DATA#3 LIMITED — AGM Information 2008

Nov 11, 2008

Data[#] 3 Limited 2008 AGM - Chairman’s Address 12[th] November 2008

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Ladies and Gentlemen,

Welcome to this 2008 Annual General Meeting of Data[#] 3 Limited.

And welcome again to the company’s corporate and Brisbane office. This is the eighth year that the annual meeting has been held here.

The company’s annual report issued with the notice of today’s meeting presents the 2008 financial year results and the financial position as at 30[th] June 2008. The report reveals another excellent result which again demonstrates the company’s ability to sustain and improve financial performance. The payment of the full year dividend of 46 cents per share comes directly from this improvement in financial results. As was the case last year, this result was achieved through strong business performance across all the company’s product and services offerings but led by 46% growth over the previous year in Software Licensing and Asset Management.

Performance in key areas such as receivables collections, cash management and cost control continues to be first rate. Again our balance sheet strengthened further with net assets increasing from $19.1 million at 30 June 2007 to $21.3 million at 30 June 2008.

The 2009 year presents us with the most significant change we have had in our operating environment for many years. I do not need to elaborate for you on the macro market conditions, but these will play into the ICT industry and into our business over the course of the year. We are expecting and are experiencing restraint in customer investment and higher levels of market competition and these are materialising as pressure on pricing and margins as we forecast in our annual report. However, we have a diversified business with much of our revenue under contract, and even given this backdrop, our objectives for the 2009 financial year remain to gain marketshare, continue to build sustainable profitability through appropriate investments and to improve on the record performance of 2008. The senior leadership team has built this year’s plan to achieve those objectives on the foundations established last year with deeper focus on the three key areas that underpin our strategy – remarkable people, outstanding solutions and organisational excellence. Our Managing Director will cover this further in his address.

At the end of the first quarter we are on plan and our first half is expected to better last year’s. Again John Grant will provide further details in his address.

The declaration of a final 2008 dividend of 28 cents per share is very pleasing for all concerned - shareholders, management and the Board. Combined with the first half dividend of 18 cents this represents a total dividend of 46 cents per share for the 2008 financial year and distribution of almost 79% of available profits. Assuming business performance holds as I have indicated, we expect to continue the payment of dividends of this proportion or higher.

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As I explained last year the policy of geographic and service expansion set out in 1997 when the company listed on the ASX remains in place and we were delighted to open new offices in Adelaide and Perth and expand our facilities in Brisbane, Sydney and Melbourne in the course of the year. The basic structure of the business has been further tuned this year with three national areas of specialisation operating through this expanded geographical presence. The 2009 business plans incorporate a small number of structural changes aimed at further focussing responsibility and driving growth and marketshare gain at better than average industry rates. We see growth as a vital key in a difficult market and while we see it being predominantly organic, we expect market conditions to present situations that we may be able to take advantage of to enhance the company’s results and financial position. John will expand further in his address.

With the obvious decline in share prices and hence wealth, understandably there has been a great deal of comment from investors on executive remuneration. Within Data[#] 3, as in previous years, targets to produce acceptable total returns to shareholders have been established and the management team’s remuneration is structured in line with these targets.

The remuneration report which is included in the annual report will be put to the meeting for adoption. I thought it appropriate to expand on the commentary in the annual report and put executive remuneration in Data[#] 3 into an appropriate context.

In setting targets and remuneration, we’re very conscious of two things:

• Expense levels, and

• Attracting and retaining key people – they ultimately make the difference.

Clearly these two objectives can appear to be contradictory at times particularly given the competitive market for management, sales and technical expertise.

The key personnel in the annual report are those who drive our business and as has been commented on previously, they have done an excellent job over a long period.

As shareholders consider this year’s remuneration report, I’d offer the following observations:

1. The increase in total executive remuneration over the 5 year period from 2004 to 2008 is 77%

2. The increase in NPAT over the same period is 167%

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1. The percentage that executive remuneration is of NPAT dropped from 69% in 2004 to 46% in 2008

2. The variable or at risk component of total remuneration has remained almost unchanged at around 36% over the 5 year period

3. The share price has increased from $1.00 at 30th June 2003 to $5.60 at 30[th] June 2008; dividends over the 5 year period total $1.445; and hence Total Shareholder Return over the 5 year period is around 600%.

As I said at the outset, remuneration needs to attract, reward and retain. We benchmark remuneration every year against industry benchmarks to ensure they are appropriate and the Board believes that both the levels and structure of remuneration are in line with the market and appropriate to produce the results we are targeting. This year you will also have noticed that we have included profiles of the full senior leadership team in the annual report. In the light of investor concern in the area of share and option plans, the Board has made a decision to delay the implementation of the Employee Share Option Plan and the Deferred Share Incentive Plan approved by shareholders at last year’s AGM at least until after the first half. I commend the report to the meeting for adoption.

In the 2008 financial year the company’s market share price at 30[th] June had slipped only 6.7% from that of a year earlier – finishing at $5.60 against $6.00. Since this time the share price has slipped further but performed well against the market finishing yesterday at $4.80. As you know on 1[st] September 2006 the Board commenced an on-market share buy-back with the dual aim of improving shareholder returns on a sustainable basis and reducing volatility in the company’s share price. This on-market program was extended for a further twelve months from 1[st] September 2007 and for a further 12 months from 1[st] September 2008. Since the commencement of the share buy-back program, the company has purchased a total of 226,556 shares at a cost of $1,235,527. In accordance with the requirements of the Corporations Act these shares have been cancelled. We believe that the buyback program has contributed significantly to the resilience of the price of the shares against the overall market and has also resulted in reduced volatility. Subject to future profitability we intend to maintain the momentum by further improving dividend returns to shareholders.

There are resolutions today for the reappointment to the board of both Terry Powell and Ian Johnston. Terry is well known to you as the founder of the business; the father of Data[#] 3. His value to the company is as great today as it has ever been. Ian Johnston was appointed to the Board following last year’s AGM. He has made a very strong contribution in his first year as a member of the board. The directors unanimously recommend their reelection.

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I will now ask our Managing Director, Mr John Grant, to the microphone to address operational aspects of the company’s 2008 performance and the outlook for the current period. In doing so, I’m very pleased to acknowledge his recent induction to the ICT Industry Hall of Fame at the Australian Reseller News IT Industry Awards. The Hall of Fame has been established to recognise individuals who have done outstanding work over a long period of time and inductees are chosen by their peers across the industry. At the completion of his address I will invite your comments and questions regarding the annual report, the remuneration report and further information that we have released today.

Thank you for your continuing interest in the company and your attendance at this 2008 Annual General Meeting.

Richard Anderson Chairman Data[#] 3 Limited

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Data[#] 3 Limited 2008 AGM - MD’s Review of Operations 12[th] November 2008

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Ladies and Gentlemen

Firstly let me share the Chairman’s welcome to you. It’s a pleasure once again to have our shareholders, key members of our management team and other friends of the company to our head office.

By any measure 2008 was another outstanding year. Certainly the strong market provided a platform for this, but the quality and commitment of our team, the repositioning of our offerings through our Solutions Framework and an unwavering focus on efficient business operations translated into performance ahead of target in most areas of the business, an increase in net profit of 26% and a 28% increase in dividend.

2008 saw us once again reach a number of significant milestones.

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We expanded geographically establishing new offices in Adelaide and Perth and expanding our footprint in Melbourne and Sydney with an additional 110 people joining our team. Continuing on this theme we opened a state of the art integration and configuration centre in Brisbane and extended our investments in demonstration equipment to support our Infrastructure Solutions business.

We completed our first acquisition in a number of years enhancing our IT recruitment capability in NSW with the addition of Fingerprint Consulting Services.

In our annual surveys, 95.9% of our people indicated they would recommend Data[#] 3 as their preferred employer to others in the industry – this compared with 93.6% in the previous year; and in our annual customer survey, in line with the previous year, over 96% indicated we met or exceeded their expectations.

We continued to be recognised by our vendor partners - by Microsoft as Partner of the Year in Australia and New Zealand for Software Licensing, Software Asset Management and Security; by IBM as X-Series Partner of the Year; by Sophos as Australian Partner of the Year and very recently we have been voted by our peers as Enterprise Reseller of the Year in Australia in the ARN Industry Awards and similarly in the CRN Industry Awards. And as Richard said in his introduction I was surprised and honoured to be inducted into the ARN ICT Industry Hall of Fame – I hope somehow we can turn that into bottom line.

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These milestones were topped off by another ‘best ever’ financial performance.

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Revenue was up almost 28% to $364m of which 57% was under some form of term contract; internal expense as % of gross margin remained steady; net profit after tax increased 26%;

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net assets increased by 11.4%, net cashflow from operations was steady at $8.4m and the company carries no debt; eps increased 27% to 58.5 cents and dividends increased 28% to 46 cents representing a payout ratio of almost 79%. And as Richard commented, the share price has performed well against the market.

To dive into a little more detail, shareholders will recall that our business provides customers with technology solutions that help them run their businesses better.

We offer software licensing and software asset management solutions to help our customers optimise the acquisition and management of software in volume from global vendors.

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Performance of our Licensing Solutions business was once again outstanding with revenue up 46% to $143m of which $107m was under contract. This business is the unquestioned leader in its field in Australia and the Pacific finishing the year with 65 people up from 43 and winning several national awards from its vendor partners, particularly Microsoft.

We help our customers cost effectively design, deploy and operate their desktop, network and data centre hardware and software infrastructure.

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Performance of our Infrastructure Solutions business was very strong against average market growth with revenues increasing 18% to $175m of which $62m was under contract. It finished the year with 327 people up from 256 and also received acknowledgements from a number of its key partners.

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And finally we assist our customers recruit and manage permanent and contract staff through our People Solutions business. Revenue grew 17% to $45m which included a contribution from the Fingerprint acquisition in the second half.

As I said at the outset 2008 was another outstanding year for the company – our best ever. However, it’s fair to say that that is now well past and with global economic conditions the way they are, our focus and presumably that of our shareholders’ also, is clearly on the current year.

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Before I get into some detail on this and in order to ease any anxiety that there might be, while demand has certainly slowed and while we have a number of opportunities on which decisions are yet to be made, we have good visibility of our half year and expect to better the profit of last year. Our position should this be the case is that we will at least hold last year’s first half dividend of 18 cents. Clearly things can change but that’s our view sitting here now.

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So with that as background, in our annual report and in our full year market briefings, given the increased access to market that came with our geographic expansion, we stated that our objectives for the year were to gain market share and to improve performance over the 2008 result. In simple terms we are aiming to get a larger slice of the available revenue with the belief that in doing so we will optimise our performance through conditions that remain uncertain and be as strongly positioned as we can be for the future.

So what are we finding and what are we doing?

Firstly let’s deal with the ‘not so good’ news.

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Customers have reduced permanent and contract recruitment considerably. This has affected the market opportunity for our People Solutions business particularly in NSW. We have trimmed the size of our team accordingly, have scaled back our financial targets and have substantially increased new business generation.

Customers have also reduced expenditure on what we call ‘business as usual’ purchases of commodity equipment e.g. PCs, laptops, servers, printers and the like and deferred more significant ‘desktop fleet refreshes’ seeking to extract more from existing assets rather than upgrading them. This has effected the opportunity for our Product Solutions business in the commercial marketplace but this is being offset at least in part by an improving contribution from Government in Queensland. In response we have trimmed the size of our team and are accelerating implementation of new supply chain and online procurement systems that can further lower the cost of doing business toward the latter part of the year.

Customers are also taking much more time to make decisions on project investment. Consequently, while we have more major projects in the pipeline than at any other time, the delays are having an impact on our Professional Services business which depends on optimising daily utilisation to generate profitability. Again we have trimmed some of the excess capacity but, given the pipeline of projects, we are determined not to forsake the hard earned technical capability in this team without a considerable fight and to this end we have increased our focus on opportunity generation independently and with our vendors, reorganised and integrated our presales

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team where appropriate and have repositioned our offerings to promote cost savings as the primary benefit.

With the lessening in demand, competition has increased substantially and this has and will continue to manifest as pressure on pricing and margins. While we have a track record of high win rates, maintaining these is critical and we are taking a number of initiatives to at least maintain but ideally enhance them. We are accelerating implementation of a new customer relationship and sales management and forecasting system, increasing sales training and vendor certification levels, have negotiated co-funding from our vendor partners to deploy highly skilled sales specialists into our teams and are injecting our key management people increasingly into major sales opportunities.

It’s easy in the light of this ‘not so good’ news, the general market malaise and the continuing stream of woe coming it seems minute by minute, to overlook the good news. However I believe there’s plenty of good news to look at.

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Customers are spending where they can see relatively short term savings. This means in technologies like virtualisation to drive equipment utilisation and reduce systems management overheads; unified communications to lower communications costs through consolidation of voice and data traffic, and to reduce staff costs through productivity gains; mobility to remove overlapping manual processes; modern data centres to lower energy costs and reduce emissions; and outsourcing to replace internal variable cost with

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fixed external cost. This is translating to a significant increase in opportunity for our Enterprise Infrastructure and our Managed Services businesses in Infrastructure Solutions.

Customers are also ‘locked in’ in a sense to software license fees and while there is plenty of ‘argy-bargy’ going on in the negotiation of new agreements, new agreements are and will continue to be signed and this means increasing opportunity for our Licensing Solutions business particularly given its status in the market. Already we have signed significant new contracts for Microsoft licensed software with Linfox, NSW Health and the Federal Dept of Defence, which has the opportunity to be extended to the whole of the Federal Government.

There is also a ‘flight to quality’ by customers in the decisions that are being made and our reputation, strong brand, market positioning and alignment around major global vendors is positioning us as one of the acknowledged quality suppliers.

Similarly there is a ‘flight to quality’ by vendors who are concerned that small or poorly capitalised resellers represent a risk and that they would be better placed putting their marketing resources and funds with the stronger resellers. Our track record stands us in very good stead in this regard and this is manifesting as higher levels of engagement and support by vendors in both marketing and sales initiatives.

The labour market, while still competitive for the best skills, is starting to stabilise and become more negotiable as job security rather than opportunity and remuneration increasingly drives decisions. Our standing both with our current people and in the market generally positions us well to decrease turnover levels and access additional specialist skills as they become available.

And finally ‘with every cloud there is a silver lining’ and in the months ahead, with the pressure on profitability that comes in the market we are experiencing, we believe there will continue to be consolidation within the sector that will translate as opportunities for well funded and managed businesses like Data[#] 3. While we would pursue exceptional value in any market, the degree to which we can participate in any such opportunities can be influenced by the strength of our share price which will in turn be influenced by shareholder sentiment.

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So from a shareholder’s point of view, why will an investment in Data[#] 3 continue to be a good thing?

Firstly as you can see from the ‘not so good’ and ‘good’ news, at times like these there is value in a diversified business, which we are, and one in which large lumps of revenue are secured under contract, which we have.

Secondly as we all have seen amply displayed, debt and credit crunches just don’t mix. We have no debt.

Thirdly, in times like these, ‘cash is king’ and well run cash generating businesses, which we are, can offer the greatest certainty in dividend payment streams. Additionally strong cashflows facilitate our on-market buy-back which generates increased value for shareholders.

Fourthly, while margins and profit may come under pressure in the short term, businesses that can grow the top line in a difficult market will be the best positioned to succeed even further as the market improves. We have proven over a long time that we can do this and expect to complete the half year with revenue increasing over the corresponding period by near to 50%.

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And finally, the businesses that weather poor market conditions best are those that have a proven, experienced management team, which we have – over 200 years of experience inside Data[#] 3 and over 300 in the ICT industry.

So, while we retain our position that we can improve on the 2008 result and deliver dividends near the top of the sector, even if market conditions deteriorate further and the impact deepens, we are as well positioned as anyone and better positioned than most to tough it out, take advantage of opportunities that arise and emerge even stronger – which means increasing capital growth and increasing dividends.

In closing, in 2008 once again we had a terrific result both in financial and operational terms. Shareholders have been rewarded with strong dividends and relative stability in the share price via strong institutional support for the company and the on-market buy-back. The management team and staff are to be congratulated for their commitment to the task and are well prepared to deal with the market this year.

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Thank you and I will now hand back to the Chairman.

John Grant Managing Director Data[#] 3 Limited

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