Davis + Henderson Reports Third Quarter 2009 Results

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

TORONTO, Nov. 2 /CNW/ - Davis + Henderson reported solid financial results for the three months and nine months ended September 30, 2009. On July 27, 2009, Davis + Henderson completed the acquisition of Resolve Business Outsourcing Income Fund ("Resolve") and accordingly the results of Resolve have been included in the consolidated results since that date. The large increases in revenues and expenses as compared to prior periods are primarily attributed to the inclusion of Resolve. Overall, we consider the results to be good in context of the current economic environment and the incremental activities associated with the integration of the Resolve operation.

    
    Third Quarter Highlights

    -   Revenue was $142.5 million, an increase of $47.4 million, or 49.9%,
        as compared to the same quarter in 2008.

    -   EBITDA(1) was $37.6 million, an increase of $4.2 million, or 12.6%,
        as compared to the same quarter in 2008. The increase in EBITDA
        (12.6%) relative to the increase in revenue (49.9%) reflects the
        inclusion of service offerings within Resolve which have contributed
        lower margins as a percentage of revenues as compared to other D+H
        services.

    -   Adjusted income(1) was $30.4 million, an increase of $2.9 million, or
        10.5%, as compared to the same quarter in 2008. Adjusted income(1)
        per unit was $0.6002, a decrease of 4.0% as compared to the same
        quarter in 2008.

    -   Net income was $25.0 million, an increase of $1.7 million, or 7.1%,
        as compared to the same quarter in 2008. Net income per unit was
        $0.4931, a decrease of 7.0% as compared to the same quarter in 2008.

    -   Cash distributions declared for the quarter were $0.4599 per unit,
        unchanged compared to the same quarter in 2008.

    Nine-Month Highlights

    -   Revenue was $325.5 million for the first nine months of 2009, an
        increase of $47.7 million, or 17.2%, as compared to the same period
        in 2008.

    -   EBITDA(1) was $98.5 million for the first nine months of 2009, an
        increase of $3.9 million, or 4.1%, as compared to the same period in
        2008. The increase in EBITDA (4.1%) relative to revenue (17.2%)
        reflects the inclusion of service offerings within Resolve which
        have lower margins as a percentage of revenues as compared to other
        D+H services.

    -   Adjusted income(1) was $80.3 million for the first nine months of
        2009, an increase of $2.6 million, or 3.3%, as compared to the same
        period in 2008. Adjusted income(1) per unit was $1.7375 per unit for
        the first nine months of 2009, a decrease of 1.7%, as compared to the
        same period in 2008.

    -   Net income was $69.4 million, an increase of $4.9 million, or 7.6%,
        as compared to the first nine months of 2008. Net income per unit was
        $1.5027, a 2.4% increase, as compared to the same period in 2008.

    -   Cash distributions declared for the nine month period were $1.3797
        per unit, a 3.1% increase, compared to $1.3385 per unit for the same
        period in 2008.

    (1) Davis + Henderson reports several non-GAAP measures, including EBITDA
    and Adjusted income used above. Adjusted income is calculated as net
    income, adjusted to remove the non-cash impacts of certain fair value and
    purchase accounting items and future tax recoveries or expenses. These
    items are excluded in calculating Adjusted income as they are non-cash
    items and are not considered indicative of the financial performance of
    the Business for the period being reviewed. Any non-GAAP measures should
    be considered in context with the GAAP financial presentation and should
    not be considered in isolation or as a substitute for GAAP net earnings
    or cash flow. Further, Davis + Henderson's measures may be calculated
    differently from similarly titled measures of other companies. A
    reconciliation of these non-GAAP measures to related GAAP measures is
    included in the attachments to this press release.
    

Management Commentary

Overall, we were pleased with the progress we made as a business during the quarter. Strategically, we advanced the Business with the acquisition of Resolve. Operationally, we delivered solid results in the context of a challenging economic environment that again impacted revenues within our cheque program. As well, we initiated the full integration of the otherwise segregated business units within both D+H and Resolve. This integration will allow us to better service customers and will provide improved cost effectiveness over time.

Over the immediate future period, we will focus on integrating the business of Resolve, executing our organic growth initiatives and continuing to diligently manage costs. Beyond the immediate term, we believe that combining D+H and Resolve will position the Business well in the markets we serve, which in turn will allow us to grow consistent with our long-term objectives.

For a more detailed discussion of third quarter results, please see the Management's Discussion and Analysis below.

Caution Concerning Forward-looking Statements

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in Davis + Henderson's industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements include all disclosure regarding possible events, conditions or results of operations that are based on assumptions about future economic conditions and courses of action. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. Davis + Henderson cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of cheques by consumers; the Fund's dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the Fund's financial objective; stability and growth in the real estate and mortgage markets; as well as general market conditions, including economic and interest rate dynamics and investor interest in, and government regulations relating to, income trusts. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and Davis + Henderson does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

Conference Call

Davis + Henderson will discuss its financial results for the third quarter ended September 30, 2009 via conference call at 10:00 a.m. EST (Toronto time) on Tuesday, November 3, 2009. The number to use for this call is 416-644-3426 for Toronto area callers or 1-800-732-1073 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 access code 4167530 followed by the number sign. The rebroadcast will be available until Tuesday, November 17, 2009. 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 2009 should be read in conjunction with MD&A in Davis + Henderson Income Fund's (the "Fund" or the "Company" or the "Business" or "Davis + Henderson" or "D+H") Annual Report for the year ended December 31, 2008, dated February 24, 2009, and the attached interim unaudited consolidated financial statements. External economic and industry factors remain substantially unchanged from those described in the annual MD&A and the Fund's most recently filed Annual Information Form, unless otherwise stated under "Business Risks" below.

STRATEGY

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

Davis + Henderson's strategy is to establish market leading positions within niche and growing service areas and to further expand our service offerings by enhancing the activities that we perform on behalf of our customers. We expect to advance this strategy through internal (or organic) initiatives, as well as by partnering with third parties and by way of selective acquisitions. The Business' financial goal is to deliver stable and modestly growing cash distributions to unitholders by targeting annual revenue growth in the range of 3% to 5%. The Business has three primary strategies to meet its objectives. These are to evolve and enhance the value of the cheque supply program and services to the chequing account, to extend our technology supported services related to personal, student and commercial lending and leasing, and to pursue further opportunities in other areas within the financial services marketplace.

Over the past several years, D+H has executed the above referenced strategy through evolving our programs to the chequing account, completing several acquisitions, including Advanced Validation Systems in 2005, Filogix in 2006, Cyence in 2008 and Resolve in 2009, and by further enhancing our services and capabilities, such that today we offer a diverse range of market-leading services.

Since December 2001, the initial public offering date of Davis + Henderson Income Fund, the Business has operated as an income trust pursuant to its declaration of trust. In 2007, changes were made to the Income Tax Act that will require certain income trusts, including D+H, to pay taxes after fiscal 2010, similar to those paid by taxable Canadian corporations. In the future, the payment of such taxes will reduce the cash flow of the Business, thereby reducing the amount available for distribution to unitholders.

While we do not currently have definitive plans related to the future or capital structure of the business or policies related to future payout ratios, in 2010 D+H expects to propose to unitholders that, effective the end of 2010, the Fund would convert to a corporate structure. Such a conversion would be subject to 66 2/3% of unitholders voting in support of a change. At that time, the Business would expect to make dividend payouts, rather than distributions to owners, from available cash flow. During 2010, the Company would expect to advise owners on the proposed level of dividend and dividend policy.

FINANCIAL INFORMATION PRESENTATION

Since 2006, the Business has operated and reported upon two business segments, the "D+H Segment" and the "Filogix Segment". Subsequent to the completion of the Resolve acquisition, the Business announced that it would move to a single integrated operation in order to better serve customers and maximize effectiveness. The Business is now managed along functional lines and operating decisions and performance assessment is aligned with these functions. As such, the Business will report as a single segment. Segmented data has been provided related to revenues pertaining to major service areas.

OPERATING RESULTS FOR THE THIRD QUARTER - CONSOLIDATED

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

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

                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Revenue                       $ 142,463  $  95,055  $ 325,549  $ 277,874
    Expenses                        104,879     61,664    227,050    183,265
    -------------------------------------------------------------------------

    EBITDA(2)                        37,584     33,391     98,499     94,609

    Amortization of capital
     assets and non-acquisition
     intangibles                      4,530      4,219     12,028     11,738
    Interest expense                  2,681      1,690      6,215      5,200
    -------------------------------------------------------------------------

    Adjusted income(2)               30,373     27,482     80,256     77,671

    Amortization of
     mark-to-market adjustment
     of interest-rate swaps             103        151        375        410
    Net unrealized loss (gain) on
     derivative instruments(3)       (1,647)       728     (2,525)     2,038
    Future income tax expense
     (recovery)                       1,018         52        236        818
    Amortization of intangibles
     from acquisitions                5,942      3,412     12,757     10,307
    -------------------------------------------------------------------------
    Income from continuing
     operations                      24,957     23,139     69,413     64,098
    Income from discontinued
     operations                           -        167          -        414
    -------------------------------------------------------------------------
    Net income                    $  24,957  $  23,306  $  69,413  $  64,512
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted income per unit,
     basic and diluted(2)         $  0.6002  $  0.6253  $  1.7375  $  1.7674
    Net income per unit, basic
     and diluted                  $  0.4931  $  0.5303  $  1.5027  $  1.4680
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                         2009 vs. 2008         2009 vs. 2008
                                              % change              % change
    -------------------------------------------------------------------------
    Revenue                                      49.9%                 17.2%
    EBITDA(2)                                    12.6%                  4.1%
    Adjusted income per unit(2)                  -4.0%                 -1.7%
    Net income per unit                          -7.0%                  2.4%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The results of the three and nine months ended September 30, 2009
        include the results of the Cyence and Resolve businesses effective
        the date of acquisition of December 19, 2008 and July 27, 2009,
        respectively.

    (2) EBITDA and Adjusted income are non-GAAP terms. Please see Non-GAAP
        Measures section for a more complete description of these terms and
        reconciliation to GAAP.

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

Overview

On July 27, 2009 D+H acquired Resolve and, accordingly, the Resolve results have been included in the consolidated results since that date. As a result of the inclusion, the comparative financial information reflect large year-over-year increases in revenues and expenses as well as an expanded Balance Sheet. While the detail to follow within the MD&A further describes these changes, overall when comparing the third quarter results of 2009 to the same quarter in 2008, the Business experienced reduced revenues from our cheque program, due primarily to lower business cheque order volumes, and lower mortgage origination fees, as measured against strong origination fees in the same quarter last year. In both service areas, the financial impact was partially mitigated through growth initiatives and continuing expense reduction activities. While revenue and earnings increased, on a per unit basis, after reflecting the additional issued D+H units, D+H's consolidated Adjusted income and net income per unit were lower by 4.0% and 7.0%, respectively as compared to the relatively strong third quarter of 2008. Overall, recognizing the challenging economic environment that impacted our business volumes, we were pleased with our results and satisfied with the integration activity completed to date.

    
    Revenue
                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Revenue
      Programs to the chequing
       account                    $  72,239  $  75,281  $ 216,770  $ 222,445
      Loan servicing solutions       21,091          -     21,091          -
      Registration services          18,119      1,058     20,056      3,195
      Lending technology solutions   18,891     17,073     51,717     47,176
      Other                          12,123      1,643     15,915      5,058
    -------------------------------------------------------------------------
                                  $ 142,463  $  95,055  $ 325,549  $ 277,874
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Revenue - Third Quarter

Consolidated revenue for the third quarter was $142.5 million, an increase of $47.4 million, or 49.9%, compared to the same quarter in 2008. The increase in consolidated revenues is primarily attributable to the inclusion of revenues from acquisitions including Resolve since July 27, 2009 and Cyence since December 19, 2008. Reported revenue also benefited from the positive impact of annual cheque program changes and product and service enhancements. Revenue was negatively impacted by the economic slow down which reduced demand for cheque orders particularly from small business, and reduced activity related to mortgage origination. Excluding the inclusion of the Resolve and Cyence businesses, consolidated revenues decreased $3.8 million, or 4.0%, compared to the same quarter in 2008.

Revenue for the third quarter from programs to the chequing account was $72.2 million, a decrease of $3.0 million, or 4.0%, compared to the same quarter in 2008. The decrease is primarily attributable to reduced demand for cheque orders particularly from small business, partially offset by annual program changes and product and service enhancements, such as IDefence(R) and BizAssist(R), which positively impacted revenues in the third quarter of 2009. Management believes that cheque orders from small business consumers were negatively impacted by the economic downturn, which both reduced cheque usage by existing businesses and reduced the number of small business start-ups. In general, notwithstanding the larger than anticipated decline in volumes during the first nine months of 2009, management believes that the long-term historical trend related to cheque order decline is unchanged and continues to be in the low single digit range.

Revenue for the third quarter of 2009 from loan servicing solutions, which includes student loan administration services and credit card servicing, was $21.1 million. There was no comparative revenue for 2008 as these services were part of the Resolve business acquired July 27, 2009. Revenue from student loan administrative services, which comprise the largest portion of revenues within this service area, are expected to be relatively stable over the short term with modestly growing volumes and new program initiatives being offset by reduced pricing related to particular contracts.

Registration services revenue for the third quarter of 2009 was $18.1 million. This service area includes the personal property search and registration ("PPSA") business acquired with the Resolve acquisition and the existing PPSA program operated by D+H. Volumes in this area would be expected to improve with an improving economic environment.

Revenue for the third quarter from lending technology solutions, which include services to the mortgage market and other credit markets, was $18.9 million, an increase of $1.8 million, or 10.6%, compared to the same quarter in 2008. Revenue for the third quarter included the results of the Cyence business which was acquired in late 2008. Excluding the results of the Cyence business, revenue decreased $0.6 million, or 3.8%, compared with the same period in 2008 primarily as a result of reduced mortgage origination service fees. The mortgage origination services fees, which comprise the largest portion of revenue within this service area, were lower by 7% and 8% as compared to the same quarter and year-to-date period last year, respectively. More recently, activity in the real estate and mortgage markets have increased, which may have a positive impact on future revenues.

Other revenue for the third quarter of 2009 of $12.1 million is comprised of a number of smaller service offerings, the largest of which are contact centre services.

The following proforma table reflects management's estimate of the relative size of each of the major service areas as a percentage of total revenue.

    
    Proforma Allocation of Revenue by Service Area(1)              % Revenue
    -------------------------------------------------------------------------
    Revenue
      Programs to the chequing account                                   45%
      Loan servicing solutions                                           18%
      Registration services                                              15%
      Lending technology solutions                                       11%
      Other                                                              11%
    -------------------------------------------------------------------------
                                                                        100%
    -------------------------------------------------------------------------
    (1) Based on management's estimate
    

Revenue - Year to date

For the first nine months of 2009, total revenue increased by $47.7 million, or 17.2%, compared to the first nine months of 2008 with the inclusion of the Resolve and Cyence businesses and other positive organic initiatives, offsetting the decreases due to the impacts of the economic slow down referred to above. Excluding the acquisitions of the Resolve and Cyence businesses, total revenue decreased $10.3 million, or 3.7%, compared to the first nine months of 2008.

Revenue from programs to the chequing account for the first nine months of 2009 was $216.8 million, a decrease of $5.7 million, or 2.6%, compared to the same period in 2008. The decrease is primarily attributable to the economic slow down which has negatively impacted small business demand for cheque orders, partially offset by annual program changes and product and service enhancements, such as IDefence(R) and BizAssist(R), which positively impacted revenues in the first nine months of 2009.

Revenue for the first nine months of 2009 from lending technology services was $51.7 million, an increase of $4.5 million, or 9.6%, compared to the same period in 2008. Revenue for the first nine months of 2009 included the results of the Cyence business which was acquired in late 2008. Excluding the results of the Cyence business, revenue decreased $4.7 million, or 9.9%, compared with the same period in 2008 primarily as a result of reduced origination services revenue and decreases in revenues from project implementation services. For the first nine months of 2009, mortgage origination revenues were down 8% over the same period last year.

Increased revenues from the remaining service areas are primarily attributed to the inclusion of the results of Resolve as described earlier.

Expenses

On a consolidated basis, expenses for the third quarter of 2009 of $104.9 million increased by $43.2 million, or 70.1%, compared to the same quarter in 2008. For the nine months of 2009, consolidated expenses increased by $43.8 million, or 23.9%, to $227.1 million when compared to the first nine months 2008. The net increase was due to the inclusion of the expense base of the Resolve and Cyence businesses and the ongoing current costs of integrating the businesses, partially offset by decreases related to lower business cheque order volume, as described above, and to continued cost management activities undertaken in the context of the economic environment.

EBITDA

EBITDA during the third quarter of 2009 was $37.6 million, an increase of $4.2 million, or 12.6%, as compared to the same quarter in 2008. For the first nine months of 2009, EBITDA was $98.5 million for the first nine months of 2009, an increase of $3.9 million, or 4.1%, as compared to the same period in 2008. The increase in EBITDA (12.6%) relative to the increase in revenue (49.9%) during the third quarter of 2009 and the increase in EBITDA (4.1%) relative to revenue (17.2%) during the first nine months of 2009, respectively, reflects the inclusion of service offerings within Resolve which have contributed lower margins as a percentage of revenues as compared to other D+H services.

Amortization of Capital and Non-acquisition Intangible Assets

Amortization of capital and non-acquisition intangible assets increased by $0.3 million, or 7.4%, when compared to the third quarter of 2008. This increase related to the inclusion of amortization related to assets acquired from the Resolve and Cyence businesses, partially offset by the impact of certain capital and other assets having become fully amortized. Similarly, for the first nine months of 2009, amortization of capital and non-acquisition intangible assets increased $0.3 million, or 2.5%.

Other Expenses

Interest expense for the third quarter of 2009 increased by $1.0 million compared to the prior year, due to an increase in the level of outstanding debt related to the acquisition of Resolve and, to a lesser degree, Cyence in 2008. Similarly, for the first nine months of 2009, interest expense increased by $1.0 million, for the reasons described above. Partially offsetting the increases was a reduction in the average interest rate on certain of the outstanding debt.

Amortization of mark-to-market adjustment of interest-rate swaps refers to the amortization of net losses in fair market value of interest-rate swaps that were deferred prior to January 1, 2007. Commencing January 1, 2007, the Business no longer designated its interest-rate swaps as hedges for accounting purposes.

An unrealized gain on interest-rate swaps and foreign currency contracts of $1.6 million was recognized in the third quarter of 2009 (Q3 2008 - $0.7 million loss), reflecting mark-to-market adjustments related to changes in market interest rates at September 30 as compared to June 30 (or on July 27, 2009 for swaps acquired on acquisition) and from currency fluctuations on foreign exchange contracts changes since July 27, 2009. For the nine months ended September 30, 2009, an unrealized gain on interest-rate swaps and currency contracts of $2.5 million was recorded (nine months ended September 30, 2008 - unrealized loss of $2.0 million). These unrealized gains and losses for interest rate swaps are recognized in income as these swaps are not designated as hedges for accounting purposes. Unrealized gains and losses on foreign exchange contracts are recognized in income as the foreign exchange contracts do not qualify for hedge accounting treatment. Provided the Business does not cancel its interest-rate swaps or foreign exchange contracts, the unrealized amounts represent a non-cash unrealized gain or loss that will subsequently reverse through income as the related swaps and foreign exchange contracts mature.

A large portion of the income earned by the Business and distributed annually to unitholders is not subject to taxation in the Fund, but is taxed at the individual unitholder level. The Fund and its subsidiaries do not anticipate paying 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.

The Fund does recognize future income tax assets and liabilities, with a corresponding impact on future income tax expense or recovery based on temporary differences expected to reverse. For the parts of the organization structured as trusts and partnerships, future taxes are setup only for timing differences expected to reverse after December 31, 2010. For corporate entities, all timing differences are considered in establishing future tax balances. In the third quarter of 2009, the Fund recorded a future tax expense of $1.0 million (third quarter 2008 - $0.1 million expense). For the nine months ended September 30, 2009, the Fund recorded a future tax expense of $0.2 million (nine months ended September 30, 2008 - $0.8 million expense).

The business has net operating losses for tax purposes of $56.0 million available to reduce taxable income in future periods. The Canadian component of these losses is expected to be fully utilized in the current and following year.

Amortization of acquisition related intangibles for the third quarter and first nine months of 2009 increased as compared to the same periods in 2008. The increase in amortization related to the incremental intangible assets arising on the acquisitions of the Resolve and Cyence businesses will add annualized amortization of $16 million. The intangible assets recorded on the acquisition of Resolve consisted of rights related to customer relationships and proprietary software and are amortized on a straight-line basis over periods ranging from 3 to 15 years. For more information on the acquisition, see Note 2 to the consolidated financial statements.

Income from Discontinued Operations

Effective December 31, 2008, the Fund ceased providing services under a U.S. cheque supply contract. As a result, the 2008 operating results from the U.S. operations related to the service of this contract have been classified as discontinued operations.

Net Income

Net income of $25.0 million for the third quarter of 2009 increased by $1.7 million, or 7.1%, compared to the same period in 2008 with increased EBITDA from the businesses acquired in the Resolve acquisition more than offsetting increased amortization and interest expense. However, as the acquisition was financed by way of the exchange of units and for the reasons described above, on a per unit basis, net income decreased by 7.0% to $0.4931 per unit, as compared with the third quarter of 2008. For the nine-month period ended September 30, 2009, net income of $69.4 million increased by $4.9 million, or 7.6%, compared to the same period in 2008. On a per unit basis, net income per unit of $1.5027 increased by $0.0347, or 2.4%, as compared to the same period in 2008. This increase in net income per unit for the nine month period was positively impacted by mark-to-market unrealized gains on derivative instruments as previously described.

Excluding the non-cash impacts of mark-to-market gains and losses on derivative instruments, future income taxes and amortization of intangibles from acquisitions, Adjusted income of $30.4 million for the third quarter of 2009 increased by $2.9 million, or 10.5%, compared to the same period in 2008. On a per unit basis, Adjusted income per unit of $0.6002 decreased by $0.0251, or 4.0%, compared with the third quarter of 2008. For the nine-month period ended September 30, 2009, Adjusted income of $80.3 million increased by $2.6 million, or 3.3%, compared to the same period in 2008. On a per unit basis, Adjusted income per unit of $1.7375 decreased 1.7% compared to the same period in 2008.

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

                                                             2009       2008
                                         Q3         Q2         Q1         Q4
    -------------------------------------------------------------------------

    Revenue                       $ 142,463  $  94,557  $  88,529  $  89,357
    Expenses                        104,879     62,080     60,091     62,413
    -------------------------------------------------------------------------
    EBITDA(1)                        37,584     32,477     28,438     26,944

    Amortization of capital
     assets and non-acquisition
     intangibles                      4,530      3,679      3,819      3,800
    Interest expense                  2,681      1,787      1,747      1,647
    Minority interest                     -          -          -          -
    -------------------------------------------------------------------------
    Adjusted income(1)               30,373     27,011     22,872     21,497

    Amortization of
     mark-to-market adjustment
     of interest-rate swaps             103        136        136        151
    Net unrealized loss (gain)
     on derivative instruments(2)    (1,647)    (1,069)       191      3,653
    Future income tax expense
     (recovery)                       1,018       (718)       (64)       399
    Amortization of intangibles
     from acquisition                 5,942      3,441      3,374      3,409
    -------------------------------------------------------------------------
    Income from continuing
     operations                      24,957     25,221     19,235     13,885
    Income from discontinued
     operations                           -          -          -         51

    -------------------------------------------------------------------------
    Net income                    $  24,957  $  25,221  $  19,235  $  13,936
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted income per unit,
     basic and diluted(1)         $  0.6002  $  0.6146  $  0.5204  $  0.4892

    Net income per unit,
     basic and diluted            $  0.4932  $  0.5739  $  0.4377  $  0.3172
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

    Revenue                       $  95,055  $  95,407  $  87,412  $  88,641
    Expenses                         61,664     61,334     60,267     62,075
    -------------------------------------------------------------------------
    EBITDA(1)                        33,391     34,073     27,145     26,566

    Amortization of capital
     assets and non-acquisition
     intangibles                      4,219      3,771      3,748      3,970
    Interest expense                  1,690      1,754      1,756      1,713
    Minority interest                     -          -          -       (139)
    -------------------------------------------------------------------------
    Adjusted income(1)               27,482     28,548     21,641     21,022

    Amortization of
     mark-to-market adjustment
     of interest-rate swaps             151        152        107        163
    Net unrealized loss (gain)
     on derivative instruments(2)       728     (1,034)     2,344        823
    Future income tax expense
     (recovery)                          52        766          -        137
    Amortization of intangibles
     from acquisition                 3,412      3,447      3,448      3,386
    -------------------------------------------------------------------------
    Income from continuing
     operations                      23,139     25,217     15,742     16,513
    Income from discontinued
     operations                         167        149         98        109

    -------------------------------------------------------------------------
    Net income                    $  23,306  $  25,366  $  15,840  $  16,622
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted income per unit,
     basic and diluted(1)         $  0.6253  $  0.6496  $  0.4924  $  0.4784

    Net income per unit,
     basic and diluted            $  0.5303  $  0.5772  $  0.3604  $  0.3782
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) EBITDA and Adjusted income are non-GAAP terms. Please see Non-GAAP
        Measures section for a more complete description of these terms.

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

The Fund has generally reported quarterly revenues that are stable and growing when measured on a year-over-year basis. Measured on a sequential quarter-over-quarter basis, revenues can vary as they are subject to seasonality and are generally stronger in the second and third quarter of each year. As a result of the weakening economic environment, commencing in the later part of 2008, the Business has experienced reduced mortgage origination fees and lower small business cheque order volumes as previously described.

The acquisition of the Resolve business has resulted in a substantial increase in all reported balances in the third quarter of 2009, except per unit amounts, which were additionally impacted by the issuance of 9,286,581 additional units of Davis + Henderson to fund the Resolve acquisition.

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

CASH FLOW AND LIQUIDITY

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

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

                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------

    Cash flows from operating
     activities                   $  38,959  $  35,110  $  79,147  $  84,256

    Add:
      Changes in non-cash working
       capital and other items(2)    (4,056)    (3,169)    13,137      5,786
    -------------------------------------------------------------------------
    Adjusted cash flows from
     operating activities            34,903     31,941     92,284     90,042

    Less:
      Maintenance asset
       expenditures(3)                  883        748      3,582      4,061
      Growth asset expenditures(3)    1,635        969      2,973      1,635
      Contract payments(4)              300      1,310      3,117      2,827
    -------------------------------------------------------------------------
    Adjusted cash flows after
     capital expenditures and
     contract payments               32,085     28,914     82,612     81,519

    Less:
      Distributions paid to
       unitholders                   23,058     20,211     63,480     58,369
    -------------------------------------------------------------------------
                                      9,027      8,703     19,132     23,150

    Cash flows provided by
     (used in repayment) of
     long-term indebtedness          (3,948)    (5,000)    (5,948)   (10,000)
    Cash flows used in issuance
     costs for long-term
     indebtedness                    (1,621)         -     (1,621)         -
    Fair value of trust
     units issued                   119,394          -    119,394          -
    Fair value of acquisitions     (129,682)         -   (129,519)    (4,250)
    Changes in non-cash working
     capital and other items(2)       4,056      3,169    (13,137)    (5,786)
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and cash equivalents
     for the period               $  (2,774) $   6,872  $ (11,699) $   3,114
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The subtotals in this table are not consistent with GAAP and
        accordingly are considered non-GAAP measures. Please see Non-GAAP
        Measures section for a more complete discussion of non-GAAP terms and
        reconciliation to GAAP.

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

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

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



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

                                             Three months ended September 30,
                                                  2009       2008   % change
    -------------------------------------------------------------------------
    Adjusted cash flows from operating
     activities                              $  0.6897  $  0.7268      -5.1%
    Adjusted cash flows after capital
     expenditures and contract payments      $  0.6340  $  0.6579      -3.6%
    Distributions paid to unitholders        $  0.4599  $  0.4599       0.0%
    Cash distributions declared
     during period                           $  0.4599  $  0.4599       0.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                              Nine months ended September 30,
                                                  2009       2008   % change
    -------------------------------------------------------------------------
    Adjusted cash flows from operating
     activities                              $  1.9978  $  2.0489      -2.5%
    Adjusted cash flows after capital
     expenditures and contract payments      $  1.7885  $  1.8549      -3.6%
    Distributions paid to unitholders        $  1.3797  $  1.3282       3.9%
    Cash distributions declared
     during period                           $  1.3797  $  1.3385       3.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash Flows, Income and Distributions Paid

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

                                      Three       Nine
                                     months     months       Year       Year
                                      ended      ended      ended      ended
                                  September  September   December   December
    (in thousands of Canadian            30,        30,        31,        31,
     dollars, unaudited)               2009       2009       2008       2007
    -------------------------------------------------------------------------

    Cash flows from operating
     activities                   $  38,959  $  79,147  $ 116,062  $ 117,401

    Net income                    $  24,957  $  69,413  $  78,448  $  82,239

    Adjusted income(1)            $  30,373  $  80,256  $  99,168  $  96,499

    Distributions paid during
     period                       $  23,058  $  63,480  $  78,580  $  78,357

    Excess (shortfall) of cash
     flows from operating
     activities over cash
     distributions paid           $  15,901  $  15,667  $  37,482  $  39,044

    Excess (shortfall) of net
     income over cash
     distributions paid           $   1,899  $   5,933  $    (132) $   3,882

    Excess (shortfall) of
     Adjusted income over cash
     distributions paid           $   7,315  $  16,776  $  20,588  $  18,142

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

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

Historically, excess cash flows from operating activities over cash distributions paid have been used to fund capital expenditures, pay down debt and to fund acquisitions. During the third quarter of 2009 and over the next several quarters, the Company will be making payments related to restructuring activities pertaining to the operational integration of the business as well as payments related to the settlement of outstanding contractual obligations within Resolve.

Expenditures on Capital Assets and Contract Payments

Total capital asset expenditures for the third quarter of 2009 were $2.5 million, an increase of $0.8 million compared to the same period in 2008. For the first nine months of 2009, total capital expenditures increased by $0.9 million compared to the first nine months of 2008. Additionally, fixed contract payments decreased $1.0 million in the third quarter of 2009 and increased $0.3 million during first nine months of 2009 respectively, as compared to 2008.

The variance in the three and nine month periods ended September 30, 2009 reflects the timing of capital project expenditures and the inclusion of capital expenditures made within the newly acquired Resolve business. The Business' capital program provides for continued expenditures to be funded by cash flows from operations.

Distributions

The Trustees of the Fund establish distribution levels of the Fund with reference to its financial position, the historical results, projected performance of the business and funds required for potential acquisitions. The Fund intends to make monthly cash distributions of its adjusted cash flows after capital asset and contract expenditures, subject to working capital requirements, debt repayments and other reserves.

The Fund paid cash distributions of $0.4599 per unit ( $23.1 million) during the third quarter of 2009 and $1.3797 per unit ( $63.5 million) in the first nine months of 2009 compared to $0.4599 per unit ( $20.2 million) and $1.3282 per unit ( $58.4 million) in the same periods in 2008. In connection with the Resolve acquisition, D+H issued 9.3 million units on July 27, 2009, which increased the distributions paid of the Fund by $2.8 million in the third quarter of 2009. For the third quarter of 2009 distributions per unit were unchanged while for the nine months ended September 30, 2009, distributions per unit paid increased by 3.9%. Similarly distributions per unit declared for the third quarter were unchanged, but for the nine months ended September 30, 2009, increased 3.1%.

On an annualized basis, the monthly cash distribution rate for September 2009 was $1.84 per unit, unchanged compared to September 2008.

Distributions paid can be different than distributions declared during a period. Monthly distributions are declared by the Fund for unitholders of record on the last business day of each month and are paid within 31 days following each month end. In the third quarter of 2009, these amounts were the same on a per unit basis. The holders of the new units of D+H issued for the purchase of Resolve were unitholders of record on July 31, 2009, and accordingly, these units were entitled to all distributions declared during the quarter and were paid distributions during the quarter in respect of July and August distributions declared.

In general, mutual fund trusts, like the Fund, must distribute all their taxable income to their unitholders in order not to pay income taxes in the trust.

The estimated tax allocation of distributions to be declared for 2009 is 100% "other income", as was the case for all of 2008.

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, 2009 and November 2, 2009, 53,233,373 trust units (December 31, 2008, 43,946,792 trust units) were outstanding. This reflects an issuance of an additional 9,286,581 trust units on July 27, 2009 in exchange for all the outstanding units of Resolve.

    
    Changes in Non-Cash Working Capital and Other Items

    (in thousands of Canadian dollars, unaudited)

                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Decrease (increase) in
     non-cash working
     capital items                $   4,452  $   2,985  $ (13,157) $  (4,089)
    Decrease (increase) in other
     operating assets and
     liabilities                       (396)       184         20     (1,697)
    -------------------------------------------------------------------------

    Decrease (increase) in
     non-cash working capital
     and other items              $   4,056  $   3,169  $ (13,137) $  (5,786)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The decrease in non-cash working capital items for the third quarter of 2009 was primarily related to increases in trade payables. The net increase in non-cash working capital items for the first nine months of 2009 was primarily a result of a significant decrease in payables in the first quarter reflecting normal course timing differences of when payments are made, payments under certain multi-year compensation programs and severance payments made earlier in the year.

Acquisitions

With the acquisition of Resolve, the Business significantly advanced its strategy by expanding its service offerings within the financial services industry, by establishing market leading positions in several niche markets and increasing its overall servicing capabilities. The acquisition was funded through the issuance of Davis + Henderson units in exchange for all the outstanding units of Resolve, valued at $119.4 million, and the assumption of Resolve debt. Including transaction costs and estimated restructuring costs, the total cost of the acquisition (excluding the assumed debt) is expected to be approximately $130 million. Management has not yet completed its assessment and valuation of the assets acquired and liabilities assumed for this acquisition and has estimated transaction and restructuring costs. As a result, the presented purchase information may change. For additional information on the acquisition, refer to Note 2 to the consolidated financial statements.

Cash Balances and Long-term Indebtedness

At September 30, 2009, cash and cash equivalents totalled $0.4 million, compared to $12.1 million at December 31, 2008. This decrease relates primarily to the increase of non-cash working capital as described above and payments in respect of the acquisition of Resolve including a reduction of approximately $4.0 million of the outstanding debt of Resolve.

The balance of long-term indebtedness as at September 30, 2009, before deducting unamortized deferred finance fees was $216.0 million compared with $148.0 million at December 31, 2008 and $146.0 million at June 30, 2009. During the third quarter of 2009, the Business increased its credit facilities in order to assume approximately $70.0 million of debt obligation within Resolve. The long-term indebtedness is recorded on the Balance Sheet net of $1.9 million of unamortized deferred financing fees as at September 30, 2009.

Total credit facilities available at September 30, 2009 were $260.0 million consisting of two non-revolving term loans and two revolving credit facilities. A non-revolving term loan of $120.0 million matures June 15, 2011 and a second non-revolving term loan of $70.0 million matures January 2, 2011. A revolving credit facility of $50.0 million matures June 15, 2011 and a second revolving credit facility of $20.0 million matures January 2, 2011. As of September 30, 2009, the Business had drawn $190.0 million under the non- revolving term loans and $26.0 million under the revolving term credit facilities. The Business is permitted to draw on the revolving facilities' available balance of $44.0 million to fund capital expenditures or for other general purposes.

The Credit Agreement contains a number of covenants and restrictions, including the requirement to meet certain financial ratios and financial condition tests. The financial covenants include a leverage test, a fixed charge coverage ratio test, 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 at www.sedar.com.

As of September 30, 2009, the Fund had interest-rate swap hedge contracts in place with certain of its lenders, such that the borrowing rates on 76.4% of outstanding indebtedness are effectively fixed at the interest rates and for the time periods ending as follows:

    
    (in thousands of Canadian dollars, unaudited)
    -------------------------------------------------------------------------
                                   Fair value of interest-rate swaps
                                  -----------------------------------
    Maturity Date     Notional Amount   Asset    Liability   Interest Rate(1)
    -------------------------------------------------------------------------
    March 16, 2010          $  65,000       -    $   1,301            8.240%
    July 15, 2010              33,000       -        1,417            5.815%
    January 5, 2011            22,000       -          401            2.980%
    June 15, 2011              20,000       -        1,370            5.685%
    June 15, 2011              25,000       -        1,714            5.685%
    -------------------------------------------------------------------------
                            $ 165,000  $    -    $   6,203
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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.
    

As at September 30, 2009, the Fund would have to pay the fair value of $6.2 million, the liability on the balance sheet, if it were to close out the interest-rate swap contracts. It is not the present intention of management to close out these contracts. The Fund expects to continue to enter into interest- rate swaps for the purpose of hedging interest rates.

The Fund's remaining indebtedness of $51.0 million as at September 30, 2009 is subject to floating interest rates that may be funded either by way of prime-rate loans or through the issuance of bankers' acceptance with maturities and interest rates which reset typically in the one-month to three- month range.

The average effective interest rate applicable to the Fund's total indebtedness was 5.262% as at September 30, 2009.

As at September 30, 2009, the Fund had several foreign-exchange contracts in place with one of its lenders aggregating to $4.0 million USD. The last of these contracts expires on May 17, 2010. Under these contracts, the Fund is required to deliver the agreed USD amount and in return receive the contracted CDN dollar amount set forth in each contract. As at September 30, 2009, the Fund would receive the fair value of $0.5 million if it were to close out the foreign exchange contracts. It is not the present intention of management to close out these contracts.

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

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

Business Risks

For a comprehensive discussion of risks, please refer to the Fund's most recently filed Annual Information Form and Annual Report available on SEDAR at www.sedar.com. In addition to those described in the aforementioned reports, with the acquisition of Resolve on July 27, 2009, the Business may be subject to the following additional business risks:

Potential Undisclosed Liabilities Associated with Acquisitions

In connection with acquisition of businesses, there may be liabilities that Davis + Henderson or prior owners failed or were unable to discover, or were unable to quantify, in their diligence prior to the consummation of the acquisitions. Within the applicable purchase and sale agreements, Davis + Henderson may not be fully indemnified for some or all of these liabilities by the former owners, and in connection with the purchase of Resolve, is not indemnified. To the extent that prior owners of the businesses failed to comply with or otherwise violated applicable laws, including environmental laws, Davis + Henderson, as a successor owner may be financially responsible for these violations. The discovery of any material liabilities could have a material adverse effect on the Fund.

Furthermore, acquisitions may involve a number of special risks including diversion of management's attention, failure to retain key personnel and unanticipated events or circumstances, some or all of which could have an adverse effect on the Fund's performance.

Contract Performance

Most of the customer contracts acquired through the acquisition of Resolve contain provisions that govern the performance of the services being provided. Failure to meet the terms or performance standards can result in variability in revenue earned, early termination of the contract, financial performance penalties or litigation. There can be no assurance that service delivery differences or disputes will not occur. Differences or disputes and the resolution thereof could have an adverse affect on the Business.

Non-GAAP Measures

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

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

EBITDA

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

Adjusted Income

Adjusted income is used as a measure of internal performance similar to net income, but is calculated after removing the non-cash impacts of certain fair value and purchase accounting items and future tax recoveries or expenses. These items are excluded in calculating adjusted income as they are non-cash items and not considered indicative of the financial performance of the Business for the period being reviewed.

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

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

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, 2009, the Fund adopted CICA Handbook Section 3064, Goodwill and Intangible Assets. This section, which replaces Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs, establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets. The provisions relating to the definition and initial recognition of intangible assets are equivalent to the corresponding provision of International Financial Reporting Standard IAS 38, Intangible Assets. The new standard also provides guidance for the recognition of internally developed intangible assets, including assets developed from research and development activities, ensuring consistent treatment of all intangible assets, whether separately acquired or internally developed. The Fund has evaluated the impact of adopting Section 3064 and has reclassified all software and its related amortization from capital assets to intangible assets. For a more detailed discussion of this change and its related impact, refer to Note 1 to the attached unaudited interim consolidated financial statements.

Future Accounting and Reporting Changes

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 has implemented 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 and provide input into the application of IFRS to the Fund's business. The implementation team has significantly advanced its assessment of the differences between IFRS and Canadian GAAP standards. The team will be expanding its assessment to identify any differences arising from the acquisition of Resolve. 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.

However, D+H management has limited its certification with respect to the scope of the design of disclosure controls and procedures and internal control over financial reporting to exclude controls, policies and procedures of the Resolve business acquired on July 27, 2009. The following is a summary of certain financial information about the Resolve business.

    
                                                    As at September 30, 2009
    -------------------------------------------------------------------------

    Current Assets                                                 $  56,372
    Future income tax assets                                          19,185
    Capital assests                                                   15,057
    Intangibles                                                        6,420
    -------------------------------------------------------------------------
                                                                   $  97,034
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Current liabilities                                            $  52,302
    Future income tax liabilities                                     44,832
    Other long-term liabilities                                       13,591
    -------------------------------------------------------------------------
                                                                   $ 110,725
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Commitments                                                    $  29,149
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   From period July 28, 2009
                                                       to September 30, 2009
    -------------------------------------------------------------------------

    Revenue                                                        $  48,737
    Expenses(1)                                                    $  41,012
    Amortization                                                   $   1,287
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) These expenses do not include all Resolve related expenses but only
        those to which the certification limitation applies.
    

Outside of the acquisition of Resolve, there have been no other changes in the Fund's internal controls over financial reporting during the quarter ended September 30, 2009 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 cash distributions through growing revenue in the 3% to 5% range. For the nine months ended September 30, 2009, revenue was substantially above this target due to the inclusion of the results of Resolve effective from the date of acquisition on July 27, 2009. For service areas of the Business, other than Resolve, growth in revenues was below our long-term target primarily due to the weak economic environment, as previously described in this report. For the balance of 2009 and into 2010, we expect revenues will continue to show a substantial increase over the prior year's comparable quarter as a result of the inclusion of the Resolve business within our consolidated results.

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

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

Also, as referred to above, we are continuing to integrate the business and operations of Resolve with those of the other D+H businesses. As part of this integration, we expect to achieve cost synergies by the end of 2010 in the range of $8 million annually. To date we believe that we have attained annualized savings in the range of $4 million to $6 million through the elimination of certain corporate costs and the reduction of duplicate senior management personnel. Future cost synergies are expected from additional organizational alignment and operational integration activities. The cost to be incurred related to the attainment of these synergies is expected to be in the $7 million to $9 million range of which approximately $5 million has been paid to date. These restructuring cost estimates have been recorded as part of the acquisition costs of the business.

The Business' 2009 capital program, including those of the acquired businesses, are expected to be in the range of $14 million to $16 million. With a full year inclusion of the Resolve business activities, for 2010, we expect the consolidated capital program to be in the order of $25 million, although additional integration saving opportunities may result in an expansion of our capital program.

Since December 2001, the initial public offering date of Davis + Henderson Income Fund, the Business has operated as an income trust pursuant to its trust indenture. In 2007, changes were made to the Income Tax Act that will require certain income trusts, including D+H, to pay taxes after fiscal 2010, similar to those paid by taxable Canadian corporations. In the future, the payment of such taxes will reduce the cash flow of the Business, thereby reducing the amount available for distribution to unitholders.

While we do not currently have definitive plans related to the future or capital structure of the business or policies related to future payout ratios, in 2010 D+H expects to propose to unitholders that, effective the end of 2010, the Fund would convert to a corporate structure. Such a conversion would be subject to 66 2/3% of unitholders voting in support of a change. At that time, the Business would expect to make dividend payouts, rather than distributions to owners, from available cash flow. During 2010, the company would expect to advise owners on the proposed level of dividend and dividend policy.

Caution Concerning Forward-looking Statements

This MD&A contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements") including those set out in the Outlook above. Such forward- looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in Davis + Henderson's industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward- looking statements include all disclosure regarding possible events, conditions or results of operations that are based on assumptions about future economic conditions and courses of action. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. Davis + Henderson cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made.

Risks related to forward-looking statements include, among other things, challenges presented by declines in the use of cheques by consumers; the Fund's dependence on a limited number of large financial institution customers and dependence on their acceptance of new programs; strategic initiatives being undertaken to meet the Fund's financial objective; stability and growth in the real estate and mortgage markets; as well as general market conditions, including economic and interest rate dynamics and investor interest in, and government regulations relating to, income trusts. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and Davis + Henderson does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

ADDITIONAL INFORMATION

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

    
    Davis + Henderson Income Fund
    CONSOLIDATED BALANCE SHEETS
    (in thousands of Canadian dollars, unaudited)

                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash equivalents                    $       367   $    12,066
      Accounts receivable                               73,019        16,180
      Inventory (note 3)                                 5,056         4,475
      Prepaid expenses                                   7,085         2,813
    -------------------------------------------------------------------------
                                                        85,527        35,534

    Future income tax asset (note 11)                   26,389         3,162
    Capital assets (note 4)                             33,213        20,464
    Other assets (note 5)                                1,082         1,082
    Fair value of derivatives (note 9)                     520             -
    Intangible assets (note 6)                         293,623       144,675
    Goodwill (note 7)                                  516,374       458,989
    -------------------------------------------------------------------------
                                                   $   956,728   $   663,906
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued liabilities     $    78,649   $    41,617
      Distributions payable to unitholders               8,161         6,737
      Deferred revenue - current                         6,575           777
    -------------------------------------------------------------------------
                                                        93,385        49,131

    Long-term indebtedness (note 8)                    214,109       147,331
    Fair value of derivatives (note 9)                   6,203         6,759
    Deferred revenue - non-current                       9,584             -
    Other long-term liabilities (note 10)                5,235           812
    Future income tax liability (note 11)               54,143        10,204
    -------------------------------------------------------------------------
                                                       382,659       214,237

    Unitholders' equity:
      Trust units (note 12)                            595,859       476,343
      Deficit                                          (21,205)      (25,714)
      Accumulated other comprehensive income (loss)       (585)         (960)
    -------------------------------------------------------------------------
                                                       574,069       449,669
    Commitments (note 14)
    -------------------------------------------------------------------------
                                                   $   956,728   $   663,906
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, 2009   30, 2008   30, 2009   30, 2008
    -------------------------------------------------------------------------

    Revenue                       $ 142,463  $  95,055  $ 325,549  $ 277,874
    Cost of sales and operating
     expenses (note 3)              105,205     62,018    227,999    184,442
    Amortization of capital assets    2,100      1,545      4,276      3,520
    -------------------------------------------------------------------------

                                     35,158     31,492     93,274     89,912

    Interest expense                  2,784      1,841      6,590      5,610
    Net unrealized loss (gain)
     on derivative instruments       (1,647)       728     (2,525)     2,038
    Amortization of intangible
     assets                           8,046      5,732     19,560     17,348
    -------------------------------------------------------------------------
    Income from continuing
     operations before income
     taxes                           25,975     23,191     69,649     64,916
    Future income tax expense         1,018         52        236        818
    -------------------------------------------------------------------------
    Income from continuing
     operations                      24,957     23,139     69,413     64,098
    Income from discontinued
     operations (note 17)                 -        167          -        414
    -------------------------------------------------------------------------
    Net income                    $  24,957  $  23,306  $  69,413  $  64,512
    -------------------------------------------------------------------------
    Net income per unit, basic
     and diluted                  $  0.4931  $  0.5303  $  1.5027  $  1.4680
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, 2009   30, 2008   30, 2009   30, 2008
    -------------------------------------------------------------------------

    Net income                    $  24,957  $  23,306  $  69,413  $  64,512

    Other comprehensive income:
    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                              103        151        375        410
    -------------------------------------------------------------------------
    Total comprehensive income    $  25,060  $  23,457  $  69,788  $  64,922
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, 2009   30, 2008   30, 2009   30, 2008
    -------------------------------------------------------------------------

    Deficit
    Deficit, beginning of period  $ (21,680) $ (20,776) $ (25,714) $ (23,371)
    Net income                       24,957     23,306     69,413     64,512
    Distributions                   (24,482)   (20,211)   (64,904)   (58,822)
    -------------------------------------------------------------------------
    Deficit, end of period          (21,205)   (17,681)   (21,205)   (17,681)
    -------------------------------------------------------------------------

    Accumulated Other
     Comprehensive Income (Loss)
    Accumulated other comprehensive
     income (loss),
     beginning of period               (688)    (1,262)      (960)    (1,521)
    Other comprehensive income :
    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                              103        151        375        410
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income (loss),
     end of period                     (585)    (1,111)      (585)    (1,111)
    -------------------------------------------------------------------------
    Deficit and accumulated other
     comprehensive income (loss),
     end of period                $ (21,790) $ (18,792) $ (21,790) $ (18,792)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, 2009   30, 2008   30, 2009   30, 2008
    -------------------------------------------------------------------------

    Cash and cash equivalents
     provided by (used in):

    OPERATING ACTIVITIES
    Net income                    $  24,957  $  23,306  $  69,413  $  64,512
    Add:
      Amortization of capital
       assets                         2,100      1,605      4,276      3,697
      Amortization of capital
       assets included in cost
       of sales                         326        354        949      1,177
      Amortization of intangible
       assets                         8,046      5,745     19,560     17,390
      Amortization of mark-to-
       market adjustment of
       interest-rate swaps              103        151        375        410
      Net unrealized loss (gain)
       on derivative instruments     (1,647)       728     (2,525)     2,038
      Future income tax expense       1,018         52        236        818
    -------------------------------------------------------------------------
                                     34,903     31,941     92,284     90,042

    Decrease(increase) in
     non-cash working capital
     items                            4,452      2,985    (13,157)    (4,089)
    Changes in other operating
     assets and liabilities            (396)       184         20     (1,697)
    -------------------------------------------------------------------------
                                      38,959    35,110     79,147     84,256
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Net proceeds from (repayment
     of) long-term indebtedness       (3,948)   (5,000)    (5,948)   (10,000)
    Issuance costs of long-term
     indebtedness                     (1,621)        -     (1,621)         -
    Issuance costs of trust units       (700)        -       (700)         -
    Distributions paid to
     unitholders                     (23,058)  (20,211)   (63,480)   (58,369)
    -------------------------------------------------------------------------
                                     (29,327)  (25,211)   (71,749)   (68,369)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Expenditures on capital
     assets, non-acquisition
     intangible assets and
     long-term contracts              (2,818)   (3,027)    (9,672)    (8,523)
    Acquisition of businesses
     (note 2)                         (9,588)        -     (9,425)    (4,250)
    -------------------------------------------------------------------------
                                     (12,046)   (3,027)   (19,097)   (12,773)
    -------------------------------------------------------------------------

    Increase (decrease) in cash
     and cash equivalents
     for the period                   (2,774)    6,872    (11,699)     3,114
    Cash and cash equivalents,
     beginning of period               3,141     9,390     12,066     13,148
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                $      367  $ 16,262  $     367  $  16,262
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
    Cash interest paid            $    3,436  $  1,609  $   6,153  $   4,765
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Three and nine months ended September 30, 2009 and 2008
    (in thousands of Canadian dollars, except unit and per unit amounts,
    unaudited)

    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, 2008, which are
    included in the 2008 Annual Report along with changes in accounting
    policies that became effective January 1, 2009. 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, 2008.

    2.  ACQUISITIONS

    a.  Resolve Business

    On July 27, 2009, the Fund acquired all of the outstanding units of
    Resolve Business Outsourcing Income Fund through the exchange of 0.285
    trust units of the Fund for each unit of Resolve Business Outsourcing
    Income Fund. A total of 9,286,581 Fund trust units were issued for this
    exchange. Resolve is a leading provider in Canada of student loan
    administration services, credit card portfolio management services, and
    search and registration services, among other offerings. The assets
    acquired and consideration given were as follows:


    Net assets acquired, at fair value:
      Current assets                                             $    54,712
      Capital, software and other assets                              22,174
      Intangibles                                                    156,800
      Future income tax assets                                        20,502
      Payables and other current liabilities                         (60,088)
      Future income tax liabilities                                  (45,100)
      Long-term indebtedness                                         (73,812)
      Other long-term liabilities                                     (6,800)

    -------------------------------------------------------------------------
                                                                      68,388
    Goodwill                                                          61,294

    -------------------------------------------------------------------------
    Total                                                        $   129,682
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration for 100% ownership:
      Units issued                                               $   120,094
      Transaction costs, net of cash acquired of $3,212                9,588
    -------------------------------------------------------------------------
    Total                                                        $   129,682
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The value of the Fund's trust units issued on acquisition reflects the
    unit's average trading price over a five-day period surrounding the
    Fund's announcement to acquire Resolve Business Outsourcing Income Fund
    on June 3, 2009. Along with the estimated transaction and restructuring
    costs of $12.8 milllion reduced by Resolve's cash on hand at the date of
    acquisition, the Fund also incurred an estimated $0.7 million to issue
    additional trust units. The Fund has not completed its assessment and
    valuation of the assets acquired and liabilities assumed for this
    acquisition. As a result the amount of the purchase price in excess of
    the carrying value of the acquired assets and liabilities has not been
    fully allocated to the acquired assets and liabilities in the
    consolidated balance sheet.

    b.  Cyence Business

    On December 19, 2008, the Fund completed an agreement to acquire a 100%
    interest in Cyence International Inc., a provider of credit lifecycle
    management software and service solutions to financial institutions in
    Canada and the United States. The assets acquired and consideration given
    were as follows:

    Net assets acquired, at fair value:
      Current assets                                             $     3,868
      Capital, software and other assets                               1,224
      Intangibles                                                     24,800
      Future income tax assets                                         4,995
      Payables and other current liabilities                          (5,832)
      Future income tax liabilities                                   (6,785)
    -------------------------------------------------------------------------
                                                                      22,270
    Goodwill                                                          15,443

    -------------------------------------------------------------------------
    Total                                                        $    37,713
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consideration for 100% ownership:
      Cash                                                       $    37,713
    -------------------------------------------------------------------------
    Total                                                        $    37,713
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The purchase price and related transaction costs were financed with $28
    million from the drawdown of then existing credit facility, and the
    balance from cash on hand. The Fund has not completed its assessment and
    valuation of the assets acquired and liabilities assumed for this
    acquisition. As a result, the amount of the purchase price in excess of
    the carrying value of the acquired assets and liabilities has not been
    fully allocated to the acquired assets and liabilities in the
    consolidated balance sheet.

    c.  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,
                                                          2009          2008
    -------------------------------------------------------------------------
    Raw materials                                  $     1,844   $     1,988
    Work-in-process                                      1,733         1,503
    Finished goods                                       1,479           984
    -------------------------------------------------------------------------
                                                   $     5,056   $     4,475
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Inventory that was recognized as cost of sales during the three months
    ended September 30, 2009 was $11,285 (Q3 2008 - $12,180) and nine months
    ended September 30, 2009 was $33,000 (nine months ended September 30,
    2008 - $37,063). The amount of write-down of inventories recognized as an
    expense during the three months ended September 30, 2009 was $18 (Q3 2008
    - $16) and nine months ended September 30, 2009 was $144 (nine months
    ended September 30, 2008 - $146) .

    4.  CAPITAL ASSETS

                                                          September 30, 2009
    -------------------------------------------------------------------------
                                                   Accumulated
                                            Cost  amortization           Net
    -------------------------------------------------------------------------
    Machinery and equipment          $    19,629   $     9,602   $    10,027
    Computer equipment                    23,932         9,185        14,747
    Furniture, fixtures and
     leasehold improvements               12,574         7,084         5,490
    Land and building                      2,975            26         2,949
    -------------------------------------------------------------------------
                                     $    59,110   $    25,897   $    33,213
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                           December 31, 2008
    -------------------------------------------------------------------------
                                                   Accumulated
                                            Cost  amortization           Net
    -------------------------------------------------------------------------
    Machinery and equipment          $    15,589   $     8,609   $     6,980
    Computer equipment                    18,492         7,439        11,053
    Furniture, fixtures and
     leasehold improvements                9,048         6,617         2,431
    -------------------------------------------------------------------------
                                     $    43,129   $    22,665   $    20,464
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Commencing January 1, 2009, in accordance with Section 3064, Goodwill and
    Intangible Assets, the Fund reclassified software costs previously
    recorded in capital assets to intangible assets. Accordingly, net book
    value of $10,816 at December 31, 2008 was reclassified from computer
    equipment and software to intangible assets.

    On July 27, 2009, with the acquisition of Resolve, the Fund recorded
    capital assets with fair value of $15,918.

    Amortization during the three months ended September 30, 2009 was $2,426
    (Q3 2008 - $1,959) and during the nine months ended September 30, 2009
    was $5,225 (nine months ended September 30, 2008 - $4,874), of which $326
    was included in cost of sales during the three months ended September 30,
    2009 (Q3 2008 - $354) and $949 is included in cost of sales during the
    nine months ended September 30, 2009 (nine months ended September 30,
    2008 - $1,177). For the three and nine months ended September 30, 2008,
    amortization of $1,388 and $4,297 was reclassified respectively from
    capital assets to intangible assets. Fully amortized capital assets
    removed from the accounts during the three months ended September 30,
    2009 was nil (Q3 2008 -$537) and during the nine months ended September
    30, 2009 was $1,973 (nine months ended September 30, 2008 - $4,688).

    5.  OTHER ASSETS

                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
    Investments                                    $     1,000   $     1,000
    Other                                                   82            82
    -------------------------------------------------------------------------
                                                   $     1,082   $     1,082
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Commencing January 1, 2009, the Fund reclassified long-term supply
    contracts previously recorded in other assets to intangible assets.
    Accordingly, net book value of $3,347 at December 31, 2008 was
    reclassified from other assets to intangible assets.

    On December 19, 2008, the Fund acquired a portfolio investment in a
    technology services company for a cash consideration of $1 million. This
    investment has been accounted for using the cost method.

    6.  INTANGIBLE ASSETS

                 Three months ended September 30, 2009
    ---------------------------------------------------
                                              Software
                                  ---------------------
                                            Internally
                       Contracts  Purchased  developed
    ---------------------------------------------------
    Cost
    At July 1, 2009     $  6,499   $ 20,422   $ 10,422
    Additions(1)             300      4,222      3,442
    Other movements(2)         -          -          -
    ---------------------------------------------------
    At September 30,
     2009               $  6,799   $ 24,644   $ 13,864
    ---------------------------------------------------
    ---------------------------------------------------

    Amortization
    At July 1, 2009     $  3,501   $ 17,115   $  3,520
    Amortization             601      1,009        494
    Other movements(2)         -          -          -
    ---------------------------------------------------
    At September 30,
     2009               $  4,102   $ 18,124   $  4,014
    ---------------------------------------------------
    ---------------------------------------------------

    Net carrying amount
     At September 30,
     2009               $  2,697   $  6,520   $  9,850
    ---------------------------------------------------
    ---------------------------------------------------


                                       Three months ended September 30, 2009
    -------------------------------------------------------------------------
                                        Acquisition of businesses
                      --------------------------------------------
                                                         Customer
                                 Proprietary     Brand   relation-
                       Contracts    software     names      ships      Total
    -------------------------------------------------------------------------
    Cost
    At July 1, 2009     $  1,201   $ 55,900   $ 10,900   $ 90,735   $196,079
    Additions(1)               -     14,600          -    142,200    164,764
    Other movements(2)    (1,201)         -          -          -     (1,201)
    -------------------------------------------------------------------------
    At September 30,
     2009               $      -   $ 70,500   $ 10,900   $232,935   $359,642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization
    At July 1, 2009     $  1,201   $ 13,629   $  1,816   $ 18,392   $ 59,174
    Amortization               -      1,689        182      4,071      8,046
    Other movements(2)    (1,201)         -          -          -     (1,201)
    -------------------------------------------------------------------------
    At September 30,
     2009               $      -   $ 15,318   $  1,998   $ 22,463   $ 66,019
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
     At September 30,
     2009               $      -   $ 55,182   $  8,902   $210,472   $293,623
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                  Nine months ended September 30, 2009
    ---------------------------------------------------
                                              Software
                                  ---------------------
                                            Internally
                       Contracts  Purchased  developed
    ---------------------------------------------------
    Cost
    At January 1, 2009  $  8,761   $ 21,727   $ 10,676
    Additions(1)           1,600      5,340      4,696
    Other movements(2)    (3,562)    (2,423)    (1,508)
    ---------------------------------------------------
    At September 30,
     2009               $  6,799   $ 24,644   $ 13,864
    ---------------------------------------------------
    ---------------------------------------------------

    Amortization
    At January 1, 2009  $  5,414   $ 17,393   $  4,194
    Amortization           2,250      3,231      1,323
    Other movements(2)    (3,562)    (2,500)    (1,503)
    ---------------------------------------------------
    At September 30,
     2009               $  4,102   $ 18,124   $  4,014
    ---------------------------------------------------
    ---------------------------------------------------

    Net carrying amount
    At September 30,
     2009               $  2,697   $  6,520   $  9,850
    At December 31,
     2008               $  3,347   $  4,334   $  6,482
    ---------------------------------------------------
    ---------------------------------------------------


                                        Nine months ended September 30, 2009
    -------------------------------------------------------------------------
                                        Acquisition of businesses
                      --------------------------------------------
                                                         Customer
                                 Proprietary     Brand   relation-
                       Contracts    software     names      ships      Total
    -------------------------------------------------------------------------
    Cost
    At January 1, 2009  $  1,201   $ 56,093   $ 10,900   $107,064   $216,422
    Additions(1)               -     14,600          -    142,200    168,436
    Other movements(2)    (1,201)      (193)         -    (16,329)   (25,216)
    -------------------------------------------------------------------------
    At September 30,
     2009               $      -   $ 70,500   $ 10,900   $232,935   $359,642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization
    At January 1, 2009  $    864   $ 11,017   $  1,452   $ 31,413   $ 71,747
    Amortization             337      4,494        546      7,379     19,560
    Other movements(2)    (1,201)      (193)         -    (16,329)   (25,288)
    -------------------------------------------------------------------------
    At September 30,
     2009               $      -   $ 15,318   $  1,998   $ 22,463   $ 66,019
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At September 30,
     2009               $      -   $ 55,182   $  8,902   $210,472   $293,623
    At December 31,
     2008               $    337   $ 45,076   $  9,448   $ 75,651   $144,675
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                 Three months ended September 30, 2008
    ---------------------------------------------------
                                              Software
                                  ---------------------
                                            Internally
                       Contracts  Purchased  developed
    ---------------------------------------------------
    Cost
    At July 1, 2008     $  8,863   $ 20,034   $  9,042
    Additions              1,260        854        519
    Other movements(2)         -       (534)         -
    ---------------------------------------------------
    At September 30,
     2008               $ 10,123   $ 20,354   $  9,561
    ---------------------------------------------------
    ---------------------------------------------------

    Amortization
    At July 1, 2008     $  4,981   $ 15,235   $  3,354
    Amortization(3)          932        963        425
    ---------------------------------------------------
    At September 30,
     2008               $  5,913   $ 16,198   $  3,779
    ---------------------------------------------------
    ---------------------------------------------------

    Net carrying amount
    At September 30,
     2008               $  4,210   $  4,156   $  5,782
    ---------------------------------------------------
    ---------------------------------------------------


                                       Three months ended September 30, 2008
    -------------------------------------------------------------------------
                                        Acquisition of businesses
                      --------------------------------------------
                                                         Customer
                                 Proprietary     Brand   relation-
                       Contracts    software     names      ships      Total
    -------------------------------------------------------------------------
    Cost
    At July 1, 2008     $  1,201   $ 41,993   $  8,400   $ 98,864   $188,397
    Additions                  -          -          -          -      2,633
    Other movements(2)         -          -          -          -       (534)
    -------------------------------------------------------------------------
    At September 30,
     2008               $  1,201   $ 41,993   $  8,400   $ 98,864   $190,496
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization
    At July 1, 2008     $    583   $  8,906   $  1,168   $ 27,269   $ 61,496
    Amortization(3)          140      1,031        140      2,101      5,732
    -------------------------------------------------------------------------
    At September 30,
     2008               $    723   $  9,937   $  1,308   $ 29,370   $ 67,228
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At September 30,
     2008               $    478   $ 32,056   $  7,092   $ 69,494   $123,268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                  Nine months ended September 30, 2008
    ---------------------------------------------------
                                              Software
                                  ---------------------
                                            Internally
                       Contracts  Purchased  developed
    ---------------------------------------------------
    Cost
    At January 1, 2008  $ 12,581   $ 20,509   $ 10,230
    Additions              1,260      2,121      1,801
    Other movements(2)   ( 3,718)    (2,276)    (2,470)
    ---------------------------------------------------
    At September 30,
     2008               $ 10,123   $ 20,354   $  9,561
    ---------------------------------------------------
    ---------------------------------------------------

    Amortization
    At January 1, 2008  $  6,757   $ 14,875   $  5,018
    Amortization(3)        2,744      3,065      1,231
    Other movements(2)    (3,588)    (1,742)    (2,470)
    ---------------------------------------------------
    At September 30,
     2008               $  5,913   $ 16,198   $  3,779
    ---------------------------------------------------
    ---------------------------------------------------

    Net carrying amount
    At September 30,
     2008               $  4,210   $  4,156   $  5,782
    ---------------------------------------------------
    ---------------------------------------------------


                                        Nine months ended September 30, 2008
    -------------------------------------------------------------------------
                                        Acquisition of businesses
                      --------------------------------------------
                                                         Customer
                                 Proprietary     Brand   relation-
                       Contracts    software     names      ships      Total
    -------------------------------------------------------------------------
    Cost
    At January 1, 2008  $  1,201   $ 41,993   $  8,400   $ 97,521   $192,435
    Additions                  -          -          -      1,343      6,525
    Other movements(2)         -          -          -          -     (8,464)
    -------------------------------------------------------------------------
    At September 30,
     2008               $  1,201   $ 41,993   $  8,400   $ 98,864   $190,496
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization
    At January 1, 2008  $    303   $  6,773   $    887   $ 23,067   $ 57,680
    Amortization(3)          420      3,164        421      6,303     17,348
    Other movements(2)         -          -          -          -     (7,800)
    -------------------------------------------------------------------------
    At September 30,
     2008               $    723   $  9,937   $  1,308   $ 29,370   $ 67,228
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At September 30,
     2008               $    478   $ 32,056   $  7,092   $ 69,494   $123,268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Software additions other than proprietary software for the three and
        nine months ended September 30, 2009 include software from the
        acquisition of Resolve of $5,621
    (2) Other movements primarily relate to fully amortized assets removed
        from the accounts during the period
    (3) Amortization for the three and nine months ended September 30, 2008
        does not include $13 and $42 of amortization, respectively, that
        relates to discontinued operations


    7.  GOODWILL

                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------

    Balance, beginning of period                   $   458,989   $   438,502
    Goodwill acquired during the period:
      AVS acquistion                                         -         2,691
      Cyence acquisition                                (2,553)       17,796
      Resolve acquisition                               61,294             -
    Filogix adjustment                                  (1,356)            -
    -------------------------------------------------------------------------
    Balance, end of period                         $   516,374   $   458,989
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The Filogix adjustment relates to the recognition of future tax asset for
    loss carryforwards that was available at the point of acquisition and for
    which a valuation allowance was recorded.

    8.  LONG-TERM INDEBTEDNESS

                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
    Non-revolving term loan maturing
     June 15, 2011                                 $   120,000   $   120,000
    Non-revolving term loan maturing
     January 2, 2011                                    70,000             -
    Revolving credit facility maturing
     June 15, 2011                                      26,000        28,000
    -------------------------------------------------------------------------
                                                       216,000       148,000
    Deferred finance costs                              (1,891)         (669)
    -------------------------------------------------------------------------
                                                   $   214,109   $   147,331
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As of September 30, 2009, the Fund had $260 million of available credit
    facilities consisting of two non-revolving term loans and two revolving
    credit facilities. These include a non-revolving term loan maturing June
    15, 2011 of $120 million, a second non-revolving term loan of $70 million
    maturing January 2, 2011, a revolving credit facility maturing June 15,
    2011 of $50 million (of which $26 million was drawn at September 30,
    2009) and a second revolving credit facility maturing January 2, 2011 of
    $20 million (of which nil was drawn at September 30, 2009). The credit
    facilities do not require the Fund to make any principal payments prior
    to their stated maturities. 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 Fund also has obligations outstanding pursuant to letters of credit
    and performance guarantees aggregating to approximately $5 million, of
    which less than $0.1 million represents a drawing under the committed
    revolving credit facilities.

    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, 2009, the Fund was in
    compliance with all of its financial covenants and financial condition
    tests.

    Deferred finance costs relate to the fourth amended and restated credit
    agreement dated July 27, 2009 and the renewal and amendment of long-term
    indebtedness on June 15, 2006. Amortization of deferred finance costs
    during the three months ended September 30, 2009 was $260 (Q3 2008 - $69)
    and during the nine months ended September 30, 2009 was $399 (nine months
    ended September 30, 2008 - $208). Amortization of deferred finance costs
    is recognized over the term of the facilities as interest expense using
    the effective interest method.

    9.  FINANCIAL INSTRUMENTS

    Recognition and Measurement

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

    Credit Risk

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

    Market Risk

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

    The following table presents a sensitivity analysis to changes in market
    interest rates and their potential impact on the Fund for the three
    months and nine months ended September 30, 2009. As the sensitivity is
    hypothetical, it should be used with caution.


                                    Three months ended     Nine months ended
                                    September 30, 2009    September 30, 2009
    -------------------------------------------------------------------------
                                  + 100 bps  - 100 bps  + 100 bps  - 100 bps
    -------------------------------------------------------------------------

    Increase (decrease) in
     interest expense             $     129  $    (129) $     381  $    (381)
    Change to net unrealized
     (gain) loss on interest-
     rate swaps                      (1,600)     1,600     (1,600)     1,600
    -------------------------------------------------------------------------

    Increase (decrease) in
     net income                   $   1,471  $  (1,471) $   1,219  $  (1,219)
    -------------------------------------------------------------------------

    Increase (decrease) in total
     comprehensive income         $   1,471  $  (1,471) $   1,219  $  (1,219)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Fund manages its interest-rate risks through the use of interest-rate
    swaps for some of its outstanding long-term indebtedness. As of September
    30, 2009, the Fund has entered into interest-rate swap contracts with its
    lenders, such that the floating borrowing rates on $165.0 million, or
    76.4%, of its outstanding term indebtedness are effectively fixed at
    interest rates and for periods shown in the following table:


    -------------------------------------------------------------------------
                                                  Fair value of
                                            interest-rate swaps
                                       -------------------------    Interest
    Maturity date     Notional Amount        Asset    Liability       rate(1)
    -------------------------------------------------------------------------
    March 16, 2010         $   65,000   $        -   $    1,301       8.240%
    July 15, 2010              33,000            -        1,417       5.815%
    January 5, 2011            22,000            -          401       2.980%
    June 15, 2011              20,000            -        1,370       5.685%
    June 15, 2011              25,000            -        1,714       5.685%
    -------------------------------------------------------------------------
                           $  165,000   $        -   $    6,203
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The listed interest rates are inclusive of bankers' acceptance fees
        currently in effect. Such fees could increase depending on the
        Fund's financial leverage as compared to certain levels specified in
        the Credit Agreement.

    The Fund is party to foreign exchange contracts. As these foreign
    exchange contracts do not qualify for hedge accounting, the unrealized
    gain or loss is recorded as mark-to-market on derivative instruments in
    the consolidated statements of income. The following table lists the
    foreign exchange contracts as at September 30, 2009:


    -------------------------------------------------------------------------
                                                  Fair value of
                                     foreign exchange contracts
                                     --------------------------     Exchange
    Maturity date     Notional Amount        Asset    Liability       rate(1)
    -------------------------------------------------------------------------
    October 19, 2009       $      500   $       74   $        -       1.2191
    November 16, 2009             500           74            -       1.2190
    December 16, 2009             500           74            -       1.2180
    January 19, 2010              500           84            -       1.2375
    February 16, 2010             500           90            -       1.2500
    March 16, 2010                500           90            -       1.2500
    April 15, 2010                500           17            -       1.1057
    May 17, 2010                  500           17            -       1.1057
    -------------------------------------------------------------------------
                           $    4,000   $      520   $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following table presents a sensitivity analysis to changes in the
    foreign exchange between the Canadian and US dollar on the Fund for the
    three months and nine months ended September 30, 2009. As the sensitivity
    is hypothetical, it should be used with caution.


                                    Three months ended     Nine months ended
                                    September 30, 2009    September 30, 2009
    -------------------------------------------------------------------------
                                    + $0.05    - $0.05    + $0.05    - $0.05
                                        CAD        CAD        CAD        CAD
                                    Per USD    Per USD    Per USD    Per USD
    -------------------------------------------------------------------------

    Increase (decrease) in
     net income                   $      44  $     (44) $      46  $     (46)
    Unrealized gain (loss) on
     mark-to-market on
     foreign exchange contracts        (200)       200       (200)       200
    -------------------------------------------------------------------------

    Increase (decrease)
     in net income                $     156  $    (156) $     154  $    (154)
    -------------------------------------------------------------------------
    Increase (decrease)
     in total comprehensive
     income                       $     156  $    (156) $     154  $    (154)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liquidity Risk

    The Fund has long-term indebtedness with maturity dates of
    January 2, 2011 and 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 outstanding interest-rate swaps and foreign exchange contracts.

    Derivative Financial Instruments

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

    Accumulated Other Comprehensive Income (Loss)

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

    10. OTHER LONG-TERM LIABILITIES

                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
    Deferred compensation program                  $       567   $         -
    Employee future benefits                             3,132           707
    Contractual supplier obligation                      1,495             -
    Capital lease                                           41           105
    -------------------------------------------------------------------------
                                                   $     5,235   $       812
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The deferred compensation program, which commenced on January 1, 2009, is
    a long-term incentive plan that includes a cash award component and a
    cash-settled unit-based payment component. Both the cash component and
    the cash-settled unit-based payment component awarded at the grant date
    are subject to a 3-year performance target for compound annual growth in
    adjusted income. The units awarded will earn distributions through the 3
    years equal to the actual per unit distributions declared on the units of
    Davis + Henderson during the fiscal periods that form the performance
    period. The cash-settled unit-based payment is determined based on the
    average trading price for the units in the 30 days following the release
    of the results for the last fiscal year in the performance period, along
    with the annualized growth rate achieved and the distributions earned.
    The employee must remain an employee throughout the three year
    performance period in order for the plan to vest. The first possible
    payment under this program is in 2012.

    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, 2009 was $0.6 million (Q3 2008 - $0.3 million)
    and for nine months ended September 30, 2009 was $1.5 million (nine
    months ended September 30, 2008 - $1.1 million).

    The contractual supplier obligation relates to payments to be made for a
    customized software package. The total liability is $2,124 of which $629
    is recorded in current liabilities.

    11. INCOME TAXES

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

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

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

                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
    Future income tax assets:
      Capital assets less than tax values          $     3,164   $     3,121
      Intangible assets less than tax values            11,793        10,979
      Loss carryforwards                                16,867         1,677
      Valuation allowance                              (15,082)      (12,615)
      Accruals not deductible in current period          9,647             -
    -------------------------------------------------------------------------
      Total future tax assets                           26,389         3,162
    -------------------------------------------------------------------------

    Future income tax liabilities:
      Capital assets greater than tax values             3,257         2,849
      Intangible assets greater than tax values         50,886         7,355
    -------------------------------------------------------------------------
      Total future tax liabilities                      54,143        10,204
    -------------------------------------------------------------------------
    Net future income tax liabilities              $    27,754   $     7,042
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Fund does not expect the temporary differences between the carrying
    amount and tax base of certain intangible assets to reverse in the
    foreseeable future and accordingly has reduced the related future income
    tax asset by a valuation allowance for the portion that is not expected
    to reverse.

    With the acquisition of the Cyence business, the Fund recognized a future
    income tax asset of $2,459 relating to loss carryforwards, a future
    income tax asset of $3,164 relating to capital assets that are less than
    their tax values and a future income tax liability of $6,600 relating to
    intangible assets that are greater than their tax values. Both the future
    income tax asset and the future income tax liability are expected to
    reverse in the foreseeable future. The Fund does not expect to
    realize the benefit of certain loss carryforwards of certain corporate
    subsidiaries in the foreseeable future and accordingly has reduced the
    related future income tax asset by a valuation allowance for the portion
    that is not expected to be realized.

    With the acquisition of the Resolve business, the Fund recognized future
    income tax assets of $9,766 relating to loss carryforwards, and $9,423
    relating to reserves not deductible in the current period. The Fund also
    recognized a future income tax liability of $44,286 relating to
    intangible assets that are greater than their tax values. Both the future
    income tax asset and future income tax liability are expected to reverse
    in the foreseeable future. No future tax liability has been provided for
    the taxable temporary difference related to goodwill since this amount is
    not deductible for tax purposes and is therefore specifically exempt from
    the recognition requirements.

    The provision for future income taxes in the consolidated statement of
    income represents the change in the consolidated net future income tax
    liabilities, excluding goodwill adjustments. The effective tax rate for
    the period differs from the expected tax rate of nil due to the change in
    temporary differences of the Fund and its flow-through trust and
    partnership subsidiaries expected to reverse after 2010 and the results
    of operations of its corporate subsidiaries.

    As at September 30, 2009, the Fund had $56,025 of net operating losses
    for income tax purposes. These losses will begin to expire commencing in
    fiscal 2022. Restrictions apply on the use of some of these losses.

    12. TRUST UNITS

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

                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------

    Balance, beginning of period                   $   476,343   $   474,585
    Non-cash distribution                                    -         1,758
    Units issued                                       119,516             -
    -------------------------------------------------------------------------
    Balance, end of period                         $   595,859   $   476,343
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Units outstanding, end of period                53,233,373    43,946,792
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The weighted average number of units outstanding during the three months
    ended September 30, 2009 was 50,608,904 and nine months ended September
    30, 2009 was 46,191,900 (three and nine months ended September 30, 2008 -
    43,946,792).

    13. CAPITAL

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

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

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

    The Fund's indebtedness is subject to a number of covenants and
    restrictions including the requirement to meet certain financial ratios
    and financial condition tests at a subsidiary level. One such ratio is
    the "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, 2009, this
    ratio was calculated at 1.38 (12-month trailing period ended September
    30, 2008 - 1.00). Management also uses this ratio as a key indicator in
    managing the Fund's capital.

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

    14. COMMITMENTS

    As of September 30, 2009, the Fund has annual lease obligations with
    respect to real estate, vehicles and equipment as follows:

    2009                                                         $     3,602
    2010                                                              14,075
    2011                                                               7,067
    2012                                                               4,782
    2013                                                               4,027
    Thereafter                                                         6,482
    -------------------------------------------------------------------------
                                                                 $    40,035
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. SIGNIFICANT CUSTOMERS

    For the three months ended September 30, 2009, the Fund earned 67% of its
    consolidated revenue from its seven largest customers (Q3 2008 - 78%).
    For the three months ended September 30, 2009, three of these customers
    individually accounted for greater than 10%, but not more than 14% of the
    Fund's total revenue (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).

    For the nine months ended September 30, 2009, the Fund earned 70% of its
    consolidated revenue from its seven largest customers (for the nine
    months ended September 30, 2008 - 79%). For the nine months ended
    September 30, 2009, three of these customers individually accounted for
    greater than 10%, but not more than 16% of the Fund's total revenue (for
    the nine months ended September 30, 2008, four of these customers
    individually accounted for greater than 10%, but no more than 17% of the
    Fund's total revenue).

    16. SEGMENTED INFORMATION

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

    Revenue pertaining to major service areas for the three and nine months
    ended September 30, 2009 and 2008 are as follows:


                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Revenue
      Programs to the chequing
       account                    $  72,239  $  75,281  $ 216,770  $ 222,445
      Loan servicing solutions       21,091          -     21,091          -
      Registration services          18,119      1,058     20,056      3,195
      Lending technology solutions   18,891     17,073     51,717     47,176
      Other                          12,123      1,643     15,915      5,058
    -------------------------------------------------------------------------
                                  $ 142,463  $  95,055  $ 325,549  $ 277,874
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    17. DISCONTINUED OPERATIONS

    Effective December 31, 2008, the Fund ceased servicing a U.S. cheque
    supply contract. As a result, the U.S. operations were classified as
    discontinued operations at December 31, 2008.

    Revenue attributable to the discontinued operations during the three
    months and nine months ended September 30, 2009 was nil (Q3 2008 -
    $2,265, nine months ended September 30, 2008 - $5,797). Earnings per
    share information relating to the discontinued operations is as follows:


                                    Three months ended     Nine months ended
                                  September  September  September  September
                                   30, 2009   30, 2008   30, 2009   30, 2008
    -------------------------------------------------------------------------

    Income from discontinued
     operations,
     per unit, basic and diluted  $       -  $  0.0038  $       -  $  0.0094

    Income from continuing
     operations,
     per unit, basic and diluted     0.4931     0.5265     1.5027     1.4586

    -------------------------------------------------------------------------
    Net income per unit,
     basic and diluted            $  0.4931  $  0.5303  $  1.5027  $  1.4680
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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)             2009       2009       2009       2008       2008
    -------------------------------------------------------------------------

    Revenue            $ 142,463  $  94,557  $  88,529  $  89,357  $  95,055
    Expenses             104,879     62,080     60,091     62,413     61,664
    -------------------------------------------------------------------------
    EBITDA                37,584     32,477     28,438     26,944     33,391

    Amortization of
     capital assets and
     non-acquisition
     intangibles           4,530      3,679      3,819      3,800      4,219
    Interest expense       2,681      1,787      1,747      1,647      1,690

    -------------------------------------------------------------------------
    Adjusted income       30,373     27,011     22,872     21,497     27,482

    Amortization of
     mark-to-market
     adjustment of
     interest-rate swaps     103        136        136        151        151
    Net unrealized loss
     (gain) on
     interest-rate swaps
     and foreign currency
     contracts            (1,647)    (1,069)       191      3,653        728
    Future income tax
     expense (recovery)    1,018       (718)       (64)       399         52
    Amortization of
     intangibles from
     acquisition           5,942      3,441      3,374      3,409      3,412
    -------------------------------------------------------------------------

    Income from
     continuing
     operations           24,957     25,221     19,235     13,885     23,139
    Income from
     discontinued
     operations                -          -          -         51        167
    -------------------------------------------------------------------------

    Net income         $  24,957  $  25,221  $  19,235  $  13,936  $  23,306

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

    Cash flows from
     operating
     activities        $  38,959  $  27,173  $  13,015  $  31,806  $  35,110
    Changes in non-cash
     working capital
     other items(1)       (4,056)     3,517     13,676     (6,380)    (3,169)
    -------------------------------------------------------------------------
    Adjusted cash flows
     from operating
     activities           34,903     30,690     26,691     25,426     31,941

    Less:
      Capital
       expenditures and
       contract
       payments(2)         2,818      2,491      4,363      4,915      3,027

    -------------------------------------------------------------------------
    Adjusted cash flows
     after capital asset
     expenditures and
     contract payments    32,085     28,199     22,328     20,511     28,914

    Distributions paid
     to unitholders       23,058     20,211     20,211     20,211     20,211

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

                           9,027      7,988      2,117        300      8,703

    Cash flows provided
     by (used in) other
     financing activities (5,569)    (2,000)         -     28,000     (5,000)
    Fair value of trust
     units issued        119,394          -          -          -          -
    Fair value of
     acquisitions       (129,682)       103         60    (38,876)         -
    Changes in non-cash
     working capital
     and other items(1)    4,056     (3,517)   (13,676)     6,380      3,169

    -------------------------------------------------------------------------
    Increase (decrease)
     in cash and cash
     equivalents for
     the period        $  (2,774) $   2,574  $ (11,499) $  (4,196) $   6,872

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

    (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.  This balance also
        includes changes to other long-term liabilities.
    (2) Asset expenditures include expenditure on capital asset, contract
        payments and non-acquisition intangibles.
    (3) Certain comparative figures have been reclassified to conform to the
        current period's presentation.
    (4) Certain subtotals in this table are not consistent with GAAP and
        accordingly are considered non-GAAP measures. Please see Non-GAAP
        Measures section of the MD&A for a more complete discussion of
        non-GAAP terms.



    Summary of Cash Flows Per Unit
    -------------------------------------------------------------------------
                           Three      Three      Three      Three      Three
                          months     months     months     months     months
                           ended      ended      ended      ended      ended
    (in Canadian       September       June      March   December  September
     dollars,                 30,        30,        31,        31,        30,
     unaudited)             2009       2009       2009       2008       2008
    -------------------------------------------------------------------------
    Adjusted income
     per unit, basic
     and diluted       $  0.6002  $  0.6146  $  0.5204  $  0.4892  $  0.6253
    Net income per
     unit, basic and
     diluted           $  0.4931  $  0.5739  $  0.4377  $  0.3172  $  0.5303
    Adjusted cash
     flows from
     operating
     activities        $  0.6897  $  0.6983  $  0.6073  $  0.5786  $  0.7268
    Adjusted cash
     flows after
     capital asset
     expenditures and
     contract payments $  0.6340  $  0.6417  $  0.5081  $  0.4667  $  0.6579
    Distributions paid
     to unitholders    $  0.4599  $  0.4599  $  0.4999  $  0.4599  $  0.4599
    Distributions
     declared during
     period            $  0.4599  $  0.4599  $  0.4599  $  0.4999  $  0.4599


    Condensed Consolidated Balance Sheet
    -------------------------------------------------------------------------
    (in thousands of   September       June      March   December  September
     Canadian dollars,        30,        30,        31,        31,        30,
     unaudited)             2009       2009       2009       2008       2008
    -------------------------------------------------------------------------

    Cash and cash
     equivalents       $     367  $   3,141  $     567  $  12,066  $  16,262
    Other current
     assets               85,160     29,996     27,137     23,468     25,604
    Capital and other
     assets               61,204     24,203     23,854     24,708     18,883
    Intangible assets    293,623    136,905    140,902    144,675    123,270
    Goodwill             516,374    457,636    459,037    458,989    441,193

    -------------------------------------------------------------------------
                       $ 956,728  $ 651,881  $ 651,497  $ 663,906  $ 625,212
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Payables and other
     current
     liabilities       $  93,385  $  36,745  $  37,464  $  49,101  $  44,119
    Other long-term
     liabilities          75,165     15,691     17,804     17,805      6,038
    Long-term
     indebtedness        214,109    145,470    147,400    147,331    119,262
    Unitholders' equity  574,069    453,975    448,829    449,669    455,793

    -------------------------------------------------------------------------
                       $ 956,728  $ 651,881  $ 651,497  $ 663,906  $ 625,212
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Distribution History
    -------------------------------------------------------------------------
                                                    Distributions per unit(1)
    Month                       2009      2008      2007      2006      2005
    -------------------------------------------------------------------------

    January                 $ 0.1533  $ 0.1430  $ 0.1280  $ 0.1220  $ 0.1200
    February                  0.1533    0.1430    0.1280    0.1220    0.1200
    March                     0.1533    0.1430    0.1320    0.1250    0.1200
    April                     0.1533    0.1430    0.1320    0.1250    0.1200
    May                       0.1533    0.1533    0.1320    0.1250    0.1200
    June                      0.1533    0.1533    0.1320    0.1250    0.1200
    July                      0.1533    0.1533    0.1320    0.1250    0.1200
    August                    0.1533    0.1533    0.1320    0.1250    0.1220
    September                 0.1533    0.1533    0.1320    0.1250    0.1220
    October                             0.1533    0.1320    0.1250    0.1220
    November(2)                         0.1533    0.3430    0.1280    0.1220
    December(3)                         0.1933    0.1430    0.1280    0.1220

    -------------------------------------------------------------------------
                            $ 1.3797  $ 1.8384  $ 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 include a special distribution
        of $0.20 for unitholders of record on November 15, 2007 and was paid
        on November 30, 2007
    (3) December 2008 declared distributions include a non-cash special
        distribution of $0.04 for unitholders of record on December 31, 2008
        and was paid on December 31, 2008



    Tax Allocation of Distributions

    -------------------------------------------------------------------------
                2009    2008    2007    2006    2005    2004    2003    2002

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

    Dividend
     income     0.0%    0.0%    0.0%    0.0%    0.0%   15.0%   19.5%   16.9%
    Other
     income   100.0%  100.0%  100.0%  100.0%   91.6%   75.2%   69.5%   71.5%
    Return of
     capital    0.0%    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%  100.0%
    -------------------------------------------------------------------------

    The above tax allocation of distributions for 2009 represents an estimate
    based on the total expected distributions for the year ended December 31,
    2009.



    Other Statistics
    (in thousands, except per unit amounts)

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

    2009 - Q3    14.99      12.25      14.90        182     53,233   793,177
         - Q2    14.29      11.51      12.25        126     43,947   538,348
         - Q1    16.76      10.40      11.92        104     43,947   523,846
    2008 - Q4    17.15      10.30      16.79        117     43,947   737,867
         - Q3    16.40      13.50      15.47         93     43,947   679,857
         - Q2    17.85      15.53      15.58         83     43,947   684,691
         - Q1    21.75      15.77      17.19        107     43,947   755,445
    2007 - Q4    22.00      18.75      21.00         98     43,947   922,883
         - Q3    20.10      17.14      19.80         78     43,947   870,146
         - Q2    19.79      16.30      19.31         90     43,947   848,613
         - Q1    17.19      15.00      16.60         87     43,947   729,517
    2006 - Q4    19.80      13.80      15.46        143     43,947   679,417
         - Q3    19.49      17.21      19.19         96     43,947   843,339
         - Q2    21.99      16.99      17.70        100     43,947   777,858
         - Q1    23.18      19.50      21.50         61     37,921   815,297
    2005 - Q4    24.00      16.32      23.19         92     37,921   879,383
         - Q3    24.07      19.50      21.19         88     37,921   803,542
         - Q2    22.85      19.58      20.92         61     37,921   793,303
         - Q1    23.25      19.65      22.00         67     37,921   834,257
    2004 - Q4    23.25      18.80      22.70         81     37,921   860,802
         - Q3    19.62      16.75      19.45         58     37,921   737,559
         - Q2    19.34      15.05      18.00         93     37,921   682,574
         - Q1    19.40      16.71      19.40         92     37,921   735,663
    2003 - Q4    17.50      15.10      17.45         67     37,921   661,718
         - Q3    15.65      14.52      15.30         99     37,921   580,188
         - Q2    15.20      12.91      15.00         82     37,921   568,812
         - Q1    13.69      12.48      12.94         92     37,921   490,695
    2002 - Q4    13.25      11.22      12.86        139     37,921   487,661
         - Q3    12.13      10.45      12.10        165     37,921   458,842
         - Q2    11.25      10.00      10.95        176     37,921   415,233
         - Q1    11.20      10.11      10.51        149     18,955   199,217
    

About Davis + Henderson

Davis + Henderson uses its market-leading capabilities to meet the evolving needs of the financial services industry in Canada and abroad. Founded in 1875, the company today provides innovative programs to customers who offer chequing and credit card accounts, and a comprehensive array of technology-based solutions to support our customers' credit lifecycle management services. Davis + Henderson Income Fund is listed on the Toronto Stock Exchange under the symbol DHF.UN. Further information can be found in the disclosure documents filed by Davis + Henderson Income Fund with the securities regulatory authorities, available at www.sedar.com.

%SEDAR: 00017092EF

SOURCE DH Corporation

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

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