DATA#3 LIMITED — Annual Report 2009

Aug 23, 2009

Appendix 4E

ASX Preliminary Final Report

Name of entity:

ABN:

Data[#] 3 Limited

31 010 545 267

Reporting period:

Year ended 30 June 2009

Previous corresponding period: Year ended 30 June 2008

Results for announcement to the market

Results
Revenues from ordinary activities	up	46 %	to	$530,481,000
Profit from ordinary activities after tax attributable to members	up	8 %	to	$9,832,000
Net profit for the period attributable to members	up	8 %	to	$9,832,000

Dividends	Amount per security	Franked amount per security
Current period
Interim dividend	20.0 cents	20.0 cents
Final dividend	30.0 cents	30.0 cents
Previous corresponding period
Interim dividend	18.0 cents	18.0 cents
Final dividend	28.0 cents	28.0 cents
The Record Date for determining entitlements to the dividend is 15 September 2009.

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 2009

Please refer to the attached audited Annual Financial Report for the year ended 30 June 2009 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 2009

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	12,632 9,832 - (7,409)	9,690 9,137 - (6,195)
Retained profits at end of financial period	15,055	12,632

Additional dividend information

Details of dividends declared or paid during or subsequent to the year ended 30 June 2009 are as follows:

Record date	Payment date	Type	Amount per security	Franked amount per security	Total dividend $’000
16/9/2008	30/9/2008	Final	28.0 cents	28.0 cents	4,329
17/3/2009	31/3/2009	Interim	20.0 cents	20.0 cents	3,080
15/9/2009	29/9/2009	Final	30.0 cents	30.0 cents	4,619

Total dividend per security (interim plus final)

Ordinary securities	Current year	Previous year
	50.0 cents	46.0 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 2009

Net tangible assets per security

Net tangible asset backing per ordinary security	Current year	Previous year
	$1.16	$0.93

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 2009

Commentary on the results for the period

The result for 2009 was the best the company has yet reported with net profit after tax of $9.8 million, basic earnings per share of 63.76 cents and fully franked dividends for the year of 50.0 cents per share.

Highlights include:

• Total revenue of the group increased by 45.9% to $530,481,000 with growth in all geographic regions.

• Gross margin in dollar terms increased by 15.5% to $82,711,000.

• The overall gross margin percentage decreased from 19.7% to 15.6%, reflecting the significant growth in licensing revenues at historically lower relative margins and successful efforts to increase market share in a highly competitive environment.

• Earnings before interest (net) and tax increased by 9.9% to $13,419,000.

• Net profit after tax increased by 7.6% to $9,832,000.

• Earnings per share increased by 8.2% to 63.76 cents.

• Fully franked dividends declared of 50.0 cents per share for the financial year, an 8.7% increase from last year.

• Very strong net operating cash inflows of $19,550,000.

• Solid financial position with no debt.

Compliance Statement

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

Signed:

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John Grant Managing Director

Date: 24 August 2009

5

Data[#] 3 Limited ABN 31 010 545 267 Annual Financial Report Year Ended 30 June 2009

directors’ report

Your directors present their report on Data[#] 3 Limited and its subsidiaries (the group) for the year ended 30 June 2009.

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

	Cents	$’000
Final dividend recommended for the year ended 30 June 2009	30.0	4,619
Dividends paid in the year:
Interim for the year ended 30 June 2009	20.0	3,080
Final for theyear ended 30 June 2008	28.0	4,329
		7,409

3. operating and financial review

• Total revenue of the group increased by 45.9% to $530,481,000 with growth in all geographic regions.

• Gross margin in dollar terms increased by 15.5% to $82,711,000.

• The overall gross margin percentage decreased from 19.7% to 15.6%, reflecting the significant growth in licensing revenues at historically lower relative margins and successful efforts to increase market share in a highly competitive environment.

• Earnings before interest (net) and tax increased by 9.9% to $13,419,000.

• Net profit after tax increased by 7.6% to $9,832,000.

• Earnings per share increased by 8.2% to 63.76 cents.

• Fully franked dividends declared of 50.0 cents per share for the financial year, an 8.7% increase from last year.

• Very strong net operating cash inflows of $19,550,000.

• Solid financial position with no debt.

• Internal staff costs increased by 17.5% in support of growth and increasing expertise, and operating expenses increased by 15.7%.

• The internal cost ratio (being internal staff costs and operating expenses as a percentage of gross margin in dollar terms) increased from 83.1% to 84.3%.

4. business strategy

Our vision is to be an exceptional company - one that unites to enable our customers’ success through the use of 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 that 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.

5. earnings per share

	2009	2008
	Cents	Cents
Basic earnings per share	63.76	58.94
Diluted earnings per share	63.76	58.94

Data[#] 3 Limited | Annual report 2009 | 1

Directors’ report (continued)

6. significant changes in the state of affairs

During the year the group bought back 80,835 shares on market at a total cost to the group of $416,231. Refer to note 21 to the financial statements. There were no other significant changes in the state of affairs of the group during the year.

7. significant events after the balance date

No matter or circumstance has arisen since 30 June 2009 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 2010 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 market share. We expect the relatively stable labour market to remain 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 the software and systems that support the operations of the business. Overall we expect to reduce operating expense relative to gross margin compared to 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 to at least maintain the financial performance of 2009 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 I J Johnston W T Powell

Names, qualifications, experience and special responsibilities

R A Anderson, OAM, BCom, FCA, FCPA (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 (a 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; Chief Executive Officer or Managing Director from 1996; extensive experience in the IT industry; Chairman of the Australian Information Industry Association, the ICT industry’s peak representative body; chair of the Federal Government’s IT Industry Innovation Council; a member of the Queensland Government’s Employment Taskforce; a member of the Queensland ICT Working Group; and a member of Hewlett Packard’s Asia Pacific Partner Advisory Board.

Mr Grant is also a non-executive director of Sargent Group.

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

Non-executive director since November 2007. Currently Executive Chairman Corporate Finance at ABN AMRO Morgans and a member of its advisory board. Extensive experience in the banking and stockbroking industries including roles in treasury, corporate banking and equity capital markets.

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), Symbiosis Group Limited (director from 2004 to 2009) and The Rock Building Society Limited (director from 2006 to 2009).

Special responsibilities:

Member of audit committee.

Data[#] 3 Limited | Annual report 2009 | 2

Directors’ report (continued)

9. directors (cont’d)

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 the 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.

Interests in shares

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

	Number of
	ordinary shares
R A Anderson	60,000
J E Grant	764,020
I J Johnston	60,000
W T Powell	440,000

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	Full meetings of directors	Meetings of audit committee	Meetings of audit committee
	Meetings	Meetings	Meetings	Meetings
	attended	held *	attended	held *
R A Anderson	15	16	4	4
J E Grant	15	16	**	**
I J Johnston	16	16	4	4
W T Powell	15	16	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.

Mr T W Bonner, LLB, BComm, ACIS, was appointed to the position of Joint Company Secretary in November 2007. He has served as the Legal Counsel of the company since 2005 and is a member of the Queensland Law Society and Chartered Secretaries Australia.

Data[#] 3 Limited | Annual report 2009 | 3

Directors’ report (continued)

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.

Executives

The executive pay and reward framework has three components:

• Base pay and benefits

• Performance-related bonuses

• Other remuneration such as superannuation.

The combination of these comprises the executive’s remuneration.

Base pay

Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed nonfinancial benefits at the executive’s discretion. There are no 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 2009 the proportion of the planned total executive remuneration that was performance-related was 35% (2008: 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 2009 the planned profit-related component represented 75% of the total executive bonuses (2008: 80%). The balance of the executive bonus entitlement is determined by performance against agreed nonfinancial 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 is comprised of three non-executive directors and one executive director. 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 2009 | 4

Directors’ report (continued)

11. remuneration report (cont’d)

			Short-term		Long- term	Post- employ- ment	Other benefits
		Cash		Non-	Long				%
		salary	Cash	monetary	service	Super-	Termina-		perfor-
		and fees	bonus	benefits	leave	annuation	tion	Total	mance
		$	$	$	$	$	$	$	related
Non-executive directors
Anderson, R.	2009	90,000	-	-	-	8,100	-	98,100	-
Chairman	2008	90,000	-	-	-	8,100	-	98,100	-
Johnston, I.	2009	55,000	-	-	-	4,950	-	59,950	-
(appointed 2 November 2007)	2008	36,458	-	-	-	3,282	-	39,740	-
Powell, W.T.	2009	65,000	-	-	-	5,850	-	70,850	-
	2008	65,000	-	-	-	5,850	-	70,850	-
Subtotals - non-executive	2009	210,000	-	-	-	18,900	-	228,900	-
directors	2008	191,458	-	-	-	17,232	-	208,690	-
Executive director
Grant, J. *	2009	397,384	120,149	-	6,436	13,745	-	537,714	22.3
ManagingDirector	2008	398,000	137,318	-	7,400	13,129	-	555,847	24.7
Other key management personnel
Baynham, L.	2009	230,122	154,799	-	6,324	13,745	-	404,990	38.2
Group General Manager	2008	219,371	221,056	-	5,990	13,129	-	459,546	48.1
Bowser, M. – General Manager	2009	176,255	119,977	-	10,562	13,745	-	320,539	37.4
Queensland	2008	166,871	119,889	-	4,615	13,129	-	304,504	39.4
Colledge, B. – General Manager	2009	192,255	154,221	-	7,506	13,745	-	367,727	41.9
Licensing Solutions	2008	171,871	213,924	-	5,031	13,129	-	403,955	53.0
Crouch, B. – General Manager	2009	177,255	136,920	-	4,091	13,745	-	332,011	41.2
Enterprise Solutions	2008	171,871	208,629	-	5,031	13,129	-	398,660	52.3
Crouch, P. – General Manager	2009	176,255	134,895	-	3,717	13,745	-	328,612	41.0
New South Wales	2008	166,871	133,505	-	4,698	13,129	-	318,203	42.0
Esler, M. * – General Manager	2009	166,255	120,871	-	2,389	13,745	-	303,260	39.9
ICT Product Solutions	2008	166,871	115,720	-	4,698	13,129	-	300,418	38.5
Hill, B. * – Chief Financial	2009	204,055	57,671	-	7,445	13,745	-	282,916	20.4
Officer / Company Secretary	2008	184,871	67,200	-	3,998	13,129	-	269,198	25.0
MacPherson, L. * – General
Manager People Solutions and	2009	148,145	67,278	-	3,984	13,745	-	233,152	28.9
Gen. Mgr. Org. Dev. & HR	2008	136,621	65,668	-	3,442	13,129	-	218,860	30.0
Murphy, P. – General Manager	2009	176,255	139,613	-	3,615	13,745	-	333,228	41.9
ICT Services	2008	171,871	134,061	-	4,531	13,129	-	323,592	41.4
Peters, W. – General Manager
People Solutions (resigned 27
March 2008)	2008	115,516	77,628	-	-	13,129	88,957	295,230	26.3
Phillips, M. – National Manager	2009	165,000	32,825	-	2,750	13,745	-	214,320	15.3
Marketing & Alliances
(appointed 1 July 2008)
Rackham, J. – General Manager	2009	176,255	93,195	-	3,222	13,745	-	286,417	32.5
Victoria	2008	166,871	138,700	-	4,615	13,129	-	323,315	42.9
Totals – key management	2009	2,595,491	1,332,414	-	62,041	183,840	-	4,173,786	31.9
personnel	2008	2,428,934	1,633,298	-	54,049	174,780	88,957	4,380,018	37.3

• Denotes those executives who were employed by the parent entity for the year ended 30 June 2009 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 2009 (2008: nil).

No director or executive received compensation in the form of share-based payments during the year ended 30 June 2009 (2008: nil).

Data[#] 3 Limited | Annual report 2009 | 5

Directors’ report (continued)

11. remuneration report (cont’d)

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)

• Termination notice of six months is required.

• Payment of a termination benefit on early termination by the company, other than for gross misconduct, of twelve months of his packaged salary together with an additional amount representing the performance-related bonus earned up to the date of termination. 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 2009 (2008: nil), no rights or options vested or lapsed during the year (2008: nil), and no rights or options were exercised during the year (2008: 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 2004, the group’s net profit has grown at an average rate of 24% per annum, and the average executive remuneration has increased by an average rate of approximately 6.8% per annum. Shareholder wealth grew at an average rate of 30% per annum from 2004 until 2007; during 2008 the share price fell $0.40 per share but was offset by dividend payments of $0.40 per share during the year. In 2009 the share price increase and dividends paid together resulted in an increase in shareholder wealth of $0.88 per share.

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.

Name	Earned %	Forfeited %
Baynham, L.	97%	3%
Bowser, M.	96%	4%
Colledge, B.	100%	-
Crouch, B.	94%	6%
Crouch, P.	100%	-
Esler, M.	93%	7%
Grant, J.	97%	3%
Hill, B.	95%	5%
MacPherson, L.	76%	24%
Murphy, P.	100%	-
Phillips, M.	98%	2%
Rackham,J.	78%	22%

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.

Data[#] 3 Limited | Annual report 2009 | 6

Directors’ report (continued)

13. indemnification and insurance of directors and officers

During the financial year, Data[#] 3 Limited paid a premium of $31,875 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.

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
	2009	2008
	$	$
Audit services
Audit and review of financial reports and other audit work under
theCorporations Act 2001	102,500	100,000
Non-audit services
Acquisition due diligence services	-	8,300
Tax compliance services	9,000	5,430
	111,500	113,730

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 non-audit 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.

A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 8.

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

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R A Anderson Director

Brisbane 24 August 2009

Data[#] 3 Limited | Annual report 2009 | 7

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

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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 2009, 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 24 August 2009

Liability limited by a scheme approved under Professional Standards Legislation.

Data[#] 3 Limited | Annual report 2009 | 8

income statements

for the year ended 30 june 2009

		Consolidated	Consolidated		Parent
		2009	2008	2009		2008
	Notes	$’000	$’000	$’000		$’000
Revenue
Sale of goods		450,049	281,845	-		-
Services		79,616	81,013	-		-
Other	4	816	849	15,865		14,404
		530,481	363,707	15,865		14,404
Other income	5	353	106	-		-
Expenses
Changes in inventories of finished goods		(692)	1,916	-		-
Purchase of goods		(403,766)	(246,852)	-		-
Employee and contractor costs directly on-charged (cost
of sales on services)		(35,860)	(39,370)	-		-
Other cost of sales on services		(6,636)	(6,953)	-		-
Other employee and contractor costs		(57,975)	(49,360)	(4,868)		(4,392)
Telecommunications		(1,224)	(975)	(421)		(360)
Software maintenance and licensing		(183)	(40)	(169)		(27)
Rent	6	(3,828)	(3,221)	(385)		(239)
Travel		(1,377)	(1,312)	(138)		(141)
Professional fees		(656)	(704)	(288)		(232)
Depreciation and amortisation	6	(1,050)	(711)	(218)		(233)
Finance costs	6	(82)	(24)	(34)		(15)
Management charges – subsidiaries		-	-	(1,022)		(719)
Other		(3,352)	(3,174)	(686)		(620)
		(516,681)	(350,780)	(8,229)		(6,978)
Profit before income tax expense		14,153	13,033	7,636		7,426
Income tax expense	7	(4,321)	(3,896)	(41)		(128)
Net profit		9,832	9,137	7,595		7,298
		Cents	Cents
Basic earnings per share	8	63.76	58.94
Diluted earnings per share	8	63.76	58.94

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

Data[#] 3 Limited | Annual report 2009 | 9

balance sheets

as at 30 june 2009

		Consolidated	Consolidated		Parent
		2009	2008	2009		2008
	Notes	$’000	$’000	$’000		$’000
Current assets
Cash and cash equivalents	10	27,957	17,014	27,673		16,822
Trade and other receivables	11	93,993	68,238	10		963
Inventories	12	6,116	6,601	-		-
Other	13	3,156	1,379	739		514
Total current assets		131,222	93,232	28,422		18,299
Non-current assets
Other financial assets	14	-	-	14		14
Property and equipment	15	1,310	1,730	137		275
Deferred tax assets	7	1,242	1,225	184		176
Intangible assets	16	5,429	5,277	316		65
Total non-current assets		7,981	8,232	651		530
Total assets		139,203	101,464	29,073		18,829
Current liabilities
Trade and other payables	17	106,641	71,212	8,398		2,637
Current tax liabilities		654	1,423	545		1,312
Provisions	18	1,060	849	363		353
Other	19	6,652	5,773	6,201		636
Total current liabilities		115,007	79,257	15,507		4,938
Non-current liabilities
Other payables	17	194	160	-		-
Provisions	18	669	586	59		50
Other	19	-	135	-		104
Total non-current liabilities		863	881	59		154
Total liabilities		115,870	80,138	15,566		5,092
Net assets		23,333	21,326	13,507		13,737
Equity
Contributed equity	21	8,278	8,694	8,278		8,694
Retained earnings		15,055	12,632	5,229		5,043
Total equity		23,333	21,326	13,507		13,737

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

Data[#] 3 Limited | Annual report 2009 | 10

statements of changes in equity

for the year ended 30 june 2009

	Number of	Contributed	Retained	Total
	Ordinary	Equity	Earnings	Shareholders’
	Shares			Equity
	’000	$’000	$’000	$’000
Consolidated
Balance at 1 July 2007	15,591	9,387	9,690	19,077
Net profit	-	-	9,137	9,137
Total recognised income and expense	-	-	9,137	9,137
Repurchase of ordinary shares	(113)	(693)	-	(693)
Payment of dividends	-	-	(6,195)	(6,195)
Balance at 30 June 2008	15,478	8,694	12,632	21,326
Net profit	-	-	9,832	9,832
Total recognised income and expense	-	-	9,832	9,832
Repurchase of ordinary shares	(81)	(416)	-	(416)
Payment of dividends	-	-	(7,409)	(7,409)
Balance at 30 June 2009	15,397	8,278	15,055	23,333
Parent
Balance at 1 July 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
Net profit	-	-	7,595	7,595
Total recognised income and expense	-	-	7,595	7,595
Repurchase of ordinary shares	(81)	(416)	-	(416)
Payment of dividends	-	-	(7,409)	(7,409)
Balance at 30 June 2009	15,397	8,278	5,229	13,507

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

Data[#] 3 Limited | Annual report 2009 | 11

cash flow statements

for the year ended 30 june 2009

	Consolidated	Parent
	2009 2008	2009 2008
Notes	$’000 $’000	$’000 $’000
Cash flows from operating activities Net profit after income tax Depreciation and amortisation Impairment of inventory Bad and doubtful debts Loss on disposal of property and equipment Reduction of doubtful debt provision Other Change in operating assets and liabilities, net of effects from purchase and sale of businesses (Increase) in trade receivables (Increase) / decrease in inventories (Increase) / decrease in other operating assets (Increase) / decrease in net deferred tax assets Increase in trade payables Increase / (decrease) in unearned income Increase / (decrease) in other operating liabilities Increase / (decrease) in current tax liabilities Increase in liabilityfor employee benefits	9,832 9,137 1,050 711 - 300 278 61 - 18 (110) (52) 34 2 (26,175) (16,690) 485 (1,916) (1,525) 69 (18) (228) 29,102 16,578 940 (520) 6,146 635 (769) 32 280 215	7,595 7,298 218 233 - - - - - 11 - - - - - - - - (170) (189) (8) 4 - - - - 5,657 (74) (767) (79) 19 52
Net cash inflow from operating activities	19,550 8,352	12,544 7,256
Cash flows from investing activities Payments for property and equipment Payments for software assets Payment for acquisition of business 29 Other	(461) (1,157) (322) (72) - (593) 1 5	(13) (28) (318) (72) - - - 5
Net cash outflow from investing activities	(782) (1,817)	(331) (95)
Cash flows from financing activities Proceeds/(repayments) from amounts due to/from subsidiaries Payment of dividends 9 Repurchase of ordinaryshares 21	- - (7,409) (6,195) (416) (693)	6,463 623 (7,409) (6,195) (416) (693)
Net cash outflow from financing activities	(7,825) (6,888)	(1,362) (6,265)
Net increase (decrease) in cash and cash equivalents held Cash and cash equivalents, beginning of financial year	10,943 (353) 17,014 17,367	10,851 896 16,822 15,926
Cash and cash equivalents, end of financial year 10	27,957 17,014	27,673 16,822

Financing arrangements 3

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

Data[#] 3 Limited | Annual report 2009 | 12

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 Australian Accounting Interpretations) and the Corporations Act 2001. 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 also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

(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 2009 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’s specified location pursuant to a sales order, the risks of obsolescence and loss have passed to the customer, and the customer has either accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the group has objective evidence that all criteria for acceptance have been satisfied.

(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.

Data[#] 3 Limited | Annual report 2009 | 13

Notes to the financial statements (continued)

note 1. summary of significant accounting policies (cont’d)

(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.

(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.

Data[#] 3 Limited | Annual report 2009 | 14

Notes to the financial statements (continued)

note 1. summary of significant accounting policies (cont’d)

(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.

(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.

Data[#] 3 Limited | Annual report 2009 | 15

Notes to the financial statements (continued)

note 1. summary of significant accounting policies (cont’d)

(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)).

(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.

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).

Data[#] 3 Limited | Annual report 2009 | 16

Notes to the financial statements (continued)

note 1. summary of significant accounting policies (cont’d)

(s) Employee benefits (continued)

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) Comparatives

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

(w) 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 24 August 2009. 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

Data[#] 3 Limited | Annual report 2009 | 17

Notes to the financial statements (continued)

note 1. summary of significant accounting policies (cont’d)

(x) 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 2009, are as follows:

Standard/Interpretation	Application date of standard*	Application date for the group*
AASB 3Business Combinations– revised standard and consequential amendments to other accountingstandards resultingfrom its issue	1 July 2009	1 July 2009
AASB 8Operating Segmentsand consequential amendments to other accounting standards resultingfrom its issue	1 January 2009	1 July 2009
AASB 101Presentation of Financial Statements– revised and consequential amendments to other accountingstandards resultingfrom its issue	1 January 2009	1 July 2009
AASB 123Borrowing Costsrevised and consequential amendments to other accounting standards resultingfrom its issue	1 January 2009	1 July 2009
AASB 127 Consolidated and Separate Financial Statements – revised and consequential amendments to other accountingstandards resultingfrom its issue	1 July 2009	1 July 2009
AASB 2008-1Amendments to Australian Accounting Standard – Share-based Payments: VestingConditions and Cancellations	1 January 2009	1 July 2009
AASB 2008-2Amendments to Australian Accounting Standard – Puttable Financial Instruments and Obligations arisingon 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, JointlyControlled Entityor Associate	1 January 2009	1 July 2009
AASB 2008-8Amendments to Australian AccountingStandards – Eligible Hedged Items	1 July2009	1 July2009
AASB 2009-2Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments	1 January 2009	1 July 2009
AASB 2009-4Amendments to Australian Accounting Standards arising from the Annual Improvements Project	1 July 2009	1 July 2009
AASB 2009-5Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project	1 January 2010	1 July 2010
AASB 2009-6Amendments to Australian AccountingStandards	1 January2009	1 July2009
AASB 2009-7Amendments to Australian AccountingStandards	1 July2009	1 July2009
AASB 2009-8Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions	1 January 2010	1 July 2010
Interpretation 15Agreements for the Construction of Real Estate	1 January2009	1 July2009
Interpretation 16Hedges of a Net Investment in a Foreign Operation	1 October 2008	1 July2009
Interpretation 17Distribution of Non-cash Assets to Ownersand consequential amendments to accountingstandards resultingfrom its issue	1 July 2009	1 July 2009
Interpretation 18Transfers of Assets from Customers	1 July2009	1 July2009

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

Impact of AASB 3 and AASB 127

AASB 3 (revised) continues to apply the acquisition method to business combinations, but with some significant changes. It requires that all payments to purchase a business be recorded at fair value as at the acquisition date, with contingent payments classified as debt and subsequently remeasured through the income statement. There is a choice on each acquisition to measure the non-controlling interest in the acquiree at either fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs must be charged to expense. This is different to the group’s current policy which is set out in note 1(j).

AASB 127 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain or loss is recognised in profit or loss. This is consistent with the group’s current policy if significant influence is not retained, as set out in note 1(b).

The group will apply revised AASB 3 and AASB 127 prospectively to all business combinations and transactions with non-controlling interests from 1 July 2009.

Data[#] 3 Limited | Annual report 2009 | 18

Notes to the financial statements (continued)

note 1. summary of significant accounting policies (cont’d)

(x) Accounting standards not yet effective (continued)

Impact of other standards and interpretations

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 2008-5, AASB 2008-6, AASB 2009-2, AASB 2009-6 and AASB 2009-7 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. 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 these amendments will have no material impact on the financial statements of the company or the group.

AASB 2009-4 and AASB 2009-5 introduce various changes to IFRSs. AASB 2009-8 clarifies the scope of AASB 2 by requiring an entity that receives goods or services in a share-based payment arrangement to account for those goods or services regardless of which entity in the group settles the transaction, and regardless of whether the transaction is settled in shares or cash. The directors have not yet assessed the impact, if any, of these amendments.

The circumstances addressed by 2008-2, 2008-8 and Interpretations 15, 16, 17 and 18 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.

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 16.

Acquisition of business

The group accounted for the acquisition of a business during 2008 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 29 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	2009	30 June	2008
	XPF	AUD	XPF	AUD
		equivalent		equivalent
	’000	$’000	’000	$’000
Cash and cash equivalents	19,643	282	13,952	189
Trade receivables	31,598	453	50,073	679
Trade and otherpayables	8,570	123	6,223	84

The carrying amounts of the parent entity’s financial assets and liabilities are denominated in Australian dollars.

Data[#] 3 Limited | Annual report 2009 | 19

Notes to the financial statements (continued)

note 3. financial risk management (cont’d)

(a) Market risk (continued)

(i) Foreign exchange risk

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	After-tax profit		Equity
	Higher/(lower)		Higher/(lower)
	2009	2008	2009	2008
	$000	$000	$000	$000
AUD/XPF –10%	43	55	43	55
AUD/XPF +10%	(43)	(55)	(43)	(55)

(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 2009 (2008: nil). 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 one large financial institution.

• During the 2009 year, sales to one government customer comprised 11% of revenue (2008: 11%).

• There are a number of individually significant debtors. At 30 June 2009, one government debtor comprised 14% of total debtors, and the ten largest debtors comprised approximately 38% of total debtors (2008: 37%), of which 72% were accounts receivable from a number of government customers (2008: 25%).

• 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 level of bad debt write-offs experienced historically. Bad debt write-offs as a percent of the trade receivables carrying amount was 0.2% for 2009 (2008: 0.1%).

• Financial guarantees have been extended to certain parties (refer to note 26 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	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
Bank overdrafts	600	600	600		600
Bill facility	3,955	3,955	3,955		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 for the year ended 30 June 2009 was 10.5% (2008: 11.2%). The bill facility is subject to annual review.

Data[#] 3 Limited | Annual report 2009 | 20

Notes to the financial statements (continued)

note 3. financial risk management (cont’d)

(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 2009. For financial liabilities, the contractual maturities match the expected maturities shown in the tables below.

Consolidated	<= 6	6-12	1-5	Total
	months	months	years
As at 30 June 2009	$’000	$’000	$’000	$’000
Financial assets
Cash and cash equivalents	27,957	-	-	27,957
Trade and other receivables	93,993	-	-	93,993
	121,950	-	-	121,950
Financial liabilities
Trade and otherpayables	106,641	-	194	106,835
Net maturity	15,309	-	(194)	15,115
As at 30 June 2008
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 otherpayables	71,212	-	160	71,372
Net maturity	13,980	60	(160)	13,880
Parent			2009	2008
			$’000	$’000
Financial assets
Cash and cash equivalents			27,673	16,822
Trade and other receivables			10	963
			27,683	17,785
Financial liabilities
Trade and other payables			8,398	2,637
Amountspayable to subsidiaries			6,097	532
			14,495	3,169
Net maturity			13,188	14,616

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

Data[#] 3 Limited | Annual report 2009 | 21

Notes to the financial statements (continued)

note 3. financial risk management (cont’d)

(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 has no long-term debt obligations. At balance date the group and parent maintained the following variable rate accounts:

	30 June	2009	30 June	2008
	Weighted		Weighted
	average		average
Consolidated	interest rate	Balance	interest rate	Balance
	%	$’000	%	$’000
Cash at bank and on hand	3.3%	4,957	2.6%	1,014
Deposits at call	6.4%	23,000	6.5%	16,000
Cash and cash equivalents	5.1%	27,957	6.0%	17,014
Parent
Cash at bank and on hand	3.4%	4,673	2.8%	822
Deposits at call	6.4%	23,000	6.5%	16,000
Cash and cash equivalents	5.1%	27,673	6.0%	16,822

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	After-tax profit		Equity
	Higher/(lower)		Higher/(lower)
	2009	2008	2009	2008
	$000	$000	$000	$000
Consolidated
+1% (100 basis points)	196	120	196	120
–.5% (50 basis points)	(98)	(60)	(98)	(60)
Parent
+1% (100 basis points)	194	118	194	118
–.5%(50 basispoints)	(97)	(59)	(97)	(59)

(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
	2009 2008	2009 2008
	$’000 $’000	$’000 $’000
note 4. other revenue Interest Corporate charges – subsidiaries Dividends – subsidiaries	816 849 - - - -	618 798 7,747 6,606 7,500 7,000
	816 849	15,865 14,404
note 5. other income Foreign exchange gain Reversal of provision against receivables Reversal ofprovision for lease remediation	243 39 110 52 - 15	- - - - - -
	353 106	- -
note 6. expenses Cost of goods sold Depreciation and amortisation of property and equipment (note 15) Amortisation of intangibles(note 16)	404,458 244,936 880 521 170 190	- - 151 162 67 71
	1,050 711	218 233

Data[#] 3 Limited | Annual report 2009 | 22

Notes to the financial statements (continued)

	Consolidated	Parent
	2009 2008	2009 2008
	$’000 $’000	$’000 $’000
note 6. expenses (cont’d) Employee benefits expense (excluding superannuation) Other charges against assets Impairment of trade receivables Impairment of other receivables Impairment of inventory Rental expenses on operating leases Minimum lease payments Contingent rentals Rental expenses – other	45,718 39,297 218 61 60 - - 300 3,367 2,701 (63) (45) 524 565	3,353 2,972 - - - - - - 357 201 - - 28 38
	3,828 3,221	385 239
Finance costs Interest and finance charges paid/payable Unwindingof discount onprovisions and otherpayables	34 16 48 8	34 15 - -
	82 24	34 15
Loss on disposal of property and equipment Loss on disposal of software assets note 7. income tax Income tax expense The major components of income tax expense are: Current income tax expense Deferred income tax relating to the origination and reversal of temporary differences Adjustments for current tax ofprioryears	- 18 - 2 4,500 4,216 (108) (218) (71) (102)	- 11 - - 48 124 (7) 4 - -
Income tax expense	4,321 3,896	41 128
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	14,153 13,033	7,636 7,426
Income tax calculated at the Australian tax rate: 30% (2008: 30%) Tax effect of amounts which are not deductible/ (taxable) in calculating taxable income: Non-taxable dividends Non-deductible items Other	4,246 3,910 - - 56 88 90 -	2,291 2,228 (2,250) (2,100) - - - -
Under(over) provision inprioryear	4,392 3,998 (71) (102)	41 128 - -
Income tax expense	4,321 3,896	41 128

The parent entity, in its capacity as head entity of the tax-consolidated group, paid income taxes of $5,126,000 during financial year 2009 (2008: $4,070,000 for group and parent entity). A subsidiary of the group outside of the consolidated tax group paid income taxes of $164,000 during the year ended 30 June 2009 (2008: nil).

Data[#] 3 Limited | Annual report 2009 | 23

Notes to the financial statements (continued)

	Balance Sheet	Balance Sheet	Income	Statement
	2009	2008	2009	2008
	$’000	$’000	$’000	$’000
note 7. income tax (cont’d)
Consolidated
Deferred income tax
Deferred income tax for the group comprises:
Deferred tax assets
Accrued liabilities	837	796	41	121
Provisions	595	557	129	151
Lease incentive liability	40	99	(59)	(59)
Foreign tax losses	-	-	-	(22)
Other	11	16	(5)	2
	1,483	1,468	106	193
Deferred tax liabilities
Intangible assets	(45)	(75)	30	15
Lease incentive asset	(40)	(99)	59	59
Other	(156)	(69)	(87)	(49)
	(241)	(243)	2	25
Net deferred tax assets	1,242	1,225
Deferred income tax revenue			108	218
Parent
Deferred income tax
Deferred income tax for the parent comprises:
Deferred tax assets
Accrued liabilities	66	75	(9)	(6)
Provisions	127	121	5	16
Lease incentive liability	31	63	(32)	(31)
Other	10	15	(5)	4
	234	274	(41)	(17)
Deferred tax liabilities
Lease incentive asset	(31)	(63)	32	31
Other	(19)	(35)	16	(18)
	(50)	(98)	48	13
Net deferred tax assets	184	176
Deferred income tax revenue/(expense)			7	(4)

Unrecognised temporary differences

The parent entity has recorded impairment charges of $6,117,000 (2008: $6,117,000) in respect of its investment in a subsidiary (refer notes 14, 26). No deferred tax asset has been recognised in relation to these accumulated impairment charges (2008: 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.

Data[#] 3 Limited | Annual report 2009 | 24

Notes to the financial statements (continued)

note 7. income tax (cont’d)

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 (2008: nil).

	Consolidated	Consolidated
	2009	2008
	Number	Number
note 8. earnings per share
(a) Weighted average number of shares
Weighted average number of ordinaryshares for basic and diluted earningsper share	15,421,679	15,501,128

(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 27. No rights or options were on issue during 2009 or 2008; therefore there was no impact on the calculation of diluted earnings per share.

				Parent
			2009		2008
			$’000		$’000
note 9. dividends
Dividends paid on ordinary shares during the year
Final fully franked dividend for 2008: 28.0c (2007: 22.0c)			4,329		3,409
Interim fullyfranked dividend for 2009: 20.0c(2008: 18.0c)			3,080		2,786
			7,409		6,195
Dividends declared (not recognised as a liability at year end)
Final fullyfranked dividend for 2009: 30.0c(2008: 28.0c)			4,619		4,329
The tax rate at which dividends paid have been franked is 30% (2008: 30%).	Dividends
declared will be franked at the rate of 30% (2008: 30%).
Franking credit balance
Franking credits available for subsequent financial years based on a tax rate of 30%)		30% (2008:	10,097		9,172

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 $1,980,000 (2008: $1,856,000).

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 10. cash and cash equivalents
Cash at bank and on hand	4,957	1,014	4,673		822
Deposits at call	23,000	16,000	23,000		16,000
Balances per cash flow statements	27,957	17,014	27,673		16,822

Data[#] 3 Limited | Annual report 2009 | 25

Notes to the financial statements (continued)

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 11. trade and other
receivables
Trade receivables	94,169	68,028	-		-
Allowance for impairment(a)	(196)	(122)	-		-
	93,973	67,906	-		-
Other receivables (b)	20	272	10		65
Receivable from Powerlan (Qld)	1,327	1,327	-		-
Allowance for impairment(c)	(1,327)	(1,267)	-		-
	-	60	-		-
Amounts receivable from subsidiaries (d)	-	-	-		898
	93,993	68,238	10		963

(a) Allowance for impairment

An impairment loss of $218,000 (2008: $61,000) 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 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
Provision for impairment recognised during the year	218
Receivables written off during the year	(34)
Unused amount reversed	(110)
Carrying amount at 30 June 2009	196

The ageing of overdue trade receivables for the group as at 30 June 2009 is as follows:

	2009	2009	2008	2008
	Considered	Past due but not	Considered	Past due but not
	impaired	impaired	impaired	impaired
	$’000	$’000	$’000	$’000
31-60 days	-	10,361	-	10,282
61-90 days	-	4,560	-	4,855
91-120 days	74	1,695	61	761
+120 days	122	1,621	61	2,077
	196	18,237	122	17,975

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 2009 | 26

Notes to the financial statements (continued)

note 11. trade and other receivables (cont’d)

(c) Allowance for impairment – Powerlan

An impairment loss of $60,000 (2008: nil) 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 2007	1,267
Carrying amount at 30 June 2008	1,267
Provision for impairment recognised duringtheyear	60
Carrying amount at 30 June 2009	1,327

(d) Receivables from subsidiaries

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

		Consolidated	Consolidated			Parent
		2009	2008	2009			2008
		$’000	$’000	$’000			$’000
note	12. inventories
Finished	goods – at cost	6,116	6,357		-			-
Finished	goods – at net realisable value	-	244		-			-
		6,116	6,601		-			-

Finished goods at cost is composed entirely of inventory purchased pursuant to customer orders or letters of intent (2008: $6,057,000).

Inventories recognised as an expense for the year ended 30 June 2009 totalled $404,458,000 (2008: $244,936,000) for the group and are included in the cost of goods sold line item (refer to note 6). For the year ended 30 June 2008 the amount of inventory charged as an expense in other expenses included $300,000 (2009: nil) for the group relating to inventory that was considered obsolete.

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 13. other current assets
Prepayments	740	452	643		418
Security deposits	203	200	96		96
Accrued rebates	2,213	727	-		-
	3,156	1,379	739		514
note 14. other financial assets
(non-current)
Shares in subsidiaries – at cost (note 26)	-	-	6,131		6,131
Accumulated impairment	-	-	(6,117)		(6,117)
	-	-	14		14

Data[#] 3 Limited | Annual report 2009 | 27

Notes to the financial statements (continued)

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 15. property and equipment
Leasehold improvements – at cost	3,447	3,160	1,042		1,042
Accumulated amortisation	(2,400)	(1,703)	(938)		(834)
	1,047	1,457	104		208
Equipment – at cost	938	799	499		512
Accumulated depreciation	(675)	(526)	(466)		(445)
	263	273	33		67
	1,310	1,730	137		275

	Leasehold	Equipment	Total
	improvements
	$’000	$’000	$’000
Consolidated
Carrying amount at 1 July 2007	893	191	1,084
Additions	973	184	1,157
Additions through acquisition of business (note 29)	-	28	28
Disposals	(5)	(13)	(18)
Depreciation/amortisation expense	(404)	(117)	(521)
Carrying amount at 30 June 2008	1,457	273	1,730
Additions	287	174	461
Disposals	-	(1)	(1)
Depreciation/amortisation expense	(697)	(183)	(880)
Carrying amount at 30 June 2009	1,047	263	1,310
Parent
Carrying amount at 1 July 2007	313	107	420
Additions	-	28	28
Disposals	-	(11)	(11)
Depreciation/amortisation expense	(105)	(57)	(162)
Carrying amount at 30 June 2008	208	67	275
Additions	-	13	13
Depreciation/amortisation expense	(104)	(47)	(151)
Carrying amount at 30 June 2009	104	33	137

Data[#] 3 Limited | Annual report 2009 | 28

Notes to the financial statements (continued)

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 16. intangible assets
Goodwill – at cost	5,036	5,036	-		-
Accumulated impairment	(76)	(76)	-		-
	4,960	4,960	-		-
Software assets – at cost	780	464	531		219
Accumulated amortisation and impairment	(461)	(397)	(215)		(154)
	319	67	316		65
Customer relationships – at cost	300	300	-		-
Accumulated amortisation	(150)	(50)	-		-
	150	250	-		-
	5,429	5,277	316		65

		Consolidated	Consolidated		Parent
	Goodwill	Software	Customer	Total	Software
		assets	relation-		assets
			ships
	$’000	$’000	$’000	$’000	$’000
Carrying amount at 1 July 2007	4,333	137	-	4,470	64
Additions	-	72	-	72	72
Additions through acquisition of business (note 29)	627	-	300	927	-
Disposals	-	(2)	-	(2)	-
Amortisation expense	-	(140)	(50)	(190)	(71)
Carrying amount at 30 June 2008	4,960	67	250	5,277	65
Additions	-	322	-	322	318
Amortisation expense	-	(70)	(100)	(170)	(67)
Carrying amount at 30 June 2009	4,960	319	150	5,429	316

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 2009 (2008: 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 2010. The before-tax discount rate applied to cash flow projections is 10% (2008: 13%). Cash flows beyond the 2010 financial year have been extrapolated using an average growth rate of 7% (2008: 9.8%).

Key assumptions used in value-in-use calculations

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

Data[#] 3 Limited | Annual report 2009 | 29

Notes to the financial statements (continued)

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 17. trade and other payables
Current
Trade payables - secured (note 20)	8,094	10,808	-		-
Tradepayables - unsecured	83,860	52,045	-		-
	91,954	62,853	-		-
Other payables - unsecured	14,687	8,359	8,398		2,637
	106,641	71,212	8,398		2,637
Non-current
Other payables - unsecured	194	160	-		-

Other payables (non-current) comprise amounts payable as contingent consideration for a business acquisition (refer to note 29). The amount recorded is the present value of contingent payments, discounted at 14%, which are due to be made in March 2010. No interest is payable.

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 18. provisions
Current
Employee benefits	1,060	849	363		353
Non–current
Employee benefits	487	418	54		45
Lease remediation(note 1(f))	182	168	5		5
	669	586	59		50

Movements in provisions other than employee benefits are as follows:

	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 topresent value	8	-
Balance at 30 June 2008	168	5
Increase topresent value	14	-
Balance at 30 June 2009	182	5

Data[#] 3 Limited | Annual report 2009 | 30

Notes to the financial statements (continued)

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 19. other liabilities
Current
Unearned income	6,517	5,577	-		-
Lease incentives	135	196	104		104
Amountspayable to subsidiaries	-	-	6,097		532
	6,652	5,773	6,201		636
Non–current
Lease incentives	-	135	-		104

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	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 20. secured liabilities
Secured liabilities (current and non-current)
Lease incentives (note 19)	135	331	104		208
Tradepayables(note 17)	8,094	10,808	-		-
Total secured liabilities	8,229	11,139	104		208

Assets pledged as security

All of the assets of the group are pledged as security for bank facilities (refer to note 3) and certain trade creditor facilities as noted above. Leasehold improvements (refer to note 15) effectively secure lease incentive liabilities as noted above.

Data[#] 3 Limited | Annual report 2009 | 31

Notes to the financial statements (continued)

note 21. contributed equity

(a) Movements in ordinary share capital

		Number of	Issue price
Details	Notes	shares	$	$’000
Balance – 1 July 2007		15,590,936		9,387
Repurchase of ordinary shares	(i)	(95,606)	6.00	(574)
Repurchase of ordinaryshares	(i)	(17,000)	7.00	(119)
Balance – 30 June 2008		15,478,330		8,694
Repurchase of ordinary shares	(i)	(34,481)	5.50	(190)
Repurchase of ordinary shares	(i)	(4,000)	5.40	(22)
Repurchase of ordinary shares	(i)	(2,000)	5.35	(11)
Repurchase of ordinary shares	(i)	(1,000)	5.31	(5)
Repurchase of ordinary shares	(i)	(1,641)	5.30	(9)
Repurchase of ordinary shares	(i)	(1,013)	5.25	(5)
Repurchase of ordinary shares	(i)	(1,000)	5.20	(5)
Repurchase of ordinary shares	(i)	(1,000)	5.10	(5)
Repurchase of ordinary shares	(i)	(5,000)	5.00	(25)
Repurchase of ordinary shares	(i)	(1,000)	4.88	(5)
Repurchase of ordinary shares	(i)	(2,000)	4.81	(9)
Repurchase of ordinary shares	(i)	(15,700)	4.80	(75)
Repurchase of ordinary shares	(i)	(1,000)	4.75	(5)
Repurchase of ordinary shares	(i)	(1,000)	4.70	(5)
Repurchase of ordinary shares	(i)	(1,000)	4.60	(5)
Repurchase of ordinary shares	(i)	(5,000)	4.50	(22)
Repurchase of ordinary shares	(i)	(1,000)	4.45	(4)
Repurchase of ordinaryshares	(i)	(2,000)	4.40	(9)
Balance – 30 June 2009		15,397,495		8,278

(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 has been extended to 31 August 2009. 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.

(b) Ordinary shares

All ordinary shares issued as at 30 June 2009 and 2008 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 2009 (refer to note 27).

(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 2009, the board paid dividends of $7,409,000 (2008: $6,195,000). The board's intent for dividend payments for 2010 - 2014 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.

Data[#] 3 Limited | Annual report 2009 | 32

Notes to the financial statements (continued)

note 22. contingent liabilities

At 30 June 2009 bank guarantees totalling $410,000 (2008: $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 26.

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$’000	$’000	$’000		$’000
note 23. commitments
Future minimum rentals payable under non-cancelable
operating leases as at 30 June are as follows:
Within one year	2,778	3,278	1,397		1,427
Later than oneyear but not later than fiveyears	2,590	5,400	1,104		2,337
	5,368	8,678	2,501		3,764

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.

note 24. key management personnel

Key management personnel compensation is set out below.

	Consolidated	Consolidated		Parent
	2009	2008	2009		2008
	$	$	$		$
Short-term employee benefits	3,927,905	4,062,232	1,491,808		1,463,727
Long-term employee benefits	62,041	54,049	20,254		19,538
Post-employment benefits	183,840	174,780	73,880		69,748
Termination benefits	-	88,957	-		-
	4,173,786	4,380,018	1,585,942		1,553,013

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 27. No rights or options were granted and no rights or options were outstanding during the 2008 and 2009 financial years.

Data[#] 3 Limited | Annual report 2009 | 33

Notes to the financial statements (continued)

note 24. key management personnel (cont’d)

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 personally-related entities are shown below.

	Balance	Other	Balance	Other	Balance
	1 July 2007	changes*	30 June 2008	changes*	30 June 2009
Directors:
Anderson, R.	50,000	10,000	60,000	-	60,000
Grant, J.	861,520	(97,500)	764,020	-	764,020
Johnston, I	-	**60,000	60,000	-	60,000
Powell, W.T.	510,000	(45,000)	465,000	(25,000)	440,000
Other executives:
Baynham, L.	51,600	-	51,600	-	51,600
Bowser, M.	10,000	-	10,000	-	10,000
Colledge, B.	23,600	-	23,600	-	23,600
Crouch, B.	10,000	-	10,000	-	10,000
Esler, M.	760,100	(10,000)	750,100	-	750,100
Hill, B.	50,000	-	50,000	-	50,000
MacPherson, L.	12,000	(7,000)	5,000	(2,000)	3,000
	2,338,820	(89,500)	2,249,320	(27,000)	2,222,320

• 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 (2008: nil) nor were any issued on exercise of options (2008: 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.

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.

	2009	2008
	$	$
Amounts recognised as expense
Other expense	20,718	17,695

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

	Consolidated	Parent
	2009 2008	2009 2008
	$ $	$ $
note 25. 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 Non-audit services Acquisition due diligence services Tax compliance services	102,500 100,000 - 8,300 9,000 5,430	102,500 100,000 - 8,300 9,000 5,430
Total remuneration	111,500 113,730	111,500 113,730

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.

Data[#] 3 Limited | Annual report 2009 | 34

Notes to the financial statements (continued)

note 26. 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	Equity holding	Equity holding
	or incorporation	(ordinary shares)
		2009	2008
		%	%
Data#3 Business Systems Pty Ltd	Australia	100	100
Gratesand Pty Ltd	Australia	100	100
Data#3 NC SARL	New Caledonia	100	100

Transactions between Data[#] 3 Limited and other entities in the wholly-owned group during the years ended 30 June 2009 and 30 June 2008 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 $4,270,000 in relation to its subsidiaries’ current tax amounts for the year ended 30 June 2009 (2008: a receivable of $3,940,000).

Loans provided are at call, interest-free and unsecured and have no fixed repayment terms (refer notes 11 and 19). 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 2009. However, Gratesand has net liabilities of $5,045,000 as at 30 June 2009 (2008: $5,592,000). Management believes no provision is necessary in relation to the net deficiency in Gratesand, as Gratesand has traded profitably from financial year 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 2009 and 2008 are set out in the following table.

Data[#] 3 Limited | Annual report 2009 | 35

Notes to the financial statements (continued)

note 26. related parties (cont’d)

	Closed Group	Closed Group
	2009	2008
	$’000	$’000
Revenues
Sale of goods	449,982	281,871
Services	77,671	79,286
Other	1,459	849
Total	529,112	362,006
Other income	111	67
Expenses
Changes in inventories of finished goods	(692)	1,916
Purchase of goods	(403,715)	(246,854)
Employee and contractor costs directly on-charged (cost of sales on services)	(35,860)	(39,370)
Other cost of sales on services	(6,632)	(6,874)
Other employee and contractor costs	(56,914)	(48,404)
Telecommunications	(1,216)	(960)
Software maintenance and licensing	(183)	(40)
Rent	(3,769)	(3,164)
Travel	(1,311)	(1,316)
Professional fees	(623)	(682)
Depreciation and amortisation	(1,046)	(705)
Finance costs	(82)	(24)
Other	(3,320)	(3,147)
Total	(515,363)	(349,624)
Profit before income tax expense	13,860	12,449
Income tax expense	(4,211)	(3,773)
Net profit	9,649	8,676

A summary of movements in consolidated retained earnings for the years ended 30 June 2009 and 2008 of the closed group is set out below.

	Closed Group
	$’000
Retained earnings at 1 July 2007	9,651
Profit after income tax/net profit (total recognised income and expense)	8,676
Dividendsprovided for orpaid	(6,195)
Retained earnings at 30 June 2008	12,132
Profit after income tax/net profit (total recognised income and expense)	9,649
Dividendsprovided for orpaid	(7,409)
Retained earnings at 30 June 2009	14,372

Data[#] 3 Limited | Annual report 2009 | 36

Notes to the financial statements (continued)

note 26. related parties (cont’d)

The consolidated balance sheet as at 30 June 2009 for the closed group is set out below.

	Closed Group	Closed Group
	2009	2008
	$’000	$’000
Current assets
Cash and cash equivalents	27,676	16,825
Trade and other receivables	93,777	67,664
Inventories	6,116	6,601
Other	3,149	1,373
Total current assets	130,718	92,463
Non-current assets
Other financial assets	14	14
Property and equipment	1,306	1,723
Deferred tax assets	1,242	1,225
Intangible assets	5,429	5,277
Total non-current assets	7,991	8,239
Total assets	138,709	100,702
Current liabilities
Trade and other payables	106,513	71,060
Current tax liabilities	545	1,312
Provisions	1,060	849
Other	7,078	5,773
Total current liabilities	115,196	78,994
Non-current liabilities
Other payables	194	160
Provisions	669	586
Other	-	136
Total non-current liabilities	863	882
Total liabilities	116,059	79,876
Net assets	22,650	20,826
Equity
Contributed equity	8,278	8,694
Retained earnings	14,372	12,132
Total equity	22,650	20,826

note 27. 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 21(b)).

Data[#] 3 Limited | Annual report 2009 | 37

Notes to the financial statements (continued)

note 27. share-based payments (cont’d)

Data[#] 3 Limited Employee Share Ownership Plan (continued)

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 2009 no shares have been issued under the ESOP. The ESOP is currently being held in abeyance until such time as the directors determine that the plan should be implemented.

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 2009 no shares or incentives have been issued under the DSIP. The DSIP is currently being held in abeyance until such time as the directors determine that the plan should be implemented.

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 2008 or 2009.

note 28. 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.

Data[#] 3 Limited | Annual report 2009 | 38

Notes to the financial statements (continued)

note 29. 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.

(a) Provisional accounting

The group initially accounted for the acquisition on a provisional basis. Details of the acquisition were as follows:

	$’000
Purchase consideration comprised:
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 was attributable to the expertise of the consultants of FCS. The fair value of assets acquired was 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 was accounted for provisionally in the event the profit targets are not met, management believed payment of the earn-out was probable and recorded a payable for the present value 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 were 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

(b) Adjustments to provisional accounting

During the financial year ended 30 June 2009, management determined that the initial accounting for the acquisition requires the following adjustments, effective as at 1 January 2008, the date of the acquisition:

	Original amount	Revised amount	Increase/(decrease)
	$’000	$’000	$’000
Property and equipment	28	28	-
Intangible assets – customer relationships	874	300	(574)
Goodwill	1,791	627	(1,164)
Deferred tax liability	262	89	(173)
Liabilities for acquisition costs and earn-out:
Trade and other payables – current	457	156	(301)
Other payables–non-current	1,424	160	(1,264)

The adjustments to the initial accounting for the acquisition resulted in a decrease of $1,498,000 to consolidated total assets, a decrease of $1,565,000 to consolidated total liabilities, and an increase of $67,000 to consolidated retained earnings as at 30 June 2008. The adjustments also resulted in increases to consolidated profit before income tax by $96,000, consolidated income tax expense by $29,000, and consolidated profit after income tax by $67,000 for the year ended 30 June 2008.

The adjustments have been reflected by restating each of the affected financial statement line items for the prior year, as described above. Earnings per share for the prior year has also been restated. The adjustment resulted in an increase to both basic and diluted earnings per share of $0.43 cents per share.

Data[#] 3 Limited | Annual report 2009 | 39

Directors’ declaration

In the opinion of the directors:

• (a) the financial statements and notes set out on pages 9 to 39 are in accordance with the Corporations Act 2001, including:

• (i) complying with Australian Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

• (ii) giving a true and fair view of the company’s and group’s financial position as at 30 June 2009 and of their performance for the financial year ended on that date;

• (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 26 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 26.

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.

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R A Anderson Director

Brisbane

24 August 2009

Data[#] 3 Limited | Annual report 2009 | 40

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

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 2009, 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 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.

Independence

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

Liability limited by a scheme approved under Professional Standards Legislation.

Data[#] 3 Limited | Annual report 2009 | 41

independent auditor’s report to the members of Data[#] 3 Limited (cont’d)

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 2009 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 2009. 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 2009 complies with Section 300A of the Corporations Act 2001.

JOHNSTON RORKE

Chartered Accountants

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J J Evans

Partner

Brisbane, Queensland 24 August 2009

Liability limited by a scheme approved under Professional Standards Legislation.

Data[#] 3 Limited | Annual report 2009 | 42

shareholder information

The shareholder information set out below was applicable as at 20 August 2009.

1. distribution of equity securities

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

			Class of security	Class of security
			Ordinary shares	Options for ordinary
				shares
1	-	1,000	820	-
1,001	-	5,000	1,227	-
5,001	-	10,000	264	-
10,001	-	100,000	162	-
100,001 and	over		21	-
			2,494	-

• (b) There were 64 holders of less than a marketable parcel of ordinary shares.

2. twenty largest quoted equity security holders

Name	Ordinary shares	Ordinary shares
	Number held	Percentage of
		issued shares
		%
J P Morgan Nominees Australia Limited	804,434	5.22
National Nominees Limited	659,516	4.28
ANZ Nominees Limited	569,065	3.70
Citicorp Nominees Pty Limited	541,917	3.52
Oakport Pty Ltd	541,899	3.52
Wood Grant & Associates Pty Ltd	344,169	2.24
Powell Clark Trading Pty Ltd	327,000	2.12
Citicorp Nominees Pty Limited	248,160	1.61
Elterry Pty Ltd	240,000	1.56
Fadmoor Pty Ltd	210,002	1.36
Thomson Associates Pty Ltd	200,000	1.30
M R Esler	179,100	1.16
J E Grant	179,100	1.16
J T Populin	169,014	1.10
JHG Super Pty Ltd	160,771	1.04
A J & L D O’Rourke	141,910	0.92
Perpetual Trustees Consolidated Limited	140,276	0.91
M G Populin	120,444	0.78
UBS Nominees Pty Ltd	116,414	0.76
G R Clark	108,000	0.70
	6,001,191	38.98

Data[#] 3 Limited | Annual report 2009 | 43

Shareholder information (continued)

3. substantial shareholders

Substantial shareholders in the company are set out below:

Name	Number held	Percentage
Souls Funds Management Limited	1,415,879	9.20
Paradice Investment Management Pty Ltd	935,887	6.08
Commonwealth Bank of Australia	790,077	5.13

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 2009 | 44