Davis + Henderson Reports Third Quarter 2010 Results

TORONTO, Nov. 2, 2010 (Canada NewsWire via COMTEX) – TSX Stock Symbol: “DHF.UN”.

Website: www.dhltd.com

Davis + Henderson (“D+H” or the “Business” or the “Company”) today reported solid financial results for the three months ended September 30, 2010 that were consistent with expectations. As in previous quarters in 2010, growth in revenues compared to last year was primarily attributable to the inclusion of Resolve, which was acquired mid-way through the third quarter in 2009. Additionally, the results for the third quarter included the previously announced restructuring plan that resulted in a charge of $2.2 million.

Third Quarter Highlights

    <<
    -   Revenue was $161.9 million, an increase of $22.7 million, or 16.3%,
        compared to the same quarter in 2009.

    -   EBITDA(1) was $38.4  million, an increase of $0.9  million, or 2.3%,
        compared to the same quarter in 2009 and included the $2.2 million
        restructuring charge.

    -   Adjusted income(1) was $29.9 million, a decrease of $0.5 million, or
        1.6%, as  compared to the same quarter in 2009. Adjusted income(1)
        per unit was  $0.5613, a decrease of 6.4%, compared to the same
        quarter in 2009. Adjusted income and Adjusted income per unit both
        included the $2.2 million restructuring charge in the third quarter
        of 2010.

    -   Net income was $21.6 million, a year-over-year decrease of $3.4
        million, or 13.6%. Net income per unit was $0.4052, a decrease of
        17.8%, compared to the same quarter in 2009. Net income and net
        income per unit include the non-cash expenses related to mark-to
        market adjustments on interest-rate swaps and amortization of
        acquisition intangibles related to business acquisitions. Net income
        per unit was also impacted by the issuance of 9,286,581 trust
        units for the Resolve acquisition.

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

    Nine-Month Highlights

    -   Revenue was $479.9 million, an increase of $157.6 million, or 48.9%,
        compared to the same nine-month period in 2009.

    -   EBITDA was $119.9 million, an increase of $21.4 million, or 21.8%,
        compared to the same period in 2009. The increase in EBITDA of 21.8%
        relative to the increase in revenue of 48.9% reflected the inclusion
        of acquired Resolve service offerings that contributed lower
        margins as a percentage of revenues as compared to the other D+H
        services.

    -   Adjusted income was $94.7 million, an increase of $14.4 million, or
        18%, compared to the first nine months of 2009. Adjusted income(1)
        per unit was $1.7784, an increase of 2.4%, compared to the same
        period in 2009.

    -   Net income was $69.7 million, a year-over-year increase of $0.3
        million, or 0.4%. Net income per unit was $1.3088, a decrease of
        12.9% compared to the same period in 2009. As described above, the
        decrease in net income per unit includes the non-cash expenses
        including mark-to-market adjustments on interest-rate swaps and
        amortization of intangible assets related to business acquisitions.
        Net income per unit was also impacted by the issuance of 9,286,581
        trust units for the Resolve acquisition.

    -   Cash distributions paid for the first nine months were $1.3797 per
        unit, unchanged from the same period in 2009.

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

Management Commentary

The results for the third quarter of 2010 are consistent with our expectations and we are satisfied with these results given the changes within the markets we service and their related impacts on our volumes. Financially, we benefited from the inclusion of Resolve service offerings from July 27, 2009, and through the latter portion of 2009 and into 2010, we also experienced stronger volumes, particularly related to services to the lending markets. In the third quarter of 2010 and in next several quarters, our results will be compared to those earlier periods that featured strong activity in real estate, mortgage and other lending markets where activity is now expected to moderate.

Also during the quarter, we continued to advance our strategy related to enhancing our service offerings and integrating our operations. These initiatives are designed to achieve our goal of positioning D+H to grow in the future.

As part of our further integration and transformation initiatives, and as previously announced, D+H recorded a restructuring charge in the third quarter of 2010 of $2.2 million and expects to record an additional restructuring charge in the range of $5.0 to $7.0 million in the fourth quarter of 2010. The annualized savings of $3.0 to $4.0 million associated with these initiatives are expected to be realized by the end of 2012.

In addition to and separate from the restructuring charge, D+H announced on October 7, 2010 that it sold its non-strategic contact centre operations acquired as part of the Resolve acquisition. As at September 30, 2010, these operations were held for sale and classified as discontinued operations for both current and comparative periods. For further information, refer to the Company’s press release issued on October 7, 2010 outlining the divestiture.

As previously announced, the Company received unitholder approval to convert to a corporation effective January 1, 2011 and we are executing against that plan. In addition, our intention remains to maintain monthly distributions for the remainder of 2010 at an annualized rate of $1.84 per unit and commencing in 2011 to move to a quarterly dividend payout to owners at $1.20 per share annualized.

For a more detailed discussion of third quarter results and management’s outlook, please see Management’s Discussion and Analysis below.

Caution Concerning Forward-Looking Statements

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

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in Davis + Henderson’s industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

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

Conference Call

Davis + Henderson will discuss its financial results for the three months ended September 30, 2010 via conference call at 10:00 a.m. EST (Toronto time) on Wednesday, November 3, 2010. The number to use for this call is 647-427-7450 for Toronto area callers or 1-888-231-8191 for all other callers. The conference call will be hosted by Bob Cronin, Chief Executive Officer and by Brian Kyle, Chief Financial Officer. The conference call will also be available on the web by accessing CNW Group’s website www.newswire.ca/webcast/. For anyone unable to listen to the scheduled call, the rebroadcast number will be: 416-849-0833 for Toronto area callers, or 1-800-642-1687 for all other callers, with Encore Password 19604329. The rebroadcast will be available until Wednesday, November 17, 2010. An archive recording of the conference call will also be available at the above noted web address for one month following the call and a text version of the call will be available at www.dhltd.com.

ADDITIONAL INFORMATION

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

MANAGEMENT’S DISCUSSION AND ANALYSIS

Management’s Discussion and Analysis (“MD&A”) for the third quarter of 2010 for the Davis + Henderson Income Fund (the “Fund” or the “Company” or the “Business” or “Davis + Henderson” or “D+H” or “we” or “our”) should be read in conjunction with the MD&A in the Annual Report for the year ended December 31, 2009, dated March 2, 2010, and the attached interim unaudited consolidated financial statements. External economic and industry factors remain substantially unchanged from those described in the annual MD&A and the Fund’s most recently filed Annual Information Form.

STRATEGY

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

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

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

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

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

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

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

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 for a discussion of non-GAAP terms used. Effective July 27, 2009, the consolidated results include those of Resolve.

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

                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    Revenue                       $ 161,900  $ 139,245  $ 479,917  $ 322,331
    Expenses                        121,311    101,696    357,845    223,867
    Restructuring charges(4)          2,160          -      2,160          -
    -------------------------------------------------------------------------
    EBITDA(1)                        38,429     37,549    119,912     98,464

    Amortization of capital assets
     and non-acquisition
     intangibles                      5,030      4,505     14,661     12,003
    Interest expense                  3,517      2,681     10,583      6,215

    -------------------------------------------------------------------------
    Adjusted income(1)               29,882     30,363     94,668     80,246

    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                               52        103        344        375
    Net unrealized loss (gain) on
     derivative instruments(2)        1,514     (1,647)     1,649     (2,525)
    Future income tax expense
     (recovery)                        (645)     1,015        619        233
    Amortization of intangibles
     from acquisitions                6,925      5,942     21,180     12,757
    -------------------------------------------------------------------------

    Income from continuing
     operations                      22,036     24,950     70,876     69,406
    Income (loss) from discontinued
     operations, net of taxes(3)       (465)         7     (1,206)         7
    -------------------------------------------------------------------------

    Net income                    $  21,571  $  24,957  $  69,670  $  69,413

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

    Adjusted income per unit,
     basic and diluted(1)         $  0.5613  $  0.6000  $  1.7784  $  1.7372

    Net income per unit, basic
     and diluted                  $  0.4052  $  0.4931  $  1.3088  $  1.5027

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

                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                         2010 vs. 2009         2010 vs. 2009
                                              % change              % change
    -------------------------------------------------------------------------

    Revenue                                      16.3%                 48.9%
    EBITDA(1)                                     2.3%                 21.8%
    Adjusted income per unit(1)                  -6.4%                  2.4%
    Net income per unit                         -17.8%                -12.9%

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

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

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

    (3) On October 7, 2010, the Business sold a non-strategic component of
        its contact centre business and as such, these disposed operations
        are presented as discontinued operations for both current and prior
        periods.

    (4) Restructuring charges relate to further integration and
        transformation initiatives designed to better position the business
        going forward to serve customers and improve the effectiveness,
        efficiency and scalability of operations.
    >>

Overview

D+H had solid operating performance in the third quarter of 2010 in the context of current economic and market conditions. The large year-over-year increase in revenues and expenses during the first nine months of 2010 and more modestly for the three months ended September 30, 2010, were primarily due to the inclusion of Resolve, which was acquired during the third quarter of 2009. The Business also benefited from a modest increase in revenues from several service areas as more fully described below. Additionally, the Business continued its integration and transformation activities, including activities related to the attainment of cost synergies. As part of a restructuring initiative, the Business recorded a charge of $2.2 million in the third quarter of 2010. Also as referred to below, on October 7, 2010, the Business sold a non-strategic component of its contact centre business and as such, these disposed operations are presented as discontinued operations for both current and prior periods presented. On a per unit basis, after reflecting the additional units issued in connection with the acquisition of Resolve, and the restructuring charge, D+H’s consolidated Adjusted income per unit for the third quarter of 2010 was lower by 6.4%, and for the first nine months of 2010 was higher by 2.4%, both as compared to the same periods in 2009. Net income per unit for the third quarter and year-to-date 2010, was lower by 17.8%, and 12.9%, respectively, compared to the same periods in 2009, largely as a result of the increase in amortization of intangible assets related to business acquisitions and the mark-to-market adjustment on derivative instruments, both of which are more fully described below within the MD&A.

Revenue

(in thousands of Canadian dollars, unaudited)

    <<
                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    Revenue
      Programs to the chequing
       account                    $  72,994  $  72,239  $ 220,818  $ 216,770
      Loan servicing                 32,738     21,091     92,826     21,091
      Loan registration technology
       services                      27,227     18,119     78,412     20,056
      Lending technology services    19,392     18,891     57,335     51,717
      Other(1)                        9,549      8,905     30,526     12,697

    -------------------------------------------------------------------------
                                  $ 161,900  $ 139,245  $ 479,917  $ 322,331
    -------------------------------------------------------------------------

    (1) Excluded for the current and comparative periods are the discontinued
        operations that were sold on October 7, 2010.
    >>

Revenue – Third Quarter and Year-to-Date

Consolidated revenue for the third quarter of 2010 was $161.9 million, an increase of $22.7 million, or 16.3%, compared to the same quarter in 2009. For the first nine months of 2010, consolidated revenue was $479.9 million, an increase of $157.6 million, or 48.9%, compared to the same period in 2009. Revenue for both the three months and the nine months ended September 30, 2010 increased primarily due to the inclusion of Resolve (effective July 27, 2009) and from modest increases in several service areas. Services delivered by the Business are subject to seasonality, particularly relating to fees earned in connection with mortgage origination services and automobile loan registration services, which are typically stronger in the second and third quarters than in the first quarter, as was the case this year.

Revenue for the third quarter from programs to the chequing account was $73.0 million, an increase of $0.8 million, or 1.0%, compared to the same quarter in 2009. Revenue for the first nine months from programs to the chequing account was $220.8 million, an increase of $4.0 million, or 1.9%, compared to the same period in 2009. The modest increase in both periods was primarily attributable to program changes and product and service enhancements that increased average order values. The increase in the third quarter was less than in earlier periods in 2010 due to a decline in overall volumes, particularly related to personal cheque orders. Management believes that the long-term historical trend related to cheque order decline is relatively unchanged and continues to be in the low single digit range, however, there has been more volatility in order volumes in recent periods.

Revenue for the third quarter of 2010 from loan servicing, which includes student loan administration services and credit card servicing was $32.7 million and $92.8 million for the first nine months of 2010. There were no meaningful comparable results in either reporting period of 2009. Revenue from student loan administrative services, which comprise the largest portion of revenues within this service area, is expected to be relatively stable over the short-term with modestly growing volumes and new program initiatives being offset by reduced pricing related to particular contracts. The year-to-date results also benefited from strong performance incentives which can be earned under contracts within the service area.

Loan registration technology services revenue for the third quarter of 2010 was $27.2 million and for the first nine months of 2010 was $78.4 million. There were no meaningful comparable results in either reporting period of 2009. This service area includes the personal property search and registration (“PPSA”) business acquired with the Resolve acquisition and the PPSA program historically operated by D+H. In both instances, our services are directed toward supporting personal and commerical lending activity within Canada. Volumes in this area can be variable, and in general change in line with the changes in the overall Canadian economic environment, particularly as it relates to servicing customers within the automotive lending area. During the third quarter, the Business experienced declines in certain year-over-year volume changes as the economic recovery in the latter portion of 2009 and into 2010 drove stronger volumes as compared to the more recent months in 2010. This service area also experiences seasonality and generally has stronger volumes during the second and third quarters as compared to the first quarter as consumers typically purchase and finance cars in the spring and summer.

Revenue for the third quarter of 2010 from lending technology services, which includes services to the mortgage market and other credit markets was $19.4 million, an increase of $0.5 million, or 2.7%, compared to the same quarter in 2009. For the first nine months of 2010, revenue from lending technology services was $57.3 million, an increase of $5.6 million, or 10.9%, compared to the same period in 2009. The modest increase during the third quarter was less than earlier periods in 2010 due to a slowing of the Canadian real estate and mortgage markets. Specifically, third quarter mortgage origination service fees increased year-over-year by 3% as compared to an average increase of 28% for the first six months of 2010. In general, industry analysts expect the housing and mortgage markets to further settle as compared to earlier periods in 2010.

Other revenue for the third quarter of 2010 of $9.5 million and $30.5 million for the first nine months of 2010 is comprised of a number of smaller service offerings. In general, revenues from these service areas change due to customer specific and some seasonal activities, with such changes not material to overall consolidated earnings. On October 7, 2010, the Business sold a non-strategic component of its contact centre business and as such, these disposed operations are presented as discontinued operations in both current and prior periods presented. Accordingly, the revenues relating to this part of the Business of $4.3 million and $13.5 million respectively, for the third quarter and the first nine months of 2010 have been removed from reported consolidated revenue.

The following table reflects the current relative size of each of the major service areas as a percentage of total revenue on an annualized basis:

    <<

    Allocation of Revenue by Service Area(1)                       % Revenue
    -------------------------------------------------------------------------
    Revenue
      Programs to the chequing account                                   46%
      Loan servicing                                                     19%
      Loan registration technology services                              16%
      Lending technology services                                        12%
      Other                                                               7%

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

    (1) Based on a 12 month rolling revenue from Q4 2009 to Q3 2010.
    >>

Expenses(1) – Third Quarter and Year-to-Date

On a consolidated basis, expenses for the third quarter of 2010 of $121.3 million increased by $19.6 million, or 19.3%, compared to the same quarter in 2009. Expenses for the first nine months of 2010 were $357.8 million, an increase of $134.0 million, or 59.8%. The increases for both periods primarily reflected the inclusion of Resolve with the impact being less significant in the third quarter of 2010 due to the acquisition being completed on July 27, 2009. The changes also reflect the ongoing costs of integrating the businesses, reduced by continued cost management activities and integration savings.

    <<
                                    Three months ended     Nine months ended
    (in thousands of Canadian             September 30,         September 30,
     dollars, unaudited)               2010       2009       2010(4)    2009
    -------------------------------------------------------------------------
    Employee compensation and
     benefits                     $  47,498  $  40,120  $ 142,925  $  85,532
    Non-compensation direct
     expenses(2)                     49,203  $  43,131  $ 143,439  $ 102,890
    Other operating expenses(3)      20,728     14,896  $  58,777  $  28,445
    Occupancy costs                   3,882      3,549  $  12,704  $   7,000

    -------------------------------------------------------------------------
                                  $ 121,311  $ 101,696  $ 357,845  $ 223,867
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Excluded from the current and comparative periods are the
        discontinued operations that were sold on October 7, 2010.

    (2) Non-compensation direct expenses include materials, shipping, selling
        expenses and third party direct disbursements.

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

    (4) For the nine months ended September 30, 2010, to be consistent with
        second and third quarter presentation, $1.5 million of Other
        operating expenses from Q1 2010 have been reclassified as
        Non-compensation direct expenses. There was no change in total
        expenses related to this reclassification.
    >>

Employee compensation and benefits costs of $47.5 million for the third quarter of 2010 increased by $7.4 million, or 18.4%, compared to the same quarter in 2009. For the first nine months of 2010, employee compensation and benefit costs were $142.9 million, up $57.4 million, or 67.1% compared to the same period in 2009, with the increase primarily due to the inclusion of Resolve expenses. Resolve service offerings, such as loan servicing, contact centre services and other process outsourcing services are more employee intensive than other D+H service areas.

Non-compensation direct expenses were $49.2 million for the third quarter of 2010, an increase of $6.1 million, or 14.1%, compared to the same quarter in 2009. For the first nine months of 2010, these expenses were $143.4 million, an increase of $40.5 million, or 39.4% compared to the same period in 2009. The increase was mainly due to the inclusion of Resolve expenses. In general, these expenses directionally change with revenue changes, and as such increased in the third quarter due to some of the seasonality changes described above.

Other operating expenses were $20.7 million, an increase of $5.8 million, or 39.2% compared to the same quarter in 2009. For the first nine months of 2010, other operating expenses were $58.8 million, an increase of $30.3 million, or 106.6% compared to the same period in 2009. These increases were primarily attributable to the inclusion of Resolve expenses and to a lesser extent, the ongoing costs of integration partially offset by cost management activities.

Occupancy costs for the third quarter of 2010 were $3.9 million, an increase of $0.3 million, or 9.4%, compared to the same quarter in 2009. For the first nine months of 2010, occupancy costs were $12.7 million, an increase of $5.7 million, or 81.5%, compared to the same period in 2009. The increase in occupancy costs in the first nine months of 2010 was mainly due to the inclusion of Resolve facilities, which as described above, are employee intensive service businesses.

Restructuring Charges

D+H recorded a restructuring charge of $2.2 million during the third quarter of 2010. Additionally, the Company expects to incur a further $5.0 – 7.0 million charge in the fourth quarter of 2010, as previously announced. Together, these charges relate to integration and transformation initiatives designed to better position the business going forward to serve customers and improve the effectiveness, efficiency and scalability of our operations. These initiatives are a result of the Company completing four acquisitions over the past four years which led to expanded service offerings and operations. The integration activities consist of items that include the consolidation of facilities, centralization of certain functions and operations, elimination of management duplication and repositioning of personnel related to the integrated business, among other items. As a result of these activities we expect to both better position the Company to grow and to achieve annualized savings in the range of $3.0 – 4.0 million by the end of 2012.

EBITDA

EBITDA during the third quarter of 2010, including the $2.2 million restructuring charge, was $38.4 million, an increase of $0.9 million, or 2.3%, compared to the same quarter in 2009. For the first nine months of 2010, EBITDA was $119.9 million, an increase of $21.4 million, or 21.8% compared to the same period in 2009. As a percentage of revenue, EBITDA margins have decreased to 23.7% in the third quarter of 2010 from 27.0% in the third quarter of 2009. This was due to the full quarter inclusion of Resolve service areas that contribute lower margins than the historical D+H service areas as well as an increase in integration and investment expenses including the restructuring charge. For the first nine months of 2010, EBITDA as a percentage of revenue was 25.0% compared to 30.5% for the first nine months of 2009, with the change primarily attributed to the factors just described. The decrease in the third quarter of 2010 as compared to earlier 2010 quarters is primarily attributed to the restructuring charge.

In general, the later periods of 2009 and the first portion of 2010 provided stronger than normal volumes for D+H as the economy moved out of the recession and, in particular, lending activity increased. Additionally, the Business now experiences increases in seasonality with the second and third quarter volumes generally being stronger than the first and fourth quarters.

Other Expenses

Amortization of Capital and Non-acquisition Intangibles

Amortization of capital and non-acquisition intangible assets during the third quarter of 2010 increased by $0.5 million, or 11.7% compared to the third quarter of 2009, and during the first nine months of 2010, increased by $2.7 million, or 22.1% compared to the same period in 2009. These increases primarily related to the inclusion of amortization related to assets acquired from the Resolve business and to capital additions during 2010.

Interest Expense

Interest expense for the third quarter of 2010 increased by $0.8 million compared to the same quarter last year, due to an increase in the level of outstanding debt related to the acquisition of Resolve. For the first nine months of 2010, interest expense increased by $4.4 million compared to the same period in 2009, due to the reason described above, as well as the write-off of certain unamortized financing costs during the second quarter of 2010 as described below. During the second quarter of 2010, the Business renewed its bank credit facilities and issued a seven-year Bond as described below. Certain unamortized financing fees totalling $0.4 million were written off during the second quarter of 2010 in connection with the renewal of the credit facilities and changes made to the syndicate. This write-off is included in interest expense for the first nine months of 2010.

Net Unrealized Loss (Gain) on Derivative Instruments

A net unrealized loss of $1.5 million on interest-rate swaps and foreign currency contracts was recognized in the third quarter of 2010 (Q3 2009 – $1.6 million net unrealized gain) reflecting mark-to-market adjustments related to changes in market interest rates at September 30, compared to June 30, and from currency fluctuations on foreign exchange contracts. For the nine months ended September 30, 2010, an unrealized loss of $1.6 million was recorded (nine months ended September 30, 2009 – unrealized gain of $2.5 million). These unrealized gains and losses are recognized in income because these swaps are not designated as hedges for accounting purposes. In general, a loss on interest-rate swaps is recorded when rates decrease as compared to previous periods and a gain is recorded when rates increase. In addition, unrealized gains and losses on foreign exchange contracts are recognized in income because the foreign exchange contracts do not qualify for hedge accounting treatment. Provided the Business does not cancel its interest-rate swaps or foreign exchange contracts, the unrealized amounts represent a non-cash unrealized gain or loss that will subsequently reverse through income as the related swaps and foreign exchange contracts mature. The Company has historically held its derivative contracts to maturity.

Future Income Tax Expense (Recovery)

In the third quarter of 2010, the Fund recorded a future tax recovery of $0.6 million (Q3 2009 – $1.0 million expense). This related to the recording of a future tax benefit for tax losses and other deductible temporary differences in certain corporate subsidiaries and the decrease in the future tax liability resulting from the amortization of intangibles. For the first nine months of 2010, the Fund recorded a future tax expense of $0.6 million (nine months ended September 30, 2009 – $0.2 million).

Amortization of Intangibles from Acquisitions

Amortization of acquisition related intangibles for the third quarter of 2010 and for the first nine months of 2010, increased by $1.0 million and $8.4 million respectively, as compared to the same periods in 2009 due to the incremental intangible assets from the acquisition of Resolve on July 27, 2009.

Income (loss) from Discontinued Operations

As of September 30, 2010, the non-strategic portion of the contact centre operations of D+H was held for sale, and the results of operations related to this part of the Business have been classified as discontinued operations for both current and comparative periods. The sale of this component was completed in October 2010. Refer to the Divestiture section in the MD&A for further details.

Net Income

Net income of $21.6 million for the third quarter of 2010 decreased by $3.4 million, or 13.6%, compared to the same period in 2009. For the nine months ended September 30, 2010, net income of $69.7 million increased by $0.3 million, or 0.4% compared to the same period in 2009. On a per unit basis, net income decreased by 17.8% to $0.4052 per unit, compared to the third quarter of 2009. For the first nine months of 2010, net income per unit decreased by 12.9% to $1.3088 per unit, compared to the same period in 2009. Adjusted income which excludes the (1) non-cash impacts of mark-to-market gains and losses on derivative instruments, future income taxes and amortization of intangibles from acquisitions, and (2) discontinued operations, was $29.9 million for the third quarter of 2010. This included the $2.2 million restructuring charge. Adjusted income decreased by $0.5 million, or 1.6%, compared to the same period in 2009. Adjusted income for the first nine months of 2010 increased by $14.4 million, or 18.0% compared to the same period in 2009. On a per unit basis, reflecting the issuance of 9,286,581 units upon the acquisition of Resolve, Adjusted income per unit of $0.5613 decreased by 6.4%, compared to the third quarter of 2009. For the nine months ended September 30, 2010, Adjusted income of $1.7784 per unit increased by 2.4% compared to the same period in 2009.

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

                                                             2010
                                         Q3         Q2         Q1
    --------------------------------------------------------------
    Revenue                       $ 161,900  $ 164,319  $ 153,698
    Expenses                        121,311    120,545    115,989
    Restructuring
     charges(4)                       2,160          -          -
    --------------------------------------------------------------
     EBITDA(1)                       38,429     43,774     37,709

    Amortization of
     capital assets and
     non-acquisition
     intangibles                      5,030      4,962      4,669
    Interest expense                  3,517      3,692      3,374
    --------------------------------------------------------------
      Adjusted income(1)             29,882     35,120     29,666

    Amortization of
     mark-to-market
     adjustment of
     interest-rate
     swaps                               52        103        189
    Net unrealized loss
     (gain) on derivative
     instruments(2)                   1,514      1,694     (1,559)
    Future income tax
     expense (recovery)                (645)       603        661
    Amortization of
     intangibles from
     acquisition                      6,925      7,158      7,097
    --------------------------------------------------------------
    Income from continuing
     operations                      22,036     25,562     23,278
    Income (loss) from
     discontinued
     operations,
     net of taxes(3)                   (465)      (531)      (210)

    --------------------------------------------------------------
    Net income                    $  21,571  $  25,031  $  23,068

    --------------------------------------------------------------
    --------------------------------------------------------------
    Adjusted income per
     unit, basic and
     diluted(1)                   $  0.5613  $  0.6597  $  0.5572

    Net income per unit,
     basic and diluted            $  0.4052  $  0.4702  $  0.4333

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

                                                             2009       2008
                               Q4        Q3         Q2         Q1         Q4
    -------------------------------------------------------------------------
    Revenue             $ 151,521 $ 139,245  $  94,557  $  88,529  $  89,357
    Expenses              114,467   101,696     62,080     60,091     62,413
    Restructuring
     charges(4)                 -         -          -          -          -
    -------------------------------------------------------------------------
     EBITDA(1)             37,054    37,549     32,477     28,438     26,944

    Amortization of
     capital assets and
     non-acquisition
     intangibles            4,514     4,505      3,679      3,819      3,800
    Interest expense        3,326     2,681      1,787      1,747      1,647
    -------------------------------------------------------------------------
      Adjusted income(1)   29,214    30,363     27,011     22,872     21,497

    Amortization of
     mark-to-market
     adjustment of
     interest-rate
     swaps                    103       103        136        136        151
    Net unrealized loss
     (gain) on derivative
     instruments(2)        (1,620)   (1,647)    (1,069)       191      3,653
    Future income tax
     expense (recovery)    (2,605)    1,015       (718)       (64)       399
    Amortization of
     intangibles from
     acquisition            7,330     5,942      3,441      3,374      3,409
    -------------------------------------------------------------------------
    Income from
     continuing operations 26,006    24,950     25,221     19,235     13,885
    Income (loss) from
     discontinued
     operations, net
     of taxes(3)             (405)        7          -          -         51

    -------------------------------------------------------------------------
    Net income          $  25,601 $  24,957  $  25,221  $  19,235  $  13,936

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

    Adjusted income per
     unit, basic and
     diluted(1)         $  0.5488 $  0.6000  $  0.6146  $  0.5204  $  0.4892

    Net income per
     unit, basic and
     diluted            $  0.4809 $  0.4931  $  0.5739  $  0.4377  $  0.3172

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

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

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

    (3) On October 7, 2010, the Business sold a non-strategic component of
        its contact centre business and as such, these disposed
        operations are presented as discontinued operations in both current
        and prior periods presented.

    (4) Restructuring charges relate to further integration and
        transformation initiatives designed to better position the business
        going forward to serve customers and improve the effectiveness,
        efficiency and scalability of operations.
    >>

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

Adjusted income per unit has generally been trending consistently with changing revenue. Adjusted income for the third quarter of 2010 and all comparative periods presented exclude the results of the discontinued operations sold on October 7, 2010. Net income has been more variable as it has been affected by the variability in non-cash items such as mark-to-market adjustments on interest-rate swaps and foreign exchange contracts, amortization of intangibles from acquisitions and changes in future income tax provisions. Both Adjusted income and net income for the third quarter of 2010 were also impacted by the restructuring charges recorded during the period relating to integration and transformation activities.

CASH FLOW AND LIQUIDITY

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

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

                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------

    Cash flows from operating
     activities                   $  36,743  $  38,959  $  94,337  $  79,147

    Add:
      Changes in non-cash working
       capital and other items(2)    (2,419)    (4,056)    13,480     13,137
    -------------------------------------------------------------------------

    Adjusted cash flows from
     operating activities            34,324     34,903    107,816     92,284

    Less:
      Asset expenditures(3)           7,079      2,518     14,631      6,555
      Contract payments(4)                -        300      1,717      3,117
    -------------------------------------------------------------------------

    Adjusted cash flows after
     asset expenditures and
     contract payments               27,245     32,085     91,468     82,612

    Less:
      Distributions paid to
       unitholders                   24,482     23,058     73,446     63,480
    -------------------------------------------------------------------------

                                      2,763      9,027     18,022     19,132

    Cash flows provided by (used
     in repayment of) long-term
     indebtedness                    (5,000)    (3,948)    (5,000)    (5,948)
    Cash flows used in issuance
     costs                                -     (2,321)    (2,564)    (2,321)
    Fair value of acquisitions          167     (9,588)       167     (9,425)
    Changes in non-cash working
     capital and other items(2)       2,419      4,056    (13,480)   (13,137)
    -------------------------------------------------------------------------

    Increase (decrease) in cash
     and cash equivalents for
     the period                   $     349  $  (2,774) $  (2,854) $ (11,699)

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

    (1) The subtotals in this table are not consistent with GAAP and
        accordingly are considered non-GAAP measures. See Non-GAAP Measures
        for a discussion of non-GAAP terms used.

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

    (3) Asset expenditures include both maintenance asset expenditures and
        growth asset expenditures. Maintenance asset expenditures for the
        three months ended September 30, 2010 were $4.3 million and for the
        nine months ended September 30, 2010 were $8.2 million. Maintenance
        asset expenditures are defined by the Fund as asset expenditures
        necessary to maintain and sustain the current productive capacity of
        the Business or generally improve the efficiency of the Business.
        Growth asset expenditures for the three months ended September 30,
        2010 were $2.7 million and for the nine months ended September 30,
        2010 were $6.4 million. Growth asset expenditures are defined by the
        Fund as asset expenditures that increase the productive capacity of
        the Business with a reasonable expectation of an increase in cash
        flow. The distinction between growth and maintenance asset
        expenditures will become less relevant to management in the future as
        D+H converts to a corporation.

    (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 D+H 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            Nine months ended
                                   September 30,                September 30,
                        2010      2009 % change      2010      2009 % change
    -------------------------------------------------------------------------
    Adjusted cash
     flows from
     operating
     activities     $ 0.6448  $ 0.6897    -6.5%  $ 2.0253  $ 1.9979     1.4%
    Adjusted cash
     flows after
     asset
     expenditures
     and contract
     payments       $ 0.5118  $ 0.6340   -19.3%  $ 1.7182  $ 1.7884    -3.9%
    Cash
     distributions
     paid to
     unitholders    $ 0.4599  $ 0.4599     0.0%  $ 1.3797  $ 1.3797     0.0%
    Distributions
     declared during
     period         $ 0.4599  $ 0.4599     0.0%  $ 1.3797  $ 1.3797     0.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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
    (in thousands of Canadian     September  September   December   December
     dollars, unaudited)           30, 2010   30, 2010   31, 2009   31, 2008
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                   $  36,743  $  94,337  $ 119,722  $ 116,062
    Net income                    $  21,571  $  69,670  $  95,014  $  78,448
    Adjusted income(1)            $  29,882  $  94,668  $ 108,923  $  99,168
    Distributions paid during
     period                       $  24,482  $  73,446  $  87,962  $  78,580
    Excess (shortfall) of cash
     flows from operating
     activities over cash
     distributions paid           $  12,261  $  20,891  $  31,760  $  37,482
    Excess (shortfall) of net
     income over cash
     distributions paid           $  (2,911) $  (3,776) $   7,052  $    (132)
    Excess (shortfall) of
     Adjusted income over cash
     distributions paid           $   5,400  $  21,222  $  20,961  $  20,588

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

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

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

Expenditures on Capital Assets and Contract Payments

Compared to the prior year periods, total capital asset expenditures increased by $4.6 million to $7.1 million in the third quarter of 2010 and increased by $8.1 million to $14.6 million over the first nine months of 2010. Fixed contract payments decreased by $0.3 million in the third quarter of 2010 compared to 2009 and decreased by $1.4 million in the first nine months of 2010 compared to the same period in 2009. The increase in capital expenditures over 2009 relates to the increased size of operations since the acquisition of Resolve in July 2009 and the Company’s plans for further integration activities. The changes in fixed contract payments relate to timing of when payments are made.

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

Distributions

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

The Fund paid cash distributions of $0.4599 per unit ($24.5 million) during the third quarter of 2010 and $1.3797 per unit ($73.4 million) in the first nine months of 2010, compared to $0.4599 per unit ($23.1 million) and $1.3797 per unit ($63.5 million) in the first three and nine months ended September 30, 2009 respectively. For the third quarter of 2010 both distributions declared and paid per unit were unchanged.

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

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

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

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

The Fund may issue an unlimited number of trust units. Each trust unit is transferable and represents an equal, undivided beneficial interest in any distribution from the Fund and the net assets of the Fund. All units are of the same class with equal rights and privileges and are not subject to future calls or assessments. Each unit entitles the holder to one vote at all meetings of unitholders. As at September 30, 2010 and November 2, 2010, the total number of trust units outstanding was 53,233,373, which was the same as at September 30, 2009. This reflects an issuance of 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,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------

    Decrease (increase) in
     non-cash working capital
     items                        $   1,909  $   4,452  $ (16,347) $ (13,157)
    Decrease (increase) in other
     operating assets and
     liabilities                      510       (396)      2,867         20
    -------------------------------------------------------------------------

    Decrease (increase) in
     non-cash working capital and
     other items                  $   2,419  $   4,056  $ (13,480) $ (13,137)

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

    >>

The net decrease in non-cash working capital items for the third quarter of 2010 is attributable to the decrease in trade receivables offset by a decrease in trade payables.

The net increase in non-cash working capital items for the nine months ended September 30, 2010 was primarily related to the increase in trade receivables attributable to higher revenues and revenues that are subject to seasonality are generally stronger in the second and third quarters.

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

Acquisition

With the acquisition of Resolve, the Business significantly advanced its strategy by expanding its service offerings within the financial services industry, by establishing market leading positions in several niche markets and by increasing its overall servicing capabilities. The acquisition was funded through the issuance of Davis + Henderson units in exchange for all the outstanding units of Resolve, valued at $119.5 million (net of after-tax issuance costs of $0.6 million), and the assumption of Resolve debt. Including transaction costs and estimated restructuring costs, the total cost of the acquisition (excluding assumed debt) is approximately $130.5 million. During the third quarter of 2010, management completed its assessment of the valuation of the assets acquired and liabilities assumed for this acquisition including finalizing related restructuring charges and consequently, recorded an adjustment to the purchase price allocation of approximately $6.9 million, net of taxes. For additional information on the acquisition and the final allocation of the purchase price, refer to Note 2 to the consolidated financial statements.

Divestiture

As of September 30, 2010, the non-strategic portion of the contact centre operations of D+H were held for sale, and the results of these operations were classified as discontinued operations for both current and comparative periods.

On October 7, 2010, D+H announced the sale of this part of the Business, which primarily served non-core markets of D+H, for proceeds approximately equal to the working capital and certain assets of the operations sold. The transaction fees and other transition costs relating to the disposition were recognized as part of the final purchase price allocation for Resolve.

Cash Balances and Long-Term Indebtedness

At September 30, 2010, cash and cash equivalents totalled $1.0 million, compared to $3.9 million at December 31, 2009. The long-term indebtedness as at September 30, 2010, before deducting unamortized deferred finance fees, was $205.0 million compared to $210.0 million at December 31, 2009 and consisted of drawings under a Fifth Amended and Restated Credit Agreement dated June 30, 2010 (“Credit Agreement”) of $155.0 million and fixed-rate Bonds issued under a Note Purchase and Private Shelf Agreement dated June 30, 2010 (“Note Purchase Agreement”) of $50.0 million. The long-term indebtedness is recorded on the Balance Sheet, net of unamortized deferred financing fees of $2.9 million as at September 30, 2010.

Total senior secured credit facilities available at September 30, 2010 were $220.0 million, consisting of a non-revolving term loan of $130.0 million and a revolving term credit facility of $90.0 million that each mature on June 30, 2013. As of September 30, 2010, the Business had drawn $130.0 million under the non-revolving term loan and $25.0 million under the revolving term credit facility. The Business is permitted to draw on the revolving facility’s available balance of $65.0 million to fund capital expenditures or for other general purposes. The Credit Agreement contains a number of covenants and restrictions, including the requirement to meet certain financial ratios and financial condition tests. The financial covenants include a leverage test, a fixed charge coverage ratio test and a limit on the maximum amount of distributions that may be made by Davis + Henderson, Limited Partnership to the Fund during each rolling four-quarter period. Davis + Henderson was in compliance with all of its financial covenants and financial condition tests as of the end of its latest quarterly period. A copy of the Credit Agreement is available at www.sedar.com.

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

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

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

    <<
    -------------------------------------------------------------------------

                                                 Fair value of
                                              interest-rate swaps
    (in thousands of Canadian
     dollars,unaudited)                       --------------------
                                   Notional                         Interest
    Maturity Date                    Amount      Asset  Liability     Rate(1)
    -------------------------------------------------------------------------
      January 5, 2011                22,000          -        104     1.980%
      June 15, 2011                  20,000          -        633     4.685%
      June 15, 2011                  25,000          -        791     4.685%
      December 18, 2014              25,000          -        822     2.720%
      March 18, 2015                 25,000          -      1,054     2.940%
      March 20, 2017                 25,000          -      1,571     3.350%
      March 20, 2017                 20,000          -      1,276     3.366%
    -------------------------------------------------------------------------
                                  $ 162,000  $       -  $   6,251
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The listed interest rates exclude bankers' acceptance fees and
        prime-rate spreads currently in effect. Such fees and spreads could
        increase or decrease depending on the Fund's financial leverage as
        compared to certain levels specified in the Credit Agreement. As of
        September 30, 2010, the Fund's long-term bank indebtedness was
        subject to bankers' acceptance fees of 2.50% over the applicable BA
        rate and prime rate spreads of 1.50% over the prime rate.
    >>

As at September 30, 2010, the Fund would have to pay the fair value of $6.3 million if it were to close out all of the interest-rate swap contracts as set out on the balance sheet. It is not the present intention of management to close out these contracts and the Company has historically held its derivative contracts to maturity. The Fund expects to continue to enter into interest-rate swaps for the purpose of hedging interest rates.

As of September 30, 2010, the average effective interest rate on the Fund’s total indebtedness is approximately 6.0%.

The Fund also enters into foreign-exchange contracts to fix foreign-exchange rates on its foreign currency transactions, which are relatively minor. As at September 30, 2010, the Fund had three foreign-exchange contracts in place with one of its lenders amounting to $1.5 million USD and the last of these contracts expires on December 15, 2010.

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

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

Business Risks

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

Non-GAAP Measures

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

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

EBITDA

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

Adjusted Income

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

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

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

OUTLOOK

Davis + Henderson’s overall long-term financial objective for revenues is to deliver stable and modestly growing cash distributions by growing revenue in the 3% to 5% range. For 2009 and the first nine months of 2010, revenue was substantially above this range due to the inclusion of the results of Resolve. As measured on a quarter-over-quarter basis, future comparative periods will fully include the Resolve results.

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

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

With the inclusion of several new service areas over the last several years, we expect to experience some level of increase in variability in year-over-year quarterly revenues, earnings and cash flows, due to: (i) volume variances within the lien registration service area; (ii) variability in professional services work; and (iii) variability in fees relating to mortgage origination services revenues due to recent significant variability in the housing market. The Company believes that, in general, revenues in the latter part of 2009 and early 2010 benefited from stronger volumes as housing and mortgage markets, and auto and personal lending markets increased following earlier contractions. During the third quarter and for the next several quarters, our results will be compared to these earlier periods that featured strong activity in real estate, mortgage and other lending markets where activity is now expected to moderate.

For 2010, with a full-year inclusion of Resolve and various integration and transformation initiatives, we expect the consolidated capital program to be in the range of $28.0 million to $30.0 million. The fourth quarter capital spend will be higher than the third quarter due to the timing of expenditures relating to the additional initiatives designed to save costs and improve delivery within the integrated business and to support revenue growth through the building of technology products. For 2011, we anticipate that our capital spending will be similar to 2010.

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

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

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

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

Caution Concerning Forward-Looking Statements

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

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Business, or developments in Davis + Henderson’s industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

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

ADDITIONAL INFORMATION

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

    <<
                        Davis + Henderson Income Fund

                 Unaudited Consolidated Financial Statements
       For the Three and Nine Months Ended September 30, 2010 and 2009

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

                                                  September 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash equivalents                    $     1,024   $     3,878
      Accounts receivable (note 3)                      63,801        57,251
      Inventory (note 4)                                 5,843         6,197
      Prepaid expenses                                   8,018         6,156
      Future income tax asset - current (note 11)        3,583         3,274
      Assets held for sale (note 18)                     1,731             -
    -------------------------------------------------------------------------
                                                        84,000        76,756

    Future income tax asset (note 11)                   24,817        21,425
    Capital assets (note 5)                             30,023        33,296
    Fair value of derivatives (note 9)                       -           456
    Intangible assets (note 6)                         267,938       289,774
    Goodwill (note 7)                                  527,242       519,848
    -------------------------------------------------------------------------
                                                   $   934,020   $   941,555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND UNITHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued liabilities     $    73,979   $    72,274
      Distributions payable to unitholders               8,161         8,161
      Deferred revenue - current                         6,567         7,028
      Liabilities held for sale (note 18)                  129             -
     ------------------------------------------------------------------------
                                                        88,836        87,463

    Long-term indebtedness (note 8)                    202,055       208,463
    Fair value of derivatives (note 9)                   6,253         4,733
    Deferred revenue - non-current                       9,370         9,510
    Other long-term liabilities (note 10)                8,559         7,161
    Future income tax liability (note 11)               47,088        48,934
    -------------------------------------------------------------------------
                                                       362,161       366,264

    Unitholders' equity:
      Trust units (note 12)                            595,859       595,859
      Deficit                                          (23,862)      (20,086)
      Accumulated other comprehensive income (loss)       (138)         (482)
    -------------------------------------------------------------------------
                                                       571,859       575,291

    Commitments (note 14)

    -------------------------------------------------------------------------
                                                   $   934,020   $   941,555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

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

                                    Three months ended     Nine months ended
                                  September  September  September  September
                                   30, 2010   30, 2009   30, 2010   30, 2009
    -------------------------------------------------------------------------

    Revenue                       $ 161,900  $ 139,245  $ 479,917  $ 322,331
    Cost of sales and operating
     expenses (note 4)              121,679    102,022    358,930    224,816
    Restructuring charges
     (note 17)                        2,160          -      2,160          -
    Amortization of capital assets    2,023      2,088      5,666      4,264
    -------------------------------------------------------------------------
                                     36,038     35,135    113,161     93,251

    Interest expense                  3,569      2,784     10,927      6,590
    Net unrealized loss (gain)
     on derivative instruments        1,514     (1,647)     1,649     (2,525)
    Amortization of intangible
     assets (note 6)                  9,564      8,033     29,090     19,547
    -------------------------------------------------------------------------
    Income from continuing
     operations before income
     taxes                           21,391     25,965     71,495     69,639

    Future income tax expense
     (recovery) (note 11)              (645)     1,015        619        233
    -------------------------------------------------------------------------
    Income from continuing
     operations                      22,036     24,950     70,876     69,406

    Income (loss) from
     discontinued operations,
     net of taxes (note 18)            (465)         7     (1,206)         7
    -------------------------------------------------------------------------
    Net income                    $  21,571  $  24,957  $  69,670  $  69,413
    -------------------------------------------------------------------------
    Net income per unit, basic
     and diluted                  $  0.4052  $  0.4931  $  1.3088  $  1.5027
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, 2010   30, 2009   30, 2010   30, 2009
    -------------------------------------------------------------------------

    Net income                    $  21,571  $  24,957  $  69,670  $  69,413

    Other comprehensive income:
    Amortization of mark-to-
     market adjustment of
     interest-rate swaps                 52        103        344        375
    -------------------------------------------------------------------------
    Total comprehensive income    $  21,623  $  25,060  $  70,014  $  69,788
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, 2010   30, 2009   30, 2010   30, 2009
    -------------------------------------------------------------------------

    Deficit
    Deficit, beginning of period  $ (20,951) $ (21,680) $ (20,086) $ (25,714)
    Net income                       21,571     24,957     69,670     69,413
    Distributions                   (24,482)   (24,482)   (73,446)   (64,904)
    -------------------------------------------------------------------------
    Deficit, end of period          (23,862)   (21,205)   (23,862)   (21,205)
    -------------------------------------------------------------------------

    Accumulated Other Comprehensive
     Income (Loss)
    Accumulated other comprehensive
     income (loss), beginning
     of period                         (190)      (688)      (482)      (960)
    Other comprehensive income:
    Amortization of mark-to-market
     adjustment of interest-rate
     swaps                               52        103        344        375
    -------------------------------------------------------------------------
    Accumulated other comprehensive
     income (loss), end of period(1)   (138)      (585)      (138)      (585)
    -------------------------------------------------------------------------
    Deficit and accumulated other
     comprehensive income (loss),
     end of period                $ (24,000) $ (21,790) $ (24,000) $ (21,790)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Accumulated other comprehensive income (loss) consists of cumulative
        net gains and losses that were deferred prior to January 1, 2007 when
        hedge accounting was used by the Fund.

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

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

                                    Three months ended     Nine months ended
                                  September  September  September  September
                                   30, 2010   30, 2009   30, 2010   30, 2009
    -------------------------------------------------------------------------

    Cash and cash equivalents
     provided by (used in):

    OPERATING ACTIVITIES
    Net income from continuing
     operations                   $  22,036  $  24,950  $  70,876  $  69,406
    Add:
      Amortization of capital
       assets                         2,023      2,088      5,666      4,264
      Amortization of capital
       assets included in cost
       of sales                         368        326      1,085        949
      Amortization of intangible
       assets                         9,564      8,033     29,090     19,547
      Amortization of mark-to-
       market adjustment of
       interest-rate swaps               52        103        344        375
      Net unrealized loss (gain)
       on derivative instruments      1,514     (1,647)     1,649     (2,525)
      Future income tax expense
       (recovery)                      (645)     1,015        619        233
    -------------------------------------------------------------------------
                                     34,912     34,868    109,329     92,249

    Decrease (increase) in non-
     cash working capital items       1,909      4,452    (16,347)   (13,157)
    Changes in other operating
     assets and liabilities             510       (396)     2,867         20
    Cash flows from discontinued
     operations                        (588)        35     (1,512)        35
    -------------------------------------------------------------------------
                                     36,743     38,959     94,337     79,147
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of long-term
     indebtedness                    (5,000)    (3,948)   (65,000)    (5,948)
    Proceeds from long-term
     indebtedness                         -          -     60,000          -
    Issuance costs of long-term
     indebtedness                         -     (1,621)    (2,564)    (1,621)
    Issuance costs of trust units         -       (700)         -       (700)
    Distributions paid to
     unitholders                    (24,482)   (23,058)   (73,446)   (63,480)
    -------------------------------------------------------------------------
                                    (29,482)   (29,327)   (81,010)   (71,749)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Expenditures on capital
     assets, non-acquisition
     intangible assets and
     long-term contracts             (7,079)    (2,818)   (16,348)    (9,672)
    Acquisition of businesses and
     acquisition adjustments(note 2)    167     (9,588)       167     (9,425)
    -------------------------------------------------------------------------
                                     (6,912)   (12,406)   (16,181)   (19,097)
    -------------------------------------------------------------------------

    Increase (decrease) in cash
     and cash equivalents for
     the period                         349     (2,774)    (2,854)   (11,699)
    Cash and cash equivalents,
     beginning of period                675      3,141      3,878     12,066
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                $   1,024  $     367  $   1,024  $     367
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
      Cash interest paid          $   4,411  $   3,436  $   9,816  $   6,153
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Three and nine months ended September 30, 2010 and 2009
    (in thousands of Canadian dollars, except unit and per unit amounts,
    unaudited)

    NATURE OF BUSINESS

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

    1.  SIGNIFICANT ACCOUNTING POLICIES

    The consolidated financial statements have been prepared using the
    accounting policies generally accepted in Canada and follow the
    same accounting policies and their method of application as the Fund's
    consolidated financial statements for the year ended December 31, 2009,
    which are included in the 2009 Annual Report. They do not conform in all
    respects with disclosures required for annual financial statements and
    should be read in conjunction with the audited financial statements of
    the Fund for the year ended December 31, 2009.

    2.  ACQUISITION

    Resolve Business

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

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

    Net assets acquired, at fair value:
      Current assets                                             $    55,362
      Capital and other assets                                        16,425
      Intangible assets                                              160,396
      Future income tax asset                                         27,152
      Payables and other current liabilities                         (74,123)
      Future income tax liability                                    (45,100)
      Long-term indebtedness                                         (73,812)
      Other long-term liabilities                                     (6,800)

    -------------------------------------------------------------------------
                                                                      59,500
    Goodwill                                                          71,026

    -------------------------------------------------------------------------
    Total                                                        $   130,526
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consideration for 100% ownership:
      Units issued                                               $   120,094
      Acquisition costs, net of cash acquired of $3,212               10,432

    -------------------------------------------------------------------------
    Total                                                        $   130,526
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The value of the Fund's trust units issued on acquisition reflects the
    unit's average trading price over a five-day period surrounding the
    Fund's announcement to acquire Resolve Business Outsourcing Income Fund
    on June 3, 2009. The acquisition costs of $13.6 million, which included
    transaction and restructuring costs were reduced by Resolve's cash on
    hand of $3.2 million at the date of acquisition. In addition, the Fund
    also incurred after tax costs of $0.6 million to issue additional trust
    units.

    During the three months ended September 30, 2010, management completed
    its assessment of the valuation of the assets acquired and liabilities
    assumed for this acquisition and the purchase price allocation shown
    above has been finalized. An adjustment to the purchase price allocation
    of approximately $6.9 million (net of taxes) was recorded during the
    three months ended September 30, 2010, that included adjustments relating
    to severances, transaction fees and other transaction costs relating to
    the disposition of the non-strategic part of the contact centre
    operations, estimated liabilities related to the consolidation of
    facilities and the finalization of other liabilities as at the
    acquisition date. This adjustment includes a revaluation of intangibles
    which resulted in a reduction of intangible assets of $1.0 million.

    3.  ACCOUNTS RECEIVABLE

                                                  September 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

    Trade receivables                              $    63,311   $    56,073
    Other receivables                                      490         1,178

    -------------------------------------------------------------------------
                                                   $    63,801   $    57,251
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The amount for allowance for doubtful accounts recorded as at
    September 30, 2010 was $960 (December 31, 2009 - $614). The amount of
    past due accounts as at September 30, 2010 was $2,242 (Q3 2009 - $2,200).

    4.  INVENTORY

                                                  September 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

    Raw materials                                  $     2,376   $     2,457
    Work-in-process                                      1,480         1,322
    Finished goods                                       1,987         2,418

    -------------------------------------------------------------------------
                                                   $     5,843   $     6,197
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Inventory that was recognized as cost of sales during the three months
    ended September 30, 2010 was $10,066 (Q3 2009 - $11,285) and nine months
    ended September 30, 2010 was $31,143 (nine months ended September 30,
    2009 - $33,000). The amount of write-down of inventories recognized as an
    expense during the three months ended September 30, 2010 was $39 (Q3 2009
    - $18) and nine months ended September 30, 2010 was $140 (nine months
    ended September 30, 2009 - $144).

    5.  CAPITAL ASSETS

                                       Three months ended September 30, 2010
    -------------------------------------------------------------------------
                                                        Furniture,
                                                         fixtures
                                                              and
                                  Machinery             leasehold
                        Land and        and   Computer    improve-
                       buildings  equipment  equipment      ments      Total
    -------------------------------------------------------------------------
    Cost
    Balance at
     July 1, 2010       $  2,975   $ 20,201   $ 25,555   $ 13,191   $ 61,922
    Additions                  -         11      2,082        403      2,496
    Other movements(1)      (800)         -          -        (98)      (898)
    -------------------------------------------------------------------------
    At September 30,
     2010               $  2,175   $ 20,212   $ 27,637   $ 13,496   $ 63,520
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     impairment losses
    Balance at
     July 1, 2010       $    193   $ 11,080   $ 11,793   $  8,019   $ 31,085
    Amortization              46        311      1,410        624      2,391
    Other movements(1)         7          -          -         14         21
    -------------------------------------------------------------------------
    At September 30,
     2010               $    246   $ 11,391   $ 13,203   $  8,657   $ 33,497
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At September 30,
     2010               $  1,929   $  8,821   $ 14,434   $  4,839   $ 30,023
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                       Three months ended September 30, 2009
    -------------------------------------------------------------------------
                                                        Furniture,
                                                         fixtures
                                                              and
                                  Machinery             leasehold
                        Land and        and   Computer    improve-
                       buildings  equipment  equipment      ments      Total
    -------------------------------------------------------------------------
    Cost
    Balance at July 1,
     2009               $      -   $ 15,667   $ 18,238   $  8,814   $ 42,719
    Additions              2,975      3,962      5,694      3,762   $ 16,393
    Other movements(1)         -          -          -          -          -
    -------------------------------------------------------------------------
    At September 30,
     2009               $  2,975   $ 19,629   $ 23,932   $ 12,576   $ 59,112
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     impairment losses
    Balance at July 1,
     2009               $      -   $  9,031   $  7,740   $  6,702   $ 23,473
    Amortization(2)           26        571      1,445        384   $  2,426
    Other movements(1)         -          -          -          -          -
    -------------------------------------------------------------------------
    At September 30,
     2009               $     26   $  9,602   $  9,185   $  7,086   $ 25,899
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At September 30,
     2009               $  2,949   $ 10,027   $ 14,747   $  5,490   $ 33,213
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                        Nine months ended September 30, 2010
    -------------------------------------------------------------------------
                                                        Furniture,
                                                         fixtures
                                                              and
                                  Machinery             leasehold
                        Land and        and   Computer    improve-
                       buildings  equipment  equipment      ments      Total
    -------------------------------------------------------------------------
    Cost
    Balance at
     January 1, 2010    $  2,975   $ 19,971   $ 25,589   $ 12,798   $ 61,333
    Additions                  -        212      3,462        763      4,437
    Other movements(1)      (800)        29     (1,414)       (65)    (2,250)
    -------------------------------------------------------------------------
    At September 30,
     2010               $  2,175   $ 20,212   $ 27,637   $ 13,496   $ 63,520
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     impairment losses
    Balance at
     January 1, 2010    $     45   $  9,998   $ 10,617   $  7,377   $ 28,037
    Amortization             180      1,364      3,948      1,259      6,751
    Other movements(1)        21         29     (1,362)        21     (1,291)
    -------------------------------------------------------------------------
    At September 30,
     2010               $    246   $ 11,391   $ 13,203   $  8,657   $ 33,497
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At September 30,
     2010               $  1,929   $  8,821   $ 14,434   $  4,839   $ 30,023
    At December 31,
     2009               $  2,930   $  9,973   $ 14,972   $  5,421   $ 33,296
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                        Nine months ended September 30, 2009
    -------------------------------------------------------------------------
                                                        Furniture,
                                                         fixtures
                                                              and
                                  Machinery             leasehold
                        Land and        and   Computer    improve-
                       buildings  equipment  equipment      ments      Total
    -------------------------------------------------------------------------
    Cost
    Balance at
     January 1, 2009    $      -   $ 15,589   $ 18,491   $  9,048   $ 43,128
    Additions              2,975      4,079      7,219      3,810     18,083
    Other movements(1)         -        (39)    (1,778)      (282)    (2,099)
    -------------------------------------------------------------------------
    At September 30,
     2009               $  2,975   $ 19,629   $ 23,932   $ 12,576   $ 59,112
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     impairment losses
    Balance at
     January 1, 2009    $      -   $  8,609   $  7,438   $  6,617   $ 22,664
    Amortization(2)           26      1,025      3,423        751      5,225
    Other movements(1)         -        (32)    (1,676)      (282)    (1,990)
    -------------------------------------------------------------------------
    At September 30,
     2009               $     26   $  9,602   $  9,185   $  7,086   $ 25,899
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At September 30,
     2009               $  2,949   $ 10,027   $ 14,747   $  5,490   $ 33,213
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Other movements primarily relate to fully amortized assets removed
        from the accounts during the period. Other movements for the three
        and nine months ended September 30, 2010 reflect assets removed and
        classified as held for sale.

    (2) Amortization for the three and nine months ended September 30, 2009
        includes $12 of amortization related to discontinued operations.

    6.  INTANGIBLE ASSETS

                 Three months ended September 30, 2010
    ---------------------------------------------------
                       Contracts              Software
                       ---------  ---------------------
                                            Internally
                                  Purchased  Developed
    ---------------------------------------------------
    Cost
    At July 1, 2010     $  4,979   $ 28,513   $ 17,832
    Additions                  -      1,469      3,114
    Other movements(1)         -          -          -
    ---------------------------------------------------
    At September 30,
     2010                  4,979     29,982     20,946
    ---------------------------------------------------
    ---------------------------------------------------

    Amortization and
     impairment loss
    At July 1, 2010     $  1,972   $ 19,810   $  5,411
    Amortization             600      1,096        943
    Other movements(1)         -         19          -
    ---------------------------------------------------
    At September 30,
     2010                  2,572     20,925      6,354
    ---------------------------------------------------
    ---------------------------------------------------

    Net carrying amount
    At September 30,
     2010                  2,407      9,057     14,592
    ---------------------------------------------------
    ---------------------------------------------------

                                       Three months ended September 30, 2010
    -------------------------------------------------------------------------
                                        Acquisition of businesses      Total
                      -------------------------------------------- ----------
                                                         Customer
                                Proprietary      Brand   relation-
                       Contracts   software      names      ships
    -------------------------------------------------------------------------
    Cost
    At July 1, 2010     $    438   $ 70,500   $ 10,900   $229,335   $362,497
    Additions                  -          -          -          -      4,583
    Other movements(1)         -          -          -     (1,000)    (1,000)
    -------------------------------------------------------------------------
    At September 30,
     2010                    438     70,500     10,900    228,335    366,080
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization and
     impairment loss
    At July 1, 2010     $    346   $ 20,814   $  2,545   $ 37,661   $ 88,559
    Amortization              54      1,832        182      4,857      9,564
    Other movements(1)         -          -          -          -         19
    -------------------------------------------------------------------------
    At September 30,
     2010                    400     22,646      2,727     42,518     98,142
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At September 30,
     2010                     38     47,854      8,173    185,817    267,938
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Amortization and
     impairment loss
    At July 1, 2009     $  3,501   $ 17,115   $  3,520
    Amortization(2)          601      1,009        494
    Other movements(1)         -          -          -
    ---------------------------------------------------
    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      Total
                      -------------------------------------------- ----------
                                                         Customer
                                Proprietary      Brand   relation-
                       Contracts   software      names      ships
    -------------------------------------------------------------------------
    Cost
    At July 1, 2009     $  1,201   $ 55,900   $ 10,900   $ 90,735   $196,079
    Additions                  -     14,600          -    142,200    164,764
    Other movements(1)    (1,201)         -          -          -     (1,201)
    -------------------------------------------------------------------------
    At September 30,
     2009               $      -   $ 70,500   $ 10,900   $232,935   $359,642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization and
     impairment loss
    At July 1, 2009     $  1,201   $ 13,629   $  1,816   $ 18,392   $ 59,174
    Amortization(2)            -      1,689        182      4,071      8,046
    Other movements(1)    (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, 2010
    ---------------------------------------------------
                       Contracts              Software
                       ---------  ---------------------
                                            Internally
                                  Purchased  Developed
    ---------------------------------------------------
    Cost
    At January 1, 2010  $  6,799   $ 29,814   $ 14,126
    Additions              1,717      3,452      6,742
    Other movements(1)    (3,537)    (3,284)        78
    ---------------------------------------------------
    At September 30, 2010  4,979     29,982     20,946
    ---------------------------------------------------
    ---------------------------------------------------

    Amortization and
     impairment loss
    At January 1, 2010  $  4,693   $ 19,261  $  4,674
    Amortization           1,416      3,811     2,682
    Other movements(1)    (3,537)    (2,147)   (1,002)
    ---------------------------------------------------
    At September 30, 2010  2,572     20,925     6,354
    ---------------------------------------------------
    ---------------------------------------------------

    Net carrying amount
    At September 30, 2010$  2,407   $  9,057   $ 14,592
    At December 31,
     2009               $  2,106   $ 10,553   $  9,452
    ---------------------------------------------------
    ---------------------------------------------------

                                        Nine months ended September 30, 2010
    -------------------------------------------------------------------------
                                        Acquisition of businesses      Total
                      -------------------------------------------- ----------
                                                         Customer
                                Proprietary      Brand   relation-
                       Contracts   software      names      ships
    -------------------------------------------------------------------------
    Cost
    At January 1, 2010  $    438   $ 70,500   $ 10,900   $232,935   $365,512
    Additions                  -          -          -          -     11,911
    Other movements(1)         -          -          -     (4,600)   (11,343)
    -------------------------------------------------------------------------
    At September 30, 2010    438     70,500     10,900    228,335    366,080
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization and
     impairment loss
    At January 1, 2010  $     37   $ 17,149   $  2,180   $ 27,744   $ 75,738
    Amortization             363      5,497        547     14,774     29,090
    Other movements(1)         -          -          -          -     (6,686)
    -------------------------------------------------------------------------
    At September 30, 2010    400     22,646      2,727     42,518     98,142
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net carrying amount
    At September 30, 2010$    38   $ 47,854   $  8,173   $185,817   $267,938
    At December 31,
     2009               $    401   $ 53,351   $  8,720   $205,191   $289,774
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Amortization and
     impairment loss
    At January 1, 2009  $  5,414   $ 17,393   $  4,194
    Amortization(2)        2,250      3,231      1,323
    Other movements(1)    (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
    ---------------------------------------------------
    ---------------------------------------------------

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

    Amortization and
     impairment loss
    At January 1, 2009  $    864   $ 11,017   $  1,452   $ 31,413   $ 71,747
    Amortization(2)          337      4,494        546      7,379     19,560
    Other movements(1)    (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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Other movements primarily relate to fully amortized assets removed
        from the accounts during the period. For three and nine months ended
        September 30, 2010, other movements include reclassification from
        intangibles to goodwill of certain Resolve customer relationship
        intangibles and reflect assets removed and classified as held for
        sale.

    (2) Amortization for the three and nine months ended September 30, 2009
        includes $13 of amortization related to discontinued operations.

    7.  GOODWILL

                                                  September 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

    Balance, beginning of period                   $   519,848   $   458,989
    Goodwill additions and adjustments
    during the period:
      Cyence                                                 -        (1,417)
      Resolve                                            7,394        63,632
      Filogix                                                -        (1,356)
    -------------------------------------------------------------------------
    Balance, end of period                         $   527,242   $   519,848
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    A net adjustment of $7.4 million was made to goodwill in Resolve during
    the nine months ended September 30, 2010.

    An adjustment of $2.6 million recorded during the first quarter of 2010
    related to the revaluation of certain customer relationship
    contracts which resulted in a reduction of intangibles.
    This was partially offset by an adjustment to goodwill during the
    second  quarter of 2010 of $2.1 million relating to changes in the
    estimated tax attributes of Resolve resulting from information that
    became available during the period.

    During the three months ended September 30, 2010, an adjustment of
    $6.9 million (net of taxes) was recorded to goodwill as a result of
    Resolve purchase price adjustments relating to severances, estimated loss
    on disposition of the non-strategic part of the contact centre
    operations, estimated liabilities related to consolidation of facilities
    and finalization of other liabilities as at the acquisition date. This
    adjustment includes a revaluation of intangibles which resulted in a
    reduction of intangibles of $1.0 million.

    The future income taxes relating to the adjustments to the purchase price
    allocation recorded during the three months ended September 30, 2010 was
    $2.7 million, of which $0.3 million related to the reclassification of
    certain intangibles to goodwill and $2.4 million related to the tax
    impact of recording certain severance and other costs to the purchase
    price equation for Resolve.

    8.  LONG-TERM INDEBTEDNESS

                                                  September 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

    Non-revolving term loan                        $   130,000   $   190,000
    Drawings under revolving credit facility            25,000        20,000
    -------------------------------------------------------------------------
                                                       155,000       210,000
    Series A 5.99% Bonds due June 30, 2017              50,000             -
    -------------------------------------------------------------------------
                                                       205,000       210,000
    Deferred finance costs                              (2,945)       (1,537)
    -------------------------------------------------------------------------
                                                   $   202,055   $   208,463
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at September 30, 2010, the Fund had $220 million of available senior
    secured credit facilities consisting of a non-revolving term loan of
    $130 million and a revolving term credit facility of $90 million each
    maturing on September 30, 2013. As of September 30, 2010, $25 million was
    drawn under the revolving term credit facility. The credit facilities do
    not require the Fund to make any principal payments prior to September
    30, 2013. The credit facilities bear interest at rates that depend on
    certain financial ratios of the Fund and vary in accordance with
    borrowing rates in Canada. The credit facilities, including any hedge
    contracts and cash management facilities provided by the lenders, are
    guaranteed by all entities within the Fund's corporate structure and are
    secured in first priority by substantially all of the Fund's assets and
    by a pledge of the Fund's indirect ownership interests in Davis +
    Henderson L.P. and its other operating subsidiary entities. The Credit
    Agreement contains a number of covenants and restrictions including the
    requirement to meet certain financial ratios and financial condition
    tests and, as at September 30, 2010, the Fund was in compliance with all
    of its financial covenants and financial condition tests. The carrying
    value of long-term bank indebtedness approximates its fair value as it
    bears interest at floating rates that reset in most cases within three
    months and in all cases within one year.

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

    Deferred finance costs relate to amendments to the Credit Agreement and
    entering into the Note Purchase and Private Shelf Agreement dated
    September 30, 2010. Amortization of deferred finance costs during the
    three months ended September 30, 2010 was $0.2 million (Q3 2009 -
    $0.3 million) and the nine months ended September 30, 2010 was
    $0.8 million (nine months ended September 30, 2009 - $0.4 million).
    Amortization of deferred finance costs is recognized over the terms of
    the credit facilities and Bonds as interest expense using the effective
    interest method. During the nine months ended September 30, 2010, certain
    unamortized financing fees of $0.4 million were written off in connection
    with the renewal of the credit facilities and changes in the syndicate.
    The remaining balance is amortized over the term of the amended credit
    facilities.

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

    9.  FINANCIAL INSTRUMENTS

    Recognition and Measurement

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

    Credit Risk

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

    Market Risk

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

    The following table presents a sensitivity analysis to changes in market
    interest rates and their potential impact on the Fund for the three and
    nine months ended September 30, 2010. As the sensitivity is hypothetical,
    it should be used with caution.

                                    Three months ended     Nine months ended
                                    September 30, 2010    September 30, 2010
    -------------------------------------------------------------------------
                                  + 100 bps  - 100 bps  + 100 bps  - 100 bps
    -------------------------------------------------------------------------

    Increase (decrease) in
     interest expense              $    (17)  $     17   $    (35)  $     35
    Change to net unrealized
     (gain) loss on
     interest-rate swaps             (4,900)     4,900     (4,900)     4,900
    -------------------------------------------------------------------------

    Increase (decrease) in
     net income                    $  4,917   $ (4,917)  $  4,935   $ (4,935)
    -------------------------------------------------------------------------

    Increase (decrease) in
     total comprehensive income    $  4,917   $ (4,917)  $  4,935   $ (4,935)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

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

    -------------------------------------------------------------------------
                                                    Fair value of
                                              interest-rate swaps
                                             ---------------------  Interest
    Maturity Date           Notional Amount      Asset  Liability     Rate(1)
    -------------------------------------------------------------------------
    January 5, 2011                $ 22,000        $ -      $ 104     1.980%
    June 15, 2011                    20,000          -        633     4.685%
    June 15, 2011                    25,000          -        791     4.685%
    December 18, 2014                25,000          -        822     2.720%
    March 18, 2015                   25,000          -      1,054     2.940%
    March 20, 2017                   25,000          -      1,571     3.350%
    March 20, 2017                   20,000          -      1,276     3.366%
    -------------------------------------------------------------------------
                                  $ 162,000   $      -   $  6,251
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) The listed interest rates exclude bankers' acceptance fees and prime-
        rate spreads currently in effect. Such fees and spreads could
        increase or decrease depending on the Fund's financial leverage as
        compared to certain levels specified in the Credit Agreement. As of
        September 30, 2010, the Fund's long-term bank indebtedness was
        subject to bankers' acceptance fees of 2.50% over the applicable BA
        rate and prime rate spreads of 1.50% over the prime rate.

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

    -------------------------------------------------------------------------
                                             Fair value of
                                     foreign exchange contracts
                                     ---------------------------    Exchange
    Maturity Date           Notional Amount      Asset  Liability       Rate
    -------------------------------------------------------------------------
    October 15, 2010                   $500        $ -        $ 1     1.0275
    November 15, 2010                   500          -          1     1.0278
    December 15, 2010                   500          -          -     1.0282
    -------------------------------------------------------------------------
                                   $  1,500   $      -   $      2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

                                    Three months ended     Nine months ended
                                    September 30, 2010    September 30, 2010
    -------------------------------------------------------------------------
                                 +$0.05 CAD -$0.05 CAD +$0.05 CAD -$0.05 CAD
                                    Per USD    Per USD    Per USD    Per USD
    -------------------------------------------------------------------------

    Increase (decrease) in net
     income                        $    112   $   (112)  $    247   $   (247)
    Unrealized gain (loss) on
     mark-to-market on foreign
     exchange contracts                 (75)        75        (75)        75
    -------------------------------------------------------------------------

    Total increase (decrease) in
     net income                    $    (37)  $     37   $   (172)  $    172
    -------------------------------------------------------------------------

    Increase (decrease) in total
     comprehensive income          $    (37)  $     37   $   (172)  $    172
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liquidity Risk

    The Fund has outstanding long-term bank indebtedness of $155 million with
    a maturity date of September 30, 2013 and fixed-interest-rate Bonds of
    $50 million maturing September 30, 2017. The degree to which the Fund is
    leveraged may reduce its ability to obtain additional financing for
    working capital and to finance investments to maintain and grow the
    current levels of cash flows from operations. The Fund may be unable to
    extend the maturity date of the credit facilities or to refinance
    outstanding indebtedness.

    Management, to reduce liquidity risk, has historically renewed the terms
    of the Fund's long-term indebtedness in advance of its maturity dates and
    the Fund has maintained financial ratios that are conservative compared
    to financial covenants applicable to the financing arrangements. To
    enhance its liquidity position, in prior years the Fund has made numerous
    voluntary payments on its outstanding long-term indebtedness and a
    portion of its committed term credit facilities remain undrawn. Further,
    the Credit Agreement and the Note Purchase and Private Shelf Agreement
    provide for additional uncommitted credit arrangements of up to $150
    million and Bonds (under an uncommitted shelf facility) of up to $30
    million with the use of these arrangements subject to the prior approval
    of the relevant lenders and fees, spreads and other terms to be
    negotiated at that time.

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

    Fair Value Hierarchy

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

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

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

    Liabilities:
      Derivative instruments       $      -   $  6,253   $      -   $  6,253
    -------------------------------------------------------------------------
                                   $      -   $  6,253   $      -   $  6,253
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    Hedge Accounting

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

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

    Derivative Financial Instruments

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

    Accumulated Other Comprehensive Income (Loss)

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

    10. OTHER LONG-TERM LIABILITIES

                                                  September 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------
     Deferred compensation program                 $     2,313   $       845

     Employee future benefits                            4,900         4,987
     Contractual supplier obligation                     1,346         1,319
     Capital lease                                           -            10
    -------------------------------------------------------------------------
                                                   $     8,559   $     7,161
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The deferred compensation program, which commenced on January 1, 2009, is
    a long-term incentive plan that includes a cash award component and a
    cash-settled unit-based compensation component. Both the cash component
    and the cash-settled unit-based compensation component awarded at the
    grant date are subject to a three year target for compound annual growth
    in adjusted income.

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

    The Fund's principal pension plans are defined contribution pension plans
    that provide pensions to substantially all eligible employees. Total
    expense for the Fund's defined contribution pension plan for the three
    months ended September 30, 2010 was $0.7 million (Q3 2009 - $0.6 million)
    and for nine months ended September 30, 2010 was $2.2 million (nine
    months ended September 30, 2009 - $1.5 million).

    The contractual supplier obligation relates to payments to be made for a
    customized software package. The total liability is $1.5 million of which
    $0.1 million is recorded in current liabilities.

    11. INCOME TAXES

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

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

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

                                                  September 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------
    Future income tax assets:
      Capital assets less than tax values          $         -   $     2,935
      Intangible assets less than tax values            10,559        10,284
      Tax losses available for future periods           24,759        19,289
      Accrued and other liabilities                      7,718         6,088
    -------------------------------------------------------------------------
                                                        43,036        38,596
      Valuation allowance                              (14,636)      (13,897)
    -------------------------------------------------------------------------
      Total future tax asset                            28,400        24,699

    Future income tax liabilities:
      Capital assets greater than tax values             7,344         3,208
      Intangible assets greater than tax values         39,744        45,726
    -------------------------------------------------------------------------
      Total future tax liabilities                      47,088        48,934

    -------------------------------------------------------------------------
    Net future income tax liabilities              $    18,688   $    24,235
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    The Fund also does not expect to realize the benefit of certain loss
    carry-forwards of certain corporate subsidiaries in the foreseeable
    future and accordingly has not recognized a future income tax asset for
    such losses by recording a valuation allowance of $4,077.

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

    The provision for future income taxes of $809($645 relating to
    continuing operations and $164 related to discontinued operations) in
    the consolidated statement of income represents the quarterly change in
    the consolidated net future income tax liabilities, excluding amounts
    that were recorded as an adjustment to goodwill. The effective tax rate
    for the period differs from the expected tax rate due to the results of
    operations of its corporate subsidiaries; and the change in temporary
    differences expected to reverse after 2010 for the Fund, its flow
    -through trust and partnership subsidiaries.

    As at September 30, 2010, certain corporate subsidiaries of the Fund had
    $90,434 of net operating losses for income tax purposes. These losses
    will begin to expire commencing in fiscal 2022. The deductibility of
    losses of a U.S. corporate subsidiary of $7,115 is subject to annual
    limitations.

    12. TRUST UNITS

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

                                                  September 30,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

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

    The weighted average number of units outstanding during the three and
    nine months ended September 30, 2010 was 53,233,373 (three and nine
    months ended September 30, 2009 - 50,608,904 and 46,191,900
    respectively).

    13. CAPITAL

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

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

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

    The Fund's indebtedness is subject to a number of covenants and
    restrictions including the requirement to meet certain financial ratios
    and financial condition tests at a subsidiary level. One such ratio is
    the "Senior Funded Debt/EBITDA Ratio" as defined in the Credit Agreement.
    The maximum ratio allowed for a 12-month trailing period is 2.50. For the
    12-month trailing period ended September 30, 2010, this ratio was
    calculated at 1.36 (12-month trailing period ended September 30, 2009 -
    1.38). Management also uses this ratio as a key indicator in managing the
    Fund's capital.

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

    14. COMMITMENTS

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

    2010                                                               3,496
    2011                                                               7,392
    2012                                                               4,581
    2013                                                               3,785
    2014                                                               2,507
    Thereafter                                                         3,207
    -------------------------------------------------------------------------
                                                                      24,967
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. SIGNIFICANT CUSTOMERS

    For the three months ended September 30, 2010, the Fund earned 65% of its
    consolidated revenue from its seven largest customers (Q3 2009 - 67%).
    For the three months ended September 30, 2010, 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, 2009,
    three of these customers individually accounted for greater than 10%, but
    not more than 14% of the Fund's total revenue).

    For the nine months ended September 30, 2010, the Fund earned 66% of its
    consolidated revenue from its seven largest customers (Q3 2009 - 70%).
    For the nine months ended September 30, 2010, three of these customers
    individually accounted for greater than 10%, but not more than 15% of the
    Fund's total revenue (for the nine months ended September 30, 2009, three
    of these customers individually accounted for greater than 10%, but no
    more than 16% of the Fund's total revenue).

    16. SEGMENTED INFORMATION

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

                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    Revenue
      Programs to the chequing
       account                    $  72,994  $  72,239  $ 220,818  $ 216,770
      Loan servicing                 32,738     21,091     92,826     21,091
      Loan registration
       technology services           27,227     18,119     78,412     20,056
      Lending technology services    19,392     18,891     57,335     51,717
      Other                           9,549      8,905     30,526     12,697

    -------------------------------------------------------------------------
                                  $ 161,900  $ 139,245  $ 479,917  $ 322,331
    -------------------------------------------------------------------------

    17. RESTRUCTURING CHARGES

    During the three months ended September 30, 2010, the Fund recorded a
    restructuring charge of $2,160 relating to severances as part of the
    integration and transformation activities designed to better position
    the Business going forward to serve customers and improve the
    effectiveness, efficiency and scalability of operations. These
    initiatives are a result of the Fund completing four acquisitions
    over the past four years which led to expanded service offerings and
    operations. The integration activities consist of items that include the
    consolidation of facilities, centralization of certain functions and
    operations, elimination of management duplication, repositioning of
    personnel related to the integrated business and enhancing the
    scalability of operations, among other items.

    18. DISCONTINUED OPERATIONS

    As of September 30, 2010, the non-strategic part of the contact centre
    operations was held for sale, and the results of these operations were
    classified as discontinued operations for both current and comparative
    periods presented. Assets and liabilities relating to the discontinued
    operations are classified as "Assets held for sale" and "Liabilities
    held for sale" on the balance sheet as at September 30, 2010. Revenue
    attributable to the discontinued operations during the three months
    ended September 30, 2010 was $4,346 (three months ended September 30,
    2009 was $3,218). Revenue for the nine months ended September 30, 2010
    was $13,482 (nine months ended September 30, 2009 was $3,218). In prior
    periods, revenue related to the discontinued operations was reported as
    part of the "Other" category in the revenue disclosure by service area.

    Income taxes attributable to the discontinued operations during the
    three months ended September 30, 2010 was a recovery of $163 (three
    months ended September 30, 2009 - $3 expense). $425 of future income tax
    recovery relates to the discontinued operations for the nine months
    ended September 30, 2010 (nine months ended September 30, 2009 - $3).

    Per unit information relating to the discontinued operations is as
    follows:

                                    Three months ended     Nine months ended
                                          September 30,         September 30,
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------

    Income (loss) from
     discontinued operations,
     per unit, basic and diluted  $ (0.0087) $  0.0001  $ (0.0227) $  0.0002
    Income from continuing
     operations, per unit,
     basic and diluted               0.4139     0.4930     1.3315     1.5025

    -------------------------------------------------------------------------
    Net income per unit,
     basic and diluted            $  0.4052  $  0.4931  $  1.3088  $  1.5027
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    19. SUBSEQUENT EVENT

    On October 7, 2010, D+H announced the sale of the non-strategic portion
    of its contact centre operations, which primarily served non-core
    markets of D+H. The proceeds from the sale were approximately equal to
    the working capital and certain assets of the operations that were sold.
    The transaction fees and other transition costs relating to the
    disposition were recognized as part of the final purchase price
    allocation for Resolve. D+H and the purchaser have entered into a
    transition services agreement in order to facilitate the movement of
    certain staff activities and operations that are presently integrated
    within other D+H service areas.

    20. COMPARATIVE FIGURES

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

    SUPPLEMENTARY FINANCIAL INFORMATION

    -------------------------------------------------------------------------
                           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)             2010       2010       2010       2009       2009
    -------------------------------------------------------------------------

    Revenue            $ 161,900  $ 164,319  $ 153,698  $ 151,521  $ 139,245
    Expenses             121,311    120,545    115,989    114,467    101,696

    Restructuring
     charges(5)            2,160          -          -          -          -
    -------------------------------------------------------------------------
    EBITDA(1)             38,429     43,774     37,709     37,054     37,549

    Amortization of
     capital assets and
     non-acquisition
     intangibles           5,030      4,962      4,669      4,514      4,505
    Interest expense       3,517      3,692      3,374      3,326      2,681
    ------------------------------------------------------------------------
    Adjusted income(1)    29,882     35,120     29,666     29,214     30,363
    -------------------------------------------------------------------------

    Amortization of mark-
     to-market adjustment
     of interest-rate
     swaps                    52        103        189        103        103
    Net unrealized loss
     (gain) on derivative
     instruments(2)        1,514      1,694     (1,559)    (1,620)    (1,647)
    Future income tax
     expense (recovery)     (645)       603        661     (2,605)     1,015
    Amortization of
     intangibles from
     acquisition           6,925      7,158      7,097      7,330      5,942
    -------------------------------------------------------------------------

    Income from
     continuing
     operations           22,036     25,562     23,278     26,006     24,950
    Income (loss) from
     discontinued
     operations, net
     of taxes(6)            (465)      (531)      (210)      (405)         7
    -------------------------------------------------------------------------

    Net income         $  21,571  $  25,031  $  23,068  $  25,601  $  24,957
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows from
     operating
     activities           36,743     36,613     20,981  $  40,575  $  38,959
    Changes in non-cash
     working capital
     and other items(3)   (2,419)     2,792     13,107     (7,356)    (4,056)
    -------------------------------------------------------------------------
    Adjusted cash flows
     from operating
     activities           34,324     39,405     34,088     33,219     34,903

    Less:
      Asset expenditures
       and contract
       payments(4)         7,079      5,293      3,976      5,133      2,818
    -------------------------------------------------------------------------
    Adjusted cash flows
     after asset
     expenditures and
     contract payments    27,245     34,112     30,112     28,086     32,085

    Distributions paid
     to unitholders       24,482     24,482     24,482     24,482     23,058
    -------------------------------------------------------------------------
                           2,763      9,630      5,630      3,604      9,027

    Cash flows provided
     by (used in) other
     financing
     activities           (5,000)    (7,564)     5,000     (6,000)    (5,569)
    Fair value of
     acquisitions            167          -          -     (1,449)  (129,682)
    Fair value of trust
     units issued              -          -          -          -    119,394
    Changes in non-cash
     working capital and
     other items(3)        2,419     (2,792)   (13,107)     7,356      4,056

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

    Increase (decrease)
     in cash and cash
     equivalents for
     the period        $     349  $    (726) $  (2,477) $   3,511  $  (2,774)

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

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

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

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

    (5) Restructuring charges relate to further integration and
        transformation activities designed to better position the Business
        going forward to serve customers and improve the effectiveness,
        efficiency and scalability of operations.

    (6) On October 7, 2010, the Business sold a non-strategic component of
        its contact centre business and as such, these disposed operations
        are presented as discontinued operations for both current and prior
        periods presented.

    Summary of Cash Flows Per Unit
    -------------------------------------------------------------------------
                           Three      Three      Three      Three      Three
                          months     months     months     months     months
                           ended      ended      ended      ended      ended
                       September       June      March   December  September
    (in Canadian              30,        30,        31,        31,        30,
     dollars, unaudited)    2010       2010       2010       2009       2009
    -------------------------------------------------------------------------
    Adjusted income
     per unit, basic
     and diluted       $  0.5613  $  0.6597  $  0.5573  $  0.5488  $  0.6000
    Net income per
     unit, basic and
     diluted           $  0.4052  $  0.4702  $  0.4333  $  0.4809  $  0.4931
    Adjusted cash
     flows from
     operating
     activities        $  0.6448  $  0.7402  $  0.6403  $  0.6240  $  0.6897
    Adjusted cash
     flows after
     asset
     expenditures
     and contract
     payments          $  0.5118  $  0.6408  $  0.5657  $  0.5276  $  0.6340
    Cash distributions
     paid to
     unitholders       $  0.4599  $  0.4599  $  0.4599  $  0.4599  $  0.4599
    Distributions
     declared during
     period            $  0.4599  $  0.4599  $  0.4599  $  0.4599  $  0.4599
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

-------------------------------------------------------------------------
                           Three      Three      Three      Three      Three
                          months     months     months     months     months
                           ended      ended      ended      ended      ended
                       September       June      March   December  September
    (in Canadian              30,        30,        31,        31,        30,
     dollars, unaudited)    2010       2010       2010       2009       2009
    -------------------------------------------------------------------------

    Cash and cash
     equivalents       $   1,024  $     675  $   1,401  $   3,878  $     367
    Other current
     assets               81,245     89,034     88,247     72,878     85,242
    Capital and other
     non-current assets   56,571     54,591     52,848     55,177     61,122
    Intangible assets    267,938    273,938    279,663    289,774    293,623
    Goodwill             527,242    520,364    522,482    519,848    516,374

    -------------------------------------------------------------------------
                       $ 934,020  $ 938,602  $ 944,641  $ 941,555  $ 956,728
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Payables and
     other current
     liabilities       $  88,836  $  87,499  $ 159,873  $  87,463  $  93,385
    Other long-term
     liabilities          71,270     69,483     66,942     70,338     75,165
    Long-term
     indebtedness        202,055    206,902    143,760    208,463    214,109
    Unitholders'
     equity              571,859    574,718    574,066    575,291    574,069

    -------------------------------------------------------------------------
                       $ 934,020  $ 938,602  $ 944,641  $ 941,555  $ 956,728
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                    Distributions per unit(1)
    Month                   2010       2009       2008       2007       2006
    -------------------------------------------------------------------------

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

    -------------------------------------------------------------------------
                       $  1.3797  $  1.8396  $  1.8384  $  1.7980  $  1.5000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                    Distributions per unit(1)
    Month                   2005       2004       2003       2002       2001
    -------------------------------------------------------------------------

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

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

    (1) Monthly distributions are made to unitholders of record on the last
        business day of each month and are paid within 31 days following each
        month end.

    (2) November 2007 declared distributions included a special distribution
        of $0.20 for unitholders of record on November 15, 2007 and was paid
        on November 30, 2007.

    (3) Distributions in 2001 are in respect of the 12 calendar days from
        December 20, 2001 to December 31, 2001. December 2008 declared
        distributions included a non-cash special distribution of $0.04 for
        unitholders of record on December 31, 2008 and was paid on December
        31, 2008.

    Tax Allocation of Distributions

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

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

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

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

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

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

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

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

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

    Other Statistics
    (in thousands, except per unit amounts)

                                                           Number     Market
                 Trading price range of units            of units   capital-
                        (TSX: "DHF.UN")                 outstand-    ization
                 ----------------------------  Average     ing at         at
        Quarter     High       Low     Close     daily    quarter    quarter
                                                volume        end        end
    -------------------------------------------------------------------------
    2010 - Q3      19.25     16.00     19.15       100     53,233  1,019,419
         - Q2      18.46     15.16     16.58       118     53,233    882,609
         - Q1      18.00     15.59     17.71       161     53,233    942,763
    2009 - Q4      16.92     14.05     16.92       177     53,233    900,709
         - Q3      14.99     12.25     14.90       182     53,233    793,177
         - Q2      14.29     11.51     12.25       126     43,947    538,348
         - Q1      16.76     10.40     11.92       104     43,947    523,846
    2008 - Q4      17.15     10.30     16.79       117     43,947    737,867
         - Q3      16.40     13.50     15.47        93     43,947    679,857
         - Q2      17.85     15.53     15.58        83     43,947    684,691
         - Q1      21.75     15.77     17.19       107     43,947    755,445
    2007 - Q4      22.00     18.75     21.00        98     43,947    922,883
         - Q3      20.10     17.14     19.80        78     43,947    870,146
         - Q2      19.79     16.30     19.31        90     43,947    848,613
         - Q1      17.19     15.00     16.60        87     43,947    729,517
    2006 - Q4      19.80     13.80     15.46       143     43,947    679,417
         - Q3      19.49     17.21     19.19        96     43,947    843,339
         - Q2      21.99     16.99     17.70       100     43,947    777,858
         - Q1      23.18     19.50     21.50        61     37,921    815,297
    2005 - Q4      24.00     16.32     23.19        92     37,921    879,383
         - Q3      24.07     19.50     21.19        88     37,921    803,542
         - Q2      22.85     19.58     20.92        61     37,921    793,303
         - Q1      23.25     19.65     22.00        67     37,921    834,257
    2004 - Q4      23.25     18.80     22.70        81     37,921    860,802
         - Q3      19.62     16.75     19.45        58     37,921    737,559
         - Q2      19.34     15.05     18.00        93     37,921    682,574
         - Q1      19.40     16.71     19.40        92     37,921    735,663
    2003 - Q4      17.50     15.10     17.45        67     37,921    661,718
         - Q3      15.65     14.52     15.30        99     37,921    580,188
         - Q2      15.20     12.91     15.00        82     37,921    568,812
         - Q1      13.69     12.48     12.94        92     37,921    490,695
    2002 - Q4      13.25     11.22     12.86       139     37,921    487,661
         - Q3      12.13     10.45     12.10       165     37,921    458,842
         - Q2      11.25     10.00     10.95       176     37,921    415,233
         - Q1      11.20     10.11     10.51       149     18,955    199,217

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About Davis + Henderson

Davis + Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Davis + Henderson Income Fund is listed on the Toronto Stock Exchange under the symbol DHF.UN. Further information can be found in the disclosure documents filed by Davis + Henderson Income Fund with the securities regulatory authorities, available at www.sedar.com.

%SEDAR: 00017092EF

SOURCE: Davis + Henderson Income Fund

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