GK Software SE — Management Reports 2008

Nov 27, 2008

Overview of KPIs

	Sept 30, 2008 (unaudited)	Sept 30, 2007 (unaudited)
Sales revenue (EUR thousand)	10,859	7,528
Total operating revenue (EUR thousand)	10,853	7,889
EBIT (EUR thousand)	2,095	1,137
EBIT margin (in terms of sales revenvue)	19.3%	15.1%
EBIT margin (in terms of total operating revenue)	21.3%	14.4%
EBT (EUR thousand)	2,098	1,105
Net income for the period (EUR thou sand)	1,482	785
Earnings per share (weighted) (EUR)	2.031	5.23
Equity ratio	59.8%	17.6% 2
Net debt (EUR thousand)	-4,406	5,085 2

¹ Earnings per share (as of balance sheet date) amounted to EUR 0.89.

2 Net debt is calculated as of Dec. 31, 2007.

Table of content

Rainer Gläß CEO

Stephan Kronmüller CTO

Ronald Scholz COO

André Hergert CFO

1. To our shareholders

a. Preface of the Managing Board

Dear shareholders,

The past nine months of the 2008 business year have been a highly successful period for GK SOFTWARE AG. This is partly due to the fact that the company has continued to acquire new customers, complete major projects and obtain followup business with existing customers. We were able to acquire a major new customer with international operations in the luxury goods sector in the shape of Escada AG during the third quarter. We also completed the roll-out for Kaufhof Warenhaus AG, one of the largest IT projects in the retail sector in Germany during the past few years, and managed to do so within the planned budget and time framework. This means that we can add another wellknown customer to our reference list. The roll-out of the new store solution for the "DEPOT" sales line at Gries Deco Company GmbH was also completed on time.

One of the keys to our ability to acquire new customers was our successful IPO in the first half of the year. The IPO makes it easier for us to approach potential customers and the gross proceeds generated by the share issue (approx. EUR 8.7 million) form a solid basis for further growth. Thus, we plan to expand our technology leadership, consistently penetrate the German market and achieve greater international expansion. We have already intensified our marketing and sales operations in Russia and Great Britain, for example. We are also focussing on tapping into foreign markets, expanding our market share in the German-speaking world and moving into new retail sectors.

The current financial crisis has not had any negative effects on our operating business. We are conducting detailed negotiations with potential customers and progress in our project work with customers is running according to schedule. However, we are unable to clearly forecast the investment behaviour of the retail sector as it is not yet possible to fully predict the economic consequences of the financial crisis.

The positive developments in our operating business are reflected in the financial figures. Sales revenues rose by 44% to EUR 10.86 million in comparison with the same period in the previous year. Earnings before interest and taxes (EBIT) totalled EUR 2.09 million, which means that this figure almost doubled in comparison with the first nine month in 2007. Net income for this period rose by 87% to EUR 1.48 million when compared to the same period in the previous year. We continue to expect strong growth for the remainder of this fiscal year with sales revenues of EUR 14.0 – 14.5 million and an EBIT margin of approx. 20% in terms of total operating revenue.

As part of this positive development, we have continued to boost the project management and software production departments and are planning to take on more staff in the fourth quarter of 2008 and at the beginning of 2009, particularly at our subsidiary StoreWeaver in Basel and at its new business centre in St. Ingbert. The major focus there is on further developing the StoreWeaver product by adding important new functions and "business logics". It is our goal to broaden this product to ensure that it can be marketed even better as an independent solution.

We are very confident that the fourth quarter of 2008 will be a successful time for the company and we view the future with optimism. We are very confident that the fourth quarter of 2008 will be successful for the company and we view the future

with optimism. The prospects for 2009 are promising on account of the well filled sales pipelines. We would like to thank you for placing your confidence in us and supporting us in our growth.

The Managing Board

Rainer Gläß (CEO)

Ronald Scholz (COO)

Stephan Kronmüller (CTO)

André Hergert (CFO)

i. Overview

Key facts
German Securities Identification Number (WKN)	757142
ISIN	DE0007571424
Ticker symbol	GKS
IPO	June 19, 2008
Type of shares	No-par value bearer shares
Stock exchanges	Frankfurt and XETRA
Segment	Regulated Market (Prime Standard)
Designated Sponsor	ICF Kursmakler AG
Number of shares out standing	1.665,000
Number of shares from capital increase	415,000
Share capital	1,665,000 EUR
Free float	24.93 %
Offering Price	EUR 21.00
Gross Issuing Volume	EUR 8.72 million
First Price (XETRA) Jun. 19, 2008	EUR 21.40

GK SOFTWARE AG shares are listed in the Prime Standard segment of the Frankfurt Stock Exchange. The issue price for the shares at the IPO on 19 June 2008 was EUR 21.00 and their initial trading price was fixed at EUR 21.40. The share performance has been affected by a difficult capital market environment, which has shown a high degree of volatility. The share price at the end of the third quarter (30 September) was EUR 15.50. This corresponds to a market capitalisation of approx. EUR 25.8 million.

ii. Shareholder Structure

GK SOFTWARE AG has a very stable shareholder base, which allows the company a sustainable and long-term development. There were no changes to the shareholder structure until 30 September 2008. The company founder and chairman of the management board, Rainer Gläß, directly holds a 2.25% interest. Stephan Kronmüller, co-founder of the company and CTO, also directly holds a 2.25% interest. GK Software Holding GmbH

Development of GK SOFTWARE AG's share since IPO on June 19, 2008, in EUR

holds 70.57% of the shares, which are equally held indirectly by the shareholders Rainer Gläß and Stephan Kronmüller. As a result, the free float amounts to 24.93%.

iii Directors' Dealings

Rainer Gläß, CEO

Purchase: Nov. 12 2008 5,000 shares EUR 13.55 Purchase: Nov. 13 2008 5,000 shares EUR 12.39

Current shareholder structure of GK SOFTWARE AG

Financial calendar

2008 annual report and invitation to shareholders' Annual General Meeting in 2009	Apr. 16, 2009
First quarter report for 2009	May 14, 2009
Annual General Meeting in 2009	Jun. 11, 2009
Report on the first six months of 2009	Aug. 13, 2009
Third quarter report for 2009	Nov. 12, 2009

2. Group Interim Managment Report

a. Business Report

Business and Underlying Conditions for GK SOFTWARE AG

a. Market and Competitive Environment

The ongoing success at GK SOFTWARE AG is affected by economic developments and a willingness on the part of the retail sector to invest. The German Retail Federation (HDE) is expecting sales in 2008 to total EUR 403.7 billion, i.e. EUR 7.9 billion more than in 2007. The IT budgets of retail companies on average amount to 1% of gross revenues (ranging between 0.4 and 1.3%). We have not yet noticed any effects of the global financial crisis or any reluctance among consumers to part with their cash. The German Retail Federation (HDE) has not observed any reluctance on the part of consumers in Germany to purchase goods over the past few months. If an economic slow-down does occur, customer loyalty will almost certainly play an even more important role for retail companies. This opens up potential for further sales for GK SOFTWARE AG.

The efficiency of IT systems in the retail sector opens up further opportunities for sales and growth for GK SOFTWARE AG. According to a survey carried out by the EHI Retail Institute in Germany, IT systems in the country are on average more than six years old. About 20% of existing systems are ten years old or older. So retail companies will have to make greater investments in IT systems in future. The most important requirements for modern IT systems are process optimisation and customer loyalty.

The company has been able to significantly improve its market position as a result of the successful IPO. This is evident in the new projects that have been acquired – ESCADA, for example – and in the company's good position in current invitations for tenders. The company has crucial advantages over its competitors: rapid project implementation, a broad portfolio of products, internationally applicable and reductions in operating costs.

b. Customer Projects

One of the largest European IT projects for retail store software was accepted by Galeria Kaufhof within the allotted schedule and budget in the third quarter of 2008. During the roll-out, approx. 4,000 POS units were converted in 100 days and more than 10,000 cashiers received training. The GK SOFTWARE AG solution for Galeria Kaufhof is largely based on the GK/Retail standard software, but it was extended to include particular features for the department store chain. Ongoing developments will be made to the project in future as new business processes are handled on behalf of Kaufhof.

The roll-out for the new store software for the "DEPOT" sales line at Gries Deco Company GmbH was also completed on time. As the standard version of GK/Retail meets most of the customer's requirements, it was possible to complete the roll-out on schedule in less than two months with the required quality levels.

The company acquired another major customer in the shape of ESCADA AG in July 2008. GK/Retail will be used to manage ESCADA stores on four continents in future – America, Europe, Asia and Australia. So GK SOFTWARE AG has managed to tap into a new promising sector – the luxury goods market.

GK SOFTWARE AG also acquired a new customer from the small and medium business sector in the third quarter: TSG 1899 Hoffenheim Fussball-Spielbetrieb GmbH. It will also use GK/Retail standard software.

GK SOFTWARE is also providing support while approx. 1,400 stores belonging to the Swiss retail company, Coop, switch to GK/Retail as its standard software. This project is one of the largest on the retail sector software market in Europe. This is ample proof of the company's leading position in the store technology sector – beyond Germany's borders too.

8 9

c. Human Resources

GK SOFTWARE AG currently employs 199 members of staff (as of 30 September 2008), an increase of 39 over the same time last year. Middle management levels and the development and production department in particular have been strengthened. Most members of staff are employed at company headquarters in Schöneck (101 people). There are nine employees at the offices in Berlin and they mainly work in the sales & marketing, project management and partner management departments. There are currently 87 employees at the Czech subsidiary EUROSOFTWARE s.r.o. and two at the second subsidiary StoreWeaver GmbH in Basel/Riehen. The company needs additional highly qualified staff to ensure further growth. So the company is planning to take on more staff in the next few months in order to continue to strengthen and improve its employee base. The degree of brand awareness of GK SOFT-WARE AG has increased as a result of the successful IPO and this is making it easier to approach highly qualified workers.

Explanation of the Operating Results and Analysis of the Asset, Financial and Earnings Situation

a. Earnings

GK SOFTWARE AG has continued to grow during the first nine months of the year. This is particularly evident from the development in sales. Revenues from sales rose to EUR 10.86 million during the reporting period. This corresponds to a growth rate of 44% over the same period last year (EUR 7.53 million). The reason for the significant improvement in sales and earnings in the current business year was the broadening of our customer base, which led to new projects. Existing customer relations have also been intensified and expanded.

Taking into account changes in stocks of finished goods and work in progress and own work capitalised, conservatively activated according to accounting standards, total operating revenue rose to EUR 10.85 million in the first nine months of the year. This corresponds to an increase of 38% over the same period in the previous year (EUR 7.89 million in the first nine months of 2007).

As GK SOFTWARE AG grows, it needs to expand its development capacity and therefore requires more qualified members of staff. In this connection, personnel costs rose by 26% to EUR 5.73 million in the first nine months of the year compared with the same period in the previous year. Because of significant growth in sales, the company was able to further increase its productivity, primarily because of improvements in process standardisation. Depreciation in the first three quarters of 2008 amounted to EUR 0.48 million (EUR 0.34 million in 2007); the increase in depreciation requirements can be attributed to the planned depreciation on the company building and the amortisations due to capitalisation of in-house work. Other operating expenditure rose to EUR 2.04 million (EUR 1.50 million in the same period last year). This increase can be largely attributed to one-off consultancy, connected with the IPO as well as seasonal expenses in marketing and travel i.e. trade fairs.

GK SOFTWARE AG achieved earnings before interest and taxes (EBIT) of EUR 2.09 million in the first nine months of 2008. This represents a significant improvement (+84%) over the corresponding period in the previous year (EUR 1.14 million). In terms of its total operating revenue, GK SOFT-WARE AG achieved an EBIT margin of 19.3% during the first nine months of 2008 (14.4% in the first nine months of 2007) and was once again able to increase its profitability over the same period in the previous year.

The financial results in the first nine months of 2008 totalled approx. EUR 3 thousand (EUR -32 thousand in the previous year). As a result, earnings before taxes (EBT) and net income for the period almost doubled. Earnings before taxes rose to EUR 2.1 million (+ 90%). After tax, net income for the period amounted to EUR 1.48 million (EUR 0.79 million in 2007: +87%). This corresponds to earnings per share of EUR 0.89 based on the 1,665,000 shares outstanding as of the balance sheet date. Computing earnings per share based on the weighted average of shares issued (730.493 shares) earnings per share are EUR 2.03.

b. Assets and liabilities

As a result of the IPO and the associated capital increase in the first half of the year, total assets at GK SOFTWARE AG rose significantly from EUR 11.83 million (31 December 2007) to EUR 18.82 million at the end of the third quarter (30 September 2008). This was linked to a significant increase in shareholder funds on the balance sheet from EUR 2.08 million (31 December 2007) to EUR 11.25 million on 30 September 2008. As a result of the IPO and the positive earnings situation, the equity ratio at the end of the quarter improved to a figure of 59.8% – the figure on 31 December 2007 was just 17.6%.

It has been possible to reduce non-current liabilities in comparison with the previous year. They totalled EUR 2.41 million at the end of the ninemonth period, a lower level than on 31 December 2007 (EUR 2.87 million). This is mainly due to a

reduction in long-term bank liabilities as a result of agreed redemption payments and the reclassification of dormant equity holdings as current liabilities. Current liabilities in the first nine months of 2008 fell to EUR 5.16 million (EUR 6.88 million on 31 December 2007). This mainly concerns advance payments from customers amounting to EUR 1.85 million, which represent an important financing tool for the company.

On the assets side, non-current assets rose from EUR 3.77 million on 31 December 2007 to EUR 4.17 million at the end of the third quarter of 2008, which largely results from changes to the values of intangible assets. They rose from EUR 1.13 million on 31 December 2007 to EUR 1.58 million at the end of the quarter (30 September 2008) and can mainly be attributed to capitalising in-house work on the further development of the GK/Retail software suite.

Current assets also rose in the first half of the year from EUR 8.06 million (31 December 2007) to EUR 14.64 million at the end of the quarter (30 September 2008). The reason for this is the increase in cash and cash equivalents as a result of Composition of equity by source

the IPO and good operating developments from EUR 2.90 million on 31 December 2007 to EUR 10.41 million at the end of the quarter (30 September 2008). Amounts of stocks on hand fell from EUR 2.00 million (31 December 2007) to EUR 1.01 million (30 September 2008) as a result of the successful completion of projects. This also led to reduced trade receivables. At the end of the third quarter in 2008 this figure amounted to EUR 1.3 million compared to EUR 2.26 million on 31 December 2007.

The company's working capital therefore totalled EUR 9.49 million on 30 September 2008 (EUR 1.19 million on 31 December 2007). Other receivables and assets totalled EUR 1.90 million at the end of the quarter (30 September 2008) and therefore exceeded the value of EUR 0.90 million on 31 December 2007. This item largely consists of accounts receivable from public bodies for investment subsidies, income tax and revenue receivables, receivables from shareholders and loans issued to third parties. The receivables to shareholders and the loans issued to third parties yield interest and are guaranteed by securities.

c. Liquidity

Cash flow in the narrower sense (largely the pretax results, adjusted by non-cash depreciation and amortisation) rose to EUR 2.58 million in the first nine months of the 2008 business year. Due to profitable growth in the operating business, this figure was almost exactly the same as for the whole of 2007 (EUR 2.72 million). Cash flow from operating activities totalled EUR 0.83 million (EUR 1.92 million for 2007) during the reporting period. This includes a one-off payment of tax arrears amounting to EUR 0.8 million during the first half of 2008.

Following a figure of EUR -2.05 million for the 2007 business year, the cash flow from investment activities in the first nine months of 2008 totalled EUR -0.78 million. These investments mainly involve planned payments for fixed assets and non-current assets. These include investments in office and business equipment and the further development of the GK/Retail software suite.

The cash flow from financing activities amounted to EUR 7.46 million during the reporting period (EUR 0.57 million in 2007 as a whole). The reason for the increase was mainly the cash inflow as a result of the IPO. Through this, GK SOFTWARE AG was able to record gross proceeds of EUR 8.70 million before IPO costs. Cash and cash equivalents as a whole increased to EUR 10.41 million on 30 September 2008 (EUR 2.90 million on 31 December 2007).

Opportunities and risks at GK SOFTWARE AG

GK SOFTWARE AG deliberately takes entrepreneurial risks in order to benefit from the market opportunities. Initial modules of a risk management system have been introduced in order to recognise, manage and minimise any risks at an early stage. Among other things, the management board meets once a month in order to identify any possible risks and initiate countermeasures. The supervisory board is informed of the results of these discussions. The relevant project managers inform the management board members responsible for possible risks in the course of current projects in the company's operating business. GK SOFTWARE AG regards the degree of customer satisfaction and the number of new customer contacts as an important indicator to assess any risks. As a result, these two factors are subject to particular scrutiny and they are regularly checked as part of the controlling processes for sales and project work. As a next step, GK SOFTWARE AG is planning to draw up a comprehensive risk management manual in order to identify potential risks at an early stage, define who is responsible for managing risks and document countermeasures.

There are only a few issues to mention in addition to the information provided on opportunities and risks in the six-monthly financial report:

The current financial crisis has not had any negative effects on the company's operating business. The company is involved in detailed negotiations with potential customers and the progress being made in projects with existing customers is running according to schedule. However, it is not yet possible to clearly forecast the economic consequences of the financial crisis on the retail sector's investment behaviour. If the retail sector cuts back on software investments as a result of the economic slow-down, a negative effect on the earnings at GK SOFTWARE AG cannot be ruled out.

However, this economic development also represents an opportunity for the company. Any reluctance on the part of consumers to spend money may create a situation where retail companies

particularly invest in IT systems in order to improve customer loyalty and their efficiency, in order to remain competitive.

Outlook

We are expecting the retail sector to continue to demonstrate a high degree of readiness to invest in new and expanded IT structures and this will have a positive effect on GK SOFTWARE AG's operating business. In our opinion, the fields of process optimisation, the internationalisation of store networks and customer loyalty will be the main investment goals for the retail sector. They provide attractive opportunities for sales and growth for GK SOFTWARE AG in future.

The company has good prospects of continuing its strong expansion and remaining highly profitable. We are holding detailed discussions with potential new customers, both in Germany and abroad. Our international expansion, particularly in Great Britain and Russia, is giving us additional opportunities to acquire new customers. We have achieved a technological quantum leap as a result of our new release 12 and have been able to further expand our technology leadership in technology. This also opens up potential for providing existing customers with improved solutions and tapping into further potential for sales and revenue. We shall also increasingly concentrate on new sectors and segments in the SMB market (small and medium businesses).

The management board expects clear double digit growth rates for the remainder of the 2008 business year both in sales revenues and earnings. Given that the fourth quarter is normally a strong period of the year, we are expecting sales revenues of between EUR 14 and 14.5 million for 2008 as a whole and an EBIT margin related to the company's total operating revenue of approx. 20%. Despite what will probably be a difficult economic environment, we are still expecting double digit growth during the 2009 business year.

3. Consolidated financial statements

a. Consolidated balance sheet as of September 30, 2008

Assets

Note No.	Sept 30, 2008 (unaudited)	Dec 31, 2007 (unaudited)
2.1.; 3.1.	2,582,876.59	2,620,143.27
2.2.; 3.2.	1,583,419.51	1,128,348.62
2.11.; 4.9.	5,562.66	17,689.48
	4,171,858.76	3,766,181.37
2.3.; 3.3.	1,008,771.59	1,998,672.25
2.4.; 3.4.	1,320,712.29	2,262,831.52
2.4.; 3.5.	1,900,845.91	897,872.10
2.5.; 3.6.	10,413,668.16	2,904,371.54
	14,643,997.95	8,063,747.41
	18,815,856.71	11,829,928.78

Equity and liabilities

EUR	Note No.	Sept 30, 2008 (unaudited)	Dec 31, 2007 (unaudited)
Shareholders' equity	3.7.
Subscribed capital		1,665,000.00	155,000.00
Share premium		7,455,955.62	0.00
Retained earnings		31,095.02	207,134.07
Net retained profits		2,097,794.41	1,718,753.00
		11,249,845.05	2,080,887.07
Non-current liabilities
Provisions for pensions and similar commitments	2.6.; 3.8.	59,757.15	52,991.15
Non-current liabilities to banks	2.7.; 3.9.	1,160,646.86	1,251,775.46
Deferred government grants	2.8.; 3.10.	758,287.77	784,195.00
Other non-current liabilities	2.7.; 3.11.	0.00	471,214.31
Deferred taxes	2.11.; 4.9.	431,554.00	313,037.49
		2,410,245.78	2,873,213.41
Current liabilities
Current provisions	2.9.; 3.13.	940,288.36	523,978.32
Current liabilities to banks	2.10.	115,397.39	123,888.01
Trade payables	2.10.; 3.14.	604,574.76	198,249.71
Advance payments received	2.10.; 3.15.	1,845,666.74	3,498,057.83
Income tax liabilities	3.16.	311,581.15	1,228,022.25
Other current liabilities	2.10.; 3.17.	1,338,257.48	1,303,632.18
		5,155,765.88	6,875,828.30
Total liabilities		7,566,011.66	9,749,041.71
Total equity and liabilities		18,815,856.71	11,829,928.78

b. Consolidated income statement as of September 30, 2008

	Note No.	Sept 30, 2008 EUR (unaudited)	Sept 30, 2007 EUR thousand (unaudited)	Dec 31, 2007 EUR thousand (audited)
Sales revenues	4.1.	10,859,295.78	7,528	10,745
Change in finished goods and work in progress		-991,840.33	-298	-2
Own work capitalised	4.2.	621,081.07	404	558
Other operating income	4.3.	364,038.98 10,852,575.50	255 7,889	379 11,680
Cost of materials	4.4.	506,054.20	367	486
Personnel expenses	4.5.	5,730,149.63	4,550	6,152
Amortisation/depreciation	4.6.	478,784.23	334	527
Other operating expenses	4.7.	2,042,589.88	1,501	2,184
		8,757,577.94	6,752	9,349
Operating result		2,094,997.56	1,137	2,332
Financial result	4.8.	2,615.99	-32	-115
Result before income taxes		2,097,613.55	1,105	2,217
Income taxes	2.11; 4.9.	615,441.18	-320	656
Net income for the period		1,482,172.37	785	1,561
Profit carried forward		1,718,753.00	283	283
Appropriation to the share premium		-918,960.95	0	0
Dividend payments		-184,300.00	0	0
Expense from the withdrawal of own shares		0.00	0	126
Net retained profits		2,097,664.42	1,068	1,718
Number of shares issued (average)		730,493	150,000	150,068
Earnings per share (in EUR/share)	4.10.	2.03	5.23	10.40

c. Consolidated cash flow statement as of September 30, 2008

EUR thousand	Sept 30, 2008 (unaudited)	Dec 31, 2007 (audited)
Cash flow from operating activities
Net income/loss	1,482	1,561
Income taxes recognised in income	615	656
Interest income/expenses recognised in income	-3	115
Gains/losses from the sale or disposal of property, plant and equipment	-16	0
Reversal of deferred government grants	-26	-11
Write-downs recognised for receivables	18	12
Write-ups recognised for receivables	0	-14
Amortisation/depreciation	479	527
Expense from the withdrawal of own shares	0	-126
Other non-cash income and expense	7	0
	2,556	2,720
Change in net current assets
Change in trade receivables and other assets	-149	-1,552
Change in inventories	990	2
Change in trade payables and other liabilities	-30	1,441
Change in advance payments received	-1,652	-96
Change in provisions	423	-130
Cash provided by operating activities	2,138	2,385
Interest received	18	45
Interest paid	-71	-160
Income tax paid	-1,254	-350
Net cash flow provided by operating activities	831	1,920
Cash flow from investing activities
Payments for property, plant and equipment and non-current assets	-872	-2,613
Investment subsidies used	88	567
Net cash used in investing activities	-784	-2,046
Cash flow from financing activities
Dividend payments	-184	-800
New equity	8,715	0
Booked IPO costs	-976	0
Draw-down of loans	0	1,425
Repayment of credit	-99	-52
Net cash provided by financing activities	7,456	-573
Net increase in cash and cash equivalents	7,503	447
Cash and cash equivalents at beginning of year	2,904	2,457
Impact of changes in exchange rates on cash and cash equivalents	7	0
Cash and cash equivalents at Sept 30, 2008	10,414	2,904

d. Consolidated statement of changes in equity as of September 30, 2008

EUR	Subscribed capital	Reserves	Net profits	Total
Balance at Jan 1, 2007	150,000.00	207,134.07	1,083,068.47	1,440,202.54
Net income	0.00	0.00	1,561,288.78	1,561,288.78
Capital increase	5,000.00	0.00	0.00	5,000.00
Dividend payments	0.00	0.00	-800,039.25	-800,039.25
Withdrawal of shares	0.00	0.00	-125,565.00	-125,565.00
Balance at Dec 31, 2007	155,000.00	207,134.07	1,718,753.00	2,080,887.07
Net income for the period	0.00	0.00	1,482,172.37	1,482,172.37
Dividend payments	0.00	0.00	-184,300.00	-184,300.00
Addition to share premium for capital in crease	0.00	918,960.95	-918,960.95	0.00
Increase in subscribed capital	1,095,000.00	-1,095,000.00	0.00	0.00
Capital increase	415,000.00	8,300,000.00	0.00	8,715,000.00
Netting equity procurement costs with re tained earnings less tax effect	0.00	-843,914.39	0.00	-843,914.39
Balance at Sept 30, 2008	1,665,000.00	7,487,180.63	2,097,664.42	11,249,845.05

e. Notes to the consolidated financial statements as of September 30, 2008

1. Reporting principles

1.1. General information

GK SOFTWARE AG is an Aktiengesellschaft (German public limited company) located in Germany. The company's registered office is Waldstraße 7, 08261 Schöneck. This is also its headquarters.

GK SOFTWARE AGis registered in the commercial register of Chemnitz local court with the number HRB 19157.

The Group's business activities span the development and production as well as selling and trading in software and hardware. Over the past few years, the company has transitioned from being an exclusively project-oriented company to a productoriented company.

The Group manages its capital with the aim of maximising income for its stakeholders by optimising the equity/borrowing ratio. This ensures that all of the group companies can operate as going concerns. The company's largest customers include:

• Lidl Stiftung & Co. KG, Neckarsulm,
• Edeka (MIOS Großhandel GmbH, Min-
• den), Netto Michael Schels & Sohn GmbH & Co. oHG, Maxhuette-Haidhof,
• Tchibo Holding AG, Hamburg,
• dm-drogerie markt GmbH + Co. KG, Karlsruhe,
• Kaufhof Warenhaus AG, Cologne,
• Parfümerie Douglas GmbH, Hagen.

1.2. Basis of Presentation

The consolidated financial statements of GK SOFT-WARE AG have been prepared according to the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) as were to be applied on the balance sheet date. The consolidated financial statements were prepared for the first time according to IFRS as of December 31, 2005.

The consolidated financial statements are denominated in euros.

The balance sheet is classified according to IFRS in line with the maturities of the individual balance sheet items.

The income statement has been prepared using the total cost (type of expenditure) method.

As a rule, trade payables and receivables are carried as current items on the balance sheet. Pension obligations are carried as non-current liabilities in line with their nature.

Deferred tax assets and liabilities are presented as non-current.

1.3. Consolidated group

The consolidated financial statements include GK SOFTWARE AG and all of the companies in which GK SOFTWARE AG holds a majority of the shareholders' voting rights.

The consolidated group comprises the parent company and three foreign companies.

1.4. Principles of consolidation

When capital is consolidated, the acquisition values of the participating interests are netted with the present values of the acquired assets and liabilities. Any remaining positive difference is carried as goodwill. Any remaining negative difference is recognised in income after the fair values of the acquired assets and liabilities have been reviewed. If less than a 100% interest is acquired, the acquisition values of the participating interest are netted with the proportionate present values of the acquired assets and liabilities. Minority interests are carried under equity in the amount of the remaining present values.

Earnings, revenues, expenses and income as well as loans and liabilities within the group between the consolidated companies are eliminated.

1.5. Currency translation

The group companies prepare their financial statements based on their respective functional currencies.

Foreign currency transactions for consolidated companies are translated to the functional currency using the exchange rate on the date of the transaction. Assets and liabilities are adjusted on each balance sheet date using the applicable exchange rates. The resulting currency gains and losses are recognised in income under other operating income or expense.

20 21

2. Accounting and valuation policies

2.1 . Property, plant and equipment

Property, plant and equipment is carried at acquisition cost or manufacturing cost plus incidental acquisition costs, less scheduled depreciation. As a rule, assets are written down in line with their useful lives using the straight line method on a pro-rata basis. Any expected permanent impairment that goes beyond wear and tear is taken into account via unscheduled depreciation. If the reasons for unscheduled write downs no longer exist, the assets are written up accordingly. No major unscheduled depreciation was required.

Property is depreciated using the straight line method over a useful life of 33 years. As a rule, moveable assets are written down using the straight line method; the useful life for technical equipment and machinery is three to 20 years, and three to ten years for other equipment, operating and office equipment.

Fully depreciated property, plant and equipment is carried at cost and accumulated depreciation until the affected assets is taken out of operation. In the event of the disposal of assets, cost and the accumulated depreciation are deducted, gains from the disposal of assets (income from the disposal less the remaining carrying amounts) are carried in the income statement under other operating income or other operating expenses.

2.2. Intangible assets

2.2.1. Goodwill

Goodwill is carried at cost less impairment if required.

2.2.2. Purchased intangible assets

Purchased intangible assets are carried at cost less accumulated amortisation and impairment. The amortisation expense is recognised in income over the anticipated useful life using the straight line method. The anticipated useful life and the amortisation method are reviewed at the end of each fiscal year and all changes in estimates are prospectively taken into account.

2.2.3. Internally generated intangible assets – research and development costs

Expenditure for research activities is recognised as an expense in the period in which it is incurred.

Internally generated intangible assets which stem from development activities (or from the development phase of an internal project) are only recognised if the following evidence can be provided:

• The technical feasibility of completing the intangible asset so that it will be available for use or sale.
• It is intended to complete the intangible asset and use or sell it;
• It is possible to use or sell the intangible asset.
• How the intangible asset will generate probable future economic benefits.
• The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• the ability to reliably determine the allocable expenses incurred when developing the intangible asset.

The amount at which an internally generated intangible asset is capitalised for the first time is the total of the expenses incurred starting on the date on which the intangible asset fulfils the above criteria. If an internally generated intangible asset cannot be capitalised, the development costs are recognised in income in the period in which they are incurred.

In the following periods, internally generated intangible assets are measured at cost less accumulated amortisation and impairment, as is the case for individually acquired intangible assets.

2.3. Inventories

Finished goods and services and work in progress are carried under inventories.

Finished goods and services and work in

progress are carried at cost. Cost includes the directly allocable costs as well as the production-related material and production overheads including production-related depreciation and a reasonable portion of the necessary overheads.

Borrowing costs are not capitalised as part of cost, as there is no direct connection.

To the extent required, inventories are carried at their lower realisable net marketable value.

2.4. Trade receivables and other receivables

Receivables and other assets are carried at their face values. Write-downs were made to account for recognisable individual risks.

2.5. Cash and cash equivalents

Cash and cash equivalents are carried at their face values.

Cash and cash equivalents comprise bank balances and cash in hand.

2.6. Provisions for pensions and similar commitments

Provisions for pensions are measured using the projected unit credit method. Future commitments are valued based on actuarial surveys.

There is re-insurance which is pledged to the beneficiaries. As the conditions for carrying this as plan assets, the assets are netted with the provision.

In doing so, not only the future rights known on the balance sheet date are taken into account, but also increases in salaries and pensions to be anticipated in future as well as the inflation rate are to be taken into account in the calculation. In line with IFRS, the discount factor is based on the interest rate on the capital market. The corridor method was applied. The biometric probabilities were calculated based on Prof. Klaus Heubeck's 2005 G mortality tables.

2.7. Non-current liabilities

Non-current liabilities are carried at their repayment amounts.

2.8. Government grants

Government grants are not carried as long as there is reasonable certainty that the group will fulfill the conditions associated with the grants and the grants are also issued.

Government grants, for which the most important condition is the purchase, construction or other acquisition of non-current assets are carried as deferred items in the balance sheet and recorded based on a systematic and reasonable basis over the term of the corresponding asset.

Other public subsidies are recognised as income over the period required to allocate these, on a systematic basis, to the corresponding expenses they are designated to cover. Public grants that are received to compensate for expenses already incurred or losses or for the purpose of immediate financial support for the group, for which there are no corresponding future costs, are recognised in income in the period in which the claim arises.

2.9. Current provisions

Provisions are formed for uncertain liabilities to third parties if these obligations are expected to lead to a future outflow of funds. They are formed taking into account all recognisable risks at the expected fulfillment amount and are not offset against any recourse claims. Provisions are not formed for future expenses that are not based on an external obligation.

2.10. Other current liabilities

Current liabilities are carried at their repayment or fulfilment amount.

2.11. Taxation

Income tax expenses is the total of the ongoing tax expenses and deferred taxes.

2.11.1. Current taxes

The current tax expenses are calculated for the year based on the taxable income. The taxable income differs from the net income from the consolidated income statement as it excludes income and expenses that will later or never be taxable or taxdeductible. The group's liability for current taxes is calculated based on the applicable tax rates or the tax rates which are expected to apply over the short term based on the balance sheet date.

2.11.2. Deferred taxes

Deferred taxes are formed for the difference between the carrying amount of the assets and liabilities in the consolidated financial statements and the corresponding amounts in the tax base when the taxable income is calculated. These are accounted for using the balance-sheet oriented liability method. As a rule, deferred tax liabilities and deferred tax assets are recorded for all taxable temporary differences for which it is probable that taxable gains will be available for which the deductible temporary differences can be used. These assets and liabilities are not carried if the temporary difference results from goodwill or the initial inclusion (with the exception of business combinations) of other assets and liabilities that result from transactions which neither affect the taxable income nor the net profit for the period.

Deferred tax liabilities are recognised for taxable temporary differences arising from interests in subsidiaries unless the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets result from temporary differences in connection with these investments and participating interests which are only recorded to the extent to which it is probable that there is sufficient taxable income available to use the claims from the temporary differences and if it can be assumed that these will not reverse

in the foreseeable future.

The carrying amount of the deferred taxes is reviewed each year on the balance sheet dated and reduced if it is no longer probable that there will be sufficient taxable income to regain the deferred taxes either in full or in part.

Deferred tax assets and liabilities are identified based on the anticipated tax rate (and tax law) which are expected to apply on the date the liability is fulfilled or the asset is recognised. The valuation of deferred tax assets and liabilities reflects the tax consequences resulting from how the group believes that it will fulfil the liability or recognise the asset on the balance sheet date.

Deferred tax assets and liabilities are netted if there is a legally enforceable right to set off the deferred tax receivables against the deferred tax liabilities and these are for income taxes for the same tax authority and if the group intends to net its current tax assets and tax liabilities.

2.11.3. Current and deferred taxes in the period

Current and deferred taxes are recognised as income or expense unless they are connected to items which are taken directly to equity. In this case, taxes are also to be taken directly to equity. In addition, they are not recorded if the tax effects result from the first-time accounting for a business combination. In the event of a business combination, the tax impact is to be taken into account when calculating the goodwill or when determining the amount by which the acquiring party's interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the acquired company exceeds the acquisition costs for the business combination.

2.12. Recognition of income

Revenues are carried at the fair value of the compensation received or to be received, less anticipated customer returns, discounts and other similar reductions.

2.12.1. Sale of goods

Revenue from the sale of goods is recognised if the following conditions are fulfilled:

• The group has transferred the key risks and opportunities resulting from ownership of the goods to the purchaser.
• The group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold.
• The amount of revenue can be measured reliably.
• It is probable that the economic benefits associated with the transaction will flow to the entity, and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

2.12.2. Provision of services

Income from service agreements is recorded according to their degree of completion. Revenues are recognised as follows:

Income from licenses:

Revenues are recognised on the date a productive cash desk system or a functional software solution is handed over to the customer.

Income from services (customising):

Revenues are realised on the date the agreed service is transferred to or accepted by the customer.

Income from adjustments outside the contractually agreed services (change request):

Revenues are realised on the date the agreed adjustments are transferred to or accepted by the customer.

Income from maintenance:

Income from maintenance services are settled monthly at the contractually agreed rates for the hourly work provided and costs that result directly. If contracts provide for a certain set of services to be made available the customer at contingent

events and invoices cover periods of more than a month, revenue will be realised on a monthly prorata-basis.

2.13. Estimates and assessments by management

In preparing the annual financial statements, assumptions have to be made and estimates have to be used to a certain extent. The estimates and assessments concern the amount and disclosure of the assets and liabilities, income and expenses included in the financial statements. The estimates and assumptions mostly relate to assessments for the impairment of intangible assets, the uniform definition of useful lives for property, plant and equipment and accounting for and the valuation of provisions. The assumptions and estimates are based on presumptions that are based on the respective current knowledge. In particular, the predicted future business development was based on the conditions prevailing when the financial statements were prepared and a realistic assumption for the future development of the global and industryspecific environment. Developments in the underlying conditions that differ from the assumptions and which are outside the management's sphere of influence may result in the actual amounts recorded differing from the original estimates. If actual developments do not match anticipated developments, the assumptions and, if necessary, the carrying amounts of the affected assets and liabilities are adjusted accordingly. On the date the annual financial statements were prepared, the underlying assumptions and estimates were not subject to any major risks, with the result that, from today's perspective, no major adjustment of the carrying amounts of the assets and liabilities carried on the balance sheet for the next fiscal year has to be assumed.

2.13.1. Main sources of estimating insecurity

The following section describes the key, futurelooking assumptions and the other key sources of estimating insecurity on the balance sheet date that can result in a substantial risk which would necessitate a major adjustment to the assets and liabilities disclosed in the coming fiscal year.

Impairment of internally generated intangible assets

During the fiscal year, the management reviews internally generated assets resulting from the group's software development for impairment. Intangible assets on the consolidated balance sheet total EUR 1,482 thousand on September 30, 2008.

This project has made very pleasing progress, and feedback from customers has also confirmed the management's estimates with regard to anticipated income from this project. However, management constantly reviews their assessments concerning future market shares and expect margins This review has convinced the management that it will be possible to realise the carrying amount of the asset in their full amount, even though income may possibly be lower. This situation is being monitored closely and, if required by the future situation on the market, adjustments will be made in the coming fiscal years to the extent that these are pertinent.

3. Notes to the consolidated balance sheet

3.1. Property, plant and equipment

EUR	Land and build ings	Technical equipment and machinery	Operating and office equip ment	Payments on account and assets under construction	Total
Acquisition/historical cost
Balance at Jan 1, 2007	0.00	177,244.42	641,562.42	27,080.44	845,887.28
Additions from merger	888,386.51	0.00	24,285.09	0.00	912,671.60
Additions	1,617,967.10	55,621.08	333,047.36	0.00	2,006,635.54
Reclassifications	27,080.44	0.00	0.00	-27,080.44	0.00
Disposals	0.00	18,605.43	272,390.22	0.00	290,995.65
Balance at Dec 31, 2007	2,533,434.05	214,260.07	726,504.65	0.00	3,474,198.77
Accumulated depreciation
Balance at Jan 1, 2007	0.00	150,459.52	389,514.42	0.00	539,973.94
Additions from merger	253,245.77	0.00	21,746.09	0.00	274,991.86
Additions	28,358.89	52,053.41	249,604.04	0.00	330,016.34
Disposals	0.00	18,605.42	272,321.22	0.00	290,926.64
Balance at Dec 31, 2007	281,604.66	183,907.51	388,543.33	0.00	854,055.50
Carrying amounts on Dec 31, 2007	2,251,829.39	30,352.56	337,961.32	0.00	2,620,143.27
Acquisition/historical cost
Balance at Jan 1, 2008	2,533,434.05	214,260.07	726,504.65	0.00	3,474,198.76
Additions	20,015.00	0.00	173,839.98	0.00	193,854.98
Disposals	0.00	0.00	20,000.00	0.00	20,000.00
Balance at Sept 30, 2008	2,553,449.05	214,260.07	880,344.63	0.00	3,648,053.75
Accumulated depreciation
Balance at Jan 1, 2008	281,604.66	183,907.49	388,543.33	0.00	854,055.48
Additions	60,975.49	5,709.93	148,325.13	0.00	215,010.55
Disposals	0.00	0.00	3,888.89	0.00	3,888.89
Balance at Sept 30, 2008	342,580.15	189,617.44	532,979.57	0.00	1,072,954.94
Carrying amounts on Sept 30, 2008	2,210,868.90	24,642.63	347,365.06	0.00	2,582,876.59

3.2. Intangible assets

EUR	Capitalised develop ment costs	Concessions, indus trial and similar rights and assets	Total
Acquisition/historical cost
Balance at Jan 1, 2007	869,830.23	86,082.08	955,912.31
Additions from merger	0.00	1,942.92	1,942.92
Additions	558,351.64	47,362.27	605,713.91
Disposals	0.00	3.93	3.93
Balance at Dec 31, 2007	1,428,181.87	135,383.34	1,563,565.21
Accumulated amortisation
Balance at Jan 1, 2007	179,593.48	57,106.07	236,699.55
Additions from merger	0.00	1,941.91	1,941.91
Additions	173,966.05	22,613.00	196,579.05
Disposals	0.00	3.92	3.92
Balance at Dec 31, 2007	353,559.53	81,657.06	435,216.59
Carrying amounts on Sept 30, 2008	1,074,622.34	53,726.28	1,128,348.62

EUR	Capitalised develop ment costs	Concessions, indus trial and similar rights and assets	Total
Acquisition/historical cost
Balance at Jan 1, 2008	1,428,181.87	135,383.34	1,563,565.21
Additions	621,081.07	78,357.37	699,438.44
Disposals	0.00	0.00	0.00
Balance at Sept 30, 2008	2,049,262.94	213,740.71	2,263,003.65
Accumulated amortisation
Balance at Jan 1, 2008	353,559.52	81,657.06	435,216.58
Additions	214,227.27	30,140.28	244,367.55
Disposals	0.00	0.00	0.00
Balance at Sept 30, 2008	567,786.80	111,797.34	679,584.14
Carrying amounts on Sept 30, 2008	1,481,476.14	101,943.37	1,583,419.51

Goodwill from first-time consolidation (EUR 153 thousand) was written off in full in the opening balance sheet.

Capitalised development costs are subject to scheduled straight-line amortisation over their estimated useful life of five years. The amortisation starts in the year after these are capitalised.

Research costs totaling EUR 248 thousand were recognised immediately as an expenses in the third quarter of 2008 (fiscal year 2007: EUR 273 thousand).

3.3. Inventories

EUR	Sept 30, 2008	Dec 31, 2007
Unfinished goods and
work in progress	1,005,759.68	1,997,600.00
Finished goods and goods
purchased for resale	0.00	1,072.25
Advance payments made	3,011.91	0.00
Total		1,008,771.59 1,998,672.25

3.4. Trade receivables

Trade receivables are due within one year.

The carrying amounts of the trade receivables are in line with their fair values.

Write-downs totaled EUR 50 thousand (fiscal year 2007: EUR 32 thousand).

3.5. Other receivables and assets

EUR	Sept 30, 2008	Dec 31, 2007
Receivables from share
holders	262,388.85	391,282.09
Receivables from tax
authorities	520,363.13	398,277.38
Other	1,118,093.93	108,312.63
Total	1,900,845.91	897,872.10

Receivables from shareholders relate to loans granted for an unlimited period in the amount of EUR 255 thousand (others are current) and bear interest of 5% p.a.

There were receivables in foreign currencies in CZK totaling EUR 0 thousand on the balance sheet date (fiscal year 2007: EUR 0 thousand).

3.6. Cash and cash equivalents

Cash and cash equivalents are carried at face value. This item includes cash on hand and current bank deposits with terms of less than three months.

3.7. Equity

For further information on changes in GK SOFT-WARE AG's equity on September 30, 2008, please refer to the statement of changes in equity.

The company's share capital originally totaled EUR 150,000.00 and comprised 150,000 par value shares, with a par value of EUR 1.00. In fiscal year 2007, these were initially changed in 150,000 no-par value shares, each with a nominal amount of EUR 1.00. In order to execute the merger of Gläß & Kronmüller OHG, Schöneck, with the company, the share capital was increased by 5,000.00 to EUR 155,000.00 (comprising 155,000 shares). The existing 150,000 shares transferred to the company as part of the merger were then withdrawn without reducing the share capital within the meaning of Section 237 (3) no. 3 of the Aktiengesetz (AktG – German Public Limited Companies Act). The reduction in assets resulting from the withdrawal is carried separately in the statement of retained earnings as "expenses from the withdrawal of shares". On March 31, 2008, the company's share capital totaled EUR 155,000.00 comprising 5,000 no-par value shares.

On June 30, 08, the company's share capital totaled EUR 1,665,000 comprising 1,665,000 shares. The share capital changed in May 2008 as a result of the resolved capital increase in the amount of EUR 1,095,000 to EUR 1,250,000. A 1:250 share split was then executed. The number of issued shares increased to 1,250,000.

The resolved capital increase from the issue of new shares totaling EUR 415,000 or 415,000 shares in free float was resolved in May 2008 and completed on July 19, 2008 with a public placement.

EUR	Sept 30, 2008	Dec 31, 2007
Subscribed capital
5,000 shares, fully paid	0.00	155,000.00
1,250,000 shares, fully
paid	1,250,000.00	0.00
415,000 capital increase,
issue of shares	415,000.00	0.00
Total	1,665,000.00	155,000.00

The company did not hold any own shares on the balance sheet date.

There was no conditional capital on September 30, 2008. There are no stock options.

The following resolutions were passed at the company's ordinary General Meetings on May 15 and 22, 2008:

• 1. Capital increase from company funds. The company's share capital totaling EUR 155,000 is increased from company funds by EUR 1,095,000 to EUR 1,250,000 by converting a partial amount of EUR 918,960.95 of the net retained profits carried on the balance sheet as of December 31, 2007 which is to be added to the retained earnings according to the resolution, and by converting a partial amount of EUR 179,039.05 of the "Other retained earnings" carried on the balance sheet as of December 31, 2007 to share capital.
• 1. Share split. The above capital increase is performed without issuing new shares. Subsequent to the capital increase, the existing 5,000 shares with a theoretical interest in the share capi-

tal of EUR 250 per share are to be split in the ratio of 1:250. Accordingly, the share capital then comprised 1,250,000 shares.

• 1. Capital increase against cash contribution. The company's share capital was increased against cash contributions from EUR 1,250,000 by up to EUR 415,000 to up to EUR 1,665,000 by issuing up to 415,000 new no-par value bearer shares (shares) carrying profit participation rights from January 1, 2008. The new shares are issued at an amount of EUR 1.00 per share (issuing amount).
• 1. Creation of authorised capital. The Managing Board was authorised, with the approval of the Supervisory Board, to increase the company's share capital in the period from May 15, 2008 to May 14, 2013 on one or several occasions by up to a total of EUR 625,000 by issuing up to 625,000 new, no-par value shares (shares) against cash or non-cash contributions (authorised capital).

Retained earnings comprise the addition to statutory reserves as well as the differences from the first-time application of IFRS.

3.8. Provisions for pensions and similar commitments

Actuarial gains and losses are amortised using the corridor method. They are not taken into account if they do not exceed 10% of the obligation. The amount in excess of the corridor is recognised in income and distributed over the average remaining service periods of the active workforce and carried on the balance sheet.

Current service cost is carried in the income statement under expenses for retirement benefits, interest expense is carried under the financial result, and the income from re-insurance is carried under other operating income. The assumptions from fiscal year 2007 were applied

analogously on June 30, 2008. Underlying assumptions:

Parameter	2007 %	2006 %	2005 %
Interest rate	5.5	5.0	5.0
Salary trend	0.0	0.0	0.0
Pension trend	1.5	1.5	1.5

3.9. Non-current liabilities to banks

The company took out two investment loans with Commerzbank AG, Plauen in fiscal year 2007 (original amounts: EUR 750 thousand and EUR 450 thousand). In addition, the company took over a loan from Gläß & Kronmüller OHG, Schöneck as part of the merger (original amount: EUR 225 thousand).

3.10. Deferred government grants

This item relates to taxable investment grants from the Free State of Saxony (issued by the Sächsische AufbauBank) as part of a regional economic subsidisation program and tax-free investment grants.

The subsidies and grants are reversed over the useful lives of the subsidised assets.

3.11. Other non-current liabilities

EUR	Sept 30, 2008	Dec 31, 2007
Silent partnership		0.00 450,000.00
Other	0.00	21,214.31
Total	0.00	471,214.31

The contract governing the silent partnership has been terminated on Sept 15, 2008 and runs now until Dec 31, 2008. Accordingly, it has been reclassified as current debt.

The silent partner's profit participation comprises a fixed portion, based on the capital contribution (8.75% p.a.) and a fee for the interest (variable fee) which depends on the bearer's earnings.

3.12. Deferred taxes

Please see note 4.9.

3.13. Current provisions

Current provisions for personnel are mostly for vacation, bonuses and for statutory accident insurance and prevention. Provisions for production are mostly for warranties and in the other areas these are mostly for outstanding goods-in invoices, auditing costs, consulting costs and interest.

The provision for warranties is calculated based on historical expenses for warranties and estimates with regard to future costs.

Personnel	Production	Other areas	Total
267,204.25	241,500.00	133,595.35	642,299.60
267,204.25	241,500.00	133,595.35	642,299.60
0.00	0.00	0.00	0.00
299,878.32	150,000.00	74,100.00	523,978.32
299,878.32	150,000.00	74,100.00	523,978.32
			523,978.32
			702,294.89
			630,726.59
397,535.47	15,000.00	1,336,796.05	1,749,331.52
444,015.55	165,000.00	331,272.81	940,288.36
	299,878.32 249,006.72 4,391.52	150,000.00 0.00 0.00	74,100.00 453,288.17 626,335.07

3.14. Trade payables

Trade payables are due within one year.

There were liabilities in foreign currencies in CZK totaling EUR 246 thousand on the balance sheet date (fiscal year 2007: EUR 193 thousand).

The carrying amounts of the trade payables are in line with their fair values.

3.15. Advance payments received

Advance payments received are due within one year.

On the balance sheet date there were no advance payments received in foreign currencies.

The advance payments received are not netted with inventories.

3.16. Income tax liabilities

This item includes the anticipated subsequent payment for corporation tax, the solidarity surcharge and trade tax in Germany and the Czech Republic for the year under review.

3.17. Other current liabilities

EUR	Sept 30, 2008	Dec 31, 2007
Liabilities from wages and salaries	327,580.17	310,260.43
Tax liabilities	389,410.05	800,881.59
Liabilities to shareholders	0.00	0.00
Liabilities to related parties	0.00	0.00
Other	621,267.26	192,490.16
Total	1,338,257.48	1,303,632.18

3.18. Collateralised liabilities

Liabilities to banks are collateralised with registered charges on the company's property, registered in the Schöneck land register, Plauen Local Court, Page 1895. In addition, in order to collateralise an investment loan, the assignment of all current and future claims from life insurance and pension insurance agreements and the global cession for receivables of GK SOFTWARE AG from deliveries of goods and services to third-party debtors has been agreed.

4. Notes to the consolidated income statement

4.1. Revenues

Revenues exclusively stem from the sale of hardware and software and the provision of services in the European Union.

4.2. Own work capitalised

Own work capitalised comprises the capitalised costs of development services for internally-generated software. Both direct and indirect costs are included in production costs.

4.3. Other operating income

EUR	Sept 30, 2008	Dec 31, 2007
Write-ups of receivables writ
ten down	0.00	14,863.70
Income from investment
grants	0.00	139,107.00
Income from the reversal of
deferred public grants	25,907.23	11,501.00
Reversal of provisions	520.50	0.00
Expense allowances	3,388.00	54,632.44
Vehicle use	113,621.86	84,535.55
Other	220,601.39	74,845.24
Total	364,038.98	379,484.93

4.4. Cost of materials

EUR	Sept 30, 2008	Dec 31, 2007
Cost of raw materials, con sumables and supplies, and of goods purchased for
resale	131,474.35	230,353.70
Cost of purchased services	374,579.85	255,325.33
Total	506,054.20	485,679.03

4.5. Personnel expenses

EUR	Sept 30, 2008	Dec 31, 2007
Wages and salaries	4,943,794.17	5,338,407.72
Social security contributions	748,506.00	804,378.54
Expenses for retirement
benefits	37,849.46	9,317.57
Total	5,730,149.63	6,152,103.83

There was an average of 189 employees in the third quarter of 2008 (third quarter of 2007: 160).

4.6. Depreciation and amortisation

This item exclusively includes the scheduled depreciation of property, plant and equipment and the scheduled amortisation of intangible assets.

4.7. Other operating expenses

This item mostly includes legal and consulting costs as well as office and operating costs.

4.8. Financial result

EUR	Sept 30, 2008	Dec 31, 2007
Interest income	151,745.39	44,475.91
Interest expense	-149,129.40	-159,843.42
Total	2,615.99	-115,367.51

4.9. Income taxes

Sept 30, 2008	Dec 31, 2007
146,916.10	570,940.76
468,525.08	84,815.21
615,441.18	655,755.97

Deferred taxes were calculated based on a tax rate of 38.0% (to December 31, 2007) or 29.1% (from January 1, 2008) for Germany and 24.0% for the Czech Republic.

Deferred tax liabilities are included in the following items:

	Sept 30, 2008		Dec 31, 2007
EUR	assets	liabilities	assets	liabilities
Intangible assets	0.00	431,554.00	0.00	313,037.49
Provisions for pensions	2,008.80	0.00	2,046.67	0,00
Inventories	3,553.86	0.00	15,642.81	0,00
Tax impact of netting the costs of producing equity with the
share premium	346,931.18	346,931.18	0.00	0.00
Netting the tax impact of the costs for the share premium with
deferred tax liabilities from the ongoing net income for the
period	-346,931.18	-346,931.18	0.00	0.00
Tax losses carried forward	0.00	0.00	0.00	0.00
Total (balance sheet)	5,562.66	431,554.00	17,689.48	313,037.49

Deferred tax assets/liabilities result from:

		Sept 30, 2008			Dec 31, 2007
EUR	Initial balance	Recognised in in come	Final balance	Initial balance	Recognised in in come	Final balance
Temporary differences
Provisions for pensions	2,046,67	-37.87	2,008.80	5,881.93	-3,835.26	2,046.67
Intangible assets	-313,037.49	-118,516.51	-431,554.40	-216,554.46	-96,483.03	-313,037.49
Inventories	15,642.81	-12,088.95	3,553.86	0.00	15,642.81	15,642.81
	-295,348.01	-130,643.33	-425,991.34	-210,672.53	-84,675.48	-295,348.01
Unused tax losses	0.00	0.00	0.00	139.73	-139.73	0.00
Total	-295,348.01	-130,643.33	-425,991.34	-210,532.80	-84,815.21	-295,348.01

Tax expense for the fiscal year can be reconciled to the profits for the period as followed:

Reconciliation of tax expense/EUR	Sept 30, 2008	Dec 31, 2007
Pre-tax earnings	2,097,613.55	2,217,044.75
Anticipated tax expense 29.1% (previous year 38.0%)	606,391.74	842,477.01
Tax impact of non-deductible company spending	0.00	11,822.70
Tax impact of tax-free income	0.00	-52,860.66
Other tax effects	9,049.44	-145,683.08
Actual tax expense	615,441.18	655,755.97
Effective tax rate	29.3 %	29.6 %

4.10. Earnings per share

Earnings per share are calculated as the earnings divided by the weighted average number of shares in circulation during the fiscal year.

There were an average of 730,493 shares in the first nine months of 2008 (previous year: 150,000).

Earnings as of the balance sheet date totaled EUR 1,482 thousand (Sept 30, 2007: EUR 785 thousand). The basic earnings per share were thus EUR 2.03 (Sept 30, 2007: EUR 5.23).

There were no shares outstanding on September 30, 2008 or on December 31, 2007 that could dilute the earnings per share.

5. Information on the cash flow statement

Cash and cash equivalents are cash in hand and bank balances.

6. Segment reporting

Segment reporting is not necessary as GK SOFT-WARE AG does not have different business segments.

7. Other disclosures

7.1. Financial instruments

Financial instruments include original and derivative financial instruments.

The original financial instruments on the assets side mostly comprise receivables, other financial

assets and cash and cash equivalents. On the equity and liabilities side, the original financial instruments mostly comprise liabilities measured at amortised cost. The original financial instruments are disclosed in the balance sheet. To the extent that default risks can be recognised for the financial assets, these risks are covered by write-downs.

The company took out two investment loans with Commerzbank AG, Plauen in fiscal year 2007 (original amounts: EUR 750 thousand and EUR 450 thousand). The interest payments for the two investment loans are secured via in interest rate cap. This hedge runs until June 30, 2012 and has a cap rate of 5.2% p.a.

7.2. Contingent liabilities

Contingent liabilities are possible obligations which do not actually exist until one or several uncertain future events occur that cannot be fully influenced. They also include obligations that are not expected to lead to any outflow of funds. According to IAS 37, contingent liabilities are not included in the balance sheet.

There were no contingent liabilities on the balance sheet date.

7.3. Operating leases

Operating leases are for vehicles. The payments recorded as expenses in the third quarter of 2008 totaled EUR 176 thousand.

7.4. Other financial commitments

There are financial commitments from leases totaling EUR 445 thousand (thereof with a remaining term of up to one year EUR 229 thousand).

Name of subsidiary	Registered office	Interest %	Voting rights %	Primary business
EUROSOFTWARE s.r.o.	Czech Republic	100	100	Software development, Software programming
GK Soft GmbH	Switzerland	100	100	Software development, Software programming
StoreWeaver GmbH	Switzerland	100	100	Software development, Software programming

The companies are fully consolidated in these financial statements.

7.6. Related party disclosures

GK SOFTWARE AG's related parties are: the members of the Managing and Supervisory Boards including their family members and companies over which GK SOFTWARE AG, the members of the Managing and Supervisory Boards and their close family members can exercise a significant influence.

All transactions with related parties are concluded under normal market conditions. Expenses for valuation allowances or uncollectible receivables from related parties were not necessary or not available.

Transactions between GK SOFTWARE AG and its consolidated subsidiaries were eliminated during consolidation.

Managing Board

The Managing Board members are:

• Rainer Gläß, Schöneck, CEO (engineering graduate)

• Stephan Kronmüller, Schöneck, CTO (engineering graduate)

• Ronald Scholz, Rodewisch, COO (engineering graduate)

• André Hergert, Hamburg, CFO (since March 28, 2008) (business administration graduate)

Remuneration for members of the Managing Board in the period under review totaled EUR 1,180 thousand (fiscal year 2007: EUR 1,260 thousand).

The Managing Board members directly held the following interests in GK SOFTWARE AG as of Sept 30, 2008:

Rainer Gläß	37,500 shares 2.3%
Stephan Kronmüller	37,500 shares 2.3%

Supervisory Board

The Supervisory Board members are:

• Uwe Ludwig, Neumorschen, management consultant, chairman of the Supervisory Board
• Heinrich Sprenger, Iserlohn, entrepreneur
• Thomas Bleier, Oelsnitz, merchant

The total remuneration for GK SOFTWARE AG's Supervisory Board in fiscal year 2007 amounted to EUR 10 thousand. As of the balance sheet date

no payments had yet been made in favor of the members of the Supervisory Board.

There are no agreements between the company's Supervisory Board members that include compensation payments or other compensation in favor of the members of the Supervisory Board when their period of office ends. There are currently no conflicts of interest between their obligations to the company and their private interests or other commitments.

There are no agreements with the company for pensions in favor of the members of the Supervisory Board.

7.7. Fee for the audit review

The fee recorded for the auditors Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft as expenses for the third quarter of 2008 for audit services totaled EUR 5 thousand.

7.8. Approval of the financial statements

The management approved the financial statements on November 26, 2008 and released these for publication.

Schöneck, November 2008

The Managing Board

4. Declaration by legal representatives

To the best of our knowledge, we declare that, according to the principles of proper interim reporting applied, the interim financial statements provide a true and fair view of the company's net assets, financial position and results of operations, that the interim management report presents the

company's business including the results and the company's position such as to provide a true and fair view and that the major opportunities and risks of the company's anticipated growth for the remaining financial year are described.

The Management Board

Rainer Gläß (CEO)

Ronald Scholz (COO)

Stephan Kronmüller (CTO)

André Hergert (CFO)

GK SOFTWARE AG Waldstraße 7 08261 Schöneck Tel. +49 37464 84-0

www.gk-software.com investorrelations@gk-software.com