term loan and
a $50.0 million revolving term credit facility. As of June 30, 2008, the
Business had drawn $120.0 million under its non-revolving term loan and
$5.0 million under the revolving term credit facility. The Business is
permitted to draw on the revolving facility's available balance of
$45.0 million to fund capital expenditures or for other general corporate
purposes. The credit facilities mature on June 15, 2011.
The Credit Agreement for the Business contains a number of covenants and
restrictions, including the requirement to meet certain financial ratios and
financial condition tests. The financial covenants include a leverage test, a
fixed charge coverage ratio test, a minimum net worth test and a limit on the
maximum amount of distributions that may be made by Davis + Henderson, Limited
Partnership to the Fund during each rolling, four-quarter period. Davis +
Henderson was in compliance with all of its financial covenants and financial
condition tests as of the end of its latest quarterly period. A copy of the
Credit Agreement is available on SEDAR at www.sedar.com.
As of June 30, 2008, the Fund had interest-rate swap hedge contracts in
place with certain of its lenders, such that the borrowing rates on 86.4% of
outstanding indebtedness are effectively fixed at the interest rates and for
the time periods ending as follows:

<<
(in thousands of Canadian
dollars, unaudited)
-------------------------------------------------------------------------
Fair value of interest-rate swaps
Maturity Date Notional Amount Asset Liability Interest Rate(1)
-------------------------------------------------------------------------
January 4, 2009 $ 10,000 $ - $ 18 4.505%
July 15, 2009 20,000 - 335 5.688%
July 15, 2010 33,000 - 822 5.690%
June 15, 2011 20,000 - 668 5.560%
June 15, 2011 25,000 - 535 5.560%
-------------------------------------------------------------------------
$ 108,000 $ - $ 2,378
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(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.
>>

At June 30, 2008, the Fund would have had to pay the fair value of
$2.4 million if it were to close out all of its swap contracts. It is not the
present intention of the Fund to close out these contracts. The Fund expects
to continue to enter into interest-rate swaps for the purpose of hedging its
exposure to 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 banker's 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 5.33% as at June 30, 2008.
The Fund intends to make monthly cash distributions of its adjusted cash
flows after capital asset and contract expenditures, as defined in the Fund's
Declaration of Trust, subject to working capital requirements, debt repayments
and other reserves.
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.

CHANGES IN ACCOUNTING POLICY

The Fund reviews all revisions to the Canadian Institute of Chartered
Accountants ("CICA") Handbook when issued. All revisions are considered and
applied by the effective date or earlier if practical. Effective January 1,
2008, the Fund adopted the following CICA Handbook sections: Section 3031,
Inventories and Amendments to Section 1400, General Standards of Financial
Statement Presentation.
Section 3031, which replaces Section 3030 with the same title,
establishes that inventories should be measured at the lower of cost and net
realizable value, with guidance on the determination of cost. The impact of
adoption of this new standard on the January 1, 2008 Fund's consolidated
financial statements was a nominal amount and therefore was charged to the
income statement.
Section 1400, General Standards of Financial Statement Presentation, was
amended to require management, when preparing financial statements, to make an
assessment of an entity's ability to continue as a going concern. Any material
uncertainties related to events or conditions that may cast doubt upon the
entity's ability to continue as a going concern must be disclosed. Management
does not believe that there are any material uncertainties related to events
or conditions that may cast significant doubt upon the Fund's ability to
continue as a going concern.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS

The Fund and its subsidiaries have designed and maintain a set of
disclosure controls and procedures designed to ensure that information
required to be disclosed in filings made pursuant to Multilateral Instrument
52-109 is recorded, processed, summarized and reported within the time periods
specified in the Canadian Securities Administrators' rules and forms.
The Fund and its subsidiaries have also designed and maintain a set of
internal controls over financial reporting to provide reasonable assurance
regarding the reliability of financial reporting and preparation of financial
statements for external purposes in accordance with Canadian GAAP.
There have been no changes in the Fund's internal controls over financial
reporting during the quarter ended June 30, 2008 that have materially
affected, or are reasonably likely to materially affect, its internal control
over financial reporting.

OUTLOOK

Davis + Henderson's overall long-term objective is to deliver stable and
modestly growing distributions through growing revenue in the 3% to 5% range
and maintaining margins. In 2007, revenue grew in excess of the targeted
range. Management believes increased reorder activity levels experienced in
2007 contributed to higher than historically observed average volume declines
in 2008 as consumers delay orders due to recent cheque supply replenishments.
Additionally, record activity levels in 2007 within the real estate and
mortgage markets have not been sustained in the first six months of 2008. The
combined impact of these factors may result in revenue growth in 2008 being
below the targeted long-term range of 3% to 5%.
The Business' current U.S. cheque supply contract will expire at the end
of 2008 and will not be renewed. Income and cash flow contributions from this
business are relatively modest and expiration of this contract will not have a
significant impact on overall operations. The absence of this contract will,
however, reduce the revenues of the Business beginning in 2009.
While the Fund's long-term objective is to modestly grow distributions
supported by growing revenue, distribution levels can be influenced by the
level of taxable income generated in the Fund as the Fund is subject to income
taxes on taxable income that is not distributed to its unitholders. Deductions
for tax purposes that were previously available to the Fund have been
diminishing and, as a result, the Fund may pay out a greater proportion of its
cash flows to unitholders than in previous periods.
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 its
volumes related to mortgage origination and underwriting services and PPSA
services.
The Business' capital program provides for continued expenditures to be
funded by cash flows from operations. The 2008 capital program is expected to
be in the range of $14.0 million to $16.0 million and, while the timing of
capital projects can vary, we expect capital expenditures to be at the upper
end of the range.
Recent changes made to the Income Tax Act require certain income trusts,
including the Fund, to pay taxes after fiscal 2010, similar to those paid by
taxable Canadian corporations. The payment of such taxes will, in the future,
reduce the cash flow of the Fund, thereby reducing the amount available for
distributions to unitholders. Since the announcement of this change in tax
legislation, management and the Trustees have monitored the changes in the
income trust environment and capital markets and continue to review potential
impacts on the Fund's current strategies and the alternatives available to the
Fund, consistent with protecting and enhancing unitholder value.

Caution Concerning Forward-looking Statements

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

ADDITIONAL INFORMATION

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

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

-------------------------------------------------------------------------
June 30, December 31,
2008 2007
-------------------------------------------------------------------------

ASSETS
Current assets:
Cash and cash equivalents $ 9,390 $ 13,148
Accounts receivable 19,164 17,860
Inventory (note 3) 4,488 5,316
Prepaid expenses 3,195 2,973
-------------------------------------------------------------------------
36,237 39,297

Capital assets (note 4) 30,355 32,199
Other assets (note 5) 3,992 5,964
Interest-rate swaps (note 10) - 105
Intangible assets (note 6) 112,533 118,085
Goodwill (note 7) 441,193 438,502
-------------------------------------------------------------------------
$ 624,310 $ 634,152
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 33,478 $ 39,870
Distributions payable to unitholders 6,737 6,284
Current portion of disbursement obligations
on customer contracts (note 8) 2,212 2,962
-------------------------------------------------------------------------
42,427 49,116

Disbursement obligations on customer
contracts (note 8) - 767
Long-term indebtedness (note 9) 124,193 129,054
Interest-rate swaps (note 10) 2,378 1,173
Other long-term liabilities (note 11) 408 2,558
Future income tax liability (note 12) 2,357 1,591
Minority interest - 200

-------------------------------------------------------------------------
171,763 184,459

Unitholders' equity:
Trust units (note 13) 474,585 474,585
Deficit (20,776) (23,371)
Accumulated other comprehensive income (loss) (1,262) (1,521)
-------------------------------------------------------------------------
452,547 449,693

Commitments (note 14)
-------------------------------------------------------------------------
$ 624,310 $ 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)

-------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ 97,263 $ 101,992 $ 186,351 $ 193,141
Cost of sales and operating
expenses (note 3) 63,357 67,250 125,563 131,528
Amortization of capital and
other assets 3,455 3,368 6,842 6,709
-------------------------------------------------------------------------
30,451 31,374 53,946 54,904

Income before income taxes 26,132 27,974 41,972 46,195
Future income tax expense
(recovery) 766 1,454 766 1,454
-------------------------------------------------------------------------
Net income $ 25,366 $ 26,520 $ 41,206 $ 44,741
-------------------------------------------------------------------------
Net income per unit, basic
and diluted $ 0.5772 $ 0.6035 $ 0.9376 $ 1.0181
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

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

Net income $ 25,366 $ 26,520 $ 41,206 $ 44,741

Other comprehensive income:
Amortization of mark-to-market
adjustment of interest-rate
swaps 152 176 259 352
-------------------------------------------------------------------------
Total comprehensive income $ 25,518 $ 26,696 $ 41,465 $ 45,093
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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)

DEFICIT
Deficit, beginning of period $ (26,384) $ (25,424) $ (23,371) $ (26,710)
Mark-to-market adjustment of
interest-rate swaps - - - 116
Net income 25,366 26,520 41,206 44,741
Distributions (19,758) (17,403) (38,611) (34,454)
-------------------------------------------------------------------------
Deficit, end of period (20,776) (16,307) (20,776) (16,307)
-------------------------------------------------------------------------

ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive
income (loss),
beginning of period (1,414) (2,023) (1,521) -
Mark-to-market adjustment of
interest-rate swaps
financial instrument standards - - - (2,199)
Other comprehensive income:
Amortization of mark-to-market
adjustment of interest-rate
swaps 152 176 259 352
-------------------------------------------------------------------------
Accumulated other
comprehensive income (loss),
end of period(1) (1,262) (1,847) (1,262) (1,847)
-------------------------------------------------------------------------
Deficit and accumulated other
comprehensive income (loss),
end of period $ (22,038) $ (18,154) $ (22,038) $ (18,154)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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)

Cash and cash equivalents
provided by (used in):

OPERATING ACTIVITIES
Net income $ 25,366 $ 26,520 $ 41,206 $ 44,741
Add:
Amortization of capital
assets 2,534 2,759 5,000 5,432
Amortization of capital
assets included in cost
of sales 389 377 823 742
Amortization of other assets 921 609 1,842 1,277
Amortization of intangible
assets 3,447 3,271 6,895 6,565
Amortization of mark-to-
market adjustment of
interest-rate swaps 152 176 259 352
Net unrealized loss (gain)
on interest-rate swaps (1,034) (2,196) 1,310 (2,520)
Future income tax expense
(recovery) 766 1,454 766 1,454
Minority interest - 204 - 313
-------------------------------------------------------------------------
32,541 33,174 58,101 58,356

Decrease (increase) in
non-cash working capital items 2,018 1,520 (7,074) (2,006)
Changes in other operating
assets and liabilities (1,936) 90 (1,881) 108
-------------------------------------------------------------------------
32,623 34,784 49,146 56,458
-------------------------------------------------------------------------

FINANCING ACTIVITIES
Repayment of long-term
indebtedness (5,000) (10,000) (5,000) (10,000)
Distributions paid to
unitholders (19,305) (17,403) (38,158) (34,278)
-------------------------------------------------------------------------
(24,305) (27,403) (43,158) (44,278)
-------------------------------------------------------------------------

INVESTING ACTIVITIES
Expenditures on capital assets (2,962) (2,955) (3,979) (5,027)
Payments pursuant to
long-term supply contracts - - (1,517) (1,517)
Acquisition and acquisition
adjustments (note 2) - - (4,250) 91
-------------------------------------------------------------------------
(2,962) (2,955) (9,746) (6,453)
------------------------------------------------------------------------

Increase (decrease) in cash
and cash equivalents
for the period 5,356 4,426 (3,758) 5,727
Cash and cash equivalents,
beginning of period 4,034 7,089 13,148 5,788
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 9,390 $ 11,515 $ 9,390 $ 11,515
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Supplementary information:
Cash interest paid $ 1,588 $ 2,016 $ 3,156 $ 4,088
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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

Davis + Henderson Income Fund
Notes to Consolidated Financial Statements
Three and six months ended June 30, 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. and Advanced Validation System Limited Partnership ("AVS L.P.").

1. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared using accounting
policies generally accepted in Canada and follow the same accounting
policies and their method of application as the Fund's consolidated
financial statements for the year ended December 31, 2007, which are
included in the 2007 Annual Report along with changes in accounting
policies that became effective January 1, 2008. They do not conform in
all respects with disclosures required for annual financial statements
and should be read in conjunction with the audited consolidated financial
statements of the Fund for the year ended December 31, 2007.

2. ACQUISITION

AVS Business

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

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

Each step acquisition was made with available cash on hand.

3. INVENTORY

June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Raw materials $ 2,101 $ 2,202
Work-in-process 1,435 2,152
Finished goods 952 962
-------------------------------------------------------------------------
$ 4,488 $ 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 three months
ended June 30, 2008 was $12,394 (Q2 2007 - $14,334) and six months ended
June 30, 2008 was $24,882 (six months ended June 30, 2007 - $28,227).

4. CAPITAL ASSETS

June 30, 2008
-------------------------------------------------------------------------
Accumulated
amortiz-
Cost ation Net
-------------------------------------------------------------------------
Machinery and equipment $ 15,133 $ 8,104 $ 7,029
Computer equipment and software 44,917 23,937 20,980
Furniture, fixtures and leasehold
improvements 8,595 6,249 2,346
-------------------------------------------------------------------------
$ 68,645 $ 38,290 $ 30,355
-------------------------------------------------------------------------
-------------------------------------------------------------------------

December 31, 2007
-------------------------------------------------------------------------
Accumulated
amortiz-
Cost ation 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 three months ended June 30, 2008 was $2,923
(Q2 2007 - $3,136) and during the six months ended June 30, 2008 was
$5,823 (six months ended June 30, 2007 - $6,174), of which $389 is
included in cost of sales during the three months ended June 30, 2008
(Q2 2007 - $377) and $823 is included in cost of sales during the six
months ended June 30, 2008 (six months ended June 30, 2007 - $742). Fully
amortized capital assets removed from the accounts during the three
months ended June 30, 2008 was $8 (Q2 2007 - $94) and during the six
months ended June 30, 2008 was $5,893 (six months ended June 30, 2007 -
$94).

5. OTHER ASSETS

June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Cost:
Long-term supply contracts $ 8,863 $ 12,581
Other 370 370
-------------------------------------------------------------------------
9,233 12,951

Accumulated amortization (5,241) (6,987)
-------------------------------------------------------------------------
$ 3,992 $ 5,964
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Amortization during the three months ended June 30, 2008 on long-term
supply contracts was $921 (Q2 2007 - $609) and during the six months
ended June 30, 2008 was $1,842 (six months ended June 30, 2007 - $1,277).

6. INTANGIBLE ASSETS

June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Cost:
Cheque supply outsourcing contracts $ 16,329 $ 16,329
Customer service contracts 5,849 4,506
Proprietary software 41,993 41,993
Brand names 8,400 8,400
Customer relationships 77,887 77,887
-------------------------------------------------------------------------
150,458 149,115
Accumulated amortization (37,925) (31,030)
-------------------------------------------------------------------------
$ 112,533 $ 118,085
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Amortization during the three months ended June 30, 2008 was $3,447
(Q2 2007 - $3,271) and during six months ended June 30, 2008 was $6,895
(six months ended June 30, 2007 - $6,565).

7. GOODWILL

June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Balance, beginning of period $ 438,502 $ 438,546
Goodwill acquired during the period:
AVS acquistion 2,691 (44)
-------------------------------------------------------------------------
Balance, end of period $ 441,193 $ 438,502
-------------------------------------------------------------------------
-------------------------------------------------------------------------

8. DISBURSEMENT OBLIGATIONS ON CUSTOMER CONTRACTS

June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Current portion $ 2,212 $ 2,962
Long-term portion - 767
-------------------------------------------------------------------------
Total disbursement obligations on customer
contracts $ 2,212 $ 3,729
-------------------------------------------------------------------------

The Fund has fixed customer contract disbursement obligations payable as
of June 30, 2008 as follows:

2008 $ 1,445
2009 767
-------------------------------------------------------------------------
$ 2,212
-------------------------------------------------------------------------
-------------------------------------------------------------------------

9. LONG-TERM INDEBTEDNESS

June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Non-revolving term loan $ 120,000 $ 120,000
Revolving credit facility 5,000 10,000
-------------------------------------------------------------------------
125,000 130,000
Deferred finance costs (807) (946)
-------------------------------------------------------------------------
$ 124,193 $ 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 June 30, 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 three months ended June 30, 2008 was $70 (Q2 2007 - $69) and
during the six months ended June 30, 2008 was $139 (six months ended
June 30, 2007 - $138). Amortization of deferred finance costs is
recognized as interest expense using the effective interest method.

10. FINANCIAL INSTRUMENTS

Recognition and Measurement

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

Credit Risk

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

Market Risk

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

The following table presents a sensitivity analysis to changes in market
interest rates and their potential impact on the Fund for the three and
six months ended June 30, 2008. As the sensitivity is hypothetical, it
should be used with caution.

Three months ended Six months ended
June 30, 2008 June 30, 2008
-------------------------------------------------------------------------
+ 100 bps - 100 bps + 100 bps - 100 bps
-------------------------------------------------------------------------

Increase (decrease) in
interest expense $ 42 $ (42) $ 84 $ (84)
Change to net unrealized
(gain) loss on
interest-rate swaps (2,200) 2,200 (2,200) 2,200
-------------------------------------------------------------------------

Increase (decrease) in net
income $ 2,158 $ (2,158) $ 2,116 $ (2,116)
-------------------------------------------------------------------------

Increase (decrease) in total
comprehensive income $ 2,158 $ (2,158) $ 2,116 $ (2,116)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Fund manages its interest rate risks through the use of interest-rate
swaps for most of its outstanding long-term indebtedness. As of June 30,
2008, the Fund has entered into interest-rate swap contracts with its
lenders, such that the borrowing rates on $108.0 million, or 86.4%, 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)
-------------------------------------------------------------------------
January 4, 2009 $ 10,000 $ - $ 18 4.505%
July 15, 2009 20,000 - 335 5.688%
July 15, 2010 33,000 - 822 5.690%
June 15, 2011 20,000 - 668 5.560%
June 15, 2011 25,000 - 535 5.560%
-------------------------------------------------------------------------
$ 108,000 $ - $ 2,378
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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.

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

June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Deferred compensation program $ - $ 1,997
Employee future benefits 408 561
-------------------------------------------------------------------------
$ 408 $ 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 as of June 30, 2008 was reclassified to current liabilities
during the quarter as it is payable in March 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 three
months ended June 30, 2008 was $0.4 million (Q2 2007 - $0.4 million) and
for six months ended June 30, 2008 was $1.0 million (six months ended
June 30, 2007 - $0.9 million).

12. INCOME TAXES

The Fund is a mutual fund trust for income tax purposes. As such, the
Fund is subject to current income taxes on any amount not allocated to
unitholders. As all current taxable income will be allocated to the
unitholders, no provision for current income taxes has been made in these
consolidated financial statements. Current income tax liabilities
relating to distributions of the Fund are taxed in the hands of the
unitholders.

On June 22, 2007, legislation (the "SIFT Rules") relating to the
federal income taxation of publicly listed or traded trusts (such as
income trusts and real estate investment trusts) and partnerships
received royal assent. The SIFT Rules apply to a publicly traded trust
that is a specified investment flow-through entity (a "SIFT") which
existed before November 1, 2006 ("Existing Trust"), commencing with
taxation years ending in 2011, assuming transitional rules apply.

Certain distributions of a SIFT will not be deductible in computing the
SIFT's taxable income, and the SIFT will be subject to tax on its income
distributed at a rate that is substantially equivalent to the general tax
rate applicable to Canadian corporations. Distributions paid by a SIFT as
returns of capital will not be subject to this tax. There will be
circumstances where an Existing Trust may lose its transitional relief
where its equity capital grows beyond certain dollar limits measured by
reference to the Existing Trust's market capitalization at the close of
trading on October 31, 2006.

The Fund is a SIFT as defined in the legislation, and under the existing
SIFT Rules certain flow-through subsidiaries of the Fund themselves may
also be within the definition of a SIFT. Even if it is determined that
these flow-through subsidiaries of the Fund meet the definition of a
SIFT, there would be no impact on the future tax assets and liabilities
of the Fund. On December 20, 2007, the Minister of Finance announced his
intention to introduce technical amendments to the SIFT Rules under which
certain flow-through subsidiaries of a SIFT, which would include those of
the Fund, will not themselves be SIFTs.

Commencing January 1, 2011, the Fund will be subject to tax on its income
distributed. The Fund is also required to recognize future income tax
assets and liabilities with respect to the temporary differences between
the carrying amount and tax bases of its assets and liabilities and those
of its flow-through subsidiaries that are expected to reverse in or after
2011. 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 the temporary differences expected to reverse prior to 2011.

Significant components of the Fund's future tax liabilities and assets
with respect to the consolidated carrying values related to its
investments in certain partnership and trust subsidiaries that are
expected to reverse after 2010 are as follows:

June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Future income tax assets:
Intangible assets less than tax values $ 11,043 $ 10,854
Loss carryforwards 1,636 1,636
Valuation allowance (12,679) (12,490)
-------------------------------------------------------------------------
Total future tax assets - -
-------------------------------------------------------------------------

Future income tax liabilities:
Capital assets greater than tax values 2,357 1,591
-------------------------------------------------------------------------
Total future tax liabilities 2,357 1,591
-------------------------------------------------------------------------
Net future income tax liabilities $ 2,357 $ 1,591
-------------------------------------------------------------------------

The Fund does not expect the temporary difference between the carrying
amount and tax base of intangible assets to reverse in the foreseeable
future and accordingly has reduced the future income tax asset by a
valuation allowance for the full amount. A corporate subsidiary of the
Fund has losses available for carry forward. The Fund does not expect to
realize the benefit of these losses in the foreseeable future and
accordingly has reduced the future income tax asset by a valuation
allowance for the full amount.

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

13. TRUST UNITS

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

June 30, December 31,
2008 2007
-------------------------------------------------------------------------

Balance, beginning of period $ 474,585 $ 474,585
Units issued - -
-------------------------------------------------------------------------
Balance, end of period $ 474,585 $ 474,585
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Units outstanding, end of period 43,946,792 43,946,792
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The weighted average number of units outstanding during the three months
and the six months ended June 30, 2008 was 43,946,792 (three and six
months ended June 30, 2007 - 43,946,792).

14. COMMITMENTS

As of June 30, 2008, the Fund has annual lease obligations with respect
to real estate, vehicles and equipment as follows:

2008 $ 2,057
2009 3,550
2010 3,445
2011 1,924
2012 796
Thereafter 305
-------------------------------------------------------------------------
$ 12,077
-------------------------------------------------------------------------
-------------------------------------------------------------------------

15. 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
three months ended June 30, 2008, this ratio was calculated at 1.06 (Q2
2007 - 1.19). 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.

16. SIGNIFICANT CUSTOMERS

For the three months ended June 30, 2008, the Fund earned 78% of its
consolidated revenue from its seven largest customers (Q2 2007 - 77%).
For the three months ended June 30, 2008, four of these customers
individually accounted for greater than 10%, but not more than 17% of the
Fund's total revenue (Q2 2007 - five of these customers individually
accounted for greater than 10%, but not more than 17% of the Fund's total
revenue).

For the six months ended June 30, 2008, the Fund earned 79% of its
consolidated revenue from its seven largest customers (for the six months
ended June 30, 2007 - 78%). For the six months ended June 30, 2008, four
of these customers individually accounted for greater than 10%, but not
more than 17% of the Fund's total revenue (for the six months ended June
30, 2007, five 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 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, in accordance with the CICA Handbook
Section 1701, Segment Disclosures, 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 three and six months ended
June 30, 2008 and 2007 are as follows:

Three months ended June 30,
-------------------------------------------------------------------------
Davis +
Henderson Segment Filogix Segment
--------------------- ---------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue $ 77,946 $ 84,184 $ 19,317 $ 17,808
Cost of sales and
operating expenses 52,305 57,760 10,229 8,820
Amortization of capital
and other assets 2,179 1,912 1,276 1,456
-------------------------------------------------------------------------
23,462 24,512 7,812 7,532

Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of
intangible assets 723 788 2,724 2,483
Minority interest - - - -
-------------------------------------------------------------------------
Income (loss) before income
taxes 22,739 23,724 5,088 5,049
Future income tax expense
(recovery) - - - -
-------------------------------------------------------------------------
Net income (loss) $ 22,739 $ 23,724 $ 5,088 $ 5,049
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital and other
assets expenditures $ 1,098 $ 2,142 $ 1,864 $ 813
Intangible assets $ 1,708 $ 6,211 $ 110,825 $ 117,770
Goodwill $ 359,385 $ 366,562 $ 81,808 $ 71,940
Total assets $ 427,121 $ 445,484 $ 187,799 $ 186,074
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Three months ended June 30,
-------------------------------------------------------------------------
Corporate Consolidated
--------------------- ---------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue $ - $ - $ 97,263 $ 101,992
Cost of sales and
operating expenses 823 670 63,357 67,250
Amortization of capital
and other assets - - 3,455 3,368
-------------------------------------------------------------------------
(823) (670) 30,451 31,374

Interest expense 1,906 2,121 1,906 2,121
Net unrealized loss (gain)
on interest-rate swaps (1,034) (2,196) (1,034) (2,196)
Amortization of
intangible assets - - 3,447 3,271
Minority interest - 204 - 204
-------------------------------------------------------------------------
Income (loss) before income
taxes (1,695) (799) 26,132 27,974
Future income tax expense
(recovery) 766 1,454 766 1,454
-------------------------------------------------------------------------
Net income (loss) $ (2,461) $ (2,253) $ 25,366 $ 26,520
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital and other
assets expenditures $ - $ - $ 2,962 $ 2,955
Intangible assets $ - $ - $ 112,533 $ 123,981
Goodwill $ - $ - $ 441,193 $ 438,502
Total assets $ 9,390 $ 11,515 $ 624,310 $ 643,073
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 three months ended June 30, 2008, the Davis + Henderson Segment
had six customers that individually accounted for greater than 10% but
not more than 21% of the Davis + Henderson Segment revenue and the
Filogix Segment had three customers that individually accounted for
greater than 10% but not more than 19% of the Filogix Segment revenue
(Q2 2007 - Davis + Henderson Segment had four 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).

Six months ended June 30,
-------------------------------------------------------------------------
Davis +
Henderson Segment Filogix Segment
--------------------- ---------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue $ 152,670 $ 162,681 $ 33,681 $ 30,460
Cost of sales and
operating expenses 102,848 112,611 21,300 17,568
Amortization of capital
and other assets 4,329 3,924 2,513 2,785
-------------------------------------------------------------------------
45,493 46,146 9,868 10,107

Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of
intangible assets 1,447 1,599 5,448 4,966
Minority interest - - - -
-------------------------------------------------------------------------
Income (loss) before income
taxes 44,046 44,547 4,420 5,141
Future income tax expense
(recovery) - - - -
-------------------------------------------------------------------------
Net income (loss) $ 44,046 $ 44,547 $ 4,420 $ 5,141
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital and other asset
expenditures $ 3,563 $ 4,237 $ 1,933 $ 2,307
Intangible assets $ 1,708 $ 6,211 $ 110,825 $ 117,770
Goodwill $ 359,385 $ 366,562 $ 81,808 $ 71,940
Total assets $ 427,121 $ 445,484 $ 187,799 $ 186,074
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Six months ended June 30,
-------------------------------------------------------------------------
Corporate Consolidated
--------------------- ---------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue $ - $ - $ 186,351 $ 193,141
Cost of sales and
operating expenses 1,415 1,349 125,563 131,528
Amortization of capital
and other assets - - 6,842 6,709
-------------------------------------------------------------------------
(1,415) (1,349) 53,946 54,904

Interest expense 3,769 4,351 3,769 4,351
Net unrealized loss (gain)
on interest-rate swaps 1,310 (2,520) 1,310 (2,520)
Amortization of
intangible assets - - 6,895 6,565
Minority interest - 313 - 313
-------------------------------------------------------------------------
Income (loss) before income
taxes (6,494) (3,493) 41,972 46,195
Future income tax expense
(recovery) 766 1,454 766 1,454
-------------------------------------------------------------------------
Net income (loss) $ (7,260) $ (4,947) $ 41,206 $ 44,741
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital and other asset
expenditures $ - $ - $ 5,496 $ 6,544
Intangible assets $ - $ - $ 112,533 $ 123,981
Goodwill $ - $ - $ 441,193 $ 438,502
Total assets $ 9,390 $ 11,515 $ 624,310 $ 643,073
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 six months ended June 30, 2008, the Davis + Henderson Segment had
six customers that individually accounted for greater than 10% but not
more than 20% of the Davis + Henderson Segment revenue and the Filogix
Segment had three customers that individually accounted for greater than
10% but not more than 19% of the Filogix Segment revenue (for the six
months ended June 30, 2007, the 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 16% of the Filogix Segment revenue).

The following tables illustrate the reporting under the new and old basis
of segmentation for the three and six months ended June 30, 2008.

Three months ended June 30,
-------------------------------------------------------------------------
Davis +
Henderson Segment Filogix Segment
--------------------- ---------------------
New Basis Old Basis New Basis Old Basis
---------- ---------- ---------- ----------
2008 2008 2008 2008
-------------------------------------------------------------------------
Revenue $ 77,946 $ 79,158 $ 19,317 $ 18,105
Cost of sales and
operating expenses 52,305 53,070 10,229 9,464
Amortization of capital
and other assets 2,179 2,179 1,276 1,276
-------------------------------------------------------------------------
23,462 23,909 7,812 7,365

Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of
intangible assets 723 964 2,724 2,483
-------------------------------------------------------------------------
Income (loss) before income
taxes 22,739 22,945 5,088 4,882
Future income tax expense
(recovery) - - - -
-------------------------------------------------------------------------
Net income (loss) $ 22,739 $ 22,945 $ 5,088 $ 4,882
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital and other assets
expenditures $ 1,098 $ 1,098 $ 1,864 $ 1,864
Intangible assets $ 1,708 $ 4,696 $ 110,825 $ 107,837
Goodwill $ 359,385 $ 369,253 $ 81,808 $ 71,940
Total assets $ 427,121 $ 450,381 $ 187,799 $ 164,539
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Three months ended June 30,
-------------------------------------------------------------------------
Corporate Consolidated
--------------------- ---------------------
New Basis Old Basis New Basis Old Basis
---------- ---------- ---------- ----------
2008 2008 2008 2008
-------------------------------------------------------------------------
Revenue $ - $ - $ 97,263 $ 97,263
Cost of sales and
operating expenses 823 823 63,357 63,357
Amortization of capital
and other assets - - 3,455 3,455
-------------------------------------------------------------------------
(823) (823) 30,451 30,451

Interest expense 1,906 1,906 1,906 1,906
Net unrealized loss (gain)
on interest-rate swaps (1,034) (1,034) (1,034) (1,034)
Amortization of
intangible assets - - 3,447 3,447
-------------------------------------------------------------------------
Income (loss) before income
taxes (1,695) (1,695) 26,132 26,132
Future income tax expense
(recovery) 766 766 766 766
-------------------------------------------------------------------------
Net income (loss) $ (2,461) $ (2,461) $ 25,366 $ 25,366
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital and other assets
expenditures $ - $ - $ 2,962 $ 2,962
Intangible assets $ - $ - $ 112,533 $ 112,533
Goodwill $ - $ - $ 441,193 $ 441,193
Total assets $ 9,390 $ 9,390 $ 624,310 $ 624,310
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The results presented under the old basis for the Davis + Henderson and
Filogix Segments remove from the current period results, the impact of
the change in the reporting of the personal property, search and
registration programs.

Six months ended June 30,
-------------------------------------------------------------------------
Davis +
Henderson Segment Filogix Segment
--------------------- ---------------------
New Basis Old Basis New Basis Old Basis
---------- ---------- ---------- ----------
2008 2008 2008 2008
-------------------------------------------------------------------------
Revenue $ 152,670 $ 154,807 $ 33,681 $ 31,544
Cost of sales and
operating expenses 102,848 104,406 21,300 19,742
Amortization of capital
and other assets 4,329 4,329 2,513 2,513
-------------------------------------------------------------------------
45,493 46,072 9,868 9,289

Interest expense - - - -
Net unrealized loss (gain)
on interest-rate swaps - - - -
Amortization of
intangible assets 1,447 1,929 5,448 4,966
-------------------------------------------------------------------------
Income (loss) before income
taxes 44,046 44,143 4,420 4,323
Future income tax expense
(recovery) - - - -
-------------------------------------------------------------------------
Net income (loss) $ 44,046 $ 44,143 $ 4,420 $ 4,323
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital and other asset
expenditures $ 3,563 $ 3,563 $ 1,933 $ 1,933
Intangible assets $ 1,708 $ 4,696 $ 110,825 $ 107,837
Goodwill $ 359,385 $ 369,253 $ 81,808 $ 71,940
Total assets $ 427,121 $ 450,381 $ 187,799 $ 164,539
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Six months ended June 30,
-------------------------------------------------------------------------
Corporate Consolidated
--------------------- ---------------------
New Basis Old Basis New Basis Old Basis
---------- ---------- ---------- ----------
2008 2008 2008 2008
-------------------------------------------------------------------------
Revenue $ - $ - $ 186,351 $ 186,351
Cost of sales and
operating expenses 1,415 1,415 125,563 125,563
Amortization of capital
and other assets - - 6,842 6,842
-------------------------------------------------------------------------
(1,415) (1,415) 53,946 53,946

Interest expense 3,769 3,769 3,769 3,769
Net unrealized loss (gain)
on interest-rate swaps 1,310 1,310 1,310 1,310
Amortization of
intangible assets - - 6,895 6,895
-------------------------------------------------------------------------
Income (loss) before income
taxes (6,494) (6,494) 41,972 41,972
Future income tax expense
(recovery) 766 766 766 766
-------------------------------------------------------------------------
Net income (loss) $ (7,260) $ (7,260) $ 41,206 $ 41,206
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital and other asset
expenditures $ - $ - $ 5,496 $ 5,496
Intangible assets $ - $ - $ 112,533 $ 112,533
Goodwill $ - $ - $ 441,193 $ 441,193
Total assets $ 9,390 $ 9,390 $ 624,310 $ 624,310
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The results presented under the old basis for the Davis + Henderson and
Filogix Segments remove from the current period results, the impact of
the change in the reporting of the personal property, search and
registration programs.

18. COMPARATIVE FIGURES

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

SUPPLEMENTARY FINANCIAL INFORMATION

Consolidated Operating Results by Period

-------------------------------------------------------------------------
Three Three Three Three Three
months months months months months
(in thousands of ended ended ended ended ended
Canadian dollars, June March December September June
except per unit 30, 31, 31, 30, 30,
amounts, unaudited) 2008 2008 2007(2) 2007(2) 2007(2)
-------------------------------------------------------------------------

Revenue $ 97,263 $ 89,088 $ 90,934 $ 94,676 $101,992
Cost of sales and
operating expenses 63,357 62,206 64,582 63,813 67,250
Amortization of capital
and other assets 3,455 3,387 3,647 3,496 3,368
-------------------------------------------------------------------------
30,451 23,495 22,705 27,367 31,374
Interest expense 1,906 1,863 1,876 1,982 2,121
Net unrealized loss
(gain) on interest-
rate swaps (1,034) 2,344 823 957 (2,196)
Amortization of
intangible assets 3,447 3,448 3,386 3,347 3,271
Future income tax
expense (recovery) 766 - 137 - 1,454
Minority interest - - (139) 205 204
-------------------------------------------------------------------------
Net income $ 25,366 $ 15,840 $ 16,622 $ 20,876 $ 26,520
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cash flows from
operating activities $ 32,623 $ 16,523 $ 32,141 $ 28,802 $ 34,784
Changes in non-cash
working capital and
other items(1) (82) 9,037 (6,959) 425 (1,814)
-------------------------------------------------------------------------
Adjusted cash flows from
operating activities 32,541 25,560 25,182 29,227 32,970

Less:
Capital asset
expenditures and
contract payments 2,962 2,534 4,354 4,598 2,955
-------------------------------------------------------------------------
Adjusted cash flows
after capital asset
expenditures and
contract payments 29,579 23,026 20,828 24,629 30,015

Distributions paid to
unitholders 19,305 18,853 26,676 17,403 17,403
-------------------------------------------------------------------------
10,274 4,173 (5,848) 7,226 12,612

Cash flows provided by
(used in) other
financing activiites (5,000) - - (5,000) (10,000)
Cash flows used in
acquisition of
businesses and customer
service contracts - (4,250) - (837) -
Changes in non-cash
working capital and
other items(1) 82 (9,037) 6,959 (425) 1,814
Distributions paid to
minority interest - - (187) (255) -
-------------------------------------------------------------------------
Increase (decrease) in
cash and cash
equivalents for the
period $ 5,356 $ (9,114) $ 924 $ 709 $ 4,426
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Changes in non-cash working capital and certain other balance sheet
items have been excluded from adjusted cash flows from operating
activities so as to remove the effects of timing differences in cash
receipts and cash disbursements, which generally reverse themselves
but can, vary significantly across quarters. Minority interest and
changes to other long-term liabilities are deducted to arrive at
adjusted cash flows.

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

Summary of Cash Flows Per Unit

-------------------------------------------------------------------------
Three Three Three Three Three
months months months months months
ended ended ended ended ended
June March December September June
(in Canadian dollars, 30, 31, 31, 30, 30,
unaudited) 2008 2008 2007 2007 2007
-------------------------------------------------------------------------
Adjusted cash flows
from operating
activities $ 0.7405 $ 0.5816 $ 0.5730 $ 0.6651 $ 0.7502
Adjusted cash flows
after capital asset
expenditures and
contract payments $ 0.6731 $ 0.5240 $ 0.4739 $ 0.5604 $ 0.6830
Distributions paid to
unitholders $ 0.4393 $ 0.4290 $ 0.6070 $ 0.3960 $ 0.3960
Distributions declared
during period $ 0.4496 $ 0.4290 $ 0.6180 $ 0.3960 $ 0.3960
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Condensed Consolidated Balance Sheet

-------------------------------------------------------------------------
(in thousands of
Canadian dollars, June March December September June
unaudited) 30, 2008 31, 2008 31, 2007 30, 2007 30, 2007
-------------------------------------------------------------------------

Cash and cash
equivalents $ 9,390 $ 4,034 $ 13,148 $ 12,224 $ 11,515
Other current assets 26,847 25,382 26,149 29,644 29,772
Capital and other assets 34,347 35,229 38,268 38,049 39,303
Goodwill and other
intangible assets 553,726 557,173 556,587 559,973 562,483

-------------------------------------------------------------------------
$624,310 $621,818 $634,152 $639,890 $643,073
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Payables and other
current liabilities $ 42,427 $ 38,491 $ 49,116 $ 45,165 $ 45,994
Other long-term
liabilities 5,143 7,417 6,289 5,673 6,732
Long-term indebtedness 124,193 129,123 129,054 128,985 133,916
Unitholders' equity 452,547 446,787 449,693 460,067 456,431

Distribution History

-------------------------------------------------------------------------
Distributions
per
unit(1)
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 - 0.1320 0.1250 0.1200
August - 0.1320 0.1250 0.1220
September - 0.1320 0.1250 0.1220
October - 0.1320 0.1250 0.1220
November(2) - 0.3430 0.1280 0.1220
December(3) - 0.1430 0.1280 0.1220
-------------------------------------------------------------------------
$0.8786 $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.

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)

Quarter High -------------------- 2008 - 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 -------------------- >> Number Market
Trading price range of units of units capital-
(TSX: "DHF.UN") outstand- ization
------------------------------- Average ing at at
Low Close daily quarter quarter
volume end end
-----------------------------------------------------
$ 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