Business Review

POLYDOC PLC
25 August 1999


                          PolyDoc Plc

                    SHAREHOLDER COMMUNICATION

           A business review of the first half of 1999
          and the outlook for the remainder of the year
                             from

                 Barry Mence, Executive Chairman


PolyDoc, a computer software company, which specialises in the
development and provision of business solutions in the rapidly
growing  field of Knowledge Management announces its  business
highlights for the first half of 1999.

Highlights:
  -    Consistent levels of revenue from our long term contracts
       to install QualiFlow, our healthcare industry product,
       continue to form the foundation of our turnover. This revenue
       has been supplemented by both product and consultancy sales.
       Total turnover has shown a 14% increase compared to the same
       period in the previous year. With operating costs increasing
       in line with budget, pre-tax losses will be around £600,000

  -    Lessenger B.V., PolyDocs recently acquired supplier of
       document management software to the healthcare industry,
       brings additional revenue from both new and its existing 50
       Dutch healthcare clients

  -    StudyFlow pilot successfully evaluated by DERA,  the
       Defence Evaluation and Research Agency related to the UK
       Ministry of Defence, resulting in additional development work
       being contracted

  -    Knowledge Management Consultancy division launched and
       starting to contract first customers

  -    PolyDoc and Hiscom announce agreement to collaborate on
       Medical Knowledge Management Systems to accelerate progress
       towards electronic patient dossiers for Dutch healthcare
       market

  -    Letter of intent signed to acquire AppliedNet, a UK-based
       knowledge management software products, systems integration
       and consulting company. This would add a complementary product
       set, a solid blue-chip UK customer base, an additional
       existing revenue stream and more than 40 highly skilled UK
       staff.

  -    First important business partnership agreements entered
       into in the UK and the USA

  -    Senior software industry executive, Paul Heller,  is
       appointed as Chief Technology Officer and a member of the
       management board of directors


CHAIRMANS LETTER TO SHAREHOLDERS

With  the  first half of 1999 now completed I  would  like  to
update you on PolyDocs progress during the past half year and
to  share  with you our major objectives for the rest  of  the
current year and beyond.

Business review of the first half of 1999.

Healthcare.

Our  first multimillion guilder contract involving three (from
a   total  of  eight)  academic/teaching  hospitals   in   the
Netherlands  is progressing well. Our QualiFlow  software  has
continued  to  be  delivered to the initial customers  in  the
stages  as  planned enabling them to prepare for the important
phase  of content production. With further deliveries  planned
for  October  1999 the environment has been  created  for  all
sizes  of  hospital  to  become customers  of  both  QualiFlow
software  and content. We have had clear indications from  the
highest level at several hospitals, both academic and general,
that  they intend to contract for PolyDocs software to enable
them  to share the content with the first launching customers.
We  expect  to sign further substantial business in this  area
during  the current year, as we seek to establish our approach
as a form of standard for the Dutch healthcare industry.

As  mentioned in a previous shareholder communication, a joint
venture  company called Pro-GRAM B.V. has been formed  by  the
initial  academic hospitals to market, together with  PolyDoc,
the  QualiFlow  software and the knowledge created  using  the
software  to  a  broad  range of organisations  in  the  Dutch
healthcare  industry. PolyDoc has accepted  an  invitation  to
become  a shareholder in this company, which has at the  start
of this year commenced active marketing.

Lessenger  B.V.,  our recently acquired supplier  of  document
management software to the healthcare industry, has been fully
integrated into PolyDocs business. This has started to  bring
additional  revenue from both new and its existing  50  Dutch
healthcare  clients.  In addition to  our  commitment  to  the
ongoing   development,  enhancement  and  support   of   these
products,  we  will also ensure that our QualiFlow  healthcare
solution  interfaces  with the Lessenger family  of  products.
This should put both PolyDoc and Pro-GRAM in a strong position
to   further  accelerate  our  sales  of  QualiFlow   in   the
substantial healthcare market.

We  have entered agreements with Hiscom in the Netherlands and
Marlow  in  the U.K. which are more fully described under  the
Business  Partnership section of this note.  We  are  also  in
discussions  in  the U.K., U.S.A., Belgium  and  Germany  with
prospects  and  additional business partners that  have  shown
serious interest in our Healthcare solution QualiFlow.

Manufacturing and Defence.

DSM,  the multinational chemical manufacturer, went into  full
production  early this year with the latest version  (3.0)  of
NormFlow,  our solution for the production and maintenance  of
standards  for  the manufacturing and process  industries.  We
have  extended  the  scope  and use  of  the  product  at  DSM
resulting  in  additional  revenue  on  top  of  the   ongoing
maintenance fees.

We   have  contracted  the  services  of  two  former   senior
executives  of  the Baan Company, Otto van der Tang  and  Henk
Speksnijder  to  initiate  the  volume  selling  of  this  new
enhanced   NormFlow   as  well  as  the   marketing   of   our
ResearchFlow/StudyFlow solutions into  this  sector.  This  is
presently  underway, and we would expect to see the commercial
results of this starting during the current year.

The  StudyFlow  pilot  we  have been executing  at  DERA,  the
Defence  Evaluation  and Research Agency  related  to  the  UK
Ministry of Defence, has been successfully evaluated resulting
in further development work being contracted.

Our  plans  for penetrating the Defence Industry  have  become
closely  linked to our Manufacturing strategy. This is because
our early prospects apart from DERA are major defence industry
manufacturers.  One of these manufacturers  is  at  the  final
stages  of  evaluating  the  implementation  and  benefits  of
PolyDocs  solutions, and we would expect to see further  work
with  that  organisation and DERA in the second half  of  this
year.

Knowledge and Content Management Consultancy Services.

Our  new  consultancy services group has now been  established
and  is focussing on generating additional revenue as well  as
bringing  potential  software product customers  and  business
partners  into  PolyDoc as paying services customers.  Initial
work  of this nature has been contracted with DSM, Oci,  DERA,
IBM and KPMG in the first half of this year.

Business Partnerships.

Our  strategy  for  expanding PolyDocs business  into  volume
sales has always been to enter into business partnerships with
mature organisations with strong customer bases, once we  have
established   the   early  customers  in  our   chosen   focus
industries. The initial target geographies remain the  Benelux
countries, the UK and the USA.

In  addition to the partnership covering the Benelux with  the
hospitals joint venture company, Pro-GRAM we have put two non-
exclusive  agreements in place with business partners  in  the
United  Kingdom  and the United States. Marlow  Consulting  in
United  Kingdom  specialises  in  management  consultancy  and
systems  integration,  and they are  focusing  with  PolyDocs
products  on a number of named accounts in the healthcare  and
pharmaceutical industries. TelTech, a recognised USA Knowledge
Management specialist-consulting firm will be focussing on the
manufacturing industry. All three partners have  been  working
closely  with PolyDoc staff on concrete business opportunities
in  the  Netherlands,  USA, UK and Germany.  We  are  also  in
detailed discussions with a small number of software suppliers
with  substantial  existing  customer  bases  concerning   the
integration  of  parts of our software into theirs,  which  we
believe  could potentially form the start of a very  lucrative
revenue  stream. Another important agreement we  have  entered
into  is  with  Hiscom in the Netherlands whereby  we  are  to
collaborate   on  medical  knowledge  systems  to   accelerate
progress  towards electronic patient dossiers  for  the  Dutch
healthcare market. Hiscom is the market leader in the  medical
IT  market in the Netherlands, and is increasingly focusing on
new  Care  information systems outside its  local  market,  in
particular in the United Kingdom, Germany and Scandinavia.  We
are  currently  discussing the potential for jointly  pursuing
commercial opportunities also in these geographies.

Financial.

Consistent  levels of revenue from our long term contracts  to
install  QualiFlow,  our  major healthcare  industry  product,
continue to form the foundation of our turnover. This  revenue
has   been   supplemented  by  both  Lessenger   product   and
consultancy sales from our recently formed Consultancy  group.
Total  turnover has shown a 14% increase compared to the  same
period  in  the previous year. With operating costs increasing
in line with budget, pre-tax losses will be around £600,000.

The  convertible loan that was put in place last year  was  an
interim   term   solution   for  our   medium   term   capital
requirements. These funds have been utilised to a point  where
as  announced  previously, we need to  complete  further  more
substantial  fund  raising  in  this  current  year.   Initial
indications  from  Institutions in the U.K.  Financial  Market
have  been positive as born out by the issuing of £500,000  of
new  ordinary  shares  to  three new  institutional  investors
earlier this year, at market price at the time (£1.47).

The  new  funds to be raised will ensure we have the  cash  in
place to meet our ongoing financial requirements, and to build
upon  our  business successes in the Healthcare  industry,  by
expanding  into  the  UK  and  USA  markets,  replicating  the
successful  formula  we  have developed  in  the  Netherlands.
Additionally,  we  will then be in a position  to  more  fully
exploit  our  potential  in  the lucrative  Manufacturing  and
Defence  industries, where we are currently working  with  our
initial  customers  as  mentioned earlier  in  this  document.
Further details of this fund raising will be announced  during
the coming months.

Outlook for the second half of 1999 and beyond

Following  the successful integration of our first acquisition
and  in  line  with our acquisition strategy, we are  actively
working  with  a number of European companies to evaluate  the
benefits  of them becoming part of PolyDoc. The most important
development in this area is the signing of a letter of  intent
to  purchase AppliedNet, a UK-based software products, systems
integration and consulting company. Upon completion this  will
be  a  significant step forward and a major milestone  in  our
business  development,  with  the  acquisition  providing  the
necessary  critical mass and additional resources  to  broaden
and  accelerate  sales  in the European  marketplace,  and  to
expand   faster   into   the  United   States.   Additionally,
AppliedNets impressive UK client portfolio, comprising  blue-
chip  multinationals,  defence and  publishing  organisations,
would  significantly  enhance our overall  customer  base  and
brings  an important further revenue stream. We firmly believe
that  the  combination  of AppliedNets  knowledge  harvesting
software  and web publishing solutions together with PolyDocs
knowledge capture and content management software would create
a very competitive and highly commercial range of solutions in
the   fast   emerging  knowledge  management  and   e-business
marketplaces. With our push into the United States starting to
take  shape  via our business partnership agreements  and  our
small  team  of senior executives led by Paul Heller,  we  are
then  targeting  the  year 2000 for  an  acquisition  in  that
territory.

Recent months have seen several important announcements in the
Knowledge   Management  arena  from  market  leader   software
companies  like  Microsoft.  Not  only  is  this  starting  to
increase  potential  customers focus on  purchasing  Knowledge
Management  software, it is adding substantial credibility  to
PolyDocs  software solutions. In particular, this is  because
our  software is complementary to that being brought to market
by  the likes of Microsoft and also that we actually integrate
the  technology  from  several  leading  suppliers,  such   as
Microsoft   and   Oracle,   into  our   Knowledge   Management
applications.

1999  has  so  far  been a year of considerable  progress  for
PolyDoc  that  to-date  has  not  substantially  impacted  our
revenue  figures.  The benefits of this  should  have  a  more
substantial  impact  in  the second half  of  this  year  with
revenue  generation being anticipated in most, if not all,  of
the  above  mentioned areas. These developments together  with
the completion of our next round of fund raising will form the
foundation  from  which  to move the business  forward  at  an
enhanced  pace, which in-turn should bring exciting times  for
both PolyDocs shareholders and staff in the new millennium.

     Barry Mence or Richard Maddocks (PolyDoc) 0031 20 301  3900   
     [e-mail]
     Steve  Liebmann (Buchanan Communications)  0171 466  5000
     [e-mail]