Resolve Business Outsourcing Income Fund
TSX : RBO.UN

Resolve Business Outsourcing Income Fund

August 03, 2006 08:00 ET

Resolve Business Outsourcing Income Fund Reports Q2 Fiscal 2006 Results



TORONTO, ONTARIO--(CCNMatthews – Aug. 3, 2006) –

Attention Business Editors:

Resolve Business Outsourcing Income Fund (the "Fund")(TSX:RBO.UN)today announced financial results for the second quarter of fiscal 2006. These results reflect the Fund's first full quarter of operations, for the three months ended June 30, 2006, as well as for year to date results from the establishment of the fund on March 17, 2006 to June 30, 2006.

Second Quarter & YTD Highlights

- For the period ended June 30, 2006

- Q2 Revenue of $69.1 million; YTD Revenue of $81.0 million
- Q2 EBITDA(1) of $6.1 million; YTD EBITDA of $8.0 million
- Continued focus on operational efficiencies, streamlined reporting
structures and standardized policies and procedures throughout
operations

Distribution Highlights

- Initial cash distribution of $0.1237 per unit for the six week period
March 17, 2006 to April 30, 2006, paid on May 15, 2006 to unitholders
of record as of April 28, 2006
- Cash distribution of $0.0833 per unit for the period May 1, 2006 to
May 31, 2006, paid on June 15, 2006 to unitholders of record as of
May 31, 2006
- Cash distribution of $0.0833 per unit for the period June 1, 2006 to
June 30, 2006, paid on July 17, 2006 to unitholders of record as of
June 30, 2006
- Subsequent to Q2 - Cash distribution of $0.0833 per unit for the period
July 1, 2006 to July 31, 2006, to be paid on August 15, 2006 to
unitholders of record as of July 31, 2006.
>>

Management Commentary

"The second quarter was a solid period for Resolve, during which we
secured several new client contracts, renewals and extensions," said Lawrence
Zimmering, President and Chief Executive Officer. "Our long-term objective is
to be an income fund known for its consistency in providing incremental
growth, stable operating results and, over time, increasing distributions. Our
year to date results confirm we are on the right path."
"As always, we improved operational efficiencies and best practices
during the quarter, including ongoing investments to standardize information
technology throughout the organization. In addition, we continued to enhance
employee policies, procedures, training and incentive programs designed to
provide greater consistency across product lines and geography to add further
value to our growing client base," added Zimmering.
"Our financial results were in line with our expectations for the period.
Revenues were up 3.9% for the second quarter, while gross margin was up 3%,
compared to the same period last year," said David Horton, Chief Financial
Officer. "In addition to our success with client contracts, these results
reflect the fact that selling, general and administrative expenses continued
to decline during the quarter, as a result of cost reduction initiatives
implemented earlier this year."
New client contracts, renewals and extensions for the period include,
among others: a new $2.5 - $3 million contract to supply marketing fulfillment
services to a large, Canadian mutual fund company over the next five years; a
new $5.4 million contract with a provincial ministry of health to administer a
drug co-payment program for seniors over the next three years; a new
$3.5 million contract to provide customer relationship management to an
international internet service provider and e-commerce company over the next
two years; and the expansion of an existing contract to provide fulfillment
services for marketing and technical literature to a large medical diagnostics
company worth $2 million over the next two years.

Outlook

"Looking ahead, we'll continue our proven, three-part growth strategy of
cross-selling services to existing clients, securing new clients by
identifying the opportunities inherent in our operating sectors, and
considering acquisition opportunities that will be accretive to earnings,"
said Zimmering.

About Resolve

Resolve is a leading provider of customized business process outsourcing
services to businesses and governments across North America. The company
provides integrated solutions to clients for many of their essential, but
non-core business processes. With 3,900 employees in 25 locations, Resolve
assumes the complete management of these processes subject to agreed
performance measures, allowing clients to focus on their core operations,
achieve cost-savings by eliminating in-house resources, transfer fixed costs
to variable costs and improve customer service levels. Across its three
service categories of Financial and Administrative Solutions, Customer
Relationship Management, and Supply Chain Management, Resolve provides more
than 1,000 clients with outsourcing solutions that include loan
administration, security registration and search services, credit and loyalty
card processing, medical and dental insurance claims processing, call centre
services, coupon and rebate processing, trade and consumer order fulfillment,
warehousing, and inventory transportation management. Along with various
government ministries and agencies, Resolve's clients include some of the most
recognizable brand names from the financial services, retail, consumer goods
and manufacturing sectors. Resolve Business Outsourcing Income Fund is listed
on the Toronto Stock Exchange, symbol RBO.UN. www.resolve.com

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This news release contains certain "forward-looking information" under
applicable securities laws. Such forward-looking information may involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of Resolve, or industry results, to be
materially different from any future results, performance, achievements, or
opportunities expressed or implied by such forward-looking information. This
forward-looking information includes estimates, forecasts and statements as to
management's and others' expectations with respect to, among other things,
growth strategies and the outlook for Resolve and the business process
outsourcing industry, and may use words such as "may", "will", "estimate",
"expect", "anticipate", "believe", "intend", "plan", "could", "continue" and
other similar terminology. This information reflects current expectations
regarding future events and operating performance and speaks only as of the
date of this news release. Forward-looking information involves significant
risks and uncertainties, and should not be read as a guarantee of future
performance or results, and will not necessarily be an accurate indication of
whether or not such results will be achieved. A number of factors could cause
actual results to differ materially from the results discussed in the
forward-looking information, including, but not limited to, loss of key
customer contracts or reduction of services purchased by key customers,
foreign exchange rates, increases in costs to Resolve that cannot be passed on
to customers, disputes with key customers, competition, the ability of Resolve
to manage operations and execute growth strategies, stability of internal and
government information systems and technology, technological changes, ability
to maintain software licenses, changes in privacy laws, and risks inherent in
bidding on government contracts. These risk factors as well as additional
factors are discussed in greater detail under "Risk Factors" on page 117 in
Resolve's prospectus dated March 9, 2006. Although the forward-looking
information contained in this news release is based upon what management
believes are reasonable assumptions, Resolve cannot assure that actual results
will be consistent with this forward-looking information. This forward-looking
information is made as of the date of this news release, and Resolve assumes
no obligation to update or revise them to reflect new events or circumstances.

<<
(1) EBITDA is not a recognized measure under Canadian generally accepted
accounting principles ("Canadian GAAP") and does not have a
standardized meaning under Canadian GAAP. Accordingly, this measure
may not be comparable to similar measures presented by other issuers.
Please refer to the Fund's Management's Discussion and Analysis of
Financial Condition and Results of Operations for the period ended
June 30, 2006 for additional information concerning this measure and
a reconciliation of this measure to net loss and total revenues for
the period presented.

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Conference Call

A conference call hosted by Lawrence Zimmering, President and CEO, and
David Horton, Chief Financial Officer will be held at 2:00 p.m. (EDT) on
Thursday, August 3, 2006 to review these financial results and answer any
questions.

To participate in the conference call please dial 1-866-250-4665. A live
audio webcast will also be available at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1548140.

For anyone unable to access the scheduled call, a taped rebroadcast will
be available until August 10, 2006 by dialing 1-416-640-1917 or
1-877-289-8525. The access code for the rebroadcast is 21197870 followed
by the number sign. An archive version of the webcast will also be
available at www.newswire.ca/webcast for three months.
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RESOLVE BUSINESS OUTSOURCING
INCOME FUND

INTERIM FINANCIAL STATEMENTS
(unaudited)

Second Quarter
June 30, 2006

>>

The Fund's independent auditors have not performed an audit or review of
the Interim Financial Statements.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
August 3, 2006

The following discussion and analysis, which is the responsibility of
management, should be read in conjunction with the interim consolidated
financial statements and accompanying notes of Resolve Business Outsourcing
Income Fund (the "Fund") for the second quarter and year to date ended
June 30, 2006. This discussion contains forward-looking information. Please
see "Risk Factors" and "Cautionary Statement on Forward-Looking Information"
for a discussion of the risks, uncertainties and assumptions relating to this
information.
In this discussion, "Resolve" refers to Resolve Business Outsourcing
Income Fund and the terms "Company", "we", "us" and "our" refer to Resolve
Business Outsourcing Income Fund and, as applicable, the Fund's subsidiaries
as a group. All financial information in this discussion and analysis is
presented in Canadian dollars unless otherwise stated and have been prepared
in accordance with Canadian Generally Accepted Accounting Principles (GAAP).

OVERVIEW OF THE FUND

The Fund is an unincorporated, open-ended, limited purpose trust
established under, and governed by, the laws of the Province of Ontario on
February 12, 2006 by a declaration of trust, as amended and restated on
March 9, 2006. The Fund commenced active operations on March 17, 2006 when it
completed an initial public offering (IPO) of 22,500,000 units of the Fund
("Units") at a price of $10.00 per Unit and indirectly acquired a 70.5%
ownership interest in Resolve Corporation and CSRS Holdings, Ltd ("CSRS"). The
prior owners of Resolve Corporation and CSRS retained a 29.5% limited
partnership interest in Resolve Business Outsourcing LP. The interest of the
prior owners are represented by 9,614,622 Class B units ("Class B LP Units")
of Resolve Business Outsourcing LP. The Class B LP Units can be exchanged on a
one-for-one basis for Units pursuant to certain conditions as described in the
final prospectus of the Fund dated March 9, 2006. As at August 3, 2006, there
are 22,969,878 Units and 9,614,622 Class B LP Units issued and outstanding.
There has been no change to the number of Units or Class B LP Units during the
period from March 17, 2006 to June 30, 2006.

OVERVIEW OF THE BUSINESS

Resolve is a leading provider of customized business process outsourcing
(BPO) services to businesses and governments across North America. This
involves delivering large, integrated service offerings to clients for many of
their essential, but non-core business processes. Resolve typically assumes
the complete management of the contracted processes, subject to agreed
performance measures such as accuracy, volume or speed of transactions. As a
result, Resolve's clients are able to focus on their core operations, achieve
cost savings by eliminating in-house resources, transfer fixed costs to
variable costs and improve customer service levels.
Resolve seeks to improve its clients' operating performance by delivering
superior business process outsourcing services. With 3,900 employees in 25
locations, Resolve provides clients with outsourcing services in three major
service categories: Financial and Administrative Solutions (F&A), Customer
Relationship Management (CRM) and Supply Chain Management (SCM). Resolve's
offering includes essential processing solutions for an impressive list of
clients that includes many companies with some of the most recognizable brand
names in the sectors in which Resolve operates: government, financial
services, retail, and consumer goods and manufacturing. Individual solutions
include, but are not limited to loan administration, security registration and
search services, credit and loyalty card processing, medical and dental
insurance claims processing, call centre services, coupon and rebate
processing, other marketing and promotional services, trade and consumer order
fulfillment, as well as warehousing, inventory and transportation management.
These solutions share a number of common characteristics, including high
transaction volume, standardized processing and the use of program-specific
information technology applications. Because these characteristics are shared
across the services Resolve provides to its more than 1,000 clients, Resolve
is able to offer improved economies of scale and superior processing than its
clients might be able to achieve in-house.

GROWTH STRATEGY

Resolve's growth strategy involves leveraging these strengths to
capitalize on the positive prospects inherent to the BPO market. The Company
plans to expand its operations and market share through a three-part growth
strategy:

1) Continue to leverage existing long-term client relationships and
cross-sell additional services or newly developed BPO solutions. An
important component of this strategy is bundling existing services to
deliver larger, integrated solutions.

2) Identify and secure new clients, and departments within existing
clients, where outsourcing models have not yet been adopted. Management
believes many opportunities exist within the sectors in which Resolve
operates.

3) Continue to pursue selective acquisitions that are accretive to
earnings. Within the BPO industry, there are numerous opportunities that
would complement Resolve's existing portfolio of products and services.

DELIVERING RESULTS

Resolve is committed to enhancing unitholder value and providing
unitholders with solid returns on their investment. The Company has strong
gross revenues, stable and predictable cash flow and prudent capital
expenditure policies. This has allowed Resolve to make regular, monthly cash
distributions since April 2006.
Over the last ten years, combined gross revenue for Resolve Corporation
and CSRS has increased at a compound annual growth rate (CAGR) of 27% as a
result of organic growth and strategic acquisitions.
The Company has a steady stream of new and renewal contracts that
typically range from one to five years - many of which have exclusivity
provisions. Since its IPO, Resolve has maintained a strong balance sheet from
which to fund future organic growth and strategic acquisitions.

Q2 OPERATING HIGHLIGHTS

In keeping with the growth strategy described above, during the second
quarter, Resolve secured several new client contracts, renewals and
extensions. These include, but are not limited to the following:

<<
- Financial Services - New, five-year contract to supply marketing
fulfillment services to a large, Canadian mutual fund company (contract
value $2.5 - $3 million).
- Government - New, three-year contract to administer a drug co-payment
program for seniors for a provincial ministry of health (contract value
$5.4 million), with the option to extend for an additional two years.
- Consumer Goods and Manufacturing - Expansion of an existing contract to
provide fulfillment services for marketing and technical literature to
a large medical diagnostics firm (contract value $2 million over two
years).
- Retail - New two-year contract to provide customer relationship
services to an international internet service provider and e-commerce
company (contract value $3.5 million).
>>

Management believes these client contracts are indicative of the Fund's
ability to execute on its growth strategies. There were no significant
contract losses during the period.
Resolve continued to focus on operational efficiencies and the
enhancement of best practices during the second quarter, with ongoing
investments to standardize its information technology. This included the
successful migration of several business units to a common operating platform
and improved broadband communications at the Company's Toronto Data Centre to
facilitate the routing of data traffic. Similar ongoing improvements will
continue to enhance Resolve's seamless delivery of services on a North
American basis.
Highlighting Resolve's continued focus on its clients in the second
quarter Resolve reorganized sales on a product line orientation under a new
Vice President of Sales and Marketing. Resolve began an initiative to improve
sales training and client communications within its operations group.
In the second quarter Resolve continued its focus on product lines and
contracts that will drive future growth and profitability. As a result Resolve
made the decision to sell a small group of non-core contracts during the
quarter. For further information please see note 6 of the interim consolidated
financial statements.

Q2 OPERATING RESULTS

BASIS OF MANAGEMENT'S DISCUSSION AND ANALYSIS

The Fund was established on February 12, 2006 and acquired a 70.5%
indirect interest in Resolve Corporation and CSRS on March 17, 2006. Pro-forma
revenue, cost of sales, gross margin and selling general and administrative
expenses are included for the three- and six-month periods ended June 30, 2006
which exclude costs associated with the Fund's initial public offering.
Historical consolidated financial statements for both Resolve Corporation and
CSRS for the twelve months ended December 31, 2005 and pro-forma financial
statements of the Fund as of and for the twelve months ended December 31, 2005
giving effect to the initial public offering and the acquisition of Resolve
Corporation and CSRS are contained in the final prospectus of the Fund dated
March 9, 2006. The interim consolidated financial statements included herein
should be read in conjunction with the interim consolidated financials
statements contained in that prospectus.

CONSOLIDATED REVIEW
FOR THE THREE MONTHS ENDED JUNE 30, 2006
AND THE PERIOD FROM MARCH 17, 2006 TO JUNE 30, 2006

For the three months ended June 30, 2006 revenues totaled $69.1 million
and net earnings from continuing operations were $4.0 million or $0.17 per
Unit, basic and diluted. From the inception of operations of the Fund on
March 17, 2006 to June 30, 2006 revenues totaled $81.0 million and net
earnings from continuing operations were $3.9 million or $0.17 per Unit, basic
and diluted.
Consistent with the Fund's intention, as stated in its prospectus, an
initial cash distribution of $0.1237 per Unit was paid for the period from
March 17, 2006 to April 30, 2006, followed by a cash distribution of $0.0833
per Unit in each of May 2006 and June 2006.
The following discussion for the three months ended June 30, 2006 and
pro-forma three months ended June 30, 2005, as well as, the pro-forma six
months ended June 30, 2006 and pro-forma six months ended June 30, 2005
compares major operating metrics. Other items not discussed on a pro-forma
comparable basis are as follows:

Interest

Interest incurred on borrowings for the three months ended June 30, 2006
and for the period from March 17, 2006 to June 30, 2006 amounted to
$1.2 million and $1.4 million, respectively. This interest expense on the term
credit facility was in line with management expectations.

Income taxes

The indirect purchase of the businesses by the Fund in connection with
the IPO resulted in the establishment of a significant deferred tax liability
related to the value of the intangible assets. As the intangible assets are
amortized this liability will be reduced and income tax recovery will be
reported. Cash tax payments for taxes based on income at this time are not
expected to be material due to the benefits the Fund receives from
distributing its income to its unitholders. Due to a change in future Canadian
tax rates the Fund recorded an income tax recovery during the period of
$2.7 million.

Discontinued operations

On May 1, 2006, the Fund sold travel related client lists and client
contracts to a third party, and entered into an agreement not to compete in a
specific specialized type of fulfillment to the travel industry in Canada for
three years. For further information on discontinued operations please see
note 6 of the interim consolidated financial statements.

<<
SELECTED FINANCIAL INFORMATION
FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND
PERIOD FROM MARCH 17, 2006 TO JUNE 30, 2006
(thousands of Canadian dollars)

Three months March 17,
ended 2006 to
June 30, June 30,
2006 2006
(unaudited) (unaudited)
---------------------------
Total revenues $ 69,147 $ 81,007
Direct costs 49,381 57,017
-------------------------------------------------------------------------
Gross margin 19,766 23,990
Selling, general and administrative expenses 13,704 15,949
-------------------------------------------------------------------------
EBITDA(1) 6,062 8,041
Adjustments to EBITDA:
Non-controlling interest share of earnings (1,680) (1,652)
Income taxes 6,039 6,440
Depreciation (1,809) (2,112)
Amortization (5,924) (6,873)
Interest expense (1,162) (1,378)
Mark to market on derivative investment 2,484 1,478
-------------------------------------------------------------------------

Net earnings from continuing operations
for the period 4,010 3,944
Net earnings from discontinued operations, net
of income taxes and non-controlling interest
share of income(2) 677 623
-------------------------------------------------------------------------
Net earnings for the period $ 4,687 $ 4,567
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted earnings per Unit continuing
operations $ 0.17 $ 0.17
Basic and diluted earnings per Unit discontinued
operations 0.03 0.03
-------------------------------------------------------------------------
$ 0.20 $ 0.20
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Gross margin (as a % of revenues) 28.6% 29.6%
Selling, general and administrative expenses
(as a % of revenues) 19.8% 19.7%
EBITDA margin (as a % of revenues) 8.8% 9.9%
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Total assets $ 533,167 $ 533,167
Total long term liabilities $ 175,382 $ 175,382
-------------------------------------------------------------------------
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Average foreign exchange rate (CA$ per US$1.00) 1.1213 1.1280
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Notes

(1) EBITDA (earnings before interest, taxes, depreciation and
amortization) is not a recognized measure under Canadian generally
accepted accounting principles (GAAP) and does not have a
standardized meaning prescribed by GAAP. Therefore, EBITDA may not be
comparable to similar measures presented by other funds. EBITDA is an
integral part of the Fund's planning and reporting systems to
evaluate operating performance. Management believes EBITDA is a
reasonable operating measure because of the low capital intensity of
our service operations. EBITDA excludes the impact of other expense
relating to an unrealized loss on foreign exchange contracts.
(2) On May 1, 2006, the Fund sold travel related client lists and client
contracts to a third party, and entered into an agreement not to
compete in a specific specialized type of fulfillment to the travel
industry in Canada for three years. For further information on
discontinued operations please see note 6 of the interim consolidated
financial statements.


DISTRIBUTABLE CASH
FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND
PERIOD FROM MARCH 17, 2006 TO JUNE 30, 2006
(thousands of Canadian dollars)

Three months March 17,
ended 2006 to
June 30, June 30,
2006 2006
(unaudited) (unaudited)
---------------------------
---------------------------

Net earnings from continuing operations $ 4,010 $ 3,944
Adjustments to net earnings:
Non-controlling interest share of earnings 1,680 1,652
Future income taxes (6,088) (6,408)
Depreciation 1,809 2,112
Amortization(3) 5,924 6,873
Deferred revenue adjustment(3) 6,279 7,181
Unrealized gain on foreign exchange contracts (2,484) (1,478)
Maintenance capital expenditures (1,034) (1,232)
Cash provided by discontinued operations(4) 1,190 1,136
-------------------------------------------------------------------------
Total cash available for distribution
(distributable cash)(1) $ 11,286 $ 13,780
-------------------------------------------------------------------------
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Distributable cash per Unit(2) $ 0.35 $ 0.42
-------------------------------------------------------------------------
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Distribution declared per Unit(2) $ 0.29 $ 0.29
-------------------------------------------------------------------------
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Notes

(1) Distributable cash is not a recognized measure under GAAP and does
not have a standardized meaning prescribed by GAAP. Canadian open-
ended trusts, such as the Fund, use distributable cash and
distributable cash per unit as indicators of financial performance.
Distributable cash and distributable cash per unit may differ from
similar computations reported by other entities and, accordingly, may
not be comparable to distributable cash and distributable cash per
unit as reported by such entities. Management believes that
distributable cash and distributable cash per Unit are useful
supplemental measures that may assist investors in assessing
financial performance and the cash generated by the Fund that is
available to unitholders for distribution.
(2) Distributable cash per Unit and distribution declared per Unit is
based on distribution of cash to 22,969,878 Units and 9,617,746 Class
B LP Units. Additional information regarding the Units and Class B LP
Units can be found in the final prospectus of the Fund dated March 9,
2006.
(3) As a result of the initial public offering, the Fund will have
significant adjustments to its balance sheet that will result in an
increase in distributable cash for several years. These adjustments
for the fiscal year ending December 31, 2006 will include a deferred
revenue adjustment for registration services estimated to be
$14.6 million and increased amortization expenses of $18.7 million.
(4) Cash provided by discontinued operations includes an initial cash
payment of $1.5 million partially offset by a cash outlay for
operating cash flow. Please see note 6 of the interim consolidated
financial statements for further information on the discontinued
operations.
>>


PRO-FORMA PERIOD
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005

Resolve Business Outsourcing Income Fund has completed multiple
acquisitions of businesses that had differing bases of financial statement
presentation, accounting periods, and operating structures, resulting in
significant differences in selling, general and administrative costs and cost
of revenue and purchase price changes that resulted in adjustments to deferred
revenue and intangible asset amortization, which make such amounts not
comparable on a year-over-year basis.
Management has provided certain supplemental pro-forma unaudited
financial information for the three-month and six-month periods ended June 30,
2006 and June 30, 2005, as management believes this will assist the reader in
understanding the operating results for the underlying businesses. The
information presented for the three-month and six-month periods ended June 30,
2006 and June 30, 2005 include the consolidated financial information of
Resolve Corporation and CSRS prior to the acquisition by the Fund on March 17,
2006. This consolidated financial information has been adjusted to exclude
costs of the initial public offering, which occurred in Resolve Corporation
and CSRS prior to acquisition, a Resolve Corporation prior year gain on
settlement of a long-term contract, as well as the discontinued operations
discussed in note 6 of the interim consolidated financial statements. Readers
are cautioned that the operating results presented are not that of the Fund
for the three- and six-month periods ended June 30, 2005 and the six-month
periods ended June 30, 2006 and these results have been presented only to
provide the reader with additional information to enhance the comparability of
the Fund's operating results.

<<
SELECTED FINANCIAL INFORMATION
FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005 (unaudited)
(thousands of Canadian dollars)

Pro-forma
Three Three
months months
ended ended
June 30, June 30,
2006 2005
-------------------------------------------------------------------------
Total revenues $ 69,147 $ 66,525
Direct costs 49,381 47,327
-------------------------------------------------------------------------
Gross margin - $ 19,766 19,198
Gross margin - % 28.6% 28.9%

Selling, general and administrative expenses 13,704 14,590
% of revenues 19.8% 21.9%

Depreciation and amortization 7,733 5,609
-------------------------------------------------------------------------
Loss from continuing operations before
interest, other income, taxes and
non-controlling interest $ (1,672) $ (1,001)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other data:
EBITDA(1) 6,061 4,608
-------------------------------------------------------------------------
-------------------------------------------------------------------------
% of revenues 8.8% 6.9%

(1) EBITDA (earnings before interest, taxes, depreciation and
amortization) is not a recognized measure under Canadian generally
accepted accounting principles (GAAP) and does not have a
standardized meaning prescribed by GAAP. Therefore, EBITDA may not be
comparable to similar measures presented by other funds. EBITDA is an
integral part of the Fund's planning and reporting systems to
evaluate operating performance. Management believes EBITDA is a
reasonable operating measure because of the low capital intensity of
our service operations. EBITDA excludes discontinued operations and
the impact of other expense relating to an unrealized loss on foreign
exchange contracts.
>>

Revenues

Revenues increased by $2.6 million or 3.9% to $69.1 million for the three
months ended June 30, 2006 compared to the pro-forma revenues of $66.5 million
for the three months ended June 30, 2005. Revenue increased $1.7 million,
primarily due to a new large student loan customer that was not fully
implemented until November 2005. In association with contracts that Resolve
has in the states of Texas and New Mexico for delivery of school textbooks to
public schools, earlier than anticipated delivery schedules resulted in an
increase in revenue $1.3 million.
Revenue during the period would have increased by $2.3 million, or 3%,
over prior period assuming a constant exchange rate of CA$ to US$ of 1.2439.

Gross Margin

For the three months ended June 30, 2006 gross margin was $19.8 million,
representing an improvement of $0.6 million or 3% over the pro-forma gross
margin of $19.2 million for the three months ended June 30, 2005. The
improvement in gross margin is attributed to the improvement in revenue
mentioned previously.
Gross margin percent remained consistent at 28.6% for the three months
ended June 30, 2006 compared to 28.9% for the pro-forma three months ended
June 30, 2005.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended
June 30, 2006 were $13.7 million compared to $14.6 million for the pro-forma
three months ended June 30, 2005.
The $0.9 million, or 6% improvement over the second quarter of 2005 is
attributable to a cost reduction initiative implemented in the first quarter
of 2006. These cost savings were partially offset by an increase in
administration cost of $0.3 million related to the Fund operating as a public
income trust. These administration costs were associated with an increase in
legal, marketing, audit, insurance and other miscellaneous fees.

Depreciation and amortization

Depreciation and amortization expense increased $2.1 million to
$7.7 million for the three months ended June 30, 2006 from $5.6 million for
the pro-forma three months ended June 30, 2005. This increase in depreciation
and amortization expenses is a result of amortization of the intangible assets
which arose upon the indirect acquisition by the Fund of Resolve Corporation
and CSRS.

EBITDA (see note 1 of the pro-forma financial information)

EBITDA for the three months ended June 30, 2006 was $6.1 million compared
to $4.6 million for the pro-forma three months ended June 30, 2005. This 32%
increase in EBITDA was due to the increased revenue and cost saving
initiatives offset partially by the increase in administrative costs
associated with the Fund.

<<
SELECTED PRO-FORMA FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005 (unaudited)
(thousands of Canadian dollars)

Pro-forma Pro-forma
Six months Six months
ended ended
June 30, June 30,
2006 2005
-------------------------------------------------------------------------
Total revenues $ 135,517 $ 131,115
Direct costs 96,388 95,076
-------------------------------------------------------------------------
Gross margin - $ 39,129 36,039
Gross margin - % 28.9% 27.5%

Selling, general and administrative expenses 27,354 26,848
% of revenues 20.2% 20.5%

Depreciation and amortization 13,165 11,029
-------------------------------------------------------------------------
Loss from continuing operations before interest,
other income, taxes and non-controlling interest $ (1,391) $ (1,838)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Other data:
EBITDA(1) 11,775 9,191
-------------------------------------------------------------------------
-------------------------------------------------------------------------
% of revenues 8.7% 7.0%

(1) EBITDA (earnings before interest, taxes, depreciation and
amortization) is not a recognized measure under Canadian generally
accepted accounting principles (GAAP) and does not have a
standardized meaning prescribed by GAAP. Therefore, EBITDA may not be
comparable to similar measures presented by other funds. EBITDA is an
integral part of the Fund's planning and reporting systems to
evaluate operating performance. Management believes EBITDA is a
reasonable operating measure because of the low capital intensity of
our service operations. EBITDA excludes discontinued operations and
the impact of other expense relating to an unrealized loss on foreign
exchange contracts.
>>

Revenues

Revenues increased by $4.4 million or 3% to $135.5 million for the
pro-forma six months ended June 30, 2006 compared to revenues of $131.1
million for the pro-forma six months ended June 30, 2005. The improvement in
revenues is primarily due to a new large student loan customer that was not
fully implemented until November 2005, combined with increased revenue from
Personal Property Security Act (PPSA) registrations and searches.
Revenue during the period would have increased by $3.5 million, or 3%,
over the prior period assuming a constant exchange rate of CA$ to US$ of
1.2354.

Gross margin

For the pro-forma six months ended June 30, 2006 gross margin was
$39.1 million, representing an improvement of $3.1 million or 9% over the
gross margin of $36.0 million for the pro-forma six months ended June 30,
2005. The improvement in gross margin is attributed to the improvement in
revenue mentioned previously.
Gross margin percent increased to 28.9% for the pro-forma six months
ended June 30, 2006 compared to 27.5% for the pro-forma six months ended
June 30, 2005. The improvement is due primarily to improved margins in supply
chain and fulfillment as a result of lower occupancy costs combined with
increased sales of higher margin accounts versus 2005. The lower occupancy
costs are a result of terminating a lease on a fulfillment warehouse in March
of 2005 as part of a strategic cost reduction initiative.

Selling, general and administrative expenses

Selling, general and administrative expenses for the pro-forma six months
ended June 30, 2006 were $27.3 million compared to $26.8 million for the
pro-forma six months ended June 30, 2005.
The $0.5 million increase is primarily related to the Fund operating as a
public income trust. These administration costs were associated with an
increase in legal, marketing, audit, insurance and other miscellaneous fees.
As a percentage of revenue, the selling, general and administrative expenses
remained consistent at 20.2% for the pro-forma six months ended June 30, 2006
versus 20.5% for the pro-forma six months ended June 30, 2005.

Depreciation and amortization

Depreciation and amortization expenses increased $2.6 million to
$13.2 million for the pro-forma six months ended June 30, 2006 from
$11.0 million for the pro-forma six months ended June 30, 2005. This increase
in depreciation and amortization expenses is a result of amortization of the
intangible assets which arose upon the indirect acquisition by the Fund of
Resolve Corporation and CSRS.

EBITDA (see note 1 of the pro-forma financial information)

EBITDA for the pro-forma six months ended June 30, 2006 was $11.8 million
compared to $9.2 million for the pro-forma six months ended June 30, 2005.
This 28% increase in EBITDA was due to the increased revenue and cost saving
initiatives offset partially by the increase in administrative costs
associated with the Fund.

OUTSTANDING UNIT DATA

As at June 30, 2006, and at the date of this discussion and analysis, the
Fund had 22,969,878 outstanding Units and 9,617,746 Units issuable upon the
exchange of an equivalent number of Class B LP Units. Information regarding
the Units and Class B LP Units can be found in the final prospectus of the
Fund dated March 9, 2006.

<<
SUMMARY OF QUARTERLY RESULTS
FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND THE 15 DAY PERIOD ENDED
MARCH 31, 2006
(Unaudited)
15 day
Three months period
ended ended
June 30, March 31,
(thousands of Canadian dollars) 2006 2006
-------------------------------------------------------------------------

Revenue $ 69,147 $ 11,860

Net earnings (loss) from continuing operations 4,010 (65)
Net earnings (loss) from discontinued operations 677 (54)
-------------------------------------------------------------------------
Net earnings (loss) $ 4,687 $ (119)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings per Unit basic and diluted
continuing operations $ 0.17 $ 0.00
Net earnings per Unit basic and diluted
discontinued operations 0.03 0.00
-------------------------------------------------------------------------
$ 0.20 $ 0.00
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

RELATED PARTY TRANSACTIONS

The Fund will pay approximately $656,000 in annual rent on the Fund's
headquarters building to entities in which certain officers and directors of
subsidiaries of the Fund have minority equity interests. The Fund will pay
approximately $564,000 in annual rent on the Fund's Burnaby, B.C. building to
entities in which a director of a subsidiary of the Fund has an equity
interest. The consideration for these transactions is measured at the exchange
amounts which is the consideration agreed to by related parties. For the
three-month period ending June 30, 2006, the Fund paid fees for search and
registration services in the amount of $146,000 and received fees for services
in the amount of $38,000. These transactions were with an entity in which a
director of a subsidiary of the Fund has an equity interest. These
relationships were fully disclosed in the final prospectus of the Fund dated
March 9, 2006.

LIQUIDITY AND CAPITAL RESOURCES

The following table provides an overview of Resolve's cash flows for the
periods indicated:

<<
Three months March 17,
ended 2006 to
June 30, June 30,
(Unaudited) 2006 2006
-------------------------------------------------------------------------
Cash provided by (used in)

Net cash provided by operating activities $ 2,151 $ 5,451
Net cash used in investing activities (1,034) (193,103)
Net cash provided by (used in) financing activities (6,746) 192,178
Net cash provided by discontinued operations 1,190 1,136
Effect of exchange rate changes (535) (297)
-------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents
during the period $ (4,974) $ 5,364
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

Cash provided by operating activities

For the three months ended June 30, 2006 cash provided by operating
activities was $2.2 million. Accounts receivable increased $0.3 million since
March 31, 2006. Accrued liabilities decreased $9.4 million due primarily to
payments made on behalf of the prior shareholders of Resolve Corporation and
CSRS towards expenses associated with the initial public offering. At the time
of the initial public offering, $5.0 million of expenses were accrued. In
addition to the reduction in initial public offering expense liability,
customer deposits decreased by $2.0 million and other accrued liabilities were
lower due to normal business activity.
For the period between March 17, 2006 and June 30, 2006 cash provided by
operating activities was $5.5 million. Accounts receivable increased by
$4.1 million and accounts payable and other accrued liabilities decreased by
$6.7 million.
The operating activities of the business are expected to generate
sufficient funds to meet expected expenses, distributions and capital needs of
the business for the next fiscal quarter.

Cash used in investing activities

For the three months ended June 30, 2006 cash used in investing
activities was $1.0 million due to budgeted purchases of property plant and
equipment to support existing operations.
For the period between March 17, 2006 and June 30, 2006 cash used in
investing activities was $193.1 million. Upon completion of the Fund's initial
public offering, the Fund used $191.9 million to acquire Resolve Corporation
and CSRS. Capital expenditures for this period were $1.2 million, all of which
related to maintenance capital expenditures.

Cash provided by used in financing activities

For the period between March 31, 2006 and June 30, 2006 cash used in
investing activities was $6.7 million due to $4.8 million of distributions
paid to holders of Units and $1.9 million of distributions paid to holders of
Class B LP Units.
For the period between March 17, 2006 and June 30, 2006, cash provided by
financing activities was $192.2 million.
On March 17, 2006, the Fund completed its initial public offering and
issued 22,500,000 Units, receiving net proceeds of $207.9 million after
deducting underwriters' fees and other issuance costs.
Upon completion of the offering, the Fund entered into a new credit
agreement that provides for an $86.0 million term facility and a $25.0 million
revolving credit facility. The Fund immediately utilized the $86.0 million
term facility. The $86.0 million from the term facility and cash on hand from
the offering were used to retire previously existing debt of $93.9 million and
to pay expenses related to the credit facility of $1.1 million.
During this period, $4.8 million of distributions were paid to
unitholders of the Fund and $1.9 million of distributions were paid to the
holders of Class B LP Units.
Resolve has fixed the interest rate on a portion of the term loan
($65.0 million) through a swap agreement, resulting in an effective interest
rate of 6.49%. The swap's maturity date was set to coincide with the maturity
date of the term loan. Hedge accounting is being applied in the treatment of
this agreement.

Cash provided by discontinued operations

Cash provided by discontinued operations was $1.2 million for the period
between March 31, 2006 and June 30, 2006 and $1.1 million for the period
between March 17, 2006 and June 30, 2006. For further information on
discontinued operations please see note 6 of the interim consolidated
financial statements.

COMMITMENT AND CONTINGENCIES

The annual commitments as at June 30, 2006 are as follows:

<<
(in thousands of Canadian dollars) Operating Leases Term Loan
-------------------------------------------------------------------------
2006 (6mos. ending) December 31, 2006 $ 4,977 $ -
2007 9,607 -
2008 8,886 -
2009 6,262 -
2010 5,476 86,000
Thereafter 2,913 -
-------------------------------------------------------------------------
Total $ 38,121 $ 86,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>

The Fund has outstanding letters of credit in the amounts of $250,000 and
$100,000 as part of normal business operations.
Subsequent to June 30, 2006, pursuant to an indemnity agreement in favor
of CSRS, the former shareholders of CSRS paid a portion of a claim against
CSRS by the former shareholders of CCNS Corporate Services Ltd. ("CCNS"), an
entity acquired by CSRS. The estimated cost of settling this dispute was
recorded at June 30, 2006 as both a current asset and current liability in the
amount of $4,126,000. The estimated remaining potential liability, which is
fully indemnified by the former shareholders of CSRS, is $1.9 million.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies are those that management deems to be most
important to the portrayal of the Fund's financial condition and results of
operations, and that require management's most difficult, subjective or
complex judgements, due to the need to make estimates about the effects of
matters that are inherently uncertain. Management has identified certain
critical accounting policies: revenue recognition, goodwill and intangible
asset impairment testing, amortization of intangible assets, accounts
receivable allowances and accounting for income taxes.
Service fee revenue comprises registration revenue that is deferred and
recognized on a straight-line basis over the registration term. Fee revenue
related to searches and disbursement revenue related to registration
transactions are recognized as the related fees and disbursements are
incurred.
Annual goodwill and intangible impairment asset testing requires
judgement on the part of management. Goodwill and intangible asset impairment
testing involves making estimates concerning fair value and then comparing the
fair value to the carrying amount of assets. Estimates of fair value can be
impacted by sudden changes in the business environment or prolonged economic
downturns, and therefore require significant management judgement in their
determination.
Amortization of intangible assets requires management to make estimates
of useful lives and to select methods of amortization. Useful lives and
methods of amortization are determined at the time these assets are initially
acquired, and then are re-evaluated each reporting period. Significant
judgement is required to determine whether events and circumstances warrant a
revision to remaining periods of amortization. Changes to estimated useful
lives and methods of amortization could result in increases or decreases in
amortization expense.
Accounts receivable allowances are determined using a combination of
historical experience, current information, and management's judgement. Actual
collections may differ from management's estimates.
Income taxes are calculated based on the expected treatment of
transactions recorded in the unaudited interim consolidated financial
statements. In determining current and deferred components of income taxes,
management interprets tax legislation and makes assumptions about the timing
of the reversal of deferred tax assets and liabilities. If management's
interpretations differ from those of tax authorities or if the timing of
reversals is not as anticipated, the provision for income taxes could increase
or decrease in future periods.

RECENT CANADIAN ACCOUNTING PRONOUNCEMENTS

In an effort to standardize Canadian GAAP with U.S. GAAP, the Canadian
Institute of Chartered Accountants has recently issued new Handbook sections:

<<
- 1530, Comprehensive Income;
- 3855, Financial Instruments - Recognition and Measurement; and
- 3865, Hedges
>>

Under these new standards, all financial assets should be measured at
fair value with the exception of loans, receivables and investments that are
intended to be held to maturity and certain equity investments, which should
be measured at cost. Similarly, all financial liabilities should be measured
at fair value when they are held for trading or they are derivatives. Gains
and losses on financial instruments measured at fair value will be recognized
in the income statement in the periods they arise with the exception of gains
and losses arising from:

<<
- financial assets held for sale, for which unrealized gains and losses
are deferred in other comprehensive income until sold or impaired; and
- certain financial instruments that qualify for hedge accounting
>>

Sections 3855 and 3865 make use of "other comprehensive income". Other
comprehensive income comprises revenues, expenses, gains and losses that are
excluded from net income. Unrealized gains and losses on qualifying hedging
instruments, foreign currency, and unrealized gains or losses on financial
instruments held for sale will be included in other comprehensive income and
reclassified to net income when realized. Comprehensive income and its
components will be a required disclosure under the new standard. These
standards are effective for interim and annual financial statements relating
to fiscal years beginning on or after October 1, 2006.

FINANCIAL INSTRUMENTS

The Fund uses financial instruments as part of its strategy to manage the
risk associated with currency exchange rates and interest rate risks. The Fund
does not use financial instruments for trading or speculative purposes. The
Fund uses foreign exchange contracts to fix U.S. dollar revenues relative to
Canadian dollar expenses and interest rate swap agreements to lock variable
rate debt at a fixed amount. As at June 30, 2006, the Fund had foreign
exchange contracts in place to purchase CA $55.0 million through April of
2009. Gains and losses on the contracts are included in other income /
(expense). The interest rate swap is considered highly effective in hedging
the Fund's exposure to interest rate fluctuations. As at June 30, 2006 the
fair value of the interest rate swap was $629,840 and the fair value of the
foreign exchange contracts was $1,478,314.

RISK FACTORS

A number of factors could cause actual results to differ materially from
the results discussed in this management's discussion and analysis (MD&A),
including, but not limited to, loss of key customer contracts or reduction of
services purchased by key customers, foreign exchange rates, increases in
costs to Resolve that cannot be passed on to customers, disputes with key
customers, competition, the ability of Resolve to manage operations and
execute growth strategies, stability of internal and government information
systems and technology, technological changes, ability to maintain software
licenses, changes in privacy laws, and risks inherent in bidding on government
contracts. These risk factors as well as additional factors are discussed in
greater detail under "Risk Factors" on page 117 in Resolve's prospectus dated
March 9, 2006.

OUTLOOK

Resolve Business Outsourcing Income Fund's long-term objective is to
provide stable operating results while providing incremental growth in
distributions through solid annual revenue and income growth. Resolve is an
established BPO provider within a dynamic industry. Resolve has an extensive
list of more than 1,000 clients that includes some of North America's best
known brand names. Overall, the North American BPO industry is highly
fragmented, consisting of a few large, multinational service providers as well
as many small regional players in niche markets. Over the past five years, the
industry has experienced steady growth, as businesses and governments
increasingly recognize the advantages of integrating BPO solutions into their
operations. While management believes the long-term growth outlook is
favourable, the acquisition of larger integrated service agreements may result
in variances on a short-term basis.

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

Certain information in this MD&A contains management's assessment of
Resolve's future plans and may constitute "forward-looking information" under
applicable securities laws. Such information may involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of Resolve, or industry results, to be materially
different from any future results, performance, achievements, or opportunities
expressed or implied by such forward-looking information. This forward-looking
information includes estimates, forecasts and statements as to management's
and others' expectations with respect to, among other things, growth
strategies and the outlook for Resolve and the business process outsourcing
industry. When used in this MD&A, such information uses words such as "may",
"will", "estimate", "expect", "anticipate", "believe", "intend", "plan",
"could" and other similar terminology. This information reflects current
expectations regarding future events and operating performance and speaks only
as of the date of this MD&A. Forward-looking information involves significant
risks and uncertainties, should not be read as a guarantee of future
performance or results, and will not necessarily be an accurate indication of
whether or not such results will be achieved. A number of factors could cause
actual results to differ materially from the results discussed in the forward-
looking information, including, but not limited to, the factors discussed
under "Risk Factors". Although the forward-looking information contained in
this MD&A is based upon what management believes are reasonable assumptions
Resolve cannot assure that actual results will be consistent with this
forward-looking information. This forward-looking information is made as of
the date of this MD&A, and Resolve assumes no obligation to update or revise
it to reflect new events or circumstances.

ADDITIONAL INFORMATION

Additional information relating to the Resolve, including all public
filings, is available on SEDAR (www.sedar.com).

<<
RESOLVE BUSINESS OUTSOURCING INCOME FUND
INTERIM CONSOLIDATED BALANCE SHEET
(in thousands of Canadian dollars)

-------------------------------------------------------------------------
As at June 30, 2006
-------------------------------------------------------------------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 5,364
Accounts receivable 61,038
Assets related to settlement (note 10) 4,126
Income taxes recoverable 1,945
Inventories 2,261
Prepaid expenses and other assets 5,722
Future income taxes 256
-------------------------------------------------------------------------
80,712
-------------------------------------------------------------------------

Fair value of derivatives 1,478
Property, plant and equipment (note 7) 22,389
Future income taxes 8,537
Intangible assets (note 8) 236,244
Goodwill 183,807
-------------------------------------------------------------------------
452,455
-------------------------------------------------------------------------
$ 533,167
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Liabilities and unitholders' equity
Current liabilities
Accounts payable and accrued liabilities $ 25,782
Distribution payable 2,714
Customer deposits 13,139
Deferred revenues 8,281
Liabilities related to settlement (note 10) 4,126
-------------------------------------------------------------------------
54,042
-------------------------------------------------------------------------

Long-term debt - non-current (note 9) 86,000
Deferred revenue - non-current 8,160
Future income taxes (note 12) 80,644
Other non-current liabilities 578
-------------------------------------------------------------------------
175,382
-------------------------------------------------------------------------

-------------------------------------------------------------------------
Non-controlling interest 95,267
-------------------------------------------------------------------------

Unitholders' equity
Fund units 212,616
Accumulated earnings 4,567
Accumulated distributions (6,668)
Foreign currency translation adjustments (2,039)
-------------------------------------------------------------------------
208,476
-------------------------------------------------------------------------
$ 533,167
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements.



RESOLVE BUSINESS OUTSOURCING INCOME FUND
INTERIM CONSOLIDATED STATEMENT OF EARNINGS
(in thousands of Canadian dollars except unit and per unit amounts)

Three months March 17,
ended 2006 to
June 30, June 30,
2006 2006
-------------------------------------------------------------------------
(unaudited) (unaudited)

Revenues $ 69,147 $ 81,007
Direct costs 49,381 57,017
-------------------------------------------------------------------------
Gross margin 19,766 23,990
Selling, general and administrative expenses 13,704 15,949
Depreciation 1,809 2,112
Amortization 5,924 6,873
Interest expense - long term 1,162 1,378
Mark to market on derivative instruments (2,484) (1,478)
-------------------------------------------------------------------------
Loss before income taxes and non-controlling
interest (349) (844)

Provision for (recovery of) income taxes (6,039) (6,440)
-------------------------------------------------------------------------
Earnings before non-controlling interest 5,690 5,596
Non-controlling interest 1,680 1,652
-------------------------------------------------------------------------
Net earnings from continuing operations 4,010 3,944

Net earnings from discontinued operations,
net of income taxes and non-controlling
interest (note 6) 677 623
-------------------------------------------------------------------------
Net earnings for the period $ 4,687 $ 4,567
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Basic and diluted earnings per unit (note 4)
Continuing operations $ 0.17 $ 0.17
Discontinued operations 0.03 0.03
-------------------------------------------------------------------------
$ 0.20 $ 0.20
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements.
Please see note 2 for basis of presentation.



RESOLVE BUSINESS OUTSOURCING INCOME FUND
INTERIM CONSOLIDATED STATEMENT OF CASH FLOW
(in thousands of Canadian dollars)

Three months March 17,
ended 2006 to
June 30, June 30,
2006 2006
(unaudited) (unaudited)
Cash provided by (used in)

Operating activities
Net earnings from continuing operations $ 4,010 $ 3,944
Items not affecting cash:
Depreciation 1,809 2,112
Amortization 5,924 6,873
Future income taxes (6,088) (6,408)
Non-controlling interest 1,963 1,913
Mark to market on derivative instruments (2,484) (1,478)

Changes in operating assets and liabilities:
Accounts receivable (304) (4,138)
Inventories 355 30
Prepaid expenses and other assets (578) 1,673
Accounts payable and accrued liabilities (9,358) (6,696)
Deferred revenues 6,902 7,626
-------------------------------------------------------------------------
Net cash provided by operating activities 2,151 5,451
-------------------------------------------------------------------------

Investing activities
Acquisitions of businesses, net of cash
acquired of $7,052 - (191,871)
Purchases of property, plant and equipment (1,034) (1,232)
-------------------------------------------------------------------------
Net cash used in investing activities (1,034) (193,103)
-------------------------------------------------------------------------

Financing activities
Initial public offering of Fund units;
net of expenses - 207,917
Repayment of acquired Resolve and CSRS debt - (93,869)
Increase in long term debt - 86,000
Distributions paid to unitholders (4,755) (4,755)
Distributions paid to non-controlling interest (1,991) (1,991)
Payment of bank financing fees - (1,125)
-------------------------------------------------------------------------
Net cash (used in) provided by financing activities (6,746) 192,178
-------------------------------------------------------------------------
Net cash provided by discontinued operations
(note 6) 1,190 1,136
-------------------------------------------------------------------------
Effect of exchange rate changes (535) (297)
-------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents
during the period (4,974) 5,364
-------------------------------------------------------------------------

Cash and cash equivalents; beginning of period 10,338 -
-------------------------------------------------------------------------

Cash and cash equivalents; end of period $ 5,364 $ 5,364
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements.
Please see note 2 for basis of presentation.



RESOLVE BUSINESS OUTSOURCING INCOME FUND
INTERIM CONSOLIDATED STATEMENT OF UNITHOLDERS' EQUITY
(in thousands of Canadian dollars)

For the period from March 17, 2006 to June 30, 2006 (unaudited)

-------------------------------------------------------------------------
Accumulated Currency
Fund Accumulated Distri- translation
Units Earnings butions adjustment Total
-------------------------------------------------------------------------

Issuance of
Fund Units on
initial public
offering $ 225,000 $ - $ - $ - $ 225,000

Units
issued as
consideration
for acquisition 4,699 - - - 4,699

Issuance costs (17,083) - - - (17,083)

Net earnings
for the period - 4,567 - 4,567

Distributions - - (6,668) - (6,668)

Foreign currency
translation
adjustment - - - (2,039) (2,039)
-------------------------------------------------------------------------

Balance, end
of period $ 212,616 $ 4,567 $ (6,668) $ (2,039) $ 208,476
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements.
Please see note 2 for basis of presentation.


RESOLVE BUSINESS OUTSOURCING INCOME FUND
NOTES TO INTERIM CONSOLIDATED STATEMENT

1) Organization and Nature of Business

The Fund is an unincorporated, open-ended, limited purpose trust
established under, and governed by, the laws of the Province of Ontario
on February 12, 2006 by a declaration of trust, as amended and restated
on March 9, 2006. The Fund commenced active operations on March 17, 2006
when it completed an initial public offering (IPO) of 22,500,000 units of
the Fund ("Units") at a price of $10.00 per Unit and indirectly acquired
a 70.5% ownership interest in Resolve Corporation and CSRS Holdings, Ltd
("CSRS"). The prior owners of Resolve Corporation and CSRS retained a
29.5% limited partnership interest in Resolve Business Outsourcing LP.
The interests of the prior owners are represented by 9,614,622 Class B
units ("Class B LP Units") of Resolve Business Outsourcing LP. The
Class B LP Units can be exchanged on a one-for-one basis for Units
pursuant to certain conditions as described in the final prospectus of
the Fund dated March 9, 2006. As at August 3, 2006, there are 22,969,878
Units and 9,614,622 Class B LP Units issued and outstanding. There has
been no change to the number of Units or Class B LP Units during the
period from March 17, 2006 to June 30, 2006.

Resolve is a leading provider of customized business process outsourcing
(BPO) services to businesses and governments across North America. This
involves delivering large, integrated service offerings to clients for
many of their essential, but non-core business processes. Resolve
typically assumes the complete management of the contracted processes,
subject to agreed performance measures such as accuracy, volume or speed
of transactions. As a result, Resolve's clients are able to focus on
their core operations, achieve cost savings by eliminating in-house
resources, transfer fixed costs to variable costs and improve customer
service levels.

2) Basis of Presentation

The Fund prepares its consolidated financial statements in accordance
with Canadian generally accepted accounting principles. The disclosure
contained in these unaudited interim consolidated financial statements
does not include all requirements of Canadian generally accepted
accounting principles for annual financial statements.

The unaudited interim consolidated financial statements should be read in
conjunction with the final prospectus of the Fund dated March 9, 2006
(the prospectus) and the consolidated financial statements of Resolve
Corporation and CSRS included in the prospectus.

These unaudited interim consolidated financial statements reflect the
results of operations for the period from March 17, 2006 to the period
ended June 30, 2006. As the Fund commenced active operations on March 17,
2006, no comparative information is provided.

3) Summary of Significant Accounting Policies

Basis of consolidation

The interim consolidated financial statements include the accounts of the
Fund and its subsidiaries. Intercompany transactions and accounts are
eliminated on consolidation.

Cash and cash equivalents

Cash equivalents consist of highly liquid investments, which are readily
convertible into cash and have original maturities of three months or
less.

Inventories

Inventories are carried at the lower of cost and net realizable value.
Cost is determined by the first-in, first-out method. Work-in-progress
includes direct labor, manufacturing overhead costs and the cost of
materials.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated
amortization. The cost of additions and improvements are capitalized,
while maintenance and repairs are expensed as incurred. Property, plant
and equipment are amortized over their estimated useful lives as follows:


Property, plant and equipment Straight line rate
-------------------------------------------------------------------------
Buildings 40 years
Vehicles 4 years
Furniture and equipment 5 to 10 years
Computer equipment and software 3 to 5 years
Leasehold improvements term of the lease to a maximum
of 10 years
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Construction-in-process projects are not amortized until completed and
placed in production.

Goodwill and intangible assets

Goodwill represents the excess of purchase price over the fair value of
identifiable assets acquired in a business combination and is not subject
to amortization.

Intangible assets are recorded at cost and are amortized over their
estimated useful lives as follows:

Intangible assets Straight line rate
-------------------------------------------------------------------------
Deferred financing fees over the term of the debt facility,
which is 4 years
Software and technology 7 years
Customer relationships 15 years
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Fund reviews the carrying value of long-lived intangible assets and
other long-lived assets for impairment whenever events and circumstances
indicate that the carrying amount of an asset may not be recoverable from
the estimated future cash flows expected to result from its use and
eventual disposition. If the sum of the expected future cash flows is
less than the carrying amount of the asset, an impairment loss will be
recognized. Measurement of the impairment loss is based on the excess of
the carrying amount of the asset over the fair value calculated using
discounted expected future cash flows.

Goodwill is tested for impairment annually or more frequently if events
or changes in circumstances indicate the asset might be impaired, in
which case the carrying amount of the asset is written down to fair
value. Impairment of goodwill is tested at the reporting unit level.
Impairment of goodwill is tested by comparing the reporting unit's
carrying amount, including goodwill, to the fair value of the reporting
unit. The fair values of the reporting unit are estimated using a
discounted cash flow approach. If the carrying amount of the reporting
unit exceeds its fair value, then a second step is performed to measure
the amount of impairment loss, if any.

Revenue recognition and deferred revenue

Revenues are recognized at the time the service is rendered. Revenues
from certain contracts in process are recognized on the percentage of
completion method, generally in the ratio of actual costs to total
estimated contract costs, unless the Fund cannot reasonably estimate its
gross margins, in which case the completed contract method is used.

Personal Property Security Act (PPSA) fee registration revenue is
deferred and recognized on a straight-line basis over the average
contractual term of the registrations (typically over a five-year
period). Other amounts received from customers in advance of services
being provided are recorded as deferred revenue when received.

Customer deposits and advances to customers

In connection with certain of its operations, the Fund accepts deposits
from customers to fund third party freight, rebate or coupon redemption
payments. Customer deposits are recorded in current liabilities. Amounts
advanced to customers to fund such payments are recorded in accounts
receivable. Due to the Fund's agency relationship with respect to these
payments, the payments are recorded on a net basis in the statement of
earnings.

Derivative financial instruments

The Fund follows the guidance in Accounting Standards Board Accounting
Guideline 13, "Hedging Relationships", which addresses the
identification, designation, documentation and effectiveness of hedging
relationships for the purpose of applying hedge accounting. AcG-13 also
establishes certain conditions for applying hedge accounting and deals
with discontinuance of hedge accounting. In addition the Fund also
follows Emerging Issues Committee Abstract 128, "Accounting for Trading,
Speculative or Non-Hedging Derivative Financial Instruments". This EIC
abstract requires that any derivative financial instrument that is not
designated as a compliant hedge under AcG-13 be measured at fair value,
with changes in fair value recorded in the statement of operations.

The Fund is a party to interest rate swap agreements used to manage
interest rate risk. Payments and receipts under interest rate swap
agreements are recognized as adjustments to interest expense. The Fund is
party to a foreign exchange contract used to manage the risk of U.S.
dollar revenues relative to Canadian dollar expenses. The values of these
contracts are marked to market monthly recognizing the unrealized gains
and losses on foreign exchange contracts.

Foreign currency translation

Assets and liabilities of the Fund's subsidiary operations, which are
measured in a functional currency other than the Canadian dollar are
translated into Canadian dollars at the exchange rates prevailing at
year-end and revenues and expenses at the weighted average exchange rates
for the year. Exchange gains and losses are included in earnings.
Currency translation adjustments are a component of unitholders' equity.

Income taxes

The Fund's corporate subsidiaries use the asset and liability method of
accounting for income taxes. Under the asset and liability method, future
income tax assets and liabilities are recognized for the future income
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Future tax assets and liabilities are measured
using enacted or substantively enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on future tax assets and
liabilities of a change in tax rates is recognized in earnings in the
period that includes the date of enactment or substantive enactment. The
Fund is a taxable entity under the Income Tax Act (Canada) and is taxable
only on income that is not distributed or distributable to the
unitholders.

Estimates

The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Significant areas requiring the use
of management estimates relate to the net recoverable value of assets,
useful lives for amortization, recognition of revenue and contingent
liabilities. Actual results may ultimately differ from these estimates.

Exchangeable securities issued by subsidiaries of income trusts

On January 19, 2005 the CICA Emerging Issues Committee (EIC) issued EIC
Abstract 151, Exchangeable Securities Issued by Subsidiaries of Income
Trusts which provides guidance on how to present exchangeable securities
representing a retained interest in a subsidiary of an income trust on
the consolidated balance sheet of the income trust. As the Fund did not
meet all the conditions to present the exchangeable Class B LP Units held
by certain of the former shareholders of Resolve Corporation and CSRS as
part of unitholders' equity, these exchangeable units were presented as
non-controlling interest in the consolidated interim financial
statements.

4) Earnings per Unit

Basic earnings per Unit from continuing operations are computed by
dividing net earnings from continuing operations by the weighted average
Units outstanding during the period. Diluted earnings from continuing
operations are computed by dividing net earnings from continuing
operations before non controlling interests by the weighted average Units
outstanding during the period which are increased to include the assumed
conversion of the Class B LP Units.

The following is the weighted average Units and Class B LP Units during
the period:

Three months March 17,
ended 2006 to
June 30, June 30,
2006 2006
-------------------------------------------------------------------------
Weighted average:
Units outstanding - basic 22,969,878 22,969,878
Dilutive effect of Class B LP Units 9,614,622 9,614,622
-------------------------------------------------------------------------
Units - diluted 32,587,624 32,587,624
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings from continuing operations $ 5,690 $ 5,596
Non-controlling interest 1,680 1,652
-------------------------------------------------------------------------
Net earnings from continuing operations $ 4,010 $ 3,944
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings from discontinued operations
before non-controlling interest $ 961 $ 884
Non-controlling interest 284 261
-------------------------------------------------------------------------
Net earnings from continuing operations $ 677 $ 623
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Basic and diluted earnings per Unit from
continuing operations $ 0.17 $ 0.17
Basic and diluted earnings per Unit from
discontinued operations 0.03 0.03
-------------------------------------------------------------------------
$ 0.20 $ 0.20
-------------------------------------------------------------------------
-------------------------------------------------------------------------


5) Issuance of Fund Units and Acquisition

The Fund commenced operations on March 17, 2006 when it completed an
initial public offering of 22,500,000 Units at a price of $10.00 per Unit
and indirectly acquired a 70.5% ownership interest in Resolve Corporation
and CSRS, held through Resolve Business Outsourcing Limited Partnership.
The prior owners of Resolve Corporation and CSRS, retained a 29.5%
ownership interest in Resolve Business Outsourcing Limited Partnership.
The acquisition has been accounted for by the purchase method with the
results of Resolve Corporation's and CSRS's operations included in the
Fund's earnings from the date of acquisition. The interim consolidated
statement of earnings includes the results of operations for the period
from March 17, 2006 to June 30, 2006. The purchase price allocation is
preliminary and subject to change. These interim consolidated financial
statements reflect the assets and liabilities of the Fund at assigned
fair values as follows:



(in thousands of Resolve
Canadian dollars) Corporation CSRS Total
----------------------------------------

Cash purchase consideration $ 107,835 $ 92,214 $ 200,049
Units and Class B LP Units 36,452 64,393 100,845
(Less) cash acquired (7,490) 438 (7,052)
-------------------------------------------------------------------------
Net purchase consideration: $ 136,797 $ 157,045 $ 293,842
-------------------------------------------------------------------------

Allocation:
Net working capital $ 19,458 $ 1,773 $ 21,231
Intangible assets 70,502 172,623 243,125
Goodwill 87,411 97,757 185,168
Property, plant and equipment 21,589 2,054 23,643
Debt (30,513) (63,357) (93,870)
Post-employment benefits liability (1,626) - (1,626)
Deferred revenues - non-current - (5,142) (5,142)
Net future income taxes (30,024) (48,663) (78,687)
-------------------------------------------------------------------------
Net assets acquired $ 136,797 $ 157,045 $ 293,842
-------------------------------------------------------------------------


6) Disposition

On May 1, 2006, the Fund sold travel related client lists and client
contracts to a third party, and entered into an agreement not to compete
in a specific specialized type of fulfillment to the travel industry in
Canada for three years.

The aggregate proceeds on the disposition were $3,000,000 comprised of
cash of $1,500,000 and a note receivable due in one year of $1,500,000.
The pre-tax and pre non-controlling interest gain on the disposal was
$1,878,387, less an income tax provision of $676,219 and non-controlling
interest of $354,720 for a net gain of $847,447. Included in the pre-tax
and pre non-controlling interest gain on disposal were lease
termination, severance and other exist costs in the amount of $1,121,613,
of which $907,000 remains accrued on the balance sheet as at June 30,
2006. The operating results and cash flow information for the
discontinued operations are as follows:

(in thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months March 17,
ended 2006 to
June 30, June 30,
Operating results for: 2006 2006
-------------------------------------------------------------------------

Revenues $ 799 $ 958
Loss from discontinued operations before
income taxes and non-controlling interest (377) (497)
Income taxes (136) (179)
-------------------------------------------------------------------------
Loss before non-controlling interest (241) (318)
Non-controlling interest share of loss (71) (94)
-------------------------------------------------------------------------
Net loss from discontinued operations (170) (224)
Net gain on disposal 847 847
-------------------------------------------------------------------------
Net earnings from discontinued operations $ 677 $ 623
-------------------------------------------------------------------------
-------------------------------------------------------------------------


(in thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months March 17,
ended 2006 to
June 30, June 30,
Cash flow information for: 2006 2006

Cash provided by (used in)
Operating activities $ (310) $ (364)
Investing activities 1,500 1,500
-------------------------------------------------------------------------
Net cash provided by $ 1,190 $ 1,136
-------------------------------------------------------------------------
-------------------------------------------------------------------------


7) Property, Plant and Equipment


(in thousands of Canadian dollars) Accumulated
As at June 30, 2006 (unaudited) Cost depreciation Net
-------------------------------------------------------------------------

Land $ 470 $ - $ 470
Buildings 2,124 32 2,092
Vehicles 39 7 32
Furniture and equipment 12,032 755 11,277
Computer equipment and software 4,998 414 4,584
Leasehold improvements 4,182 247 3,935
-------------------------------------------------------------------------
Total $ 23,845 $ 1,455 $ 22,389
-------------------------------------------------------------------------
-------------------------------------------------------------------------


8) Intangibles


(in thousands of Canadian dollars) Accumulated
As at June 30, 2006 (unaudited) Cost amortization Net
-------------------------------------------------------------------------

Customer relationships $ 146,000 $ 2,822 $ 143,178
Software 55,000 2,278 52,722
Deferred financing fees 1,125 82 1,043
Technology 41,000 1,699 39,301
-------------------------------------------------------------------------
Total $ 243,125 $ 6,881 $ 236,244
-------------------------------------------------------------------------
-------------------------------------------------------------------------


9) Long-term Debt

(in thousands of Canadian dollars) June 30, 2006
-------------------------------------------------------------------------
Long-term debt due to third parties $ 86,000
-------------------------------------------------------------------------
86,000
-------------------------------------------------------------------------
Less: current portion -
-------------------------------------------------------------------------
Total $ 86,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------


The Fund has available two senior secured credit facilities, which
include a revolving credit facility of up to $25 million and a four year
term credit facility of $86 million. The term facility carries a variable
interest rate and is repayable at maturity. The Fund is required to
maintain certain financial covenants under the terms of both its credit
facilities. The effective interest rate as at June 30, 2006, was 6.69%.
At June 30, 2006 there were no withdrawals against the revolving credit
facility. To mitigate its exposure to variable interest rates, the
Resolve Business Outsourcing LP also entered into an interest rate swap
agreement. The swap fixes the interest on a portion of the term facility
($65 million), resulting in an effective interest rate of 6.49%. The
swap's maturity date is set to coincide with the maturity of the term
facility.

10) Commitments and Contingencies

The annual commitments as at June 30, 2006 are as follows:

Operating Term
(in thousands of Canadian dollars) Leases Facility
-------------------------------------------------------------------------
2006 (6mos. ending) December 31, 2006 $ 4,977 $ -
2007 9,607 -
2008 8,886 -
2009 6,262 -
2010 5,476 86,000
Thereafter 2,913 -
-------------------------------------------------------------------------
Total $ 38,121 $ 86,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Fund has outstanding letters of credit in the amounts of $250,000 and
$100,000 as part of normal business operations.

Subsequent to June 30, 2006, pursuant to an indemnity agreement in favor
of CSRS, the former shareholders of CSRS paid a portion of a claim
against CSRS by the former shareholders of CCNS Corporate Services Ltd.
("CCNS"), an entity acquired by CSRS. The estimated cost of settling this
dispute was recorded at June 30, 2006 as both a current asset and current
liability in the amount of $4,126,000. The estimated remaining potential
liability, which is fully indemnified by the former shareholders of CSRS,
is $1.9 million.

11) Related Party Transactions

The Fund will pay approximately $656,000 in annual rent on the Fund's
headquarters building to entities in which certain officers and directors
of subsidiaries of the Fund have minority equity interests. The Fund will
pay approximately $564,000 in annual rent on the Fund's Burnaby, B.C.
building to entities in which a director of a subsidiary of the Fund has
an equity interest. The consideration for these transactions is measured
at the exchange amounts which is the consideration agreed to by related
parties. For the three-month period ending June 30, 2006, the Fund paid
fees for search and registration services in the amount of $146,000 and
received fees for services in the amount of $38,000. These transactions
were with an entity in which a director of a subsidiary of the Fund has
an equity interest. These relationships were fully disclosed in the final
prospectus of the Fund dated March 9, 2006.

12) Income Taxes

The Fund has recorded a deferred tax liability at the purchase date
(March 17, 2006) related to the differences between the values assigned
to certain assets for financial reporting and income tax purposes. The
deferred tax liability relates to the differences in the basis of those
assets contributed by the former shareholders. The Fund continues to
evaluate the tax attributes of these assets in order to finalize purchase
accounting associated with the acquisition and, therefore, the deferred
tax liability is subject to change. Due to a change in future Canadian
tax rates the Fund recorded an income tax recovery during the period of
$2,728,000.

13) Accumulated Distributions Declared

Distributions are declared each month to holders of Units and Class B LP
Units on the last business day of each month. Distributions declared
during the period ended June 30, 2006, are as follows:

(in thousands of Canadian dollars except per unit amounts)

Date Date
Period Declared Paid Per unit Amount
-------------------------------------------------------------------------
Fund Units
March 17, 2006 - April 30, 2006 4/19/06 5/15/06 $ 0.1237 $ 2,842
May 1, 2006 - May 31, 2006 5/10/06 6/15/06 0.0833 1,913
June 1, 2006 - June 30, 2006 6/21/06 7/17/06 0.0833 1,913

Class B LP Units
March 17, 2006 - April 30, 2006 4/19/06 5/15/06 0.1237 1,190
May 1, 2006 - May 31, 2006 5/10/06 6/15/06 0.0833 801
June 1, 2006 - June 30, 2006 6/21/06 7/17/06 0.0833 801
-------------------------------------------------------------------------
$ 9,460
-------------------------------------------------------------------------
-------------------------------------------------------------------------


14) Segment Information

The Fund conducts business in Canada and the United States. Revenues from
continuing operations in each geographic segment are reported by customer
location.

Three Months March 17,
Ended 2006 to
June 30, June 30,
(in thousands of Canadian dollars) 2006 2006
-------------------------------------------------------------------------
(unaudited) (unaudited)
Canada

Revenues $ 48,221 $ 56,601
-------------------------------------------------------------------------
Total long-lived assets $ 393,899 $ 393,899
-------------------------------------------------------------------------

United States

Revenues $ 20,926 $ 24,406
-------------------------------------------------------------------------
Total long-lived assets $ 48,541 $ 48,541
-------------------------------------------------------------------------

Consolidated

Revenues $ 69,147 $ 81,007
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total long-lived assets $ 442,440 $ 442,440
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Contact Information

  • Investor Inquiries:
    Dave Horton
    Chief Financial Officer
    Resolve Corporation
    (416) 503-1800
    Website: www.resolvecorporation.com

    Media Inquiries:
    Edelman
    Nolan Reeds
    (416) 979-1120 ext 316