Davis + Henderson Income Fund Reports Growth in Revenue and Cash Flow in Fourth Quarter and Year Ended December 31, 2007



    TSX Stock Symbol: "DHF.UN"

    Website: www.dhltd.com

    TORONTO, Feb. 26 /CNW/ - Davis + Henderson Income Fund reported increases
in revenue and cash flow for the fourth quarter and year ended December 31,
2007.

    
    Fourth Quarter Highlights

    -   Revenue increased by $3.0 million, or 3.4%, to $90.9 million compared
        to the same quarter in 2006. This increase was the result of a
        $0.6 million, or 0.8%, increase for the Davis + Henderson Segment and
        a $2.4 million, or 18.0%, increase for the Filogix Segment over the
        comparable prior period.

    -   Net income per unit increased to $0.3782, or just under 1% compared
        to the fourth quarter of 2006. Excluding the impact of a mark-to-
        market swap loss and the charge for future income taxes, both non-
        cash items, net income per unit increased 6.8% over the same quarter
        last year.

    -   Distributions paid were $0.6070 compared to $0.3780 paid during the
        fourth quarter of 2006. Excluding the special distribution in
        November of $0.20 per unit, the year-over-year increase was 7.7%.

    2007 Highlights

    -   Revenue increased by $55.0 million, or 17.0%, to $378.8 million
        compared to the same period in 2006. Of this increase, $32.8 million
        related to the Filogix Segment and was primarily attributable to both
        the inclusion of a full year of results in 2007 compared with a half
        year in 2006 and to strong growth in origination fees. The
        Davis + Henderson Segment reported above expected revenue growth of
        7.6%, or $22.2 million, compared to the same period in 2006.

    -   Net income per unit increased to $1.8713 per unit, or 16.4%, compared
        to 2006.

    -   Declared distributions for 2007 of $1.7980 per unit were 19.9% higher
        than 2006.
    

    Management Commentary

    Davis + Henderson had a very solid year with annual revenue growth above
its long-term objective of 3% to 5%. Several factors contributed to this
growth. The two most significant were the inclusion of the Filogix results for
the full year of 2007, as compared to approximately a half year in 2006, as
well continued contribution from program initiatives, such as iDefence(R) and
BizAssist(R).
    Additionally, two other significant factors contributed to above-target
revenue growth for the year: (1) cheque order volumes were stronger than
anticipated, including incremental reorders related to the changes in imaging
standards on cheques; and (2) record real estate activity in 2007
significantly increased mortgage origination revenues within the Filogix
Segment. While both of these factors have influenced year-over-year
comparisons, they were less pronounced in the second half of 2007.
    Management believes that the increased reorder activity levels that
lifted revenue in the first half of 2007 reduced order volumes in the later
part of 2007. Management also believes that increased reorder activity from
earlier in 2007 will contribute to reduced order volumes in future quarters,
particularly in the first half of 2008, as consumers delay orders due to
recent cheque supply replenishments. Taking into account the specific items
referred to above, management believes revenue growth in 2008 may be less than
the Business's 3% to 5% long-term objective.
    We remain committed to our long-term financial objective of growing
distributions. 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 our established
platforms, we look to increase value for customers and unitholders by
continuing to enhance our existing programs.
    For a more detailed discussion of fourth quarter and full year results
and management's outlook, please see the Management's Discussion and Analysis
below.

    Caution Concerning Forward-Looking Statements

    Forward-looking statements may also include, without limitation, any
statement relating to future events, conditions or circumstances. Davis +
Henderson cautions you not to place undue reliance upon any such
forward-looking statements, which speak only as of the date they are made.
Risks related to forward-looking statements include, among other things,
challenges presented by declines in the use of cheques by consumers; the
Fund's dependence on a limited number of large financial institution customers
and dependence on their acceptance of new programs; exposure to fluctuations
in residential real estate and mortgage activity; strategic initiatives being
undertaken to meet the Fund's financial objectives as well as general market
conditions, including economic and interest rate dynamics and investor
interest in, and government regulations relating to income trusts.
    Forward-looking statements are based on management's current plans,
estimates, projections, beliefs and opinions, and Davis + Henderson does not
undertake any obligation to update forward-looking statements should
assumptions related to these plans, estimates, projections, beliefs and
opinions change.

    Conference Call

    Davis + Henderson will discuss its financial results for the fourth
quarter ended December 31, 2007 via conference call at 10:00 a.m. EST (Toronto
time) on Wednesday February 27, 2008. The number to use for this call is
416-644-3414 for Toronto area callers or 1-800-731-6941 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 21259652
followed by the number sign. The rebroadcast will be available until Wednesday
March 12, 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 and the Short Form Prospectus dated
May 30, 2006, is available on SEDAR at www.sedar.com.

    MANAGEMENT'S DISCUSSION AND ANALYSIS

    Management's Discussion and Analysis ("MD&A") for the fourth quarter of
2007 and year ended December 31, 2007 should be read in conjunction with MD&A
in the Fund's Annual Report for the year ended December 31, 2006, dated
February 27, 2007, the Short Form Prospectus, dated May 30, 2006, and the
attached unaudited consolidated financial statements. External economic and
industry factors remain substantially unchanged from the annual MD&A and the
Short Form Prospectus, unless otherwise stated.

    STRATEGY

    The Fund's financial goal is to deliver stable and modestly growing cash
distributions to unitholders by targeting annual revenue growth in the range
of 3% to 5% and maintaining margins. The Fund has three primary strategies to
meet this financial goal. These are to enhance the value of the Davis +
Henderson cheque supply program, 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(R), a service that allows financial institutions to more easily
move electronic pre-authorized payments and direct deposit authorizations
between chequing accounts 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 AVS, which under Davis +
Henderson's brand CollateralGuard(TM), provides lenders with, among other
offerings, personal property search and registration programs across Canada.
The addition of these business interests has created another business platform
for Davis + Henderson.
    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.

    FINANCIAL INFORMATION PRESENTATION

    The Fund's results for the year ended December 31, 2007 include the
results of the Filogix business acquired on June 15, 2006. The inclusion of
Filogix had a significant impact on the financial results and has also
resulted in changes to the form of Davis + Henderson's disclosures.
    With the acquisition of Filogix, the Fund now operates in two business
segments, the "Davis + Henderson Segment" and the "Filogix Segment". The Davis
+ Henderson Segment includes the cheque supply program, deposit program,
eSwitch and the personal property search and registration programs, among
other offerings. The Filogix Segment includes services related to the
origination and underwriting of mortgages in Canada, 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 corporation-wide costs.

    
    OPERATING RESULTS FOR THE FOURTH QUARTER

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

                                                   Quarter ended December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    Revenue                                        $    90,934   $    87,932
    Cost of sales and operating expenses                64,178        62,034
    Amortization of capital and other assets             4,051         3,902
    -------------------------------------------------------------------------
                                                        22,705        21,996

    Interest expense                                     1,876         2,186
    Net unrealized loss (gain) on interest-rate
     swaps                                                 823             -
    Amortization of intangible assets                    3,386         3,254
    Minority interest                                     (139)           89
    -------------------------------------------------------------------------
    Income before income taxes                          16,759        16,467

    Future income tax expense                              137             -
    -------------------------------------------------------------------------
    Net income                                     $    16,622   $    16,467
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income per unit, basic and diluted         $    0.3782   $    0.3747
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                                                   Quarter ended December 31,
    -------------------------------------------------------------------------
                           Davis + Henderson Segment         Filogix Segment
                           -------------------------- -----------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Revenue                   $   75,359  $   74,730  $   15,575  $   13,202
    Percentage change               0.8%                   18.0%

    Cost of sales and
     operating expenses           53,082      52,720      10,437       8,794
    Amortization of capital
     and other assets              2,628       2,421       1,423       1,481
    -------------------------------------------------------------------------
                                  19,649      19,589       3,715       2,927
    Percentage change               0.3%                   26.9%

    Interest expense                   -           -           -           -
    Net unrealized loss (gain)
     on interest-rate swaps            -           -           -           -
    Amortization of
     intangible assets               903         771       2,483       2,483
    Minority interest               (139)         89           -           -
    -------------------------------------------------------------------------
    Income before income
     taxes                        18,885      18,729       1,232         444
    Future income tax
     expense                           -           -           -           -
    -------------------------------------------------------------------------
    Net income                $   18,885  $   18,729  $    1,232  $      444
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   Quarter ended December 31,
    -------------------------------------------------------------------------
                                           Corporate            Consolidated
                           -------------------------- -----------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Revenue                   $        -  $        -  $   90,934  $   87,932
    Percentage change                  -                    3.4%

    Cost of sales and
     operating expenses              659         520      64,178      62,034
    Amortization of capital
     and other assets                  -           -       4,051       3,902
    -------------------------------------------------------------------------
                                    (659)       (520)     22,705      21,996
    Percentage change              26.7%                    3.2%

    Interest expense               1,876       2,186       1,876       2,186
    Net unrealized loss (gain)
     on interest-rate swaps          823           -         823           -
    Amortization of
     intangible assets                 -           -       3,386       3,254
    Minority interest                  -           -        (139)         89
    -------------------------------------------------------------------------
    Income before income
     taxes                        (3,358)     (2,706)     16,759      16,467
    Future income tax
     expense                         137           -         137           -
    -------------------------------------------------------------------------
    Net income                $   (3,495) $   (2,706) $   16,622  $   16,467
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Revenue

    Revenue for the fourth quarter of 2007 was $90.9 million, an increase of
$3.0 million, or 3.4%, when compared to the fourth quarter of 2006. The
Filogix Segment accounted for $2.4 million of the increase with the balance of
the increase, $0.6 million, attributable to the Davis + Henderson Segment.
    Revenue for the Davis + Henderson Segment increased by 0.8%
year-over-year. Revenue increases from successful program initiatives,
including products and service enhancements such as iDefence and BizAssist,
were essentially offset by a reduction in revenue driven by a year-over-year
decline in cheque order volumes.
    Historically, cheque order volumes have, on average, declined annually by
low single digit percentages as a result of declining cheque usage. In the
first nine months of 2007, the Davis + Henderson Segment did not experience
this decline and, for the first six months of 2007, overall cheque order
volume was higher than in the prior year. These stronger than anticipated
order volumes are believed to be the result of increased customer promotional
activities, the continuing movement of consumers to orders with fewer cheques
and changes in the imaging standards required for cheques produced in Canada,
which generated incremental and accelerated reorders. Management believes that
many of these accelerated reorders would otherwise have been received in
future periods pursuant to normal reorder cycles. Management also believes
that for this reason cheque order volumes were lower in the fourth quarter of
2007 than would otherwise be expected given historical declines and that
declines may continue at this higher level for the next few quarters.
    Total revenue for the fourth quarter of 2007 for the Filogix Segment was
up 18.0% compared with the same quarter in 2006, reflecting growth in the
origination and other transaction based revenues. This growth was consistent
with the overall strength in the real estate and mortgage market. The growth
in transaction-based revenue was less pronounced in the second half of the
year than in the first half.

    Cost of Sales and Operating Expenses

    Cost of sales and operating expenses for the fourth quarter of 2007 were
$64.2 million, an increase of $2.1 million, or 3.5%, over the comparable prior
year period. The Filogix Segment accounted for $1.6 million of the increase
with the balance of $0.5 million attributable to the Davis + Henderson Segment
and corporate expenses. Expenses in the Davis + Henderson Segment and
corporate expenses grew 0.9%, relatively unchanged from the same period in
2006.
    Filogix expenses were 18.7% higher compared to the same period last year.
During the fourth quarter, the Filogix Segment incurred additional expenses
for customer implementations, contract renewals and in support of further
product enhancements and strengthening the general delivery capabilities of
the Business as planned. This increased level of spending is expected to
continue into 2008.

    Other Expenses and Net Income

    Amortization of capital and other assets increased by $0.1 million when
comparing the fourth quarters of 2007 and 2006. The Davis + Henderson Segment
accounted for $0.2 million of the increase, which was partially offset by a
$0.1 million decrease in the Filogix Segment.
    Interest expense decreased by $0.3 million in the fourth quarter of 2007
compared to the fourth quarter of 2006. This decrease reflected the repayment
of $15.0 million in debt during the year.
    An unrealized loss on interest rate swaps of $0.8 million was recognized
in the fourth quarter of 2007, reflecting mark-to-market adjustments in
interest rates since September 30, 2007. These unrealized gains and losses are
recognized in income as these swaps are no longer designated as hedges for
accounting purposes.
    Amortization of intangibles increased by $0.1 million to $3.4 million for
the fourth quarter of 2007 when compared to the same period in 2006. These
intangible assets consist of rights related to customer relationships, brand
names and proprietary software and are amortized on a straight-line basis over
periods ranging from 10 to 15 years.
    The minority interest recognized in the fourth quarter increased income
by $0.1 million, reflecting a loss recorded in the AVS business as a result of
increased costs, including an increase in expenses allocated to the business
and certain direct costs.
    Net income of $16.6 million for the quarter ended December 31, 2007,
represents an increase of $0.2 million, or 0.9%, when compared to the same
quarter in the previous year. On a per unit basis, net income increased by
$0.0035 per unit to $0.3782 per unit. Excluding the non-cash impact of the
mark-to-market swap loss and the charge for future income taxes, net income
per unit increased 6.8% over the same quarter last year.

    Summary of Cash Flows

    The following table is a supplementary disclosure provided by management
to provide useful additional information related to the cash flows of the
Business, including the amount of cash available for distribution to
unitholders, repayment of debt and other investing activities. For a full
description of the table and terminology used, see Non-GAAP Measures under the
Cash Flow and Liquidity section of this MD&A.

    
                                                   Quarter ended December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    Cash flows from operating activities           $    32,141   $    22,110

    Add (deduct):
      Changes in non-cash working capital other
       items(1)                                         (6,959)        1,512
    -------------------------------------------------------------------------
    Adjusted cash flows from operating activities       25,182        23,622

    Less:
      Maintenance capital expenditures - D+H(2)          2,640         1,057
      Maintenance capital expenditures - Filogix(2)      1,564           854
      Growth capital expenditures(2)                         -            34
      Contract payments(3)                                 150            20
    -------------------------------------------------------------------------
    Adjusted cash flows after capital expenditures
     and contract payments(2)                           20,828        21,657

    Distributions paid to unitholders                   26,676        16,612
    -------------------------------------------------------------------------
    Adjusted cash flows after capital, contract
     payments and distributions paid                    (5,848)        5,045

    Cash flows provided by (used in) other
     financing activities                                    -        (5,000)
    Cash flows used in acquisition of businesses
     and customer service contracts                          -        (1,518)
    Changes in non-cash working capital and other
     items(1)                                            6,959        (1,512)
    Distributions paid to minority interest               (187)         (120)
    -------------------------------------------------------------------------
    Increase (decrease) in cash and cash
     equivalents for the period                    $       924   $    (3,105)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 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.

    Note 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.

    Note 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)

                                                   Quarter ended December 31,
                                                2007        2006    % change
    -------------------------------------------------------------------------
    Adjusted cash flows from operating
     activities                           $   0.5730  $   0.5375        6.6%
    Adjusted cash flows after capital
     expenditures and contract payments   $   0.4739  $   0.4928       -3.8%
    Distributions paid to unitholders     $   0.6070  $   0.3780       60.6%
    Distributions declared during period  $   0.6180  $   0.3810       62.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Cash Flows, Net Income and Distributions Paid

    The following table compares cash flows from operating activities and net
income to distributions paid for the fourth quarter and year ended
December 31, 2007.

                                      Quarter ended            Year ended
     (in thousands of Canadian         December 31,            December 31,
      dollars, unaudited)           2007        2006        2007        2006
    -------------------------------------------------------------------------
    Cash flows from operating
     activities               $   32,141  $   22,110  $  117,401  $   89,753
    Net income                $   16,622  $   16,467  $   82,239  $   66,529
    Distributions paid
     during period            $   26,676  $   16,612  $   78,357  $   61,191
    Excess (shortfall) of
     cash flows from operating
     activities over cash
     distributions paid       $    5,465  $    5,498  $   39,044  $   28,562
    Excess (shortfall) of net
     income over cash
     distributions paid       $  (10,054) $     (145) $    3,882  $    5,338
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net income, in all periods shown in the above table, included a non-cash
charge for amortization of intangibles arising on acquisitions. Additionally,
in the fourth quarter of 2007, distributions included the payment of a special
distribution of $8.8 million, funded by cash balances on hand accumulated from
prior periods. As a result of these factors, in the fourth quarter of both
2007 and 2006, distributions exceeded net income.

    Expenditures on Capital Assets and Contract Payments

    Total capital asset expenditures for the fourth quarter increased
$2.3 million over the same quarter in 2006. The Filogix Segment accounted for
$0.7  million of the increase, with the balance of the increase of $1.6
million attributable to the Davis + Henderson Segment. The increase in capital
expenditures in the fourth quarter of 2007, compared with the same period in
2006, was consistent with the increase in the full year capital expenditures
program. Total capital asset expenditures for the year ended December 31, 2007
were $12.0 million, an increase of $4.8 million compared to the same period in
2006. The Filogix Segment accounted for $2.6 million of the increase and the
Davis + Henderson Segment accounted for $2.2 million of the increase. Most of
the increase in 2007 over 2006 reflects continued investment in both the Davis
+ Henderson and the Filogix Segments' technology infrastructure as well as
including a full-year capital program for the Filogix Segment.
    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 $13.0 million to
$15.0 million. The Business' capital program provides for continued
expenditures to be funded by cash flows from operations.

    Distributions

    During the fourth quarter of 2007, the Fund paid distributions of
$26.7 million. Included in the fourth quarter total was an $8.8 million
special distribution paid in November 2007. On a per unit basis, distributions
paid were $0.6070 compared to $0.3780 paid during the fourth quarter of 2006,
representing a 60.6% year-over-year increase. Excluding the special
distribution of $0.20 per unit, the year-over-year increase was 7.7%. Monthly
distributions declared increased in November 2007 to $0.143 per unit
(annualized basis, $1.72 per unit), up 8.3% from the October 2007 monthly
distribution rate of $0.132 per unit.

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

                                                   Quarter ended December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    Minority interest                              $      (139)  $        89
    Change in non-cash working capital items             6,963        (1,671)
    Changes in other operating assets and
     liabilities                                           135            70
    -------------------------------------------------------------------------
    Changes in non-cash working capital and
     other items                                   $     6,959   $    (1,512)
    -------------------------------------------------------------------------
    

    The decrease in non-cash working capital for the quarter ended
December 31, 2007, a source of cash flow,  reflects a decrease in the level of
receivables and an increase in the level of payables, both of which are
considered timing differences that are expected to reverse in future quarters.
The increase in non-cash working capital for the quarter ended December 31,
2006, reflects the settlement of certain purchase price obligations and the
reversal of timing differences from earlier quarters.

    Cash Flows Provided by Financings and Used in Business Acquisitions

    There were no expenditures in the fourth quarter of 2007 related to debt
repayments and business acquisitions. Cash flows used in other financing
activities for the quarter ended December 31, 2006 reflect a $5.0 million pay
down of debt. Cash flows used in investing activities for the quarter ended
December 31, 2006 relate to a $1.0 million purchase price adjustment for the
increased investment in AVS, $1.8 million (of which $1.1 million are current
receivables that have been collected) relating to the acquisition of customer
contracts to provide personal property search and registration programs,
partially offset by a final purchase price adjustment for the acquisition of
the Filogix business of $1.3 million.

    
    2007 OPERATING RESULTS

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

                                                      Year ended December 31,
                                                2007        2006        2005
    -------------------------------------------------------------------------
    Revenue                               $  378,751  $  323,716  $  276,537
    Cost of sales and operating expenses     258,389     228,793     196,956
    Amortization of capital and other
     assets                                   15,386      13,940      13,107
    -------------------------------------------------------------------------
                                             104,976      80,983      66,474

    Interest expense                           8,209       6,016       3,301
    Net unrealized loss (gain)
     on interest-rate swaps                     (740)          -           -
    Amortization of intangible assets         13,298       8,236       2,422
    Minority interest                            379         202           -
    -------------------------------------------------------------------------
    Income before income taxes                83,830      66,529      60,751

    Future income tax expense                  1,591           -           -
    -------------------------------------------------------------------------
    Net income                            $   82,239  $   66,529  $   60,751
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income per unit, basic and
     diluted                              $   1.8713  $   1.6081  $   1.6020
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Operating Results by Business Segment
    (in thousands of Canadian dollars)
                                                      Year ended December 31,
    -------------------------------------------------------------------------
                           Davis + Henderson Segment         Filogix Segment
                           -------------------------- -----------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Revenue                   $  315,204  $  292,981  $   63,547  $   30,735
    Percentage change               7.6%                  Note 1

    Cost of sales and
     operating expenses          219,089     205,442      36,726      21,365
    Amortization of capital
     and other assets              9,789      11,168       5,597       2,772
    -------------------------------------------------------------------------
                                  86,326      76,371      21,224       6,598
    Percentage change              13.0%                  Note 1

    Interest expense                   -           -           -           -
    Net unrealized loss (gain)
     on interest-rate swaps            -           -           -           -
    Amortization of
     intangible assets             3,366       2,884       9,932       5,352
    Minority interest                379         202           -           -
    -------------------------------------------------------------------------
    Income before
     income taxes                 82,581      73,285      11,292       1,246
    Future income tax
     expense                           -           -           -           -
    -------------------------------------------------------------------------
    Net Income                $   82,581  $   73,285  $   11,292  $    1,246
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                      Year ended December 31,
    -------------------------------------------------------------------------
                                           Corporate            Consolidated
                           -------------------------- -----------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Revenue                   $        -  $        -  $  378,751  $  323,716
    Percentage change                  -                   17.0%

    Cost of sales and
     operating expenses            2,574       1,986     258,389     228,793
    Amortization of capital
     and other assets                  -           -      15,386      13,940
    -------------------------------------------------------------------------
                                  (2,574)     (1,986)    104,976      80,983
    Percentage change              29.6%                   29.6%

    Interest expense               8,209       6,016       8,209       6,016
    Net unrealized loss (gain)
     on interest-rate swaps         (740)          -        (740)          -
    Amortization of
     intangible assets                 -           -      13,298       8,236
    Minority interest                  -           -         379         202
    -------------------------------------------------------------------------
    Income before
     income taxes                (10,043)     (8,002)     83,830      66,529
    Future income tax
     expense                       1,591           -       1,591           -
    -------------------------------------------------------------------------
    Net Income                $  (11,634) $   (8,002) $   82,239  $   66,529
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Note 1: The results of the year ended December 31, 2006 included
    financial results of Filogix for the period of June 15, 2006 to
    December 31, 2006 and accordingly, the year-over-year growth percentages
    are not provided as they do not compare equivalent time periods.
    

    Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

    Revenue

    Total revenue for the year ended December 31, 2007 was $378.8 million, an
increase of $55.0 million, or 17.0%, compared to 2006. The Davis + Henderson
Segment contributed $22.2 million to this increase with the remaining balance
of $32.8 million attributable to the Filogix Segment. The significant growth
in the Filogix Segment was due to the inclusion of a full year of results for
the Filogix Segment in 2007 versus only a partial period in 2006 (commencing
on the date of acquisition on June 15, 2006) and to strong activity in the
mortgage and real estate market.
    The revenue growth rates achieved by the Business for the year were
higher than the Fund's long-term objective of 3% to 5%, even after considering
the impact of the short reporting period for the Filogix Segment in 2006.
    Revenue for the Davis + Henderson Segment increased by 7.6%
year-over-year. The revenue growth in this segment was above the long-term
target as a result of contributions related to program initiatives, such as
iDefence(R) and BizAssist(R), and to a lesser extent, the expansion of
personal property search and registration programs, and growth in eSwitch
volumes related to customer promotional programs. In addition, stronger than
expected cheque order volumes, including incremental reorders related to the
changes in imaging standards on cheques, contributed to growth rates exceeding
the Fund's overall long-term objectives.
    Historically, cheque order volumes have, on average, been declining by
low single digit percentages annually as a result of declining cheque usage.
Order volumes in both 2006 and 2007 were different than the historical
average, with 2006 being comparable to 2005, and 2007 order volumes being
higher than 2006. Specifically, for the first six months of 2007 overall
cheque order volume was higher than in the prior year. These stronger than
anticipated order volumes are believed to be the result of increased customer
promotional activities, the continuing movement of consumers to orders with
fewer cheques, and changes in the imaging standards required for cheques
produced in Canada, which generated incremental and accelerated reorders. In
the second half of the year, order activity was directionally more in line
with historical experience and management believes there were few accelerated
reorders. As management further believes that many of these accelerated
reorders would otherwise have been received in future periods pursuant to
normal reorder cycles, the Business may experience higher than historically
observed average declines in future quarters, particularly in the first half
of 2008, reducing revenues in such periods. Management believes that cheque
order volumes in the last quarter of 2007 were so impacted. In looking beyond
the shifting reorder cycles experienced in the most recent periods, management
believes that declining cheque usage will continue to contribute to declining
cheque orders as it has in the past.
    Revenue for the Filogix Segment was also stronger than expected as the
Business benefited from a strong real estate and mortgage market. Including
2006 revenue earned by Filogix prior to its acquisition by the Fund,
origination services revenue, which represents a substantial share of overall
Filogix revenues, was up 30.0% year-over-year. Total revenue for 2007 for the
Filogix Segment of $63.5 million was up 22.9% when compared with full-year
2006 revenue, reflecting growth in the origination and other transaction-based
revenues and reduced revenues from project implementation and customization
services.

    Cost of Sales and Operating Expenses

    On a consolidated basis, cost of sales and operating expenses increased
by $29.6 million, or 12.9%, when compared to 2006. The Filogix Segment
accounted for $15.4 million of the increase and the Davis + Henderson Segment,
along with corporate expenses, accounted for the remaining $14.2 million.
    While most of the expense increase in the Davis + Henderson Segment
related directly to revenue growth, the segment also had increased spending on
information technology related to infrastructure upgrade initiatives,
enhancements to the overall internal computing environment and project
implementations.
    The expense increase in the Filogix Segment for 2007 was largely a result
of its inclusion for a full fiscal year in 2007 versus six-and-a-half months
in 2006. Within the Filogix Segment, margins were stronger in 2007 compared to
2006 and stronger than expectations. During 2007, Filogix benefited from
growth in origination revenues with relatively unchanged expenses for the
first three quarters of 2007, but during the fourth quarter of 2007, the
Filogix Segment incurred additional expenses for customer implementations,
contract renewals and in support of further product enhancements and
strengthening the general delivery capabilities of the Business. An increased
level of spending over 2007 levels is expected to continue into 2008, and
accordingly, margins for the Filogix Segment are expected to be reduced from
those recorded in 2007.
    While Davis + Henderson operates primarily in Canada, the Business also
services a U.S. subsidiary of one of our Canadian customers. All revenue and
substantially all expenses relating to our 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.

    Other Expenses and Net Income

    Amortization of capital and other assets on a consolidated level
increased by $1.4 million, or 10.4%, to $15.4 million when comparing 2007 to
2006. Increased capital asset amortization in the Filogix Segment of
$2.8 million was related to capital additions. This increase was partially
offset by a decline in expense in the Davis + Henderson Segment of
$1.4 million, related to certain capital and other assets having become fully
amortized.
    Interest expense in 2007 was $2.2 million higher than in the comparable
2006 period. This increase reflected the drawdown of additional debt for the
acquisition of the Filogix business late in the second quarter of 2006.
Included in this increase was $0.7 million of amortization of net losses in
fair market value of interest-rate swaps that were deferred prior to
January 1, 2007. Commencing January 1, 2007, the Business no longer designates
its interest-rate swaps as hedges for accounting purposes.
    An unrealized gain on interest-rate swaps of $0.7 million was recognized
in 2007, reflecting mark-to-market adjustments related to changes in interest
rates since December 31, 2006. Gains recorded earlier in the year have reduced
as interest rates have fallen in the second half of 2007. These unrealized
gains and losses were recognized in income, as these swaps are no longer
designated as hedges for accounting purposes.
    Amortization of intangibles increased by $5.1 million to $13.3 million
when comparing 2007 to 2006. This increase was primarily related to
incremental intangible assets arising on the purchase of the Filogix business.
These intangible assets consist of rights related to customer relationships,
brand names and proprietary software and are amortized on a straight-line
basis over periods ranging between 10 and 15 years.
    During the second quarter of 2006, the Fund increased its ownership in
AVS to 75% and, since that time, the Business has fully consolidated the
results of AVS. The minority interest recorded in the consolidated statement
of income represents the 25% interest in the earnings of AVS that do not
accrue to the Business. Effective January 2, 2008, the Fund acquired the
remaining 25% interest in AVS and now owns 100% of the AVS 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 distributed at a rate
similar to that paid by taxable corporations. As the new tax rules were
enacted late in June 2007, the Fund is 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 a
corresponding non-cash future income tax expense of $1.6 million in 2007.
    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
a U.S. income tax liability.
    Net income of $82.2 million for 2007 represents an increase of
$15.7 million, or 23.6%, when compared to 2006. On a per unit basis, net
income increased by $0.2632 per unit to $1.8713 per unit or, 16.4%, compared
to 2006. Net income per unit includes a charge for amortization of intangible
assets arising on acquisitions of $0.3026 per unit in 2007.

    
    EIGHT QUARTER CONSOLIDATED STATEMENT OF INCOME - SUMMARY

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

                                                                        2007
                                      Q4          Q3          Q2          Q1
    -------------------------------------------------------------------------
    Revenue                   $   90,934  $   94,676  $  101,992  $   91,149
    Cost of sales and
     operating expenses           64,178      63,425      66,873      63,913
    Amortization of capital
     and other assets              4,051       3,884       3,745       3,706
    -------------------------------------------------------------------------
                                  22,705      27,367      31,374      23,530
    Interest expense               1,876       1,982       2,121       2,230
    Net unrealized loss (gain)
     on interest-rate swaps          823         957      (2,196)       (324)
    Amortization of
     intangible assets             3,386       3,347       3,271       3,294
    Minority interest               (139)        205         204         109
    -------------------------------------------------------------------------
    Income before income taxes    16,759      20,876      27,974      18,221
    Future income tax expense        137           -       1,454           -
    -------------------------------------------------------------------------
    Net income                $   16,622  $   20,876  $   26,520  $   18,221
    -------------------------------------------------------------------------
    Net income per unit       $   0.3782  $   0.4750  $   0.6035  $   0.4146
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     units outstanding            43,947      43,947      43,947      43,947
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                                        2006
                                      Q4          Q3          Q2          Q1
    -------------------------------------------------------------------------
    Revenue                   $   87,932  $   87,966  $   75,900  $   71,918
    Cost of sales and
     operating expenses           62,034      62,754      52,989      51,016
    Amortization of capital
     and other assets              3,902       3,752       3,286       3,000
    -------------------------------------------------------------------------
                                  21,996      21,460      19,625      17,902
    Interest expense               2,186       2,248         887         695
    Net unrealized loss (gain
     on interest-rate swaps            -           -           -           -
    Amortization of
     intangible assets             3,254       3,339         996         647
    Minority interest                 89          88          25           -
    -------------------------------------------------------------------------
    Income before income taxes    16,467      15,785      17,717      16,560
    Future income tax expense          -           -           -           -
    -------------------------------------------------------------------------
    Net income                $   16,467  $   15,785  $   17,717  $   16,560
    -------------------------------------------------------------------------
    Net income per unit       $   0.3747  $   0.3592  $   0.4477  $   0.4367
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     units outstanding            43,947      43,947      39,576      37,921
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Fund has generally reported quarterly revenues that are stable and
growing on a year-over-year basis. The significant increase in revenue from
the second to third quarter of 2006 is primarily a result of the inclusion of
the Filogix Segment revenue beginning in mid-June 2006. In 2007, the Business
benefited from higher than expected order volume and mortgage origination fees
as described previously. The impact of the higher than expected order volume
was a positive factor in the first and second quarters of 2007 and, management
believes, contributed to some order decline toward the end of the year.
    Net income and net income per unit have generally been trending
consistently with changing revenue with some exceptions. Commencing in the
third quarter of 2006 and continuing thereafter, as a result of the
acquisition of Filogix, the Business incurred increased amortization of
intangible assets expense and increased interest expense. As a result, both
net income and net income per unit were impacted accordingly. Net income and
net income per unit, starting in the first quarter of 2007, were also affected
by amounts recognized for net unrealized gains and losses on interest-rate
swaps. The fair market value of a swap can fluctuate significantly
quarter-over-quarter as a result of changes in market interest rates.
    Management believes that consolidated Davis + Henderson results will be
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, the accelerated and incremental orders received within
the Davis + Henderson Segment that related to the changes in imaging
standards, as previously described, may cause increased variability in revenue
and cash flows as historical reorder patterns adjust.

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

                                                      Year ended December 31,
                                                2007        2006        2005
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total assets                          $  634,152  $  641,051  $  425,303
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total long-term liabilities           $  135,143  $  148,493  $   55,302
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Total assets of $634.2 million at December 31, 2007 decreased by
$6.9 million compared with total assets at December 31, 2006, primarily as a
result of the amortization of intangible assets. The increase in total assets
between December 31, 2005 and December 31, 2006 was primarily a result of the
acquisition of the Filogix business and the increased investment in AVS in
2006.
    Long-term liabilities decreased by $13.4 million as the Business made
$15.0 million of voluntary debt payments in 2007. The change between
December 31, 2005 and December 31, 2006 was principally a result of the
$100.0 million in debt drawn to finance the acquisition of the Filogix
business.

    CASH FLOW AND LIQUIDITY

    Non-GAAP Measures

    The following table is 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 cash flows table below, such as
"Adjusted cash flows from operating activities" and "Adjusted cash flows after
capital expenditures and contract payments" are not defined terms under GAAP.
Management uses these subtotals as measures of internal performance and as a
supplement to the consolidated 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)

                                                      Year ended December 31,
                                                2007        2006        2005
    -------------------------------------------------------------------------
    Cash flows from operating activities  $  117,401  $   89,753  $   76,844

    Add (deduct):
      Changes in non-cash working capital
       other items(1)                         (4,949)     (1,048)       (564)
    -------------------------------------------------------------------------
    Adjusted cash flows from
     operating activities                    112,452      88,705      76,280

    Less:
      Maintenance capital expenditures
       - D+H(2)                                6,804       4,551       6,729
      Maintenance capital expenditures
       - Filogix(2)                            4,949       1,280           -
      Growth capital expenditures(2)             251       1,329           -
      Contract payments(3)                     3,492       2,695       3,945
    -------------------------------------------------------------------------
    Adjusted cash flows after capital
     expenditures and contract payments(2)    96,956      78,850      65,606

    Distributions paid to unitholders         78,357      61,191      54,910
    -------------------------------------------------------------------------
    Adjusted cash flows after capital,
     contract payments and
     distributions paid                       18,599      17,659      10,696

    Cash flows provided by (used in)
     other financing activities              (15,000)    202,749     (10,000)
    Cash flows used in acquisition of
     businesses and customer service
     contracts                                  (746)   (223,852)     (3,214)
    Changes in non-cash working capital
     and other items(1)                        4,949       1,048         564
    Distributions paid to minority interest     (442)       (120)          -
    -------------------------------------------------------------------------
    Increase (decrease) in cash and cash
     equivalents for the year             $    7,360  $   (2,516) $   (1,954)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 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.

    Note 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.

    Note 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)

                                                      Year ended December 31,
                                                2007        2006        2005
    -------------------------------------------------------------------------
    Adjusted cash flows from
     operating activities                 $   2.5588  $   2.1441  $   2.0116
    Adjusted cash flows after capital
     expenditures and contract payments   $   2.2062  $   1.9059  $   1.7301
    Distributions paid to unitholders     $   1.7830  $   1.4940  $   1.4480
    Distributions declared during year    $   1.7980  $   1.5000  $   1.4500
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                            2007        2006
                                                        vs. 2006    vs. 2005
                                                        % Change    % Change
    -------------------------------------------------------------------------
    Adjusted cash flows from operating activities          19.3%        6.6%
    Adjusted cash flows after capital expenditures
     and contract payments                                 15.8%       10.2%
    Distributions paid to unitholders                      19.3%        3.2%
    Distributions declared during year                     19.9%        3.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash Flows, Net Income and Distributions Paid

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


    (in thousands of Canadian                        Year ended December 31,
     dollars, unaudited)                        2007        2006        2005
    -------------------------------------------------------------------------
    Cash flows from operating activities  $  117,401  $   89,753  $   76,844
    Net income                            $   82,239  $   66,529  $   60,751
    Distributions paid during year        $   78,357  $   61,191  $   54,910
    Excess of cash flows from operating
     activities over cash distributions
     paid                                 $   39,044  $   28,562  $   21,934
    Excess of net income over cash
     distributions paid                   $    3,882  $    5,338  $    5,841
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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

    Expenditures on Capital Assets and Contract Payments

    Total capital asset expenditures for the year ended December 31, 2007
were $12.0 million, an increase of $4.8 million compared to the same period in
2006. The Filogix Segment accounted for $2.6 million of the increase and the
Davis + Henderson Segment accounted for $2.2 million of the increase. Most of
the increase in 2007 over 2006 reflects continued investment in both the Davis
+ Henderson and the Filogix Segments' technology infrastructure as well as
including a full-year capital program for the Filogix Segment.
    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 $13.0 million to
$15.0 million. The Business' capital program provides for continued
expenditures to be funded by cash flows from operations.

    Distributions

    The Trustees of the Fund manage distribution levels of the Fund with
reference to its financial position, the historical projected performance of 
the business and funds required for potential acquisitions. The Fund intends
to make monthly cash distributions of its adjusted cash flows after capital
asset and contract expenditures, subject to working capital requirements, debt
repayments and other reserves.
    The Fund paid distributions of $78.4 million ($1.7830 per unit) during
2007 compared to $61.2 million ($1.4940 per unit) in 2006. In the second
quarter of 2006, the Fund issued 6,026,000 trust units to finance the
acquisition of Filogix, increasing cash flow expended on distributions. On a
per unit basis, distributions paid increased by 19.3%, when comparing 2007 to
2006, including a special distribution made in the fourth quarter of 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 19.9% for the year ended December 31, 2007.
    On an annualized basis, the monthly distribution rate for December 2007
was $1.72 per unit as compared to $1.54 per unit annualized in December 2006,
representing an increase of 11.4%.
    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.
    In 2007, Davis + Henderson recorded higher than expected revenues, cash
flow and net income due to a number of factors including incremental cheque
orders and a stronger than anticipated mortgage and real estate market. As a
result, and in recognition of the Fund's intention to pay distributions
sufficient to ensure no taxable income remains within the Fund, the Fund
declared a special distribution in the amount of $0.20 per unit that was paid
in November 2007.
    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 declared for 2007 is 100%
"other income", as was the case for all of 2006.
    The Fund may issue an unlimited number of trust units. Each trust unit is
transferable and represents an equal, undivided beneficial interest in any
distribution from the Fund and the net assets of the Fund. All units are of
the same class with equal rights and privileges and are not subject to future
calls or assessments. Each unit entitles the holder to one vote at all
meetings of unitholders.
    As at December 31, 2007 and February 26, 2008, 43,946,792 trust units
were outstanding. This reflects the issuance of an additional 6,026,000 trust
units on June 15, 2006 in exchange for subscription receipts issued on June 6,
2006, which was the first new issuance of units by the Fund since April 2,
2002.

    Cash Flows Provided by (Used in) Other Financing Activities

    During the year ended December 31, 2007, the Fund repaid $15.0 million of
long-term indebtedness. Repayments of the debt facility are not subject to
penalties. For the year ended December 31, 2006, the Fund received
$109.2 million of net proceeds from the issuance of new trust units and
$98.5 million from a new debt facility, net of financing fees, to fund the
acquisition of Filogix. The drawdown was partially offset by a $5.0 million
repayment late in 2006.

    Cash Flows Used in Acquisition of Business

    In June 2006, the Fund significantly advanced its strategy of providing
services to the consumer-lending marketplace by acquiring 100% of Filogix Inc.
for total cash consideration of $212.5 million plus $1.7 million of balance
sheet adjustments. As described above, the cash required to fund this
acquisition was raised by drawing $100.0 million from a newly expanded credit
facility and $109.2 million from net proceeds on the issuance of new trust
units, with the balance funded from cash generated by the operating activities
of the Business.
    In May 2006, the Fund entered into an amending agreement to accelerate
its purchase obligation and its first option related to partnership units of
AVS. The Fund, as at December 31, 2007, has a 75% interest in AVS. As noted
earlier, effective January 2, 2008, the Fund purchased the remaining 25%
interest in AVS, bringing its investment to 100%.

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

                                                      Year ended December 31,
                                                2007        2006        2005
    -------------------------------------------------------------------------
    Minority interest                     $      379  $      202  $        -
    Change in non-cash working
     capital items                             4,256         610         220
    Changes in other operating
     assets and liabilities                      314         236         344
    -------------------------------------------------------------------------
    Changes in non-cash working
     capital and other items              $    4,949  $    1,048  $      564
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The decrease in non-cash working capital items for the year ended
December 31, 2007, a source of cash flow, was primarily related to an increase
in trade payables and other current liabilities that is expected to reverse in
future quarters.

    Cash Balances and Long-term Indebtedness

    The Business has continued to generate operating cash flow in excess of
distributions. For 2007, this excess cash flow, together with cash on hand,
was applied primarily to make voluntary repayments of bank debt. Management
expects to continue to use excess cash flow to pay down debt during 2008.
    At December 31, 2007, cash and cash equivalents totalled $13.1 million,
compared to $5.8 million at December 31, 2006. The cash on hand at
December 31, 2007, at higher than normal levels, was used to reduce trade
payables after year end.
    Total debt facilities available at December 31, 2006 were $170.0 million
and included a $120.0 million non-revolving term loan and a $50.0 million
revolving term credit facility. As of December 31, 2007, the Business had
drawn $120.0 million under the non-revolving term loan and $10.0 million under
the revolving term credit facility. The Business is permitted to draw on the
revolving facility's available balance of $40.0 million to fund capital
expenditures or for other general purposes.
    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 L.P. to
the Fund during each rolling, four-quarter period. Davis + Henderson was in
compliance with all of its financial covenants and financial condition tests
as of the end of its latest quarterly period. A copy of the Credit Agreement
is available on SEDAR at www.sedar.com.
    As of December 31, 2007, the Fund had interest-rate swap hedge contracts
in place with certain of its lenders, such that the borrowing rates on 92.3%
of outstanding indebtedness are effectively fixed at the interest rates and
for the time periods ending as follows:

    
    (in thousands of Canadian
     dollars, unaudited)            Fair value of Interest-rate swaps
    -------------------------------------------------------------------------
                                Notional                            Interest
    Maturity Date                 Amount       Asset   Liability      Rate(1)
    -------------------------------------------------------------------------
    June 30, 2008             $   12,000  $       19  $        -      5.035%
    January 4, 2009               10,000          86           -      4.505%
    July 15, 2009                 20,000           -         207      5.688%
    July 15, 2010                 33,000           -         455      5.690%
    June 15, 2011                 20,000           -         284      5.560%
    June 15, 2011                 25,000           -         227      5.560%
    -------------------------------------------------------------------------
                              $  120,000  $      105  $    1,173
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The listed interest rates are inclusive of banker's 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.
    

    Pursuant to new accounting pronouncements implemented with effect from
January 1, 2007, the fair value of the interest-rate swaps is now recorded on
the Balance Sheet.
    As at December 31, 2007, the Fund would have to pay the fair value of
$1.2 million ($2.0 million at December 31, 2006) if it were to close out four
of the contracts and would receive $0.1 million ($0.2 million at December 31,
2006) on the closing of the remaining two contracts, as set out on the balance
sheet.
    The Fund expects to continue to enter into interest-rate swaps for the
purpose of hedging interest rates.
    The Fund's remaining indebtedness is subject to floating interest rates
that may be funded either by way of prime-rate loans or through the issuance
of 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 5.48% as at December 31, 2007.
    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.

    
    Contractual Obligations - Payments Due by Period

    The table below presents the contractual obligations of the Business as at
December 31, 2007 and the timing of the expected payments.

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

    Long-term
     indebtedness      $ 130,000  $       -  $       -  $ 130,000  $       -

    Disbursement
     obligations on
     customer contracts    3,729      2,962        767          -          -

    Operating leases      13,058      4,212      6,222      2,319        305

    Employee future
     benefits                561        168        393          -          -

    Obligations
     relating to a
     deferred
     compensation
     program               1,997          -      1,997          -          -

    -------------------------------------------------------------------------
                       $ 149,345  $   7,342  $   9,379  $ 132,319  $     305
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cumulative Summary of Cash Flows

    The table below provides an analysis of cash flows of the Fund since
inception through December 31, 2007, excluding the transactions pertaining to
the purchase of the original Davis + Henderson business by the Fund.

    (in thousands of Canadian dollars, unaudited)                 Cumulative
    -------------------------------------------------------------------------
    Cash flows from operating activities                          $  502,439

    Less:
      Expenditures on capital assets and contract payments            71,824
    -------------------------------------------------------------------------
    Adjusted cash flows after capital expenditures and
     contract payments                                               430,615

    Less:
    Distributions paid to unitholders                                346,793
    -------------------------------------------------------------------------
    Adjusted cash flows after capital, contract payments
     and distributions paid                                           83,822

    Cash flows provided by (used in) other financing activities
      Net proceeds from issuance of trust units                      109,200
      Proceeds from long-term indebtedness net of issuance costs      98,549
      Distributions paid to minority interest                           (562)
      Repayments of long-term indebtedness                           (50,000)
    -------------------------------------------------------------------------
                                                                     157,187
    Cash flows used in acquisition of businesses                    (227,861)
    -------------------------------------------------------------------------
    Increase in cash and cash equivalents for the period              13,148
    Cash and cash equivalents, beginning of period                         -
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period                      $   13,148
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cumulative distributions paid as a % of adjusted
     cash flows after capital expenditures and contract payments       80.5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Adjusted cash flows after capital, contract payments and distributions
paid of $83.8 million was retained by the Business and used to contribute to
the funding of acquisitions and to pay down debt.
    In general, mutual fund trusts, including the Fund, must distribute all
their taxable income to their unitholders in order not to pay income taxes in
the trust. Taxable income may be less than distributable cash at the Fund
level if the Business has excess tax deductions it can utilize to reduce
taxable income.
    The Fund intends to make monthly cash distributions of its Distributable
Cash (a term defined in the Fund's Declaration of Trust) subject to working
capital requirements, debt repayments and other reserves. On a cumulative
basis since inception, Davis + Henderson has distributed approximately 80.5%
of Distributable Cash generated. It has been possible to pay less than 100% of
its Distributable Cash generated to unitholders and not pay taxes within the
trust as the Business had excess tax deductions available to reduce taxable
income. These excess tax deductions diminish each year, and if the Business
continues to generate growing cash flow, the Fund may pay out a higher
proportion of the Distributable Cash it generates to unitholders in order not
to pay taxes in the trust.

    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, revenues grew in excess of the targeted
range, in part, as a result of the consolidation of the Filogix business.
Also, as previously described, two additional factors have contributed in 2007
to organic growth exceeding the targeted range: the incremental revenue in the
first half of 2007 from accelerated cheque reorders related to the changes in
imaging standards; and, the record real estate and mortgage activity in 2007
which has contributed to strong growth in fee revenue in the Filogix Segment.
The increased reorder activity levels experienced earlier in 2007 may, in
future quarters, particularly in the first half of 2008, contribute to higher
than historically observed average volume declines as consumers delay orders
due to recent cheque supply replenishments. Additionally, the increased
activity within the real estate and mortgage markets may not be sustained due
to the historical cyclical nature of those markets. The combined impact of
these factors may result in revenue growth in 2008 being below the targeted
long-term range of 3% to 5%.
    In addition, 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 the chequing account. Relating to lending
markets, the Business looks to grow its volumes related to mortgage
origination and underwriting services.
    The Business' current U.S. cheque supply contract will expire at the end
of 2008 and it is not expected to be renewed. Contributions from this business
are relatively modest and its expiration will not have a significant impact on
overall operations and, more specifically, cash flows.
    The Business' capital program provides for continued expenditures to be
funded by cash flows from operations. Consistent with 2007, the 2008 capital
program is expected to be in the range of $13.0 million to $15.0 million,
    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 Trustee have monitored the changes in the
income trust environment and capital markets and continue to review potential
impacts on the Fund's current strategies and the alternatives available to the
Fund, consistent with protecting and enhancing unitholder value.

    Caution Concerning Forward-looking Statements

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

    ADDITIONAL INFORMATION

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


    
    CONSOLIDATED BALANCE SHEETS
    December 31, 2007 and 2006
    (in thousands of Canadian dollars)

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

                                                            2007        2006
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash equivalents                       $   13,148  $    5,788
      Accounts receivable                                 17,860      18,299
      Inventory                                            5,316       5,238
      Prepaid expenses                                     2,973       3,920
    -------------------------------------------------------------------------
                                                          39,297      33,245

    Capital assets (note 2)                               32,199      32,567
    Other assets (note 3)                                  5,964       6,147
    Interest-rate swaps (note 8)                             105           -
    Intangible assets (note 4)                           118,085     130,546
    Goodwill (note 5)                                    438,502     438,546
    -------------------------------------------------------------------------
                                                      $  634,152  $  641,051
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued liabilities        $   39,870  $   36,600
      Distributions payable to unitholders                 6,284       5,625
      Current portion of disbursement obligations on
       customer contracts (note 6)                         2,962       2,195
    -------------------------------------------------------------------------
                                                          49,116      44,420


    Disbursement obligations on customer
     contracts (note 6)                                      767       2,195
    Long-term indebtedness (note 7)                      129,054     143,778
    Interest-rate swaps (note 8)                           1,173           -
    Other long-term liabilities (note 9)                   2,558       2,520
    Future income taxes (note 10)                          1,591           -
    Minority interest                                        200         263
    -------------------------------------------------------------------------
                                                         184,459     193,176

    Unitholders' equity:
      Trust units (note 11)                              474,585     474,585
      Deficit                                            (23,371)    (26,710)
      Accumulated other comprehensive income (loss)       (1,521)          -
    -------------------------------------------------------------------------
                                                         449,693     447,875

    Commitments (note 12)
    -------------------------------------------------------------------------
                                                      $  634,152  $  641,051
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



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

    -------------------------------------------------------------------------
                           Quarter ended December 31, Year ended December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Revenue                   $   90,934  $   87,932  $  378,751  $  323,716
    Cost of sales and
     operating expenses           64,178      62,034     258,389     228,793
    Amortization of capital
     and other assets              4,051       3,902      15,386      13,940
    -------------------------------------------------------------------------
                                  22,705      21,996     104,976      80,983

    Interest expense               1,876       2,186       8,209       6,016
    Net unrealized loss (gain)
     on interest-rate swaps          823           -        (740)          -
    Amortization of intangible
     assets                        3,386       3,254      13,298       8,236
    Minority interest               (139)         89         379         202
    -------------------------------------------------------------------------

    Income before income taxes    16,759      16,467      83,830      66,529
    Future income tax expense        137           -       1,591           -
    -------------------------------------------------------------------------
    Net income                $   16,622  $   16,467  $   82,239  $   66,529
    -------------------------------------------------------------------------
    Net income per unit,
     basic and diluted        $   0.3782  $   0.3747  $   1.8713  $   1.6081
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



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

    -------------------------------------------------------------------------
                           Quarter ended December 31, Year ended December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Net income                $   16,622  $   16,467  $   82,239  $   66,529

    Other comprehensive income:
      Amortization of
       transitional adjustment
       to net income                 163           -         678           -
    -------------------------------------------------------------------------
    Total comprehensive
     income                   $   16,785  $   16,467  $   82,917  $   66,529
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



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

    -------------------------------------------------------------------------
                           Quarter ended December 31, Year ended December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    DEFICIT
    Deficit, beginning of
     period                   $  (12,834) $  (26,433) $  (26,710) $  (31,049)
    Transitional adjustment
     on adoption of financial
     instruments                       -           -         116           -
    Net income                    16,622      16,467      82,239      66,529
    Distributions                (27,159)    (16,744)    (79,016)    (62,190)
    -------------------------------------------------------------------------
    Deficit, end of period       (23,371)    (26,710)    (23,371)    (26,710)
    -------------------------------------------------------------------------

    ACCUMULATED OTHER
     COMPREHENSIVE INCOME (LOSS)
    Accumulated other
     comprehensive income
     (loss), beginning of
     period                       (1,684)          -           -           -
    Transitional adjustment
     on adoption of financial
     instruments standards             -           -      (2,199)          -
    Other comprehensive income:
      Amortization of
       transitional adjustment
       to net income                 163           -         678           -
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income
     (loss), end of period        (1,521)          -      (1,521)          -
    -------------------------------------------------------------------------
    Deficit and accumulated
     other comprehensive
     income (loss), end of
     period                   $  (24,892) $  (26,710) $  (24,892) $  (26,710)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



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

    -------------------------------------------------------------------------
                           Quarter ended December 31, Year ended December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Cash and cash
     equivalents provided
     by (used in):

    OPERATING ACTIVITIES
    Net income                $   16,622  $   16,467  $   82,239  $   66,529
    Add:
      Amortization of capital
       assets                      3,102       3,442      12,372      10,639
      Amortization of other
       assets                        949         459       3,014       3,301
      Amortization of
       intangible assets           3,386       3,254      13,298       8,236
      Amortization of
       transitional adjustment
       in interest expense           163           -         678           -
      Net unrealized loss
       (gain) on interest-rate
       swaps                         823           -        (740)          -
      Future income tax expense      137           -       1,591           -
      Minority interest             (139)         89         379         202
    -------------------------------------------------------------------------
                                  25,043      23,711     112,831      88,907

    Decrease in non-cash
     working capital items         6,963      (1,671)      4,256         610
    Changes in other
     operating assets and
     liabilities                     135          70         314         236
    -------------------------------------------------------------------------
                                  32,141      22,110     117,401      89,753
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Gross proceeds from
     issuance of trust units           -           -           -     116,000
    Issuance costs                     -           -           -      (6,800)
    Proceeds from (repayment
     of) long-term
     indebtedness                      -      (5,000)    (15,000)     95,000
    Financing fees                     -           -           -      (1,451)
    Distributions paid to
     minority interest              (187)       (120)       (442)       (120)
    Distributions paid to
     unitholders                 (26,676)    (16,612)    (78,357)    (61,191)
    -------------------------------------------------------------------------
                                 (26,863)    (21,732)    (93,799)    141,438
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Expenditures on capital
     assets                       (4,204)     (1,945)    (12,004)     (7,160)
    Payments pursuant to
     long-term supply
     contracts                      (150)        (20)     (3,492)     (2,695)
    Acquisition of businesses
     (note 1)                          -         247          91    (222,087)
    Acquisition of customer
     service contracts                 -      (1,765)       (837)     (1,765)
    -------------------------------------------------------------------------
                                  (4,354)     (3,483)    (16,242)   (233,707)
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and cash equivalents
     for the period                  924      (3,105)      7,360      (2,516)
    Cash and cash equivalents,
     beginning of period          12,224       8,893       5,788       8,304
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period            $   13,148  $    5,788  $   13,148  $    5,788
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
      Cash interest paid      $    1,886  $    2,058  $    7,810  $    6,526
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



    Davis + Henderson Income Fund
    Notes to Consolidated Financial Statements
    Years ended December 31, 2007 and 2006
    (in thousands of Canadian dollars, except unit and per unit amounts
    unaudited)

    1.  ACQUISITIONS

    a. Filogix Business

    On June 15, 2006, the Fund completed an agreement to indirectly acquire
    all the outstanding partnership units of Filogix L.P. through the
    acquisition of Filogix Holdings Inc. Filogix L.P. provides, among other
    offerings, processing services related to the origination and
    underwriting of mortgages in Canada. The assets acquired and
    consideration given were as follows:

                                                                        2006
    -------------------------------------------------------------------------
    Net assets acquired, at fair value:
      Assets                                                      $   22,704
      Intangible assets                                              128,087
      Liabilities                                                     (8,581)
    -------------------------------------------------------------------------
                                                                     142,210
    Goodwill                                                          71,940

    -------------------------------------------------------------------------
    Total                                                         $  214,150
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration for 100% ownership:
      Cash                                                        $  214,150
    -------------------------------------------------------------------------
    Total                                                         $  214,150
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Intangible assets consist of proprietary software, brand names and
    customer relationships. The purchase price and related transaction costs
    were financed with net proceeds of $109.2 million from the issuance of
    Trust units and $98.5 million from the drawdown of debt, net of financing
    fees, with the balance from cash on hand.

    b. AVS Business

    On April 28, 2005, the Fund entered into an agreement to acquire a 50%
    interest in AVS L.P. through a step-by-step acquisition over 20 months
    ending January 2007. On May 25, 2006, the Fund entered into an amending
    agreement to accelerate its remaining obligation as well as exercising
    its option to acquire a further 25% interest in the AVS business. As at
    December 31, 2006 and December 31, 2007, the Fund owned a 75% interest in
    AVS L.P. The purchase price paid for the additional ownership was based
    on a formula that referenced the earnings of AVS up to and including
    earnings for the year ended December 31, 2006. During the year ended
    December 31, 2007, the Fund recognized $0.1 million of adjustments on the
    purchase price. The Fund has adopted the purchase method of accounting in
    respect of AVS.

    Effective January 2, 2008, the Fund acquired the remaining 25% of
    interest in the AVS business for consideration of $4.2 million, of which
    $1.4 million was allocated to intangible assets and $ 2.8 million was
    allocated to goodwill. The acquisition was made with available cash on
    hand.

    2.  CAPITAL ASSETS

                                                                        2007
    -------------------------------------------------------------------------
                                                     Accumulated
                                                         amorti-
                                                Cost      zation         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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                                        2006
    -------------------------------------------------------------------------
                                                     Accumulated
                                                         amorti-
                                                Cost      zation         Net
    -------------------------------------------------------------------------
    Machinery and equipment               $   15,014  $    6,689  $    8,325
    Computer equipment and software           36,211      14,827      21,384
    Furniture, fixtures and leasehold
     improvements                              7,774       4,916       2,858
    -------------------------------------------------------------------------
                                          $   58,999  $   26,432  $   32,567
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Amortization during the quarter ended December 31, 2007 was $3,102
    (Q4 2006 - $3,442) and during the year ended December 31, 2007 was
    $12,372 (2006 - $10,639). Fully amortized capital assets removed from the
    accounts during the year ended December 31, 2007 were $444
    (2006 - $5,236).

    3.  OTHER ASSETS
                                                            2007        2006
    -------------------------------------------------------------------------
    Cost:
      Long-term supply contracts                      $   12,581  $    9,750
      Other                                                  370         370
    -------------------------------------------------------------------------
                                                          12,951      10,120

    Accumulated amortization                              (6,987)     (3,973)
    -------------------------------------------------------------------------
                                                      $    5,964  $    6,147
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Amortization during the quarter ended December 31, 2007 on long-term
    supply contracts was $130 (Q4 2006 - $459) and during the year ended
    December 31, 2007 was $3,014 (2006 - $3,301). Fully amortized other
    assets removed from the accounts during the year ended December 31, 2007
    was $nil (2006 - $4,303).

    4.  INTANGIBLE ASSETS

                                                            2007        2006
    -------------------------------------------------------------------------
    Cost:
      Cheque supply outsourcing contracts             $   16,329  $   16,329
      Customer service contracts                           4,506       3,669
      Proprietary software                                41,993      41,993
      Brand names                                          8,400       8,400
      Customer relationships                              77,887      77,887
    -------------------------------------------------------------------------
                                                         149,115     148,278
    Accumulated amortization                             (31,030)    (17,732)
    -------------------------------------------------------------------------
                                                      $  118,085  $  130,546
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Amortization during the quarter ended December 31, 2007 was $3,386
    (Q4 2006 - $3,254) and during the year ended December 31, 2007 was
    $13,298 (2006 - $8,236).

    5.  GOODWILL
                                                            2007        2006
    -------------------------------------------------------------------------

    Balance, beginning of year                        $  438,546  $  361,288

    Goodwill acquired during the year:
      AVS acquistion                                         (44)      5,318
      Filogix acquistion                                       -      71,940
    -------------------------------------------------------------------------
    Balance, end of year                              $  438,502  $  438,546
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6.  DISBURSEMENT OBLIGATIONS ON CUSTOMER CONTRACTS

                                                            2007        2006
    -------------------------------------------------------------------------

    Current portion                                   $    2,962  $    2,195
    Long-term portion                                        767       2,195
    -------------------------------------------------------------------------
    Total disbursement obligations on customer
     contracts                                        $    3,729  $    4,390
    -------------------------------------------------------------------------

    The Fund has fixed customer contract disbursement obligations payable as
    of December 31, 2007 as follows:

    2008                                                          $    2,962
    2009                                                                 767
    -------------------------------------------------------------------------
                                                                  $    3,729
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.  LONG-TERM INDEBTEDNESS

                                                            2007        2006
    -------------------------------------------------------------------------

    Non-revolving term loan                           $  120,000  $  120,000
    Revolving credit facility                             10,000      25,000
    -------------------------------------------------------------------------
                                                         130,000     145,000
    Deferred finance costs                                  (946)     (1,222)
    -------------------------------------------------------------------------
                                                      $  129,054  $  143,778
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Fund has $170.0 million of available term credit facilities due
    June 15, 2011 (December 31, 2006 - $170.0 million), consisting of a
    $120.0 million non-revolving term loan and a $50.0 million revolving
    credit facility. The credit facilities do not require the Fund to make
    any principal payments prior to their maturity. The facilities bear
    interest at rates that depend on certain financial ratios of the Fund and
    vary in accordance with borrowing rates in Canada and the United States.
    The credit facilities, including any hedge contracts with the lenders,
    are secured in first priority by a pledge of substantially all of the
    Fund's assets and by a pledge of the Fund's indirect ownership interest
    in Davis + Henderson L.P. The carrying value of long-term indebtedness
    approximates its fair value as it bears interest at floating rates that
    reset in most cases within three months and in all cases within one year.

    The Credit Agreement for the Fund contains a number of covenants and
    restrictions including the requirement to meet certain financial ratios
    and financial condition tests. As at December 31, 2007, the Fund was in
    compliance with all of its financial covenants and financial condition
    tests.

    Deferred finance costs relate to the renewal and amendment of long-term
    indebtedness on June 15, 2006. Amortization of deferred finance costs
    during the quarter ended December 31, 2007 was $69 (Q4 2006 - $131) and
    during the year ended December 31, 2007 was $276 (2006 - $228).
    Amortization of deferred finance costs is recognized as interest expense
    using the effective interest method.

    8.  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, 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 as at December 31,
    2007. As the sensitivity is hypothetical, it should be used with caution.

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

    Increase (decrease) in interest expense           $      160  $     (160)
    Change to net unrealized (gain) loss on
     interest-rate swaps                                  (2,700)      2,700
    -------------------------------------------------------------------------
    Increase (decrease) in net income                 $    2,540  $   (2,540)
    -------------------------------------------------------------------------
    Increase (decrease) in total
     comprehensive income                             $    2,540  $   (2,540)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Fund manages its interest rate risks through the use of interest-rate
    swaps for most of its outstanding long-term indebtedness. As of
    December 31, 2007, the Fund has entered into interest-rate swap contracts
    with its lenders, such that the borrowing rates on $120.0 million, or
    92.3%, 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)
    -------------------------------------------------------------------------

    June 30, 2008             $   12,000  $       19  $        -      5.035%
    January 4, 2009               10,000          86           -      4.505%
    July 15, 2009                 20,000           -         207      5.688%
    July 15, 2010                 33,000           -         455      5.690%
    June 15, 2011                 20,000           -         284      5.560%
    June 15, 2011                 25,000           -         227      5.560%
    -------------------------------------------------------------------------
                              $  120,000  $      105  $    1,173
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The listed interest rates are inclusive of banker's 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.

    9. OTHER LONG-TERM LIABILITIES

                                                            2007        2006
    -------------------------------------------------------------------------
    Deferred compensation program                     $    1,997  $    1,659
    Employee future benefits                                 561         861
    -------------------------------------------------------------------------
                                                      $    2,558  $    2,520
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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.

    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 quarter
    ended December 31, 2007 was $0.5 million (Q4 2006 - $0.3 million) and for
    the year ended December 31, 2007 was $1.8 million (2006 - $1.3 million).

    The Fund's non-pension post-retirement benefit plan provides certain
    health care, life insurance and dental benefits to eligible employees.
    Terms of the plan were amended effective January 1, 2005, resulting in a
    reduction in obligations of $1.8 million and actuarial losses of
    $1.6 million. Reductions in obligations from the plan amendment are being
    amortized over three-and-a-half years and the actuarial losses are being
    amortized over six years.

    10. 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.

    The future income tax expense of the Fund includes the impact of the
    enactment of the SIFT Rules and the impact of the Canadian tax
    rate reductions that were substantively enacted during the year.

    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 as of
    December 31, 2007 that are expected to reverse after 2010 are as follows:

                                                                        2007
    -------------------------------------------------------------------------
    Future income tax assets:
      Intangible assets less than tax values                      $   10,854
      Loss carryforwards                                               1,636
      Valuation allowance                                            (12,490)
    -------------------------------------------------------------------------
      Total future tax assets                                              -
    -------------------------------------------------------------------------

    Future income tax liabilities:
      Capital assets greater than tax values                           1,591
    -------------------------------------------------------------------------
      Total future tax liabilities                                     1,591
    -------------------------------------------------------------------------
    Net future income tax liabilities                             $    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 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
    asset by a valuation allowance for the full amount.

    The Fund does not have significant temporary differences that are
    expected to reverse prior to 2011.

    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.

    11. 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:

                                                           2007         2006
    -------------------------------------------------------------------------

    Balance, beginning of year                      $   474,585  $   365,385
    Units issued                                              -      109,200
    -------------------------------------------------------------------------
    Balance, end of year                            $   474,585  $   474,585
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Units outstanding, end of year                   43,946,792   43,946,792
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The weighted average number of units outstanding during 2007 was
    43,946,792 (2006 - 41,371,297).

    12. COMMITMENTS

    As of December 31, 2007, the Fund has annual lease obligations with
    respect to real estate, vehicles and equipment as follows:

    2008                                                          $    4,212
    2009                                                               3,182
    2010                                                               3,040
    2011                                                               1,523
    2012                                                                 796
    Thereafter                                                           305
    -------------------------------------------------------------------------
                                                                  $   13,058
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    13. 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 year ended December 31, 2007, this ratio was calculated at
    1.09 (2006 - 1.47). 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.

    14. SIGNIFICANT CUSTOMERS

    For the quarter ended December 31, 2007, the Fund earned 79%
    (Q4 2006 - 77%) of its consolidated revenue from its seven largest
    customers and for the year ended December 31, 2007, the Fund earned 78%
    (2006 - 79%) of its consolidated revenue from its seven largest
    customers. For the quarter ended December 31, 2007, four of these
    customers individually accounted for greater than 10%, but not more than
    18% of the Fund's total revenue (for the quarter ended December 31, 2006,
    three of these customers individually accounted for greater than 10%, but
    not more than 16% of the Fund's total revenue). For the year ended
    December 31, 2007, four of these customers individually accounted
    for greater than 10%, but not more than 17% of the Fund's total revenue
    (for the year ended December 31, 2006, three of these customers
    individually accounted for greater than 10%, but not more than 17% of the
    Fund's total revenue).

    15. 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, eSwitch(R) and
    the personal property search and registration programs, among other
    offerings. The Filogix Segment includes services related to the
    origination and underwriting of mortgages in Canada, 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.

    Summarized financial information for the quarters and years ended
    December 31, 2007 and 2006 is as follows:

                                                              Quarters ended
    -------------------------------------------------------------------------
                                             Davis +
                                   Henderson Segment         Filogix Segment
                              ----------------------- -----------------------
                                  Dec 31,     Dec 31,     Dec 31,     Dec 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Revenue                   $   75,359  $   74,730  $   15,575  $   13,202
    Cost of sales and
     operating expenses           53,082      52,720      10,437       8,794
    Amortization of capital
     and other assets              2,628       2,421       1,423       1,481
    -------------------------------------------------------------------------
                                  19,649      19,589       3,715       2,927

    Interest expense                   -           -           -           -
    Net unrealized loss on
     interest-rate swaps               -           -           -           -
    Amortization of intangible
     assets                          903         771       2,483       2,483
    Minority interest               (139)         89           -           -
    -------------------------------------------------------------------------

    Income before income taxes    18,885      18,729       1,232         444
    Future income tax expense          -           -           -           -
    -------------------------------------------------------------------------
    Net income                $   18,885  $   18,729  $    1,232  $      444
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capital and other
     expenditures             $    2,660  $    1,077  $    1,694  $      888
    Intangible assets         $    5,282  $    7,810  $  112,803  $  122,736
    Goodwill                  $  366,562  $  366,606  $   71,940  $   71,940
    Total assets              $  452,012  $  418,372  $  168,992  $  216,891
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                              Quarters ended
    -------------------------------------------------------------------------
                                           Corporate            Consolidated
                              ----------------------- -----------------------
                                  Dec 31,     Dec 31,     Dec 31,     Dec 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Revenue                   $        -  $        -  $   90,934  $   87,932
    Cost of sales and
     operating expenses              659         520      64,178      62,034
    Amortization of capital
     and other assets                  -           -       4,051       3,902
    -------------------------------------------------------------------------
                                    (659)       (520)     22,705      21,996

    Interest expense               1,876       2,186       1,876       2,186
    Net unrealized loss on
     interest-rate swaps             823           -         823           -
    Amortization of intangible
     assets                            -           -       3,386       3,254
    Minority interest                  -           -        (139)         89
    -------------------------------------------------------------------------

    Income before income taxes    (3,358)     (2,706)     16,759      16,467
    Future income tax expense        137           -         137           -
    -------------------------------------------------------------------------
    Net income                $   (3,495) $   (2,706) $   16,622  $   16,467
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capital and other
     expenditures             $        -  $        -  $    4,354  $    1,965
    Intangible assets         $        -  $        -  $  118,085  $  130,546
    Goodwill                  $        -  $        -  $  438,502  $  438,546
    Total assets              $   13,148  $    5,788  $  634,152  $  641,051
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                                      Year ended December 31,
    -------------------------------------------------------------------------
                                             Davis +
                                   Henderson Segment         Filogix Segment
                              ----------------------- -----------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Revenue                   $  315,204  $  292,981  $   63,547  $   30,735
    Cost of sales and
     operating expenses          219,089     205,442      36,726      21,365
    Amortization of capital
     and other assets              9,789      11,168       5,597       2,772
    -------------------------------------------------------------------------
                                  86,326      76,371      21,224       6,598

    Interest expense                   -           -           -           -
    Net unrealized loss (gain)
      on interest-rate swaps           -           -           -           -
    Amortization of intangible
     assets                        3,366       2,884       9,932       5,352
    Minority interest                379         202           -           -
    -------------------------------------------------------------------------

    Income before income taxes    82,581      73,285      11,292       1,246
    Future income tax expense          -           -           -           -
    -------------------------------------------------------------------------
    Net income                $   82,581  $   73,285  $   11,292  $    1,246
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capital and other asset
     expenditures             $    9,766  $    7,246  $    5,730  $    2,609
    Intangible assets         $    5,282  $    7,810  $  112,803  $  122,736
    Goodwill                  $  366,562  $  366,606  $   71,940  $   71,940
    Total assets              $  452,012  $  418,372  $  168,992  $  216,891
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                      Year ended December 31,
    -------------------------------------------------------------------------
                                           Corporate            Consolidated
                              ----------------------- -----------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Revenue                   $        -  $        -  $  378,751  $  323,716
    Cost of sales and
     operating expenses            2,574       1,986     258,389     228,793
    Amortization of capital
     and other assets                  -           -      15,386      13,940
    -------------------------------------------------------------------------
                                  (2,574)     (1,986)    104,976      80,983

    Interest expense               8,209       6,016       8,209       6,016
    Net unrealized loss (gain)
      on interest-rate swaps        (740)          -        (740)          -
    Amortization of intangible
     assets                            -           -      13,298       8,236
    Minority interest                  -           -         379         202
    -------------------------------------------------------------------------

    Income before income taxes   (10,043)     (8,002)     83,830      66,529
    Future income tax expense      1,591           -       1,591           -
    -------------------------------------------------------------------------
    Net income                $  (11,634) $   (8,002) $   82,239 $    66,529
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capital and other asset
     expenditures             $        -  $        -  $   15,496 $     9,855
    Intangible assets         $        -  $        -  $  118,085 $   130,546
    Goodwill                  $        -  $        -  $  438,502 $   438,546
    Total assets              $   13,148  $    5,788  $  634,152 $   641,051
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the quarter ended December 31, 2007, the Davis + Henderson Segment
    had five customers that individually accounted for greater than 10% but
    not more than 21% of the Davis+Henderson Segment revenue and the Filogix
    Segment had three customers that individually accounted for greater than
    10% but not more than 18% of the Filogix Segment revenue (for the quarter
    ended December 31, 2006, the Davis + Henderson Segment had five customers
    that individually accounted for greater than 10% but not more than 19% of
    the Davis + Henderson Segment revenue and the Filogix Segment had two
    customers that individually accounted for greater than 10% but not more
    than 15% of the Filogix Segment revenue).

    For the year ended December 31, 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 17% of the Filogix Segment revenue (for the year
    ended December 31, 2006, the Davis + Henderson Segment had four customers
    that individually accounted for greater than 10% but not more than 19% of
    the Davis + Henderson Segment revenue and the Filogix Segment had two
    customers that individually accounted for greater than 10% but not more
    than 13% of the Filogix Segment revenue).

    SUPPLEMENTARY FINANCIAL INFORMATION

    Consolidated Operating Results by Period


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

    Revenue            $ 378,751  $  90,934  $  94,676  $ 101,992  $  91,149
    Cost of sales and
     operating
     expenses            258,389     64,178     63,425     66,873     63,913
    Amortization of
     capital and other
     assets               15,386      4,051      3,884      3,745      3,706
    -------------------------------------------------------------------------
                         104,976     22,705     27,367     31,374     23,530
    Interest expense       8,209      1,876      1,982      2,121      2,230
    Net unrealized
     loss (gain) on
     interest-rate
     swaps                  (740)       823        957     (2,196)      (324)
    Amortization of
     intangible assets    13,298      3,386      3,347      3,271      3,294
    Future income tax
     expense               1,591        137          -      1,454          -
    Minority interest        379       (139)       205        204        109
    -------------------------------------------------------------------------
    Net income         $  82,239  $  16,622  $  20,876  $  26,520  $  18,221
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Less:
      Capital asset
       expenditures and
       contract
       payments           15,496      4,354      4,598      2,955      3,589
    -------------------------------------------------------------------------
    Adjusted cash flows
     after capital
     asset expenditures
     and contract
     payments             96,956     20,828     24,629     30,015     21,484

    Distributions paid
     to unitholders       78,357     26,676     17,403     17,403     16,875
    -------------------------------------------------------------------------
    Adjusted cash flows
     after capital,
     contract payments
     and distributions
     paid                 18,599     (5,848)     7,226     12,612      4,609

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

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

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


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

    Revenue            $ 323,716  $  87,932  $  87,966  $  75,900  $  71,918
    Cost of sales and
     operating
     expenses            228,793     62,034     62,754     52,989     51,016
    Amortization of
     capital and
     other assets         13,940      3,902      3,752      3,286      3,000
    -------------------------------------------------------------------------
                          80,983     21,996     21,460     19,625     17,902
    Interest expense       6,016      2,186      2,248        887        695
    Net unrealized loss
     (gain) on
     interest-rate swaps       -          -          -          -          -
    Amortization of
     intangible assets     8,236      3,254      3,339        996        647
    Future income
     tax expense               -          -          -          -          -
    Minority interest        202         89         88         25          -
    -------------------------------------------------------------------------
    Net income         $  66,529  $  16,467  $  15,785  $  17,717  $  16,560
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Less:
      Capital asset
       expenditures and
       contract payments   9,855      1,966      2,681      2,413      2,795
    -------------------------------------------------------------------------
    Adjusted cash flows
     after capital asset
     expenditures and
     contract payments    78,850     21,657     20,195     19,586     17,412

    Distributions paid
     to unitholders       61,311     16,732     16,479     14,221     13,879
    -------------------------------------------------------------------------
    Adjusted cash flows
     after capital,
     contract payments
     and distributions
     paid                 17,539      4,925      3,716      5,365      3,533

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

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

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


    -------------------------------------------------------------------------
                                      Three      Three      Three      Three
                            Year     months     months     months     months
                           ended      ended      ended      ended      ended
                        December   December  September    June 30,  March 31,
    (in thousands of    31, 2005   31, 2005   30, 2005       2005       2005
     Canadian dollars,
     except per unit
     amounts,
     unaudited)
    -------------------------------------------------------------------------

    Revenue            $ 276,537  $  69,232  $  69,845  $  71,226  $  66,234
    Cost of sales and
     operating
     expenses            196,956     49,586     49,791     50,585     46,994
    Amortization of
     capital and
     other assets         13,107      3,258      3,339      3,298      3,212
    -------------------------------------------------------------------------
                          66,474     16,388     16,715     17,343     16,028
    Interest expense       3,301        760        813        839        889
    Net unrealized loss
     (gain) on
     interest-rate swap        -          -          -          -          -
    Amortization of
     intangible assets     2,422        646        610        582        584
    Future income
     tax expense               -          -          -          -          -
    Minority interest          -          -          -          -          -
    -------------------------------------------------------------------------
    Net income         $  60,751  $  14,982  $  15,292  $  15,922  $  14,555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows from
     operating
     activities        $  76,844  $  19,629  $  19,634  $  24,175  $  13,406
    Changes in non-cash
     working capital
     and other item(1)      (564)      (743)      (393)    (4,373)     4,945
    -------------------------------------------------------------------------
    Adjusted cash flows
     from operating
     activities           76,280     18,886     19,241     19,802     18,351

    Less:
      Capital asset
       expenditures and
       contract payment   10,674      2,673      2,270      2,962      2,769
    -------------------------------------------------------------------------
    Adjusted cash flows
     after capital asset
     expenditures and
     contract payments    65,606     16,213     16,971     16,840     15,582

    Distributions paid
     to unitholders       54,910     13,880     13,728     13,650     13,652
    -------------------------------------------------------------------------
    Adjusted cash flows
     after capital,
     contract payments
     and distributions
     paid                 10,696      2,333      3,243      3,190      1,930

    Cash flows provided
     by (used in) other
     financing
     activities          (10,000)    (4,000)    (3,000)         -     (3,000)
    Cash flows used in
     acquisition of
     businesses and
     customer service
     contracts            (3,214)      (448)      (622)    (2,144)         -
    Changes in non-cash
     working capital
     and other items(1)      564        743        393      4,373     (4,945)
    Distributions paid
     to minority
     interest                  -          -          -          -          -
    -------------------------------------------------------------------------

    Increase (decrease)
     in cash and cash
     equivalents for
     the period        $  (1,954) $  (1,372) $      14  $   5,419  $  (6,015)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ---------------------------------------------------
                                                 Year
                            Year       Year     ended
                           ended      ended  December
                        December   December        31,
    (in thousands of    31, 2004   31, 2003    2002(2)
     Canadian dollars,                      (proforma)
     except per unit
     amounts,
     unaudited)
    ---------------------------------------------------

    Revenue            $ 275,586  $ 251,783  $ 228,259
    Cost of sales and
     operating
     expenses            196,789    177,704    158,287
    Amortization of
     capital and
     other assets         13,509     14,065     14,212
    ---------------------------------------------------
                          65,288     60,014     55,760
    Interest expense       4,193      4,630      4,527
    Net unrealized loss
     (gain) on
     interest-rate swap        -          -          -
    Amortization of
     intangible assets     2,333      2,332      2,408
    Future income
     tax expense           4,494      4,595      3,314
    Minority interest          -          -          -
    ---------------------------------------------------
    Net income         $  54,268  $  48,457  $  45,511
    ---------------------------------------------------
    ---------------------------------------------------

    Cash flows from
     operating
     activities        $  77,271  $  68,569  $  64,786
    Changes in non-cash
     working capital
     and other item(1)    (3,616)      (132)      (352)
    ---------------------------------------------------
    Adjusted cash flows
     from operating
     activities           73,655     68,437     64,434

    Less:
      Capital asset
       expenditures and
       contract payment   11,928     11,192     12,597
    ---------------------------------------------------
    Adjusted cash flows
     after capital asset
     expenditures and
     contract payments    61,727     57,245     51,837

    Distributions paid
     to unitholders       53,066     51,442     47,827
    ---------------------------------------------------
    Adjusted cash flows
     after capital,
     contract payments
     and distributions
     paid                  8,661      5,803      4,010

    Cash flows provided
     by (used in) other
     financing
     activities           (7,000)   (13,000)         -
    Cash flows used in
     acquisition of
     businesses and
     customer service
     contracts                 -          -          -
    Changes in non-cash
     working capital
     and other items(1)    3,616        132        352
    Distributions paid
     to minority
     interest                  -          -          -
    ---------------------------------------------------

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


    Summary of Cash Flows Per Unit
    -------------------------------------------------------------------------
                                      Three      Three     Three       Three
                            Year     months     months    months      months
    (in Canadian           ended      ended      ended     ended       ended
     dollars,           December   December  September   June 30,   March 31,
     unaudited)         31, 2007   31, 2007   30, 2007      2007        2007
    -------------------------------------------------------------------------
    Adjusted cash flows
     from operating
     activities        $  2.5588  $  0.5730  $  0.6651  $  0.7502  $  0.5705
    Adjusted cash flows
     after capital asset
     expenditures and
     contract payments $  2.2062  $  0.4739  $  0.5604  $  0.6830  $  0.4889
    Distributions paid
     to unitholders    $  1.7830  $  0.6070  $  0.3960  $  0.3960  $  0.3840
    Distributions
     declared during
     period            $  1.7980  $  0.6180  $  0.3960  $  0.3960  $  0.3880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                      Three      Three      Three      Three
                            Year     months     months     months     months
    (in Canadian           ended      ended      ended      ended      ended
     dollars,           December   December  September    June 30,  March 31,
     unaudited)         31, 2006   31, 2006   30, 2006       2006       2006
    -------------------------------------------------------------------------
    Adjusted cash
     flows from
     operating
     activities        $  2.1441  $  0.5375  $  0.5205  $  0.5559  $  0.5329
    Adjusted cash
     flows after
     capital asset
     expenditures and
     contract payments $  1.9059  $  0.4928  $  0.4595  $  0.4949  $  0.4592
    Distributions paid
     to unitholders    $  1.4940  $  0.3780  $  0.3750  $  0.3750  $  0.3660
    Distributions
     declared during
     period            $  1.5000  $  0.3810  $  0.3750  $  0.3750  $  0.3690
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                      Three      Three      Three      Three
                            Year     months     months     months     months
    (in Canadian           ended      ended      ended      ended      ended
     dollars,           December   December  September    June 30,  March 31,
     unaudited)         31, 2005   31, 2005   30, 2005       2005       2005
    -------------------------------------------------------------------------
    Adjusted cash
     flows from
     operating
     activities        $  2.0116  $  0.4980  $  0.5074  $  0.5222  $  0.4839
    Adjusted cash
     flows after
     capital asset
     expenditures and
     contract payments $  1.7301  $  0.4275  $  0.4475  $  0.4441  $  0.4109
    Distributions paid
     to unitholders    $  1.4480  $  0.3660  $  0.3620  $  0.3600  $  0.3600
    Distributions
     declared during
     period            $  1.4500  $  0.3660  $  0.3640  $  0.3600  $  0.3600
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ---------------------------------------------------
                                                 Year
                            Year       Year     ended
    (in Canadian           ended      ended  December
     dollars,           December   December        31,
     unaudited)         31, 2004   31, 2003    2002(2)
    ---------------------------------------------------
    Adjusted cash
     flows from
     operating
     activities        $  1.9423  $  1.8047  $  1.6992
    Adjusted cash
     flows after
     capital asset
     expenditures and
     contract payments $  1.6278  $  1.5096  $  1.3670
    Distributions paid
     to unitholders    $  1.3994  $  1.3566  $  1.2510
    Distributions
     declared during
     period            $  1.4044  $  1.3599  $  1.3200
    ---------------------------------------------------
    ---------------------------------------------------
    (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)  The year ended December 31, 2002 was compiled from proforma
    financial statements adjusted to remove the twelve-day period ended
    December 31, 2001. The proforma balances presented are based on the
    actual statements of the Fund adjusted to remove the expense related to
    the distributions paid to the non-controlling owner and to increase the
    number of units outstanding to 37,920,792 as at December 20, 2001 (versus
    the 17,235,000 units outstanding from December 20, 2001 to January 9,
    2002; 19,955,000 units outstanding from January 10, 2002 to April 1,
    2002; and 37,920,792 units outstanding subsequent to April 1, 2002).


    Condensed Consolidated Balance Sheet

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

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

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

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

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


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

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

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

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

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


    -------------------------------------------------------------------------
    (in thousands of Canadian
     dollars,                      December  September    June 30,  March 31,
     unaudited)                    31, 2005   30, 2005       2005       2005
    -------------------------------------------------------------------------

    Cash and cash equivalents     $   8,304  $   9,674  $   9,660  $   4,243
    Other current assets             17,076     18,245     17,009     16,826
    Capital and other assets         30,673     31,401     33,093     34,652
    Goodwill and other
     intangible assets              369,250    369,538    369,610    368,056

    -------------------------------------------------------------------------
                                  $ 425,303  $ 428,858  $ 429,372  $ 423,777
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Payables and other current
     liabilities                  $  35,665  $  35,703  $  34,181  $  30,373
    Other long-term liabilities       5,302      5,921      6,446      6,930
    Long-term indebtedness           50,000     54,000     57,000     57,000
    Unitholders' equity             334,336    333,234    331,745    329,474

    -------------------------------------------------------------------------
                                  $ 425,303  $ 428,858  $ 429,372  $ 423,777
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

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

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

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


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

    Distribution History
    -------------------------------------------------------------------------
                                                               Distributions
                                                                per unit(1)
    Month         2007     2006     2005     2004     2003     2002     2001
    -------------------------------------------------------------------------

    January   $ 0.1280 $ 0.1220 $ 0.1200 $ 0.1150 $ 0.1117 $ 0.1083 $      -
    February    0.1280   0.1220   0.1200   0.1150   0.1117   0.1083        -
    March       0.1320   0.1250   0.1200   0.1168   0.1117   0.1083        -
    April       0.1320   0.1250   0.1200   0.1168   0.1133   0.1083        -
    May         0.1320   0.1250   0.1200   0.1168   0.1133   0.1083        -
    June        0.1320   0.1250   0.1200   0.1168   0.1133   0.1083        -
    July        0.1320   0.1250   0.1200   0.1168   0.1133   0.1117        -
    August      0.1320   0.1250   0.1220   0.1168   0.1133   0.1117        -
    September   0.1320   0.1250   0.1220   0.1168   0.1133   0.1117        -
    October     0.1320   0.1250   0.1220   0.1168   0.1150   0.1117        -
    November(2) 0.3430   0.1280   0.1220   0.1200   0.1150   0.1117        -
    December(3) 0.1430   0.1280   0.1220   0.1200   0.1150   0.1117   0.0427

    -------------------------------------------------------------------------
              $ 1.7980 $ 1.5000 $ 1.4500 $ 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

    -------------------------------------------------------------------------
                           2007     2006     2005     2004     2003     2002

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

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

    -------------------------------------------------------------------------
                         100.0%   100.0%   100.0%   100.0%   100.0%   100.0%
    -------------------------------------------------------------------------

    The above tax allocation of distributions for 2007 represents an
    estimate based on the total expected distributions for the year ended
    December 31, 2007.

    Other Statistics
    (in thousands, except per unit amounts)

                                                       Number of      Market
                   Trading price range of                  units   capitali-
        Quarter     units (TSX: "DHF.UN")   Average  outstanding      zation
                 --------------------------   daily   at quarter  at quarter
                    High      Low    Close   volume          end         end
    -------------------------------------------------------------------------

    2007 - Q4    $ 22.00  $ 18.75  $ 21.00       98       43,947   $ 922,883
         - Q3      20.10    17.14    19.80       78       43,947     870,146
         - Q2      19.79    16.30    19.31       90       43,947     848,613
         - Q1      17.19    15.00    16.60       87       43,947     729,517
    2006 - Q4      19.80    13.80    15.46      143       43,947     679,417
         - Q3      19.49    17.21    19.19       96       43,947     843,339
         - Q2      21.99    16.99    17.70      100       43,947     777,858
         - Q1      23.18    19.50    21.50       61       37,921     815,297
    2005 - Q4      24.00    16.32    23.19       92       37,921     879,383
         - Q3      24.07    19.50    21.19       88       37,921     803,542
         - Q2      22.85    19.58    20.92       61       37,921     793,303
         - Q1      23.25    19.65    22.00       67       37,921     834,257
    2004 - Q4      23.25    18.80    22.70       81       37,921     860,802
         - Q3      19.62    16.75    19.45       58       37,921     737,559
         - Q2      19.34    15.05    18.00       93       37,921     682,574
         - Q1      19.40    16.71    19.40       92       37,921     735,663
    2003 - Q4      17.50    15.10    17.45       67       37,921     661,718
         - Q3      15.65    14.52    15.30       99       37,921     580,188
         - Q2      15.20    12.91    15.00       82       37,921     568,812
         - Q1      13.69    12.48    12.94       92       37,921     490,695
    2002 - Q4      13.25    11.22    12.86      139       37,921     487,661
         - Q3      12.13    10.45    12.10      165       37,921     458,842
         - Q2      11.25    10.00    10.95      176       37,921     415,233
         - Q1      11.20    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:

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


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