DATA#3 LIMITED — Annual Report 2006

Sep 28, 2006

anan an

film de

annual report 2006

solutions adding value
annual report 2006

the Data 3 team. The plotters throughout capture some of the Data 3 team at vork across Australia.

annual general meeting

The Annual General Meeting of Data's Limited will be held at 10.30am on Wednesday 3th November 2006 in Data 3's corporate head office, Level 2, Data 3 Centre, 80 Jephson Street, Trowong Queensend

Contents

Anzan standardaven	H
Kavisharehenderining artiken	P
Antoining as to be antificial	9Ľ,
a manazarta ya matsh	887
Manasha bilaan kalendar	93
enterna en han	×
Commencemunical nomenal monda	I.
Experience and Contract www.mmmmm	D
Emmatikana	$\mathcal{L}^{(0)}_{\mathcal{L}^{(0)}}$
Independent and Incelori	33
Siffraich i Buildimine	猪卷

2006 WES STOCKS LOAD Tyear for Data"3. and the second second in the second second in the second in the second in the second in the second in the second in the second in the second in the second in the second in the second in the second in the second in the se

While a strong market provided a platform for this, it was the value we delivered to our customers that definitively positioned us in the marketplace. Central to that proposition is simply that our market-leading expertise in technologies from the world's leading suppliers gives us, and resultantly our customers, competitive advantage. Acceptance of that proposition by our customers translated into a solid performance ahead of target in most areas of the business.

Richard Anderson - Chairman

a matamatan

Key shareholder information

Financial highlights

Revenue

Total revenue grew by 22% to \$239.6 million, with service revenue increasing 42% and product revenue increasing 17%

Internal expenses

of gross margin

Internal staff costs & operating expenses decreased as a percentage of gross margin by 2.2%

Net profit after tax

Net profit after tax increased by 37% to \$5.7 million

highlights Lyna

2008 - 2008 - 2008 - 2009 - 2009 - 2009 2008 - 2008 - 2008 - 2009 - 2009 - 2009 - 2009 - 2009 - 2009 - 2009 - 2009 - 2009 - 2009 - 2009 - 2009 - 2009
We achieved our target to improve customer satisfaction over the previous year, doing so in 8 out of 9 areas.
We grew the index by 45% over the previous year
We achieved our target with 90% of our people indicating Data 3 is an excellent company to work for and one that they would recommend to others in the industry
We achieved all key vendor sales targets receiving П several sales and service awards in the process
We retained or improved certification levels across all īΒ key vendors
We met all our targets, improving on performance in the previous year
We provided international, award winning ICT and business skills training to staff through our e-learning program

Net tangible assets increased by 33% to \$12.3 million

Basic earnings per share up 35% to 36.9 cents Dividends per share up 47% to 28 cents, representing a 76% payout

Share price increased by 23% to 30 June 2006.

Objectives for 2007

In 2007 we expect market conditions, while contracting slightly, to remain positive but competitive. We are targeting further organic growth in all areas of the business. Our objectives in 2007 relate to four key areas:

Positioning to compete and win

Increasing the commitment of our customers

Increasing the commitment of our staff

Improving our operational excellence

mumus

We believe that achieving our objectives in these four areas will see financial performance improve on the record 2006 result, with returns to shareholders near the top of the sector.

Additionally we will continue to look for appropriate partnerships and acquisitions to enhance either our geographic scale or our expertise and ultimately further improve financial performance.

An outline of our business

Data 3 is a significant national Information and Communication Technology (ICT) Solutions company. This year revenue was \$240 million and over 350 employees sérved customers from afflices in Brisbane, Sydney, Melbourne, Canberra, Townsville, Rockhampton, Gladstone and New Caledonia.

OUR VISION AND GULTURE

Our vision is to be recognised as "Australia's leading ICT Solutions Company - the one that everyone wants to work for buy from, or own shares in."

Our core values define our culture - excellence and innovation; honesty and integrity; taking responsibility; flexibility and adaptability; making decisions quickly; and always going the extra mile to exceed expectations.

OUR STRATEGY

To achieve this vision our strategy is to:

• Position ourselves competitively with ICT .
  Solutions underpinned by market-leading expertise and with selected vendors that are driving the industry globally.
• Strengthen customer commitment by leveraging that expertise to deliver solutions that meet their business and technology needs and exceed their expectations.
• Maintain commitment to staff development processes that recruit, nurture and retain the 'right' people and further develop their expertise and their commitment to our core values.
• C. Through continuous review and improvement, accelerate development of the organisation as a leader in operational excellence.

Successful execution of this strategy underpins. achievement of our goal for financial performance increasing returns to shareholders - an imperative to achieving our vision.

We believe we will have achieved our vision when over 90% of our staff consistently recommends Data*3 to others as their preferred employer; our key customers consistently tell us that we are their preferred ICT supplier; our key vendors consistently recognise our expertise and performance; and we consistently deliver total returns to shareholders near the top of the ICT sector.

AREAS OF SPECIALISATION

Data^r3 specialises in ICT Solutions for the following six areas:

• Software licensing and software asset management delivered through Licensing Solutions
• Application and infrastructure integration delivered n through ICT Services
• a Outsourcing and remote management delivered through ICT Services

• Product sourcing and related integration services delivered through ICT Product Solutions

• Ontimisation of data centre infrastructure delivered through Enterprise Infrastructure Solutions

• Contract and permanent recruitment delivered through Recruitment Solutions.

These areas of specialisation develop market leading expertise in the technologies and services that underpin their specialisations and apply this expertise to deliver ICT solutions that ensure customers achieve their business and technology objectives.

Licensing Solutions

Licensing Solutions provides expertise in ICT Solutions for Software Licensing and Software Asset Management. These solutions help our customers procure and manage software under licensing agreements with the industry's global software vendors including Microsoft, IBM, Symantec, Computer Associates and Citrix. Our Licensing Solutions consultants are appropriately certified and experienced in vendor licensing terms and conditions and the business benefits of managing software as an asset. They are supported by Data'3's Licensing Online web-based portal that allows customers access to their licensing information and to purchase licensed software product. This expertise was recognised with Microsoft naming Data'3 its 2006 Large Account Reseller of the Year for Australia and New Zealand and its Global Award winner for Software Asset Management.

Data^® 3 won the Global Software Asset Management, Licensing Solutions Award at the Microsoft Worldwide Partner Conference in Boston, USA in July 2006. This peak award acknowledged that Data'3 demonstrates world's best practice in its whole of government Software Asset Management (SAM) contract with the Queensland Government. The highly sought after award was celebrated by Microsoft Australia Partner Group Director, Ms Kerstin Baxter, who extended her congratulations to Data®3 saying "The Data®3 win highlights the strength of the Australian partner community to develop and implement world-class software solutions. Software asset management is a key focus for Microsoft, as we look to work with partners who have a deep understanding of software licensing and how it relates to providing our customers with real competitive advantage."

ICT Services

ICT Services addresses our customers' challenges of designing, deploying and supporting reliable, high performance and secure network and communications infrastructure and applications. It does this through ICT Solutions for Workforce Productivity and Collaboration, Business Process Optimisation, Wireless and Mobility, (Network) Infrastructure Optimisation, Unified Communications, Outsourcing and Security and Privacy.

These solutions are underpinned by market-leading expertise and the highest levels of certification in mainstream technologies from global leaders Cisco Systems and Microsoft. This expertise has been acknowledged by our Gold Partner status with Cisco for its Advanced Technologies - VPN Security, Wireless Networking, Network Management, Routing and Switching and IP Telephony - and Gold Partner status with Microsoft for Integrated eBusiness and Advanced Infrastructure Solutions. Data'3 was nominated as one of three finalists in Microsoft's 2006 Global Partner of the Year Award for Advanced Infrastructure Solutions and was awarded 2006 Partner of the Year for Infrastructure Solutions for Australia and New Zealand.

In partnering with Data^®3 for the design and implementation of a complete Microsoft-based electronic service delivery infrastructure, a major state government department was able to reap significant benefits in staff productivity from a collaboration workspace for its internal and external customers. Underpinning the success of the project was Data*3's commitment to helping the department fully appreciate the scope of capabilities inherent within the technologies being implemented.

Enterprise Infrastructure Solutions

Enterprise Infrastructure Solutions combines expertise in consulting and support services with hardware and software from leading global vendors to deliver ICT Solutions for (Data Centre) Infrastructure Optimisation, Virtualisation, Business Continuity, ICT Governance and Information Lifecycle Management.

Partnering with the world's leading enterprise computing vendors - IBM, HP and Cisco Systems - the team has developed the skills and infrastructure to be positioned as a leader in this area and has been recognised with its third annual award as IBM's Storage Partner of the Year. Further consolidation of this leadership is demonstrated by a continuing investment in Australia's only TotalStorage™ Solution Centre (TSSC) where customers work with a range of specialists to design, test and pilot data centre infrastructure solutions incorporating virtualised server and storage technologies prior to deployment.

"Coca-Cola Amatil (CCA) initially worked with Data^®3 for provision and implementation of a large IBM iSeries environment which runs our core loaistics systems. Through this process Data'3 backed up its promise with actions and delivered the result CCA was expecting. One measure of satisfaction with a supplier is repeat business, and since the iSeries experience CCA has worked with Data 3 on a number of other key projects. Data''3 has become a true partner for our business".

Lillian Nowak - IT Manager Coca-Cola Amatil

ICT Product Solutions

ICT Product Solutions provides expertise in solutions for ICT Product Procurement and related integration services for (Intel) Infrastructure and Network Optimisation, and Print Services. The team leverages the investments we have made in our people and our systems and processes to meet our customers' needs for competitive pricing, appropriate quality and ease. of doing business in acquiring and implementing technology product, particularly in volume. Product Specialists apply proven supply-chain and implementation services expertise in engaging with customers face-to-face, via tele-sales or through on-line purchasing tools.

"Long term relationships in the IT industry are somewhat of a rarity. The fact that we have maintained our relationship with Data'3 since 1996 is testament to the consistent high quality of service and competitive pricing we receive on our server, networking and personal systems hardware and software. One of the definite advantages we've gained by partnering with Data^®3 is the enormous breadth of support upon which we are able to call. Whether it's the provision of new servers and desktops, software licensing or even staff recruitment, Data^r3 delivers unfailingly."

Bill Clarke - Director (Information Management Services) Department of Education and the Arts

Recruitment Solutions

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

Recruitment Solutions also provides a range of specialist services including psychometric profiling, outplacement and contractor performance management using its proprietary tool, PerForm. These services can be tailored to meet each customer's specific requirements.

"One of the definite advantages in partnering with Data^r3 Recruitment Solutions is that we have a technology services company taking on the responsibility of recruiting technology personnel. We're dealing with recruitment personnel who have a full understanding of our technology needs and use that understanding to provide us with candidates from project managers and administrators through to technical writers and support staff of the highest possible calibre."

John Richards - Service Delivery Manager Advanced Data Integration

Corporate Services

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

VALUE TO CUSTOMERS

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 Asia Pacific.

Our Customer Value Proposition sets the standard by which we seek to be compared and judged:

Data⁸3 ensures its ICT Solutions meet customers' business imperatives through a unique methodology underpinned by market-leading expertise and a culture that puts customers first.

Now more than ever, our customers are seeking creative ways to address their business imperatives strategic positioning, growth, reduced cost and improved governance and risk management.

Tactics employed to do this range from those that represent innovation - new ways of doing things - to those that seek to drive more from less through consolidation, to those that drive results through operational excellence.

Increasingly these tactics can only effectively be enabled through ICT Solutions that feature the combination of skilled people, a portfolio of products and services from industry leading partners, experience and the strongest focus on quality and value.

ICT solutions from Data'3 are underpinned by market leading expertise in technologies from global vendors that are leading the industry. This expertise is embedded in six areas of specialisation and solutions are delivered under a solution lifecycle methodology (PDO)² that positions the technology vision against business imperatives, develops a plan that aligns scope, cost and resources, provides a resilient design, deploys the solution into the workplace, provides the most effective environment in which to operate and optimises performance over time.

During this process, customers can expect Data'3's people to demonstrate excellence and innovation, deal honestly and with integrity, accept responsibility, remain flexible and adaptable, make decisions quickly and always go the extra mile to exceed expectations.

This combination of expertise and culture delivers our customers ICT Solutions of unparalleled value.

Chainan a the sabo

2006 was an outstanding year for Data 3. While a strong market provided a platform for this it was the value we delivered to our customers that definitively positionally in the

Central to that proposition is simply that market-leading expertise in technologies from the world's leading suppliers gives us, and resultantly our customers, competitive advantage. Acceptance of that proposition by our customers translated into a solid performance ahead of target in most areas of the business. Further examination of the 2006 performance and a review of our expectations for the 2007 financial year are contained in the Managing Director's Review.

Englished School (Bookschool)

The financial performance of the company once again delivered overall returns to shareholders in excess of our targets. This is reflected in the gains in the company's share price and dividends for the second half of 17.0 cents per share payable on 29 September 2006 adding to the first half's 11.0 cents for a total of 28.0 cents per share for the full year. Our aim is to continue to increase these returns over time.

At the start of the financial year, the Board set three prime objectives for the business - earnings growth in the top quartile of similar ICT companies, operational efficiencies that deliver NPAT growth rates substantially higher than revenue growth and implementation of capital management strategies that create value for shareholders. Progress was achieved in all aspects.

In terms of our objective for earnings growth, with revenues up 22% and internal staff and operating expenses up a lesser 18%, earnings per share increased 35% on the previous year. This performance places this company clearly as a top performer when compared to other like companies. All areas of specialisation contributed strongly to this earnings growth with Recruitment and Licensing Solutions leading the way in terms of rate of growth.

Increased operational efficiency is measured by a decline in expenses as a percentage of gross margin. This was achieved with a decline of 2.2% and consequently NPAT grew 37% in the year.

In terms of capital management, in June we announced our intention to conduct an on-market buy-back of up to 10% of the shares in the company to deliver improved shareholder return and reduce volatility in the share price. This buy-back commenced on 1 September 2006.

Our strategy remains to ensure that all our offerings are competitively positioned to win, that we have the right people in the team, that we offer value to our customers and that we operate as cost effectively as possible. Over the last year this strategy has been well executed by the management team. We see opportunities for further organic growth from all of the current businesses and from new offerings that can emerge through a combination of the capabilities and skills across the business. Initiatives introduced during the year in executing this strategy have seen positive return:

Our software asset management consulting offering in Licensing Solutions proved to be a market leader with success in a two year Queensland whole-of-Government contract and in winning Microsoft's Global Award for Software Asset Management

Further investment in the technology solutions laboratories in each of Brisbane, Sydney and Melbourne saw several significant customer wins and awards from a number of our key vendors

$\Box$ A broadening in focus in the ICT Product procurement area from server and personal systems to networking and communications products saw us increase product margin slightly and increase our revenue from Cisco products by 50%.

$\Box$ An investment in an e-learning platform for internal professional and technical training for our staff saw increasing use and decreased cost per training hour over the course of the year.

The investment we made in new management software in the Managed Services Centre to improve efficiency and allow a range of new and advanced managed services offerings did not see a return in the 2006 financial year. We expect to see this in the current year.

In addition, opportunities for accelerated growth through partnerships, joint ventures and acquisition were explored, however sustainable value remained elusive.

The 2007 business plans recently approved by the Board incorporate a small number of key structural changes aimed at further focusing areas of expertise and maintaining growth at better than average industry rates.

Revenue and cost management, together with control of cash flow and other balance sheet items continues to be maintained through a strong focus by the company's Corporate Services team. The company remains debt free.

During the year former Chairman and non-executive director Mr Howard Stack retired from the Board. Also, current non-executive director and original founder Mr Graham Clark has indicated he will not stand for re-election at the AGM on 8 November 2006. All other current members of the Board continue in office.

We expect market conditions to contract slightly in the 2007 financial year but remain strong and believe we are positioned to improve financial performance over the record 2006 result and provide dividends to shareholders near the top of the sector. The company's management team and staff performed admirably in 2007 and the Board very much acknowledges their contribution on behalf of all shareholders.

I trust that shareholders share the confidence of management and the Board in the company's future success.

& Almenson

Richard Anderson. Chairman

Managing Director's review

I am pleased to report on the 2006 financial year in which the company's performance once again bettered the previous year.

With basic earnings per share of 36.9 cents, up 35% on the previous year and a fully franked dividend of 28.0 cents per share, 76% of profit was distributed to shareholders representing a yield of 8.4% based on the average share price at the start and end of the year. We trust we have met the expectations of our. stakeholders and are pleased with the continuing positive sentiment towards the company.

My review looks at the financial results in some detail, outlines progress we made against the strategic imperatives we identified at the beginning of the year and sets out our objectives and outlook for 2007.

OVERALL FINANCIAL PERFORMANCE

The following table sets out our performance in 2006 compared with the previous four years. Suffice to say I am delighted with the progress we have made.

	20.94 PENING	20082 SNI	2019 SANDIA	200 3100	经销售 SIN
Product revenue	145,058	160,684	146,222	158,443	185,042
-%Growth					$-17\%$
Services revenue %Growth	26.474	31,925	29.275	38.052	53,926 42%
Total revenue	172,590	192,885	176,195	197,129	239,612
-%Growth					22%
% Revenue under contract			48.5%	51.4%	53.5%
Total gross margin (GM\$)	37,200	39,983.	38,369.	40,976	49,620
– %Growth	21.7%	20.8%	21.9%	20.9%	21% 20.8%
Total gross margin % Internal staff costs.	25,500	26,471	26,308	27,877	33,514
-%Growth					20%
Operating expenses	8,596	10.233	7900	7.634	8.391
SuGrowth					10%
Staff & operating expense as % GM\$	91.7%.	91.8%	89.2%	86.7%	84.5%
Net profit after tax %Growth	3.370	2,259	3.393	4.177	5.713 37%
Basic earnings per share	$21.7$ cents	15.5 cents	$22.8$ cents	$27.4$ cents.	36.9 cents
%Growth					35%
Dividends per share %Growth	0.0 cents	10.0 cents	15.6 cents	19.0 cents	28.0 cents 47%
Payout ratio		65%	68%	69%.	76%
%Growth					10%
Share price at 30 June Capital growth %	\$7.21	\$1.00	\$2.05	\$3.00	\$3.70 23%
Net tangible assets	2.766.	4.829	6.947	9.215	12,271
%Growth					33%

Note: AlFRS applied from 1 July 2005, therefore the 2005 results have been restated for AlFRS and the 2002, 2003 and 2004 results have not.

Key points

The key points compared to the previous year are:

• Difficien by the market for recruitment services and several significant integration and outsourcing contracts, overall services revenues increased by 42% to \$54 million
• Gross margin dollars generated increased by 21% with the most significant growth attained by Licensing and Recruitment Solutions
• In a very competitive market where reported supplier margins have in general declined, the overall gross margin percentage held at 20.8%.
• Internal staff costs increased by 20% in support of revenue growth and deepening expertise, particularly in ICT Services which accounted for more than 50% of the increase
• C Total expense as a percentage of gross margin declined by 2.2%
• Earnings per share increased by 35% to 36.9 cents
• □ Dividends per share increased by 47% to 28.0 cents per share fully franked
• Satisfaction levels of both our customers and staff improved.

Cash flow

Operating cash flow for the year was approximately \$8.2 million, to some degree as in previous years reflecting the timing benefit of receipts from customers in advance of payments to suppliers. The key trade receivables indicator of average days' sales outstanding (DSOS - calculated as the average monthly balance sheet trade receivables divided by average day's sales) was ahead of target at 37 days, down from 41 days in the previous year.

Expenses

To meet our growth targets for 2006 our financial plan assumed expenses would increase due to continuing investment in training and recruitment of appropriately skilled people and in providing the associated infrastructure, management and human resources support. In exceeding our targets, internal staff costs increased by 20% and operating costs by 10%, however the key measure of expenses as a percentage of gross margin decreased by 2,2% over the previous year.

Returns to shareholders

With dividends up 47% to 28.0 cents per share fully franked and a strong increase in the share price to \$3.70 at 30 June 2006, the total return to shareholders. over the year was 33%.

Balance sheet

Over the year total net assets increased by 22%, total net tangible assets increased by 33%, and the company remained essentially debt free.

PERFORMANCE OF AREAS OF SPECIALISATION

In the main, performance across all areas of specialisation was exceptional.

Bevenue

		WALES ET STARK	MARATTEL
Producersvenue
ICT Products	$$68.0$ million	million 3/30	$-12%$
Software Licensing	\$60.5 milion	-581.4 million	$+35%$
Enterprise Infrastructure	$$30.0$ million	$5275$ million *	$-9\%$
Total Product Revenue	$$158.5$ million	\$1850 million	$+11%$
SERVICES REVENUE
ICT Services	\$24.2 million	$-$ \$29.3 $\,$ million $\,$	$+21%$
Recruitment	$$13.8$ million	- \$24.6 ∶ mìllion	$+78%$
Total Services Revenue	\$38.0 million	million \$53.9	$+42%$

$^$ Year on year revenue increased when fee for service margin is grossed up to revenue $^$

Key points

• Licensing Solutions a spectacular year for this area with a 35% increase in revenue and similar increase in contribution to profit capped by recognition from Microsoft in Australia and New Zealand as the Large Account Reseller of the Year and with the Global Award for Software Asset. Management for 2006
• ICT Services Strong increases in revenue from m Integration Services and Outsourcing drove revenue up 21% and contribution to profit up 19% over the previous year offsetting a decline in revenue from the Managed Services Centre. Costs increased as a percentage of gross margin as competition for skills increased. but we improved our competitive positioning as a consequence. This culminated in nomination as one of three finalists in Microsoft's 2006 Global Partner of the Year Award for Advanced Infrastructure Solutions. and being awarded the 2006 Partner of the Year for Infrastructure Solutions for Australia and New Zealand
• Enterprise Infrastructure Solutions delays in appointing the appropriate people to the team and a mid-year reorganisation of management in NSW led to a slower year than planned and saw gross margin and contribution to profit decline over the previous year. Offsetting this, momentum developed around new 'virtualisation' offerings with several wins and a number of new 'blue chip' customers were added to the business. The expertise of the team was rewarded with a third. annual award as IBM's Storage Partner of the Year
• $\Box$ ICT products with success in renewing existing supply contracts, substantial growth in revenue from Cisco products and stability in margins of volume desktop and server product, this business completed the year 12% up on revenue and 37% up in contribution to profit compared to the prior year
• E Recruitment Solutions in a buoyant market and
  solvith a stable and experienced team, the recruitment business recorded the strongest growth within the group increasing revenue by 78% and contribution to profit by 71%. It further developed its expertise in resourcing for the application software and managed services markets and was also successful in winning two preferred supplier agreements late in the year which should see it in good position for another strong performance in 2007
• Corporate Services recorded strong investment income coupled with relatively lower expenses than for the remainder of the business
• $\Box$ Organisational Development and Human Resources - an increase in investment of 40% over the previous year was in keeping with the focus on developing skills and expertise across all areas of the business.

OBJECTIVES AND OUTLOOK FOR 2007 Objectives

We have four high level operational objectives that define our strategy for 2007:

Positioning to compete and win by:

• El Aligning our value proposition with our customers' business imperatives through a new solutions framework
• Implementing a solution lifecvcle new methodology - $( \text{PDO})^2$
• a Improving our sales processes and capability, the success of which will be measured by win rates
• Achieving vendor sales and certification targets
• E Proactively looking for broader partnering opportunities particularly with independent software vendors
• Executing faultlessly

Increasing customer commitment by:

• Proactively working to increase customer satisfaction levels
• Improving the level of engagement of our customers across our offerings - measured by the 'cross-sell' index
• I Increasing revenue under contract

Increasing staff commitment by:

• Proactively improving recruitment, retention and satisfaction levels - measured by turnover and through the staff satisfaction survey
• El Increase our expertise in selected technologies - measured by average levels of certification

Improving operational excellence by:

• Lowering expense as a percentage of gross margin
• Achieving all targets in Corporate Services and Sales Operations
• C Improving systems and processes particularly in business intelligence and staff productivity.

Achieving these objectives is a prerequisite to continued improvement in financial performance.

Based on research by industry analysts and feedback we have received from customers through our survey processes, we intend to focus investment and resourcing to develop solutions and capability in the following areas:

• People resourcing
• □ Workforce productivity and collaboration
• □ Information lifecvele management
• Business process optimisation
• Software asset management and licensing
• □ Wireless and mobility
• □ Unified communications
• Infrastructure optimisation
• □ Virtualisation
• Security and privacy
• Business continuity and disaster recovery
• O Outsourcing
• Strategic ICT procurement
• □ ICT governance

Execution

Our strategy is implemented by identifying specific outcomes, setting targets, ensuring the organisation structure and the people are in place to take responsibility, defining specific actions, and continuously reviewing progress and changing where necessary.

In 2007 we have made two structural changes intended to deepen our expertise and deliver solutions nationally:

• Formation of a national ICT Product Solutions specialty to provide focus and consistency to what was a \$76 million regionally-based operation in the previous year
• Restructuring ICT Services along national lines for all areas of specialisation

The section An outline of our business on page 4 describes this in more detail.

Outlook

In 2007 we intend to take the next step in our development by transitioning our market-leading expertise in technologies from global vendors into ICT Solutions delivered under a solution lifecycle methodology (PDO)² which alms at ensuring that ICT Solutions from Data'3 deliver business benefit to our customers. This development is intended to strengthen our competitive positioning in each of our. areas of specialisation.

Our outlook for financial performance in 2007 reflects. the following assumptions:

• □ The macro economy will remain positive even if contracting somewhat
• Q Our customers will retain the view that ICT solutions are strategic and will maintain a positive' view of ICT investment
• $\Box$ We will be able to recruit and retain the right people and deploy them to deliver revenue growth
• D Our competitive positioning will allow us to maintain or improve current success rates
• Our key vendors will continue to drive growth and technology leadership and our partnerships will be at least maintained or strengthened
• □ We will be able to predict the effect of emerging technologies and adapt accordingly.

Licensing Solutions :

We see this area of our business maintaining market leadership and driving strong revenue growth at margins similar to last.

ICT Services

The transitional changes we are making most effect ICT Services. We are well positioned with our ICT Solution offerings and have a new highly motivated leadership and sales team to realise the opportunity we see for continued growth. On balance we believe we can achieve moderate growth in revenue again at similar margin to the previous year and offset increases in people costs in a competitive market through the scale afforded by that growth.

Enterprise Infrastructure Solutions

With well developed ICT Solutions and operating in a mature market, we see opportunity for moderate revenue growth, with some margin decline. We intend to introduce annuity revenue streams in management and support services to start to offset this trend, but do not see this having significant impact in the current year.

This is the other area of the business in which the transitional changes will have an effect. We are well positioned with our ICT Solution offerings in a market that we believe will grow at single digit rates. However the trend of vendors dealing directly with the customer, compounded by consolidated purchasing within Government, represent challenges for this area. Any hampering of growth that comes as a consequence will be countered by a focus on communications products, further development of the lower cost tele-sales model and 'solution bundling' to. the medium business market.

Recruitment

With the presumption we can continue to take advantage of the strong market and that the successes we had in winning preferred supplier agreements last year materialise as revenue, Recruitment Solutions is poised for another strong year of high growth. Margins are expected to decline but to be offset by relatively lower expense. We are enhancing current operational systems to accommodate the expected increases in transaction volumes that come with growth and expect to have some success with sales of our PerForm staff performance management software.

Cross-selling

Our sales incentive model for 2007 is targeted to generate a significant increase in referral opportunities across the areas of specialisation. We believe that this 'cross-selling' remains one of our key growth opportunities.

Additionally we will continue to look for appropriate partnerships and acquisitions to enhance either our geographic scale or our expertise in specific areas and ultimately further improve financial performance.

CONCLUSION

With another 'best ever' performance in 2006 and a repositioning in 2007 that transitions our value proposition from 'expertise-priented' to 'solutionsoriented', we believe we can improve financial performance over the record 2006 result and deliver dividends near the top of the sector.

My thanks once again go to all our stakeholders - to the people who make up the Data*3 team who have applied their expertise diligently and consistently to deliver great results to our customers throughout the past year; to our customers who continue to put their faith in us to deliver ICT solutions that allow them to meet their business goals: to our suppliers whose support has shown the true value of our partnership and whose technical excellence is the solid base on which our solutions are built; and to our shareholders whose continued support is being rewarded with the appropriate returns.

Am Grand.

John Grant Managing Director

Die Gregore Gregorie

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.

Graham Clark Non-executive director

Graham has been a director of Data³3 Limited $it$ subsidiaries and its predecessor, Powell Clark and Associates, since 1977. He retired from management responsibilities within Data⁹3

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^r3 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^r3 in 2001. Terry was Manager Group Operations General 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.

John Grant Executive director

John was a director of Data'3 from its foundation in 1984 and then Managing Director from 1996. He stepped down from the Board as a director in November 2000 along with all other executive

directors and took the position of Chief Executive Officer. He was reappointed as Managing Director in July 2004. From 1980 until he joined Data'3 in 1982, John worked with IBM in sales. John has a degree in Engineering with Honours from the University of Queensland and worked as a civil engineer with the Brisbane City Council from 1970 until 1980. He is a fellow of the Institute of Engineers. John is a national director of the Australian Information Industry Association, the ICT industry's peak representative body: a member the Federal Government's ICT Advisory Board whose charter is to provide advice to the Minister for Communications, Information Technology and the Arts, Senator Helen Coonan, on ICT industry priorities; a member of the Queensland Government's Ministerial Advisory Group whose charter is to provide advice to the Minister for Small Business, Multi-cultural Affairs and IT Policy, Mr Chris Cummins on ICT industry development policy; a member of the Queensland Government's Smart State Council which has been established by Premier Peter Beattie to provide advice and input to the State Government's Smart State strategy; and a member of Hewlett Packard's Asia Pacific Partner Advisory Board whose charter is to provide advice and input to HP on its relationship with its distribution and reseller partners in Asia Pacific.

Gorporate goverance statencrit

Data'3 has a well established corporate governance culture that provides clarity and openness, and aids its ongoing focus on sustainable performance and shareholder value.

In 2005/2006 corporate governance remained an area of increasing focus for Data'3 and the company continued to build on the governance systems embedded in prior years.

A description of the company's main corporate governance practices is set out below. All of these practices, unless otherwise stated, were in place for the entire year.

ASX Principles and Recommendations

The ASX Corporate Governance Council has published Principles of Good Corporate Governance and Best Practice Recommendations. One of the features of the ASX Principles and Recommendations is an "if not, why not" disclosure obligation in relation to practices that differ from the ASX recommendations.

With three minor exceptions (set out below), Data'3's corporate governance practices accord with all of the ASX recommendations:

• $\Box$ 2.5 The board should establish a nomination. committee
• $\Box$ 4.3 The structure of the audit committee should consist of ... at least 3 members

2 9.2 - The board should establish a remuneration committee.

The "If not, why not" rationales for the above exceptions are set out below.

Responsibilities and functions of the board

The board is ultimately responsible for building sustainable shareholder value within an appropriate risk framework, having regard to the interests of other stakeholders.

To fulfil that responsibility, the board considers and approves company goals and directions, strategic plans and performance targets and ensures that appropriate policies, procedures and systems are in place to manage risk, optimise business performance and maintain high standards of ethical behaviour and fegal compliance.

The most significant responsibilities of the board are:

• $\Box$ Reporting to shareholders and the market
• E Ensuring compliance with applicable regulations and standards
• Ensuring adequate risk management processes
• Reviewing internal controls, and internal and external audit reports to maintain the integrity of accounting and financial records and reporting
• U Monitoring and influencing the culture and reputation of the company

• Monitoring board composition, director selection and board processes and performance

• Approving key executive appointments, transfers and terminations and ensuring executive succession planning

• El Reviewing the performance of the Managing Director and the senior management team
• Reviewing and approving remuneration policies and practices generally and determining remuneration packages and other terms of employment for directors (within the maximum amount approved by the shareholders) and senior executives
• Ensuring that the board has a sufficient understanding of each substantial segment of the husiness
• Participating in the development of, and subsequently approving, corporate strategy to position the company so that its sustainable value, and shareholders' ability to realise that value, is maximised
• Determining the amount, timing and nature of dividends to be paid to shareholders
• Reviewing and approving business plans, budgets and financial policies
• Reviewing business results, monitoring budgetary control and corrective actions
• a Adopting and overseeing the implementation of corporate governance practices that represent best practice in the company's particular circumstances
• a Authorising and monitoring major strategic investment commitments.

The board has delegated authority and powers to the Managing Director as necessary to implement the strategies approved by the board and to manage the operation and administration of the business affairs of the company. The Managing Director may further delegate within specific policies and delegation limits to members of the senior management team, but remains accountable for all authority delegated to its members. The board ensures that the senior management team is appropriately qualified and experienced to discharge its responsibilities. The board has in place procedures to assess the performance of the Managing Director and other members of the senior management team.

Board composition and committees

Details of the members of the board, their experience, expertise, qualifications, term of office and independence status are set out in the Directors' Report under the heading "Information on directors". There are three non-executive directors, all of whom are deemed independent under the principles set out below, and one executive director at the date of signing the Directors' Report.

The board has determined that its optimum composition will:

• C Conform with the constitution of the company (being not less than three nor more than twelve in number)
• Have a majority of directors as non-executive
• Reflect the company's geographic operations and strategic objectives.

Committees

The board has established the following committees to advise and support the board in carrying out its duties:

• Audit committee
• Superannuation policy committee

Audit committee

The current members of the audit committee are WT Powell (Chairman) and R A Anderson, with the Managing Director and the Chief Financial Officer participating by invitation. Mr WT Powell assumed the role of Chairman effective from 1 June 2006.

The audit committee structure meets the ASX Corporate Governance Council recommendations with one exception, being that it does not consist of at least three members and consequently the company will give further consideration to the appointment of an additional member to the audit committee during the coming year. For more information on the audit committee please see below under the heading "Integrity of financial reporting".

Superannuation policy committee

The superannuation policy committee reviews the corporate superannuation funds and provides liaison between the fund members and the fund managers. The committee meets at least once a year and more frequently if required. The superannuation policy committee comprises the following members:

• $\Box$ Employer representatives: G R Clark (Chairman), B I Hill and J M Pickard
• Member representatives: N F Bennett, L MacPherson and K J Woods.

Director nominations and appointment, and director remuneration

The ASX Corporate Governance Council recommends that companies' boards of directors establish separate nomination and remuneration committees. Considering the size of Data'3 and the number of its directors, the board considers that the establishment of separate nominations and remuneration committees is not necessary.

• In relation to nominations, ⊱the $board$ is responsible for:
• C Assessment of the necessary and desirable competencies of board members
• Review of board succession plans
• Evaluation of the board's performance
• $\Box$ Appointment of directors.

Directors are initially appointed by the board, subject to election by the shareholders at the next Annual General Meeting (AGM). The company's Constitution specifies that all directors (with the exception of the Managing Director) must retire from office no later than the third AGM following their last election. Where eligible, a director may stand for re-election.

The full board also addresses remuneration requirements. Information on directors' and executives' remuneration is set out in the Directors' Report, under the heading "Remuneration report" and in note 21 to the financial statements.

Board commitment

The board meets as often as the directors determine is necessary to fulfil their responsibilities and duties. Generally though, the board holds normal meetings on a monthly basis. The board also meets formally on a regular basis with the senior management team. The meetings are chaired by the 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 Company Secretary and other executives attend the meetings by invitation, when appropriate.

The number of meetings of the company's board of directors and audit committee held during the year ended 30 June 2006, and the number of meetings attended by each director, is disclosed in the Directors' Report.

Non-executive directors are expected to make the necessary commitment in preparing for and attending board and committee meetings and associated activities. The commitments of non-executive directors are considered by the full board prior to the director's appointment to the board and are reviewed each year as part of the annual performance assessment. Prior to appointment or being submitted for re-election, each non-executive director is required to specifically acknowledge that he has and will continue to have the time available to discharge his responsibilities to the company as outlined above.

Directors' independence

Based on guidance set out in the ASX Principles and Recommendations, the board has adopted specific principles in relation to an assessment of directors' independence. The company's threshold criteria for assessing independence are as follows:

• the director is not a member of executive management;
• $\Box$ the director is not a substantial shareholder of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company (substantial being more than 5% of the company's shares on issue (as defined in section 9 of the Corporations Act 2001));

$\Box$ within the past three years neither the director, nor an immediate family member, has been employed in an executive capacity by the company or a related body corporate of the company, or been a director after ceasing to hold any such employment;

Within the last three years neither the director, nor an immediate family member, has been a principal of an auditor or of any material professional adviser or a material consultant to the company or a related body corporate of the company, or an employee materially associated with the services provided:

neither the director, nor an immediate family member, is a material supplier or customer of the company or a related body corporate of the company, or an officer of, or otherwise associated directly or indirectly with, a material supplier or customer:

director has no material contractual $\Box$ the $\Box$ relationship with the company or a related body corporate of the company other than as a director of the company, nor does the director receive additional compensation from any such company, apart from approved director and committee fees;

the director has not been on the board for a period П which could, or could reasonably be perceived to, materially interfere with the director's ability to act in the best interests of the company; and

Ethe director does not have any interest or any business or other relationship which could, or could be reasonably be perceived to, materially interfere with the director's ability to act in the best interests of the company or to exercise unfettered and independent judgment.

Materiality for these purposes is an amount of over 5% of annual turnover of the company. In addition, a transaction of any amount or a relationship is deemed material if knowledge of it impacts the shareholders' understanding of the director's performance.

In addition to the above threshold criteria, the board determines whether a director is independent in character and judgment.

Managing Director

Our most senior executive, the Managing Director, is selected by the board and is subject to annual performance reviews by the non-executive directors. The review evaluates performance against pre-set financial and non-financial goals. The Managing Director 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

A structured process has been established to review and evaluate the performance of the board as a whole, its committees and the performance of individual directors on an ongoing basis. The issues examined in the review include the board's interaction with management, the type of information provided to the board by management and management performance in helping the board meet its objectives.

Integrity of financial reporting

The primary responsibility of the audit committee is to assist the board in fulfilling its corporate governance and oversight responsibilities with respect to:

• The integrity of the company's financial reporting
• Compliance with legal and regulatory requirements
• qualifications $T1$ The external auditor's and independence
• The system of risk management and internal controls that management has established and the process of internal and external auditor review of internal control
• The performance of the company's internal audit function and external auditors.

All members of the audit committee are independent. non-executive directors. The board is responsible for the initial appointment of the external auditor and the appointment is ratified by company members at the Annual General Meeting,

Should a change in auditor be considered necessary, a formal tendering process will be undertaken. The board will identify the relevant evaluation criteria and will ensure that the selection process is sufficiently robust to ensure selection of an appropriate external auditor. In selecting an external auditor, particular consideration will be given to determining whether the fee quoted is appropriate for the work required; that the work is to be undertaken by people with an appropriate level of seniority and skill; and whether the work proposed is sufficient to meet the company's needs and expectations.

The lead partner of the company's external auditor must be rotated at least every five years, followed by a five-year minimum time out period during which that partner may not take part in the company audit.

On an annual basis, the board discusses with the external auditor the provisions the audit firm has in place for rotation of the lead engagement partner and the overall succession plan regarding the professional staff assigned to the company's audit. The rotation of the lead engagement partner occurred prior to the audit for the financial year ending 30 June 2006.

Directors' arrangements with the company

The Constitution provides that a director may enter into an arrangement with the company or with a related body corporate of the company. Directors, or firms that they are members of, may act in a professional capacity for the company or a related body corporate of the company, other than to act as an external auditor of the company. These arrangements are subject to the requirements of the Corporations Act 2001. 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. Directors' arrangements with the company in the past have not been material and have therefore not adversely impacted the directors' independent status. Disclosure of related party transactions is set out in note 21 to the financial statements.

When a potential or actual conflict of interest or a material personal interest arises in relation to any matter that concerns the affairs of the company, the director concerned (i) must give the other directors immediate notice of such interest and (ii) does not receive copies of the relevant board papers and withdraws from participating in the board meeting whilst such matters are considered. Accordingly, the director concerned takes no part in discussions or exercises any influence over other members of the board if a potential conflict of interest exists.

Board and committee agenda

Board 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 committee members 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. If appropriate, any advice so received will be made available to all directors. This right was neither exercised nor sought to be exercised during the year.

Code of conduct

The directors, managers and employees are expected to act with the utmost integrity and objectivity, observe the highest standards of behaviour and business ethics and strive at all times to enhance the good reputation and performance of the company.

The company has developed an extensive code of conduct, which is encapsulated in the corporate governance statement and the company's terms and conditions of employment and conduct guidelines that apply to all employees.

The terms and conditions of employment and conduct guidelines address:

D The underlying values and vision of the company

• Business ethics and protocol
• Relevant policies and procedures
• Employee entitlements

Responsibilities and expectations of the company and the employees.

Compliance with relevant legal and stakeholder obligations.

All employees have position descriptions that reinforce their duties, rights and responsibilities and all are required to reconfirm their acceptance of the terms and conditions of employment annually. Performance plans are developed for all employees at the start of each financial year and align their goals and key performance indicators with those of the business. The actual performance against these plans is reviewed at six-monthly or annual intervals and more frequently if required.

The company also has a well-established business improvement program that encourages regular feedback, review and continuous improvement, so as to maintain and enhance the desired corporate culture and standard of ethical behaviour.

Policy for trading in company securities

Directors, officers and employees 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 reasonable person would expect it to have a material effect on the price or value of the securities in the company. The Corporations Act 2001 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 or not to subscribe for, buy or sell the securities.

It is the board's policy that directors, officers and employees may only trade in the company's securities, subject to the insider trading restrictions above, within the four-week period following each half-yearly profit announcement, Annual General Meeting or date of issue of a prospectus. Directors must discuss their intention to trade in the company's securities with the Chairman of the company prior. to trading.

The board's policy also reinforces the directors' and company's statutory obligations to notify the ASX regarding any dealing in the company's securities which results in a change in the relevant interests of the director in the company's securities. As contemplated in the ASX listing rules, each director has agreed to provide notice of such dealings to the company within three business days of any such dealing to enable the company to comply with its corresponding obligation to notify the ASX.

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

Continuous disclosure and shareholder communication

The board has established written policies and procedures that focus on continuous disclosure and improving access to information for all investors.

The Company Secretary, working closely with the Managing Director and Chairman, has been delegated responsibility for:

• El Ensuring that the company complies with its continuous disclosure requirements
• Doverseeing and co-ordinating the disclosure of information to the ASX, analysts, brokers, shareholders and the media
• Educating directors and employees on the company's disclosure policies and procedures and raising awareness of the principles underlying continuous disclosure.

Price sensitive information is publicly released through the ASX before it is disclosed to analysts or other external parties. This information is then posted in the "investor Relations" section of the company's website, so as to ensure that it is accessible to the widest audience.

The board has also developed procedures for safequarding confidential corporate information to avoid premature disclosure and for responding to market rumours, leaks and inadvertent disclosures.

The company is committed to providing shareholders with extensive, transparent, accessible and timely communications on company activities, strategy and performance. All shareholders receive a hard copy of the company's annual and half yearly reports. In addition, all recent company announcements, media briefings, details of company meetings, press releases for the last three years and financial reports for the last five years are made available on the company's website www.data3.com.au.The website also includes a mechanism for shareholders to provide feedback and comments. Shareholders can raise questions by contacting the company by telephone, facsimile, email or post. Contact details are provided on the company's internet site and in the "Corporate directory" section of this annual report.

Data's Limited and Subsidiancs

Directors' report

Your directors present their report on Data^®3 Limited and its subsidiaries (the group) for the year ended 30 June 2006.

Principal activities

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

These activities included the procurement of information and communication technology (ICT) products; the design, implementation and support of ICT infrastructure solutions: the provision of ICT 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 group during the year.

Dividends

A fully franked final dividend for the year ended 30 June 2005 of \$1.766.000 (11.5 cents per share) was paid on 30 September 2005. A fully franked interim dividend of \$1,704,000 (11.0 cents per share) was paid on 31 March 2006. In addition, since the end of the financial year the directors have declared a fully franked final dividend of \$2,658,000 (17.0 cents per share) to be paid on 29 September 2006 out of retained profits at 30 June 2006.

Review of operations and results

• □ Total revenue of the group for the year was \$239,612,000, a 22 % increase from last year.
• □ Operating profit of the group before interest (net), tax, depreciation and amortisation was \$8,266,000; and the net profit after tax was \$5,713,000, a 37% increase from last year.
• □ Total dividends of 28.0 cents per share fully franked, a 47% increase from last year.
• Services revenues increased 42% to \$53,926,000, driven by the market for recruitment services and several significant integration and outsourcing contracts.
• □ Product revenues increased by 17% to \$185,042,000, driven by particularly strong growth in software licensing revenues.
• □ Gross margin dollars increased by 21%, with most significant growth in the specialist areas of Licensing Solutions and Recruitment Solutions.
• In a very competitive market where reported supplier margins have in general declined, overall gross margin percentage was maintained at 20.8%.
• □ Strong net operating cash inflows, to some degree reflecting the timing benefit of receipts from customers in advance of payments to suppliers.
• □ A strong financial position, with essentially no long-term borrowings and a current ratio of 1.26 (2005: 1.24).
• Internal staff costs increased by 20% in support of growth and deepening expertise particularly in ICT Services, however total internal staff costs and operating expenses declined as a percentage of gross margin by 2.2%.
• □ Establishment costs of a branch office in New Caledonia, and growth in all geographic regions of Australia.

Directors' report

Data'3 Limited and Subsidianes

Business strategy

Our vision is to be recognised as "Australia's leading ICT Solutions Company - the one that everyone wants to work for, buy from, or num charge in"

To achieve this vision, our strategy is to:

• Position ourselves competitively with ICT Solutions underpinned by market leading expertise and with selected vendors that are driving the industry olobally
• □ Strengthen customer commitment by leveraging that expertise to deliver solutions that meet their business and technology needs and exceed their expectations
• □ Maintain commitment to staff development processes that recruit, nurture and retain the 'right' people and further develop their expertise and their commitment to our core values
• □ Through continuous review and improvement, accelerate development of the organisation as a leader in operational excellence.

Successful execution of this strategy underpins our goal of financial performance - increasing returns to shareholders - an imperative to achieving our vision.

We believe we will have achieved our vision when over 90% of our staff consistently recommends Data^r3 to others as their preferred employer; our key customers consistently tell us that we are their preferred ICT solution provider; our key vendors consistently recognise our expertise and performance; and we consistently deliver total returns to shareholders near the top of the ICT sector.

TABLES	2006 Cents	2005 Cents
Basic earnings per share	36.88	27.41
Diluted earnings per share	36.84	27.36

Significant changes in the state of affairs

There were no significant changes in the state of affairs of the group 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 2006 that has significantly affected, or may significantly affect:

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

In June 2006 we announced our intention to conduct an on-market buy-back of up to 10% of the company's ordinary shares over a 12 month period, so as to deliver improved shareholder return on a sustainable basis and to reduce volatility of the company's share price. In conjunction with this initiative, we also announced that the Data*3 Dividend Reinvestment Plan would be suspended from 1 September 2006 until further notice from the board of directors.

In July 2006 we confirmed that the on-market buy-back would commence on 1 September 2006 and continue for a 12 month period, and that ABN AMRO Morgans Limited would act as brokers to the buy-back. All shares purchased under the on-market buy-back will be cancelled.

Likely developments and expected results of operations

In 2007 we expect buoyant but competitive market conditions to remain in place and are targeting continued organic growth in all areas of the business. We will continue to invest in developing the expertise of our staff and in associated infrastructure to maintain our competitive positioning, and are proposing to lower overhead expense relative to gross margin generated.

We will continue to look for appropriate partnerships and acquisitions to enhance either our geographic scale or our expertise in specific areas and ultimately further improve financial performance.

For shareholders we expect financial performance to improve on the record 2006 result and are looking to continue to deliver dividends that balance the need for working capital and provide returns near the top of the sector.

Additional comments on the operations of the group and the expected results of those operations are included in the review of operations of the group set out in the Annual Report.

Further information on likely developments in the operations of the group 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 group.

Meetings of directors

The names of all directors of Data⁸3 Limited during 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 រាងត	Meetings attended	Meetings held
R A Anderson	13
H L Stack
G R Clark	13
WT Powell	13
J E Grant	13

$*$ = 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 except for Mr H L Stack, who was a director from the beginning of the financial year until 23 December 2005, the date of his resignation.

Information on directors

R A Anderson, OAM, BCom, FCA - Chairman, non-executive director

Experience and expertise:

Independent non-executive director since 1997 and Chairman since 2000. Formerly a partner with PricewaterhouseCoopers and a member of the firm's National Committee. Previously a member of the Brisbane Grammar School Board of Trustees and the Capital Markets Board of Queensland Treasury Corporation, and President of the Brisbane Polo Club and of CPA Australia in Queensland.

Other current directorships:

Non-executive director of three other public companies: Namoi Cotton Cooperative Limited (director since 2001), Lindsay Australia Limited (director since 2002) and Villa World Limited (director since 2002). President of the Guide Dogs for the Blind Association of Queensland.

Former directorships in the last three years:

Not applicable.

Special responsibilities:

Chairman of the board.

Member of audit committee.

Interests in shares and options:

45,000 ordinary shares in Data'3 Limited.

Directors' report

Data'3 Limited and Subsidiaries

Information on Directors (continued)

G R Clark, BSc, Dip. Comp. Sc. - non-executive director

Experience and expertise:

Non-executive director since 1997. Extensive experience in the IT industry, including being director of the company and its predecessor, Powell Clark and Associates, since he and WT Powell formed the business in 1977.

Other current directorships:

Not applicable.

Former directorships in the last three years:

Not applicable.

Special responsibilities:

Chairman of superannuation policy committee (not a committee of the Board of directors).

Interests in shares and options:

583.732 ordinary shares in Data*3 Limited.

WT Powell, BEcon - Non-executive director

Experience and expertise:

Non-executive director since 2002. Executive Chairman of the company from its foundation in 1984 and then Managing Director from 1989 to 1996. Prior to 1984 had extensive experience in the IT industry and was Managing Director of Powell Clark and Associates, formed in 1977 with G R Clark. Re-joined the board of Data'3 Limited in 2002.

Other current directorships:

Not applicable.

Former directorships in the last three years:

Not applicable.

Special responsibilities:

Chairman of the audit committee.

Interests in shares and options:

565,000 ordinary shares in Data'3 Limited.

J E Grant, BEng - Managing Director

Experience and expertise.

Director of the company from its foundation in 1984; Managing Director from 1996 to 2000; and Chief Executive Officer from 2000 to 2004. Re-appointed Managing Director effective from 1 July 2004. Extensive experience in the IT industry. Member of the Federal Government's ICT Advisory Board whose charter is to provide advice to the Minister for Communications, Information Technology and the Arts, Senator Helen Coonan, on ICT industry and research priorities; member of the Queensland Government's Ministerial Advisory Group whose charter is to provide advice to the Minister for Small Business, Multi-cultural Affairs and IT Policy, Mr Chris Cummins on ICT industry development policy; a member of the Queensland Government's Smart State Council which has been established by Premier Peter Beattie to provide advice and input to the State Government's Smart State strategy; and a member of Hewlett Packard's Asia Pacific Partner Advisory Board whose charter is to provide advice and input to HP on its relationship with its distribution and reseller partners in Asia Pacific.

Other current directorships:

A national director of the Australian Information Industry Association, the ICT industry's peak representative body.

Former directorships in the last three years:

Not anolicable.

Special responsibilities:

Managing Director.

Interests in shares and options:

861,520 ordinary shares in Data*3 Limited.

Company secretary

Mr B I Hill, BBus, was appointed to the position of company secretary in 1997. He has served as Financial Controller or Chief Financial Officer of the company since 1992 and is a member of CPA Australia and a Fellow of Chartered Secretaries Australia.

Date's Limited and Subsidianas

Remuneration report

All information in this remuneration report has been audited by the company's auditor with the exception of section E. The remuneration report is set out under the following main headings:

• A Principles used to determine the nature and amount of remuneration
• B Details of remuneration
• C Service agreements
• D Share-based compensation
• E Additional information
• Principles used to determine the nature and amount of remuneration $\Lambda$

The board addresses remuneration policies and practices generally, and determines remuneration packages and other terms of employment for 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. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the group's operations, achieving the group's strategic objectives, and increasing shareholder wealth.

Executive pay

The executive pay and reward framework has four components:

• Base pay and benefits
• Performance-related bonuses
• □ Long-term incentives through participation in the Data*3 Limited Emolovee Option Plan
• Other remuneration such as superannuation.

The combination of these comprises the executive's remuneration.

Base pay

Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed nonfinancial benefits at the executive's discretion. There are no quaranteed base pay increases included in any senior executives' contracts.

Performance-related bonuses

Performance-related cash bonus entitlements are linked to the achievement of individual objectives, both financial and non-financial, which are relevant to meeting the company's business objectives. In 2006 the proportion of the planned total executive remuneration that was performance-related was 37% (2005: 36%).

A major part of the bonus entitlement is determined by the actual performance against planned group and divisional profit targets relevant to each individual. Using a profit target ensures variable reward is only available when value has been created for shareholders and when profit is consistent with the business plan. In 2006 the planned profit-related component represented 81% of the total executive bonuses. The balance of the executive bonus entitlement is determined by performance against agreed key performance indicator targets relevant to each individual.

The executives' cash bonus entitlements are assessed and paid either quarterly or six-monthly, based on the actual performance against the relevant full-year profit and key performance indicator targets. The board, together with certain senior managers, is responsible for assessing whether an individual's targets have been met, and profit targets and key performance indicator targets are reviewed and reset annually.

Directors' fees

Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. 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 for salary and fees, to be divided among the non-executive directors in such a proportion and manner as they agree. Non-executive directors are paid a fixed remuneration, comprising base fees and superannuation. Non-executive directors do not receive bonus payments or share options, and are not provided with retirement benefits other than statutory superannuation. The board was comprised of four Non-executive directors and one executive director during the financial year until December 2005, when one non-executive director resigned. 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.

Directors' report

Data'3 Limited and Subsidiaries

Remuneration report (continued)

B Details of remuneration

Compensation paid, payable, or provided by the group or on behalf of the group, to key management personnel is set out below. Key management personnel include all directors of the company and certain executives who, in the opinion of the board and Managing Director, have authority and responsibility for planning, directing and controlling the activities of the group directly or indirectly. Comparative information is not shown for individuals who were not considered to be key management personnel in the previous year. The following also includes the five most highly remunerated executives of the group.

Œ,		Short term employee benefits			Long-term Post- employee employment benefits benefits
		Cash salary and fees \$	Cash bonus \$.	Non- monetary benefits 53	Long service leave 63	Super- annuation \$.	Total \$
Non-executive directors Anderson, R. Chairman	2006 2005	90,000 90,000	ų.			8,100 8,100	98,100 98,100
Clark, G. Director	2006 2005	55,000 55,000	$\bullet$	$\overline{\phantom{a}}$	٠	4,950 4,950	59,950 59,950
Powell, W. Director	2006 2005	55,833 55,000	$\overline{a}$ ÷.	÷,		5,025 4,950	60,858 59,950
Stack, H. (resigned 23 December 2005)	2006 2005	32,500 65,000	$\overline{a}$ ÷	$\overline{a}$ $\overline{\phantom{a}}$	$\overline{a}$	2,925 5,850	35,425 70,850
Subtotal Non-executive directors	2006 2005	233,333 265,000	$\overline{a}$	$\overline{a}$		21,000 23,850	254,333 288,850
Executive Director Grant, J. * Managing Director	2006 2005	229,012 212,541	100,000 100,000	70,203 75,923	2,998 2,998	12.139 11,536	414,352 402,998
Other key management personnel Baynham, L. General Manager	2006 2005	170,000 170,000	142,055 140,700	$\overline{a}$ $\overline{\phantom{a}}$	2,831 2,743	12,139 11,585	327,025 325,028
Bowser, M. Manager - Sales	2006 2005	128,998 128,998	110.175 141,999		1,948 1,949	12.139 11,585	253,260 284,531
Colledge, B. - Manager - Licensing Solutions	2006 2005	130,973 128,998	138,304 164,070	ä, $\rightarrow$	2,181 2,148	12,139 11,585	283,597 306,801
Crouch, B. - Manager - Enterprise Solutions	2006 2005	141,973 128,998	129,406 137,682	٠	2,364 2,148	12,139 11,585	285,882 280,413
Crouch, P. - Manager - NSW (from 1 November 2005) Esler, M. *	2006 2006	103,333 106,525	70,336 115,302		1,721	8,093 20,826	183,483 267,037
Manager - Queensland Hill, B. * - Chief Financial Officer /	2005 2006	107,448 136,000	103,588 33,240	23,185 22,710 5,963	1,199 1,199 2,365	19,842 12,139	254,787 189,707
Company Secretary Lavett, J.	2005 2006	137,550 138,397	32,045 72,778	950 3,900	2,160 2,201	11,585 12.139	184,290 229.415
Manager – Victoria MacPherson, L. * - Manager	2005 2006	130,000	54,090 29,480	23,400	1,960	11,585	221,035
Organisational Development & HR Murphy, P.	2005 2006	108,991 99,083 135,000	26,704 79,759	$\overline{\phantom{a}}$	1,815 2,517 2,248	12,139 11,167 12.139	152,425 139,471 229,146
Manager – ICT Services Peters, W. - Manager -	2005 2006	125,000 120,000	46,442 105,828	1,998	1,968 4,874	11,585 12,139	184,995 244,839
Recruitment Solutions (from 1 July 2005)
Totals - key management personnel	2006 2005	1,882,535 1,633,616	1,126,663 947,320	105,249 122,983	28,745 21,790	171,309 147,490	3,314,501 2,873,199

Onto 3 thinked and Substdience

* Denotes those executives who were employed by the parent entity for the year ended 30 June 2006 and represent the four most highly remunerated officers of the parent entity. There were no other officers of the parent entity for the year ended 30 June 2006 (2005: nil).

No director or executive received compensation in the form of share-based payments during the year ended 30 June 2006 (2005; nil).

C Service agreements

Terms of employment for the Managing Director and other key management personnel are formalised in service agreements. Except for the Managing Director, whose base salary and bonus amounts were agreed for the two years ended 30 June 2006, the service agreements state that base salary and performance-related bonuses will be agreed annually, which occurs at the commencement of each financial year. The company may terminate the agreements without notice for gross misconduct; otherwise, either party may terminate the agreement early with the agreed notice period, subject to termination payments as detailed below. For all key management personnel, except those listed below, termination notice of one month is required and no termination benefit is payable. Other major provisions of the agreements relating to remuneration of the Managing Director and certain other key management personnel are as follows:

J Grant, Managing Director

• □ Term of agreement two years commencing 1 July 2004, then reviewed annually.
• □ Base salary, inclusive of superannuation, for the year ended 30 June 2005 of \$300,000, thereafter to be reviewed annually by the board of directors.
• Performance-related bonus of up to \$100.000 may be earned for each of the years ended 30 June 2005 and 30 June 2006, with the $\Box$ bonus amount and performance targets to be reviewed annually thereafter by the board of directors.
• $\Box$ Termination notice of six months is required.
• □ Payment of a termination benefit on early termination by the company, other than for gross misconduct, of twelve months of his packaged salary together with an additional amount representing the performance-related bonus earned up to the date of termination. From 1 July 2006, if at the annual renewal date the company chooses not to continue the agreement, the company must provide six months notice and Mr Grant will be entitled to his packaged salary and performance bonus calculated up to the date of his termination.

L Baynham, B Hill and L MacPherson

• C Termination notice of three months is required.
• □ Payment of a termination benefit on early termination by the company, other than for gross misconduct, of six months of the packaged salary including performance-related bonuses. A termination benefit is provided for these individuals as these positions are considered most likely to be subject to early termination in the event of a significant business combination.

D Share-based compensation

Subject to shareholder approval, additional options may be granted to directors and key management personnel under the Data'3 Limited Employee Option Plan. All directors and key management personnel of Data*3 Limited and its subsidiaries are eligible to participate in the plan. Options are issued for \$1 per parcel of options issued and are exercisable from two years prior to the expiry date; the options lapse 30 days following cessation of the option holder's employment. The exercise price of the options that were last issued was determined as the higher of 90 cents per share or the weighted average price of the shares as listed with the ASX within the five days immediately prior to the offer date. Options granted under the plan carry no dividend or voting rights. Options may only be granted with shareholder approval. The Plan must be reviewed and approved at an Annual General Meeting prior to the granting of additional options. When exercisable, each option is convertible into one ordinary share.

No options were granted to directors or key management personnel during the year ended 30 June 2006 (2005: nil), and no options vested or lapsed during the year (2005: nil).

Diretors report

Data'3 Limited and Subsidiaries

Remuneration report (continued)

Details of the value of options exercised by directors and key management personnel during the year were as follows:

Kev management person	Exercise date	Number of options	Option exercise price	Fair value per share at exercise date	Value of options at exercise date	Aggregate value at exercise date
2006 MacPherson, L.	11 November 2005	20.000	\$0.91	\$3.39	\$2.48	\$49,600
2005 Bowser, M.	24 June 2005	20.000	\$0.91	\$2.90	\$1.99	\$39,800

E Additional information (unaudited)

Relationship between remuneration and company performance

The overall level of executive reward takes into account the performance of the group over a number of years, with greater emphasis given to improving performance over the prior year. From 2001 to 2002, the group's net profit improved from a loss of \$4,262,000 to a profit of \$3,170,000. From 2002 to 2006, the group's net profit has grown at an average rate of 16% per annum. From 2001 to 2006 shareholder wealth has grown at an average rate of 19% per annum, and over that same five year period the average executive remuneration has increased by approximately 9% per annum.

Cash honoses

For each cash bonus included in the previous table in Section B, the percentage of the planned bonus that was actually earned in the financial year, and the percentage that was forfeited because the person did not meet the relevant profit or other performance-related criteria, are set out below.

Name	Eamed	Forfeited
Baynham, L.	100	$\sim$
Bowser, M.	100	$\overline{\phantom{a}}$
Colledge, B.	100	$\blacksquare$
Crouch, B.	100	٠
Crouch, P.	100	$\overline{a}$
Esler, M.	100	$\overline{\phantom{a}}$
Grant, J.	100	$\overline{\phantom{a}}$
Hill, B.	100	$\overline{\phantom{a}}$
Lavett, J.	73	27
MacPherson, L.	100	$\overline{\phantom{a}}$
Murphy, P.	100	$\overline{\phantom{a}}$
Peters, W.	100	$\sim$

Shares under option

No unissued ordinary shares of Data²3 Limited remain under option at the date of this report. No share options were granted during the financial year. Furthermore, there has been no movement in shares under option since year end up to the date of this report.

Shares issued on the exercise of options

The following ordinary shares of Data^r3 Limited were issued during the year ended 30 June 2006 on the exercise of options granted under the Data'3 Limited Employee Option Plan. No further shares have been issued since that date. No amounts are unpaid on any of the shares.

Grant date	issue price of shares	Number of shares issued
22 November 2002	\$0.91	20.000

Data's Lumbed and Subsidiance

Indemnity/insurance of officers

During the financial year, Data'3 Limited paid a premium of \$37,166 to insure the directors and members of the executive management team of the company and the group 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 group 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 requiations

The group 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.

Non-audit services

The company may decide to employ Johnston Rorke on assignments additional to its statutory duties where the auditor's expertise and experience with the company and/or the group are important.

The board of directors has considered the position and, in accordance with the advice received from the audit committee is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor
• □ none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards.

A copy of the auditors' independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 28. During the year the following fees were paid or payable to the auditor for audit and non-audit services:

		Consolidated
	2006 S	2005 s
Audit services
Audit and review of financial reports and other audit work under the Corporations Act 2001	92,500	82,000
Other assurance services
Due diligence services on potential acquisition	1.500	5.900
Corporate services	940	1.140
IFRS accounting services	10,000	3.500
Taxation services
Tax compliance services	5,140	7190
	110,080	99.730
This report is made in accordance with a resolution of the directors.

Altricurry

R A Anderson Director

Brisbane 25 August 2006

Сладетей Ассоцииання

Flour 5 National Bank Flouse 255 Adelaide Stress Brisbaue O 4000 GPO flox 1144 Bristonic Q-4001 Ph O7 3222 8444 / Fax O7 3221 7779 Websing www.jr.com.au Omall je Pjezdan ku

The Directors Data^r3 Limited Level 2, Data^r3 Centre 80-88 Jephson Street TOOWONG QLD 4066

Auditor's Independence Declaration

As lead engagement partner for the audit of the financial report of Data'3 Limited for the financial year ended 30 June 2006, I declare that, to the best of my knowledge and belief, there have been:

i. no contraventions of the independence requirements of the Corporations Act 2001 in relation to the audit; and

ii. no contraventions of any applicable code of professional conduct in relation to the audit.

JOHNSTON RORKE

Chartered Accountants

1. Erano

J J Evans Partner

Brisbane, Queensland 25 August 2006

Finalis Hope

Date's Umited and Subsidiation

income Statements

Diluted earnings per share

For the year ended 30 June 2006 a sa mga bayang pangalang ng mga bayang nag

	Notes		Consolidated		Parent Entity
		2006	2005	2006	2005
		\$'000	\$'000	\$'000	\$'000
Revenues
Sale of goods	4	185,042	158,443
Services	4	53,926	38,052	49	218
Other	4	644	634	10,490	8.477
Total		239,612	197,129	10,539	8.695
Expenses
Changes in inventories of finished goods		901	1,212
Purchase of goods		(163, 147)	(139, 476)
Employee and contractor costs directly on-charged (cost of sales on services)		(22,302)	(13, 917)
Other cost of sales on services		(4,800)	(3,338)
Other employee and contractor costs		(33.514)	(27877)	(3.926)	(3,745)
Telecommunications		(823)	(839)	(219)	(226)
Rent	4	(2,444)	(2.213)	(249)	(273)
Travel		(1,203)	(952)	(100)	(100)
Depreciation and amortisation	4	(501)	(528)	(162)	(198)
Finance costs		(3)	(15)	131	(15)
Management charges - subsidiaries				(924)	(781)
Other		(3,417)	(3,087)	(1.010)	(881)
Total		(234, 253)	(191,030)	(6,593)	(6,219)
Profit before income tax expense		8,359	6,099	3,946	2.476
Income tax expense	5	(2,640)	(1,922)	(286)	(146)
Net profit		5.713	4.177	3,660	2.330
		Cents	Cents
Basic earnings per share	29	36.88	27.41

The above income statements should be read in conjunction with the accompanying notes.

29

36.84

27.36

Data'3 Limitad and Subsidiancs Balance Sheets

Az at 30 hine 2606

	Notes Consolidated			Parent Entity
		2006	2005	2006	2005
		\$'000	\$'000	\$'000	\$'000
Current assets
Cash and cash equivalents	$\overline{\phantom{a}}$	13,997	9.173	13,811	9.171
Trade and other receivables	8	34,553	30.192	4.190	9,498
Inventories	9	3,263	2,362
Other	10	1,259	1,021	321	335.
Total current assets		53,072	42,748	18,322	19,004
Non-current assets
Available-for-sale financial assets	11	5		ß
Other financial assets	12		7	$\mathcal{U}$	7
Property and equipment	13	1,352	1,372	503	599
Deferred tax assets	5	912	766	131	131
Intangible assets	14	4.626	4,582	117 G.	53.
Total non-current assets		6,895	6,727	770.	790
Total assets		59,967	49,475	19.092	19,794
Current liabilities
Trade and other payables	15	31,275	31,356	1,752	1.478
Current tax liabilities		1,454	699	1,454	699
Provisions	16	684	507	273	259
Other	17	2.806	1,997	4.918	7619
Total current liabilities		42,119	34,559	8,397	10,055
Non-current liabilities
Provisions	16	424	397	48	35
Other	17	527 Ŵ,	722	313	417
Total non-current liabilities		951	1.119	361	452
Total liabilities		43,070	35,678	8,758	10,507
Net assets		16,897	13,797	10,334	9,287
Equity
Contributed equity	18	9,563	8,706	9,563	8,706
Retained profits		7334	5,091	$J\bar{J}$ 1	581
Total equity		16,897	13,797	10,334	9,287

The above balance sheets should be read in conjunction with the accompanying notes.

Dan't Linited and Subsidiances

Statements of Changes in Equity
For the year ended 30 June 2006

	Number of Ordinary Shares	Contributed Equity	Retained Profits	Total Shareholders' Equity
	\$'000	\$'000	\$'000	\$'000
Consolidated			202
Balance at 1 July 2004	15,126	8,190	3,496	11,686
Net profit			4,177	4,177
Total recognised income and expense			4, 3, 7, 7	4,177
Issuance of ordinary shares	224	516		516
Payment of dividends			(2,582)	(2,682)
Balance at 30 June 2005	15,350	8,706	5,091	13,797
Net profit	Martin Sal		5,713	5,713
Total recognised income and expense			5,713	5,113
Issuance of ordinary shares	285	857		867
Payment of dividends			(3,470)	(3.470)
Balance at 30 June 2006	15.635	9,563	7,334	16.897
Parent Entity
Balance at 1 July 2004	15,126	8,190	833	9.023
Net profit			2,330	2,330
Total recognised income and expense			2,330	2,330
Issuance of ordinary shares	224	516		516
Payment of dividends			(2,582)	(2,582)
Balance at 30 June 2005	15,350	8,706	681	9,281
Net profit			3,660	3.660
Total recognised income and expense			3,660	3,660
Issuance of ordinary shares	285	857		857
Payment of dividends			(3,470)	(3,470)
Balance at 30 June 2006	15,635	9,563	771	10.334

The above statements of changes in equity should be read in conjunction with the accompanying notes.

Data'3 Linited and Subsidianes Cash Flow Statements For the year ended 30 dune 2006

	Notes		Consolidated	Parent Entity
		2006	2005	2006	2005
		\$'000	\$'000	\$'000	\$'000
Cash flows from operating activities
Receipts from customers		258.675	213,052	7009	6,384
Payments to suppliers and employees		(249,012)	(208, 221)	(3,664)	(4,898)
Dividends received				3.000	2.000
Interest received		570	371	822	331
Finance costs		(3)	(15)	13)	(15)
Income taxes paíd		(2.071)	(1,531)	(2.067)	(1,071)
Income taxes refunded			193	x
Net cash inflow from operating activities	26	8,159	3,849	4,797	2,731
Cash flows from investing activities
Proceeds from sale of property and equipment			12		7.
Payments for property and equipment		(399)	(891)	(46)	(37)
Payments for software assets		(325)	(60)	(85)	(60)
Proceeds from sale of business assets			175
Proceeds received from former joint venture partner			619
Repayment of loans from subsidiaries				5.300	429
Payment for investment in subsidiary				(14)
Other		2		2
Net cash inflow (outflow) from investing activities		(722)	657	5,157	339
Cash flows from financing activities
Repayment of lease liabilities			(64)		(64)
Proceeds from issues of shares		18	36	18.	36
Payment of dividends	6	(2.631)	(2,102)	(2.631)	(2, 102)
Loans from subsidiaries					1.436
Repayment of loans to subsidiaries				(2,701)
Net cash inflow (outflow) from financing activities		(2.613)	(2, 130)	(5,314)	(694)
Net increase in cash and cash equivalents held		4.824	2376	4.640	2.376
Cash and cash equivalents at the beginning of the financial year		9,173	6,797	9.171	6.795
Cash and cash equivalents at the end of the financial year	7	13.997	9173	13.811	9.171
Non-cash financing and investing activities	27
Financing arrangements	28

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

Note 1. Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(a) Basis of preparation of financial report

This general purpose financial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, UIG Interpretations, and the Corporations Act 2001.

Compliance with IFRS

This financial report complies with Australian Accounting Standards, which include AIFRS. Compliance with AIFRS ensures that the financial report, comprising the financial statements and related notes, complies with International Financial Reporting Standards (IFRS). The parent entity financial statements and notes also comply with AIFRS except that the company has elected to apply the relief provided to parent entities in respect of certain disclosure requirements contained in AASB 132 Financial Instruments: Presentation and Disclosure.

This is the first annual financial report of Data⁸3 Limited prepared in accordance with AIFRS. AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards has been applied in preparing these financial statements.

Financial statements of Data*3 Limited until 30 June 2005 had been prepared in accordance with previous Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from AIFRS. When preparing the Data'3 Limited financial report for the year ended 30 June 2006, management has amended certain accounting, valuation, and consolidation methods applied in the previous AGAAP financial statements to comply with AIFRS. With the exception of financial instruments, the comparative figures were restated to reflect these adjustments. The group has taken the exemption available under AASB 1 to only apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005.

Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRS on the group's and parent entity's equity and net income are given in note 30.

Historical cost convention

These financial statements have been prepared under the historical cost convention, except for available-for-sale investments, which have been measured at fair value.

(b) Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Data'3 Limited ("company" or "parent entity") as at 30 June 2006 and the results of all subsidiaries for the year then ended. Data*3 Limited and its subsidiaries together are referred to in this financial report as the group.

Subsidiaries are consolidated from the date on which control is transferred to the group and cease to be consolidated from the date on which control is transferred out of the group.

Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of the subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

(c) Foreign currency translation

Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The group's functional and presentation currency is Australian dollars.

Foreign currency transactions are translated to Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. As at balance sheet date the group has not entered any hedge transactions, as the risk to the group from foreigndenominated transactions is insignificant.

Data'3 Limited and Subsidiancs Notes to the financial statements For the year ended 30 June 2006

Note 1. Summary of significant accounting policies (continued)

(d) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue includes revenue earned (net of returns, discounts, allowances and duties and taxes paid) from the provision of goods or services to entities outside the group.

Revenue from the 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 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 for each contract. Where it is probable that a loss will arise from a fixed price service contract, the excess of total costs over revenue is recognised as an expense immediately.

(e) income tax

Income tax expense for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences arising from the initial recognition of an asset or a liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or liability, in that no deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction (other than a business combination) that did not affect either accounting profit or taxable loss at the time of the transaction.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax basis of investments in subsidiaries where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Data'3 Limited and its wholly-owned Australian subsidiaries are part of a tax-consolidated group under Australian taxation law. Data'3 Limited and the controlled entities in the tax-consolidated group, continue to account for their own current and deferred tax amounts. These amounts are measured as if each entity in the tax-consolidated group continues to be a stand-alone taxpayer in its own right. Data'3 Limited, as the head entity, immediately assumes current tax liabilities or assets and any carryforward loss amounts recognised for the period by its wholly-owned subsidiaries in this group, in addition to the current and deferred tax amounts arising in relation to its own transactions, events and balances. The entities have also entered into tax sharing and funding agreements. Refer to note 5.

(f) Leases

Leases of property and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased property or the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other long-term payables. Lease payments are allocated between the liability and the interest expense. The leased asset is depreciated on a straight-line basis over the shorter of the asset's useful life or the lease term.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease payments, net of any incentives received from the lessor, are charged to the income statement on a straight-line basis over the period of the lease. Where the group is required to return the premises to their original condition on cessation of the lease, a provision for lease remediation is recorded for the present value of the estimated liability.

(g) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, and other short-term, highlyliquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

For purposes of the cash flow statement, cash includes cash and cash equivalents, net of outstanding bank overdrafts.

Mones is the financial statements

For the year onded 30 June 2008

Note 1. Summary of significant accounting policies (continued)

(h) Receivables

Receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Collectibility of receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off. A provision for doubtful debts is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables.

(i) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs are assigned to individual items of inventory on a specific identification basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

(j) Business combinations

The purchase method of accounting is used to account for all business combinations, 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 incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the fair value of the instruments is their published market price as at the date of exchange, unless it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill (refer to note 1(p)). If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

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 exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

(k) Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

(I) Non-current assets held for sale

Non-current assets or disposal groups are classified as held for sale and stated at the lower of their carrying amounts or fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use.

(m) Investments and other financial assets

The group has taken the exemption available under AASB 1 to apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement only from 1 July 2005. The group has applied previous AGAAP to the comparative information on financial instruments within the scope of AASB 132 and AASB 139. Under previous AGAAP, interests in listed securities were recorded at cost.

The nature of the adjustments necessary for the comparative information to comply with AASB 132 and AASB 139 are that, with the exception of held-to-maturity investments and loans and receivables, which are measured at amortised cost (refer below), fair value is the measurement basis. On transition at 1 July 2005, no significant adjustments were required.

From 1 July 2005, the group classifies its investments in the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, loans and receivables, and held-to-maturity investments. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and reevaluates this designation at each reporting date. Purchases and sales of investments are recognised on trade date.

Data'3 Limited and Subsidiancs Notes to the financial statements For the year ended 30 June 2006

Note 1. Summary of significant accounting policies (continued)

(m) investments and other financial assets (continued)

Investments are initially recognised at fair value plus, for all financial assets not carried at fair value through profit and loss, transaction costs. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active, and for unlisted securities, the group establishes fair value using other valuation techniques such as reference to the fair values of recent arms' length transactions involving the same or similar instruments, discounted cash flow analysis, and option pricing models refined to reflect the issuer's specific circumstances. The group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. The group considers various factors in determining whether to recognise an impairment charge, including the length of time and extent to which the fair value has been less than the group's cost basis, the financial condition and near-term prospects of the investee, and the group's intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Financial assets at fair value through profit and loss and available-for-sale financial assets are subsequently carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any discount or premium on acquisition over the period of maturity. For investments carried at amortised cost, gains and losses are recognised in income when the investments are derecognised or impaired, as well as through the amortisation process.

As at balance sheet date the group has not entered any derivative contracts.

(n) Fair value of financial instruments

The fair value of certain of the group's financial instruments, including cash and cash equivalents, trade and other receivables (net of allowance for doubtful accounts) and trade and other payables, accrued compensation, and other accrued liabilities, approximate cost because of their short maturities. The fair value of investments is determined using quoted market prices for those securities or similar financial instruments.

(o) Property and equipment

Property and equipment is stated at cost, less accumulated depreciation and amortisation. Depreciation and amortisation are computed using the straight-line method to allocate cost net of residual values over the estimated useful lives of the assets, being three to 20 years. Depreciation and amortisation of leasehold improvements are computed using the straight-line method over two to ten years.

Upon impairment, an asset's carrying amount is written down immediately to its recoverable amount (refer to note 1(k)).

(p) Goodwill and purchased intangible assets

Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Subsequently goodwill is carried at cost less any accumulated impairment losses. Goodwill is tested for impairment on an annual basis, and between annual tests in certain circumstances, and written down when impaired.

Purchased intangible assets other than goodwill are amortised over their useful lives unless these lives are determined to be indefinite. Purchased intangibles are carried at cost less accumulated amortisation and impairment losses. Amortisation is computed using the straight-line method over the estimated useful lives of the respective assets, generally three to five years.

(q) Trade and other payables

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

(r) Provisions

Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the group expects some or all of a provision to be reimbursed, such as under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

Mores to the financial statements

For the year anded 30 June 2008 . . . . . . . . . . . . . . . . . . . .

Note 1. Summary of significant accounting policies (continued)

(s) Employee benefits

Wages, salaries, annual leave and sick leave

Liabilities for wages, salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services 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 liability for long service leave is recognised in the 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.

Post-employment benefits

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

Bonus plans

A liability for employee benefits in the form of bonus plans is recognised in other payables when the group has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. 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.

Share-based compensation benefits

Share-based compensation benefits are provided to employees via the Data*3 Limited Employee Option Plan and an employee share scheme

For share options granted before 7 November 2002 and/or vested before 1 January 2005, no expense is recognised. The shares are recognised when the options are exercised and the proceeds received are allocated to share capital.

For share options granted after 7 November 2002 and vested after 1 January 2005, the fair value of the options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. Fair value is determined using the Black Scholes Option Pricing Model and takes into account factors such as exercise price, the term of the option, the share price at grant date and expected volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

At each balance sheet date, the group revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

The market value of shares issued under the employee share scheme is recognised in the balance sheet as share capital, with employee benefits expense, measured as the difference between the market value of the shares and the consideration paid by the employee, if any.

(t) Contributed equity

Ordinary shares are classified as equity. Issued and paid up capital is recognised at the fair value of the consideration received. Any transactions costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

(u) Earnings per share

Basic earnings per share is computed as profit attributable to equity holders of the company, adjusted to exclude costs of servicing equity (other than ordinary shares), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after-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.

Data'3 Limited and Subsidianes

Notes to the financial statements

For the year ended 30 June 2006

Note 1. Summary of significant accounting policies (continued)

(v) Rounding of amounts

The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and 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.

(w) Accounting standards not yet effective

Australian Accounting Standards that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ended 30 June 2006, are as follows:

AASE amendment or new standard	Affected standards	Nature of change to Accounting policy	Application date of standard*	Application date for the group*
2004-3	AASB 1 First-time adoption of AIFRS, AASB 101 Presentation of Financial Statements, and AASB 124 Related Party Disclosures	No change to accounting policy required. Therefore no impact	1 January 2006	1 July 2006
2005-1	AASB 139 Financial Instruments: Recognition and Measurement	No change to accounting policy required. Therefore no impact	1 January 2006	1 July 2006
2005-5	AASB 1 First-time adoption of AIFRS, AASB 139 Financial Instruments: Recognition and Measurement	No change to accounting policy required. Therefore no impact	1 January 2006	1 July 2006
2005-6	AASB 3 Business Combinations	No change to accounting policy required. Therefore no impact	1 January 2006	1 July 2006
2005-10	AASB 132 Financial Instruments: Disclosure and Presentation. AASB 101 Presentation of Financial Statements, AASB 114 Segment Reporting, AASB 117 Leases, AASB 133 Earnings per Share, AASB 139 Financial Instruments: Recognition and Measurement, AASB 1 First-time adoption of AIFRS, AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts	No change to accounting policy required. Therefore no impact	1 January 2007	1 July 2007
2006-1	AASB 121 The Effects of Changes in Foreign Currency Rates	No change to accounting policy required. Therefore no impact	31 December 2006	30 June 2006
AASB 119 Employee Benefits	Existing standard	No change to accounting policy required. Therefore no impact	1 January 2006	1 July 2006
New standard	AASB 7 Financial Instruments: Disclosures	No change to accounting policy required. Therefore no impact	1 January 2007	1 July 2007
New UIG interpretation	UIG 4 Determining whether an Arrangement contains a Lease	No change to accounting policy required. Therefore no impact	1 January 2006	1 July 2006

* Application date is for annual reporting periods beginning on or after the date shown in the above table, except for 2006-1, where the application date is for annual reporting periods ending on or after the date shown in the above table. .
http://www.analizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanalizanali

Gate 3 Limited and Subsidiance

Money to the financial statements

For the year anded 30 June 2008 a sa sa sa sa sa sa sa sa sa sa sa sa sa

Note 1. Summary of significant accounting policies (continued)

(w) Accounting standards not yet effective (continued)

The following amendments are not applicable to the group and therefore have no impact:

AASB amendment or new standard	a a Affected standards
2005-4	AASB 139: Financial Instruments: Recognition and Measurement, AASB 132: Financial Instruments: Disclosure and Presentation, AASB 1: First-time adoption of AIFRS, AASB 1023: General Insurance Contracts and AASB 1028: Life Insurance Contracts
2005-9	AASB 4: Insurance Contracts, AASB 1023: General Insurance Contracts, AASB 139: Financial Instruments: Recognition and Measurement and AASB 132: Financial Instruments: Disclosure and Presentation
New UIG interpretation	UIG 5 Rights to Interests in Decommissioning, Restorations and Environments Rehabilitation Funds
New UIG interpretation	UIG 7 Applying the Restatement Approach under AASB 129 Financial Reporting in Hyperinflationary Economies
New UIG interpretation	UIG 8 Scope of AASB 2
New UIG interpretation	UIG 9 Reassessment of Embedded Derivatives

(x) Corporate information

This financial report covers both Data*3 Limited as an individual entity (parent entity) and the group consisting of Data*3 Limited and its subsidiaries. Data''3 Limited is a public company limited by shares, incorporated and domiciled in Australia. The financial report was authorised for issue in accordance with a resolution of the directors on 25 August 2006.

lts registered office is: I	Its principal place of business is:
5th Floor.	Level 2
Natìonal Bank House	Data*3 Centre
255 Adelaide Street	80 Jephson Street
BRISBANE OLD 4000	TOOWONG OLD 4066

Note 2. Significant accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Impairment of goodwill

The group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill is allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill are discussed in note 14.

Data'3 Limited and Subsidiaries Notes to the financial statements

For the year ended 30 June 2006 _______________________________________

Note 3. Financial risk management

The group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the group. To date the group has not used derivative financial instruments.

Risk management is carried out by the chief financial officer (CFO) under policies approved by the Board of directors. The CFO identifies, evaluates and mitigates financial risks in close cooperation with senior management.

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity's functional currency. The group operates internationally in New Caledonia; as the revenue contracts are denominated in Australian dollars, the foreign exchange risk in relation to these operations is not material.

(ii) Price risk

The group is exposed to an immaterial amount of equity securities price risk, arising from investments held by the group and classified on the balance sheet as available-for-sale. The group is not exposed to commodity price risk.

(iii) Fair value interest rate risk

Refer to (d) below.

(b) Credit risk

The maximum exposure to credit risk on financial assets which have been recognised on the balance sheet is the carrying amount of those assets. The group has no significant concentrations of credit risk. The group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history; collateral is not normally obtained. Specific information as to the group's credit risk exposures is as follows:

□ During the 2006 year there were no customers to whom sales exceeded 10% of revenue (2005: nil).

There are a number of individually significant debtors. At 30 June 2006, the ten largest debtors comprised approximately 29% $\Box$ of total debtors (2005: 30%), of which 34% were accounts receivable from Queensland government customers (2005: 17%).

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the business, the group aims at maintaining flexibility in funding by keeping committed credit lines available. The group manages liquidity risk by monitoring cash flows and ensuring that adequate cash and unutilised borrowing facilities are maintained.

(d) Cash flow and fair value interest rate risk

The group's exposure to interest rate risk arises predominantly from cash and cash equivalents bearing variable interest rates, as the group intends to hold fixed rate assets and liabilities to maturity. As the group has no other significant interest-bearing assets, the group's income and operating cash flows are not materially exposed to changes in market interest rates.

(e) Net fair values

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

(f) Denvative financial instruments

The group does not use derivative financial instruments.

Gata Lindad and Subsidiance Notes to the financial statements

For the year ended 30 June 2008 1999 - Jan Salah Barat, Indonesia da

Parent Entity

	2006	2005	2006	2005
	\$'000	\$'000	\$'000	\$'000
Note 4. Revenue and expenses
Revenue
Sales revenue
Sale of goods	185,042	158,443
Services	53,926	38,052	49	218
	238,968	196,495	49	218
Other revenue
Interest	597	383	549	343
Corporate charges			6,936	6,134
Dividends			3,000	2,000
Other	AI	251	ß.
	644	634	10,490	8,477
	239,612	497129	10,539	8.695
Expenses
Cost of sales of goods	162,246	138,264
Depreciation: property and equipment	86	132	37	32
Amortisation
Leasehold improvements	288	274	104	104
Property and equipment under finance leases		55		55.
Software	127	67	21	Г.
Total amortisation	416	396	125	166
Defined contribution superannuation expense	2.423	1,909	296	289
Employee benefits expense (excluding superannuation)	25,731	21,475	3.231	3,125
Other charges against assets
Impairment of goodwill	70	69.
Impairment of software assets	84
Bad and doubtful debts	63	67
Rental expenses on operating leases
Minimum lease payments	2.364	2,089	250	272
Contingent rentals	15	56	$^{{4}}$
Rental expenses - other	$65 -$	68
	2.444	2213	249	273
Loss on disposal of property and equipment	45	92	1	1
Loss on sale of business assets		118
Included in other expenses is the net foreign exchange gain	(42)
Included in other expenses is the reversal of provision
against Powerlan (Old) receivable	(115)

Consolidated

Data'3 Limited and Subsidianes Notes to the financial statements For the year ended 30 June 2006

Income tax expense

The major components of income tax expense are:

Current income tax expense

Deferred income tax relating to the origination and reversal of temporary differences Under provision in prior year

Income tax expense

A reconciliation between income tax expense and the product of accounting profit before income tax multiplied by the group's applicable income tax rate is as follows:

Accounting profit before income tax

Income tax calculated at the Australian tax rate: 30% (2005: 30%)

Tax effect of amounts which are not deductible/ (taxable) in calculating taxable income:

Non-taxable dividends Non-deductible items Other

Under provision in prior year

Income tax expense

Deferred income tax

Deferred income tax at 30 June for the group relates to the following:

Deferred tax assets

Accrued liabilities

Provisions

Lease incentive liability Other

Deferred tax liabilities

Lease incentive asset Other

Net deferred tax assets Deferred income tax revenue (expense)

Gata 3 Limited and Subskhanes

Notes to the financial statements For the year ended 30 June 2006

Parent Entity Balance Sheet Income Statement 2006 2006 2005 2005 \$'000 \$'000 \$'000 \$'000 49 42 3. P) 95 87 ., ą $125$ 156 $(31)$ $(32)$ 41 M $(11)$ 269 $296$ $(27)$ $(31)$ $(125)$ $(156)$ $\overline{31}$ 32 $(12)$ M $(9)$ $(7)$ $(165)$ $(138)$ 27 25 131 131

Note 5. Income tax (continued)

Deferred income tax

Deferred income tax at 30 June for the parent entity relates to the following:

Deferred tax assets

Accrued liabilities Provisions Lease incentive liability Other

Deferred tax liabilities

Lease incentive asset Other

Net deferred tax assets

Deferred income tax revenue (expense)

Unrecognised temporary differences

The parent entity has recorded impairment charges of \$6,117,000 in respect of its investment in a subsidiary (refer notes 12, 23). No deferred tax asset has been recognised in relation to these accumulated impairment charges. The group has recognised a receivable from Powerlan Qld of \$526,000 (note 8). The tax cost base of this receivable is \$1,853,000. No deferred tax asset has been recognised in respect of this temporary difference.

Tax consolidation legislation

Data'3 Limited and its wholly-owned Australian subsidiaries have implemented the tax consolidation legislation as of 1 July 2003. The accounting policy in relation to this legislation is disclosed in note 1(e).

The entities in the tax-consolidated group entered into tax sharing and funding agreements. Under the terms of these agreements, the wholly-owned subsidiaries reimburse Data"3 Limited for any current tax payable assumed and are compensated by Data"3 Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Data'3 Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned subsidiaries' financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax installments. The funding amounts are recognised as current intercompany receivables or payables.

In the opinion of the directors, the tax sharing agreement is also a valid agreement under the tax consolidation legislation and limits the joint and several liability of the wholly-owned subsidiaries in the case of a default by Data'3 Limited.

The group has no tax losses available for offset against future taxable profits (2005: nil).

Data'3 Limited and Subsidiatios Notes to the financial statements For the year ended 30 June 2006

Parent Entity 2006 2005 \$'000 \$'000 1,439 1,766 1 704 1,143 3.470 2.582 $2.658$ 1,765 6,596

$\mathbf{r}$ and $\mathbf{r}$

Note 6. Dividends

Dividends paid on ordinary shares during the year Final fully franked dividend for 2005: 11.5c (2004: 9.5c) Interim fully franked dividend for 2006: 11.0c (2005: 7.5c)

Dividends declared (not recognised as a liability at year end)

Final fully franked dividend for 2006: 17.0c (2005: 11.5c)

The tax rate at which dividends paid have been franked is 30% (2005: 30%). Dividends declared will be franked at the rate of 30% (2005: 30%).

Franking credit balance

Franking credits available for subsequent financial years based on a tax rate of 30% (2005: 30%)

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; and

(iii) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

The dividend recommended by the directors since year end, but not recognised as a liability at year end, will result in a reduction in the franking account of \$1,139,000 (2005: 757,000).

$\mathbf{r}$

		Consolidated		Parent Entity
	2006	2005	2006	2005
	\$'000	\$'000	\$'000	\$'000
Note 7. Cash and cash equivalents
Cash at bank and on hand	2.497	1.673	2,311	1.671
Deposits at call	11.500	7500	11.500	7.500
Balances per cash flow statements	13.997	9,173	13.811	9.11

Cash is bearing floating interest rates of approximately 4.4% per annum (2005: 4.2%). Deposits at call comprise deposits with financial institutions available at call and are bearing a floating interest rate of approximately 5.3% per annum (2005: 5.2%). The weighted average interest rate in relation to cash and cash equivalents for 2006 was 5.2% (2005: 5.0%).

Data 3 Limited and Subsidiaries

Notes to the financial statements For the vear ended 30 June 2006

		Consolidated	Parent Entity
	2006	2005	2006	2005
	\$'000	\$'000	\$'000	\$'000
Note 8. Trade and other receivables
Trade receivables	34.079	29,824		14
Provision for doubtful debts	(175)	(121)
	33,904	29,703		14
Other receivables	123	-78	52	46
Receivable from Powerlan Old	1,853	1,853
Provision for doubtful debt	(1,327)	(1,442)
	-526	411
Amounts receivable from subsidiaries			4,138	9,438
	34,553	30.192	4.190	9.498

Trade receivables

Trade receivables are non-interest bearing and are generally due for settlement no more than 30 days from the date of recognition.

Other receivables

These amounts generally arise from accrued rebates or transactions outside the usual operating activities of the group. Interest is normally not charged, collateral is not normally obtained and the receivables are normally due within 30 days of recognition.

Receivable from Powerlan Old

Subsequent to year end \$526,000 was received from Powerlan Qld in settlement of the above debt. Interest is not charged on this balance.

Receivables from subsidiaries

These amounts are at call, unsecured, interest-free and repayable in cash.

		Consolidated Parent Entity
	2006	2005	2006	2005
	\$'000	\$'000	\$'000	\$'000
Note 9. Inventories
Finished goods - at cost	3.263	2,362
Note 10. Other current assets
Prepayments	777	341	320	334
Security deposits	76	.82
Accrued rebates	406	598
	1.259	1,021	321	335
Note 11. Available-for-sale financial assets (non-current)

Shares in listed corporations - at fair value

Available-for-sale investments consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon rate.

Files and the boy

Data'3 Limited and Subsidiancs Notes to the financial statements For the year ended 30 June 2006

Note 12. Other financial assets (non-current)
Shares in listed corporations - at cost
Shares in subsidiaries - at cost (note 23)
Accumulated impairment

Note 13. Property and equipment

Leasehold improvements - at cost Accumulated amortisation

Equipment - at cost Accumulated depreciation

Carrying amount at 1 July 2004

Depreciation/amortisation expense Carrying amount at 30 June 2005

Depreciation/amortisation expense Carrying amount at 30 June 2006

Carrying amount at 1 July 2004

Depreciation/amortisation expense Carrying amount at 30 June 2005

Disposal of business assets

Consolidated

Additions

Disposals

Additions Disposals

Parent entity

Additions Disposals

Additions Disposals

	2006 \$'000	2005 \$'000	2006 \$'000	2005 \$'000
it)
	m	7		7
	ř		6,131	6,117
	Ï		(6,117)	(6, 117)
	Ï		14
		Þ	14	7
	2,335	2,007	1,042	1,042
	(1,1)4)	(825)	(625)	(521)
	1.221	1.182	417	521
	882	963	671	639
	(751)	(773)	(535)	(561)
	131	190	86	78
	1,352	1.372	503	599
	Leasehold		Leased
	improvements \$'000	Equipment \$'000	equipment \$'000	Total \$'000
	1,406	395	55	1,856
	50	39		89
		(8)		(8)
	$\sum_{\text{SUSSE} \in \mathcal{S} \text{SUSSE}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal{S}} \sum_{\text{SUSSE} \in \mathcal$	(104) $\left( 132\right)$	$\left(55\right)$ we assume that the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the	(104) $\langle 461\rangle$ where excess a second second second second $\langle 461\rangle$
	twee 1,182	190		1,372
	327	72		399
		(45)		(45)
	(288) Hillarena	(86)	mSemeS	(374)
	1,221 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 - 1920 1921 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922 - 1922	131 KINING NG MGA NASA NG KASANG NG KASANG NG KASANG NG KASANG NG KASANG NG KASANG NG KASANG NG KASANG NG KASANG N	KINING NG MATING NASA NG KASANG NASA	1,352 822232323232323232323232333
	625	81	55	761
		37		37 (8)
	(104)	(8) (32)	(55)	(191)
	isnensnensnensnelsggaaajnazzisis. 521	8080808080808080808 mene 78	*****	STATASTATISTATISTATISTAGGARDINISTI 599
		46		46
		(1)		(1)
	11041	127		1111

86

417

Consolidated

Parent Entity

503.

Gata 3 Limited and Subsidiancs

Nates to the financial statements

For the year ended 30 June 2006

		Consolidated		Parent Entity
	2006	2005	2006	2005
	\$'000	\$'000	\$'000	\$'000
Note 14. Intangible assets
Goodwill - at cost	6,166	6,236
Accumulated amortisation	(1,327) 4,339	(1,827) 4,409
Software assets - at cost	578	253	145	60.
Accumulated amortisation	(291) 287.	(80) 173	(28) $-117$	$\left( 7\right)$ 53
	4,626	4,582	117	53
		Consolidated		Parent Entity
		Software		Software
	Goodwill	assets	Total	assets
	\$'000	\$'000	\$'000	\$000
Carrying amount at 1 July 2004	4,805	180	4,985
Additions		60	60	60
Disposals	(327)		(327)
Amortisation expense		(67)	(67)	(7)
Impairment charge	(69)	1912/223399	(69)	88809982
Carrying amount at 30 June 2005	4,409 ្រ ប្រុស្តិប្រុស្តិប្រុស្តិប្រព្រៃស្តីប្រព្រៃល្បាញ់ល្បាញ់ល្បាញ់ល្បាញ់ប្រព្រៃស្តីប្រ	173 ARRESTS REPORTED BY A ROOM AND RELEASE	4,582 ASPERSORS DESCRIPTION CONTROL	53 ASPERSION RESIDENCE DE LA COMPLEXIONAL
Additions		325	325	85
Amortisation expense		(127)	(127)	(21)
Impairment charge	(70)	(84)	(154)

Intangibles - software assets

Software assets, which have been externally acquired, have been capitalised at cost and are amortised on a straight-line basis over the asset's useful economic life which is generally two to three years. The useful lives and potential impairment of the software assets are reviewed at the end of each financial year.

Goodwill impairment testing

Goodwill acquired through business acquisitions has been allocated to the smallest identifiable group of assets that generates largely independent cash flows and which are expected to benefit from synergies of the combination. Due to the nature of Data'3 operations and internal management reporting and monitoring of goodwill, goodwill has been allocated to the consolidated group. Under AIFRS, goodwill must be tested at least annually for impairment. Management has carried out impairment testing as at each reporting date.

The recoverable amount has been determined based on a value-in-use calculation using cash flow projections based on financial projections approved by senior management for financial year 2007. The before-tax discount rate applied to cash flow projections is 13%. Cash flows beyond the 2007 financial year have been extrapolated using an average growth rate of 9.8%.

Key assumptions used in value-in-use calculations

Budgeted gross margins have been determined based on past performance and management's expectations for the future. The discount rate was estimated based on the company's weighted average cost of capital at the date of impairment test.

Data'3 Limited and Subsidianes Notes to the financial statements For the year ended 30 June 2006

		Consolidated	Parent Entity
	2006	2005	2006	2005
	\$'000	\$'000	\$'000	\$'000
Note 15. Trade and other payables
Trade payables - secured (note 28)	11,328	8,510
- unsecured	20.515	18,337
	31,840	26,847
Other payables - unsecured	5,435	4,509	J. JSL	1,478
	37275	31,356	1,752	1.478
Note 16. Provisions
Current
Employee benefits	584	507	273	259
Non-current
Employee benefits	315	311	43	31
Lease remediation (note 1(f))	109	86	ļ.	$\boldsymbol{a}$
	424	397	48	35
Total	1,008	904	321	294
			Consolidated	Parent Entity
			Lease	Lease
			remediation	remediation
			\$'000	\$'000
Balance at 1 July 2005			86	4
Arising during the year			23	1
Utilised during the year			*********	manyan
Balance at 30 June 2006			109	5.

Cara 3 Limited and Subsidianes

For the vear ended 30 June 2006

Notes to the financial statements

Unearned income comprises amounts received in advance of the provision of goods or services. Payables to subsidiaries are at call, unsecured, interest-free and repayable in cash.

Note 18. Contributed equity

Details	Notes	Number of Shares	issue Price \$	\$000
(a) Movements in ordinary share capital
Opening balance - 1 July 2004		15.126.053		8,190
Exercise of options under Data*3 Limited Employee Option Plan	24	40.000	0.91	36
Dividend reinvestment plan issue	稍	93,700	2.22	208
Dividend reinvestment plan issue	${i}$	90,020	3.03	272 SECONDENSIVA
Balance - 30 June 2005		15,349,773		8.706
Exercise of options under Data*3 Limited Employee Option Plan	24	20.000	0.91	18
Dividend reinvestment plan issue	${i}$	125,211	2.96	371
Dividend reinvestment plan issue	稱	140.067	3.35	468
Balance - 30 June 2006		15,635,051		9.563

• (i) 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%; the shares issued under the plan during the year were offered to shareholders at a discount of 5%. The dividend reinvestment plan will be suspended indefinitely from 1 September 2006.
• (ii) Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par value shares. Accordingly, the company does not have authorised capital or par value in respect of its issued shares.

(b) Ordinary shares

All ordinary shares issued as at 30 June 2006 and 2005 are fully paid. 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.

(c) Share options

For details as to the number of share options outstanding as at 30 June 2006, refer note 24.

Data'3 Limited and Subsidianes

_______________________________________

Note 19. Contingent liabilities

At 30 June 2006 bank guarantees totalling \$410,000 (2005: \$410,000) were provided by the parent entity to lessors as security for premises leased by the parent entity and the subsidiaries. The guarantees will remain in place for the duration of the operating leases. Bank quarantees are secured by charges over all of the group's assets.

Cross guarantees have been provided by the parent entity and its Australian wholly-owned subsidiaries as described in note 23.

	Consolidated		Parent Entity
	2006	2005	2006	2005
	\$'000	\$000	\$'000	\$'000
Note 20. Commitments
Future minimum rentals payable under non-cancelable operating leases as at 30 June are as follows:
Within one year	2.167	2.163	1.001	$982 -$
Later than one year but not later than five years	4.429	5.531	2638	3.007
	6.626	7694	3.639	3.989

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 subsidiaries.

Note 21. Key management personnel

Directors

The following persons were directors of Data*3 Limited during the 2005 and 2006 financial years, except as noted:

R Anderson	Chairman - non-executive
G Clark	Non-executive director
J Grant.	Managing Director
W Powell	Non-executive director
H Stack	Non-executive director (from 1 July 2005 to 23 December 2005, the date of his resignation)

Other key management personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of the group, directly or indirectly, during the financial year:

Name	Position	Employer
L Baynham	General Manager	Data r 3 Business Systems Pty Ltd
M Bowser	Manager - Recruitment Solutions	Data r 3 Business Systems Pty Ltd
B Colledge	Manager - Licensing Solutions	Data r 3 Business Systems Pty Ltd
B Crouch	Manager - Enterprise Solutions	Data"3 Business Systems Pty Ltd
P Crouch	Manager - New South Wales	Gratesand Pty Ltd
M Esler	Manager - Queensland	Data 3 Limited
B Hill	Chief Financial Officer and Company Secretary	Data'3 Limited
J Lavett	Manager - Victoria	Gratesand Pty Ltd
L MacPherson	Manager – Organisational Development and HR	Data'3 Limited
P Murphy	Manager - ICT Services	Data r 3 Business Systems Pty Ltd
W Peters	Manager - Recruitment Solutions	Data'3 Business Systems Pty Ltd

Note 21. Key management personnel (continued)

All of the above persons were also key management personnel during the year ended 30 June 2005, except for W Peters and P Crouch, who were promoted to their positions on 1 July 2005 and 1 November 2005, respectively.

Key management personnel compensation

		Consolidated		Parent Entity
	2006	2005	2006	2005
	S
Short-term employee benefits	3.114.447	2.703.919	1,191,234	1.183.542
Long-term employee benefits	28.745.	21,790	8,377	8.874
Post-employment benefits	171 303	147490	78,243	77.980
	3.314.501	2,873,199	1,277,854	1,270,396

The company has taken advantage of the relief provided by regulation 2M.6.04 of the Corporations Regulations 2001 and has transferred the detailed remuneration disclosures to the directors' report. The relevant information can be found at Sections A-D of the remuneration report.

Equity instrument disclosures relating to key management personnel

Shares under option

Subject to shareholder approval, additional options may be granted to directors and executives under the Data*3 Limited Employee Option Plan, details of which are set out in note 24. Information in respect of options held as at 30 June 2006, whether directly, indirectly or beneficially, by each key management person, including their personally-related entities, is set out below.

22 S. L. S. S.

$\sim$ $\sim$

							vested and exercisable
	Balance	Exercised	Balance	Exercised	Balance	30 June	30 June
	30 June 2004		30 June 2005		30 June 2006	2005	2006
Bowser, M.	20,000	(20.000)
MacPherson, L.	20.000 SORROBERS SERIES : 40.000	$\overline{ }$ 020000000000000000000000000000000000000 20.000)	20.000 SORGHING RECENTED 20.000	(20,000) WEBSHORENESS (20.000)	SOBRACEFORDSORFERY	20.000 SWARESWARESSERR 40431004002 20,000 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,	XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Shares issued on exercise of Data"3 Limited remuneration options during the years ended 30 June 2006 and 2005

Key management person	Shares issued Number	Paid per share s	Unpaid per share
2006 MacPherson, L.	20.000	0.91
2005 Bowser, M.	20,000	0.91

Ordinary shares held directly, indirectly or beneficially by each key management person, including their personally-related entities are shown below.

Data'3 Limited and Subsidianes

Notes to the financial statements

For the year ended 30 June 2006

Note 21. Key management personnel (continued)

Number of shares in Data^r3 Limited held by key management personnel

	Balance 30 June 2004	Options exercised	Net change other	Balance 30 June 2005	Options exercised	Net change other	Balance 30 June 2006
Anderson, R.	40,000			40,000		5,000	45,000
Clark, G.	668,880		(50.000)	618,880		(35, 148)	583,732
Grant, J.	861,520			861.520			861,520
Powell. W.	680,000		(60,000)	620,000		(55,000)	565,000
Stack, H.	10,000			10,000			10,000
Baynham, L.	54,905		(3.305)	51,600			51,600
Bowser, M.		20,000		20,000		(10,000)	10,000
Colledge, B.	23,600			23,600			23,600
Crouch, B.	10,000			10,000			10,000
Esler, M.	760.100			760.100			760,100
НіІІ, В.	43,000		7,000	50,000			50,000
MacPherson, L.	ASMESHINARSHUILDREDH				20,000		20,000
	3.152.005	20.000	(106,305)	3.065.700	20,000	(95, 148)	2.990.552

Key management personnel who are not shown in above tables held no shares or options in Data*3 Limited. There has been no movement in key management personnel' shareholdings since year end up to the date of this report.

Other transactions with key management personnel

Mr J E Grant, an executive director, is a director of Wood Grant & Associates Pty Ltd and has the capacity to significantly influence decision making of that entity. Data'3 Limited engages Wood Grant & Associates Pty Ltd to assist with design and production of the annual and half-yearly financial reports. These transactions are made on normal commercial terms and conditions and at market rates.

	2006	2005
Amounts recognised as expense
Other expense	21,325	12,525

There were no other transactions during the year with key management personnel or their personally-related entities.

		Consolidated		Parent Entity
	2006	2005	2006	2005
	\$	Ş	\$
Note 22. Remuneration of auditor
During the year the following fees were paid or payable to the auditor for audit and non-audit services:
Audit services
Audit and review of financial reports and other audit work under the Corporations Act 2001	92.500	82,000	92.500	82.000
Other assurance services
Due dilígence services on potential acquisition	1,500	5.900	1.500	5.900
Corporate services	940	1,140	-940	1.140
IFRS accounting services	10,000	3,500	10,000	3.500
Taxation services
Tax compliance services	5.140	7190	5,140	7.190
Total remuneration	110,080	99.730	110,080	99,730
These masses commentational de calendaries of lohannes Node, his als accuels collines another the long-

There was no remuneration paid to related practices of Johnston Rorke. It is the group's policy to employ Johnston Rorke on assignments additional to its statutory audit duties where Johnston Rorke's expertise and experience with the group are important.

Gate 3 Limited and Subsidiance

Motes to the financial statements

For the year anded 30 June 2008 a da segunda da segunda de la contra de la contra de la contra de la contra de la contra de la contra de la co

Note 23. Related parties

Wholly-owned group

The consolidated financial statements include the financial statements of Data^® Limited and the subsidiaries listed in the following table.

Name of entity	Country of formation or incorporation	Equity holding (ordinary shares)
		2006 %	2005 %
Data'3 Business Systems Pty Ltd	Australia	100	100
Gratesand Pty Ltd	Australia	100	100
Data'3 NC SARL	New Caledonia	100

Transactions between Data*3 Limited and other entities in the wholly-owned group during the years ended 30 June 2006 and 30 June 2005 consisted of:

• [] Loans advanced to/by subsidiaries and repayments (refer Cash Flow Statement);
• □ Recovery of corporate charges received by Data*3 Limited for accounting, administrative services, management and use of assets (refer note 4);
• □ Management charges from subsidiaries for use of assets and provision of systems and services (refer Income Statement);
• □ Dividends received by Data*3 Limited (refer note 4); and
• □ Transactions between Data'3 Limited and its wholly-owned subsidiaries under the accounting tax sharing and funding agreements described in note 5. The parent entity recognised a receivable of \$2,778,000 and a payable of \$238,000 in relation to its subsidiaries' current tax payable or receivable amounts for the year ended 30 June 2006 (2005: a receivable of \$1,631,000).

Loans provided are at call, interest-free and unsecured and have no fixed repayment terms (refer notes 8 and 17). Corporate charges by the parent entity are based on budgeted cost. Management charges by subsidiaries are based on discounted retail price. Unless otherwise stated, transactions are on commercial terms and conditions.

Management has carried out impairment testing as at each reporting date in relation to the parent entity's investment in its subsidiaries. As at 1 July 2004 an impairment loss of \$1,745,000 was recognised against the net investment in CiCtechnology (Gratesand Pty Ltd). The investment's carrying value was written down to zero on the basis of the value-in-use calculation used to determine the asset's recoverable amount.

Entities subject to class order relief

Data'3 Limited, Data'3 Business Systems Pty Ltd, and Gratesand Pty Ltd are parties to a Deed of Cross Guarantee under which each company guarantees the debts of the others. By entering into the deed, these wholly-owned entities have been relieved from the requirements to prepare a financial report and directors' report under Class Order 98/1418 (as amended) issued by the Australian Securities & Investments Commission. Data"3 Limited and Data"3 Business Systems Pty Ltd both have net assets as at 30 June 2006. However, Gratesand Pty Ltd has net liabilities of \$8,536,000 as at 30 June 2006 (2005: 7,733,000); this deficiency includes a payable to Data'3 Limited of \$4,458,000 (2005: 8,075,000).

The above companies, which comprise the parent entity and all of its Australian subsidiaries, represent a "Closed Group" for the purposes of the Class Order. The Closed Group for 2005 was the group, therefore comparative disclosures are not presented in the following tables; refer to the consolidated financial statement comparatives. The consolidated income statement for the closed group for the year ended 30 June 2006 is set out in the following table.

Data'3 Limited and Subsidiaries Notes to the financial statements For the year ended 30 June 2006

Note 23. Related parties (continued)

Sale of goods Services Other Total

Expenses

Changes in inventories of finished goods Purchase of goods Employee and contractor costs directly on-charged (cost of sales on services) Other cost of sales on services Other employee and contractor costs Telecommunications Rent Travel Depreciation and amortisation Finance costs Other Total

Profit before income tax expense

Income tax expense

Net profit

A summary of movements in consolidated retained earnings for the year ended 30 June 2006 of the closed group is set out below.

Retained earnings at 1 July 2005

Profit after income tax/net profit Dividends provided for or paid

Retained profits at 30 June 2006

2006			roup
\$'000
	185.042
	51,971
		$\overline{227}$
	ł
	238.240
			901
(163, 147)
(22, 302)
	(4,768)
(32, 158)
	(795)
	(2,407)
	(1, 109)
	(501)
			(3)
	(3,476)
(229, 765)
		8.475
	(2,680)
		$\sqrt{2}$
		5.091
		5.795
	3,4701
		7,416

$\ddot{\phantom{1}}$

Note 23. Related parties (continued)

The consolidated balance sheet as at 30 June 2006 for the closed group is set out below.

	Closed Group 2006 \$'000
Current assets
Cash and cash equivalents	13,814
Trade and other receivables	34,667
Inventories	3.263
Other	1,218
Total current assets	52,962
Non-current assets
Available-for-sale financial assets	5,
Other financial assets	14
Property and equipment	1.349
Deferred tax assets	912
Intangible assets	4,619
Total non-current assets	6,899
Total assets	59.861
Current liabilities
Trade and other payables	37,087
Current tax liabilities	1,454
Provisions	584
Other	2,806
Total current liabilities	41,931
Non-current liabilities
Provisions	424
Other	527
Total non-current liabilities	951
Total liabilities	42.882
Net assets	10,979
Equity
Contributed equity	9,563
Retained profits	7,416
Total equity	16,979

Data'3 Limited and Subsidianes Notes to the financial statements For the year ended 30 June 2006

Note 24. Share-based payments

Data'3 Limited Employee Share Scheme

The establishment of the Data^®3 Limited 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 subsidiaries are eligible to participate in the scheme. To 30 June 2006 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 balance sheet 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 issue (see note 18(b)).

Data⁴3 Limited Employee Option Plan

The establishment of the Data'3 Limited Employee Option Plan (the 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 subsidiaries are eligible to participate in the plan. Options are issued for \$1 per parcel of options issued and are exercisable from two years prior to the expiry date; the options lapse 30 days following cessation of the option holder's employment. The exercise price of the options on issue was 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. Options may only be granted with shareholder approval. The Plan must be reviewed and approved at an Annual General Meeting prior to the granting of additional options. When exercisable, each option is convertible into one ordinary share.

Set out below are summaries of options granted under the plan:

Grant date	Expiry date	Exercise price	Balance at start of the year	Issued durina the year	Exercised durina the year	Lapsed/ cancelled during the year	Balance at end of the year
			Number	Number	Number	Number	Number
	Consolidated and parent entity - 2006
22 November	21 November
2002	2005	\$0.91	20.000		20.000		ea
	Consolidated and parent entity - 2005
22 November	21 November
2002	2005	\$0.91	60.000	000000000000000000000000000000000000000	40.000	-------------------------------------- -------------------------------------- 88888888888888	20.000

Gata 3 Lambad and Subsidianes

Mones to the financial statements For the year ended 30 June 2008

Note 24. Share-based payments (continued)

Details of the options exercised during the years ended 30 June 2006 and 2005 are as follows:

Exercise date	Fair value per share at issue date	2006 Number	2005 Number	2006 Number	2005 Number
11 November 2005	\$3.39	20,000		20,000
24 June 2005	\$2.90		20.000		20,000
31 August 2004	\$2.45	20,000	20,000 40,000		20,000 40.000

The fair value of shares issued on the exercise of options is the closing price at which the company's shares were traded on the Australian Stock Exchange on the date the options were exercised.

	Consolidated		Parent Entity
	2006	2005	2006	2005
	\$
Aggregate proceeds received from employees on the exercise of options and recognised as issued capital	18,200	36,400	18,200 WALLER	36.400
Aggregate fair value of shares issued to employees on the exercise of options as at their issue date	67200		67800	107.000

Refer to note 1(s) for information in relation to the company's accounting policy for options granted. The above options were granted after 7 November 2002 and vested prior to 1 January 2005. Accordingly the exemption contained in AASB 1 First-time Adoption of Australian Equivalents to IFRS does not require the application of AASB 2 Share Based Payments to the above options.

Note 25. Segment information

Business seament

The group predominantly operates in one business segment. Its activities include the procurement of information and communication technology (ICT) products; the design, implementation and support of ICT infrastructure solutions; the provision of ICT recruitment services; and the supply, implementation and support of application software solutions.

The products and services offered by the group are similar with respect to nature, distribution methods, risks and returns, and customer bases. Revenue is generated by providing customer solutions that draw on all or several areas of specialisation, resulting in strong interdependency among our product and service offerings.

Geographical segment

The group's operations are based predominantly in Australia.

Faandal report

Data'3 Limited and Subsidiancs Notes to the financial statements For the year ended 30 June 2006

Note 26. Reconciliation of net profit after income tax to net cash flow from operating activities

Net profit after income tax Depreciation and amortisation Impairment of goodwill Impairment of software assets Bad and doubtful debts Loss on sale of property and equipment Reduction of bad debt provision Loss on sale of business assets Write-off of investment in subsidiaries Change in operating assets and liabilities, net of effects from purchase and sale of businesses (Increase) / decrease in trade receivables (Increase) in inventories (Increase) / decrease in other operating assets (Increase) / decrease in net deferred tax assets Increase / (decrease) in trade payables Increase / (decrease) in unearned income Increase / (decrease) in other operating liabilities Increase in current tax liabilities Increase in liability for employee benefits

Net cash inflow from operating activities

Note 27. Non-cash financing and investina activities

Dividends satisfied by issue of shares (note 18)

839

839.

480

480

Gata's thurtad and Subsidiance Notes to the financial statements

For the vear ended 30 June 2006

Note 28. Financing arrangements

Unrestricted access was available at balance date to the following lines of credit:

Bank overdrafts Bill facility

All financing facilities were unused as at 30 June 2006 and 2005.

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 9.7% (2005: 9.5%).

Bill facility

The facility is subject to annual review. No bills were outstanding as at 30 June 2006 or 2005.

	Consolidated		Parent Entity
	2006	2005		2005
	\$'000	\$'000	\$'000	\$'000
Secured liabilities (current and non-current)
Lease incentives (note 17)	723	918	417	521
Trade payables (note 15)	11.325	8.510
Total secured liabilities	12.048	9.028	417	52%

Assets pledged as security

All the assets of the group are pledged as security for bank facilities and certain trade creditor facilities as noted above. Leasehold improvements (refer note 13) effectively secure lease incentive liabilities as noted above.

Data'3 Limited and Subsidianes Notes to the financial statements For the year ended 30 June 2006

		Consolidated
	2006	2005
	Cents	Cents
Note 29. Eamings per share
Basic earnings per share	36.88	2141
Diluted earnings per share	36.84	27.36
	Number	Number
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share	15.492,196	15,236,746
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share	15.507.449	15,264,258

• 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 24.
• d) In the circumstances of the company the options are considered dilutive and are therefore included in the calculation of diluted earnings per share.
• e) Reconciliation of the 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

Gata's thinned and Subskhanes

Notes to the financial statements

For the year ended 30 June 2005 the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company

Note 30. Explanation of transition to Australian equivalents to International Financial Reporting Standards (AIFRS)

Reconcilations of equity and profit reported under previous AGAAP to equity and profit reported under AIFRS are set out below.

At the date of transition to AIFRS: 1 July 2004

			Consolidated			Parent Entity
	Notes	Previous AGAAP \$'000	Effect of transition to AIFRS \$'000	AIFRS \$'000	Previous AGAAP \$'000	Effect of transition to AIFRS \$'000	AIFRS \$'000
Current assets
Cash and cash equivalents		6,797		6,797	6,795		6,795
Trade and other receivables		27,673		27,673	9,930		9,930
Inventories		1,115		1,115
Other		928 tenengmeteranggegrange,	\$888\$\$\$\$\$\$\$\$\$\$\$\$\$\$\$	928 ISTANOV-OTIVILISATORISMASA	290 MODERN CONTROLLER	MINDSON-000000000000	290 39999999999
Total current assets		36,513 manan	an propinsi mengenakan pada sa	36,513 chachach manan	17,015 Andriddebietetete	the checked color becked color becks	17,015
Non-current assets
Other receivables		500		500
Other financial assets	{a}	7		7	1,758	(1,745)	13
Property and equipment	${i}$	1,367	489	1,856	761		761
Deferred tax assets	(b), (c), (g)	831	87	918	831	(694)	137
Intangible assets		4,985 ISBS05	****	4,985	MEDICAL DESCRIPTION OF A SERVICE OF A SERVICE OF A SERVICE OF A SERVICE OF A SERVICE OF A SERVICE OF A SERVICE		Mindretre Brand (Brander)
Total non-current assets		7,690 SEGURASIO	576 ****	8,266	3,350 000000000000000000000000000000000000000	(2,439)	911 8998
Total assets		44,203	576	44,779	20,365	(2, 439)	17,926
Current liabilities
Trade and other payables	(d)	28,467	268	28,735	1,612	1	1,613
Interest bearing liabilities		64		64	64		64
Current tax liabilities		268		268	268		268
Provisions		410		410	213		213
Other	${i}$	2,214 ana. tenen.	92 Michelenienie de Christian	2,306	6,183 Mondadade	renensnensnensnensners	6,183
Total current liabilities		31,423	360 Kinini	31,783	8,340 X9888	1 enenener repertenencing	8,341
Non-current liabilities
Provisions	(e)	327	65	392	38	3	41
Other	(i), (c)	521 ISTISTINGOV	397	918	1,216	(695)	521
Total non-current liabilities		848	462 MARKER	1,310	1,254	(692)	562
Total liabilities		32,271	822	33,093	9,594	(691)	8,903
Net assets		11.932	(246)	11,666	10/77	(1,748)	9.023
Equity
Contributed equity		8,190		8,190	8,190		8,190
Retained profits	$\left( 0\right)$	3,742 789	(246) MB.	3,496	2,581	(1,748)	833
Total equity		11.932	(246)	11,686	10.771	(1,748)	9.023

Data's Limited and Subsidiaries

Notes to the financial statements

For the year ended 30 June 2008

Note 30. Explanation of transition to Australian equivalents to International Financial Reporting Standards (AIFRS) (continued)

For the last reporting period: 30 June 2005

			Consolidated		Parent Entity
	Notes	Previous AGAAP \$'000	Effect of transition to AIFRS \$'000	AIFRS \$'000	Previous AGAAP \$'000	Effect of transition to AIFRS \$'000	AIFRS \$'000
Current assets
Cash and cash equivalents		9,173		9,173	9,171		9,171
Trade and other receivables		30,192		30,192	9,498		9,498
Inventories		2,362		2,362
Other		1,021	summannummannum	1,021	335	0.003/00031030310300000000	335
Total current assets		42,748	. Natala kata kata kale kale kale kale kale	42,748	19,004	Provident Control Provident	19,004
Non-current assets
Other financial assets	(a)	7		7	1,752	(1,745)	7
Property and equipment	(i)	1.028	344	1.372	652	(53)	599
Deferred tax assets	(b), (c), (g)	649	117	766	649	(518)	131
Intangible assets	(a), (i)	4,217	365	4.582	MARKARASHOWSKRAK	53	53 Ministrate
Total non-current assets		5,901 tenen.	826 Miniminininin 82888828	6,727 servery man	3,053 Management	(2, 263)	790 Moderdelblassk
Total assets		48,649	826	49,475	22,057	(2, 263)	19,794 89899999999999999999
Current liabilities
Trade and other payables	(d)	31,032	324	31,356	1,476	2	1,478
Current tax liabilities		699		699	699		699
Provisions		507		507	259		259
Other	(i)	1,905	92	1,997	7,619	.	7,619
Total current liabilities		34,143	416 8556888888888888	34,559	10,053	$\frac{2}{2}$	10,055
Non-current liabilities
Provisions	(e)	311	86	397	31	4	35
Other	(i), (c)	417	305	722	937	(520)	417
Total non-current liabilities		728 e.	391 eleksele 000000000	1,119	968 ABBISBIRGS	(516)	452 8999
Total liabilities		34,871	807	35,678	11,021	(514)	10,507
Net assets		13,778	19	13,797	11.036	(1,749)	9,287
Equity
Contributed equity		8,706		8,706	8,706		8,706
Retained profits	(g)	5,072	19	5,091	2,330	(1,749)	581
Total equity		13.778	19	13.797	11,036	(1,749)	9,287

Gata's thinned and Subskhanes

Notes to the financial statements

For the year ended 30 June 2008 a shekarar 1980 - Andrew Maria Barat a San Andrew Maria Barat a San Andrew Maria Barat a San Andrew Maria Bar

Note 30. Explanation of transition to Australian equivalents to International Financial Reporting Standards (AIFRS) (continued)

For the year ended 30 June 2005

			Consolidated		Parent Entity
	Notes	Previous AGAAP \$'000	Effect of transition to AIFRS \$'000	AIFRS \$'000	Previous AGAAP \$'000	Effect of transition to AIFRS \$'000	AIFRS \$'000
Revenues
Sale of goods		158,443		158,443
Services		38,052		38,052	218		218
Other	(h)	646	(12)	634	8,484	(7)	8,477
Total		197,141	(12)	197,129	8,702	${7}$	8,695
Expenses
Changes in inventories of finished goods		1,212		1,212
Purchase of goods		(139, 476)		(139, 476)
Employee and contractor costs directly on-charged (cost of sales on services) Other cost of sales on services		(13, 917)		(13, 917)
		(3,338)		(3, 338)
Other employee and contractor costs		(27, 877)		(27, 877)	(3.745)		(3,745)
Telecommunications		(839)		(839)	(226)		(226)
Rent	(d)	(2, 249)	(36)	(2,213)	(272)	1	(273)
Travel		(952)		(952)	(100)		(100)
Depreciation and amortisation (a), (i)		(748)	(220)	(528)	(198)		(198)
Finance costs		(15)		(15)	(15)		(15)
Management charges - subsidiaries					(781)		(781)
Other	$(e)$ , $(h)$	(3,078)	9 aszadoss	(3,087)	(887)	(6)	(881)
Total		(191, 277)	(247)	(191,030)	(6, 224) SERIES	(5)	(6, 219) 49222
Profit before income tax expense		5,864	235	6,099	2.478	(2)	2,476
Income tax expense	(g)	(1, 952)	30	(1,922)	(147) 9888		(146) 89.HV
Net profit		3,912	265	4,177	2.331	${1}$	2.330

Data'3 Limited and Subsidiaries

Notes to the financial statements For the year ended 30 June 2006

_______________________________________

Note 30. Explanation of transition to Australian equivalents to International Financial Reporting Standards (AIFRS) (continued)

(a) Intangible assets and impairment of assets

Under AASB 3 Business Combinations, amortisation of goodwill is prohibited. Instead goodwill is subject to impairment testing. Under AASB 136 Impairment of Assets, impairment of assets is assessed by determining the recoverable amount as the higher of fair value less costs to sell or value in use, focusing on the cash flows of the related cash generating unit, rather than using the previous method of undiscounted cash flows. The parent entity's investment in one of its subsidiaries was shown to be impaired as at 1 July 2004 using the new methodology. This change in accounting policy had the following impact:

At 1 July 2004

Consolidated: There is no effect.

Parent entity: There is a decrease in investment in subsidiaries of \$1,745,000 and retained profits of \$1,745,000.

$At 30$ , $line 2005$

Consolidated: There is an increase in goodwill of \$312,000 and retained profits of \$312,000. Parent entity: There is a decrease in investment in subsidiaries of \$1,745,000 and retained profits of \$1,745,000.

For the year ended 30 June 2005

Consolidated: Amortisation expense is \$312,000 lower. Parent entity: There is no effect.

(h) income tax

Under AASB 112 Income Taxes, deferred tax balances are determined using the balance sheet approach under which temporary differences are identified for each asset and liability based on the differences between their carrying amounts and their tax bases rather than the income statement method which accounts for the effects of timing and permanent differences between taxable income and accounting profit. Under previous AGAAP income tax expense was calculated by reference to the accounting profit after allowing for permanent differences. Deferred tax was not recognised in relation to amounts recognised directly in equity. This change in accounting policy has no effect on the parent entity; the effect on the group is:

At 1 July 2004

There is a decrease in consolidated deferred tax assets of \$12,000 and consolidated retained profits of \$12,000.

At 30 June 2005

There is a decrease in consolidated deferred tax assets of \$5,000 and consolidated retained profits of \$5,000.

For the year ended 30 June 2005

There is a decrease in consolidated income tax expense of \$7,000.

(c) Tax consolidation

Data*3 Limited and its wholly-owned Australian controlled entities implemented the tax consolidation legislation as of 1 July 2003. Under previous AGAAP, the parent entity recognised current and deferred tax amounts relating to transactions, events and balances of the tax consolidated entities as if those transactions, events and balances were its own. Under AIFRS the parent entity only recognises the current tax payable and deferred tax assets relating to tax losses, where applicable, from controlled entities in the tax consolidated group. There is no effect on the group; the effect on the parent entity is:

At 1 July 2004

There is a decrease in deferred tax assets of \$695,000 and amounts payable to subsidiaries of \$695,000.

$At 30$ , $line 2005$

There is a decrease in deferred tax assets of \$520,000 and amounts payable to subsidiaries of \$520,000.

For the year ended 30 June 2005

There is no effect.

Gate 3 Limited and Subsidiance

Montes to the financial station one

For the year anded 30 June 2008

Note 30. Explanation of transition to Australian equivalents to International Financial Reporting Standards (AIFRS) (continued)

(d) Operating lease rentals

Under AIFRS operating lease payments are generally required to be charged to expense on a straight-line basis over the term of the lease. Under previous AGAAP lease payments were charged to expense as incurred. The effect of this change in accounting policy is:

At 1 July 2004

Consolidated: There is an increase in accrued liabilities of \$268,000 and a corresponding decrease in retained profits. Parent entity: There is an increase in accrued liabilities of \$1,000 and a corresponding decrease in retained profits.

At 30 June 2005

Consolidated: There is an increase in accrued liabilities of \$324,000 and a corresponding decrease in retained profits. Parent entity: There is an increase in accrued liabilities of \$2,000 and a corresponding decrease in retained profits.

For the year ended 30 June 2005

There are increases in rent expense of \$56,000 for the group and \$1,000 for the parent entity.

(e) Provisions

Under AIFRS a provision must be taken up for the present value of provisions in relation to the remediation of premises under operating leases. Under previous AGAAP remediation costs were charged to expense as incurred. The effect of this change in accounting policy is:

At 1 July 2004

Consolidated: There is an increase in non-current provisions of \$65,000 and a corresponding decrease in retained profits. Parent entity: There is an increase in non-current provisions of \$3,000 and a corresponding decrease in retained profits.

At 30 June 2005

Consolidated: There is an increase in non-current provisions of \$86,000 and a corresponding decrease in retained profits. Parent entity: There is an increase in non-current provisions of \$4,000 and a corresponding decrease in retained profits.

For the year ended 30 June 2005

There are increases in other expense of \$21,000 for the group and \$1,000 for the parent entity.

(f) Employee benefits

Under AASB 2 Share-based Payment, the group recognises an expense in relation to those options that were issued to employees under the Data"3 Employee Option Plan after 7 November 2002 but that had not vested by 1 January 2005; under AGAAP the group's policy required no recognition of expense.

No adjustment is required under AASB 2 during the year ended 30 June 2005, as all options outstanding had vested prior to 1 January 2005.

Data'3 Limited and Subsidiaries Notes to the financial statements For the year ended 30 June 2006

Note 30. Explanation of transition to Australian equivalents to International Financial Reporting Standards (AIFRS) (continued)

(g) Retained profits

The effect on retained profits of the changes set out above are as follows:

		Consolidated		Parent Entity
		1 July 2004	30 June 2005	1 July 2004	30 June 2005
	Notes	\$'000	\$'000	\$'000	\$'000
Goodwill amortisation	(a)		(312)
Impairment of investment	(a)			1.745	1.745
Straight-line rent	${d}$	268	324
Lease remediation provisions	(e)	65	86 BREAKRA	.
		333	98	1.749	1.751
Tax effect of above adjustments *		(99)	(122)	${1}$	(2)
Adjustment due to adoption of AASB 112	(b)	$\frac{12}{2}$	Б 60000000000000	muditoisuusitsikuuntikoottis
Decrease/(increase) in retained profits		246.	(19)	1748	1,749

*increase in deferred tax assets

(h) Proceeds on sale of non-current assets

Under previous AGAAP, proceeds from the sale of non-current assets were included in revenue and the book value of the assets sold was included in other expense. Under AIFRS net gains on the sale of assets are presented in other income and net losses in other expense. The effect of this is:

At 1 July 2004 and 30 June 2005

There is no effect.

For the year ended 30 June 2005

There are decreases in other revenue and other expense of \$12,000 for the group and \$7,000 for the parent entity.

(i) Other changes

In addition to the above, other changes made on transition to AIFRS are as follows:

• E Reclassification of purchased software assets from property and equipment to intangible assets (consolidated and parent: \$53,000 at 30 June 2005).
• □ Recognition of additional leasehold improvements and related lease incentive liability (\$489,000 at 1 July 2004 and \$397,000 at 30 June 2005; no effect on the parent entity). For the year ended 30 June 2005, consolidated amortisation increased by \$92,000 and consolidated rent expense decreased by a corresponding amount.

These changes did not impact equity or net profit.

(i) Cash Flow Statement

The adoption of AIFRS has not resulted in any material adjustments to the cash flow statement.

Ditantive States in the

Gera Linked and Subsidiance

In the opinion of the directors:

• (a) the attached financial statements and notes are in accordance with the Corporations Act 2001, including:
• (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
• (ii) giving a true and fair view of the company's and group's financial position as at 30 June 2006 and of their performance, as represented by the results of their operations and their cash flows, for the financial year ended on that date; 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 23 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 23.

The directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001.

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

& Alminson

R A Anderson Director

Brisbane 25 August 2006

Data'3 Limited and Subsidianes Indevendent Audit Report to the Members of Date'3 Limited

Scope

The financial report and directors' responsibility

The financial report comprises the income statements, balance sheets, statements of changes in equity, cash flow statements, accompanying notes to the financial statements, the disclosures made as required by Australian Accounting Standard AASB 124 Related Party Disclosures in sections A to D of the remuneration report in the directors' report as permitted by the Corporations Regulations 2001 (the remuneration disclosures) and the directors' declaration for both Data'3 Limited (the company) and Data'3 Limited and its controlled entities (the consolidated entity) for the financial year ended 30 June 2006. The consolidated entity comprises both the company and the entities it controlled during that financial year.

The remuneration report also contains information not required by Australian Accounting Standard AASB 124 which is not subject to our audit.

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. The directors are also responsible for preparing the relevant reconciling information regarding the adjustments required under the Australian Accounting Standard AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards.

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 and the remuneration disclosures comply with Australian Accounting Standard AASB124 and the Corporations Regulations 2001. The nature of an audit is influenced by factors such as the use of professional judgement, 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, Australian 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, changes in equity and cash flows and whether the remuneration disclosures comply with Australian Accounting Standard AASB 124 and the Corporations Regulations 2001.

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 have followed applicable independence requirements of Australian professional and ethical pronouncements and the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of the company would be in the same terms if provided to the directors as at the date of this audit report.

Independent Audit Report to the Members of Data 1 innited

Audit Opinion

1. 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 2006 and of their performance for the financial year ended on that date; and
• (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

(b) other mandatory financial reporting requirements in Australia.

1. The remuneration disclosures that are contained in sections A to D of the remuneration report in the directors' report comply with Australian Accounting Standard AASB 124 Related Party Disclosures and the Corporations Regulations 2001.

JOHNSTON RORKE

Chartered Accountants

1. Erano

J J EVANS Partner Brisbane, Queensland 25 August 2006

Data'3 Limited and Subsidiaties Shareholder Information

The shareholder information set out below was applicable as at 23 August 2006.

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
$1 - 1,000$	362
1,001 - 5,000	889
5,001 - 10,000	246
10,001 - 100,000	155	$\sim$
100,001 and over	20 ${\color{red}36.02787378999999999999999999999999999999999$	Activitation of the production of the state of the state of the state of the state of the state of the state o
	1,672 Marquest Marquest et al. (2009)	W

(b) There were 73 holders of less than a marketable parcel of ordinary shares.

2. Twenty largest quoted equity security holders

		Ordinary shares
	Number held	Percentage of issued shares $\%$
National Nominees Limited	1,746,497	11.17
Westpac Custodian Nominees Limited	752,088	4.81
Wood Grant & Associates Pty Ltd	682,420	4.36
Oakport Pty Ltd	581.000	3.72
ANZ Nominees Limited	409,181	2.62
J P Morgan Nominees Australia Limited	361,162	2.31
Elterry Pty Ltd	345,000	2.21
G R Clark	324,500	2.08
Cogent Nominees Pty Limited	314,572	2.01
Powell Clark Trading Pty Ltd	259,232	1.66
Fadmoor Pty Ltd	250,000	1.60
Citicorp Nominees Pty Limited	239,103	1.53
Thomson Associates Pty Ltd	200,000	1.28
M R Esler	179,100	1.15
J E Grant	179,100	1.15
JT Populin	169,014	1.08
Citicorp Nominees Pty Limited	136,475	0.87
M G Populin	120,444	0.77
WT Powell	120,000	0.77
DR&VJNewbold	116.000	0.74
	7.484.688	4787

Data 3 kmitted and Subskhame Shareholder Information

3. Substantial shareholders

Substantial shareholders in the company are set out below:

Name	Number held	Percentage
Souls Funds Management Limited	1.545.392	9.88
Paradice Investment Management Pty Ltd	1,326,525	8.48
J E Grant / Wood Grant & Associates Pty Ltd	861.520	5.51

4. Unquoted equity securities

	Number held	Number of holders
Options issued under Data*3 Limited Employee Option Plan to take up ordinary shares	$\overline{\phantom{0}}$
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.

CORPORATE HEAD OFFICE Brisbane Lavel 2 Data^*3 Centre 80 Jephson Street TOOWONG OLD 4066 P.O. Box 551 INDOOROOPILLY OLD 4068 All Data⁴3 locations can be reached on the following numbers for the cost of a local call. T: 1300 23 28 23 F: 1300 32 82 32 E: info@data3.com.au W: www.data3.com.au REGISTERED OFFICE Level 5 National Bank House 255 Adelaide Street BRISBANE OLD 4000 BRANCH OFFICES Svdnev Level 2 107 Mount Street NORTH SYDNEY NSW 2060 -P.O. Box 426 NORTH SYDNEY NSW 2059 Melbourne¹ Level $2 - 1$ 785 Toorak Road HAWTHORN EAST VIC 3123 Canherra 65 Canberra Avenue GRIFFITH ACT 2603 P.O. Box 3611 MANUKA ACT 2603 Gladstone. Shop 3 93 Goondoon Street GLADSTONE QLD 4680 Noumea 140, Rue Bénébig Haut-Magenta

98800 Noumea

NEW CALEDONIA

Silverwater Unit 4 8 Millennium Court SILVERWATER NSW 2128 BOARD OF DIRECTORS Richard Anderson (Non-executive Chairman) Graham Clark (Non-executive director) Terry Powell (Non-executive director) John Grant (Managing Director) AUDITORS Johnston Rorke Level 5 National Bank House 255 Adelaide Street BRISBANE OLD 4000 BANKERS Commonwealth Bank of Australia Corporate Banking Level 9 240 Oueen Street BRISBANE OLD 4000 SHARE REGISTRY Link Market Services Limited Level 12 300 Queen Street BRISBANE QLD 4000 Locked Bag A14 SYDNEY SOUTH NSW 1235 T: (02) 8280 7454 F: (02) 9287 0303 E: registrars@linkmarketservices.com.au W: www.linkmarketservices.com.au ABN NUMBERS Data⁴3 Limited ABN: 31 010 545 267 Data⁴3 Business Systems Pty Ltd ABN: 31 010 500 642 Gratesand Pty Ltd ABN: 49 002 725 171 ACN NUMBER 010 545 267 ASX CODE DTL

WAREHOUSE AND SERVICE CENTRES

Milton

67 Castlemaine Street

MILTON OLD 4064