Davis + Henderson Reports Third Quarter 2008 Results



    
    Davis + Henderson reported solid financial results for the three and
    nine months ended September 30, 2008.

    TSX Stock Symbol: "DHF.UN".

    Website: www.dhltd.com
    

    TORONTO, Oct. 28 /CNW/ -

    
    Third Quarter Highlights

    -   Revenue in the third quarter of 2008 was $97.3 million, an increase
        of $2.6 million, or 2.8%, compared to $94.7 million in the same
        quarter in 2007.

    -   Net income increased 11.6% to $0.5303 per unit compared to the same
        period last year. Excluding the non-cash impact of unrealized gains
        and losses on interest-rate swaps and the charge for future income
        taxes, net income was 10.3% higher compared to a year ago.

    -   Declared distributions in the third quarter of 2008 of $0.4599 per
        unit were 16.1% higher than in the third quarter of 2007.

    Nine-Month Highlights

    -   Revenue for the nine-month period ending September 30, 2008 was
        $283.7 million, a decrease of $4.1 million, or 1.4%, compared to
        $287.8 million in the same period in 2007. This year-over-year
        decrease reflects lower revenues in the D+H Segment in the first
        six months of 2008, partially offset by increases in the Filogix
        Segment. The lower level of revenue within the D+H Segment was
        primarily attributed to reduced cheque order volumes as compared to
        the unusually strong order volumes in 2007.

    -   Net income per unit decreased by 1.7% to $1.4680, compared to the
        first nine months of 2007. Excluding the non-cash impact of
        unrealized gains and losses on interest-rate swaps and the charge for
        future income taxes, net income was 2.8% higher than a year ago.

    -   Declared distributions for the first nine months of 2008 of
        $1.3385 per unit were 13.4% higher than in the first nine months of
        2007.
    

    Management Commentary

    The Business performed well during the third quarter of 2008 as revenue
growth in the D+H Segment returned and our Filogix Segment delivered revenues
above our expectations. The positive contribution from the continued expansion
of our customer programs and effective cost management allowed the Business to
produce strong cash flow for our unitholders.
    In the D+H Segment, we benefited from the contribution of our IDefence(R)
and BizAssist(R) programs and from our annual product repositioning
initiatives earlier in the year. Through the early part of the year, the
benefit of these initiatives was offset by lower cheque order volumes compared
to 2007. As reported previously, cheque order volumes within the Business
fluctuated outside of normal patterns during much of 2007, when we had higher
order volumes than normally expected, and throughout the first six months of
2008, when we had reduced order volumes. In both cases, these variances were
primarily related to changes in Canadian cheque imaging initiatives.
    Within our Filogix Segment, increased revenues in several areas
contributed to modest year-over-year growth. We are pleased with the Filogix
Segment performance, which was achieved despite the softening from a
previously strong real estate market.
    Davis + Henderson remains committed to its long-term financial objective
of delivering stable and modestly growing distributions based on achieving
annual revenue growth in the 3% to 5% range. Financial results may, however,
be more variable and negatively affected in the short term given the
uncertainty in many markets. Historically cheque order volumes, which generate
approximately 80% of our consolidated revenues, have not varied significantly
with changes in economic activity. Origination and underwriting revenues
within the Filogix Segment are however likely to be negatively impacted by
changes in the economy and in the real estate and mortgage markets.
    For a more detailed discussion of third quarter results and management's
outlook, please see Management's Discussion and Analysis.

    Caution Concerning Forward-Looking Statements

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

    Conference Call

    Davis + Henderson will discuss its financial results for the third
quarter ended September 30, 2008 via conference call at 10:00 a.m. EST
(Toronto time) on Wednesday October 29, 2008. The number to use for this call
is 416-644-3416 for Toronto area callers or 1-800-733-7560 for all other
callers. The conference call will be hosted by Bob Cronin, Chief Executive
Officer and by Catherine Martin, Chief Financial Officer. The conference call
will also be available on the web by accessing CNW Group's website
www.newswire.ca/webcast/. For anyone unable to listen to the scheduled call,
the rebroadcast number is: 416-640-1917 for Toronto area callers, or
1-877-289-8525 for all other callers, with reservation number 21284339
followed by the number sign. The rebroadcast will be available until
Wednesday, November 12, 2008. An archive recording of the conference call will
also be available at the above noted web address for one month following the
call and a text version of the call will be available at www.dhltd.com

    ADDITIONAL INFORMATION

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

    MANAGEMENT'S DISCUSSION AND ANALYSIS

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

    STRATEGY

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

    FINANCIAL INFORMATION PRESENTATION

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

    OPERATING RESULTS FOR THE THIRD QUARTER - CONSOLIDATED

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

                                        Three months             Nine months
                                               ended                   ended
                               September   September   September   September
                                30, 2008    30, 2007    30, 2008    30, 2007
    -------------------------------------------------------------------------
    Revenue                   $   97,320  $   94,676  $  283,671  $  287,817
    Cost of sales and
     operating expenses(1)        64,043      63,813     189,606     195,341
    Amortization of capital
     and other assets(1)           3,938       3,496      10,780      10,205
    -------------------------------------------------------------------------
                                  29,339      27,367      83,285      82,271

    Interest expense               1,841       1,982       5,610       6,333
    Net unrealized loss (gain)
     on interest-rate swaps          728         957       2,038      (1,563)
    Amortization of
     intangible assets             3,412       3,347      10,307       9,912
    Minority interest                  -         205           -         518
    -------------------------------------------------------------------------
    Income before income taxes    23,358      20,876      65,330      67,071

    Future income tax expense
     (recovery)                       52           -         818       1,454
    -------------------------------------------------------------------------
    Net income                $   23,306  $   20,876  $   64,512  $   65,617
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income per unit,
     basic and diluted        $   0.5303  $   0.4750  $   1.4680  $   1.4931
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Historically, the Business has reported amortization related to
        production assets used to manufacture finished products as part of
        amortization of capital and other assets. Commencing January 1, 2008,
        the Fund has included this amortization with cost of sales and
        operating expenses in order to present the total costs incurred in
        the manufacturing process in cost of sales. The comparative numbers
        for previous periods have been reclassified to conform to this new
        presentation format. Amortization included in cost of sales and
        operating expenses during the third quarter of 2008 was $354
        (Q3 2007 - $388) and $1,177 for the nine months ended September 30,
        2008 (nine months ended September 30, 2007 - $1,130 ).
    


    Revenue

    Revenue for the third quarter of 2008 was $97.3 million, an increase of
$2.6 million, or 2.8%, when compared to the third quarter of 2007. For the
first nine months of 2008, total revenue decreased by $4.1 million, or 1.4%,
compared to the first nine months of 2007. While results for both segments are
discussed in more detail in the sections that follow, during the third quarter
of 2008 revenue growth within the D+H Segment returned as cheque order volumes
moved to levels directionally more in line with those historically
experienced. During the first six months of 2008, declines in cheque order
volumes were elevated due to the shift in reorder cycles as described in more
detail below.

    Cost of Sales and Operating Expenses

    On a consolidated basis, cost of sales and operating expenses for the
third quarter of 2008 increased by $0.2 million, or 0.4%, compared to the
third quarter of 2007 with small cost reductions within the D+H Segment
partially offsetting cost increases with the Filogix Segment and with both
business units continuing to focus on cost containment initiatives. For the
first nine months of 2008, consolidated cost of sales and operating expenses
decreased by $5.7 million, or 2.9%, when compared to the first nine months of
2007. This decline during the first nine months of 2008 was primarily driven
by reduced costs related to the decline in cheque order volumes in the D+H
Segment, partially offset by increased costs in the Filogix Segment, as more
fully described below.
    While Davis + Henderson operates primarily in Canada, the Business also
services a U.S. subsidiary of one of its Canadian customers. All revenue and
substantially all expenses relating to the U.S. cheque supply program are
contracted for in U.S. dollars. As the net U.S. dollar contribution from this
activity is relatively modest, the change in relative dollar valuations has
not had a meaningful impact on the results of the Business.

    Amortization of Capital and Other Assets

    Amortization of capital and other assets on a consolidated basis during
the third quarter of 2008 increased by $0.4 million, or 12.6%, to $3.9 million
compared to the same period in 2007. The increased capital asset amortization
was primarily a result of capital additions in the Filogix Segment.
    Similarly, for the first nine months of 2008, amortization of capital and
other assets on a consolidated basis was $10.8 million, an increase of
$0.6 million compared to the first nine months of 2007. Increased capital
asset amortization of $0.5 million in the D+H Segment and $0.1 million in the
Filogix Segment were related to capital additions.

    Other Expenses

    Interest expense decreased by $0.1 million for the third quarter of 2008
compared to the same quarter in the prior year, reflecting debt repayments
made over the past twelve months. Similarly, for the first nine months of
2008, interest expense was $0.7 million lower than the comparable 2007 period
due primarily to the lower level of outstanding debt.
    For the third quarter of 2008, an unrealized loss on interest-rate swaps
of $0.7 million (Q3 2007 - $1.0 million unrealized loss) was recorded
reflecting mark-to-market adjustments related to generally lower interest
rates at September 30, 2008 compared to June 30, 2008. For the nine months
ended September 30, 2008, an unrealized loss on interest-rate swaps of
$2.0 million was recorded (nine months ended September 30, 2007 - unrealized
gain of $1.6 million). These unrealized gains and losses were recognized in
income as, effective January 1, 2007, the Business no longer designated its
interest-rate swaps as hedges for accounting purposes.
    Amortization of intangibles increased by $0.1 million and $0.4 million,
compared with the third quarter and first nine months of 2007, respectively.
These increases were primarily related to the incremental intangible assets
arising on the acquisition of the remaining 25% interest in the AVS business
discussed below and the purchase of a customer service contract.
    Effective January 2, 2008, the Fund increased its ownership in AVS to
100%. As AVS is now a wholly-owned subsidiary, the Business no longer
recognizes minority interest as all earnings accrue to the Business.
    Income earned by the Business and distributed annually to unitholders is
not subject to taxation in the Business, but is taxed at the individual
unitholder level. The Fund and its subsidiaries do not anticipate being
subject to taxes until 2011, as long as all taxable income generated by the
Fund is paid to unitholders in the form of distributions. In 2011 and
subsequent years, the Fund will pay a tax on its income that is distributed to
its unitholders at a rate similar to that paid by taxable corporations. As the
new tax rules were enacted in June 2007, the Fund was required under Canadian
GAAP to recognize future income tax assets and liabilities, with a
corresponding impact on future income tax expense or recovery based on the
temporary differences expected to reverse after the date the tax is effective.
Accordingly, the Fund recognized a future income tax liability and the related
expense of $0.1 million during the third quarter of 2008 (Q3 2007 - nil) and
$0.8 million in the first nine months of 2008 (nine months ended September 30,
2007 - $1.5 million).
    With respect to delivery of products and services under its U.S. cheque
supply contract, the Business does not have a permanent establishment in the
U.S. for the purposes of determining tax liability and therefore does not have
U.S. income tax liability.

    Net Income

    Net income of $23.3 million for the third quarter of 2008 increased by
$2.4 million, or 11.6%, compared to the third quarter of 2007. On a per unit
basis, net income of $0.5303 per unit increased by $0.0553 per unit. For the
nine-month period ended September 30, 2008, net income was $64.5 million, or
$1.4680 per unit. This represents a decrease of $1.1 million, or $0.0251 per
unit, compared to the same period in 2007. Excluding the non-cash impact of
the mark-to-market losses on interest-rate swaps and the non-cash charge for
future income taxes, net income per unit increased year-over-year by 10.3% in
the third quarter of 2008 and 2.8% for the first nine months of 2008.

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

                                           Three  months ended September 30,
    -------------------------------------------------------------------------
                           Davis + Henderson Segment         Filogix Segment
                           -------------------------- -----------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenue                   $   78,449  $   77,164  $   18,871  $   17,512
    Percentage change               1.7%                    7.8%

    Cost of sales and
     operating expenses(2)        54,084      54,526       9,419       8,721
    Amortization of capital
     and other assets(2)           2,161       2,107       1,777       1,389
    -------------------------------------------------------------------------

                                  22,204      20,531       7,675       7,402
    Percentage change               8.1%                    3.7%

    Interest expense                   -           -           -           -
    Net unrealized loss (gain)
     on interest-rate swaps            -           -           -           -
    Amortization of
     intangible assets               724         864       2,688       2,483
    Minority interest                  -           -           -           -
    -------------------------------------------------------------------------

    Income (loss) before
     income taxes                 21,480      19,667       4,987       4,919
    Future income tax
     expense  (recovery)               -           -           -           -
    -------------------------------------------------------------------------

    Net income (loss)         $   21,480  $   19,667  $    4,987  $    4,919
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                           Three  months ended September 30,
    -------------------------------------------------------------------------
                                           Corporate            Consolidated
                           -------------------------- -----------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenue                   $        -  $        -  $   97,320  $   94,676
    Percentage change                  -                    2.8%

    Cost of sales and
     operating expenses(2)           540         566      64,043      63,813
    Amortization of capital
     and other assets(2)               -           -       3,938       3,496
    -------------------------------------------------------------------------

                                    (540)       (566)     29,339      27,367
    Percentage change              -4.6%                    7.2%

    Interest expense               1,841       1,982       1,841       1,982
    Net unrealized loss (gain)
     on interest-rate swaps          728         957         728         957
    Amortization of
     intangible assets                 -           -       3,412       3,347
    Minority interest                  -         205           -         205
    -------------------------------------------------------------------------

    Income (loss) before
     income taxes                 (3,109)     (3,710)     23,358      20,876
    Future income tax
     expense  (recovery)              52           -          52           -
    -------------------------------------------------------------------------

    Net income (loss)         $   (3,161) $   (3,710) $   23,306  $   20,876
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Effective January 1, 2008, the results of the PPSA program are
        included in the Filogix Segment. Prior to this date, the results were
        included in the Davis + Henderson Segment.
    (2) Historically, the Business has reported amortization related to
        production assets used to manufacture finished products as part of
        amortization of capital and other assets. Commencing January 1, 2008,
        the Fund has included this amortization with cost of sales and
        operating expenses in order to present the total costs incurred in
        the manufacturing process in cost of sales. The comparative numbers
        for previous periods have been reclassified to conform to this new
        presentation format. Amortization included in cost of sales and
        operating expenses during the third quarter of 2008 was $354 (Q3 2007
        - $388 ) for the Davis + Henderson Segment


                                             Nine months ended September 30,
    -------------------------------------------------------------------------
                           Davis + Henderson Segment         Filogix Segment
                           -------------------------- -----------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenue                   $  231,119  $  239,845  $   52,552  $   47,972
    Percentage change              -3.6%                    9.5%

    Cost of sales and
     operating expenses(2)       156,932     167,137      30,719      26,289
    Amortization of capital
     and other assets(2)           6,490       6,031       4,290       4,174
    -------------------------------------------------------------------------

                                  67,697      66,677      17,543      17,509
    Percentage change               1.5%                    0.2%

    Interest expense                   -           -           -           -
    Net unrealized loss (gain)
     on interest-rate swaps            -           -           -           -
    Amortization of
     intangible assets             2,171       2,463       8,136       7,449
    Minority interest                  -           -           -           -
    -------------------------------------------------------------------------

    Income (loss) before
     income taxes                 65,526      64,214       9,407      10,060
    Future income tax
     expense (recovery)                -           -           -           -
    -------------------------------------------------------------------------

    Net Income (loss)         $   65,526  $   64,214  $    9,407  $   10,060
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                             Nine months ended September 30,
    -------------------------------------------------------------------------
                                           Corporate            Consolidated
                           -------------------------- -----------------------
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenue                   $        -  $        -  $  283,671  $  287,817
    Percentage change                  -                   -1.4%

    Cost of sales and
     operating expenses(2)         1,955       1,915     189,606     195,341
    Amortization of capital
     and other assets(2)               -           -      10,780      10,205
    -------------------------------------------------------------------------

                                  (1,955)     (1,915)     83,285      82,271
    Percentage change               2.1%                    1.2%

    Interest expense               5,610       6,333       5,610       6,333
    Net unrealized loss (gain)
     on interest-rate swaps        2,038      (1,563)      2,038      (1,563)
    Amortization of
     intangible assets                 -           -      10,307       9,912
    Minority interest                  -         518           -         518
    -------------------------------------------------------------------------

    Income (loss) before
     income taxes                 (9,603)     (7,203)     65,330      67,071
    Future income tax
     expense  (recovery)             818       1,454         818       1,454
    -------------------------------------------------------------------------

    Net Income (loss)         $  (10,421) $   (8,657) $   64,512  $   65,617
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Effective January 1, 2008, the results of the PPSA program are
        included in the Filogix Segment. Prior to this date, the results were
        included in the Davis + Henderson Segment.
    (2) Historically, the Business has reported amortization related to
        production assets used to manufacture finished products as part of
        amortization of capital and other assets. Commencing January 1, 2008,
        the Fund has included this amortization with cost of sales and
        operating expenses in order to present the total costs incurred in
        the manufacturing process in cost of sales. The comparative numbers
        for previous periods have been reclassified to conform to this new
        presentation format. Amortization included in cost of sales and
        operating expenses during the first nine months of 2008 was $1,177
        (nine months ended September 30, 2007 - $1,130 ) for the Davis +
        Henderson Segment
    


    Operating Results - D+H Segment

    Revenue

    Revenue within the Davis + Henderson Segment for the third quarter of
2008 increased by $1.3 million, or 1.7%, compared with the same period in
2007. This increase is net of a $1.3 million reclassification of the PPSA
business to the Filogix Segment, which during 2007 was operated and reported
within the Davis + Henderson Segment. Excluding the impact of this
reclassification, there was a $2.6 million, or 3.4%, increase in revenues in
the third quarter of 2008, compared to the same period in 2007. This increase
was driven by successful cheque program initiatives, including annual program
changes and product and service enhancements such as IDefence and BizAssist
which positively impacted the quarter and the nine months ended September 30,
2008.
    For the nine-month period ended September 30, 2008, revenue within the
Davis + Henderson Segment decreased by $8.7 million, or 3.6%, compared to the
same period in 2007. Excluding the impact of the PPSA business
reclassification, there was a $5.3 million, or 2.3%, decrease in revenues.
This decrease for the nine-month period is primarily attributed to fewer
cheque orders received for the first six months of 2008 than in the same
period in 2007.
    Historically, cheque order volumes have, on average, declined annually by
low single digit percentages as a result of declining cheque usage. In the
first half of 2008, this decline was in excess of historical declines due to
changes in the imaging standards required for cheques produced in Canada,
which generated incremental and accelerated reorders in the first six months
of 2007. Management believes that many of these accelerated reorders received
in 2007 would otherwise have been received in 2008 pursuant to normal reorder
cycles. In the third quarter of 2008, cheque order volumes returned to levels
directionally more in line with those historically experienced. In general,
changes in the economic environment have not significantly impacted the
Business' cheque order volumes.

    Cost of Sales and Operating Expenses

    Expenses within the Davis + Henderson Segment decreased by $0.4 million,
or 0.8%, during the third quarter of 2008. This year-over-year expense
decrease was primarily related to the transfer of the PPSA business to the
Filogix Segment and an overall reduction in project costs and other costs
generally related to the PPSA business, partially offset by increased selling
and project implementation costs.
    For the nine months ended September 30, 2008, expenses within the Davis +
Henderson Segment decreased by $10.2 million, or 6.1%. A large part of the
year-over-year decrease was related to the decrease in cheque volumes in the
first six months of 2008 and other revenue-related reductions, including the
transfer of the PPSA business to the Filogix Segment, and an overall reduction
in project and other costs generally related to the PPSA business.

    Operating Results - Filogix Segment

    Revenue

    Total revenue for the third quarter of 2008 for the Filogix Segment
increased by $1.4 million, or 7.8%, over the same period in 2007. Excluding
the PPSA program, revenue increased $0.3 million, or 1.7%, compared with the
same quarter in 2007.
    Revenue for the first nine months of 2008 increased by $4.6 million, or
9.5%, over the same period in 2007. Excluding the PPSA program, revenue
increased by $1.4 million, or 2.8%, compared with the same first nine months
of 2007.
    A significant component of the Filogix Segment revenue is derived from
services related to the origination of mortgages. The volume of origination
transactions is driven by new mortgages and, in the case of broker-originated
transactions, by the refinancing and renewal of existing mortgages. As such,
while the Filogix Segment revenue is impacted by changes in housing market
activity, negative market impacts are partially mitigated by refinancing and
renewal activity.
    The increase in the third quarter revenues of 1.7% over the same period
in 2007, reflects relatively stable revenue across the various Filogix service
offerings. The nine month year-to-date revenue increase of 2.8% over 2007
reflects slightly higher professional fees, licensing revenue and other
transactional revenue reduced by slightly lower origination revenues (1.5%
year-to-date September). While the third quarter and year-to-date revenues
within the Filogix Segment have been affected by changing market conditions,
the market conditions will likely weaken, which will negatively impact Filogix
future revenues.

    Cost of Sales and Operating Expenses

    Direct and operating expenses for the Filogix Segment increased by
$0.7 million, or 8.0%, in the third quarter of 2008 compared with the same
period last year primarily due to the inclusion of the PPSA expense base.
Expense increases to fund product expansion activities were largely offset by
other expense reductions, including cost containment activities. For the nine
months ended September 30, 2008, compared to the same period in 2007, expenses
increased by $4.4 million, or 16.9%. The year-over-year increases in operating
costs include the expenses related to PPSA services recorded within the
Filogix Segment and a planned increase in expenditures in support of product
enhancements and strengthening the general delivery capabilities of the
Business.

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

                                                            2008
                                      Q3          Q2          Q1          Q4
    -------------------------------------------------------------------------
    Revenue                   $   97,320  $   97,263  $   89,088  $   90,934
    Cost of sales and
     operating expenses           64,043      63,357      62,206      64,582
    Amortization of capital
     and other assets              3,938       3,455       3,387       3,647
    -------------------------------------------------------------------------
                                  29,339      30,451      23,495      22,705
    Interest expense               1,841       1,906       1,863       1,876
    Net unrealized loss (gain)
     on interest-rate swaps          728      (1,034)      2,344         823
    Amortization of
     intangible assets             3,412       3,447       3,448       3,386
    Minority interest                  -           -           -        (139)
    -------------------------------------------------------------------------
    Income before income taxes    23,358      26,132      15,840      16,759
    Future income tax expense         52         766           -         137
    -------------------------------------------------------------------------
    Net income                $   23,306  $   25,366  $   15,840  $   16,622
    -------------------------------------------------------------------------
    Net income per unit       $   0.5303  $   0.5772  $   0.3604  $   0.3782
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     units outstanding            43,947      43,947      43,947      43,947
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                            2007        2006
                                      Q3          Q2          Q1          Q4
    -------------------------------------------------------------------------
    Revenue                   $   94,676  $  101,992  $   91,149  $   87,932
    Cost of sales and
     operating expenses           63,813      67,250      64,278      62,461
    Amortization of capital
     and other assets              3,496       3,368       3,341       3,475
    -------------------------------------------------------------------------
                                  27,367      31,374      23,530      21,996
    Interest expense               1,982       2,121       2,230       2,186
    Net unrealized loss (gain)
     on interest-rate swaps          957      (2,196)       (324)          -
    Amortization of
     intangible assets             3,347       3,271       3,294       3,254
    Minority interest                205         204         109          89
    -------------------------------------------------------------------------
    Income before income taxes    20,876      27,974      18,221      16,467
    Future income tax expense          -       1,454           -           -
    -------------------------------------------------------------------------
    Net income                $   20,876  $   26,520  $   18,221  $   16,467
    -------------------------------------------------------------------------
    Net income per unit       $   0.4750  $   0.6035  $   0.4146  $   0.3747
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     units outstanding            43,947      43,947      43,947      43,947
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


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

    CASH FLOW AND LIQUIDITY

    Non-GAAP Measures

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

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

                                        Three months             Nine months
                                               ended                   ended
                               September   September   September   September
                                30, 2008    30, 2007    30, 2008    30, 2007
    -------------------------------------------------------------------------

    Cash flows from operating
     activities               $   35,110  $   28,802  $   84,256  $   85,260

    Add:
      Changes in non-cash
       working capital and
       other items(1)             (3,169)        425       5,786       2,010
    -------------------------------------------------------------------------

    Adjusted cash flows from
     operating activities         31,941      29,227      90,042      87,270

    Less:
      Maintenance capital
       expenditures - D+H(2)         370       1,444       2,416       4,164
      Maintenance capital
       expenditures - Filogix(2)     378       1,261       1,645       3,385
      Growth capital
       expenditures(2)               969          68       1,635         251
      Contract payments(3)         1,310       1,825       2,827       3,342
    -------------------------------------------------------------------------

    Adjusted cash flows after
     capital expenditures
     and contract payments(2)     28,914      24,629      81,519      76,128

    Less:
      Distributions paid to
       unitholders                20,211      17,403      58,369      51,681
    -------------------------------------------------------------------------

                                   8,703       7,226      23,150      24,447

    Cash flows provided by
     (used in) other financing
     activities                   (5,000)     (5,000)    (10,000)    (15,000)
    Cash flows used in
     acquisition of businesses
     and customer service
     contracts                         -        (837)     (4,250)       (746)
    Changes in non-cash working
     capital and other items(1)    3,169        (425)     (5,786)     (2,010)
    Distributions paid to
     minority interest                 -        (255)          -        (255)
    -------------------------------------------------------------------------

    Increase in cash and cash
     equivalents for the
     period                   $    6,872  $      709  $    3,114  $    6,436
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Changes in non-cash working capital and certain other balance sheet
        items have been excluded from adjusted cash flows from operating
        activities so as to remove the effects of timing differences in cash
        receipts and cash disbursements, which generally reverse themselves
        but can vary significantly across quarters. Minority interest and
        changes to other long-term liabilities are deducted to arrive at
        adjusted cash flows. For details, see the Changes in Non-Cash Working
        Capital and Other Items section.

    (2) Maintenance capital expenditures are defined by the Fund as capital
        expenditures necessary to maintain and sustain the current productive
        capacity of the Business or generally improve the efficiency of the
        Business. Growth capital expenditures are defined by the Fund as
        capital expenditures that increase the productive capacity of the
        Business with a reasonable expectation of an increase in cash flow.

    (3) The Business has various payment obligations under customer
        contracts, which include fixed contract or program initiation
        payments and annual payments payable over the life of the contract.
        The aggregate of all contract payments, both fixed and variable,
        reflects, among other things, the high degree of integration and
        sharing between Davis + Henderson and the financial institutions of
        the many activities related to ordering, data handling, customer
        service and other activities undertaken by financial institutions
        related to the operation of the cheque supply and other programs.


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

                                                          Three months ended
                                           September   September
                                            30, 2008    30, 2007    % change
    -------------------------------------------------------------------------
    Adjusted cash flows from
     operating activities                 $   0.7268  $   0.6651        9.3%
    Adjusted cash flows after capital
     expenditures and contract payments   $   0.6579  $   0.5604       17.4%
    Distributions paid to unitholders     $   0.4599  $   0.3960       16.1%
    Distributions declared during period  $   0.4599  $   0.3960       16.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                           Nine months ended
                                           September   September
                                            30, 2008    30, 2007    % change
    -------------------------------------------------------------------------
    Adjusted cash flows from
     operating activities                 $   2.0489  $   1.9858        3.2%
    Adjusted cash flows after capital
     expenditures and contract payments   $   1.8549  $   1.7323        7.1%
    Distributions paid to unitholders     $   1.3282  $   1.1760       12.9%
    Distributions declared during period  $   1.3385  $   1.1800       13.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Cash Flows, Net Income and Distributions Paid

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

                                   Three        Nine
                                  months      months
                                   ended       ended              Year ended
    (in thousands of Canadian  September   September             December 31,
     dollars, unaudited)        30, 2008    30, 2008        2007        2006
    -------------------------------------------------------------------------

    Cash flows from operating
     activities               $   35,110  $   84,256  $  117,401  $   89,753

    Net income                $   23,306  $   64,512  $   82,239  $   66,529

    Adjusted net income(1)    $   27,649  $   78,085  $   97,066  $   74,765

    Distributions paid
     during period            $   20,211  $   58,369  $   78,357  $   61,191

    Excess (shortfall) of
     cash flows from operating
     activities over cash
     distributions paid       $   14,899  $   25,887  $   39,044  $   28,562

    Excess (shortfall) of net
     income over cash
     distributions paid       $    3,095  $    6,143  $    3,882  $    5,338

    Excess (shortfall) of
     adjusted net income over
     cash distributions paid  $    7,438  $   19,716  $   18,709  $   13,574

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

    (1) Adjusted net income is a non-GAAP term and is defined as net income
        (Q3 2008 - $23,306 ) adjusted to remove amortization of intangible
        assets (Q3 2008 - $3,412 ), unrealized losses on interest-rate swaps
        (Q3 2008 - $728 ), future income tax expense (Q3 2008 - $52 ), and
        amortization of net losses in fair market value of interest-rate
        swaps (Q3 2008 - $151 ) that were deferred prior to January 1, 2007
        and which are included in interest expense. In each case, these
        adjustments are non-cash items.
    


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

    Expenditures on Capital Assets and Contract Payments

    Total capital asset expenditures for the third quarter of 2008 decreased
by $1.1 million to $1.7 million compared to the same period in the prior year.
Substantially all of the decrease is attributable to the Davis + Henderson
Segment and in general reflects lower capital spending after a period of
higher capital spending in 2007.
    For the first nine months of 2008, total capital expenditures decreased
by $2.1 million compared to the first nine months of 2007. The Davis +
Henderson Segment accounted for $1.7 million of the decrease, with the balance
of the decrease, attributable to the Filogix Segment. While the fluctuation in
both segments for the three and nine month periods ended September 30, 2008
reflects the timing of capital projects, the Business has also reduced its
2008 forecasted expenditures to be in the range of $12.0 million to
$14.0 million. The reduction of expenditures from previous estimates relates
to the movement of certain projects into 2009 from 2008. The Business expects
the capital expenditure program in 2009 to be modestly higher than in 2008.

    Distributions

    The Fund paid distributions of $20.2 million ($0.4599 per unit) during
the third quarter of 2008 and $58.4 million ($1.3282 per unit) in the first
nine months of 2008 compared to $17.4 million ($0.3960 per unit) and
$51.7 million ($1.1760 per unit), respectively, for the same periods in 2007.
On a per unit basis for the three and nine months ended September 30, 2008,
distributions paid increased by 16.1% and 12.9%, respectively, when compared
to the same periods in 2007.
    Distributions paid can be different than distributions declared during a
period. Monthly distributions are declared by the Fund for unitholders of
record on the last business day of each month and are paid within 31 days
following each month end. On a declared basis, the year-over-year increase in
distributions per unit was 16.1% and 13.4% for the three and nine month
periods ended September 30, 2008, respectively.
    On an annualized basis, the monthly distribution rate for September 2008
was $1.84 per unit as compared to $1.58 per unit annualized in September 2007,
representing an increase of 16.1%. This increase in distributions recognizes
the performance of the Business, expectations of future performance and the
need for the Fund to pay distributions sufficient to ensure the Fund itself is
not taxable.
    In general, mutual fund trusts, like the Fund, must distribute all their
taxable income to their unitholders in order not to pay income taxes in the
trust. Historically, Davis + Henderson has paid distributions below the level
of adjusted cash flows after capital asset and contract expenditures generated
and has not paid taxes as the Business had excess tax deductions available to
eliminate taxable income.
    If the Business continues to generate growing cash flow and net income,
and in combination with expected diminishing deductions for tax purposes, the
Fund may pay out a higher proportion of the cash flows it generates to
unitholders in order not to pay taxes in the trust.
    The estimated tax allocation of distributions expected to be declared for
2008 is 100% "other income", as was the case for all of 2007.
    The Fund may issue an unlimited number of trust units. Each trust unit is
transferable and represents an equal, undivided beneficial interest in any
distribution from the Fund and the net assets of the Fund. All units are of
the same class with equal rights and privileges and are not subject to future
calls or assessments. Each unit entitles the holder to one vote at all
meetings of unitholders.
    As at September 30, 2008 and the date of this report, 43,946,792 trust
units were outstanding.

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

                                        Three months             Nine months
                                               ended                   ended
                               September   September   September   September
                                30, 2008    30, 2007    30, 2008    30, 2007
    -------------------------------------------------------------------------

    Minority interest         $        -  $      205  $        -  $      518
    Decrease (increase) in
     non-cash working capital
     items                         2,985        (701)     (4,089)     (2,707)
    Decrease (increase) in
     other operating assets
     and liabilities                 184          71      (1,697)        179
    -------------------------------------------------------------------------

    Decrease (increase) in
     non-cash working capital
     and other items          $    3,169  $     (425) $   (5,786) $   (2,010)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    The decrease in non-cash working capital items for the third quarter was
primarily related to increases in trade payables reflecting normal course
timing differences of when payments are made. The increase in non-cash working
capital items for the first nine months of 2008 was similarly affected by the
timing of trade payable payments, including payments made for capital asset
purchases in the latter part of 2007. In particular, in the fourth quarter of
2007, the Business had $7.0 million of incremental cash flow generated from
changes in working capital balances, which largely reversed in the first
quarter of 2008.

    Cash Balances and Long-term Indebtedness

    At September 30, 2008, cash and cash equivalents totalled $16.3 million,
compared to $13.1 million at December 31, 2007.
    The balance of long-term indebtedness as at September 30, 2008 was
$120.0 million compared with $130.0 million at December 31, 2007. During the
third quarter of 2008, the Business made a voluntary debt payment of
$5.0 million. The long-term indebtedness is recorded on the Balance Sheet net
of $0.7 million of unamortized deferred financing fees as at September 30,
2008.
    Management expects to continue to use a portion of any future excess cash
flow to pay down debt and fund acquisitions.
    Total debt facilities available at September 30, 2008 and December 31,
2007 were $170.0 million, comprised of a $120.0 million non-revolving term
loan and a $50.0 million revolving term credit facility. As of September 30,
2008, the Business had drawn $120.0 million under its non-revolving term loan
and has not utilized its revolving term credit facility. The Business is
permitted to draw on the revolving facility's available balance of
$50.0 million to fund capital expenditures or for other general corporate
purposes. The credit facilities mature on June 15, 2011.
    The Credit Agreement for the Business contains a number of covenants and
restrictions, including the requirement to meet certain financial ratios and
financial condition tests. The financial covenants include a leverage test, a
fixed charge coverage ratio test, a minimum net worth test and a limit on the
maximum amount of distributions that may be made by Davis + Henderson, Limited
Partnership to the Fund during each rolling, four-quarter period. Davis +
Henderson was in compliance with all of its financial covenants and financial
condition tests as of the end of its latest quarterly period. A copy of the
Credit Agreement is available on SEDAR at www.sedar.com.
    As of September 30, 2008, the Fund had interest-rate swap hedge contracts
in place with certain of its lenders, such that the borrowing rates on 90.0%
of outstanding indebtedness are effectively fixed at the interest rates and
for the time periods ending as follows:

    
    (in thousands of Canadian dollars, unaudited)
    -------------------------------------------------------------------------
                                   Fair value of interest-rate swaps
                                  -----------------------------------
                            Notional                                Interest
    Maturity date             Amount         Asset     Liability     rate(1)
    -------------------------------------------------------------------------
    January 4, 2009     $     10,000  $          -  $          7      4.505%
      July 15, 2009           20,000             -           311      5.688%
      July 15, 2010           33,000             -         1,046      5.690%
      June 15, 2011           20,000             -           968      5.560%
      June 15, 2011           25,000             -           774      5.560%
    -------------------------------------------------------------------------
                        $    108,000  $          -  $      3,106
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The listed interest rates are inclusive of bankers' acceptance fees
        currently in effect. Such fees could increase or decrease depending
        on the Fund's financial leverage as compared to certain levels
        specified in the Credit Agreement.
    

    At September 30, 2008, the Fund would have had to pay the fair value of
$3.1 million if it were to close out all of its swap contracts. It is not the
present intention of the Fund to close out these contracts. The Fund expects
to continue to enter into interest-rate swaps for the purpose of hedging its
exposure to interest rates.
    The Fund's remaining indebtedness is subject to floating interest rates
that may be funded either by way of prime-rate loans or through the issuance
of banker's acceptance with maturities, and thus interest rates, resetting
typically in the one-month to three-month range.
    The average effective interest rate applicable to the Fund's total
indebtedness was 5.39% as at September 30, 2008.
    The Fund intends to make monthly cash distributions of its adjusted cash
flows after capital asset and contract expenditures, as defined in the Fund's
Declaration of Trust, subject to working capital requirements, debt repayments
and other reserves.
    Cash flows from operations together with cash balances on hand and
unutilized term credit facilities are expected to be sufficient to fund the
Business' operating requirements, capital expenditures, contractual
obligations and anticipated distributions.

    CHANGES IN ACCOUNTING POLICY

    The Fund reviews all revisions to the Canadian Institute of Chartered
Accountants ("CICA") Handbook when issued. All revisions are considered and
applied by the effective date or earlier if practical. Effective January 1,
2008, the Fund adopted the following CICA Handbook sections: Section 3031,
Inventories and Amendments to Section 1400, General Standards of Financial
Statement Presentation.
    Section 3031, which replaces Section 3030 with the same title,
establishes that inventories should be measured at the lower of cost and net
realizable value, with guidance on the determination of cost. The impact of
adoption of this new standard on the January 1, 2008 Fund's consolidated
financial statements was a nominal amount and therefore was charged to the
income statement.
    Section 1400, General Standards of Financial Statement Presentation, was
amended to require management, when preparing financial statements, to make an
assessment of an entity's ability to continue as a going concern. Any material
uncertainties related to events or conditions that may cast doubt upon the
entity's ability to continue as a going concern must be disclosed. Management
does not believe that there are any material uncertainties related to events
or conditions that may cast significant doubt upon the Fund's ability to
continue as a going concern.
    International Financial Reporting Standards - The Accounting Standards
Board of Canada (AcSB) plans to converge Canadian GAAP for publicly
accountable enterprises with International Financial Reporting Standards
(IFRS) over a transition period that will end effective January 1, 2011 with
the adoption of IFRS. The AcSB announced on February 13, 2008 that IFRS will
be required in 2011 for publicly accountable profit-oriented enterprises. The
changeover date is for interim and annual financial statements relating to
fiscal years beginning on or after January 1, 2011. The Fund is in the process
of establishing a changeover plan to convert to these new standards according
to the timetable set with these new rules. An implementation team has been
created, and third party advisors have been engaged to provide training to
staff. The implementation team has started the process of assessing accounting
policy choices and elections that are allowed under IFRS. The Fund is also
assessing the impact of the conversion on business activities including the
effect on information technology and data systems, internal controls over
financial reporting and disclosure controls. The Fund will continually review
and adjust the changeover plan to ensure the implementation process properly
addresses the key elements of the plan.

    DISCLOSURE CONTROLS AND INTERNAL CONTROLS

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

    OUTLOOK

    Davis + Henderson's overall long-term objective is to deliver stable and
modestly growing distributions through growing revenue in the 3% to 5% range
and maintaining margins.
    Revenues, earnings and cash flow over the past 18 months were more
variable than those experienced historically due to changes in the imaging
standards on cheques in Canada that affected the D+H cheque reordering cycle.
In the third quarter of 2008, cheque order trends moved more in line with
those historically experienced. While economic activity in Canada is slowing,
it has not been the Business' experience that cheque order volumes vary
significantly with changes in the economic environment. Cheque order volumes
currently contribute approximately 80% of the consolidated revenues of the
Business. Recent changes in the real estate and mortgage markets and in
general economic activity have impacted, and are expected to continue to
impact, the revenues of the Filogix Segment and the impacts are likely to be
more negative than recently experienced.
    The Business' current U.S. cheque supply contract will expire at the end
of 2008 and will not be renewed. Income and cash flow contributions from this
business are relatively modest and expiration of this contract will not have a
significant impact on overall operations. The absence of this contract will,
however, reduce the revenues of the Business beginning in 2009.
    While the Fund's long-term objective is to modestly grow distributions
supported by growing revenue, distribution levels can be influenced by the
level of taxable income generated in the Fund as the Fund is subject to income
taxes on taxable income that is not distributed to its unitholders. Deductions
for tax purposes that were previously available to the Fund have been
diminishing and, as a result, the Fund may pay out a greater proportion of its
cash flows to unitholders than in previous periods.
    As set out in the Fund's statement of strategy, the objective is to grow
profits and cash flow by enhancing the value of our cheque supply program,
offering additional programs to serve the chequing account and delivering
programs within the lending services market.
    Management's operational plans include many initiatives which, when
combined, are intended to allow the Fund to meet its objective. Examples
include further implementations and enhancements of IDefence, BizAssist and
eSwitch programs. Relating to lending markets, the Business looks to grow its
volumes related to mortgage origination and underwriting services and PPSA
services.
    The Business' capital program provides for continued expenditures to be
funded by cash flows from operations. The 2008 capital program is expected to
be in the range of $12.0 million to $14.0 million and it is expected that 2009
expenditures will be somewhat higher.
    Changes made to the Income Tax Act require certain income trusts,
including the Fund, to pay taxes after fiscal 2010, similar to those paid by
taxable Canadian corporations. The payment of such taxes will, in the future,
reduce the cash flow of the Fund, thereby reducing the amount available for
distributions to unitholders. Since the announcement of this change in tax
legislation, management and the Trustees have monitored the changes in the
income trust environment and capital markets and continue to review potential
impacts on the Fund's current strategies and the alternatives available to the
Fund, consistent with protecting and enhancing unitholder value.

    Caution Concerning Forward-looking Statements

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

    ADDITIONAL INFORMATION

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


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

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

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash equivalents                      $  16,262     $  13,148
      Accounts receivable                               18,195        17,860
      Inventory (note 3)                                 4,142         5,316
      Prepaid expenses                                   3,267         2,973
    -------------------------------------------------------------------------
                                                        41,866        39,297

    Capital assets (note 4)                             28,726        32,199
    Other assets (note 5)                                4,306         5,964
    Interest-rate swaps (note 10)                            -           105
    Intangible assets (note 6)                         109,121       118,085
    Goodwill (note 7)                                  441,193       438,502
    -------------------------------------------------------------------------
                                                     $ 625,212     $ 634,152
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued liabilities       $  35,220     $  39,870
      Distributions payable to unitholders               6,737         6,284
      Current portion of disbursement obligations
       on customer contracts (note 8)                    2,162         2,962
    -------------------------------------------------------------------------
                                                        44,119        49,116

    Disbursement obligations on customer
     contracts (note 8)                                      -           767
    Long-term indebtedness (note 9)                    119,262       129,054
    Interest-rate swaps (note 10)                        3,106         1,173
    Other long-term liabilities (note 11)                  523         2,558
    Future income tax liability (note 12)                2,409         1,591
    Minority interest                                        -           200
    -------------------------------------------------------------------------
                                                       169,419       184,459

    Unitholders' equity:
      Trust units (note 13)                            474,585       474,585
      Deficit                                          (17,681)      (23,371)
      Accumulated other comprehensive income (loss)     (1,111)       (1,521)
    -------------------------------------------------------------------------
                                                       455,793       449,693

    Commitments (note 14)
    -------------------------------------------------------------------------
                                                     $ 625,212     $ 634,152
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



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

    -------------------------------------------------------------------------
                                    Three months ended     Nine months ended
                                  September  September  September  September
                                   30, 2008   30, 2007   30, 2008   30, 2007
    -------------------------------------------------------------------------

    Revenue                       $  97,320  $  94,676  $ 283,671  $ 287,817
    Cost of sales and operating
     expenses (note 3)               64,043     63,813    189,606    195,341
    Amortization of capital and
     other assets                     3,938      3,496     10,780     10,205
    -------------------------------------------------------------------------
                                     29,339     27,367     83,285     82,271

    Interest expense                  1,841      1,982      5,610      6,333
    Net unrealized loss (gain)
     on interest-rate swaps             728        957      2,038     (1,563)
    Amortization of intangible
     assets                           3,412      3,347     10,307      9,912
    Minority interest                     -        205          -        518
    -------------------------------------------------------------------------

    Income before income taxes       23,358     20,876     65,330     67,071
    Future income tax expense
     (recovery)                          52          -        818      1,454
    -------------------------------------------------------------------------
    Net income                    $  23,306  $  20,876  $  64,512  $  65,617
    -------------------------------------------------------------------------
    Net income per unit, basic
     and diluted                  $  0.5303  $  0.4750  $  1.4680  $  1.4931
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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     Nine months ended
                                  September  September  September  September
                                   30, 2008   30, 2007   30, 2008   30, 2007
    -------------------------------------------------------------------------

    Net income                    $  23,306  $  20,876  $  64,512  $  65,617

    Other comprehensive income:
    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                              151        163        410        515
    -------------------------------------------------------------------------
    Total comprehensive income    $  23,457  $  21,039  $  64,922  $  66,132
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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     Nine months ended
                                  September  September  September  September
                                   30, 2008   30, 2007   30, 2008   30, 2007
    -------------------------------------------------------------------------

    DEFICIT
    Deficit, beginning of period  $ (20,776) $ (16,307) $ (23,371) $ (26,710)
    Mark-to-market adjustment
     of interest-rate swaps               -          -          -        116
    Net income                       23,306     20,876     64,512     65,617
    Distributions                   (20,211)   (17,403)   (58,822)   (51,857)
    -------------------------------------------------------------------------
    Deficit, end of period          (17,681)   (12,834)   (17,681)   (12,834)
    -------------------------------------------------------------------------

    ACCUMULATED OTHER
     COMPREHENSIVE INCOME (LOSS)
    Accumulated other
     comprehensive income (loss),
     beginning of period             (1,262)    (1,847)    (1,521)         -
    Mark-to-market adjustment
     of interest-rate swaps               -          -          -     (2,199)
    Other comprehensive income:
    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                              151        163        410        515
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income (loss),
     end of period(1)                (1,111)    (1,684)    (1,111)    (1,684)
    -------------------------------------------------------------------------
    Deficit and accumulated other
     comprehensive income (loss),
     end of period                $ (18,792) $ (14,518) $ (18,792) $ (14,518)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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     Nine months ended
                                  September  September  September  September
                                   30, 2008   30, 2007   30, 2008   30, 2007
    -------------------------------------------------------------------------

    Cash and cash equivalents
     provided by (used in):

    OPERATING ACTIVITIES
    Net income                    $  23,306  $  20,876  $  64,512  $  65,617
    Add:
      Amortization of capital
       assets                         2,992      2,708      7,992      8,140
      Amortization of capital
       assets included in cost
       of sales                         354        388      1,177      1,130
      Amortization of other assets      946        788      2,788      2,065
      Amortization of intangible
       assets                         3,412      3,347     10,307      9,912
      Amortization of mark-to-
       market adjustment of
       interest-rate swaps              151        163        410        515
      Net unrealized loss (gain)
       on interest-rate swaps           728        957      2,038     (1,563)
      Future income tax expense
       (recovery)                        52          -        818      1,454
      Minority interest                   -        205          -        518
    -------------------------------------------------------------------------
                                     31,941     29,432     90,042     87,788

    Decrease (increase) in
     non-cash working capital items   2,985       (701)    (4,089)    (2,707)
    Changes in other operating
     assets and liabilities             184         71     (1,697)       179
    -------------------------------------------------------------------------
                                     35,110     28,802     84,256     85,260
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of long-term
     indebtedness                    (5,000)    (5,000)   (10,000)   (15,000)
    Distributions paid to
     minority interest                    -       (255)         -       (255)
    Distributions paid to
     unitholders                    (20,211)   (17,403)   (58,369)   (51,681)
    -------------------------------------------------------------------------
                                    (25,211)   (22,658)   (68,369)   (66,936)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Expenditures on capital assets   (1,717)    (2,773)    (5,696)    (7,800)
    Payments pursuant to
     long-term supply contracts      (1,310)    (1,825)    (2,827)    (3,342)
    Acquisition and acquisition
     adjustments (note 2)                 -          -     (4,250)        91
    Acquisition of customer
     service contracts                    -       (837)         -       (837)
    -------------------------------------------------------------------------
                                     (3,027)    (5,435)   (12,773)   (11,888)
    -------------------------------------------------------------------------

    Increase in cash and cash
     equivalents for the period       6,872        709      3,114      6,436
    Cash and cash equivalents,
     beginning of period              9,390     11,515     13,148      5,788
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                $  16,262  $  12,224  $  16,262  $  12,224
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
      Cash interest paid          $   1,609  $   1,836  $   4,765  $   5,924
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



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

    NATURE OF BUSINESS

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

    1.  SIGNIFICANT ACCOUNTING POLICIES

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

    2.  ACQUISITION

    AVS Business

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

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

    Each step acquisition was made with available cash on hand.

    3.  INVENTORY

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------

    Raw materials                                    $   1,917     $   2,202
    Work-in-process                                      1,358         2,152
    Finished goods                                         867           962
    -------------------------------------------------------------------------
                                                     $   4,142     $   5,316
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Inventory that was recognized as cost of sales during the three months
    ended September 30, 2008 was $12,180 (Q3 2007 - $12,042) and nine months
    ended September 30, 2008 was $37,063 (nine months ended September 30,
    2007 - $40,269).

    4.  CAPITAL ASSETS

                                                          September 30, 2008
    -------------------------------------------------------------------------
                                                   Accumulated
                                            Cost  amortization           Net
    -------------------------------------------------------------------------
    Machinery and equipment            $  15,207     $   8,355     $   6,852
    Computer equipment and software       45,946        26,316        19,630
    Furniture, fixtures and
     leasehold improvements                8,672         6,428         2,244
    -------------------------------------------------------------------------
                                       $  69,825     $  41,099     $  28,726
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Amortization during the three months ended September 30, 2008 was $3,346
    (Q3 2007 - $3,096) and during the nine months ended September 30, 2008
    was $9,169 (nine months ended September 30, 2007 - $9,270), of which $354
    was included in cost of sales during the three months ended September 30,
    2008 (Q3 2007 - $388) and $1,177 was included in cost of sales during the
    nine months ended September 30, 2008 (nine months ended September 30,
    2007 - $1,130). Fully amortized capital assets removed from the accounts
    during the three months ended September 30, 2008 was $537 (Q3 2007 -
    $127) and during the nine months ended September 30, 2008 was $6,430
    (nine months ended September 30, 2007 - $221).

    5.  OTHER ASSETS

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------

    Cost:
      Long-term supply contracts                     $  10,123     $  12,581
      Other                                                370           370
    -------------------------------------------------------------------------
                                                        10,493        12,951

    Accumulated amortization                            (6,187)       (6,987)
    -------------------------------------------------------------------------
                                                     $   4,306     $   5,964
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization during the three months ended September 30, 2008 on
    long-term supply contracts was $946 (Q3 2007 - $788) and during the nine
    months ended September 30, 2008 was $2,788 (nine months ended
    September 30, 2007 - $2,065). Fully amortized assets removed from the
    accounts during the three months ended September 30, 2008 was nil
    (Q3 2007 - nil) and during the nine months ended September 30, 2008 was
    $3,588 (nine months ended September 30, 2007 - nil).

    6.  INTANGIBLE ASSETS

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------
    Cost:
      Cheque supply outsourcing contracts            $  16,329     $  16,329
      Customer service contracts                         5,849         4,506
      Proprietary software                              41,993        41,993
      Brand names                                        8,400         8,400
      Customer relationships                            77,887        77,887
    -------------------------------------------------------------------------
                                                       150,458       149,115
    Accumulated amortization                           (41,337)      (31,030)
    -------------------------------------------------------------------------
                                                     $ 109,121     $ 118,085
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization during the three months ended September 30, 2008 was $3,412
    (Q3 2007 - $3,347) and during nine months ended September 30, 2008 was
    $10,307 (nine months ended September 30, 2007 - $9,912).

    7.  GOODWILL

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------

    Balance, beginning of period                     $ 438,502     $ 438,546
    Goodwill acquired during the period:
      AVS acquisition                                    2,691           (44)
    -------------------------------------------------------------------------
    Balance, end of period                           $ 441,193     $ 438,502
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8.  DISBURSEMENT OBLIGATIONS ON CUSTOMER CONTRACTS

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------
    Current portion                                  $   2,162     $   2,962
    Long-term portion                                        -           767
    -------------------------------------------------------------------------
    Total disbursement obligations on customer
     contracts                                       $   2,162     $   3,729
    -------------------------------------------------------------------------

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

    2008                                                           $     645
    2009                                                               1,517
    -------------------------------------------------------------------------
                                                                   $   2,162
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9.  LONG-TERM INDEBTEDNESS

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------

    Non-revolving term loan                          $ 120,000     $ 120,000
    Revolving credit facility                                -        10,000
    -------------------------------------------------------------------------
                                                       120,000       130,000
    Deferred finance costs                                (738)         (946)
    -------------------------------------------------------------------------
                                                     $ 119,262     $ 129,054
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

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

    Deferred finance costs relate to the renewal and amendment of long-term
    indebtedness on June 15, 2006. Amortization of deferred finance costs
    during the three months ended September 30, 2008 was $69 (Q3 2007 - $69)
    and during the nine months ended September 30, 2008 was $208 (nine months
    ended September 30, 2007 - $207). Amortization of deferred finance costs
    is recognized as interest expense using the effective interest method.

    10. FINANCIAL INSTRUMENTS

    Recognition and Measurement

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

    Credit Risk

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

    Market Risk

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

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

                                    Three months ended     Nine months ended
                                    September 30, 2008    September 30, 2008
    -------------------------------------------------------------------------
                                  + 100 bps  - 100 bps  + 100 bps  - 100 bps
    -------------------------------------------------------------------------

    Increase (decrease) in
     interest expense             $      30  $     (30) $      90  $     (90)
    Change to net unrealized
     (gain) loss on
     interest-rate swaps             (1,900)     1,900     (1,900)     1,900
    -------------------------------------------------------------------------

    Increase (decrease) in
     net income                   $   1,870  $  (1,870) $   1,810  $  (1,810)
    -------------------------------------------------------------------------

    Increase (decrease) in total
     comprehensive income         $   1,870  $  (1,870) $   1,810  $  (1,810)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Fund manages its interest rate risks through the use of interest-rate
    swaps for most of its outstanding long-term indebtedness. As of
    September 30, 2008, the Fund has entered into interest-rate swap
    contracts with its lenders, such that the borrowing rates on
    $108.0 million, or 90.0%, of its outstanding term indebtedness are
    effectively fixed at interest rates and for periods shown in the
    following table:

    -------------------------------------------------------------------------
                                   Fair value of interest-rate swaps
                                  -----------------------------------
                            Notional                                Interest
    Maturity date             Amount         Asset     Liability     rate(1)
    -------------------------------------------------------------------------
    January 4, 2009     $     10,000  $          -  $          7      4.505%
    July 15, 2009             20,000             -           311      5.688%
    July 15, 2010             33,000             -         1,046      5.690%
    June 15, 2011             20,000             -           968      5.560%
    June 15, 2011             25,000             -           774      5.560%
    -------------------------------------------------------------------------
                        $    108,000  $          -  $      3,106
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The listed interest rates are inclusive of bankers' acceptance fees
        currently in effect. Such fees could increase or decrease depending
        on the Fund's financial leverage as compared to certain levels
        specified in the Credit Agreement.


    Liquidity Risk

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

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

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

    Hedge Accounting

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

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

    Derivative Financial Instruments

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

    Accumulated Other Comprehensive Income (Loss)

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

    11. OTHER LONG-TERM LIABILITIES

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------
    Deferred compensation program                    $       -     $   1,997
    Employee future benefits                               523           561
    -------------------------------------------------------------------------
                                                     $     523     $   2,558
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

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

    The Fund's principal pension plans are defined contribution pension plans
    that provide pensions to substantially all eligible employees. Total
    expense for the Fund's defined contribution pension plan for the three
    months ended September 30, 2008 was $0.5 million (Q3 2007 - $0.4 million)
    and for the nine months ended September 30, 2008 was $1.5 million (nine
    months ended September 30, 2007 - $1.3 million).

    12. INCOME TAXES

    The Fund is a mutual fund trust for income tax purposes. As such, the
    Fund is subject to current income taxes on any taxable income not
    distributed to unitholders. As all current taxable income will be
    distributed to the unitholders, no provision for current income taxes has
    been made in these consolidated financial statements. Taxable income
    distributed by the Fund to its unitholders will be taxable income to
    those unitholders.

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

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

    The Fund is a SIFT as defined in the legislation, and under the existing
    SIFT Rules certain flow-through subsidiaries of the Fund themselves may
    also be within the definition of a SIFT. Even if it is determined that
    these flow-through subsidiaries of the Fund meet the definition of a
    SIFT, there would be no impact on the future tax assets and liabilities
    of the Fund. On July 14, 2008, the Minister of Finance released draft
    legislation introducing technical amendments to the SIFT Rules under
    which certain flow-through subsidiaries of a SIFT, which would include
    those of the Fund, will not themselves be SIFTs.

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

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

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------
    Future income tax assets:
      Intangible assets less than tax values         $  10,979     $  10,854
      Loss carryforwards                                 1,636         1,636
      Valuation allowance                              (12,615)      (12,490)
    -------------------------------------------------------------------------
      Total future tax assets                                -             -
    -------------------------------------------------------------------------

    Future income tax liabilities:
      Capital assets greater than tax values             2,409         1,591
    -------------------------------------------------------------------------
      Total future tax liabilities                       2,409         1,591
    -------------------------------------------------------------------------
    Net future income tax liabilities                $   2,409     $   1,591
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

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

    The provision for future income taxes in the consolidated statement of
    income represents the change in the future income tax liability for the
    period. The effective tax rate for the period differs from the expected
    Canadian statutory rate of nil due to the change in temporary differences
    expected to reverse after 2010.

    13. TRUST UNITS

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

                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------

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

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

    14. COMMITMENTS

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

    2008                                                           $   1,132
    2009                                                               3,757
    2010                                                               3,681
    2011                                                               2,160
    2012                                                               1,032
    Thereafter                                                         3,495
    -------------------------------------------------------------------------
                                                                   $  15,257
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. CAPITAL

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

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

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

    The Fund's indebtedness is subject to a number of covenants and
    restrictions including the requirement to meet certain financial ratios
    and financial condition tests at a subsidiary level. One such ratio is
    the "Total Funded Debt/EBITDA Ratio" as defined in the Credit Agreement.
    The maximum ratio allowed for a 12-month trailing period is 2.50. For the
    12-month trailing period ended September 30, 2008, this ratio was
    calculated at 1.00 (12-month trailing period ended September 30,
    2007 - 1.09). Management also uses this ratio as a key indicator in
    managing the Fund's capital.

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

    16. SIGNIFICANT CUSTOMERS

    For the three months ended September 30, 2008, the Fund earned 78% of its
    consolidated revenue from its seven largest customers (Q3 2007 - 78%).
    For the three months ended September 30, 2008, four of these customers
    individually accounted for greater than 10%, but not more than 18% of the
    Fund's total revenue (Q3 2007 - four of these customers individually
    accounted for greater than 10%, but not more than 17% of the Fund's total
    revenue).

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

    17. SEGMENTED INFORMATION

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

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

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

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

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

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

                                             Three months ended September 30,
    -------------------------------------------------------------------------
                                               Davis +
                                     Henderson Segment       Filogix Segment
                                  --------------------- ---------------------
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    Revenue                       $  78,449  $  77,164  $  18,871  $  17,512
    Cost of sales and
     operating expenses              54,084     54,526      9,419      8,721
    Amortization of capital
     and other assets                 2,161      2,107      1,777      1,389
    -------------------------------------------------------------------------
                                     22,204     20,531      7,675      7,402

    Interest expense                      -          -          -          -
    Net unrealized loss (gain)
     on interest-rate swaps               -          -          -          -
    Amortization of
     intangible assets                  724        864      2,688      2,483
    Minority interest                     -          -          -          -
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    21,480     19,667      4,987      4,919
    Future income tax expense
     (recovery)                           -          -          -          -
    -------------------------------------------------------------------------
    Net income (loss)             $  21,480  $  19,667  $   4,987  $   4,919
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other assets
     expenditures                 $   1,680  $   2,869  $   1,347  $   1,729
    Intangible assets             $     984  $   6,184  $ 108,137  $ 115,287
    Goodwill                      $ 359,385  $ 366,562  $  81,808  $  71,940
    Total assets                  $ 428,393  $ 446,225  $ 180,557  $ 180,426
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                             Three months ended September 30,
    -------------------------------------------------------------------------
                                             Corporate          Consolidated
                                  --------------------- ---------------------
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    Revenue                       $       -  $       -  $  97,320  $  94,676
    Cost of sales and
     operating expenses                 540        566     64,043     63,813
    Amortization of capital
     and other assets                     -          -      3,938      3,496
    -------------------------------------------------------------------------
                                       (540)      (566)    29,339     27,367

    Interest expense                  1,841      1,982      1,841      1,982
    Net unrealized loss (gain)
     on interest-rate swaps             728        957        728        957
    Amortization of
     intangible assets                    -          -      3,412      3,347
    Minority interest                     -        205          -        205
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    (3,109)    (3,710)    23,358     20,876
    Future income tax expense
     (recovery)                          52          -         52          -
    -------------------------------------------------------------------------
    Net income (loss)             $  (3,161) $  (3,710) $  23,306  $  20,876
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other assets
     expenditures                 $       -  $       -  $   3,027  $   4,598
    Intangible assets             $       -  $       -  $ 109,121  $ 121,471
    Goodwill                      $       -  $       -  $ 441,193  $ 438,502
    Total assets                  $  16,262  $  12,224  $ 625,212  $ 638,875
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Effective January 1, 2008, the results of the personal property, search
    and registration programs are included as part of the results of the
    Filogix Segment. Prior to this date, the results were included as part of
    the Davis + Henderson Segment. Current period results under both the new
    and old basis of segmentation have been presented separately.


    For the three months ended September 30, 2008, the Davis + Henderson
    Segment had four customers that individually accounted for greater than
    10% but not more than 22% of the Davis + Henderson Segment revenue and
    the Filogix Segment had three customers that individually accounted for
    greater than 10% but not more than 19% of the Filogix Segment revenue (Q3
    2007 - Davis + Henderson Segment had five customers that individually
    accounted for greater than 10% but not more than 20% of the Davis +
    Henderson Segment revenue and the Filogix Segment had three customers
    that individually accounted for greater than 10% but not more than 18% of
    the Filogix Segment revenue).

                                              Nine months ended September 30,
    -------------------------------------------------------------------------
                                               Davis +
                                     Henderson Segment       Filogix Segment
                                  --------------------- ---------------------
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    Revenue                       $ 231,119  $ 239,845  $  52,552  $  47,972
    Cost of sales and
     operating expenses             156,932    167,137     30,719     26,289
    Amortization of capital
     and other assets                 6,490      6,031      4,290      4,174
    -------------------------------------------------------------------------
                                     67,697     66,677     17,543     17,509

    Interest expense                      -          -          -          -
    Net unrealized loss (gain)
     on interest-rate swaps               -          -          -          -
    Amortization of
     intangible assets                2,171      2,463      8,136      7,449
    Minority interest                     -          -          -          -
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    65,526     64,214      9,407     10,060
    Future income tax expense
     (recovery)                           -          -          -          -
    -------------------------------------------------------------------------
    Net income (loss)             $  65,526  $  64,214  $   9,407  $  10,060
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other asset
     expenditures                 $   5,243  $   7,106  $   3,280  $   4,036
    Intangible assets             $     984  $   6,184  $ 108,137  $ 115,287
    Goodwill                      $ 359,385  $ 366,562  $  81,808  $  71,940
    Total assets                  $ 428,393  $ 446,225  $ 180,557  $ 180,426
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                              Nine months ended September 30,
    -------------------------------------------------------------------------
                                             Corporate          Consolidated
                                  --------------------- ---------------------
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    Revenue                       $       -  $       -  $ 283,671  $ 287,817
    Cost of sales and
     operating expenses               1,955      1,915    189,606    195,341
    Amortization of capital
     and other assets                     -          -     10,780     10,205
    -------------------------------------------------------------------------
                                     (1,955)    (1,915)    83,285     82,271

    Interest expense                  5,610      6,333      5,610      6,333
    Net unrealized loss (gain)
     on interest-rate swaps           2,038     (1,563)     2,038     (1,563)
    Amortization of
     intangible assets                    -          -     10,307      9,912
    Minority interest                     -        518          -        518
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    (9,603)    (7,203)    65,330     67,071
    Future income tax expense
     (recovery)                         818      1,454        818      1,454
    -------------------------------------------------------------------------
    Net income (loss)             $ (10,421) $  (8,657) $  64,512  $  65,617
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other asset
     expenditures                 $       -  $       -  $   8,523  $  11,142
    Intangible assets             $       -  $       -  $ 109,121  $ 121,471
    Goodwill                      $       -  $       -  $ 441,193  $ 438,502
    Total assets                  $  16,262  $  12,224  $ 625,212  $ 638,875
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Effective January 1, 2008, the results of the personal property, search
    and registration programs are included as part of the results of the
    Filogix Segment. Prior to this date, the results were included as part of
    the Davis + Henderson Segment. Current period results under both the new
    and old basis of segmentation have been presented separately.


    For the nine months ended September 30, 2008, the Davis + Henderson
    Segment had five customers that individually accounted for greater than
    10% but not more than 21% of the Davis + Henderson Segment revenue and
    the Filogix Segment had three customers that individually accounted for
    greater than 10% but not more than 19% of the Filogix Segment revenue
    (for the nine months ended September 30, 2007, the Davis + Henderson
    Segment had five customers that individually accounted for greater than
    10% but not more than 20% of the Davis + Henderson Segment revenue and
    the Filogix Segment had three customers that individually accounted for
    greater than 10% but not more than 16% of the Filogix Segment revenue).

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

                                             Three months ended September 30,
    -------------------------------------------------------------------------
                                               Davis +
                                     Henderson Segment       Filogix Segment
                                  --------------------- ---------------------
                                  New Basis  Old Basis  New Basis  Old Basis
                                  ---------- ---------- ---------- ----------
                                       2008       2008       2008       2008
    -------------------------------------------------------------------------
    Revenue                       $  78,449  $  79,507  $  18,871  $  17,813
    Cost of sales and
     operating expenses              54,084     54,710      9,419      8,793
    Amortization of capital
     and other assets                 2,161      2,161      1,777      1,777
    -------------------------------------------------------------------------
                                     22,204     22,636      7,675      7,243

    Interest expense                      -          -          -          -
    Net unrealized loss (gain)
     on interest-rate swaps               -          -          -          -
    Amortization of
     intangible assets                  724        929      2,688      2,483
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    21,480     21,707      4,987      4,760
    Future income tax expense
     (recovery)                           -          -          -          -
    -------------------------------------------------------------------------
    Net income (loss)             $  21,480  $  21,707  $   4,987  $   4,760
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other assets
     expenditures                 $   1,680  $   1,680  $   1,347  $   1,347
    Intangible assets             $     984  $   3,767  $ 108,137  $ 105,354
    Goodwill                      $ 359,385  $ 369,253  $  81,808  $  71,940
    Total assets                  $ 428,393  $ 450,168  $ 180,557  $ 158,782
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                             Three months ended September 30,
    -------------------------------------------------------------------------
                                             Corporate          Consolidated
                                  --------------------- ---------------------
                                  New Basis  Old Basis  New Basis  Old Basis
                                  ---------- ---------- ---------- ----------
                                       2008       2008       2008       2008
    -------------------------------------------------------------------------
    Revenue                       $       -  $       -  $  97,320  $  97,320
    Cost of sales and
     operating expenses                 540        540     64,043     64,043
    Amortization of capital
     and other assets                     -          -      3,938      3,938
    -------------------------------------------------------------------------
                                       (540)      (540)    29,339     29,339

    Interest expense                  1,841      1,841      1,841      1,841
    Net unrealized loss (gain)
     on interest-rate swaps             728        728        728        728
    Amortization of
     intangible assets                    -          -      3,412      3,412
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    (3,109)    (3,109)    23,358     23,358
    Future income tax expense
     (recovery)                          52         52         52         52
    -------------------------------------------------------------------------
    Net income (loss)             $  (3,161) $  (3,161) $  23,306  $  23,306
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other assets
     expenditures                 $       -  $       -  $   3,027  $   3,027
    Intangible assets             $       -  $       -  $ 109,121  $ 109,121
    Goodwill                      $       -  $       -  $ 441,193  $ 441,193
    Total assets                  $  16,262  $  16,262  $ 625,212  $ 625,212
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The results presented under the old basis for the Davis + Henderson and
    Filogix Segments remove the impact of the change in the reporting of the
    personal property, search and registration programs from the current
    period results.


                                              Nine months ended September 30,
    -------------------------------------------------------------------------
                                               Davis +
                                     Henderson Segment       Filogix Segment
                                  --------------------- ---------------------
                                  New Basis  Old Basis  New Basis  Old Basis
                                  ---------- ---------- ---------- ----------
                                       2008       2008       2008       2008
    -------------------------------------------------------------------------
    Revenue                       $ 231,119  $ 234,314  $  52,552  $  49,357
    Cost of sales and
     operating expenses             156,932    159,116     30,719     28,535
    Amortization of capital
     and other assets                 6,490      6,490      4,290      4,290
    -------------------------------------------------------------------------
                                     67,697     68,708     17,543     16,532

    Interest expense                      -          -          -          -
    Net unrealized loss (gain)
     on interest-rate swaps               -          -          -          -
    Amortization of
     intangible assets                2,171      2,858      8,136      7,449
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    65,526     65,850      9,407      9,083
    Future income tax expense
     (recovery)                           -          -          -          -
    -------------------------------------------------------------------------
    Net income (loss)             $  65,526  $  65,850  $   9,407  $   9,083
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other asset
     expenditures                 $   5,243  $   5,243  $   3,280  $   3,280
    Intangible assets             $     984  $   3,767  $ 108,137  $ 105,354
    Goodwill                      $ 359,385  $ 369,253  $  81,808  $  71,940
    Total assets                  $ 428,393  $ 450,168  $ 180,557  $ 158,782
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                              Nine months ended September 30,
    -------------------------------------------------------------------------
                                             Corporate          Consolidated
                                  --------------------- ---------------------
                                  New Basis  Old Basis  New Basis  Old Basis
                                  ---------- ---------- ---------- ----------
                                       2008       2008       2008       2008
    -------------------------------------------------------------------------
    Revenue                       $       -  $       -  $ 283,671  $ 283,671
    Cost of sales and
     operating expenses               1,955      1,955    189,606    189,606
    Amortization of capital
     and other assets                     -          -     10,780     10,780
    -------------------------------------------------------------------------
                                     (1,955)    (1,955)    83,285     83,285

    Interest expense                  5,610      5,610      5,610      5,610
    Net unrealized loss (gain)
     on interest-rate swaps           2,038      2,038      2,038      2,038
    Amortization of
     intangible assets                    -          -     10,307     10,307
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    (9,603)    (9,603)    65,330     65,330
    Future income tax expense
     (recovery)                         818        818        818        818
    -------------------------------------------------------------------------
    Net income (loss)             $ (10,421) $ (10,421) $  64,512  $  64,512
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital and other asset
     expenditures                 $       -  $       -  $   8,523  $   8,523
    Intangible assets             $       -  $       -  $ 109,121  $ 109,121
    Goodwill                      $       -  $       -  $ 441,193  $ 441,193
    Total assets                  $  16,262  $  16,262  $ 625,212  $ 625,212
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The results presented under the old basis for the Davis + Henderson and
    Filogix Segments remove the impact of the change in the reporting of the
    personal property, search and registration programs from the current
    period results.


    18. COMPARATIVE FIGURES

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

    SUPPLEMENTARY FINANCIAL INFORMATION

    Consolidated Operating Results by Period

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

    Revenue                 $ 97,320  $ 97,263  $ 89,088  $ 90,934  $ 94,676
    Cost of sales and
     operating expenses       64,043    63,357    62,206    64,582    63,813
    Amortization of capital
     and other assets          3,938     3,455     3,387     3,647     3,496
    -------------------------------------------------------------------------
                              29,339    30,451    23,495    22,705    27,367
    Interest expense           1,841     1,906     1,863     1,876     1,982
    Net unrealized loss
     (gain) on interest-
     rate swaps                  728    (1,034)    2,344       823       957
    Amortization of
     intangible assets         3,412     3,447     3,448     3,386     3,347
    Future income tax
     expense (recovery)           52       766         -       137         -
    Minority interest              -         -         -      (139)      205
    -------------------------------------------------------------------------
    Net income              $ 23,306  $ 25,366  $ 15,840  $ 16,622  $ 20,876
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows from
     operating activities   $ 35,110  $ 32,623  $ 16,523  $ 32,141  $ 28,802
    Changes in non-cash
     working capital and
     other items(1)           (3,169)      (82)    9,037    (6,959)      425
    -------------------------------------------------------------------------
    Adjusted cash flows from
     operating activities     31,941    32,541    25,560    25,182    29,227

    Less:
      Capital asset
       expenditures and
       contract payments       3,027     2,962     2,534     4,354     4,598
    -------------------------------------------------------------------------
    Adjusted cash flows
     after capital asset
     expenditures and
     contract payments        28,914    29,579    23,026    20,828    24,629

    Distributions paid to
     unitholders              20,211    19,305    18,853    26,676    17,403
    -------------------------------------------------------------------------
                               8,703    10,274     4,173    (5,848)    7,226

    Cash flows provided by
     (used in) other
     financing activities     (5,000)   (5,000)        -         -    (5,000)
    Cash flows used in
     acquisition of
     businesses and customer
     service contracts             -         -    (4,250)        -      (837)
    Changes in non-cash
     working capital and
     other items(1)            3,169        82    (9,037)    6,959      (425)
    Distributions paid to
     minority interest             -         -         -      (187)     (255)
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and cash
     equivalents for the
     period                 $  6,872  $  5,356  $ (9,114) $    924  $    709
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Changes in non-cash working capital and certain other balance sheet
        items have been excluded from adjusted cash flows from operating
        activities so as to remove the effects of timing differences in cash
        receipts and cash disbursements, which generally reverse themselves
        but can, vary significantly across quarters. Minority interest and
        changes to other long-term liabilities are deducted to arrive at
        adjusted cash flows.

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


    Summary of Cash Flows Per Unit

    -------------------------------------------------------------------------
                               Three     Three     Three     Three     Three
                              months    months    months    months    months
                               ended     ended     ended     ended     ended
                           September      June     March  December September
    (in Canadian dollars,         30,       30,       31,       31,       30,
     unaudited)                 2008      2008      2008    2007(2)   2007(2)
    -------------------------------------------------------------------------
    Adjusted cash flows
     from operating
     activities             $ 0.7268  $ 0.7405  $ 0.5816  $ 0.5730  $ 0.6651
    Adjusted cash flows
     after capital asset
     expenditures and
     contract payments      $ 0.6579  $ 0.6731  $ 0.5240  $ 0.4739  $ 0.5604
    Distributions paid to
     unitholders            $ 0.4599  $ 0.4393  $ 0.4290  $ 0.6070  $ 0.3960
    Distributions declared
     during period          $ 0.4599  $ 0.4496  $ 0.4290  $ 0.6180  $ 0.3960
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


     Condensed Consolidated Balance Sheet

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

    Cash and cash
     equivalents            $ 16,262  $  9,390  $  4,034  $ 13,148  $ 12,224
    Other current assets      25,604    26,847    25,382    26,149    29,644
    Capital and other assets  33,032    34,347    35,229    38,268    38,049
    Goodwill and other
     intangible assets       550,314   553,726   557,173   556,587   559,973
    -------------------------------------------------------------------------
                            $625,212  $624,310  $621,818  $634,152  $639,890
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Payables and other
     current liabilities    $ 44,119  $ 42,427  $ 38,491  $ 49,116  $ 45,165
    Other long-term
     liabilities               6,038     5,143     7,417     6,289     5,673
    Long-term indebtedness   119,262   124,193   129,123   129,054   128,985
    Unitholders' equity      455,793   452,547   446,787   449,693   460,067
    -------------------------------------------------------------------------
                            $625,212  $624,310  $621,818  $634,152  $639,890
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Distribution History

    -------------------------------------------------------------------------
    Month                        2008         2007         2006         2005
    -------------------------------------------------------------------------
    January                   $0.1430      $0.1280      $0.1220      $0.1200
    February                   0.1430       0.1280       0.1220       0.1200
    March                      0.1430       0.1320       0.1250       0.1200
    April                      0.1430       0.1320       0.1250       0.1200
    May                        0.1533       0.1320       0.1250       0.1200
    June                       0.1533       0.1320       0.1250       0.1200
    July                       0.1533       0.1320       0.1250       0.1200
    August                     0.1533       0.1320       0.1250       0.1220
    September                  0.1533       0.1320       0.1250       0.1220
    October                         -       0.1320       0.1250       0.1220
    November(2)                     -       0.3430       0.1280       0.1220
    December(3)                     -       0.1430       0.1280       0.1220
    -------------------------------------------------------------------------
                              $1.3385      $1.7980      $1.5000      $1.4500
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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


    Tax Allocation of Distributions

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


    Other Statistics

    (in thousands, except per unit amounts)

                                                           Number     Market
                 Trading price range of units            of units    capital-
                       (TSX: "DHF.UN")                   outstand-   ization
                -------------------------------  Average   ing at         at
      Quarter       High        Low      Close    daily   quarter    quarter
                                                 volume       end        end
    -------------------------------------------------------------------------
    2008 - 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 and its predecessors have been serving the Canadian
financial services industry since 1875. Through integrated service offerings,
Davis + Henderson is a market leader in providing programs to customers who
offer chequing account and lending services within Canada. Davis + Henderson
Income Fund is listed on the Toronto Stock Exchange, symbol DHF.UN.
    Further information can be found in the disclosure documents filed by
Davis + Henderson Income Fund with the securities regulatory authorities,
available at www.sedar.com.

    %SEDAR: 00017092EF




For further information:

For further information: Bob Cronin, Chief Executive Officer, Davis +
Henderson, Limited Partnership, (416) 696-7700, extension 5301,
bob.cronin@dhltd.com; Catherine Martin, Chief Financial Officer, Davis +
Henderson, Limited Partnership, (416) 696-7700, extension 5265,
catherine.martin@dhltd.com


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