CANCOM SE — Interim / Quarterly Report 2006

May 15, 2006

INTERIM REPORT

First 3 months 2006

Table of con ten t s

Section	Page
Table of contents	02
Preface – Key figures	03
Business Developmen t Q1	04-07
1) Business development	04
2) Order situation	04
3) Cash position	04
4) Significant changes in risks	05
5) Research and development activities	05
6) Investment	05
7) Employees	05
8) Outlook for the current financial year	05
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	14-22

BALANCE SHEET	08-09
Income statement	10
Cash Flow Statement	11
DEVELOPMENT OF EQUITY	12-13
APPENDIX	14-22

CONTENT

Preface – Key figures

Dear Shareholders,

The leading economic research institutes predict that the German economy will experience a revival in 2006. In the past few weeks,some of these institutes have even revised upwards the forecasts they made at the end of 2005.

According to the German Federal Association of the Information Economy, Telecommunications and the New Media (Bitkom), this development should have a particularly positive impact on the IT sector. Considerable growth in

sales can be expected, especially in the software and IT services segments.

The trend towards complete solutions in a »one-stop shop« will also continue.

CANCOM has positioned itself well in this respect during the past few years, a fact that is clearly reflected in the results for the first quarter of 2006: sales revenues and profits have risen yet again.

We also expect significant growth in sales revenues and profits for the year as a whole.

In addition to the positive trend in the IT sector, this growth should also be boosted, among other things, by a newApple software that allows Microsoft's operating systemWindows XP to be used on Apple computers for the first time. This is quite a revolutionary development for many commercial users.

We also expect further growth from the expansion of our range of high-value services. The objective of this expansion

is to offer our customers added value by covering all their requirements.

All in all, therefore, our future looks very bright!

Kind regards

Klaus Weinmann CEO

Key figures

First 3 months 2005 in Euro million

Kennzahlenübersicht Dreimonatszahlen 2006 in Mio. Euro	First 3 months 01/01/ - 03/31/2006	First 3 months 01/01/ - 03/31/2005	Change	Key Figures First 3 months 2006 in Euro million
Konzernumsatz	58.4	53.6	+8.9 %	Consolidated Sales
Rohertrag	11.7	10.3	+13.7 %	Gross profit
EBITDA CANCOM Konzern	1.1	1.0	+8.7 %	EBITDA CANCOM Group
EBIT CANCOM Konzern	0.9	0.7	+31.4 %	EBIT CANCOM Group
Periodenüberschuss Konzern	0.6	0.4	+58.5 %	Consolidated result
	03/31/2006	12/31/2005
Bilanzsumme	63.0	70.1	-10.2 %	Balance Sheet Total
Eigenkapitalquote	43.5 %	38.4 %	+13.5 %	Equity Ratio
Mitarbeiter	570	567	+0.5 %	Workforce

1. Business development since the start of the financial year

In Germany, there are currently signs of a slight economic revival.

The German Federal Association of the Information Economy, Telecommunications and the New Media (Bitkom) expects this development to stimulate particularly strong growth in the German IT sector.

The CANCOM Group has been able to take advantage of the general conditions to continue its steady growth in the first three months of the current financial year.

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

Consolidated sales revenues and profits exceeded the respective figures for the same period in 2005. The reason for this is the expansion of our higher-margin offerings and higher-value services, partly through acquisitions.

Consolidated sales revenues rose from e 53.6 million to e 58.4 million – an increase of 8.9 percent.

Sales revenues in Germany rose by 10.4 percent to e 49.6 million. In international business, sales revenues were up 0.9 percent to e 8.7 million.

The consolidated gross profit rose by 13.7 percent, from e 10.3 million to e 11.7 million.

Consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 8.7 percent, from e 1.0 million to e 1.1 million.

At e 0.9 million, consolidated earnings before interest and tax (EBIT) have also risen by 31.4 percent in comparison with the first quarter of 2005.

The consolidated net profit was e 0.4 million in the first quarter of 2006 ,compared with e 0.4 million in the first quarter of 2005.

The consolidated balance sheet total as at 31 March 2006 has fallen to e 63.0 million, compared with e 70.1 million as at 31 December 2006. Because of this and the positive results for the quarter, the CANCOM Group's equity ratio rose from 38.4 percent at 31 December 2005 to e 43.5 percent at 31 March 2006.

There was a negative net cash flow of e 6.2 million in the first quarter of 2006. However,

this is in line with the usual seasonal trend; in the first quarter of 2005, there was also a negative operating cash flow of e 4.4 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 e 4.6 million. The net cash flow of the first quarter of 2006 was also impacted by extraordinary items relating to acquisitions made.

In view of the positive performance during the first quarter, the Executive Board also expects a significant increase in sales revenues and profits over the year as a whole.

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

CANCOM Financial Services GmbH established

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

The object of the company is the acquisition and negotiation of lease agreements, the leasing of information and communications technology, advice relating to such transactions, and all other activities directly connected with them.

The CANCOM Group intends the new company to offer its customers added value, which should help to strengthen customer loyalty.A direct, positive impact on earnings is expected in two to four years at the earliest.

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 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.

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

There have been no significant changes in the risks of future development at CANCOM since the start of the financial year. Details of the 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 on intangible assets amounted to e 0.245 million, compared with e 0.362 million in the first quarter of 2005.

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

7. Our employees

At 31 March 2006, the CANCOM Group had a total of 570 employees, according to the method of counting specified by the German Commercial Code (Handelsgesetzbuch, HGB). A year ago the Group had 510 employees.As at 31 December 2005, the CANCOM Group had 567 employees.

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:	2.1
Germany:	1.5
UK:	2.3
USA:	3.5
Japan:	3.3
Asia (excl. Japan):	7.2
Latin America:	4.4
World:	4.5

* Forecast: Deutsche Bank Research Office, Frankfurt, Germany, 5 May 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.

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 consolidate our market position in the IT services environment by making targeted acquisitions. The present market environment offers favourable conditions for this, since several small, mostly owner-managed, 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 31 March 2006)

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

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

At the time when this quarterly report was prepared, there had been no events of particular significance since the end of the quarter.

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 first quarter of	Jettingen-Scheppach, Germany, May 2006
2006. (For further details regarding stock options, please refer to the Notes.)
	CANCOM IT Systeme Aktiengesellschaft
CANCOM IT Systeme AG's own shareholdings:
The Company did not acquire or sell any shares during the period under review.	The Executive Board

Consolidated balance sheet (ifrs) – Assets

Zahlenangaben in TE	3 months` report	Annual accounts	Figures in E '000
Aktiva	03/31/2006 (TEuro)	12/31/2005 (TEuro)	Assets
Kurzfristige Vermögensgegenstände			Current assets
Liquide Mittel	5,654	11,855	Cash
Wertpapiere des Umlaufvermögens	0	0	Securities of the circulating capital
Forderungen aus			Trade receiveable
Lieferungen und Leistungen	17,880	19,467
Vorräte	10,513	9,736	Inventories
Rechnungsabgrenzungsposten und			Prepaid expenses and
sonstige kurzfristige Vermögensgegenstände	2,202	2,170	other current assets
Kurzfristige Vermögens
gegenstände, gesamt	36,049	43,228	Total current assets
Langfristige Vermögensgegenstände			Long-term assets
Sachanlagevermögen	8,040	8,042	Property, plant and equipment
Immaterielle Vermögensgegenstände	113	124	Intangible assets
Geschäfts- oder Firmenwert	16,856	16,675	Goodwill
Finanzanlagen	30	5	Financial assets
Ausleihungen	157	157	Loans receivable
Latente Steuern	1,569	1,648	Deferred taxes
Sonstige Vermögensgegenstände	150	202	Other assets
Langfristige Vermögens
gegenstände, gesamt	26,915	26,853	Total long-term assets
Aktiva, gesamt	62,964	70,018	Total assets

Consolidated balance sheet (ifrs) – liabilities and equity

Zahlenangaben in TE	3 months` report	Annual accounts	Figures in E '000
Passiva	03/31/2006 (TEuro)	12/31/2005 (TEuro)	Equity and liabilities
Kurzfristige Verbindlicheiten			Current liabilities
Kurzfristige Darlehen und kurzfristiger Anteil an			Short term debt and
langfristigen Darlehen	2,101	1,715	current portion of long-term debt
Verbindlichkeiten aus Lieferungen
und Leistungen	17,375	22,857	Trade payables
Erhaltene Anzahlungen	58	69	Advanced payments redeived
Rückstellungen	1,844	2,290	Accrued liabilities
Umsatzabgrenzungsposten	400	192	Deferred revenues
Verbindlichkeiten aus Ertragssteuern	287	298	Income tax payable
Sonstige kurzfristige Verbindlichkeiten	3,232	5,239	Other current liabilities
Kurzfristige Verbindlichkeiten, gesamt	25,297	32,660	Total current liabilities
Langfristige Verbindlicheiten			Long-term liabilities
Langfristige Darlehen	3,839	4,111	Long-term debt
Genussrechtskapital und nachrangige Darlehen	6,000	6,000	Profit-participation capital
Umsatzabgrenzungsposten	63	65	Deferred revenues
Latente Steuern	0	0	Deferred taxes
Pensionsrückstellungen	343	343	Pension accrual
Sonstige langfristige Verbindlichkeiten	15	15	Other long-term liabilities
Langfristige Verbindlichkeiten, gesamt	10,260	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)	4,187	3,629
Eigenkapitaldifferenz aus Währungsumrechnung	-192	-154	Currency translation difference
Minderheitenanteile	0	0	Minority proportions
Eigenkapital, gesamt	27,407	26,887	Total equity
			Total equity and
Passiva, gesamt	62,964	70,081	liabilities

Income statement (ifrs)

01/01/06	01/01/05	Figures in E '000
-03/31/06	-03/31/05	Income Statement
- 30.09.03 - 30.09.02	- 30.09.03 - 30.09.02	Income State
58,381	53,613	Revenues
89	116	Other operating income
		Work performed by the
0	35	enterprise and capitalised
58,470	53,764	Total operating performance
-46,806	-43,502	Cost of purchased materials and services
11,664	10,262	Gross profit
-6,875	-5,744	Staff costs
		Depreciation of property, plant and
		equipment and amortisation of
-245	-362	intangible assets
-3,687	-3,504	Other operating expenses
857	652	Profit from operations
-226	-150	Interest income / expense
28	17	Foreign currency exchange income / losses
		Profit before taxes
659	519	(and minority interests)
-101	-167	Income tax
558	352	Profit before minority interests
558	352	Net profit for the period
		Average number of
9,590,751	9,272,626	shares outstanding (basic)
		Average number of
9,590,751	9,272,626	shares outstanding (diluted)
0.06	0.04	Earnings per share (basic)
0.06	0.04	Earnings per share (diluted)

Consolidated cash flow statement (ifrs)

Zahlenangaben in T€	01/01/06-	01/01/05	Figures in E '000
Kapitalfluss	-03/31/06	-03/31/05	Cashflow
Cashflow aus gewöhnlicher Tätigkeit:			Cash flows from operating activities:
Periodengewinn vor Steuern- und Minderheitenanteilen	659	519	Net profit for the period before taxes and minority interests
Berichtigungen:			Adjustments:
+/- Abschreibungen auf Sachanlagen und immaterielle			+/- Depreciation of property, plant and
Vermögensgegenstände	245	362	equipment, and amortisation of intangible assets
+/- Veränderungen der langfristigen Rückstellungen	0	-3	+/- Change in long-term accruals
+/- Veränderungen der kurzfristigen Rückstellungen	-446	-592	+/- Change in current accruals
+/- Ergebnis aus dem Abgang von Anlagevermögen	1	-8	+/- Profit/ losses on the disposal of fixed assets
+/- Zinsaufwand	226	150	+/- Interest expense
+/- Veränderungen der Vorräte	-777	-983	+/- Change in inventories
+/- Veränderungen der Forderungen aus Lieferungen			+/- Change in trade receivables and
und Leistungen sowie anderer Forderungen	1,812	-2,463	other receivables
+/- Veränderungen der Verbindlichkeiten aus Lieferungen			+/- Change in trade payables and
und Leistungen sowie anderer Schulden	-7,294	-1,422	other liabilities
+/- Gezahlte Zinsen	251	-56	+/- Interest paid
+/- Gezahlte und erstattete Ertragsteuern	-38	42	+/- Income tax paid and refunded
Nettozahlungsmittel aus betrieblicher Tätigkeit	-5,361	-4,454	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)	-206	-956	cash assets acquired
+/- Zahlungen für Zugänge zu immateriellen			+/- Payments for additions to intangible assets as
Vermögenswerten sowie Sachanlagen	-257	-126	well as property, plant and equipment
+/- Zahlungen für Zugänge zu anderen Finanzanlagen	0	-14	+/- Payments for additions to financial assets
+/- Erlöse aus dem Abgang von und Sachanlagen			+/- Proceeds from disposal of property, plant and
und Finanzanlagen	24	23	equipment as well as financial assets
+/- Erhaltene Zinsen	23	15	+/- Interest received
Für Investitionstätigkeit eingesetzte Nettozahlungsmittel	-416	-1.058	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	-56	+/- Dividends Paid
+/- Ein/Auszahlungen für aufgenommene Kredite			+/- Inflows/ outflows in connection with loans
	114	60	taken out by the enterprise
+/- Gezahlte Zinsen	-500	-109	+/- Interest paid
Für Finanzierungstätigkeit eingesetzte Nettozahlungsmittel	-386	1,095	Net cash from/ used in financing activities
Nettozu-/abnahme von Zahlungsmitt. u. Zahlungmittelaqivalente	-6,163	-4,417	Net increase/ decrease in cash and cash equivalents
+/- Wechelkursbedingte Wertänderungen	-38	21	+/- Effects of currency exchange rate changes
+/- Finanzmittelbestand am Anfang der Periode	11,855	7,224	+/- Cash and cash equivalents at beginning of period
Finanzmittelbestand am Ende der Periode	5,654	2,828	Cash and cash equivalent sat end of period

Consolidated statement of changes in equity (ifrs)

	Aktien/ Shares	Gezeichnetes Kapital Issued capital	Kapitalrücklagen/ Capital reserves	Gewinnrücklagen Revenue reserves	Eigene Anteile Treasury shares
	TStück/Quantity '000	TE /'000	TE /'000	TE /'000	TE /'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
31. März 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
		TE /'000	TE /'000	TE /'000	TE /'000
31 December 2004	23,921	0	2,658	-153	-172
Capital increase	2,001
Change in accumulated foreign
currency exchange difference	18				18
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	26,887	0	3,660	-153	-154
Capital increase	0	0
Change in accumulated foreign
currency exchange difference	-38				-38
Change in reserves
- change in stock options	0
- IPO costs	0
Net profit for the period	558		558
Minority interests	0	0
31 March 2006	27,407	0	4,218	-153	-192

NOTES

to the consolidated accounts for the quarter ended 31 March 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 the year 2005 this was changed over to the International Financial Reporting Standards or International Accounting Standards (IFRS/IAS), and backdated to 1 January 2004.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 (e '000 or e 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 corporate objective 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, based in Jettingen-Scheppach, Germany, in the form of a joint venture under equal ownership. The company is concerned with the acquisition and negotiation of lease contracts, the leasing of information and communications technology, advice in such transactions, and all business operations directly connected with these areas.

In December, CANCOM IT Systeme Aktiengesellschaft took over part of the assets of Holme & Co. Computersysteme + Lösungen GmbH, and Holme & Co. Computersysteme + Lösungen OHG. The acquisition was carried out via the subsidiary CANCOM Deutschland GmbH and took effect from 1 January 2006.

The German and non-German subsidiaries shown in the following list are included in the consolidated financial statements of CANCOM IT Systeme Aktiengesellschaft for the quarter ended 31 March 2006 according to the principles of full consolidation:

	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 ComputerPartner GmbH	Munich, Germany	100.0
3. Novodrom GmbH	Jettingen-Scheppach, Germany 100.0
4. Maily Distribution GmbH	Sindelfingen, Germany	100.0
5. CANCOM Ltd.	Guildford, UK	100.0
6. SoftMail IT AG	Caslano, Switzerland	100.0

3. Accounting and valuation methods

The basic accounting and valuation methods 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 non-German 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 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 covers the period from 1 January 2006 to 31 March 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 must be carried out at business unit (cash generating unit) level. For the purposes of this rule, a business unit is an ope-

rating 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 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

		First quarter 2006 First quarter 2005	First quarter 2004
Swiss francs
• Rate on reporting date	1E=1.579 SFR	1E=1.549 SFR	1E=1.544 SFR
• Average rate	1E=1.559 SFR	1E=1.549 SFR	1E=1.544 SFR
Pounds sterling
• Rate on reporting date	1E=0.697 GBP	1E=0.688 GBP	1E=0.706 GBP
• Average rate	1E=0.686 GBP	1E=0.694 GBP	1E=0.679 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. Revenues 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 compared with 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 them 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, 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. The values shown are 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, and shown in the income statement. 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 includes land charges of e 3.0 million, which are valued at e 2.4 million as at 31 December 2005.

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 on the reporting date) is less than the costs of acquisition carried over, the asset is written down in accordance with IAS 36 and IAS 38.108.

Financial assets

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

IT SYSTEME AG

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 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. Cash and cash equivalents amounting to e 855k (first quarter 2005: e 845k) are 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 logistics centre in Jettingen-Scheppach, Germany.

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

	31 March 2006 Te	31 December 2005 Te
Finished products and merchandise	10,703	10,146
Advance payments made	7	2
Advance payments received	-197	-412
	10,513	9,736

4. Prepaid expenses and other assets

This item mainly consists of other short-term assets. These include bonuses and discounts due from suppliers (e 754k), marketing revenues (e 168k),creditors with a debit balance (e128k), tax rebates (e 67k), employee loans e 64k), insurance recovery (e 58k), social security receivables (e 38k) and revenue from commission (e 33k). The deferred income comprises 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 e 5.6 million with the equipment necessary for the automated small parts warehouse and the manual pallet rack in the value of e 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 to the sum of e 157k.

6. Deferred tax assets

The deferred tax assets were capitalised on the basis of the existing approximately e 9.1 million German and non-German corporate tax losses carried forward, and the approximately e 7.4 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.

	€ '000
As at 1 January 2006	1,648
Inflow from capitalisation	0
Tax expenditure from profit and loss calculation	-79
As at 31 March 2006	1,569

7. 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.

8. Trade accounts payable

The trade accounts payable are due within one year.

9. Pension provisions

Individual performance-related commitments exist with regard to Executive Board members. With the resignation of two members of the Executive Board with effect from 31 December 2005, the pension provisions for one member were reversed. The pension provision for the other resigning member of the Executive Board is non-forfeitable.

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

10. Other provisions

The other provisions mainly consist of provisions for bonuses and commissions (€ 597k), holiday entitlements (€ 430k), invoices not yet received (€ 353k), contingent risks (€ 176k), costs of litigation (€ 79k), financial statement costs (€ 64k), Supervisory Board remunerations (€ 50k) and salaries (€ 42k).

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

11. Income tax payable

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

12. Other short-term liabilities

Other short-term (current) liabilities include sales tax liabilities (€ 1,453k), tax on wages and salaries, and church tax (€ 507k), debtors with a credit balance (€ 401k), social security contributions (€ 364k) and purchase price liabilities (€ 190k).

13. 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".

14. Capital from profit-participation rights and subordinated loans

Capital from profit-participation rights and subordinated loans includes profit-participation rights of € 3 million (PREPS 2005-2) and a subordinated loan of € 3 million. (PREPS 2005-1).

The profit-participation rights were granted under 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 right 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 (1) 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 (1) 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, it is planned to convert the subordinated loan into profit-participation rights.

15. Equity capital

Share capital (as at 31 March 2006)

The Company's share capital as at 31 March 2006 was € 9,590,751, divided into 9,590,751 notional no-par-value shares.

The Company's authorised capital as at 31 March 2006 amounted to € 4,788,671.

Authorised and conditional capital (as at 31 March 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 the 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-parvalue 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 are 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-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 31 March 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 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 by 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 or their current market prices, depending on the type of service or product sold.

The CANCOM Group's segmental reporting for the first quarter of 2006 includes the following companies in Germany: CANCOM Deutschland GmbH, CANCOM Computer-Partner 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 "Geographical Segments" 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 customer that individually account for more than 3 percent of its total sales.

2. Other operating income

Other operating income consists of the following:

Total	89	116
Other operating income	23	35
Income not relating to the period	23	36
Release of pension provision	0	0
Rental income	43	45
€ '000	1 Jan. to 31 March 2006	1 Jan. to 31 March 2005

3. Other capitalised services rendered for own account

Development costs of € 35k were capitalised under property, plant and equipment in the period 1 January to 31 March 2006 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:

Total	6,875	5,744
Pension expenses	63	51
Social security contributions	904	795
Wages and salaries	5,908	4,986
€ '000	1 Jan. to 31 March 2006	1 Jan. to 31 March

5. Other operating expenses

Other operating expenses consist of the following:

€ '000	1 Jan. to 31 March 2006	1 Jan. to 31 March 2005
Cost of premises Insurance and other charges	663 159	694 133
Vehicle costs	413	268
Advertising costs Stock exchange and entertainment expenses	556 73	672 109
Hospitality and travel costs	154	133

Total	3,687	3,504
Other operating expenses	105	74
Adjustment of value of accounts receivable	41	186
Fees and charges for money transfers	125	111
Legal and consultancy costs	142	117
Communication and office costs	206	203
Repairs, maintenance, operating leases	130	19
Outside services	368	291
Goods delivery costs	552	494

6. Interest income/expenses

Interest income / expenses	-226	-150
Other interest and similar incom Interest and other expenses	23 -249	15 -165
€ '000	1 Jan. to 31 March 2006	1 Jan. to 31 March 2005

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, subject to the approval of the Annual General Meeting of CANCOM IT Systeme Aktiengesellschaft. This means 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 in 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 37.8 percent (2005: 38.4 percent) and relates to corporate tax, trade tax and solidarity surcharge. The divergence between the tax expenses reported and those at the tax rate of CANCOM IT Systeme Aktiengesellschaft arises as follows:

€ '000	1 Jan. to 31 March 2006 1 Jan. to 31 March 2005
Result before tax	659	519
Tax expenses at the rate of the companies in
Germany (37.8 percent; 2005: 38.4 percent)	249	199
Tax rate difference outside Germany	-107	-107
Change in adjustment item for
deferred tax assets	-12	105
Tax-free income	0	10
Tax expenses in previous years	-16	-35
Non-deductible operating expenditure
and trade tax additions and
reductions	-29	5
Temporary differences	16	-17
Other	0	7
Actual tax expenses	101	167

Below is a breakdown of the income tax:

	€ '000
Utilisation of tax loss carryover of CANCOM IT Systeme Aktiengesellschaft	169
Deferred taxes owing to deviations from tax balance sheet of
CANCOM IT Systeme Aktiengesellschaft	0
Deferred taxes owing to deviations from tax balance sheet of
CANCOM Deutschland GmbH	0
Tax expense of CANCOM Deutschland GmbH in previous years	0
Capitalisation of tax loss carryover of CANCOM ComputerPartner GmbH	-92
Trade tax of CANCOM ComputerPartner GmbH	-16
Utilisation of tax loss carryover of Novodrom GmbH	1
Corporate tax and solidarity surcharge of Maily Distribution GmbH	0
Trade tax of Maily Distribution GmbH	0
Utilisation of tax loss carryover of CANCOM Computersysteme GmbH,
Austria	14
Corporate tax of CANCOM Computersysteme GmbH, Austria	5
Utilisation of tax loss carryover of CANCOM (Switzerland) AG	11
Corporate tax of CANCOM Ltd., UK	33
Capitalisation of tax loss carryover of Softmail Group, Switzerland	-24
Total	101

The actual tax rate is calculated as follows:

Actual tax expense rate	15,3 %
Income tax	101
Result before tax	659
	€ '000

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

Group tax expense	101	167
	79	64
Tax liabilities	0	0
Tax assets	79	64
Deferred taxes:
Current taxes	22	103
€ '000	1 Jan. to 31 March 2006	1 Jan. to 31 March 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.

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 € 0.9 million in comparison with the first quarter 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, both based in Augsburg, Germany, as well as the incidental costs associated with the acquisition amounting to € 167k.

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.

Other disclosures

1. Stock options

Long-Term Incentive Plan

On 18 April 2000, the shareholders of CANCOM IT Systeme Aktiengesellschaft approved the introduction of the CANCOM IT Systeme Aktiengesellschaft Long-Term Incentive Plan (LTI Plan 2000). This is a stock-based compensation scheme for members of the Executive Board, the Management of the subsidiaries and other selected employees. Those entitled may be allocated options to purchase ordinary shares.

Each stock option entitles the holder to purchase an ordinary share in CANCOM IT Systeme Aktiengesellschaft. It can be exercised during a period of up to five years, although certain lock-up periods must be observed. The exercise price is fixed in the individual option agreement. This is equal to the average stock market price (closing price in floor trading) of ordinary shares in CANCOM IT Systeme Aktiengesellschaft at the Frankfurt Stock Exchange over the last 10 trading days before the day the relevant stock options are granted. However, the stock options may only be exercised if, at the time the stock options are exercised, the CANCOM IT Systeme Aktiengesellschaft share has performed at least as well as the Technology All Share Index over the period since the Annual General Meeting in the financial year in which the stock options were issued.

Stock options may not be exchanged by the beneficiaries until at least three years after the subscription rights were granted.

No stock options were issued to employees in the period under review, because the stock options scheme referred to has since expired. There are no plans at present to start a new stock options scheme.

The options granted under the LTI Plan 2000 changed as follows up to 31 March 2006 (IFRS 2.45):

	Number of shares for LTI Plan not issued	Number of options granted	Average exercise price per option in €
Position at 31 December 2005 136,800		43,200	4.65
Shares authorised in the
financial year	-	-	-
Granted	-	-	-
Exercised	-	-	-
Forfeited	-	-	-
Position at 31 March 2006	136,800	43,200	4.65

The following table gives an overview of the options outstanding as at 31 March 2006:

Year	Number of options granted	Average term remaining (in years)	Average exercise price (in €)
2001	15,200	0.50	8.99
2002	28,000	1.50	2.30
2003	0	-	-
2004	0	-	-
2005	0	-	-
1-3/2006	0	-	-
	43,200	1.15 4	.65

No stock options were granted to members of the Executive Board. The new Executive Board member, Paul Holdschik, holds stock options from existing stock. In 2006, the stock options issued in 2001 can be exercised solely between the fourth and the twentieth exchange trading day following the Company's Annual General Meeting. The stock options issued in 2002 can be exercised in 2006 or 2007, but again only between the fourth and the twentieth exchange trading day following the Company's Annual General Meeting

2. 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.

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.

Die Transaktionen mit nahe stehenden Personen wurden zu Marktpreisen abgerechnet.

3. 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.

4. 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 31 March 2006.

IT SYSTEME AG

Consolidated segment reporting

geographical segments	Germany Europe Elimination			consolidation
	03/31/06	03/31/05	03/31/06	03/31/05	03/31/06	03/31/05	03/31/06	03/31/05
	T€	T€	T€	T€	T€	T€	T€	T€
Sales revenues
- External sales	49,633	44,944	8,748	8,669
- Sales between segments	1,858	2,164	303	177	-2,161	-2,341
- Total income	51,491	47,108	9,051	8,846	-2,161	-2,341	58,381	53,613
Result
EBITDA	659	536	443	477			1,102	1,013
- Depreciation and amortization	210	333	35	29			245	362
EBIT	449	203	408	448			857	651
- Interest income							23	16
- Interest expense							-249	-165
Result of ordinary activities							631	502
- Extraordinary result	0	0	0	0			0	0
- Currency differences							28	17
- Income tax							-101	-167
- Minority interest							0	0
- Discontinuing operations							0	0
Consolidated income							558	352
Other information
- Segment assets1	56,175	51,886	6,789	6,439			62,964	58,325
- Current liabilities	21,746	22,884	3,550	2,827			25,269	25,711
- Long-term liabilities	10,235	7,164	25	13			10,260	7,177
- Investments1	426	1,713	24	30			450	1,743

1 Segment assets and investments including goodwill from consolidation of capital

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CANCOM IT Systeme AG Investor Relations

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

INTERIM REPORT

First 3 months 2006

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