DATA#3 LIMITED — Annual Report 2010

Aug 22, 2010

Appendix 4E

ASX Preliminary Final Report

Name of entity

ABN

Data[#] 3 Limited

31 010 545 267

Reporting period

Previous corresponding period

Year ended 30 June 2010

Year ended 30 June 2009

Results for announcement to the market

Results				$
Revenues from ordinary activities	up	13 %	to	$599,215,000
Profit from ordinary activities after tax attributable to members	up	11 %	to	$10,914,000
Net profit for the period attributable to members	up	11 %	to	$10,914,000

Dividends	Amount per security	Franked amount
		per security
Current period
Interim dividend	23.0 cents	23.0 cents
Final dividend	33.0 cents	33.0 cents
Previous corresponding period
Interim dividend	20.0 cents	20.0 cents
Final dividend	30.0 cents	30.0 cents

The Record Date for determining entitlements to the dividend is 16 September 2010.

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.

Please refer to the attached audited Annual Financial Report for the year ended 30 June 2010 for the following information:

• Statement of comprehensive income

• Balance sheet

• Statement of changes in equity

• Cash flow statement

• Notes to the financial statements

Data[#] 3 Limited | Appendix 4E 2010 | 1

Appendix 4E (continued) For the year ended 30 June 2010

Retained profits

	Current year	Previous year
	$’000	$’000
Retained profits (accumulated losses) at the beginning of
financial period	15,055	12,632
Net profit attributable to members	10,914	9,832
Net transfers to and from reserves	-	-
Dividends provided for or paid	(8,161)	(7,409)
Retained profits at end of financial period	17,808	15,055

Additional dividend information

Details of dividends declared or paid during or subsequent to the year ended 30 June 2010 are as follows:

Record date	Payment date	Type	Amount per	Franked amount	Total dividend
			security	per security	$’000
15/9/2009	29/9/2009	Final	30.0 cents	30.0 cents	4,619
17/3/2010	31/3/2010	Interim	23.0 cents	23.0 cents	3,542
16/9/2010	30/9/2010	Final	33.0 cents	33.0 cents	5,081

Total dividend per security (interim plus final)

	Current	year	Previous year
Ordinary securities	56.0	cents	50.0 cents

Data[#] 3 Limited Dividend Reinvestment Plan

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

Net tangible assets per security

	Current year	Previous year
Net tangible asset backing per ordinary security	$1.36	$1.16

Control gained over entities having a material effect

Not applicable

Data[#] 3 Limited | Appendix 4E 2010 | 2

Appendix 4E (continued) For the year ended 30 June 2010

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).

Commentary on the results for the period

The result for 2010 was the best the company has yet reported with net profit after tax of $10.9 million, basic earnings per share of 70.88 cents and fully franked dividends for the year of 56.0 cents per share.

Highlights include:

• Total revenue of the group increased by 13.0% to $599,215,000 with growth in all geographic regions.

• Gross margin in dollar terms increased by 8.9% to $90,045,000.

• The overall gross margin percentage decreased from 15.6% to 15.0%, reflecting the significant growth in product 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 13.6% to $15,247,000.

• Net profit after tax increased by 11.0% to $10,914,000.

• Earnings per share increased by 11.2% to 70.88 cents.

• Fully franked dividends declared of 56.0 cents per share for the financial year, a 12% increase from last year.

• Very strong net operating cash inflows of $44,906,000.

• Solid financial position with no debt.

• Internal staff costs increased by 9.5% in support of growth and increasing expertise, and operating expenses decreased by 1.4%.

• � The internal cost ratio (being internal staff costs and operating expenses as a percentage of gross margin in dollar terms) decreased from 84.3% to 83.4%.

Compliance statement

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

Signed:

==> picture [118 x 34] intentionally omitted <==

John Grant Managing Director Date: 23 August 2010

Data[#] 3 Limited | Appendix 4E 2010 | 3

Data[#] 3 Limited ABN 31 010 545 267 Annual Financial Report Year Ended 30 June 2010

directors’ report

Your directors present their report on Data[#] 3 Limited and its subsidiaries (the group) for the year ended 30 June 2010.

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 2010	33.0	5,081
Dividends paid in the year:
Interim for the year ended 30 June 2010	23.0	3,542
Final for theyear ended 30 June 2009	30.0	4,619
		8,161

3. operating and financial review

• Total revenue of the group increased by 13.0% to $599,215,000 with growth in all geographic regions.

• Gross margin in dollar terms increased by 8.9% to $90,045,000.

• The overall gross margin percentage decreased from 15.6% to 15.0%, reflecting the significant growth in product 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 13.6% to $15,247,000.

• Net profit after tax increased by 11.0% to $10,914,000.

• Earnings per share increased by 11.2% to 70.88 cents.

• Fully franked dividends declared of 56.0 cents per share for the financial year, a 12% increase from last year.

• Very strong net operating cash inflows of $44,906,000.

• Solid financial position with no debt.

• Internal staff costs increased by 9.5% in support of growth and increasing expertise, and operating expenses decreased by 1.4%.

• � The internal cost ratio (being internal staff costs and operating expenses as a percentage of gross margin in dollar terms) decreased from 84.3% to 83.4%.

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

	2010	2009
	Cents	Cents
Basic earnings per share	70.88	63.76
Diluted earnings per share	70.88	63.76

Data[#] 3 Limited | Annual report 2010 | 1

directors’ report (continued)

6. significant changes in the state of affairs

There were no 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 2010 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 the 2011 financial year 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 labour market to strengthen with continued competition for the best skills and general upward pressure on remuneration levels. 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. We are also committed to the relocation and expansion of our Perth and Brisbane offices, and are planning for further expansion of our Sydney office and configuration and integration centre in the 2011 financial year. Consequently we expect an increase in 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 2010 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 Chairman Corporate Finance at RBS 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 2008) and The Rock Building Society Limited (director from 2006 to 2009).

Special responsibilities:

Member of audit committee.

Data[#] 3 Limited | Annual report 2010 | 2

directors’ report (continued)

9. directors (continued)

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	763,520
I J Johnston	60,000
W T Powell	410,000

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	16	16	4	4
J E Grant	16	16	**	**
I J Johnston	15	16	4	4
W T Powell	16	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 2010 | 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 2010 the proportion of the planned total executive remuneration for key management personnel that was performance-related was 34% (2009: 35%).

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 2010 the planned profit-related component represented 76% of the total executive bonuses (2009: 75%). 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 2010 | 4

directors’ report (continued)

11. remuneration report (continued)

			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.	2010	90,000	-	-	-	8,100	-	98,100	-
Chairman	2009	90,000	-	-	-	8,100	-	98,100	-
Johnston, I.	2010	55,000	-	-	-	4,950	-	59,950	-
	2009	55,000	-	-	-	4,950	-	59,950	-
Powell, W.T.	2010	65,000	-	-	-	5,850	-	70,850	-
	2009	65,000	-	-	-	5,850	-	70,850	-
Subtotals - non-executive	2010	210,000	-	-	-	18,900	-	228,900	-
directors	2009	210,000	-	-	-	18,900	-	228,900	-
Executive director
Grant, J. *	2010	397,384	138,055	-	6,623	14,461	-	556,523	24.8
ManagingDirector	2009	397,384	120,149	-	6,436	13,745	-	537,714	22.3
Other key management personnel
Baynham, L.	2010	230,122	198,400	-	3,835	14,461	-	446,818	44.4
Group General Manager	2009	230,122	154,799	-	6,324	13,745	-	404,990	38.2
Colledge, B. – General Manager	2010	192,255	206,353	-	3,204	14,461	-	416,273	49.6
Licensing Solutions	2009	192,255	154,221	-	7,506	13,745	-	367,727	41.9
Crouch, B. – General Manager	2010	177,255	182,234	-	2,954	14,461	-	376,904	48.4
Integrated Solutions	2009	177,255	136,920	-	4,091	13,745	-	332,011	41.2
Esler, M. * – General Manager	2010	166,255	168,058	-	2,771	14,461	-	351,545	47.8
Product Solutions	2009	166,255	120,871	-	2,389	13,745	-	303,260	39.9
Hill, B. * – Chief Financial	2010	204,055	67,833	-	3,401	14,461	-	289,750	23.4
Officer and Company Secretary	2009	204,055	57,671	-	7,445	13,745	-	282,916	20.4
MacPherson, L. * – General
Manager People Solutions and	2010	148,145	105,044	-	2,469	14,461	-	270,119	38.9
Gen. Mgr. Org. Dev. & HR	2009	148,145	67,278	-	3,984	13,745	-	233,152	28.9
Murphy, P. – General Manager	2010	205,418	126,238	1,226	3,424	14,461	-	350,767	36.0
Managed Services	2009	176,255	139,613	-	3,615	13,745	-	333,228	41.9
Totals – key management	2010	1,930,889	1,192,215	1,226	28,681	134,588	-	3,287,599	36.3
personnel	2009	1,901,726	951,522	-	41,790	128,860	-	3,023,898	31.5

• Denotes those executives who were employed by the parent entity for the year ended 30 June 2010 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 2010 (2009: nil).

Remuneration disclosures in the 2009 financial year included information for all executives who were part of the senior leadership team. The board has reassessed the executive group and has reduced the disclosures in the above table strictly to those individuals with the authority and responsibility for planning, directing and controlling the activities of the group directly or indirectly.

No director or executive received compensation in the form of share-based payments during the year ended 30 June 2010 (2009: nil).

Data[#] 3 Limited | Annual report 2010 | 5

directors’ report (continued)

11. remuneration report (continued)

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 2010 (2009: nil), no rights or options vested or lapsed during the year (2009: nil), and no rights or options were exercised during the year (2009: 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 2005, the group’s net profit has grown at an average rate of 22.8% per annum, the average executive remuneration has increased by an average rate of 8.0% per annum, and shareholder wealth grew at an average rate of 18.0% per annum.

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.	100%	-
Colledge, B.	100%	-
Crouch, B.	100%	-
Esler, M.	100%	-
Grant, J.	100%	-
Hill, B.	100%	-
MacPherson, L.	100%	-
Murphy,P.	100%	-

12. shares under option

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

Data[#] 3 Limited | Annual report 2010 | 6

directors’ report (continued)

13. indemnification and insurance of directors and officers

During the financial year, Data[#] 3 Limited paid a premium of $38,605 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 non-audit services:

	Consolidated	Consolidated
	2010	2009
	$	$
Non-audit services
Acquisition due diligence services	8,000	-
Tax compliance services	5,600	9,000
	13,600	9,000

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.

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

R A Anderson Director

Brisbane 23 August 2010

Data[#] 3 Limited | Annual report 2010 | 7

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

==> picture [49 x 131] intentionally omitted <==

==> picture [106 x 131] intentionally omitted <==

Auditor’s Independence Declaration

As lead auditor for the audit of the financial r e port of Data[#] 3 Limited for the financial year ended 30 June 2 010, I declare that, to the best of my knowledge and belief, there have bee n :

(i) no contraventions of the auditor in d ependence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) no contraventions of any applicabl e code of professional conduct in relation to the audit.

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

JOHNSTON RORKE

Chartered Accountants

==> picture [73 x 39] intentionally omitted <==

J J Evans Partner Johnston Rorke Brisbane 23 August 2010

Liability limited by a scheme approved unde r Professional Standards Legislation.

Data#3 Limited | Annual report 2010 | 8

statement of comprehensive income

for the year ended 30 june 2010

		Consolidated	Consolidated
		2010	2009
	Notes	$’000	$’000
Revenue
Sale of goods	2	513,585	450,049
Services	2	85,015	79,616
Other	5	615	816
		599,215	530,481
Other income	6	194	353
Expenses
Changes in inventories of finished goods		2,897	(692)
Purchase of goods		(469,345)	(403,766)
Employee and contractor costs directly on-charged (cost of sales on services)		(30,651)	(35,860)
Other cost of sales on services		(11,457)	(6,636)
Other employee and contractor costs		(63,471)	(57,975)
Telecommunications		(1,272)	(1,224)
Software maintenance and licensing		(332)	(183)
Rent	7	(3,908)	(3,828)
Travel		(1,716)	(1,377)
Professional fees		(628)	(656)
Depreciation and amortisation	7	(1,015)	(1,050)
Finance costs	7	(69)	(82)
Other		(2,649)	(3,352)
		(583,616)	(516,681)
Profit before income tax expense		15,793	14,153
Income tax expense	8	(4,879)	(4,321)
Net profit		10,914	9,832
Other comprehensive income, net of tax		-	-
Total comprehensive income		10,914	9,832
Profit is attributable to:
Owners of Data#3 Limited		10,914	9,832
Non-controllinginterests		-	-
		10,914	9,832
Total comprehensive income is attributable to:
Owners of Data#3 Limited		10,914	9,832
Non-controllinginterests		-	-
		10,914	9,832
		Cents	Cents
Basic earnings per share	9	70.88	63.76
Diluted earnings per share	9	70.88	63.76

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

Data[#] 3 Limited | Annual report 2010 | 9

balance sheet

as at 30 june 2010

		Consolidated	Consolidated
		2010	2009
	Notes	$’000	$’000
Current assets
Cash and cash equivalents	11	64,335	27,957
Trade and other receivables	12	86,353	96,206
Inventories	13	9,006	6,116
Other	14	1,346	943
Total current assets		161,040	131,222
Non-current assets
Property and equipment	15	773	1,310
Deferred tax assets	8	1,532	1,242
Intangible assets	16	5,138	5,429
Total non-current assets		7,443	7,981
Total assets		168,483	139,203
Current liabilities
Trade and other payables	17	109,986	106,641
Current tax liabilities		3,285	654
Provisions	18	849	1,060
Other	19	26,547	6,652
Total current liabilities		140,667	115,007
Non-current liabilities
Other payables	17	-	194
Provisions	18	1,179	669
Other	19	551	-
Total non-current liabilities		1,730	863
Total liabilities		142,397	115,870
Net assets		26,086	23,333
Equity
Contributed equity	21	8,278	8,278
Retained earnings		17,808	15,055
Total equity		26,086	23,333

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

Data[#] 3 Limited | Annual report 2010 | 10

statement of changes in equity for the year ended 30 june 2010

	Number of	Contributed	Retained	Total
	Ordinary	Equity	Earnings	Shareholders’
	Shares			Equity
	’000	$’000	$’000	$’000
Consolidated
Balance at 1 July 2008	15,478	8,694	12,632	21,326
Net profit	-	-	9,832	9,832
Other comprehensive income,net of tax	-	-	-	-
Total comprehensive income	-	-	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
Net profit	-	-	10,914	10,914
Other comprehensive income,net of tax	-	-	-	-
Total comprehensive income	-	-	10,914	10,914
Payment of dividends	-	-	(8,161)	(8,161)
Balance at 30 June 2010	15,397	8,278	17,808	26,086

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

Data[#] 3 Limited | Annual report 2010 | 11

cash flow statement

for the year ended 30 june 2010

		Consolidated	Consolidated
		2010	2009
	Notes	$’000	$’000
Cash flows from operating activities
Net profit after income tax		10,914	9,832
Depreciation and amortisation		1,015	1,050
Impairment of intangible assets		178	-
Impairment of inventory		7	-
Bad and doubtful debts		166	278
Loss on disposal of property and equipment		2	-
Reversal of contingent consideration payable		(194)	-
Reduction of allowance for impairment		-	(110)
Other		14	34
Change in operating assets and liabilities, net of effects from purchase and sale of
businesses
(Increase) / decrease in trade receivables		11,770	(26,175)
(Increase) / decrease in inventories		(2,897)	485
(Increase) in other operating assets		(2,486)	(1,525)
(Increase) in net deferred tax assets		(290)	(18)
Increase in trade payables		4,223	29,102
Increase in unearned income		19,935	940
Increase / (decrease) in other operating liabilities		(279)	6,146
Increase / (decrease) in current tax liabilities		2,631	(769)
Increase inprovision for employee benefits		197	280
Net cash inflow from operating activities		44,906	19,550
Cash flows from investing activities
Payments for property and equipment	15	(249)	(461)
Payments for software assets	16	(118)	(322)
Other		-	1
Net cash outflow from investing activities		(367)	(782)
Cash flows from financing activities
Payment of dividends	10	(8,161)	(7,409)
Repurchase of ordinaryshares	21	-	(416)
Net cash outflow from financing activities		(8,161)	(7,825)
Net increase in cash and cash equivalents held		36,378	10,943
Cash and cash equivalents, beginning of financial year		27,957	17,014
Cash and cash equivalents, end of financial year	11	64,335	27,957

Financing arrangements 4

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

Data[#] 3 Limited | Annual report 2010 | 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 and have been applied consistently by all entities in the group, unless otherwise stated.

(a) Basis of preparation of financial report

The financial statements include the consolidated entity comprising Data[#] 3 Limited and its subsidiaries. This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group 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.

Early adoption of standards

The group has elected to apply AASB 2009-5 Further Amendments to Australian Accounting Standards Arising from the Annual Improvements Project , as it applies to AASB 8 Operating Segments only, to the annual reporting period beginning 1 July 2009. This includes applying the revised pronouncement to the comparatives in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors . As a result of the early adoption, the group is not required to allocate assets to its reportable segments (refer to note 2). There was no other impact on the current or prior year financial statements.

Financial statement presentation

The group has applied the revised AASB 101 Presentation of Financial Statements which became effective on 1 January 2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement of changes in equity. All non-owner changes in equity must now be presented in the statement of comprehensive income. As a consequence, the group had to change the presentation of its financial statements. Comparative information has been re-presented to conform with the new presentation requirements.

(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 2010 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 all entities over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity.

Subsidiaries are consolidated from the date on which control is transferred to the group and are deconsolidated from the date on which control is transferred out of the group. Investments in subsidiaries are accounted for at cost in the financial statements of Data[#] 3 Limited.

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.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and balance sheet, respectively.

(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 profit or loss. 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.

Data[#] 3 Limited | Annual report 2010 | 13

notes to the financial statements (continued)

note 1. summary of significant accounting policies (continued)

(d) Revenue recognition (continued)

(ii) Rendering of services

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

(iii) Interest income

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

(iv) Dividends

Dividend income is recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence (refer to note 1(k)).

Change in accounting policy

The group has changed its accounting policy for dividends paid out of pre-acquisition profits from 1 July 2009 when the revised AASB 127 Consolidated and Separate Financial Statements became operative. Previously, dividends paid out of pre-acquisition profits were deducted from the cost of the investment. In accordance with the transitional provisions, the new accounting policy is applied prospectively. Therefore no adjustment was required to any of the amounts previously recognised in the financial statements.

(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 is recognised in profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. 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 8.

(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 expense 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.

Data[#] 3 Limited | Annual report 2010 | 14

notes to the financial statements (continued)

note 1. summary of significant accounting policies (continued)

(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 statement of comprehensive income 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 statement of comprehensive income.

(i) Inventories

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

(j) Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. Consideration for an acquisition is measured as the fair value of the assets given up, liabilities incurred and the equity interests issued by the group. Consideration also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Costs associated with the acquisition are charged to expense as incurred. 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. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration of the acquisition, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree 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 those amounts are less than the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in profit or loss, 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.

Change in accounting policy

A revised AASB 3 Business Combinations became operative on a prospective basis from 1 July 2009. While the revised standard continues to apply the acquisition method to business combinations, the following changes were significant:

All purchase consideration is now recorded at fair value at acquisition date. Contingent payments classified as debt are subsequently remeasured through profit or loss. Under the group’s previous policy, contingent payments were only recognised when the payments were probable and could be measured reliably and were accounted for as an adjustment to the cost of the acquisition.

Acquisition-related costs are charged to expense as incurred. Previously, they were recognised as part of the cost of acquisition and therefore included in goodwill.

Non-controlling interests in an aquiree are now recognised either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. Under the previous policy, the noncontrolling interest was always recognised at its share of the acquiree’s net identifiable assets.

If the group recognises previous acquired deferred tax assets after the initial acquisition accounting is completed, there will no longer be any adjustment to goodwill. As a result, the recognition of the deferred tax asset will increase the group’s net profit after tax.

As there were no business combinations since 1 July 2009, there is no impact on the group.

(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 that cannot be tested individually are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit or CGU). For the purpose of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

Data[#] 3 Limited | Annual report 2010 | 15

notes to the financial statements (continued)

note 1. summary of significant accounting policies (continued)

(l) Non-current assets held for sale

Non-current assets or disposal groups are classified as held for sale and stated at the lower of their carrying amounts or fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. They are not depreciated or amortised. For an asset or disposal group to be classified as held for sale, it must be available for immediate sale in its present condition and its sale must be highly probable.

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

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the statement of comprehensive income 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 significant 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 statement of comprehensive income. 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 profit or loss 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 other comprehensive income 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 other comprehensive income is included in profit or loss. 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 profit or loss on equity instruments classified as available-for-sale are not reversed through profit or loss.

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 profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

(n) Property and equipment

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

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

(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.

Data[#] 3 Limited | Annual report 2010 | 16

notes to the financial statements (continued)

note 1. summary of significant accounting policies (continued)

(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 statement of comprehensive income 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).

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 statement of comprehensive income 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 owners of the company, adjusted to exclude costs of servicing equity (other than ordinary shares), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

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

Data[#] 3 Limited | Annual report 2010 | 17

notes to the financial statements (continued)

note 1. summary of significant accounting policies (continued)

(v) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors.

Change in accounting policy

The group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting . The new standard requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments presented. In addition, the segments are reported in a manner that is consistent with the internal reporting provided to the CODM. As goodwill is allocated to groups of cashgenerating units on a segment level, the change in reportable segments has required a reallocation of goodwill. This has not resulted in any new impairment of goodwill. There has been no other impact on the measurement of the company’s assets and liabilities. Comparatives for 2009 have been restated.

(w) Comparatives

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

(x) Corporate information

The financial report was authorised for issue in accordance with a resolution of the directors on 23 August 2010. 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

(y) 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 2010, are as follows:

	Application	Application
Standard/Interpretation	date of	date for
	*standard **	*the group **
AASB 2009-5Further Amendments to Australian Accounting Standards arising from the	1 January	1 July 2010
Annual Improvements Project(excluding AASB 8_Operating Segments_amendments, which	2010
have been early adopted – refer to note 1(a))
These amendments affect various AASBs resulting in minor changes for presentation, disclosure,
recognition and measurement purposes. The amendments are not expected to have a significant
impact on the financial statements.
AASB 2009-8Amendments to Australian Accounting Standards – Group Cash-settled Share-	1 January	1 July 2010
based Payment Transactions [AASB 2]	2010
This amendment 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 group will apply these amendments retrospectively for the financial reporting period
commencing on 1 July 2010. There will be no impact on the financial statements.
AASB 2009-10Amendments to Australian Accounting Standards – Classification of Rights	1 February	1 July 2010
Issues [AASB 132]	2010
Under this amendment, provided certain conditions are met, rights issues that are denominated in a
currency other than the functional currency of the issuer must be classified as equity regardless of the
currency in which the exercise price is denominated. Previously these issues had to be accounted for
as derivative liabilities. This amendment must be applied retrospectively. The group will apply the
amended standard from 1 July 2010. There will be no impact on the group’s or parent entity’s financial
statements as there have been no rights issues.
AASB 9_Financial Instruments and_AASB 2009-11Amendments to Australian Accounting	1 January	1 July 2013
Standards arising from AASB 9	2013
AASB 9 addresses the classification and measurement of financial assets. The directors anticipate this
standard will have no material impact on the financial statements, but the full impact has not yet been
assessed. AASB 9 is available for early adoption; the group has not yet decided when it will adopt it.
Revised AASB 124Related Party Disclosures and AASB 2009-12Amendments to Australian	1 January	1 July 2011
Accounting Standards	2011
This amendment affects government-related entities and also clarifies and simplifies the definition of a
related party. The group will apply the amended standard retrospectively for the financial reporting
period commencing on 1 July 2010. There will be no impact on the financial statements.

Data[#] 3 Limited | Annual report 2010 | 18

notes to the financial statements (continued)

note 1. summary of significant accounting policies (continued)

(y) Accounting standards not yet effective (continued)

Standard/Interpretation	Application	Application
	date of	date for
	standard*	the group*
Interpretation 19_Extinguishing financial liabilities with equity instruments_and AASB 2009-13	1 July 2010	1 July 2010
Amendments to Australian Accounting Standards arising from Interpretation 19
This interpretation clarifies the accounting when an entity renegotiates the terms of its debt with the
result that the liability is extinguished by the debtor issuing its own equity instruments to the creditor
(debt for equity swap). It requires a gain or loss to be recognised in profit or loss which is measured as
the difference between the carrying amount of the financial liability and the fair value of the equity
instruments issued. The group will apply the interpretation from 1 July 2010. It is not expected to have
any impact on the financial statements since the group has not entered into any debt for equity swaps.
AASB 2010-3Amendments to Australian Accounting Standards Arising from the Annual	1 Jul 2010	1 Jul 2010
Improvements Project
This amendment introduces various changes to IFRSs. The directors have not yet assessed the
impact of the amendments, if any.
AASB 2010-4Amendments to Australian Accounting Standards Arising from the Annual	1 Jan 2011	1 Jul 2011
Improvements Project
This amendment introduces various changes to IFRSs. The directors have not yet assessed the
impact of the amendments, if any.

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

note 2. segment information

The group's business is conducted primarily in Australia. The group’s management makes financial decisions and allocates resources based on the information it receives from its internal management system. Sales are attributed to an operating segment based on the type of product or service provided to the customer. Revenue from customers domiciled in Australia comprised 99% of external sales for the year ended 30 June 2010 (2009: 99%).

Segment information is prepared in conformity with the accounting policies of the group as disclosed in note 1 and Accounting Standard AASB 8 Operating Segments . The group does not allocate income tax, assets or liabilities to each segment because management does not include this information in its measurement of the performance of the operating segments. Depreciation and amortisation are, however, allocated to each operating segment; the amounts allocated to each reportable segment are shown below. Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an arm’s-length basis and are eliminated on consolidation.

The group has identified two reportable segments, as follows:

• Product - providing hardware and software solutions that integrate customers' desktop, network and data centre hardware and software infrastructure; and

• Services - providing consulting services in relation to the design and operation of ICT solutions, workforce recruitment and consulting.

Summarised financial information by segment for the financial years ended 30 June 2010 and 2009 is set out in the following table.

Data[#] 3 Limited | Annual report 2010 | 19

notes to the financial statements (continued)

note 2. segment information (continued)

	Product		Services	Services	Total
	2010	2009	2010	2009	2010	2009
	$’000	$’000	$’000	$’000	$’000	$’000
Revenue
Total revenue	513,612	450,573	92,023	83,225	605,635	533,798
Inter-segment revenue	(27)	(524)	(7,008)	(3,609)	(7,035)	(4,133)
External revenue	513,585	450,049	85,015	79,616	598,600	529,665
Unallocated corporate revenue:
Interest					615	816
Consolidated revenue					599,215	530,481
Segment result
Segmentprofit/(loss)	18,115	17,325	7,059	3,619	25,174	20,944
Unallocated corporate items
Interest revenue					615	816
Other employee and contractor costs					(6,138)	(4,873)
Rent					(478)	(357)
Depreciation and amortisation					(834)	(694)
Other					(2,546)	(1,683)
					(9,381)	(6,791)
Net profit/(loss) before income tax					15,793	14,153
Items included in segment result
Interest expense	5	-	-	23	5	23
Depreciation and amortisation expense	35	165	146	191	181	356

note 3. 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.

note 4. 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 financial assets are all within the loans and receivables category, and its 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 has operated internationally in New Caledonia, however the operations have ceased in 2010; the revenue contracts and employee benefits were denominated in South Pacific francs (XPF). At 30 June 2010 and 2009 the group’s exposure to foreign currency risk was immaterial.

(ii) Price risk

The group is not exposed to equity securities or commodity price risk.

Data[#] 3 Limited | Annual report 2010 | 20

notes to the financial statements (continued)

note 4. financial risk management (continued)

(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 2010 year, sales to one government customer comprised 7% of revenue (2009: 11%).

• There are a number of individually significant debtors. At 30 June 2010, one government debtor comprised 4% of total debtors, (2009: 14%) and the ten largest debtors comprised approximately 32% of total debtors (2009: 38%), of which 70% were accounts receivable from a number of government customers (2009: 72%).

• 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 2010 (2009: 0.2%).

• Financial guarantees have been extended to certain parties (refer to notes 22 and 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 had access to the following undrawn borrowing facilities at the reporting date:

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
Bank overdraft facility	533	600
Receivables financing facility	7,000	-
Bill facility	-	3,955
	7,533	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 2010 was 9.5% (2009: 10.5%).

The receivables financing facility was opened during the current year in replacement of the bill facility that existed in 2009 and is subject to annual review. Under the facility amounts not exceeding 80% of the debtors balance (subject to the facility limit) may be drawn at any time. Interest is variable and is charged at prevailing market rates. The weighted average interest rate for the year ended 30 June 2010 was 6.6%.

The group’s financial liabilities, which are all non-derivative and due within six months of year end, comprised $109,986,000 and $106,835,000 for the years ended 30 June 2010 and 2009, respectively.

(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 maintained the following variable rate accounts:

	30 June	30 June	2010	30 June	2009
	Weighted			Weighted
	average			average
Consolidated	interest rate		Balance	interest rate	Balance
	%		$’000	%	$’000
Cash at bank and on hand	1.7%		12,576	3.3%	4,957
Deposits at call	3.0%		51,759	6.4%	23,000
Cash and cash equivalents	2.8%		64,335	5.1%	27,957

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)
	2010	2009	2010	2009
	$000	$000	$000	$000
Consolidated
+1.5% (150 basis points) (2009: +1%)	676	196	676	196
–.5%(50 basispoints) (2009: –.5%)	(225)	(98)	(225)	(98)

Data[#] 3 Limited | Annual report 2010 | 21

notes to the financial statements (continued)

note 4. financial risk management (continued)

(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
	2010 2009
	$’000 $’000
note 5. other revenue Interest	615 816
note 6. other income Foreign exchange gain Reversal of allowance for impairment against receivables Reversal of contingent considerationpayable	- 243 - 110 194 -
	194 353
note 7. expenses Cost of goods sold Depreciation and amortisation of property and equipment (note 15) Amortisation of intangibles(note 16)	466,448 404,458 784 880 231 170
	1,015 1,050
Employee benefits expense Defined contribution superannuation expense Other charges against assets Impairment of trade receivables (note 12) Impairment of other receivables Impairment of inventory (note 13) Impairment of intangible assets (note 16) Rental expenses on operating leases Minimum lease payments Contingent rentals Rental expenses – other	57,516 49,739 4,423 4,021 166 218 - 60 7 - 178 - 2,955 3,367 (63) (63) 1,016 524
	3,908 3,828
Finance costs Interest and finance charges paid/payable Unwindingof discount onprovisions and otherpayables	55 34 14 48
	69 82
Loss on disposal of property and equipment note 8. 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	2 - 5,169 4,500 (290) (108) - (71)
Income tax expense	4,879 4,321

Data[#] 3 Limited | Annual report 2010 | 22

notes to the financial statements (continued)

	Consolidated
	2010	2009
	$’000	$’000
note 8. income tax (continued)
A reconciliation between income tax expense and the product of accounting profit before income
tax multiplied by the group’s applicable income tax rate is as follows:
Accounting profit before income tax	15,793	14,153
Income tax calculated at the Australian tax rate: 30% (2009: 30%)	4,738	4,246
Tax effect of amounts which are not deductible/ (taxable) in calculating taxable income:
Non-deductible items	106	56
Other	35	90
	4,879	4,392
Under(over) provision inprioryear	-	(71)
Income tax expense	4,879	4,321

The parent entity, in its capacity as head entity of the tax-consolidated group, paid income taxes of $2,583,000 during financial year 2010 (2009: $5,126,000 for group and parent entity). A subsidiary of the group outside of the consolidated tax group paid income taxes of $172,000 during the year ended 30 June 2010 (2009: $164,000).

	Balance	sheet	Statement comprehensive	Statement comprehensive	of income
	2010	2009	2010		2009
	$’000	$’000	$’000		$’000
Consolidated
Deferred income tax
Deferred income tax for the group comprises:
Deferred tax assets
Accrued liabilities	943	837	106		41
Provisions	656	595	61		129
Lease incentive liability	194	40	154		(59)
Other	8	11	(3)		(5)
	1,801	1,483	318		106
Deferred tax liabilities
Intangible assets	-	(45)	45		30
Lease incentive assets	(130)	(40)	90		59
Other	(139)	(156)	17		(87)
	(269)	(241)	(28)		2
Net deferred tax assets	1,532	1,242
Deferred income tax revenue			290		108

Tax consolidation legislation

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

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

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

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

The group has no tax losses available for offset against future taxable profits (2009: nil).

Data[#] 3 Limited | Annual report 2010 | 23

notes to the financial statements (continued)

	Consolidated	Consolidated
	2010	2009
	Number	Number
note 9. earnings per share
(a) Weighted average number of shares
Weighted average number of ordinaryshares for basic and diluted earningsper share	15,397,495	15,421,679

(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 2010 or 2009; therefore there was no impact on the calculation of diluted earnings per share.

				Parent
			2010		2009
			$’000		$’000
note 10. dividends
Dividends paid on ordinary shares during the year
Final fully franked dividend for 2009: 30.0c (2008: 28.0c)			4,619		4,329
Interim fullyfranked dividend for 2010: 23.0c(2009: 20.0c)			3,542		3,080
			8,161		7,409
Dividends declared (not recognised as a liability at year end)
Final fullyfranked dividend for 2010: 33.0c(2009: 30.0c)			5,081		4,619
The tax rate at which dividends paid have been franked is 30% (2009: 30%).		Dividends
declared will be franked at the rate of 30% (2009: 30%).
Franking credit balance
Franking credits available for subsequent financial years based 30%)	on a tax rate of 30% (2009:		11,676		10,113

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 $2,178,000 (2009: $1,980,000).

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
note 11. cash and cash equivalents
Cash at bank and on hand	12,576	4,957
Deposits at call	51,759	23,000
	64,335	27,957

Data[#] 3 Limited | Annual report 2010 | 24

notes to the financial statements (continued)

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
note 12. trade and other receivables
Trade receivables	82,134	94,169
Allowance for impairment(a)	(97)	(196)
	82,037	93,973
Other receivables (b)	4,316	2,233
Receivable from Powerlan (Qld)	1,327	1,327
Allowance for impairment(c)	(1,327)	(1,327)
	-	-

(a) Allowance for impairment

An impairment loss of $166,000 (2009: $218,000) has been recognised by the group in the current year. These amounts have been included in other expense in the statements of comprehensive income. Movements in the provision for impairment loss were as follows:

	Consolidated
	$’000
Carrying amount at 1 July 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
Provision for impairment recognised during the year	166
Receivables written off duringtheyear	(265)
Carrying amount at 30 June 2010	97

The ageing of overdue trade receivables for the group as at 30 June 2010 is as follows:

	2010	2010	2009	2009
	Considered	Past due but not	Considered	Past due but not
	impaired	impaired	impaired	impaired
	$’000	$’000	$’000	$’000
31-60 days	-	7,847	-	10,361
61-90 days	-	2,533	-	4,560
91-120 days	-	1,634	74	1,695
+120 days	97	1,447	122	1,621
	97	13,461	196	18,237

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.

(c) Allowance for impairment – Powerlan

An impairment loss of $60,000 (2010: nil) was recognised by the group in 2009. These amounts have been included in other expense in the statements of comprehensive income. Movements in the provision for impairment loss were as follows:

	Consolidated
	$’000
Carrying amount at 1 July 2008	1,267
Provision for impairment recognised during the year	60
Carrying amount at 30 June 2009 and 30 June 2010	1,327

Data[#] 3 Limited | Annual report 2010 | 25

notes to the financial statements (continued)

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
note 13. inventories
Finished goods – at cost	9,006	6,116
Finishedgoods – at net realisable value	-	-
	9,006	6,116

Finished goods at cost comprises $7,435,000 of inventory purchased pursuant to customer orders or letters of intent (2009: $6,116,000).

Inventories recognised as an expense for the year ended 30 June 2010 totalled $466,448,000 (2009: $404,458,000) for the group and are included in the cost of goods sold line item (refer to note 7). For the year ended 30 June 2010 the amount of inventory charged as an expense in other expenses included $7,000 (2009: nil) for the group relating to inventory that was considered obsolete.

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
note 14. other current assets
Prepayments	1,109	740
Securitydeposits	237	203
	1,346	943

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
note 15. property and equipment
Leasehold improvements – at cost	3,630	3,447
Accumulated amortisation	(3,030)	(2,400)
	600	1,047
Equipment – at cost	990	938
Accumulated depreciation	(817)	(675)
	173	263
	773	1,310

	Leasehold	Equipment	Total
	improvements
	$’000	$’000	$’000
Consolidated
Carrying amount at 1 July 2008	1,457	273	1,730
Additions	287	174	461
Disposals	-	(1)	(1)
Depreciation and amortisation expense	(697)	(183)	(880)
Carrying amount at 30 June 2009	1,047	263	1,310
Additions	183	66	249
Disposals	-	(2)	(2)
Depreciation and amortisation expense	(630)	(154)	(784)
Carrying amount at 30 June 2010	600	173	773

Data[#] 3 Limited | Annual report 2010 | 26

notes to the financial statements (continued)

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
note 16. intangible assets
Goodwill – at cost	5,036	5,036
Accumulated impairment	(204)	(76)
	4,832	4,960
Software assets – at cost	898	780
Accumulated amortisation and impairment	(592)	(461)
	306	319
Customer relationships – at cost	300	300
Accumulated amortisation and impairment	(300)	(150)
	-	150
	5,138	5,429

		Consolidated	Consolidated
	Goodwill	Software	Customer	Total
		assets	relation-
			ships
	$’000	$’000	$’000	$’000
Carrying amount at 1 July 2008	4,960	67	250	5,277
Additions	-	322	-	322
Amortisation expense	-	(70)	(100)	(170)
Carrying amount at 30 June 2009	4,960	319	150	5,429
Additions	-	118	-	118
Amortisation expense	-	(131)	(100)	(231)
Impairment charge	(128)	-	(50)	(178)
Carrying amount at 30 June 2010	4,832	306	-	5,138

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. Data[#] 3 has allocated goodwill according to operating segment, unless the segment did not exist at the time of the business acquisition which generated the goodwill. Under AIFRS, goodwill must be tested at least annually for impairment. Management has carried out impairment testing as at each reporting date and has recorded an impairment charge of $128,000 in relation to the year ended 30 June 2010 for goodwill arising from the Fingerprint Consulting Services acquisition in 2008 (2009: 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 2011. The before-tax discount rate applied to cash flow projections is 10% (2009: 10%). Cash flows beyond the 2011 financial year have been extrapolated using an average growth rate of 7% (2009: 7%).

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 2010 | 27

notes to the financial statements (continued)

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
note 17. trade and other payables
Current
Trade payables - secured (note 20)	-	8,094
Tradepayables - unsecured	96,177	83,860
	96,177	91,954
Other payables - unsecured	13,809	14,687
	109,986	106,641
Non-current
Other payables - unsecured	-	194

Other payables (non-current) comprised amounts payable as contingent consideration for a business acquisition. The payable was reversed during the year as the amount is longer required to be paid.

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
note 18. provisions
Current
Employee benefits	703	1,060
Lease remediation(note 1(f))	146	-
	849	1,060
Non–current
Employee benefits	1,041	487
Lease remediation(note 1(f))	138	182
	1,179	669

Movements in provisions other than employee benefits are as follows:

	Consolidated
	Lease
	remediation
	$’000
Balance at 1 July 2008	168
Increase topresent value	14
Balance at 30 June 2009	182
Arising during the year	102
Unused amount reversed	(14)
Increase topresent value	14
Balance at 30 June 2010	284

Data[#] 3 Limited | Annual report 2010 | 28

notes to the financial statements (continued)

	Consolidated	Consolidated
	2010	2009
	$’000	$’000
note 19. other liabilities
Current
Unearned income	26,452	6,517
Lease incentives	95	135
	26,547	6,652
Non–current
Lease incentives	551	-
Unearned income comprises amounts received in advance of the provision of goods or services.
note 20. secured liabilities
Secured liabilities (current and non-current)
Lease incentives (note 19)	646	135
Tradepayables(note 17)	-	8,094
Total secured liabilities	646	8,229

Assets pledged as security

All of the assets of the group are pledged as security for bank facilities (refer to note 4) and certain trade creditor facilities as noted above. Leasehold improvements (refer to note 15) effectively secure lease incentive liabilities as noted above.

note 21. contributed equity

(a) Movements in ordinary share capital

		Number of	Issue price
Details	Notes	shares	$	$’000
Balance – 1 July 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
Balance – 30 June 2010		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 was most recently extended to 31 August 2010. All shares purchased under the buyback are cancelled.

Effective 1 July 1998, the corporations legislation in place abolished the concepts of authorised capital and par value shares. Accordingly, the company does not have authorised capital or par value in respect of its issued shares.

Data[#] 3 Limited | Annual report 2010 | 29

notes to the financial statements (continued)

note 21. contributed equity (continued)

(b) Ordinary shares

All ordinary shares issued as at 30 June 2010 and 2009 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 2010 (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 2010, the board paid dividends of $8,161,000 (2009: $7,409,000). The board's intent for dividend payments for 2011 - 2015 is to maintain the current dividend payout ratio; however, market conditions will be taken into consideration prior to the declaration of each dividend. The board has no current plans to issue further shares on the market but intends to use share buybacks as a mechanism to deliver improved shareholder return on a sustainable basis and to reduce volatility in the company’s share price.

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

note 22. contingent liabilities

At 30 June 2010 bank guarantees totalling $467,000 (2009: $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
	2010	2009	2010		2009
	$’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	3,293	2,778	1,599		1,397
Later than one year but not later than five years	8,895	2,590	4,971		1,104
Later than fiveyears	7,485	-	7,485		-
	19,673	5,368	14,055		2,501

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.

note 24. key management personnel

Key management personnel compensation is set out below.

	Consolidated	Consolidated	Parent
	2010	2009	2010	2009
	$	$	$	$
Short-term employee benefits	3,124,330	2,853,248	1,604,829	1,491,808
Long-term employee benefits	28,681	41,790	15,264	20,254
Post-employment benefits	134,588	128,860	76,744	73,880
	3,287,599	3,023,898	1,696,837	1,585,942

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 2009 and 2010 financial years.

Data[#] 3 Limited | Annual report 2010 | 30

notes to the financial statements (continued)

note 24. key management personnel (continued)

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 2008	changes*	30 June 2009	changes*	30 June 2010
Directors:
Anderson, R.	60,000	-	60,000	-	60,000
Grant, J.	763,520	-	763,520	-	763,520
Johnston, I	60,000	-	60,000	-	60,000
Powell, W.T.	465,000	(25,000)	440,000	(30,000)	410,000
Other executives:
Baynham, L.	51,600	-	51,600	-	51,600
Colledge, B.	23,600	-	23,600	-	23,600
Crouch, B.	10,000	-	10,000	-	10,000
Esler, M.	750,100	-	750,100	(10,000)	740,100
Hill, B.	50,000	-	50,000	-	50,000
MacPherson,L.	5,000	(2,000)	3,000	-	3,000
	2,238,820	(27,000)	2,211,820	(40,000)	2,171,820

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

Share ownership disclosures in the 2009 financial year included information for all executives who were part of the senior leadership team. The board has reassessed the executive group and has reduced the disclosures in the above table strictly to those individuals with the authority and responsibility for planning, directing and controlling the activities of the group directly or indirectly.

No shares were granted to key management personnel during the year as compensation (2009: nil) nor were any issued on exercise of options (2009: 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.

	2010	2009
	$	$
Amounts recognised as expense
Other expense	17,940	20,718

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

	Consolidated
	2010 2009
	$ $
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 the_Corporations Act 2001_ Non-audit services Acquisition due diligence services Tax compliance services	105,000 102,500 8,000 - 5,600 9,000
Total remuneration	118,600 111,500

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 2010 | 31

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)
		2010	2009
		%	%
Data#3 Business Systems Pty Ltd	Australia	100	100
Gratesand Pty Ltd	Australia	100	100
Data#3 NC SARL	New Caledonia	100	100

Summarised financial information for the parent entity is as follows:

	Parent
	2010	2009
	$’000	$’000
As at 30 June
Current assets	66,027	28,422
Total assets	66,503	29,073
Current liabilities	52,664	15,507
Total liabilities	52,958	15,566
Shareholders’ equity
Contributed equity	8,278	8,278
Retained earnings	5,267	5,229
Total equity	13,545	13,507
For the year ended 30 June
Netprofit	8,199	7,595
Total comprehensive income	8,199	7,595

Transactions between Data[#] 3 Limited and other entities in the wholly-owned group during the years ended 30 June 2010 and 30 June 2009 consisted of:

• Loans advanced to/by subsidiaries and repayments;

• Recovery of corporate charges received by Data[#] 3 Limited for accounting, administrative services, management and use of assets;

• Management charges from subsidiaries for use of assets and provision of systems and services;

• � Dividends received by Data[#] 3 Limited; and

• Transactions between Data[#] 3 Limited and its wholly-owned subsidiaries under the tax sharing and funding agreements described in note 8. The parent entity recognised a receivable of $5,044,000 in relation to its subsidiaries’ current tax amounts for the year ended 30 June 2010 (2009: a receivable of $4,270,000).

Loans provided are at call, interest-free and unsecured and have no fixed repayment terms. 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 2010. However, Gratesand has net liabilities of $2,100,000 as at 30 June 2010 (2009: $5,045,000). 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 statements of comprehensive income for the closed group for the years ended 30 June 2010 and 2009 are set out in the following table.

Data[#] 3 Limited | Annual report 2010 | 32

notes to the financial statements (continued)

note 26. related parties (continued)

	Closed Group	Closed Group
	2010	2009
	$’000	$’000
Revenues
Sale of goods	513,586	449,982
Services	83,771	77,671
Other	984	1,459
Total	598,340	529,112
Other income	194	111
Expenses
Changes in inventories of finished goods	2,897	(692)
Purchase of goods	(467,978)	(403,715)
Employee and contractor costs directly on-charged (cost of sales on services)	(30,651)	(35,860)
Other cost of sales on services	(12,820)	(6,632)
Other employee and contractor costs	(63,000)	(56,914)
Telecommunications	(1,265)	(1,216)
Software maintenance and licensing	(332)	(183)
Rent	(3,872)	(3,769)
Travel	(1,685)	(1,311)
Professional fees	(611)	(623)
Depreciation and amortisation	(1,013)	(1,046)
Finance costs	(69)	(82)
Other	(2,706)	(3,320)
Total	(583,105)	(515,363)
Profit before income tax expense	15,430	13,860
Income tax expense	(4,771)	(4,211)
Net profit	10,659	9,649
Total comprehensive income	10,659	9,649

A summary of movements in consolidated retained earnings for the years ended 30 June 2010 and 2009 of the closed group is set out below.

	Closed Group
	$’000
Retained earnings at 1 July 2008	12,132
Profit after income tax/net profit (total comprehensive income)	9,649
Dividendsprovided for orpaid	(7,409)
Retained earnings at 30 June 2009	14,372
Profit after income tax/net profit (total comprehensive income)	10,659
Dividendsprovided for orpaid	(8,161)
Retained earnings at 30 June 2010	16,870

Data[#] 3 Limited | Annual report 2010 | 33

notes to the financial statements (continued)

note 26. related parties (continued)

The consolidated balance sheet as at 30 June 2010 for the closed group is set out below.

	Closed Group	Closed Group
	2010	2009
	$’000	$’000
Current assets
Cash and cash equivalents	64,331	27,676
Trade and other receivables	86,185	93,777
Inventories	9,006	6,116
Other	1,342	3,149
Total current assets	160,864	130,718
Non-current assets
Other financial assets	14	14
Property and equipment	773	1,306
Deferred tax assets	1,649	1,242
Intangible assets	5,138	5,429
Total non-current assets	7,574	7,991
Total assets	168,438	138,709
Current liabilities
Trade and other payables	109,985	106,513
Current tax liabilities	3,301	545
Provisions	849	1,060
Other	27,425	7,078
Total current liabilities	141,560	115,196
Non-current liabilities
Other payables	-	194
Provisions	1,179	669
Other	551	-
Total non-current liabilities	1,730	863
Total liabilities	143,290	116,059
Net assets	25,148	22,650
Equity
Contributed equity	8,278	8,278
Retained earnings	16,870	14,372
Total equity	25,148	22,650

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 2010 | 34

notes to the financial statements (continued)

note 27. share-based payments (continued)

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 2010 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 2010 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 2009 or 2010.

Data[#] 3 Limited | Annual report 2010 | 35

directors’ declaration

In the opinion of the directors:

• (a) the financial statements and notes set out on pages 9 to 35 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 group’s financial position as at 30 June 2010 and of its performance for the financial year ended on that date;

• (b) the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board;

• (c) 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

• (d) 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.

==> picture [109 x 26] intentionally omitted <==

R A Anderson

Director

Brisbane 23 August 2010

Data[#] 3 Limited | Annual report 2010 | 36

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

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 (the company), which comprises the balance sheet as at 30 June 2010, and the statement of comprehensive income, 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 of 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 2010 | 37

independent au d itor’s report to the members of Data[#] c 3 Limited ( ontinued)

Auditor's opinion on the financial report

In our opinion:

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

• (i) giving a true and fair vie w of the consolidated entity's financial position as at 30 June 2010 and of its performance for the year ended on tha t date; and

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

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

Report on the remuneration report

We have audited the remuneration report com p rising section 11 of the directors’ report for the year ended 3 0 June 2010. The directors of the company are responsible for the prepara t ion and presentation of the remuneration report in accord a nce with Section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, bas e d 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 2010 complies with Section 300A of the Corporations Act 2001 .

JOHNSTON RORKE Chartered Accountants

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

J J Evans

Partner

Brisbane, Queensland 23 August 2010

Data[#] 3 Limited | Annual report 2010 | 38

shareholder information

The shareholder information set out below was applicable as at 18 August 2010.

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	1,075	-
1,001	-	5,000	1,414	-
5,001	-	10,000	295	-
10,001	-	100,000	163	-
100,001 and	over		19	-
			2,966	-

(b) There were 62 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	697,227	4.53
Oakport Pty Ltd	514,399	3.34
Citicorp Nominees Pty Limited	513,587	3.34
Powell Clark Trading Pty Ltd	359,000	2.33
Wood Grant & Associates Pty Ltd	338,221	2.20
National Nominees Limited	324,393	2.11
Citicorp Nominees Pty Limited	298,988	1.94
Elterry Pty Ltd	220,000	1.43
Rubi Holdings Pty Ltd	210,002	1.36
ANZ Nominees Limited	203,758	1.32
Thomson Associates Pty Ltd	200,000	1.30
National Australia Trustees Limited	199,205	1.29
M R Esler	179,100	1.16
J E Grant	179,100	1.16
HSBC Custody Nominees (Australia) Limited	170,012	1.10
J T Populin	169,014	1.10
JHG Super Pty Ltd	160,771	1.04
Perpetual Trustees Consolidated Limited	134,972	0.88
Citicorp Nominees Pty Limited	116,521	0.76
W T & E M Powell	100,000	0.65
	5,288,270	34.35

Data[#] 3 Limited | Annual report 2010 | 39

shareholder information (continued)

3. substantial shareholders

Substantial shareholders in the company are set out below:

Name	Number held	Percentage
Commonwealth Bank of Australia	962,367	6.25
Celeste Funds Management Limited	782,276	5.08

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 2010 | 40