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Letter to Shareholders

the business development in the second quarter of 2008 is fully in line with our expectations. In April we announced we would achieve material improvements in the second quarter. We did just that: On a purely organic basis sales increased to € 102.1 million (previous year: € 99.6 million). This represents growth of 8% against the first quarter of 2008 and 3% on a year-on-year basis.

In terms of results, the upturn was even stronger. The IDS Scheer group generated operating earnings before interest, taxes and amortization of intangible assets (EBITA) of € 7.7 million. With an EBITA plus of 85%, this means almost doubling the figure achieved in the first quarter of 2008. On a year-on-year basis, a downturn was posted as expected, due to the fact that the equivalent quarter in the previous year had been affected by unusually large license orders. The improvements in comparison to the previous quarter were carried by the two business areas, ARIS Products as well as Consulting.

These results show that our customer-driven value-added strategy and the announced measures to expand license volume and profitability are already bearing fruit. For example, in Berlin we generated a very positive response to our customer event - ‘ARIS ProcessWorld’ which was held in June. We welcomed a record figure of 1,600 participants from 44 countries and noted great demand for our business process management solutions.

We will vigorously implement the catalogue of measures to realign the company. The closer intermeshing of the ARIS product expertise with the industry know-how in the consultancy area will result in a considerable upturn of value added for the customer. In the future, the consulting business area will advance sales of ARIS licenses in addition to the ARIS product sales team. At the same time, we will continue focusing our resources in the consulting business area on profitable consulting issues. Finally, to enhance quality and efficiency, back office functions will be bundled in shared services centers.

With the measures which have been initiated to improve profitability and the strengthening of our international sales organization, we have created a good basis to expand the leading position of our ARIS software for business process management and to augment the profit margins in subsequent quarters and years.

Yours sincerely,

Thomas Volk,
CEO and President

Source: Six Months' Financial Statement 2008, page 5