Davis + Henderson Reports Second Quarter 2008 Results



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

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

    
    Second Quarter Highlights

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

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

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

    Six-Month Highlights

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

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

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

    Management Commentary

    The Business performed well throughout the first half of 2008 despite the
reduction in revenue, which we had anticipated. The positive contribution from
the continued expansion of our customer programs and effective cost management
allowed the Business to produce strong cash flow for our unitholders.
    In the D+H Segment, we experienced positive results in many areas, as we
continued to benefit from the adoption of our IDefence(R) and BizAssist(R)
programs and from our annual product repositioning initiatives. As expected,
these contributions were offset by lower cheque order volumes compared to
2007. We believe changes to cheque imaging standards in Canada resulted in
consumers accelerating reorders into the first half of 2007. This resulted in
higher order volumes and revenues than expected during that period. We believe
that these orders would otherwise have been received in later periods,
including the first six months of 2008, and accordingly, their absence
resulted in higher order volume declines in the second quarter and the first
half of 2008 than historically observed. By the end of the third quarter of
2008, we expect the trend in cheque order volumes to return to levels that are
directionally more in line with those historically experienced.
    Within our Filogix Segment, increased revenues in several areas
contributed to modest year-over-year growth in the second quarter, despite
lower origination services fees. We are pleased with the overall Filogix
Segment performance, especially given the strong real estate and mortgage
markets in 2007.
    Davis + Henderson remains committed to its long-term financial objective
of delivering stable and modestly growing distributions based on achieving
growth in the 3% to 5% range. With the addition of Filogix, Davis + Henderson
has significantly strengthened its capabilities and the breadth of services it
offers to the Canadian financial services marketplace. From Davis +
Henderson's established platforms, management looks to increase value for
customers and unitholders by building on our strong programs.
    For a more detailed discussion of second quarter results and management's
outlook, please see Management's Discussion and Analysis below.

    Caution Concerning Forward-Looking Statements

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

    Conference Call

    Davis + Henderson will discuss its financial results for the second
quarter ended June 30, 2008 via conference call at 10:00 a.m. EST (Toronto
time) on Friday July 25, 2008. The number to use for this call is 416-644-3414
for Toronto area callers or 1-800-733-7571 for all other callers. The
conference call will be hosted by Bob Cronin, Chief Executive Officer and by
Catherine Martin, Chief Financial Officer. The conference call will also be
available on the web by accessing CNW Group's website
www.newswire.ca/webcast/. For anyone unable to listen to the scheduled call,
the rebroadcast number is: 416-640-1917 for Toronto area callers, or
1-877-289-8525 for all other callers, with reservation number 21275792
followed by the number sign. The rebroadcast will be available until Friday
August 8, 2008. An archive recording of the conference call will also be
available at the above noted web address for one month following the call and
a text version of the call will be available at www.dhltd.com

    ADDITIONAL INFORMATION

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

    MANAGEMENT'S DISCUSSION AND ANALYSIS

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

    STRATEGY

    Davis + Henderson's financial goal is to deliver stable and modestly
growing cash distributions to unitholders by targeting annual revenue growth
in the range of 3% to 5% and maintaining margins. The Fund has three primary
strategies to meet this financial goal. These are to enhance the value of the
Davis + Henderson cheque supply program, offer additional programs to serve
the chequing account, and deliver programs within the lending services market.
The Fund advances its strategies through internal (or organic) initiatives, as
well as by partnering with third parties and by way of selective acquisitions.
    In growing its cheque supply program, Davis + Henderson is focused on
increasing value by continuously introducing product design alternatives,
enhancing security components and combining other logical products and
services into convenient and valuable packages for chequing account holders.
    Other Davis + Henderson programs that serve the chequing account include
a deposit program, which is directed towards small business account holders,
and eSwitch(R), a service that allows financial institutions to more easily
move electronic pre-authorized payments and direct deposit authorizations on
behalf of account holders at the time of new account openings.
    Davis + Henderson significantly advanced its third key strategy with the
acquisition of Filogix in June 2006. Among other services, Filogix provides
processing services related to the origination and underwriting of mortgages
in Canada. Davis + Henderson also acquired Advanced Validation Systems Limited
Partnership ("AVS"), which, under Davis + Henderson's brand
CollateralGuard(TM), provides lenders with, among other offerings, personal
property search and registration ("PPSA") programs across Canada. The addition
of these business interests has created another business platform for Davis +
Henderson.
    Changes made to the Income Tax Act require certain income trusts,
including the Fund, to pay taxes after fiscal 2010, similar to those paid by
taxable Canadian corporations. The payment of such taxes will, in the future,
reduce the cash flow of the Fund, thereby reducing the amount available for
distributions to unitholders. Since the announcement of this change in tax
legislation, management and the Trustees have monitored the changes in the
income trust environment and capital markets and continue to review potential
impacts on the Fund's current strategies and the alternatives available to the
Fund, consistent with protecting and enhancing unitholder value.

    FINANCIAL INFORMATION PRESENTATION

    The Fund operates in two business segments, the "Davis + Henderson, or
D+H, Segment" and the "Filogix Segment". The Davis + Henderson Segment
includes the cheque supply program, deposit program, and eSwitch, among other
offerings. The Filogix Segment includes services related to the origination
and underwriting of mortgages in Canada, and the PPSA program, among other
offerings. Corporate expenses have also been segmented and include
expenditures related to public company activities, a share of executive
corporate management costs and certain other business-wide costs.
    Effective January 1, 2008, the PPSA business has been operated and
reported as part of the Filogix Segment. Prior to this date, this program was
operated and reported as part of the Davis + Henderson Segment. The
comparative segmented information for previous years has not been reclassified
as the operational integration of the business in previous periods does not
make a separation of these costs practical.

    
    OPERATING RESULTS FOR THE SECOND QUARTER - CONSOLIDATED

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

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

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

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

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

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

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

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


    Revenue

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

    Cost of Sales and Operating Expenses

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

    Amortization of Capital and Other Assets

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

    Other Expenses

    Interest expense decreased by $0.2 million for the second quarter of 2008
compared to the same quarter in the prior year, reflecting $10.0 million of
debt repayments made over the past twelve months. Similarly, for the first
six months of 2008, interest expense was $0.6 million lower than the
comparable 2007 period.
    For the second quarter of 2008, an unrealized gain on interest-rate swaps
of $1.0 million (Q2 2007 - $2.2 million) was recorded reflecting
mark-to-market adjustments related to generally higher interest rates at June
30, 2008 compared to March 31, 2008. For the six months ended June 30, 2008,
an unrealized loss on interest-rate swaps of $1.3 million was recorded
(six months ended June 30, 2007 - unrealized gain of $2.5 million). These
unrealized gains and losses were recognized in income as, effective January 1,
2007, the Business no longer designated its interest-rate swaps as hedges for
accounting purposes.
    Amortization of intangibles increased by $0.2 million and $0.3 million
compared with the second quarter and first half of 2007 respectively. These
increases were primarily related to the incremental intangible assets arising
on the acquisition of the remaining 25% interest in the AVS business discussed
below and the purchase of a customer service contract.
    Effective January 2, 2008, the Fund increased its ownership in AVS to
100%. The acceleration of the ownership interest in AVS was initiated by the
Business so as to better serve customers on an integrated basis. As AVS is now
 a wholly-owned subsidiary, the Business no longer recognizes minority
interest as all earnings accrue to the Business.
    Income earned by the Business and distributed annually to unitholders is
not subject to taxation in the Business, but is taxed at the individual
unitholder level. The Fund and its subsidiaries do not anticipate being
subject to taxes until 2011, as long as all taxable income generated by the
Fund is paid to unitholders in the form of distributions. In 2011 and
subsequent years, the Fund will pay a tax on its income that is distributed to
its unitholders at a rate similar to that paid by taxable corporations. As the
new tax rules were enacted in June 2007, the Fund was required under Canadian
GAAP to recognize future income tax assets and liabilities, with a
corresponding impact on future income tax expense or recovery based on the
temporary differences expected to reverse after the date the tax is effective.
Accordingly, the Fund recognized a future income tax liability and the related
expense of $1.5 million during the second quarter of 2007. A non-cash future
income tax charge of $0.8 million was recorded in the second quarter and first
six months of 2008.
    With respect to delivery of products and services under its U.S. cheque
supply contract, the Business does not have a permanent establishment in the
U.S. for the purposes of determining tax liability and therefore does not have
U.S. income tax liability.

    Net Income

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

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

                                                  Three months ended June 30,
    -------------------------------------------------------------------------
                             Davis + Henderson Segment       Filogix Segment
                             -------------------------- ---------------------
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------

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

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

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

    Interest expense                      -          -          -          -
    Net unrealized loss (gain)
     on interest-rate swaps               -          -          -          -
    Amortization of
     intangible assets                  723        788      2,724      2,483
    Minority interest                     -          -          -          -
    -------------------------------------------------------------------------

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

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


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

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

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

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

    Interest expense                  1,906      2,121      1,906      2,121
    Net unrealized loss (gain)
     on interest-rate swaps          (1,034)    (2,196)    (1,034)    (2,196)
    Amortization of
     intangible assets                    -          -      3,447      3,271
    Minority interest                     -        204          -        204
    -------------------------------------------------------------------------

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

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

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


                                                    Six months ended June 30,
    -------------------------------------------------------------------------
                             Davis + Henderson Segment       Filogix Segment
                             -------------------------- ---------------------
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------

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

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

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

    Interest expense                      -          -          -          -
    Net unrealized loss (gain)
     on interest-rate swaps               -          -          -          -
    Amortization of
     intangible assets                1,447      1,599      5,448      4,966
    Minority interest                     -          -          -          -
    -------------------------------------------------------------------------

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

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


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

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

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

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

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

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

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

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


    Operating Results - D+H Segment

    Revenue

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

    Cost of Sales and Operating Expenses

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

    Operating Results - Filogix Segment

    Revenue

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

    Cost of Sales and Operating Expenses

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

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

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

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


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

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


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

    CASH FLOW AND LIQUIDITY

    Non-GAAP Measures

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

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

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

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

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

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

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

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

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

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

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

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

    (1) Changes in non-cash working capital and certain other balance sheet
        items have been excluded from adjusted cash flows from operating
        activities so as to remove the effects of timing differences in cash
        receipts and cash disbursements, which generally reverse themselves
        but can vary significantly across quarters. Minority interest and
        changes to other long-term liabilities are deducted to arrive at
        adjusted cash flows. For details, see the Changes in Non-Cash Working
        Capital and Other Items section.
    (2) Maintenance capital expenditures are defined by the Fund as capital
        expenditures necessary to maintain and sustain the current productive
        capacity of the Business or generally improve the efficiency of the
        Business. Growth capital expenditures are defined by the Fund as
        capital expenditures that increase the productive capacity of the
        Business with a reasonable expectation of an increase in cash flow.
    (3) The Business has various payment obligations under customer
        contracts, which include fixed contract or program initiation
        payments and annual payments payable over the life of the contract.
        The aggregate of all contract payments, both fixed and variable,
        reflects, among other things, the high degree of integration and
        sharing between Davis + Henderson and the financial institutions of
        the many activities related to ordering, data handling, customer
        service and other activities undertaken by financial institutions
        related to the operation of the cheque supply and other programs.


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

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


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


    Cash Flows, Net Income and Distributions Paid

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

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

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

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

    Expenditures on Capital Assets and Contract Payments

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

    Distributions

    The Fund paid distributions of $19.3 million ($0.4393 per unit) during
the second quarter of 2008 and $38.2 million ($0.8683 per unit) in the first
six months of 2008 compared to $17.4 million ($0.3960 per unit) and
$34.3 million ($0.7800 per unit), respectively, for the same periods in 2007.
On a per unit basis for the three and six months ended June 30, 2008,
distributions paid increased by 10.9% and 11.3%, respectively, when compared
to the same periods in 2007.
    Distributions paid can be different than distributions declared during a
period. Monthly distributions are declared by the Fund for unitholders of
record on the last business day of each month and are paid within 31 days
following each month end. On a declared basis, the year-over-year increase in
distributions per unit was 13.5% and 12.1% for the three and six-month periods
ended June 30, 2008, respectively.
    On an annualized basis, the monthly distribution rate for June 2008 was
$1.84 per unit as compared to $1.58 per unit annualized in June 2007,
representing an increase of 16.4%. This increase in distributions recognizes
the performance of the Business, expectations of future performance and the
need for the Fund to pay distributions sufficient to ensure the Fund itself is
not taxable.
    In general, mutual fund trusts, like the Fund, must distribute all their
taxable income to their unitholders in order not to pay income taxes in the
trust. Historically, Davis + Henderson has paid distributions below the level
of adjusted cash flows after capital asset and contract expenditures generated
and has not paid taxes as the Business had excess tax deductions available to
eliminate taxable income.
    If the Business continues to generate growing cash flow and net income,
and in combination with expected diminishing deductions for tax purposes, the
Fund may pay out a higher proportion of the cash flows it generates to
unitholders in order not to pay taxes in the trust.
    The estimated tax allocation of distributions expected to be declared for
2008 is 100% "other income", as was the case for all of 2007.
    The Fund may issue an unlimited number of trust units. Each trust unit is
transferable and represents an equal, undivided beneficial interest in any
distribution from the Fund and the net assets of the Fund. All units are of
the same class with equal rights and privileges and are not subject to future
calls or assessments. Each unit entitles the holder to one vote at all
meetings of unitholders.
    As at June 30, 2008 and the date of this report, 43,946,792 trust units
were outstanding.

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

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

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

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


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

    Cash Balances and Long-term Indebtedness

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

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

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


    At June 30, 2008, the Fund would have had to pay the fair value of
$2.4 million if it were to close out all of its swap contracts. It is not the
present intention of the Fund to close out these contracts. The Fund expects
to continue to enter into interest-rate swaps for the purpose of hedging its
exposure to interest rates.
    The Fund's remaining indebtedness is subject to floating interest rates
that may be funded either by way of prime-rate loans or through the issuance
of banker's acceptance with maturities, and thus interest rates, resetting
typically in the one-month to three-month range.
    The average effective interest rate applicable to the Fund's total
indebtedness was 5.33% as at June 30, 2008.
    The Fund intends to make monthly cash distributions of its adjusted cash
flows after capital asset and contract expenditures, as defined in the Fund's
Declaration of Trust, subject to working capital requirements, debt repayments
and other reserves.
    Cash flows from operations together with cash balances on hand and
unutilized term credit facilities are expected to be sufficient to fund the
Business' operating requirements, capital expenditures, contractual
obligations and anticipated distributions.

    CHANGES IN ACCOUNTING POLICY

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

    DISCLOSURE CONTROLS AND INTERNAL CONTROLS

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

    OUTLOOK

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

    Caution Concerning Forward-looking Statements

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

    ADDITIONAL INFORMATION

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


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

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

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

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

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


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

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

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

    Commitments (note 14)
    -------------------------------------------------------------------------
                                                     $ 624,310     $ 634,152
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



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

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

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

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

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

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



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

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

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

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

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



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

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

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

    ACCUMULATED OTHER
     COMPREHENSIVE INCOME (LOSS)
    Accumulated other comprehensive
     income (loss),
     beginning of period             (1,414)    (2,023)    (1,521)         -
    Mark-to-market adjustment of
     interest-rate swaps
     financial instrument standards       -          -          -     (2,199)
    Other comprehensive income:
    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                              152        176        259        352
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income (loss),
     end of period(1)                (1,262)    (1,847)    (1,262)    (1,847)
    -------------------------------------------------------------------------
    Deficit and accumulated other
     comprehensive income (loss),
     end of period                $ (22,038) $ (18,154) $ (22,038) $ (18,154)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Accumulated other comprehensive income (loss) consists of cumulative
        net gains and losses that were deferred prior to January 1, 2007 when
        hedge accounting was used by the Fund.

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



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

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

    Cash and cash equivalents
     provided by (used in):

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

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

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

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

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

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

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



    Davis + Henderson Income Fund
    Notes to Consolidated Financial Statements
    Three and six months ended June 30, 2008 and 2007
    (in thousands of Canadian dollars, except unit and per unit amounts,
    unaudited)

    NATURE OF BUSINESS

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

    1.  SIGNIFICANT ACCOUNTING POLICIES

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

    2.  ACQUISITION

    AVS Business

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

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

    Each step acquisition was made with available cash on hand.

    3.  INVENTORY

                                                       June 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------
    Raw materials                                    $   2,101     $   2,202
    Work-in-process                                      1,435         2,152
    Finished goods                                         952           962
    -------------------------------------------------------------------------
                                                     $   4,488     $   5,316
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Inventory that was recognized as cost of sales during the three months
    ended June 30, 2008 was $12,394 (Q2 2007 - $14,334) and six months ended
    June 30, 2008 was $24,882 (six months ended June 30, 2007 - $28,227).

    4.  CAPITAL ASSETS

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

                                                           December 31, 2007
    -------------------------------------------------------------------------
                                                     Accumulated
                                                         amortiz-
                                                Cost       ation         Net
    -------------------------------------------------------------------------
    Machinery and equipment               $   15,191  $    7,679  $    7,512
    Computer equipment and software           47,044      24,887      22,157
    Furniture, fixtures and leasehold
     improvements                              8,324       5,794       2,530
    -------------------------------------------------------------------------
                                          $   70,559  $   38,360  $   32,199
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    5.  OTHER ASSETS

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

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

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

    6.  INTANGIBLE ASSETS

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

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

    7.  GOODWILL

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

    8.  DISBURSEMENT OBLIGATIONS ON CUSTOMER CONTRACTS

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

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

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

    9.  LONG-TERM INDEBTEDNESS

                                                       June 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------
    Non-revolving term loan                          $ 120,000     $ 120,000
    Revolving credit facility                            5,000        10,000
    -------------------------------------------------------------------------
                                                       125,000       130,000
    Deferred finance costs                                (807)         (946)
    -------------------------------------------------------------------------
                                                     $ 124,193     $ 129,054
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Fund has $170.0 million of available term credit facilities due
    June 15, 2011 (December 31, 2007 - $170.0 million), consisting of a
    $120.0 million non-revolving term loan and a $50.0 million revolving
    credit facility. The credit facilities do not require the Fund to make
    any principal payments prior to their maturity. The facilities bear
    interest at rates that depend on certain financial ratios of the Fund and
    vary in accordance with borrowing rates in Canada and the United States.
    The credit facilities, including any hedge contracts with the lenders,
    are secured in first priority by a pledge of substantially all of the
    Fund's assets and by a pledge of the Fund's indirect ownership interest
    in Davis + Henderson L.P. The carrying value of long-term indebtedness
    approximates its fair value as it bears interest at floating rates that
    reset in most cases within three months and in all cases within one year.

    The Credit Agreement for the Fund contains a number of covenants and
    restrictions including the requirement to meet certain financial ratios
    and financial condition tests. As at June 30, 2008, the Fund was in
    compliance with all of its financial covenants and financial condition
    tests.

    Deferred finance costs relate to the renewal and amendment of long-term
    indebtedness on June 15, 2006. Amortization of deferred finance costs
    during the three months ended June 30, 2008 was $70 (Q2 2007 - $69) and
    during the six months ended June 30, 2008 was $139 (six months ended
    June 30, 2007 - $138). Amortization of deferred finance costs is
    recognized as interest expense using the effective interest method.

    10. FINANCIAL INSTRUMENTS

    Recognition and Measurement

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

    Credit Risk

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

    Market Risk

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

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

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

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

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

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

    The Fund manages its interest rate risks through the use of interest-rate
    swaps for most of its outstanding long-term indebtedness. As of June 30,
    2008, the Fund has entered into interest-rate swap contracts with its
    lenders, such that the borrowing rates on $108.0 million, or 86.4%, of
    its outstanding term indebtedness are effectively fixed at interest rates
    and for periods shown in the following table:

    -------------------------------------------------------------------------
                                   Fair value of interest-rate swaps
                            Notional                                Interest
    Maturity date             Amount         Asset     Liability     rate(1)
    -------------------------------------------------------------------------
    January 4, 2009     $     10,000  $          -  $         18      4.505%
    July 15, 2009             20,000             -           335      5.688%
    July 15, 2010             33,000             -           822      5.690%
    June 15, 2011             20,000             -           668      5.560%
    June 15, 2011             25,000             -           535      5.560%
    -------------------------------------------------------------------------
                        $    108,000  $          -  $      2,378
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The listed interest rates are inclusive of bankers' acceptance fees
        currently in effect. Such fees could increase or decrease depending
        on the Fund's financial leverage as compared to certain levels
        specified in the Credit Agreement.


    Liquidity Risk

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

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

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

    Hedge Accounting

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

    Effective January 1, 2007, the Fund ceased applying hedge accounting on
    the interest-rate swaps outstanding at December 31, 2006.

    Derivative Financial Instruments

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

    Accumulated Other Comprehensive Income (Loss)

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

    11. OTHER LONG-TERM LIABILITIES

                                                       June 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------
    Deferred compensation program                    $       -     $   1,997
    Employee future benefits                               408           561
    -------------------------------------------------------------------------
                                                     $     408     $   2,558
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The deferred compensation program, which commenced in 2003, is a five-
    year long-term incentive plan for management, subject to certain
    performance criteria and vesting terms, payable after December 31, 2008.
    The balance as of June 30, 2008 was reclassified to current liabilities
    during the quarter as it is payable in March 2009.

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

    The Fund's principal pension plans are defined contribution pension plans
    that provide pensions to substantially all eligible employees. Total
    expense for the Fund's defined contribution pension plan for the three
    months ended June 30, 2008 was $0.4 million (Q2 2007 - $0.4 million) and
    for six months ended June 30, 2008 was $1.0 million (six months ended
    June 30, 2007 - $0.9 million).

    12. INCOME TAXES

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

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

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

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

    Commencing January 1, 2011, the Fund will be subject to tax on its income
    distributed. The Fund is also required to recognize future income tax
    assets and liabilities with respect to the temporary differences between
    the carrying amount and tax bases of its assets and liabilities and those
    of its flow-through subsidiaries that are expected to reverse in or after
    2011. The Fund expects that its income distributed will not be subject to
    tax prior to 2011 and accordingly has not provided for future income
    taxes on the temporary differences expected to reverse prior to 2011.

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

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

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

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

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

    13. TRUST UNITS

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

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

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

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

    14. COMMITMENTS

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

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

    15. CAPITAL

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

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

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

    The Fund's indebtedness is subject to a number of covenants and
    restrictions including the requirement to meet certain financial ratios
    and financial condition tests at a subsidiary level. One such ratio is
    the "Total Funded Debt/EBITDA Ratio" as defined in the Credit Agreement.
    The maximum ratio allowed for a 12-month trailing period is 2.50. For the
    three months ended June 30, 2008, this ratio was calculated at 1.06 (Q2
    2007 - 1.19). Management also uses this ratio as a key indicator in
    managing the Fund's capital.

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

    16. SIGNIFICANT CUSTOMERS

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

    For the six months ended June 30, 2008, the Fund earned 79% of its
    consolidated revenue from its seven largest customers (for the six months
    ended June 30, 2007 - 78%). For the six months ended June 30, 2008, four
    of these customers individually accounted for greater than 10%, but not
    more than 17% of the Fund's total revenue (for the six months ended June
    30, 2007, five of these customers individually accounted for greater than
    10%, but not more than 17% of the Fund's total revenue).

    17. SEGMENTED INFORMATION

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

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

    Corporate costs include costs incurred by the Fund for the operation of a
    public entity. Corporate assets consist primarily of cash and cash
    equivalents.

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

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

    Summarized financial information for the three and six months ended
    June 30, 2008 and 2007 are as follows:

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

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

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

    Interest expense                  1,906      2,121      1,906      2,121
    Net unrealized loss (gain)
     on interest-rate swaps          (1,034)    (2,196)    (1,034)    (2,196)
    Amortization of
     intangible assets                    -          -      3,447      3,271
    Minority interest                     -        204          -        204
    -------------------------------------------------------------------------
    Income (loss) before income
     taxes                           (1,695)      (799)    26,132     27,974
    Future income tax expense
     (recovery)                         766      1,454        766      1,454
    -------------------------------------------------------------------------
    Net income (loss)             $  (2,461) $  (2,253) $  25,366  $  26,520
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other
     assets expenditures          $       -  $       -  $   2,962  $   2,955
    Intangible assets             $       -  $       -  $ 112,533  $ 123,981
    Goodwill                      $       -  $       -  $ 441,193  $ 438,502
    Total assets                  $   9,390  $  11,515  $ 624,310  $ 643,073
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Effective January 1, 2008, the results of the personal property, search
    and registration programs are included as part of the results of the
    Filogix Segment. Prior to this date, the results were included as part of
    the Davis + Henderson Segment. Current period results under both the new
    and old basis of segmentation have been presented separately.


    For the three months ended June 30, 2008, the Davis + Henderson Segment
    had six customers that individually accounted for greater than 10% but
    not more than 21% of the Davis + Henderson Segment revenue and the
    Filogix Segment had three customers that individually accounted for
    greater than 10% but not more than 19% of the Filogix Segment revenue
    (Q2 2007 - Davis + Henderson Segment had four customers that individually
    accounted for greater than 10% but not more than 20% of the Davis +
    Henderson Segment revenue and the Filogix Segment had three customers
    that individually accounted for greater than 10% but not more than 17% of
    the Filogix Segment revenue).

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

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

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

    Interest expense                  3,769      4,351      3,769      4,351
    Net unrealized loss (gain)
     on interest-rate swaps           1,310     (2,520)     1,310     (2,520)
    Amortization of
     intangible assets                    -          -      6,895      6,565
    Minority interest                     -        313          -        313
    -------------------------------------------------------------------------
    Income (loss) before income
     taxes                           (6,494)    (3,493)    41,972     46,195
    Future income tax expense
     (recovery)                         766      1,454        766      1,454
    -------------------------------------------------------------------------
    Net income (loss)             $  (7,260) $  (4,947) $  41,206  $  44,741
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other asset
     expenditures                 $       -  $       -  $   5,496  $   6,544
    Intangible assets             $       -  $       -  $ 112,533  $ 123,981
    Goodwill                      $       -  $       -  $ 441,193  $ 438,502
    Total assets                  $   9,390  $  11,515  $ 624,310  $ 643,073
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Effective January 1, 2008, the results of the personal property, search
    and registration programs are included as part of the results of the
    Filogix Segment. Prior to this date, the results were included as part of
    the Davis + Henderson Segment. Current period results under both the new
    and old basis of segmentation have been presented separately.


    For the six months ended June 30, 2008, the Davis + Henderson Segment had
    six customers that individually accounted for greater than 10% but not
    more than 20% of the Davis + Henderson Segment revenue and the Filogix
    Segment had three customers that individually accounted for greater than
    10% but not more than 19% of the Filogix Segment revenue (for the six
    months ended June 30, 2007, the Davis + Henderson Segment had five
    customers that individually accounted for greater than 10% but not more
    than 20% of the Davis + Henderson Segment revenue and the Filogix Segment
    had three customers that individually accounted for greater than 10% but
    not more than 16% of the Filogix Segment revenue).

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

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

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

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

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

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

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

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

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


    18. COMPARATIVE FIGURES

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


    SUPPLEMENTARY FINANCIAL INFORMATION

    Consolidated Operating Results by Period

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

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

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

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

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

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

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


    Summary of Cash Flows Per Unit

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


    Condensed Consolidated Balance Sheet

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

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

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

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

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


    Distribution History

    -------------------------------------------------------------------------
                                                               Distributions
                                                                         per
                                                                      unit(1)
    Month                        2008         2007         2006         2005
    -------------------------------------------------------------------------
    January                   $0.1430      $0.1280      $0.1220      $0.1200
    February                   0.1430       0.1280       0.1220       0.1200
    March                      0.1430       0.1320       0.1250       0.1200
    April                      0.1430       0.1320       0.1250       0.1200
    May                        0.1533       0.1320       0.1250       0.1200
    June                       0.1533       0.1320       0.1250       0.1200
    July                            -       0.1320       0.1250       0.1200
    August                          -       0.1320       0.1250       0.1220
    September                       -       0.1320       0.1250       0.1220
    October                         -       0.1320       0.1250       0.1220
    November(2)                     -       0.3430       0.1280       0.1220
    December(3)                     -       0.1430       0.1280       0.1220
    -------------------------------------------------------------------------
                              $0.8786      $1.7980      $1.5000      $1.4500
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                               Distributions
                                                                         per
                                                                      unit(1)
    Month                        2004         2003         2002         2001
    -------------------------------------------------------------------------
    January                   $0.1150      $0.1117      $0.1083      $     -
    February                   0.1150       0.1117       0.1083            -
    March                      0.1168       0.1117       0.1083            -
    April                      0.1168       0.1133       0.1083            -
    May                        0.1168       0.1133       0.1083            -
    June                       0.1168       0.1133       0.1083            -
    July                       0.1168       0.1133       0.1117            -
    August                     0.1168       0.1133       0.1117            -
    September                  0.1168       0.1133       0.1117            -
    October                    0.1168       0.1150       0.1117            -
    November(2)                0.1200       0.1150       0.1117            -
    December(3)                0.1200       0.1150       0.1117       0.0427
    -------------------------------------------------------------------------
                              $1.4044      $1.3599      $1.3200      $0.0427
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Monthly distributions are made to unitholders of record on the last
        business day of each month and are paid within 31 days following each
        month end.
    (2) November 2007 declared distributions included a special distribution
        of $0.20 for unitholders of record on November 15, 2007 and was paid
        November 30, 2007.
    (3) Distributions in 2001 are in respect of the 12 calendar days from
        December 20, 2001 to December 31, 2001.


    Tax Allocation of Distributions

    -------------------------------------------------------------------------
                        2008    2007    2006    2005    2004    2003    2002
    -------------------------------------------------------------------------
    Dividend income     0.0%    0.0%    0.0%    0.0%   15.0%   19.5%   16.9%
    Other income      100.0%  100.0%  100.0%   91.6%   75.2%   69.5%   71.5%
    Return of capital   0.0%    0.0%    0.0%    8.4%    9.8%   11.0%   11.6%
    -------------------------------------------------------------------------
                      100.0%  100.0%  100.0%  100.0%  100.0%  100.0%  100.0%
    -------------------------------------------------------------------------

    The above tax allocation of distributions for 2008 represents an estimate
    based on the total expected distributions for the year ended December 31,
    2008.


    Other Statistics

    (in thousands, except per unit amounts)

                                                           Number     Market
                 Trading price range of units            of units    capital-
                       (TSX: "DHF.UN")                   outstand-   ization
                -------------------------------  Average   ing at         at
      Quarter       High        Low      Close    daily   quarter    quarter
                                                 volume       end        end
    -------------------------------------------------------------------------
    2008 - Q2    $ 17.85    $ 15.53    $ 15.58       83    43,947  $ 684,691
         - Q1      21.75      15.77      17.19      107    43,947    755,445
    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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