DATA#3 LIMITED - Annual Report 2013

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 2013 Year ended 30 June 2012

RESULTS FOR ANNOUNCEMENT TO THE MARKET

				$
Revenues from ordinary activities	down	5.0 %	to	$771,042,000
Profit from ordinary activities after tax attributable to members	down	11.3 %	to	$12,138,000
Net profit for the period attributable to members	down	11.3 %	to	$12,138,000


	Amount per Franked amount
Dividends
	security per security


Current period Interim dividend Final dividend	3.45 cents 3.45 cents 3.55 cents 3.55 cents
Previous corresponding period Interim dividend Final dividend	3.45 cents 3.45 cents 3.55 cents 3.55 cents

The Record Date for determining entitlements to the dividend is 16 September 2013.

BRIEF EXPLANATION OF THE FIGURES REPORTED ABOVE

The current period’s results reflect solid performance in a challenging and volatile economic environment and a highly competitive and relatively flat technology market. The total dividend is the same as the previous year, reflecting the company’s solid financial position and strong cash flow.

Please refer to the attached audited Annual Financial Report for the year ended 30 June 2013 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 2013 | 1

APPENDIX 4E (CONTINUED) for the year ended 30 June 2013

RETAINED PROFITS

	Current	Previous
	year	year
	$’000	$’000
Retained profits at the beginning of financial period	24,236	21,875
Net profit attributable to members	12,138	13,679
Net transfers to and from reserves	-	-
Dividends provided for or paid	(10,778)	(11,318)
Retained profits at end of financial period	25,596	24,236

ADDITIONAL DIVIDEND INFORMATION

Details of dividends declared or paid during or subsequent to the year ended 30 June 2013 are as follows:

Record date	Payment date	Type	Amount per	Franked amount	Total dividend
			security	per security	$’000
14/9/2012	28/9/2012	Final	3.55 cents	3.55 cents	5,466
14/3/2013	28/3/2013	Interim	3.45 cents	3.45 cents	5,312
16/9/2013	30/9/2013	Final	3.55 cents	3.55 cents	5,466

TOTAL DIVIDEND PER SECURITY (INTERIM PLUS FINAL)

	Current year	Previous year
Ordinary securities	7.0 cents	7.0 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	$0.17	$0.18

CONTROL GAINED OVER ENTITIES HAVING A MATERIAL EFFECT

Not applicable

LOSS OF CONTROL OF ENTITIES HAVING A MATERIAL EFFECT

Not applicable

Data[#] 3 Limited | Appendix 4E 2013 | 2

APPENDIX 4E (CONTINUED) for the year ended 30 June 2013

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 2013 was strong despite a weakened economy with net profit after tax of $12.1 million, basic earnings per share of 7.88 cents and fully franked dividends for the year of 7.0 cents per share.

Please refer to the attached Operating and Financial Review for further information in relation to the results for the period.

COMPLIANCE STATEMENT

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

Signed:

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John Grant Managing Director

Date: 23 August 2013

Data[#] 3 Limited | Appendix 4E 2013 | 3

OPERATING AND FINANCIAL REVIEW

After a difficult year in 2012, market conditions in both the public and private sectors remained weak throughout the year and those areas of our business with revenues primarily dependent on investment decisions (i.e. not contracted) were impacted. This general trend was somewhat disguised in the first half by our largest ever infrastructure sale of Cisco networking equipment and related contract maintenance services to Perth’s Fiona Stanley Hospital. This fuelled strong growth in our Western Australian business which somewhat offset the much flatter conditions for our businesses in Queensland, New South Wales and Victoria and for our services businesses other than software asset management, software development and contract maintenance. Given its revenues are predominantly under contract, our software licensing business grew solidly in a very competitive and flat market.

The volatility of a moderate first half, a very weak third quarter and an exceptionally strong fourth quarter, particularly June, injected a greater level of unpredictability into our forecasting. However we retained confidence throughout that we could convert a strong pipeline and deliver a solid result.

WHOLE OF COMPANY PERFORMANCE

Total revenue was $771.0 million, 5.0% lower than last year’s $811.4 million, with a decrease in product revenues and an increase in services revenues. The reductions in product revenue and consequently total revenue were primarily due to changes in the way some software licensing contracts were transacted (see the ‘Product revenue and gross profit’ and ‘Licensing Solutions’ sections below).

With these changes in revenue, we see total gross profit (excluding other revenue) as a better indicator of growth, and this increased by 2.1% from $120.0 million to $122.5 million. Total gross margin increased from 14.8% to 15.9% reflecting increased product margins.

Total revenue ($M)

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Total gross profit ($M)

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Net profit before tax decreased by 11.5% from $19.7 million to $17.5 million due to the increased cost structure of the business generally, and lower interest income compared to the previous year.

Net profit after tax decreased by 11.3% from $13.7 million to $12.1 million. This represented basic earnings per share of 7.88 cents, a decrease of 11.3% from 8.88 cents in the previous year.

The board declared fully franked dividends of 7.0 cents per share for the full year, increasing the payout ratio from 79% to 89% and maintaining the same payment as the previous year.

Return on equity decreased to 35.8% but remained a sector-leading result.

Product revenue and gross profit

Total product revenue (hardware and software) decreased by 7.2% from $689.1 million to $639.6 million, reflecting the combination of a $56.1 million reduction in licensing revenues and a $6.7 million increase in hardware product revenues.

The total product gross profit increased by 4.5% from $63.9 million to $66.8 million, and the combined product gross margin increased from 9.3% to 10.4% reflecting the change in sales mix and increased licensing margins.

Please refer to the ‘Operating results by area of specialisation’ for further explanation of the changes in product revenue and gross profit.

Data[#] 3 Limited | Operating and financial review 2013 | 1

OPERATING AND FINANCIAL REVIEW (CONTINUED)

WHOLE OF COMPANY PERFORMANCE (CONTINUED)

Services revenue and gross profit

Total services revenue increased by 8.1% from $120.4 million to $130.2 million, reflecting the following changes:

Project services revenue decreased by 2.2% from $30.7 million to $30.0 million
Recruitment and contracting revenue decreased by 13.7% from $41.4 million to $35.7 million
Managed services revenue increased by 33.5% from $45.7 million to $61.0 million
Other services associated with software licensing increased from $2.6 million to $3.5 million.

Overall services gross profit decreased by 0.5% from $56.1 million to $55.8 million with declines in project services and recruitment and contracting offset by contract maintenance services, and gross margin reduced from 46.6% to 42.8% due to lower margins on contract maintenance.

Please refer to the ‘Operating results by area of specialisation’ for further explanation of the changes in services revenue and gross profit.

Other revenue

Other revenue was composed almost entirely of interest income which decreased by $0.6 million to $1.1 million. This reduction was due to the short-term funding requirements for the Fiona Stanley Hospital contract which reduced surplus cash balances during the year and the reduction in bank deposit rates compared to the previous year.

Operating expenses

Internal staff costs increased by 2.7% from $87.9 million to $90.2 million, reflecting stable headcount throughout the year.

Other operating expenses increased by 12.7% from $14.2 million to $16.0 million with an additional $1.9 million in rent, depreciation and amortisation expenses, partly offset by small savings in other areas. This reflects the increased costs from our investments to improve efficiency and productivity (including enhancements to our supply chain system and customer portal), expanded premises in Melbourne and Adelaide, and further investment in infrastructure to support our ‘as a service’ offerings.

Cash flow

The net cash flow from operating activities was a strong inflow of $30.5 million, higher than the previous year. As usual the operating cash flow and year-end cash balance were temporarily inflated due to the timing of receipts and payments around 30 June. The traditional May/June sales peak produces higher than normal collections pre-30 June that generate temporary cash surpluses which subsequently reverse after 30 June when the associated supplier payments occur. Consequently the 30 June 2013 cash balance of $85.3 million was inflated by this temporary year-end surplus.

Due to the cash flow seasonality it is more meaningful to compare the average daily cash balance throughout the period which was $31.1 million, down from $36.7 million in the previous year. This reduction was mostly due to the short-term funding requirements for the Fiona Stanley Hospital contract.

Performance against whole of company objectives

The plan for 2013 set a number of objectives. The progress we made against these is set out below.

a. Remaining an employer of choice in our industry

We finished the year with 641 permanent and 50 casual employees, virtually unchanged from 2012’s 648 permanent and 34 casual employees. Our people continued to be committed and engaged through a difficult time. Overall satisfaction was at our target level, with the willingness to recommend Data[#] 3 as an employer to others improving on the previous year and reaching our target.

Overall staff satisfaction (out of 5)

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% Recommend Data[#] 3 to others

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OPERATING AND FINANCIAL REVIEW (CONTINUED)

WHOLE OF COMPANY PERFORMANCE (CONTINUED)

This year our team in Victoria moved into refurbished and expanded premises at Southbank. We also refurbished and expanded our offices in South Australia. The modern design of each office, similar to our Brisbane and Sydney offices, features a fully mobile and flexible workplace. We also extended the range of benefits we provide to our employees with the valuable addition of income protection insurance.

For the sixth time in succession we were voted ARN’s Enterprise Reseller of the Year by our peers and in our first nomination, voted runner up by Australian customers and candidates in the medium sized ICT Recruiter of Choice in SEEK’s Annual Recruitment Awards.

b. Solutions that stand out and a sales team enabled for success

Our customers confirmed strong support for the solutions we offer with survey results exceeding our target of 4.

Satisfaction with products and services (out of 5)

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We continued to develop and expand the solutions we offer across what we uniquely describe as the Technology Consumption Model – consumption from one-time purchase to pay-per-use on or off customer premises. We increased our sales team’s ability to ‘connect the dots’ between what we offer and our customers’ business objectives, developing a ‘whiteboard’ pitch and providing training in its use as a competitive differentiator.

We achieved significant recognition both nationally and internationally from our partners:

Microsoft - Devices and Deployment Partner of the Year (Global award)
Microsoft - Enterprise Partner of the Year
HP and Microsoft - Frontline Partner for 2013 in Private Cloud and Virtualisation
HP - Total Highest Revenue Partner in Australia and New Zealand
Cisco - Services Partner of the Year for Asia Pacific Japan and Greater China
Cisco - Smart Services Partner of the Year for Asia Pacific Japan and Greater China
Cisco - Alliance Manager of the Year
Cisco - Borderless Technologies Partner of the Year
Sophos - Large Account Reseller Partner of the Year for ANZ
EMC - New Partner of the Year Award
Veeam - ANZ ProParter of the Year
Autodesk - Highest Billings in ANZ for Volume Channel
Websense - Australian Partner of the Year
McAfee - Commercial Partner of the Year.

While not a significant level of investment, we were able to apply some funds to further development of intellectual property for resale in a number of areas:

Enhancement of the Business Productivity Toolkit to include content for Microsoft Lync and SharePoint, Windows 8 and Office 2013
Templates developed for the implementation of the IT Service Management tool Remedy in our Managed Services Service Desk
Enhancement of the Schools Information System (SIS).

c. To be disciplined and productive in the way we work

In the continuing pursuit of improvements in execution, discipline and productivity, we implemented enhanced systems for document management, collaboration, video conferencing, sales process, service desk and supply chain automation.

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OPERATING AND FINANCIAL REVIEW (CONTINUED)

WHOLE OF COMPANY PERFORMANCE (CONTINUED)

Building on the success we achieved in 2012 through a program run across the business called ‘A Million Minutes of Productivity’, our people were again encouraged to look for ways we could change and improve to deliver quantifiable productivity improvements. This year the program delivered 3.3 million minutes of productivity improvement.

However, our overall measure of productivity, the cost ratio (=gross profit/expenses), did not improve as gross profit growth of 2.1% was more than eroded by a 2.7% increase in staff expense and a 12.7% increase in operating expense.

Cost ratio (%)

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In our products segment, the cost ratio increased from 65.6% to 68.6% and in services from 83.0% to 83.9% as we consciously accepted lower levels of utilisation in return for maintaining capacity and capability.

d. To provide an outstanding customer experience

While there are points of difference in some of the solutions we take to market, differentiation as a reseller primarily comes as a result of how we engage with our customers and how effectively what we have to offer aligns with their business objectives. We judge this based on the response they give us in our annual survey against our target of 4.

This year we sought a much broader response from our customers and tripled the number of responses to the survey. We expected results to decline as a consequence and on balance have been very pleased with the outcome.

Overall customer satisfaction (out of 5)

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e. To deliver significant growth in project and annuity services

Project services declined by 2.2% given their exposure to the weak investment environment.

Annuity services include recruitment and contracting, which decreased by 13.7%, and managed services which increased by 33.5%.

Total revenue under contract declined from 62.4% to 59.2%.

REVIEW OF FINANCIAL POSITION

Our balance sheet remains conservative with no material intangible assets and no material debt.

Trade receivables and payables are generally highest at year-end due to the traditional sales peak in May/June. Trade and other receivables at 30 June 2013 were $108.1 million and trade and other payables $164.9 million, reflecting the timing differences in the collections from customers and payments to suppliers around 30 June (referred to in the ‘Cash flow’ section on page 2).

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OPERATING AND FINANCIAL REVIEW (CONTINUED)

REVIEW OF FINANCIAL POSITION (CONTINUED)

The year-end cash balance increased from $70.8 million to $85.3 million due to these temporary surplus funds combined with the strong underlying operating cash flow.

The key trade receivables indicator of average days’ sales outstanding remained ahead of target at 31 days and consistent with the previous year, and the ageing of trade receivables reduced compared to the previous year. This is an excellent result which demonstrates our ongoing focus on collections and credit management.

Total inventory holdings decreased from $4.2 million to $3.2 million, reflecting tighter control over the volume of product held in our warehousing and configuration centres pending shipment to customers, and greater efficiencies achieved through enhancements to our supply chain system.

OPERATING RESULTS BY STATE

Performance across the states varied, reflecting the strength of local market conditions and the scale of our business in each location.

Queensland

Given the significant annuity contracts and long-term customer relationships, our business in Queensland remained a leader albeit the market remained particularly challenging given the continuing restraint in IT expenditure by the government. While this showed signs of abating toward the end of the year, it particularly impacted contribution to profit from our product and contracting activities. This was offset by stronger performance from software licensing and managed services such that overall, contribution to profit from all businesses in Queensland declined only slightly on 2012.

We were very pleased to be reappointed in May as a panel supplier of computer hardware and associated services to the Queensland Government. We were also rewarded for the investment we’ve made in ’as a service’ with a significant win at Ipswich City Council, where the decision to move all its IT datacentre infrastructure into the Data[#] 3 Cloud is a benchmark for cloud adoption in Australia. Both these successes will positively influence performance in 2014.

New South Wales/Australian Capital Territory

Having renewed the Federal Government agreement for Microsoft licenced software in 2012, NSW/ACT remained our largest state by revenue in 2013. However, general market conditions remained challenging and the contribution to group profit remained flat on 2012 with declines in project services and contracting offset by solid growth in product, software licensing and managed services.

Victoria

After very strong growth in 2012, our Victorian business echoed the broad decline in investment that occurred across both the government and private sectors as the state’s economy slowed. Despite these factors and the deferral or slippage of a number of projects, our revenue line declined only 10%. However, this decline, combined with higher local and national overheads, caused the contribution to profit to decline more substantially.

South Australia

Our South Australian business achieved solid top line growth. However, this came with higher costs and the business ended slightly down on 2012 overall. Declines in contribution from our product and project services businesses were offset by a solid increase in software licensing in part due to renewal of the South Australian Government’s agreement for Microsoft licensed software. Toward the end of the year we undertook expansion and refurbishment of our office facilities incorporating the new look and mobile operating model.

Western Australia

In relative terms, performance from our Western Australian business was the strongest across the company. Revenue more than doubled and contribution to profit, while off a small base, more than tripled. This result was strongly fuelled by the supply and implementation of Cisco equipment at Perth’s new Fiona Stanley Hospital and the sale of related contract maintenance services. Pleasingly, there were other significant successes, notably the design and implementation of a private cloud solution for Toyota WA.

Data[#] 3 Limited | Operating and financial review 2013 | 5

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OPERATING RESULTS BY STATE (CONTINUED)

In achieving this result for Western Australia, all businesses performed well. In particular, our software licensing business maintained market leadership with another very solid year and our managed services business provided a very strong contribution to state profit. Toward the end of the year we commenced the fit out of new and expanded premises, again incorporating our new look and mobile operating model.

OPERATING RESULTS BY AREA OF SPECIALISATION

The specialist businesses - Licensing Solutions, Infrastructure Solutions (incorporating Integrated Solutions, Product Solutions and Managed Services) and People Solutions - remained unchanged. They brought marketleading solutions and capability individually to the benefit of our customers and a unique integrated proposition when united.

Licensing Solutions

The solutions offered in this area helped our customers optimise and manage the acquisition and use of licensed software. It operated in all our locations. For the eighteenth consecutive year, Licensing Solutions exceeded all its targets, growing gross profit in a market that was flat at best and very competitive. This growth was achieved through a combination of increasing market share, maximising vendor channel incentives and further gains in operational efficiency.

Licensing Solutions total revenue ($M)

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Revenue declined by 12% as a result of changes in the timing and structure of some public sector contract renewals which included a partial shift from annual to monthly invoicing and an increased proportion of revenue from customers replaced by commission from the software vendor at 100% margin. Consequently licensing gross profit increased despite the reduction in revenue. 10% of licensing revenue came from software delivered ‘as a service’ from Microsoft’s and other partners’ clouds.

Our asset management services business had its strongest ever year and business productivity services, after a very slow first half, ramped up in the second but ended behind the previous year.

We remained a member of Microsoft’s Worldwide Licensing Partner Engagement Board and have contributed strongly to Microsoft’s planning for changes to its channel programs. The Licensing Solutions team continued to be the most successful licensing team in Australia, winning major awards with all our key software licensing partners, including a global award from Microsoft.

Infrastructure Solutions

The solutions offered in this area helped our customers cost effectively design, procure, deploy, operate and support hardware and software infrastructure across their desktop, network and data centre environments. It operated in all states and includes our Integrated Solutions, Product Solutions and Managed Services businesses.

Infrastructure Solutions total revenue ($M)

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Data[#] 3 Limited | Operating and financial review 2013 | 6

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OPERATING RESULTS BY AREA OF SPECIALISATION (CONTINUED)

The growth in revenue belies the difficulties this area experienced in 2013. Product and managed services contract maintenance revenues were considerably boosted by the sale to Fiona Stanley Hospital which more than offset the underlying decline in product and outsourcing revenues:

Product revenues grew 3.2% to $215.0 million
Project services revenues, which are primarily dependent on investment decisions, decreased by 2.2% from $30.7 million to $30.0 million
Managed Services revenues increased by 33.5% from $45.7 million to $ 61.0 million with very strong growth in contract maintenance services as customers broadly elected to extend the life of existing equipment in preference to replacement, and the sale to the Fiona Stanley Hospital, offsetting a decline in outsourcing revenues and slow take-up of ‘as a service’.

Though conditions remained challenging, there were a number of significant achievements in the year:

Appointment to the Queensland Government’s computer hardware and associated services panel contract
� Completion of the next stage of our supply chain automation project with the implementation of one of the world’s leading configuration and quotation systems, Big Machines
Implementation of a new IT Service Management tool to underpin the 24x7 support solutions delivered to our contracted customers
Success with the Data[#] 3 Cloud in the Ipswich City Council’s move from infrastructure on-premise to infrastructure from the cloud.

We remained a member of the Hewlett Packard Asia Pacific Partner Advisory Board and the Cisco Advisory Board for Asia Pacific.

People Solutions

This specialist business aligns with our customers’ need to recruit and/or contract people with the appropriate expertise for their internal IT function. It operates from all locations other than South Australia.

The market for contract and permanent labour cycles with general economic conditions and hence was challenging. This was exacerbated by the bias in our revenues to Queensland Government where the contraction was more marked, and the scale of our businesses outside Queensland where costs remained high relative to revenue. While numbers lifted toward the end of the year, overall contractor placement activity was down 17% and permanent placement activity was in line with 2012. As a consequence, recruitment and contracting revenues decreased by 13.7% from $41.4 million to $35.7 million.

People Solutions total revenue ($M)

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OPERATING AND FINANCIAL REVIEW (CONTINUED)

OUR STRATEGY AND PLAN FOR 2014

The strategic planning process for 2014 identified that the ways technology can be consumed are transforming rapidly, and that in order to remain relevant and maintain growth, Data[#] 3 needs to adapt and transform also.

Our customers’ transformation

We see our customers’ transformation occurring at two levels – the business user and the IT department. We see the catalyst for transformation being the combination of the end user device - the smartphone, tablet and notebook - and ‘apps’ drawn from the public cloud.

For the business user:

a. Prior to this combination of end user devices and ‘apps’, the business user participated in delivering company objectives via IT systems that were defined and delivered by the IT department
b. With this combination of end user devices and ‘apps’, the business user has enjoyed a consumer-like experience using ‘apps’ and data stored in the cloud and functions more like a ‘consumer in the business’
c. We believe there will be reconciliation between this consumer-like behaviour within the business and the requirement for enterprise resilience and integrity. We see today’s ‘consumer in the business’ transforming to a ‘Business Consumer’ – a user operating in an integrated information and applications environment with a consumer-like experience that drives productivity while maintaining the enterprise characteristics of resilience and integrity.

For the IT department:

a. Prior to this combination of end user devices and ‘apps’, the IT department was almost exclusively technology focused. They were ‘the tech team’
b. With this combination of end user devices and ‘apps’, the tech team has come under serious cost and relevancy pressure and today has transformed to a more modern IT department – still primarily technology skilled and focused, but with an understanding that business outcomes via technology are increasingly important
c. Driven by the need to respond to the transformation of the business user to Business Consumer, we see today’s IT department transforming to what could be called ‘Business IT’ – an integrator, enabler and advisor targeted at strategic business challenges and opportunities; requiring ‘consulting’ capabilities to have ‘business’ discussions; and transitioning from technology led to business outcome led. And we see their technology systems environment transforming from primarily on-premise to what we believe will be called ‘Hybrid IT’ – an integrated combination of on-premise, outsourced and cloud.

Data[#] 3’s transformation

As our customers transform we see them valuing an engagement that spans Business IT and the Business Consumer; offers thought leadership, consistency and flexibility; and lowers risk through supplier longevity, experience and financial strength. And we see them valuing solutions that deliver business outcomes; transform the user experience to that of a Business Consumer; transform the IT department to Business IT; and deliver and leverage returns from their Hybrid IT assets.

Our transformation and the skills we develop and solutions we offer must align with our customers’ transformation.

Our plan

The foundations for our plans are our vision, our core values and our high level strategy. We have assessed that these remain relevant and are essentially unchanged.

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

Our core values guide how we behave:

Honesty & integrity
Respect & trust
Collaboration & teamwork
Excellence, agility & innovation
� Take responsibility & go the extra mile.

Data[#] 3 Limited | Operating and financial review 2013 | 8

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OUR STRATEGY AND PLAN FOR 2014 (CONTINUED)

Our strategy remains to unite outstanding solutions, remarkable people and organisational excellence through our Solutions Framework to deliver customer success. Doing so consistently over time will deliver us exceptional performance.

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To guide our transformation, our plan for 2014 – 2016 has five strategic priorities which seem simple and obvious at the highest level but are supported by a number of targets to be achieved by 2016 and a number of milestones to be achieved in 2014. The strategic priorities are:

Our plan must respond to our customers’ changing circumstances
Our solutions must help our customers achieve their business objectives in a changing environment
Our people must continue to be the best in the industry and Data[#] 3 must be the right organisation for them
We must simplify our business, move quickly with change and opportunity and continually improve operational efficiency
Performance must maximise returns to shareholders as we invest year on year to build a sustainable, high performance organisation.

The milestones to be achieved in 2014 are built into the business unit plans and our people’s performance plans.

In relation to the market in which we operate, we see our fortunes continuing to be largely susceptible to economic cycles which will remain unchanged in 2014 but with the potential to improve thereafter. We see expenditure on business technology solutions increasingly changing from capital to operating expense and we see the environment remaining aggressive for the best people and competitive on price and hence margin.

Executing our plan in 2014

We have implemented a new organisational model for 2014. It is simplified, efficient and more scalable; better aligned to our customers’ needs and transformation; able to sell and deliver solutions across our Technology Consumption Model – product to cloud; and it provides a leveraged cost structure and an integrated and costeffective ’back-office’.

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OPERATING AND FINANCIAL REVIEW (CONTINUED)

OUR STRATEGY AND PLAN FOR 2014 (CONTINUED)

The new model features three new lines of business and a new consulting business.

Software Solutions

This line of business extends the long success achieved by the Software Licensing business to include project and application development services. Its solutions extend from on-premise to cloud and span from the sale and asset management of licensed software; to its customisation, deployment and management; and to enhancing productivity for the Business Consumer.

Key initiatives intended to underpin performance of this business in 2014 include:

Improving the internet portal experience for our customers for purchasing, asset registration/management, and renewals
Establishing partnering relationships that improve the competitiveness and breadth of our solutions
Improving the sale process to articulate and sell the value proposition from product to cloud
Leveraging the skill of our services people to enhance sales success
Adjusting our business model to optimise returns from partner channel programs
Simplifying performance measurement and reporting.

The major areas of risk to this business are:

Continuing changes in partner channel programs and incentives
Pricing pressure driven by competitive bidding, and services moving off-shore.

We are planning for relatively flat sales of licensed software offset by growth in services.

Infrastructure Solutions

This line of business consolidates hardware procurement with contract maintenance and infrastructure design, deployment and management services. Its solutions extend from on-premise to cloud and span from the sale, asset management and contract support of IT hardware products; to infrastructure design, deployment and management; to unified communication and collaboration for the Business Consumer; and Hybrid IT for Business IT services.

Key initiatives that are intended to underpin performance of this business in 2014 include:
Improving the sales process to articulate and sell the value proposition from product to cloud
Optimising returns from partner channel programs
Capitalising on our automated supply chain to increase sales of hardware under contract
Including ROI models in all solutions
Enhancing customer Service Level Agreement reporting
Simplifying performance measurement and reporting.
The major areas of risk to this business are:
Continuing changes in partner channel programs and incentives
Pricing pressure driven by competitive bidding.

We are planning for some growth in both product and services but at higher cost as market and competitive pressure increases and customers continue to progress slowly into Hybrid IT.

Managed Solutions

The formation of Managed Solutions consolidates the continuum of our ‘services delivered by people’ into one business. Its solutions extend from on-premise to cloud and span the selective sourcing under contract of permanent and contract labour; labour augmentation; to field services for end user computing support; onsite and remote Hybrid IT Service Management including a 24x7 domestic, ITIL based service desk; and to full cloud services, brokerage and integration. Managed Solutions is also the delivery arm for Software and Infrastructure Solutions for service desk and cloud solutions.

Data[#] 3 Limited | Operating and financial review 2013 | 10

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OUR STRATEGY AND PLAN FOR 2014 (CONTINUED)

Key initiatives that are intended to underpin performance in 2014 include:

Expanding our presence in the Western Australian market
Extension of the self-service and management portals for ‘as a service’ to incorporate and integrate other non-Data[#] 3 cloud platforms into our customers’ Hybrid IT environments
Increased investment in sales capability and capacity
Programs that ensure our existing customers enjoy the transformational benefits arising from the improved efficiencies available from our ITIL based IT service management tools.
The major areas of risk to this business are:
Loss of any existing major contracts
Pricing pressure driven by competitive bidding.

With the expectation that customers will continue to be driven to lower operating costs and minimise capital expenditure and with the addition of labour augmentation services and cloud integration, we see the potential for relatively solid growth in revenue across the Managed Solutions portfolio.

Consulting

This new business builds on the technical focus of our Strategic Consulting practice, adding services that provide roadmaps for our customers’ transformation to Business IT and the Business Consumer; improve business performance through technology; and augment and facilitate cost effective use of Data[#] 3’s business technology solutions.

This business is expected to enhance our market differentiation and to improve contribution to profit in FY14.

Shared Services and Corporate Services

We have consolidated all ‘back office’ and sales support processes into these two business units with the aim of reducing cost and integrating internal service delivery.

In summary

2013 saw the challenging market and the cost of investments made over the last three years impact and reduce performance. We see little change in the market in 2014. However, the investments we’ve made in a competitive range of solutions, strong customer and partner relationships, and broad geographic access to the market position us well as business conditions improve.

In 2014 our plan once again targets the best financial performance possible organically in all areas of the business. In addition we will remain watchful for partnering and acquisition opportunities mindful of the cultural and financial issues that accompany them. Our overall financial objective in 2014 is to at least match the performance of 2013.

Data[#] 3 Limited | Operating and financial review 2013 | 11

DIRECTORS’ REPORT

Your directors present their report on Data[#] 3 Limited and its subsidiaries (together referred to as “the company”, or “we, our, or us”) for the year ended 30 June 2013.

1. PRINCIPAL ACTIVITIES

We provide information technology solutions which draw on our broad range of products and services and our alliances with other industry providers. This includes software licensing and software asset management; the design, deployment and operation of desktop, network and data centre hardware and software infrastructure; and contract and permanent recruitment services.

There were no significant changes in the nature of our company’s activities during the year.

2. DIVIDENDS

		Cents	$’000
Final dividend recommended for the year ended 30 June 2013		3.55	5,466
Dividends paid in the year:
	Interim for the year ended 30 June 2013	3.45	5,312
	Final forthe yearended 30 June2012	3.55	5,466
			10,778

3. OPERATING AND FINANCIAL REVIEW

Information on the operations and financial position of the group and its business strategies and prospects is set out in the attached Operating and Financial Review, as follows:

	Page
Whole of company performance	1
Review of financial position	4
Operating results by state	5
Operating results by area of specialisation	6
Our strategy and plan for 2014	8

4. BUSINESS STRATEGY

Our vision is to remain 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.

For more information on our business strategy please refer to page 8 of the attached Operating and Financial Review.

5. EARNINGS PER SHARE

	2013	2012
	Cents	Cents
Basic and diluted earnings per share	7.88	8.88

6. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

The company’s state of affairs did not change significantly during the year.

Data[#] 3 Limited | Financial report 2013 | 1

DIRECTORS’ REPORT (CONTINUED)

7. SIGNIFICANT EVENTS AFTER THE BALANCE DATE

No matter or circumstance has arisen since 30 June 2013 that has significantly affected, or may significantly affect:

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

8. LIKELY DEVELOPMENTS AND EXPECTED RESULTS

Information on likely developments and expected results is included in the attached Operating and Financial Review on pages 9-12.

9. DIRECTORS

The names and details of the company’s directors are set out below. Directors were in office for the entire financial year and remain in office at the date of this report.

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 Villa World Group (director from 2002 to 2012). Mr Anderson is also president of the Guide Dogs for the Blind Association of Queensland.

Special responsibilities:

Chairman of the board Member of audit and risk committee Chairman of remuneration and nomination committee

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

G F Boreham, AM, BEcon ( non-executive director)

Independent non-executive director since November 2011. Extensive experience in the IT industry, including 25 years at IBM, (Managing Director, IBM Australia, from 2006 to 2011 and various senior roles prior to 2006) and former Chair of the Australian Government’s Convergence Review. Currently Chair of Screen Australia (since 2008), and Chair of Advance (since August 2012).

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; immediate past Chairman and a current Director of the Australian Information Industry Association, the ICT industry’s peak representative body; and the inaugural Chairman of the Australian Rugby League Commission.

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 two other public companies: Cardno Limited (current director, since 2004) and Northern Energy Corporation Limited (former director in 2011).

Data[#] 3 Limited | Financial report 2013 | 2

DIRECTORS’ REPORT (CONTINUED)

9. DIRECTORS (CONTINUED)

Special responsibilities:

Chairman of audit and risk committee (from 30 May 2013, the date of his appointment) Member of audit and risk committee (prior to his appointment as Chairman) Member of remuneration and nomination committee

W T Powell, BEcon ( non-executive director)

Non-executive director since 2002. Executive Chairman of the company from its foundation in 1984 and then Managing Director from 1989 to 1996. Prior to 1984 had extensive experience in the IT industry and was 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 and risk committee (until 29 May 2013, the date of his resignation as Chairman) Member of audit and risk committee (from 30 May 2013)

Member of remuneration and nomination committee

Interests in shares

At the date of this report, the directors owned shares of Data[#] 3 Limited as follows:

	Number of
	ordinary shares
R A Anderson	600,000
G F Boreham	83,150
J E Grant	4,666,450
I J Johnston	600,000
W T Powell	3,800,000

Meetings of directors

The number of meetings of our board of directors (including meetings of the board committees) 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	Meetings of remuneration	Meetings of remuneration
			and risk committee		and nomination committee
	Meetings	Meetings	Meetings	Meetings	Meetings	Meetings
	attended	held *	attended	held *	attended	held *
R A Anderson	14	14	4	4	2	2
G F Boreham	14	14	**	**	**	**
J E Grant	13	14	**	**	**	**
I J Johnston	14	14	4	4	2	2
W T Powell	13	14	3	4	2	2

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 our Financial Controller or Chief Financial Officer 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 2007. He has served as our General Counsel since 2005 and is a member of the Queensland Law Society and Chartered Secretaries Australia.

Data[#] 3 Limited | Financial report 2013 | 3

DIRECTORS’ REPORT (CONTINUED)

11. REMUNERATION REPORT

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

Role of the remuneration committee

The remuneration and nomination committee is a separate committee of the board and is responsible for:

Data[#] 3’s remuneration, recruitment, retention and termination policies and procedures for senior executives
Senior executives’ remuneration and incentives
Superannuation arrangements
The remuneration for directors.

The committee’s objective in relation to remuneration policy is to motivate senior executives to pursue the long-term growth and success of Data[#] 3 and to demonstrate a clear relationship between senior executives’ performance and remuneration. The Corporate Governance Statement provides further information on the role of this committee.

Executives

The board and the remuneration committee address remuneration policies and practices generally, and determine remuneration packages and other terms of employment for our senior executives. Each year the board reviews executive remuneration and other terms of employment 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 our operations, achieving our strategic objectives, and increasing shareholder wealth.

The executive pay and reward framework has three components:

Base pay and benefits, including superannuation,
Short-term performance-related bonuses, and
Long-term incentives (applicable to the managing director only).

The combination of these comprises the executive’s remuneration.

Base pay

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

Short-term 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 2013 the proportion of the planned total executive remuneration for key management personnel that was performance-related was 30% (2012: 30%).

A major part of the bonus entitlement is determined by the actual performance against planned company 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 2013 the planned profit-related component represented 70% of the total executive bonuses (2012: 70%). Profit targets for some areas of the business were not met in 2013, resulting in reduced bonus payments calculated on a pro rata basis. The balance of the executive bonus entitlement is determined by performance against agreed non-financial objectives relevant to each individual.

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

Data[#] 3 Limited | Financial report 2013 | 4

DIRECTORS’ REPORT (CONTINUED)

11. REMUNERATION REPORT (CONTINUED)

Long-term incentives

Our managing director is eligible to earn a long-term incentive in the form of a cash payment. Details of the incentive are set out in Section C “Service agreements” below.

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 $500,000 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. Members of the board (non-executive directors) are paid a fixed remuneration comprising base fees, superannuation, and additional fees for those in the role of chair for the full board and chair of the audit and risk committee. 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 composed of four non-executive directors and one executive director. The board undertakes a periodic review of its performance and the performance of the board committees.

B Details of remuneration

Compensation paid, payable, or provided by the company or on behalf of the company, 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 company’s activities directly or indirectly. Comparative information is not shown for individuals who were not considered to be key management personnel in the previous year.

		Short-term	Short-term	Long-term	Long-term	Post- employment
		Cash salary and fees	Cash bonus	Long service	LTI	Super- annuation	Total	% perfor-
				leave				mance
		$	$	$	$	$	$	related
Non-executive directors
Anderson, R.	2013	103,500	-	-	-	9,315	112,815	-
Chairman	2012	103,500	-	-	-	9,315	112,815	-
Boreham, G.	2013	65,000	-	-	-	5,850	70,850	-
(appointed 9 November 2011)	2012	41,856	-	-	-	3,767	45,623	-
Johnston, I.	2013	63,250	-	-	-	5,693	68,943	-
	2012	63,250	-	-	-	5,693	68,943	-
Powell, W.T.	2013	74,750	-	-	-	6,728	81,478	-
	2012	74,750	-	-	-	6,728	81,478	-
Subtotals – non-executive	2013	306,500	-	-	-	27,586	334,086	-
directors	2012	283,356	-	-	-	25,503	308,859	-
Executive director
Grant, J.	2013	530,801	132,896	8,842	107,875	16,470	796,884	30.2
Managing Director	2012	530,801	133,679	8,861	-	15,775	689,116	19.4
Other key management personnel
Baynham, L.	2013	300,000	172,593	12,536	-	16,470	501,599	34.4
Group General Manager	2012	274,722	164,969	10,771	-	15,775	466,237	35.4
Hill, B. – Chief Financial	2013	234,000	97,516	7,004	-	16,470	354,990	27.5
Officer and Company Secretary	2012	222,815	94,348	8,368	-	15,775	341,306	27.6
Totals – key management	2013	1,371,301	403,005	28,382	107,875	76,996	1,987,559	20.3
personnel	2012	1,311,694	392,996	28,000	-	72,828	1,805,518	21.8

No director or executive received compensation in the form of share-based payments during the year ended 30 June 2013 (2012: nil).

Data[#] 3 Limited | Financial report 2013 | 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. Other major provisions of the contracts relating to remuneration of the managing director and the other key management personnel are as follows:

J Grant (Managing Director)

Five-year service agreement effective until 31 December 2015 unless terminated under the terms of the agreement.
A long-term incentive (LTI) is payable at the discretion of the board of directors based on Mr Grant’s performance over the term of the agreement assessed against agreed financial and non-financial targets. The board must consider whether and how much to accrue by way of LTI at least once each financial year. In 2013 the board approved an entitlement of $107,875 in relation to performance in the 2012 financial year. The total amount accrued over the term of the agreement may not exceed Mr Grant’s base salary (including statutory superannuation but excluding short-term performance-related bonuses) for the 2015 calendar year and is payable after 31 December 2015 or on the earlier termination of the agreement.
Termination notice of six months is required.
Payment of a termination benefit on early termination by the company, other than for gross misconduct, of twelve months of his packaged salary together with an additional amount representing the performancerelated bonus earned up to the date of termination. 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 and B Hill

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 2013 (2012: nil), no rights or options vested or lapsed during the year (2012: nil), and no rights or options were exercised during the year (2012: nil).

E Additional information

Relationship between remuneration and company performance

The overall level of executive reward takes into account the company’s performance over a number of years, with greater emphasis given to improving performance over the prior year. Since 2008, the our net profit has grown at a compounded average rate of 6.0% per annum, average executive remuneration has increased by a compounded average rate of 5.2% per annum, and total shareholder return has increased by an average rate of 26% per annum over this period.

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.

Data[#] 3 Limited | Financial report 2013 | 6

DIRECTORS’ REPORT (CONTINUED)

11. REMUNERATION REPORT (CONTINUED)

Name	Earned	Forfeited
	%	%
Baynham, L.	85%	15%
Grant, J.	85%	15%
Hill,B.	85%	15%

2012 Annual General Meeting

We received 89% “yes” proxy votes on our Remuneration Report for the 2012 financial year, and the vote at the AGM was a unanimous “yes”.

12. SHARES UNDER OPTION

We have no unissued ordinary shares under option at the date of this report. No share options were granted or exercised during the financial year and up to the date of this report.

13. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During the financial year, we paid a premium of $32,278 to insure the directors and members of the executive management team against any liability incurred by them in their capacity as officers, unless the liability arises out of conduct involving a lack of good faith. Our executive officers 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

Our company 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. We have rounded off amounts in the directors’ report and financial report 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

Pitcher Partners (formerly known as Johnston Rorke) continued as our auditor in 2013. We employ Pitcher Partners on assignments additional to its statutory duties where the firm’s expertise and experience with our company are important. Fees we paid or owed to the auditor for these non-audit services during the year are set out in Note 25 of the financial statements.

The board of directors has considered the position, and in accordance with the advice received from the audit and risk 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 and risk 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 .

Data[#] 3 Limited | Financial report 2013 | 7

DIRECTORS’ REPORT (CONTINUED)

16. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES (CONTINUED)

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

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

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R A Anderson Director

Brisbane

23 August 2013

Data[#] 3 Limited | Financial report 2013 | 8

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The Directors Data[#] 3 Limited 67 High Street TOOWONG QLD 4066

Auditor’s Independence Declaration

As lead auditor for the audit of the financial report of Data[#] 3 Limited for the financial year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been:

(i) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

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

PITCHER PARTNERS

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R C N Walker Partner Pitcher Partners

Brisbane

23 August 2013

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Data[#] 3 Limited | Financial report 2013 | 9

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 June 2013

		2013	2012
	Notes	$’000	$’000
Revenue
Sale of goods	2	639,644	689,060
Services	2	130,182	120,427
Other	5	1,216	1,903
		771,042	811,390
Expenses
Changes in inventories of finished goods		(1,076)	(971)
Purchase of goods		(571,812)	(624,204)
Employee and contractor costs directly on-charged (cost of sales on services)		(38,286)	(43,379)
Other cost of sales on services		(36,127)	(20,976)
Other employee and contractor costs		(90,220)	(87,878)
Telecommunications		(1,522)	(1,420)
Rent	6	(5,964)	(4,968)
Travel		(2,199)	(2,225)
Professional fees		(457)	(573)
Depreciation and amortisation	6	(2,036)	(1,128)
Finance costs	6	(282)	(249)
Other		(3,589)	(3,681)
		(753,570)	(791,652)
Profit before income tax expense		17,472	19,738
Income tax expense	7	(5,334)	(6,059)
Profit for the year		12,138	13,679
Other comprehensive income, net of tax		-	-
Total comprehensive income		12,138	13,679
		Cents	Cents
Basic earnings per share	8	7.88	8.88
Diluted earnings per share	8	7.88	8.88

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

Data[#] 3 Limited | Financial report 2013 | 10

CONSOLIDATED BALANCE SHEET

as at 30 June 2013

		2013	2012
	Notes	$’000	$’000
Current assets
Cash and cash equivalents	10	85,322	70,820
Trade and other receivables	11	108,084	135,883
Inventories	12	3,232	4,239
Other	13	2,603	2,222
Total current assets		199,241	213,164
Non-current assets
Property and equipment	14	6,249	6,196
Deferred tax assets	7	2,186	2,573
Intangible assets	15	7,166	4,723
Total non-current assets		15,601	13,492
Total assets		214,842	226,656
Current liabilities
Trade and other payables	16	164,919	165,602
Borrowings	17	695	639
Current tax liabilities		218	1,899
Provisions	18	1,734	1,433
Other	19	9,845	20,701
Total current liabilities		177,411	190,274
Non-current liabilities
Borrowings	17	1,158	1,853
Provisions	18	1,783	1,344
Other	19	616	671
Total non-current liabilities		3,557	3,868
Total liabilities		180,968	194,142
Net assets		33,874	32,514
Equity
Contributed equity	21	8,278	8,278
Retained earnings		25,596	24,236
Total equity		33,874	32,514

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

Data[#] 3 Limited | Financial report 2013 | 11

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2013

	Number of	Contributed	Retained	Total
	Ordinary	Equity	Earnings	Shareholders’
	Shares			Equity
	’000	$’000	$’000	$’000
Consolidated
Balance at 1 July 2011	153,975	8,278	21,875	30,153
Profit for the year	-	-	13,679	13,679
Othercomprehensiveincome,net oftax	-	-	-	-
Total comprehensive income	-	-	13,679	13,679
Payment ofdividends	-	-	(11,318)	(11,318)
Balance at 30 June 2012	153,975	8,278	24,236	32,514
Profit for the year	-	-	12,138	12,138
Othercomprehensiveincome,net oftax	-	-	-	-
Total comprehensive income	-	-	12,138	12,138
Payment ofdividends	-	-	(10,778)	(10,778)
Balance at 30 June 2013	153,975	8,278	25,596	33,874

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

Data[#] 3 Limited | Financial report 2013 | 12

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 30 June 2013

		2013	2012
	Notes	$’000	$’000
Cash flows from operating activities
Profit for the year		12,138	13,679
Depreciation and amortisation		2,036	1,128
Impairment of inventory		-	55
Bad and doubtful debts		-	288
Reversal of unused doubtful debts provision		(96)	-
Loss on disposal of property and equipment		38	22
Other		-	13
Change in operating assets and liabilities
(Increase)/decrease in trade receivables		32,009	(47,615)
Decrease in inventories		1,007	971
(Increase)/decrease in other operating assets		(4,495)	2,111
(Increase)/decrease in net deferred tax assets		387	(1,005)
Increase/(decrease) in trade payables		(1,968)	55,450
(Decrease) in unearned income		(10,885)	(3,324)
Increase in other operating liabilities		1,260	7,172
(Decrease) in current tax liabilities		(1,681)	(401)
Increase in provision for employee benefits		739	347
Net cash inflow from operating activities		30,489	28,891
Cash flows from investing activities
Payments for property and equipment	14	(1,604)	(2,730)
Payments for software assets	15	(2,966)	(391)
Net cash outflow from investing activities		(4,570)	(3,121)
Cash flows from financing activities
Payment of dividends	9	(10,778)	(11,318)
Finance lease payments	23	(639)	(588)
Net cash outflow from financing activities		(11,417)	(11,906)
Net increase / (decrease) in cash and cash equivalents held		14,502	13,864
Cash and cash equivalents, beginning of financial year		70,820	56,956
Cash and cash equivalents, end of financial year	10	85,322	70,820

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

Data[#] 3 Limited | Financial report 2013 | 13

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies we’ve adopted in the preparation of our financial report are set out below. These policies have been consistently applied to all the periods presented and have been applied consistently by all our entities, unless otherwise stated. The financial statements are for the consolidated entity consisting of Data[#] 3 Limited and its subsidiaries.

(a) Basis of preparation of financial report

We have prepared these general purpose financial statements in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. These financial statements have also been prepared under the historical cost convention. Data[#] 3 Limited is a for-profit entity for the purpose of preparing the financial statements.

Our financial statements are presented in Australian dollars and we have rounded all values to the nearest thousand dollars ($’000), unless otherwise stated.

Compliance with IFRS

Our consolidated financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Changes in accounting standards and regulatory requirements

There are a number of new and amended accounting standards issued by the AASB which are applicable for reporting periods beginning on 1 July 2012. We have adopted all the mandatory new and amended accounting standards issued that are relevant to our operations and effective for the current reporting period. There was no material impact on the financial report as a result of the mandatory new and amended accounting standards adopted.

(b) Principles of consolidation

These consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Data[#] 3 Limited (“company” or “parent entity”) as at 30 June 2013 and the results of all our subsidiaries for the year then ended. Our subsidiaries had no activity during the 2013 financial year and have no assets or liabilities, due to the corporate restructure carried out in the 2012 financial year. Therefore, Data[#] 3 Limited and its subsidiaries together are referred to in this financial report simply as “the company” or “we, us or our”.

Subsidiaries are all entities over which we have 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 we control another entity. Subsidiaries are consolidated from the date on which control is transferred to us and are deconsolidated from the date on which control is transferred from us. 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 companies we control 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 company.

(c) Foreign currency translation

We measure items included in our financial statements using the currency of the primary economic environment in which the entity operates (“the functional currency”). Our functional and presentation currency is Australian dollars.

We translate foreign currency transactions 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, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. As at balance sheet date we have not entered any hedge transactions, as our risk from foreigndenominated transactions is not material.

Data[#] 3 Limited | Financial report 2013 | 14

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Revenue recognition

We recognise and measure revenue at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. We recognise revenue for major business activities as follows:

(i) Sale of goods

We recognise revenue from the sale of goods when the goods are received at 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 we have objective evidence that all criteria for acceptance have been satisfied.

(ii) Rendering of services

We recognise revenue from services 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, we immediately recognise the excess of total costs over revenue as an expense.

(iii) Bundled sales

We offer certain arrangements whereby customers can purchase computer systems together with a multi-year servicing arrangement. For these sales, the amount recognised as revenue upon sale of the computer systems is the fair value of the system in relation to the fair value of the sale taken as a whole. The remaining revenue, which relates to the service arrangement, is recognised over the service period. We determine the fair values of each element based on the current market price of each of the elements when sold separately. Any discount on the arrangement is allocated between the elements of the contract based on the fair value of the elements.

(iv) Interest income

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

(v) Dividends

We recognise dividend income 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)).

(e) Income tax

Income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable 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.

We recognise deferred tax assets and liabilities 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.

We only recognise deferred tax assets for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to use those temporary differences and losses. We do not recognise deferred tax assets and liabilities 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.

Data[#] 3 Limited | Financial report 2013 | 15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Income tax (continued)

We recognise current and deferred tax 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. We only offset deferred tax assets and deferred tax liabilities if they relate to the same taxable entity and the same taxation authority, and a legally enforceable right exists to set off current tax assets against current tax liabilities.

Tax consolidation legislation

Data[#] 3 Limited and its wholly-owned Australian subsidiaries are part of a tax-consolidated group under Australian taxation law. Data[#] 3 Limited and the controlled entities in the tax-consolidated group continue to account for their own current and deferred tax amounts. These amounts are measured as if each entity in the tax-consolidated group continues to be a stand-alone taxpayer in its own right. Data[#] 3 Limited, as the head entity, immediately assumes current tax liabilities or assets and the deferred tax assets arising from unused tax losses and unused tax credits from controlled entities in the tax consolidated group, in addition to its own current and deferred tax amounts. The entities have also entered into tax sharing and funding agreements. Refer to note 7.

(f) Leases

We classify leases of property and equipment where the company, as lessee, has substantially all the risks and rewards of ownership 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. We include the corresponding rental obligations, net of finance charges, in other short-term and long-term payables. Lease payments are allocated between the liability and interest expense. We depreciate each leased asset on a straight-line basis over the shorter of the asset’s useful life or the lease term.

We classify leases in which a significant portion of the risks and rewards of ownership are retained by the lessor 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 we are required to return the premises to their original condition at the end of the lease, we record a provision for lease remediation equal to the present value of the estimated liability.

(g) Cash and cash equivalents

For purposes of the cash flow statement, 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, and bank overdrafts. We show any bank overdrafts within borrowings in current liabilities on the balance sheet.

(h) Trade receivables

Trade receivables, which are non-interest bearing and generally due for settlement within 30 days, are recognised initially at fair value and subsequently measured at amortised cost, less an allowance for impairment. We review collectability of trade receivables on an ongoing basis. Debts we know to be uncollectible are written off by reducing the carrying amount directly. We establish an allowance for impairment of trade receivables when there is objective evidence that we will not be able to collect all amounts due according to the original terms of the receivables. We consider significant financial difficulties of the debtor, default payments or debts more than 120 days overdue where there are not extenuating circumstances to be 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.

We recognise impairment losses in profit or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, we write it off against the allowance account. Subsequent recoveries of amounts previously written off are credited to other revenue in the statement of comprehensive income.

Data[#] 3 Limited | Financial report 2013 | 16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i) Inventories

Inventories are stated at the lower of cost and net realisable value. We assign costs to individual items of inventory on a specific identification basis 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

We use the acquisition method of accounting to account for all business combinations, regardless of whether we acquire equity instruments or other assets. Consideration for an acquisition comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the company. Consideration also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. We charge costs associated with the acquisition to expense as incurred. With limited exceptions, we initially measure identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination at their fair values at the acquisition date. On an acquisition-by-acquisition basis, we recognise 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.

We record as goodwill the excess of the consideration of the acquisition and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired (refer to note 1(o)). If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, we recognise the difference directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, we discount the amounts payable in the future to their present value as at the date of the exchange. The discount rate used is our incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

(k) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation; we test them annually for impairment, or more frequently if events or changes in circumstances indicate they might be impaired. We test other assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We recognise an impairment loss 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, we group together assets that cannot be tested individually 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, we aggregate CGUs to which goodwill has been allocated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. We allocate goodwill acquired in a business combination to groups of CGUs that are expected to benefit from the synergies of the combination.

(l) Non-current assets held for sale

We classify non-current assets or disposal groups 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.

Data[#] 3 Limited | Financial report 2013 | 17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l) Non-current assets held for sale (continued)

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. We present results of discontinued operations separately on the face of the statement of comprehensive income and the net cash flows attributable to discontinued operations separately on the cash flow statement.

(m) Investments and other financial assets

Our 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. We determine the classification of our investments at initial recognition and reevaluate this designation at each reporting date where appropriate. As at balance sheet date we have no financial assets at fair value through profit or loss or held-to-maturity investments or available for sale financial assets and have not entered any significant derivative contracts.

Recognition and derecognition

We recognise purchases and sales of investments on trade date. We initially recognise investments 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, we establish 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. We derecognise financial assets 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. We include 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 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.

We carry loans and receivables and held-to-maturity investments at amortised cost using the effective interest method. We calculate amortised cost 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. Impairment losses are measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), we reverse the previously recognised impairment loss and recognise it in profit or loss.

Data[#] 3 Limited | Financial report 2013 | 18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) Property and equipment

Property and equipment is stated at cost, less accumulated depreciation and amortisation. We depreciate our equipment 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. We calculate amortisation on leasehold improvements using the straight-line method over two to ten years.

If an asset is impaired, we immediately write down its carrying amount to its recoverable amount (refer to note 1(k)).

(o) Intangible assets

Goodwill

We initially measure goodwill on acquisition 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. We test goodwill for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired, and we write its value down when impaired (refer to note 1(k)).

Software

We capitalise costs incurred in purchasing or developing software where the software will provide a future financial benefit to the company. Costs of internally generated software that we capitalise from the date we have determined the software’s technical feasibility include external direct costs of materials and service and direct payroll and payroll-related costs of employees’ time spent on the project. Software assets are carried at cost less accumulated amortisation and impairment losses. We calculate amortisation using the straight-line method over the estimated useful lives of the respective assets, generally two to five years.

(p) Trade and other payables

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

(q) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs, and subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowing using the effective interest method. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless we have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(r) Financial guarantee contracts

We recognise financial guarantee contracts 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, we account for the fair values as contributions and recognise them as part of the cost of the investment.

Data[#] 3 Limited | Financial report 2013 | 19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Provisions

We recognise provisions when we have a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. We measure provisions at the present value of management’s best estimate of the expenditure required to settle the obligation at the balance sheet date, where the discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

If we are virtually certain that some or all of a provision will be reimbursed, such as under an insurance contract, we recognise the reimbursement as a separate asset. We present the expense relating to any provision in the statement of comprehensive income net of any reimbursement.

(t) 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 which is not expected to be settled within 12 months after the end of the period in which the employee renders the related service 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. We consider expected future wage and salary levels, experience of employee departures and periods of service when estimating the liability. We discount expected future payments 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.

We present the obligations as current liabilities in the balance sheet if we do not have an unconditional right to defer settlement for at least 12 months after the reporting date, regardless of when the actual settlement is expected to occur.

Post-employment benefits

We make contributions to defined contribution superannuation funds. We charge these contributions to expense as they are incurred.

Bonus plans

We recognise a liability for employee benefits in the form of bonus plans in other payables when we have 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. We measure liabilities for bonus plans at the amounts expected to be paid when they are settled; settlement occurs within 12 months.

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). As at balance sheet date we have not provided any share-based compensation benefits to our employees under these plans.

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.

Data[#] 3 Limited | Financial report 2013 | 20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(t) Employee benefits (continued)

At each balance sheet date, we revise our 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.

(u) Contributed equity

We classify ordinary shares as equity. Issued and paid up capital is recognised at the fair value of the consideration received. We recognise any transaction costs arising on the issue of ordinary shares directly in equity as a reduction of the share proceeds received.

(v) 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.

(w) Segment reporting

We report operating segments 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.

(x) Comparatives

We have reclassified comparative figures where necessary to ensure consistency with current year presentation.

(y) Corporate information

The financial report was authorised for issue in accordance with a resolution of the directors on 23 August 2013. Data[#] 3 Limited is a public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Data[#] 3 67 High Street TOOWONG QLD 4066

Data[#] 3 Limited | Financial report 2013 | 21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(z) 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 2013, are as follows:

Standard/Interpretation	Application	Application	Application
	date of	date	for
	Standard(i)	the group(i)
AASB 9_Financial Instruments - revised_and consequential amendments to other	1 January	1 July	2015
*accounting standardsarising from its issue***	2015
AASB 9 addresses the classification and measurement of financial assets and
liabilities. We 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; we do not expect to adopt the new standard before its operative
date.
AASB 10 Consolidated Financial Statements (including AASB 2012-10	1 January	1 July	2013
amendments), AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in	2013
Other Entities, revised AASB 127 Separate Financial Statements and AASB 128
Investments in Associates and Joint Ventures and consequential amendments
to other accounting standards resulting from the revision/issuance of these
accounting standards
This suite of new and amended standards addresses the accounting for joint
arrangements, consolidated financial statements and associated disclosures. We
anticipate these standards will have no material impact on the financial statements
as we currently have no joint arrangements. The standards are available for early
adoption; we do not expect to adopt the new standards before their operative
date.
AASB 13_Fair Value Measurement_and consequential amendments to other	1 January	1 July	2013
*accounting standardsarising from its issue***	2013
The new standard replaces the fair value measurement guidance contained in the
various standards. It provides guidance on how to determine fair value by defining
fair value and providing a framework for measurement, but does not change when
an entity is required to determine fair value. It also expands the disclosures
required when fair value is used. We anticipate this standard will have no material
impact on the financial statements, as the process we use to apply fair value
measurement is confirmed by the new standard. Disclosures in our financial
statements may increase, however.

*AASB 119Employee Benefits – revised***	1 January	1 July 2013
These amendments introduce various modifications including changes to the	2013
measurement of defined benefit plans, change in the timing for recognition of
termination benefits and amend the definition of short-term and other long-term
employee benefits.We anticipatethere will be no significant impact on the amounts
recognised in our financial statements because our company policy requires accrued
annual leave to be taken each year (and historically this has occurred), and we do
not have a defined benefit plan or any foreseeable, material termination benefits
payable.

Data[#] 3 Limited | Financial report 2013 | 22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(z) Accounting standards not yet effective (continued)

Standard/Interpretation	Application	Application
	date of	date for
	Standard(i)	the group(i)
*AASB 2011-4Amendments to Australian Accounting Standards to Remove***	1 July 2013	1 July 2013
*Individual Key Management Personnel Disclosure Requirements*
This amendment removes individual key management personnel (KMP) disclosure
requirements from AASB 124 to eliminate replication with the_Corporations Act_
_2001_and achieve consistency with the international equivalent standard. The KMP
disclosures will be reduced as a result of these amendments, but there will be no
impact on the amounts recognised in the financial statements.
*AASB 2012-2Amendments to Australian Accounting Standards – Disclosures –***	1 January	1 July 2013
*Offsetting Financial Assets and Liabilities*	2013
The amendments to AASB 7 increase the disclosure about offset positions, including
the gross position and the nature of the arrangements. We anticipatethere will be
no impact on our financial statements, as we currently do not offset any financial
assets and liabilities.
*AASB 2012-3Amendments to Australian Accounting Standards - Offsetting***	1 January	1 July 2014
*Financial Assets and Liabilities*	2014
The amendments to AASB 132 clarify when an entity has a legally enforceable right
to setoff financial assets and financial liabilities permitting entities to present
balances net on the balance sheet. We anticipatethere will be no impact on our
financial statements, as we currently do not offset any financial assets and liabilities.
*AASB 2012-5Amendments to Australian Accounting Standards arising from***	1 January	1 July 2013
*Annual Improvements 2009-2011 Cycle*	2013
These amendments introduce various changes to AASBs.We anticipatethese
changes will have no impact on our financial statements as they are not applicable
to our circumstances.
*AASB 2013-3Amendments to AASB 136 – Recoverable Amount Disclosures for***	1 January	1 July 2014
*Non-Financial Assets*	2014
These amendments introduce additional disclosure requirements where the
recoverable amount of impaired assets is based on fair value less cost of disposal.
There will be no impact on our disclosures as we do not determine the recoverable
amounts of impaired assets using fair value less cost of disposal.
*Interpretation 21Levies***	1 January	1 July 2014
This interpretation clarifies the accounting recognition of levies imposed by the	2014
government aside from income taxes and fines/breaches.We anticipatethis
interpretation will have no significant impact on our financial statements as it is not
applicable to our current or foreseeable circumstances.

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

Data[#] 3 Limited | Financial report 2013 | 23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. SEGMENT INFORMATION

Our business is conducted primarily in Australia. Our management team makes financial decisions and allocates resources based on the information it receives from our internal management system. We attribute sales 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 2013 (2012: 99%).

Segment information is prepared in conformity with our accounting policies as disclosed in note 1 and Accounting Standard AASB 8 Operating Segments . We do 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. Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an arm’s-length basis and are eliminated on consolidation.

We have identified two reportable segments, as follows:

Product - providing hardware and software for our customers' desktop, network and data centre infrastructure; and
Services - providing consulting, professional, managed and workforce recruitment and contracting services in relation to the design, implementation, operation and support of ICT solutions.

The following table shows summarised financial information by segment for the financial years ended 30 June 2013 and 2012.

	Product	Product	Services	Services	Total	Total
	2013	2012	2013	2012	2013	2012
	$’000	$’000	$’000	$’000	$’000	$’000
Revenue
Total revenue	639,644	689,586	142,155	131,286	781,799	820,872
Inter-segment revenue	-	(526)	(11,973)	(10,859)	(11,973)	(11,385)
External revenue	639,644	689,060	130,182	120,427	769,826	809,487
Costs of sale
Cost of goods sold	(572,888)	(625,175)			(572,888)	(625,175)
Employee and contractor costs
directly on-charged			(38,286)	(43,379)	(38,286)	(43,379)
Othercosts ofsales onservices			(36,127)	(20,976)	(36,127)	(20,976)
Gross profit	66,756	63,885	55,769	56,072	122,525	119,957
Other expenses	(45,770)	(41,913)	(46,796)	(46,554)	(92,566)	(88,467)
Segment profit	20,986	21,972	8,973	9,518	29,959	31,490
Unallocated corporate items
Interest and other revenue					1,216	1,903
Other employee and contractor costs					(8,152)	(8,761)
Rent					(1,680)	(1,517)
Depreciation and amortisation					(1,769)	(984)
Other					(2,102)	(2,393)
					(12,487)	(11,752)
Profit before income tax					17,472	19,738
Reconciliation of revenue:
External revenue					769,826	809,487
Unallocated corporate revenue:
Interest and other revenue					1,216	1,903
Consolidated revenue					771,042	811,390

Data[#] 3 Limited | Financial report 2013 | 24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 we believe to be reasonable under the circumstances.

Significant accounting estimates and assumptions

We are often required to determine the carrying amounts of certain assets and liabilities 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

We determine 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 15.

NOTE 4. FINANCIAL RISK MANAGEMENT

Our business activities can expose us to a variety of financial risks: market risk (including foreign exchange risk, price risk, and cash flow and fair value interest rate risk), credit risk, and liquidity risk. Our overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on our financial performance. To date we have not used derivative financial instruments. We use sensitivity analysis to measure interest rate and foreign exchange risks, and aging analysis for credit risk. Risk management is carried out by our 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.

All our financial assets are within the loans and receivables category, and our financial liabilities are all within the financial liabilities recorded at amortised cost category.

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk arises for us when future commercial transactions and recognised assets and liabilities are denominated in a currency other than the Australian dollar. From time to time we make sales to customers who require the currency of settlement to be a foreign currency. At 30 June 2013 and 2012 our exposure to foreign currency risk was immaterial.

(ii) Price risk

We are not exposed to equity securities or commodity price risk.

(iii) Cash flow and fair value interest rate risk

Our exposure to cash flow interest rate risk arises predominantly from cash and cash equivalents bearing variable interest rates. Our borrowings bear a fixed interest rate and are carried at amortised cost, so we are not exposed to fair value interest rate risk. At balance date we maintained the following variable rate accounts:

	30 June	2013	30 June 2012	30 June 2012
	Weighted	Balance	Weighted	Balance
	average		average
	interest rate		interest rate
	%	$’000	%	$’000
Cash at bank and on hand	0.3%	6,322	0.3%	10,820
Deposits at call	3.3%	79,000	5.1%	60,000
Cash and cash equivalents	3.0%	85,322	4.5%	70,820

Data[#] 3 Limited | Financial report 2013 | 25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4. FINANCIAL RISK MANAGEMENT (CONTINUED)

(a) Market risk

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

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)
	2013	2012	2013 2012
	$000	$000	$000 $000
–0.25% (25 basis points) (2012: +0.25%)	(149)	124	(149) 124
–1.00% (100 basis points) (2012: –.75%)	(597)	(372)	(597) (372)

(b) Credit risk

Credit risk arises from the financial assets of our company, which comprise cash and cash equivalents and trade and other receivables. Our exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. We do not hold any credit derivatives to offset the credit exposure. We have 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. We set risk limits for each individual customer in accordance with parameters set by the board. These limits are regularly monitored.

Specific information as to our credit risk exposures is as follows:

Cash and cash equivalents are maintained at one large financial institution.
During the 2013 year, sales to one government customer comprised 3% of revenue (2012: 8%).
There are a number of individually significant debtors. At 30 June 2013, one government debtor comprised 7% of total debtors, (2012: 25%) and the ten largest debtors comprised approximately 34% of total debtors (2012: 47%), of which 74% were accounts receivable from a number of government customers (2012: 82%).
Generally our customers do not have independent credit ratings. Our risk control procedures assess the credit quality of the customer taking into account its financial position, past experience and other factors. We set individual risk limits based on internal or external ratings in accordance with limits set by the board. Our credit management department regularly monitors compliance with credit limits. Management believes the credit quality of our customers is high based on the very low level of bad debt write-offs experienced historically. There were no bad debt write-offs in 2013, and in 2012 bad debt write-offs as a percent of the trade receivables carrying amount was 0.2%.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. We aim to maintain flexibility in funding by keeping committed credit lines available. We manage liquidity risk by monitoring cash flows and ensuring that adequate cash and unused borrowing facilities are maintained.

At reporting date we had used $2,578,000 (2012: 1,854,000) of the multi-option financing facility for bank guarantees and our corporate credit card facility and had access to the following undrawn borrowing facilities at the reporting date:

	2013	2012
	$’000	$’000
Multi-option bank facility	8,422	9,146

The multi-option facility is a comprehensive borrowing facility which includes a bank overdraft facility and is subject to certain financial undertakings. The facility is subject to annual review. Interest is variable and is charged at prevailing market rates. The weighted average interest rate for the year ended 30 June 2013 was 6.7% (2012: 8.0%).

Data[#] 3 Limited | Financial report 2013 | 26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4. FINANCIAL RISK MANAGEMENT (CONTINUED)

(c) Liquidity risk (continued)

Maturity of financial liabilities

The table below categorises our financial liabilities into relevant maturity groups based on their contractual maturities, calculated as their undiscounted cash flows. All the financial liabilities are non-derivative.

	Less than	6 – 12	Between 1	Between 2	Total	Carrying
	6 months	months	and 2	and 5	contractual	amount
			years	years	cash flows
	$’000	$’000	$’000	$’000	$’000	$’000
At 30 June 2013
Trade and other payables	164,919	-	-	-	164,919	164,919
Financeleaseliabilities	412	412	824	412	2,060	1,853
	165,331	412	824	412	166,979	166,772
At 30 June 2012
Trade and other payables	165,602	-	-	-	165,602	165,602
Finance lease liabilities	412	412	824	1,236	2,884	2,492
	166,014	412	824	1,236	168,486	168,094

(d) Net fair values

The carrying amounts of financial assets (net of any provision for impairment) and current financial liabilities approximate net fair value primarily because of their short maturities. The carrying amount of the non-current borrowing approximates fair value because the interest rate applicable to the borrowing approximates current market rates.

	2013	2012
	$’000	$’000
NOTE 5. OTHER REVENUE
Interest	1,090	1,685
Other recoveries	126	218
	1,216	1,903
NOTE 6. EXPENSES
Cost of goods sold	572,888	625,175
Depreciation and amortisation of property and equipment (note 14)	1,513	927
Amortisation of intangibles (note 15)	523	201
	2,036	1,128
Employee benefits expense	82,426	79,067
Termination benefits expense	414	663
Defined contribution superannuation expense	6,219	6,024
Other charges against assets
Impairment of trade receivables (note 11)	-	288
Impairment of inventory	-	55

Data[#] 3 Limited | Financial report 2013 | 27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

	2013 2012
	$’000 $’000
NOTE 6. EXPENSES (CONTINUED) Rental expenses on operating leases Minimum lease payments Straight lining lease rentals Rental expenses–other	4,162 3,528 413 389 1,389 1,051
	5,964 4,968
Finance costs Interest and finance charges paid/payable Unwinding of discount on provisions and other payables	268 236 14 13
	282 249
Loss on disposal of property and equipment NOTE 7. INCOME TAX Income tax expense The major components of income tax expense are: Current income tax expense Deferred income tax relating to the origination and reversal of temporary differences Adjustments for current tax of prior years Foreign dividends tax	38 22 4,947 6,965 387 (932) - (38) - 64
Income tax expense	5,334 6,059
A reconciliation between income tax expense and the product of accounting profit before income tax multiplied by the company’s applicable income tax rate is as follows: Accounting profit before income tax	17,472 19,738
Income tax calculated at the Australian tax rate: 30% (2012: 30%) Tax effect of amounts which are not deductible in calculating taxable income: Non-deductible items Other	5,242 5,921 92 112 - 64
Under(over) provision inprioryear	5,334 6,097 - (38)
Income tax expense	5,334 6,059

We paid income taxes of $6,500,000 during financial year 2013 (2012: $7,257,000).

Data[#] 3 Limited | Financial report 2013 | 28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7. INCOME TAX (CONTINUED)

	Balance sheet	Balance sheet	Statement	of
			comprehensive	income
	2013	2012	2013	2012
	$’000	$’000	$’000	$’000
Deferred income tax
Deferred income tax for the group comprises:
Deferred tax assets
Accrued liabilities	1,928	1,691	237	320
Provisions	1,055	876	179	104
Lease incentive liability	253	260	(7)	(60)
Other	11	12	(1)	5
	3,247	2,839	408	369
Deferred tax liabilities
Lease incentive assets	(138)	(145)	7	30
Other	(923)	(121)	(802)	533
	(1,061)	(266)	(795)	563
Net deferred tax assets	2,186	2,573
Deferred income tax revenue			(387)	932

No tax losses are available for offset against future taxable profits (2012: nil).

Tax consolidation legislation

Data[#] 3 Limited and its wholly-owned Australian subsidiaries have implemented the tax consolidation legislation as of 1 July 2003. The accounting policy in relation to this legislation is disclosed in note 1(e). Refer to note 26 in relation to the parent entity’s purchase of its subsidiaries’ assets and liabilities. At year end the subsidiary companies had not yet been liquidated, therefore the tax-consolidated group remained in existence.

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 whollyowned subsidiaries in the case of a default by Data[#] 3 Limited.

Data[#] 3 Limited | Financial report 2013 | 29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

		2013	2012
		Number	Number
NOTE 8. EARNINGS PER SHARE
(a) Weighted average number of shares
Weighted average number of ordinary shares for share	basic and diluted earnings per	153,974,950	153,974,950

(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 2013 or 2012; therefore there was no impact on the calculation of diluted earnings per share.

		2013	2012
		$’000	$’000
NOTE 9. DIVIDENDS
Dividends paid on ordinary shares during the year
Final fully franked dividend for 2012: 3.55c per share (2011: 3.9c)		5,466	6,006
Interim fullyfranked dividendfor 2013:3.45c pershare	(2012:3.45c)	5,312	5,312
		10,778	11,318
Dividends declared (not recognised as a liability at year end)
Final fullyfranked dividend for 2013: 3.55c (2012: 3.55c)		5,466	5,466
The tax rate at which dividends paid have been franked	is 30% (2012: 30%).
Dividends declared will be franked at the rate of 30% (2012: 30%).
Franking credit balance
Franking credits available for subsequent financial years	for the consolidated and
parent entitybased on a tax rate of 30% (2012: 30%)		17,550	15,395
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 $2,343,000
(2012: $2,343,000).
NOTE 10. CASH AND CASH EQUIVALENTS
Cash at bank and on hand		6,322	10,820
Deposits at call		79,000	60,000
		85,322	70,820

Data[#] 3 Limited | Financial report 2013 | 30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

	2013	2012
	$’000	$’000
NOTE 11. TRADE AND OTHER RECEIVABLES
Trade receivables	100,700	132,756
Allowance for impairment (a)	-	(143)
	100,700	132,613
Other receivables (b)	7,384	3,270
	108,084	135,883

(a) Allowance for impairment

We did not recognise any impairment loss in the current year (2012: $288,000). Impairment amounts are included in other expense in the statements of comprehensive income. Movements in the provision for impairment loss were as follows:

	$’000
Carrying amount at 1 July 2011	120
Provision for impairment recognised during the year	288
Receivables written off duringtheyear	(265)
Carrying amount at 30 June 2012	143
Unused provision reversed during the year	(96)
Receivables written off during the year	(47)
Carrying amount at 30 June 2013	-

Our ageing of overdue trade receivables as at 30 June 2013 is as follows:

	2013		2012
	Considered	Past due	Considered	Past due
	impaired	but not	impaired	but not
		impaired		impaired
	$’000	$’000	$’000	$’000
31-60 days	-	8,037	-	11,267
61-90 days	-	2,775	-	1,330
91-120 days	-	578	-	538
+120 days	-	1,113	143	2,943
	-	12,503	143	16,078

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 account has been placed on hold where deemed necessary until full payment is made. Each of these debtors has been contacted, and we are satisfied that payment will be received in full.

(b) Other receivables

These amounts generally arise from accrued rebates or transactions outside our usual operating activities. Interest is normally not charged, collateral is not normally obtained, and the receivables are normally due within 30 days of recognition. None of these receivables are past due.

Data[#] 3 Limited | Financial report 2013 | 31

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

	2013	2012
	$’000	$’000
NOTE 12. INVENTORIES
Goods held for sale – at cost	3,232	4,239
Inventories recognised as expense in cost of goods sold during the year ended 30
June 2013 amounted to $572,888,000 (2012: $625,175,000).
NOTE 13. OTHER CURRENT ASSETS
Prepayments	2,509	2,075
Security deposits	94	147
	2,603	2,222
NOTE 14. PROPERTY AND EQUIPMENT
Leasehold improvements – at cost	8,661	7,936
Accumulated amortisation	(2,622)	(1,894)
	6,039	6,042
Equipment – at cost	602	790
Accumulated depreciation	(392)	(636)
	210	154
	6,249	6,196
(a) Assets in the course of construction
The carrying amounts of the assets disclosed above include the following
expenditure in relation to leasehold improvements which are currently in the course
of construction:
Leasehold improvements	535	855
(b) Leased assets
Leasehold improvements include the following amounts where we are a lessee
under a finance lease:
Cost	3,380	3,380
Accumulated depreciation	(873)	(535)
Carrying amount	2,507	2,845

Data[#] 3 Limited | Financial report 2013 | 32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14. PROPERTY AND EQUIPMENT (CONTINUED)

Leasehold improvements	Equipment Total
$’000	$’000 $’000
Carrying amount at 1 July 2011 4,255 Additions 2,634 Disposals (22) Depreciation and amortisation expense (825)	160 4,415 96 2,730 - (22) (102) (927)
Carrying amount at 30 June 2012 6,042	154 6,196
Additions 1,463	141 1,604
Disposals (38)	- (38)
Depreciationand amortisationexpense (1,428)	(85) (1,513)
Carrying amount at 30 June 2013 6,039	210 6,249

	2013 2012
	$’000 $’000
NOTE 15. INTANGIBLE ASSETS Goodwill – at cost Accumulatedimpairment	4,919 4,919 (587) (587)
	4,332 4,332
Software assets – at cost Accumulated amortisation and impairment	1,996 1,289 (1,184) (898)
	812 391
Internally generated software assets – at cost Accumulated amortisationandimpairment	2,259 - (237) -
	2,022 -
	7,166 4,723
(a) Software under development The carrying amounts of the assets disclosed above include the following expenditure in relation to internally generated software assets which are currently being developed: Internally generated software assets	762 -

(a) Software under development
The carrying amounts of the assets disclosed above include the following
expenditure in relation to internally generated software assets which are currently
being developed:
Internally generated software assets	762	-

	Goodwill	Software	Internally	Total
		assets	generated software
	$’000	$’000	$’000	$’000
Carrying amount at 1 July 2011	4,332	201	-	4,533
Additions	-	391	-	391
Amortisation expense	-	(201)	-	(201)
Carrying amount at 30 June 2012	4,332	391	-	4,723
Additions	-	707	2,259	2,966
Amortisation expense	-	(286)	(237)	(523)
Carrying amount at 30 June 2013	4,332	812	2,022	7,166

Data[#] 3 Limited | Financial report 2013 | 33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15. INTANGIBLE ASSETS (CONTINUED)

Intangibles – software assets

Software assets include those we have developed ourselves and those we have purchased. Our software accounting policy is set out in note 1(o). We review the useful lives and potential impairment of all software assets at the end of each financial year.

Goodwill impairment testing

We have allocated goodwill to our cash-generating units (CGUs) according to operating segment, unless the segment did not exist at the time of the business acquisition which generated the goodwill.

We determined the recoverable amount of each operating segment based on a value-in-use calculation using cash flow projections on the basis of financial projections approved by senior management for financial year 2014. We applied a 12% before-tax discount rate to cash flow projections (2012: 12%). We have extrapolated cash flows beyond the 2014 financial year using an average growth rate of 7% (2012: 7%).

Key assumptions used in value-in-use calculations

We determined budgeted gross profits based on past performance and our expectations for the future. The discount rate was estimated based on our weighted average cost of capital at the date of impairment test. We believe that no reasonably possible change in any of the key assumptions would cause the carrying value of the goodwill to be materially different from its recoverable amount.

	2013	2012
	$’000	$’000
NOTE 16. TRADE AND OTHER PAYABLES
Current
Trade payables – unsecured	140,301	142,269
Otherpayables–unsecured	24,618	23,333
	164,919	165,602
NOTE 17. BORROWINGS
Current
Finance lease liabilities – secured(note 23(c))	695	639
Non–current
Finance lease liabilities – secured (note 23(c))	1,158	1,853

		2013			2012
	Current	Non-	Total	Current	Non-	Total
		current			current
	$’000	$’000	$’000	$’000	$’000	$’000
NOTE 18. PROVISIONS
Employee benefits	1,734	1,552	3,286	1,375	1,172	2,547
Lease remediation (note 1(f))	-	231	231	58	172	230
	1,734	1,783	3,517	1,433	1,344	2,777

Data[#] 3 Limited | Financial report 2013 | 34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 18. PROVISIONS (CONTINUED)

Movements in provisions other than employee benefits are as follows:

	Lease
	remediation
	$’000
Balance at 1 July 2011	194
Arising during the year	23
Increase to presentvalue	13
Balance at 30 June 2012	230
Arising during the year	7
Used during the year	(20)
Increase to present value	14
Balance at 30 June 2013	231

	2013	2012
	$’000	$’000
NOTE 19. OTHER LIABILITIES
Current
Unearned income	9,619	20,504
Leaseincentives	226	197
	9,845	20,701
Non–current
Lease incentives	616	671
Unearned income comprises amounts received in advance of the provision of
goods or services.
NOTE 20. SECURED LIABILITIES
Secured liabilities (current and non-current)
Financeleaseliabilities (note23(c))	1,853	2,492
Total secured liabilities	1,853	2,492

Assets pledged as security

All our assets are pledged as security for bank facilities (refer to note 4). Leasehold improvements subject to finance lease (refer to note 14) effectively secure lease liabilities as noted above.

Data[#] 3 Limited | Financial report 2013 | 35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21. CONTRIBUTED EQUITY

(a) Movements in ordinary share capital

There were no movements in ordinary share capital during the years ended 30 June 2012 and 2013.

(b) Ordinary shares

We have restated the number of shares shown on the consolidated statement of changes in equity to reflect the ten-for-one share split undertaken on 16 November 2011. All ordinary shares issued as at 30 June 2013 and 2012 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. Ordinary shares have no par value and the company has an unlimited amount of authorised capital. Subject to legislative requirements, the directors control the issue of shares in the company.

(c) Share options

No share options remain outstanding as at 30 June 2013 (refer to note 27).

(d) Capital management

When managing capital (equity), the board's objective is to ensure the company 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 2013, the board paid dividends of $10,778,000 (2012: $11,318,000). The board's intent for dividend payments is to maintain the historical 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.

We are not subject to any externally imposed capital requirements.

NOTE 22. CONTINGENT LIABILITIES

At 30 June 2013 we had provided bank guarantees totalling $1,860,000 (2012: $1,854,000) to lessors as security for premises we lease and $468,000 (2012: nil) to a customer for a contract performance. The guarantees will remain in place for the duration of the relevant contracts. Bank guarantees are secured by charges over all our assets.

Cross guarantees have been provided by the parent entity and its Australian wholly-owned subsidiaries as described in note 26.

	2013	2012
	$’000	$’000
NOTE 23. COMMITMENTS
(a) Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as
liabilities is as follows:
Leasehold improvements	1,036	665

Data[#] 3 Limited | Financial report 2013 | 36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

	2013	2012
	$’000	$’000
NOTE 23. COMMITMENTS (CONTINUED)
(b) Non-cancellable operating leases
Future minimum lease payments under non-cancelable operating leases are as
follows:
Within one year	4,770	3,742
Later than one year but not later than five years	13,910	10,756
Laterthan five years	5,058	6,973
	23,738	21,471
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.
(c) Finance leases
Commitments related to finance leases as at 30 June are payable as follows:
Within one year	824	824
Later than one year but not later than five years	1,236	2,060
	2,060	2,884
Less: futurefinance charges	(207)	(392)
Recognised as a liability	1,853	2,492
The present value of finance lease liabilities is as follows:
Within one year	695	639
Later than one year but not later than five years	1,158	1,853
	1,853	2,492

We lease our head office fitout under a finance lease which expires in December 2015 (refer to note 14(b)). The fitout becomes our property on expiry of the lease. The lease liability is secured by the fitout assets.

	2013	2012
	$	$
NOTE 24. KEY MANAGEMENT PERSONNEL
Key management personnel compensation is set out below.
Short-term employee benefits	1,774,306	1,704,690
Long-term employee benefits	136,257	28,000
Post-employment benefits	76,996	72,828
	1,987,559	1,805,518

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 2012 and 2013 financial years.

Data[#] 3 Limited | Financial report 2013 | 37

NOTES TO THE CONSOLIDATED 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 2011	changes*	30 June 2012		changes*	30 June 2013
Directors:
Anderson, R.	600,000	-		600,000	-	600,000
Boreham, G.	-	42,150		42,150	41,000	83,150
Grant, J.	7,635,200	(468,750)		7,166,450	(2,500,000)	4,666,450
Johnston, I.	600,000	-		600,000	-	600,000
Powell, W.T.	4,000,000	(100,000)		3,900,000	(100,000)	3,800,000
Other executives:
Baynham, L.	516,000	16,650		532,650	-	532,650
Hill, B.	500,000	16,650		516,650	-	516,650
	13,851,200	(493,300)		13,357,900	(2,559,000)	10,798,900

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

No shares were granted to key management personnel during the year as compensation (2012: nil) nor were any issued on exercise of options (2012: nil). There has been no movement in key management personnel share-holdings 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. We engage Wood Grant & Associates Pty Ltd to assist with design and production of our annual financial reports. These transactions are made at arms’ length on normal commercial terms and conditions and at market rates. There were no other transactions during the year with key management personnel or their personally related entities.

	2013 2012
	$ $
Amounts recognised as expense Other expense	19,400 19,400
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 and other assurance services Audit and review of financial statements IT controls review services	138,000 130,000 26,500 -
	164,500 130,000
Non-audit services Acquisition due diligence services Taxcompliance services	8,900 20,000 6,700 8,200
	15,600 28,200
Total remuneration	180,100 158,200

No remuneration was paid to related practices of Pitcher Partners. We employ Pitcher Partners on assignments additional to its statutory duties where the firm’s expertise and experience with our company are important.

Data[#] 3 Limited | Financial report 2013 | 38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 26. RELATED PARTIES

Wholly–owned group

The consolidated financial statements include the financial statements of Data[#] 3 Limited (being the ultimate parent entity) and the subsidiaries listed in the following table.

Name of entity	Country of	Equity holding
	formation	(ordinary shares)
	or incorporation
		2013 2012
		% %
Data#3 Business Systems Pty Ltd	Australia	100 100
Gratesand PtyLtd	Australia	100 100

We streamlined our corporate structure effective 31 December 2011. On that date the businesses, including all assets and liabilities, of Data[#] 3 Business Systems Pty Ltd and Gratesand Pty Ltd were transferred to Data[#] 3 Limited at cost and all intercompany loans were forgiven. The impact on consolidated profit and loss resulting from the liquidation and restructure was not material. At 30 June 2013 we were in the process of winding up the two subsidiaries. Summarised financial information for the parent entity is as follows:

		2013	2012
		$’000	$’000
	As at 30 June
Current assets		199,241	213,164
Total assets		210,510	222,324
Current liabilities		177,411	190,274
Total liabilities		180,968	194,142
Shareholders’ equity
	Contributed equity	8,278	8,278
	Retained earnings	21,264	19,904
Total equity		29,542	28,182
	For the year ended 30 June
Net profit and total comprehensive income		12,138	25,040

Entities subject to class order relief

Data[#] 3 Limited, Data[#] 3 Business Systems Pty Ltd, and Gratesand Pty Ltd are parties to a deed of cross guarantee under which each company guaranteed 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. These companies represent a closed group for the purposes of the class order. The financial statements of the closed group approximate the consolidated financial statements.

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.

Data[#] 3 Limited | Financial report 2013 | 39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 27. SHARE-BASED PAYMENTS (CONTINUED)

Under the ESOP, all full-time and part-time employees of the company, 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)).

Where shares are issued to employees of subsidiaries within the group, the subsidiaries compensate Data[#] 3 Limited for the fair value of these shares. To 30 June 2013 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(t).

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 within the group, the subsidiaries compensate Data[#] 3 Limited for the fair value of these shares. To 30 June 2013 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 company, including directors, are eligible to participate in the plan.

No options were granted, exercised or outstanding under the plan during the year ended 30 June 2013 (2012: nil).

Data[#] 3 Limited | Financial report 2013 | 40

DIRECTORS’ DECLARATION

In the opinion of the directors:

(a) the financial statements and notes set out on pages 10 to 40 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 2013 and of its performance for the financial year ended on that date;
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the closed group identified in note 26 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 26.

Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The directors have been given the declarations by the managing director and chief financial officer required by section 295A of the Corporations Act 2001 .

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

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R A Anderson Director

Brisbane 23 August 2013

Data[#] 3 Limited | Financial report 2013 | 41

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DATA[#] 3 LIMITED

Report on the financial report

We have audited the accompanying financial report of Data[#] 3 Limited, which comprises the consolidated statement of financial position as at 30 June 2013, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, 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 of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB101 Presentation of Financial Statements , that the financial statements comply 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. Those 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 judgement, 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 company’s preparation of the financial report gives a true and fair view 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 company’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 .

Data[#] 3 Limited | Financial report 2013 | 42

Opinion

In our opinion:

(a) the financial report of Data[#] 3 Limited is in accordance with the Corporations Act 2001 , including:
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001 ; and
(b) the consolidated financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report comprising section 11 of the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion the Remuneration Report of Data[#] 3 Limited for the year ended 30 June 2013 complies with Section 300A of the Corporations Act 2001.

PITCHER PARTNERS

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R C N Walker Partner

Brisbane, Queensland 23 August 2013

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Data[#] 3 Limited | Financial report 2013 | 43

SHAREHOLDER INFORMATION

The shareholder information set out below was applicable as at 19 August 2013.

1. DISTRIBUTION OF EQUITY SECURITIES

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

	Number of shares	% of issued capital	Number of holders
1 to 1,000	220,609	0.14	367
1,001 to 5,000	3,589,588	2.33	1,092
5,001 to 10,000	7,674,476	4.98	925
10,001 to 50,000	38,264,459	24.85	1,607
50,001 to 100,000	20,418,544	13.26	268
100,001and over	83,807,274	54.43	165
	153,974,950	100.00	4,424

(b) There were 94 holders of less than a marketable parcel of ordinary shares.

2. TWENTY LARGEST QUOTED EQUITY SECURITY HOLDERS

Name		shares
	Number held	% of issued shares
Citicorp Nominees Pty Limited	11,018,336	7.16
HSBC Custody Nominees (Australia) Limited	5,055,415	3.28
J P Morgan Nominees Australia Limited	4,917,019	3.19
Oakport Pty Ltd	4,887,239	3.17
Citicorp Nominees Pty Limited	3,767,458	2.45
J P Morgan Nominees Australia Limited	3,665,482	2.38
Powell Clark Trading Pty Ltd	3,000,000	1.95
Wood Grant & Associates Pty Ltd	2,167,330	1.41
Thomson Associates Pty Ltd	2,000,000	1.30
Elterry Pty Ltd	2,000,000	1.30
National Nominees Limited	1,984,323	1.29
J E Grant	1,791,000	1.16
J T Populin	1,690,140	1.10
M R Esler	1,191,000	0.77
A J & L D O’Rourke	1,030,000	0.67
W T & E M Powell	1,000,000	0.65
Rubi Holdings Pty Ltd	991,507	0.64
W T Powell	800,000	0.52
T R Collin	720,000	0.47
M T Pitt	658,260	0.43
	54,334,509	35.29

Data[#] 3 Limited | Financial report 2013 | 44

SHAREHOLDER INFORMATION (CONTINUED)

3. SUBSTANTIAL SHAREHOLDERS

Substantial shareholders in the company are set out below:

Name	Number held	% of issued shares
Celeste Funds Management Limited	13,305,442	8.64
Commonwealth Bankof Australia	9,623,670	6.25

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 | Financial report 2013 | 45

AI assistant

DATA#3 LIMITED — Annual Report 2013

64791_rns_2013-08-22_28a1a2b8-9636-4bab-8184-90140b49a110.pdf

APPENDIX 4E

ASX Preliminary Final Report

Name of entity

ABN

Reporting period

Previous corresponding period

RESULTS FOR ANNOUNCEMENT TO THE MARKET

BRIEF EXPLANATION OF THE FIGURES REPORTED ABOVE

APPENDIX 4E (CONTINUED) for the year ended 30 June 2013

RETAINED PROFITS

ADDITIONAL DIVIDEND INFORMATION

TOTAL DIVIDEND PER SECURITY (INTERIM PLUS FINAL)

DATA[#] 3 LIMITED DIVIDEND REINVESTMENT PLAN

NET TANGIBLE ASSETS PER SECURITY

CONTROL GAINED OVER ENTITIES HAVING A MATERIAL EFFECT

LOSS OF CONTROL OF ENTITIES HAVING A MATERIAL EFFECT

APPENDIX 4E (CONTINUED) for the year ended 30 June 2013

DETAILS OF AGGREGATE SHARE OF PROFITS (LOSSES) OF ASSOCIATES AND JOINT VENTURE ENTITIES

COMPLIANCE WITH IFRS

COMMENTARY ON THE RESULTS FOR THE PERIOD

COMPLIANCE STATEMENT

OPERATING AND FINANCIAL REVIEW

WHOLE OF COMPANY PERFORMANCE

Product revenue and gross profit

OPERATING AND FINANCIAL REVIEW (CONTINUED)

WHOLE OF COMPANY PERFORMANCE (CONTINUED)

Services revenue and gross profit

Other revenue

Operating expenses

Cash flow

Performance against whole of company objectives

a. Remaining an employer of choice in our industry

OPERATING AND FINANCIAL REVIEW (CONTINUED)

WHOLE OF COMPANY PERFORMANCE (CONTINUED)

b. Solutions that stand out and a sales team enabled for success

c. To be disciplined and productive in the way we work

OPERATING AND FINANCIAL REVIEW (CONTINUED)

WHOLE OF COMPANY PERFORMANCE (CONTINUED)

d. To provide an outstanding customer experience

e. To deliver significant growth in project and annuity services

REVIEW OF FINANCIAL POSITION

OPERATING AND FINANCIAL REVIEW (CONTINUED)

REVIEW OF FINANCIAL POSITION (CONTINUED)

OPERATING RESULTS BY STATE

Queensland

New South Wales/Australian Capital Territory

Victoria

South Australia

Western Australia

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OPERATING RESULTS BY STATE (CONTINUED)

OPERATING RESULTS BY AREA OF SPECIALISATION

Licensing Solutions

Infrastructure Solutions

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OPERATING RESULTS BY AREA OF SPECIALISATION (CONTINUED)

People Solutions

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OUR STRATEGY AND PLAN FOR 2014

Our customers’ transformation

For the business user:

For the IT department:

Data[#] 3’s transformation

Our plan

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OUR STRATEGY AND PLAN FOR 2014 (CONTINUED)

Executing our plan in 2014

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OUR STRATEGY AND PLAN FOR 2014 (CONTINUED)

Software Solutions

Infrastructure Solutions

Managed Solutions

OPERATING AND FINANCIAL REVIEW (CONTINUED)

OUR STRATEGY AND PLAN FOR 2014 (CONTINUED)

Consulting

Shared Services and Corporate Services

In summary

DATA#3 LIMITED Annual Report 2013