Resolve Business Outsourcing Income Fund
TSX : RBO.UN

Resolve Business Outsourcing Income Fund

October 30, 2007 19:56 ET

Resolve Business Outsourcing Income Fund Reports Record Revenue, EBITDA for 3rd Quarter

TORONTO, ONTARIO--(Marketwire - Oct. 30, 2007) -

Attention Business and Financial Editors:

Resolve Business Outsourcing Income Fund (TSX:RBO.UN) today announced strong third quarter financial results, including record revenue and EBITDA, for the three months ended September 30, 2007.

At $95.2 million, quarterly revenue grew by 19% over the previous quarter and by 39% over the third quarter of 2006, thanks to strong customer retention, revenue expansion from new and existing customers, and growth through acquisition.

Despite $1.5 million in non-recurring costs, adjusted quarterly EBITDA was $15.0 million, up from the $14.5 million reported a year earlier.

Net earnings from continuing operations for the current quarter were $2.8 million, versus $2.2 million in 2006. Diluted earnings per unit were $0.11, up sharply from $0.08 in the second quarter of 2007.

Revenue for the trailing twelve-month period ended September 30, 2007, was $322.4 million with adjusted EBITDA of $41.9 million, or $1.28 per unit. Net earnings from continuing operations for the same period were $1.5 million, or $0.11 per unit basic. Cash provided by operating activities less maintenance capital expenditures for the trailing twelve-month period was $29.5 million or $0.91 per unit.

"These results and the growth we expect to achieve are the direct outcome of strategies we have developed and implemented to improve both top and bottom line performance," said Lawrence Zimmering, Resolve President and Chief Executive Officer.

Resolve anticipates that the fourth quarter of 2007 will generate improved adjusted EBITDA and distributable cash over the prior year.

"It is important to note that we expect to grow our distributable cash while at the same time continuing to invest wherever necessary to assure a solid operational platform for the future," Zimmering added.

About Resolve

Resolve works with businesses as an outsourced resource taking on critical processes and managing them better, faster and more cost-effectively. We have over 35 years experience managing processes for Fortune 500 clients in the financial services, retail, government, consumer goods and communications industries. Headquartered in Toronto, Canada, Resolve employs more than 4,500 people in 29 locations and is listed on the Toronto Stock Exchange as Resolve Business Outsourcing Income Fund, symbol RBO.UN. For more information, visit www.resolve.com.

Conference Call

A conference call hosted by Lawrence Zimmering, president and CEO, and Jamie Hyde, executive vice president and CFO, will be held at 10:00 a.m. (EST) on October 31, 2007, to review these results and answer any questions.

To participate in the conference call, please dial 416-406-6419 or 1-888-575-8232. A live audio webcast will also be available at www.vcall.com/IC/CEPage.asp?ID=120870.

For anyone unable to access the scheduled call, a taped rebroadcast will be available until November 7, 2007, by dialing 416-695-5800 or 1-800-408-3053. The access code for the rebroadcast is 3236093#.

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This press release may include certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). 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 press 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, the ability to maintain software licenses, changes in privacy laws, and risks inherent in bidding on government contracts. These risk factors are discussed in greater detail under ''Risks'' on page 14 of Resolve's MD&A for the period ended December 31, 2006, which is available on SEDAR at www.sedar.com. Although the forward-looking information contained in this press 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 press release, and Resolve assumes no obligation to update or revise it to reflect new events or circumstances.




RESOLVE BUSINESS OUTSOURCING INCOME FUND
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

September 30, December 31,
As at 2007 2006
---------------------------------------------------------------------------
(in thousand of dollars, unaudited) $ $

ASSETS
Current
Cash and cash equivalents 8,226 8,796
Accounts receivable 87,192 65,387
Assets related to settlement 800 1,900
Income taxes recoverable 668 386
Inventories 2,268 2,038
Prepaid expenses and other assets 6,259 5,668
Fair value of derivatives 2,938 -
Future income taxes 252 479
---------------------------------------------------------------------------
Total current assets 108,603 84,654
Capital assets 27,899 22,820
Future income taxes 25,324 14,529
Intangible assets and deferred charges 207,988 224,736
Goodwill 181,338 187,617
---------------------------------------------------------------------------
Total assets 551,152 534,356
---------------------------------------------------------------------------
---------------------------------------------------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY
Current
Bank indebtedness 13,000 -
Accounts payable and accrued liabilities 50,908 28,248
Fair value of derivatives - 675
Distribution payable 2,714 2,714
Customer deposits 15,652 17,921
Future income taxes 2,367 3,626
Deferred revenue 12,808 10,265
Liabilities related to settlement 800 1,900
---------------------------------------------------------------------------
Total current liabilities 98,249 65,349
Long-term debt - non-current 85,308 86,000
Deferred revenue - non-current 27,378 15,278
Future income taxes 72,378 77,227
Other non-current liabilities 4,013 674
---------------------------------------------------------------------------
Total liabilities 287,326 244,528
---------------------------------------------------------------------------

Non-controlling interest 77,892 88,911
---------------------------------------------------------------------------

Unitholders' equity
Fund units 217,964 214,175
Accumulated distributions (36,192) (18,272)
Accumulated earnings 9,790 4,634
Accumulated other comprehensive income (loss) (5,628) 380
---------------------------------------------------------------------------
Total unitholders' equity 185,934 200,917
---------------------------------------------------------------------------
Total liabilities, non-controlling interest
and unitholders' equity 551,152 534,356
---------------------------------------------------------------------------
---------------------------------------------------------------------------



RESOLVE BUSINESS OUTSOURCING INCOME FUND
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EARNINGS

Three months Nine months
ended ended
September 30 September 30
2007 2006 2007 2006(1)
---------------------------------------------------------------------------
(in thousands of dollars, except $ $ $ $
per unit amounts, unaudited)

Revenues 95,220 68,432 239,303 149,439
Direct costs 68,554 47,274 173,865 104,292
---------------------------------------------------------------------------
Gross profit 26,666 21,158 65,438 45,147
Operating expenses 15,979 12,130 45,603 28,078
Depreciation 2,122 1,803 5,979 3,915
Amortization 5,921 5,932 17,699 12,806
Interest expense 1,840 1,449 4,732 2,827
Mark-to-market on derivative instruments (1,032) 263 (3,479) (1,215)
---------------------------------------------------------------------------
Earnings (loss) before income taxes,
non-controlling interest, discontinued
operations and extraordinary item 1,836 (419) (5,096) (1,264)
Recovery of income taxes (1,873) (3,098) (9,869) (9,538)
---------------------------------------------------------------------------
Earnings before non-controlling
interest, discontinued operations
and extraordinary item 3,709 2,679 4,773 8,274
Non-controlling interest 908 513 1,050 2,164
---------------------------------------------------------------------------
Earnings before discontinued
operations and extraordinary item 2,801 2,166 3,723 6,110
Earnings from discontinued operations,
net of income taxes and
non-controlling interest (note 8) - 84 101 707
---------------------------------------------------------------------------
Earnings before extraordinary item 2,801 2,250 3,824 6,817
Gain on purchase of Edulinx, net of
income taxes and non-controlling
interest (note 9) 73 - 1,332 -
---------------------------------------------------------------------------
Net earnings for the period 2,874 2,250 5,156 6,817
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Basic earnings per unit
Continuing operations 0.12 0.10 0.21 0.27
Discontinued operations - - 0.01 0.03
---------------------------------------------------------------------------
Basic earnings per unit (note 5) 0.12 0.10 0.22 0.30
---------------------------------------------------------------------------

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

Diluted earnings per unit
Continuing operations 0.11 0.08 0.20 0.25
Discontinued operations - - - 0.03
---------------------------------------------------------------------------
Diluted earnings per unit (note 5) 0.11 0.08 0.20 0.28
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1)March 17, 2006, to September 30, 2006



RESOLVE BUSINESS OUTSOURCING INCOME FUND
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

Three months Nine months
ended ended
September 30 September 30
2007 2006 2007 2006(1)
---------------------------------------------------------------------------
(in thousands of dollars, unaudited) $ $ $ $

OPERATING ACTIVITIES
Net earnings from continuing
operations 2,801 2,166 3,723 6,110
Items not affecting cash:
Depreciation 2,122 1,803 5,979 3,915
Amortization 5,921 5,932 17,699 12,806
Amortized financing costs 70 - 211 -
Future income taxes (1,850) (3,437) (10,094) (10,216)
Non-controlling interest 908 513 1,093 2,164
Mark-to-market on derivative
instruments (1,032) 263 (3,479) (1,215)
Changes in operating assets and
liabilities:
Accounts receivable (1,832) (4,232) (775) (5,640)
Inventories 68 (111) (229) (81)
Prepaid expenses and other assets 521 560 1,277 2,047
Accounts payable and accrued
liabilities 2,787 8,106 698 4,544
Deferred revenues 4,351 5,485 13,978 13,112
---------------------------------------------------------------------------
Cash provided by operating
activities 14,835 17,048 30,081 27,546
---------------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisitions of businesses,
net of cash acquired (note 9) - - (4,801)(191,871)
Transaction expenses funded
by sellers - (193) - (4,897)
Working capital adjustment
to purchase price - 1,600 - 1,600
Addition to deferred charges (161) - (2,211) -
Purchase of capital assets (5,999) (947) (11,650) (2,179)
---------------------------------------------------------------------------
Cash (used in) provided by
investing activities (6,160) 460 (18,662)(197,347)
---------------------------------------------------------------------------

FINANCING ACTIVITIES
Initial public offering of
Fund units, net of expenses - - - 207,917
Repayment of acquired
Resolve and CSRS debt - - - (93,869)
Increase in bank indebtedness - - 13,000 -
Increase in long-term debt - - - 86,000
Increase (decrease) in
capital lease obligation (21) - 96 -
Distributions paid to
unitholders (5,956) (5,740) (17,621) (10,495)
Distributions paid to
non-controlling interest (2,186) (2,403) (6,807) (4,393)
Payment of bank financing fees - - - (1,125)
---------------------------------------------------------------------------
Cash (used in) provided
by financing activities (8,163) (8,143) (11,332) 184,035
---------------------------------------------------------------------------

Cash (used in) provided by
discontinued operations - (199) 1,377 704
---------------------------------------------------------------------------

Effect of exchange rate changes (1,197) 382 (2,034) (26)
---------------------------------------------------------------------------

Increase (decrease) in cash
and cash equivalents during
the period (685) 9,548 (570) 14,912
Cash and cash equivalents,
beginning of period 8,911 5,364 8,796 -
---------------------------------------------------------------------------
Cash and cash equivalents,
end of period 8,226 14,912 8,226 14,912
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Interest paid 1,784 1,354 4,635 4,359

(1)March 17, 2006, to September 30, 2006



RESOLVE BUSINESS OUTSOURCING INCOME FUND
DISTRIBUTABLE CASH

Three months ended September 30 Nine months ended September 30

2007 2006 2007 2006(1)
---------------------------------------------------------------------------
Per Per Per
$ Unit $ Unit $ Unit $

Cash provided by
(applied to)
operating
activities 14,835 0.46 17,048 0.52 30,081 0.92 27,546

Capital
adjustment -
maintenance
capital
expenditures (860) (0.03) (947) (0.03)(2,717) (0.09)(2,179)
---------------------------------------------------------------------------
Cash available
for
distribution
before capital
adjustment for
growth capital
expenditures,
non-recurring
adjustments
and other
adjustments
(A) 13,975 0.43 16,101 0.49 27,364 0.84 25,367
Capital
adjustment -
growth
capital
expenditures (5,139) (0.15) - - (8,933) (0.27) -
Cash available
for
distribution
before
non-recurring
and other
adjustments 8,836 0.28 16,101 0.49 18,431 0.57 25,367
Non-recurring
adjustments - - - - - - -
Other
adjustments - - - - - - -
---------------------------------------------------------------------------
Cash available
for
distribution 8,836 0.28 16,101 0.49 18,431 0.57 25,367
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Distributions
declared per
unit 0.25 0.25 0.75
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Distributions
declared as
a percentage
of (A)

(1)March 17, 2006, to September 30, 2006



Nine months ended September 30
--------------------------------------------------------------------------
Trailing 12-month
period ended
September 30,
2006(1) 2007
---------------------------------------------------------------------------
Per Per
$ Unit $ Unit

Cash provided by
(applied to) operating
activities 27,546 0.85 34,858 1.07

Capital adjustment -
maintenance capital
expenditures (2,179) (0.07) (5,348) (0.16)
---------------------------------------------------------------------------
Cash available for
distribution before
capital adjustment for
growth capital
expenditures, non-
recurring adjustments
and other adjustments (A) 25,367 0.78 29,510 0.91
Capital adjustment -
growth capital
expenditures - - (9,190) (0.28)
---------------------------------------------------------------------------
Cash available for
distribution before non-
recurring and other
adjustments 25,367 0.78 20,320 0.63
Non-recurring
adjustments - - - -
Other adjustments - - - -
---------------------------------------------------------------------------
Cash available for
distribution 25,367 0.78 20,143 0.63
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Distributions declared
per unit 0.54 1.00
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Distributions declared
as a percentage of (A) 110%
---------------------------------------------------------------------------
---------------------------------------------------------------------------

(1)March 17, 2006, to September 30, 2006


RESOLVE BUSINESS OUTSOURCING INCOME FUND CONDENSED MANAGEMENT'S DISCUSSION AND ANALYSIS

INTRODUCTION

The following is Management's Discussion and Analysis (MD&A) of Resolve Business Outsourcing Income Fund's (the "Fund") results of operations, changes in cash flow and distributable cash(1) for the three months and nine months ended September 30, 2007, and of its financial position as at September 30, 2007. The MD&A includes a comparison to the three-month period ended September 30, 2006 and the period March 17, 2006, to September 30, 2006, and should be read in conjunction with the audited consolidated financial statements and the MD&A for the period March 17, 2006, to December 31, 2006. The consolidated interim financial statements are prepared in accordance with Canadian generally accepted accounting principles (GAAP). All financial information provided in this MD&A is also in accordance with Canadian GAAP unless otherwise noted. All dollar amounts referred to are in Canadian dollars unless otherwise noted. All dollar amounts are in thousand of dollars, except per unit amounts.

(1) Distributable cash is a non-GAAP measure. See below for a definition.

NON-GAAP FINANCIAL MEASURES

Gross Revenues is not a recognized financial measure under Canadian GAAP. Under Canadian GAAP, the Fund recognizes Personal Property Security Act (PPSA) fee registration revenue, one of Resolve's sources of revenue, as revenue on a straight-line basis over the average contractual term of the registrations. As a result of the purchase accounting impact on deferred revenue, it is difficult to compare revenue period over period. Gross revenue presents revenue other than PPSA fee registration revenue on a GAAP basis and PPSA fee registration revenue on a billed basis.

Management uses gross revenues to assist in evaluating performance. Gross revenues assist investors in assessing the revenue generation of the business that may not be readily evident due to the write-down of deferred revenue as a result of purchase accounting at the time of the IPO on March 17, 2006. Comparability is further impacted by the timing of revenue recognition of PPSA fee registration revenue.

EBITDA or earnings before interest, taxes, depreciation and amortization is not a recognized financial measure under Canadian GAAP and does not have a standardized meaning prescribed by GAAP. The Fund's definition of EBITDA may not be comparable to similar measures presented by other funds. The Fund defines EBITDA as earnings or loss before income taxes plus interest expense, amortization, depreciation and unrealized loss on mark-to-market derivative instruments and less unrealized gain on mark-to-market derivative instruments. Management believes EBITDA is a reasonable operating measure as it looks at earnings prior to certain significant non-cash expenses.

Adjusted EBITDA is not a recognized financial measure under Canadian GAAP. EBITDA adjusted for the change in deferred revenue is referred to as adjusted EBITDA and is used by management to evaluate performance, to measure compliance with debt covenants and to make decisions relating to distributions to unitholders.

Distributable cash is not a recognized financial measure under Canadian 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 similar distributable cash and distributable cash per unit reported by such entities. On July 6, 2007, the Canadian Securities Administrator replaced National Policy 41-201, Income Trusts and Other Indirect Offerings. The new policy is intended to promote transparent disclosure for investors with respect to presentation of distributable cash. As a result, certain disclosures previously presented have been revised to conform to the new guidance. Management believes that distributable cash and distributable cash per unit are useful supplemental measures that may assist investors in assessing financial performance and cash generated by the Fund that is available to unitholders for distribution.

DESCRIPTION OF BUSINESS

Resolve Business Outsourcing Income Fund was established on February 12, 2006. On March 17, 2006, the Fund completed an initial public offering (IPO) of units and through Resolve Business Outsourcing Limited Partnership (the "Partnership") acquired two businesses, Resolve Corporation and CSRS Holdings, Ltd. for cash and a 29.5% interest in the Partnership. The interests of the prior shareholders of Resolve Corporation and CSRS Holdings, Ltd. in the Partnership may be exchanged for units of the Fund pursuant to the terms of the Exchange Agreement.

On May 25, 2007, Resolve acquired Edulinx Canada Corporation ("Edulinx"), a competitor in the delivery of student loan services in Canada.

On July 5, 2007, Resolve Corporation, CSRS Holdings, Ltd. and Edulinx Canada Corporation were amalgamated under the laws of the Province of Ontario to form Resolve Corporation. The amalgamated business operations are collectively referred to as "Resolve" or the "Business".

Resolve operates in one business segment - business process outsourcing (BPO). The Business provides customized BPO solutions primarily to large businesses and governments in North America. The solutions provided by Resolve increasingly include a combination of the Business's core competencies in financial transaction-related processing, customer relationship management (or "contact centre") and supply chain management in an integrated service offering.

OVERALL PERFORMANCE OF THE BUSINESS

Management is very pleased with the results generated in the quarter compared to the same quarter last year and to Q2 2007. The current quarter reflects the strongest revenue and adjusted EBITDA generated by Resolve since going public. The positive quarterly results are after a number of nonrecurring charges incurred during the quarter that better position the business for the future.

As a result of changes discussed below, the Fund expects Q4 2007 revenue, adjusted EBITDA and the resulting cash provided by operating activities to be stronger than the same quarter last year.

Resolve had a strong revenue quarter reporting a $26,788 or 39% increase in revenue for the three-month period compared to the same period last year. Assuming a foreign exchange rate consistent with Q4 2006, revenue for the quarter would have been $1,402 higher. Revenue for the quarter also increased 19% over Q2 2007.

Revenue growth in the quarter compared to the same period last year was a combination of organic growth (11%) and growth from acquisition (28%). The major components of the revenue growth were student loans, credit card and search and registration. Revenue growth was also achieved in the contact centre service area. Supply chain management revenue was flat as textbook adoption year revenue was not as strong as originally expected. During the quarter, however, the supply chain operations were working on a significant implementation for a new client that will benefit revenue and adjusted EBITDA in the fourth quarter.

Increasingly, Resolve's revenue growth is being achieved by integrated service offerings under longer term contracts that will provide greater revenue predictability. The expanded student loan customer portfolio and the credit card solution both include transaction-related processing, contact centre services and to a lesser extent supply chain services.

Revenue growth in the quarter compared to Q2 2007 was approximately 3% from organic growth and 16% from acquisition. In the prior year, revenue in Q3 2006 declined by 1% from the prior quarter.

The Fund generated $15,038 of adjusted EBITDA for the quarter compared to $14,513 in the same quarter last year and $11,809 in Q2 2007. The strong adjusted EBITDA for the quarter was the best quarter achieved since the IPO and these results are after a number of non-recurring costs incurred during the quarter.

Integration of Edulinx

On July 5, 2007, Edulinx was amalgamated with Resolve Corporation and CSRS Holdings, Inc. to form Resolve Corporation. The amalgamation was undertaken to simplify the corporate structure and to obtain a more tax efficient structure, which was followed by a reorganization of all the student loan operations under one team. During Q4 the Canada Student Loans Program (CSLP) student loans previously administered by Resolve will be integrated into the CSLP student loan processing platform of the former Edulinx. This will facilitate a single conversion to a new platform in 2008 once the new combined CSLP contract commences. As a result of the initial platform consolidation, personnel synergies will be achieved. The affected employees are being redeployed to other opportunities within the organization.

Management Changes

Additional management changes were made during the quarter as Resolve integrates the underlying businesses that were brought together at the IPO and positions the organization for operational excellence and to meet the changed requirements and expectations of the marketplace. During the quarter, approximately $1,500 in severance and recruiting costs were recorded. Although these costs are significant, the changes are already benefiting Resolve and position the Business for the future.

FINANCIAL POSITION, RESULTS OF OPERATIONS, CASH PROVIDED BY OPERATIONS, AND DISTRIBUTABLE CASH

The following is an overview of Resolve's financial position as at September 30, 2007, compared to December 31, 2006. The results of operations, cash provided by operations and distributable cash for the three and nine-month periods ended September 30, 2007, have been compared to the same periods ended September 30, 2006. Further details, comments and analysis are included under "Results of Operations", "Liquidity" and "Capital Resources".



Financial Position

Change
Increase/
September 30, December 31, (Decrease)
2007 2006
---------------------------------------------------------------------------
$ $ $

Working capital, excluding
deferred revenue 23,162 29,570 (6,408)
Intangible assets and deferred
charges 207,988 224,736 (16,748)
Deferred revenue, current and
long-term 40,186 25,543 14,643
Future income tax liability, net 49,169 65,845 (16,676)
Unitholders' equity 185,934 200,917 (14,983)


Working capital, excluding the current portion of deferred revenue, decreased by $6,408. Working capital, including cash, of approximately $10,730 was acquired as part of the Edulinx acquisition. The acquisition was financed with $13,000 of bank indebtedness that is outstanding at September 30, 2007. The major components of the decrease are an increase in accounts payable and accrued charges and the net working capital impact related to the acquisition and financing of Edulinx. This was partially offset by an increase in accounts receivable related to revenue growth.

Intangible assets and deferred charges decreased by $16,748. Amortization of intangible assets of $17,699 for the nine-month period was offset by an increase in deferred start-up costs related to the PC Financial contract and to the new CSLP contract of approximately $1,852. In addition, $903 of deferred financing charges classified with intangibles assets and deferred charges at December 31, 2006, were reclassified as of January 1, 2007, to long-term debt.

Deferred revenue increased by $14,643 from December 31, 2006, from $25,543 to $40,186. The increase in deferred revenue is a result of increased PPSA registrations and the replacement of PPSA registrations on which the deferred revenue had been written down under purchase accounting at the IPO with new registrations. Deferred revenue is expected to increase to approximately $44,000 by December 31, 2007.

The net future income tax liability decreased by $16,676 from year-end. The decrease is primarily the result of loss carryforwards recognized in the underlying businesses that can be utilized in the future to reduce income taxes payable.

Unitholders' equity has decreased by $14,983 since year-end. The components of the change are an increase of $3,789 resulting from the conversion of Class B LP units to Fund Units, an increase of $5,156 from net earnings for the nine-month period, distributions to Fund unitholders of $17,920 and an increase in accumulated other comprehensive loss of $6,008. The financial statements of Resolve's US operations are translated into Canadian dollars at the period end rate. As a result of the weaker US dollar, a negative currency translation adjustment arose that is reflected as a loss in accumulated other comprehensive income (loss).



Results of Operations

Three months ended September 30 Nine months ended September 30
2007 2006 Change 2007 2006(2) Change
---------------------------------------------------------------------------
$ $ $ $ $ $
Gross
revenues(1) 99,897 74,092 25,805 253,239 162,280 90,959
Revenues 95,220 68,432 26,788 239,303 149,439 89,864
Direct costs (68,554) (47,274) (21,280) (173,865) (104,292) (69,573)
Gross profit 26,666 21,158 5,508 65,438 45,147 20,291
Operating
expenses (15,979) (12,130) (3,849) (45,603) (28,078) (17,525)
Operating
profit or
EBITDA(1) 10,687 9,028 1,659 19,835 17,069 2,766
Adjusted
EBITDA(1) 15,038 14,513 525 33,813 30,182 3,631
Earnings
(loss)
before
income
taxes and
non-
controlling
interest 1,836 (419) 2,255 (5,096) (1,264) (3,832)
Net earnings
for the
period 2,874 2,250 624 5,156 6,817 (1,661)

(2) March 17, 2006, to September 30, 2006

(1) Gross revenues, EBITDA, and Adjusted EBITDA are non-GAAP measures.
See page 13 for a definition.


Revenues for the three-month period ended September 30, 2007, increased $26,788 or 39% over the same quarter last year. The Edulinx acquisition represented 28% of the revenue increase, and the balance of 11% was organic growth. The Q3 2007 revenues increased 19% over revenues for Q2 2007. Revenue for the nine-month period is not directly comparable to the prior year due to the IPO on March 17, 2006.

Revenues as reported in the consolidated interim financial statements are impacted by purchase accounting related to the deferred revenue for PPSA registration services and by the amortization of PPSA fee registration revenue. Therefore, gross revenue information has been provided to assist users in understanding revenue generation by quarter. The explanations of the changes in revenues for the quarter and for the nine-month period compared to the prior year are the same as for gross revenues.

All new projects have associated implementation costs prior to revenue generation. Resolve has deferred pre-operating implementation costs on the new CSLP contract and on the President's Choice Financial MasterCard contract in accordance with its accounting policies for significant project implementations. All pre-operating costs on other new revenue have been expensed as incurred. The direct costs of new revenue are typically higher during the period immediately post implementation until processes can be refined and efficiencies realized.

Direct costs as a percentage of revenues and gross revenues increased in the quarter compared to the same quarter last year. Costs related to new implementations, impending implementations and lower efficiency at the commencement of new contracts negatively impacted direct costs for the quarter. On a year-to-date basis the direct costs as a percentage of revenues and gross revenues increased for the same reasons.

Gross profit as a percentage of revenues was 28% for the quarter compared to 31% in the same quarter last year. Gross profit was 27% for the nine-month period compared to 30% the prior year. Gross profit percentage is impacted by implementation costs, reduced initial operating margins on new contracts, and certain operating inefficiencies experienced in our contact centre operations, which are in the process of being remediated.

Operating expenses for the quarter increased $3,849 over the same period last year and by $396 over the prior quarter. The major components of the increase are severance and recruiting costs and the acquisition of Edulinx. Operating expenses for the nine-month period are not directly comparable to the prior year as noted previously.

Adjusted EBITDA for the three-month period was $15,038, an increase of $525 from the same period last year. As noted previously, new project implementation costs and other one-time costs related to changes in the senior management negatively impacted profitability in Q3. Adjusted EBITDA for the nine-month period in 2007 is not comparable to the prior year due to the truncated period in 2006 from the date of the IPO. On a trailing twelve-month basis, adjusted EBITDA to September 30, 2007, was $41,880. Operating profit or EBITDA calculated from the consolidated statement of earnings does not present the normalized EBITDA of the Business due to purchase accounting for deferred revenue acquired at the time of the IPO. As a result, adjusted EBITDA has been presented to normalize the impact of purchase accounting.

Earnings before income taxes and non-controlling interest were $1,836 for the quarter compared to a loss of $419 in the same quarter last year. Depreciation increased related to asset acquisitions over the period. Amortization is relatively constant quarter to quarter. Interest expense increased by $391as a result of a higher effective rate and the additional $13,000 drawn down in May to fund the Edulinx acquisition. The unrealized gain recorded on forward foreign exchange contracts was $1,295 greater in the quarter compared to the prior year.

Net earnings for the quarter increased $624 over the same quarter last year. Net earnings for the nine-month period are not directly comparable to the prior year as noted previously. Net earnings for the nine-month period includes a gain of $1,332 recognized on the acquisition of Edulinx.

Cash Provided By Operations



Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------------
Trailing
12-month
period ended
September 30,
2007 2006 2007 2006 2007
---------------------------------------------------------------------------
Per Per Per Per Per
$ Unit $ Unit $ Unit $ Unit $ Unit
Net earnings
from
continuing
operations 2,801 0.09 2,166 0.07 3,723 0.11 6,110 0.19 1,539 0.05
Items not
affecting
cash 6,139 0.19 5,074 0.16 11,409 0.35 7,454 0.23 16,952 0.52
Change in
deferred
revenue 4,351 0.13 5,485 0.16 13,978 0.43 13,112 0.40 17,595 0.54
---------------------------------------------------------------------------
Cash
provided
before
changes in
other
operating
assets and
liabilities 13,291 0.41 12,725 0.39 29,110 0.89 26,676 0.82 36,086 1.11
Change in
operating
assets and
liabilities,
excluding
deferred
revenue 1,544 0.05 4,323 0.13 971 0.03 870 0.03 (1,228) (0.04)
---------------------------------------------------------------------------
Cash
provided
by
(applied to)
operating
activities 14,835 0.46 17,048 0.52 30,081 0.92 27,546 0.85 34,858 1.07
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Cash provided by operating activities is determined by adjusting net earnings from continuing operations for non-cash items that were charged to net earnings and for changes in operating assets and liabilities, which is also referred to as changes in working capital.

The change in working capital has historically been impacted by the timing of collection of accounts receivable. A 1% increase or decrease in the accounts receivable outstanding at September 30, 2007, would represent a $0.03 per unit impact on cash available for distribution for the quarter.

In addition, management has previously stated that one of its objectives is revenue growth. Growth requires working capital and in many instances investment in implementation costs and capital assets related to new customers.

Cash provided for the quarter before changes in operating assets and liabilities, other than deferred revenue, was $13,291 or $0.41 per unit compared to $12,725 or $0.39 per unit for the same quarter last year. Changes in working capital in the quarter were $0.05 per unit compared to $0.13 per unit in the same quarter last year. The decrease in working capital in Q3 last year was offset by increases in Q2 and Q4 2006.

Cash provided for the period ended September 30, 2007, is not directly comparable to the same period last year as the prior year included activities from the date of the IPO of March 17, 2006.

On a trailing twelve month basis, cash provided before changes in operating assets and liabilities, other than deferred, was $36,086 or $1.11 per unit. Cash provided by operating activities was $34,858 or $1.07 per unit. The investment in working capital represented $0.04 per unit.

Distributable Cash

Cash Available for Distribution

As noted previously, NP 41-201 has provided new guidance regarding the disclosure of distributable cash. The table below has been revised from the table presented in Q2 to eliminate the reconciliation of EBITDA to cash provided by operating activities and to present additional categories of adjustments to cash available for distribution - capital adjustments, non-recurring adjustments, and other adjustments. Previously only maintenance capital expenditures were deducted as a capital adjustment. The revised guidance recommends growth capital expenditures also be deducted as a capital adjustment. Non-recurring adjustments are a new adjustment and are intended to present unusual expenses or gains that are not expected to recur. Other adjustments would include items such as external restrictions on distributions and provides for discretionary adjustments subject to documentation of the underlying assumptions.



Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------------
2007 2006 2007 2006(i)
---------------------------------------------------------------------------
Per Per Per
$ Unit $ Unit $ Unit $
Cash provided by
(applied to)
operating
activities 14,835 0.46 17,048 0.52 30,081 0.92 27,546

Capital
adjustment
maintenance
capital
expenditures (860) (0.03) (947) (0.03) (2,717) (0.09) (2,179)
---------------------------------------------------------------------------
Cash available
for
distribution
before capital
adjustment for
growth capital
expenditures, non
recurring
adjustments and
other
adjustments (A) 13,975 0.43 16,101 0.49 27,364 0.84 25,367
Capital
adjustment
growth capital
expenditures (5,139) (0.15) - - (8,933) (0.27) -
---------------------------------------------------------------------------
Cash available
for
distribution
before non-
recurring and
other
adjustments 8,836 0.28 16,101 0.49 18,431 0.57 25,367
Non-recurring
adjustments - - - - - - -
Other adjustments - - - - - - -
---------------------------------------------------------------------------
Cash available
for distribution 8,836 0.28 16,101 0.49 18,431 0.57 25,367
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Distributions
declared
per unit 0.25 0.25 0.75
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Distributions
declared as a
percentage of (A)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(i)March 17, 2006, to September 30, 2006


Trailing 12-month
period ended
September 30,
2007
--------------------------------------------------------------------------
Per Per
Unit $ Unit
Cash provided by (applied to) operating
activities 0.85 34,858 1.07

Capital adjustment - maintenance capital
expenditures (0.07) (5,348) (0.16)
--------------------------------------------------------------------------
Cash available for distribution before capital
adjustment for growth capital expenditures,
non-recurring adjustments and other
adjustments 0.78 29,510 0.92
Capital adjustment - growth capital
expenditures - (9,190) (0.28)
--------------------------------------------------------------------------
Cash available for distribution before non-
recurring and other adjustments 0.78 20,320 0.63
Non-recurring adjustments - - -
Other adjustments - - -
--------------------------------------------------------------------------
Cash available for distribution 0.78 20,143 0.63
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Distributions declared per unit 0.54 1.00
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Distributions declared as a percentage of (A) 110%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(i)March 17, 2006, to September 30, 2006


Capital adjustments

Annual capital expenditures required to maintain productive capacity are estimated at $7,000. Resolve expects maintenance capital expenditures for the 2007 fiscal year will be less than $7,000. The reduction in 2007 results from a focus on growth capital expenditures related to new customer implementations, the construction of a new customer contact centre in Ottawa, a decision to defer certain maintenance expenditures in order to obtain input from new senior management and as a result of expenditures that had been made by Edulinx prior to acquisition. Management is currently assessing maintenance capital requirements for the 2008 fiscal year but does not currently anticipate a need to increase expenditures in 2008 above $7,000 to maintain productive capacity.

Maintenance capital expenditures for the quarter were similar to the same quarter last year. On a trailing twelve month basis maintenance capital expenditures were $5,348 or $0.16 per unit. As noted earlier, normalized annual maintenance capital expenditures are estimated at $7,000. Growth capital expenditures for the quarter were $5,139 or $0.16 per unit compared to $0 in the same quarter last year. Growth capital expenditures during the quarter included development of two new facilities in Toronto and Calgary related to a new significant supply chain customer, expenditures related to the new customer contact centre in Ottawa and expenditures related to the new CSLP contract. Growth capital expenditures for the nine-month period included costs related to the PC Financial implementation in addition to the projects noted above.

Non-recurring adjustments

No material non-recurring cash flow expenditures or gains are included in cash provided by operating activities. Subsequent to the quarter end, Resolve received an incentive payment under one of its existing CSLP contracts in the amount of $11,984. The incentive amount is significantly greater than any amount received in the past under the contract and is based on performance measures contained in the contract. There is no certainty that a similar amount will be received in the future. In connection with the acquisition of Edulinx, Resolve agreed to share incentive amounts received under this contract with the vendor, net of income taxes calculated at a defined rate. An amount of approximately $6,846, net of income taxes was paid to the vendor subsequent to the period end.

Other adjustments

As noted above under Cash Provided by Operations, working capital has fluctuated between quarters due to timing of collection of accounts receivable, seasonality of certain accounts and growth in working capital related to new business. Resolve believes cash provided by operating activities on a trailing twelve-month basis which reflects the impact of changes in working capital.

Distributions declared

Distributions were declared of $0.25 per unit for the quarter, $0.75 per unit for the nine months and $1.00 per unit on a trailing twelve month basis. On a trailing twelve month basis, this equates to 110% of cash available for distribution before capital adjustment for growth capital expenditures, non-recurring adjustments, and other adjustments. This calculation is comparable to the calculation presented previously. The trailing twelve month cash available for distribution includes a weak Q4 2006.

Resolve expects Q4 2007 to be significantly stronger than Q4 2006.

Distributions

National Policy 41-201 recommended the inclusion of additional information not previously provided that compares cash provided by operating activities and net earnings from continuing operations to distributions paid or declared.




Three months Nine months
ended ended
September 30, September 30, March 17, 2006 to
2007 2007 December 31, 2006
---------------------------------------------------------------------------
$ Per $ Per $ Per
Unit Unit Unit
Net earnings
from continuing
operations (A) 2,802 0.09 3,724 0.11 3,927 0.12
---------------------------------------------------------------------------
Cash provided
by operating
activities (B) 14,835 0.46 30,081 0.92 32,324 0.99
---------------------------------------------------------------------------
Actual cash
distributions
paid or payable
Unitholders (5,956) (0.17) (17,621) (0.54) (18,272) (0.56)
Non-controlling
interests (2,186) (0.08) (6,807) (0.21) (7,563) (0.23)
---------------------------------------------------------------------------
Total
distributions (C) (8,142) (0.25) (24,428) (0.75) (25,835) (0.79)
---------------------------------------------------------------------------
Shortfall of
net earnings
from continuing
operations to
total
distributions (A) - (C) (5,340) (0.16) (20,704) (0.64) (21,908) (0.67)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Excess of cash
provided by
operating
activities to
total
distributions (B) - (C) 6,693 0.21 5,653 0.17 6,489 0.20
---------------------------------------------------------------------------
---------------------------------------------------------------------------


An excess of cash provided by operating activities compared to total distributions is provided for each of the periods presented in the table. The Fund's current stated objective is to distribute $1.00 per unit on an annual basis. Based on units outstanding at September 30, 2007, $32,584 is expected to be distributed for the 2007 fiscal year. Cash provided by operating activities for the nine months ended and on a trailing twelve months ended September 30, 2007, was $30,081, and $34,858. Therefore, Resolve does not expect a shortfall for the 2007 fiscal year.

A shortfall of net earnings from continuing operations compared to total distributions occurs in each of the periods presented. This is not a meaningful measure as Resolve has significant recurring non-cash items and purchase accounting adjustments that reduce net earnings. These include depreciation, amortization, non-controlling interest in income, mark-to-market on derivatives, future income tax recovery and adjustments to deferred revenue. Taking into consideration the net non-cash expense, and the impact of purchase accounting on revenue recognition, no shortfall would exist. A shortfall is expected to continue until such time as amortization related to intangible assets acquired at the time of the IPO is substantially amortized and the impact of purchase accounting is eliminated as pre-IPO PPSA registrations are discharged and replaced by new post IPO PPSA registrations.



SUMMARY OF QUARTERLY RESULTS

Consolidated Statements of Earnings

Q1 Q2 Q3 Q4
2006(i) 2006 2006 2006
---------------------------------------------------------------------------
$ $ $ $

Gross revenues 12,762 75,426 74,092 69,183

Revenues 11,860 69,147 68,432 65,315
Direct costs 7,636 49,381 47,274 46,760
---------------------------------------------------------------------------
Gross profit 4,224 19,766 21,158 18,555
Operating expenses 2,244 13,704 12,130 14,105
---------------------------------------------------------------------------
Operating profit 1,980 6,062 9,028 4,450
Depreciation and amortization 1,252 7,733 7,735 7,722
Interest expense 217 1,162 1,449 1,226
---------------------------------------------------------------------------
Earnings (loss) before the following: 511 (2,833) (156) (4,498)
Mark-to-market on derivative instruments 1,006 (2,484) 263 1,890
---------------------------------------------------------------------------
Earnings (loss) before income taxes,
non-controlling interest, discontinued
operations and extra ordinary item (495) (349) (419) (6,388)
Recovery of income taxes (401) (6,039) (3,098) (3,386)
---------------------------------------------------------------------------
Earnings (loss) before non-controlling
interest, discontinued operations and
extraordinary item (94) 5,690 2,679 (3,002)
Non-controlling interest (29) 1,680 513 (818)
---------------------------------------------------------------------------
Earnings (loss) before discontinued
operations and extraordinary item (65) 4,010 2,166 (2,184)
Earnings (loss) from discontinued
operations, net of income taxes and
non-controlling interest (54) 677 84 -
---------------------------------------------------------------------------
Earnings before extraordinary item (119) 4,687 2,250 (2,184)
---------------------------------------------------------------------------
Gain on purchase of Edulinx, net of
income taxes and non-controlling
interest - - - -
---------------------------------------------------------------------------
Net earnings (loss) for the period (119) 4,687 2,250 (2,184)
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Earnings (loss) per unit from continuing
operations
Basic 0.00 0.17 0.10 (0.10)
Diluted 0.00 0.17 0.08 (0.09)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Net earnings (loss) per unit
Basic 0.00 0.20 0.10 (0.10)
Diluted 0.00 0.20 0.08 (0.09)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

(i) 15-day period (March 17, 2006, to March 31, 2006)


Trailing
12-
month
period
ended
Q1 Q2 Q3 September
2007 2007 2007 30, 2007
---------------------------------------------------------------------------
$ $ $ $

Gross revenues 67,281 86,060 99,897 322,421

Revenues 63,799 80,284 95,220 304,618
Direct costs 46,251 59,060 68,554 220,625
---------------------------------------------------------------------------
Gross profit 17,548 21,224 26,666 83,993
Operating expenses 14,041 15,583 15,979 59,708
---------------------------------------------------------------------------
Operating profit 3,507 5,641 10,687 24,285
Depreciation and amortization 7,697 7,936 8,043 31,398
Interest expense 1,313 1,578 1,840 5,957
---------------------------------------------------------------------------
Earnings (loss) before the following: (5,503) (3,873) 804 (13,070)
Mark-to-market on derivative
instruments (364) (2,082) (1,032) (1,588)
---------------------------------------------------------------------------
Earnings (loss) before income taxes,
non-controlling interest,
discontinued operations and extra
ordinary item (5,139) (1,791) 1,836 (11,482)
Recovery of income taxes (4,771) (3,225) (1,873) (13,255)
---------------------------------------------------------------------------
Earnings (loss) before non-controlling
interest, discontinued operations and
extraordinary item (368) 1,434 3,709 1,773
Non-controlling interest (214) 358 908 234
---------------------------------------------------------------------------
Earnings (loss) before discontinued
operations and extraordinary item (154) 1,076 2,801 1,539
Earnings (loss) from discontinued
operations, net of income taxes and
non-controlling interest - 102 - 102
---------------------------------------------------------------------------
Earnings before extraordinary item (154) 1,178 2,801 1,641
Gain on purchase of Edulinx, net of
income taxes and non-controlling
interest - 1,259 73 1,332
---------------------------------------------------------------------------
Net earnings (loss) for the period (154) 2,437 2,874 2,973
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Earnings (loss) per unit from continuing
operations
Basic (0.01) 0.10 0.12 0.11
Diluted (0.01) 0.10 0.11 0.11
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Net earnings (loss) per unit
Basic (0.01) 0.11 0.12 0.12
Diluted (0.01) 0.10 0.11 0.12
---------------------------------------------------------------------------
---------------------------------------------------------------------------

(i) 15-day period (March 17, 2006, to M



Adjusted EBITDA

The following is a quarterly reconciliation of operating profit on EBITDA
to adjusted EBITDA.

Trailing
12
month
period
ended
Q1 Q2 Q3 Q1 Q2 Q3 Q4 September
2007 2007 2007 2006(i) 2006 2006 2006 30, 2007
---------------------------------------------------------------------------
$ $ $ $ $ $ $ $

Operating profit
or EBITDA 3,507 5,641 10,687 1,980 6,062 9,028 4,450 24,285
Changes in
deferred
revenue 3,459 6,168 4,351 725 6,902 5,485 3,617 17,595
---------------------------------------------------------------------------
Adjusted EBITDA 6,966 11,809 15,038 2,705 12,964 14,513 8,067 41,880
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Adjusted EBITDA
per unit 0.21 0.36 0.46 0.08 0.40 0.45 0.25 1.28
---------------------------------------------------------------------------
---------------------------------------------------------------------------


LIQUIDITY

The Fund generated $30,081 in cash from operations for the nine-month period ended September 30, 2007. In addition, $1,377 of cash was generated from the final proceeds of disposition of a discontinued operation. These sources of cash flow were used to fund distributions during the period of $24,428, maintenance capital expenditures of $2,717 and implementation costs for the PC
Financial and CSLP contracts of $1,853.

The Fund drew down $13,000 on its bank facility during the second quarter to acquire Edulinx. Edulinx had $8,199 in cash on hand at closing and therefore the net cash impact of the acquisition was $4,801.

For the nine-month period ended September 30, 2007, cash and cash equivalents decreased by $570 to $8,226.

The Fund has generated sufficient cash flow, substantially through operations, to fund its distribution to unitholders and its maintenance capital expenditures. Resolve is not aware of any matters that would be likely to impact its ability to fund distributions and maintenance capital expenditures from operations. Growth, including the acquisition of Edulinx and growth capital expenditures, has been funded to date from both operating cash flows and existing bank borrowing facilities. The Fund is reviewing its current bank facilities in order to accommodate future growth financing requirements.

CONTRACTUAL OBLIGATIONS

In connection with the acquisition of Edulinx, the Fund committed to payments of US$3,000 for certain software licenses, and this discounted liability has been recorded at the date of acquisition. In addition, the Edulinx annual lease commitments for equipment and facilities acquired by the Fund were approximately $3,650. Other than those resulting from the acquisition of Edulinx, there have been no material changes in the contractual obligations presented by the Fund as at December 31, 2006, that are outside the ordinary course of business.

At September 30, 2007, the Fund had commitments totalling $178 to acquire capital assets.

FINANCIAL INSTRUMENTS AND OTHER 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. Forward foreign exchange contracts are used primarily to fix the value of estimated US-dollar-denominated revenue generated by operations located in Canada. As at September 30, 2007, the Fund had outstanding contracts to purchase $22,500 ($4,500 - Q4 2007; $14,000 - 2008; $4,000 - 2009) over a period from October 2007 to April 2009, at an average rate of 1.1350. An unrealized gain of $2,804 on these contracts has been recorded in the consolidated statement of earnings. The Fund entered into an interest rate swap to fix the interest rate on $65,000 of its variable-rate term debt at 6.49% . The interest rate swap is considered highly effective. At September 30, 2007, the fair value of the interest rate swap agreement is an unrealized gain of $134.

CAPITAL RESOURCES

The Fund has cash on hand at September 30, 2007, of $8,226. The Partnership has an available credit facility of $25,000 of which $13,000 was drawn down in the second quarter to acquire Edulinx and the balance remains outstanding at September 30, 2007. Letters of credit outstanding at September 30, 2007, in the amount of $5,312 reduce availability under the credit facility. The Fund is reviewing its current bank facilities in order to accommodate future growth financing requirements.

The Partnership has a drawn term facility in the amount of $86,000 that matures on March 16, 2010. The term facility has a variable interest rate, but the Partnership has entered into an interest rate swap agreement that fixes the interest rate on $65,000 of the term debt.

The Fund has budgeted maintenance capital expenditures of $7,000 for the 2007 fiscal year. Maintenance capital expenditures for the nine-month period ended September 30, 2007, were $2,717. The Fund does not expect to incur $7,000 for maintenance capital expenditures for the reasons previously noted.

In addition, the Fund budgeted growth capital expenditures of $7,100 and other implementation costs of $2,400 related to the new contract announcements in December 2006. The Board approved additional growth capital expenditures of approximately $2,800 related to opening of a new contact centre facility for a total of $9,900. For the nine-month period ended September 30, 2007, growth capital expenditures and other implementation costs of $8,933 and $2,211 respectively, were incurred.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING

The Fund's disclosure controls and procedures have been designed to provide reasonable assurance that all relevant information is identified to its Disclosure Committee to ensure appropriate and timely decisions are made regarding public disclosure.

Internal controls over financial reporting have been designed to provide reasonable assurance regarding the reliability of the Fund's financial reporting and its preparation of consolidated financial statements for external purposes in accordance with Canadian generally accepted accounting principles.

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements, in conformity with Canadian generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. These estimates are based on management's assessment of available information. Actual results could differ from these estimates. Management has identified service fee revenue, goodwill and intangible asset valuation, amortization of intangible assets, accounts receivable allowances and accounting for income taxes as critical accounting estimates.

CHANGES IN ACCOUNTING POLICY

The Fund reviews all revisions to the Canadian Institute of Chartered Accountants Handbook when issued. The Fund adopted three new standards that became effective on January 1, 2007: Financial Instruments - Recognition and Measurement, Hedges and Comprehensive Income.

RECENT ACCOUNTING DEVELOPMENTS

There are no recent accounting developments that are expected to have a material impact on the Fund.

RELATED-PARTY TRANSACTIONS

There are no changes to the nature or description of the related-party transactions described in the annual MD&A. For the three- and nine-month periods ended September 30, 2007, rent paid on the Burnaby property was $126 and $408, search and registration services purchased were as $156 and $457 and search and registration revenue was $12 and $41. Rent paid for the periods on three Ontario properties was $164 and $492.

RISKS

The Fund is subject to a number of business and Fund structure risks that are summarized in the Fund's MD&A for the period ended December 31, 2006.

On June 22, 2007, the Canadian Senate approved Bill 52, which includes the trust tax rules that will subject the Fund to taxation as of January 1, 2011. The future tax assets and liabilities that are reflected in the Fund's financial statements represent temporary differences existing on the date the respective asset or liability was acquired, adjusted for changes in subsequent periods. The enactment of this legislation has not required any additional future tax assets or liabilities to be recognized.

The Fund is affected by changes in foreign exchange rates on the revenue generated in US dollars by its Canadian operations, on the translation of the financial statements of its US-based operations into Canadian dollars and on net monetary assets held by the Fund denominated in US dollars. The Fund entered into foreign currency contracts to assist managing the impact of fluctuations in foreign exchange.

The Canadian operations generated US dollar revenue of US$16,042 for the period. The impact of conversion of the revenue into Canadian dollars at the average rate for the nine-month period compared to the average rate last year reduced EBITDA by $313. Revenue generated by the US-based operations for the nine-month period was US$32,964. The impact of translation of revenue and EBITDA was a reduction of $644 and $61 respectively. Net monetary assets held by the Canadian operations in US dollars or settled into Canadian dollars during the period negatively impacted EBITDA by $419. Realized gains on foreign currency contracts settled during the period positively impacted EBITDA by $374. Mark-to-market on derivative instruments as presented in the statement of earnings reflects unrealized gains of $2,804 on the $22,500 of foreign currency contracts outstanding. These unrealized gains are not included in EBITDA.

There have been no other material changes to the risks as outlined in that document.

OUTLOOK

The Business has significantly evolved since the IPO. New customer implementations, such as the PC Financial MasterCard solution and a significant new supply chain customer combined with the new student loans customers obtained with the acquisition of Edulinx will provide greater revenue predictability going forward. The impact is already evident in the Q3 results and will continue to positively benefit Resolve through the balance of the year and beyond. A number of one-time charges were incurred related to changes in the management team. Resolve believes that the changes to the team and the experience and knowledge that have been added will continue to assist Resolve in its evolution as a significant business process outsourcer. Resolve expects greater revenue predictability as a result of the addition of longer term contracts for a credit card solution, for student loans and for a new supply chain contract that is commencing in Q4.

Adjusted EBITDA is expected to benefit as efficiencies are realized on new implementations and onetime costs related to management changes are reduced or eliminated.

Resolve expects revenue, adjusted EBITDA and the resulting cash provided by operating activities to increase in Q4 compared to Q4 last year.

The Fund's mid-term objective continues to be to significantly grow revenue and earnings through a combination of organic growth and selective acquisitions.

Resolve believes it is well positioned for the future as a result of a strengthened management team and a focus on operational excellence.

CAUTION CONCERNING FORWARD-LOOKING INFORMATION

This MD&A may include certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). 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 MD&A. 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, the ability to maintain software licenses, changes in privacy laws, and risks inherent in bidding on government contracts. These risk factors are discussed in greater detail under ''Risks" on page 14 of Resolve's MD&A for the period ended December 31, 2006, which is available on SEDAR at www.sedar.com. 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

Details of the Fund's authorized and outstanding unit data are as follows:

The Fund may issue an unlimited number of ordinary trust units and an unlimited number of special voting units. Each ordinary trust unit is transferable and represents an equal undivided beneficial interest in any distribution from the Fund. Except for the right to vote, each special voting unit does not confer any other rights.

As at September 30, 2007, there were 23,504,659 ordinary trust units and 9,079,841 special voting units outstanding.

As at September 30, 2007, the 9,079,841 special voting unitholders also held 9,079,841 Class B LP units of the Partnership. The Class B LP units can be exchanged on a one-for-one basis, subject to the terms of the Exchange Agreement. For each Class B LP unit exchanged, one special voting unit is cancelled. Assuming full conversion of the Class B LP units of the Partnership, the Fund will have 32,584,500 ordinary trust units outstanding and no special voting units. There have been 50,000 Class B LP units converted and 50,000 new ordinary trust units issued between October 1, 2007, and the date of the MD&A.

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

The comments and analysis contained in the MD&A are as of October 30, 2007.



SUPPLEMENTAL FINANCIAL INFORMATION
Distribution History
Per Unit Per Unit
Month(1) 2007 2006
----------------------------------------------------------------------
$ $
January 0.0833 -
February 0.0833 -
March 0.0833 -
April 0.0833 0.1237(2)
May 0.0833 0.0833
June 0.0833 0.0833
July 0.0833 0.0833
August 0.0833 0.0833
September 0.0833 0.0833
October 0.0833
November 0.0833
December 0.0833
----------------------------------------------------------------------
0.7497 0.7901
----------------------------------------------------------------------
----------------------------------------------------------------------

(1) Monthly distributions are made to unitholders of record on the last
business day of each month.
(2) Distribution paid in April 2006 is in respect of the period March 17,
2006, to April 30, 2006.

Tax Allocation of Distributions

2006
--------------------------------------------------------
%
Foreign non-business income 7.6
Interest income 91.4
Return of capital 1.0
--------------------------------------------------------
Total distributions for the period 100.0
--------------------------------------------------------
--------------------------------------------------------



2007 Trading Prices and Volume

Month High Low Volume
---------------------------------------------------------------------------
$ $

January 8.89 8.25 2,376,421
February 9.43 8.60 1,853,685
March 9.14 8.30 1,636,725
April 8.94 8.40 1,222,408
May 9.48 8.71 1,060,612
June 9.39 8.70 553,871
July 9.25 8.61 650,780
August 8.75 7.60 549,026
September 8.48 7.90 578,235



2006 Trading Prices and Volume

Month High Low Volume
---------------------------------------------------------------------------
$ $

March (from March 17) 9.75 8.71 4,855,669
April 9.38 8.28 1,716,718
May 9.00 7.71 1,194,709
June 8.29 7.00 2,543,432
July 9.20 8.10 1,785,642
August 8.88 8.40 1,013,245
September 8.97 8.20 2,448,680
October 8.90 8.01 1,495,659
November 7.98 5.85 2,182,267
December 8.50 6.45 2,375,797


Contact Information

  • Resolve Corporation,
    Jamie Hyde
    Chief Financial Officer
    (416) 503-1800
    Website: www.resolve.com