Group Management Report for the Nine Months Ended September 30, 2004

This annual report contains forward-looking statements regarding future events or the future financial and operational performance of Intershop. Actual events or performance may differ materially from those contained or implied in such forward-looking statements. Risks and uncertainties that could lead to such difference could include, among other things: Intershop's limited operating history, the unpredictability of future revenues and expenses and potential fluctuations in revenues and operating results, significant dependence on large single customer deals, consumer trends, the level of competition, seasonality, risks related to electronic security, possible governmental regulation, general economic conditions and the uncertainty regarding the release of current restricted cash.

Market Environment

In the first nine months of 2004, Intershop Communications AG Group's ("Intershop", "the Company", or "the Intershop Group") business was impacted by generally low levels of corporate information technology (IT) spending. In addition, in the first nine months of 2004 Intershop's earnings suffered as a result of seasonally lower corporate IT budgets in the first quarter as well as in the third quarter of 2004.

Revenue

Reflecting the weak market environment, Intershop's total revenue for the first nine months of 2004 decrease to €13.9 million, compared with revenue of €18.5 million in the first nine months of 2003. First nine-months 2004 license revenue totaled €2.4 million, compared to €5.0 million in the prior year comparable period. Service revenue (including consulting, customer support, maintenance, and other revenue) totaled €11.5 million in the first nine months of 2004, compared to €13.5 million in the first nine months of 2003.

With a large installed base across the region, Europe remained the Company's primary market in the first nine months of 2004, accounting for €10.9 million, or 77% of the worldwide total, as compared to €15.5 million or 83% in the first nine months of 2003.

In the Americas region, Intershop generated €2.8 million, or 20% of total global revenue, in the first nine months of 2004, compared with €2.6 million, or 14%, in the first nine months of 2003.

In the Asia Pacific region, Intershop generated revenues of €0.2 million in the first nine months of 2004, representing 1% of total global revenue for that period. This compares to €0.4 million in total revenue, or 3%, in the first nine months of 2003. The revenue in this region was generated within the first six months of 2004 since Intershop departed from direct sales in Asia towards working with distributors.

In the first nine months of 2004, Intershop sold 35 Enfinity configurations (i.e., Enfinity platforms and solutions including Enfinity MultiSite), bringing the total number of Enfinity configurations sold to date worldwide to 491 since the fourth quarter of 1999. By comparison, Intershop sold 34 in the first nine months of 2003.

Gross Profit

Gross profit generated in the first nine months of 2004 was €6.9 million, versus €8.8 million in the first nine months of 2003. Gross margin on sales for the first nine months of 2004 was 49%, as compared to 47% in the first nine months of 2003.

The Company's license gross margin in the first nine months of 2004 was 89%, as compared to 92% in the first nine months of 2003.

The Company's service gross margin was 41% in the first nine months of 2004, as compared to 31% in the first nine months of 2003. This quarter-on-quarter improvement in Intershop's service gross margin in the first nine months of 2004 was driven primarily by improved utilization of service personnel capacity in conjunction with a reduction in the service workforce.

Expense and Income

Due to efficiency gains from a number of restructuring initiatives throughout the first nine months of 2004, Intershop reduced total operating costs (cost of revenue and operating expense) by 50%, from €37.8 million in the first nine months of 2003 to €18.9 million in the first nine months of 2004.

As of September 30, 2004, the Company employed a total of 232 full-time equivalent employees worldwide (compared with 235 full-time equivalents as of June 30, 2004 and with 326 full-time equivalent as of September 30, 2003 ), of which 217 were employed in Europe and 15 in the Americas region. As of September 30, 2004, Intershop employed 173 full-time equivalents in technical departments (research and development, services), 27 full-time equivalents in sales and marketing, and 32 full-time equivalents in general and administrative functions.

The Company recorded restructuring charges of around €0.4 million in the first nine months of 2004, driven primarily by facility-related charges. By comparison, the Company recorded restructuring costs of €3.2 million in the first nine months of 2003.

In the first nine months of 2004, R&D expenses were €3.1 million, as compared to €5.0 million in the first nine months of 2003.

Sales and marketing expenses were €3.8 million in the first nine months of 2004, compared with €12.9 million in the first nine months of 2003. Primarily due to lower revenue-dependent commission payments to sales employees as well as further headcount reductions in both the sales and the marketing departments, sales and marketing expenses were further reduced in the first nine months of 2004. The sales and marketing expenses of the first nine months of 2004 included costs incurred for the CeBIT 2004 trade fair in Hanover, Germany, where Intershop presented its new multichannel ecommerce software Enfinity Suite 6. The new Enfinity Suite 6 package has six functional modules that can also be used as separate applications: Consumer Channel, Business Channel, Partner Channel, Supplier Channel, Procurement Channel, and Content Channel. All individual packages are optimized for the use of web-based services and support both Linux and Blade systems.

As a result of further workforce reductions and efficiency gains, general and administrative (G&A) expenses decreased from €7.0 million in the first nine months of 2003 to €4.6 million in the first nine months of 2004.

Depreciation and amortization charges were €0.4 million in the first nine months of 2004, compared with €2.9 million in the first nine months of 2003. Investments in the first nine months of 2004 were focused on capital replacements to adequately support the Company's ongoing operations in line with reduced business activities.

Other income amounted to €1.0 million in the first nine months of fiscal year 2004, against €0.6 million in the comparable prior-year period. The figure for the first nine months of 2004 includes extraordinary income in the amount of €0.7 million relating to the spin-off of Intershop's Asian operations.

Due primarily to the significant reduction in total operational costs, Intershop reduced its operating loss to €5.0 million for the first nine month of 2004, as compared to an operating loss of €19.3 million for the first nine month of 2003.

In the first nine months of 2004, Intershop's net loss was €4.0 million, representing a net loss of €0.17 per share. In the comparable first nine months of 2003, Intershop's net loss was €18.7 million, representing a net loss of €0.92 per share.

Liquidity and Balance Sheet

Net cash usage related to operating activities decreased from €11.0 million in the first nine months of 2003 to €3.6 million in the first nine months of 2004, primarily driven by lower net losses from operating activities in the first nine months of 2004 as compared to the first nine months of 2003.

Investments in capital replacements were the main cause of the net cash usage from investing activities of €0.8 million in the first nine months of 2004. In the first nine months of 2003 investing activities provided a total of €4.1 million, largely driven by proceeds from sale of marketable securities.

Cash generated by financing activities was €5.2 million in the first nine months of 2004, compared with €0.0 million in the first nine months of 2003. The cash generated in the first nine months of 2004 is the result of a rights issue of €1,916,113 from the issuance of 1,916,113 new common bearer shares in Intershop, which was approved by Intershop's Board on March 5, 2004, as well as a capital increase for cash excluding shareholders' subscription rights from the issuance of 1.6 million new common bearer shares, which was approved by Intershop's Board on September 15, 2004.

Total cash, including cash and cash equivalents, marketable securities, and restricted cash as of September 30, 2004 totaled €10.3 million, compared to €8.8 million as of December 31, 2003. The amount of unrestricted cash included in this total were €3.6 million as of September 30, 2004, compared to €2.6 million as of December 31, 2004. Intershop is in active negotiations with a number of international financial and strategic investors in order to further improve its cash position and capital resources.

Days sales outstanding (DSO) decreased from 67 as of December 31, 2003 to 42 as of September 30, 2004, reflecting a reduction of accounts receivables as well as some early payments in the third quarter of 2004.

Trade receivables as of September 30, 2004 were €2.1 million, compared with €3.3 million as of December 31, 2003. The decrease in this item is mainly due to the decrease in days sales outstanding as of September 30, 2004 in comparison to December 31, 2003.

Intershop had short-term deferred revenues of €3.3 million as of September 30, 2004, compared with €5.1 million as of December 31, 2003.

Capital Structure

On January 14, 2004, Intershop announced its voluntary delisting from the Nasdaq National Market (Nasdaq) and also notified Citibank, N.A., the depositary for Intershop ADRs, of termination of its American Depositary Receipt facility (ADR facility) effective as of the close of trading on February 17, 2004. American Depositary Receipts (ADRs) issued by Intershop ceased to be tradable with effect from that date. In addition, effective January 15, 2004, Intershop terminated its F-6 Registration Statement with the U.S. Securities and Exchange Commission (SEC) in respect of all 98,550,000 unissued ADRs in its ADR facility.

On January 27, 2004, Intershop announced that it had agreed with Citibank, N.A., to shorten the sixmonth period for holders of Intershop ADRs to surrender them in exchange for the underlying Intershop common bearer shares. Under the termination provision, which was amended as of January 27, 2004, holders of Intershop ADRs were entitled to surrender their Intershop ADRs in exchange for the underlying Intershop common bearer shares at any time up to February 27, 2004, i.e., ten days after conclusion of the surrender agreement on February 27, 2004, rather than six months as previously. Holders of Intershop ADRs who chose not to surrender their Intershop ADRs in exchange for the underlying common bearer shares received the cash proceeds from the sale of the underlying Intershop common bearer shares at the price obtained on the Frankfurt Stock Exchange. The depositary bank then remitted the cash proceeds from the sale, less any charges, expenses, taxes or governmental charges, to such holders of Intershop ADRs.

On March 5, 2004, Intershop announced resolutions adopted by the Management and Supervisory Boards for the implementation of a cash capital increase from authorized capital that would enable shareholders to exercise preemptive rights.

As part of the subscription offer published in the electronic German Federal Bulletin (Bundesanzeiger) and in the Frankfurter Allgemeine Zeitung the Company offered all Intershop shareholders the opportunity to subscribe for one new Intershop common bearer share per 11.5 old Intershop common bearer shares at a price of €2.00 per share (indirect preemptive right) in the period March 10, 2004 through March 24, 2004. To this end, Intershop issued 1,916,113 new common bearer shares from authorized capital. The investment bank handling the transaction, VEM Aktienbank AG, Munich, Germany, placed any shares not subscribed by shareholders with institutional investors.

The issue of the new shares increased the total number of Intershop issued and outstanding shares by 1,916,113, from 22,035,299 before the transaction to 23,951,412 after the transaction. The cash capital increase took legal effect by entry in the commercial register at the Local Court in Gera, Germany, on March 30, 2004. The new shares were admitted to trading on the Frankfurt Stock Exchange on April 6, 2004 and were first quoted on April 8, 2004

On March 26, the issued and outstanding Intershop ADRs were deregistered with the SEC with submission of Form 15, effective as of June 26, 2004.

On September 15, 2004, Intershop announced resolutions adopted by the Management and Supervisory Boards for the implementation of a cash capital increase from authorized capital excluding the shareholders' subscription rights.

VEM Aktienbank AG was admitted to subscribe the New Shares at a price of Euro 1.00 per share. Pricing was based on the average XETRA daily closing price at the Frankfurt Stock Exchange in a ten banking day reference period preceding the resolutions.

The issue of the new shares increased the total number of Intershop issued and outstanding shares by 1,600,000, from 23,951,412 before the transaction to 25,551,412 after the transaction. The cash capital increase took legal effect by entry in the commercial register at the Local Court in Gera, Germany, on September 27, 2004. The new shares were admitted to trading on the Frankfurt Stock Exchange on October 15, 2004 and were first quoted on October 18, 2004

In the first nine months of 2004, 10 employee stock options were exercised and exchanged for Intershop Communications AG common bearer shares.

Organizational Changes

On February 4, 2004 Intershop announced that Stephan Schambach had asked the Supervisory Board to be immediately released of his duties as a Member of the Management Board. The Company's Supervisory Board accepted Mr. Schambach's decision; his contract of employment was terminated by mutual agreement and he left the Company effective February 4, 2004. As of December 31, 2003, Mr. Schambach held a 19.26% interest in the Company and was therefore one of the Company's major shareholders.

The Company's Supervisory Board appointed Ralf Männlein as member of Executive Management Board with overall responsibility for the Company's Sales and Marketing in Europe with effect from July 5, 2004. Before joining Intershop, Ralf Männlein was a member of the Executive Management Board of Beta Systems Software AG, a stock exchange-listed provider of software solutions for data centers, security, document and storage management. In the course of his career he also held executive positions at Loewe Opta, Alcatel and Bosch, among other companies.

The Intershop Annual Stockholders' Meeting on July 7, 2004 approved the resolutions proposed by the Management Board and Supervisory Board by a large majority. The key resolutions passed by the 6th Annual Stockholders' Meeting concerned the formal approval of the activities of the Management Board and Supervisory Board, the election of new auditors, the reduction in the size of the Supervisory Board from six to three members and the prolongation of the authorization to acquire own shares. All resolutions were passed by a majority of more than 90% of the voting capital represented at the Annual Stockholders' Meeting. The Annual Stockholders' Meeting was attended by roughly 350 stockholders representing approximately 15% of the capital stock.

The remaining members of the Supervisory Board are Eckhard Pfeiffer as Chairman of the Supervisory Board, Hans W. Gutsch and Peter Mark Droste.

Business Outlook

Intershop revised its expectations for the fiscal year 2004 and is expecting an annual loss for fiscal year 2004 of between Euro 4.5 million and Euro 5.5 million now, as against an annual loss in the amount of Euro 18.6 million in 2003 and a loss of Euro 27.6 million in 2002. The improved results are primarily due to the fact that costs have almost halved year-on-year.

Intershop Communications AG Consolidated Balance Sheets (U.S.GAAP) (in thousands €, except share and per-share amounts)

	September 30,	December 31,
	2004	2003
	(unaudited)
ASSETS	€	€
Current assets
Cash and cash equivalents	3.570	2.611
Marketable securities	-	-
Restricted cash	6.754	6.190
Trade receivables, net of allowances for doubtful accounts of
€5,254 at December 31, 2003	2.094	3.345
Prepaid expenses and other current assets	1.063	1.370
Total current assets	13.481	13.516
Property and equipment, net	1.066	1.106
Other assets	475	557
Goodwill	4.473	4.473
Total assets	19.495	19.652
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current debt and current maturities of long-term debt	-	-
Accounts payable	1.047	249
Accrued restructuring costs	2.060	2.657
Other accrued liabilities	4.087	3.827
Deferred revenue	3.292	5.058
Total current liabilities	10.486	11.791
Long-term liabilities, net of current portion	-	-
Deferred revenue	11	23
Total liabilities	10.497	11.814
Shareholders' equity
Common share, stated value €1-authorized: 75,051,106 shares;
outstanding: 25,551,412 shares at September 30, 2004 and
22,035,299 shares at December 31, 2003	25.551	22.035
Paid-in capital	1.717	-
Accumulated deficit	(21.237)	(17.245)
Accumulated other comprehensive income	2.967	3.048
Total shareholders' equity	8.998	7.838
Total liabilities and shareholders' equity	19.495	19.652

Consolidated Statements of Operations (U.S.-GAAP) (In thousands €, except per-share amounts, unaudited)

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2004	2003	2004	2003
	€	€	€	€
Revenues
Licenses	692	2.195	2.393	5.021
Services, maintenance, and other	3.802	4.342	11.485	13.520
Total revenues	4.494	6.537	13.878	18.541
Cost of revenues
Licenses	116	140	261	396
Services, maintenance, and other	2.167	2.670	6.758	9.383
Total costs of revenues	2.283	2.810	7.019	9.779
Gross profit	2.211	3.727	6.859	8.762
Operating expenses
Research and development	1.082	1.497	3.125	4.985
Sales and marketing	1.058	2.660	3.766	12.873
General and administrative	1.424	1.411	4.562	6.980
Restructuring costs and asset impairment	233	2.261	381	3.218
Total operating expenses	3.797	7.829	11.834	28.056
Operating loss	(1.586)	(4.102)	(4.975)	(19.294)
Other income (expense)
Interest income	45	47	110	202
Interest expense	-31	-8	-183	(25)
Other income (expense), net	135	310	1.056	393
Total other income (expense)	149	349	983	570
Net loss	(1.437)	(3.753)	(3.992)	(18.724)
Basic and diluted result per share	(0,06)	(0,17)	(0,17)	(0,92)
Shares used in computing:
For basic and diluted result per share	24.005	22.035	22.993	20.347

Intershop Communications AG Consolidated Statements of Cashflows (U.S.GAAP) (in thousands €, unaudited)

	Nine Months Ended
	September 30,
	2004	2003
	€	€
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	(3.992)	(18.724)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation and amortization	352	2.893
Non-cash effects from deconsolidation	(679)
Provision for doubtful accounts	(76)	(1.292)
(Gain) loss on disposal of marketable securities	-	(40)
(Gain) Loss on disposal of property and equipment	(24)	(35)
Changes in operating assets and liabilities
Accounts receivable	1.332	7.739
Prepaid expenses and other current assets	298	(273)
Other assets	88	1.609
Accounts payable	792	89
Deferred revenue	(1.656)	(73)
Accrued restructuring costs	(597)	(1.156)
Accrued expenses and other liabilities	599	(1.797)
Net cash used in operating activities	(3.563)	(11.060)
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash	(564)	371
Proceeds on disposal of equipment	(251)	116
Purchases of property and equipment, net of capital leases	(31)	(494)
Proceeds from sale of marketable securities	-	8.294
Purchases of marketable securities	-	(4.162)
Net cash (used in) provided by investing activities	(846)	4.125
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received for unregistered stock	5.233	-
Net cash provided by financing activities	5.233	-
Effect of change in exchange rates on cash	135	(145)
Net change in cash and cash equivalents	959	(7.080)
Cash and cash equivalents, beginning of period	2.611	11.303
Cash and cash equivalents, end of period	3.570	4.223

Intershop Communications AG Consolidated Statement of Shareholders' Equity (in thousands €, except share data)

					O Ac lat ed the cu mu r
	Co mm on	Co S ha mm on res		Ac lat ed cu mu	Co reh siv mp en e	To tal S ha reh old ` ers
	Sh are s	Sta ted V alu e	AP IC	De fic it	Inc om e	Eq uit y
Ba lan Ja 1, 20 02 ce nu ary ,	88 .19 1.3 22	88 .19 1	13 .42 0	( 60 .63 2)	2.8 94	43 .87 4
Ot he he ive lo r c om pre ns ss :
Ne t lo ss				( 27 .55 5)		( 27 .55 5)
Fo rei lat ion ad jus tra tm ts gn cu rre nc ns en y					15 7	15 7
Un lize d g ain ( los s) ail ab le for le rity et rea on av sa se cu , n					( 9) 10	( 9) 10
Co reh siv e l mp en os s						( 7) 27 .50
of Ex ise st k o tio erc oc p ns	6.6 78	7	( 3)			4
Pr iva lac f c k, te t o toc t p em en om mo n s ne	8.3 34 .00 0	8.3 34	1.6 67			10 .00 1
of fro All ati alu ult ing toc k s lit oc on pa r v e r es m rev ers e s p	( 77 .22 5.6 00 )	( 77 .22 6)	77 .22 6
Ap iat ion of ad dit ion al id- in ita l pro pr pa ca p			( 92 .31 0)	92 .31 0
31 20 02 Ba lan De mb ce ce er , ,	19 .30 6.4 00	19 .30 6	-	4.1 24	2.9 42	26 .37 2
Ot he he ive lo r c om pre ns ss :
Ne t lo ss				( 18 .64 0)		( 18 .64 0)
Fo rei tra lat ion ad jus tm ts gn cu rre nc y ns en					( 83 )	( 83 )
Un lize d g ain ( los s) ail ab le for le rity et rea on av sa se cu , n					18 9	18 9
Co reh siv e l mp en os s						( 18 .53 4)
Co ion of k o f s ub sid iar st nv ers co mm on oc y
k o f p to st nt co mm on oc are	2.4 99 .99 9	2.5 00		( 2.5 00 )
Co ion of efe d s k o f s ub sid iar toc nv ers pr rre y
f p to st k o nt co mm on oc are	22 8.9 00	22 9		( 9) 22
Ba lan De mb 31 20 03 ce ce er , ,	22 .03 5.2 99	22 .03 5		( 17 .24 5)	3.0 48	7.8 38
Ot he he ive lo r c om pre ns ss :
(u d) Ne t lo ud ite ss na				( ) 3.9 92		( ) 3.9 92
Fo rei tra lat ion ad jus tm ts (un dit ed ) gn cu rre nc y ns en au					( 81 )	( 81 )
Co reh siv e l mp en os s						( 4.0 73 )
Iss f c n b k, rig hts st ua nc e o om mo ea rer oc iss ud ite
(u d) ue na	3.5 16 .11 3	3.5 16	1.7 17			5.2 33
Ba lan Se be r 3 0, 20 04 tem ce p ,	25 1.4 12 .55	25 1 .55	1.7 17 9 - 22	( 21 .23 7)	2.9 67	8.9 98

Intershop Communications AG and Subsidiaries

Notes to Consolidated Financial Statements

1. Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Frankfurt Stock Exchange. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report for the fiscal year ended December 31, 2003. The unaudited condensed consolidated financial statements included herein reflect all adjustments (which include only normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year ending December 31, 2004.

2. Accounting Policies

The consolidated financial statements presented are prepared in conformity with U.S. generally accepted accounting principles (U.S.-GAAP). The principle accounting policies adopted by the Company are as follows:

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain financial statement captions that are prepared using estimates where it is reasonably possible that these estimates will change in the near term include allowance for doubtful accounts and restructuring accruals.

Revenue Recognition

The Company generates the following types of revenue:

Licenses. License fees are earned under software license agreements primarily to end-users, and to a lesser extent resellers and distributors. Revenues from licenses to end-users are recognized upon shipment of the software if persuasive evidence of an arrangement exists, collection of the resulting receivable is probable and the fee is fixed and determinable. If an acceptance period is required, revenues are recognized upon the earlier of customer acceptance or the expiration of the acceptance period.

Service and maintenance. Services consist of support arrangements and consulting and education services. Support agreements generally call for the Company to provide technical support and provide certain rights to unspecified software updates to customers. Revenue on technical support and software update rights is recognized ratably over the term of the support agreement. The Company provides consulting and education services to its customers; revenue from such services is generally recognized as the services are performed.

For arrangements that include multiple elements, the fee is allocated to the various elements based on vendor-specific objective evidence of fair market value established by independent sale of the elements when sold separately.

Stock-Based Compensation

The Financial Accounting Standards Board ("FASB") issued SFAS No. 123, "Accounting for Stock-Based Compensation," in October 1995. This accounting standard permits the use of either a fair value based method of accounting or the method defined in Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25") to account for stock-based compensation arrangements. The Company has elected to continue to account for its stock-based compensation arrangements under the provisions of APB 25, and, accordingly, has included in Note 12 the pro forma disclosures required under SFAS No. 123. If compensation cost for the Plan had been determined based on the fair value at the grant dates for the awards calculated in accordance with the method prescribed by SFAS No. 123, the impact on the Company's net loss and net loss per share would have been as follows (in thousands of €, except per-share amounts):

		Three months ended	Nine months ended
	September 30,	September	September 30,	September 30,
	2004	30, 2003	2004	2003
Net loss attributable to common
shareholders
As reported	(1,437)	(3,753)	(3,992)	(18,724)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects	(2)	(99)	(5)	(168)
Pro forma	(1,439)	(3,852)	(3,997)	(18,892)
Basic and diluted loss per share
As reported	(0.06)	(0.17)	(0.17)	(0.92)
Pro forma	(0.06)	(0.17)	(0.17)	(0.93)

The following assumptions have been made to estimate the fair value of the options:

	2003	2004
Risk-free interest on the date of grant	3.0	3.0
Assumed dividend	-	-
Volatility	110%	117%
Expected option lives (in years)	3.7	3.51

Goodwill

Since the beginning of 2002, the Company has adopted the accounting standard SFAS No. 142, "Goodwill and Other Intangible Assets," which was published in June 2001. Under SFAS No. 142, goodwill will no longer be amortized, but will be tested for impairment on an annual basis and whenever indicators of impairment arise. The Company identified indicators of impairment under SFAS No. 142 to be the same as under SAB No. 100. The goodwill impairment test, which is based on fair value, is to be performed on a reporting unit level. A reporting unit is defined by SFAS No. 131 as an operating segment or one level lower. The Company markets its products and services in one segment and thus allocates goodwill to one reporting unit. Therefore, impairment is tested at the enterprise level using the Company's market capitalization as fair value. Goodwill will no longer be allocated to other long-lived assets for impairment testing in accordance with SFAS No. 121.

A full description of the accounting policies adopted by the Company can be found within the Company's Annual Report for the financial year ending December 31, 2003.

3. Comprehensive Income

Comprehensive income includes foreign currency translation gains and losses and unrealized gains and losses on equity securities that are reflected in stockholders' equity instead of net income.

The following table sets forth the calculation of comprehensive income for the periods indicated (in thousands €)

		Three months ended	Nine months ended
	September 30,	September 30,	September 30,	September 30,
	2004	2003	2004	2003
Net loss	(1,437)	(3,753)	(3,992)	(18,724)
Foreign Currency translation	(2)	9	(81)	(105)
gains (losses)
Unrealized loss on	-	-	-	(2)
available-for-sale securities
Total comprehensive	(1,439)	(3,744)	(4,073)	(18,831)
income (loss)

4. Earnings Per Share

Basic net loss per common share is presented in conformity with Statement of Financial Accounting Standards ("FAS") No. 128 "Earnings Per Share" for all periods presented. Basic net loss per share is computed using the weighted-average number of vested outstanding shares of common stock. Diluted net loss per share is computed using the weighted-average number of vested shares of common stock outstanding and, when dilutive, unvested common stock outstanding, potential common shares from options and warrants to purchase common stock using the treasury stock method and from convertible securities using the as-if-converted basis. The options exercised that result in shares subject to repurchase have been excluded in computing the number of weighted average shares outstanding for basic earnings per share purposes. All potential common shares have been excluded from the computation of diluted net loss per share for the periods presented because the effect would be antidilutive.

The following table sets forth the computation of basic earnings per share for the periods indicated (in thousands €, except per share data):

		Three months ended	Nine months ended
	September 30,	September 30,	September 30,	September 30,
	2004	2003	2004	2003
Net loss attributable to	(1,437)	(3,753)	(3,992)	(18,724)
common shareholders
Basic and diluted
net loss per share:
Weighted average	24,005	22,035	22,993	20,347
common shares outstanding
Less: weighted average
shares subject to repurchase
Total weighted average	24,005	22,035	22,993	20,347
common shares
Basic and diluted	(0.06)	(0.17)	(0.17)	(0.92)
net loss per share

5. Stock-Based Compensation

In accounting for the 1997, 1999 and 2000 stock-based compensation plan, the Company applies APB Opinion No. 25 and related interpretations

Option activity under the plans was as follows (in thousands of €, except per-share data):

Nine Months ended
September 30,	2003	2003	2004	2004
	Number of	Weighted	Number of
	shares	average exercise	shares	Weighted-average
	outstanding	price (€)	outstanding	exercise price (€)
Outstanding at
beginning of period	1,979	77.60	2,055	36.50
Granted	776	1.70	15	2.41
Exercised	0	0	10	1.65
Forfeited	589	56.63	488	12.66
Outstanding at
end of period	2,166	51.48	1,572	40.15
Exercisable options
at end of period	832	115.40	896	66.21
Weighted average
fair market value
of options granted
during the year (€)	776	1.19	15	1.56

The following table summarizes information with respect to the stock options outstanding on September 30, 2004:

	Number of options	Weighted-average remaining	Weighted average	Number exercisable on	Weighted average
Range of Exercise Price	outstanding (000s)	contractual life (in years)	exercise price (€)	September 30, 2004 (000s)	exercise price (€)
0.07 – 5.99	733	7.6	2.55	263	2.99
6.00 – 6.99	169	6.4	6.03	109	6.03
7.00 – 16.99	341	5.2	7.98	233	7.98
17.00 – 49.99	201	2	21.34	166	21.55
50.00 – 758.04	128	0.7	417.40	125	418.29
	1,572	6.2	40.15	896	66.21

6. Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires companies to record an appropriate charge in connection with the retirement or disposal of property and equipment in the period in which this took place, provided that the fair value can be reasonably determined. The costs incurred in the retirement or disposal of assets are netted against the carrying amount of the long-lived assets. Companies will calculate the changes over time in the amount of the anticipated expenses to be incurred for the retirement or disposal of an asset by discounting the amount calculated at the beginning of the period. The interest rate used in the calculation of this change corresponds to the risk-adjusted rate to be fixed in accordance with the company's credit rating the first time the expenses are recognized. The carrying amount of the related property and equipment increases by the amount calculated, which is then written down over the objects' remaining useful lives and recorded as operating expenses in the income statement. SFAS No. 143 is effective for the fiscal years beginning after June 15, 2002. The adoption of SFAS No. 143 did not have a material effect on the Company´s financial position, results of operations, or cash flows.

In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Effective for fiscal year 2003, under SFAS No. 145, gains and losses on extinguishments of debt will be required to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under Statement 4. Extraordinary treatment will be required for certain extinguishments as provided in APB Opinion No. 30. All other provisions for SFSA No. 145 became effective for transactions occurring after May 15, 2002. Statement 145 also amends Statement 13 to require certain modifications to capital leases be treated as a sale-leaseback and modifies the accounting for sub-leases when the original lessee remains a secondary obligor (or guarantor). In addition, the FASB rescinded Statement 44, which addressed the accounting for intangible assets of motor carriers and made numerous technical corrections. The adoption of SFAS No. 145 did not have a material impact on the Company's Group's financial position, results of operations or cash flows.

In June 2002, the FASB published SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes the preliminary provisions of the Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." This statement requires that a liability for a cost associated with an exit or disposal activity must be recognized when the liability is incurred. Under Issue 94-3, the liability for an exit cost was recognized as the date of an entity's commitment to a concrete exit or disposal plan. The new standard holds that a company's commitment to a plan does not represent a direct obligation to another party that would be defined as a liability. SFAS No. 146 therefore rescinds the definitions and requirements for the accounting of exit costs contained in Issue 94-3 until a liability is actually incurred and stipulates that the amount of the liability be initially measured at the current fair value. However, this standard does not apply to expenses arising in connection with the retirement of activities in divisions acquired by way of a combination or covered by SFAS No. 144. The Company applies SFAS No. 144 since January 1, 2003. The Company does not expect the adoption of SFAS No. 146 to have a material adverse effect on its financial position, results of operations, or cash flows.

In May 2003, the FASB published SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". The Standard describes how the issuer classifies and measures such financial instruments. The financial instruments that are within the scope of this Standard must therefore be classified as liabilities (or assets in some circumstances) because these financial instruments embody an obligation of the issuer. SFAS No. 150 is effective for financial instruments issued or modified after March 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have any material effect on the Company's financial position, results of operations, or cash flows.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken by it in issuing the guarantee. It also expands the disclosure requirements in the financial statements of the guarantor with respect to its obligations under certain guarantees that it has issued. The Company is required to adopt the initial recognition and initial measurement accounting provisions of this interpretation on a prospective basis to guarantees issued or modified after December 31, 2002. The Company does not anticipate the adoption to have a material effect on the Company's financial position, results of operations, or cash flows.

In January 2003, the FASB issued FASB Interpretations No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." This interpretation clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective February 1, 2003 for variable interest entities created after January 31, 2003, and July 31, 2003 for variable interest entities created prior to February 1, 2003. The Company does not anticipate the adoption of FIN 46 to have a material impact on its financial position, results of operations, or cash flows.

At the November 21, 2002 EITF meeting, the Task Force reached a consensus that cash consideration received by a customer from a vendor is presumed to be a reduction of the prices of the vendor's products or services and should, therefore, be characterized as a reduction of cost of sales when recognized in the customer's income statement. That presumption is overcome when the consideration is either (a) a reimbursement of costs incurred by the customer to sell the vendor's products, in which case the cash consideration should be characterized as a reduction of that cost when recognized in the customer's income statement, or (b) a payment for assets or services delivered to the vendor, in which case the cash consideration should be characterized as revenue when recognized in the customer's income statement. The Task Force also reached a consensus that a rebate or refund of a specified amount of cash consideration that is payable only if the customer completes a specified cumulative level of purchases or remains a customer for a specified time period should be recognized as a reduction of the cost of sales based on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions that results in progress by the customer toward earning the rebate or refund, provided the amounts are reasonably estimable. The Copmany does not expect the adoption of EITF 02-16 to have a material effect on it's financial position, results of operations, or cash flows.

At the July 31, 2003 meeting, the ETIF discussed whether non-software deliverables (e.g., non-software related equipment or services) included in an arrangement that contains software that is more than incidental to the products or services as a whole are included within the scope of AICPA Statement of Position 97-2, "Software Revenue Recognition". The Task Force reached the following consensus: In an arrangement that includes software that is more than incidental to the products or services as a whole, software and software-related elements are included within the scope of SOP 97-2. Software-related elements include software-products and services such as those listed in paragraph 9 of SOP 97-2 (examples of software deliverables include software products, upgrades/enhancements, postcontract customer support, and services) as well as any non-software deliverable(s) for which a software deliverable is essential to its functionality. For example, in an arrangement that includes software, computer hardware that will contain the software, and additional unrelated equipment, if the software is essential to the functionality of the hardware, the hardware would be considered software-related and, therefore, included within the scope of SOP 97-2. However, because the software is not essential to the functionality of the unrelated equipment, the equipment would not be considered software-related and would, therefore, be excluded from the scope of SOP 97-2. The Task Force agreed that the consensus in Issue 03-5 should be applied to arrangements entered into in the first reporting period (annual or interim) beginning after the date of Board ratification of the consensus, which was August 13, 2003. The Company does not anticipate the adoption to have a material effect on the Company's financial position, or results of operations, or cash flows.

In December 2003, the Securities & Exchange Commission ("SEC") published Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition." This SAB updates portions of the SEC staff's interpretive guidance provided in SAB 101 and included in Topic 13 of the Codification of Staff Accounting Bulletins. SAB 104 deletes interpretative material no longer necessary, and conforms the interpretive material retained, because of pronouncements issued by the FASB's EITF on various revenue recognition topics, including EITF 00-21, "Revenue Arrangements with Multiple Deliverables." SAB 104 also incorporates into the SAB Codification certain sections of the SEC staff's "Revenue Recognition in Financial Statements – Frequently Asked Questions and Answers." To the extent not incorporated into the SAB codification, the SEC staff's FAQ on SAB 101 (Topic 13) has been rescinded. The adoption of SAB 104 will not have a material effect on the Group's financial position, results of operations or cash flows.

7. Industry Segment and Geographic Information

The Company operates primarily in one line of business, which is providing Unified Commerce Management software for managing online commerce processes across extended enterprises. Accordingly, the Company does not disclose significant additional segment information under the definition of segment reporting, defined by SFAS No. 131. However, the Company's business had five international sales geographies until June 30, 2004: Germany, United States, United Kingdom, Asia Pacific, and other (which includes France, Denmark, Norway, and Sweden). These geographies are supported by the central General Administration as well as by the Research & Development and Technical Support departments. The Company's products are developed at its headquarter in Jena, Germany, and are sold in Europe, North America, Australia, and Asia via the Company's own direct distribution, sales partners, and independent distributors. By June 30, 2004 Intershop departed from its direct sales unit in Asia and has been continuing its business with partners and distributors only.

Three months ended September 30, 2004 (in thousands of €):

		United	United	Asia
	Germany	States	Kingdom	Pacific	Other	Total
Revenues
Licenses	473	199	20	0	0	692
Services, maintenance
and other	2,967	688	147	0	0	3,802
Total Revenues	3,440	887	167	0	0	4,494
Gross profit
Licenses	360	196	20	0	0	576
Services, maintenance
and other	936	552	147	0	0	1,635
Total gross profit (loss)	1,296	748	167	0	0	2,211
Total Operating expenses	5,160	663	251	0	5	6,079
Operating income (loss)	(1,720)	224	(84)	0	(5)	(1,585)
Other income (expense)
net						148
Net loss						(1,437)
Long lived assets	752	29	278	0	7	1,066

Three months ended September 30, 2003 (in thousands of €):

		United	United	Asia
	Germany	States	Kingdom	Pacific	Other	Total
Revenues
Licenses	1,249	822	7	105	12	2,195
Services, maintenance
and other	2,947	691	245	54	405	4,342
Total Revenues	4,196	1,513	252	159	417	6,537
Gross profit
Licenses	1,107	824	7	105	12	2,055
Services, maintenance
and other	641	390	199	54	388	1,672
Total gross profit (loss)	1,748	1,214	206	159	400	3,727
Total Operating expenses	7,422	1,197	400	531	1,089	10,639
Operating income (loss)	(3,226)	316	(148)	(372)	(672)	(4,105)
Other income (expense)
net						349
Net loss						(3,753)
Long lived assets	1,255	51	361	17	137	1,821

Nine months ended September 30, 2004 (in thousands of €):

	United	United	Asia
Germany	States	Kingdom	Pacific	Other	Total

1,413	888	24	68	0	2,393

8,917	1,893	588	87	0	11,485
10,330	2,781	612	155	0	13,878

1,177	863	24	68	0	2,132

2,591	1,462	588	87	0	4,728
3,768	2,325	612	155	0	6,860
15,118	2,166	834	730	5	18,853
(4,788)	615	(222)	(575)	(5)	(4,975)

					983
					(3,992)
752	29	278	0	7	1,066

Nine months ended September 30, 2003 (in thousands of €):

Germany States Kingdom Pacific Other Total Revenues Licenses 3,086 951 380 338 284 5,021 Services, maintenance and other 9,609 1,666 586 87 1,572 13,520 Total Revenues 12,677 2,617 966 425 1,856 18,541 Gross profit Licenses 2,670 953 380 338 284 4,625 Services, maintenance and other 1,446 855 397 87 1,352 4,137 Total gross profit (loss) 4,116 1,808 777 425 1,636 8,762 Total Operating expenses 26,951 3,464 1,815 1,592 4,013 37,835 Operating income (loss) (14,274) (847) (849) (1,167) (2,157) (19,294) Other income (expense) net 570 Net loss (18,724) Long lived assets 1,255 51 361 17 137 1,821		United	United	Asia

The accounting policies followed by the Company's business segments are the same as those described for the group and these can be found within the Company's Annual Report for the financial year ending December 31, 2003.

8. Restructuring Charges and Asset Impairments

In the first nine months of 2004, the restructuring measures implemented in the previous year meant that the Company further reduced its headcount in line with reduced revenue expectations, and transferred the majority of its European sales activities outside Germany and, starting July 1, 2004, the Asian sales activities to local distributors.

The following tables summarize the restructuring charges recorded during the quarters ended September, 2004 and 2003 respectively (in thousands €):

	Three months ended			Nine months ended
	September 30,	September 30,	September 30,	September 30,
	2004	2003	2004	2003
Employee Related Charges	4	1,490	64	2,145
Facility Related Charges	229	821	325	1,040
Other	0	(50)	(8)	33
Total restructuring charges	233	2,261	381	3,218

	Employee related charges	Facility related charges	Other	Total
Accrued restructuring costs
at December 31, 2003	224	2,433	-	2,657
Currency Adjustments	5	18	-	23
Restructuring charges from January 1, 2004 through
September 30, 2004	(7)	(274)	(8)	(289)
Cash Payments	(12)	(321)	-	(333)
Accrued restructuring costs at September 30,
2004	210	1,856	(8)	2,058

The above costs are broken down as follows:

Employee Related Charges

As of December 31, 2003, the Group employed 278 full-time equivalents.

As a result of cost reductions, the number of employees was reduced further to 232 full-time equivalents in the first nine months of 2004.

The accruals for employee-related charges mainly comprise expected future payments relating to the termination of contracts, including severance payments, payroll taxes, and legal costs.

Facility Related Charges

In the first nine months of 2004, the Intershop Group recorded restructuring costs of approximately €0.4 million in connection with the consolidation of existing facilities, which principally relate to probable future payments for existing lease commitments for property no longer in use, net of sublease income.

The accruals for facility-related costs mainly include the expected future payments for existing lease commitments for property no longer in use, net of sublease income. The sub lease income has been estimated based upon the contractual agreements in place as of the date the financials were prepared.

Other

The accruals for other restructuring costs principally relate to various non-cancelable contracts for which there is no future benefit to the Company.

Restructuring accruals are calculated on the basis of financial estimates and data available as at September 30, 2004. Adjustments to this restructuring reserve will be made in future periods, if necessary, based upon actual events and available information at that moment in time.

9. Dividends

The Company did not pay any dividends in the first nine months of 2004 or in the previous financial year.

10. Research and development

The Company is continuing to invest resources into research and development of new products in the ecommerce software market. In the first nine months of 2004, the Company incurred research and development costs of approximately €3.1 million compared with €5.0 million in the first nine months of 2003. The Company expenses all research and development costs as incurred.

11. Share Repurchase

The Company did not own or repurchase any of its own shares in the first nine months of 2004.

12. Marketable Securities

Investments in debt and marketable equity securities are categorized as available for sale and are stated at fair value, with unrealized gains and losses, net of deferred income taxes, and reported as a component of accumulated other comprehensive income. Currently, Intershop does not possess any marketable securities.

13. Shareholders' Equity

The following tables summarize the change in shareholders' equity for the nine months ended September 30, 2004 and 2003 (in thousands €):

	September 30, 2003	September 30, 2004
Net loss	(18,724)	(3,992)
Foreign Currency translation gains (losses)	(105)	(81)
Unrealized gain (loss) on available-for-sale securities	(2)	-
Conversion of common stock of subsidiary to common
stock of parent	2,500	-
Conversion of preferred stock of subsidiary to common
stock of parent	229	-
Accumulated deficit	(2,729)	-
Cash received for unregistered stock	-	5,233
Opening Shareholders' equity	26,372	7,838
Closing Shareholders' equity	7,541	8,998

Stephan Schambach (former member of board of directors) has converted 4,166,667 shares in Intershop Communications, Inc., a majority-owned subsidiary of Intershop Communications AG, into 2,499,999 Intershop Communications AG common bearer shares on June 18, 2003.

On March 5, 2004 Intershop announced that the Company's Executive Board (Vorstand) and Supervisory Board (Aufsichtsrat) had decided to implement a public rights issue from authorized capital in order to raise cash and strengthen the Company's balance sheet.

The Company offered all current Intershop shareholders the opportunity to subscribe for one new Intershop common bearer share per 11.5 existing Intershop common bearer shares held at a price of €2.00 per share (indirect pre-emptive right). during the period from March 10, 2004 to March 24, 2004. To this end, Intershop issued 1,916,113 new common bearer shares from authorized capital.

The new shares increased the total number of Intershop issued and outstanding shares by 1,916,113, from 22,035,299 before the transaction to 23,951,412 after the transaction.

On September 15, 2004 Intershop announced that the Company's Executive Board (Vorstand) and Supervisory Board (Aufsichtsrat) had resolved to increase the share capital by €1,6 million by issuing 1,6 million new Intershop Communications AG common bearer shares ("New Shares") from authorized capital. The shareholders' subscription right was excluded.

VEM Aktienbank AG will be admitted to subscribe the New Shares at a price of Euro 1.00 per share. Pricing is based on the average XETRA daily closing price at the Frankfurt Stock Exchange in a ten banking day reference period preceding the resolutions.

The new shares increased the total number of Intershop issued and outstanding shares by 1,600,000 from 23,951,412 before the transaction to 25,551,412 after the transaction

14. Legal Matters

The Company is a defendant in various legal matters arising in the normal course of business. It is possible that an adverse ruling in any such matter individually, or some or all of the matters collectively, may have a materially adverse effect on our results of operations. The Company expenses legal costs associated with loss contingency as such legal costs are incurred.

The Company is a defendant in a consolidated class-action lawsuit in the United States and an investigation by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BAFin; formerly German Federal Supervisory Office for Securities Trading (Bundesaufsichtsamt für den Wertpapierhandel, BAWe)). At the beginning of 2001, several securities class-action lawsuits were filed in the U.S. against Intershop Communications AG, Management Board members, certain other officers, and the underwriters of the Company's September 2000 public offering. The plaintiffs allege that the defendants made material misrepresentations and omissions of material facts concerning the Company's business performance. The plaintiffs seek an unspecified amount of damages. The Management Board believes there is no merit to these allegations and intends to defend itself vigorously. However, there can be no assurance that the Company will prevail in the lawsuit, or that the outcome of the lawsuit will not adversely affect the Company's operations. In Germany, BAFin announced in January 2001 that it had initiated an investigation regarding a possible violation of the duty to disclose material information in connection with the release on January 2, 2001 of Intershop Communications AG's preliminary results for 2000. BAFin handed this case over to the public prosecutor in Hamburg, Germany, who initiated an investigation into complaints about stock price manipulations in May 2001. The Company is cooperating in full with these investigations and, to the best of the management's knowledge, has never previously been the subject of such investigations. The Company believes there is no merit to these allegations.

In January 2001, a U.S. company filed a suit in the federal district court in Delaware against Intershop Communications, Inc., claiming violation of certain patent rights. The plaintiff seeks an unspecified amount of compensation for damages based on the alleged patent infringements. This case was settled for US\$0.5 million on September 24, 2001. As part of the settlement, the parties exchanged certain licenses and rights for a limited term under their respective United States patents and patent applications, in addition to other terms and conditions of the settlement agreement that were not disclosed.

In 2002, a claim of €5 million regarding the violation of a license agreement was legally asserted by another software company. An out-of-court settlement with this software company was reached, subject to the approval of the software Company's stockholders. This approval was not granted; for this reason, the Company has restarted legal proceedings with the aim of having the claim fully dismissed. As of September 30, 2004 the court had not yet ruled on the legally asserted claims.

In 2003, a claim was brought against the Company by a consulting firm for the reimbursement of expenses in the amount of €435,000 based on a Memorandum of Understanding from 2000. The claim was granted by the court of first instance and has now gone to appeal. As of September 30, 2004 the court had not yet ruled on the appeal.

In spring 2004 the company was sued by the landlord of the principal office in Jena within two different actions for payment of the rent amounting to €1,4 million. Since October 2003 the company has reduced the monthly rent payable due to serious deficiencies in the rented premises and, in addition, has set off against the rent several claims for penalties arising from their late completion. Initially the landlord claimed the unpaid rent in an action based on documentary evidence alone at the Landgericht Gera. By September 30, 2004 no decision had been given by the court.

15. Directors' Holdings

As of September 30, 2004, the following Company directors held Intershop Communications AG ordinary bearer shares or options to purchase such shares:

Name	Title, Function	Share held *	Stock options held, *
Eckhard Pfeiffer	Chairman of the Supervisory Board	80.000	0
	Vice-Chairman of the Supervisory
Theodore J. Smith	Board	21.458	0
Peter Mark Droste	Member of the Supervisory Board	0	0
Hans W. Gutsch	Member of the Supervisory Board	76.086	0
Burgess Jamieson	Member of the Supervisory Board	228.900	0
Dr. Jürgen Schöttler	Chairman of the Executive Management Board, Chief Financial Officer (Finanzvorstand)	15.217	160.000
Ralf Männlein	Member of the Executive
	Management Board	0	0

* All information post one-for-five reverse stock split. As part of the Company's initiative to strengthen its balance sheet and increase its financial flexibility, on October 30, 2002 Intershop's stockholders approved the reduction of the company's capital by €77,225,600, or a ratio of five to one, from €96,532,000 to €19,306,400. This reduction in share capital took legal effect on December 12, 2002, when a resolution on a simplified reduction of capital was entered in the commercial register of Gera, Germany, local court, in accordance with sections 229 ff. of the Aktiengesetz (German Stock Corporation Act). The new shares began trading on a consolidated basis on January 20, 2003. Following the stock split, the International Securities Identification Number (ISIN) of Intershop Communications AG's common bearer shares changed from ISIN DE 000 622 700 2 to ISIN DE 000 747 292 0.

** The stock options were granted under the conditions of the 1999 Equity Incentive Plan. Details on the 1999 Equity Incentive Plan can be found in the Notes to the Consolidated Financial Statements in the Company's 2003 annual report (section 12). Dr. Jürgen Schöttler's stock options have an average reverse stock split adjusted exercise price of €4.16 per share.

16. Securities Transactions subject to Reporting Requirements

The members of the Company's executive bodies made the following purchases of Intershop common bearer shares during the first nine months of 2004.

Name	Date	Type of transaction	Amount	Total value (€)
Supervisory Board:
Hans W. Gutsch	April 8, 2004	Purchase*	6.086	12.233
Management Board:
Dr. Jürgen Schöttler	April 8, 2004	Purchase*	1.217	2.434

* Exercise of preemptive rights under the rights issue

INTERSHOP Communications AG

Investor Relations Silke Matzke Intershop Tower· D-07740 Jena ·Germany Tel.: +49-3641-50-1370, Fax: +49-3641-50-1309 [email protected] http://www.intershop.com