DATA#3 LIMITED — Annual Report 2003

Sep 8, 2003

Data^#3 Limited ABN 31 010 545 267

Annual Financial Report
Year Ended 30 June 2003

Directors' report

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

Princinal 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 (Old) 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

	2003	2002
	Cents	Cents
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.

Directors' report (continued)

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	Meetings	Meetings	Meetings
	attended	held	attended	held
R A Anderson	21	22.	6	6
HL Stack	20	22	*	*
GR Clark	21	22.	*	*
W T Powell	21	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	shares and options of Data * 3 Limited as at the date of this report	Particulars of Directors' interests in
			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' report (continued)

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 non-financial, 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 fees	Committee fees S	Superannuation	Options	Total \$
R A Anderson	50,000	$\blacksquare$	4,500	۰	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	۰	2,700		32,700

Directors' report (continued)

Directors' and executives' remuneration (continued)

Executives of Data®3 Limited
Name	Base salary	Motor	Incentive	Superannuation	Other	Options	Total
	\$	vehicle \$	payments \$	\$	benefits \$	\$	\$
J E Grant Chief Executive Officer	72,000	73,867	117,631	28,330	7,258		299,086
B I Hill Chief Financial Officer and Company Secretary	109,050		31,093	12,569	2,597	1,600	156,909
K R Partridge Manager -- Systems & Processes	109,332	8,400	5,385	10,519		1,600	135,236
D P Ryan Manager - Finance	68,973	19,100	17,015	9,458			114,546
K H Weber Manager -- Operations	86,000		14,879	9,079			109,958

Executives of the consolidated entity
Name	Base salary	Motor vehicle	Incentive payments	Superannuation	Other benefits	Options	Total
	\$	S	£.	\$	\$	\$	\$
B D Colledge Manager - Licensing Solutions	125,000	٠	171,721	10,519		1,600	308,840
B A Crouch Manager - Enterprise Solutions	129,481	$\blacksquare$	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.

Directors' report (continued)

Directors' and executives' remuneration (continued)

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

Shares under option

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

Number	Exercise price	Expiry date
	ъ
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.

Directors' report (continued)

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.

& Alenderson

RA Anderson Director

Brisbane Dated this 8^th day of September 2003

Statements of Financial Performance

For the year ended 30 June 2003

	Consolidated Notes				Parent Entity
		2003	2002	2003	2002.
		\$'000	$$^{\circ}000$	\$'000	\$'000
Revenues from ordinary activities
Sale of goods	$\overline{2}$	160,684	145,058
Services	$\overline{2}$	31,925	26,474	365
Other	$\overline{2}$	196	274	8,027	7,726
Total		192,805	171,806	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	(934)	(967)	(310)	(332)
Borrowing costs		(208)	(346)	(208)	(345)
Management charges - controlled entities				(1, 157)	(1,018)
Other		(5,220)	(3,328)	(526)	(578)
Total		(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)
Net profit	21	2,259	3,170	2,325	2,084
		Cents	Cents
Basic earnings per share	39.	15.46	21.72
Diluted earnings per share	39	15.44	21.72

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

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	5,193	14,650	5,188
Receivables	7	34,379	22,569	8,455	7,750
Inventories	8	790	1,296
Other	9	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	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	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	1,085	125	1,085
Provisions	18	466	435	125	127
Other	19	625	730	625	730
Total non-current liabilities		1,216	2,250	875	1,942
Total liabilities		48,298	30,593	17,557	9,660
Net assets		9,811	7,867	8,635	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	8,635	6,625

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

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	31
partnerships received Interest received		167	698 197	167	197
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		(316)	(245)	(33)	(94)
Proceeds from sale of property, plant and
equipment		18	10
Payment for purchase of joint venture
interest Cash acquired through purchase of joint	32	(3,406)
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 Loans from controlled entities			8,255	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	14,650	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 $1(u)$ .

$(a)$ Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by $Data^{\theta}3$ Limited ("company" or "parent entity") as at 30 June 2003 and the results of all controlled entities for the year then ended. Data⁸3 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.

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

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 non-current asset is

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

Note 1. Summary of significant accounting policies (continued)

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

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.

$($ f) Investments

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:

$3 - 20$ years Plant and equipment

$(h)$ Leasehold improvements

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.

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

Note 1. Summary of significant accounting policies (continued)

$(i)$ 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.

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 sale 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.

$(k)$ Employee benefits

Revised accounting standard AASB 1028 Employee Benefits was adopted with effect from 1 July 2002. This revised account 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 nonaccumulating, are recognised when the leave is taken and measured at the rates paid or payable.

Long service leave

The liability 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 interest rates on national government guaranteed securities with terms to maturity 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.

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

Note 1. Summary of significant accounting policies (continued)

$(k)$ Employee benefits (continued)

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.

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.

$\theta$ 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: $\bullet$
• $\blacksquare$ 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 $\omega$

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 liabilities 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.

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

Note 1. Summary of significant accounting policies (continued)

Dividends $(q)$

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. 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 / (loss) 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 pavables which are recognised inclusive of GST. $\bullet$

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

Rounding of amounts $(f)$

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.

Reclassification of liability for certain employee benefits $(u)$

The liability 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.

Dataⁱ3 Limited is a public company limited by shares, incorporated and domiciled in Australia.

Its registered office is:	Its principal place of business is:
$5th$ Floor	Level $2$
National Bank House	Data # 3 Centre
255 Adelaide Street	80 Jephson Street
BRISBANE QLD 4000	TOOWONG QLD 4066

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

2003	2002	2003	2002 \$'000
160,684	145,058
31.925	26,474	365
192.609	171,532	365
148	235	148	235
18	10
		5,871	5,476
		2,000	2,000
30	29.	8	15.
196	274	8,027	7,726
			7.726
	\$'000 192.805	Consolidated \$3000 171,806	Parent Entity \$000 8.392

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:

Cost of sales of goods	142,657	127,956
Depreciation
Plant and equipment	371	419	106	128
Amortisation
Leasehold improvements	138	126	104	104
Plant & equipment under finance leases	102	106	100	100
Goodwill	323	316
Total amortisation	563	548	204	204

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

	Consolidated		Parent Entity
	2003 \$'000	2002 \$3000	2003 \$'000	2002 \$'000
Note 3. Profit from ordinary activities (continued)
Other charges against assets Bad and doubtful debts Inventory obsolescence	43	137 (48)
Rental expenses on operating leases	1,485	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 Share of joint venture partnerships' non-	97	95
deductible expenses Share of joint venture partnerships' non-	367
assessable revenue	(362)
Rebateable dividends Non-allowable items	102	76	(600) 25	(600) 59
Income tax adjusted for permanent differences Under / (over) provision in previous year	1,271 25	1,420 46	114 1	88 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 tax-related amounts receivable or payable. The impact on the income tax expense and results of Data ^$\pi$ 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.

The financial effect of the implementation of the legislation has not been recognised in the financial statements for the year ended 30 June 2003.

	Parent Entity
Note 5. Dividends	2003 \$'000	2002 \$'000
Interim dividend of 2.5 cents (2002 - nil) per fully paid ordinary share, 100% franked based on tax rate of 30%	365
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	315
Satisfied by issue of shares	50
	365
Dividends not recognised at year end
In addition to the above dividends, since year end the directors have recommended
the payment of 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
proposed dividend expected 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 1(q):	1,099

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

Note 5. Dividends (continued)

	Parent entity
Franked dividends The franked portions of the final dividends recommended 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.	2003 \$3000	2002 \$'000
Franking credits available for subsequent financial years	1.699	968

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

franking credits that will arise from the payment of the current tax liability; $(i)$ franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; $(ii)$

• $(iii)$ 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	2002	2003	2002
	\$000	\$'000	\$000	\$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%).

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

	Consolidated		Parent Entity
	2003 \$000	2002 \$'000	2003 \$000	2002 \$'000
Note 7. Receivables
Trade debtors	33,378	22,572
Provision for doubtful debts	(272)	(304)
	33,106	22,268
Other debtors	123	301	17	90
Receivable from Powerlan Qld (note 32)	3,092
Provision for doubtful debt	(1, 942)
	1,150
Amounts receivable from controlled entities			8,438	7,660
	34.379	22,569	8,455	7,750

Trade debtors

Trade debtors as at 30 June 2003 includes approximately \$10,596,000 due from various Oueensland Government departments arising from sales, the prior year equivalent of which were recorded in ODS and OSS. From 1 September 2002, business formerly carried on by ODS 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 Old

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

Note 8. Inventories

Finished goods - at cost	819	1,325
Provision for obsolescence	(29)	(29)
	790	1,296
Note 9. Other current assets
Prepayments	315	324	150.	168
Security deposits	98	66	20.	13
Accrued rebates	208	766
	621	1,156	170	181

Note 10. Investments accounted for using the equity method

Interest in joint venture partnerships (note 31)

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

	Consolidated		Parent Entity
	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Note 11. Other financial assets
Investments traded on organised markets
Shares in other corporations $-$ at cost (note 29)	7	7	7	7
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)
	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	1,751	1,751
	$\tau$	7	1,758	1,758
Note 12. Property, plant and equipment
Leasehold improvements - at cost	1,362	1,163	1,042	1,042
Accumulated amortisation	(439)	(301)	(312)	(208)
	923	862	730	834
Plant and equipment - at cost	3,763	2,656	659	626
Accumulated depreciation	(3,129)	(1,907)	(538)	(432)
	634	749	121	194
Plant and equipment under finance lease	498	540	498	498
Accumulated amortisation	(291)	(217)	(291)	(191)
	207	323	207	307
	1,764	1,934	1,058	1,335

Reconciliations

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.

van en uiv van vin maailvan yvar are set eat ovle m.	Leasehold improvements	Plant and equipment	Leased plant and equipment	Total
	\$'000	\$'000	\$3000	\$3000
Consolidated
Carrying amount at 1 July 2002	862	749.	323	1,934
Additions	199	117		316
οf Additions acquisition through
businesses (note 32)		139		139
Disposals			(14)	(14)
Depreciation/amortisation expense	(138)	(371)	(102)	(611)
Carrying amount at 30 June 2003	923	634	207	1,764
Parent entity
Carrying amount at 1 July 2002	834	194	307	1,335
Additions		33		33
Depreciation/amortisation expense	(104)	(106)	(100)	(310)
Carrying amount at 30 June 2003	730	121	207	1,058

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

	Consolidated		Parent Entity
	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Note 13. Deferred tax assets
Future income tax benefit	907	573	101	73
Note 14. Intangible assets
Goodwill Accumulated amortisation	6,472 (1,490)	6,268 (1,167)
	4,982	5,101
Note 15. Payables
Trade creditors - secured (note 37) - unsecured	7,488 30,874 38,362	11,301 6,935 18,236
Other creditors and accruals - unsecured	5,406	3,747	3,642	1,189
	43,768	21,983	3,642	1,189

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

870	580	870	580
106	111	106	98
976	691	976	678
	855		855
125	230	125	230
125	1.085	125	1,085

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

	Consolidated		Parent Entity
	2003 \$000	2002 \$'000	2003 \$'000	2002 \$'000
Note 17. Current tax liabilities
Income tax	405	344
Note 18. Provisions
Current
Employee benefits (note 33)	187	145	85	54
Non-current
Employee benefits (note 33)	466	435	125	127
Note 19. Other liabilities
Current
Unearned income	1,642	1,257
Lease incentives	104	104	104	104
Amounts payable to Controlled entities			11,875	5,693
Joint venture partnership (note 31)		3,819
	1,746	5,180	11,979	5,797
Non-current
Lease incentives	625	730	625	730

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 $000^{\circ}$	2002 Shares $000^{\circ}$	2003 \$3000	2002 \$300
Note 20. Contributed equity
(a) Share capital
Ordinary shares - fully paid	14,654	14.602	7,459	7,409

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

Note 20. Contributed equity (continued)

(b) Movements in ordinary share capital

Details	Notes	Number of Shares	Issue Price \$	\$3000
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

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

The company has established a dividend reinvestment plan under which holders of ordinary shares may $(i)$ 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%.

(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	\$3000
Note 21. Retained profits / (accumulated losses)
Retained profits / (accumulated losses) at the
beginning of the financial year	458	(2,712)	(784)	(2,868)
Net profit	2.259	3.170	2.325	2.084
Dividends paid (note 5)	(365)	$\blacksquare$	(365)
Retained profits / (accumulated losses) at the
end of the financial year	2.352	458	1.176	(784)

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

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.

	Consolidated		Parent Entity
	2003	2002	2003	2002
	\$000	\$2000	\$3000	\$3000
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	1.215	1.443	911	882
Later than one year but not later than 5 years	3.382	3,012	3.130	2.647
Later than 5 years	1.274	1.911	1.274	1,911
	5.871	6.366	5.315	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		47
Commitments in relation to finance leases are payable as follows:
Within one year	121	134	121	121
Later than one year but not later than 5 years	132	253	132	253
Minimum lease payments	253	387	253	374
Less: Future finance charges	(22)	(46)	(22)	(46)
	231	341	231	328
Representing lease liabilities:
Current (note 16)	106	111	106	98
Non-current (note 16)	125	230	125	230
	231	241	231.	ገንጽ

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.

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

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 whollyowned 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.

	Directors of entities in the consolidated entity		Directors of parent entity
	2003 S	2002	2003 S	2002 S
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	541.625	628.738	152.600	132.300

Options are 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 of the parent entity during the year (2002; nil), and these directors held no option 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
\$		S			2003	2002
10,000	$\overline{\phantom{a}}$	19,999
30,000	$\blacksquare$	39,999			3	2
50,000		59,999
			Executive officers of the consolidated entity		Executive officers of the parent entity
			2003	2002	2003	2002
			S	S	\$	\$
		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	4.327.599	4.041.619	815.735	845.174

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

Note 26. Remuneration of executives (continued)

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 Australianbased executive offices (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	20,000	40,000	۰	20,000	40,000
Australian-based executive officers of other entities in the consolidated entity	130,000	170,000	٠	130,000	170,000
	150.000	210,000		150.000	210,000

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 vield 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:

			No. of executive officers of the consolidated entity		No. of executive officers of the parent entity
\$		S	2003	2002	2003	2002
100,000	$\blacksquare$	109,999		4
110,000	$\blacksquare$	119,999
120,000	٠	129,999
130,000	$\blacksquare$	139,999
150,000	$\blacksquare$	159,999
160,000	۰	169,999
180,000	٠	189,999
190,000	٠	199.999
250,000	$\blacksquare$	259,999
260,000	$\blacksquare$	269,999
280,000	٠	289,999
290,000	$\blacksquare$	299,999
300,000	$\blacksquare$	309,999
330,000		339,999

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

	Consolidated		Parent Entity
	2003	2002	2003	2002
	\$	S	\$	\$
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	74.500	69,000	74.500	69,000
Other services	54,950	56.280	54,950	56.280
Total remuneration	129.450	125,280	129.450	125,280

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.

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	$\overline{\phantom{a}}$	20.000

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	-	1.800	$\blacksquare$	1.800.

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

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

Note 28. Related parties (continued)

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 $\bullet$ use of assets (refer note 2):
• Management charges from controlled entities for use of assets and provision of systems and services (refer $\bullet$ Statement of Financial Performance): and
• Dividends received by Data^#3 Limited (refer note 2). $\bullet$

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	\$3000
Shares in other corporations – at cost
Note 30, Investments in controlled entities

Name of entity	Country of formation or	Equity holding
	incorporation	(ordinary shares)
		2003	2002
		$\%$	%
Data #3 Business Systems Pty Ltd	Australia	100	100.
Data " 3 Client Services Pty Ltd	Australia	100	100
Data"3 (Gold Coast) Pty Ltd	Australia	100	100
Gratesand Pty Ltd	Australia	100	100.

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 (Old) 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	2002
	\$'000	\$'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		(200)
Write-off of joint venture partnership interest	(694)
Carrying amount at the end of the financial year		631
Share of joint venture partnership's assets and liabilities
Current assets		1,964
Non-current assets		50.
Total assets		2,014
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	63	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.

Notes to the financial statements For the year ended 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 Oueensland State Government.

Consolidated

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	17	498
Distributions received		(498)
Write-off of joint venture partnership interest	(17)
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)		(3, 819)
Share of joint venture partnership's assets and liabilities *
Current assets		7,187
Non-current assets		19
Total assets		7,206
Current liabilities		(11, 025)
Total liabilities		(11, 025)
Net liabilities		(3, 819)

* excluding amount receivable from controlled entity of Data 5 Limited of \$3,819,000 as at 30 June 2002

Share of joint venture partnership's revenues, expenses and results
Revenues	748	11.517
Expenses	(731)	(11.019)
Profit before income tax		498

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. Acquisition of businesses

(a) Receivership and administration of Powerlan Old and the acquisition of ODS and OSS

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 Old, appointed partners of PricewaterhouseCoopers as Receivers.

Powerlan Qld was the joint venture partner of a controlled entity, Data^*3 Business Systems Pty Ltd (Data^*3) in Oueensland Desktop Services (ODS) and Oueensland Software Services (OSS) - refer note 31.

Negotiations with the Powerlan Old 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 Old (being the net of the original OSS Joan to Powerlan Old of \$3.819,000 offset by moneys owed to Powerlan Old 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 Old.

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 Powerlan 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 Old. The consolidated entity is the largest creditor of Powerlan Old, 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 Old 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 Old 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.

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

Note 32. Acquisition 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.

	2003
	\$3000
Fair value of identifiable net assets/(liabilities) acquired:
Cash	2,176
Trade and other debtors	1,356
Receivable -- Powerlan Qld	3,092
Provision for doubtful debt – Powerlan Qld	(1, 942)
Inventories	61
Other	73
Plant and equipment	121
Trade and other creditors	(2,450)
Loan payable to consolidated entity	(3,406)
Unearned income	(80)
Net identifiable liabilities assumed	(999)
Less: 50% interest in joint venture partnerships already held	(711)
Legal and other costs	(240)
Loss on assumption of joint venture partnerships' net liabilities as at
30 June 2003	(1,950)

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

Note 32. Acquisition of businesses (continued)

(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 \$203,000. The operating results of the acquired business have been included in the consolidated statement of financial performance since 1 July 2002. Details of the acquisition are as follows:

	2003 \$'000
Fair value of identifiable net assets/(liabilities) acquired:
Plant and equipment	18
Future income tax benefit	7
Other creditors and accruals	(24)
Other provisions	(2)
Net identifiable liabilities assumed	(1)
Goodwill	204
	203
Consideration:
Cash paid	203

(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.

	Consolidated		Parent Entity
	2003 \$'000	2002 \$3000	2003 \$000	2002 \$3000
Note 33. Employee benefits
Employee benefits and related on-costs
liabilities Included in other creditors $\sim$ current (note 15) Provision for employee benefits - current	1,483	1,303	180	153.
(note 18) Provision for employee benefits - non-	187	145	85	54
current (note 18)	466	435	125	127
Aggregate employee benefit and related on-costs
liabilities	2.136	1.883	390.	334
	Number		Number
Employee numbers Number of employees at end of financial year	284	269	38	37

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

Note 33. Employee benefits (continued)

Data^#3 Employee Share Scheme

The establishment of the Data^#3 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 Emplovee 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 shares 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 are as follows:

Date granted	Expiry date	Exercise price	Number of options
12 March 2001	13 March 2004	3.47	20.000
25 March 2001	26 March 2004	3.45	150,000
			170.000

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 become exercisable on 22 November 2003, are as follows:

Date granted	Expiry date	Exercise price	Number of options
22 November 2002	28 February 2004	\$0.91	20.000
22 November 2002	21 November 2005	\$0.91	190,000
			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.

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

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	2002	2003	2002
	\$'000	\$'000	\$'000	\$'000
Note 35. Reconciliation of net profit after income tax to net cash inflow from operating activities
Net profit after income tax	2,259	3,170	2,325	2,084
Depreciation and amortisation	934	967	310	332
Provision for doubtful debts	43	76
Provision for stock obsolescence		(48)
Profit on sale of plant and equipment	(4)
Share of joint venture partnerships' operating profit	(80)	(784)
Distributions from joint venture partnerships received		698
Loss on assumption of joint venture liabilities	1,950
Other	(240)
Change in operating assets and liabilities, 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	84	(135)
(Increase) / decrease in future tax benefits	(327)	30	(28)	13
(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	6	(652)	(269)
Increase / (decrease) in income tax payable	61	344
Increase / (decrease) in employee benefits	73	23	29	22
Net cash inflow from operating activities	16,006	841	2,068	2,047
Note 36. Non-cash financing and investing activities
Dividends satisfied by issue of shares (note 5)	50		50

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

	Consolidated		Parent Entity
	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
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	1,300
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	700	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 $$^{\circ}000$	2002 \$'000	2003 %	2002 %			2003 \$'000	2002 \$'000
165	385	6.7	6.7	Fixed	1/12/2003	55	55
250	560	5.8	5.6	Fixed until next rollover date	8/07/2003		55
455	490	5.8	5.9	Fixed until next rollover date	2/07/2003		35
870	1.435

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

Note 37. Financing arrangements (continued)

	Consolidated		Parent Entity
	2003	2002	2003	2002
	\$000	\$3000	\$'000	\$'000
Secured liabilities
Total secured liabilities (current and non-current) are:
Bills payable	870	1,435	870	1,435
Lease liabilities (note 23)	231	341	231	328
Lease incentives (note 19)	729	834	729	834
Trade creditors (note 15)	7.488	11,301
Total secured liabilities	9.318	13,911	1,830	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 $\blacksquare$ (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	less	years	interest
		rate			bearing
2003	Notes	\$'000	\$'000	\$'000	\$'000	\$'000
Financial assets
Cash assets	6	14,659				14,659
Receivables	7				34,379	34,379
Other financial assets	$\mathbf{1}$					7
		14,659			34,386	49,045
Weighted average interest rate		4.2%
Financial liabilities
	16		870			870
Bills payable Lease liabilities	16		106	125		231
	15
Payables					43,768	43,768
			976	125	43,768	44,869
Weighted average interest rate			6.2%	8.2%
Net financial assets /(liabilities)		14,659	(976)	(125)	(9,382)	4,176

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

Note 38. Financial instruments (continued)

(b) Interest rate risk exposures (continued)

				Fixed interest
				maturing in
		Floating interest rate	1 year or less	over 1 to 5 years	$Non -$ interest bearing	Total
	Notes	\$'000	\$'000	\$'000	\$'000	$$^{\circ}000$
2002
Financial assets
Cash assets	6	5,193				5,193
Receivables	7				22,569	22,569
Other financial assets	$\mathbf{1}$				7	7
		5,193			22,576	27,769
Weighted average interest rate		4.0%
Financial liabilities
Bills payable	16		1,270	165		1,435
Lease liabilities	16		111	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			6.4%	7.3%
Net financial assets / (liabilities)		5,193	(2,881)	(395)	(1, 726)	191

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

$1.0000021111111111111111111111111111111$	Consolidated
	2003	2002
	Cents	Cents
Basic earnings per share	15.46	21.72
Diluted earnings per share	15.44	21.72
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per	Number	Number
share	14,610,601	14.596.345
Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share	14.627,509	14.596.345

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 $3\overline{3}$ .
• 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: $\frac{1}{2}$

reconvinuou or neighted avenue number or oramary shares is as rono h s.	Number	Number
Number used in calculating basic earnings per share Weighted average number of options outstanding	14.610,601 16.908	14.596.345
Number used in calculating diluted earnings per share	14.627,509	14,596.345

Directors' declaration

The Directors declare that the attached financial statements and notes:

• comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional $(a)$ reporting requirements; and
• give a true and fair view of the company's and consolidated entity's financial position as at 30 June 2003 and $(b)$ 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:

• the financial statements and notes are in accordance with the Corporations Act 2001; and $(a)$
• there are reasonable grounds to believe that the company will be able to pay its debts as and when they $(b)$ become due and payable; and
• at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group $(c)$ identified in note 24 will be able to meet any obligations or liabilities 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.

1 Atenderson

RA Anderson Director

Brisbane Dated this 8^th 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 indement, 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 $\ddot{\phantom{0}}$ 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:
• giving a true and fair view of the company's and the consolidated entity's financial position as at 30 June $(i)$ 2003 and of their performance for the year ended on that date; and
• complying with Accounting Standards in Australia and the Corporations Regulations 2001: and $(ii)$
• (b) other mandatory financial reporting requirements in Australia.

JOHNSTON RORKE

Whales

Chartered Accountants RCN Walker Partner

Brisbane. Queensland 8 September 2003

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
	$\overline{\phantom{a}}$	1,000	363	-
1,001	$\overline{\phantom{a}}$	5,000	911	۰
5,001	$\blacksquare$	10,000	241	$\blacksquare$
10,001	$\sim$	100.000	172	9
100,001 and over			20
			1,707	Q

(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	731,000	4.98
MJE Marketing Pty Ltd	696,000	4.74
G R Clark	574,500	3.92
Elterry Pty Ltd	519,400	3.54
Westpac Custodian Nominees Limited	236,340	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	1.22
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	0.76
M Rees	103,615	0.70
Exelmont Pty Ltd	101,258	0.69
Oregon Sales Pty Limited	100,680	0.68
	5,790,420	39.51

Shareholder information (continued)

3. Substantial shareholders

Substantial shareholders in the company are set out below:

Name	Number held	Percentage
J E Grant / Wood Grant & Associates Pty Ltd	1.111.520	7.59
M R Esler / Oakport Pty Ltd	910.100	6.21
W T Powell / Elterry Pty Ltd	778.600	5.31
G R Clark / Powell Clark Trading Pty Ltd	768,880	5.25

4. Unquoted equity securities

	Number held	Number of holders
Options issued under Data # 3 Limited Employee
Option Plan to take up ordinary shares	210,000

5. Voting rights

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.