CANCOM SE — Interim / Quarterly Report 2006

Aug 11, 2006

INTERIM REPORT

Q 2/ 2 0 0 6 www.cancom.de

»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 Q2	04-07
1) Business development	04
2) Order position	05
3) Cash position	05
4) Significant changes in risks	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

Our customers are laying increasing importance on highvalue services. If we are to continue to grow as a company in the IT sector, we must respond quickly and appropriately to this trend. Many measures have already been taken: during the last few months we have steadily expanded our service offering and taken on further expert IT consultants.

Our acquisition of NSG Netzwerk-Service GmbH in the

second quarter of 2006 was not just a big step, but a leap. NSG has excellent competence and in-depth expertise in the service business. During the last few years, NSG has undergone a successful restructuring programme, making it one of the leading medium-sized ITC service providers in Germany.

CANCOM and NSG have the same objective: to occupy a leading position among German systems houses, with our joint total of more than 1,300 employees. Our product and service portfolios complement each other very well – the ideal basis for mutual benefit and for growing together.

Our acquisition of NSG expands our service offering significantly, enabling us to continue to face the demands of the market with confidence. The conditions have been created for more growth and profitability.

Kind regards

Klaus Weinmann

CEO

Key figures

First 6 months 2006 in Euro million

Kennzahlenübersicht Sechsmonatszahlen 2006 in Mio. Euro	First 6 months 01/01. - 06/30/2006	First 6 months 01/01. - 06/30/2005	Change	Key Figures First 6 months 2006 in Euro million
Konzernumsatz	109.6	105.7	+3.7 %	Consolidated Sales
Rohertrag	21.6	19.5	+10.7 %	Gross profit
EBITDA CANCOM Konzern	1.8	1.6	+10.0 %	EBITDA CANCOM Group
EBIT CANCOM Konzern	1.3	0.9	+45.8 %	EBIT CANCOM Group
Periodenüberschuss Konzern	0.6	0.5	+12.9 %	Consolidated result
	06/30/2006	12/31/2005
Bilanzsumme	64.7	71.9	-10.1 %	Balance Sheet Total
Eigenkapitalquote	42.7 %	37.6 %	+13.4 %	Equity Ratio
Mitarbeiter	571	567	+0.7 %	Workforce

First 3 months

Business development

1. Business development since the start of the financial year

The CANCOM Group continued its profitable growth in the first half of 2006.

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

Both sales revenues and operating profit rose again in the first half of 2006. Consolidated sales revenues rose by 3.8 percent from € 105.6 million to € 109.6 million. Sales revenues in Germany rose by 4.2 percent to € 94.8 million in the first six months. In the rest of Europe, sales revenues rose by about one percentage point to € 14.8 million. Of the consolidated sales revenues, € 52.4 million is attributable to the second quarter of 2006, compared with € 53.4 million in the second quarter of 2005. The reason for this result is the suppressed demand for Apple computers in anticipation of the launch of new products. Sales revenues are expected to recover accordingly in the second half of 2006 and in the first half of 2007. This should have an appreciable impact on profits.

At the same time, the IT services business continued its upward trend, resulting in a further increase in the consolidated gross profit and consolidated operating profit in both the second quarter and the first half-year of 2006.

The consolidated gross profit for the first half of 2006, at € 21.6 million, is 10.7 percent higher than in the same period of 2005.

The figure for the second quarter of the year, at € 10.7 million, is € 5.4 percent higher than last year.

At € 1.8 million, earnings before interest, tax, depreciation and amortisation (EBITDA) were 10 percent higher in the second half of 2006 than in the same period of 2005. EBITDA in the second quarter, at € 0.8 million, was about the same as during the same period last year.

Consolidated earnings before interest and tax (EBIT) rose to € 1.3 million, an increase of 45.7 percent in comparison with the first half of 2005. For the second quarter of 2006, consolidated EBIT amounted to € 0.6 million, compared with € 0.5 million in 2005.

The consolidated net income for the first half of 2006 rose by 32 percent to € 0.7 million. Consolidated net income for the second quarter is about the same as for the second quarter of the previous year.

The consolidated balance sheet total as at 30 June 2006 has fallen to € 64.6 million, compared with € 70.1 million as at 31 December 2005. Because of this and the positive results for the first half of the year, the CANCOM Group's equity ratio rose from 38.4 percent as at 31 December 2005, to 42.9 percent as at 30 June 2006.

There was a negative net cash flow of € 5.7 million in the first half of 2006. However, this is in line with the usual seasonal trend; in the first half of 2005, there was also a negative operating cash flow of € 3.4 million, which was offset by the accustomed strong operating cash flow of the fourth quarter, so that over the year 2005 as a whole, there was a positive net cash flow of € 4.6 million.

The Executive Board expects a significant increase in sales revenues and profits, starting in the current quarter, partly as a result of the recently completed takeover of NSG Netzwerk-Service GmbH.

Below is an overview of the most significant developments within the CANCOM Group and its divisions during the second quarter of 2006:

CANCOM IT Systeme AG acquires majority holding in NSG Netzwerk-Service GmbH

On 24 May 2006, CANCOM IT Systeme AG announced its acquisition of 75.1 percent of NSG Netzwerk-Service GmbH. The purchase price of € 6.0 million was paid in cash.

As a result of this transaction, Siemens Business Services GmbH & Co. OHG has reduced its previous minority holding from 48.47 percent to 24.9 percent.

CANCOM IT Systeme AG has also been given a call option to acquire the remaining shares, which may be exercised until 2009. Siemens Business Services GmbH & Co. OHG will be given a put option until 2009, depending on how NSG's business develops. If the option is exercised, the balance of the purchase price will depend on NSG's future EBIT. It could be as much as € 2.5 million.

NSG Netzwerk-Service GmbH, based near Munich, Germany, is a provider of IT services and has seven locations in Germany. In the 2005 financial year the company, which has about 650 employees, generated sales revenues of € 54.7 million and made a net profit of € 1.3 million.

The takeover will enable CANCOM to generate multiple synergies and significantly expand its market position in the IT services sector in Germany, with its future total of around 1,300 employees.

Following the takeover of NSG, the Executive Board expects gross profits to double, with a correspondingly positive impact on net profits, especially from the 2007 financial year.

The German Federal Cartel Office announced on 7 July that it had no objections to the majority takeover of NSG Netzwerk-Service GmbH by CANCOM IT Systeme AG.

Business development

CANCOM IT Systeme AG's capital increase through cash contributions successfully placed

On 26 May 2006, CANCOM IT Systeme AG carried out a capital increase through cash contributions from its Authorised Capital. The capital increase had been resolved by the Executive Board and approved by the Supervisory Board. A total of 800,000 shares were issued. Shareholders were not granted subscription rights.

The capital increase was subscribed entirely by KST Beteiligungs AG, at an issue price of € 3.09 per share. The equity base will be strengthened further by the expected capital inflow of € 2,472,000.

After the capital increase was entered in the German Commercial Register on 1 August 2006, CANCOM IT Systeme AG's share capital was increased by 8.34 percent to € 10,390,751.

Announcement by CANCOM IT Systeme Aktiengesellschaft (ISIN DE0005419105), Jettingen-Scheppach, Germany,

in compliance with Section 21 (1) of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG)

In a letter dated 29 May 2006, AvW Invest Aktiengesellschaft, Hauptstrasse 118, 9201 Krumpendorf, Austria, informed us that since 24 May 2006 it has held 533,151 shares in CANCOM IT Systeme Aktiengesellschaft, or 5.559 percent of the Company's voting capital, thus exceeding the 5 percent shareholding threshold.

This means that the following persons or companies who have either a direct or indirect shareholding in AvW Invest AG also indirectly hold 5.559 percent of the voting capital of CANCOM IT Systeme Aktiengesellschaft in accordance with the above Act:

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

2. Order position

Our high capacity to deliver goods immediately means that incoming orders are often converted into sales within two weeks. Consequently, the reporting date figures on their own normally do not give a true picture of our order situation, and we therefore do not publish them.

3. Continued 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 guarantees 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.

0

Business development

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. NSG Netzwerk-Service GmbH has up to now generated most of its sales revenues with companies within the Siemens Group. The majority takeover of NSG Netzwerk-Service GmbH by CANCOM IT Systeme AG will make the Siemens Group the largest customer of the CANCOM Group. In order to minimise the risk of becoming too dependent on this customer, the Executive Board places great importance on maintaining a close and open partnership with the Siemens Group. It also plans gradually to reduce the dependence on Siemens by expanding the sales activities of NSG Netzwerk-Service GmbH and diversifying the customer base.

Details of other risks to which we are exposed can be found in the 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

Investments by the CANCOM Group:

The Group's investments are mainly concentrated on acquisitions, as well as on the continual improvement of the internal infrastructure, and office and business equipment. Depreciation on property, plant and equipment, and amortisation of intangible assets amounted to € 0.23 million in the first half of 2006, compared with € 0.36 million in the same period of 2005.

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

7. Our employees

At 30 June 2006, the CANCOM Group had a total of 571 employees, according to the method of counting specified by the German Commercial Code (Handelsgesetzbuch, HGB). A year ago the Group had 528 employees. As at 31 December 2005, the CANCOM Group had a staff of 567. This does not take into account NSG's employees, as NSG will not be consolidated into the CANCOM Group until the third quarter.

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 UK can be expected in the current year.

Gross domestic product 2006* (real change compared with 2005, as a percentage)

Euroland:	2.2
Germany:	1.6
UK:	2.6
USA:	3.1
Japan:	3.3
Asia (excl. Japan):	8.1
Latin America:	4.6
World:	4.8

* Forecast: Deutsche Bank, Research Office, Frankfurt/Main, Germany, 14 July 2006

The Executive Board expects the positive trend in the German IT sector to continue in 2006.

According to the German Federal Association of the Information Economy, Telecommunications and the New Media (Bitkom) the rising demand for hardware in Germany will probably be largely offset by a fall in prices. It therefore expects only slight growth of 0.6 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 complete solutions in a "one-stop shop" with an integrated service offering will continue.

Business development

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

IT market as a whole:	3.4
Hardware:	0.6
Software:	5.5
IT services:	4.5

* Forecast: Bitkom, March 2006

CANCOM geared 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 would also like to continue to consolidate our market position by making targeted acquisitions, such as that of NSG Netzwerk-Service GmbH. The present market environment offers favourable conditions for this, since several small systems houses and IT services providers are looking for prospective buyers.

Experience has shown that the consolidation of service activities by recruiting new employees involves initial costs, which is why 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 the profits is expected until at least 2007. On the other hand, an increased contribution to profits is expected from the acquisitions and asset deals carried out during 2005.

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

Executive Board Klaus Weinmann Paul Holdschik	476,145 (4.965 %) 13,059 (0.136 %)
Supervisory Board: Stefan Kober	511,099 (5.329 %)
Walter von Szczytnicki	6,252 (0.065 %)

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

No stock options were issued to Board members or employees during the second quarter of 2006. (For further details regarding stock options, please refer to the Notes.)

CANCOM IT Systeme AG's own shareholdings: The Company did not acquire or sell any shares during the period under review.

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

German Federal Cartel Office has no objections to majority takeover of NSG Netzwerk-Service GmbH

On 7 July, the German Federal Cartel Office announced that there were no objections to the majority takeover of NSG Netzwerk-Service GmbH by CANCOM IT Systeme AG.

Jettingen-Scheppach, Germany, August 2006

CANCOM IT Systeme Aktiengesellschaft The Executive Board

Consolidated balance sheet (ifrs) – Assets

Zahlenangaben in T€	6 months` report	Annual accounts	Figures in € '000
Aktiva	06/30/2006 (TEuro)	12/31/2005 (TEuro)	Assets
Kurzfristige Vermögensgegenstände			Current assets
Liquide Mittel	5,617	11,329	Cash
Zur Veräußerung gehaltene Vermögenswerte	2,618	2,732	Assets as held for Sale
Forderungen aus			Trade receiveable
Lieferungen und Leistungen	17.785	19,398
Vorräte	9,382	9,607	Inventories
Rechnungsabgrenzungsposten und			Prepaid expenses and
sonstige kurzfristige Vermögensgegenstände	2,299	2,115	other current assets
Kurzfristige Vermögens
gegenstände, gesamt	37,701	45,181	Total current assets
Langfristige Vermögensgegenstände			Long-term assets
Sachanlagevermögen	7,890	8,016	Property, plant and equipment
Immaterielle Vermögensgegenstände	266	113	Intangible assets
Geschäfts- oder Firmenwert	17,006	16,667	Goodwill
Finanzanlagen	29	5	Financial assets
Ausleihungen	72	157	Loans receivable
Latente Steuern	1,579	1,634	Deferred taxes
Sonstige Vermögensgegenstände	127	133	Other assets
Langfristige Vermögens
gegenstände, gesamt	26,969	26,725	Total long-term assets
Aktiva, gesamt	64,670	71,906	Total assets

Consolidated balance sheet (ifrs) – Assets

Zahlenangaben in T€	6 months` report	Annual accounts	Figures in € '000
Passiva	06/30/2006 (TEuro)	12/31/2005 (TEuro)	Equity and liabilities
Kurzfristige Verbindlicheiten			Current liabilities
Kurzfristige Darlehen und kurzfristiger Anteil an			Short term debt and
langfristigen Darlehen	818	1,715	current portion of long-term debt
Verbindlichkeiten aus Lieferungen
und Leistungen	17,252	24,252	Trade payables
Erhaltene Anzahlungen	16	30	Advanced payments redeived
Rückstellungen	1,750	2,240	Accrued liabilities
Umsatzabgrenzungsposten	438	192	Deferred revenues
Verbindlichkeiten aus Ertragssteuern	246	204	Income tax payable
Sonstige kurzfristige Verbindlichkeiten	2,996	5,197	Other current liabilities
Mit Veräußerung im Zusammenhang stehende Schulden	381	470	Liabilities related to assets held for sale
Kurzfristige Verbindlichkeiten, gesamt	23,897	34,300	Total current liabilities
Langfristige Verbindlicheiten			Long-term liabilities
Langfristige Darlehen	6,902	4,111	Long-term debt
Genussrechtskapital und nachrangige Darlehen	6,000	6,000	Profit-participation capital
Umsatzabgrenzungsposten	71	65	Deferred revenues
Latente Steuern	0	0	Deferred taxes
Pensionsrückstellungen	166	343	Pension accrual
Sonstige langfristige Verbindlichkeiten	15	15	Other long-term liabilities
Langfristige Verbindlichkeiten, gesamt	13,154	10,534	Total Long-term liabilities
Eigenkapital			Equity
Gezeichnetes Kapital	9,591	9,591	Issued capital
Kapitalrücklage	13,821	13,821	Capital reserves
Bilanzgewinn/Bilanzverlust (inklusive			Earned surplus
Gewinnrücklagen)	4,190	3,629
Eigenkapitaldifferenz aus Währungsumrechnung	17	31	Currency translation difference
Eigenkapital, gesamt	27,619	27,072	Total equity
			Total equity and
Passiva, gesamt	64,670	71,906	liabilities

Income statement (ifrs)

Zahlenangaben in T€	04/01/06	04/01/05	01/01/06	01/01/05	Figures in € '000
Gewinn- und Verlustrechnung	-06/30/06	-06/30/05	-06/30/06	-06/30/05	Income Statement
Gewinn- u. Verlustrechnung	- 30.09.03	- 30.09.02	- 30.09.03	- 30.09.02	Income State
Umsatzerlöse	52,422	53,501	109,579	105,687	Revenues
Sonstige betriebliche Erträge	306	298	539	578	Other operating income
Andere aktivierte Eigenleistungen					Work performed by the
	0	26	0	61	enterprise and capitalised
Gesamtleistungen	52,728	53,825	110,115	106,326	Total operating performance
Materialaufwand /
Aufwand für bezogene Leistungen	-42,059	-43,699	-88,528	-86,831	Cost of purchased materials and services
Rohertrag	10,669	10,126	21,587	19,495	Gross profit
Personalaufwand	-6,408	-5,922	-13,079	-11,454	Staff costs
Abschreibungen auf Sachanlagen					Depreciation of property, plant and
und immaterielle					equipment and amortisation of
Vermögensgegenstände	-233	-360	-472	-716	intangible assets
Sonstige betriebliche Aufwendungen	-3,430	-3,325	-6,750	-6,443	Other operating expenses
Betriebsergebnis	598	519	1,286	882	Profit from operations
Zinserträge/ -aufwendungen	-229	-191	-462	-348	Interest income / expense
Beteiligungserträge	-1	0	-1	0	Incom from investments and participations
Währungsgewinne /-verluste	-4	-22	16	-16	Foreign currency exchange income / losses
Ergebnis vor Steuern					Profit before taxes
(und Minderheitenanteile)	364	306	839	518	(and minority interests)
Steuern vom Einkommen und Ertrag	-2	-7	-103	-192	Income tax
Ergebnis vor Minderheiteanteilen	362	299	736	326	Profit before minority interests
Minderheitenanteile	0	0	0	0	Minority interests
Discontinued operations	-359	-154	-175	171	Discontinued operations
Periodenüberschuss / Periodenfehlbetrag	3	145	561 4	97	Net profit for the period
Durchschnittlich im Umlauf befindliche					Average number of
Aktien (Stück) unverwässert	9,590,751	9,558,920	9,590,751	9,333,313	shares outstanding (basic)
Durchschnittlich im Umlauf befindliche					Average number of
Aktien (Stück) verwässert	9,590,751	9,558,920	9,590,751	9,333,313	shares outstanding (diluted)
Ergebnis je Aktie (unverwässert)	0.00	0.02	0.06	0.05	Earnings per share (basic)
Ergebnis je Aktie (verwässert)	0.00	0.02	0.06	0.05	Earnings per share (diluted)

Consolidated cash flow statement (ifrs)

Zahlenangaben in T€	01/01/06-	01/01/05	Figures in € '000
Kapitalfluss	-06/30/06	-06/30/05	Cashflow
Cashflow aus gewöhnlicher Tätigkeit:			Cash flows from operating activities:
Periodengewinn vor Steuern- und Minderheitenanteilen	839	518	Net profit for the period before taxes and minority interests
Berichtigungen:			Adjustments:
+/- Abschreibungen auf Sachanlagen und immaterielle			+/- Depreciation of property, plant and
Vermögensgegenstände	472	716	equipment, and amortisation of intangible assets
+/- Veränderungen der langfristigen Rückstellungen	-177	-530	+/- Change in long-term accruals
+/- Veränderungen der kurzfristigen Rückstellungen	-490	-680	+/- Change in current accruals
+/- Ergebnis aus dem Abgang von Anlagevermögen	-4	-20	+/- Profit/ losses on the disposal of fixed assets
+/- Zinsaufwand	462	348	+/- Interest expense
+/- Veränderungen der Vorräte	225	-811	+/- Change in inventories
+/- Veränderungen der Forderungen aus Lieferungen			+/- Change in trade receivables and
und Leistungen sowie anderer Forderungen	1,444	-2,294	other receivables
+/- Veränderungen der Verbindlichkeiten aus Lieferungen			+/- Change in trade payables and
und Leistungen sowie anderer Schulden	-8,963	365	other liabilities
+/- Gezahlte Zinsen	-148	-169	+/- Interest paid
+/- Gezahlte und erstattete Ertragsteuern	-15	1	+/- Income tax paid and refunded
Nettozahlungsmittel aus betrieblicher Tätigkeit	-6,355	-2,556	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)	-363	-1,493	cash assets acquired
+/- Zahlungen für Zugänge zu immateriellen			+/- Payments for additions to intangible assets as
Vermögenswerten sowie Sachanlagen	-518	-324	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	23	35	equipment as well as financial assets
+/- Erhaltene Zinsen	45	33	+/- Interest received
Für Investitionstätigkeit eingesetzte Nettozahlungsmittel	-728	-1,284	Net cash from/ used in investing activities
Cashflow aus Finanzierungstätigkeit			Cash flows from financing activities
+/- Erlöse aus der Ausgabe von gezeichnetem Kapital	0	1,200	+/- Proceeds from issuance of share capital
+/- Kapitalerhöhungskosten	0	-68	+/- Dividends Paid
+/- Ein/Auszahlungen für aufgenommene Kredite			+/- Inflows/ outflows in connection with loans
	1,894	-508	taken out by the enterprise
+/- Gezahlte Zinsen	-359	-212	+/- Interest paid
Für Finanzierungstätigkeit eingesetzte Nettozahlungsmittel	1,535	412	Net cash from/ used in financing activities
Nettozu-/abnahme von Zahlungsmitt. u. Zahlungmittelaqivalente	-5,548	-3,428	Net increase/ decrease in cash and cash equivalents
+/- Wechelkursbedingte Wertänderungen	-14	69	+/- 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	5,767	3,349	Cash and cash equivalent sat end of period

Consolidated statement of changes in equity (IFRS)

Consolidated statement of changes in equity (ifrs)

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

Consolidated statement of changes in equity (ifrs)

	Eigenkapital gesamt/Total equity	Minderheitenanteile Minority interests	Bilanzgewinn/ Earned surplus	Eigenkapitaldiff. aus der erstmaligen Anwendung von IFRS	Eigenkapitaldiff. aus der Währungsumrechnung/ 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
- IPO costs	-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	0
Change in accumulated foreign
currency exchange difference	-14				-14
Change in reserves
- change in stock options	0
- IPO costs	0
Net profit for the period	561		561
Minority interests	0	0
30 June 2006	27,619	0	4,221	-153	17

Notes to the consolidated accounts

Notes to the consolidated accounts

NOTES

to the Interim Financial Statements for Q2/2006

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.

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 Mr Georg Feiertag for cash a share in NSG Netzwerk-Service GmbH 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 Dr Hans-Ulrich Jerschke.

Siemens Business Services GmbH & Co. OHG has sold its shares in NSG Netzwerk-Service GmbH 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 Dr Hans-Ulrich Jerschke. The purchase price of € 6 million was paid on 25 July 2006.

NSG 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 NSG 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.

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 third quarter of 2006, if possible. In the accounts for the second quarter of 2006, the subsidiary is classified as being held for resale, in accordance with IFRS 5.

The German and international subsidiaries shown in the following list are included in the consolidated financial statements of CANCOM IT Systeme Aktiengesellschaft as at 30 June 2006, in accordance with the principles of full consolidation:

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

3. Accounting and valuation methods

The basic accounting and valuation methods which were used in the preparation of the present consolidated financial statements are set out as follows. 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 June 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 Second quarter Second quarter Second quarter 2006 2005 2004 Swiss francs • Rate on reporting date 1€=1.567 SFR 1€=1.549 SFR 1€=1.525 SFR • Average rate 1€=1.561 SFR 1€=1.546 SFR 1€=1.553 SFR Pounds sterling • Rate on reporting date 1€=0.693 GBP 1€=0.672 GBP 1€=0.671 GBP • Average rate 1€=0.687 GBP 1€=0.6866 GBP 1€=0.674 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

www.cancom.de

Notes to the consolidated accounts

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 five-year 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 in future the company will accrue economic use 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 € 4.3 million as at 30 June 2006.

Extraordinary depreciation on 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 contributionbased 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 stock-based 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. Cash and cash equivalents amounting to € 855k (second quarter 2005: € 847k) were pledged to a bank.

2. Trade accounts receivable

The trade accounts receivable are due within a year.

3. 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 June 2006 T€	31 December 2005 T€
Finished products and merchandise	9,472	10,146
Advance payments made	16	2
Advance payments received	-106	-412
	9,382	9,736

4. Prepaid expenses and other assets

This item mainly consists of other short-term assets. These include bonuses due from suppliers (€1,021k), marketing revenues (€ 205k), creditors with a debit balance (€ 205k), insurance recovery (€ 90k), employee loans (€ 70k), tax rebates (€ 43k) and revenue from commission (€ 10k). The deferred income, amounting to € 378k, consists of deferred insurance premiums and advance payments.

5. Fixed assets

5.1 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 € 5.6 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.

5.2 Intangible assets

Intangible assets predominantly include software that has been purchased.

5.3 Goodwill

Goodwill at the balance sheet date mainly includes the relevant figures arising from the consolidation of CANCOM Deutschland GmbH, Cancom Ltd., UK and CANCOM ComputerPartner GmbH.

5.4 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 the reinsurance cover of a former Executive Board member to his new employer.

6. Assets held for resale

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

7. Active tax assets

The deferred tax assets were capitalised on the basis of the existing approximately € 8.8 million German and non-German corporate tax losses carried forward, and the approximately € 7.2 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.

T€
1,634
0
-55
1,579

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. 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 nonforfeitable, 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.

11. Other provisions

The other provisions mainly comprise a provision for holiday entitlements (€ 425k), invoices not yet received (€ 362k), bonuses and commissions (€ 357k), costs of litigation (€ 210k), contingent risks (€ 156k), financial statement costs (€ 96k), Supervisory Board remuneration (€ 60k) and provisions for salaries (€ 48k).

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.

12. Income tax payable

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

13. Other current liabilities

Other current liabilities include sales tax liabilities (€ 1,159k), tax on wages and salaries, and church tax (€ 552k), social security contributions (€ 515k), debtors with a credit balance (€ 408k) and purchase price liabilities (€ 190k).

14. Debts connected with sale of equity investments

Debts connected with the sale of equity investments comprises the current liabilities of SoftMail IT AG.

15. 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".

16. 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 profitparticipation rights, the same applies as to the profit-participation rights designated as PREPS 2005-2 above.

17. Equity capital

Share capital (as at 30 June 2006)

The Company's share capital as at 30 June 2006 was € 9,590,751, divided into 9,590,751

www.cancom.de

notional no-par-value shares.

The Company's authorised capital as at 30 June 2006 amounted to € 4,788,671.

Authorised and conditional capital (as at 30 June 2006)

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 € 950,000, by issuing up to 950,000 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).

In May 2006, the Executive Board of CANCOM IT Systeme Aktiengesellschaft, with the authorisation of the Supervisory Board, resolved to increase the Company's share capital by € 800,000 by issuing 800,000 new no-par-value bearer shares in exchange for cash fromAuthorised Capital (2005) II. The ensuing increase in the share capital to € 10,390,751 was entered in Commercial Register B of the Memmingen Registrar of Companies (Registergericht) on 1 August 2006. After partial utilisation, the Authorised Capital (2005) II therefore amounts to € 150,000.

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-parvalue 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).

As at 30 June 2006, the conditional capital amounted to € 3,740,866.

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.

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 first half of 2006 includes the following companies in Germany: CANCOM Deutschland GmbH, CANCOM ComputerPartner GmbH, Novodrom GmbH, Maily Distribution 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 23 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.

2. Other operating income

Other operating income consists of the following:

€ '000	1 Januar to 30 June 2006	1 Januar to 30 June 2005
Rental income	373	45
Release of pension provision	85	65
Income not relating to the period	53	63
Other operating income	25	56
Total	536	578

3. Other capitalised services rendered for own account

Development costs of € 61k were capitalised in the period 1 January to 30 June 2006 under property, plant and equipment for the integrated EDP system ff-eCommerce. These are written down by straight-line depreciation from the commencement of their useful life up to the time of sale of the software on 30 September 2005.

4. Personnel expenses

Personnel expenses consist of the following:

€ '000	1 Januar to 30 June 2006	1 Januar to 30 June 2005
Wages and salaries Social security contributions Pensions expenses	11,245 1,783 51	9,808 1,607 39
Total	13,079	11,454

5. Other operating expenses

Other operating expenses consist of the following:

€ '000	1 Januar to 30 June 2006	1 Januar to 30 June 2005
Cost of premises	1,282	1,472
Insurance and other charges	317	280
Vehicle costs	863	618
Advertising costs	767	952
Stock exchange and entertainment expenses	295	202
Hospitality and travel costs	318	288
Goods delivery costs	813	767
Outside services	743	612
Repairs, maintenance, operating leases	265	55
Communication and office costs	372	401
Legal and consultancy costs	299	228
Fees and charges for money transfers	209	175
Adjustment of value of accounts receivable	14	224
Other operating expenses	193	169
Total	6,750	6,443

6. Interest income / expenses

€ '000	1 Januar to 30 June 2006	1 Januar to 30 June 2005
Other interest and similar income Interest and other expenses	45 -507	33 -381
Interest income / expenses	-462	-348

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 Januar to 30 June 2006	1 Januar to 30 June 2005
Result before tax	664	689
Tax expenses at the rate of the companies
in Germany (38.0 percent; 2005: 38.4 percent)	252	265
- Tax rate difference outside Germany	-11	-69
- Change in adjustment item for deferred tax assets	-104	-12
- Tax-free income	0	10
- Tax expenses in previous years	-12	-20
- Non-deductible operating expenditure and trade
tax additions and reductions	-62	20
- Temporary differences	29	-23
- Other	11	21
Actual tax expenses	103	192

Below is a breakdown of the income tax:

	€ '000
Utilisation of tax loss carryover of CANCOM IT Systeme Aktiengesellschaft	110
Deferred taxes owing to deviations from tax balance sheet of CANCOM IT
Systeme Aktiengesellschaft	12
Deferred taxes owing to deviations from tax balance sheet of
CANCOM Deutschland GmbH	17

The actual tax rate is calculated as follows:

	€ '000
Result before tax	664
Income tax	103
Actual tax expense rate	15.5 %

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

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

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.

8. Discontinued operations

Discontinued operations had a negative effect of € 175k on the income statement in the first half of 2006 (first half of 2005: € 171k).

Of the negative figure shown, € 25k relates to the after-tax result of SoftMail IT AG. This is broken down as follows:

€ '000	02.01.2010 - 30.06.2006	02.01.2009 - 30.06.2005
Revenues Other operating income	1.835 2	2.220 58
Cost of purchased materials and services	-484	-609
Personnel expenses	-415	-495
Depreciation on property, plant and equipment
and amortisation of intangible assets	-11	-9
Other operating expenses	-964	-1.040
Interest income / expenses	15	14
Foreign currency exchange gains / losses	-3	8
Income tax expense	0	24
Result after tax	-25	171

Also shown are the additional costs of litigation connected with the sale of the shares in eBizcuss.com S.A. in 2003, which amounted to € 150k.

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 fallen by € 3.9 million in the first half of 2006 in comparison with the first half of 2005.

Payments for the acquisition of subsidiaries 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:

€ '000	1 Januar to 30 June 2006	1 Januar to 30 June 2005
Cash flow from ordinary activities
Profit for the half-year before tax and minority interest	-25	147
Adjustments +/- Depreciation on property, plant and equipment and
amortisation of intangible assets	11	9
+/- Changes in short-term provisions	-1	-5
+/- Interest expenditure	-15	-14
+/- Changes in inventories	32	-20
+/- Changes in trade accounts receivable and
other accounts receivable	74	-69
+/- Changes in trade accounts payable and other
accounts payable	-29	-126
+/- Income tax payments and rebates	-59	0

Net cash from operating activities	-12	-78
Cash flow from investing activities
+/- Payments for additions to intangible assets
and property, plant and equipment	-3	-11
+/- Interest received	15	14
Net cash used in investing activities	12	3
Cash flow from financing activities
+/- Inflows / outflows from borrowings	0	48
Net cash used in financing activities	0 4	8
Net change in cash and cash equivalents	0	-27
+/- Changes in value resulting from foreign
currency exchange	-7	-15
+/- Cash and cash equivalents at beginning of period	527	516
Cash and cash equivalents at end of period	520 4	74

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

CANCOM IT 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 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 7 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 June 2006.

Consolidated segment reporting

geographical segments	Germany		Europe			Elimination		consolidation
	06/30/06	06/30/05	03/31/06	03/31/05	03/31/06	03/31/05	03/31/06	03/31/05
	'000 €	'000 €	'000 €	'000 €	'000 €	'000 €	'000 €	'000 €
Sales revenues
- External sales	94.772	90.927	14.807	14.760
- Sales between segments	3.475	4.880	372	428	-3.847	-5.308
- Total income	98.247	95.807	15.179	15.188	-3.847	-5.308	109.579	105.687
Result
EBITDA	1.321	1.418	437	180			1.758	1.598
- Depreciation and amortization	414	667	58	49			472	716
EBIT	907	751	379	131			1.286	882
- Interest income							45	33
- Interest expense							-507	-380
Result of ordinary activities							824	535
- Extraordinary result	0	0	0	0			0	0
+ Currency differences							-1	0
- Income tax							16	-16
- Minority interest							-103	-193
- Discontinuing operations							-175	171
Consolidated income							561 4	97
Other information
- Segment assets1	58.378	54.387	6.292	6.885			64.670	61.272
- Current liabilities	21.167	24.889	2.730	3.121			23.897	28.010
- Long-term liabilities	13.131	6.665	23	13			13.154	6.678
- Investments1	842	3.219	42	82			884	3.301

1 Segment assets and investments including goodwill from consolidation of capital

Investor Relations

Messerschmittstr. 20 89343 Jettingen-Scheppach Germany

Tel: +49 (0) 82 25 / 9 96-1051 Fax: +49 (0) 82 25 / 9 96-4-1051 eMail: IR@CANCOM.DE

INTERIM REPORT

Q 2/ 2 0 0 6