DH CORPORATION ANNUAL INFORMATION FORM

Transcription

1 DH CORPORATION ANNUAL INFORMATION FORM March 15, 2016

2 TABLE OF CONTENTS EXPLANATORY NOTES... 3 NON-IFRS FINANCIAL MEASURES... 3 FORWARD-LOOKING STATEMENTS... 3 BACKGROUND AND STRUCTURE... 4 CREDIT AGREEMENT, NOTE PURCHASE AGREEMENTS AND PERFORMANCE GUARANTEES RISK FACTORS DESCRIPTION OF CAPITAL STRUCTURE DIVIDENDS AND DISTRIBUTIONS MARKET FOR SECURITIES SHAREHOLDER RIGHTS PLAN MANAGEMENT OF THE CORPORATION GOVERNANCE OF THE CORPORATION LEGAL PROCEEDINGS AND REGULATORY ACTIONS INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTION TRANSFER AGENT AND DEBENTURE TRUSTEE MATERIAL CONTRACTS INTERESTS OF EXPERTS ADDITIONAL INFORMATION APPENDIX A APPENDIX B CORPORATION ENTITIES AND INCORPORATION DETAILS AUDIT COMMITTEE MANDATE

3 3 EXPLANATORY NOTES Unless otherwise stated, the information in this Annual Information Form is stated as of December 31, 2015 and all references to DH Corporation s (the Corporation ) fiscal year are to the year ended December 31, Effective January 1, 2011, the income trust structure of Davis + Henderson Income Fund (the Fund ) was reorganized into a corporate structure by way of a plan of arrangement (the Arrangement ) among the Fund, D + H Holdings Trust (the Trust ) and the Corporation under Section 182 of the Business Corporations Act (Ontario) (the OBCA ). The Arrangement was approved by unitholders of the Fund at the annual and special meeting held on June 17, Pursuant to the Arrangement, the Fund was dissolved and common shares of a newly incorporated corporation, DH Corporation, were distributed to unitholders of the Fund on the basis of one common share of the Corporation (the Shares and each a Share ) for each Fund unit held. In this Annual Information Form, the Corporation and its subsidiaries are also collectively referred to as D+H or the Business. Currency All dollar amounts set forth in this Annual Information Form are in Canadian dollars, except where otherwise indicated. NON-IFRS FINANCIAL MEASURES The information presented in this Annual Information Form with respect to D+H includes an adjusted financial measure, Adjusted revenues, which is not a defined term under International Financial Reporting Standards ( IFRS ). Please refer to the Corporation s Management s Discussion and Analysis for the year ended December 31, 2015, available on Canadian Securities Administrators System for Electronic Document Analysis and Retrieval ( SEDAR ) at for a definition of Adjusted revenues and a reconciliation to the nearest IFRS measure. This non-ifrs measure should also be read in conjunction with the audited consolidated financial statements of the Corporation, including the notes thereon, for the fiscal years ended December 31, 2015 and December 31, 2014 which are available on SEDAR at Management believes this supplementary financial measure provides useful additional information related to the operating results of the Corporation. Management uses this measure to assess financial performance and as a supplement to the consolidated statements of income. Readers are cautioned that this measure should not be construed as an alternative to using net income as a measure of profitability or as an alternative to the IFRS consolidated statements of income or other IFRS statements. Further, this measure does not have any standardized meaning and the Corporation s method of calculating this measure may not be comparable to calculations used by other companies bearing the same description. FORWARD-LOOKING STATEMENTS This Annual Information Form contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ( forward-looking statements ). Statements concerning D+H s objectives, goals, strategies, priorities, intentions, plans, beliefs, expectations and estimates, and the

4 4 business, operations, financial performance and condition of D+H are forward-looking statements. The words believe, expect, anticipate, estimate, intend, may, will, would, could, should, continue, goal, objective, and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause D+H s actual results, performance or achievements, or developments in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Risks related to forward-looking statements include, among other things, those outlined under the heading Risk Factors. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The documents incorporated by reference herein also identify additional factors that could affect the operating results and performance of D+H. Forward-looking statements are based on management s current plans, estimates, projections, beliefs and opinions, and D+H does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities laws. D+H has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While D+H considers these factors and assumptions to be reasonable based on information available at that time, there can be no assurance that actual results will be consistent with these forward-looking statements. All of the forward-looking statements made in this Annual Information Form and the documents incorporated by reference herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, D+H. Name, Address and Formation BACKGROUND AND STRUCTURE The Corporation is the successor to the Fund, following completion of the conversion of the Fund from an income trust to a corporate structure by way of a court-approved plan of arrangement under the OBCA on January 1, The Corporation was incorporated under the OBCA on April 28, 2010 for the sole purpose of participating in the Arrangement and did not carry on any active business prior to the Arrangement, other than executing the arrangement agreement pursuant to which the Arrangement was implemented. The registered and head office of the Corporation is located at Suite 201, 939 Eglinton Avenue East, Toronto, Ontario M4G 4H7. The Shares are posted and listed for trading on the Toronto Stock Exchange (the TSX ) under the symbol DH.

5 5 History of the Corporation On December 20, 2001, Davis + Henderson Limited Partnership ( Davis + Henderson LP ) acquired the D+H business from MDC Corporation Inc. ( MDC ). On the same day, the Fund acquired an indirect 45.45% interest in Davis + Henderson LP from MDC, held through its wholly owned subsidiary, Davis + Henderson G.P. Inc. The Fund acquired the remaining 54.55% interest in Davis + Henderson LP from MDC in two separate transactions completed on January 10, 2002 and April 2, 2002, respectively. Following the acquisition of Davis + Henderson LP, the Fund completed several acquisitions, including the acquisition of Filogix Inc. (completed in 2006), Advanced Validation Systems Limited Partnership (completed in 2008), Cyence International Inc. (completed in 2008) and Resolve Business Outsourcing Income Fund (completed in 2009). In 2010, the Fund sold the operations of its Charlottetown-based contact centre business to Atelka Inc. Conversion On June 17, 2010, the unitholders of the Fund (the Unitholders ) approved by special resolution the Arrangement agreement between the Fund, the Corporation and the Trust and the plan of arrangement, providing for the reorganization of the income trust structure of the Fund into a publicly traded corporation named DH Corporation. The Arrangement was approved by the Ontario Superior Court of Justice on June 28, 2010 and became effective on January 1, Pursuant to the Arrangement, on January 1, 2011, the Fund and the Trust sold, assigned and transferred all of their assets to the Corporation in exchange for the Corporation assuming all of their liabilities and issuing Shares. Subsequently, the Fund and the Trust were wound up and the Shares issued as consideration were distributed to the Unitholders. In accordance with the terms of the Arrangement, on January 1, 2011, each Unitholder received, for each Unit held, one Share. The Shares commenced trading on the TSX on January 4, 2011 under the symbol DH. The Units were delisted from the TSX on December 31, As a result of the Arrangement, the Corporation is the successor reporting issuer of the Fund in all provinces and territories of Canada, the same jurisdictions as those of the Fund prior to the Arrangement. In addition, as a result of the Arrangement, the Fund ceased to be a reporting issuer. Internal Reorganization following the Conversion On December 31, 2010, Ontario Ltd., Cyence International Inc., Ontario Inc., Filogix Inc. and Resolve Corporation amalgamated pursuant to the terms of an amalgamation agreement to form D+H Ltd. (the Amalgamation ). Subsequent to the Amalgamation, the assets relating to the businesses carried on by each of Cyence International Inc. and Resolve Corporation immediately prior to the Amalgamation were transferred by D+H Ltd. to Filogix Limited Partnership. On January 1, 2011, the assets relating to the business carried on by Davis + Henderson LP were also transferred to Filogix Limited Partnership. Filogix Limited Partnership then changed its name to D+H Limited Partnership. Effective January 1, 2011, D+H Limited Partnership operates all prior business of Filogix Inc., Cyence International Inc. and its subsidiaries, Resolve Business Outsourcing Income Fund and its subsidiaries

6 6 (with the exception of Tricura Canada Inc.) and Davis + Henderson LP. The U.S. business of the Corporation was carried on by D+H USA Inc. (formerly known as Cyence International USA Inc.). ASSET Acquisition On January 18, 2011, following completion of the conversion and internal reorganization described above, the Corporation, through D+H Limited Partnership, acquired substantially all of the assets of ASSET Inc. ( ASSET ), Canada s largest provider of technology based asset recovery and insolvency management solutions to the Canadian financial services industry, for a purchase price of $76 million. The acquisition was financed by drawings under credit facilities. Mortgagebot Acquisition On April 12, 2011, the Corporation, through a wholly owned subsidiary, acquired effectively all of the outstanding shares of Mortgagebot Holdings ( Mortgagebot ) for a purchase price of US$231.8 million subject to working capital and other adjustments. Mortgagebot is the leading provider of Software-as-a- Service ( SaaS ) mortgage point-of-sale solutions in the United States and provides a wide range of consumer direct loan officer and branch and call centre origination solutions to banks and credit unions. Avista Acquisition On May 3, 2012, the Corporation announced that it had acquired Avista Solutions, Inc. ( Avista ), a leading provider of SaaS mortgage loan origination software to community banks and credit unions in the United States, for US$40 million. In order to consolidate D+H s U.S. operating businesses, effective December 31, 2013, Avista merged with Mortgagebot LLC, with Mortgagebot LLC being the surviving entity. Compushare Acquisition On April 24, 2012, the Corporation announced that it had completed a strategic minority investment in Compushare Inc. ( Compushare ), a technology management and cloud computing provider to financial institutions. As part of the strategic investment transaction, Compushare and the Corporation entered into an investor rights agreement dated April 24, 2012 which provided the Corporation with a call option to acquire the remaining issued and outstanding shares of Compushare not already owned by it (the Call Option ). On January 29, 2013, the Corporation exercised the Call Option and Compushare became an indirect wholly-owned subsidiary of the Corporation. Divestiture of Non-Strategic Businesses On May 10, 2013, the Corporation announced the closing of the previously announced divestiture of its business processing operations (the Non-Strategic Businesses ) to The Gores Group. The Non-Strategic Businesses were acquired by D+H as part of larger acquisitions in 2006 and 2009 and include businesses pertaining to credit card services, contact centre services, benefits and administration, coupon and rebate services and real estate services. The Non-Strategic Businesses provided services or support to customers that were outside of the Corporation s core focus of providing financial technology solutions for banks and credit unions. The transaction had a non-material impact on the Corporation s financial condition.

7 7 Acquisition of Harland Financial Solutions On July 23, 2013, the Corporation announced that it had entered into a stock purchase agreement pursuant to which two indirect wholly-owned subsidiaries of the Corporation agreed to purchase all of the outstanding shares of capital stock of Harland Financial Solutions, Inc., Harland Financial Solutions Worldwide Limited and Harland Israel Ltd. (collectively, HFS ), for a purchase price of approximately US$1.2 billion in cash. The acquisition of HFS was subsequently completed on August 16, HFS is a leading U.S.-based provider of strategic financial technology, including lending and compliance, core banking and channel management technology solutions. HFS served over 5,000 financial institutions and counted more than half of the top 100 financial institutions in the United States as its clients. It operated from offices throughout the U.S., as well as Dublin Ireland, Trivandrum, India and Tel Aviv, Israel. Internal Reorganization following HFS Acquisition Effective January 1, 2014, D+H USA Holdings Corporation, Mortgagebot LLC, Compushare and HFS Research and Development Inc. merged into Harland Financial Solutions, Inc. Harland Financial Solutions, Inc., in turn, changed its name to D+H USA Corporation. As a result of this merger, the U.S. business of D+H is now carried on by D+H USA Corporation. In connection with the reorganization, D+H USA Inc. changed its name to D+H USA Holdings Inc. Name Change Effective May 5, 2014, the Corporation changed its name to DH Corporation. The name change is part of the broader strategy noted below to unify the D+H brand and increase brand recognition across North America and globally. The new name also leverages the existing nameplate, which has considerable brand equity in Canada, while acknowledging the Corporation s ongoing evolution into a financial technology leader. While DH Corporation will be the Corporation s new official legal name, the Corporation continues to operate as D+H and the D+H brand remains. Acquisition of Fundtech On March 30, 2015, D+H announced that it had entered into a definitive agreement (the Fundtech Definitive Agreement ) to acquire Fundtech Investments II, Inc. and its subsidiaries ( Fundtech ), a leading provider of global payments solutions to banks worldwide. On April 30, 2015, D+H completed the acquisition of all of the outstanding shares of Fundtech Investments II, Inc. for a purchase price of US$1.29 billion, subject to post-closing adjustments. The purchase price of the acquisition and associated transactions costs were financed from (a) the net proceeds from the prospectus offering of (i) 18,975,000 subscription receipts, inclusive of an over-allotment option of 2,475,000 subscription receipts which was exercised in full, at a price of $37.95 per Subscription Receipt, and (ii) $230 million aggregate principal amount of 5.00% extendible convertible unsecured subordinated debentures, inclusive of an over-allotment option of $30 million principal amount of debentures which was exercised in full (see Description of Capital Structure and Market for Securities ); and (b) borrowings under new committed credit facilities. For more information on the new committed credit facilities, refer to Credit Agreement, Note Purchase Agreements and Performance Guarantees. The subscription receipts and debentures were sold pursuant to an underwriting agreement (the Underwriting Agreement ) dated April 1, 2015, among the Corporation and a syndicate of underwriters

8 8 co-led by CIBC World Markets Inc., RBC Dominion Securities Inc., and Scotia Capital Inc. (collectively, the Lead Underwriters ). The debentures were issued pursuant to a trust indenture (the 2015 Indenture ) dated April 9, 2015, between the Corporation and the Debenture Trustee and the subscription receipts were issued pursuant to a subscription receipt agreement (the Subscription Receipt Agreement ) dated April 9, 2015, among the Corporation, the Lead Underwriters and CIBC Mellon Trust Company, as subscription receipt agent. Upon the closing of the Fundtech acquisition on April 30, 2015, each subscription receipt was converted into one (1) Share in the capital of the Corporation. Headquartered in New York City, Fundtech (now re-branded as D+H s Global Transaction Banking Solutions segment ( GTBS )) is a leading provider of financial technology to banks and corporations of all sizes in the Americas, EMEA (Europe, Middle East and Africa), and APAC (Asia Pacific) regions with approximately 1,600 employees and 19 offices worldwide, including development centers in the United States, India, Israel, Switzerland and the United Kingdom. GTBS solutions are mission-critical to the dayto-day operations of banks and corporate clients. GTBS offers a comprehensive line of transaction banking solutions including global and domestic payments solutions, financial messaging, corporate cash and liquidity management and merchant services. GTBS has approximately 1,200 clients, including global money center banks, mid-sized banks and credit unions, non-bank financial institutions, central banks and corporates. The Corporation filed a Business Acquisition Report on Form F4, a copy of which is available on the Corporation s profile on SEDAR at in respect of the Fundtech acquisition. Rebranding of Operations On January 28, 2014, the Corporation announced that it is operating as a single brand in North America and globally following the rebranding of its legacy HFS, Mortgagebot and Compushare brands to D+H. The Corporation continued this strategy by re-branding in October 2015 the Fundtech operations as D+H s GTBS segment. Leading technology products and solutions from these brands are now operating under the D+H brand, but will continue to use their existing product names. These moves are aligned with D+H s long-term plan, outlined following the HFS acquisition, and reintroduced following the Fundtech acquisition, and is part of D+H s continuing evolution as a financial technology leader. The rebranding reflects a broader integration within D+H, following a series of acquisitions, and is expected to allow the Corporation to better support and partner with clients across the U.S., Canada and globally. D+H anticipates the rebranding will be a strategic enabler that will allow it to unlock synergies and create tangible benefits for its business and its clients. Unifying its operations under a single brand is expected to bring new benefits to D+H s clients centered on easier access to more products and more options to solve their important business challenges with financial technology. Intercorporate Relationships The Corporation owns an indirect 100% interest in D+H Limited Partnership, which was formed under the laws of the Province of British Columbia as a limited partnership on May 31, As mentioned above, the Canadian operations are carried on by D+H Limited Partnership The Corporation s interest in D+H Limited Partnership is held through its wholly owned subsidiary, Davis + Henderson G.P. Inc. (the General Partner ), an Ontario corporation, and its limited partnership interest in Davis + Henderson LP, a British Columbia limited partnership. The Corporation owns 100% of the limited partnership units of Davis + Henderson LP, and the general partner is the General Partner, which holds a 0.001% beneficial interest in Davis + Henderson LP.

9 9 The Corporation s United States operations, other than the GTBS segment, are carried on by D+H USA Corporation, a wholly owned subsidiary of D+H USA Holdings Inc., a Delaware corporation. The Corporation s interest in D+H USA Corporation is held indirectly through its limited partnership interest in Davis + Henderson LP. Davis + Henderson LP owns 100% of D+H Ltd., an Ontario Corporation, which in turn owns 100% of D+H USA Holdings Inc. The GTBS segment of the Corporation s business is primarily carried on by Fundtech Corporation (a Delaware Corporation), Fundtech Ltd. (an Israeli corporation), BServ, Inc. (a Nevada Corporation) and BBP GmbH (a Swiss Company). Fundtech Corporation and BServ, Inc. are indirect wholly-owned subsidiaries of D+H USA Corporation. Fundtech Ltd. and BBP GmbH are indirect wholly-owned subsidiaries of D+H Ltd. Certain subsidiaries, each of which represents not more than 10% of the consolidated assets and not more than 10% of the consolidated revenues of the Corporation, and all of which, in the aggregate, represent not more than 20% of the total consolidated assets and the total consolidated revenues of the Corporation as at and for the year ended December 31, 2015, have been omitted from this disclosure. Refer to Appendix A for details relating to the above entities, including jurisdiction of formation and ownership details. The Business D+H is a leading financial technology provider the world's financial institutions rely on every day to help them grow and succeed. D+H s global transaction banking, lending, payments and integrated core solutions are trusted by nearly 8,000 banks, specialty lenders, community banks, credit unions, governments and corporations. Headquartered in Toronto, Ontario, Canada, D+H has more than 5,500 employees worldwide who are passionate about partnering with clients to create forward-thinking solutions that fit their needs. Today, D+H offers products and services in the following areas: Global Transaction Banking Lending and Integrated Core Canada Solutions Global Payment Technologies (Global and U.S. Domestic) Cash Management Financial Messaging Merchant Services Customers Global financial Institutions and large corporate customers Over 1,000 customers globally Operations Global operations team based in the U.S., EMEA, APAC Solutions Integrated Core Solutions Core Banking Channel and Optimization Solutions Lending Solutions Mortgage Lending Consumer Lending Commercial Lending Customers United States based financial institutions including banks and credit unions and other lenders Over 5,500 customers in the United States Operations United States operations team based in several states Solutions Payments Solutions Cheque program Enhancement Services Lending Solutions Mortgage Technology Collateral Management Solutions Student Lending Customers Canadian financial institutions and corporate customers Over 1,000 customers in Canada Operations Canadian operations team based in Ontario and British Columbia, Canada

10 10 D+H s vision is to be a leading FinTech provider to the financial services industry. Since 2006, D+H has successfully grown its business, principally through acquisition and to a lesser extent, organic growth, transforming its business from a monoline cheque manufacturing company to a diversified leading provider of financial technology solutions to the world s financial institutions. Over the past several years, D+H has executed on its strategy by further enhancing the services and capabilities of its existing business and by completing several strategic acquisitions, including ASSET in Canada and Mortgagebot in the U.S. in 2011, Avista in 2012, Compushare and HFS in 2013, and Fundtech in Through organic growth and acquisitions, D+H has extended its reach and capability as a company that offers a range of financial technology solutions to the financial services market. Now with annual revenues in excess of $1.5 billion, it is recognized as one of the world's top FinTech companies on IDC Financial Insights FinTech Rankings and American Banker's FinTech Forward rankings. D+H is committed to the communities it operates in through financial support, sound corporate responsibility policies and practices, and employee involvement and volunteering. D+H is also dedicated to environmentally sound principles and practices. In addition to compliance with environmental statutes and laws, D+H operates its business efficiently, and continuously strives to reduce waste where economically reasonable. D+H offers a diverse range of market-leading services in Canada, the U.S and globally. The following tables reflect the current relative size of each of the major service areas and major geographic areas served as a percentage of total Adjusted revenues. Allocation of Adjusted revenues by Service Area Adjusted Revenues % of Adjusted revenues for the year ended December 31, 2015 % of Adjusted revenues for the year ended December 31, 2014 Global Transaction Banking Solutions 16% N/A Segment Lending & Integrated Core Segment 39% 44% Canadian Segment 45% 56% 100% 100% Allocation of Adjusted Revenues by Geographic Mix % of Adjusted revenues for the year ended December 31, 2015 % of Adjusted Revenues for the year ended December 31, 2014 Canada 45% 56% United States 47% 43% International 8% 1% 100% 100% Global Transaction Banking Solutions ( GTBS ) Segment GTBS transaction banking solutions enable customers, which primarily include large domestic or global financial institutions and large corporate clients, to manage all types of payments, within and across national borders, from and to any channel, with a high degree of automation and straight-throughprocessing. With these solutions, financial institution customers or a corporate customer can also exchange standardized messages over secure electronic networks, manage their cash, liquidity and working capital requirements, and implement remote deposit capture, e-billing and internet payment solutions.

11 11 With D+H s payment hub and its related technology solutions, D+H serves a growing global client base of approximately 1,200 that includes 17 of the world's 25 biggest banks, 59 of the top 100 U.S. banks, including 7 of the top 10 U.S. banks, as well as government-sponsored entities and large corporations. Payments D+H offers a range of global and domestic payment solutions in its GTBS segment. D+H s flagship payments platform captures, manages and processes payments in domestic and international environments sourced from multiple initiating channels and routes to multiple clearing networks globally. Within the FinTech industry, this type of solution is commonly referred to as a payment hub. D+H s products and solutions are designed to simplify global payments by providing globally deployable, single-instance payment hub software that enables banks to originate, process, transact, and settle every type of payment in any currency, anywhere in the world at any hour of the day, and in real time. D+H s single instance of software capabilities is a key competitive advantage as it means that all the banks global and domestic payment transactions flow through one single integrated multi-channel, multi-instrument payment hub, Global PAYplus. This solution eliminates the need for multiple payment systems and sits at the centre of a bank's IT architecture. Global PAYplus is differentiated in today s market because it provides a flexible rules-based engine with best-in-class functionality. D+H s software has a track record of reliability, can scale to meet the highest payment volumes of the world's largest banks, and is equipped with compliance, controls, and audit tools. Global PAYplus is built on what is known as Service-Oriented Architecture ( SOA ), which means it is designed to easily integrate into new applications as they are introduced over time and become part of an overall bank system. Payment hub relationships with D+H s customers are typically multi-year due to the scale of the undertaking, leading to subsequent add-on licenses, service, and maintenance revenues, and in turn increasing its recurring revenue stream. D+H s revenue model includes SaaS contracts that stipulate fees per transaction based on usage, as well as licenses that include service and maintenance. D+H also offers an integrated wire and compliance solution for U.S. financial institutions. The solution is available in-house or through a SaaS solution, and supports the processing of all payment types, including Fedwire funds transfer, Fedwire securities transfers, SWIFT messaging, and foreign exchange transfers, among others. Due to the growth of D+H s international client roster, the growing number of payment transactions processed by its existing customers, and the additional revenues generated as its customers roll out new features and functionality in existing and new geographies, D+H continues to experience global growth. The solutions targeted at Tier 1 and Tier 2 banks are typically offered on-premise, while the solutions targeted at Tier 3 and Tier 4 banks are provided on a SaaS basis. Tier 1 generally refers to banks with over $500 billion in assets, Tier 2 refers to banks with $20 billion to $500 billion in assets, Tier 3 refers to banks with $1 billion to $20 billion in assets, and Tier 4 refers to banks with under $1 billion in assets. The primary products in this category include Global PAYplus, as well as PAYplus and ACHplus. Cash Management Cash management solutions enable financial institutions to offer their corporate customers effective cash and liquidity management. D+H s global cash management software platform is a multi-region, multi-

12 12 lingual and multi-currency online banking channel for financial institutions. It enables banks to optimize their clients working capital management via an integrated suite of modules. Cash management is offered through both an on-premise and hosted solution, and offered globally with a focus on Tier 1 through Tier 3 banks in developed economies. The primary products in this category include Global CASHplus and CASHplus. Financial Messaging Financial messaging solutions enable the exchange of standard transaction messages over secure networks. D+H s financial messaging solution offers global message gateway software to financial institutions and corporate clients, enabling extensive connectivity to interbank services, such as the SWIFT messaging network. This is a single-instance platform which processes all types of financial messages. D+H s financial messaging solution is offered as an in-house or SaaS-solution, targeted at Tier 1 through Tier 3 banks and multi-national corporate clients. It is offered globally with a focus on Europe and North America. The primary products in this category include Global Messaging Plus and Global Compliance Plus. Merchant Services D+H s merchant services include a range of payment solutions for small and medium business customers including internet payment, remote deposit capture and electronic invoicing solutions. D+H s secure and scalable remote deposit capture solutions scan cheques and transmit scanned images and/or ACH data to financial institutions for clearing. Remote deposit capture is offered primarily as a SaaS-based solution, targeted at Tier 2 through Tier 4 banks, credit unions and corporate clients. The primary products in this category include TotalTransact, NetDeposit, Accountis EIPP and Bacsactive- IP. Lending & Integrated Core ( L&IC ) Segment D+H s L&IC segment currently serves approximately 5,500 financial institution and corporate customers. D+H s technology suite allows it to offer products to large and small financial institutions alike, and D+H is targeting new customers to gain a foothold among the other 5,000+ banks and credit unions who do not use its solutions today. Furthermore, due to the breadth of its offerings, D+H has a significant opportunity to cross-sell to its current clients, thereby increasing its share of customer wallet. D+H often sells an additional 8 to 10 channel solutions when it sells an integrated core banking platform, which illustrates the cross-sell dynamics. Since D+H introduced its brand in the U.S. it has observed increases in its brand awareness and has expanded its relationships with industry analysts and industry consulting firms. D+H products have received recognition and awards for the solutions that they provide to financial institutions. Its business continues to benefit from increasing regulatory compliance requirements for banks. Under the direction of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank Act ), the U.S. Consumer Financial Protection Bureau issued a new regulation effective on October 3, The Truth in Lending Act - Real Estate Settlement Procedures Act Integrated Disclosure is a significant rollout of U.S. mortgage reform rules which require banks to use mortgage disclosure forms that are easier for borrowers

13 13 to understand and use. D+H successfully implemented all upgrades to it products by the effective date. D+H s lending solutions have helped banks maintain compliance with these new regulations in their lending operations and it sees continued interest by financial institutions seeking cost efficient solutions for their compliance and serving their customers. Lending Solutions Lending solutions in the L&IC segment include solutions that simplify the lending application and origination processes and provide compliant loan documents. The majority of solutions support commercial, consumer and mortgage lending, enabling clients to leverage their technology investments across multiple lines of business. L&IC s lending solutions accounted for 21% of the fourth quarter and the full year 2015 consolidated Adjusted revenues. Lending also accounts for more than half of the revenues in D+H s overall L&IC reporting segment, and is a primary source of growth for D+H. These solutions include: Mortgage lending D+H provides SaaS, web-based solutions that allow lenders to obtain qualified applications from multiple point-of-sale channels (via the internet, in the branch or call centre, or through professional loan officers) throughout the entire loan origination and servicing process. D+H s mortgage lending solutions also integrate with its compliant loan documentation solution. In its mortgage lending business, D+H competes with other companies in the U.S. that provide end-to-end loan origination platforms. In addition, D+H competes with a small number of large, diversified FinTech providers based in the U.S. that may incorporate, or already have incorporated, some loan origination functionalities into their core offerings. D+H also compete with internal legal teams at larger financial institutions and external legal counsels at smaller banks and credit unions. The primary products in this category include LaserPro mortgage lending, Mortgagebot POS and Mortgagebot LOS. Revenues are primarily driven by monthly fixed subscription fees paid by lenders, and to a lesser extent, by transaction fees that fluctuate with mortgage application volumes. Similar to D+H s Canadian mortgage technology services, mortgage application volumes in this service area are affected by many factors including the economy, the housing market, interest rates and changes in government regulations. Additionally, revenues are also affected by a more variable refinancing market, which is primarily impacted by interest rates and interest rate expectations. In 2015, D+H s Mortgagebot LOS solution has been endorsed by the American Bankers Association ( ABA ) through its Corporation for American Banking subsidiary. Mortgagebot LOS is D+H's all-in-one loan origination system that supports retail, wholesale and correspondent mortgage lending. The suite also includes Mortgagebot POS, a point-of-sale solution that is also endorsed by the ABA. To earn the ABA endorsement, D+H had to undergo a comprehensive due-diligence process that took into consideration the Corporation's financial soundness; management strength; training and support; and customer service. Consumer lending D+H s industry leading solutions in this category provide flexibility to automate the consumer lending process including applications acceptance from multiple channels, automating the loan origination process and providing the capabilities to automate the loan approval process and are integrated with D+H s solutions to provide compliant loan documents. In its consumer lending business, D+H competes with other companies in the U.S. that provide end-to-end loan origination platforms. In addition, D+H competes with a small number of large, diversified FinTech providers based in the U.S. that may incorporate, or already have incorporated, some loan origination functionalities into their core offerings. D+H also competes with internal legal teams at larger financial institutions and external legal counsels at

14 14 smaller banks and credit unions. The primary products in this category include LaserPro consumer lending and DecisionPro. Revenues are driven by the sale of licenses and subscriptions that are typically accompanied by professional services and maintenance fees. Commercial lending D+H provides solutions to manage the end-to-end commercial lending process including origination, analysis, underwriting, covenant tracking and portfolio reporting including commercial real estate, onetime capital investments, leasing and financing and more. D+H also provides clients with solutions to produce compliant commercial loan documents. In its commercial lending business, D+H competes with other companies in the U.S. that provide end-to-end loan origination platforms. In addition, D+H competes with a small number of large, diversified FinTech providers based in the U.S. that may incorporate, or already have incorporated, some loan origination functionalities into their core offerings. D+H also competes with internal legal teams at larger financial institutions and external legal counsels at smaller banks and credit unions. The primary products in this category include CreditPath, CreditQuest and LaserPro commercial lending. Revenues are driven by the sale of licenses and subscriptions that are typically accompanied by professional services and maintenance fees. Integrated Core Solutions Integrated core solutions, offered in the L&IC segment, include D+H s core banking platform offerings and complementary channel solutions. Integrated core solutions also include optimization solutions which assist DH s customers in managing technology infrastructure and driving efficiencies. Integrated core accounted for 16% and 18% of the fourth quarter and the full year 2015 Adjusted revenues. Core D+H provides integrated core banking platforms to a broad array of financial institutions, including community-based banks and credit unions. These core banking solutions provide comprehensive functionality, including real-time transaction processing and account servicing, which can be seamlessly integrated with D+H s other specialized products. D+H s principal competitors for core processing systems are a small number of large, diversified FinTech providers based in the U.S. The primary products in this category include PhoenixEFE Core, Phoenix System International and UltraData Enterprise Core. Revenues are driven by the sale of long term contracts for D+H to provide outsourced hosted services and/or licenses and subscriptions that are typically accompanied by professional services and maintenance fees. Revenues for core are affected by mergers and acquisitions as the newly combined entity may be processed on D+H s platform, or that of a competitor s. D+H has been named the winner of a 2015 XCelent Award in Celent s Core Banking Systems ( CBS ) for Community Banks 2015 report. D+H s PhoenixEFE was recognized as one of only two CBS platforms to earn a four-star rating for technology, client base and overall solution competitiveness among the Top 5 banking technology providers. Highlights of the 2015 report include: PhoenixEFE earned a four-star rating for Advanced Technology, one of only two CBS platforms to achieve this rating. The associated criteria includes: the architecture of the system, the level of integration with

15 15 third-party systems, the degree of customization afforded, the level of scalability, and the flexibility of deployment of the CBS. PhoenixEFE earned a higher than average rating of four stars for architecture, systems integration capabilities and deployment options. PhoenixEFE earned five stars for Average Assets Processed, the most of any CBS platform in the report. The average client size of PhoenixEFE was more than twice the median for the CBS platforms reviewed. PhoenixEFE earned a rating of four stars for system reporting. PhoenixEFE offers nearly 700 standard core reports, and its use of a standard Microsoft SQL database to hold core system data allows for relatively easy customization of standard reports, as well as the ability to create ad hoc CBS reports. Channel D+H s channel solutions encompass an extensive portfolio of technologies that are ancillary to its core banking offerings. These include technologies that enable financial institutions to provide various forms of banking, including internet and mobile, among others. D+H s solutions also include several branch automation tools, debit/credit card processing and production, person-to-person payments, and accountto-account transfer solutions. Within its channel solutions business, D+H competes with a small number of large, diversified FinTech providers based in the U.S. along with other smaller niche providers. The primary products in this category include Card Payments, Cavion, Encore, and ubanking. Revenues are primarily attributable to recurring subscription-based fees which generally are based on the number of users in an organization. Optimization D+H s optimization solutions include business intelligence tools and cloud-based infrastructure technology solutions offerings. These and other offerings within this category assist D+H s clients in reducing their business risks and associated technology costs. In the optimization solutions category, D+H competes with other larger infrastructure providers, although it is uniquely positioned in the Infrastructure-as-a-Service ( IaaS ) market because it provides one of the IaaS solutions specifically developed to meet the rigorous compliance and security requirements of financial institutions in the U.S. The primary products in this category include Compushare and Touche. Revenues are primarily attributable to recurring subscription-based fees which generally are based on the number of users in an organization. Canadian Segment Lending Solutions D+H s lending solutions help lenders manage debt collateral and process mortgages, and assist various governments and banks in managing their student lending programs. D+H is the market leader in lending solutions in Canada. The Canadian segment lending solutions accounts for 22% and 24% of the fourth quarter and the full year 2015 consolidated Adjusted revenues, respectively. Collateral management solutions D+H s collateral management solutions enable lenders to minimize risk, reduce workload, and maximize profitability. D+H is a leading provider of recovery, lien registration services and insolvency management solutions to Canadian lenders. The primary products in this category include Registry and Recovery.

16 16 Registry: When performing due diligence searches, registering a lien on a property, and discharging liens and mortgages, D+H s single point of access platforms manage the unique rules and regulations of each jurisdiction and integrates into any lending operation. Recovery: D+H also provides a suite of recovery management services. Its collateral management solutions enable its clients to co-ordinate various activities in the recovery process through a single point of contact, thus reducing operating costs, and minimizing the time they spend on non-core administrative activities. D+H competes with smaller, local firms with limited national capability (in its registration services) and primarily insourcing by lender institutions (in its recovery services). In registry services, revenues are fee-based and are driven by volume of consumer loans. Registration activities are seasonally higher in the spring and summer relative to the fall and winter periods. Within recovery services, revenues are generally based on amounts recovered and are driven by volume of loan recoveries. In both registration and recovery services, the largest volumes processed by D+H relate to auto loans, both new and used. Within the auto and auto lending markets, modest growth in new and used car sales is expected to continue through the end of 2016, with some regional weakness in Alberta and the Maritimes, offset by more stable conditions in Ontario and British Columbia, which will benefit D+H s collateral management solutions business. In the event of significant economic decline, increases in D+H s recovery business may somewhat offset declines in the registry business revenues while the margin in this business is less impacted. Student loans administration D+H is a leader in student lending technology and program management, servicing key clients such as the Government of Canada combined with five provincial governments as part of a single contract. D+H also has separate servicing contracts with the provinces of Prince Edward Island, Nova Scotia and Alberta, and certain large Canadian financial institutions. D+H supports over 1.7 million students and administers a $22 billion loan portfolio. Its student lending solutions include the technology applications and the deep program management expertise that allow D+H to manage its clients programs across the entire lending lifecycle from loan origination, through to loan maintenance, loan repayment and loan discharge. D+H s services include student enrollment, management of funds disbursement, loan tracking, student support services, reporting and collections. Revenues from the student lending program are primarily earned based on the number of student loans managed by D+H. D+H also earns incentive-based revenues from targeted improvements to its clients specific lending programs, along with revenues from professional services work connected to program enhancements requested by the lenders. The delivery of these professional services is impacted by the timing of government directed requests for enhancements and the acceptance of delivery of these services. The volumes and enhancements are historically stable along with the related revenues though D+H does have some quarterly revenue bumps following delivery and acceptance of enhancement projects. D+H expects this to continue through the end of the current contract. The contract with the Government of Canada and certain provinces will expire on March 31, 2016 after which the Government of Canada has the right to renew for one-year terms up to a maximum of two such terms. In line with government procurement policy and as highlighted in prior quarters, D+H submitted its bid for renewal of the Canada Student Loans Program contract in January 2015 and qualified for the next round of selection, which was held in August D+H presented a demonstration of its technical

17 17 capabilities to the Government of Canada to enable a new digital platform. D+H believes that they will make their final decision in early Canadian mortgage technology D+H s Canadian mortgage lending platform enables effective management of the residential mortgage process from origination within the brokerage community through the underwriting process by lenders. Its SaaS based origination solution provides a standardized application process for both brokers and lenders. The platform includes a solution for mortgage underwriting, which works in tandem with the mortgage origination engine to simplify the application review and decision process for lenders. D+H s platform also includes offerings that give lenders and mortgage professionals a common solution for document sharing, management and storage. D+H s primary competition is a private company offering similar services. The primary products in this category include Exchange, Express and Expert. Canadian mortgage technology revenues are volume-based, with primarily two pricing models: a fee per transaction model and a model where the pricing is linked to the value of the mortgage. The revenues are realized from new and refinanced mortgages, and mortgage transfers. As such, fees are variable and are primarily impacted by many factors including the housing market (new home starts, the average value of homes, and resale activities), interest rates, mortgage renewal and refinancing activities, changes in government regulations, and the general state of the economy, among others. Analysts are expecting the Canadian housing market to enter a moderating phase with a soft landing later in 2016, with some regional weakness in Alberta and The Maritimes, offset by more stable conditions in Ontario and British Columbia. A soft landing in the housing sector would likely impact the volume of transactions in D+H s Canadian mortgage technology services, and would be tempered by the volume of mortgage renewals and home refinancing activities. The introduction of new products and product extensions for various areas in the lending value chain has and is expected to continue to contribute to organic growth as these new products are added to D+H s platforms, and align D+H with the transformation of the sales processes used in Canadian banking. Payments Solutions Payments solutions offered in the Canadian segment include D+H s cheque program, where D+H is a market leader and serves consumers and small businesses, and the enhancement services program, an expanding business where D+H provides value-added fraud prevention and related services to the banks customers. Canadian Payments solutions account for 18% and 21% of the fourth quarter and the full year 2015 consolidated adjusted revenues, respectively. Cheques: D+H is the primary supplier of personal and business cheques for most financial institutions in Canada. Its personal cheque program offers cheque products, options, and added value features. D+H s primary competition in this service area is from alternative payment methods. D+H s revenues are based on the number of cheques delivered. As a result of growth in credit cards, debit cards and other electronic forms of payment such as online banking and mobile payments, the number of cheques written has declined over the past several years and volume is expected to continue to decline by mid-to-high single digits, with ongoing volatility in personal and business cheque order volumes. D+H anticipates some offset to these volume declines through increases in average order value, and D+H has various programs underway to decrease operational costs and to mitigate future legacy vendor risks. D+H is also looking to increase the business cheque volumes through new marketing programs with its customers. Enhancement services: D+H s enhancement services program allows Canadian financial institutions to offer additional products to their customers to further enhance the value they gain from their chequing or credit