DATA#3 LIMITED — Annual Report 2003

Sep 29, 2003

ZARA BERTANDA 11 h a 2 enia
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MILLER

• Company Profile of
• 2002.03.03.072
• Anadat Fall Lands
• An Outline of the Business 4
• Crainmark Hund H
  • a da Caraba
• Diragas Baance is
• Corporate Governance Statement 44
• Directors increased the
• Marchitector (2)
• intenentent Austriaans (* 57)
• Shatcholder Information 58
  • Corporate Directory 58

Amira tenera Verting

The Annual General Meeting of Data 3 Limited will be held at 10.30am on Thursday 6th November 2003 in Data 3's head office. Level 2. Data 3 Centre, 80 Jephson Street, Toowong, Queensland,

The Palak Titalin

The protures throughout capture some of the Data'3 team at work

Since listing in 1997, Data'3 has evolved from a Queensland oriented IT Solutions Company to one of national significance. In its first year of listing, Data*3 revenues were \$69 million and staff numbered 250. This year revenues were \$192 million and 415 staff served customers from Data'3 offices in Brisbane, Sydney, Melbourne, Canberra and Gladstone.

As an IT Solutions Company, Data*3 seeks to provide value for its customers from their IT investment by providing expertise in:

• business solutions delivered through application software

• $\blacktriangleright$ the design, implementation and management of reliable technology infrastructure

• cost effective procurement of IT hardware and software products, and

• sourcing the right IT people

Applying this expertise in its broadest sense provides a total solution to our customers' business and technology needs. This in turn can maximise shareholder value by delivering performance that meets or exceeds our financial objectives. Our customers cover a wide

range of industries including

banking and finance, mining, tourism and leisure, legal, healthcare, manufacturing, distribution, government and utilities and are located throughout Australia and into Asia and China.

Our vision is to be recognised as "Australia's leading IT Solutions Company - the one that everyone wants to work for, buy from, or own shares in." To achieve this vision we ensure we understand our customers' needs and market opportunities better than our competitors; rapidly bring to market solutions incorporating products and services to meet these needs; nurture and develop our people to enable. them to best apply their expertise in delivering these solutions; and continuously review and improve our performance.

We believe we will have achieved our vision when 90% of our staff recommend Data*3 to others as their preferred employer, when our key customers tell us we are their preferred IT supplier, and when we consistently deliver total returns to shareholders exceeding those provided by like companies.

Our core values underpin the manner in which we approach the business of doing business. We act with honesty and integrity in everything we do, we always go the extra mile in serving our customers, we respect our shareholders, our clients and our colleagues, and we strive for excellence and welcome innovation.

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Adileveniens Highlights of the verifinalities

• 2. Managing the implications of our idirit venture partner Powerlan (Old) Pry Lidis voluntary administration and receivership... With the support of key vendors particularly Microsoft HP Tech Pacific and Ingram Michael Walden Schleiberg this situation by December incurring a cost at the low. a mara ya mwaka wa 1999 accountg the octetis of the contracts previously here by the form ventures in full in the second half Our estimate of the net effect of the Powertan sitiation on Data 2's results. for the full year is a pieclex oss of sughtly over \$1 million
• >Williams Strength II year result with tevenue of \$192 million. EBITA of GA 697 million, NPATIof \$2.259 million and basic earnings bei snare bill 15.46 cents
• Evill year gividencials to statenoiders of 10 cents per share
• Selection of operating costs under the looeraung costs to gross margin ranger
• Confrontive net operating cash Nows of \$16.006 million. primarily due to receipts from former joint venture contracts in advance of payment to Euppliers
• Shong growth in Technology

Solutions candidarly in Enterprise Computing Software Licensing and the core Queensland Technology Integration ousness!

• 2. Crowin in the Navision Application Solutions business with the acquisition from Stockford Limited
• 2. Crown in the Recruitment Solutions ou sincess
• $\sum$ economically local Tevenues from New South WA 165 ZUG WAGATA CIKING YETI the previous year.
• Services revenues of \$31.925 million representing strong growth over the previous. years \$26.474 million
• Ellopetatom ily commusel Inprovenient in the Key measures of average transaction costland ship to times in our logistics and warehousing operation and in debtors management, and continued improvements in business operations through implementation of ousiness processes in cleoltonic vorklow systems. enhancement of corporate identity standards and Inprovements Minuman resources management

Alexe Shocker

Retiliered och tilloulion from Supply contracts here by E Molety Canadian Springform checies revenue and EXCHE DING

• Mariellow expredicted ochordinance in NSW and Victoria in the core technology infogration and product sales areas due to continuing competitive pressure and spine management changes that altected continuity and BIONICOURT
• Concertainty Rom SAP In relation to their chained safes, plans led to no new pusiness license sales and to periormance below religer

GUIDERINAS GUIZINA

In 2004 we are targeting little change in overall revenue. but improved profitability from Technology Solutions in New South Males, Mictoria and ACT and from Application Solutions Willipontribute mener levels of operating profit We will continue to look for appropriate acquisitions to enhance either our geographic scale of our expertise in specific areas For shareholders weigte looking to continue to deliver earnings that allow for dividends and underpinthe intersying original the company's shares

Financial Highlights

	1998 Total \$000	1999 Total \$000	2000 Total \$000	2001 Total \$000	2002 Total \$000	2003 Total \$000
Sales Revenue
- Products	57,266	105.331	101,771	99,100	145.058	160,684
- Services	11,523	27,017	28,582	27,249	26,474	31,925
	68.789	132,348	130,353	126,349	171,532	192,609
Other Revenue	321	182	117	78	274	196
Share of net profits of joint venture partnerships accounted for using
the equity method	130	591	253	734	784	80
Total Revenue	69.240	133,121	130,723	127,161	172.590	192,885
Operating profit before interest, tax, depreciation, amortisation and goodwill write down and abnormal items	3,615	4,846	2,193	(475)	5.475	4,697
Abnormal items			(832)
Earnings before interest, tax, depreciation, amortisation and goodwill write down (EBITDA)	3,615	4,846	1,361	(475)	5,475	4,697
	(239)
Depreciation and lease amortisation		(556)	(597)	(590)	(651)	(611)
Goodwill amortisation		(228)	(334)	(414)	(316)	(323)
Goodwill write down				(1,965)
Interest expense	(16)	(228)	(290)	(655)	(346)	(208)
Profit / (loss) from ordinary
activities before tax	3,360	3,834	140	(4,099)	4.162	3,555
Tax expense	(1, 126)	(1,272)	(224)	(163)	(992)	(1, 296)
Net profit / (loss) after tax	2,234	2,562	(84)	(4,262)	3.170	2,259
Basic earnings per share	20.2 cents	20.8 cents	(0.6) cents (29.25) cents		21.7 cents	15.5 cents
Dividends per share	11.5 cents	12.0 cents	2.5 cents	0.0 cents	0.0 cents	10 cents

"Data'3 continues to provide Queensland schools and Education Queensland with the efficient and cost-effective procurement of our computer equipment through preferred supplier agreements. Its specialised team of licensing consultants assist our schools in getting the best value for their software licensing requirements and software asset management. Data'3 truly understands the supplier relationship that it has with Education Queensland and we are happy to continue this relationship."

Di Taylor, Assistant Director, Information Management Branch, Education Queensland

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Managed Services addresses the needs of customers requiring support, management and expertise to operate their technology. infrastructure where the essential buying criteria are flexibility, quality, track record and return on investment. Managed Services operates our national call centre, provides remote systems management via our Remote Management Centre and provides outsourcing of IT systems operations and support.

Procurement Solutions

Procurement Solutions feverages the investments we have made in our people, systems and processes to meet our customers' needs for competitive pricing, appropriate quality and ease of doing business in acquiring IT hardware and software. Our online procurement system CustomerNet is the cornerstone that provides product information, pricing, quotationand order processing facilities. and is supported by our account management and logistic teams' commitment to customer service. and consistent business. processes.

Procurement Solutions also

operates our logistics and warehousing functions and has responsibility for purchasing and inventory management.

Recruitment Solutions

For customers requiring contract or permanent IT staff and for whom quality, responsiveness and industry knowledge are key criteria, Recruitment Solutions provides temporary and permanent personnel from an extensive database of candidates across all IT disciplines.

Corporate Services

Corporate Services provides the shared services of human resources, finance and accounting, IT systems and processes, and corporate marketing.

The Total Solution

Each of our lines of business answers discrete challenges for our customers by providing expertise in people and processes to maximise return on their IT investment. Where our customers' needs cover a number of these areas and they either lack the skills internally or seek to have one partner responsible, Data'3 offers the total solution by seamlessly integrating the required products and services.

"Data'3 provides Council with a high standard of ongoing support and services in Technical Architecture, Consultancy Services and Software License procurement to meet our expanding IT service provision requirements. In a demanding time of financial competitiveness and increased scrutiny of the services provided by Council we expect and demand a significant value from our relationships with vendors. Data'3 has continued to deliver on our expectations."

Joe McCabe, Director Organisational Services, Gold Ceast City Council

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Externally the company's range of products and services continues to be well matched to the demands of the market place. We have enhanced our expertise in specific technologies that are core to our customers' IT systems and this has afforded us differentiation. and brought success in a competitive and constantly changing market. We can improve our current product and services offerings further and will particularly look to take advantage of what we see as increasing opportunities in selective outsourcing in the midmarket.

As previously announced, the Board believes that it is appropriate for its numbers to be extended to a total of five members. With the Powerlan distraction of the past year now gone the search which had been commenced to identify two new appointments to the Board will. be completed. Also, as previously announced to shareholders in fast year's report Graham Clark had expressed an

intention to stand down from the Board at an appropriate time. However he has remained and continued as the company worked through a challenging period. As Graham must retire by rotation he will stand for reelection at this year's annual general meeting and, if elected, will continue until the process to expand the Board is completed.

There remains no doubt that Data*3 operates in a continuously challenging and changing market. However there also remains no doubt that the company is able to do so profitably and is well placed to continue and to build on the success of the past two financial years. I trust that shareholders share this confidence and look. forward to rewarding their ongoing support through sustained returns.

L. A Pususon

Chairman

"From the inception of Dairy Farmers' transition to SAP, Data'3 has been involved in providing infrastructure and technical support for our SAP R/3 implementation. Data'3 also recently assisted us with a major infrastructure investment, competitively positioning Dairy Farmers as one of Australia's leading dairy manufacturers while taking advantage of cost reductions and optimising business performance. Data'3's input into this partnership has been valued by Dairy Farmers."

Tony Talbot, Group Information Services and Solutions Manager, Dairy Farmers

Rounding out an excellent year for the company, the return to dividends with a full year. payment of 10 cents per share. rewards the patience and support of our shareholders.

In financial terms, while the result in 2003 was impacted by the failure of Powertan (Old) Pty Ltd and its effect on our joint ventures Queensland Desktop Services and Queensland Software Services, the overall performance reflects a continuation of that achieved in-2002 in a competitive and uncertain market. We trust we have met the expectations of our stakeholders and that the improving sentiment towards the company continues.

My review tooks at the financial results in some detail, both the underlying performance which excludes the effect of the joint ventures in terms of the first half loss, and the second half benefit from operating the joint venture contracts exclusively, and then examines actual performance. I have also cutlined progress we made against the non-financial objectives we set at the beginning of the year and the objectives and outlook for 2004.

FINANCIAL PERFORMANCE

Coming into the year we expected revenue from Procurement Solutions to

GEO'S Réview

decrease and therefore our objective was to offset this with higher levels of performance in those parts of the business that did not positively contribute in 2002. Specifically we targeted significant improvement from our national Application and Recruitment businesses and from the Technology Solutions business in NSW and Victoria.

Revenues for the year were enhanced by joint venture' revenue not included in previous. years, and by increases in Services, Recruitment, Applications and New South Wales Technology revenues. These gains were offset by a decrease in Procurement revenue.

We see revenue becoming less retiable as a measure of our market share and growth given. the increasing incidence of our major suppliers invoicing our customers directly for the gross. amount and paying us a fee: We regard gross margin as a more accurate indicator of growth and market share. On this basis, the underlying business grew over the previous year by $2\%$ . A pleasing aspect was the substantial growth in services revenue - up 21% from \$26.474 million to \$31.925 million and indicative of a greater 'solutions' focus. This increase was primarily due to an increased. number of projects over the

previous year in Application Solutions and Technology Integration.

Underlying EBITDA increased by 5% to \$5.727 million up from \$5.475 million and underlying net profit before tax increased 10%; from \$4.162 million to \$4.591 million.

Total operating costs showed a 7% increase over 2002 primarily due to increased staff costs associated with the acquisition from Stockford Limited, operation of the joint venture. contracts and also the costs associated with the receivership and administration of Powerlan Old A measure we use. internally, 'staff costs as a percentage of gross margin. reduced by 2%. In these terms, the level of expenditure required to generate this year's profit reduced compared with the previous year. On the same basis as in the previous year, staff numbers at the close of the financial year stood at 415 which includes 90 contractors engaged through the Recruitment Solutions business.

The ongoing review of the value of goodwill resulted in amortisation of \$0.323 million. during the year reducing its. carrying value to \$4,982 million. Net profit after tax was \$2,259 million and basic earnings per share 15.46 cents.

With the joint venture issues behind us in the first half, it was a pleasure to declare a dividend for the second half of 7.5 cents. per share which, added to the 2.5 cents in the first half, returned 10 cents per share to shareholders.

The company's cash position reflected the joint venture loss in the first half, offset by receipts from customers in advance of payments to suppliers, and the strong profit performance in the second half, interest bearing debt was reduced over the previous year. The key debtor indicators showed further reductions in average ageing with 3.5% of the ledger older than 60 days against 5.8% in the previous year. Given a continuing tight business environment, this has been an excellent result.

While underlying performance exceeded our financial objectives, performance remained varied across the businesses. Coming into the year, we had targeted more balance in earnings across all parts of the business and at the half year this trend was evident. However we were not able to hold this trend in the second half in all areas and consequently have made some structural changes to improve performance in 2004.

Application Solutions'

performance was affected by two factors foreshadowed in the interim report. Firstly, the global roll out of a new reseller plan and the consequent uncertainty. in the terms and conditions of our reseller agreement with SAP led to no new license sales in the year. Secondly, software license sales of Navision subsequent to its acquisition by Microsoft were lower than targeted. These impacts were

offset in part by a generally stronger services performance, however not sufficient for the business to reach its targets for the year.

Technology Solutions had an excellent year once again, exceeding its overall targets. The technology integration business in Queensland grew very strongly as we increased our level of expertise in our customers' core technologies through additional key staff and gained further market share. Our presence in Central Queensland also grew substantially. Following an improved first half in technology. integration and managed services in New South Wales and Victoria, the second half did not follow suit. Difficulties in our sales processes and in a large integration project and the loss of a significant remote management contract impacted on financial performance. We expect an improvement early in 2004 after making some structural changes, appointing additional staff to enhance our management and technical expertise, and working more closely with our major vendor partners. After an investment in the first half in establishing a presence in the ACT, we broke even in the second half and are well positioned to produce a positive contribution in 2004.

The interim report noted that continuation of the strong performances in our national enterprise infrastructure and licensing businesses was a key success factor for the full year. Both businesses finished the year with best ever performances. In December the enterprise infrastructure business was awarded IBM's Asia Pacific Partner of the Year Award (2003) for Australia and New Zealand acknowledging our expertise and the success it brought nationally. Similarly the Licensing business was awarded Microsoft's Large Account Reseller Excellence Award for the South Pacific Region (2002) in acknowledgement of the expertise we have in licensing solutions and for our 'Licensingon-line' web-based software management tool. Both businesses are positioned for continuing success in 2004.

In a recruitment market that remains tough, Recruitment Solutions' performance improved considerably over 2002. We have built a competent and professional team and have developed specialisation in a number of areas, which offers us a clear competitive differentiator. The contribution from Recruitment Solutions can improve further in 2004 and we will look for opportunities to expand the business into Victoria and the ACT.

The Procurement Solutions

business was unable to produce performance matching that of 2002 when it positioned itself to take advantage of a specific procurement opportunity that existed at that time. During 2003. more emphasis has been placed on market coverage through direct tele-sales and continued rollout of CustomerNet for online procurement. These initiatives successfully introduced a farge. number of new customers to Data*3 with 135 CustomerNet registrations, up from 48 at the start of the year. Our logistics and warehousing function. reduced transaction costs by a further 40% over the year following the 11% reduction in the previous year and in 2003, on average, we shipped orders to customers in 3.9 days, similar to that in the previous year.

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OBJECTIVES AND OUTLOOK FOR 2004

The recently published PricewaterhouseCooper's "TechReview" reports that in the 2002 calendar year the majority of the 103 ASX listed IT companies performed poorly, with the market value falling by 49% over the previous year. This compares with the S&P/ASX 200 index that fell by 12%. Though the industry continues to undergo structural change and competitive pressures remain significant, in 2004 we are targeting to improve on the underlying performance of 2003 through a more balanced contribution to earnings from all areas of the business.

Our stakeholder objectives remain unchanged:

• To continue to deliver earnings that allow for shareholder dividends and underpin the improving price. of the company's shares
• To have over 90% of our people tell us they would recommend Data*3 to others. as their preferred employer
• To have over 90% of our key customers tell us that we are their preferred supplier in the areas of business in which we engage.

Our plans for 2004 are based on four strategic assumptions:

That there will be no significant change in the economic environment from 2003

• That the IT industry will remain competitive with continuing tight margins.
• That vendors, while under global financial pressure and hence somewhat unpredictable, are key to our potential
• That expertise in our people and processes provides the greatest opportunity for success.

The strategic planning process has determined a number of imperatives for the targeted performance to be achieved. Some of these are:

• To apply the full resources and capability of the national business and to ensure the appropriate management is in place in those areas that need to improve their performance over the previous year
• To not lose any of our key customers to a competitor
• To continue to develop expertise in our core offerings
• To ensure key staff are attracted to join and remain. with the business
• To grow the power and financial performance of our specialist businesses
• To enhance gross margin through product mix and better buying

• To continue to improve internal business processes. particularly so far as they relate to customer interaction.

• 臘 To ensure our targets and customer engagement processes realise the opportunity we have for 'cross-selling' our offerings

• ▓ To use our key vendor relationships to drive business growth.

The financial targets for 2004 imply:

• Improved performance in Technology Integration in Queensland predominantly through services growth, and in NSW, Victoria and ACT predominantly through increased product sales.
• ▓ Similar performance in Enterprise Infrastructure as we expand the operation. considerably in NSW and Victoria in line with market opportunity
• ▓ Growth in the core Licensing business through capitalisation on new contracts won in 2003 and further expansion in NSW, Victoria and ACT
• ▓ An improvement in contribution from our Application Solutions business across all areas
• Similar contribution to 2003 from Procurement Solutions
• A further improvement in contribution from Recruitment. Solutions given our improved capability and the specialisations we have and will continue to develop
• Similar corporate costs as in 2003.

"Data'3 has been the IT supplier of choice for Allied Pickfords because of its reliable and solid supply and delivery performance and its competitive pricing structure. Data'3 adds tremendous value to our business by providing us with the technical support that enables our organisation to select the best products that achieve our objectives at the lowest possible cost."

Ziad Sukkar, 17 Manager (Asia Pacífic), Allied Pickfords.

Additionally and in line with the previous year, we will address the more qualitative areas of customer and staff commitment. organisational development and competitive positioning through ANTIQUE AND LEADERS Indicators and an action plan. that realises associated fargets

MONGLISION

We have now demonstrated sustained profitability over the past two and a half years and have relestablished shareholder dividends We are intention maintaining this momentum

My sincere thanks once again go to the geople who make up the Data 3 feam liney have delivered wise counsel and real results to our customers.

infoughout the challenges of the past year. My thanks also go for our customers who continue to choose us to cather them in meeting their business goals and whose needs drive us to ever mote creative solutions, to our suppliers whose support has shown the true value of our principal of the mineral compa exectioned is the solid base on which our solutions are built, and to our shareholders wrose patience and support are stating to receive their just Tanzania provincia de la contrada de la contrada de la contrada de la contrada de la contrada de la contrada hetutns.

Am Grand.

tom Grend Chief Executive Officer

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Directors' Profiles

Richard Anderson OAM Non-Executive Chairman

Richard joined the Board of Data*3 Limited in 1997 and was appointed Chairman in September 2000.

He is a member of the Board of Naomi Cotton Cooperative Limited, Lindsay Australia Limited and Villa World Limited, President of the Guide Dogs for the Blind Association of Queensland, a member of the Council of the Queensland Art Gallery Foundation and Patron of the Brisbane Polo Club Limited.

Formerly a partner of

PricewaterhouseCoopers, he was the firm's Managing Partner in Queensland and a member of the firm's National Committee. He previously has been a member of the Board of Trustees of Brisbane Grammar School and the Capital Markets Board of Queensland Treasury Corporation, President of the Brisbane Polo Club and President of CPA Australia in Queensland.

Howard Stack Non-Executive Director

Howard served as Non-Executive

Chairman of Data*3 Limited from 1997 to September 2000 and continues as a Director. He was a partner in the Brisbane. based commercial law firm Feez Ruthning from 1969, and Managing Partner from 1992 until its merger with Allen Allen and Hemsley in 1996. He retired from the firm in 2001.

He is a Director of Flight Centre Limited and Director of the unlisted Brisbane hotel group Abney Limited. He previously served as a Director of Australian National Industries (1987-1997) and Chairman of Southern Cross Pumps and Irrigation (1996-1997) and Voxson Limited (1999-2003). In the community he has been Chairman of Brisbane Grammar School Board of Trustees since 1991, and served as a Director of Queensland Events Corporation (1996-1998).

Graham Clark Non-Executive Director

Graham has been a Director of Data*3 Limited, its subsidiaries and its

predecessor, Powell Clark and Associates, since 1977.

He retired from management responsibilities within Data*3 in 1997 after a 34 year career in IT, but remains as a Non-Executive Director. His specific management responsibilities included product and system development, finance, quality and internal systems.

Graham began his career in IT as a biometrician with the Queensland Government. He was employed by IBM from 1966 until 1976 in sales, software development and systems engineering. He formed Powell Clark and Associates with Terry Powell in 1977 and Powell Clark and Associates evolved into Data*3 in 1984. He has been a member of the Australian Computer Society since 1966. His professional focus has always been software development and he has authored scientific and commercial applications used in Australia and Asia.

Terry Powell

Non-Executive Director

Terry was Executive Chairman of Data*3 from its foundation in 1984 and then Managing Director from 1989 to June 1996. Prior to 1984, Terry was Managing. Director of Powell Clark & Associates. formed in 1977 with Graham Clark.

As part of Data*3 Limited's listing on the Australian Stock Exchange, he resigned as Chairman in October 1997 to allow for the appointment of a Non-Executive Chairman. Terry re-joined the Data*3 Limited Board in February 2002.

Prior to retirement from Data'3 in 2001, Terry was General Manager Group Operations with responsibility for Data*3's Year 2000 and eBusiness strategy development. In that position Terry had responsibility for the group's systems and processes, operations and logistics, business improvement and human resources.

Terry's career in IT began at IBM's Data-Processing Division in 1966. He continued with IBM until 1976, enjoying considerable success in systems. engineering and sales roles. He is also a Director on the Board of St Andrew's Private Hospital (Brisbane).

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Board Meeting Conduct

Normal Board meetings are conducted monthly, and the Board convenes at other times as required. The Board also meets formally on a regular basis with the senior management team. The meetings are chaired by the nonexecutive Chairman or in his absence, his nominee. The Chairman is responsible for ensuring that the governance. objectives of the Board are pursued and that the conduct of the meetings is efficient and appropriate.

The meetings are attended by the Chief Executive Officer, the Company Secretary and other executive management, when appropriate.

Board Composition and Committees

The Board has determined that its optimum composition will:

• conform with the Constitution of the company
• to have a majority of Directors as non-executive
• feflect the company's geographic operations and strategic objectives

Considering the size of the company and the number of its Directors, the Board considers that the establishment of a nominations committee is not necessary. Directors are initially appointed by the full Board,

subject to election by the shareholders at the next annual general meeting and re-election. at three yearly intervals.

The full Board also addresses remuneration and corporate conduct requirements.

There is a Board Audit Committee that gives particular attention to and reports to the full Board on the integrity of financial information, treasury activities, internal control systems and internal and external audit processes. Since the end of the financial year the structure of the Audit Committee has been amended in accordance with the ASX Corporate Governance Council's recommendations. The current membership is R A Anderson. (Chair) and H L Stack, with the Chief Executive Officer and the Chief Financial Officer participating by invitation. It is intended that H L Stack will assume the chair of the Audit Committee following the completion of the audit for the year ended 30 June 2003.

The Board is also assisted by the Superannuation Policy Committee, which reviews the corporate superannuation funds and provides liaison between the fund members and the fund managers. The committee meets at feast once a year and more frequently if required. Current membership of the

Superannuation Policy Committee is G R Clark (Chair), L MacPherson, J M Pickard, K J Woods and N F Bennett (staff members).

Chief Executive Officer

Our most senior executive, the Chief Executive Officer, is selected by the Board and is subject to annual performance. reviews by non-executive Directors. The Chief Executive Officer recommends policy and strategic direction for Board approval, is responsible for managing day-to-day operations, and is the Board's principal link to senior management.

Board Appraisal

During the year, the Board continued its process of review to evaluate the performance of the Board, collectively and individually.

Directors' Arrangements with the Company

The Constitution provides that a Director may enter into an arrangement with the companyor with any controlled entity. Directors or their firms may act in a professional capacity for the company or controlled entities, other than to act as an Auditor of the company. These arrangements are subject to the restrictions of the Corporations Act.

"Data'3 helped to transform the NSW Rural Fire Service computing infrastructure into a modern and professional facility by replacing and rebuilding almost all of our servers. This enables us to offer more reliable service to those who save lives and property from the regular onslaught of bushfires in NSW. Data'3's breadth of knowledge on all aspects of IT, as well as their professional approach, has been a source of great support to us."

Terry Fogarty, Manager Information Technology, NSW Rural Fire Service

Financial services must be provided to Directors under terms and conditions that would normally apply to the public or. in the case of an executive Director, under terms and conditions that would normally apply to employees. Disclosure of related party transactions is set out in note 28 to the financial statements.

When a potential conflict of interest arises, the Director concerned does not receive copies of the relevant Board papers and withdraws from the Board Meeting whilst such matters are considered. According y, the Director concerned takes no part in discussions not exercises any influence over other members of the Board if a potential conflict of interest exists

Board and Committee Adenda

Beard and committee agenda are structured throughout the year to reflect their defined responsibilities, to give the Board a detailed overview of the performance and significant issues confronting each business unit and the company. and to identify major risk elements for review to ensure that assets are properly valued and that protective strategies. are in place.

Directors receive detailed financial and operational reports. from senior management monthly and management is available to discuss the reports with the Board,

Independent Professional Advice

Directors and Board committees. have the right, in connection with their duties and responsibilities, to obtain independent professional advice. at the company's expense. Prior written approval of the Chairman is required but this will not be withheld unreasonably.

Sale/Purchase of Securities by Directors or Officers

Directors or officers must not buy, sell or subscribe for securities in the company if they are in possession of 'inside' information', i.e. information that is not generally available, and, if the information were generally available, a reaschable person would expect it to have a material effect on the price or value of the securities in the company. The Corporations Act provides that a reasonable person would be taken to expect information to have a material effect on the price or value of securities of a body corporate if the information would, or would be likely to, influence persons. who commonly invest in securities in deciding whether of not to subscribe for, buy or sell the securities. It is Board policy that Directors may trade in the company's securities subject to the insider trading restrictions. above, during each of the fourweeks following each half-yearly profit announcement or the date of issue of a prospectus. Directors discuss their intention to trade in the company's

securities with the Chairman of the company prior to trading,

In unusual or pressing circumstances and subject to the insider trading restrictions above, Directors may trade outside the specified periods. after discussion with the Chairman of the company.

In addition. Directors will not trade in the shares of any other entity if inside information on such entity comes to the attention of the Director by virtue of holding office as a Director of the company.

Remuneration of Directors

The remuneration policy for Directors and the remuneration of each Director is set out in the Directors' Report on pages 18 to 23 of this Annual Report.

Remuneration and Succession Planning for Executives

The full Beard reviews the succession planning for executive management and sets the remuneration packages applicable to the Chief Executive Officer and senior executives. The remuneration policy for executives and the remuneration of the five executives receiving the highest emoluments is set out in the Directors' Report on pages 18 to 23 of this Annual Report. Further details on the remuneration of executives are set out in note 26 to the financial statements.

Communicating with Shareholders

It is the intention of the Board that shareholders are informed of all major developments that impact on the company. Information is communicated to shareholders through:

• the Annual Report and half yearly reports
• disclosures to the Australian Stock Exchange
• notices and explanatory memoranda of General Meetings
• the Internet on www.data3.com.au
• to other communication from time to time as deemed necessary.

The content and structure of the company's website has been enhanced during the year, including an improved Investor. Information section. In accordance with the ASX Corporate Governance Council's recommendations the company intends to publish further corporate governance material on the website in future.

"Data"3 has the right people for the job. Being a national company, Data'3 was able to draw from a large pool of resources to find the most appropriate person with deep technical skills to manage our BizTalk integration project."

Sumith Perera, Chief Information Officer, CRT Group Pty Ltd

Your Directors present their report on Data*3 Limited and its controlled entities (the consolidated entity) for the year ended 30 June 2003.

Principal activities

The principal activities of the consolidated entity during the course of the financial year related to the delivery of information technology solutions, which draw on the entity's broad range of products and services and its alliances with other industry providers.

These activities included the procurement of Information Technology (IT) products; the design, implementation and support of IT infrastructure solutions; the provision of IT recruitment services; and the supply, implementation and support of application software solutions.

There were no significant changes in the nature of the activities of the consolidated entity during the year.

Dividends

A fully franked interim dividend of \$365,048 (2.5 cents per share) was paid on 30 April 2003. In addition, since the end of the financial year the directors have declared a fully franked final dividend of \$1,099,036 (7.5 cents per share) to be paid on 31 October 2003 out of retained profits at 30 June 2003.

Review of operations and results

Total revenue (excluding share of net profits of joint venture partnerships) of the consolidated entity for the year was \$192,805,000. The operating profit of the consolidated entity before interest, tax, depreciation and amortisation was \$4,697,000. The net profit after these expenses, including share of net profits of joint venture partnerships, was \$2,259,000.

On 15 August 2002, Powerlan (Qld) Pty Ltd, the consolidated entity's former 50% joint venture partner in the joint venture partnerships Queensland Desktop Services and Queensland Software Services, was placed into voluntary administration and receivership. The financial effect of this event is a loss of \$1,950,000, which is reflected in the financial result of the consolidated entity for the year ended 30 June 2003. Refer to note 32 to the financial statements for full disclosure of this event.

Additional information on the review of operations of the consolidated entity for the financial year ended 30 June 2003 is set out in the Annual Report.

Earnings per share the state of the state	2003	2002
Basic earnings per share	15.46	21.72
Diluted earnings per share	15 44	21.72

Significant changes in the state of affairs

There were no significant changes in the state of affairs of the consolidated entity during the year other than as disclosed in the financial report.

Matters subsequent to the end of the financial year

No matter or circumstance has arisen since 30 June 2003 that has significantly affected, or may significantly affect:

• (a) the consolidated entity's operations in future financial years; or
• (b) the results of those operations in future financial years; or
• (c) the consolidated entity's state of affairs in future financial years.

Likely developments and expected results of operations

Likely developments in the operations of the consolidated entity and the expected results of those operations are covered generally in the review of operations of the consolidated entity set out in the Annual Report.

Further information on likely developments in the operations of the consolidated entity and the expected results of operations has not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the consolidated entity.

Meetings of Directors

The names of all Directors of Data*3 Limited since the beginning of the financial year together with the numbers of meetings of the company's Board of Directors and of the Audit Committee held during the year, and the numbers of meetings attended by each Director are:

Name	Full meetings of Directors			Meetings of Audit Committee
	Meetings attended	Meetings	Meetings attended	Meetings
R A Anderson	2.	22	6	6
H L Stack	20	22		×
G R Clark	21	22		×
W T Powell	2.	22		×

* = Not a member of the committee during the year.

Each person listed above was a Director for the whole of the financial year and up to the date of this report.

Information on current Directors

Name	Experience	Special responsibilities	Particulars of Directors interests in shares and options of Data 31 Limited as at the date of this report
			Ordinary shares	Options
R A Anderson OAM, BCom, FCA	Non-Executive Director. Refer to the Directors' Profiles in the Annual Report for further information.	Chairman. Member of Audit Committee.	20,000
H L Stack LLB	Non-Executive Director. Refer to the Directors' Profiles in the Annual Report for further information.	Member of Audit Committee since 22 August 2003.	10,000
G R Clark BSc. Dip. Comp. Sc.	Non-Executive Director. Refer to the Directors' Profiles in the Annual Report for further information.		574,500
W T Powell BEcon	Non-Executive Director. Refer to the Directors' Profiles in the Annual Report for further information.		179,200

Directors' and executives' remuneration

The Board addresses remuneration policies and practices generally, and determines remuneration packages and other terms of employment for the chief executive officer and senior executives.

Executive remuneration and other terms of employment are reviewed annually by the Board having regard to performance against goals set at the start of the year, relevant comparative information and independent expert advice. As well as a base salary, executive remuneration packages include superannuation, performance-related bonuses and fringe benefits. Performance-related bonus payments are linked to the achievement of individual objectives, both financial and nonfinancial, which are relevant to meeting the company's business objectives. A major part of the bonus payment is related to growth in group profit and divisional profit relevant to each individual.

Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidated entity's operations and achieving the company's strategic objectives.

The Board determines remuneration of non-executive Directors within the maximum amount approved by the shareholders from time to time. This maximum currently stands at \$350,000 per annum in total, to be divided among the Directors in such a proportion and manner as they agree. The Board is currently comprised solely of non-executive Directors.

The Board undertakes an annual review of its performance and the performance of the Board committee against goals set at the start of the year. Executive members of the Board committee receive no compensation for service on this committee. Bonuses are not payable to non-executive Directors.

Details of the nature and amount of each element of the remuneration of each Director of Data*3 Limited and each of the five officers of the company and the consolidated entity receiving the highest remuneration are set out in the following tables.

Directors of Data 3 Limited
Name	Directors base Jees	Committee Tees.	Superannuation	Options
RA Anderson	50,000		4,500		54,500
H L Stack	30,000		2,700		32,700
G R Clark	30.000		2.700		32,700
W T Powell	30,000		2.700		32,700

Executives of Data'3 Limited Company

Name	Base salary	Motor vehicle	Incentive payments	Super- annuation	Other benefits	Options	Total
	S.	K.	S.	$\mathbf S$	$\mathbf{f}_\mathrm{b}$	S.	A.
J E Grant	72.000	73,867	117,631	28,330	7,258		299,086
Chief Executive Officer
B Hill	109,050		31,093	12,569	2,597	1,600	156,909
Chief Financial Officer
and Company Secretary
K R Partridge	109,332	8,400	5,385	10,519		1,600	135,236
Manager --
Systems & Processes
D P Ryan	68.973	19,100	17,015	9,458			114,546
Manager - Finance
K H Weber	86,000		14,879	9,079			109,958
Manager - Operations

Executives of the consolidated entity
Name	Base salary	Motor vehicle	Incentive payments	Super- annuation	Other benefits	Options	Total
	S.	Æ,	B	×,	玉	B.	趭
B D Colledge Manager - Licensing Solutions	125,000	$\overline{\phantom{a}}$	171,721	10.519		1.600	308.840
B A Crouch Manager - Enterprise Solutions	129,481	$\overline{a}$	161,162	10.519		1.600	302.762
J E Grant Chief Executive Officer	72,000	73,867	117,631	28.330	7,258		299.086
L C Baynham General Manager - Technology Solutions	142,481	7,000	122,935	10,519		4.000	286,935
M J Bowser Manager - Technology Solutions Queensland	115,001	12,000	124,348	10,519		1,600	263,468

"Executives" are officers who are involved in, concerned with, or who take part in, the management of the affairs of Data*3 Limited and/or related bodies corporate.

The amounts disclosed for remuneration include the assessed fair values of options at the date they were granted during the year ended 30 June 2003. Fair values have been determined using the Black Scholes Option Pricing Model and take into account factors such as exercise price, the term of the option, current price and expected volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

Share options granted to Directors and the most highly remunerated officers

No share options were granted to Directors during or since the end of the financial year. Options over unissued ordinary shares of Data'3 Limited granted during or since the end of the financial year to the five most highly remunerated officers of the company and the consolidated entity as part of their remuneration were as follows:

Executives of Data'3 Limited	Options granted
B I Hill	20.000
K R Partridge	20.000
Executives of the consolidated entity
B D Colledge	20.000
B A Crouch	20.000
L C Baynham	50.000
M J Bowser	20.000

Hodel People

Shares under option

At the date of this report unissued ordinary shares of Data*3 Limited under option are:

សហគាត់នោះ	Exercise price	Expiry date
Options outstanding at 1 July 2002
20.000	3.47	13 March 2004
150,000	3.45	-26 March 2004
Options cancelled during the year
20.000	3.47	13 March 2004
150,000	-3.45	-26 March 2004
Options issued during the year
20,000	0.91	28 February 2004
190,000	0.91	21 November 2005

All options outstanding at 1 July 2002 were cancelled during the year. Options were issued during the year to holders who are not Directors with an exercise price at current market value at the time of issue. All options issued during the year are exercisable from 22 November 2003.

The option holder does not have any right under the options to participate in any other share issue of the company and/or any other entity. No options were exercised during the year or up to the date of this report.

Indemnity/insurance of officers

During the financial year, Data*3 Limited paid a premium of \$26,903 to insure the Directors and members of the executive management team of the company and the consolidated entity against any liability incurred by them in their capacity as officers, unless the liability arises out of conduct involving a lack of good faith. The executive officers of the consolidated entity are also indemnified against any liability for costs and expenses incurred in defending civil or criminal proceedings involving them as such officers if judgement is given in their favour or if they are acquitted or granted relief.

Environmental regulations

The consolidated entity is not subject to any particular and significant environmental regulations.

Rounding of amounts to nearest thousand dollars

The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the "rounding off" of amounts in the Directors' report and financial report. Amounts in the Directors' report and financial report have been rounded off to the nearest thousand dollars, or in certain cases to the nearest dollar, in accordance with that Class Order.

Auditor

Johnston Rorke continues in office in accordance with section 327 of the Corporations Act 2001.

This report is made in accordance with a resolution of the Directors.

Ruderson

R A Anderson Director

Brisbane Dated this 8th day of September 2003

Statements of Financial Performance For the year ended 30 June 2003

	Notes		Consolidated		Parent Entity
		2003	2002	2003	2002
		\$'000	\$'000	\$'000	\$'000
Revenues from ordinary activities
Sale of goods	2	160,684	145,058.
Services	2	$-31,925$	26,474.	-365
Other	2	196	$^{\sim}$ $^{\sim}$ 274.	8,027	7,726
Total		192,805	471,806	8.392	7,726
Expenses from ordinary activities
Changes in inventories of finished goods		(506)	602
Purchase of goods		$(142, 151)$ .	(128, 558)
Employee and contractor costs directly
on-charged		$(9,969)$ .	(6,376)
Other employee and contractor costs		$(26, 471)$ .	$-(25,500)$	(3, 345)	(2,835)
Telecommunications		(1,086)	$-(1,242)$	$-(197)$	(209)
Rent	3	$(1,915)$ .	៍ (1,822)	(238)	$-(217)$
Travel		(870)	(891)	$(114)$ .	- (95) -
Depreciation and amortisation	3	$^{\circ} (934)$ $_{\odot}$ .	(967)	(310)	(332)
Borrowing costs		(208)	(346)	(208)	(345)
Management charges – controlled entities				$(1, 157)$ .	(1,018)
Other Total		(5, 220)	(3,328)	$(526)$ .	$(578)$ .
		(189, 330)	(168, 428)	(6.095)	(5,629)
Share of net profits of joint venture
partnerships accounted for using the
equity method	31	80	784
Profit from ordinary activities before
income tax (expense) / revenue	3	3,555	4,162.	2,297	2,097
Income tax (expense) / revenue	4	(1,296)	(992)	28	(13)
	21	2,269	3,170	2.325
Net profit					2,084
		Cents	Cents
Basic earnings per share	39	$-15.46$	21.72
	39	15.44	21.72
Diluted earnings per share

The above statements of financial performance should be read in conjunction with the accompanying notes.

$\langle \rangle$

Tirancia, Report

Data'3 Limited and Controlled Entities

Statements of Financial Position As at 30 June 2003

	Notes	Consolidated		Parent Entity
		2003	2002	2003	2002
		\$'000	\$'000	\$'000	\$'000
Current assets
Cash assets	6	14,659	$15,193$ :	$14,650$ :	$-5,188$
Receivables	7	34,379 :	22,569 -	$-8,455$	7,750
Inventories	8	$-790.$	1,296
Other	g.	$-621$	1,156	170	181
Total current assets		50.449	30,214	23.275	13,119
Non-current assets
Investments accounted for using
the equity method	10		631
Other financial assets	11		$-7.$	1,758	1,758
Property, plant and equipment	12	1,764	1.934.	1,058	1,335
Deferred tax assets	13.	$-907.$	573.	101	73
Intangible assets	14	4,982.	5,101
Total non-current assets		7.660	8,246	2.917	$-3,166$
Total assets		58,109	38,460	26.192	16,285
Current liabilities
Payables	15	43,768 :	$21,983 -$	$3,642$ .	1,189
Interest bearing liabilities	16	$-976$	$=691.$	976	678
Current tax liabilities	17	405	$-344$
Provisions	18	$-187$	- 145 1	$85 -$	54
Other	19	$1,746$	$-5,180$	11,979	5,797
Total current liabilities		47.082	28,343	16,682	7,718
Non-current liabilities
Interest bearing liabilities	16	$-125$	4,085	$125 -$	1,085
Provisions	18	466	435 -	$-125$	$-127$
Other	19	625	730.	625.	730
Total non-current liabilities		$^{216}$	2,250	875	1,942
Total liabilities		48.298	30,593.
		도시에 가지		17,557	-9,660.
Net assets		9.811	7,867	0.635	6.625
Equity
Contributed equity	20	7,459	$7,409$ .	7,459 :	7,409
Retained profits / (accumulated losses)	21	2,352	458	1,176	(784)
Total equity		9.811	7.867	0.635	6,625

The above statements of financial position should be read in conjunction with the accompanying notes.

ational Peport

Data³ Limited and Controlled Entities

Statements of Cash Flows For the year ended 30 June 2003

	Notes		Consolidated	Parent Entity
		2003	2002	2003	2002
		\$'000	\$'000	\$'000	\$'000
Cash flows from operating activities
Receipts in the course of operations.		$202,007$ .	189,379	6,273	5,476
Payments to suppliers and employees		$(182,064)$ .	(188, 763)	$(6, 164)$ .	(5,250)
Payments to former joint venture
partnership creditors		(2,333)
Distributions from joint venture
partnerships received	31		698
Interest received		~167.	197.	167.	1971
Borrowing costs		(208)	$(377)$ .	(208)	'376)
Income taxes paid		(1,597)	(618)
income taxes refunded		34	325
Dividends received				2,000-	2,000
Net cash inflow from operating activities	35	16,006	841.	2.068	2,047
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant		(316)	(245)	(33)	(94)
and equipment		~18	10
Payment for purchase of joint venture interest	32	(3,406)
Cash acquired through purchase of
joint venture interest	32.	2,176
Payments for purchase of business	32.	(203)	(85)
Loans to controlled entities				(778)	(2,113)
Net cash outflow from investing activities		(1.731)	(320)	(811)	(2, 207)
Cash flows from financing activities
Proceeds from borrowings		$-1,500$		1,500
Repayment of borrowings		(2,065)	(580)	(2,065)	(580)
Repayment of lease liabilities		(110).	(118)	(97)	(90)
Payment of dividends		-(315).		(315)
Repayment of short term funds from
joint venture partnership		(3,819)	(6, 618)
Short term funds provided by
joint venture partnership			8,255
Loans from controlled entities				$9,182 -$	2,296
Net cash inflow / (outflow) from financing activities		(4,809)	939	8,205	1,626
Net increase in cash held		9,466	1,460 -	9,462	-1,466
Cash at the beginning of the financial year		5,193	3,733.	5,188	3,722
Cash at the end of the financial year	6	14,659	5.193	14650	5.188
Non-cash financing and investing activities	36
Financing arrangements	37

The above statements of cash flows should be read in conjunction with the accompanying notes.

Notes to the financial statements For the year ended 30 June 2003

Note 1. Summary of significant accounting policies

This general purpose financial report has been prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act 2001.

It is prepared in accordance with the historical cost convention. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year.

As a result of applying the new accounting standard AASB 1044 Provisions, Contingent Liabilities and Contingent Assets for the first time, certain liabilities have been reclassified as described in note 1(u).

Principles of consolidation $(a)$

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Data*3 Limited ("company" or "parent entity") as at 30 June 2003 and the results of all controlled entities for the year then ended. Data'3 Limited and its controlled entities together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full.

Where control of an entity is obtained during a financial year, its results are included in the consolidated statement of financial performance from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control existed.

(b) Income tax

Tax effect accounting procedures are followed whereby the income tax expense in the statements of financial performance is matched with the accounting profit after allowing for permanent differences. The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation. Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse.

(c) Acquisitions of assets

The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their market price as at the acquisition date, unless the notional price at which they could be placed in the market is a better indicator of value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of the acquisition. The discount rate used is the incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Goodwill is brought to account on the basis described in note 1(n).

(d) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs are assigned to individual items of stock on an actual cost basis.

Recoverable amount of non-current assets $(e)$

The recoverable amount of an asset is the net amount expected to be recovered through the net cash inflows arising from its continued use and subsequent disposal. Where the carrying amount of a noncurrent asset is greater than its recoverable amount, the asset is written down to its recoverable amount. The expected net cash flows included in determining recoverable amounts of non-current assets are not discounted to their present values.

Notes to the financial statements For the year ended 30 June 2003

Investments $(1)$

Listed and unlisted securities and controlled entities

Interests in listed and unlisted securities, other than controlled entities in the consolidated financial statements, are brought to account at cost and dividend income is recognised in the statements of financial performance when receivable. Controlled entities are accounted for in the consolidated financial statements as set out in note 1(a). Where there has been a diminution in the value of any individual investment a provision for write down to recoverable amount is made.

Joint venture partnerships

The interests in joint venture partnerships are accounted for using the equity method. Under this method, the share of the profits or losses of the joint venture partnerships are recognised in the statements of financial performance, and the share of movements in reserves is recognised in reserves in the statements of financial position. Details relating to the joint venture partnerships are set out in note 31.

(g) Depreciation of plant and equipment

Depreciation is calculated on a straight line or diminishing value basis to write off the net cost of each item of plant and equipment over its expected useful life to the consolidated entity. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. The expected useful lives are as follows:

Plant and equipment $3 - 20$ years

Leasehold improvements $(h)$

The cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or the estimated useful life of the improvement to the consolidated entity, whichever is the shorter. Leasehold improvements held at the reporting date are being amortised on a straight line basis over 10 years.

$(i)$ Leased non-current assets

A distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all of the risks and benefits incidental to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits.

Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the interest expense.

The lease asset is amortised on a straight line basis over the term of the lease, or where it is likely that the consolidated entity will obtain ownership of the asset, the life of the asset. Leased assets held at the reporting date are being amortised over a period of 4 to 5 years.

Incentives received on entering into operating leases are recognised as liabilities. Lease payments are allocated between rental expense and reduction of the liability.

Operating lease payments are charged to the statements of financial performance in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets.

$\langle$ i) Receivables and revenue recognition

Receivables

All trade debtors are recognised at the amounts receivable, as they are generally due for settlement no more than 30 days from the date of recognition. Collectibility of debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised where significant doubt as to collection exists.

Notes to the financial statements For the year ended 30 June 2003

Revenue

Revenue includes revenue earned (net of returns, discounts and allowances) from the provision of goods or services to entities outside the consolidated entity.

Revenue from sales of goods is recognised when the goods are shipped to a customer pursuant to a sales order and the associated risks have passed to the carrier or customer.

Revenue from services is recognised in accordance with the percentage of completion method. The stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours. Where it is probable that a loss will arise from a service contract, the excess of total costs over revenue is recognised as an expense immediately.

Revenue from corporate charges is recognised when the relevant services are performed.

Accrued rebates

Accrued rebates comprise amounts receivable from suppliers of inventories and are normally based on volume purchased during the year. Accrued rebates are recognised as a reduction in cost of goods sold when the entitlement to them arises.

Unearned income

Unearned income represents contract revenue received but not earned in the current financial year. The revenue is recognised over the term of the relevant contract.

Employee benefits $(k)$

Revised accounting standard AASB 1028 Employee Benefits was adopted with effect from 1 July 2002. This revised accounting standard has had no material effect on the consolidated entity's financial statements.

Wages, salaries and annual leave

Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting date are recognised in other creditors in respect of employees' service up to the reporting date, and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for sick leave, which is non-accumulating, are recognised when the leave is taken and measured at the rates paid or payable.

Long service leave

The fiability for long service leave expected to be settled within 12 months of the reporting date is recognised in the current provision for employee benefits and is measured in accordance with the above. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the non-current provision for employee benefits and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Superannuation

Contributions are made by the consolidated entity to defined contribution superannuation funds. Contributions are charged to expense as they are incurred.

Employee benefit on-costs

Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

Notes to the financial statements For the year ended 30 June 2003

Bonus plans

A liability for employee benefits in the form of bonus plans is recognised in other creditors when there is no realistic alternative but to settle the liability and at least one of the following conditions is met:

• there are formal terms in the plan for determining the amount of the benefit
• the amounts to be paid are determined before the time of completion of the financial report, or
• · past practice gives clear evidence of the amount of the obligation.

Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.

Equity-based compensation benefits

The company grants options to employees under an Employee Option Plan. Further information in relation to the Plan is set out in note 33. No accounting entries are made in relation to the Employee Option Plan until options are exercised, at which time the amounts receivable from employees are recognised in the statement of financial position as share capital. The amounts disclosed for remuneration of executives in note 26 include the assessed fair values of options at the date they were granted.

$(1)$ Borrowing costs

Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include:

• · interest on bank overdrafts and short-term and long-term borrowings;
• · amortisation of discounts and premiums relating to borrowings;
• amortisation of ancillary costs incurred in connection with the arrangement of borrowings; and
• finance lease charges.

(m) Cash

For purposes of the statements of cash flows, cash includes cash at bank and on hand and deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.

(n) Goodwill

Where an entity or operation is acquired, the identifiable net assets acquired are measured at fair value. The excess of the fair value of the cost of acquisition over the fair value of the identifiable net assets acquired is brought to account as goodwill and amortised on a straight line basis over the period during which the benefits are expected to arise, with the maximum term of 20 years.

The unamortised balance of goodwill is reviewed at each reporting date. Where the balance exceeds the value of expected future benefits it is written down.

Trade and other creditors $\left( \mathbf{o} \right)$

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. The amounts are unsecured, unless stated otherwise, and are usually paid within 30-60 days of recognition.

(p) Interest bearing liabilities

Interest bearing flabilities are carried at their principal amount/face value. Interest is charged as an expense over the period it accrues and is included in other creditors and accruals.

(q) Dividends

Provision is made for the amount of any dividend declared, determined or publicly recommended by the directors on or before the end of the financial year but not distributed at balance date. This represents a change in accounting policy for providing for dividends, as the stated policy was adopted with effect from 1 July 2002 to comply with AASB 1044 Provisions, Contingent Liabilities and Contingent Assets released in October 2001.

Notes to the financial statements For the year ended 30 June 2003

Previously, provision was also made for dividends to be paid out of retained profits at the end of the financial year where the dividend was proposed, recommended or declared between the end of the financial year and completion of the financial report. No adjustment was required to the retained profits of the consolidated or parent entity as at the beginning of the year, as no dividend was provided for at 30 June 2002, nor was a dividend provided for at 30 June 2002.

Earnings per share $(r)$

Basic earnings per share

Basic earnings per share is determined by dividing the net profit / (foss) after income tax, excluding any cost of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

$(s)$ GST

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

• where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
• for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

$(t)$ Rounding of amounts

The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the "rounding off" of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

(u) Reclassification of liability for certain employee benefits

The fiability for wages, salaries, annual leave and related on-costs expected to be settled within 12 months of reporting date has been reclassified from provisions to other creditors in the current year as a result of the adoption of the new accounting standard, AASB 1044 Provisions, Contingent Liabilities and Contingent Assets. The directors do not believe there are any significant uncertainties relating to the amount and timing of future payments included in the liability for these employee benefits, therefore it does not meet the definition of a provision under the new standard. Comparative amounts have also been reclassified to ensure comparability with the current reporting period.

(v) General

This financial report covers both Data'3 Limited as an individual entity (parent entity) and the consolidated entity consisting of Data*3 Limited and its controlled entities. Data'3 Limited is a public company limited by shares, incorporated and domiciled in Australia.

Its registered office is: 5th Floor National Bank House 255 Adelaide Street BRISBANE QLD 4000

Its principal place of business is: Level 2 Data*3 Centre 80 Jephson Street TOOWONG QLD 4066

Notes to the financial statements For the year ended 30 June 2003

		Consolidated		Parent Entity
	2003	2002	2003	2002
	\$000	\$'000	\$'000	\$'000
Note 2. Revenue
Revenue from operating activities
Sale of goods	160.684	45,058
Services	31,925	-26,474
	192.609	171,532	365
Revenue from outside the operating activities
Interest
Proceeds from sale of non-current assets
Corporate charges - controlled entities			$-5.871$	5.476
Dividends - controlled entities			2,000	2.000
Other	ЗΩ			ъ
	196.	274	8.027
Revenue from ordinary activities (excluding
shares of equity accounted net profits of joint
venture partnerships)	192.805	171.806	8.392	1.726

Included in consolidated revenue from operating activities above is revenue derived from specified contracts with the Queensland government, formerly serviced by the QDS and QSS joint venture partnerships, since 1 September 2002, for the sale of goods totalling \$37,367,000.

During financial year 2002 all revenue was derived under these contracts via the joint venture entities QDS and QSS, of which the consolidated entity held a 50% interest, and the equity accounted net profits of these operations was recognised in the statement of financial performance.

Following the administration and receivership of Powerlan Qld, the consolidated entity purchased the remaining 50% interest in the QDS and QSS joint venture partnerships, and since then all revenue derived under the contracts has been recorded as revenue in the consolidated entity. Further details are outlined in note 32.

Note 3. Profit from ordinary activities

Profit from ordinary activities before income tax includes the following specific items:

	Consolidated			Parent Entity
	2003	2002	2003	2002
	\$'000	\$000	\$000	\$'000
Cost of sales of goods	142.651	.956
Depreciation
Plant and equipment
Amortisation
Leasehold improvements				D4
Plant & equipment under finance leases
Goodwill	323	316
Total amortisation	568	548	20 a	204

Notes to the financial statements For the year ended 30 June 2003

		Consolidated		Parent Entity
	2003	2002	2003	2002
Note 3. Profit from ordinary activities (continued)	\$'000	\$'000	\$'000	\$'000
Other charges against assets
Bad and doubtful debts		- 137
Inventory obsolescence		(48)
Rental expenses on operating leases	1,485	1,822	238.	217
Rental expenses - other	430
	1915	1.822	238	217
Profit on disposal of plant and equipment	(4)
Significant items
Loss on assumption of joint venture.
partnerships' net liabilities (note 32)	1.950
Note 4. Income tax
The income tax for the financial year
differs from the amount calculated on
the profit. The differences are reconciled
as follows:
Profit from ordinary activities before income tax	3,555	4 162	2.297	2,097
Income tax calculated at 30% (2002; 30%).	1,067	1,249.	689	629
Tax effect of permanent differences:
Amortisation of goodwill	-97	95
Share of joint venture partnerships' non-
deductible expenses	367
Share of joint venture partnerships' non-
assessable revenue	(362)
Rebateable dividends Non-allowable items			(600) 25	(600)
	102	76		59
Income tax adjusted for permanent differences	1,271	1,420	114	88
Under / (over) provision in previous year	25	46		17.
Benefit of tax losses of prior years recouped		(474)
Benefit of tax losses transferred from controlled entities			(143)	(92)
Income tax expense / (revenue)	1,296	992	(28)	13

No part of the future income tax benefit shown in note 13 is attributable to tax losses (2002; nil). The Directors estimate that the potential future income tax benefit at 30 June 2003 in respect of tax losses not brought to account is nil (2002; nil).

Notes to the financial statements For the year ended 30 June 2003

Note 4. Income tax (continued) Tax consolidation legislation

Data'3 Limited and its wholly-owned Australian subsidiaries are yet to decide whether or not to implement the tax consolidation legislation.

If the company and consolidated entity were to implement the tax consolidation legislation, Data'3 Limited, as the head entity in the tax consolidated group, would recognise current and deferred tax amounts relating to transactions, events and balances of the wholly-owned Australian controlled entities in this group in future financial statements as if those transactions, events and balances were its own, in addition to the current and deferred tax balances arising in relation to its own transactions, events and balances. Amounts receivable or payable under any proposed tax sharing agreement would be recognised separately by Data'3 Limited as taxrelated amounts receivable or payable. The impact on the income tax expense and results of Data*3 Limited is unlikely to be material because of a tax sharing agreement. This is not expected to have a material impact on the consolidated assets and liabilities and results.

Note 5. Dividends

Interim dividend of 2.5 cents (2002 - nil) per fully paid ordinary share, 100% franked based on tax rate of 30%

Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan during the years ended 30 June 2003 and 2002 were as follows:

Paid in cash Satisfied by issue of shares

Dividends not recognised at year end

In addition to the above dividends, since year end the Directors have declared a final dividend of 7.5 cents (2002: nil) per fully paid ordinary share, fully franked based on tax paid at 30%. The aggregate amount of the declared dividend to be paid on 31 October 2003 out of retained profits at 30 June 2003, but not recognised as a liability at year end in accordance with the company's accounting policy described at note $f(q)$ :

Franked dividends

The franked portions of the final dividends declared after 30 June 2003 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 30 June 2004.

Franking credits available for subsequent financial years

Parent Entity
2003	2002
\$'000	\$'000
	Ì,
æ
15
50

Notes to the financial statements For the year ended 30 June 2003

Note 5. Dividends (continued)

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:

• (i) franking credits that will arise from the payment of the current tax liability;
• (ii) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date:
• (iii) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
• (iv) franking credits that may be prevented from being distributed in subsequent financial years.

Under legislation that took effect on 1 July 2002, the amount recorded in the franking account is the amount of income tax paid, rather than franking credits based on after tax profits, and amounts debited to that account in respect of dividends paid after 30 June 2002 are the franking credits attaching to those dividends rather than the gross amount of the dividends. As a result the franking credits available at 30 June 2002 for the parent entity of \$2,259,000 based on after tax profits were converted so that the opening balance on 1 July 2002 reflected the tax paid amount of \$968,000, which is shown as the comparative amount above.

		Consolidated		Parent Entity
	2003 \$'000	2002 \$'000	2003 \$000	2002 \$'000
Note 6. Cash assets
Cash at bank and on hand	3,659	693	3,650	688
Deposits at call	11,000	4,500.	11,000	4,500
Balances per statements of cash flows	14,659	5.193.	14,650	5 188
Cash is bearing floating interest rates of approximately 3.7% per annum (2002; 3.4%). Deposits at call comprise deposits with financial institutions available at call and are bearing a floating interest rate of 4.4% per annum (2002: 4.1%).
Note 7. Receivables
Trade debtors	33,378	22,572
Provision for doubtful debts	(272) 33,106	(304) 22,268
Other debtors	123	301		90
Receivable from Powerlan Qld (note 32) Provision for doubtful debt	$-3,092$ . (1,942) 1.150
Amounts receivable from controlled entities			8.438	7,660
	34.379	22.569	8,455	7,750

Notes to the financial statements For the year ended 30 June 2003

Note 7. Receivables (continued) Trade debtors

Amounts receivable from trade debtors as at 30 June 2003 include approximately \$10,596,000 due from various Queensland Government departments arising from sales, the prior year equivalent of which were recorded in QDS and QSS. From 1 September 2002, business formerly carried on by QDS and QSS has been carried on directly by the consolidated entity. Refer to note 32 for details of the acquisition of these entities.

Other debtors

These amounts generally arise from accrued rebates or transactions outside the usual operating activities of the consolidated entity. Interest is normally not charged, and collateral is not normally obtained.

Receivable from Powerlan Qld

The amount receivable from Powerlan Qld is expected to be recovered during the 2004 financial year. Interest is not charged on this balance.

		Consolidated		Parent Entity
	2003	2002	2003	2002
Note 8. Inventories	\$'000	\$'000	\$'000	\$'000
Finished goods - at cost	819	1.325
Provision for obsolescence	(29)	(29)
	790	1.296
Note 9. Other current assets
Prepayments	315	324	50.	168
Security deposits	98	66.		13
Accrued rebates	208	766.
	62	1.156	I KO	181
Note 10. Investments accounted for using
the equity method
Interest in joint venture partnerships (note 31)		631
Note 11. Other financial assets
Investments traded on organised markets
Shares in other corporations - at cost (note 29)
Other (non-traded) investments
Shares in controlled entities - at cost (note 30)			$-6,123$	6,123
Provision for write down to recoverable amount			(4,372)	(4,372)
			1.751	1.751

$7.758$ $1.758$ $1.758$

Notes to the financial statements For the year ended 30 June 2003

	Consolidated		Parent Entity
	2003	2002	2003	2002
	\$'000	\$'000	\$'000	\$'000
Note 12. Property, plant and equipment
Leasehold improvements - at cost	.362	-63	.042	1.042
Accumulated amortisation	(439)	(301)	(312)	208)
	923.	862	730.	834
Plant and equipment - at cost	3.763	2,656	659
Accumulated depreciation	(3, 129)	(1, 907)	(538)	'432)
	634	749.	121	-94
Plant and equipment under finance lease	98	-540	498	498.
Accumulated amortisation	(291)	(217)	(291)	191)
	207	323	207	307
	1764	1.934	1.058	1,335

Reconciliations

Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below.

	Leasehold improvements \$'000	Plant and equipment S'000	Leased plant and equipment \$'000	Total 5'000
Consolidated
Carrying amount at 1 July 2002.
Additions				316
Additions through acquisitions of businesses (note 32)				39
Disposals			34
Depreciation/amortisation expense		137.1
Carrying amount at 30 June 2003.	923	634.	202	1.764
Parent entity
Carrying amount at 1 July 2002.				335
Additions				33
Depreciation/amortisation expense		1061
Carrying amount at 30 June 2003.	730	121	207	1.058

		Consolidated		Parent Entity
	2003	2002	2003	2002
	$$^{\circ}000$	\$'000	\$'000	\$'000
Note 13. Deferred tax assets
Future income tax benefit
Note 14. Intangible assets
Goodwill
Accumulated amortisation	(1.490)	(1, 167)
		$5 - 101$

Notes to the financial statements For the year ended 30 June 2003

			Consolidated		Parent Entity
		2003	2002	2003	2002
		\$'000	\$000	\$'000	\$'000
Note 15. Payables
Trade creditors	- secured (note 37)	7,488	$[11,301]$ .
	- unsecured	30.874	$-6,935$ . $-$
	Other creditors and accruals - unsecured	5.406 43.768	21.983	3.642. 9.642	189

Trade creditors

Trade creditors as at 30 June 2003 includes approximately \$22,793,000 due to various suppliers of products arising from purchases, the prior year equivalent of which were previously recorded in QDS and QSS. Refer to note 32 for details of the acquisition of these entities.

Included in trade creditors (secured) as at 30 June 2002 was a trade creditor who had provided extended credit terms of up to 90 days. This trade creditor's balance on extended credit terms has decreased from \$1,500,000 at 30 June 2002 to nil at 30 June 2003. Interest was charged on the balance outstanding after 30 days (refer note 38). Payment terms are now 30 days interest free.

Note 16. Interest bearing liabilities

Current

Bills payable - secured (note 37) Lease liabilities - secured (note 23)

Non-current

Bills payable - secured (note 37) Lease liabilities - secured (note 23)

Note 17. Current tax liabilities

Income tax

Note 18. Provisions

Current

Employee benefits (note 33)

Non-current

Employee benefits (note 33)

870 106	580 1117	870 106	580 98
976	691	976	678
	855		855
125 125	230 1,085	125 125	230 1,085
405	344
187	145	85.	54.
466	435	125	127

Notes to the financial statements For the year ended 30 June 2003

	Consolidated		Parent Entity
	2003	2002	2003	2002
	\$000	\$'000	\$'000	\$'000
Note 19, Other liabilities
Current
Unearned income
Lease incentives
Amounts payable to
Controlled entities
Joint venture partnership (note 31)		3,819
	12246	5.180	TAGE AND STRUCK
Non-current
Lease incentives	625	730.	625

The amounts payable to the joint venture partnership were unsecured, did not bear interest, and were payable within three months.

		Parent Entity		Parent Entity
	2003 Shares '000'	2002 Shares '000'	2003 \$'000	2002 \$'000
Note 20. Contributed equity
(a) Share capital
Ordinary shares - fully paid	14.654	14.602	7.459	7.409
(b) Movements in ordinary share capital
Details	Notes	Number of Shares	Issue Price \$	\$000
Opening balance - 1 July 2001 Issue for acquisition of Maggs Business Advisory Balance - 30 June 2002	${i}$	14,571,505 30,425 14,601,930	1.25	7,371 38 7,409
Dividend reinvestment plan issue	(ii)	51,889	0.96	-50
Balance - 30 June 2003		14,653,819		7.459

(i) On 5 September 2001 the company issued 30,425 fully paid ordinary shares to the vendors of Maggs Business Advisory as part of the consideration for the business purchased in financial year 2001.

(ii) The company has established a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than being paid in cash. Shares are issued under the plan at a discount to the market price of up to 10%; currently the discount offered to shareholders is 5%.

Hutica Report

Notes to the financial statements For the year ended 30 June 2003

Note 20. Contributed equity (continued)

(c) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(d) Share options

For details as to the number of share options outstanding as at 30 June 2003, refer note 33.

	Consolidated		Parent Entity
	2003	2002	2003	2002
	\$000	\$'000	\$'000	\$'000
Note 21. Retained profits / (accumulated losses)
Retained profits / (accumulated losses) at the
beginning of the financial year			(784)	(2.868)
Net profit	2,259	3.170	.2.325
Dividends paid (note 5)	(365
Retained profits / (accumulated losses) at the
end of the financial year	2.352	458	3 T. 76.

Note 22. Contingent liabilities

At 30 June 2003 bank guarantees totalling \$139,000 (2002: nil) were provided to lessors as security for premises leased by the consolidated entity. The guarantees will remain in place for the duration of the operating leases.

At 30 June 2002 a bank guarantee of \$916,000 was provided to a customer as security for the company fulfilling its obligations under a contract for the supply of goods. The guarantee lapsed unconditionally on 30 August 2002.

Bank guarantees are secured by charges over the consolidated entity's assets.

Notes to the financial statements For the year ended 30 June 2003

	Consolidated		Parent Entity
	2003	2002	2003	2002
	\$'000	\$000	\$'000	\$'000
Note 23. Commitments for expenditure
Commitments in relation to non-cancellable operating leases contracted for at the reporting date but not recognised as liabilities, payable: Within one year
Later than one year but not later than 5 years. Later than 5 years	3.382 -274	-012. -3- 1911 -	3.130 1.274	2,647 .911
	$-874$	6.366	5315	-5-440.

Operating leases include leases of premises, motor vehicles and office equipment. Under the relevant lease agreements (mainly premises) the rentals are subject to periodic review to market and/or for CPI increases. Operating leases are under normal commercial operating lease terms and conditions. Certain operating lease commitments of the parent entity, mainly comprising premises, are paid for and recognised as expenses by controlled entities.

Future minimum lease payments expected to be received in relation to sub-leases of operating leases Commitments in relation to finance leases. are payable as follows: Within one year

Later than one year but not later than 5 years Minimum lease payments Less: Future finance charges

Representing lease liabilities: Current (note 16) Non-current (note 16)

	47.
121 132	134 253	-21 132	21 :253
$-253.$	$-387$	$-253$	374
$(22)$ . 231	(46) 341	(22) -231	(46) 328
106		106	98
125	230	125	230
231	341	231	328

Finance leases comprise leases of items of plant and equipment under normal commercial finance lease terms and conditions. The weighted average interest rate implicit in the leases is 8.2% (2002: 8.2%).

Lease liabilities are effectively secured as the rights to leased assets revert to the lessor in the event of default.

Note 24. Deed of cross guarantee

Data*3 Limited, Data*3 Business Systems Pty Ltd, Data*3 (Gold Coast) Pty Ltd, Data*3 Client Services Pty Ltd and Gratesand Pty Ltd (added by Assumptions Deed dated 31 May 1999) are parties to a Deed of Cross Guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirements to prepare a financial report and Directors' report under Class Order 98/1418 (as amended by Class Orders 98/2017, 00/0321, 01/1087, 02/0248 and 02/1017) issued by the Australian Securities & Investments Commission.

The above companies, which comprise the parent entity and all of its controlled entities, represent a "Closed Group" for the purposes of the Class Order.

Notes to the financial statements For the year ended 30 June 2003

	Directors of entities in the consolidated entity		Directors of parent entity
	2003	2002	2003	2002
Note 25. Remuneration of Directors
Income paid or payable, or otherwise made.
available, to Directors by entities in the
consolidated entity and related parties in
connection with the management of affairs of
the parent entity or its controlled entities.	らす センジ	628.738

Options may be granted to executive Directors of controlled entities under the Data'3 Employee Option Plan, details of which are set out in note 33. No options were granted to, or exercised by, the Directors during the year (2002: nil), and the Directors held no options at balance date.

The numbers of parent entity Directors whose total income from the parent entity or related parties was within the specified bands are as follows:

				No. of Directors
\$			2003	2002
∴10,000 · $-30,000 -$ 50,000	$-19,999$ -39,999 59,999
			Executive Officers of the consolidated entity	Executive Officers	of parent entity
		2003	2002	2003	2002
	Note 26, Remuneration of executives
	Remuneration received, or due and receivable,
from entities in the consolidated entity and	related parties by executive officers (including
	Directors) whose remuneration was at least \$100,000	.327.599		318735	645.174

Options are granted to executive officers under the Data'3 Employee Option Plan, details of which are set out in note 33. A summary of the numbers of options granted to, exercised, cancelled, and held by Australian-based executive officers (with income of at least \$100,000) during the year ended 30 June 2003 is set out below.

	Outstanding 30 June 2002	Granted	Exercised	Cancelled	Outstanding 30 June 2003
Australian-based executive
officers of the parent entity
Australian-based executive
officers of other entities in the
consolidated entity	130.000	170.000		130.000	170.000
	150.000			$(5000 -$	210.000

2002

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N H.

Data⁴3 Limited and Controlled Entities

Notes to the financial statements For the year ended 30 June 2003

The amounts disclosed for remuneration of executive officers in this note include the assessed fair values at the date they were granted of options granted to executive officers during the year ended 30 June 2003. Fair values have been determined using the Black Scholes Option Pricing Model and take into account factors such as exercise price, the term of the option, current price and expected volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The numbers of executive officers whose remuneration from entities in the consolidated entity and related parties was within the specified bands are as follows:

$\mathbf{r}$

			No. of executive officers of the consolidated entity	No. of executive officers of the parent entity
\$		Ŝ	2003 2002	200 2003
100,000		109,999
110,000		119,999
120,000		129,999
130,000		139,999
150,000		159,999
160,000		169,999
180,000		189,999
190,000		199,999
250.000		259,999
260,000		269,999
280,000		289,999
290,000		299,999
300,000		309,999
330,000		339,999

Note 27, Remuneration of auditor
----------------------------------

During the year the auditor of the parent entity earned the following remuneration:

Johnston Rorke

Audit or review of financial reports of the entity or any entity in the consolidated entity Other services

	Consolidated		Parent Entity
2003	2002	2003	2002
\$'000	\$'000	\$'000	\$'000
74,500	69,000	74,500	69,000
54,950	56,280	54,950	56,280

Total remuneration

There was no remuneration paid to related practices of Johnston Rorke. Other services mainly comprise tax advice and reporting on acquisitions. It is the consolidated entity's policy to employ Johnston Rorke on assignments additional to its statutory audit duties where Johnston Rorke's expertise and experience with the consolidated entity are important.

Notes to the financial statements For the year ended 30 June 2003

Note 28. Related parties

Directors

The names of the persons who were Directors of Data'3 Limited at any time during the financial year are as follows: R A Anderson, G R Clark, H L Stack, and W T Powell. R A Anderson, G R Clark and H L Stack were also Directors during the year ended 30 June 2002, and W T Powell was appointed as a Director on 31 January 2002.

Remuneration

Information on remuneration of Directors is disclosed in note 25.

Shares and options - Directors and Director-related entities

Aggregate numbers of shares and options of Data*3 Limited held directly, indirectly or beneficially by Directors of the company or their Director-related entities at balance date are set out below:

	2003	2002
Ordinary shares	1,597,480	$1,597,480$
Options over ordinary shares	bernama menghari the company of the company of the company of	$-20.000\ldots$

Loans to / (from) Directors and Director-related entities

There were no loans during the 2003 or 2002 years.

Other transactions with Directors and Director-related entities

Other transactions entered into during the year with Directors and Director-related entities are as follows:

	Consolidated		Parent Entity
	2003	2002	2003	2002
Consultancy services provided for systems support to the consolidated entity by Powell Clark Trading
Pty Ltd, an entity associated with G R Clark.		ាខេតត

Transactions during the year were on normal commercial terms and conditions.

Wholly-owned group

The wholly-owned group consists of the ultimate parent entity Data*3 Limited and its wholly-owned controlled entities. Ownership interests in those controlled entities are set out in note 30.

Transactions between Data'3 Limited and other entities in the wholly-owned group during the years ended 30 June 2003 and 30 June 2002 consisted of:

• . Loans advanced to / by controlled entities and repayments (refer Statement of Cash Flows);
• Corporate charges received by Data'3 Limited for accounting, administrative services, management and use of assets (refer note 2);
• Management charges from controlled entities for use of assets and provision of systems and services (refer Statement of Financial Performance); and
• · Dividends received by Data*3 Limited (refer note 2).

Notes to the financial statements For the year ended 30 June 2003

Loans are provided interest free and unsecured and have no fixed repayment terms (refer notes 7 and 19). Corporate charges by the parent entity are based on budgeted cost. Management charges by controlled entities are based on discounted retail price.

During the year, tax losses were transferred between the entities in the wholly-owned group for nil consideration. Refer note 4 for benefit amount of tax losses transferred to Data*3 Limited from a controlled entity.

Unless otherwise stated, transactions are on commercial terms and conditions.

Other related parties

Transactions with and interests in joint venture partnerships are described in note 31. Short-term funds provided by the joint venture partnerships are separately disclosed in the Statements of Cash Flows.

Note 29. Investments in other corporations	Consolidated		Parent Entity
	2003	2002	2003	2002
	\$'000	\$000	\$'000	\$'000
				医神经性硬化学 网络福德福德国福德尔特尔 化乙基苯甲基 医心包 医心包
Shares in other corporations - at cost			. The contract $\gamma$ is a contract $\gamma$ and $\gamma$

Note 30. Investments in controlled entities

Name of entity	Country of formation or incorporation		Equity holding (ordinary shares)
		2003	2002
		%	%
Data*3 Business Systems Pty Ltd	Australia 100 100
Data*3 Client Services Pty Ltd	Australia : $\frac{1}{2}$ , $\frac{1}{2}$ , $\frac{1}{2}$ , $\frac{1}{2}$ , $\frac{1}{2}$ , $\frac{1}{2}$ , $\frac{1}{2}$ , $\frac{1}{2}$ , $\frac{1}{2}$
Data*3 (Gold Coast) Pty Ltd	Australia 100
Gratesand Pty Ltd	Australia M	CONTROL	200 00 m

As at 30 June 2001 a provision for write-down of \$4,372,000 was recognised against the net investment in CICtechnology (Gratesand Pty Ltd). The investment's carrying value was written down to \$1,745,000 on the basis of the reassessed value of the assets acquired.

Notes to the financial statements For the year ended 30 June 2003

Note 31. Investment in joint venture partnerships

Queensland Desktop Services

Until 25 November 2002, the consolidated entity had a 50% interest in Queensland Desktop Services (QDS), a joint venture partnership with Powerlan (Qld) Pty Ltd (refer to note 32 for further details). The principal activity of Queensland Desktop Services was the fulfillment of procurement contracts for IT products and services for Education Queensland and Queensland Health.

Information relating to the joint venture partnership is set out below.

		Consolidated
	2003 \$'000	2002 \$'000
Movement in carrying amount of investment in joint venture partnership
Carrying amount at the beginning of the financial year.	631	545
Share of profit	63	286
Distributions received
Write-off of joint venture partnership interest
Carrying amount at the end of the financial year		631
Share of joint venture partnership's assets and liabilities
Current assets
Non-current assets		50
Total assets		12,014.
Current liabilities		(1,383)
Total liabilities		(1, 383)
Net assets		631
Share of joint venture partnership's revenues, expenses and results
Revenues	1.313	$-9.062$
Expenses	(1,250).	(8,776)
Profit before income tax	FЗ	286

The assets of the joint venture partnership totalled \$4,028,000 at 30 June 2002 and the liabilities of the joint venture partnership totalled \$2,766,000 at 30 June 2002.

Consolidated

$12.333 \times 17.728 \times 198.22$

Data⁴3 Limited and Controlled Entities

Statements of Financial Position As at 30 June 2003

Note 31. Investment in joint venture partnerships (continued)

Queensland Software Services

Until 25 November 2002, the consolidated entity had a 50% interest in Queensland Software Services (QSS), a joint venture partnership with Powerlan (Qld) Pty Ltd (refer to note 32 for further details). The principal activity of Queensland Software Services was servicing a four-year Microsoft Licensing Agreement with the Queensland State Government.

Information relating to the joint venture partnership is set out below:

	2003 \$'000	2002 \$'000
Movement in carrying amount of investment in joint venture partnership
Carrying amount at the beginning of the financial year
Share of profit		.498 .
Distributions received
Write-off of joint venture partnership interest
Carrying amount at the end of the financial year
Aggregate short term funds provided by partnership to controlled
entity of Data*3 Limited (refer note 19)
Share of joint venture partnership's assets and liabilities *
Current assets		7,187
Non-current assets		$-49$
Total assets		$-7,206$
Current liabilities		(11, 025)
Total liabilities		(11, 025)
Net liabilities		(3.819)
* excluding amount receivable from controlled entity of Data*3 Limited of
\$3,819,000 as at 30 June 2002
Share of joint venture partnership's revenues, expenses and results
Revenues		$-11.517.$
Expenses		$(731)$ $\sim$ $(11,019)$ :

Profit before income tax

In June 2002, a total of \$8,450,000 was advanced equally to the partners in Queensland Software Services partnership, of which \$7,638,000 was due to be repaid by 31 August 2002 (50% to be repaid by each partner), the balance having been repaid prior to 30 June 2002.

The assets of the joint venture partnership (excluding amounts repayable by the partners) totalled \$14,412,000 at 30 June 2002 and the liabilities of the joint venture partnership totalled \$22,050,000 at 30 June 2002.

Notes to the financial statements For the year ended 30 June 2003

Note 32. Acquisitions of businesses

(a) Receivership and administration of Powerlan Qld and the acquisition of QDS and QSS

On 15 August 2002, Powerlan Limited announced that its subsidiary Powerlan (Qld) Pty Ltd (Powerlan Qld) had been placed into voluntary administration. The Administrators appointed were from KPMG. On the same day the Australia and New Zealand Banking Group Limited (ANZ), as a creditor of Powerlan Limited secured by, among other things, a guarantee and mortgage debenture provided by Powerlan Qld, appointed partners of PricewaterhouseCoopers as Receivers.

Powerfan Qld was the joint venture partner of a controlled entity, Data*3 Business Systems Pty Ltd (Data*3) in Queensland Desktop Services (QDS) and Queensland Software Services (QSS) - refer note 31.

Negotiations with the Powerlan Qld receivers (Receivers) and administrators (Administrators) were concluded on 25 November 2002 (the Agreement) and various outstanding claims and issues relating to this matter were settled.

Under the Agreement the Receivers were paid \$2,500,000 from joint venture partnership assets. The consolidated entity assumed the remaining asset and liabilities of the joint venture partnerships. One of the joint venture partnership assets was a loan of \$3,092,000 to Powerlan Qld (being the net of the original QSS loan to Powerlan Qld of \$3,819,000 offset by moneys owed to Powerlan Qld by the joint venture partnerships). The Agreement confirmed the consolidated entity's right to prove as a creditor for the \$3,092,000 receivable in the administration of Powerlan Qld.

The payment to the Receiver facilitated the discharge of Powerlan Limited's secured ANZ debt, which effectively enabled the administration of Powerlan Qld to continue. On 23 December 2002 a Deed of Company Arrangement (DOCA) was executed by Powerfan Limited under which Powerlan Limited committed to pay the Administrators \$2,600,000 by 30 June 2003, and a further \$100,000 per month for 24 months commencing from 1 July 2003. At the date of this report, Powerlan has complied with the DOCA payment terms. The DOCA also approved the transfer of the secured charge over the assets of Powerlan Limited and its controlled entities, to the creditors of Powerlan Qld. The consolidated entity is the largest creditor of Powerlan Qld, representing approximately 25% of total creditors.

At 31 December 2002 the consolidated entity had estimated that it would recover at least \$1,000,000 of the \$3,092,000 Powerlan Qld receivable, representing its approximate 25% share of the \$4,000,000 in administration funds that was expected to be available for distribution following receipt of the first \$2,600,000 DOCA payment from Powerlan Limited in June 2003. The consolidated entity had provided for the remaining \$2,092,000 of the Powerlan Qld receivable at 31 December 2002. Since then, the consolidated entity has increased its estimate of recovery to \$1,150,000, thereby reducing the provision for doubtful debt by \$150,000.

Based on the preliminary estimates of the recoveries provided by the Administrators, the consolidated entity's possible total recovery ranges up to approximately \$1,800,000. The recovery is uncertain as the amounts recoverable by the Adminstrators, net of recovery costs, are uncertain. Any additional funds that may be recovered from the administration process, in excess of the current \$1,150,000 estimate, will provide further mitigation against the loss (see below).

The consolidated entity also negotiated arrangements with the joint venture partnership creditors to permanently forbear from pursuing recovery of a component of the joint venture partnership debts. The debt forgiveness recognised by the partnerships totalled approximately \$1,600,000.

2003

Data^®3 Limited and Controlled Entities

Notes to the financial statements For the year ended 30 June 2003

Note 32. Acquisitions of businesses (continued)

(a) Receivership and administration of Powerlan Qld and the acquisition of QDS and QSS (continued)

The joint venture partnership assets and liabilities acquired by the consolidated entity at settlement are shown below.

Fair value of identifiable net assets/(liabilities) acquired:

	\$'000
Cash	2,176
Trade and other debtors	$1,356$ .
Receivable - Powerlan Qid	.3,092
Provision for doubtful debt - Powerlan Qid	1,942)
Inventories
Other	73
Plant and equipment	1:21
Trade and other creditors	(2,450)
Loan payable to consolidated entity	(3,406)
Unearned income	(80)
Net identifiable liabilities assumed
Less: 50% interest in joint venture partnerships already held
Legal and other costs
Loss on assumption of joint venture partnerships' net liabilities as at 30 June 2003	- 950

(b) Acquisition of Stockford Limited's Navision Solution Centre business

In July 2002 the consolidated entity acquired Stockford Limited's Navision Solution Centre business for $\cdots$ \$203,000. The operating results of the acquired business have been included in the consolidated state of financial performance since 1 July 2002. Details of the acquisition are as follows:

Fair value of identifiable net assets/(liabilities) acquired:

Plant and equipment. Future income tax benefit Other creditors and accruals Other provisions Net identifiable liabilities assumed Goodwill

Consideration: Cash paid

(c) Acquisition of Maggs Business Advisory's Navision Solution Centre business

During 2001 the consolidated entity acquired this business. In 2002 a final payment of \$85,000 was made in respect of the acquisition.

ement
2003
\$'000
18
:7
(24)
(2)
(1)
204

HERMAN MOON

Data³ Limited and Controlled Entities

Notes to the financial statements For the year ended 30 June 2003

	Consolidated			Parent Entity
	2003	2002	2003	2002
	\$'000	\$'000	\$'000	\$'000
Note 33. Employee benefits
Employee benefits and related on-costs liabilities
Included in other creditors - current (note 15)	.483	303	80
Provision for employee benefits – current
(note 18)
Provision for employee benefits - non-
current (note 18)
Aggregate employee benefit and related on-costs liabilities	2.138	1.883	390	334
	Number			Number
Employee numbers
Number of employees at end of financial year	284	269	ПΑ

Data'3 Employee Share Scheme

The establishment of the Data^r3 Employee Share Scheme was approved at an extraordinary general meeting of the company held on 26 February 1999. All full-time and part-time employees, excluding Directors, of Data*3 Limited and its controlled entities are eligible to participate in the scheme. To 30 June 2003 no shares have been issued under the scheme.

Under the scheme, eligible employees may be offered a minimum of 200 shares at a price determined by the Directors where the discount of the share price is not more than 25% of the weighted average price of the shares trading on the ASX over the five trading days immediately prior to the Board resolution. Offers under the scheme are at the sole direction of the Board of Directors. The market value of shares issued under the scheme, measured as the weighted average market price on the day of issue of the shares, is recognised in the statement of financial position as share capital, and compensation expense, measured as the difference between the market value of the shares and the consideration paid by the employee, is recorded as part of employee benefits costs.

The Board of Directors may, by resolution, restrict shares issued under the scheme from being sold for a specified period of time after their issue, up to a maximum of three years. In all other respects the shares rank equally with other fully paid ordinary shares on issues (see note 20(c)).

Data'3 Employee Option Plan

The establishment of the Data'3 Employee Option Plan was approved at an extraordinary general meeting of the company held on 5 November 1997.

All full-time and part-time employees, including Directors, of Data"3 Limited and its controlled entities are eligible to participate in the plan. Options are issued for \$1 per parcel of options issued and are exercisable from 2 years prior to the expiry date to the expiry date. The exercise price of the options is determined as the higher of 90 cents per share or the weighted average price of the shares as listed with the ASX within the 5 days immediately prior to the offer date. Options granted under the plan carry no dividend or voting rights.

Details of the options outstanding at the beginning of the reporting period, which are exercisable from March 2002, are as follows:

Date granted 12 March 2001 25 March 2001

Expiry date 13 March 2004. 26. March 2004.

Exercise price $$3.47$ $\therefore$ \$3.45.

Number of options $\cdots$ 20,000 $^{\sim}150,000$ 170,000

Notes to the financial statements For the year ended 30 June 2003

All options outstanding at 1 July 2002 were cancelled during the year. Options were issued during the year to holders who are not directors with exercise prices equivalent to the current market value at the time they were issued. Options over 210,000 ordinary shares were granted during 2003 (2002; nil). Details of the options outstanding at 30 June 2003, which vest and become exercisable on 22 November 2003, are as follows:

Date granted 22 November 2002 22 November 2002

Expiry date 28 February 2004 21 November 2005 -

Exercise price $\left[\begin{array}{ccccc} \cdots & \cdots & \bullet & 0.91 & \cdots \end{array}\right]$ $$0.91$ . . . . . . . . . . . . . . . . . . . Number of options n. 1111 20,000 it s tij $000,000$ 210,000

No options were exercised during the year. The market price of the company's shares as at the end of the year was \$1.00 per share. The parent entity credits proceeds received to issued capital upon exercise of options. No remuneration expense is recognised at the time of granting options.

Note 34. Segment information

Business segment

The consolidated entity predominantly operates in one segment. Its activities include the procurement of Information Technology (IT) products; the design, implementation and support of IT infrastructure solutions; and the supply, implementation and support of application software solutions.

Geographical segment

The consolidated entity's operations are based predominantly in Australia.

		Consolidated		Parent Entity
	2003 \$'000	2002 \$'000	2003 3'000	2002 \$'000
Note 35. Reconciliation of net profit after income tax to net cash inflow from operating activities
Net profit after income tax		$3,170$ :	2,325	2.084
Depreciation and amortisation	934	$967 -$	:310
Provision for doubtful debts		- 76
Provision for stock obsolescence		(48)
Profit on sale of plant and equipment	4}
Share of joint venture partnerships' operating profit		(784)
Distributions from joint venture partnerships received
Loss on assumption of joint venture liabilities.	.950
Other	'240)
Change in operating assets and flabilities,
net of effects from purchase of businesses
(Increase) / decrease in trade debtors	(9.497)	(1,086)
(Increase) / decrease in inventories	.567	(554)
(Increase) / decrease in other operating assets	683	- 984		135)
(Increase) / decrease in future tax benefits	(327)	30.		з
(Increase) / decrease in income tax refundable		325
Increase / (decrease) in trade creditors	17,793 :	(3,386)
Increase / (decrease) in unearned income	305	76
Increase / (decrease) in other operating liabilities	1,486			(269)
Increase / (decrease) in income tax payable	$-61$	344

Increase / (decrease) in income tax payable

Increase / (decrease) in employee benefits Net cash inflow from operating activities

²⁵³ 1123 ~ $-16,006$ 841 2 2,068 3

$\frac{1}{100000000000000000000000000000000000$

m.

$\sim$ 29. $\cdot$

$\simeq$ 22

2,047

Notes to the financial statements

For the year ended 30 June 2003

		Consolidated		Parent Entity
	2003	2002	2003	2002
	\$000	\$000	\$'000	\$'000
Note 36. Non-cash financing and investing activities
Dividends satisfied by issue of shares (note 5)	50.
Note 37. Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Total facilities
Bank overdrafts	-700-	$-1,300$	-600	.300
Bills payable	4,245	$1,890$ :	.4,245	1,890
	4,945	$-3,190.$	4 845	3,190
Used at balance date
Bank overdrafts
Bills payable	870	1.435	870	1,435
	870	1.435	870	1,435
Unused at balance date
Bank overdrafts		$-1.300$	600	1.300
Bills payable	3,375	455	3,375	455
	4.075	1.755	3.975	1.755

Bank overdrafts

The bank overdraft facilities are subject to annual review, may be drawn at any time and may be terminated by the bank without notice. Interest is variable and is charged at prevailing market rates. The weighted average interest rate at year end was 8.9% (2002: 8.7%).

Bills payable

The facilities are subject to annual review. Further details are outlined below.

	Amount drawn	Interest rate		Interest type	Maturity date	Quarterly principal repayments
2003 \$'000	2002	2003 \$'000	2002 %	%		2003 2002 \$000 \$'000
				Fixed	1/12/2003
				Fixed until next rollover date	8/07/2003
-870	- 435		$\alpha$ - $\alpha$ - $\alpha$	Fixed until next rollover date	2/07/2003

Herricaned

Data^®3 Limited and Controlled Entities

Notes to the financial statements For the year ended 30 June 2003

	Consolidated		Parent Entity
	2003	2002	2003	2002
	\$000	\$'000	\$'000	\$000
Note 37. Financing arrangements (continued)
Secured liabilities
Total secured liabilities (current and non-current) are:
Bills payable				435
Lease liabilities (note 23)
Lease incentives (note 19)	-729	834
Trade creditors (note 15)	.488
Total secured liabilities	9 3 8	13 9 L L	$-5.50$	2.597

The bills payable (and bank facilities, including overdrafts) are secured by mortgages over the whole of the consolidated entity's assets.

Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default.

Lease incentives are effectively secured as the rights of the leasehold improvements revert to the lessor in the event of default.

Certain trade creditors are secured by registered charges over the whole of the consolidated entity's assets.

Assets pledged as security

All the assets of the consolidated entity are pledged as security for bank facilities and certain trade creditor facilities as noted above. Plant and equipment under finance lease (refer note 12) effectively secure lease liabilities as noted above. Leasehold improvements (refer note 12) effectively secure lease incentive liabilities as noted above.

Note 38. Financial instruments

(a) Credit risk exposures

The credit risk on financial assets of the consolidated entity are recognised in the statement of financial position is generally the carrying amount, net of any provisions. The consolidated entity has the following material credit risk exposures:

• During the year sales totalling \$24,789,000 were made to a particular customer (non-related entity), representing approximately 13% of revenue from ordinary activities (excluding shares of equity accounted net profits of joint venture partnerships). At 30 June 2003, the amount owing from this customer was \$10,251,000. Payment terms in relation to this customer are 30 days.
• During financial year 2002, sales of goods were made to a particular customer (non-related entity) totalling \$40,588,000, representing approximately 24% of revenue from ordinary activities (excluding shares of equity accounted net profits of joint venture partnerships). At 30 June 2002, the amount owing from this customer was \$3,471,000. Payment terms in relation to this customer are 14 days.
• There are a number of individually significant debtors. At 30 June 2003, the largest 10 debtors (including the abovementioned customer) comprised approximately 48% (2002: 50%) of total debtors.

Notes to the financial statements For the year ended 30 June 2003

Note 38. Financial instruments (continued)

(b) Interest rate risk exposures

The consolidated entity's exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out below.

Exposures arise predominantly from assets and liabilities bearing variable interest rates as the consolidated entity intends to hold fixed rate assets and liabilities to maturity.

		Fixed interest maturing in
		Floating	1 year or	over 1 to 5	$Non -$	Total
		interest rate	less	years	interest
					bearing
2003	Notes	\$'000	\$'000	\$'000	\$'000	\$'000
Financial assets
Cash assets	6	4,659				14,659
Receivables					34.379	34,379
Other financial assets	11
		4.659			34,386	49.045
Weighted average interest rate		2%
Financial liabilities
Bills payable	16		870			.870
Lease fiabilities	16					-231
Payables	15				43,768	43,768
			976	25	43,768	44,869
Weighted average interest rate
Net financial assets /(fiabilities)		659	(B. 76)			4.176

Notes to the financial statements For the year ended 30 June 2003

		Fixed interest maturing in
		Floating	1 year or	over 1 to 5	Non –	Total
		interest rate	less	years	interest
					bearing
2002	Notes	\$'000	\$'000	\$'000	\$'000	\$'000
Financial assets
Cash assets	6					$-5,193$
Receivables					22,569	22,569.
Other financial assets	11
					22.576	27,769.
Weighted average interest rate
Financial liabilities
Bills payable	16		.270	65		1,435
Lease liabilities	16		ា។។	230		341
Payables	15		1.500		20,483	21,983
Other	19				3,819	3,819
			2.881	395	24.302	27,578
Weighted average interest rate			%	7.3%
Net financial assets / (liabilities)		LU 3	-2 889	3951		191

$\ddot{\phantom{0}}$

For interest rates on bills payable refer note 37; for leases refer note 23.

(c) Net fair values

The net fair values of financial assets and financial liabilities approximate their carrying amounts.

(d) Derivative financial instruments

The consolidated entity does not use derivative financial instruments.

Notes to the financial statements For the year ended 30 June 2003

Note 39. Earnings per share

Basic earnings per share Diluted earnings per share

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share

Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share

2003 2002 Cents Cents 15.46 $21.72$ 15.44 21.72 Number Number $14,610,601$ 14,596,345 $-14,627,509$ $-14,596,345$

Consolidated

Information concerning earnings per share:

• a) Earnings for the purpose of the calculation of basic earnings per share is the net profit.
• b) Earnings for the purpose of the calculation of diluted earnings per share is also the net profit.
• c) Options granted are considered to be potential ordinary shares. Details relating to options are set out in note 33.
• d) In the circumstances of the company the options are considered dilutive and are therefore included in the calculation of diluted earnings per share. In 2002 the options were not considered dilutive (comprised 170,000 options with exercises prices of \$3.45 to \$3.47 per share).
• e) Reconciliation of weighted average number of ordinary shares is as follows:

Number used in calculating basic earnings per share Weighted average number of options outstanding Number used in calculating diluted earnings per share

Number Number $-14,610,601$ 14,596,345 16,908 $14,627,509$ $14,596,345$

Directors' Declaration

The Directors declare that the attached financial statements and notes:

• (a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
• (b) give a true and fair view of the company's and consolidated entity's financial position as at 30 June 2003 and of their performance, as represented by the results of their operations and their cash flows, for the financial year ended on that date.
• In the opinion of the Directors:
• (a) the financial statements and notes are in accordance with the Corporations Act 2001; and
• (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and
• (c) at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in note 24 will be able to meet any obligations or flabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 24.

This declaration is made in accordance with a resolution of the Directors.

L. A audio

R A Anderson Director

Brisbane Dated this 8th day of September 2003

Independent Audit Report to the Members of Data'3 Limited

Scope

The Financial Report and Directors' Responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for both Data*3 Limited (the company) and the consolidated entity, for the year ended 30 June 2003. The consolidated entity comprises both the company and the entities it controlled during that year.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Audit Approach

We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgment, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

• · examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Audit Opinion

In our opinion, the financial report of Data*3 Limited is in accordance with:

(a) the Corporations Act 2001, including:

• (i) giving a true and fair view of the company's and the consolidated entity's financial position as at 30 June 2003 and of their performance for the year ended on that date; and
• (ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
• (b) other mandatory financial reporting requirements in Australia.

JOHNSTON RORKE Chartered Accountants R C N Walker Partner

Brisbane, Queensland 8 September 2003

Data'3 Limited and Controlled Entities

Shareholder information

The shareholder information set out below was applicable as at 29 August 2003.

1. Distribution of equity securities

(a) Analysis of numbers of equity security holders by size of holding:

			Class of security
			Ordinary shares	Options for ordinary shares
		1,000	$\sim$ $\sim$ 363 $\sim$	法和婚
1,001	$\overline{\phantom{a}}$	5,000	$\mathcal{L} \subset \mathsf{911} \subset \mathcal{L}$	and the thought.
5,001	$\overline{\phantom{a}}$	10,000	$\sim 244$ km $^{-2}$	$\label{eq:1} \mathcal{L}=\frac{1}{2}\sum_{i=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1}{2} \sum_{j=1}^{n} \frac{1$
10,001	$\overline{\phantom{a}}$	100,000	$\mathbb{E}[\mathbb{E}[\mathbf{1}]\mathbf{7}\mathbf{2}]\mathbb{E}[\mathbf{1}]$
100,001 and over			$\mathbb{R}^n \cong \mathbb{R}^n$ 20 $\mathbb{R}^m$	್ಲಿ ಅಪ್ರಕ್ರೀ ಅಪಾ
				man g saam

(b) There were 95 holders of less than a marketable parcel of ordinary shares.

2. Twenty largest quoted equity security holders

Name	Ordinary shares
	Number held	Percentage of
		issued shares
		%
Wood Grant & Associates Pty Ltd	$-932,420$	$-6.36$
Oakport Pty Ltd	1731,000	$4.98$ .
MJE Marketing Pty Ltd	696,000	4.74
G R Clark	574,500	3.92
Elterry Pty Ltd	1519,400	3.54
Westpac Custodian Nominees Limited	$-236,240$	$-1.61$
Thomson Associates Pty Ltd	200,000	1.36
M M Martin	197,000	1.34
Powell Clark Trading Pty Ltd	-194.380	$-1.32$
W T Powell	$-179,200$	$-1.22$
M R Esler	179,100	$\left[1.22\right]$
J E Grant	$-179,100.$	$-1.22$
J T Populin	$-169.014$	$-1.15$
H S Nominees (Aust) Pty Ltd	140,000	$-0.95$
Comptech Corporation Pty Ltd	-125,069	0.85
M G Populin	$-120,444$	0.82
D J Klingberg	112,000	$^{\circ}0.76$
M Rees	103,615	0.70
Exelmont Pty Ltd	101.258	0.69
Oregon Sales Pty Limited	100.680	$^{\circ}0.68$
	5,790.420	39.51

Shareholder information

3. Substantial shareholders

Substantial shareholders in the company are set out below:

Name

J E Grant / Wood Grant & Associates Pty Ltd M R Esler / Oakport Pty Ltd W T Powell / Elterry Pty Ltd G R Clark / Powell Clark Trading Pty Ltd

4. Unquoted equity securities

Options issued under Data'3 Limited Employee Option Plan to take up ordinary shares

768,880 Number held k.

Number held

$4,111,520$ $\%$

$0.910, 100$

ຳ778,600 ∷ັ

210,000

$-5.31$ $5.25 -$ Number of holders 9

Percentage

$-7.59$

$6.21$

The voting rights attaching to the ordinary shares, set out in the Company's Constitution, are:

(a) every shareholder present at a general meeting has one vote on a show of hands; and (b) on a poll, each shareholder has one vote for each fully paid share held.

Options have no voting rights.

1. Voting rights

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Data's Annual Réport 2008