Davis + Henderson Reports Second Quarter 2010 Results

TSX Stock Symbol: "DHF.UN".

Website: www.dhltd.com

TORONTO, Aug. 10 /CNW/ - Davis + Henderson ("D+H" or the "Business") today reported solid financial results for the three months ended June 30, 2010 including growth in revenue and Adjusted income. The growth compared to last year was primarily attributed to the inclusion of the operations of Resolve Business Outsourcing Income Fund ("Resolve"), which was acquired on July 27, 2009, as well as from the positive impacts on volumes attributed to an improved economy, including areas within our business that benefitted from stronger mortgage origination volumes.

    
    Second Quarter Highlights

    -   Revenue was $168.7 million, an increase of $74.2 million, or 78.4%,
        compared to the same quarter in 2009.

    -   EBITDA(1) was $43.1 million, an increase of $10.6 million, or 32.7%,
        compared to the same quarter in 2009. The increase in EBITDA of 32.7%
        relative to the increase in revenue of 78.4% reflected the inclusion
        of acquired Resolve service offerings that contributed lower margins
        as a percentage of revenues as compared to other D+H services.

    -   Adjusted income(1) was $34.4 million, an increase of $7.4 million, or
        27.4%, as compared to the same quarter in 2009. Adjusted income(1)
        per unit was $0.6462, an increase of 5.1%, compared to the same
        quarter in 2009.

    -   Net income was $25.0 million, a year-over-year decrease of
        $0.2 million, or 0.8%. Net income per unit was $0.4702, a decrease of
        18.1% compared to the same quarter in 2009. The decrease in net
        income and net income per unit as compared to the increase in
        Adjusted income reflects the recording of non-cash expenses related
        to mark-to-market adjustments on interest-rate swaps and the
        amortization of acquisition intangibles related to the Resolve
        acquisition, both of which are more fully described in the MD&A
        below.

    -   Cash distributions paid for the second quarter of 2010 were $0.4599
        per unit, unchanged from the same quarter in 2009.

    Six-Month Highlights

    -   Revenue was $327.2 million for the first six months of 2010, an
        increase of $144.1 million, or 78.7%, compared to the same period in
        2009.

    -   EBITDA was $80.6 million for the first six months of 2010, an
        increase of $19.6 million, or 32.2%, compared to the same period in
        2009. The increase in EBITDA of 32.2% relative to the increase in
        revenue of 78.7% reflected the inclusion of acquired Resolve service
        offerings that contributed lower margins as a percentage of revenues
        as compared to other D+H services.

    -   Adjusted income was $63.8 million for the first six months of 2010,
        an increase of $13.9 million, or 27.9% as compared to the first six
        months of 2009. Adjusted income(1) per unit was $1.1982, an increase
        of 5.6%, compared to the same period in 2009.

    -   Net income was $48.1 million for the first six months of 2010, a
        year-over-year increase of $3.6 million, or 8.2%. Net income per unit
        was $0.9035, a decrease of 10.7% compared to the same period in 2009
        and as described above, reflects non-cash expenses including
        mark-to-market adjustments on interest-rate swaps and amortization of
        intangible assets related to the Resolve acquisition. Net income per
        unit was also impacted by the issuance of 9,286,581 additional units
        of Davis + Henderson to fund the Resolve acquisition.

    -   Cash distributions paid for the first six months were $0.9198 per
        unit, unchanged from the same period in 2009.

    -------------------------------------------
    (1) Davis + Henderson reports several non-GAAP measures, including EBITDA
        and Adjusted income used above. Adjusted income is calculated as net
        income, adjusted to remove the non-cash impacts of mark-to-market
        gains and losses on derivative instruments, future income taxes and
        amortization of intangibles from acquisitions. These items are
        excluded in calculating Adjusted income as they are non-cash items
        and are not considered indicative of the financial performance of the
        Business for the period being reviewed. Any non-GAAP measures should
        be considered in context with the GAAP financial presentation and
        should not be considered in isolation or as a substitute for GAAP net
        earnings or cash flow. Further, Davis + Henderson's measures may be
        calculated differently from similarly titled measures of other
        companies. See Non-GAAP Measures for a more complete description of
        these terms.
    

Management Commentary

We are pleased with the results of the second quarter of 2010. Financially, we benefited from the inclusion of Resolve service offerings, stronger volumes related to services to the lending markets and from program enhancements and changes within our programs to the chequing account.

During the quarter, we continued to advance our strategy related to enhancing our service offerings and integrating our operations. Both of these initiatives are aimed at improving our delivery effectiveness for customers and are part of our goal of positioning D+H to grow in the future.

Also during the quarter, we renewed our credit facilities and completed the issuance of $50.0 million of seven year fixed-rate Bonds. With these financings completed, we are well positioned to continue to advance our strategic plans.

At the combined annual general and special meeting (the "Meeting") held on June 17, 2010, we received unitholder approval to convert to a corporation effective January 1, 2011 and we are executing against that plan. We also reiterated our intention to maintain distributions for the remainder of 2010 at an annualized rate of $1.84 per unit and commencing in 2011 to move to a quarterly dividend payout to owners at $1.20 per share annualized.

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

This MD&A contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning Davis + Henderson's objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of Davis + Henderson are forward-looking statements. The words "believe", "expect", "anticipate", "estimate", "intend", "may", "will", "would" and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of Davis + Henderson to meet its revenue and EBITDA targets; general industry and economic conditions; changes in Davis + Henderson's relationship with its customers and suppliers; pricing pressures and other competitive factors. Davis + Henderson has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While Davis + Henderson considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect.

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.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of cheques by consumers; the Fund's dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the Fund's financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics and investor interest in, and government regulations relating to, Income Trusts. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. 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 except as required by applicable securities laws.

Conference Call

Davis + Henderson will discuss its financial results for the three months ended June 30, 2010 via conference call at 10:00 a.m. EST (Toronto time) on Wednesday, August 11, 2010. The number to use for this call is 647-427-7450 for Toronto area callers or 1-888-231-8191 for all other callers. The conference call will be hosted by Bob Cronin, Chief Executive Officer and by Brian Kyle, 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 will be: 416-849-0833 for Toronto area callers, or 1-800-642-1687 for all other callers, with Encore Password 88497636. The rebroadcast will be available until Wednesday, August 25, 2010. 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 2010 for the Davis + Henderson Income Fund (the "Fund" or the "Company" or the "Business" or "Davis + Henderson" or "D+H" or "we" or "our") should be read in conjunction with the MD&A in the Annual Report for the year ended December 31, 2009, dated March 2, 2010, and the attached interim unaudited consolidated financial statements. External economic and industry factors remain substantially unchanged from those described in the annual MD&A and the Fund's most recently filed Annual Information Form.

STRATEGY

Davis + Henderson is a leading solutions provider to the financial services marketplace. We have several market-leading service offerings within Canada, including our cheque supply program, the servicing of student loans, the provision of registration and related services for secured loan products and the delivery of leading technology solutions within the mortgage market. We also offer broader technology solutions in the commercial lending, small business lending and leasing area, as well as servicing solutions within the credit card market and other outsourced services in a number of specialty areas.

Davis + Henderson's strategy is to establish market leading positions within well defined and growing service areas in the financial services marketplace and to further expand our service offerings by enhancing the activities that we perform on behalf of our customers. We expect to advance this strategy through internal (or organic) initiatives, as well as by partnering with third parties and by way of selective acquisitions. The Business' 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%. The Business has three primary strategies to meet its objectives. These are to: (i) evolve and enhance the value of the cheque supply program and services to the chequing account; (ii) extend our technology supported services related to personal, student and commercial lending and leasing markets; and (iii) pursue opportunities in other areas within the financial services marketplace.

Over the past several years, D+H has executed this strategy by evolving our programs to the chequing account, completing several acquisitions, including Advanced Validation Systems ("AVS") in 2005, Filogix in 2006, Cyence in 2008 and Resolve in 2009, and by further enhancing our services and capabilities. As a result, we offer a diverse range of market-leading services.

Since December 2001, the initial public offering date of Davis + Henderson Income Fund, the Business has operated as a subsidiary of an Income Trust pursuant to its Declaration of Trust. In 2007, changes were made to the Income Tax Act that will require certain Income Trusts, including D+H, to be subject to taxes after fiscal 2010, similar to those paid by taxable Canadian corporations. At the meeting of unitholders held on June 17, 2010, D+H unitholders approved a proposal to convert from an income trust into a corporation effective January 1, 2011. Upon completion of the conversion, unitholders will receive on a tax deferred, roll-over basis, one share of the resulting public corporation for each unit held. The information circular in respect of the Meeting, which provided a detailed outline of the conversion, is available on SEDAR at www.sedar.com.

Independent of the conversion plan and as a result of the enacted tax changes, the Business will be subject to taxes commencing in 2011 that will reduce the amount of cash flow otherwise available for distribution. Our current intention is to pay quarterly distributions commencing in 2011 at an initial annualized rate of $1.20 per share. For the remainder of 2010, we intend to maintain our current annualized distributions at $1.84 per unit ($0.1533 per unit monthly). Subsequent to the conversion, distributions made by Davis + Henderson will be taxed as dividends rather than regular income as they are today. Investors that are taxed as individuals may be entitled to dividend tax credits which may enhance their after-tax yield and therefore significantly reduce the after-tax impact of the reduction in distributions.

Consistent with past practices, actual distributions will only be made to owners of record based upon a declaration by the Trustees. Among other items, in determining actual distributions, the Trustees will consider the financial performance, capital plans, acquisition plans, expectations of future economic conditions and other factors.

Notwithstanding the structural and distribution changes attributed to the changes to the law, the strategies and objectives of the Business will remain unchanged.

FINANCIAL INFORMATION PRESENTATION

Historically, the Business operated and reported upon two business segments, the "D+H Segment" and the "Filogix Segment". Subsequent to the completion of the Resolve acquisition in July 2009, the Business announced that it would move to a single integrated operation in order to better serve customers and maximize effectiveness. The Business is now managed along functional lines and operating decisions and performance assessment are aligned with these functions. As such, the Business reports as a single segment. Segmented data has been provided related to revenues pertaining to major service areas.

OPERATING RESULTS FOR THE SECOND QUARTER - CONSOLIDATED

The following table is derived from, and should be read in conjunction with, the Consolidated Statements of Income and includes non-GAAP measures. Management believes this supplementary disclosure provides useful additional information. See Non-GAAP Measures for a discussion of non-GAAP terms used. Effective July 27, 2009, the consolidated results include those of Resolve.

    
    Consolidated Operating and Financial Results(1)
    (in thousands of Canadian dollars, except per unit amounts, unaudited)

                                    Three months ended      Six months ended
                                               June 30,              June 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    Revenue                       $ 168,734  $  94,557  $ 327,153  $ 183,086
    Expenses                        125,637     62,080    246,594    122,171
    -------------------------------------------------------------------------
    EBITDA(2)                        43,097     32,477     80,559     60,915

    Amortization of capital
     assets and non-acquisition
     intangibles                      5,003      3,679      9,709      7,498
    Interest expense                  3,692      1,787      7,066      3,534
    -------------------------------------------------------------------------

    Adjusted income(2)               34,402     27,011     63,784     49,883

    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                              103        136        292        272
    Net unrealized loss (gain) on
     derivative instruments(3)        1,694     (1,069)       135       (878)
    Future income tax expense
     (recovery)                         416       (718)     1,003       (782)
    Amortization of intangibles
     from acquisitions                7,158      3,441     14,255      6,815
    -------------------------------------------------------------------------
    Net income                    $  25,031  $  25,221  $  48,099  $  44,456
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted income per unit,
     basic and diluted(2)         $  0.6462  $  0.6146  $  1.1982  $  1.1351
    Net income per unit, basic
     and diluted                  $  0.4702  $  0.5739  $  0.9035  $  1.0116
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                    Three months ended      Six months ended
                                               June 30,              June 30,
                                         2010 vs. 2009         2010 vs. 2009
                                              % change              % change
    -------------------------------------------------------------------------

    Revenue                                      78.4%                 78.7%
    EBITDA(2)                                    32.7%                 32.2%
    Adjusted income per unit(2)                   5.1%                  5.6%
    Net income per unit                         -18.1%                -10.7%

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

    (1) The results of the three and six months ended June 30, 2010 include
        the results of the Resolve business.

    (2) EBITDA and Adjusted income are non-GAAP terms. See Non-GAAP Measures
        for a more complete description of these terms.

    (3) The Business enters into derivative contracts to fix the interest
        rates and foreign exchange rates on a significant portion of its
        outstanding bank debt and foreign currency transactions, which are
        relatively minor, respectively. For accounting purposes, these
        derivative instruments do not qualify for hedge accounting treatment
        and, accordingly, any change in the fair value of these contracts is
        recorded through income. Provided the Business does not cancel its
        derivative contracts prior to maturity, the amounts represent a non-
        cash unrealized gain or loss that will subsequently reverse through
        income. The Company has historically held its derivative contracts to
        maturity.
    

Overview

D+H had solid operating performance in the second quarter of 2010. While the large year-over-year increases in revenues and expenses during both the second quarter and the first six months of 2010 were primarily due to the inclusion of Resolve, the Business also benefited from stronger origination services revenue and an increase in revenue from the cheque supply program. In various areas during the current year, we benefitted from an improved economy as compared to the same period in 2009. Additionally, the Business continued its integration activities, including activities related to the attainment of cost synergies. Revenue and Adjusted income increased and, on a per unit basis after reflecting the additional units issued in connection with the acquisition of Resolve, D+H's consolidated Adjusted income per unit was higher by 5.1% and 5.6%, respectively, for the second quarter and the six month periods of 2010 compared to 2009. Net income per unit for the second quarter and year-to-date 2010, was lower by 18.1%, and 10.7%, respectively, compared to the same periods in 2009, largely as a result of the increase in amortization of intangible assets recorded as part of the Resolve acquisition and the mark-to-market adjustment on interest-rate swaps, both non-cash items and both as more fully described below within the MD&A.

    
    Revenue

    (in thousands of Canadian dollars, unaudited)

                                    Three months ended      Six months ended
                                               June 30,              June 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    Revenue
      Programs to the chequing
       account                    $  74,660  $  72,972  $ 147,825  $ 144,531
      Loan servicing                 30,365          -     60,034          -
      Loan registration
       technology services           28,338      1,178     51,185      1,942
      Lending technology services    20,852     18,619     37,942     32,821
      Other                          14,519      1,788     30,167      3,792

    -------------------------------------------------------------------------
                                  $ 168,734  $  94,557  $ 327,153  $ 183,086
    -------------------------------------------------------------------------
    

Revenue - Second Quarter and Year-to-Date

Consolidated revenue for the second quarter of 2010 was $168.7 million, an increase of $74.2 million, or 78.4%, compared to the same quarter in 2009. For the first six months of 2010, consolidated revenue was $327.2 million, an increase of $144.1 million, or 78.7%, compared to the same period in 2009. The increase in consolidated revenues is primarily attributable to the inclusion of revenues from Resolve. Revenue for both the three months and the six months ended June 30, 2010 also benefited from the positive impact of annual cheque program changes and stronger mortgage origination service fees. Services delivered by the Business are subject to seasonality, particularly relating to fees earned in connection with mortgage origination services and automobile loan registration services, which typically are stronger in the second quarter as compared to the first quarter, as was the case this year.

Revenue for the second quarter from programs to the chequing account was $ $74.7 million, an increase of $1.7 million, or 2.3%, compared to the same quarter in 2009. Revenue for the first six months from programs to the chequing account was $147.8 million, an increase of $3.3 million, or 2.3%, compared to the same period in 2009. The modest increase in both periods was primarily attributable to program changes and product and service enhancements. This increase was partially offset by a slight decline in overall volumes in the second quarter of 2010. Management believes that the long-term historical trend related to cheque order decline is relatively unchanged and continues to be in the low single digit range despite more recent volatility due to the changes in the economic environment.

Revenue for the second quarter of 2010 from loan servicing, which includes student loan administration services and credit card servicing was $30.4 million. There was no comparative revenue for the second quarter of 2009 as these services were part of the Resolve business acquired on July 27, 2009. Revenue from student loan administrative services, which comprise the largest portion of revenues within this service area, is expected to be relatively stable over the short-term with modestly growing volumes and new program initiatives being offset by reduced pricing related to particular contracts. The year-to-date results benefitted from strong performance incentives which can be earned under contracts within the service area.

Loan registration technology services revenue for the second quarter of 2010 was $28.3 million and for the first six months was $51.2 million. This service area includes the personal property search and registration ("PPSA") business acquired with the Resolve acquisition and the existing PPSA program operated by D+H. Volumes in this area can be variable, but in general would be expected to improve with an improving economic environment, particularly as it relates to servicing customers within the automotive area. This service area also experiences seasonality and generally has stronger volumes during the second quarter as compared to the first quarter as consumers typically purchase and finance cars in the spring and summer.

Revenue for the second quarter of 2010 from lending technology services, which includes services to the mortgage market and other credit markets was $20.9 million, an increase of $2.2 million, or 12.0%, compared to the same quarter in 2009. For the first six months of 2010, revenue from lending technology services was $37.9 million, an increase of $5.1 million, or 15.6%, compared to the same period in 2009. Growth was primarily related to increased mortgage origination service fees, which increased year-over-year by 26% and 28% respectively for the second quarter and the first six months, due to strong activity in the Canadian housing and mortgage markets, partially offset by reduced professional service revenues within the service area. In general, industry analysts expect a slowing of the housing and mortgage markets as compared to current activity.

Other revenue for the second quarter of 2010 of $14.5 million and $30.2 million for the first six months of 2010 is comprised of a number of smaller service offerings, the largest of which are contact centre services. Revenue within the contact centre services area is more variable due to changing customer initiatives and also will vary depending upon customer contract wins and losses, which are more common in these service areas compared to other D+H service areas.

The following pro forma table reflects management's estimate of the current relative size of each of the major service areas as a percentage of total revenue on an annualized basis:

    
    Allocation of Revenue by Service Area(1)                       % Revenue
    -------------------------------------------------------------------------
    Revenue
      Programs to the chequing account                                   45%
      Loan servicing                                                     18%
      Loan registration technology services                              15%
      Lending technology services                                        11%
      Other                                                              11%

    -------------------------------------------------------------------------
                                                                        100%
    -------------------------------------------------------------------------

    (1) Based on management's estimate using pro forma 2009 revenue.
    

Expenses - Second Quarter and Year-to-Date

On a consolidated basis, expenses for the second quarter of 2010 of $125.6 million increased by $63.6 million, or 102.4%, compared to the same quarter in 2009. Expenses for the first six months of 2010 were $246.6 million, an increase of $124.4 million, or 101.8%. The increase was primarily due to the inclusion of the Resolve expense base and to a lesser extent, the ongoing costs of integrating the businesses, partially offset by continued cost management activities and integration savings.

    
                                    Three months ended      Six months ended
                                               June 30,              June 30,
    (in thousands of Canadian
     dollars, unaudited)               2010       2009       2010(3)    2009
    -------------------------------------------------------------------------

    Employee compensation and
     benefits                     $  51,271  $  23,156  $ 103,642  $  45,412
    Non-compensation direct
     expenses(1)                     49,156     30,374  $  94,236  $  59,759
    Other operating expenses(2)      20,582      6,830  $  39,212  $  13,549
    Occupancy costs                   4,628      1,720  $   9,504  $   3,451

    -------------------------------------------------------------------------
                                  $ 125,637  $  62,080  $ 246,594  $ 122,171
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Non-compensation direct expenses include materials, shipping, selling
        expenses and third party direct disbursements.

    (2) Other operating expenses include communication costs, licensing fees,
        professional fees and expenses not included in other categories.

    (3) For the six months ended June 30, 2010, to be consistent with the
        second quarter presentation, $1.5 million of other operating expenses
        from Q1 2010 have been reclassified as Non-compensation direct
        expenses. There was no change in total expenses related to this
        reclassification.
    

Employee compensation and benefits costs of $51.3 million for the second quarter of 2010 increased by $28.1 million, or 121.4%, compared to the same quarter in 2009. For the first six months of 2010, employee compensation and benefit costs were $103.6 million, up $58.2 million, or 128.2% compared to the same period in 2009, with the increase primarily due to the inclusion of Resolve expenses for both reporting periods. Resolve service offerings, such as loan servicing, contact centre services and other process outsourcing services are more employee intensive than other D+H service areas.

Non-compensation direct expenses were $49.2 million for the second quarter of 2010, an increase of $18.8 million, or 61.8%, compared to the same quarter in 2009. For the first six months of 2010, these expenses were $94.2 million, an increase of $34.5 million, or 57.7% compared to the same period in 2009. The increase is mainly due to the inclusion of Resolve expenses. In general, these expenses directionally change with revenue changes, and as such increased in the second quarter due to some of the seasonality changes described above.

Other operating expenses were $20.6 million, an increase of $13.8 million, or 201.3% compared to the same quarter in 2009. For the first six months of 2010, other operating expenses were $39.2 million, an increase of $25.7 million, or 189.4% compared to the same period in 2009. These increases were primarily attributed to the inclusion of Resolve expenses and to a lesser extent, the ongoing costs of integration partially offset by cost management activities.

Occupancy costs for the second quarter of 2010 were $4.6 million, an increase of $2.9 million, or 169.1%, compared to the same quarter in 2009. For the first six months of 2010, occupancy costs were $9.5 million, an increase of $6.1 million, or 175.4%, compared to the same period in 2009. Increase in occupancy costs were mainly due to the inclusion of Resolve facilities, which as described above, are employee intensive service businesses.

EBITDA

EBITDA during the second quarter of 2010 was $43.1 million, an increase of $10.6 million, or 32.7%, compared to the same quarter in 2009. For the first six months of 2010, EBITDA was $80.6 million, an increase of $19.6 million, or 32.2% compared to the same period in 2009. The increase in EBITDA relative to the increase in revenue during the first six months of 2010 reflected the inclusion of service offerings within Resolve which contributed lower margins as a percentage of revenues compared to other D+H services. The increase in EBITDA in the second quarter of 2010 as compared to the first quarter of 2010 was largely related to the revenue increases attributed to seasonality as described above, and stronger fees related to mortgage origination services.

Other Expenses

Amortization of capital and non-acquisition intangible assets during the second quarter of 2010 increased by $1.3 million, or 36.0% compared to the second quarter of 2009, and during the first six months of 2010, increased by $2.2 million, or 29.5% compared to the same period in 2009. These increases primarily related to the inclusion of amortization related to assets acquired from the Resolve business and to capital additions during 2010.

Interest expense for the second quarter of 2010 increased by $1.9 million compared to the same quarter last year, due to an increase in the level of outstanding debt related to the acquisition of Resolve and the write-off of certain unamortized financing costs as described below. Similarly, for the first six months of 2010, interest expense increased by $3.5 million compared to the same period in 2009. During the quarter, the Business renewed its bank credit facilities and issued a seven-year Bond as more fully described below. Certain unamortized financing fees totalling $0.4 million were written off during the second quarter of 2010 in connection with the renewal of the credit facilities and changes made to the syndicate. The write-off of the unamortized financing fees that is included in interest expense for the second quarter and the first six months of 2010 represented a one-time charge.

A net unrealized loss of $1.7 million on interest-rate swaps and foreign currency contracts was recognized in the second quarter of 2010 (Q2 2009 - $1.1 million net unrealized gain) reflecting mark-to-market adjustments related to changes in market interest rates at June 30, compared to March 31, and from currency fluctuations on foreign exchange contracts. For the six months ended June 30, 2010, an unrealized loss of $0.1 million was recorded (six months ended June 30, 2009 - unrealized gain of $0.9 million). These unrealized gains and losses are recognized in income because these swaps are not designated as hedges for accounting purposes. In addition, unrealized gains and losses on foreign exchange contracts are recognized in income because the foreign exchange contracts do not qualify for hedge accounting treatment. Provided the Business does not cancel its interest-rate swaps or foreign exchange contracts, the unrealized amounts represent a non-cash unrealized gain or loss that will subsequently reverse through income as the related swaps and foreign exchange contracts mature. The Company has historically held its derivative contracts to maturity.

In the second quarter of 2010, the Fund recorded a future tax expense of $0.4 million (Q2 2009 - $0.7 million recovery). This related to the utilization of tax losses and other deductible temporary differences in certain corporate subsidiaries for which the Fund had previously recorded a future tax benefit net of the decrease in the future tax liability resulting from the amortization of intangibles. Similarly, for the first six months of 2010, the Fund recorded a future tax expense of $1.0 million (six months ended June 30, 2009 - $0.8 million recovery).

Amortization of acquisition related intangibles for the second quarter of 2010 and for the first six months of 2010, increased by $3.7 million and $7.4 million respectively, as compared to the same periods in 2009 due to the incremental intangible assets from the acquisition of Resolve.

Net Income

Net income of $25.0 million for the second quarter of 2010 decreased by $0.2 million, or 0.8%, compared to the same period in 2009. For the six months ended June 30, 2010, net income of $48.1 million increased by $3.6 million, or 8.2% compared to the same period in 2009. On a per unit basis, net income decreased by 18.1% to $0.4702 per unit, compared to the second quarter of 2009. For the first six months of 2010, net income per unit decreased by 10.7% to $0.9035 per unit, compared to the same period in 2009.

Excluding the non-cash impacts of mark-to-market gains and losses on derivative instruments, future income taxes and amortization of intangibles from acquisitions, Adjusted income of $34.4 million for the second quarter of 2010 increased by $7.4 million, or 27.4%, compared to the same period in 2009. Adjusted income for the first six months of 2010 increased by $13.9 million, or 27.9% compared to the same period in 2009. On a per unit basis, reflecting the issuance of 9,286,581 units upon the acquisition of Resolve, Adjusted income per unit of $0.6462 increased by $0.0316, or 5.1%, compared to the second quarter of 2009. For the six months ended June 30, 2010, Adjusted income of $1.1982 per unit increased by 5.6% compared to the same period in 2009.

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

                                                  2010
                                         Q2         Q1         Q4         Q3
    -------------------------------------------------------------------------
    Revenue                       $ 168,734  $ 158,419  $ 156,215  $ 142,463
    Expenses                        125,637    120,957    119,671    104,879
    -------------------------------------------------------------------------
    EBITDA(1)                        43,097     37,462     36,544     37,584

    Amortization of capital assets
     and non-acquisition
     intangibles                      5,003      4,706      4,551      4,530
    Interest expense                  3,692      3,374      3,326      2,681
    -------------------------------------------------------------------------
    Adjusted income(1)               34,402     29,382     28,667     30,373

    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                              103        189        103        103
    Net unrealized loss (gain) on
     derivative instruments(2)        1,694     (1,559)    (1,620)    (1,647)
    Future income tax expense
     (recovery)                         416        587     (2,747)     1,018
    Amortization of intangibles
     from acquisition                 7,158      7,097      7,330      5,942
    -------------------------------------------------------------------------
    Income from continuing
     operations                      25,031     23,068     25,601     24,957
    Income from discontinued
     operations                           -          -          -          -
    -------------------------------------------------------------------------
    Net income                    $  25,031  $  23,068  $  25,601  $  24,957

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted income per unit,
     basic and diluted(1)         $  0.6462  $  0.5519  $  0.5385  $  0.6002

    Net income per unit, basic
     and diluted                  $  0.4702  $  0.4333  $  0.4809  $  0.4931
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                  2009                  2008
                                         Q2         Q1         Q4         Q3
    -------------------------------------------------------------------------
    Revenue                       $  94,557  $  88,529  $  89,357  $  95,055
    Expenses                         62,080     60,091     62,413     61,664
    -------------------------------------------------------------------------
    EBITDA(1)                        32,477     28,438     26,944     33,391

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

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

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

    Adjusted income per unit,
     basic and diluted(1)         $ 0.6146   $  0.5204  $  0.4892  $  0.6253

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

    (1) EBITDA and Adjusted income are non-GAAP terms. See Non-GAAP Measures
        for a more complete description of these terms.

    (2) The Business enters into derivative contracts to fix the interest
        rates and foreign exchange rates on a significant portion of its
        outstanding bank debt and foreign currency transactions, which are
        relatively minor, respectively. For accounting purposes, these
        derivative instruments do not qualify for hedge accounting treatment.
        Accordingly, any change in the fair value of these contracts is
        recorded through income. Provided the Business does not cancel its
        derivative contracts prior to maturity, the amounts represent a non-
        cash unrealized gain or loss that will subsequently reverse through
        income. The Company has historically held its derivative contracts to
        maturity.
    

The Business has generally reported quarterly revenues that are stable and growing when measured on a year-over-year basis, however more recent changes in the economic environment and the housing and mortgage markets have increased volatility. Measured on a sequential quarter-over-quarter basis, revenues can also vary as they are subject to seasonality and are generally stronger in the second and third quarters. The acquisition of the Resolve business has resulted in a substantial increase in all reported balances since acquisition on July 27, 2009, except per unit amounts, which were additionally impacted by the issuance of 9,286,581 additional units of Davis + Henderson to fund the Resolve acquisition.

Adjusted income per unit has generally been trending consistently with changing revenue. Net income has been more variable as it has been affected by the variability in non-cash items such as mark-to-market adjustments on interest-rate swaps and foreign exchange contracts, amortization of intangibles from acquisitions and changes in future income tax provisions.

CASH FLOW AND LIQUIDITY

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

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

                                    Three months ended      Six months ended
                                               June 30,              June 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                   $  36,613  $  27,173  $  57,594  $  40,188

    Add:
      Changes in non-cash working
       capital and other items(2)     2,792      3,517     15,899     17,193
    -------------------------------------------------------------------------
    Adjusted cash flows from
     operating activities            39,405     30,690     73,493     57,381

    Less:
      Asset expenditures(3)           4,526      2,191      7,552      4,037
      Contract payments(4)              767        300      1,717      2,817
    -------------------------------------------------------------------------
    Adjusted cash flows after
     capital expenditures and
     contract payments               34,112     28,199     64,224     50,527

    Less:
      Distributions paid to
       unitholders                   24,482     20,211     48,964     40,422
    -------------------------------------------------------------------------
                                      9,630      7,988     15,260     10,105

    Cash flows provided by
     (used in repayment of)
     long-term indebtedness          (5,000)    (2,000)         -     (2,000)
    Cash flows used in issuance
     costs for long-term
     indebtedness                    (2,564)         -     (2,564)         -
    Fair value of acquisitions            -        103          -        163
    Changes in non-cash working
     capital and other items(2)      (2,792)    (3,517)   (15,899)   (17,193)
    -------------------------------------------------------------------------
    Increase (decrease) in cash
     and cash equivalents for the
     period                       $    (726) $   2,574  $  (3,203) $  (8,925)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The subtotals in this table are not consistent with GAAP and
        accordingly are considered non-GAAP measures. See Non-GAAP Measures
        for a discussion of non-GAAP terms used.

    (2) Changes in non-cash working capital and certain other balance sheet
        items have been excluded from adjusted cash flows from operating
        activities so as to remove the effects of timing differences in cash
        receipts and cash disbursements, which generally reverse themselves,
        but can vary significantly across quarters and to remove certain of
        the payments related to the acquisition and related restructuring
        activities that were recorded as part of the acquisition. For
        details, see the Changes in Non-Cash Working Capital and Other Items
        section.

    (3) Asset expenditures include both maintenance asset expenditures and
        growth asset expenditures. Maintenance asset expenditures for the
        three months ended June 30, 2010 were $2.2 million and for the six
        months ended June 30, 2010 were $3.9 million. Maintenance asset
        expenditures are defined by the Fund as asset expenditures necessary
        to maintain and sustain the current productive capacity of the
        Business or generally improve the efficiency of the Business. Growth
        asset expenditures for the three months ended June 30, 2010 were
        $2.3 million and for the six months ended June 30, 2010 were
        $3.7 million. Growth asset expenditures are defined by the Fund as
        asset expenditures that increase the productive capacity of the
        Business with a reasonable expectation of an increase in cash flow.

    (4) The Business has various payment obligations under customer and
        partner contracts, which include fixed contract or program initiation
        payments and annual payments payable over the life of the contract.
        The aggregate of all contract payments, both fixed and variable,
        reflects, among other things, the high degree of integration and
        sharing between Davis + Henderson and its customers and partners of
        the many activities related to ordering, data handling, customer
        service, customer access and other activities.



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

                               Three months ended           Six months ended
                                          June 30,                   June 30,
                                              %                          %
                            2010      2009 change      2010      2009 change
    -------------------------------------------------------------------------
    Adjusted cash flows
     from operating
     activities         $ 0.7402  $ 0.6983   6.0%  $ 1.3806  $ 1.3057   5.7%
    Adjusted cash flows
     after capital
     expenditures and
     contract payments  $ 0.6408  $ 0.6417  -0.1%  $ 1.2065  $ 1.1497   4.9%
    Cash distributions
     paid to
     unitholders        $ 0.4599  $ 0.4599   0.0%  $ 0.9198  $ 0.9198   0.0%
    Distributions
     declared during
     period             $ 0.4599  $ 0.4599   0.0%  $ 0.9198  $ 0.9198   0.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Cash Flows, Income and Distributions Paid

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

                                      Three        Six
                                     months     months       Year       Year
                                      ended      ended      ended      ended
                                       June       June   December   December
    (in thousands of Canadian            30,        30,        31,        31,
     dollars, unaudited)               2010       2010       2009       2008
    -------------------------------------------------------------------------

    Cash flows from operating
     activities                   $  36,613  $  57,594  $ 119,722  $ 116,062

    Net income                    $  25,031  $  48,099  $  95,014  $  78,448

    Adjusted income(1)            $  34,402  $  63,784  $ 108,923  $  99,168

    Distributions paid during
     period                       $  24,482  $  48,964  $  87,962  $  78,580

    Excess (shortfall) of cash
     flows from operating
     activities over cash
     distributions paid           $  12,131  $   8,630  $  31,760  $  37,482

    Excess (shortfall) of net
     income over cash
     distributions paid           $     549  $    (865) $   7,052  $    (132)

    Excess (shortfall) of
     Adjusted income over cash
     distributions paid           $   9,920  $  14,820  $  20,961  $  20,588

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

Historically, excess cash flows from operating activities over cash distributions paid have been used to fund capital expenditures, pay down debt and to fund acquisitions. During certain historical periods distributions have exceeded net income as a result of non-cash charges recorded through income including amortization of intangible assets related to acquisitions and future income taxes. During the second quarter of 2010 and over the next several quarters, payments will be made related to restructuring activities pertaining to the operational integration of the Business as well as payments related to the settlement of outstanding contractual obligations within Resolve.

Expenditures on Capital Assets and Contract Payments

Compared to the prior year periods, total capital asset expenditures increased by $2.3 million to $4.5 million in the second quarter of 2010 and increased by $3.5 million to $7.6 million over the first six months of 2010. Fixed contract payments increased by $0.5 million in the second quarter of 2010 compared to 2009 and decreased by $1.1 million in the first six months of 2010 compared to the same period in 2009. The increase in capital expenditures over 2009 relates to the increased size of operations since the acquisition of Resolve in July 2009 and the Company's plans for further integration activities. The changes in fixed contract payments relate to timing of when payments are made.

The Business' capital program provides for continued expenditures to be funded by cash flows from operations.

Distributions

The Trustees of the Fund establish distribution levels of the Fund with reference to its financial position, historical results, projected performance of the Business and funds required for potential acquisitions.

The Fund paid cash distributions of $0.4599 per unit ($24.5 million) during the second quarter of 2010 and $0.9198 per unit ($49.0 million) in the first six months of 2010, compared to $0.4599 per unit ($20.2 million) and $0.9198 per unit ($40.4 million) in the first three and six months ended June 30, 2009 respectively. In connection with the Resolve acquisition, D+H issued 9,286,581 units on July 27, 2009, which increased the distributions paid of the Fund by $4.3 million in the second quarter of 2010. For the second quarter of 2010 both distributions declared and paid per unit were unchanged.

On an annualized basis, the monthly cash distribution rate for June 2010 was $1.84 per unit, unchanged from June 2009.

Distributions paid can be different than distributions declared during a period. Monthly distributions are declared by the Fund for unitholders of record on the last business day of each month and are paid within 31 days following each month end. In the second quarter of 2010, these amounts were the same on a per unit basis.

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.

The estimated tax allocation of distributions to be declared for 2010 is 100% "other income", as was the case for all of 2009.

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, 2010 and August 10, 2010, the total number of trust units outstanding was 53,233,373 compared to 43,946,792 trust units outstanding as at June 30, 2009. This reflects an issuance of an additional 9,286,581 trust units on July 27, 2009 in exchange for all the outstanding units of Resolve.

    
    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,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------

    Decrease (increase) in
     non-cash working capital
     items                        $  (4,162) $  (3,724) $ (18,256) $ (17,609)
    Decrease (increase) in other
     operating assets and
     liabilities                      1,370        207      2,357        416
    -------------------------------------------------------------------------
    Decrease (increase) in
     non-cash working capital and
     other items                  $  (2,792) $  (3,517) $ (15,899) $ (17,193)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The net increases in non-cash working capital items for both the second quarter of 2010 and six months ended June 30, 2010 were primarily a result of an increase in trade receivables attributable to higher revenues. Revenues are subject to seasonality and are generally stronger in the second and third quarters. Also contributing to the increase in non-cash working capital during the second quarter of 2010, was a decrease in trade payables due to normal course timing differences of when payments are made.

The Company expects to experience a continuing increase in the volatility of non-cash working capital due to the nature of services rendered in connection with the businesses recently acquired.

Acquisition

With the acquisition of Resolve, the Business significantly advanced its strategy by expanding its service offerings within the financial services industry, by establishing market leading positions in several niche markets and by increasing its overall servicing capabilities. The acquisition was funded through the issuance of Davis + Henderson units in exchange for all the outstanding units of Resolve, valued at $119.5 million (net of after-tax issuance costs of $0.6 million), and the assumption of Resolve debt. Including transaction costs and estimated restructuring costs, the total cost of the acquisition (excluding assumed debt) is expected to be approximately $130.0 million. Management has not completed its assessment of the valuation of the assets acquired and liabilities assumed for this acquisition and therefore continues to estimate transaction and restructuring costs. As a result, the presented purchase information may change. For additional information on the acquisition, refer to Note 2 to the consolidated financial statements.

Cash Balances and Long-Term Indebtedness

At June 30, 2010, cash and cash equivalents totalled $0.7 million, compared to $3.9 million at December 31, 2009. The long-term indebtedness as at June 30, 2010, before deducting unamortized deferred finance fees, was unchanged at $210.0 million compared to December 31, 2009 and consisted of drawings under a Fifth Amended and Restated Credit Agreement dated June 30, 2010 ("Credit Agreement") of $160.0 million and fixed-rate Bonds issued under a Note Purchase and Private Shelf Agreement dated June 30, 2010 ("Note Purchase Agreement") of $50.0 million. The long-term indebtedness is recorded on the Balance Sheet, net of unamortized deferred financing fees of $3.1 million as at June 30, 2010.

Total senior secured credit facilities available at June 30, 2010 were $220.0 million, consisting of a non-revolving term loan of $130.0 million and a revolving term credit facility of $90.0 million that each mature on June 30, 2013. As of June 30, 2010, the Business had drawn $130.0 million under the non-revolving term loan and $30.0 million under the revolving term credit facility. The Business is permitted to draw on the revolving facility's available balance of $60.0 million to fund capital expenditures or for other general purposes. The Credit Agreement contains a number of covenants and restrictions, including the requirement to meet certain financial ratios and financial condition tests. The financial covenants include a leverage test, a fixed charge coverage ratio test and a limit on the maximum amount of distributions that may be made by Davis + Henderson, Limited Partnership to the Fund during each rolling, four-quarter period. Davis + Henderson was in compliance with all of its financial covenants and financial condition tests as of the end of its latest quarterly period. A copy of the Credit Agreement is available at www.sedar.com.

The Business has $50.0 million of Bonds issued under the senior secured Note Purchase Agreement at a fixed-interest rate of 5.99% until maturity on June 30, 2017. The Bonds rank equally in all respects with amounts outstanding under the Credit Agreement, any related hedging contracts and cash management facilities and benefit from the same financial covenants as exist under the Credit Agreement described above. The Note Purchase Agreement is available at www.sedar.com.

To reduce liquidity risk, management 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 financing arrangements. To enhance its liquidity position, in prior years the Fund has made numerous voluntary payments on its outstanding long-term indebtedness and a portion of its committed term credit facilities remain undrawn. Further, the Credit Agreement and the Note Purchase Agreement provide for additional uncommitted credit arrangements of up to $150.0 million and additional Bonds under the uncommitted shelf note facility of up to $30.0 million with the use of these arrangements subject to the prior approval of the relevant lenders with any fees, spreads and other additional terms to be negotiated at that time.

The Fund looks to hedge against increases in market interest rates by utilizing interest-rate swaps. In respect of interest-rate swap hedge contracts with its lenders, as of June 30, 2010 the Fund's borrowing rates on the outstanding long-term indebtedness under the Credit Agreement are effectively fixed at the interest rates and for the time periods ending as outlined in the table below:

    
    -------------------------------------------------------------------------
                                  Fair value of interest-rate swaps
                                 -----------------------------------
    Maturity Date     Notional Amount   Asset    Liability   Interest Rate(1)
    -------------------------------------------------------------------------
    July 15, 2010           $  33,000    $  -    $     349            4.815%
    January 5, 2011            22,000       -          191            1.980%
    June 15, 2011              20,000       -          847            4.685%
    June 15, 2011              25,000       -        1,059            4.685%
    December 18, 2014          25,000       -          339            2.720%
    March 18, 2015             25,000       -          538            2.940%
    March 20, 2017             25,000       -          745            3.350%
    March 20, 2017             20,000       -          616            3.366%
    -------------------------------------------------------------------------
                            $ 195,000    $  -    $   4,684
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The listed interest rates exclude bankers' acceptance fees and
        prime-rate spreads currently in effect. Such fees and spreads could
        increase or decrease depending on the Fund's financial leverage as
        compared to certain levels specified in the Credit Agreement. As of
        June 30, 2010, the Fund's long-term bank indebtedness was subject to
        bankers' acceptance fees of 2.50% over the applicable BA rate and
        prime rate spreads of 1.50% over the prime rate.
    

As at June 30, 2010, the Fund would have to pay the fair value of $4.7 million if it were to close out all of the interest-rate swap contracts as set out on the balance sheet. It is not the present intention of management to close out these contracts and the Company has historically held its derivative contracts to maturity. The Fund expects to continue to enter into interest-rate swaps for the purpose of hedging interest rates.

As of mid July 2010, after the maturing of the July 15, 2010 swap shown above, the average effective interest rate on the Fund's total indebtedness is approximately 5.9%.

The Fund also enters into foreign exchange contracts to fix foreign-exchange rates on its foreign currency transactions, which are relatively minor. As at June 30, 2010, the Fund had six foreign-exchange contracts in place with one of its lenders amounting to $3.0 million USD.

(in thousands of Canadian dollars, unaudited)

    
    -------------------------------------------------------------------------
                                 Fair value of foreign exchange contracts
                                 ----------------------------------------
    Maturity Date     Notional Amount   Asset    Liability     Exchange rate
    -------------------------------------------------------------------------
    July 15, 2010           $     500    $  -    $      19            1.0271
    August 16, 2010               500       -           19            1.0272
    September 15, 2010            500       -           19            1.0273
    October 15, 2010              500       -           18            1.0275
    November 15, 2010             500       -           18            1.0278
    December 15, 2010             500       -           18            1.0282
    -------------------------------------------------------------------------
                           $    3,000    $  -    $     111
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The last of these contracts expires on December 15, 2010. Under these contracts, the Fund is required to deliver the agreed USD amount and in return receive the contracted CDN dollar amount set forth in each contract. As at June 30, 2010, the fair value the Fund would have paid if it were to have closed out the foreign exchange contracts was $0.1 million. It is not the present intention of management to close out these contracts. The Company has historically held its derivative contracts to maturity.

The Company believes that its customers, suppliers and lenders, while impacted by economic volatility, will continue to operate with the Company on similar terms to those currently in place. As well, while the Company's products and services may be impacted by the changing economic environment, the Company expects to remain profitable and generate positive cash flow.

Cash flows from operations, together with cash balances on hand and unutilized term credit facilities are expected to be sufficient to fund the Business' operating requirements, asset expenditures, contractual obligations and anticipated distributions.

Business Risks

For a comprehensive discussion of business risks, please refer to the Fund's most recently filed Annual Information Form and Annual Report available on SEDAR at www.sedar.com.

Non-GAAP Measures

The information presented within the tables in this MD&A include certain adjusted financial measures such as "EBITDA" (Earnings before income taxes, depreciation and amortization), "Adjusted income" (net income before certain non-cash charges) and "Adjusted cash flow after capital expenditures and contract payments", all of which are not defined terms under Canadian generally accepted accounting principles ("GAAP"). These non-GAAP financial measures are derived from, and should be read in conjunction with, the Consolidated Statements of Income and the Consolidated Statements of Cash Flow. Management believes these supplementary disclosures provide useful additional information related to the operating results of the Fund.

Management uses these subtotals as measures of financial performance and as a supplement to the Consolidated Statements of Income and Consolidated Statements of Cash Flow. Investors are cautioned that these measures should not be construed as an alternative to using net income as a measure of profitability or as an alternative to the GAAP Consolidated Statements of Income or other GAAP statements. Further, the Fund's method of calculating each balance may not be comparable to calculations used by other Income Trusts bearing the same description.

EBITDA

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

Adjusted Income

Adjusted income is used as a measure of internal performance similar to net income, but is calculated after removing certain non-cash items such as mark-to-market adjustments on interest-rate swaps and foreign exchange contracts, amortization of intangibles from acquisition and changes in future income tax provisions. These items are excluded in calculating Adjusted income as they are non-cash items and not considered indicative of the financial performance of the Business for the period being reviewed.

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

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

OUTLOOK

Davis + Henderson's overall long-term objective for revenues is to deliver stable and modestly growing cash distributions by growing revenue in the 3% to 5% range. For 2009 and the first half of 2010, revenue was substantially above this range due to the inclusion of the results of Resolve. For 2010 overall, we expect revenues will continue to show a substantial increase over the prior year as a result of the inclusion of the Resolve business within our consolidated results. As measured on a quarter-over-quarter basis for the balance of 2010, the year-over-year percentage increase will reduce as comparative periods from 2009 will include the Resolve results.

In the immediate future, we will focus on executing our organic growth initiatives, integrating the Business and continuing to diligently manage costs. Beyond the immediate term, we believe that combining Davis + Henderson and Resolve will solidly position the Business in the markets we serve and allow us to grow consistent with our long-term objectives.

As set out in our statement of strategy, we look to grow our Business through a combination of organic initiatives, partnering with third parties and by way of selective acquisitions. Our organic initiatives are many and include: (1) the ongoing enhancement and evolution of our cheque program through the addition of value-added service enhancements (such as our IDefence(R) and BizAssist(R) programs), (2) the expansion of our current services within the student lending, commercial and personal lending areas (including the mortgage, credit card and personal property markets), (3) selling and delivering our lending technology services to new customers and (4) combining the capabilities of D+H together with those of the recently acquired Resolve and Cyence businesses to develop new service offerings for our financial institution customers.

With the inclusion of several new service areas over the last several years, we expect to experience some level of increase in variability in year-over-year quarterly revenues, earnings and cash flows, due to: (i) volume variances within the lien registration service area; (ii) variability in professional services work; and (iii) variability in fees relating to mortgage origination services revenues due to recent significant variability in the housing market.

For 2010, with a full-year inclusion of Resolve and various integration initiatives, we expect the consolidated capital program to be in the range of $27.0 million to $30.0 million. This range represents an increase from previous plans to spend $24.0 million to $27.0 million, due to the inclusion of additional initiatives designed to save costs within the integrated business and support revenue growth through the building of technology products. We expect the capital plan for the remainder of 2010 to be more heavily weighted towards the third quarter.

Since December 2001, the initial public offering date of Davis + Henderson Income Fund, the Business has operated as a subsidiary of an Income Trust pursuant to its Declaration of Trust. In 2007, changes were made to the Income Tax Act that will require certain Income Trusts, including D+H, to be subject to taxes after fiscal 2010, similar to those paid by taxable Canadian corporations. At a meeting of unitholders held on June 17, 2010, D+H unitholders approved a proposal to convert from an income trust into a corporation effective January 1, 2011. Upon completion of the conversion, unitholders will receive on a tax deferred, roll-over basis, one share of the resulting public corporation for each unit held. The information circular in respect of the Meeting, which provided a detailed outline of the conversion is available on SEDAR at www.sedar.com.

Independent of the conversion plan and as a result of the enacted tax changes, the Business will be subject to taxes commencing in 2011 that will reduce the amount of cash flow otherwise available for distribution. Our current intention is to pay quarterly distributions commencing in 2011 at an initial annualized rate of $1.20 per share. For the remainder of 2010, we intend to maintain our current annualized distributions at $1.84 per unit ($0.1533 per unit monthly). Subsequent to the conversion, distributions made by Davis + Henderson will be taxed as dividends rather than regular income as they are today. Investors that are taxed as individuals may be entitled to dividend tax credits which may enhance their after-tax yield and therefore significantly reduce the after-tax impact of the reduction in distributions.

Consistent with past practices, actual distributions will only be made to owners of record based upon a declaration by the Trustees. Among other items, in determining actual distributions, the Trustees will consider the financial performance, capital plans, acquisition plans, expectations of future economic conditions and other factors.

Notwithstanding the structural and distribution changes attributed to the changes to the law, the strategies and objectives of the Business will remain unchanged.

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"). Statements concerning Davis + Henderson's objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of Davis + Henderson are forward-looking statements. The words "believe", "expect", "anticipate", "estimate", "intend", "may", "will", "would" and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of Davis + Henderson to meet its revenue and EBITDA targets; general industry and economic conditions; changes in Davis + Henderson's relationship with its customers and suppliers; pricing pressures and other competitive factors. Davis + Henderson has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While Davis + Henderson considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect.

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.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of cheques by consumers; the Fund's dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the Fund's financial objective; stability and growth in the real estate, mortgage and lending markets; as well as general market conditions, including economic and interest rate dynamics and investor interest in, and government regulations relating to, Income Trusts. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. 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 except as required by applicable securities laws.

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,
                                                          2010          2009
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash equivalents                    $       675   $     3,878
      Accounts receivable (note 3)                      74,505        57,251
      Inventory (note 4)                                 6,163         6,197
      Prepaid expenses                                   7,103         6,156
      Future income tax asset - current (note 11)        1,263         3,274
    -------------------------------------------------------------------------
                                                        89,709        76,756

    Future income tax asset (note 11)                   23,754        21,425
    Capital assets (note 5)                             30,837        33,296
    Fair value of derivatives (note 9)                       -           456
    Intangible assets (note 6)                         273,938       289,774
    Goodwill (note 7)                                  520,364       519,848

    -------------------------------------------------------------------------
                                                   $   938,602   $   941,555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued liabilities     $    72,661   $    72,274
      Distributions payable to unitholders               8,161         8,161
      Deferred revenue - current                         6,677         7,028
    -------------------------------------------------------------------------
                                                        87,499        87,463

    Long-term indebtedness (note 8)                    206,902       208,463
    Fair value of derivatives (note 9)                   4,795         4,733
    Deferred revenue - non-current                       9,384         9,510
    Other long-term liabilities (note 10)                8,133         7,161
    Future income tax liability (note 11)               47,171        48,934
    -------------------------------------------------------------------------
                                                       363,884       366,264

    Unitholders' equity:
      Trust units (note 12)                            595,859       595,859
      Deficit                                          (20,951)      (20,086)
      Accumulated other comprehensive
       income (loss)                                      (190)         (482)
    -------------------------------------------------------------------------
                                                       574,718       575,291

    Commitments (note 14)

    -------------------------------------------------------------------------
                                                   $   938,602   $   941,555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------

    Revenue                       $ 168,734  $  94,557  $ 327,153  $ 183,086
    Cost of sales and operating
     expenses (note 4)              126,001     62,393    247,311    122,794
    Amortization of capital assets    1,846      1,078      3,683      2,176
    -------------------------------------------------------------------------
                                     40,887     31,086     76,159     58,116

    Interest expense                  3,795      1,923      7,358      3,806
    Net unrealized loss (gain)
     on derivative instruments        1,694     (1,069)       135       (878)
    Amortization of intangible
     assets (note 6)                  9,951      5,729     19,564     11,514
    -------------------------------------------------------------------------
    Income before income taxes       25,447     24,503     49,102     43,674

    Future income tax expense
     (recovery) (note 11)               416       (718)     1,003      (782)
    -------------------------------------------------------------------------
    Net income                    $  25,031  $  25,221  $  48,099  $  44,456
    -------------------------------------------------------------------------
    Net income per unit, basic
     and diluted                  $  0.4702  $  0.5739  $  0.9035  $  1.0116
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------

    Net income                    $  25,031  $  25,221  $  48,099  $  44,456

    Other comprehensive income:
    Amortization of mark-to-
     market adjustment of
     interest-rate swaps                103        136        292        272
    -------------------------------------------------------------------------
    Total comprehensive income    $  25,134  $  25,357  $  48,391  $  44,728
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------

    Deficit
    Deficit, beginning of period  $ (21,500) $ (26,690) $ (20,086) $ (25,714)
    Net income                       25,031     25,221     48,099     44,456
    Distributions                   (24,482)   (20,211)   (48,964)   (40,422)
    -------------------------------------------------------------------------
    Deficit, end of period          (20,951)   (21,680)   (20,951)   (21,680)
    -------------------------------------------------------------------------

    Accumulated Other Comprehensive
     Income (Loss)
    Accumulated other comprehensive
     income (loss), beginning of
     period                            (293)      (824)      (482)      (960)
    Other comprehensive income:
    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                              103        136        292        272
    -------------------------------------------------------------------------
    Accumulated other comprehensive
     income (loss), end of period(1)   (190)      (688)      (190)      (688)
    -------------------------------------------------------------------------
    Deficit and accumulated other
     comprehensive income (loss),
     end of period                $ (21,141) $ (22,368) $ (21,141) $ (22,368)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------

    Cash and cash equivalents
     provided by (used in):

    OPERATING ACTIVITIES
    Net income                    $  25,031  $  25,221  $  48,099  $  44,456
    Add:
      Amortization of capital
       assets                         1,846      1,078      3,683      2,176
      Amortization of capital
       assets included in cost
       of sales                         364        313        717        623
      Amortization of intangible
       assets                         9,951      5,729     19,564     11,514
      Amortization of mark-to-
       market adjustment of
       interest-rate swaps              103        136        292        272
      Net unrealized loss (gain)
       on derivative instruments      1,694     (1,069)       135       (878)
      Future income tax expense
       (recovery)                       416       (718)     1,003       (782)
    -------------------------------------------------------------------------
                                     39,405     30,690     73,493     57,381

    Increase in non-cash working
     capital items                   (4,162)    (3,724)   (18,256)   (17,609)
    Changes in other operating
     assets and liabilities           1,370        207      2,357        416
    -------------------------------------------------------------------------
                                     36,613     27,173     57,594     40,188
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Proceeds from long-term
     indebtedness                    50,000          -     60,000          -
    Repayment of long-term
     indebtedness                   (55,000)    (2,000)   (60,000)    (2,000)
    Issuance costs of long-term
     indebtedness                    (2,564)         -     (2,564)         -
    Distributions paid to
     unitholders                    (24,482)   (20,211)   (48,964)   (40,422)
    -------------------------------------------------------------------------
                                    (32,046)   (22,211)   (51,528)   (42,422)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Expenditures on capital
     assets, non-acquisition
     intangible assets and long
     term contracts                  (5,293)    (2,491)    (9,269)    (6,854)
    Acquisition of businesses
     and acquisition adjustments          -        103          -        163
    -------------------------------------------------------------------------
                                     (5,293)    (2,388)    (9,269)    (6,691)
    -------------------------------------------------------------------------

    Increase (decrease) in cash
     and cash equivalents for
     the period                        (726)     2,574     (3,203)    (8,925)
    Cash and cash equivalents,
     beginning of period              1,401        567      3,878     12,066
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                $     675  $   3,141  $     675  $   3,141
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
      Cash interest paid          $   2,337  $   1,617  $   5,405  $   2,717
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Three and six months ended June 30, 2010 and 2009
    (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 including Filogix Limited Partnership ("Filogix L.P."),
    Filogix Inc., Cyence International Inc. ("Cyence") and Resolve
    Corporation ("Resolve").

    1.  SIGNIFICANT ACCOUNTING POLICIES

    The consolidated financial statements have been prepared using the
    following 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, 2009,
    which are included in the 2009 Annual Report. They do not conform in all
    respects with disclosures required for annual financial statements and
    should be read in conjunction with the audited financial statements of
    the Fund for the year ended December 31, 2009.

    2.  ACQUISITION

    Resolve Business

    On July 27, 2009, the Fund acquired all of the outstanding units of
    Resolve Business Outsourcing Income Fund through the exchange of 0.285
    trust units of the Fund for each unit of Resolve Business Outsourcing
    Income Fund. A total of 9,286,581 Fund trust units were issued for this
    exchange.

    Resolve is a leading provider in Canada of student loan administration
    services, credit card portfolio management services, and search and
    registration services, among other offerings. The net assets acquired and
    consideration given were as follows:

    Net assets acquired, at fair value:
      Current assets                                             $    55,362
      Capital and other assets                                        16,522
      Intangible assets                                              161,396
      Future income tax asset                                         24,494
      Payables and other current liabilities                         (65,517)
      Future income tax liability                                    (45,100)
      Long-term indebtedness                                         (73,812)
      Other long-term liabilities                                     (6,800)

    -------------------------------------------------------------------------
                                                                      66,545
    Goodwill                                                          64,148

    -------------------------------------------------------------------------
    Total                                                        $   130,693
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration for 100% ownership:
      Units issued                                               $   120,094
      Acquisition costs, net of cash acquired of $3,212               10,599

    -------------------------------------------------------------------------
    Total                                                        $   130,693
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The value of the Fund's trust units issued on acquisition reflects the
    unit's average trading price over a five-day period surrounding the
    Fund's announcement to acquire Resolve Business Outsourcing Income Fund
    on June 3, 2009. The estimated acquisition costs of $13.8 million, which
    included transaction and restructuring costs was reduced by Resolve's
    cash on hand of $3.2 million at the date of acquisition. In addition, the
    Fund also incurred after tax costs of $0.6 million to issue additional
    trust units. The Fund has not completed its assessment and valuation of
    the assets acquired and liabilities assumed for this acquisition. As a
    result, the amount of the purchase price in excess of the carrying value
    of the acquired assets and liabilities allocated to the acquired assets
    and liabilities in the consolidated balance sheet has not been finalized.

    A net adjustment of $0.5 million was made to goodwill in Resolve
    during the first six months of 2010. An adjustment of $2.6 million
    recorded during the first quarter of 2010 related to the reclassification
    of certain customer relationship contracts from intangibles to goodwill.
    This was partially offset by an adjustment to goodwill during the second
    quarter of 2010 of $2.1 million relating to changes in the estimated tax
    attributes of Resolve resulting from information that became available
    during the period.

    3.  ACCOUNTS RECEIVABLE

                                                       June 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

    Trade receivables                              $    74,168   $    56,073
    Other receivables                                      337         1,178

    -------------------------------------------------------------------------
                                                   $    74,505   $    57,251
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The amount for allowance for doubtful accounts recorded as at June 30,
    2010 was $892 (December 31, 2009 - $614). The amount of past due accounts
    as at June 30, 2010 was $1,142 (Q2 2009 - $1,641).

    4.  INVENTORY

                                                       June 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------
    Raw materials                                  $     2,608   $     2,457
    Work-in-process                                      1,758         1,322
    Finished goods                                       1,797         2,418
    -------------------------------------------------------------------------
                                                   $     6,163   $     6,197
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, and manufacturer
    coupons. Finished goods primarily consist of retail products, labels,
    accessories, security bags and corporate seals.

    Inventory that was recognized as cost of sales during the three months
    ended June 30, 2010 was $10,511 (Q2 2009 - $11,248) and six months ended
    June 30, 2010 was $21,097(six months ended June 30, 2009 - $21,715). The
    amount of write-down of inventories recognized as an expense during the
    three months ended June 30, 2010 was $61 (Q2 2009 - $83) and six months
    ended June 30, 2010 was $101 (six months ended June 30, 2009 - $126).

    5. CAPITAL ASSETS

                                            Three months ended June 30, 2010
    -------------------------------------------------------------------------
                                                        Furniture,
                                                         fixtures
                                                              and
                                  Machinery             leasehold
                        Land and        and   Computer    improve-
                       buildings  equipment  equipment      ments      Total
    -------------------------------------------------------------------------
    Cost
    Balance at
     April 1, 2010      $  2,975   $ 20,115   $ 24,844   $ 12,921   $ 60,855
    Additions                  -         86        711        270      1,067
    Other movements(1)         -          -          -          -          -
    -------------------------------------------------------------------------
    At June 30, 2010    $  2,975   $ 20,201   $ 25,555   $ 13,191   $ 61,922
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     impairment losses
    Balance at
     April 1, 2010      $    140   $ 10,541   $ 10,519   $  7,675   $ 28,875
    Amortization              53        539      1,274        344      2,210
    Other movements(1)         -          -          -          -          -
    -------------------------------------------------------------------------
    At June 30, 2010    $    193   $ 11,080   $ 11,793   $  8,019   $ 31,085
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At June 30, 2010    $  2,782   $  9,121   $ 13,762   $  5,172   $ 30,837
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                            Three months ended June 30, 2009
    -------------------------------------------------------------------------
                                                        Furniture,
                                                         fixtures
                                                              and
                                  Machinery             leasehold
                        Land and        and   Computer    improve-
                       buildings  equipment  equipment      ments      Total
    -------------------------------------------------------------------------
    Cost
    Balance at
     April 1, 2009      $      -   $ 15,594   $ 17,600   $  8,781   $ 41,975
    Additions                  -         73        732         33        838
    Other movements(1)         -          -        (94)         -        (94)
    -------------------------------------------------------------------------
    At June 30, 2009    $      -   $ 15,667   $ 18,238   $  8,814   $ 42,719
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     impairment losses
    Balance at
     April 1, 2009      $      -   $  8,804   $  6,777   $  6,516   $ 22,097
    Amortization               -        227        978        186      1,391
    Other movements(1)         -          -        (15)         -        (15)
    -------------------------------------------------------------------------
    At June 30, 2009    $      -   $  9,031   $  7,740   $  6,702   $ 23,473
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At June 30, 2009    $      -   $  6,636   $ 10,498   $  2,112   $ 19,246
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                              Six months ended June 30, 2010
    -------------------------------------------------------------------------
                                                        Furniture,
                                                         fixtures
                                                              and
                                  Machinery             leasehold
                        Land and        and   Computer    improve-
                       buildings  equipment  equipment      ments      Total
    -------------------------------------------------------------------------
    Cost
    Balance at
     January 1, 2010    $  2,975   $ 19,971   $ 25,589   $ 12,798   $ 61,333
    Additions                  -        201      1,380        360      1,941
    Other movements(1)         -         29     (1,414)        33     (1,352)
    -------------------------------------------------------------------------
    At June 30, 2010    $  2,975   $ 20,201   $ 25,555   $ 13,191   $ 61,922
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     impairment losses
    Balance at
     January 1, 2010    $     45   $  9,998   $ 10,617   $  7,377   $ 28,037
    Amortization             148      1,053      2,538        661      4,400
    Other movements(1)         -         29     (1,362)       (19)    (1,352)
    -------------------------------------------------------------------------
    At June 30, 2010    $    193   $ 11,080   $ 11,793   $  8,019   $ 31,085
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At June 30, 2010    $  2,782   $  9,121   $ 13,762   $  5,172   $ 30,837
    At
     December 31, 2009  $  2,930   $  9,973   $ 14,972   $  5,421   $ 33,296
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                              Six months ended June 30, 2009
    -------------------------------------------------------------------------
                                                        Furniture,
                                                         fixtures
                                                              and
                                  Machinery             leasehold
                        Land and        and   Computer    improve-
                       buildings  equipment  equipment      ments      Total
    -------------------------------------------------------------------------
    Cost
    Balance at
     January 1, 2009    $      -   $ 15,589   $ 18,491   $  9,048   $ 43,128
    Additions                  -        117      1,525         48      1,690
    Other movements(1)         -        (39)    (1,778)      (282)    (2,099)
    -------------------------------------------------------------------------
    At June 30, 2009    $      -   $ 15,667   $ 18,238   $  8,814   $ 42,719
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     impairment losses
    Balance at
     January 1, 2009    $      -   $  8,609   $  7,438   $  6,617   $ 22,664
    Amortization               -        454      1,978        367      2,799
    Other movements(1)         -        (32)    (1,676)      (282)    (1,990)
    -------------------------------------------------------------------------
    At June 30, 2009    $      -   $  9,031   $  7,740   $  6,702   $ 23,473
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At June 30, 2009    $      -   $  6,636   $ 10,498   $  2,112   $ 19,246
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    6.  INTANGIBLE ASSETS

                      Three months ended June 30, 2010
    ---------------------------------------------------
                       Contracts              Software
                       ---------  ---------------------
                                            Internally
                                  Purchased  developed
    ---------------------------------------------------
    Cost
    At April 1, 2010    $  4,212   $ 28,489   $ 14,397
    Additons                 767      1,104      2,355
    Other movements(1)         -     (1,080)     1,080
    ---------------------------------------------------
    At June 30, 2010       4,979     28,513     17,832
    ---------------------------------------------------
    ---------------------------------------------------

    Amortization and
     impairment loss
    At April 1, 2010    $  1,564   $ 18,384   $  4,453
    Amortization             408      1,426        958
    Other movements(1)         -          -          -
    ---------------------------------------------------
    At June 30, 2010       1,972     19,810      5,411
    ---------------------------------------------------
    ---------------------------------------------------

    Net carrying amount
    At June 30, 2010       3,007      8,703     12,421
    ---------------------------------------------------
    ---------------------------------------------------

                                           Three months ended June 30, 2010
    -------------------------------------------------------------------------
                                        Acquisition of businesses      Total
                      -------------------------------------------- ----------
                                                         Customer
                                 Proprietary     Brand   relation-
                       Contracts    software     names      ships
    -------------------------------------------------------------------------
    Cost
    At April 1, 2010    $    438   $ 70,500   $ 10,900   $229,335   $358,271
    Additons                   -          -          -          -      4,226
    Other movements(1)         -          -          -          -          -
    -------------------------------------------------------------------------
    At June 30, 2010         438     70,500     10,900    229,335    362,497
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization and
     impairment loss
    At April 1, 2010    $     73   $ 18,981   $  2,363   $ 32,790   $ 78,608
    Amortization             273      1,833        182      4,871      9,951
    Other movements(1)         -          -          -          -          -
    -------------------------------------------------------------------------
    At June 30, 2010         346     20,814      2,545     37,661     88,559
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At June 30, 2010          92     49,686      8,355    191,674    273,938
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

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


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

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

    Net carrying amount
    At June 30, 2009    $      -   $ 42,271   $  9,084   $ 72,343   $136,905
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Other movements during the period primarily relate to fully amortized
        assets removed from the accounts.


                        Six months ended June 30, 2010
    ---------------------------------------------------
                       Contracts              Software
                       ---------  ---------------------
                                            Internally
                                  Purchased  developed
    ---------------------------------------------------
    Cost
    At January 1, 2010  $  6,799   $ 29,814   $ 14,126
    Additions              1,717      1,983      3,628
    Other movements(1)    (3,537)    (3,284)        78
    ---------------------------------------------------
    At June 30, 2010       4,979     28,513     17,832
    ---------------------------------------------------
    ---------------------------------------------------

    Amortization and
     impairment loss
    At January 1, 2010  $  4,693   $ 19,261   $  4,674
    Amortization             816      2,753      1,739
    Other movements(1)    (3,537)    (2,204)    (1,002)
    ---------------------------------------------------
    At June 30, 2010       1,972     19,810      5,411
    ---------------------------------------------------
    ---------------------------------------------------

    Net carrying amount
    At June 30, 2010    $  3,007   $  8,703   $ 12,421
    At December 31,
     2009               $  2,106   $ 10,553   $  9,452
    ---------------------------------------------------
    ---------------------------------------------------


                                              Six months ended June 30, 2010
    -------------------------------------------------------------------------
                                        Acquisition of businesses      Total
                      -------------------------------------------- ----------
                                                         Customer
                                 Proprietary     Brand   relation-
                       Contracts    software     names      ships
    -------------------------------------------------------------------------
    Cost
    At January 1, 2010  $    438   $ 70,500   $ 10,900   $232,935   $365,512
    Additions                  -          -          -          -      7,328
    Other movements(1)         -          -          -     (3,600)   (10,343)
    -------------------------------------------------------------------------
    At June 30, 2010         438     70,500     10,900    229,335    362,497
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization and
     impairment loss
    At January 1, 2010  $     37   $ 17,149   $  2,180   $ 27,744   $ 75,738
    Amortization             309      3,665        365      9,917     19,564
    Other movements(1)         -          -          -          -     (6,743)
    -------------------------------------------------------------------------
    At June 30, 2010         346     20,814      2,545     37,661     88,559
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At June 30, 2010    $     92   $ 49,686   $  8,355   $191,674   $273,938
    At December 31,
     2009               $    401   $ 53,351   $  8,720   $205,191   $289,774
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

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


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

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

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

    (1) Other movements for the six months ended June 30, 2010 reflect fully
        amortized assets removed from the accounts and reclassification from
        intangibles to goodwill of certain Resolve customer relationship
        intangibles in connection with the purchase price adjustment relating
        to the Resolve acquisition.

    7.  GOODWILL

                                                       June 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

    Balance, beginning of period                   $   519,848   $   458,989
    Goodwill acquired during the period:
      Cyence                                                 -        (1,417)
      Resolve                                              516        63,632
      Filogix                                                -        (1,356)
    -------------------------------------------------------------------------
    Balance, end of period                         $   520,364   $   519,848
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    A net adjustment of $0.5 million was made to goodwill in Resolve
    during the first six months of 2010. An adjustment of $2.6 million
    recorded during the first quarter of 2010 related to the reclassification
    of certain customer relationship contracts from intangibles to goodwill.
    This was partially offset by an adjustment to goodwill during the second
    quarter of 2010 of $2.1 million relating to changes in the estimated tax
    attributes of Resolve resulting from information that became available
    during the period.

    8.  LONG-TERM INDEBTEDNESS

                                                       June 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

    Non-revolving term loan                        $   130,000   $   190,000
    Drawings under revolving credit facility            30,000        20,000
    -------------------------------------------------------------------------
                                                       160,000       210,000
    Series A 5.99% Bonds due June 30, 2017              50,000             -
    -------------------------------------------------------------------------
                                                       210,000       210,000
    Deferred finance costs                              (3,098)       (1,537)
    -------------------------------------------------------------------------
                                                   $   206,902   $   208,463
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at June 30, 2010, the Fund had $220 million of available senior
    secured credit facilities consisting of a non-revolving term loan of $130
    million and a revolving term credit facility of $90 million each maturing
    on June 30, 2013. As of June 30, 2010, $30 million was drawn under the
    revolving term credit facility. The credit facilities do not require the
    Fund to make any principal payments prior to June 30, 2013. The credit
    facilities bear interest at rates that depend on certain financial ratios
    of the Fund and vary in accordance with borrowing rates in Canada. The
    credit facilities, including any hedge contracts and cash management
    facilities provided by the lenders, are guaranteed by all entities within
    the Fund's corporate structure and are secured in first priority by
    substantially all of the Fund's assets and by a pledge of the Fund's
    indirect ownership interests in Davis + Henderson L.P. and its other
    operating subsidiary entities. The Credit Agreement contains a number of
    covenants and restrictions including the requirement to meet certain
    financial ratios and financial condition tests and, as at June 30, 2010,
    the Fund was in compliance with all of its financial covenants and
    financial condition tests. The carrying value of long-term bank
    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 Fund has $50.0 million of Bonds issued under the senior secured
    Note Purchase and Private Shelf Agreement at a fixed-interest rate of
    5.99% until maturity on June 30, 2017. The Bonds rank equally in all
    respects with amounts outstanding under the Credit Agreement and any
    related hedging contracts and cash management facilities and benefit from
    the same financial covenants that exist under the Credit Agreement
    described above.

    Deferred finance costs relate to amendments to the Credit Agreement and
    entering into of the Note Purchase and Private Shelf Agreement dated June
    30, 2010. Amortization of deferred finance costs during the three months
    ended June 30, 2010 was $0.3 million (Q2 2009 - $0.1 million) and the six
    months ended June 30, 2010 was $0.6 million (six months ended June 30,
    2009 - $0.1 million). Amortization of deferred finance costs is
    recognized over the terms of the credit facilities and Bonds as interest
    expense using the effective interest method. During the three months
    ended June 30, 2010, certain unamortized financing fees of $0.4 million
    were written off in connection with the renewal of the credit facilities
    and changes in the syndicate. The remaining balance is amortized over the
    term of the renewed facilities.

    In addition to the credit facilities and Bonds described above, the Fund
    also has unsecured obligations outstanding pursuant to letters of credit
    and performance guarantees aggregating to $5 million.

    9.  FINANCIAL INSTRUMENTS

    Recognition and Measurement

    The Fund's financial instruments consist of cash and cash equivalents,
    accounts receivable, accounts payable and accrued liabilities,
    distributions payable to unitholders, interest-rate swaps, foreign
    exchange contracts, long-term indebtedness and Bonds. The Fund does not
    enter into financial instruments for trading or speculative purposes. As
    such, financial assets are classified as held to maturity, 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. 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 interest method.

    Credit Risk

    The Fund's financial assets that are exposed to credit risk consist
    primarily of cash and cash equivalents, accounts receivable, foreign
    exchange contracts 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 and foreign exchange contracts.
    Risks associated with concentrations of credit risk with respect to
    accounts receivable, foreign exchange contracts and interest-rate swaps
    are limited due to the credit rating of the applicable customers serviced
    by the Fund and hedge counterparties utilized by the Fund and by the
    generally short payment terms and frequent settlement of foreign exchange
    and 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, 2010. As the sensitivity is hypothetical, it
    should be used with caution.

                                    Three months ended      Six months ended
                                         June 30, 2010         June 30, 2010
    -------------------------------------------------------------------------
                                  + 100 bps  - 100 bps  + 100 bps  - 100 bps
    -------------------------------------------------------------------------
    Increase (decrease) in
     interest expense             $     (87) $      87  $    (174) $     174
    Change to net unrealized
     (gain) loss on interest-
     rate swaps                      (5,200)     5,200     (5,200)     5,200
    -------------------------------------------------------------------------

    Increase (decrease) in
     net income                   $   5,287  $  (5,287) $   5,374  $  (5,374)
    -------------------------------------------------------------------------

    Increase (decrease) in
     total comprehensive income   $   5,287  $  (5,287) $   5,374  $  (5,374)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Fund manages its interest-rate risks through the use of interest-rate
    swaps for some of its outstanding long-term indebtedness and by way of
    the issuance of fixed-interest rate Bonds.

    As at June 30, 2010, the following fixed-paying interest-rate swaps were
    outstanding:

    -------------------------------------------------------------------------
                                                  Fair value of
                                            interest-rate swaps
                                       -------------------------    Interest
    Maturity date     Notional Amount        Asset    Liability       rate(1)
    -------------------------------------------------------------------------
    July 15, 2010          $   33,000   $        -   $      349       4.815%
    January 5, 2011            22,000            -          191       1.980%
    June 15, 2011              20,000            -          847       4.685%
    June 15, 2011              25,000            -        1,059       4.685%
    December 18, 2014          25,000            -          339       2.720%
    March 18, 2015             25,000            -          538       2.940%
    March 20, 2017             25,000            -          745       3.350%
    March 20, 2017             20,000            -          616       3.366%
    -------------------------------------------------------------------------
                           $  195,000   $        -   $    4,684
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The listed interest rates exclude bankers' acceptance fees and prime-
        rate spreads currently in effect. Such fees and spreads could
        increase or decrease depending on the Fund's financial leverage as
        compared to certain levels specified in the Credit Agreement. As of
        June 30, 2010, the Fund's long-term bank indebtedness was subject to
        bankers' acceptance fees of 2.50% over the applicable BA rate and
        prime rate spreads of 1.50% over the prime rate.

    The Fund is a party to foreign exchange contracts. As these foreign
    exchange contracts do not qualify for hedge accounting, the unrealized
    gain or loss is recorded as mark-to-market on derivative instruments in
    the consolidated statements of income. The following table lists the
    foreign exchange contracts as at June 30, 2010:

    -------------------------------------------------------------------------
                                          Fair value of foreign
                                             exchange contracts
                                       -------------------------    Exchange
    Maturity date     Notional Amount        Asset    Liability         rate
    -------------------------------------------------------------------------
    July 15, 2010          $      500   $        -   $       19       1.0271
    August 16, 2010               500            -           19       1.0272
    September 15, 2010            500            -           19       1.0273
    October 15, 2010              500            -           18       1.0275
    November 15, 2010             500            -           18       1.0278
    December 15, 2010             500            -           18       1.0282
    -------------------------------------------------------------------------
                           $    3,000   $        -   $      111
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following table presents a sensitivity analysis to changes in the
    foreign exchange between the Canadian and US dollar on the Fund for the
    three months ended June 30, 2010. As the sensitivity is hypothetical, it
    should be used with caution.

                                  Three months ended        Six months ended
                                       June 30, 2010           June 30, 2010
    -------------------------------------------------------------------------

                              + $0.05 CAD -$0.05 CAD  + $0.05 CAD -$0.05 CAD
                                  Per USD    Per USD      Per USD    Per USD
    -------------------------------------------------------------------------
    Increase (decrease) in
     net income                 $     111  $    (111)   $     197  $    (197)
    Unrealized gain (loss) on
     mark-to-market on foreign
     exchange contracts              (150)       150         (150)       150
    -------------------------------------------------------------------------

    Total increase (decrease)
     in net income              $      39  $     (39)   $     (47) $      47
    -------------------------------------------------------------------------

    Increase (decrease) in
     total comprehensive
     income                     $      39  $     (39)   $     (47) $      47
    -------------------------------------------------------------------------

    Liquidity Risk

    The Fund has outstanding long-term bank indebtedness of $160 million with
    a maturity date of June 30, 2013 and fixed-interest-rate Bonds of $50
    million maturing June 30, 2017. 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 financing arrangements. To
    enhance its liquidity position, in prior years the Fund has made numerous
    voluntary payments on its outstanding long-term indebtedness and a
    portion of its committed term credit facilities remain undrawn. Further,
    the Credit Agreement and the Note Purchase and Private Shelf Agreement
    provide for additional uncommitted credit arrangements of up to $150
    million and Bonds (under an uncommitted shelf facility) of up to $30
    million with the use of these arrangements subject to the prior approval
    of the relevant lenders and fees, spreads and other terms to be
    negotiated at that time.

    Management measures liquidity risk through comparisons of current
    financial ratios with financial covenants contained in the Credit
    Agreement and the Note Purchase and Private Shelf Agreement.

    Fair Value Hierarchy

    The Fund values instruments carried at fair value using quoted market
    prices, where available. Quoted market prices represent a Level 1
    valuation. When quoted market prices are not available, the Fund
    maximizes the use of observable inputs within valuation models. When all
    significant inputs are observable, the valuation is classified as Level
    2. Valuations that require a significant use of unobservable inputs are
    considered Level 3. The following table outlines the fair value hierarchy
    of instruments carried at fair value:

                                                               June 30, 2010
    -------------------------------------------------------------------------
                                    Level 1    Level 2    Level 3      Total

    Assets:
      Derivative instruments      $       -  $       -  $       -  $       -
    -------------------------------------------------------------------------
                                  $       -  $       -  $       -  $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities:
      Derivative instruments      $       -  $   4,795  $       -  $   4,795
    -------------------------------------------------------------------------
                                  $       -  $   4,795  $       -  $   4,795
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Level 2 financial instruments recorded in the Fund's balance sheet
    include interest-rate swaps and foreign exchange contracts.

    Hedge Accounting

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

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

    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.

    10. OTHER LONG-TERM LIABILITIES

                                                       June 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------
    Deferred compensation program                  $     1,904   $       845

    Employee future benefits                             4,927         4,987
    Contractual supplier obligation                      1,302         1,319
    Capital lease                                            -            10
    -------------------------------------------------------------------------
                                                   $     8,133   $     7,161
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The deferred compensation program, which commenced on January 1, 2009, is
    a long-term incentive plan that includes a cash award component and a
    cash-settled unit-based compensation component. Both the cash component
    and the cash-settled unit-based compensation component awarded at the
    grant date are subject to a three year target for compound annual growth
    in adjusted income. An expense of $0.6 million was recorded in the
    consolidated statement of earnings for the three months ended June 30,
    2010 relating to the deferred compensation program (Q2 2009 -$0.2
    million) and $0.9 million for the six months ended June 30, 2010 (six
    months ended June 30, 2009 - $1.0 million).

    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 non-pension post-retirement benefit plans are
    defined benefit plans funded on a cash basis by contributions from the
    Fund, which covers certain medical costs of a limited number of
    employees. The Fund measures its accrued benefit obligations and the fair
    value of the plan for accounting purposes as at December 31 of each year.
    The latest actuarial valuation of the post-retirement benefit plan was
    performed as at December 31, 2009. The next valuation will be performed
    in 2010.

    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, 2010 was $0.7 million (Q2 2009 - $0.4 million) and
    for six months ended June 30, 2010 was $1.5 million (six months ended
    June 30, 2009 - $0.9 million).

    The contractual supplier obligation relates to payments to be made for a
    customized software package. The total liability is $1.3 million of which
    $0.3 million is recorded in current liabilities.

    11. INCOME TAXES

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

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

    Significant components of the Fund's future tax assets and liabilities
    with respect to differences between the consolidated carrying values and
    the related tax bases of the assets and liabilities within certain
    partnership, trust and corporate subsidiaries are as follows:

                                                       June 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------
    Future income tax assets:
      Capital assets less than tax values          $        83   $     2,935
      Intangible assets less than tax values            10,559        10,284
      Tax losses available for future periods           23,952        19,289
      Accrued and other liabilities                      4,737         6,088
    -------------------------------------------------------------------------
                                                        39,331        38,596
      Valuation allowance                              (14,314)      (13,897)
    -------------------------------------------------------------------------
      Total future tax asset                            25,017        24,699

    Future income tax liabilities:
      Capital assets greater than tax values             6,106         3,208
      Intangible assets greater than tax values         41,065        45,726
    -------------------------------------------------------------------------
      Total future tax liabilities                      47,171        48,934

    -------------------------------------------------------------------------
    Net future income tax liabilities              $    22,154   $    24,235
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Fund does not expect the temporary differences between the carrying
    amount and tax base of certain intangible assets to reverse in the
    foreseeable future and accordingly has reduced the related future income
    tax asset by a valuation allowance of $10,559.

    The Fund also does not expect to realize the benefit of certain loss
    carry-forwards of corporate subsidiaries in the foreseeable future
    and accordingly has not recognized a future income tax asset for such
    losses by recording a valuation allowance of $3,755.

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

    The provision for future income taxes of $416 in the consolidated
    statement of income represents the change in the consolidated net future
    income tax liabilities, excluding amounts that were recorded as an
    adjustment to goodwill. The effective tax rate for the period differs
    from the expected tax rate due to the results of operations of its
    corporate subsidiaries; and the change in temporary differences expected
    to reverse after 2010 for the Fund, its flow-through trust and
    partnership subsidiaries.

    As at June 30, 2010, certain corporate subsidiaries of the Fund had
    $87,238 of net operating losses for income tax purposes. These losses
    will begin to expire commencing in fiscal 2022. The deductibility of
    losses of a U.S. corporate subsidiary of $7,361 is subject to annual
    limitations.

    12. 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,
                                                          2010          2009
    -------------------------------------------------------------------------

    Balance, beginning of period                   $   595,859   $   476,343
    Units issued                                             -       119,516
    -------------------------------------------------------------------------
    Balance, end of period                         $   595,859   $   595,859
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Units outstanding, end of period                53,233,373    53,233,373
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The weighted average number of units outstanding during the three and six
    months ended June 30, 2010 was 53,233,373 (Q2 2009 - 43,946,792).

    13. CAPITAL

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

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

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

    The Fund's indebtedness is subject to a number of covenants and
    restrictions including the requirement to meet certain financial ratios
    and financial condition tests at a subsidiary level. One such ratio is
    the "Senior Funded Debt / EBITDA Ratio" as defined in the Credit
    Agreement. The maximum ratio allowed for a 12-month trailing period is
    2.50. For the 12- month trailing period ended June 30, 2010, this ratio
    was calculated at 1.37 (12-month trailing period ended June 30, 2009
    - 1.25). Management also uses this ratio as a key indicator in managing
    the Fund's capital.

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

    14. COMMITMENTS

    As at June 30, 2010, the Fund has lease obligations with respect to real
    estate, vehicles and equipment as follows:

    2010                                                               6,922
    2011                                                               8,880
    2012                                                               7,597
    2013                                                               6,949
    2014                                                               6,004
    Thereafter                                                         6,915
    -------------------------------------------------------------------------
                                                                      43,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. SIGNIFICANT CUSTOMERS

    For the three months ended June 30, 2010, the Fund earned 65% of its
    consolidated revenue from its seven largest customers (Q2 2009 - 75%).
    For the three months ended June 30, 2010, two of these customers
    individually accounted for greater than 10%, but not more than 15% of the
    Fund's total revenue (for the three months ended June 30, 2009, three of
    these customers individually accounted for greater than 10%, but no more
    than 17% of the Fund's total revenue).

    For the six months ended June 30, 2010, the Fund earned 64% of its
    consolidated revenue from its seven largest customers (Q2 2009 - 76%).
    For the six months ended June 30, 2010, two of these customers
    individually accounted for greater than 10%, but not more than 14% of the
    Fund's total revenue (for the six months ended June 30, 2009, three of
    these customers individually accounted for greater than 10%, but no more
    than 17% of the Fund's total revenue).

    16. SEGMENTED INFORMATION

    The Fund had previously operated and reported upon two business segments,
    the "D+H Segment" and the "Filogix Segment". Subsequent to the completion
    of the Resolve acquisition, the Fund announced that it would move to a
    single integrated operation in order to better serve customers and
    maximize effectiveness. The business is now managed along functional
    lines and operating decisions and performance assessment is aligned with
    these functions. As such, the Fund will report its business as a single
    segment and prior year segment information has been restated to conform
    to the current year's presentation.

    Revenue pertaining to major service areas for the three and six months
    ended June 30, 2010 and 2009 are as follows:

                                    Three months ended      Six months ended
                                           June 30,              June 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    Revenue
      Programs to the chequing
       account                    $  74,660  $  72,972  $ 147,825  $ 144,531
      Loan servicing                 30,365          -     60,034          -
      Loan registration
       technology services           28,338      1,178     51,185      1,942
      Lending technology services    20,852     18,619     37,942     32,821
      Other                          14,519      1,788     30,167      3,792

    -------------------------------------------------------------------------
                                  $ 168,734  $  94,557  $ 327,153  $ 183,086
    -------------------------------------------------------------------------

    17. COMPARATIVE FIGURES

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



    SUPPLEMENTARY FINANCIAL INFORMATION

    Consolidated Operating Results by Period
    -------------------------------------------------------------------------
                           Three      Three      Three      Three      Three
                          months     months     months     months     months
                           ended      ended      ended      ended      ended
    (in thousands of        June      March   December  September       June
     Canadian dollars,        30,        31,        31,        30,        30,
     unaudited)             2010       2010       2009       2009       2009
    -------------------------------------------------------------------------
    Revenue            $ 168,734  $ 158,419  $ 156,215  $ 142,463  $  94,557
    Expenses             125,637    120,957    119,671    104,879     62,080
    -------------------------------------------------------------------------
    EBITDA(1)             43,097     37,462     36,544     37,584     32,477

    Amortization of
     capital assets
     and non-
     acquisition
     intangibles           5,003      4,706      4,551      4,530      3,679
    Interest expense       3,692      3,374      3,326      2,681      1,787
    -------------------------------------------------------------------------
    Adjusted income(1)    34,402     29,382     28,667     30,373     27,011

    Amortization of mark-
     to-market adjustment
     of interest-rate
     swaps                   103        189        103        103        136
    Net unrealized loss
     (gain) on derivative
     instruments(2)        1,694     (1,559)    (1,620)    (1,647)    (1,069)
    Future income tax
     expense (recovery)      416        587     (2,747)     1,018       (718)
    Amortization of
     intangibles from
     acquisition           7,158      7,097      7,330      5,942      3,441
    -------------------------------------------------------------------------

    Net income         $  25,031  $  23,068  $  25,601  $  24,957  $  25,221
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows from
     operating
     activities        $  36,613  $  20,981  $  40,575  $  38,959  $  27,173
    Changes in non-cash
     working capital
     other items(3)        2,792     13,107     (7,356)    (4,056)     3,517
    -------------------------------------------------------------------------
    Adjusted cash flows
     from operating
     activities           39,405     34,088     33,219     34,903     30,690

    Less:
      Asset expenditures
       and contract
       payments(4)         5,293      3,976      5,133      2,818      2,491

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

    Adjusted cash flows
     after capital asset
     expenditures and
     contract payments    34,112     30,112     28,086     32,085     28,199

    Distributions paid
     to unitholders       24,482     24,482     24,482     23,058     20,211
    -------------------------------------------------------------------------
                           9,630      5,630      3,604      9,027      7,988

    Cash flows provided
     by (used in) other
     financing
     activities           (7,564)     5,000     (6,000)    (5,569)    (2,000)
    Fair value of trust
     units issued              -          -          -    119,394          -
    Fair value of
     acquisitions              -          -     (1,449)  (129,682)       103
    Changes in non-cash
     working capital and
     other items(3)       (2,792)   (13,107)     7,356      4,056     (3,517)
    -------------------------------------------------------------------------
    Increase (decrease)
     in cash and cash
     equivalents for
     the period        $    (726) $  (2,477) $   3,511  $  (2,774) $   2,574
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) EBITDA and Adjusted income are non-GAAP terms. See Non-GAAP Measures
        for a more complete description of these terms.
    (2) The Business enters into derivative contracts to fix the interest
        rates and foreign exchange rates on a significant portion of its
        outstanding bank debt and foreign currency transactions, which are
        relatively minor, respectively. For accounting purposes, these
        derivative instruments do not qualify for hedge accounting treatment
        and, accordingly, any change in the fair value of these contracts is
        recorded through income. Provided the Business does not cancel its
        derivative contracts prior to maturity, the amounts represent a non-
        cash unrealized gain or loss that will subsequently reverse through
        income. The Company has historically held its derivative contracts to
        maturity.
    (3) 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 and to remove certain of
        the payments related to the acquisition and related restructuring
        activities that were recorded as part of the acquisition. For
        details, see the Changes in Non-Cash Working Capital and Other Items
        section.
    (4) Asset expenditures include both maintenance asset expenditures and
        growth asset expenditures. Maintenance asset expenditures are defined
        by the Fund as asset expenditures necessary to maintain and sustain
        the current productive capacity of the Business or generally improve
        the efficiency of the Business. Growth asset expenditures are defined
        by the Fund as asset expenditures that increase the productive
        capacity of the Business with a reasonable expectation of an increase
        in cash flow.


    -------------------------------------------------------------------------
                           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)             2010       2010       2009       2009       2009
    -------------------------------------------------------------------------
    Adjusted income
     per unit, basic
     and diluted       $  0.6462  $  0.5519  $  0.5385  $  0.6002  $  0.6146
    Net income per
     unit, basic and
     diluted           $  0.4702  $  0.4333  $  0.4809  $  0.4931  $  0.5739
    Adjusted cash
     flows from
     operating
     activities        $  0.7402  $  0.6403  $  0.6240  $  0.6897  $  0.6983
    Adjusted cash
     flows after
     capital asset
     expenditures
     and contract
     payments          $  0.6408  $  0.5657  $  0.5276  $  0.6340  $  0.6417
    Distributions paid
     to unitholders    $  0.4599  $  0.4599  $  0.4599  $  0.4599  $  0.4599
    Distributions
     declared during
     period            $  0.4599  $  0.4599  $  0.4599  $  0.4599  $  0.4599
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Condensed Consolidated Balance Sheet

    -------------------------------------------------------------------------
    (in thousands of        June      March   December  September       June
     Canadian dollars,        30,        31,        31,        30,        30,
     unaudited)             2010       2010       2009       2009       2009
    -------------------------------------------------------------------------

    Cash and cash
     equivalents       $     675  $   1,401  $   3,878  $     367  $   3,141
    Other current
     assets               89,034     88,247     72,878     85,242     30,078
    Capital and other
     non-current assets   54,591     52,848     55,177     61,122     24,121
    Intangible assets    273,938    279,663    289,774    293,623    136,905
    Goodwill             520,364    522,482    519,848    516,374    457,636

    -------------------------------------------------------------------------
                       $ 938,602  $ 944,641  $ 941,555  $ 956,728  $ 651,881
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Payables and other
     current
     liabilities       $  87,499  $ 159,873  $  87,463  $  93,385  $  36,745
    Other long-term
     liabilities          69,483     66,942     70,338     75,165     15,691
    Long-term
     indebtedness        206,902    143,760    208,463    214,109    145,470
    Unitholders'
     equity              574,718    574,066    575,291    574,069    453,975

    -------------------------------------------------------------------------
                       $ 938,602  $ 944,641  $ 941,555  $ 956,728  $ 651,881
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Distribution History
    -------------------------------------------------------------------------
                                                    Distributions per unit(1)
    Month                       2010      2009      2008      2007      2006
    -------------------------------------------------------------------------
    January                 $ 0.1533  $ 0.1533  $ 0.1430  $ 0.1280  $ 0.1220
    February                  0.1533    0.1533    0.1430    0.1280    0.1220
    March                     0.1533    0.1533    0.1430    0.1320    0.1250
    April                     0.1533    0.1533    0.1430    0.1320    0.1250
    May                       0.1533    0.1533    0.1533    0.1320    0.1250
    June                      0.1533    0.1533    0.1533    0.1320    0.1250
    July                                0.1533    0.1533    0.1320    0.1250
    August                              0.1533    0.1533    0.1320    0.1250
    September                           0.1533    0.1533    0.1320    0.1250
    October                             0.1533    0.1533    0.1320    0.1250
    November(2)                         0.1533    0.1533    0.3430    0.1280
    December(3)                         0.1533    0.1933    0.1430    0.1280
    -------------------------------------------------------------------------
                            $ 0.9198  $ 1.8396  $ 1.8384  $ 1.7980  $ 1.5000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                    Distributions per unit(1)
    Month                       2005      2004      2003      2002      2001
    -------------------------------------------------------------------------
    January                 $ 0.1200  $ 0.1150  $ 0.1117  $ 0.1083  $      -
    February                  0.1200    0.1150    0.1117    0.1083    -
    March                     0.1200    0.1168    0.1117    0.1083    -
    April                     0.1200    0.1168    0.1133    0.1083    -
    May                       0.1200    0.1168    0.1133    0.1083    -
    June                      0.1200    0.1168    0.1133    0.1083    -
    July                      0.1200    0.1168    0.1133    0.1117    -
    August                    0.1220    0.1168    0.1133    0.1117    -
    September                 0.1220    0.1168    0.1133    0.1117    -
    October                   0.1220    0.1168    0.1150    0.1117    -
    November(2)               0.1220    0.1200    0.1150    0.1117    -
    December(3)               0.1220    0.1200    0.1150    0.1117    0.0427

    -------------------------------------------------------------------------
                            $ 1.4500  $ 1.4044  $ 1.3599  $ 1.3200  $ 0.0427
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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


     Tax Allocation of Distributions

    -------------------------------------------------------------------------
                                2010      2009      2008      2007      2006

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

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

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


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

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

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

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

    The above tax allocation of distributions for 2010 represents an estimate
    based on the total expected distributions for the year ended December 31,
    2010.


    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
    -------------------------------------------------------------------------
    2010 - Q2    18.46      15.16      16.58        118     53,233   882,609
         - Q1    18.00      15.59      17.71        161     53,233   942,763
    2009 - Q4    16.92      14.05      16.92        177     53,233   900,709
         - Q3    14.99      12.25      14.90        182     53,233   793,177
         - Q2    14.29      11.51      12.25        126     43,947   538,348
         - Q1    16.76      10.40      11.92        104     43,947   523,846
    2008 - Q4    17.15      10.30      16.79        117     43,947   737,867
         - Q3    16.40      13.50      15.47         93     43,947   679,857
         - 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 is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Davis + Henderson Income Fund is listed on the Toronto Stock Exchange under the symbol DHF.UN. Further information can be found in the disclosure documents filed by Davis + Henderson Income Fund with the securities regulatory authorities, available at www.sedar.com.

%SEDAR: 00017092EF

SOURCE DH Corporation

For further information: For further information: Bob Cronin, Chief Executive Officer, Davis + Henderson, Limited Partnership, (416) 696-7700, extension 5301, bob.cronin@dhltd.com; Brian Kyle, Chief Financial Officer, Davis + Henderson, Limited Partnership, (416) 696-7700, extension 5690, brian.kyle@dhltd.com


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