CANCOM SE — Interim / Quarterly Report 2006

Nov 30, 2006

INTERIM REPORT

Q3/2006

»Leading provider of IT infrastructure and professional services«

Table of contents

Section	Page
Tab le of contents	02
Prefac e – Key figures	03
Business Development Q3	04-07
1) Business development	04
2) Order position	05
3) Cash position	05
4) Significant changes in risks	05-06
5) Research and development activities	06
6) Investment	06
7) Employees	06
8) Outlook for the current financial year	06-07
9) Shareholdings	07
10) Notes on shares and stock positions	07
11) Significant events since the end of the quarter	07
Balance sheet	08-09
Income statement	10
Cash flow statement	11
Development of equity	12-13
Appendix	14-23

BALANCE SHEET	08-09
INCOME STATEMENT	10
CASH FLOW STATEMENT	11
DEVELOPMENT OF EQUITY	$12 - 13$
APPENDIX	14-23

Preface – Key figures

Dear Shareholders,

The autumn report of Germany's IT industry federation, BITKOM, forecasts that the ITC hardware and systems segment in Germany will shrink slightly this year and in 2007.

At the same time, BITKOM predicts that the IT services segment will grow considerably this year and in 2007, by 4.5 percent and

4.6 percent respectively.

As you know, we decided at an early stage to take advantage of this trend, and have gradually consolidated our position in the IT services segment. Our current staff structure provides impressive evidence of this development. Of our approximately 1,400 employees, almost 900 are now highly qualified IT advisers and technicians.

The first signs of the success of our strategic realignment can be seen clearly in the figures for the third quarter of 2006 – for example, our operating profit is more than twice as high as that in the third quarter of 2005.

The outlook for the future of our business is also good, and not only for the IT services segment. Our trading business should also benefit in the next financial year from the introduction of two new operating systems – Apple's 'Leopard' and Microsoft's 'Vista' – and the follow-up business in hardware.

However, there is a lack of publicity regarding the new operating systems. In addition, there is insufficient awareness among the public of the considerable strengthening of our position in the IT services segment, which should really result in a revaluation of our share.

We will therefore make it a priority to create more publicity regarding our operating successes.

Kind regards

Klaus Weinmann, CEO

Key figures

First 9 months 2006 in Euro million

Kennzahlenübersicht Neunmonatszahlen 2006 in Mio. Euro	First 9 months 01/01/ - 09/30/2006	First 9 months 01/01/ - 09/30/2005	Change	Key Figures First 9 months 2006 in Euro million
Konzernumsatz	178.7	158.2	+13.0 %	Consolidated Sales
Rohertrag	41.5	29.5	+40.9 %	Gross profit
EBITDA CANCOM Konzern	3.3	2.6	+28.2 %	EBITDA CANCOM Group
EBIT CANCOM Konzern	2.3	1.3	+77.7 %	EBIT CANCOM Group
Periodenüberschuss Konzern	1.1	0.6	+76.9 %	Consolidated result
	09/30/2006	12/31/2005
Bilanzsumme	81.6	71.9	+13.5 %	Balance Sheet Total
Eigenkapitalquote	39.4 %	37.6 %	+4.8 %	Equity Ratio
Mitarbeiter	1.287	567	+127.0 %	Workforce

Business development

1. Business development since the start of the year

The CANCOM Group has continued its profitable growth in the first nine months of the financial year 2006. We are particularly pleased with the development of the IT services business, which has been successfully expanded both in 2005 and in the current year.

Below is a summary of the figures for the first nine months of the financial year 2006:

Both sales revenues and operating profit increased further in the first nine months of the year as compared with the same period of 2005.

Consolidated sales revenues in the first nine months were 13 percent higher than in the first nine months of 2005, at € 178.7 million compared with € 158.2 million.

In Germany, sales revenues for the first nine months were 15.4 percent higher, at € 156.9 million, while in the rest of Europe sales revenues were slightly lower than in the same period of 2005, falling 1.8 percent to € 21.8 million.

Of the total consolidated sales revenues, € 69.2 million is attributable to the third quarter, in comparison with € 52.5 million in the third quarter of 2005. This represents an increase of 31.7 percent.

Consolidated gross profits for the first nine months of 2006 are 40.9 percent higher than in the same period of 2005, at € 41.5 million. Gross profits doubled in the third quarter of 2006 to € 19.9 million as the result of an acquisition.

Consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) were 28.1 percent higher in the first nine months than in the same period of 2005, at € 3.3 million.

The EBITDA results for the quarter were significantly higher than those of the third quarter of 2005, rising by 58.5 percent to € 1.5 million.

The consolidated operating profit was 77.7 percent higher in the first nine months of 2006 than in the same period of 2005, at € 2.3 million compared with € 1.3 million. For the third quarter of 2006, the consolidated operating profit was more than double that in the same period of 2005, rising from € 0.4 million to € 1.1 million (an increase of 142.6 percent). This gives CANCOM its best third-quarter operating results in the history of the Company.

At € 1.1 million, the consolidated net income for the first nine months of 2006 was up 76.9 percent on the same period of 2005. Of this amount, € 0.5 million was attributable to the third quarter – an increase of 471.3 percent on the same period of 2005. The consolidated balance sheet total as at 30 September 2006 has increased 13.5 percent as compared with 31 December 2005, from € 71.9 million to € 81.6 million, as a result of NSG Netzwerk-Service GmbH's being consolidated for the first time. Despite the increase in the balance sheet total, the equity ratio of the CANCOM Group has improved from 37.6 percent as at 31 December 2005 to 39.4 percent as at 30 September 2006.

There was a negative operating cash flow of € 3.2 million for the first nine months of 2006, caused partly by the strong growth. In the same period of 2005 there was also a negative operating cash flow of € 5.1 million.

In the fourth quarter we expect an improvement in the figure as a result of the traditionally strong year-end business.

Because of the consolidation of NSG Netzwerk-Service GmbH and the anticipated introduction of new operating systems by Apple and Microsoft at the start of next year, we expect a further improvement in sales revenues and profits over the next three to nine months.

Below is an overview of the most significant developments within the CANCOM Group during the third quarter of 2006:

Claims for damages against CANCOM IT Systeme AG withdrawn

In August, CANCOM IT Systeme AG reached an out-of-court agreement with Francois Prudent, President and Director-General as well as minority shareholder of eBizcuss.com S.A., a former affiliated company of CANCOM. Following this agreement, Mr Prudent received a one-off payment of € 200,000, for which a provision was made in the financial statements for the half-year ended 30 June 2006, so that it does not affect the results for the third quarter.

The terms of the settlement required the withdrawal of all claims and counterclaims for damages in connection with the dismissal of Mr Prudent as President and Director-General of eBizcuss.com S.A. and the sale of the company in 2003.

Mr Prudent had sued CANCOM IT Systeme AG for € 1.9 million for breach of his pre-emptive rights and for € 0.15 million for his dismissal as President and Director-General.

Announcements by CANCOM IT Systeme Aktiengesellschaft, Jettingen-Scheppach, Germany, in compliance with Section 25 (1) of the German Securities Act (Wertpapierhandelsgesetz, WpHG)

On 7 August 2006 we received notice in writing from Stefan Kober, 89343 Jettingen-Scheppach, Germany that his voting interest of 511,099 shares in CANCOM IT

Business development

Systeme AG had on 1 August 2006 fallen below the 5 percent threshold referred to in Section 25 (1) of the German Securities Trading Act. This followed the entry in the Commercial Register of a capital increase in exchange for cash, and the resulting dilution of his shareholding. His voting interest now represents 4.919 percent of the voting capital.

On 13 September we received correspondence from lawyers Dr. Robert Briem Rechtsanwalt-GmbH, 1016 Wien, Austria, for and on behalf of the following persons / legal entities:

• 1. AvW Invest Aktiengesellschaft, Krumpendorf, Austria
• 1. AvW Management-Beteiligungs AG, Krumpendorf, Austria
• 1. AvW Beteiligungsverwaltung GmbH, Vienna, Austria
• 1. Auer von Welsbach Privatstiftung, Vienna, Austria
• 1. Dr. Wolfgang Auer von Welsbach, Krumpendorf, Austria

The correspondence informed us that, since 11 September 2006, AvW Invest Aktiengesellschaft has held 1,049,980 shares in CANCOM IT Systeme Aktiengesellschaft, or 10.104 percent of the Company's voting capital. The 10 percent shareholding threshold has thus been exceeded.

It also informed us that the indirect shareholdings via AvW Invest AG of the persons/ legal entities listed above under numbers 2 to 5 have since 11 September 2006 also exceeded the threshold of 10 percent of the voting capital of CANCOM IT Systeme Aktiengesellschaft for the purposes of Section 21 of the German Securities Trading Act. The persons or legal entities listed above under numbers 2 to 5 are each indirectly entitled to 10.104 percent of CANCOM IT Systeme Aktiengesellschaft's voting capital via AvW Invest AG. These voting rights must be attributed in full to each of the persons or legal entities listed under numbers 2 to 5 in accordance with Section 22 paragraph 1 sentence 1 no. 1 of the German Securities Act, even though they have no direct stake in CANCOM IT Systeme AG themselves.

2. Order position

In our merchandise business, the majority of incoming orders are converted to sales within two weeks because of our large delivery capacity. For this reason, the reporting date figures on their own do not give a true picture of the current order position in this area of our business, which is why we do not publish them.

In the IT services business, orders are often given over long periods. At present the volume of orders in this segment is stable or slightly rising.

3. Strong cash position

The CANCOM Group's cash position continues strong.

Our business makes it necessary to maintain our inventory at an appropriate level, but this also ensures that we are able to make deliveries at short notice, which often gives us a decisive competitive advantage over our rivals. Our accounts receivable represent a valuable asset which can be used as security, and the credit facilities at our disposal enable us to raise large sums of cash at short notice if necessary. At the same time they serve as a method of financing CANCOM's future growth.

4. Significant changes in the risks of future development (since the start of the financial year)

Apart from the one exception outlined below, there have been no significant changes in the risks of future development at CANCOM since the start of the financial year. CANCOM Netzwerk-Service GmbH (previously NSG Netzwerk-Service GmbH) makes most of its sales revenues with Siemens Group companies. The majority takeover of CANCOM Netzwerk-Service GmbH by CANCOM IT Systeme AG makes the Siemens Group the largest customer of the CANCOM Group. In order to minimise the risk of becoming too dependent on this customer, we place great importance on

0

Business development

maintaining a close and open partnership with the Siemens Group. We also plan gradually to reduce the dependence on Siemens by expanding the sales activities of NSG Netzwerk-Service GmbH and by diversifying the customer base.

CANCOM's strong growth is also leading to a reduction in the Group's dependence on individual manufacturers. Dependence on manufacturers is thus no longer regarded as a significant risk.

Details of other risks can be found in our annual report for 2005, starting on page 28.

5. Continual development and improvement of our products

No significant research and development costs have been incurred.

6. Investments

The CANCOM Group's investments are mainly concentrated on acquisitions, and on the continual improvement of the internal infrastructure and office and business equipment.

For details of the CANCOM Group's investments, please refer to the Notes.

7. Our employees

At 30 September 2006, the CANCOM Group had a total of 1,287 employees, according to the method of counting specified by the German Commercial Code (Handelsgesetzbuch, HGB). A year ago the Group had 528 employees, and at 31 December 2005 it had a staff of 567. The sharp rise in the number of employees is due primarily to CANCOM Netzwerk-Service GmbH's having been consolidated for the first time.

8. Outlook for the current financial year

According to the latest forecast by Deutsche Bank, a slight recovery in the economies of Germany and the United Kingdom is starting to be felt this year. Gross domestic product in 2006* (real change compared with 2005, as a percentage)

Euroland:	2.6
Germany:	2.0
United Kingdom:	2.7
USA:	3.3
Japan:	2.6
Asia (excl. Japan):	8.5
Latin America:	4.8
World:	5.0

* Forecast: Deutsche Bank, Research Office, Frankfurt am Main, Germany, 27 October 2006

According to the German Federal Association of the Information Economy, Telecommunications and the New Media (Bitkom), the rising demand for hardware in Germany in 2006 will probably be more than offset by a fall in prices, and it therefore expects slight negative growth of 1.6 percent. However, sector experts expect that, if prices remain stable, the demand for software, and especially IT services, will grow steadily by 5.5 percent and 4.5 percent respectively.

In addition, we feel that the trend towards integrated, complete solutions will continue.

Development of German IT sector in 2006* (real change compared with 2005, as a percentage)

IT market as a whole: 2.5
Hardware:	-1.6
Software:	5.5
IT services:	4.5

* Forecast: Bitkom, September 2006

Business development

CANCOM adapted its business policy to these trends early on and, because of the promising prospects, it intends to pursue the same policy in future.

Our plan therefore provides for organic growth, among other things by appointing new IT consultants and technicians, so as to strengthen as a matter of priority the IT services provided by the existing locations.

We also plan to consolidate our market position by making targeted acquisitions. The present market environment offers favourable conditions for this, since several small systems houses and IT service providers are looking for prospective buyers.

Experience has shown that the consolidation of service activities by recruiting new employees involves initial costs, so the recruitment drive planned for the current financial year is expected to lead to a slightly negative or at best neutral effect on the Company's profits. No positive contribution to profits is expected until 2007 at the earliest.

11. Events of particular significance after the end of the third quarter.

There were no events of particular significance after the end of the third quarter of 2006.

Jettingen-Scheppach, Germany, November 2006

CANCOM IT Systeme Aktiengesellschaft

The Executive Board

9. Shareholdings of members of the Executive and Supervisory Boards (as at 30 September 2006)

Executive Board:

Supervisory Board: Stefan Kober 511,099 (5.329 percent) Walter von Szczytnicki 6,252 (0.065 percent)

Klaus Weinmann 476,145 (4.965 percent) Paul Holdschik 13,059 ( 0.136 percent)

10. Explanatory notes on the Company's own shareholdings and on stock options held by Board members and employees

No shares were purchased or sold by the Company during the third quarter of 2006.

For details of stock options, please refer to the Notes.

Consolidated balance sheet (ifrs) – Assets

Zahlenangaben in T€	9 months` report	Annual accounts	Figures in € '000
Aktiva	09/30/2006 ('000 €)	12/31/2005 ('000 €)	Assets
Kurzfristige Vermögensgegenstände			Current assets
Liquide Mittel	6,135	11,329	Cash
Wertpapiere	49	0	Securities
Zur Veräußerung gehaltene Vermögenswerte	2,731	2,732	Assets as held for Sale
Forderungen aus			Trade receiveable
Lieferungen und Leistungen	29,171	19,398
Vorräte	9,325	9,607	Inventories
Rechnungsabgrenzungsposten und			Prepaid expenses and
sonstige kurzfristige Vermögensgegenstände	2,933	2,115	other current assets
Kurzfristige Vermögens
gegenstände, gesamt	50,362	45,181	Total current assets
Langfristige Vermögensgegenstände			Long-term assets
Sachanlagevermögen	8,546	8,016	Property, plant and equipment
Immaterielle Vermögensgegenstände	1,019	113	Intangible assets
Geschäfts- oder Firmenwert	19,074	16,667	Goodwill
Finanzanlagen	32	5	Financial assets
Ausleihungen	72	157	Loans receivable
Latente Steuern	2,392	1,634	Deferred taxes
Sonstige Vermögensgegenstände	122	133	Other assets
Langfristige Vermögens
gegenstände, gesamt	31,257	26,725	Total long-term assets
Aktiva, gesamt	81,619	71,906	Total assets

Consolidated balance sheet (ifrs) – Assets

Zahlenangaben in T€	9 months` report	Annual accounts	Figures in € '000
Passiva	09/30/2006 ('000 €)	12/31/2005 ('000 €)	Equity and liabilities
Kurzfristige Verbindlicheiten			Current liabilities
Kurzfristige Darlehen und kurzfristiger Anteil an			Short term debt and
langfristigen Darlehen	1,364	1,715	current portion of long-term debt
Verbindlichkeiten aus Lieferungen
und Leistungen	21,340	22,786	Trade payables
Erhaltene Anzahlungen	49	30	Advanced payments redeived
Rückstellungen	5,929	2,240	Accrued liabilities
Umsatzabgrenzungsposten	559	192	Deferred revenues
Verbindlichkeiten aus Ertragssteuern	680	204	Income tax payable
Sonstige kurzfristige Verbindlichkeiten	5,338	5,197	Other current liabilities
Mit Veräußerung im Zusammenhang stehende Schulden	819	470	Liabilities related to assets held for sale
Kurzfristige Verbindlichkeiten, gesamt	36,078	34,300	Total current liabilities
Langfristige Verbindlicheiten			Long-term liabilities
Langfristige Darlehen	6,750	4,111	Long-term debt
Genussrechtskapital und nachrangige Darlehen	6,000	6,000	Profit-participation capital
Umsatzabgrenzungsposten	69	65	Deferred revenues
Latente Steuern	364	0	Deferred taxes
Pensionsrückstellungen	175	343	Pension accrual
Sonstige langfristige Verbindlichkeiten	15	15	Other long-term liabilities
Langfristige Verbindlichkeiten, gesamt	13,373	10,534	Total Long-term liabilities
Eigenkapital			Equity
Gezeichnetes Kapital	10,391	9,591	Issued capital
Kapitalrücklage	15,460	13,821	Capital reserves
Bilanzgewinn/Bilanzverlust (inklusive			Earned surplus
Gewinnrücklagen)	4,699	3,629
Eigenkapitaldifferenz aus Währungsumrechnung	32	31	Currency translation difference
Minderheitenanteile	1,586	0	Minority interests
Eigenkapital, gesamt	32,168	27,072	Total equity
			Total equity and
Passiva, gesamt	81,619	71,906	liabilities

Income statement (ifrs)

Zahlenangaben in T€	07/01/06	07/01/05	01/01/06	01/01/05	Figures in € '000
Gewinn- und Verlustrechnung	-09/30/06	-09/30/05	-09/30/06	-09/30/05	Income Statement
Gewinn- u. Verlustrechnung	- 30.09.03	- 30.09.02	- 30.09.03	- 30.09.02	Income State
Umsatzerlöse	69,159	52,505	178,738	158,192	Revenues
Sonstige betriebliche Erträge	424	353	960	931	Other operating income
Bestandsveränderungen an fertigen					Change in finished goods
und unfertigen Erzeugnissen	83	12	83	12	and work in progress
Andere aktivierte Eigenleistungen					Work performed by the
	0	217	0	278	enterprise and capitalised
Gesamtleistungen	69,666	53,087	179,781	159,413	Total operating performance
Materialaufwand /
Aufwand für bezogene Leistungen	-49,728	-43,114	-138,256	-129,945	Cost of purchased materials and services
Rohertrag	19,938	9,973 4	1,525	29,468	Gross profit
Personalaufwand	-13,536	-5,823	-26,615	-17,277	Staff costs
Abschreibungen auf Sachanlagen					Depreciation of property, plant and
und immaterielle					equipment and amortisation of
Vermögensgegenstände	-457	-518	-929	-1,234	intangible assets
Sonstige betriebliche Aufwendungen	-4,892	-3,198	-11,642	-9,641	Other operating expenses
Betriebsergebnis	1,053	434	2,339	1,316	Profit from operations
Zinserträge/ -aufwendungen	-281	-333	-743	-681	Interest income / expense
Beteiligungserträge	4	0	3	0	Income from investments and participations
Währungsgewinne /-verluste	13	22	29	6	Foreign currency exchange income / losses
Ergebnis vor Steuern					Profit before taxes
(und Minderheitenanteile)	789	123	1,628	641	(and minority interests)
Steuern vom Einkommen und Ertrag	250	-51	147	-243	Income tax
Ergebnis vor Minderheitsanteilen	1,039	72	1,775	398	Profit before minority interests
Minderheitenanteile	-150	0	-150	0	Minority interests
Discontinued operations	-380	36	-555	207	Discontinued operations
Periodenüberschuss / Periodenfehlbetrag	509	108	1,070	605	Net profit for the period
Durchschnittlich im Umlauf befindliche					Average number of
Aktien (Stück) unverwässert	10,121,186	9,558,920	9,769,506	9,418,237	shares outstanding (basic)
Durchschnittlich im Umlauf befindliche					Average number of
Aktien (Stück) verwässert	10,121,186	9,558,920	9.769.506	9,418,237	shares outstanding (diluted)
Ergebnis je Aktie (unverwässert)	0.05	0.01	0.11	0.06	Earnings per share (basic)
Ergebnis je Aktie (verwässert)	0.05	0.01	0.11	0.06	Earnings per share (diluted)

Consolidated cash flow statement (ifrs)

Zahlenangaben in T€	01/01/06-	01/01/05	Figures in € '000
Kapitalfluss	-09/30/06	-09/30/05	Cashflow
Cashflow aus gewöhnlicher Tätigkeit:			Cash flows from operating activities:
Periodengewinn vor Steuern- und Minderheitenanteilen	1,628	641	Net profit for the period before taxes and minority interests
Berichtigungen:			Adjustments:
+/- Abschreibungen auf Sachanlagen und immaterielle			+/- Depreciation of property, plant and
Vermögensgegenstände	929	1,234	equipment, and amortisation of intangible assets
+/- Veränderungen der langfristigen Rückstellungen	-177	-530	+/- Change in long-term accruals
+/- Veränderungen der kurzfristigen Rückstellungen	-430	-1,154	+/- Change in current accruals
+/- Ergebnis aus dem Abgang von Anlagevermögen	64	-10	+/- Profit/ losses on the disposal of fixed assets
+/- Zinsaufwand	743	681	+/- Interest expense
+/- Veränderungen der Vorräte	1,148	-1,571	+/- Change in inventories
+/- Veränderungen der Forderungen aus Lieferungen			+/- Change in trade receivables and
und Leistungen sowie anderer Forderungen	-730	-2,088	other receivables
+/- Veränderungen der Verbindlichkeiten aus Lieferungen			+/- Change in trade payables and
und Leistungen sowie anderer Schulden	-6,089	-1,799	other liabilities
+/- Gezahlte Zinsen	-268	-382	+/- Interest paid
+/- Gezahlte und erstattete Ertragsteuern Nettozahlungsmittel aus betrieblicher Tätigkeit	0 -3,182	-81 -5,059	+/- Income tax paid and refunded Netto cash from/ used in operating activities
Cashflow aus Investitionstätigkeit			Cash flows from investing activities
+/- Erwerb von Tochterunternehmen			+/- Acquisition of subsidiaries less net
(abzgl. erworbene Nettozahlungsmittel)	-4,117	-1,077	cash assets acquired
+/- Zahlungen für Zugänge zu immateriellen			+/- Payments for additions to intangible assets as
Vermögenswerten sowie Sachanlagen	-573	-751	well as property, plant and equipment
+/- Zahlungen für Zugänge zu anderen Finanzanlagen	85	465	+/- Payments for additions to financial assets
+/- Erlöse aus dem Abgang von und Sachanlagen			+/- Proceeds from disposal of property, plant and
und Finanzanlagen	30	846	equipment as well as financial assets
+/- Erhaltene Zinsen	78	54	+/- Interest received
Für Investitionstätigkeit eingesetzte Nettozahlungsmittel	-4,497	-463	Net cash from/ used in investing activities
Cashflow aus Finanzierungstätigkeit			Cash flows from financing activities
+/- Erlöse aus der Ausgabe von gezeichnetem Kapital	2,472	1,200	+/- Proceeds from issuance of share capital
+/- Kapitalerhöhungskosten	-33	-68	+/- Dividends Paid
+/- Ein/Auszahlungen für aufgenommene Kredite			+/- Inflows/ outflows in connection with loans
	626	942	taken out by the enterprise
+/- Gezahlte Zinsen	-553	-353	+/- Interest paid
Für Finanzierungstätigkeit eingesetzte Nettozahlungsmittel	2,512	1,721	Net cash from/ used in financing activities
Nettozu-/abnahme von Zahlungsmitt. u. Zahlungmittelaqivalente	-5,167	-3,801	Net increase/ decrease in cash and cash equivalents
+/- Wechelkursbedingte Wertänderungen	1	49	+/- Effects of currency exchange rate changes
+/- Finanzmittelbestand am Anfang der Periode	11,329	6,708	+/- Cash and cash equivalents at beginning of period
Finanzmittelbestand am Ende der Periode	6,163	2,956	Cash and cash equivalent sat end of period
Zusammensetzung:			Compostion:
Liquide Mittel	6,153	2,956	Cash
Wertpapiere des Umlaufvermögens	10	2,956	Marketable Securieties
	6,163	2,956

Consolidated statement of changes in equity (ifrs)

31. Dezember 2004 Kapitalerhöhungen Veränderung der kumulierten Währungsdifferenzen	Aktien/ Shares TStück/Quantity '000 8,827 764	Gezeichnetes Kapital Issued capital T€ /'000 € 8,827 764	Kapitalrücklagen/ Capital reserves T€ /'000 € 12,639	Gewinnrücklagen Revenue reserves T€ /'000 € 122	Eigene Anteile Treasury shares T€ /'000 €
					0
			1,237
Veränderung der Rücklagen:
- Veränderung stock options			15
- IPO Kosten			-70
Ergebnis des Berichtszeitraums
Minderheitenanteile
31. Dezember 2005	9,591	9,591	13,821	122	0
Kapitalerhöhungen	800	800	1,672
Veränderung der kumulierten
Währungsdifferenzen
Veränderung der Rücklagen:
- Veränderung stock options
- IPO Kosten			-33
Ergebnis des Berichtszeitraums
Minderheitenanteile
30. September 2006	10,391	10,391	15,460	122	0

Consolidated statement of changes in equity (ifrs)

	Eigenkapital gesamt/Total	Minderheitenanteile	Bilanzgewinn/	Eigenkapitaldiff. aus der erstmaligen Anwendung	Eigenkapitaldiff. aus der Währungsumrechnung/
	equity	Minority interests	Earned surplus	von IFRS	Translation reserve
		T€ /'000 €	T€ /'000 €	T€ /'000 €	T€ /'000 €
31 December 2004	24,086	0	2,658	-153	-7
Capital increase	2,001
Change in accumulated foreign
currency exchange difference	38				38
Change in reserves:
- change in stock options	15
	-70
Net profit for the period	1,002		1,002
Minority interests	0	0
31 December 2005	27,072	0	3,660	-153	31
Capital increase	2,472
Change in accumulated foreign
currency exchange difference	1				1
Change in reserves
- change in stock options	0
	-33
Net profit for the period	1,070		1,070
Minority interests	1,586	1,586
30 September 2006	32,168	1,586	4,730	-153	32

NOTES

to the consolidated accounts for the quarter ended 30 September 2006

A. The principles adopted for the consolidated financial statements

1. General information

The consolidated financial statements of CANCOM IT Systeme Aktiengesellschaft and its subsidiaries ("the CANCOM Group" or "the Group") were drawn up according to the US Generally Accepted Accounting Principles (US GAAP) until 31 December 2004. In 2005 this was changed over retroactively with effect from 1 January 2004 to the International Financial Reporting Standards (IFRS) or International Accounting Standards (IAS). All compulsory IFRS and IAS as well as Interpretations of the International Financial Reporting Interpretation Committee (IFRIC) or Standing Interpretations Committee (SIC) were taken into account. The previous year's figures were calculated according to the same principles. The consolidated income statement was prepared on the basis of the total cost method.

The consolidated financial statements were drawn up in euro. Unless otherwise stated, all amounts are shown in thousand euro (€ '000 or € k).

The financial year covers the period from 1 January to 31 December 2006. The address of the Company's registered office is Messerschmittstrasse 20, 89343 Jettingen-Scheppach, Germany.

The shares are traded on the Regulated Market of the FWB Frankfurt Stock Exchange under ISIN DE0005419105 and are admitted to the Prime Standard of Deutsche Börse AG.

The main object of CANCOM IT Systeme Aktiengesellschaft and its consolidated subsidiaries is the sale and distribution of integrated IT system solutions (hardware, software and network products) in both the PC and Apple environments. It also offers a comprehensive range of IT services (e.g. IT advice, system integration, service and support, and training).

2. Scope of consolidation

The consolidated financial statements include CANCOM IT Systeme Aktiengesellschaft and all subsidiaries in which CANCOM IT Systeme Aktiengesellschaft has either a direct or an indirect majority shareholding, or in which it holds the majority of the voting rights. These subsidiaries are fully consolidated.

Shareholdings in other companies:

	Company's registered office	Percentage- holding
1. CANCOM Deutschland GmbH	Jettingen-Scheppach, Germany 100.0
and its subsidiaries
• CANCOM Computersysteme Ges.mbH	Grambach, Austria	100.0
• CANCOM (Switzerland) AG	Caslano, Switzerland	100.0
2. CANCOM Netzwerk-Service GmbH	Munich, Germany	100.0
3. CANCOM ComputerPartner GmbH	Munich, Germany	100.0
4. Novodrom GmbH	Jettingen-Scheppach, Germany 100.0
5. Maily Distribution GmbH	Sindelfingen, Germany	100.0
6. CANCOM Ltd.	Guildford, UK	100.0

In January 2006, CANCOM IT Systeme Aktiengesellschaft and TRS Technology Refresh GmbH, Aschheim, Germany, founded CANCOM Financial Services GmbH, headquartered in Jettingen-Scheppach, Germany, in the form of a joint venture under equal ownership.

The object of the company is the acquisition and negotiation of lease contracts, the leasing of information and communications technology, and advice in such business transactions and in all transactions directly connected with these areas. CANCOM Financial Services GmbH was consolidated using the "at equity" method, in accordance with IAS 31.38.

In December 2005, CANCOM IT Systeme AG acquired part of the assets of Holme & Co. Computersysteme + Lösungen OHG with effect from 1 January 2006. The absorbing company was CANCOM Deutschland GmbH, a subsidiary of CANCOM IT Systeme AG.

CANCOM has purchased from Georg Feiertag for cash one share in NSG Netzwerk-Service GmbH (renamed CANCOM Netzwerk-Service GmbH since 1 September 2006) at the nominal price of € 300. The transaction was agreed in a contract of sale dated 22 May 2006, document register no. 1183/2006 II, notarised by Prof Dr Hans-Ulrich Jerschke.

Siemens Business Services GmbH & Co. OHG has sold its shares in NSG Netzwerk-Service GmbH (renamed CANCOM Netzwerk-Service GmbH since 1 September 2006) to CANCOM IT Systeme Aktiengesellschaft at the nominal price of € 301,700 and € 659,300 with economic effect from midnight on 30 June 2006. The transaction was agreed in a contract of sale and option dated 23/24 May 2006, document register no. 1198/2006 II, notarised by Prof Dr Hans-Ulrich Jerschke. The purchase price of € 6 million was paid on 25 July 2006.

CANCOM Netzwerk-Service GmbH's share capital amounts to € 1,280,000. This means that CANCOM IT Systeme Aktiengesellschaft holds 71.5 percent of the shares in CANCOM Netzwerk-Service GmbH with effect from July 2006.

In connection with this acquisition, a € 800,000 capital increase for cash was resolved in the second quarter of 2006, and 800,000 new no-par-value bearer shares were issued. The capital increase was entered in the Commercial Register on 1 August 2006.

Change in the scope of consolidation:

Name and registered office of company	Date of	Share of	Share of
	acquisition		capital voting rights
CANCOM Netzwerk-Service GmbH, Munich,
Germany	'1 July 2006	75.1%	75.1%

At the date on which CANCOM Netzwerk-Service GmbH was first consolidated – 1 July 2006 – the impact on the consolidated financial statements of the change in the scope of the consolidation was as follows:

	€ '000
Current assets	13,605
Long-term assets	2,356
Total assets	15,961
Current liabilities	9,777
Long-term liabilities	417
Equity	5,767
Total equity and liabilities	15,961

The acquisition of the company resulted in goodwill amounting to € 2,063k and intangible assets amounting to € 1,009k.

Novodrom GmbH has established a company called Novodrom People Value Service GmbH. This is documented by a notarial deed (document register no. B1580/2006) dated 2 October 2006 drawn up by Dr Braun, notary. The company's share capital is € 25,000 and was taken over in full by Novodrom GmbH. The new company has not yet been entered in the Commercial Register.

In the context of the CANCOM Group's strategic orientation as a leading supplier of IT infrastructure and services, the Executive Board and Supervisory Board plan to sell the majority stake of SoftMail IT AG, which does not form part of the Group's core business. It is planned to carry out the sale in the fourth quarter of 2006, if possible. Since the second quarter of 2006, the subsidiary has been classified in the accounts as being held for resale, in accordance with IFRS 5.

3. Accounting and valuation methods

The basic accounting and valuation methods which were used in the preparation of these consolidated financial statements are set out below. The methods described were used consistently for the reporting periods shown, unless declared otherwise.

Standards which came into effect after the accounting date are not applied in advance. There are therefore no effects from the prior application of standards on the assets, financial position and earnings of the Group.

Preparation of the individual financial statements included in the consolidated statements

The financial statements of German and international companies included in the consolidated financial statements were prepared as at the balance sheet date for the annual financial statements of CANCOM IT Systeme Aktiengesellschaft. The annual financial statements of the subsidiary CANCOM ComputerPartner GmbH were drawn up as at 31 March 2006 in accordance with the differing financial year. The income statement includes the period from 1 January to 30 September 2006.

Principles of consolidation

The consolidated financial statements are based on the individual financial statements of the companies consolidated in CANCOM IT Systeme Aktiengesellschaft.

IFRS 3 is used from 31 March 2004, which means that a retrospective application does not take place. In accordance with IFRS 3.79 the amortisation of previously recognised goodwill is discontinued. The carrying amount of the amortisation thus accumulated is charged against a corresponding reduction of the goodwill. The goodwill is analysed annually for impairment of assets in accordance with IAS 36.

The financial statements of the individual subsidiaries were included in the consolidated statements according to the acquisition method. This means the purchase costs of an equity investment are set off against the relevant equity capital of the subsidiary in question at the time of acquisition. Any differences are allocated to the assets and liabilities of the subsidiaries, if they have undisclosed reserves. Any remaining difference on the asset side is capitalised as goodwill under intangible assets. In line with IFRS 3 "Business Combinations", IAS 36 "Impairment of Assets" and IAS 38 "Intangible Assets", goodwill is no longer subject to scheduled amortisation. Instead, an impairment test must be carried out at least once a year to establish whether extraordinary impairment is necessary. The reviews of goodwill based on market values are to be carried out at business unit (cash generating unit) level. For the purposes of this rule, a business unit is an operating segment or one level below.

Profits, losses, revenues, expenses and income within the Group, and existing accounts payable and receivable between the Group companies are eliminated. Interests held by other shareholders are shown as a separate adjusting item under the equity capital.

Calculations and assumptions

In drawing up the consolidated financial statements we have to make estimates and assumptions. These have an impact on the amounts shown for assets, liabilities and contingent liabilities, as well as the reporting of expenditure and income. The actual amounts may deviate from these assumptions and estimates.

Currency conversion principles

Conversion of the financial statements of international subsidiaries is carried out according to the concept of functional currency. In the CANCOM Group, all international subsidiaries are financially independent ("foreign entities"). The assets and liabilities are accordingly converted at the rate of exchange applicable on the reporting date, while income and expenditure are converted at the average rate for the year. Differences from the conversion rate on the reporting date in the previous year and between the net income for the year shown in the balance sheet and in the income statement are charged against the equity capital, without affecting the net profit, and are separately indicated under equity capital. Conversion differences in monetary entries are recorded with an effect on the net income according to IAS 21.28.

Currency

	Third quarter 2006	Third quarter 2005	Third quarter 2004
Swiss francs
• Rate on reporting date	1€=1.588 SFR	1€=1.555 SFR	1€=1.554 SFR
• Average rate	1€=1.566 SFR	1€=1.549 SFR	1€=1.547 SFR
Britisches Pfund
• Rate on reporting date	1€=0.677 GBP	1€=0.683 GBP	1€=0.686 GBP
• Average rate	1€=0.685 GBP	1€=0.685 GBP	1€=0.673 GBP

Realisation of revenues

Revenues for sales of hardware and software are realised when ownership and risk passes to the customer, if payment is pre-arranged or determinable by contract and it is probable that the accounts receivable relating to the sale will be met. Sales relating to system integration are realised only after acceptance by the customer, or installation, if this is an essential condition for the commissioning of the product. The revenues figures constitute the amounts after deduction of cash discounts, price reductions, customer bonuses and rebates.

Interest income is accrued under the relevant period, taking into account the outstanding loan amount and the interest rate to be applied. The applicable interest rate is the interest rate which discounts the anticipated future cash inflows over the life of the financial asset with regard to the carrying amount of the asset. Dividend income from financial investments is recorded at the time when the shareholder acquires the right to receive the dividend payment.

Earnings per share

Earnings per share are determined in accordance with IAS 33 "Earnings per share". The basic earnings per share are calculated by dividing the consolidated net income by the weighted average number of ordinary shares outstanding in the financial year.

The diluted earnings per share are calculated on the basis that all potentially diluted stock options will be exercised. It can be assumed, economically speaking, that the

options are exercised when the strike price per option is favourable with regard to the traded share price.

Short-term assets

Inventories are valued at the lower of acquisition or manufacturing cost and market value (lower of cost or market) in accordance with IAS 2.9. Acquisition or manufacturing costs include direct materials costs and, where applicable, direct production costs as well as any overheads that have occurred in connection with the transfer of inventories to their current location and in order to bring inventories to their current condition. Acquisition and manufacturing costs are calculated according to the weighted average method. The net realisable value is the estimated sales price less all estimated costs up to completion, and the costs for marketing, sales and distribution. Items with reduced marketability are valued at the lower net realisable value. No extraordinary write-downs were necessary during the year under review.

No interest on loans was capitalised under the manufacturing costs. Interest on loans was immediately recorded as expenditure.

Accounts receivable are shown at their net sales proceeds value, allowing for a write-down for doubtful debts. Where the agreed interest rate for long-term accounts receivable is less than the market rate, the nominal amount of the account receivable is discounted. Trade accounts receivable are not discounted. If it is unlikely that an account receivable can be collected, the amount is written down.

Other assets are shown at their nominal values.

Cash and cash equivalents include cash in banks and cash in hand, and cash deposits which are not subject to any considerable value fluctuation and can be turned into cash within a period of three months at most.

Prepaid expenses are accrued to charge expenses to their relevant accounting period, and are valued at their nominal value.

Intangible assets

In line with IAS 38 "Intangible assets", goodwill and other intangible assets purchased are recognised at acquisition cost and the estimated residual carrying amount is written down by the straight-line method over the expected useful life of the assets. Assets are written down uniformly throughout the Group by the straight-line method (generally over a period of three to five years) over the period during which the relevant company can expect to use the asset. Goodwill from acquisitions is not subject to scheduled amortisation. Instead of scheduled amortisation, goodwill is subject to an impairment test at least once a year (in line with IFRS 3 and IAS 36). IAS 38 distinguishes between intangible assets with limited useful lives and those with indeterminable useful lives. Only intangible assets with limited useful lives are subject to scheduled amortisation, unlike intangible assets with indeterminable useful lives, which are instead reviewed at least once a year to check if a write-down is necessary in accordance with IAS 36. With the exception of goodwill, all intangible assets have a limited useful life.

Once a year, goodwill is checked for impairment losses – as well as for signs of a possible impairment loss. The impairment value of goodwill is reviewed at reporting unit (cash generating unit) level based on the geographical segment reporting in accordance with IAS 36. In this process the carrying amounts of cash generating units are compared with the realisable amount.

The realisable amount is the higher of the realisable value less realisation costs and the value in use. CANCOM IT Systeme Aktiengesellschaft calculates the value in use as the present value of the future cash flows of the reporting unit over a period of five years, discounted by the prevailing market rate. Cash flows beyond the fiveyear period are projected with a constant rate of growth and discounted.

Property, plant and equipment

Property, plant and equipment are valued at acquisition or manufacturing cost less depreciation, in accordance with IAS 16. They are subject to scheduled straight-line depreciation over their useful lives. Their recognition is based on the following useful lives:

Administrative and warehouse buildings	33 1/3 years
Fixtures, fittings and equipment	4-10 years

Acquisition/manufacturing costs include expenditure directly attributable to the purchase of assets. Subsequent acquisition/manufacturing costs are only recorded as a part of the acquisition/manufacturing costs of an asset or – where relevant – as separate assets if it is probable that economic use will in future accrue to the company out of them and the costs of the assets can be reliably determined. All other repair and maintenance costs are recorded as expense in the financial year in which they occur. The carrying amounts and useful lives are checked as at every balance sheet date and adjusted where necessary. If the carrying amount of an asset exceeds its estimated realisable amount, the value is immediately written down to this amount. Gains and losses from disposals of assets are recorded as the difference between the realised proceeds and the carrying amount, affecting the net income or loss. Low-value assets are written off in full in the year of acquisition and shown in the statement of fixed assets as additions or disposals, and as depreciation for the relevant financial year.

Property, plant and equipment are subject to land charges of € 6.0 million, which are valued at € 4.1 million as at 30 September 2006.

Extraordinary depreciation of long-term assets

If there are indications that the carrying amount of a long-term asset cannot be recovered, the requirement for an extraordinary write-down is reviewed on the basis of IAS 36.9 "Impairment of Assets". In this case CANCOM would carry out extraordinary depreciation. Long-term assets that will continue to be used in the future are subjected to an impairment test by comparing the carrying amount and the discounted future inflow and outflow of funds. If this value (current value of the reporting date) is less than the costs of acquisition carried over, a reduction in value of the asset takes place in accordance with IAS 36 and IAS 38.108.

Financial investments

Other notes receivable/loans are valued at acquisition cost. Non-interest-bearing and low-interest-bearing notes receivable and loans are valued at their present value. The financial investments do not include any securities traded on organised markets.

Deferred taxes

Deferred taxes are accrued according to the balance sheet liability method. This involves the accrual of deferred taxes for temporary differences between the basis of calculation for the purposes of tax law and for commercial law, which will most probably be cancelled out in the future, and for temporary result differences from consolidation measures affecting the net income or net loss. Deferred taxes are assessed using the tax rates applying in the year the differences are reversed, if these are already approved on the balance sheet date. In accordance with IAS 12 and SIC-21, the deferred tax assets and liabilities are shown separately in the Group figures. For loss carryovers that reduce future tax burdens, deferred tax assets have been accrued if it is probable that they will be realised. The value of the deferred taxes is reviewed and adjusted if necessary. Deferred taxes are shown in the balance sheet at their nominal value; no discounting is carried out.

Provisions and liabilities

Provisions for employee benefits mainly include performance-based pension obligations, which are determined on the basis of actuarial reports using the projected unit credit method and taking into account future increases in salary and pensions. For contribution-based pension schemes, provisions are made only to the amount

of the contributions still due at the balance sheet date. In the event of unforeseeable changes in pension obligations or plan assets, actuarial gains and losses can occur which are not reported in the statement of income. These gains and losses which have been incurred but not yet entered in the accounts with effect on profit or loss are realised to the extent that they exceed, at the beginning of a financial year, the value of pension obligations and plan assets by a range that is greater than 10 percent.

Other provisions are made where there is an uncertain external obligation with a financial or legal cause, which is expected to be claimed and which can be reliably quantified. The obligation is valued on the basis of best estimate, taking into account unit costs and overheads. General administrative, distribution and development costs are not taken into account.

Liabilities are valued at their repayment value, which is equivalent to the current market value.

Stock options

IFRS 2 "Share-based Payment" provides rules for reporting and explaining stockbased payment transactions. CANCOM IT Systeme Aktiengesellschaft only granted stock options to employees before 1 October 2003. The accounting and valuation rules laid down in IFRS 2 are applied for these stock options. The valuation of stock-based employee compensation agreements is based on the total fair value of the option, which is recorded according to the Black Scholes option price model at the time the stock options are granted. Share-based payment programmes are recorded in accordance with IFRS 2.7ff.

Consolidated cash flow statement

The cash flow statement is drawn up according to IAS 7 and shows the inflow and outflow of cash in the Group during the year under review. It distinguishes between cash flows from current operating activities and cash flows from investing and financing activities.

Leasing

Payments on an operating lease are recorded as expenses in the income statement using the straight-line method over the term of the leasing contract, unless another systematic fundamental corresponds more closely to the development of usefulness to the Company over the term. An operating lease is one in which not all major risks and opportunities are assigned to the lessee. The Company reviews all leasing contracts at regular intervals to establish whether operating or finance lease terms apply.

B. Notes to the consolidated balance sheet

1. Cash and cash equivalents

Cash and cash equivalents consist exclusively of cash in banks payable on demand and cash in hand.

2. Assets held for sale

Assets held for sale consist of the equity investment in SoftMail IT AG, amounting to € 1,300k, and the assets of SoftMail IT AG.

3. Trade accounts receivable

The trade accounts receivable are due within a year.

4. Inventories

Inventories consists almost exclusively of merchandise, particularly hardware components and software. The majority of the hardware components are stored at the new logistics centre in Jettingen-Scheppach, Germany.

Inventories consist of the following (company-specific breakdown):

	30 September 2006 € '000	31 December 2005 € '000
Work in progress	1,139	0
Finished products and merchandise	9,448	10,017
Advance payments made	88	2
Advance payments received	-1350	-412
	9,325	9,607

5. Prepaid expenses and other short-term assets

This item mainly consists of other short-term assets. These include bonuses from suppliers (€ 813k), creditors with a debit balance (€ 289k), marketing revenues (€ 248k), accounts receivable from employees (€ 223k), an account receivable from the fleet manager (€ 198k), an account receivable from a former shareholder (€ 92k), tax rebates (€ 73k), insurance recovery (€ 64k) and revenue from commission (€ 36k). The deferred income, amounting to € 749k, consists of deferred insurance premiums and advance payments.

6. Fixed assets

6.1 Property, plant and equipment

Property, plant and equipment mainly consists of the land and buildings of the administrative and logistics centre in Jettingen-Scheppach, Germany in the value of € 5.5 million, as well as the equipment necessary for the automated small parts warehouse and the manual pallet rack in the value of € 0.7 million. Computer equipment, tenant's fittings and office furnishings are also shown under this item.

6.2 Immaterielle Vermögensgegenstände

Intangible assets consist of the customer list of CANCOM Netzwerk-Service GmbH, which is valued at € 896k. The remaining amount (€ 123k) mainly consists of software that has been purchased.

6.3 Goodwill

Goodwill at the balance sheet date mainly includes the relevant figures arising from the consolidation of CANCOM Deutschland GmbH, Cancom Ltd., UK, CANCOM Computer-Partner GmbH and CANCOM Netzwerk-Service GmbH.

6.4 Loans

Loans include the asset value from reinsurance, amounting to € 72k (as at 31 December 2005: € 157k). The reduction in comparison to 2005 is the result of the transfer of reinsurance cover for a former Executive Board member to his new employer.

7. Deferred tax assets

The majority of the deferred tax assets (€ 2,177k) were capitalised on the basis of the existing approximately € 13.3 million German and non-German corporate tax losses carried, and the approximately € 11.6 million German trade tax losses carried forward. Where the losses carried forward were taken on as a result of company acquisitions, deferred tax assets were accrued with no effect on the profit and loss, by netting against the relevant goodwill.

The remaining deferred tax assets amounting to € 215k are deferred taxes arising from deviations from the tax balance sheet.

	€ '000
As at 1 January 2006	1,634
Inflow from capitalisation	468
Tax expenditure from profit and loss calculation	290
As at 30 September 2006	2,392

8. Short-term debt and current portion of long-term debt

Short-term debt and current portion of long-term debt comprises liabilities to banks. These are drawings on credit facilities provided by banks and those portions of long-term loans due for repayment within one year..

9. Trade accounts payable

The trade accounts payable are due within one year.

10. Other provisions

The other provisions mainly comprise a provision for bonuses and commissions (€ 1,798k), invoices not yet received (€ 1,201k), holiday entitlements (€ 807k), contingent risks (€ 551k), salaries (€ 477), guarantees (€ 295k), trade association (€ 256k), financial statement costs (€ 203k), social security contributions and tax on wages and salaries (€ 175k), costs of litigation (€ 48k) and Supervisory Board remuneration (€ 30k).

The total amount of the provisions is due within one year, apart from the provision of € 14k for severance payments which are legally mandatory in Austria. This is shown under long-term liabilities.

11. Income tax payable

Income tax payable mainly consists of obligations for 2004, 2005 and 2006.

12. Other current liabilities

Other current liabilities include sales tax liabilities (€ 2,041k), a short-term loan from the Softmail Group (€ 1,487k), tax on wages and salaries, and church tax (€ 734k), debtors with a credit balance (€ 454k), purchase price liabilities (€ 190k), salaries (€ 110k) and social security contributions (€ 65k).

13. Debts connected with the sale of equity investments

This balance sheet item relates to the current liabilities of SoftMail IT AG.

14. Long-term debt

Long-term debt consists purely of liabilities to banks with a remaining term of at least one year. The portion of these debts that is due within the next twelve months is shown under "Short-term debt and current portion of long-term debt".

15. Capital from profit-participation rights and subordinated loans

Capital from profit-participation rights and subordinated loans includes only profit-participation rights, which amount to € 6,000,000 (PREPS 2005-1 and PREPS 2005-2). The profit-participation rights designated as PREPS 2005-2, a portion which amounts to € 3,000,000, were granted by a contract dated 1 November 2005. The capital was paid in on 8 December 2005. The profit-participation rights expire on 8 December 2012. There is no participation in the Company's losses. Claims arising from the profit-participation rights are ranked inferior to the claims of all current and future creditors of the Company. This means that, in the event of the liquidation or insolvency of the Company, they are subordinate to the claims defined by Section 39 paragraph 1 no. 4 of the German Insolvency Statute (Insolvenzordnung, InsO), and are therefore only to be met after these and any claims senior to them have been fully met, but before the claims defined by Section 39 paragraph 1 no. 5 of the above Statute.

In line with the resolution of the Annual General Meeting of 2005 giving the Executive Board authority to grant profit-participation rights, the portion shown in the balance sheet as at 31 December 2005 as a subordinated loan (PREPS 2005-1), amounting to € 3,000,000, has been converted into profit-participation rights. The conversion became effective from the interest period started on 4 May 2006. The profit-participation rights expire on 4 August 2012. There is no participation in the Company's losses. With regard to the ranking of any claims arising from these profit-participation rights, the same applies as to the profit-participation rights designated as PREPS 2005-2 above.

16. Pension provisions

Individual performance-related commitments exist with regard to some Executive Board members. Two members of the Executive Board resigned with effect from 31 December 2005, and the pension provision for one of them was released with effect from that date. The pension provision for the other resigning member of the Executive Board was non-forfeitable, and was only released in 2006, when it was transferred to his new employer.

The size of the pension commitments for pension schemes in Germany is calculated mainly by the years of service and the remuneration of the employees in question.

17. Deferred tax liabilities

The deferred tax liabilities relate to deviations from the tax balance sheet. They are valued at a tax rate of 38.4 percent.

18. Subscribed capital

Subscribed capital (as at 30 September 2006)

The Company's share capital as at 30 September 2006 was € 10,390,751, divided into 10,390,751 notional no-par-value shares.

Authorised capital (as at 30 September 2006)

The Company's authorised capital as at 30 September 2006 amounted to € 3,988,671 and is subdivided as follows:

At the Annual General Meeting of 16 June 2004 a resolution was passed authorising the Executive Board to undertake a one-off increase or several increases in the share capital of up to a total of € 838,671, by issuing up to 838,671 new notional no-par-value bearer shares in exchange for cash or non-cash contributions. The capital increases require the approval of the Supervisory Board and must be carried out by 15 June 2009. The shareholders were granted subscription rights which can be rescinded in the event of a capital increase through non-cash contributions in connection with the acquisition of an equity investment. The Executive Board is also authorised to exclude fractional amounts from the shareholders' subscription rights; the Executive Board, with the agreement of the Supervisory Board, will decide on the content of the relevant rights inherent in the shares and the other conditions of the share issue (Authorised Capital 2004/I).

Based on a resolution of the Annual General Meeting of 22 June 2005, the Executive Board is also authorised to undertake a one-off increase or several increases in the share capital of up to a total of € 150,000, by issuing up to 150,000 new notional no-par-value bearer shares in exchange for cash contributions. The capital increases require the approval of the Supervisory Board and must be carried out by 20 June 2010. The Executive Board may rescind the shareholders' subscription rights with the approval of the Supervisory Board, provided that the new shares were issued at a price that is not significantly lower than the stock market price. The Executive Board is also authorised to exclude fractional amounts from the shareholders' subscription right; the Executive Board, with the agreement of the Supervisory Board, will decide on the content of the relevant rights inherent in the shares and the other conditions of the share issue (Authorised Capital 2005/II).

By a resolution of the Annual General Meeting of 22 June 2005, the Executive Board is authorised to undertake a one-off increase or several increases in the Company's share capital of up to a total of € 3,000,000 by issuing up to 3,000,000 new notional no-par-value bearer shares in exchange for cash or non-cash contributions. The capital increases require the approval of the Supervisory Board and must be carried out by 20 June 2010. The shareholders were granted subscription rights which can be rescinded in the event of a capital increase through non-cash contributions in connection with the acquisition of an equity investment or parts of other companies. The Executive Board is also authorised to exclude fractional amounts from the shareholders' subscription rights; the Executive Board, with the agreement of the Supervisory Board, will decide on the content of the relevant rights inherent in the shares and the other conditions of the share issue (Authorised Capital 2005/III).

Conditional capital (as at 30 September 2006)

As at 30 September 2006, the conditional capital amounted to € 3,740,866, and is subdivided as follows:

The increase in share capital by up to € 3,560,866 through the issue of up to 3,560,866 new notional no-par-value bearer shares will be implemented to the extent that holders of bonds exercise their conversion rights or obligations and option rights. The Executive Board was authorised by the Annual General Meeting of 27 May 2002 to issue these shares, subject to the approval of the Supervisory Board, until 25 May 2007. The new shares carry dividend rights from the beginning of the financial year for which, at the time of the their issue, no resolution of the Annual General Meeting has been passed on the appropriation of the net profit for the year.

The increase in share capital by up to € 180,000 through the issue of up to 180,000

new notional no-par-value bearer shares will only be carried out to the extent that beneficiaries of warrants, which the Executive Board was authorised to issue according to the resolution of the Annual General Meeting held on 18 April 2000, exercise their conversion rights. The shares resulting from the exercised option rights are entitled to profit participation from the beginning of the financial year in which they originate as a result of the option rights being exercised.

19. Minority interest

Minority interest is the portion of the equity capital attributable to CANCOM Netzwerk-Service GmbH's minority shareholders.

C. Notes to the consolidated income statement

1. Segment reporting

The CANCOM Group discloses segmental information according to the rules of IAS 14.

The primary segment reporting format of the CANCOM Group is based on geographical segments, since the risks, the return on equity and the earnings potential of the Group are influenced mainly by whether the business is operational in Germany or in the rest of Europe.

Since the CANCOM Group's business model is the integrated provision of IT infrastructure and services to professional end-users, there are no distinguishable sub-activities in terms of products or services, or groups of products or services, which would be identified by differing risks or income. In this respect there is no further segmentation by business segments.

The accounting methods used for internal segment reporting are in line with the accounting and valuation methods described in Section A. 3 (see page 14). The only differences arise from currency conversion and these result in slight deviations between the data for internal reporting and the relevant disclosures for external accounting.

Internal sales are recorded on the basis of either their cost of their current market prices, depending on the type of service or product sold.

The CANCOM Group's segmental reporting for the period 1 January to 30 September 2006 includes the following companies in Germany: CANCOM Deutschland GmbH, CANCOM ComputerPartner GmbH, Novodrom GmbH, Maily Distribution GmbH, CAN-COM Netzwerk-Service GmbH and CANCOM IT Systeme Aktiengesellschaft.

The Europe segment includes CANCOM Ltd., CANCOM (Switzerland) AG, CANCOM Computersysteme GmbH and SoftMail IT AG.

The table on page 22 divides up different data from the consolidated financial statements by regions. All the figures shown were calculated in the same way as the relevant consolidated data, which is why the totals of the segmental data correspond to the consolidated values.

Information on dominant customers:

The CANCOM Group has no customers that individually account for 3 percent or more of its total sales revenues.

2. Other operating income

Die sonstigen betrieblichen Erträge setzten sich wie folgt zusammen:

Total	960	931
Other operating income	27	100
Income not relating to the period	266	137
Release of pension provision	122	65
Rental income	545	629
€ '000		1 Jan. to 30 Sept. 2006 1 Jan. to 30 Sept. 2005

3. Other capitalised services rendered for own account

Development costs of € 278 were capitalised in the period 1 January to 30 September 2005 under property, plant and equipment for the integrated EDP system ff-eCommerce. These were written down by straight-line depreciation from the commencement of their useful life up to the time of the sale of the software on 30 September 2005.

4. Personnel expenses

Personnel expenses consist of the following:

Total	26,615	17,277
Pensions expenses	160	75
Social security contributions	3,819	2,377
Wages and salaries	22,636	14,825
€ '000	1 Jan. to 30 Sept. 2006 1 Jan. to 30 Sept. 2005

5. Other operating expenses

Other operating expenses consist of the following:

€ '000		1 Jan. to 30 Sept. 2006 1 Jan. to 30 Sept. 2005
Cost of premises	2,000	1,962
Insurance and other charges	504	453
Vehicle costs	1,916	1,012
Advertising costs	1,099	1,385
Stock exchange and entertainment expenses	353	277
Hospitality and travel costs	712	437
Goods delivery costs	1,215	1,166
Outside services	1,145	1,059
Repairs, maintenance, operating leases	439	178
Communication and office costs	654	583
Legal and consultancy costs	667	364
Fees and charges for money transfers	272	275
Adjustment of value of accounts receivable	121	221
Other operating expenses	545	269
Total	11,642	9,641

6. Interest income / expenses

€ '000	1 Jan. to 30 Sept. 2006 1 Jan. to 30 Sept. 2005
Other interest and similar income Interest and similar expenses	78 -821	55 -736
Interest income / expenses	-743	-681

Interest income mainly consists of interest on cash in banks and interest from customers.

7. Income tax

A profit transfer agreement was concluded between CANCOM IT Systeme Aktiengesellschaft and CANCOM Deutschland GmbH in the first quarter of 2006. This means that, from 2006, the two companies have an interlocking relationship for the purposes of corporate tax and trade tax. Since the actual trade tax rate within the scope of the interlocking relationship is higher than that of CANCOM IT Systeme Aktiengesellschaft during 2005, the utilisation of the tax loss carryovers of CANCOM IT Systeme Aktiengesellschaft from 2006 is assessed at a higher tax rate than in 2005, resulting in a fall in the income tax rate.

The rate of income tax for German companies is 38.0 percent (2005: 38.4 percent) and relates to corporation tax, trade tax and solidarity surcharge. The divergences between the tax expenses reported and those at the tax rate of CANCOM IT Systeme Aktiengesellschaft arise as follows:

€ '000		1 Jan. to 30 Sept. 2006 1 Jan. to 30 Sept. 2005
Result before tax	923	848
Tax expenses at the rate of the companies
in Germany (38.0 percent; 2005: 38.4 percent)	351	326
- Tax rate difference outside Germany	114	-93
- Change in adjustment item for deferred tax assets -504		22
- Tax-free income	-1	10
- Tax expenses in previous years	-23	-15
- Non-deductible operating expenditure and
trade tax additions and reductions	-96	18
- Temporary differences	-9	-31
- Other	21	6
Actual tax expenses	-147	243

Below is a breakdown of the income tax:

	€ '000
Capitalisation of tax loss carryover of CANCOM IT Systeme Aktiengesellschaft	-488
Deferred taxes owing to deviations from tax balance sheet of
CANCOM IT Systeme Aktiengesellschaft	31
Deferred taxes owing to deviations from tax balance sheet of
CANCOM Deutschland GmbH	28
Tax expense of CANCOM Deutschland GmbH in previous years	20

Utilisation of tax loss carryover of CANCOM Netzwerk-Service GmbH	150
Deferred taxes owing to deviations from tax balance sheet of
CANCOM Netzwerk-Service GmbH	-42
Corporate tax and solidarity surcharge of CANCOM Netzwerk-Service GmbH	69
Trade tax of CANCOM Netzwerk-Service GmbH	75
Capitalisation of tax loss carryover of CANCOM ComputerPartner GmbH	-8
Trade tax of CANCOM ComputerPartner GmbH	4
Tax expenses of CANCOM ComputerPartner GmbH in previous years	-16
Capitalisation of tax loss carryover of Novodrom GmbH	-5
Tax expenses of CANCOM Deutschland GmbH in previous years	-24
Capitalisation of tax loss carryover of Maily Distribution GmbH	-9
Utilisation of tax loss carryover of CANCOM Computersysteme GmbH, Austria	1
Corporate tax of CANCOM Computersysteme GmbH, Austria	1
Tax expenses of CANCOM Computersysteme GmbH, Austria, in previous years	-3
Utilisation of tax loss carryover of CANCOM (Switzerland) AG	28
Corporate tax of CANCOM Ltd., U.K.	41
Total	-147

Actual tax expense rate	-15.9 percent
Income tax	-147
Result before tax	923
	€ '000

The actual tax rate is calculated as follows:

Income tax comprises the income tax paid or due, and the deferred taxes, in the individual countries:

Group tax expense	103	192
	55	179
Tax liabilities	0	-3
Tax assets	55	182
Deferred taxes:
Current taxes	48	13
€ '000		1 Jan. to 30 Sept. 2006 1 Jan. to 30 Sept. 2005

The computation of income tax in accordance with IAS 12 includes tax deferrals resulting from differing valuations in the commercial balance sheet and the tax balance sheet, from realisable loss carryovers, from differences in results between the tax valuations in the individual financial statements of the consolidated subsidiaries and the standard CANCOM valuation, or from the consolidation processes, if these balance out over the course of time. Deferred tax claims relating to the carrying forward of unused tax losses are partially capitalised in view of the expected future positive results. The deferred taxes are calculated on the basis of the taxation rates expected to apply to the period in which an asset is realised or a debt satisfied. The taxation rates used are those that apply or will apply on the balance sheet date.

6. Discontinued operations

Discontinued operations had a negative impact of € 555k on the income statement in the period 1 January to 30 September 2006 (first nine months of 2005: € 207k). Of the negative figure shown, € 350k relates to the after-tax result of SoftMail IT AG. This can be broken down as follows:

Result after tax	-350	207
Income tax expense	-364	16
Foreign currency exchange gains / losses	5	9
Interest income / expenses	23	22
Other operating expenses	-1,384	-1,512
amortisation of intangible assets	-16	-15
Depreciation on property, plant and equipment and
Personnel expenses	-612	-742
Cost of purchased materials and services	-713	-855
Other operating income	3	87
Sales revenues	2,708	3,197
€ '000	1 Jan. to 30 Sept. 2006 1 Jan. to 30 Sept. 2005

Also shown are the additional costs of litigation connected with the sale of shares in eBizcuss.com S.A. in 2003, which amount to € 205k.

D. Notes to the cash flow statement

The consolidated cash flow statement is drawn up in line with the principles of IAS 7 "Cash flow statements". This states that a distinction must be made between cash flows from operating activities, investing activities and financing activities. The cash and cash equivalents shown in the cash flow statement comprise cash in hand and cash at banks.

The indirect method was used to establish the cash flow from current activities. The cash flow from ordinary activities has increased by € 1.9 million in the period 1 January to 30 September 2006 in comparison with the same period of 2005.

For information regarding the acquisition of CANCOM Netzwerk-Service GmbH, please see page 14 (Scope of consolidation). Cash and cash equivalents amounting to € 2,854k were taken over with the acquisition of CANCOM Netzwerk-Service GmbH.

Payments for the acquisition of subsidiaries also include the consideration paid for the customer list and current customer orders of Holme & Co. Computersysteme + Lösungen GmbH and Holme & Co. Computersysteme + Lösungen OHG, based in Augsburg, Germany, as well as the incidental costs associated with the acquisition, amounting to € 317k.

The subsidiary SoftMail IT AG, which is currently being offered for sale, is no longer included in the cash flow statement. The following amounts have been eliminated:

www.cancom.de

€ '000	1 Jan. to 30 Sept. 2006		1 Jan. to 30 Sept. 2005
Cash flow from ordinary activities
Profit for the first nine months before tax and minority interest		14	191
Adjustments +/- Depreciation on property, plant and equipment and amortisation of intangible assets		16	15
+/- Changes in short-term provisions +/- Interest expenditure +/- Changes in inventories		20 -23 -6	17 -22 -92
+/- Changes in trade accounts receivable and other accounts receivable		52	-78
+/- Changes in trade accounts payable and other accounts payable +/- Income tax payments and rebates		53 -89	-80 -2
Net cash from operating activities		37	-51
Cash flow from investing activities
+/- Payments for additions to intangible assets and property, plant and equipment +/- Interest received		-4 23	-16 22
Net cash used in investing activities		19	6
Cash flow from financing activities
+/- Inflows / outflows from borrowings		0	73
Net cash used in financing activities		0	73
Net change in cash and cash equivalents		56	28
+/- Changes in value resulting from foreign currency exchange		-17	-12
+/- Cash and cash equivalents at beginning of period 527			516
Cash and cash equivalents at end of period		566	532

The addition of fixtures, fittings and equipment is shown in the cash flow statement under additions for property, plant and equipment. The addition of inventories is shown under changes to inventories.

Cash and cash equivalents at year end comprise cash in hand and cash at banks, taking into account short-term overdraft facilities and the current portion of long-term debt.

E. Other disclosures

1. Associated and related companies and persons

CANCOMIT Systeme Aktiengesellschaft has drawn up these consolidated financial statements as the parent company. The consolidated financial statements are not included in any other consolidated financial statements of a holding or corporate group.

For the purposes of IAS 24, Klaus Weinmann can be considered a related person, who can exercise decisive control over the CANCOM Group, both in his capacity as an Executive Board member and as a shareholder in CANCOM IT Systeme Aktiengesellschaft. Rudolf Hotter (Executive Board member since 16 June 2005) and Paul Holdschik (Executive Board member since 1 January 2006) are also related persons for the purposes of IAS 24, as are all members of the Supervisory Board.

• There were no accounts receivable or payable in relation to the Executive Board or the other companies in the CANCOM Group on the balance sheet date.
• Since 1 November 2001 there has been a consultancy agreement in place between CANCOM IT Systeme Aktiengesellschaft and the Chairman of its Supervisory Board. This was approved by the Supervisory Board in accordance with Section 114 of the German Companies Act (Aktiengesetz, AktG). The agreement is for an unspecified term and can be terminated at 12 months' notice. The annual fee is € 120k.
• Transactions with related persons were accounted for at market prices.

2. Shareholdings of members of the Executive and Supervisory Boards (as at balance sheet date)

Please see page 6 of this quarterly report for details of the shareholder structure.

3. Shareholdings in the Company as defined by Section 20 IV of the German Companies Act (Aktiengesetz, AktG)

No shareholder reported in writing to CANCOM IT Systeme Aktiengesellschaft a majority shareholding as defined by Section 20 of the above Act in the period from 1 January to 30 September 2006.

Consolidated segment reporting

geographical segments		Germany Europe		Elimination		consolidation
	09/30/06	09/30/05	09/30/06	09/30/05	09/30/06	09/30/05	09/30/06	09/30/05
	'000 €	'000 €	'000 €	'000 €	'000 €	'000 €	'000 €	'000 €
Sales revenues
- External sales	156,926	135,975	21,812	22,217
- Sales between segments	4,810	7,126	384	528	-5,194	-7,654
- Total income	161,736	143,101	22,196	22,745	-5,194	-7,654	178,738	158,192
Result
EBITDA	2,845	2.131	423	419			3,268	2,550
- Depreciation and amortization	842	1,157	87	77			929	1,234
EBIT	2,003	974	336	342			2,339	1,316
- Interest income							78	54
- Interest expense							-821	-735
Result of ordinary activities							1,596	635
- Extraordinary result	0	0	0	0			0	0
+ Currency differences							3	0
- Foreign currency exchange gains / losses							29	6
- Income tax							147	-243
- Minority interest							-150	0
- Discontinuing operations							-555	207
Consolidated income							1,070	605
Other information
- Segment assets1	75,000	53,873	6,619	6,628			81,619	60,501
- Current liabilities	32,575	23,310	3,503	2,962			36,078	26,272
- Long-term liabilities	13,348	7,527	25	29			13,373	7,556
- Investments1	6,229	3,707	158	129			6,387	3,836

1 Segment assets and investments including goodwill from consolidation of capital

INTERIM REPORT

Q3/2006

Masthead

Germany

CANCOM IT Systeme AG

Investor Relations

Messerschmittstr. 20

89343 Jettingen-Scheppach