Matt's comfortable existence at Hartley High is threatened when his past comes back to haunt him. Paul - Matt's competitive, over-achieving father - wants his son to return home to his family and a more settled existence. Paul is convinced that Deloraine has let Matthew run wild - a belief that is confirmed when he sees Matt's less than impressive school results. Paul's worst fears about his son become reality when - angered by his father's domineering approach - Matt uncharacteristically lashes out on the basketball court, punching teacher, Andrew. It looks like Steve is also in trouble. Everyone needs him: Con needs photographs for the school magazine, Allie needs help with finding a new flatmate, and Danielle wants to go to the movies with him. But Steve is missing. Everyone is angry and puzzled: it's just not like Steve to go disappear without a word. Where is he? The answer will change Hartley High and its students forever.

When Steve's death is investigated for a Coronial Report, the question arises of how well his sister, Allie, and friends actually knew him. Allie is convinced his death was an accident - a terrible tragedy - but Danielle is not so sure. Their different points of view inevitably lead to conflict especially when Allie allows Matt to move into Steve's old room. They're not the only ones having difficulty coming to terms with Steve's death. Con just can't face putting together the school paper which is to be a tribute to Steve. But that's because he has a secret. It is only the intervention of new teacher, Ronnie Brooks, that helps bring the gang together again, and resolve their feelings of grief over Steve's death.

It looks like time is up for Athol Pike Hartley's maths teacher. When the senior students should be learning linear progression and binomial theorem, Athol is more intent on teaching them how to win on the third race at Hawkesbury. Led by Matt, the students campaign to have Athol thrown out. One student who does appreciate Athol's practical approach to punting-as-mathematics is Katerina. She has just dented Con's car and is anxious to get some cash in a hurry. With Bolton's help, Katerina embarks on a gambling career. For once, Bolton is a man in demand. Danielle also needs money, and she turns to him for help. Unbeknownst to Bolton, Danielle wants the money to feed a burgeoning drug habit.

Allie and Bolton try to save Danielle from the lure of the drug dealer, Bunka, but not before Ronnie discovers drugs in her locker. Matt's elusive behaviour is explained when he breaks a promise to Deloraine and takes Allie to his hospital bed. Together they urge Ms Dyson to keep Danielle at Hartley High. Meanwhile, Katerina tries to revamp her image for Con's impending return with a new hair colour.

Bolton can hardly contain his excitement. Not only is he about to break his own blade-skating speed record, but he and the gang are about to go on the excursion of the century until things go horribly wrong. Bolton collides with the Principal June ""The Terminator"" Dyson, knocking her to the ground. Dyson confiscates Bolton's blades and the situation escalates when Bolton gets banned from the excursion and the other kids protest. It's the students vs Dyson. Who will win? Con is revamping the Shark Pool. He has hired a new manager, Antonio and business is booming. However, his paradise soon disappears when Con discovers that ""Ant"" wants Katerina and the Shark Pool for himself.

A dream comes true for Con when he is accepted as a student exchange in America. However, this causes problems with Katerina who, after taking a gamble on the relationship in the first place, now feels betrayed. Will Con actually leave Hartley High and Katerina, or will she be able to convince him to stay? Ronnie and Andrew have their first disagreement over teaching methods when Andrew lends Allie a lap top to help her with her work. Some of the other kids view it as favouritism, including Matt who allows his feelings to put another dent in his and Allie's already fragile relationship.

With Declan's past haunting him he has a huge chip on his shoulder and proves to be a menacing presence in the school. Could it be that Declan's attitude is the consequence of his bad reputation or is he indeed a bad apple that can't be disciplined? When Bolton decides to challenge Declan in an attempt to mark his territory he is surprised, and somewhat relieved, to find that Declan isn't interested in fighting him. Instead, Declan stands up for him when the teachers accuse him of stealing. Unfortunately, Declan is about to find out that the teachers have good reason to suspect Bolton. Meanwhile, Katerina is more determined than ever to be a successful dancer and, after a difficult clash of wills, Ronnie helps her understand that to be a successful dancer, she has to find some discipline and commitment. When Matt and Allie enlist Roberto's help to train them for the annual school cross country both Roberto and Allie have something to prove - Allie needs to show Matt and Roberto t

Her name is Stassy and she is an enigma. Stassy has no friends at Hartley and does not seem to want any. After school, she does not hang out with the gang, instead she is whisked away by her father in a tow truck - ""the beast"". The mystery around Stassy heightens when she accuses Andrew of sexually harassing her. Will one of Hartley's best teachers have to leave the school? Meanwhile, Katerina is doing her best to know Declan. Trying to talk to him doesn't work, so Katerina takes matters into her own hands when she swipes his wallet. Will Declan be charmed by this romantic gambit or will he kill Katerina? It seems the latter is the more likely reponse!

Ronnie has set her English class a Friday the 13th assignment; they are to watch tonight's horror movie - Frankenstein - and write an essay on confronting fear. The kids get in the mood for the spooky night by scaring the cleaner, a simple man by the name of Damien. However, when he is consoled by Danielle, he takes a liking to her that is threatening. Danielle is left at home alone to watch the movie while Allie and Matt head off to a party. Strange occurrences start - phones ringing with no one on the other end, doors banging, blackouts, etc. Could this be Bolton's idea of a joke, or is someone really out to get Danielle? Meanwhile, at the party, Matt is finds himself in a precarious situation when, driven by spontaneous lust, he kisses Stassy.

Danielle is disgusted when she and Declan stumble upon Matt and Stassy secretly kissing in the school gym. She wrestles with her conscience - she should tell her best friend Allie but is stopped by Declan who thinks they should mind their own business. Stassy has come to the bitter realisation that her moment with Matt was simply a diversion for him and that he is still in love with Allie. She is even more humiliated when she is asked to interpret Shakespeare's ""Much Ado About Nothing"" which reflects with bitter irony her own life. With pressure coming from all angles Stassy is bound to crack, but where will that leave Matt & Allie? When June Dyson's son Gary makes an unexpected visit he and Bolton forge an unlikely friendship. However, Bolton finds himself in the middle of a family feud and it seems that he could be the one to fix it.

Stassy borrows Allie's essay and copies it to hand in as her own but when Ronnie confronts her about the matching papers,

The senior class is participating in a work experience programme. Katerina is eager to go to work at an advertising agency but is disappointed to learn she has been given the job of receptionist.

An old flame from Andrew's past visits him en route to her new research job in Antarctica. While Katerina spends the evening managing the Shark Pool on her own, the rest of the gang works on a science project at the warehouse. Their work however comes to an abrupt end when Matt is electrocuted. Andrew accepts Dana's offer to join her research team and announces his departure from Hartley.

Bolton costs Hartley the first round of a debating competition by agreeing with his opponent, a girl from St. Catherine's Girl School [Allie's former school] whom he has a crush on. Bolton asks Linda out on a date but after his dinner with her parents, they forbid Linda to see him again. Hartley wins the second debate on the strength of Bolton's inspired concluding argument on the topic of racism, but afterwards Linda tells him that she will be moving back to Taiwan with her family. Stassy's home life interferes with her school work. Katerina flirts with Internet dating.

New teacher Tom Summers, son of school Superintendent James Summers, arrives at Hartley as Dyson begins a programme to teach the girls auto mechanics and the boys cooking.

After Danielle discovers the body of her deceased neighbour, Danielle and Allie decide to volunteer their time to an organisation that provides companions for senior citizens.

Mr. Summers announces a new Creative Marketing Project which sees the kids pair up to create and market environmentally friendly products from their original ideas. While Matt and Bolton push their ""Bolton's Beads"", Danielle markets Declan's repackaged musical talents, while Katerina's perfume endeavour fizzles. Meanwhile, Stassy and Allie's project is threatened by Stassy's father's steadfast refusal to allow his daughter to work after school or go to the final presentations at the Shark Pool. Stassy goes behind her father's back to attend the presentations but when he finds out (her picture was in the newspaper), their heated argument culminates in Stassy leaving home.

It's the day of the school's cross country race. Tom's girlfriend, book editor Vicki Hodge, looks at Allie's work and asks her to skip the race so they can work on the book together.

Charlie approaches Matt to ask for his help in becoming ""cool"". After the make-over, the girls's fawn all over the ""new"" Charlie, and a superficial Katerina quickly changes her mind about the former nerd, and despite her failed attempt to change his personality as well, the predestined couple finally hook up. A former bandmate from Declan's days in ""Rapscallion"" arrives with an offer to cut him in on her impending record deal. Unfortunately, their fateful partnership falls apart when it is revealed that she is only interested in using his songwriting talents to further her struggling career. Bolton helps Stassy through her first runway modelling session and the pair succeed in bringing down the house, quite literally in fact. Afterwards, Stassy admits to Bolton that she never wanted to model but was only looking for a way to earn money, and when her financial assistance comes through, she is able to give it up. Tom helps Allie finish her novel, entitled ""Clouds in the Water"", and annou

Stassy enraptures Bolton with her new-found mysticism but only manages to enrage the Petty Tyrant that is Katerina with displays of her so-called psychic abilities.

Dyson announces that Allie has won the state literary fellowship but Allie decides to turn down the award after having just learned that she is pregnant.

Bolton surprises everyone when he wins the prestigious Henry Lawson poetry contest.

Bolton goes to great lengths to prevent the closing of his uncle's bowling alley but receives little help from his friends. Dani and Declan win the school elections and want no part in Bolton's plan to create a school bowling programme and instead, Declan proposes fencing as an alternative sport for the school. Katerina accuses Stassy of stealing a lottery ticket the group bought in hopes of giving the prize money to Bolton's uncle and challenges her to a dual during Declan's fencing exhibition. June sits in on Ronnie's blind date with Roger, a real ""blue algae"" of a guy. When Bolton learns from his uncle that the Hartley Council is taking money from a developer interested in redeveloping his uncle's property, Bolton informs Dyson who convinces Roger to obtain the evidence needed to reveal the Council's corruption and save the bowling alley. A 50's gala is held at the bowling alley to celebrate. Matt decides to move in with Stassy at the warehouse.

With his parents making plans to divorce, Charlie falls into the clutches of a cult, the ""Deliverance Movement"". Katerina asks Stassy for her help (she was very briefly involved with them) to get Charlie out, and along with Matt, Bolton, and Declan, they rescue Charlie from the cult's commune. Helen is irked by Roberto's laissez-faire attitude towards their impending 20th anniversary and petty jealousies about one another's coworkers only add to the Bordino's domestic dilemmas. Feeling squeezed out by Matt's arrival at the warehouse, Danielle asks Declan about the possibility of moving in with him and his mother. Declan turns her down stating that his mother would feel embarrassed but Danielle quickly realises that Declan is not telling her the truth.

With HSC exams just a few short days away, Bolton rallies his classmates to make their Muck-Up Day an event to remember. Events however go horribly wrong when a fire breaks out in the school computer lab and Dyson eyes Matt as her prime suspect — and threatens to withdraw the entire class's HSC eligibility unless the culprit comes forward. Fortunately, while reviewing the video Charlie made of the days events, Katerina spots the real perpetrator (he's an old friend of Matt's who was kicked out of school and returned to settle the score) and Matt is exonerated. Charlie proposes to Katerina, but after her acceptance, they both begin to have second thoughts about the commitment and decide to put off their nuptials — much to Roberto's delight. The gang decide to create a time capsule to mark the year's end, and after burying it, Danielle announces to her friends that she's decided to take a reporter's job offered to her by a television station in Wollongong.