DATA#3 LIMITED — Annual Report 2008

Aug 24, 2008

Appendix 4E

ASX Preliminary Final Report

Name of entity:

ABN:

Data[#] 3 Limited

31 010 545 267

Reporting period:

Year ended 30 June 2008

Previous corresponding period:

Year ended 30 June 2007

Results for announcement to the market

Results
Revenues from ordinary activities	up	28 %	to	$363,707,000
Profit from ordinary activities after tax attributable to members	up	26 %	to	$9,070,000
Net profit for the period attributable to members	up	26 %	to	$9,070,000

Dividends	Amount per security	Franked amount per security
Current period
Interim dividend	18.0 cents	18.0 cents
Final dividend	28.0 cents	28.0 cents
Previous corresponding period
Interim dividend	14.0 cents	14.0 cents
Final dividend	22.0 cents	22.0 cents
The Record Date for determining entitlements to the dividend is 16 September 2008.

Brief explanation of the figures reported above:

The current period’s results are the best ever reported, and reflect consistently strong performance across all areas of the company’s business.

1

Data[#] 3 Limited and Controlled Entities

Appendix 4E – ASX Preliminary Final Report For the year ended 30 June 2008

Please refer to the attached audited Annual Financial Report for the year ended 30 June 2008 for the following information:

Income Statements

Balance Sheets

Statements of Changes in Equity

Cash Flow Statements

Notes to the financial statements

2

Data[#] 3 Limited and Controlled Entities

Appendix 4E – ASX Preliminary Final Report For the year ended 30 June 2008

Retained profits

	Current year $’000	Previous year $’000
Retained profits (accumulated losses) at the beginning of financial period Net profit attributable to members Net transfers to and from reserves Dividends provided for or paid	9,690 9,070 - (6,195)	7,334 7,197 - (4,841)
Retained profits at end of financial period	12,565	9,690

Additional dividend information

Details of dividends declared or paid during or subsequent to the year ended 30 June 2008 are as follows:

Record date	Payment date	Type	Amount per security	Franked amount per security	Total dividend $’000
14/9/2007	28/9/2007	Final	22.0 cents	22.0 cents	3,409
14/3/2008	28/3/2008	Interim	18.0 cents	18.0 cents	2,786
16/9/2008	30/9/2008	Final	28.0 cents	28.0 cents	4,330

Total dividend per security (interim plus final)

Ordinary securities	Current year	Previous year
	46.0 cents	36.0 cents

Data[#] 3 Limited Dividend Reinvestment Plan

The Data[#] 3 Dividend Reinvestment Plan has been suspended from 1 September 2006.

3

Data[#] 3 Limited and Controlled Entities

Appendix 4E – ASX Preliminary Final Report For the year ended 30 June 2008

Net tangible assets per security

Net tangible asset backing per ordinary security	Current year	Previous year
	$0.93	$0.94

Control gained over entities having a material effect

Not applicable

Loss of control of entities having a material effect

Not applicable

Details of aggregate share of profits (losses) of associates and joint venture entities

Not applicable

Compliance with IFRS

The attached Annual Financial Report complies with Australian Accounting Standards, which include AIFRS. Compliance with AIFRS ensures that the financial report complies with International Financial Reporting Standards (IFRS).

4

Data[#] 3 Limited and Controlled Entities

Appendix 4E – ASX Preliminary Final Report For the year ended 30 June 2008

Commentary on the results for the period

2008 closed as the best year the company has yet reported with net profit after tax of $9.1 million, basic earnings per share of 58.5 cents and fully franked dividends for the full year of 46 cents per share.

Highlights include:

• Total revenue of the group was $363,707,000, a 28% increase from last year with growth in all geographic regions.

• Gross margin in $ terms increased by 24%

• Operating profit of the group before interest (net) and tax was $12,112,000, an increase of 22%

• Net profit after tax was $9,070,000, a 26% increase from last year.

• Earnings per share increased 27% to 58.5 cents.

• Total dividends of 46.0 cents per share fully franked, a 28% increase from last year.

• Strong net operating cash inflows of $8,352,000.

• A strong financial position with no debt.

• The overall gross margin percentage decreased only marginally from 20.4% to 19.9%, reflecting the significant absorption of additional services staff in the second half.

• Internal staff costs increased by 27% in support of growth and deepening expertise, and operating expenses increased by 15%.

• The internal cost ratio (being internal staff costs and operating expenses as a percentage of gross margin in $ terms) remained essentially unchanged at 83%.

Compliance Statement

This report is based on financial statements that have been audited.

Signed:

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John Grant Managing Director Date: 25 August 2008

5

Data[#] 3 Limited ABN 31 010 545 267 Annual Financial Report Year Ended 30 June 2008

Directors’ report

Your directors present their report on Data[#] 3 Limited and its subsidiaries (the group) for the year ended 30 June 2008.

1. 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 software licensing and software asset management; the design, deployment and operation of desktop, network and data centre hardware and software infrastructure; and the provision of contract and permanent recruitment services.

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

2. DIVIDENDS

2. DIVIDENDS
	Cents	$’000
Final dividend recommended for the year ended 30 June 2008	28.0	4,330
Dividends paid in the year:
Interim for the year ended 30 June 2008	18.0	2,786
Final for the year ended 30 June 2007	22.0	3,409
		6,195

3. OPERATING AND FINANCIAL REVIEW

• Total revenue of the group was $363,707,000, a 28% increase from last year with growth in all geographic regions.

• Gross margin in $ terms increased by 24%.

• Operating profit of the group before interest (net) and tax was $12,112,000, an increase of 22%; and the net profit after tax was $9,070,000, a 26% increase from last year.

• Earnings per share increased 27% to 58.5 cents

• Fully franked dividends declared of 46.0 cents per share for the financial year, a 28% increase from last year.

• Strong net operating cash inflows of $8,352,000.

• A strong financial position with no debt.

• The overall gross margin percentage decreased only marginally from 20.3% to 19.7%, reflecting the significant absorption of additional services staff.

• Internal staff costs increased by 27% in support of growth and deepening expertise, and operating expenses increased by 15%.

• The internal cost ratio (being internal staff costs and operating expenses as a percentage of gross margin in $ terms) remained essentially unchanged at 83%.

4. BUSINESS STRATEGY

Our vision is to be an exceptional company - one that unites to enable our customers’ success through technology; inspires our people to do their best every day; and rewards investors’ confidence and support.

To achieve this vision, our focus is on three key areas:

• Remarkable people – who are inspired and supported in their passion for excellence and to do their best every day; who meet the challenge of work/life balance; who are empowered to contribute to positive change; and who are rewarded and celebrated both as members of the team and as individuals.

• Outstanding solutions – that embody market-leading expertise in technologies from vendors that are driving the industry globally and quickly adapt to changes in the environment.

• Organisational excellence – embedded processes that continuously review and improve the effectiveness of our business operations to ensure we remain a leader in our industry.

Achieving the objectives we have in each of these areas will see expertise and solutions in technology unite through our solutions framework to enable customer success.

Our customers’ success will in turn deliver exceptional performance with the appropriate rewards to all stakeholders.

Data[#] 3 Limited | Annual report 2008 | 2

Directors’ report (continued)

5. EARNINGS PER SHARE

5. EARNINGS PER SHARE
	2008	2007
	Cents	Cents
Basic earnings per share	58.51	46.13
Diluted earnings per share	58.51	46.13

6. 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.

7. SIGNIFICANT EVENTS AFTER THE BALANCE DATE

No matter or circumstance has arisen since 30 June 2008 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.

8. LIKELY DEVELOPMENTS AND EXPECTED RESULTS

In 2009 we expect the tighter economic environment and competitive market conditions to remain in place; however we are targeting continued organic growth in all areas of the business by increasing our relative market share. We expect a more stable labor market than we have experienced in previous years but with continued competition for the best skills. To maintain Data[#] 3’s position as an employer of choice, we intend to invest further in developing the expertise of our staff and in associated infrastructure. Overall we expect to contain operating expense relative to gross margin generated to a level similar to that achieved in the previous year.

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 2008 result and are looking to continue to deliver dividends that balance the need for working capital and the provision of returns near the top of the sector.

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.

9. DIRECTORS

The following persons were directors of Data[#] 3 Limited during the whole of the financial year and up to the date of this report:

R A Anderson J E Grant W T Powell

Mr I J Johnston was a director from the date of his appointment on 2 November 2007 up to the date of this report.

Data[#] 3 Limited | Annual report 2008 | 3

Directors’ report (continued)

9. DIRECTORS (continued)

Names, qualifications, experience and special responsibilities

R A Anderson, OAM, BCom, FCA (chairman, non-executive director)

Independent non-executive director since 1997 and chairman since 2000. Formerly a partner with PricewaterhouseCoopers, the firm’s managing partner in Queensland, and a member of the firm’s National Committee. Previously a member of the Capital Markets Board of Queensland Treasury Corporation and president of CPA Australia in Queensland.

During the past three years Mr Anderson has also served as a non-executive director of three other public companies: Namoi Cotton Cooperative Limited (director since 2001), Lindsay Australia Limited (director since 2002) and GEO Property Group following its acquisition of Villa World Limited (director since 2002 and chairman since January 2008). President of the Guide Dogs for the Blind Association of Queensland.

Special responsibilities:

Chairman of the board. Member of audit committee.

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

J E Grant, BEng (managing director)

Director of the company from its foundation in 1984; managing director from 1996 to 2000; chief executive officer from 2000 to 2004; re-appointed managing director effective 1 July 2004; extensive experience in the IT industry; member of the Queensland Government’s Ministerial Advisory Group, whose charter is to provide advice to the Minister for Tourism, Regional Development and Industry on Queensland ICT industry development policy; a member of the Queensland government’s Smart State Council; 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.

Mr Grant is currently chairman of the Australian Information Industry Association, the ICT industry’s peak representative body and a non-executive director of Sargent Group.

I J Johnston, DipCM, GradDip App Fin & Inv (non-executive director)

Non-executive director since November 2007. Currently executive chairman corporate finance at ABN AMRO Morgans. Extensive experience in the banking industry including experience in treasury and corporate banking. He has also been involved in a significant number of initial public offerings, capital raisings and corporate transactions during his career.

During the past three years Mr Johnston has also served as a non-executive director of three other public companies: Cardno Limited (director since 2004), The Rock Building Society Limited (director since 2006), and Symbiosis Group Limited (director since 2004).

Special responsibilities: Member of audit committee.

W T Powell, BEcon (non-executive director)

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. Re-joined the board of Data[#] 3 Limited in 2002.

Special responsibilities:

Chairman of audit committee.

Data[#] 3 Limited | Annual report 2008 | 4

Directors’ report (continued)

9. DIRECTORS (continued)

Interests in shares and options

As at the date of this report, the interests of the directors in the shares of Data[#] 3 Limited were:

	Number of
	ordinaryshares
R A Anderson	60,000
J E Grant	764,020
I J Johnston	60,000
W T Powell	465,000

Meetings of directors

The number of meetings of the company’s board of directors (including meetings of the audit committee) held during the year, and the numbers of meetings attended by each director were:

Name Full meetings of directors Meetings of audit committee Meetings attended Meetings held * Meetings attended Meetings held *	Name Full meetings of directors Meetings of audit committee Meetings attended Meetings held * Meetings attended Meetings held *
R A Anderson 17 J E Grant 16 I J Johnston 8 W T Powell 16	17 4 4 17 8 2 2 17 4 4

• Number of meetings held during the time the director held office or was a member of the committee during the year. ** Not a member of the committee during the year.

10. COMPANY SECRETARY

Mr B I Hill, BBus, was appointed to the position of company secretary in 1997. He has served as the 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.

11. REMUNERATION REPORT

All information in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. 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

A Principles used to determine the nature and amount of remuneration

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.

Data[#] 3 Limited | Annual report 2008 | 5

Directors’ report (continued)

11. REMUNERATION REPORT (continued)

A Principles used to determine the nature and amount of remuneration (continued)

Executives

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 employee equity plans

• 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 non-financial benefits at the executive’s discretion. There are no guaranteed base pay increases included in any senior executives’ contracts.

Performance-related bonuses

Performance-related cash bonus entitlements are linked to the achievement of financial and non-financial objectives which are relevant to meeting the company’s business objectives. In 2008 the proportion of the planned total executive remuneration that was performance-related was 36% (2007: 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 2008 the planned profit-related component represented 80% of the total executive bonuses (2007: 85%). The balance of the executive bonus entitlement is determined by performance against agreed non-financial objectives 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.

Non-executive directors

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 two non-executive directors and one executive director during the financial year until the appointment of one additional non-executive director on 2 November 2007. 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.

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 and of the company.

Data[#] 3 Limited | Annual report 2008 | 6

Directors’ report (continued)

11. REMUNERATION REPORT (continued)

11. REMUNERATION REPORT (continued)	11. REMUNERATION REPORT (continued)
Short-term		Long- term Post- employ- ment Other benefits
Cash salary and fees $	Cash bonus $ Non- monetary benefits $	Long service leave $ Super- annuatio n $ Termina- tion $ Total $	% perfor- mance related
Non-executive directors Anderson, R. 2008 90,000 Chairman 2007 90,000	- - - -	- 8,100 - 98,100 - 8,100 - 98,100	- -
Clark, G. 2008 - (retired 8 November 2006) 2007 19,583	- - - -	- - - - - 1,763 - 21,346	- -
Johnston, I. 2008 36,458 (appointed 2 November 2007) 2007 -	- - - -	- 3,282 - 39,740 - - - -	- -
Powell, W.T. 2008 65,000 2007 65,000	- - - -	- 5,850 - 70,850 - 5,850 - 70,850	- -
Subtotals - non- executive directors 2008 191,458 2007 174,583	- -	- 17,232 - 208,690	-
	- -	- 15,713 - 190,296	-
Executive director Grant, J. * 2008 320,481 ManagingDirector 2007 243,165
	137,318 77,519	7,400 13,129 - 555,847	24.7
	107,079 69,985	3,016 12,686 - 435,931	24.6
Other key management personnel Baynham, L. 2008 219,371 Group General Manager 2007 184,207	221,056 - 138,637 -	5,990 13,129 - 459,546 5,903 12,686 - 341,433	48.1 40.6
Bowser, M. – General Manager 2008 166,871 Queensland 2007 140,000	119,889 - 115,676 -	4,615 13,129 - 304,504 5,703 12,686 - 274,065	39.4 42.2
Colledge, B. – General Manager 2008 171,871 Licensing Solutions 2007 145,000	213,924 - 159,531 -	5,031 13,129 - 403,955 4,924 12,686 - 322,141	53.0 49.5
Crouch, B. – General Manager 2008 171,871 Enterprise Solutions 2007 155,000	208,629 - 143,276 -	5,031 13,129 - 398,660 4,919 12,686 - 315,881	52.3 45.4
Crouch, P. – General Manager 2008 166,871 New South Wales 2007 162,750	133,505 - 96,802 -	4,698 13,129 - 318,203 3,113 12,686 - 275,351	42.0 35.2
Esler, M. * – General Manager 2008 166,871 ICT Product Solutions 2007 123,570	115,720 - 95,858 21,747	4,698 13,129 - 300,418 1,161 12,686 - 255,022	38.5 37.6
Hill, B. * – Chief Financial Officer / Company Secretary 2008 184,871 2007 157,314	67,200 - 49,410 -	3,998 13,129 - 269,198 6,436 12,686 - 225,846	25.0 21.9
Lavett, J. – Manager Victoria 2008 - (resigned 31 August 2006) 2007 39,733	- - - -	- - - - - 3,577 59,599 102,909	- -
MacPherson, L. * – General Manager Organisational Devel- 2008 136,621 opment & Human Resources 2007 119,890	65,668 - 29,286 -	3,442 13,129 - 218,860 3,079 12,686 - 164,941	30.0 17.8
Murphy, P. – General Manager 2008 171,871 ICT Services 2007 150,000	134,061 - 78,384 -	4,531 13,129 - 323,592 4,331 12,686 - 245,401	41.4 31.9
Peters, W. – General Manager People Solutions 2008 115,516 (resigned 27 March 2008) 2007 130,000	77,628 - 104,910 -	- 13,129 88,957 295,230 1,388 12,686 - 248,984	26.3 42.1
Rackham, J. – General Manager 2008 166,871 Victoria (from 1 Sept. 2006) 2007 133,333	138,700 - 72,781 -	4,615 13,129 - 323,315 2,221 10,572 - 218,907	42.9 33.2
Totals – key management personnel 2008 2,351,415 2007 2,058,545	1,633,298 77,519	54,049 174,780 88,957 4,380,018
	1,191,630 91,732	46,194 169,408 59,599 3,617,108

• Denotes those executives who were employed by the parent entity for the year ended 30 June 2008 and represent the four most highly remunerated officers of the parent entity. There were no other executives of the parent entity for the year ended 30 June 2008 (2007: nil).

Data[#] 3 Limited | Annual report 2008 | 7

Directors’ report (continued)

11. REMUNERATION REPORT (continued)

B Details of remuneration (continued)

No director or executive received compensation in the form of share-based payments during the year ended 30 June 2008 (2007: nil).

C Service agreements

Terms of employment for the managing director and other key management personnel are formalised under rolling contracts. The contracts 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 contracts without notice for gross misconduct; otherwise, either party may terminate the contract 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 contractually payable. Other major provisions of the contracts relating to remuneration of the managing director and certain other key management personnel are as follows:

J Grant (managing director)

Mr Grant’s current employment contract commenced 1 July 2004. Key provisions under his present contract are as follows:

• 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 performancerelated 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

• 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

Share-based compensation may be granted to directors and key management personnel under the Data[#] 3 Limited Employee Share Ownership Plan, the Data[#] 3 Limited Deferred Share and Incentive Plan, and the Data[#] 3 Limited Employee Option Plan.

No shares, rights, or options were granted to directors or key management personnel during the year ended 30 June 2008 (2007: nil), no rights or options vested or lapsed during the year (2007: nil), and no rights or options were exercised during the year (2007: nil).

E Additional information

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. Since 2002, the group’s net profit has grown at an average rate of 19% per annum, and the average executive remuneration has increased by approximately 9.8% per annum. Shareholder wealth grew at an average rate of 30% per annum from 2002 until 2007; during 2008 the share price fell $0.40 per share, however this loss was offset by dividend payments of $0.40 per share during the year.

Data[#] 3 Limited | Annual report 2008 | 8

Directors’ report (continued)

11. REMUNERATION REPORT (continued)

E Additional information (continued)

Cash bonuses

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.

other performance-related criteria, are set out below.
	Earned	Forfeited
Name	%	%
Baynham, L.	100%	-
Bowser, M.	100%	-
Colledge, B.	100%	-
Crouch, B.	100%	-
Crouch, P.	100%	-
Esler, M.	100%	-
Grant, J.	100%	-
Hill, B.	100%	-
MacPherson, L.	100%	-
Murphy, P.	100%	-
Peters, W.	100%	-
Rackham, J.	100%	-

12. SHARES UNDER OPTION

No unissued ordinary shares of Data[#] 3 Limited are under option at the date of this report. No share options were granted or exercised during the financial year. Furthermore, there has been no movement in shares under option since year end up to the date of this report.

13. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During the financial year, Data[#] 3 Limited paid a premium of $24,103 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.

14. ENVIRONMENTAL REGULATION AND PERFORMANCE

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

15. ROUNDING

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.

Data[#] 3 Limited | Annual report 2008 | 9

Directors’ report (continued)

16. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

Johnston Rorke continues in office in accordance with section 327 of the Corporations Act 2001. During the year the following fees were paid or payable to the auditor for audit and non-audit services:

	Consolidated	Consolidated
	2008	2007
	$	$
Audit services
Audit and review of financial reports and other audit work under
theCorporations Act 2001	100,000	97,000
Non-audit services
Acquisition due diligence services	8,300	860
Corporate services	-	720
Tax compliance services	5,430	6,030
	113,730	104,610

Non-audit services

The company employs 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 nonaudit services by the auditor (refer above) 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 APES 110 Code of Ethics for Professional Accountants, 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 11.

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

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R A Anderson Director

Brisbane

25 August 2008

Data[#] 3 Limited | Annual report 2008 | 10

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The Directors Data[#] 3 Limited Level 2, Data[#] 3 Centre 80-88 Jephson Street TOOWONG QLD 4066

Auditor’s Independence Declaration

As lead auditor for the audit of the financial report of Data[#] 3 Limited for the financial year ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been:

• (i) no contraventions of the auditor 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.

This declaration is in respect of Data[#] 3 Limited and the entities it controlled during the period.

JOHNSTON RORKE

Chartered Accountants

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J J Evans Partner Johnston Rorke

Brisbane 25 August 2008

Liability limited by a scheme approved under Professional Standards Legislation.

Data[#] 3 Limited | Annual report 2008 | 11

Income Statements

For the year ended 30 June 2008

Consolidated Parent 2008 2007 2008 2007 Notes $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 Notes $’000 $’000 $’000 $’000
Revenue Sale of goods 281,845 214,414 - Services 81,013 70,245 - Other 4 849 458 14,404	- - 13,924
363,707 285,117 14,404	13,924
Other income 5 106 60 -	-
Expenses Changes in inventories of finished goods 1,916 1,722 - Purchase of goods (246,852) (188,580) - Employee and contractor costs directly on-charged (cost of sales on services) (39,370) (34,305) - Other cost of sales on services (6,953) (5,754) - Other employee and contractor costs (49,360) (38,970) (4,392) Telecommunications (975) (901) (360) Software maintenance and licensing (40) (305) (27) Rent 6 (3,221) (2,568) (239) Travel (1,312) (1,473) (141) Professional fees (704) (601) (232) Depreciation and amortisation 6 (807) (614) (233) Finance costs 6 (24) (22) (15) Management charges – subsidiaries - - (719) Other (3,174) (2,468) (620)	- - - - (3,412) (250) (294) (171) (121) (272) (222) (12) (545) (396)
(350,876) (274,839) (6,978)	(5,695)
Profit before income tax expense 12,937 10,338 7,426 Income tax expense 7 (3,867) (3,141) (128)	8,229 (219)
Net profit 9,070 7,197 7,298	8,010
Cents Cents Basic earnings per share 8 58.51 46.13
Diluted earnings per share 8 58.51 46.13

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

Data[#] 3 Limited | Annual report 2008 | 12

Balance Sheets As at 30 June 2008

Consolidated Parent 2008 2007 2008 2007 Notes $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 Notes $’000 $’000 $’000 $’000
Current assets Cash and cash equivalents 10 17,014 17,367 16,822 Trade and other receivables 11 68,238 51,396 963 Inventories 12 6,601 4,985 - Other 13 1,379 1,609 514	15,926 2,436 - 346
Total current assets 93,232 75,357 18,299	18,708
Non-current assets Available-for-sale financial assets 14 - 5 - Other financial assets 15 - - 14 Property and equipment 16 1,730 1,084 275 Deferred tax assets 7 1,081 1,087 176 Intangible assets 17 6,919 4,470 65	5 14 420 180 64
Total non-current assets 9,730 6,646 530	683
Total assets 102,962 82,003 18,829	19,391
Current liabilities Trade and other payables 18 71,513 53,736 2,637 Current tax liabilities 1,423 1,391 1,312 Provisions 19 849 685 353 Other 20 5,773 6,293 636	2,607 1,391 298 1,507
Total current liabilities 79,558 62,105 4,938	5,803
Non-current liabilities Other payables 18 1,424 - - Provisions 19 586 490 50 Other 20 135 331 104	- 53 208
Total non-current liabilities 2,145 821 154	261
Total liabilities 81,703 62,926 5,092	6,064
Net assets 21,259 19,077 13,737	13,327
Equity Contributed equity 22 8,694 9,387 8,694 Retained earnings 12,565 9,690 5,043	9,387 3,940
Total equity 21,259 19,077 13,737	13,327

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

Data[#] 3 Limited | Annual report 2008 | 13

Statements of Changes in Equity For the year ended 30 June 2008

	Number of Ordinary Shares ’000 Contributed Equity $’000 Retained Earnings $’000 Total Shareholders’ Equity $’000
Consolidated Balance at 1 July 2006 Net profit	15,635 9,563 7,334 16,897 - - 7,197 7,197
Total recognised income and expense Repurchase of ordinary shares Payment of dividends	- - 7,197 7,197 (44) (176) - (176) - - (4,841) (4,841)
Balance at 30 June 2007	15,591 9,387 9,690 19,077
Net profit	- - 9,070 9,070
Total recognised income and expense	- - 9,070 9,070
Repurchase of ordinary shares	(113) (693) - (693)
Payment of dividends	- - (6,195) (6,195)
Balance at 30 June 2008	15,478 8,694 12,565 21,259
Parent Balance at 1 July 2006 Net profit	15,635 9,563 771 10,334 - - 8,010 8,010
Total recognised income and expense Repurchase of ordinary shares Payment of dividends	- - 8,010 8,010 (44) (176) - (176) - - (4,841) (4,841)
Balance at 30 June 2007	15,591 9,387 3,940 13,327
Net profit	- - 7,298 7,298
Total recognised income and expense	- - 7,298 7,298
Repurchase of ordinary shares	(113) (693) - (693)
Payment of dividends	- - (6,195) (6,195)
Balance at 30 June 2008	15,478 8,694 5,043 13,737

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

Data[#] 3 Limited | Annual report 2008 | 14

Cash Flow Statements

For the year ended 30 June 2008

		Consolidated	Consolidated	Parent
		2008	2007	2008	2007
	Notes	$’000	$’000	$’000	$’000
Cash flows from operating activities
Net profit after income tax		9,070	7,197	7,298	8,010
Depreciation and amortisation		807	614	233	222
Impairment of goodwill		-	6	-	-
Impairment of inventory		300	-	-	-
Bad and doubtful debts		61	84	-	-
Loss on disposal of property and equipment		18	4	11	4
Reduction of doubtful debt provision		(52)	(60)	-	-
Other		2	-	-	-
Change in operating assets and liabilities, net of
effects from purchase and sale of businesses
(Increase) in trade receivables		(16,690)	(17,405)	-	-
(Increase) in inventories		(1,916)	(1,722)	-	-
(Increase) / decrease in other operating assets		69	(338)	(189)	(17)
(Increase) / decrease in net deferred tax assets		(256)	(175)	4	(49)
Increase in trade payables		16,578	14,435	-	-
Increase / (decrease) in unearned income		(520)	3,487	-	-
Increase / (decrease) in other operating liabilities		634	1,844	(74)	750
Increase / (decrease) in current tax liabilities		32	(63)	(79)	(63)
Increase in liability for employee benefits		215	153	52	30
Net cash inflow from operating activities		8,352	8,061	7,256	8,887
Cash flows from investing activities
Proceeds received from former joint venture partner		-	526	-	-
Payments for property and equipment		(1,157)	(197)	(28)	(87)
Payments for software assets		(72)	(3)	(72)	(3)
Payment for acquisition of business	30	(593)	-	-	-
Other		5	-	5	-
Net cash inflow (outflow) from investing activities		(1,817)	326	(95)	(90)
Cash flows from financing activities
Proceeds/(repayments) from amounts due to/from
subsidiaries		-	-	623	(1,665)
Payment of dividends	9	(6,195)	(4,841)	(6,195)	(4,841)
Repurchase of ordinary shares	22	(693)	(176)	(693)	(176)
Net cash outflow from financing activities		(6,888)	(5,017)	(6,265)	(6,682)
Net increase (decrease) in cash and cash equivalents held		(353)	3,370	896	2,115
Cash and cash equivalents, beginning of financial year		17,367	13,997	15,926	13,811
Cash and cash equivalents, end of financial year	10	17,014	17,367	16,822	15,926

Financing arrangements

3

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

Data[#] 3 Limited | Annual report 2008 | 15

Notes to the financial statements

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 Accounting Standards (including the Australian Accounting Interpretations), the Corporations Act 2001, and other requirements of the law. These financial statements have also been prepared under the historical cost convention, except for available-for-sale investments, which have been measured at fair value.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000), unless otherwise stated, under the option available to the company under ASIC Class Order 98/0100. The company is an entity to which the class order applies.

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).

(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 2008 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 or the consolidated entity.

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 foreign-denominated transactions is not material.

(d) Revenue recognition

Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Sale of goods

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.

Data[#] 3 Limited | Annual report 2008 | 16

Notes to the financial statements (continued)

Note 1. Summary of significant accounting policies (continued)

(d) Revenue recognition (continued)

(ii) Rendering of services

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.

(iii) Interest income

Revenue is recognised as interest accrues using the effective interest method.

(iv) Dividends

Dividend income is recognised as revenue when the right to receive payment is established.

(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, except 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 or taxable profit or 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 base 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. Deferred tax assets and deferred tax liabilities are offset only if they relate to the same taxable entity and the same taxation authority, and a legally enforceable right exists to set off current tax assets against current tax liabilities.

Tax consolidation legislation

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 the deferred tax assets arising from unused tax losses and unused tax credits from controlled entities in the tax consolidated group, in addition to its own current and deferred tax amounts. The entities have also entered into tax sharing and funding agreements. Refer to note 7.

(f) Leases

Leases of property and equipment where the group, as lessee, 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 short-term and 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.

Data[#] 3 Limited | Annual report 2008 | 17

Notes to the financial statements (continued)

Note 1. Summary of significant accounting policies (continued)

(g) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, and other short-term, highly-liquid 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.

For purposes of the cash flow statement, cash includes cash and cash equivalents, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(h) Trade receivables

Trade receivables, which are non-interest bearing and generally due for settlement within 30 days, are recognised initially at fair value and subsequently measured at amortised cost, less an allowance for impairment. Collectibility of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off by reducing the carrying amount directly. An allowance for impairment of trade receivables 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. Significant financial difficulties of the debtor, default payments or debts more than 120 days overdue where there are not extenuating circumstances are considered objective evidence of impairment. The amount of the impairment loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The amount of the impairment loss is recognised in the income statement within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to other income in the income statement.

(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 and are determined after deducting rebates and discounts. 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(o)). If the cost of acquisition is less than the fair value of the identifiable 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

Goodwill and intangible 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 inflows.

Data[#] 3 Limited | Annual report 2008 | 18

Notes to the financial statements (continued)

Note 1. Summary of significant accounting policies (continued)

(l) 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. They are not depreciated or amortised. For an asset or disposal group to be classified as held for sale, it must be available for immediate sale in its present condition and its sale must be highly probable.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the income statement and the net cash flows attributable to discontinued operations are presented separately on the cash flow statement.

(m) Investments and other financial assets

The group’s investments and financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are categorised as follows: 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 where appropriate. As at balance sheet date the group has no financial assets at fair value through profit or loss or held-to-maturity investments and has not entered any derivative contracts.

Recognition and derecognition

Purchases and sales of investments are recognised on trade date. Investments are initially recognised at fair value plus, for all financial assets not carried at fair value through profit and loss, transaction costs; transaction costs on financial assets carried at fair value through profit and loss are charged directly to expense in the income statement. 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. Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or been transferred.

Subsequent measurement

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 as an indicator that the security is impaired. Impairment losses recognised in the income statement on equity instruments classified as available-for-sale 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 the income statement when the investments are derecognised or impaired, as well as through the amortisation process.

(n) Property and equipment

Property and equipment is stated at cost, less accumulated depreciation and amortisation. Depreciation of equipment is 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. Amortisation of leasehold improvements is 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)).

Data[#] 3 Limited | Annual report 2008 | 19

Notes to the financial statements (continued)

Note 1. Summary of significant accounting policies (continued)

(o) 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 two to five years.

(p) Trade and other payables

These amounts represent liabilities for goods and services provided to the group prior to the end of the financial year which are unpaid. The amounts are generally unsecured and are usually paid within 30 to 60 days of recognition.

(q) Financial guarantee contracts

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less any cumulative amortisation.

The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.

Where guarantees in relation to loans or other payables of subsidiaries or associates are provided for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of the investment.

(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. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the obligation at the balance sheet date. The increase in the provision due to the passage of time is recognised as interest expense.

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.

(s) Employee benefits

Wages, salaries, annual leave and sick leave

Liabilities for wages, salaries, including non-monetary benefits, and annual 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 are non-vesting, 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.

Data[#] 3 Limited | Annual report 2008 | 20

Notes to the financial statements (continued)

Note 1. Summary of significant accounting policies (continued)

(s) Employee benefits (continued)

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 may be provided to employees via the Data[#] 3 Limited Deferred Share and Incentive Plan, an employee option plan, and an employee share ownership plan (ESOP).

The fair value of the incentives and 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 incentives or options. Fair value is determined using an appropriate 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 ESOP is recognised in the balance sheet as share capital, with a corresponding charge to the income statement for employee benefits expense.

(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 transaction 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.

(v) Accounting standards not yet effective

Relevant Australian Accounting Standards that have recently been issued or amended but are not yet effective and have not been adopted for the annual reporting period ended 30 June 2008, are as follows:

Data[#] 3 Limited | Annual report 2008 | 21

Notes to the financial statements (continued)

Note 1. Summary of significant accounting policies (continued)

(v) Accounting standards not yet effective (continued)

Standard/Interpretation	Application date	Application date
	of standard*	for thegroup*
AASB 8Operating Segmentsand consequential amendments to other accounting standards resulting from its issue	1 January 2009	1 July 2009
AASB 101Presentation of Financial Statements– revised and consequential amendments to other accounting standards resulting from its issue	1 January 2009	1 July 2009
AASB 123Borrowing Costsrevised and consequential amendments to other accounting standards resulting from its issue	1 January 2009	1 July 2009
AASB 3Business Combinations– revised standard	1 July 2009	1 July 2009
AASB 127 Consolidated and Separate Financial Statements – revised and
consequential amendments to other accounting standards resulting from its	1 July 2009	1 July 2009
issue
AASB 2008-1Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations	1 January 2009	1 July 2009
AASB 2008-2Amendments to Australian Accounting Standard – Puttable Financial Instruments and Obligations arising on Liquidation	1 January 2009	1 July 2009
AASB 2008-5Amendments to Australian Accounting Standards arising from the Annual Improvements Project	1 January 2009	1 July 2009
AASB 2008-6Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project	1 July 2009	1 July 2009
AASB 2008-7Amendments to Australian Accounting Standard – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate	1 January 2009	1 July 2009
Interpretation 13Customer Loyalty Programs	1 July 2008	1 July 2008
IFRIC 15Agreements for the Construction of Real Estate	1 January 2009	1 July 2009
IFRIC 16Hedges of a Net Investment in a Foreign Operation	1 October 2008	1 July 2009

• Application date is for annual reporting periods beginning on or after the date shown in the above table.

AASB 3 (revised) applies prospectively after it becomes effective and introduces a number of changes which may have a significant impact on accounting for future business combinations. The directors have not yet assessed the impact this standard will have in future periods.

The directors anticipate that the adoption of the remaining Standards and Interpretations in future periods will have no material impact on the financial statements of the company or the group. The application of AASB 8, AASB 101 (revised), AASB 123, AASB 127 (revised), AASB 2008-5 and AASB 2008-6 may change the measurement of and disclosures presently made in relation to the company’s and the group’s assets, liabilities, segments, financial instruments and the objectives, policies and processes for managing capital. AASB 2008-1 introduces a number of changes to accounting for share-based payments, including clarifying that vesting conditions comprise service conditions and performance only; the directors anticipate these amendments will have no material impact on the financial statements of the company or the group. The circumstances addressed by 2008-2, Interpretation 13, and IFRIC 15 and 16 do not currently have application to the business of the company or the group and are not expected to have application in the foreseeable future. AASB 2008-7, relating to the cost of an investment in a subsidiary, is expected to result in all dividends being recognised in profit or loss in the separate financial statements of an investor; the directors anticipate that no change will be required to the company’s or group’s current accounting treatment.

(w) Comparatives

Comparative figures have been reclassified where necessary to ensure consistency with current year presentation.

Data[#] 3 Limited | Annual report 2008 | 22

Notes to the financial statements (continued)

Note 1. Summary of significant accounting policies (continued)

(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. The financial report was authorised for issue in accordance with a resolution of the directors on 25 August 2008. Data[#] 3 Limited is a public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Level 2 Data[#] 3 Centre 80 Jephson Street TOOWONG QLD 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 financial year are discussed below.

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 17.

Acquisition of business

The group accounted for the acquisition of a business during the year on a provisional basis. This required an estimation of the amount of contingent payments payable under the terms of the purchase agreement. Refer to note 30 for details of the transaction.

Note 3. Financial risk management

The group’s activities expose it to a variety of financial risks: market risk (including currency risk, cash flow and fair value interest rate risk and price risk), credit risk, and liquidity 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. The group uses sensitivity analysis to measure interest rate and foreign exchange risks, and aging analysis for credit risk. 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.

The group’s and parent’s financial assets are all within the loans and receivables category. The group’s and parent’s financial liabilities are all within the financial liabilities recorded at amortised cost category.

(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; the revenue contracts and employee benefits are denominated in South Pacific francs (XPF). At year end the group’s exposure to foreign currency risk was as follows:

30 June 2008 XPF AUD equivalent ’000 $’000	30 June 2007 XPF AUD equivalent ’000 $’000
Cash and cash equivalents 13,952 189 Trade receivables 50,073 679 Trade and otherpayables 6,223 84	109,711 1,438 39,568 519 18,877 247

The carrying amounts of the parent entity’s financial assets and liabilities are denominated in Australian dollars. Note 3. Financial risk management (continued)

Data[#] 3 Limited | Annual report 2008 | 23

Notes to the financial statements (continued)

a) Market risk (continued)

(i) Foreign exchange risk (continued)

At balance date, if the Australian dollar had fluctuated relative to the South Pacific franc, as illustrated in the table below, with all other variables remaining constant, after-tax profit and equity for the group would have been affected as follows:

After-tax profit Higher/(lower) 2008 $000 2007 $000	Equity Higher/(lower) 2008 $000 2007 $000
AUD/XPF–10% 55 120 AUD/XPF +10% (55) (120)	55 120 (55) (120)

(ii) Price risk

The group can be exposed to small amounts of equity securities price risk, arising from investments held by the group and classified on the balance sheet as available-for-sale; no such investments were held at 30 June 2008 (2007: $5,000). The group is not exposed to commodity price risk. The parent entity is not exposed to equity securities or commodity price risk.

(b) Credit risk

Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents, trade and other receivables, and available-for-sale financial assets. The group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. The group does not hold any credit derivatives to offset its credit exposure. 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. Risk limits are set for each individual customer in accordance with parameters set by the board. These limits are regularly monitored. Specific information as to the group’s credit risk exposures is as follows:

• Cash and cash equivalents are maintained at two large financial institutions.

• During the 2008 year, sales to one government customer comprised 11% of revenue (2007: 14%).

• There are a number of individually significant debtors. At 30 June 2008, the ten largest debtors comprised approximately 37% of total debtors (2007: 44%), of which 25% were accounts receivable from a number of government customers (2007: 41%).

• Generally our customers do not have external credit ratings. Management believes the credit quality of the group’s customers is high based on the very low bad debt write-offs experienced historically. Bad debt write-offs as a percent of the trade receivables carrying amount was 0.10% for 2008 (2007: 0.15%).

• Financial guarantees have been extended to certain parties (refer to note 27 for details).

(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.

The group and the parent entity had access to the following undrawn borrowing facilities at the reporting date:

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Bank overdrafts 600 600 600 Bill facility 3,955 3,955 3,955	600 3,955
4,555 4,555 4,555	4,555

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 11.2% (2007: 10.3%). The bill facility is subject to annual review.

Data[#] 3 Limited | Annual report 2008 | 24

Notes to the financial statements (continued)

Note 3. Financial risk management (continued)

(c) Liquidity risk (continued)

The following maturity analyses present the cash flows expected for financial assets and liabilities; the amounts do not have fixed timings and are based on the conditions existing at 30 June 2008. For financial liabilities, the contractual maturities match the expected maturities shown in the tables below.

Consolidated As at 30 June 2008	<= 6 months $’000	6-12 1-5 months years $’000 $’000	Total $’000
Financial assets
Cash and cash equivalents	17,014	- -	17,014
Trade and other receivables	68,178	60 -	68,238
	85,192	60 -	85,252
Financial liabilities
Trade and other payables	71,513	- 1,424	72,937
Net maturity	13,679	60 (1,424)	12,315
As at 30 June 2007
Financial assets Cash and cash equivalents Trade and other receivables	17,367 51,336	- - 60 -	17,367 51,396
	68,703	60 -	68,763
Financial liabilities Trade and other payables	53,736	- -	53,736
Net maturity	14,967	60 -	15,027
Parent		2008 $’000	2007 $’000
Financial assets Cash and cash equivalents Trade and other receivables		16,822 963	15,926 2,436
		17,785	18,362
Financial liabilities Trade and other payables Amounts payable to subsidiaries		2,637 532	2,607 1,403
		3,169	4,010
Net maturity		14,616	14,352

All parent entity financial assets and liabilities shown in the table above have maturities of six months or less.

(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 any fixed rate assets and liabilities to maturity. At balance date the group and parent maintained the following variable rate accounts:

30 June 2008 30 June 2007 Consolidated Weighted average interest rate Balance Weighted average interest rate Balance % $’000 % $’000	30 June 2008 30 June 2007 Consolidated Weighted average interest rate Balance Weighted average interest rate Balance % $’000 % $’000
Cash at bank and on hand 6.2% 1,014 4.5% Deposits at call 6.8% 16,000 5.8%	3,867 13,500
Cash and cash equivalents 6.5% 17,014 5.4%	17,367

Data[#] 3 Limited | Annual report 2008 | 25

Notes to the financial statements (continued)

Note 3. Financial risk management (continued)

(d) Cash flow and fair value interest rate risk (continued)

30 June 2008 30 June 2007 Parent Weighted average interest rate Balance Weighted average interest rate Balance % $’000 % $’000	30 June 2008 30 June 2007 Parent Weighted average interest rate Balance Weighted average interest rate Balance % $’000 % $’000	30 June 2008 30 June 2007 Parent Weighted average interest rate Balance Weighted average interest rate Balance % $’000 % $’000
Cash at bank and on hand 6.2% 822 4.5% Deposits at call 6.8% 16,000 5.8%		2,426 13,500
Cash and cash equivalents 6.5% 16,822 5.4%		15,926
At balance date, if the interest rates had changed, as illustrated in the table below, with all other variables remaining constant, after-tax profit and equity would have been affected as follows: After-tax profit Higher/(lower) Equity Higher/(lower) 2008 $000 2007 $000 2008 $000 2007 $000
Consolidated +1% (100 basis points) 120 –.5% (50 basis points) (60) Parent +1% (100 basis points) 118 –.5% (50 basis points) (59)	132 120 132 (66) (60) (66) 100 118 100 (56) (59) (56)

(e) Net fair values

The net fair values of financial assets (net of any provision for impairment) and financial liabilities approximate their carrying amounts primarily because of their short maturities.

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 4. Other revenue Interest 849 Corporate charges – subsidiaries - Dividends–subsidiaries -	458 798 457 - 6,606 5,967 - 7,000 7,500
849	458 14,404 13,924
Note 5. Other income Foreign exchange gain 39 Reversal of provision against receivables 52 Reversal of provision for lease remediation 15	- - - 60 - - - - -
106	60 - -

Data[#] 3 Limited | Annual report 2008 | 26

Notes to the financial statements (continued)

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 6. Expenses Cost of goods sold 244,936 Depreciation and amortisation of property and equipment (note 16) 521 Amortisation of intangibles (note 17) 286	186,858 - - 461 162 166 153 71 56
807	614 233 222
Defined contribution superannuation expense 3,367 Employee benefits expense (excluding superannuation) 39,297 Foreign exchange loss - Other charges against assets Impairment of trade receivables 61 Impairment of inventory 300 Rental expenses on operating leases Minimum lease payments 2,701 Contingent rentals (45) Rental expenses–other 565	2,944 250 287 31,432 2,972 2,339 133 - - 84 - - - - - 2,363 201 130 (43) - (1) 248 38 42
3,221	2,568 239 171
Finance costs Interest and finance charges paid/payable 16 Unwinding of discount on provisions 8	12 15 12 10 - -
24	22 15 12
Loss on disposal of property and equipment 18 Loss on disposal of software assets 2 Note 7. Income tax Income tax expense The major components of income tax expense are: Current income tax expense 4,216 Deferred income tax relating to the origination and reversal of temporary differences (247) Adjustments for current tax of prior years (102)	4 11 4 - - - 3,315 124 269 (126) 4 (49) (48) - (1)
Income tax expense 3,867	3,141 128 219

Data[#] 3 Limited | Annual report 2008 | 27

Notes to the financial statements (continued)

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 7. Income tax (continued) 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 12,937	10,338 7,426 8,229
Income tax calculated at the Australian tax rate: 30% (2007: 30%) 3,881 Tax effect of amounts which are not deductible/ (taxable) in calculating taxable income: Non-taxable dividends - Non-deductible items 88 Other -	3,101 2,228 2,469 - (2,100) (2,250) 61 - 1 1 - -
3,969	3,163 128 220
Difference in overseas tax rates - Under (over) provision in prior year (102)	26 - - (48) - (1)
Income tax expense 3,867	3,141 128 219

The group (and the parent entity, in its capacity as head entity of the tax-consolidated group) paid income taxes of $4,070,000 during financial year 2008 (2007: $3,344,000).

Balance Sheet Income Statement Consolidated 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Balance Sheet Income Statement Consolidated 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Deferred income tax Deferred income tax for the group comprises: Deferred tax assets Accrued liabilities 796 Provisions 557 Lease incentive liability 99 Foreign tax losses - Other 16	688 121 117 406 151 51 158 (59) (59) - (22) (45) 14 2 10
1,468	1,266 193 74
Deferred tax liabilities Intangible assets (218) Lease incentive asset (99) Other (70)	- 44 - (158) 59 59 (21) (49) (7)
(387)	(179) 54 52
Net deferred tax assets 1,081	1,087 247 126
Deferred income tax revenue

Data[#] 3 Limited | Annual report 2008 | 28

Notes to the financial statements (continued)

Note 7. Income tax (continued)

Balance Sheet Income Statement Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Balance Sheet Income Statement Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Deferred income tax Deferred income tax for the parent comprises: Deferred tax assets Accrued liabilities 75 Provisions 121 Lease incentive liability 63 Other 15	81 (6) 32 105 16 10 94 (31) (31) 11 4 11
274	291 (17) 22
Deferred tax liabilities Lease incentive asset (63) Other (35)	(94) 31 31 (17) (18) (4)
(98)	(111) 13 27
Net deferred tax assets 176	180 (4) 49
Deferred income tax revenue/(expense)

Unrecognised temporary differences

The parent entity has recorded impairment charges of $6,117,000 (2007: $6,117,000) in respect of its investment in a subsidiary (refer notes 15, 27). No deferred tax asset has been recognised in relation to these accumulated impairment charges (2007: nil).

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 (2007: nil).

Data[#] 3 Limited | Annual report 2008 | 29

Notes to the financial statements (continued)

Consolidated 2008 2007 Number Number	Consolidated 2008 2007 Number Number
Note 8. Earnings per share (a) Weighted average number of shares Weighted average number of ordinaryshares for basic and diluted earningsper share 15,501,128	15,600,001

(b) Other information concerning earnings per share

• Earnings for the purpose of the calculation of basic earnings per share and also diluted earnings per share is the net profit.

• Rights and options granted are considered to be potential ordinary shares. Details relating to rights and options are set out in note 28. No rights or options were on issue during 2008 or 2007; therefore there was no impact on the calculation of diluted earnings per share.

Parent 2008 2007 $’000 $’000	Parent 2008 2007 $’000 $’000
Note 9. Dividends Dividends paid on ordinary shares during the year Final fully franked dividend for 2007: 22.0c (2006: 17.0c) 3,409 Interim fully franked dividend for 2008:18.0c (2007: 14.0c) 2,786	2,658 2,183
6,195	4,841
Dividends declared (not recognised as a liability at year end) Final fullyfranked dividend for 2008: 28.0c(2007: 22.0c) 4,330	3,409
The tax rate at which dividends paid have been franked is 30% (2007: 30%). Dividends declared will be franked at the rate of 30% (2007: 30%). Franking credit balance Franking credits available for subsequent financial years based on a tax rate of 30% (2007: 30%) 9,172	7,836

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

(a) franking credits that will arise from the payment of the current tax liability;

(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and

(c) 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 $1,856,000 (2007: $1,461,000).

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 10. Cash and cash equivalents Cash at bank and on hand 1,014 Deposits at call 16,000	3,867 822 2,426 13,500 16,000 13,500
Balances per cash flow statements 17,014	17,367 16,822 15,926

Data[#] 3 Limited | Annual report 2008 | 30

Notes to the financial statements (continued)

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 11. Trade and other receivables Trade receivables 68,028 Allowance for impairment (a) (122)	51,407 - - (182) - -
67,906	51,225 - -
Other receivables (b) 272	111 65 44
Receivable from Powerlan (Qld) 1,327 Allowance for impairment (c) (1,267)	1,327 - - (1,267) - -
60	60 - -
Amounts receivable from subsidiaries (d) -	- 898 2,392
68,238	51,396 963 2,436

(a) Allowance for impairment

An impairment loss of $61,000 (2007: $84,000) has been recognised by the group in the current year. These amounts have been included in other expense in the income statements. Movements in the provision for impairment loss were as follows:

	Consolidated
	$’000
Carrying amount at 1 July 2006	175
Provision for impairment recognised during the year	84
Receivables written off during the year	(77)
Carrying amount at 30 June 2007	182
Provision for impairment recognised during the year	61
Receivables written off during the year	(69)
Unused amount reversed	(52)
Carrying amount at 30 June 2008	122

The ageing of overdue trade receivables for the group as at 30 June 2008 is as follows:

2008 2007 Considered impaired $’000 Past due but not impaired $’000 Considered impaired $’000 Past due but not impaired $’000	2008 2007 Considered impaired $’000 Past due but not impaired $’000 Considered impaired $’000 Past due but not impaired $’000
31-60 days - 10,282 - 61-90 days - 4,855 - 91-120 days 61 761 - +120 days 61 2,077 182	5,260 1,740 729 398
122 17,975 182	8,127

There are no trade receivables that would otherwise be past due or impaired whose payment terms have been renegotiated. For trade receivables that are past due but not impaired, each customer’s credit has been placed on hold where deemed necessary until full payment is made. Each of these debtors has been contacted, and management is satisfied that payment will be received in full.

(b) 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.

Data[#] 3 Limited | Annual report 2008 | 31

Notes to the financial statements (continued)

Note 11. Trade and other receivables (continued)

(c) Allowance for impairment - Powerlan

Movement in the provision for impairment loss was as follows:

	Consolidated
	$’000
Carrying amount at 1 July 2006	1,327
Unused amount reversed	(60)
Carrying amount at 30 June 2007 and 30 June 2008	1,267

(d) Receivables from subsidiaries

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

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 12. Inventories Finished goods – at cost 6,357 Finished goods–at net realisable value 244	4,985 - - - - -
6,601	4,985 - -

Finished goods at cost include $6,057,000 of inventory purchased pursuant to customer orders or letters of intent (2007: 3,785,000).

Inventories recognised as an expense for the year ended 30 June 2008 totalled $244,936,000 (2007: $186,858,000) for the group and are included in the cost of goods sold line item (refer to note 6). The amount of inventory charged as an expense in other expenses for 2008 includes $300,000 (2007: nil) for the group relating to inventory that is considered obsolete.

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 13. Other current assets Prepayments 452 Security deposits 200 Accrued rebates 727	529 418 345 82 96 1 998 - -
1,379	1,609 514 346
Note 14. Available-for-sale financial assets (non-current) Shares in listed corporations – at fair value -	5 - 5

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

Data[#] 3 Limited | Annual report 2008 | 32

Notes to the financial statements (continued)

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 15. Other financial assets (non- current) Shares in subsidiaries – at cost (note 27) - Accumulated impairment -	- 6,131 6,131 - (6,117) (6,117)
-	- 14 14
Note 16. Property and equipment Leasehold improvements – at cost 3,160 Accumulated amortisation (1,703)	2,369 1,042 1,042 (1,476) (834) (729)
1,457	893 208 313
Equipment – at cost 799 Accumulated depreciation (526)	957 512 670 (766) (445) (563)
273	191 67 107
1,730	1,084 275 420
	Leasehold improvements $’000 Equipment $’000 Total $’000 1,221 131 1,352 34 163 197 - (4) (4) (362) (99) (461) 893 191 1,084 973 184 1,157 - 28 28 (5) (13) (18) (404) (117) (521) 1,457 273 1,730 417 86 503 - 87 87 - (4) (4) (104) (62) (166) 313 107 420 - 28 28 - (11) (11) (105) (57) (162) 208 67 275
Consolidated Carrying amount at 1 July 2006 Additions Disposals Depreciation/amortisation expense
Carrying amount at 30 June 2007
Additions
Additions through acquisition of business (note 30)
Disposals
Depreciation/amortisation expense
Carrying amount at 30 June 2008
Parent Carrying amount at 1 July 2006 Additions Disposals Depreciation/amortisation expense
Carrying amount at 30 June 2007
Additions
Disposals
Depreciation/amortisation expense
Carrying amount at 30 June 2008

Data[#] 3 Limited | Annual report 2008 | 33

Notes to the financial statements (continued)

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 17. Intangible assets Goodwill – at cost 6,200 Accumulated impairment (76)	4,409 - (76) -	- -
6,124	4,333 -	-
Software assets – at cost 464 Accumulated amortisation and impairment (397)	580 219 (443) (154)	147 (83)
67	137 65	64
Customer relationships – at cost 874 Accumulated amortisation (146)	- - - -	- -
728	- -	-
6,919	4,470 65	64
Consolidated Goodwill $’000 Software assets $’000 Customer relation- ships $’000 Total $’000		Parent Software assets $’000
Carrying amount at 1 July 2006 4,333 287 - 4,620 Additions - 3 - 3 Amortisation expense - (153) - (153)		117 3 (56)
Carrying amount at 30 June 2007 4,333 137 - 4,470		64
Additions - 72 - 72		72
Additions through acquisition of business (note 30) 1,791 - 874 2,665		-
Disposals - (2) - (2)		-
Amortisation expense - (140) (146) (286)		(71)
Carrying amount at 30 June 2008 6,124 67 728 6,919		65

Intangibles – software assets and customer relationships

Software assets and customer relationships, which have been externally acquired, have been capitalised at cost and are amortised on a straight-line basis over the assets’ useful economic lives which are generally two to five years for software assets and three years for customer relationships. The useful lives and potential impairment of the software assets and customer relationships 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 inflows 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 and has determined that no impairment charge is necessary in relation to the year ended 30 June 2008 (2007: nil).

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 2009. The before-tax discount rate applied to cash flow projections is 13%. Cash flows beyond the 2009 financial year have been extrapolated using an average growth rate of 9.8%.

Data[#] 3 Limited | Annual report 2008 | 34

Notes to the financial statements (continued)

Note 17. Intangible assets (continued)

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.

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 18. Trade and other payables Current Trade payables - secured (note 21) 10,808 Trade payables-unsecured 52,045	12,697 - - 33,578 - -
62,853	46,275 - -
Other payables-unsecured 8,660	7,461 2,637 2,607
71,513	53,736 2,637 2,607
Non-current Other payables - unsecured 1,424	- - -

Other payables (non-current) comprise amounts payable as contingent consideration for a business acquisition (refer to note 30). The amount recorded is the present value of contingent payments, discounted at 14%, which are due to be made in March 2009 and 2010. No interest is payable.

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 19. Provisions Current Employee benefits 849	685 353 298
Non–current Employee benefits 418 Lease remediation (note 1(f)) 168	367 45 48 123 5 5
586	490 50 53
Total 1,435	1,175 403 351

Movements in provisions other than employee benefits:	Consolidated	Parent
	Lease	Lease
	remediation	remediation
	$’000	$’000
Balance at 1 July 2007	123	5
Arising during the year	52	-
Unused amount reversed	(15)	-
Increase to present value	8	-
Balance at 30 June 2008	168	5

Data[#] 3 Limited | Annual report 2008 | 35

Notes to the financial statements (continued)

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 20. Other liabilities Current Unearned income 5,577 Lease incentives 196 Amounts payable to subsidiaries -	6,097 - - 196 104 104 - 532 1,403
5,773	6,293 636 1,507
Non–current Lease incentives 135	331 104 208

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.

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 21. Secured liabilities Secured liabilities (current and non-current) Lease incentives (note 20) 331 Trade payables (note 18) 10,808	527 208 312 12,697 - -
Total secured liabilities 11,139	13,224 208 312

Assets pledged as security

All of the assets of the group are pledged as security for bank facilities and certain trade creditor facilities as noted above. Leasehold improvements (refer to note 16) effectively secure lease incentive liabilities as noted above.

Note 22. Contributed equity

(a) Movements in ordinary share capital

Details	Notes Number of shares	Issue price $ $’000
Balance – 1 July 2006 Repurchase of ordinary shares	15,635,051 (i) (44,115)	9,563 4.00 (176)
Balance – 30 June 2007	15,590,936	9,387
Repurchase of ordinary shares	(i) (95,606)	6.00 (574)
Repurchase of ordinary shares	(i) (17,000)	7.00 (119)
Balance – 30 June 2008	15,478,330	8,694

(i) The company commenced a 12 month on-market buyback of up to 10% of the company’s ordinary shares beginning 1 September 2006; the buyback period was extended a further 12 months effective 1 September 2007. All shares purchased under the buyback are cancelled.

(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.

Data[#] 3 Limited | Annual report 2008 | 36

Notes to the financial statements (continued)

Note 22. Contributed equity (continued)

(b) Ordinary shares

All ordinary shares issued as at 30 June 2008 and 2007 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. The issue of shares in the company, subject to legislative requirements, is under the control of the directors.

(c) Share options

No share options remain outstanding as at 30 June 2008 (refer note 28).

(d) Capital management

When managing capital (equity), the board's objective is to ensure the group continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders.

The board adjusts the capital structure as necessary to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, the board may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or reduce debt that may be incurred to acquire assets.

During 2008, the board paid dividends of $6,195,000 (2007: $4,841,000). The board's intent for dividend payments for 2009 - 2013 is to maintain the current dividend payout ratio; however, market conditions will be taken into consideration prior to the declaration of each dividend. The board has no current plans to issue further shares on the market but intends to use share buybacks as a mechanism to deliver improved shareholder return on a sustainable basis and to reduce volatility in the company’s share price.

The Group is not subject to any externally imposed capital requirements.

Note 23. Contingent liabilities

At 30 June 2008 bank guarantees totalling $410,000 (2007: $410,000) were provided 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 guarantees 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 27.

Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000	Consolidated Parent 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Note 24. Commitments Future minimum rentals payable under non- cancelable operating leases as at 30 June are as follows: Within one year 3,278 Later than one year but not later than five years 5,400	2,035 1,427 989 3,079 2,337 2,058
8,678	5,114 3,764 3,047

Operating leases include leases of premises 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.

Data[#] 3 Limited | Annual report 2008 | 37

Notes to the financial statements (continued)

Note 25. Key management personnel

Key management personnel compensation is set out below.

Key management personnel compensation is set out below.	Key management personnel compensation is set out below.
Consolidated Parent 2008 2007 2008 2007 $ $ $ $
Short-term employee benefits 4,062,232 Long-term employee benefits 54,049 Post-employment benefits 174,780 Termination benefits 88,957	3,341,907 1,463,727 1,191,887 46,194 19,538 13,692 169,408 69,748 66,457 59,599 - -
4,380,018	3,617,108 1,553,013 1,272,036

Equity instrument disclosures relating to key management personnel

Shares under option

Rights or options may be granted to directors and executives under the Data[#] 3 Limited Deferred Share and Incentive Plan or the Data[#] 3 Limited Employee Option Plan, details of which are set out in note 28. No rights or options were granted and no rights or options were outstanding during the 2007 and 2008 financial years.

Number of shares in Data[#] 3 Limited held by key management personnel

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

Balance 1 July2006 Other changes* Balance 30 June 2007	Other changes* Balance 30 June 2008
Directors: Anderson, R. Clark, G. Grant, J. Johnston, I Powell, W.T. 45,000 583,732 861,520 - 565,000 5,000 **(583,732) - - (55,000) 50,000 - 861,520 - 510,000 Other executives: Baynham, L. Bowser, M. Colledge, B. Crouch, B. Esler, M. Hill, B. MacPherson, L. 51,600 10,000 23,600 10,000 760,100 50,000 20,000 - - - - - - (8,000) 51,600 10,000 23,600 10,000 760,100 50,000 12,000	10,000 - (97,500) **60,000 (45,000) 60,000 - 764,020 60,000 465,000
	- - - - - - (7,000) 51,600 10,000 23,600 10,000 760,100 50,000 5,000
2,980,552 (641,732) 2,338,820	(79,500) 2,259,320

• Except as noted, other changes refer to the individual’s on market trading.

** Reflects appointment or retirement/resignation of director.

No shares were granted to key management personnel during the year as compensation (2007: nil) nor were any issued on exercise of options (2007: nil). Key management personnel who are not shown in the tables above 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.

Data[#] 3 Limited | Annual report 2008 | 38

Notes to the financial statements (continued)

Note 25. Key management personnel (continued)

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.

commercial terms and conditions and at market rates.
	2008 2007 $ $
Amounts recognised as expense Other expense	17,695 21,318

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

Consolidated Parent 2008 2007 2008 2007 $ $ $ $	Consolidated Parent 2008 2007 2008 2007 $ $ $ $
Note 26. 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 theCorporations Act 2001 100,000 Non-audit services Acquisition due diligence services 8,300 Corporate services - Tax compliance services 5,430	97,000 100,000 97,000 860 8,300 860 720 - 720 6,030 5,430 6,030
Total remuneration 113,730	104,610 113,730 104,610

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.

Note 27. Related parties

Wholly–owned group

The consolidated financial statements include the financial statements of Data[#] 3 Limited and the subsidiaries listed in the following table.

Name of entity Country of formation or incorporation	Equity holding (ordinary shares) 2008 2007 % %
Data#3 Business Systems Pty Ltd Australia Gratesand Pty Ltd Australia Data#3 NC SARL New Caledonia	100 100 100 100 100 100

Data[#] 3 Limited | Annual report 2008 | 39

Notes to the financial statements (continued)

Note 27. Related parties (continued)

Transactions between Data[#] 3 Limited and other entities in the wholly-owned group during the years ended 30 June 2008 and 30 June 2007 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 tax sharing and funding agreements described in note 7. The parent entity recognised a receivable of $3,940,000 in relation to its subsidiaries’ current tax amounts for the year ended 30 June 2008 (2007: a receivable of $3,046,000).

Loans provided are at call, interest-free and unsecured and have no fixed repayment terms (refer notes 11 and 20). 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). In 2006 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 (Business Systems), and Gratesand Pty Ltd (Gratesand) 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 Business Systems both have net assets as at 30 June 2008. However, Gratesand has net liabilities of $5,592,000 as at 30 June 2008 (2007: $7,776,000). Management believes no provision is necessary in relation to the net deficiency in Gratesand, as Gratesand traded profitably in 2008 and 2007 and is expected to continue trading profitably in the foreseeable future. Additionally, trading profits in other subsidiaries which are party to the deed of cross guarantee, particularly Business Systems, are more than sufficient to cover the deficiency in Gratesand.

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 consolidated income statements for the closed group for the years ended 30 June 2008 and 2007 are set out in the following table.

Data[#] 3 Limited | Annual report 2008 | 40

Notes to the financial statements (continued)

Note 27. Related parties (continued)

	Closed Group	Closed Group
	2008	2007
	$’000	$’000
Revenues
Sale of goods	281,871	213,514
Services	79,286	67,635
Other	849	1,338
Total	362,006	282,487
Other income	67	60
Expenses
Changes in inventories of finished goods	1,916	1,722
Purchase of goods	(246,854)	(187,914)
Employee and contractor costs directly on-charged (cost of sales on services)	(39,370)	(34,305)
Other cost of sales on services	(6,874)	(5,514)
Other employee and contractor costs	(48,404)	(37,871)
Telecommunications	(960)	(880)
Software maintenance and licensing	(40)	(305)
Rent	(3,164)	(2,504)
Travel	(1,316)	(1,317)
Professional fees	(682)	(583)
Depreciation and amortisation	(801)	(607)
Finance costs	(24)	(22)
Other	(3,147)	(2,305)
Total	(349,720)	(272,405)
Profit before income tax expense	12,353	10,142
Income tax expense	(3,744)	(3,066)
Net profit	8,609	7,076

A summary of movements in consolidated retained earnings for the years ended 30 June 2008 and 2007 of the closed group is set out below.

	Closed Group
	$’000
Retained earnings at 1 July 2006	7,416
Profit after income tax/net profit (total recognised income and expense)	7,076
Dividends provided for or paid	(4,841)
Retained earnings at 30 June 2007	9,651
Profit after income tax/net profit (total recognised income and expense)	8,609
Dividends provided for or paid	(6,195)
Retained earnings at 30 June 2008	12,065

Data[#] 3 Limited | Annual report 2008 | 41

Notes to the financial statements (continued)

Note 27. Related parties (continued)

The consolidated balance sheet as at 30 June 2008 for the closed group is set out below.

	Closed Group	Closed Group
	2008	2007
	$’000	$’000
Current assets
Cash and cash equivalents	16,825	15,929
Trade and other receivables	67,664	50,863
Inventories	6,601	4,985
Other	1,373	1,604
Total current assets	92,463	73,381
Non-current assets
Available-for-sale financial assets	-	5
Other financial assets	14	14
Property and equipment	1,723	1,072
Deferred tax assets	1,081	1,075
Intangible assets	6,919	4,466
Total non-current assets	9,737	6,632
Total assets	102,200	80,013
Current liabilities
Trade and other payables	71,361	52,753
Current tax liabilities	1,312	1,391
Provisions	849	685
Other	5,773	5,325
Total current liabilities	79,295	60,154
Non-current liabilities
Other payables	1,424	-
Provisions	586	490
Other	136	331
Total non-current liabilities	2,146	821
Total liabilities	81,441	60,975
Net assets	20,759	19,038
Equity
Contributed equity	8,694	9,387
Retained earnings	12,065	9,651
Total equity	20,759	19,038

Data[#] 3 Limited | Annual report 2008 | 42

Notes to the financial statements (continued)

Note 28. Share-based payments

Data[#] 3 Limited Employee Share Ownership Plan

The establishment of the Data[#] 3 Limited Employee Share Ownership Plan (ESOP) was approved by shareholders at the 2007 annual general meeting. The object of the plan is to recognise the contribution of eligible employees by providing them with an opportunity to share in the future growth of the company.

Under the ESOP, all full-time and part-time employees of the group, excluding directors, may be offered fully paid ordinary shares in the company, at no consideration, with a total value in any given financial year not exceeding the exemption requirements of the Tax Act or any limit placed by the board of directors (currently $1,000). Shares are offered under the ESOP at the sole discretion of the board of directors. The market value of shares issued under the ESOP, measured as the weighted average market price at which the company’s shares are traded during the one week period up to and including the day of issue, is recognised in the balance sheet as share capital, and compensation expense is recorded as part of employee benefits costs in the period the shares are granted.

Shares issued under the ESOP are subject to a holding lock period which concludes the earlier of three years after issuance of the shares or cessation of employment of the participant. During the holding lock period, the shares are not transferable and no security interests can be held against them. In all other respects the shares rank equally with other fully paid ordinary shares on issue (see note 22(b)).

Where shares are issued to employees of subsidiaries with the group, the subsidiaries compensate Data[#] 3 Limited for the fair value of these shares. To 30 June 2008 no shares have been issued under the ESOP.

Data[#] 3 Limited Deferred Share and Incentive Plan

The establishment of the Data[#] 3 Limited Deferred Share and Incentive Plan (DSIP) was approved by shareholders at the 2007 annual general meeting. The plan is designed to provide full-time and part-time employees, including directors, with medium and long-term incentives to recognise ongoing contribution to the achievement of company objectives and to encourage them to have a personal interest in the future growth and development of the company. Under the DSIP the board of directors may award selected employees DSIP securities in the form of either a DSIP share or a DSIP incentive, being a right to a future share. The market value of shares issued under the DSIP, measured as the weighted average market price at the date of grant, is recognised in the balance sheet as share capital, and compensation expense is recorded as part of employee benefits costs in the period the shares are granted. DSIP incentives are accounted for as described in note 1(s).

DSIP securities remain in the DSIP until performance conditions (in the case of DSIP incentives) or disposal conditions (in the case of DSIP shares) are met. The performance conditions are designed from time to time having regard to various hurdles approved by the board of directors, such as the individual's key performance indicators and the company's performance, by reference to commonly employed external measures such as Total Shareholder Return or Earnings Per Share Growth, as well as pertinent internal measures, such as the successful execution of a business plan over a three-year period. Several performance conditions may apply to the one invitation. To this extent, the performance conditions will be commensurate with the company's remuneration philosophy, aligning the interests of participants with shareholders. Generally, shares are not issued under the DSIP unless the related performance conditions are met.

Where shares or incentives are issued to employees of subsidiaries with the group, the subsidiaries compensate Data[#] 3 Limited for the fair value of these shares. To 30 June 2008 no shares or incentives have been issued under the DSIP.

Data[#] 3 Limited Employee Option Plan

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 of the group, including directors, 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 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 5 days immediately prior to the offer date. Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share.

No options were granted, exercised or outstanding under the plan during the years ended 30 June 2007 or 2008.

Data[#] 3 Limited | Annual report 2008 | 43

Notes to the financial statements (continued)

Note 29. Segment information

Business segment

The group predominantly operates in one business segment. Its activities include software licensing and software asset management; the design, deployment and operation of desktop, network and data centre hardware and software infrastructure; and the provision of contract and permanent recruitment services.

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.

Note 30. Business combination

On 1 January 2008 the group acquired all of the assets of Fingerprint Consulting Services (FCS), a recruitment business. The acquired business contributed revenues of $2,722,000 and net profit of $92,000 to the group for the period from 1 January 2008 to 30 June 2008. If the acquisition had occurred on 1 July 2007, consolidated revenue and consolidated profit for the year ended 30 June 2008 would have been $366,282,000 and $9,000,000, respectively. These amounts have been calculated using the group’s accounting policies and by adjusting the results of the business to reflect the additional amortisation that would have been charged assuming the fair value adjustments to intangible assets had applied from 1 July 2007, together with the consequential tax effects. Details of the acquisition are as follows:

the acquisition are as follows:
	$’000
Purchase consideration comprises:
Cash paid	550
Direct costs relating to the acquisition (of which $43,000 had been paid as at 30 June 2008)	172
Total cash consideration	722
Present value of estimated contingent payments *	1,709
Total purchase consideration	2,431
Less: fair value of net identifiable assets acquired (refer below)	640
Goodwill	1,791

The goodwill is attributable to the expertise of the consultants of FCS. The fair value of assets acquired is based on discounted cash flow models. No acquisition provisions were created.

• In the event that certain predetermined profit targets are achieved by the business, additional consideration will be payable (the earn-out). While the acquisition has been accounted for provisionally in the event the profit targets are not met, management believes payment of the earn-out is probable and has recorded a payable for the present value of the amounts expected to be paid, as follows:

of the amounts expected to be paid, as follows:
	$’000
Trade and other payables – current	285
Other payables–non-current	1,424
	1,709

The assets and liabilities arising from the acquisition are as follows:

	FCS’s carrying
	amount	Fair value
	$’000	$’000
Property and equipment	28	28
Intangible assets – customer relationships	-	874
Deferred tax liability	-	(262)
	28	640

There were no acquisitions in the year ended 30 June 2007.

Data[#] 3 Limited | Annual report 2008 | 44

Directors’ declaration

In the opinion of the directors:

• (a) the financial statements and notes set out on pages 12 to 44 are in accordance with the Corporations Act 2001 including:

• (i) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

• (ii) giving a true and fair view of the company’s and group’s financial position as at 30 June 2008 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 27 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 27.

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.

==> picture [109 x 27] intentionally omitted <==

R A Anderson

Director

Brisbane 25 August 2008

Data[#] 3 Limited | Annual report 2008 | 45

Independent auditor’s report to the members of Data[#] 3 Limited

==> picture [154 x 131] intentionally omitted <==

Report on the financial report

We have audited the accompanying financial report of Data[#] 3 Limited, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration for both Data[#] 3 Limited (the company) and the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor's responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Liability limited by a scheme approved under Professional Standards Legislation.

Data[#] 3 Limited | Annual report 2008 | 46

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor's opinion on the financial report

In our opinion:

• (a) the financial report of Data[#] 3 Limited is in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the company’s and consolidated entity's financial position as at 30 June 2008 and of their performance for the year ended on that date; and

• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report comprising section 11 of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Data[#] 3 Limited for the year ended 30 June 2008 complies with Section 300A of the Corporations Act 2001.

JOHNSTON RORKE

Chartered Accountants

==> picture [73 x 38] intentionally omitted <==

J J Evans

Partner

Brisbane, Queensland 25 August 2008

Liability limited by a scheme approved under Professional Standards Legislation.

Data[#] 3 Limited | Annual report 2008 | 47

Data[#] 3 Limited and Subsidiaries

Shareholder information

The shareholder information set out below was applicable as at 20 August 2008.

1. Distribution of equity securities

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

Class of security

1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over	Ordinary shares Options for ordinary shares
	726 - 1,109 - 251 - 154 - 20 -
	2,260 -

• (b) There were 72 holders of less than a marketable parcel of ordinary shares.

2. Twenty largest quoted equity security holders

Name		Ordinary shares
	Number held	Percentage of
		issued shares
		%
J P Morgan Nominees Australia Limited	1,097,546	7.10
National Nominees Limited	698,930	4.52
ANZ Nominees Limited	663,956	4.29
Oakport Pty Ltd	547,399	3.54
Citicorp Nominees Pty Limited	508,717	3.29
Citicorp Nominees Pty Limited	380,336	2.46
Wood Grant & Associates Pty Ltd	360,429	2.33
Powell Clark Trading Pty Ltd	315,000	2.04
Elterry Pty Ltd	265,000	1.71
UBS Nominees Pty Ltd	244,718	1.58
Fadmoor Pty Ltd	210,002	1.36
Thomson Associates Pty Ltd	200,000	1.29
M R Esler	179,100	1.16
J E Grant	179,100	1.16
J T Populin	169,014	1.09
JHG Super Pty Ltd	160,771	1.04
Queensland Investment Corporation	137,918	0.89
A J & L D O’Rourke	131,910	0.85
M G Populin	120,444	0.78
G R Clark	120,000	0.78
W T & E M Powell	100,000	0.65
W T Powell	100,000	0.65
	6,890,290	44.56

Data[#] 3 Limited | Annual report 2008 | 48

Data[#] 3 Limited and Subsidiaries

Shareholder information (continued)

3. Substantial shareholders

Substantial shareholders in the company are set out below:

Name	Number held	Percentage
Souls Funds Management Limited	1,536,335	9.94
Paradice Investment Management Pty Ltd	1,107,825	7.16
Commonwealth Bank of Australia	889,053	5.75

4. Unquoted equity securities

	Number held	Number of holders
Options issued under Data#3 Limited Employee
Option Plan to take upordinaryshares	-	-

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.

Data[#] 3 Limited | Annual report 2008 | 49